Your Board of Directors has pleasure in presenting the 28th Annual Reporttogether with the Audited Accounts of the Company for the year ended 31stMarch 2017:
Your Board of Directors reports the following financial results for the year 2016-17:
|Particulars ||Year ended 31-03-2017 ||Year ended 31-03-2016 |
|1. Gross revenue from operations ||11315975529 ||12322446236 |
|2. Other income ||118305033 ||90862164 |
|3. Operating profit/(loss) before finance costs and depreciation ||997101414 ||904712415 |
|4. Finance costs ||1160614556 ||1042964018 |
|5. Depreciation and amortization ||484181604 ||459808405 |
|6. Profit / (loss) before tax ||(647694746) ||(598060008) |
|7. Tax expense ||0 ||(254570388) |
|8. Net Profit / (loss) after tax ||(647694746) ||(343489620) |
|9. Add: Profit/(loss) brought forward from last year ||(755967721) ||(412478101) |
|10. Balance carried forward ||(1403662467) ||(755967721) |
|11. Earning /(loss)per Equity Share-Basic ||(12.72) ||(6.75) |
|12. Earning/(loss)per Equity Share-Diluted ||(12.72) ||(6.75) |
The performance during the year is satisfactory considering the various adverse factorsat micro and macro level. On macro front the performance was adversely impacted due tounconducive economic conditions volatile commodity prices and subdued market conditions.At the micro level the performance was impacted due to working capital constraints whichresulted in not only lower capacity utilizations but also prevented deepermarketpenetration especially the new product that requires higher working capital. Thegross revenue at 11315975529/- is lower as compared to previous year's revenue of-12322446236/-. The year ended with loss before tax of -647694746/- as against loss beforetax of -598060008/- in the previous year. During the year in the absence of virtualcertainty deferred tax asset on account of unabsorbed depreciation and business loss andothers amounting to
Accordingly the loss per share accounted for at -12.72 as compared to loss per shareof -6.75 in the previous year. DIVIDEND AND GENERAL RESERVE:
The Board of Directors has not recommended any dividend for the year 2016-17 due toloss incurred during the year and carry forward loss from earlier years. Company cannotdeclare dividend until the carry forward loss is fully set off against the profits asprovided in the Companies Act 2013.The Board of Directors also has not proposed totransfer any amount to General Reserve in view of the carry forward loss.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 withrespect to Directors' Responsibility Statement your Directors hereby state and confirmthat:
i) In the preparation of Annual Accounts for the Financial Year 2016-17 the applicableAccounting Standards had been followed with proper explanation relating to materialdepartures;
ii) The Accounting Policies selected were applied consistently and the judgements andestimates made are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31st March 2017 and of the Loss of the Companyfor the year ended on that date;
iii) Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
iv) The Annual Accounts have been prepared on a going concern basis;
v) Internal financial controls to be followed by the Company have been laid down andthat such Internal Financial Controls are adequate and were operating effectively; and
vi) Proper systems had been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
The Audit Committee comprises Chairman -Shri K.Thanu Pillai Independent Director andfour other Independent Director members -Shri Syed Anis Hussain Shri S.N.Rao SmtY.Prameela Rani and Shri M.S. Rama Mohan Rao.The Audit Committee at its meeting held on 30thMay 2017 has considered and approved the Audited Accounts of the Company for the financialyear ended 31st March 2017. The Audited Accounts for the financial year ended31st March 2017 as approved and recommended by the Audit Committee do notrequire any explanations from the Board.
Pursuant to Listing Regulations 2015 the Company is required to comply with the Code ofCorporate Governance for the financial year under review. Accordingly the Reports onCorporate Governance and Management Discussion and Analysis together with Auditors' Reporton compliance of Code of Corporate Governance are attached to this Report and forms partof the Annual Report. These Reports are to be read in conjunction with thisDirectors'Report.
