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Welspun Specialty Solutions Ltd.

BSE: 500365 Sector: Metals & Mining
NSE: REMIMETAL ISIN Code: INE731F01037
BSE 00:00 | 09 Apr 16.18 0.02
(0.12%)
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16.49

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17.25

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NSE 05:30 | 01 Jan Welspun Specialty Solutions Ltd
OPEN 16.49
PREVIOUS CLOSE 16.16
VOLUME 471227
52-Week high 17.25
52-Week low 5.50
P/E
Mkt Cap.(Rs cr) 857
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 16.49
CLOSE 16.16
VOLUME 471227
52-Week high 17.25
52-Week low 5.50
P/E
Mkt Cap.(Rs cr) 857
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Welspun Specialty Solutions Ltd. (REMIMETAL) - Director Report

Company director report

To

The Members

RMG Alloy Steel Limited

Your directors are pleased to present the Thirty Seventh Annual Report together withAudited Financial Statement of the Company for the year ended 31st March 2019.

FINANCIAL RESULTS

(Rs. in Lakh)
Particulars 2018-19 2017-18
Sales and other income 44016 24477
Profit/(Loss) before interest depreciation and exceptional items (3350) (607)
Interest and Financial charges 945 4683
Depreciation and Amortization 668 661
Profit/ (Loss) before exceptional items and tax (4963) (5951)
Exceptional items 2949 500
Profit/(Loss) before tax (2014) (5451)

OPERATIONS

Operations of the Company were as under:

2018-19 2017-18
Particulars Production Sales Gross Sales Production Sales Gross Sales
(Tones) (Qty M.T.) (Rs.in Lakh) (Tones) (Qty M.T.) (Rs.in Lakh)
Steel 75280 71458 43715 42757 40862 24164

The year witnessed many challenges which adversely affected the business performance.

- Steep hike in graphite electrode prices a major impact on cost of steel makingthrough EAF route.

- Post festival season generally automobile demand improves significantly. But thisyear suddenly due to liquidity crisis in the market there was a sudden fall in demand forautomobiles a major user of our products which compelled the automobile manufacturers todefer their steel procurement schedules and there is no improvement in demand till now.

With the continuation of government at the center for the second term and the normalmonsoon predictions we expect revival of demand in the next couple of months.

The Company was granted registration on 22/06/2018 under Industrial & MinesDepartment (Govt. of Gujarat) resolution No.MIS/10/2015/702426/P dated 11-09-2017 whichmakes the Company eligible for various reliefs & concessions from Government ofGujarat as per the extant policy in this regard. The management is hopeful thisconcession will help to revive the business of the Company.

Except as mentioned in this Report no material change or commitment has occurred whichwould have affected the financial position of your Company between the end of thefinancial year of your Company to which the financial statements relate and the date ofthe Report.

DIVIDEND AND RESERVES

In view of the loss during the year as well as accumulated losses your directors couldnot recommend any dividend for the financial year ended on March 31 2019 nor couldpropose to transfer any amount to reserves.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) & 134(5) of the Companies Act 2013 (the"Act") your directors hereby confirm that:

a) In the preparation of the annual accounts for the financial year ended March 312019 the applicable accounting standards had been followed along with proper explanationrelating to material departures;

b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year 31stMarch 2019 and of the profit and loss of the Company for that period;

c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;

d) the directors had prepared the annual accounts on a going concern basis;

e) the directors have laid down internal financial controls to be followed by theCompany and such internal financial controls are adequate and were operating effectively;and

f) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

DIRECTORS/ KEY MANAGERIAL PERSONNEL (KMP)

a. Board of Directors:

Mr. Hanuman Kanodia (non-executive director) and Mr. Aneel Lasod (non-executivedirector) resigned with effect from August 6 2018. Mr. Ashok Jain (independent director)tendered his resignation on account of his pre-occupation w.e.f. August 6 2018.

Mr. Balkrishan Goenka was appointed as a non-executive director of the Company witheffect from August 8 2018 and subsequently appointed as the Chairman of the Company witheffect from August 28 2018. Mr. Myneni Narayana Rao and Mr. Prakash Tatia were appointedas additional directors effective from August 28 2018.

During the year Mr. Balkrishan Goenka (Chairman) Mr. Prakash Tatia (non-executivedirector) and Mr. Myneni Narayana Rao (independent director) were appointed as directorsby the members in their Annual General Meeting held on September 24 2018.

Mr. Prakash Tatia (non-executive director) of the Company retiring by rotation at the37th Annual General Meeting and being eligible has offered himself for reappointment.Board has recommended his reappointment.

