Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Forward looking statements In this annual report, we have shared information and made forward looking statements to enable investors to know our product portfolio, business logic and direction and thereby comprehend our prospects. Such statements that we make are based on our assumptions. We have tried wherever possible to identify such statements by using words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘intend’, ‘plan’, ‘project’ or words of similar substance in connection with any discussion of future performance. We cannot guarantee that these forward looking statements will be realised although we believe we have been prudent in our assumptions. The actual results may be affected because of uncertainties, risks and even inaccurate assumptions. If uncertainties or known or unknown risks materialise or if underlying assumptions prove inaccurate, actual results may vary materially from those anticipated, believed, estimated, intended, planned or projected. We undertake no obligation to publicly update any forward looking statements, whether as a result of new information, future events or otherwise. The members may send in their comments or suggestions for improvement of the annual report by e-mail to shareholders@atul.co.in The secret of change is to focus all of our energy not on fighting the old, but on building the new. - Socrates of Athens Atul Ltd (Atul) was founded by Kasturbhai Lalbhai, an institution builder par excellence, on September 05, 1947, within a month of the independence of India. Atul celebrated its 75 years of incorporation this year, coinciding with the 75 years of independence of the country. The cover page depicts products belonging to diverse industries served by Atul and chemicals used to manufacture them in an arrow formation symbolizing its renewed endeavour to move forward - by connecting externally and internally, growing the businesses and imagining the future in an ever-evolving environment. Contents Revisiting 2022-23 1 Corporate identity 2 Purpose 4 Values 5 Business model 6 Serving diverse industries 8 Footprint 9 Operational highlights 10 Financial charts 12 Serving the society 16 Letter to the shareholders 18 Board of Directors 20 Directors’ Report 22 Annexure to the Directors’ Report 28 Management Discussion and Analysis 39 Corporate Governance Report 46 Business Responsibility and Sustainability Report 66 Notice 100 Performance trend 114 Standalone Financial Statements Independent Auditor’s Report 116 Financial Statements 126 Consolidated Financial Statements Independent Auditor’s Report 190 Financial Statements 198 To download or read this report online, please visit www.atul.co.in 46th Annual General Meeting Friday, July 28, 2023 10:30 am The meeting will be held through video conferencing
• Incurred the highest capital expenditure of around ` 900 cr (including Group entities) • Achieved the highest annual sales, crossed the ` 5,000 cr mark • Took 40 initiatives under six programs of national importance via Atul Foundation Revisiting 2022-23 World economy* grew by 3.40% Crude oil, steel prices and forex rates remained unpredictable and varied between ` 83.20 and ` 76.09 per US$ ` ` 57 and ` 86 per kg US$ 71.03 and US$ 129.20 per barrel USA US$ 25.46 tn 2.10% Latin America, Caribbean US$ 5.76 tn 4.00% Africa US$ 2.97 tn 3.80% EU US$ 14.13 tn 3.50% India US$ 3.39 tn 6.80% China US$ 18.10 tn 3.00% Japan US$ 4.23 tn 1.10% Australia US$ 1.70 tn 3.70% *Calendar year 2022 for all except India where the year is April 2022 to March 2023 Source: IMF report, January 2023 Atul sustained external challenges Atul Bioscience Ltd (` cr) Atul shareholding: 100% DPD Ltd (` cr) Atul shareholding: 98% (` cr) Rudolf Atul Chemicals Ltd Atul shareholding: 50% 76 14 104 13 105 142 126 158 17-18 18-19 19-20 20-21 21-22 22-23 (2) (3) 5 (7) Sales Profit before tax 21 5 23 4 21 6 38 13 47 20 41 16 17-18 18-19 19-20 20-21 21-22 22-23 Sales Profit before tax Sales Profit before tax 17-18 18-19 19-20 20-21 21-22 22-23 73 14 83 15 81 13 89 19 121 22 111 11 1
We are a diversified Indian company (a part of Lalbhai Group, one of the oldest business houses of India with a legacy of conducting business with a larger purpose) meeting the needs of varied industries such as Adhesives, Agriculture, Animal Feed, Automobile, Composites, Construction, Cosmetic, Defence, Dyestuff, Electrical and Electronics, Foam and Furnishing, Flavour, Food, Footwear, Fragrance, Glass, Handicraft, Home Care, Horticulture, Hospitality, Paint and Coatings, Paper, Personal Care, Pharmaceutical, Plastic, Rubber, Soap and Detergent, Sport and Leisure, Textile, Tyre and Wind Energy. We manage complex chemical processes in a responsible way. In order to enhance focus, we have placed the products belonging to the two reporting segments, namely Life Science Chemicals and Performance and Other Chemicals, under seven sub-segments (interchangeably called Businesses), namely Aromatics, Bulk Chemicals and Intermediates, Colours, Crop Protection, Floras, Pharmaceuticals and Polymers – these in turn are managed through a matrix organisation structure for achieving all-round functional excellence. Dilwara temples Dilwara temples in Rajasthan, India are known for their meticulous and unparalleled marble stone-carved structures. The temple complex hosts five distinct temples, each representing the values of the Indian spiritual heritage. Built between the 11th and 13th centuries by the Chalukya dynasty, the temples look simple from the outside, but are a treasure of intricate carvings and architectural excellence from the inside. Kasturbhai Lalbhai, Founder of Atul, had spearheaded the renovation of Dilwara and other Jain temples as the Chairman of the Anandji Kalyanji Trust. Following the footsteps of its exemplary Founder, team Atul values attention to