The Members of
Garg Furnace Limited
The Directors of your company have pleasure in presenting the 44th Annual Report on theaffair of the company together with the Audited Accounts for the year ending 31st March2017.
(Rupees in Lacs)
| ||2016-17 ||2015-16 |
|Operating Income ||5961.00 ||9738.77 |
|Profit before depreciation Interest & tax ||(1104.63) ||(455.99) |
|Interest & Financial Expenses ||105.80 ||745.56 |
|Profit before depreciation & tax ||(1210.43) ||(1201.55) |
|Depreciation ||135.91 ||140.01 |
|Profit before tax ||(1346.34) ||(1341.56) |
|Provision for tax -Current Tax ||0.00 ||0.00 |
|-Deferred Tax Asset ||0.00 ||0.00 |
|Less : Mat Credit Entitlement ||0.00 ||0.00 |
|Profit after Tax ||(1346.34) ||(1341.56) |
|Prior year Tax adjustments / Depreciation to Reverse as per Schedule - II || ||0.00 |
|Balance brought forward ||(1095.78) ||226.89 |
|APPROPRIATIONS || || |
|Transfer to General Reserve ||0 ||0 |
|Balance carried over to Balance Sheet ||(1355.14) ||(1322.67) |
The Board of Directors do not recommend payment of dividend for the year under review.
There was no public issue rights issue bonus issue or preferential issue etc. duringthe year. The Company has not issued shares with differential voting rights sweat equityshares nor has it granted any stock options.
Detailed information on the operations of the different business lines of the Companyand details on the state of affairs of the Company are covered in the ManagementDiscussion and Analysis Report
EXTRACT OF ANNUAL RETURN
The extract of annual return as provided under sub-section (3) of section 92 of theCompanies Act 2013 in the prescribed Form MGT-9 is annexed to this Report.
NUMBER OF MEETINGS OF THE BOARD
There were 7 meetings of the Board held during the year 10/05/2016 30/05/201630/06/2016 13/08/2016
15/11/2016 09/01/2017 15/02/2017; detailed information is given in the CorporateGovernance Report annexed hereto as part of Board Report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under clause (c) of sub-section (3) of section 134 of Companies Act 2013directors to the best of their knowledge and belief state that -
a) in the preparation of the annual accounts the applicable Accounting Standards hadbeen followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
DECLARATION BY INDEPENDENT DIRECTORS
The independent directors have submitted the Declaration of Independence as requiredpursuant to section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in sub-section (6).
DIRECTORS' REMUNERATION POLICY AND CRITERIA FOR MATTERS UNDER SECTION 178
Information regarding Directors' Remuneration Policy and criteria for determiningqualifications positive attributes independence of a director and other matters providedunder sub-section (3) of section 178 are provided in the Corporate Governance Report.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Information regarding loans guarantees and investments covered under the provisions ofsection 186 of the Companies Act 2013 are detailed in the Financial Statements.
RELATED PARTY TRANSACTIONS
There are related party transactions (RPTs) entered into by the Company during thefinancial year which attracted the provisions of section 188 of Companies Act 2013.There being 'material' related party transactions as defined under regulation asapplicable of SEBI (LO&DR) Regulations 2016 there are details to be disclosed in FormAOC-2 in that regard.
During the year 2016-17 pursuant to section 177 of the Companies Act 2013 regulationas applicable of SEBI (LO&DR) Regulations 2016 all RPTs were placed before AuditCommittee for its prior/omnibus approval as well as shareholders' approval has been takenin this regard.
MATERIAL CHANGES AND COMMITMENTS
There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year of the Companyand the date of this Report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO.
The information relating to Conservation of Energy Technology Absorption and ForeignExchange Earning and Outgo as required under Section 134 (3)(m) of The Companies Act 2013read with Rule 5 of Companies (Accounts) Rules 2014 is annexed and forms part of thisreport.
RISK MANAGEMENT POLICY
Information on the development and implementation of a Risk Management Policy for theCompany including identification therein of elements of risk which in the opinion of theBoard may threaten the existence of the Company is given in the Corporate GovernanceReport.
CORPORATE SOCIAL RESPONSIBILITY
Provisions of section 135 of the Companies Act 2013 are not applicable to Company
FORMAL ANNUAL EVALUATION OF THE RFORMANCE OF BOARD ITS COMMITTEES AND DIRECTORS
Information on the manner in which formal annual evaluation has been made by the Boardof its own performance and that of its Committees and individual directors is given in theCorporate Governance Report.
