The Directors hereby present this Twenty Fifth Annual Report of the
Company together with the Audited Statements of Accounts for the
Financial Year 2012-13
EXTENSION OF FINANCIAL YEAR
The Financial Year 2012-13 which in the normal course would have
completed on 31st March, 2013 was extended by a period of 6 months
after necessary approval from Registrar of Companies to that effect.
Thus, the so extended Financial Year 2012-13 comprised of 18 month
period ended on 30th September, 2013.
The financial performance during the extended year under review is
summarized below :
(Rs. in Crores)
Particulars Current year Previous year
Sales 2483.66 2277.94
Other Income 13.64 13.05
Total Income 2497.30 2290.99
Profit before depreciation and finance (63.21) 432.60
After deducting depreciation and 530.00 362.94
Finance cost of
The profit/ (loss) for the year before (593.21) 69.66
Taxation Provisions is
From which is deducted a Taxation 2.05 15.50
Thereby Leaving a Net Profit / (Loss) of (595.26) 54.16
Which your directors have recommended
to be appropriated as follows :-
a) Transfer to General Reserve 0.00 5.42
b) Proposed Dividend 0.00 24.78
c) Prior Year Payments 5.25 5.25 5.57 35.77
Thereby leaving a balance of (600.51) 18.39
for carrying over to next year''s
COMPANY''S PERFORMANCE (A) ON STANDALONE BASIS
1. DURING THE YEAR UNDER REVIEW
Despite the decline in the growth rate in Indian Economy, your
company''s total income amounted to '' 2497.30 Crores during the year
under review in comparison to '' 2290.99 Crores in the previous year.
The Net Loss before and after tax stood at '' (593.21) Crores and ''
(595.26) Crores respectively.
Broadly some of the factors contributing to the decline in the
financial performance of the Company during the year under review are
1) Delay in implementation of National Gas Grid
2) Excess capacity in the industry leading to aggressive pricing
3) Low capacity utilization
4) Increase in Interest cost
5) Adverse Movement in Exchange Rate
2. FOR THE YEAR UNDER REVIEW
a) Due to the loss incurred by the company, no amount is proposed to be
transferred to the General Reserve account.
b) Due to the reason as stated above, the debit balance of Profit &
Loss Account proposed to be carried to Balance Sheet is '' 600.51
c) Keeping in mind the loss incurred by the Company, the directors do
not recommend any dividend for the extended financial year ended 30th
B. ON CONSOLIDATED BASIS
During the year under review, the consolidated total income stood at ''
3208.19 Crores as compared to '' 2715.56 Crores in the previous year.
The Net Loss before and after tax amounted to '' (641.02) Crores and ''
(659.92) Crores respectively.
RESTRUCTURING OF DEBTS
Members will agree that ever since Company''s incorporation way back
in 1987 adequate growth of the Company was registered in most of the
financial years eventually enhancing the turnover as well as
profitability year after year. As can be seen from the financial
snapshot for last 10 years included in a table forming part of this
Annual Report without a break in any year Company''s reserves grew
substantially which directly permitted your Board to recommend sizable
dividends (not below 40%) year after year.
While all these years company grew at an exponential rate suddenly
during the Financial Year 2012-13 your Company''s operations were
severally effected due to reasons (outlined above) which were mainly
external. Such reduced operations had to create an adverse impact on
the liquidity of the Company as a result of which your Company had no
choice but to apply in March, 2013 to CDR Cell for restructuring of
Company''s debt through CDR mechanism envisaged under the guidelines
issued by the Reserve Bank of India After considering Company''s
proposal, the final restructuring scheme was approved by CDR Empowered
group on 23rd August, 2013 which was duly communicated to the Company
by the CDR Cell vide its letter of approval dated 23rd September, 2013.
The scheme inter-alia provide for rescheduling of re-payment schedule,
downward revision of interest rates, pledge of shares by promoters,
contribution into share capital by promoters and promoters group & a
right of conversion to Company''s CDR Lenders to convert the portion
of their respective outstanding Working Capital facility into equity
capital of the company.
