ifgl refractories ltd Management discussions

Report to the Shareholders

Dear Shareholders

Your Directors present the 27th Annual Report together with Statement of Profit and Loss for Financial Year ended on 31st March 2016 (FY 2015-2016) and Balance Sheet as on that date along with Notes, Cash Flow Statement and Auditors Report forming part thereof.

Performance of your Company for FY 2015-2016 on Consolidated and Standalone basis is as follows :

(Rs in Millions)

	Consolidated	Standalone
Total Revenue	7,220.56	3,073.20
Total Expenses	6,409.50	2,701.82
EBIDTA	811.06	371.38
Finance Costs	47.50	20.76
Depreciation and Amortisation Expense	154.72	63.21
Profit before Tax	608.84	287.41
Provision for Current Tax/Deferred Tax	156.86	101.78
Profit after Tax	*451.98	185.63
Earning Per Share (Rs)	12.12	5.36

*including Minority Interest of Rs 32.35 Global Scenario and Future Outlook

The year 2015-2016 saw some macro economic contradictions. The Chinese economy which was hitherto growing well, experienced a slowing down both on the external and internal fronts. This resulted in sizeable excess capacities. Export of steel from China reached 110 Millions tonnes in 2015 recording a growth of 22% over the previous year.

On the energy front crude oil experienced one of the lowest selling prices in recent times. While this ordinarily would have been a big benefit to most countries importing oil, the prices reached a point that while the direct outgo on account of oil imports reduced substantially but so did the export of goods and services as the entire development work in the oil exporting countries reduced substantially.

The steel production in USA was negatively impacted on both the counts, the Chinese export at prices much below the US levels and the reduction in demand for steel pipes as the shell oil and gas became unviable due to very low crude oil prices.

The World Economic Outlook was reduced to 3.2% for the year 2016 but some optimism has been built in for 2017 at 3.5%. Similar optimism is derived from the World Steel Association, which has projected a growth of 1.8% and 4.8% in 2016 and 2017 respectively, outside of China.

Your Directors are of the view that globally economies are going through a phase of consolidation, which is likely to stabilize going forward. Your Company is poised to do well and prospects and outlook of your Company for the future therefore appear to be encouraging. Various opportunities for both organic and inorganic growth are also being looked at.

Dividend

Following your Companys Policy of distributing available profits amongst the Shareholders, your Directors had declared an Interim Dividend of 20% i.e. Rs 2/- per Equity Share for FY 2015-2016 on 13th March 2016. The amount involved together with Dividend Distribution Tax aggregated to Rs 83.31 Millions. Your Directors are not recommending payment of any further Dividend for FY 20152016. The Dividend declared and paid for the year 2015-2016 is similar to the previous year 2014-2015 (20%), despite a low Profit after Tax.

Subsidiaries

Due to the prevailing market scenario the performance of the steel and other related industries remained weak. This got further aggravated by a big increase in exports of steel by China at very low prices. This led to substantial reduction/closure of steel production capacities and thereby affected performance of your Subsidiaries excepting German Subsidiary, Hofmann Ceramic GmbH and Indian Subsidiary, IFGL Exports Limited. Total Revenue, PBT and PAT on consolidated basis of IFGL Worldwide Holdings Limited, which hold all overseas subsidiaries, have been GBP 40.96 Millions, GBP 2.32 Millions and GBP 1.75 Millions respectively.

Performance of Hofmann Ceramic has been better than that of immediately preceding financial year inasmuch as Total Revenue, PBT and PAT are Euro 10.6 Millions, Euro 0.9 Millions and Euro 0.7 Millions respectively.

IFGL Exports Limited recorded a robust performance. While the Total Income was Rs 465.68 Millions in 2015-2016 against Rs 438.67 Millions in 2014-2015, an increase of 6% over previous year. The PBT for the year jumped to Rs 65.53 Millions, a PBT margin of 14.1% on Total Income, as against Rs 3.64 Millions in the previous year. EBIDTA rose to Rs 114.71 Millions for the year (24.6% of Total Income) as against Rs 66.10 Millions (15.1% of Total Income). The plant is now fully stabilized and has been able to reduce in process rejections. The plant is running full capacity and has undertaken work on expanding the capacity, which is scheduled to be completed in the first half of the current year.

Expansion, New Products and Other Measures

During FY 2015-2016, capacity expansion of Iso Statically pressed (ISO) Continuous Casting Refractories (CCR) from 85,000 pcs to 126,000 pcs per annum and facilities set up for manufacture of 10,000 pcs of Clay Graphite Stopper Rods for foundries by US Subsidiary, EI Ceramics LLC were stabilized. Similarly, second phase of capacity expansion at Companys Indian Subsidiary for manufacture of CCR from 80,000 pcs to 160,000 pcs per annum is going on and orders for key equipments have already been placed. Hofmann Ceramic, Germany Subsidiary, is in the process of seffing up facilities for manufacture of Feeders. Several initiatives have been taken for costs reduction. Besides this, it has been continued endeavor of your Company to further synergies resources available within the Group, thereby optimize revenues and increase margins.

