DIRECTORS' REPORT & MANAGEMENT DISCUSSION ANALYSIS DEAR SHAREHOLDERS, Your Directors have pleasure in presenting Fourth Annual Report of the Company together with the Audited Balance Sheet as at 31st March, 2015 and the Statement of Profit & Loss for the year ended on that date Scheme of Arrangement Pursuant to the Scheme of Arrangement entered between your Company, Star Ferro and Cement Limited and their respective shareholders, duly approved by the Hon'ble High Court of Meghalaya at Shillong vide its order dated 31st March, 2015, the business of Ferro Alloys unit of Star Ferro and Cement Limited along with captive power plant has been demerged and all the assets and liabilities of the Ferro Alloys business including the captive power plant attached thereto as also the investment in equity of Meghalaya Power Limited have been transferred to and vested in the Company at their book value on going concern basis with effect from 1st April, 2014 being the appointed date of demerger as approved. The Scheme although effective from 10th April, 2015, being the date of filing of certified copy of the order with the Registrar of Companies, has become operative from 1st April, 2014 being the appointed date. The main objective of the demerger was to unlock shareholder value. In addition, the demerger shall have focused attention on each of the segments and a more transparent benchmarking of the companies with their peers in their respective industries, enabling the investors to hold separate focused stocks. The figures for current year are not comparable with figures of previous years due to effect of the scheme in current year figures. Allotment of Shares and Share Capital In accordance with the Scheme, the Board of Directors of the Company at their meeting held on 28th April, 2015, issued and allotted 222,172,990 Equity Shares of H1/- each to every member of Star Ferro and Cement Limited (SFCL) holding fully paid up equity shares of SFCL and whose name appeared in the Register of Members of SFCL as on 24th April, 2015, the record date fixed by SFCL for this purpose. The shares have been allotted in the ratio of 1:1, i.e. one fully paid-up Equity shares of Rs.1/- each in the Company for every one Equity Share of Rs.1/- each held in SFCL on 28th April, 2015. Your Company will take necessary steps to get these shares listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Cancellation of Shares Upon allotment of aforesaid shares, existing 500,000 Equity Shares of Rs.1/- each held by Star Ferro and Cement Limited ('Demerged Company') in the Company were cancelled. Ferro Alloys Business The year 2014-15 was a difficult one in terms of operating business environment with Indian economy facing various challenges. Persistent inflationary conditions together with poor market sentiments and high interest rates pegged industrial growth. Infrastructural bottlenecks, weak rupee coupled with a tapered demand and contraction of industrial production was observed during the year under review. Liquidity conditions have worsened due to persistent hardening of interest rates, resulting into drying of availability of funds for the Industry. The Steel sector, one of the largest consumers of your Company's products, witnessed weak demand and dumping of Ferro Silicon from China into India. As a result, the demand for Ferro Alloys remained subdued. Despite these constraints and challenging environment, your Company continued to focus on its fundamental strength of its ability to continuously focus on productivity and quality. There was strong emphasis on internal efficiencies together with an improvement in the sales mix which enabled your Company to withstand inflationary pressures on costs and profitability. During the year under review, your Company has sold 13,849 MT of Ferro Silicon during the year under review as against 17,331 MT during the immediate previous year. While your Company constantly strives to increase stakeholder's value, emphasis continues to be on delivering value to customers and strengthening processes while driving sustainable practices, resulting into expanding our customer base. Future Outlook The Indian Ferro Alloys industry has a capacity of 5.15 million tonnes and accounts for 10% of the world's Ferro Alloys production. The industry has abundant rich Chrome Ore and Manganese deposit but has not been globally competitive despite low manpower cost mainly due to the various challenges faced by the Industry essentially on account of high cost of electric power and power shortage, inadequate transportation facilities for rapid transportation of ores from mines to plants, lack of capital and technology. There is stiff competition from the producers and exporters of the Ferro Alloys in India. Exports from India to China, South Africa and other countries constitute nearly 50% of the market of the Ferro Alloys. China has become the largest consumer of Ferro Alloys and thus has been dominant in the market. There is a wide fluctuation in Ferro Alloys price in international market. The Global Ferro Alloys market is anticipated to increase at a CAGR of 5.4%. by the FY2020. With the change in the Government, the Indian industry is expected to grow at the rate of 8-10% over the medium term and translate into enhanced business opportunities for the overall industry. India is expected to be one of the highest in growth of Steel consuming nations in the next decade. With this, Steel scenario globally and domestically is likely to be changed, the consumption of Ferro Alloys will increase domestically and internationally in coming years. Opportunities and Threat Ferro Alloys business has been transferred to the Company pursuant to the Scheme of arrangement. Performance of the Company depends on the continued demand for our products in the steel and