The Board of Directors have pleasure in presenting the 12^th annual report of the company and the audited financial statements for the year ended March 31, 2018 covering 12 months of operation. The Management Discussion and Analysis (MD&A) Report have been included at the appropriate places in this report.

First year of implementation of Indian Accounting Standards (Ind AS)

This is the first year of implementation of the Indian Accounting Standards (Ind AS). The standalone and consolidated financial statements for the year ended March 31, 2018 have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. The financial statements for the year ended March 31, 2017 have been restated in accordance with Ind AS for comparative information.

Financial Highlights

(Rs. in million)

Review of Business Operations and Future Outlook

During the year under review, your company recorded a sales of INR 1885.14 million as against INR 2138.97 million in the previous year. The company had made a net profit of INR 19.30 million as against the net profit of INR 78.80 million in the previous year.

The reduced profit was primarily on account of reduced sales. The drop in sales was on account of GST introduction which significantly impacted sales in first quarter and increased the cost of materials consumed also impacted on our profits.

Change in the nature of Business

There was no change in the nature of business of the company during the financial year ended March 31, 2018.

Transfer to Reserves

During the year under review, an amount of INR 1093.69 million (including the previous year closing balance of INR 1,084.59 million) has been retained under surplus in the Statement of Profit and Loss.

Dividend

During the year under review, the Directors have not recommended any Dividend for the year ended March 31, 2018. Considering the new Reclaimed rubber project at Mambattu, the company is conserving the reserves for investing in the project.

Transfer of Unclaimed Dividend to Investor Education and Protection Fund

The company had transferred an amount of INR 0.58 million to Investor Education and Protection Fund during the financial year 2017-18, as per the terms of section 124 and 125 of the Companies Act, 2013. As stipulated under the Act, unclaimed or unpaid dividend relating to the financial year 2010-11 will be remitted on or before October 21, 2018 to the Investor Education and Protection Fund, established by the Central Government. The shares in respect of such unclaimed or unpaid dividend will also be transferred to the Investor Education and Protection Fund Authority Ministry of Corporate Affairs Demat Account, on or before October 21, 2018, in accordance with the provisions of Section 124(6) of the Companies Act, 2013 read with Regulation 6 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

Share Capital

The paid-up capital of the company as at March 31, 2018 stood at INR 50.05 million. During the year under review, your company had not made any fresh issue of shares.

Extract of Annual Return

The extract of annual return pursuant to the provisions of section 92 of the Companies Act, 2013 read with rule 12 of the Companies (Management and Administration) Rules, 2014 is furnished in Annexure I of this report.

Board and Committee meetings conducted during the period under review

During the year under review, 4 meetings of the Board of Directors, 4 meetings of the Audit Committee, 1 meeting of the Nomination and Remuneration Committee, 4 meetings of the Corporate Social Responsibility Committee, 22 meetings of the Stakeholders’ Relationship Committee, 3 meetings of the Finance and Administrative Committee and 1 meeting of the Independent Directors were held. Further details of the same have been enumerated in the Corporate Governance Report annexed herewith.

Statement on Compliance of applicable Secretarial Standards

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and that such systems are adequate and operating effectively.

Directors’ Responsibility Statement

Pursuant to the requirement of section 134(3)(c) of the Companies Act, 2013 with respect to Directors Responsibility Statement, the Board hereby confirms that:

a) In the preparation of the annual accounts, the applicable accounting standards had been followed and there were no material departures;

b) The Directors had selected such accounting policies, 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 that period;

c) The Directors had 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;

d) The Directors had prepared the annual accounts on a going concern basis;

e) The Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and

f) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Details in respect of frauds reported by Auditors under Section 143(12) of the Companies Act, 2013 other than those which are reportable to the Central Government

There had been no frauds reported by the auditors pursuant to section 143(12) of the Companies Act, 2013.

Declaration of Independent Directors

The company has received declarations from all the Independent Directors of the company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and regulation 16(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Company’s policy relating to Directors appointment, payment of remuneration and other matters provided under Section 178(3) of the Companies Act, 2013

The Board, on the recommendation of the nomination and remuneration committee, had framed a policy for fixing and revising remuneration of Directors, Key Managerial Personnel and Senior Management Personnel of the company. The criteria for determining qualifications, positive attributes and independence of directors has been stated in Annexure II to this report. The nomination and remuneration policy of the company in annexed herewith as Annexure III and can also be accessed on the company’s website www.elgirubber.com.

Comments on Audit Report

There are no qualifications, reservations or adverse remarks or disclaimers made by M.S.Jagannathan & Visvanathan, Statutory Auditors and by CN Paramasivam, Secretarial Auditor, in their reports.

