HARYANA STEEL AND ALLOYS LIMITED
ANNUAL REPORT 2006-2007
DIRECTORS' REPORT
The Directors present their 37th Annual Report on the operations and
results of the Company for the ended 31st March, 2007.
Rupees in Lacs
2006-2007 2005-2006
FINANCIAL RESULTS:
(a) Profit/(Loss) before Tax & Depreciation (1018.87) (177.27)
(b) Less: Depreciation 99.04 99.72
(c) Profit/(Loss) before Tax (1117.91) (276.99)
(d) Provision for Tax (FBT) 1.41 1.51
(e) Profit/(Loss) after Tax & Depreciation (1119.32) (278.50)
(f) Appropriations:
(i) (Profit)/Loss carried to Balance Sheet 1119.32 278.50
(ii) Loss as per Last Balance Sheet 3514.03 3235.54
4633.35 3514.04
OPERATIONS & RESULTS:
The production of Stainless Steel. M.S. Steel, Alloy Steel & Non-Alloy
Steel Billets/Ingots/Flats; etc., during the year was 17983 MT as against
16431 MT during the previous year. The total turnover during the year was
Rs.7468.89 Lac as against Rs. 5465.86 Lac during the Previous year. This
shows increase in Production & Turnover.
Your Company has Incurred a loss before tax and depreciation of Rs. 1018.87
lac against the loss of Rs. 177.27 lac during the previous year. Loss after
tax & depreciation was Rs. 1119.32 lac against a loss of Rs. 278.50 lac
during previous year. This loss was mainly due to significant increase in
the prices of key raw material such as metallic scrap, ferro alloys and
Petroleum products and freight rates during the year in comparison with the
steel prices. Your company has been declared a Sick Company as defined
under Section 3(1)(O) of the Sick industrial Companies (Special Provision)
Act, 1985 by the Hon'ble BIFR vide its order acted 19.4.2006. Industrial
Investment Bank of India (HBO was appointed as an operating agency by the
Hon'ble Bench which was subsequently replaced by Industrial Development
Bank of India (IDBI) vide its order dated 17.04.2007.
There has been a material change affecting the financial position of the
Company which nave occurred between the end of the financial year of the
company to which the Balance Sheet relates and the date of the report Price
of the Mrs. Scrap and other inputs like Ferro-chrome, Ferro-manganese,
Ferro-silicon, Copper increased significantly while there was marginal
increase in the prices of output. Price of even could not increase due to
appreciation in the value of Rupee which forced the exports TO divert their
produce in the local market resulting a further decrease in selling price.
All these factors led the management to suspend the production from
03.06.2007 till the situation improves.
DIVIDEND:
In view of the accumulated losses of the Company the Directors regret
their inability to recommend any dividend for the year under review.
FIXED DEPOSITS:
As on 31.03.2007 no deposits from the public or shareholders was
outstanding.
DIRECTORS:
In accordance with the provisions of Articles of Association of the Company
Smt. Ranjit Kaur retire by rotation and is eligible for re-election. Shri
Suman Khandelwal and Shri H.L. Arora have resigned of Board on 19-6-2006
respectivly. The Board has appreciated their contrubution during their as
Directors. Further, Shri Rakesh Rowat has resigned from the post of
Managing Director W.e.f, 24-7-2006 and he is still an ordinary director of
the company.
AUDITORS REPORT:
The Auditors in their report have referred to Note Nos. B-2, B-3, B-6, B-
7(a), B-7(b), B-12 B-13, B-21(a) B-21(b) B-22 & B-25 (c) of Notes to the
Accounts. The explanation contained in these notes may be told as
information/explanation submitted by the Board as contemplated in Section
217 (3) of the companies act, 1956.
AUDITORS:
The Auditors of Company M/s. P. C. Bindal & Co. Chartered Accountants, New
Delhi who retire at this meeting eligible have signified their willingness
to act in that capacity. if re-appointed.
LISTING AGREEMENTS:
The company securities are listed at Delhi, Mumbai & Calcutta Stock
Exchanges. The company has paid Annual Listing Fee to all, these Stock
Exchanges upto the financial year 2007-2008.
PARTICULARS OF EMPLOYEES:
No employees of the Company was in receipt of remuneration exceeding the
limits prescribed under section of the Companies Act, 1956 and the rules
framed there under, as amended to date.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS
AND OUTGO:
Necessary equipments for the recovery of waste, heat and other measures are
taken resulting in saving of energy.
Information in accordance with the provisions of Section 217(1)(e) of the
Companies Act, 1956 of Particulars in the report of Board of Directors read
with companies (Disclosure of the particulars in the Board of the
Directors) Rules, 1988,regarding conservation of energy technology,
absorption and foreign exchange earnings & out-go is given in the Annexures
marked I & II.
DIRECTORS' RESPONSIBILITY STATEMENT:
In accordance with the provisions of Section 217(2AA) of the Companies Act,
1956, your Directors state:
i) That In the preparation of the Annual accounts the applicable accounting
standards have been followed alongwith proper explanation relating to
material departures;
ii) That your Directors have Selected such accounting policies and applied
them consistently and made judgements and estimate that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for that period;
iii) That your Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of your Company and for
preventing and detecting fraud and other irregularities; and
iv) That your Directors have prepared the annual account on a going concern
basis.
