To the Members
Your Directors take pleasure in presenting the 3rd Integrated Report (prepared as perthe framework set forth by the International Integrated Reporting Council) and the 111thAnnual Accounts on the business and operations of your Company along with the summary ofstandalone and consolidated financial statements for the year ended March 31 2018.
A. Financial Results
|Particulars ||Tata Steel Standalone || ||Tata Steel Group || |
| ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Gross revenue from operations ||60519.37 ||53260.96 ||133016.27 ||117419.94 |
|Total expenditure before finance cost depreciation (net of expenditure transferred to capital) ||44740.41 ||41385.01 ||111125.84 ||100412.12 |
|Operating Profit ||15778.96 ||11875.95 ||21890.53 ||17007.82 |
|Add: Other income ||763.66 ||414.46 ||909.45 ||527.47 |
|Profit before finance cost depreciation exceptional items and taxes ||16542.62 ||12290.41 ||22799.98 ||17535.29 |
|Less: Finance costs ||2810.62 ||2688.55 ||5501.79 ||5072.20 |
|Profit before depreciation exceptional items and taxes ||13732.00 ||9601.86 ||17298.19 ||12463.09 |
|Less: Depreciation ||3727.46 ||3541.55 ||5961.66 ||5672.88 |
|Profit/(Loss) before share of profit/(loss) of joint ventures & associates exceptional items & tax ||10004.54 ||6060.31 ||11336.53 ||6790.21 |
|Share of profit/(loss) of Joint Ventures & Associates ||- ||- ||174.10 ||7.65 |
|Profit/(Loss) before exceptional items & tax ||10004.54 ||6060.31 ||11510.63 ||6797.86 |
|Add/(Less): Exceptional Items ||(3366.29) ||(703.38) ||9599.12 ||(4324.23) |
|Profit before taxes ||6638.25 ||5356.93 ||21109.75 ||2473.63 |
|Less: Tax Expense ||2468.70 ||1912.38 ||3405.39 ||2778.01 |
|(A) Profit/(Loss) after taxes from Continuing operations ||4169.55 ||3444.55 ||17704.36 ||(304.38) |
|Profit/(loss) before tax from Discontinued operations ||- ||- ||53.30 ||(770.86) |
|Less: Tax expense of Discontinued Operations ||- ||- ||- ||8.01 |
|Profit/(Loss) after tax from Discontinued Operations ||- ||- ||53.30 ||(778.87) |
|Profit/(Loss) on Disposal of Discontinued Operations ||- ||- ||5.15 ||(3085.32) |
|(B) Net Profit/(loss) after tax from Discontinued operations ||- ||- ||58.45 ||(3864.19) |
|(C) Net Profit/(Loss) for the Period [ A + B ] ||4169.55 ||3444.55 ||17762.81 ||(4168.57) |
|Total Profit/(Loss) for the period attributable to: || || || || |
|Owners of the Company ||- ||- ||13434.33 ||(4240.80) |
|Non-controlling interests ||- ||- ||4328.48 ||72.23 |
|(D) Total other comprehensive income ||(61.12) ||675.79 ||(3078.01) ||(563.06) |
|(E) Total comprehensive income for the period [ C + D ] ||4108.43 ||4120.34 ||14684.80 ||(4731.63) |
|Retained Earnings: Balance brought forward from the previous year ||12280.91 ||10075.75 ||(11447.01) ||(2415.49) |
|Add: Profit for the period ||4169.55 ||3444.55 ||13434.33 ||(4240.80) |
|Less: Distribution on Hybrid perpetual securities ||266.13 ||266.10 ||266.13 ||266.10 |
|Add: Tax effect on distribution of Hybrid perpetual securities ||92.70 ||92.09 ||92.70 ||92.09 |
|Add: Other Comprehensive Income recognised in Retained Earnings ||155.39 ||(142.42) ||(2780.05) ||(3549.43) |
|Add: Other movements within equity ||3427.46 ||1.75 ||9926.37 ||(142.57) |
|Balance ||19859.88 ||13205.62 ||8960.21 ||(10522.30) |
|Which the Directors have apportioned as under to:- || || || || |
|(i) Dividend on Ordinary Shares ||971.22 ||776.97 ||970.05 ||776.97 |
|(ii) Tax on dividends ||188.41 ||147.74 ||188.17 ||147.74 |
|Total Appropriations ||1159.63 ||924.71 ||1158.22 ||924.71 |
|Retained Earnings: Balance to be carried forward ||18700.25 ||12280.91 ||7801.99 ||(11447.01) |
During the year the exceptional items primarily include: a) Provision of ( Rs. 3214)crore in respect of certain statutory demands and claims net of liability towardsdistrict mining fund no longer required written back and provision for advances paid forrepurchase of equity shares in Tata Teleservices Ltd. from NTT DoCoMo Inc. (Rs. 27 crore)at Tata Steel India. b) Charge on account of Employee Separation Scheme (ESS)under Sunhere
Bhavishya Ki Yojana (SBKY) scheme (Rs. 108 crore) mainly at TataSteel India and at Jamshedpur Utilities & Services Company Limited. c) Restructuringand other provisions of 13851 crore represents gains arising out of modification inbenefit structure for members of the new pension scheme (NBSPS) versustheir benefits under Tata Steel Europe's British Steel
Pension Scheme (BSPS') offset by settlement charges for those members whodid not join the NBSPS and one-o costs at Tata Steel Europe. d) Impairment charges(Rs. 903 crore) in respect of property plant and equipment (including CapitalWork-in-Progress) and intangible assets relating to global mineral entities.
The exceptional items in Financial Year 2016-17 primarily include: a) Provision fordemands and claims (Rs. 218 crore) charge on account of Employee Separation Scheme(ESS') under Sunhere Bhavishya Ki Yojana (SBKY) scheme
(Rs. 207 crore) provision for advances given for repurchase of Equity shares in TataTeleservices Ltd. from NTT DoCoMo Inc. (Rs. 125 crore) at Tata Steel India b) Impairmentcharges (Rs. 268 crore) in respect of property plant and equipment (including CWIP) andintangible assets mainly relating to European & South-East Asian operations. c)Restructuring and other provisions (Rs. 3614 crore) primarily include curtailment chargerelating to closure of Tata Steel Europe's British Steel Pension Scheme (BSPS')to future accrual. d) Profit on sale of investments in subsidiaries associates and jointventures 23 crore and profit on sale of assets of a subsidiary in South-East Asia onliquidation 86 crore.
1. Dividend Distribution Policy
In terms of Regulation 43A of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (Listing Regulations')the Board of Directors of the Company has formulated and adopted the Dividend DistributionPolicy (the Policy'). As per the Policy the Company endeavours to paydividend up to 50% of profit after tax of the Company subject to the applicable rules andregulations. The Policy is annexed to this report (Annexure 1) and is alsoavailable on our website www.tatasteel.com
TheBoardofDirectorsoftheCompany(theBoard')hasrecommended a dividend of 10per Fully Paid Ordinary Share on 1126484815 Ordinary Shares of Face Value 10 each forthe year ended March 31 2018. (Dividend for Financial Year 2016-17: 10 perOrdinary Share on 971215889 Ordinary Shares of 10 each). The Board has recommended adividend of 2.504 per Partly Paid Ordinary Share on 77634625 Ordinary Shares of FaceValue 10 (paid-up 2.504 per share) each for the year ended March 31 2018.
The Board has recommended dividend based on the parameters laid down in the DividendDistribution Policy.
The dividend on Ordinary (fully paid as well as partly paid) Shares is subject to theapproval of the Shareholders at the ensuing Annual General Meeting (AGM)scheduled to be held on Friday July 20 2018. The dividend once approved byShareholders will be paid on and from Monday July 23 2018. The total dividend pay-outworks out to 33% (Previous Year: 34%) of the net profit for the standalone results.
The Register of Members and Share Transfer Books of the Company (for fully paid as wellas partly paid shares) will remain closed from Saturday July 7 2018 to Friday July 202018 (both days inclusive) for the purpose of payment of dividend for the Financial Yearended March 31 2018 and the AGM.
3. Transfer to Reserves
The Board of Directors has decided to retain the entire amount of profits in the profitand loss account.
4. Capex and Liquidity
During the year the Company on a consolidated basis spent 7479 crore oncapital projects across India Europe South-East Asia and Canada. The spend was largelytowards essential sustenance replacement and on-growth projects in India and Netherlands.Despite this significant spend the Company was able to keep the gross debt level stableduring the year.
The Company's liquidity position remains strong at 36320 crore as on March 31 2018which includes undrawn lines.
5. Management Discussion and Analysis
The Management Discussion and Analysis as required in terms of the Listing Regulationsis annexed to the report (Annexure 2) and is incorporated herein by reference andforms an integral part of this report.
B. Integrated Report
Commitment to society has always been at the forefront in the Company. In furtheranceto this commitment in 2016 the Company transitioned from compliance based reporting togovernance based reporting and adopted the <IR> framework developed by theInternational Integrated Reporting Council. Our Integrated Report for Financial Year2016-17 has been recognised as Asia's Best Integrated Report by Asia SustainabilityReporting Awards (ASRA') the highest regional recognition for sustainabilityand integrated reporting. In continuation with our efforts towards enhancing stakeholdervalue we are happy to present to you our 3rd Integrated Report which endeavours toarticulate the measures undertaken by the Company in the journey towards long-termsustainability and value creation.
