The Directors have pleasure in presenting 30th Annual Report togetherwith the Audited Financial Statements for the year ended 31 March 2021.
Financial Performance :
The audited financial results of the Company for the financial year2020-2021 as compared with the previous year are as given below :
| || ||(Rs. in Crores) |
|Particulars ||2020-2021 ||2019-2020 |
|Total Income ||2040.91 ||1865.30 |
|Profit before tax ||363.19 ||156.18 |
|Tax Expenses ||61.08 ||43.81 |
|Profit for the year ||302.11 ||112.37 |
|Other Comprehensive Income for the year ||(0.86) ||(1.25) |
|Total Comprehensive Income for the period ||301.25 ||111.12 |
|Profit brought forward from previous year ||390.92 ||334.63 |
|Transfer from share options ||0.15 ||Nil |
|Final Dividend paid on equity shares ||Nil ||(13.77) |
|Tax on above Dividend ||N. A. ||(2.83) |
|Interim Dividend paid on equity shares ||(27.67) ||(27.56) |
|Tax on above Dividend ||N. A. ||(5.67) |
|Transfer to General Reserves ||(5.00) ||(5.00) |
|Balance carried to Surplus in Statement of Profit and Loss ||659.65 ||390.92 |
The Board of Directors at its meeting held on 2 March 2021 declared anInterim Dividend of Rs. 2 per equity share of Rs. 5 each (i.e. 40 percent) and the InterimDividend has been paid to the eligible Members on 25 March 2021.
Further the Board of Directors at its meeting held on 5 May 2021 hasrecommended a Final Dividend of Rs. 3 per equity share of Rs. 5 each (i.e. 60 Percent) forapproval of the Members at the ensuing annual general meeting.
Accordingly total dividend (inclusive of interim dividend paid andfinal dividend recommended) for the financial year 2020-2021 aggregates to Rs. 5 perequity share of Rs. 5 each (i.e. 100 percent).
Company Performance :
The Company achieved Net Sales of Rs. 2038.08 Crores as compared toRs. 1849.66 Crores in the previous year.
The Profit Before Tax for the year under review stood at Rs. 363.19Crores as compared to Rs. 156.18 Crores of the previous year after providing fordepreciation and amortisation.
During the year under review the Company completed the acquisition ofmovable and immovable assets relating to the pig iron plant of VSL Steels Limited with acapacity of 150000 MT per annum situated at Paramenahally Village Hiriyur ChitradurgaDistrict 577598 Karnataka in December 2020. After renovation of plant and machineriesmanufacturing operations of that plant have commenced on 8 February 2021.
During the year under review the Company achieved 100 percent capacityutilisation of Coke Oven plant which was commissioned in March 2020. Coke consumptionreduced during the year under review as the coke was produced as per specificationrequired for the furnaces. The Company also installed conveyors from coke oven plants tomini blast furnaces to reduce handling loss. The 20MW power plant which works on wasteheat recovery from coke oven plant was commissioned in June 2020 and achieved 100 percentcapacity utilisation by September 2020. The Company achieved substantial reduction in thepower cost on account of captive consumption.
The Company also received the permission from the Government tocommence mining operations after completing necessary statutory clearances in respect ofKirloskar Bharat Mines. The permission so granted was valid to operate the mine upto 5April 2021. The Company is now in process to obtain renewal of forest agreement beyond 5April 2021 to recommence the mining operations. The Company extracted around 98600 MT ofiron ore till 31 March 2021 but was unable to dispatch the same to the plant due tonon-availability of road clearance in the forest area for transportation of mined ironore.
Sale of products :
In the beginning of the financial year operations of the Company weresuspended from 25 March 2020 on account of the nationwide lockdown to contain the spreadof Covid-19 pandemic. Subsequently the Government granted permission to commenceindustrial operations and the Company started operations of Mini Blast Furnace I foundryat Koppal foundry at Solapur Mini Blast Furnace II on 6 May 2020 11 May 2020 14 May2020 and 5 June 2020 respectively.
The Company sold 313690 MT of pig iron valued at Rs. 1067.32 Crores(includes 12824 MT from newly acquired Hiriyur plant) during the financial year 2020-2021as compared to 358146 MT of pig iron valued at Rs. 1070 Crores in the previous financialyear.
Post commencement of the operations the demand for Pig Iron improvedand the Company was able to sell all the Pig Iron produced. The average realisation of PigIron has also gone up from Rs. 28127 per MT in quarter I of the financial year 2020-2021to Rs. 39161 per MT in quarter IV of the financial year 2020-2021.
