The Directors are pleased to present their 48lh Annual Report on the affairsof the Company together with the Audited Financial Statements for the year ended 31stMarch 2021.
1. FINANCIAL RESULTS
The summarized financial results for the year vis-a-vis the previous year are asfollows:
(Rs. in Crores)
|Particulars ||31.03.2021 ||31.03.2020 |
|Net Sales ||3705.05 ||3632.18 |
|Other Income ||6.38 ||8.52 |
|Total Revenue (Net) ||3711.43 ||3640.70 |
|Operating Expenses ||3094.97 ||3432.72 |
|EBIDTA ||616.46 ||207.98 |
|Finance Costs ||908.63 ||867.36 |
|Depreciation and Amortization Expenses ||266.76 ||276.34 |
|Exceptional Item ||- ||568.17 |
|Profit / (Loss) before tax ||(558.93) ||(1503.89) |
|Tax Expenses ||(0.65) ||0.58 |
|Profit / (Loss) after Tax carried to Balance Sheet ||(558.27) ||(1504.47) |
Your Company has not carried any amount to reserves and the amount of Loss after tax ofRs.558.27 Crores has been carried to Balance Sheet and adjusted against retained earnings.
Due to absence of profits your Directors regret their inability to recommenddeclaration of Dividend for the year to the Members of the Company.
3. MANAGEMENT DISCUSSION AND ANALYSIS:
Management Discussion and Analysis Report for the year under review giving detailedanalysis of the Company's operations segment-wise performance etc. as stipulated underSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 is given herein below and forms part of this report.
A] Financial Performance:
Your Directors wish to inform that the year under review continued to be a challengingone with multiple challenges being faced by the Company including Covid-19 pandemic whichcaused significant disruptions.
The performance during the year under review was depressed in the first two quarters ofFY 20-21. However thereafter the company witnessed robust demand for its Iron and Steelproducts and increased prices in Q3 and Q4 of FY 20-21.
In the beginning of FY 20-21 the outbreak of Covid-19 virus across the globe includingIndia forced the Governmental authorities to commence nationwide lockdown. Accordinglywith effect from 24th March 2020 to 14th May 2020 the Company had to shut down itsIntegrated Steel Plant at Siltara Raipur Captive Iron Ore Mine at Metabodeli and FoundryUnit at Anjora in the state of Chhattisgarh. The foundry units of the Company situated atHingna Nagpur and Butibori Industrial Areas had been shut down from 21st March 2020 andthey reopened in the month of May 2020.
Thereafter the operations commenced with reduced capacity. It did significantly affectthe business financial performance and liquidity of the Company.
The first half of FY 20-21 was a challenging year for the Steel and the automobileindustry where the Company's Alloy Steel Rolled Products are predominantly sold.
As stated above Q1 of FY 20-21 witnessed Covid-19 induced lockdowns. The restrictionon movement of people created labor shortages and closure of factories led tomanufacturing levels dropping to significantly low levels. Hence the spread of Covid-19added to the woes of the industry that was already grappling under the slowdown effectsfaced by the Indian economy since FY 18-19.
Q2 of FY 20-21 witnessed easing of government restrictions production gained pace andsupply chains were gradually restored. During the quarter the demand for vehiclesremained on the lower side due to closure of schools and colleges reopening of limitednumber of offices and reduced infrastructural and mining activities. The same impacteddomestic sales of two and three wheelers passenger vehicles and commercial vehicles.
Q3 of FY 20-21 witnessed a significant turnaround in the Steel and Auto sector as thewholesale as well as retail auto volumes started gaining momentum principally due to thepent-up demand festive and wedding season. The same coupled with lower coking coalprices increased sales volumes selling prices and margins led to strong rebound in theSteel Sector performance.
The economy started recovering strongly since August 2020 which was much sharper thanexpected aided by the resumption of government projects and pent-up consumption demand.
Q4 of FY 20-21 saw an unprecedented surge in the domestic steel prices. RolledProducts Sales Volumes and Margins also improved quite significantly.
During the said year the Company tried to optimize production and improve its plantyields through efficient use of its resources. The Company's Net Sales from operations forthe year stood at Rs.3705.05 Crores and the same has increased marginally by 2.01% thanthe previous year's Net Sales from operations of Rs.3632.18 Crores despite the Covid-19impact.
The Company focused on selling high-end value-added products (Rolled Products) withapplications mainly in Auto components segment. The Company was able to record spectacularrecovery and record earnings (EBIDTA). The Company's Earnings before Interest Depreciationand Tax (EBIDTA) level during the year was at Rs.616.46 Crores as against Rs. 207.98Crores for the previous year. The Net Loss before Tax for the year stood at Rs.558.93Crores and Net loss after Tax for the year stood at Rs.558.27 Crores.
During the year the Net Worth of the Company remained negative to Rs. (1362.60)Crores from Rs. (806.38) Crores in the previous year on account of the losses recordedprincipally due to lesser than expected contribution margin to cover the fixed costs(interest and depreciation) on the capitalized projects for want of getting benefits ofdebt restructuring implemented by addressing overdue interest. On the expectedimplementation of debt restructuring in FY 21-22 the Net worth and financial position isexpected to improve substantially.
Key Financial Ratios:
FY 2020-21 Vs FY 2019-20 - Variance over 25% with Reasoning:
Interest Coverage Ratio: The Interest Coverage Ratio has improved from 0.24 in FY20 to0.68 in FY21 with 182.94% variance. The Ratio has improved on account of significant risein YOY EBIDTA due to better sales realization in the sale of Rolled Products Pig IronPellet and DRI during FY21. Further in FY21 there was increase in sale of Alloy Steel asagainst Metallic Sales as compared to the last year due to improved Steel Sector scenariopost lifting of Covid induced lockdowns. Further rise in the selling prices of RolledProducts was also supported by lower coal and coke prices which has resulted in increasedmargins in Rolled Products.
