To the Members of ISMT Limited
Your Directors present herewith the Twenty First Annual Report & Audited FinancialStatements of the Company for financial year ended March 31 2019.
The Company had undergone a very difficult period in last few years and peak net salesof Rs. 1879 Crores in 201112 dipped to Rs. 968 Crores in 2015-16 and the net profit ofRs. 29 Crores dipped to net loss of Rs. 382 Crores during the said period. However aremarkable turnaround has been achieved in last 3 years where the sales have gone back tothe same level while the net loss also came down by 40% as can be seen from the following:
| || |
Rs. in Crore
|Particulars || |
| ||2018-19 ||2015-16 |
|Net Sales ||1795.44 ||968.44 |
|Gross Sales ||2423.39 ||1331.28 |
|Profit/ (Loss) before Finance Charges Depreciation Amortization & Tax (EBIDTA) ||119.87 ||33.65 |
|Cash Profit/ (Loss) ||(154.35) ||(300.99) |
|Gross Profit/ (Loss) ||(156.59) ||(246.47) |
|Profit/ (Loss) Before Tax ||(228.78) ||(372.82) |
|Taxation ||- ||(9.39) |
|Net Profit/ (Loss) ||(228.78) ||(382.21) |
|Re-measurement Gains/ (Losses) on Defined Benefit Plans ||(0.84) ||- |
|Total Comprehensive income for the year ||(229.62) ||(382.21) |
Your Directors are unable to recommend dividend for the year ended March 31 2019 inview of the losses.
No amount is proposed to be transferred to Reserves. OPERATIONS
There has been gradual improvement in utilization at all the plants. Steel plantutilization has gone up from 38% in 2015-16 to 50% in 2018-19. There is a quantum jump intube plant utilization which went up from 22% in 2015-16 to 48% in 2018-19. MARKET
Total tube sales went up from Rs. 566 Crores in 2015-16 to Rs. 1317 Crores in 2018-19i.e. an increase of 133%. In fact the domestic sales increased 2.5 times from Rs. 456Crores in 201516 to Rs. 1122 Crores in 2018-19 while the exports sales nearly doubledfrom Rs. 110 Crores in 2015-16 to Rs. 195 Crores in 2018-19.
Steel despatches went up from Rs. 609 Crores in 2015-16 to Rs. 1020 Crores in 2018-19.Most of the increase was driven by the captive sales which increased from Rs. 207 Croresin 2015-16 to Rs. 541 Crores in 2018-19 while external sales also went up by 20% from Rs.402 Crores in 2015-16 to Rs. 478 Crores in 201819 despite the slow down in the AutoIndustry.
The turnover of the Company doubled over last 3 years from Rs. 968 Crores in 2015-16 toRs. 1795 Crores in 2018-19. EBIDTA went up more steeply and EBIDTA in 2018-19 of Rs.120Crores was more than thrice the EBIDTA in 2015-16 of Rs. 34 Crores. The cash loss in turnhalved from Rs. 301 Crores in 2015-16 to Rs. 154 Crores in 2018-19.
The Company has continued to be EBIDTA positive throughout this period and theincreasing EBIDTA is a positive for the Lenders of the Company. The Company is proposingto restructure its debt on sustainable basis which inter alia could necessitatedownsizing of debt including interest. However pending restructuring the Company isrequired to provide full interest in its books to comply with the relevant accountingstandards and will give effect to the restructuring once it is implemented.
The internal cash flows are mainly utilized for incremental working capitalrequirements essential maintenance capex and other need based capex and also for paymentto Lenders of the Company.
The Company is also regular in payment of its statutory dues.
The Company and the Bankers had been looking at various options permitted by ReserveBank of India Circular in force from time to time and has finally decided to exploreassignment of debt to Asset Reconstruction Company (ARC) as a Resolution Plan. Pursuant tothe same erstwhile Lead Bank viz. Indian Overseas Bank and other major Banks agregatatingto about 71% have assigned their debt to ARCs with ARCIL acquiring most of this debt.ARCIL has initiated the process for restructuring the debt on a sustainable basis.