SUBSIDIARIES AND JOINT VENTURE
Company has no subsidiary associate and Company in Joint Venture
DIRECTORS AND KEY MANAGERIAL PERSONNEL
a. In light of the provisions of the Companies Act 2013 Smt.Vaneera Gargnon-executive Woman director of the Company retires from the Board by rotation this yearand being eligible offers herself for re-appointment. The information as required to bedisclosed a per regulation as applicable of SEBI (LO&DR) Regulations 2016 in case ofre-appointment of the director is provided in the Notice of the ensuing annual generalmeeting.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
During the year under review there were no significant and material orders passed bythe regulators or courts or tribunals which may impact the going concern status of theCompany and its operations in future however the accounts of the company has beendeclared by the banks as Non-Performing Assets (NPA) and thereafter the bank has takensymbolic possession of assets of the company u/s 13(4) of The Securitisation andReconstruction of Financial Assests and Enforcement of Security Interest Act 2002 theaction of the bank has been challenged by the company before the Concerned Debt RecoveryTribunal (DRT). Further the management is under negotiation with the bank for one timesettlement (OTS) of account.
ADEQUACY OF INTERNAL FINANCIAL CONTROLS
Internal financial controls with reference to the financial statements were adequateand Operating effectively.
PRESENTATION OF FINANCIAL RESULTS
The financial results of the Company for the year ended 31 March 2017 have beendisclosed as per Schedule III to the Companies Act 2013. The same are placed on theCompany's website.
As Company has no subsidiaries and joint ventures Company the summary of the keyfinancials of the Company's (Form AOC-1) is not applicable to comply.
Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theprescribed particulars are set out in an annexure to the Directors' Report. As perprovisions of section 136(1) of the said Act these particulars will be made available toshareholder on request.
A Cash Flow Statement for the year 2016-17 is attached to the Balance Sheet.
Pursuant to the legislation 'Prevention Prohibition and Redressal of Sexual Harassmentof Women at Workplace Act 2013' introduced by the Government of India which came intoeffect from 9 December 2013 the Company has framed a Policy on Prevention of SexualHarassment at Workplace. There was no case reported during the year under review under thesaid Policy.
The company has put in place a system of Corporate Governance. A Separate report onCorporate Governance forming part of the Annual Report is annexed hereto. A Certificatefrom the Auditors of the company regarding compliance of conditions of CorporateGover-nance as stipulated under The Corporate Governance clause of the
Listing Agreement is annexed to the report on Corporate Governance.
Particulars of Employees
Information as per Section 197 of the Companies Act 2013 (the 'Act') read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part ofthis Report is NIL .However salary being paid to whole time directors is mentioned inCorporate Governance Report.
Annual Performance Evaluation by Board
Pursuant to the provisions of the Companies Act 2013 and regulation as applicable ofSEBI (LO&DR) Regulations 2016 the Board has carried out an Annual PerformanceEvaluation of its own performance the Directors individually as well as the evaluation ofthe working of the Committees. The manner in which the evaluation was carried out has beenexplained in the Corporate Governance Report.
The Board of Directors of your Company has on recommendation of the Risk ManagementCommittee framed and adopted a policy on Risk Management of the Company. The broad termsof reference of the Committee are stated in the Corporate Governance Report.
Your Company has an effective Vigil Mechanism system which is embedded in its Code ofConduct. The Code of Conduct of your Company serves as a guide for daily businessinteractions reflecting your Company's standard for appropriate behavior and livingCorporate Values. The Code of Conduct applies to all Colgate People including DirectorsOfficers and all employees of the Company. Even your Company vendors and suppliers arealso subject to these requirements as adherence to the Code is a prerequisite forconducting business with your Company.
Nomination & Remuneration Policy
The Board of Directors of your Company has on recommendation of the Nomination &Remuneration Committee framed and adopted a policy for selection and appointment ofDirectors Senior Management and their remuneration. The contents of the policy are statedin the Corporate Governance Report.
AUDITORS STATUTORY AUDITOR
M/s Pawan Puri & Associates. Chartered Accountants Ludhiana (ICAI Registration No.005950N) the existing statutory auditor of the company has shown his unwillingness toact as Statutory Auditors of the company in future and requested the board of directorsvide their letter dated 01/09/2017 to not recommend to the shareholders to ratify theirre- appointment in next annual general meeting for Financial Year 2017-18 hence theexisting auditors shall be auditors of the company till the conclusion of forthcomingannual general meeting. Consequent thereof board of director after considering theproposal of audit committee hereby recommend to appoint M/s R.K. Chadha & Company.Chartered Accountants Ludhiana (ICAI Registration No. 003513N) as statutory Auditors ofthe Company for next 5 years from the conclusion of forthcoming Annual General Meeting tothe conclusion of 49th Annual General Meeting subject to the ratification by members atevery Annual General Meeting.
