Graphite India Ltd.
|BSE: 509488||Sector: Engineering|
|NSE: GRAPHITE||ISIN Code: INE371A01025|
|BSE 15:47 | 22 Jan||803.20||
|NSE 15:48 | 22 Jan||804.05||
|Mkt Cap.(Rs cr)||15,695|
|Mkt Cap.(Rs cr)||15694.53|
Graphite India Ltd. (GRAPHITE) - Director Report
Company director report
The Directors have pleasure in presenting their Forty Second Annual Report togetherwith the audited statement of accounts of the Company for the year ended 31st March 2017.
The financial statements of the Company have been prepared in accordance with theIndian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013read with Companies (Accounts) Rules 2014. The financial statements for the FinancialYear ended 31st March 2017 are the Company's first Ind AS compliant annual financialstatements with comparative figures for the year ended 31st March 2016 also under Ind AS.The date of transition is 1st April 2015. The disclosure and effects of first timeadoption of Ind AS are detailed in Note 47 of the standalone financial statements and Note47 of the consolidated financial statements.
The standalone and consolidated financial highlights of your Company for the FinancialYear ended 31st March 2017 are summarized as follows:
Rs in Crore
REVIEW OF THE ECONOMY
As per the latest estimates of International Monetary Fund (IMF) issued in August 2016global economic growth remained moderate in 2016 at 3.1% which is less than the earlierestimate of 3.4%. There was high degree of uncertainty as a result of political changeswhich depressed the global economy. The primary factors that shape the global outlook -both in the short and the long term - point to a subdued growth for 2017 and a gradualrecovery thereafter but also with downside risks. These forces include major departuressuch as Brexit; ongoing realignments in China of commodity exporters; continuingslow-growth trends in some of the western economies along with poor productivity growthas well as geo-political uncertainties and protectionist regulatory measures inhibitingfree trade opportunities between the developed and the developing economies.
After a lackluster turn out in 2016 economic growth is projected to pick up momentumin 2017 and 2018 especially in the emerging markets and the developing economies.However there is a wide disparity in the projections of possible outcomes given theuncertainty surrounding the global economy.
With these strictures the aggregate growth projections for 2017-18 remain unchanged ascompared with the October 2016 IMF World Economic Outlook. The outlook for advancedeconomies has improved for 2017-18 reflecting a spurt in the activity in the second halfof 2016 as also triggered by the fiscal and administrative stimulus given in the UnitedStates. As a corollary the growth prospects have marginally diminished for emerging /developing economies where financial conditions have correspondingly tightened. Neartermgrowth prospects were revised upwards for China due to expected policy stimulus but wererevised downwards for a number of other large economies - notably India Brazil andMexico.
The Central Statistics Office (CSO) Ministry of Statistics & ProgrammeImplementation Government of India has estimated that Indian economy is likely to growat 7.1% in 2016-17 compared to the growth of 7.6% achieved in 2015-16. The growth inagriculture industry and services is estimated at 4.1% 5.2% and 8.8% respectively in2016-17 as compared to 1.2% 7.4% and 8.9% respectively in 2015-16. Growth rate ofindustry sector declined in 2016-17 mainly on account of contraction in mining &quarrying and moderation of growth in manufacturing sector. The improvement in India'seconomic fundamentals accelerated in the year 2015 with the combined impact of stronggovernment reforms Reserve Bank of India's (RBI) inflation focus supported by benignglobal commodity prices. Moody's has affirmed the Government of India's Baa3 rating with apositive outlook stating that the reforms by the government will enable the country toperform better compared to its peers over the medium term. According to IMF World EconomicOutlook Update (January 2017) Indian economy is expected to grow at 7.2% during FY2016-17 and further accelerate to 7.7% during FY 2017-18. Demonetisation is expected tohave a positive impact on the Indian economy which will help foster a clean and digitisedeconomy in the long run. India is expected to be the third largest consumer economy as itsconsumption may triple to US$ 4 trillion by 2025 owing to shift in consumer behaviour andexpenditure pattern.
