DIRECTORS' REPORT 1. The Directors present the 77th Annual Report and audited statements of accounts of the Company for the year ended March 31, 2015. 3. Performance: 3.1 The performance during the year has improved as compared to the previous year due to higher capacity utilization. The production of alloy steel at Ginigera (Karnataka) increased due to the substitution of iron ore lumps by using iron ore fines through sintering, using beneficiated iron ore and increase in availability of iron ore from mines in Karnataka. The production of stainless steel at Dighe (Thane) was also higher as compared to the previous year. The margins have improved due to substitution of high cost inputs by low cost inputs by changes in process and general down trend in prices of all commodity inputs viz., iron ore, coke, fuel, nickel, stainless steel scrap, ferro chrome, etc. The improved productivity resulted in higher production and cost reduction has helped to enhance the market share and sell additional production. The Industrial Machinery Division was severely affected due to slow down in modernization and expansion activities in steel and infrastructure sectors, resulting in lower sales and margins. The interest cost has increased mainly due to repayment on maturity of low cost borrowings under Corporate Debt Restructuring (CDR) scheme and fixed deposits from Public and Shareholders. These borrowings were replaced by high cost borrowings as Company required additional working capital for increased turnover. The market price of the Company's share has improved from Rs.23.40 per share as on March 31, 2014 to Rs.46.75 per share as on March 31, 2015. It is to be noted that last Rights Issue was at Rs.21 per Share. Market Capitalization of the Company increased from Rs.171.69 Cr as on March 31, 2014 to Rs.661.06 Cr as on March 31, 2015. 3.2 The performance of the Company is elaborated in the Management Discussion & Analysis annexed to this report. 3.3 Material Changes & Commitments: There have been no material changes and commitments, affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this report. 4. Dividend: The Directors do not recommend any dividend on equity shares in view of inadequate profits earned during the year and unabsorbed losses of the earlier years. The Directors recommend a dividend of 0.01% on cumulative redeemable preference shares. The dividend and tax thereon aggregate to Rs.6,773 for the year.* 5. Transfers to Reserves: In view of unabsorbed losses brought forward from the previous years, no amount has been transferred to the Reserves. 6. Transfer of Alloy Steel business: Shareholders by way of a postal ballot have approved the transfer of Alloy Steel business as a going concern on slump sale basis on February 18, 2015 to a prospective subsidiary of the Company. Accordingly, Company has signed business transfer agreement dated March 14, 2015 for the said business with Mukand Alloy Steels Pvt. Ltd., a subsidiary of the Company. This agreement will come into effect after obtaining approval of Lenders, release of charge by lenders, other authorities and fulfillment of conditions precedent as stipulated in the agreement. Company is in various stages of obtaining these approvals / consents. 7. Joint Ventures: 7.1 With Sumitomo Corporation, Japan: Mukand Sumi Metal Processing Limited (MSMPL) is a subsidiary formed under joint venture with Sumitomo Corporation, Japan to carry on the business of cold finished bars and wires. During the year under review, revenue from operations is Rs.524.48 Cr as compared to Rs.408.26 Cr in the previous year. Profit after tax is at Rs.3.08 Cr as compared to Rs.1.34 Cr in the previous year. 7.2 With Vini Iron and Steel Udyog Ltd. (India): Further to our last year's report about de-allocation of coal block by Ministry of Coal, please note that the Supreme Court of India by its judgment dated September 24, 2014 cancelled allotment of all coal blocks in the Writ Petitions before it including the allotment received by Joint Venture Company, M/s. Mukand Vini Mineral Ltd. 8. Finance: 8.1 During the year under review a major development was that the Company has requested for exit from Corporate Debt Restructuring (CDR) Cell as all dues of Lenders are fully paid on maturity date. The Board of Directors places on record its appreciation of the roles of Lenders and CDR Cell to enable the Company to sail through this difficult period. 8.2 In view of requirement of additional funds for working capital on account of higher turnover, Company has during the year obtained loans amounting to Rs.335 Cr and paid loans of Rs.324 Cr during the year. 8.3 Share Capital: The paid-up equity share capital as on March 31, 2015 was Rs. 141.41 Crore. During the year under review, the Company has neither issued shares with differential voting rights nor has granted stock options/sweat equity. 