Corporate Governance/Internal Control System and their adequacy

Report on Corporate Governance duly certified by your Companys Statutory Auditors form part of this Report as Annexure A. Corporate Governance Policies and Procedures practiced by your Company are following continued philosophy for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.

Vigil Mechanism/Whistle Blower Policy and Policy for Prevention of Sexual Harassment of Women at work place have also been implemented. During FY 2015-2016, no complaint was received under these Policies. Policies and Systems for Internal Control including Financial, Risk Management and Transfer Pricing in place are commensurate to nature of business and size of your Company and are reviewed and updated from time to time as and when necessary.

Disclosure of Information

Form MGT 9, being extract of Annual Return, form part of this Report as Annexure B. Several matters including those provided at Section 134(3) of the Companies Act, 2013 read with relevant provisions of the Companies (Accounts) Rules 2014 and Regulation 34 and 53 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR, 2015) required to be included herein, have been dealt in Annexures hereto including Audited Financial Statements and Notes forming part thereof and thus have not been included herein again, for brevity. Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in Annexure C. Transactions with related parties have been in ordinary course of your Companys business and at arms length and hence, details thereof have not been given in Form AOC-2. Formal Annual Evaluation has been made by your Board of its performance and that of its Committees and Individual Directors - further details are appearing in Report on Corporate Governance, being Annexure A hereto

Your Directors are now regularly doing Quarterly Presentations, Conference Calls and Interaction, following Announcement of Quarterly and Annual Results and this has enhanced Investors confidence in your Company.

Accounts of Subsidiary Companies

A statement in Form AOC-1 having financial information of Subsidiary Companies form part of this Annual Report as Annexure D. Shareholders of the Company and those of Subsidiary Companies who are desirous of having complete Statement of Accounts and related detailed information of Subsidiary Companies, may send their request there for either to the Companys Registered Office or to Head and Corporate Office. The same are being kept for inspection at Head Offices of your Company and Subsidiary Companies and also available on your Companys website i.e. www.ifglref.com.

Directors Responsibility Statement

Your Directors state that :

a) in preparation of Annual Accounts, the applicable Accounting Standards have been followed.

b) Accounting Policies selected and applied are consistent and judgments and estimates made 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) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities.

d) the Annual Accounts have been prepared on a Going Concern basis.

e) Internal Financial Controls i.e. Policies and Procedures for ensuring orderly and efficient conduct of business, including adherence to Companys Policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information, have been laid down and that such controls are adequate and operating effectively.

f) proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and operating effectively.

Your Companys Statutory Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants have Audited the Statement of Accounts in accordance with Generally Accepted Accounting Standards and Practices as indicated in their Report.

CSR, Human Resources and Industrial Relations

Your Company has a Committee of the Directors on Corporate Social Responsibility. For details regarding constitution, reference is drawn to Corporate Governance Report i.e. Annexure A. Annual Report in compliance of Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is forming part hereof as Annexure E.

Your Company also has a Nomination and Remuneration Committee of Directors following provisions of Section 178(1) of the Act and brief details thereof are also contained in Corporate Governance Report. Based on recommendation of this Committee, your Board has adopted a Nomination and Remuneration Policy, which is hosted on your Companys website www.ifglref.com. For the sake of brevity said Policy has not been reproduced here.

4 persons employed throughout FY 2015-2016 were in receipt of remuneration of Rs 60 lacs per annum or more. None was employed for part of the year and received remuneration of Rs 5 lacs per month or more. Whole-time Directors, Mr S K Bajoria and Mr P Bajoria have been paid "minimum remuneration" for FY 2015-2016 in accordance with Special Resolutions passed by you in Annual General Meeting held on 22nd August 2014 and approval of the Central Government as per provisions of Section 197(3) and other relevant applicable Sections of the Act. As on 31st March 2016, your Company have had 380 permanent employees in India. An Annexure having information following provisions of Sections 134(3)(q) and 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of this Report. This Annexure is however not being sent to Members as per provisions of Section 136 of the Act. Members desirous of having the Annexure may write to the Company Secretary at the Registered Office and or Head & Corporate Office. However the Annexure will also be available for inspection by the Members at Companys Registered Office upto conclusion of forthcoming Annual General Meeting. None of the Employees listed in the Annexure is a relative of any Director of the Company. None of the Employees, excepting your Chairman, hold (by himself or along with his spouse) more than two percent of Total Equity Share Capital of your Company.

During FY 2015-2016, Industrial Relations remained cordial. Your Company continued to provide conducive working environment to its team members and empowered them by trainings on latest techniques and practices. Compensation packages and benefits provided compare favourably with those offered by others in the Refractory Industry.

Consolidated Financial Statements

In accordance with Accounting Standard 21 and other relevant provisions particularly Section 129(3) of the Act, Consolidated Financial Statements duly audited by Statutory Auditors, M/s Deloitte Haskins & Sells form part of this Annual Report. Consolidated Financial Statements have been prepared based on Financial Statements (including Consolidated) of immediate two Subsidiary Companies i.e. IFGL Worldwide Holdings Limited and IFGL Exports Limited, as approved by their respective Boards.

