The Directors take pleasure in presenting the Thirty-fourth Annual Report on thebusiness and operations of the Company and its financial results for the year ended March31 2017.
| ||Standalone ||Consolidated |
|Particulars ||FY 2016-17 ||FY 2015-16 ||FY 2016-17 ||FY 2015-16 |
| ||(Rs. Lakh) ||(Rs. Lakh) ||(Rs. Lakh) ||(Rs. Lakh) |
|(i) Sales (Net of Excise Duty) and other income ||65218 ||67071 ||65223 ||67076 |
|(ii) Profit before interest depreciation and taxes ||9868 ||6162 ||9871 ||6167 |
|Less: Interest ||244 ||538 ||244 ||538 |
|Profit /(loss) before depreciation and taxes ||9624 ||5624 ||9627 ||5629 |
|(iii) Less: Depreciation and amortisation expenses ||1277 ||1289 ||1277 ||1289 |
|(iv) Profit Before Taxes ||8347 ||4335 ||8350 ||4340 |
|(v) Tax Expense ||2473 ||1146 ||2473 ||1146 |
|(vi) Profit after tax ||5874 ||3189 ||5877 ||3194 |
"The Company has adopted Indian Accounting Standard (referred to as Ind AS')with effect from April 01 2016 and accordingly these financial results along with thecomparatives have been prepared in accordance with the recognition and measurementprinciples stated therein prescribed under Section 133 of the Companies Act 2013 (theAct) read with the relevant rules issued thereunder and the other accounting principlesgenerally accepted in India."
The Board has recommended a dividend of Rs 11 per share (i.e. 110%) on 15400000equity shares of Rs.10 each for the financial year ended March 31 2017 subject toapproval of the shareholders at the ensuing Annual General Meeting. The total outgo onaccount of dividend (ex-taxes) will be Rs. 1694 lakhs.
TRANSFER TO RESERVE
The Company proposes to retain the entire amount of Rs 5874 lakhs in the statement ofprofit & loss account.
During the year (FY'17) the kilns produced 390000 MT (100% of rated capacity) which ishigher by 8.2% as compared to 360446 MT of DRI production during the previous year(FY'16). During the year daily production level was 1247 TPD and average operating dayswere 313 days. Debottlenecking of Kiln 1 procurement of excellent quality of rawmaterials and process improvements have resulted in the enhanced production during theyear.
The Company continues to enjoy uninterrupted supply of iron ore requirement from TataSteel. During the year the Company sourced 95% of iron ore from Tata Steel.
Based on the experience gained in the past from using imported coal of superior qualityhaving a positive impact on the quality of sponge iron the Company sourced 96% of coal ofdifferent grades from South Africa.
The sale of sponge iron has been 392782 MT which is higher by 7.4% as against the saleof 365815 MT during previous year. Increase in the dispatch was consequent to the higherproduction. As a part of customer engagement initiative the Company dispatched spongeiron through containerized rakes during the year which has also helped in enhancingefficiency and controlling cost.
In FY'17 the total generation of power was 185.47 million Kwh visa-vis to 162.83million Kwh during the last year an increase of 13%. The power export was 132.49 millionKwh as compared to 113.59 million Kwh during FY'16 an increase by 16.6%.
Even though the market conditions for steel and sponge iron were volatile during theyear the Company could maintain profitability due to record sponge iron dispatches of392782 MT positive cash flow and focus on segments for higher net realization. Thedemand for steel and sponge iron recovered during the later part of the year. During thesecond half of the financial year real estate segment recovered partly and there was anincreased spending in infrastructure areas which led to sustained demand and increase inprice on month to month basis.
Further the intention of Government to increase funding in infrastructure affordablehousing smart cities etc will generate positive demand for steel and sponge iron. TheGovernment has also supported the steel industry in curtailing cheap imports andsupporting usage of locally made steel.
The above factors will have a positive impact for both sponge iron and steel industryduring FY'18.
