To The Members
The Directors of the Company present to you the 24th Annual Report of the Companytogether with the Audited Balance Sheet as at 31st March 2015 and the Statement of Profitand Loss for the year ending on 31st March 2015.
1. FINANCIAL RESULTS
The Financial Results of the Company for the year under review is summarized below foryour perusal and consideration.
(Rs. in Crores)
|PARTICULARS ||2014-15 ||2013-14 |
|NET REVENUE ||642.17 ||555.20 |
|PROFIT BEFORE TAX AND DEPRECIATION ||(172.66) ||(201.95) |
|PROFIT /(LOSS) BEFORE TAX (PBT) ||(234.49) ||(233.87) |
|PROVISION FOR CURRENT TAX ||- ||- |
|TAX EXPENSE ||28.29 ||(78.41) |
|PROFIT AFTER TAXES/(LOSS) (PAT) ||(262.78) ||(155.46) |
1.1 FINANCIAL PERFORMANCE
The Company has achieved Net sales of Rs. 642.17 Crores for the year ended 31st March2015 as compared to Rs.555.20 crores in the previous year.
The Company has incurred a Net loss of Rs. 262.78 Crores as against a loss after taxesof Rs. 155.46 Crores in the previous year. The losses are attributable to high inputcosts irregular supply of raw materials high finance costs and unfavourable marketconditions. While the Raichur plant was particularly affected by the iron ore mining banand labour issues the Gummudipoondi plant faced with irregular power supply and adversemarket conditions.
1.2 CORPORATE DEBT RESTRUCTURING (CDR)
The lenders have restructured the debts of the Company to the extent of Rs.1331 crsunder the CDR mechanism. All overdues have been restructured with effect from 1st June2013 on the basis of the terms of moratorium and revised repayment schedule contained inthe Final Letter of Approval (Final LOA) dated March 13 2014. The package also includes apriority loan of Rs.41.72 crs for balancing equipment required for the Rolling mill andelectric arc furnace. Overdues on the existing loans as on the Cut-off date have beenconverted into funded interest term loans. Further repayment of loans has been rescheduledover a 10 year period ending the year 2023.
2. SHARE CAPITAL
The paid up Equity Share Capital as on 31st March 2015 was Rs. 44.52 Crores. Duringthe year under report the Company has not issued any shares with differential votingrights nor granted stock options nor sweat equity.
Your Directors have not recommended any dividend for the financial year 2014-15 in viewof the losses incurred and the need to conserve resources of the Company. The Company isalso required to seek prior approval of the lenders for declaration of dividend in termsof the Corporate Debt Restructuring package.
4. MANAGEMENT DISCUSSION AND ANALYSIS
STEEL INDUSTRY OUTLOOK:
The Indian steel industry one of the core industries in India is more than a centuryold. India is currently the world's fourth largest producer of crude steel and is expectedto become the second largest producer by 2016.
Steel industry derives its demand from other important sectors like infrastructureaviation engineering construction automobile pipes and tubes etc. Thus its intenseintegration with other important industries makes it a strategic sector for Government aswell.
The Indian steel sector enjoys advantages of domestic availability of raw materials andcheap labour. Iron ore is also available in abundant quantities though the recent miningrestrictions have put a strain on its availability. This abundance has been providing amajor cost advantage to the domestic and steel industry.
Steel plays a vital role in the development of any modern and emerging economy. The percapita consumption of steel is generally accepted as a yardstick to measure the level ofsocio-economic development and living standards of its countrymen. As such no developingcountry can afford to ignore the steel industry.
Therefore our endeavour through this conglomeration of Governments policy makersindustrial leaders and potential investors from India and abroad is to discuss new growthdrivers that are revolutionizing the Indian steel industry and assess the challenges &opportunities associated with new technologies along with identifying new growthfrontiers.
Structure of the Indian steel industry
The Indian steel industry is divided into primary and secondary sectors. The primarysector comprises a few large integrated steel providers producing billets slabs and hotrolled coils among others. The secondary sector comprises small units focused on theproduction of value added products such as cold rolled coils galvanized coils anglescolumns beams and other re-rollers and sponge iron units. Both sectors cater todifferent market segments.
On the basis of ownership the Indian steel industry is broadly divided into privateand public sector enterprises. The private sector dominates production accounting foralmost 78 percent of the finished steel output while the public sector has higher capacityutilizations.
Indian steel industry is more consolidated than the global steel industry
The capacity share of the top five Indian steel players stood at 51 percent of thetotal capacity
(87.3 MTPA) in fiscal year (FY) 2015 compared to less than 15 percent capacity sharefor the top five global steel players. This has resulted in the large integrated producershaving significant pricing power forcing the secondary producers to look at backwardintegration to remain competitive.
INDIAN STEEL INDUSTRY OUTLOOK
Domestic steel demand to remain muted during FY 2012-17 on account of a weakmacroeconomic environment
The demand for longs is expected to increase by 19 million ton (MT) at a CAGR of 9percent and for flats by 16 MT at a CAGR of 8 percent between FY2015 and FY2017. This isdue to relatively weaker growth prospects of flats end-user industries (such as automotiveand consumer durables) than those for longs.
Increased domestic competition
Incumbents and challengers have announced 71 million ton per annum (MTPA) of steelcapacity addition between FY2015 and FY2017 through both brownfield and greenfield routes.However there is considerable uncertainty on the actual capacity addition as manyprojects are yet to achieve financial closure due to delays or lack of regulatoryclearances.
Based on our bottom-up assessment of the announced capacity additions projectsaggregating to 35 MTPA of crude steel capacity have already achieved financial closure.Hence we expect a minimum aggregate capacity of 122 MTPA to be commissioned by FY2017.
This capacity addition will lead to two structural changes. First the concentration inthe longs segment will increase by 5-7 percent in the medium term deepening thesustainability challenge for secondary producers.
Second it will shift the current flats-longs capacity split of 50:50 to 60:40 byFY2017 if all the announced projects are commissioned. As a result one can expectoversupply in flats and a capacity shortfall in longs.
In 2014-15 the world crude steel production reached 1661.5 million tonnes (mt)and showed a growth of 1.2% over 2013-14. (Source: World Steel Association or WSA prov.)
China remained the world's largest crude steel producer in 2014 (823 mt)followed by Japan (110.7 mt) the USA (88.3 mt) and India (83.2 mt) at the 4th position.
WSA has projected that global apparent steel use will increase by 2% to 1562 mtin 2015 following growth of 3.8% in 2014 while in 2016; world steel demand will grow byanother 2% and will reach 1594 mt. As per their forecast India's outlook is improvingand in 2015 India's steel demand is expected to grow by 3.4% to 76.2 mt following growthof 1.8% in 2014. In 2016 structural reforms and improving confidence will support afurther 6% growth in Indian steel demand but elevated inflation and fiscal consolidationremain key downside risks to the outlook.
The Indian steel industry has entered into a new development stage from 2007-08riding high on the resurgent economy and rising demand for steel.
Rapid rise in production has resulted in India becoming the 4th largest producerof crude steel and the largest producer of sponge iron or DRI in the world.
As per the report of the Working Group on Steel for the 12th Five Year Planthere exist many factors which carry the potential of raising the per capita steelconsumption in the country. These include among others an estimated infrastructureinvestment of nearly a trillion dollars a projected growth of manufacturing from current8% to 11-12% increase in urban population to 600 million by 2030 from the current levelof 400 million emergence of the rural market for steel currently consuming around 10 kgper annum buoyed by projects like Bharat Nirman Pradhan Mantri Gram Sadak Yojana RajivGandhi Awaas Yojana among others.
At the time of its release the National Steel Policy 2005 had envisaged steelproduction to reach 110 million tonnes (mt) by 2019-20. However based on the assessmentof the current ongoing projects both in Greenfield and brownfield the Working Group onSteel for the 12th Five Year Plan has projected that domestic crude steel capacity in thecounty is likely to be 140 mt by 2016-17 and has the potential to reach 149 mt if allrequirements are adequately met.
The National Steel Policy 2005 is currently being reviewed keeping in mind therapid developments in the domestic steel industry (both on the supply and demand sides) aswell as the stable growth of the Indian economy since the release of the Policy in 2005.
Data on production for sale of pig iron sponge iron and total finished steel(alloy + non-alloy) are given below for last five years and April-December 2014-15:
Indian steel industry: Production for Sale (in million tonnes)
|Category ||2009-10 ||2010-11 ||2011-12 ||2012-13 ||2013-14 ||April-December 2014-15 |
|Pig Iron ||5.88 ||5.68 ||5.371 ||6.870 ||7.950 ||6.081 (5.868) |
|Sponge Iron ||24.33 ||25.08 ||19.63 ||14.33 ||18.20 ||13.276 (13.413) |
|Total Finished Steel (alloy + non alloy) ||60.62 ||68.62 ||75.70 ||81.68 ||87.67 ||65.197 (64.190) |
Steel contributes to nearly two per cent of the gross domestic product (GDP) andemploys over 500000 people. The total market value of the organized Indian steel sectorstood at US$ 57.8 billion in 2011 and is expected to touch US$ 95.3 billion by 2016. Theinfrastructure sector is India's largest steel consumer thereby attracting investmentsfrom several global players. Owing to this connection with core infrastructure segments ofthe economy the steel industry is of high priority right now. Also steel demand isderived from other sectors like automobiles consumer durables and infrastructure;therefore its fortune is dependent on the growth of these user industries.
The liberalisation of the industrial policy and other government initiatives has givena definite impetus for entry participation and growth of the private sector in the steelindustry. Allowing foreign direct investment (FDI) has been a positive step since India isheavily dependent on foreign technologies. These foreign technologies generally add lifeto the plant and production units which ultimately lead to the country's economic growth.
POTENTIAL GROWTH CONSTRAINTS
The growth in the steel market is expected to be muted in the short term on account ofpoor growth in core consumer sectors such as infrastructure and construction. The demandis expected to rebound in the latter half of 2015 with growth in infrastructure asannounced in the Twelfth Five-year Plan. Growth in the automobile and consumer durablesectors will also support demand growth in the long term.
The large steel players and new entrants have announced capacity addition of about 71MTPA till 2017. Regulatory hurdles and land acquisition challenges remain the largestsupply-side constraint for the Indian steel market. Mining bans in Karnataka and Goa anddelays in the execution of announced capital projects can further constrain supplies.
SHORT RANGE OUTLOOK OF STEEL INDUSTRY FOR THE FY 2015-16
World steel forecasts that global apparent steel use will increase by 0.5% to 1544 Mtin 2015 following growth of 0.6% in 2014. In 2016 it is forecast that world steel demandwill grow by 1.4% and will reach 1565 Mt.
THE OUTLOOK FOR THE STEEL INDUSTRY SUGGESTS SLOW GROWTH FOR GLOBAL STEEL DEMAND
Commenting on the outlook Hans Jurgen Kerkhoff Chairman of the world steel EconomicsCommittee said "We are realizing a restrained growth outlook for the global steelindustry mainly due to the deceleration in China. The outlook also reflects the influenceof major structural adjustments in most economies particularly owing to limitedinvestment growth post 2008. As these changes take effect the steel industry willexperience a slower pace of growth it will focus on operational efficiencies and on thevalue that steel products generate for customers and society."
"While we continue to face some downside risks coming from some parts of Europe -geopolitical instability international capital flow volatility and the economic slowdownin China - the impact of these risks has come down. We have also started to see someencouraging developments. We hear increasingly positive news from developed economiesespecially signs of firming recovery momentum in the Eurozone. In the developing andemerging world we see increased optimism about India and growth in steel use in some MENAand ASEAN countries. While these developments will not be enough to counterbalance thedeceleration of China we expect to see gradually improving growth prospects beyond2016"
An interesting factor which has become increasingly apparent is that in some developingeconomies the steel markets are beginning to exhibit the characteristics of maturemarkets.
