MANAGEMENT DISCUSSION AND ANALYSIS
The Directors are pleased to present their 46th Annual Reporton the affairs of the Company together with the Audited Financial Statements for the yearended 31st March 2019.
1. FINANCIAL RESULTS
The summarized financial results for the year vis-a-vis the previous year are asfollows:
| || ||(Rs. in crore) |
|Particulars ||31.03.2019 ||31.03.2018 |
|Net Sales ||4226.53 ||3477.40 |
|Other Income ||17.41 ||24.55 |
|Total Revenue (Net) ||4243.94 ||3501.94 |
|Operating Expenses ||3703.82 ||3169.87 |
|EBIDTA ||540.12 ||332.07 |
|Finance Costs ||711.47 ||658.18 |
|Depreciation and Amortization Expenses ||272.68 ||273.00 |
|Exceptional Item ||- ||(7.06) |
|Profit/(Loss) before tax ||(444.03) ||(592.05) |
|Tax Expenses ||(0.16) ||(100.68) |
|Profit / (Loss) after Tax carried to Balance Sheet ||(443.87) ||(491.36) |
Your Company has not carried any amount to reserves and the amount of Loss after tax ofRs 443.87 crore 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 on financial and legal front.
The first half of the year was good for the Steel Sector which witnessed robust demandand prices from the end user customers. The second half of the year more particularly fromthe end of November 2018 onwards however witnessed sharp slowdown in the Auto Componentcustomers demand due to which the Company was not able to pass on the raw material andother cost increase.
The slowdown in the end user Auto sector was attributed principally due to strict loandisbursal norms by NBFCs & MFIs market liquidity issues farm distress fuel pricespurt stringent pollution control norms hike in insurance costs revision in Axle loadnorms and China Auto sector demand slowdown.
Despite the aforesaid challenges the Company tried to optimise the production andplant yield through efficient use of its resources. The Company's Net Sales fromoperations for the year stood at Rs. 4226.53 Crores and has increased approximately by21.54% than the previous year's Net Sales from operations of Rs. 3477.40 Crores. Duringthe year the Net sales has increased mainly due to increased capacity utilisation of newSteel Making Facility and increase in selling prices of Iron and Rolled products up toNovember 2018.
The Company has been focused on selling high-end value-added products (Rolled Products)with applications in automotive and Auto components segment thereby ensuring thatrealisations were better. However with the slowdown in the second half of the year moreparticularly from the end of November 2018 the Company had to sell more metallics and lowAlloy Steel in the market with lesser margins to ensure cash flows to sustain itsoperations.
Despite the aforesaid challenges the Company was able to record good earnings (EBIDTA).The Company's Earnings before Interest Depreciation and Tax (EBIDTA) level during the yearwas at Rs. 540.12 Crores as against Rs. 332.07 Crores for the previous year.
The Net Loss before Exceptional Items and Tax for the year stood at Rs. 444.03 Croresand Net loss after Tax for the year stood at Rs. 443.87 Crores.
During the year the Net Worth of the Company has decreased to Rs. 699.80 Crores fromRs. 1149.89 Crores in the previous year on account of the losses recorded principally dueto less than expected contribution margin to cover the fixed costs (interest anddepreciation) on the capitalized projects.
Key Financial Ratios:
Variance over 25% (FY 2018-19 Vs FY 2017-18) with Reasoning:
Debtors Turnover Ratio: The Debtors Turnover Ratio has improved from 6.20 times inFY 2017-18 to 8.70 times in FY 2018-19 with 40.38% variance. The Ratio has improved due tocompany's effectiveness in collecting its receivables.
Interest Coverage Ratio: The Interest Coverage Ratio has improved from 0.50 inFY 2017-18 to 0.76 in FY 2018-19 with 50.47% variance. The Ratio has improved on accountof improvement in EBIDTA due to increase in sale quantity of Rolled Products and increasein overall selling prices and margins during FY 2018-19. In FY 2018-19 the capacityutilization of new Steel Making facility has improved as compared to the last year.
