You are here » Home » Companies » Company Overview » Graphite India Ltd

Graphite India Ltd.

BSE: 509488 Sector: Engineering
BSE 00:00 | 21 Jan 515.65 -17.90






NSE 00:00 | 21 Jan 515.45 -18.00






OPEN 531.00
VOLUME 103336
52-Week high 815.35
52-Week low 299.10
P/E 19.99
Mkt Cap.(Rs cr) 10,076
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 531.00
CLOSE 533.55
VOLUME 103336
52-Week high 815.35
52-Week low 299.10
P/E 19.99
Mkt Cap.(Rs cr) 10,076
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Graphite India Ltd. (GRAPHITE) - Director Report

Company director report

The Directors have pleasure in presenting their Forty Fifth AnnualReport together with the audited statement of accounts of the Company for the year ended31st March 2020.

Financial Results

Rs. in Crore

2019-20 2018-19 2019-20 2018-19
Particulars Graphite India Limited Graphite India Limited Consolidated
Revenue from Operations (Gross) 2875 6737 3094 7858
Profit for the year after charging all Expenses but before providing Finance Costs Depreciation Exceptional Items Tax and other Comprehensive Income 61 4403 95 5233
Finance Costs 17 11 18 12
Profit before Depreciation Exceptional Item and Tax 45 4392 77 5221
Depreciation and Amortisation Expense 44 56 51 62
Profit before Share of profit/(loss) of Associate and Tax 1 4336 26 5159
Share of profit/(Loss) of Associate (7) (3)
Profit before Exceptional Items and Tax 1 4336 19 5156
Exceptional Items 55 - 55
Profit before Tax 1 4281 19 5101
Tax Expense for the Current Year
Current Tax 2 1469 6 1654
Deferred Tax (32) 6 (32) 51
Profit for the Year 31 2806 45 3396
Other Comprehensive Income (net of tax) (3) (1) 30 (23)
Total Comprehensive Income for the year 28 2805 75 3373
Statement of Retained Earnings
Retained Earnings at the beginning of the year 3071 1019 3776 1135
Add Profit for the year 31 2806 45 3396
Add Comprehensive Income (3) (1) (3) (1)
Less Final Dividend on Equity Shares 684 234 684 234
Less Dividend Distribution Tax on above 141 48 141 48
Less Interim Dividend on Equity Shares 39 391 39 391
Less Dividend Distribution Tax on above 8 80 8 80
Less Transfer to Reserve Fund - - 1 1
Retained Earnings at the end of the year 2227 3071 2945 3776


Global economic growth declined consecutively for the second year to2.9% in 2019 from 3.0% in 2018 and 3.2% in 2017. During the year global economy continuedto face several headwinds due to escalating US-China trade war heightened geopoliticaltensions along with slower demand and weaker trade investments. In many parts of theworld manufacturing sectors were affected resulting in weaker industrial activity andexports. To provide impetus to the overall subdued economic performance major centralbanks started to ease monetary policy led by Federal Reserve cutting rates three times inthe year.

In the United States growth decelerated to 2.3% from 2.9% in 2018 dueto the US-China trade war slowing investment and exports. The European economy continuedto decline in particular the German manufacturing sector was impacted due to fallingdemand from Asia and disruption in the auto sector. Brexit uncertainty added to thepressure on the European economy in 2019. During the year emerging markets growth wasalso impacted by the global manufacturing activity slowdown lower business spending andtrade restrictions due to ongoing trade negotiations between the countries. At the end of2019 the global economy saw some relief with a pause in additional tariffs between US andChina stability in the UK post Brexit and continued supportive monetary policies acrossthe world.

However the positive momentum at the start of 2020 was short lived dueto the unfortunate outbreak of COVID-19 which turned into a pandemic. The world is facingan unprecedented health crisis which has also ballooned into an economic crisis. Countriesaround the world are taking all necessary measures to contain the pandemic such asfocusing on healthcare services implementing curfews social distancing practices andlockdowns which had brought much of global economic activity to a complete halt. Torestart economic activity the governments are announcing various stimulus packageseasing fiscal and monetary policies providing financial aid to support affectedhouseholds and businesses.

These are extremely challenging times and the ongoing crisis hasimpacted all countries individuals businesses including all industries and sectors andthe path back to normality are likely to be slow. The COVID-19 situation is rapidlyevolving and the actual impact of the pandemic on the global economy and businesses willdepend upon the severity and course of COVID-19 in the near term.

India's GDP growth declined to 4.2% in 2019 from 6.8% in 2018 andfrom the highs of 7.2% in 2017. The growth was impacted mainly due to sluggish privatesector investments slowing consumer demand plunging auto sales and slowdowns in bothreal estate and construction sectors. According to the data released by the Ministry ofStatistics & Programme Implementation (MOSPI) the Index of Industrial Production(IIP) growth during 2019-20 slipped to 0.7% as compared to a 3.8% rise in 2018-19. Thesubdued economic performance resulted in higher unutilized production capacity lowercorporate profits coupled with tightening credit facilities and rising unemployment.

