The Directors of the Company present to you the 24th Annual Report of
the Company, together with the Audited Balance Sheet as at 31st March,
2015 and the Statement of Profit and Loss for the year ending on 31st
1. FINANCIAL RESULTS
The Financial Results of the Company for the year under review is
summarized below for your perusal and consideration.
(Rs. in Crores)
PARTICULARS 2014-15 2013-14
NET REVENUE 642.17 555.20
PROFIT BEFORE TAX AND
DEPRECIATION (172.66) (201.95)
PROFIT /(LOSS) BEFORE
TAX (PBT) (234.49) (233.87)
PROVISION FOR CURRENT
TAX - -
TAX EXPENSE 28.29 (78.41)
PROFIT AFTER TAXES/(LOSS)
(PAT) (262.78) (155.46)
1.1 FINANCIAL PERFORMANCE
The Company has achieved Net sales of Rs. 642.17 Crores for the year
ended 31st March, 2015 as compared to Rs.555.20 crores in the previous
The Company has incurred a Net loss of Rs. 262.78 Crores as against a
loss after taxes of Rs. 155.46 Crores in the previous year. The losses
are attributable to high input costs, irregular supply of raw
materials, high finance costs and unfavourable market conditions. While
the Raichur plant was particularly affected by the iron ore mining ban
and labour issues, the Gummudipoondi plant faced with irregular power
supply and adverse market conditions.
1.2 CORPORATE DEBT RESTRUCTURING (CDR)
The lenders have restructured the debts of the Company to the extent of
Rs.1331 crs under the CDR mechanism. All overdues have been
restructured with effect from 1st June 2013, on the basis of the terms
of moratorium and revised repayment schedule contained in the Final
Letter of Approval (Final LOA) dated March 13, 2014. The package also
includes a priority loan of Rs.41.72 crs for balancing equipment
required for the Rolling mill and electric arc furnace. Overdues on the
existing loans as on the Cut-off date have been converted into funded
interest term loans. Further repayment of loans has been resched- uled
over a 10 year period ending the year 2023.
2. SHARE CAPITAL
The paid up Equity Share Capital as on 31st March, 2015 was Rs. 44.52
Crores. During the year under report, the Company has not issued any
shares with differential voting rights nor granted stock options nor
Your Directors have not recommended any dividend for the financial year
2014-15 in view of the losses incurred and the need to conserve
resources of the Company. The Company is also required to seek prior
approval of the lenders for declaration of dividend, in terms of the
Corporate Debt Restructuring package.
5.1 SIL OPERATIONS AT CHENNAI PLANT
Production at Chennai Plant had adversely been affected for the last
couple of years due to severe power cut in Tamil Nadu. The plant faced
a 20% power cut and this situation continued for most part of the
financial year. The power shortage coupled with unfavourable market
prices for end products have resulted in lower operation level at the
5.2 SIL OPERATIONS AT RAICHUR PLANT
The existing operations at the Integrated Steel Complex at Raichur
comprises of the Sponge Iron Plant (Direct Reduction of Iron), Steel
Melting Shop and the Rolling Mill.
The Company has been facing labour unrest at the plant for the majority
of the financial year. Consequently, production had been adversely
affected, post implementation of the CDR package. The Company is set to
re-start the DRI operations in full swing by June 2015. The company is
using pellets for producing sponge iron due to non-availability of high
grade iron ore lumps. However, the SMS Plant and Rolling Mill is
expected to commence productions once the refurbishment work is
completed which is subject to release of the priority loan by the
The existing facilities at the Raichur plant are summarized below:
Facility Metric Tonnes Per Annum
DRI Plant 160,000
Billet Caster 240,000
Bar Mill 400,000
EXPANSION PROJECT- BENEFICIATION & PELLET PLANT
Earlier in terms of the Hon''ble Supreme Court order the illegal mines
were all closed down in Karnataka. And the Hon''ble Supreme Court wanted
to regulate the mining activities. As a result, there was a shortage of
iron ore supply in the State of Karnataka. Your company resorted
to buy pellets instead of iron ore lumps. In order to obviate this
difficulty the company had planned a Backward Integration exercise of
setting up a Beneficiation and Pelletisation Plant. This expansion
envisages Beneficiation of Iron ore fines and the company will be
producing Pellets which in turn will be utilized for the production of
Sponge Iron. In other words, the Pellets which will be produced will
become the raw materials for the manufacture of Sponge Iron in our
Direct Reduction of Iron (DRI) Kilns.
The Techno Economic Viability of the project was also carried out by
M/s. MITCON Consultancy which has found the project to be viable.
6. WAY FORWARD FOR THE COMPANY
As stated earlier, the Company has availed the CDR mechanism to
restructure its existing debts with the lenders. The Company has signed
a Master Restructuring Agreement (MRA) with its lenders. The repayment
is spread over a ten year period ending in the year 2023-24. The
mechanism also stipulates stringent monitoring by the lenders including
monthly cash flows. The lenders have constituted a Monitoring Committee
(MC) lead by the Monitoring Institution (MI) viz. IDBI Bank Ltd.
The Company with a view to augment the operational profitability has
introduced certain concepts which will help in utilizing the full
capacity of the plant and simultaneously contributing towards the
recovery of fixed cost. Further, the cost optimization exercise is
being undertaken on continuous basis for improving the overall
productivity and thereby helping in improving the bottom line.
