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Sunflag Iron & Steel Company Ltd.

BSE: 500404 Sector: Metals & Mining
NSE: SUNFLAG ISIN Code: INE947A01014
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VOLUME 33392
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OPEN 85.80
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VOLUME 33392
52-Week high 136.10
52-Week low 58.70
P/E 8.74
Mkt Cap.(Rs cr) 1,554
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sunflag Iron & Steel Company Ltd. (SUNFLAG) - Director Report

Company director report

To

The Members

Your Directors take pleasure in presenting the 35 Annual Reportalongwith the Audited Financial Statements of the Company for the Financial Year 2020-21ended 31 March 2021.

Financial Year under review was relatively fair compared to previousFinancial Year for the steel industry despite frequent interruptions due to lockdowns. Butuncertain market conditions owing to ongoing worldwide COVID-19 pandemic have broughtrestrictions in the movement of goods and availability of labour force. This has resultedin reduction in the consumption of steel and also decrease in investment in the domesticsteel industry affecting the overall growth in the sector. Sunflag is mainly catering toAutomobile industry apart from its presence in Railways Heavy engineering industry. Thedemand from the automotive sector is expected to be sustained despite the temporary dipin growth this year. However the efforts by the government to encourage on the use ofelectric vehicles may reduce the steel consumption in automobiles as the electricvehicles have fewer auto components.

During the Financial Year 2020-21 there was an increase in the salesand profit before tax and EBIDTA as a percentage to total income for the year hasincreased to 13.53% as against 10.27% for the previous year.

1. FINANCIAL RESULTS

The summarised Financial Results for the year are as follows :-

(Rs. in Lakh except EPS)

For the Financial Year ended
Particulars 2020-21 2019-20
1 Total Income 190247 176928
2 Total Expenditure 164501 158750
3 Gross Profit 25746 18178
4 Finance Cost 2868 4125
5 Profit before Depreciation 22878 14053
6 Depreciation 7018 4620
7 Profit before exceptional and extraordinary items and Tax 15860 9433
8 Tax Expenses and Provisions 2508 177
9 Net profit from ordinary activities after tax 13352 9256
10 Other comprehensive Income (net of taxes) # 68 36443#
11 Profit After Tax 13420 45699
12 Earnings Per Share (EPS) [Basic and Diluted] in (Rs.) 7.41 5.14

# Other Comprehensive income for the previous year includes an amountof Rs. 36302 Lakh towards revaluation surplus net of taxes (i.e. Revaluation surplus ofRs. 48512 Lakh Less deferred tax of Rs. 12210 Lakh).

2. FINANCE

The Total Income of your Company for the Financial Year 2020-21 stoodat Rs. 190247 Lakh as compared to Rs. 176928 Lakh of the previous Financial Year. YourCompany has ended the Financial Year 2020-21 with a profit after tax from the ordinaryactivities of Rs. 13352 Lakh as against the previous financial year's Rs. 9256 Lakh.After taking into account the brought forward profit of Rs. 79770 Lakh your Company hascarried forward an amount of Rs. 94371 Lakh to the Balance Sheet.

In view of revaluation of plant and machinery and building during theprevious year the Company has made transfer of Rs. 1249 Lakh during the year towardsadditional depreciation on the revalued assets from revaluation reserve to retainedearnings.

3. DIVIDEND

The Company is in need of more funds through internal accruals to copeup with the terms and conditions of the lending banks financing the ongoing capitalprojects under the expansion programme which will enable future growth of the Company.

Due to the prevailing spread of COVID-19 pandemic and uncertainrecessionary trend in the economy besides the need to support capex your directors took aprudent decision to plough back the profits into the business and not to recommend anydividend for the Financial Year 2020-21.

4. DIVIDEND DISTRIBUTION POLICY

In terms of Regulation 43A of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 as amended('SEBI Listing Regulations') the Board of Directors of the Company (the 'Board')formulated and adopted the Dividend Distribution Policy ('Policy').

The Policy is available on the Company's website www.sunflagsteel.comand can be accessed at: https:sunflagsteel.com/wp- content/uploads/2021/06/SISCO -Dividend - Distribution - Policy.pdf.

5. SHARE CAPITAL

During the Financial Year 2020-21 under review there is no changein the capital structure of the Company and accordingly the issued subscribed andpaid-up Share Capital of the Company stood at Rs. 1802194480/- divided into180219448 equity shares of face value of Rs. 10/- each as on 31 March 2021.

6. MARKET SCENARIO

Imposition of lock down to prevent the spread of COVID-19 pandemic hasweighed down market sentiments in Indian steel industry.

During the year under review the Government of India had imposedstringent nationwide lockdowns in phases which severely impacted manufacturingactivities. Though the Steel and Mining sectors were allowed to operate under theEssential Services Maintenance Act 1968 they were subject to certain guidelines. Steeldemand was affected as key steel consuming sectors struggled to operate amidst weakeningeconomic activities shortage of manpower and logistical issues.

During the year under review the Company could not face anydifficulties in the availability of input raw materials and has also been able to manageits regular requirement of working capital and long-term fund.

The Company is periodically reviewing possible impact of COVID-19 onits business and the same have been considered in preparation of financial statements forthe year ended 31 March 2021. Review includes the related internal and external factorsas known to the Company up to the date of approval of its financial statements to assessand finalise the carrying amounts of its assets and liabilities.

