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Sunflag Iron & Steel Company Ltd.

BSE: 500404 Sector: Metals & Mining
NSE: SUNFLAG ISIN Code: INE947A01014
BSE 15:53 | 19 Jan 82.20 2.45
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OPEN 80.55
PREVIOUS CLOSE 79.75
VOLUME 118913
52-Week high 90.70
52-Week low 33.25
P/E 19.30
Mkt Cap.(Rs cr) 1,481
Buy Price 82.20
Buy Qty 50.00
Sell Price 0.00
Sell Qty 0.00
OPEN 80.55
CLOSE 79.75
VOLUME 118913
52-Week high 90.70
52-Week low 33.25
P/E 19.30
Mkt Cap.(Rs cr) 1,481
Buy Price 82.20
Buy Qty 50.00
Sell Price 0.00
Sell Qty 0.00

Sunflag Iron & Steel Company Ltd. (SUNFLAG) - Director Report

Company director report

To

The Shareholders

The Board of Directors of the Company hereby present the Thirty-first (31st) AnnualReport together with the Audited Financial Statements for the year 2016-2017 ended 31stMarch 2017.

During the financial year under review the profitability of Steel industry was understress due to drop in the sales realisations as a result of reduction in demand. Eventhough there was some reductions in the prices of few raw materials but the overall gapbetween the realisations and cost of production has increased resulting in the slightreduction of profit. However with the continuous efforts by the Company's Managementtowards strict cost reduction and better financial / working capital management hashelped to improve its overall performance in order to survive in the difficult marketconditions.

1. FINANCIAL RESULTS

The summarised financial results for the year are as follows :

Particulars

For the financial year ended

31st March 2017 31st March 2016 (#)
1 Total Income 172098 180116
2 Total Expenditure 156782 161388
3 Gross Profit 15316 18728
4 Finance Cost 3506 6495
5 Profit before Depreciation 11810 12233
6 Depreciation 3319 3564
7 Profit before exceptional and extraordinary items and Tax 8491 8669

(#) The figures pertaining to the financial year 2015-2016 are after giving effect ofthe Ind AS adjustments.

2. FINANCE

Your Company has ended the financial year with a profit after tax of ' 6517 Lakhs.After taking into account the brought forward profit of ' 42243 Lakhs your Company hascarried forward an amount of ' 48760 Lakhs to the Balance Sheet.

3. DIVIDEND

There is a continuous need of capital to upgrade product and its process with latesttechnology. The Company is always in the process of upgrading its facilities with certaincapital projects either through renovation addition expansion or modernisation.Simultaneously the Company is required to infuse its internal accruals to comply with therequirements of the lending banks financing for such capital projects.

As such the Board of Directors does not recommend any dividend on the equity sharesfor the financial year 2016-2017 ended 31st March 2017.

4. SHARE CAPITAL

During the financial year under review there is no change in the capital structure ofthe Company and accordingly the issued subscribed and paid-up share capital of theCompany stand at ' 1802194480 as on 31st March 2017.

5. MARKET SCENARIO

Despite various initiatives of the Indian Government domestic steel companies arefacing stiff competition due to dumping from China Korea and Japan. Moreover there wasno substantial increase in demand from automobile and auto component industries. Howeverit is expected to improve the current market scenario in the days to come particularly inview of implementation of GST. SUNFLAE STEEL is continuing to develop new high valuegrades of alloy steel to cater the needs of domestic as well as international markets inaddition to existing ones.

6. COMPANY'S WORKING / OPERATIONS

During the financial year under review the operational (production) details of theCompany are as under (Production in MT and Power in Lakh kWh) :

Particulars Financial Year 2016 - 2017 Financial Year 2015 - 2016
1 Direct Reduction Plant (I + II) 114233 98092
2 Steel Melt Shop 342181 334991
3 Rolled products 366417 322504
4 Mini Blast Furnace (Hot Metal) / Pig Iron 264063 265468
5 Coal (Belgaon Coal Block) 153015 165013
6 Power Plant (Lakh kWh) 1674.59 1598.54

7. PROJECTS Steel Plant :

The Company has taken up installation of certain balancing equipment viz. (i)Pulverized Coal Injection System (ii) Refurbishing of Mini Blast Furnace (iii) CapacityEnhancement of Sinter Plant and (iv) Conversion of Heat Recovery Boiler of DRP-I to DualOperation of FBC and WHRB. These projects have been initiated with a view to reduce costof production and improve productivity. The estimated capital outlay was ' 113 Crores ofthis the Company have already incurred an amount of ' 45.00 Crores during the year underreview. Pulverized Coal Injection and boiler is expected to be commissioned in financialyear 2017-2018 and others are expected by 1st quarter of financial year 2018-2019.