In response to the decelerating economic growth government hasundertaken many supportive measures and made significant policy changes during the yearincluding fiscal measures like corporate tax rate cuts bank recapitalization sectoralreforms to boost core sectors etc. The Reserve Bank of India (RBI) has also announcedprudent monetary policies reduced the policy rates for the sixth consecutive time andmaintained its accommodative monetary policy stance. These measures supported the economyand businesses during 2019 despite the challenging macroeconomic indicators.

The Indian economy faced a major setback with the outbreak of COVID-19pandemic in the month of March 2020. Although the COVID-19 has impacted all countriesaround the world the threat to India was much greater due to its large and densepopulation. The Government of India was quick to respond to this unprecedented healthcrisis and announced the nationwide complete lockdown for 21 days initially which wasfurther extended from time to time to contain the spread of COVID-19. The lockdown wasnecessary to prevent further spread of COVID-19 and save human lives. However thecomplete closure of factories and offices brought all economic activities to a grindinghalt. This pandemic has impacted all industries and sectors disrupting demand and supplybalance. Further reverse migration of labour to their hometown has aggravated thesituation. Due to these challenges corporates and MSMEs have focused on liquidity andcash flow management resulting in cost cutting and temporary scaling back of operations.

In context of the impact of COVID-19 the International Monetary Fund(IMF) has cut its 2020-21 growth projection for India to 1.9% from 5.8% projected inJanuary 2020. Major international ratings agencies like S&P Fitch and Moody'shad also cut India's growth forecast to 0% to 3%. India and China are the only twoeconomies in the world that are not projected to shrink in 2020 even though their growthrates have slowed down considerably. However the actual impact of pandemic on the economywill depend upon severity and course of COVID-19.

Despite the negative outlook for the global and domestic economy theresponsive action by the Indian government with supportive monetary policy are expected toimprove the business environment in India and should help build a better foundation for aneconomic resurgence post COVID-19.


The Company's performance for FY 2019-20 was dismal as compared toits bestever performance during FY 2018-19. Revenue from operations decreased by 57% toRs. 2875 crore for FY 2019-20 as against Rs. 6737 crore in the previous year. PBTdeclined to Rs. 1 crore as against Rs. 4281 crore of previous year which also includesinvestment income of Rs. 45 crore as against Rs. 102 crore in the last year. Theperformance of the Company was significantly impacted due to lower realizations andvolumes due to demand-supply imbalance during the year. The global demand for graphiteelectrodes was weak owing to – (1) overall economy slow down and lower manufacturingactivity leading to production cuts and declining capital investments around the globe;(2) consumption of electrode inventory built-up by the steel industry during FY 2018-19when electrode was in short supply; and (3) re-emergence of supply from China due toincremental electrode capacity coming much ahead of expected increase in steel productionthrough EAF route.

The Company's Graphite and Carbon Segment continues to be the mainsource of revenue and profit for the Company accounting for about 97% of the totalrevenue.


The performance of the German subsidiaries was also dismal during theyear after showing sharp improvement during the previous year due to economic slowdown inthe region lower steel production and consumption of electrode inventory that wasbuilt-up during FY 2018-19 which clearly impacted the demand and prices of electrodes.


Interim dividend @ Rs. 2/- per share on 195375594 equity shares ofRs. 2/- each for the financial year ended 31st March 2020 has been paid before theyear-end. The Board decided not to recommend any final dividend for the said year.


(i) Industry's structure and developments

A. Graphite and Carbon Segment Graphite Electrodes

Graphite Electrode is used in electric arc furnace based steel millsfor conducting current to melt scrap iron and steel and is a consumable for the steelindustry. The principal manufacturers are based in USA Europe India China Malaysia andJapan.

Graphite Electrode demand is primarily linked with the globalproduction of steel in electric arc furnaces which is one of the two basic methods forsteel production i.e. – [1] Blast Furnace (BF); and [2] Electric Arc Furnace (EAF).According to the World Steel Association (WSA) EAFs account for 42% i.e. 416 millionmetric tons (MT) of global crude steel production (excluding China) in 2018. With averageproduction increase of 3.5% per year between 1984 and 2011 EAF steelmaking was thefastest-growing segment of the steel sector based on WSA data. However this growth trendhad reversed between 2011 and 2015 due to global overcapacity in EAF steel productiondriven largely by Chinese BF steel production. Beginning 2016 focused efforts by theChinese government to restructure China's domestic steel industry have led to clampingrestrictions on Chinese BF steel production and lowering of export volumes. AccordinglyChina's share in EAF production which was only 6% of global steel making till 2014through EAF had increased to 9% upto 2018 and is estimated to be higher going forward.

In addition developed economies which typically have much larger EAFsteel industries have instituted a number of protective trade policies to protect itsdomestic steel producers. This revival in EAF steel production had resulted in increaseddemand for graphite electrodes. WSA reported a further growth of 10% in EAF production in2018 on the back of 14% 2017. EAF steel production has its inherent advantages over BF dueto its greater resilience variable cost structure less capital intensive and moreenvironment friendly nature.

