Your Directors have the pleasure of presenting their 46th Annual Report andaudited statements of accounts for the year ended 31st March 2018.
(? in crore)
|1. Financial Results ||2017-18 ||2016-17 |
|Net sales ||2672.06 ||869.15 |
|Other operating income ||86.34 ||26.87 |
|Total income from operations (Net) ||2758.40 ||896.02 |
|Other income ||12.37 ||7.13 |
|Total income ||2770.77 ||903.15 |
|Profit before finance cost depreciation and amortisation ||1733.94 ||87.87 |
|Finance cost ||56.68 ||54.72 |
|Profit before depreciation and amortisation ||1677.26 ||33.15 |
|Depreciation and amortisation ||72.55 ||73.92 |
|Profit/Loss before tax ||1604.71 ||(40.77) |
|Provision for taxation:- || || |
|Current tax ||513.56 ||1.12 |
|Deferred tax ||9.81 ||8.16 |
|Net profit/Loss for the period ||1081.34 ||(50.05) |
|EPS (Basic) ? ||270.61 ||(12.52) |
2. OVERALL PERFORMANCE
The Company recorded net sales of ?2672.06 Crore during the financial year 2017-18 ascompared to ?869.15 crore in the previous financial year. The Net Profit during thefinancial year 2017-18 was at ?1081.34 Crore as compared to a net loss of ?50.05 crore infinancial year 2016-17 translating to basic earning per share at ?270.61 for the financialyear 2017- 18 as against ?(12.52) in financial year 2016-17.
3. STATE OF COMPANY'S AFFAIRS
The analytical review of the Company's performance and its businesses includinginitiatives in the areas of Human
Resources and Corporate Social Responsibility have been presented in the section ofManagement Discussion and Analysis of this Annual Report.
In recent years electrode prices have been extremely low as cheap iron ore and cokingcoal saw EAF players choosing to reroll blast furnace-produced semis or utilise merchantpig iron. For every electrode they made producers lost money and consequently shutteredcapacity as a survival strategy. About 200000 TPA of electrode manufacturing capacity wasshut over the last four years across the globe - most of which was permanently shut.
This period saw an unusual increase in demand even as supply remained squeezed. OverallEAF production has increased by around 10% on year so far in 2017 perhaps aided by hikesin coking coal last year that saw melting become more economically viable. This was afallout of reduced exports of steel products from China (steel export quantity for 2017declined by around 30% year-on-year) which allowed other steel manufacturers to reignitetheir EAF infrastructure shoring the demand for electrodes. This when combined with thecurtailment of Chinese electrode capacity and short needle coke supply the main rawmaterial for the melting sticks pushed up spot prices for electrodes by at least tenfoldduring the year. As a result contractual terms for electrodes which have been annual innature for decades altered to quarterly deals. HEG has proved that it is amongst thefirst to cope up with the enhanced requirement of the electrodes globally. The Company gotan interesting opportunity to prove the utility of state of art technology it added in2012 which it grabbed with open arms. The results of the year demonstrates our beliefthat we are on a strong footing.
The Company has captive power generation capacity of 76.5MW (comprising two thermalpower plants and a hydroelectric power facility) leading to sustained supply of reliableenergy for its graphite electrode facility. Excess power generated was sold in the marketthrough IEX and bi-partite power purchase agreement with open access consumers.
Sale of excess power generated a turnover of ?19.56 crore in 2017-18 against ?25.68crore in 2016-17. This was primarily due to an increase in consumption of power in thegraphite electrode operations. Thus leaving small surplus for external sale.
With the prediction of average rainfall by the Met department for the forthcoming yearthe prospect of using lowest cost hydel power in plant activities would help strengthenthe results of this segment favourably. Thermal facilities provide both flexibility tooperations and also an opportunity to optimise cost in times when it is required the most.
4. MATERIAL CHANGES AND COMMITMENTS
No material changes and commitments affecting the financial position of the Companyhave occurred between the end of the financial year of the Company to which the financialstatements relate and the date of the report.
5. CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business during the financial year 2017-18.
6. SUBSIDIARY ASSOCIATE COMPANIES OR JOINT VENTURES
(i) Subsidiary Company
Your Directors informs that M/s HEG Graphite Products and
Services Ltd a wholly owned subsidiary ("WOS") ceased to be subsidiary ofthe Company since the name of WOS has been struck-off from the Register of Companiesunder Section 248 (5) of the Companies Act 2013 upon the application made by WOS underSection 248(2) of the Companies Act 2013 and WOS stands dissolved w.e.f. 21st December2017. At present the Company does not have any subsidiary.
(ii) Associate Companies or Joint Ventures
There are two Associates of the Company namely Bhilwara Infotechnology Ltd. andBhilwara Energy Ltd. Bhilwara Infotechnology Ltd. had a turnover of ?44.21 crore and NetProfit was ?4.33 crore in the financial year 2017-18. Bhilwara Energy Ltd had aconsolidated turnover of ?317.72 crore and Net Profit was ?55.84 crore as per theirfinancial statements (audited & consolidated) for the financial year 2017-18. TheCompany has no Joint Ventures.
No Company has become/ceased to be an Associate or Joint venture during the financialyear 2017-18.
Pursuant to the provisions of Section 129(3) of the Companies Act 2013 a statementcontaining the salient features of financial statements is annexed in the Form AOC-1 tothe consolidated Financial Statement and hence not repeated here for the sake of brevity.
7. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by the Company in accordancewith the applicable Accounting Standards. The audited consolidated financial statementstogether with Auditors' Report form part of the Annual Report. The Auditor's Report doesnot contain any qualification reservation or adverse remarks.
Your Directors had approved the payment of Interim Dividend @ ?30/- per Equity Share of?10/- each at its meeting held on 8th February 2018 and the same has been paid to all theeligible shareholders within the stipulated time.
Your Directors are pleased to recommend a final dividend on equity shares at the rateof ?50/- per Share on Equity Shares of ?10/- each for the financial year ended 31stMarch 2018 subject to your approval at the Annual General Meeting.
As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Dividend Distribution Policy is attached as Annexure IV which formpart of this report and is also available on the website of the Company.
9. CORPORATE GOVERNANCE
A report on Corporate Governance forms part of this Report along with the Auditors'Certificate on Corporate Governance as required under SEBI (Listing Obligations andDisclosure
Requirements) Regulations 2015. The Auditors' Certificate for the financial year2017-18 does not contain any qualifications reservations or adverse remarks.
10. MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report as required under the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 forms part of this Report.
11. BUSINESS RESPONSIBILITY REPORT
As per Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a Business Responsibility Report describing the initiatives taken bythe Company from an environmental social and governance perspective is attached as partof the Annual Report.
12. INTERNAL CONTROL / INTERNAL FINANCIAL CONTROL SYSTEMS AND ADEQUACYTHEREOF
The Company has an adequate internal control system commensurate with the size andnature of its business. An internal audit programme covers various activities andperiodical reports are submitted to the management. The Company has a well-definedorganisational structure authority levels and internal rules and guidelines forconducting business transactions.
Besides the Companies Act 2013 has put primary responsibility of implementing arobust Internal Financial Control framework and is under consistent supervision of AuditCommittee Board of Directors and also independent Statutory Auditors. During the year noreportable material weakness in the design or operation were observed.
a) Industrial relations
The industrial relations during the period under review generally remained cordial atall the plants of the Company.
b) Particulars of employees
The information required pursuant to Section 197 read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith asAnnexure -1.
14. PUBLIC DEPOSITS
Your Company has not invited any deposits from public/ shareholders in accordance withChapter V of the Companies Act 2013.
15. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
There were no significant material orders passed by the Regulators/ Courts/ Tribunalsduring the financial year 2017- 18 which would impact the going concern status of theCompany and its future operations.
16. CONSERVATION OF ENERGYTECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The information with regard to Conservation of Energy Technology Absorption ForeignExchange Earnings and Outgo in accordance with the provisions of Section 134(3)(m) of theCompanies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is given asAnnexure II forming part of this Report.
17. DIRECTORS AND KEY MANAGERIAL PERSONNEL
One of your Directors namely Shri S.N Bhattacharya (holding DIN 06758088) shall retireby rotation at the ensuing Annual General Meeting and being eligible offers himself forreappointment. The Board recommends his re-appointment.
