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ISMT Ltd.

BSE: 532479 Sector: Metals & Mining
NSE: ISMTLTD ISIN Code: INE732F01019
BSE 16:01 | 27 Jan 61.00 -1.40
(-2.24%)
OPEN

62.40

HIGH

65.55

LOW

59.75

NSE 15:53 | 27 Jan 60.70 -1.60
(-2.57%)
OPEN

62.50

HIGH

65.70

LOW

59.75

OPEN 62.40
PREVIOUS CLOSE 62.40
VOLUME 439632
52-Week high 71.10
52-Week low 44.05
P/E 7.11
Mkt Cap.(Rs cr) 1,833
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 62.40
CLOSE 62.40
VOLUME 439632
52-Week high 71.10
52-Week low 44.05
P/E 7.11
Mkt Cap.(Rs cr) 1,833
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

ISMT Ltd. (ISMTLTD) - Director Report

Company director report

To the Members of ISMT Limited

Your Directors present herewith the Twenty Fourth Annual Report & the AuditedFinancial Statements of the Company for the financial year ended March 31 2022.

FINANCIAL HIGHLIGHTS

Particulars

Financial Year

2021-22 2020-21
Gross Sales 3216.84 1681.70
Revenue from Operations 2152.54 1234.67
Earnings Before Interest 79.66 31.25*
Depreciation Tax & Amortization
(EBIDTA)
Cash Profit/ (Loss) 48.66 (289.33)
Net Profit/ (Loss) 2357.39 (350.71)
Total Comprehensive income 2351.53 (350.18)

*regrouped/ reclassified to meet current years classification. Members will be pleasedto note that as a result of the successful debt resolution the Company has returned toprofit after several years.

DIVIDEND

Directors do not propose any dividend for the year ended March 31 2022 in order toconserve resources.

RESERVES

No amount is proposed to be transferred to Reserves.

IMPACT OF COVID-19

While the delta variant has caused severe disruption in the economic activity and lossof human life subsequent variant however has been milder leading to gradual return ofnormalcy.

OPERATIONS

Capacity utilization at steel plant went up from 44% to 68% driven by higher captivesourcing. Tube plants too attained pre pandemic level with capacity utilization going upfrom 30% to 45% on account of higher Automobile and Energy sectors demand.

DEBT RESOLUTION

Members are aware that the Company along with lenders has been working towardssatisfactory debt resolution which had became inevitable due to mismatch of cash flowsarising from economic slowdown dumping of tubes by China regulatory changes etc.

Accordingly various processes as mandated by RBI guidelines were undertaken by Banksfrom time to time but could not be concluded for various reasons beyond theCompany’s control including RBI circular dated February 12 2018 and subsequentlyCOVID-19 pandemic.

Debt resolution was finally attained on March 12 2022 and the Company repaid entireoutstanding debt to lenders by way of One-time Settlement (OTS) of Rs. 670 Crore alongwith change in management. Kirloskar Ferrous Industries Limited (KFIL) a part of 130years old Kirloskar group acquired majority stake in the Company by investing Rs. 476.63Crore in the equity share capital of the Company and further extended unsecured loan ofRs. 194 Crore towards OTS.

The Company on its part ensured that the value of the business was preserved despitenumerous challenges leading to successful debt resolution.

The operations of the Company continued to be sustained and in fact increased duringthe entire pendency of the debt resolution period. Thus the turnover of the Company wasincreased from Rs. 968.44 Crore in FY2015-16 to Rs. 2123.41 Crore in FY2021-22 withcorresponding EBITDA increased from Rs. 33.66 Crore to Rs. 79.66 Crore.

The Company is deeply thankful to all lenders for their unstinted support andco-operation. We are especially thankful to our business associates viz. customerssuppliers vendors etc. who stood by the Company during this difficult period. Most ofall this has been made possible by dedicated hard work of the employees of the Companyacross all the levels.

AUTHORIZED SHARE CAPITAL

Authorized share capital of the Company was Rs. 158.50 Crore comprising of 17.50 Croreequity shares of Rs. 5/- each aggregating to Rs. 87.50 Crore & unclassified sharesaggregating to Rs. 71 Crore.

The Board at its meeting held on November 25 2021 approved classification of theaforesaid unclassified shares into 14.20 Crore equity shares of Rs. 5/- each ranking paripassu in all respect with the existing equity shares of the Company.

