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Prakash Industries Ltd.

BSE: 506022 Sector: Metals & Mining
NSE: PRAKASH ISIN Code: INE603A01013
BSE 00:00 | 07 Apr 22.00 1.20
(5.77%)
OPEN

21.75

HIGH

22.85

LOW

21.40

NSE 00:00 | 07 Apr 22.00 1.30
(6.28%)
OPEN

22.20

HIGH

22.70

LOW

20.80

OPEN 21.75
PREVIOUS CLOSE 20.80
VOLUME 42196
52-Week high 82.01
52-Week low 18.55
P/E 1.62
Mkt Cap.(Rs cr) 377
Buy Price 22.00
Buy Qty 19.00
Sell Price 22.35
Sell Qty 480.00
OPEN 21.75
CLOSE 20.80
VOLUME 42196
52-Week high 82.01
52-Week low 18.55
P/E 1.62
Mkt Cap.(Rs cr) 377
Buy Price 22.00
Buy Qty 19.00
Sell Price 22.35
Sell Qty 480.00

Prakash Industries Ltd. (PRAKASH) - Director Report

Company director report

Dear Shareholders

Your Directors have pleasure in presenting the 38th Annual Report on thebusiness & operations of the Company together with the Audited Statement of FinancialAccounts for the year ended 31st March 2019.

FINANCIAL RESULTS

(Rs. in Crores)

For the year ended 31st March 2019 For the year ended 31st March 2018
Net Sales 3587.51 2934.81
Other Income 7.57 14.81
Total Income 3595.08 2949.62
EB ITDA 793.65 595.89
Depreciation 133.98 120.94
Financial Expenses 100.53 86.61
Profit before exceptional item and tax 559.14 388.34
Exceptional Items 389.05 -
Less: Transferred from General Reserve (382.56) -
6.49
Provision for Taxes 13.43 2.09
Profit after tax 539.22 386.25
Other Comprehensive Income (4.09) (2.39)
Total Comprehensive Income 535.13 383.86

PERFORMANCE

During the year under review the Company's Net Sales registered growth of 22% toRs.3588 crores as against Rs.2935 crores in the previous year. The EBITDA for the year wasRs.794 crores in comparison to Rs.596 crores in the previous year reflecting a growth of33% . After providing for interest depreciation and tax the profit after tax of theCompany grew by more than 39% to Rs.535 crores as against Rs.384 crores in the previousyear which resulted in EPS of Rs.33.41 in the current year as against Rs.25.58 in theprevious year. Your Directors have immense pleasure in informing that subsequent to thesanction by the Hon'ble National Company Law Tribunal Chandigarh vide order dated 14thMarch 2019 the PVC Pipe Undertaking had been demerged from your Company into theresulting Company i.e. Prakash Pipes Limited (PPL) with effect from the appointed datei.e. 1st April 2018. This is expected to provide better focused strategy forboth steel and PVC pipe business. In view of this Demerger the figures of the year underreview are exclusive of PVC Pipe Undertaking and are not comparable with those of theprevious year. During the year under review the PVC pipe Undertaking which now formspart of Prakash Pipes Limited had achieved Net Sales of Rs.341 crores EBITDA of Rs.43crores and PAT of Rs.28 crores.

OPERATIONAL REVIEW

Your Directors are pleased to inform that the performance of the Company bothfinancial and operational has attained significant growth during the year under review.As a result of capacity addition and buoyant steel demand the sales volumes have grown bymore than 20% as compared to the previous year. The average sales realization has alsoimproved by over 12% over last year. The operating margins have improved to more than 22%against 20% in the previous year. During the last quarter of the year under review theCompany modernized its fourth Rolling Mill at Raipur Chhattisgarh with a vision toimprove the production of value added products i.e. wire rods. Also the Company continuedto improve the operational efficiencies In the Steel Melting Shop by setting up new energyefficient furnaces and also modernizing some of the existing furnaces. Further the Longterm supply arrangements entered into by the Company with its suppliers for the key inputsi.e. coal and iron ore ensured uninterrupted supplies at stable prices therebyinsulating its margins against the vagaries arising out of the volatility of their prices.