An effective import duty levied in 2016 provided immediate and much needed relief.After the initial dip imports from China have again started increasing. There is alsoincrease in non Chinese imports. The Company will seek continuation and widening of thetariff regime to address increasing imports.
Captive Power Plant of the Company continued to be inoperative throughout the year inthe absence of banking facility from MSEDCL. The Company has contested the wrongful denialof the banking facility and the Company's appeal in this regard is pending in the SupremeCourt.
NON CORE ASSETS
Captive Power Plant in Maharashtra had in the past been identified as asset held forsale. Given the continuing weakness in the economic environment the Company does notforesee disposal of the same in the short term. Hence it has been decided to reclassifythe said asset as non-current asset under the head Property Plant &Equipment.
Despite non operation for last 5 years the Captive Power Plant has been kept in goodworking condition. It also has easy access to raw material being located close to the coalmines. The Company also has surplus land and other infrastructure for increasing thecapacity. The Company is also evaluating the possibility of restarting the Power Plant.
Port and Power project in Tamil Nadu does have long term potential. The Companythrough its wholly owned subsidiary has also got about 1000 acres of freehold land whichcan be put to alternate use once there is improvement in the investment scenario.
RESEARCH & DEVELOPMENT
As part of Company's overall strategy Company remained focused on developing newproducts for all its market segments including Energy OCTG Bearing Auto & MiningSectors. R&D activities also focused on process cost reductions. Details of R&Dactivities undertaken are enumerated in Annexure B' attached to this Report.
DIRECTORS & KEY MANAGERIAL PERSONNEL
Mr. R Poornalingam & Mr. Kanakraj Madhavan were appointed as Additional Directors(Independent) of the Company w.e.f. December 28 2018 & March 1 2019 respectively.
Mr. Shyam Powar is re-appointed as Independent Director of the Company subject toshareholders approval at the ensuing AGM. Post completion of the tenure as IndependentDirectors Mr. S C Gupta and Ms. Deepa Mathur continued on the Board as NonExecutiveDirectors (Non-Independent) till the ensuing AGM. Mr. Shashank Dixit Nominee Director& Mr. S C Gupta Nonexecutive Director resigned as Directors of the Company w.e.f.January 18 2019 & March 29 2019 respectively.
The Board placed on record its sincere appreciation and gratitude for services renderedby Mr. Shashank Dixit and Mr. S C Gupta during their respective association with theCompany.
The term of Mr. Rajiv Goel as Whole-time Director expired on September 30 2018. He wasfurther re-appointed as such upto September 30 2019.
The term of Mr. B R Taneja as Managing Director expired on November 30 2018. He wasfurther re-appointed as such upto November 30 2020.
Eight (8) meetings of the Board of Directors were held during the year. Detailedinformation is given in the Corporate Governance report.
The Independent Directors have given a Declaration pursuant to Section 149(7) of theCompanies Act 2013 (Act).
The Company has devised a Policy for annual performance evaluation of the Board itsCommittees & individual Directors which include criteria for performance evaluation ofthe nonexecutive & executive directors.
The performances of non-independent directors & Committees of the Board have beenevaluated by independent directors. The performances of independent directors have beenevaluated by Chairman of the Nomination & Remuneration Committee (NRC) with inputsfrom all directors. The performance of the Board as a whole is evaluated by the Chairmanwith inputs from all directors. The performance evaluation of Chairman of NRC is evaluatedby Chairman with inputs from all the directors.
The above evaluations have been carried out once during the year.