7. COMPANY'S OPERATIONS OR OVERALL WORKING PERFORMANCE

During the Financial Year 2020-21 under review the operational(production) details of the Company are as under:

Production in MT and Power in Lakh kWh

Particulars Financial Year 2020 - 21 Financial Year 2019 - 20
1 Direct Reduction Plant (I + II) 49592 51582
2 Steel Melt Shop 288272 308335
3 Rolled Products 325112 301194
4 Mini Blast Furnace (Hot Metal) / Pig Iron 314642 304266
5 Coal (Belgaon Coal Block) 68400 270000
6 Power Plant (Lakh kWh) 1531.78 1745.71

8. PROJECTS

Steel Plant:-

The outbreak of COVID -19 pandemic caused significant disturbance ineconomic activities. Economy has shown positive trends in the second half of the FY2020-21 after resumption of business activities in most of the industries particularlyafter India started its national COVID vaccination programme in January 2021. Howevercountry is witnessing resurge in COVID cases from start of April 2021. The Company hassuccessfully commissioned its Super Alloy project and started its commercial production.So far as the ongoing project expansion at its Blooming Mill / Finishing Line isconcerned there are delays in import of main equipment from China on account of COVID-19pandemic. Due to which the Company has now proposed to foreclose the loan taken from thelender banks as no further extension is available for achieving DCCO (Date of Commencementof Commercial Operation) for this project. The Company has availed an amount of Rs. 126Crores approx. for Blooming Mill/Finishing Line project as at the end of the FinancialYear under review which is now proposed to be prepaid and the balance undrawn loanrelated to this project shall be cancelled. The Company is working out to avail term loan/ corporate loan from the prospective lenders to complete the pending projects as well asto fill the gap in the working capital.

Subsidiary Companies:-

Sunflag Power Limited [CIN U 31200 UR 2003 PLC 027802]

There were no specific developments or updates for reporting and theprocess of obtaining necessary approvals were continued for implementation andcommencement of operations of Hydro Power Project of the Company at Hanol-Tuini in theState of Uttarakhand.

Khappa Coal Company Private Limited [CIN U 10100 MH 2009 PTC 191907]

In view of order of the Hon'ble Supreme Court of India dated 24September 2014 the Khappa & Extn. Coal Block which was allocated to Khappa CoalCompany Private Limited stood de-allocated with immediate effect. The closure of the saidCompany solely depends upon the outcome of final decision regarding bank guarantee andcompensation from the appropriate authorities.

Sunflag Foundation [CIN U 74999 MH 2017 NPL 289961]

Sunflag Foundation a Section 8 Company (a Company not for profits) wasincorporated on 27 January 2017 as a Wholly-owned Subsidiary of Sunflag Iron and SteelCompany Limited. The said Company was appointed as an implementing Agency to carry out theCorporate Social Responsibility (CSR) activities as per CSR Policy of the Company withinthe framework of applicable provisions of law. Associate / Joint Venture (JV)Companies:- Madanpur (North) Coal Company Private Limited [CIN U 10101 CT 2007 PTC 020161]and C T Mining Private Limited [CIN U 10100 JH 2008 PTC 013329]

In view of order of the Hon'ble Supreme Court of India dated 24September 2014 the Coal Block(s) which were allocated to Madanpur (North) Coal CompanyPrivate Limited in the state of Chhattisgarh and to C T Mining Private Limited in thestate of Jharkhand stood de-allocated with immediate effect. The closure of the saidCompanies solely depends upon the outcome of final decision regarding bank guarantee andcompensation from the appropriate authorities.

Daido D.M.S. India Private Limited [CIN U 28113 HR 2015 FTC 054839]

Daido D.M.S. India Private Limited is a Joint Venture (JV) Company ofSunflag Iron and Steel Co. Ltd. Daido Steel Co. Ltd. Japan and Daido Die and Mold SteelSolutions Co. Ltd. Japan. Sunflag has made an investment of INR 36000000/- (INR Threecrores sixty lakh) constituting Twenty percent (20%- presently 17.56%) in the capital ofthe said JV Company. The JV Company is engaged in the business of manufacturing importexport and distribution in die mold steel (tool steel and other metallic materials)processed products and mold parts. The Company is in operation.

Ramesh Sunwire Private Limited [CIN U 28999 MH 2016 PTC 287281]

Sunflag jointly with Stumpp Schuele & Somappa Springs PrivateLimited Bengaluru has formed and incorporated a Joint Venture (JV) Company Ramesh SunwirePrivate Limited on 31 October 2016 in the state of Maharashtra. The main object of the JVCompany is manufacturing high quality of alloy steel wire for automobile and autocomponent industries both in domestic and export market. The Company is in operation.

Present Status of Coal and Minerals Mines:-

Name of Mine Area in (Ha.) Mineral Present Status
1 Belgaon Coal Mine at Village Balgoan (Deshpande) Tah. Warora Dist. Chandrapur Maharashtra 383.56 Coal Underground Coal mine having estimated reserves of 8 million tons (MT) with extractable balance of about 5.82 MT.
2 Navegaon Manganese Mine at Village Navegaon Tah. Mohadi Dist. Bhandara Maharashtra 15.90 Manganese Ore Open cast mine with reserves of about 30000 tons.
48.78 Manganese Ore Application for conversion of Prospecting Licence into Mining Lease is under process for 5(1) approval presently with Central Govt.
3 Warpani Manganese Ore Block at Village Warpani Tah. Saoner Dist. Nagpur Maharashtra 1419.65 Manganese Ore Application for conversion of Prospecting Licence into Mining Lease for an area of 460 Ha is under process for 5(1) approval presently with Central Government.
4 Bande Iron Ore Block at Village Bande Tah. Ettapalli Dist. Gadchiroli Maharashtra 236.75 Iron Ore Application for conversion of Prospecting Licence into Mining Lease for an area of 205.75 Ha is under process for 5(1) approval presently with Central Government.
5 Kodalibad Iron and Manganese Ore Mine at Village - Kodalibad Tah - Noamundi Dist. - Singhbhum / Jharkhand 120.00 Iron and Manganese Ore Mining Lease is yet to be executed.
6 Lohardongri Iron Ore Mines at Village Lohardongri Tah - Brahmapuri District - Chandrapur Maharashtra 35.73 Iron Ore Declared successful bidder in auction. Letter of Intent (LOI) dated 13.09.2019 received from Government of Maharashtra. Mining plan has been approved. The application for forest clearance & Environmental clearance was submitted. The approval is awaited.