M/s R.K. Chadha & Company Chartered Accountants Ludhiana have conveyed theirconsent to be appointed as the Statutory Auditors of the Company along with a confirmationthat their appointment if made by the members would be within the limits prescribedunder the Companies Act 2013.
Reply to remarks in Statutory Audit Report
The does not contain any qualification reservation or adverse or disclaimer made bystatutory auditor except as mentioned in Para Emphasis of Matter
(a) Interested not provided for on borrowings and has not paid to the bank due to theoperational losses suffered by the company because that operating assets are notgenerating revenue on account of various factor beyond the control of company such asslump in steel industry and delayed payment from customers is posting challenges to meetthe cash flow needs. The Company is taking adequate steps to resolve the liquidity issues.Further the sale of the company significantly reduced due to slump & cut throatcompetition with china market etc. As in last quarter of Financial Year bank has declaredthe account of company as Non Performing asset (NPA). Management is in process to settlethe account with the bank.
(b) reasons as explained above
(c) Explained in related note.
(d) Management is in process to confirm/reconcile balances with the concerned parties.
Basis for Qualified Opinion
(i) Because of huge losses suffered during last two financial years as explained abovein Para(a) the organization structure is also forced to become unshaped but Managementis looking for a competent person to appoint him as Company Secretary and Key ManagerialPersonal of the Company as well as to fill the vacancy of internal auditors
(ii) Provision in respect of impairment /loss on assets is not require as managementhas view that due to slump & cut throat competition in iron industries / market istemporally and hope will recover soon.
Pursuant to the provisions of section 204 of the Companies Act 2013 and Rules madethereunder the Company has appointed Baldev Arora & Associates (membership number:4283) Company Secretaries in Practice to undertake the secretarial audit of the Company.Secretarial Audit Report for the year 2016-17 given by Baldev Arora & Associates inthe prescribed form MR-3 is annexed to this Report. The Secretarial Audit Report for theyear under review does not contain any qualification reservation or adverse remark ordisclaimer made by the secretarial auditor except some observations.
Para wise replay of said observation are given hereunder
(a) Because of huge losses suffered during last two financial years as explained abovein Para(a) the organization structure is also forced to become unshaped but Managementis looking for a competent person to appoint him as Company Secretary and Key ManagerialPersonal of the Company as well as to fill the vacancy of internal auditors.
(b) Company has an active website which is being modified as per the requirement ofLaw.
(c) Explained above in the concerned para.
Pursuant to section 148 of the Companies Act 2013 and Rules made thereunder Board ofDirectors had on the recommendation of the Audit Committee appointed M/s Meenu &Associates (firm registration number: FRN: 100729) Cost Accountants to audit the costaccounts of the Company for the financial year 2017-18 at a remuneration of 25000.00 plusservice tax out-of pocket and travel and living expenses subject to ratification by theshareholders at annual general meeting. Accordingly a resolution seeking members'ratification for the remuneration payable to cost auditor is included in the Noticeconvening the annual general meeting.
The Industrial relations remained cordial through out the year and have resulted insustained growth of the company.
The Directors wish to extend their sincere thanks to the Indian Bank Punjab StatePower Corporation Limited Container Corporation of India other State & CentralGovern-ment Agencies Suppliers and Customers for their continued support andco-operation.
The Directors also wish to place on record their deep appreciation for the servicesrendered by the workers & staff at all levels.
| ||For and on behalf of the Board |
| ||SD/- |
| ||Devinder Garg |
|Place: LUDHIANA ||Chairman |
|Date: 01/09/2017 ||DIN : 01665456 |
ANNEXURE TO BOARD REPORT
Information pursuant to Section 134 (3)(m) of The Companies Act 2013 read with Rule 5of Companies (Accounts) Rules 2014 and forming part of the Director's Report for the yearended 31st March 2016.
|I. CONSERVATION OF ENERGY || || |
|a) Energy conservation measures ||: ||The company has always been conscious of the need to conserve energy and has always attempted various measures for the same wherever possible to achieve reduction in cost of production. The company has taken various measures on suggestions of experts in the areas where energy reduction and fuel & oil conservation is possible. The Company has installed LED lamps in place of failed Tube lights and CFL thereby reducing energy consumption in lighting during the year |
|b) Additional Investment and proposals if any being implemented for reduction of energy consumption. ||: ||No. |
|c) Impact of Measures taken at (a) above for reduction of energy consumption and consequent impact on the cost of production of goods. ||: ||5% Saving in Energy consumption. |
d) Total energy consumption per unit of production as per form A of the annexure to therules in respect of industries specified in schedule thereto.