C. External Environment
1. Macroeconomic Condition
During the Financial Year 2017-18 the global economy continued its broad-basedmomentum and registered a growth of 3.8% its strongest level since 2011 as more thanhalf of the world's economies registered growth. Global manufacturing activity continuedto grow on account of favourable financing conditions globally accommodative policiesrising investor confidence and increase in commodity prices. Global economy was aided byrebound in global trade investment recovery in advanced economies and continued growth inemerging Asia. Growth in advanced economies was driven by strong domestic demand andimproved labour markets while emerging markets witnessed strong consumption and trademomentum. The United States of America (US') witnessed a growth of 2.3% onthe back of strong external demand private investment and a weaker dollar. Demand waspositively affected by the overhaul of the tax code in 30 years - the corporateincome tax rate was slashed to 21% from 35% and taxes for households were also lowered.Strong domestic demand is also a recurring theme in Europe and Asia. Euro area registereda growth of 2.4% which is almost 0.6% higher than previous year. Policy stimulus andstrengthening global demand has contributed to this increase in growth. In Japan strongdomestic demand aided by recovery in consumer spending and investment helped achievegrowth of 1.7%. Among the emerging and developing economies China continued to maintainits growth rate at approximately 7% aided by policy support and recovery in trade. Growthin India was 6.7% owing to consumption led growth influenced by Government policies andinvestments. Growth in Middle-East and sub-Saharan Africa was impacted bygeo-political/domestic conflicts. Overall improved growth in US Europe and other keyregions more than offset the lower growth in other regions and helped sustain growthmomentum.
2. Economic Outlook
According to International Monetary Fund (IMF') global growth isprojected to rise to 3.9% in 2018 and 2019 closer to the long-term growth trend of 4%.The IMF estimates that the growth of more than 1.5% in 2017 in each of the world's sevenbiggest economiesthe US China Germany Japan France the UK and India willprovide an impetus to the world economy to achieve more robust growth in 2018. Advancedeconomies are expected to maintain their growth momentum in 2018. The US economy isprojected by IMF to grow at a faster pace (2.7%) in 2018 aided by fiscal stimulus andpolicies. The euro area economic recovery has broadened across its member nations and islikely to be aided by rise in capex and consumption. Unemployment rate has reached itslowest level since 2009 and the European Central Bank (ECB') is expected tokeep interest rates unchanged and gradually scale back on asset purchases with an eye oneconomic growth. Among other key regions China's GDP growth is likely to moderate to 6.5%in 2018 as the policy makers continue their efforts to promote quality growth. Supply sidereforms through capacity cuts rural revitalisation urbanisation & housing reform andcontrolled pace of credit growth are likely to determine domestic demand and potentialmovement in commodity prices. As per IMF India is expected to grow between 7.0% to 7.5%in Financial Year 2018-19 aided by rural development infrastructure investment andexpansion of manufacturing activity. Outlook for Middle-East and North Africa is graduallyimproving on the back of higher commodity prices. Structural issues though continue topose a significant risk to the global growth cycle. While the supportive economicenvironment policies and commodity prices are likely to aid growth in the short termpossible financial stress increased protectionism and rising geopolitical tensions maypose as downside risks to growth. Further restrictions by the US government on importsand other protectionist measures in Europe & other regions may disrupt global tradeand investment adversely affecting global growth and sentiment. Also high leverage levelsamong nations makes them financially vulnerable and any tighter financial conditions inUS Europe or China is likely to have adverse spill-over effect on global growth. Outcomeof the Brexit negotiations is likely to impact the pace of recovery in UK as well as theEurozone economy.
D. Steel Industry
1. Global Steel Industry
Global steel markets continued their recovery in Financial Year 2017-18. Steelprices were up across the regions aided by growth in regional demand supply side reformsin China and low inventory levels. During 2017 global steel demand grew by nearly 2% to1.58 billion tonnes while the global crude steel production increased by 4% to 1.7billion tonnes as compared to the previous year. Policy led capacity cuts have led toimproved utilisation levels in China. This coupled with strong domestic demand has led tolower steel exports from China compared to the previous year. China's steel net exportswere down 20% to 0.08 billion tonnes. Low level of exports coupled with volatile rawmaterial prices have led to demand pull and cost push for steel prices at various timesduring the year. Iron ore prices were positively affected by growth in China and increaseddemand for higher quality raw material. Along with these factors weather disruptions andproduction outages have contributed to coking coal price movements. During the year Indiawitnessed steel (including alloy and stainless steel) demand growth of approximately 7.8%in apparent steel use terms aided by strong demand in steel consuming sectors i.e. AutoConstruction and Consumer durables etc. The Indian steel industry has witnessed improvedutilisation levels (approximately 80%) even as the resolution process under Insolvency andBankruptcy Code 2016 paves way for further consolidation within the industry. This islikely to ease the financial stress and further improve utilisation levels within theindustry. The domestic crude steel production was around 102 MnT with approximately91 MnT being consumed. India continued to remain a net exporter.
In Europe anti-dumping legislation domestic demand and currency movement have led toan increase in demand by approximately 2% to 159 MnT as compared to 2016. Steel demandgrew broadly in line with economic growth. Domestic steel production also witnessed anincrease in market share as compared to imports.
2. Outlook for Steel Industry
As per the World Steel Association (WSA') global steel demand is expectedto grow at 1.8% in 2018 to 1.62 billion tonnes and a further 0.7% in 2019 to reach 1.63billion tonnes. Broad-based global growth momentum is expected to aid growth in advancedas well as developing markets. However possible escalation of trade tensions between USand China and rising inflationary pressure due to oil prices poses a significant risk tothe outlook. China's steel demand which accounts for 46% of global steel demand isexpected to be fiat at 737 MnT in 2018 while declining by 2% in 2019. However steeldemand in rest of the world is expected to grow at 3.4% in 2018 and 2.9% in 2019. Advancedeconomies are expected to grow at a steady pace while much of the growth is likely to bewitnessed in Asia Middle-East and North Africa. India's prospects continue to remainbright considering that India's per capita consumption of approximately 65 kg is one-thirdof the global average and government intends to increase it to approximately 160 kg byFinancial Year 2031 (CAGR approximately 8%) under the National Steel Policy. Publicinvestment government initiatives such as Make in India' Smart cities and focus onrural development is likely to support growth in domestic demand while headwinds exist inthe form of increased competitiveness and possible delay in increase of investment cycleparticularly private investments. As per WSA Indian steel demand is expected to grow at6-7% per annum in the next two years. In Europe increase in non-residential constructionand strong manufacturing activities are expected to aid growth in steel demand. As perWSA EU is expected to grow at 2% to approximately 166 MnT in 2018 and a further 0.8% toapproximately167 MnT in 2019. Growth in automotive sector is likely to moderate whilemachinery sector is expected to benefit from rising investment. At the same time theconstruction sector is likely to witness growth in 2018 and 2019 on back of rise inconsumer confidence and access to low cost finance.
E. Operations and Performance
1. Tata Steel Group
During the year under review the Tata Steel Group (the Group') recordedtotal deliveries of 25.27 MnT (previous year - 23.88 MnT). The turnover for the Group wasat 133016 crore (previous year - 117420 crore) an increase of 13% over theprevious year. This increase is due to additional volumes from Tata Steel Kalinganagar(TSK') which were capitalised from June 2016 as well as increasedrealisations. The chrome business also saw an increase in revenue owing to higher volumes.The turnover at Europe increased due to improvement in average revenue per tonne.
The Group EBITDA was 22045 crore (previous year - 17025 crore) an increase of 29.5%over the previous year. This increase in EBITDA is attributable to higher volumes andimproved realisations partly offset by increase in operating costs mainly raw materialsin India as well as on account of favourable foreign exchange movement at Tata SteelGlobal Holdings. This increase was partly offset by decline in steel spread andoperational issues encountered in Europe and higher operating costs at Tata SteelThailand.
During the year the Group reported a consolidated profit after tax (includingdiscontinued operations) of 17763 crore as against a consolidated loss of 4169 crore inthe previous year. The year's profit includes an exceptional gain of 9599 crore asagainst a charge of 4324 crore during the previous year. The exceptional gain during theyear is primarily due to non-cash accounting surplus arising from the formation of the newBritish Steel Pension Scheme. The underlying profit during the year is driven by increasedproduction due to ramp-up at the Kalinganagar plant and improved selling prices.
During the year total deliveries at Tata Steel India were at 12.15 MnT(previous year - 10.97 MnT) recording an increase of 10.7% over the previous year. Theturnover from the Indian operations was 60519 crore (previous year - 53261 crore) 13.6%higher than the previous year. The increase in turnover was primarily through highervolumes at TSK and higher realisations and volumes at Tata Steel Jamshedpur. Higherrevenue at Ferro Alloys and Minerals Divison from ferro chrome and ferro manganese as wellas Wires and Tubes Division has also contributed to the increase. The EBITDA from Indianoperations was 15800 crore (previous year - 11944 crore) 32% higher than the previousyear. The increase in EBITDA is on account of improved steel margins attributable tohigher volumes and realisations. The profit after tax from Indian operations was 4170crore (previous year - 3445 crore) 21% higher than previous year. The increase isprimarily on account of improved realisations and higher deliveries partly offset byhigher exceptional charges over previous year.
The Company's branded products portfolio has been growing strongly and the Companycontinues to invest in this portfolio with the aim of gaining greater market share. Thebranded products contributed to around 46% of total sales. The Company continued its focustowards value added products and achieved highest ever annual sales in value addedsegments over last year through the various product development initiatives.
The Company is striving to continuously increase its presence in Services &Solutions space for better consumer connect and experience. Pravesh' (Steel doorsand windows) won the Best Online Marketing Campaign of the year' award by ET now.
During the year our European operations continued to focus on improving operationalefficiencies and minimising environmental impact.
Our European operations recorded total deliveries of 9.99 MnT (previous year 9.93 MnT). The turnover increased from 52085 crore in the previous year to59985 crore during the year thereby recording an increase of 7900 crore (15%). Theincrease can be attributed to improvement in average revenue per tonne driven by improvedmarket conditions which were a result of the imposition of anti-dumping measures alongwith marginal increase in deliveries partly offset by adverse exchange impact ontranslation. The EBITDA from European operations was 3792 crore as against 4705 crore inthe previous year. The decrease of 913 crore (19%) was mainly due to decline in steelspread and operational issues encountered in Strip UK and Strip MLE partly offset byimprovement in steel prices. The profit after tax reported during the year was 11687crore as against a loss of 4515 crore in the previous year. The significant increase inprofits is due to an exceptional gain of Regulated Apportionment Arrangement credit.