Calcined Petroleum Coke and Paste

Graphite India's Coke plant in Barauni Bihar is engaged in themanufacturing of Calcined Petroleum Coke (CPC) Carbon Paste and Electrically CalcinedAnthracite Paste and is one of the several backward integration initiatives of theCompany. Two grades of CPC - aluminium and graphite – are produced. CPC is primarilyused in the manufacture of anodes for use in aluminium smelters manufacture of graphiteelectrodes and also used as carburiser in steel. The division also manufactures fourgrades of Paste i.e. Electrode Paste based on either CPC or Electrically CalcinedAnthracite Coal (ECAC) and Tamping Paste based on either CPC or ECAC. Electrode Paste isused in Ferro Alloy Smelters and Tamping Paste is used as a lining material in submergedarc furnaces.

This division's performance has declined this year because ofrecessionary market condition in its user industries namely steel aluminium and graphiteelectrodes.

Impervious Graphite Equipment

The Impervious Graphite Equipment (IGE) Division is engaged in thedesign manufacture and supply of Impervious Graphite Heat and Mass Transfer Equipment andTurnkey systems. The product range includes Graphite Heat Exchangers in Shell and Tubetype and Poly-Block type construction Turnkey systems like HCL synthesis units and DryGas generation units Absorbers and Absorption systems Graphite Columns Dilution andCooling units Vacuum Ejector systems H2SO4 Graphite Bursting Discs and accessories.

Impervious graphite is an ideal material of construction for corrosive"process fluids" and finds wide application in industries like Chloro-AlkaliChlorinated Organic Chemicals Phosphoric Acid Fertilizers Steel Pickling MetalProcessing Polymers like VCM Polycarbonate and Caprolactum Drug Intermediates etc.

Over the years the Company has built this product line into a reliablebrand with a reputation for prompt service good quality and consistent performance byinvesting in strengthening its core competencies. Domestic chemical industry has beendoing well for last three years. During the year some major orders were received both fromdomestic and export markets and it is expected the momentum will continue.

B. Other Segments

Glass Reinforced Plastic Pipes (GRP)

GRP Division is engaged in manufacturing of large diameter Glass FibreReinforced Plastic Pipes as well as Pipe-liners for rehabilitation of old pipes/ducts.Product is manufactured by continuous filament winding process with computerized advancedtechnology comparable to other plants worldwide. The plant operations are dependent upontenders floated by government/semi-government authorities.

Steel Segment

Powmex Steels Division (PSD) is engaged in the business ofmanufacturing high speed steel and alloy steel having its plant at Titilagarh in the Stateof Orissa. PSD is the single largest manufacturer of High Speed Steel (HSS) in thecountry. HSS is used in the manufacture of cutting tools such as drills taps millingcutters reamers hobs and broaches. HSS cutting tools are essentially used in – (a)automotive; (b) machine tools; (c) aviation; and (d) retail market. The industry ischaracterised by one good quality manufacturer of HSS viz.

PSD faces competition from small domestic producers and cheap importsfrom overseas manufacturers.

During the year the Government of India issued a notificationimposing Anti-dumping Duty on imports of HSS products from certain countries who wereindulging in unfair competition by dumping such products into India. This should providesome relief to PSD going forward.

18 MW Hydel Power Facility

The Company has an installed capacity of 18 MW of power generationthrough Hydel route which was used for captive consumption. However with closure ofBengaluru operations approval has been obtained for third party sale.

(ii) Opportunities and threats

During 2019 India continued to maintain its position as the secondlargest steel producer with crude steel production of 111.2 million tonnes (MT)registering a growth of 1.8% over 2018. India contributes 6% to total world crude steelproduction. The country was net exporter of total finished steel during 2018 however itbecame net importer during 2019 with total imports of 7.83 MT and exports of 6.36 MT. Percapita finished steel consumption in India rose marginally to 75.7 Kg as compared to 73.3Kg in 2018.

Indian steel industry during 2019 was impacted by global economicslowdown amidst the heightened US-China trade war. India is vulnerable to cheaper importsand consumption of steel was also impacted due to overall slowdown in key sectors. Indianautomotive industry is the largest manufacturer of two wheelers three wheelers andtractors and fourth largest producer of passenger vehicles and one of the largestcontributor to steel demand is going through a massive slowdown. The real estate sectorhas been suffering from inventory overhang over the past few years resulting in a lowerdemand for capital goods and heavy machinery. Lower spending in infrastructure projectshas impacted the overall steel demand and consumption. The decline in domestic steelconsumption and decrease in investment across sectors have affected the overall growth andprofitability of the steel industry. In order to promote domestic steel industry Indiangovernment has introduced various policy measures including Steel Scrap Recycling Policyaimed at reducing import reduction in export duty levied on iron-ore and increased importduty on most steel items along with approval for the National Steel Policy (NSP) 2017 tocreate a globally competitive steel industry in India.

However with the sudden outbreak of COVID-19 world crude steelproduction declined by 6% year on year to 147.1 MT in March 2020 due to production cut byauto and construction industries. India also took preventive measures such as a completelockdown closure of factories and offices impacting the overall steel production anddemand. According to India Ratings global steel sector is staring at increased downsiderisks in near-term following this pandemic and Indian companies may face pricingpressures in the near term. There are near term challenges such as lower steel demand andproduction however with the recent announcement of Atmanirbhar Bharat package byGovernment of India it is expected that increased government spending on Indianinfrastructure development and revival of key sectors such as construction miningcapital goods and automobile will lead to increased demand for steel in India.