A. POWER & FUEL CONSUMPTION
|1. Electricity ||Current Year ||Previous Year |
|a) Purchased || || |
|Units(KWH) (in Units) ||19848374 ||13423237 |
|Total amount ||Rs. 134944411.00 ||Rs. 95855130.00 |
|Rate per unit ||Rs. 6.80 ||Rs. 7.14 |
|b) Own Generation ||Current Year ||Previous Year |
|i) Through Diesel Generator Units (KWH) ||15939 ||15990 |
|Units per litre of diesel ||3.90 ||3.90 |
|Oil Cost/unit ||Rs. 14.62 ||Rs. 12.40 |
|ii) Through steam Turbine ||Nil ||Nil |
|2. Coal || || |
|Quantity (Kgs) ||211660 ||218650 |
|Total Amount ||Rs. 1912363.00 ||Rs. 1910567.00 |
|Average Rate per Kg ||Rs. 9.03 ||Rs. 8.74 |
B. CONSUMPTION PER UNIT OF PRODUCTION
|Products ||Current Year ||Previous Year |
|Electricity (KWH) Steel Ingots Rounds ||730 Units (*) ||1140 Units (*) |
|Castings/Wire Rod/Mig wire || || |
|Coal Rounds/Castings/Wire Rod ||40 Kgs ||40 Kgs |
|(*) Consumption for separate products is not feasible. || || |
|II. TECHNOLOGY ABSORPTION || || |
|Efforts made in technology absorption are as under: || || |
|A. Research and Development (R&D) ||Nil || |
|B. Technology absorption adoption and innovation ||Nil || |
The manufacturing process is based on the indigenous know-how. We are adopting watercooling system with heat exchanger and colloid-A-Tran equipment for improvement in theworking of the plant.
III. FOREIGN EXCHANGE EARNING AND OUT GO
| ||2016-2017 ||2015-2016 |
|Total Foreign Exchange ||NIL ||NIL |
|Used (CIF Value of Imports) ||Rs. 2790948.78 ||Rs. 54920115.26 |
MANAGEMENT DISCUSSION AND ANALYSIS REPORT A) BUSINESS REVIEW: STEEL INDUSTRY - GLOBALPERSPECTIVE
The world economy has experienced subdued growth for another year in 2017.Underperformance in the world economy was observed across almost all regions and majoreconomic groups. Most developed economies continued struggling against the lingeringeffects of the financial crisis grappling in particular with the challenges of takingappropriate fiscal and monetary policy actions. A number of emerging economies which hadalready experienced a notable slowdown in the past two years encountered new headwindsduring 2017 on both international and domestic fronts.
Slow growth has been observed in the demand for steel products in India primarily dueto near stagnant growth in steel consuming sectors like Infrastructure housing auto andconsumer goods.
Overall the future outlook for the steel sector could be positive from third quarteronwards. The steel prices will be competitive as the demand is likely to pick up dependingupon revival in economic growth and the government measures to ease infrastructureinvestment rules. The demand for value added products like bright bar spherodisedannealing steel normalized steel etc.will boost the demand in engineering and autosector.
COMPANY'S BUSINESS STRATEGY
As we had predicted last year's annual report the year 2016-17 was going to be adifficult year with increased capacities among steel mills and slowdown in auto sector andother steel consuming sectors .As a result of overall down scenario we face squeeze inmargins. This Situation is likely to continue at least for the first half of year.
COMPANY'S FUTURE OUTLOOK
Your Company however believes in the future of high quality products. As the countryis witnessing the slowdown in growth the steel industry has slowed down. This is having aserious impact on business sentiments for steel industry as a result this year the volumewill be under stress and also margins for the first half of the year. In addition therewill be plants shutdown which has to be taken for project. This will have an impact evenon margins.
B) PRODUCTION AND SALES REVIEW
During the year under review the company has produced 17788.630 Metric tons of Steelproducts. The operating receipts of the company has decreased to Rs. 59.61 Crores fromRs.97.39 Crores in the previous year.
C) INTERNAL CONTROL & SYSTEMS
The company has adequate internal control procedures commensurate with its size andnature of its business. These internal policies ensure efficient use and Protection ofassets and resources. Compliance with policies ensure reliability of financial andoperational reports.
D) RISK AND CONCERNS
The Steel Industry witnesses cyclical price movements. The fortunes of the industrymove up and down in time with the market trend of prices. This phenomenon has become moreuncertain and unpredictable with the increased integration of domestic and global markets.The company has taken the cost cutting initiatives enriching the product mix andstrengthened its marketing to cope with the business trend.
E) HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATION
During the year the company has employed 74 persons. The Industrial Relations remaincordial during the year. The company is continuing its efforts for improve-ment in thework culture wherein employees can contribute to their fullest poten-tial.The managementacknowledges the contribution of all employees in achieving better performance.