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Splendid Metal Product Ltd.

BSE: 513414 | NSE: SMPL | Series: NA | ISIN: INE215G01021 | SECTOR: Steel - Rolling

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Annual Report

For Year :
2016 2015 2014 2013 2012 2011 2009 2008 2007

Director’s Report

To

The Members of Sujana Metal Products Limited,

The Directors have pleasure in presenting the Twenty Sixth Annual Report of your Company together with the Audited Financial Statements of Accounts for the Financial Year ended 31st March, 2016.

Company’s Performance:

Your Directors hereby report that the Company has achieved a turnover of Rs. 348297.76 lakhs up to 31.03.2016 as against the turnover of Rs. 345159.78 lakhs during the previous financial year ended 31.03.2015.

The highlights of the financial results are as follows:

(Rs. In Lakhs)

Particulars

2015-2016

2014-2015

Profit Before Depreciation & Interest

12099.88

26052.58

Financial Costs

22661.43

21589.50

Depreciation

3512.26

3896.73

Profit/Loss Before Tax

(14095.61)

537.89

Provision for Tax

- Current Tax

-

199.67

- Deferred Tax

(3672.44)

244.46

Profit/Loss After Tax

(10423.17)

93.76

Balance of profit brought forward from earlier years

11116.84

11040.67

Add: Excess Provision for IT written off

Profit available for appropriation

693.67

11134.41

Appropriations:

Proposed Dividend:

- Equity

-

-

- Preference

-

14.93

- Dividend Tax

-

2.64

Balance of Profit

693.67

11116.84

Operations & Overall Performance:

During the year under review, your Company reported total income of Rs.349485.62 Lakhs as against Rs. 346188.86 lakhs of previous year. Your company incurred loss before tax of Rs. 14073.81 lakhs as against profit of Rs.566.35 lakhs in the previous year. After making a provision of Rs.22661.43 Lakhs towards interest and Rs.3512.26 Lakhs towards depreciation, the current financial year closed with a net loss of Rs.10423.17 Lakhs as against net profit of Rs.93.76 Lakhs last year.

The net worth of the Company as on 31st March, 2016 is Rs 62877.08 lakhs against Rs.69691.17 lakhs in 2014-15. Net worth is decreased by Rs. 6814.09 lakhs.

Consolidated turnover of Rs.414343.80 lakhs as against Rs.394248.21 lakhs in the previous year and Consolidated Loss before Tax of Rs.13602.74 lakhs as against Profit of Rs.1473.98 lakhs in the previous year.

Despite adverse Global as well as Indian economy, your Company performed moderately and Sujana Metal looks ahead to a hopeful further systematic robustness in the business and operation. Your Directors continue to identify opportunities to leverage and introduce technology to improve our performance, be it in operations, people management, and knowledge management and to strengthen proactive stakeholder relations.

Dividend:

In the absence of profit, your directors are unable to declare any dividend for the financial year 2015-16.

Your Company has always emphasized on achieving operational excellence and continues to focus on customer satisfaction and delight. Backed by strong fundamentals and robust plans your Company is fully prepared to face current challenges and benefit from expected medium and long term growth in Indian economy.

Prospects:

The Government is undertaking proactive policy initiatives for Infrastructure development and Industrial growth, which will accelerate steel demand in line with economic growth. However, concerns like poor availability of iron ore and inconsistent quality as well as high import dependency of coking coal need to be addressed.

Material Changes and Commitments:

There is no material change and commitment has occurred, affecting the financial position of the Company, between the end of the financial year of the Company i.e. 31st March, 2016 and the date of this report.

Details of significant and material Orders passed by the regulators or courts or tribunals impacting the going concern status of the Company and the Company’s operations in future:

Company petition (C.P. 175/2013) filed by Standard Bank (Mauritius) Limited (SBML) against the Company u/s 433 of the Companies Act, 1956, in connection with the corporate guarantee furnished by the Company on behalf of its step down subsidiary Optimix Enterprises Limited, Mauritius was admitted by the Hon’ble High Court of Judicature at Hyderabad for the State of Telangana and The State of Andhra Pradesh. The Company has preferred appeal OSA 12 of 2015 against the said admission and the Company Petition No.175 of 2013 is pending for disposal. The Company is also exploring the process of settlement with Standard Bank (Mauritius) Limited.

