KARMA INDUSTRIES LIMITED
(FORMERLY KNOWN AS KARMA ISPAT LIMITED)
ANNUAL REPORT 2011-2012
Yours Directors have great pleasure in presenting the 35th Annual Report
together with the Audited Accounts for the year ended on March 31, 2012.
CONSOLIDATED FINANCIAL RESULTS:
Year Ended Year Ended
Particular 31.03.2012 31.03.2011
Amt in Rs. Amt in Rs.
Sales & Other Income 7,469,964,698 6,591,044,638
Less: Expenditure 7,444,264,823 6,556,446,580
Depreciation 1,256,190 2,311,656
Profit/(Loss) before tax and appropriations 25,429,875 32,286,402
Profit/(Loss) after tax 16,556,119 20,449,411
Add: Balance brought forward
from Previous year 19,342,999 10,431,656
Surplus carried to Balance Sheet 35,899,118 19,342,999
With a view to conserve the resources of the company the Board of
Director's have not recommended any dividend for the year ended 31st March,
The Company is presently trading in broad range of steel products,
including C.R. Coils & Sheets, C.T.D. Bars, H.R. Sheets & Plates and Hot
Rolled Steel Plates, In got irons M.S. Plates, Angles, Channels, Chequered
Plates, Wires, T.M.T Bars, Rebars and Tor Steel, Stainless Steel and other
Alloy Steels and had a good year in terms of turnover and performance. The
Company has already established factory at valsad and would be starting
manufacturing activity shortly.
The turnover of the Company rose from Rs. 6,587,997,822/- in the previous
year to Rs. 7,465,034,795/-.
- In the year under review. However the Profit after tax substantially
decreased from Rs. 20,449,411/-
- In the previous year to Rs.16,556,119/- for the year ended March 31,
The Company's present paid up capital stands at Rs.33,00,00,000/-
comprising 3,30,00,000 equity shares of Rs. 10/- which is listed on Bombay,
Ahmedabad and Hyderabad Stock Exchange.
BOARD OF DIRECTORS:
The Board of Director's of the Company is duly constituted and has a
combination of Executive and Non*executive directors.
Mrs. Bhavna Mehta, Director of the Company retires by rotation at the
ensuing Annual General Meeting and being eligible offer herself for re-
Your company has the following two wholly-owned subsidiaries namely
M/s. Karma Commodities Ltd., M/s. KIL Infrastructure Ltd. And a Associate
Group Concern M/s. Karma Stock Trade Limited where company holds 44% of
Paid up share capital of the company.
1. KIL Infrastructure Limited which was incorporated to carry out the
business of construction, development, repairing, roads, path, streets,
2. Karma Commodities Limited was incorporated to do the business of
commodity trading with the Commodity Exchanges. The Company in is the
process of starting its operations shortly. The Company has taken
membership of MCX/NMCE/ICEX/Reliance Spot Exchange. The Company has also
applied for the Membership of NCDEX & NCDEX Spot.
3. Karma Stock Trade Limited which was incorporated to carry out the
business as share and stock broker, sub-broker, finance broker, dealer,
jobber, market maker, portfolio manager, underwriter, sub-underwriter,
dealers or broker or agent in any shares, securities, financial
instruments, capital market money market instruments of all kinds. However
the company has not started its operations yet and is in the process of
starting its operations. The Company has applied for Deposit Base Trading
Membership of BSE and also Membership of NSE.
The Consolidated financial Statements of the subsidiaries are attached with
the Annual Report.
The Company has taken proactive steps to ensure that the conditions of
Corporate Governance stipulated in Clause 49 of the Listing Agreement with
the Stock Exchange are complied with. A separate report on Corporate
Governance together with Auditor's Certificate on its compliance is
included in the Annual Report.
DIRECTORS RESPONSIBILITY STATEMENT:
Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors
1] In the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanations relating to
2] Appropriate accounting policies have been selected and applied,
reasonable and prudent so as to give a true and fair view of the state of
affairs of the Company as at the March 31, 2012.
3] Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.
4] The Annual Accounts have been prepared on a going concern basis.
