Electrotherm (India) Limited
Your Directors have pleasure in presenting the 33rd Annual Report onthe business and operations of the Company and Audited Financial Statements for the yearended on 31st March 2019.
FINANCIAL SUMMARY OR HIGHLIGHTS:
The financial statements of the Company have been prepared inaccordance with the Indian Accounting Standards (Ind AS) notified under section 133 of theCompanies Act 2013 read with Rule 7 of the (Companies Accounts) Rules 2014.
The standalone financial performance of the Company for the year endedon 31st March 2019 is summarized below:
| || ||(' In Crores) |
|Particulars ||2018-2019 ||2017-2018 |
|Total Income ||3475.75 ||2778.23 |
|Total Expenses ||3334.98 ||2767.03 |
|Profit / (Loss) before Exceptional Items and Tax ||140.77 ||11.20 |
|Less : Exceptional Items ||- ||- |
|Profit / (Loss) before Tax ||140.77 ||11.20 |
|Less: Tax Expenses ||- ||- |
|Profit / (Loss) for the Year ||140.77 ||11.20 |
|Share of Profit of Joint Venture ||0.02 ||0.00 |
|Profit after share of Joint Venture ||140.79 ||11.20 |
|Other Comprehensive Income ||(1.35) ||0.58 |
|Total Comprehensive Income ||139.44 ||11.78 |
STATE OF THE COMPANY'S AFFAIRS AND OPERATIONS:
The Company is engaged in the business of manufacturing inductionfurnaces TMT Bars Ductile Iron Pipes (DI Pipes) Electric Vehicles TransformersTransmission Line Towers etc.
During the year ended on 31st March 2019 the total income of theCompany was ' 3475.75 Crores compared to ' 2778.23 Crores of previous financial year. Thenet profit for the current financial year was ' 140.77 Crores as compared to profit '11.20 Crores of previous financial year. A detailed analysis of performance for the yearis included in the Management Discussion and Analysis which forms part of this AnnualReport.
CHANGE IN NATURE OF BUSINESS:
During the financial year there was no change in the nature ofbusiness carried out by the Company.
TRANSFER TO RESERVES:
During the financial year under review no amount has been transferredto the General Reserve.
In view of accumulated losses during the previous financial years andfund requirements the Board of Directors of the Company do not recommend any dividend onEquity Shares and on Preference Shares for the year ended on 31st March 2019.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANICAL POSITION AFTERTHE END OF FINANCIAL YEAR:
There have been no material changes and commitments affecting thefinancial position of the Company between the end of the financial year and date of thisReport.
CONSOLIDATED FINANCIAL STATEMENTS:
The Consolidated financial statements of the Company for the financialyear 2018-2019 are prepared in compliance with applicable provisions of the Companies Act2013 Indian Accounting Standards ("Ind AS") and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 ("Listing Regulations") which formpart of this Annual Report.
SUBSIDIARY / JOINT VENTURE COMPANIES:
The Company has the following subsidiaries as on 31st March 2019:
1. Hans Ispat Limited
2. Electrotherm Services Limited (erstwhile known as Shree Hans PapersLimited)
3. Shree Ram Electro Cast Limited
4. ET Elec-Trans Limited
5. Jinhua Indus Enterprises Limited
6. Jinhua Jahari Enterprises Limited (Step-down Subsidiary Company)
7. Bhaskarpara Coal Company Limited (Joint Venture Company)
Pursuant to section 129(3) of the Companies Act 2013 a statementcontaining the salient features of the financial statement including the highlights of theperformance of the subsidiary / joint venture companies in Form AOC-1 is attached as"Annexure - A" to this Report.
Pursuant to the section 136 of the Companies Act 2013 the financialstatements of the company consolidated financial statements along with relevant documentsand separate audited accounts in respect of subsidiaries / joint venture companies areavailable on the website of the company www.electrotherm.com .
