Primo Chemicals Ltd

Your Directors have pleasure in presenting the Company's 49th Annual Report on the business and operations of the Company together with Standalone and Consolidated Audited Financial Statements (Ind AS based) for the Financial Year ended 31st March, 2024 and the report of the Auditors thereon.

FINANCIAL HIGHLIGHTS

The financial results of the Company for the year ended 31st March, 2024 are summarised below:-

(C In Crores)

PERFORMANCE REVIEW & STATE OF COMPANY'S AFFAIRS

The financial year 2023-24 has been a tough year for the Company because of the increase in finance cost due to ongoing investment in setting up of new plants to diversify the product-mix, augmentation of existing Caustic capacity, investment in setting up of Captive Power Plant coupled with sluggish demand and pressure on selling prices of Caustic Soda, Chlorine, etc. coupled with marginally higher input cost – major raw material (Salt).

Despite the undue pressure on operations, the Company has recorded an EBITDA of Rs. 26.34 Crores during the Financial Year ended 31st March, 2024. The Capacity Utilization at 77% with production of 1,18,899 MT of Caustic Soda Lye (CSL) during the year under review was lower against 1,34,977 MT denoting 91% Capacity Utilization in the preceding year. Consequently, Net Sales Turnover has decreased by 38.96% to Rs. 396.87 Crores during the financial year ended 31st March, 2024 as against Net Sales Turnover of Rs. 650.16 Crores during the previous financial year. The combined average sales realization (net of GST) has declined from Rs. 50,045 per ECU in the Financial Year ended 31st March, 2023 to Rs. 33,959 for the financial year ended 31st March, 2024. All these factors resulted Company's suffering a Net Loss before Tax of Rs. 31.43 Crores for the financial year ended 31st March, 2024 as against Net profit before Tax of Rs. 186.50 Crores during the previous financial year.

During the financial year under review, the Company has commissioned its Aluminium Chloride Plant and Flaker Plant in the middle of the year. The impact of these plants is likely to be reflected in the current year 2024-25 as during the year under review these could not be operated at full capacity due to pressure on the demand for these products in the market. The implication of the operation of the Power Plant on the profitability of the Company would likely to be witnessed in the financial year 2024-25.

ASSOCIATE COMPANY

As on 31st March, 2024, the Company has only one Associate Company namely Flow Tech Chemicals Private Limited (FTCPL), a Promoter Group Company. The total Revenue of FTCPL was Rs. 228.78 Crores with Profit before tax of Rs. 1.47 Crores as compared to the Revenue of Rs. 246.56 Crores with Net Profit before tax of Rs. 9.43 Crores in the previous year. There are no Subsidiary or Joint Venture Companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). Pursuant to Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, the Statement containing salient features of the financial statements of the Associate Company in Form AOC-1 is given in Annexure – I, forming part of this Report.

CHANGE IN CAPITAL STRUCTURE

During the period under review, the Company did not undertake any issuance or allotment of shares. As a result, there has been no change in the paid-up share capital of the company.

PERFORMANCE_AT_THE_CONSOLIDATED LEVEL

The Company's Associate Company Flow Tech Chemicals Private Limited (FTCPL) which is primarily engaged in the manufacturing of Chlorinated Paraffin (CP) a widely used Plasticizer and Hydrochloric Acid. FTCPL is one of the major consumer of Chlorine, resulting substantial dependence of our Company on its Associate company for the disposal of Chlorine and sustainable operations.

At Consolidated Level, Loss after Tax of the Company was Rs.25.33 Crores during the Financial Year 2023-24 as against profit after tax of Rs. 137.40 Crores in the previous year.

In view of the Net Loss before Tax of Rs. 31.43 Crores incurred during the financial year ended 31st March, 2024, the Board felt that no dividend be recommended for the financial year ended 31st March, 2024 for payment to the equity shareholders of the Company.

DIVIDEND DISTRIBUTION POLICY

In terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors of the Company has formulated and adopted the Dividend Distribution Policy, which is available on the website of the Company at https:// www.primochemicals.in/ page/investors.