Particulars of loans, guarantees or investments made under Section 186 of the Companies Act, 2013

Details of loans given, investments made, guarantees given and securities provided pursuant to the provisions of section 186 of the Companies Act, 2013 have been given in the notes to the financial statements.

Particulars of contracts or arrangements made with related parties

All transactions entered into with related parties as defined under the Companies Act, 2013 and regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year 2017-18 were in the ordinary course of business and on arm’s length pricing basis. Since there are no transactions which are not on arm’s length basis and material in nature, Form AOC-2 is not being annexed.

The policy on related party transactions, as approved by the Board of Directors of the company, is available on the company’s website www.elgirubber.com.

Material changes and commitment if any affecting the financial position of the company occurred between the end of the financial year to which this financial statements relate and the date of the report

No material changes and commitments affecting the financial position of the company occurred between the end of the financial year to which this financial statements relate and the date of this report.

Conservation of energy, technology absorption, foreign exchange earnings and outgo

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under section 134(3)(m) of the Companies Act, 2013 read with rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure IV of this report.

Statement on Risk Management

The Board identifies and reviews the various elements of risk which the company has to face and laid out the procedures and measures for mitigating those risks. The elements of risk threatening the company’s existence are very minimal.

The company does not face any risks other than those that are prevalent in the industry and has taken all possible steps to overcome such risks. The main concerns are volatility in raw material prices and fluctuations in foreign exchange rates. Effective planning in raw material purchasing and the ability to pass on raw material price increases have minimised the risk relating to the volatility in raw material prices. Foreign exchange fluctuation risk is minimised through proper planning and natural hedging. As a part of the overall risk management strategy, all assets are appropriately insured.

As a matter of abundant caution, the company proposes to commence hedging of some of its key inputs like natural rubber with a view to containing risk further and necessary processes and approvals are being initiated.

Details about the policy developed and implemented by the company on Corporate Social Responsibility initiatives

The Board has formed a Corporate Social Responsibility (CSR) Committee comprising Sudarsan Varadaraj, MD Selvaraj and Suresh Jagannathan. The CSR policy deals with allocation of funds, activities, identification of programmes, approval, implementation, monitoring and reporting mechanisms for CSR activities.

As part of its initiatives under CSR, the company has undertaken projects in the areas of education including support to the education of differently abled children. The said projects are by and large in accordance with Schedule VII of the Companies Act, 2013 and the CSR Policy of the company.

The CSR spend is predominantly directed through registered trust(s). The trust(s) expends the sums contributed by the company towards educational and related activities and also for having a corpus for undertaking construction of new school building within the next 5-10 years. The trust(s) has a proven track record of over five years in involvement in educational activities as it runs a full-fledged school and has earned a good reputation over a period. The trust has medium term plans to construct a new school building with all modern amenities and is working to make it in par to international standards in the years to come. Hence, the company would continue to significantly contribute to the trust.

The trust also expends the funds towards educational scholarships, medical relief, to help the upliftment of rural people by way of building infrastructure like, schools, street lights, roads etc., to support special children’s school and also for the building corpus. The annual report on CSR activities is annexed herewith as Annexure V.

Annual evaluation of the Board on its own performance and of the individual directors

On the advice of the Board of Directors, the nomination and remuneration committee formulated the criteria for evaluating the performance of the Board of Directors & its Committees, Independent Directors, Non-Independent directors and the Chairman & Managing Director. Based on that, performance evaluation has been undertaken. The Independent Directors of the company have also convened a separate meeting for this purpose. The results and evaluation have been communicated to all concerned.

Directors and Key Managerial Personnel

As per the provisions of section 152 of the Companies Act, 2013, Jairam Varadaraj, the Director of the company, retires by rotation at this annual general meeting. Being eligible, he offers himself for re-appointment.

Selvakumar D has resigned as the Company Secretary & Compliance Officer of the Company with effect from the closure of business hours of January 25, 2018.

Subsidiaries, Joint Ventures and Associate Companies

The company has 7 wholly-owned subsidiaries, 3 step-down subsidiaries and one wholly-owned LLP. The statement pursuant to section 129(3) of the Companies Act, 2013 containing the salient features of the financial statements of subsidiary companies forms part of this annual report.

The Board has approved a policy for determining material subsidiaries which is available on the company’s website www.elgirubber.com.

The annual accounts of the subsidiary companies are available on the website of the company www.elgirubber.com and kept for inspection by the shareholders at the registered office during normal business hours of the company. The company shall provide the copy of the annual accounts of subsidiary companies to the shareholders upon their request.