Even though there has been delay in expected commencement of operations
at Raichur, the resolution of the Labour dispute amicably has created a
positive working environment. The Company in all its earnest is looking
to capitalize this positive environment and immediately commence the
operations at Raichur subject to necessary approvals for release of
sanctioned funds from the consortium lenders. The Company is very
positive that on the commencement of Raichur operations the overall
financial outlook of the company will become vibrant.
The Company in the past few years had suffered severe liquidity crunch
on account of negative market sentiments per se prevailing in steel
industry. This had been the major contributing factor for the company''s
decision to utilize the CDR forum for restructuring its debts with
consortium of bankers. With a view to improve the financial viability
of the company conscious decision to dilute the company''s holding in
its subsidiaries is envisaged. It is also planned to unlock the
inherent valuations of each of the projects by bringing in strategic
partners to augment the parent company in realizing its investment.
UNLOCKING INVESTMENTS IN SUBSIDIARIES
SIL has made total investments of Rs.534.24 Crores in its subsidiaries
viz. SPL (Rs. 418.50 Crores), SGPL (Rs. 56.15 Crores) & SMML (Rs.
59.59 Crores). These investments are yet to yield returns. While the
investment decision is sound, the execution of these businesses have
faced various bottlenecks in the form of non-availability of working
capital, un-favourable market conditions, coal linkage, inordinate
delay in getting certain regulatory approvals and other macroeconomic
issues. These have stressed the cash flows of the parent company, SIL.
Presently, we are in advanced discussions with various investors. Going
forward, it is proposed to unlock their value by divesting majority
equity stake in these Companies.
The Board of Directors of SIL has in principle approved the divestment
of the three subsidiaries viz; M/s. Surana Power Limited, M/s. Surana
Green Power Limited and M/s. Surana Mines & Minerals Limited.
In accordance with the General Circular issued by the Ministry of
Corporate Affairs, Government of India, the Balance Sheet, Statement of
Profit and Loss and other documents of the subsidiary companies are not
being attached with the Balance Sheet of the Company. However, the
financial information of the subsidiary companies is disclosed in the
Annual Report in compliance with the said circular.
SURANA POWER LIMITED
Surana Power Limited a 100% subsidiary of Surana Industries Limited is
in the process of setting up of 2 x 210 MW Thermal Power Plant at
Raichur. The original project cost was estimated at Rs.2400 crs in the
year 2010. However, the project cost has been revised to Rs.3090 crores
on account of increase in Interest during Construction (IDC). SPL has
an 35MW operational thermal power plant. After completing the 2 x 210
MW Thermal Power Plant, the generation capacity of Surana Power Limited
will be increased to 455 MW.
The operations of the 35MW were adversely affected during the year due
to fall in power tariff rates and increase in input costs.
Consequently, the debt under sole banking with UCO Bank was
During the financial year 2014-15, the revenue from operation is stood
at Rs. 51.77 Crores as compared to Rs.70.97 Crores for the previous
financial year 2013-14. Revenue from operation is only through sale of
coal in stock and the 35 MW Captive Power Plant was not in operation
for the entire financial year due to labour unrest, financial
constraint and other unviable market conditions.
During the financial year 2014-15, the Other Income stood at Rs. 0.09
Crores as compared to Rs. 0.12 Crores for the previous financial year
Finance cost stood at Rs. 25.90 Crores for the financial year 2014-15
as against Rs. 23.80 Crores for the financial year 2013-14.
Depreciation and amortization expenses stood at Rs. 76.90 Crores for
the financial year 2014-15 as against Rs. 12.13 Crores for the
financial year 2013-14.
Other expenses stood at Rs. 53.02 Crores for the financial year 2014-15
as against Rs. 36.61 Crores for the financial year 2013-14.
Loss before tax is Rs. 150.84 Crores for the financial year 2014-15 and
Rs.29.07 Crores for the financial year 2013-14. Loss after tax for the
financial year 2014-15 stood at Rs.160.08 Crores and Rs. 116.24 Crores
for the financial year 2013-14.
Surana Industries Limited has already infused a capital contribution of
Rs.418.50 Crores. SPL has already spent around Rs. 1929.66 Crores as on
31st March 2015. The source for the same was equity contribution of Rs.
350 Crores, and balance by way of term loan from consortium of lenders.
SURANA MINES AND MINERALS LIMITED
Surana Mines and Minerals Ltd, SMML a 100% subsidiary of Surana
Industries Limited, at Singapore is expected to commence trading
activities in coal as well as scraps in the global market for supply to
steel and power plants in the group. SMML has a step down subsidiary PT
Borneo Mines & Minerals Ltd which has acquired mining rights in the
Sassanga coal mines in Indonesia. The 2640 acres of the Sassanga coal
mines have proven reserves of 60-70 million tonnes of coal. The Company
is facing difficulty in raising funds for working capital due to the
restructuring of the debts of the parent company Surana Industries Ltd
and has incurred a loss of US$ 1,17,971/- on a consolidated basis for
the FY 2014-15.
SURANA GREEN POWER LIMITED
SGPL, a 100% subsidiary of Surana Industries Limited, is in the
business of Power Generation. SGPL has currently 7 windmills of 1.5MW
capac- ity. SGPL has a step down subsidiary (wholly owned subsidiary)
M/s. Surana Green Energy Limited (SGEL), an SPV through which the
Company is availing the Group Captive Scheme (GCS), whereby SGEL is
able to sell electricity to other Captive users.