The demand for pig Iron from July 2020 onwards was strong fromfoundries supplying castings to tractor steel agriculture pump and auto sector acrossIndia.
The Company sold 92507 MT of castings aggregating to Rs. 874.40 Croresduring the financial year 2020-2021 as compared to 78663 MT castings aggregating to Rs.734.21 Crores in the previous financial year.
The demand for the casting was strong during the year. The demand forthe casting from the Tractor industry was strong and kept on increasing till end of thefinancial year. The demand from Heavy and medium Auto industry started picking up fromsecond quarter and further improved in second half of the financial year. The increaseddemand for casting from Tractor Auto and diesel engine industry enabled the Company toscale up production by removing the bottlenecks and optimised load distribution betweenall three moulding lines. With such measures the Company achieved quarterly sale of30000 MT of casting in third and fourth quarter of the financial year.
Operational Improvements :
During the year under review iron ore prices increased substantiallyon account of lower availability against strong requirement from the domestic / globaliron and steel industry. China was not interested in export of coke and as such startedquoting higher prices which resulted in increased prices in Indian domestic marketvis-a-vis export prices of coking coal from Australia remained subdued due to tradedisagreement between China and Australia. Additionally the cost of converted coke waslower and the selling price of pig iron was higher resulting in higher margins.
The Company was able to source coking coal from Australia at economicalprices. The timing of coke oven plant commissioning followed by subdued prices of coalgave substantial advantage in lower cost of coal to coke conversion as against sourcing ofcoke from market.
The Company continuously worked on the improvement of the quality ofthe casting at both units of Koppal and Solapur by reducing rejection rates.
The Company added machining capacity and ramped up the machiningcapabilities to meet customer demand. Consequently the sale of machined castingsincreased during the year as compared to previous year and sold machined castings ofaround 11.5 percent.
Finance Costs :
The Company worked on the optimisation of interest rates by availingfacility at competitive rates and effectively managed the working capital thereby reducingthe interest expense.
The Company also negotiated the rate of interest on each put and calloptions in respect of term loans availed thereby reducing the cost of finance.
The Company hedged import transactions of input materials by takingforward covers to minimize the impact of fluctuations in the forex currencies.
Updates on Customers :
During the year under review the Company was successful to bring innew customers and new products to increase the customer and product base and alsoincreased the supply of machined castings.
Update on Projects :
The Company has completed following projects during the financial yearunder review :
The commissioning of 20 MW Power Plant (using waste gasgenerated from Coke Oven plant) was commissioned in month of June 2020. Power generatedhas been used for captive consumption at Koppal plant and the unit achievedself-sufficiency in power requirement resulting in reduction of power cost. The Company isalso exploring the possibility of use of surplus power generated especially on weekly offdays for using at Solapur plant.
The Company has undertaken various projects for capacityexpansion and up-gradation on technology / infrastructure in foundry and machine shop bothat Koppal and Solapur units to meet the increasing demand for castings from thecustomers.
The Company has undertaken following projects during the year underreview :
Initiated setting up new moulding line with contemporarytechnology with a capacity of 40000 MT per annum at Solapur plant.
Expanding machining capacity to add more value.
Installation of Bell-less Top equipment for both the Mini BlastFurnaces (MBF) and up-gradation of MBF II and Pulvarised Coal Injection. All theseprojects are expected to be completed in the financial year 2022-2023.
a) Changes in Directors and Key Managerial Personnel
Mr. A. N. Alawani (DIN : 00036153) retires by rotation at the ensuingannual general meeting and being eligible offers himself for re-appointment.
Changes in Directors during the financial year 2020-2021 :
The Members of the Company at their 29th Annual General Meeting held on11 August 2020 have appointed Mr. V. M. Varma and Mr. M. V. Kotwal as Independent Directorof the Company to hold office for a term upto 4 March 2025 and 9 October 2023respectively.
Mr. A. R. Jamenis and Mr. B. S. Govind have retired as IndependentDirectors on 12 August 2020 pursuant to the resolutions passed by the Members of theCompany at their annual general meetings held on 25 July 2018 and 23 July 2019respectively. The Board of Directors placed on record its sincere appreciation for theirvaluable contribution.
