REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 MARCH 2015 Dear Shareholders, The Directors are pleased to present their Report and Audited Statement of Accounts for the year ended 31 March 2015: MINING OPERATIONS The Government of Karnataka has vide notifications No.CI 214 MMM 2014 and No.CI 213 MMM 2014 both dated 23 September 2014 accorded sanction for third renewal of Company's Mining Leases No.2580 and 2581 for extraction of manganese and iron ores over an extent of 2,837 ha and 378 ha in Swamimalai and Ramanamalai Blocks, Sandur Taluk, Bellary district for a further period of 20 years effective from 1 January 2014 and valid till 31 December 2033 under the provisions of Section 8 of the Mines & Minerals (Development & Regulation) Act, 1957. In furtherance of the same, keeping about 1,210 hectares for future use by the Company after obtaining Forest Clearance under Section 2 of the Forest (Conservation) Act, 1980, Mining Lease Deeds No.2678 and No.2679 for 1,860.10 hectares and 139.20 hectares respectively, were executed on 20 March 2015 by the Director, Department of Mines & Geology, Government of Karnataka in favour of the Company and the same have been duly registered on 25 March 2015 with the jurisdictional Sub-Registrar at Sandur as Documents No.2787 and No.2788. In the meanwhile, the Government of India promulgated the Mines and Minerals (Development and Regulation) (Amendment) Ordinance, 2015 on 12 January 2015 under Article 123(1) of the Constitution amending certain provisions of the MMDR Act, 1957. The Ordinance seeks to bring in transparency and weed out discretion and accordingly, the grant of mineral concessions under the Ordinance shall only be through auctions. Unlike in the 1957 Act, henceforth, no renewal of any mining concessions shall be granted. Further, the tenure of the mineral concessions has been extended from the existing 30 years to 50 years; thereafter, the Mining Lease would be put up for auction (and not for renewal as in the earlier system). The Government has provided for transition period in sub-section 5 and 6 of Section 8A of the Ordinance in accordance with which Mining Leases would be deemed to be extended from the date of their last renewal to 31 March 2030 (for the captive miners) and till 31 March 2020 (for the merchant miners) or till the completion of the renewal already granted, if any, whichever is later. Accordingly, the Company's Mining Leases No.2678 and 2679 having been renewed with effect from 1 January 2014 are valid upto 31 December 2033. The Ministry of Environment, Forest and Climate Change (MoEFCC) has issued a Circular dated 1 April 2015 amending Para 4.16 of the Guideines issued by it under the Forest (Conservation) Act, 1980 and extended the already granted Forest Clearance for a period co-terminus with the period of Mining Leases in accordance with the provisions of Section 8A(1) of the Mines & Minerals (Development & Regulation) Amendment Act, 2015. Further, by another Circular dated 1 May 2015 the MoEFCC clarified that no further renewals or approvals would be required if Forest Clearance under Section 2 of the Forest (Conservation) Act, 1980 has been granted by MoEFCC either during the original lease period or previous renewal(s) of the mining lease. Forest Clearance which was granted to the Company's Mining Leases No.2678 (Old No.2580) and No.2679 (Old No.2581) for a period of 20 years expiring in December 2026 stands extended to 31 December 2033 in light of the above circulars dated 1 April 2015 and 1 May 2015. However, the question of validity of this Forest Clearance is pending before the Hon'ble Supreme Court for confirmation. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY No significant and material orders were passed by any Regulator(s) or Court(s) or Tribunal(s) which would impact the going concern status of the Company. MATERIAL CHANGES AND COMMITMENT, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT No material changes and commitment affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate and the date of this report. DIVIDEND Directors are pleased to recommend a dividend of Rs.3 per share for the current financial year. The dividend if approved and declared in the forthcoming Annual General meeting would result in a cash outflow of Rs. 315.94 lakh (including tax). SUBSIDIARY Star Metallics and Power Private Limited (SMPPL), a subsidiary of the Company commenced its commercial operations on 9 January 2011. It has two ferroalloy furnaces and also a 32 MW thermal power plant which is used as a captive unit for its ferroalloy operations. Further, a statement containing the salient features of the financial statement of SMPPL in the prescribed format is appended as Annexure- 'A' to this Report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013 Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report. The details of the loans and guarantees given and investments made by the Company are in Note Nos.9 and 25 of the audited financial statements. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES In terms of clause (h) of sub-section (3) of section 134 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the Company is required to furnish particulars of the contract entered into by the Company with its related parties in the Report of the Board. The Company has entered into a Conversion Contract with its subsidiary, SMPPL for conversion of the Company's manganese ore ('Mn ore') into Silicomanganese ('SiMn') / ferro manganese at SMPPL's ferroalloys plant. In terms of the Contract, requisite quantity and quality of Mn ores, reductants and electrode paste, are made available to SMPPL without any cost, for conversion of the same into SiMn (or any other ferro alloy). The balance materials and consumables are procured by SMPPL, the cost of which is included in the conversion cost. The entire SiMn (or any other ferro alloys) so produced by SMPPL is supplied to SMIORE. Silicomanganese is being sold to SMPPL to enable it to export the same to fulfill the export obligation commitment, as per the requirements of Export Promotion Capital Goods (EPCG) Scheme. SMPPL, being a subsidiary company, is a related party in accordance with the provisions of Section 2(76)(viii)(A) of the Companies Act, 2013. During the year under review, the Company purchased 2.2 acres of land at Sandur, from Skand Private Limited. The Company proposes to construct quarters, to accommodate its senior executives, on the said land. Skand Private Limited, is a related party of the Company by virtue of Section (76)(iv) of the Companies Act 2013, since the Boards of both the Companies have three common directors. All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. All Related Party Transactions are placed before the Audit Committee and also the Board for approval. The policy on Related Party Transactions can be accessed on the Company's website at www.sandurgroup.com Details of the contracts or arrangements made with related parties are given in the prescribed format as Annexure - 'B'. DEPOSITS The Company has not accepted fixed deposits from the public during the financial year under review. The Company did not have any deposits at the beginning of the financial year. Thus, provisions of Section 73 of the Companies Act 2013 are not applicable to the Company. CONSOLIDATED FINANCIAL STATEMENTS In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements and in terms of provisions of Section 129(3) of the Companies Act, 2013, consolidated financial statements of the Company and its subsidiary are forming part of the Annual Report. In accordance with Section 136 of the Companies Act, 2013, the audited financial statements including consolidated financial statements along with the Auditors Report and Directors' Report thereon are available on the Company's website, www.sandurgroup.com Further, separate audited accounts in respect of the subsidiary are also placed on the website. These documents will also be available for inspection during business hours at the registered office of the Company. DIRECTORS AND KEY MANAGERIAL PERSONNEL The Board is constituted of two managing directors, four whole-time directors and six independent directors including a woman director. Chairman of the Board is an executive director. There has been no change in the composition of the Board in the year 2014-15. The Company has a Company Secretary and a Chief Financial Officer who along with the managing directors and whole time directors constitute the Key Managerial Personnel. APPOINTMENT/RE-APPOINTMENTS The Listing Agreement with Bombay Stock Exchange Limited was amended on 17 April 2014, fixing a maximum tenure for independent directors for the first time. Clause 49(II)(B)(3)(a) allowed an independent director to hold office for a term up to five consecutive years on the Board of a company and provided for reappointment for another term of up to five consecutive years on passing of a special resolution by the company. Further, an independent director who had already served for more than five years in a company as on October 1, 2014, on completion of his present term, could be appointed for one more term of up to five years only. Accordingly, shareholders approval was sought at the 60th Annual General Meeting held on 27 September 2014 for re-appointment of R. Subramanian (who was appointed on 28 May 2009 and completing more than five years as on 1 October 2014) for a term of four consecutive years expiring at the Annual General Meeting for the financial year 2017-18 i.e., before the end of September 2018. Subsequently, the aforesaid Clause was amended on 15 September 2014 to bring it in line with the Companies Act, 2013. In terms of amended Clause 49 and Section 149(10) of the Companies Act, 2013 an independent director can hold office for a term up to five consecutive years on the Board of a company and be eligible for reappointment for another term of up to five consecutive years on passing of a special resolution by the Company. Further, no independent director shall be eligible to hold office for more than two consecutive terms. Further, in accordance with explanation to Section 149(11) of the said Act, tenure of an independent director on the date of commencement of the Act shall not be counted as a term. In view of the aforementioned provisions, other five Independent Directors - V. Balasubramaian, P. Vishwanatha Shetty, B. Ananda Kumar, S. S. Rao and Vatsala Watsa have been appointed for a term