VBC FERRO ALLOYS LIMITED

DIRECTORS’ REPORT

Dear Members,

Your Directors have pleasure in presenting the 34th Annual Report of the Company together with the Audited Statements of Accounts for the Financial Year ended March 31, 2016.

FINANCIAL RESULTS:

Industry Overview:

The sharp decline in oil and commodity prices has impacted the economy of many commodity producing countries. As a result, the global steel industry has been impacted by significant oversupply in certain geographies, declining demand, falling spreads between steel prices and raw material prices and volatile currency movements. This situation has driven global steel prices lower and impacted profitability of steel companies. As a result of this, Ferro Alloys Industry could not sell its products at remunerative prices.

Performance of your Company:

Keeping in view of the above situation and to avoid further erosion of net worth, your Company suspended its manufacturing operations during the Financial Year 2015-16 also. As a result, your Company incurred a net loss of Rs.525.52 Lakhs during the Financial Year 2015-16 as against net loss of Rs.717.26 Lakhs in previous financial year.

Prospects:

The medium to long-term economic outlook in India continues to look promising and it is heartening to see the Government's drive to continue to liberalize the economy and focus on social sector spending in building both hard and soft infrastructure. Steel is the most crucial material in industrial development and infrastructure construction, and is, therefore, of strategic importance for national transformation. The progress in domestic steel industry is a pre-requisite for India to succeed in its industrial vision for 'Make-in India'. This presents good potential growth of Ferro Alloys industry in the Country as it solely depends on steel industry. Telangana State Government announced an incentive for the Ferro Alloys by way of reducing power tariff of Rs.1.50 for KWh and Ferro Alloy Industry can run its industry profitability subject to other market driven environment.




5
VBC FERRO ALLOYS LIMITED

Projects under Implementation- Thermal Power Plant -120 MW (2x60MW):

You are aware that your Company is setting up 120MW (2x60MW) Coal Based Captive Power Plant at Bodepalli (V&GP), Sirpur Kagaznagar Mandal, Adilabad Dt. The estimated project cost is Rs. 696 Cr. The Company has obtained most of the clearances such as Environmental Clearance (EC), Consent for Establishment (CFE), NoC from Forest Department,
Permission for water drawl and Airport Authority. Your Company has decided to setup the power project on priority basis through VBC Power Company Limited, a Special Purpose Vehicle Company and initiated the steps to hive off the power project division. The members and unsecured creditors have accorded their approval for scheme of arrangement between VBC Ferro Alloys Limited and VBC Power Company Limited at their meetings held on 5th December 2016.

The matter is pending before Hon'ble High Court of Hyderabad Judicature for the State of Telangana and Andhra Pradesh.

Dividend & Reserves:

As the Company incurred losses during the year under review, the Directors could not recommend dividend for the

Financial Year 2015-16. Due to inadequate profits, no amount has been transferred to Reserves.

Share Capital:

The Paid up Share Capital as on 31st March, 2016 was Rs.4.39 Cr. During the year under review, the company has not issued Equity Shares/ shares with differential voting rights/ granted stock options/ sweat equity.

Deposits:

Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 and as such, no amount of principal and interest was outstanding as on 31st March, 2016.

Details of Subsidiary/Joint Ventures/Associate Companies:

Information pursuant to sub-section (3) of section 129 of the Act, i.e., the statement containing the salient features of the financial statement of a company's subsidiary or subsidiaries, associate company or companies and joint venture or ventures is not applicable during the year, as there are no Subsidiary/Joint Venture Companies.

However, your Company has promoted the following two power companies by way of Equity Investments:

Investment In KGPL 445 Mw Gas Based Power Plant:

Konaseema Gas Power Limited (KGPL), in which your Company has invested in equity, could not operate its plant during the financial year under review as there is no natural gas supply. Information pursuant to sub-section (3) of section 129 of the Act, i.e., the statement containing the salient features of the financial statement of KGPL, Associate Company is annexed as Annexure-I

Investment In OPCL 20 MW Dam Based Hydel Power Plant:

20 MW Dam Based Hydro Electric Power Project by Orissa Power Consortium Limited (OPCL), in which your Company has invested in equity has generated 65.24 million units during the financial year 2015-16 and the said generation is below the designed energy level due to failure of monsoon and in turn low inflow to the Plant from upstream Rengali HEPP. Your Company is holding Equity Shares Capital of about 13.43% in OPCL.

