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KIOCL Ltd.

BSE: 540680 Sector: Metals & Mining
NSE: KIOCL ISIN Code: INE880L01014
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OPEN 386.95
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VOLUME 4901
52-Week high 506.45
52-Week low 84.10
P/E 418.56
Mkt Cap.(Rs cr) 23,902
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 386.95
CLOSE 386.35
VOLUME 4901
52-Week high 506.45
52-Week low 84.10
P/E 418.56
Mkt Cap.(Rs cr) 23,902
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

KIOCL Ltd. (KIOCL) - Director Report

Company director report

Dear Members

The Board of Directors of your Company is pleased to submit the reports of the businessand operations of your Company for the Financial Year ended March 31 2017 together withthe Auditors' Report on the Annual Financial Statements and Comments on the same by theComptroller & Auditor General (C&AG) of India. Your Directors are happy to informyou that the Company had a very successful year in 2016-17. Overcoming the gloomysituation of previous year your Company could achieve Pellet production of 1.460 MillionTons resulting in capacity utilization of 42% as compared to production of 0.100 MillionTons a year before. During the year your Company has achieved Pellet dispatch of 1.387Million Tons as compared to 0.409 Million Tons during the previous year. The details offinancial performance are given below:

1. Financial Results and State of Company's Affairs

(` in Crore)
Particulars Financial Financial
Year 2017 Year 2016
Revenue from Operations 929.36 205.57
Other Income 156.37 213.81
Profit before Exceptional item and Tax 32.95 (89.67)
Less : Exceptional Items-Expenses 1.73 0
Profit before Tax 31.22 (89.67)
Tax Expense (including deferred taxes) (16.71) (9.52)
Profit after Tax 47.93 (80.15)
Less : Other Comprehensive Income (Net of Tax) (0.33) 0.51
Total Comprehensive Income 47.59 (79.64)
EPS (Basic & Diluted) 0.76 (1.26)

Note: Figures for Financial Year 2016 are re-arranged as per Ind AS.

Indian Accounting Standards

The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazettedated February 16 2015 notified the Indian Accounting Standards (Ind AS) applicable tocertain classes of companies.

Ind AS has replaced the existing Indian GAAP prescribed under Section 133 of theCompanies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014. For yourCompany Ind AS is applicable from April 1 2016 with a transition date of April 1 2015.

The following are the areas which had an impact on account of transition to Ind AS: LProperty Plant & Equipment (PPE)

L Intangibles and Deferred taxes

The reconciliations and descriptions of the effect of the transition from IGAAP to IndAS have been provided in Note 23 "First time adoption of Ind AS".

Revenues

Acting promptly on the favorable market movement during the year your Company couldincrease the volume of production and dispatch resulting into significant increase inincome from plant operations at Rs.929.36 Crores as compared to Rs.205.57 Crores in theprevious year achieving a growth rate of 353%. During the year Revenue from export salesincreased by 617.07% to Rs.517.51

Crores from Rs.72.17 Crores and Domestic Sales increased to Rs.351.28 Crores fromRs.127.23

Crores an increase of 175.23%. Of the Total Revenue for the year ended March 31 2017the share from exports vis-a-vis DTA sales stood at 60% and 40% respectively. Income fromSale of

Services (O&M Operations) has also increased to Rs.32.98 Crores from Rs.5.77Crores. Other Income comprising of Interest Income on fixed deposits and othermiscellaneous Income has decreased to Rs.156.37 Crores from Rs.213.82 Crores due to loweryields on fixed deposits.

Profits

Your Company's Profit before Tax has increased to Rs.31.22 Crores from a net lossRs.89.67 Crores in the previous year. Your Company has achieved even a higher Profit afterTax at Rs.47. primarily due to deferred tax on account of timing difference and MAT creditentitlements as compared to a Loss after Tax of Rs.80.15 Crores during the previous year.

Liquidity

Your Company continues to maintain debt free status conserving sufficientcash to meetthe strategic operational objectives. Your Company recognizes that liquidity has to bebalanced between earning adequate returns on Capital employed and needs to cover financialand business risk. Liquidity enabled your Company to make a rapid shift in direction as aresponse to changing market dynamics and to overcome the adverse market condition facedduring the previous year.

Listing of Equity Shares in NSE

In pursuance to SEBI Circular dated May 22 2014 and April 17 2015 relating tode-recognition of Regional Stock Exchanges outlining the roadmap for Companies listedexclusively on such Regional Stock Exchanges your Company opted for listing on a nationallevel stock exchange and promptly got its equity shares listed with Metropolitan StockExchange of India in 2015-16. As a step forward to enhance further visibility in themarket your Board of Directors in their 238th meeting held in April 2016approved listing of Equity Shares with National Stock Exchange. The Company thereafterapplied for and got listed in National Stock Exchange w.e.f. November 29 2016 under stockcode ‘KIOCL'. Listing in two of the National Stock Exchanges resulted into highdegree of liquidity of your investment and your Directors were extremely happy toparticipate in the Bell Ceremony organized by the NSE when your share debuted at a quoteof Rs.10.50 which is being quoted at above Rs.75/- in recent past thereby increasing themarket capitalization of your Company by about 7.5% time.

Credit Rating

During the year your Company's credit worthiness was evaluated by Credit Analysis andResearch Ltd. (CARE) who has assigned following Credit Rating to your Company foravailing Bank Facilities.

Amount
Facilities Rating
(` in crore)
Long Term Bank Facilities 1.00 CARE AA; Stable
(Double A; outlook Stable)
Long term/Short term Bank Facilities 369.00 CARE AA; Stable/CARE A1+
(Double A; Outlook:Stable/A One Plus)
Total 370.00

The above rating indicates that your Company enjoys highest short term credit ratingand a notch below the highest rating for long term borrowing. This credit ratings impliesyour Company's capability to leverage for its operation and capital expenditure as andwhen need arise.

