Bihar Sponge Iron Ltd Directors Report.

To the Members,

The Directors have pleasure in presenting the 36th Annual Report of the Company along with audited accounts for the year ended 31st March, 2018.

Financial Parameters 2017-18 2016-17
Sales (Net of Excise Duty) - -
Other Income 704.33 204.15
Profit / (Loss) before Interest, Depreciation & Exceptional Items 402.04 (67.03)
Interest & Finance Charges 39.27 14.97
Depreciation 431.11 434.55
Loss for the year before Exceptional Items 68.34 516.55
Exceptional Items (Net income / (expenditure)) 56.07 139.96
Provision for Tax - -
Loss for the year carried to Balance Sheet 12.27 376.59

OPERATIONS

The Plant is under shut since 9th August, 2013 on account of sudden stoppage of coal supply by Central Coalfields Limited, a Unit of Coal India Limited against long term Fuel Supply Agreement. As per policy of Government of India, no new fuel supply agreements were being entered into with Sponge Iron manufacturers. No alternative arrangement of coal could be made by the Company. The Coal available through online auction by various coal companies were of lower grades and were available at a high price, it was not economically viable for the company to operate with the costlier coal.

Currently the steel market is reviving but the same is not yet stable. The Management expects that the recession phase of the steel market will be over, soon. Some of the sponge iron manufacturing units have started using imported coal for higher productivity. The Company is exploring viability in different combinations and aspects to restart the plant as and when the sponge iron market further improves and the economy in production of sponge iron is visible like optimum combination of using local coal and/or imported coal, whether to operate two small klins with capacity of 100 MT per day each or one big klin with capacity of 500MT per day as well as to restart the plant by the Company or on contract basis, to minimize the overall cost to diversify the business activity in the areas of manufacturing of electrode, wire drawing projects, etc.

In view of the current market development, the Company has entered into a facility user agreement on 1st April, 2017 with a Company specialized in contract manufacturing, wherein part of the plant and machinery shall be operated by the said Company. The said contract manufacturing company is considering to re-start the operations of the Company and evaluating all the options available under present circumstances.

IRON ORE MINE

The Company was allotted Ghatkuri Iron Ore Mine in April, 2007 in the State of Jharkhand with 406.40 hectares of land having estimated reserves of 35.65 million tons. However, the Department of Geology, Ministry of Mines, Government of Jharkhand has conducted the survey and assessed the reserve to be about 11.00 Million tons in its report of February, 2012.

The Terms of Reference (ToR) for Ghatkuri Iron Ore Mine expired on 13th May, 2016 and therefore the company made an online application for extension of ToR for one year (i.e. up to 13th May, 2017) on MOEFCCS Portal.

Ministry of Environment, Forest and Climate Change Impact Assessment Division (MOEFCC) called a meeting on 21-02-2016. The Company has made a representation through MECON to explain the necessity of ToR extension. MOEFCC vide letter dt. 12-04-2016 intimated that the proposal is deferred and be considered after carrying capacity study is completed by Indian Council of Forestry Research and Education (ICFRE).

5 MW POWER PLANT / STEEL PLANT

The Company from the existing power plant generates 5 MW Power based on dolo char being produced in the manufacturing of sponge iron. Since the Company is not able to consume the entire dolo char, the Company has entered into an agreement with G S Phambutor Pvt. Ltd. (GSP) to install a 5 MW Power Plant. Whenever the existing power plant goes under regular maintenance, the Company has to generate power from DG Set, which is highly uneconomical. During such time the Company will take the power from GSP and for the rest of the period GSP will consume the power in induction furnace to produce pencil ingot. The 5 MW power plant is ready to be commissioned. The Company has been informed that once the sponge iron plant starts its operations, the said power plant will be commissioned and steps for setting up induction furnace will be initiated.

CORPORATE SOCIAL RESPONSIBILITY

The Company has been receiving constant demands from employees and local residents for establishment of a higher educational institution, for the development of the area and to create employment opportunities for the residents. Due to lack of basic infrastructural facilities like institutions imparting higher education at Chandil, the attrition of employees was quite high, resulting in substantial loss to the Company. Considering the necessity of providing higher and technical education, the Company has set up a trust for establishment of educational institution named BSIL Umesh Modi Educational Trust. This step has been taken by the Company voluntarily.

DIVIDEND

In view of the loss incurred by the Company, no dividend has been proposed for the financial year ended 31st March, 2018.

FIXED DEPOSITS

During the year under review, your Company did not accept any deposits within the meaning of provisions of Chapter V - Acceptance of Deposits by Companies of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186.

