BOARD'S REPORT Dear Shareholders, Your Directors have pleasure in presenting the 44th Annual Report together with the Audited Statement of Accounts of your company for the year ended 31st March, 2015. 2. OPERATIONAL REVIEW: During the year under review, the Company has achieved sales turnover of Rs. 66882.35 lacs against previous year sales of Rs. 46553.09 Lacs. The Company has incurred loss of Rs. 8239.23 lacs against previous year loss of Rs.7433.67 lacs. Company expects to do better if there is an improvement in overall industrial scenario. 3. REFERENCE UNDER SECTION 15 AND OTHER APPLICABLE PROVISIONS OF CHAPTER III OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985. Due to erosion of net worth of the company by more than 50% in the previous accounting year i.e. 12 months period ended on March 31,2014, as per the requirement of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), a reference had been made with the Hon'ble BIFR by within the prescribed time. Since, during the current 12 months period ended 31 March, 2015, the Company has suffered a net loss of Rs. 8239.23 lacs which has resulted in full erosion of net worth of the company, the company became a "Sick Industrial Company" under Section 3(1 )(o) of the aforesaid Act. Consequently, necessary reference/registration is required to be obtained with the Hon'ble BIFR. The necessary recommendation of the Board for approval from the members of the company has been received to comply with the provisions of the SICA. 4. DIVIDEND No dividend has been recommended. 5. CAPITAL During the year under review, Company has increased authorized capital by creating 25000000 Redeemable Preference Shares of Rs. 10/- each, resulting into Authorised Capital of Rs.90,00,00,000/- divided 32000000 Equity Share of Rs.10/- each amounting to Rs.32,00,00,000/- and 58000000 redeemable shares of Rs.10/- each amounting to Rs.58,00,00,000/-. During the year company has issued 12566748 Redeemable Preference Share of Rs.10/- each at a Premium of Rs.20/-per Share amounting to Rs.37,70,02,440/-. 6. DEMERGER PLAN Orissa unit is an integrated steel manufacturing unit and with the complexities in the land acquisition, particularly of large chunks of land it will be very difficult to acquire land for setting up a new project. It has its own locational advantage in the sense near to raw materials sources, sufficient land and necessary approvals for further expansion. In order to unlock the values of both the units and outside infusion of funds/sale/PE investment, hiving off/demerger of both the units is absolutely necessary. Company plans to hive off the Orissa unit into a separate Company. Deliberation are on and decision will be taken after considering all the aspects. 7. Corporate Debt Restructuring The debts of the Company were restructured under Corporate Debt Restructuring (CDR) mechanism in the year 2013-14. The Scheme has given relief to the Company and provided with the breathing space to further improve operational levels and improve the cash position. Due to delay in implementation of approved restructuring scheme Company could not start operations at Orissa unit nor was the implementation of setting up of rolling mill at Orissa and even its Ghaziabad unit is operating at lower than desired capacity utilization. Keeping in mind the current business & economic outlook en vironment, the Company is in fresh discussions/negotiation with the lenders for its business restructuring plans and is in the process of finalizing fresh proposal for re-working of its debt obligations. 8. ECONOMIC SCENARIO AND OUTLOOK The expected population growth, emerging new applications for steel and more sophisticated steel applications, the global steel market has a potential to grow by between 700 and 1000 million tonnes in the next 50 years. That is equivalent to a market that is 60% larger than that of today. We believe that between now and 2030, global use of steel will increase by as much as 400 million tons annually. The world market for steel will reach $1.3 trillion in 2015, with production levels to reach 1,694.73 million tonnes whilst consumption will reach 1,545.50 million tonnes. The market has been declining over the past few years as a result of the large oversupply of steel that pressured prices downwards. The global recession that hit the commodities sector hard also contributed to the shrinking growth. The steel market has been dominated by China, accounting for half of the global market. It is the largest and fastest growing producer and consumer of steel and it will retain its leading position. India, Taiwan, Iran, Japan, Mexico and South Korea are other countries exhibiting strong growth in terms of steel production and consumption. Global steeldemand over the next decade will mainly depend on the emerging economies. However, economic conditions for the global steel industry remain challenging. The main factors that led to a previously significant increase in demand for steel are new infrastructure developments and the growing needs of the increasing middle class in the developing countries. The construction, automobile, and white goods industries will attract a high demand for steel over the next decade. The construction sector will be the key consumer of steel. Financial year 2014-15 saw India emerge as a bright spark even as advanced and emerging economics grappled with uncertainty and slower growth. Cyclical macro parameters like inflation, current account deficit have improved during the year due to domestic as well as external