During the financial year 2018-2019 none of the companies have becomeor ceased to be subsidiaries joint ventures or associate companies.
NUMBER OF BOARD MEETINGS:
During the financial year 2018-2019 Six (6) Board Meetings were heldand the intervening gap between the meetings was within the period prescribed under theCompanies Act 2013. Details of the composition of the Board and its Committees and of themeetings held attendance of the Directors at such meetings and other relevant details areprovided in the Corporate Governance Report.
DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP):
* Retirement by Rotation
Pursuant to the provisions of Section 152 of the Companies Act 2013read with the Companies (Appointment and Qualification of Directors) Rules 2014 andArticles of Association of the Company Mr. Siddharth Bhandari (DIN: 01404674) retires byrotation at the ensuing Annual General Meeting and being eligible offers himself forre-appointment.
* Appointment of Directors:
During the year at the 32nd Annual General Meeting held on 28thSeptember 2018 the members of the Company regularized/approved the appointment of Mr.Arun Kumar Jain (DIN: 07563704) and Ms. Nivedita Sarda (DIN: 00938666) as a Non-ExecutiveIndependent Directors of the Company to hold office for five (5) consecutive years witheffect from 19th January 2018 and 25th May 2018 respectively.
* Cessation of Directors:
Mr. Avinash Bhandari (DIN: 00058986) Joint Managing Director & CEOretired by rotation at the 32nd AGM as he was not re-appointed and as such he ceased tobe a Director as well as Joint Managing Director and CEO of the Company with effect from28th September 2018.
Ms. Sheetal Manhas (DIN: 07439658) as nominated by M/s. Invent AssetsSecuritisation & Reconstruction Pvt. Ltd. (Invent) the Secured Creditor of theCompany was appointed as a Nominee Director in the category of Non-Executive AdditionalDirector of the Company with effect from 14th August 2018 and hold office upto the dateof 32nd Annual General Meeting of the Company. However she was not appointed as NomineeDirector at the 32nd AGM and she ceased to be a Nominee Director of the Company witheffect from 28th September 2018.
The Board places on record its appreciations for the services renderedby Mr. Avinash Bhandari (DIN: 00058986) as a Director / Joint Managing Director & CEOof the Company and as a Member of various Committees during his tenure. The Board alsoplaces on record its appreciations for the services rendered Ms. Sheetal Manhas (DIN:07439658) as a Nominee Director of the Company.
* Key Managerial Personnel:
During the year 2018-2019 the Board of Directors of the Company intheir meeting held on 4th July 2018 approved the change of designation of Mr. MukeshBhandari from 'Chairman & Managing Director' to 'Chairman'.
At the 32nd Annual General Meeting held on 28th September 2018 themembers of the Company has not re-appointed Mr. Avinash Bhandari (DIN: 00058986) as aDirector and as such he ceased to be a Jt. Managing Director & CEO of the Company.
Except above there was no change in the Key Managerial Personnelduring the year under review.
* Declaration of Independence
The Company has received declaration of Independence as stipulatedunder section 149(7) of the Companies Act 2013 and Regulation 16(b) of the ListingRegulations from all Independent Directors confirming that they meet the criteria ofindependence and not disqualified from appointment / continuing as an IndependentDirector; and they have complied with the code of conduct for Independent Directorsprescribed in Schedule IV of the Companies Act 2013.
* Annual Evaluation of Board's Performance
In terms of the provisions of Section 134(3)(p) of the Companies Act2013 read with Rule 8(4) of the Companies (Accounts) Rules 2014 and Listing Regulationsthe Nomination and remuneration Committee has carried out the annual evaluation ofperformance of the Board and its Committee and the Board of Directors has carried out theannual evaluation of the performance of individual directors. The manner in which theevaluation was carried out is provided in the Corporate Governance Report which is partof this Annual Report.
