MALVIKA STEEL LIMITED
ANNUAL REPORT 2000-2001
TO THE SHAREHOLDERS
Your Director's are presenting the Thirteenth Annual Report of your Company
together with the Audited Statement of Accounts for the year ended 30th
1. INDUSTRIAL PERFORMANCE
The domestic and global steel industry is in an un-precedented state of
recession for the longest period ever. Correspondingly trading operations
has also been marginal.
2. PROJECT IMPLEMENTATION
Both the Blast Furnaces were operative till 1997-98 and had to be shut down
for want of funds coupled with depressed market conditions and
correspondingly low sales realisation and the adverse impact of anti-
dumping duty on coke. With support of the Financial Institutions, the
company is taking steps to re-start both the Blast Furnaces in phased
manner and it is expected that the commissioning of the first Blast Furnace
shall take place by May, 2002 and the second Blast Furnace by Sept., 2002.
The anti-dumping duty for coke has since been withdrawn. The prevailing and
potential price of foundry pig iron in Northern India in particular
provides opportunity for generation of gross margin. This can be achieved
with highest level of productivity and specific consumptions with
corresponding low cost of production.
Presently the participating Financial Institutions have reviewed the status
along with Lender's Engineers and Auditors and have given the clearance for
completion of the steel project, which includes the 2 LD Convertors, Lime
Calcining Plant, Oxygen Plant Ladle Furnace and Continuous Casting Plant.
On the basis of the review, appraisal, sanction and disbursement of the
funds, the steel project is now expected to be completed by March, 2003.
3. FUTURE OUTLOOK
Though industry has not been able to quantify the exact quantum of growth
in the steel sector, a recent report put out by consultancy major Mckinsey
and Company, has pointed out that the domestic steel sector overall would
soon see a 8 to 10% surge in demand mainly on the back of a good
performance by the housing, construction and retail sectors. This view is
reinforced by the 15% growth posted by the Cement Sector. The price of long
products has also increased lately by around 7%. Scrap prices are also on
the increase and Electric Arc / Induction Furnace user would be more
inclined to buy Pig Iron.
We are also exploring the market for both Billet and Bars. Our strategic
advantage of having the plant in Northern India helps us to economically
sell our products in Punjab, U.P, Haryana and Rajasthan markets and
generate contributions and help in generation of cash for sustaining the
The Director's wish to point out that barring unforeseen circumstances, the
anticipated turnaround and the proposed project implementation plan depend
substantially upon the availability of finance and the related
disbursements becoming available in accordance with the time schedule
4. RESTRUCTURING OF MANAGEMENT AND CAPITAL
The members may be aware that the Integrated Steel Protect of the company
at Jagdishpur has undergone time and cost overruns. The Promoters could not
bring in further funds for the Project and the Financial Institutions were
requested again for additional financial assistance for completion of the
Project. The Financial Institutions as a condition for further financial
assistance to the Company for completion of ifs Integrated Steel Project
situated at Jagdishpur, L.P., amongst other things, asked the Company for
both Management and Capital restructuring. Accordingly the Board of
Directors of the Company was re-structured and Dr S K Gupta, a renowned
figure in steel industry, was appointed as non-executive Chairman of the
Company. Besides Dr.Bhaskar Dutta, holding a doctorate in Metallurgy from
U.K. and having three decades of experience in the Steel Industry in India
and abroad has been appointed as Managing Director. Mr. Anil Rai, Co-
Chairman, Mr. S.K.Mittal Managing Director and other Directors mentioned
elsewhere in the report resigned from the Board.
As regards capital restructuring as advised by the Financial Institutions,
steps are already underway for approval by you and the concerned
authorities of a scheme for restructuring of financial liabilities by :-
1. Converting 40% of the existing a quity share capital into 0.0001%
Cumulative Redeemable Preference Shares (CRPS) to be redeemed inn 5 equal
annual installments commencing in the year 2016.
2. Conversion of Institutional loans to the extent of Rs. 2,800 million
into equity shares of Fell. 10 each.
Dr. S.K.Gupta, whose nomination has been withdrawn by IFCI Ltd., has been
appointed as additional director (independent) and non-executive Chairman
of the Company. Dr Bhaskar Dutta and Mr. Rajeshwar Singh and Dr Ramesh C
Vaish were appointed by the Board as Additional Directors of the Company.