India's real consumption of total finished steel grew by 0.6 per cent year-on-year inApril-March 2013-14 to 73.93 million tonnes (MT) according to Joint Plant Committee(JPC) Ministry of Steel. Construction sector accounts for around 60 per cent of thecountry's total steel demand while the automobile industry consumes 15 per cent.
India became net steel exporter in 2013-14 and is likely to maintain the momentum in2015-16 as producers are looking to dock more overseas shipment to tide over subdueddomestic consumption. Total steel exports by India during 2013-14 stood at 5.59 MT asagainst imports of 5.44 MT.
Iron ore export from India has showed a 253 per cent increase during the periodOctober-Decem-ber 2013 at 3.75 MT as against 1.06 MT in the corresponding period of theprevious year on the back of the opening of new mines in Chhattisgarh Madhya Pradesh andRajasthan as per the Federation of Indian Mineral Industries (FIMI).
RESEARCH & DEVELOPMENT IN IRON & STEEL SECTOR
R&D in Indian Steel Sector is carried out mainly by major steel plants and some ofthe national laboratories like National Metallurgical Laboratory (NML) Jamshedpur &Institute of Minerals and Materials Technology (IIMT) Bhubaneswar. The R&D projectsmainly comprise short term initiatives for solving day to day problems faced by theIndustry with minimum emphasis on development of innovative/disruptive technologies.Consequently investment in R&D is very low @ 0.15-0.30% of turnover of the steelcompanies as against 1-2% in the reputed steel companies abroad. To augment R&D inthe steel sector Ministry of Steel is extending financial support from Steel DevelopmentFund as well as Plan Fund.
INVESTMENTS & GOVERNMENT INITIATIVES
MINISTRY OF STEEL - FACILITATOR FOR DEVELOPMENT OF STEEL INDUSTRY
The Ministry of Steel is expected to play a crucial role in ensuing harmonious andintegrated growth of Steel Sector. Being a core sector its sustained growth is aprerequisite for attaining the high level of Gross Domestic Product (GDP) growth. Theindustry has strong forward and backward linkages with other sectors of the economy andtherefore its own growth pattern is also influenced by other sectors of the economyspecially infrastructure development real estate auto mobiles/auto components etc. Theenvironment in which the domestic steel sector operates calls for a greater promotionalrole by the Ministry of Steel specially as a facilitator to remove sectoralbottlenecks/constraints like availability of raw materials development of infrastructureand also interaction with other concerned Ministries/Departments of the Govt. forappropriate policy formulation and implementation.
India needs investment of US$ 210 billion over the next decade to achieve the steelproduction capacity of 300 million tonnes per annum (MTPA) by 2025 from the current 90 MT.The future of the Indian steel industry is bright. The government plans to increaseinfrastructure spending from the current 5 per cent GDP to 10 per cent by 2017 and thecountry is committed to investing US$ 1 trillion in infrastructure during the 12thFive-Year plan.
The Government of India has allowed 100 per cent FDI through the automatic route in theIndian steel sector. It has significantly reduced the duty payable on finished steelproducts and has streamlined the associated approval process.
In order to provide thrust on research and development (R&D) the Ministry of Steelis encouraging R&D activities both in public and private steel sectors by providingfinancial assistance from Steel Development Fund (SDF) and Plan Scheme of the CentralGovernment. Under the SDF scheme 82 R&D projects have been approved with totalproject cost of Rs 677 crore (US$ 111.92 million) wherein SDF assistance is Rs 370 crore(US$ 61.17 million). Under the Plan Scheme eight projects were approved with a total costof Rs 123.27 crore (US$ 20.38 million) wherein Government assistance is Rs 87.28 crore(US$ 14.43 million).
To encourage beneficiation and pelletisation of iron ore fines in the country basiccustoms duty on the plants and equipment required for initial setting up or substantialexpansion of iron ore pellets plants and iron ore beneficiation plants has been reducedfrom 7.5 per cent to 2.5 per cent. Import of critical raw materials for steel industrysuch as coking coal non-coking coal and scrap are subject to zero or very low levels ofcustom duty.
INVESTMENT SCENARIO IN STEEL
Incumbents and challengers have announced 71 MTPA of steel capacity addition betweenFY2012 and FY2017 through both brownfield and greenfield routes. However there isconsiderable uncertainty on the actual capacity addition as many projects are yet toachieve financial closure due to delays or lack of regulatory clearances.
Land acquisition and regulatory clearances pose major challenges to new greenfieldinvestments
Delays in the government allocating sufficient iron ore blocks regulatory approvalsand challenges in land acquisition have slowed many steel projects. Moreover regulatoryclearances and land acquisition challenges have affected expansion and modernizationprojects. Major investments from leading MNCs and large Indian corporates acrossKarnataka Odisha Jharkhand and West Bengal have been affected due to land acquisitionchallenges.
Need to secure raw material supply have led Indian steel companies to look at globalasset base
The raw material security scenario has slightly improved due to regulatory support tooverseas acquisitions. The Indian steel companies are actively seeking mining leases andassets globally to secure raw material supplies. The capability to acquire develop andoperate these assets has become a key strategic imperative. These assets provide a naturalhedge at the raw material portfolio level and are also important for over coming theshort-term domestic challenges.
Several Indian steel companies have acquired iron ore and coking coal assets incountries such as Canada Australia and South Africa through joint ventures. One of theleading Indian steel companies acquired a majority stake in a new iron ore reserve inCanada. It had acquired a minority stake in an Australian mine which was sold last yearto a leading global miner. Another Indian steel company has acquired and operatesanthracite mines in South Africa. It has also acquired a significant minority stake in anAustralian coal miner with exploration rights for coking coal in Queensland.
1. Domestic iron ore production declined continuously over the last three years andthe trend has been continuing in the current year as well on account of variousrestrictions in key iron ore producing states. While the Supreme Court has allowedCategory A and B mines in Karnataka to resume mining operations in the state therequirement of fulfilling various conditions has resulted in only a limited number ofmines commencing operations till now leading to a significant supply shortage in thestate. While the Mining ban in the state of Goa has been lifted mining is yet to resumepending policy formation by the State government. The iron ore mining industry in Odishamay also face a ban in light of the report of the Justice M. B. Shah Commission. Despitefalling supplies domestic iron ore prices nevertheless declined over the last one year.Domestic lump ore prices are ruling at levels which are 10-15% lower than the rates oneyear back. This is because of the ongoing downturn in the steel industry leading to anominal production growth for steel players without captive iron ore mines.
2. International coking coal contract prices too have declined during FY 14-15 but thedepreciation in the INR vis-a-vis the USD has largely offset the benefit from the same forIndian steelmakers importing coking coal. However a further decline in contract prices ofcoking coal is likely to have a positive bearing on their margins.
3. Insufficient infrastructure and logistics. The steel industry is a major user ofinfrastructure resources like railways roads and ports. A growth in steel production willincrease the burden of the country's already stretched logistics infrastructure. To meetthe needs of a growing steel industry major improvements in various infrastructurefacilities are required.
4. Land Acquisitions and rules for calculation of compensation to landowners needclarity. Further the number of approvals governing land acquisition and setting up newcapacity needs to be streamlined.
5. Overcapacity: Steel producers across the globe are grappling with low capacity uselevels resulting in a high fixed cost. Indian steel producers' capacity use contracted tobelow 80% in FY13. Any increase in the capacity use due to an uptick in demand could belimited by significant new capacities (about 13-15 million tonnes (mt)) scheduled tostart in FY15. Domestic steel producers will have to increase their focus on costcompetitiveness and efficiency of operations to protect their margins.
CHALLENGING GLOBAL ENVIRONMENT
Globally steel players have been operating in a challenging environment. These trendsare now extending to India leading to margin compression and weaker growth prospects.
Steel companies globally have been operating in a challenging environment of risinginput costs and limited pricing power (in most years) leading to steady erosion inmargins. In response steel makers have been integrating upstream facilities to securesupplies of iron ore and coking coal.
The global scenario has been a prologue to the Indian market where after a decade ofexponential revenue and profit growth the steel players are entering a down-cycle.Historically high asset utilizations benign global pricing consolidated industrystructure and a local demand-supply environment have enabled Indian players to generatebetter realizations compared to their global counterparts.
Recently however the Indian steel industry has started witnessing the signs ofdown-cycle leading to margin compression despite strong volume growth. This is primarilydue to high input costs and a weak macroeconomic environment both globally anddomestically.
Declining margins coupled with sluggish demand growth has made investors cautiousabout steel companies. As a result enterprise value for the Indian steel industry hasdeclined almost 30 percent since FY2010.
This situation is further complicated by key trends in the global and domestic steelindustry that have far-reaching impact on Indian steel players and customer markets.
Steel demand growth is expected to flatten in heavy-weight economies including OECDeconomies even as major structural shifts in China and fewer acquisitions of raw materialsuppliers in India are expected to reshape these markets.
The steel industry in OECD economies is witnessing persistent low capacity utilizationcompounded by margin squeeze. This coupled with three key trends is leading to astructural shift in the global steel industry.
Shift toward relatively lower steel demand growth in most of the heavy-weight economiesincluding China
The global macroeconomic crisis appears to have accelerated the pre-existing trendtoward declining the steel intensity in the OECD economies. The steel industry is staringat a flatter demand trajectory globally including in China-which is expecting a very lowsingle-digit growth.
Structural shifts in China could fundamentally impact Indian players
China is experiencing significant overcapacity as players have created capacity aheadof demand. This coupled with weak pricing presents a significant threat to demand in thelocal and other Asian markets for Indian players.
Cooling down of iron ore and coking coal prices reducing acquisition pace of Chineseand Indian players
Steel players in China and India were on an acquisition spree for iron ore and cokingcoal assets around the globe to insulate themselves from price volatility. But as rawmaterial prices cooled in the past few years the race for self-sufficiency has taken abackseat.
FUTURE OUTLOOK OF THE INDUSTRY:
With urban population increasing globally there is a greater need for steel to buildpublic-transport infrastructure. Emerging economies will also continue to be a majordriver of demand as these necessitate a huge amount of steel for urbanization andindustrialization. As per the World steel forecasts in India steel demand is expected togrow by 3.3% to 76.2 Mt in 2015 following 1.8% growth in 2013 due to an improved outlookfor the construction and manufacturing sectors even though this will be constrained byhigh inflation and structural problems. Steel demand is projected to grow by 4.5% in 2015supported by the expectation that structural reforms will be implemented. Over a longerterm volume growth however would be critical given that substantial fresh capacities arelikely to be commissioned in the next two years. Unless demand conditions improvesignificantly overall capacity utilization levels and profitability of steel playerswould remain impacted.
Source: a) Ministry of Steel b) World Steel c) Confederation of Indian Industry.
5.1 SIL OPERATIONS AT CHENNAI PLANT
Production at Chennai Plant had adversely been affected for the last couple of yearsdue to severe power cut in Tamil Nadu. The plant faced a 20% power cut and this situationcontinued for most part of the financial year. The power shortage coupled withunfavourable market prices for end products have resulted in lower operation level at theplant.
5.2 SIL OPERATIONS AT RAICHUR PLANT
The existing operations at the Integrated Steel Complex at Raichur comprises of theSponge Iron Plant (Direct Reduction of Iron) Steel Melting Shop and the Rolling Mill.