FUTURE PROSPECTS

The Indian steel industry is expected to grow by 7-8% annually in the coming years atthe back of strong demand from vital sectors like construction infrastructure automobileamong others. In order to benefit from the continuing favorable scenario in the industrythe Company has taken up capacity addition with higher focus on backward integration. Inthis direction the Company has completed the installation of another 0.2 mntpa SpongeIron kiln along with 15 MW power co-generation and the commercial production is expectedfrom the end of July 2019. This will almost fully integrate the present steel operationsand eliminate the Company's dependence on market sponge iron for its steel making.Further the Company's iron ore mine in the state of Odisha has now largely received allstatutory approvals and the Company is making all out efforts to operationalize the samevery soon. All these steps for backward integration are expected to give a boost to theprofitability margins of the Company in future years.

DIVIDEND

Based on Company's performance the Directors have recommended a dividend of Rs.1.20per share for financial year 2018-19. If approved by the members would involve a cashoutflow of Rs.2363 lakhs including dividend distribution tax.

ENVIRONMENT

Company has always emphasised on installation of the effective Pollution ControlSystems with latest technology alongwith the production units as well as otherEnvironmental measures to ensure a healthy Environment for its employees as well as peoplein the surroundings. The Pollution Control equipments installed by the Company includesBag Filters Electro Static Precipitators (ESP) Ventury Scrubber Dust SuppressionSystems etc. Company has also installed latest Online Pollution Monitoring Systems in theStacks as per the Statutory Guidelines. Company has always complied with all statutorynorms which has resulted in providing a safe & healthy work places to its employees.Various production units of the Company has been certified with Integrated ManagementSystems consisting of ISO - 14001 Environment Management System ISO - 9001 QualityManagement System & OHSAS - 18001 Occupational Health & Safety Management Systemwhich shows commitment of the Company towards its Environmental Protection Responsibilityas well as production of the quality products with safety. Company has taken all requiredsteps to control Pollution in the Plant. Extensive Plantation has been carried outalongwith Plant Boundary in open areas in the plant premises and also at the road sidenear the plant. Company has also made Corporate Environmental Policy and has trained allemployees to contribute towards making the Environment Healthy Green & Safe. Companyhas maintained Zero Discharge of waste by recycling. No water is allowed to flow outsidethe factory premises as per statutory guidelines. No water is allowed to be dischargedoutside the factory premises. All waste water is treated in the Effluent Treatment Plantbefore reusing it. A well equipped Environmental Laboratory is also set up in the Plantalongwith experienced Environmental team to ensure timely implementation of Environmentalmeasures.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There were no material changes and commitments affecting the financial position of theCompany between the end of the financial year of the Company to which the financialstatements relate and the date of the report.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

The Hon'ble National Company Law Tribunal at Chandigarh vide its order dated 14thMarch 2019 sanctioned the Scheme of Demerger between Shareholders Secured Creditors andUnsecured Creditors of Prakash Industries Limited and Prakash Pipes Limited. Accordinglythe Scheme becomes effective w.e.f. 15th April 2019. The appointed date ofScheme is 1st April 2018.

CHANGE IN NATURE OF BUSINESS IF ANY.

During the year the Company had started PVC flexible packaging business under its PVCbusiness segment which is now transferred to Prakash Pipes Limited consequent upondemerger of the Company.

DETAILS OF SUBSIDIARY COMPANIES JOINT VENTURES AND ASSOCIATE COMPANIES

Prakash Pipes Ltd. has ceased to be subsidiary Company of Prakash Industries Ltd.consequent upon demerger order dated 14th March 2019 of National Company LawTribunal during the Financial Year Ended 31st March 2019

The Company's policy for determining material subsidiaries is available atwww.prakash.com.

AMOUNT CARRIED TO ANY RESERVE (IF ANY)

The Company had not carried any amount to any reserve from its Profit & Lossaccount for the current financial year.