Directors

Director due to retire at ensuing Annual General Meeting is Mr S K Bajoria (DIN : 00084004) who consented to retire by rotation for compliance with the requirements of Section 152 of the Act and being eligible, has offered himself for re-appointment. His Profile is also forming part of Notice of ensuing Annual General Meeting.

Secretarial Audit

M/s S M Gupta & Co., Practicing Company Secretaries have carried out Secretarial Audit following provisions of Section 204 of the Act. Their Report in MR 3, free of qualifications, form part hereof as Annexure F.

Auditors Report and Auditors

Report of the Auditors, including references made therein to the Notes forming part of the Statement of Accounts, are self explanatory.

Auditors, M/s Deloitte Haskins & Sells (Regn No. 302009E), Chartered Accountants will retire at conclusion of 30th Annual General Meeting. Following provisions of Section 139 of the Act, their appointment as Auditors of your Company is required to be ratified at ensuing Annual General Meeting.

Acknowledgement

Your Directors place on record their sincere appreciation for continued support received from all stakeholders particularly you the Shareholders.

	On behalf of the Board of Directors
	S K Bajoria	P Bajoria
Kolkata	(DIN : 00084004)	(DIN : 00084031)
14th May 2016	Chairman	Managing Director

Information under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and Rule 8(3) of Companies (Accounts) Rules, 2014 and forming part of the Directors Report for financial year ended on 31st March 2016

A. Conservation of Energy

Steps taken or impact on conservation of energy, steps taken for utilizing alternate sources of energy and capital investment on energy conservation equipments.

For conservation of energy, the Company have taken several steps and using energy to the extent necessary only. Wastage of energy is strict no-no. Energy efficient systems namely LED lights, CFL lamps, drive control and dampers, voltage stabilizers etc. have been installed to reduce consumption. Use of compressed air has also been optimized. Investments made have generally been regular in nature and during FY 2015-2016 no amount was capitalized. Steps for use of solar energy have also been taken and few fiffings for illumination have been installed on trial basis

Details of total energy consumption and energy consumption per unit of production are given in enclosed Form A.

B. Technology Absorption

Efforts made towards technology absorption, benefits derived therefrom, details of imported technologies and expenditure incurred on Research & Development.

Improvement in product quality and performance, development of indigenous source of raw materials including quality upgradation and substitutes, enhancement of production capacity and capability and other important areas like customers satisfaction, cost competitiveness, cost control etc. are looked into by Companys in-house Research and Development facility. These efforts and inputs received from time to time from various stakeholders including providers of technologies, bring about and foster requisite desired advantages to keep pace with rapid changes taking place in dynamic market in the products segment the Company is operating in.

During last 3 FYs including FY 2015-2016, the Company have not imported any technology.

R & D activities are an integral part of the manufacturing activities carried out by the Company. Expenditure incurred on R & D are not captured separately unless substantial in nature.

C. Foreign Exchange Earnings and Outgo

Total Foreign Exchange used and earned : ( in Millions)

1.	Foreign Exchange Outgo
	i) CIF Value of Imports of Raw Materials, Stores and Spares, Trading Items and Capital Goods	406.56
	ii) Others	143.51
2.	Foreign Exchange Earnings
	FOB Value of Exports	994.96

Form - A

Disclosure of particulars with respect to conservation of energy

	For the year ended 31st March 2016	For the year ended 31st March 2015
A. Power & Fuel Consumption
1. Electricity
a) Purchased
Units (KWH)	4,634,630	4,531,520
Total Amount (Rs in Millions)	29.57	27.84
Rate/Unit ()	6.38	6.13
b) Own Generation
i) Through Diesel Generator
Units (KWH)	360,504	375,545
Units per Ltr of Diesel Oil	2.87	2.93
Cost/Unit (Rs)	18.02	20.41
ii) Through Steam Turbine/Generator
Units (KWH)	Nil	Nil
Units per Ltr of Fuel Oil/Gas	Nil	Nil
Cost/Unit (Rs)	Nil	Nil
2. Coal (Specify quality and where used)
Quantity	Nil	Nil
Total Cost	Nil	Nil
Average Rate	Nil	Nil
3. LDO
Quantity (Kilo Ltr)	Nil	Nil
Total Cost (Rs in Millions)	Nil	Nil
Average Rate (/Ltr)	Nil	Nil
4. LPG
Quantity (MT)	1,461.80	1,606.96
Total Cost (Rs in Millions)	63.70	101.50
Average Rate (/MT)	43,575.71	63,160.30
5. Others/Internal generation
Quantity	Nil	Nil
Total Cost	Nil	Nil
Rate/Unit	Nil	Nil
B. Consumption per unit of production
Products-Refractories
Electricity (KWH/Pc)	9.41	8.76
LDO (Ltrs/Pc)	Nil	Nil
Coal	Nil	Nil
LPG (Kgs/Pc)	2.79	2.88
HSD (Ltrs/Pc)	0.27	0.25