China crude steel production increased by 8.3% to 996.3 MT and share ofglobal crude steel production increased to 53.3% in 2019 as compared to 50.9% in2018.China's steel capacity expanded in 2019 with new capacity commissioned through EAFroute after the closure of blast furnace capacities during 2016-2018 in an attempt to curbpollution. However incremental steel production was absorbed internally by China on theback of robust steel demand from property construction sector and resulting in a declineof finished steel exports by 7.3% in 2019.In 2020 there have been clear signs that steeldemand and consumption is impacted by the outbreak of Coronavirus. Chinese domestic marketwill continue to face several challenges due to high steel production inventory builduplower demand from manufacturing and construction sector and limited opportunities forexports. With the worldwide spread of COVID-19 export of steel from China will beimpacted due to various safety and precautionary policies adopted by countries worldwide.

EAF steelmaking which uses graphite electrodes as an essentialconsumable had declined between 2011 and 2015 as Chinese steel production which ispredominantly BF based grew significantly taking market share from EAF steel producers.Beginning 2016 efforts by the Chinese government to eliminate excess steel makingproduction capacity and improve environmental and health conditions have led torestrictions on Chinese BF steel production. This also included the closure of over 200million MT of its steel production capacity based on data from S&P Global Platts andthe Ministry of Commerce of the People's Republic of China. In 2017 Chinese steelexports fell by more than 30%. Chinese steel exports continued to decline further at 8% in2018 according to the National Bureau of Statistics of China reflecting the reduction insteel production capacity. As a result the historical growth trend of EAF steelmakingrelative to the overall steel market resumed and has led to an increased demand forgraphite electrodes. Prior to this improvement in demand the electrode industryexperienced an extended five-year downturn. At the same time consolidation andrationalization of graphite electrode production capacity limited the ability of graphiteelectrode producers to meet this demand.

The Company is closely monitoring the recent developments and theimpact of Coronavirus on the industry and business. Opportunities in the near terminclude(a) renewed focus on Make in India initiatives and stringent import policies willlead to the revival of key sectors in the medium term and is expected to boost the demandfor steel in India; (b) lower exports from China to India and globally will allow Indiansteel companies to tap in export opportunities; and (c) lower exports from China to theworld especially to the regions such as Europe and North America which has higher EAFcapacities will lead to revival of domestic steel industries and higher demand forgraphite electrodes.

The threats in the near terms include (a) an unprecedented health andeconomic crisis caused by COVID-19 impacting global economies and as per IMF the globaleconomy is expected to contract by 3% in 2020; (b) prolonged lockdowns will continue toimpact all industries and sectors in the near term; (c) lower pace of inventory clearancewill put further downward pressure on prices and steel demand globally; and (d)sustainability and pace of recovery of economic activities and economies around the worldwill depend upon the severity and course of COVID-19.

Graphite India is well positioned with its strong balance sheet andlongstanding customer relationship. The Company remains fully confident of not onlynavigating successfully through these unprecedented times but also emerging stronger.

(iii) Segment-wise Performance Revenue of the Company

The revenue from operations amounted to Rs. 2875 crore as against Rs.6737 crore in the previous year.

Aggregate Export Revenue of all divisions together was Rs.1345 croreas against Rs. 3058 crore in the previous year.

Graphite and Carbon Segment

The performance of the segment was not satisfactory in 2019-20 ascompared to exceptionally commendable performance in FY 2018-19.

Production of Graphite Electrodes and Other Miscellaneous Carbon andGraphite Products during the year under review was 63088 Mt against 91480 Mt in theprevious year. Production of Calcined Petroleum Coke during the year was 27315 MT asagainst 28464 MT in the previous year. Production of Carbon Paste during the year was4453 MT against 4849 MT in the previous year.

Production of Impervious Graphite Equipment (IGE) and spares during theyear was 1749 MT as against 1835 MT in the previous year.

The segment revenue decreased to Rs. 2780 crore from Rs. 6575 crorein the previous year with decline in domestic and export sales on value terms. Segmentrecorded loss of Rs. 77 crore in FY 2019-20 from profit of Rs. 4251 crore in FY 2018-19.

Other Segments

GRP division produced 1513 MT pipes as against 5692 MT in theprevious year.

Production of HSS and Alloy Steels was 1327 MT during the year asagainst 1954 MT in the previous year. Power generated from captive Hydel Power Plant of18 MW capacity amounted to 49.69 million units during the year as against 52.88 millionunits in the previous year. Unit sold 25.20 million unit during the year as against Nil in2018-19.

(iv) Outlook

As per the World Steel Association (WSA) global crude steel productionreached 1869.9 MT for the year 2019 up 3.4% compared to 2018. Crude steel productioncontracted in all regions in 2019 except in Asia and the Middle East. Annual production ofcrude steel for Asia was 1341.6 MT in 2019 representing an increase of 5.7% compared to2018.This growth was mainly driven by China which expanded by 8.3% whereas Indiaregistered a modest increase of 1.8% year on year.