FINANCE

The Company, during the year under review, availed financial facilities from AU Small Finance Bank Limited and HDFC Bank Limited for meeting its funds requirement for Working Capital / Operational Capital. The Company has also availed Term Loan from Punjab National Bank for meeting a part of investment in Aluminum Chloride Project besides availing a part of working capital finance from them. The details of the said finance, forms part of Notes of the Financial Statements.

DEPOSITS

During the year under review, the Company has not accepted any deposit from the public within the meaning of Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There had been no material changes and commitments during the period from end of Financial Year under review till the date of this Report which may be affecting the financial position of the Company.

CURRENT OPERATIONS & OUTLOOK

As a part of ongoing expansion plans, the Company has commissioned a) Aluminum Chloride Plant with an installed capacity of 16,500 Ton Per Annum (TPA) to boost Chlorine consumption and b) Caustic Flaker Plant with an installed capacity of 66,000 Ton Per Annum (TPA) for better realization for Caustic Soda. These projects alongwith Stable Bleaching Powder (SBP) Plant commissioned in the FY 2022-23, will have a positive impact on the Company's revenue and profitability of the Company in FY 2024-25.

The Company has achieved a major milestone and achievement towards its vision by commissioning 35 MW Coal and Biomass based Power Plant. It will have a positive impact on the Company's revenue and profitability in the current financial year 2024-25 by reducing power cost which constitutes nearly 65% of cost of production. The Company has secured a 10-year coal supply agreement with Northern Coalfields Limited (A subsidiary of Coal India Limited) to ensure the long-term sustainability of the power plant. This agreement guarantees an annual supply of coal, providing a stable foundation for the plant's operations and contributing to improved financial performance.

The Company has already acquired 49% stake in Flow Tech Chemicals Private Limited (FTCPL) its Promoter Group Company till 31st March, 2024 to strengthen the Company's downstream portfolio and to amplify product profitability. Post 100% acquisition, FTCPL will become wholly owned Subsidiary of the Company.

CREDIT RATING

The details of Credit Rating are disclosed in the Corporate Governance Report, which forms part of this Annual Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Pursuant to Section 186 of the Act read with the Companies (Meetings of the Board and its Powers) Rules, 2014, disclosures relating to loans, guarantees and investments as on 31st March 2024 are given in the Notes to the Financial Statements.

ENVIRONMENT AND ENERGY CONSERVATION

As a responsible Chemicals manufacturer environmental safety has been one of the key concerns of the Company. It is the constant endeavor of the Company to strive for compliant of stipulated pollution control norms.

The Company gives top priority to ensure clean air and better living environment and to the inhabitants in and around the factory. The Company has in place the Online Monitoring System at Works connected with Central Pollution Control Board server showing Real Time data of all parameters specified by them. A Safety Audit of the Plant was conducted during the financial year 2023-24 by the National Safety Council and its recommendations are being implemented.

The Company strives to enhance energy efficiency in all its manufacturing facilities. Energy Audit is conducted on a regular basis through various agencies, active in the field. Various activities & modifications in the plant process are being implemented which are directed towards achieving the Targeted Specific energy Consumption i.e., Energy Consumption Per Metric Tonne of Caustic Production, as set by Bureau of Energy Efficiency.

The information relating to the Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo as required to be disclosed pursuant to the provisions of Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, is given in Annexure-II forming a part of this report.

LISTING

The Equity Shares of the Company are listed on the BSE Limited. The Annual listing fee for the year 2024-25 has been paid to BSE Limited.

CORPORATE SOCIAL RESPONSIBILITY

During the year under review, the Company had to spend Rs. 183.44 lacs based on the average net profit of the last three years on CSR Activities. Accordingly, an amount of Rs. 183.55 lacs was spent on various CSR Activities as per the Policy. The detailed report as per Section 135 of the Companies Act, 2013 read with the Companies (CSR Policy) Rules, 2014 has been attached as Annexure III.

