DIRECTORS' REPORT Dear Members, The Directors of your Company have pleasure in presenting their 5th Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended, 31st March, 2015. 2. FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS PRODUCTION & SALES REVIEW: During the year under review, your Company has registered Revenue from Operations of Rs. 734.18 Crore as compared to Rs. 408.66 Crore in the previous year. The exports for the year ended were Rs. 28.64 Crore as compared to Rs. 27.29 Crore in the previous year. PROFITABILITY: The Company earned profit before depreciation, interest and tax of Rs. 18.96 Crore as against Rs. 4.43 Crore in the previous year. After providing for depreciation of Rs. 13.87 Crore (Previous Year Rs. 5.70 Crore), interest of Rs. 20.21 Crore (Previous Year Rs. 11.90 Crore), provision for current tax Rs. 0.009 Crore (Previous Year Rs. 0.01 Crore), the net loss from operations worked out to Rs. 15.13 Crore as compared to Rs. 9.42 Crore in the previous year. RESOURCES UTILISATION: a) Fixed Assets: The net fixed assets (including capital work-in-progress) as at 31st March, 2015 were Rs. 250.78 Crore as compared to Rs. 239.93 Crore in the previous year. b) Current Assets: The current assets as on 31st March, 2015 were Rs. 339.89 Crore as against Rs. 299.92 Crore in the previous year. Inventory level was at Rs. 132.89 Crore as compared to the previous year level of Rs. 119.31 Crore. FINANCIAL CONDITIONS & LIQUIDITY: Management believes that the Company's liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:- 3. DIVIDEND: No Dividend was declared during the current financial year. 4. CONSOLIDATED FINANCIAL STATEMENT: As your Company does not have any subsidiary, associate or joint venture company, the provisions of Companies Act, 2013 and Accounting Standards 21, 23 and 27 in relation to consolidation of accounts do not apply. 5. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES: The Company does not have any subsidiary, associate or joint venture company. 6. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT: No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate on the date of this report. 7. CORPORATE SOCIAL RESPONSIBILITY: Your Company is committed to and fully aware of its Corporate Social Responsibility (CSR), the guidelines in respect of which were more clearly laid down in the recently overhauled Companies Act. The Company's vision is to pursue a corporate strategy that enables shareholders value enhancement and societal value creation in mutually reinforcing and synergistic manner. The Corporate Social Responsibility Committee of the Company has formulated and recommended to the Board, a Corporate Social Responsibility (CSR) Policy indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR policy may be assessed on the Company's website at the link: <http://www.vardhmansteel.com/sites/default/files/> corporate social responibility policy.pdf The Company has identified following thrust areas for CSR:- • PROMOTION OF EDUCATION: To continue our endeavour for promoting education by setting up schools, colleges to deliver high quality education to students of all strata of society including wards of VSSL employees. • ENVIRONMENT PROTECTION AND ENERGY CONSERVATION: To protect environment and to sustain and continuously improve standards of Environment, Health and Safety through the collective endeavour of Company and its employees at all levels towards attaining world class standards. • DEVELOPMENT OF HUMAN CAPITAL: To encourage the development of human capital through skills development, vocational training programmes. • RURAL DEVELOPMENT: To contribute to development in rural areas through agricultural research and knowledge sharing, promoting superior farm practices, improving cotton production, productivity and quality and other agri-extension practices such as soil and moisture conservation and watershed management etc. • OTHER INITIATIVES: V To contribute to empowering women economically, supplementing primary and secondary education and participating in rural capacity building programmes and such other schemes. V To respond to emergency situations & disasters by providing timely help to affected victims and their families. V Any other project/ programme pertaining to activities listed in Schedule VII of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules, 2014) During the year, the Company has not undertaken any CSR initiatives as it has incurred losses and was not in a position to make CSR expenditure. The disclosures related to CSR activities pursuant to Section 134(3) of the Companies Act, 2013 read with Rule 9 of Companies (Accounts) Rules, 2014 and Companies (Corporate Social Responsibility) Rules, 2014 is annexed hereto and form part of this report as Annexure I. 8. RISK MANAGEMENT: The Board of Directors in their meeting held on 31st January, 2015 had constituted Risk Management Committee of the Company. The Committee has formulated Risk Management Policy of the Company which has been subsequently approved by the Board of Directors of the Company. The aim of risk management policy is to maximize opportunities