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YOU ARE HERE > MONEYCONTROL > MARKETS > ELECTRODES & GRAPHITE > DIRECTORS REPORT - HEG

HEG

BSE: 509631|NSE: HEG|ISIN: INE545A01016|SECTOR: Electrodes & Graphite
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Directors Report Year End : Mar '18    Mar 17

The Directors have the pleasure of presenting their 46th Annual Report and audited statements of accounts for the year ended 31st March, 2018.

(Rs. in crore)

1. Financial Results

2017-18

2016-17

Net sales

2,672.06

869.15

Other operating income

86.34

26.87

Total income from operations (Net)

2,758.40

896.02

Other income

12.37

7.13

Total income

2,770.77

903.15

Profit before finance cost, depreciation and amortisation

1,733.94

87.87

Finance cost

56.68

54.72

Profit before depreciation and amortisation

1,677.26

33.15

Depreciation and amortisation

72.55

73.92

Profit/Loss before tax

1,604.71

(40.77)

Provision for taxation:-

Current tax

513.56

1.12

Deferred tax

9.81

8.16

Net profit/Loss for the period

1,081.34

(50.05)

EPS (Basic) Rs.

270.61

(12.52)

2. OVERALL PERFORMANCE

The Company recorded net sales of RS.2,672.06 Crore during the financial year 2017-18 as compared to RS.869.15 crore in the previous financial year. The Net Profit during the financial year 2017-18 was at RS.1,081.34 Crore as compared to a net loss of RS.50.05 crore in financial year 2016-17 translating to basic earning per share at RS.270.61 for the financial year 201718 as against H(12.52) in financial year 2016-17.

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.

ELECTRODE SECTOR

In recent years, electrode prices have been extremely low, as cheap iron ore and coking coal saw EAF players choosing to reroll blast furnace-produced semis, or utilise merchant pig iron. For every electrode they made, producers lost money, and consequently shuttered capacity as a survival strategy. About 200,000 TPA of electrode manufacturing capacity was shut over the last four years across the globe - most of which was permanently shut.

This period saw an unusual increase in demand even as supply remained squeezed. Overall EAF production has increased by around 10% on year so far in 2017, perhaps aided by hikes in coking coal last year that saw melting become more economically viable. This was a fallout of reduced exports of steel products from China (steel export quantity for 2017 declined by around 30% year-on-year) which allowed other steel manufacturers to reignite their EAF infrastructure shoring the demand for electrodes. This, when combined with the curtailment of Chinese electrode capacity and short needle coke supply, the main raw material for the melting sticks, pushed up spot prices for electrodes by at least tenfold during the year. As a result, contractual terms for electrodes, which have been annual in nature for decades, altered to quarterly deals. HEG has proved that it is amongst the first to cope up with the enhanced requirement of the electrodes globally. The Company got an interesting opportunity to prove the utility of state of art technology it added in 2012, which it grabbed with open arms. The results of the year demonstrates our belief that we are on a strong footing.

POWER GENERATION

The Company has captive power generation capacity of 76.5MW (comprising two thermal power plants and a hydroelectric power facility) leading to sustained supply of reliable, energy for its graphite electrode facility. Excess power generated was sold in the market through IEX and bi-partite power purchase agreement with open access consumers.

Sale of excess power generated a turnover of RS.19.56 crore in 2017-18 against RS.25.68 crore in 2016-17. This was primarily due to an increase in consumption of power in the graphite electrode operations. Thus, leaving small surplus for external sale.

With the prediction of average rainfall by the Met department for the forthcoming year, the prospect of using lowest cost hydel power in plant activities would help strengthen the results of this segment favourably. Thermal facilities provide both flexibility to operations and also an opportunity to optimise cost in times when it is required the most.

4. MATERIAL CHANGES AND COMMITMENTS

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 2017-18.

6. SUBSIDIARY, ASSOCIATE COMPANIES OR JOINT VENTURES

(i) Subsidiary Company

Your Directors informs that M/s HEG Graphite Products and Services Ltd, a wholly owned subsidiary (“WOS”) ceased to be subsidiary of the Company, since the name of WOS has been struck-off from the Register of Companies under Section 248 (5) of the Companies Act, 2013, upon the application made by WOS under Section 248(2) of the Companies Act, 2013 and WOS stands dissolved w.e.f. 21st December, 2017. At present, the Company does not have any subsidiary.

(ii) Associate Companies or Joint Ventures

There are two Associates of the Company namely Bhilwara Infotechnology Ltd. and Bhilwara Energy Ltd. Bhilwara Infotechnology Ltd. had a turnover of RS.44.21 crore and Net Profit was RS.4.33 crore in the financial year 2017-18. Bhilwara Energy Ltd had a consolidated turnover of RS.317.72 crore and Net Profit was RS.55.84 crore as per their financial statements (audited & consolidated) for the financial year 2017-18. The Company has no Joint Ventures.

No Company has become/ceased to be an Associate or Joint venture during the financial year 2017-18.

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing the salient features of financial statements 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. The Auditor’s Report does not contain any qualification, reservation or adverse remarks.

8. DIVIDEND

Your Directors had approved the payment of Interim Dividend @ RS.30/- per Equity Share of RS.10/- each at its meeting held on 8th February, 2018 and the same has been paid to all the eligible shareholders within the stipulated time.

Your Directors are pleased to recommend a final dividend on equity shares at the rate of RS.50/- per Share on Equity Shares of RS.10/- each for the financial year ended 31st March, 2018, subject to your approval at the Annual General Meeting.

As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Dividend Distribution Policy is attached as Annexure IV, which form part of this report and is also available on the website of the Company.

