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Steel Exchange India Ltd.

BSE: 534748 | NSE: STEELXIND |

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Series: BE | ISIN: INE503B01013 | SECTOR: Steel - Large

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Annual Report

For Year :
2018 2016 2015 2014 2013 2012 2011 2010 2009

Director’s Report

Dear Members,

The Directors have pleasure in presenting the 19thAnnual Report together with the Standalone Audited Accounts for the year ended 31st March, 2018.

Financial Results

The performance of the Company for the Financial Year ended March 31, 2018 is as under:

(Rs. in Lakhs)

PARTICULARS

31-Mar-18

31-Mar-17

Total Revenue

939.51

1337.98

Profit/ (Loss) before finance cost, depreciation and tax expense

(5017.50)

2835.45

Finance cost

13552.06

15744.23

Profit / (Loss) before depreciation and tax expense

(18569.56)

(12908.78)

Depreciation

2899.87

2975.59

Profit/(Loss) before tax expense

(21469.43)

(15884.37)

Tax expense

i. Tax expense of prior years

ii. Deferred Tax

(4456.23)

23.49

(191.88)

Profit/(Loss) for the year

(17013.20)

(15715.98)

Add: Other Comprehensive Income

0.80

(9.61)

Total Comprehensive Income/ (Loss) for the year

(17012.40)

(15725.59)

Review of operations:

During the year under review, the total revenue of the company was Rs. 939.51 crores as against the 1337.98 Crores. Net Profit/Loss recorded at (170.12) Crores as against Net Profit/Loss of (157.25) crores in the Previous Year.

The Manufacturing Sales including power sales were Rs.610.36 Crores in the current year compared to 645.96 crores in the previous year. The trading sales during the year amounted to Rs.317.36 Crores compared to 669.68 Crores in the previous year.

The decrease in revenues was due to the lower production levels in the steel segment due to liquidity constraints. Power sales were also substantially less in the current year due to lower price and reduced off-take of power by the state utilities despite agreement existing for supply of power.

SEIL Debt Resolution Scheme

The Company has been under financial stress since 2016- 17 due to various external factors beyond the control of the Company and its management, which amongst others, includes continued recession in steel markets and non-off take of surplus power by state utilities despite signing a PPA for 1 year in 2016-17. This has resulted in sharp drop in EBIDTA earnings and consequently the company has been unable to service its debt obligations.

On reference to the Lenders, it was agreed for a debt resolution under the S4A scheme and the sanction was received during the year. However due to the effects of demonetization and introduction of GST in the intervening period, the steel markets were adversely affected resulting in lower than anticipated earnings under the S4A scheme. There has been no improvement in power off take even during 2017-18. The S4A scheme was therefore not implemented by the Lenders.

With the uptrend and strong demand witnessed in the steel markets since October 2017, the company has requested the lenders for a suitable debt restructuring for a possible debt resolution. RBI has changed the guidelines vide its notification in February 2018 wherein all existing schemes like CDR, S4A, SDR etc have been completely withdrawn and new guidelines have been introduced with onus of debt resolution to be decided by the Lenders subject to guidelines of RBI. The Lenders have broadly agreed for debt resolution by way of restructuring the debt. The Lenders in a JLM held on 20.06.18 have agreed on the broad contours of the draft proposal submitted to them.

The revised proposals with couple of options have been submitted to the Lenders based on the observations made. The proposal is based on the outstanding of Rs.1046.78 cr as on 31.3.18 as per the balances given by the Lenders. The final proposal is expected to be selected by the Lenders in the ensuing JLM to be held on 17.08.18. Thereafter the accepted proposal has to be rated by two external agencies appointed by the Lenders before receiving the final approval and sanction.

The operations of the company have been ensured with the support of operational creditors to continue production so that Plant does not shut down and thus is having large overdue outstanding payments to operational creditors.

Listing of Equity Shares

The Equity Shares of your Company are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited. It may be noted that there are no payments outstanding to the Stock Exchanges by way of Listing Fees. The company has paid the listing fee for the financial year 2018-19.

Delisting from Calcutta Stock Exchange Limited (CSE)

The Company has made an application for voluntary delisting of equity shares from Calcutta Stock Exchange Limited (CSE) during the year and it’s in work in progress and waiting for final order from CSE.

