BOARD OF DIRECTORS" REPORT TO SHAREHOLDERS Dear Shareholders, The Board of Directors of your Company are pleased to present the 25th Annual Report on the business of the Company along with the Audited Financial Statements of the Company for the year ended 30th June, 2015. THE FINANCIAL PERFORMANCE During the period under review, the Company has achieved, on standalone basis, revenue of Rs. 12,344 lakhs and net profit of n,215 lakhs. During the same period, the Company, on consolidated basis, has achieved revenue of Rs. 24,296 lakhs and net profit of Rs. 659 lakhs. DIVIDEND & RESERVES The Board recommends a dividend of Rs. 1.20 per equity shares of Rs. 10 per share (12%) on the equity share capital of Rs. 15,88,67,920/- for the financial year ended 30th June, 2015 aggregating Rs. 1,90,64,150/-. The total dividend payout works out to 15.69% of the net profit of the Standalone results. The dividend on equity shares is subject to the approval of the shareholders in the Annual General Meeting. The dividend, if approved, will be payable to those shareholders whose names appear in the Register of Members as on 9th December, 2015, the date fixed for the purpose. In terms of the Companies Act, any unclaimed or unpaid dividend relating to the financial year 2007-08, is due for transfer on 11.01.2016 to the Investor Education and Protection Fund established by the Central Government. The Company does not propose to transfer any amount to the General Reserves for the financial year ended 30th June, 2015. STATE OF AFFAIRS OPERATIONS : During the year under review, the Company has achieved a turnover of Rs. 12344 Lakhs (2013-14 : Rs. 12404 Lakhs) resulting in a profit before tax of Rs. 1501 Lakhs before tax for the current year (2013-14 : Rs.1106 Lakhs). The increase in profit is due to the decent performance of the Hydro Electric Power division of the Company which produced 50.53 million units of electricity during the year under review as against 38.23 million units for the previous year. Thus, your Company could manage a reasonable financial performance, though the Ferro Alloy division of your Company could not perform as expected during the year as a result of your Company unable to cope up with the sluggish market conditions. Generally, the stainless steel industry globally went through a prolonged phase of demand slow down and still such situation continues. FUTURE PROSPECTS : The outlook and future prospects of the Company are presented in the "Management Discussion and Analysis Report" forming part of this Report. RENEWABLE ENERGY CERTIFICATES (REC) : As the shareholders are aware, your Company is a registered Renewable Energy (RE) generator under the new REC mechanism promulgated by the Central Government. This status entitles the Hydro Power Project (HPP) of your Company to receive Renewable Energy Certificates for every 1000 units of renewable energy produced. These certificates are tradeable in the Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL). During the year under review, your Company could realize Rs. 2,58,43,500/- being the sale proceeds of 17229 REC units. As on date, your Company has RECs for a total value of Rs.13,78,60,137/-. It is expected that the scope for demand for RECs would improve as there is a momentum towards complying with Renewable Purchase Obligations (RPO) of RECs. With RPO compliance drive initiated by various State Regulators in the Country, it is expected that the buyer's participation for RPO's would increase in the forthcoming trading sessions. JOINT VENTURE AL-TAMMAN INDSIL FERROCHROME LLC As the shareholders are aware, the ferro-chrome manufacturing operations of the Company's Joint Venture Al-Tamman Indsil Ferrochrome LLC in Sultanate of Oman commenced full scale commercial production from April, 2014 onwards. The Joint Venture, has been performing reasonably well during the year under review and it is expected, barring unforeseen circumstances, your Company's financial parameters will improve substantially when the Joint Venture declares dividends. Meanwhile, your Company has started receiving returns by way of dividend from its Wholly Owned Subsidiary viz., Indsil Hydro Global FZE, Sharjah Airport International Freezone, after it receives marketing fee from the JV for every ton of Ferrochrome sold by the JV. SREE MAHALAKSHMI SMELTERS (P) LTD (SMS) - SUBSIDIARY OF THE COMPANY As the shareholders are aware, the capacity of SMS plant was upgraded from 5 MVA to 7.5 MVA for the manufacture of Low Carbon Silico Manganese from that of High Carbon Silico Manganese. A huge hike in power tariff during the period under review resulting in under-utilisation of operations making it difficult for the Subsidiary to operate its plant at its capacity. This, in turn, coupled with adverse market conditions, caused severe constraints resulting in the Subsidiary suffering huge financial losses . As a result, the management was constrained to declare temporary suspension of its plant with effect from 22nd May, 2015. INDSIL HYDRO GLOBAL FZE, SHARJAH AIRPORT INTERNATIONAL FREEZONE (WHOLLY OWNED