Debt Equity Ratio: The Debt Equity Ratio has deteriorated from 3.18 (As on 31stMarch 2018) to 5.14 (As on 31st March 2019) with 61.61% variance. TheRatio has deteriorated mainly due to decrease in Net worth which is on account of netlosses during the period.
Operating Profit Margin (%): The Operating Profit Margin has improved from 8.84%in FY 2017-18 to 12.37% in FY 2018-19 with 39.85% variance. The Improvement in OperatingProfit
Rolled Products and increase in overall selling prices and margins during FY 2018-19.In FY 2018-19 the capacity utilization of new Steel Making facility has improvedsignificantly as compared to the last year. The Margin on Rolled products are higher ascompared to Iron Products.
Net Profit (Loss) Margin (%) : The Net Loss Margin has improved from -14.13% inFY 2017-18 to -10.50% in FY 2018-19 with 25.68% variance. The ratio has improved due tolesser Net Losses mainly due to improvement in EBIDTA levels.
Return on Net Worth: The ratio has deteriorated from -42.73% to -63.43% with 48.43%variance. The ratio has deteriorated due to reduction in Net Worth in FY 2018-19 due toNet Losses in the current year.
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.
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. 3717.97 Crores ascompared to Rs. 3087.20 Crores of the previous year.
The production levels of the Steel Melt Shop during 2018-19 was around 107% of theprevious year and the production levels of the Rolling Mills was around 119% of theprevious year. The Hot Metal production level was around 107% of the previous year. Pelletproduction level was around 107% of the previous year. The Sponge Iron production levelwas around 111% of the previous year.
The Net Sales has increased mainly due to increased capacity utilisation of new SteelMaking Facility pellet plant blast furnace sponge iron plants and increase in sellingprices of Iron and Rolled products up to November 2018.
The share of metallics sales value i.e. pig iron sponge iron and pellets to totalSteel Plant division sales was around 29.30% in 2018-19 which is marginally lower (by0.19%) than that previous year figure of 29.49%. Going forward the Company expects tofurther increase the production of finished steel in its overall sales by graduallyramping up the capacity utilisation of its new Steel making facility.
ii) Castings Division:
The Net Sales from the foundry division has increased to Rs. 508.55 Crores during theyear from Rs. 390.20 Crores in the Financial Year 2017-18.
The Automotive Castings Sub Division accounted for around 46% the Centrifugal CastingsSub Division for around 22% Engineering Castings Sub Division for around 26% and theConstruction Casting Sub Division for around 6% of the total Foundry Division Net Sales.
D] Restructuring of Term Loans and Debt Assignment:
The Company underwent significant financial stress in the last five years due tocancellation of its three captive coal mines which resulted in significant viabilityissues of the end use Iron and Steel making facilities payment of additional levy onmined coal as per Hon'ble Supreme Court order huge dumping of steel in the country whichresulted in the low capacity utilisation of its new steel making facilities andunavailability of incremental working capital support due to Reserve Bank of India's(RBI's) Asset Quality review classifying the Company's accounts as technicalNon-performing Asset from back date effect. Hence the Company had requested its thenlenders to restructure its debts in the year 2017.
The Company's Debt Restructuring Scheme of the year 2017 had already been sanctioned by11 out of 12 lenders (around 96% in value) and out of the sanctioned 11 lenders 10lenders (Including Lead Bank SBI) had already executed Master RestructuringAgreement (MRA) on 12th December 2017.
The Company had complied with all the pre-conditions including bringing upfrontpromoters' contribution of Rs. 100.38 Crores Independent Evaluation Committee(IEC) recommendation to the debt restructuring scheme and getting Investment Grade ratingto the residual debt from two Credit Rating Agencies (CRA) CARE & SMERA appointed bySBI (erstwhile Lead Lender) on the instructions of the erstwhile JLF.
The Lenders appointed CRAs i.e. CARE & SMERA had given Investment Grade Ratinghowever RBI had appointed India Rating & Research Pvt Ltd (IRRPL) who could not giveInvestment Grade Rating in only 3 working days (from the RBI appointment date) by the RBIstipulated timeline of 13th December 2017. The company has contested thematter and it is currently subjudiced.