Deposits

The company has not accepted or renewed any fixed deposit and hence there are no unclaimed deposits as on March 31, 2018.

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operation in future

There were no significant or material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future.

Adequacy of internal financial controls with reference to the financial statements

The company has implemented and evaluated the internal financial controls which provide a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes and policies, safeguarding of assets, prevention and detection of frauds, accuracy and completeness of accounting records. The company has appointed internal auditors with a dedicated internal audit team. The internal audit reports were reviewed periodically by the Board. Further, the Board annually reviews the effectiveness of the company’s internal control system.

The Directors and management confirm that the internal financial controls are adequate with respect to the operations of the company. A report of auditors pursuant to Section 143(3)(i) of the Companies Act, 2013 certifying the adequacy of internal financial controls is annexed with the Auditors report.

Statutory Auditors

M.S.Jagannathan & Visvanathan, Chartered Accountants, Coimbatore were appointed as statutory auditors for a period of 5 consecutive years at the 11^th annual general meeting of the company held on August 26, 2017 subject to ratification by the shareholders at every annual general meeting. Their continuance of appointment and payment of remuneration for the financial year 2018-19 is to be ratified in the ensuing annual general meeting. The company has received a certificate from the statutory auditors to the effect that if the appointment is ratified, it would be in accordance with the provisions of section 141 of the Companies Act, 2013.

Secretarial Auditors

Pursuant to the provisions of section 204 of the Companies Act, 2013 read with corresponding rules framed thereunder, CN Paramasivam, Company Secretary in Practice, was appointed as the secretarial auditor of the company to carry out the secretarial audit for the year ended March 31, 2018. A secretarial audit report given by the secretarial auditors in Form No. MR-3 is enclosed with this report as Annexure VI.

Cost Auditors

The Board of Directors, at their meeting held on May 24, 2018, have appointed M/s. P. Mohan Kumar & Co. (Firm Registration No.100490), Cost Accountants, as the Cost Auditors of the company for the financial year 2018-19. Pursuant to Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Accounts) Rules, 2014, the remuneration payable to the Cost Auditors of the company is subject to the ratification by the shareholders at the annual general meeting. The Board recommends their remuneration.

Particulars of employees

There are no employees who are in receipt of remuneration in excess of the prescribed limits for the whole financial year 2017-18 or a part thereof during the year. Particulars pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial personal) Rules, 2014, is enclosed as Annexure VII.

Human Resources and Industrial Relations

The company continues to enjoy a cordial relationship with all its employees. The employee count as on March 31, 2018 is 526.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The company has in place a policy for prevention of sexual harassment of women at workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An internal complaints committee has been set up to redress complaints received. All employees (permanent, contractual, temporary and trainees) are covered under this policy. There were no complaints received from any employee during the financial year 2017-18.

Corporate Governance

A report on corporate governance, as per regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is annexed as Annexure VIII and forms part of this report. The company has complied with the conditions relating to corporate governance as stipulated in clause C of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Audit Committee

Audit committee is in existence in accordance with the provisions of Section 177 of the Companies Act, 2013. The particulars relating to the composition, meetings and functions of the committee has been disclosed in the Report on Corporate Governance under the head, ‘Audit committee’. The Board has accepted the Audit committee recommendations during the year whenever required and hence no disclosure is required under Section 177(8) of the Companies Act, 2013 with respect to rejection of any recommendations of Audit committee by board.

Whistle Blower Policy

The company has a whistle blower policy to deal with unethical or improper practice or violation of company’s code of business conduct or any complaints regarding accounting, auditing, internal controls or disclosure practices of the company. The policy gives a platform to the whistle blower to report the complaints on the above mentioned practices to the Chairman of the Audit Committee. Although the complainant is not expected to prove the truth of an allegation, the complainant aims to demonstrate that there are sufficient grounds for concern and is not done as a malicious act against an individual. The Audit Committee of the Board reviews the complaints received, redressed, objected, withdrawn and dismissed for, every quarter in their meeting. The whistle blower policy is available on the company’s website www.elgirubber.com.

Cautionary Statement

Statements in this report, especially those relating to MD&A giving details of company’s objectives, projections, estimates and expectations may be construed as “forward looking statements” within the realm of applicable laws and regulations. Actual results are liable to differ materially from those either expressed or implied.

Acknowledgement

The Directors thank the company’s customers, vendors, investors, business associates and bankers for their support to the company. The Directors also wish to place on record their appreciation of the contributions made by all the employees towards the growth of the company.

For and on behalf of the Board

Coimbatore Sudarshan Varadaraj

Chairman & Managing Director

^May ²⁴, ²⁰¹⁸ DIN: 001313533