surana industries ltd Management discussions

To The Members,

The Directors of the Company present to you the 26th Annual Report of the Company, together with the Audited Balance Sheet as at 31st March, 2017 and the Statement of Profit and Loss for the year ending on 31st March, 2017.

1. FINANCIAL RESULTS

The Financial Results of the Company for the year under review is summarized below for your information and consideration.

(Rs. in Crores)

PARTICULARS	2016-17	2015-16
NET REVENUE	68.41	602.76
PROFIT BEFORE TAX AND	(568.47)	(483.52)
DEPRECIATION
PROFIT /(LOSS) BEFORE TAX (PBT)	(608.26)	(525.72)
PROVISION FOR CURRENT TAX	-	-
TAX EXPENSE	-	-
PROFIT AFTER TAXES/(LOSS) (PAT)	(608.26)	(525.72)

1.1 FINANCIAL PERFORMANCE

The Company has achieved Net sales of Rs. 63.24 Crores for the year ended 31st March, 2017 as compared to Rs.584.83 Crores in the previous year. The Company has incurred a net loss of Rs. 608.26 Crores as against a net loss of Rs. 525.73 Crores in the previous year. The losses are attributable due 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 company approached the lenders for restructuring of its loan liabilities which was done under the CDR route. The CDR EG on 07th March, 2014 approved the restructuring scheme of the lenders and accordingly MRA was signed between the company and the lenders on 24th March, 2014 effective from 01st June, 2013.

The lenders have restructured the debts of the Company to the extent of Rs.1331 Crores under the CDR mechanism. All overdues have been restructured with effect from 01st 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 Crores 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 rescheduled over a 10 year period ending the year 2023.

PREMISES BEHIND CDR:

The company went under the aegis of Corporate Debt Restructuring with a cut-off date as June 01, 2013 due to the following major issues faced by the Company.

1. Non availability of Raw Materials due to the Iron Ore mining ban imposed by Honorable Supreme Court of India.

2. Deep depreciation of Indian Rupee in Dollar terms which had a cascading effect on the price of the raw materials.

3. Severe Power Cuts in the State of Tamil Nadu to the tune of 40% for High Tension Industry users resulting in low levels of manufacturing.

4. Labour Agitation and Strike resulting in drastic reduction of production and revenue generation resulting in liquidity constraint.

5. Interest burden also piled up in the wake of low production levels and non availability of Raw Materials.

1.3 ISSUES POST CDR:

DELAY IN IMPLEMENTATION OF CDR PACKAGE:

The CDR package was proposed/ projected to be implemented in December 2013 primarily considering a Cut-Off Date of 1st June 2013. However, there was considerable time delay due to consortium internal procedures and approvals resulting in the implementation of the CDR package only in March 2014. This had a cascading effect on the release of priority loan for refurbishment work which in turn had an effect on the re-commissioning and restart of operations at Raichur.

LABOR AGITATION:

The labor unrest and workforce agitation was one of the major issues faced by the Company which affected the operations of the Company significantly in the Financial Year 2012-13. Thereafter, during April–May 2013, the strike went out of hand with workers resorting to violence. Subsequently, with the intervention of Deputy Labor Commissioner (DLC), we were able to move positively to an agreement by way of having conciliation meeting with our employees. However, workforce was still not cooperative and resorted to unfair practices like theft/ go-slow/ sabotage causing damage to companys property during January-February 2014.

Thereafter, the company attended conciliation meetings based on representation from Centre of Indian Trade Unions (CITU), Raichur in the presence of Deputy Commissioner (DC), Raichur on 5th May, 2014. After Two (2) more rounds of conciliation meetings with the DC, it was decided to resolve the issue once and for all at the DLCs Chamber. Subsequently on 14th August 2014, the company could achieve some progress in this issue with some portion of the labor agreeing for amicable settlement.

Further to this, there continued to be some agitations/ sabotage/ theft/ strike at the plant and the company could get the issue completely resolved only after the District and Sessions Court, Raichur issued their Judgment vide Order No. 972/15 on 18th April 2015.

The aftermath of this issue, which is a "Force Majeure" condition (since the workforce resorted to agitation/ go-slow), not only had adverse effect on the operational performance of the company significantly in the Financial Year 2013-14 and Financial Year 2014-15 by way of huge losses but also took its toll on the precious time of the management as the company could not commence the operations of the plant from June 2014 onwards, as per CDR package.

In view of the above problem, the original plan of the company to restart the plant as per CDR projection was disturbed and this was further complicated due to non-release of funds (Priority Loan as well as Working Capital) from the lenders, in the absence of plant operations not being commenced resulting in a vicious circle.

The above facts were presented by the company during the various Joint Lenders Meeting (JLM) held in the presence of representative of CDR Cell. Though the lenders understood the difficulties faced by the company, adequate measures by way of releasing priority loan or enhanced working capital were not forthcoming from the lenders on account of various economic factors, especially the negative sentiments and market conditions prevailing in the Steel Sector.

NON-RELEASE OF PRIORITY LOAN ON TIME:

As a part of the CDR Package, priority loan to the tune of Rs.41.72 Crores was envisaged for release by the consortium of lenders for carrying out the refurbishment and re-commissioning of the Plant at Raichur. This release of priority loan was not made on time by the lenders. Though the company had bought in their contribution towards release of priority loan, the same was not forthcoming from the lenders. In fact, the first disbursement of the priority loan happened only in the month of December 2014 (9 months post the CDR implementation date) from IDBI Bank and 18 months from the cut of date. Further, after several rounds of follow ups, written correspondences and representations during the JLM/ JLF/ MC meeting with the consortium of lenders, the Priority Loan was progressively released. Even during the representations by the company during the JLM/ JLF for expeditious release of Priority Loan, unwarranted conditions would be stipulated by the lenders. For example, during the MC meeting with the consortium dated 25th February 2015, it was stipulated to the company that the release of priority loan would be subject to clearance of outstanding critical dues with all the lenders. The lenders were aware that payment of critical dues would not be possible since the Raichur Plant was yet to commence operations in the absence of release of priority loan by the lenders. The cash fl ows from Gummidipoondi Operations were minimal and were utilized for meeting the day to day operational expenses of the company.

However, despite the above difficulties, the company has been unfailingly pleading and making request to all the lenders of the consortium about the release of priority loan on priority basis to enable recommissioning and restart of operations of the plant during every JLM starting from 26th September 2014. It may also be not out of place to mention that the entire release of priority loan is yet to happen fully and the majority of the amount released so far by the lenders has been utilized only for adjustment of their critical interest dues.

Moreover, after traversing one and half years post finalization of CDR proposal and one year post CDR implementation, the lenders were not aware of the purpose of the priority loan. The purpose of the Priority Loan (which was approved and sanctioned as part of the CDR Package) was debated at length during the JLM held on 19th June 2015 which was incongruous.

NON-RELEASE OF ENHANCED WORKING CAPITAL:

On account of the aforementioned vicious circle viz. non release of priority loan leading to non-restart of operations at Raichur, the release of working capital as per the sanctioned limits could not happen on a timely basis as per the CDR projections. This further affected the difficult situations since the company could not make payments to the Refurbishment/O & M agency. Though the lead bank issued their working capital assessment note for the Financial Year 2014-15 as part of CDR itself in the Month of December 2013 and circulated to all the lenders, only few lenders took approval and released the same. The other lenders, however, took approval only for the Financial Year 2013-14 alone and for the Financial Year 2014-15, the approval and release is still continuing. This Working Capital, which should be used for increasing top line ended up in servicing the debt/ interest obligations. This non-availability of WC contributed heavily to the delay of commencement of operation of Raichur Plant.

