BOARD'S REPORT To The Shareholders, The Board of Directors hereby present the 29th Annual Report together with the Audited Financial Statements for the year ended 31st March, 2015. During the year under review, the Steel Industry as well as Automobile and Auto component sectors continued to remain in the market with sluggish demand in addition to this there is a sudden surge in import of iron ore and coal, resulted in the high input costs, which have adversely affected the profitability resulting into lesser margin. However, with the continuous efforts by the Company's Management towards strict cost reduction and better financial /working capital management, has helped to improve its overall performance in order to survive in the difficult market conditions. 2. FINANCE Your Company has ended the financial year with a profit after tax of Rs. 2,441 Lacs. After taking into account the brought forward profit of Rs. 33,849 Lacs, your Company has carried forward an amount of Rs. 36,290 Lacs. 3. DIVIDEND The Company is in need of more funds through internal accruals to cope with the terms and conditions of the lending banks financing ongoing capital projects under expansion programmes, which will enable future growth of the Company. As such, Board of Directors does not recommend dividend on the equity share of the Company for the Financial Year 2014 - 2015. 4. SHARE CAPITAL During the year under review, the authorised share capital of the Company was reclassified, with creation of additional 40,000,000 (Four crore) equity shares of Rs. 10/- (Rs. Ten) each, against cancellation of 4,000,000 (Forty lacs) 10% cumulative preference shares of Rs. 100/- (Rs. One hundred) each, lying unissued and forming part of the authorised share capital of the Company and consequent amendments to the capital clause of the Memorandum and Articles of Association of the Company under Section 13, 14, 61 and 64 of the Act. Further, during the year under review, the Company has issued and allotted 18,021,945 equity shares of face value of Rs. 10/-( Rs. Ten) each, at a premium of Rs. 21/- (Rs. Twenty one) each to Non-promoter foreign body corporate namely M/s Daido Steel Co. Ltd., Japan on preferential allotment basis on 11th September 2014. Accordingly, the issued, subscribed and paid-up share capital of the Company increased from Rs. 1,621,975,030 to Rs. 1,802,194,480 as on 31st March, 2015. 5. MARKET SCENARIO During the year under review, there was no substantial increase of demand in Automobile and Auto Component Industries. However, SUNFLAESTEEL is continuing to develop new high value grades of alloy steel to cater the needs of other domestic as well as international markets than its present market. There is no significant change in current market scenario however it is expected to improve in the days to came after slow down in the past previous year/s. 7. The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future : No such orders passed during the year, hence not applicable. 8. BELGAON COAL BLOCK During the year 2005 - 2006, the Company was allocated Belgaon coal block in the State of Maharashtra for captive use at the Company's steel plant at Bhandara in the State of Maharashtra. As per the order of the Hon'ble Supreme Court of India dated 24th September 2014, the Belgaon coal block which was allocated to the Company stand de-allocated effective 31st March, 2015 with an additional levy of X 295/- per ton on the quantity of coal extracted from the said Coal Block. Further, as per decision, the Nominated Authority, Ministry of Coal, Government of India have auctioned the coal block/s so cancelled including the Belgaon coal block. Your Company has participated in the e-auction and was declared as a successful bidder for re-allocation of the said coal block at a Final Price Offer (FPO) of X 1785/- per MT. 9. PROJECTS Steel Plant : As reported in previous year the Company has undertaken to commission the online inspection system for hot rolled round bars. The project consists of ultrasonic testing machine and 2 Roll straightening machine. The project is expected to be in operation in the current financial year 2015 - 2016. Further, the Company has undertaken alloy feeding system in Ladle re-heating furnace - 2 of Steel Melt Shop wherein alloy materials will be weighted and fed through automatic process in to steel ladle in re-heating process. The project is expected to be commissioned in the current financial year 2015 - 2016. Subsidiary Companies : Sunflag Power Limited : Requisite approvals are being sought for the implementation of Hydro Power Project at Hanol-Tuini in the state of Uttarakhand. Sunflag Special Steels Limited : The management is exploring the business opportunities for the Company. Khappa Coal Company Private Limited : As per the order of the Hon'ble Supreme Court of India dated 24th September 2014, the Khappa & Extn coal block which was allocated to Khappa Coal Company Private Limited, being at initial stage and non-operating