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Sathavahana Ispat Ltd.

BSE: 526093 Sector: Metals & Mining
NSE: SATHAISPAT ISIN Code: INE176C01016
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Sathavahana Ispat Ltd. (SATHAISPAT) - Director Report

Company director report

To

The Members

SATHAVAHANA ISPAT LIMITED

Your Board of Directors has pleasure in presenting the 31st Annual Report together withthe Audited Accounts of the Company for the year ended 31stMarch 2020:

FINANCIAL RESULTS:

Your Board of Directors report the following financial results for the year 2019-20:

(Rupees in Lakhs)

Sl.No Particulars Year ended 31-03-2020 Year ended 31.03.2019
1 Gross revenue from operations 27289.63 49853.69
2 Other income 915.92 817.87
3 Operating profit/ (loss) Before finance costs and depreciation (7416.98) 2383.36
4 Finance costs 19177.73 17438.49
5 Depreciation and amortization 4481.39 4738.65
6 Profit / (loss) before tax (31076.10) (19793.78)
7 Exceptional Item 0 (2983.98)
8 Tax expense 0 0
9 Net Profit / (loss) after tax (31076.10) (22777.76)
10 Earnings /(loss) per Equity Share-Basic (61.05) (44.75)
11 Earnings/(loss) per Equity Share-Diluted (61.05) (44.75)

The performance during the year was impacted adversely due to factors beyond thecontrol of the Company. The performance suffered due to working capital constraints andthe consequent financial stress which resulted in underutilization of capacities.

The gross revenue of Rs. 27289.63 Lacs is lower as compared to previous year's revenueof Rs. 49853.69 Lacs. The year ended with loss before tax of Rs. 31076.10 Lacs as againstloss before tax of Rs. 22777.76 Lacs in the previous year. During the year in the absenceof reasonable certainty deferred tax asset on account of unabsorbed depreciation andbusiness loss and others amounting to Rs. 11843.44 Lacs as against previous year's amountof Rs. 11567.97 Lacs has been recognized to the extent it can be realised fully againstdeferred tax liability. Accordingly the tax impact is nil in both current and previousyears. The year ended with net loss after tax of Rs. 31076.10 as against net loss aftertax of Rs. 22777.76 in the year before. Accordingly the loss per share accounted for atRs. 61.05 as compared to loss per share of Rs. 44.75 in the previous year.

CHANGE IN THE NATURE OF BUSINESS:

There is no change in the nature of business during the Financial Year 2019-20 DIVIDENDAND GENERAL RESERVE:

The Board of Directors has not recommended any dividend for the year 2019-20 due toloss incurred during the year and carry forward loss from earlier years. Company cannotdeclare dividend until the carry forward loss is fully set off against the profits asprovided in the Companies Act 2013.

The Board of Directors also has not proposed to transfer any amount to General Reservein view of the carry forward loss.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 withrespect to Directors' Responsibility Statement your Directors hereby state and confirmthat:

i) In the preparation of Annual Accounts for the Financial Year 2019-20 the applicableIndian Accounting Standards (Ind-As) had been followed with proper explanation relating tomaterial departures;

ii) The Accounting Policies selected were applied consistently and the judgements andestimates made are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as at 31st March 2020 and of the Loss of the Company for theyear ended on that date;

iii) Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

iv) The Annual Accounts have been prepared on a going concern basis;

v) Internal financial controls to be followed by the Company have been laid down andthat such Internal Financial Controls are adequate and were operating effectively; and

vi) Proper systems had been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

AUDIT COMMITTEE:

The Audit Committee is duly constituted as per the provisions of the Act applicableRules framed thereunder read with the listing regulations. The primary objective of thecommittee is monitoring and supervising the Management's financial reporting process toensure accurate and timely disclosures with highest levels of transparency integrity andquality of financial reporting.

Committee comprises of Chairman - Shri K. Thanu Pillai Independent Director and twoother Independent Director members -Shri Syed Anis Hussain and Shri S.N.Rao.

The Committee met 4(four) times during the year. Details of terms of reference of theCommittee number and dates of meetings held and attendance of Members during the year arepart of the Corporate Governance Report.

The Audit Committee at its meeting held on 18th July 2020 has considered and approvedthe Audited Accounts of the Company for the financial year ended 31st March 2020.