Mr. Atul Desai was appointed as an Independent Director for five years from May 272014 till May 26 2019. Now being eligible for reappointment and meeting the criteria forindependence as prescribed under Section 149 of the Act after consideration of outcome ofevaluation done by the Board of Directors in March 2019 the Board has approvedreappointment of Mr. Desai for second term of five years subject to approval by members byway of special resolution in the ensuing general meeting.

Eight (8) meetings of Board of Directors were held during the financial year 2018-19the details of which are given in the Corporate Governance Report.

b. Key Managerial Personnel:

Mr. Nilesh Javker Company Secretary of the Company resigned and Ms. Rashmi Mamturawas appointed to fill the vacancy for the position of the Company Secretary of theCompany with effect from August 6 2018.

Mr. Anuj Burakia (Whole Time Director) was re-appointed for further period of 3 yearsw.e.f. July 29 2018 by members in their Annual General Meeting held on September 242018.

c. Declaration by Independent Directors:

Mr. Atul Desai Mr. Myneni Narayana Rao and Ms. Amita Karia independent directors havegiven declaration that they meet the criteria of independent directors as provided inSection 149(6) of the Companies Act 2013.

d. Annual Board Evaluation:

The performance evaluation of the Directors was conducted by the entire Board(excluding the director being evaluated) on the basis of a structured questionnaire whichwas prepared after taking into consideration SEBI's Guidance Note on board evaluation andinputs received from the directors covering various aspects of the Board's functioningviz. adequacy of the composition of the Board and its Committees time spent by each ofthe directors; accomplishment of specific responsibilities and expertise; conflict ofinterest; integrity of the director; active participation and contribution duringdiscussions and governance.

For the financial year 2018-19 the annual performance evaluation was carried out bythe Independent Directors Nomination and Remuneration Committee and the Board whichincluded evaluation of the Board Independent Directors Non-independent DirectorsExecutive Directors Chairman Committees of the Board Quantity Quality and Timelinessof Information to the Board. All the results were satisfactory to the Board.

DISCLOSURE AS PER SECTION 197(12) AND RULE 5 (1) OF COMPANIES (APPOINTMENT ANDREMUNERATION OF MANAGERIAL PERSONNEL) RULES 2014:

(i) the ratio of the remuneration of each director to the median remuneration of theemployees of the company for the financial year: the ratio cannot be derived as noremuneration was paid to any directors during the year under consideration.

(ii) the percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year:there was no increase in remuneration of Directors CEO CFO or CS.

(iii) the percentage increase in the median remuneration of employees in the financialyear: 11.11%.

(iv) the number of permanent employees on the rolls of company: 683.

(v) average percentile increase already made in the salaries of employees other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration: the averageincrease in remuneration of employees excluding KMP in last financial year was 7.36%.There was no increase in managerial remuneration as compared to the last year.

(vi) the remuneration is as per the remuneration policy of the Company.

No commission to directors was payable during the year under review.

PARTICULARS OF EMPLOYEES

The details of employees of the Company drawing remuneration as prescribed under Rule5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is as follows:

Sr No Name Designation Remuneration Drawn during the year (Rs.) Nature of Employment Qualification Esperience (Years) Date of commencement of employment Age Last employment % of equity shares relative
1. Sudhakar Asawale COO & President 13595568 Permanent B Tech Metallurgy 40.60 20 Nov 2017 62 JSW Steel NIL NO
2. Dinesh Pahade Senior Vice President 7225000 Permanent BE 26.9 01/05/2018 56 Tubacex NIL NO
3. Nitin Bhat Senior Vice President 7500000 Permanent BE Metallurgy 31.06 18/Apr/16 55 Kalyani Carpenter Special Steels ltd NIL NO
MBA
4. Shrinivas Durge Senior Vice President 6603744 Permanent BE-Mechanical 36.6 10/11/2010 59 Ispat Industries NIL NO
5. Naresh Bansal Senior Vice President 6500004 Permanent B.Com. + CA 29.1 16/04/2018 55 Bansal Naresh & Co. CA. NIL NO
6. Samir Malhotra Vice President 6264329 Permanent B E Metallurgy MBA Sales 24.96 24-May-18 50 Arora Iron & Steels Ltd as Head Marketing NIL NO
7. Madhukar Bansal Vice President 3524384 Permanent BE-Metallurgical 31.7 03/09/2018 57 Rimjhim Ispat Ltd NIL NO
8. Minine Gudinho Vice President 4500000 Permanent BE-Electrical 31.1 10/04/2018 55 Jindal South West NIL NO
9. Narendra Hinge Vice President 3900000 Permanent BE-Metallurgical 27.2 03/03/2018 53 Sun flag Iron & Steel co. ltd NIL NO
10. Balasubramanian Natrajan President 1342467 Permanent BE - Electrical 49.4 09/01/2019 70 ISMT as Freelancer NIL NO