The particulars of the Corporate Social Responsibility Committee constituted by the Company pursuant to the provisions of Section 135 of the Companies Act, 2013 and the rules made thereunder are included in the Corporate Governance Report annexed and forming part of this Report.

HUMAN RESOURCES

The Company continues to place great value on its human resources. The process of development and up gradation of human resources continued. The industrial relations remained cordial during the financial year under review. The Company has received full support in implementation of various projects and reforms towards pollution control and ensuring safety and energy conservation.

The Particulars of Employees and Managerial Remuneration under Section 197(12) of the Companies Act, 2013 read with Rule 5(1), (2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in Annexure - IV forming a part of this Report.

As per the requirement of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the members of the Company which will be available for inspection at the Registered Office of the Company during working hours. Members interested in obtaining the said information will be furnished the same upon receipt of the request.

POLICY ON PREVENTION OF SEXUAL HARASSMENT AT THE WORKPLACE

The Company has zero tolerance for Sexual Harassment at Workplace and has in place a "Policy on Sexual Harassment at Workplace" pursuant to Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder. The Policy aims to provide protection to employees at the Workplace and prevent and redress complaints of sexual harassment. The Policy has been framed with the objective of providing a safe working environment, where employees feel secure. This policy is being enforced in a positive manner.

Internal Complaints Committee has been setup to redress complaints regarding sexual harassment. During the year under review, the Company has not received any complaint under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

(i) Management Discussion and Analysis

AsperSEBI(ListingObligations&DisclosureRequirements) Regulations, 2015, the Management Discussion and Analysis Report for the financial year 2023-24 is annexed as Annexure – V forming part of this report.

(ii) Corporate Governance Report

The Company has complied with the Corporate Governance Code as stipulated under the Listing Regulations. The Corporate Governance Report for the financial year 2023-24 and Auditors' Certificate regarding compliance of conditions of Corporate Governance are also annexed as Annexure – VI forming part of this report.

(iii) Business Responsibility & Sustainability Report

The Business Responsibility and Sustainability Report (BRSR) for the year ended 31st March, 2024 as stipulated under Regulation 34(2)(f) of SEBI Listing Regulations is annexed as Annexure VII which forms part of this Annual Report.

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, your Company is in compliance with the applicable Secretarial Standards specified by the Institute of Company Secretaries of India relating to the meetings of the Board and General Meetings.

DIRECTORS & KEY MANAGERIAL PERSONNEL

As on 31st March, 2024, the total Board strength comprises of 8 Directors out of which 2 Directors are Executive Directors, 2 are Non-Executive Non-Independent Directors and 4 are Non- Executive Independent Directors.

Declaration of Independent Directors

As on 31st March, 2024, the Company has four Independent Directors on its Board including a woman Independent Director. All the Independent Directors have met the requirements specified under Section 149 (6) of the Act, 2013 regarding holding the position of ‘Independent Director' and the necessary Declaration from each Independent Director under Section 149(7) of the Act has been received.

In the opinion of the Board, there has been no change in the circumstances which may affect their status as Independent Directors of the Company and the Board is satisfied of the integrity, expertise, and experience (including proficiency in terms of Section 150(1) of the Act and applicable rules thereunder) of all Independent Directors on the Board. In terms of Section 150 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, Independent Directors of the Company are registered on the Independent Director Databank maintained by the Indian Institute of Corporate Affairs (IICA).

Meeting of Board of Directors

Five meetings of the Board were held during the year under review. For details, please refer to the Corporate Governance Report, which is a part of this Report.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an Annual Performance Evaluation of its own performance, its Committees and all the Directors individually. The performance of the Independent Directors was evaluated by the entire Board except the person being evaluated. The exercise of performance evaluation was carried out electronically through a secure application.

The evaluation of Non-Independent Directors, Chairman and the Board as a whole was done at a separate meeting by the Independent Directors.

