Facor Alloys Ltd Directors Report.

TO THE MEMBERS

The Directors submit the SIXTEENTH ANNUAL REPORT on the business and operations of the Company together with the Standalone and Consolidated Audited Financial Statements for the year ended 31st March, 2019.

FINANCIAL RESULTS

Rs in Lacs

Particulars Standalone Consolidated
2018-19 2017-18 2018-19 2017-18
Gross Revenue from operations 36,104.24 31,319.97 36,104.24 31,319.97
Other Income 440.44 359.99 852.04 382.50
Total Revenue 36,544.68 31,679.96 36,956.28 31,702.47
Operating expenses 33,256.37 29,668.98 33,306.81 29,745.96
Profit before interest, 3,288.31 2010.98 3,649.47 1,956.51
Depreciation, Tax and Amortization (EBIDTA)
Finance Costs 1,363.63 1,664.36 1,444.09 1,793.98
Depreciation and amortization expenses 217.52 246.94 204.14 295.39
Add : Share of (Loss) of Associates & Joint Ventures (after tax) NA NA - -
Profit/(Loss)before exceptional item and tax 1,707.16 99.68 2001.24 (132.86)
Exceptional item (130.75) (112.51) (130.75) (134.38)
Profit/(Loss) before taxation 1,576.41 (12.83) 1,870.49 (267.24)
Taxation (including 379.31 (302.86) 379.31 (299.04)
Deferred Tax)
Profit/(Loss)after 1,197.10 290.03 1,491.18 31.80
Taxation (PAT)
Other Comprehensive (84.32) 15.27 (591.95) 109.48
Income
Total 1,112.78 305.30 899.23 141.28
Comprehensive Income for the period Comprising profit/(loss) & Other comprehensive Income for the period

During the year under consideration, Company achieved the highest ever production of 82,340 M.T. as against 73,600 M.T. in the previous year recording a surge of 11.88%. The demand for ferro alloys principally is determined by developments within the Stainless Steel industry. The global stainless steel market size was valued at USD 93.69 billion in 2018 and is expected to witness a CAGR of 5.2% from 2019 to 2025. Rising demand from end-use industries such as automotive, oil and gas, and construction is anticipated to propel the growth. Stainless steel caters to demand from various application segments such as building and construction, heavy industries, consumer goods, and others. Stable Stainless Steel industry scenario augurs well for the ferro alloys industry. Exports are at Rs 124.41 crores as against Rs 111.01 crores in the previous year and during the year under review foreign currency earnings in rupee terms was Rs 24.60 crores. The Company derived 34.55% of its total sales from exports.

On account of above and other factors, the profit before tax was at Rs 17.07 crore as compared to Rs 1.00 crore in the previous year.

DIVIDEND

In view of the pooling the funds for OTS with banks the Directors regret their inability to recommend any dividend for the financial year ended 31st March 2019 on Equity Shares of the company.

SHARE CAPITAL

The paid up Equity Share Capital as on 31st March, 2019 is Rs19.55 crores. During the year under review, the Company has not issued any shares. The Company has not issued shares with differential voting rights. It has neither issued employee stock options nor sweat equity shares and does not have any scheme to fund its employees to purchase the shares of the Company.

EXTRACT OF THE ANNUAL RETURN

An extract of annual return for the financial year ended on 31st March, 2019 in Form MGT-9 pursuant to Section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014 is attached as

Annexure-1. The same is available on website of the Company www.facoralloys.com in "Investor" section.

NUMBER OF MEETINGS OF THE BOARD

The Board met four times in FY 2018-19 viz. on 18th May 2018, 11th August 2018, 12th November 2018 and 13th February 2019. The maximum interval between any two meetings did not exceed 120 days.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act, 2013 and implementation requirements of Indian Accounting Standards (‘IND-AS) under Companies Act, 2013 on accounting and disclosure requirements, and as prescribed by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Audited

Consolidated Financial Statements are provided in this Annual Report.