The Company recorded a subdued performance during the year. Revenue from Operationsdecreased by 2% to Rs. 1391.75 crore for FY 2016-17 as against Rs. 1424.64 crore in theprevious year. The decline was primarily driven by lower sales price realization while thesale volume increased. The slide in the prices witnessed during last year continuedunabated during the current year with surplus capacity and fierce competition. The globaldemand for graphite electrodes had remained subdued owing to marginal incremental demandfor steel. Furthermore falling iron ore prices have made the Electric Arc Furnace routeless economical as compared to the Blast Furnace route. Reduction in input costs hascompensated to some extent the fall in electrode prices. However the reduction was notsufficient to compensate for the falling price of finished electrodes which resulted infalling margins. The PBT of Rs. 111.43 crore for current year was lower in comparison toRs. 144.50 crore of previous year which also includes investment income of Rs. 47.05 croreas against Rs. 28.52 crore in the last year. However this trend seems to have reversedsomewhat in the recent months with some visible recovery in the steel industry which hasled to a recovery in electrode demand too.
The Company's Graphite and Carbon Segment continues to be the main source of revenueand profit for the Company accounting for about 90% of the total revenue.
The business environment in all segments has become intensely competitive. In order tosustain and survive through this difficult phase the Company has taken extraordinarymeasures in ensuring efficient management of all its resources innovative and creativeapproach towards cost reduction and high level of operating efficiencies.
The performance of the German subsidiaries continues to suffer due to unremunerativeselling prices and weak demand scenario in Europe. However the industry is hopeful of arecovery considering the recent growth in electrode demand across several geographies.
The Directors recommend dividend @ Rs. 2/- per equity share on 195375594 equityshares for the financial year ended 31st March 2017.
MANAGEMENT DISCUSSION AND ANALYSIS
(i) Industry's structure and developments
A. Graphite and Carbon Segment Graphite Electrodes
Graphite Electrode is used in electric arc furnace based steel mills for conductingcurrent that melts scrap iron and steel and is a consumable item for the steel industry.The principal manufacturers are based in USA Europe India China Malaysia and Japan.
Graphite Electrode demand is primarily linked with the global production of steel inelectric arc furnaces. Between the two basic methods for steel production - (1) BlastFurnace (BF); and (2) Electric Arc Furnace (EAF) - the share of EAF route to steelproduction is estimated at about 26% at the global level. This is expected to grow furtherin years to come due to its inherent favourable characteristics of (a) an environmentfriendly and less polluting production process; (b) low capital cost; and (c) fasterproject (commissioning) time. Fresh investments in EAF steel mills are characterised bylarge furnace capacities requiring large diameter UHP Electrodes. It is expected that thedemand for UHP Electrodes too will grow synchronously. These typical industry featurescoupled with an increasing proportion of EAF steel share in total crude steel productionin future should hopefully augment the demand for Graphite Electrodes in the long term.
Stagnant demand intense competition and sliding sales price continued to posechallenges since last 3-4 years. But a turnaround is possible with the recovery in steeldemand coupled with consolidation / restructuring in the electrode industry.
Calcined Petroleum Coke and Paste
The Coke Division in Barauni Bihar is engaged in the manufacturing of CalcinedPetroleum Coke Carbon Paste and Electrically Calcined Anthracite Paste and is one of theseveral backward integration initiatives of the Company. In Calcined Petroleum Coke (CPC)two grades - aluminium and graphite - are produced. It is primarily used for manufactureof anodes for use in aluminium smelters manufacture of graphite electrodes and also usedas carburiser in steel. The division also manufactures four grades of Paste i.e. ElectrodePaste based on either CPC or Electrically Calcined Anthracite Coal (ECAC) & TampingPaste based on either CPC or ECAC. Electrode Paste is used in Ferro Alloy Smelters andTamping Paste is used as a lining material in submerged arc furnaces.
This division could not perform to expectations because of low realization competitionand constraint in getting its basic raw material i.e. Green / Raw Petroleum Coke.
Impervious Graphite Equipment
The Impervious Graphite Equipment (IGE) Division is engaged in design manufacture andsupply of Impervious Graphite Heat and Mass transfer equipment and Turnkey systems. Theproduct range includes Graphite Heat Exchangers in Shell & tube type and Polyblocktype construction Turnkey systems like HCl Synthesis units and Dry Gas generation unitsAbsorbers and Absorption systems Graphite Columns H2SO4 Dilutionand Cooling units Vacuum Ejector systems Graphite Bursting Discs and accessories.