SUBSIDIARY) The consolidated financial results incorporating the financial statement of the Wholly Owned Subsidiary, Indsil Hydro Global FZE is attached to the Annual Report as required under the Accounting Standards and Listing Agreement. DISCLOSURE ON SUBSIDIARY/JOINT VENTURE As per the provisions of Section 129 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the Subsidiary Company / Joint Venture is attached (Form AOC-1) to this Report along with the financials (Annexure-1). CONSOLIDATED FINANCIAL STATEMENTS: The consolidated financial statements by consolidating the accounts of the Company, Sree Mahalakshmi Smelters Private Limited (Subsidiary of the Company) Al-Tamman Indsil Ferro Chrome LLC, Sultanate of Oman (the JV) and Indsil Hydro Global FZE, Sharjah Airport International Freezone (Wholly Owned Subsidiary of the Company) under the Accounting Standards 21 issued by the Institute of Chartered Accounts of India forms part of this Annual Report. CHANGE OF FINANCIAL YEAR It is mandatory that every Company shall, within the period of two years from 1st April, 2014 the date of commencement of the Act, should align its financial year end to 31st March as per the provisions of Section 2 (41) of the Companies Act, 2013. Accordingly, the Board of Directors at its meeting held on 17th August, 2015 approved alignment of financial year of the Company to 31st March every year. The same was also informed to Bombay Stock Exchange Ltd and requisite Form MGT-14 was filed with the Ministry of Corporate Affairs. Therefore, the next financial year of the Company will be for a period of 9 months from 1st July, 2015 to 31st March, 2016 and thereafter each financial year will be from 1st April to 31st March. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 Details as per the provisions of Section 186 of the Companies Act, 2013 are given under Notes to Financial Statements. PARTICULARS OF CONTRACTS WITH RELATED PARTY All the transactions of the Company with related parties are at arms length and have taken place in the ordinary course of business. Provisions of Section 188 of the Companies Act, 2013 is not applicable. Form No. AOC - 2 pursuant to Clause (h) of Sub-section (3) of Section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014 is attached as Annexure-2. MATTERS AS MAY BE PRESCRIBED As per Rule 8(5) of the Companies Accounts Rules, 2014 the following additional information are provided : 1. The financial summary or highlights :The financial highlights including state of affairs of the Company, Dividend and Reserves is provided in the Board of Directors Report to the shareholders forming part of this Annual Report. 2. The change in the nature of business, if any :There is no change in the nature of business. 3. The details of Directors or Key Managerial Personnel who were appointed or have resigned during the year Sri S. Mahadevan and Sri R.Murali were appointed as Company Secretary and Chief Financial Officer, respectively on 13.11.2014 4. a) The names of Companies which are Subsidiaries, Joint Venture Sree Mahalakshmi Smelters Private Limited - Subsidiary Indsil Hydro Global FZE, Sharjah Airport International Freezone (SAIF) - Wholly Owned Subsidiary Al-Tamman Indsil Ferrochrome LLC, Sultanate of Oman - Joint Venture b) Any of the above have become ceased during the year : No 5. The details of deposits under Chapter V of the Act :The Company has not accepted deposits 6. The details of deposits which are in Compliance with requirement of Chapter V of the Act : Not Applicable 7. The details of significant and material orders passed by the Regulators / Courts or Tribunals impacting the going concern status and Company's operation: Nil 8. The details of adequacy of internal controls with reference to the financial statements : Systems and procedures are in place to detect and protect the organizational resources both physical and intangibles. The financial statements are prepared in accordance with the Accounting Standards issued by the ICAI. DEPRECIATION Depreciation on fixed assets is provided on Straight Line Method in accordance with the rates specified under Schedule II of the Companies Act, 2013, except the useful life of the Plant and Machinery based on the technical evaluation. As per the technical evaluation such useful life has been taken as 20 years. EXTRACTS OF ANNUAL RETURN : As per the requirements of provisions of the Companies Act, 2013, the Extract of the Annual Return in the prescribed Form MGT-9 is annexed to this Report (Annexure-3). COMMITTEES OF THE BOARD OF DIRECTORS : A. AUDIT COMMITTEE An Audit Committee has been constituted by the Board of Directors of the Company to handle the activities as set out in Clause 49 of the Listing Agreement with the Stock Exchange read with Section 177 of the Companies Act, 2013. COMPOSITION OF AUDIT COMMITTEE: The Board constituted the Audit Committee which comprises of Dr. A K Sreedharan as Chairman, Dr. T C P Nambiar and Sri Vinod Narsiman as Members. All the recommendations of the Audit Committee were accepted by the Board. More details on the Committee