Your Directors are pleased to present the Twenty Seventh Annual Report of your Companytogether with the Audited Financial Statements for the year ended 31st March2017.
1. FINANCIAL HIGHLIGHTS
| || ||(Rs in Lakhs) |
|Particulars ||Current Year Ended ||Previous Year Ended |
| ||31.03.17 ||31.03.16 |
|Sales / Other Income ||53499.97 ||50849.01 |
|(Net of Excise Duty) || || |
|Profit before Depreciation & Interest ||(693.25) ||227.88 |
|(Less) : Depreciation ||(252.15) ||(254.92) |
|Profit / Loss before interest & financial charges ||(945.40) ||(27.04) |
|(Less) : Interest & financial charges ||(2128.81) ||(2095.76) |
|Profit / (Loss) after interest & financial charges ||(3074.21) ||(2122.80) |
|Exceptional & extraordinary items ||0.00 ||(2221.43) |
|Profit after Exceptional & ||(3074.21) ||98.63 |
|Extraordinary items || || |
|Net profit / (loss) before tax ||(3074.21) ||98.63 |
|(Less) : Tax ||0.00 ||0.00 |
|Net profit / (loss) after tax ||(3074.21) ||98.63 |
Your Directors do not recommend any dividend on the equity shares of the Company inview of carried forward losses.
3. REVIEW OF OPERATIONS & PERFORMANCE
The overall sales during FY 2016-17 stood at 109109 MT increased by 5% over FY2015-16 (104052 MT) and in terms of revenue also it has increased by approx. 5% from Rs508.49 crores to Rs 534.99 crores. Further the Company made cash loss of Rs 28.22 croresas compared to Cash Profit of Rs 3.53 crores of FY 2015-16.
The Steel Industry has been impacted adversely during the year and the Company facedvarious challenges due to certain factors which are as under: Global pressure due tostructural demand slowdown; Significant overcapacity in China coupled with the slowdown inits domestic demand has resulted in Chinese Steel producers 'dumping'' itsproduction in overseas market at uneconomic rates for others to be able to compete andthus has adversely affected the Company's export market with lower margins; Lack ofadequate working capital assistance from banks adversely affected the SGL's operations.With the support of third party financing it resulted in a higher input cost ultimatelyimpacting margins of the Company; The domestic coated market has moved towards 1220 mmmaterial with rapid growth in the colour coated steel sector and against that the companywas not able to participate in this high growth high margin market due to width concern;Discontinuance of Open Access Power by GETCO resulting in considerably high power cost;and Fluctuation in raw material prices during the year.
There are challenges going forward in FY 2017-18 however the outlook of the Companyis optimistic in view of the following:
The Company is implementing various long-term measures to improve its cash flow andrevival of the operations of the Company. The Company is exploring multiple options offinancial restructuring and is in discussions with strategic investor to infuse long-termrequired finance for its critical capex plan and also for revival of its operations. TheCompany is also in discussion with lenders on its detailed Debt Resolution Plan envisagingproposed critical capex on colour coating line and Alu Zinc lines. On positive outcome ofefforts in above direction the Company and its management is hopeful to make optimumutilization of its resources renegotiate its contracts and complete the on-going projectsto generate future cash flows meet its financial obligations towards lenders andcreditors. The Company believes that these measures will not only generate cash flows forrevival but will also result in future orders and consequently sustainable cash flows. Thepromoters also continue to be committed to providing the required operational support toCompany in the foreseeable future;
Strategies & markets with upcoming economy with colour coated products undercapex;
Starting of open Access power which has already started resulting intosignificant saving in power cost which is one of the major cost of the Company;
Various steps being taken by the Government of India will help to grow steelindustry as a whole;
The value-add capex of Colour Coating Line (CCL) has already started from June 2017 andis in operations with capacity of around 80%;
The proposed value-add capex of Aluminum Zinc (AZ) Line will enable the company toenhance the Company's viability in the market with wider market both domestic &export better margin and branding of the Company;
Diversifying the product basket and market;
Forward Integration by implementation of capex adding value added products resulting inhigher realization per ton of production; and
With various products the Company will be in a position to explore and penetrate newmarkets including domestic markets which will enable sustained growth.