detail, excellence and collaboration in its journey of sustained growth in harmony with nature and the community. The heritage of the past is the seed that brings forth the harvest of the future. – Wendell Philips Corporate identity 2 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Distinguished past • Founded on September 05, 1947, by Kasturbhai Lalbhai, a legendary Indian, to create wealth in rural India, generate employment on a large-scale and make India self-reliant ... ... ... • First private sector company of independent India to be inaugurated by the first Prime Minister of the country, Pandit Jawaharlal Nehru, on March 17, 1952 • A company that has manufactured many products for the first time in India Determined present • Increasing productivity and efficiency and strengthening people and business processes • Broadening and deepening its presence in the marketplace • Serving the society, particularly in the areas of national priorities like education, empowerment and infrastructure Dynamic future • Seeking growth through existing, downstream, related, value added and diversified product portfolio • Leveraging depth in science and technology and having integrated manufacturing • Developing and growing a retail product portfolio to participate in the full value chain Equity share capital of ` 30 cr, reserves of ` 4,560 cr Paid uninterrupted dividend* since commencement of operations in 1952; declared a special interim dividend of 75% during 2022-23 and recommended 250% final dividend for 2022-23, total 325%. Market capitalisation increased from ` 57 cr as at March 31, 1999, to ` 20,539 cr as at March 31, 2023 *except one year Anaven LLP Anaven LLP Atul Brasil Quimicos Ltda Anaven LLP Atul China Ltd Anaven LLP Atul Europe Ltd Atul Ireland Ltd en Atul Middle East FZ-LLC Anaven LLP Atul USA Inc Atul Foundation Atul Rajasthan Date Palms Ltd Anaven LLP Atul Bioscience Ltd DPD Ltd Anaven LLP Amal Ltd Anaven LLP Anaven LLP Anaven LLP Atul Ltd Rudolf Atul Chemicals Ltd ve LLP Valsad Institute of Medical Sciences aven LL Anaven LLP naven LLP Atul Club 3
Steadfast in Purpose Kasturbhai Lalbhai (1894 – 1980) The legacy of our Founder has been synonymous with three terms: excellence, perseverance and trusteeship. At Atul, we have the most onerous responsibility to expand and diversify our footprint and follow his figurative footsteps. We are endeavouring to achieve this remit in full measure. Siddharth Lalbhai (1923 – 1998) A chemical engineer and the elder son of our Founder, Siddharth Lalbhai dedicated his life to the development of Atul. He accorded equal value to creation of wealth and service to society. The principles of trusteeship that he upheld, the personal qualities of integrity, perseverance and simplicity that he lived by and the single-minded devotion that he gave to tasks on hand will always remain our guiding force. We are committed to significantly enhancing value for our stakeholders by: • fostering a spirit of continuous learning and innovation • adopting developments in science and technology • providing high quality products and services, thus becoming the most preferred partner • having people who practice Values and exemplify a high standard of behaviour • seeking sustained, dynamic growth and securing long-term success • taking responsible care of the surrounding environment • improving the quality of life of the communities we operate in Balwantrai Mazumdar (1902 – 1981) An economist, Balwantrai Mazumdar was a voracious reader, sound thinker, patient listener and a farsighted professional. He created an atmosphere of camaraderie that brought out the collective best of the people of Atul. He was the moving force behind making Atul Complex one of the largest eco-friendly chemical sites of its kind in the world. He remained with the Group till the end of his life, as did most of the people who worked with our Founder. 4 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Sustained by Values The name ‘Atul’ is a unique asset, which represents a rich heritage of Values. In an environment where change is a way of life, continuity of Values provides stability and is fundamental to us. We have therefore formalised key Values and are committed to institutionalising them. We will seek to create an environment wherein these Values are consistently practised and nurtured and ensure that they are not compromised. UNDERSTANDING How well we work with others depends on our ways to connect and this in turn is based on our level of understanding of human relationships. This certainly does not mean that we accept poor performance, but that we do it the right way. Understanding is the external manifestation of internal realisation. RESPONSIBILITY Delivering value and taking ownership of actions. Responsibility must also give us the realisation that what is good for the business must be in the overall good. In essence, we must work with a spirit of trusteeship for the shareholders and other stakeholders. What comes to us must be returned many times over. EXCELLENCE A drive that is more from inside than outside; it is about us seeking to continuously improve and develop an eye for innovation even in day to day work. Excellence is about excelling in everything we do and not giving up. Excellence is also a journey, not simply a destination in itself. UNITY Working together and taking advantage of synergy while harnessing unique abilities of each of us to achieve a larger goal. Unity is the realisation that though we may work in different areas, we are finally interconnected and that interdependence is a higher order of living than independence. Though we may be many, we share a common purpose. 5 INTEGRITY Working with honesty, following the highest standards of professionalism. Integrity is when our decisions and actions remain consistent with our thoughts and words, written or spoken.
