USHA ISPAT LIMITED
ANNUAL REPORT 2004-2005
Your Directors are pleased to present the Seventeenth Annual Report
together with the Audited Statement of Accounts and the Auditors' Report of
your Company for the Financial Year ended 31st March, 2005.
Rupees in Thousands
Particulars 2004-2005 2003-2004
Total Income 1119486 1484119
Gross Profit/ (Loss) (34574) 180790
Less: Interest 376618 347140
Depreciation 132873 133953
Profit / (Loss) before tax (544065) (300303)
Less: Extraordinary Items
(Preoperative Exp. And
Interest of Abandoned
Projects) (38108) (42208)
Interest on Suspended Projects - -
Prior Period Adjustments 658 (942)
Less: Provision for taxation - -
Profit / (Loss) after taxation (581515) (343453)
Add: Profit/(Loss) for
the earlier years (13614600) (13271147)
Profit / (Loss) available
for appropriation (14196115) (13614600)
General Reserve - -
Debenture Redemption Reserve - -
Balance carried to Balance Sheet (14196115) (13614600)
DECLARATION OF DIVIDEND AND TRANSFER TO RESERVES:
In view of losses being suffered by the Company, the Board of Directors do
not recommend any dividend and nothing is proposed to carry to any reserves
in the Balance Sheet.
The company during the year has recognised Rs.316800/- as deferred income
and adjusted the amount of Rs. 316800/- from the Government Grants received
by the company in the previous years under the head Capital Reserves as per
Accounting Standard - 12.
BUSINESS OPERATIONS OVERVIEW AND OUTLOOK:
The Board of Industrial and Financial Reconstruction (BIFR) vide its order
dated 29th December, 2003 had rejected both the references made by the
company registered with BIFR viz. first reference filed with the BIFR in
September, 2001 and registered with the BIFR as Case No. 409/2001 and
second reference filed with the BIFR in September, 2002 and registered with
the BIFR as Case No. 75012002.
The Company has filed appeals against rejection order passed by BIFR with
the Appellate Authority for Industrial and Financial Reconstruction, New
Delhi (AAIFR). The first appeal registered as Case no. 34/04 dated
20.02.2004 against rejection of our first reference registered with BIFR as
Case No 409/2001 and same has been admitted by the AAIFR vide its order
dated 25th May, 2005. The second appeal has also been registered by the
AAIFR as Case No 46/04 dated 01.03.2004 against rejection of our second
reference registered with BIFR as Case No. 750/2002 and the same is
The Company has filed reference applications based on Audited Accounts for
the financial year ended on 31st March, 2003 and 31st March, 2004 since the
earlier references filed by the company based on its audited accounts as on
31st March, 2001 and 31st March, 2002 were rejected by the BIFR vide their
orders dated 29th December, 2003. The references have been registered by
the BIFR as Case No. 149/2004 vide weir letter no. F3 (U-1) BC/2004 dated
12.03.2004 and Case No. 330/2004 vide their letter no. F3 (U-5) BC/2004
The sickness had set-in the operations of the Company in the financial year
2000-2001, when in June, 2001, the Financial / Investment Institutions,
viz. IDBI and LIC of India cancelled the sanctioned loans and recalled the
loans obtained by the Company for the Sinter project at Redi (Sinter) and
Integrated Steel Plant project at Satarda (ISP), consequent to which these
projects were abandoned. Subsequently, the General Insurance Corporation of
India, IFCI Limited, Sumitomo Mitsubishi Bank Corporation Limited, New
India Assurance Company, United India Assurance Company Limited and
Oriental Insurance Company Limited have also recalled their loans.
Both the appeals filed with AAIFR along with the third and fourth reference
of the Company filed with the BIFR are still pending and Company is just
awaiting the decision of BIFR which will be discussed with the Financial
Institutions for further course of action.