Except the above , there are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the Company and the Company’s operations in future.

Deposits

Your Company has not accepted Deposits from Public or Members under Chapter V of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 for the year under review.

Related Party Transactions

The Board of Directors, on recommendation of the Audit Committee framed a policy for Related Party Transaction which includes matters covered u/s 178(3) of the Companies Act 2013. The details of the same are provided in the Corporate Governance Report. The Policy is also posted in the Investors section of the Company’s website.

All Related Party Transactions that were entered into during the financial year were on an arm’s length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with

Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. The requisite details of the related party transactions entered into during the financial year are provided in Annexure - I included in this report.

Suitable disclosure as required by the Accounting Standards (AS18) has been made in the notes to the Financial Statements. All Related Party Transactions are placed before the Audit Committee as also the Board for approval, where ever required. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseeable and repetitive nature. A statement giving details of all related party transactions entered into pursuant to the omnibus approval so granted are placed before the Audit Committee on a quarterly basis.

None of the Directors, other than to the extent of their shareholding, receipt of remuneration / commission, has any pecuniary relationships or transactions vis-a-vis the Company.

Corporate Social Responsibility

The Board of Directors, on recommendation of the Corporate Social Responsibility Committee framed a Corporate Social Responsibility Policy in consonance with Section 135 of the Companies Act, 2013 read with the rules framed there under duly indicating the activities to be undertaken by the Company as specified in the Schedule VII of the Companies Act, 2013. The Corporate Social Responsibility Policy is posted in the Investors section of the Company’s website.

The Annual Report on CSR activities is annexed herewith as Annexure - II and forms part of this report.

Directors’ Responsibility Statement:

Directors’ Responsibility Statement as required under the provisions of Section 134(3)(c) of the Companies Act, 2013, is given in the Annexure -III attached hereto and forms part of this Report.

Auditors:

(a) Statutory Auditors:

The Company’s Statutory Auditors, M/s T. Raghavendra & Associates, Chartered Accountants [Registration No.003329S], Hyderabad will retire at the ensuing Annual General Meeting of the Company and being eligible offers themselves for re-appointment for a term of 4 (Four) years i.e., from the conclusion of this Annual General Meeting to the conclusion of the 30th Annual General Meeting in accordance with Section 139 of the Companies Act, 2013.

M/s T. Raghavendra & Associates, has furnished written consent and a certificate of their eligibility obtained as required under second proviso of Section 139(1) of the Companies Act, 2013 read with the rules made thereunder. In terms of the Listing Regulations, they have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI.

Your Board of Directors recommended the re-appointment of M/s T. Raghavendra & Associates, Chartered Accountants (Registration No. 003329S), Hyderabad, as Statutory Auditors of your Company. Your approval for such appointment is solicited. Notes to the accounts as referred in the Auditor’s Report are self-explanatory and does not contain any qualification and therefore, do not call for any further comments or explanations.

(b) Cost Auditors:

The Board of your Company has reappointed M/s. Nageswara Rao & Co, Cost Accountants [Firm No.000332] as the Cost Auditor of the Company for financial year 2016-17 pursuant to provisions of Section 148 and other applicable provisions of the Companies Act 2013. The said Auditors have confirmed that their appointment, if made, shall be within the limits as prescribed under Section 141(3) of the Companies Act, 2013. The Cost Audit Report shall be submitted along with full information and explanation on every reservation or qualification contained therein, if any, and Annexure to the Central Government within stipulated time period.

As required by Section 148 of the Companies Act,2013, necessary resolution has been included in the notice convening the Annual General Meeting seeking ratification by the members to the remuneration proposed to be paid to the cost auditors for the financial year ending 31st March,2017.

The Cost Audit Reports the financial year ended March 31, 2015 were filed within the prescribed period.

(c) Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules framed there under, the Board of Directors, on recommendation of the Audit Committee, appointed Shri Y Ravi Prasada Reddy, Practicing Company Secretary to undertake the secretarial audit of the Company. The secretarial audit report issued by Shri Y Ravi Prasada Reddy Practicing Company Secretary for the financial year ending 31st March, 2016 is given in the Annexure- IV attached hereto and forms part of this Report. There are no qualifications, reservations or adverse remarks made by the secretarial auditor and the observation made is self explanatory and requires no further explanation from the Board.