Changes in Key Managerial Personnel (KMP) during the financial year2020-2021 :
There was no change in the Key Managerial Personnel during thefinancial year 2020-2021.
b) Statement on declarations by Independent Directors :
The Company has received declarations from all the IndependentDirectors of the Company confirming that they meet the criteria of independence as laiddown under Section 149(6) of the Companies Act 2013 rules thereof and Regulation16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015(Hereinafter referred to as 'SEBI LODR Regulations 2015') and they have complied with theCode for Independent Directors as prescribed in Schedule IV to the Companies Act 2013.
Pursuant to provisions of Rule 6 of the Companies (Appointment andQualification of Directors) Rules 2014 and as amended; all five Independent Directorshave confirmed that they hold valid registration certificate with the Databank ofIndependent Directors.
The Company has laid down a Code for the Board of Directors and SeniorManagement of the Company. The said Code is available on the website of the Company viz.www.kirloskarferrous.com All the Board Members and Senior Management Personnel of theCompany have affirmed compliance with the Code of Conduct.
c) Board Evaluation :
Pursuant to provisions of the Companies Act 2013 and Regulation 17 ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015; the Boardhas carried out a formal review for evaluating the performance and effectiveness of theBoard Committees of the Board and of individual directors.
Performance of the Board was evaluated on the basis of criteria such asboard composition and structure effectiveness of board processes participation inorganisation strategy etc. Performance of various committees was evaluated by the Boardbased on appropriate criteria.
d) Nomination and Remuneration Policy :
Upon recommendation of the Nomination and Remuneration Committee theBoard has adopted a policy for selection and appointment of Directors KMPs and SeniorManagement Personnel and their remuneration. The policy is available on the website of theCompany viz. www.kirloskarferrous.com
e) Number of meetings of the Board :
During the financial year 2020-2021 seven meetings of the Board ofDirectors were convened and held details of which are provided in the Report on CorporateGovernance.
f) Composition of Audit Committee and other committees of the Board :
Details of composition of committees of the Board viz. AuditCommittee Nomination and Remuneration Committee and Stakeholders Relationship Committeeare provided in the Report on Corporate Governance.
Particulars of loans guarantees or investments under Section 186 ofthe Companies Act 2013
The Company has granted loans aggregating to Rs. 1.94 Crores during theyear ended 31 March 2021. These primarily consist of loans to employees as per thepolicies of the Company and loans to suppliers in the normal course of business of theCompany. Closing balances of these loans are disclosed under the schedule of Loans andAdvances in the Financial Statements.
During the financial year 2020-2021 the Company has not given any loanor guarantee or acquired any security exceeding the limit prescribed pursuant toprovisions of Section 186(2) of the Companies Act 2013.
Related Party transactions
Pursuant to provisions of Section 134 of the Companies Act 2013 readwith Rule 8(2) of the Companies (Accounts) Rules 2014; contracts or arrangements enteredinto with the related parties during the financial year 2020-2021 were at arm'slength and in the ordinary course of business. There was no material contract orarrangement or transaction with any related party and hence there is no transaction to bereported in Form AOC-2.
The policy on related party transactions is available on the website ofthe Company viz. www.kirloskarferrous.com
During the financial year 2020-2021;
a) Pursuant to provisions of Section 148 of the Companies Act 2013 andrules thereof; maintenance of cost records has been mandatory for the Company and suchaccounts and records relating to utilisation of materials labour and other items of costhave been prepared and maintained.
b) Secretarial Standards issued by the Institute of Company Secretariesof India and approved by the Central Government under Section 118(10) of the CompaniesAct 2013 have been complied with.
c) The Company did not have any subsidiary or associate or jointventure company.
d) The Company has not accepted any public deposit pursuant toprovisions of the Companies Act 2013 and rules thereof.
e) There has been no change in the nature of business of the Company.
f) To the best of our knowledge the Company has not received any suchorder from Regulators Courts or Tribunals which may impact the going concern status orthe operations of the Company in future.
g) No case of fraud by any officer or employee of the Company has beenreported by any auditor of the Company either to the Audit Committee or the Board pursuantto provisions of Section 143(12) of the Companies Act 2013.
h) Neither any application has been made nor any proceeding has beenpending against the Company under the Insolvency and Bankruptcy Code 2016.
i) There was no incidence of settlement in respect of any loan availedfrom any bank or financial institution.
There is no material change or commitment occurring after the end ofthe financial year which may affect the financial position of the Company.
Risk Management Framework
The process of risk management at the Company encompasses riskidentification classification and evaluation. The Company identifies strategicoperational and financial risks that it faces. The Company deploys mitigation activitiesand plans for current and future risks that it may face.
