Jayaswal Neco Industries Ltd Management Discussions.
The Directors are pleased to present their 46th Annual Report on the affairs of the Company together with the Audited Financial Statements for the year ended 31st March, 2019.
1. FINANCIAL RESULTS
The summarized financial results for the year vis-a-vis the previous year are as follows:
|(Rs. in crore)|
|Total Revenue (Net)||4,243.94||3,501.94|
|Depreciation and Amortization Expenses||272.68||273.00|
|Profit/(Loss) before tax||(444.03)||(592.05)|
|Profit / (Loss) after Tax carried to Balance Sheet||(443.87)||(491.36)|
Your Company has not carried any amount to reserves and the amount of Loss after tax of Rs 443.87 crore has been carried to Balance Sheet and adjusted against retained earnings.
Due to absence of profits, your Directors regret their inability to recommend declaration of dividend for the year to the Members of the Company.
3. MANAGEMENT DISCUSSION AND ANALYSIS:
Management Discussion and Analysis Report for the year under review giving detailed analysis of the Companys operations, segment-wise performance etc., as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is given herein below and forms part of this report.
A] Financial Performance:
Your Directors wish to inform that the year under review continued to be a challenging one with multiple challenges being faced by the Company on financial and legal front.
The first half of the year was good for the Steel Sector which witnessed robust demand and prices from the end user customers. The second half of the year more particularly from the end of November, 2018 onwards however witnessed sharp slowdown in the Auto Component customers demand due to which the Company was not able to pass on the raw material and other cost increase.
The slowdown in the end user Auto sector was attributed principally due to strict loan disbursal norms by NBFCs & MFIs, market liquidity issues, farm distress, fuel price spurt, stringent pollution control norms, hike in insurance costs, revision in Axle load norms and China Auto sector demand slowdown.
Despite the aforesaid challenges, the Company tried to optimise the production and plant yield through efficient use of its resources. The Companys Net Sales from operations for the year stood at Rs. 4,226.53 Crores and has increased approximately by 21.54% than the previous years Net Sales from operations of Rs. 3477.40 Crores. During the year the Net sales has increased mainly due to increased capacity utilisation of new Steel Making Facility and increase in selling prices of Iron and Rolled products up to November, 2018.
The Company has been focused on selling high-end value-added products (Rolled Products) with applications in automotive and Auto components segment, thereby ensuring that realisations were better. However, with the slowdown in the second half of the year more particularly from the end of November, 2018 the Company had to sell more metallics and low Alloy Steel in the market with lesser margins to ensure cash flows to sustain its operations.
Despite the aforesaid challenges the Company was able to record good earnings (EBIDTA). The Companys Earnings before Interest Depreciation and Tax (EBIDTA) level during the year was at Rs. 540.12 Crores as against Rs. 332.07 Crores for the previous year.
The Net Loss before Exceptional Items and Tax for the year stood at Rs. 444.03 Crores and Net loss after Tax for the year stood at Rs. 443.87 Crores.
During the year, the Net Worth of the Company has decreased to Rs. 699.80 Crores from Rs. 1149.89 Crores in the previous year on account of the losses recorded principally due to less than expected contribution margin to cover the fixed costs (interest and depreciation) on the capitalized projects.
Key Financial Ratios:
Variance over 25% (FY 2018-19 Vs FY 2017-18) with Reasoning:
Debtors Turnover Ratio: The Debtors Turnover Ratio has improved from 6.20 times in FY 2017-18 to 8.70 times in FY 2018-19 with 40.38% variance. The Ratio has improved due to companys effectiveness in collecting its receivables.
Interest Coverage Ratio: The Interest Coverage Ratio has improved from 0.50 in FY 2017-18 to 0.76 in FY 2018-19 with 50.47% variance. The Ratio has improved on account of improvement in EBIDTA due to increase in sale quantity of Rolled Products and increase in overall selling prices and margins during FY 2018-19. In FY 2018-19 the capacity utilization of new Steel Making facility has improved as compared to the last year.
Debt Equity Ratio: The Debt Equity Ratio has deteriorated from 3.18 (As on 31st March, 2018) to 5.14 (As on 31st March, 2019) with 61.61% variance. The Ratio has deteriorated mainly due to decrease in Net worth which is on account of net losses during the period.
Operating Profit Margin (%): The Operating Profit Margin has improved from 8.84% in FY 2017-18 to 12.37% in FY 2018-19 with 39.85% variance. The Improvement in Operating Profit
Rolled Products and increase in overall selling prices and margins during FY 2018-19. In FY 2018-19 the capacity utilization of new Steel Making facility has improved significantly as compared to the last year. The Margin on Rolled products are higher as compared to Iron Products.