During the year several strategic and critical re-structuring initiatives wereundertaken including signing of Memorandum of Understanding between Tata Steel andthyssenkrupp AG to create a new 50:50 joint venture company restructuring the BritishSteel Pension Scheme and sale of Tata Steel UK 42-inch and 84-inch pipe mills inHartlepool.
During the year Tata Steel Europe won a Steelie' the highest award for thesteel industry presented by the World Steel Association for taking a new approach towardsdemonstrating that steel is a highly sustainable product. BMW announced that TSE has beenawarded the best performing supplier with a maximum rating of 100 for quality as pertheir rating system.
4. South-East Asia
During the year the demand for steel in South-East Asia was weak but price stabilitywas observed due to supply side reforms and lower exports from China. The turnover stoodat 9542 crore (previous year 8245 crore) and the EBITDA was 437 crore (previousyear 528 crore). The Profit after tax for the year stood at 141 crore(previous year - 175 crore). The operational profit witnessed a negative growth despiteimproved selling prices primarily due to negative sentiment in construction sector in bothSingapore and Thailand and elevated scrap prices. During the year NatSteel Holdings(NSH') witnessed a stable operating profitability. The EBITDA for the yearwas 201 crore as compared to 206 crore in the previous year. The better management ofspreads and upward movement of selling prices helped to offset the weakening demand causeddue to slump in the construction activities. The profit for the year showed a significantdrop as compared to previous year since the profits of the previous year included a one-timegain relating to sale of land and other assets at NatSteel Xiamen.
Our operations in Thailand witnessed a drop in deliveries owing to weak marketsentiments and sluggish demand for rebar partly offset by higher export volumes. Howeverthere was an increase in turnover owing to improvement in realisation driven by increasein input metallic price and international prices partly offset by lower volumes. TheEBITDA for the year was 236 crore as compared to 322 crore in the previous year. Thedecline is mainly due to higher metallic prices along with increase in the cost ofelectrodes. The profit for the year was however higher as compared to previous year sincethe profits of the previous year contained one time provision for impairment of Mini BlastFurnace.
Tata Steel in line with its Vision of being a global benchmark in ValueCreation' and Corporate Citizenship' is pursuing the following priorities in themedium term:
Industry leadership in India and Europe: India is expected to be one of the fewlarge regions with good demand growth. Tata Steel intends to grow through organic andinorganic routes to ensure it remains the leading steel player in attractive segments andalso at the overall industry level. The Company has initiated execution of expansion ofthe steel plant at Kalinganagar from 3 MnTPA to 8 MnTPA. The Company will continue to lookfor inorganic opportunities that provide a good strategic fit in terms of assets andproduct mix. In Europe the Company is working out a strategic JV with thyssenkrupp AGwhich will be the second largest steel company in Europe and generate synergies throughcomplementarities in manufacturing and products.
Cost competitiveness and focus on downstream: Operational efficiency is one of ourkey strengths and one of our key priorities is to be the lowest cost producer in theregions in which we operate. The Netherlands plant has world class operating parametersand we will continue to build on this platform. In India our ongoing operationalexcellence programme continues to bring more of our operations closer to world benchmarklevels further consolidating our position as a global cost leader. To counter thecyclicality of steel business Tata Steel continues to focus on and now scale updownstream products & services which are less vulnerable to steel down cycles.
Industry Leadership in CSR: In India Tata Steel has a long value chain frommining to steel manufacturing and these have significant impact on the communitiesneighbouring the operating sites. Tata Steel expects to continue funding its signatureprogrammes on Health Education & Tribal Welfare in collaboration with localcommunities and other stakeholders.
Focus on Safety & Environment: Creating a safe working environment is a keyfocus area for Tata Steel. Safety of its people is the Company's top priority. Tata Steelthrough the Committed to Zero' programme aims to achieve Zero Lost Time Injuryacross all its sites. Safety performance will continue to remain a priority withconcentrated efforts in the areas of Organisational Safety Competency and CapabilityImprovement Contractor Safety Risk Management etc.
Tata Steel is committed to minimising the impact of its operations on the environment.Reducing carbon footprint is one of the key goals that Tata Steel has set for itself. InIndia Tata Steel has reduced the by 24% in the last 10 years and is currently
specific emission of CO2 the Indian steel industry benchmark at 2.29 tCO2/tcs. Stepsare being taken to bring this down to below 2.0 tCO2/tcs by 2025. In Europe the
Tata Steel plant has achieved CO2 emission of 1.8 tCO2/tcs. In addition
the HIsarna pilot plant at Tata Steel in IJmuiden uses groundbreaking technology toconvert iron ore fines and coal almost directly into emissions by 20%. Further steel is a
liquid iron which can reduce CO2
completely recyclable material and in India steel scrap availability is expected toincrease in the future and therefore Tata Steel is taking substantial steps to create anorganised circular economy system for steel recycling. Leverage digital technologies:Digital technologies have the potential to transform all aspects of the steel value chain.Tata Steel is actively seeking opportunities to redefine existing processes and systemsthrough digital technologies to create innovative products & services and increaseflexibility and productivity of operations. Keeping pace with the global trends ofdigitalisation a number of projects have been initiated to identify businessopportunities and build capabilities for better value and improved stakeholderexperience.
G. Key Developments
Bhushan Steel Limited
Pursuant to the Insolvency and Bankruptcy Code 2016 (IBC') the Companyhad submitted its bid for the acquisition of Bhushan Steel Limited (BSL'). Ata meeting of the Committee of Creditors (CoC') of BSL held on March 6 2018Tata Steel Limited was identified as the highest evaluated compliant resolution applicantto acquire controlling stake in BSL under the Corporate Insolvency Resolution Process(CIRP') of the IBC.
Thereafter CoC of BSL declared Tata Steel Limited as the successful resolutionapplicant subject to obtaining necessary regulatory approvals including approval fromNational Company Law Tribunal (NCLT') and the Competition Commission of India(CCI'). On April 25 2018 CCI accorded its approval to the resolutionplan (RP') submitted by the Company. NCLT vide its order dated May 15 2018also approved the RP.
As per the terms of the RP the Company will acquire 72.65% equity stake in BSL throughits wholly-owned subsidiary company Bamnipal Steel Limited for an aggregate amount of158.89 crore. To complete the acquisition process the financial creditors will be given atotal consideration of 35200 crore for settlement of the existing financial debt of BSL.Further the financial creditors will also be allotted equity shares by virtue ofconversion of loan amount of 14.5 crore. The Company will carry out the further necessarysteps in this process as per the stipulations under the CIRP of the IBC.
Bhubaneshwar Power Private Limited
As on November 30 2017 Tata Steel held 26% stake in Bhubaneshwar Power PrivateLimited (BPPL'). In order to increase its captive source of power to meet thegrowing demand the Company on November 30 2017 executed definitive agreements with JLPower Ventures Private Limited to acquire 74% equity shares of BPPL. BPPL is engaged inthe business of generation of power. BPPL owns a 135 MW (2 x 67.5 MW) thermal power plantat Anantapur village in Cuttack district in Odisha. The acquisition of the remaining 74%shares was completed on February 1 2018.
Subarnarekha Port Private Limited
In January 2017 the Company entered into definitive agreement to acquire 51% equitystake in Creative Port Development Private Limited (CPDPL') for thedevelopment of Subarnarekha Port at Odisha through a wholly-owned subsidiary SubarnarekhaPort Private Limited (SPPL'). CPDPL had executed a 34 years Concessionagreement with the Government of Odisha to develop and operate the Subarnarekha port whichis to be carried out through SPPL. As per the terms of the definitive agreement in March2017 the Company had subscribed to 3% equity shares of SPPL. On April 9 2018 theCompany entered into a definitive agreement to subscribe to additional 4.19% equity sharesof SPPL. Pursuant to the additional subscription the Company's equity stake in SPPL shallincrease to 7.06%.
Tata Motors Limited
On June 23 2017 the Company sold 83537697 equity shares held in Tata MotorsLimited for a profit of 3427.29 crore.
The Board at its meeting held on December 18 and 19 2017 approved the issuance ofequity and equity linked instruments including ordinary shares of the Company by way of arights issue to the existing shareholders of the Company for an amount not exceeding12800 crore. Subsequently the Executive Committee of the Board approved the simultaneousbut unlinked issue of 4:25 fully paid shares for amount upto 8000 crore at a price of 510per share and 2:25 partly paid shares for amount upto 4800 crore at price of 615 pershare (Rs. 154 per share payable as application money and 461 per share payable on firstand final call) on a rights basis. The said issue opened for subscription by shareholderson February 14 2018 and closed on February 28 2018. The shares were allotted tothe shareholders on March 14 2018.
During the year Brickwork revised its rating outlook on the Company from Stable'to Positive' while Moody's revised its rating outlook on the Company fromNegative' to Stable'.
Joint Venture between Tata Steel and thyssenkrupp AG
On September 20 2017 the Company and thyssenkrupp AG signed a Memorandum ofUnderstanding to create a leading European steel enterprise by combining the fiat productbusinesses of the two companies in Europe and the steel mill services of the thyssenkruppgroup. The proposed 50:50 joint venture (thyssenkrupp Tata Steel) would be formed througha non-cash transaction framework based on fair valuation where both shareholders wouldcontribute debt and liabilities to achieve an equal shareholding in the venture. Theproposed joint venture would be focused on quality and technology leadership and thesupply of premium and differentiated products to customers with annual shipments of about21 MnT of fiat steel products. The proposed venture is expected to benefit from the scaleand network capability of the combined assets to achieve quality technology and costleadership in the European steel industry.