Presentation of Financial Statements:

The Financial Statements for the year ended 31st March, 2016 are prepared in due compliance of the Schedule III of the Companies Act, 2013.

Corporate Social Responsibility Policy:

Section 135 of the Companies Act, 2013 relating to Corporate Social Responsibility is not applicable and hence the Company has not adopted any Corporate Social Responsibility Policy.





6
VBC FERRO ALLOYS LIMITED

Cash Flow Statement:

A Cash Flow Statement for the year 2015-16 is annexed to the Statement of Accounts.

Board of Directors and Key Managerial Personnel:

Independent Director:

As per the provisions of the Section 149(4) of the Companies Act, 2013 and rules made there under, every Listed Company shall have at least one Women Director. Accordingly, Members have appointed Dr. B.Kinnera Murthy as an Independent Women Director for a period of five years w.e.f 30th September 2016.

Reappointment of Directors: There are no Directors liable to retaire at every Annual General Meeting on theBoard of Directors.

None of the directors of the company is disqualified under the provisions of the Act or under the Listing Agreement with the Stock Exchanges.

Number of Meetings of Board:

During the year, four meetings of the Board of Directors were held, the details of which forms part of the report on Corporate Governance.

Annual Evaluation of the Board, Committees and Individual Directors:

Pursuant to the provisions of the Companies Act, 2013 and clause 49 of the Listing Agreement, 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 Committees as per the evaluation procedure approved by the Board.

Policy on Directors Appointment and Remuneration Policy:

The Board, on recommendation of Nomination & Remuneration Committee, has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Policy is also available on the website of the Company i.e., www.vbcindia.co.in

Auditors:

At the Annual General Meeting held on 30th September 2014, M/s Brahmayya & Co., Chartered Accountants, were appointed as statutory Auditors of the Company to hold office till the conclusion of the Annual General Meeting to be held in the calendar year 2017. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the Auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of

M/s Brahmayya & Co., Chartered Accountants, as Statutory Auditors for the Financial Year 2016-17 of the Company, is placed for ratification of shareholders. In this regard, the Company has received a certificate from the Auditors to the effect that if they are appointed, it would be in accordance with the provision of the Section 141 of the Companies
Act, 2013.

Auditors' Report:

The Auditors' Report contained a qualification regarding non-provision of Fuel Surcharge Adjustment and deemed energy charges. As advised by the Legal Counsel, your Company has not made any provision for Fuel Surcharge Adjustment
(FSA) charges and deemed energy charges levied by TSSPDCL due to the cases pending before various Forums/

Courts.Your Directors are of the view that there are bright chances of winning the cases.

The Auditors' Report contained a further qualification for maintenance of books under going concern basis. It is reported that the Company initiated effective steps to meet the power requirements of the Company by setting up 120 MW Coal based power plant at Bodepalli V&GP, Sirpur Kagaznagar Mandal, Adilabad District, Telangana State through VBC

Power Company Limited by transferring its power division by way of demerger. Accordingly, the books of accounts of the Company are maintained under "Going concern Concept" as Board is confident of construction of Captive Power

Plant starts on completion of demerger activities. Your Directors confident that natural gas supply will be improved in KG basin shortly, inturn Konaseema Gas Power Ltd. (KGPL) will resume it operations. Hence diminution in KGPL networth is in temporary nature.

Notes to Accounts and Auditors remarks in their report are self-explanatory and do not call for any further comments.

7
VBC FERRO ALLOYS LIMITED

Cost Audit Report:

The Company discontinued the Cost Audit as there are no manufacturing operations during the Financial Year 2015-16 and consequently the Company has not appointed Cost Auditors for the Financial Year 2015-16.

Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company had appointed M.Nagakishore,

Practicing Company Secretary to conduct the Secretarial Audit and give a Secretarial Audit Report for the Financial Year 2015-16 to be annexed to the Report of Board of Directors.