Dividend

Complying with the directives from the Committee on Management of Government Investmentin CPSEs (CMGIC) Govt of India on February 10 2017 your Company paid an InterimDividend @1.1% of the Paid up Share Capital amounting to Rs.6.97 Crores (i.e. Re.0.11 pershare) out of its free reserve of previous year. In view of improved financialperformance during the year your Board of Directors were happy to pass a resolution inits meeting held on May 29 2017 recommending a final dividend of 50% of Profit after Taxfor the Financial Year ended March 31 2017 which works out to be Rs 0.37 per EquityShare including the Interim Dividend already paid. The proposal to pay final dividend issubject to the approval of shareholders at the ensuing Annual General Meeting to be heldon 31.08.2017. The total dividend (excluding dividend tax) for the current year is Rs23.47 Crores. Dividend (including dividend tax) as a percentage of Profit after Tax is59%. The Register of Members and Share Transfer Books will remain closed from 25.08.2017to 31.08.2017 (both days inclusive) for the purpose of payment of the dividend for theFinancial Year ended March31 2017 and the AGM.

Performance vis--vis MoU

Performance of your Company in terms of the Memorandum of Understanding (MoU) signedwith the Ministry of Steel Government of India was rated as "Fair" for theFinancial Year 2015-16. Performance Evaluation of the Company for the years 2016-17vis-a-vis MoU Targets on provisional basis result would be "Good" rating.

Particulars of Loans Guarantees or Investments

No loan guarantee or investment made by your Company under Section 186 of theCompanies Act2013 during the Financial Year 2016-17.

Particulars of Contracts or Arrangements made with Related Parties

During the Financial Year no transactions were entered into with Related Parties asdefined under the Companies Act 2013 and Regulation 53(f) and Para A of Schedule V of theSEBI (Listing Obligations and Disclosure Requirements) Regulation 2015 which attract theprovisions of Section

188 of the Companies Act 2013 as such annexure AOC is not furnished. There were nomaterially were in conflict with the interest of the Company.significant The Board hasapproved a Policy on Materiality of Related Party transactions and Dealing with RelatedParty transactions which is available on the Company website.

Material Changes and Commitments if any affecting Financial Position

No material changes and commitments occurred between the end of the Financial Year ofyour Company to which the Financial Statements relates and the date of the report whichhave affected on the financial position of your Company.

Management Discussion and Analysis

In terms of the provisions of Regulation 34 of the Securities and Exchange Board ofIndia (Listing

Obligations and Disclosure Requirements) Regulation 2015 the Management's discussionand analysis is set out in this Annual Report.

2. BUSINESS AND OPERATIONAL REVIEW

During the year under review your Company achieved stellar performance and produced1.460 Million Tons of Pellets in comparison to 0.100 Million Tons produced in theprevious year thereby recorded a quantum jump of 1360% on Y-o-Y basis. The quantityproduced also surpassed the "Very Good" Target set in the MoU for the year2016-17.

During the year Your Company had sold 1.387 Million Tons of Pellets as against 0.409Million Tons in the previous year a jump of 239.12% Y-o-Y. Out of the total 1.387 MillionTons sold exported quantity was 0.898 Million Tons which is almost 65% and balance 0.489Million Tons was sold to domestic customers.

The Pellet Plant Unit of your Company is strategically located and ideal for overseascustomers. However after the imposition of Distance Based Charge by Indian Railways onIron ore moved through Railway Network for Pelletisation and subsequent exports coupledwith high logistics cost on input raw material like Iron Ore the products becameuneconomical in the overseas market causing adverse impact on the capacity utilizationduring last couple of years. During the year under review Indian Railways provided reliefby suspending levy of DBC till March 31 2017 which is now extended till March 31 2018.In addition to this Government of India withdrew Export Duty on Pellets from January 042016. These favorable developments supported by upward movement of price in theInternational market from second half of Financial Year 2016-17 contributed to improvedperformance of the Company.

Due to increased sales in export market your Company could be able to nullify thedeficit in foreign exchange earnings and turned into a positive Net Foreign Exchangeearner as per the Foreign Trade Policy.

Revival of Blast Furnace Unit

The operation of the Blast Furnace Unit continues to remain under suspension sinceAugust 05 2009. Considering early signs of improvement in price scenario of input rawmaterials the Board of Directors of the Company in its 238th meeting held inApril 06 2017 approved re-starting of the

Blast Furnace operation immediately after refurbishment works.

The execution of all planned jobs for refurbishment of Blast Furnace and associatedequipments were completed on time within the approved cost. All equipments of BlastFurnace Staves Pump houses and Raw material handling system have been tested and foundto be working satisfactorily.

Erection of new cooling tower for BF and CPP has been completed. A schedule has beenprepared for regular running of all equipments in the Plant and the same is beingfollowed.

However due to frequent floods in Australia increased demand for Coke the prices ofLow AshMetallurgical (LAM) coke a major component of raw material for operating BFU hasdoubled in International market. Your Company is keeping a watch on the LAM Coke prices.Once the price stabilizes the procurement action will be taken and the plant operationshall be commenced.

A snapshot of production target vis-a-vis actual achievement with capacity utilizationand sales performance during last five years includ ing current year are depicted at Table1 & 2.

Table: 1
(Qty. In Million Tons)
Utilization of installed
Year MoU Target Actual Production
capacity in %
2016-17 1.300 1.460 42
2015-16 1.800 0.100 3
2014-15 1.800 0.785 22
2013-14 1.700 1.710 49
2012-13 2.500 1.265 36

(Installed capacity of Pellet Plant is 3.500 Million Tons / Annum).