On the directions of Reserve Bank of India (RBI) which had not agreed to the approvedDebt Restructuring Scheme being fully implemented within the stipulated time line of 13thDecember 2017 State Bank of India (SBI) the then lead secured lender had filed anapplication under the Insolvency and Bankruptcy Code 2016 against the
Company claiming an amount of Rs. 51383 lakhs is in default as on 30thNovember 2017. The matter is currently in pre-admission stage in the National Company LawTribunal (NCLT) Mumbai.
Being aggrieved by the non-implementation of the approved Debt Restructuring Schemethe Company had filed
Writ Petition (WP) before the Hon'ble Bombay High Court Mumbai against RBI and theother respondents raising various questions of law and challenging various communicationsissued by RBI from time to time which had adversely affected the implementation of theapproved Debt Restructuring Scheme of the Company. The Hon'ble Bombay High Court hadhowever dismissed the WP of the company.
The Company then challenged the order of the Hon'ble Bombay High Court before theHon'ble Supreme Court of India and on 16th April 2018 the Hon'ble SupremeCourt was pleased to issue notice and directed the parties to maintain status quo. Thematter is yet to be listed on the bench.
The Company has been regularly servicing its Letter of Credit bills payments WorkingCapital interest as per existing sanctioned rates and term loan servicing as per 2017 DebtRestructuring package without getting any benefits of the Debt restructuringimplementation as its implementation was stalled on the instructions of Reserve Bank ofIndia to the erstwhile lead Bank State Bank of India to file case against the Companyunder IBC in NCLT.
Your company sincerely believes and is quite hopeful to achieve better performance interms of serviceability of its financial obligations deployment of capital and resourcesetc.
Presently eight out of twelve bankers of the Company with around 94.20% of thePrincipal Fund Based Outstanding have assigned their debt in favour of Assets Care &Reconstruction Enterprise Ltd (ACRE) acting in its capacity as trustee of various trusts.
During the December 2018 quarter four bankers of the Company viz. State Bank ofIndia Union bank of India Punjab National Bank and Indian Overseas Bank have assignedtheir fund based debt along with underlying financial documents together with theirrights benefits and obligations to Assets Care & Ltd (ACRE) acting in its capacity astrustee of ACRE 54 Trust (for State Bank of India Debt assignment) ACRE 59 Trust (forUnion Bank of India Debt assignment) ACRE 64 Trust (for Punjab National Bank Debtassignment) and ACRE 63 Trust (for Indian Overseas Bank Debt assignment) vide AssignmentAgreements executed by them in favour of ACRE.
Further during the March 2019 quarter further four bankers of the Company viz. IDBIBank Central Bank of India Oriental Bank of Commerce and Bank of India have assignedtheir fund based debt along with underlying financial documents together with theirrights benefits and obligations to Assets Care & Reconstruction Enterprise Ltd (ACRE)acting in its capacity as trustee of ACRE 68 Trust (for IDBI Bank Debt assignment) ACRE69 Trust (for Central Bank of India Debt assignment) ACRE 70 Trust (for Oriental Bank ofCommerce Debt assignment) and ACRE 76 Trust (for Bank of India Debt assignment) videAssignment Agreements executed by them in favour of ACRE.
The Company has been actively engaged with ACRE to get its debts restructured and ishopeful to get its Debt
Restructuring scheme finalized and implemented in this financial year.
The Company envisages to ensure timely servicing of its obligations as per the new DebtRestructuring scheme.
The Company with a view to set up end use projects for its captive coal mineswhich were although subsequently deallocated optimize costs 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 have been completed except the 3.0Lacs TPA DRI Plant (Sponge Iron Plant) & it's Associated Captive Power Plant atBilaspur district in Chhattisgarh.