factors. However, domestic steel producers witnessed subdued sales as increased imports from China and Russia resulted in sharp cut to steel prices in India over the past six months. The Indian economy is in the midest of significant structural change and is expected to embark on a sustained economic growth cycle. According to World Bank.lndia is set to be the world's fastest growing major economy in the financial year 2015-16 at 7.5% and gradually move up to 8% in the next two financial years. However, this economic growth will depend on steady implementation of reforms aimed to improve productivity and competitiveness. Government initiatives like "Make in India" will stimulate manufacturing growth while its focus on infrastructure should revive the investment cycle. This should help India grow while being fiscally prudent. Indian steel demand is expected to reflect improving macro-economic environment. Steel end use sectors are expected to perform better compared to previous financial year. Infrastructure projects like dedicated freight corridor etc. are gaining momentum and the steady decline in stalled projects coupled with hike in import duty should stimulate steel demand. However, steel prices are expected to remain under pressure from Chinese exports and increased domestic competitiveness. 9. CORPORATE SOCIAL RESPONSIBILITY Even though the provisions of Companies Act, 2013 regarding Corporate Social Responsibility are not attracted to the company yet the Company has been, over the years, pursuing as part of its corporate philosophy, an unwritten CSR policy voluntarily which goes much beyond mere philanthropic gestures and integrates interest, welfare and aspirations of the community with those of the Company itself in an environment of partnership for inclusive development. 10. BUSINESS RISK MANAGEMENT Although the company has long been following the principle of risk minimization as is the norm in every industry, it has now become a compulsion. Therefore, in accordance with clause 49 of the listing agreement the Board members were informed about risk assessment and minimization procedures after which the Board formally adopted steps for framing, implementing and monitoring the risk management plan for the company. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management, in order to guide decisions on risk related issues. In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks inter alia are: Regulations, competition, Business risk, Technology obsolescence, Investments, retention of talent and expansion of facilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk, legal risk. As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same 11. INTERNAL CONTROL SYSTEM AND THEIR' ADEQUACY The Company has adequate system of internal control to safeguard and protect from loss, unauthorized use or disposition of its assets. All the transactions are properly authorized, recorded and reported to the Management. The Company is following all the applicable Accounting Standards for properly maintaining the books of account and reporting financial statements. The internal auditor of the company checks and verifies the internal control and monitors them in accordance with policy adopted by the company. 12. VIGIL MECHANISM / WHISTLE BLOWER POLICY In order to ensure that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour the company has adopted a vigil mechanism policy. This policy is explained in corporate governance report and also posted on the website of company www.rathisteelandpower.com 13. DIRECTORS & COMMITTEES At the 43rd Annual General Meeting of the company held on 30th September, 2014 the company appointed the existing independent directors Shri S. K. Daga (DIN: 00208058) and Shri Dwarka Das Lakhotia (DIN: 00012380)) as independent directors under the companies Act, 2013 for 5 consecutive years for a term upto the conclusion of the 49th Annual General Meeting. All independent directors have given declaration that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and clause 49 of listing agreement. In accordance with the provisions of Companies Act, 2013 Shri Pradeep Kumar Rathi (DIN-00012596), Director retires by rotation and being eligible offers himself for reappointment. Ms Akanksha Garg was appointed as an Additional Director w.e.f. May 30, 2015 in accordance with the provisions of Section 161 of the Companies Act, 2013 and Article 99 of Article of Association of the Company. Pursuant to Section 161 of the Companies Act, 2013 the above director holds office up to the date of the ensuing Annual General Meeting. In this regard the Company has received request in writing from a member of the company proposing Ms Akanksha Garg candidature for appointment as Director of the Company. 13.1. BOARD EVALUATION Pursuant to the provisions of companies Act, 2013 and clause 49 of the Listing Agreement, the Board has carried out annual performance evaluation of its own performance, the directors individually as well the evaluation of the working of its Audit, Nomination & Remuneration and Stakeholder committee. The manner in which the evaluation has been carried out has been explained in Corporate Governance Report. 13.2. REMUNERATION POLICY The Board has, on the recommendation of the Nomination & Remuneration committee framed a policy for selection and. appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report. 13.3. MEETINGS During the year twelve Board Meetings and one independent directors' meeting was held. The Details of which are given in Corporate Governance Report. The provisions of CompaniesAct, 2013 and listing agreement were adhered to while considering the time gap between two meetings. 