STELCO STRIPS LIMITED
ANNUAL REPORT 2011-2012
Your Directors are presenting the 24th Annual Report together with Audited
Accounts for the financial year ended 31st March, 2012.
Financials Rs. in lacs.
Particulars 2011-12 2010-11
Turnover & Other Income:
- Income from operations 888.42 4426.42
- Other Income 68.75 957.17 12.27 4438.69
Profit (Loss) Before Interest
Depreciation and Tax (257.34) (4257.99)
Less: i) Interest 2.38 735.53
ii) Depreciation 256.27 229.35
iii) Provision For Tax - 258.65 - 964.88
Profit (Loss) After Tax (515.99) (5222.87)
Add: Balance brought forward (4024.20) 1195.13
Less : Taxation adjustment of - 3.54
Balance carried forward (4540.19) (4027.74)
Management Discussion and Analysis Report
a) Industry Structure and Developments
The business line of your Company comprises of flat steel products
entailing cold rolled (CR) ,galvanized plain(GP) and galvanized corrugated
(GC) steel sheets/coils/strips which fall under the single business segment
Indian steel industry is highly fragmented particularly in downstream
segment with large number of organized and unorganized players. It can be
broadly classified into primary and secondary sectors. The primary sector
produces billets, ingots, hot rolled coils, plates. These form raw
materials for the secondary sector which produces pipes, cold rolled &
galvanized products. The operations of your Company are in secondary steel
segment with product mix of cold rolled and galvanized steel sheets/strips
catering to automobile, hardware, housing, consumer durables,
infrastructure and other engineering sectors. The gloomy global
macroeconomic environment coupled with slackening of growth in domestic
market poses major challenges for the overall steel sector including your
company 's plans of revival.
b) Company's Performance:
The operations of your company have been meager during 2011-12 due to
stifling liquidity crunch caused by erosion of net worth/working capital by
accumulated losses . The turnover & other income of the company for the
year 2011-12 sharply decreased to Rs. 9.57 crores in comparison to Rs.44.38
crores in the previous year 2010-11. The net loss for financial year ended
31st March,2012 is Rs. 5.15 crores.
Your company has filed reference with the Board for Industrial and
Financial Reconstruction(BIFR) under Section 15(1) of Sick Industrial
Companies (Special Provisions) Act, 1985 on 08.02.2012 and it stands
registered vide Case No. 27/2012.
Your company continued to be in default to the lending banks in meeting
financial commitments in view of operational and financial constraints but
it adopted proactive approach to address this grim situation by pursing one
time/negotiated settlement of bank dues by hiving off /sale of plant
facilities and balance by private arrangement of funds by promoters
including provision for paying off statutory dues.
During the course of discussions for settlement of dues with lead banker
viz. State Bank of Patiala and prior to the culmination of these
discussions into approval of One Time Settlement (OTS) envisaging inter-
alia proposal of sale of company's plant facilities at G.T.Road, Doraha to
an affiliate of an internationally recognized steel conglomerate in India ,
the company received demand notice dated 13.02.2012 under Section 13(2) of
the Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act (SARFAESI) Act, 2002 from State Bank of Patiala
inter-alia calling upon the company and its directors/ guarantors payment
of amounts mentioned in the notice together with interest etc. within 60
(sixty) days from the receipt of the notice & restraining transfer by
sale/lease or otherwise of secured assets.
Your company replied to this notice and requested State Bank of Patiala for
its withdrawal to facilitate contemplated transactions of sale in its
approved OTS to be completed without any threat or apprehension of proposed
action under SARFAESI Act,2002. However the bank did not accept request for
the withdrawal of the notice but terms of OTS were not agitated .
Your company vigorously stepped up efforts for negotiated settlement of
dues with other lending banks so as to implement the conditions attendant
in One Time Settlement scheme approved by the lead banker. However these
efforts of your company was constrained by the fact that each of the other
lending/consortium banks have its own system / mechanism of considering and
approving settlement of dues including granting of concessions /sacrifices
even on the lines of those approved by the lead banker. Consequently the
financial year was scheduled to be extended so as to close on 30th
September ,2012 so that the financial year itself depicts the outcome of
one time/ negotiated settlement of dues being pursued with the banks.
However uncertainty still persists as to implementation of the one time
settlement/ negotiated settlement of dues before 30th September, 2012 . So
it was decided not to go ahead with the extension of the financial year and
continue to adopt usual annual closure of 31st March
The directors regret their inability to declare any dividend in view of
d) Outlook & SWOT Analysis
The operations of your company are presently standstill with the wiping out
of its net worth /working capital by losses resulting into disconnection of
electricity connection of both plants and mopping up of bank & statutory
dues in the nature of provident fund, employees state insurance, income tax
etc. There are apprehensions of threatened litigations.
Against this backdrop ,your company proposes to take measures for
rehabilitation/revival of operations in consultation /approval of the
lending banks /BIFR and is of confident of positive outcome in view of
following areas of strength and opportunities despite exposed to
threats/weakness as stated below :
1. Independently located 2(two) manufacturing facilities - any of which can
be hived off / disinvested for long term viability of the company.
2. Surplus moveable assets to infuse liquidity through sale with the
permission of the lending banks/BIFR.
3. Manufacturing units having intrinsic strength & economic values to get
replaced with alternate market oriented manufacturing lines /supplement the
4. Strategic advantage of being located in industry friendly area having
all infrastructural amenities.
1. Stifling liquidity/working capital crunch presently constraining the
operations of the company.
2. Working capital intensive nature of existing operations of the company &
tightening of available trade credit.