4. PERFORMANCE OF SUBSIDIARY COMPANY
As such as per the provisions of the Companies Act 2013 there is no subsidiaryCompany of the Company.Metchem Singapore Pte. Ltd during the year under review havetransferred all the shares of Steelco Colour Coating Limited held by them to SPICAInvestment Ltd Mauritius (holding company of the Company) and hence Steelco ColourCoating Limited has become fellow subsidiary of Steelco Gujarat Limited as per theapplicable Accounting Standards.
5. BOARD OF DIRECTORS
Dr. R. S. Mamak Non-Executive Vice Chairman and Shri S. S. Ranjan IndependentDirector ceased to be the directors of the Company due to their resignations w.e.f. 16thSeptember 2016 and 25th May 2017.
Shri Amish H. Mehta has been appointed as an additional director of the company whoholds the office till the conclusion of the Annual General Meeting.
The Independent Directors on the Board of the Company viz. Shri J. Mehra ShriMahendra Lodha Shri S. S. Ranjan (upto 24th May 2017) & Smt. AmeetaTrehan (Woman Director) and the Company has received confirmation / declarations from theIndependent Directors of the Company under Section 149(6) of the Companies Act 2013 andapplicable provisions of the SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015.
Shri Rashmi Chandaria ceased to be a director w.e.f. 29th July 2017 due tohis sad and sudden demise occurred on 29th July 2017.
6. KEY MANAGERIAL PERSONNEL
During the year under review the details of Key Managerial Personnel are as under:
|Sr. No ||Name of person ||Designation |
|1 ||Shri Mitesh H. Shah ||Managing Director |
|2 ||Shri Abhishek Jajoo ||Chief Financial Officer |
|3 ||Shri Achal Thakkar ||Company Secretary |
7. BOARD EVALUATION
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015 as may be applicable a structuredquestionnaire was prepared after taking into consideration of the various aspects of theBoard's functioning composition of the Board and its Committees culture execution andperformance of specific duties obligations and governance. Respective member of the Boarddoes not participate in the discussion of his / her evaluation. The Board of Directorsexpressed their satisfaction with the evaluation process.
8. NUMBER OF MEETINGS OF THE BOARD
The Company has complied with the provisions for holding Board Meetings and the gapbetween any two meetings did not exceed 120 days. Four meetings (including one adjournedmeeting) of the Board of Directors of the Company were held during the year under reviewon 20/05/2016 12/08/2016 11/11/2016 16/02/2017 (adjourned meeting of 14/02/2017).
9. WHISTLE BLOWER POLICY / VIGIL MECHANISM
The Company has a Whistle Blower Policy pursuant to Section 177 of the Companies Act2013 and the rules made thereunder and applicable provisions of the SEBI (ListingObligations & Disclosure Requirements) Regulations 2015 to report genuine concernsof Directors and Employees. The Policy has been posted on website of the Companywww.steelcogujarat.com.
10. NOMINATION AND REMUNERATION POLICY
The Policy of the Company has been framed on Directors' appointment and remunerationincluding criteria for determining qualifications positive attributes independence of aDirector and remuneration of Key Managerial Personnel and other employees of the Companypursuant to Sub-section (3) of Section 178 and Regulation 19 of SEBI (Listing Obligations& Disclosure Requirements) Regulations 2015. The Policy has been posted on website ofthe Company www.steelcogujarat.com.
11. CORPORATE GOVERNANCE
Your Company is compliant of all mandatory requirements pursuant to SEBI (ListingObligations & Disclosure Requirements) Regulations 2015. A separate report onCorporate Governance as stipulated by Regulation 72 of SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 along with the required certificate from aPracticing Company Secretary regarding compliance of the conditions of CorporateGovernance as stipulated by the said Regulations is given in Annexure - 3.
12. MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report is given in Annexure - 4.
13. RELATED PARTY TRANSACTIONS
All transactions entered with related parties during the year under review if anywere on arm's length basis and in ordinary course of business and that the provisions ofSection 188 of the Companies Act 2013 are not attracted. Further there is no materialrelated party transaction during the year under review with the promoters directors orkey managerial personnel.
