DIRECTORS' REPORT Dear Members, The Directors take pleasure in presenting the Thirty-third Annual Report on the business and operations of the company and its financial results for the year ended 31st March, 2016. DIVIDEND The Board has recommended the dividend of Rs 10 per share (i.e.100%) on 1,54,00,000 equity shares of Rs.10 each for the financial year ended 31st March, 2016, subject to approval of the shareholders at the ensuing Annual General Meeting. The total outgo on account of dividend (ex-taxes) will be Rs. 1,540 lakhs. TRANSFER TO RESERVE We propose to transfer Rs. 1,120 lakhs to the General Reserve. OPERATIONS Sponge Iron During the year Kiln-1, which was in operating since 1986, was completely renovated within a shutdown period of 115 days. During this period, customers requirement was supported by contract manufacturing of about 22,000 MT of sponge iron in nearby plants. During the year, all the three kilns produced 3,60,446 MT of sponge iron compared to 3,65,324 MT in the previous year. The daily production rate at its kilns stood at 1248 TPD as against 1175 TPD in the previous year. The company sourced almost two-third of its iron ore requirement from Tata Steel. It sourced nearly 95% of its coal requirement through imports. The sale of sponge iron during the year was 3,87,793 MT as compared to 3,62,912 MT in the previous year, an increase of 6.8%. Power During the year, the total generation of power was 163 million kwh and surplus power of 113 million kwh was exported, compared with generation of 173 million kwh and export of 121 million kwh in the previous year. The decrease in the generation and sale of power was consequential to Kiln-1 renovation outage. MARKET The market for sponge iron remained subdued during the year due to the poor demand of steel and the increase in steel imports. The improved supply of iron ore and restarting of shut down sponge iron plants caused an increased supply of sponge iron in the market resulting into 32% drop in price of sponge iron. The sluggish growth of real estate and infrastructure sector reduced the growth rate of demand of long product steel to 2-3%. The drop in raw material cost could not offset the drop in Net Realisation of sponge iron thereby severally impacting the profit. FINANCE Even though, higher volumes of sponge iron were sold this year, the net revenue from operations was lower at Rs. 574 crs compared to Rs. 790 crs. in the previous year primarily due to a substantial drop in price of sponge iron. Consequently, the Profit After Tax was lower at Rs 30.83 crs., compared to Rs. 91.89 crs. in the previous year.The Company continued to be debt free during the year. UPDATE ON RADHIKAPUR COAL BLOCK The Radhikapur (East) Coal Block stands de-allocated and re-allotment has not happened yet. The Ministry of Coal ("MoC") vide its letter dated December 28, 2015, has reiterated its decision for encashment of the Bank Guarantee of 32.50 cr. The Bank Guarantee has since expired. The Company has filed a writ petition before Hon'ble High Court of Delhi challenging the decision of the "MoC". Pending finalisation of the matter the Bank Guarantee amount continues to be disclosed as Contingent Liability as at the end of the year. The investments made by the Company on the coal block developments amounting to Rs. 180 cr has been shown as receivable in the Financial Statements for the year ended 31st March, 2016, pending re-allotment and receipt of the amount from the subsequent allotee. SUBSIDIARY COMPANY Your Company has one wholly owned subsidiary i.e. "TSIL Energy Limited". There is no associate or joint venture company as defined under the Companies Act, 2013. Pursuant to provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of the financial statements of TSIL Energy Limited in Form AOC-1 is annexed as (Annexure "A"). Pursuant to provisions of Section 136 of the Companies Act, 2013, the financial statements of the Company, Consolidated financial statements along with relevant documents and separate audited accounts of TSIL Energy Limited are available on the website of the Company. INTERNAL PROCESS & FINANCIAL CONTROL Improvement in the business processes and systems across all functions is a continuous process, in line with the Tata Business Excellence Model that the Company has adopted. The company continues to maintain Integrated Management System (IMS) comprising of Quality Management System (ISO: 9001). Environment Management System (ISO: 14001) and Occupational Health, Safety & Accountability Management System (ISO: 18001). The Company has an internal control system, commensurate with the size, scale and complexity of its operations. The scope of authority of the Internal Audit function is defined in the Internal Audit Charter. The Company's internal controls are tested for adequacy and effectiveness by the Internal Auditor and StatutoryAuditors on a regular basis. LISTING FEES TheAnnual Listing Fee for the year 2015-16 had been paid to those Stock Exchanges where the company's shares are listed. CORPORATE SOCIAL RESPONSIBILITY (CSR) During the year the Company has spent Rs. 277.49 Lakh (previous year Rs. 259.03 Lakhs) on CSR activities. An Annual Report on CSR activities is annexed herewith as Annexure "B"in the prescribed format. VIGIL MECHANISM/ WHISTLE BLOWER POLICY The Company has a vigil mechanism by way of internal reviews and a third party helpline, escalating system of ethical concerns etc. The Company also has a "Whistle Blower Policy", the copy of which is available on the website of the Company, namely www.tatasponge.com. PREVENTION OF SEXUAL HARASSMENT AT WORK PLACES The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. Further, the Company has Internal Complaint Committees for various locations of the Company in compliance with the above mentioned Act and Rules. For the financial year 2015-16, no case of sexual harassment was pending at the beginning, no case was received during the year nor any case remained pending at the close of the year. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO As required under Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8 of the Companies (Accounts) Rules, 2014, particulars regarding conservation of energy, technology absorption, foreign exchange earnings and outgo are annexed to this report as Annexure "C". SAFETY & ENVIRONMENT The Company is committed to providing a safe and healthy working environment and achieving an injury and illness free work place. In recognition of Company's best practices in Safety, Health and Environment, the Company received the prestigious "Kalinga Safety" award during the year. Over the years, the Company has been setting benchmarks in its industry vertical in reducing its carbon footprint through the 3R's, producing power from waste heat in its twin captive power plants, keeping emissions well under prescribed norms and becoming a Zeroaffluint Discharge Company. PARTICULARS OF EMPLOYEES The particulars of employees are given in Annexure "D"to this Report as required under Section 197(12) of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. DIRECTOR(S) In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association, Mr. R. Ranganath, Director, retires by rotation at the forthcoming Annual General Meeting and, being eligible offers himself for re-appointment. All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16 (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the year under review, there is no change in the Board of Directors of the Company. The Board at its meeting held on 11th March, 2016, has reappointed Mr. Digambar Pandurang Deshpande as Managing Director of the Company for the period from 1st April, 2016 to 31st October, 2016. Necessary resolutions together with the explanatory statement have been included in the Notice of Thirty-third Annual General Meeting as the above reappointment is subject to the approval of the shareholders. DIRECTORS' RESPONSIBILITY STATEMENT Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the Internal, Statutory, Cost and Secretarial auditors and external consultant(s) including audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by the management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2015-16. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that: (i) in the preparation of annual financial statements, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; (ii) the directors have selected such accounting policies and applied them consistently and made judgements 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 2015- 16 and of the profit of the company for that period; (iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the directors have prepared the annual accounts on a going concern basis; (v) The directors had laid down proper internal financial controls and such internal financial controls are adequate and were operating effectively (vi) 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; BOARD EVALUATION The Board has carried out an annual performance evaluation of its own performance and that of its Committees and individual directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. INDEPENDENT DIRECTORS' MEETING: During the year under review, the Independent Directors met on 20th January, 2016, inter alia, to: a) Review the performance of Non Independent Directors, and the Board of Directors as a whole; b) Review the performance of the Chairman of the Company, taking into account the views of the Executive and Non-Executive Directors. c) Assess the quality, content and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform its duties. All the Independent Directors were present at this meeting. The observations made by the Independent Directors have been adopted and put into force. APPOINTMENTAND REMUNERATION POLICY FOR DIRECTORS, KEY MANAGERIAL PERSONNELAND OTHER EMPLOYEES The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management Personnel and Key Managerial Personnel ("KMP") and their remuneration. This Policy is described in the Corporate Governance Report. KEY MANAGERIAL PERSONNEL The following are the Key Managerial Personnel of the Company: 1. Mr. D.P. Deshpande - Managing Director 2. Mr. Sanjay Kumar Pattnaik - Executive Director 3. Mr. S.K. Mishra - Chief Financial Officer 4. Mr. Sanjay Kasture - Company Secretary During the year, Mr. S.S. Dhanjal, superannuated as Company Secretary of the Company w.e.f December 31, 2015. The Board at its meeting held on 22nd December, 2015 has appointed Mr. Sanjay Kasture as Company Secretary with effect from January 01, 2016. BOARD MEETINGS / BOARD COMMITTEE MEETINGS A calendar of meetings is prepared and circulated in advance to the Directors. During the year seven (7) Board meetings and five (5) Audit Committee meetings were held details of which are given in the Corporate Governance Report. The gap between the meetings was within the period prescribed under the Companies Act, 2013 / SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All recommendations made by the Audit Committee were accepted by the Board during FY 2015-16. All other Committees also have met during the year and have helped the Board to provide direction to the management. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION 188(1) OF COMPANIES ACT, 2013 During the year under review, purchase of Iron ore from Tata Steel Limited, promoter of the Company, constitutes majority of the transactions entered with related parties. The transactions, being material, were approved by the shareholders during the year. All the transactions with related parties were on an arm's length basis and were in the ordinary course of business. All related party transactions are placed before the Audit Committee as also the Board for approval. The particulars of material contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, is given in prescribed FormAOC - 2 as Annexure "E". The policy on Related Party Transactions as approved by the Board is displayed on the website of the Company, viz, www.tatasponge.com. Members' attention is also drawn on Notes to Financial Statements which sets out details of Related Party transactions. MANAGEMENT DISCUSSION & ANALYSIS The Management's Discussion and Analysis Report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, form part of this Annual Report. CORPORATE GOVERNANCE REPORT As per Regulation 34 (3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section on corporate governance, together with a certificate from the Company's Secretarial Auditors confirming compliance forms part of this Report. AUDITORS (a) STATUTORY AUDITORS Messrs Deloitte Haskins & Sells, Chartered Accountants, (Registration Number : 302009E) who are Statutory Auditors of the Company hold office up to the forthcoming Annual General Meeting and are recommended for re-appointment for conducting audit of financial statements of the Company for financial year 2016-17. As required under the provisions of Section 139 of the Companies Act, 2013, the Company has obtained written confirmation from Messrs Deloitte Haskins & Sells that their appointment, if made, would be in conformity with the limits specified in the said Section. There is no Audit qualification for the year under review. (b) COST AUDITOR Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your Company has been carrying out cost audit every year. The Board of Directors, on the recommendation of Audit Committee, has appointed Messrs Shome & Banerjee, Cost Accountants, (Firm Registration Number 00001) as Cost Auditor to audit the cost statements of the Company for the financial year 2016-17. As required under the Companies Act, 2013, a resolution seeking member's approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting for their ratification. (C) SECRETARIAL AUDITOR Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014, the Company has appointed M/s S. M. Gupta & Company, a firm of Company Secretaries in Practice, to undertake the Secretarial Audit of the Company for the financial year 2016-17. The Secretarial Audit Report for FY 2015-16, is annexed herewith as Annexure "F". COMMENTS ON AUDITORS'/SECRETARIAL AUDIT REPORT There are no qualifications, reservations or adverse remarks or disclaimers made by Deloitte Haskins & Sells, Statutory Auditors, in their report. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review. The Company paid a fine of Rs. 65,265/- to BSE Limited on account of delayed filing of Corporate Governance Report for the quarter ended 30th September, 2015, which is reported in the Secretarial Audit report for FY 2015-16. EXTRACT OF ANNUAL RETURN The extract of the Annual Return as provided under Section 92(3) of the CompaniesAct, 2013 in the prescribed Form MGT - 9 is annexed herewith as Annexure "G". DISCLOSURES WITH RESPECT TO EMPLOYEES STOCK OPTION SCHEME The Company does not have any Employees Stock Option Scheme. RISK MANAGEMENT The Company has a Risk Management framework in place to identify, assess, monitor and mitigate various risks to the business. This framework seeks to minimize adverse impact on the business objectives and enhance the Company's competitive advantage. The framework also defines the risk management approach across the enterprise at various levels. Risk Management forms an integral part of the Company's planning process. A Risk Management Committee of the Board reviews the process of risk management. The details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board's Report. SIGNIFICANTAND MATERIAL ORDERS PASSED BY THE REGULATORY BODIES / COURTS: During the financial year under review, no significant or material orders passed by the Regulatory / Statutory Authorities / Courts or the Courts which would impact the going concern status of the Company and its future operations. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY Details of Loans, Guarantees and Investments are given in the notes to Financial Statements. DEPOSITS During the year, the Company has not accepted any "Deposits", as defined under CompaniesAct, 2013. ACKNOWLEDGEMENT The Board takes this opportunity to sincerely thank all its stakeholders namely, shareholders, customers, suppliers/contractors, bankers, employees, Government agencies, local authorities, and the immediate society for their un-stinted support and co-operation during the year. On behalf of the Board of Directors (A.M. Misra) Chairman Kolkata 25th April, 2016 |