9. NATURE OF BUSINESS ACTIVITIES AND CHANGES THEREOF

During the Financial Year 2020-21 under review the Board ofDirectors though exploring addition to existing business and commercial activities buttill date there is no change in nature of business and commercial activities of theCompany. As such no specific details regarding change in nature of business activitiesare required to be given or provided.

10. PUBLIC DEPOSITS

During the Financial Year 2020-21under review the Company has neitherinvited nor accepted any public deposits within the meaning of Section 73 and 74 of theCompanies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014 (asamended). As such no specific details prescribed in Rule 8(1) of the Companies (Accounts)Rules 2014 (as amended) have been given or provided.

11. DIRECTORS AND KEY MANAGERIAL PERSONNEL

The changes amongst the Board of Director/s including ExecutiveDirector/s and Key Managerial Personnel during the period under review are as follows:

I. CHANGES RELATED TO THE PROMOTER DIRECTOR(S) :-

1. Pursuant to the provisions of Section 152 of the Companies Act2013 the Members of the Company on the recommendation of the Board of Directors and theNomination and Remuneration Committee (NRC) of the Board at their 34 Annual GeneralMeeting held on 21 September 2020 consented to the re-appointment of Mr. Suhrit RaviBhushan Bhardwaj (DIN-02318190) Director (Category-Promoter Non-executive) of theCompany who retired by rotation and being eligible offered himself for re-appointment.

2. Pursuant to provisions of Section 196 197 198 203 and otherapplicable provisions if any of the Companies Act 2013 Schedule V to the Act readwith the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014(including any statutory modifications and/or re-enactment thereof for the time being inforce) and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theMembers of the Company on the recommendation of the Board of Directors and the Nominationand Remuneration Committee (NRC) of the Board at their 34 Annual General Meeting held on21 September 2020 consented for the re-appointment of Mr. Pranav Bhardwaj (DIN:00054805) as the Managing Director (Category - Promoter Executive) designated KeyManagerial Personnel of the Company not liable to retire by rotation for a further periodof 5 years effective from 17 January 2021.

II CHANGES RELATED TO THE EXECUTIVE DIRECTOR/S AND KEY MANAGERIALPERSONNEL (KMP):

1. Pursuant to provisions of Section 196 197 198 203 and otherapplicable provisions if any of the Companies Act 2013 Schedule V to the Act readwith the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014(including any statutory modifications and/or re-enactment thereof for the time being inforce) and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theMembers of the Company on the recommendation of the Board of Directors and the Nominationand Remuneration Committee (NRC) of the Board at their 34 Annual General Meeting held on21 September 2020 consented for the re-appointment of Mr. Surendra Kumar Gupta (DIN :00054836) as the Deputy Managing Director (Category - Non-Promoter Executive)designated Key Managerial Personnel of the Company liable to retire by rotation for afurther period of 3 years effective from 30 July 2020.

2. Pursuant to provisions of Section 196 197 198 203 and otherapplicable provisions if any of the Companies Act 2013 Schedule V to the Act readwith the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014(including any statutory modifications and/or re-enactment thereof for the time being inforce) and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theMembers of the Company on the recommendation of the Board of Directors and the Nominationand Remuneration Committee (NRC) of the Board at their 34 Annual General Meeting held on21 September 2020 consented for the re-appointment of CA Rambhatla Muralidhar (DIN:00982212) as the Executive Director (Finance) (Category - Non-Promoter Executive)designated Key Managerial Personnel of the Company liable to retire by rotation for afurther period of 3 years effective 14 August 2020.

3. Pursuant to provisions of Section 196 197 198 203 and otherapplicable provisions if any of the Companies Act 2013 Schedule V to the Act readwith the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014(including any statutory modifications and/or re-enactment thereof for the time being inforce) and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theMembers of the Company on the recommendation of the Board of Directors and the Nominationand Remuneration Committee (NRC) of the Board at their 34 Annual General Meeting held on21 September 2020 consented for the re-appointment of Mr. Ramchandra Vasant Dalvi (DIN :00012065) as the Executive Director (Works) (Category - Non-Promoter Executive)designated Key Managerial Personnel of the Company liable to retireby rotation for afurther period of 3 years effective 14 August 2020.

III. CHANGES RELATED TO THE INDEPENDENT DIRECTOR/S:

1. The Members of the Company at their 34 Annual General Meeting heldon 21 September 2020 on the recommendation of the Board of Directors and the Nominationand Remuneration Committee (NRC) of the Board have appointed Mr. Anand Sadashiv Kapre (DIN- 00019530) as Director [Category Non-executive Independent] to hold the office for afixed first term of consecutive 3 years i.e. from 21 September 2020 till 20 September2023.