UPDATE ON RADHIKAPUR COAL BLOCK
The Radhikapur (East) Coal Block stands de-allocated and reallotment has not happenedyet. The Ministry of Coal ("MoC") vide its letter dated December 28 2015 hasreiterated its decision for encashment of the Bank Guarantee of Rs. 32.50 cr. The Bank
Guarantee has since expired. The Company has filed a writ petition before Hon`ble HighCourt of Delhi challenging the decision of MoC. Pending finalisation of the matter theBank Guarantee amount continues to be disclosed as Contingent Liability as at the end ofthe year.
During pendency of the aforesaid matters in Hon'ble High Court of Delhi the Hon'bleSupreme Court of India vide its order dated September 24 2014 has cancelled allocation of214 coal blocks including the Radhikapur (East) Coal Block which was allotted to theCompany on February 7 2006. The expenditure incurred on the Radhikapur (East) Coal Blockas on March 31 2017 aggregates to Rs. 18040.96 lakhs (March 31 2016: Rs. 18040.96lakhs).
Pursuant to the judgment of Hon'ble Supreme Court of India the Government of India haspromulgated Coal Mines (Special Provision) Rules 2014 ("Rules") for allocationof the coal mines through auction and matters related thereto. In terms of the said Rulesthe successful bidder will be called upon to pay to the prior allocattee the expensesincurred by the prior allocatee towards land and mine infrastructure. Pursuant to MoC'sdirective seeking the details of expenses vide letter dated December 26 2014 the Companyhas furnished the required statement of expenses on January 5 2015. Based on the Rulesand necessary legal opinion obtained by the Company no provision is considered necessary.
Your Company has a wholly owned subsidiary i.e. "TSIL Energy Limited". Thereis no associate or joint venture company as defined under the Companies Act 2013.
Pursuant to provisions of Section 129(3) of the Companies Act 2013 a statementcontaining salient features of the financial statements of TSIL Energy Limited in FormAOC-1 is annexed as Annexure A.
Pursuant to provisions of Section 136 of the Companies Act 2013 the financialstatements of the Company consolidated financial statements along with relevant documentsand separate audited accounts of TSIL Energy Limited are available on the website of theCompany.
INTERNAL PROCESS & FINANCIAL CONTROL
Improvement in the business processes and systems across all functions is a continuousprocess in line with the Tata Business Excellence Model that the Company has adopted. Thecompany continues to maintain Integrated Management System (IMS) comprising of QualityManagement System (ISO: 9001). Environment Management System (ISO: 14001) and OccupationalHealth Safety & Accountability Management System (ISO: 18001).
The Company has an internal control system commensurate with the size scale andcomplexity of its operations. The scope of authority of the Internal Audit function isdefined in the Internal Audit Charter. The Company's internal controls are tested foradequacy and effectiveness by the Internal Auditor and Statutory Auditors on a regularbasis.
The Annual Listing Fee for the financial year 2016-17 had been paid to those StockExchanges where the Company's shares are listed.
CORPORATE SUSTAIN ABILITY
As a member of Tata Group and as a responsible corporate citizen the Company continuesto undertake steps towards welfare of society around it community initiatives peripherydevelopment environment protection and improvement in harmony with the normal businessand contributing to exchequer through various taxes/duties etc. At the same time theCompany continued its focus on employees' health and safety skill development andsuperior living conditions. The Company has taken a serious note of threat of globalwarming and climate change. Through a specific study the Company has measured carbon footprint of its operations and is taking steps to reduce the Green House Gas emissions.Corporate sustainability is aligned with Triple Bottom Line approach by complying with -
??the UN Global Compact by addressing its ten principles
??Guidelines of Tata Council for Community Initiatives (TCC)
The concept of inclusive growth through Affirmative Action (AA) has been adopted by theCompany in the past. Further efforts have been made by the Company during the year tostrengthen the actions.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
During the year the Company has spent Rs. 219.21 lakhs (previous year Rs. 277.49lakhs) on CSR Activities. An Annual Report on CSR Activities is annexed herewith as AnnexureB in the prescribed format.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
The Company has a vigil mechanism by way of internal reviews and a third partyhelpline escalating system of ethical concerns etc. The Company also has a "WhistleBlower Policy" which is available on the website of the Company namelywww.tatasponge.com.