14. DIRECTORS' RESPONSIBILITY STATEMENT
To the best of the knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement in terms ofSection 134(4) (c) of the Companies Act 2013:
i. That in preparation of the annual accounts for the year ended 31st March2017 the applicable accounting standards read with requirements set out under ScheduleIII have been followed along with proper explanation relating to material departures ifany;
ii. The Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March 2017 and ofthe loss of the Company for the year ended on that date;
iii. That the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother regularities;
iv. The annual accounts have been prepared on a Going Concern' basis;
v. That the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively as such however the same needs to be strengthened further.
vi. That the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such system were adequate and operatingeffectively.
15. STATUTORY AUDITORS
The terms of present statutory auditors M/s Mukesh M. Shah & Co. CharteredAccountants Ahmedabad expired and they hold office until the conclusion of the ensuingAnnual General Meeting.
The Company has received consent and requisite certificate from M/s. Walker Chandiok& Co. LLP Chartered Accountants as the Auditors to the effect that theirappointment if made would be within the prescribed limit under Section 141 of theCompanies Act 2013 confirming their eligibility for appointment as Auditors of theCompany.
16. COST AUDITORS
Your Directors have appointed M/s A. G. Tulsian & Co. Cost Accountants Ahmedabadas Cost Auditors in compliance with the Companies (Cost Accounting Records) Rules 2011.
The Cost Auditors have filed the Cost Audit Report for the financial year ended 31stMarch 2016 within the due date.
Pursuant to provisions of section 148 of the Companies Act 2013 read with theCompanies (Audit & Auditors) Rules 2014 and the Companies (Cost Records and Audit)Rules 2014 and other applicable provisions if any the Board on the recommendation ofthe Audit Committee has approved the reappointment of M/s A. G. Tulsian & Co. CostAccountants Ahmedabad as the Cost Auditors and remuneration payable to them to conductthe audit of the cost records of the Company for the financial year ending 31stMarch 2018. The Company has received a letter from M/s A. G. Tulsian & Co. CostAccountants Ahmedabad showing their willingness to be appointed as Cost Auditorscertifying that they are not disqualified under section 148(5) read with section 141(3) ofthe Companies Act 2013.
17. SECRETARIAL AUDITOR
The Company has received consent and requisite certificate from M/s. Devesh Vimal &Co. Practicing Company Secretaries Vadodara the present Secretarial Auditors to theeffect that their re-appointment if made would be within the prescribed limitconfirming their eligibility for re-appointment as Secretarial Auditors of the Company.Accordingly M/s. Devesh Vimal & Co. has been re-appointed to act as SecretarialAuditors of the Company for the FY 2017-18.
18. QUALIFICATIONS / OBSERVATIONS OF STATUTORY AUDITORS' REPORT AND SECRETARIAL AUDITREPORT
Note No. 35 relating to preparation of financial statement on Going Concern basis inspite of accumulated losses and their impact on net worth is self-explanatory as regardsthe observation made by the Statutory Auditors in their report.
In Secretarial Audit Report Observations relating to order of SEBI for non-compliance/ delayed compliance of Minimum Public Shareholding please refer to clause XI para 5 ofCorporate Governance Report which is self-explanatory.
19. SECRETARIAL AUDIT REPORT
Pursuant to the provisions of section 204 of the Companies Act 2013 and the rules madethereunder the Company has appointed M/s. Devesh Vimal & Co. Practicing CompanySecretaries Vadodara to undertake the Secretarial Audit of the Company. The SecretarialAudit Report is included as Annexure 5 and forms an integral part of this report.
20. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 as requiredunder section 92 of the Companies Act 2013 is included in this Report as Annexure 6 and forms an integral part of this report.
21. INTERNAL FINANCIAL CONTROLS
The Company has appointed M/s. CNK & Associates LLP Chartered Accountants toreport on adequacy and effectiveness of internal financial controls with reference tofinancial statements. During the year under review such controls were tested and noreportable weakness in the design or operation was observed by them. The StatutoryAuditors have opined that the Company has in all material respects internal financialcontrols over financial reporting which is required to be strengthened further and itsoperative effectiveness requires improvement.
22. ENVIRONMENT & SAFETY
The Company is conscious of the importance of environmentally clean and safeoperations. The Company's policy requires conduct of operations in such a manner so as toensure safety of all concerned compliances environmental requirement regulations andpreservation of natural resources.