Impervious graphite is an ideal material of construction for corrosive process fluidsand finds wide application in industries like Chloro Alkali Chlorinated OrganicChemicals Phosphoric Acid Fertilizers Steel Pickling Metal Processing Polymers likeVCM Polycarbonate and Caprolactam Drug Intermediates etc.
Over the years the Company has built this product line into a reliable brand with areputation for prompt service good quality and consistent performance by investing instrengthening the core competencies. Division's total sale was higher by about 35% in thisfinancial year. Domestic business is consistently doing good as there are expansions inchloro-alkali drugs / pharma agrochemicals and fine chemicals sectors. Domestic orderbooking in this year increased by about 40% compared to last year. In export market thereare no major expansions & many projects are getting deferred. Competitors have alsodropped their prices substantially & most companies prefer to buy locally. However wecontinue to be strong in phosphoric acid business. In this year Company manufactured thebiggest phosphoric acid evaporators so far used for this application for an overseascustomer.
Power constitutes one of the major costs of Electrode Production. For captiveconsumption the Company has an installed capacity of 31.5 MW of power generation throughHydel route (18 MW) and through multi-fuel route (13.5 MW). Power generation through HydelPower Plant was 33.75 million units as against 41.00 million units in the previous year.The multi fuel power generating sets remained as a stand-by facility as adequate power wasavailable from the Grid and 6 MW DG set was disposed off during the year.
B. Glass Reinforced Plastic Pipes and Tanks (GRP)
GRP Division is engaged in manufacturing of large diameter Glass Fibre ReinforcedPlastic Pipes and Pipe liners for rehabilitation of old pipes. Product is manufactured bycontinuous filament winding process with computerized advanced technology comparable toother plants worldwide. These pipes find application in diverse fields such as bulk watersupply projects power plants sewerage disposal schemes industrial effluent disposaletc. For sea water it is the most suitable recommended alternative.
The Company has a good track record of supplying large diameter pipes and theirsuccessful commissioning. Its pipes are in use for many years in several infrastructureprojects in private as well as in public sector. Some of the competitors have either shutshop or are in difficult financial position due to unsustainable business strategy adoptedby them. This will give an edge to the units which are focused on good quality GRP pipeproduction. However project cost overruns delay in completion of projects disputes oncontractual defaults and non-receipt of receivables have still remained as inherent risksin the business. The Company's policy of
Directors' Report picking up orders selectively has paid off and the unit has performedbetter than previous year on these parameters. Further rationalisation and consolidationin the industry is expected.
C. Other Segments Steel Segment
Powmex Steels Division (PSD) is engaged in the business of manufacturing high speedsteel and alloy steel having its plant at Titilagarh in the State of Orissa. PSD is thesingle largest manufacturer of High Speed Steel (HSS) in the country. HSS is used in themanufacture of cutting tools such as drills taps milling cutters reamers hobsbroaches and special form tools. HSS cutting tools are essentially utilised in - (a)automotive; (b) machine tools; (c) aviation; and (d) retail market. The industry ischaracterised by one good quality manufacturer of HSS viz. PSD and several other smallmanufacturers who cater to the low end of the quality spectrum in the retail segment. Onthe demand side the industry is broadly divided into large and small cutting toolmanufacturers who use both domestic and imported HSS. PSD faces competition from smalldomestic producers and imports from large overseas manufacturers. Demand for HSS productsin PSD's range remained subdued during the year under review. The division is facingincreasing competition from cheaper Chinese imports.
Development of new grades of HSS has been successfully undertaken which is likely tobenefit the division in the medium term.
1.5 MW Hydel Power Facility
Power generated from this facility is sold to Karnataka Power Grid under a PowerPurchase Agreement. Generation of power is entirely dependent on monsoon.
(ii) Opportunities and threats
India was the third largest steel producer in 2016. India's crude steel production grewby 7.4% year-on-year to 95.6 million tons in 2016. India's steel exports grew 150% year-on-year to 0.75 million tons in February 2017 while steel imports declined 46%year-on-year to 0.49 million tons. Total consumption of finished steel grew by 3.4%year-on-year to 76.22 million tons during April 2016 - February 2017. India is expected tobecome the world's second largest producer of crude steel in the next 10 years moving upfrom the third position as its capacity is projected to increase to about 300 milliontons by 2025. Huge scope for growth is offered by India's comparatively low per capitasteel consumption and the expected rise in consumption due to increased infrastructureconstruction and the thriving automobile and railways sectors.