Subsidiary Companies :

Sunflag Power Limited :

There were no specific developments or updates for reporting to the members and theprocess of obtaining necessary approvals were continued for implementation andcommencement of operations of Hydro Power Project of the Company at Hanol-Tuini in theState of Uttarakhand.

Sunflag Special Steels Limited :

The Company in absence of viability to continue has made an application and submittedrequisite documents for strike-off (closure) of name of the Company on 27th March 2017 anda confirmation from the Office of the Registrar of Companies Odisha at Cuttak about theStriking-off of its Name pursuant to Section 248 of the Companies Act 2013 is awaited.

Khappa Coal Company Private Limited :

In view of order of the Hon'ble Supreme Court of India dated 24th September 2014 theKhappa & Extn coal block which was allocated to Khappa Coal Company Private Limitedstands de-allocated with immediate effect. The closure of the said Company solely dependsupon the outcome of final decision regarding bank guarantee and compensation from theappropriate authorities. Sunflag Foundation

Sunflag Foundation (U74999MH2017NPL289961) - a Section 8 Company (a Company not forprofits) was incorporated on 27th January 2017 as a Wholly owned Subsidiary of SunflagIron and Steel Company Limited The said Company was appointed as an implementing Agency tocarry out the Corporate Social Responsibility (CSR) activities as per CSR Policy of theCompany within the framework of applicable provisions of law.

Joint Venture (JV) Companies :

Madanpur (North) Coal Company Private Limited and C T Mining Private Limited :

In view of order of the Hon'ble Supreme Court of India dated 24th September 2014 thecoal block(s) which were allocated to Madanpur (North) Coal Company Private Limited in thestate of Chhattisgarh and to C T Mining Private Limited in the state of Jharkhand standsde-allocated with immediate effect. The closure of the said Company solely depends uponthe outcome of final decision regarding bank guarantee and compensation from theappropriate authorities.

Daido D.M.S. India Private Limited :

A Joint Venture (JV) Company between Sunflag Daido Steel Co. Ltd. Japan and Daido Dieand Mold Steel Solutions Co. Ltd. Japan. Sunflag has made an investment of INR36000000/- (INR Three crores sixty lakhs) constituting Twenty percent (20%) in thecapital of the said JV Company. The JV Company is engaged in the business ofmanufacturing import export and distribute in die mould steel (tool steel and othermetallic materials) processed products and mould parts.

Ramesh Sunwire Private Limited :

Sunflag jointly with Stumpp Schuele & Somappa Springs Private Limited Bengaluruhas formed and incorporated a Joint Venture (JV) Company - Ramesh Sunwire Private Limitedon 31st October 2016 in the state of Maharashtra. The Company has contributed an amount of' 22050000/- towards subscription to share capital in a joint venture company viz.Ramesh Sunwire Private Limited constituting 49% of its equity share holding. The mainobject of the Company is manufacturing high quality of alloy steel wire for automobile andauto component industries both in domestic and export market.

Present Status of Coal and Minerals Mines :

Name of Mine Area in (Ha.) Mineral Present Status
1 Belgaon Coal Mine at Village Balgoan (Deshpande) Tah.Warora Dist. Chandrapur Maharashtra 383.56 Coal Underground Coal mine having estimated reserves of 8 millions tons (MT) with extractable balance of about 6.5 MT
2 Navegaon Manganese Mine at Village Navegaon Tah. Mohadi Dist. Bhandara Maharashtra 15.90 Manganese Ore Open cast mine with reserves of about 30000 tons
48.78 Manganese Ore Application for conversion of Prospecting Licence into Mining Lease is under process
3 Warpani Manganese Ore Block at Village Warpani Tah. Saoner Dist. Nagpur Maharashtra 1419.65 Manganese Ore Application for conversion of Prospecting Licence into Mining Lease over an area of 439 Ha is under process
4 Bande Iron Ore block at Village Bande Tah. Ettapalli Dist. Gadchiroli Maharashtra 236.75 Iron Ore Application for conversion of Prospecting Licence into Mining Lease over an area of 205.75 Ha is under process
5 Kodalibad Iron and Manganese Ore Mine Village - Kodalibad Tah - Noamundi Dist. - Singhbhum / Jharkhand 120.00 Iron and Manganese Ore Mining Lease is yet to be executed

8. NATURE OF BUSINESS ACTIVITIES AND CHANGES THEREOF

During the financial year 2016-2017 under review the Board of Directors thoughexploring addition to existing business and commercial activities had neither beenexplored any change in nature of business and commercial activities for the Company northere is a change in nature of business and commercial activities of the Company. As suchno specific details regarding change in nature of business activities are required to begiven or provided.