The said project had been put under abeyance. It was decided in the erstwhile JointLenders' Forum (JLF) meeting held on 25th April 2017 that the said project tobe kept in abeyance and no further investment to be done in the Sponge Iron Plant &Associated Captive Power Plant unit at Bilaspur by the Company due to its commercialunviability due to cancellation of the captive coal mines of the Company by the HonourableSupreme Court. It was also decided by the JLF forum that the said project would beNon-Core Asset of the Company.
Subsequently the Directorate of Enforcement in its first attachment provisionallyattached the plant and machinery under installation at Dagori Integrated steel plantsituated at Bilaspur district to the extent of Rs. 20616 Lakhs and in its secondattachment also provisionally attached land at Dagori Integrated steel plant for Rs.2092Lakhs (apart from Office and Factory Building and Plant and Machinery of the Sponge IronPlants (350 TPD + 500 TPD) at Steel Plant Division Siltara Raipur to the extent of Rs.8050 Lakhs) for alleged misuse of coal raised from Gare Palma IV/4 coal block atChhattisgarh.
The Company had challenged the two provisional orders before the AdjudicatingAuthority. The Adjudicating Authority dismissed the appeals filed by the Company andconfirmed the Provisional Attachment Orders. The Company then filed appeal against theorders passed by the Adjudicating Authority before the ED Appellate Authority. The EDAppellate Authority vide its order issued notice to Directorate of Enforcement and alsodirected Directorate of Enforcement not to take any coercive steps.
The last hearing in the ED first Attachment matter was done by the ED AppellateAuthority on 15th March 2019 and now the ED first attachment matter had beenclubbed by the ED Appellate Authority with the ED second attachment matter and have beenput up for hearing on 17th July 2019.
The Company has a good case on merits is likely to succeed in refuting the allegationsand does not expect any material liability on the Company on this account.
F] Industry Outlook Developments and Concerns:
India was the world's second largest steel producer in the year 2018. The growth in theIndian steel sector has been driven by domestic availability of raw materials such as ironore fines non-coking coal strong domestic demand and cost-effective labour.Consequently the steel sector which is part of the Core Sector has been a majorcontributor to India's manufacturing output.
Steel industry and its associated mining and metallurgy sectors have seen a number ofmajor investments and developments in the recent past in India. The India's National SteelPolicy (2017) which projected crude steel production capacity to increase to 300 MT peryear 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.
Over the last five years the output of long products in the country grew at a CAGR of4.8% and that of flat grew at a CAGR of 3.9%. The output of long products increased to 45million tonnes and that of flat products rose to 49.8 million tonnes.
The likely growth in the rural economy and infrastructure is expected to lead to growthin demand for steel. Further the Government of India has also launched e-platform whichwill facilitate sale of finished and semi-finished steel products.
Huge scope for growth is offered by India's comparatively low per capita steelconsumption and the expected rise in consumption due to increased infrastructureconstruction and the thriving automobile and railways sectors. The higher consumption iscrucially dependent on infrastructure investment from the public and private sources inport rail and road-led development more spending by the household and the government inreal estate affordable housing and the smart cities.
The Company's Steel Plant is primarily into Alloy Steel Production. Alloy Steelproduction is specialty steel production against confirmed orders of various gradesshapes and sizes of Long products. Alloy steel is not a commodity and it has a structuredmarket. The Alloy Steel Industry has witnessed growth rate in India of 6% to 12% in thelast decade. Alloy Steel Industry demand comes from - (a) Automobile Industries (AutoComponent players and OEMs) (b) Railways (c) Defence (d) Component Export (e)Non-auto segment like electrodes shafting cathode bar etc.
Alloy Steel market is presently approx. 6.5 million ton/annum in the organized sector.Alloy steel production in India is set to rise up to 13 MTPA by FY 2025. Indian AlloySteel production accounts for 5% share in the global alloy steel production.
The Alloy steel sector has faced headwinds from the end of November 2018 as the Indianautomobile sector continues to be in a slow lane as is evident from March 2019 volumenumbers. The slowdown is principally attributable to the multiple challenges such asincrease in the total cost of ownership of vehicles due to mandatory long-term third-partyinsurance and implementation of stringent safety regulations higher cost of retailfinance liquidity squeeze with the NBFCs farm distress revision in the Axle Load normsand moderate economic activities ahead of elections.