A business model is not a mere representation of the operations of an organisation, but is one that is endeavouring to create, deliver and capture value. Ultimately, it is tested against time and adversity. When an organisation and its approach sustain through volatile and uncertain business cycles and still create, deliver and capture value for the stakeholders, then they can well be called a model business. Business model What we depend on What we do We work closely with consumers and customers to develop insights into their needs. We source materials and services so as to manufacture ~1,300 products (including formulations) and 140 brands using several unit processes and unit operations. 3. Sourcing and manufacturing We develop our products and brands through innovation and consistent improvements based on insights and critical thinking. 2. Innovation Team members Our ~3,000 team members apply their knowledge and skill and invest their time in an agile way. Suppliers Our ~3,800 suppliers help us to source materials and obtain services uninterruptedly. Customers Our ~2,000 distributors and ~38,000 retailers help us to reach our products and brands across India and outside. Governments Our operations are facilitated further by the policies of the state and central governments. Relationships Input materials We use, amongst others, thousands of tons of derivatives of crude oil, salt and coal. Financial resources We predominantly use capital from our shareholders and internal accruals which enable us to secure sustainable growth. Intangible assets We leverage our strengths in research, technology, sourcing, manufacturing, logistics, brands and customer service which provide us competitive edge. Tangible assets We have integrated manufacturing facilities spread over ~1,500 acres, with eight sites and 18 offices in India and outside. Resources 1. Consumer insights 6 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Value we create for Our business model puts the customer at the centre of the business and decision-making and provides a foundation for future growth. We strive for innovation and excellence in select chemistries to delight our customers with our consistently superior quality, competent prices and valuable technical services. We aim to create lasting value and deliver benefits to our customers and the economies and communities we operate in. We deliver our products and brands through a network of warehouses and distribution channels in India and outside. 4. Logistics We make our products available to our customers directly and through distributors and retailers. 6. Sales We manage our portfolio of products and brands through product management, market development and marketing services. 5. Marketing We aim to provide superior quality products and brands to our consumers to meet their expectations. Consumers We supply our products to customers consisting of users and channel partners (distributors and retailers) to grow their businesses (and ours). Customers We partner with suppliers for our requirement of materials and services which in turn grow their business with that of ours. Suppliers We aim to create a happy work environment, reward the team members fairly and provide them with opportunities to learn and grow. Team members We contribute to the government exchequers, in India and outside, through our business operations. Governments We serve in particular the communities we operate in and in general the society to make a difference in the lives of people. Society We aim to make the planet better by consistently improving our operations, amongst others, to bring down gaseous emissions, liquid effluents and solid wastes. Planet We strive to deliver responsible, profitable and consistent growth for our shareholders. Shareholders 7
Serving diverse industries touching lives in many ways ... Agriculture Composites Construction Cosmetic Defence Dyestuff Electrical and Electronics Sport and Leisure Textile Tyre Wind Energy Personal Care Rubber Soap and Detergent Pharmaceuticals Automobile Home Care Horticulture Paint and Coatings Paper Flavour Food Fragrance Glass 8 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Footprint • Production facilities in India (Ankleshwar, Atul, Panoli and Tarapur) • Subsidiary companies with production facilities in India (Ambernath and Atul) and the UK (Bristol) • Joint venture entities with production facilities in India (Atul and Jodhpur) • Wholly-owned subsidiary companies in Brazil (São Paulo), China (Shanghai), Ireland (Dublin), the UAE (Dubai), the UK (Wilmslow) and the USA (Charlotte) • Building distribution network of retail sales across India • Operates through a network of 38,000 retail outlets in India • Has started selling its retail products in neighbouring countries manufactures 900 products and 400 formulations serves 4,000 customers in 83 countries owns 140 brands 9
Operational highlights Knowledge gained through literature remains unclear and common. It becomes clear and unique only with actions. Our endeavour is to continuously improve in all that we undertake. Given below are a few initiatives we took during 2022-23. The biggest room in theworld is the room for improvement. - Helmut Schmidt People • Executed structured role rotations and the filling up of middle and senior level positions internally • Implemented online recruitment process • Introduced flexible work timings Systems • Implemented advanced network infrastructure to empower next-generation technologies • Introduced a contractor job evaluation portal • Migrated four group entities to the core ERP application of Atul as part of the Single Global Instance project Safety • Conducted 126 HAZOP studies and 195 risk assessments • Implemented addressable fire detection and alarm system at Atul site. • Upgraded the existing firefighting systems at Atul and Ankleshwar sites with the introduction of a new fire tender and firefighting equipment Health • Built a new health centre with state-of-the-art facilities to serve team members, their families and the local community • Carried out 18,177 health check-ups and conducted seven COVID-19 vaccination camps for employees and their family members • Constructed