SGPL has also been registered under the UNFCCC (United Nations
Framework Convention on Climate Change) Clean Development Mechanism
Scheme (CDM). The project is eligible for Carbon Credits which are
sold in the international markets. This has provided additional revenue
For the FY 2014-15, the Company has operated on average PLF of 14.95%
and generated 152.22 lakh units. During the year there was a decline in
the turnover and it stood at Rs.0.70 Crs compared to Rs. 0.95 Crs in
the previous year ended March 31,2014.
For the FY 2014-15, SGEL had achieved a total turnover of Rs. 8.14
Crores as against Rs.7.87 Crores during the previous year ended March
A Statement Pursuant to first proviso to sub-section (3) of section 129
read with rule 5 of Companies (Accounts) Rules, 2014 containing salient
features of the financial statement of subsidiaries/associate
companies/joint ventures in Form AOC-1 is annexed to this report as
The steel production capacity in the country has increased
substantially and the production may touch around 200 million tonnes by
the year 2020. The country has the necessary iron ore reserves to
achieve this level of steel production. Due to expected acceleration in
GDP growth rate in the medium and long term, the demand for steel is
bound to go up significantly. This will benefit all steel producers
including your Company.
The Infrastructure sector is expected to get an impetus under the new
government, which will also translate into substantial increase in
steel demand. The Company also undertakes Cold Rolling operations which
provide a good margin of profitability. The Company procures materials
mainly from leading steel producers and after cold rolling, sells the
same in the market. This shall also add to the overall profitability of
9. THREAT PERCEPTION
Your Directors feel that the Company will have to gear up its marketing
activities so as to compete effectively with the established producers.
Marketing of Alloy Steel and Special Steels needs concerted efforts and
experience. In the Raichur steel plant, the Company will be
manufacturing Special Alloy Steels which are mostly meant for
Automobile Manufacturers who will demand strict adherence to the
quality of the products. The alloy steel market has high competition.
There- fore, it is essential for the Company''s marketing team to
aggressively and effectively market the products.
Similarly, in the case of TMT Bars, there can be good competition from
the various producers. Builders and contractors are the ultimate end
users of TMT Bars and it is necessary for the Company to aggressively
market these products.
Shortage of quality raw materials, surging freight costs and escalation
of the costs of inputs, fuels etc. will continue to keep the cost of
production high for steel manufacturers.
The main threat perception is linkage of iron ore and coal. Delay in
completion of the backward integration project can also affect
profitability of future operations.
Further, in regards to financial implications, there can be threat
perceptions, due to tough competition it would be difficult for the
Company to pass on the entire cost push to the Customers by way of
increased finished steel prices. Faced with aggressive marketing
strategy and cost cutting initiatives, the Company constantly reviews/
monitors the costs of various inputs and finds out ways (either
technological or commercial) to reduce the cost of steel production,
wherever is possible. The Directors have been taking requisite measures
to overcome various impediments which may come in the way of smooth
functioning of the Company.
10. RISK PERCEPTION
The Directors are constantly assessing the business risks pertaining to
the performance of the Company. The following are the important risks
* Quality Maintenance of the End Products
* Adequate availability of Raw Materials
* Requisite Power Supply
* Removal of Transport Bottlenecks
* Sudden Increase in Prices of Inputs
* Customers Default
* Inadequacy of Finance Arrangement
* Statutory Policies
* Events Due to Unforeseen Circumstances
* Volatility in international supply/demand of steel products
Your Directors are fully conscious of the various business risks and
have taken adequate care to tackle any situation. Strict controls are
enforced on the quality front and all other matters for smooth
operation of the steel plants.
11. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has a internal control system which is in the process of
streamlining. All transactions are subject to proper scrutiny. The
Company also has Independent Internal Auditors who carry out the
internal audit on a quarterly basis covering all areas during the
financial year and submit their report on a quarterly basis to the
Audit Commit- tee. The Management takes immediate correc- tive action
wherever it is being pointed out to help streamline the internal
control process. The Audit Committee further insisted that there should
be stronger internal control systems to be in place. A policy on
internal controls had already been devised and implemented for the
company and the management shall ensure the effectiveness of the
working of such policy.
12. CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Accounting Standard (AS) - 21 on Consolidated
Financial Statements read with AS - 23 on Accounting for Investments in
Associates and AS - 27 on Financial Reporting of Interests in Joint
Ventures, the audited consolidated financial statements is provided in
the Annual Report.
13. HUMAN RESOURCES
The Management envisions trained and motivated employees as the
backbone of the Company. Special attention is given to recruit trained
and experienced personnel not only in the production department but
also in marketing, finance and accounts. The Management strives to
retain and improve employee morale. The Company has total staff
strength of about 300 employees. The Company is in the process of
revamping the employer employee engagement program.
The labour unrest at the Raichur Integrated steel plant plagued the
operations of the plant for the major part of the financial year. For
the last three years a certain section of the workers of our
Raichur Integrated Steel Plant have been resorting to illegal
activities and have been instigated by local elements with vested
interests. The Company would like to bring to the notice of the share
holders that the said strike / labour dispute have been amicably
resolved and we expect no turbulence in the near future.