CORPORATE GOVERNANCE REPORT:
The Director affirm their commitments to the Corporate Governance standards
prescribed by the SEBI.
Pursuant to Clause 49 of the Listing Agreement, Management Discussion and
Analysis report on Corporate Governance and Auditors Certificates on
compliance of mandatory requirements of Corporate Governance are given as
an annexure to this Report.
APPRECIATION:
Your Directors wish to place on record their appreciation to employees at
all levels for their co-operation. The Directors would also like to
acknowledge the continued support of the Company's Shareholders Customers
and Suppliers.
Dated : 27th August, 2007 By order of the Board
Registered Office:
48th K. M., G. T. Read, Rakesh Rawat Ramesh Rawat
Murthal, Sonepat Director Whole-Time Director
(Haryana)
ANNEXURE-I
FORM - A (SEE RULE 2)
FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY:
A. POWER AND FUEL CONSUMPTION:
1. ELECTRICITY 2006-2007 2005-2006
a) Purchased
- Unit (000 Kwh.) 18141 17786
- Total Amount (Rs. In lac) 812.01 797.19
- Rate/Unit (Rs./Kwh.) 4,48 4,48
b) Own Generation
i) Through Diesel Generator
- Unit (000 Kwh.) 17 143
- Unit Per Ltr. of Diesel Oil 2.06 2.06
- Cost/Unit (Rs./Kwh) 14,05 16.87
ii) Through Steam Turbine/Generator NIL NIL
2. COAL (STEAM COAL/HARD COKE)
Quantity (MT) 8 10
Total Cost (Rs. In lac) 0.69 0.82
Average Rate (Rs. in PMT) 8641 852
3. FURNACE OIL:
Quantity (000 Ltr.) 1506 1051
Total Amount (Rs. In lac) 269.28 169.65
Average Rate (Rs. Per Ltr.) 17.88 16.14
4. OTHER/INTERNAL GENERATION:
Diesel Oil
Quantity (000 Ltr.) 224 744
Total Amount (Rs. In lac) 62.94 114.31
Average Rate (Rs. Per Ltr.) 28.10 15.37
B. CONSUMPTION PMT OF PRODUCTION:
1. Electricity (Unit) 1010 1104
2. Coal (Kg.) 0,44 0.59
3. Furnace Oil (Ltr.) 83.75 64.71
4. Diesel Oil (Ltr.) 12.46 45.81
ANNEXURE- II
FORM - B (SEE RULE 2)
FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT OF TECHNOLOGY ABSORPTION:
Research & Development (R & D)
2006-2007 2005-2006
1. Specific areas in which R&D carried
out by the company NIL NIL
2. Benefits derived as a result of the above NIL NIL
R & D
3. Future plan of action NIL NIL
4. Expenditure on R & D
a) Capital NIL NIL
b) Recurring NIL NIL
c) Total NIL NIL
d) Total R&D Expenditure NIL NIL
Technology absorption, adaptation & innovation:
1. Efforts in brief, made towards technology,
absorption, adaptation and innovation. }
2. Benefits derived as a result of the above
efforts, e.g., Products Improvement,Import
Substitution etc.
3. In case of imported technology
(Imported during the NIL NIL
last 5 years reckoned from the beginning
of the financial year), following information
may be furnished:
a) Technology Imported:
b) Year of Import.
c) Has technology been fully absorbed.
d) If not fully absorbed, areas
where this has not taken place,
reasons there of and future plan of
action.
Foreign Exchange Earning & Outgo:
Total Foreign Exchange ended *** 1,71,868 15,52,13,649
Total Foreign Exchange earned 2,25,83,750 81,61,437
* The Outgo represents the C.I.F. Value of certain Raw Materials, Stores &
Spares and Directors Travelling Expenses.
MANAGEMENT DISCUSSION AND ANALYSIS:
BUSINESS REVIEW:
In 2006,the global economy enjoyed one of its strongest period of growth in
last several years with economic growth in real term accelerating from 3.3%
in 2005 to 3.9% 2006. The Indian economy witness robust growth in FY-2006-
2007,India GDP grew by 9.4% as compared to 9% in the previous year. India
continue to be a high growth economy. The Indian economy grew at the
stepped up rate for the consecutive fourth year from 3.8% In FY 2002-2003
to 9.4% in 2006-2007.
GLOBAL STEEL INDUSTRY REVIEW:
Global crude steel out put, grew by 8.9% to 1,222 million tonnes in 2006 as
compared to 1,142 million tonnes in 2005 mainly drives by strong growth of
18% in China. The finish steel consumption grew by 8.5% at 1113 million
tonns in 2006 compared to 1026 million tonnes In 2005 China accounted for
3.3% of the global steel consumption and 50% of the global demand growth.
The demand for raw materials (i.e) Iron ore, coal, scrap, Ferro Alloys etc.
nave increased significantly due to robust growth in global crude steel
production led by China. The shortage of Raw material and constrains of
logistics led to increase in prices of Raw material.
