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HEG Ltd.

BSE: 509631 Sector: Engineering
NSE: HEG ISIN Code: INE545A01016
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VOLUME 258689
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Mkt Cap.(Rs cr) 3,816
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Sell Price 944.70
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OPEN 893.45
CLOSE 940.45
VOLUME 258689
52-Week high 1068.00
52-Week low 144.10
P/E
Mkt Cap.(Rs cr) 3,816
Buy Price 0.00
Buy Qty 0.00
Sell Price 944.70
Sell Qty 6.00

HEG Ltd. (HEG) - Director Report

Company director report

Directors’ Report

Your Directors have the pleasure of presenting their 44th Annual Report andaudited statements of accounts for the year ended 31st March 2016.

(Rs. in crore)
1. (i) FINANCIAL RESULTS 2015-16 2014-15
Net sales 820.14 1227.18
Other operating income 7.40 5.89
Total income from operations (Net) 827.54 1233.07
Other income 4.17 15.16
Total income 831.71 1248.23
Profit/(Loss) before finance cost depreciation and amortisation 128.62 196.80
Finance cost 59.94 77.13
Profit before depreciation and amortisation 68.68 119.67
Depreciation and amortisation 79.22 75.36
Profit/(Loss) before tax (10.54) 44.32
Provision for taxation:-
Current year 1.81 5.32
Income tax for earlier years 2.80 -
Net profit/(loss) for the period (15.15) 39.00
EPS (Basic) H (3.79) 9.76
(ii) Appropriations
Amount available for appropriation 421.43 457.80
Dividend :
a) On Equity Shares
Proposed dividend - 11.99
b) Dividend distribution tax
On proposed dividend - 2.40
Transfer to:
General reserve - 3.90
Balance carried forward 421.43 439.52

2. OVERALL PERFORMANCE

The Company recorded net sales of C820.14 crore during the financial year 2015-16 ascompared to C1227.18 crore in the previous financial year. The net loss during thefinancial year 2015-16 was at C15.15 crore as compared to a net profit of C39.00 crore infinancial year 2014-15 translating to basic earning per share at C(3.79) for the financialyear 2015-16 as against C9.76 in financial year 2014-15.

3. STATE OF COMPANY’S AFFAIRS

The analytical review of the Company’s performance and its businesses includinginitiatives in the areas of Human Resources and Corporate Social Responsibility have beenpresented in the section of Management Discussion and Analysis of this Annual Report.

Graphite Electrodes

Significant reduction in EAF denominated steel making globally during the year underreview coupled with increased exports of steel from China forced the pertinent industryplayers to operate below 55% capacity. This resulted in fierce competition amongst playersto hold on to their respective market share. The year witnessed a steep fall in pricesthereby affecting the bottom line negatively.

Continuing efforts towards qualitative improvement and costs across all operational andcommercial areas could not fully nullify the impact of fall in prices which was moresevere.

There has been signs of demand outlook improving specially in China and efforts ofvarious governments in providing local protection is also expected to give a boost to thesteel prices and in turn profitability of the industry at large.

Being one of the lowest cost producer in the world we are ready to reap the firstmover benefit as the tide turns favourable.

Power Generation

Power business comprises of facilities which are primarily run for meeting captiverequirement of manufacturing graphite electrodes and in the process also sell surpluspower in the open market.

The power segment went through a challenging phase and the Company continue to utilisebulk of the power generated for captive purposes. Hydro power generation was also lowerdue to insufficient rains in the region.

The effect of reduced operating levels in Graphite Electrode segment have beencountered by alternate but full usage of one of the thermal facilities. This has not onlyoptimised the SHR of coal but also helped improve this segment’s results for theyear under review.

4. MATERIAL CHANGES AND COMMITMENTS DURING THE YEAR

No material changes and commitments affecting the financial position of the Companyhave occurred between the end of the financial year of the Company to which the financialstatements relate and the date of the report.

5. CHANGE IN THE NATURE OF BUSINESS

There is no change in the nature of business during the financial year 2015-16.