Unclaimed Suspense Account/Escrow Account:

In accordance with the procedure laid down in Schedule VI to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the company has transferred unclaimed shares of Equity shareholders (previously GSAL Shareholders) into one folio in the name of “Steel Exchange India Limited -Unclaimed Suspense Account “and maintain details of shareholders whose shares are credited to the said Unclaimed Suspense Account.

Subsidiaries, Joint Ventures or Associate Companies

Your company incorporated a subsidiary company in Hong Kong on 02nd June, 2015 which was in dormant due to non- commencement of business operations since its incorporation. Your company does not have any Joint Ventures or associate companies.

Number of Meetings of the Board of Directors

During the year ended March 31, 2018, Seven Board Meetings were held.

The dates on which the Board meetings were held are May 27, 2017, May 30,2017, June 24, 2017, August 16, 2017, September 11, 2017, December 14, 2017, and February 9, 2018.

Details of number of Meetings attended by each Director have been given in the corporate governance report, which forms part of the Annual Report.

Director’s Responsibility Statement as required under Section 134 of the Companies Act, 2013

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to the Directors’ Responsibility Statement, the Board of Directors of the Company hereby confirms:

i) that in the preparation of the Annual Accounts, the applicable accounting standards have been followed;

ii) that the Directors 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 as at March 31, 2018 and of Profit and Loss Account of the Company for that period;

iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the Annual Accounts for the Financial Year ended March 31, 2018 on a going concern basis;

v) that the Directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

vi) That the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Statement on Declaration given by Independent Directors under Sub-Section (6) of Section 149

The independent directors have submitted the declaration of independence, as required pursuant to section 149(7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in sub-section(6).

Particulars of Loans, Guarantees and Investments under Section 186 of the Companies Act, 2013

The company has not given any Loans / Guarantees and not made any Investments during the FY 2017-18, as specified under the provisions of section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014, the disclosure in the prescribed format is annexed as Annexure-1

Related Party Transactions

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 are prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and the same is given in notes to accounts of the company wide note no 4.36.3.

Transfer of Amount to Reserves

The Company doesn’t propose to transfer any amount to the general reserve for the Financial Year ended 31st March, 2018.

Dividend

The Board of Directors of the Company has not recommend Dividend for the financial year ended March 31, 2018.

Share Capital

During the period under review, there was a change in the Authorized Share Capital, the revised capital structure as mentioned bellow:

The Authorized Share Capital of the Company is Rs. 332, 00,00,000/- (Rupees three hundred and thirty two crores only) divided into 25,80,00,000 (Twenty Five crores Eighty Lakhs only) equity shares of Rs.10/- ( Ten only) each, and 7,40,00,000 (Seven Crore Forty Lakhs only) preference shares of Rs. 10/- (Ten only) each and the said preference shares may be redeemable/non-redeemable, cumulative/non-cumulative, convertible/nonconvertible, participating/non-participating or otherwise at the option of the Company, in the share capital of the Company with power to increase or reduce the capital of the Company and to divide the shares in the capital for the time being into several classes and to attach thereto respectively such preferential/deferred, qualified or special rights, privileges or conditions as may be determined by or in accordance with the regulations of the company and to vary modify or abrogate any such rights, privileges or conditions in such manner as may for the time being be provided by the regulations of the Company .

There was no change in Paid up Share Capital of the Company during the year under review

The Company has not issued any shares with differential rights and hence no information as per the provisions of Section 43(a) (ii) of the Act read with Rule 4(4) of the Companies (Share Capital and Debenture) Rules, 2014 is furnished.

Deposits

The Company has not accepted any deposits from the public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet, in terms of Section 73 of the Companies Act, 2013.

Extracts of Annual Return

As required by Section 92(3) of the Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of the Annual Return in Form MGT-9 is available on the Company’s website at www.seil.co.in / investor relations.

Conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to provisions of Section 134(3)(m) of the Companies Act, 2013 (Act) read with the Companies (Accounts) Rules, 2014

Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is prepared and the same is enclosed as Annexure - 2 to this Report.

Risk Management

The Board of Directors has formed a risk management committee to identify, evaluate, mitigate and monitor the risk associated with the business carried by the company. The committee reviews the risk management plan and ensures its effectiveness. A mechanism has been put in place which will be reviewed on regular intervals.

