DIRECTORS' REPORT TO THE MEMBERS Your directors present the 59thAnnual Report and the Audited Financial Statements of the Company for the financial year ended 31st March, 2015, and the audited consolidated financial statements of the Company for the Financial Year ended 31st March, 2015 STATE OF COMPANY'S AFFAIRS Ferro alloy refers to various alloys of iron, which are used in the production of mild steel, carbon steel, special alloy steel and stainless steel. India's steel production is increasing every year, thereby the consumption of Ferro Alloys is also increasing. The Ferro Alloys industry has a capacity of 5.15 million tonnes. It is accounting for nearly 10% of the world's ferro alloy production and is among the 10 largest producers of the material in the world. In the midst of raw material availability being a key factor for Ferro Alloy industry growth, production is concentrated in a few pockets. India, South Africa, China and the CIS countries are the large producers of Ferro Alloys. India's Ferro Alloys production comprises of Ferro chrome about 32%, Ferro Manganese and Silicon Manganese about 62% and rest other alloys. India has fifth largest chrome ore reserves at about 100 million tonnes and sixth largest manganese ore reserves of about estimated 176 million tonnes . Your company is engaged mainly in production of ferrochrome. Growth in stainless steel production which is the main user of ferro chrome has been sluggish during the last year. This resulted in fall in sales realisations and combined with higher input costs and increase in working capital requirement put profitability and debt-servicing capability under stress. Your company's turnover for the current financial year, 2014-15 stood at Rs. 59069.32 lacs as against Rs. 63262.91 lacs last year, an decrease of 6.63% over the previous year. Exports during the year were Rs. 21269.53 lacs. Further, your company has posted a profit before tax of Rs. 2456.11 lacs this year as against Rs. 4296.57 lacs in the previous year, reflecting a decrease of 42.84% on account of the factors mentioned earlier. PROSPECTS Prospects of Ferro Alloys industry are linked to the growth and progress of Steel Industry. With Steel Industry contributing substantially to the growth of Indian Economy, India has emerged as the 4th largest producer of crude steel in the world as against the 8th position it occupied in 2003 and expects to become the 2nd largest producer of crude steel soon. The market size of the ferroalloys industry is estimated to have shrunk in 2014-15, led by a drop in market size of chrome alloys, which had close to 30 per cent share in revenues. India's economic outlook is improving following the election of a new government which is promising pro-business reforms. In FPL's 2015-16, structural reforms and improving business confidence will support a further 6% growth in steel demand but higher imports and increasing input costs coupled with regulatory issues related to mining remain key downside risks. FUTURE STRATEGY AND GROWTH With power being a major cost element in production of ferrochrome, your Company, as a measure for backward integration, has set up a 100 MW Captive thermal Power Plant through its subsidiary Facor Power Ltd. (FPL). At present only one Boiler & one Turbine of FPL's power plant is in operation which is generating about 35-38 MW power as per the requirement of your Company and selling around 1-1.50 MW power at IEX. Further, FPL has signed a Power Sharing Agreement with M/s Balasore Alloys Ltd., a Ferro Alloys producer in Orissa to share power of upto 35 MW on group captive basis. DIVIDEND Keeping in view the future requirement of funds for working capital and other purposes, the Directors do not recommend any dividend in the financial year ended 31st March, 2015. FINANCE Cash and cash equivalent as at March 31, 2015 was Rs. 133.97 lacs. The Company continues to focus on judicious management of its working capital. Receivables, inventories and otherworking capital parameters were kept under strict check through continuous monitoring. DEPOSITS The Company has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies(Acceptance of Deposits) Rules, 2014. CONSOLIDATED FINANCIAL STATEMENTS In accordance with the Accounting Standard 21 on Consolidated Financial Statements read with Accounting Standard 23 on Accounting for Investments in Associates, the audited consolidated financial statement is provided in the Annual Report for the year. SHARE CAPITAL The paid up Equity Share Capital as on March 31, 2015 was Rs. 1852.68 lacs. During the year under review, the Company has neither issued shares with differential voting rights nor granted stock options nor sweat equity. INDUSTRIAL RELATIONS Industrial relations with workers, trade unions, and with local populace remained amicable and pleasant throughout the year. DIRECTORS Mr. Vineet Saraf shall retire by rotation at the ensuing 59th Annual General Meeting and, being eligible, offers himself for re-appointment in accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of theCompany. During the year, Mr. Anurag Saraf was appointed as an Additional Director in the category of Non-Executive Director w.e.f 10th November, 2014. Mr. Umesh Khaitan and Mrs. Urmila Gupta as Additional Directors of the Company in the category of Independent Director and Independent Woman Director respectively with effect from 13th February, 2015. The above mentioned directors are to be elected in the forthcoming 59th Annual General Meeting of the Company. During the year Mr. Sridhar Srinivasan and Mr. N L Ajwalia resigned from the board due to their other preoccupations. The Board places on record, its appreciation for the outstanding contributions made by Mr. Sridhar Srinivasan and Mr. N L Ajwaliya during their respective tenures of office till 29th September, 2014 and 24th December, 2014 respectively. Further, Mr. Arye Berest, Non-Executive Director ceased to be Director consequent upon his death dated 21st April, 2015. Further, 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 and Clause 49 of the Listing Agreement. The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/executives have affirmed compliance with the said code. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS All new Independent Directors (IDs) inducted into the Board are given an orientation. Chairman & Managing Director and the Senior Management give an overview of the operations of the Company, to familiarise the new IDs with the Company's business operations. The new IDs are given an orientation on the group structure, its operations, subsidiaries, Board constitution and procedures besides providing them with the financials of the Company for at least 3 years and the corporate brochure etc. BOARD EVALUATION The Board evaluated the effectiveness of its functioning and of individual directors. The aspects covered in the evaluation included the contribution to and monitoring of corporate governance practices, participation in the long-term strategic planning and the fulfilment of Directors' obligations and fiduciary responsibilities, including but not limited to, active participation at the Board and Committee meetings. The Chairman had meetings with the Independent Directors and the Chairman of the Nomination and Remuneration Committee also had meetings with the Executive and Non-Executive Directors. These meetings were intended to obtain Directors' inputs on effectiveness of Board/Committee processes. Further, the Independent Directors at their meeting, reviewed the performance of Board, Chairman of the Board and of Non- Executive Directors. REMUNERATION POLICY The Board has, on the recommendation of the Nomination & Remuneration Committee framed a Nomination and Remuneration policy for the appointment and remuneration of the Directors, Key Managerial Personnel and Senior Executives of the Company including criteria for determining qualifications, positive attributes, independence of a Director and other related matters can be accessed at www.facorgroup.in DISCLOSURE AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Ferro Alloys Corporation Limited, (FACOR), believes in equal employment opportunity and remains committed to creating and nurturing a working environment for all employees to enable them work without fear of any prejudice, gender bias and sexual harassment. The Company does not tolerate sexual harassment at the workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. During the Financial Year 2014-15, the Company has not received any complaint of sexual harassment. MEETINGS During the year Six Board Meetings, Four Audit Committee Meetings, One Shareholders' Grievances Committee, Four Nomination and Remuneration Committee and One Corporate Social Responsibility Committee were convened and held, details whereof are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. SUBSIDIARIES The Report and Accounts of the Company are prepared in consolidated form and contains results of its subsidiaries, Facor Power Limited, Facor Realty and Infrastructure Limited and Facor Energy Limited. The annual accounts of the subsidiaries shall be available on request to the members of the Company and are available for inspection at the registered office of the Company. Further, the Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies. During the year under review, there has been no change in the list of subsidiaries or joint ventures or associates. Further, pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of the Company's Subsidiaries', Associates' and Joint Ventures (in Form AOC-1) is attached herewith as "Annexure F". Regarding operations of subsidiaries, it is informed that here have been no operations at Facor Realty And Infrastructure Limited and Facor Energy Limited, Guernsey and the business operations shall be taken up as and when an opportunity emerges. Further, Facor Power Limited, another subsidiary of the Company has set up a 100 MW (2*50MW) Thermal Power Plant at Bhadrak, Orissa which has been funded through a combination of debt and equity in the ratio of 70:30. Due to delays largely due to delay in receipt of statutory approvals which were beyond control and also delay in dispatches by the Project Vendors, there has been Cost Overrun which has been funded through debt and equity. At present only one Boiler & one Turbine is in operation which is generating about 35-38 MW power as per the requirement of FACOR and selling around 1-1.50 MW power at IEX. The Company has signed Power Sharing Agreement with M/s Balasore Alloys Ltd., a Ferro Alloys producer in Orissa to share power of upto 35 MW on group captive basis and is trying to tie up for its balance power sale. As a result of partial functioning of the power plant FPL's operations have resulted in significant losses which is reflected in the consolidated financial statements of the company. DIRECTORS' RESPONSIBILITY STATEMENT On the basis of framework of internal financial controls established and maintained by the Company, the work performed by the internal, statutory, Cost and Secretarial auditors and external agencies, the reviews performed by Management and the relevant Board Committees, the Board, with the concurrence of the Audit Committee, is of the opinion that the Company's internal financial controls were adequate and effective as on 31 March, 2015. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013 the Board of Directors to the best of their knowledge and ability confirm: (a) That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) That we 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 at the end of the financial year and of the profit and loss of the company for that period; (c) That 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) That the annual accounts have been prepared on a going concern basis; (e) That proper internal financial controls were laid down by the company and that such internal financial controls are adequate and were operating effectively. (f) That proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. AUDIT COMMITTEE Audit Committee of the Company comprises of Mr A.S. Kapre, Mr M.B. Thaker, and Mr. S.B. Mishra, all Independent Directors. The committee has been constituted in compliance with the provisions of Clause 49 of the Listing agreement and assumes all responsibilities provided therein, discharging their duties diligently with transparency and accountability as their sole motivation. AUDITORS M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the 61st Annual General Meeting subject to their appointment being ratified at every intervening Annual General Meeting of the Company till 61st Annual General Meeting of the Company. Based on the recommendation of the Audit Committee, the Board of Directors of the Company have proposed the ratification of appointment of M/s Salve & Co., Chartered Accountants, as the Auditors of the Company from the conclusion of the forthcoming 59th Annual General Meeting till the conclusion of the 61stAnnual General Meeting. M/s Salve & Co., have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 141 of the Companies Act, 2013. AUDITOR'S REPORT The observations made in the Auditors' Report are self-explanatory and therefore, do not call for any further comments u/s 134(3) of the Companies Act, 2013. COST AUDITORS Pursuant to Section 141 & 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 activity is required to be audited. Your Directors have, on the recommendation of the Audit Committee, appointed M/s Niran & Co. to audit the cost accounts of the Company for the financial year 2015-16. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to Messrs Niran& Co., Cost Auditors( Registration No. 000113) is included at Item No. 12 of the Notice convening the Annual General Meeting. M/s Niran & Co., have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 141 of the Companies Act, 2013. Further, your Directors had, in accordance with the General Circular from the Ministry of Corporate Affairs appointed M/s Niran & Co., Cost Accountants, as Cost Auditors for Financial Year ended 31st March, 2015, for which Central Government approval had been received by the Company. While the report on Cost audit for Financial Year ended 31st March, 2014 was filed on 24th September, 2014, the report for the year ended 31st March, 2015 would be filed with Central Government before 30th September, 2015. SECRETARIAL AUDITOR Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Ashish Saxena & Company, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company for financial Year 2015-16. The Report of the Secretarial Audit in Form MR-3 is annexed herewith as "Annexure A". CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO A statement giving details of conservation of energy, technology absorption, foreign exchange earnings and outgo, in accordance with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed as Annexure 'B' which forms part of this Report. PARTICULARS OF EMPLOYEES 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 annexed herewith as "Annexure C". In terms of the provisions of Section 197(12) of the Companies Act, 2013 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 employees drawing remuneration in excess of the limits set out in the said Rules forms part of the Report. However, having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the Members of the Company. The said information is available for inspection at Registered Office of the Company during working hours. Any member interested in obtaining such information may write to the Company Secretary, at the registered office and the same will be furnished on request. Further the details are also available on the Company's website: www.facorgroup.in/investerrelations CORPORATE GOVERNANCE Corporate Governance in your Company is about Commitment to values, ethical business conduct, nurturing good business ethics and creating value for its stakeholders in line with the principles of fairness, equity, transparency, accountability and dissemination of information. Your Company's efforts are driven by the fundamental objectives of maximizing value by employing resources in opportunities that generate consistent returns and position it for sustained growth. In terms of clause 49 of the Listing Agreement, a separate report on Corporate Governance, Management Discussion and Analysis along with your Company's Statutory Auditors' Certificate dated 8th August, 2015 confirming the above compliance is annexed to and forms part of the Directors' Report. HUMAN RESOURCE DEVELOPMENT Your Company takes great pride in the commitment, competence and vigour shown by its workforce in all aspects of business. The Company continues to take new initiatives to further align its HR policies to meet the growing needs of its business. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure D". SECRETARIAL AUDIT REPORT In respect of observations made out by the Secretarial Auditor in its report, the management submits, as under: a) As explanation to Rule 13 of Companies (Management & Administration) Rules, 2014 has been deleted w.e.f 24th July, 2014, the management is of the view that intimation regarding 2% change in individual shareholding at the then relevant time was not more required; and b) Slight delay in intimation to Stock exchange was just due to oversight. The same cannot, therefore, be attributed to any negligence on the part of the officers and Directors of the Company. PARTICULAR OF LOANS & INVESTMENTS Particulars of loans, guarantees given and investments made during the year in accordance with section 186 of the Companies Act, 2013 are, as under: RELATED PARTY TRANSACTION There have been no materially significant related party transactions between the Company and the Directors, the management, the subsidiaries or the relatives except for those disclosed in the financial statements. Accordingly, particulars of contracts or arrangements with related parties referred to in Section 188(1) along with the justification for entering into such contract or arrangement in Form AOC-2 does not form part of the report. RISK MANAGEMENT POLICY A company is exposed to uncertainties owning to the sector in which it is operating. The Company is conscious of the fact that any risk that could have a material impact on its business should be included in its risk profile. Accordingly, in order to contain / mitigate the risk, the Board of Directors have approved a Risk management policy which shall be reviewed by Board and the management from time to time. The Company's Risk Management framework is designed to identify, assess and monitor various risks related to key business and strategic objectives and lead to the formulation of a mitigation plan. Major risks in particular are monitored regularly at Executive meetings and the Board of Directors of the Company is kept abreast of such issues. CORPORATE SOCIAL RESPONSIBILITY Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company approved a Policy on CSR and the Policy was parked on the website of the Company. As part of CSR initiatives, your Company during the financial year 2014-15 has amongst other activities, undertaken projects in areas of promoting healthcare, empowerment of woman, ecological balance. These projects are in accordance with Schedule VII of the Companies Act, 2013. The report on CSR activities is attached herewith as Annexure-E to this Report DISCLOSURE WHERE COMPANY IS REQUIRED TO CONSTITUTE NOMINATION AND REMUNERATION COMMITTEE: The Company has constituted a Nomination & Remuneration Committee under Clause 49 of the Listing Agreement &adopted Nomination & Remuneration Policy for appointment and remuneration of Directors Under Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. All the appointments of Directors are as per the Nomination & Remuneration Policy of the Company, which were also approved by the Committee. DISCLOSURE IF MD/WTD IS RECEIVING REMUNERATION OR COMMISSION FROM SUBSIDIARY COMPANY As per Section 197(14) of the Act, 2013 A MD/WTD of company can receive remuneration or commission from any holding company or subsidiary company of such company. This should be disclosed by the company in Board's Report. DISCLOSURE OF VIGIL MECHANISM IN BOARD REPORT The Company has adopted the Vigil Mechanism Policy for the Company in its duly held Board Meeting on 13th February, 2015 and the same is available on the website of the Company. DETAILS OF DIRECTORS AND KMP Pursuant to the provisions of section 2014 and other applicable provisions, if any, of the Companies Act, 2013 and the rules framed there under, Mr. R.K. Saraf, Chairman & Managing Director, Mr. O.P. Banka, Director (Finance) & Chief Finance Officer and Mr. Ritesh INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. DISCLOSURE ABOUT ESOP AND SWEAT EQUITY SHARE Company has not issued any shares under ESOP or Sweat Equity Shares during the year. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There have been no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations. However, members' attention is drawn to the statement on contingent liabilities, commitments in the notes forming part of the Financial statements. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCTION AND PROTECTION FUND In terms of Section 125 of the Companies Act, 2013, unclaimed or unpaid Dividends detailed, as under, are due for remittance on the dates specified below to the Investor Education and Protection Fund established by the Central Government. • Final Dividend for the year 2007-08, on or after 12th October, 2015. • Dividend for the year 2009-10, on or after 17th October, 2017 • Dividend for the year 2010-11, on or after 12th October, 2018 CAUTIONARY STATEMENT Statements in the Board's Report describing the Company's objectives, expectations or forecasts 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 of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations. ACKNOWLEDGEMENTS Directors of the Company wish to thank the Central and State Governments for their continued support and co-operation extended towards the business as well as the company's social functions. The Management also thanks the shareholders, Business Associates, Financial Institutions & Banks, Customers and Suppliers for the faith reposed in the Company and in them. The Board expresses its sincere appreciation to the dedicated and committed team of employees and workmen without whom reaching this far and maintaining the standard and quality of the products for which the company is famous, would not have been possible. We look forward to all of your continued support. Let's grow and move ahead together. On behalf of Board of Directors, R.K. SARAF Chairman & Managing Director Dated : 8th August, 2015 Place : Noida |