Dr Bhaskar Dutta and Mr. Raieshwar Singh have also been appointed as
Managing Director and Whole time Director respectively of the Company.
Mr. Anil Rai, Mr Vijay Bhushan, Mr Y P Sharma, Mr J R Gupta, Mr S K Mittal,
Mr M F Mehta and Mr K C Gupta resigned from the directorship of the
Company. The Board places on record its appreciation for the services
rendered by them during they tenure as Directors of the Company.
Nomination of Mr. Mr. S G Galati, nominated by IDBI and Mr P K Sengupta
nominated by IFCI Ltd. on the Board of the company, were subsequently
withdrawn by IDBI and IFCI Ltd. respectively. The IDBI has nominated Mr. K
Raghavan and IFCI Ltd. has nominated Mr. D U Rao as Directors on the Board
of the Company.
6. AUDIT COMMITTEE
The Board has in pursuance of Section 292A of the Companies Act, 1956,
constituted an Audit Committee consisting of Mr. M.Sankarnarayanan (UTI
Nominee), Mr. D.U.Rao (IFCI Nominee) and Dr. R.C.Vaish, Director of the
7. CORPORATE GOVERNANCE
The Stock Exchanges have introduced clause 49 on 'Corporate Governance' in
the Listing Agreements. As per this clause the Corporate Governance has to
be implemented by the Company during the financial year 2001 - 2002. Your
Company has already initiated steps to put in place system of corporate
governance in right earnest.
8. STOCK OPTIONS TO THE EMPLOYEES OF THE COMPANY
An Employee Stock option Scheme (ESOS) for the employees of the company,
prepared in accordance with the SEBI (Employee Stock option Scheme and
Employee Stock purchase Scheme) Guidelines, 1999 notified by the SEBI, and
approved by the members of the Company, was introduced during the last
In accordance with the scheme, a total of 18,84,680 stock options have been
granted to the eligible employees and directors of the Company on
14.04.2000 and each option is convertible into one equity share. 25% of the
options granted shall vest after one year, another 25% of the grant after
two years and balance 50% of the grant after three years from the date of
grant mentioned above. The exercise price is at par i.e. Rs.10/- per share
with a power to the Board to decide the premium, if any, in subsequent
It may be informed here that the company has not received application from
any option holder so tar for exercise of the option of converting the
options into shares of the company.
9. HUMAN RESOURCES
In our previous report we had mentioned about the formation of cross
functional core teams to enable your company to utilize the Human Resource
potential. With the fund flow for the project coming to a hall, these core
teams at Jagdishpur were utilized for various construction and fabrication
work which should have otherwise been contracted to outside agencies.
Activities related to maintenance of equipment and machinery were also
carried out by these core teams.
With the induction of new management an exercise is being carried out to
bring the manpower requirement to such levels that the productivity are at
par with the international norms. This would involve re-building the
management structure where responsibilities are well defined and hierarchy
barriers are reduced. Parallely positional manning is to be replaced by the
concept of total work load.
The Company's shares are also now admitted to the Central Depository
Services (India) Ltd. (CDSL) for dematerlisation. As you are aware the
company has already joined the National Securities Depository Limited
(NSDL). This enables you to hold your shares in dematerialsed form. The
holding of shares in demat form facilitates quicker transfers and prevents
forgery. Accordingly the shareholders who have not opted yet for this
facility are advised to dematerialise their shares in their own interest.
Alankit Assignments Limited, New Delhi are the R 8T agents for the purpose
of dematerlisation of shares of the company.
The Company's Shares are listed at the Uttar Pradesh, Moral and Delhi Stock
Exchanges The Company has paid listing fee to these Stock Exchanges upto
the year 1997 - 98. The Mumbai Stock Exchange has suspended the trading in
securities of the Company for nonpayment of annual listing lee. Application
for delisting has been made in January, 1997 to the Stock Exchanges at
Ahmedabad, Madras, Calcutta and Jaipur for reasons of infrequent and low
volumes of trading in the Company's shares at these Stock Exchanges.
The Company has not accepted any Public Deposits during the year. There are
no outstanding public deposits.
13. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO
Information pursuant to Section 277(1)(e) of the Companies Act, 1956 read
with Rule 2 of the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988 is annexed and forms part of this report.