Secretarial Audit Report received from M.Nagakishore, Practicing Company Secretary in the prescribed Form MR-3 is annexed to this Report (Annexure-II). It is replied to the observations of Secretarial Auditors that Company will file certain E-forms shortly and Company is in the process of appointment of Company Secretary. The Company could not pay Income Tax and other dues due to insufficient cashflow. Apart from these, the Report does not contain any qualification, reservation or adverse remarks.

Internal Audit & Controls:

The Company appointed M/s K.S. Rao & Co., Chartered Accountants, Hyderabad, as its Internal Auditors. Their scope of work includes review of Records, Ledgers, voucher checking and the internal controls applied and practiced by the Company to ensure the Assets are safeguarded and payments are made only for the benefits received and also review of operational expenditure, effectiveness of internal control procedures and systems, and assessing the internal control strengths in all areas.

The internal control procedures and systems are adequate commensurating with the nature and size of the operations of the Company.

Internal Auditors findings are discussed and suitable corrective actions are taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations.

Particulars of Loans, Guarantees or Investments under Section 186:

The particulars of loans, guarantees and investments have been disclosed in the Financial Statements.

Extract of Annual Return (MGT-9):

Pursuant to section 92(3) of the Companies Act, 2013 read with rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in form MGT-9 is provided as Annexure- III.

Particulars of Employees:

The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

(i)the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;

Our Non-executive Directors draw remuneration only by way of sitting fee. The details of the same are provided in the Corporate Governance Report which forms Annexure to this report. Hence, the ratio of remuneration of each Non-executive Director to the median remuneration could not be given.






8
VBC FERRO ALLOYS LIMITED

(ii) the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company

(v) the explanation on the relationship between average increase in remuneration and company performance;

There is no increase of the salary of the employees during the year under review.

comparison of the remuneration of the Key Managerial Personnel against the performance of the company;

The Remuneration to Key Managerial Personnel is below the norms being practiced in Comparable Industries for such experienced persons.

average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: There is no increase of salaries to the employees.

the key parameters for any variable component of remuneration availed by the Directors: There is no variable component of remuneration availed by Directors

the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year : Not Applicable as Company paid only sitting fees to Non-executive Directors.

Affirmation that the remuneration is as per the remuneration policy of the company.

The Company affirms remuneration is as per the remuneration policy of the Company.

None of the employees is drawing Rs. 8,500,000/- and above per month or Rs.1,02,00,000/- and above in aggregate per annum, the limits prescribed under Section 197(12) of the Companies Act, 2013 read with rule 5(2) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Management Discussion & Analysis

Pursuant to clause 49 of the Listing Agreement with Stock Exchange, a Report on Management Discussion & Analysis is enclosed as Annexure -IV

Corporate Governance:

Pursuant to clause 49 of the Listing Agreement with Stock Exchange, a Report on Corporate together with the Auditors Certificate regarding compliance of the conditions of Corporate Governance and Management Discussion and Analysis Report forms part of this Report.

Particulars of Contracts or Arrangements with Related Parties:

Your Company has formulated a policy on related party transactions which has been placed on the website of the company i.e. www.vbcindia.co.in. There are no related party transactions except mentioned in the Financial Statements.

Accordingly, the details of Related Party Transactions are annexed in Form AOC-2 is not applicable.

Declaration by Independent Director(s):

All the Independent Directors have submitted declarations to the Company to the effect that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013.

9
VBC FERRO ALLOYS LIMITED

DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM:

The Audit Committee consists of the following members as of date:

employees to report genuine concerns has been established. The Company empowered the victimized Employees or

Director to approach directly the Chairman of the Audit Committee for a solution to the issue so that the victimized

Employee/Director is rescued. The said policy is available on the website of the Company www.vbcindia.co.in.

Risk Management Policy:

Risk Management Policy has been approved by the Board of Directors and the company is taking steps to mitigate and minimize various Business risks which have impact on the operations of the company.

Material Changes and Commitments:

No material changes occurred subsequent to the close of the financial year of the Company to which the balance sheet relates and the date of this report which affecting Financial position of the Company as on 31.03.2016.