The Company has been facing labour unrest at the plant for the majority of thefinancial year. Consequently production had been adversely affected post implementationof the CDR package. The Company is set to re-start the DRI operations in full swing byJune 2015. The company is using pellets for producing sponge iron due to non-availabilityof high grade iron ore lumps. However the SMS Plant and Rolling Mill is expected tocommence productions once the refurbishment work is completed which is subject to releaseof the priority loan by the consortium lenders.
The existing facilities at the Raichur plant are summarized below:
|Facility ||Metric Tonnes Per Annum |
|DRI Plant ||160000 |
|Electric Arc Furnace ||250000 |
|Billet Caster ||240000 |
|Bar Mill ||400000 |
EXPANSION PROJECT- BENEFICIATION & PELLET PLANT
Earlier in terms of the Hon'ble Supreme Court order the illegal mines were all closeddown in Karnataka. And the Hon'ble Supreme Court wanted to regulate the mining activities.As a result there was a shortage of iron ore supply in the State of Karnataka. Yourcompany resorted to buy pellets instead of iron ore lumps. In order to obviate thisdifficulty the company had planned a Backward Integration exercise of setting up aBeneficiation and Pelletisation Plant. This expansion envisages Beneficiation of Iron orefines and the company will be producing Pellets which in turn will be utilized for theproduction of Sponge Iron. In other words the Pellets which will be produced will becomethe raw materials for the manufacture of Sponge Iron in our Direct Reduction of Iron (DRI)Kilns.
The Techno Economic Viability of the project was also carried out by M/s. MITCONConsultancy which has found the project to be viable.
6. WAY FORWARD FOR THE COMPANY
As stated earlier the Company has availed the CDR mechanism to restructure itsexisting debts with the lenders. The Company has signed a Master Restructuring Agreement(MRA) with its lenders. The repayment is spread over a ten year period ending in the year2023-24. The mechanism also stipulates stringent monitoring by the lenders includingmonthly cash flows. The lenders have constituted a Monitoring Committee (MC) lead by theMonitoring Institution (MI) viz. IDBI Bank Ltd.
The Company with a view to augment the operational profitability has introduced certainconcepts which will help in utilizing the full capacity of the plant and simultaneouslycontributing towards the recovery of fixed cost. Further the cost optimization exerciseis being undertaken on continuous basis for improving the overall productivity and therebyhelping in improving the bottom line.
Even though there has been delay in expected commencement of operations at Raichur theresolution of the Labour dispute amicably has created a positive working environment. TheCompany in all its earnest is looking to capitalize this positive environment andimmediately commence the operations at Raichur subject to necessary approvals for releaseof sanctioned funds from the consortium lenders. The Company is very positive that on thecommencement of Raichur operations the overall financial outlook of the company willbecome vibrant.
The Company in the past few years had suffered severe liquidity crunch on account ofnegative market sentiments per se prevailing in steel industry. This had been the majorcontributing factor for the company's decision to utilize the CDR forum for restructuringits debts with consortium of bankers. With a view to improve the financial viability ofthe company conscious decision to dilute the company's holding in its subsidiaries isenvisaged. It is also planned to unlock the inherent valuations of each of the projects bybringing in strategic partners to augment the parent company in realizing its investment.
UNLOCKING INVESTMENTS IN SUBSIDIARIES
SIL has made total investments of Rs.534.24 Crores in its subsidiaries viz. SPL (Rs.418.50 Crores) SGPL (Rs. 56.15 Crores) & SMML (Rs. 59.59 Crores). These investmentsare yet to yield returns. While the investment decision is sound the execution of thesebusinesses have faced various bottlenecks in the form of non-availability of workingcapital un-favourable market conditions coal linkage inordinate delay in gettingcertain regulatory approvals and other macroeconomic issues. These have stressed the cashflows of the parent company SIL. Presently we are in advanced discussions with variousinvestors. Going forward it is proposed to unlock their value by divesting majorityequity stake in these Companies.
The Board of Directors of SIL has in principle approved the divestment of the threesubsidiaries viz; M/s. Surana Power Limited M/s. Surana Green Power Limited and M/s.Surana Mines & Minerals Limited.
In accordance with the General Circular issued by the Ministry of Corporate AffairsGovernment of India the Balance Sheet Statement of Profit and Loss and other documentsof the subsidiary companies are not being attached with the Balance Sheet of the Company.However the financial information of the subsidiary companies is disclosed in the AnnualReport in compliance with the said circular.
SURANA POWER LIMITED
Surana Power Limited a 100% subsidiary of Surana Industries Limited is in the processof setting up of 2 x 210 MW Thermal Power Plant at Raichur. The original project cost wasestimated at Rs.2400 crs in the year 2010. However the project cost has been revised toRs.3090 crores on account of increase in Interest during Construction (IDC). SPL has an35MW operational thermal power plant. After completing the 2 x 210 MW Thermal Power Plantthe generation capacity of Surana Power Limited will be increased to 455 MW.
The operations of the 35MW were adversely affected during the year due to fall in powertariff rates and increase in input costs. Consequently the debt under sole banking withUCO Bank was restructured.
During the financial year 2014-15 the revenue from operation is stood at Rs. 51.77Crores as compared to Rs.70.97 Crores for the previous financial year 2013-14. Revenuefrom operation is only through sale of coal in stock and the 35 MW Captive Power Plant wasnot in operation for the entire financial year due to labour unrest financial constraintand other unviable market conditions.
During the financial year 2014-15 the Other Income stood at Rs. 0.09 Crores ascompared to Rs. 0.12 Crores for the previous financial year 2013-14.
Finance cost stood at Rs. 25.90 Crores for the financial year 2014-15 as against Rs.23.80 Crores for the financial year 2013-14.
Depreciation and amortization expenses stood at Rs. 76.90 Crores for the financial year2014-15 as against Rs. 12.13 Crores for the financial year 2013-14.
Other expenses stood at Rs. 53.02 Crores for the financial year 2014-15 as against Rs.36.61 Crores for the financial year 2013-14.
Loss before tax is Rs. 150.84 Crores for the financial year 2014-15 and Rs.29.07 Croresfor the financial year 2013-14. Loss after tax for the financial year 2014-15 stood atRs.160.08 Crores and Rs. 116.24 Crores for the financial year 2013-14.
Surana Industries Limited has already infused a capital contribution of Rs.418.50Crores. SPL has already spent around Rs. 1929.66 Crores as on 31st March 2015. The sourcefor the same was equity contribution of Rs. 350 Crores and balance by way of term loanfrom consortium of lenders.
SURANA MINES AND MINERALS LIMITED
Surana Mines and Minerals Ltd SMML a 100% subsidiary of Surana Industries Limited atSingapore is expected to commence trading activities in coal as well as scraps in theglobal market for supply to steel and power plants in the group. SMML has a step downsubsidiary PT Borneo Mines & Minerals Ltd which has acquired mining rights in theSassanga coal mines in Indonesia. The 2640 acres of the Sassanga coal mines have provenreserves of 60-70 million tonnes of coal. The Company is facing difficulty in raisingfunds for working capital due to the restructuring of the debts of the parent companySurana Industries Ltd and has incurred a loss of US$ 117971/- on a consolidated basisfor the FY 2014-15.
SURANA GREEN POWER LIMITED
SGPL a 100% subsidiary of Surana Industries Limited is in the business of PowerGeneration. SGPL has currently 7 windmills of 1.5MW capacity. SGPL has a step downsubsidiary (wholly owned subsidiary) M/s. Surana Green Energy Limited (SGEL) an SPVthrough which the Company is availing the Group Captive Scheme (GCS) whereby SGEL is ableto sell electricity to other Captive users.
SGPL has also been registered under the UNFCCC (United Nations Framework Convention onClimate Change) Clean Development Mechanism Scheme (CDM). The project is eligible forCarbon Credits which are sold in the international markets. This has provided additionalrevenue to SGPL.
For the FY 2014-15 the Company has operated on average PLF of 14.95% and generated152.22 lakh units. During the year there was a decline in the turnover and it stood atRs.0.70 Crs compared to Rs. 0.95 Crs in the previous year ended March 31 2014.
For the FY 2014-15 SGEL had achieved a total turnover of Rs. 8.14 Crores as againstRs.7.87 Crores during the previous year ended March 31 2014.
A Statement Pursuant to first proviso to subsection (3) of section 129 read with rule 5of Companies (Accounts) Rules 2014 containing salient features of the financial statementof subsidiaries/associate companies/joint ventures in Form AOC-1 is annexed to thisreport as "Annexure A".
The steel production capacity in the country has increased substantially and theproduction may touch around 200 million tonnes by the year 2020. The country has thenecessary iron ore reserves to achieve this level of steel production. Due to expectedacceleration in GDP growth rate in the medium and long term the demand for steel is boundto go up significantly. This will benefit all steel producers including your Company.
The Infrastructure sector is expected to get an impetus under the new government whichwill also translate into substantial increase in steel demand. The Company also undertakesCold Rolling operations which provide a good margin of profitability. The Company procuresmaterials mainly from leading steel producers and after cold rolling sells the same inthe market. This shall also add to the overall profitability of the Company.
9. THREAT PERCEPTION
Your Directors feel that the Company will have to gear up its marketing activities soas to compete effectively with the established producers. Marketing of Alloy Steel andSpecial Steels needs concerted efforts and experience. In the Raichur steel plant theCompany will be manufacturing Special Alloy Steels which are mostly meant for AutomobileManufacturers who will demand strict adherence to the quality of the products. The alloysteel market has high competition. Therefore it is essential for the Company's marketingteam to aggressively and effectively market the products.
Similarly in the case of TMT Bars there can be good competition from the variousproducers. Builders and contractors are the ultimate end users of TMT Bars and it isnecessary for the Company to aggressively market these products.
Shortage of quality raw materials surging freight costs and escalation of the costs ofinputs fuels etc. will continue to keep the cost of production high for steelmanufacturers.
The main threat perception is linkage of iron ore and coal. Delay in completion of thebackward integration project can also affect profitability of future operations.
Further in regards to financial implications there can be threat perceptions due totough competition it would be difficult for the Company to pass on the entire cost push tothe Customers by way of increased finished steel prices. Faced with aggressive marketingstrategy and cost cutting initiatives the Company constantly reviews/ monitors the costsof various inputs and finds out ways (either technological or commercial) to reduce thecost of steel production wherever is possible. The Directors have been taking requisitemeasures to overcome various impediments which may come in the way of smooth functioningof the Company.
10. RISK PERCEPTION
The Directors are constantly assessing the business risks pertaining to the performanceof the Company. The following are the important risks perceptions:
Quality Maintenance of the End Products
Adequate availability of Raw Materials
Requisite Power Supply
Removal of Transport Bottlenecks
Sudden Increase in Prices of Inputs
Inadequacy of Finance Arrangement
Events Due to Unforeseen Circumstances
?Volatility in international supply/demand of steel products
Your Directors are fully conscious of the various business risks and have takenadequate care to tackle any situation. Strict controls are enforced on the quality frontand all other matters for smooth operation of the steel plants.
11. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has a internal control system which is in the process of streamlining. Alltransactions are subject to proper scrutiny. The Company also has Independent InternalAuditors who carry out the internal audit on a quarterly basis covering all areas duringthe financial year and submit their report on a quarterly basis to the Audit Committee.The Management takes immediate corrective action wherever it is being pointed out to helpstreamline the internal control process. The Audit Committee further insisted that thereshould be stronger internal control systems to be in place. A policy on internal controlshad already been devised and implemented for the company and the management shall ensurethe effectiveness of the working of such policy.
12. CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Accounting Standard (AS) - 21 on Consolidated FinancialStatements read with AS - 23 on Accounting for Investments in Associates and AS - 27 onFinancial Reporting of Interests in Joint Ventures the audited consolidated financialstatements is provided in the Annual Report.
13. HUMAN RESOURCES
The Management envisions trained and motivated employees as the backbone of theCompany. Special attention is given to recruit trained and experienced personnel not onlyin the production department but also in marketing finance and accounts. The Managementstrives to retain and improve employee morale. The Company has total staff strength ofabout 300 employees. The Company is in the process of revamping the employer employeeengagement program.
The labour unrest at the Raichur Integrated steel plant plagued the operations of theplant for the major part of the financial year. For the last three years a certain sectionof the workers of our
Raichur Integrated Steel Plant have been resorting to illegal activities and have beeninstigated by local elements with vested interests. The Company would like to bring to thenotice of the share holders that the said strike / labour dispute have been amicablyresolved and we expect no turbulence in the near future.
The Company has streamlined its manpower strength at the Chennai offices including thecorporate head office. As a result of manpower rationalization exercise the monthlypayroll has been optimized. The decision for rationalization of labour has enabled thecompany to curtail fixed manpower costs. However the core technical expert team isretained to guide the Company to achieve higher and efficient level of production.
14. CORPORATE GOVERNANCE
The Directors pay special attention to ensure that the guidelines given for thecorporate governance are strictly adhered to. All possible steps are taken to adhere tothe requirements set out by SEBI Guidelines on Corporate Governance. The Company is alsoaligning itself to implement global corporate governance practices. This is ensured bytaking ethical business decisions and conducting business with a firm commitment tovalues while meeting stakeholder's expectations. At Surana it is imperative that thecompany affairs are managed in a fair and transparent manner. This is vital to gain andretain the trust of our stakeholders.
A separate report on the Corporate Governance also forms part of the Annual Report.Requisite certificates from the Auditors of your Company regarding compliance of theconditions of the corporate governance as stipulated under Clauses 49 of the ListingAgreement with the Stock Exchanges is also attached to the corporate governance report.With regard to the Business Responsibility Report the Company is not covered in the top100 listed entities based on the market capitalization at BSE & NSE in terms of SEBICircular CIR/CFD/DIL/8/2012 dated August 13 2012.
15. CORPORATE SOCIAL RESPONSIBILITY AND GOVERNANCE COMMITTEE
The Board of Directors has constituted a Corporate Social Responsibility and GovernanceCommittee (CSR&G Committee) in compliance with the provisions under the Companies Act2013. The committee comprises of Shri K.N Prithiviraj as the Chairman Shri Krishna Udupaand Shri. Dineshchand Surana as its other members.
The said Committee has been entrusted with the responsibility of formulating andrecommending to the Board a Corporate Social Responsibility Policy (CSR Policy)indicating the activities to be undertaken by the Company monitoring the implementationof the framework of the CSR Policy and recommending the amount to be spent on CSRactivities.
Since the company is making losses for the past three years CSR spend does not applyto the company for the financial year 2014-15. Hence submission of a report on CSRactivities does not apply.
16. RISK MANAGEMENT COMMITTEE AND POLICY
The Board of Directors has constituted a Risk Management Committee and framed a RiskManagement Policy in compliance with the provisions under the Companies Act 2013 andClause 49 of the Listing Agreement. The committee comprises of Shri Dineshchand Surana asthe Chairman Shri Krishna Udupa Shri. Anil Gupta and Shri. D. Hem Senthil Raj as itsother members.
17. SEXUAL HARASSMENT POLICY
The Company had adopted the sexual harassment policy as recommended by the AuditCommittee of the Board of Directors; however the Company is in the process of constitutinga committee for the same.
18. DEPOSITORY SYSTEM / E-VOTING MECHANISM:
The Company has entered into a Tripartite Agreement with both the Depositories viz.National Securities Depository Limited (NSDL) and Central Depository Services (I) Ltd(CSDL) along with Registrars M/s Cameo Corporate Service Ltd Chennai for providingelectronic connectivity for dematerialization on the Company's shares facilitating theinvestors to hold the shares in electronic form and trade in those shares. The shares ofyour Company are being traded now in on the Bombay and National Stock Exchanges undercompulsory demat form. Further in accordance with provisions stipulated under CompaniesAct 2013 the facility of e-voting is also made available to all shareholders of theCompany. The instructions regarding e-voting are available in a separate section of theAnnual report. All shareholders are also requested to update their email ids with theCompany or our RTA M/s. Cameo Corporate Services Ltd.
19. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act 1956relevant amounts which remained unpaid or unclaimed for a period of seven years have beentransferred by the Company from to time to time on due dates to the Investor Educationand Protection Fund. The details of the same are covered under the Corporate GovernanceReport.
Pursuant to the provisions of Investor Education and Protection Fund (Uploading ofinformation regarding unpaid and unclaimed amounts lying with companies) Rules 2012 theCompany has uploaded the details of unpaid and unclaimed amounts lying with the Company ason 18th July 2014 (date of last Annual General Meeting) on the Company's website(www.suranaind.com) as also on the Ministry of Corporate Affairs' website.
20. AUDITORS STATUTORY AUDITORS
During the year M/s Deloitte Haskins & Sells LLP. Chartered Accountants havingfirm registration number 117366W/W 100018 have been appointed as statutory auditors of thecompany to fill the casual vacancy arisen on account of resignation of M/s. CSP Jain &Co due to their pre-occupation with other assignments. The said appointment has beenapproved by the shareholders at the Extra-Ordinary General Meeting of the company held on30th September 2014.
M/s. Deloitte Haskins & Sells LLP. Chartered Accountants Chennai having firmregistration number 117366W/W 100018 Statutory Auditor hold office up to the conclusionof the 24th AGM and are eligible for re-appointment. The Company has appointed M/s. M/s.Deloitte Haskins & Sells LLP for a period of five years starting from the financialyear 2015-16 to 2019- 20 subject to ratification of members in the each annual generalmeeting. Further the company had received letters to the effect that theirre-appointment if made would be within the prescribed limits under Section 141(3) (g) ofthe Companies Act 2013 and that they are not disqualified for such re-appointment. YourBoard of Directors recommends their re-appointment as Statutory Auditors to hold officefrom the conclusion of the 24th AGM till the conclusion of the 29th AGM of the Company.
21. AUDITORS REPORT AND MANAGEMENT'S RESPONSE TO AUDITORS OBSERVATIONS
The Auditors have qualified and emphasized certain matters in their report.
I. Capital work in progress relating to the Pelletisation and Beneficiation (P&B)Project includes:
a) Interest on borrowings aggregating to Rs. 40765 Lakhs (including Rs. 22339 Lakhs forthe year) relating to the periods during which the project has been stalled whichconstitutes a departure from Accounting Standard 16 (AS-16) on "BorrowingCosts". Had the interest capitalized during the period in which the project wasstalled been charged to the Statement of Profit & Loss the loss for the year and theDeficit in the Statement of Profit and Loss will be higher by Rs. 40765 Lakhs and CapitalWork in Progress will be lower by Rs. 40765 Lakhs.
b) Preoperative expenses incurred in relation to the project aggregating to Rs. 68Lakhs (including Rs. 19.82 Lakhs for the year) relating to the periods during which theproject has been stalled which constitutes a departure from Accounting Standard 10(AS-10) on "Fixed Assets". Had such expenditure capitalized during the period inwhich the project was stalled been charged to the Statement of Profit & Loss the lossfor the year and the Deficit in the Statement of Profit and Loss will be higher by Rs. 68Lakhs and Capital Work in Progress will be lower by Rs. 68 Lakhs.
We submit that Interest and pre-operative expenditure have been capitalised consideringthe exceptional nature of this industry and prolonged project implementation period and isbeing retained under capital work in progress as per the CDR package.
II. Current investments include investments in subsidiaries aggregating to Rs 53424Lakhs which are held for sale and valued at cost. As per Accounting Standard 13-Accounting for Investments these investments should be valued at the lower of cost andnet realizable value. In the absence of the net realizable value we are unable to commenton the adjustments if any to the carrying value of the value of investments as at March31 2015.
We submit that our Company is in negotiations with prospective buyers. In the opinionof the management the Company will be able to realize the carrying value of the saidinvestments and hence no adjustment to their carrying values is considered necessary.
III. As at 31 March 2015 the quantity quality and realizable value of Inventoryaggregating to Rs. 25869 Lakhs was not assessed and determined. As per by AccountingStandard 2 - Inventories these inventories should be valued at the lower of cost and netrealizable value. In the absence of the net realizable value we are unable to comment onthe adjustments that may be required to the carrying values of inventories as at March 312015.
We submit that currently efforts are being made to segregate the inventory at Raichurplant with that inventory belonging to a subsidiary and physically verify the stock ofstores and spares. Raw Materials lying at the Raichur plant will be segregated andphysically weighed on resumption of production and blended with fresh materials purchasedfor use in production. The extent of deterioration or obsolescence if any on the aboveinventory will be assessed at the time of physical verification / resumption of productionand appropriate adjustments will be recorded on completion of the exercise. In the opinionof the management any such adjustment arising out of physical verification / assessmentof the quality will not be material and will be appropriately dealt with on completion ofthe exercise.
AUDITOR'S OBSERVATIONS ON CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S RESPONSETO THE OBSERVATIONS
The Statutory Auditors have issued a qualified opinion dated 30th May 2015 on theconsolidated audited financial statements for the year ended March 31 2015 and the basisfor qualified opinion and management responses are as under:
IV. a) Interest on borrowings aggregating to Rs. 48535 Lakhs (including Rs. 22872 Lakhsfor the year) relating to the periods during project have been stalled which constitutesa departure from Accounting Standard 16 (AS-16) on "Borrowing Costs".
Had the interest capitalized during the period in which the projects were stalled beencharged to the Statement of Profit & Loss the loss for the year and the Deficit inthe Statement of Profit and Loss will be higher by Rs. 48535 Lakhs and Capital Work inProgress will be lower by Rs. 48535 Lakhs.
b) Preoperative expenses incurred in relation to the project aggregating to Rs. 5475Lakhs (including Rs. 448 Lakhs for the year) relating to the periods during which theproject has been stalled which constitutes a departure from Accounting Standard 10(AS-10) on "Fixed Assets". Had such expenditure capitalized during the period inwhich the project was stalled been charged to the Statement of Profit & Loss the lossfor the year and the Deficit in the Statement of Profit and Loss will be higher by Rs.5475 Lakhs and Capital Work in Progress will be lower by Rs. 5475 Lakhs.
Please refer our submission to our responses in note I (a & b) above.
V. As at 31 March 2015 the quantity quality and realizable value of inventoryaggregating to Rs. 29369 Lakhs was not assessed and determined. As per Accounting Standard2 - Inventories these inventories should be valued at the lower of cost and net realizablevalue. In the absence of the net realizable value we are unable to comment on theadjustments that may be required to the carrying value of these inventories as at March31 2015.
Please refer our submission to our responses in note III above.
VI. Long term loans and advances include dues from subcontractors aggregating to Rs4034 Lakhs represent the amounts taken over from the EPC contractors which are consideredgood and recoverable by the management. In the absence of any confirmation / agreementfrom these parties we are unable to comment on the adjustments that may be required onthe carrying value of these advances.
We submit that the dues are collectable / adjustable on resumption of project workand no provision is considered necessary.