Dr. Shailendra Dasari is liable for retirement of Directors by rotation at the end ofthe ensuing 28h Annual General Meeting and being eligible offer himself forre-appointment at the said Annual General Meeting.
Dr. Shailendra Dasari has been appointed as Executive Director (Operations) at 20hAnnual General Meeting for a period of three years effective from 01.10.2015 to 30.09.2018and the office of Executive Director (Operations) is liable for retirement of Directors byrotation. Dr. Shailendra Dasari is eligible for re-appointment and approval of the Membersfor his re-appointment is being sought in the ensuing Annual General Meeting.
In the opinion of the Board the proposed appointee fulfils the conditions specified inthe Companies Act 2013 and Rules made thereunder and keeps the Board strengthened.
Policy on selection and appointment of Directors Composition and category ofDirectors attendance of each Director at meetings Number of other Directorships held byeach Director Number of Board meetings held and dates on which held Board meetingsprocess familiarisatioin programme of each Independent Directors Board's evaluationprocess are discussed in the Report on Corporate Governance which forms part of thisReport.
The Board of Directors confirms that based on the declarations given by all theIndependent Directors in pursuance of provisions of Section 149(7) of the Companies Act2013 they meet the criteria of independence as provided in Section 149(6) of the CompaniesAct 2013. Shri M.S. Rama Mohan Rao will retire at the end of the Annual General Meeting.
AUDITORS AND AUDIT REPORT:
The tenor of present Auditors M/s P.V.R.K.Nageswara Rao & Co. CharteredAccountants Hyderabad comes to end at the end of this Annual General Meeting and they arenot eligible for re-appointment by virtue of provisions of the Companies Act 2013.
Pursuant to Section 139141 and other applicable provisions if any of the CompaniesAct 2013 and Rules made there under as amended from time to time and for the time being inforce M/s. Majeti & Co. Chartered Accountants (Firm's Registration Number: 15975S)Hyderabad is proposed to be appointed as Auditors of the Company to hold office fromconclusion of this Annual General Meeting till the conclusion of thirty third AnnualGeneral Meeting and the resolution thereof is coming up for your approval. The proposedappointee firm has confirmed that they are eligible to be the Auditors of the Companysubject to ratification of their appointment by the members at every Annual GeneralMeeting during theirtenure.
Majeti & Co. is headed by Shri Kiran Kumar Majeti and Shri K. Ramesh Babu. ShriKiran Kumar Majeti B.Com.FCA. ACMACISA is a Practicing Chartered Accountant with over11 years of experience including with Price Waterhouse Coopers (PWC) with expertise inStatutory AuditsTax Audits Review of Internal Financial Controls and IND AS transition.Shri Ramesh Babu B.Com. ACA. ACS. is having over 9 years of experience with a stint atPrice Waterhouse Coopers (PWC) and about six years of industry experience withspecialization in direct and indirect taxes and company secretarial matters.The team isassisted by well qualified persons in finance accountancy information technology lawetc. Your Board of Directors opines that the experience and expertise of the proposedauditors would go long way in the audit of the Company's accounts.
With respect to the Independent Auditors' Report for the financial year ended 31stMarch 2017 which forms part of the Annual Report containing emphasis of matter your Boardof Directors state that the management replies to the same are contained in notes toaccounts at 26.ll.4(a)and26.ll.4(b)which are self-explanatory and the opinion of theAuditors is unmodified in respect of these matters.The Report do not require anyfurtherexplanations from the Board.
