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Orissa Sponge Iron & Steel Ltd.

BSE: 504864 Sector: Metals & Mining
NSE: N.A. ISIN Code: INE228D01013
BSE 00:00 | 04 Mar Orissa Sponge Iron & Steel Ltd
NSE 05:30 | 01 Jan Orissa Sponge Iron & Steel Ltd
OPEN 159.70
52-Week high 160.00
52-Week low 0.00
Mkt Cap.(Rs cr) 477
Buy Price 0.00
Buy Qty 0.00
Sell Price 160.00
Sell Qty 64.00
OPEN 159.70
CLOSE 160.00
52-Week high 160.00
52-Week low 0.00
Mkt Cap.(Rs cr) 477
Buy Price 0.00
Buy Qty 0.00
Sell Price 160.00
Sell Qty 64.00

Orissa Sponge Iron & Steel Ltd. (ORISSASPONGE) - Director Report

Company director report

Your Directors submit the following report on Financial Results for the year ended 31stMarch 2017:

Financial Results
For the year ended 31st March 2017 For the year ended 31st March 2016
(Rs. in lacs) (Rs. in lacs)
Turnover 346.49 673.84
Profit / (Loss) before depreciation (7759.06) (7191.30)
Depreciation (net of revaluation adjustment) 900.16 927.84
Profit / (Loss) before tax (8659.22) (8119.14)
Provision for Deferred Tax-Assets (1278.77) 1376.25
Profit /(Loss) after tax (9937.99) (6742.89)
Surplus(Deficit) brought forward from previous year (42815.60) (36072.71)
Surplus(Deficit) carried forward to Profit & Loss A/c (52753.59) (42815.60)

State of Affairs

The Company suspended production in June 2012 due to unviable cost economics andcontinuing losses. The loss for the financial year 2016-17 amount to Rs. 8659.22 lakhs Inthe present scenario resumption of plant operations and viability of the Company islargely dependent on availability of raw material from captive sources.

The net worth of the Company has been fully eroded as on 31st March 2015under the applicable provisions of the Sick Industrial Companies (Special Provisions) Act1985 (SICA). The Company has made reference to the Board for Industrial and FinancialReconstruction (BIFR) in terms of Section 15(1) of SICA. While the matter was underconsideration SICA stands repealed w.e.f 01.12.2016 and Section 5 of the SICA Repeal Act2003 provides for "saving" provisions which states that any rights/privilegesaccrued under the repealed enactment shall not be affected

State Bank of India on behalf of itself Bank of India and Punjab National Bank haveissued Possession Notice dated 24.04.2015 under Section 13(4) of the Securitization andReconstruction of Financial Assets and Enforcement of Security Interest Act 2002(SARFAESI) in respect of the properties described in the notice. Indian RenewableDevelopment Agency (IREDA) has also issued notice under Section 13(2) of SARFAESI. Inaddition State Bank of India Punjab National Bank and Edelweiss Asset ReconstructionCompany Limited has also filed application under Section 19 (1) of the Recovery of Debtsdue to Banks and Financial Institutions Act 1993 before the Debt Recovery Tribunal (DRT).IREDA is also pursuing the cases initiated by them against the Company for dishonour ofcheques.

The Company has made representation before all the lenders explaining the reasons forthe current state of affairs and the action plan for revival of the company in the nearfuture. The Company is hopeful of receiving favourable response from the lenders for acomprehensive debt restructuring and working capital facility in view of the iron oremines allotted to the company which on commencement of mining operations has the potentialto turnaround the company into a profitable unit in the near future.