9. PUBLIC DEPOSITS

During the financial year 2016-2017 under review the Company has neither invited noraccepted any public deposits within the meaning of Section 73 and 74 of the Companies Act2013 read with the Companies (Acceptance of Deposits) Rules 2014 (as amended). As suchno specific details prescribed in Rule 8(1) of the Companies (Accounts) Rules 2014 (asamended) are required to be given or provided.

10. DIRECTORS AND KEY MANAGERAIL PERSONNEL

The changes amongst the Directors including the Executive Directors and Key ManagerialPersonnel during the period are as follows :-

I. CHANGES AMONGST THE PROMOTER DIRECTOR/S :

a) Mr. Suhrit Ravi Bhushan Bhardwaj (DIN : 02318190) who had been appointed as anAlternate Director to Mr. Ravi Bhushan Bhardwaj (DIN : 00054700) on the Board effective7th November 2015 ceased to be an Alternate Director effective 28th May 2016 as theOriginal Director returned to India.

b) Mr. P. B. Bhardwaj (DIN : 00136076) ceased to be a Director (Category - PromoterNon-executive Chairman) of the Company due to death In London on 6th November 2016. TheBoard places on records its appreciation for wide contributions of Late Mr. P. B. Bhardwajsince inception of the Company.

c) Mr. Vinod Kumar Kapur (DIN : 05256912) who was appointed as an Alternate Directorto Mr. P. B. Bhardwaj (DIN : 00136076) Director (Category - Promoter Non-executiveChairman) of the Company effective 8th February 2016 ceased to be a Alternate Directoreffective 6th November 2016 due to death of an Original Director.

d) In view of (b) above the Board of Directors at its 159th meeting held on 12thDecember 2016 has appointed Mr. Ravi Bhushan Bhardwaj (DIN : 00054700) Director(Category - Promoter Non-executive Vice-Chairman) of the Company as a Director (Category- Promoter Non-executive Chairman) of the Company effective 12th December 2016.

e) The Board of Directors at its 161th meeting held on 27th March 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its31st meeting held on 26th March 2017 has appointed Mr. Suhrit Ravi Bhushan Bhardwaj (DIN: 02318190) as an Additional Director (Category - Promoter Non-executive Nonindependent)of the Company effective 27th March 2017.

II CHANGES AMONGST THE EXECUTIVE DIRECTOR/S :

a) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has appointed Mr. Surendra Kumar Gupta (DIN :00054836) as the Deputy Managing Director designated Key Managerial Personnel of theCompany for a further period of three (3) years effective 30th July 2017.

b) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has appointed CA R. Muralidhar (DIN : 00982212) asan Additional Director effective 14th August 2017 and also the Whole-time Directordesignated as the Executive Director (Finance) & CFO designated Key ManagerialPersonnel of the Company for a period of three (3) years effective 14th August 2017.

c) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has appointed Mr. Ramchandra Vasant Dalvi (DIN :00012065) as an Additional Director effective 14th August 2017 and also the WholetimeDirector designated as an Executive Director (Works) designated Key ManagerialPersonnel of the Company for a period of three (3) years effective 14th August 2017.

III. CHANGES AMONGST KEY MANAGERIAL PERSONNEL (KMP)

Apart from change referred to in (II) above there is no other change in the KeyManagerial Personnel (KMP) of the Company and accordingly Mr. Pranav Bhardwaj (ManagingDirector) Mr. Surendra Kumar Gupta (Deputy Managing Director) CA R. Muralidhar(Executive Director (Finance) & CFO) Mr. Ramchandra Vasant Dalvi (Executive Director(Works) and CS Pranab Panigrahi (Company Secretary) continued to act as the Key ManagerialPersonnel (KMP) of the Company pursuant to the provisions of Section 203 of the CompaniesAct 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 (as amended).

IV. CHANGES AMONSGT THE INDEPENDENT DIRECTORS :

Pursuant to Section 149 152 of and Schedule IV to the Companies Act 2013 read withthe Companies (Appointment and Qualification of Directors) Rules 2014 (as amended) andthe SEBI (LODR) Regulations the first term of Dr. E.R.C. Shekar Mr. S. Gajendran CAJayesh M. Parmer and Mr. Kumar Jitendra Singh Director/s (Category - Non-executiveIndependent) of the Company for a consecutive three (3) years expiring at the conclusionof the ensuing Thirty-first (31st) Annual General Meeting of the Company.

V. DIRECTOR - RETIREMENT BY ROTATION :

Pursuant to Section 152 of Companies Act 2013 read with the Companies (Appointment andQualification of Directors)

Rules 2014 (as amended) Mr. Ravi Bhushan Bhardwaj (DIN : 00054700) Director(Category - Non-executive Chairman) of the Company retires by rotation and beingeligible offers himself for re-appointment. The Board recommends his re-appointment as aDirector (Category - Non-executive Chairman) of the Company in the interest of theCompany.