CORPORATE GOVERNANCE:

Pursuant to Listing Regulations 2015 the Company is required to comply with the Code ofCorporate Governance for the financial year under review. Accordingly the Reports onCorporate Governance and Management Discussion and Analysis together with Auditors' Reporton compliance of Code of Corporate Governance are attached to this Report and forms partof the Annual Report. These Reports are to be read in conjunction with this Directors'Report.

Policy on selection and appointment of Directors Composition and category ofDirectors attendance of each Director at meetings Number of other Directorships held byeach Director Number of Board meetings held and dates on which held Board meetingsprocess familiarisation programme of each Independent Directors Board's evaluationprocess are discussed in the Report on Corporate Governance which forms part of thisReport.

DECLARATION GIVEN BY INDEPENDENT DIRECTORS:

The Board of Directors confirms that based on the declarations given by all theIndependent Directors in pursuance of provisions of Section 149(7) of the Companies Act2013 all the independent Directors meet the criteria of independence as provided inSection 149(6) of the Companies Act 2013.

DETAILS OF DIRECTORS OR KEY MANAGERIAL PERSONNEL WHO WERE APPOINTED OR HAVE RESIGNEDDURING THE YEAR:

Shri A.S. Rao is liable for retirement of Directors by rotation at the ensuing 31stAnnual General Meeting and being eligible; offer himself for re-appointment at the saidAnnual General Meeting.

Shri A.S. Rao has been appointed as Executive vice Chairman in the Board meeting heldon 30.05.2018 for a period of 3 years w.e.f. 27.07.2018 to 26.07.2021 and the appointmentwas subsequently approved at the 29th Annual general Meeting of the Company and the officeof Executive vice chairman is liable for retirement of Directors by rotation.

During the year Shri A.Sainath Company secretary & Compliance officer of theCompany resigned w.e.f 07th November 2019.

Smt. G.Pushkarini has been appointed as Company Secretary & Compliance officer ofyour Company w.e.f 13th May 2020 on the recommendation of Nomination and RemunerationCommittee to the Board of the Company.

The remuneration and other details of KMPs for the Financial Year 2019-20 are dulydisclosed in Form MGT-9 forming part of this report.

Except for the above there has been no changes in the office of directors or keymanagerial personnel during the year.

MEETINGS:

During the year six meetings of Board of Directors were held as more particularlydisclosed in the attached report of Corporate Governance. The intervening gap between anytwo meetings was within the prescribed period.

The Number and dates of meeting held by the Board and its Committees attendance ofDirectors is given separately in Corporate Governance Report in terms of Section 134(3)(b)of the Companies Act 2013.

PERFORMANCE EVALUATION:

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligation andDisclosure Requirements) Regulations 2015 the Board has carried out the annualperformance evaluation of its own performance the Directors individually as well as theevaluation of the working of its Audit Nomination and Remuneration and ShareholdersGrievance Committees.

A structured questionnaire was prepared after taking into consideration inputs receivedfrom the Directors covering various aspects of the Board's functioning such as adequacyof the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations and governance.

A separate exercise was carried out to evaluate the performance of individual Directorsincluding the Chairman of the Board who were evaluated on parameters such as level ofengagement and contribution independence of judgments safeguarding the interest of theCompany and its minority shareholders etc.

The performance evaluation of the Independent Directors was carried out by the entireBoard. The performance evaluation of the Chairman and the Non Independent Directors wascarried out by the Independent Directors who also reviewed the performance of theSecretarial Department. The Directors expressed their satisfaction with the evaluationprocess.

AUDITORS AND AUDIT REPORT:

The tenor of present Auditors M/s. Majeti & Co. Chartered Accountants Hyderabadhas been fixed for period of five years at the Annual General Meeting held on 29.09.2017subject to ratification of appointment at every subsequent Annual General Meeting. Howeverthe Ministry of Corporate Affairs Government of India has vide Companies (Amendment) Act2017 notified vide notification dated 07.05.2018 that such ratification of appointment ofstatutory auditors is not required at the subsequent Annual General Meetings which inother words means that appointment made initially continues to be effective until theexpiry of five years from the date of their appointment. Accordingly no ratifications ofappointment of statutory auditors is proposed in the ensuing Annual General Meeting.