The Nomination and Remuneration Committee also reviewed the performance of all Directors of the Company. The same was discussed in the Board Meeting that followed the meeting of the Independent Directors and the Nomination and Remuneration Committee. The criteria for evaluation of the performance of the Directors (including Independent Directors) is placed on the Company's website at https://www.primochemicals.in/ page/investors.

Retirement by Rotation

In accordance with the provisions of the Articles of Association of the Company, read with Section 152 of the Companies Act, 2013, Shri Sukhbir Singh Dahiya, Director of the company, retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment.

Necessary Resolutions for the re-appointment of aforesaid Director, wherever applicable, have been incorporated in the Notice convening the ensuing AGM. As required under the listing regulations and Secretarial Standards on General Meetings issued by ICSI, the relevant details of Director retiring by rotation at the ensuing AGM is furnished as ‘Annexure A' to the Notice of AGM.

Committees of the Board

Pursuant to the requirements under the Companies Act, 2013 and the Listing Regulations, the Board has constituted the following committees: a. Audit Committee b. Stakeholders Relationship cum Share Transfer Committee c. Nomination & Remuneration Committee d. Corporate Social Responsibility (CSR) Committee e. Risk Management Committee The details of the Committees viz. Composition, number of meetings held and attendance of the Committee Members in the meetings are given in the Corporate Governance Report forming part of this Annual Report.

The Company has formulated a Risk Management Policy as per the requirement under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 which can be accessed on the Company's website at https://www.primochemicals.in/page/ investors. The said Policy includes identification, assessment, response and monitoring system for mitigation of various risks.

Key Managerial Personnel (‘KMP')

The Company has re-appointed Shri Naveen Chopra as Managing Director and Jatin Dahiya as Executive Director for a further period of 5 years in its 48th Annual General Meeting held on 29th September, 2023 w.e.f. 29th October, 2023 and 1st April, 2024, respectively.

As on 31st March, 2024, the Company has the following Key Managerial Personnel as per Section 2(51) of the Companies Act, 2013:

1. Shri Naveen Chopra, Managing Director

2. Shri Jatin Dahiya, Executive Director

3. Shri Arun Kumar Kaushal, Chief Financial Officer

4. CS Sugandha Kukreja, Company Secretary and Chief HR Officer.

The Board of Directors of the Company, in its meeting held on 30th May, 2024, has appointed CA Sunil Parsad, Sr. Manager (Finance) as Chief Financial Officer w.e.f. 1st July, 2024 in place of Shri Arun Kumar Kaushal, who had retired from the services of the Company w.e.f. 30th June, 2024.

INTERNAL FINANCIAL CONTROL WITH RESPECT TO FINANCIAL STATEMENTS

The Company has in place adequate Internal Financial Controls with respect to financial statements. No material weakness in the design or operation_of_such controls was observed during the financial year 2023-24.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm that: (i) In the preparation of the annual accounts for the financial year ended 31st March, 2024, the applicable accounting standards have been followed along with proper explanation relating to material departures; (ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are 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 of the Company for the period under review; (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) The Directors have prepared the annual accounts for the financial year ended 31st March, 2024 on a ‘going concern' basis;

(v) The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; (vi) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

RELATED PARTY TRANSACTIONS

Consequent upon acquisition of the PACL by new management in October 2020, the Companies with which PACL was already dealing with and had already entered into Agreements have become related parties. All the contracts /arrangements / transactions with Related Parties during the year were in the ordinary course of business and were at arm's length. Related Party Transactions approved by members in 48th AGM held on 29th September, 2023 i.e.

1. acquisition of Balance stake of 51% in Flow Tech Chemicals Private Limited at the same price of Rs. 1418.20 per equity share (by 31st December, 2024) and

2. providing Corporate Guarantee to HDFC Bank Limited for securing the working capital facilities amounting to Rs. 62.03 Crores to be availed by Flow Tech Chemicals Private Limited, were not executed during the FY 2023-24 and accordingly, transactions entered with Flow Tech are not material in nature for the FY under review. Accordingly, the disclosure of related party transactions as required is not applicable under Section 134(3)(h) of the Act in Form AOC-2 for the financial year 2023-24. During the year, all related party transactions were placed before the Audit Committee and Board of Directors for approval. Prior Omnibus approval of the Audit Committee has been obtained for related party transactions, which are repetitive in nature. The transactions entered into pursuant to Omnibus approval so granted are reviewed on a quarterly basis by the Audit Committee.