The first term of office of Smt. Vinita Singhania (DIN 00042983) as IndependentDirector expires at the ensuing Annual General Meeting.
The Board has recommended the re-appointment of Smt. Vinita Singhania (DIN 00042983)as Independent Director of the Company for a second term of 5 (five) consecutive years.
The brief profile pursuant to Regulation 36 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 of the Director eligible for appointment/re-appointment forms part of the Corporate Governance Report.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
18. BOARD EVALUATION
The Board has carried out an annual evaluation of its own performance the directorsindividually as well as the evaluation of the working of its Committees in the manner asenumerated in the Nomination and Remuneration Policy in accordance with the provisions ofCompanies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. The evaluation exercise covered various aspects of the Board'sfunctioning such as composition of the Board & Committee(s) their functioning &effectiveness contribution of all the Directors and the decision making process by theBoard.
Your Directors express their satisfaction with the evaluation process and inform thatthe performance of the Board as a whole its Committees and its member individually wasadjudged satisfactory.
19. NOMINATION AND REMUNERATION POLICY
The Nomination & Remuneration Policy of the Company is in place and is attached asAnnexure - III to this Report.
20. MEETINGS OF THE BOARD
The Board of Directors met 5 (five) times in the financial year 2017-2018. The detailsof the Board Meetings and the attendance of the Directors are provided in the CorporateGovernance Report.
21. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
All related party contracts/arrangements/transactions that were entered into during thefinancial year were on an arm's length basis and were in the ordinary course of business.
All Related Party Transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee was obtained for the transactions which areof a foreseen and repetitive nature. The statement of transactions entered into pursuantto the omnibus approval so granted is placed before the Audit Committee for approval on aquarterly basis. The statement is supported by a Certificate from the Statutory Auditorsand CFO.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website the weblink of which is as under:
There are no pecuniary relationships or transactions of Non- Executive Directorsvis-a-vis the Company that have a potential conflict with the interests of the company.
No material Related Party Transactions i.e transactions exceeding ten percent of theannual consolidated turnover as per the last audited financial statements were enteredduring the financial year of the Company. Accordingly the disclosure of Related PartyTransactions as required under Section 134(3)(h) of the Companies Act 2013 in Form AOC-2is not applicable.
22. AUDIT COMMITTEE
The composition of the Audit Committee is stated in the
Corporate Governance Report. All the recommendations of the Audit Committee wereaccepted by the Board during the financial year 2017-18.
The appointment of M/s. S C Vasudeva & Co. Chartered Accountants (FirmRegistration No. 000235N) Auditors of the Company who were appointed at 45th AnnualGeneral Meeting held on September 22 2017 for a period of 5 years till the conclusion ofthe 50th AGM of the Company to be held in the year 2022 subject toratification of the appointment by the Members at every AGM will be placed before themembers at this Annual General meeting for ratification.
With effect from April 1 2018 M/s. S C Vasudeva & Co. Chartered Accountants theStatutory Auditors of the Company has been merged with M/s. S.P. Puri & Co.Chartered Accountants and the name of the new firm is SCV & Co. CharteredAccountants (SCV). There would not be any change in the date of establishment of firm asregistered with ICAI. The FRN 000235N remain same.
Further the Auditors have confirmed their eligibility under Section 144 of theCompanies Act 2013 and the rules made thereunder.
The Auditors' Report read along with notes to accounts is self-explanatory andtherefore does not call for any further comments. The Auditors' Report does not containany qualification reservation or adverse remark.
24. BUSINESS RISK MANAGEMENT
The objective of risk management at the Company is to protect shareholders value byminimizing threats or losses and identifying and maximising opportunities. Anenterprisewide risk management framework is applied so that effective management of riskis an integral part of every employee's job.
The Risk Management Policy of the Company is in place. The Company's risk managementstrategy is integrated with the overall business strategies of the organization and iscommunicated throughout the organisation. Risk management capabilities aide inestablishing competitive advantage and allow management to develop reasonable assuranceregarding the achievement of the Company's objectives.
The annual strategic planning process provides the platform for identificationanalysis treatment and documentation of key risks. It is through this annual planningprocess that key risks and risk management strategies are communicated to the Board. Theeffectiveness of risk management strategies is monitored both formally and informally bymanagement and process owners. There is no major risk which may threaten the existence ofthe Company.