VI. PROPOSED CHANGES AMONGST DIRECTOR/S PLACED BEFORE THE MEMBERS FOR THEIR APPROVAL :

a) The term of Mr. Suhrit Ravi Bhushan Bhardwaj (DIN : 02318190) as an AdditionalDirector (Category - Promoter Nonexecutive Non-independent) of the Company expiring atthe conclusion of the ensuing Thirty-first (31st) Annual General Meeting of the Company.The Board recommends his appointment as a Director (Category - Promoter Non-executiveNon-independent) of the Company in the interest of the Company.

b) The term of CA R. Muralidhar (DIN : 00982212) as an Additional Director (Category -Non-Promoter Executive) of the Company expiring at the conclusion of the Thirty-first(31st) Annual General Meeting of the Company. The Board recommends his appointment as aDirector (Category - Non-Promoter Executive) of the Company in the interest of theCompany.

c) The term of Mr. Ramchandra Vasant Dalvi (DIN : 00012065) as an Additional Director(Category - Non-Promoter Executive) of the Company expiring at the conclusion of ensuingThirty-first (31st) Annual General Meeting of the Company The Board recommends hisappointment as a Director (Category - Non-Promoter Executive) of the Company in theinterest of the Company.

d) The Board recommends the re-appointment of Mr. Surendra Kumar Gupta (DIN :00054836) as the Deputy Managing Director (Category - Non-Promoter Executive)designated Key Managerial Personnel of the Company for a further period of three (3)years effective 30th July 2017 in the interest of the Company.

e) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has appointed CA R. Muralidhar (DIN : 00982212) asthe Whole-time Director designated as the Executive Director (Finance) & CFOdesignated Key Managerial Personnel of the Company for a period of three (3) yearseffective 14th August 2017 subject to approval of the Shareholders (Members) of theCompany at the ensuing Thirty-first (31st) Annual General Meeting of the Company. TheBoard recommends his appointment as the Whole-time Director designated as the ExecutiveDirector (Finance) & CFO designated Key Managerial Personnel of the Company for aperiod of three (3) years effective 14th August 2017 in the interest of the Company.

f) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has appointed

Mr. Ramchandra Vasant Dalvi (DIN : 00012065) as the Whole-time Director designated asthe Executive Director (Works) designated Key Managerial Personnel of the Company for aperiod of three (3) years effective 14th August 2017 subject to approval of theShareholders (Members) of the Company at the ensuing Thirty-first (31st) Annual GeneralMeeting of the Company. The Board recommends his appointment as the Whole-time Directordesignated as the Executive Director (Works) designated Key Managerial Personnel of theCompany for a period of three (3) years effective 14th August 2017 in the interest of theCompany.

g) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has approved and recommended the re-appointment ofDr. E. R. C. Shekar (DIN : 0001367) as a Director (Category - Non-executive Independent)of the Company to hold the office for a fixed second term of consecutive five (5) yearsi.e. from the conclusion of Thirty-first (31st) Annual General Meeting up to theconclusion of Thirty-sixth (36th) Annual General Meeting of the Company to be held in thecalendar year 2022.

h) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has approved and recommended the re-appointment ofMr. Kumar Jitendra Singh (DIN : 00626836) as a Director (Category - NonexecutiveIndependent) of the Company to hold the office for a fixed second term of consecutivefive (5) years i.e. from the conclusion of Thirty-first (31st) Annual General Meeting upto the conclusion of Thirty-sixth (36th) Annual General Meeting of the Company to be heldin the calendar year 2022.

i) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has approved and recommended the re-appointment ofMr. S. Gajendran (DIN : 00250136) as a Director (Category - Non-executive Independent) ofthe Company to hold the office for a fixed second term of consecutive two (2) years i.e.from the conclusion of Thirty-first (31st) Annual General Meeting up to the conclusion ofThirty-third (33rd) Annual General Meeting of the Company to be held in the calendar year2019.

j) The Board of Directors at its 164th meeting held on 14th August 2017 based on therecommendations vide resolution passed by the Nomination and Remuneration Committee at its33rd meeting held on 14th August 2017 has approved and recommended the re-appointment ofCA Jayesh M. Parmar (DIN : 00802843) as a Director (Category - Nonexecutive Independent)of the Company to hold the office for a fixed second term of consecutive two (2) yearsi.e. from the conclusion of Thirty-first (31st) Annual General Meeting up to theconclusion of Thirty-third (33rd) Annual General Meeting of the Company to be held in thecalendar year 2019.