* Remuneration policy and criteria for making payment to non-executive directors:

Pursuant to Section 178 (3) and provisions of SEBI (Listing Obligation and DisclosureRequirements) Regulation 2015 Nomination and Remuneration Committee (NRC) at its meetingheld on 5th February 2019 had approved and recommended a revamped policy relating tocriteria for determining qualifications positive attributes and independence ofdirectors the remuneration for the Directors Key Managerial Personnel and otheremployees and the Board of Directors had approved the said revised policy as recommendedby NRC at its meeting held on 5th February 2019.

An extract of Nomination and Remuneration Policy of the Company is included as a partof the Corporate Governance Report.

AUDIT COMMITTEE

The Audit Committee consists of the following Non-Executive Directors as on March 312019:

a. Mr. Atul Desai Chairman Independent
b. Mr. M. Narayana Rao Member Independent
c. Ms. Amita Karia Member Independent
d. Mr. Anuj Burakia Member Whole Time Director

None of the Audit Committee's recommendations were rejected.

EMPLOYEE STOCK OPTIONS

The Company granted stock options during the year under Report disclosure as requiredunder Regulation 14 of the SEBI (Share Based Employee Benefits) Regulations 2014 and Rule12(9) of the Companies (Share Capital and Debentures) Rules 2014 are as under:

(I) A description of each ESOS that existed at any time during the year including thegeneral terms and conditions of each ESOS including -

(a) Name of the ESOP Plan RMG Alloy Steel Ltd Employee Stock Options (Senior Management Personnel) Scheme 2018
(b) Date of shareholders' approval 15.05.2018
(c) Total number of options approved under ESOS 2000000
(d) Vesting requirements The Vesting of ESOPs shall happen at every anniversary of the date of grant in quantum of 35% 35% and 30% of the total ESOPs granted over the period of 3 years from the date of grant
(e) Exercise price or pricing formula Nil
(f) Maximum term of options granted Upto the third anniversary from the date of Vesting
(g) Source of shares (primary secondary or combination) Primary
(h) Variation in terms of options -
(II) Method used to account for ESOS - Intrinsic or fair value. Fair Value
(III) Where the company opts for expensing of the options using the intrinsic value of the options the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed. Not Applicable
(IV) Option movement during the year
Number of options outstanding at the beginning of the period 0
Options granted 1782000
Options vested Nil
Options exercised Nil
The total number of shares arising as a result of exercise of option Nil
Options forfeited / lapsed 530000
The exercise price Nil
Money realized by exercise of options Nil
Loan repaid by the Trust during the year from exercise price received Not Applicable
Number of options outstanding at the end of the year 1252000
Number of options exercisable at the end of the year Nil
Employee wise details of options granted to:-
• Key managerial personnel
Mr. Anuj Burakia 835000
• Any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during that year
Mr. Chintan Thaker 417000
Mr. Sudhakar Asawale 530000 (lapsed)
• Identified employees who were granted option during any one year equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant. Nil
Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 "Earnings Per Share. (0.88)
Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock Exercise Price: Nil
Fair Value 25.50
A description of the method and significant assumptions used during the year to estimate the fair values of options including the following weighted-average information:
(i) risk-free interest rate 7.84% to 8.02%%
(ii) expected life 4 to 6 years
(iii) expected volatility 56.85%
(iv) expected dividends 0%
(v) the price of the underlying share in market at the time of option grant. 25.50

DEPOSITS

The Company has not accepted any deposit within the meaning of Chapter V to theCompanies Act 2013. Further no amount on account of principal or interest on deposit wasoutstanding as at the end of the year under the Report.

EXTRACT OF ANNUAL RETURN

An extract of the annual return in Form MGT-9 of the Companies (Management andAdministration) Rules 2014 is attached to this Report as Annexure I and is also placed onthe website of the Company and can be accessed at www.rmgalloysteel.com.

DETAILS OF RELATED PARTY TRANSACTIONS

Details of arrangement entered into with Welspun Steel Limited under section 189(related party) pursuant to Rule 8(2) of the Companies (Accounts) Rules 2014 arementioned in form AOC-2 enclosed as Annexure II.

The Company's policy on Related Party Transactions as approved by the Board is uploadedon the Company's website www.rmgalloysteel.com.

