DIRECTORS' REPORT To, The Members Electrotherm (India) Limited Your Directors have pleasure in presenting the 29thAnnual Report on the business and operations of the Company and Audited Financial Statements for the year ended on 31st March, 2015 DIVIDEND: In view of losses incurred by the Company during the financial year, the Board of Directors of the Company do not recommend any dividend on Equity Shares and on Preference Shares for the year ended on 31st March, 2015. TRANSFER TO RESERVES: In view of losses incurred by the company during the financial year, no amount has been transferred to the General Reserve. OPERATIONS / STATE OF THE COMPANY’S AFFAIRS: During the year ended on 31st March, 2015, the total revenue of the company was ` 1833.26 Crores & Loss was `440.51 Crores. A detailed analysis of performance for the year is included in the Management Discussion and Analysis, which forms part of this Annual Report. During the financial year, there was no change in the nature of the business carried out by the Company. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANICAL POSITION AFTER THE END OF FINANCIAL YEAR: As per the settlement terms & conditions vide document dated 10th March, 2015 with Edelweiss Asset Reconstruction Company Limited (“EARC”) for restructuring of dues / loan, the Board of Directors of the Company at their meeting held on 2nd July, 2015 and the Shareholders through postal ballot on 10th August, 2015 approved the issue of 2,85,90,000 Partially Convertible Partially Redeemable Preference Shares ("PCPRPS") of face value of X 10/- each convertible into proportionate number of equity shares within 18 months and balance PCPRPS shall continue as Non-Convertible Redeemable Preference Shares and shall carry 0% Coupon Rate and shall be redeemed / re-purchased on such date as determined by the Board but not later than a period exceeding three years. CONSOLIDATED FINANCIAL STATEMENTS: The Consolidated financial statements of the Company for the financial year 2014-15 are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standards and Listing Agreement. The company has prepared Consolidated Financial Statements of the Company and its subsidiaries, which form part of this Annual Report. SUBSIDIARY COMPANY: The company has the following subsidiaries as on 31st March, 2015: 1. Jinhua Jahari Enterprises Ltd. 2. Jinhua Indus Enterprises Ltd. 3. Bhaskarpara Coal Company Ltd. 4. ET Elec-Trans Ltd. 5. Hans Ispat Ltd. 6. Shree Hans Papers Ltd. 7. Shree Ram Electro Cast Ltd. 8. Electrotherm Mali SARL Pursuant to section 129(3) of the Companies Act, 2013, a statement containing the salient features of the financial statement of the subsidiary companies in Form AOC-1 is attached as "Annexure - A" to this Report. Pursuant to the section 136 of the Companies Act, 2013, the financial statements of the company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the company www. electrotherm.com . During the financial year 2014-2015, none of the companies have become or ceased to subsidiaries, joint ventures or associate companies. NUMBER OF BOARD MEETINGS: During the financial year 2014-15, 5 (Five) Board Meetings were convened and held. Details of the composition of the Board and its Committees and of the meetings held, attendance of the Directors at such meetings and other relevant details are provided in the Corporate Governance report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. DIRECTORS AND KEY MANAGERIAL PERSONNEL: ? Retirement by Rotation Pursuant to the provisions of section 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and Articles of Association of the Company, Mr. Shailesh Bhandari, ManagingDirector, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. ? Appointment of Director Pursuant to section 161 of the Companies Act, 2013 and the Rules framed there under, the Board of Directors has appointed Mr. Chaitanyapratap Sharma (DIN 07067095) as an Additional Director of the Company in the category of Independent & Non-Executive Director with effect from 11th February, 2015 and Mrs. Nita Mukati (DIN 07161844) as an Additional Woman Director of the company in the category of Independent & Non-Executive Director with effect from 20th April, 2015. Mr. Chaitanyapratap Sharma shall hold office up to date the ensuing Annual General Meeting. The company has received a notice in writing from a member proposing the candidature of Mr. Chaitanyapratap Sharma for appointment as a Director. Your Directors recommend his appointment as a Director of the Company. ? Resignation of Directors Mr. Nilesh Desai (DIN 00058890) has resigned from directorship on 16th May, 2014, Mr. Pradeep Krishna Prasad (DIN 00059004)has resigned from directorship on 15th November, 2014 and Mrs. Nita Mukati (DIN 07161844) has resigned from directorship on 2nd June, 2015. The Board places on record its appreciation for the services rendered by them during their tenure as members of the Board of Directors of the company. ? Key Managerial Personnel: Mr. Mukesh Bhandari, Managing Director designated as Chairman, Mr. Shailesh Bhandari, Managing Director, Mr. Avinash Bhandari, Managing Director designated as Joint Managing Director & CEO and Mr. Pawan Gaur, Chief Financial Officer and Mr. Jigar Shah, Company Secretary are the key managerial personnel of the company in accordance with the provisions of sections 2(51) and section 203 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Mr. Pawan Gaur was appointed as Chief Financial Officer (CFO) of the Company with effect from 7th July, 2014. Mr. Jigar Shah, Company Secretary has resigned with effect from 14th August, 2015. ? Declaration of Independence: 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 