Material Orders, if any, Passed by the Regulators, Courts Etc.:

There are no orders passed by Regulators/Courts/Tribunals which have impact on the going concern status and Company's operations in future.

Prevention of Sexual Harassment of Women at Work Place:

In order to prevent sexual harassment of women at work place as per provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company adopted a policy for prevention of Sexual Harassment of Women at workplace and has set up Committee for implementation of said policy. During the year under review, there were no women employees employed by the Company.

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

The details of conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo are as follows:

Conservation of Energy

The information in accordance with the provision of Section 134 of the Companies Act, 2013, read with the Companies

(Disclosure of Particulars in the Report of Board of Directors) Rules 2014, regarding conservation of Energy is not applicable as there are no manufacturing operations during the year under review.

Technology Absorption

No expenditure is incurred by the Company attributable to Technology absorption during the year under review.

Foreign exchange earnings and Outgo

During the year, there are no foreign exchange inflows/earnings or outflows/investments.

Expenditure on Research and Development

No expenditure is incurred by the Company attributable to Expenditure on Research and Development during the year under review.




10
VBC FERRO ALLOYS LIMITED

Human Resources:

The Cost of production of Ferro Silicon has exceeded the market price due to steep increase of power tariff. Accordingly, Company has closed down its production unit at Rudraram Village, Medak District. To reduce the fixed cost burden, your Company has entered into a cordial settlement with the worker's union for Retrenchment under the Industrial Disputes Act on 30th June, 2014. Your Directors and Management express their appreciation for the commitment and devotion shown by the employees.

Directors' Responsibility Statement:

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, the best of their knowledge and ability confirm that:

in the preparation of the annual accounts for the year ended 31st March 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures;

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 as at
31st March 2016 and of the profit and loss of the company for the year ended on that date;

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;

the Directors have prepared the annual accounts on a going concern basis;

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; and

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.

Acknowledgements

Your Directors thank the Government of India and Government of Telangana for their support. They also place on record their appreciation for the help and encouragement received from Bank of India, and other Financial Institutions.

Your Directors sincerely thank Customers, Vendors and Members for their sustained support and co-operation.

11
VBC FERRO ALLOYS LIMITED

Form AOC-I Annexure - I(Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules, 2014)

Statement containing salient features of the financial statement of subsidiaries/associate companies/joint ventures

Part "A": Subsidiaries:NA

(Information in respect of each subsidiary to be presented with amounts in Rs )

Notes: The following information shall be furnished at the end of the statement:

Names of subsidiaries which are yet to commence operations

Names of subsidiaries which have been liquidated or sold during the year.

Part "B": Associates and Joint Ventures

Statement pursuant to Section 129 (3) of the Companies Act, 2013 related to Associate Companies and JointVentures

Names of associates or joint ventures which are yet to commence operations - None.

Names of associates or joint ventures which have been liquidated or sold during the year - None.

FOR THE FINANCIAL YEAR ENDED 31st MARCH, 2016

[Pursuant to section 204(1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014]


To,

The Members,

VBC Ferro Alloys Limited

I have conducted the secretarial audit of the compliance of applicable statutory provisions andthe adherence to good corporate practices by M/s.VBC Ferro AlloysLimited (hereinafter called thecompany). Secretarial Audit was conducted in a manner that provided me a reasonable basis forevaluating the corporate conducts/ statutory compliances and expressing my opinion thereon.

Based on my verification of the M/s.VBC Ferro Alloys Limited books,papers, minute books, forms and returns filed and other records maintained by the company and alsothe information provided by the Company, its officers, agents and authorized representatives duringthe conduct of secretarial audit, I hereby report that in my opinion, the company has, duringthe audit period covering the financial year ended on 31st March, 2016 complied with the statutoryprovisions listed hereunder and also that the Company has proper Board-processes and compliancemechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

I have examined the books, papers, minute books, forms and returns filed and other recordsmaintained by M/s. VBC Ferro Alloys Limited (“the Company”) alisted Public Companyfor the financial year ended on 31st March, 2016according tothe provisions of:

The Companies Act, 2013 (the Act) and the rules made thereunder;

The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made thereunder;

The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;

Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to theextent of Foreign Direct Investment, Overseas Direct Investment and External CommercialBorrowings;

The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’)-

The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;

The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;

13
VBC FERRO ALLOYS LIMITED

The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;

The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and

The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;

Other laws applicable to the company as provided by the management as mentioned below:

Employees State Insurance Act,1948 and Employees’ State Insurance (General) Regulations, 1950;

Employees Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees’ Provident Funds Scheme, 1952;

Payment of Bonus Act,1965 and the Payment of Bonus Rules, 1965; Employment Exchanges(Compulsory Notification of Vacancies )Act,1959
Contract Labour (Regulation and Abolition) Act,1970 and the Contract Labour (Regulation and Abolition) Central Rules,1971;

Factories Act, 1948 and the rules made thereunder; A.P.Shops and Establishment Act, 1988;
Water (Prevention and Control of Pollution) Act, 1974 Air (Prevention and Control of Pollution) Act, 1981
Environment Protection Act, 1986 Public Liability Insurance Act,1991 Indian Boilers Act,1923

Explosives Act,1884

I have also examined compliance with the applicable clauses of the following:

Secretarial Standards issued by The Institute of Company Secretaries of India.

Listing Agreement entered into by the company with Stock Exchange(s), if any / SEBI (LODR) Regulations, 2015

During the period under review the Company has complied with the provisions of the Act, Rules,Regulations, Guidelines, Standards, etc. mentioned above except to the extent as mentioned below:

The Company has not appointed Company Secretary.

The Company is due and payable in respect of Income Tax, Sales Tax, wealth tax, Service Tax, duty of customs and excise value added tax, EPF, ESI or cess which are arrears as at 31st March, 2016.

The Company is defaulted in filing of various forms with Ministry of Corporate Affairs.





14
VBC FERRO ALLOYS LIMITED


I further report that

The Board of Directors of the Company is duly constituted with proper balance of ExecutiveDirectors, Non-Executive Directors and Independent Directors. The changes in the composition ofthe Board of Directors that took place during the period under review were carried out in compliancewith the provisions of the Act.


Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed noteson agenda were sent at least seven days in advance, and a system exists for seeking and obtainingfurther information and clarifications on the agenda items before the meeting and for meaningfulparticipation at the meeting.

Majority decision is carried through while the dissenting members’ views are captured and recordedas part of the minutes.

I further report that there are adequate systems and processes in the company commensuratewith thesize and operations of the company to monitor and ensure compliance with applicable laws,rules, regulations and guidelines.

I further report thatduring the audit period the company has not entered into / carried out any activitythat has major bearing on the company’s affairs.

This report is to be read with our letter of even date which is annexed as Annexure -A and forms an integral part of this report.






















15
VBC FERRO ALLOYS LIMITED

ANNEXURE – A


To,

The Members,

VBC Ferro Alloys Limited

Our report of even date is to be read along with this letter.

Maintenance of secretarial record is the responsibility of the management of the company. Our responsibility is to express an opinion on these secretarial records based on our audit.

We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the secretarial records. The verification was done on test basis to ensure that correct facts are reflected in secretarial records. We believe that the processes and practices, we followed provide a reasonable basis for our opinion.

We have not verified the correctness and appropriateness of financial records and books of accounts of the company.

Where ever required, we have obtained the Management representation about the compliance of laws, rules and regulations and happening of events etc.

The compliance of the provisions of corporate and other applicable laws, rules, regulations, standards is the responsibility of management. Our examination was limited to the verification of procedures on test basis.

The secretarial audit report is neither an assurance as to the future viability of the company nor of the efficacy or effectiveness with which the management has conducted the affairs of the company.

16
VBC FERRO ALLOYS LIMITED

Annexure - III

FORM NO. MGT 9

EXTRACT OF ANNUAL RETURN

As on financial year ended on 31.03.2016

Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Company (Management & Administration) Rules, 2014.

REGISTRATION & OTHER DETAILS:

PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities contributing 10% or moreof the total turnover of the company shall be stated)

PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES:

17
VBC FERRO ALLOYS LIMITED

VI. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)

Category-wise Share Holding

18
VBC FERRO ALLOYS LIMITED