* Nomination and Remuneration Policy
The Board of Directors of the Company has on the recommendation ofNomination and Remuneration Committee framed and adopted a policy for selection andappointment of Directors Key Managerial Personnel Senior Management and theirremuneration. The salient aspects covered in the Nomination and Remuneration Policycovering the policy on appointment and remuneration of Directors and other matters havebeen outlined in the Corporate Governance Report which forms part of this Annual Report.The said policy is available on the website of the Company at www.electrotherm.com .
PARTICULARS OF LOANS GUARANTEES OR INVESTMENT:
Particulars of investments made loans given and guarantee given ascovered under the section 186 of the Companies Act 2013 has been provided in Note No. 56 and 30 of the notes to the financial statement which form part of this Annual Report.
CORPORATE SOCIAL RESPONSIBILITY (CSR):
Pursuant to the provisions of Section 135 of the Companies Act 2013read with the Companies (Corporate Social Responsibility Policy) Rules 2014 the Companyhas constituted a CSR Committee. The Board of Directors on the recommendation of CorporateSocial Responsibility (CSR) Committee had approved the Corporate Social ResponsibilityPolicy. The CSR policy is available on the website of the company at www.electrotherm.com . The composition and terms ofreference of the Committee are detailed in the enclosed Corporate Governance Report.
Since the Company has incurred losses the Company is not required toincur any expenditure on CSR activities for the financial year 2018-2019. The AnnualReport on CSR activities in accordance with the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 is set out as "Annexure -B" to this report.
RELATED PARTY TRANSACTIONS:
The Company has pursuant to the approval of the shareholders throughspecial resolution under Section 188 of the Companies Act 2013 entered into relatedparty transactions on arm's length basis. During the year the Company had not enteredinto any contract / arrangement / transaction with related parties which could beconsidered material in accordance with the Policy of the Company on materiality of relatedparty transactions.
The Policy on materiality of related party transactions and on dealingwith related party transactions as approved by the Board may be accessed on the Company'swebsite at www.electrotherm.com . There are nomaterially significant related party transactions that may have potential conflict withinterest of the Company at large. The details of transaction with related parties for thefinancial year ended on 31st March 2019 is given in Note No. 38 of the financialstatements which is part of this Annual Report of the Company. FIXED DEPOSIT:
During the financial year 2018-19 the Company has not accepted anydeposit within the meaning of section 73 to 76 of the Companies Act 2013 read with theCompanies (Acceptance of Deposits) Rules 2014. Further there are no outstanding depositsas on 31st March 2019.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to section 134(3)(c) of the Companies Act 2013 the Directorsstate that :
a) in the preparation of the annual accounts for the financial yearended on 31st March 2019 the applicable accounting standards had been followed alongwith proper explanation relating to material departures if any;
b) the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the company at the end of financialyear and of the profit of the company for that period;
c) the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the company and for preventing anddetecting frauds and other irregularities;
d) the Directors had prepared the Annual Accounts on a going concernbasis;
e) the Directors had laid down internal financial controls to befollowed by the company and that such internal financial controls are adequate and wereoperating effectively; and
f) the Directors had devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems were adequate and operatingeffectively.
AUDITORS AND AUDITORS' REPORT:
Pursuant to the provisions of Section 139 142 and other applicableprovisions of the Companies Act 2013 read with the Companies (Audit and Auditors) Rules2014 M/s. Hitesh Prakash Shah & Co. Chartered Accountants Ahmedabad (FirmRegistration No. 127614W) were appointed as Statutory Auditors of the Company at the 31stAnnual General Meeting held on 5th September 2017 for a term of five (5) years beginningfrom the conclusion of the 31st Annual General Meeting till the conclusion of the 36thAnnual General Meeting subject to ratification of the appointment by the Members at everysubsequent Annual General Meeting. However as per the notification of the Ministry ofCorporate Affairs ("MCA") dated 7th May 2018 Section 139 of the Companies Act2013 was amended by the Companies (Amendment) Act 2017 and as per the amendment ofCompanies (Audit and Auditors) Second Amendment Rules 2018 the requirement of annualratification of appointment of the Statutory Auditors has been omitted. Accordingly theresolution pertaining to ratification of the appointment of M/s. Hitesh Prakash Shah &Co. Chartered Accountants Ahmedabad (Firm Registration No. 127614W) is not required tobe placed before the members at the 33rd1 Annual General Meeting.