9. CORPORATE GOVERNANCE

A report on Corporate Governance forms part of this Report along with the Auditors’ Certificate on Corporate Governance as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Auditors’ Certificate for the financial year 2017-18 does not contain any qualifications, reservations or adverse remarks.

10. MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report as required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of this Report.

11. BUSINESS RESPONSIBILITY REPORT

As per Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective is attached as part of the Annual Report.

12. INTERNAL CONTROL / INTERNAL FINANCIAL 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 Company has a well-defined organisational structure, authority levels and internal rules and guidelines for conducting business transactions.

Besides, the Companies Act, 2013 has put primary responsibility of implementing a robust Internal Financial Control framework and is under consistent supervision of Audit Committee, Board of Directors and also independent Statutory Auditors. During the year, no reportable material weakness in the design or operation were observed.

13. 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.

14. PUBLIC DEPOSITS

Your Company has not invited any deposits from public/ shareholders in accordance with Chapter V of the Companies Act, 2013.

15. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There were no significant material orders passed by the Regulators/ Courts/ Tribunals during the financial year 201718 which would impact the going concern status of the Company and its future operations.

16. 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.

17. DIRECTORS AND KEY MANAGERIAL PERSONNEL

One of your Directors namely Shri S.N Bhattacharya (holding DIN 06758088), shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. The Board recommends his re-appointment.

The first term of office of Smt. Vinita Singhania (DIN 00042983), as Independent Director, expires at the ensuing Annual General Meeting.

The Board has recommended the re-appointment of Smt. Vinita Singhania (DIN 00042983), as Independent Director of the Company for a second term of 5 (five) consecutive years.

The brief profile, pursuant to Regulation 36 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, of the Director eligible for appointment/ 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 Regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

18. BOARD EVALUATION

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, in the manner as enumerated in the Nomination and Remuneration Policy, in accordance with the provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The evaluation exercise covered various aspects of the Board’s functioning such as composition of the Board & Committee(s), their functioning & effectiveness, contribution of all the Directors and the decision making process by the Board.

Your Directors express their satisfaction with the evaluation process and inform that the performance of the Board as a whole, its Committees and its member individually was adjudged satisfactory.

19. NOMINATION AND REMUNERATION POLICY

The Nomination & Remuneration Policy of the Company is in place and is attached as Annexure - III to this Report.

20. MEETINGS OF THE BOARD

The Board of Directors met 5 (five) times in the financial year 2017-2018. The details of the Board Meetings and the attendance of the Directors are provided in the Corporate Governance Report.

21. 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 Statutory Auditors and CFO.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company’s website, the weblink of which is as under:http://hegltd.com/wp-content/uploads/2018/05/Policy_on_Related_Party_Transactions-HEG-Limited.pdf

There are no pecuniary relationships or transactions of Non- Executive Directors vis-a-vis the Company that have a potential conflict with the interests of the company.

No material Related Party Transactions i.e transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements were entered during the financial year of the Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is not applicable.

22. 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 2017-18.

23. AUDITORS

The appointment of M/s. S C Vasudeva & Co., Chartered Accountants (Firm Registration No. 000235N), Auditors of the Company, who were appointed at 45th Annual General Meeting held on September 22, 2017, for a period of 5 years till the conclusion of the 50th AGM of the Company to be held in the year 2022, subject to ratification of the appointment by the Members at every AGM, will be placed before the members at this Annual General meeting for ratification.

With effect from April 1, 2018, M/s. S C Vasudeva & Co., Chartered Accountants, the Statutory Auditors of the Company, has been merged with M/s. S.P. Puri & Co., Chartered Accountants, and the name of the new firm is SCV & Co., Chartered Accountants (SCV). There would not be any change in the date of establishment of firm as registered with ICAI. The FRN 000235N remain same.

Further, the Auditors have confirmed their eligibility under Section 144 of the Companies Act, 2013 and the rules made thereunder.

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.

24. BUSINESS RISK MANAGEMENT

The objective of risk management at the Company is to protect shareholders value by minimizing 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 organization 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.

25. COST AUDITORS

The Cost Audit for financial year ended March 31, 2017 was conducted by M/s. N.D. Birla & Co. (M. No. 7907). The said Cost Audit Report was filed on 29th August, 2017.

Based on the recommendation of Audit Committee at its meeting held on 8th May, 2018, 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 20182019 on a remuneration of RS. 2 Lacs 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.

26. 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 2017-18. The Secretarial Audit Report is annexed herewith as Annexure V. 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 2018-19.

27. 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 Dharmendar Nath. Davar and Smt. Vinita Singhania.

The CSR policy may be accessed on the Company’s website at the link mentioned below: http://hegltd.com/wp-content/uploads/2018/05/Corporate_Social_Responsibility_Policy.pdf

The Annual Report on CSR activities is enclosed as Annexure VI, forming part of this report.

28. INTERNAL AUDITORS

Based on the recommendation of Audit Committee at its meeting held on 30th May, 2017, 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 2018-2019.

29. 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 2017-18 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; and

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.

30. 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 of which is as under: http://hegltd.com/wp-content/uploads/2018/05/whistle.pdf

31. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in the Annual Report.

32. EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in form MGT-9 as required under Section 92(3) under Rule 12 of the Companies (Management and Administration) Rules, 2014 is appended as Annexure VII to this report.

33. GENERAL DISCLOSURE

a) 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. No complaint of sexual harassment was received during the financial year 2017-18.

b) The Company is in compliance of all applicable secretarial standards issued by The Institute of Company Secretaries of India from time to time.

34. 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 and on behalf of the Board of Directors

Ravi Jhunjhunwala

Place: Noida (U.P.) Chairman, Managing Director & CEO

Dated: 8th May, 2018 DIN 00060972

Source : Dion Global Solutions Limited
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