The World Steel Association expects the demand for steel to grow by 0.4% YoY in 2017.Steel demand in China is expected to fall by 3% in 2017 which translates into a declineof almost 19 million tons. But overall steel demand will get a boost from higher demandin USA India Middle East and Africa. We believe that the increased demand from thesecountries will lead to higher steel production through EAF route as production throughthe EAF method is higher in these countries compared to the blast furnace route. Overallsteel production through EAF route is expected to reach 435 million tons in 2017 ascompared to 410 million tons in 2016.
The Company is currently witnessing the resultant positive impact of the ongoingconsolidation in the Graphite Electrode sector coupled with increase in demand as well asrealisation.
Volumes and business prospects in general would be impacted by factors like: (a)sustainability of the global economic recovery in 2017-18; (b) pace of recovery in theeuro zone and China; (c) rising cost of key inputs; (d) highly deteriorated financialhealth of steel industry; (e) sustainability of recent surge of commodity and oil prices;and (f) pace of hike in interest rates in the United States.
While the Company is equipped and geared to face these business challenges it ishopeful of realising its business goals with the positive revival of the businessenvironment.
(iii) Segment-wise Performance Revenue of the Company
The revenue from operations amounted to Rs. 1391.75 crore as against Rs. 1424.64crore in the previous year.
Aggregate Export Revenue of all divisions together was Rs. 527.31 crore as against Rs.643.46 crore in the previous year.
Graphite and Carbon Segment
The performance of the segment was sub-optimal in the F.Y.2016-17 but can be termed assatifactory considering overall challenging enviroment.
Production of Graphite Electrodes and Other Miscellaneous Carbon and Graphite Productsduring the year under review was 73756 Mt against 62022 Mt in the previous year.
Production of Calcined Petroleum Coke during the year was 24007 Mt as against 20162Mt in the previous year.
Production of Carbon Paste during the year was 3886 Mt against 5405 Mt in theprevious year.
Production of Impervious Graphite Equipment (IGE) and spares at 1505 Mt was higher ascompared to that of 1070 Mt in the previous year.
Power generated from captive Hydel Power Plant of 18 MW capacity amounted to 33.75million units during the year as against 41.00 million units in the previous year.Multifuel generating facilities remained as stand-by and were not operated due to adequateavailability from the grid.
The Segment Revenue declined to Rs. 1257.40 crore from Rs. 1290.75 crore in theprevious year. Domestic and Export sales in terms of volume and realization were impactedadversely due to severe competition during the year. The profitability of the segmentdecreased from Rs. 139.67 crore in FY 2015-16 to Rs. 53.28 crore in FY 2016-17.
The GRP Division produced 6760 Mt pipes as against 6132 Mt in the previous year.
Production of HSS and Alloy Steels was 1374 Mt during the year as against 1275 Mt inthe previous year.
Sale of power from 1.5 MW Link Canal facility was 0.88 million units as against 3.39million units in the previous year.
World crude steel production reached 1628.50 million tons for the year 2016 up by0.8% compared to 2015. Annual production in Asia during 2016 was 1125.10 million tons ofcrude steel an increase of 1.6% compared to 2015. India's crude steel production for 2016was 95.6 million tons up by 7.4% compared to 2015.
The year 2017 and 2018 is expected to see a cyclical upturn in steel demand with acontinuing recovery in the developed economies and an accelerating growth momentum in theemerging and developing economies. We expect that Russia and Brazil will finally come outof their recessions. However China which accounts for 45% of global steel demand isexpected to return to a more subdued growth rate after its recent short uplift. For thisreason overall growth momentum will remain modest.
With the "risk of global recession" receding and economic performanceimproving across most regions a number of geopolitical changes still create some concern.US policy uncertainties Brexit the rising populist wave in current European electionsand the potential retreat from globalisation and free trade under the pressure of risingnationalism / protectionism add a new dimension of uncertainty in investment environment.However risks from ongoing conflicts in the Middle East and in Eastern Ukraine appear tobe reducing.