2. The Members of the Company at their 34 Annual General Meeting heldon 21 September 2020 on the recommendation of he Board of Directors and the Nominationand Remuneration Committee (NRC) of the Board have appointed CA Vinita Bahri (DIN -03109454) as Director [Category Non-executive Independent] to hold the office for afixed first term of consecutive 5 years i.e. from 21 September 2020 till 20 September2025.

3. The Members of the Company at their 34 Annual General Meeting heldon 21 September 2020 on the recommendation of the Board of Directors and the Nominationand Remuneration Committee (NRC) of the Board have re-appointed CA Neelam KothariDirector (DIN - 06709241) as Director [Category Non-executive Independent] to hold theoffice for a fixed second term of consecutive 5 years i.e. from 21 September 2020 till20 September 2025.

The Company has received declarations from all the IndependentDirectors of the Company confirming that they meet the criteria of independence asprescribed both under Section 149 (6) of the Companies Act 2013 and the SEBI ListingRegulations.

IV. DIRECTOR - RETIREMENT BY ROTATION :

Pursuant to Section 152 of Companies Act 2013 read with the Companies(Appointment and Qualification of Directors) Rules 2014 (as amended) Mr. RamchandraVasant Dalvi (DIN - 00012065) Director (Category - Non-Promoter Executive) of theCompany retires by rotation and being eligible offers himself for re-appointment. TheBoard recommends his re-appointment as a Director (with existing category) of the Companyfor the approval of the Members at the ensuing Annual General Meeting in the interest ofthe Company.

12. NUMBER OF MEETINGS OF THE BOARD

During the Financial year 2020-21 under review 4 meetings of the Boardof Directors of the Company held on

(i) 26 June 2020

(ii) 13 August 2020

(iii) 10 November 2020 and

(iv)12 February 2021.

13. DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors confirms:-

i. That in the preparation of the Annual Accounts (FinancialStatements) the applicable Accounting Standards had been followed along with properexplanation relating to material departures;

ii. That the Directors had selected such accounting policies andapplied them consistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company at the end ofthe Financial Year and of the profit of the Company for that Financial Year;

iii. That the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

iv. That the Directors had prepared the Annual Financial Statements ona going concern basis;

v. That the Directors had laid down internal financial controls to befollowed by the Company and that such internal financial controls were adequate andoperating effectively; and

vi. That the Directors had devised proper system to ensure compliancewith the provisions of all applicable laws and regulations and that such systems wereadequate and operating effectively.

14. COST RECORDS

Pursuant to the amendment to the Companies (Accounts) Rules 2014 videMCA's Notification dated 31 July 2018 the Board of Directors do confirm that themaintenance of cost records as specified by the Central Government under Sub-section (1)of Section 148 of the Companies Act 2013 is required by the Company and accordinglysuch accounts and records are made and maintained by the Company for the Financial Year2020-21.

15. BUSINESS RESPONSIBILITY REPORT

The Securities Exchange Board of India's (SEBI) Listing Regulationsmandate the inclusion of the Business Responsibility Report as part of the Annual Reportfor the top 1000 listed entities based on market capitalization. The BusinessResponsibility Report (BRR) as mandated by the Securities and Exchange Board of India(SEBI) for the year under review is part of the Annual Report 2020-21 of the Company. TheBRR maps the sustainability performance of your Company against the reporting frameworksuggested by SEBI. It describes the initiatives taken by your Company from anenvironmental social and governance perspective.

16. COMMITTEE(S) OF THE BOARD

The Company has constituted all the requisite Committee(s) of theBoard namely Audit Committee Nomination and Remuneration Committee Stakeholders'Relationship Committee Corporate Social Responsibility (CSR) Committee Share TransferCommittee Risk Management Committee and Project Monitoring Committee pursuant to theprovisions of the Companies Act 2013 read with the rules made there under and ListingRegulations. The details of its constitution objective or terms of reference and otherrelated information have been provided in the Corporate Governance Report which formspart and parcel of the Board's Report.

17. AUDITORS

I. STATUTORY AUDITORS AND THEIR REPORT:-

M/s. NSBP & Co. Chartered Accountants New Delhi (ICAI FirmRegistration No. 001075N Peer Review Certificate No. 009284) were appointed as theStatutory Auditors of the Company in place of retiring Auditors M/s. S. S. Kothari Mehta& Co. Chartered Accountants New Delhi (ICAI Firm Registration No. 000756N PeerReview Certificate No. 008927) by the shareholders in the 34 Annual General Meeting (AGM)of the Company held on 21 September 2020 for a fixed first term of 5 years from theconclusion of 34 Annual General Meeting until the conclusion of the Annual General Meetingto be held for the Financial Year 2024-25.

The Auditors' Report submitted by M/s. NSBP & Co. CharteredAccountants New Delhi the Statutory Auditors to the Members of the Company for theFinancial Year 2020-21 do not contain any qualification. The observations made by theStatutory Auditors in their report are self-explanatory and have also been furtheramplified in the Notes to the Financial Statements and as such do not call for anyexplanations.

During the Financial Year 2020-21 under review:

a) there has been no fraud occurred noticed and/or reported by theStatutory Auditors under Section 143(12) of the Companies Act 2013 read with theCompanies (Audit and Auditors) Rules 2014 (as amended);

b) the observations made by the Statutory Auditors on the financialstatements for the Financial Year 2020-21 under review including the affairs of theCompany are self-explanatory and do not contain any qualification reservation adverseremarks or disclaimer.

As such no specific information details or explanations required tobe given or provided by the Board of Directors of the Company.