3. Erosion of net worth of the company
4. Volatile economic scenario
1. Expected reliefs/concessions under SICA ,1985 including suspension of
legal proceedings to assist rehabilitation of the company in the interest
of all stakeholders if the company gets registered as Sick Industrial
2. Revival of operations if working capital concerns are addressed .
3. Being listed company, infusion of funds / liquidity through private
arrangements /strategicinvestors if adjustments /set off in
disproportionate levels of debts /dues through debt rehabilitation plan are
permitted without proposed takeover /sale of units under SARFAESI Act, 2002
1. Disruption of relationships with lenders and creditors and legal
2. Loss of business from customers on account of supply constraints
3. Credit risk that can arise from deterioration in the financial health of
4. Loss of key managerial personnel/manpower leaving of company
Internal Control System
Your Company has adequate internal control system commensurate with the
size and nature of business to ensure utilization and protection of assets,
compliance with statutes and proper recording of transactions. M/s.
Parshotam Singla & Associates, Chartered Accountants conducts internal
audit of affairs of your company. Your Company has also an Audit Committee
which inter-alia reviews internal control system of the company from time
Industrial relations remained harmonious during the year under review.
Pursuant to Clause 49 of the Listing Agreement, Corporate Governance
Report, certifications and Auditors' Certificate regarding compliance of
conditions of Corporate Governance are annexed to the Directors' Report as
Directors' Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956 your directors
state that they have:
a) Followed, in the preparation of Annual Accounts, the applicable
b) Selected such accounting policies and applied them consistently and made
judgments and estimates that are reasonable and prudent so as to give a
true & fair view of the state of affairs of the company at the end of the
financial year and the loss of the company for that year.
c) Taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act,
1956, so as to safeguard the assets of the company and to prevent and
detect fraud and other irregularities.
d) Prepared the annual accounts on a going concern basis.
Sh.Amarjit Singh Palta retires by rotation as director and being eligible
offer himselves for re-appointment at the ensuring Annual General Meeting
of the Company.
During the year under review, the Company has not accepted any deposits
within the meaning of Section 58-A of the Companies Act, 1956 and rules
M/s. M. P. Goyal & Co., Chartered Accountants, the Statutory Auditors of
the Company retire at the conclusion of this Annual General meeting and are
eligible for re-appointment. They have confirmed that they have been
subjected to peer review process of the Institute of Chartered Accountants
of India (ICAI) and holds a valid certificate issued by the Peer Review
Board of ICAI .They have also furnished a certificate to the effect that
their appointment, if made, will be in accordance with Section 224(1B) of
the Companies Act, 1956.
Auditor's Report read with Notes on Accounts is self-explanatory and does
not call for further explanations. Pursuant to Section 217(3) of the
Companies Act,1956, following explanations are given on observations/
remarks on audited accounts :
Regarding Auditors observations as to accumulated losses exceeding the net
worth of the company, it is hereby submitted that company has already filed
reference under Section 15(1) of Sick Industrial Companies (Special
Provisions) Act,1985 on 08.02.2012 and it stands registered vide Case No.
Regarding the observations as to default in provident fund ,employees state
insurance , welfare fund contributions & electricity dues , it is submitted
that stifling liquidity crunch caused by erosion of net worth/ working
capital resulted into default in these payments /dues. The company will be
settling all these outstandings in the manner as may be set out in proposed
revival plans in consultation with lending banks /BIFR
The preparation of accounts on ongoing basis is based on these perceptions
of management and relied upon by the auditors Regarding contingent
liabilities as to filing of OA with Debt Recovery Tribunal -1 at Chandigarh
by Punjab State Industrial Development Corporation Limited (PSIDC) in
connection with cancellation of previously entered and executed buy back
arrangements , it is submitted your company has approached the Hon'ble High
Court for the states of Punjab and Haryana at Chandigarh challenging
amongst others this move of the PSIDC. The company has been granted interim
protection with the stay of proceedings at Debt Recovery Tribunal Regarding
observations as to stay on alienation of 13 Kanals 18.5 Marals of company's
land forming part & parcel of its 79 Kanals 12 Marals of land housing
company's unit no. 2 at GT.Road, Doraha, it is submitted that this area of
land is duly registered in the name of the company in January 1995 &
subsequenlty mutated in its name. Your company is not /was not imp leaded
as party in RSA No. 5039 filed in Hon'ble High Court for the states of
Punjab and Haryana in which stay is transpired to be passed on account of
dispute amongst family members/legal heirs of the seller and subsequently
stay order stands entered in mutation records. The company is exploring all
legal options available to it to protect its interests.
Sh. Gurjant Singh ,cost accountants, FCMA-22514 have been appointed as cost
auditors of the company under Section 233B of the Companies Act,1956 read
with Cost Audit Rules 2011 for the year 2012-13. The Cost Auditors Report
for the financial year 2011-12 will be forwarded to the central government
as required by law.
The Equity Shares of your Company continue to be listed with the Bombay
Stock Exchange Limited to whom Annual Listing Fee upto year 2012-13 has
been duly paid.
Conservation of Energy, Technology Absorption and Foreign Exchange:
Information required under Section 217(1)(e) of the Companies Act 1956 read
with Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 is given as the Annexure-II to the Directors'
Particulars of Employee
During the year under review, no employee of the Company was drawing
remuneration equal to or more than the limits prescribed under Section 217
(2A) of the Companies Act, 1956 read with Companies (Particulars of
Employees) Rules 1975 as amended.
Your directors wish to place on record their gratitude to lenders,
creditors , shareholders, government departments, customers and business
constituents for their co-operation.
Statements in the Management Discussion and Analysis Report describing the
Company's expectations, estimates, and projections may constitute 'forward
looking statements' within the meaning of applicable laws and regulations.
Actual results may differ materially from those expressed or implied.
For and on behalf of the Board of Directors
(Bharat Bhushan Jindal
Place: Ludhiana (Amarjit Singh Palta)
Date : 05.09.2012 Director