STATUS OF WORKING CAPITAL ASSESSMENT RELEASE:

(Amount In Rs. Crs)

	FY – 2013-14		FY – 2014-15
Bank	Sanctioned	Disbursed	Sanctioned	Disbursed	Pending
IDBI Bank Ltd	78.15	78.15	133.49	133.49	Nil
Central Bank of India	41.35	37.21	76.28	37.61	38.67
Allahabad Bank	34.64	34.64	57.21	45.65	11.56
State Bank of India	28.70	26.51	50.88	28.70	22.18
Oriental Bank of Commerce	28.54	28.54	44.81	28.54	16.27
Bank of India	23.39	23.39	40.87	23.39	17.48
Canara Bank	27.72	27.72	53.81	27.72	26.09
Bank of Baroda	15.97	15.97	27.92	15.97	11.95
UCO Bank	12.44	12.44	20.44	12.44	08.00
Syndicate Bank	3.18	3.18	4.76	3.18	1.58
Punjab National Bank	107.53	107.53	182.53	107.53	75.00
TOTAL	401.61	395.28	693.00	464.22	228.78

During the period starting from April 2014 to September 2015, the company has made a total interest and overdue clearance payments of Rs. 130.34 Crores, for the consortium of lenders. Similarly, in the same period, the promoters had infused equity of Rs. 46.47 Crores. The consortium of lenders during the said period had released only Rs. 77.23 Crores as part of the enhanced working capital limits under the CDR Package.

On account of the above factors, there has been considerable delay in the implementation of CDR Package and delay in commencement of operations because of which set milestones could not be achieved. However, the company in the right earnest and with available resources completed the refurbishment work for the DRI Plant and also completed the trial run. However, even at the behest of the company and the lead bank/ Monitoring Institution, release of enhanced working capital was not forthcoming. Thereafter, during the JLM held on 19th June 2015, "MI requested the member banks to de-link the issue of release of enhanced WC limits, receipt of Fresh TEV Report and also assessment of

WC limits for Financial Year 2015-16. MI also requested member banks to expedite sanction of enhanced working capital limits as some of the banks had released enhanced WC limits for which Joint Documentation and security completion formalities were yet to be completed.

Due to the above factors, since the Raichur Plant could not recommence the operations, the Priority Loan which was released by the Lenders was used to adjust their critical interest dues.

TEV STUDY:

In view of the non release of enhanced working capital by some of the lenders consequentially leading to non-start of operations of the Plant, the Monitoring Committee was called on 27th August 2015 wherein the lenders deliberated amongst themselves and decided to consider Strategic Debt Restructuring (SDR) mechanism for the earlier revival and restart of the plant, for which the company rendered their full support and cooperation. Based on the above deliberation and discussions amongst the consortium for considering SDR mechanism, the Monitoring Institution (MI) appointed ITCOT for carrying out the TEV Study, the final report of which had already been circulated to all the lenders.

CORRECTIVE ACTION PLAN BY WAY OF SDR PROPOSED BY THE LENDERS:

Subsequently on receipt of the report, IDBI vide their email dated 02nd November 2015 to all the lenders indicated the status of SDR mandate from the consortium, wherein it was been mentioned that the date of invocation of SDR would be 22nd September 2015 by the time 28 months completed from the CDR cut-off date.

It may be noted that the MI and lead bank has received SDR Sanctions/ Mandates from Seven (7) Lenders amounting to 50.44% of their total exposure. Subsequently, at the behest of lenders, M/s. Think Capital was appointed as an external consultant by MI for examining/ preparing SDR Package for the company. M/s. Think Capital was part of the JLM held on 27th August 2015 as well 11th September 2015 and gave their presentation/views on the same.

However, during the JLM held on 28th December 2015, it was informed by IDBI that some of the banks do not have the mandates to convert part of loan into equity under SDR route and lead bank requested all the other lenders to convey their mandates by the next high level JLM to be held at Mumbai in January 2016.

HIGH LEVEL JLM AT MUMBAI:

On 22nd January 2016, a high level Joint Lenders Meeting was held at Mumbai to discuss the way forward in terms of mandates from other lenders for invocation of SDR. During the meeting, it was concluded that requisite percentage of mandates for invocation of SDR was not available and hence SDR cannot be invoked as a corrective action plan for SIL.

It was opined that change of management could be considered for which the company as well as the lenders would in parallel scout for a potential buyer. Monitoring Institution (MI) also opined that change of management and restructuring could be considered outside SDR in line with RBI circular dated 24th September 2015. Subsequently a time till 15th March 2016 was given by the lender to SIL for finding an acceptable investor.

STATUS POST HLJLM:

The company identified a prospective investor M/s. TCP Limited (TPCL) for infusion of equity into the Company for restarting the ISP at Raichur, Karnataka and had a discussion with Lead Bank on

26th February 2016. In this regard, the company had sent a detailed letter including the background and presence of TCPL to the lead bank on 26th February 2016. Subsequently a HLJLM was held at Chennai on 05th April 2016 to discuss on the investment proposal submitted by TCPL. During the meeting, MI informed the company that the change in management could be done only through transparent bidding process and requested TCPL to participate in their tender process which would be published in news dailies.

Further to the above, again a JLM was held on 02nd May 2016 to discuss on the way forward. During the meeting, MI informed that against the backdrop of IFCI declaring the company as Willful Defaulter though contested by the company, the member banks would initiate recovery measures against the company including SARFAESI.

ISSUES WITH IFCI:

The company had taken a corporate loan from IFCI. At the time of implementation/ proposal stages of CDR Package, at the behest of IFCI, in order to move forward, the company had offered additional collateral securities to IFCI, over and above the security stipulated by CDR EG. This was done since IFCI threatened the company that they would not be supporting the CDR Package without the collateral security in place.

In addition to the above, IFCI had computed their Pre-COD dues by considering an interest rate of 15% plus penal interest and other charges. Even after repeated request of the company, the calculation and basis for arriving at the Pre-COD dues by IFCI was not shared with the company at the time of implementation of CDR Package. Subsequently, post CDR implementation, the company requested IFCI crystallize the Pre-COD due by reducing the additional interest/ charges and penal interest which was not forthcoming from IFCI. Hence, the company approached IDBI Bank and other consortium lenders. Based on the above request, MI invited IFCI as special invitee to the Monitoring Committee meeting dated 12th July 2014. However due to other prior commitments, IFCI did not attend the meeting. In the absence of IFCI and also to resolve this issue at the earliest, MI had sought views from member banks regarding payment of FITL interest to IFCI Ltd. The MC members were of the view that post CDR, the security structure should be same for all lenders other than the lenders who had exclusive security pre CDR and the same was approved by CDR EG to continue post CDR also. The members also opined that since IFCI had not mentioned any additional security held by them in their sanction communicated to company post CDR, IFCI should release the additional securities and the same to be pooled to secure all lenders.

Subsequently during the MC Meeting held on 26th September 2014, IFCI officials informed lenders that reworking and release of exclusive securities would be considered by them only upon clearing the overdues and the same was communicated to the company on various occasions. Unexpectedly, it was decided by MI during the MC that "Since the matter was specific to company and IFCI, the member banks requested both the company and IFCI to solve the issue amicably and inform MI about their decision." Even after the above aspects, the company decided and put their all out efforts to resolve the issue with IFCI by written communication, personal representation at the highest level and during various correspondences/ meetings. However, the results were not fruitful.

Thereafter, during the JLM held on 13th April 2015, the details of the additional security available with IFCI were divulged by the Company. The member banks after deliberations made by both the parties felt that the issue should be amicably resolved between IFCI and the Company. Further, the member banks allowed time till 30th June 2015 for resolving the issue and requested IFCI to release the additional security held by them to the common pool. The member bank also resolved that in case if IFCI is not releasing the additional security within the stipulated time of 30th June 2015, the security extended to them as per CDR package would be revoked.