6. SUBSIDIARY ASSOCIATE COMPANIES OR JOINT VENTURES

(i) Subsidiary Company

In terms of provisions of Section 136(1) of the Companies Act 2013 the auditedfinancial statements of HEG Graphite Products and Services Ltd subsidiary Company of theHEG Ltd have been placed on the website of the Company and are not being annexed in thisAnnual Report.

The financial statements of the subsidiary Company are kept for inspection by theshareholders at the registered office of the Company. The Company shall provide the copyof the financial statements of its subsidiary Company to the shareholders upon theirrequest.

There were no business operations in the subsidiary Company. The subsidiary Companyreported a net loss of C47311 in the financial year 2015-16.

The Managing Director of the Company does not receive any remuneration or commissionfrom its subsidiary.

(ii) Associate Companies or Joint Ventures

There are two Associates of the Company namely Bhilwara Infotechnology Ltd. andBhilwara Energy Ltd. Bhilwara Infotechnology Ltd. had a turnover of C40.32 crore and NetProfit was C6.00 crore in the financial year 2015-16. Bhilwara Energy Ltd had aconsolidated turnover of C391.49 crore and Net Profit (after minority interest) was C29.52crore as per their financial statements (audited & consolidated) for the financialyear 2015-16. The Company has no Joint Ventures.

No Company has become/ceased to be a Subsidiary Associate or Joint venture during thefinancial year 2015-16.

A report on the performance and financial position of Subsidiary and AssociateCompanies as per the Companies Act 2013 is annexed in the Form AOC-1 to the consolidatedfinancial statements and hence not repeated here for the sake of brevity.

7. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements have been prepared by the Company in accordancewith the applicable Accounting standards. The audited consolidated financial statementstogether with Auditors’ Report form part of the Annual Report.

8. DIVIDEND

In view of absence of net profits no dividend is being recommended for the financialyear 2015-16.

9. CORPORATE GOVERNANCE

A report on Corporate Governance forms part of the Annual Report along with theAuditors’ Certificate on Corporate Governance as required under SEBI (ListingObligations and Disclosure Requirements) Regulations 2015. The Auditors’ Certificatefor financial year 2015-16 does not contain any qualifications reservations or adverseremarks.

10. MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report as required under the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 forms part of the AnnualReport.

11. INTERNAL CONTROL / INTERNAL FINANCIAL CONTROL SYSTEMS AND ADEQUACY THEREOF

The Company has an adequate internal control system commensurate with the size andnature of its business. An internal audit programme covers various activities andperiodical reports are submitted to the management. The Company has a well-definedorganisational structure authority levels and internal rules and guidelines forconducting business transactions.

Besides the Companies Act 2013 has put primary responsibility of implementing arobust Internal Financial Control framework and is under consistent supervision of AuditCommittee Board of Directors and also independent Statutory Auditors. During the year noreportable material weakness in the design or operation were observed.

12. PERSONNEL

a) Industrial relations

The industrial relations during the period under review generally remained cordial atall the plants of the Company. b) Particulars of employees

The information required pursuant to Section 197 read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith asAnnexure I.

13. PUBLIC DEPOSITS

Your Company has not invited any deposits from public/ shareholders in accordance withChapter V of the Companies Act 2013.

14. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There were no significant material orders passed by the Regulators/ Courts/ Tribunalsduring the financial year 2015-16 which would impact the going concern status of theCompany and its future operations.

15. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

The information with regard to Conservation of Energy Technology Absorption ForeignExchange Earnings and outgo in accordance with the provisions of Section 134(3)(m) of theCompanies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is given asAnnexure II forming part of this Report.

16. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Your Directors inform you about the resignation of Shri Lalit Mohan Lohani w.e.f. 25thMay 2015. The Board appreciates the valuable contribution and guidance extended by ShriLalit Mohan Lohani during his tenure as a Director of the Company.

One of your Directors namely Shri Riju Jhunjhunwala shall retire by rotation at theensuing Annual General Meeting and being eligible offers himself for re-appointment. TheBoard recommends his re-appointment.