The debt profile of the company is about Rs.1000 crore (only Principal). A
joint meeting of secured creditors of the Company was held us on 5th May,
2005. The meeting was attended by the representatives of SASF (IDBI), IFCI,
UTI, GIC, LIC, OIC, Standard Chartered Bank, United Western Bank Ltd., who
constitute almost the whole of the Debt profile of the company. In the
meeting it was decided that action should be taken against the company
under SARFAESI and the transfer of account of Usha Ispat Limited to
Stressed Assets Stabilization Fund (SASF), a trust formed with the object
of acquiring by transfer the stressed assets of IDBI Limited. Accordingly,
it was decided to (i) identify a custodian/ manager for take over the unit
who would run the unit (ii) Get a valuation of assets (iii) Obtain consent
from all the lender for initiating the action under SARFAESI (iv) take over
the assets and hand it over to the custodian / manager who would run the
unit if a buyer is not identified Till now no further action has been taken
/ initiated by lending institution except visit of some prospective buyers
from the steel industry, sent by lending institution. The lenders are,
also, in favour of reviving the unit by taking it over and handing it to a
party who would be running the unit continuouly.
In an attempt to improve the operational bottom-line, the coke-oven unit of
the Company was made functional on contract basis. The coke produced being
cheaper than the imported coke has given better margins to the Company
besides reducing the dependability on the imported coke for running one
During the year the production at plant was resumed of the only operational
furnace out of the three furnaces w.e.f. 11th August. 2004 which was closed
due to shutdown for acute shortage of raw material.
The Company has approached the Maharashtra Government to seek its aid in
the matter of the exemption of its sales tax liability. The Company was
enjoying a ten year Sales Tax holiday, upto the limit of Rs. 106.74 crores
which ended on 31st May, 2003. Whereas the time period of the exemption has
been expired, the Company could not achieve its anticipated production
levels and capacities, the value of exemption is still unutilized to the
extent of 60%. On these basis the company has requested the state
government to review the period of exemption and a favourable response is
expected in the matter. In the current Financial Year, sales tax demands to
the tune of Rs. 323427 thousand have been raised by the Sales Tax
authorities, Kolhapur disallowing exemption on some of the products of the
company, which are being contested.
MATERIAL CHANGES AND COMMITMENTS IF ANY EFFECTING THE FINANCIAL POSITION OF
THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF
THE COMPANY TO WHICH THE BALANCE SHEET RELATES AND THE DATE OF REPORT:
The Production at plant had been closed due to shutdown w.e.f. 31st July.
2005 of the only operational furnace out of the three furnaces due to
shortage of raw material, paucity of funds and bad market conditions of pig
During the month of April, 05 the company has received a demand notice of
Rs. 49361 thousands, from Commissionerate of Central Excise & Customs, Goa.
on account of non fulfillment of export obligation towards import of coke
against advance license. The company has filed an appeal against the said
demand before The Custom, Excise and Service Tax Appellate Tribunal,
The Company's main banker United Western Bank Ltd provided the working
capital facilities to the Company. In pursuance of the terms of the
arrangement with the Banker, the company has to make a payment of Rs. 30
lacs P.M. to the banker. Your company has fulfilled its obligation under
the contractual arrangement and an amount of Rs. 36139 thousand in the
current financial year has been paid to the Bank.
Dr. Rajesh Kumar Gupta, Director, retires by rotation at the ensuing Annual
General Meeting and has expressed his unwillingness to be reappointed. The
Board has decided that the vacancy caused by his retirement shall not be
A notice in writing has been received from Mr. Gopal Kishan Garg, under
Section 257 of the Companies Act, 1956, signifying her intention for the
candidature for the office of Director of the Company. It would therefore
be in the interests of the Company that the Board of Directors should avail
the benefit of his experience and expertise.
Brief resume relating to director who is proposed to be appointed has been
given in the explanatory statement to the notice of the ensuing Annual
DIRECTOR'S RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Sub-section (2AA) of Section 217 of the
Companies Act, 1956 with respect to the Directors' Responsibility
Statement, it is hereby confirmed
That in preparation of the annual accounts for the financial year ended
31.03.2005, the applicable accounting standards have been followed along
with proper explanations relating to material departures.