Corporate Social Responsibility

The Board of Directors has constituted a Corporate Social Responsibility (CSR) Committee to monitor implementation of CSR activities of your Company. The details of the composition of the CSR Committee, CSR policy, CSR initiatives and activities during the year are given in the Annual Report on CSR activities in Annexure - 3 to this Report.

Committees of the Board

The Board has Audit Committee, Nomination and Remuneration Committee, Stakeholders’ Relationship Committee and Corporate Social Responsibility Committee. The composition and other details of these committees have been given in the Report on the Corporate Governance forming part of the Annual Report.

Corporate Governance

A separate report on Corporate Governance is annexed as part of the Annual Report along with the Auditor’s Certificate on its compliance.

Management Discussion and Analysis

Management Discussion and Analysis Report for the year under review, as stipulated under Listing Regulations, is annexed herewith which forms part of this report.

Whistle Blower Policy and Mechanism

The Board of Directors has adopted Whistle Blower Policy. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud, or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the audit committee in exceptional cases.

Board Evaluation

The Board of Directors has carried out an annual evaluation of its own performance, board committees and individual directors pursuant to the provisions of the Act and the corporate governance requirements as prescribed by SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015. The performance of the Board was evaluated by the board after seeking inputs from all the directors on the basis of the criteria such as the board composition and structure, effectiveness of the board processes, in formation and functioning etc. In a separate meeting of independent directors, performance of non-independent directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of executive directors and non-executive directors. The same was discussed in the board meeting that followed the meeting off the independent directors, at which the performance of the board its committees and individual directors was also discussed. Performance evaluation of independent directors was done by the entire board, excluding the independent director being evaluated.

Directors

Mr. Bavineni Suresh and Mr. Veeramachaneni Venkata Krishna Rao, Directors of the Company retire by rotation and being eligible offer themselves for re-appointment.

Details of Directors or Key Managerial Personnel Who were appointed or have resigned during the Year

Mr. B. Ramesh Kumar (DIN: 00206293) was reappointed as Joint Managing Director of the Company for a further period of three years with effect from 9th February, 2018 pursuant to the provisions of Sections 196, 197 and 203 read with Schedule V and all other applicable provisions of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Mr. B Ramesh Kumar, Joint managing Director of the Company was appointed as CFO of the company with effect from 14th December, 2017 and Mr. Raveendra Babu M was appointed as Whole time Company Secretary & Compliance officer of the company w.e.f 31st December, 2017 pursuant to the provision of Section 203 and all other applicable provisions of the Companies Act, 2013.

Resignations:

Mr. V S Rakesh resigned as CFO of the Company with effect from 14th December, 2017 Mr. A.L Babu resigned as Company Secretary of the company w.e.f 31st December, 2017 Policy on directors’ appointment and remuneration

A gist of policy of the Company on directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters, as required under sub-section (3) of Section 178 of the Companies Act, 2013, is available in the Corporate Governance Report.

The company’s policy on directors’ appointment and remuneration and other matters provided in Section 178 (3) of the Act have been disclosed in the corporate governance report. Under Section 178 (3) of the Companies Act, 2013, the Nomination and Remuneration Committee of the board has adopted a policy for nomination, remuneration and other related matters for directors and senior management personnel. A gist of the policy is available in the Corporate Governance Report.

Statutory Auditors

At the Annual General Meeting held on December 31st 2014, M/s. Pavuluri& Co, Chartered Accountants (Firm Registration No. 012194S), Hyderabad, were appointed as Statutory Auditors of the Company to hold office for a period of Five years i.e., till the conclusion of the Annual General Meeting to be held in the calendar year 2019.

As required under section 139 of the Companies Act, 2013, the Company has obtained written consent from M/s. Pavuluri& Co, Chartered Accountants (Firm Registration No. 012194S), Hyderabad, to such appointment and also a certificate from the auditors to the effect that if their appointment is ratified, it would be in accordance with the provisions of Section 139(1) of the Act and the rules made there under.

The para-wise management response to the qualifications / observations made in the Independent Auditors Report is stated as under: Attention is drawn to point No 8 of the Independent Auditors Report regarding Basis for Qualified Opinion. The detailed clarification of the same is provided in Note No. 4.11 of the Accounts of the Standalone Accounts

The Auditors observation in point No. 8 of the Annexure to the Auditors report regarding dues to financial institution and banks aggregating Rs 214.78 Cr were due to severe liquidity crisis being faced by the Company on account of continued cash losses incurred.

