The Directors have pleasure in presenting the Forty-Fifth Annual Report on the businessand operations of the Company together with the Audited Financial Statements for theFinancial Year ended 31st March 2018.
1. Financial Highlights (on stand-alone basis) :
| || ||( Rs. in Million) |
| ||2017-18 ||2016-17 |
|Total Income ||14042.13 ||14237.83 |
|Total Expenditure ||11837.59 ||11228.93 |
|Finance Cost ||86.37 ||96.31 |
|Depreciation & amortisation expenses ||372.22 ||520.26 |
|Profit before Tax ||1745.95 ||2392.33 |
|Tax Expenses : || || |
|- Current Tax ||610.63 ||903.71 |
|- Deferred Tax ||(13.50) ||(76.20) |
|Profit after Tax ||1148.82 ||1564.82 |
2. Indian Accounting Standards (Ind AS) :
The Ministry of Corporate Affairs (MCA) vide its notification dated 16th February2015 notified the Indian Accounting Standards (Ind AS) applicable to certain classes ofcompanies. Ind AS has replaced the existing Indian GAAP prescribed under Section 133 ofthe Companies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014.
Being applicable the Company has adopted Ind AS from April 1 2017 and accordinglythe transition was carried out from the Accounting Principles generally accepted in Indiaas specified under Section 133 of the Companies Act 2013 read with Rule 7 of theCompanies (Accounts) Rules 2014 (previous GAAP) to Ind AS 101 First time adoptionof Indian Accounting Standards.
The impact of transition has been recorded in opening reserves as at April 1 2016 andthe periods presented have been restated / reclassified.
The reconciliation and descriptions of the effect of the transition from Indian GAAP toInd AS have been provided in Note 47 of the notes forming part of separate financialstatements.
3. Dividend & Reserves :
The Directors are pleased to recommend a dividend of Rs. 5/- per Equity Share of Rs.5/- each (i.e.100%) for the financial year ended 31st March 2018 for approval of themembers. The dividend on Equity Shares if approved by the members would involve a cashoutflow of Rs. 218.27 Million plus a dividend tax of Rs. 44.87 Million.
During the year under review no transfer is made to the General Reserve. An amount ofRs. 7035.59 Million is retained as surplus in the Statement of Profit and Loss.
4. Performance of the Company :
During the Financial Year ended 31st March 2018 the Company achieved Revenue fromOperation of
Rs. 13870.15 Million against Rs. 14105.10 Million in the previous year. The Profitsbefore Tax is Rs. 1745.95 Million against Rs. 2392.33 Million in the previous year. Inthe steel industry cost is the main driver for competitiveness. During the year underreview cost of key raw materials such as Iron Ore Coke Electrodes Refractories etc. hasincreased substantially however there was a delay in accepting such increased costs byour customers which resulted in comparatively lower profits. Secondly in view of thereduction in margins for sale of Pig Iron the Company sold 4095 tonnes of Pig Iron ascompared to 26686 tonnes in the previous year.
5. State of Company's Affairs :
Discussion on the state of Company's affairs has been covered as part of the ManagementDiscussion and Analysis (MD&A). MD&A for the year under review as stipulatedunder Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is presented in a separate section forming part of the Annual Report.
6. Corporate Governance
The Company has committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance Requirements set out by SEBI. The Report on CorporateGovernance as stipulated under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is presented in a separate section forming part of the Annual Report.
The requisite certificate from Auditors of the Company viz. M/s. P. G. BhagwatChartered Accountants Pune confirming compliance with conditions of Corporate Governanceis attached to Report on Corporate Governance.
During the year under review the Company has not accepted any deposit under Chapter Vof the Companies Act 2013.
In terms of the provisions of the Companies Act 2013 and the Articles of Associationof the Company Mr.B.N. Kalyani Chairman and Mr.S.M. Kheny Director of the Company areretiring by rotation at the ensuing Annual General Meeting and being eligible haveoffered themselves for re-appointment.
Mr.C.G. Patankar Independent Director of the Company resigned with effect from 11thAugust 2017 due to his other pre-occupations and ceased to be the Director of theCompany. The Board places on record its appreciation of the valuable contributions made byMr.Patankar during his tenure as Director of the Company.