Accordingly the revised authorized share capital of the Company is Rs. 158.50 Crorecomprising of 31.70 Crore equity shares of Rs. 5/- each. The shareholders of the Companyapproved the aforesaid classification at the Extra-ordinary General Meeting (EGM) held onDecember 22 2021.

PREFERENTIAL ALLOTMENT

Pursuant to the Share Subscription Agreement dt. November 25 2021 executed with KFILthe Board at its meeting held on March 10 2022 allotted 154000000 equity shares onpreferential basis to KFIL for Rs 476.63 Crore and that the Company became a subsidiaryof KFIL. Post the aforesaid allotment paid up share capital of the Company stood at Rs.150.25 Crore.

UTILIZATION OF FUNDS RAISED VIA PREFERENTIAL ISSUE

The entire issue proceeds of the funds raised via preferential issue has been utilizedby the Company for the purposes/ objects as stated in the Explanatory Statement to thenotice of the EGM held on December 22 2021 wherein the shareholders’ approval wasgiven for the aforesaid issue.

Consequent upon allotment of 15.40 Crore equity shares KFIL acquired majority stake inthe Company (i.e. 51.25% of post issue paid-up share capital). Accordingly KFIL appointedits representatives on the Board w.e.f. March 10 2022. Simultaneously Mr. B R TanejaPromoter and Managing Director of the Company stepped down from the Board. KFIL a 25years old entity is a major producer of pig iron and castings with turnover of Rs.2038.08 Crore and net profit of Rs. 302.11 Crore in FY2020-21. Its future plans includesetting up of steel making facility.

CAPTIVE POWER PLANT

Captive Power Plant (CPP) continued to be inoperative throughout the year in absence ofbanking facility from Maharashtra State Electricity Distribution Company Ltd. (MSEDCL).

The Company’s appeal against wrongful denial of banking facility is pending inSupreme Court. The Company in the past had pursued various options viz. for selling CPP oroperating as group captive without success.

Consequent upon change in management on March 10 2022 the Company is again evaluatingthese options. However while demand for power is showing increasing trend recent spurtin commodity prices including coal prices has affected the economics of thermal powergeneration.

IMPORTS

Anti dumping duty on imports from China was provisionally extended until October 312021 and the Ministry of Finance vide notification dated October 28 2021 extended theduty for further 5 years until October 27 2026.

Steep increase in raw material cost has resulted in the domestic setting price beinghigher than the reference price and an effective Anti Dumping Duty needs to address theimpact of this increase in input cost.

RAW MATERIAL

The Company has also witnessed sudden and steep increase in international scrap pricesas well as in the prices of domestically procured raw materials.

Effective implementation of the New Vehicle Scrappage policy will increase domesticavailability of scrap at competitive price & considerably enhance the viability ofsteel making by EAF. The Company is entirely dependent on high cost power from the Stategrid. Availability of power at competitive rates is key to success of Atmanirbhar Bharatand suitable steps need to be taken at both Central and State Governments levels tofacilitate-

(a) Special tariff for EAF route;

(b) Free market for sale of power across India;

(c) Removal of cross subsidy and other State levies on captive power generation; and(d) Banking of energy on the lines of renewable.

RESEARCH & DEVELOPMENT

Details of R&D activities undertaken are enumerated in Annexure ‘A’attached to this Report.

DIRECTORS & KEY MANAGERIAL PERSONNEL

Consequent upon change in management Mr. B R Taneja Promoter and Managing Directorstepped down from the Board after serving the Company for over four decades.

Under the leadership of Mr. B R Taneja-i. The Company which started with initialcapacity of 3000 Tons at single location has now reached 465000 Tons of tube making atthree locations and 350000 Tons of Steel making capacity in addition to 40 MW CPP; ii.Turnover has grown from Rs. 4 Crore in the first year to over Rs. 2000 Crore; iii. TheCompany provided direct and indirect employment to over 10000 people; and iv. The Companyhas built a strong reputation for quality and is globally a recognized producer ofprecision seamless tubes.

The Board places on record its whole-hearted appreciation for the yeoman servicesrendered by Mr. B R Taneja.

In accordance with the provisions of the Companies Act 2013 (Act) and the Articles ofAssociation of the Company Mr. Rajiv Goel Director retires by rotation and beingeligible offers himself for re-appointment.