Once again, during the subsequent JLM held on 19th June 2015, MI requested the company to resolve the issue with IFCI, clear the overdues as per CDR package and report the development. After multiple meetings with IFCI, the differences of opinion on rate of interest calculation and release of security to common pool could not be resolved. Finally IFCI in January 2016 decided to declare the company and its managing director as willful defaulter on the grounds of company being deliberately avoiding payment of interest and installment dues. As per the legal opinion obtained by the company, the contention of IFCI is legally not tenable on the ground that the company had not generated any operational cash surplus and hence could not pay the interest. As far as the payment of interest to other lenders is concerned, the lenders had never given the money to the common TRA for usage by the company for its operations and had instead adjusted it towards their interest dues as and when it became due. Further, IFCI, suo moto has invoked Section 13 (2) of SARFAESI Act to recall the loans extended to the company. As per the legal opinion obtained by the company, IFCI has faulted in invoking Sec 13 (2) of the SARFAESI act, as it being a member of the consortium and signatory to MRA, under sec 13 (9) of the SARFAESI act, the revocation / recalling of loan can happen only after 60% of the lenders consortium agree to do the same. In this regard, the company had written to Reserve Bank of India a detailed letter on March 16, 2017 and Reserve Bank of India vide its letter dated May 22, 2017 has mentioned that the matter will be examined and shall revert back to the company shortly.

CURRENT SCENARIO: The consortium of lenders led by M/s. IDBI has initiated steps under SARFAESI with respect to our Gummudipoondi and Raichur factories. In the integrum, the company had multiple level of negotiations with labor union in presence of DLC, Raichur and have amicably arrived at an understanding wherein the demands of the labors have been satisfied to a great extent.

Accordingly, the labor force since March, 2017 has started clearing the vegetation at Raichur factory. However, on May 05, 2017 the factory was physically possessed by the consortium under SARFAESI.

On physical possession, the company had requested the consortium to give the company, the limited access to the plant at Raichur for cleaning, up-keeping and maintenance of plant and machinery, so that the economic value of the plant does not erode. The company with the positive improvements in the steel sectors and with the support of the creditors is interested to re-start the DRI operations on a holding on basis. In case of the permission for the same is given by the consortium, the company can re-start the plant in immediately. In this regard and also with the view to maintain the economic value of the plant, we have requested the consortium to permit access to our plant to do the various parity checks and up keep the value of plant. Further to the above, the company vide its letter dated June 23, 2016 informed the consortium bankers that the company has been in touch with various vendors in and around Karnataka area who have shown interest in starting the plant on a strategic investment basis. The discussion with these interested parties has come to a matured stage whereby, the DRI plant can be restarted immediately as there is a readymade market for the finished products. With the support of such strategic partners, the company is confident of starting the DRI plant operations at Raichur in the first available opportunity. Further, the company also informed that as a next step of restarting the plant, the company is in the process of initiating discussions with various statutory bodies of Karnataka for getting necessary permissions and approvals to make the payments due to them in a phased manner. In addition to this, the company is already in the process of reducing the laborers to maintainable/sustainable levels. In case of the lenders consortium permitting the company to restart the operations on a holding on basis, the company can immediately take steps to restart the Raichur Operations. However, the company is yet to receive the approval from the consortium to commence the production on "Holding on operations" Further, the company had requested the consortium to consider the deep restructuring debts of the company in line with the latest RBI circular no. DBR.BP.BC.No.67/21.04.048/2016-17 issued by Reserve Bank of India on May 05, 2017.

2. SHARE CAPITAL:

The paid up Equity Share Capital as on 31st March, 2017 was Rs. 50.91 Crores.

3. DIVIDEND:

Your Directors have not recommended any dividend for the financial year 2016-17 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.

4. MANAGEMENT DISCUSSION AND ANALYSIS: STEEL INDUSTRY OUTLOOK: GLOBAL SCENARIO: World Steel Short Range Outlook April 2017:

The World Steel Association (world steel) released its Short Range Outlook (SRO) for 2017 and 2018. World steel forecasts that global steel demand will increase by 1.3% to 1,535.2 Mt in 2017, following growth of 1.0% in 2016. In 2018, it is forecast that global steel demand will grow by 0.9% and will reach 1,548.5 Mt. Global Economy Is Gaining Strength, But Uncertainty Escalates:

With the risk of global recession receding and economic performance improving across most regions, a number of geopolitical changes still create some concern. US policy uncertainties, Brexit, the rising populist wave in current European elections and the potential retreat from globalisation and free trade under the pressure of rising nationalism adds a new dimension of uncertainty in investment environments. To balance this, risks from ongoing confl icts in the Middle East and in Eastern Ukraine appear to be reducing. In the capital markets, the probable US FED interest rate increase and any appreciation of the US dollar is likely to have global impact. In particular, it may provoke capital outfl ows from the emerging economies and place a risk on corporate debt in the developing countries, which has climbed significantly over the last few years.

Oil And Other Commodities:

The pickup in oil prices in 2016 helped the fiscal position of oil producing countries. In 2017-18 oil prices are expected to show a moderate gain but any spike in oil prices to the levels seen in 2010- 12 seems unlikely despite the recent OPEC agreement on oil production cuts. Other commodity prices also rebounded due to stronger activities in China, but no further hikes are envisaged. The mildly rising oil prices may stimulate investment in economies worldwide

Automotive Sector Will Decelerate, But Construction Sector Could Pick Up:

The automotive sector has been the top performer among key steel using sectors thanks to the consumption driven recovery in the developed economies, low oil prices and the government stimuli programmes supporting automobile purchases in several countries. However, this may now be approaching a peak. The construction, building and infrastructure sector, which accounts for 50% of global steel use, has been showing a divided picture between the developing and developed economies. This sector has been a major driver for steel demand in the developing countries driven by urbanisation, but activity in the developed economies since the 2008 financial crisis has been more subdued. This appears to be about to change with a recovery in construction activities apparent in the EU through the improving economic conditions and the potential renewal initiatives for infrastructure in the US. The machinery sector could also benefit from rising investment activities if the uncertainties surrounding the global economy can be contained. On the other hand, depression in shipbuilding activities is expected to continue for some time given the global glut in shipping capacity.

China Slowdown:

The economic rebalancing and reform agenda of the Chinese economy continued for the first half of 2016, only to be interrupted by the governments mini stimulus measures designed to reduce the speed of the decline. This produced a short term boom in infrastructure investment and the housing market, which stimulated demand for steel and other commodities. As a result, Chinas steel demand showed growth of 1.3% in 2016. While the Chinese economic outlook appears stable and steel demand continues to remain strong in the early part of 2017, this is expected to gradually decelerate as the government tries to retighten its real estate policies. Chinas steel demand is expected to remain fl at in 2017 and then decline by -2% in 2018.

Developed World:

Benefiting from strong fundamentals, newly announced measures related to fiscal stimuli and rising infrastructure spending, the United States is expected to continue to lead growth in the developed world in 2017-18. However, despite a recovery in oil prices, a rebound of investments in the oil and gas sector may be limited given the increased efficiency of shale producers. The EU recovery is solidifying with many positive developments. Eurozone monetary policy is expected to remain on its current path, at least in 2017, while fiscal tightening is not expected to strengthen further and risk of disinfl ation has significantly receded. If political stability can be maintained, investment is expected to pick up to provide a further boost to the recovery. Benefiting from the improving global economy and weak yen, Japans steel demand is expected to show a stable recovery. Steel demand in the developed economies will increase by 0.7 % in 2017 and 1.2 % in 2018.