Shri Dantuluri Satyanarayana Ravindra Raju has been appointed as an Additional Directorw.e.f. 27th May 2016. The Board on the recommendation of Nomination andRemuneration Committee of the Company has also appointed him as an Executive Directorw.e.f. the same date for a period of three years.

The Company has received a notice under Section 160 of the Companies Act 2013 alongwith the requisite deposit proposing the candidature of Shri Dantuluri SatyanarayanaRavindra Raju for the office of Executive Director of the Company. The proposal forconfirmation of his appointment as an Executive Director for a period of three yearsw.e.f. 27th May 2016 shall be put up before the ensuing Annual General Meetingfor approval.

The brief profile pursuant to the provisions of Regulation 36 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 of the Directors eligible forappointment/ reappointment forms part of the Corporate Governance Report.

All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

17. BOARD EVALUATION

The Board has carried out an annual evaluation of its own performance the directorsindividually as well as the evaluation of the working of its Committees. The exercisecovered various aspects of the Board’s functioning such as composition of the Board& Committee(s) their functioning & effectiveness contribution of all theDirectors and the decision making process by the Board.

The Directors express their satisfaction with the evaluation process.

18. NOMINATION AND REMUNERATION POLICY

The Nomination & Remuneration Policy of the Company is in place and is attached asAnnexure III to this Report.

19. MEETINGS OF THE BOARD

The Board of Directors met 4 (four) times in the financial year 2015-16. The details ofthe Board Meetings and the attendance of the Directors are provided in the CorporateGovernance Report.

20. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All related party contracts/arrangements/transactions that were entered into during thefinancial year were on an arm’s length basis and were in the ordinary course ofbusiness.

All Related Party Transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee was obtained for the transactions which areof a foreseen and repetitive nature. The statement of transactions entered into pursuantto the omnibus approval so granted is placed before the Audit Committee for approval on aquarterly basis. The statement is supported by a Certificate from the CFO.

The policy on Related Party Transactions as approved by the Board is uploaded on theCompany’s website the weblink of which is as under:

http://www.hegltd.com/pdf/Policy_on_Related_Party_Transactions_ HEG_Limited.pdf

There are no pecuniary relationships or transactions of Non- Executive Directorsvis--vis the Company that have a potential conflict with the interests of the Company.

No material Related Party Transactions i.e. transactions exceeding ten percent of theannual consolidated turnover as per the last audited financial statements were enteredduring the year by the Company. Accordingly the disclosure of Related Party Transactionsas required under Section 134 (3) (h) of the Companies Act 2013 in Form AOC-2 is notapplicable.

21. AUDIT COMMITTEE

The composition of the Audit Committee is stated in the Corporate Governance Report.All the recommendations of the Audit Committee were accepted by the Board during thefinancial year 2015-16.

22. AUDITORS

M/s. Doogar & Associates Chartered Accountants and M/s. S.S. Kothari Mehta &Co. Chartered Accountants Auditors of the Company will retire from their office at theensuing Annual General Meeting. They are however eligible for reappointment. They havefurnished a Certificate to the effect that their re-appointment will be in accordance withthe applicable provisions of the Companies Act 2013. You are requested to consider theirre-appointment. The Auditors’ Report read along with notes to accounts isself-explanatory and therefore does not call for any further comments. The Auditors’Report does not contain any qualification reservation or adverse remark.

23. BUSINESS RISK MANAGEMENT

The objective of risk management at the Company is to protect shareholders value byminimising threats or losses and identifying and maximising opportunities. Anenterprise-wide risk management framework is applied so that effective management of riskis an integral part of every employee’s job.

The Risk Management Policy of the Company is in place. The Company’s riskmanagement strategy is integrated with the overall business strategies of the organisationand is communicated throughout the organisation. Risk management capabilities aide inestablishing competitive advantage and allow management to develop reasonable assuranceregarding the achievement of the Company’s objectives.

The annual strategic planning process provides the platform for identificationanalysis treatment and documentation of key risks. It is through this annual planningprocess that key risks and risk management strategies are communicated to the Board. Theeffectiveness of risk management strategies is monitored both formally and informally bymanagement and process owners. There is no major risk which may threaten the existence ofthe Company.