The Company has streamlined its manpower strength at the Chennai
offices including the corporate head office. As a result of manpower
rationalization exercise, the monthly payroll has been optimized. The
decision for rationalization of labour has enabled the company to
curtail fixed manpower costs. However, the core technical expert team
is retained to guide the Company to achieve higher and efficient level
14. CORPORATE GOVERNANCE
The Directors pay special attention to ensure that the guidelines given
for the corporate governance are strictly adhered to. All possible
steps are taken to adhere to the requirements set out by SEBI
Guidelines on Corporate Governance. The Company is also aligning itself
to implement global corporate governance practices. This is ensured by
taking ethical business decisions and conducting business with a firm
commitment to values, while meeting stakeholder''s expectations. At
Surana, it is imperative that the company affairs are managed in a fair
and transparent manner. This is vital to gain and retain the trust of
A separate report on the Corporate Governance also forms part of the
Annual Report. Requisite certificates from the Auditors of your Company
regarding compliance of the conditions of the corporate governance as
stipulated under Clauses 49 of the Listing Agreement with the Stock
Exchanges is also attached to the corporate governance report. With
regard to the Business Responsibility Report, the Company is not
covered in the top 100 listed entities, based on the market
capitalization at BSE & NSE, in terms of SEBI Circular
CIR/CFD/DIL/8/2012 dated August 13, 2012.
15. CORPORATE SOCIAL RESPONSIBILITY AND GOVERNANCE COMMITTEE
The Board of Directors has constituted a Corporate Social
Responsibility and Governance Committee (CSR&G Committee) in compliance
with the provisions under the Companies Act, 2013. The committee
comprises of Shri K.N Prithiviraj as the Chairman, Shri Krishna Udupa
and Shri. Dineshchand Surana as its other members.
The said Committee has been entrusted with the responsibility of
formulating and recommending to the Board, a Corporate Social
Responsibility Policy (CSR Policy) indicating the activities to be
undertaken by the Company, monitoring the implementation of the
framework of the CSR Policy and recommending the amount to be spent on
Since the company is making losses for the past three years, CSR spend
does not apply to the company for the financial year 2014-15. Hence
submission of a report on CSR activities does not apply.
16. RISK MANAGEMENT COMMITTEE AND POLICY
The Board of Directors has constituted a Risk Management Committee and
framed a Risk Management Policy in compliance with the provisions under
the Companies Act, 2013 and Clause 49 of the Listing Agreement. The
committee comprises of Shri Dineshchand Surana as the Chairman, Shri
Krishna Udupa, Shri. Anil Gupta and Shri. D. Hem Senthil Raj as its
17. SEXUAL HARASSMENT POLICY
The Company had adopted the sexual harassment policy as recommended by
the Audit Committee of the Board of Directors; however the Company is
in the process of constituting a committee for the same.
18. DEPOSITORY SYSTEM / E-VOTING MECHANISM:
The Company has entered into a Tripartite Agreement with both the
Depositories viz. National Securities Depository Limited (NSDL) and
Central Depository Services (I) Ltd (CSDL) along with Registrars M/s
Cameo Corporate Service Ltd, Chennai for providing electronic
connectivity for dematerialization on the Company''s shares facilitating
the investors to hold the shares in electronic form and trade in those
shares. The shares of your Company are being traded now in on the
Bombay and National Stock Exchanges under compulsory demat form.
Further, in accordance with provisions stipulated under Companies Act,
2013, the facility of e-voting is also made available to all
shareholders of the Company. The instructions regarding e-voting are
available in a separate section of the Annual report. All shareholders
are also requested to update their email ids with the Company or our
RTA M/s. Cameo Corporate Services Ltd.
19. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND
Pursuant to the provisions of Section 205A(5) and 205C of the Companies
Act, 1956, relevant amounts which remained unpaid or unclaimed for a
period of seven years have been transferred by the Company, from to
time to time on due dates, to the Investor Education and Protection
Fund. The details of the same are covered under the Corporate
Pursuant to the provisions of Investor Education and Protection Fund
(Uploading of information regarding unpaid and unclaimed amounts lying
with companies) Rules, 2012, the Company has uploaded the details of
unpaid and unclaimed amounts lying with the Company as on 18th July 2014
(date of last Annual General Meeting) on the Company''s website
(www.suranaind.com), as also on the Ministry of Corporate Affairs''
During the year M/s Deloitte Haskins & Sells LLP., Chartered
Accountants, having firm registration number 117366W/W 100018 have been
appointed as statutory auditors of the company to fill the casual
vacancy arisen on account of resignation of M/s. CSP Jain & Co due to
their pre-occupation with other assignments. The said appointment has
been approved by the share- holders at the Extra-Ordinary General
Meeting of the company held on 30th September 2014.
M/s. Deloitte Haskins & Sells LLP., Chartered Accountants, Chennai
having firm registration number 117366W/W 100018, Statutory Auditor
hold office up to the conclusion of the 24th AGM and are eligible for
re-appointment. The Company has appointed M/s. M/s. Deloitte Haskins &
Sells LLP for a period of five years starting from the financial year
2015-16 to 2019- 20, subject to rati- fication of members in the each
annual general meeting. Further, the company had received letters to
the effect that their re-appointment, if made, would be within the
prescribed limits under Section 141(3) (g) of the Companies Act, 2013
and that they are not disqualified for such re-appointment. Your Board
of Directors recommends their re-appointment as Statutory Auditors to
hold office from the conclusion of the 24th AGM till the conclusion of
the 29th AGM of the Company.
