To The Members Modern Steels Limited
Your Directors hereby present their 43rd Annual Report and auditedaccounts of the Company for the year ended 31st March 2017.
|FINANCIAL HIGHLIGHTS || ||Rs. in Lacs |
| ||Year Ended 31.03.2017 ||Year Ended 31.03.2016 |
|Gross Sales ||35415 ||30270 |
|Excise Duty ||3911 ||3345 |
|Net Sales & Income from Operations ||31504 ||26925 |
|Operating ||963 ||1528 |
|Finance Cost ||486 ||2713 |
|Cash Profit/(Loss) ||477 ||(1185) |
|Depreciation & Amortisation ||535 ||539 |
|Profit/(Loss) before Tax ||(58) ||(1724) |
|Profit/(Loss) after Tax ||(58) ||(3357) |
Financial year 2016-17 has been challenging year for Indian Steel industry due to lowmargins. The Company was able to achieve Gross Sales of Rs. 354.15 Crores as compared toRs. 302.70 Crores in the previous year. The operating profit of the Company for the yearstood at Rs. 9.63 Crores as against Rs. 15.28 Crores previous year. The input cost of rawmaterials continued to increase during the year and could not be passed on fully to theconsumer.
Due to the difficult financial position and the losses suffered by the Company theDirectors have not recommended any dividend for the year.
STATUS OF COMPANY'S ACCOUNTS WITH LENDERS
Members will recall that earlier the company had submitted its proposal for additionalfinancial assistance to the lenders. The lenders conducted the TEV study of the Companyand assessed the need based working capital requirements of the Company. Due toinadvertent delay in sanctioning financial assistance by the Lenders the financial systemthe Company got in difficulties and pushed the Company into difficult position of NPA.
The Company has submitted its restructuring scheme again and the Banks are yet todecide leading to uncertainty with regard to the amount and time of any repayment fallingdue which are both crucial to identify the quantum of liability and its nature whethercurrent or otherwise. The Company based on the opinion has shown the total debts payableas on the balance sheet date under the head long term borrowings instead of showing othercurrent liabilities.
The Company is in discussions with the Lenders to find out a workable solution to meetthe present financial difficulties of the company.
The fiscal 2017-18 augurs bright for the Indian Automotive sector which shall increasethe demand of steel in the market. On the other hand increase in the prices of electrodeswill impact the Input cost. Given the above scenario it is becoming more and moreimportant to focus on cost reduction to remain competitive in current market and tomaintain margins.
KAIZEN & TS 16949 ACCREDITATION
Your Company's manufacturing facilities continue to maintain the prestigious TS 16949certification by DNV Netherlands a leading international Certification Company.
During the year the Company continued implementation of Kaizen and 5'S' projects tocome up to the expectations of major global OEMs.
The outstanding exempted deposits at the end of the year under review amount to Rs. 679Lacs (Previous year Rs. 661 Lacs). There are no overdue deposits.
CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSIONS & ANALYSIS
A separate report on Corporate Governance and Management Discussions & Analysis isattached herewith and forms part of this report.
Mr. Krishan Kumar Goyal Managing Director shall retire by rotation at the ensuingAnnual General Meeting and being eligible offers himself for re-appointment.
The terms of Mr. Amarjit Goyal Chairman & Whole Time Director and Mr. KrishanKumar Goyal Managing Director of the Company are up to 31st March 2017. TheBoard of Directors on the recommendation of the Nomination and Remuneration Committee hasre-appointed Mr. Amarjit
Goyal Chairman & Whole Time Director and Mr. Krishan Kumar Goyal ManagingDirector of the Company for a period of 3 (three) years with effect from 1stApril 2017 subject to approval of shareholders.
The first term of office of Mr. D.S. Gill and Dr. Priyavrat Thareja as IndependentDirectors expires at the ensuing Annual General Meeting. The Board has recommendedreappointment of Mr. D.S. Gill and Dr. Priyavrat Thareja as Independent Directors of theCompany for a second term of 3 (three) consecutive years.
DECLARATION BY INDEPENDENT DIRECTORS
The Company has received the necessary declaration from each Independent Director inaccordance with Section 149 (7) of the Companies Act 2013 that they meet the criteria ofindependence as laid out in Sub Section (6) of Section 149 of the Companies Act 2013 andSEBI (Listing Obligation and Disclosure Requirements) Regulations 2015.
BOARD DIVERSITY AND REMUNERATION POLICY
The Company has a policy for formation of the Board to have Executive Directors andIndependent Directors of diverse background to maintain the independence of the Board. Ason 31st March 2017 the Board consists of 7 members three are Executive/WholeTime Directors three Independent Directors and One Bank Nominee Director.