COST AUDITORS AND COST AUDIT REPORT:
Company appointed M/s. S. Mahadevan & Co CoimbatorePracticing Cost Accountants(Firm's Registration Number 00007) as Cost Auditors for the financial year 2015-16 and2016-17. The Cost Compliance Report as prepared by the Cost Auditors for the financialyear 2015-16 has been filed with the Central Government with in the due date.The CostCompliance Report for the year 2016-17 prepared by the said Cost Auditors is under review.The Board of Directors based on the recommendations of the Audit Committee has appointedM/s S. Mahadevan & Co. Practicing Cost Accountants (Firm's Registration Number:00007) as Cost Auditors for conducting Cost Audit of the Cost Records of the Company forthe year 2017-18. In pursuance of the provisions of Section 148 and other applicableprovisions if any of the Companies Act 2013 read with Companies (Audit and Auditors)Rules 2014 the remuneration payable for conducting the Cost Audit for the year ending 31stMarch 2018 to M/s S. Mahadevan & Co. Practicing Cost Accountants is being placedbefore the Members in the ensuing Annual General Meeting for their ratification.
SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT:
M/s D. Hanumanta Raju & Co. Practicing Company Secretaries Hyderabad who havebeen appointed as Secretarial Auditor for the financial year 2016-17 have conducted theAudit of the Secretarial Records and submitted their Report in MR-3 which is annexed tothis Report (Annexure-V). The Secretarial Audit Report for the financial year ended 31stMarch 2017 do not require any explanations from the Board as there are no qualificationsor reservations or adverse remarks.The Board of Directors at its meeting held on 3CfhMay 2017 has re-appointed D.Hanumanta Raju & Co. Practicing Company SecretariesHyderabad as Secretarial Auditor for the financial year 2017-18.
TRANSFER OF UNCLAIMED DIVIDEND AMOUNTS TO IEPF:
Pursuant to the provisions of Section 205A(5) of the Companies Act 1956 and / orSection 124(5) of the Companies Act 2013 previously declared dividends which remainedunclaimed for a period of seven years have been transferred by the Company to theInvestor Education and Protection Fund (IEPF) established by the Central Governmentpursuant to Section 205C of the Companies Act 1956 and / or Section 125 of the CompaniesAct 2013.
DIRECTORS EMPLOYEES AND THEIR REMUNERATION:
The particulars of employees required to be furnished pursuant to Section 197(12) ofthe Companies Act 2013 read with sub rule (2) to Rule 5 to the Companies (Appointment& Remuneration) Rules 2014 as amended are not required to be provided as there wereno employees drawing remuneration more than the stipulated limits. Details of RemunerationPolicy and payment of remuneration to all Directors / Key Managerial Personnel / othermanagerial employees is given in the Report on Corporate Governance under the headNomination and Remuneration Committee which forms part of this Report. Managing Directorand other WholeTime Directors have not received any remuneration or commission fromholding or subsidiary companies as the Company do not have such companies. In the opinionof the Board the level and composition of remuneration to Directors Key ManagerialPersonnel and other managerial employees is reasonable and sufficient to attract retainand motivate the people who could run the Company efficiently. The Board affirms that theremuneration paid is in accordance with Remuneration Policy of the Company. Therelationship between performance and remuneration is clear and meets appropriatebenchmarks and that the remuneration criteria succinctly balances between fixed andvariable pay wherever set reflecting short and long term performance objectivesappropriate to the working of the Company and its goals. Disclosures required to be madepursuant to Rule 5 to the Companies (Appointment & Remuneration) Rules 2014 areattached to this report (Annexure-ll).
DEMATERIALISATION OF EQUITY SHARES:
The Agreements entered into by the Company with the two Depositories viz. NationalSecurities Depository Limited (NSDL) and Central Depository Services (India) Limited(CDSL) for dematerialisation of Shares are in force and the Company's Shares are indematerialised mode under ISIN No. INE176C01016. As per the Securities and Exchange Boardof India(SEBI) directives the Equity Shares of the Company are to be compulsorily tradedin dematerialisation form with effect from 26th February 2001. In view of thesignificant benefits that accrue on dematerialisation of securities Members may avail thefacility.