The Company has received a Notice in writing under Section 160 of the Companies Act2013 from a member proposing the candidatures of Mr. Suhrit Ravi Bhushan Bhardwaj CA R.Muralidhar Mr. Ramchandra Vasant Dalvi Dr. E. R. C. Shekar Mr. Kumar Jitendra SinghMr. S. Gajendran and CA Jayesh M Parmar for the office of the Director/s of the CompanyExcept the above there is no change in the composition of the Board of Directors duringthe period under review.

[Brief profile of Director/s seeking appointment / re-appointment is given in theCorporate Governance Report]

11. NUMBER OF MEETINGS OF THE BOARD

Five (5) meetings of the Board of Directors of the Company were held during thefinancial year 2016-2017 under review on 28th May 2016 19th August 2016 12th December2016 28th January 2017 and 27th March 2017.

12. DIRECTORS' RESPONSIBILITY STATEMENT The Board of Directors confirms :

i. That in the preparation of the Annual Financial Accounts the applicable AccountingStandards had been followed along with proper explanation relating to materialdepartures;

ii. That the Directors had 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 of the Company for that financial year;

iii. That the Directors had taken proper and sufficient care for the maintenance ofadequate Accounting records in accordance with the provisions of this Act for safeguardingthe Assets of the Company and for preventing and detecting fraud and other irregularities;

iv. That the Directors had prepared the Annual Financial Statements on a going concernbasis;

v. That the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls were adequate and operating effectively;and

vi. That the Directors had devised proper system to ensure compliance with theprovisions of all applicable laws and regulations and that such systems were adequate andoperating effectively.

13. COMMITTEE(S) OF THE BOARD

The Company has constituted all the requisite Committee(s) of the Board namely AuditCommittee Nomination and Remuneration Committee Stakeholders' Relationship CommitteeCorporate Social Responsibility (CSR) Committee Share Transfer Committee Risk ManagementCommittee and Project Monitoring Committee pursuant to the provisions of the CompaniesAct 2013 read with the rules made there under and Listing Agreement or ListingRegulations (to the extent applicable). The details of its constitution objective orterms of reference and other related information has been provided under the CorporateGovernance Report which forms part and parcel of the Board's Report.

14. AUDITORS

I. STATUTORY AUDITORS AND THEIR REPORT :

Messers S. S. Kothari Mehta & Co. Chartered Accountants New Delhi (ICAI FirmRegistration No. 000756N) have been recommended by the Audit Committee and subsequentlyalso approved and recommended by the Board of Directors of the Company has been appointedas the Statutory Auditors of the Company at the Thirtieth (30th) Annual General Meeting tohold office of the Statutory Auditors for a period of two (2) years from the conclusion ofThirtieth (30th) Annual General Meeting until the conclusion of Thirty-second (32nd)Annual General Meeting subject to ratification by the members at the ensuing Thirty-first (31st) Annual General Meeting of the Company.

The Statutory Auditors have furnished a Certificate of their consent qualification andeligibility for appointment including reappointment under Section 139 and 141 of theCompanies Act 2013 read with the rules and regulations made thereunder. The Auditors'Report submitted by Messers S. S. Kothari Mehta & Co. Chartered Accountants NewDelhi (ICAI Firm Registration No. 000756N) the Statutory Auditors and Messers Patel Shah& Joshi Chartered Accountants Mumbai (ICAI Firm Registration No. 107768W) the jointStatutory Auditors of the Company to the shareholders for the financial year 2016-2017ended 31st March 2017 do not contain any qualification. The observations made by theStatutory Auditors and Joint Statutory Auditors in their report are self-explanatory andhave also been further amplified in the Notes to the financial statements and as such donot call for any explanations.

During the financial year 2016-2017 under review :

a) there is no fraud occurred noticed and/or reported by the Statutory Auditors underSection 143(12) of the Companies Act 2013 read with the Companies (Audit and Auditors)Rules 2014 (as amended);

b) the observations made by the Statutory Auditors on the financial statements for thefinancial year 2016-2017 under review including the affairs of the Company are selfexplanatory and do not contain any qualification reservation adverse remarks ordisclaimer thereof.

As such no specific information details or explanations required to be given orprovided by the Board of Directors of the Company.

II. COST AUDITORS AND THEIR REPORT :

Pursuant to Section 148 of the Companies Act 2013 the Board of Directors on therecommendations of the Audit Committee of the Company has appointed M/s. G. R. Paliwal& Company (Membership No. 7815) Cost Accountants Nagpur as the Cost Auditors of theCompany for the financial year 2016-2017 and has also recommended their remuneration tothe shareholders for their ratification at the ensuing Thirty-first (31st) Annual GeneralMeeting.