Consequent upon the aforesaid issuance of the LOA dated 23rd September,
2013, the various formalities associated with implementation of CDR
scheme (including execution of Master Restructuring Agreement dated
19th November, 2013) are being carried out.
Your Company is engaged in the business of manufacturing HSAW/ Spiral
pipes, Providing of pipe coating & ancillary services such as induction
pipe bending, turnkey HSAW plant manufacturing etc. Your Company is the
largest manufacturer of HSAW pipes in India and has 1.40 million MTPA
capacity in locations across India & 525000 MTPA capacities overseas.
Your Company has strategically located pipe mills and coating
facilities in Chennai, Kandla, Vizag, Ahmedabad, Jaipur, Daman,
Mississippi (through its subsidiary company ''PSL North America
LLC'') and Sharjah (through its subsidiary company ''PSL FZE'') to
cater to domestic as well as overseas market.
During the year under review, your Company witnessed certain
constraints due to external factors that affected its operational
performance. Several delays in Implementation of the National Gas Grid
projects due to jurisdictional disputes between public sector
undertakings and drastic drop and reduction in national gas output have
adversely impacted the pipeline sector in India. In anticipation of
the demand leading from the gas grid and other pipeline projects, the
production capacity have been added on exponential basis, However, as
the demand has not picked up as expected, a situation of over supply in
the Industry arose which resulted into cut down on margins & hence
worsened the financial position of the businesses operating within the
Due to the delays in implementation of country-wide projects such as
the gas grid & water distribution projects, the accumulation of raw
materials increased which resulted into higher inventory and lower
capacity utilization. Other factors which added to the downfall were
the stretched working capital cycle of the company due to higher levels
of inventory and debtors resulting into increased Interest Cost and
adverse movement in exchange rate.
Despite the aforesaid difficulties and strained liquidity position,
your Company has managed to complete a host of projects on time and
PROGRESS ON OVERSEAS FRONT (a) PSL USA Inc., USA :
PSL USA Inc., incorporated in December, 2006 in the state of Delaware,
USA. This Company was incorporated as a wholly owned subsidiary of the
Company to primarily take up contracts for manufacturing of pipes,
keeping in view the upsurge in pipe laying activity in North America.
During the Financial Year 2007, PSL USA Inc. floated a joint venture
(with 78 % holding) namely PSL North America LLC. A plant using state
of the art technology to manufacture 24 meter long pipes, with
installed capacity of 300,000 MTPA has been set up by the Company in
Mississippi, USA. The Company has executed an order for Florida Gas
Transmission Company LLC & is currently executing an order received
from ETC Texas Pipeline limited for approx million.
b) UAE PROJECT
Your Company''s associate in the UAE - PSL FZE is engaged in
manufacturing of steel pipes, anti-corrosive coating of steel pipes and
export of steel pipes with a capacity of 150,000 MTPA. The Company has
executed major orders for Hanwa Co. Ltd for $ 40 million and
Saipem-Afcons Joint Venture for $ 22 million. The Company is now
actively executing a major order received from Saline Water Conversion
Corporation for $ 80 million.
In view of high depreciation, interest and in the absence of profits
during the current financial year, your Directors are unable to
recommend any dividend for the year under review.
TRANSFER TO RESERVES
Keeping in mind the loss registered by the Company during the year
under review, the Board of Directors did not propose transfer of any
amount to the General Reserve Account.
ANNUAL ACCOUNTS OF SUBSIDIARY COMPANIES
In terms of the General Exemption granted by Ministry of Corporate
Affairs, Government of India vide its general circular no. 2/2011 dated
8th February, 2011 regarding attaching of financial documents of the
subsidiary companies with the Balance Sheet of the Holding Company
subject to compliance of few conditions specified in the circular, the
Board of Directors of the Company has granted its consent by way of
resolution for not attaching the copy of Balance Sheet, Profit & Loss
Account and other documents of the various subsidiaries with the Annual
Accounts of the Company.