Net Profit (Loss) Margin (%) : The Net Loss Margin has improved from -14.13% in FY 2017-18 to -10.50% in FY 2018-19 with 25.68% variance. The ratio has improved due to lesser Net Losses mainly due to improvement in EBIDTA levels.
Return on Net Worth: The ratio has deteriorated from -42.73% to -63.43% with 48.43% variance. The ratio has deteriorated due to reduction in Net Worth in FY 2018-19 due to Net Losses in the current year.
B] Share Capital:
During the year under review the Company has not issued any shares including shares with differential voting rights as to dividend, voting or otherwise nor granted stock option or sweat equity.
C] Segment wise performance for the year under review is as under: i) Steel Plant Division:
The Net Sales from operations during the year has increased to Rs. 3,717.97 Crores as compared to Rs. 3087.20 Crores of the previous year.
The production levels of the Steel Melt Shop during 2018-19 was around 107% of the previous year and the production levels of the Rolling Mills was around 119% of the previous year. The Hot Metal production level was around 107% of the previous year. Pellet production level was around 107% of the previous year. The Sponge Iron production level was around 111% of the previous year.
The Net Sales has increased mainly due to increased capacity utilisation of new Steel Making Facility, pellet plant, blast furnace, sponge iron plants and increase in selling prices of Iron and Rolled products up to November, 2018.
The share of metallics sales value i.e. pig iron, sponge iron and pellets to total Steel Plant division sales was around 29.30% in 2018-19 which is marginally lower (by 0.19%) than that previous year figure of 29.49%. Going forward the Company expects to further increase the production of finished steel in its overall sales by gradually ramping up the capacity utilisation of its new Steel making facility. ii) Castings Division:
The Net Sales from the foundry division has increased to Rs. 508.55 Crores during the year from Rs. 390.20 Crores in the Financial Year 2017-18.
The Automotive Castings Sub Division accounted for around 46%, the Centrifugal Castings Sub Division for around 22%, Engineering Castings Sub Division for around 26% and the Construction Casting Sub Division for around 6% of the total Foundry Division Net Sales.
D] Restructuring of Term Loans and Debt Assignment:
The Company underwent significant financial stress in the last five years due to cancellation of its three captive coal mines which resulted in significant viability issues of the end use Iron and Steel making facilities, payment of additional levy on mined coal as per Honble Supreme Court order, huge dumping of steel in the country which resulted in the low capacity utilisation of its new steel making facilities and unavailability of incremental working capital support due to Reserve Bank of Indias (RBIs) Asset Quality review classifying the Companys accounts as technical Non-performing Asset from back date effect. Hence the Company had requested its then lenders to restructure its debts in the year 2017.
The Companys Debt Restructuring Scheme of the year 2017 had already been sanctioned by 11 out of 12 lenders (around 96% in value) and out of the sanctioned 11 lenders, 10 lenders (Including Lead Bank SBI) had already executed Master Restructuring Agreement (MRA) on 12th December, 2017.
The Company had complied with all the pre-conditions including bringing upfront promoters contribution of Rs. 100.38 Crores, Independent Evaluation Committee (IEC) recommendation to the debt restructuring scheme and getting Investment Grade rating to the residual debt from two Credit Rating Agencies (CRA) CARE & SMERA appointed by SBI (erstwhile Lead Lender) on the instructions of the erstwhile JLF.
The Lenders appointed CRAs i.e. CARE & SMERA had given Investment Grade Rating, however, RBI had appointed India Rating & Research Pvt Ltd (IRRPL), who could not give Investment Grade Rating in only 3 working days (from the RBI appointment date), by the RBI stipulated timeline of 13th December, 2017. The company has contested the matter and it is currently subjudiced.
On the directions of Reserve Bank of India (RBI), which had not agreed to the approved Debt Restructuring Scheme being fully implemented within the stipulated time line of 13th December, 2017, State Bank of India (SBI), the then lead secured lender, had filed an application under the Insolvency and Bankruptcy Code, 2016, against the Company, claiming an amount of Rs. 51383 lakhs is in default as on 30th November, 2017. The matter is currently in pre-admission stage in the National Company Law Tribunal (NCLT), Mumbai.
Being aggrieved by the non-implementation of the approved Debt Restructuring Scheme, the Company had filed
Writ Petition (WP) before the Honble Bombay High Court, Mumbai, against RBI and the other respondents, raising various questions of law and challenging various communications issued by RBI from time to time, which had adversely affected the implementation of the approved Debt Restructuring Scheme of the Company. The Honble Bombay High Court had however dismissed the WP of the company.