21. AUDITORS REPORT AND MANAGEMENT''S RESPONSE TO AUDITORS OBSERVATIONS
The Auditors have qualified and emphasized certain matters in their
I. Capital work in progress relating to the Pelletisation and
Beneficiation (P&B) Project includes:
a) Interest on borrowings aggregating to Rs. 40765 Lakhs (including
Rs. 22339 Lakhs for the year) relating to the periods during which the
project has been stalled, which constitutes a departure from Accounting
Standard 16 (AS-16) on Borrowing Costs. Had the interest capitalized
during the period in which the project was stalled been charged to the
Statement of Profit & Loss, the loss for the year and, the Deficit in
the Statement of Profit and Loss, will be higher by Rs. 40765 Lakhs and
Capital Work in Progress will be lower by Rs. 40765 Lakhs.
b) Preoperative expenses incurred in relation to the project
aggregating to Rs. 68 Lakhs (including Rs. 19.82 Lakhs for the year)
relat- ing to the periods during which the project has been stalled,
which constitutes a departure from Accounting Standard 10 (AS-10) on
Fixed Assets. Had such expenditure capi- talized during the period in
which the project was stalled been charged to the Statement of Profit &
Loss, the loss for the year and the Deficit in the Statement of Profit
and Loss, will be higher by Rs. 68 Lakhs and Capital Work in Progress
will be lower by Rs. 68 Lakhs.
We submit that Interest and pre-operative expen- diture have been
capitalised considering the exceptional nature of this industry and
prolonged project implementation period and is being retained under
capital work in progress as per the CDR package.
II. Current investments include investments in subsidiaries aggregating
to Rs 53424 Lakhs which are held for sale and valued at cost. As per
Accounting Standard 13 - Accounting for Investments, these invest-
ments should be valued at the lower of cost and net realizable value.
In the absence of the net realizable value, we are unable to comment
on the adjustments, if any, to the carrying value of the value of
investments as at March 31, 2015.
We submit that, our Company is in negotiations with prospective buyers.
In the opinion of the management, the Company will be able to realize
the carrying value of the said investments and hence, no adjustment to
their carrying values is considered necessary.
III. As at 31 March, 2015, the quantity, quality and realizable value
of Inventory aggregating to Rs. 25869 Lakhs, was not assessed and
determined. As per by Accounting Standard 2 - Inventories these
inventories should be valued at the lower of cost and net realizable
value. In the absence of the net realizable value, we are unable to
comment on the adjustments that may be required to the carrying values
of inventories as at March 31, 2015.
We submit that, currently efforts are being made to segregate the
inventory at Raichur plant with that inventory belonging to a
subsidiary and physically verify the stock of stores and spares. Raw
Materials lying at the Raichur plant will be segregated and
physically weighed on resumption of production and blended with fresh
materials purchased for use in production. The extent of deterioration
or obsolescence, if any on the above inventory will be assessed at the
time of physical verification / resumption of production and
appropriate adjustments will be recorded on completion of the exercise.
In the opinion of the management, any such adjustment arising out of
physical verification / assessment of the quality will not be material
and will be appropriately dealt with on completion of the exercise.
AUDITOR''S OBSERVATIONS ON CONSOLI- DATED FINANCIAL STATEMENTS AND
MANAGEMENT''S RESPONSE TO THE OBSERVATIONS
The Statutory Auditors have issued a qualified opinion dated 30th May
2015 on the consolidated audited financial statements for the year
ended March 31, 2015 and the basis for qualified opinion and management
responses are as under:
IV. a) Interest on borrowings aggregating to Rs. 48535 Lakhs (including
Rs. 22872 Lakhs for the year) relating to the periods during project
have been stalled, which constitutes a departure from Accounting
Standard 16 (AS-16) on Borrowing Costs. Had the interest capitalized
during the period in which the projects were stalled been charged to the
Statement of Profit & Loss, the loss for the year and, the Deficit in
the Statement of Profit and Loss, will be higher by Rs. 48535 Lakhs and
Capital Work in Progress will be lower by Rs. 48535 Lakhs.
b) Preoperative expenses incurred in relation to the project
aggregating to Rs. 5475 Lakhs (including Rs. 448 Lakhs for the year)
relating to the periods during which the project has been stalled,
which constitutes a departure from Accounting Standard 10 (AS-10) on
Fixed Assets. Had such expenditure capitalized during the period in
which the project was stalled been charged to the Statement of Profit &
Loss, the loss for the year and the Deficit in the Statement of Profit
and Loss, will be higher by Rs. 5475 Lakhs and Capital Work in Progress
will be lower by Rs. 5475 Lakhs.
Please refer our submission to our responses in note I (a & b) above.
V. As at 31 March, 2015, the quantity, quality and realizable value of
inventory aggregating to Rs. 29369 Lakhs was not assessed and
determined. As per Accounting Standard 2 - Inventories these
inventories should be valued at the lower of cost and net realiz- able
value. In the absence of the net real- izable value, we are unable to
comment on the adjustments that may be required to the carrying value
of these inventories as at March 31, 2015.
Please refer our submission to our responses in note III above.
VI. Long term loans and advances include dues from subcontractors
aggregating to Rs 4034 Lakhs represent the amounts taken over from the
EPC contractors which are considered good and recoverable by the
management. In the absence of any confirmation / agreement from these
parties, we are unable to comment on the adjustments that may be
required on the carrying value of these advances.
We submit that, the dues are collectable /adjustable on resumption of
project work, and no provision is considered necessary.