like terms of reference are given in the Corporate Governance Report. B. SHARE TRANSFER COMMITTEE A Share Transfer Committee was constituted by the Board of Directors of the Company to expedite the process of Share Transfers in respect of share held in physical form and to take on record the volume of shares transacted in the Demat segment periodically. The Board constituted the Share Transfer Committee which consists of Sri S. Inderchand as Chairman and Smt D.Pushpa Varadarajan as Member. C. STAKEHOLDERS' RELATIONSHIP COMMITTEE This Committee considers and resolves the grievances of the shareholders of the Company. The said Committee comprises of Sri S.Inderchand as Chairman and Smt. D.Pushpa Varadarajan as Member. Earlier the Committee was known as Shareholders Grievance Committee and subsequently changed to "Stakeholders Relationship Committee" in the meeting of the Board of Directors held on 17/8/2015. D. COMPENSATION COMMITTEE A Compensation Committee has been constituted to administer Indsil Hydro Power and Manganese Limited Employee Stock Option Scheme. The Committee consists of Dr. A.K. Sreedharan as Chairman and Sri. Vinod Narsiman and Dr. T.C.P. Nambiar as Members. E. CORPORATE SOCIAL RESPONSIBILITY The objective of Corporate Social Responsibility (CSR) Committee is to improve the quality of life of the communities through long-term value creation for all stakeholders. Towards achieving this, the Company has commenced its CSR initiatives. The Company continues to remain focused on improving the quality of life and encouraging communities through health, education, old age homes and drinking water facilities in and around the area where the plants of the Company are situated. CSR Committee consisting of Directors namely Sri S.N. Varadarajan, Executive Vice-Chairman as Chairman of the Committee and Sri Vinod Narsiman, Managing Director and Dr. A.K.Sreedharan, Independent Director as Members of the Committee was constituted by the Board of Directors of the Company . The preference for spending CSR funds has been in and around the area where the plant is situated. However, the Company could not identify the Agencies / Trusts suitable in line with CSR Policy of the Company for spending the entire amount. The Company would endeavour to spend the entire CSR amount in the current year. Expenditure of 2% of average net profit could not be fulfilled totally due to the Company not being able to identify suitable local area projects for CSR activities. Thus there was a short fall of Rs. 4,91,276/-. A mechanism to execute all identified local area projects in future is being put in place and will be monitored by CSR Committee. CSR Policy was adopted by the Board of Directors on the recommendation of CSR Committee. Report on CSR as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed to this Annual Report (Annexure-4). F. NOMINATION & REMUNERATION COMMITTEE Nomination and Remuneration Committee was framed by the Board of Directors as per the requirements of the provisions of the Companies Act, 2013. This Committee consists of : 1) Dr. A.K.Sreedharan, Chairman (Non-Executive, Independent) 2) Sri B.Balchand, Member (Non-Executive, Non-Independent) 3) Dr. T.C.P.Nambiar, Member (Non-Executive, Independent) The said Committee has been empowered and authorized to exercise the powers as entrusted under the provisions of Section 178 of the Companies Act, 2013. The Company has a policy on Directors' appointment and remuneration including criteria for determining the positive attributes, independence of a Director and other matters provided under Section 178(3) of the Act. Nomination and Remuneration Policy was adopted by the Board of Directors. The concerned Policy is annexed to this Report (Annexure-5). G. RISK MANAGEMENT COMMITTEE The Company follows a risk appraisal mitigation and management process. As per the requirements of Clause 49 of the Listing Agreement, the Company has constituted a Risk Management Committee. The Committee has formulated a Risk Management Policy for Risk Management. The Risk Management Policy is periodically reviewed for improvement. The Risk Management Committee duly constituted by the Board of Directors consists of : 1) Sri S.N.Varadarajan, Executive Vice-Chairman as Chairman of the Committee 2) Sri Vinod Narsiman, Managing Director as Member of the Committee 3) Dr. A.K. Sreedharan, Director as Member of Committee H. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION & REDRESSEL) ACT, 2013 The Company has adopted policy on Prevention of Sexual Harassment of Women at Workplace in accordance with the Sexual Harassment of women at Workplace (Prevention, Prohibition and Redressal) Act,2013. A Committee in this regard has been constituted in accordance with Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressel) Act, 2013. During the financial year ended 30th June, 2015, the Company has not received any complaints pertaining to Sexual Harassment of women. VIGIL MECHANISM The Board has constituted Vigil Mechanism as per Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014. The Audit Committee has been authorized to oversee the Vigil Mechanism. Sri Vinod Narsiman, Managing Director has been nominated to facilitate the Vigil Mechanism. The Vigil Mechanism is intended to provide adequate safeguards against victimization of employees and to facilitate to report the genuine concerns or grievances. WHISTLE BLOWER POLICY A Whistle Blower Policy was adopted by the Board of Directors in its meeting held on 17 August, 2015. The details of Whistle Blower Policy is published in the Company's website www.indsil.com . POLICY ON MATERIAL SUBSIDIARY The Board of Directors adopted a policy on Material Subsidiary and the same is published in the Company's website www.indsil.com . EVALUATION OF BOARD'S PERFORMANCE On the advice of the Board of Directors, the Nomination and Remuneration Committee consisting of three Directors of the Company formulated the criteria for the evaluation of the performance of the Board of Directors & its Committees, Independent Directors, Non-Independent Directors, Executive Director, Chairman and Managing Director. According to the evaluation, the Independent Directors of the Company have also convened a separate meeting for this purpose. All the Board of Directors are aware of the performance and are familiar with the business of the Company. STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL: Statement pursuant to Section 134 of the Companies Act, 2013 read with the Companies (Particulars of Employees Rule, 1975 and section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this Annual Report (Annexure-6). RESIGNATION OF DIRECTOR & REAPPOINTMENT OF INDEPENDENT DIRECTOR There was no resignation and re-appoinment of Independent Director(s) during the year under review. MEETING OF INDEPENDENT DIRECTORS Pursuant to Clause 49 (II)(6) of the Listing Agreement, a meeting of the Independent Directors to review the performance of the Chairman and that of the Board was conducted on 26th June, 2015 and all the Independent Directors attended this meeting. AUDITORS: The Board of Directors of the Company recommended M/s Raja & Raman, (Firm's Registration No.003382S) Chartered Accountants, 1055/11, First Floor, Gowtham Centre, Avanashi Road, Coimbatore 641018, the retiring Auditors to be reappointed as Statutory Auditors of the Company from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting for the financial year 2015-16 subject to the approval of the shareholders in the ensuing Annual General Meeting. The said item regarding appointment of M/s Raja & Raman, Auditors is placed before the shareholders for their approval. The Auditors have consented and confirmed their eligibility and desire to continue as Statutory Auditors of the Company. INTERNAL AUDITOR Ms. K.R.Divya, (Membership No. 228896) Chartered Accountant, No.37, P.M.Samy Colony, 1st Street, R.S.Puram, Coimbatore 641 002 was appointed as Internal Auditor pursuant to the provisions of Section 138 of the Companies Act, 2013 by the Board of Directors of the Company to conduct the internal audit functions. COST AUDITOR Pursuant to Section 148 of the Companies Act, 2013 Sri B.Venkateswar, Cost Accountant was appointed by the Board of Directors of the Company for conducting audit of the Cost Account Records of the Company for the year 2015-16. He was the Cost Auditor of the Company for the previous year 2014-15 as well. SECRETARIAL AUDITOR KSR & Co, Company Secretaries LLP, a firm of Company Secretaries is the Secretarial Auditors of the Company. The Secretarial Audit Report submitted by them forms part of this Report (Annexure-7) . AUDITOR'S REPORT & ACCOUNTING POLICIES & SECRETARIAL AUDIT REPORT The Auditors' Report read with the Notes on Accounts are self-explanatory and does not require any further clarification. A statement detailing significant Accounting Policies of the Company is annexed to the Accounts. The Reports of the Statutory Auditors and the Secretarial Audit Report (both appearing elsewhere in this Annual Report) are without any adverse comments. EMPLOYEE STOCK OPTION SCHEME : Pursuant to the SEBI (Share Based Employee Benefits) Regulations, 2014 (the ESOP Regulations) issued by SEBI on October 28, 2014, the Company has obtained approval of the shareholders through Postal Ballot replacing the INDSIL ESOS 2008 with "INDSIL ESOS 2015" in conformity with such regulations and accordingly executed Variation Deed of Trust with the concerned Registering Authority in Coimbatore. The results of the Postal Ballot passing the resolution to this effect by the shareholders were furnished to the Bombay Stock Exchange accordingly and such results were published in the newspapers and website of the Company www.indsil.com . A copy of the INDSIL ESOS 2015 and the registered Variation Deed was furnished to the Bombay Stock Exchange for the Exchange to take the same on record. A corporate announcement to this effect has been published in the Bombay Stock Exchange website. A disclosure with regard to ESOS of the Company as on 30th June, 2015 is covered in the Corporate Governance Report. The Company has already obtained a certificate from