The pickup in oil prices in 2016 helped stabilise the fiscal position of oil producingcountries. In 2017-18 oil prices are expected to show a moderate gain but any spike in oilprices to the levels seen in 2010-12 seems unlikely despite the recent OPEC agreement onoil production cuts. Other commodity prices also rebounded due to stronger activities inChina but no further hikes are envisaged. The mildly rising oil prices may boost theinvestment in several economies worldwide.
Benefitting from strong fundamentals newly announced measures related to fiscalstimuli and rising infrastructure spending the United States is expected to continue tolead the growth in the developed world in 2017-18. The EU recovery is strengthening withmany positive developments. Eurozone monetary policy is expected to remain on its currentpath at least in 2017 while fiscal tightening is not expected to strengthen further andrisk of deflation has significantly receeded.
The Government initiatives for infrastructure development including railway projectsimplementation of smart city project and Make in India' initiatives should boostdemand for steel in India. This will also increase graphite electrode demand in thedomestic market.
The imposition of Safeguard Duty and MIP on various grades of steel should augur wellfor the domestic steel industry and should provide a boost for higher level of capacityutilization.
With better economics of EAF steel as compared to BF route coupled with its inherentadvantages like low capital requirement and low emission levels it is expected that EAFsteel production will steadily grow. This has to some extent resulted in higher electrodedemand during the later part of Q4/16-17. It is expected that this will sustain and grow.
With its competitive cost structure and a well diversified customer base the Companyis well geared to enhance its presence in the global Graphite Electrode market and benefitfrom the upturn in the industry.
(v) Risks and Concerns
The Company is exposed to the threat of the cyclical nature of the steel demand as alsoto the risks arising from the volatility in the cost of input materials. Over the last fewyears steel industry across the globe was undergoing tremendous stress due to reducedsteel demand increasing export of steel from China and slowing down of development in theMiddle East due to lower crude oil prices. In addition due to reduced price level of ironore and coking coal the BF route for producing steel had become more economical and hencewas being preferred by steel producers. Combined result of these developments had reducedcapacity utilization of EAF steel industry for the last 3-4 years. This had resulted insurplus supply in the market leading to reduction in electrode price level. Although someimprovement is evident in the recent past with the rebounding of demand for steel but theeconomic slowdown and/or cyclical recession in certain major steel consuming industriesmay adversely impact the demand-supply dynamics as also the profitability and your Companytoo is vulnerable to these changes.
Disproportionate increase in taxes and other levies imposed periodically by the Centraland State Governments especially on essential inputs may increase the cost ofmanufacture and reduce the profit margins. However likely implementation of Goods &Service Tax (GST) is expected to bring in stability in this area.
Exports to specific regions may get severely affected by trade barriers in the form ofcrippling import duties or anti dumping duties or countervailing duties or sanctions asthe case may be and our export volumes to specific markets could get majorly affected bysuch protectionist/ restrictive impositions. Devaluation or appreciation of currency mayimpact business prospects.
The main raw materials are either petroleum based or coal based. Increase or decreasein oil and commodity price will directly impact cost of product and margins. Furtherincrease in price of crude and coal and its direct impact on its derivative materials likeNeedle Coke Pitch Furnace Oil Met Coke etc. will all tend to inflate the input cost ina major way.
The Company has a mixed exposure of exports and imports and is a net foreign exchangeearner. So volatility in foreign currency market directly impacts the company'sprospects. Inherent natural hedge of various balancing exposures may mitigate the risk upto an extent.
Due to rapid urbanization close to the industrial zones the Pollution ControlAuthorities are imposing strict conditions resulting in additional capital expenditure.
(vi) Internal control systems and their adequacy
The Company has proper and adequate systems of internal controls. Internal audit isconducted by outside auditing firms. The Internal audit reports are reviewed by the topmanagement and the Audit Committee and timely remedial measures are ensured.
(vii) Discussion on financial performance with respect to operational performance
Revenue from Operations recorded Rs. 1391.75 crore as against Rs. 1424.64 crore inthe previous year.
Profit after tax was Rs. 112.28 crore as against Rs. 104.64 crore in the previous year.Profit before tax was lower at Rs. 111.43 crore as compared to Rs. 144.50 crore in theprevious year. The benefit of lower input costs has been negated by lower realization buthigher investment income.
Borrowing at Rs. 126.82 crore was lower than Rs. 179.92 crore in the previous year andas a result the Finance Cost decreased to Rs. 6.50 crore from Rs. 7.84 crore in previousyear.