LISTING OF SHARES ON STOCK EXCHANGES:
The Equity Shares of the Company are listed on BSE Ltd (formerly The Bombay StockExchange Limited) Stock Code:526093 and The National Stock Exchange of India Limited (NSE)Stock Code: SATHAISPAT and are regularly traded.The listing fee to these Stock Exchangeshas been paid upto date.
CONSERVATION OF ENERGYTECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO:
Information on conservation of energy technology absorption foreign exchange earningsand out go required to be disclosed under Section 134 of the Companies Act 2013 read withCompanies (Accounts) Rules 2014 is given in the Annexure forming part of this Report(Annexure-I).
During the year the Company has not accepted fixed deposits within the meaning ofSection 2(31) read with Sections 73 and 74 of the Companies Act 2013.There are no overduedeposits or outstanding deposits as on the Balance Sheet date.
The Board engaged itself with the task of Risk Management by preparing implementingand monitoring the risk management plan of the Company. The Board apart from ensuring theeffectiveness of risk management covering internal financial risks and controls alsoreviews the same on regular basis. Major risks identified are monitored on a regular basisby the Board.
INTERNAL FINANCIAL CONTROL AND SYSTEMS AND THEIR ADEQUACY:
The Company has put in place Internal Financial Controls that will ensure the policiesand procedures of the Company are followed regularly so that the business of the Companyis conducted in orderly and efficient manner. The Internal Financial Controls are appliedinter alia to test various aspects in the conduct of business including adherence toCompany's policies safeguarding Company's assets preventionand detection of frauds anderrors or irregularities the accuracy and completeness of the accounting records andtimely preparation of reliable financial information and the financial statements. In theopinion of the Board such Internal Financial Controls are adequate and were operatingeffectively. During the year such Internal Financial Controls have been tested and noreportable weaknesses in the design and operations were observed excepting as containedunder Qualified Opinion in Annexure B to Independent Auditor's Report with respect towhich your Board of Directors state that the management replies to the same are containedin notes to accounts at 26.ll.4(b)which is self-explanatory.
RELATED PARTY TRANSACTIONS:
There are no material related party transactions entered into by the Company fallingwithin the meaning of Section 188(1) of the Companies Act 2013. Other related partytransactions contracts or arrangements entered into by the Company are in the ordinarycourse of business and at arm's length price.The details of these contracts orarrangements ortransactions as required to be disclosed in terms of Section 134(3)(h)areprovided in Form AOC-2 which forms part of this Report (Annexure-lll) and accompanyingFinancial Statements.
PARTICULARS OF LOANSGUARANTEES AND INVESTMENTS:
The Company has not granted loans guarantees or made investments in orto companiesfirms or other parties covered in the Register maintained under Section 189 of theCompanies Act 2013. The Company has not extended any loans to the employees for purchaseof its shares. Other investments made by the Company are given in the accompanyingFinancial Statements which are in the ordinary course of business.
EXTRACTS OF ANNUAL RETURN:
Information on Extracts of Annual Return required to be disclosed under Section 92(3)of the Companies Act 2013 read with Rule 12 of Companies (Management and Administration)Rules 2014 is given in the prescribed Form MGT-9 forming part of this report(Annexure-IV).
CORPORATE SOCIAL RESPONSIBILITY:
The details with respect to Corporate Social Responsibility of the Company as requiredto be disclosed in terms of provisions of Section 135 read with Section 134(3)(o) and Rule9 of Companies (Accounts) Rules 2014 are given in the Report on Corporate Governanceattached to and forming part of this Report. During the year the Company in terms ofprovisions of sub section 5 to Section 135 of the Companies Act 2013 is not required toearmark any fund for Corporate Social Responsibility activities in view of the losses.
Adoption of S4A scheme:
The Company considering the delay in repayment of term loans including interest thereonand in meeting the obligations of short term borrowings and letters of credit hasrequested the secured lenders to consider and adopt the "Scheme for SustainableStructuring of Stressed Assets'(S4A) with respect to the total exposure to the Company onthe term loans and working capital loans.