a new occupational health centre for providing quality medical care to employees 10 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Environment • Built additional storage capacity for wastewater at Ankleshwar site to ensure uninterrupted production and sustain zero liquid discharge • Developed value-added by-products from waste streams at Atul site • Conducted life cycle impact assessment for four products and product carbon footprint calculation for six products Technology and Manufacturing • Decreased consumption of a key raw material in five products • Implemented 102 process improvement initiatives • Introduced a cost-efficient cooling system in a key product Research and Development • Decreased consumption of raw materials in five products and solvents • Developed 43 new products, of which 18 were commercialised • Improved the yield of 29 products Sales and Marketing • Added 382 new B2B customers • Introduced 164 new retail customers • Commenced sales in seven new geographies Growth • Debottlenecked 16 products • Executed two expansion projects • Received grant of patents for two products 11
Financial charts Sales by geography 2% 2% 4% 13% 8% 23% 50% 3% 13% 12% 50% 20% 2022-23 2021-22 South America Asia (excluding India) India North America Africa Europe Expenses as % of revenue (` cr) 6-year CAGR: 11% Sales 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Earnings before interest, taxes, depreciation and amortisation (` cr) 6-year CAGR: 10% 511 768 922 950 895 953 19.4% 16.7% 20.0% 24.1% 27.5% 19.3% 17.9% 512 EBITDA EBITDA % 47% 50% 50% 52% 54% 50% 50% 2,639 3,052 3,845 3,460 3,824 4,929 5,002 53% 47% 50% 50% 50% 50% 48% 46% 54% 50% 50% 50% 50% 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 India Outside India Growth 10% 16% 26% (1%) (10%) 42% 1% 52% 52% Raw materials Power, fuel and water Employees Selling and distribution Others Repairs and maintenance Depreciation Tax 4% 3% 3% 3% 4% 4% 6% 5% 5% 6% 6% 5% 10% 12% 52% 51% 2022-23 2021-22 12 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
*Excluding capital work-in-progress 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 (` cr) 6-year CAGR: 11% Profit before tax from operations and dividend Profit before tax from operations Dividend % (` cr) Sources and utilisation of cash Borrowings Operating cash flows Reduction in investments Other sources 2022-23 2021-22 Direct taxes Fixed assets Investments in group entities Dividend Buy-back of equity shares 63 388 909 409 73 392 34 Sources 552 449 177 86 96 Property, plant and equipment* (` cr) 307 621 928 96 823 113 805 104 800 277 779 374 899 268 1,078 919 918 904 1,056 1,273 1,346 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Additions during the year *as at March 31 Asset turnover ratio* 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2.44 2.60 3.04 2.81 2.16 2.56 2.35 100% 400 120% 397 150% 652 275% 803 200% 828 250% 804 325% 730 2022-23 2021-22 Utilisation 297 360 59 192 13
Return on average capital employed Employee benefit expenses and sales per employee 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 *as at March 31 Inventories NoDs % to sales 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 *as at March 31 Trade receivables NoDs % to sales (` cr) Inventories* (` cr) Trade receivables* 13.9% 12.4% 11.1% 11.2% 14.8% 14.2% 13.0% 51 45 41 41 54 52 47 368 379 428 427 511 701 648 507 718 762 719 714 1,059 894 65 79 66 63 69 72 60 19.2% 23.5% 19.8% 18.8% 20.6% 21.5% 17.9% 1excluding capital work-in-progress I revaluation reserve 2excluding exceptional I non-recurring items Average capital employed1 Return on average capital employed %1 2 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 25.7% 22.4% 32.1% 33.8% 29.6% 23.6% 19.2% 1,638 1,814 2.047 2,380 2,808 3,424 3,812 (` cr) (` cr) Employee benefit expenses Sales per employee 1.08 1.24 1.49 1.31 1.16 1.62 1.57 173 181 219 249 249 276 301 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 14 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
(` per share) 6-year CAGR: 16% Book value per share (` cr) Payment to the exchequer (` per share) 6-year CAGR: 12% Earnings per share 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 307 442 627 640 698 948 914 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 (` per share) BSE Sensex and share price 6-year CAGR: BSE sensex 12% Share price 20% 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 1year end closing prices Sensex1 Price per share1 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 29,621 32,969 38,673 29,468 49,509 10,288 58,569 58,992 2,380 2,622 3,573 3,975 7,076 6,961 96 91 145 216 213 205 187 648 741 893 1,035 1,254 1,459 1,555 15
Serving the society The purpose of life is to have it make some difference that you have lived and lived well. - Ralph Waldo Emerson Education • Distributed educational kits to 4,323 students of 31 schools • Imparted quality primary education to 8,410 children through 103 trained Atul Adhyapikas • Issued scholarships to 34 needy meritorious students • Supported 3,646 students through the enhancement of educational practices in four schools • Supported setting-up a library and a science laboratory in two schools benefitting 382 students Empowerment • Empowered 25 tribal families by providing cows • Formed 65 self-help groups to empower 723 women; linked 866 women with government schemes • Provided soft skills training to 383 students and 65 trainers | teachers of five ITIs • Supported 57 students by setting-up a computer lab with 30 computers in an ITI • Trained 1,794 youth in 15 vocational courses Health • Conducted 34 anaemia screening camps benefitting 3,755 adolescent girls and women • Conducted 45 eye camps benefitting 16,293 patients; 13,140 patients were provided with spectacles • Organised 41 blood donation camps; 3,778 units of blood were collected • Supported the Fit@50+ Women’s Trans Himalayan expedition cause to promote health and wellness among women above the age of 50 • Trained 75 frontline workers on the first 1000 nutrition days of a child The Founder of our Company, Kasturbhai Lalbhai, believed that businesses must have a broader purpose, beyond just generating profits and promoted this philosophy in every business enterprise he built. The Company has inherited this legacy and has continued to build on it in its own small way by implementing various initiatives to serve society since its inception. 