Debt Equity Ratio: The Debt Equity Ratio has deteriorated and cannot be calculated dueto negative Net Worth in FY20 as well as in FY21. The negative Net Worth of the Companyhas further deteriorated as compared to previous year on account of continued net lossesprincipally due to overdue interest on existing loan contracts.
Operating Profit Margin (%): The Operating Profit Margin has improved from 5.49% inFY20 to 16.47% in FY21 with 199.85% variance. The improvement in Operating Profit Marginis mainly due to better sales realisation in the sale of Rolled Products Pig Iron Pelletand DRI during the FY21. Further there was increase in sale of Alloy Steel as againstMetallic Sales as compared to the last year due to improved Steel Sector scenario postlifting of covid induced lockdowns. Further rise in the selling prices of Rolled Productswas also supported by lower coal and coke prices which has resulted in increased marginsin Rolled Products.
Net Profit (Loss) Margin (%): The ratio although negative has improved significantlyfrom (41.42%) in FY20 to (15.07%) in FY21 with 63.62% variance on account of decrease inNet Loss during the period. The Net Loss has decreased on account of better salesrealisation in the sale of Rolled Products Pig Iron Pellet and DRI during the FY21.Further there was increase in the sale of Alloy Steel as against Metallic Sales ascompared to the last year due to improved Steel Sector scenario post lifting of Covidinduced lockdowns. Further rise in the selling prices of Rolled Products was alsosupported by lower coal and coke prices which has resulted in increased margins in RolledProducts. Further in FY 19-20 a one-time exceptional item of Impairment provisioning ofnon-operational Flat Product Division (FPD) and Bilha Fixed Assets/Capital Work inProgress was also booked for Rs.568.17 Crores as compared to Nil in FY 20-21.
Return on Net Worth: The Return on Net Worth Ratio though negative has improvedsignificantly but cannot be calculated due to negative Net Worth in FY 19-20 as well as inFY 20-21. The Net Worth of the Company has deteriorated as compared to previous year onaccount of continued net losses principally due to overdue interest on existing loancontracts. However Net Losses in FY 20-21 have decreased as compared to FY 19-20 onaccount of better sales realization increase in sale of Alloy Steel as against MetallicSales as compared to the last year. Further in FY 19-20 a one-time exceptional item ofImpairment provisioning of non-operational Flat Product Division FPD and Bilha FixedAssets/Capital Work in Progress was booked for Rs.568.17 Crores as compared to Nil in FY20-21.
B] Share Capital:
During the year under review the Company has not issued any shares including shareswith differential voting rights as to dividend voting or otherwise nor granted stockoption or sweat equity. However subsequent to the year under review in accordance withthe resolutions passed by the Shareholders of the Company at their meeting held on 23rdSeptember 2021 the Company has allotted 332365181 Equity Shares on 28thOctober 2021.
C] Segment wise performance for the year under review is as under:
i) Steel Plant Division:
The Net Sales from operations during the year has increased to Rs.3315.36 Crores ascompared to Rs.3218.31 Crores of the previous year.
The production levels of the Steel Melt Shop during 2020-21 was around 108% and theproduction levels of the Rolling Mills was around 113% of the previous year. The Hot Metalproduction level was around 77% Pellet production level was around 101% and the SpongeIron production level was around 95% of the previous year.
The Net Sales has increased mainly due to better sales realization in the sale ofRolled Products Pig Iron Pellet and DRI during the FY 20-21 and robust demand of AlloySteel (Rolled Products).
The share of metallic sales value i.e. Pig Iron Sponge Iron and Pellets to total SteelPlant Division sales was around 33.67% in FY 20-21 which is lower by 10.55% than that ofthe previous year which stood at 44.22%.
ii) Castings Division:
The Net Sales from the Foundry Division has decreased to Rs. 389.69 Crores during theyear from Rs.413.87 Crores of the previous year.
Of the total Foundry Division Net Sales the Automotive Castings Subdivision accountedfor around 50% the Centrifugal Castings Sub Division for around 29% Engineering CastingsSub Division for around 13% and the Construction Casting Sub Division for around 8%.
D] Restructuring of Term Loans and Debt Assignment:
The Company underwent significant financial stress in the last six years due tocancellation of its three captive coal mines payment of additional levy on mined coal asper the Hon'ble Supreme Court order Covid-19 related lockdown of business units and itsconsequent adverse impact on the Company and various other reasons which have resulted infinancial constraints to the Company losses in the operations wipe out of net worth andcalling back of loans by few of the secured lenders.
Further an appropriate debt restructuring scheme was approved by the super majority ofthe secured lenders and the Company had complied with the conditions of debt restructuringscheme and got its Master Restructuring Agreement signed by the Lenders.
However on the directions of Reserve Bank of India (RBI) which had not agreed to theapproved Debt Restructuring Scheme being fully implemented within the stipulated timelineof 13th December 2017 State Bank of India (SBI) the erstwhile lead secured lender hadfiled an application under Section 7 of the Insolvency and Bankruptcy Code 2016 againstthe Company claiming an amount of Rs. 513.83 Crores as default as on 30th November 2017.
In view of the Status Quo order issued by the Hon'ble Supreme Court on April 16 2018the case had been adjourned sine die by the National Company Law Tribunal (NCLT) Mumbaiin its hearing dated November 14 2019. The matter is at pre-admission stage in NCLT andwould be listed only after the Special Leave Petition (SLP) filed by the Company isdisposed of by the Hon'ble Supreme Court.
As at March 31 2021 ten out of twelve bankers of the Company have assigned theirfund-based debt along with underlying financial documents together with their rightsbenefits and obligations in favour of Assets Care & Reconstruction Enterprise Ltd(ACRE) acting in its capacity as trustee of various trusts. Accordingly as on March 312021 total debt assignment from ten bankers' amounts to Rs. 3563.25 Crores constituting97.91% of the total Principal Fund Based Outstanding.