The Company has not given any loans, guarantees or made any investments under Section 186 of Companies Act, 2013 during the financial year 2017-18.

INTERNAL CONTROL SYSTEM

The Company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial disclosures.

NOMINATION AND REMUNERATION POLICY OF THE COMPANY

Pursuant to Section 178 of the Companies Act, 2013 and part D of Schedule II to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of the Company has approved and adopted the Companys Nomination and Remuneration policy. Members interested may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy. The same is also disclosed on the Companys website www.bsil.org.in. Details of the Committee is provided in the corporate governance report annexed with this report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

In compliance of Section 177 (9) & (10) of the Companies Act, 2013 and in terms of Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has set up a whistle blower policy which can be viewed on the Companys website www.bsil.org.in. In terms of the said policy, the Directors and employees are given direct access to the Chairman of the Audit Committee to report on alleged wrong doings. Your Company hereby affirms that no Director/ employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES.

Transactions entered by the Company with Related Parties were in the ordinary course of business and at Arms Length Price. The Audit Committee granted omnibus approval for the transactions (which are repetitive in nature) and the same was reviewed by the Audit Committee and the Board of Directors.

The materially significant transactions with Related Parties during the financial year 2017-18 are within the limits approved by the Shareholders in 35th Annual General Meeting of the Company. Suitable disclosures as required under IND AS - 24 have been made in the Notes to the financial statements.

The policy on Related Party Transactions has been uploaded on the Companys website: www.bsil.org.in. Member may inspect the same at the Registered Office of the Company or write to the Company Secretary for a copy.

The particulars of contract and arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 read with Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are disclosed separately in Form No. AOC -2 as Annexure - D and forms part of this report.

EXTRACT OF THE ANNUAL RETURN

The extract of the Annual Return for 2017-18 in Form No. MGT - 9 is given separately as Annexure - E, which form part of the Boards report.

MANAGERIAL REMUNERATION

The particulars of employees are given in Annexure - F to this report as required under Section 197 (12) of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

SECRETARIAL AUDIT

The Board of Directors of the Company have appointed M/s. R Singhal & Associates, Company Secretaries (PCS Registration No. 10699) as the Secretarial Auditor of the Company in relation to the financial year 2017-18, in terms of Section 204 of the Companies Act, 2013. The Secretarial Audit Report for financial year 2017-18 is in Annexure - G with this report and is available on the Companys website www. bsil.org.in.

The observation in secretarial audit report are self explanatory and therefore do not call for any further explanation. Further due to shutdown of the plant and suspension of operations since 09.08.2013 various dues could not be paid on due dates. Necessary steps are being taken to re-start the Company and payment of all such dues shall be made after re-start of operation of the Company.

DIRECTORS :

A) CHANGES IN DIRECTORS AND KEY MANAGERIAL PERSONNEL

Since last reported, the following changes have taken place in the Board of Directors:

In accordance with the provisions of Section 152 of the Companies Act, 2013 and Article 128 of the Articles of Association of the Company, Mr. Jayesh Modi (DIN: 02849637) retires by rotation and is eligible for re-appointment.

Mr. Satish Kumar Gupta (DIN : 03537417) has been re-appointed as Wholetime Director designated as Director- Works in the Board Meeting held on 18th November, 2017, for a period of 1 year w.e.f. 14th December, 2017, subject to shareholders approval.

Mr. Jagan Nath Khurana (DIN: 00003817), Independent Director of the Company has resigned w.e.f. 25th April, 2018.

Mr. Shiv Shankar Agarwal (DIN: 00004840), was appointed as an Additional Director on 11th May, 2018 by the Board who shall hold the office of Independent Director for a term of 5 years w.e.f. 11th May, 2018 pursuant to section 149 (10) of the Companies Act, 2013 subject to the shareholders approval in 36th Annual General Meeting of the Company.

None of the directors of the Company are disqualified under Section 164 (2) of the Companies Act, 2013. Your directors have made necessary disclosures as required under various provisions of the Companies Act, 2013.

B) DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaration by all Independent Director(s) that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013. The declaration received from the independent directors were placed at the meeting of the Board of Directors of the Company held on 11th May, 2018.

C) FORMAL ANNUAL EVALUATION

Pursuant to the provisions of Section 134 of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Independent Directors at their meeting without participation

of the Non-Independent Directors and Management, considered/evaluated the Boards performance, Performance of the Chairman and other Non-Independent Directors.