16 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Infrastructure • Built a post office and a police station benefitting 10 villages • Constructed three school toilets benefitting 1,286 students • Developed three playgrounds benefitting 281 students • Renovated six schools benefitting 571 students • Renovated 16 anganwadis benefitting 1,100 children Relief • Distributed food and blankets to the flood-affected families of Valsad • Established a bal vikas kendra for 50 children of brick kiln workers • Provided blood units to 84 poor and abandoned patients • P rovided community-based rehabilitation counselling and intensive care to 72 children • Supported education of 136 children and their mothers in their upbringing Conservation • Commissioned five sewage treatment plants of 187 KLD in three educational institutes • Created 116 structures for conservation of soil and water in a village • Installed five solar pumps consuming 29,700 kWh of green energy for agariya farmers • Installed solar power plants generating 65,100 kWh energy annually in four educational institutions • Planted 11,000 trees of 62 species to develop a Miyawaki forest • Planted 40,000 trees to preserve biodiversity • Prevented 15,918 kg of plastic from being added to landfills through cleanliness drives • Provided 16 solar pumps benefitting 63 farmers • Started waste management project in eight villages • Supported 200 families to install home-based biogas plants 17
Letter to the Shareholders Dear Shareholders, In a year of historic uncertainties, our Company completed 75 years on September 5, 2022. This is therefore one more occasion for team Atul, of which I have the privilege to be a part, to look back – on what has helped our Company to survive the test of time, in particular the cherished legacy of Values: integrity, perseverance and unity and attributes: learning agility, continuous improvement and bias for action, lived by Kasturbhai Lalbhai, the Founder of our Company – and look forward, based on such a legacy, to prepare it for the times ahead. Thus, despite 2022-23being one of the harder years, with uncertainties still continuing and some of our own operating problems, team Atul is ready to face the future. World economy rapidly worsened in the second half of 2022 as it was hit by a series of severe andmutually reinforcing shocks (such as war in Ukraine, pandemic, inflation and climate). World GDP, sized at US$ 100 tn, thus grew at 3.4% in 2022 against 5.9% in 2021; world GDP growth forecast is 2.8% in 2023 – advanced economies are expected to see a pronounced growth slow down. IMF considers multilateral cooperation as essential to make progress to create a more resilient world economy. India is opening up further to fuel its economic growth, and India Inc is front leading the turnaround by embracing better operational efficiency and financial prudence – this endeavour is also true for our Company. Sized at US$ 5.3 tn and US$ 1.48 tn, world chemical industry and world pharmaceutical industry grew slower at 5.5% and 4.2% respectively. Sized at US$ 191 bn and US$ 50 bn, Indian chemical industry and Indian pharmaceutical industry grew slower at 9% and 19% respectively. The above numbers show the opportunity to participate and innovate that lies ahead for both India and our Company. Chemistry has influenced our life so much we do not even realise that we come across chemicals every moment. With depth in science and technology, our Company is well placed to further expand its portfolio of products and formulations and thus in its own small way contribute to the development of India. Since its inception on September 5, 1947, our Company has nurtured the concept of sustainability and is strengthening it further. Team Atul worked with a leading consultant and learnt more about how to express its existing initiatives and outcomes to substantiate its commitment to sustainability; the team is also taking new initiatives. ESG which can be viewed as a subset of sustainability (with four pillars – environmental, social, human and economic) is a set of criteria used to evaluate performance related to environment, social and governance. Our endeavour is to better both ESG and economic (financial) performance of our Company – I trust you will value this combined approach to competitiveness. Our endeavour fell short - standalone PBT from operations of our Company declined in 2022-23 to ` 730 cr (PY ` 804 cr). This adversely impacted EBITDA and RoCE at 18% and 19% respectively (earlier best EBITDA 26%1 and RoCE 28%1 in 2020-21 and 2019-20 respectively). The key reasons for the decline in performance were i) lower sales in international markets ii) pressure on selling prices and iii) fire in a plant. Standalone sales at ` 5,002 cr grew by ~ 1.5% whereas sales volume de-grew by ~ 1% as compared to 2021-22. The Board of Directors declared an interim dividend of 75% (to commemorate completion of 75 years of incorporation) and recommended 250% final dividend; the pay-out will be 17%. Our Company has been building two B to C businesses – Crop Protection (current sales ~ ` 200 cr) and Polymers (current sales ~ ` 250 cr). The businesses serve mainly agriculture, automobile, construction, foam and furnishing, footwear and handicraft industries whose potential is limitless, restrained only by our limitations – team Atul is slowly, but steadily strengthening itself in the marketplace (e.g. identifying and narrowing the gaps in the portfolio) and at the workplace (e.g. institutionalising processes). These are still early days for these businesses, and we are confident to grow them into significant businesses. Some of the products and formulations have also been accepted in markets beyond India. Combined sales of subsidiary, joint venture and associate entities – which will not tally with the consolidated sales (as per iGAAP) – namely, Atul Bioscience (100%), Osia Infrastructure (100%), DPD (98%), Atul Rajasthan Date Palms (74%), Rudolf Atul Chemicals (50%), Anaven (50%) and