The term of Mr. Rajiv Goel as Whole-time Director expired on September 30 2021 &he was further re-appointed upto September 30 2022.

Mr. Rahul Kirloskar & Mr. Ravindranath Gumaste were appointed as Directors(Non-Executive Non-Independent) of the Company w.e.f March 10 2022 designated asChairman and Vice-Chairman respectively.

Mr. Nishikant Ektare was appointed as Managing Director of the Company w.e.f March 102022.

Dr. Shalini Sarin & Mr. S. Venkataramani were appointed as Independent Directors ofthe Company w.e.f March 10 2022. Mr. O P Kakkar & Ms. Deepa Mathur resigned asDirectors of the Company w.e.f. March 10 2022.

The Board placed on record its sincere appreciation and gratitude for services renderedby Mr. O P Kakkar & Ms. Deepa Mathur during their association with the Company.

Ten meetings of the Board were held during the year under review. Detailed informationis given in the Corporate Governance report as enclosed herewith.

Independent Directors have given declarations pursuant to Section 149(7) of the Act& Regulation 25(8) of the SEBI (LODR) Regulations 2015 (Listing Regulations)stating that they meet the criteria of independence. The Board is assured that IndependentDirectors posses adequate proficiency experience expertise and integrity. Pursuant toRule 6 of the Companies (Appointment and Qualification of Directors) Rules 2014Independent Directors have confirmed that they hold valid registration certificate withthe Databank of Independent Directors.

The Company has devised Policy for annual performance evaluation of the BoardCommittees & Directors which include criteria for performance evaluation ofnon-executive & executive directors. The Board evaluates performance of the Committees& of the Independent Directors whereas the Chairman of the Board evaluates performanceof the Board. The Independent Directors evaluate the performance of Non-IndependentDirectors. Details of familiarization Programme of Independent Directors with the Companytheir roles rights responsibilities in the Company nature of industry in which theCompany operates business model of the Company and related matters are on website of theCompany: www.ismt.co.in

AUDITORS

Tenure of the Auditors of the Company will expire at the ensuing Annual General Meeting(AGM) of the Company.

The Auditors have discussed the key matters separately as per the Annexure A to theIndependent Auditors Report as enclosed herewith.

COST AUDITORS

The Company is required to maintain cost records as specified u/S 148(1) of the Act& accordingly such accounts/ records are made & maintained.

Pursuant to Section 148 of the Act the Board on recommendation of Audit Committeehas approved the appointment & remuneration of the following Cost Auditors forFY2021-22: (i) M/s. Dhananjay V. Joshi & Associates; and (ii) M/s. Parkhi Limaye &Co.

Payment of remuneration for FY2021-22 to the aforesaid Cost Auditors is subject toratification by Members at ensuing AGM. The Cost Audit Report for FY2020-21 was filedwithin the prescribed time limit as per the Companies (Cost Record and Audit Rules) 2014.

SUBSIDIARIES

As on date of this report the Company has ten direct & indirect subsidiaries. Inaccordance with Section 129(3) of the Act statement containing salient features offinancial statements of subsidiaries in Form AOC-1 & report on performance &financial position of each subsidiary is forming part of enclosed financial statements forFY2021-22. The Company has framed Policy for determining Material Subsidiaries which isavailable on: www. ismt.co.in Consequent upon the change in management on March 10 2022the Company has initiated review of its subsidiary’s viz. Structo Hydraulics ABSweden (Structo) with regard to its operations and future opportunities. With positivenet-worth and strong balance sheet of the Company Structo can expect to have bettermarket access and availability of working capital. Recent geopolitical developmentshowever together with steep increase in ocean freight create fresh business challenges.

The recent infrastructure push could create new opportunities for green field projectlike Tridem Port and Power Company Private Limited (Tridem) wholly owned subsidiary ofthe Company. Consequent upon change in management on March 10 2022 the Company willevaluate fresh potential opportunities for Tridem as well.

FIXED DEPOSITS

The Company has not accepted deposits from the public.

MANAGEMENT DISCUSSION & ANALYSIS & CORPORATE GOVERNANCE REPORT

Pursuant to Listing Regulations a separate section on Management Discussion &Analysis & Corporate Governance’ Report is forming part of this Report.