stainless steel industry. The Steel business is cyclical in nature, accordingly, performance and results of operations are influenced by a variety of factors relating to the steel industry like fluctuations in demand and supply of steel and steel products, both domestically and internationally, general economic conditions and changes in the international prices of steel and steel products and slowdowns in steel industry. Uncertainty of availability of raw materials and other resources such as water, uninterrupted power supply, skilled manpower etc., high cost, insufficient infrastructural facilities for rapid transportation from ore mines to plants may also affect the operations and in turn the financial condition and profitability of the Company. The Indian Ferro Alloys industry has tremendous growth opportunities which may lead India in emerging as the leading exporter of Ferro Alloys for the world. In view of investment projections by the Government for infrastructural sector, demand of steel in future may accelerate. The Twelfth Five Year Plan projects infrastructural investment worth US$ 1 trillion, which could accelerate steel off-take. The increase in infrastructural spending could translate into an additional steel demand. Performance and Operations Review Due to slower growth in Global steel market output, the performance of Ferro Alloys remained dampened and subdued during the year under review. Despite weak economy and intense market situation, the Ferro Alloys segment posted a turnover of Rs.11,591 lacs and profit before tax stood at H881.30 Lacs. During the year under review the production was at 14,835 MT. Extract of Annual Return In terms of requirement of Section 134 (3)(a) of the Companies Act, 2013, the extract of the Annual return in form MGT-9 is annexed herewith and marked Annexure 1. Meetings of the Board During the year six (6) Board Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. The details of the Board Meeting are provided in the Corporate Governance Report. Committees of the Board The composition and terms of reference of the Audit Committee, Nomination and Remuneration Committee and Share transfer cum Stakeholders Relationship Committee has been furnished in the Corporate Governance Report forming a part of this Annual Report. Whistle Blower Policy / Vigil Mechanism The Company has formed a Whistle Blower Policy/ Vigil Mechanism as required under Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. A Vigil (Whistle Blower) mechanism provides a channel to the employees and Directors to report to the management concerns about unethical behavior, actual or suspected fraud or violation of the Codes of conduct or policy. The mechanism provides for adequate safeguards against victimisation of employees and Directors to avail of the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The said policy may be referred to, at the Company's website at the web link: <http://shyamcenturyferrous.com/wp->conten^uploads/2015/04/Whistle_Blower_Policy.pdf. Directors' Responsibility Statement Pursuant to requirement of Section 134 (3)(c) read with Section 134(5) of the Companies Act, 2013, the Directors hereby confirm and state that: • In the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with the proper explanation relating to material departures, if any; • The Directors have selected such accounting policies and have 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, 2015 and of the profit of the Company for the year under review; • The Directors have 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; • The Directors have prepared the annual accounts on going concern basis; • The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively; • 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. Declaration by Independent Directors All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013. Mr. Santanu Ray, Mr. Mangilal Jain and Mrs. Plistina Dkhar are Independent Directors on the Board of your Company. In the opinion of the Board and as confirmed by these Directors, they fulfil the conditions specified in Section 149 of the Act and the Rules made there under about their status as Independent Director of the Company. Policy on Appointment and Remuneration of Directors The Board has framed a Remuneration Policy for selection, appointment and remuneration of Directors, Key Managerial Personnel and Senior Management Employees. The remuneration policy aims to enable the Company to attract, retain and motivate highly qualified members for the Board and other executive levels. The remuneration policy seeks to enable the Company to provide a well-balanced and performance-related compensation package, taking into account shareholder interests, industry standards and relevant Indian corporate regulations. Auditors & Auditors' Report M/s. Kailash B. Goel & Co., Chartered Accountants, Statutory Auditors (Firm Registration no. 322460E) of the Company, will retire at the conclusion of the ensuing Annual General Meeting of the Company. Being eligible, they have offered themselves for re-appointment and have confirmed that their appointment, if made, will be in accordance to the provisions of Section 141 read with Section 139 of the Companies Act, 2013 and the rules framed there under for re-appointment of auditors. Members are requested to approve and ratify their appointment. Members are also requested to empower the Board of Directors for fixation of Auditor's Remuneration. The notes to the accounts referred to in the Auditors' Report are self-explanatory and, therefore, do not call for any further comments. Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its manufacturing activity is required to be audited. Your Directors have appointed M/s. B. G. Chowdhury & Co., Cost Accountants, Firm Registration number 000064 as Cost Auditor of the Company for the financial year ended 31st March, 2015. The remuneration proposed to be paid to them requires ratification of the shareholders of the Company. In view of this, your ratification for payment of remuneration to Cost Auditors is being sought at the ensuing Annual General Meeting. The ratification of remuneration is proposed to be taken afresh from shareholders of your Company in view of transfer of Ferro Alloys Business from Star Ferro and Cement Limited to your Company. Further, the Board, on recommendation of audit committee has re-appointed M/s. B. G. Chowdhury & Co., Cost Accountants, Firm Registration number 000064 as Cost Auditors for the ensuing Financial Year. The remuneration proposed to be paid to them requires ratification of the shareholders of the Company. In view of this, your ratification for payment of remuneration to Cost Auditors is being sought at the ensuing Annual General Meeting. Particulars of Loans, Guarantees or Investments During the year under review, your Company has not given any loan or guarantee to any person falling under ambit of Section 186 of the Companies Act, 2013. Details of Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. Related Party Transactions All related party transactions that were entered into during the financial year under review were entered on an arm's length basis and in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. The details of transactions entered into with the Related Parties are annexed herewith and marked Annexure - 2. A policy on 'Related Party Transactions' has been devised by the Company which may be referred to, at the Company's website at the web link <http://shyamcenturyferrous.com/wp-content/> uploads/2015/07/Related_Party_Policy.pdf. Reserves During the year under review no amount was transferred to reserves. Dividend In order to conserve resources for future operations, your Directors do not recommend any dividend for the Financial Year 2014-15. Conservation of Energy (Steps Taken / Impact on Conservation of Energy, Steps Taken for Utilising Alternate Sources of Energy, Capital Investment in Energy Conservation Equipments) Your Company has taken following steps towards Conservation of Energy during the year under review: • Replacement of metallic blades with FRP blades in cooling tower fan of Ferro Alloys plant. • Condenser tube cleaning work was carried out to improve heat transfer area, vacuum & reduce CT fan power consumption. • CT fan VFD operation controlling configured in DCS for maintaining required AT. • APH tube leakage arrested & damaged tubes replaced in order to minimise air leakage & reduced ID fan power consumption. • Secondary air nozzle maintenance work was carried out to reduce un-burnt carbon. • Replacement of Bed coil for minimising boiler breakdown. • Installation of energy meters to minimise import power loss. Technological Absorption • Installation of 3000 KVAr, 42.5 KV HT Harmonic Filter Capacitor bank at Furnaces. Expenditure on Research & Development The Company has developed a Research & Development cell for carrying out R&D Projects in the plant with specific objective of development of advanced systems for quality improvement. During the year under review, your Company incurred Capital expenditure of H1.33 Lacs. Foreign Exchange Earnings and Outgo During the period under review, there was no Foreign Exchange Earning and Outgo. Corporate Social Responsibility Initiatives (CSR) Your Company's Corporate Social Responsibility (CSR) Policy is committed towards improving the quality of life of communities by working on four thrust areas - employability, education, health and environment. During the year under review the Company has constituted Corporate Social Responsibility Committee as per the requirements of Section 135 of the Companies Act 2013. The Committee is headed by Mr. Sajjan Bhajanka, Director of your Company and consists of members as stated below: Directors and Key Managerial Personnel Mr. Aditya Vimal kumar Agarwal was appointed as Additional Director of the Company with effect from 1st April, 2015. Mr. Mangilal Jain and Mr. Santanu Ray were appointed as Additional Directors of the Company in the capacity of Independent Directors with effect from 1st April, 2015 subject to the confirmation by the members at the ensuing General Meeting. The Board of Directors appointed Ms. Hasti Doshi as Chief Financial Officer (CFO), Mrs. Rachna Pareek as the Company Secretary and Mr. M. V. K. Nageswara Rao as Chief Executive Officer (CEO) of the Company with effect from 1st April, 2015, 16th April, 2015 and 1st May, 2015 respectively. In accordance with the provisions of Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company, Mr. Nag Raj Tater will retire by rotation and being eligible offers himself for re-appointment. In view of his considerable experience, your Directors recommend his re-appointment as Director of the Company. The following personnel are Key Managerial Personnel of the Company: 1. Mr. M. V. K. Nageswara Rao - Chief Executive Officer 2. Ms. Hasti Doshi - Chief Financial Officer 3. Mrs. Rachna Pareek - Company Secretary Associate Company Consequent to the Scheme of Arrangement becoming effective, M/s Meghalaya Power Limited has now become associate to your Company in terms of section 2 (6) of the Companies Act, 2013. Policy on Prevention of Sexual Harassment The Company values the integrity and dignity of its employees. The Company has put in place a 'Policy on Prevention of Sexual Harassment' as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("Sexual Harassment Act"). We affirm that adequate access has been provided to any complainants who wish to register a complaint under the policy. No complaint was received during the year. Audited Financial Statements of the Company's