With respect to the Independent Auditors' Report for the year ended 31st March 2020which forms part of the Annual Report containing emphasis of matters and qualificationsyour Board of Directors state that the management replies to the same areas under:

1. With respect to emphasis matter the explanation contained in Note No.33 to thefinancial statements is self-explanatory and the opinion of the Auditors is unmodified inrespect of this matter.

2. With respect to Qualification on Trade receivables supplier advances and capitaladvances as at March 312020 the explanation contained in Note No.36 to the financialstatements is self-explanatory and does not require further explanations

3. With Respect to Statutory dues statutory dues related to Income tax Employee'sprovident fund Employee state insurance act Gratuity and professional tax amounting toRs. 108339226/- have become overdue and remain unpaid the same is due to the cashcrunch and tight working capital constraints the management is working closely with theconcerned authorities and will clear the dues based on the available cashflows.

4. With respect to Qualification on Advance from customer contained in Note No. 39 tothe financial statements is self explanatory and does not require further explanations.

5. With respect to Qualification on Non movement of inventories the explanationcontained in Note No. 40 to the financial statements is self explanatory and does notrequire further explanations.

6. With respect to emphasis matter the explanation contained in Note No. 41 to thefinancial statements is self explanatory and does not require further explanations.

7. With respect to Qualification on overdue foreign currency payable to as companyfacing financial difficulty it's pending for long on improving company financial stabilitywe make the payment to supplier.

The Independent Auditors' Report for the financial year ended 31st March 2020 whichforms part of the Annual Report do not require any further explanations from the Board.

COST AUDITORS AND COST AUDIT REPORT:

Company appointed M/s. Nageswara Rao & Co Hyderabad Practicing Cost Accountants(Firm's Registration Number 000332) as Cost Auditors for the financial year 2019-20. TheCost Audit Report as prepared by the Cost Auditors for the financial year 2019-20 has beenfiled with the Central Government within the due date.

The Board of Directors based on the recommendations of the Audit Committee hasappointed M/s. Nageswara Rao & Co Practicing Cost Accountants (Firm's RegistrationNumber : 000332) as Cost Auditors for conducting Cost Audit of the Cost Records of theCompany for the year 2020-21.

In pursuance of the provisions of Section 148 and other applicable provisions if anyof the Companies Act 2013 read with Companies (Audit and Auditors) Rules 2014 theremuneration payable for conducting the Cost Audit for the year ending 31st March 2021 toM/s. Nageswara Rao & Co Practicing Cost Accountants is being placed before theMembers in the ensuing Annual General Meeting for their ratification and approval.

INTERNAL AUDITORS:

The Board of Directors based on the recommendation of the Audit Committee haveappointed ASK & CO Chartered Accountants as internal Auditors of your Company. TheInternal Auditors are submitting their reports on quarterly basis.

SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT:

M/s. D. Hanumanta Raju & Co. Practicing Company Secretaries Hyderabad who havebeen appointed as Secretarial Auditor for the financial year 2019-20 have conducted theAudit of the Secretarial Records and submitted their Report in MR-3 which is annexed tothis Report (Annexure-V).

The Secretarial Audit Report for the financial year ended 31st March 2020 contains thefollowing observations.

1. The Company is yet to file Form IEPF-4 for statement of transfer of shares inrespect of Un-claimed dividend for seven years to IEPF authority as required under Section124 (6) of Companies Act 2013.

Reply : Company is in the process of transferring the shares and filing IEPF-4.

2. The Listed Entity has delayed by 3 days in intimating to Stock Exchanges regardingclosure of trading window of designated person for the quarter ended 30.06.2019 asrequired under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.

Reply : It was missed by oversight and not intentional and on coming to our knowledgewe immediately submitted the same.

3. The Listed Entity has delayed by 20 days in submitting the disclosures of relatedparty transactions on a consolidated basis to Stock Exchanges for the half year ended30.09.2019 as required under Regulation 23(9) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 .

Reply : It was missed by oversight and not intentional and on coming to our knowledgewe immediately submitted the same.

4. That Listed Entity has delayed by 37 days in disclosing to the Stock Exchange aboutthe details of default on payment of interest / installment obligations on loans fromBanks/Financial Institution as required under circular SEBI/HO/CFD/CMD1/CIR/P/2019/140dated 21.11.2019.

Reply : By oversight and due to change in the compliance officer and the personlooking after the compliances there was an inadvertent delay of 37 days in making thedisclosure.