The long-term Auto Sector outlook however continues to be positive primarily due tothe government's focus on construction and infrastructure and increase in miningactivities and strong macroeconomic fundamentals of the country.
According to Society of Indian Automobile Manufacturers (SIAM) the commercial vehicleindustry is expected to grow by 10 to 12 per cent in FY'20. The growth projectionis largely based on the expected pre-buying which is anticipated to kick in during H2FY'20 due to implementation of BS VI norms from 1st April 2020.
The passenger vehicle sales are projected to grow between 3-5 per cent. The two-wheelersegment is expected to grow between 5-7 percent and three-wheeler segment is pegged togrow between 7-9 percent.
Driving this growth will be overall infrastructure and Gross Domestic Product that isestimated to grow at 7 percent during FY20. As per SIAM the Auto Industry growth willlikely to remain intact with positive GDP growth outlook and infrastructure expenditure.
However despite positive outlook projections key concerns relating to below normalmonsoons political uncertainty and dipped consumer sentiment continue to be challengesfor the auto industry.
As per SIAM the Indian automotive industry saw marginal increase of 5 per cent at26267783 units in FY'19.
The Commercial Vehicle (CV) sector mostly a cyclical industry for the first timecrossed one million domestic sales mark in FY 18-19 even as the sector struggled in thesecond half of the fiscal. The segment was mainly driven by demand due to newinfrastructure projects and fleet replacement. The H1 of FY'19 saw the segment obtaining astrong double-digit growth of 37.82 per cent which shrank to 3.3 per cent in the H2 of thefiscal.
The Company is gradually ramping up the operations of its new Steel Melting Shop andRolling Mill however finding market for the products amidst subdued demand and shortageof working capital remain its key concerns.
The Law and order problems in the Iron Ore Mining belts in the State of Chhattisgarh isstill continuing to be a matter of concern for the Company creating serious problems forgovernmental and social machineries although the company has commenced mining from coupleof its iron ore mines .
G] Internal Control Systems:
The Board of Directors of the Company is responsible for ensuring that InternalFinancial Controls have been laid down in the Company and that such controls are adequateand operating effectively.
The Company has an Internal Control System commensurate with the size scale andnature of its business. It's a risk focused system analysing and reporting to themanagement on the day to day operations of the Company.
The Internal Audit Department monitors and evaluates the efficacy and adequacy ofinternal control system in the Company its compliance with the operating systemsaccounting procedures policies and rules & regulations at all the locations of theCompany.
On the basis of the report of the Internal Audit Department the respective departmentor 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 around7806.
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:
i) Performance parameter for PMS evaluation has been modified to TPM target from aconventional balance score card. Improvement project aimed at involving each employee inthe process of innovation / excellence in the organisation made mandatory.
ii) To enhance skill set and knowledge level of employees two-pronged action initiatedi.e at least attending of two training man-days during the appraisal cycle and impartingtwo training programs for colleagues/ junior / peer within or outside the departmentarena.
iii) Awareness on ISO functioning and involvement made obligatory and credits given onthe intensity of involvement / participation.
iv) Multi skilling introduced in major production department for horizontal growth ofEmployees as well bringing flexibility in the work site.
v) As a part of Employee welfare measure benevolent scheme has been introduced tomitigate the financial hardship of the family member in the event of death of an employeeon any account while in service.
vi) Organisation has made a Skill Development centre functional at the plant site forproviding employable skill to 170 youth in seven trades to the unemployed andunderprivileged youth of Dharsiwa block through the State Government project under theaegis of Mukhya Mantri Kaushal Vikash Yojana.
vii) Company has been bestowed with 4 National level awards in the arena of HumanResource and CSR activities which includes:
1) NIPM National Runners Award-2018 for Best HR Practices and
2) India CSR community initiative service Award 2018 for initiating action on skilldevelopment centre for the local youth.
viii) Activated summer internship program for a span of 2 months covering 235 studentsunder summer internship program for the technical and professional colleges ofChhattisgarh.