Developing World:

Having dealt with the structural problems and fall in commodity prices, the Russian and Brazilian economies are stabilising and expected to show modest growth in 2017. Russian growth will continue to pick up in 2018 as structural reforms take more effect. After the demonetization shock, the Indian economy is expected to resume growth, although on a slightly weakened basis. The ASEAN countries are expected to demonstrate solid growth in 2017-18. However, the region remains vulnerable to currency volatilities associated with US interest rate hikes and dollar appreciation. Steel demand in the emerging and developing economies excluding China, which accounts for 30% of world total, is expected to grow by 4.0% in 2017 and then 4.9% in 2018.

(Source: www.worldsteel.org website)

DOMESTIC INDUSTRY OVERVIEW:

India was the worlds third-largest steel producer in 2016. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to Indias manufacturing output. The Indian steel industry is very modern with state-of-the-art steel mills. It has always strived for continuous modernisation and up-gradation of older plants and higher energy efficiency levels. During the year, Indias steel sector was impacted by intense competitive pressure with a surge in domestic steel production and elevated level of steel imports at predatory pricing. In FY2016-17, Indias crude steel production grew by 8.5% y-o-y to 97.4 million tonnes. India imposed ‘Minimum Import Price (MIP) in Feb 2016 on various iron and steel products, after seeing that the provisional safeguard duty of hot rolled sheet failed to have a desirable impact on unbridled and unfair fl ow of steel imports into the country. This was an emergency provision, which provided some relief to the industry.

Later on the Government imposed provisional anti-dumping duty on: hot rolled and cold roll products in August 2016; wire rods in November 2016; and colour coated rods in January 2017 as the industry needed adequate, swifter and longer shelf-life trade remedial measures to check unbridled and unfair steel imports. India also notified final safeguard duty on hot rolled sheets and plates in November 2016. However, steel imports remained at around 8 million tonnes on an annualised basis, despite these trade remedial measures. The domestic steel industry suspects circumvention of these trade remedial measures. Therefore, a stringent monitoring mechanism is required. The situation was further aggravated by the fact that the apparent finished steel consumption in the country grew by just 2.6% y-o-y for the same period. Indias steel demand was expected to gather momentum in the second half of FY2016-17, driven by the Governments measures to drive the economy and manage quantifiable progress on various policy reforms. Normal monsoon and the Seventh Pay Commission announcements were also likely to drive consumer discretionary spending. However, the steel demand did not to see the desirable upswing in the second half of the year, amid poor liquidity, following the Governments de-monetisation initiative. This led to a liquidity crunch and a contraction of the major consuming sectors such as real estate. However, this does not negate the fact that the long-term potential of the Indian steel industry remains bright. The opportunities for the industry have been identified and efforts are being taken by both public and private entities to achieve sustainable growth.

MARKET SIZE

Indias crude steel output grew 10.7 per cent year-on-year to 25.76 million tonnes (MT) during January-March 2017. Indias crude steel output during April 2017 grew by 5.4 per cent year-on-year to 8.107 MT. Indias finished steel exports rose 102.1 per cent to 8.24 MT, while imports fell by 36.6 per cent to 7.42 MT in 2016-17. Indias steel exports rose 142 per cent in April 2017 to 747,000 tonnes over April 2016, while imports fell by 23 per cent to 504,000 tonnes in April 2017 over April 2016. Total consumption of finished steel grew by 3.4 per cent year-on-year at 6.015 MT during April 2017.

GOVERNMENT INITIATIVES

Some of the other recent government initiatives in Steel sector are as follows:

• The Union Cabinet, Government of India has approved the National Steel Policy (NSP) 2017, as it seeks to create a globally competitive steel industry in India. NSP 2017 targets 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030.

• Metal Scrap Trade Corporation (MSTC) Limited and the Ministry of Steel have jointly launched an e-platform called ‘MSTC Metal Mandi under the ‘Digital India initiative, which will facilitate sale of finished and semi-finished steel products.

• The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs 200 crore (US$ 30 million).

(Source: www.ibef.org website)

ROAD AHEAD:

India is expected to become the second largest steel producer in the world by 2018, based on increased capacity addition in anticipation of upcoming demand, and the new steel policy, that has been approved by the Union Cabinet in May 2017, is expected to boost Indias steel production.* Huge scope for growth is offered by Indias comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.

Steel demand has outpaced supply over the Last Five Years

• Driven by rising infrastructure development and growing demand for automotives, steel consumption is expected to reach 104 MT by 2017

• It is expected that consumption per capita would increase supported by rapid growth in the industrial sector, and rising infra expenditure projects in railways, roads & highways, etc.

DOMESTIC SCENARIO

Post liberalization of the steel sector in 1991-92, the Indian steel industry has witnessed unprecedented growth. The steel sector in India, like any major steel producing country, shows a strong co-relation with growth in domestic economy.

The growth in Indian economy has fueled the infrastructure and industrial manufacturing sectors in the country which have in turn led to significant increase in steel demand. The domestic steel industry has in turn grown in line to meet the steel demand. From a modest capacity of 22 MT and production of 17 million tonnes of crude steel in 1991-92, it has grown by over 400% to reach a capacity of 122 MT and a production level of ~89 million tonnes in 2015-16. In fact, in 2015, India overtook the United States to become the third largest steel producer and is well on course to become the second largest producer soon. Even during the global economic downturn of 2008-09, when the steel industries of rest of the major producing countries faltered, Indian steel industry stood resilient.

The Indian steel industry also enjoys inherent advantages in terms of availability of high grade iron ore and non-coking coal – the two critical inputs of steel production. In addition, it also has a vast and rapidly growing market for steel, strong MSME sector and a relatively young work force with competitive labour costs. These factors have so far ably supported the growth of steel industry in the country.

The Indian steel industry has entered into a new development stage, post de-regulation, riding high on the resurgent economy and rising demand for steel. Rapid rise in production has resulted in India becoming the 3rd largest producer of crude steel in 2015 as well as in 2016. The country was the largest producer of sponge iron or DRI in the world during the period 2003-2015 and emerged as the 2nd largest global producer of DRI in 2016 (after Iran). India is also the 3rd largest finished steel consumer in the world and maintained this status in 2016. Such rankings are based on provisional data released by the World Steel Association for the above year.

In a de-regulated, liberalized economic/market scenario like India the Governments role is that of a facilitator which lays down the policy guidelines and establishes the institutional mechanism/ structure for creating conducive environment for improving efficiency and performance of the steel sector. In this role, the Government has released the National Steel Policy 2017, which has laid down the broad roadmap for encouraging long term growth for the Indian steel industry, both on demand and supply sides, by 2030-31.

The said Policy is an updated version of National Steel Policy 2005 which was released earlier and provided a long-term growth perspective for the domestic iron and steel industry by 2019-20. The Government has also announced a policy for providing preference to domestically manufactured Iron & Steel products in Government procurement. This policy seeks to accomplish PMs vision of ‘Make in India with objective of nation building and encourage domestic manufacturing and is applicable on all government tenders where price bid is yet to be opened. Further, the Policy provides a minimum value addition of 15% in notified steel products which are covered under preferential procurement. In order to provide fl exibility, Ministry of Steel may review specified steel products and the minimum value addition criterion.

Production:

• Steel industry was de-licensed and de-controlled in 1991 & 1992 respectively.

• India is currently the 3rd largest producer of crude steel in the world.

• In 2016-17 (prov.), production for sale of total finished steel (alloy + non alloy) was 100.74 mt, a growth of 10.7% over 2015-16.

• Production for sale of Pig Iron in 2016-17 (prov.) was 9.39 mt, a growth of 1.8% over 2015-16.

• India was the largest producer of sponge iron in the world during the period 2003-2015 and was the 2nd largest producer in 2016 (after Iran). The coal based route accounted for 79% of total sponge iron production in the country in 2016-17 (prov).