of four consecutive years expiring on 31 March 2019, by the shareholders vide resolution dated 31 March 2015 passed by postal ballot. It may be noted that in accordance with the provisions of sub-section (13) of Section 149 of the Companies Act, 2013, none of the Independent Directors shall be liable to determination to retirement by rotation henceforth. K. Raman- Director (Finance) & Chief Financial Officer is liable to retire by rotation at the ensuing meeting and being eligible is offering himself for re-appointment. He is not disqualified from being appointed as a director as specified under Section 164 of the Companies Act, 2013. NUMBER OF MEETINGS OF THE BOARD The Board met five times during the financial year, the details of which are given in the Corporate Governance Report forming part of this report. The intervening gap between any two consecutive meetings of the Board did not exceed one hundred and twenty days as prescribed under the Companies Act, 2013 and the Listing Agreement. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION The Board is committed to maintain its independence and accordingly, half of the Board is constituted by Independent Directors; thereby, ensuring separation of governance and management. The policy of the Company on directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178 of the Companies Act, 2013, adopted by the Board is appended as Annexure- 'C'to the Report. DECLARATION BY INDEPENDENT DIRECTORS All six independent directors of the Company meet the criteria of independence as provided under sub-section (6) of Section 149 of the Companies Act, 2013. Declarations to this effect have also been received from them. BOARD EVALUATION The Companies Act, 2013 vide Section 134(3)(p) read with Rule 8 of Companies (Accounts) Rules 2014, requires the Board to carry out formal annual evaluation of its own performance, of Committees and of individual directors. Further, all the listed companies and public companies with paid-up share capital of Rs.25 crore or more are required to indicate the manner & criteria of formal Board evaluation in Board's Report. Also, Schedule IV of the Companies Act, 2013 read with clause 49(II)(B)(5) of the Listing Agreement requires performance evaluation of independent directors to be done by the entire Board of Directors, excluding the director being evaluated (based on the criteria laid down by the Nomination and Remuneration Committee). On the basis of the report of performance evaluation, it is required to be determined whether to extend or continue the term of appointment of the independent director. As mandated by the aforementioned provisions, a mechanism for formal annual evaluation has been devised by the Company. Evaluation of the Board, its Committees and the directors for the year 2014-15 has been done based on this mechanism.The mechanism provides for annual evaluation at the end of each year. The performance of the Board, Committees and individual directors are evaluated based on reviews/ feedback of the directors themselves. The feedback forms have been prepared based on the broad parameters as set out in the 'Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and other employees'. A Report, prepared based on completed feedback form, is then placed before the Board for its review. TRAINING OF INDEPENDENT DIRECTORS On induction, the new independent directors on Board are familiarized with the nature of Industry and the Company's business operations. They are updated on a frequent basis with regard to operations of the Company. Any material development is intimated promptly. The Management encourages participation by the independent directors and accordingly, any clarification sought by the independent directors with regard to the Company's operations is duly addressed. Presently, no formal training programme exists. Until now, learning for the independent directors has been a pervasive ongoing phenomenon via participation. Further, at the time of appointment of a director, the company issues a formal letter of appointment entailing his/her role, function, duties and responsibilities as a director. The terms and conditions of appointment of independent directors is available on the Company's website . COMMITTEES OF THE BOARD Currently, the Board has six committees - namely, Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Environment Committee, Corporate Social Responsibility Committee and Risk Management Committee. DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM The Audit Committee is constituted of five Independent Directors namely, R. Subramanian as its Chairman and V. Balasubramanian, B. Ananda Kumar, S. S. Rao and Vatsala Watsa as its members. The Company believes in conduct of its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. The Company has established a vigil mechanism towards this end. In accordance with sub-section (9) of Section 177 read with Section Rule 7(2) of the Companies (Meetings of Board and its Powers) Rules, 2014, the Company's Audit Committee is required to oversee the vigil mechanism. The Committee oversees the vigil mechanism which has been established to address genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct and Ethics expressed by the employees and other Directors. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the Chairman of the Audit Committee in matters concerning financial/accounting and concerns relating to personnel belonging to levels above Senior General Manager. The Whistleblower Policy along with other Policies of the Company is available on the Company's website. DIRECTORS' RESPONSIBILITY STATEMENT In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013, your directors state that: (a) in the preparation of the accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) the Directors 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 as at 31 March 2015 and of the profit and loss of the Company for the year ended 31 March 2015; (c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) the Directors have prepared the annual accounts for the financial year ended 31 March 2015 on a 'going concern' basis; (e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and (f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SUB-SECTION (12) OF SECTION 143 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT Auditors have not reported any frauds during the year under review. ADEQUACY OF INTERNAL FINANCIAL CONTROLS Company's internal financial controls are deployed through an internally evolved framework that address material risks in the Company's operations and financial reporting objectives, through a combination of entity level controls (including Enterprise Risk Management, Legal Compliance Framework and Anti-fraud Mechanism such as Ethics Framework, Code of Conduct, Whistle Blower Policy, etc.), process controls (both manual and automated), information technology based controls, period end financial reporting and closing controls and through internal audit. It is an irrefutable presumption that internal financial controls, no matter how well conceived and operated, cannot provide absolute assurance of achieving financial, operational and compliance reporting objectives because of its inherent limitations. Also, projections of any evaluation of the internal financial controls to future periods are subject to the risk that the internal financial control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Further, the Company has appointed a practicing chartered accountancy firm M/s. P. Chandrashekar as internal auditors to look into various process in areas pertaining to purchases, sales, creditors, receivables, contracts, sub-contracts, inventory, cash management, payroll, labour contracts, expenses, Reclamation & Rehabilitation (R&R), core drilling and taxation. The Company is also undertaking the implementation of a structured framework on Internal Controls to further strengthen the internal control environment in the Company. This will provide a benchmark approach for evaluating the adequacy of controls and monitoring the operating effectiveness of those controls on an ongoing basis. During the implementation of the structured framework on internal controls, there is a possibility of identifying weaknesses or improvements in the design and / or operation of the existing controls and the underlying processes. Those will be dealt with as they are identified. EXTRACT OF ANNUAL RETURN The extract of Annual Return pursuant to the provisions of Section 92(3) read with Rule 12 of the Companies (Management and administration) Rules, 2014 is furnished as Annexure - 'D'attached to this Report. AUDITORS M/s. Deloitte Haskins & Sells, Chartered Accountants, Bangalore (ICAI Registration No.008072S) are the Statutory Auditors of the Company. M/s. Deloitte Haskins & Sells have already completed the maximum tenure of two terms of five consecutive years as stipulated in Section 139 of the Companies Act, 2013. However, in terms of proviso to sub-section (2) of Section 139 of the Companies Act, 2013, three years time has been granted from the commencement of the Act i.e. 1 April 2014, for complying with the aforesaid requirement. Accordingly, M/s. Deloitte Haskins & Sells were appointed as statutory auditors at the 60th Annual General Meeting held on 27 September 2014 in terms of the said proviso, to hold office until the conclusion of 63rd Annual General Meeting, subject to ratification at each Annual General Meeting. As per provisions of Section 139(1) of the Act, their appointment as Statutory Auditors of the Company to hold office from the conclusion of this meeting until the conclusion of next Annual General Meeting is subject to ratification by Members. AUDITORS' REPORT Auditors' Report on the financial statements of the Company is forming part of this Annual Report and there are no qualifications in the said report. No qualifications, reservations or adverse remarks have been made by the Satutory Auditors in the said Report. SECRETARIAL AUDIT Pursuant to provisions of sub-section (1) of Section 204 of the Companies Act 2013, the Company is required to annex with its Board's Report a secretarial audit report, given by a company secretary in practice. Sathya Prasad Yadav, Practicing Company Secretary (ICSI Membership No.18755 and Certificate of Practice No.6775) has been appointed as Secretarial Auditor of the Company for the financial year 2014-15. The Secretarial Audit Report is forming part of this