British Steel Pension Scheme
In furtherance to its ongoing efforts to ensure a sustainable and enduring future forthe business Tata Steel UK (TSUK') on August 11 2017 signed thedocumentation for a Regulated Apportionment Agreement (RAA') with the Trusteeof the British Steel Pension Scheme (BSPS') offering more sustainableoutcomes for the pensioners employees and the business. Consequent to the signing of thedocumentation the Pensions Regulator issued a determination notice and a clearancestatement in response to Tata Steel's application for clearance and approval in respect ofthe RAA. This resulted in the commencement of a 28 days period during which the affectedparties by the RAA could refer the decision to approve the RAA to the Upper Tribunal. OnSeptember 11 2017 the Pensions Regulator approved the RAA. Consequent to the approvalthe BSPS has been separated from TSUK and a number of affiliated companies. As part of theRAA a payment of 550 million from TSUK has been made to BSPS and the shares in TSUKequivalent to a 33% economic equity stake in TSUK have been issued to the BSPS Trusteeunder the terms of the Shareholder's Agreement.
TSUK also agreed to sponsor a new pension scheme subject to certain qualifyingconditions being met. The members of the BSPS were offered an option to transfer to thenew Scheme. 69% of the members of the BSPS opted to transfer to the new scheme. The newscheme would have lower future annual increases for pensioners and deferred members thanthe BSPS giving it an improved funding position which would pose significantly less riskfor TSUK.
Sale of Hartlepool SAW pipe mills
As part of restructuring the UK portfolio of the Company TSUK on July 11 2017signed a definitive agreement with Liberty House Group for sale of its HartlepoolSubmerged Arc Weld (SAW') pipe mills. The sale covers the 42-inch and 84-inchpipe mills which employs about 140 people to manufacture pipeline for gas and oil productsaround the world. The sale was completed on August 1 2017.
3. South-East Asia
Issue of Bonds
During the year ABJA Investment Co. Pte. Ltd. a wholly-owned subsidiary of theCompany issued a dual tranche of USD 1.3 billion unsecured bonds in the internationalmarkets. The issue comprises USD 300 million 4.45% Unsecured bonds due on July 24 2023and USD 1 billion 5.45% Unsecured bonds due on January 24 2028.
At Tata Steel sustainability is embedded in the culture of the organisation stemmingfrom the belief of our founder that the community is not just another stakeholder but thevery purpose of our existence. This belief is embedded in the vision and values of TataSteel which balances the aspiration for value creation with that of the responsibility ofbeing a benchmark corporate citizen. The sustainability approach of the Company isarticulated in the Sustainability policy of the Company as well as in various otherpolicies such as CSR Policy HR Policy Afirmative Action Policy Climate Change PolicyEnvironment Policy Energy Policy etc. which embed the triple bottom line approach in itssystems and processes. Further the Company has established various platforms forperiodically listening to the voice of stakeholders i.e. community investors customersemployees etc. which are prioritised and embedded in our business objectives andstrategies. The Company is also focused on embedding Sustainability in its miningoperations across supply chains and towards product stewardship through Life CycleAnalysis studies. The Company is also examining the relevance of the UN SustainableDevelopment Goals to progressively embed them into the strategy of the Company. TheCompany is associated with various industry bodies such as Confederation of IndianIndustry (CII') Global Reporting Initiative International IntegratedReporting Council and the Taskforce for Climate Related Financial Disclosures of theFinancial Stability Board on implementing Sustainability practices.
During the year the Company has strengthened the Governance structure for mitigatingthe environmental social and people related material issues and related risks. TheCorporate Social Responsibility (CSR') Committee of the Board wasre-designated as the CSR and Sustainability Committee to enhance the Governance ofIntegrated Thinking and the working of Tata Steel.
There is a dedicated Corporate Sustainability Group at Tata Steel which is responsiblefor implementing and mainstreaming sustainability across the organisation and throughoutits value chain. The group tracks the global best practices related to sustainability andfacilitates their incorporation in the key processes of the Company. The group also drivesvarious external assessments like the Dow Jones Sustainability index and those conductedby the CII. Globally the Company has been awarded the Gold Class Rating for the secondyear in a row in the steel sector in the Dow Jones Sustainability index CorporateSustainability Assessment 2017.
The Company aims to be the benchmark for environmental stewardship in Steel Industry byfocusing on climate change mitigation and reducing its resource footprint. Given thenature of the business and the industry that we operate in the Company recognises itsimpact on the environment and is conscious of its duty towards safeguarding theenvironment. The Company is committed to responsible use and protection of the naturalenvironment through conservation and sustainable practices. The Company focuses onoperational excellence aimed at resource efficiency through a Prevent MinimiseRecover Reuse and Recycle' hierarchical approach to reducing its ecological footprint.The Company has also implemented environmental management systems that meet therequirements of international standard ISO14001 at all of its leading manufacturing sites.These systems provide the Company with a framework for managing compliance and improvingenvironmental performance making it future ready to address stakeholder requirements.
The Company pursues responsible advocacy on policy and regulatory issues by being themember of World Steel Association Environment Policy Committee Central Pollution ControlBoard's National Taskforce Indian Steel Association and various other organisations.During the year the Company engaged with Government of India to address environmentalissues such as actions to surpass National Development Council's commitmentsinternational bilateral initiatives showcasing achievements on climate response andpursuing growth under blue sky to realise aspirations under Make in India'.
The Company is currently national benchmark in Specific Energy emission intensity
Consumption in integrated steel sector and CO2
(coal based integrated steel plants BF-BOF route). In order to cater to variousstakeholders' requests for greater reporting scopes the Company is consolidating its GHGfootprint of business. The Company has in place a Safety Health & EnvironmentCommittee that provides the necessary direction and guidance on matters relating toenvironment and also monitors the performance of the Company and its impact on theenvironment.
In Europe the Company continues to invest in short to medium emission reduction andenergy efficiency improvements.
In addition to these improvements as a follow up to the ULCOS (Ultra-Low
CO2 Steel-making) co-operative research initiative to
achieve a step change in emissions from steel-making the
Company is also working on a longer term major project to develop a new smeltingreduction technology (HIsarna') to produce steel without the need for cokemaking or agglomeration processes thereby improving efficiency reducing energyconsumption and emissions. The pilot plant is located at the Company's
IJmuiden site in the Netherlands.
NatSteel Holdings (NSH') in South-East Asia operates one of the mostenergy efficient steel operations in the world. NSH is ranked in
the top 25% for CO2 emission for Electric Arc Furnace operators. All
three manufacturing sites of Tata Steel Thailand were awarded with the Green IndustryAward level 4 by Ministry of Industry Thailand.
2. Climate Change
Climate change is the defining environmental issue of the early 21st Century and theCompany recognises that it has an obligation to minimise its own contribution to climatechange. Furthermore the Company aims to play a leadership role in addressing thechallenge of climate change. However the Company also understands that steel productswill be an integral part of the solution to climate change and that local short-termaction will not necessarily help to tackle this global long-term issue. Considering allthese factors the Company has formulated a climate change strategy based on 5 key themesas outlined below: Emissions Reduction: To improve its current processes toincrease its energy efficiency and to reduce its carbon footprint. The Company aims toreduce its carbon dioxide emissions per tonne of crude steel by at least 20% compared to1990 levels.
Investing in Technology: To invest in the development of long-term breakthroughtechnologies through initiatives such as HIsarna & Carbon Capture & Utilisation(CCU').
Market Opportunities: To develop new products and services that reduceenvironmental impact over product life cycles and in turn help its customers to reducetheir carbon footprints.
Employee Engagement: To actively engage its workforce and encourage everyone tocontribute to its strategy.
Lead by Example: To develop its pro-active role in global steel sector initiativesthrough the World Steel Association.
3. Health and Safety
Health and safety remains the Company's highest priority and Tata Steel aspires to bethe steel industry benchmark in health & safety. Safety and Health Management isintegrated into the Annual Business Plan and is cascaded into the personal key resultareas (KRAs') of each officer to place accountability and responsibility atall levels in the Company. The Company has made some significant achievements through theCommitted to Zero' programme. The Company's strategic efforts are directed towardsensuring committed leadership engaged employees and effective systems in order tominimise risk. At the Group level the Company achieved a 21% improvement in Lost TimeInjury Frequency Rate (LTIFR') in Financial Year 2017-18 as compared to theprevious year. It is with regret we report that during the year in India there were 3fatalities. However the Company is continuously channelising its efforts to eliminatesuch incidents and achieve zero fatality. Several initiatives were undertaken during theyear to improve health & safety standards of the Company. Steps were taken to improvecompetency and capability for hazard identification and risk management. To ensuredeployment of competent vendors for high risk jobs star-rating assessment was conductedfor all high-risk vendors and 88% of the vendors have achieved star rating 3 and above.This helped in 40% reduction in contractor fatalities and 21% reduction in Lost Timeinjury cases of contractor employees across Tata Steel India.
We regret to report that in Europe the Company had one fatality during the year.However efforts are being made to ensure such instances are avoided in future. Trainingfor Group Senior Managers focusing on their leadership role related to health & safetyhas been completed. The same was also extended to more junior Business Senior Managersduring Financial Year 2017-18. In addition process safety leadership training wascontinued throughout the year under review. The combined LTIFR in Financial Year 2017-18for employees and contractors improved to 1.36 as compared to 1.51 in the previous year.The recordables rate which includes lost time injuries as well as minor injuries alsoimproved from 5.12 in Financial Year 2016-17 to 4.13 in Financial Year 2017-18. Aback to basics' campaign focusing on hazard identification and risk minimisation wasundertaken during the year and there were various initiatives to accelerate deployment ofstandards and to improve maturity of the Group's health & safety management system.
During the year NatSteel recorded the lowest LTI in the last 5 years. The Governmentof Singapore has selected NatSteel as one of the pioneering companies in the area of SafeWorking. NatSteel was awarded the bizSAFE award' by the Work Place Safety and HealthCouncil Singapore for exemplary risk management systems. Tata Steel Thailand (TSTH')was recognised at World Steel Association for Contractor Safety Management practices andNTS plant of TSTH won Prime Minister Industry award for Safety Excellence.
4. Research and Development
The competitive business environment in which the Company operates makes innovationimperative for success of the business. Recognising the need to improve expand andinnovate the Company is concentrating efforts on research and development of alternatematerials and new products.