The Lenders having constituted Joint Lenders Forum (JLF) in their meeting held oni.e.07-Jun-2017 have acceded in-principle to the request of the company for S4A schemewith Reference date i.e. 07-Jun-2017 which scheme shall be finalised within 180 days fromReference Date in terms of guidelines / directions of Reserve Bank of India (RBI) issuedfrom time to time with respect to S4A scheme. Under the S4A scheme the debt exposure ofthe Company based on Techno Economic Viability study will be bifurcated into two parts-Sustainable and Unsustainable debt. The Sustainable debt amount which shall not belessthan 50% of existing debt shall have to be serviced by the Company on the same terms asthat of existing terms and conditions including repayment schedules. The Unsustainabledebt portion of the exposure shall be converted in to equity or other instruments asmutually agreed between the Company and the JLF by following the RBI guidelines for theS4A scheme with a clearly spelt out terms. JLF gets 180 days from Reference Date toformulate the resolution plan and implement the same after due internal approvals.
This is positive from the Company's point of view as the Cash Flows of the Company areexpected to ease post implementation of S4A scheme which will eventually facilitateimprovement in its operations.
The Company has considered adopting the restructuring scheme of loans for the firsttime in its history of over two and a half decades.
Due to tight cash flows and non-availability of working capital limits the operationsat Ferrous division have been impacted and the plant was under shut down since 12thJune 2017. The operations at Kudithini works too were impacted where Metallurgical Cokefacility is running on job work basis and Power generation has been shut down.This impactis likely to continue until the restructuring of the loans are done by the financinginstitutions and banks.
Barring the above there are no material changes and commitments affecting thefinancial position of the Company which have occurred between the end of the financialyear to which theFinancial Statements relates and the date of this Report.
ORDERS PASSED BY THE REGULATORSCOURTS OR TRIBUNALS:
There are no significant and material orders passed by the Regulators or CourtsorTribunals impacting the going concern status and Company's operations in future. Howeverthe Company in the year 2015-16 along with some other buyers of Iron Ore contested beforethe Hon'ble High Court of Karnataka (HC) the levy of Forest Development Tax(FDT) by theminers on their sale of Iron Ore. The Hon'ble HC vide its judgement dated 15.02.2016 hasgranted partial relief to the Company and directed the Government of Karnataka (GOK) torefund the FDT collected earlier. Following the judgement the Company has vide its letterdated 09.03.2016 filed an application for refund of companies have since gone on appealbefore the Hon'ble Supreme Court against the above judgement. Pending disposal of theappeal the Company has not recognised the said refund claim in its books of account inthe Financial Year 2016-17.
SUBSIDIARY OR ASSOCIATE COMPANIES:
There are no subsidiary or associate companies to the Company as at the end of 31stMarch 2017. Accordingly no Consolidated Financial Statements is required to be preparedand reported.
During the year Brickwork Ratings India Private Limited. has assigned BWR BBB- ratingfor the company's long term bank borrowings and BWR A3 for working capital limits.
STANDALONE FINANCIAL STATEMENTS:
The accompanying Financial Statements and this Board's Report are prepared based onstandalone operations of the Company.
This Directors' Report has been considered approved and adopted by the Board ofDirectors at its meeting held on 28th August 2017. The accompanying FinancialStatements were approved and adopted by the Board of Directors at its meeting held on 30thMay 2017.
Your Directors take this opportunity to express their grateful thanks to Canara BankState Bank of India (formerly State Bank of Hyderabad) Andhra Bank Shareholders Centraland State Governments and valued suppliers and customers for their co-operation andsupport.The Board also placeson record its appreciation of the valuable services renderedby the employees at all levels of the Company.
| ||for and on behalf of the Board |
| ||(K.Thanu Pillai) |
|Place: Hyderabad ||Chairman |
|Date: 28.08.2017 ||(DIN:0011 5814) |