Subsequent to year end out of the two remaining bankers (as above) one banker hasassigned their fund based debt of Rs. 61.87 Crores constituting 1.70 % to AcRe and theother banker with Rs. 14.32 Crores constituting 0.39% of the total Principal Fund BasedOutstanding did One Time Settlement (OTS) of its debt dues with the Company. Hence 100% ofthe fund-based debt of the twelve bankers amounting to Rs. 3639.44 Crores has been settledeither by way of debt assignment to ACRE or OTS with the Company.
ACRE continues to support the operations of the Company. The Company has entered into arestructuring support agreement dated 23rd August 2021 with various trusts declared andmanaged by Asset Care & Reconstruction Enterprise Limited in its capacity as atrustee of such trusts ("Lenders") in relation to restructuring of itsoutstanding debt owed to the Lenders in accordance with Section 9 of the Securitizationand Reconstruction of Financial Assets and Enforcement of Securities Interest Act 2002("SARFAESI Act") as amended and restated from time to time ("RestructuringSupport Agreement").
It is expected that the implementation of the proposed debt restructuring would improvethe cash flow position of the Company result in reduction of financial stress and willlead to realignment of debt to a sustainable level and prompt servicing of debt dues bythe Company.
Post receipt of necessary approvals including by the equity shareholders of theCompany as part of the debt restructuring equity shares have been issued by the Companyto the Lenders and the promoters/ promoter Group at Rs. 28.80 per share (Issue Price).
Around 15.27% of the total debt exposure of the Lenders in the Company has beenconverted into equity shares of the Company which have been issued and allotted to theLenders aggregating to 31.44% of the expanded equity share capital of the Company on afully diluted basis.
Simultaneously the promoters/ promoter group have been issued and allotted equityshares in the Company against their contribution of Rs.78 Crores in the Company in thefollowing manner: (i) fresh infusion of Rs.58 Crores in cash by the promoters/ promotergroup in the Company; and (ii) unsecured loan of Rs.20 crores already extended to theCompany converted against the issue of equity shares.
The pre issue and post issue equity shareholding of the Company on a fully dilutedbasis is as follows: -
|Category of Equity shareholders ||Pre-issue equity shareholding on a fully diluted basis ||Post-issue equity shareholding on a fully diluted basis |
|Promoter and Promoter Group ||68.79% ||48.03% |
|Public ||31.21% ||51.97% |
|-Lenders (Out of Public) ||Nil ||31.44% |
The existing promoter and promoter group of the Company continues to retain managementcontrol of the Company post the aforesaid issuance of equity shares.
The debt restructuring would become effective upon completion of certain conditionprecedents under the Restructuring Support Agreement. It is yet to achieve effectiveness.
To comply with the conditions of the "Restructuring Support Agreement" whichis the principal agreement as part of the transaction documents the Company has alsoentered into a Shareholders' Agreement (SHA) on 23rd August 2021 along with the Promotersand Promoter Group of the Company with various trusts declared and managed by Asset Care& Reconstruction Enterprise Limited in its capacity as a trustee of such trusts.
Apart from as stated above the other significant terms of the SHA are as follows: -
i) Until such time as the Investor Shareholders together with their respectiveAffiliates hold in the aggregate at least 10% (Ten per cent) of the Equity Capital ofthe Company the Investor Shareholders and their respective Affiliates shallcollectively have the right to appoint 2 (Two) Directors on the Board (the "NomineeDirectors") of the Company.
ii) To align the Articles of Association of the Company with the conditions stipulatedin the Restructuring Support Agreement and Shareholders' Agreement and to insert newclauses with the approval of shareholders:
> To provide affirmative voting rights to the ACRE Trusts;
> To provide rights of the ACRE Trusts in relation to nominee directors i.e. Untilsuch time as the Investor Shareholders together with their respective Affiliates holdin the aggregateat least 10% (ten per cent) of the equity share capital the ACRE Trustsand their respective affiliates shall collectively have the right to appoint 2 (Two)Nominee Directors on the Board;
> The consent of the ACRE Trusts will be prerequisite for any change in the clausesof the Articles of the Company which impacts the rights of the ACRE Trusts.
> Right of first offer in favor of the Promoters of the Company with respect to theconverted equity held by the Investors
Further the Company has taken active steps for effective and efficient operationsincluding cost reduction. Accordingly the Company continues to prepare its books ofaccount on going concern basis.
E] Projects and Impairment of Non-Operational Assets:
The Company with a view to set up end use projects for its captive coal mines (whichwere although subsequently deallocated) optimize costs and increase the extent of valueaddition in the long product alloy steel segment had commenced implementation of variousfacilities in the State of Chhattisgarh.
All the under-implementation projects of the company had been completed in the pastexcept the 3.0 Lacs TPA DRI Plant (Sponge Iron Plant) & its Associated Captive PowerPlant at Bilaspur district in Chhattisgarh.
The said project had been put under abeyance and was decided to be put as Non-CoreAsset by the erstwhile Joint Lenders' Forum (JLF) due to its commercial unviability onaccount of cancellation of the captive coal mines of the Company by the Honorable SupremeCourt.
In the earlier years the Directorate of Enforcement by way of two attachments hadprovisionally attached the Plant and Machinery under installation at Dagori IntegratedSteel Plant situated at Bilha Bilaspur (Chhattisgarh) and certain property plant andequipment at Steel Plant Division Siltara Raipur to the extent of Rs.307.58 Crores foralleged misuse of coal raised from Gare Palma IV/4 coal block in Chhattisgarh.
The Adjudicating Authority had confirmed the above provisional attachments.Subsequently the Appellate Authority stayed both the attachments on an appeal filed bythe Company where the matter has been put up for hearing on January 112022. The Companyhas a good case on merits is likely to succeed in refuting the allegations and does notexpect any material liability on the Company on this account.