Capital expenditure during the year amounted to Rs. 80.44 crore as against Rs. 51.69crore in the previous year. The Company is a net foreign exchange earner.
ICRA has reaffirmed the long term rating at [ICRA] AA+' (pronounced ICRA double Aplus) which indicates that the outlook on the long term rating is stable. The shorttermdebt programme rating has been reaffirmed at [ICRA] A1+' (pronounced ICRA A oneplus). This rating indicates highest-credit-quality. The retention of these ratingsreflects comfortable financial risk profile characterized by low gearing strong coverageindicators and the financial flexibility emanating from large liquid investment portfolio.
Details of contingent liabilities are given in Note 37 to the Financial Statements.
(viii) Material developments in Human Resources / Industrial Relations front includingnumber of people employed
The HRD policies and practices focus on contemporary and pragmatic people centricinitiatives aligning it with business vision and objectives which primarily help increating robust organisational structure and aims at optimum utilisation of resources.
The Training & Development Programmes encompassing the competency buildinginitiatives amongst employees continues to be an ongoing process. Besides the leadershipbuilding at senior and middle management level and the succession planning for criticalpositions continue to be a focus area.
The involvement of employees in the operational initiatives at the manufacturing plantsof the Company continues to be high.
The total number of permanent employees in the Company is 2026 as on 31st March 2017.
The employee relations continue to be cordial and harmonious at all the locations ofthe Company.
Pollution Matter - Bangalore
Appeal filed by complainants before the Hon'ble National Green Tribunal South Zone atChennai against the majority order dated 22.06.2013 passed in favour of the Company by theHon'ble Karnataka State Appellate Authority at Bangalore is pending.
Research & Development
The Company's R&D is committed towards continual improvement development oftechnology and development of import substitute material.
R&D initiatives are in the area of new product development raw materialsproductivity process development reduction in carbon emission etc.
Continuous efforts are made to develop import substitute materials for AeronauticalAerospace Railway and other industrial applications. Continual process developmentactivities are towards producing superior version of carbon brake pads for aircrafts andhelicopters.
Carbon Finance Limited is a wholly owned Indian subsidiary. Graphite International B.V.in The Netherlands is a wholly owned overseas subsidiary Company which is the holdingcompany of four subsidiaries in Germany (viz) Graphite Cova GmbH Bavaria Electrodes GmbHBavaria Carbon Specialities GmbH Bavaria Carbon Holdings GmbH.
The overseas subsidiaries recorded a turnover of Euro 32.51 Mn as compared to Euro35.17 Mn in the previous year.
On the backdrop of prolonged economic slowdown German subsidiaries did not do well dueto low demand in Europe high production costs and reduction in prices by competitors tocapture volumes in the dwindling market. Due to these unfavourable factors the loss forthe year was higher at 5.18 Mn as against 4.77 Mn in the previous year.
The Company earned by way of Royalty Rs. 2.32 crore during the year as against Rs.2.81 crore in the previous year from overseas subsidiary.
Statement containing salient features of the financial statements of subsidiaries isenclosed - Annexure 1
No Company has ceased to be a subsidiary of the Company during the year. The Companydoes not have any joint venture or associate companies.
The Consolidated Financial Statements of the Company along with those of itssubsidiaries prepared as per Ind AS 110 forms a part of this Annual Report.
The Audit Committee comprises Mr. A. V. Lodha as its Chairman with Dr. R SrinivasanMr. N. Venkataramani and Mr. J. D. Curravala as its members.
All recommendations of the Audit Committee were accepted by the Board.
Information pursuant to Section 134 of the Companies Act 2013
a. Extract of the annual return as provided under Section 92 (3) of Companies Act 2013is enclosed - Annexure 2
b. Four meetings of the Board of Directors of the Company were held during the year on12th May 2016 10th August 2016 01st December 2016 and 14th February 2017.
c. All the Independent Directors of the company have furnished declarations that theysatisfy the requirement of Section 149 (6) of the Companies Act 2013.
d. Relevant extracts of the Company's policy on directors appointment and remunerationincluding criteria for determining qualifications positive attributes independence of adirector and other matters provided in section 178(3) of Companies Act 2013 is enclosed -Annexure 3
e. There is no qualification reservation or adverse remark or disclaimer made by thestatutory auditor in his audit report and by Company Secretary in practice in thesecretarial audit report and hence no explanations or comments by the Board are required.