That the Directors had selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company Al the end of financial year and of the profit/loss of the Company
for the year under report. Material departures have been properly explained
by the directors in this report elsewhere.
That the Directors had taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and by
preventing and detecting fraud and other irregularities.
That the Directors had prepared the accounts for the financial year ended
31 03.2005 on a 'going concern basis'.
The Audit Committee of Directors constituted by the Board of Directors in
terms of the provisions of Section 292A of the Companies Act, 1956, and the
Listing Agreement presently comprises of Dr. Rajesh Kumar Gupta, Mr. Ashok
Kumar Gupta, Mrs. Shraddha S. Wadkar, Directors as its members and Mr. S.
C. Gupta, Wholetime Director also attends the committee meetings.
A separate report on the Corporate Governance is appended elsewhere as a
part of the Annual Report.
STOCK OPTIONS TO THE EMPLOYEES OF THE COMPANY:
An ESOS for the employees was introduced during the year 2000. A total of
1460260 stock options have been granted to the eligible employees and
directors of the Company on 29-04-2000 and each option is convertible into
one equity share. It may be informed here that the company has not received
application from any option holder so far for exercise of the option of
converting the options into shares of the Company
PARTICULARS OF EMPLOYEES UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956:
There were no employees in the Company during the year covered under
Section 217(2A) of the Companies Act, 1956 read with the Companies
(Particulars of Employees) Rules, 1975. None of the employees is related to
any of the Directors of the Company.
The schemes for accepting deposits from public and shareholders were
discontinued from 10th November, 1997. The deposits received before such
discontinuation of the schemes have been repaid on their maturity. The
deposits matured but not yet claimed was Rs.7,820/- (maturity value) on
31st March, 2005. The Company has reminded the deposit holder to claim his
deposit and surrender the FDR, but Of no avail. This has been intimated to
the Registrar of Companies, Pune vide Company's letter dated 15th March,
The Company's shares are admitted to the Central Depository Services
(India) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for
dematerialization. This enables you to hold your share in dematerialized
form. Your Company's share is in the compulsory denial list for trading for
all investors as per the SEBI directives. M/s Abhipra Capital Limited. New
Delhi are the Common Share Transfer Agents of the Company for the security
related matters of the Company in both physical and dematerialized forms.
The Company's Shares are listed on the Mumbai and Delhi Stock Exchanges.
The Company has paid listing fee to the Mumbai Stock Exchange up to
31.03.2000 and Delhi Stock Exchange up to 31.03.1999. The trading of shares
of the Company continued to remain suspended during the financial year
under report on both stock exchanges.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNINGS AND OUTGO:
Information pursuant to Section 217(1)(e) of the Companies Act, 1956 read
with Rule 2 of the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988 is annexed and forms part of this report.
With regard to Auditor's observation regarding to balance confirmations and
reconciliation it is to state that amount outstanding is as per terms of
agreements executed with the lenders except for the non provision of
interest on loans for abandoned/ suspended projects for which explanation
has been given in para below and non receipt of party balances.
Due to non provision of interest on loans for suspended/ abandoned
projects, auditor's has observed that financial statements do not give a
true and fair view. The said interest provision has not been provided in
view of total erosion of company's net worth and pending references/
appeals with BIFR/ AAIFR.
Physical verification of fixed assets of abandoned/suspended projects has
not been done because there is no activity at these projects. Delay in
payments/ non payment of dues to financial institutions, banks and the
mutual funds was due to the financial sickness of the company. Delay in
payments of statutory dues was due to the financial sickness of the
company. However the same has been deposited alongwith interest and nothing
is outstanding as arrears for the financial year 2004-05 The appointment of
the debenture trustee for 145543, 16% Secured Redeemable Non Convertible
Debentures is pending till the decision of cases with BIFR/ AAIFR.