As per the impairment policy the Company has carried out an impairment test in thefinancial year 2019-20 of its property plant and equipment of Flat Production Division(FPD) at Raipur and Capital Work in Progress presently being suspended at its DagoriIntegrated steel plant at Bilha - Bilaspur in accordance with the Indian AccountingStandards (Ind AS) 36 - Impairment of Assets' and found that the carrying cost ofthese assets exceeds its recoverable value; therefore an impairment loss of Rs.568.17Crores had been recognized for the year ended 31st March 2020 and had been recognized asExceptional Item (appearing in the previous year figures).
F] Industry Outlook Developments Covid-19 Pandemic Concerns and Mitigation Efforts:
India's economic recovery strengthened in the last quarter of 2020-21 before the onsetof the second wave of Covid pandemic. The country's GDP grew by 1.6% in the fourth quarterof FY 20-21 as compared to a year ago period an improvement over the 0.5% growth in thethird quarter and the negative growth of 24.4% and 7.4% in the first two quarters of FY21.The higher economic growth during Q4 FY 20-21 can be linked to the unlocking of theeconomy that was underway during the period.
The unlocking of the economy which was underway in the last two quarters of FY 20-21(Oct'20-Mar'21) boosted consumption and activity across sectors. The higher economicactivity in the last quarter of FY 20-21 was broad-based across sectors. Consumption(private and government) and investments too witnessed an improvement in the last quarterof FY 20-21.
However the more widespread and intense second wave of the Covid pandemic since theend of Q4 of FY 20-21 and start of FY 21-22 has been a setback to the country's nascenteconomic recovery.
Domestic economic growth prospects hinges on the effective control of the pandemic andrelaxation of the restrictions that were put in place across the various parts of thecountry. At the same time there is optimism that with higher proportion of the populationgetting vaccinated there could be a turnaround in the economic activity as has beenwitnessed in the other parts of the world.
Indian Steel industry and its associated mining and metallurgy sectors have seen anumber of major investments and developments in the recent past. The India's NationalSteel Policy (2017) which projected crude steel production capacity to increase to 300 MTper year by 2030-31 seeks to create a globally competitive steel industry in India and todomestically meet entire demand of high-grade automotive steel electrical steel specialsteels and alloys for strategic applications.
The growth in the Indian steel sector over the years has been driven by domesticavailability of raw materials such as iron ore fines non-coking coal strong domesticdemand and cost-effective labor.
The Country had witnessed nationwide lockdown since last week of March 2020 due toCOVID-19 pandemic outbreak.
To deal effectively with the Covid-19 pandemic periodic instructions were issued bythe Company to its workers contractors and employees aligned with the periodicinstructions issued by the Governmental authorities. Constant awareness campaign and theneed and importance to adhere to them has been continuously spread amongst the workerscontractors and the employees.
By keeping in mind the health and safety of its employees customers and the vendorsthe Company strives hard to come out of the Covid-19 crisis with positive approachpatience committed teamwork enhancement of efficiencies cost reduction Governmentaland stakeholders support clearly defined objectives and meticulous roadmap for itsexecution.
In FY 20-21 India's production of crude steel and finished steel fell by 5.9% to 103million tonnes and 7.3% to 95.1 million tonnes impacted by the Covid-19 pandemic whichhampered production mainly in Q1 of FY 20-21. However the domestic steel industry made aquick recovery in the second half of FY 20-21 riding on the back of higher internationalsteel demand and revival in domestic demand.
By Q2 of FY 20-21 the domestic crude steel production reached 96% of pre-covid levelsand by Q3 of fY 20-21 the production was 7.5% higher on YOY basis. In Q4 of FY 20-21 thecrude steel production increased by 7.4% on YOY basis as manufacturers ramped up output ina seasonally strong quarter.
During FY 20-21 the export of finished steel from the country was higher at 10.8million tonnes being higher YOY by 29.1%. The Import of finished steel at 4.8 mt waslower by 29.8% YOY making India Net exporter of finished steel during the FY 20-21.
The domestic steel consumption in FY20-21 stood at 87.96 MT down by only 6.3% YOYdespite the COVID-19 pandemic reflecting significantly improved end-use demand in thesecond half of the year. The end-use demand is likely to remain strong in FY 21-22 unlessimpacted further by COVID-19 led further surges.
The Steel demand is expected to be supported by economic recovery government spendingand enhanced liquidity. The Union Budget for FY 21-22 has a sharp 34.5% YOY increase inallocation for Capex at 5.54 lakh crore. The budget's thrust is on infrastructure creationand manufacturing to propel the economy. Therefore enhanced outlays for key sectors likedefence services railways and roads transport and highways would provide impetus tosteel consumption which is expected to grow by 10-12% in FY 21-22.
An up-cycle in steel prices in expected to continue in FY 21-22. Stimulus packageunveiled by various countries is expected to keep demand for steel high. Continued higherdemand from China on the back of stimulus package and the country's desire to bring downproduction levels to reduce Co2 levels are expected to be an important factor that isexpected to strengthen steel prices. Cost push from iron ore prices would remain.Demand-supply imbalance in the global market is expected to continue to present exportopportunities to the domestic players.
Domestic iron ore prices are expected to gradually correct in FY 21-22 as iron oresupply improves although expected to remain elevated till the domestic iron ore outputincreases to FY 20-21 levels. Additionally once the Odisha iron ore mines ramp-up givenhigh premiums bid by the lessees they are expected to pass them to the customers thusproviding a further fillip to the ore prices.
FY 21-22 coking coal prices are likely to be higher than FY 20-21 levels but unlikelyto be at pre-COVID19 levels. However the prices could remain volatile for certain monthsbecause of the concentrated nature of the coking coal mining sector and the risks arisingfrom natural calamity in Australia.