Share Capital

The paid up equity share capital as on 31st March, 2016 was Rs.15050.54 Lakhs.

In pursuance of Special Resolution passed by the shareholders of the company through postal ballot on 20th March, 2015, to issue 9,95,60,000 equity shares of Rs.5/- each at par [as the price calculated in accordance with the Regulations for Preferential Issue under SEBI (ICDR) Regulations is less than the face value] to the promoters/promoters’ group against the Promoters’ contribution brought in the form of unsecured loans of Rs.49.78 Crores (Rupees Forty Nine Crores and Seventy Eight Lakhs only) as per the CDR package, by way of preferential allotment, the Company allotted 9,95,60,000 equity shares of Rs.5/- each to the promoters on 19.01.2016.

The Company has not issued any share with differential voting rights nor has granted any stock options or sweat equity as on 31st March, 2016. None of the Directors of the Company hold instruments convertible into equity shares of the Company.

Extract of Annual Return:

Pursuant to the provisions of Section 92 of the Companies Act, 2013 and rules framed there under, the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure - V and forms part of this Report.

Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Particulars with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 are given in the Annexure - VI attached hereto and forms part of this Report.

Meetings:

During the year under review 6 (Six) board meetings were held on May 27th, 2015, August 12th, 2015, August 28th, 2015, November 14th, 2015, December 28th, 2015 and February 12th, 2016. The maximum time gap between any two consecutive meetings was within the period prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

Directors:

During the year under review, the members of the Company at their Annual General Meeting held on September 30th , 2015 appointed Smt B.Sandhyasri as Independent Directors under Section 149 of the Act to hold office for 5 (Five) consecutive years w.e.f March 30, 2015 and re-appointed Shri S. Hanumantha Rao, as the Director - Finance of the Company for a period a 5 (Five) years w.e.f. May 27th, 2015.

During the year, Smt B.Sandhyasri, an Independent and Non Executive Director of the Company resigned from the Board of Directors with effect from May 30th , 2016. The Board placed on record its sincere appreciation and thanks to Smt B. Sandhyasri for her support and guidance provided from time to time during her tenure as Director of the Company. Shri S.Hanumantha Rao, resigned from the position of Director-Finance of the Company and continues as Non-Executive Director of the Company w.e.f: 28.12.2015

The Board has appointed Smt. A. Syamala Reddy as Additional Director (Independent Director) w.e.f August 27th, 2016 and now it is recommended her appointment to be regularized and be appointed for a period of 5(Five) years i.e from September 30th, 2016 to September 30th, 2021. Her appointment on the Board shall also fulfill the requirement of a Woman Director on the Board of the Company as required under the Companies Act, 2013 and Regulation 17(1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

Pursuant to the provisions of Section 152 of the Companies Act, 2013 and in accordance with the Articles of Association of the Company, Shri. S.Hanumantha Rao, Director of the Company will retire by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for reappointment.

The Resolutions proposing their re-appointment/ appointments as Directors will be placed before the Shareholders for their approval at the ensuing Annual General Meeting of the Company.

The Company has received declarations from all the Independent Directors of the Company confirming that they continue to meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and under Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

None of the Directors of your Company is disqualified under Section 162 (2) of the Companies Act, 2013. As required by law, this position is also reflected in the Auditors’ Report.

The following persons are Key Managerial Personnel of the Company:

Shri R.K. Birla : Managing Director

Shri Ch. Narayana Rao : Chief Financial Officer

Shri Shaik Ibraheem : Company Secretary

During the year there is no change in the role of the aforesaid KMP.

For Directors seeking appointment/re-appointment in the forthcoming Annual General Meeting of the Company; the particulars as required to be disclosed in accordance with Regulation 36(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, forms part of this Report.

Board Evaluation:

The Board of Directors evaluated the annual performance of the Board as a whole, its committee’s and the directors individually in accordance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 in the following manner:

Structured evaluation forms, after taking into consideration inputs received from the Directors, covering various aspects of the Board’s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance, for evaluation of the performance of the Board, its Committee’s and each director were circulated to all the members of the Board along with the Agenda Papers.