Mr.S.S. Vaidya Independent Director of the Company resigned with effect from 18th May2018 due to health reasons and ceased to be the Director of the Company. The Board placeson record its appreciation of the valuable contributions made by Mr.Vaidya during histenure as Director of the Company.
The Board of Directors at its meeting held on 9th November 2017 had co-opted Mr.SachinK. Mandlik as an Additional Independent Director for the period of 5 (five) years from9th November 2017 to 8th November 2022 subject to approval of the members at theensuing Annual General Meeting. The Board of Directors at its meeting held on 18th May2018 had co-opted Mr.Shrikrishna K. Adivarekar as an Additional Independent Director forthe period of 5 (five) years from 18th May 2018 to 17th May 2023 subject to approval ofthe members at the ensuing Annual General Meeting.
Mr.B.B. Hattarki Independent Director on the Board of the Company is seekingre-appointment for a second term of 5 (five) years with effect from 1st April 2019 to31st March 2024.
These appointment / re-appointments form part of the Notice of the Annual GeneralMeeting and the Resolutions are recommended for your approval. Profiles of theseDirectors are given in the Report on Corporate Governance for reference of the members.
The Company has received declarations from all Independent Directors that they meet thecriteria of independence as prescribed under Section 149(6) of the Companies Act 2013 andRegulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. 8.1 Board Evaluation Pursuant to provisions of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board has carriedout an annual performance evaluation of its own performance the directors individually aswell as the evaluation of the working of its Committees. Performance evaluation has beencarried out as per the Board Diversity and Remuneration Policy.
8.2 Board Diversity and Remuneration Policy
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Board Diversity and Remuneration Policy is available on the website ofthe Company. (Web-link : http://www.kalyanisteels.com/profile/code-of-conduct/board-diversity-remuneration-policy/)
8.3 Meetings of the Board
During the Financial Year 2017-18 four Board Meetings were convened and held. Also aseparate meeting of Independent Directors as prescribed under Schedule IV of the CompaniesAct 2013 was held. The details of meetings of Board of Directors are provided in theReport on Corporate Governance that forms part of this Annual Report.
9. Directors' Responsibility Statement
Pursuant to the requirements under Section 134(5) of the Companies Act 2013 withrespect to Directors' Responsibility Statement it is hereby confirmed that :
i) in the preparation of the annual accounts for the year ended 31st March 2018 theapplicable accounting standards have been followed and that there are no materialdepartures;
ii) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March 2018 and of the profitof the Company for that period;
iii) the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
iv) the Directors have prepared the annual accounts for the year ended 31st March2018 on a going concern basis;
v) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
vi) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
10. Conservation of Energy Technology Absorption and Foreign Exchange Earnings &Outgo
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as required to be disclosed under Section 134(3)(m) of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is annexed herewith asAnnexure A.
11. Corporate Social Responsibility
The Company has been carrying out various Corporate Social Responsibility (CSR)activities in the areas of education health water sanitation etc. These activities arecarried out in terms of Section 135 read with Schedule VII of the Companies Act 2013 andCompanies (Corporate Social Responsibility Policy) Rules 2014.
The details of CSR Activities undertaken by the Company are annexed herewith asAnnexure B. The CSR Policy is available on Company's website. (Web-link :http://www.kalyanisteels.com/profile/code-of-conduct/corporate-social-responsibility-csr/)
12. Related Party Transactions
All contracts or arrangements entered into by the Company with Related Parties duringthe financial year were in the ordinary course of business and on an arm's length basis.Pursuant to Section 134 of the Companies Act 2013 read with Rule 8(2) of the Companies(Accounts) Rules 2014 the particulars of transactions with related parties are providedin Form AOC-2 which is annexed herewith as Annexure C. Related partydisclosures as per Ind AS have been provided in Note 39 of the notes forming part ofseparate Financial Statements.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website. (Web-link :http://www.kalyanisteels.com/profile/code-of-conduct/related-party-transactions-policy/)
13. Risk Management
The Company recognises that risk is an integral and unavoidable component of businessand is committed to managing the risk in a proactive and efficient manner. The Company aspart of business strategy has in place a mechanism to identify assess monitor risks andmitigate various risks with timely action. Risks are discussed at the meetings of theAudit Committee and the Board of Directors of the Company.