World crude steel production was 443.0 MT in the first three months of2020 down by 1.4% compared to the same period in 2019. Asia produced 315.2 MT of crudesteel in the first quarter of 2020 a decrease of 0.3% over the first quarter of 2019. TheEuropean Union produced 38.3 MT of crude steel in the first quarter of 2020 down by 10.0%compared to the same quarter of 2019. China produced 231.7 MT of crude steel in firstquarter of 2020 an increase of 1.2% compared to same period in 2019. India is estimatedto produce 29.1 MT of crude steel in first quarter of 2020 a decline of 5.3% compared tosame period in 2019.

China's rapid increase in BF steel production between 2000 and2016 has also created a significant new source of scrap. The closure of BF steel capacityis being replaced by environment friendly EAFs. As a result of these factors it isexpected that total UHP graphite electrode demand in China will increase going forward.

The graphite electrode industry has historically followed the growth ofthe EAF steel industry and to a lesser extent the steel industry as a whole which hasbeen highly cyclical and affected significantly by general economic conditions.Historically EAF steel production has grown faster than the overall steel output due toits greater resilience more variable cost structure lower capital intensity and moreenvironmentally friendly nature.

The Company remains confident in the long-term growth trajectory of EAFsteel production. Global warming and other environmental concerns are critical issuesfacing the society and companies globally and the EAF steelmakers are among the largestrecycling industry in the world. EAF steel making produces 75% less carbon emissions thantraditional blast oxygen furnace steel making.

Due to coronavirus pandemic the global steel industry is also beingimpacted resulting in force majeure claims by customers disruption in supply chains andlower demand from key sectors such as capital goods construction and automobile.Volatility in the financial markets and significant decline in oil prices has furtherimpacted the business sentiment and investment.

In 2019 the growth in steel demand was lower than expected primarilydue to the escalated US-China trade war lower industrial and manufacturing activity andweaker exports. The global steel demand is expected to further decline in the secondquarter of 2020 due to prolonged lockdowns and weaker economic activity worldwide. Giventhe uncertainty on the course that COVID-19 will take in the near term the full impact onsteel industry is difficult to assess.

The recovery of economic activity around the globe from the currentcrisis is expected to be slow and will critically depend on the duration of the lockdownand severity of the outbreak. The manufacturing sector is expected to be quicker torebound compared to other sectors but supply chain disruptions are expected to continuefor some time.

Despite the near-term challenges the Indian economy is expected torebound at a faster pace with a clear focus to make India self-reliant. This will give themuch needed impetus to the Indian manufacturing sector. With recovery in key sectors suchas infrastructure construction automobile and mining the demand for steel in India isexpected to rebound. Furthermore lower exports of steel from China due to higher domesticconsumption coupled with precautionary policies adopted by countries worldwide due to theoutbreak of COVID-19 will allow Indian steel companies to tap the export markets. Theliquidation of graphite electrode inventory in the short term and increased steel demandand production in line with the economic activity rebound post COVID-19 will bode wellfor graphite electrode industry.

(v) Risks and Concerns

The cyclical nature of steel demand production through the EAF routeand volatility in the cost of input materials has always been key risk and concern for theCompany.

Graphite India sells its products to the steel manufacturers using theEAF route. The steel industry historically has been highly cyclical and is affectedsignificantly by macroeconomic conditions. Major customers for the steel industry includecompanies in the automotive construction appliance machinery equipment andtransportation industries. In the recent past these industries were negatively impactedby the general economic downturn and the deterioration in the financial markets includingrestricted liquidity and credit availability. Due to the general economic downturn anddeterioration in financial markets during the subprime crisis in 2008 and 2009 the EAFsteel production had declined by 17%. EAF steel production further declined by 10% between2011 to 2015 due to global steel production overcapacity driven largely by Chinese BFsteel production. Since 2016 however the EAF steel market has experienced a strongrebound and resumed its medium to long-term growth trajectory. Customers including majorsteel producers have in the past experienced and may again experience downturns orfinancial distress that could adversely impact the Company. Global graphite electrodeovercapacity has adversely impacted graphite electrode prices in the past. The pricingdowntrend has resumed after a sharp upswing seen in 2017and 2018 thus adverselyimpacting sales margins and profitability. Pricing for graphite electrodes hashistorically been cyclical and current prices are receding from highs noted in 2018-19and the price of graphite electrodes are expected to decline further in the future. Theperformance of the Company is sensitive to economic conditions and a downturn in economicconditions may adversely affect business.

Petroleum needle coke is the primary raw material used in theproduction of graphite electrodes. Supply of petroleum needle coke has been limited sincethe second half of 2017 as the demand has outpaced supply. This is due to the increasingdemand for the production of lithium-ion batteries used in electric vehicles. Theperformance of the Company is also dependent on the price and timely availability ofpetroleum needle coke. The price of needle coke has softened to some extent due to generalslowdown in demand from the end user industry. Similarly the availability and price ofother materials and energy cost may impact the operations and margins of the Company.

Exports to specific regions may be severely impacted by trade barriersin the form of crippling import duties anti dumping duties countervailing duties orsanctions as the case may be and our export volumes to specific markets could get majorlyaffected by such protectionist/restrictive impositions.

The Company has an optimum exposure to exports imports and is a netforeign exchange earner. Volatility in foreign currency market directly impacts theCompany's prospects. Inherent natural hedge of various balancing exposures maymitigate the risk to an extent.