Your Directors regret their inability to recommend any dividend for the year in view oflosses


The Reserves and Surplus as on 31.03.2017 is negative at Rs.12396.98 lakhs

Future Outlook

The Company was allotted Iron Ore Mines by the Central Government and the StateGovernment of Odisha. Commencement of mining operations from the mines requires severalapprovals clearances and fulfillment of conditions as specified in the respectivedocuments. The Company has received all approvals and clearances including Stage IClearance from the Ministry of Environment and Forest vide Letter dated 21stSeptember 2016 and Compliance Certificate under the Scheduled Tribes and OtherTraditional Dwellers (Recognition of Forest Rights Act) 2006 vide Letter dated 23rdJune 2016. The Company is presently awaiting execution of mining lease having receivedLetter from the Central Government under Section 2 (iii) of the Forest Conservation Act1980 for proceeding to execute the Mining Lease.

Availability of iron ore from captive mines will permit production at higher capacityand significantly improve profitability of the Company.

Changes in Capital Structure

Equity Shares

1500000 Equity Shares were issued and allotted on conversion of equivalent sharewarrants at the Board Meeting held on 02.02.2017 1290000 Equity Shares were issued andallotted on conversion of equivalent share warrants at the Board Meeting held on18.02.2017 Preference Shares

Allotment of 20000000 10% Non Convertible Cumulative Redeemable Preference Shares ofRs. 10/- aggregating Rs. 20 crores allotted at the Board Meeting held on 14.08.2014 wasfound to be irregular and non compliant of extant laws as opined by Legal Experts. Thesaid shares were therefore cancelled at the Board Meeting held on 18.02.2017and restoredto its original position prior to allotment.

Transfer of Unclaimed Dividend to Investor Education and Protection Fund

The Company does not have any unclaimed dividend for transfer to Investor Education andProtection Fund.

Subsidiary Company

The Company has no subsidiary on the reporting date.

Directors and Key Managerial Personnel

(1) Independent Directors

Ms. Nancy Roy (DIN 07702150) Mr. Mukesh Bhusan Bhagat (DIN 00055064) and Mr. AnuragTulsyan (DIN 01035316) were appointed as Additional Directors on 14.01.2017 02.02.2017and 18.02.2017 respectively all in the category of Independent Directors.

The Company has received declarations from the aforesaid Directors confirming that theymeet the criteria of independence as laid down in Section 149(6) of the Companies Act2013 and Regulation 16 (b) of SEBI (LODR) Regulations 2015. Accordingly their respectiveappointments for a term of 5 years as Independent Directors are being placed at theforthcoming Annual General Meeting for approval of shareholders.

Mr. S.K.Khetan Independent Director ceased to be a Director in terms of Section 167 ofthe Companies Act 2013.

(2) Nominee Directors

The nomination of Ms. Sonia Jabbar (DIN 01222834) on the Board by Torsteel ResearchFoundation in India (TRFI) was withdrawn by TRFI by letter dated 06.06.16 which was takenon record by the Board at the Meeting held on 11.06.16. Accordingly she ceased to be aDirector on the record date.

(3) Executive Directors

The term of office of Dr. P.K.Mohanty Vice Chairman and Managing Director expired on22nd June 2016 as per the terms of appointment approved by the CentralGovernment. On the recommendation of the Nomination and Remuneration Committee he wasre-appointed as Vice Chairman and Managing Director for a period of 3 yearsretrospectively from 23rd June 2016 at the Board Meeting held on 13.10.2016.Shareholders approval by Special Resolution was obtained at Annual General Meeting held on16.12.2016. The approval of Central Government is awaited.

Dr.P.K.Mohanty was appointed as Chairman of the Company at the Board meeting held on18.02.2017.

Mr. Munir Mohanty Whole-time Director continues to hold office having been appointedfor a period of 5 years with effect from 31st May 2013 in terms of theapproval granted by the Central Government.

(3) Retirement by Rotation

In accordance with the provisions of Section 152 of the Companies Act 2013 Mr.S.K.Kar retires by rotation at the ensuing Annual General Meeting and being eligibleoffers himself for re-appointment.

(4) Key Managerial Personnel

Mr. Ankur Gupta was appointed as Company Secretary and Compliance Officer at the BoardMeeting held on 18.02.2017 with effect from 01.03.2017.