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 Companyapproved a comprehensive CSR Budget and as such the CSR activities planned for thefinancial year 2018-19 as per the recommendation of CSR Committee and since then it 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 Watermitigate 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 reviewsome of the CSR activities undertaken by the Company in and around the Plants and Miningareas which are largely in accordance with Schedule VII of the Companies Act 2013 are asfollows:
1. Four numbers of Health & Eye check-up/awareness camp in association with SMCHeart Institute and Research Centre MGM Eye Hospital and District Health Services etctwo numbers of Blood donation camp with the support of Vilasa Blood Bank Medicine supplyto the poor in the village of Metabodeli free Ambulance services for needy patients ofnearby villages of Mining areas Construction of a toilet in Chargaon villageDistribution of Garbage Bins for collection of garbage from Schools Provision of safedrinking water Installation/repairing of hand pumps solar water tanks solar waterpumps submersible pumps and drilling of ten numbers of Borewells in peripheral villagesof Mines water supply by tankers to villages during Summer distribution of nutritiousfood and fruits to the malnourished children of mines peripheral villages.
2. Provided Computer Training to five numbers of needy youths awards and fifty-twonumbers of scholarship to academic meritorious students financial assistance forhonorarium to three teachers distribution of stationaries to the students & computerprinter to schools.
3. Organising of Road Safety Awareness program providing skill development training to186 unemployed youths of Dharsiwa Block Raipur.
4. Organized educational tours and free coaching to school children.
5. Organizing sports activities sports ground maintenance and providing financialassistance and distribution of sports items for promotion of rural /nationally recognizedsports.
6. Development of tailoring training center in four peripheral villages of Mines forimparting training to rural women providing tailoring material and sewing machines toneedy women.
7. Protection of ecological balance through landscaping & garden development treeplantation and distribution of plants.
8. Promotion of traditional art & culture of state through financial assistance toorganise traditional cultural programs in peripheral villages and providing variousarticles and materials in such programs and distribution of blankets to weaker sections ofthe society including senior citizens retarded and physically handicapped childrenorphans and mobile assistance to blind children.
9. Financial Assistance for local development work renovation of Government schoolinstallation of solar street lights in villages construction of Community Hall andSamadhan Kendra in villages providing Hume Pipes in drains for maintenance of culvertsconstruction and maintenance of village roads etc.
10. Our company have been conferred with one national and state award each for our CSRnotable action in the field CSR.
11. Besides the above Company has also given financial assistance to the DistrictCollector's CSR fund for the socioeconomic development work in the Raipur district.
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 2018-19 on the CSRActivities.
ii. That the CSR Budget for the Financial Year 2018-19 as approved by the CSR Committeeand the Board was of Rs. 323.85 lacs.
iii. That during the financial year 2018-19 the actual expenditure incurred by theCompany on the CSR activities was of Rs. 220.73 lacs.
During the Financial Year 2018-19 the Company spent Rs. 220.73 lacs on CSR activitiesand thus has been able to increase the amount spent on the CSR activities during theFinancial Year 2018-19 as compared to previous financial year's Rs. 209.24 lacs.
The Annual Report on CSR activities is attached as "Annexure A"and forms part of this report.
4. AUDITORS' REPORT:
Auditors Report on the financial statements of the Company for the year ended31 stMarch 2019 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. 230954.89 Lakhs due to certain banks and AssetsReconstruction Company. During the year banks holding 94.20% (by value) of the totalprincipal debt equivalent to Rs. 339353.50 Lakhs assigned all their rights title andinterests in financial assistances granted by them to the Company in favour of Assets Care& Reconstruction
Enterprise Limited acting in its capacity as Trustee of eight different Trusts (ACRE).Until the revised terms and condition will be agreed between the Company and ACRE thearrangement with those banks are valid and as per the arrangements with those banks theCompany is required to comply with certain covenants as referred in the said note andnon-compliance with these covenants may give rights to the banks/ACRE to demand repaymentof the loans. As at 31st March 2019 the Company has not complied with certain covenantsand they have not been provided with any confirmation from those lenders for extension oftime to comply with these covenants. The Company has not classified theseliabilities as current liabilities as required by Indian Accounting Standards (IndAS) 1 - "Presentation of Financial Statements".