The evolution of the COVID-19 pandemic remains uncertain. The recoveryof the global economy could be weaker than expected after the spread of the virus slowsdown for a number of other reasons. These include lingering uncertainty about contagionloss of business and consumer confidence establishment closures and structural shifts infirm and household behavior leading to more lasting supply chain disruptions and weaknessin aggregate demand.

The repercussions of reduced investment and bankruptcies may run moreextensively through the economies. Depending on the duration global business confidencecould be severely affected leading to weaker investment and growth than projected in thebaseline. Related to the uncertainty around COVID-19 an extended risk-off episode infinancial markets and tightening of financial conditions could cause deeper andlonger-lasting downturns in a number of countries.

The Ministry of Home Affairs Government of India on 24th March 2020notified the first ever nation-wide lockdown throughout India to contain the outbreak ofCOVID-19. In line with the health guidelines the Company implemented several mandated andprecautionary measures such as allowing all employees to work from home while promotingaudio-video conferencing for all internal and external meetings.

The Company shut its factories and offices to ensure the well-being ofall employees and other stakeholders. Further operations of the Company's Germansubsidiaries were also temporarily disrupted with lockdown beginning third week of March2020. The operations in India and Germany resumed partially between April and May 2020after taking requisite permissions from the government authorities wherever required. TheCompany remains fully committed in ensuring the well-being and safety of its workforce andhas adopted various safety measures at the manufacturing facilities including socialdistancing while at work temperature screening at regular intervals providing sanitizersat work place and mask distribution.

The pandemic is rapidly evolving and government has extended lockdownmultiple times and with some relaxation from the second week of May 2020 the economicactivity has restarted but at a lower pace. The supply chain has also been disrupted dueto inter-state restrictions and reverse migration of labour adding to the challenges.Amidst the ongoing crisis the Company is operating at a lower capacity and will scale upits operation after carefully assessing the course of COVID-19 in the near term.

(vi) Internal control systems and their adequacy

The Company has proper and adequate systems of internal controls.Internal audit is conducted by outside auditing firms. The Internal audit reports arereviewed by the top management and the Audit Committee and timely remedial measures areensured.

(vii) Discussion on financial performance with respect to operationalperformance

Revenue from Operations recorded Rs. 2875 crore as against Rs. 6737crore in the previous year. Profit after tax was Rs. 31 crore as against Rs. 2806 crorein the previous year. Profit before tax was lower at Rs. 1 crore as compared to Rs. 4281crore in the previous year. Borrowing at Rs. 416 crore was higher than Rs. 359 crore inthe previous year and the Finance Cost increased to Rs. 17 crore from Rs. 11 crore in theprevious year. Capital expenditure during the year amounted to Rs. 32 crore as against Rs.29 crore in the previous year.

The Company is a net foreign exchange earner.

ICRA has reaffirmed the long term rating at [ICRA] ‘AA+'(pronounced ICRA double A plus) but outlook on the long term rating has been revised tonegative from stable. The short-term debt programme rating has been reaffirmed at [ICRA]'A1+' (pronounced ICRA A one plus). This rating indicates highest-credit-quality. Theretention of these ratings reflects comfortable financial risk profile characterized bylow gearing strong coverage indicators and the financial flexibility emanating from largeliquid investment portfolio. Details of contingent liabilities are given in Note 34 to theFinancial Statements.

(viii) Material developments in Human Resources / Industrial Relationsfront including number of people employed

The HRD policies and practices focus on contemporary and pragmaticpeople centric initiatives aligning those with business vision and objectives whichprimarily help in creating robust organisational structure and aims at optimum utilisationof human resources.

The Training and Development Programmes encompassing the competencybuilding initiatives amongst employees at all levels continues to be an ongoing processwith major focus on improving employees' effectiveness towards achievingCompany's business objectives. Employees are being oriented to improve value additionwhile ensuring that routine jobs are carried out seamlessly. Emphasis is being given tofurther improve team approach within functions.

Leadership development at middle and senior level is being ensured inorder to prepare future leaders in the Organization and to ensure smooth seamlesssuccession.

The total number of permanent employees in the Company is 1744 as on31st March 2020.

The employee relations continue to be cordial and harmonious at all thelocations of the Company.

(ix) Significant changes (i.e. change of 25% or more as compared to theimmediately previous financial year) in key financial ratios along with explanations areas under :-

Sl. No. Particulars 2019-20 2018-19 Improvement / (deterioration)
1 Debtors Turnover - (Debtors / Revenue from Operations) - (Days) 51 38 (34%)
2 Inventory Turnover-(Revenue from Operations / Inventory)- (Days 153 99 (55%)
3 Interest Coverage Ratio - (Finance cost / PBIDT) % 3.65 404.26 (99%)
4 Current Ratio - (current assets / current Liabilities) 4.56 4.19 9%
5 Debt Equity Ratio- (Debts/Total Equity) -Times 0.11:1 0.08: 1 (38%)
6 Operating Profit Margin- (PBDIT/ Total Revenue) % 2.06 63.49 (97%)
7 Net Profit Margin - (PAT/ Total Revenue) % 1.03 40.47 (97%)
8 Return on Net worth - (PAT/ Net worth) % 0.82 60.29 (99%)

Explanations :-

The Company had recorded the best ever performance during FY 2018-19which substantially deteriorated during FY 2019-2020 principally due to subdued demand andadverse price movements in the electrode market witnessed during the year. The performancehas led to longer credit terms with customers increase in inventory levels substantialfall in margin and return indicators as above. Increased working capital requirementshave led to a higher debt equity ratio. However current ratio improved due to higherliquidation of liabilities.