In the Independent Auditors' Report for the year ended on 31st March2019 there are certain matters of emphasis related to winding up petitions recovery ofdues assignment of debts balance confirmations etc. The relevant Notes to accountsrelated to these matters of emphasis are self-explanatory. With regard to thequalification in the Independent Auditors' Report for non-provision of interest on Bankloan as account declared as Non-Performing Assets (NPA) amounting to ' 124.31 Crores forthe financial year 2018-2019 and total amount of ' 876.35 Crores upto 31st March 2019the Board of Directors submits that the loan accounts of the Company have been classifiedas Non-Performing Assets (NPA) by the Bankers and some of the Bankers has not chargedinterest on the said accounts and therefore provision for interest has not been made inthe books of accounts. The quantification has been done only for the loans which have notbeen settled.
Pursuant to the consent and certificate received from M/s V. H.Savaliya & Associates Cost Accountants Ahmedabad and as per Section 148 and otherapplicable provisions if any of the Companies Act 2013 read with Companies (Audit andAuditors) Rules 2014 the Board of Directors of the Company has on the recommendation ofthe Audit Committee appointed him as Cost Auditors to conduct the cost audit of theCompany for the financial year ending on 31st March 2020 at a remuneration as mentionedin the notice convening the Annual General Meeting subject to ratification of theremuneration by the Members of the Company.
Maintenance of cost records as specified by the Central Governmentunder sub-section (1) of section 148 of the Companies Act 2013 is required by theCompany and accordingly such accounts and records are made and maintained by the Company.
Pursuant to the provisions of section 204 of the Companies Act 2013read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the Company has appointed M/s. Bharat Prajapati & Co. Company Secretaries inPractice to conduct the Secretarial Audit of the
Company. The Secretarial Audit Report in Form No. MR-3 is annexedherewith as ''Annexure - C" to this Report.
With regard to qualification of the Secretarial Auditor the Board ofDirectors submits as under:
(a) With regard to delay in filing of Cost Audit Report the Companywill ensure to file Cost Auditors Report within the time period as prescribed under theAct.
(b) With regard to optimum combination of executive and Non-ExecutiveDirectors with at least one Woman Director comprising half Board with IndependentDirectors filling up the intermitted vacancy of Woman Director and Independent Directorthe same could be not be done immediately due to pending approval of the Board ofDirectors.
(c) With regard to non-reconstitution of Audit Committee the samecould not be immediately reconstituted due to pending approval of the Board of Directors.Also the NSE has considered the application for waiver of fine favourably and applicationfor waiver of fine is in process at BSE.
(d) With regard to issue of duplicate share certificate one of theExecutive Director had filed his compliant before the SEBI. Thereafter he also filed aspecial civil application before the Hon'ble High Court of Gujarat on the ground that noaction was taken by SEBI. The Hon'ble Gujarat High Court vide its order dated 26th March2019 directed SEBI to decide representation within a period of four weeks. The Board ofDirectors of the Company in their meeting held on 28th May 2019 decided with majoritythat the duplicate share certificate will be issued if the Company does not receive arestrain order of SEBI or any statutory authority within 15 days from the date of saidBoard Meeting. On 22nd June 2019 the Company has issued duplicate share certificates.