SUBSIDIARIES

Pursuant to Section 129 (3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of the Companys Subsidiaries and Associates (in amended Form AOC-1) is attached to the financial statements as Annexure-2. The company will make available the Annual

Accounts of the subsidiary companies and related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the Company and that of the respective subsidiary companies as well will also be kept open for inspection at the Registered of the Company. Further, the Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to provisions under Section 134 (5) of the Companies confirm: Act,2013,yourDirectorshereby (i) that in the preparation of the annual accounts for the financial year ended 31st March, 2019, the applicable accounting standards read with requirements set out under schedule III of the Companies Act, 2013 have been followed and there are no material departures from the same; (ii) that they have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 for the year under consideration;

(iii) that they have taken proper and the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; (iv) that they have prepared the annual accounts of the

Company for the financial year ended 31st March, 2019 on a going concern basis;

(v) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) that they had devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DECLARATION GIVEN BY INDEPENDENT DIRECTORS

The Independent Directors have given declaration that they meet the criteria specified under Section 149 (6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations).

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The amended Policy of the Company on Directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-Section (3) of Section 178, is attached as

Annexure-3 to this Report.

AUDITORS AND AUDITORS REPORT Statutory Auditors

The Auditors Report to the Shareholders on the Standalone Audited Financial Results for the year under review contains the following qualification :-

The Company has defaulted in repayment of Rs 2104.61 lacs (as on 31st March, 2019) to the Bank of India against devolvement of SBLC amounting to Rs 6089.76 lacs on 3rd August 2015, provided by the bank for the term loan by the overseas lender to one of the overseas subsidiary of the Company. The devolved amount is secured by the first fixedassets of the company chargeonthe by deposit of title deeds in respect of immovable properties. The company has received demand notice dated 20th February, 2017 from the lender of Cati Madencilik Ithalat Ve Ihracat A.S.

(Tier II subsidiary) against the corporate guarantee given by Facor Alloys Limited towards its borrowing amount USD 1.5 million. The lender has offered one time settlement (OTS) vide its letter dated 17.01.2019 for payment of USD 1.188 million.

Management Note :

On the request of Company, Bank of India, Visakhapatnam had issued a SBLC for 10 Million USD in favour of Bank of

India, Jersy for sanctioning a loan of 10 Million USD to Facor

Minerals (Netherlands) B.V., one of the oversea subsidiary of the

Company.

Further SBLC was devolved/invoked due to non re-payment of loan amount to Bank of India by oversea subsidiary due to non operation of the project and the total amount of SBLC was debited to Companys bank A/c by Bank of India, Vizag. For satisfaction of liability to Bank of India including of care the SBLC for obligations of the company and to settle the outstanding amount of Rs 27.05 crores as on 31-03-2019, the company approached to Bank of India, Visakhapatnam, who vide its letter Ref. no. BOI/ VSKP/2019-20/32 dtd.19.06.2019 read with letter Ref. no. BOI/ VSKP/2019-20/34 dtd. 21.06.2019 and no. BOM/VSKP/2019-20/37 dtd. 24.06.2019 communicated its acceptance for proposal of compromise settlement. The salient features of the compromise settlement are given as under:- i) Cut back amount of Rs 4.42 crores received by the BOI up to 31-05-2019 is treated as application money and form part of the OTS amount. ii) Rs 10.00 crores out of outstanding amount of Rs 21.28 crores (Rs 27.05 crores-Rs 5.77 crores towards Cut back amount including Rs 1.35 crore towards incentive for quick payment) is to be paid by 29-06-2019. iii) Balance amount of Rs11.28 crores is to be paid by 18-09-2019 on monthly installments basis. iv) Failure of the company to pay any of the agreed amount as per terms of sanction will terminate OTS proposal and the amount recovered till such date will be treated as normal recovery and the entire contractual amount will be due for payment as if no OTS is agreed and appropriate recovery action to be initiated as per banks norms. The Company has already repaid the amount as per the above schedule and the balance amount may also be cleared by 18-09-2019 as agreed.

Further Company had given a corporate guarantee as a collateral security for USD 1.6 Million in favour of Bank of India, London for borrowings made by Cati Madencilik, Ithalat, Turkey, a step down second level subsidiary.

Cited Corporate Guarantee was devolved/invoked by said bankdue fulfillmentof obligation for payment of interest/ non-repayment of loan amount by overseas subsidiary on due dates on account of non-operation of the project. Further in fulfillment of the guarantee obligations of the company and to settle the outstanding Term Loan amount of USD 1188401.29 of Cati Madencilik Ve Ithalat Ve Ithracat A.S., the company approached to Bank of India, London, who vide its letter Ref.no.LON:ADV:DA:18-19:625 dtd.17.01.2019 communicated its acceptance for proposal of compromise settlement. The salient features of the compromise settlement are given as under:- i) 50% of outstanding USD 1188401.29 amount i.e. USD 594200.29 is to be paid within 15 days from the date of acceptance letter. ii) Balance 50% amount of USD 594200.29 is to be paid in six equal monthly installments of USD 99033.33 each following the month of payment of 1st part (50% of OTS) mentioned in (i) above. iii) In the event of non-payment of the above advised OTS amount as per the advised repayment terms, bank shall continue recovery process against the company and corporate guarantor-Facor Alloys Limited.