The details of familiarization Programme of Independent Directors with the Companytheir roles rights responsibilities in the Company nature of the industry in which theCompany operates business model of the Company and related matters are put up on thewebsite of the Company at www.ismt.co.in
In respect of the Qualified Opinion and Emphasis of Matter by the Auditors on theFinancial Statements of the Company it has been explained in the Notes forming part ofthe said Financial Statements i.e. Note Nos. 1.31 3.12 3.16 3.17 3.18 3.19 and 3.20which are self-explanatory and therefore do not call for any further comments.
The Auditors have discussed the key matters for each of the qualifications.
The Company is required to maintain cost records as specified u/S 148(1) of the Act andaccordingly such accounts and records are made and maintained by the Company.
Pursuant to Section 148 of the Act read with Rules framed thereunder your Directorshad on recommendation of the Audit Committee approved the appointment & remunerationof the following Cost Auditors of the Company for FY2018-19:
(i) M/s Dhananjay V. Joshi & Associates; and
(ii) M/s Parkhi Limaye & Co.
The payment of remuneration for FY2018-19 to aforesaid Cost Auditors is subject toratification by the Members at the ensuing Annual General Meeting.
The Cost Audit Report for FY2017-18 was filed within the prescribed time limit as perthe Companies (Cost Record and Audit) Rules 2014.
As on date of this report the Company has ten direct and indirect subsidiarycompanies. In accordance with Section 129(3) of the Act a statement containing salientfeatures of the financial statements of subsidiaries in Form AOC-1 is provided separatelyin this Annual Report. A report on performance & financial position of each of thesubsidiaries is provided in financial statements forming part of this Annual Report. TheCompany has also framed a Policy for determining Material Subsidiaries which is availableon website: www.ismt.com.
The Company has not accepted any deposits from the public.
MANAGEMENT DISCUSSION & ANALYSIS AND CORPORATE GOVERNANCE REPORT
Pursuant to SEBI (LODR) Regulations 2015 (Listing Regulations) a separate section onManagement Discussion & Analysis & Corporate Governance' Report is forming part ofthis Report.
The Managing Director & CFO have certified to the Board with regard to thefinancial statements & other matters as required under Regulation 17(8) of the ListingRegulations.
Certificate from Auditors of the Company regarding compliance of conditions ofCorporate Governance is also annexed to this Report.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return in Form MGT-9 is forming part of this Report as AnnexureA'.
Further the latest Annual Return of the Company in Form MGT- 7 is placed on website ofthe Company at www.ismt.com
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO
Information required under Section 134(3)(m) of the Act is forming part of this Reportas Annexure B'.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the provisions of Section 134(3)(c) read with Section 134(5) of the Actyour Directors make the following statement:
i) That in preparation of annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
ii) that the Directors have selected such accounting policies & applied themconsistently & made judgments & estimates that are reasonable & prudent so asto give a true & fair view of the state of affairs of the Company at end of financialyear March 31 2019 and of the Loss of the Company for that period;
iii) That the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
iv) That the Directors have prepared the annual accounts on a going concern basis;
v) That the Directors had laid down internal financial controls to be followed by theCompany & that such internal financial controls are adequate & were operatingeffectively; and
vi) That the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
NOMINATION & REMUNERATION POLICY
The Nomination & Remuneration Policy of the Company on director's appointment &remuneration including criteria for determining qualifications positive attributesindependence of a director & other matters is available on website of the Company atwww.ismt.com.
The criteria for performance evaluation as laid down by the Nomination &Remuneration Committee have been defined in the Nomination & Remuneration Policy.
Details pertaining to Section 197(12) of the Act read with Rules framed thereunder areforming part of this Report as Annexure C'.
A statement showing details of employees in terms of Rule 5(2) and (3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of thisReport. However in terms of Section 136 of the Act the Annual Report excluding theaforesaid information is being sent to the members and other entitled thereto. The saidstatement is available for inspection by the Members at the Registered Office of theCompany during business hours on working days up to the date of the ensuing AGM. If anyMember is interested in obtaining a copy thereof such Member may write to the CompanySecretary in this regard.