PREVENTION OF SEXUAL HARASSMENT AT WORK PLACES
The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on prevention prohibition and redressal of sexual harassment at workplace in linewith the provisions of The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the Rules framed thereunder.
Further the Company has Internal Complaint Committees for various locations of theCompany in compliance with the above mentioned Act and Rules. During the financial year2016-17 one complaint was received and the same was resolved. No case remained pending atthe end of the year.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
As required under Section 134(3)(m) of the Companies Act 2013 read with Rule 8 of theCompanies (Accounts) Rules 2014 particulars regarding conservation of energy technologyabsorption foreign exchange earnings and outgo are annexed to this report as AnnexureC.
SAFETY HEALTH & ENVIRONMENT
The Company is committed to providing a safe and healthy working environment andachieving an injury and illness free work place. In recognition of Company`s bestpractices in Safety Health and Environment the Company received the CII Excellence awardin Safety Health and Environment during the year. During the year under review there wasno lost time injury incident reported.
Over the years the Company has been setting benchmarks in its industry vertical inreducing its carbon footprint through the 3Rs (Reduce Reuse and Recycle) producing powerfrom waste heat in its twin captive power plants keeping emissions well under prescribednorms and becoming a zero - affluent discharge Company.
PARTICULARS OF EMPLOYEES
The particulars of employees are given in Annexure D to this Report as requiredunder Section 197(12) of the Companies Act 2013 read with Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014.
In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association Mrs. Meena Lall (Non-Executive Director) retires byrotation at the forthcoming Annual General Meeting and being eligible offers herself forre-appointment.
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 Regulation16(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
During the year under review Mr. Digambar Pandurang Deshpande superannuated from theservices of the Company with effect from October 31 2016. The Board of Directors place onrecord their appreciation towards Mr. Deshpande's contribution during his tenure asDirector of the Company.
The Board in its meeting held on October 21 2016 has appointed Mr. Sanjay KumarPattnaik as Managing Director with effect from November 01 2016. Necessary resolutionstogether with the explanatory statement have been included in the Notice of Thirty-FourthAnnual General Meeting as the above appointment/re-appointment are subject to the approvalof the shareholders.
DIRECTORS' RESPONSIBILITY STATEMENT
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the Internal Statutory Costand Secretarial Auditors and external consultant(s) including audit of internal financialcontrols over financial reporting by the statutory auditors reviews performed by themanagement and the relevant Board Committees including the Audit Committee the Board isof the opinion that the Company's internal financial controls were adequate and effectiveduring the financial year 2016-17.
Accordingly pursuant to Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm that:
(i) in the preparation of annual financial statements the applicable accountingstandards have been followed along with proper explanation relating to materialdepartures if any;
(ii) the directors have selected such accounting policies and applied them consistentlyand made judgements 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 2016-17and of the profit of the company for that period;
(iii) the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
(iv) the directors have prepared the annual accounts on a going concern basis;
(v) the directors had laid down proper internal financial controls and such internalfinancial controls are adequate and were operating effectively; and
(vi) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
The Board had carried out an annual performance evaluation of its own performance andthat of its Committees and individual directors. The manner in which the evaluation wascarried out has been explained in the Corporate Governance Report.
INDEPENDENT DIRECTORS' MEETING
During the year under review the Independent Directors met on March 22 2017 interalia to:
a) Review the performance of Non Independent Directors and the Board of Directors as awhole;
b) Review the performance of the Chairman of the Company taking into account the viewsof the Executive and Non-Executive Directors;
c) Assess the quality content and timeliness of flow of information between theCompany management and the Board that is necessary for the Board to effectively andreasonably perform its duties.
All the Independent Directors were present at this meeting.
The observations made by the Independent Directors have been adopted and put intoforce.
APPOINTMENT AND REMUNERATION POLICY FOR DIRECTORS KEY MANAGERIAL PERSONNEL AND OTHEREMPLOYEES
The Board has on the recommendation of the Nomination and Remuneration Committeeframed a policy for selection appointment and remuneration of Directors SeniorManagement Personnel and Key Managerial Personnel ("KMP"). This Policy isdescribed in the Corporate Governance Report.