Amal2 (49.85%) were higher at ` 578 cr (from ` 518 cr). Combined PBT of these entities however declined to ` 10 cr (from ` 47 cr) because of i) lower sales in Atul Bioscience, ii) delayed stabilisation of Atul Rajasthan Date Palms, iii) pressure on selling price in Anaven, iv) start-up problems in Amal Speciality Chemicals (a 100% subsidiary of Amal) and v) higher interest and depreciation in general - these problems are being resolved. In 2022-23, our Company completed investment of ` 268 cr and Amal completed investment of ` 78 cr. Investment under implementation in our Company (four key projects) and its subsidiary entities, Atul Products (one key project ) and DPD (one key project ) is ` 1,350 cr and will be completed between now and fourth quarter of 2024-25. These projects at full capacity utilisation at prevailing prices (raw materials and finished products) can add sales of ` 1,150 cr in our Company and ` 380 cr in its subsidiary entities per annum. Furthermore, unrealised sales from completed projects in our Company and its subsidiary, JV and associate entities at full capacity can add ` 800 cr and ` 40 cr respectively per annum. 18 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Our immediate tasks are to i) realise envisaged sales (even when demand is lacklustre), ii) streamline the completed projects wherein we have encountered difficulties, iii) commission projects underway and iv) trim excess working capital tied up – team Atul is already seized of these tasks. Our six enduring mandates remain just as important: i) drive process efficiency in manufacturing and every other function, ii) pervade technology in every function – it is a deflationary force in an inflationary economy, iii) become world-class in people productivity, iv) remain lean in fixed cost, v) conserve cash while evolving the future (that is, measure performance by free cash flow) and vi) engage with customers on ideas with large potential. Atul Foundation undertook 40 projects under its six programs, namely conservation, education, empowerment, health, infrastructure and relief, all in sync with the national priorities, for serving society. The Foundation manages 15 institutions of which seven are public private partnerships; it is having 16 major ongoing projects. Atul Healthcare is a new institution and Community Based Rehabilitation andWater Recycling System are two new projects. The Foundation touched the lives of ~ 1,25,000 people (in seven states of India). The amount spent by the Foundation was ` 16 cr whereas the total spent was ` 40 cr. For more reading on the activities of the Foundation, please visit www.atulfoundation.org Despite the fact that our Company has come a long way in the key people processes (in particular, recruitment, learning and development, performance management and people planning), we see a need to further articulate and institutionalise them – this will enhance individual and collective performance and help us achieve the immediate tasks and enduring mandates mentioned in the paragraph nine above. We are therefore articulating the processes with internal functional and cross-functional teams and external HR consulting firms and institutionalising them along with team members across our Company particularly those with people responsibility. I value the members of team Atul - they have demonstrated commitment and dedication amidst unnerving uncertainties. I thank the consumers and customers – they set a higher bar and thus push us to stretch and also give us an opportunity to serve. I recognise the support of the supply chain partners. Bansi Mehta retired from the Board after distinguished affiliation of 31 years and Rajendra Shah will retire at the coming AGM after esteemed association of 41 years – I am indebted to them for their guidance, constructive approach and availability all the time. I am grateful to you, my every fellow shareholder, for your confidence, trust and understanding – these mean more than anything else. Even though 2023-24 is still in a slowdown mode, I am sure that our Company will emerge from these testing times in a stronger position than when it entered them. We consistently assess and discern between the ‘trend of the minute’ and those ‘shifts that are truly permanent’. Even if there is a lag for the demand to pick up, team Atul is using these times to broaden and deepen customer base and build new capabilities at the workplace. As we embrace responsibility and grasp opportunities embedded even in uncertain times, there is no limit to what we can achieve for our Company and in a small way for India. I therefore say that the best days for our Company are yet to come. Sincerely, Sunil Siddharth Lalbhai Chairman and Managing Director 1excluding one-time dividend income 2along with Amal Speciality Chemicals Ltd, 100% subsidiary of Amal True self-leadership is about self-examination by looking inwards, identifying mistakes and their reasons and correcting them as against examination of the faults outside. The real endeavour is to turn the attention inwards; this nurtures the human spirit. This concept is of course true for people, but it is equally rational if seen from the lens of science and technology. Process engineering laboratory – established to revalidate and improve manufacturing processes – is one such endeavour. We are working to institutionalise this concept personally and professionally. Process engineering laboratory, Atul site 19