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 willnot affect the continuity of the Company's operations. It has been actively engaged withits lead lender-ACRE ARC to get its debts restructured and is hopeful to get it finalizedthis year. 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 45th Annual GeneralMeeting of the Company pursuant to the provisions of Sections 149 152 read with ScheduleIV of the Companies Act 2013 consented to the appointment of Shri Rajendra Prasad Mohanka(DIN 00235850) as an Independent Director of the Company not liable to retire by rotationfor the period of 5 (Five) years w.e.f. 27th July 2018 and also approved thecontinuance of Shri Basant Lall Shaw as the Director of the Company liable to retire byrotation and continuance of Shri Darshan Kumar Sahni as an Independent Director of theCompany for the remaining tenure upto 21st September 2021.
On 10th of September 2018 IDBI Bank Limited withdrew the nomination ofSmt. Kanika Sharma (DIN 07902750) and appointed Smt.Vaishali Nemlekar (DIN 02474433) asits nominee.
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Shri Basant Lall Shaw (DIN 00249729) Chairman of theCompany is liable to retire by rotation at the ensuing Annual General Meeting and beingeligible has offered himself for re-appointment.
Pursuant to provisions of Section 149 of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 Shri B. K. Agrawal is to bere-appointed as an Independent Director of the Company not liable to retire by rotation tohold office for further 5 (Five) consecutive years w.e.f. 22nd September 2019subject to approval of shareholders in the ensuing Annual General Meeting of the Company.
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 Regulations.
KEY MANAGERIAL PERSONNEL
The following are the Key Managerial Personnel of the Company:
i) Shri Arbind 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 evaluatedin order to identify its strengths and areas in which it may improve its functioning. Tothat end the Nomination and Remuneration Committee has established the process forevaluation of performance of Directors including Independent Directors the Board and itsCommittees. The evaluation of performance of Executive Directors is done by IndependentDirectors.
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 shall be based on theoutcome of 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 2015.
RELATED PARTY TRANSACTIONS:
During the period under review all related party transactions that were enteredwere on 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 2018-19 and 2019-20 has been dulyapproved by the shareholders of the Company as it has exceeded the limits prescribed underSection 188 of the Companies Act 2013. There are no materially significant related partytransactions made by the Company with Promoters Directors Key Managerial Personnel orother designated persons which may have a potential conflict with the interest of theCompany at large.
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 ANDOUTGO:
The information on conservation of energy technology absorption and foreignexchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013read with Rule 8 of The Companies (Accounts) Rules 2014 is attached as "AnnexureB" and forms part of this report.
7. PARTICULARS OF EMPLOYEES:
The information required pursuant to Section 197(12) of the Companies Act 2013read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 as amended in respect of employees of the Company forming part of Directors'Report is given in "Annexure F" 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' and thesaid 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 ofSection 186 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 Auditors of the Company 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 identifyassess monitor 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 andEmployees to report genuine concerns. The Vigil Mechanism provides for (a) adequatesafeguards against victimization of persons who use the Vigil Mechanism; and (b) directaccess to the Chairperson of the Audit Committee of the Board of Directors of the Companyin appropriate or exceptional cases. Details of the Vigil Mechanism Policy are madeavailable on the website of the Company and have also been provided in the CorporateGovernance Report forming part of this Report.