• Data on production / production for sale of pig iron, sponge iron and total finished steel (alloy stainless + non-alloy) are given below for last five years and April-May 2017:

Indian steel industry :(in million tonnes)

Category	2012-13	2013-14	2014-15	2015-16	2016-17*	April-May 2017*
Pig Iron Production for sale	6.870	7.950	9.694	9.228	9.391	1.53
Sponge Iron Production	23.01	22.87	24.24	22.43	24.39	4.23
Total Finished Steel Production for sale (alloy/ stainless + non alloy)	81.68	87.67	92.16	90.98	100.74	17.48

Source: Joint Plant Committee; *prov.

Demand – Availability:

• Industry dynamics including demand – availability of iron and steel in the country are largely determined by market forces and gaps in demand-availability are met mostly through imports.

• Interface with consumers exists by way of meeting of the Steel Consumers Council, which is conducted on regular basis.

• Interface helps in redressing availability problems, complaints related to quality.

OPPORTUNITIES FOR GROWTH OF STEEL IN PRIVATE SECTOR THE NEW INDUSTRIAL POLICY REGIME

The New Industrial policy opened up the Indian iron and steel industry for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are now freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of a facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario.

The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. In the last few years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to set up fresh greenfield projects in different states of the country.

Crude steel capacity was 126.33 mt in 2016-17 (prov.), up by 3.6% over 2015-16 and India, which emerged as the 3rd largest producer of crude steel in the world in 2016 as per provisional ranking released by the World Steel Association, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. The country is expected to become the 2nd largest producer of crude steel in the world soon.

CHALLENGES

1. Domestic iron ore production declined continuously over the last three years, and the trend has been continuing in the current year as well on account of various restrictions in key iron ore producing states. While the Supreme Court has allowed Category A and B mines in Karnataka to resume mining operations in the state, the requirement of fulfilling various conditions has resulted in only a limited number of mines commencing operations till now, leading to a significant supply shortage in the state. While the Mining ban in the state of Goa has been lifted, mining is yet to resume pending policy formation by the State government. The iron ore mining industry in Odisha may also face a ban in light of the report of the Justice M. B. Shah Commission. Despite falling supplies, domestic iron ore prices nevertheless declined over the last one year. Domestic lump ore prices are ruling at levels which are 10-15% lower than the rates one year back. This is because of the ongoing downturn in the steel industry, leading to a nominal production growth for steel players without captive iron ore mines.

2. Insufficient infrastructure and logistics. The steel industry is a major user of infrastructure resources like railways, roads and ports. A growth in steel production will increase the burden of the countrys already stretched logistics infrastructure. To meet the needs of a growing steel industry, major improvements in various infrastructure facilities are required.

FUTURE OUTLOOK OF THE INDUSTRY:

In emerging economies the structural factors of population growth linked to urbanisation and (hopefully) industrialisation, suggest a bright future for our product. It is estimated that a bit more than 1 billion people will move to towns and cities between now and 2030. This major fl ow not only creates substantial new demand for steel to be used in infrastructure developments such as water, energy and mass transit systems as well as major construction and housing programmes, but the process of urbanisation also leads to an increased, and hopefully, more equitable distribution of wealth. This in turn drives demand for steel for additional consumer products such as household appliances, vehicles, and additional machine building that supports the industrial processes to manufacture these consumer goods. Moreover, continued transformation of urban areas plays an important role even in the countries having already reached a high level of urbanisation. Cities are in the process towards improvements in city organisation and living standards. Over the last 10 years, many countries have started revising their urban policies to increase living standards in urban areas, to improve energy efficiency and to make cities more environmentally friendly. Given the expected population growth, emerging new applications for steel and more sophisticated steel applications, the global steel market has a potential to grow by between 700 and 1000 million tonnes in the next 50 years. That is equivalent to a market that is 60% larger than that of today. That between now and 2030; global use of steel will increase by as much as 400 million tons annually. India being a developing economy with a large population. The forces of economic growth will require continued investments in new infrastructure, new and larger cities, machinery and production to employ more people and drive the economy forward. India already is the third largest producer of steel. It is also expected to be one of the fastest growing areas in steel use this year and next year.

The GDP/capita in India of around 5815 US$ per person (2010 PPP), coupled with urbanisation that is below 35% of the total population and a steel use per person of less than 100 kg per person per year, are all indicating towards an economy that is approaching the structural conditions for rapid acceleration. This phase usually has its own challenges, such as lack of adequate availability of land, insufficient infrastructure, inadequate regulatory capacity, lack of sufficient manufacturing capacity and most large skills shortages. But for a country with imaginative managers, relatively competent bureaucracy and available raw materials the positives in the longer term outlast the negatives. In particular, the implementation of the reform agenda has a crucial importance for growth. Moreover, with good raw material supply conditions, a growing market and competent producers, the India is at the start of a new growth curve. It may not come immediately, but the fundamental conditions for growth is in place and is positive.

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. Therefore, it is essential for the Companys 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.

RISK PERCEPTION

The Directors are constantly assessing the business risks pertaining to the performance of the Company. The following are the important risks perceptions:

• 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.

5. OPERATIONS

5.1 SIL OPERATIONS AT GUMMUDIPOONDI PLANT

Production at Gummudipoondi Plant had adversely been affected for the last 4 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. Due to power shortage coupled with unfavourable market prices for end products have resulted in lower operation level at the plant during the year and forced the company to close the operations of the unit during the Month of October, 2016.

5.2 SIL OPERATIONS AT RAICHUR PLANT EXISTING OPERATIONS

The existing plant 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 was not able to re-start/re-commence its operation at Raichur due to non-release of enhanced working capital, non-release of priority loans on time and adjusting the same towards the critical interest dues of the Company. 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 consortium lenders and SARFAESI initiation against the said project. The existing facilities at the Raichur plant are summarized below:

Facility	Metric Tonnes Per Annum
DRI Plant	160,000
Electric Arc Furnace	250,000
Billet Caster	240,000
Bar Mill	400,000

6. SUBSIDIARIES:

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.

SIL has investments in three subsidiaries viz., Surana Power Limited, Surana Green Power Limited and Surana Mines and Minerals Limited.

6.1 SURANA POWER LIMITED (SPL):

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 a 35 MW 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.

Surana Power Limited deals with two power projects. One 35 MW Captive Power Plant, which was commissioned and currently is non operational due to various stress factors and the same has been repossessed by UCO Bank under SARFAESI Act. Another 2 x 210 MW Thermal Power Project is under implementation and is in stalled condition. The 2 x 210 MW power project has been repossessed by the consortium of lenders under SARFAESI Act on December 21, 2015. As the 2 x 210 MW project is stalled and possession being taken over by the lenders, the related asset and the corresponding liabilities has moved out of companies control. It is also expected that the lenders would utilize the realization on the sale of assets relating to the projects for settling their outstanding from the company in full and final manner. Consequent to this the companys ability to service the pared debt will improve substantially. During the financial year 2016-17, the revenue from operation is stood at Nil as compared to Rs. 12.82 Crores for the previous financial year 2015-16. The 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 2016-17, the Other Income stood at Rs. 0.69 Crores as compared to Rs. 5.89 Crores for the previous financial year 2015-16. Finance cost stood at Rs. 45.20 Crores for the financial year 2016-17 as against Rs. 4.09 Crores for the financial year 2015-16.

Depreciation and amortization expenses stood at Rs. 7.09 Crores for the financial year 2016-17 as against Rs. 7.27 Crores for the financial year 2015-16.

Other expenses stood at Rs. 0.50 Crores for the financial year 2016-17 as against Rs. 0.39 Crores for the financial year 2015-16.

Loss before tax is Rs. 431.32 Crores for the financial year 2016-17 and Rs. 686.04 Crores for the financial year 2015-16. Loss after tax for the financial year 2016-17 stood at Rs. 431.32 Crores and Rs. 686.04 Crores for the financial year 2015-16.