Table: 2

Qty: in Million Tons

Value: ` In Lakhs
Pellets Pig Iron Total
Year
Qty Value Qty Value Qty Value
2016-17 1.387 86872 0.000 7 1.387 86879
2015-16 0.409 19845 0.001 135 0.410 19980
2014-15 0.680 62687 0.001 197 0.681 62884
2013-14 1.615 153007 0.002 230 1.617 153237
2012-13 1.236 115252 0.004 660 1.240 115912

(Note: Pig Iron includes Auxiliary)

Performance of Operation & Maintenance Portal

The Operation and Maintenance Portal was created with primary objective of providingexpertise of your Company to other organisation in helping them to improve theirefficiency level and in the process optimizing the resource utilization of the Company.The portal is structured on a fee based interlinking with the number of engineers andsupport staff deployed to the concerned organization. Under this platform your Company ismanaging following two operations:

L NMDC's 1.89 mtpa beneficiation and 1.2 mtpa Pellet Plant at Donimalai Karnataka.Your Company's technical manpower were involved in pre-commissioning activities trialruns of the equipments etc. and the plant has been successfully commissioned and isoperating. Modification jobs were carried out by O&M team during the commissioningstage and continuous Pellet production commenced from September 30 2016.

L Orissa Mining Corporation's Chromite Ore Beneficiation Plant at South KaliapaniJajpur

Odisha.

MARKET SCENARIO

During the Financial Year 2016-17 steel production in India witnessed a jump of about9.3% Y-o-Y. The crude steel production stood at 98.11 Million Tons. Good internal demandcombined with backing of Government in the form of levy of Minimum Import Price (MIP) torein in cheaper imports resulted into enhanced performance of steel sector.

Good performance of steel sector boosted iron ore production. It was reported thatduring Financial

Year 2016-17 Indian iron ore production surged by 28% Y-o-Y to 182.33 Million Tonsagainst 142.5 Million Tons in Financial Year 2015-16. Iron ore movement acrossmajor producing states of the Country was recorded at 123.29 Million Tons in FinancialYear 2016-17 up 21% Y-o-Y. Indian iron ore exports have seen fourfold increase inFinancial Year 2016-17. India has exported 24.35

Million Tons material in Financial Year 2016-17 compared with 6.04 Million Tons inFinancial Year 2015-16 which is 303% higher Y-o-Y. Iron ore exports from Goa increasedsharply from 3.86 Million Tons in Financial Year 2015-16 to 14.56 Million Tons inFinancial Year 2016-17. Indian pellet exports which were recorded at 0.83 Million Tons inFinancial Year 2015-16 moved up to 8.26 Million Tons in Financial Year 2016-17.

In the Domestic market iron ore prices initially witnessed declining trend and thenstarted moving up. The prices touched a bottom of Rs.1450 per Ton at the end of firstquarter and started moving up from the third quarter. The pellet prices have also followeda more or less similar pattern. The prices remained low till first half of the year andstarted moving up from second half. In the International market during calendar year2016 the steel production went up marginally by 0.8% to 1628.5 Million Tons. Chinaproduction went up by 1.2% producing 808.37 Million Tons.

India was the third largest steel producer after China and Japan. During Financial Year2016-17 the iron ore prices depicted high turbulence during the beginning and thedeclining trend continued till June 2016. Both iron ore and pellets started moving up fromJuly 2016. By September 2016 the pellet prices touched US$ 80 per Metric Ton and Iron ore& pellet producers capitalized on the positive market sentiment. The pellet pricescrossed US$ 100 per Metric Ton in Dec 2016. This sentiment continued till March 2017. Theimproved demand for iron ore and pellets in China was mainly due to improved demand forSteel in China as Chinese Government infused about RMB 14 trillion into Chinese economy.China imported around 1020 Million Tons of Iron ore during calendar year an increase of7.8% Y-o-Y. Increased iron ore and pellet output and higher global prices resulted insharp increase in iron ore & pellet exports from India in Financial Year 2016-17.

3. GROWTH STRATEGY

The Company is in the process of strategic expansion diversificationaiming atexponential and growth for long term sustainability/viability in the competitive marketenvironment. A part of the plan of the Company has already been taken forward. Consequentto expansionanddiversification closure of mining activities at Kudremukh the Company hasbeen exploring various alternatives for mining at other locations within Karnataka andalso in other States. The following efforts have been made to get iron ore mining leasesetting up of value added Plants etc. for diversification.

Development of Devadari Iron Ore Block

Ministry of Mines GoI vide its letter dated December 05 2016 to Govt. of Karnatakahas conveyed the approval under Section 17A(2) of MMDR Act 1957 for reserving area of470.40 ha in Devadari

Range Sandur Taluk Bellary District in favour of your Company. Govt. of Karnatakaissued Gazette notification on January 23 2017 for reservation of said area in favour ofyour Company for mining of iron and Manganese ore.

DMG Govt. of Karnataka vide letter dated February 13 2017 informed your Company tosubmit approved Mine Plan obtained from IBM Forest Clearance under Section 2 of FC Act1980

Environment Clearance obtained under EIA Notification 2006 and CFE obtained from KSPCBfor execution of Mining Lease deed.

Your Company has initiated action for obtaining statutory clearances from authoritiesfor execution of mining lease deed.

Your Company will undertake development of iron ore mines setting up of Beneficiationand Plant with capital investment of around Rs.1500 Crores. Initially the iron oreproduced from this mine will be utilized in the existing Pellet Plant and Blast FurnaceUnits at Mangaluru. Your Company has plans to set up Pellet Plant at Mine site at a laterstage and on reaching mine peak production level of 4 mtpa to optimize production ofexisting PPU and BFU in Mangaluru.

Development of Chikkanayakanahalli Iron Ore Deposit

Govt. of Karnataka accorded in principle approval for grant of ML for a period of 30years over an area of 116.55 ha vide letters dated 01 Aug 2008 and 02 Aug 2008 with theprior approval of Govt. of India under section 5(1) of MMDR Act 1957. During Joint SurveyML map was issued with overlapping of adjacent areas. The application for Forest Clearancewas kept pending by Forest Department at Tumkur. Writ Petition was filed in Hon'ble HighCourt GoK on the issue of overlapping of ML boundaries. Judgment was passed by Hon'bleHigh Court of Karnataka on 14.12.2016 and same is challenged in Hon'ble Supreme Court.Stay granted for the Special Leave Petition (SLP).