FY 20-21 was a year of transition for the Indian auto components industry. Theannouncement of an incentive-based vehicle scrappage policy though voluntary is expectedto lead to rise in automobile sales in the country going forward which would directlybenefit the auto components industry.
G] Internal Control Systems:
The Board of Directors of the Company is responsible for ensuring that the InternalFinancial Controls have been laid down properly in the Company and that such controls areadequate and operating effectively.
The Company has an Internal Control System commensurate with the size scale and natureof its business. It's a risk focused system analyzing and reporting to the management onthe day-to-day operations of the Company.
The Internal Audit Department across locations monitors and evaluates the efficacy andadequacy of the internal control system in the Company its compliance with the operatingsystems accounting procedures policies and rules & regulations.
On the basis of the report of the Internal Audit department the respective departmentand functional head undertakes corrective action in their respective areas and therebystrengthens the controls. The Internal Audit Department presents audit observations andcorrective actions thereon to the Audit Committee of the Board.
H] Industrial Relations:
Industrial Relations in all the Divisions of the Company remained cordial andharmonious. During the year average number of persons working in the Company was around5280.
I] Material Development in Human Resources Programs Designed and Undertaken forDevelopment of Human Resource:
The following measures were taken to develop Human Resources in the organization:
1. Initiatives taken by HR during Covid-19 Pandemic:
a) The Company had arranged Vaccination camp for the employees and their families inthe SPD plant premises at Raipur to protect the employees from Covid - 19.
b) The Company has hired the services of one private agency for conducting both Antigenand RTPCR test inside the plant premises to avoid spread of Covid - 19.
c) During the Pandemic Company has supplied a large number of Oxygen Cylinders Oxygenconcentrator Ventilator and other related articles to government and various privateagencies across the State of Chhattisgarh.
d) Company has given Ambulance facilities to pick dead bodies from the nearby Covidcenters.
e) HR department assisted employees and their family members to get medical treatmentfrom government and private hospital across Chhattisgarh.
f) The Company assisted employees and their families for food medicine and counselingas per need/requirements.
2. HRMS Automation:
Human Resource Management System has been introduced with a view to automise the entireHR processes. According to the automation an employee can apply leave gate pass mispunch and related information through mobile application. Employees need not to visit HRDepartment for collecting their residential service or any other certificates. Moreoverthe company can process their salaries IT deduction etc. through the system. Outstationemployees can register their attendance through this system irrespective of the placesthey are posted.
3. Interaction of HR representative with HoDs:
It has been decided to have an interactive session between department and HR where headHR and sectional heads will meet HODs at their place to discuss with the HR issues beingfaced by the HoDs. The Human Resources Department was successful in solving many of theissues raised.
Company has been bestowed with various National & International level awards in thearena of Human Resource and CSR activities which includes:
a) the Company has been awarded with Gold Award in the category "Most InnovativeHR" in HR Distinction Awards.
b) the Company has been awarded with Diamond Award in the category "Most HumanIntervention" in HR Distinction Awards held on 6th May 2021 at New Delhi.
c) Award for the Practices in Corporate Social Responsibility by Global HR excellenceaward 2021.
J] Corporate Social Responsibility:
The Corporate Social Responsibility for our Company entails much more than socialoutreach programs and is an integral part of the way the Company conducts its business. Asa part of the social responsibility and as a good corporate citizen the Company regularlyundertakes various programs and projects with a view to promote and protect a congenialand eco-friendly atmosphere in and around the Plants and Mines. We pledge to serve andcontribute to the welfare of the society in general and the surrounding areas of theworking site in particular.
During the year under review the Board of our Company approved a comprehensive CSRBudget and accordingly the CSR activities were planned for the financial year 2020-21 asper the recommendation/approval of the CSR Committee and the Board. The Company ispursuing the CSR programs and projects as per its approved Corporate Social ResponsibilityPolicy.
As part of its initiatives under "Corporate Social Responsibility" (CSR) theCompany has undertaken projects and programs in the areas such as Healthcare SanitationProvision of Safe Drinking Water Mitigate malnutrition Promotion of Education andImparting Training Women Empowerment Promotion of Traditional Art and CultureEnvironmental Sustainability Development of Rural Sports Programs and Training fordevelopment and upliftment of rural masses especially women youths and girls andDevelopment of Infrastructural facilities in rural areas.
During the year under review some of the CSR activities undertaken by the Company inand around the Plants and Mining areas which are largely in accordance with Schedule VIIof the Companies Act 2013 are as follows:
1. Opening of a Charitable Medical Centre at Village Dhaneli to provide medical carefacilities to the people residing in the plant peripheral areas. The center has facilitiesto accommodate two doctors at a time and attending emergency/other cases of villagers.
2. Health & Eye check-up/awareness camp Provision of safe drinking watersubmersible pumps and drilling for Borewells water supply by tankers in villages.
3. Financial assistance for honorarium to teachers providing skill developmenttraining to unemployed youths organizing educational tours.
4. Organizing sports activities sports ground maintenance and providing financialassistance and distribution of sports material for promotion of rural /nationallyrecognized sports.
5. Development of tailoring training center for imparting training to rural womenproviding tailoring material and sewing machines at training centers providing furnitureto local Mahila Samiti and organizing women amusement programs.
6. Protection of ecological balance through landscaping & garden development treeplantation and distribution of plants.
7. Financial Assistance for local development work renovation of Government schoolinstallation of solar streetlights in villages assistance in infrastructure work of localtemples and areas maintenance of roads etc.
Your Directors wish to inform:
i. That as per the provisions of Section 135 (5) of the Companies Act 2013 Companywas not required to spend any amount during the Financial Year 2020-21 on the CSRActivities.
ii. That the CSR Budget for the Financial Year 2020-21 as approved by the CSR Committeeand the Board was Rs. 258.90 lacs.
iii. That during the financial year 2020-21 the actual expenditure incurred by theCompany on the CSR activities was Rs.242.34 lacs.