CORPORATE SOCIAL RESPONSIBILITY AND GOVERNANCE COMMITTEE

The Company recognizes the need and importance of a focused and inclusive social andeconomic development especially of the industries and communities within which itoperates. A Board level Committee of CSR has been constituted. The details of membershipof the Committee & the meetings held are detailed in the Corporate Governance Reportforming part of this Report. The Corporate Social Responsibility Policy is available onthe website of the Company at the link http://prakash.com/pdfs/ CSR_Policy.pdf

The Annual Report on Corporate Social Responsibility activities is annexed to thisreport as Annexure 1 .

BOARD EVALUATION

During the year the annual evaluation of the performance of the Board its committeeand of individual Directors has been made under the provisions of the Act relevant Rulesand the Corporate Governance requirements as prescribed under Regulation 17 of ListingRegulations 2015 and the circular issued by SEBI with respect to Guidance Note on BoardEvaluation from time to time.

In a separate meeting of Independent Directors performance of Non IndependentDirectors and performance of the Board as a whole was evaluated. Further they alsoevaluated the performance of the Chairman of the Company taking into account the views ofthe Executive Directors and Non-executive Directors.

NUMBER OF MEETINGS OF THE BOARD

The details of the Board Meetings and other Committee Meetings held during thefinancial year 2018-19 are given in the separate section of Corporate Governance Report.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaration from all the Independent Directors of the Companyconfirming that they meet with the criteria of independence as prescribed undersub-section (6) of Section 149 of the Act and as per SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.

FAMILIARISATION PROGRAMME FOR THE INDEPENDENT DIRECTORS

In compliance with the requirements of Regulation 25(7) of the Listing Regulations2015 the Company has put in place a Familiarisation Programme for the IndependentDirectors to familiarise them with the Company their roles rights responsibilities inthe Company nature of the industry in which the Company operates business model etc.

DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP)

The following three persons are the Key Managerial Personnel of the Company as per theprovisions of Section 203 of the Companies Act 2013.

i) Shri M.L. Pareek Chief Executive Officer

ii) Shri P.L. Gupta Chief Financial Officer

iii) Shri Ashwini Kumar Company Secretary

In accordance with the provisions of the Companies Act 2013 and Articles ofAssociation of the Company Shri M.L.Pareek retires by rotation at the ensuing AnnualGeneral Meeting and being eligible offers himself for reappointment.

Dr.Satish Chander Gosain has joined as an Independent Director of the Company witheffect from 13th August 2018. Shri K.C.Mehra Independent Director on theBoard of the Company since 1985 left for his heavenly abode on 4th June 2018.The Board would like to place on record the invaluable contribution made by him during histenure on the Board.

Further the Board of Directors has reappointed Shri Y.N . Chugh Shri Mamraj Agarwaland Smt Purnima Gupta for the second term of 5 (Five) consecutive years on the Board ofthe Company with effect from 1st April 2019.

BOARD COMMITTEES

All Committees of the Board of Directors are constituted in line with the provisions ofthe Companies Act 2013 and applicable regulations of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.

DEPOSITS

Company has not accepted any deposits during the year under review.

TRANSFERS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to applicable provisions of the Companies Act 2013 ("Act") readwith the Investor Education and Protection Fund Authority (Accounting Audit Transfer andRefund) Rules 2016 ("IEPF Rules") all unpaid or unclaimed dividends arerequired to be transferred by the Company to the Investor Education and Protection Fund("IEPF" or "Fund") established by the Central Government aftercompletion of seven years from the date of dividend becoming unpaid / unclaimed. Furtheraccording to the Rules the shares in respect of which dividend has not been paid orclaimed by the members for seven consecutive years or more shall also be transferred tothe demat account created by the IEPF Authority.

The Company had sent individual notices and also advertised in the newspapers seekingaction from the members who have not claimed their dividends for seven consecutive yearsor more. Accordingly the Company has transferred such unpaid or unclaimed dividends andcorresponding shares to IEPF up to the financial year ended 31st March 2011.

Members/claimants whose shares and/or unclaimed dividend have been transferred to theIEPF Demat Account or the Fund as the case may be may claim the shares or apply forrefund by making an application to the IEPF authority in Form IEPF-5 (available onhttp://www.iepf.gov.in) along with requisite fee as decided by the IEPF authority fromtime to time.