one, stand de-allocated with immediate effect. The management will take appropriate steps once the final decision regarding fate of bank guarantee is resolved. Joint Venture Companies (JVC) : Madanpur (North) Coal Company Private Limited and C T Mining Private Limited : As per the order of the Hon'ble Supreme Court of India dated 24th September 2014, the coal block/s which were allocated to Madanpur (North) Coal Company Private Limited in the state of Chhattisgarh and to C T Mining Private Limited in the state of Jharkhand, being at initial stage and non-operating ones, stand de-allocated with immediate effect. The management will take appropriate steps once the final decision regarding fate of bank guarantee is resolved. Gujarat State Mining and Resources Corporation Limited : In absence of allocation of coal block to the JVC and non-viability of integrated coke oven project, the board of directors of the Company at its meeting held on 19th March, 2015 unanimously resolved to strike-off the name of the JV Company subject to requisite approval/s. Daido D.M.S. India Private Limited : Your Company has formed and incorporated a joint venture Company at Faridabad in the National Capital Territory of Delhi with two JV partners namely Daido Steel Co. Ltd., Japan and Daido Die & Mold Steel Co. Ltd., Japan on 10th March, 2015. The JVC is in the process of commencement of its proposed business and commercial activities. The object of the Company is to carry on the business as manufacture (processing, heat treatment, surface treatment), import, export, distribute or otherwise deal in die and mold steel (tool steel and other metallic materials), processed products thereof and mold parts. 10. DEMATERIALISATION OF SHARES As on 31st March, 2015, there were approximately 1072 lacs equity shares dematerialised through depositories viz. National Securities Depository Limited and Central Depository Services (India) Limited, which represents about 59.49% of the total paid-up capital of the Company. 11. LISTING OF SHARES During the year, 18,021,945 equity shares in the capital of the Company issued and allotted on 11th September, 2014 to Daido Steel Co. Ltd., Japan were got listed, subject to lock in period of one (1) year, with BSE Limited (BSE) and The National Stock Exchange of India Limited (NSE) effective 9th October, 2014. The Equity shares of your company continued to be listed with / traded on the BSE Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing fees have been paid to both Stock Exchanges (BSE & NSE) for the financial year 2015 - 2016. 12. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGES EARNINGS AND OUTGO The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are given in the Annex - C to this report. 13. DIRECTORS & KEY MANAGERIAL PERSONNEL I. APPOINTMENT & CESSATION OF KEY MANAGERIAL PERSONNEL (KMP) a) The existing managerial personnel of the Company namely, Mr. Ravi Bhushan Bhardwaj (DIN : 00054700), Vice-Chairman & Managing Director; Mr. Pranav Bhardwaj (DIN : 00054805), Joint Managing Director and Mr. Surendra Kumar Gupta, Whole-time Director, designated as Director & CEO of the Company have been re-classified (recognised) as the key managerial personnel (KMP) of the Company effective 1st April, 2014. b) Mr. Ravi Bhushan Bhardwaj ceased to be the Managing Director & Key Managerial Personnel (KMP) of the Company effective 12th August, 2015. However, continued as a Non-Executive Vice-Chairman of the Company. c) Mr. Pranav Bhardwaj, Joint Managing Director is re-designated as Managing Director of the Company effective 12th August, 2015. d) Mr. Surendra Kumar Gupta, Whole-time Director designated as Director & CEO is re-designated as Deputy Managing Director of the Company effective 12th August, 2015. e) Mr. R. Muralidhar, Executive Director (Finance) of the Company was appointed as the Key Managerial Personnel (KMP) of the Company effective 1st April, 2014. CS Mukesh D Parakh (ICSI Membership No. FCS-4343) Company Secretary was also re-classified (recognised) as the Key Managerial Personnel (KMP) of the Company effective 1st April, 2014. f ) CS Mukesh D Parakh, (Membership No. FCS-4343) Company Secretary of the Company has resigned and in his place, CS Pranab Panigrahi (Membership No. ACS-16186) was appointed as the Company Secretary & Compliance Officer of the Company effective 5th August, 2014. II. RETIREMENT BY ROTATION Pursuant to Section 152 of Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014, Mr. Pranav Bhardwaj (DIN : 00054805), Managing Director retire by rotation and, being eligible, offers himself for re-appointment. The Board recommends his re-appointment in the interest of the Company. III. NOMINATION & CESSATION OF NOMINEE DIRECTOR IDBI Bank Limited has withdrawn nomination of Mr. Sonam Bodh (DIN - 06731687) from the Board and instead appointed Mr. P. K. Das (DIN - 06593113) (Chief General Manager - RBG, IDBI Bank Limited, Nagpur), effective 12th December, 2014. Further, IDBI Bank