We affirm that the remuneration paid to the directors is as per the terms approved bythe Nomination & Remuneration Committee of the Company.
During the year five Board Meetings were convened and held the details of which aregiven in the Corporate Governance Report.
DIRECTOR'S RESPONSIBILITY STATEMENT
Pursuant of requirements under Section 134(3) (c) of the Companies Act 2013 withrespect to Directors Responsibility Statement it is hereby confirmed that: i) in thepreparation of the annual financial statements for the year ended 31st March2017 the applicable accounting standards have been followed along with proper explanationrelating to material departures if any; ii) the Directors have selected such accountingpolicies and applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 31st March 2017 and of the loss of the Company for the yearended on that date; iii) the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventingand detecting fraud and other irregularities; iv) the Directors have prepared the annualfinancial statements for the year ended 31st March 2017 on a goingconcern' basis; v) the Directors have laid down internal financial controls to be followedby the Company and that such internal financial controls are adequate and were operatingeffectively; vi) the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.
RELATED PARTY TRANSACTIONS
All contracts or arrangements entered into by the Company with Related Parties havebeen done at arm's length and are in the ordinary course of business.
Pursuant to Section 134 of the Companies Act 2013 read with Rule 8(2) of the Companies(Accounts) Rules 2014 the particulars of such transactions are provided in Form AOC-2which is annexed herewith as Annexure "A" to this report. Related Partydisclosures as per AS-18 have been provided in the Notes to the financial statement.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is annexed herewith as Annexure"B".
The Company recognises that risk is an integral and unavoidable component of businessand is committed to managing the risk in a proactive and efficient manner. The Company hasformulated Risk Management Policy to identify and then manage threats/risks that couldhave impact on the goals and objectives of the Company.
INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY
MSL has aligned its current systems of internal financial control with the requirementof Companies Act 2013.
MSL's internal controls are commensurate with its size and nature of its operations.These have been designed to provide reasonable assurance with regard to recording andproviding reliable financial and operational information complying with applicablestatues safeguarding assets from unauthorized use executing transactions with properauthorisation and ensuring compliance of corporate policies.
The management assessed the effectiveness of the Company's internal control overfinancial reporting (as defined in Clause 17 of SEBI Regulations 2015) as of 31stMarch 2017. The assessment involved self review and external audit.
Aaryaa & Associates the statutory auditors of MSL has audited the financialstatements including in this annual report and has issued an attestation report on ourinternal control over financial reporting (as defined in Section 143). The Audit Committeereviews reports submitted by the management and audit reports submitted by internalauditors and statutory auditors. Suggestions for improvement are considered and the auditcommittee follows up on corrective action.
Based on its evaluations (as defined in Section 177 of Companies Act 2013 and Clause18 of SEBI Regulations 2015) the Audit Committee has concluded that as of 31stMarch 2017 the internal financial controls were adequate and operating effectively.
At the Annual General Meeting held on 29th September 2014 M/s.Aaryaa & Associates Chartered Accountants were appointed as Statutory Auditors ofthe Company to hold office till the conclusion of the Annual General Meeting to be held inthe year 2019. In terms of the provisions of Section 139 of the Companies Act 2013 theappointment of the Auditor shall be placed for ratification at every Annual GeneralMeeting.
Accordingly the appointment of M/s. Aaryaa & Associates Chartered Accountants asStatutory Auditors of the Company will be placed for ratification by shareholders. thisregard the Company has received a Certificate the Auditors to the effect that if theirappointment is ratified it would be in accordance with the provisions of Section 141 ofthe Companies Act 2013.
The Board of Directors have approved the appointment and remuneration of M/s. V. Kumar& Associates as Cost Auditors of the Company to conduct the cost audit for the year2017-18 on the recommendations of the Audit Committee subject to the ratification of theremuneration by the shareholders.
The Board has appointed M/s. B.K. Gupta & Associates Company Secretaries toconduct Secretarial Audit for the financial year 2016-17. The Secretarial Audit Report inForm MR-3 for the financial year ended 31st March 2017 is annexed herewith asAnnexure "C" to this report.
The Notes on financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report does notcontain any qualification reservation or adverse remark.
The Company is having motivated work force. Harmonious employee relations prevailedthroughout the year. Your Directors place on record their appreciation for all employeesfor their hard work and dedication.
EXTRACT OF ANNUAL RETURN
The extract of the Annual Return of the Company in Form MGT-9 is annexed herewith sAnnexure "D" to this report.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Particulars of Loans guarantees and investments covered under Section 186 of theCompanies Act 2013 form part of the notes to the financial statements provided in theAnnual Report.
MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING FINANCIAL POSITION OF THE COMPANY
There are no adverse material changes or commitments occurring after 31stMarch 2017 which may affect the financial position of the Company.
SIGNIFICANT AND MATERIAL ORDERS
There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
The Directors also wish to place on record its appreciation for the commitmentdisplayed by all employees at all levels during the year.
The Directors also take this opportunity to express its deep gratitude for thecontinued co-operation and support received from its valued stakeholders.
| ||For & on behalf of the Board |
|Place : Chandigarh ||Amarjit Goyal |
|Dated: 27th May 2017 ||Chairman & Whole Time Director |
ANNEXURE A' TO DIRECTORS ' REPORT
Form No. AOC-2
(Pursuant to clause (h) of sub-section (3)of section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014)
Form for disclosure of particulars of contracts/arrangements entered into by theCompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arms length transactions under third proviso thereto
1. Details of contracts or arrangements or transactions not at arm's length basis Nosuch contract or arrangement.
2. Details of material contracts or arrangement or transactions at arm's length basis
|(a) Name(s) of the related party and nature of relationship ||Modern Automotives Limited |
| ||Related Party |
|b) Nature of contracts/arrangements/transactions ||(Purchase / Sale of scrap alloy and non-alloy rounds and machined and auto forged components |
|c) Duration of the contracts / arrangements/transactions ||During the year |
|(d) Salient terms of the contracts or arrangements or transactions including the value if any: ||The Company is engaged in the sale / purchase of scrap alloy and non-alloy rounds and machined and auto forged components in the normal course of business at arms length basis. |
|(e) Date(s) of approval by the Board if any: ||At quarterly board meetings |
|(f) Amount paid as advances if any: ||Nil |
ANNEXURE B' TO DIRECTORS' REPORT
Information as per Section 134(3)(m) of the Companies Act 2013 read with rule 8 of theCompanies (Accounts) Rules2014 and forming part of the Directors' Report for the yearended 31st March 2017.
| ||Current Year ||Previous Year |
| ||2016-17 ||2015-16 |
|A) Power and Fuel Consumption || || |
|1. Electricity || || |
|Purchased Units (kwh) ||68808000 ||58153270 |
|Total Amount ` ||488633849 ||419963880 |
|Rate Per unit ` ||7.10 ||7.22 |
|2. Fuel || || |
|Quantity (Kgs)/kl ||2948816 ||1703598 |
|Total Amount ` ||77122226 ||49713878 |
|Rate Per Unit ` ||26.15 ||29.18 |
|3.Steam Coal(Gasifire) || || |
|Quantity (Kgs) ||5796094 ||6329321 |
|Total Amount ` ||53097967 ||60072237 |
|Rate Per Unit ` ||9.16 ||9.49 |
|B) Consumption Per Unit of Production || || |
|1. Production (Concast Billets) MT ||51682 ||43671 |
|a. Electricity Units ||803 ||804 |
|b. Furnace Oil (Kgs) ||19 ||21 |
|2. Production (Ingots) MT ||17488 ||13625 |
|a. Electricity Units ||647 ||663 |
|b. Furnace Oil (Kgs) ||3 ||3.00 |
|Production (Rolled Products with Oil) MT ||28264 ||6499 |
|Production (Rolled Products with Coal) MT ||32094 ||42530 |
|a. Electricity Units ||91 ||86 |
|b. Steam Coal(Kgs)-Gasifire ||180 ||149 |
|c. Furnace Oil (Kgs) ||53 ||41 |
1. TECHNOLOGY ABSORPTION
During the current Financial Year 2016-17 the Company has under gone Process OrientedR&D towards efficiency improvement and significant cost saving measures. These are as
Research & Development
(a) Dispersion De-oxidization concept for refining practice in L.R.F.
(b) Development of Engine Piston Material developed for major OEMs. After the final useit was appreciated and award was given for this development.
Technology Absorption Adaptation and Innovation
Towards process optimization in EAF there is further improvement in Refractory lifeM-9 Ingot weighing 10 Ton each introduced in the product mix towards value addition.
High Alloy Grades started producing through Heavy Ingot Route getting satisfactoryappreciation from the customers.
Optimization of casting powder towards further improving the quality.
2. FOREIGN EXCHANGE EARNING AND OUTGO
Particulars with regard to Foreign Exchange earnings and outgo appear on the relevantnote of the Balance Sheet.
| ||For & on behalf of the Board |
|Place: Chandigarh ||Amarjit Goyal |
|Dated:27th May 2017 ||Chairman & Whole Time Director |