24. COST AUDITORS

The Cost Audit for financial year ended 31st March 2015 was conducted byM/s. N.D. Birla & Co. (M. No. 7907). The said Cost Audit Report was filed on 17thSeptember 2015.

Based on the Audit Committee recommendations at its meeting held on 27thMay 2016 the Board has approved the re-appointment of M/s. N.D. Birla & Co. (M. No.7907) as the Cost Auditors of the Company for the financial year 2016-17 on aremuneration of C2 lakhs plus service tax and out of pocket expenses that may be incurredby them during the course of audit. As required under the Companies Act 2013 theremuneration payable to the cost auditor is required to be placed before the Members in ageneral meeting for their ratification. Accordingly a Resolution seeking Member’sratification for the remuneration payable to M/s. N.D. Birla & Co. Cost Auditors isincluded in the Notice convening the Annual General Meeting.

25. SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hadappointed M/s. GSK & Associates a firm of Company Secretaries in Practice toundertake the Secretarial Audit of the Company for the financial year 2015-16. TheSecretarial Audit Report is annexed herewith as Annexure IV. The Secretarial Audit Reportdoes not contain any qualification reservation or adverse remark. The Board hasre-appointed M/s. GSK & Associates Company Secretaries in practice as SecretarialAuditor of the Company for the financial year 2016-17.

26. CORPORATE SOCIAL RESPONSIBILITY (CSR)

As part of its initiatives under Corporate Social Responsibility (CSR) the Company hasundertaken projects in the areas of promotion of education eradicating hunger &poverty initiatives towards Community Service and rural development HealthcarePlantation & Environment Development Protection of National heritage art cultureetc. These projects were in accordance with the CSR Policy of the Company and Schedule VIIof the Companies Act 2013.

The CSR Committee comprises Shri Ravi Jhunjhunwala (Chairman) Shri Dharmendar NathDavar and Smt. Vinita Singhania.

The CSR policy may be accessed on the Company’s website at the link mentionedbelow:

http://www.hegltd.com/pdf/Corporate_Social_Responsibility_ Policy.pdf

The Annual Report on CSR activities is enclosed as Annexure V forming part of thisreport.

27. INTERNAL AUDITORS

Based on the Audit Committee recommendation at its meeting held on 27th May2016 the Board has approved the reappointment of M/s. S.L. Chhajed & Co as theInternal auditors of the Company for the financial year 2016-17.

28. DIRECTORS RESPONSIBILITY STATEMENT

The Directors confirm that: i) In preparation of the annual accounts the applicableaccounting standards have been followed and there are no material departures from thesame;

ii) They have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year ended 31stMarch 2016 and of the loss of the Company for the year under review;

iii) They have taken proper and sufficient care for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safe guarding theassets of the Company and for preventing and detecting frauds and other irregularities;

iv) They have prepared the annual accounts on a going concern basis;

v) They have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating effectively; and

vi) They have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.

29. VIGIL MECHANISM /WHISTLE BLOWER POLICY

The Company has a vigil mechanism named "Whistle Blower Policy" in place. Thedetails of the Whistle Blower Policy are explained in the Corporate Governance Report andthe policy is also posted on the website of the Company the weblink of which is as under:

http://www.hegltd.com/pdf/whistle.pdf

30. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 form part of the notes to the financial statements providedin the Annual Report.

31. EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in form MGT-9 as required under Section 92(3) and Rule12 of the Companies (Management and Administration) Rules 2014 is appended as Annexure VIto this Report.

32. GENERAL DISCLOSURE

The Company has a group policy in place against sexual harassment in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. No complaint of sexual harassment wasreceived during the financial year 2015-16.

33. ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the valuable assistanceand support received by your Company from banks financial institutions the CentralGovernment the Government of Madhya Pradesh the Government of Uttar Pradesh and theirdepartments. The Board also thanks the employees at all levels for the dedicationcommitment and hard work put in by them.

For and on behalf of the Board of Directors
Place: Noida (U.P.) Ravi Jhunjhunwala
Dated: 27th May 2016 Chairman Managing Director & CEO