Board of Directors Rajendra Shah Mr Rajendra Shah is a Director of the Company since May 1983. He is a Senior Partner of Crawford Bayley & Co, a firm of Solicitors and Advocates. Mr Shah holds a degree in Law from the University of Mumbai and has passed the Solicitor examination from the Honourable High Court of Bombay. Samveg Lalbhai Mr Samveg Lalbhai is a Director of the Company since January 2000 and a Managing Director of the Company since December 2000. Mr Lalbhai holds a graduate degree in Commerce from Gujarat University. Board Committees 1. Audit Committee 2. Corporate Social Responsibility Committee 3. Investment Committee 4. Nomination and Remuneration Committee 5. Risk Management Committee 6. Stakeholders Relationship Committee Chairperson Member Sunil Lalbhai Mr Sunil Lalbhai is a Managing Director since June 1984 and the Chairman of the Board of the Company since August 2007. Mr Lalbhai holds a postgraduate degree in Chemistry from the University of Massachusetts and a postgraduate degree in Economic Policy and Planning from Northeastern University. 3 Susim Datta Mr Susim Datta is a Director of the Company since October 2002. He was the Chairman of Hindustan Unilever Ltd in India and Nepal from 1990 to 1996. Mr Datta holds a postgraduate degree in Science and Technology from the University of Calcutta and is a Chartered Engineer. Bansi Mehta Mr Bansi Mehta is a Director of the Company since April 1992. He is the Chief Mentor at Bansi S Mehta & Co since 2009. Mr Mehta holds a graduate degree in Commerce from the University of Mumbai and is a Fellow Member of the ICAI. 1 3 3 4 2 3 5 6 20 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow
Shubhalakshmi Panse Ms Shubhalakshmi Panse is a Director of the Board since March 2015. She was the Chairperson and Managing Director of Allahabad Bank Ltd. Ms Panse holds a postgraduate degree in Science from Pune University and a postgraduate degree in Business Administration from Drexel University. 2 Bharathy Mohanan Mr Bharathy Mohanan joined the Company in August 1992 and is aWhole-time Director since January 2009. He is currently President, Utilities and Services and the Occupier of the Company. Mr Mohanan holds a graduate degree in Engineering (Honours) from the University of Calicut. 2 5 Gopi Kannan Thirukonda Mr Gopi Kannan Thirukonda joined the Company in October 1993 and is a Whole-time Director since October 2014. He is currently the Chief Financial Officer. Mr Gopi Kannan holds a graduate degree in Science from the University of Madras and a postgraduate diploma in management from IIMA. He is a Fellow Member of the ICAI, the ICMAI and the ICSI. 5 6 Srinivas Rangan Mr Srinivasa Rangan is a Director of the Company since July 2010. He is an Executive Director of Housing Development Finance Corporation Ltd. Mr Rangan holds a graduate degree in Commerce from the University of Delhi and is an Associate Member of the ICAI and the ICMAI. 1 Mukund Chitale Mr Mukund Chitale is a Director of the Company since October 2014. He is a founder of the Chartered Accountancy firm, Mukund M Chitale & Co. Mr Chitale holds a graduate degree in Commerce from the University of Mumbai and is a Fellow Member of the ICAI. 1 4 Baldev Arora Mr Baldev Arora is a Director of the Board since April 2015. He was the Chairman of Cyanamid Agro Ltd and Chairman and Managing Director of Wyeth Lederle Ltd. Mr Arora holds a graduate degree in Mechanical Engineering from Punjab University. 1 3 4 5 6 Pradeep Banerjee Mr Pradeep Banerjee is a Director of the Company since May 2022. He was Executive Director on the Board of Hindustan Unilever Ltd, Managing Director of a joint venture entity of HUL in Singapore, and the Chairman of a joint venture entity in Nepal. Mr Banerjee holds a graduate degree in Chemical Engineering from Indian Institute of Technology, Delhi. 21
22 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow Directors’ Report Dear Members, The Board of Directors (Board) presents the annual report of Atul Ltd together with the audited Financial Statements for the year ended on March 31, 2023. 01. Financial results (` cr) 2022-23 2021-22 Sales 5,002 4,929 Revenue from operations 5,062 4,993 Other income 199 90 Total revenue 5,261 5,083 Profit before tax 730 804 Tax expenses (178) (196) Profit for the year 552 608 Balance in retained earnings at the beginning of the year 3,664 3,143 Transfer from comprehensive income 5 (28) Buy-back of equity shares (net of amount adjusted from general reserve) (18) - Dividend (96) (59) Balance in retained earnings at the end of the year 4,107 3,664 02. Performance Sales during the year remained almost the same as last year, registering 1% increase from ` 4,929 cr to ` 5,002 cr. This was mainly due to subdued demand in the Performance and Other Chemicals (POC) segment, which was marginally offset by better volumes in the Life Science Chemicals (LSC) segment; the non-availability of one of the plants due to fire had impacted sales of the LSC segment. Sales in India as well as outside India witnessed no major growth and reported about 1% increase from ` 2,479 cr to ` 2,505 cr within India and about 2% increase from ` 2,450 cr to ` 2,497 cr outside India. Profit before tax decreased by 9% from ` 804 cr to ` 730 cr, mainly due to lower sales volumes on account of muted demand and very thin margins due to the higher raw material and energy prices. Sales of the LSC segment increased by 19% from ` 1,445 cr to ` 1,715 cr because of higher sales prices and volumes in the Crop Protection sub-segment; the EBIT increased by about 67% from ` 191 cr to ` 319 cr. Sales of the POC segment decreased by about 6% from ` 3,484 cr to ` 3,287 cr, mainly because of lower sales volumes in two sub-segments; the EBIT decreased by about 48% from ` 586 cr to ` 302 cr. More details are given in the Management Discussion and Analysis. 03. Dividend and buy-back of equity shares During 2022-23 the Board declared a special interim dividend of ` 7.50 per equity share of ` 10 each fully paid up to commemorate the 75th anniversary of the incorporation of the Company. The Board also recommended payment of a final dividend of ` 25 per equity share of ` 10 each fully paid up. During 2021-22, the Board approved ` 70 cr for the buy-back of equity shares through the open market stock exchange route to return surplus funds to the members of the Company and to improve earnings per share by a decrease in the equity base, thereby leading to a long-term increase in value for the members. The Company bought back 73,296 equity shares at an aggregate consideration of ` 69.90 cr. The buy-back was closed on May 09, 2022. 04. Energy conservation, technology absorption and foreign exchange earnings and outgo Information required under Section 134 (3)(m) of the Companies Act, 2013 (the Act ) read with Rule 8(3) of the Companies (Accounts) Rules, 2014 as amended from time to time, forms a part of this report, which is given on page number 28.