II. COST AUDITORS AND THEIR REPORT

Pursuant to Section 148 of the Companies Act 2013 the Board ofDirectors on the recommendation of the Audit Committee of the Company has appointed M/s.G. R. Paliwal & Company Cost Accountants Nagpur (Membership No. 7815) as the CostAuditors of the Company for the Financial Year 2021-22 and has also recommended theirremuneration to the Members of the Company for their ratification at the ensuing 35 AnnualGeneral Meeting of the Company.

The said Cost Auditors have furnished a Certificate of theireligibility for appointment including re-appointment pursuant to Section 141(3)(g)Section 148(5) of the Companies Act 2013 read with the rules made there underCertificate for independence and arms' length relationship with the Company and have alsoconfirmed about their not being disqualified for such appointment including re-appointmentwithin the meaning of Section 141(3) of the Companies Act 2013.

Pursuant to the applicable provisions of the Act read with the rulesmade there under the Statements Annexures Proforma annexed to the Cost Audit Report inForm No. CRA-3 to be submitted by the said Cost Auditors with the Central Government ine-Form No. CRA-4 for the Financial Year 2019-20 was filed vide SRN R-54261532 dated 08September 2020.

Moreover the Statements Annexures Proforma annexed to the CostAudit Report in Form No. CRA-3 to be submitted by the said Cost Auditors with the CentralGovernment in e-Form No. CRA-4 for the Financial Year 2020-21 do not contain any adverseremarks and qualifications is self-explanatory and do not call for any furtherexplanation/s by the Company.

III. SECRETARIAL AUDITORS AND THEIR REPORT

M/s. Mukesh Parakh & Associates Company Secretaries Nagpur[Unique Identification Number S2015MH344000] were appointed as the Secretarial Auditors ofthe Company for the Financial Year 2020-21.

The Secretarial Audit Report in Form No. MR-3 submitted by the saidSecretarial Auditors is attached as an Annexure III which forms an integral partof the Board's Report do not contain any adverse remarks and qualifications isself-explanatory and do not call for any further explanations by the Company.

Further the Board of Directors of the Company at its 184 Meeting heldon 30 July 2021 has approved the re-appointment of M/s. Mukesh Parakh & AssociatesCompany Secretaries Nagpur [Unique Identification Number S2015MH344000] as theSecretarial Auditors of the Company for the Financial Year 2021-22.

IV. INTERNAL AUDITORS AND THEIR REPORT

M/s. AKMK & Associates Chartered Accountants Surat [ICAI FirmRegistration No. 136206W] were appointed as the Internal Auditors of the Company by theBoard of Directors of the Company at its 177 meeting held on 13 February 2020 on therecommendation of the Audit Committee for the period of 3 Financial Year/s from theFinancial Year 2020-21 to the Financial Year 2022-23.

Further M/s. Nitin Alshi & Associates Chartered AccountantsNagpur [ICAI Firm Registration No. 116875W] were appointed as the Joint Internal Auditorsof the Company by the Board of Directors of the Company at its 177 meeting held on 13February 2020 on the recommendation of the Audit Committee for the period of 2 yearsfrom the Financial Year 2020-21 to the Financial Year 2021-22.

During the period under review M/s. Nitin Alshi & AssociatesChartered Accountants Nagpur [ICAI Firm Registration No. 116875W] ceased w.e.f. 12February 2021 as the Joint Internal Auditors of the Company on resignation due to theirengagement in the other assignments.

The Internal Audit finding/s and report/s submitted by the saidInternal Auditor/s from time to time during the Financial Year 2020-21 to the AuditCommittee and Board of Directors of the Company do not contain any adverse remarks andqualifications is/are self-explanatory and do not call for any further explanation/s bythe Company.

18. PERSONNEL / PARTICULARS OF EMPLOYEES

The information required to be provided pursuant to the provisions ofSection 197 of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 are given below:

a) The ratio of the remuneration of each Executive Directorto the median remuneration of the employees of the Company for the

Financial Year 2020-21 ended 31 March 2021:

Executive Director(s) Ratio to Median remuneration of employees
Mr. Pranav Bhardwaj - Managing Director 30.28: 1
Mr. Surendra Kumar Gupta - Deputy Managing Director 19.15: 1
CA Rambhatla Muralidhar - Executive Director (Finance) 15.34: 1
Mr. Ramchandra Vasant Dalvi - Executive Director (Works)* 13.24: 1
* Re-designated as Director (Technical) w.e.f. 14.06.2021

b) The percentage increase in remuneration of each DirectorChief Executive Officer Chief Financial Officer Company Secretary in the Financial Year2020-21 ended 31 March 2021:

Directors Chief Executive Officer Chief Financial Officer and Company Secretary % decrease in remuneration over previous Financial Year
Mr. Pranav Bhardwaj - Managing Director 1.25
Mr. Surendra Kumar Gupta - Deputy Managing Director 8.23
CA Rambhatla Muralidhar - Executive Director (Finance) 14.83
Mr. Ramchandra Vasant Dalvi - Executive Director (Works) * 9.83
CS Ashutosh Mishra - Company Secretary 14.92
S. Mahadevan Iyer - Chief Financial Officer (w.e.f. 1 October 2019) # NA

(*) - Re-designated as Director (Technical) w.e.f. 14.06.2021

(#) - Not comparable as he was in service for part of the previousFinancial Year.

c) The percentage decrease in the median remuneration ofemployees in the Financial Year 2020-21 ended 31 March 2021: -13.28%

d) The number of permanent employees on the rolls of Company as on 31March 2021: 1098

e) Average percentile increase already made in the salaries ofemployees other than the managerial personnel in the last Financial Year and itscomparison with the percentile increase in the managerial remuneration and justificationthereof and point out if there are any exceptional circumstances for increase in themanagerial remuneration:

There is no increase in the employees and managerial remuneration forthe Financial Year 2020-21. f) Affirmation: Remuneration paid to Director/s KeyManagerial Personnel and Employees of the Company is as per the remuneration policy of theCompany.

g) Statement of Particulars of Employees as per Section 197 of theCompanies Act 2013 read with rule 5(2) and (3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 as amended and forming part of theDirectors' Report for the year ended 31 March 2021 is as below:

Name of the Employee Designation/ Nature of Employment Age / Qualification Experience (Years) Remuneration (Rs. in Lakh) Last Employment Date of Appointment Equity holding %
1. Mr. Pranav Bhardwaj Managing Director 47 B.Sc. (Chemistry & Business Management) 22.04 499.99 Not Applicable 01-12-1998 0.89
2. Mr. S. K. Gupta Dy. Managing Director 72 PGD (DBM) B.E. (M) D. Engg. (M) 53.07 99.74 Coventry Springs 05-09-1992 -
3. CA R. Muralidhar Executive Director (Finance) 66 C.A. M.Com. 41.02 79.90 BALCO 06-10-1993 -
4. Mr. Ramchandra Dalvi Executive Director (Works)* 70 B.Tech (Metallurgy) 38.08 68.98 Sanika Hospitality- Own Venture 03-08-2015 -
5. Mr. Jitendra Singh Head-Marketing 56 M.Tech (MET) B.E. (MET) 32.03 63.16 Punjab Concast Steels 21-12-1998 -
6. Mr. D. D. Khonde Deputy Head Plant* 46 B.Tech (Mech) PGPBA D. Engg(CHE) 25.04 53.95 PT. Gunung Garuda Indonesia 01-12-2012 -
7. Mr. S. K. Chanda Deputy Head-Marketing 52 MBA (MKT) B.E. (MET) 28.07 53.59 Mukand Ltd. 04-09-2003 0.0001 (200 Shares)
8. Mr. D.S. Kalne VP (Finance & Store-Works) 65 C.A. 37.10 51.54 Orient Cordage Pvt. Ltd. 01-06-1989 -
9. Mr. S. Mahadevan Chief Financial Officer 55 MBA (Finance) PG Diploma in Financial Management. 36.00 43.32 Safari Sales Industries Ltd. 14-09-1990 0.0004 (800 Shares)
10. Mr. D.D. Chowdhury Associate Head-Project 58 D.Engg (MET) P. DIP (FT) B.A.PGDMSM 35.09 38.38 Abhijeet Group 03-07-2009 -

* Mr. Ramchandra Dalvi and Mr. D. D. Khonde re-designated asDirector (Technical) and Chief Operating Officer of the Company respectively w.e.f.14.06.2021.

Note:

i. Remuneration includes Salary and allowances. In the case of Mr.Pranav Bharadwaj it includes Salary allowances and commission.

ii. None of the above employees are related to any Director or Managerexcept Mr. Pranav Bhardwaj who is relative of Mr. Ravi Bhushan Bhardwaj (Non- executiveChairman) and Mr. Suhrit Bhardwaj (Non-executive Non-Independent Director).

19. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO

The particulars relating to energy conservation technology absorptionforeign exchange earnings and outgo as required to be disclosed under Section 134(3)(m)of the Companies Act 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 aregiven in the Annexure - I to this report.

20. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186OF THE COMPANIES ACT 2013

The particulars of Loans Guarantees or investments given or madeby the Company under Section 186 of the Companies Act 2013 are disclosed in the Notes tothe Financial Statements of the Company for the Financial Year 2020-21.

21. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES UNDERSECTION 188 OF THE COMPANIES ACT 2013

a) Details of contracts or arrangements or transactions not at arm'slength basis: There are no such transactions and hence not applicable.

b) Details of contracts or arrangements or transactions at arm's lengthbasis:

The details of contracts or arrangements or transactions in theordinary course of business and at arm's length basis are as given below:

Pursuant to clause (h) of sub-section (3) of Section 134 of theCompanies Act 2013 and Rule 8(2) of the Companies (Accounts) Rules 2014 (as amended):

Name of the related party and nature of relationship Nature of contracts / arrangements / transactions Duration of contracts / arrangements / transactions Salient terms of the contracts / arrangements / transactions including the value if any Dates of approval / ratification by the Board if any Consideration Amount for the FY 2020-21
Haryana Television Limited Ordinary course of Business and at Arm's length Continuing Refundable Security Deposit 28.05.2018 & 26.06.2020 / ratified on 29.05.2021 Rs. 2820000/- (Continuing from Previous years)
Haryana Television Limited Ordinary course of Business and at Arm's length Continuing Rent paid for Company's Godown at Faridabad 28.05.2018 & 26.06.2020 / ratified on 29.05.2021 Rent Rs. 4749500/-
for the
FY 2020-21
Ramesh Sunwire Private Limited Ordinary Course of Business and at Arm's length -- Sale of Wire Rods 13.08.2020 & 12.02.2021 Rs. 176463815/- in the FY 2020-21
Ramesh Sunwire Private Limited Ordinary Course of Business and at Arm's length -- Purchase of scrap of Wire Rods 13.08.2020 & 12.02.2021 Rs. 5051/- in the FY 2020-21

Note :Particulars of contracts or arrangements or transactions withrelated parties are not given in Form AOC-2 during the Financial Year 2020-21 underreview as the Company has not entered into any contracts or arrangements or transactionswhich are material in nature or are not at arm's length.