in all activities and to minimize adversity. The policy includes identifying types of risks and its assessment, risk handling and monitoring and reporting, which in the opinion of the Board may threaten the existence of the Company. The Risk Management policy may be accessed on the Company's website at the link: <http://www.vardhmansteel.com/sites/default/files/> downloadfiles/risk_management_policy_final.pdf 9. INTERNAL FINANCIAL CONTROLS: The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed. 10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES: All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. The details of material contracts/ arrangements/ transactions at arm's length basis for the year ended 31st March, 2015 is annexed hereto and form part of this report as Annexure II. The Policy on dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.vardhmansteel.com/sites/default/files/> downloadfiles/related party transaction final.pdf Your Directors draw attention of the members to Note 37 to the financial statement which sets out related party disclosures. 11. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013: Particulars of loans given/ taken, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement (Please refer to Note 13, 14, and 15 to the financial statement). 12. DIRECTORS AND KEY MANAGERIAL PERSONNEL: Mrs. Suchita Jain, Director of the Company, retire by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of the Articles of Association of the Company and being eligible, offer herself for re-appointment. The Board recommended her appointment for the consideration of the members of the Company at the ensuing Annual General Meeting. During the year under review, the members approved the appointments of Mr. Prafull Anubhai, Mr. Rajeev Gupta, Mr. Jayant Davar, Mr. Sanjeev Pahwa and Mr. Mukund Choudhary as Independent Directors of the Company who are not liable to retire by rotation. Declaration under Section 149(6): The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules thereof. Company's Policy relating to Directors appointment, payment of remuneration and discharge of their duties: The Nomination & Remuneration Committee of the Company has formulated the Nomination & Remuneration Policy on Director's appointment and remuneration includes the criteria for determining qualifications, positive attributes, independence of a director and other matters as provided under Section 178(3) of the Companies Act, 2013. The Nomination & Remuneration Policy is annexed hereto and form part of this report as Annexure III. Familiarisation programmes for Board Members: The Board members are provided with necessary documents/ brochures, reports and internal policies to enable them to familiarise with the Company's procedures and practices. Periodic presentations are made at the Board and Board Committee Meetings on business and performance updates of the Company, global business environment, business strategy and risks involved. Quarterly updates on relevant statutory changes and landmark judicial pronouncements encompassing important laws are regularly circulated to the Directors. Site visits to various plant locations are organized for the Directors to enable them to understand the operations of the Company Annual Evaluation of the Board Performance: The meeting of Independent Directors of the Company was held on 30th March, 2015 to evaluate the performance of Non-Independent Directors, Chairman of the Company and the Board as a whole for the financial year 2014-15. The evaluation was done by way of discussions on the performance of the Non-Independent Directors, Chairman and Board as a whole and the minutes of the meeting was submitted to the Chairman of the Company. A policy on the performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of non-executive directors and executive directors have been formulated by the Company. 13. AUDITORS AND AUDITORS REPORT: Statutory Auditors: At the Annual General Meeting held on 24th September, 2014, M/s. S.S. Kothari Mehta & Company, Chartered Accountants, Panchkula were appointed as Statutory Auditors of the Company to hold office till the conclusion of 9th Annual General Meeting of the Company. In terms of provisions of Section 139 (1) of the Companies Act, 2013, the appointment of Statutory Auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. S.S. Kothari Mehta & Company as Statutory Auditors is placed for ratification by the members. Further, the Statutory Auditors of the Company have submitted Auditors' Report on the accounts of the Company for the accounting year ended 31st March, 2015. This Auditors' Report is self-explanatory and requires no comments. Secretarial Auditor: M/s. Khanna Ashwani & Associates, Company Secretary in Practice, were appointed as Secretarial Auditors of the Company by the Board of Directors of the Company in their meeting held on 17th May, 2014 for the financial year 2014-15. The Secretarial Auditors of the Company have submitted their Report in Form No. MR-3 as required under Section 204, of the Companies Act, 2013 for the financial year ended 31st March, 2015. This Report