DIRECTORS' REPORT Dear Shareholders, Your Directors present the 34th Annual Report together with the Audited Statement of Accounts of the Company for the year ended 31st March, 2015 PERFORMANCE During the year under review, the net sales revenue of the Company was Rs. 2844 crores as against Rs. 2600 crores in the previous year. The operating EBITDA for the year increased to Rs. 418 crores from Rs. 379 crores in the previous year indicating a growth of 10%. After providing for financial expenses, depreciation and expenses amortised, the Profit before exceptional item and tax was Rs. 258 crores during the year under review as against Rs. 204 crores in the previous year. OPERATIONAL REVIEW Your Directors are pleased to inform you that the performance of the Company has achieved all round growth during the year. The entire chain of integrated steel operations performed satisfactory and the Sponge Iron, Power, Steel melting shop and Ferro Alloys Division achieved highest ever capacity utilisation. Encouraged with the performance of the Ferro Alloys division, the Company further added new capacities in the division during the year. Also, during the year, the Company modernized its Steel Melting Shop by replacing some of the existing furnaces with more energy efficient furnaces, which has resulted in substantial cost savings and higher efficiency. I n the finished steel segment, the Company continued with its concerted efforts to expand its customer base by taking steps to enhance the awareness and accessibility of the products. Availability of iron ore has improved significantly during the year leading to correction in the iron ore prices, which resulted in substantial cost reduction in the operations. The operations of Captive coal mine were stable with uninterrupted production during the year, however, in terms of the order dated 24th September, 2014 passed by the Hon'ble Supreme Court cancelling the allotment of all captive coal mines allotted since 1993 and putting them under the auction route, the Chotia Coal Mine of the Company , which was operational for past more than eight years, was also cancelled . Rigid PVC Pipes division also performed satisfactory during the year. FUTURE PROSPECTS The Company has always focused on its approach to achieve full integration at all intermediary product levels throughout its chain of steel operations by augmenting and balancing its existing capacities. The Company has already taken up the implementation of an additional sponge iron Kiln, which is underway. The Company is modernizing further its steel melting shop by replacing some of the existing furnaces with higher capacity energy efficient furnaces. Modernisation of existing furnaces and addition of new furnaces is also underway in the Ferro Alloys Division. In addition, the company is also setting up Private Railway Siding at its Champa plant, which shall result in significant savings to the company in terms of freight cost, reduction in wastages and maintaining uninterrupted supplies of critical inputs like iron ore and coal. These expansion and cost reduction plans will make significant contribution to the profitability and long term sustainability of the business. Although, the Chotia coal mine was cancelled during the year in terms of the order of the Hon'ble Supreme Court, the Company is of the view that the improved availability of coal and softening of its prices worldwide shall make up for the loss to a reasonable extent in the times to come. With a stable and forward looking government, the infrastructure industry is expected to receive major spending in the coming years, which will lead to substantial boost for demand of steel products. As regards the status of the iron ore mines allotted to the Company in the states of Chhattisgarh and Orissa, the Company is making all its efforts to make these mines operational at the earliest. ENVIRONMENT AND SOCIAL RESPONSIBILITY The Company continues to focus on its approach to be exemplary, not only in terms of financial performance, but also by setting rich corporate social responsibility standards for itself. Your Company understands that all organizations operate in social environment and Corporate Social Responsibility (CSR) is the mode through which corporates can repay the obligations which the society has made by contributing the resources in its various forms as required for the efficient operation of the Business. We believe that organizations should make decisions based not only on financial factors, but also on the social and environmental consequences. The Company strictly adheres to its policy to minimize the environmental impact that may be associated with any of its activities. The Company continuously aims at improving efficiency, conserving natural resources and reducing waste and emissions by undertaking CDM (Clean Development Mechanism) projects and to evolve itself into an environment friendly organisation. Company has its Corporate Environment Policy to regulate environmental activities and an Environment Management System (EMS) to ensure optimal utilisation of the resources on one hand and minimising pollution on the other. The Company is a firm believer that the growth and development of the community in and around its locations is prerequisite for its progress. The Company has adopted villages in the surrounding areas and it grants regular assistance to the educational and social institutions in these villages for the economic upliftment of the locals. The Company also organizes non-formal educational programs in the surrounding areas on a regular basis. Company is continually involved in developing recreational and infrastructure facilities in its close vicinity. CORPORATE SOCIAL RESPONSIBILITY AND GOVERNANCE COMMITTEE During the year, your directors have constituted the Corporate Social Responsibility and Governance Committee (CSR & G Committee) comprising Dr. S. L. Keswani, as Chairman and Shri K C Mehra, Shri Kanha Agarwal, Smt Purnima Gupta and Shri Vikram Agarwal as other members. The said Committee has been entrusted with the responsibility of formulating and recommending to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, monitoring the implementation of the framework of the CSR Policy and recommending the amount to be spent on CSR activities. The details of CSR activities during the year are given in the annexure to this report. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors (including non executive and independent Directors) individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and other Committees. The Independent Directors are regularly updated on industry and market trends, plant and process and operational performance of the Company through presentations in this regard. They are also periodically kept aware of the latest developments in the Corporate Governance, their duties as Directors and relevant laws. DIRECTORS The Company has received declarations from all the Independent Directors under Section 149 of the Companies Act, 2013 and Clause 49 of the Listing agreement confirming that they meet the criteria of independence as prescribed. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP) During the year Shri Pankaj Chaturvedi and Smt. Purnima Gupta joined the Board as Indeptehndent Directors and Shri Kanha Agarwal as Director of the Company w.e.f. 25 May, 2014. The members approved appointments of said Directors of the Company at the 33rd Annual General Meeting held on 24th September, 2014. The following three persons are the Key Managerial Personnel of the Company as per the provisions of Section 203 of the Companies Act, 2013. i) Shri M.L. Pareek, Chief Executive Officer ii) Shri P.L. Gupta, Chief Financial Officer iii) Shri Manoj Aggarwal, Company Secretary Pursuant to Section 134(3)(q) read with Rule 5 of Companies (appointment and Remuneration of Managerial Personnel) Rules 2014, the Remuneration and other details of Key Managerial Personnel and other Employees for the year ended 31st March, 2015 are annexed to this report. In accordance with the provisions of the Companies Act, 2013 and Articles of Association of the Company, Shri M.L. Pareek retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. BOARD COMMITTEES All Committees of the Board of Directors are constituted and rechristened, wherever needed, in line with the provisions of the Companies Act, 2013 and Clause 49 of the amended Listing Agreement with the Stock Exchanges. FIXED DEPOSITS Company has not accepted any deposits during the year under review. DIRECTORS' RESPONSIBILITY STATEMENT Your Directors state that: a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgements 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 March 31, 2015 and of the profit of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors have prepared the annual accounts on a 'going concern' basis; e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f ) 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 AUDITORS & AUDITORS REPORTS i) Statutory Auditors The observations made by the Statutory Auditors in their report for the financial year ended 31st March 2015 read with the explanatory notes therein are self-explanatory and therefore, do not call for any further explanation or comments from the Board under Section 134(3) of the Companies Act, 2013. The Auditors' Report does not contain any qualification, reservation or adverse remark. M/s Chaturvedi and Partners, Chartered Accountants, were appointed as Auditors of the Company for tenure of three years i.e. from the conclusion of 33rd Annual General Meeting till the conclusion of the 36th Annual General Meeting to be held in the year 2017 of the Company. However, this appointment is subject to ratification by members at every Annual General Meeting held after appointment during their tenure of office. The Auditors have confirmed their eligibility and qualification under Section 141 of Companies Act 2013 and therefore, their ratification for appointment as Statutory Auditors for the year 2015-16 is being sought from the Members of the Company at the ensuing Annual General Meeting. ii) Secretarial Auditor The Board had appointed Ms. Reetika Gupta, Practising Company Secretary, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith as annexure to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. iii) Cost Auditor The Board had appointed, subject to ratification of the remuneration payable to the cost auditor by the shareholders in the 33rd Annual General Meeting, M/s. Rashit & Associates Cost and Management Accountants, to conduct the audit of the cost accounting records for financial year 2014-15. The Cost Audit Report for financial year 2013-2014 for audit of Cost accounting records has been duly filed with the Ministry of Corporate Affairs. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and 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 were on arms' length basis and were 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 Company at large. All related party transactions are placed before the Audit Committee and given in the notes annexed to and forming part of this Financial Statement. The approved policy on related party transactions is also available on the website of the Company www.prakash.com VIGIL MECHANISM AND WHISTLE BLOWER POLICY The Company has a Vigil Mechanism and Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Vigil Mechanism and Whistle Blower Policy are available on the website of the Company. REMUNERATION POLICY On the recommendation of Nomination & Remuneration Committee, the Board has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The details of the Remuneration Policy are available on the website of the Company. RISK MANAGEMENT As a policy the Company has identified key risk concern/areas. The assessment of each risk area has been done on quarterly basis. Following are the concern areas of the Company: Market Related Risk: related to mainly demand, realisation and redundancy of the product. Production related Risk: related to mainly availability of inputs, accident or break down in the plant and rejection of material by the customers. Human Resources Risk includes the risk of labour unrest, high employee turnover ratio and lower productivity due to dissatisfaction of employees. Revenue Risk: adverse exchange rate movement. The Board and the Audit Committee takes note of the Risk management of the Company in every quarter. The Risk Assessment is also discussed in the Management Discussion and Analysis attached to this report. EXTRACT OF ANNUAL RETURN Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013. Extract of the Annual Return for the financial year ended 31st March, 2015 made under the provisions of Section 92(3) of the Act is attached as annexure to this report. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Annual Report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided as annexure to this Report. Your Directors state that during the year under review, there was no case filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO As required under Section 134 of the Companies Act, 2013 read with the Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1988, a statement showing the information relating to the Conservation of Energy, Research and Development, Technology Absorption and Foreign Exchange Earnings and Outgo is enclosed as annexure to this report. CORPORATE GOVERNANCE The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The Company has also implemented several best corporate governance practices as prevalent globally. The Report on corporate governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance as stipulated under the aforesaid Clause 49, is attached to the Report on corporate governance. APPRECIATION Your Directors wish to place on record their gratitude for the valuable guidance and support rendered by the Government of India, various State Government departments, Financial Institutions, Banks and various stakeholders, such as, shareholders, customers and suppliers, among others. The Directors also commend the continuing commitment and dedication of the employees at all levels, which has been critical for the Company's success. The Directors look forward to their continued support in future. By Order of the Board P. L. Gupta Whole-time Director Vikram Agarwal Managing Director Dated : 25th May, 2015 Place : New Delhi |