Backward and Forward integration of BFU

M/s MECON LIMITED Bengaluru was assigned the work of preparation and submission of aTechno Economic Feasibility Report for setting up of backward and forward integrationprojects to the 350 M3 capacity Blast Furnace Unit to make the uniteconomically viable. MECON has submitted the final TEFR on which your Company is in theprocess of obtaining necessary approvals to implement the same.

Setting up of R&D and Training Centre

With an objective of providing expertise in the fields of Mining Beneficiation andPelletisation by utilizing the expertise available your Company proposes to establish anR&D and Training Centre with state of the art facilitiesforthebenefitof steel industryin Karnataka State as well as other States of India with an aim to improve thetechnologies in terms of quality productivity marketability etc. besides diversifyinginto many other innovative areas of business.

Based on your Company's request M/s KIADB has allotted 4.32 Acres of land in Plot No.7of

Obadenahalli Industrial Area Doddabalapur Bengaluru Rural District for setting up ofR&D and

Training Centre. With due approval of the Board the allotted land was procured fromKIADB. The total amount towards land cost as per Lease Deed is Rs. 55729663/- (RupeesFive Crores fifty seven lakhs twenty nine thousand six hundred sixty three only). Thepreliminary estimated project cost projected for setting up of Research & Developmentand Training Centre along with Lab facilities for testing Ferrous & Non-FerrousMinerals Food Pharmaceuticals etc. is Rs.26.00 Crores inclusive of the land buildingand other facilities. An Expression of Interest (EoI) floated to identify an agency forpreparation of Detailed Project Report (DPR) for setting up the R&D and TrainingCentre.

Setting up of Grid connected Solar Roof Top Power Plant

With an objective of participating in Government of India's initiative of achievingambitious target of 40GW of Rooftop Solar Power by 2022 KIOCL had setup 380 kwp gridconnected solar roof top plant at available roof top area of 3940 sq. mtrs. on theexisting buildings located at Blast

Furnace Unit (BFU) and Pellet Plant Unit (PPU) at Mangaluru. Your Company hadapproached Solar Energy Corporation of India (SECI) a CPSU under the administrativecontrol of the Ministry of New and Renewable Energy (MNRE) which has been entrusted byMNRE for implementation of a Large scale Grid connected Rooftop pilot projects to the PSUsunder the Ministry of Steel. Solar Energy Corporation of India (SECI) informed KIOCL thatM/s Clean Max Enviro Energy Solutions Pvt Ltd. is one of the approved agency forexecuting the Roof top solar plants in RESCO mode on Net metering

Basis.

A Power Purchase Agreement (PPA) has been signed between M/s Clean Max Enviro EnergySolutions Pvt. Ltd and your Company for a period of 25 years for setting up of 380 Kwpcapacity Grid connected Solar Roof Top Power plant as per mandate given by the MNRE Govt.of India.

JOINT VENTURE/MOU

Development of Nemkallu Iron Ore Deposit in Anathapuram District Andhra Pradesh

A MoU was signed among your Company APMDC and RINL on June 22 2013 at Hyderabad forexploration and mining of Nemakal iron ore deposit in Ananthapuram District AndhraPradesh.

Subsequently Govt. of AP issued notification dated 30 Nov 2015 reserving an area overan extent of 1327 hectares for Iron Ore in Minchery R.F. of Kalyandurg Range inAnanthapuram District in favour of M/s A.P.Mineral Development Corporation Limited (APMDC)under Section 17A(2) of the Mines and Minerals (D&R) Act1957. APMDC has submittedproposal to PCCF Govt. of Andhra

Pradesh for seeking permission to carry out exploratory drilling (20 holes) in theaforesaid area. DGPS survey to demarcate the drilling area is under progress. On receivingthe forest clearance for exploratory drilling work will be undertaken jointly by KIOCLand APMDC. TEFR for the setting up of Beneficiation Plant and Pellet Plant will beprepared based on the outcome of the exploratory drilling.

MoU with M/s WBMDTCL

Your Company has entered into MoU on January 08 2016 for setting up Joint Venture withWBMDTCL for exploration and development of iron ore mines and for other minerals in theState of West Bengal. WBMDTCL and your Company will form Joint Venture Company in 51:49equity. Your Company and WBMDTCL to jointly identify an iron ore blocks to put up proposalto State Govt. for reservation of iron ore blocks in favor of JV Company. Your Companyappointed Consultant for preparation of Joint Venture Agreement (JVA) and other documentsand incorporation of JV Company. Joint discussions were held in the month of April 2017among WBMDTCL your Company and Consultant. JVA is under finalization for incorporation ofthe company with due approvals.

DIVERSIFICATION Mineral Exploration Field

Ministry of Mines Govt. of India notified the Company as Mineral Exploration Entity onFebruary 16

2015 under second proviso of sub-section (1) of Section 4 of the Mines and Minerals(Development and Regulation) Act 1957. This will facilitate the Company to take upprospecting and exploration works of various minerals across the Country.

Ministry of Mines allotted two Nos. G4 stage of mineral investigation blocks to theCompany. The blocks were allotted to the Company on September 12 2016 during the meetingheld under the Chairmanship of Secretary Ministry of Mines GoI for allocation ofexploration blocks to PSUs. The blocks includes investigation of Iron Ore over an area of100 Sq. Kms at Tirumankaradu region of Tiruppur District in Tamilnadu State andinvestigation of Gold and associated minerals over an area of 202 Sq. Kms at Udbur regionof Mysore District in Karnataka State.

The work plans of both the blocks allotted to the Company is technically approved inthe 6th National Mineral Exploration Trust (NMET) Technical Committee meetingwhich was held on 2nd and 3rd December 2016. The financial proposalsof both the blocks were also approved in the 4th NMET Executive Committee meeting whichwas held on February 21 2017 under the Chairmanship of Secretary Ministry of Mines GoI.The exploration works of both the allotted blocks will be taken up soon by the Company asper the directions of NMET and the same will add up to the profitability and woulddemonstrate the expertise of your Company in the field of mineral exploration.