8.4 Details relating to fixed deposits, covered under Chapter V of the Act are as under: a) Accepted during the year - Rs. Nil b) Re- paid during the year - Rs. 63.27 crore c) Matured & unclaimed as at the end of year - Rs. 2.15 crore. d) There has been no default in repayment of deposits or payment of interest thereon during the year. * Refer Note No. 10 of the Notice convening 77th Annual General Meeting in connection with withdrawal of this recommendation in view of amendment to Section 123 of the Companies Act, 2013. e) There are no deposits which are not in compliance with the requirements of Chapter V of the Act. 9. Corporate Social Responsibility (CSR): 9.1 Company has constituted a CSR Committee of the Board of Directors comprising of Shri Niraj Bajaj, Shri Rajesh V. Shah, Shri Suketu V. Shah and Shri Dhirajlal S. Mehta pursuant to Section 135 of the Companies Act, 2013. In view of losses incurred by the Company during three immediately preceding financial years, the relevant provisions of the Companies Act, 2013, the Company is not required to incur any expenditure in pursuance of CSR Policy. However, the Company and the Group has carried out following activities under CSR. 9.2 By the Company: The Company participates in the celebrations held by local schools on Children's Day and Independence Day by distributing shields, medals, prizes, etc. The Company supports the students staying around the plant by distributing school bags, books, etc. The Company also ensures regular supply of drinking water to Ginigera village and conducts free health/eye check-up camps for the benefit of the villagers in and around the Company's plant. Moreover, it contributed towards drainage at Village Ginigera and cultural development at Village Kanakagiri. The Company with active support from Janakidevi Bajaj Gram Vikas Sanstha continues its effort in promoting education of the girl child in Shahapur Taluka of Thane district as part of its CSR programme. The Company hopes to motivate all girls from the taluka to achieve at least a minimum education of class 10. Towards achieving this goal, Company provided uniforms, text books and notebooks to approximately 6,000 girl students studying across 45 high schools in Shahapur taluka. As part of this programme, the Company also conducted extra coaching classes in mathematics for girl students studying in classes 7, 8 and 9. Currently, the Company conducts 46 coaching classes across the taluka. The Company also started a vocational training in the basics of tailoring and trains girls who have passed Class 10 to become financially independent by setting up their own tailoring units. 9.3 By the Group: In addition to the activities carried out by the Company, the Bajaj Group is involved in a number of CSR projects through various trusts and group companies in the areas of: rural development, education, health care, economic and environmental development, social and urban development, protection of culture, employment enhancing vocation skills and livelihood enhancement particularly for women, homes/hostels for women, education for differently abled children and measures for benefit of armed forces veterans. The group also manages schools, colleges, hospitals, and a nursing college. It helps NGOs, Charitable Bodies and Trusts operating at various locations. One of the trusts also gives awards for outstanding contribution for constructive work for application of science, technology and upliftment and welfare of women and children along Gandhian lines. Rural and community development activities are also conducted in the villages. 10. Statutory disclosures: The statutory disclosures in accordance with Section 134 read with Rule 8 of Companies (Accounts) Rules 2014, Section 178, Section 197 read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: 10.1 Management Discussion and Analysis: As required under Clause 49 of the Listing Agreements with the Stock Exchanges, the Management Discussion and Analysis is enclosed as a part of this report - Annexure - 1. 10.2 Corporate Governance Report: The Company has taken necessary steps to adhere to all the requirements of clause 49 of the Listing Agreements. A report on Corporate Governance together with certificate of statutory auditors confirming compliance with the conditions of Corporate Governance as stipulated under clause 49 of the Listing Agreement is included as a part of this report. - Annexure - 2. 10.3 Extract of Annual Return: An extract of the Annual Return as prescribed under Sub-Section (3) of Section 92 of the Companies Act, 2013 in Form MGT - 9 is annexed to this report - Annexure - 3. 10.4 Number of meetings of the Board and composition of Audit Committee: During the year under review, five Board Meetings of the Board of Directors of the Company were convened and held. The relevant details, including composition of the Board, dates of meetings, attendance and various Committees of the Board are given in the Corporate Governance Report forming part of this report 10.5 Directors' Responsibility statement: Pursuant to Section 134 (3)(c) of the Companies Act, 2013, the Directors confirm that: i. In the preparation of the annual accounts, the applicable accounting standards have been followed; ii. Appropriate accounting policies have been selected and applied consistently. Judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as on March 31, 2015, and of the Profit of the Company for the year ended March 31, 2015; iii. 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; iv. The Annual Accounts have been prepared on a going concern basis; v. Internal financial controls have been laid down and followed by the Company and that such controls are adequate and are operating effectively; vi. Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 10.6 Statement on declaration given by Independent Directors: The Independent Directors of the Company have submitted their Declaration of Independence, as required under the provisions of Section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in Section 149 (6) of the Act. 10.7 Familiarization programme for Independent Directors: The Company has held familiarization programme for the Independent Directors by way of presentations by business heads of the Company from time to time and deliberations held on major developments in legal and regulatory areas. The website link on this is <http://www.mukand>. com/images/Familiarisation_Programme.pdf. 10.8 Disclosure regarding Company's policies under Companies Act, 2013: Company's policies on i) Directors appointment and Remuneration, determining criteria for qualification/independence, ii) Remuneration for Directors, Key Managerial Personnel and other employees, iii) Performance evaluation of the Board, Committees and Directors, iv) Materiality of Related Party transactions, v) Risk Management, vi) Determining Material Subsidiaries and vii) Whistle Blower/Vigil Mechanism along with details of web link (in cases where it is prescribed) are given in Annexure - 4. 10.9 Particulars of Loans, Guarantees and Investments: The particulars of loans, guarantee or investments given or made by the Company under Section 186 of the Act are disclosed at Note No.35 of the financial statements. 10.10 Related Parties Transactions: There were no Related Party Transactions (RPTs) entered into by the Company during the financial year, which attracted the provisions of Section 188 of Companies Act, 2013. However, there were material RPTs, which got covered as material RPTs under clause 49 of the Listing Agreement. During the year 2014-15, pursuant to Section 177 of the Companies Act, 2013 and Clause 49 of Listing Agreement, all RPTs were placed before Audit Committee for its prior / omnibus approval. The requisite disclosure in Form AOC-2 is furnished in Annexure - 5. The policy on RPTs as approved by board is uploaded on the Company's website. 10.11 Conservation of Energy, technology absorption, imported technology, Foreign Exchange earnings and outgo: Information under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is provided in Annexure - 6. 10.12 Report on the subsidiaries, associates and joint venture companies. Names of companies which have become or ceased to be its Subsidiaries, Joint Venture or Associate Companies: A report on performance and financial position of each of the subsidiaries, associates and joint venture companies included in the financial statement together with names of companies which have become or ceased to be subsidiaries, joint ventures or associate companies during the year under review are furnished in Annexure - 7. 10.13 Significant and material orders passed by the Regulators or Courts: There were no significant and material orders passed by the Regulators or Courts or Tribunals during the year under review which would impact the going concern status of the Company and its future operations. 10.14 Details of Directors or KMP who are appointed or have resigned during the year and Directors who are liable to retire by rotation: Shri Niraj Bajaj, Shri Rajesh V. Shah and Shri Suketu V. Shah were re-appointed as Chairman & Managing Director, Co-Chairman & Managing Director and Joint Managing Director respectively for a period of three years with effect from July 5, 2014 by the shareholders by Postal Ballot on August 8, 2014. Shri Amit Yadav, a non-executive director and representative of Life Insurance Corporation of India, resigned from the directorship of the Company on August 13, 2014 and was re-appointed as on additional independent director at the Board Meeting held on November 10, 2014. His appointment as an independent director for a period of 5 years was approved by the shareholders in accordance with the requirements of Section 149 and 152 of the Companies Act, 2013 by Postal Ballot on February 18, 2015. Shri Pradip P. Shah, an independent director, resigned from the directorship on September 30, 2014. The Board places on record valuable contribution made by shri Shah during his tenure as a director of the Company. Smt. Bharti R. Gandhi, (DIN: 00306004) was appointed as an Additional Independent Director on February 11, 2015. In accordance with the requirements of Section 149 and 152 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, her continuation as an Independent Director on the Board of the Company for a period of 5 years will have to be approved by the Members of the Company at the ensuing Annual General Meeting. Shri Narendra J.Shah , a Non Independent Director and Shri Niraj Bajaj, Chairman & Managing Director retire by rotation and are eligible for re-appointment. Pursuant to Section 203 of the Companies Act, 2013, the Company has appointed Mr. A.M. Kulkarni as Chief Executive Officer, Steel Plant, Thane with effect from November 10, 2014. The Company already has Mr. S. B. Jhaveri, Chief Financial