DEAR SHAREHOLDERS
The financial year 2015-16 has been a year with significant developments includingamendment to the MMDR Act and imposition of Minimum Import Price. The operations of theCompany have seen improvement inspite of the challenges being faced by the Iron &Steel industry due to global over capacity rising steel exports from China weak demand& prices high interest cost and non availability of working capital for Plantoperations. Your Company continues to pursue its interests in Special Steel Ferro Alloy& Metallurgical Coke businesses.
For the year ended 31 March 2016 the Company recorded consolidated revenue ofRs.13163.24 million EBITDA of Rs. 46.84 million and loss after tax of Rs.6155.28million. The Company's margins were much lower than its potential mainly due tonon-availability of raw materials at viable prices sluggish demand and weak productprices high interest cost and non availability of adequate working capital foroperations.
SPECIAL STEEL BUSINESS
During the first half of the financial year the Company's Special Steel Business wasseverely affected due to non availability of Iron Ore at viable prices but after the MMDRAmendment Act was passed and with the reopening of mines there has been improvement inthe availability of Iron Ore from end 2015 onwards.
With the improvement in the availability of Iron Ore and after relining of its BlastFurnace despite continued constraint of working capital your Company has ramped upoperations of Blast Furnace & DRI from Q4 FY'2015-16 onwards. The Company has alsoresumed operations of Special Steel Long Products from end July 2016. The focus is now onramping up production of Special Steel products establishing best quality standards anddeveloping market and getting various approvals from end users.
FERRO ALLOYS BUSINESS
During the year under review the Company's Ferro Alloy Business was affected due tofrequent stoppage in the supply of Chrome Ore and Concentrate due to closure of variousprivate Chrome Ore mines due to Supreme Court judgment dated 16th May 2014. The managementtook up the raw materials issue with OMC & Government officials through variousIndustry Chambers which has improved the availability and Chrome Ore production by OMC andothers from end 2015 onwards. With the improvement in availability of Chrome Ore theoperations of Ferro Alloy Plant have increased from Q4 FY'2015-16 onwards. However aperiod of uncertainty in supply of Chrome Ore is likely after 31 March 2020 when leasesof all non-captive mines will expire.
To consolidate the Ferro Alloy Business of your Company & VISA Bao Limited theBoards & Shareholders of VISA Bao Limited (VBL) and the Company have approvedamalgamation of VBL with the Company. Consequently Baosteel will be issued 5% stake in theCompany. The integration will improve the operational and cost efficiency of the FerroAlloy Business.
COKE BUSINESS
The Coke Business is being operated through Company's subsidiary - VISA SunCokeLimited a joint venture between VISA Steel Limited and SunCoke Energy USA in which theCompany holds 51% stake and SunCoke Energy holds remaining 49% stake.
The Coke Business performance has also been adversely affected due to sluggish demandfor Coke in the domestic market and pressure of cheap imports from China. Coking Coal andCoke prices have been weakening over the year and
VISA SunCoke has been adversely affected due to inventory writedown. The inverted dutystructure in Coking Coal & Coke is adversely impacting Coke manufacturers in India.The Import duty on Coking Coal is at 2.5% and Clean Energy Cess on Coking Coal is at Rs.400 per MT whereas the import duty on Coke is only 5%. The key challenge for the Cokebusiness is the shift to index pricing for Coking Coal which has increased volatility.
THE INDUSTRY
As per WSA the Global Steel demand will increase by 0.2% to 1501 million tonnes in2016 following a contraction of 3% in 2015 primarily due to the slowdown in China.Global Steel industry continued to be impacted by large overcapacity especially in China.
India has become the third largest producer of Steel with production of 89.8 million MTCrude Steel in FY 2015-16 after China and Japan. In FY 2015-16 India was amongst the fewcountries that saw a growth in Steel whereas globally the Steel consumption fell.
As per the Ministry of Steel Government of India the current per capita consumptionof finished steel in the country is only around 60 kg which is far less than the worldaverage of 220 kg (China at 500 kg). It is estimated that India would need 300 million TPAof Steel by 2030 and therefore there is a huge growth potential in Steel demand /consumption in India. However any significant improvement in demand for Iron and Steelproducts may take a little longer and can show up only after investments in infrastructureand construction industries start to pick up.
VISION & STRATEGY
The Company is committed to its vision to emerge as an efficient producer of highquality value added Special Steel Long Products High Carbon Ferro Chrome andMetallurgical Coke.
Having set up state of the art value addition facilities the Company is focused onincreasing capacity utilisation for all
Units raising funds for working capital and restructuring loan to a sustainable level.The Company is also keen to secure Iron Ore & Chrome Ore mines by participating inauctions as permitted under the newly amended MMDR Act.
The Company has initiated an array of cost saving projects in areas like overheadslogistics repairs and maintenance stores and spares improving yields processefficiencies and so on. Further with the ramping up of the Special Steel facilities theCompany is confident of achieving higher revenues and better margins with improvement inthe market scenario.
OUTLOOK
The growing Auto Sector and opening up of Railways and Defence Sectors for FDI willhelp in increasing the domestic demand of Special Steel Long products in India. Havingstarted the plant and established the quality the Company is ready to take on thisopportunity to cater to the Special Steel market segment. The Government of India plans togive thrust to the manufacturing sector through the ‘Make in India' Campaign and theCompany has a good range of products to serve this segment.
I would like to place on record my sincere appreciation and gratitude to the entireteam of VISA Steel Group for its relentless commitment inspite of the challenging businessenvironment. I am grateful to the members of the Board of the Company for their invaluableguidance and contribution. I would also like to convey my sincere thanks to all thestakeholders lenders suppliers customers Government Officials and employees for theirvalued support and I hope to continue to receive your support in the future.
Warm Regards
Vishambhar Saran