INORGANIC GROWTH

Acquisition of Equity Stake in M/s IDCOL Odisha

With an objective to capitalize on the emerging opportunities in the mineral rich Stateof Odisha your Company approached the Chief Secretary Govt. of Odisha with a proposalto set up 1.5 to 2 MTPA Pellet Plant in the State subject to the State committingan ore-linkage for the purpose. During the meeting held on May 13 2015 Govt. of Odishadecided a Central PSU may be inducted as a strategic investor in IDCOL Odisha with anequity participation upto 51% along with Management Control. In case of becomingsuccessful in acquiring management control in IDCOL the Company has plans :

L To set up iron ore beneficiation and pellet plant at free land available at IDCOLKalinga IronWorks Ltd. (IKIWL) Barbil.

L Up-gradation of existing furnaces and establishing a Captive Power Plant at IDCOLFerro-Chrome & Alloys (IFCAL).

L Expansion and modernization of existing Chrome Ore Beneficiation Plant to enhanceproduction capacity. L Development of Mines and a Concentrator Plant at Telangi"B" mine for the commencement of mining.

The Board of Director in its Meeting held on April 06 2016 accorded approval forsubmitting conditional Financial Bid to IDCOL to acquire 51% of the paid up Equity ofIDCOL with management control in line with the financial due diligence report of M/s YESSecurities (India) Limited. Your Company submitted conditional financial bid on April 252016 to IDCOL with following conditions:-

a) The Govt of Odisha to reserve and notify a suitable iron ore mine having reserves ofatleast 100 million tons with average grade of Fe 60-62% in favour of IDCOL for thepurpose of establishing a suitable mineral based manufacturing plant at the premises ofM/s IDCOL Kalinga Works Barbil Odisha; b) The Govt. of Odisha to reserve and notify asuitable chrome ore mine having reserves of at least 1 million tons in favour of IDCOL for the purpose of expanding the Ferro chrome manufacturing plant at the premises of M/sIDCOL Ferro-Chrome &Alloys (IFCAL) Jajpur Road Odisha; c) The Govt. of Odisha shallensure coal linkage for the proposed captive power plant at IFCAL

Jajpur; d) The Govt. of Odisha shall take over the responsibility of settling alloutstanding Contingent Liabilities as on date of acquisition.

Further bid validity has been extended till 23 August 2017.

Compliances on financial bid conditions submitted by your Company are being discussedwith Govt. of Odisha. Allotment of Iron Ore mines and Chromite mine to IDCOL and settlingall outstanding Contingent Liabilities of IDCOL has been made prerequisite for acquisitionof IDCOL.

4. HUMAN RESOURCE MANAGEMENT & INDUSTRIAL RELATIONS

Manpower Profile

As on March 31 2017 the Company had 922 employees on its rolls comprising of 303Executives including Non-unionized Supervisors (33%) and 619 Non Executive Employees(67%).

Table: 3 show the break up of employees under different categories such as SCs STsWomen employees Ex-servicemen and PwD under different categories on rolls of the Companyas on March

31 2017.

Table: 3
Group Total No. of employees on rolls SC ST Women employees Ex-servicemen PwD
A 254 44 12 12 -- 5
B 49 04 2 6 -- --
C 578 86 30 10 1 5
D 41 7 6 1 -- 3
Total 922 141 50 29 1 13

Compliance under the Persons with Disabilities Act 1995

Your Company ensures compliance under the Persons with Disabilities Act 1995. Suitableprovisions/modifications are made in the workplace to meet the requirements of suchpersons with disability.

Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013

Your Company is following Anti Sexual Harassment procedures in line with therequirements of the

Sexual Harassment of Women at the Workplace (Prevention Prohibition & Redressal)Act 2013.

Your Company has constituted Internal Complaint Committees in two major locations i.e.Corporate Office at Bengaluru and Plant level at Mangaluru to redress sexual harassmentcomplaints. All employees (permanent contractual temporary trainees) are covered underthis policy. During the year no complaints were reported.

Empowerment of Women

A Women's Forum Women in Public Sector (WIPS) is operating in your Company and all thewomen employees are Life Members of the said Forum. your Company is a corporate LifeMember for Forum of WIPS under the aegis of SCOPE. Women employees are being regularlynominated to attend the meets of WIPS. International Women's Day was celebrated on 8thMarch 2017 in a befitting manner. WIPS your Company has bagged the Best Recognition Awardfor WIPS Activities for the year 2016 during 27th National Convention of Forumof WIPS held on 11th and 12th February 2017 at Nagpur. During theyear 2016-17 apart from participating in Swachh Bharat Abhiyan WIPS Cell has activelyundertaken various activities such as organizing Medical Camps monetary assistance togirl pursuing higher studies awareness classes on health studentsfromfinancially andhygiene extended domestic support to orphanages self defense workshop for employeesworkshops on cashless transactions and other CSR activities.

Industrial Relations and Employees Welfare

During the year your Company continued to maintain harmonious industrial relationsco-operation between the elected representative bodies of employees and managementensuring no loss of mandays during the year. Personnel policies and welfare schemes werecontinuously aligned with the Company's goals and objectives.

Human Resource Development

A series of initiatives were taken towards human resource development by your Companywhich includes in-house training programmes to enhance skills nomination for variousseminars and conferences. During the year 3960 mandays of training was imparted to theemployees.

Public/Staff Grievance Redressal

Your Company has framed a well defined grievance procedure evolved under the Code ofDiscipline since its inception. Grievances received are being redressed to thesatisfaction of the aggrieved employees. With respect to public grievance as and when anycomplaints are received from the public necessary remedial action if any is taken byyour Company immediately. Complaints/grievances other than the staff grievance arecategorized into customer/consumer complaints/grievances from the ContractorsNGOs/General Public etc. The respective project heads are empowered to dispose off thegrievances concerning their areas. Linkage has been provided to Centralized PublicGrievances Redressal & Monitoring System (CPGRAMS) with effect from May 01 2011.