VII. Trade payables include amounts payable to subcontractors
aggregating to Rs. 3141 Lakhs and retention monies aggregating to
Rs 661 Lakhs In the absence of details or confirmations from the
parties, we are unable to comment on the completeness of these
We submit that, the Management is of the opin- ion that the said
payables are complete and will be settled in the normal course of
business on resumption of the 2 X 210 MW project work and there will be
no additional liabilities on this account.
The Board has appointed M/s. Agrya Consulting Private Limited, (CIN:
U74900TN2010PTC078072) Chennai as the Internal Auditors of the Company
pursuant to Section 138 of Companies Act, 2013 and Rule No. 13 of The
Companies (Accounts of Companies) Rules, 2014 for the financial year
The Internal Auditors of the Company has a qualified team of Internal
Audit professionals, who shall be reporting directly to the Audit
Committee of the Company. The Internal Audit would ensure that strong
internal control mechanism is put in place in the Company as per the
recommendations and guidance of Audit Committee.
The Board of Directors had appointed M/s. JV Associates, Cost &
Management Accountants, Chennai (M.No. 6128) as the Cost Auditors of
the Company to audit the cost accounting records of the Company for the
financial year 2015-16.
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 has appointed M/s. Lakshmmi
Subramanian & Associates, Practising Company Secretaries, Chennai to
undertake the Secretarial Audit of the Company. The report of the
Secretarial Audit Report is annexed herewith as Annexure B
MANAGEMENT''S RESPONSE TO SECRETARIAL AUDITOR''S OBSERVATIONS
1. The Company is yet to appoint a woman director on its Board as per
section 149(1) of the Companies Act, 2013
The Company had taken necessary steps for inducting a woman director on
its Board pursuant to the provisions of Section 149 of the Companies
Act, 2013 and the same will be complied on or before June 30, 2015.
2. For the 3rd and 4th Quarter, there was a vacancy in the Board in
place of the Independent director which was not filled in during the
audit period as required under section 149(4) read with Schedule IV
and revised Clause 49 of the Listing Agreement entered with the Stock
As per the provisions of revised Clause 49(D)(4) of the Listing
Agreement any vacancy caused due to resignation or removal of an
Independent Director from the Board shall be replaced by a new
Independent Director at the earliest but not later than the immediate
next Board meeting or three months from the date of such vacancy,
whichever is later.
However the company had taken appropriate steps in inducting an
Independent Director on its Board including registration in the
Independent Directors Repository for finding a suitable candidate who
has a sound technical knowledge in the field of steel and power
3. The composition of the audit committee in the 3rd and 4th quarter
had fallen below the minimum threshold limit of independent directors
and total number of members. Further, there was a lack of quorum in
the audit committee meeting held in the 4th quarter of the audit
The Composition of the audit committee during the 3rd and 4th quarter
had fallen below the minimum threshold limit of independent
directors as per the revised clause 49 of the Listing Agreement due to
resignation of few independent directors on the board with
retrospective effect due to their other pre-occupations.
Further, the lack of quorum for the audit committee meeting held during
the 4th quarter was unexceptional due to the resig- nation of an
independent director on the board who formed part of the Audit
Committee as Member and the same was intimated to the stock exchanges
by way of outcome of Board Meeting.
4. Directors retiring by rotation under section 152 of the Companies
Act, 2013 in the 23rd Annual General Meeting of the Company held on
18th July 2014, as per Companies Act, 1956 and Independent directors
was appointed and under section 149 of the Companies Act 2013 on 30th
September 2014 in the extra-ordinary general meet- ing of the company.
The Independent Directors of the company who retired by rotation at the
23rd Annual General Meeting of the company held on July 18, 2014 are
those Independent Directors who are appointed under the erstwhile
Companies Act, 1956, Further it is to be noted that the Independent
Directors are not liable to retire by rotation only under the Companies
Subsequently the Company had appointed all its Independent Directors at
the Extraordi- nary General Meeting of the Company held on September
30, 2014 as per the provisions of Section 149 of the Companies Act,
5. The service of notice of annual general meeting together with the
annual report of the company for the financial year 2013- 14 was done
partly through courier and by book post.
The Company had served the notice of 23rd annual general meeting
together with the annual report of the company for the finan- cial year
2013-14 well within the stipulated time period under the Companies Act
2013 by way of electronic mode, the confirmation from the Registrar and
Share Transfer Agents is also obtained evidencing the same.
6. The Company is yet to ratify the limits for inter-corporate
investments, loans, guar- antees and securities as per section 186 of
the Companies Act, 2013 and the Rules made thereunder which is required
to be complied not within 1 year from the date of notification of the
provisions of the Companies Act, 2013.
The Company had proposed to ratify the limits for inter-corporate
investments, loans, guarantees and securities as per section 186
of the Companies Act, 2013 and the Rules made thereunder from the
shareholders by way of postal ballot which will be held during the
month of July 2015.
The following changes have occurred in the Board of Directors during
the financial year 2014-2015:
22.1 INDUCTIONS/ CHANGE IN DESIGNATION
Appointment of Shri. V. Subramanian as Nomi- nee Director of M/s. IFCI
Ltd on 18th July 2014 and Appointment of Shri. Biju George as Nominee
Director of M/s. IDBI Ltd on 6th September 2014;
Further on the recommendations of the nomination and remuneration
committee, the Board appointed Shri. Babu Srinivasan and Smt.