TRANSFER OF UNCLAIMED DIVIDEND AMOUNTS TO IEPF:

Pursuant to the provisions of Section 205A (5) of the Companies Act 1956 and / orSection 124(5) of the Companies Act 2013 previously declared dividends which remainedunclaimed for a period of seven years have been transferred by the Company to theInvestor Education and Protection Fund (IEPF) established by the Central Governmentpursuant to Section 205C of the Companies Act 1956 and / or Section 125 of the CompaniesAct 2013.

DIRECTORS EMPLOYEES AND THEIR REMUNERATION:

The particulars of employees required to be furnished pursuant to Section 197(12) ofthe Companies Act 2013 read with sub rule (2) to Rule 5 to the Companies (Appointment& Remuneration) Rules 2014 as amended are not required to be provided as there wereno employees drawing remuneration more than the stipulated limits. Details of RemunerationPolicy and payment of remuneration to all Directors / Key Managerial Personnel / othermanagerial employees is given in the Report on Corporate Governance under the headNomination and Remuneration Committee which forms part of this Report. Managing Directorand other Whole Time Directors have not received any remuneration or commission fromholding or subsidiary companies as the Company do not have such companies. In the opinionof the Board the level and composition of remuneration to Directors Key ManagerialPersonnel and other managerial employees is reasonable and sufficient to attract retainand motivate the people who could run the Company efficiently.

The Board affirms that the remuneration paid is in accordance with Remuneration Policyof the Company. The copy of Nomination and Remuneration policy is also posted in theinvestors section of the company's website www.sathavhana.com. The relationship betweenperformance and remuneration is clear and meets appropriate benchmarks and that theremuneration criteria succinctly balances between fixed and variable pay wherever setreflecting short and long term performance objectives appropriate to the working of theCompany and its goals. Disclosures required to be made pursuant to Rule 5 to the Companies(Appointment & Remuneration) Rules 2014 are attached to this report (Annexure-II).

DEMATERIALISATION OF EQUITY SHARES:

The Agreements entered into by the Company with the two Depositories viz. NationalSecurities Depository Limited (NSDL) and Central Depository Services (India) Limited(CDSL) for dematerialisation of Shares are in force and the Company's Shares are indematerialised mode under ISIN No. INE176C01016. The Securities and Exchange of India(SEBI) in its circular dated 20.04.2018 has stated that the equity shares have tocompulsorily convert into dematerialization before 5th December 2018 the same was furtherextended to 1st April 2019. and thereafter dematerialized equity shares are only eligiblefor transfers with the exception of transmissions. In view of the significant benefitsthat accrue on dematerialisation of securities Members may avail the facility.

LISTING OF SHARES ON STOCK EXCHANGES:

The Equity Shares of the Company are listed on BSE Ltd (formerly The Bombay StockExchange Limited) Scrip Code:526093 and The National Stock Exchange of India Limited (NSE)Scrip Code: SATHAISPAT and are regularly traded.

The listing fee to these Stock Exchanges has been paid upto date.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information on conservation of energy technology absorption foreign exchange earningsand out go required to be disclosed under Section 134 of the Companies Act 2013 read withCompanies (Accounts) Rules 2014 is given in the Annexure forming part of this Report(Annexure-I).

DEPOSITS:

Your Company has not accepted any fixed deposits nor does the Company have anyoutstanding deposits under section 73 of the Act read with the Companies (Acceptance ofDeposits) Rules 2014 as on the date of Balance Sheet.

DEVELOPMENT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY FOR THE COMPANY INCLUDINGIDENTIFICATION THEREIN OF ELEMENTS OF RISK IF ANY WHICH IN THE OPINION OF THE BOARD MAYTHREATEN THE EXISTENCE OF THE COMPANY:

The Board engaged it self with the task of Risk Management by preparing implementingand monitoring the risk management plan of the Company. The Board apart from ensuring theeffectiveness of risk management covering internal financial risks and controls alsoreviews the same on regular basis. Major risks identified are monitored on a regular basisby the Board.