The grievances received and disposed off by the Company are reported to theAdministrative Ministry on monthly and quarterly basis. The guidelines laid down by theGovernment of India in this regard are being followed. A Public Service Delivery(SEVOTTAM) has been created for assessing and improving the quality of services deliveredto the citizens. The system also involves the identification of the services deliveredquality of service its objective improvement of quality using innovative methods fordeveloping business processes and being more informative with the help of advancedinformation technology. The same is also available in the Company's website.

During the year nine grievances from public/ex-employees were received directly/CPGRAM portal and all of them were disposed off.

Particulars of Employees

Ministry of Corporate Affairs vide its notification dated June 05 2015 has exemptedGovernment Company with the applicability of section 197 of the Companies Act 2013.However the remuneration received by the employees of the Company has not exceeded thelimit prescribed under section 197 read with Rule 5 of The Companies (Appointment andRemuneration of Managerial Personnel)

Rules 2014 during the Financial Year 2016-17.

Skill India Initiatives

Your Company has undertaken Skill Development Initiative and signed MoU with NationalSkill Development Corporation (NSDC) and started Skill Development Centre "KIOCLQuess Skill Academy" in the BFU premises at Mangaluru in partnership with M/s QuessCorp an approved agency of NSDC. The Centre of Excellence was inaugurated on February 052016 and so far around The various topics covered under for Skill Development are HeavyEarth Moving Machinery Mechanic Safety Operator Raw Material Handling Operator Conveyorand Other Bulk Material Handling Technician. This copies are provided by Mining SectorSkill Council/ Steel Sector Skill Council.

5. CORPORATE GOVERNANCE

Pursuant to Regulation 34(3) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a separate section on Corporate Governance along with certificate fromPractising Company Secretary confirming the level of compliance is attached and forms apart of the Board's Report.

Directors and Other Key Managerial Personnel

The Board consists of eight members four of whom are executive or whole-timeDirectors two are non-executive Directors representing Ministry of Steel and two areIndependent Directors. Remuneration and other details of the KMP's are mentioned in theextract of the Annual Return which forms part of this Report.

Independent and Non-Independent Non-Executive Directors

Your Company has received necessary declaration under section 149(7) of the CompaniesAct 2013 from each Independent Director that he/she meets the criteria of independencelaid down in Section 149(6) of the Companies Act 2013 and Regulation 25 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.

Woman Director

In terms of the provisions of Section 149 of the Companies Act 2013 and Regulation17(1) (a) of

SEBI (Listing Obligations and Disclosure Requirements) Regulation 2015 for the yearended March 31 2017 your Company has one Women Director on its Board.

Changes in the Composition of the Board of Directors Inductions

During the year following Directors were appointed by the President of India

L Sri S K Gorai Director (Finance) in the category of Functional Director w.e.f.11.11.2016. L Sri Saraswati Prasad Additional Secretary and Financial AdviserMinistry of Steel in the category of Govt. Nominee Director w.e.f. 08.02.2017.

L Dr. Deepika Sharma in the category of Independent Director w.e.f. 10.02.2017.

A proposal for appointment of aforesaid Additional Directors in pursuance to Section161 of the Companies Act 2013 is being placed before the shareholders for approval; therelevant details form a part of the AGM notice.

Retirement/Cessation

During the year under review following Directors ceased to be the Members of Board:-

L Sri Laxminarayana Director (Finance) w.e.f. 31.05.2016 consequent upon attainingthe age of superannuation.

L Sri S. Manoharan Sri P K Bajaj and Dr. S. Raghunath Independent Directors w.e.f.04.07.2016 after completion of three years tenure. L Dr. B.K. Sahoo IndependentDirector w.e.f 29.01.2017 after completion of three years tenure.

L Smt. Bharathi S. Sihag Government Nominee Director w.e.f. 30.11.2016 tenderedher resignation as Director from the Board of KIOCL consequent upon her appointment asOfficer on Special Duty in the Department of Fertilizers and release from the duties asSpecial Secretary and Financial Adviser Ministry of Steel.

The Board placed on record its deep appreciation of the valuable services rendered bythe Directors whose term of office ended during the year.

Appointments/Resignations of the Key Managerial Personnel

Sri S.K. Gorai Director (Finance) and CFO was appointed during the year.

Directors Retiring by Rotation

In terms of Section 152 (6) of the Companies Act 2013 Sri. M V Subba Rao and Sri N.Vidyananda being longest in the office shall retire by rotation at the ensuing AGM andbeing eligible for re-appointment offers themselves for re-appointment. The Boardrecommends their re-appointment.

Number of Meetings of the Board

The Board met seven times during the Financial Year the details of which are given inthe Corporate Governance Report. The maximum interval between any two meetings did notexceed 120 days as prescribed in the Act. The Meetings were conducted in compliance withrelevant regulations of the

SEBI (LODR) Regulations 2015 and Secretarial Standard on Meetings of the Board ofDirectors

(SS-2) issued by The Institute of Company Secretaries of India (ICSI).

Directors' Responsibility Statement

The Financial Statements are prepared in accordance with Indian Accounting Standards(Ind AS) under the historical cost convention on accrual basis. The Ind AS is prescribedunder Section 133 of the Companies Act 2013 read with Rule 3 of the Companies (IndianAccounting Standards)

Rules 2015 and Companies (Indian Accounting Standards) Amendment Rules 2016. TheCompany has adopted all the Ind AS standards and adoption was carried out in accordancewith applicable transition guidance. Accounting Policies have been consistently appliedexcept where a newly issued Accounting Standard is initially adopted or a revision to anexisting Accounting Standard requires a change in the Accounting Policy hitherto in use.

The Directors confirm that : a) In the preparation of the Annual Accounts for theFinancial Year ended March 31 2017 the applicable Accounting Standards had beenfollowed. b) The Company has selected such Accounting Policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of theFinancial Year and of the Profit Company for that period. c) The Company has taken properand sufficient care towards the maintenance of adequate accounting records in accordancewith the provisions of the Companies Act 2013 for safeguarding the assets of the Companyand for preventing and detecting fraud and other irregularities. d) The Company haveprepared the Annual Accounts on a going concern basis. e) The Company has laid downInternal Financial Controls which are adequate and are operating effectively. f) TheCompany has devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT-9 is annexedto this Report.