14. AUDIT REPORT
The Auditors comments regarding note no. 6 8 14 state the factual position
and the relevant notes are self explanatory. Due to closure of trading
activities at the Ghaziabad branch, the relevant books of accounts and
records could not be available and the relevant accounts were compiled on
the basis of data available in computerized system.
No provision is made for claim for rent and charges for equipment lying in
the bonded warehouse at this stage since the necessary adjustments are
proposed to be made when the matter is finalized and the equipment is
M/s. Barisal & Co., Chartered Accountants, the retiring auditors of the
Company have expressed their unwillingness fir re-appointment. The Board of
Directors of the Company have in their meeting held on 5 November, 2001
considered the appointment of M/s Ray & Ray, chartered accountants, as
statutory auditors of the company and recommend the same for your approval.
The Company has received certificate from the firm viz. M/s Ray & Ray to
the effect that their appointment, if made, will be within the permissible
limits specified under Section 224(1B) of the Companies Act, 1956.
16. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under sub section 2AA of Section 277 of the
Companies Act, 1956 with respect to the Directors Responsibility Statement,
it is hereby confirmed:
i) That in preparation of the annual accounts for the financial year ended
30.06.2001, the applicable accounting standards had been followed along
with proper explanations relating to material departures.
ii) That the Directors had selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of financial year and of the profit of the Company for
the year under report.
iii) That the Directors had taken proper and sufficient care 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 by preventing and detecting fraud and other irregularities.
iv) That the Directors had prepared the accounts for the financial year
ended 30.06.2001 on a 'going concern basis'.
Your Directors wish to acknowledge and thank the Central & State
Governments for their support and guidance.
Your Directors wish to place on record their deep appreciation of the
continued support of shareholders, debentureholders and the devoted
services rendered by the executives, staff and workers of the Company at
Your Directors also acknowledge with gratitude the co-operation and
assistance given by the Financial Institutions, Mutual Funds, Banks and
On behalf of the Board
Place: New Delhi (Dr. S K GUPTA)
Date : 05.17.2001 CHAIRMAN
ANNEXURE TO DIRECTORS' REPORT
A. (CONSERVATION IN COMPLIANCE OF ENERGY ON 217(1)(e) OF THE COMPANIES ACT,
(a) Energy Conservation Measures taken : NIL
(b) Additional investment and proposals, if any being implemented for
reduction of consumption of energy:
Proposal is to install a Turbo Generator of 3.5 MW capacity utilizing
excess BF gas to generate Electrical Power to reduce the consumption of
purchased electric energy. The investment is to the tune of Rs.3.5 Cores.
(c) Impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods ;
The bought out electrical energy shelf be reduced to the extent of 3 MW for
2 Blast Furnaces operation saving about Rs. 300/- per ton of hot metal.
(d) Total energy consumption and energy consumption per unit:
As per Form A
B. TECHNOLOGY ABSORPTION:
(e) Efforts made in technology absorption
As per Form B
G. FOREIGN EXCHANGE EARNING AND OUTGO
(f) Activities relating to exports; initiatives taken to increase ex ports;
development of new export markets for products and services and export
plans : NIL
(g) Total foreign exchange earned and used :
Used : NIL
(See rule 2)
Form for disclosure of particulars with respect to Absorption, Research And
Development (R & D)
1. Specific areas In which R & D Carried out by the Company
2. Benefits derived as a result of the above efforts
3. Future plan of action
To optimize the operation of Blast Furnace Computer Simulation Model from
Rautaruukki shall be implemented.
4. Expenditure on (R & D)
(d) Total R&D expenditure as a percentage of turnover Technology absorption
adaptation and innovation
Technology, absorption, adaptation and innovation
(i) Efforts, in brief, made towards technology absorption, adaptation and
(ii) Benefits derived as a result of the above efforts
(iii) In case of imported technology (imported during the last 5 years
recokned from the beginning of the financial year) following information
may be furnished
(a) Technology imported : Mini Blast Furnace Data Logging System for Level
II Automation from Rautaruukki Engineering Oy, Finland.
(b) Year of import : 7997
(c) Has technology been fully absorbed?: No
(d) If not fully absorbed, areas where this has not taken place, reasons
there for and future plans of action: Shall be implemented when BF
On behalf of the Board
Place: New Delhi Dr. S.K.Gupta
Date : 5.11.2001 Chairman