The said Cost Auditors have furnished a Certificate of their eligibility forappointment pursuant to Section 141(3)(g) Section 148(5) of the Companies Act 2013 readwith the rules made there under Certificate for independence and arms length relationshipwith the Company and have confirmed about their not being disqualified for suchappointment including re-appointment within the meaning of Section 141(3) of the CompaniesAct 2013.

Pursuant to the applicable provisions of the Act read with the rules made there underthe Cost Audit Report for the financial year 2015-2016 was filed vide SRN : G11418647dated 15th September 2016.

III. SECRETARIAL AUDITORS AND THEIR REPORT :

M/s. Mukesh Parakh & Associates Company Secretaries Nagpur (Membership No.FCS-4343 & Certificate of Practice No. 13693) were appointed as the SecretarialAuditors of the Company for the financial year 2016-2017 ended 31st March 2017. TheSecretarial Audit Report in Form No. MR-3 submitted by the said Secretarial Auditors isattached herewith as an Annex - B and forms part and parcel of the Board's Report do notcontain any adverse remarks and qualifications is self explanatory and do not call forany further explanations by the Company.

Further the Company has re-appointed M/s. Mukesh Parakh & Associates CompanySecretaries Nagpur (Membership No. FCS-4343 & Certificate of Practice No. 13693) asthe Secretarial Auditors of the Company for the financial year 2017-2018 ending 31st March2018.

15. PERSONNEL / PARTICULARS OF EMPLOYEES

The information required under Section 197 of the Act read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow:

a) The ratio of the remuneration of each Executive Director to the median remunerationof the employees of the Company for the financial year :

Executive Directors Ratio to Median remuneration
Mr. Pranav Bhardwaj - Managing Director 24.28 : 1
Mr. Surendra Kumar Gupta - Deputy Managing Director 16.59 : 1

b) The percentage increase in remuneration of each Director Chief Executive OfficerChief Financial Officer Company Secretary in the financial year 2016-2017 :

Directors Chief Executive Officer Chief Financial Officer and Company Secretary % increase in remuneration in the financial year
Mr. Pranav Bhardwaj - Managing Director 4.36%
Mr. Surendra Kumar Gupta - Deputy Managing Director 7.31%
CA R. Muralidhar - Chief Financial Officer 5.96%
CS Pranab Panigrahi - Company Secretary 9.28%

c) The percentage increase in the median remuneration of employees in the financialyear : 5%

d) The number of permanent employees on the rolls of Company as on 31st March 2017 :1321

e) Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:

The average annual increase was about 5%. During the financial year the total increaseis approximately 1.81% after accounting for promotions and other event based compensationrevisions.

Increase in the managerial remuneration for the financial year was around 6% otherthan commission based on net profit as per the terms of their appointment.

f) Affirmation : Remuneration paid to Director/s Key Managerial Personnel andEmployees of the Company is as per the remuneration policy of the Company.

g) Information as per Section 197 of the Companies Act 2013 ("the Act") andRule 5(2) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules2014 (as amended) forms part of this report. However in terms of Section 136(1) of theAct the Report and Financial Statements are being sent to all the shareholders and othersentitled to receive the same excluding the statement of particulars of employees. Thestatement is available for inspection by the members at the Registered Office of theCompany during business hours on any working day up to the date of the ensuing AnnualGeneral Meeting. If any member interested in obtaining a copy thereof such member maywrite to the Company Secretary whereupon a copy would be sent.

16. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGES EARNINGS AND OUTGO

The particulars relating to energy conservation technology absorption foreignexchange earnings and outgo as required to be disclosed under Section 134(3)(m) of theCompanies Act 2013 read with Rule 8(3) of The Companies (Accounts) Rules 2014 are givenin the Annex - C to this report.

17. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIESACT 2013

Name of the related party and nature of relationship Nature of contracts / arrangements / transactions Duration of contracts / arrangements / transactions Salient terms of the contracts / arrangements / transactions including the value if any Dates of approval by the Board if any Amount paid as advance if any
Sunflag Power Limited - Wholly owned subsidiary Interest Free Unsecured Loan Continuing N.A. 28.05.2016 and ratified on 26.05.2017 ' 1212405 for the financial year 2016-2017
Daido D.M.S. India Pvt. Ltd. Associate (JV) Company Investment in Equity Share Capital N.A. N.A. 30.05.2016 and ratified on 28.05.2017 ' 36000000 in the capital of the Company
Ramesh Sunwire Pvt. Ltd. - Associate (JV) Company Investment in Equity Share Capital N.A. N.A. 19.08.2016 and ratified 26.05.2017 ' 22050000 in the capital of the Company

18. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES UNDER SECTION 188 OFTHE COMPANIES ACT 2013

a) Details of contracts or arrangements or transactions not at arm's length basis :

There are no such transactions and hence not applicable.

b) Details of contracts or arrangements or transactions at arm's length basis :

The details of contracts or arrangements or transactions in the ordinary course ofbusiness and at arm's length basis are as given below :

Form No. AOC - 2

Pursuant to clause (h) of sub-section (3) of Section 134 of the Companies Act 2013 andRule 8(2) of the Companies (Accounts) Rules 2014 (Amended) :

Name of the related party and nature of relationship Nature of contracts / arrangements / transactions Duration of contracts / arrangements / transactions Salient terms of the contracts / arrangements / transactions including the value if any Dates of approval by the Board if any Amount paid as advance if any
Haryana Television Limited Ordinary Course of Business and at Arm's length Continuing Refundable Security deposit 28.05.2016 and ratified on 26.05.2017 ' 2107573 as on 31st March 2017
Haryana Television Limited Ordinary Course of Business and at Arm's length Continuing Rent paid for Company's Godown at Faridabad 28.05.2016 and ratified on 26.05.2017 Rent : ' 4826500 for the financial year 2016 - 2017
Mr. Suhrit Ravi Bhushan Bhardwaj Ordinary Course of Business and at Arm's length Continuing Refundable Security deposit 28.05.2016 and ratified on 26.05.2017 ' 1000000 as on 31st March 2017
Mr. Suhrit Ravi Bhushan Bhardwaj Ordinary Course of Business and at Arm's length Continuing Rent paid for Company's Transit House 28.05.2016 and ratified on 26.05.2017 Rent : ' 2068500 for the financial year 2016 - 2017

19. LISTING OF SHARES

The Equity shares of the Company continued to be listed with and actively traded on theBSE Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing feesfor the financial year 2017-2018 have been paid to both the Stock Exchanges (BSE &NSE).

20. DEMATERIALISATION OF SHARES

As on 31st March 2017 there were approximately 1075 lakh equity shares dematerialisedthrough depositories viz. National Securities Depository Limited and Central DepositoryServices (India) Limited which represents about 59.64% of the total issued subscribedand paid-up capital of the Company.

21. EXTRACT OF THE ANNUAL RETURN

The extract of the Annual Return as on 31st March 2017 pursuant to the provisions ofSection 92(3) of the Companies Act 2013 read with Rule 12 of the Companies (Managementand Administration) Rules 2014 (as amended) is furnished in the Annex - D attached tothis report which forms an integral part of this report.

22. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The detailed information related to the dividend declared by the Company in theprevious years together with amount remained unpaid or unclaimed its transfer to theInvestor Education and Protection Fund are provided in Notes annexed to the Noticeconvening the Thirty-first (31st) Annual General Meeting of the Company.

23. CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of corporate governance andadhere to the corporate governance requirements set out by the SEBI through ListingAgreement and Listing Regulations (to the extent applicable) executed with the stockexchange/s. The Company has also implemented several best corporate governance practicesas prevalent globally.

Your Directors are pleased to report that your Company has complied with the SEBIGuidelines on Corporate Governance as of 31st March 2017 relating to the ListingRegulations. A Certificate from M/s. Mukesh Parakh & Associates Company SecretariesNagpur (Membership No. FCS-4343 Certificate of Practice No. 13693) confirming compliancewith conditions as stipulated under Listing Agreement and Listing Regulations is annexedto the Corporate Governance Report.

24. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company's steel plant is located at Bhandara Road Village Warthi Tahsil MohadiDistrict Bhandara. It is located at a distance of 12 kilometers from the district placeBhandara. The unit is surrounded by about 3 villages in the radius of 5 Kms. The Companyis having its captive coal mines at Belgaon near Village Aathmurdi in Chandrapurdistrict. The residents of these localities are directly or indirectly associated with theCompany.

All the activities / programmes covered under SISCO CSR are being monitored by the CSRCommittee and are implemented by the CSR Sub-committee.

Sunflag Foundation :

Sunflag Foundation (U74999MH2017NPL289961) - a Section 8 Company (A Company not forprofits) was incorporated on 27th January 2017 as a Wholly-owned Subsidiary of SunflagIron and Steel Company Limited. The said Company was appointed as an implementing Agencyto carry out the Corporate Social Responsibility (CSR) activities as per CSR Policy of theCompany within the framework of applicable provisions of law.

Accordingly Sunflag Foundation will implement monitor all CSR activities budget andaccounts for the same the manner in which the CSR amount has been spent / to be spent etcand in turn shall furnish its report to the Company on regular basis.