6.2 SURANA GREEN POWER LIMITED (SGPL):

SGPL, a 100% subsidiary of Surana Industries Limited, is in the business of Power Generation. SGPL has currently 7 windmills of 1.5MW capacity. 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 to SGPL. The said windmills of SGEL are financed by State Bank of India and IFCI Ventures. The combined outstanding of loans with these two institutions amounts to Rs.43.65 crores. The company had settled the outstanding dues to State Bank of India by selling the property to the prospective buyer. However, the loan relating to M/s. IFCI Ventures are still outstanding and the company is in advance stage of negotiation with various parties for selling the windmill, which is under the loan component of M/s. IFCI Venture, to settle their dues. Accordingly, the said investments have been impaired during the year.

For the Financial Year 2016-17, the Company has not generated any units. During the year there was no turnover as compared to Rs. 0.31 Crs in the previous year ended March 31, 2016.

6.3 SURANA MINES & MINERALS LIMITED (SMML):

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$ 32,020/- on a consolidated basis for the Financial Year 2016-17.

SIL is confident of recovering its complete investment in the company on restarting of mining operations. Accordingly, SIL considers this long term investment in SMML as realizable and consequently no impairment is anticipated.

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 "Annexure A".

UNLOCKING INVESTMENTS IN SUBSIDIARIES

SIL has made total investments of Rs.569.24 Crores in its subsidiaries viz. SPL (Rs. 453.50 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 fl ows 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 and the Shareholders of SIL has 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 view of the above, SIL are in the process of exploring variable options in order to divest the respective stakes held in these subsidiaries as referred above and thus hope to increase the liquidity position of the company and to concentrate on its core business.

7. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has a sound internal control system framed by the expert professional in consultation with the Audit Committee and Statutory Auditors of the Company. 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 Committee. The Management takes immediate corrective 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.

8. CONSOLIDATED FINANCIAL STATEMENTS:

In accordance with the Ind AS 110 - Consolidated Financial Statements read with Ind AS 28 - Invesments in Associates and Joint Ventures. the audited consolidated financial statements is provided in the Annual Report.

9. 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 150 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 registered office of the company. 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 of production. Further to the above, during the financial year 2016-17, the company had fully resolved the labor unrest at Raichur.

10. 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 stakeholders 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 our stakeholders.

A separate compliance certificate on compliance of conditions of Corporate Governance also forms part of the Annual Report. Requisite compliance certificate from the practicing company secretaries of your Company regarding compliance of the conditions of the corporate governance as stipulated under Regulation 34(3) of the SEBI (LODR) Regulation 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.

11. 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 Babu Srinivasan as the Chairman, Smt Agnes Roselind Joseph 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 CSR activities.

Since the company is making losses for the past three years, CSR spend does not apply to the company for the financial year 2016-17. Hence submission of a report on CSR activities does not apply.

12. 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 SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015. The committee comprises of Shri Dineshchand Surana as the Chairman, Shri. Babu Srinivasan and Shri. Agnes Roselind Joseph as its other members.

13. SEXUAL HARASSMENT POLICY:

The Company had adopted the sexual harassment policy as recommended by the Audit Committee of the Board of Directors.

14. 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 Companys 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.

15. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Companies Act, 2013 and rules framed thereunder, 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 Governance Report.

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 30th September, 2016 (date of last Annual General Meeting) on the Companys website (www.suranaind. com), as also on the Ministry of Corporate Affairs website.

16. AUDITORS

STATUTORY AUDITORS

M/s. VDSR & Co, Chartered Accountants, Chennai having Firm Registration Number 001626S, Statutory Auditor of the Company has been appointed for a period of five years starting from the financial year 2015-16 to 2019- 20, subject to ratification of members in the each annual general meeting. Your Board of Directors recommends their appointment as Statutory Auditors to hold office from the conclusion of the 26th AGM till the conclusion of the 31st AGM of the Company.

17. AUDITORS REPORT AND MANAGEMENTS RESPONSE TO AUDITORS OBSERVATIONS

The Auditors have qualified and emphasized certain matters in their report.

Auditors Report – Qualifications & Management response thereof: Standalone Financial Statement:

i. Auditors Qualification:

We refer to the Note No.7 relating to the investment in its subsidiaries Surana Power Limited (SPL). The carrying value of the investment in the SPL as at March 31, 2017 was Rs. 45,350 lakhs. In addition, the Company has also issued a financial guarantee of Rs. 10,000 lakhs to the lenders against the loan taken by the SPL. The net worth of this subsidiary has been fully eroded and its current liability exceeds its current assets. The independent auditor of the subsidiary had given the adverse opinion on its financial statements for the year ended March 31, 2017 stating that going concern assumption is not appropriate and the carrying value of the assets may also be impaired. No provision has been considered by the management for the diminution in the value of the investment in this subsidiary in the likelihood of devolvement of the guarantee on the Company.

Management Response:

Based on the preliminary negotiations with prospective buyers, the company currently is of the opinion that actual realizable value of the current assets of the subsidiary company will be sufficient to discharge its current liabilities. The company is also in discussions with some Financial Institutions who have evinced interest in restarting the project by pumping in additional equity and debt required for completing the project. These discussions are being held at tripartite level between the prospective Financial Institution, Leader of the Consortium and the Company. Consequently, the company does not envisage any prospective devolvement of liability on account of revocation of guarantee. And also, the company has appointed an advisory to revive the operation of the company and to bring the current debts to sustainable levels by negotiating with the consortium of lenders. Accordingly, the company has not made any provision in this regard. The Audit Report for the year ended March 31, 2016 was also modified in respect of the above matter under the previous GAAP (in accordance with the Accounting Standards specified in the Annexure to the Companies (Accounting Standards) Rules, 2006).

ii. Auditors Qualification:

Attention is invited to Note No. 7 regarding investments in Subsidiaries Surana Mines & Minerals Limited (having a carrying value aggregating to Rs. 5,848.26 lakhs) that were approved for divestment due to continuing adverse market scenario which was impacting the survival of the parent Company. This investment is carried at cost and has not been assessed for any impairment to the carrying values.

Management Response:

In view of the ongoing negotiations with the prospective buyers and the lenders and also considering the expected realizable value of the assets the Company will be able to realize the carrying value of the said investments in SMML.

The Audit Report for the year ended March 31, 2016 was also modified in respect of the above matter under the previous GAAP (in accordance with the Accounting Standards specified in the Annexure to the Companies (Accounting Standards) Rules, 2006).

iii. Auditors Qualification:

Inventory as at March 31, 2017 aggregated to Rs.14,878/- lakhs, for which the quantity, quality and realizable value were not assessed and determined by the management. In the absence of evidence for physical existence of inventory as at March 31, 2017 and net realizable value of inventory, we are unable to comment on the adjustment that may be required to the carrying value of the inventory.

Management Response:

During the year the stocks have been provided to the extent of Rs. 6176.37 lakhs arising on account of deterioration, obsolescence and quality issues identified on a scientific and technical basis. The management is of the opinion post the said provisioning the stocks refl ects the realizable value. The Audit report for the year ended March 31, 2016 was also modified in respect of the above matter under the previous GAAP (in accordance with the Accounting Standards specified in the Annexure to the Companies (Accounting Standards) Rules, 2006).

iv. Auditors Qualification:

The financial results for the quarter ended March 31, 2017 have been prepared on a going concern basis in spite of negative net worth after considering the impact of the modifications mentioned in paragraph ( a ) and ( b ) above. The ability of the Company to continue as a going concern is significantly dependent on the successful outcome of the ongoing negotiations with the lenders and therefore, we are unable to comment if the going concern assumption is appropriate and any effect it may have on the financial results for the quarter ended March 2017.

