DIRECTORS REPORT Your Directors have the pleasure of presenting their 43rd Annual Report and audited statements of accounts for the year ended 31st March, 2015. 2. OVERALL PERFORMANCE The Company recorded net sales of Rs.1234.63 crore during the financial year 2014-15 as compared to Rs.1458.91 crore in the previous financial year. The Net profit during the financial year 2014-15 was at Rs.39.00 crore as compared to Rs.86.62 crore in financial year 2013-14 translating to basic earning per share at Rs.9.76 for the financial year 2014-15 as against Rs.21.68 in financial year 2013-14. 3. STATE OF COMPANY'S AFFAIRS The analytical review of the Company's performance and its businesses, including initiatives in the areas of Human Resources and Corporate Social Responsibility have been presented in the section of Management Discussion and Analysis of this Annual Report. Graphite Electrodes The year under review was one of the most challenging years for the Company, as the Graphite Electrode industry saw erosion in margins. The Company by reformulating its operational management discipline, was able to reduce the effect of declining margins. The major initiatives during financial year 2014-15 were undertaken to usher in qualitative improvement. A keen emphasis was laid on optimising costs across all operational and commercial areas. Company's focus on reducing working capital continued to show improvements in the level of plant inventories, receivables and other current assets, thereby releasing cash for productive purposes. Graphite Electrode segment has become increasingly challenging, reflected by weakness in demand. Journey on reducing working capital, cost reduction and reduced debt position, adds strength to the Company in times like these and will reap the first mover benefit, as the tide turns favourable. Power Generation Power Generation comprises of facilities, which are primarily run for meeting captive requirement of manufacturing graphite electrodes and in the process, also sells surplus power in the open market. The power segment went through a challenging phase and the Company continues to utilise bulk of the power generated for captive purposes. Hydro power generation was also lower due to insufficient rains in the region. Reduced operating levels in Graphite Electrode segment and limited availability of cost effective coal during the year made it imperative for the Company, to optimise on specific coal consumption, to ensure healthy bottomline. The Company will be affected by the completion of the exemption period of duty payment on one of its power generation facility. This will have an impact on the cost of power generation, going forward. 4. MATERIAL CHANGES AND COMMITMENTS DURING THE YEAR No material changes and commitments, affecting the financial position of the Company have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report. 5. CHANGE IN THE NATURE OF BUSINESS There is no change in the nature of business during the financial year 2014-15. 6. SUBSIDIARY, ASSOCIATE COMPANIES OR JOINT VENTURES (i) Subsidiary Company In terms of provisions of Section 136(1) of the Companies Act, 2013, the audited financial statements of M/s. HEG Graphite Products and Services Ltd, subsidiary Company of the HEG Ltd, have been placed on the website of the Company and are not being annexed in this Annual Report. The financial statements of the subsidiary Company are kept for inspection by the shareholders at the registered office of the Company. The Company shall provide, the copy of the financial statements of its subsidiary Company to the shareholders upon their request. There were no business operations in the subsidiary Company. The subsidiary reported a net loss of Rs.30,495/- in the financial year 2014-15. The Managing Director of the Company does not receive any remuneration or commission from its subsidiary. (ii) Associate Companies or Joint Ventures There are two Associates of the Company namely M/s Bhilwara Infotechnology Ltd and M/s. Bhilwara Energy Ltd. M/s. Bhilwara Infotechnology Ltd had a turnover of Rs.37.07 crore and Net Profit was Rs.4.65 crore in the financial year 2014-15. M/s. Bhilwara Energy Ltd had a turnover of Rs.416.77 crore and Net Loss (after Minority Interest) was Rs.17.70 crore as per their financial statements (unaudited but limited reviewed and consolidated) for the financial year 2014-15. The Company has no Joint Ventures. No Company has become/ceased to be a Subsidiary, Associate or Joint venture during the financial year 2014-15. A report on the performance and financial position of Subsidiary and Associate Companies as per the Companies Act, 2013 is annexed in the Form AOC-1 to the consolidated Financial Statement and hence not repeated here for the sake of brevity. 7. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards. The audited consolidated financial statements together with Auditors' Report form part of the Annual Report. 8. DIVIDEND The Board has recommended a dividend at the rate of H3/-per share on Equity Shares of face value of H10/- each for the financial year ended 31st March, 2015, subject to your approval at the Annual General Meeting. 