is self-explanatory and requires no comments. The Report forms part of this report as Annexure IV. Cost Auditor: The Board of Directors has appointed M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, as the Cost Auditors of the Company to conduct Cost Audit of the Accounts for the financial year ended 2015-16. However, as per provisions of Section 148 of the Companies Act, 2013, read with Companies (Cost Records and Audit) Rules, 2014, the remuneration to be paid to the Cost Auditors is subject to ratification by members at the Annual General Meeting. Accordingly, the remuneration to be paid to M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, for financial year 2015-16 is placed for ratification by the members. The Cost Auditor's Report for the Financial Year 2014-15 will be forwarded to the Central Government as required under law. 14. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW: Four meetings of the Board were held during the year. 15. AUDIT COMMITTEE DISCLOSURES: Composition: The Audit Committee consists of Mr. Prafull Anubhai, Independent Director, Mr. Rajeev Gupta, Independent Director, Mr. Sanjeev Pahwa, Independent Director and Mr. R.K. Jain, Non-Executive Director. Mr. Prafull Anubhai is the Chairman of the Committee and Ms. Sonam Taneja is the Secretary of the Committee. All the recommendations made by the Audit Committee were accepted by the Board. Vigil Mechanism: The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Listing Agreement aims to provide a channel to the employees and Directors to report to the management concerns about unethical behaviour, actual or suspected fraud or violation of the Codes of conduct or policy. The mechanism provides for adequate safeguards against victimization of employees and Directors to avail of the mechanism and also provide for direct access to the Chairman/ Chairman of the Audit Committee in exceptional cases. The Policy on Vigil Mechanism and whistle blower policy as approved by the Board may be accessed on the Company's website at the link: <http://www.vardhmansteel.com/sites/default/files/> downloadfiles/vigil mechanism final.pdf 16. CORPORATE GOVERNANCE: The Company has in place a system of Corporate Governance. A separate report on Corporate Governance forming part of the Annual Report of the Company is annexed hereto. A certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Corporate Governance Clause of the Listing Agreement is annexed to the report on Corporate Governance. 17. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: Energy conservation continues to be an area of major emphasis in our Company. Efforts are made to optimize the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, are annexed hereto and form part of this report as Annexure V. 18. ANNUAL RETURN: The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 for the financial year 2014-15 in Form No. MGT-9 is annexed hereto and form part of this report as Annexure VI. 19. HUMAN RESOURCES /INDUSTRIAL RELATIONS: The Company continues to lay emphasis on building and sustaining an excellent organization climate based on human performance. Performance management is the key word for the company. During the year the Company employed around 827 employees. Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floors of the various plants. 20. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES: The disclosures in respect of managerial remuneration as required under section 197(12) read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and form part of this report as Annexure VII. None of the employee of the Company receives salary in excess of the limits set out in Rule 5 (2) and 5 (3) Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014. In terms of section 197(14) of the Companies Act, 2013, the Company does not have any Holding or Subsidiary Company. 21. DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submit its Responsibility Statement:— a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with the proper explanation relating to material departures; b. appropriate accounting policies have been selected and applied consistently, and have 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 ended on 31st March, 2015; c. proper and sufficient care has been taken 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; d. the annual accounts have been prepared on a going concern basis; e. the Internal financial controls has been laid down to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and f. the proper systems has been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively 22. GENERAL DISCLOSURES: Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Details relating to deposits covered under Chapter V of the Act. 2. Issue of equity shares with differential rights as to dividend, voting or otherwise. 3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme. 4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. 23. ACKNOWLEDGEMENT: Your Directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year. FOR AND ON BEHALF OF THE BOARD (PRAFULL ANUBHAI) Chairman Dated : 2nd May, 2015 Place : Gurgaon |