The Company has deposited the entire amount of settlement with BOI, Visakhapatnam for onward remittance to BOI, London after compliance of RBI requirements.

Secretarial Auditor reservations or adverse remarks or Thereare noqualifications, disclaimers made in the Secretarial Audit Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

The Company has not provided any guarantee, made a Loan and investment pursuant to Section 186 of the Companies Act, 2013 during the Financial Year.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

There are no contracts/arrangements/transactions which are not at arms length basis and there are no material contracts/ arrangements/transactions which are at arms length basis.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY AFTER CLOSE OF THE FINANCIAL YEAR

There are no material changes and commitments affecting financial position of the company which have occurred between the end of the financial year to which the financial statements relate and the date of the report.

DISCLOSURE OF INTERNAL FINANCIAL CONTROLS

The Internal Financial Controls with reference to financial statements as designed and implemented by the Company are adequate and commensurate with the size and scale of its operation. The internal controls are tested for adequacy, efficiency and effectiveness through audits by the internal auditors and the observations, corrective and preventive actions are reviewed by the management and Audit Committee of the Board of Directors.

During the financial year under review, no material or serious observation has been received from the Internal Auditors of the Company for inadequacy or ineffectiveness of such controls.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNAL

There are no significant and/or material orders passed by the Regulator(s) or Court(s) or Tribunal(s) impacting the going concern status of the Company and its business operations in future.

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

The information required under Section 134 of the Companies

Act, 2013 read with Companies (Accounts) Rules, 2014 are set out in Annexure-4 hereto forming part of this report.

RISK MANAGEMENT POLICY

The Companys Risk Management framework is designed to identify, assess and monitor various risks related to key business and strategic objectives and lead to the formulation of a mitigation plan. Major risks in particular are monitored regularly at

Executive meetings and the Board of Directors of the Company is kept abreast of such issues.

DISCLOSURE AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has formed a Committee and adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder.

CORPORATE SOCIAL RESPONSIBILITY

Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company at the Board Meeting held on 29th May, 2014 approved a Policy on CSR and the Policy was hosted on the website of the Company.

Company is not having average net profits in the immediately preceding three years.

ANNUAL BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and

Regulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Independent Directors at their meeting without the 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 its own performance, the working of its Committees (Audit, Nomination and Remuneration and Stakeholders Relationship Committee) and Independent Directors (without participation of the relevant Director).

TRANSFER OF UNCLAIMED EQUITY SHARES TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF) SUSPENSE ACCOUNT

Pursuant to the provisions of Section 125 of the Companies Act, 2013, the outstanding amount of dividend which remained unpaid or unclaimed for a period of seven years and shares whose dividend was unpaid/unclaimed for seven consecutive years have been transferred by the Company, from time to time on due dates, to the Investor Education and Protection Fund. During the year under review, the Company has credited Rs6,38,495/- to the Investor Education and Protection Fund (IEPF) pursuant to Section 125 of the Companies Act, 2013/ Section 205C of the Companies Act, 1956 read with the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001.

During the year under review, the Company has also transferred 8,05,142 Equity Shares to the Investor Education and Protection Fund (IEPF) relating to 2384 shareholders of the Company, whose dividend were unclaimed/unpaid for seven consecutive years, pursuant to Section 125 of the Companies Act, 2013 read with the Investor Education and Protection Fund (Awareness and

Protection of Investors) Rules, 2001 and the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

The details of shares/shareholders in respect of which dividend has not been claimed and transferred to the IEPF, as required are provided on our website www.facoralloys.com and on the website of the Ministry of Corporate Affairs.

Any person, whose unclaimed or unpaid amount has been transferred by the Company to IEPF may claim his refunds from the IEPF authority. For claiming such amount, claimant needs to file Form IEPF-5 along with requisite documents. The detailed procedure for claiming shares and Dividend Amount is available on the website of IEPF (www.iepf.gov.in).