DOMESTIC STEEL INDUSTRY OVERVIEW:
India steel Industry Required a strong growth in steel consumption driven
by strong growth in all steel consuming sectors like automotive 14%,
capital goods 18% etc. during the Financial year 2006-2007. Indian apparent
steel consumption grew by 11.7% to 44(approx) million tonnes. The flat
products & long products consumption grew by 11.5% and 12%(app)
respectively. Domestic steel production grew by 11.10% to 4.7 million
tonnes and steel import increased by 6.4% to 4.1 million tonnes.
COMPANY'S PERFORMANCE & GROWTH STRATEGY:
Your Company has incurred a net loss of Rs.1119.32 lac against net loss of
Rs.278.50 lac in the previous year. The turnover of the Company increased
by 36.65% from Rs.54. 66 crores to Rs.74.69 crores in the year under
review. The company has incurred the loss due to significant increase in
the prices of key raw material such as metallic scrap, Ferro Alloys and
Freight rates during the year in comparison with the steel prices. As there
is acute shortage of Power in the State of Haryana, your Company had to
face 100% power cuts in the peak season which also added to the losses.
Further, your Company is an industrial unit with negative net worth and
working capital as well. Most of the Indian steel manufacturers had been
able to reduce their cost of production by modernizing their plants and by
acquiring some in-house facilities like their own gas plants, ore mines and
power generation system. They acquired all these facilities by their
internal accruals and by financing through external sources. But Your
company due to negative networth and working capital could not add anything
to the pool of its existing facilities, hence, been unable to reduce the
cost of production. That is why inspite of boom in the steel market when
most of the companies earned huge profits your company could not do better.
OPPORTUNITIES:
The Indian economy is expected to grow by 8% and domestic steel growth is
likely to be around 8 to 9% during, the year 2007-2008. The apparent steel
corruption in India has grown at a steady rate of about 5% to 6% over the
last decade. This growth rate is likely to accelerate in future with
increased expenditure on infrastructure projects like ports, airports,
power projects dams,metro rail system,special economic zones,urbanisation
etc. Further, the Bharat Nirman Yozna for rural infrastructure, rural
housing and major construction activities under way for Common Wealth
Games scheduled to be held in the 2010 would also boost the consumption of
Steel.
THREATS RISK & CONCERNS:
The Steel Industry today faces several significant strategic issues which
includes inter-alia industry consolidation issues, execution of profitable
growth options. Raw material linkage and security technology development
raising financial from global financial market.
The steel industry is still highly fragmentated and cyclical in nature as
well as demand for steel products is generally affected by macroeconomic
fluctuations in the global market. Further, major capacity addition by
large producers and continuous appreciation in the value of Rupee resulting
a revision of export targets set by the exporters may keep the prices under
pressure. Industrial output growth in the year to come is expected to
decline sharply. Rising inflation may also affect the demand. Rising
interest rates is another factor which may increase the cost of production
on one side and scale down the demand on other side. Due to poor financial
the company could not undertake any major initiative to insulate itself
from the volatility in steel prices and decided to suspend its operations
till the situation improves. Further the company is looking for the
approval of the rehabilitation scheme filed before Hon'ble BIFR.
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY:
The Company has a proper and adequate system of internal controls to
provide reasonable assurance that all assets are safeguarded and protected
against loss from unauthorized use or disposition and that transactions are
authorized, recorded and reported correctly.
The internal control system provides for well-documented policies,
guidelines, authorizations and approval procedures. Management Information
System (MIS) is the backbone of the Company's control mechanism. Well
conceived annual planning and effective budgetary control assures Adequate
control on all the expenditures of the Company.
The Internal Auditors Report significant audit observations, at regular
intervals, to the Audit Committee comprising of Independent Directors. The
Committee met regularly during the financial year and followed up the
implementation of corrective action as suggested by the Internal Auditors
on their audit observations. The Audit Committee also met the Company's
Statutory Auditors to ascertain their views on the adequacy of the Internal
Control systems in the Company.
INDUSTRIAL RELATIONS & HUMAN RESOURCE MANAGEMENT:
Your Company is of the firm belief that good Human Resources Management
would ensure success through high performance. HR strategy and plans at
your company are deeply concerned with the organizational goals. All the
operational goals of the top management emanate from the business plan.
CAUTIONARY STATEMENT:
Statements in this report on Management Discussion and Analysis of the
Company's objective, projections, estimates, expectations or predictions
may be 'forward looking statements' within the meaning of applicable
securities laws or regulations. These statements are based on certain
assumptions and expectations of future events. Actual results could differ
materially from those expressed or implied. Important factors that could
make a difference to the Company's operations include economic condition
effective global and domestic demand and supply, finished goods prices in
the domestic and overseas markets in which the company operates, raw
materials cost and availability thereof, changes in Government regulations
etc. tax regimes, economic developments with in India and other factors
such as litigation and industrial relations etc. The Company assumes no
responsibility to publicly s amend, modify or revise any forward looking
statements,on the basis of any subsequent developments,information or
events.
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