(e) With regard to delay in circulation of draft minutes of the BoardMeetings within the prescribed time period the company will ensure to circulate draftminutes within the time line.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNING AND OUTGO:
The information required under the provisions of section 134(3) (m) ofthe Companies Act 2013 read with Rule 8(3) the Companies (Accounts) Rules 2014 withrespect to conservation of energy technology absorptions and foreign exchange earningsand outgo is given in "Annexure - D" which forms part of this Annual Report.
PARTICULARS OF EMPLOYEES:
The information required pursuant to section 197 of the Companies Act2013 read with Rule 5 of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 in respect of the employees are given in "Annexure- E" tothis Annual Report.
The composition terms of the reference and number of meetings &attendance at the Audit Committee held during the financial year is covered in theenclosed Corporate Governance Report.
At the beginning of the year the Audit Committee comprised of Mr.Pratap Mohan Independent Director (Chairman of Audit Committee) Mr. Dinesh MukatiIndependent Director (Member) and Mr. Avinash Bhandari Joint Managing Director & CEO(Member). At the 32nd Annual General Meeting (AGM) of the Shareholders of the Company heldon Friday 28th September 2018 the resolution for re-appointment of Mr. Avinash Bhandari(retired by rotation) was not passed with requisite majority. As such he ceased to be aDirector of the Company and consequently he also ceased to be a Member of the AuditCommittee.
The Board of Directors of the Company in their meeting held on 14thNovember 2018 reconstituted Audit Committee consisting with
(i) Mr. Pratap Mohan Independent Director (Chairman of AuditCommittee)
(ii) Mr. Dinesh Mukati Independent Director (Member)
(iii) Ms. Nivedita Sarda Independent Director (Member) and
(iv) Mr. Siddharth Bhandari Whole-time Director (Member). The NationalStock Exchange of India Limited (NSE) and BSE Limited (BSE) have imposed penalty fornon-compliance of provisions of Regulation 18(1) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 (the 'SEBI Regulations') for the quarter endedon 30th September 2018 and 31st December 2018. The Company by way of abundantpre-caution and without accepting the non-compliance and imposition of fine for allegednon-compliance of Regulation 18(1) of the SEBI Regulations for the quarter ended 30thSeptember 2018 and 31st December 2018 remitted ' 4720/- and ' 103840/- to NSE &BSE respectively. The NSE vide its letter dated 11th April 2019 informed the Companythat the relevant committee of the NSE have examined request and considered applicationfor waiver of fine favorably. The Company has not received further communication from theBSE.
RISK MANAGEMENT POLICY:
The Risk Management Policy adopted by the Board of Directors of theCompany covers the various criteria for identification of key risk action plans tomitigate those risks review and reporting of identified risks on periodical basis etc.
In the opinion of the Board of the Directors of the Company there areelements of risks in the nature of legal cases related to winding up petitions recoveryof dues and possession of assets which may impact the operations of the Company.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS:
Presently there are certain significant and material orders passed bythe regulator / court / tribunal which may impact company's operations in future asmentioned in Note No. 33 of the standalone financial statements which is part of thisAnnual Report in respect of winding up petitions recovery cases and attachment ofproperties against the Company.
In compliance with the provisions of Listing Regulations a separatereport on Corporate Governance along with a certificate from a Practicing CompanySecretary regarding the status of compliance of conditions of corporate governance forms apart of this report.
WHISTLE BLOWER POLICY/VIGIL MECHANISM:
The Company is committed to highest standards of ethical moral andlegal business conduct. Accordingly the Board of Directors has formulated Whistle BlowerPolicy/Vigil Mechanism policy in compliance with the provision of Section 177(10) of theCompanies Act 2013 and Regulation 22 of the Listing Regulations. The policy provides fora framework and process whereby concerns can be raised by its employees against any kindof discrimination harassment victimization or any other unfair practice being adoptedagainst them. More details of the Whistle Blower Policy/ Vigil Mechanism are explained inthe Corporate Governance Report. The Policy of Vigil Mechanism of the company is availableon the website of the Company at www.electrotherm.com .
MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
Pursuant to Regulation 34(2)(e) read with Part B of Schedule V of theListing Regulations Management Discussion and Analysis Report is annexed after theDirectors' Report and form a part of this report.
EXTRACT OF ANNUAL RETURN:
Pursuant to section 143(3)(a) and section 92(3) of the Companies Act2013 the extract of the Annual Return in Form No. MGT-9 is annexed herewith as"Annexure - F" and forms part of this report and same is also available on thewebsite of the Company at www. electrotherm.com.
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITHREFERENCE TO THE FINANCIAL STATEMENTS:
The Company has put in place adequate internal financial controls withreference to the financial statements. During the financial year such internal financialcontrols were operating effectively and it is commensurate with the size scale andcomplexity of the Company and the nature of business of the Company.
During the year under review the Company has complied with theapplicable Secretarial Standards issued by The Institute of Company Secretaries of India.
a) During the year 2018-19 there was no change in authorized sharecapital subscribed and paid-up share capital of the Company. Also there was noreclassification/sub-division in authorized share capital of the Company.
b) There was no reduction of share capital or buy back of shares orchange in capital traction resulting from restructuring.
c) The Company has not issued equity shares with differential rights asto dividend voting or otherwise.
d) The Company has not issued sweat equity shares to its directors oremployees.
e) The Company does not have any Employees Stock Option Scheme for itsEmployees/Directors.
f) During the year 2018-19 the Company has not made allotment of anysecurities as such the requirement for obtaining credit rating was not applicable to thecompany.
g) There is no money lying to unpaid / unclaimed dividend accountpertaining to any of the previous years with the Company. As such the Company is notrequired to transfer such amount to the Investor Education and Protection Fund establishedby the Central Government.
h) The Auditors has not reported any frauds under sub-section (12) ofSection 143 of the Companies Act 2013.
i) The Company has complied with the provisions relating to theconstitution of Internal Complaints Committee under the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and during the financial yearthe Company has not received any complaints under the said Act.
j) Mr. Siddharth Bhandari one of the Promoter and Whole-time Directorand Dr. Rakesh Bhandari one of the Promoter of the Company has filed two separatepetitions before the Hon'ble National Company Law Tribunal Ahmedabad ("NCLT")under section 149 150 152 159 and 176 of the Companies Act 2013 inter alia fordeclaring the appointment of four independent directors as null and void from theirrespective dates of appointment being violative of provisions of section 149 and 150 andother related provisions of the Companies Act 2013 and the Companies (Appointment andQualification of Directors) Rules 2014. All the parties have filed their reply /rejoinder and now the petition is pending before the Hon'ble NCLT for hearing.
k) Mr. Mukesh Bhandari - Chairman & Promoter Mr. SiddharthBhandari - Whole-time Director & Promoter and Dr. Rakesh Bhandari Promoter of theCompany has filed petition before the Hon'ble National Company Law Tribunal Ahmedabad("NCLT") under section 241-242 of the Companies Act 2013 against the CompanyMr. Shailesh Bhandari & Others inter alia for removal of Mr. Shailesh Bhandari fromthe Board and investigation into the ownership of shares by some of the shareholders. Thepetition is pending before the Hon'ble NCLT for admission as well as maintainability. Thefinancial implication of this petition is not ascertainable at this point of time.
Your Directors wish to place on record their appreciation for thevaluable co-operation and support received from the customers and suppliers variousfinancial institutions banks government authorities auditors and shareholders duringthe year under review. Your Directors also wish to place on record their deep sense ofappreciation for the devoted services of the Executives Staff and Workers of the Company.
| || ||For and on behalf of the Board of Directors Electrotherm (India) Limited |
| ||Shailesh Bhandari ||Pratap Mohan |
|Place : Palodia ||Managing Director ||Independent Director |
|Date : 31st August 2019 ||(DIN: 00058866) ||(DIN: 03536047) |