13. DIRECTORS RESPONSIBILITY STATEMENT:
As required under section 134 (3) (c) of the Companies Act 2013 your Directorsconfirm and state: year ended 31
a. that in the preparation of the annual financial st March 2019 theapplicable accounting standards have been followed along with proper explanation relatingto 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 2019 and of the profit and loss ofthe Company for 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 balances established for all the materialtransactions. The Company has also fixed process flows for all the transactions. TheCompany has also designed strong Management Information System (MIS) for proactivecontrols and monitoring. reference to Financial Statements. During the TheCompanyhasinplaceadequate internal financial year such controls were operating effectively.
15. EXTRACT OF ANNUAL RETURN:
The particulars forming part of the extract of the Annual Return in Form MGT - 9 isattached as "Annexure D" and forms a part of this report.
The Joint Statutory Auditors M/s. Pathak H. D. & Associates Chartered AccountantsMumbai and M/s. Naresh Patadia & Co. Chartered Accountants Nagpur hold office forthe Meeting (AGM) held on 29th September 2016 and the Annual General Meeting(AGM) held on 27th September 2017 respectively.
17. COST AUDITOR:
In pursuance of Section 148 of the Companies Act 2013 your Directors appointedM/s. Manisha & Associates Cost Accountants Nagpur to conduct the Audit of the CostAccounting records for the financial year 2018-2019.
The Board of Directors of the Company on the recommendation of the Audit Committee atits meeting held on 22nd May 2019 has re-appointed M/s. Manisha &Associates as the Cost Auditors of the Company to conduct the Audit of the CostAccounting records for the financial year 2019-2020 on the remuneration of Rs. 143750 /-plus applicable taxes and reimbursement of out of pocket expenses at actuals. As requiredunder Section 148 (3) of the Companies Act 2013 read with Rule 14 of the Companies (Auditand Auditors) Rules 2014 the remuneration payable to the Cost Auditors istoberatifiedbythe shareholders. Therefore the Board of Directors recommend the remuneration payable toM/s. Manisha & Associates Cost Auditors for the financial year 2019-20 for theratification by the Members at the ensuing Annual General Meeting.
18. SECRETARIAL AUDITOR:
Pursuant to the provisions of Section 204 of the Companies Act 2013 and theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Boardappointed M/s. R. A. Daga and Co. Company Secretaries Nagpur to conduct SecretarialAudit for the financial year 2018-19.
The Board of Directors of the Company on the recommendation of the Audit Committee atits meeting held on 22nd May 2019 has re-appointed M/s. R. A. Daga andCo. Company Secretaries Nagpur to conduct Secretarial Audit for the financial year2019-20 on the remuneration of Rs. 46000 /- plus out of pocket expenses at actuals. TheSecretarial Audit Report for the financial year ended 31st March 2019 in FormMR-3 is attached as "Annexure E" and forms part to this Report. TheSecretarial Audit Report does not contain any qualification reservation or adverseremark.
19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS ormaterial orders were Nosignificant passed by the Regulators or Courts or Tribunals whichimpact the going concern status and Company's operations infuture.Howevertheothersignificantand material orders passed by theRegulators/Courts/Tribunals have been covered under points 3 (D) Restructuring ofTerm Loans 3 (E) Projects and 20 (2) of this Report.
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 Companies Act 1956 wasfiled before the Bombay High Court Nagpur Bench Nagpur by Corporate Ispat Alloys Limited(CIAL) through its Director Shri Manoj Kumar Jayaswal against the Company (JNIL)claiming an amount of Rs. 1022678728/- as payable to CIAL.
The Company has challenged the maintainability of the winding up petition and presentlythe hearing in the matter has been completed. The Petition is still at pre-admissionstage.
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/with holding the merger ofStripMillDivisionofCIALwith which is pending before the Hon'ble Civil Judge SeniorDivision 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.
Your Directors place on record their sincere appreciation and gratitude for allthe co-operation extended by Government Agencies Lenders Financial InstitutionsBusiness Associates 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 || |
|Date: 22nd May 2019 ||Arbind Jayaswal ||P.K. Bhardwaj |
|Place: Nagpur ||Managing Director & ||Executive Director & CFO |
| ||CEO (Foundry Division) ||(DIN 03451077) |
| ||(DIN 00249864) || |