INTERNAL FINANCIAL CONTROL AND SYSTEMS AND THEIR ADEQUACY:

The Company has put in place Internal Financial Controls that will ensure the policiesand procedures of the Company are followed regularly so that the business of the Companyis conducted in orderly and efficient manner. The Internal Financial Controls are appliedinter alia to test various aspects in the conduct of business including adherence toCompany's policies safeguarding Company's assets prevention and detection of frauds anderrors or irregularities the accuracy and completeness of the accounting records andtimely preparation of reliable financial information and the financial statements. In theopinion of the Board such Internal Financial Controls are adequate and were operatingeffectively. During the year such Internal Financial Controls have been tested and noreportable weaknesses in the design and operations were observed. With respect to theIndependent Auditors' Report for the year ended 31st March 2020 which forms part of theAnnual Report containing qualification on the Internal Financial Controls your Board ofDirectors state that the management replies to the same are contained in Note No.36 to thefinancial statements which is selfexplanatory.

RELATED PARTY TRANSACTIONS:

In Compliance with the provision of the Act and the Listing Regulations each Relatedparty transaction is placed before the Audit Committee for prior approval/noting.

There are no material related party transactions entered into by the Company fallingwithin the meaning of Section 188(1) of the Companies Act 2013. Other related partytransactions contracts or arrangements entered into by the Company are in the ordinarycourse of business and at arm's length price. The details of these contracts orarrangements or transactions as required to be disclosed in terms of Section 134(3)(h)areprovided in Form AOC-2 which forms part of this Report (Annexure-III) and accompanyingFinancial Statements.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS:

The Company has not granted loans guarantees or made investments in or to companiesfirms or other parties covered in the Register maintained under Section 189 of theCompanies Act 2013. The Company has not extended any loans to the employees for purchaseof its shares. Other investments made by the Company are given in the accompanyingFinancial Statements which are in the ordinary course of business.

EXTRACTS OF ANNUAL RETURN:

Information on Extracts of Annual Return required to be disclosed under Section 92(3)of the Companies Act 2013 read with Rule 12 of Companies (Management and Administration)Rules 2014 is given in the prescribed Form MGT-9 forming part of this report(Annexure-IV).

A copy of the same has also been hosted on our website; weblink for the same iswww.sathavahana.com/ annual_report.html

CORPORATE SOCIAL RESPONSIBILITY:

The details with respect to Corporate Social Responsibility of the Company as requiredto be disclosed in terms of provisions of Section 135 read with Section 134(3) (o) andRule 9 of Companies (Accounts) Rules 2014 are given in the Report on Corporate Governanceattached to and forming part of this Report. During the year the Company in terms ofprovisions of sub section 5 to Section 135 of the Companies Act 2013 is not required toearmark any fund for Corporate Social Responsibility activities in view of the losses.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY:

Your Company has well-defined Vigil Mechanism policy in place to provide a formalmechanism for all Directors employees business associates and vendors of the Company toapproach Chairman of the Audit Committee.

During the year under review none of the Directors/employees/ business associates /vendors was denied access to Chairman of Audit Committee.

REPORTING OF FRAUD:

The auditors of the Company have not reported any fraud as specified under section143(12) of the Act.

DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013:

Your Company has zero tolerance towards sexual harassment at the workplace. It has welldefined policy in compliance with the requirements of The Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the rules framedthereunder. An internal Committee is in place to redress complaints received regardingsexual harassment. All employees (permanent contractual temporary trainees etc.) arecovered under this Policy. The Company has not received any compliant of sexual harassmentduring the F.Y 2019-2020.

MATERIAL CHANGES AND COMMITMENTS:

There are no material changes and commitments affecting the financial position of thecompany occurred between the end of financial year of the company to which the financialstatements relate and the date of the report.

ORDERS PASSED BY THE REGULATORS COURTS OR TRIBUNALS:

There has been no significant and material order(s) or Tribunal(s) impacting the goingconcern status of the Company's operations. However Members' attention is drawn to thestatement of contingent liabilities in the notes to the Financial Statement.

THE NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES JOINTVENTURES OR ASSOCIATE COMPANIES DURING THE YEAR:

Your Company does not have any Subsidiaries or Associates or Joint ventures.

ACKNOWLEDGMENTS:

Your Directors take this opportunity to express their grateful thanks to Canara BankState Bank of India (formerly State Bank of Hyderabad) Andhra Bank Shareholders Centraland State Governments and valued suppliers and customers for their co-operation andsupport. The Board also places on record its appreciation of the valuable servicesrendered by the employees at all levels of the Company.

for and on behalf of the Board
(K. Thanu Pillai)
Chairman
(DIN: 00123920)
Place: Hyderabad
Date: 12.11.2020

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