VII. Trade payables include amounts payable to subcontractors aggregating to Rs. 3141
Lakhs and retention monies aggregating to Rs 661 Lakhs In the absence of details orconfirmations from the parties we are unable to comment on the completeness of theseliabilities.
We submit that the Management is of the opinion that the said payables are completeand will be settled in the normal course of business on resumption of the 2 X 210 MWproject work and there will be no additional liabilities on this account.
The Board has appointed M/s. Agrya Consulting Private Limited (CIN:U74900TN2010PTC078072) Chennai as the Internal Auditors of the Company pursuant to Section138 of Companies Act 2013 and Rule No. 13 of The Companies (Accounts of Companies) Rules2014 for the financial year 2015-16.
The Internal Auditors of the Company has a qualified team of Internal Auditprofessionals who shall be reporting directly to the Audit Committee of the Company. TheInternal Audit would ensure that strong internal control mechanism is put in place in theCompany as per the recommendations and guidance of Audit Committee.
The Board of Directors had appointed M/s. JV Associates Cost & ManagementAccountants Chennai (M.No. 6128) as the Cost Auditors of the Company to audit the costaccounting records of the Company for the financial year 2015-16.
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. Lakshmmi Subramanian & Associates Practising Company SecretariesChennai to undertake the Secretarial Audit of the Company. The report of the SecretarialAudit Report is annexed herewith as "Annexure B"
MANAGEMENT'S RESPONSE TO SECRETARIAL AUDITOR'S OBSERVATIONS
1. The Company is yet to appoint a woman director on its Board as per section149(1) of the Companies Act 2013
The Company had taken necessary steps for inducting a woman director on its Boardpursuant to the provisions of Section 149 of the Companies Act 2013 and the same will becomplied on or before June 30 2015.
2. For the 3rd and 4th Quarter there was a vacancy in the Board in place of theIndependent director which was not filled in during the audit period as required undersection 149(4) read with Schedule IV and revised Clause 49 of the Listing Agreemententered with the Stock Exchange.
As per the provisions of revised Clause 49(D)(4) of the Listing Agreement any vacancycaused due to resignation or removal of an Independent Director from the Board shall bereplaced by a new Independent Director at the earliest but not later than the immediatenext Board meeting or three months from the date of such vacancy whichever is later.
However the company had taken appropriate steps in inducting an Independent Director onits Board including registration in the Independent Directors Repository for finding asuitable candidate who has a sound technical knowledge in the field of steel and powerindustry.
3. The composition of the audit committee in the 3rd and 4th quarter had fallenbelow the minimum threshold limit of independent directors and total number of members.Further there was a lack of quorum in the audit committee meeting held in the 4th quarterof the audit period.
The Composition of the audit committee during the 3rd and 4th quarter had fallen belowthe minimum threshold limit of independent directors as per the revised clause 49 of theListing Agreement due to resignation of few independent directors on the board withretrospective effect due to their other pre-occupations.
Further the lack of quorum for the audit committee meeting held during the 4th quarterwas unexceptional due to the resignation of an independent director on the board whoformed part of the Audit Committee as Member and the same was intimated to the stockexchanges by way of outcome of Board Meeting.
4. Directors retiring by rotation under section 152 of the Companies Act 2013in the 23rd Annual General Meeting of the Company held on 18th July 2014 as per CompaniesAct 1956 and Independent directors was appointed and under section 149 of the CompaniesAct 2013 on 30th September 2014 in the extra-ordinary general meeting of the company.
The Independent Directors of the company who retired by rotation at the 23rd AnnualGeneral Meeting of the company held on July 18 2014 are those Independent Directors whoare appointed under the erstwhile Companies Act 1956 Further it is to be noted that theIndependent Directors are not liable to retire by rotation only under the Companies Act2013.
Subsequently the Company had appointed all its Independent Directors at theExtraordinary General Meeting of the Company held on September 30 2014 as per theprovisions of Section 149 of the Companies Act 2013.
5. The service of notice of annual general meeting together with the annualreport of the company for the financial year 2013-14 was done partly through courier andby book post.
The Company had served the notice of 23rd annual general meeting together with theannual report of the company for the financial year 2013-14 well within the stipulatedtime period under the Companies Act 2013 by way of electronic mode the confirmation fromthe Registrar and Share Transfer Agents is also obtained evidencing the same.
6. The Company is yet to ratify the limits for inter-corporate investmentsloans guarantees and securities as per section 186 of the Companies Act 2013 and theRules made thereunder which is required to be complied not within 1 year from the date ofnotification of the provisions of the Companies Act 2013.
The Company had proposed to ratify the limits for inter-corporate investments loansguarantees and securities as per section 186 of the Companies Act 2013 and the Rules madethereunder from the shareholders by way of postal ballot which will be held during themonth of July 2015.
The following changes have occurred in the Board of Directors during the financial year2014-2015:
22.1 INDUCTIONS/ CHANGE IN DESIGNATION
Appointment of Shri. V. Subramanian as Nominee Director of M/s. IFCI Ltd on 18th July2014 and Appointment of Shri. Biju George as Nominee Director of M/s. IDBI Ltd on 6thSeptember 2014;
Further on the recommendations of the nomination and remuneration committee the Boardappointed Shri. Babu Srinivasan and Smt. Soundharya Panchapakeran as additional Directorsof the Company We seek your support in conforming the appointment of Shri. Babu Srinivasanand Smt. Soundharya Panchapakeran in the ensuing Annual General Meeting.
At the Extra-ordinary General Meeting held on 30th September 2014 the members hadappointed the existing Independent Director viz. Shri. K.N. Prithviraj as IndependentDirector under the Companies Act 2013 for a term of five years with effect from 30thSeptember 2014.
Shri. Krishna Udupa Director (Projects) has been redesignated as Director(Non-Executive) of the Company with effect from 18th July 2014.
22.2 DECLARATION BY INDEPENDENT DIRECTORS
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Clause 49 ofthe Listing Agreement.
Dr. B. Samal has resigned from the position of Independent Director with effect from25th September 2014; Shri. S.K. Gupta has resigned from the position of IndependentDirector with effect from 14th October 2014 Shri. B.S. Patil has resigned from theposition of Independent Director with effect from 1st December 2014 and Shri. V.Aranganathan has resigned from the position of Executive Director with effect from 31stMay 2014.
The Board had placed on record its appreciation for the outstanding contributions madeby Dr. B. Samal Shri. S.K. Gupta Shri. B.S. Patil and Shri. V. Aranganathan during theirtenure of office with the Company.
Shri. G.R. Surana has resigned from the position of Executive Chairman of the companywith effect from 29th April 2015 due to personal reasons. Shri. G.R. Surana is aco-founder of the Company and has played a seminal role in shaping its destiny. The Boardappreciates and thanks him for his efforts in driving delivery and quality excellence forthe Company The Board also places on record its gratitude for the services rendered byShri. G.R. Surana during his long association with the Company.
In accordance with the provisions of the Companies Act 2013 and in terms of theMemorandum & Articles of Association of the Company At the ensuing 24th AnnualGeneral Meeting Shri. Dineshchand Surana Director and Shri. Biju George Director of theCompany are liable to retire by rotation and being eligible offer them selves forre-appointment. The Board recommends their re-appointment.
The Companies Act 2013 provides for the appointment of independent directors. Subsection (10) of Section 149 of the Companies Act 2013 provides that independent directorsshall hold office for a term of up to five consecutive years on the board of a company;and shall be eligible for re-appointment on passing a special resolution by theshareholders of the Company. Accordingly all independent directors except for Shri. BabuSrinivasan & Smt. Soundharya Panchapakeran who were appointed as additional directorof the Company & Smt. Soundharya Panchapakeran were appointed by the shareholders atthe General Meeting as required under Section 149(10). Further according to sub section(11) of Section 149 no independent director shall be eligible for appointment for morethan two consecutive terms of five years. Sub section (13) states that the provisions ofretirement by rotation as defined in Sub section (6) and (7) of Section 152 of the Actshall not apply to such independent directors.
None of the independent directors will retire at the ensuing Annual General Meeting.
22.5 BOARD EVALUATION
Pursuant to the provisions of Clause 49 of the Listing Agreement the Board shallmonitor and review the Board evaluation framework. The Companies Act 2013 states that aformal annual evaluation needs to be made by the Board of its own performance and that ofits committees and individual directors. Schedule IV of the Companies Act 2013 statesthat the performance evaluation of independent directors shall be done by the entire Boardof Directors excluding the director being evaluated. The Board has carried out an annualperformance evaluation of its own performance the directors individually as well as theevaluation of the working of its Audit Nomination & Remuneration and ComplianceCommittees. The manner in which the evaluation has been carried out has been explained inthe Corporate Governance Report.
22.6 FAMILIARIZATION PROGRAMME / TRAINING OF INDEPENDENT DIRECTORS
Every new independent director of the Board attends an orientation program. Tofamiliarize the new inductees with the strategy operations and functions of our Companythe executive directors/senior managerial personnel make presentations to the inducteesabout the Company's strategy operations product and service offerings marketsorganization structure finance human resources technology quality facilities and riskmanagement.
22.7 REMUNERATION POLICY
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy is stated in the Corporate Governance Report. Allremuneration paid to the Directors Key Managerial Personnel and senior managementpersonnel are as per the remuneration policy of the Company.
23. DIRECTORS' RESPONSIBILITY STATEMENT:
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement in terms ofSection 134 (3) (c) of the Companies Act 2013:
(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.
(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
24. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
A statement containing the particulars relating to conservation of energy research anddevelopment and technology absorption as required under Section 134 (3) (m) of theCompanies Act 2013 and Rule 8 (3) (A) (3) (B) and 3 (A) (C) of The Companies (Accounts)Rules 2014 is annexed to this report as "Annexure C"
25. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF COMPANIES ACT2013
Details of Loan Guarantees and Investments covered under the provisions of Section 186of the Companies Act 2013 are given in the notes to financial statements refer note 27B30B and 30C of notes to financial statement.
26. PARTICULARS OF EMPLOYEES:
The information required pursuant to Section 197 of the Companies Act 2013 read withRule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014in respect of the employees of the company will be provided upon request. In terms ofSection 136 of the Act the Report and Accounts are being sent to the Members and othersentitled thereto excluding the information on employees' particulars which is availablefor inspection by the Members at the Registered Office of the Company during businesshours on working days of the Company up to the date of the ensuing Annual General Meeting.If any Member is interested in obtaining a copy thereof such Member may write to theCompany Secretary in this regard.
Your Company has not accepted any deposits from the public during the year underreview.
During the year five Board Meetings and four Audit Committee Meetings were convened andheld. The details of which are given in the Corporate Governance Report. The interveninggap between the meetings was within the period prescribed under the Companies Act 2013.
Currently the Board of Directors of the Company pursuant to the mandatory provisionsof Companies Act 2013 has the following committees namely:
a) Audit Committee
b) Nomination & Remuneration Committee
c) Stakeholders Relationship Committee
d) Corporate Social Responsibility & Governance Committee
e) Risk Management Committee
A detailed note on the Board and its committees along with the composition of thecommittees and compliances is provided under the Corporate Governance Report section inthis Annual Report.
30. AUDIT COMMITTEE
Currently the Company has an independent and qualified Audit Committee as per theprovisions of Section 177 (8) of the Companies Act 2013 and Rule 7 of The Companies(Meetings of Board and its Powers) Rules 2014 and Clause 49 of the Listing Agreement thefollowing is the current composition of Audit Committee:
|Name of the Director ||Category ||Status |
|Shri. Babu Srinivasan ||Non-Executive Independent Director ||Chairman |
|Shri. K.N. Prithviraj ||Non-Executive Independent Director ||Member |
|Shri. Krishna Udupa ||Non-Executive Director ||Member |
The Board has accepted all the recommendations provided by the Audit Committee.
31. VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has a vigil mechanism/whistle blower Policy to deal with instance of fraudand mismanagement if any. The details of the vigil mechanism Policy is explained in theCorporate Governance Report and also posted on the website of the Company.
32. PARTICULARS OF CONTRACTS OR ARRAGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION188(1) OF THE COMPANIES ACT 2013:
All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large. All Related Party Transactions are placed before theAudit Committee as also the Board for approval. The Company is in the process ofdeveloping a Related Party Transactions Manual Standard Operating Procedures for purposeof identification and monitoring of such transactions. The policy on Related PartyTransactions as approved by the Board is uploaded on the Company's website at the Weblinkhttp://www. suranaind. com/related-party-transaction-policy. None of the Directors has anypecuniary relationships or transactions vis-a-vis the Company. Particulars of Contracts orarrangement with related parties referred to in Section 188(1) of the Companies Act 2013in the prescribed Form AOC-2 is appended as Annexure "D" to the Board'sReport.
33. ENHANCING SHAREHOLDER VALUE
Your Company believes that its Members are among its most important stakeholders.Accordingly your company's operations are committed to the pursuit of achieving highlevels of operating performance and cost competitiveness consolidating and building forgrowth enhancing the productive asset and resource base and nurturing overall corporatereputation. Your company is also committed to creating value for its other stakeholders byensuring its corporate actions positively impact the socio-economic and environmentaldimensions and contribute to sustainable growth and development.
34. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as "Annexure E".
35. GREEN INITIATIVES
During fiscal 2014-15 we started a sustainability initiative with the aim of goinggreen and minimizing our impact on the environment. This year we are publishing only thestatutory disclosures in the print version of the Annual Report. Additional information isavailable on our website www.suranaind.com.
Electronic copies of the Annual Report 2014-15 and Notice of the 24th Annual GeneralMeeting are sent to all the members whose email addresses are registered with the Company/Depository Participant(s). For members who have not registered their email addressesphysical copies of the Annual Report 2015 and the Notice of 24th Annual General Meetingare sent in the permitted mode. Members requiring physical copies can send a request tothe Company.
The Board of Directors of the Company wishes to express their deep sense ofappreciation and offer their sincere thanks to all the Shareholders of the Company fortheir unstinted support to the Company.
The Board also wishes to express their sincere thanks to all the esteemed Customers fortheir support to the Company's products.
The Board would also like to place on record their deep sense of gratitude to thevarious Central and State Government Departments Organizations and Agencies for thecontinued help and co-operation extended by them.
The Directors also gratefully acknowledge and thank all financial institutions andbanks for their timely support in restructuring the Company's debt under the CDR mechanismfailing which the Company would have succumbed to the recession faced by the SteelIndustry.
In the end the Board would like to place on record their deep sense of appreciation toall the executives officers employees staff members and workers at the factories.
For and on behalf of the Board of Directors
| ||-Sd- ||-Sd- |
| ||Babu Srinivasan ||Dineshchand Surana |
|Date: June 29 2015 ||Chairman ||Managing Director |
|Place: Chennai ||(DIN: 06608264) ||(DIN: 00007032) |
ANNEXURE "A" TO DIRECTORS REPORT
Form AOC-1 - Statement containing salient features of the financial statement ofsubsidiaries/associate companies/joint ventures
(Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 ofCompanies (Accounts) Rules 2014)
Part "A": Subsidiaries
(Information in respect of each subsidiary to be presented with amounts in Rs.)
| || ||Name of the Subsidiaries |
|S. No. ||Particulars ||Surana Power Ltd ||Surana Green Power Ltd (Consol) ||Surana Mines & Minerals Limited |
|1 ||Reporting period for the subsidiary concerned if different from the holding company's reporting period ||31st March 2015 ||31st March 2015 ||31st March 2015 |
|2 ||Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries ||INR ||INR ||INR |
|3 ||Share capital ||3451492000 ||561536000 ||705436052 |
|4 ||Reserves & surplus ||(698604246) ||(362406123) ||(58563669) |
|5 ||Total assets ||22379742197 ||584978222 ||813169198 |
|6 ||Total Liabilities ||22379742197 ||584978222 ||813169198 |
|7 ||Investments ||Nil ||43540000 ||91951470 |
|8 ||Turnover ||52637235 ||3155698 ||6165210 |
|9 ||Profit (Loss) before taxation ||(1356788772) ||(172130306) ||2194816 |
|10 ||Provision for taxation/Tax Expense ||92325505 ||(74997) ||2194816 |
|11 ||Profit (Loss) after taxation ||(1600764 277) ||(172205303) ||1659104 |
|12 ||Proposed Dividend ||Nil ||Nil ||Nil |
|13 ||% of shareholding ||100 ||100 ||100 |
* Conversion rate of USD is taken as 60.099 INR as on March 31 2015
Part "B": Associates and Joint Ventures
Statement pursuant to Section 129 (3) of the Companies Act 2013 related to AssociateCompanies and Joint Ventures
This space is intentionally left blank
ANNEXURE "B" TO DIRECTORS REPORT
SECRETARIAL AUDIT REPORT FOR THE FINANCAL YEAR ENDED 31.03.2015
[Pursuant to section 204(1) of the Companies Act 2013 and rule No.9 of the Companies(Appointment and Remuneration Personnel) Rules 2014]
Surana Industries Limited
2nd Floor Chokkani Building
No 29 Whites Road Royapettah
We have conducted the secretarial audit of the compliance of applicable statutoryprovisions and the adherence to good corporate practices by Surana Industries Limited(hereinafter called the company). Secretarial Audit was conducted in a manner thatprovided us a reasonable basis for evaluating the corporate conducts/statutory compliancesand expressing our opinion thereon.
Based on our verification of the Company's books papers minute books forms andreturns filed and other records maintained by the company and also the informationprovided by the Company its officers agents and authorized representatives during theconduct of secretarial audit We hereby report that in our opinion the company hasduring the audit period covering the financial year ended on 31st March 2015 compliedwith the statutory provisions listed hereunder and also that the Company has properBoard-processes and compliance-mechanism in place to the extent in the manner and subjectto the reporting made hereinafter:
We have examined the books papers minute books forms and returns filed and otherrecords maintained by Surana Industries Limited ("the Company") for thefinancial year ended on 31st March 2015 according to the provisions as applicable to theCompany during the period of audit:
(i) The Companies Act 2013 (the Act) and the rules made there under;
(ii) The Securities Contracts (Regulation) Act 1956 ('SCRA') and the rules made thereunder;
(iii) The Depositories Act 1996 and the Regulations and Bye-laws framed there under tothe extent of Regulation 55A;
(iv) Foreign Exchange Management Act 1999 and the rules and regulations made thereunder to the extent of Overseas Direct Investment imports and export of goods andservices;
(v) The following Regulations and Guidelines prescribed under the Securities andExchange Board of India Act 1992 ('SEBI Act'):-
(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares andTakeovers) Regulations 2011;
(b) The Securities and Exchange Board of India (Prohibition of Insider Trading)Regulations 1992;
(c) The Securities and Exchange Board of India (Registrars to an Issue and ShareTransfer Agents) Regulations 1993 regarding the Companies Act and dealing with client tothe extent of securities issued;
(d) The Securities and Exchange Board of India (Issue of Capital and DisclosureRequirements) Regulations 2009;
(vi) There are no laws/ Regulations (as amended from time to time) as informed andcertified by the management of the Company which are specifically applicable to theCompany based on their sector/industry.
We have also examined compliance with the applicable clauses of the following:
(i) Secretarial Standards issued by The Institute \ of Company Secretaries of India.(Not applicable for the audit period).
(ii) The Listing Agreements entered into by the Company with the Stock Exchanges wherethe equity shares of the Company are listed.
During the period under review the Company has generally complied with the provisionsof the Act Rules Regulations Guidelines Standards etc. mentioned above subject to thefollowing observations:
1. The Company is yet to appoint a woman director on its Board as per section 149(1) ofthe Companies Act 2013.
2. For the 3rd and 4th Quarter there was a vacancy in the Board in place of theIndependent director which was not filled in by the Company during the audit period asrequired under section 149(4) read with schedule IV of Companies Act 2013 and revisedclause 49 of the listing agreement entered with the Stock Exchanges and Company is yet toappoint one of its Independent Director on the Board of Directors of the non listed IndianMaterial subsidiary company as per Clause 49 of Listing Agreement.
3. The composition of the audit committee in the 3rd and 4th quarter had fallen belowthe minimum threshold limit of independent directors and total number of members. Furtherthere was a lack of quorum in the audit committee meeting held in the 4th quarter of theaudit period.
4. Directors retiring by rotation under section 152 of the Companies Act 2013 in the23rd Annual General Meeting of the Company held on 18th July 2014 as per Companies Act1956 and Independent directors was appointed and under section 149 of the Companies Act2013 on 30th September 2014 in the extra-ordinary general meeting of the company.
5. The service of notice of annual general meeting for the financial year 2013-14 wasdone partly through courier and by Book Post.
6. The Company is yet to ratify the limits for inter-corporate investments loansguarantees and securities as per section 186 of the Companies Act 2013 and the Rules madethere under which is within 1 year from the date of notification of the provisions of theCompanies Act 2013.
We further report that there were no actions/ events occurred in the pursuance of
(a) The Securities and Exchange Board of India (Share Based employee Benefits)Regulations 2014
(b) The Securities and Exchange Board of India (Delisting of Equity Shares)Regulations 2009
(c) The Securities and Exchange Board of India (Buyback of Securities) Regulations1998
(d) The Securities and Exchange Board of India (Issue and Listing of Debt Securities)Regulations 2008; requiring compliance thereof by the Company during the Financial Yearunder review.
We further report that on examination of the relevant documents and records and basedon the information provided by the Company its officers and authorized representativesduring the conduct of the audit and also on the review of quarterly compliance reports byrespective department heads / company secretary / CEO taken on record by the Board ofDirectors of the Company in our opinion adequate systems and processes and controlmechanism exist in the Company to monitor and ensure compliance with applicable othergeneral laws including Industrial Laws Environmental Laws Human Resources and labourlaws however a few updations are required to the labour law compliances.
We further report that the compliance by the Company of applicable financial lawslike direct and indirect tax laws has not been reviewed in this Audit since the same havebeen subject to review by statutory financial auditor and other designated professionals.
We further report that:
The Board of Directors of the Company is constituted with a balance of ExecutiveDirectors Non-Executive Directors and Independent Directors subject to our observation inpoint number 1-4 above. The changes in the composition of the Board of Directors that tookplace during the period under review were carried out in compliance with the provisions ofthe Act.
Adequate notice is given to all directors to schedule the Board Meetings CommitteeMeetings agenda and detailed notes on agenda were delivered and a system exists forseeking and obtaining further information and clarifications on the agenda items beforethe meeting and for meaningful participation at the meeting.
All decisions at Board Meetings and Committee Meetings are carried out unanimously asrecorded in the minutes of the meetings of the Board of Directors or Committee of theBoard as the case may be.
We further report that during the audit period no events other than the followinghave occurred during the year which have a major bearing on the Company's affairs
" The Company has sought the approval of the members for issue of shares to itspromoters on a preferential basis under the CDR scheme however the issue and allotment ofshares is not done during the audit period.