The Company has started working on the technology roadmap that aligns with it's visionof becoming a leader among the innovation driven organisations. A number of research anddevelopment projects have reached high Technology Readiness Levels. The Company isfocusing on making these innovations ready for the market through lean scalableefficient and sustainable processes.
Venturing into new market areas is another focus area for research and development andaccordingly a number of new product developments have been targeted. The planning forplant trials of new products is underway and will be completed in the next couple ofmonths.
In Europe the Company is continuously engaged in various research and technologyinitiatives. To illustrate the Company has progressed its activities to reduce emissionsthrough the HIsarna project
i.e. a collaborative project amongst the major steelmakers in Europe to develop a moreflexible new smelting reduction technology to produce steel from lower grade raw materialswithout the need for coke making or agglomeration processes. The HIsarna pilot plant isnow in the final testing phase undertaking a 6 month sustained campaign after which theCompany will look at scaling up for commercial-scale production.
5. New Product Development
Creating value for customers meeting their ever-increasing expectations andresponsibility towards the environment sets the foundation for the Company to invest itsresources to create new and enriched products services and solutions which not onlyprovide enhanced benefits to the customer but also reduce the negative impact on theenvironment.
During the year in India the major focus for new product development was to leveragethe superior capability of the products from the Kalinganagar steel plant. During theyear 133 new products were launched in India of which 108 were from the Kalinganagarplant. This resulted in an additional sales of 190 kilo tonnes during the year. The majorfocus was to address the needs of automotive segment and accordingly different grades forwheels and structural applications were developed. In the industrial products and projectsvertical grades for lifting and excavation segment pre-engineered buildings and oil& gas sector were developed. In addition a grade for line pipes was also designedwhich is in the final stage of plant trial. In the branded products segment a grade steelwas developed for bank ATM application. For the first time in India hot rolled enamelinggrade steel was developed for grain silos. Galvanised Coated steel for solar back panelapplication and new grades of wire rods were also developed.
In Europe the Company launched 23 new products during the year. These launches includemajor developments for the automotive construction engineering and packaging markets.Prominent examples of product and service launches include Hilumin and Prime LubricationTreatment. Hilumin is a nickel plated strip for lithium-ion batteries for application inautomotive energy storage solutions. Prime Lubrication Treatment is a booster lubricantthat improves press performance by reducing tool pollution during deep drawing of GI FullFinish. The solution enables a switch from electrogalvanised to hot dipped galvanisedproducts. Advantica SDP 35 TR a tailored offering for construction of large highthermal insulation roof-sandwich panels for cooled trailers was also developed. Protactis a cost-efficient environmentally friendly laminated packaging steel product whichalready has a proven track record for two-piece can making has now been developed forthree-piece cans. The Protact offering has also extended its range of available coloursoffering customers even greater design options and in particular enhancing contentappearance. The Company has also succeeded in making its Colorcoat range of organic coatedsteel products hexavalent chrome free to comply with European legislation called REACH.
In Singapore in line with the Government's push for digital transformation NatSteelcollaborated with a key customer to develop a system to automate steel rebar procurementprocess. Through digitalised selection process aided with 3D visualisation under theBuilding Information Modelling environment the customer can now easily place order forrebar and the order placed integrates seamlessly into NatSteel's back-end system. Thisproject won the title of Most Scalable Collaboration' at the 2018 SingaporeInternational Chamber Of Commerce Awards Gala. NatSteel launched bars and couplers inSingapore which support the government's initiative for higher construction productivityby speeding up construction and increasing construction safety. In Thailand the Companydeveloped and commercialised Tyre Cord grade wire rods for Bridgestone Thailand. Revenuefrom new products increased by 36% over last year.
6. Customer Relationship
The Company endeavours to develop and sustain long-term value-creating partnershipswith our customers and channel partners through a wide range of product offeringsinnovative services and unique solutions. In India the customers are segmented into B2BB2C and B2ECA (Emerging Corporate Accounts). These segments are further divided intomicro-segments based on applications and buying behavior. The Company concentrates itsefforts to understand the expectations and requirements of current and potentialcustomers/ market segments in order to deliver customer specific products and services andprovide value-creating solutions. The Company engages with B2B customers through cross-functionalCustomer Service Teams (CSTs') to work on new product development qualityimprovement and value-creating ideas which helps it to achieve operational excellence. TheCompany has also collaborated with key automotive customers to provide cost and weightreduction solutions using the Value Analysis & Value Engineering (VAVE')platform and the Advanced Product Application support. This has also enabled the Companyto partner with these customers for future product launches. These initiatives are nowextended to industrial customers as well. In March 2018 the Company also launched theDigital Supply Chain Real Time Visibility Portal to track end-to-end material movement.
The Company has increased its customer engagement with Emerging Corporate Accountsthrough the ECafez initiative which facilitates upgradation of shop floor workers underprogrammes such as Skills4India' and promotes a culture of safety through
Safety First' initiative. The Company also conducts Qualithon clinic'-expert sessions on powder coating welding with customer quality people andPurchasePro' for people in supply chain division. CREATE'- CollaborativeReform with ECA for Advanced Technical Enhancement is carried out to strengthenpartnership in value chain. The Company's B2C brands have embraced digital solutions tosubstantially enhance the consumer buying experience. In February 2018 TATA Tisconlaunched the early engagement platform aashiyana.tatasteel.com for individual housebuilders. The platform has 4 sections - Inspirational Home Designs Material EstimatorService Provider Directory and E-Commerce. To reach out to the rural consumers at the lastmile intensive mobile marketing campaigns are conducted under the programme of EkKadam Parivartan ki Ore' (A step towards positive change) where the consumers are educatedabout the benefits of Tata Shaktee vis--vis other roong solutions prevalent inthe region. The Group Rural Action Mission (GRAM') initiative continues tofocus on harnessing synergies with other group companies for creating rural consumersawareness and to lead generation programmes. The programme was further strengthened withdigital enrolling of fabricators (6000 nos. registered) and training programme on bestpractices.
During the year the Company organised a Construction Conclave' to bring togetherindustry experts from around the globe as well as from India including ourcustomers. This initiative has facilitated the Company to develop deeper understanding ofthe construction and infrastructure industry thereby helping to build new partnerships.The Company also organised other knowledge-sharing platforms such as Wired 2 Win'and Technical Seminars with Original Equipment Manufacturing customers' to provideinsights on current and future industry trends and to promote new services & solutionofferings. The senior leadership team of Tata Steel frequently interacts with strategicand key customers at various customer meets business seminars and during plant visitsundertaken by the customers and at celebration events to commemorate the milestonesachieved. In Europe the Company partners with customers to help them excel in theirmarket co-creating more sustainable value throughout the entire value chain.Customer Focus' a company wide programme reinforces our mission and drive towardscustomer centricity. Improvements on this front have also been acknowledged in the TataBusiness Excellence Model assessment. The Company also has a value chain transformationprogramme known as Future Value Chain' programme which focuses on driving serviceimprovements. Our European operations are also focusing on a balanced portfolio anddifferentiation strategy which aims to increase the proportion of differentiatedproducts. As part of the strategy the Company launched 23 new products in Europe thisyear. These launches include major developments for the automotive constructionengineering and packaging markets. Along with products the Company also offers servicessuch as Electronic Data Interchange Track and Trace Early Vendor Involvement Design andEngineering support Technical Support Building Information Modelling and Life
Cycle Analysis. In June 2017 the Company launched an overarching programme calledFuture Commercial Excellence' that focuses on commercial improvements. In Singaporethe Company continues to focus on building strong relationship with key customers andproviding high levels of service. To improve customer connectivity a new solutions teamwas created to address the needs and requirements of customers at the design level. TheCompany achieved the best ever Customer Satisfaction Score against its competitors in thecountry. In Thailand too the Customer Satisfaction Index of the Company increased from 77to 81 being the highest among its peers in the country.
7. Human Resources Management & Industrial Relations
Human Resource has always been the central focus at Tata Steel. The emphasis on thepeople of the organisation stems from the belief that human resource is the key factor toachieving success in business. Tata Steel has been a front runner in its people practiceswith many pioneering policies in the area of human resources. Our people practices arebased on the Tata Values with emphasis on respect dignity unity and fostering a cultureof togetherness. Financial year 2017-18 was a milestone year for the Company as majorimprovements were seen in areas related to diversity & inclusion and training &development where initiatives were undertaken to bring about a change in culture and mindset of the workforce. The focus for the year was on Gender diversity and inclusion ofdifferently abled persons. Special efforts have been put in on hiring and creatinginfrastructure for diverse workforce as well as retaining and developing women leaders.During the year learning and development underwent a shift in pedagogy and variouse-learning courses on managerial and functional competencies were assigned to more than15000 persons (not unique) through the Skillsoft learning platform. The Digitalcapability programme saw a participation of more than 9000 employees. With the managementfocusing on Learning and Innovation the Innovation club was started during the year withmore than 120 members and over 40 projects. The Company undertook an exhaustive exerciseto re-look at its training programmes. Training programmes at the Tata Steel ManagementDevelopment Centre were aligned with the 9 managerial competencies under ManagementCompetency framework and have been redesigned to include a blend of facilitator-ledsessions and e-learning including complete revamp of the Cadre training methodology andcontent. Safety and health of the workforce is of utmost importance and hence the need wasfelt for the same to percolate from the top leadership in form of learning andexperience-sharing. Steps were taken to ensure complete coverage of employees for Feltleadership training across various locations of Tata Steel India with senior leaders astrainers sharing with the audience their learning and advice on matters related to workand safety.
Improving employee productivity is the key focus area for the Company and achievingbenchmark performance in this area year on year is a major goal for the Company led bythe Human Resource division. This focus has led to an improvement in productivity from 709tonnes of crude steel/employee/year to 769 tonnes/employee/year with the employees on rollreducing from 34989 to 34072 in India.