the Listing Agreement. ? Annual Evaluation of Board's Performance: In terms of the provisions of Section 134(3)(p) the Companies Act, 2013 read with Rule 8(4) of the Companies (Accounts) Rules, 2014 and Clause 49 of the Listing Agreement, the Board of Directors has carried out the annual performance evaluation of itself, the Directors individually as well as the evaluation of its committees. The manner in which the evaluation was carried out is provided in the Corporate Governance Report, which is part of this Annual Report. ? Nomination and Remuneration Policy: The Board of Directors of the Company has, on recommendation of the Nomination and Remuneration Committee, framed and adopted a policy for selection and appointment of Directors, Key Managerial Personnel, Senior Management and their remuneration. The salient aspects covered in the Nomination and Remuneration Policy, covering the policy on appointment and remuneration of Directors and other matters have been outlined in the Corporate Governance Report which forms part of this Annual Report. The said policy is available on the website of the Company at www.electrotherm.com . PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT: Particulars of investments made and loans given covered under the section 186 of the Companies Act, 2013, has been provided in Note No. 2.10 and 2.11 of the notes to the financial statement which form part of this Annual Report. The company has not given any guarantee during the financial year. CORPORATE SOCIAL RESPONSIBILITY (CSR): Pursuant to the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted a CSR Committee. The Board of Directors in its meeting held on 15th November, 2014 on the recommendation of Corporate Social Responsibility (CSR) Committee had approved the Corporate Social Responsibility Policy. The CSR policy is available on the website of the company at www.electrotherm.com . The composition and terms of reference of the Committee are detailed in the enclosed Corporate Governance Report. Since the Company has incurred losses during three immediately preceding financial years, the Company has not incurred any expenditure on CSR activities. The Annual Report on CSR activities in accordance with the Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as "Annexure -B" to this report. RELATED PARTY TRANSACTIONS: The Company has pursuant to the approval of shareholders through special resolution under Section 188 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, entered into related party transactions. The said transactions entered by the company with Related Parties were in the ordinary course of business and at arm's length basis. The details of contracts or arrangements with related parties for the financial year ended on 31st March, 2015 is given in Note No. 2.36 of the financial statements of the Company. FIXED DEPOSIT: During the financial year 2014-15, the Company has not accepted any deposit within the meaning of section 73 and 74 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. DIRECTORS' RESPONSIBILITY STATEMENT: Pursuant to section 134(3)(c) of the Companies Act, 2013, the Directors state that : a) in the preparation of the annual accounts for the financial year ended on 31st March, 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any; b) the Directors had 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 financial year and of the loss of the company for that period; c) the Directors had 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 frauds and other irregularities; d) the Directors had prepared the Annual Accounts on a going concern basis; e) the Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and. f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. AUDITORS AND AUDITORS' REPORT: > Statutory Auditor: M/s. Mehta Lodha & Co., Chartered Accountants (Firm Registration No. 106250W), Ahmedabad, statutory auditors of the company, retires at the forthcoming Annual General Meeting and are eligible for re-appointment. The company has received a letter from the retiring auditors to the effect that their re-appointment as a statutory auditors, if made, would be within the limits prescribed under section 141 of the Companies Act, 2013. The Board of Directors on the recommendation of the Audit Committee, recommends the re-appointment of M/s. Mehta Lodha & Co., Chartered Accountants as the statutory auditors of the company. There are matter of emphasis and qualification in the Auditors' Report for the year ended on 31st March, 2015. The Board of Directors of the company would like to clarify/explain the same as under: 1. With regard to Note No. 2.27 in respect of the winding up petitions and recovery cases against the Company, the same has been contested by the Company before the relevant statutory authorities including Courts/Tribunals and hence in opinion of the Board, the said legal cases would not affect the going concern concept of the Company. 2. With regard to Note No. 2.28 in respect of filing of Reference to BIFR on account of erosion of the net worth of the Company, the Board submits that as per CDR directives as described in Letter of Approval under the head of "critical conditions" and since the networth of the Company is fully eroded, the company has filed reference to BIFR on February 28, 2014 and the same has been registered on June 27, 2014 as Case No. 29/2014 and the same would not affect the going concern concept of the Company. 3. With regard to Note No. 2.30 relating to pending judgment of Hon'ble Supreme Court, the said note is self-explanatory and in the opinion of the Board, the same would not affect the going concern concept of the Company. 