(1) Meeting of the Board of Directors

During the financial year 2016-17 four meetings were held the details of which aregiven in the Corporate Governance Report. The intervening gap between the meetings waswithin the period prescribed under the Companies Act 2013 except for a delay of 3 days inthe second quarter due to unavoidable reasons.

(2) Meeting of the Independent Directors

In terms of Schedule IV of the Companies Act 2013 and revised Regulation 25 (3) ofSEBI (LODR) Regulation 2015 a meeting of the Independent Directors was held on18.02.2017 wherein the performance of the non independent Directors including theChairman and the Board as a whole was reviewed. The Independent Directors also assessedthe quality quantity and timeliness of flow of information between the Company managementand the Board of Directors of the Company.

Corporate Governance

(1) Directors' Responsibility Statement

Pursuant to Section 134 (3) (c) and 134 (5) of the Companies Act 2013 the Directorshereby confirm that:

a) In the preparation of the annual accounts for the year ended 31st March2017 the applicable accounting standards have been followed along with proper explanationrelating to material departures from the standards.

b) Accounting policies were selected are applied consistently. Judgments and estimatesthat are reasonable and prudent are made so as to give a true and fair view of the stateof affairs of the Company as at 31st March 2017 and of the Loss of the Companyfor the year ended on that date.

c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities.

d) The Accounts for the financial year ended 31st March 2017 have beenprepared on a ‘going concern' basis.

e) The laid down internal financial controls to be followed by the company are adequateand are operating effectively

f) Proper system devised by the company to ensure compliance with the provisions of allapplicable laws were adequate and are operating effectively

(2) Management Discussion and Analysis

A detailed report on the Management Discussion and Analysis for the year under reviewas stipulated under Regulation 34 ((2) (e) read with Section B of Schedule V of SEBI(LODR) Regulation 2015 is provided as a separate Section in the Annual Report which formspart of this Directors Report

(3) Corporate Governance Report

A detailed report on Corporate Governance as stipulated under Regulation 34(3) readwith Section C of Schedule V to SEBI (LODR) Regulation 2015 is provided in a separatesection and forms part of this Directors Report

A Certificate from M/s A.K.Labh & Co. Practicing Company Secretaries confirmingcompliance with the conditions of Corporate Governance as stipulated under the aforesaidRegulation is attached to the Report on Corporate Governance.

(4) CEO & CFO Certification

As required under Regulation 17(8) read with Part B of Schedule II to SEBI (LODR)Regulation 2015 the Managing Director & CFO has provided Compliance Certificate tothe Board of Directors.

Related Parties

Related Party transactions are disclosed in Note No. 35 of the Notes on Accounts andforms part of this report.

There are no materially significant related party transaction made by the Company withPromoters Directors Key Managerial Personnel or other designated persons which may havea potential conflict with the interest of the Company at large

Committees of the Board

(1) Audit Committee

The composition and terms of reference of the Audit Committee have been furnished inthe Corporate Governance Report forming part of this Report. There has been no instancewhere the Board has not accepted the recommendation of the Audit Committee

(2) Nomination and Remuneration Committee

The composition and terms of reference of the Nomination and Remuneration Committeehave been furnished in the Corporate Governance Report forming part of this Report.

(3) Stakeholders Relationship Committee

The composition and terms of reference of the Stakeholders Relationship Committee havebeen furnished in the Corporate Governance Report forming part of this Report.

(4) Ethics Committee

The composition and terms of reference of the Ethics Committee have been furnished inthe Corporate Governance Report forming part of this Report.

(5) Risk Management Committee

The composition and terms of reference of the Risk Management Committee have beenfurnished in the Corporate Governance Report forming part of this Report.