This being our 89th year of Industrial harmony our focus has been to have highlyengaging and meaningful partnership with our Unions in order to achieve our targets andimprove productivity over last year. During the year Tata Steel won the Golden PeacockAward for HR Excellence in 2018. Tata Steel was also declared the Best Place to Work inthe Core Sector by Business Today. This recognition was bestowed on the Company for the2nd year in a row. Tata Steel was also certified as Great Place to Work in the Great Placeto Work study conducted for the year 2017.
In Europe too the Company continues to invest in the recruitment engagement healthskills and capabilities of its employees. The Tata Steel Academy in Europe strengthens theorganisation's competitive advantage by enabling its people to achieve the higheststandards of technical and professional expertise with a combined use of practicalvirtual and classroom training to maximise training effectiveness. The major part of thetraining remains on the job' but is structured through the creation of 12 distinctfaculties focused on par leadership health & safety sales & marketingmanufacturing engineering technical supply chain finance HR IT procurement andtotal quality management. The Company aims to create modern employment conditions thatensure healthy long-term employability and a well-received Employer Value Proposition withcurrent and potential employees. The Company has responsible pension schemes that allowfor a sustainable business. The Company has also made the provision of an income forenrolled employees beyond retirement. In Europe the Company employs a wide range ofstrategies to engage its employees. Steps are taken to regularly review the organisationalhealth through surveys as well as comparisons with other companies using theOrganisational Health Index method supported by McKinsey. The Company strives to ensurethat the employees' motivation and capabilities are enhanced by its leadersorganisational structure operational protocols including daily management andoperational excellence programmes communication processes & business excellence andreward and recognition policies.
In Europe the Company also focused on developing a healthy work environment. Physicalhealth is promoted through various central and local programmes and a range of sportingand outdoor activities. The Company provides training and support to promote mental healthinside and outside the workplace. Health and wellbeing of employees is an important partof the local labour conditions and a focus of improvement initiatives. In Singapore toothe Company has begun a focus initiative on building employee capability at all levelsthrough secondment opportunities job rotations and trainings. NatSteel achieved its bestever Employee Engagement Score (58%) and the lowest attrition level in Financial Year2017-18. In Thailand the Company undertook the Shop Floor Knowledge TransformationProgramme to identify and share best practices among various operating units. The Companyhas also taken steps to improve employee agility and cut unproductive work. The SiamConstruction Steel Co. Ltd. (SCSC') a subsidiary company was awarded theKaizen Gold award and Thailand Quality Circle award from Ministry of Industry. SCSC andNTS Steel Group Plc also received the Thailand Labour Management Excellence Award 2017.
8. Corporate Social Responsibility
The Company's vision is to be a global benchmark in value creation' andcorporate citizenship'. The objective of the Company's Corporate SocialResponsibility (CSR') initiatives is to improve the quality of life ofcommunities through long-term value creation for all stakeholders. For decades theCompany has pioneered various CSR initiatives. The Company continues to remain focused onimproving the quality of life and engaging communities through health educationlivelihood sports and infrastructure development. The Company is working with indigenouscommunities in its areas of operation in India (primarily in Jharkhand and Odisha).Towards achieving excellence in our CSR activites the Company has partnered with theState Governments of Jharkhand and Odisha and with various reputed national andinternational organisations such as American India Foundation The Hans Foundation TimkenFoundation NABARD Welt Hunger Hilfe and Tata Trusts amongst others.
The Company has in place a CSR policy which provides guidelines to conduct CSRactivities of the Company. The CSR policy is available on the website of the Companywww.tatasteel.com During the year the Company spent 232 crore on CSR activities. TheAnnual Report on CSR activities in terms of Section 135 of the Companies Act 2013(Act') is annexed to this report (Annexure 3).
In Europe too the Company focuses on working with local communities in three key areas- education & learning health & well-being and environment & sustainability.The Company is building on education and learning partnerships which have been formed withlocal organisations. The Company works with these organisations to increase the socialskills and confidence of young people boost pupils' level of understanding about thesteel industry and improve the understanding and ambition of students. The Company alsoruns its own Academy in IJmuiden. Every year around 100 students start their education inmechanics electro or process technology. The Academy is currently working closely withmunicipalities and the Province Noord Holland in order to have more regional impact.Further the Company at its site in IJmuiden is cooperating with local and regionalparties on sustainable energy projects such as residual heat and wind turbines. Throughour community partnership programme we invest in a range of sustainable initiatives whichbenefit large groups within our communities ranging from sports groups to charities andkey community organisations.
In Singapore the Company continues to promote active volunteerism and touches thelives of people through three of its adopted charities. In Thailand the Companyencourages each of its employees to participate in at least one CSR activity and hasclocked over 11 man hours/employee on CSR activities.
I. Corporate Governance
At Tata Steel we ensure that we evolve and follow the corporate governance guidelinesand best practices sincerely not only to boost long-term shareholder value but also torespect minority rights. We consider it our inherent responsibility to disclose timely andaccurate information regarding our operations and performance as well as the leadershipand governance of the Company.
Pursuant to the Listing Regulations the Corporate Governance Report along with theCertificate from a Practicing Company Secretary regarding compliance of conditions ofCorporate Governance is annexed to this report (Annexure 4).
1. Board Meetings
For seamless scheduling of meetings a calendar is prepared and circulated in advance.The Board has also adopted an activity guidance giving them visibility on the upcomingtopics for discussions. The Board met 7 times during the year the details of which aregiven in the Corporate Governance Report. The intervening gap between the meetings waswithin the period prescribed under the Act and the Listing Regulations.
2. Selection of New Directors and Board Membership Criteria
The Nomination and Remuneration Committee (NRC') works with the Board todetermine the appropriate characteristics skills and experience for the Board as a wholeand its individual members with the objective of having a Board with diverse backgroundsand experience in business government education and public service. Characteristicsexpected of all Directors include independence integrity high personal and professionalethics sound business judgement ability to participate constructively in deliberationsand willingness to exercise authority in a collective manner. The Policy on appointment& removal of Directors and determining Directors' independence was adopted by theBoard on March 31 2015. During the year there have been no changes to the Policy. Thesame is annexed to this report (Annexure 5) and is available on our websitewww.tatasteel.com
3. Familiarisation Programme for Independent Directors
All new Independent Directors (IDs') inducted on the Board go through astructured orientation programme. Presentations are made by Executive Directors and SeniorManagement giving an overview of our operations to familiarise the new IDs with theCompany's business operations. The new IDs are given an orientation on our products groupstructure and subsidiaries Board constitution and procedures matters reserved for theBoard and our major risks and risk management strategy. Visits to Plant and mininglocations are organised for the IDs to enable them to understand the business better.
Details of orientation given to our existing IDs in areas of strategy operations &governance safety health and environment industry & regulatory trends competitionand future outlook are provided in the Corporate Governance Report and is also availableon our website www.tatasteel.com
The Board evaluated the effectiveness of its functioning that of the Committees and ofindividual Directors. The Board sought the feedback of Directors on various parameterssuch as: Degree of fulfillment of key responsibilities towards stakeholders (by way ofmonitoring corporate governance practices participation in the long-term strategicplanning etc.); The structure composition and role clarity of the Board and Committees;Extent of co-ordination and cohesiveness between the Board and its Committees;Effectiveness of the deliberations and process management; Board/Committee culture anddynamics; and Quality of relationship between Board Members and the Management.
The Chairman of the Board had one-on-one meetings with the IDs and the Chairman of theNRC had one-on-one meetings with the Executive and Non-Executive Directors. These meetingswere intended to obtain Directors' inputs on effectiveness of the Board/ Committeeprocesses.
The Board considered and discussed the inputs received from the Directors. Further theIDs at their meeting reviewed the performance of non Independent Directors Board as awhole and Chairman of the Board after taking into account views of Executive Directors andNon-Executive Directors. The evaluation process endorsed the Board Members' confidence inthe ethical standards of the Company the resilience of the Board and Management innavigating the Company during challenging times cohesiveness amongst the Board Membersconstructive relationship between the Board and the Management and the openness of theManagement in sharing strategic information to enable the Board Members to discharge theirresponsibilities. In the coming year the Board intends to enhance focus on diversity ofthe Board through the process of induction of members having industry expertise strategicplan for portfolio restructuring of Tata Steel Europe exploring new drivers of growth forthe Tata Steel Group and further enhancing engagement with investors.
5. Compensation Policy for the Board and Senior Management
Based on the recommendations of the NRC the Board has approved the Remuneration Policyfor Directors Key Managerial Personnel (KMPs') and all other employees ofthe Company. As part of the policy the Company strives to ensure that: the level andcomposition of remuneration is reasonable and sufficient to attract retain and motivateDirectors of the quality required to run the Company successfully; relationship betweenremuneration and performance is clear and meets appropriate performance benchmarks; andremuneration to Directors KMPs and Senior Management involves a balance between fixed andincentive pay reflecting short medium and long-term performance objectives appropriateto the working of the Company and its goals. The Remuneration Policy for Directors KMPsand other Employees was adopted by the Board on March 31 2015. During the year therehave been no changes to the Policy. The same is annexed to this report (Annexure 6)and is available on our website www.tatasteel.com
6. Particulars of Employees
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are annexed to this report.
In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 a statement showing the names and other particulars of employeesdrawing remuneration in excess of the limits set out in the said Rules forms part of thereport (Annexure 7).
7. Independent Directors' Declaration
The Company has received the necessary declaration from each ID in accordance withSection 149(7) of the Act that he/she meets the criteria of independence as laid out inSection 149(6) of the Act and the Listing Regulations.
The year under review saw the following changes to the Board of Directors (Board').
Inductions to the Board
On the recommendations of the NRC the Board appointed Mr. Saurabh Agrawal as anAdditional (Non-Executive) Director of the Company effective August 10 2017. Mr. Agrawalbrings to the Board his extensive knowledge and experience in finance strategy andcapital markets.
The resolution for confirming the above appointment forms part of the Notice conveningthe Annual General Meeting (AGM') scheduled to be held on July 20 2018. Weseek your support and hope you will enthusiastically vote in confirming Mr. SaurabhAgrawal's appointment to the Board.