6. AUDITORS

Statutory Auditors

Pursuant to Section 139 of the Companies Act 2013 the Comptroller and Auditor Generalof India shall appoint the Statutory Auditors of the Company for the year 2017-18. TheStatutory Auditors Report on Accounts of the Company for the Financial Year ended March31 2017 are annexed.

Cost Auditors

Pursuant to Section 148 of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the Cost Audit records of the Pellet Plant Unitof the Company is required to be audited. The Board on the recommendations of the Auditand Risk Management

Committee has appointed PKR & Associates LLP Cost Accountants Bengaluru to auditthe cost accounts of the Company for the Financial Year 2017-18 at a remuneration ofRs.50000/- plus applicable taxes.

As required under the Companies Act 2013 the remuneration payable to the Cost Auditoris required to be placed before the Members in a Annual General Meeting for theirratification. Accordingly a Resolution seeking Member's ratification for the remunerationpayable to PKR & Associates LLP

Cost Auditors is included at Item No. 9 of the Notice convening the Annual GeneralMeeting.

The Cost Audit Report for the Financial Year 2015-16 was filed with the Ministry ofCorporate Affairs on 04.10.2016. The Cost Audit Report for Financial Year 2016-17 is underfinalization and will be submitted to the Ministry of Corporate Affairs within theprescribed period.

Secretarial Auditors

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 hasappointed M/s NG Joshi and Co. Company Secretaries a firm of Company Secretaries inpractice to undertake the Secretarial Audit of the Company for the Financial Year 2016-17.

The Secretarial Audit Report and comments of Management on the adverse remarks areannexed to this Report.

C&AG Audit

The Comptroller & Auditor General of India (C&AG) vide its letter dated June 62017 has conveyed "NIL" comments on the accounts of the Company for the yearended March 31 2017. Copy of the same is annexed to this Report.

7. CORPORATE SOCIAL RESPONSIBILITY

Your Company has been an early adopter of Corporate Social Responsibility (CSR)initiatives. Your Company has undertaken projects in the areas of Education CommunityDevelopment Health

Water Sanitation etc. In compliance with Section 135 of the Companies Act 2013 readwith the

Companies (Corporate Social Responsibility Policy) Rules 2014 the Company hasestablished Corporate Social Responsibility (CSR) Committee. A Board approved CorporateSocial Responsibility Policy is in existence in the Company which is available under thelink https://www.kioclltd.in/ user/cms/95.

The statutory disclosures with respect to the CSR Committee and an Annual Report on CSRactivities forms a part of this Report as Annexure.

8. KEY INITIATIVES

Environmental Management & Pollution Control Measures

As in the past your Company continued to stress upon measures for the conservation andoptimal utilization of energy in all its areas of operations including those for energygeneration and effective usage of sources/equipments used for generation. Within thefactories there have been continuous efforts to improve operational efficienciesminimizing consumption of natural resources and reducing water energy while maximizingproduction volumes. Some of the Environmental Mitigation initiatives taken during the year2016-17 are as under:-L Tree saplings around 100 Nos. in the plant and townshiparea have been planted to augment the existing tree plantations during World Environmentday celebrations.

L Work proposal has been initiated to utilize Lakya Dam water head at Pellet Plantduring the non production time for miscellaneous activities with some modification worksin the existing pumping arrangement. The utilization of gravity head will help conserveenergy.

L Combined Air and Water consent has been renewed for Pellet Plant Unit and isvalid from

01.07.2016 to 30.06.2021.

L Awareness programme conducted during World Environment day celebrations onutilization of Kitchen waste in houses for developing and maintaining roof top garden toreduce waste generation at Source.

L Composting facility created for disposal of canteen wastes scientifically toprevent the pollution in the premises.

L Large sprinklers and Mist type sprinklers have been extensively installed in thePlant area to suppress fugitive dust generated along haul roads raw material storagesheds and loading areas.

L The standard norms prescribed by KSPCB in respect of air and water qualitymonitoring are being adhered to. The company has complied with the requirements specifiedunder Battery

Management Hazardous waste management Bio medical waste management Rules Water ActAir Act and EP Acts.

Safety

The onsite emergency plan approved by Directorate of Factories is in existence at bothPellet Plant and Blast Furnace units and the same is updated as and when there is anychange in plant condition as well as emergency team members. Safety Inspections arecarried out regularly once in two months by the Safety officer along with concernedDepartment Engineers and Safety Committee members. Suitable Personal Protective equipmentssuch as Safety helmets Shoes Rain coats Gloves Safety Goggles Face shields ApronsEar plugs/muffs are issued to all employees including Contract labourers to protect themagainst work place hazards. Various training programmes are being conducted to inculcateSafety consciousness among employees and labourers. Your Company has conducted theNational Safety Week celebration from 4th March 2017 to 10th March2017 during which different training programmes on Occupational Health Electrical Safetyand Safety Management System were conducted. The Onsite Emergency Mock drills areconducted once in six months in Pellet Plant and Blast Furnace units to check the efficacyof preparedness to handle any major accident.

ISO Certification

Your Management System: ISO-14001:2004 Quality Company is certified

Management System: ISO-9001:2008 and Occupational Health & Safety ManagementSystem:

OHSAS-18001:2007.

Implementation of Official Language Policy

Your Company follows and implements the directives issued from time to time by theDepartment of Official Language Ministry of Home Affairs and Ministry of SteelGovernment of India for the progressive use of Official Language Hindi. Employees of theCompany are encouraged to work inHindi with regular training cash awards and incrementsas per the Government directives. Hindi

Workshops Orientation programmes are conducted regularly to create awareness impartknowledge and encourage the employees to do their Official work in Hindi.