The members of the Board were requested to evaluate by filling the evaluation forms and the duly filled in evaluation forms were required to be sent to the Company Secretary in a sealed envelope or personally submitted to the Chairman at the concerned meeting.

The Board also provided an individual feedback to the concerned director on areas of improvement, if any.

A separate meeting of Independent Directors was held on 30th March, 2016 to evaluate the performance of the Chairman, the Non Independent Directors, the Board and flow of information from management.

Particulars of Employees:

The information required pursuant to the provision of Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, are set out in Annexure-VII of this Report.

Management Discussion and Analysis Report:

Management Discussion and Analysis, forming part of this report as required under Regulation 34(2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is attached hereto as Annexure-VIII and forms part of this Report.

Corporate Governance:

Your Company is committed to principles of good Corporate Governance. The Board of Directors ensures that your Company is in compliance with all the applicable regulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 pertaining to Corporate Governance. A detailed report on Corporate Governance is attached as Annexure-IX and forms part of this report. Certificate from the Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance as stipulated under Regulation 34(3) read with Schedule V of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is attached to this report.

Subsidiaries of the Company:

Details of the subsidiaries are given below:

S. No

Name of the Company

Status

Nature of Business

Country of Incorporation

Percentage of ownership interest

1

Glade Steel Private Limited

Subsidiary

It is engaged in the business of manufacturing, distributing, supplying, selling and other wise dispose of Rounds, Flats, Squares, Angles, Channels, Girders and Allied Products with installed capacity of 75,000 MT/per annum of rerolling and 50,000 MT/per annum of MS ingots

India

51.15%

2

Asian Tide Enterprises Limited

Wholly Owned Subsidiary (WOS)

It was incorporated in Hong Kong for carrying on the business of trading of goods and services with accent on procuring raw materials (in bulk) for manufacturing activities of the Company (melting scarp for its rolling division) and sale surplus in the market.

Hong Kong

100%

3

Alpha Ventures Limited

Wholly Owned Subsidiary(WOS)

Alpha Ventures Limited has been promoted to carry out any object not prohibited by the Companies Law (2004) Revision, or as the same may be revised from time to time, or any other law of the Cayman Islands. As per the law prevailing in Cayman Islands

Cayman Islands

100%

4

Optimix Enterprises Limited

Stepdown Subsidiary (WOS of Asian Tide Enterprises Limited)

It was incorporated in Mauritius for carrying on the business or businesses which are not prohibited under the laws for the time being in force in the Republic of Mauritius. This includes (inter alia) to engage in the business of all forms of investments including but not limited to venture capital and private equity investments whether directly, indirectly through any special purpose vehicles or otherwise.

Mauritius

100%

A separate statement containing the salient features of the Financial Statement for the financial year ended 31st March, 2016 of the aforesaid subsidiary companies are included in the Annual Report as Form AOC-1 as an ‘Annexure -X’. The Financial statements of the said Subsidiaries Companies are available for inspection by the Shareholders at the Registered office of your Company. Your Company undertakes that the Financial statements of the Subsidiaries Companies shall be made available to the Shareholders of the Company on demand.

Consolidated Financial Statements:

The consolidated financial statements of your Company for the financial year 2015-16, are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standards and Listing Regulations as prescribed by the Securities and Exchange Board of India (SEBI).

The consolidated financial statements have been prepared on the basis of audited financial statements of the Company and its subsidiaries.

Audit Committee:

Your Company has constituted an Audit Committee as per the requirements of Section 177 of the Companies Act, 2013. The details of the composition of the Audit Committee as required under the provisions of Section 177(8) of the Companies Act, 2013, is given in the Corporate Governance Report furnished as part of the Annual Report. During the year under review, the Board has accepted all the recommendations of the Audit Committee.

Internal Control Systems and their adequacy:

Your Company has an effective Internal Control System to prevent fraud and misuse of Company’s resources and protect shareholders’ interest. Your Company has an independent Internal Audit Department to monitor and review and focus on the compliances of various business processes. The internal audit report along with audit findings and tracking of process improvements & compliances is presented for review to the Audit Committee of Board of Directors.