Policies and Codes

(1) Remuneration Policy

The Policy of the Company on appointment and remuneration of Directors Key ManagerialPersonnel and Senior Management Personnel including criteria for determiningqualification positive attributes independence of a Director and other matters providedin Section 178 (3) of the Companies Act 2013 is dealt in detail in the Report onCorporate Governance

(2) Whistle Blowers Policy

The Company has formed a Whistle Blower Policy/Vigil Mechanism as required underSection 177 (9) of the Companies Act 2013 and Regulation 22 of SEBI (LODR) Regulation2015 A Vigil (Whistle Blower) Mechanism provides a channel to the Directors and Employeesto report their concerns about unethical behaviour actual or suspected fraud or violationof the code of conduct / business ethics that provides for adequate safeguards againstvictimization of the director(s) and employee (s) who avail of the mechanism. No director/ employee have been denied access to the Chairman of the Audit Committee. The said Policymay be referred to at the Company's Website.

(3) Risk Management Policy

The process of identification and evaluation of various risks inherent in the businessenvironment and the operations of the company and initiation of appropriate measures forprevention and /or mitigation of the same are dealt with by the concerned operationalheads under the overall supervision of the Managing Director of the Company. The RiskManagement Committee periodically reviews the adequacy and efficacy of the overall riskmanagement system.

(4) Policy on prevention of Sexual Harassment

The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Woman at the Workplace (Prevention Prohibition &Redressal) Act 2013 covering all employees of the Company. Internal Complaints Committeehas been set up for the purpose. No complaint was received during the year. The AuditCommittee periodically reviews the adequacy of the system on prevention of sexualharassment overall risk management system.

(5) Policy on Corporate Social Responsibility

The provisions of Section Section135 of the Companies Act 2013 is not applicable tothe Company. However the internal CSR Policy encompasses the Company's philosophy forgiving back to the society as a corporate citizen. CSR activities in the Company arecarried through OSIL TRFI Community Services Trust.

(6) Policy on determining Material Subsidiaries

As the Company has no subsidiary the requirement of Regulation 34(3) read withSchedule V Part C (10) (e) of SEBI (LODR) Regulations 2015 is not applicable to theCompany

(7) Policy on Materiality of and Dealing with Related Party Transactions

As required under Regulation 23 of SEBI (LODR) Regulation 2015 the company hasformulated a Policy on Materiality of and Dealing with Related Party Transaction and thesame has been put up on the Company's Website.

(8) Code of Conduct

Code of conduct for Prevention of Insider Trading and Code of Corporate DisclosurePractices for prevention of Insider Trading

In compliance with the provisions of SEBI (Prohibition of Insider Trading)Regulations 1992 as amended from time to time the Company has in place a comprehensivecode of conduct for its Directors and Senior Management Officers Which lays downguidelines and procedures to be followed and disclosures to be made while dealing withshares of the Company so as to preserve the confidentiality and prevent misuse ofunpublished price sensitive information by Directors and specified employees of theCompany. This policy also provides for periodical disclosures from designated employees aswell as pre clearance of transactions by such persons so that they may not use theirposition or knowledge of the company to gain personal benefit or to provide benefit to anythird party.

Corporate Social Responsibility

Your Company provided financial assistance of Rs. 19.75 lakhs to Green Field Schoollocated in Palaspanga Dist. Keonjhar Odisha for Children education. Your Company regretsits inability to provide the desired support for CSR activities due to financial lossessuffered by the Company.


Your Company continues to follow the Quality Management System for Production andsupply of Sponge Iron and Steel Billets and possesses Certificate of Registration of ISO9001:2008 from British Certification Inc. Your Company is proud of maintaining the cleanenvironment in the vicinity of the Plant and your Company's Environmental ManagementSystem applicable to production and supply of Sponge Iron and Steel Billets has beencertified under ISO 14001:2004 by British Certification Inc. The occupational Health andSafety Management System of your Company has also been certified by the same Agency andyour Company complies with the requirements of OHSAS 18001:2007.

Listing Fees

The annual listing fees have been paid to the Stock Exchanges where the Company'sshares are listed for the years 2015-16 2016-17 and 2017-18. Your Company's applicationto National Stock Exchange (NSE) for listing and Calcutta Stock Exchanges for de-listingis pending before the respective Exchanges.