14. Audit Committee
As on 31st March 2018 the Audit Committee comprises of Mr.S.S. Vaidya Chairman ofthe Committee and Independent Director Mr.B.N. Kalyani Promoter Non-Executive DirectorMr.B.B. Hattarki Independent Director and Mr.M.U. Takale Independent Director.
All the recommendations made by the Audit Committee were deliberated and accepted bythe Board during the Financial Year 2017-18.
15. Auditors and Auditor's Report
The members at their Forty-Fourth Annual General Meeting held on 1st August 2017 hadappointed M/s. P.G. Bhagwat Chartered Accountants Pune as Auditors of the Company tohold office for the period of five years i.e. from the conclusion of Forty-Fourth AnnualGeneral Meeting till the conclusion of the Forty-Ninth Annual General Meeting to be heldin 2022 and the said appointment was subject to ratification by members at every AnnualGeneral Meeting.
The Companies (Amendment) Act 2017 has amended Section 139(1) of the Companies Act2013 effective from 7th May 2018 whereby first proviso to Section 139(1) is omitted whichprovided for ratification of appointment of Auditors by members at every Annual GeneralMeeting.
In view of the same the Board of Directors have proposed to ratify the appointment ofM/s. P. G. Bhagwat Chartered Accountants Pune (Firm Registration No.101118W) asAuditors of the Company for the period of four years i.e. from the Conclusion of thisAnnual General Meeting till the conclusion of the Forty-Ninth Annual General Meeting to beheld in 2022.
The Company has received letter from M/s. P. G. Bhagwat Chartered Accountants to theeffect that ratification of appointment if made would be within the prescribed limitsunder Section 141(3)(g) of the Companies Act 2013 and that they are not disqualified forappointment.
The Directors recommend ratification of appointment of Auditors from the conclusion toensuing Annual General Meeting till the conclusion of the Forty-Ninth Annual GeneralMeeting to be held in 2022.
The Notes on Financial Statements referred to in the Auditor's Report areself-explanatory and hence do not call for any further comments. The Auditor's Report doesnot contain any qualification reservation adverse remark or disclaimer.
16. Cost Auditors
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Rules 2014 as amended the cost audit record maintained by theCompany is required to be audited. The Board of Directors had on the recommendation ofthe Audit Committee appointed M/s S.R. Bhargave & Co. Cost Accountants Pune forconducting the cost audit of the Company for Financial Year 2018-19.
As required under the Companies Act 2013 the remuneration payable to the CostAuditors is required to be ratified by the members of the Company. Accordingly resolutionseeking members' ratification for remuneration to be paid to Cost Auditors is included atItem No.10 of the Notice convening Annual General Meeting.
17. Secretarial Audit and Secretarial Standards
Pursuant to provisions of Section 204 of the Companies Act 2013 the Board hadappointed M/s. SVD & Associates Company Secretaries Pune to undertake SecretarialAudit of the Company for the Financial Year 2017-18. The Secretarial Audit Report for theFinancial Year ended 31st March 2018 is annexed herewith as Annexure D. TheSecretarial Audit Report does not contain any qualification reservation adverse remarkor disclaimer.
The Company is compliant with the Secretarial Standards issued by the Institute ofCompany Secretaries of India and approved by Central Government under Section 118(10) ofthe Companies Act 2013.
18. Particulars of Employees and related Disclosures
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 has been provided in Annexure E.
19. Extract of the Annual Return
An extract of the Annual Return of the Company pursuant to the Section 92(3) of theCompanies Act 2013 in Form MGT-9 is annexed hereto as Annexure F.
20. Whistle Blower Policy
The Company has vigil mechanism named Whistle Blower Policy' wherein the employees /directors can report the instances of unethical behavior actual or suspected fraud or anyviolation of the Code of Conduct and / or laws applicable to the Company and seekredressal. This mechanism provides appropriate protection to the genuine Whistle Blowerwho avail of the mechanism. During the year under review the Company has not received anycomplaint under the said mechanism. The Whistle Blower Policy' as approved by the Boardis uploaded on the Company's website. (Web-link :http://www.kalyanisteels.com/profile/code-of-conduct/whistle-blower/)
21. Particulars of Loans Guarantees or Investments
Particulars of Loans Guarantees and Investments covered under Section 186 of theCompanies Act 2013 form part of the notes to the Financial Statements provided in thisAnnual Report.