f. Particulars of loans guarantees or investments under Section 186 of Companies Act2013 is enclosed - Annexure 4
g. Particulars of contracts or arrangements with related parties referred to in Section188(1) of Companies Act 2013 is enclosed - Annexure 5
h. Details of conservation of energy technology absorption foreign exchange earningsand outgo as prescribed vide Rule 8(3) of Companies (Accounts) Rules 2014 is enclosed -Annexure 6
i. Risk management policy has been developed and implemented. The Board is keptinformed of the risk mitigation measures being taken through half yearly risk mitigationreports / Operations Report. There are no current risks which threaten the existence ofthe Company.
j. Corporate Social Responsibility (CSR)
As part of its CSR activities the Company has initiated projects aimed at promotingeducation and employment enhancing vocational skills and livelihood enhancement projectsand healthcare initiatives through B D Bangur Endowment. The CSR policy has been displayedon company website www.graphiteindia.com and canbe viewed on http://www.graphiteindia.com/View/investor_relation.aspx
The CSR annual report for the year ended 31st March 2017 is attached separately andforms part of this report - Annexure 7
k. Formal annual evaluation has been made by the Board of its own performance and thatof its Committees and individual directors on the basis of a set of criterias framed andapproved by the Nomination & Remuneration Committee / Board.
l. The Company has adopted a Vigil Mechanism which has been posted on the Company'swebsite and can be viewed on http://www.graphiteindia.com/View/ investor_relation.aspx
m. The Company does not accept deposits from public.
n. There were no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company's operations in future.
Disclosures pursuant to Section 197(12) of Companies Act 2013 read with Rule 5(1)Rule 5(2) and Rule 5(3) of Companies (Appointment & Remuneration of ManagerialPersonnel) Rules 2014 are contained in Annexures 8 and 9.
o. Dividend Distribution Policy is enclosed - Annexure 10. The same can also be viewedon http://www . graphiteindia.com/View/investor_relation.aspx.
Mr. J. D. Curravalla retires by rotation at the ensuing AGM and being eligible offershimself for re-appointment.
No director is related inter-se to any other director of the Company.
The Company continues to enjoy the status of a Star Trading House. This year too theCompany received the following awards for export performance - from CAPEXIL : TopExport Award for 2014-15 Top Export Award for 2013-14.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(5) of the Companies Act 2013 the Directorsstate that-
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed;
(b) the directors have selected such accounting policies and applied them consistentlyand made judgements 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 have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors have prepared the annual accounts on a going concern basis;
(e) the directors have 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 have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
Corporate Governance Report
A Report on Corporate Governance along with a Certificate of Compliance from theAuditors forms part of this Report - Annexure 11
Business Responsibility Report (BRR)
The Listing Regulations mandate the inclusion of the BRR as part of Annual Report fortop 500 listed entities based on market capitalisation. In compliance with the ListingRegulations we have incorporated BRR into our Annual Report.
The Board of Directors recommend the appointment of M/s S. R. Batliboi & Co. LLPChartered Accountants (Firm Registration No. 301003E/E300005) as the next StatutoryAuditors of the Company for a five year term beginning from the conclusion of the 42nd AGMtill the conclusion of the 47 th AGM of the Company in place of Price WaterhouseChartered Accountants pursuant to the provision of the Section 139(2) of the CompaniesAct 2013.
The Company had appointed following Cost Auditors for FY 2016-17 who conducted costaudit as detailed below-
Consolidated Cost Audit Report for FY 2015-16 was filed with the Ministry of CorporateAffairs Government of India on 7th September 2016.
The said Cost auditors have been appointed to conduct cost audit for the same divisionsas mentioned above for FY 201718:
Secretarial Audit Report
The Board appointed M/s. P. S. & Associates Practicing Company Secretaries toconduct Secretarial Audit for FY 2016-17. The Secretarial Audit Report is annexed herewith- Annexure 12
Your directors place on record their appreciation of the assistance and supportextended by all government authorities financial institutions banks consultantssolicitors and shareholders of the Company. The directors express their appreciation ofthe dedicated and sincere services rendered by employees of the Company.
On behalf of the Board
K. K. Bangur
May 18 2017