DIRECTORS' REPORT To, The Members, RMG Alloy Steel Limited, Your Directors are pleased to present the Thirty-Third Annual Report together with Audited Statement of Accounts of the Company for the year ended 31st March 2015. I The Company has lost production for 24 days in October 2014 due to breakdown in transformer. Entire steel industry is operating at 30-40% capacity. The Company concentrates on niche market since our competitors manufacturing facilities are based on blast furnace which has low cost of production as compared to our facilities which is based on electrical furnace. The management concentrates on product mix which give more margin, some of the products are now approved by Original Equipment Manufacturers (OEM) and some of the OEM has recommended to their suppliers (forger companies) to buy products from the Company. Value addition in Spheroidization will increase our tonnages from existing & new customers with higher contributions. Production of high margin & high value added category of steel is already started & will enhance our overall earnings. The Product known as AISI O-1 is used in the Pharma industry The Company has appointed BOB Capital Markets Ltd to carry out viability study & to structure Corrective action plan (CAP) for the Company. The exercise is done to structure a viable rectification plan for the Company to overcome the current stress. As per the scheme, Rupee Term Loan of Rs. 145 Crores is approved by the consortium banks & Working capital limits will be reduced by Rs. 95 Crores. II. DIRECTORS' RESPONSIBILITY STATEMENT a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 31st March 2015 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 adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) the directors had prepared the annual accounts on a going concern basis; e) the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. III. DISCLOSURE AS REQUIRED UNDER THE COMPANIES ACT 2013: a. Mr. Atul Desai, Mr. Ashok Jain and Mrs. Amita Karia, the independent directors have given declaration that they meet the criteria of independent directors as provided in sub section 6 of Section 149 of the Companies act 2013. b. Nomination and Remuneration committee (NRC) at their meeting held on 27th May 2014 approved and recommended policy relating to criteria for determining qualifications, positive attributes and independence of directors, the remuneration for the directors, key managerial personnel and other employees; the Board of directors approved the said policy as recommended by NRC at its meeting held on 27th May 2014. c. NRC at their meeting held on 10th February, 2015 laid down criteria for the evaluation of Board of directors. Evaluation of directors consisted of two parts i.e. quantitative data and qualitative data. The instruments was so designed that only ticks is required with no provision for descriptions, name of the directors who has evaluated was not disclosed. Evaluation took place in March 2015 and the same was discussed by the Board of directors and took remedial action at its meeting held on 31st March 2015. (Rules 8 (4) under Chapter 9 of the Companies (Accounts) Rules, 2014) d. Meeting of Board of directors were conducted five times during the financial year 2014-15, the details of which are given in the Corporate Governance Report. e. The Company does not have any subsidiary company. f. Ratio of remuneration of Mr. Shashank Chaturvedi, executive director who was upto 12th November 2014 to the median employee's remuneration and other details as may be prescribed - Section 197 (12) (i) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year- 37.69 times (ii) the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year- No increment during the year (iii) the percentage increase in the median remuneration of employees in the financial year- No increment during the year (iv) the number of permanent employees on the rolls of company- 501 (v) the explanation on the relationship between average increase in remuneration and company performance - No increment during the year (vi) comparison of the remuneration of the Key Managerial Personnel against the performance of the company-Remuneration not linked to performance of the Company (vii) average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration- No increment during the year (ix) comparison of the each remuneration of the Key Managerial Personnel against the performance of the company-remuneration not related to performance of the Company (x) the key parameters for any variable component of remuneration availed by the directors- no