SECRETARIAL AUDIT REPORT
Pursuant to Section 204 of the Act & Rules made thereunder the Board has appointedM/s. MRM Associates Company Secretaries as Secretarial Auditors to undertake SecretarialAudit of the Company for the period ended March 312019.
The Report of the Secretarial Auditors in Form MR-3 is forming part of this Report asAnnexure D'.
In respect of the Audit observations following are the comments of the Board:
i. Delay in submission of financial Results:
Submission of the financial results got delayed only by 2 weeks due to delay infinancials of foreign subsidiaries.
ii. Inadequate Board composition:
Listing Regulations usually provide 3 months to fill vacancy of independent directors.
Accordingly the Company within 3 months filled the vacancy of Independent Director.
iii. Promoter shareholding not in demat form:
One Promoter Group (holding 0.02% shares in physical form) was classified as such byvirtue of being related to a former promoter of the Company.
The Company proposes to take steps to reclassify the said promoter group to publiccategory.
iv. Disqualification of Director
The concerned director was erroneously disqualified by ROC. Nevertheless on the dateof appointment in the Company the said Director was not disqualified. Subsequently hehas resigned from the Board on becoming aware of his disqualification.
v. Non-filing of forms with ROC
Due to pre-scrutiny/ technical error on MCA website the Company could not file fewforms with ROC. However the said forms were subsequently filed through form GNL-2 whichwere duly approved by ROC.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
Particulars of Loans Guarantees and Investments covered under Section 186 of the Acthave been mentioned in the Notes to the Financial Statements forming part of this AnnualReport.
The Company has constituted a Risk Management Committee to address organization widerisk including credit security property regulatory and other risks. The Committee isassisting the Board in ensuring that there is adequate risk management policy in placecapable of addressing those risks.
INTERNAL FINANCIAL CONTROLS The Company has an internal financial control frameworkwhich is commensurate with the size scale and complexity of its operations. The StatutoryAuditors of the Company review the same on periodical basis.
CORPORATE SOCIAL RESPONSIBILITY
Pursuant to Section 135 of the Act a CSR Committee has been constituted by the Boardconsisting of three directors including one independent director.
Pursuant to the provisions of Section 135 of the Act no profits were available forspending on CSR activities.
AUDIT COMMITTEE & VIGIL MECHANISM
Pursuant to Section 177 of the Act an Audit Committee constituted by the Boardconsists of at least three directors with independent directors forming a majority.
The Whistle Blower Policy/ Vigil Mechanism of the Company was established by the Board& available on website at www. ismt.com.
CONTRACTS & ARRANGEMENTS WITH RELATED PARTIES
During the year the Company has not entered into any contract/ arrangement/transaction with related parties which were either not at an arm's length or not in theordinary course of business & further could be considered material in accordance withthe policy of the Company on materiality of related party transactions. Hence there is noinformation to be provided in Form AOC-2 while particulars of Related Party Transactionsin terms of Ind AS-24 are forming part of the enclosed financial statements.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the website at www.ismt.com
1. No significant or material orders were passed by Regulators or Courts or Tribunalswhich impact the going concern status & Company's operations in future.
2. The Company has complied with the provisions relating to the constitution ofInternal Complaints Committee under the Sexual Harassment of Women at Workplace(Prevention Prohibition & Redressal) Act 2013 and during the year there were nocases filed/pending under the said Act.
3. The Company has complied with the applicable secretarial standards.
Your Directors take this opportunity to express its sincere gratitude for continuedsupport & co-operation received by the Company from Government of India Government ofMaharashtra Reserve Bank of India Stock Exchanges other regulatory agencies &shareholders. The Board would also like to acknowledge continued support of its bankersvendors clients & investors. The Directors also wish to place on record theirappreciation of all employees for their dedication & team work.
| ||For and on behalf of |
| ||the Board of Directors |
|Pune ||O P Kakkar |
|June 14 2019 ||Chairman |