Limited has also withdrawn nomination of Mr. P. K. Das (DIN - 06593113), effective 11th February, 2015. The Board places on record its appreciation for valuable services and wide contributions made by Mr. Sonam Bodh and Mr. P. K. Das during their respective tenure as a Nominee Director/s of the Company. IV. APPOINTMENT OF INDEPENDENT DIRECTOR Pursuant to Section 149, 152, Schedule IV of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement/s, Mrs. Neelam Kothari (DIN - 06709241) was appointed as an Additional Director (Non-executive, Independent Director) effective 29th September, 2014 and her term is expiring at the conclusion of ensuing Annual General Meeting of the Company. The Company has received a notice in writing under Section 160 of the Companies Act, 2013 from a member proposing her candidature for office of the Director (Non-executive, Independent Director) of the Company. The Board recommends her appointment as a Non-executive, Independent Director for a fixed term of consecutive five (5) years i.e. from the conclusion of 29th Annual General Meeting up to the conclusion of 34th Annual General Meeting of the Company in the calendar year 2020. Except the above, there is no change in the composition of Board of Directors including Key Managerial Personnel during the period under review. 14. EVALUATION OF BOARD'S PERFORMANCE In compliance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement entered with the Stock Exchange/s, the performance evaluation of the Board was carried out during the year under review, the details of which are given in the Corporate Governance Report, forms an integral part of this report. 15. BOARD MEETINGS Details about Board Meetings held during the Financial Year 2014 - 2015 are given in the Corporate Governance Report, which forms an integral part of this report. 16. DECLARATION BY INDEPENDENT DIRECTORS The Independent Directors have confirmed that they meet the criteria of 'Independence' as stipulated under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement/s with the Stock Exchanges. 17. REMUNERATION POLICY Details about the remuneration policy are given in the Corporate Governance Report, which forms an integral part of this report. 18. PUBLIC DEPOSITS During the year under review, the Company has not accepted any Public Deposits within the meaning of the Companies Act, 2013 read with rules made there under. 20. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND The dividend declared by the Company which remains unpaid / unclaimed for a period of seven (7) years is required to be transferred to the Investor Education & Protection Fund (IEPF) established by the Central Government pursuant to Section 125 of the Companies Act, 2013. Therefore, Dividend declared / paid at the 22nd Annual General Meeting held on 23rd September, 2008 and remaining unpaid / unclaimed for Seven (7) years will liable to be transferred to the credit of IEPF Account on 22nd September, 2015. The members are requested to claim their unpaid / unclaimed dividends, if any. 21. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Company's steel plant is located at Bhandara Road, Warthi Village, Tahsil Mohadi, District Bhandara. It is located at a distance of about 12 kilometers from the district place Bhandara. The unit is surrounded by about 3 villages in the radius of about 5 Kms. The Company is having its captive coal mines at Belgaon, near village Aathmurdi in Chandrapur district. The residents of these localities are directly or indirectly associated with the Company. The Company has primarily focused on the development of the residents of these localities. All the activities / programmes are covered under SISCO CSR are being monitored by the CSR Committee and are implemented by the delegated CSR Sub-committee. As required, the Annual Report on Corporate Social Responsibility (CSR) activities together with details of expenditure is enclosed herewith as Annex - A attached to this Report. 22. 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 is furnished in Annex D attached to this Report, which forms an integral part of this report. 23. AUDITORS I. STATUTORY AUDITORS AND THEIR REPORT : M/s. Patel, Shah & Joshi, Chartered Accountants, Mumbai (Firm Registration No. 107768W) - the Statutory Auditors of the Company are eligible and recommended for re-appointment as the Statutory auditors from the conclusion of this meeting untill the conclusion of next Annual General Meeting. The Statutory Auditors have furnished a Certificate of their eligibility for re-appointment under Section 139 of the Companies Act, 2013 read with rules and regulations made there under and are not disqualified for such re-appointment within the meaning of Section 139 and Section 141 of the Companies Act, 2013. The Auditors' Report to the shareholders for the year under review do not contain any qualification. The observations made by the Auditors in their report are self-explanatory and have also been further