22. LISTING OF SHARES

The Equity Shares in the capital of the Company continued to be listedwith and actively traded on BSE Limited (BSE) and National Stock Exchange of India Limited(NSE). The listing fees for the Financial Year 2021-22 have been paid to both the StockExchanges (BSE & NSE) within the stipulated time.

23. DEMATERIALISATION OF SHARES

As on 31 March 2021 there were 111203697 Equity Sharesdematerialised through depositories viz. National Securities Depository Limited andCentral Depository Services (India) Limited which represents about 61.70 % of the totalissued subscribed and paid-up capital of the Company.

24. ANNUAL RETURN

Pursuant to the provisions of Sections 92 (3) and 134 (3) (a) of theCompanies Act 2013 copies of the Annual Returns of the Company have been uploaded on theCompany's website www.sunflagsteel.com and can be accessed atweblink-https://sunflagsteel.com/wp-content/uploads/2021/08/Annual-Return-e-Form-No_MGT-7-31-March-2021.pdf.

25. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTIONFUND

The detailed information related to the dividend declared by theCompany in the previous year/s together with the amount remained unpaid or unclaimed itstransfer to the Investor Education and Protection Fund are provided in the Notes annexedto the Notice convening the 35 Annual General Meeting of the Company. To avoid repetitionthe Shareholders of the Company are advised to refer the said Notes for detailedinformation on the subject matter.

26. TRANSFER OF SHARES TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Ministry of Corporate Affairs (MCA) has notified "InvestorEducation and Protection Fund Authority (Accounting Audit Transfer and Refund) Rules2016" (the Rules) which have come into force from 7 September 2016. The said Rulesamongst other matters contain provisions for transfer of all shares in respect of whichdividend has not been claimed for 7 consecutive years or more in the name of 'IEPF DematAccount'. Accordingly the Company has so far transferred 3169315 Equity Sharesconstituting about 1.759% of the total issued subscribed and paid-up capital. The votingrights on these shares shall remain frozen till the rightful owner of such shares claimthe Equity Shares from the IEPF Authority. The IEPF Authority has laid down the detailedprocedure for claiming both Dividend as well as Equity Shares by the Shareholders orInvestors of the Company.

27. CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of CorporateGovernance and adhere to the Corporate Governance practices or requirements as set out inthe Listing Regulations by the SEBI enforced through the Stock Exchange/s (BSE &NSE). The Company has also implemented several best Corporate Governance practices asprevalent globally.

Your Board of Directors are pleased to report that your Company hascomplied with the SEBI Guidelines on Corporate Governance for the Financial Year 2020-21relating to the Listing Regulations. Certificates from M/s. Mukesh Parakh &Associates Company Secretaries Nagpur [Unique Identification Number S2015MH344000]confirming compliance with conditions as stipulated under Listing Regulations andNon-disqualification of Directors are annexed to the Corporate Governance Report whichform an integral part of the Board's Report of the Company.

28. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company's Steel plant is located at Bhandara Road Village WarthiTahsil Mohadi District Bhandara in the State of Maharashtra. It is located at a distanceof about 12 kilometers from the Bhandara District Headquarters. The unit is surrounded by7 villages in the radius of 5 KMs. The Company is having its captive Coal Mines atBelgaon Village Aathmurdi District Chandrapur in the State of Maharashtra. The Company'sCSR activities as per its CSR Policy are to the best possible implemented in all the areasclose to the manufacturing facilities (Steel Plant) and coal mines of the Company.

All the activities and programs covered under SISCO CSR are beingmonitored by the CSR Committee and are implemented by the CSR Sub-committee through anImplementing Agency.

Sunflag Foundation (CIN-U 74999 MH 2017 NPL 289961) a Section 8 Company(A Company not for Profits) was incorporated on 27 January 2017 as a Wholly-ownedSubsidiary of Sunflag Iron and Steel Company Limited. The said Company has been appointedas an implementing Agency to carry out the Corporate Social Responsibility (CSR)activities as per CSR Policy of the Company within the framework of applicable provisionsof law.

Accordingly Sunflag Foundation is implementing all the CSR activitiesbudget and accounts for the same the manner in which the CSR amount has been spent or tobe spent etc. and in turn furnishes its report to the Company on regular basis. Asrequired the details pertaining to the Corporate Social Responsibility (CSR) activitiestogether with details of expenditure is enclosed as an Annexure II which forms anintegral part of the Board's Report of the Company.

29. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTIONOF INSIDER TRADING AND OTHER CODES / POLICIES

The Board of Directors are pleased to report that your Company hascomplied with the:- i. Code of Conduct of Business Principles and Conduct; ii. Code ofPrevention of Insider Trading in Sunflag Securities by the designated persons [Insider](as amended from time to time); iii. Code for Vigil Mechanism - Whistle Blower Policy; iv.Code for Independent Directors; v. Corporate Social Responsibility (CSR) Policy; vi. RiskManagement Policy which includes identification of elements of risk if any which in theopinion of the Board of Directors may threaten the existence of the Company;

vii. Policy on Document Preservations (Regulation 9 of the SEBI (LODR)Regulations 2015);

viii. Policy for determining of 'material' Subsidiary (Regulation 16 ofthe SEBI (LODR) Regulations 2015);

ix. Policy on materiality of related party transaction/s and on dealingwith related party transactions (Regulation 23 of the SEBI (LODR) Regulations 2015);

x. Policy for determination of materiality based on specified criteriaand accordingly grant authorisation for determination of materiality of events(Regulation 30 of the SEBI (LODR) Regulations 2015);

xi. Nomination and Remuneration Policy; and

xii. Dividend Distribution Policy.