During the Financial Year 2020-21 the Company spent Rs.242.34 lacs on CSR activitiesand thus has been able to increase the amount spent on the CSR activities during theFinancial Year 2020-21 as compared to previous financial year - Rs.229.15 lacs.
The Annual Report on CSR activities is attached as "Annexure A" and formspart of this report.
4. AUDITORS' REPORT:
The Auditors Report on the financial statements of the Company for the year ended 31stMarch 2021 is self - explanatory except a qualification which have been specified hereinbelow along with Boards explanations thereto:
AUDITORS' QUALIFICATION (if any)
As mentioned in Note no. 18.10 to the Financial Statements Non Current Borrowingsinclude an amount of Rs.183111.16 Lakhs due to an Asset Reconstruction Company. Banksholding 97.91% (by value) of the total principal debt equivalent to Rs. 356324.74 Lakhsassigned all their rights title and interests in financial assistances granted by them tothe Company in favour of Assets Care & Reconstruction Enterprise Limited acting inits capacity as Trustee of ten different Trust (ACRE). Until the revised terms andcondition will be agreed between the Company and ACRE the arrangement with those banksare valid and as per the arrangements with those banks the Company is required to complywith certain covenants as referred in the said note and non-compliance with thesecovenants may give rights to the banks/ACRE to demand repayment of the loans. As at March31 2021 the Company has not complied with certain covenants and they have not beenprovided with any confirmation from those lenders for extension of time to comply withthese covenants. The Company has not classified these liabilities as current liabilitiesas required by Indian Accounting Standards (Ind AS) - 1 - "Presentation of FinancialStatements".
EXPLANATION TO AUDITORS' QUALIFICATION (if any)
Your Directors submit the following explanation to the above qualification of theAuditors:
The Management is of the view that the non-compliance of the loan covenants will notaffect the continuity of the Company's operations and it continues to prepare its books ofaccounts on going concern basis. ACRE continues to support the operations of the Company.The Company has entered into a restructuring support agreement dated 23rd August 2021with various trusts declared and managed by Asset Care & Reconstruction EnterpriseLimited in its capacity as a trustee of such trusts ("Lenders") in relation torestructuring of its outstanding debt owed to the Lenders in accordance with Section 9 ofthe Securitization and Reconstruction of Financial Assets and Enforcement of SecuritiesInterest Act 2002 ("SARFAESI Act") as amended and restated from time to time("Restructuring Support Agreement").
The debt restructuring would become effective upon completion of certain conditionprecedents under the Restructuring Support Agreement.
It is expected that the implementation of the proposed debt restructuring would improvethe cash flow position of the Company result in reduction of financial stress and willlead to realignment of debt to a sustainable level and prompt servicing of debt dues bythe Company.
Hence the Company continues to classify these borrowings as non-current.
5. DIRECTORS AND KEY MANAGERIAL PERSONNEL:
During the period under review the Members at the 47th Annual General Meeting of theCompany pursuant to provisions of Sections 196 197 198 and other applicable provisionsif any of the Companies Act 2013 Schedule V thereof and rules made there-underincluding any modifications and/or re-enactments thereof and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 consented to:
a) re-appointment of Shri Arvind Jayaswal (DIN 00249864) as Managing Director & CEO(Foundry Division) for a period of 3 (Three) years w.e.f. 1st January 2020
b) re-appointment of Shri Ramesh Jayaswal (DIN 00249947) as Joint Managing Director& CEO (Steel Plant Division) for a period of 3 (Three) years w.e.f. 1st January 2020
c) re-appointment of Shri P.K. Bhardwaj (DIN 03451077) as Executive Director & CFOfor a period of 3 (Three) years w.e.f. 25th February 2020 and
d) re-appointment of Shri Meghpal Singh (DIN 02635073) as Executive Director (Steel)& Chief Operating Officer (COO) Steel Plant Division of the Company for a period of 3years w.e.f 13th November 2020.
Shri Darshan Kumar Sahni Independent Director ceased to be a Director of the Companydue to his sad demise on 30th April2021.
Shri Ashwini Kumar (DIN 07694424) has been appointed as an Independent Director of theCompany not liable to retire by rotation for a period of 3 years w.e.f. 14th August 2021subject to approval of shareholders in the ensuing Annual General Meeting.
Shri Manoj Shah (DIN 00010473) and Smt. Kumkum Rathi (DIN. 03128864) have beenappointed as Independent Directors of the Company not liable to retire by rotation for aperiod of 3 years w.e.f. 21st October 2021 subject to approval of shareholders in theensuing Annual General Meeting.
Further the terms of Shri S.N. Singh and Smt. Raji Nathani Independent Directorsexpired on 21st September 2021 and that of Shri Arvind Iyer Independent Director of theCompany will be expiring on 12th November 2021.
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Shri Meghpal Singh (DIN 02635073) Executive Director (Steel)& Chief Operating Officer (COO) Steel Plant Division and Shri Ramesh Jayaswal (DIN00249947) Joint Managing Director & Chief Executive Officer (CEO) Steel PlantDivision of the Company are liable to retire by rotation at the ensuing Annual GeneralMeeting and being eligible have offered themselves for re-appointment.
Necessary information on the Director(s) seeking appointment/ reappointment will begiven in the Notice of the ensuing Annual General Meeting.
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed both under Section149 (6) of the Companies Act 2013 and the SEBI (Listing Obligations and DisclosoureRequirements) Regulations 2015.