The Boards views on other Auditors' observations have been detailed in
Schedule P i.e. Significant Accounting Policies and Notes to the Accounts
and are self explanatory.
M/s. Barisal & Co., Chartered Accountants, Auditors of the Company shall
retire at the conclusion of the ensuing Annual General Meeting of the
Company and being eligible offer themselves for re-appointment. The Company
has received certificate from the retiring Auditors to the effect that
their appointment, if made, will be within the permissible limits specified
under Section 224 (1B) of the Companies Act, 1956.
INTERNAL CONTROL SYSTEM:
The Company's internal control system comprises audit and compliance by
independent professionals The company had appointed M/s S V Modak & Co.,
Chartered Accountants. as the internal auditors of the company from 1st
April, 2004 to 31st March. 2005 The internal auditors independently
evaluate the adequacy of internal controls and concurrently audit the
majority of the transactions in value terms Independence of audit and
compliance is ensured by the direct reporting of the internal auditors to
MANAGEMENT DISCUSSION AND ANALYSIS:
A detailed section of the Management Discussion and Analysis forms part of
the Director's Report.
Your Directors wish to acknowledge and thank the Central and State
Governments for their support and guidance.
Your Directors wish to place on record their deep appreciation of the
continued support of shareholder, debenture holders, warrant holders and
the devoted services rendered by the executives., staff and workers of the
Company at all levels.
Your Directors also acknowledge with gratitude the co-operation and
assistance given by the Financial Institutions. Mutual Funds, Banks and
For and on Behalf of the Board
S. C. Gupta S. A. Bhat
Wholetime Director Wholetime Director
Place : Redi (Maharashtra)
Date : 30th July, 2005
ADDENDUM TO DIRECTORS' REPORT:
(IN COMPLIANCE TO SECTION 217(1)(e) OF THE COMPANIES ACT,1956)
A. CONSERVATION OF ENERGY:
a. Energy conservation measures taken:
Financial year 2004-2005 witnessed in the recent past one of the worst ore
crisis. Ore prices sky rocketed and it became practically impossible to get
Mini Blast Furnace grade good reduceable Iron ore. Hence we had to resort
to inferior grade less reduceable ores leading to higher coke consumption
rate. However utmost care was taken to re-process the available Iron ore to
make it usable in our blast furnaces. The right sizing exercise of ore has
yielded better result.
b. Additional investment and proposals, if any, being implemented for
reduction of consumption of energy:
c. Impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:
Cost of production reduced by approximately Its 125/- per ton
d. Total energy consumption and energy consumption per unit:
As per Form A
B. TECHNOLOGY ABSORPTION:
e. Efforts made in technology absorption:
(i) A coal feed conveyor is installed at coke oven to bring down the
handling cost of coal.
(ii) Major revamping of coke pusher car is done at coke oven to improve the
coke oven operation.
(iii) Coke & coal cutter major overhauling for improving the efficiency.
(iv) Yard screening of Iron ore to improve the BF efficiency.
(v) Rain water harvesting to overcome water crisis,
(vi) Pig casting machine metal runner modification for better pig yield
(vii) Maximum demand (MD) reduction from 3 MW to 2 MW to reduce the power
(viii) Unity power factor maintained.
C. FOREIGN EXCHANGE EARNING AND OUTGO:
f. Activities relating to exports; initiatives taken to increase exports;
development of new export markets for products and services and export
g. Total foreign exchange earned and used:
Earned Rs. : NIL
Used Rs. : 247480.00
(See Rule 2)
Form for disclosure of particulars with respect to Conservation of Energy:
A. Power and fuel consumption:
1. Electricity : Current year Previous year
units 1066890 441990
Total amount (Rs.) 7128218 7561155
Rate/Unit 6.68 17.11
(b) Own generation:
I) Through diesel generators - -
Units - -
Units per Ltr. of diesel oil - -
Cost/Unit - -
II) Through steam turbine generators
Units 4913400 10677000
Units per Ltr. of fuel/gas 18.68 22.24
Cost/Unit 2.76 1.79
2. Furnace Oil
Quantity (K. Ltrs) 263 480
Total amount (Rs.) 3096214 5918400
Average rate 11.77 12.33
B. Consumption per unit of production
Products Standards Current year Previous Year
Pig Iron M.T 54205.000 106898.000
Electricity Units 110.33 104.01
Furnace Oil Ltrs 4.85 4.49
MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
AN OVERVIEW OF STEEL SECTOR:
As a result of the economic developments IISI had projected an increase by
6.2% or 53 million metric tonnes in 2004 in the global consumption of
finished steel products. IISI has split the growth into two separate areas,
China and the Rest of the World (ROW). Steel consumption in China has been
estimated to increase by 13.1% or 31 mmt in 2004.