In terms of the provisions of the Act Mr. N. Chandrasekaran will retire at the ensuingAGM and being eligible seeks re-appointment. The Board recommends seeks your support andhopes you will enthusiastically vote in confirming the re-appointment of Mr. N.Chandrasekaran.
During the year based on the recommendations of Nomination and Remuneration Committeethe Board of Directors re-appointed Mr. Koushik Chatterjee as a Whole Time Director of theCompany for a period of five years effective November 9 2017. The re-appointment issubject to the approval of the Members of the Company at the ensuing AGM of the Company.The Board seeks your support and hopes you will enthusiastically vote in confirming there-appointment of Mr. Koushik Chatterjee.
The profile and particulars of experience attributes and skills that qualify the aboveDirectors for the Board membership is disclosed in the Notice convening the AGM to be heldon July 20 2018.
In accordance with the retirement policy applicable for the Company's Board Mr. IshaatHussain and Mr. Andrew Robb retired from the Board effective September 1 2017. Mr.Hussain joined the Company in 1983 and has been a Member of the Board since July 1989 andMr. Robb joined the Tata Steel Board in 2007.
Mr. D. K. Mehrotra stepped down as a Member of the Board effective May 16 2018. Mr.Mehrotra joined the Board as a Non-Executive Director on October 22 2012.
The Board expresses its gratitude towards Mr. Hussain Mr. Robb and Mr. Mehrotra fortheir contributions to the Company. The Board acknowledges that the Company has immenselybenefitted from their profound knowledge and experience in the steel industry. The Boarddeeply appreciates Mr. Hussain's invaluable dedication and support throughout his tenurewith the Company. The Board sincerely appreciates Mr. Robb's valued counsel and deepinsights in the areas of Governance and Finance as well as his effective stewardship andexpert supervision at Tata Steel Europe. The Board thanks Mr. Mehrotra for hiscontributions as a Director of the Company.
Based on the recommendations of the Nomination and Remuneration Committee the Board ofDirectors on October 30 2017 elevated Mr. T. V. Narendran as the global ChiefExecutive Officer and Managing Director of Tata Steel. Prior to this elevation Mr.Narendran was the Managing Director (India and South East Asia). The Board approved hiselevation based on his track record of successfully executing and commissioning one of thelargest greenfield projects in India the Kalinganagar Steel Plant and enhancing itsability to deliver to higher value segments like steel for automobiles. Mr. Narendran'scareer in Tata Steel has spanned across many areas in India and abroad includingMarketing & Sales International Trade Supply Chain & Planning Operations andGeneral Management. Further based on the recommendations of the NRC the Board ofDirectors also re-appointed Mr. Koushik Chatterjee as Whole-time Director for a period of5 years effective November 9 2017 and designated him as Executive Director and ChiefFinancial Officer. The Board approved the re-appointment of Mr. Koushik Chatterjee basedon his significant contributions to the financial management of the Company and in view ofthe key role he has played in the re-organisation of Tata Steel Europe.
9. Key Managerial Personnel
Pursuant to Section 203 of the Companies Act 2013 the Key Managerial Personnel of theCompany are Mr. T. V. Narendran Chief Executive Officer and ManagingDirector Mr. Koushik Chatterjee Executive Director and Chief Financial Officer and Mr.Parvatheesam K Company Secretary and Compliance Officer. During the year there has beenno change in the Key Managerial Personnel.
10. Audit Committee
The Audit Committee was constituted in the year 1986. The Committee has adopted aCharter for its functioning. The primary objective of the Committee is to monitor andprovide effective supervision of the Management's financial reporting process to ensureaccurate and timely disclosures with the highest levels of transparency integrity andquality of financial reporting.
The Committee met 5 times during the year the details of which are given in theCorporate Governance Report. As on date of this report the Committee comprises Mr. O. P.Bhatt (Chairman) Mr. Aman Mehta Dr. Peter Blauwho and Mr. Saurabh Agrawal. All themembers of the Committee have deep knowledge in accounts and finance.
11. Internal Control Systems and Internal Audit
The Board of Directors of the Company is responsible for ensuring that InternalFinancial Controls have been laid down in the Company and that such controls are adequateand operating effectively. The foundation of Internal Financial Controls (IFC')lies in the Tata Code of Conduct (TCoC') policies and procedures adopted bythe Management corporate strategies annual business planning process managementreviews management system certifications and the risk management framework.
The Company has an IFC framework commensurate with the size scale and complexity ofits operations. The framework has been designed to provide reasonable assurance withrespect to recording and providing reliable financial and operational informationcomplying with applicable laws safeguarding assets from unauthorised use executingtransactions with proper authorisation and ensuring compliance with corporate policies.The controls based on the prevailing business conditions and processes have been testedduring the year and no reportable material weakness in the design or effectiveness wasobserved. The framework on Internal Financial Controls over Financial Reporting has beenreviewed by the internal and external auditors.
The Company uses various IT platforms to keep the IFC framework robust and ourInformation Management Policy governs these IT platforms. The systems standard operatingprocedures and controls are implemented by the executive leadership team and are reviewedby the internal audit team whose findings and recommendations are placed before the AuditCommittee.
The scope and authority of the Internal Audit function is defined in the Internal AuditCharter. To maintain its objectivity and independence the Internal Audit function reportsdirectly to the Chairman of the Audit Committee. The Internal Audit team develops anannual audit plan based on the risk profile of the business activities. The Internal Auditplan is approved by the Audit Committee which also reviews compliance to the plan.
The Internal Audit team monitors and evaluates the ecacy and adequacy of internalcontrol systems in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company and its subsidiaries. Based on thereport of internal audit function process owners undertake corrective action(s) in theirrespective area(s) and thereby strengthen the controls. Significant audit observations andcorrective action(s) thereon are presented to the Audit Committee.
The Audit Committee reviews the reports submitted by the Internal Auditors in each ofits meeting. Also the Audit Committee at frequent intervals has independent sessions withthe external auditor and the Management to discuss the adequacy and effectiveness ofinternal financial controls.
12. Risk Management
Several factors such as advancements in technology prevalent geo-political environmentand stringent regulatory and environmental requirements have consequential impacts acrossthe value chain of a business. These impacts are likely to continue and intensify overtime and for a business to be sustainable it needs to adapt to the environment bymanaging risks and opportunities in a systematic manner.
The Company follows a robust 5 step Enterprise Risk Management (ERM')process to address the risks associated with its business. The ERM process is based oninternational standards such as ISO 31000 and Committee of Sponsoring Organisationof the Treadway Commission (COSO') with inputs drawn from the best practicesof leading companies across industries.
The ERM process aims to develop a Risk intelligent culture' within the Company toencourage risk informed business decision-making as well as resilience to adverseenvironment and to create awareness of opportunities in order to enhance the long-termstakeholder value. To achieve the stated objectives the Company has constituted a robustgovernance structure comprising three levels of risk management responsibilities viz. RiskOversight Risk Infrastructure and Risk Ownership.
The Risk Oversight function consists of the Board Risk Management Committee (RMC')& Group Risk Review
Committee (GRRC') that provide guidance for implementing the ERM frameworkand policy across the organisation. The RMC assists the Board in developing and revisingthe risk management plan for the Company and reviewing and guiding the risk managementpolicy. The RMC periodically reviews key risks to the Tata Steel Group and actionsdeployed by the Management with respect to their identification impact assessmentmitigation and monitoring. GRRC is a Management Committee comprising Senior Managementpersonnel as its members. The GRRC has the primary responsibility of implementing the RiskManagement Policy of the Company and achieving the stated objective of developing a riskintelligent culture that helps ameliorate the Company's performance.
The Company has a dedicated ERM unit to successfully deploy and maintain the ERMframework across business units. The ERM unit is led by Group Head CorporateFinance & Risk Management who acts as the Chief Risk Officer (CRO') ofthe Company. The responsibility of tracking and monitoring the key risks of the divisionperiodically and implementing suitable mitigation plans proactively is with the seniorexecutives of various functional units. These risk owners are expected to avoid any unduedeviations or adverse events and ultimately help in creating value for the business.
In addition to the above the ERM process is also integrated with other core processesof the Company such as strategy & planning capital allocation internal audit etc. tonot only reduce risk but also embrace opportunities thereby creating hallmark of a riskintelligent culture. Risks identified through the ERM process are used as inputs in thestrategy & planning process while risk assessment of capital allocation and keyinvestment proposals for organic and inorganic growth ensure risk informed decisionmaking. Similarly integration with internal audit assures that the risk management andinternal control framework is operating effectively.
During the year the Company undertook multiple initiatives to strengthen widen anddeepen the scope and coverage of the ERM process across the Company. Various analyticaltools were introduced for assessment of risks. The ERM process was rolled out to domesticand overseas subsidiaries. An in-house digital platform which facilitates real timereporting data mining and escalation mechanisms across the Enterprise was successfullydeployed. Various training and communication programmes were conducted to enhanceskillsets and to help create a risk aware culture across the organisation. The Board ishappy to report that the Company has won the award for Best Risk ManagementFramework & Systems' in Metals & Mining category and also in the categoryFirm of the year: Risk Governance' at the 4th India Risk Management Awards2018' organised by ICICI Lombard & CNBC-TV18. These awards are a testimony to theCompany's commitment towards ensuring a risk intelligent culture.
13. Vigil Mechanism
Commitment towards highest moral and ethical standards in the conduct of business is ofutmost importance to the Company. To advance standards of ethical practices the Companyhas deployed the Management of Business Ethics (MBE') across the organisationthrough a well-defined Framework. The Company has adopted the Tata Code of Conduct (TCoC')which is driven by five core values Unity Integrity Responsibility Understandingand Excellence. The Company also has a Vigil Mechanism that provides a formal mechanismfor all Directors employees and vendors to approach the Ethics Counselor/Chairman of theAudit Committee and make protective disclosures about the unethical behaviour actual orsuspected fraud or violation of the TCoC.