9. CORPORATE GOVERNANCE A report on Corporate Governance forms part of the Annual Report along with the Auditors' Certificate on its compliance. 10. MANAGEMENT DISCUSSION AND ANALYSIS Management Discussion and Analysis Report as required under the Listing Agreements with the Stock Exchanges forms part of the Annual Report. 11. INTERNAL CONTROL SYSTEMS AND ADEQUACY THEREOF The Company has an adequate internal control system commensurate with the size and nature of its business. An internal audit programme covers various activities and periodical reports are submitted to the management. The Audit Committee reviews financial statements, internal audit reports along with internal control systems. The Company has a well-defined organisational structure, authority levels and internal rules and guidelines for conducting business transactions. 12. PERSONNEL a) Industrial relations The industrial relations during the period under review generally remained cordial at all the plants of the Company. b) 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, is annexed herewith as Annexure - I. 13. PUBLIC DEPOSITS Your Company has not invited any deposits from public/ shareholders in accordance with Chapter V of the Companies Act, 2013. 14. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS There are no significant and material orders passed by the regulators or courts or tribunals during the financial year 2014-15. 15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information with regard to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo in accordance with the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is given as Annexure II forming part of this Report. 16. DIRECTORS AND KEY MANAGERIAL PERSONNEL One of your Directors namely Shri Shekhar Agarwal, shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment. The brief profile, pursuant to Clause 49 of the Listing Agreement of the Director retiring by rotation at the ensuing Annual General Meeting and being eligible, for re-appointment, forms part of the Corporate Governance Report. All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Shri Raju Rustogi, Chief Financial Officer of the Company was designated as key Managerial Personnel of the Company under the provisions of Section 203 of the Companies Act, 2013 w.e.f. 30th July, 2014. 17. board evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual evaluation of its own performance, the directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. 18. nomination and remuneration policy The Board, on the recommendation of the Nomination & Remuneration Committee approved a policy for appointment and removal of Directors, key Managerial Personnel and Senior Management and their remuneration. The policy is appended as Annexure - III forming part of this Report. 19. meetings of the board The Board of Directors met 4 (four) times in the financial year 2014-15. The details of the Board Meetings and the attendance of the Directors are provided in the Corporate Governance Report. 20. contracts and arrangements with related parties All related party contracts/arrangements/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 for approval. Prior omnibus approval of the Audit Committee was obtained for the transactions which are of a foreseen and repetitive nature. The statement of transactions entered into pursuant to the omnibus approval so granted is placed before the Audit Committee for approval on a quarterly basis. The statement is supported by a Certificate from the CFO. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. Weblink: <http://www.hegltd.com/policy_on_related_party_transactions.aspx> There are no pecuniary relationships or transactions of NonExecutive Directors vis-a-vis the Company that have a potential conflict with the interests of the Company. 21. audit committee The composition of the Audit Committee is stated in the Corporate Governance Report. All the recommendations of the Audit Committee were accepted by the Board during the financial year 2014-15. 22. auditors M/s. Doogar & Associates, Chartered Accountants and M/s. S.S. kothari Mehta & Co., Chartered Accountants, Auditors of the Company, will retire from their office at the ensuing Annual General Meeting. They are, however, eligible for re-appointment. They have furnished a Certificate to the effect that their re-appointment will be in accordance with the applicable provisions of the Companies Act, 2013. You are requested to consider their re-appointment. The Auditors' Report read along with notes to accounts is self-explanatory and therefore does not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark. 23. business risk management The objective of risk management at the Company is to protect shareholder value by minimising threats or losses and identifying and maximising opportunities. An enterprise-wide risk management framework is applied so that effective management of risk is an integral part of every employee's job. The Risk Management Policy of the Company is in place. The Company's risk management strategy is integrated with the overall business strategies of the organisation and is communicated throughout the organisation. Risk management capabilities aide in establishing competitive advantage and allow management to develop reasonable assurance regarding the achievement of the Company's objectives. The annual strategic planning process provides the platform for identification, analysis, treatment and documentation of key risks. It is through this annual planning process that key risks and risk management strategies are communicated to the Board. The effectiveness of risk management strategies is monitored both formally and informally by management and process owners. There is no major risk which may threaten the existence of the Company. 