23. ANTI-SEXUAL HARASSMENT POLICY
As required by the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 the Company has formulated and implemented a policy on prevention ofsexual harassment at workplace with a mechanism of lodging complaints. All employees(permanent contractual temporary trainees) are covered under this policy. During theyear under review there were no cases filed pursuant to the Sexual Harassment of Womenunder Workplace (Prevention Prohibition and Redressal) Act 2013.
24. HUMAN RESOURCES & INDUSTRIAL RELATIONS
The Company takes pride in the commitment competence and dedication shown by itsemployees in all areas of business. The Company has structured induction process andmanagement development programs to upgrade skills of managers. Objective appraisal systemsbased on Key Result Areas (KRAs) / Key Performance Areas (KPAs) are in place formanagement staff. The Company is committed to nurturing enhancing and retaining toptalent through superior learning & organizational development.
25. CREDIT RATING
M/s Brickwork Ratings India Pvt. Ltd. had awarded BWR B' in respect of long termdebts and BWR A4' in respect of Short term Debts during FY 2015-16 and during theyear under review there has been no update on the rating renewal.
26. DISCLOSURE OF PARTICULARS REGARDING CONSERVATION OF ENERGY TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The disclosure of particulars relating to conservation of energy and technologyabsorption and foreign exchange earnings and outgo as required by Section 134 of theCompanies Act 2013 read with the Companies (Accounts) Rules 2014 is given in Annexure -1.
27. CORPORATE SOCIAL RESPONSIBILITY
Considering the losses and exposure the CSR requirements are not applicable to yourCompany; hence the Company has not framed Corporate Social Responsibility (CSR) Policy.
28. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
In terms of the provisions of Section 197 (12) of the Act read with Rules 5(1) 5(2)and Rules 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 a statement showing the names and other particulars of the employees and theDisclosure pertaining to remuneration and other details are set out in Annexure 2to the Board's Report.
Having regard to the provisions of the first proviso to Section 136(1) of the Act andas advised the Annual Report excluding the aforesaid information is being sent to themembers of the Company. The said information is available for inspection at the registeredoffice of the Company during working hours and any member interested in obtaining suchinformation may write to the Company Secretary and the same will be furnished on request.
None of the employees listed in the said Annexure - 2 is a relative of any Director ofthe Company. None of the employees hold (by himself or along with his / her spouse anddependent children) more than two percent of the equity shares of the Company.
29. GENERAL DISCLOSURES
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:
a) Details relating to deposits covered under Chapter V of the Act.
b) Details of remained unpaid or unclaimed dividend at the end of year.
c) Issue of equity shares with differential right as to dividend voting or otherwise.
d) Issue of shares (including Sweat Equity Shares) to employees of the Company underany scheme.
e) Neither the Managing Director nor the Whole Time Directors of the Company receiveany remuneration or commission from any of its subsidiaries.
f) No significant or material orders passed by the Regulators or Courts or Tribunalswhich impact the going concern status and Company's operations in future.
Your Directors take this opportunity to express their appreciation for the co-operationand assistance received from the Government of India Government of Gujarat FinancialInstitution the Company's Bankers Electricity Companies Palej Gram Panchayat otherGovernment Agencies Customers Suppliers and Investors. Your Directors express gratitudeto the investors for their confidence reposed in the Company and Co-operation andespecially to the employees for their dedicated service and support.
31. CAUTIONARY STATEMENT
Statement in the Board's Report and Management Discussion and Analysis describing theCompany's objectives projections estimates expectations or predictions may beForward Looking Statements' within the meaning of applicable securities laws andregulations. Actual results may differ materially from those expressed or implied.Important factors that may make difference to the Company's operations include rawmaterial availability and its prices cyclic demand and the pricing in the Company'sprincipal markets changes in government policies regulations tax regimes economicdevelopments within India and countries in which the Company conducts business.
| ||By order of the Board || |
| ||For Steelco Gujarat Limited || |
|Place : Mumbai ||Mahendra Lodha ||Mitesh H. Shah |
|Date : 30th August 2017 ||Director ||Managing Director |