22. Internal Financial Controls
The Company has in place adequate internal financial controls with reference to theFinancial Statements. During the year such controls were tested and no reportablematerial weakness was observed in the design or implementation.
23. Material Changes and Commitments if any affecting Financial Position of theCompany
There are no adverse material changes or commitments occurring after 31st March 2018which may affect the financial position of the Company or may require disclosure.
24. Significant and Material Orders
There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
25. Familiarisation Programme
The Board members are provided with necessary documents / brochures reports andinternal policies to enable them to familiarise with the Company's procedures andpractices. Periodic presentations are made at Board Meetings Board Committee Meetings onbusiness and performance updates of the Company global business environment businessstrategy and risks involved.
The details of programmes for familiarisation of Independent Directors with the Companyare put up on website of the Company. (Web-link :http://www.kalyanisteels.com/profile/code-of-conduct/terms-of-the-appointment-of-independent-directors-of-kalyani-steels-limited/)
26. Subsidiaries Joint Ventures or Associate Companies
As on 31st March 2018 the Company has one Subsidiary and two associates / jointventure companies. A statement containing the salient features of the financial statementof the subsidiary and associates / joint ventures in the prescribed format AOC31 isannexed hereto as Annexure G.
The Policy for determining Material' subsidiaries has been displayed on the Company'swebsite. (Web-link : http://www.kalyanisteels.com/profile/code-of-conduct/policy-on-material-subsidiary/)
27. Consolidated Financial Statements
The Consolidated Financial Statements pursuant to Section 129 of the Companies Act2013 are attached to the Standalone Financial Statements of the Company.
28. Transfer to Investor Education and Protection Fund (IEPF)
Pursuant to provisions of the Companies Act 2013 the declared dividends which areunpaid or unclaimed for a period of seven years shall be transferred by the Company tothe Investor Education and Protection Fund (IEPF) established by the Central GovernmentAccordingly the unpaid or unclaimed dividend remaining unpaid or unclaimed for a periodof seven years from the date they became due for payment have been transferred to theIEPF established by the Central Government. Pursuant to section 124(6) of the CompaniesAct 2013 read with the Investor Education and Protection Fund Authority (AccountingAudit Transfer and Refund) Rules 2016 as amended all shares in respect of whichdividend has not been paid or claimed for seven consecutive years or more shall betransferred by the Company to IEPF.
Accordingly the Company after complying with all the requisite procedures hastransferred 128464 Equity Shares to IEPF Authority.
29. Obligation of Company under The Sexual Harassment of Women at Workplace(Prevention Prohibition And Redressal) Act 2013
In terms of provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 the Company has formulated a Policy to preventSexual Harassment of Women at Workplace. During the year under review one complaint wasfiled and redressed pursuant to the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
The Directors would like to express their sincere appreciation of the co-operationreceived from the Central Government the Government of Maharashtra the Government ofKarnataka Karnataka Industrial Area Development Board Financial Institutions and theBankers. The Directors also wish to place on record its appreciation for the commitmentdisplayed by all employees at all levels resulting in the successful performance of theCompany during the year. The Directors also take this opportunity to express its deepgratitude for the continued co-operation and support received from its valuedshareholders. The Directors express their special thanks to Mr.B.N. Kalyani Chairman ofthe Company for his untiring efforts for the progress of the Company.
