DIRECTORS' REPORT To The Members Modern Steels Limited Dear Members, Your Directors hereby present their 42 nd Annual Report and audited accounts of the Company for the year ended 31st March, 2016. PERFORMANCE The year under review continued to be challenging, the Company was able to achieve Gross Sales of Rs. 302.70 Crores as compared to Rs. 356.60 Crores in the previous year. The operating profit of the Company for the year stood at Rs.15.28 Crores as against Rs.12.46 Crores previous year. The shortage of Working Capita! resulted into low capacity utilization and the lower volumes. The Company was able to improve Operating Profit because of reduction in the scrap and other input cost coupled with cost saving drive undertaken by the Company during the year. Due to the continuous losses, the deferred assets/liabilities have been taken as Nil. The Networth of the Company as on 31st December, 2015 was negative, therefore the Company made a reference to the Board for Industrial & Financial Reconstruction under Section 15 of Sick Industrial Companies (Special Provisions) Act, 1985. DIVIDEND Due to the difficult financial position and the losses suffered by the Company, the Directors have not recommended any dividend for the year. PRODUCT AND MARKET DEVELOPMENT The initiatives that the Company has undertaken for value addition is showing positive results and being pursued further. The Auto Components Division is also catering to the new component requirements of OEMs. STATUS OF COMPANY'S ACCOUNTS WITH LENDERS Members will recall that in the last fiscal the Company has submitted its proposal for additional financial assistance to the lenders. During the year the lenders conducted the TEV study of the Company and assessed the need based working capital requirements of the Company. Due to inadvertent delay in sanctioning financial assistance by the Lenders, the financial system of the Company got in difficulties and pushed the Company into difficult position of NPA. The Company is in discussions with the Lenders to find out a workable solution to meet the present financial difficulties of the Company. KAIZEN & TS 16949 ACCREDITATION Your Company's manufacturing facilities continue to maintain the prestigious TS 16949 certification by DNV Netherlands, a leading international Certification Company. During the year, the Company continued implementation of Kaizen and 5'S' projects to come up to the expectations of major global OEMs. FIXED DEPOSITS The outstanding exempted deposits at the end of the year under review amount toRs. 661 Lacs (Previous year Rs. 662 Lacs). There are no overdue deposits. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSIONS & ANALYSIS A separate report on Corporate Governance and Management Discussions & Analysis is attached herewith and forms part of this report. DIRECTORS Dr. Lalit K Bansal, Independent and Non Executive Director of the Company resigned from the Board of Directors of the Company w.e.f. 13th February, 2016 due to his preoccupations. The Board placed on record its appreciations for the services rendered by Dr. Lalit K Bansal. Mr. P.L. Talwar, Whole Time Director of the Company resigned from the Board of Directors of the Company w.e.f. 13th February, 2016 due to his preoccupations. The Board placed on record its appreciations for the services rendered by Mr. P.L. Talwar. Mr. R.K. Sinha, Director (Operations) shall retire by rotation at the ensuing Annual General Meeting, and being eligible, offers himself for re-appointment. DECLARATION BY INDEPENDENT DIRECTORS The Company has received the necessary declaration from each Independent Director in accordance with Section 149 (7) of the Companies Act, 2013, that they meet the criteria of independence as laid out in Sub Section (6) of Section 149 of the Companies Act, 2013 and SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015. BOARD DIVERSITY AND REMUNERATION POLICY The Company has a policy for formation of the Board to have Executive Directors and Independent Directors of diverse background to maintain the independence of the Board. As on 31st March, 2016,the Board consists of 7 members,three are Executive/Whole Time Directors, three Independent Directors and One Bank Nominee Director. We affirm that the remuneration paid to the Directors is as per the terms approved by the Nomination & Remuneration Committee of the Company. BOARD MEETINGS During the year, four Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. DIRECTOR'S RESPONSIBILITY STATEMENT Pursuant of requirements under Section 134(3) (c) of the Companies Act, 2013 with respect to Directors Responsibility Statement, it is hereby confirmed that: i) in the preparation of the annual financial statements for the year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; ii) the Directors have 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 as at 31st March, 2016 and of the loss of the Company for the year ended on that date; iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) the Directors have prepared the annual financial statements for the year ended 31st March, 2016, on a 'going concern' basis; v) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; vi) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. RELATED PARTY TRANSACTIONS All contracts or arrangements entered into by the Company with Related Parties have been done at arm's length and are in the ordinary course of business. Pursuant to Section 134 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of such transactions are provided in Form AOC-2 which is annexed herewith as Annexure "A" to this report. Related Party disclosures as per AS-18 have been provided in the Notes to the financial statement. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure "B". RISK MANAGEMENT The Company recognises that risk is an integral and unavoidable component of business and is committed to managing the risk in a proactive and efficient manner. The Company has formulated Risk Management Policy to identify and then manage threats/risks that could have impact on the goals and objectives of the Company. INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY MSL has aligned its current systems of internal financial control with the requirement of Companies Act, 2013. MSL's internal controls are commensurate with its size and nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statues, safeguarding assets from unauthorized use, executing transactions with proper authorisation and ensuring compliance of corporate policies. The management assessed the effectiveness of the Company's internal control over financial reporting (as defined in Clause 17 of SEBI Regulations 2015) as of 31s'March,2016. The assessment involved self review and external audit. Aaryaa & Associates, the Statutory Auditors of MSL has audited the financial statements including in this annual report and has issued an attestation report on our internal control over financial reporting (as defined in Section 143). The Audit Committee reviews reports submitted by the management and audit reports submitted by internal auditors and Statutory Auditors. Suggestions for improvement are considered and the Audit Committee follows up on corrective action. Based on its evaluations (as defined in Section 177 of Companies Act, 2013 and Clause 18 of SEBI Regulations 2015), the Audit Committee has concluded that, as of 31st March, 2016, the internal financial controls were adequate and operating effectively. AUDITORS At the Annual General Meeting held on 29i" September, 2014, M/s. Aaryaa & Associates, Chartered Accountants, were appointed as Statutory Auditors of the Company to hold office till the conclusion of the Annual General Meeting to be held in the year 2019. In terms of the provisions of Section 139 of the Companies Act, 2013, the appointment of the Auditor shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Aaryaa & Associates, Chartered Accountants, as Statutory Auditors of the Company will be placed for ratification by shareholders. In this regard, the Company has received a Certificate from the Auditors to the effect that if their appointment is ratified, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. The Board of Directors have approved the appointment and remuneration of M/s. V. Kumar & Associates as Cost Auditors of the Company to conduct the cost audit for the year 2016-17 on the recommendations of the Audit Committee subject to the ratification of the remuneration by the shareholders. The Board has appointed M/s. Sharma Sarin & Associates, Company Secretaries, to conduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report in Form MR-3 for the financial year ended 31st March, 2016 is annexed herewith as Annexure "C" to this report. AUDITOR'S REPORT The Notes on financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark. HUMAN RESOURCES The Company is having motivated work force. Harmonious employee relations prevailed throughout the year. Your Directors place on record their appreciation for all employees for their hard work and dedication. EXTRACT OF ANNUAL RETURN The extract of the Annual Return of the Company in Form MGT-9 is annexed herewith as Annexure "D" to this report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Particulars of Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in the Annual Report. MATERIAL CHANGES AND COMMITMENTS, IF ANY AFFECTING FINANCIAL POSITION OF THE COMPANY There are no adverse material changes or commitments occurring after 31st March, 2016, which may affect the financial position of the Company. SIGNIFICANT AND MATERIAL ORDERS There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. APPRECIATION The Directors would like to express their sincere appreciation of the co-operation received from the Bankers. The Directors also wish to place on record its appreciation for the commitment displayed by all employees at all levels during the year. The Directors also take this opportunity to express its deep gratitude for the continued co-operation and support received from its valued stakeholders. For & on behalf of the Board Amarjit Goyal Chairman & Whole Time Director Place : Chandigarh Dated: 28th May, 2016 |