The Board of Directors of the Company have adopted various policies like Related Party Transactions Policy, Whistle Blower Policy, Corporate Social Responsibility Policy, Risk Management

Policy, Dissemination of Material Events Policy, Documents Preservation Policy, Monitoring and Reporting of Trading by Insiders, Code of Internal Procedures and Conduct for Regulating, Code of Practices and Procedures for Fair Disclosures and such other procedures for ensuring the orderly and efficient conduct of its business for safeguarding of its assets, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

Vigil Mechanism:

The Board of Directors, on recommendation of the Audit Committee, established a vigil mechanism by framing a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The Vigil Mechanism framework ensures that strict confidentiality is maintained whilst dealing with concerns and also that no discrimination shall be meted out to any person for a genuinely raised concern. The designated officer/ Audit Committee Chairman can be directly contacted to report any suspected or confirmed incident of fraud/ misconduct.

Remuneration Policy:

The Board of Directors, on recommendation of the Nomination and Remuneration Committee framed a Nomination and Remuneration policy for selection, appointment and remuneration of Directors, KMP and Senior Management and matters covered u/s 178(3) of the Companies Act 2013. The details of the same are provided in the Corporate Governance Report.

The Policy is also posted in the Investors section of the Company’s website www.sujana.com.

Particulars of Loans, Guarantees or Investments:

Particulars of Loans, Guarantees and Investments as required under the provisions of Section 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements.

Risk Management :

The Risk Management programme at the Company is focused on ensuring that risks are known and addressed. The Board of Directors, on recommendation of the Audit Committee, established a robust Risk Management framework by framing a Risk Management Policy to deal with all risks including possible instances of fraud and mismanagement, if any. The Risk Management Policy details the Company’s objectives and principles of Risk Management along with an overview of the Risk Management process, procedures and related roles and responsibilities.

The Board is of the opinion that there are no elements of risks that may threaten the existence of the Company. The board periodically tracks the progress of implementation of the Risk Management policy.

Industrial Relations:

Your directors are happy to report that the Industrial Relations have been extremely cordial at all levels throughout the year.

Sexual Harassment Policy:

The Company as required under the provisions of “The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013” has framed a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace and matters connected therewith or incidental thereto.

In the year under review, the Company has not received any complaint under the said Policy.

Environment and Social Obligation:

The Company’s plants comply with all norms set up for clean and better environment by the competent authorities. The Company undertakes regular checks / inspections including certification for the maintenance of the environment. The Company values environmental protection and safety as the major considerations in its functioning. The Company has adequate effluent Treatment Plants to prevent pollution. The Company is continuously endeavoring to improve the health and quality of life in the communities surrounding its industrial complexes.

Human Resource Management:

The Company believes that Human Resource is its most valuable resource, which has to be nurtured well and equipped to meet the challenges posed by the dynamics of Business Developments. The Company has a policy of continuous training of its employees both in-house. The staff is highly motivated due to good work culture, training, remuneration packages and the values, which the company maintains. Your Directors would like to place on record their deep appreciation of all employees for rendering quality services and to every constituent of the Company be its customers, shareholders, regulatory agencies or creditors. Industrial relations have remained harmonious throughout the year.

Insurance:

All the properties and insurable assets of the Company, including Building, Plant and Machinery, stocks etc., wherever necessary and to the extent required, have been adequately the covered.

Quality:

Your Company accorded high priority to quality, safety, training, development, health and environment. The Company endeavours to ensure continuous compliance and improvements in this regard.

Appreciations:

The Board of Directors take this opportunity to express their deep sense of gratitude to the Central, State Government and Local Authorities, Financial Institutions, Banks, Customers, Dealers, Vendors and all the stakeholders for their continued cooperation and support to your Company.

The Board of Directors wishes to express its appreciation to all the employees of the Company for their outstanding contribution to the successful operations of the Company.

The Board specially thank to the shareholders for their continued confidence and faith in the Company.

BY ORDER OF THE BOARD

R.K.BIRLA S.HANUMANTHA RAO

Managing Director Director

DIN:00118776 DIN:00118801

Place : Hyderabad

Date : August 27th 2016

Director’s Report