4. With regard to Note No. 2.29(a) to (d) in respect of non-provision of long disputed advances / claims / liability related to VAT / CST / Excise Duty against the Company, the Board submits that the Company is contesting the relevant disputed advances / claims / liability related to VAT / CST / Excise Duty with appropriate statutory authorities and as such the same are treated as good and no provision has been made in the accounts. 5. With regard to Note No. 2.29(f) related to non-provision of interest on NPA accounts of banks of Rs. 933.01 Crores, the Board submits that loans accounts of the Company have been classified as Non Performing Assets by Bankers and some of the bankers has not charged interest on the said accounts and therefore provision for Interest (other than upfront charges) has not been made in the book of accounts. Further the company has filed Reference to BIFR on February 28, 2014 and the same has been registered on June 27, 2014 as Case No. 29/2014. 6. With regard to Note No. 2.31 related to additional disclosures in the standalone financial statements (a) In view of non-realization and payment, as per the prevalent accounting practices, the Company has written off the old balances of advances, trade receivables and Inventories during the financial year. (b) As disclosed in the Note 2.31(j), Bank of India, the lead bank of the consortium, Bank of Baroda, State Bank of India, Canara Bank and State Bank of Travancore has assigned their debt to Edelweiss Asset Reconstruction Company Limited ("EARC"). The Board submits that the debts of the EARC are restructured as per the settlement terms & conditions vide document dated 10th March, 2015 and the same is in the best interest of the Company. (c) With regard to diminution in the value of investments in Subsidiaries, the Board submits that the value of investment in Electrotherm Mali SARL is only Rs. 1 Lacs, while Shree Ram Electrocast Limited is non operation due to working capital crunch and losses. The Bhaskarpara Coal Block in Chhattisgarh was allotted to the company jointly with UltraTech Cement Limited in the year 2008 by the Ministry of Coal. During the year under review, Hon'ble Supreme Court of India vide Order dated 24th September, 2014 cancelled 204 coal blocks which had been allocated earlier for the purposes of mining coal for captive consumption. These include coal block allotted to the company jointly with UltraTech Cement Limited viz. Bhaskarpara Coal Block in Chhattisgarh. No mining activity had commenced on this block and the cancellation will not have any material adverse impact on the company. Subsequent to the Supreme Court judgment, the Central Government promulgated Ordinances dated 21st October, 2014 and 26th December, 2014 for allotment and auction of 204 coal blocks. The Ordinance framed and notified by the Ministry of Coal for the auction and allotment of all the above mentioned coal blocks. As regard to investment in the cancelled coal block, the Company is likely to recover most of the expenditure from the new allottees in terms of the ordinances promulgated by the Central Government. The Board is of the opinion that the value of the investments will be recovered / realized in due course. 7. With regard to Note No. 2.39 in respect of third party balance confirmation, its classification in nature of realization of the amount and provision, the Board is of the opinion that it is realizable in the ordinary course of business and the provisions for all known liabilities are adequate. 8. With regard to Note No. 2.09 in respect of change in the method of depreciation on account of introduction of Schedule II of the Companies Act, 2013, the same was as per the requirement of the Companies Act, 2013. The Company has evaluated the useful lives of its fixed assets and has computed depreciation according to the provisions of Schedule II of the Companies Act, 2013. > Cost Auditor: As per Section 148 and other applicable provisions if any, of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014, the Board of Directors of the Company has on the recommendation of the Audit Committee appointed M/s. V. H. Savaliya & Associates, Cost Accountants, Ahmedabad, as Cost Auditors, to conduct the cost audit of the Company for the financial year ending on 31st March, 2016, at a remuneration as mentioned in the notice convening the Annual General Meeting, subject to ratification of the remuneration by the Members of the Company. The Audit Committee has received consent from Cost Auditor M/s. V. H. Savaliya & Associates to act as Cost Auditor of the Company for the financial year 2015-2016 along with a certificate certifying their Independence and arm's length relationship with the Company. > Secretarial Auditor: Pursuant to the provisions of section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Bharat Prajapati & Co., Company Secretaries in Practice to conduct the Secretarial Audit of the Company. The Secretarial Audit Report in Form No. MR-3 is annexed herewith as "Annexure - C" to this Report. There are certain observations in the Secretarial Audit Report and Certificate of Corporate Governance for the financial year ended on 31st March, 2015. The Board of Directors of the company would like to clarify/explain the same as under: 1. With regard to non appointment of required number of Independent Director in pursuance of Clause 49 of the Listing Agreement, the Board submits that due to resignation of the Non-Executive & Independent Directors of the Company during the financial year, there was no optimum combination of executive and non-executive / independent directors on the Board. The Company is doing its best efforts to appoint suitable candidate as Independent Director to comply with the provisions of Clause 49(II)(A) of the Listing Agreement. 