KEY MANAGERIAL PERSONNEL
The following are the Key Managerial Personnel of the Company:
1. Mr. Sanjay Kumar Pattnaik - Managing Director
2. Mr. S. K. Mishra - Chief Financial Officer
3. Mr. Sanjay Kasture - Company Secretary
During the year Mr. Digambar Pandurang Deshpande superannuated as Managing Directorof the Company with effect from October 31 2016.
The Board in its meeting held on October 21 2016 has appointed Mr. Sanjay KumarPattnaik as Managing Director with effect from November 01 2016.
BOARD MEETINGS/ BOARD COMMITTEE MEETINGS
A calendar of meetings is prepared and circulated in advance to the Directors. Duringthe year six (6) Board meetings and five (5) Audit Committee meetings were held detailsof which are given in the Corporate Governance Report. The gap between the meetings waswithin the period prescribed under the Companies Act 2013/ SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. All recommendations made by the AuditCommittee were accepted by the Board during the financial year 2016-17. All otherCommittees have also met during the year and have helped the Board to provide direction tothe management.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION188(1) OF THE COMPANIES ACT 2013
During the year under review purchase of Iron ore from Tata Steel Limited promoter ofthe Company constitutes majority of the transactions entered with related parties. Thetransactions being material were approved by the shareholders during the year. All thetransactions with related parties were on an arm's length basis and were in the ordinarycourse of business.
All related party transactions are placed before the Audit Committee and the Board forapproval.
The particulars of material contracts or arrangements with related parties referred toin Section 188(1) of the Companies Act 2013 is given in prescribed Form AOC - 2as Annexure E.
The policy on Related Party Transactions as approved by the Board is displayed on thewebsite of the Company viz www.tatasponge.com. Members' attention is also drawn on Notesto Financial Statements which sets out details of related party transactions.
MANAGEMENT DISCUSSION & ANALYSIS REPORT
The Management Discussion and Analysis Report for the year under review as stipulatedunder SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 forms partof this Annual Report.
CORPORATE GOVERNANCE REPORT:
As per Regulation 34(3) read with Schedule V of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a separate section on corporate governancetogether with a certificate from the Company's Secretarial Auditors forms part of thisReport.
(a) STATUTORY AUDITORS
Under Section 139 of the Companies Act 2013 and the rules made thereunder it ismandatory to rotate the Statutory Auditors on completion of their term of five consecutiveyears. The Rules also lays down the transitional period that can be served by the existingauditors depending on the number of consecutive years for which an audit firm has beenfunctioning as auditor in the same company. The incumbent auditors Messrs DeloitteHaskins & Sells Chartered Accountants (Firm Registration No. 302009E) have served theCompany for over 10 years before the Act was notified and will be completing the maximumnumber of transitional period (three years) at the ensuing Thirty Fourth Annual GeneralMeeting.
Based on the recommendation of the Audit Committee the Board in its meeting held onTuesday June 06 2017 appointed Messrs Price Waterhouse & Co. Chartered AccountantsLLP (Firm Registration No. 304026E/E-300009) ("PWC") as the Statutory Auditorsof the Company. PWC will hold office for a period of five consecutive years from theconclusion of the Thirty Fourth Annual General Meeting of the Company till the conclusionof the Thirty Ninth Annual General Meeting to be held in 2022. As required under theCompanies Act 2013 a resolution seeking member's approval for the appointment ofStatutory Auditor forms part of the Notice convening the Annual General Meeting.
There is no audit qualification for the year under review.
(b) COST AUDITOR
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Rules 2014 as amended from time to time your Company has beencarrying out cost audit every year. The Board of Directors on the recommendation of AuditCommittee has appointed Messrs Shome & Banerjee Cost Accountants (Firm RegistrationNumber: 000001) as Cost Auditor to audit the cost statements of the Company for thefinancial year 2017-18. As required under the Companies Act 2013 a resolution seekingmember's approval for the remuneration payable to the Cost Auditor forms part of theNotice convening the Annual General Meeting for their ratification.
(C) SECRETARIAL AUDITOR
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 Messrs S. M. Gupta & Company a firm of Company Secretaries in Practice toundertake the Secretarial Audit of the Company for the financial year 2017-18.