Raja & Raman, Chartered Accountants and Statutory Auditors with respect to the implementation of the Company's ESOS. A copy of the same is also be available for inspection during the working days of the Registered Office of the Company between 9.30 am to 5.30 pm. CORPORATE WEBSITE: The website of the Company, www.indsil.com carries a comprehensive database of information of interest to the stakeholders including the corporate profile, information with regard to products, plants and financial performance of the Company, Policies and other matters. DECLARATION BY INDEPENDENT DIRECTORS The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of Independence as applicable under the provisions of Section 149(6) of the Companies Act, 2013 read with relevant rules and Clause 49 of the Listing Agreement. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS A familiarization programme for Independent Directors was conducted on 11th May, 2015. INSURANCE: All the properties of the Company including buildings, plant & machinery and stocks have been adequately insured. MANAGEMENT DISCUSSION & ANALYSIS REPORT Management Discussion and Analysis report for the year under review as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange(s) is enclosed to this Annual Report as ( Annexure-8). DIRECTORS' RESPONSIBILITY STATEMENT The Directors based on the representations received from the Management and pursuant to Sub-section 3 (c) of Section 134 of the Companies Act, 2013 hereby confirm that : (i) in the preparation of Annual Accounts, the applicable accounting standards have been followed and wherever required, proper explanation relating to material departures have been given (ii) have selected such accounting policies and applied them consistently and made judgements 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 and of the profit or loss of the Company for that year: (iii) 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 deducting frauds and other irregularities. (iv) have prepared the Annual Accounts on a going concern basis: (v) have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively: and (vi) have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. CODE OF CONDUCT The Board of Directors approved a code of conduct which is applicable to the members of the Board and all designated employees in the course of day to day business operations of the Company. The code is posted in the Company's website www.indsil.com . All the Board members and the Senior Management Personnel have confirmed compliance with the code. PREVENTION OF INSIDER TRADING The Company adopted a Code of Conduct for Prevention of Insider Trading in order to regulate the trading in Securities by the Directors and designated persons of the Company as per SEBI (Prohibition of Insider Trading Regulations, 2015). CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchange, a separate section on Corporate Governance Practices followed together with a certificate from the Company's Secretarial Auditors KSR & Co, Company Secretaries LLP, Practising Company Secretaries, Coimbatore confirming compliance (provided elsewhere in the Annual Report) form an integral part of the Directors' Report. INDUSTRIAL SAFETY Your Company has laid high emphasis on safety of all the personnel and mitigation of damage to equipment. The Company has thoroughly followed all the safety measures. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134 (3) (m) of the Act read with the Companies (Accounts) Rules 2014 is enclosed to this report (Annexure-9). MATERIAL CHANGES AND COMMITMENTS There are no material changes and commitments in the business operations of the Company for the financial year ended 30th June, 2015 upto the date of signing of the Director's Report. NUMBER OF BOARD MEETINGS: The Board of Directors met five times in the year 2014-15. The details of the Board Meetings and the attendance of the Directors are provided in the Corporate Governance Report. LISTING FEE Listing fee for the financial year 2015-16 has been paid to Bombay Stock Exchange where the shares of the Company are listed. DECLARATION The Company has been regular in filing all forms and returns with the Registrar of Companies as required under the Companies Act, 2013 and has not defaulted in payment of dividends. ACKNOWLEDGEMENTS Your Directors are extremely thankful to State Bank of Travancore, Export Import Bank of India, IDBI Bank Limited, Yes Bank Limited, Standard Chartered Bank and The Federal Bank Limited for their continued support. Your Directors acknowledge and express their grateful appreciation for the co-operation and support received from Government Authorities, Kerala State Industrial Development Corporation, employees, customers and suppliers. They also thank the shareholders for the confidence reposed by them in the management of the Company and for their continued support and co-operation. For and on behalf of the Board Sd/- VINOD NARSIMAN Managing Director DIN: 00035746 Sd/- S.N. VARADARAJAN Executive Vice-Chairman DIN: 00035693 Place : Coimbatore Date : 2nd November, 2015 |