Details of shares/shareholders in respect of which dividend has not been claimed areprovided on our website at www.prakash.com The shareholders are encouraged to verify theirrecords and claim their dividends of all the earlier seven years if not claimed.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134 (5) of the Companies Act2013 (A ct) the Board of Directorsto the best of their knowledge and ability confirm that:

I. in the preparation of the annual accounts the applicable standards have beenfollowed and there are no material departures

II. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitof the Company for that period

III. they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities

IV. they have prepared the accounts on a going concern basis

V. they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively.

VI. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

STANDALONE ACCOUNTS

The Standalone financial statements for the year ended 31st March 2019 havebeen prepared in accordance with Indian Accounting Standards (Ind AS) notified under theCompanies (Indian Accounting Standards) Rules 2015 together with the comparative perioddata as at and for the previous year ended 31st March 2018.

AUDITORS & AUDITORS REPORTS

i) Statutory Auditors

The Company's Auditors M/s Chaturvedi & Co. Chartered Accountants (FRN:302137E)were appointed as the Statutory Auditors of the Company for a period of five years at the35th Annual General Meeting of the Company upto the conclusion of the 40thAnnual General Meeting of the Company subject to ratification by members at every AnnualGeneral Meeting of the Company if so required under the Companies Act 2013. Therequirement to place the matter related to appointment of auditors for ratification by themembers at every AGM has been done away by the Companies (Amendment) Act 2017 w.e.f. 7thMay 2018.

The Auditors in their Report to the members have given two qualified opinions and theexplanations of Board with respect to it in pursuant to section 134( 3) (f) of CompaniesAct 2013 is as follows:

Explanations to note on Basis for Qualified opinion of Independent Auditors Report

a) The net deferred tax liability computed in terms of Ind AS-12 "Income Tax"amounting to Rs. 1446 Lakhs has been adjusted against Securities

Premium Account. This has been in terms of Hon'ble Punjab & Haryana High Courtorder dated 23rd August 2007. In case the Company is not able to utiliseMinimum Alternate Tax (MAT) credit within the time limit prescribed under the Income TaxAct the same is set off against the retained earning as Tax credit pertains to an earlieryear..

b) The expenditure amounting to Rs. 38256 Lakhs incurred on a power project which ison hold has been written off by withdrawing an equivalent amount from General Reserve.

Observations other than above made by the Statutory Auditors in their report for theFinancial year ended 31st March 2019 read with the explanatory notes thereinare self-explanatory and therefore do not call for any further explanation or commentsfrom the Board under section 134(3) of the Companies Act 2013.

ii) Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. Pradip Kumar Muduli Practicing Company Secretary to undertake theSecretarial Audit of the Company. The Secretarial Audit Reports are annexed herewith asAnnexure 2 in prescribed format MR-3 as per Companies Act 2013 and as Annexure 2A as perprescribed format under SE BI Listing Regulations. The Secretarial Audit Report does notcontain any qualification reservation or adverse remark.

iii) Cost Auditors

Pursuant to Section 148(1) other Companies Act 2013 Company is required to maintaincost records as specified by the Central Government and accordingly such accounts andrecords are made and maintained.

Accordingly the Board of Directors in its meeting held on 21st May 2019 hasappointed M/s. Rakshit & Associates (FRN : 101951) Cost & Management Accountantson the recommendation of the Audit Committee for auditing the cost records of the Companyfor the Financial Year 2019-20. Appropriate resolution seeking your ratification of theremuneration of Cost Auditors is included in the Notice convening the 38th AGMof the Company.

CHANGES IN CAPITAL STRUCTURE

During the financial year 2018-19 the Company had allotted 1979255 Equity Shares fullypaid-up of the face value of Rs. 10 per share at a premium of Rs. 200.18 per share onconversion of convertible equity warrants and 4484039 equity shares fully paid up value ofRs. 10 per share at a premium of Rs. 90 per share after receiving of Conversion Noticesfrom various FCCB holders. Accordingly the paid- up Equity Share Capital of the Companyincreased from Rs. 156.88 crores to Rs. 163.35 crores.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Particulars of loans guarantees investments made and securities provided by yourCompany pursuant to Section 186 of the Act if any are given in the notes to thefinancial statements which form part of the Annual Report.