The majority of the lenders have stopped charging interest on debts since the dues from the Company have been categorized as Non-performing Asset. The Company is in active discussion / negotiation With the Lenders for a suitable debt resolution by way of debt restructuring at a sustainable level. Pending finalization of a suitable debt resolution, the Company has stopped providing for accrued Interest and unpaid effective from 1st January 2018, in its books of accounts, as the same is under discussion with the Lenders. The amount of such accrued and unpaid interest (including penal interest and other charges) not ‘ provided for is estimated at Rs.36,82,l4,336 for the year ended 31st March 2018 and the same has not been considered for preparation of the financial statements for the year ended 3lst March 2018.

Cost Auditors:

The Products classified as “Steel and Electricity” manufactured by the Company are subject to Cost Audit in terms of Sec. 148 of the Companies Act, 2013 read with the rules issued there under by the Central Government.

Accordingly M/s. DZR & Co., Cost Accountants have been re-appointed as the Cost Auditors for the year ending 31st March 2019.

The Cost Audit Report for year ended 31st March 2017 was reviewed by the Audit Committee at its meeting held on September 11, 2017 and has been filed on October 10, 2017.

Internal Auditors

The Board of Directors of the Company has appointed M/s. Bhavani & CO., as Internal Auditors to perform Internal Audit of the operations of the Company for the Financial Year 2017-18 and the Internal Auditors have presented the observations to the Audit Committee at the meeting held on 30.05.2018.

Internal Control Systems and their Adequacy

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Auditor is well defined in the company. To maintain its objectivity and independence, the Internal Auditor reports to the Chairman of the Audit Committee of the Board.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of Internal Auditor, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions suggested are presented to the Audit Committee of the Board.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Directors had appointed M/s. B.S.S & Associates, Practicing Company Secretaries, Hyderabad to undertake the Secretarial Audit of your Company for the financial year 2017-18. The Secretarial Audit Report does not contain any qualifications, reservation or adverse remarks. The Report in Form MR-3 is enclosed as Annexure-4.

Particulars of employees

The ratio of remuneration of each director to the median of employees’ remuneration as per Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of the Board’s report.

A statement containing the names of every employee posted throughout the financial year and in receipt of a remuneration of Rs.60 lakh or more, or posted for part of the year and in receipt of Rs.5 lakh or more a month, under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of the Board’s report enclosed as Annexure - 5 Insurance

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured.

Change in the nature of business

There is no change in the nature of business of the Company.

The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future

Material changes and commitments

During the year under review the majority of the lenders have stopped charging interest on debts since the dues from the Company have been categorized as Non-performing Asset. The Company is in active discussion / negotiation With the Lenders for a suitable debt resolution by way of debt restructuring at a sustainable level. Pending finalization of a suitable debt resolution, the Company has stopped providing for accrued Interest and unpaid effective from 1st January 2018, in its books of accounts, as the same is under discussion with the Lenders. The amount of such accrued and unpaid interest (including penal interest and other charges) not ‘ provided for is estimated at Rs.36,82,l4,336 for the year ended 31st March 2018 and the same has not been considered for preparation of the financial statements for the year ended 3lst March 2018. Except this there are no Material changes and commitments in the business operations of the Company from the financial year ended 31stMarch, 2018 to the date of signing of the Director’s Report.

Prevention of Sexual Harassment at workplace

The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Committee has been set up to redress complaints received regarding sexual harassment. During the financial year 31st March, 2018, the company has not received any complaints pertaining to sexual harassment Industrial Relations and Human Resources

Your company believes that its employees are one of the most valuable assets of the Company and the Board appreciates the employees across the cadres for their dedicated service to the company and expects their continuous support and higher level of productivity for achieving the targets set for the company. During the year under review, the company organized various training programmes at all levels to enhance skills of employees. The total employee strength is over 1092 as on 31st March, 2018.

Acknowledgement

The Directors take this opportunity to place on record their sincere thanks to the Banks and Financial Institutions, Insurance Companies, Central and State Government Departments and the shareholders for their support and co-operation extended to the Company from time to time. Directors are pleased to record their appreciation of the dedicated services of the employees and workmen at all levels.

On behalf of the Board of Directors

For STEEL EXCHANGE INDIA LIMITED

Place: Visakhapatnam B. SATISH KUMAR

Date: 14.08.2018 Chairman and Managing Director

(DIN: 00163676)

Director’s Report