2. With regard to non re-constitution of the Nomination and Remuneration Committee, the Board submits that due to resignation of the Non-Executive & Independent Directors of the Company during the financial year, the composition of the Nomination and Remuneration Committee is not as per the provisions of Section 178 of the Companies Act 2013, Rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement. However, the Board has re-constituted the Nomination and Remuneration Committee by appointing Mr. Mukesh Bhandari, Executive Chairman as member of the said Committee w.e.f. 14th August, 2015. 3. With regard to non appointment of Woman Director as on 31st March, 2015, the Board submits that the Company has appointed Mrs. Nita Mukati as a Woman Director on 20th April, 2015. However, she has resigned on 2nd June, 2015. The Company is doing its best efforts to appoint suitable candidate as Woman Director to comply with the provisions of Section 149 of the Companies Act, 2013, Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO The information required under the provisions of section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) the Companies (Accounts) Rules, 2014 with respect to conservation of energy, technology absorptions and foreign exchange earning and outgo is given in Annexure - D" which forms part of this Annual Report. PARTICULARS OF EMPLOYEES: The information required pursuant to section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of the employees are given in "Annexure- E" to this Annual Report. AUDIT COMMITTEE: The composition, terms of the reference and number of meetings of the Audit Committee held during the financial year is covered in the enclosed Corporate Governance Report. RISK MANAGEMENT POLICY: The Board of Directors of the company has on recommendation of the Risk Management Committee framed and adopted a policy on Risk Management of the company. The broad terms of reference of the Committee are stated in Corporate Governance Report. In the opinion of the Board, except the legal cases related to winding up petitions, recovery of dues, pending judgment of Hon'ble Supreme Court and Reference to BIFR on account of erosion of the networth of the Company, there are no other elements of risk which may threaten the existence of the Company. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS: Presently, there are certain significant and material orders passed by the regulator / court / tribunal impacting the going concern status and company's operations in future as mentioned in Note No. 2.27 of the standalone financial statements in respect of winding up petitions and recovery cases against the Company, Note No. 2.28 in respect of filing of Reference to BIFR on account of erosion of the net worth of the Company and Note No. 2.30 relating to pending judgment of Hon'ble Supreme Court. CORPORATE GOVERNANCE: In compliance with the provisions of Clause 49 of the Listing Agreement, a separate report on Corporate Governance along with a certificate from a Practising Company Secretary regarding compliance of conditions of corporate governance forms a part of this report. WHISTLE BLOWER POLICY/VIGIL MECHANISM: The Company is committed to highest standards of ethical, moral and legal business conduct. Accordingly the Board of Directors has formulated Whistle Blower Policy/Vigil Mechanism policyin compliance with the provision of Section 177(10) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The policy provides for a framework and process whereby concerns can be raised by its employees against any kind of discrimination, harassment, victimization or any other unfair practice being adopted against them. More details of the Whistle Blower Policy/Vigil Mechanism are explained in the Corporate Governance Report. The Policy of Vigil Mechanism of the company is available on the website of the company at www.electrotherm.com . MANAGEMENT DISCUSSION AND ANALYSIS REPORT: Pursuant to Clause 49 of the Listing Agreement, Management Discussion and Analysis Report is annexed after the Directors' Report and form a part of this report. EXTRACT OF ANNUAL RETURN: Pursuant to section 143(3)(a) and section 92(3) of the Companies Act, 2013, the extract of the Annual Return in Form No. MGT-9 is annexed herewith as "Annexure - F" and forms a part of this report. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS: The Company has put in place adequate internal financial controls with reference to the financial statements. During the financial year, such internal financial controls were operating effectively and it is commensurate with the size of the Company and the nature of business of the Company. OTHER DISCLOSURES: a) The Company has not issued equity shares with differential rights as to dividend, voting or otherwise. b) The Company has not issued sweat equity shares to its directors or employees. c) The Company does not have any Employees Stock Option Scheme for its Employees/Directors. d) The Auditors has not reported any frauds under sub-section (12) of Section 143 of the Companies Act, 2013. e) During the year the Company has not received any complaints under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. APPRECIATION: Your Directors wish to place on record their appreciation for the valuable co-operation and support received from the Customers and Suppliers, various Financial Institutions, Banks, Government Authorities, Auditors and Shareholders during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the devoted services of the Executives, Staff and Workers of the Company. For and on behalf of the Board of Directors Mukesh Bhandari Chairman Place: Ahmedabad Date : 14thAugust, 2015 |