KEY MANAGERIAL PERSONNEL
The following are the Key Managerial Personnel of the Company:
i) Shri Arvind Jayaswal (DIN 00249864)Managing Director and Chief Executive Officer(Foundry Division)
ii) Shri Ramesh Jayaswal (DIN 00249947) Joint Managing Director and Chief ExecutiveOfficer (Steel Plant Division)
iii) Shri P. K. Bhardwaj (DIN 03451077) Executive Director and CFO
iv) Shri Megh Pal Singh (DIN 02635073) Executive Director (Steel) and Chief OperatingOfficer (Steel Plant Division) and
v) Shri Vikash Kumar Agarwal Company Secretary and Compliance Officer.
The Board of Directors of the Company is committed to get its performance evaluated inorder to identify its strengths and areas in which it may improve its functioning. To thatend the Nomination and Remuneration Committee has established the process for evaluationof performance of Directors including Independent Directors the Board and its Committees.The evaluation of performance of Executive Directors is done by Independent Directors.
The Company has devised a Policy for performance evaluation of Independent DirectorsBoard Committees and other individual Directors which includes criteria and process forperformance evaluation of the Non-Executive Directors and Executive Directors throughquestionnaire to judge the knowledge to perform the role time and level of participationperformance of duties professional conduct independence etc. Theappointment/re-appointment/ continuation of Directors on the Board is based on the outcomeof evaluation process.
During the year under review as per the policy for the performance evaluation formalevaluation of performance of Directors including Independent Directors the Board and itsCommittees was made by the Independent Directors and the Nomination and RemunerationCommittee in their respective meetings and the evaluation result was placed before theBoard for its information and consideration.
The Company has a policy for selection and appointment of Directors Key ManagerialPersonnel and Senior Management Personnel and for determination of their remuneration. TheNomination & Remuneration Policy details are stated in the Corporate GovernanceReport.
During the year 4 (Four) Board Meetings and 4 (Four) Audit Committee Meetings wereconvened and held the details of which are given in the Corporate Governance Report. Theintervening gap between the Meetings was within the period prescribed under the CompaniesAct 2013 / SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015subject to relaxations given by the Ministry of Corporate Affairs and SEBI respectively.
RELATED PARTY TRANSACTIONS:
During the period under review all related party transactions that were entered wereon an arm's length basis and were in the ordinary course of business. As a matter ofabundant precaution the transactions between the Company and one of its related partiesM/s. NSSL Private Limited during the financial year 2020-21 has been duly approved by theshareholders of the Company as it has exceeded the limits prescribed under Section 188 ofthe Companies Act 2013. There are no materially significant related party transactionsmade by the Company with Promoters Directors Key Managerial Personnel or otherdesignated persons which may have a potential conflict with the interest of the Company atlarge.
The policy on Related Party Transactions duly approved by the Board on therecommendation of the Audit Committee has been posted on the Company's website.
6. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is attached as "Annexure B" andforms part of this report.
7. PARTICULARS OF EMPLOYEES:
The information required pursuant to Section 197(12) of the Companies Act 2013 readwith Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 as amended in respect of employees of the Company forming part of Directors' Reportis given in "Annexure E" to this Report.
8. SUBSIDIARY COMPANY AND ASSOCIATE COMPANY:
During the period under review the Company did not have any Subsidiary Company.Further Statement in respect of Maa Usha Urja Limited an Associate Company under Section129 of the Companies Act 2013 read with Rule 5 of the Companies (Accounts) Rules 2014in Form AOC-1 is attached as "Annexure C" and forms part of this report.
The Company has formulated a policy for determining material subsidiaries' andthe said policy has been posted on the website of the Company.
9. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.
10. CORPORATE GOVERNANCE REPORT:
The report on Corporate Governance as stipulated under Regulation 34 (3) read withSchedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015along with the requisite certificate from the Practicing Company Secretary confirmingcompliance with the conditions of corporate governance is appended and forms a part ofthis report.
11. RISK MANAGEMENT:
The Company has a comprehensive Risk Management framework in place to identify assessmonitor and mitigate various risks to the business.
The Risk Management Committee and the Board periodically reviews the Company's riskassessment and Action taken report as per the Risk Management Policy and Plan to ensurethat the Management identifies and controls risks through a properly defined framework.
12. VIGIL MECHANISM / WHISTLE BLOWER MECHANISM:
The Company has established a Vigil Mechanism that enables the Directors and Employeesto report genuine concerns. The Vigil Mechanism provides for (a) adequate safeguardsagainst victimization of persons who use the Vigil Mechanism; and (b) direct access to theChairperson of the Audit Committee of the Board of Directors of the Company in appropriateor exceptional cases. Details of the Vigil Mechanism Policy are made available on thewebsite of the Company and have also been provided in the Corporate Governance Reportforming part of this Report.
13. DIRECTORS RESPONSIBILITY STATEMENT:
As required under section 134 (3) (c) of the Companies Act 2013 your Directorsconfirm and state:
a. that in the preparation of the annual financial statements for the year ended 31stMarch 2021 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;
b. that such accounting policies as mentioned in Note 1 of the Notes to the FinancialStatements have been selected and applied consistently and judgments and estimates havebeen made that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31st March 2021 and of the profit and loss of the Companyfor the year ended on that date;
c. that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d. that the annual financial statements have been prepared on a going concern basis;
e. that proper internal financial controls have been in place and that the internalfinancial controls are adequate and have been operating effectively;
f. that systems to ensure compliance with the provisions of all applicable laws havebeen in place and are adequate and operating effectively.
14. INTERNAL FINANCIAL CONTROL SYSTEMS:
The Company has formulated its SOPs & Policies related to Internal FinancialControl over Financial Reporting. There are sufficient controls and checks and balancesestablished for all the material transactions. The Company has also fixed process flowsfor all the transactions. The Company has also designed strong Management InformationSystem (MIS) for proactive controls and monitoring.
The Company has in place adequate internal financial controls with reference toFinancial Statements. During the year such controls were operating effectively.