The Company will also make available the Annual Accounts of the
subsidiary companies and the related detailed information to any member
of the Company who may be interested in obtaining the same. Further,
these documents of the subsidiary companies will also be kept for
inspection at the Registered Office of the Company and at the corporate
office of the respective subsidiary companies. As required under the
aforesaid circular, a summarized statement of financial position of the
subsidiaries has been appended to this Annual Report.
As stipulated by Clause 32 of the Listing Agreement executed by the
Company with the Stock Exchanges, the consolidated financial statements
have been prepared by the Company in accordance with the applicable
accounting standards issued by the Institute of Chartered Accountants
of India. The Audited Consolidated Financial Statements together with
Auditors'' Report form part of this Annual Report.
During the year under review:-
(1) Shri Paresh J. Shah, an Independent and Non-Executive Director of
the Company expressed his unwillingness to continue on the Board of the
Company and submitted his resignation due to his prior commitments and
conflict of interest in the professional assignments handled by him.
The resignation was accepted by the Board of Directors in its meeting
held on 15.05.2013. The Board while accepting his resignation recorded
its deep appreciation for the valuable services rendered by Shri Paresh
J. Shah during his tenure.
(2) In exercise of the right granted to ICICI Bank by way of
restructuring agreement, the bank has appointed Shri Sandip Sharma as a
Nominee Director on the Board of your Company w.e.f 12th August,
2013. The aforesaid appointment of Shri Sandip Sharma was also taken on
record by the Board of Directors in its meeting held on 30th October,
In terms of provisions of Section 256 of Companies Act, 1956 Shri G.
Gehani, Shri Harsh Pateria, Shri M.M. Mathur and Shri Alok Punj
Directors shall retire by rotation and being eligible, offer themselves
for reappointment at the ensuing Annual General Meeting. In Compliance
of Clause 49 (IV) (G) of the Listing Agreement a brief resume of the
said Directors is annexed to the notice to enable members to consider
1. The Company Secretary as Compliance Officer ensures timely
compliance of SEBI regulations, applicable law, rules and regulations
and provisions of Listing Agreement. He also responds to different
type of grievances and queries including the ones related to dividend
2. In compliance of Clause 32 of the Listing Agreement executed by the
Company with the different Stock Exchanges the Cash Flow Statement in
the format prescribed by SEBI is included in the Annual Report.
3. In compliance of Clause 32 of the Listing Agreement and Accounting
Standard AS-21, the consolidated financial statements are attached,
which form part of the Annual Report.
4. In compliance of Clause 49 VI (ii) of the Listing Agreement,
Quarterly Compliance Report in the prescribed format is regularly sent
to Stock Exchanges.
5. In accordance with statutory obligation, Secretarial Audit is done
on quarterly basis to reconcile the total admitted capital with the two
depositories in the country namely National Securities Depository
Limited (NSDL) & Central Depository Services limited (CDSL) and the
total issued and listed capital. Audit Reports furnished to this effect
by a Practicing Company Secretary appointed for the purpose have been
regularly submitted to the various Stock Exchanges with which the
Company''s shares are listed.
INTERNAL CONTROL AND ADEQUACY
Your Company has set up a separate Internal Audit Department headed by
a Senior Person, who is a qualified Cost Accountant for carrying out
the Internal Audit of Accounts of different branches and critically
analyse the same after which a Consolidated Internal Audit Report is
placed before the Audit Committee in its every quarterly meeting for
detailed deliberations on the same.
The team of Statutory Auditors being an External Body achieves adequate
effectivity of its extensive Audit due to support of the Company''s
Internal Audit Department. Both Statutory as well as Internal Auditor
are regularly invited at the Audit Committee Meetings wherein more
light is thrown on the regular Internal Audit checks carried out to
ensure that the responsibilities given to different Senior Officers of
the Company across all plants are executed effectively with an overall
objective that the Company''s assets are safe guarded and protected
against losses from unauthorized use or disposal.
CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS REPORT
In compliance of Clause 49 of the Listing Agreement executed by the
Company with the stock exchanges, a separate report on Corporate
Governance and Management Discussion Analysis Report together Auditors
Certificate on the compliance with the conditions of Corporate
Governance are appended hereto and forms part of this Annual Report.
For assisting the Board of Directors in discharging its
responsibilities in various fields effectively & efficiently, various
Standing and Non-standing Committees are constituted by the Board from
time to time.
While the following five Standing Committees with a defined mandate
given to them are permanent in nature, various Non- standing Committees
are constituted for dealing with specific assignments, therefore their
term automatically lapses after the assignment in question is completed
are as under:
1. Audit Committee
2. Committee of Directors
3. Remuneration Committee
4. Shareholders''/ Investors'' Grievance Committee
5. Share Transfer Committee
During the year under review meetings of these Committees were held
periodically wherein certain important decisions in accordance with
their respective mandates were taken which were thereafter ratified by
DIRECTORS'' RESPONSIBILITY STATEMENT
Pursuant to the provisions contained in Section 217 (2AA) of the
Companies Act, 1956 with respect to Directors Responsibility Statement,
it is hereby confirmed that:
- In the preparation of annual accounts of the year under review the
applicable accounting standards read with the requirements set out in
Companies Act, 1956/ 2013 have been followed
- The accounting policies in consultation with Statutory Auditors are
applied consistently to give a true and fair view of the state of
affairs of the Company at the end of Financial Year under review and
Profit & Loss Account of the period under report.
- Proper and sufficient care has been taken for maintenance of adequate
accounting records and for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities.
- The Annual Accounts have been prepared on a going concern basis.
M/s. Suresh C. Mathur & Co. Chartered Accountants are proposed to be
appointed as Auditors of the Company for the Financial Year 2013-14.
The Company has also received the necessary certificate pursuant to
Section 224(1B) of the Companies Act, 1956.
Accordingly approval of the shareholders to the appointment of M/s
Suresh C. Mathur & Co, Chartered Accountants as Auditors of the Company
is being sought at the ensuing Annual General Meeting.
AUDITORS'' REPORT AND OBSERVATIONS
The notes to the accounts referred to in Auditor''s Report are self-
explanatory and therefore do not call for any further comments.
Auditor''s Observations and Management response to Auditor''s
Observations are given in the Annexure-I forming part of this Report.
In accordance with the directions issued by Cost Audit Branch,
Government of India vide an Order no. F.No.52/26/ CAB-2010 dated
03.05.2011 pursuant to Section 233B of the Companies Act, 1956, your
Directors have appointed Mr. V. V. Deodhar, a practicing Cost
Accountant as a Cost Auditor to conduct the Cost Audit of Steel Pipe
Products for the Financial Year 2013-14.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
The particulars as prescribed by subsection (1) (e) of Section 217 of
the Companies Act, 1956 read with Companies (Disclosure of particulars
in the Report of Board of Directors) Rules, 1988, regarding
conservation of energy, technology absorption and foreign exchange
earnings and outgo are given in the Annexure-II forming part of this
PARTICULARS OF EMPLOYEES
In compliance of Section 219(1)(b)(iv) of Companies Act, 1956 this
report is being sent to the shareholders of the Company without
containing therein the information in accordance with Sub-section 2A of
Section 217 of the Companies Act, 1956 read with Companies (Particulars
of Employees) Rules, 1975. However, any member interested in obtaining
such particulars may write to the Director & Company Secretary of
the Company at its Registered Office.
Your Directors place on record its appreciation for the assistance and
support received from the lenders, Government authorities, customers
and vendors and look forward to their continued co-operation.
Your Directors also thank the employees at all levels for the
dedication and hard work put in to surge ahead in these challenging
For and on behalf of the Board of Directors
of PSL LIMITED
(ASHOK PUNJ) (ALOK PUNJ)
Managing Director Director
Date: 14th February, 2014