M/s. AMD & Co., Chartered Accountants, the retiring Auditors have expressed
their willingness to be re*appointed. It has been proposed to re-appoint
M/s. AMD & Co., Chartered Accountants as Auditors of the Company. The
Company has received a Certificate from them that they are qualified under
Section 224(1) of the Companies Act, 1956 for appointment as Auditors of
the Company. Members are requested to consider their appointment at a
remuneration to be decided by the Board of Directors for the financial year
ending March 31, 2012 as set out in the Notice convening the Meeting.
The observations of the Auditors contained in their Report regarding the
non-payment of dividend of 99,00,000 till date which was approved by the
shareholders in Annual General Meeting for F.Y 2010-11. The Company is
taking necessary steps during the current year to pay the dividend to those
shareholders who has not received.
In accordance with the provisions of the Section 292A of the Companies Act,
1956 and the Corporate Governance requirements as per the Listing Agreement
of the Company, the Audit Committee comprises of the following Directors
viz., Mr. Hemang Sampat, as Chairman, Mr. Rajesh Mehta and Mr. Mahesh
Jethva as members. The Audit Committee acts in accordance with the terms of
reference specified from time to time by the Board.
PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO:
The Company has taken effective steps to conserve and minimize power and
fuel consumption and has also installed capacitor for minimizing the power
consumption. No Technology was imported during the year by the Company. The
Company has not exported or imported any goods during the year. Therefore
Foreign Exchange Earning and Outgoing is NIL.
PARTICULARS OF EMPLOYEES:
None of the employees of the Company come within the purview of the
information required u/s 217[2A] of the Companies Act, 1956 read with the
Companies [particulars of Employees] Rules, 1975 as amended from time to
RESEARCH & DEVELOPMENT:
The Company has been arduously working to improve the R&D so as to provide
quality and value for money to the customers in keeping with market trends.
Your Company has not accepted any deposit within the meaning of Section 58A
of the Companies Act, 1956 from Public and the rules made there under.
SAFETY, ENVIRONMENTAL CONTROL AND PROTECTION:
The Company has taken all the necessary steps for safety and environmental
control and protection.
The Directors wish to convey their appreciation to the Company's
Shareholders, Customers, Suppliers, Bankers, and Distributors for their
support they have given to the Company over the past years and the
confidence, which they have reposed in its management and the employees for
the commitment and dedication shown by them.
For and behalf of the Board of Directors
Karma Industries Limited
KARMA INDUSTRIES LIMITED
H Wing, Office No. 131,
Raj Arcade, Mahavir Nagar,
Mumbai - 400067.
MANAGEMENT DISCUSSION AND ANALYSIS
The global economy is witnessing another period of uncertainty due to the
European Sovereign debt crisis. The increase in inflation in emerging
economies has led to a sharp hike in interest rates, which has resulted in
slowdown in demand. The global financial uncertainty has also resulted in
volatility in exchange rates.
The global Steel industry has witnessed reasonable demand growth and Steel
making capacities have gradually shifted to emerging markets such as China
and India. However, the high cost of raw materials and increased volatility
in prices has put pressure on margins.
The Indian Steel Industry:-
The Steel industry in India has suffered due to non availability and high
prices of Iron Ore which has impacted Steel production. The Iron Ore mining
ban in Karnataka and subsequent impact in Iron Ore production in Goa and
Odisha has forced many Steel Companies to operate at reduced capacities and
even close down operations. It is expected that the raw material
constraints shall ease towards second half of FY' 2012-13 and mines will
gradually get back to normal production.
The Government of India has imposed an export tax of 30% on export of Iron
Ore and Chrome Ore which should discourage exports and encourage value
addition within the Country. The removal of 5% import duty on thermal coal
is also a relief for the Sponge Iron based Steel producers.
The Indian economy is expected to grow at 7.6% in 2012-13 against 6.9% in
2011-12. The economy is likely to grow significantly over the next decade
driven by the infrastructure (power, road, railways, ports etc.) and
consumption (automobile, real estate etc.) sectors which will result in
sustained growth in demand for various Iron and Steel products.
The States of Orissa, Chhattisgarh and Jharkhand which account for majority
of the iron ore and coal reserves in the country will remain the most
attractive locations for setting up iron and steel manufacturing capacity.
The Odisha Government is currently reviewing the renewal of all expired
mining leases which are operating under deemed extension, which will offer
an opportunity for Steel producers in Odisha. Meanwhile, the draft MMDR
Bill is also under discussion.