| ||for and on behalf of the Board of Directors |
|Place : Pune ||B.N. Kalyani |
|Date : May 18 2018 ||Chairman |
ANNEXURE - A TO DIRECTORS' REPORT
INFORMATION ON CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGSAND OUTGO
A. CONSERVATION OF ENERGY :
I. The steps taken and impact on conservation of energy : Energy ConservationInitiatives : a) Certain fixed drives replaced with VVVF Drives as detailed below : i)Sinter Plant - 2 Primary mixing drum motor : The VVVF drive will allow motor RPM to beregulated as per actual load requirement resulting in power saving to the extent of 12%.ii) PCI Mill - 1 & 2 Combustion Air Fans' motors : The VVVF drive will allow motor RPMto be regulated as per actual load requirement. This speed regulation along with removalof inlet damper resulted in power saving to the extent of 42%. iii) Hot Gas dilution Fanmotor for Coke & Iron Ore Drying system : The VVVF drive will allow motor RPM to beregulated as per actual load requirement. This speed regulation of inlet damper resultedin power saving to the extent of 47% and 37%. iv) Fan motors of Sinter Plant - 2 Cooler :The VVVF drive will allow motor RPM to be regulated as per actual load requirement. Thisspeed regulation along with removal of inlet damper resulted in power saving to the extentof 18%. v) Rolling Mill - 2 Roller Table drives : Similar action resulted in power savingto the extent of 48% in roller table drives. b) MBF - 1 & 3 stove hydraulics :Implementation of Automation system to power the hydraulic circuit from accumulator andusing the pumps only for pressurising accumulator resulted in power saving to the extentof 33% in the said hydraulic circuits. c) MBF - 1 Fume Extraction System's Screw Conveyermotors and Overhead water tank filling system : Implementation of automation has effectedreduced operating time which has resulted in lower power consumption. d) Modification ofNon-drainable trough at MBF - 3 : Resulted in improvement of the life of trough leading toreduction in the furnace down time and in turn improvement in fuel rate. e) Modificationin Pulverize Coal Injection (PCI) system to improve PCI consumption at MBF - 3 resultingin reduced Coke Consumption. f) Cone and inlet damper modification in Main Exhaust Fan andTail ESP Fan of Sinter Plant has resulted in lower power losses. g) Installation 120 W& 37 W LED Lights in place of Mercury / Sodium vapour 400 W & 70 W Lampsrespectively in various places in the Iron Making Division. h) Installation of 150 W LEDlights in place of 800 W conventional metal halide lamps in Rolling Mills - 1 & 2.
II. The steps taken by the Company for utilising alternate sources of energy :
In Sinter plant Anthracite coal is being used as an alternative for conventional fuelsuch as Coke fines. III. The capital investment on energy conservation equipment : NA
B. TECHNOLOGY ABSORPTION :
I. The efforts made towards technology absorption : i) Air Mist cooling introducedin Bloom caster for uniform cooling of blooms leading to lesser columnar growth (smallerdendritic structure) leading to much better internal soundness. ii) Electro-mechanicalshort lever oscillator replaced with Hydraulic Oscillator in Bloom Caster for flexibilitywith oscillation curves resulting in better surface quality of blooms. II. The benefitsderived like product improvement cost reduction product development or importsubstitution : i. Cost Reduction : (a) Installation of Centrifugal Compressor in IronMaking Division (i.e. Sinter Plants & MBFs) to replace 7 smaller compressors resultingin power saving of 34 Units per 1000 CFM (Cubic Foot per Min).
(b) In Sinter Plant Mill Scale usage increased as a replacement of Iron Ore fineswhich is resulting in reduction in coal/coke fines consumption. ii. Product Development /Quality Improvement : (a) Powertrain critical application steel developed as an importsubstitution for one of our customers. (b) Hub Bearing steel developed to cater to twoleading global bearing manufacturers.
(c) Achieved superior Hot Rolled bars surface quality (in terms of lower Seams defects)due to various improvement initiatives such as :
1. Introduction of spacer between blooms in re-heating furnace.
2. De-scaler pressure improvement by spraying system modification.
3. LPG injection in re-heating furnace to reduce oxidation etc. (d) Stencil Numbermarking system introduced on blooms for better legibility and traceability.
(e) Single rolling process developed for achieving same quality using Double Rollingprocess for select material leading to energy saving.
III. In case of imported technology (imported during the last three years reckoned fromthe beginning of the financial year) : a) Auto Grinding Machine : i. Year of Import :2017-18 ii. Whether technology been fully absorbed : Yes iii. If not areas whereabsorption has not taken place with reasons : N.A. b) DC MOTOR (1650 kw) for Blooming Mill: i. Year of Import : 2017-18 ii. Whether technology been fully absorbed : Yes iii. Ifnot areas where absorption has not taken place with reasons : N.A.
IV. The expenditure incurred on Research and Development : Nil C. Foreign ExchangeEarning and Outgo :
I. The Foreign Exchange earned in terms of actual inflows during the year and theForeign Exchange outgo during the year in terms of actual outflows : a) Total foreignexchange used and earned : ( Rs. in Million) Used : Rs. 3938.12 Earned : Rs. 584.03
| ||for and on behalf of the Board of Directors |
|Place : Pune ||B.N. Kalyani |
|Date : May 18 2018 ||Chairman |