15. ANNUAL RETURN:
The Annual Return of the Company is available on the URLhttp://necoindia.com/annual-reports.html
The Joint Statutory Auditors M/s. Naresh Patadia & Co. Chartered AccountantsNagpur hold office for the period of 5 years from the Annual General Meeting (AGM) held on27th September 2017.
Further the Joint Statutory Auditors M/s. Pathak H. D. & Associates LLP CharteredAccountants Mumbai holds office until the ensuing Annual General Meeting of the Companyand consequently their term gets completed on the conclusion of the Annual GeneralMeeting. We thank them for their sincere services rendered to the Company.
Now the Company has approached M/s. Chaturvedi and Shah LLP Chartered AccountantsMumbai to give their consent to become Joint Statutory Auditors of the Company for theperiod of five years commencing from the date of the ensuing Annual General Meeting.
Their consent letters/ certificates to the effect that their appointments if madewould be within the prescribed limits under Section 141 of the Companies Act 2013 andthat they are not disqualified have been received.
Consequently the Board of Directors recommend the appointment of M/s Chaturvedi andShah LLP Chartered Accountants Mumbai as the Joint Statutory Auditor of the Company forthe period of five years commencing from the date of the ensuing Annual General Meeting.
The said recommendation has been put up for the approval of the members at the ensuingAnnual General Meeting of the Company. Further as per the terms of the RestructuringSupport Agreement the appointment is subject to receipt of consent of various trustsdeclared and managed by Asset Care & Reconstruction Enterprise Limited in itscapacity as a trustee of such trusts ("Lenders"). The lenders consent has beenreceived.
17. COST AUDITOR:
In pursuance of Section 148 of the Companies Act 2013 your Directors appointed M/s.Manisha & Associates Cost Accountants Nagpur to conduct the audit of the CostAccounting records for the financial year 2020-21.
The Board of Directors of the Company on the recommendation of the Audit Committee atits meeting held on 30th June 2021 has re-appointed M/s. Manisha & Associates as theCost Auditors of the Company to conduct the audit of the Cost Accounting records for thefinancial year 2021-22 on the remuneration of Rs. 143750/- plus applicable taxes andreimbursement of out of pocket expenses at actuals. As required under Section 148 (3) ofthe Companies Act 2013 read with Rule 14 of the Companies (Audit and Auditors) Rules2014 the remuneration payable to the Cost Auditors is to be ratified by the shareholders.Therefore the Board of Directors recommend the remuneration payable to M/s. Manisha &Associates Cost Auditors for the financial year 2021-22 for the ratification by theMembers at the ensuing Annual General Meeting.
18. 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 Board appointedM/s. R. A. Daga and Co. Company Secretaries Nagpur to conduct Secretarial Audit for thefinancial year 2020-21.
The Board of Directors of the Company on the recommendation of the Audit Committee atits meeting held on 30th June 2021 has re-appointed M/s. R. A. Daga and Co. CompanySecretaries Nagpur to conduct Secretarial Audit for the financial year 2021-22 on theremuneration of Rs. 46000/- plus out of pocket expenses at actuals.
The Secretarial Audit Report for the financial year ended 31st March 2021 in Form MR-3is attached as "Annexure D" and forms part to this Report. The Secretarial AuditReport does not contain any qualification reservation or adverse remark.
19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS:
No significant or material orders were passed by the Regulators or Courts or Tribunalswhich impact the going concern status and Company's operations in future. However theother significant and material orders passed by the Regulators/Courts/Tribunals have beencovered under points 3 (D) - Restructuring of Term Loans 3 (E) - Projects and 21 (2) ofthis Report.
20. BUSINESS RESPONSIBILITY REPORT:
The Business Responsibility Report as stipulated under Regulation 34 (2) (f) of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 describing theinitiatives taken by them from an environmental social and governance perspective in theformat as specified by the Securities Exchange Board of India forms a part of thisreport.
Your Directors state that during the year under review:
1. The Company had no deposits covered under Chapter V of the Companies Act 2013.
2. The Company Petition No.11 of 2015 under Section 434 of the Companies Act 1956was filed before the Bombay High Court Nagpur Bench Nagpur by Corporate Ispat AlloysLimited (CIAL) through its Director Shri Manoj Kumar Jayaswal against the Company(JNIL) claiming an amount of Rs. 1022678728/- as payable to CIAL.
The Company had challenged the maintainability of the said winding up petition thehearing in the matter had been completed. Subsequently the said petition has beenwithdrawn by the petitioner as confirmed by the Hon'ble Bombay High Court Nagpur Benchorder dated 25th February 2021.
Further the Company had filed a civil suit claiming a sum of Rs. 70027.00 lakhs fromCIAL towards the loss suffered by it due to delay / withholding the merger of Strip MillDivision of CIAL with a malafide intention which is pending before the Hon'ble Civil JudgeSenior Division Nagpur.
3. No cases have been filed pursuant to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. There has been no incidence/complaintrelated to sexual harassment of women at workplace during the period under review.
4. The Company has complied with the applicable Secretarial Standards under theCompanies Act 2013.
5. The Dividend Distribution Policy of the Company is available on the Company'swebsite and can be accessed at:https://www.necoindia.com/images/investor/corporate-governance/Dividend-Distribution-Policy.pdf
Your Directors place on record their sincere appreciation and gratitude for all theco-operation extended by Government Agencies Lenders Financial Institutions BusinessAssociates and Shareholders. The Directors also record their appreciation for thededicated services rendered by all the Executive Staff and Workers of the Company at alllevels in all units and for their valuable contribution in the working of the Company.
For and on behalf of Board of Directors
| ||Arvind Jayaswal ||P.K. Bhardwaj |
|Date: 11th November 2021 ||Managing Director & CEO (Foundry Division) ||Executive Director & CFO |
|Place: Nagpur ||(DIN 00249864) ||(DIN 03451077) |