Apparent consumption of finished carbon steel increased from 14.84
Million Tonnes in 1991-92 to 33.370 million tonnes in 2004-05. China has
been an important export destination for Indian steel. The steel industry
is buoyant due to strong growth in demand particularly by the demand
for steel in China.Pig Iron production in 2004-05 was 3.171 Million Tonnes
(Prov). (Source: Joint Plant Committee)
Exports of Iron & Steel
Iron & Steel are freely exportable. Advance Licensing Scheme allows
duty free import of raw materials for exports. Duty Entitlement Pass Book
Scheme (DEPB) introduced to facilitate exports. Under this scheme exporters
on the basis of notified entitlement rates, are granted due credits which
would entitle them to import duty free goods. The DEPB scheme was
temporarily suspended from 27th March 2004 to 12 July, 2004 for export of
steel items. The-Scheme has since been restarted. The DEPB rates have also
been substantially reduced.
Duties & Levies on Iron & Steel:
The customs duty on items falling under Chapter 72 has been reduced sharply
during the last five years The customs duty on non-alloy steel and alloy
steel was brought down to the level of 5% and 15% respectively in 2004-05.
In the Union Budget 2005-06 customs duty on alloy steel has been further
brought down to 10%. Currently the customs duty on prime non-alloy steel
and prime alloy steel is 5% and 10% respectively. The peak rate of customs
duty on Chapter 72 items was brought down from 40% to 20% w.e.f. 1.1.2005,
as a result the customs duty on seconds and defectives also stands reduced
from 40% to 20%. Some of the other changes made during the last one year in
the structure of customs duty on items falling under Chapter 72 are as
i. Customs duty on melting scrap reduced from 5% to Zero.
ii. Customs duty on ships for breaking reduced from 15% to 5%.
iii. Customs duty on steel making raw materials like non coking coal,
metcoke and charged nickel have been reduced to 5%.
The excise duty on all iron and steel items falling under Chapter 72 has
been increased from 12% to 16% in the Union Budget 2005-06.
Opportunities for growth of Iron and Steel in Private Sector:
(i) The New Industrial Policy Regime:
The New Industrial policy has opened up the iron and steel sector for
private investment by (a) removing it from the list of industries reserved
for public sector and (b) exempting it from compulsory licensing. Imports
of foreign technology as well as foreign direct investment are freely
permitted up to certain limits under an automatic route. Ministry of Steel
plays the role of facilitator, providing broad directions and assistance to
new and existing. steel plants, in the liberalized scenario.
ii) Pig Iron:
In pig iron also, the growth has been substantial. Prior to 1991, there was
only one unit in the secondary sector. Post liberalization, the AIFIs have
sanctioned 21 new projects with a total capacity of approx 3.9 million
tonnes. Of these, 16 units have already been commissioned. The production
of pig iron has also increased from 1.6 million tonnes in 1991-92 to 5.28
million tonnes in 2002-03. During the year 2003-04, the production of Pig
Iron was 5.221 million tonnes
Profitability of players to increase in 2004-05:
Higher price realizations and increased volumes led to healthy operating
profits and an improvement in the margins of domestic steel manufacturers.
Restructuring and repayment of debt, with better accruals, led to a
reduction in interest costs and, consequently. higher net margins.