The aforesaid code(s) and policy(ies) are available on theCompany's Website www.sunflagsteel.com.

30. MATERIAL DEVELOPMENT IN HUMAN RESOURCES

HUMAN RESOURCES

An improvement in employee productivity is the key focus area for theCompany whereby achieving benchmark performance in this area year on year is a majorgoal for the Company led by its Human Resource Department.

The emphasis on the people of the organisation stems from the beliefthat human resource is the key factor to achieve success in any business. Sunflag Steelhas always been a front runner in its human resource practices with many pioneeringpolicies in the area of human resources. Our human resource practices are based on thevalues of Sunflag Steel with emphasis on respect dignity unity and fostering a cultureof togetherness.

Employees' competencies and skills were enhanced by exposing them toseveral internal and external training programs. Various measures were taken to improvemotivation level of each employee. As a result many improvements were seen whereinitiatives were undertaken to bring about a change in culture and mind set of theworkforce of the Company.

PRVEVENTION OF SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

Sunflag Iron and Steel Company Limited ("the Company") has inplace an Anti-Sexual Harassment Policy in line with the requirements of the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 and anInternal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment.

All employees (permanent contractual temporary trainees etc.) arecovered under this Policy. Pursuant to the amendment to the Companies (Accounts) Rules2014 vide MCA's Notification dated 31 July 2018 the Board of Directors do confirm thatthe Company has complied with provisions relating to the constitution of an InternalComplaints Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 [14 of 2013].

The Certificate by the Managing Director and Deputy Managing Directorof the Company to that effect is enclosed herewith as an Annexure - IV and formsan integral part of the Board's Report of the Company.

HEALTH AND SAFETY

Health and safety remains the Company's highest priority and SunflagSteel aspires to be the steel industry benchmark in health & safety. The Health &Safety of the workforce is of utmost importance and hence the need was felt for the sameto percolate from the top leadership in the form of learning and experience-sharing.

Several initiatives were undertaken during the Financial Year toimprove health & safety standards of the Company. Steps were taken to improvecompetency and capability for hazard identification and risk management. Furtherdepartmental safety co-ordinator/s are at place for monitoring & training on safetyrelated matters at shop-floor. The Safety Committee and Apex Committee are available forperiodical review on health safety & environment of all department/s of the Company.As a part of regular assignment training programs on safety are being organised for NewJoinee as well as for regular employees and contract labour/s and as a part of thismock-drills are conducted for practical exposure to meet emergency need on quarterlybasis. The Hand book on safety awareness is distributed to all employees of the Company aswell as it is displayed at Notice Board/s at the Works and Offices of the Company.

To ensure safety at work site On-Line Safety Training is providedthrough "KIOSK" to concerned workers mainly for safe working at height. Safetywhile Fork Lift operation safe material handling with Hydra Cranes and to truck drivers.

After successful completion of safety training safety pass is beingissued to them which is valid for 6 months

31. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate internal control systems andprocedures commensurate with the size and nature of business. These procedures aredesigned to ensure :

a) that all assets and resources are used efficiently and areadequately protected;

b) that all the internal policies and statutory guidelines are compliedwith; and

c) that the accuracy and timing of financial reports and managementinformation is maintained.

32. MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIALPOSITION OF THE COMPANY

There have been no material changes and commitments affecting thefinancial position of the Company which have occurred between the end of the FinancialYear of the Company under review to which the financial statements relate and the date ofthis Board's Report. As such no specific details are required to be given or provided.

33. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORSOR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS INFUTURE

During the Financial Year 2020-21 no significant and material order ispassed by any of the Regulators or Courts or Tribunals impacting the going concern statusand the Company's operations in future. As such no specific details are required to begiven or provided.

34. COMPLIANCE WITH SECRETARIAL STANDARDS

The Board of Directors confirms that the Company has duly compliedwith the applicable Secretarial Standards namely Secretarial Standard-1 ('SS-1') onMeetings of the Board of Directors Secretarial Standard-2 ('SS-2') on General Meetingsand Secretarial Standard-3 ('SS-3') on Dividend during the Financial Year 2020-21.

35. OTHER DISCLOSURES

The details regarding Board and its Committee Meeting/s Evaluation ofBoard performance Self-Declaration by the Independent Director/s Remuneration policy forDirector/s and KMP's Induction training and familiarisation programmes for theDirector/s including Independent Director/s and such other related information has beenprovided under the Corporate Governance Report which forms an integral part of theBoard's Report of the Company.

36. ENCLOSURES a) Annexure I : Report on Energy ConservationTechnology Absorption and Foreign Exchange Earnings and Outgo; b) Annexure II : AnnualReport on Corporate Social Responsibility (CSR) activities together with expendituredetails; c) Annexure III : Secretarial Audit Report in Form No. MR-3; d) Annexure IV :Certificate on Prevention of Sexual Harassment of Women at the Workplace and itsProhibition & Redressal.

37. ACKNOWLEDGEMENT

The Board of Directors acknowledge with thanks co-operation andassistance received by the Company from the Shareholders Consortium and other Banks orLenders Central State Government and Local Authorities and other external agenciesinvolved in the overall business operations of the Company.

The Board of Directors also record its appreciation for the dedicationof all the employees of the Company and their support and commitments to ensure that theCompany continues to grow.

For and on behalf of the Board
Pranav Bhardwaj Surendra Kumar Gupta
Nagpur Managing Director Deputy Managing Director
30 July 2021 DIN - 00054805 DIN - 00054836

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