amplified in the Notes to the Accounts and do not call for any explanation II. COST AUDITORS AND THEIR REPORT : Pursuant to Section 148 of the Companies Act 2013, the Board of Directors of the Company on the recommendations of the Audit Committee, appointed M/s. G. R. Paliwal & Company (Membership No. 7815), Cost Accountants, Nagpur as the Cost Auditors of the Company for the financial year 2015-2016 and has recommended their remuneration to shareholders for their ratification at the ensuing Annual General Meeting. The Cost Auditors have furnished a Certificate of their eligibility for appointment pursuant to Sub-section 3(g) of Section 141 read with Sub-section (5) of Section 148 of the Companies Act, 2013, Certificate for independence and arms length relationship with the Company and are not disqualified for such appointment within the meaning of Section 141(3) of the Companies Act, 2013. Pursuant to Cost audit (Report) Rules 2001, the Cost Audit Report for the financial year 2013-2014 was filed vide SRN : S31210669 dated 16th September, 2014. III. SECRETARIAL AUDITORS AND THEIR REPORT : CS Mukesh D Parakh (Membership No. FCS-4343 & Certificate of Practice No.13693), Practicing Company Secretary has been appointed as the Secretarial Auditors of the Company for the financial year 2014-2015. The Secretarial Audit Report given by Secretarial Auditor is annexed herewith as an Annex - B, which is self explanatory and do not call for any further explanation. Further, the said Report do not contain any qualification. 24. AUDIT COMMITTEE The Audit Committee of the Board is under Chairmanship of Dr. E.R.C. Shekar, Non-executive, Independent Director of the Company and consists of CA Jayesh Madhavji Parmar & Mr. S. Gajendran, Non-executive, Independent Directors and Mr. Sonam Bodh (upto 12th December 2014), Nominee Director of IDBI Bank Limited, as the Members, as a practice of good Corporate Governance. Secretary : CS Mukesh D Parakh - Company Secretary (up to 05.08.2014) Secretary : CS Pranab Panigrahi - Company Secretary (effective 05.08.2014) 25. NOMINATION AND REMUNERATION COMMITTEE Chairman : Dr. E.R.C. Shekar, Independent - Non-executive Director Members : Mr. S. Gajendran and CA Jayesh M Parmar, (Independent, Non-executive Directors) and Mr. Sonam Bodh (Nominee - IDBI Bank Limited) (up to 12.12.2014) and Executive Directors viz Mr. Ravi Bhushan Bhardwaj, Vice Chairman & Managing Director and Mr. S. K. Gupta, Whole-time Director, designated as Director & CEO of the Company. Secretary : CS Mukesh D. Parakh - Company Secretary (up to 05.08.2014) Secretary : CS Pranab Panigrahi - Company Secretary (effective 05.08.2014) 26. VIGIL MECHANISAM - WHISTLE BLOWER POLICY With the rapid expansion of business in terms of volume, value and geography, various risks associated with the business have also increased considerably. One such risk identified is the risk of fraud / misconduct. The Audit Committee is committed to ensure fraud-free work environment and to this end the Committee has laid down the Whistle Blower Policy providing a platform to all the employee, vendors and customers to report any suspected or confirmed incident of fraud / misconduct through any of the following reporting protocols : The details about Vigil Mechanism- Whistle Blower Policy are given in the Corporate Governance Report, which is forms an integral part of this report. The Whistle Blower Policy is also available at the Company's website www.sunflagsteel.com 27. RISK MANAGEMENT POLICY The revised Clause 49 of the Listing Agreement mandates constitution of the Risk Management Committee (RMC) by the Company. The Committee is required to lay down the procedures to inform to the Board about the risk assessment and minimization procedures and the Board shall be responsible for framing, implementing and monitoring the risk management plan of the Company. The Business Risk Evaluation and Management (BREM) is an ongoing process within the organization. The Company has a robust risk management framework to identify, monitor and minimize risks as also identify business opportunities. The details viz objectives and scope, committee member and their attendance, are given in the Corporate Governance Report which is forming part of the Annual Report. The Risk Management Policy is also available at the Company's website www.sunflagsteel.com 29. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES UNDER SECTION 188 OF THE COMPANIES ACT, 2013 a) Details of contracts or arrangements or transactions not at arm's length basis : There are no such transactions and hence not applicable. b) Details of contracts or arrangements or transactions at arm's length basis : 30. 