Reconciliation of Share Capital

In compliance of the directions of Securities and Exchange Board of India (SEBI)Reconciliation of Share Capital is being carried out quarterly by a Practising CompanySecretary. The findings of the Reconciliation of Share Capital were satisfactory.

Conservation of energy technology absorption foreign exchange earning and outgo

Since the plant operations are closed from June 2012 no figures are available forconservation of energy; technology absorption etc as required under the provisions of theAct read with Rule 8 (3) of the Companies (Accounts) Rules 2014.The relevant informationapplicable to the company under these circumstances are given below:

(1) During the year the Company has purchased electricity 573360 units (last year590160 Units from NESCO amounting to Rs. 46.08 lakhs (Rs.46.32 lakhs)

(2) During the year the Company has neither earned nor spent in foreign currency.

Particulars of Employees

There were no employees drawing the requisite remuneration whose names are required tobe disclosed as required under Section 197 of the Companies Act 2013 read with Rule 5 (2)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014

Employee Benefit Schemes

The Company has been providing the following benefits to its employees:

Contribution to Employees Provident Fund to the approved scheme maintained by OrissaSponge Iron Provident Fund which is a Trust body formed in accordance with the provisionsof the Employees Provident Fund and Miscellaneous Provisions Act 1952 ("theAct"). Contribution is made at the statutory rate of 12% on the total of basic salaryand Dearness Allowance. Contribution to Employees Pension Fund is made to the Governmentat the rate specified under the Act and the Employees Provident Fund and MiscellaneousProvisions Scheme 1952 ("the Scheme"). The Company has not restricted thecontribution to the salary limits specified under the Act at Rs. 15000 per month to giveadditional benefit to the employees. Under this scheme the employee gets pension afterretirement from the Government throughout his life and additionally 50% of the pension onhis death to the spouse for life.

Premium on Group Insurance Scheme taken with LIC to provide enhanced insurance benefiton death of the employee while in service in lieu of Deposit Linked Insurance Scheme ofthe Government.

Contribution to Gratuity Fund by payment of premium to LIC Group Gratuity Scheme toprovide gratuity benefits to the employees on retirement death or otherwise. Under thescheme the life of the employee is also secured by payment of additional premium so thatin the event of death the employee gets gratuity not only for the period of servicerendered but also the period of service he would have rendered up to the date of hisnormal retirement.

Industrial Relations

Industrial relations have by and large remained cordial during the year


(1) Statutory Auditors

M/s A.K.Bhardwaj & Co. Chartered Accountants was appointed as Statutory Auditorsunder Section 139 of the Companies Act 2013 at the Annual General Meeting of the Companyheld on 19.02.2016 to hold office for a period of five years up to the conclusion of the40th Annual General Meeting. The Board recommends ratification of theirappointment as Statutory Auditors at the ensuing Annual General Meeting for a period up tothe conclusion of the 38th Annual General Meeting. Certificate from theAuditors have been received to the effect that their appointment if made would be withinthe prescribed limit under Section 141 of the Companies Act 2013.

(2) Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remunerations of Managerial Personnel) Rule 2014 the Company hasappointed Ms. Disha Dugar Practicing Company Secretary to conduct Secretarial Audit forthe financial year ended 31st March 2017. The Report on Secretarial Audit isprovided in the Annexure and forms part of this Report.

(3) Cost Auditors

Pursuant to the provision of Section 148 of the Companies Act 2013 and the Companies(Audit and Auditors) Rules 2014 M/s. B. Ray & Associates Cost Accountants Kolkatawas re-appointed as Cost Auditor of the Company for the year 2016-17 and 2017-18 toconduct audit of cost records maintained by the Company.