Soundharya Panchapakeran as additional Directors of the Company We seek
your support in conforming the appointment of Shri. Babu Srinivasan and
Smt. Soundharya Panchapakeran in the ensuing Annual General Meeting.
At the Extra-ordinary General Meeting held on 30th September 2014, the
members had appointed the existing Independent Director viz., Shri.
K.N. Prithviraj as Independent Director under the Companies Act, 2013
for a term of five years with effect from 30th September 2014.
Shri. Krishna Udupa, Director (Projects) has been redesignated as
Director (Non-Executive) of the Company with effect from 18th July
22.2 DECLARATION BY INDEPENDENT DIRECTORS
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 Clause 49 of the Listing Agreement.
Dr. B. Samal has resigned from the position of Independent Director
with effect from 25th September 2014; Shri. S.K. Gupta has resigned
from the position of Independent Director with effect from 14th
October, 2014, Shri. B.S. Patil has resigned from the position of
Independent Director with effect from 1st December 2014 and Shri. V.
Aranganathan has resigned from the position of Executive Director with
effect from 31st May 2014.
The Board had placed on record its appreciation for the outstanding
contributions made by Dr. B. Samal, Shri. S.K. Gupta, Shri. B.S. Patil
and Shri. V. Aranganathan during their tenure of office with the
Shri. G.R. Surana has resigned from the position of Executive Chairman
of the company with effect from 29th April 2015 due to personal
reasons. Shri. G.R. Surana is a co-founder of the Company and has
played a seminal role in shaping its destiny. The Board appreciates and
thanks him for his efforts in driving delivery and quality excellence
for the Company, The Board also places on record its gratitude for the
services rendered by Shri. G.R. Surana during his long association with
In accordance with the provisions of the Companies Act, 2013 and in
terms of the Memorandum & Articles of Association of the Company, At
the ensuing 24th Annual General Meeting, Shri. Dineshchand Surana,
Director and Shri. Biju George, Director of the Company are liable to
retire by rotation and being eligible offer them selves for
re-appointment. The Board recommends their re-appointment.
The Companies Act, 2013, provides for the appointment of independent
directors. Sub section (10) of Section 149 of the Companies Act, 2013
provides that independent directors shall hold office for a term of up
to five consecutive years on the board of a company; and shall be
eligible for re-appointment on passing a special resolution by the
shareholders of the Company. Accordingly all independent directors
except for Shri. Babu Srinivasan & Smt. Soundharya Panchapakeran who
were appointed as additional director of the Company & Smt.
Soundharya Panchapakeran were appointed by the shareholders at the
General Meeting as required under Section 149(10). Further, accord- ing
to sub section (11) of Section 149, no inde- pendent director shall be
eligible for appointment for more than two consecutive terms of five
years. Sub section (13) states that the provisions of retirement by
rotation as defined in Sub section (6) and (7) of Section 152 of the
Act shall not apply to such independent directors.
None of the independent directors will retire at the ensuing Annual
22.5 BOARD EVALUATION
Pursuant to the provisions of Clause 49 of the Listing Agreement, the
Board shall monitor and review the Board evaluation framework. The
Companies Act, 2013 states that a formal annual evaluation needs to be
made by the Board of its own performance and that of its committees and
individual directors. Schedule IV of the Companies Act, 2013 states
that the performance evaluation of independent directors shall be done
by the entire Board of Directors, excluding the director being
evaluated. The Board has carried out an annual performance evaluation
of its own performance, the directors individually as well as the
evaluation of the working of its Audit, Nomination & Remuneration and
Compliance Committees. The manner in which the evaluation has been
carried out has been explained in the Corporate Governance Report.
22.6 FAMILIARIZATION PROGRAMME / TRAINING OF INDEPENDENT DIRECTORS
Every new independent director of the Board attends an orientation
program. To familiarize the new inductees with the strategy, operations
and functions of our Company, the executive directors/senior managerial
personnel make presentations to the inductees about the Company''s
strategy, operations, product and service offerings, markets,
organization structure, finance, human resources, technology, quality,
facilities and risk management.
22.7 REMUNERATION POLICY
The Board has, on the recommendation of the Nomination & Remuneration
Committee framed a policy for selection and appointment of Directors,
Senior Management and their remuneration. The Remuneration Policy is
stated in the Corporate Governance Report. All remuneration paid to the
Directors, Key Managerial Personnel and senior management personnel are
as per the remuneration policy of the Company.
23. DIRECTORS'' RESPONSIBILITY STATE- MENT:
To the best of their knowledge and belief and according to the
information and explanations obtained by them, your Directors, make the
following statement in terms of Section 134 (3) (c) of the Companies
(a) in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper explanation
relating to material departures;
(b) the directors had selected such accounting policies and applied
them consistently and made judgments and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the company at the end of the financial year and of the profit and
loss of the company for that period;
(c) the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the company and
for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern
(e) the directors, had laid down internal financial controls to be
followed by the company and that such internal financial controls are
adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with
the provisions of all applicable laws and that such systems were
adequate and operating effectively.
24. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION
A statement containing the particulars relating to conservation of
energy, research and develop- ment and technology absorption as
required under Section 134 (3) (m) of the Companies Act, 2013 and Rule
8 (3) (A), (3) (B) and 3 (A) (C) of The Companies (Accounts) Rules,
2014 is annexed to this report as Annexure C
25. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186
OF COMPANIES ACT, 2013
Details of Loan, Guarantees and Investments covered under the
provisions of Section 186 of the Companies Act, 2013 are given in the
notes to financial statements refer note 27B, 30B and 30C of notes to
26. PARTICULARS OF EMPLOYEES:
The information required pursuant to Section 197 of the Companies Act
2013 read with Rule 5 of The Companies (Appointment and Remuneration of
Managerial Personnel) Rules 2014 in respect of the employees of the
company, will be provided upon request. In terms of Section 136 of the
Act, the Report and Accounts are being sent to the Members and others
entitled thereto, excluding the information on employees''
particulars which is available for inspection by the Members at the
Registered Office of the Company during business hours on working days
of the Company up to the date of the ensuing Annual General Meeting. If
any Member is interested in obtaining a copy thereof, such Member may
write to the Company Secretary in this regard.
Your Company has not accepted any deposits from the public during the
year under review.
During the year five Board Meetings and four Audit Committee Meetings
were convened and held. The details of which are given in the Corporate
Governance Report. The intervening gap between the meetings was within
the period prescribed under the Companies Act, 2013.
Currently, the Board of Directors of the Company pursuant to the
mandatory provisions of Companies Act, 2013 has the following
a) Audit Committee
b) Nomination & Remuneration Committee
c) Stakeholders Relationship Committee
d) Corporate Social Responsibility & Governance Committee
e) Risk Management Committee
A detailed note on the Board and its committees along with the
composition of the committees and compliances is provided under the
Corporate Governance Report section in this Annual Report.
30. AUDIT COMMITTEE
Currently, the Company has an independent and qualified Audit Committee
as per the provisions of Section 177 (8) of the Companies Act, 2013 and
Rule 7 of The Companies (Meetings of Board and its Powers) Rules, 2014
and Clause 49 of the Listing Agreement, the following is the current
composition of Audit Committee:
Name of the Director Category Status
Shri. Babu Srinivasan Non-Executive
Shri. K.N. Prithviraj Non-Executive
Shri. Krishna Udupa Non-Executive
The Board has accepted all the recommendations provided by the Audit
31. VIGIL MECHANISM/WHISTLE BLOWER POLICY
The Company has a vigil mechanism/whistle blower Policy to deal with
instance of fraud and misman- agement, if any. The details of the vigil
mechanism Policy is explained in the Corporate Governance Report and
also posted on the website of the Company.
32. PARTICULARS OF CONTRACTS OR ARRAGEMENTS WITH RELATED PARTIES
REFERRED TO IN SECTION 188(1) OF THE COMPANIES ACT, 2013:
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 con- flict with the interest of the Company at large. All
Related Party Transactions are placed before the Audit Committee as
also the Board for approval. The Company is in the process of
developing a Related Party Transactions Manual, Standard Operating
Procedures for purpose of identifica- tion and monitoring of such
transactions. The policy on Related Party Transactions as approved
by the Board is uploaded on the Company''s website at the Weblink,
http://www. suranaind. com/related-party-transaction-policy. None of
the Directors has any pecuniary relationships or trans- actions
vis-a-vis the Company. Particulars of Contracts or arrangement with
related parties referred to in Section 188(1) of the Companies Act,
2013, in the prescribed Form AOC-2, is appended as Annexure D to
the Board''s Report.
33. ENHANCING SHAREHOLDER VALUE
Your Company believes that its Members are among its most important
stakeholders. Accordingly your company''s operations are committed to
the pursuit of achieving high levels of operating performance and cost
competitiveness, consolidating and building for growth, enhancing the
productive asset and resource base and nurturing overall corporate
reputation. Your company is also committed to creating value for its
other stakeholders by ensuring its corporate actions positively impact
the socio-economic and environmental dimensions and contribute to
sustainable growth and development.
34. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form
MGT 9 is annexed herewith as Annexure E.
35. GREEN INITIATIVES
During fiscal 2014-15, we started a sustainability initiative with the
aim of going green and minimizing our impact on the environment. This
year, we are publishing only the statutory disclosures in the print
version of the Annual Report. Additional information is available on
our website, www.suranaind.com.
Electronic copies of the Annual Report 2014-15 and Notice of the 24th
Annual General Meeting are sent to all the members whose email
addresses are registered with the Company/ Depository Participant(s).
For members who have not registered their email addresses, physical
copies of the Annual Report 2015 and the Notice of 24th Annual General
Meeting are sent in the permitted mode. Members requiring physical
copies can send a request to the Company.
The Board of Directors of the Company wishes to express their deep
sense of appreciation and offer their sincere thanks to all the
Shareholders of the Company for their unstinted support to the Company.
The Board also wishes to express their sincere thanks to all the
esteemed Customers for their support to the Company''s products.
The Board would also like to place on record their deep sense of
gratitude to the various Central and State Government Departments,
Organizations and Agencies for the continued help and co-operation
extended by them.
The Directors also gratefully acknowledge and thank all financial
institutions and banks for their timely support in restructuring the
Company''s debt under the CDR mechanism failing which the Company would
have succumbed to the recession faced by the Steel Industry.
In the end, the Board would like to place on record their deep sense of
appreciation to all the executives, officers, employees, staff members,
and workers at the factories.
For and on behalf of the Board of Directors
Babu Srinivasan Dineshchand Surana
Date : June 29, 2015 Chairman Managing Director
Place : Chennai (DIN: 06608264) (DIN: 00007032)