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 through listing agreement executed with the stock exchanges/s. The Company has also implemented several best corporate governance practices as prevalent globally. Your Directors are pleased to report that your Company has complied with the SEBI Guidelines on Corporate Governance as of 31st March, 2015 relating to Clause 49 of the Listing Agreement with concerned Stock Exchange(s). A Certificate from Statutory Auditors - M/s Patel, Shah & Joshi, Chartered Accountants (Firm Registration No. 107768W), confirming compliance with conditions as stipulated under Clause 49 is annexed to the Corporate Governance Report, which forms an integral part of this report. 31. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDER TRADING AND OTHER CODES / POLICIES Your Directors are pleased to report that your Company has complied with the : 1. Code of Conduct of Business Principles and Conduct and Policy on Material Subsidiary 2. Code of Prevention of Insider Trading in Sunflag securities by the designated persons / officers (insider) (as amended from time to time) 3. Code for Whistle Blower Policy 4. Risk Management Policy 5. Code for Independent Directors; and 6. Code for Corporate Social Responsibility The aforesaid policies are also available on the Company's website www.sunflagsteel.com 32. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has in place adequate internal control systems and procedures commensurate with the size and nature of business. These procedures are designed to ensure : a) that all assets and resources are used efficiently and are adequately protected; b) that all the internal policies and statutory guidelines are complied with; and c) the accuracy and timing of financial reports and management information is maintained. 33. Material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report : There are no such material changes during this period, hence not applicable. 34. DIRECTORS' RESPONSIBILITY STATEMENT The Board of Directors confirms : 1. that in the preparation of the Annual Financial Accounts, the applicable Accounting Standards had been followed along with proper explanation, relating to material departures; 2. that the Directors had 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 and of the financial year and of the profit of the Company for that financial year; 3. that the Directors had 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; 4. that the Directors had prepared the Annual Financial Statements on a going concern basis; 5. that the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls were adequate and operating effectively; and 6. that the Directors had devised proper system to ensure compliance with the provisions of all applicable laws and regulations and that such systems were adequate and operating effectively. 35. MATERIAL DEVELOPMENT IN HUMAN RESOURCES INDUSTRIAL RELATIONS During the year under review, industrial relations remained cordial. Employees' competencies and skills were enhanced by exposing them to several internal and external training programmes. Various measures were taken to improve motivation level of employees. Additional efforts are continued to be implemented with a view to obtain commitment and loyalty towards the organization. SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE Sunflag Iron and Steel Company Limited ("the Company") has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the workplace (Prevention, Prohibition & Redressal) Act, 2013 and Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees etc) are covered under this Policy. The Certificate by Managing Director and Deputy Managing Director to that effect is enclosed herewith Annex E and forms part of this report. HEALTH AND SAFETY Departmental safety coordinators are identified for monitoring & training on safety related matter at shop-floor. Safety Committee and Apex Committee are available for periodical review on safety, health & environment of all departments. Regular Training on Safety is being organized for new joinee, regular employees & contract labour. Mock-drills are conducted for practical exposure to meet emergency need on quarterly basis. Hand book on safety awareness are distributed to all employees 36. ENCLOSURES a) Annex - A : Annual Report on Corporate Social Responsibility (CSR) Activities together with expenditure details as Annex-I b) Annex - B : Secretarial Auditors Report c) Annex - C : Report on Energy Conservation, Technology Absorption and Foreign Exchanges Earnings and Outgo d) Annex - D : Extract of Annual Return as of 31st March, 2015 in the prescribed Form MGT-9 e) Annex - E : Certificate on Sexual Harassment of Women at the Workplace and its Prevention, Prohibition & Redressal 37. ACKNOWLEDGEMENT The Directors acknowledge with thanks co-operation and assistance received by the Company from the Members, Central & State Government and Banks. The Directors also record their appreciation of the dedication of all the employees of the Company for their support and commitment to ensure that the Company continues to grow. For and on behalf of the Board Pranav Bhardwaj Managing Director DIN : 00054805 Surendra Kumar Gupta Deputy Managing Director DIN : 00054836 Place : Nagpur Date : 12th August, 2015 |