The Company has set up a Risk Review Teams (Team') to reviewthe risks faced by the Company and monitor the development and deployment of riskmitigation action plans. The Team reports to the Board of Directors and the AuditCommittee who provide oversight for the risk management framework in the Company.
The Directors have reviewed progress on the risk management activitiesduring the financial year.
Internal Financial Controls
The Company has deployed controls including defined code of conductwhistle blower policy management review and MIS mechanisms internal audit mechanism. Theprocess level controls have been instituted through Company policies and procedures andcontinuous monitoring of efficiency in operations.
There is regular management oversight of the internal controlsenvironment at the Company. The Audit Committee alongwith the Management oversees reportsof the internal audit and reviews implementation on a periodic basis.
Vigil Mechanism / Whistle Blower Policy
The Board of Directors has adopted the Vigil Mechanism / Whistle BlowerPolicy to deal with instances of fraud unethical behaviour mismanagement leakage ofUnpublished Price Sensitive Information (UPSI) etc. The policy has provided a mechanismfor employees and other persons dealing with the Company to report to the Chairman of theAudit Committee any such instance. No case was filed during the year.
The policy has been uploaded at the website of the Company viz.www.kirloskarferrous.com
Disclosure under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013
The Company has in place a Policy for Prevention of Sexual Harassmentat workplace. This would inter alia provide a mechanism for the resolution settlementsor prosecution of acts or instances of sexual harassment at workplace and to ensure thatall employees are treated with respect and dignity. There was no complaint / case filed /pending with the Company during the year under review.
The Company has complied with provisions relating to the constitutionof Internal Complaints Committee under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013.
Annual Returns filed with the Ministry of Corporate Affairs (MCA)
Pursuant to provisions of Section 134 read with Section 92(3) of theCompanies Act 2013 as amended; copies of annual returns filed with the MCA are availableat the website of the Company viz. www.kirloskarferrous.com and the Annual Return for thefinancial year 2020-2021 will be uploaded at the website of the Company after filing withthe MCA.
Conservation of Energy Technology Absorption and Foreign ExchangeEarnings and Outgo
Details on conservation of energy technology absorption and foreignexchange earnings and outgo pursuant to provisions of Section 134(3)(m) of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 are annexed herewith asAnnexure A.
Corporate Social Responsibility (CSR)
The Company has always believed in working for the betterment anduplift of the society. Corporate Social Responsibility (CSR) has been practiced over theyears in the Company. Focus areas under CSR include Education Health and HygieneEnvironment and Rural Development. The Company has been carrying out various CSRactivities directly or through implementing agencies.
The composition of CSR Committee and the Report on CSR activitiesduring the financial year is annexed herewith as Annexure B.
Information pursuant to Rule 5 of the Companies (appointment andremuneration of managerial personnel) Rules 2014
Information relating to remuneration and other details as requiredpursuant to Rule 5 of the Companies (appointment and remuneration of managerial personnel)Rules 2014 is annexed herewith as Annexure C.
Employee Stock Options Scheme (ESOS) :
The Company has instituted a stock option scheme in order to motivateincentivize and reward employees. This plan is called KFIL Employee Stock Option Scheme2017 (hereinafter referred as KFIL ESOS 2017' or Scheme'). TheCompany views employee stock options as an instrument that would enable the employees toshare the value they create for the Company and align individual objectives of theemployees with the objectives of the Company. The Board of Directors and the Nominationand Remuneration Committee of the Company are authorised to administer the said schemepursuant to provisions of the Scheme.
The Nomination and Remuneration Committee at its meeting held on 16October 2020 has granted of 130000 stock options exercisable into 130000 equity sharesof the Company. KFIL ESOS 2017 is in compliance with applicable provisions of theCompanies Act 2013; its rules and the SEBI (Share Based Employee Benefits) Regulations2014 and related applicable regulations.
The certificate from M/s. Kirtane & Pandit LLP CharteredAccountants Statutory Auditor of the Company confirming that the scheme has beenimplemented in accordance with aforesaid regulations and in accordance with the resolutionpassed by the Members of the Company at their annual general meeting held on 3 August 2017would be placed before the Members at the ensuing annual general meeting. A copy of thesame will also be available for inspection at the Registered Office of the Company.
There has been no material change to the KFIL ESOS 2017 during thefinancial year. Disclosures on the scheme details of options granted shares allottedupon exercise are enclosed herewith as Annexure "D" and are available on thewebsite of the Company at www.kirloskarferrous.com
No employee has been granted stock options equal to or exceeding onepercent of the issued capital of the Company (excluding convertible shares and warrants).