Annual Report as Annexure- 'E'. The Secretarial Auditor has in his Report observed that there has been a delay in filing of returns with the Registrar of Companies on a few occasions. In this regard, the Board hereby states that the said delays were inadvertent due to the circumstances prevailing during the period. There are no further qualifications or adverse remarks in the Report which require reply from the Board of Directors. COST AUDITORS In terms of Section 148(2) of the Companies Act, 2013 read with Rule 4 of the Companies (Cost Records and Audit) Rules, 2014 issued by the Ministry of Corporate Affairs (MCA), the Company is required to gets its cost accounting records audited by a cost auditor. M/s. K. S. Kamalakara & Co. was appointed as Cost Auditors for the Financial Year 2014-15 by the Board at its meeting held on 9 August 2014. In accordance with Rule 6(5) of the Companies (Cost Records and Audit) Rules, 2014, the cost auditor is required to submit his report within 180 days from the date of closure of the financial year. Further, the due date for filing the Cost Audit Report for the FY 2014-15 is thirty days from the date of receipt of a copy of the cost audit report. Accordingly, the same shall be filed with the Ministry of Corporate Affairs (MCA) on or before 30 October 2015. The Cost Audit Report for the FY 2013-14 was filed with the MCA on 28 October 2014. CORPORATE GOVERNANCE The Directors' Report on Corporate Governance is annexed to this Report. The certificate of the Auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is also annexed. MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT The management discussion and analysis report forms part of the Annual Report in Compliance with Clause 49 of the Listing Agreement. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY Company has adopted a risk management framework to ensure early identification and management of various critical risks, which accrue to its business model and the risk management framework adopted by the Company ensures continuous focus on identifying, assessment & evaluation, and adequate mitigation of various risks affecting the Company. The Audit committee reviews the Company's critical risks, overall risk exposure and timely changes to overall exposure, and status of various risk mitigation plans on a periodic basis. The Board at its 256th meeting held on 28 October 2005 prescribed the Risk Management and Minimisation procedures. The same is reviewed on a regular basis by the Board. Risk management includes identifying types of risks and its assessment, risk handling and monitoring and reporting DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES The Company has been, for close to six decades, consciously contributing towards Corporate, Social and Environmental improvement. Being socially, environmentally and ethically responsible in governance of operations and also to add value to the operations while contributing towards the long term sustainability of business, the Board of Directors has further strengthened its resolve to do more for the development of the area improvement of living conditions of the surrounding rural population. The Annual Report on Company's CSR activities of the Company undertaken during the year under review are furnished in Annexure-'F' attached to this report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is not applicable since the Company does not have any manufacturing activities. No foreign exchange was earned during the year and particulars of the foreign exchange outgo during the year in terms of actual outflows appear as Note No.31 in the Notes forming part of Financial Statements. EMPLOYEES Pursuant to the provisions of sub-section (12) of Section 197 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars are set out in Annexure - 'G' to the Directors' Report. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Government of India has enacted the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 for prevention of sexual harassment of women at workplace and also for providing a redressal mechanism. In furtherance of the same, the Government has also notified the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013. The Act and the Rules came into force from 9 December 2013. The Company has constituted an Internal Complaints Committee (ICC) for the prevention and redressal of complaints related to sexual harassment at workplace. No complaints pertaining to sexual harassment were received during the year ended 31 March 2015. ACKNOWLEDGEMENTS The directors wish to thank members of judiciary, its associates and legal fraternity for their strong commitment to justice, fairness and equity. The directors also extend its gratitude to the Central and State Governments for the confidence bestowed on the Company. The directors wish to place on record their appreciation for all its employees for their commendable team work and professionalism. And ultimately, we wish to thank all the Government agencies, the promoters, business associates, banks and investors and look forward to their continued support and contribution. for and on behalf of the Board S. Y. Ghorpade Chairman & Managing Director Place : Bangalore Date : 27 May 2015 |