Transaction of the Company with any person or entity belonging to thepromoter/promoter group which hold(s) 10% or more shareholding in the listed entity isgiven below :-

Emerald Company Private Limited (ECPL) (An entity of the promoterGroup holding 61.25% of the share capital)

2019-20 2018-19
(Rs. Cr.) (Rs. Cr.)
Dividend Paid 442.44 382.65

Bengaluru Plant

After paying off all dues to the manpower that was engaged in theBengaluru plant the Company obtained approval from the Governmental authorities topermanently close the said plant.

Research and Development

The Company's initiatives in R & D continual improvementtechnology upgradation and import substitution are aligned with the Government ofIndia's ‘Make in India' policy. This has helped the Company establishitself as one of the most preferred "High Quality Low Cost" supplier of graphiteelectrodes and carbon substitutes.

R&D activities are mainly concentrated in the areas of new productdevelopment process and productivity improvements and reduction in carbon emission etc.

Continuous efforts are made to develop import substitute materials forAeronautical Aerospace Railway and other industrial applications. Continual processdevelopment activities are towards producing superior version of carbon brake pads foraircrafts and helicopters.

These R&D efforts were continuous and by bench marking theoperational efficiencies of manufacturing facilities at different locations steps weretaken for process improvement and achieving operational synergies. The focus is on furtherdevelopment and upgrading of standards/norms.

Subsidiary Companies

Carbon Finance Limited is a wholly owned Indian subsidiary. GraphiteInternational The Netherlands is a wholly owned overseas subsidiary Company whichis the holding company of four subsidiaries in Germany (viz) Graphite Cova GmbH BavariaElectrodes GmbH Bavaria Carbon Specialities GmbH Bavaria Carbon Holdings GmbH.

The overseas subsidiaries recorded a turnover of Euro 51.06 Mn ascompared to Euro 161.28 Mn in the previous year. The subsidiaries have not performed welldue to adverse demand conditions and consequent decrease in prices resulting in lowerprofit of Euro 0.50 mn as against Euro 73.63 mn in the previous year.

The Company by way of Royalty earned Rs. 4.66 crore during the yearas against Rs. 17.86 crore in the previous year from overseas subsidiary.

Statement containing salient features of the financial statements ofsubsidiaries is enclosed - Annexure 1.

The Consolidated Financial Statements of the Company along with thoseof its subsidiaries prepared as per IndAS 110 forms a part of this Annual Report.

Associate Company

General Graphene Corporation USA is an associate company. As on 31stMarch 2020 investment of USD 13.98 million (39.43% of capital) has been made in thecompany. The investments in General Graphene is accounted for using the equity method asper Ind AS 28.

No Company has ceased to be a subsidiary of the Company during theyear.

Information pursuant to Section 134 of the Companies Act 2013 a.Extract of the annual return as provided under Section 92 (3) of Companies Act 2013 isenclosed-

Annexure 2. b. Five meetings of the Board of Directors of theCompany were held during the year on 8th May 2019 18th May 2019 12th August 2019 30thOctober 2019 and 14th February 2020. c. All the Independent Directors of the company havefurnished declarations that they satisfy the requirement of Section 149 (6) of theCompanies Act 2013. d. Relevant extracts of the Company's policy on directorsappointment and remuneration including criteria for determining qualifications positiveattributes independence of a director and other matters provided in section 178(3) ofCompanies Act 2013 is enclosed -

Annexure 3.

e. There is no qualification reservation or adverse remark ordisclaimer made by the statutory auditor in his audit report and by Company Secretary inpractice in the secretarial audit report and hence no explanations or comments by theBoard are required. f. Particulars of loans guarantees or investments under Section 186of Companies Act 2013 is enclosed -

Annexure 4.

g. Particulars of contracts or arrangements with related partiesreferred to in Section 188(1) of Companies Act 2013 is enclosed -

Annexure 5.

h. Details of conservation of energy technology absorption foreignexchange earnings and outgo as prescribed vide Rule 8(3) of Companies (Accounts) Rules2014 is enclosed –

Annexure 6.

i. Risk management policy has been developed and implemented. The Boardis kept informed of the risk mitigation measures being taken through half yearly riskmitigation reports / Operations Report. There are no current risks which threaten theexistence of the Company.

j. Corporate Social Responsibility (CSR)

As part of its CSR activities the Company has initiated projects aimedat promoting education employment enhancing vocational skills livelihood enhancementprojects healthcare initiatives etc. as detailed in the CSR annual report for the yearended 31st March 2020 which forms part of this report –

Annexure 7.

