Atul Ltd 2015-16

Atul Ltd | Annual Report 2015-16 Dear Shareholders, We live in a time of extraordinary change – a change that is reshaping the way we live, the way we work. It is a change that is promising amazing breakthroughs, but also economic disruptions. It is a change that is broadening opportunities, but also widening inequalities. The constants which help us face the change are the eternal Values. The legendary Founder of our Company, Mr Kasturbhai Lalbhai, lived his life founded on integrity, discipline, perseverance, respect, simplicity and larger purpose, and we will nurture and promote these time-tested Values which also help businesses sustain and create value over time. In 2015, the world GDP (size US$73.2 tn) increased by 3.1%: GDP of – the USA (size US$17.9 tn) increased by 2.4%, European Union (size US$16.2 tn) increased by 1.6%, China (size US$10.9 tn) increased by 6.9%, Japan (size US$4.1 tn) increased by 0.5% and India (size US$2.1 tn) increased by 7.3%. These numbers ultimately reflect the combined will of the respective Governments and people to perform. With forward looking policies of its Government and the aspirations of its people, India has the potential to sustain and increase its GDP, and we in our small way will work to make the ‘Made in India’ label proud. World Chemical industry (size US$4.4 tn) grew by 2% in 2015: Indian Chemical industry (size US$103 bn) grew by 3%, but is still ranked 7 after China (size US$1.5 tn), the USA (size US$630 bn), Germany (size US$198 bn), Japan (size US$190 bn), South Korea (size US$165 bn) and France (size US$107 bn). According to a leading consulting firm, India has the potential to grow its Speciality Chemicals industry at 9%. Our Company has an advantage that its Businesses have good potential to grow (as the industries they serve are growing) and its manufacturing blueprint is reasonably complex (not complicated) and integrated, therefore not easily replicable. Our Company maintained improvement trend in its performance – EBITDA margin increased to 20% (16%) and sales volume increased by 3% though sales value decreased to ` 2,407 cr ( ` 2,510 cr) mainly on account of poor performance of Colors Sub-segment and decrease in selling prices arising from lower prices of raw materials … PBT from operations increased to ` 390 cr ( ` 312 cr) … RoCE increased to 31% (27%) … Debt equity ratio improved to 0.24 (0.28) … interest coverage ratio improved to 18.1 (16.3) … Earning per share increased to ` 90 ( ` 73). The Board has recommended dividend of 100%, the highest so far. During 2015-16, our Company completed 5 expansion projects with an investment of ` 213 cr and invested ` 27 cr in the areas of environment and safety; it undertook 3 expansion projects with an investment of ` 98 cr which will be commissioned in 2016-17. We will take up new expansion projects for implementation in 2016-17 mainly to grow in existing, downstream and related products - we will make these investments mainly through internal accruals. As I had mentioned in my letter last year, we will aim for achieving sales of ` 4,000 cr in 2017-18; it is a stretched number – nonetheless, sin is not to fail, but to aim low! The subsidiary and associate companies also maintained improvement trend in their performance – Atul Bioscience, DPD, Rudolf Atul Chemicals and Amal have all increased their sales and PBT from operations. Atul Rajasthan Date Palms commenced sales in the last quarter by selling about 300 tissue culture raised date palms. The subsidiary companies in Brazil, China, the UAE, the UK and the USA, established over a span of last 20 years, will be strengthened by way of additional HR support, as required. A professional was appointed in the Netherlands for growing a set of new products introduced by the Company. In 2015-16, Atul Foundation (Trust) took up projects in Gujarat, Rajasthan and Tamil Nadu. In times to come, the number of states where Atul will serve the society will only increase. DPD, a subsidiary company based in the UK, also spent 1% of its profit before tax for the local community (though not called for by any guidance or law) keeping in step with the tradition of conducting business with a larger purpose. Atul Bioscience and Rudolf Atul Chemicals also contributed to Atul Foundation for serving the society. During the year, Atul Foundation built and handed over 624 toilets to those families who had no such facility ever. As our Company grows, it is becoming more diverse, particularly in terms of nationalities – it already has people of different origins – American, Brazilian, Chinese, Dutch, English, French and of course Indian – all working for a common purpose. The Letter to the Shareholders