variable component of remuneration availed by the director (xi) the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year- nil; and (xii) affirmation that the remuneration is as per the remuneration policy of the company. g. Details of arrangement entered into with Welspun Steel Limited under section 189 ( related party) is mention in form AOC-2 as mentioned below under Rule 8 (2) of the Companies (Accounts) Rules, 2014 Form No. AOC-2 (Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014) Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arm's length transactions under third proviso thereto 1. Details of contracts or arrangements or transactions not at arm's length basis - No such transactions. 2. Details of material contracts or arrangement or transactions at arm's length basis (a) Name(s) of the related party and nature of relationship - Welspun Steel Limited (b) Nature of contracts/arrangements/transactions - Purchase of DRI/ sponge iron lumps, sale of stores materials (c) Duration of the contracts / arrangements/transactions - 01.04.2014-31.03.2015 (d) Salient terms of the contracts or arrangements or transactions including the value, if any: Purchases of DRI/ sponge iron lumps from Welspun Steel Limited for Rs. 1253.37 lacs and sale of stores materials/spares for Rs. 1.28 lacs during the period from 01.04.2014-31.03.2015 are at a market price and on Arm's length basis. All material transactions entered with the related party is carried out in the ordinary course of the business. (e) Date(s) of approval by the Board, if any: Board of directors at their meeting held on 10.11.2014, 10.02.2015 and 28.05.2015 approved the said transactions; (f) Amount paid as advances, if any: nil i. Particulars of loans, guarantees or investments under section 186. The Company has not made investment nor given loan or provide any guarantee for repayment of loan under section 186 of the act j. Details of establishment of vigil mechanism for directors and employees Clause 49(II)(F) of Listing agreement. The Company has a Whistle Blower Policy and Vigil Mechanism for its directors and employees and no persons has been denied access to the Audit Committee. IV. Conservation of energy, technology absorption and foreign exchange earnings and outgo The details of conservation of energy, technology absorption, foreign exchange earnings and outgo required pursuant to Rule 8(3) of the Companies (Accounts) Rules, 2014 are reproduced herewith: A. Conservation of Energy (i) Steps taken or impact on conservation of energy. > In ingot soaking pit hot charging practice adopted and heating cycles optimized. Impact : Natural Gas (fuel) consumption reduced from 120 m3 / ton to 100 m3 / ton. > In walking hearth furnace modification done for stroke length change for input sizes of 150 mm & 198 mm. Impact : For 50 to 60 Round campaign natural gas consumption reduced from 90 m3 / ton to 75 m3 / ton. (ii) Planned Capexes on following areas : > Dust & fume extraction system to be provided with VVF drive. > Vertical hydraulic (water) pumps to be changed to horizontal pumps. > Capacitor bank replaced for improving power factor from 0.994 to 0.997. B. Technology Absorption i and ii Efforts made towards technology absorption and the benefits derived therefrom > Annealing furnaces added for development of hot die steel H11, H13. > Producer Gas Plant commissioned for fuel cost reduction of Rs. 18 to 20 Lacs per month. > Mechanization of round ingot grinding facility for product improvement has been done. iii. There is no import technology iv. The expenditure incurred on Research and Development- nil Foreign exchange earnings and Outgo- Foreign exchange earnings FOB value of exports Rs.87 Lacs ( nil) Foreign exchange Outgo Imports on CIF basis/expenditure in foreign currency : Rs. 2529 Lacs (Rs.3097 Lacs) V. DIRECTORS/ KEY MANAGERIAL PERSONNEL (KMP) In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. V S Iyer and Mr. Hanuman Kanodia, Directors of the Company retire by rotation at the 33rd Annual General Meeting and being eligible have offered themselves for reappointment. Mrs. Amita Karia is appointed as a woman independent director by the Board of directors at their meeting held on 31st March, 2015 for a period of two years. Mr. Anuj Burakia has been appointed as an additional director by the Board of directors at its meeting held on 28th May 2015 and holds office upto the date of ensuing 33rd Annual General Meeting. The Company has received a Notice from a member proposing him as a director of the Company. He also has been appointed as a whole time director of the