In line with the Indian Accounting Standards ("Ind AS") 102on 'Share Based Payments' issued by the Institute of Chartered Accountants of India("ICAI"); the Company has computed the cost of equity-settled transactions byusing the fair value of the options at the date of the grant and recognized the same asemployee compensation cost over the vesting period.
a) Statutory Auditor
The Members of the Company at their Annual General Meeting held on 28July 2016 have appointed M/s. Kirtane & Pandit LLP Chartered Accountants as theStatutory Auditor of the Company to hold office for a term of 5 years from the conclusionof 25th Annual General Meeting until the conclusion of 30th Annual General Meeting.
Pursuant to provisions of Section 139 of the Companies Act 2013 readwith the rules thereof and upon the recommendation of the Audit Committee the Board ofDirectors has recommended for the approval of the Members at the ensuing annual generalmeeting the re-appointment of M/s. Kirtane & Pandit LLP Chartered Accountants as theStatutory Auditor of the Company to hold office for another term of five consecutive yearsfrom the conclusion of 30th Annual General Meeting till the conclusion of 35th AnnualGeneral Meeting. The requisite certificate pursuant to provisions of Section 139 of theCompanies Act 2013 and rules thereof has been received from them.
The report given by the statutory auditor on the financial statementsof the Company for the financial year 2020-2021 forms part of this report. There is noqualification / reservation / adverse remark in the report given by the statutory auditor.
b) Secretarial Audit
Pursuant to provisions of Section 204 of the Companies Act 2013 andrules thereof; Mr. Mahesh J. Risbud Practicing Company Secretary was appointed to conductthe Secretarial Audit of the Company for the financial year 2020-2021. The SecretarialAudit Report issued by him is annexed herewith as Annexure E.
There is no qualification / reservation / adverse remark in theSecretarial Audit Report.
Pursuant to the SEBI Circular CIR/CFD/CMD1/27/2019 dated 8 February2019; Mr. Mahesh J. Risbud Practicing Company Secretary has also issued the SecretarialCompliance Report for the financial year 2020-2021.
c) Cost Auditor
The Board of Directors appointed M/s. Parkhi Limaye and Co CostAccountants as the Cost Auditor to conduct the audit of cost records maintained by theCompany for the financial year 2020-2021 pursuant to provisions of Section 148 of theCompanies Act 2013 and rules thereof.
Report on Management Discussion and Analysis
Pursuant to provisions of Regulation 34(3) of the SEBI (LODR)Regulations 2015; the Report on Management Discussion and Analysis forms part of thisAnnual Report.
Report on Corporate Governance
The Company conforms to norms of the corporate governance as envisagedin the Listing Agreement executed with the stock exchange. Pursuant to provisions ofRegulation 34(3) of the SEBI (LODR) Regulations 2015; the Report on Corporate Governanceforms part of this Annual Report.
A certificate from the statutory auditor regarding compliance withconditions of corporate governance as required pursuant to provisions of the SEBI (LODR)Regulations 2015 has been annexed to the Report on Corporate Governance.
Business Responsibility Report
Pursuant to provisions of Regulation 34(2)(f) of the SEBI (LODR)Regulations 2015; the Business Responsibility Report forms part of this Annual Report.
Directors' Responsibility Statement
Pursuant to provisions of Section 134 of the Companies Act 2013 inrespect of Directors' Responsibility Statement; the Directors state that :
a) in the preparation of the annual accounts; the applicable accountingstandards have been followed and there were no material departures;
b) accounting policies as mentioned in the Notes forming part of theFinancial Statements have been selected and applied consistently. Further judgments andestimates made are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31 March 2021 and of the profit of the Company for theyear ended on that date;
c) proper and sufficient care has been taken 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;
d) the annual financial statements have been prepared on a goingconcern basis;
e) proper internal financial controls were laid down and such internalfinancial controls were adequate and were operating effectively; and
f) proper systems were in place to ensure compliance with theprovisions of all applicable laws and such systems were adequate and operatingeffectively.
Statements in this report particularly those which relate to theManagement Discussion and Analysis describing the Company's objectives projectionsestimates and expectations may constitute "forward looking statements" withinthe meaning of applicable laws and regulations. Actual results may differ materially fromthose either expressed or implied.
The Board of Directors places on record their appreciation towards thecontribution of all employees of the Company and their gratitude to the Company's valuedcustomers bankers vendors and members for their continued support and confidence in theCompany.