The Nodal Officer for the purpose of IEPF is Company and the website address is www.facoralloys.com.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Pursuant to Section 177 (9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors had approved the Policy on Vigil Mechanism/Whistle Blower and the same was hosted on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. affirms that no Director/ employee has been Companyhereby denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

FINANCE

The Company has not invited any deposit from public during the year.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

In terms of the provisions of Section 197 (12) of the Companies Act, 2013 read with Rules 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, during the year under review there were no employees receiving remuneration of or in excess of Rs102,00,000/- per annum or Rs 8,50,000/- per month requiring disclosure.

Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annexure forming part of the Annual Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Rohit Saraf, Director, retires by rotation at the forthcoming

Annual General Meeting, and being eligible offers himself for re-appointment.

The terms of Mr. R. K. Saraf, Mr. Ashim Saraf and Mr. Anurag Saraf as Managing Director/Joint Managing Directors was/is up to 31st March, 2019 and 31st January, 2023 respectively. The Board of Directors on the recommendation of the Nomination and Remuneration Committee has re-appointed Mr. R. K. Saraf, Mr. Ashim Saraf and Mr. Anurag Saraf as Managing Director/Joint Managing Directors respectively of the Company for a period of 3 (three) years with effect from 01st April, 2019 subject to approval of shareholders. The first term of office of Mrs. Urmila Gupta as Independent Woman Director, will expire on 12th February, 2020.

The Board has recommended re-appointment of Mrs. Urmila Gupta as Independent Woman Director of the Company for a second term of 5 (five) consecutive years.

The Company has received declarations from Mrs. Urmila Gupta the Independent Woman Director of the Company confirming that she meets the criteria of independence prescribed under the Act and the Listing Regulations.

The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/executives have affirmed compliance with the said code.

SECRETARIAL AUDIT REPORT

The Company has appointed Mr. Umesh Chand Sharma of

Umesh Chand Sharma & Co., New Delhi, Company Secretaries to conduct secretarial audit and his Report on Companys Secretarial Audit is appended to this Report as Annexure-5.

CORPORATE GOVERNANCE

Management Discussion and Analysis, Corporate Governance

Report and Certificate from Practicing Company Secretary regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

AUDIT COMMITTEE

The Audit Committee formed by the Board of Directors of the

Company consists of Mr. K. Jayabharat Reddy, Mr. K.L. Mehrotra & Mr. A.S. Kapre who are Non-Executive Independent Directors of the Company and Mr. R.K. Saraf. Mr. K. Jayabharat Reddy is its Chairman. The Committees role, terms of reference and the authority and powers are in conformity with the requirement of the Companies Act, 2013 and the Listing Regulations.

AUDITORS

Pursuant to provisions of Section 139 of the Companies Act,

2013 read with the Companies (Audit and Auditors) Rules, 2014, M/s K K Mankeshwar & Co., Chartered Accountants (Firm Registration no.106009W) were appointed as Statutory Auditors for a term of 5 years to hold office from the conclusion of 14th AGM held on 20th September, 2017 upto the conclusion of the 19th AGM to be held in 2022.

The statutory auditor has confirmed their eligibility and submitted the certificate in writing that they are not disqualified to hold the office of the statutory auditor.

COST AUDITOR

Mr. Prakash Uppalapati, Cost Accountant has been appointed by the Board as Cost Auditor of the Company to conduct audit of cost records of the Company for the year ended 31st March 2019. Pursuant to the provisions of Section 148 of the Companies Act, 2013 and the Rules made there under,

Members are requested to consider the ratification of the remuneration payable to Mr. Prakash Uppalapati.

The due date for filing of the Cost Audit Report for the financial year 2017-18 was 30th September, 2018. The Company has filed the Report with the Ministry of Corporate Affairs on 29

08-2018.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Board of Directors affirms that the Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India (SS1 and SS2) respectively relating to Meetings of the Board and its Committees which are mandatory in nature.

INDUSTRIAL RELATIONS

During the year under review the overall industrial relations in the Company remained cordial.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors place on record their gratitude for the support and cooperation received from Central and State Governments,

Financial Institutions & Banks, Customers, Suppliers and

Shareholders and for their continued support. The Board also expresses its sincere appreciation to the dedicated and committed team of employees and workmen.

On behalf of Board of Directors,
Place : Noida (U.P.) R.K. SARAF
Dated : 14th August, 2019 Chairman & Managing Director
-