RELATED PARTY TRANSACTIONS [RPT]

All the related party transactions that were entered during the financial year were inthe ordinary course of the business of the Company. There were no materially significantrelated party transactions entered by the Company with its promoters Directors KeyManagement Personnel and other persons which may have a potential conflict with theinterest of the Company.

All the related party transactions are placed before the Audit Committee for approvalreview on a quarterly basis. For the business transactions with the related parties whichare of repetitive nature as well as for the normal business transactions which cannot beforeseen prior omnib us approval from the Audit Committee are obtained and accordinglyrequired disclosures are made to the Committee on quarterly basis in terms of the approvalof the Committee. The Company during the financial year entered into contracts orarrangements with related parties which were in the ordinary course of business and onarm's length basis.

The Policy on materiality of related party transactions and dealing with related partytransactions are available on the Company's website at the link at http://www.prakash.com/policy-related-party-transactions.

The details of the related party transactions as required under Section 134(3)(h) r/wRule 8 (2) of the Companies (Accounts) Rules 2014 and under Regulation 34(3) & 53(f)Para A of Schedule V of SEBI(LODR) Regulations 2015 is attached as Annexure 3.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY

To create enduring value for all stakeholders and ensure the highest level of honestyintegrity and ethical behaviour in all its operations the Company has adopted a 'WhistleBlower Policy'. The details of the Vigil Mechanism and Whistle Blower Policy are availableon the website of the Company.

NOMINATION AND REMUNERATION POLICY

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection appointment and remuneration of Directors & SeniorManagement.

The Board has framed a Nomination and Remuneration policy which is available on theCompany website at the link http://www.prakash.com/policies.

RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Company has set up a Risk Management Committee. Risk Assessment is also discussedin the Management Discussion and Analysis attached to this report. The Company maintainsan adequate and effective internal control system commensurate with its size andcomplexity. These internal control systems provide among other things a reasonableassurance that transactions are executed with management authorization and that they arerecorded in all material respects to permit preparation of financial statements inconformity with established accounting principles and that the assets of the Company areadequately safe-guarded against significant misuse or loss. An independent internal auditfunction is an important element of your Company's internal control system. The internalcontrol system is supplemented through an extensive internal audit programme and periodicreview by management and Audit Committee. The Company has in place adequate internalfinancial controls with reference to financial statements.

EXTRACT OF ANNUAL RETURN

The annual return of the Company as required under the Companies Act 2013 will beavailable on the website of the Company at www.prakash.com.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are provided as Annexure 4A to this Report.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules forms part of this Annual Report and isattached as Annexure 4.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

Company has a policy on prohibition prevention and redressal of Sexual Harassment ofwomen at work place and matters connected therewith. During the year ended 31stMarch 2019 no complaint was received under the policy.

CORPORATE GOVERNANCE

The Company is in compliance with the Corporate Governance guidelines as laid out inthe Securities Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015.

Report on Corporate Governance and Certificate of Practicing Company Secretaryregarding compliance of the conditions of Corporate Governance as stipulated in Part C ofSchedule V of the Listing Regulations 2015 with the Stock Exchanges are enclosed withreport as Annexure 5.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis on the operations of the Company as prescribedunder Part B of Schedule V read with regulation 34 (3) of the Listing Regulations 2015 isprovided in a separate section and annexed as Annexure 6.

CONSERVATION OF ENERGY RESEARCH AND DEVELOPMENT TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS AND OUTGO

The particulars relating to conservation of energy technology absorption research& development and foreign exchange earnings and outgo as required to be disclosedunder the Act are provided as Annexure 7

ACKNOWLEDGMENTS

Your Directors wish to thank all stakeholders employees and business partners andCompany's bankers for their continued support and valuable co-operation. The Directorsalso wish to express their gratitude to investors for the faith that they continue torepose in the Company.

By Order of the Board
Place :New Delhi P. L. Gupta Kanha Agarwal
Dated :21st May 2019 Whole-time Director Jt.Managing Director
DIN:00048868 DIN:06885529