24. COST AUDITORS The Cost Audit for financial year ended March 31, 2014 was conducted by M/s. N.D. Birla & Co. (M. No. 7907). The due date for filling the Cost Audit Report in XBRL mode for financial year ended March 31, 2014 was September 27, 2014 and Cost Audit Report was filed on September 09, 2014. Based on the Audit Committee recommendations at its meeting held on 14th May, 2015, the Board has approved the re-appointment of M/s. N.D. Birla & Co. (M. No. 7907), as the Cost Auditors of the Company for the financial year 2015-16 on a remuneration of H2 lakhs plus service tax and out of pocket expenses that may be incurred by them during the course of audit. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to M/s. N.D. Birla & Co., Cost Auditors is included in the Notice convening the Annual General Meeting. 25. SECRETARIAL AUDITOR Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M/s. GSk & Associates, a firm of Company Secretaries in practice to undertake the Secretarial Audit of the Company for the financial year 2014-15. The Secretarial Audit Report is annexed herewith as Annexure IV. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. The Board has re-appointed M/s. GSk & Associates, Company Secretaries in practice as Secretarial Auditor of the Company for the financial year 2015-16. 26. CORPORATE SOCIAL RESPONSIBILITY (CSR) As part of its initiatives under Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of promotion of Education, Eradicating hunger & poverty, initiatives towards Community Service and rural development, Healthcare, Plantation & Environment Development, Protection of National heritage, art, culture etc. These projects were in accordance with the CSR Policy of the Company and Schedule VII of the Companies Act, 2013. The CSR Committee comprises Shri Ravi Jhunjhunwala (Chairman), Shri D.N. Davar and Smt. Vinita Singhania. The CSR policy may be accessed on the Company's website at the link mentioned below: <http://www.hegltd.com/pdf/Corporate_Social_Responsibility_> Policy.pdf The Annual Report on CSR activities is enclosed as Annexure V forming part of this report. 27. INTERNAL AUDITORS Based on the Audit Committee recommendations at its meeting held on 14th May, 2015, the Board has approved the re-appointment of M/s. S.L. Chhajed & Co, as the Internal Auditors of the Company for the financial year 2015-16. 28. DIRECTORS RESPONSIBILITY STATEMENT The Directors confirm that: i) In preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from the same; ii) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2015 and of the profit of the Company for the year under review; iii) They have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safe guarding the assets of the Company and for preventing and detecting frauds and other irregularities; iv) They have prepared the annual accounts on a going concern basis; v) They have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; vi) They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 29. VIGIL MECHANISM /WHISTLE BLOWER POLICY The Company has a vigil mechanism named "Whistle Blower Policy" in place. The details of the Whistle Blower Policy are explained in the Corporate Governance Report and the policy is also posted on the website of the Company. The weblink is: <http://www.hegltd.com/whistle-blower-policy.aspx> 30. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. 31. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT - 9 is annexed herewith as Annexure VI. 32. GENERAL DISCLOSURE The Company has a group policy in place against Sexual Harassment in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. Two complaints of Sexual Harassment were received during the financial year 2014-15 and were disposed off within the prescribed time-limit. 33. ACKNOWLEDGEMENTS Your Directors wish to place on record, their appreciation for the valuable assistance and support received by your Company from banks, financial institutions, the Central Government, the Government of Madhya Pradesh, the Government of Uttar Pradesh and their departments. The Board also thanks the employees at all levels, for the dedication, commitment and hard work put in by them for Company's achievements. For and on behalf of the Board of Directors Ravi Jhunjhunwala Chairman, Managing Director & CEO Dated:14th May, 2015 Place: Noida (U.P.) |