In the first 7 months of 2004-05, apparent consumption of steel increased
by around 6 per cent, compared to the previous year. The domestic demand
for steel is expected to be 7-8 per cent in 2005-06. The demand for steel
in the domestic markets will be driven by sectors like automobiles.
construction and tubes and pipes. The domestic demand-supply balance is
expected to remain favorable with operating rates continuing to remain
Growth in domestic prices was curtailed due to stiff user resistance and an
unfavourable government stance with respect to frequent price hikes,
resulting in weakening linkage between domestic and international prices.
The industry's operating profit margins will come under pressure in 2005-
06, due to the sharp increase in the cost of raw materials, mainly iron ore
and coking coal, while the cost of sponge iron, coke and scrap will remain
at high levels.
Your Company is primarily engaged in the production of industrial
intermediaries. The companies main business is production of pig iron
During the the financial year 2004-2005 witnessed scarcity of raw materials
and other inputs along with increase in prices of raw materials and other
inputs. Despite plant having been to be shut down upto 10th August, 2004
due to the said reasons. Because of its constant efforts at improving
operational efficiencies, Usha Ispat Ltd was able to contain the impact of
the adverse raw material price hikes and softening end product prices. The
highlights of Usha [spat Ltd. financial performance in 2004-2005 are:
The Turnover during the year was Rs. 1119485 thousands (for apporx Eight
Months) compared to last year (Full year) Rs 1438690 thousands
The loss during the year under review is Rs. 544065 Thousand as against a
loss of Rs. 300303 Thousand during the previous year. The total loss
suffered by the company as on 31st March 2005 is Rs 14196115 thousand.
The production during the year under review along with previous years
figures are given below:
Class of Goods Unit Production Production
Current Year Previous Year
Pig Iron M.T. 54205.000 106898.000
Power KWH 4913400 10677000.00
Coke M.T. 30623.046 51354.945
During the year under review the prices of iron ore went up sharply
However, your company could negotiate a higher increase from many of its
During the year, the average price of coke was quite high owing to nigher
international price. The international price of coke was abnormally high at
the beginning of the Financial Year mainly due to lower exports from China.
The cost of transportation continued to remain high because of poor
availability of railway rakes and high road transport charges
On the cost front, there was an increase in the diesel prices, higher wages
& salaries owing to new wage settlement signed during the year and cost of
ore purchased due to prevalent market situation.
While many of the coke producers faced uncertainty as to supply of coal
owing to buoyant steel production, your company was also affected with the
same problem in getting the scheduled shipments.
The demand for raw materials required for production of steel continues to
be very strong. As a result, the international price of both iron ore and
coal have registered an unprecedented increase during the current year
71.5% for iron ore and 120% for coal on FOB basis. In spite of various
measures adopted by the Chinese authorities to cool down the pace of growth
of its economy, the production of steel in China is still growing at a
phenomenal rate. The Indian economy is also growing at a rate of around 7%
while the growth of manufacturing sector is even higher. Indian steel
production is also planned to be almost doubled from its current capacity
to more than 60 million tonnes in the course of next 6 to 7 years.
In view of the above, your company does not foresee any let up in demand
for iron ore in the medium term. However, there are reports of new
capacities coming on stream, if they materialize, will definitely create a
supply side pressure and consequently, the iron ore price is likely to come
down from the current unprecedented level.
Pig Iron Business:
Engineering, automobile and infrastructure sectors in the Indian economy
are the drivers of growth for the pig iron business. The industry has
undergone a metamorphosis since the liberalization. In the past, integrated
steel mills mainly supplied pig iron. However, after liberalization,
secondary sector capacities I-ave increased substantially to cater to the
large requirements in the domestic market and even export to niche markets.