OPPORTUNITIES, THREATS, RISKS, CONCERNS AND OUTLOOK:
Opportunities & Threats:-
The Company caters to construction, infrastructure, power, telecom and
engineering industries. Though there are large no. steel factories across
the length and breadth of the country, they are by and large concentrated
in local level. Due to its reputation as traders of quality products and
the company's plan to start manufacturing shortly, the Company has not only
been able to retain its existing customers but is also adding new
Though there is competition not only from local players but also from un-
organized sector, the company is fully geared to meet these challenges and
move towards achieving its set goals.
Three factors, however, will need to be watched carefully in order to
ensure preparedness and to be able to take timely steps to manage risk are:
a) Price Volatility b) Sourcing of key raw materials and c) cost of
borrowing d) high interest costs and taxes & duties.
Nonetheless, the Board continues to believe that this year is yet another
year of opportunity to focus on further growth and consolidation.
Risks and concerns:
The cost of power (including fuel) and its availability continues to be a
major concern. High power tariffs and volatility in input prices may
adversely affect the profitability of the Company. However, it is not
significant considering the level of operations of the Company and normal
correlation in the price of raw material and finished goods.
The economy continues to witness inflationary trends. The headline
inflation has continued to be fuelled by high food inflation and rising
prices of crude and commodities. The Reserve Bank of India's action to
consistently raise interest rates and suck liquidity out of the system to
tame inflation together with high commodity prices is likely to make new
investment less attractive, contract demand and lead to slow down in the
industry. This remains a serious concern. Management has already identified
these risks and taking necessary steps to mitigate the risks such as
exploring the possibilities to having captive power plant to become self
sufficient, linkage to coal and iron ore mines for uninterrupted production
and to reduce cost of borrowing by various means.
The Indian Steel Industry plays a significant role in the county's economic
growth. The industry continues to remain in growth mode. It continues to
hold a strong hold in the traditional sectors such as infrastructure &
constructions, automobile, transportation and industrial application. With
the Government's pro-active incentive plans to boost economic growth by
injecting funds in various industries such as construction, infrastructure,
automobile and power will drive the steel industry in future. Steel
consumption in India is expected to grow significantly in the coming years
as per capita finished steel consumption is far less than its regional
PERFORMANCE OF THE COMPANY:
The PAT of the Company has decreased by 19.04% to Rs.16,556,119 during the
year ended March 31, 2012, due to increase in the cost of Raw Materials,
high cost of borrowings. The current business of the company is trading in
steel and iron products including C.R. Coils & Sheets, C.T.D. Bars, H.R.
Sheets & Plates and Hot Rolled Steel Plates, Ingot irons M.S. Plates,
Angles, Channels, Chequered Plates, Wires, T.M.T Bars, Rebars and Tor
Steel, Stainless Steel and other Alloy Steels.
The Company has established a Factory at Valsad, Gujarat during the year
for manufacturing of Lead & Lead Alloys which will be operational shortly.
This will help the Company for sustaining in the long run in the
competitive steel industry.
The Company considers the quality of its human resources to be its most
important asset and focuses on attracting, motivating and retaining the
best talent. Communication exercises are treated as continuous process to
keep the employees in formed of the challenges being faced by the Company
and also motivate them to take up higher responsibilities, in tune with the
requirements of the Company.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
Internal Control accountability of executive action to the management's
authorization. The Statutory Auditors have evaluated the system of internal
controls of the Company and have reported that the same are adequate and
commensurate with the size of the Company and nature of its business.
The internal control systems are reviewed by the top Management and by the
Audit Committee of the Board and proper follow up action ensured wherever
Statement in the Management Discussion and Analysis describing the
Company's objectives, expectations, estimates or predictions may be forward
looking within the meaning of applicable securities laws and regulations.
Actual results may differ materially from those expressed in the statement.
Important factors that could influence the Company's operations include
global and domestic supply and demand conditions affecting selling prices
off in is had goods, in put availability and prices, changes in Government
regulations, tax laws, economic developments within the country and other
incidental factors. The Company assumes no responsibility to publicly
amend, modify or revise any forward-looking statements, on the basis, of
any subsequent developments, events or information.