" The Board has approved the disinvestment/ divestment of its subsidiaries(including material subsidiary) subject to the approval of the shareholders through PostalBallot during the financial year 2015-2016.
| ||For LAKSHMMI SUBRAMANIAN & ASSOCIATES |
| ||Sd/- |
| ||Lakshmmi Subramanian |
| ||Senior Partner |
| ||FCS No. 3534 |
| ||C.P.NO. 1087 |
|Date: June 29 2015 || |
|Place: Chennai || |
Note: This report is to be read with our letter of even date which is annexed asAnnexure A and forms an integral part of this report.
Annexure to SECRETARIAL AUDIT REPORT
Surana Industries Limited
2nd Floor Chokkani Building
No 29 Whites Road Royapettah
1. Maintenance of secretarial records is the responsibility of the management of theCompany. Our responsibility is to express an opinion on these secretarial records based onour audit.
2. We have followed the audit practices and processes as were appropriate to obtainreasonable assurance about the correctness of the contents of the secretarial records. Theverification was done on the random test basis to ensure that correct facts are reflectedin secretarial records. We believe that the processes and practices we followed provide areasonable basis for our opinion.
3. We have not verified the correctness and appropriateness of financial records andBooks of Accounts of the Company.
4. Where ever required we have obtained the Management representation about thecompliance of laws rules and regulations and happening of events etc.
5. The compliance of the provisions of Corporate and other applicable laws rulesregulations standards is the responsibility of management. Our examination was limited tothe verification of procedures on random test basis.
6. The Secretarial Audit report is neither an assurance as to the future viability ofthe company nor of the efficacy or effectiveness with which the management has conductedthe affairs of the Company.
| ||For LAKSHMMI SUBRAMANIAN & ASSOCIATES |
| ||Sd/- |
| ||Lakshmmi Subramanian |
| ||Senior Partner |
| ||FCS No. 3534 |
|Date: June 29 2015 ||C.P.NO. 1087 |
|Place: Chennai || |
ANNEXURE "C" TO DIRECTORS REPORT
Information pursuant to Sec 217(1)(e) of the Companies Act 1956 read with thecompanies (Disclosure of Particulars in the Report of Director) Rules 1988 for the yearended at 31st March 2015.
A. CONSERVATION OF ENERGY:
|1. ELECTRICITY ||2014-15 ||2013-14 |
|Purchased ||(Amount in Rs.) |
|a) Total Units Consumed ||4000620 ||8438228 |
|b) Total Amount (Rs) ||37123538 ||63236173 |
|c) Rate Per Unit (Rs) ||9.28 ||7.49 |
|2. FURNACE OIL || || |
|a) Total Consumption (lts) ||322580 ||105172 |
|b) Total Amount (Rs) ||8390541 ||4021674 |
|c) Rate Per Litre (Rs) ||26.01 ||38.24 |
|3. COAL || || |
|a) Total Consumption (Tonnes) ||3686.284 ||27027.18 |
|b) Total Amount (Rs) ||29264310 ||176900848 |
|c) Rate per Tonne (Rs) ||7938 ||6545 |
1. Total amount of electricity charges paid includes demand charges belated paymentcharges peak hour charges and meter rent.
|B. RESEARCH AND DEVELOPMENT ||NIL |
|C. TECHNOLOGY ABSORPTION ||NIL |
D. FOREIGN EXCHANGE EARNINGS AND EXPENDITURE
|PARTICULARS ||2014-15 ||2013-14 |
| ||(Amount in Rs.) |
|Earnings || || |
|Export of Goods ||NIL ||NIL |
|Expenditure || || |
|Travel Expenditure ||NIL ||NIL |
ANNEXURE "D" TO DIRECTORS REPORT
Particulars of Contracts/arrangements made with related parties
[Pursuant to Clause (h) of Sub-section (3) of Section 134 of the Companies Act 2013and Rule 8(2) of the Companies (Accounts) Rules 2014 - AOC-2] This Form pertains to thedisclosure of particulars of contracts/arrangements entered into by the Company withrelated parties referred to in Sub -section (1) of Section 188 of the Companies Act 2013including certain arm's length transactions under third proviso thereto.
Details of contracts or arrangement or transactions not at arm's length basis
There were no contracts or arrangement or transactions entered into during the yearended March 31 2015 which were not at arm's length basis.
Details of material contracts or arrangement or transactions at arm's length basis
The details of material contracts or arrangement or transactions at arm's length basisfor the year ended March 31 2015 are as follows:
|Name of the Related Party ||Nature of Relationship ||Duration of the Contract ||Salient terms ||Amount (Rs in Crore) |
|Nature of Contract || || || || |
|Investment in equity instrument || || || || |
|Surana Power Limited (1) ||Subsidiary ||Not Applicable ||Not Applicable ||418.50 |
|Surana Green Power Limited ||Subsidiary ||Not Applicable ||Not Applicable ||56.15 |
|Surana Mines & Minerals Limited ||Subsidiary ||Not Applicable ||Not Applicable ||59.59 |
| || || || ||534.27 |
|Remuneration to Relative of KMP || || || || |
|Surana Power Limited ||Relative of Shri. Dineshchand Surana || || ||0.12 |
|Shri. Rahul Dinesh Surana (2) || || || || |
(1) During the year a unsecured loan amounting to Rs. 27.50 Crore is converted intoequity.
(2) Shri. Rahul Dinesh Surana relative of Shri. Dineshchand Surana is holding anoffice or place of profit as Vice President (Projects) in the subsidiary company M/s.Surana Power Limited.
|Place: Chennai ||For and on behalf of the Board || |
|Date: June 29 2015 ||-Sd- ||-Sd- |
| ||Babu Srinivasan ||Dineschand Surana |
| ||Chairman ||Managing Director |
| ||(DIN: 06608264) ||(DIN: 00007032) |
ANNEXURE - "E" TO DIRECTORS REPORT
EXTRACT OF ANNUAL RETURN
as on the financial year ended on 31st March 2015
[Pursuant to section 92(3) of the Companies Act 2013 and rule 12(1) of the CompaniesManagement and Administration) Rules 2014]
|I. REGISTRATION DETAILS || |
|CIN ||L27104TN1991PLC020533 |
|Registration Date ||25th March 1991 |
|Name of the Company ||Surana Industries Limited |
|Category/Sub Category of the Company ||Company having Share Capital |
|Address of the Registered Office and Contact Details ||No: 29 II Floor Whites Road Royapettah Chennai - 600014. |
| ||Email: email@example.com |
| ||Phone: 044-28526336 |
|Whether Listed Company ||Yes |
|Name address and contact details of Registrar And Transfer Agent if any ||Cameo Corporate Services Limited No.1 Club House Road 5th Floor |
| ||"Subramanian Building" Mount Road |
| ||Chennai - 60002 |
| ||Tel No: 044-28460390/395 |
|II. PRINCIPAL BUSINESS ACTIVITIES || || |
|All the business Activities contributing 10% or more of the total turnover of the Company shall be stated: || || |
|Name and Description of main Products / Services ||NIC Code of the Product/Service ||% to Total Turnover |
|Iron & Steel ||27190 || |
II. PRINCIPAL BUSINESS ACTIVITIES
|S. No ||Name and Address of the Company ||CIN/GLN ||Holding/Subsid- iary/Associate ||% of Share held ||Applicable Section |
|1 ||Surana Power Limited No: 29 Whites Road Royapettah Chennai - 600014 ||U74999TN2008PLC066902 ||Subsidiary ||97.54 ||2(87)(a) |
|2 ||Surana Green Power Limited No: 29 Whites Road Royapettah Chennai - 600014 ||U40109TN2010PLC074770 ||Subsidiary ||100.00 ||2(87)(a) |
|3 ||Surana Mines & Minerals Limited 20 Maxwell Road #08-01 N Maxwell House Singapore - 069113. ||200818654G ||Subsidiary ||100.00 ||2(87)(a) |
|4 ||Surana Holdings Pte Limited 315 Outram Road #10-02 Tan Boon Liat Building Singapore - 169074. ||201206127E ||Subsidiary ||51.00 ||2(87)(a) |
|5 ||Surana Green Energy Limited No: 29 Whites Road Royapettah Chennai - 600014 ||U40300TN2012PLC085008 ||Step down Subsidiary ||74.00 ||2(87)(a) |
|6 ||PT Borneo Mines & Minerals Limited DI Jakarta ||- ||Step down Subsidiary ||51.00 ||2(87)(a) |
|7 ||Power India (Singapore) Pte Limited 1 North Bridge Road #13- 03 High Street Centre Singapore - 179094. ||- ||Step down Subsidiary ||80.00 ||2(87)(a) |
I. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)
i) Category-wise Share Holding:
|Category of Shareholders ||No. of Shares held at the beginning of the year ||No. of Shares held at the end of the year ||% of Change during the Year |
| ||Demat ||Physi- cal ||Total ||% of Total Shares ||Demat ||Physi- cal ||Total ||% of Total Shares || |
|(A) Promoters || || || || || || || || || |
|(1) Indian || || || || || || || || || |
|(a) Individual/HUF ||20307502 ||Nil ||20307502 ||45.62 ||20307502 ||Nil ||20307502 ||45.62 ||Nil |
|(b) Central Govt ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(c) State Govt (s) ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(d) Bodies Corp. ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(e) Banks / FI ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(f) Any Other ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|Sub-Total (A) (1) ||20307502 ||Nil ||20307502 ||45.62 ||20307502 ||Nil ||20307502 ||45.62 ||Nil |
|(2) Foreign || || || || || || || || || |
|(a) NRIs - Individuals ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(b) Other - Individuals ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(c) Bodies Corp. ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(d) Banks / FI ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(e) Any Other
. ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|Sub-Total (A) (2) ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|Total Shareholding of Promoter (A) = (A) (1) + (A) (2) ||20307502 ||Nil ||20307502 ||45.62 ||20307502 ||Nil ||20307502 ||45.62 ||Nil |
|(A) Public Shareholding || || || || || || || || || |
|(1) Institutions || || || || || || || || || |
|(a) Mutual Funds ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(b) Banks/FI ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(c) Central Govt ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(d) State Govt (s) ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(e) Venture Capital funds ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(f) Insurance Companies ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(g) FIIs ||688665 ||Nil ||688665 ||1.55 ||1188665 ||Nil ||1188665 ||2.67 ||+ 1.12 |
|(h) Foreign Venture Capital Funds ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|(i) Others (Specify) ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|Sub-Total (B)(1) ||688665 ||Nil ||688665 ||1.55 ||1188665 ||Nil ||1188665 ||2.67 ||+ 1.12 |