Save and except as disclosed in the financial statements none of the Directors had anypecuniary relationships or transactions vis--vis the Company.

Pursuant to Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 please refer Note no. 36 for details of transactions with Welspun SteelLtd being an entity belonging to the Promoters Group holding more than 10% ofshareholding.

As the Company neither being a holding company nor a subsidiary disclosure of relatedparty transaction as per Schedule V of SEBI (LODR) Regulations 2015 are not applicable.

RECLASSIFICATION OF PROMOTERS

Reclassification of Saraf Group and Widescreen Holdings Pvt Ltd constituents ofPromoters' Group as public shareholders was approved by members in their Annual GeneralMeeting held on September 24 2018 and the same was subsequently approved by the BSE Ltdon May 14 2019.

PREFERENTIAL ISSUE AND UTILISATION OF FUNDS

During the financial year your company has raised funds to the tune of Rs.405 Crore byway of preferential issue of securities including 238258324 equity shares of Rs.6 eachand 69415000 warrants having option to subscribe to equal number of equity shares atthe issue price of Rs.12 per share (i.e. including securities premium of Rs.6 per equityshare) and Rs.104.50 Crore by way of Redeemable Preference Shares.

Particulars Amount (Rs.)
Funds Raised:
Preference Shares (net adjusted after partial redemption)
i. April 2018 357920000
ii. September 2018 802500000
iii. March 2019 242500000
Equity Shares & Warrants (May 2018) 3692079888
Total Funds raised 5094999888
Utilisation:
Retirement of Long term loan 3160209327
Capex Till March 2019 871406445
Used for General Corporate Purpose / Working capital purpose (some part of which would be utilised for Capex going forward) 1063384116
Total Utilisation 5094999888

AUDITORS AND THEIR REPORTS

• Statutory Auditors:

Your company's Auditors M/s. Pathak H.D. & Associates Chartered Accountants wereappointed for the period of five years till the conclusion of 40th Annual General Meeting.

Please refer to Auditors' Observations/Qualifications and in relation thereto the Boardof Directors states that comments under Emphasis of Matters read together with notes toaccounts are self explanatory and therefore do not call for explanation.

No fraud was reported by the Auditors of the Company to the Audit Committee pursuant tosection 143(12) of the Act.

• Cost Auditors:

The Company has made and maintained cost records as per Section 148 and otherapplicable provisions if any of the Act read with Companies (Audit and Auditors) Rules2014. The Board of Directors of your Company has appointed M/s. Kiran J. Mehta CostAccountants as the Cost Auditors of your Company for FY 2018-19 at a remuneration ofRs.35000/ - p.a. on the recommendations made by the Audit Committee.

Members are requested to ratify their remuneration by passing an ordinary resolution inthe forthcoming Annual General Meeting.

• Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company hasappointed M/s. Mihen Halani & Associates Practicing Company Secretaries as theSecretarial Auditor of your company for the FY 2019-20. The Secretarial Audit Reportissued by M/s. Mihen Halani & Associates for FY 2018-19 is annexed herewith asAnnexure III to this Report.

As regards observations of the Secretarial Audit Report Note 1 in respect ofcompliance with Regulation 40 of SEBI (LODR) Regulations 2015 we submit that the Companyhas decided to send subsequent reminders along with any communication that will be sent tothe shareholders to save on cost involved considering the financial stress on theCompany. In respect of Note 2 the redemption proceeds of preference shares wasinstantaneously utilized for allotment of equity shares and there was no actual payment topreference shareholders the Company has informed the stock exchange about allotment ofequity shares out of such constructive redemption of preference shares. Whereas Note 3 isself explanatory and requires no comments in respect of Note 4 we submit that the Companyhas been scouting for apprentices but due to remoteness of plant location adequatesuitable candidates did not come forward nevertheless the Company continues its effortsto ensure compliance.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186.

The Company has not made any investment nor given any loan or provide any guarantee /security for repayment of loan under section 186 of the Act.

DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

The Company has a Whistle Blower Policy and Vigil Mechanism for its directors andemployees and no personnel have been denied access to the Audit Committee Chairman.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The details of conservation of energy technology absorption foreign exchange earningsand outgo required pursuant to Rule 8(3) of the Companies (Accounts) Rules 2014 are asfollows:

A. Conservation of Energy

(i) Steps taken or impact on conservation of energy.

> Re-caliberation and overhaul of Arc Furnace regulation system: Power optimisation.

> Automation of rolling mill Reheating furnace: Significant fuel optimisation.

> VVF drive system installed in Fume Extraction system: Optimised power consumption.