Company with effect from 29th July, 2015 by the Board of Directors. Board has recommended re-appointment of the aforesaid retiring directors, appointment of woman Independent director and additional director/whole time director. Mr. Sanjay Kukreja, AVP (Commercial) has been appointed as a CFO by the Board of Directors at its meeting held on 10th February 2015. Mr. Nilesh Javker has been appointed as a Company secretary and compliance officer of the Company w.e.f 27th May 2015. VI. AUDIT COMMITTEE The Audit Committee consists of the following 4 Non-Executive Directors a. Mr. Atul Desai - Chairman, independent b. Mr. Abhishek Mandawewala - Member c. Mr. Ashok Jain - Member, independent d. Mrs. Amita Karia - Member, independent VII. DEPOSITS The Company has not accepted any deposit within the meaning of the Chapter V to Companies Act 2013. Further, no amount on account of principal or interest on deposit was outstanding as at the end of the year under report. VIII. AUDITORS Your Company's Auditors, M/s. Chaturvedi & Shah, Chartered Accountants were re-appointed for the period of three years till the conclusion of 35th Annual General meeting by the members at 32nd Annual General Meeting of the Company held on 29th September 2014. Members are requested to ratify their appointment from the conclusion of 33rd Annual General Meeting to the conclusion of 34th Annual General Meeting. IX. CORPORATE GOVERNANCE A separate report on Corporate Governance is annexed hereto as a part of this Report. Management Discussion and Analysis Statement is separately given in the Annual Report. A certificate from the Mr. A. L. Makhija, Practising Company Secretary regarding compliance of conditions of Corporate Governance as prescribed under Clause 49 of the Listing Agreement is attached to this report. X. AUDITORS' REPORT References drawn by the Auditors' in their report are self-explanatory. Please refer to Auditors' Observations/ qualifications and in relation thereto the Board of directors' state as under: i) We refer to Note no. 1 (a) of "Annexure to Independent Auditor's Report" stating that the Company is in the process of updating its fixed asset register showing full particulars including quantitative details and situation of fixed assets and state that fixed asset register is being updated showing full particulars including quantitative details and situation of fixed assets. XI. SECRETARIAL AUDIT REPORT A Secretarial Audit Report given by Mr. A L Makhija, a practising company secretary is herewith annexed. As regard observation of the Report, we state that- i. The Company was in search for executive director after the resignation of Mr. Shashank Chaturvedi, the executive director with effect from 12th November 2014 and the Board of directors at their meeting held on 8th July 2015 has appointed Mr. Anuj Burakia as a whole time director and Occupier under the Factories Act, 1948 with effect from 29th July, 2015. . ii. The Company has appointed Mr. Nilesh Javker as the Company Secretary and Compliance officer w.e.f 27th May 2015. XII. RISK MANAGEMENT POLICY Board of Directors at their meeting held on 10th February 2015 considered and approved risk management policy and identified the major risk in severe competition in finished goods from local as well as international market XIII. FAMILIARIZATION PROGRAM FOR INDEPENDENT DIRECTOR (CLAUSE 49 OF LISTING AGREEMENT) The details of familiarization program (for independent directors) is disclosed on the Company's website and a web link thereto is <http://www.rmgalloysteel.com/userfiles/file/RMG%20Familiarisation%20policy.pdf> XIV. CODE OF CONDUCT The Company has Code of Conduct for Board members and senior management personnel. A copy of the Code has been put on the Company's website for information of all the members of the Board and management personnel. All Board members and senior management personnel have affirmed compliance of the same. XV. PARTICULARS OF EMPLOYEES Details of the every employee of the Company as required pursuant to 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is herewith attached. XVI. ACKNOWLEDGEMENT Your Directors take this opportunity to express gratitude for valuable assistance and co-operation extended to the Company by Financial Institutions, Commercial Banks and other authorities. Your directors also wish to place on record their sincere appreciation of the dedicated services, hard work, solidarity and profuse support by all the employees of the Company. FOR AND ON BEHALF OF THE BOARD OF DIRECTORS Abhishek Mandawewala Director Ashok Jain Director Mumbai, Date: 8-07-2015 |