Associate The Ministry of Corporate Affairs, Government of India, vide its Circular dated 14th October, 2014 clarified that in case of a Company which does not have a subsidiary or subsidiaries but has one or more associate company, no consolidation of Financial statements in respect of associate companies is required to be made for the Financial Year commencing from the 1st day of April, 2014 and ending on the 31st March, 2015. Hence, Accounts of the Associate Company has not been consolidated with the financial statements of the Company for the current financial year. Pursuant to sub-section (3) of Section 129 of the Act, the statement containing salient features of the financial statement of associate company Meghalaya Power Limited (MPL) for the year ended March 31, 2015 is annexed in the Form AOC - 1 and marked as Annexure-3. During the year under report, the Company has not accepted any deposits from public or from any of the Directors of the Company or their relatives falling under ambit of Section 73 of the Companies Act, 2013. Changes Impacting Going Concern Status and Company's Operations During the year under review, there have been no material orders passed by the Regulators/Courts impacting materially the going concern status or future operations of the Company except the order passed by the Hon'ble High Court of Meghalaya, Shillong in respect of Scheme of Arrangement as detailed in the foregoing paragraphs of this report. Internal Control Systems and their Adequecy Internal control systems have been designed and put to use in such a manner that it is commensurate with the size and nature of its business. With the adequate level of internal control in place, all operational and related activities are performed effectively and efficiently. The Internal Audit Department of the Company periodically reviews the effectiveness and efficacy of Internal Control Systems and procedures depending on the size and risk potential. Audits are finalised and conducted based on internal risk assessments. Significant deviations from the standard procedures are brought to the notice of the Board periodically and corrective measures are recommended for implementation. All these steps facilitate timely detection of any irregularities and early remedial measures to be undertaken so that no monetary losses are sustained. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. Risk Management The Company has evolved a risk management framework to identify, assess and mitigate the key risk factors of the business. The Board of the Company is kept informed about the risk management of the Company. Corporate Governance A separate section on corporate governance, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report. This certificate will be forwarded to the stock exchanges along with the Annual Report of the Company. Chief Executive Officer (CEO) /Chief Financial Officer (CFO) Certification In view of Company's proposed arrangement for listing of its shares on NSE and BSE, as required under Clause 49 of the Listing Agreement, the CEO/CFO certification has been submitted to the Board and a copy thereof is contained elsewhere in this Annual Report. Green Inititatives in Corporate Governance Ministry of Corporate Affairs has permitted Companies to send copies of Annual report, Notices, etc., electronically to the email IDs of shareholders. Your Company has arranged to send the soft copies of these documents to the registered email IDs of the shareholders, wherever applicable. In case, any shareholder would like to receive physical copies of these documents, the same shall be forwarded upon receipt of written request in this respect. Human Resource Development & Industrial Relations The Company has always provided a congenial atmosphere for work to all sections of society. It has provided equal opportunities of employment to all irrespective to their caste, religion, color, marital status and sex. The Company believes that human capital of the Company is its most valuable assets and its human resource policies are aligned towards this objective of the Company. The Company focuses on enhancing organisational performance by focusing on quick grievance resolution mechanisms and maintaining cordial relations with employees and workmen across all levels. The relation amongst its employees remained harmonious and the year under review remained free from any labor unrest. There are 167 numbers of employees during the year under review. Particulars of Employees The Company has no employee whose remuneration exceeds the limit prescribed under section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Acknowledgement Your Directors take this opportunity to express their deep sense of gratitude to the Banks, Central and State Governments and their departments and the local authorities, customers, vendors, business partners/associates and Stock exchanges for their continued guidance and support. Your Directors would also like to place on record their sincere appreciation for the commitment, dedication and hard work put in by every member of the Company and recognises their contribution in Company's achievements. Your directors express their gratitude to the shareholders of the Company for reposing their confidence and faith in the Management of the Company. Cautionary Statement Statements in this report describing the Company's objectives, expectations or predictions, may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company's operations include: global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country, and other factors which are material to the business operations of the Company. For and on behalf of the Board of Director NAG RAJ TATER Director (DIN: 00266072) SAJJAN BHAJANKA Director (DIN: 00246043) Place: Kolkata Date: 7th May, 2015 |