The Board subsequently evaluated the performance of Independent Directors as per the criteria laid down and has recommended their continuation on the Board of the Company. The working of its Committees (Audit, Nomination and Remuneration and Stakeholders Relationship Committee) and Independent Directors (without participation of the Director being evaluated) were also evaluated. The criteria for performance evaluation have been detailed in the Corporate Governance Report which is attached as Annexure- B to this Report.

D) NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

The Board of the Company met for five times, i.e., on 29th May, 2017; 29th July, 2017; 13th September, 2017, 18th November, 2017 and 8th February, 2018 during financial year 2017-18.

E) DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to Section 134 (5) of the Companies Act, 2013 the Directors of your Company declare as under:

(a) that in the preparation of the annual accounts, the applicable accounting standard had been followed along with proper explanation relating to material departures;

(b) that 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) that the directors had prepared the annual accounts on a going concern basis; and

(e) that the directors, had laid down and implemented internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

Explanation—For the purposes of this clause, the term "internal financial controls" means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information; and

(f) That 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.

AUDIT COMMITTEE

The composition of an Audit Committee is disclosed in the corporate governance report annexed with this report and forms part of it. Further there has not been any instance where the Board had not accepted any recommendation of the Audit Committee.

AUDITORS:

M/s. K. K. Jain and Co., Chartered Accountants (Firm Registration No.002465N), Auditors of the Company was appointed in 35th Annual General Meeting of the Company till the conclusion of 40th Annual General Meeting. The Company has received a letter from them to the effect that their appointment is within the prescribed limits under Section 139 of the Companies Act, 2013 read with rules made thereunder.

ACCOUNTS AND AUDIT:

Notes to accounts referred to in the Auditors Report are self-explanatory and therefore, do not require call for any further explanation. However the following has not been not been recognized as explained below:

a. Rs. 3,08,439 thousand against currency fluctuation of foreign currency loan has not been recognized as the Company has filed Letters Patent Appellate Jurisdiction (LPA) before the Divisional Bench of High Court of Jharkhand, Ranchi and it is hopeful that the decision will be in favour of the Company.

b. Rs. 21,528 thousands recovered by South Eastern Coal Fields Ltd as penalty on account of short lifting of coal quantity in terms of Fuel Supply Agreement as the matter has been disputed by the Company under writ petition filed before the Honble High Court of Chhattisgarh. It is hopeful that the Company would get the order in its favour.

c. Interest on unsecured loan taken from Promoters and other parties from 10.08.2013 to 31.03.2018 has not been taken on accounts as the Company will apply to the lenders for the waiver of the interest on unsecured loan.

d. Interest on Soft Loan taken from the Government of Jharkhand under the Industrial Rehabilitation Scheme 2003 amounting to Rs. 2,60,044 thousands from 10.08.2013 to 31.03.2018 has not been provided as the Company will make representation for waiver on re-start of the Companys operations.

Further due to shut down of the plant and suspension of operation from 9th August, 2013 the various dues could not be paid on due dates. Necessary steps are being taken to re-start the Company and payment of such dues shall be made after re-start of operation of the Company.

SUBSIDIARY COMPANY

As per Section 2(87) of the Companies Act, 2013 the Company does not have any subsidiary in the financial year 2017-2018.

CORPORATE GOVERNANCE:

A separate report on Corporate Governance is attached as Annexure B to this report. The Auditors Certificate confirming compliance of conditions of Corporate Governance as required under Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is included in the said Corporate Governance Report.

MANAGEMENT DISCUSSION ANALYSIS REPORT

In terms of Regulation 34 read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Management Discussion and Analysis Report is annexed as Annexure - C and form part of this report.

LISTING IN STOCK EXCHANGE:

The equity shares of the Company continue to be listed in the Bombay Stock Exchange and listing fee for the Financial Year 2018-19 has been paid.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information pursuant to Section 134 of the Companies Act, 2013 and rules made there under, a statement giving the required information relating to energy conservation, technology absorption, foreign exchange earnings and outgo is annexed hereto as Annexure-A and form part of this report.

ACKNOWLEDGEMENT:

Your Directors take this opportunity to place on record their sincere thanks to all stakeholders, various departments of Central Government, the Government of Bihar and Jharkhand, Financial Institutions and Banks for their valuable assistance. Your Directors equally acknowledge the trust reposed by you in the Company. The Directors also wish to place on record their appreciation for the all round support and co-operation received from the employees at all levels.

For & on behalf of the Board
S. K. Gupta R. K. Agarwal
Place: New Delhi (Director-Works) (Director)
Date: 11.05.2018 DIN: 03537417 DIN: 00298252