|(2) Non- Institutions || || || || || || || || || |
|(a) Bodies Corp ||9650802 ||800 ||9651602 ||21.68 ||9161557 ||800 ||9162357 ||20.58 ||- 1.10 |
|i. Indian || || || || || || || || || |
|ii. Overseas || || || || || || || || || |
|(b) individuals || || || || || || || || || |
|i. Individual shareholders holding nominal share capital up to Rs. 1 lakh ||388905 ||126055 ||514960 ||1.16 ||384143 ||125956 ||510099 ||1.15 ||- 0.01 |
|ii. Individual shareholders holding nominal share capital in excess of Rs 1 lakh ||316102 ||12500 ||328602 ||0.74 ||317314 ||12500 ||329814 ||0.74 ||Nil |
|(C) Others (Specify) || || || || || || || || || |
|Sub-Total (B)(2) ||10355809 ||139355 ||10495164 ||23.58 ||9863014 ||139256 ||10002270 ||22.47 ||- 1.11 |
|Total Shareholding of Public= (B) (1) + (B) (2) ||11044474 ||139355 ||11183829 ||25.13 ||11051679 ||139256 ||11190935 ||25.14 ||0.01 |
|C. Shares held by custodian for GDRs & ADRs ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil ||Nil |
|Grand Total (A+B+C) ||11044474 ||139355 ||11183829 ||25.13 ||11051679 ||139256 ||11190935 ||25.14 ||0.01 |
(ii) Shareholding of Promoters:
|S. No. ||Shareholders' Name ||Shareholding at the beginning of the year ||Shareholding at the end of the year || |
| || ||No. of Shares ||% of total Shares of the company ||% of Shares Pledged / encumbered to total shares ||No. of Shares ||% of total Shares of the company ||% of Shares Pledged / encumbered to total shares ||% of Change during the Year |
|1 ||G.R.Surana ||4407775 ||9.90 ||50.87 ||5076875 ||11.40 ||100 ||+ 1.50 |
|2 ||Shantilal Surana ||4519725 ||10.15 ||100 ||5076875 ||11.40 ||100 ||+ 1.25 |
|3 ||Dineshchand Surana ||3989736 ||8.96 ||30.23 ||5076875 ||11.40 ||100 ||+ 2.44 |
|4 ||Vijayraj Surana ||4182521 ||9.39 ||53.83 ||5076875 ||11.40 ||100 ||+ 2.01 |
|5 ||Chandan Bala Surana ||206250 ||0.46 ||100 ||Nil ||Nil ||Nil ||- 0.46 |
|6 ||Rajesh Surana ||180745 ||0.41 ||100 ||Nil ||Nil ||Nil ||- 0.41 |
|7 ||Vasantha Surana ||807350 ||1.81 ||100 ||Nil ||Nil ||Nil ||-1.81 |
|8 ||Sarala Devi Surana ||206250 ||0.46 ||100 ||Nil ||Nil ||Nil ||-0.46 |
|9 ||Alka Surana ||388400 ||0.87 ||100 ||Nil ||Nil ||Nil ||-0.87 |
|10 ||Mahaveer Surana ||605000 ||1.36 ||100 ||Nil ||Nil ||Nil ||-1.36 |
|11 ||Kavitha Surana ||462850 ||1.04 ||100 ||Nil ||Nil ||Nil ||- 1.04 |
|12 ||Rajiv Surana ||350900 ||0.79 ||100 ||Nil ||Nil ||Nil ||-0.79 |
| ||Total ||20307502 ||45.62 ||30.16 ||20307502 ||45.62 ||45.62 || |
(iii) Change in Promoters' Shareholding (please specify if there is no change):
|No. ||Particulars ||Shareholding at the beginning of the year ||Cumulative Shareholding during the year |
| || ||No. of Shares ||% of total Shares of the company ||No. of Shares ||% of total Shares of the company |
|1 ||At the beginning of the year ||20307502 ||45.62 ||20307502 ||45.62 |
|2 ||Increase / Decrease in Promoters Share holding during the year specifying the reasons for increase / decrease ||Nil ||Nil ||Nil ||Nil |
|3 ||At the End of the year ||20307502 ||45.62 ||20307502 ||45.62 |
(iv) Shareholding Pattern of top ten Shareholders (other than Directors Promoters andHolders of GDRs and ADRs):
| || ||Shareholding at the beginning of the year ||Cumulative Shareholding during the year |
|S. No. ||For Each of the Top 10 Shareholders ||No. of Shares ||% of total Shares of the company ||No. of Shares ||% of total Shares of the company |
|1 ||At the beginning of the year Date wise Increase / ||21528240 ||48.36 ||22189630 ||49.84 |
|2 ||Decrease in Share holding during the year specifying the reasons for increase / de- crease (e.g. allotment / trans- fer / bonus/ sweat equity etc): ||661390 ||1.48 ||Nil ||Nil |
|3 ||At the End of the year (or on the date of separation if Separated during the year) ||22189630 ||49.84 ||22189630 ||49.84 |
(v) Shareholding of Directors and Key Managerial Personnel:
Director Name: Shri. Dineshchand Surana
| || ||Shareholding at the beginning of the year ||Cumulative Shareholding during the year |
|S. No. ||For Each of the Directors and KMP ||No. of Shares ||% of total Shares of the company ||No. of Shares ||% of total Shares of the company |
|1 ||At the beginning of the year ||3989736 ||8.96 ||5076876 ||11.40 |
|2 ||Increase /Decrease in Pro- moters Share holding during the year specifying the rea- sons for increase / decrease ||1087140 ||2.44 ||Nil ||Nil |
|3 ||Inter-Se Transfer At the End of the year ||5076876 ||11.40 ||5076876 ||11.40 |
Director Name: Shri. G.R. Surana
| || ||Shareholding at the beginning of the year ||Cumulative Shareholding during the year |
|S. No. ||For Each of the Directors and KMP ||No. of Shares ||% of total Shares of the company ||No. of Shares ||% of total Shares of the company |
|1 ||At the beginning of the year ||4407775 ||9.90 ||5076876 ||11.40 |
|2 ||Increase / Decrease in Pro- moters Share holding during the year specifying the rea- sons for increase/decrease: Inter-Se Transfer ||669101 ||1.50 ||Nil ||Nil |
|3 ||At the End of the year ||5076876 ||11.40 ||5076876 ||11.40 |
Indebtedness of the Company including interest outstanding/accrued but not due forpayment
|S. No. ||Particulars ||Secured Loans excluding Deposits ||Unsecured Loans ||Deposits ||Total Indebtedness |
| || ||(A) ||(B) ||('C) ||(D)=(A+B+C) |
|(A) ||Indebtedness at the beginning of the Financial Year || || || || |
| ||(i) Principal Amount ||11133761663 ||1300645368 ||- ||12434407031 |
| ||(ii) Interest due but not paid ||- ||- ||- ||- |
| ||(iii) Interest accrued but not due ||- ||- ||- ||- |
| ||Total (i+ii+iii) ||11133761663 ||1300645368 ||- ||12434407031 |
|(B) ||Change in Indebtedness during the Financial Year || || || || |
| ||Addition ||1140783833 ||970199461 ||- ||2110983294 |
| ||Reduction ||119032800 ||1300645368 ||- ||1419678168 |
| ||Net Change ||1021751033 ||(330445907) ||- ||691305126 |
|(C) ||Indebtedness at the end of the Financial Year || || || || |
| ||(i) Principal Amount ||12155512696 ||970199461 ||- ||13125712157 |
| ||(ii) Interest due but not paid ||- ||- ||- ||- |
| ||(iii) Interest accrued but not due ||- ||- ||- ||- |
| ||Total (i+ii+iii) ||12155512696 ||970199461 ||- ||13125712157 |
III. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:
A. Remuneration to Managing Director Whole-time Directors and/or Manager:
(Rs in Lakhs)
| ||Name of MD/WTD/Manager || |
|S. No. Particulars of Remuneration ||Dineshchand Surana MD ||G.R.Surana WTD resigned effective April 29 2015 ||V. Aranganathan WTD resigned effective May 31 2014 ||Krishna Udupa WTD resigned effective May 18 2014 ||Total Amount |
|1 Gross salary || || || || || |
|(a) Salary as per provisions con- tained in section 17(1) of the In- come-tax Act 1961 ||Nil ||Nil ||4.00 ||7.00 ||11.00 |
|(b) Value of perquisites u/s 17(2) Income- tax Act 1961 ||Nil ||Nil ||Nil ||Nil ||Nil |
|(c) Profits in lieu of salary under sec- tion 17(3) Income- tax Act 1961 ||Nil ||Nil ||Nil ||Nil ||Nil |
|2 Stock Option ||Nil ||Nil ||Nil ||Nil ||Nil |
|3 Sweat Equity ||Nil ||Nil ||Nil ||Nil ||Nil |
|4 Commission - as % of profit - others specify
||Nil ||Nil ||Nil ||Nil ||Nil |
|5 Others please specify ||Nil ||Nil ||Nil ||Nil ||Nil |
|Total (A) ||Nil ||Nil ||4.00 ||7.00 ||11.00 |
|Ceiling as per the Act || || || || ||96.00 |
The promoter directors Shri Dineshchand Surana & Shri G.R.Surana have waived theirsalary for Directors for the Financial Year 2014-15
B. Remuneration to other Directors:
| ||Name of Directors || |
|S. No. Particulars of Remuneration ||B Samal ||SK Gupta ||BS Patil ||KN Prithviraj ||S. Babu ||Total Amount |
|a. Independent Directors || || || || || || |
| Fee for attending board / committee meetings ||0.22 ||0.45 ||0.45 ||1.13 ||- ||2.25 |
| Commission ||- ||- ||- ||- ||- ||- |
| Others please specify || || || || || || |
|Total (1) ||0.22 ||0.45 ||0.45 ||1.13 ||- ||2.25 |
| ||Name of Directors || |
|S. No. Particulars of Remuneration ||G.A. Tadas ||Usha ||V Subramanian ||Biju George ||Krishna Udupa ||Total Amount |
|b. Other Non-Executive Directors || || || || || || |
|Sitting Fee for attending board / committee meetings ||0.20 ||0.22 ||0.60 ||0.20 ||0.45 ||1.87 |
|Commission Others please specify ||- ||- ||- ||- ||- ||- |
|Total (2) ||0.20 ||0.22 ||0.80 ||0.20 ||0.45 ||1.87 |
|Total (B) = (1)+(2) ||0.42 ||0.67 ||1.25 ||1.35 ||0.45 ||4.12 |
|Total Managerial Remuneration ||0.42 ||0.67 ||1.25 ||1.35 ||0.45 ||4.12 |
|Overall Ceiling as per the Act || || || || || ||1% of Net Profit |
C. Remuneration to other Directors Key Managerial Personnel other than MD/MANAGER/WTD:In Lakhs Per Annum
|S.No Particulars of Remuneration ||Key Managerial Personnel |
| ||CEO ||CFO ||CS ||Total |
|(a) Salary as per provisions contained in section 17(1) of the Income-tax Act 1961 ||Nil ||45.00 ||5.50 ||50.50 |
|(b) Value of perquisites u/s 17(2) Income-tax Act 1961 ||Nil ||Nil ||Nil ||Nil |
|(c) Profits in lieu of salary under section 17(3) Income-tax Act 1961 ||Nil ||Nil ||Nil ||Nil |
|2 Stock Option ||Nil ||Nil ||Nil ||Nil |
|3 Sweat Equity ||Nil ||Nil ||Nil ||Nil |
|4 Commission ||Nil ||Nil ||Nil ||Nil |
|- as % of profit || || || || |
|- others specify
|| || || || |
|5 Others please specify ||Nil ||Nil ||Nil ||Nil |
|Total (A) ||Nil ||45.00 ||5.50 ||50.50 |
Note: 1. Remuneration paid to Chief Financial Officer with effect from July 2014.
2. Remuneration paid to Company Secretary with effect from October 2014.
IV. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:
|Type ||Section of the Companies Act ||Brief Description ||Details of Penalty / Punishment/ Compound- ing fees imposed ||Authority [RD / NCLT/ COURT] ||Appeal made if any (give Details) |
|Penalty ||Nil ||Nil ||Nil ||Nil ||Nil |
|Punishment ||Nil ||Nil ||Nil ||Nil ||Nil |
|Compounding ||Nil ||Nil ||Nil ||Nil ||Nil |
|C.OTHER OFFICERS IN DEFAULT || || || || || |
|Penalty ||Nil ||Nil ||Nil ||Nil ||Nil |
|Punishment ||Nil ||Nil ||Nil ||Nil ||Nil |
|Compounding ||Nil ||Nil ||Nil ||Nil ||Nil |