> Switch over to Screw Compressor from reciprocating compressor: Optimised powerconsumption.

> Replacement of certain high time use conventional lights with LED lights.

> Redesigning of rolling mill roll passes to reduce the number of passes and henceimproved productivity and fuel/power consumption.

B. Technology Absorption:

> Installation of AOD (Argon Oxygen De-carburisation) technology and commencedmaking Stainless Steel products keeping downstream plant same.

> Automation of walking beam reheat furnace of rolling mill for uniform heatingbetter soaking lesser scale loss enhanced reliability better productivity etc.

> Conversion of existing Extrusion press from low value carbon steel pipe product tohigh value SS pipes / tubes products.

C. Foreign exchange earnings and outgo

> Foreign exchange earned in terms of actual inflows during the year:

FOB Value of exports Rs.220 Lakhs (Rs.66 Lakhs)

> Foreign exchange outgo during the year in terms of actual outflows:

Imports on CIF Basis/expenditure in foreign currency Rs.1 604 lakhs (Rs. 132 Lakhs)

CORPORATE GOVERNANCE

A separate report on Corporate Governance is annexed hereto as a part of this Report asAnnexure IV. A certificate from the Secretarial Auditors of the Company regardingcompliance of conditions of Corporate Governance as prescribed under the SEBI (LODR)Regulations 2015 is attached to this report as Annexure V. Management Discussion andAnalysis Statement is separately given in the Annual Report as Annexure VII.

RISK MANAGEMENT POLICY

The Board of Directors at its meeting held on 25th May 2016 considered and approved arevamped risk management policy to suit the dynamic business environment.

The Board has approved Risk Management Policy (RMP) to effectively address financialoperational compliance and strategic risk. A structured enterprise risk managementprogram has been formulated and implemented. Refer to the Management Discussion andAnalysis Section in this Report for risks and threats relevant to your Company.

FAMILIARIZATION PROGRAM FOR INDEPENDENT DIRECTOR

The details of familiarization program (for independent directors) are disclosed on theCompany's website: www.rmgalloysteel.com.

CODE OF CONDUCT

The Company has Code of Conduct for Board members and senior management personnel. Acopy of the Code has been put on the Company's website for information of all the membersof the Board and Senior Management Personnel. All Board members and senior managementpersonnel have affirmed compliance of the same.

PROHIBITION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

The Company has complied with the provisions relating to constitution of InternalComplaint Committee ('ICC') under Sexual Harassment of Woman at Workplace (PreventionProhibition and Redressal) Act 2013. The ICC comprises of internal as well as externalmembers.

Disclosure of number of complaints filed disposed of and pending in relation to theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013as on the end of the financial year under Report are as under:

> number of complaints filed during the financial year - Nil

> number of complaints disposed of during the financial year – Not applicable

> number of complaints pending as on end of the financial year - Nil

INTERNAL CONTROLS

Your company has adequate internal control system which is commensurate with the sizescale and complexity of its operations. Your Company has designed and implemented aprocess driven framework for Internal Financial Controls ("IFC") within themeaning of the explanation of Section 134(5)(e) of the Act SEBI (Listing Obligations andDisclosures Requirements) Regulations 2015 and other relevant statutes applicable to yourCompany. The executive management and internal auditors continuously monitors theefficiency of the internal controls / compliance with the objective of providing to theAudit Committee and the Board of Directors an independent objective and reasonableassurance of the adequacy and effectiveness of the organisation's risk management controland governance processes. For the year ended March 31 2019 the Board is of the opinionthat your company has sound IFC commensurate with the nature of its business operations;wherein adequate controls are in place and operating effectively and no material weaknessexists. Also refer paragraph under caption "internal control system" inManagement Discussion and Analysis.

MISCELLANEOUS

The Board of Directors affirms that the Directors have devised proper systems to ensurecompliance with the provisions of all applicable Secretarial Standards issued by theInstitute of Companies Secretaries of India and that such systems are adequate andoperating effectively. The Company has complied with the applicable Secretarial Standards.

ACKNOWLEDGEMENT

Your directors take this opportunity to express gratitude for valuable assistance andcooperation extended to the Company by financial institutions commercial banks statutoryand regulatory authorities customers suppliers and other agencies engaged with theCompany. Your directors also wish to place on record their sincere appreciation of thededicated services hard work solidarity and profuse support by all the employees of theCompany.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS
Anuj Burakia Prakash Tatia
Whole Time Director Director
DIN: 02840211 DIN: 06559106
Place: Mumbai
Date: 15.05.2019

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