Management Response:

The company was not in a position to restart its operations in Raichur in time due to non release of sufficient working capital funding by the lenders The negotiations with the concerned parties, including the consortium of lenders, are on for restarting the operations of the Raichur Plant. Meanwhile, the company has appointed an advisory to revive the operation of the company and to bring the current debts to sustainable levels by negotiating with the consortium of lenders. Accordingly, the company is of the opinion that the assumption of going concern is appropriate.

v. Auditors Qualification:

The carrying values of the financial assets as at March 31, 2017 are not measured in accordance with the Ind-AS 39 and we are unable to comment on the adjustments that may be required to the carrying values of the financial assets.

Management Response:

The Company has implemented Ind As 39 and as all the necessary provisions on the financial assets and financial liabilities have been recognized, the company is of the view that the financial assets and financial liabilities of the company are represented at fair market value.Financial assets includes long term receivables which are covered under the MOU consisting of definitive repayment schedule wherein the recoveries either in cash or in kind from the said parties is happening as per the schedule and accordingly since these receivables are of nature of financial assets having definitive maturity the statement of the figures is in compliance with Ind AS 39.

vi. Auditors Qualification:

The Company has considered trade receivables outstanding for more than 1 year of Rs. 11,597.36 Lakhs and capital advances of Rs. 6,170.88, as good and recoverable. However, we were unable to confirm or verify, by alternative means, balances of such trade receivables and we are unable to comment on the adjustments that may be required as at March 31, 2017.

Management Response:

The company has treated the capital advances of Rs.6,170.88 lakhs as good and recoverable due to the fact that the said receivables are covered under the MOU consisting of definitive repayment schedule. As far as the trade receivables of Rs. 11,597.36 lakhs is concern it is adequately provided and the same is considered good and fully recoverable.

vii. Auditors Qualification:

Had the provision been made for the financial liability arising out of the guarantee as referred to in paragraph (a) above, had the provision been made for trade receivables and capital advances as referred to in paragraph (b), the loss would have been increased by Rs. 27,768.24 Lakhs and consequently net worth would have been reduced by Rs. 27,768.24 Lakhs respectively.

Management Response:

Covered by responses to the individual items mentioned in (i) and (vi) above

Consolidated Financial Statement:

i. Auditors Qualification:

Attention is invited to Note No 9 relating to 35MW coal fired power plant at Raichur, having a carrying value of Rs. 21,830.49 lakhs as at March 31, 2017 has not been operational since July 2013.

Further UCO Bank has issued a notice on August 19, 2015 under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), for discharge of the entire liabilities relating to the said plant. The Group has not determined the recoverable amount of these assets on March 31, 2016 as required under Ind AS 36 Impairment of Assets. Accordingly, we are unable to comment on the impairment losses, if any, that may arise in respect of the said assets.

Management Response:

ii. Auditors Qualification:

In respect of the 2X210 MW power project at Raichur, Long term loans and advances include dues from subcontractors aggregating to Rs. 4,089.65 Lakhs representing the amounts taken over from the EPC Contractors in an earlier year which are considered good and recoverable by the management. In the absence of any confirmation from / agreement with these parties, we are unable to comment on the adjustments, including provision, if any, that may be required with respect to these advances.

Management Response:

It is submitted that the dues are collectable/adjustable on resumption of project work and no provision is considered necessary.

iii. Auditors Qualification:

Management Response:

iv. Auditors Qualification:

Management Response:

The Company has implemented Ind AS 39 and as all the necessary provisions on the financial assets and financial liabilities have been recognized, the company is of the view that the financial assets and financial liabilities of the company are represented at fair market value. Financial assets includes long term receivables which are covered under the MOU consisting of definitive repayment schedule wherein the recoveries either in cash or in kind from the said parties is happening as per the schedule and accordingly since these receivables are of nature of financial assets having definitive maturity the statement of the figures is in compliance with Ind AS 39.

v. Auditors Qualification:

The Holding Company has considered trade receivables outstanding for more than 1 year of Rs. 11,597.36 Lakhs and capital advances of Rs. 6,170.88, as good and recoverable. However, we were unable to confirm or verify, by alternative means, balances of such trade receivables and we are unable to comment on the adjustments that may be required as at March 31, 2017.

Management Response:

vi. Auditors Qualification:

A subsidiary, Surana Power Limited, has not provided for interest and penal interest on certain borrowings for the year ended March 31, 2017which is estimated at Rs. 5,248.70 Lakhs.

Management Response:

With the takeover of the assets of the project by the lenders the company has not provided for Interest during the current financial year.

vii. Auditors Qualification:

The Consolidated Financial Statements regarding preparation of the financial statements on a going concern basis, notwithstanding the fact that consolidated net worth has fully eroded as on the Balance Sheet date and the current liabilities as per the consolidated financial statements exceed the current assets as on that date.

1. Further, with respect to a component, Surana Power Limited : a. IDBI Bank (the lead bank with respect to the facilities availed by Surana Power Limited) has taken possession of the project assets relating to the 2 X 210 MW power project, having a carrying value of Rs. 1,25,766.86 lakhs as March 31, 2017 under SARFAESI on December 21,2015.Theseprojectassetsaredisclosedundertheheading‘AssetsRepossessedbyLenders.

Consequent to the possession of these assets being taken over by the lead bank, the component ceases to have control over such assets and accordingly no longer qualify as asset. Pending disposal of the project assets by the lead bank for discharge of loan liabilities, we are unable to determine whether there would be any further financial obligation towards settlement of loan liabilities by the component and the components ability to fulfil such obligation, if any. b. As stated in paragraph (b) above, the 35MW coal fired power plant having a carrying value of Rs. 21,830.49 lakhs as at March 31, 2017, which is a subject matter under the SARFAESI Act, has not been operational since July, 2013. Pending any further action by UCO Bank in this regard, we are unable to determine whether the component would be able to recommence its commercial operations in the foreseeable future. c. The independent auditor of the component has given an adverse audit opinion on its financial statements for the year ended March 31, 2017 stating that the going concern assumption is not appropriate and the carrying value of the assets of the subsidiary may also be impaired.

2. The Holding Company has not considered any impairment for the carrying value of the investments in the said component and has also not considered any provision for the likelihood of the devolvement of the financial guarantee of Rs. 10,000/- lakhs provided by it to the lenders of the component. However, in the circumstance mentioned above, in our opinion, the Holding Company should have provided for the obligations relating to the financial guarantee provided by them.

3. The ability of the Holding Company to continue as a going concern is significantly dependent on the successful outcome of the ongoing negotiations with the lenders and therefore, we are unable to comment if the going concern assumption is appropriate and any effect of the measurement and classification of assets and liabilities in the Balance Sheet.

4. The above events indicate that there are multiple material uncertainties for the Group to be able to continue as a going concern and accordingly, in our opinion, the use of going concern assumption is not appropriate.

5. Had the provision been made for the financial liability arising out of the guarantee as referred to in paragraph (ii) above, had the provision been made for trade receivables and capital advances as referred to in paragraph (e) and had the provision been made for interest and penal interest as referred to in paragraph (f) , the consolidated loss would have been increased by Rs. 33,016.94 Lakhs and consequently consolidated networth would have been reduced by Rs. 33,016.94 Lakhs respectively.

Management Response:

For Audit Qualification(s) where the impact is quantified by the auditor, Managements Views:

(i) Based on the preliminary negotiations with prospective buyers, the company currently is of the opinion that actual realizable value of the current assets of the subsidiary company will be sufficient to discharge its current liabilities. Consequently, the company does not envisage any prospective devolvement of liability on account of revocation of guarantee. Accordingly, the company has not made any provision in this regard. (ii) Company could not comply with debt repayment schedule as embedded in the CDR package for want of non release of sufficient working capital funding by the lenders as per the package. Consequently, the company was not in a position to restart its operations in raichur in time and could not adhere to the debt repayment schedule. (iii) As mentioned in response to observation 10(iv) above, there is no non compliance of debt covenants as per the CDR package, since the company has disclosed the said amounts of recompense under contingent liabilities.