Officer and Mr. K. J. Mallya, Company Secretary as the other Key Managerial Personnel of the Company. Pursuant to Section 149(4) of the Companies Act, 2013 read with clause 49 of the Listing Agreement, where the Chairman of the Company is an executive director, a listed company is required to appoint at least half of its directors as independent directors. The Board has one half of its directors in the category of independent directors in terms of clause 49 of the listing agreement. The Board in its meeting held on May 29, 2014 appointed the existing independent directors under clause 49 as independent directors' pursuant to Companies Act, 2013 as well. The members at the annual general meeting held on August 13, 2014, approved the appointment of the existing Independent Directors for a term of 5 years effective from August 13, 2014. 10.15 Performance evaluation of the Board: 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 individually as well as the evaluation of the working of Audit, Nomination & Remuneration and Stakeholders' Relationship Committees of the Board. The Independent Directors met separately on March 27, 2015 to discuss the following: i) review the performance of non-independent directors and the Board as a whole; ii) review the performance of the Chairperson of the Company, taking into account the views of executive directors and non-executive directors; iii) assess the quality, quantity and timeliness of flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties. All Independent Directors except Shri Prakash V. Mehta were present at the Meeting and discussed the above and expressed their satisfaction. 10.16 Details in respect of Internal Financial Controls with reference to financial statements: Adequate systems for internal controls provide assurances on the efficiency of operations, security of assets, statutory compliance, appropriate authorization, reporting and recording transactions. The scope of the audit activity is broadly guided by the annual audit plan approved by the top management and audit committee. The Internal Auditor prepares regular reports on the review of the systems and procedures and monitors the actions to be taken. 10.17 Details relating to Remuneration of Directors, Key Managerial Personnel and employees: The information required under Section 197 read with Rule 5 of Companies (Appointment and Remuneration of Managerial personnel) Rules, 2014 in respect of employees of the Company and Directors is furnished in Annexure - 8. As per provisions of Section 136(1) of the said Act, these particulars will be made available to a shareholder on request. The aforesaid annexure includes information relating to relationship between Directors inter-se. 10.18 Consolidated Financial Statements (CFS): The CFS is prepared by the Company pursuant to Section 129(3) of the Companies Act, 2013 in accordance with the requirements of Accounting Standard (AS)-21 read with AS-23 on Accounting for Investments in Associates and AS-27 on Financial Reporting of Interests in Joint Ventures. Segment-wise disclosure of revenues, results, assets and liabilities on the basis of segments are separately given in a tabular form in the Consolidated Financial Statements (Refer Page No.87). 10.19 Pursuant to provisions of "Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace Act, 2013" becoming effective from December 9, 2013, Company has, during the year under review, formed a Committee under the said Act. No case was reported to the Committee during the year under review. 11. Auditors: 11.1 Messrs Haribhakti & Co. LLP, Chartered Accountants, Mumbai, (Registration No.103523W) were appointed as Auditors of the Company from the conclusion of 76th Annual General Meeting held on August 13, 2014 until the conclusion of 81st Annual General Meeting to be held in Calendar Year 2019. This appointment is subject to ratification by the Members at each Annual General Meeting. Messrs Haribhakti & Co. LLP are eligible for re-appointment for Financial Year 2015-16. 11.2 The Company has appointed Ms. Sangita Kulkarni as Cost Auditor to carry out the audit of cost records relating to Steel Plants of the Company for the Financial Year 2014-15. The Cost Audit Report for the Financial Year 2013-14 was filed with the Ministry of Corporate Affairs on September 25, 2014 before the due date. 11.3 Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company has appointed M/s. Anant B. Khamankar & Co.(Membership No. FCS:3198), a Practising Company Secretary to undertake the Secretarial Audit of the Company and their Report is in Annexure - 9. 12. Auditors' Report: The observations made in the auditors' report, read together with the relevant notes thereon are self-explanatory and hence, do not call for any comments under Section 134(3)(f) of the Companies Act, 2013. 13. Acknowledgement: The Board of Directors thanks the Banks, Financial Institutions, Central and State Government Authorities, Shareholders, Customers, Suppliers, Employees and Business Associates for their continued co-operation and support to the Company. On behalf of the Board of Directors, Niraj Bajaj Chairman & Managing Director Rajesh V. Shah Co-Chairman & Managing Director Place : Mumbai, date : May 29, 2015 |