25. COST AUDITORS
The Cost Audit for financial year ended March 31 2017 was conducted by M/s. N.D. Birla& Co. (M. No. 7907). The said Cost Audit Report was filed on 29th August2017.
Based on the recommendation of Audit Committee at its meeting held on 8thMay 2018 the Board has approved the re-appointment of M/s. N.D. Birla & Co. (M. No.7907) as the Cost Auditors of the Company for the financial year 2018- 2019 on aremuneration of ?2 Lacs plus service tax and out of pocket expenses that may be incurredby them during the course of audit.
As required under the Companies Act 2013 the remuneration payable to the cost auditoris required to be placed before the Members in a general meeting for their ratification.Accordingly a Resolution seeking Member's ratification for the remuneration payable toM/s. N.D. Birla & Co. Cost Auditors is included in the Notice convening the AnnualGeneral Meeting.
26. SECRETARIAL AUDITOR
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hadappointed M/s. GSK & Associates a firm of Company Secretaries in Practice toundertake the Secretarial Audit of the Company for the Financial year 2017-18. TheSecretarial Audit Report is annexed herewith as Annexure V. The Secretarial Audit Reportdoes not contain any qualification reservation or adverse remark. The Board hasre-appointed M/s. GSK & Associates Company Secretaries in practice as SecretarialAuditor of the Company for the financial year 2018-19.
27. CORPORATE SOCIAL RESPONSIBILITY(CSR)
As part of its initiatives under "Corporate Social Responsibility (CSR) theCompany has undertaken projects in the areas of promotion of education eradicating hunger& poverty initiatives towards Community Service and rural development HealthcarePlantation & Environment Development Protection of National heritage art cultureetc. These projects were in accordance with the CSR Policy of the Company and Schedule VIIof the Companies Act 2013.
The CSR Committee comprises Shri Ravi Jhunjhunwala (Chairman) Shri Dharmendar Nath.Davar and Smt. Vinita Singhania.
The CSR policy may be accessed on the Company's website at the link mentioned below:
The Annual Report on CSR activities is enclosed as Annexure VI forming part of thisreport.
Based on the recommendation of Audit Committee at its meeting held on 30th May 2017the Board has approved the re-appointment of M/s. S.L. Chhajed & Co as the Internalauditors of the Company for the financial year 2018-2019.
29. DIRECTORS RESPONSIBILITY STATEMENT
The Directors confirm that:
i) In preparation of the annual accounts the applicable accounting standards have beenfollowed and there are no material departures from the same;
ii) They have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year 2017-18 and of theprofit of the Company for the year under review;
iii) They have taken proper and sufficient care for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safe guarding theassets of the Company and for preventing and detecting frauds and other irregularities;
iv) They have prepared the annual accounts on a going concern basis;
v) They have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating effectively; and
vi) They have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.
30. VIGIL MECHANISM /WHISTLE BLOWER POLICY
The Company has a vigil mechanism named "Whistle Blower Policy" in place. Thedetails of the Whistle Blower Policy are explained in the Corporate Governance Report andthe policy is also posted on the website of the Company the weblink of which is as under:
31. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 form part of the notes to the financial statements providedin the Annual Report.
32. EXTRACT OF ANNUAL RETURN
The extract of the Annual Return in form MGT-9 as required under Section 92(3) underRule 12 of the Companies
(Management and Administration) Rules 2014 is appended as Annexure VII to this report.
33. GENERAL DISCLOSURE
a) The Company has a group policy in place against Sexual Harassment in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. No complaint of sexual harassment wasreceived during the financial year 2017-18.
b) The Company is in compliance of all applicable secretarial standards issued by TheInstitute of Company Secretaries of India from time to time.
Your Directors wish to place on record their appreciation for the valuable assistanceand support received by your Company from banks financial institutions the CentralGovernment the Government of Madhya Pradesh the Government of Uttar Pradesh and theirdepartments. The Board also thanks the employees at all levels for the dedicationcommitment and hard work put in by them.
For and on behalf of the Board of Directors
| ||Ravi Jhunjhunwala |
|Place: Noida (U.P.) ||Chairman Managing Director & CEO |
|Dated: 8th May 2018 ||DIN 00060972 |