The negotiations with concerned parties are on for restarting the operations of Raichur Plant and further, the Operational capabilities of the Gummidipoondi Plant have been improving over the past years. Accordingly, the company is of the opinion that the assumption of going concern is fully appropriate.

INTERNAL AUDITOR

The Board has appointed M/s. K. Balaji & Co, Chartered Accountants, Chennai as the Internal Auditors of the Company pursuant to Section 138 of The Companies Act, 2013 and Rule No. 13 of The Companies (Accounts of Companies) Rules, 2014 for the financial year 2017-18. 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.

COST AUDITOR

The Board of Directors had appointed M/s. JV Associates, Cost & Management Accountants, Chennai (M.No. 6128) as the Cost Auditor of the Company to audit the cost accounting records of the Company for the financial year 2016-17.

SECRETARIAL AUDIT

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"

MANAGEMENTS RESPONSE TO SECRETARIAL AUDITORS OBSERVATION

1. The Company through its Allotment Committee of Board of Directors had allotted 63,91,582 equity shares of Rs 10 each to Shri. Dineshchand Surana, as per the terms and conditions of Corporate Debt Restructuring (CDR) Scheme, however, the company has not listed the shares on the Stock Exchange as it could not be issued in Demat form due to Legal/Technical issue faced with the bankers and the depository participants.

As per the Corporate Debt Restructuring (CDR) Scheme empowered by the CDR Empowered Group (CDR EG), the Allotment Committee of Board of Directors had allotted 63,91,582 equity shares of Rs.10 each @ 72.82 (including a premium of Rs.62.82) to Shri Dineshchand Surana. However, the post issue process of listing of shares are pending with Stock Exchange due to legal/ technical issue pending for approval from consortium bankers.

2. The company has not adopted or filed the Financial Results for the quarter ended 30th September 2016 on or before 14 December 2016 as mandated by the Securities and Exchange Board of India vide circular CIR/CFD/FAC/62/2016 dated 05 July 2016. Since the company had adopted the Ind-AS for the first time, the company had the time till December 14, 2016 for approving the Financial Results for the quarter ended September 30, 2016 in line with the circular no. CIR/CFD/FAC/62/2016 dated 05 July 2016 issued by Securities Exchange Board of India. However, the company could not approve the Financial Results for the Quarter ended September 30, 2016 on or before December 14, 2016 due to casual vacancy in the office of the statutory auditors and the same was intimated to the Stock Exchanges accordingly.

3. The Company has not held the meeting of the audit committee and Board meeting during the third quarter for the financial year 2016-17 due to absence of quorum, on account of the cyclone in Chennai, Tamil Nadu.

The company had held the audit committee and board meeting for the third quarter on December 14, 2016, however the same was adjourned on account of the cyclone in Chennai, Tamilnadu and the same was intimated to the Stock Exchange accordingly.

4. The Company is yet to strictly comply with all applicable provisions of the Secretarial Standards that are in force.

The Company is already in the process of fully complying with the provisions of Secretarial Standards 1 and Secretarial Standards 2.

5. The Company has not filled in the vacancy in the post of Company Secretary and Chief Financial Officer as specified under section 203 of the Companies Act, 2013 and as mandated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015.

The company has appointed the whole time company secretary during the current financial year and Group –CAO of the company is considered to be the Chief Financial Officer of the company as required under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015. The Company is taking all necessary steps to comply with the provisions of Section 203 of Companies Act, 2013.

6. The Company is not regular in filing forms with the Registrar of Companies.

The company is already into the system of filing forms with Registrar of Companies on regular basis.

18. DIRECTORS:

The following changes have occurred in the Board of Directors during the financial year 2016 2017:

18.1 INDUCTION AND RESIGNATIONS

During the Financial Year 2016-17, on recommendations of the nomination and remuneration committee, the Board appointed Smt. Agnes Roselind Joseph as an Additional Director in the category of Independent Director of the Company with effect from June 01, 2016. In continuation to the appointment of Smt. Agnes Roselind Joseph as Additional Director, she was regularized as an Independent Director of the Company at the 25th Annual General Meeting held on September 30, 2016 to hold office for tenure of Five (5) years.

Further, during the Financial Year 2016-17, Shri. Krishna Udupa has resigned as a Non-Executive Director of the Company with effect from September 30, 2016. In addition to this, IDBI Limited had withdrawn his nominee director Shri. Biju George Kozhippattu from the Board of the company with effect from October 21, 2016. The Board appreciates and thanks them for their efforts in driving delivery and quality excellence for the Company. The Board also places on record its gratitude for the services rendered by Shri. Krishna Udupa and Shri. Biju George Kozhippattu during their long association with the Company.

18.2 RE-APPOINTMENTS

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 26th Annual General Meeting, Shri. Dineshchand Surana, Director of the Company is liable to retire by rotation and being eligible offer him selves for re-appointment. The Board recommends his 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 reappointment on passing a special resolution by the shareholders of the Company. Accordingly all independent directors were appointed by the shareholders at the General Meeting as required under Section 149(10). Further, according to sub section (11) of Section 149, no independent 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 General Meeting. 18.3 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 Regulation 16(b) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

18.4 BOARD EVALUATION AND PERFORMANCE EVALUATION OF INDEPENDENT

DIRECTORS

Pursuant to the provisions of Regulation 19(10) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 also 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.

18.5 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 Companys strategy, operations, product and service offerings, markets, organization structure, finance, human resources, technology, quality, facilities and risk management.

18.6 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.

19. DIRECTORS RESPONSIBILITY STATEMENT:

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 Act, 2013: (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 basis; and (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.

20. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

A statement containing the particulars relating to conservation of energy, research and development 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"

21. 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.

22. 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.

23. DEPOSITS

Your Company has not accepted any deposits from the public during the year under review.

24. MEETINGS

During the year Eight Board Meetings and Seven 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.

25. COMMITTEES

Currently, the Board of Directors of the Company pursuant to the mandatory provisions of Companies Act, 2013 has the following committees namely: 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.

26. 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 Regulation 18 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the following is the current composition of Audit Committee:

Name of the Director	Category	Status
Shri. Babu Srinivasan	Non-Executive Independent Director	Chairman
Smt. Agnes Roselind	Non-Executive Independent Director	Member
Shri. Dineshchand Surana	Managing Director	Member

The Board has accepted all the recommendations provided by the Audit Committee.

27. VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has a vigil mechanism/whistle blower Policy to deal with instance of fraud and mismanagement, 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.

28. 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 arms 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 confl ict 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 identification and monitoring of such transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the Companys website at the Weblink: http://www.suranaind.com/related-party-transaction-policy. None of the Directors has any pecuniary relationships or transactions vis--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 Boards Report.

29. ENHANCING SHAREHOLDER VALUE:

Your Company believes that its Members are among its most important stakeholders. Accordingly your companys 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.

30. 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".

31. GREEN INITIATIVES

During fiscal 2016-17, 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 2016-17 and Notice of the 26th 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 2017 and the Notice of 26th Annual General Meeting are sent in the permitted mode. Members requiring physical copies can send a request to the Company.

32. ACKNOWLEDGEMENT

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 Companys 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 cooperation extended by them. The Directors also gratefully acknowledge and thank all financial institutions and banks for their timely support in restructuring the Companys 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
Place: Gummudipoondi	Babu Srinivasan	Dineshchand Surana
Date: August 12, 2017	Chairman	Managing Director
	(DIN: 06608264)	(DIN: 00007032)

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