Your Company has been conferred with the Ispat Rajbhasha Trophy for the progressive useof Official Language for the year 2015-16 from Hon'ble Minister of State for SteelGovernment of India on November 19 2016 on the eve of Hindi Salahakar Samithi Meeting.

Official Language Implementation Committee Meetings take place at all the locationsregularly and the progress during the previous quarters are reviewed in such Meetings.Hindi Fortnight was celebrated at all locations of the Company during September 2016.Hindi Programmes and several Hindi Competitions were held and prizes distributed to thewinners. A valedictory function was organized on October 28 2016.

Your Company is the Convener of Bengaluru Town Official Language ImplementationCommittee (Undertakings) (TOLIC) and conducts regular meetings and Joint Hindi Monthprogrammes for allCentral PSUs in Bengaluru.

Hon'ble Governor of Goa graced the first Meeting of TOLIC in July 27 2016. During theMeeting 17 different Public Sector Undertakings were awarded shields and certificates fortheir contribution towards Official Language Implementation and for the publication of thebest house Journal inHindi. During the Year 04 Hindi Workshops were conducted to imparttraining to the employees for doing their official work in Hindi.

Your Company was awarded the third prize for best performance in implementation ofOfficial Language in ‘C' region for the year 2015 16 by TOLIC (Undertaking)Bengaluru.

Vigilance

The Company has an independent Vigilance Department headed by the Chief VigilanceOfficer. ‘Preventive vigilance' has been the thrust area of Vigilance Department allthese years and the same has received focused attention during the year. A climate ofpreventive vigilance is created to sensitize officials at all levels about the ill effectsof corruption and malpractices. Structured Meeting of Vigilance with the management isbeing conducted regularly and issues related to e-governance Leveraging TechnologyTender Management Award of Works Recruitment Policy have been discussed. VigilanceAwareness Week was observed from October 31 2016 to November 05 2016 at all thelocations/offices of your Company. Workshops seminars and various competitions wereconducted during the week.

Procurement by tendering-cum-e-reverse auction is in vogue from September 2010. Thethreshold for contracts at Rs.5 lakhs and above. During the Financial Year 2016-17 98.80%of value fixed cases by value are covered under e-reverse auction. All payments above thethreshold value of Rs.1 lakh are being made through electronic mode. During the year2016-17 99.6% of the cases by value are covered under electronic mode. During the year78 work/purchase/sale orders have been issued incorporating Integrity Pact clausecovering 96.29% of contracts by value. No complaints have been received under IP.Vigilance Department conducted 13 training programmes at three different locationscovering 800 man hours on topics such as Good GovernanceVigilance and other developmentsLokpal & Lokayukta Act 2013 Vigilance Awareness and Preventive Vigilance Publicparticipation in promoting integrity and eradicating corruption etc.

Implementation of new Public Procurement Policy for MSEs

Keeping in view the effective implementation of Public Procurement Policy for Micro andSmall

Enterprises (MSEs) Order 2012 following steps have been taken:

L List of item components that could be sourced from MSEs are placed on theCompany's web-site at www.kioclltd.in for the information of MSE vendors.

L Communication has been sent to all the registered vendors regarding the saidpolicy with the objective of achieving an overall procurement of 20% from MSEs. Furtherfor enhancing the procurement from MSEs owned by SC/ST all the vendors are approached forcapturing necessary details and update the data bank. L Appropriate weightage wasgiven for MSEs in the MoU from year 2016-17 onwards in order to ensure effectiveimplementation of the policy. L During 2016-17 your Company placed orders forgoods and services to the extent of Rs.3.39 Crores from MSEs which constituted20.72% of the total procurement value of

Rs.16.36 Crores.

Right to Information

Under the Right to Information Act 2005 the Company has set up an exclusive Right toInformation Act outfit to provide information and bring in transparency. As per therequirement of section 4(1) (b) of the Act general information required to be provided tocitizens are displayed on Company's website www.kioclltd.in

The Company has nominated Public Information Officers and Appellate Authorities in allits 3 locations (Corporate Office & Pellet Plant / Project Site) to provideinformation to the applicants. All applications and queries received under RTI weredisposed off as per the provisions of the Act. A Web Portal RTI Online with urlhttps://rtionline.gov.in has been launched by DoP&T. This is a facility for the Indiancitizens to file RTI applications and first appeals online and also to make payment of RTIFees online. On the instructions your Company has provided the link to above site.Further during the year 2016-17 the Company received 15 applications and queries relatedto human resources contracts tenders business related matters etc. and the same weredisposed off.

Energy Conservation R&D Technology Absorption and Foreign Exchange Earnings andOutgo

Details of Energy Conservation R&D technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3) (m) of the Companies Act 2013 readwith Rule 8 of The

Companies (Accounts) Rules 2014 is annexed to this report.

Green Initiatives

As in the previous years this year too your Company is publishing only the statutorydisclosures in the print version of the Annual Report. Electronic copies of the AnnualReport 2016-17 and Notice of the 41st Annual General Meeting are being sent toall members whose email addresses are registered with the Company/DepositoryParticipant(s). For members who have not registered their email addresses physical copiesare sent in the printed mode.

Acknowledgement

The Directors gratefully acknowledge the support co-operation and guidance receivedfrom the Hon'ble Minister for Steel Hon'ble Minister of State for Steel Hon'ble ChiefMinister of Karnataka the Secretary Ministry of Steel and other officials of theMinistry of Steel as well as other Ministries of the Government of India Government ofKarnataka Andhra Pradesh Odisha West Bengal

Jharkhand Haryana and all other departments/agencies of Central and State Governmentin all the endeavors of the Company.

The Directors acknowledge the support extended by the valued and esteemed customersshareholders stakeholders bankers and suppliers for their support and co-operation.

The Directors also appreciate the continued and dedicated efforts put in by all theemployees to overcome challenges faced during the year.

For and on behalf of the Board of Directors
Date : 01-08-2017 (M.V. Subba Rao)
Place: New Delhi Chairman-cum-Managing Director (Addl. Charge) and Director (Commercial)