The CSR policy has been displayed on Company and can be viewed on

k. Formal annual evaluation has been made by the Board of its ownperformance and that of its Committees and individual directors on the basis of a set ofcriterias framed and approved by the Nomination and Remuneration Committee / Board.

l. The Company has adopted a Vigil Mechanism which has been posted onthe Company's website and can be viewed on m. The Company does not accept deposits from public.

n. There were no significant and material orders passed by theregulators or courts or tribunals impacting the going concern status and company'soperations in future.

Disclosures pursuant to Section 197(12) of Companies Act 2013 readwith Rule 5(1) Rule 5(2) and Rule 5(3) of Companies (Appointment & Remuneration ofManagerial Personnel) Rules 2014 are contained in Annexures 8 and 9.

o. Dividend Distribution Policy is enclosed - Annexure

10. The same can also be viewed on


Mr. K. K. Bangur retires by rotation in this Annual General Meeting(AGM) and being eligible offers himself for re appointment.

The Board of Directors (Board) on the recommendation of the Nomination& Remuneration Committee (NRC) accepted the request of Mr. M. B. Gadgil to retire on31st March 2020 as Whole time Director (designated as "Executive Director") ofthe Company. Mr. M. B. Gadgil accordingly ceased to be a Whole time director (designatedas "Executive Director') and consequently as a Director of the Company from 1stApril 2020. The Board on the recommendation of the NRC appointed Mr. Ashutosh DixitPresident of the Company as (a) an Additional Director of the Company from 1st April 2020to hold office till the conclusion of the ensuing AGM; (b) as Whole time Director(designated as "Executive Director") for a period of five years from 1st April2020 subject to approval of the members in the ensuing AGM.

A resolution for his appointment as a Director not liable to retire byrotation has been included in the notice convening the 45th Annual General Meeting of theCompany.

The five year term of office of Mr. Gaurav Swarup as an IndependentDirector of the Company expires on 10th August 2020. The Board in the meeting held on 9thJune 2020 on the recommendation of the NRC re-appointed Mr. Gaurav Swarup as anIndependent Director for a second consecutive term of five years from 11th August 2020upto 10th August 2025 subject to approval of the members of the Company in the ensuingAGM.


The Company continues to enjoy the status of a Star Trading House.

This year the Company received the following awards for exportperformance -

• from CAPEXIL : Top Export Award for 2015-16 Special Export Awardfor 2016-17


Pursuant to the provisions of Section 134(5) of the Companies Act2013 the Directors state that-(a) In the preparation of the annual accounts theapplicable accounting standards had been followed; (b) The directors have selectedsuch accounting policies and applied them consistently and made judgments and estimatesthat are reasonable and prudent so as to give a true and fair view of the state of affairsof the Company at the end of the financial year and of the profit and loss of the Companyfor that period; (c) The directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the company and for preventing and detecting fraud andother irregularities; (d) The directors have prepared the annual accounts on agoing concern basis; (e) The directors have laid down internal financial controlsto be followed by the company and that such internal financial controls are adequate andwere operating effectively; and (f) The directors have devised proper systems toensure compliance with the provisions of all applicable laws and that such systems wereadequate and operating effectively.

Corporate Governance Report

A Report on Corporate Governance along with a Certificate of Compliancefrom the Auditors forms part of this Report -

Annexure 11

Business Responsibility Report (BRR) forms part of our Annual Report. -Annexure 12


S. R. Batliboi & Co. LLP Chartered Accountants was appointed asAuditors of the Company for a period of five (5) years at the 42nd AGM held on 4thAugust 2017. They have confirmed that they are not disqualified from continuing asAuditors of the Company.

Cost Auditors

The Company had appointed following Cost Auditors for FY 2019-20 whowill conduct cost audit in respect of accounts and records made and maintained by theCompany as required u/s 148(1) of Companies Act 2013 as detailed

Shome & Banerjee Electrode plants at Durgapur & Bangalore and Power generation facilities at Chunchanakatte &
Deodhar-Joshi & Electrode IGE and GRP plants at
Associates Nashik.
B G Chowdhury & Co. Coke division at Barauni
N Radhakrishnan & Co. Powmex Steels division at

Consolidated Cost Audit Report for FY 2018-19 was filed with theMinistry of Corporate Affairs Government of India on 7th September 2019.

Above-mentioned Cost Auditors have been appointed to conduct cost auditfor the following divisions for FY 2020-21.

Shome & Banerjee Electrode plant at Durgapur and Power generation facilities at Chunchanakatte & Mandya
Deodhar-Joshi & Associates Electrode IGE and GRP plants at Nashik.
B G Chowdhury & Co. Coke division at Barauni
N Radhakrishnan & Co. Powmex Steels division at Titilagarh

Secretarial Audit/Compliance Report

Secretarial Audit Report and Secretarial Compliance Report for FY2019-20 received from M/s. P. S. & Associates Practicing Company Secretaries areannexed herewith - Annexure 13 and 14.

Secretarial Standards

The Company is in compliance of all applicable Secretarial Standards asspecified by the Institute of Company Secretaries of India.

Prevention of Sexual Harassment of Women at Workplace

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.


Your directors place on record their appreciation of the assistance andsupport extended by all government authorities financial institutions banksconsultants solicitors and shareholders of the Company. The directors express theirappreciation of the dedicated and sincere services rendered by employees of the Company.

On behalf of the Board
Kolkata K. K. Bangur
June 9 2020 Chairman