Auditors' Report

Explanation to the Statutory Auditors Report and Secretarial Auditors Report pursuantto Section 134(3)(f) of the companies Act 2013 is given in Annexure I forming part of theDirectors Report

Extract of Annual Return

The extract of the Annual Return in Form MGT 9 is provided in the annexure and formspart of this Report

Significant and Material Orders Passed by the Regulators/Courts/Tribunals

There are no significant material orders passed by the Regulators/Courts/Tribunalswhich would impact the going concern status of the Company and its future operations

Acknowledgement and Appreciation

The Directors acknowledge with gratitude the co-operation extended by Indian RenewableEnergy Development Agency Limited Edelweiss Asset Construction Company Limited StateBank of India Bank of India Punjab National Bank Central Government State GovernmentLocal and District Administration Suppliers Customers and Shareholders and solicit theircontinued support. The Directors also wish to place on records their sincere appreciationof the dedicated services put in by the Company's workers staff and executives underdifficult conditions.

For and on behalf of the Board
Munir Mohanty Director
Place: Kolkata Dr. P. K. Mohanty
Dated: 12th August 2017 Chairman & Managing Director

Annexure I to the Director's Report

Explanation to the Auditors' Report and Secretarial Auditors' Report pursuant toSection 134 (3) (f) of the Companies Act 2013

(1) Explanation to Statutory Auditor's Report

a) Reference to Annexure B to the Audit Report vide Para 7 (a) your Directors submitthat due to shut down of plant operations since 2012 and in the absence of regular flow offunds fund situation continues to be critical. Consequently the undisputed liability onaccount of Central Sales Tax Orissa Sales Tax Entry Tax and Provident Fund dues couldnot be paid.

b) Reference to Independent Audit Report vide Para 9 (a) and (b) your Directors submitthat the Notes to Balance Sheet and Statement of Profit and Loss under the head CorporateInformation gives full details of the State of Affairs of the Company and thejustification for preparing the Accounts on the basis of going concern. For the samereasons deferred tax have been recognised in the Accounts as the Directors are of theopinion that on commencement of mining operations the profit generated would be goodenough to absorb the Deferred Tax.

c) There are no other qualifications or adverse remarks in the Auditors' Report whichrequire any clarification/explanation in the Directors Report. The Notes on Accountsforming part of the financial statements are self-explanatory and needs no furtherexplanation.

(2) Explanation to Secretarial Auditor's Report

a) Reference to the Audit Report vide Para (1) A (i) your Director submit that due toshut down of plant operations since 2012 take over of the possession of the plant by theLenders on 24.04.2015 and termination of almost all the officers including those attachedto the accounts department the preparation of annual accounts was considerably delayed.Consequently the Annual General Meeting for the Financial Year 2015-16 and periodicalmeeting for approval of the un-audited financial results could not be held on time.However the Company has ensured compliance of the same subsequently.

b) Reference to the Audit Report vide Para (1) (B) (i) & (ii) and (xiii) A yourDirector submit that the claim made by the parties is disputed and being contested by theCompany in the appropriate forum

c) Reference to Para 1 (B) (ix) A & B Item A to C in the last page and theconcluding Para vide serial no I and II of the Audit Report your Directors submit thatdue to shut down of plant operations since 2012 and in the absence of regular flow offunds fund situation continues to be critical. Consequently the undisputed liability onaccount of Central Sales Tax Orissa Sales Tax Entry Tax Provident Fund dues EmployeePension Fund dues Listing Fee to the Stock Exchange penalty imposed by the StockExchange etc could not be paid. However listing fee to the Stock Exchange for thefinancial years 2015-16 2016-17 and 2017-18 have been paid subsequently.

d) Reference to the Audit Report vide Para 1 (B) (xvi) serial I ii & iii in thelast page your Directors submit that due to non payment of the outstanding dues to theLenders they have taken action under SARFAESI and also filed an application before theDRT. The Company has made representation and having regard to substantial progress madetowards executing mining lease agreement in respect of the Iron Ore mines allotted to theCompany and the resultant profitability on commencement of mining operations the Companyis hopeful of reaching an amicable solution to address the issue of Lenders.

e) Other than the above observations of the Auditors in their Report which have beenspecifically addressed no explanation is given on other observations as all of themcomprise of statement of facts.