In terms of Regulation 23 of the SEBI Listing Regulations, the Company submits details of related party transactions on consolidated basis half-yearly as per the specified format to BSE Limited.

In line with the requirements of the Companies Act, 2013 and the SEBI Regulations, the Company has formulated a Policy on Related Party Transactions which can be accessed on the Company's website at https://www.primochemicals.in/ page/investors.

Detailed Disclosure on Related Party transactions have been provided under the Notes on Financial Statements.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY

The Board of Directors of the Company has in place the Policy on Vigil Mechanism and Whistle Blower. The same has also been placed on the Company's Website at https://www. primochemicals.in/page/investors.

Statutory Auditors

M/s. S. Tandon & Associates LLP, Chartered Accountants (Regn. No.006388N), Statutory Auditors of the company, have been appointed by the shareholders in the Annual General Meeting held on 15th September, 2022 for a period of five years i.e. from the conclusion of 47th Annual General Meeting until the conclusion of the Annual General Meeting to be held in the year 2027, at such remuneration as may be fixed by the Board of Directors.

The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report.

Cost Auditors

The Board of Directors of the Company at its Meeting held on 30th May, 2024 has appointed M/s. Kabra & Associates, Cost Accountant in practice, as Cost Auditors for the Financial Year 2024-25 as per the provisions of the Companies Act, 2013 to conduct the audit of Cost Records maintained by the Company at a remuneration of Rs. 80,000/- plus applicable GST besides the reimbursement of out of Pocket Expenses. As per the provisions of the Companies Act, 2013, your Directors propose the Resolution in the Notice in respect of remuneration payable to the Cost Auditors for the Financial Year 2024-25 for your ratification and approval. The Company maintains necessary cost records as specified by the Central Government under subsection (1) of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014.

Secretarial Auditor

M/s. A. Arora & Co., Practising Company Secretaries, were appointed as Secretarial Auditors of the Company for the Financial Year 2023-24. Their Secretarial Audit Report of the Company for the financial year ended 31st March, 2024 is annexed as Annexure-VIII to this Report. The Report does not contain any qualification. M/s. A. Arora & Co., Practising Company Secretaries have been re-appointed as Secretarial Auditors of the Company for the financial year 2024-25.

Annual Secretarial Compliance Report

The Company has obtained an Annual Secretarial Compliance Report for the financial year ended 31st March, 2024 from M/s. A. Arora & Co., Practising Company Secretaries in compliance with the Regulation 24A of the SEBI Listing Regulations. The said Report for the financial year ended 31st March, 2024 has been submitted to the BSE Limited within the prescribed statutory timelines.

ANNUAL RETURN

Pursuant to Section 92(1) of the Companies Act, 2013 read with Rule 11 of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company is placed on the Company's Website and can be accessed at web link: https:// www.primochemicals.in.com/page/investors.

OTHER DISCLOSURES

i) There is no change in the nature of business of the Company. ii) There is no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year.

iii) There was no instances of one time settlement with Banks or Financial Institutions during the year. iv) During the year under review, neither the statutory auditors nor the secretarial auditor has reported to the audit committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Board's report. v) During the year, no unclaimed dividend was required to be transferred in the Investor Education & Protection Fund of IEPF Authority. vi) There are no significant and material orders passed by the Regulators or Courts or tribunals impacting the going concern status and the Company's operations in future.

ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation of the continuous support received by the Company from the investors, participating Banks, Central/State Government Departments, its Customers and Suppliers.

The Directors would like to take this opportunity to show their deep appreciation to all the employees for their hard work, dedication and support which has enabled the Company to face all challenges and maintain sustainability.