The Managing Director & CFO has certified to the Board with regard to the financialstatements & other matters as required under Regulation 17(8) of the ListingRegulations.

Certificate from Auditors regarding compliance of conditions of Corporate Governance isalso annexed to this Report.

ANNUAL RETURN

Latest Annual Return of the Company in Form MGT-7 is available on website:www.ismt.co.in

CONSERVATION OF ENERGY ETC

Information required under Section 134(3)(m) of the Act is forming part of this Reportas Annexure ‘A’.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) read with Section 134(5) of the Act your Directors makethe 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 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 thefinancial year March 31 2022 & of the Profits of the Company for that period;

iii) That Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other 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: www.ismt.co.in.The criteria for performance evaluation as laid down by the Nomination RemunerationCommittee have been defined in the Nomination & Remuneration Policy.

Details pertaining to Section 197(12) of the Act read with Rules thereunder are formingpart of this Report as Annexure ‘B’. Pursuant to Section 197(9) of the Act Mr.B R Taneja erstwhile Managing Director has pending lenders approval refundedremuneration due for refund during the year under review. A statement showing details ofemployees in terms of Rule 5(2) and (3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 forms part of this Report. However in terms of Section136 of the Act Annual Report excluding the aforesaid information is being sent to membersand others entitled thereto. The same is available for inspection by Members at theRegistered Office of the Company during business hours on working days upto the date ofensuing AGM. If any Member is interested in obtaining a copy thereof such Member maywrite to the Company Secretary.

SECRETARIAL AUDIT REPORT

Pursuant to Section 204 of the Act & Rules made thereunder the Board has appointedM/s. KPRC & Associates Company Secretaries as Secretarial Auditors to undertakeSecretarial Audit of the Company for the period ended March 31 2022. The Report of theSecretarial Auditors in Form MR-3 is forming part of this Report as Annexure‘C’.

In respect of the Audit observations following are the comments of the Board:

i. Delay in submission of Financial Results:

Submission of financial results for Quarter ended March 31 2021 and September 2021got delayed on account of delay in the financial statements of the foreign subsidiaries& delay in finalization of the financial results respectively.

ii. Promoter shareholding not in demat form:

The Company has requested the concerned promoter group entity from time to time toDemat shareholding or reclassify to Public Category which remained unattended.

iii. Non-filing of Annual Performance Report (APR):

The Company has initiated corrective steps for filing the APR.

PARTICULARS OF LOANS GUARANTEES & INVESTMENTS

Particulars of Loans Guarantees & Investments covered under Section 186 of the Acthave been mentioned in Notes to the enclosed Financial Statements.

RISK MANAGEMENT

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 framework which is commensurate with thesize scale and complexity of its operations. The Statutory Auditors of the Companyreviews the same on periodical basis.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

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 has been constituted by theBoard consisting of three Independent directors.

Whistle Blower Policy/ Vigil Mechanism of the Company was established by the Board& available on website: www.ismt. co.in.

CONTRACTS WITH RELATED PARTIES

During the year under review the Company has not entered into any contract/arrangement/ transaction with related parties which were either not at arm’s lengthor not in the ordinary course of business & further could be considered material inaccordance with the policy of the Company on materiality of related party transactions.

Hence there is no information to be provided in Form AOC-2 while particulars ofRelated Party Transactions in terms of Ind AS-24 are forming part of the enclosedfinancial statements. The Policy on materiality of related party transactions and dealingwith related party transactions as approved by the Board may be accessed on website:www.ismt.co.in

GENERAL

1. No significant or material orders were passed by Regulators or Courts or Tribunalswhich impact the going concern status & the Company’s operations in future.

2. The Company has complied with the constitution of Internal Complaints Committeeunder the Sexual Harassment of Women at Workplace (Prevention Prohibition &Redressal) Act 2013 and during the year under review there were no cases filed under thesaid Act.

3. The Company has complied with the applicable secretarial standards.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to express its sincere gratitude for continuedsupport & co-operation received by the Company from the Government of IndiaGovernment of Maharashtra Reserve Bank of India Stock Exchanges other regulatoryagencies & shareholders. The Board would also like to acknowledge continued support ofits bankers vendors clients & investors. The Directors also wish to place on recordtheir appreciation of all employees for their dedication & team work.

For and on behalf of
the Board of Directors
Pune Rahul Kirloskar
May 09 2022 Chairman

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