The Vigil Mechanism comprises 3 policies viz. the Whistle Blower Policy for Directors& Employees Whistle Blower Policy for Vendors and Whistle Blower Reward andRecognition Policy for Employees. The same is available on our website www.tatasteel.comThe Whistle Blower Policy for Directors & Employees is an extension of the TCoC thatrequires every Director or employee to promptly report to the Management any actual orpossible violation of the TCoC or any event wherein he or she becomes aware of that whichcould affect the business or reputation of the Company.
The Whistle Blower Policy for Vendors provides protection to vendors from anyvictimisation or unfair trade practices by the Company. The Whistle Blower Reward andRecognition Policy for Employees has been implemented in order to encourage employees togenuinely blow the whistle on any misconduct or unethical activity taking place in theCompany. The disclosures reported are addressed in the manner and within the time framesprescribed in the Whistle Blower Policy. During the year the Company undertook aseries of communication and training programmes for internal and external stakeholderswith the aim to create awareness of Tata values TCoC and other ethical practices of theCompany. The Company started various theme based campaigns round table discussions anddepartmental events. Neeti Katha' i.e. storytelling through snippet series weremailed to employees as part of the awareness campaign. Each snippet consisted of a shortstory based on situations related with accepting of gifts and hospitality from businessassociates. The Company also celebrates the month of July as Ethics Month. This practicehas helped in reinforcing employee involvement and passion in driving the Management ofBusiness Ethics. The Company has also adopted the Conflict of Interest Policy. The policyrequires employees to act in the best interest of the Company without any conflicts anddeclare conflicts if any (real potential or perceived) to the Ethics Counsellor.
Tata Steel has been recognised as the World's Most Ethical company by EthisphereInstitute for the sixth time and has the distinction of being the only Indian Company towin the Award in Metals Minerals & Mining sector.
During the year the Company received 372 whistle-blower complaints of which 316 wereinvestigated and appropriate action was taken. Investigations are underway for theremaining complaints.
14. Related Party Transactions
During the year the Company did not have any contracts or arrangements with relatedparties in terms of Section 188 (1) of the Act. Also there were no material related partycontracts entered into by the Company and all contracts were at arms length and inordinary course of business. Accordingly particulars of contracts or arrangements withrelated parties referred to in Section 188(1) of the Act along with the justification forentering into such contracts or arrangements in Form AOC-2 does not form part of thereport.
15. Disclosure as per The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013
The Company has zero tolerance towards sexual harassment at the workplace and hasadopted a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder. During theyear the Company received 24 complaints of sexual harassment out of which 16 complaintshave been resolved by taking appropriate actions. The remaining 8 complaints are underinvestigation.
16. Directors' Responsibility Statement
Based on the framework of internal financial controls established and maintained by theCompany work performed by the internal statutory cost and secretarial auditors andexternal agencies including audit of internal financial controls over financial reportingby the statutory auditors and the reviews performed by Management and the relevant BoardCommittees including the Audit Committee the Board is of the opinion that the Company'sinternal financial controls were adequate and effective during Financial Year 2017-18.
Accordingly pursuant to Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm: a) that in the preparationof the annual accounts the applicable accounting standards have been followed and thereare no material departures; b) that we have selected such accounting policies and appliedthem consistently and made judgements and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company for that period; c) that proper andsufficient care has been taken for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act 2013 for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities; d) that theannual accounts have been prepared on a going concern basis; e) that proper systems toensure compliance with the provisions of all applicable laws were in place and that suchsystems were adequate and operating effectively; and f) that proper internal financialcontrols were laid down and that such internal financial controls are adequate and wereoperating effectively.
17. Business Responsibility Report
The Securities and Exchange Board of India (SEBI') requires companies toprepare and present to stakeholders a Business Responsibility Report (BRR')in the prescribed format. SEBI however allows companies to follow an internationallyrecognised framework to report on the environmental and social initiatives undertaken bythe Company. Further SEBI has on February 6 2017 advised companies that IntegratedReporting may be adopted on a voluntary basis from the Financial Year 2017-18 by top 500companies which are required to prepare BRR.
As stated earlier in the Report the Company has followed the <IR> framework ofthe International Integrated Reporting Council to report on all the six capitals that weuse to create long term stakeholder value. Our Integrated Report has been assessed andKPMG has provided the required assurance. We have also provided the requisite mapping ofprinciples between the Integrated Report the Global Reporting Initiative (GRI')and the Business Responsibility Report as prescribed by SEBI. The same is available on ourwebsite www.tatasteel.com
18. Subsidiaries Joint Ventures and Associates
The Company has 244 subsidiaries and 64 associate companies (including 30 jointventures) as on March 31 2018. During the year the Board of Directors reviewed theaffairs of material subsidiaries. We have in accordance with Section 129(3) of the
Companies Act 2013 prepared consolidated financial statements of the Company and allits subsidiaries which form part of the Integrated Report. Further the report on theperformance and financial position of each subsidiary associate and joint venture andsalient features of the Financial Statements in the prescribed Form AOC-1 is annexed tothis report (Annexure 8).
In accordance with the provisions of Section 136 of the Companies Act 2013 and theamendments thereto the audited Financial Statements including the consolidated financialstatements and related information of the Company and financial statements of thesubsidiary companies will be available on our website www.tatasteel.com These documentswill also be available for inspection during business hours at the Registered Office ofthe Company.
The names of companies that have become or ceased to be subsidiaries joint venturesand associates during the year are disclosed in the annexure to this report (Annexure 9).
Members of the Company at the Annual General Meeting (AGM') held on August8 2017 approved the appointment of Price Waterhouse & Co Chartered Accountants LLP(PW') Chartered Accountants as the statutory auditors of the Company for aperiod of five years commencing from the conclusion of the 110th Annual General Meetingheld on August 8 2017 until the conclusion of 115th Annual General Meeting of the Companyto be held in the year 2022. PW has audited the book of accounts of the Company for theFinancial Year ended March 31 2018 and have issued the Auditors' Report thereon. Thereare no qualifications or reservations or adverse remarks or disclaimers in the saidReport. In terms of the provisions relating to statutory auditors forming part of theCompanies Amendment Act 2017 notified on May 7 2018 ratication of appointment ofStatutory Auditors at every AGM is no more a legal requirement. Accordingly the Noticeconvening the ensuing AGM does not carry any resolution on ratication of appointment ofStatutory Auditors. However PW has confirmed that they are eligible to continue asStatutory Auditors of the Company to audit the books of accounts of the Company for theFinancial Year ending March 31 2019 and accordingly PW will continue to be the StatutoryAuditors of the Company for Financial Year ending March 31 2019.
In terms of Section 148 of the Act the Company is required to have the audit of itscost records conducted by a Cost Accountant. In this connection the Board of Directors ofthe Company has on the recommendation of the Audit Committee approved the appointment ofM/s Shome & Banerjee as the cost auditors of the Company for the year ending March 312019.
In accordance with the provisions of Section 148(3) of the Act read with Rule 14 of theCompanies (Audit and Auditors) Rules 2014 the remuneration payable to the Cost Auditorsas recommended by the Audit Committee and approved by the Board has to be ratied by themembers of the Company. Accordingly appropriate resolution forms part of the Noticeconvening the AGM. We seek your support in approving the proposed remuneration of 18 lakhplus applicable taxes and out-of-pocket expenses payable to the Cost Auditors for theFinancial Year ending March 31 2019. M/s Shome & Banerjee have vast experience in thefield of cost audit and have been conducting the audit of the cost records of the Companyfor the past several years.
The Cost Audit Report of the Company for the Financial Year ended March 31 2017 wasfiled in XBRL mode by the Company on September 1 2017.
Section 204 of the Companies Act 2013 inter-alia requires every listed company toannex with its Board's report a Secretarial Audit Report given by a Company Secretary inpractice in the prescribed form.
The Board appointed Parikh & Associates practicing Company Secretaries asSecretarial Auditor to conduct Secretarial Audit of the Company for the Financial Year2017-18 and their report is annexed to this report (Annexure 10). There are noqualifications or reservations or adverse remarks or disclaimers in the said Report.
The Board has also appointed Parikh & Associates as Secretarial Auditor to conductSecretarial Audit of the Company for Financial Year 2018-19.
20. Extract of the Annual Return
The details forming part of the extract of the Annual Return in Form MGT-9 as perprovisions of the Companies Act 2013 and Rules thereto are annexed to this report (Annexure11).
21. Significant and Material Orders passed by the Regulators or Court
There have been no significant and material orders passed by the regulators or courtsor tribunals impacting the going concern status and the Company's operations. HoweverMembers' attention is drawn to the statement on contingent liabilities commitments in thenotes forming part of the Financial Statements.
Further the Securities and Exchange Board of India vide adjudication order datedDecember 7 2017 imposed a penalty of 10 lakh on the Company for delayed disclosuresunder the provisions of the
Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations1992 in relation to the Company's shareholding in The Tinplate Company of India Limitedpursuant to rights issue of shares in 2009 and the automatic conversion of fullyconvertible debentures in 2011. The penalty has been paid by the Company.
22. Particulars of Loans Guarantees or Investments
Particulars of loans guarantees given and investments made during the year inaccordance with Section 186 of the Companies Act 2013 is annexed to this report (Annexure12).
23. Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo
Details of the energy conservation technology absorption and foreign exchange earningsand outgo are annexed to this report (Annexure 13).
During the year the Company has not accepted any public deposits under the CompaniesAct 2013.
25. Secretarial Standards
The Company has in place proper systems to ensure compliance with the provisions of theapplicable secretarial standards issued by The Institute of Company Secretaries of Indiaand such systems are adequate and operating effectively.
We thank our customers vendors dealers investors business associates and bankersfor their continued support during the year. We place on record our appreciation of thecontribution made by employees at all levels. Our resilience to meet challenges was madepossible by their hard work solidarity co-operation and support. We thank the Governmentof India the State Governments where we have operations and other government agencies fortheir support and look forward to their continued support in the future.
| ||On behalf of the Board of Directors |
| ||sd/- |
| ||N. CHANDRASEKARAN |
|Mumbai ||Chairman |
|May 16 2018 ||DIN: 00121863 |