13.4. AUDIT COMMITTEE 14. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013: a) that in preparation of the annual financial statements for the year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) that such accounting policies as mentioned in Notes to the Financial Statements have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the loss of the Company for the year ended on that date; c) that 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) that the annual financial statements have been prepared on a going concern basis; e) that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively. f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. 15. RELATED PARTY TRANSACTIONS None of the transactions with any of related parties were in conflict with the^Company's interest. Suitable disclosure as required by the Accounting Standards (AS18) has been made in the notes to the Financial Statements. All related party transactions are negotiated at an arms-length basis and are in'the ordinary course of business. Therefore, the Provisions of Section 188(1) of the Companies Act, 2013 are not applicable. The Related Party Transactions Policy as approved by the Board is uploaded on the Company's website. The details of the transaction with the Related party are provided in the accompanying financial statements. 16. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS A detailed note on ongoing litigations/court orders has been provided in the Notes to account. 17. AUDITORS 17.1. STATUTORY AUDITORS M/s M. Lai & Co, Chartered Accountants, who are the statutory auditors of the Company, hold office until the conclusion of the ensuing AGM and are eligible for reappointment. Members of the Company at the AGM held on 30 September, 2014 had approved the appointment of M/s M. Lai & Co as the Statutory Auditors for a period of three financial years I.e., up to 31 March, 2017. As required by the provisions of the Companies Act, 2013, their appointment should be ratified by members each year at the AGM. Accordingly, requisite resolution forms part of the notice convening the AGM. The Auditors' Report on Financial Statements of the Company for the Financial Year 2014-15 does not contain any qualification. The observations of Statutory Auditors' and Notes to the Financial Statements are self-explanatory 17.2. COST AUDITORS As per Section 148 of the Companies Act, 2013, the Company is required to have the audit of its cost records conducted by a Cost Accountant in practice. In this connection, the Board of Directors of the Company has on the recommendation of the Audit Committee, approved the appointment of R. M. Bansal & Co., Cost Accountants as the cost auditors of the Company for the year ending 31 March, 2016, at a remuneration of Rs. 50,000/- plus out of pocket expenses. R. M. Bansal & Co., Cost Accountants have vast experience in the field of cost audit and have conducted the audit of the cost records of the Company for the past several years. 17.3. SECRETARIAL AUDITORS 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 Ranjeet Verma & Associates. (CP No.: 7463, FCS: 6814), Company Secretaries to undertake the secretarial audit of the company. The Secretarial Audit Report is annexed herewith as 'Annexure 1'. 17.4. INTERNAL AUDITORS M/s Rajiv S Agarwal & Co. Chartered Accountants performs the duties of internal auditors of the company and their report is reviewed by the audit committee from time to time. 18. CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from the Company's Secretarial Auditor confirming compliance forms an integral part of this Report. 19. ENERGY CONSERVATION*, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure 2". 20. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure 3". 21. PARTICULARS OF EMPLOYEES The information required pursuant to Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company is as follows: The Company has One Executive Director and one Managing Director, no sitting fees have been paid to any director during the year. The particulars of the employees who are covered by the provisions contained in Rule 5(2) and rule 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as "Annexure 4". 22. ACKNOWLEDGEMENTS The company has been very well supported from all quarters and therefore your directors wish to place on record their sincere appreciation for the support and co-operation received from Central and State Governments, Bankers and others associated with the Company. Your Directors wish to thank the banks, financial institutions, shareholders and business associates for their continued support and cooperation. We look forward to receiving the continued patronage from all quarters to become a better and stronger company. 23. CAUTIONARY STATEMENT The statements contained in the Board's Report and Management Discussion and Analysis contain certain statements relating to the future and therefore are forward looking within the meaning of applicable securities, laws and regulations. Various factors such as economic conditions, changes in government regulations, tax regime, other statues, market forces and other associated and incidental factors may however lead to variation in actual results. BY order of the Board For Rathi Steel And Power Limited Sd/- Prem Narain Varshney (Whole Time Director) DIN:00012709 Sd/- Pradeep Kumar Rathi (Managing Director) DIN: 00012596 Place: New Delhi Date: 14/08/2015 |