The Secretarial Audit Report for the financial year 2016-17 is annexed herewith as Annexure- F.
COMMENTS ON AUDITORS`/ SECRETARIAL AUDIT REPORT
There are no qualifications reservations or adverse remarks or disclaimers made eitherby the Statutory Auditors or by the
Secretarial Auditors in their report for the year under review. The Statutory Auditorshave not reported any incident of fraud to the Audit Committee of the Company during theyear under review.
EXTRACT OF ANNUAL RETURN
The extract of the Annual Return as provided under Section 92(3) of the Companies Act2013 in the prescribed Form MGT - 9 is annexed herewith as Annexure - G.
DISCLOSURES WITH RESPECT TO EMPLOYEES STOCK OPTION SCHEME
The Company does not have any Employees Stock Option Scheme.
The Company has a Risk Management framework in place to identify assess monitor andmitigate various risks to the business. This framework seeks to minimize adverse impact onthe business objectives and enhance the Company's competitive advantage. The frameworkalso defines the risk management approach across the enterprise at various levels. RiskManagement forms an integral part of the Company's planning process.
A Risk Management Committee of the Board reviews the process of risk management. Thedetails of the Committee and its terms of reference are set out in the CorporateGovernance Report forming part of the Board's Report.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY THE COMPANY
Details of loans guarantees or investments are given in the notes to financialstatements.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORY BODIES/ COURTS
During the financial year under review no significant or material orders were passedby the Regulatory/ Statutory Authorities or the Courts which would impact the goingconcern status of the Company and its future operations.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
During the year under review there has been no material changes and commitmentsaffecting the financial position of the Company.
During the year following awards were received by the Company :-
a) Conferred the Productivity Award 2016 for Significant Improved Productivity duringthe year 2016 by CII (Eastern Region).
b) Tata Sponge Power Plant Quality Circle Team PRATIBHA received the NCQC ExcellenceAward.
c) Received the CII Excellence Award on Safety Health & Environment 2015.
d) Tata Sponge Power Plant Quality Circle Team PRATIBHA received the CCQC 2016 GoldAward.
During the year the Company has not accepted any "Deposits" as definedunder Companies Act 2013.
The Board takes this opportunity to sincerely thank all its stakeholders namelyshareholders customers suppliers/ contractors bankers employees government agencieslocal authorities and the immediate society for their un-stinted support and co-operationduring the year.
On behalf of the Board of Directors
June 06 2017
ANNEXURE - A
[Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 ofCompanies (Accounts) Rules 2014]
Statement containing salient features of the financial statement ofSubsidiaries/Associate Companies/Joint Ventures
Part "A": Subsidiaries
| || |
(Rs. In Lakhs)
|Particulars ||Details |
|1. Name of the subsidiary ||TSIL Energy Limited |
|2. Reporting period for the subsidiary concerned if different from the holding company's reporting period ||N.A |
|3. Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries ||N.A |
|4. Share capital ||106 |
|5. Reserves & surplus ||4.76 |
|6. Total assets ||114.92 |
|7. Total Liabilities ||1.15* |
|8. Investments ||113.23 |
|9. Turnover ||5.26 |
|10. Profit before taxation ||3.00 |
|11. Provision for taxation ||0.00 |
|12. Profit after taxation ||3.00 |
|13. Proposed Dividend ||NA |
|14. % of shareholding ||100% |
*Note: This figure pertains to Current Liabilities
1. Names of subsidiaries which are yet to commence operations: TSIL Energy Limited
2. Names of subsidiaries which have been liquidated or sold during the year: N.A
Part B - Associate and Joint Ventures
Statement Pursuant to Section 129(3) of the Companies Act2013 related to AssociateCompanies and Joint Venture
The Company has no associate or joint venture as at March 31 2017.
For and on behalf of the Board of Directors
| ||sd/- ||sd/- ||sd/- ||sd/- |
|Kolkata ||A. M. Misra ||Sanjay Kumar Pattnaik ||S. K. Mishra ||Sanjay Kasture |
|June 06 2017 ||Chairman ||Managing Director ||Chief Financial Officer ||Company Secretary |