23 05. Insurance The Company has taken adequate insurance to cover the risks to its employees, property (land and buildings), plant, equipment, other assets and third parties. 06. Risk management Risk management is an integral part of the business practice of the Company. The framework of risk management concentrates on formalising a system to deal with the most relevant risks, building on existing management practices, knowledge and structures. With the help of a reputed international consultancy firm, the Company has developed and implemented a comprehensive risk management system to ensure that risks to the continued existence of the Company as a going concern and to its growth are identified and remedied on a timely basis. While defining and developing the formalised risk management system, leading standards and practices have been considered. The risk management system is relevant to business reality, pragmatic and simple and involves the following: i) Risk identification and definition – Focuses on identifying relevant risks, creating | updating clear definitions to ensure undisputed understanding along with details of the underlying root causes | contributing factors. ii) Risk classification – Focuses on understanding the various impacts of risks and the level of influence on their root causes. This involves identifying various processes, generating the root causes and a clear understanding of risk inter-relationships. iii) Risk assessment and prioritisation – Focuses on determining risk priority and risk ownership for critical risks. This involves the assessment of the various impacts taking into consideration risk appetite and the existing mitigation controls. iv) Risk mitigation – Focuses on addressing critical risks to restrict their impact(s) to an acceptable level (within the defined risk appetite). This involves a clear definition of actions, responsibilities and milestones. v) Risk reporting and monitoring – Focuses on providing to the Audit Committee and Board periodic information on risk profile evolution and mitigation plans. Roles and responsibilities Governance The Board has approved the Risk Management Policy of the Company. The Company has laid down procedures to inform the Board on i) to iv) listed above. The Audit Committee | Risk Management Committee periodically reviews the risk management system and gives its recommendations, if any, to the Board. The Board reviews and guides the Risk Management Policy. Implementation Implementation of the Risk Management Policy is the responsibility of the Management. It ensures the functioning of the risk management system as per the guidance of the Audit Committee | Risk Management Committee. The Company has a risk management oversight structure in which each sub-segment has a Chief Risk and Compliance Officer. The Management at various levels takes accountability for risk identification, appropriateness of risk analysis, and timeliness aswell as theadequacy of risk mitigation decisions at both individual and aggregate levels. It is also responsible for the implementation, tracking and reporting of defined mitigation plans, including periodic reporting to the Audit Committee and Board. 07. Internal financial controls The internal financial controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Financial Statements. These include policies and procedures that: i) pertain to the maintenance of records, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company, ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Financial Statements in accordance with Generally Accepted Accounting Principles and that receipts and expenditures are being made only in accordance with authorisations of the Management and Directors of the Company, iii) provide reasonable assurance regarding the prevention or timely detection of unauthorised acquisition, use, or disposition of the assets that can have a material effect on the Financial Statements. A reputed international consultancy firm has reviewed the adequacy of the internal financial controls with respect to the Financial Statements. The Management assessed the effectiveness of the internal financial controls over financial reporting as of March 31, 2023, and the Board believes that the controls are adequate.
24 Atul Ltd | Annual Report 2022-23 Corporate Overview Statutory Reports Financial Statements Atul Ltd | Annual Report 2022-23 Atul Ltd Atul House G I Patel Marg Ahmedabad 380 014, Gujarat India Atul Ltd | Annual Report 2022-23 Reconnect | Reimagine | Regrow 08. Fixed deposits During 2022-23, the Company did not accept any fixed deposits. 09. Loans, guarantees, investments and security Particulars of loans, guarantees, investments and security provided are given on page numbers 146 and 148. 10. Subsidiary, joint venture and associate companies | entities and joint operation During 2022-23: i) Atul Healthcare Ltd, a wholly-owned subsidiary of the Company formed a joint venture entity by acquiring 50% stake of Valsad Institute of Medical Sciences Ltd in accordance with the Shareholders’ Agreement. ii) Atul Aarogya Ltd, Atul Ayurveda Ltd, Atul Clean Energy Ltd, Atul Consumer Products Ltd, Atul Crop Care Ltd, Atul Entertainment Ltd, Atul Hospitality Ltd, Atul (Retail) Brands Ltd, Atul Seeds Ltd, Jayati Infrastructure Ltd and Osia Dairy Ltd became wholly-owned subsidiary companies of the Company. There were no other changes in the subsidiary, joint venture and associate companies | entities, and joint operation which were reported earlier. 11. Related party transactions All the transactions entered into with the related parties were in the ordinary course of business and on an arm’s length basis. Details of such transactions are given on page number 160. No transactions were entered into by the Company that required disclosure in Form AOC-2. 12. Corporate social responsibility The Corporate Social Responsibility (CSR) Policy, the CSR Report and the composition of the CSR Committee are given on page number 32. 13. Annual return Annual return for 2022-23 is available on the website of the Company at: www.atul.co.in/investors/annual-general-meetings/ 14. Auditors Statutory Auditors Deloitte Haskins & Sells LLP, Chartered Accountants (DHS) were reappointed as the Statutory Auditors of the Company at the 45th Annual General Meeting (AGM) held on July 29, 2022, until the conclusion of the 50th AGM. T he Auditor’s Report for the financial year ended on March 31, 2023, does not contain any qualification, reservation or adverse remark. The report is enclosed with the Financial Statements in this annual report. Cost Auditors The Company has maintained cost records as required under the Act and the Companies (Cost Records and Audit ) Rules, 2014. The members ratified the appointment of R Nanabhoy & Co as the Cost Auditors for 2022-23 on July 29, 2022. Secretarial Auditors SPANJ & Associates, Company Secretaries, continue to be the Secretarial Auditors for 2022-23 and their report is given on page number 35. 15. Directors’ responsibility statement 15.1. In preparation of the annual accounts for the financial year that ended on March 31, 2023, the applicable accounting standards have been followed and there are no material departures. 15.2. The accounting policies were selected and applied consistently and judgements and estimates thus made were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period. 15.3. Proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. 15.4. The attached annual accounts for the year ended on March 31, 2023, were prepared on a going concern basis. 15.5. Adequate internal financial controls to be followed by the Company were laid down and they were adequate and operating effectively. This is given under para number 07. 15.6. Proper systems were devised to ensure compliance with the provisions of all applicable laws and the same were adequate and operating effectively. 16. Directors 16.1. Appointments | Reappointments | Cessations i) Mr Bansi Mehta, Independent Director is retiring on May 31, 2023. The Company immensely benefited from his knowledge, experience and expertise in the last 31 years. ii) According to Article 86 of the Articles of Association of the Company, Mr Rajendra Shah retires by rotation. Although eligible, he desires not to be reappointed in the ensuing AGM. Accordingly, he will cease to hold office as a Non-executive Director of the Company in the ensuing AGM. The Company
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