The major raw materials used for manufacturing pig iron are iron ore and
coke. Both together constitute about 80-85% of the cost of production Iron
ore is procured locally. Coke is either imported or procured from domestic
The demand supply gap this year, has resulted in decrease in pig iron
prices on the other hand hike in the cost of its main raw materials, viz.
coke and iron ore had adverse effect on the bottom-line. Though the global
coke market passed through a turbulent phase, the company is assured of
coke supply intra-group. The productivity level of the blast furnace
continues to remain at optimum level. Therefore, the company is confident
of maintaining its market share.
OPPORTUNITIES AND THREATS:
The expected increase in per capita consumption of steel in India shall
provide a good opportunity for the company. The increase in steel
production will improve the demand for metallic like pig iron. Moreover,
with the automobile and engineering sectors likely to grow at 10% and 5%
respectively during the current year, the demand for pig iron from the
foundry industry is likely to grow further.
On the other hand, the increased pig iron capacities which may result in
temporary over-supply situation in the industry, Technological changes,
Cheaper substitute of steel, Use of more scrap, Delay in forward
integration projects to manufacture steel are the major threats to the
Pig Iron Business:
The Company produces Basic and Foundry Grade pig iron for the Steel Mills
and foundries. Various grades manufactured by the company, have been
accepted by the customers for consistency in quality and deliveries,
resulting in a strong customer base over a long period of time.
Pig iron consumption, in India, is expected to grow moderately at the rate
of 5-6%. The expected high growth rate in the automobile sector will
increase the demand by about 10%. Moreover, with reasonably good monsoon,
demand in the agricultural sector for tractors and pumps will further
improve the demand. Pig iron growth is likely to rise further with increase
in investment in India in the engineering and machinery sector.
On the other hand, the pig iron market being a volatile market and also a
seasonal one, it faces competition from other competing materials like
scrap, and sponge iron. The Production cost of pig iron is under severe
pressure owing to increase in iron ore price and transportation cost.
RISKS AND CONCERNS:
The product of the company i.e. pig iron continues to suffer from over/
increasing capacities and moderate demand of the product. Product is also
1. Technological Obsolescence
2. Increased cost of Raw Materials
3. Intense competition
4. Increased cost of Logistics
The company has no control on the external factors which are adverse to the
companies operations. However, risk factors are taken into consideration
while evolving business plans and they are continuously monitored by the
FINANCIAL / OPERATIONAL PERFORMANCE:
The gross turnover of the company during the year is Rs. 1119485 thousands
as against previous year turnover of Rs. 1438690 Thousand. The decrease in
turnover is due to shut down of plant during the year. The higher cost of
coke and iron ore during the year, which are major raw materials for
manufacture of pig iron, had checked the growth in profit during the year
under review. While the price of coke appears to have stabilized to a more
reasonable level, the high cost of iron ore would continue to put its
bottom line under pressure during the year.
INTERNAL CONTROL SYSTEM:
Usha Ispat Limited has appointed M/s S V Modak & Company, Chartered
Accountants, as the internal auditors of the company from 1st April 2004 to
31st March, 2005, in order to ensure better internal control and a
professional view on the affairs of the company
The internal control systems designed by internal auditors ensure that the
financial and other records are reliable for preparing financial statements
and other data and for maintaining accountability of assets There are well-
established procedures for internal control at various levels of the
The internal auditors are reporting independently to the top management to
ensure that all assets are safeguarded, and protected against loss from
unauthorized use or disposition and that all transactions are authorized,
recorded, and reported correctly.
HUMAN RESOURCES & INDUSTRIAL RELATIONS:
Employee relations continued to be cordial and harmonious rooted in the
philosophy of bilateralism. Appox. 560 people were employed in the company
as on the date of the report.
Statements and opinions in the Management Discussion and Analysis Report
given to the shareholders reflects the Company's assessment and perception
of the situation and reports and other publications of various agencies.
The Board of Directors do not in any way guarantee to their accuracy or
correctness and that it may differ materially with the change in the
Government regulations, policies and other related factors.
For and on Behalf of the Board
S. C. Gupta S. A. Bhat
Wholetime Director Wholetime Director
Place : Redi (Maharashtra)
Date : 30th July,2005