As required the details pertaining to the Corporate Social Responsibility (CSR)activities together with details of expenditure is enclosed herewith as an Annex - A andthe same is attached to this Report.

25. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDERTRADING AND OTHER CODES / POLICIES

Your Directors are pleased to report that your Company has complied with the :

i) Code of Conduct of Business Principles and Conduct;

ii) Code of Prevention of Insider Trading in Sunflag securities by the designatedpersons (insider) (as amended from time to time);

iii) Code for Vigil Mechanism - Whistle Blower Policy ;

iv) Code for Independent Directors;

v) Corporate Social Responsibility Policy;

vi) Risk Management Policy;

vii) Policy on Document Preservations (Regulation 9 of the SEBI (LODR) Regulations2015);

viii) Policy for determining of ‘material' Subsidiary (Regulation 16 of the SEBI(LODR) Regulations 2015);

ix) Policy on materiality of related party transaction/s and on dealing with relatedparty transactions (Regulation 23 of the SEBI (LODR) Regulations 2015); and

x) Policy for determination of materiality based on specified criteria andaccordingly grant authorisation for determination of materiality of events (Regulation 30of the SEBI (LODR) Regulations 2015).

The aforesaid code(s) and policy(ies) are available on the Company's websitewww.sunflagsteel.com

26. MATERIAL DEVELOPMENT IN HUMAN RESOURCES INDUSTRIAL RELATIONS

During the financial year under review industrial relations remained cordial.Employees' competencies and skills were enhanced by exposing them to several internal andexternal training programmes. Various measures were taken to improve motivation level ofemployees. Additional efforts are continued to be implemented with a view to obtaincommitment and loyalty towards the organisation.

SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

Sunflag Iron and Steel Company Limited ("the Company") has in place an AntiSexual Harassment Policy in line with the requirements of the Sexual Harassment of Womenat the Workplace (Prevention Prohibition & Redressal) Act 2013 and InternalComplaints Committee (ICC) has been set up to redress complaints received regarding sexualharassment. All employees (permanent contractual temporary trainees etc) are coveredunder this Policy. The Certificate by Deputy Managing Director and Chairman AuditCommittee of the Company to that effect is enclosed herewith as an Annex - E and formspart of this report.

HEALTH AND SAFETY

Departmental safety coordinators are identified for monitoring & training on safetyrelated matter at shop-floor. Safety Committee and Apex Committee are available forperiodical review on safety health & environment of all departments.

Regular Training on Safety is being organised for New Joinee regular employees &contract labour. Mock-drills are conducted for practical exposure to meet emergency needon quarterly basis.

Hand book on safety awareness are distributed to all employees.

27. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate internal control systems and procedures commensuratewith the size and nature of business. These procedures are designed to ensure :-

(a) that all assets and resources are used efficiently and are adequately protected;

(b) that all the internal policies and statutory guidelines are complied with; and

(c) the accuracy and timing of financial reports and management information ismaintained.

28. MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY

During the financial year 2016-2017 under review there are no material changes andcommitments affecting the financial position of the Company which have occurred betweenthe end of the financial year of the Company to which the financial statements relates andthe date of this report. As such no specific details are required to be given orprovided.

29. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

During the financial year 2016-2017 under review no significant and material order ispassed by any of the Regulators or Courts or Tribunals impacting the going concern statusand Company's operations in future. As such no specific details are required to be givenor provided.

30. OTHER DISCLOSURES

The details regarding Board and its Committee meetings Evaluation of Boardperformance Declaration by Independent Directors Remuneration policy for Directors andKMP's Induction training and familiarisation programmes for Directors includingIndependent Directors and such other related information has been provided under theCorporate Governance Report which forms part and parcel of the Board's Report.

31. ENCLOSURES

a) Annex - A : Annual Report on Corporate Social Responsibility (CSR) activitiestogether with expenditure details;

b) Annex - B : Secretarial Auditors Report in Form No. MR-3;

c) Annex - C : Report on Energy Conservation Technology Absorption and ForeignExchange Earnings and Outgo;

d) Annex - D : Extract of Annual Return as of 31st March 2017 in the prescribed FormNo. MGT-9; and

e) Annex - E : Certificate on Sexual Harassment of Women at the Workplace and itsPrevention Prohibition & Redressal.

32. ACKNOWLEDGEMENT

The Directors acknowledge with thanks co-operation and assistance received by theCompany from the Members Central & State Government and Banks.

The Directors also record their appreciation of the dedication of all the employees ofthe Company for their support and commitment to ensure that the Company continues to grow.

For and on behalf of the Board

Dr. E.R.C. Shekar Surendra Kumar Gupta
Nagpur Director Deputy Managing Director
14.08.2017 DIN : 00013670 DIN : 00054836