The Company then challenged the order of the Honble Bombay High Court before the Honble Supreme Court of India and on 16th April, 2018 the Honble Supreme Court was pleased to issue notice and directed the parties to maintain status quo. The matter is yet to be listed on the bench.
The Company has been regularly servicing its Letter of Credit bills payments, Working Capital interest as per existing sanctioned rates and term loan servicing as per 2017 Debt Restructuring package without getting any benefits of the Debt restructuring implementation as its implementation was stalled on the instructions of Reserve Bank of India to the erstwhile lead Bank State Bank of India to file case against the Company under IBC in NCLT.
Your company sincerely believes and is quite hopeful, to achieve better performance in terms of serviceability of its financial obligations, deployment of capital and resources, etc.
Presently eight out of twelve bankers of the Company with around 94.20% of the Principal Fund Based Outstanding have assigned their debt in favour of Assets Care & Reconstruction Enterprise Ltd (ACRE) acting in its capacity as trustee of various trusts.
During the December, 2018 quarter, four bankers of the Company viz. State Bank of India, Union bank of India,
Punjab National Bank and Indian Overseas Bank have assigned their fund based debt along with underlying financial documents together with their rights, benefits and obligations to Assets Care & Ltd (ACRE) acting in its capacity as trustee of ACRE 54 Trust (for State Bank of India Debt assignment), ACRE 59 Trust (for Union Bank of India Debt assignment), ACRE 64 Trust (for Punjab National Bank Debt assignment) and ACRE 63 Trust (for Indian Overseas Bank Debt assignment) vide Assignment Agreements executed by them in favour of ACRE.
Further during the March, 2019 quarter, further four bankers of the Company viz. IDBI Bank, Central Bank of India, Oriental Bank of Commerce and Bank of India have assigned their fund based debt along with underlying financial documents together with their rights, benefits and obligations to Assets Care & Reconstruction Enterprise Ltd (ACRE) acting in its capacity as trustee of ACRE 68 Trust (for IDBI Bank Debt assignment), ACRE 69 Trust (for Central Bank of India Debt assignment), ACRE 70 Trust (for Oriental Bank of Commerce Debt assignment) and ACRE 76 Trust (for Bank of India Debt assignment) vide Assignment Agreements executed by them in favour of ACRE.
The Company has been actively engaged with ACRE to get its debts restructured and is hopeful to get its Debt
Restructuring scheme finalized and implemented in this financial year.
The Company envisages to ensure timely servicing of its obligations as per the new Debt Restructuring scheme.
The Company, with a view to set up end use projects for its captive coal mines which were although subsequently deallocated, optimize costs, increase the extent of value addition in the long product alloy steel segment, had commenced implementation of various facilities in the State of Chhattisgarh.
All the under-implementation projects of the company have been completed except the 3.0 Lacs TPA DRI Plant (Sponge Iron Plant) & its Associated Captive Power Plant at Bilaspur district in Chhattisgarh.
The said project had been put under abeyance. It was decided in the erstwhile Joint Lenders Forum (JLF) meeting held on 25th April, 2017 that the said project to be kept in abeyance and no further investment to be done in the Sponge Iron Plant & Associated Captive Power Plant unit at Bilaspur by the Company due to its commercial unviability due to cancellation of the captive coal mines of the Company by the Honourable Supreme Court. It was also decided by the JLF forum that the said project would be Non-Core Asset of the Company.
Subsequently, the Directorate of Enforcement in its first attachment provisionally attached the plant and machinery under installation at Dagori Integrated steel plant situated at Bilaspur district to the extent of Rs. 20616 Lakhs and in its second attachment also provisionally attached land at Dagori Integrated steel plant for Rs.2092 Lakhs (apart from Office and Factory Building and Plant and Machinery of the Sponge Iron Plants (350 TPD + 500 TPD) at Steel Plant Division, Siltara, Raipur to the extent of Rs. 8050 Lakhs) for alleged misuse of coal raised from Gare Palma IV/4 coal block at Chhattisgarh.
The Company had challenged the two provisional orders before the Adjudicating Authority. The Adjudicating Authority dismissed the appeals filed by the Company and confirmed the Provisional Attachment Orders. The Company then filed appeal against the orders passed by the Adjudicating Authority, before the ED Appellate Authority. The ED Appellate Authority vide its order issued notice to Directorate of Enforcement and also directed Directorate of Enforcement not to take any coercive steps.
The last hearing in the ED first Attachment matter was done by the ED Appellate Authority on 15th March, 2019 and now the ED first attachment matter had been clubbed by the ED Appellate Authority with the ED second attachment matter and have been put up for hearing on 17th July, 2019.
The Company has a good case on merits, is likely to succeed in refuting the allegations and does not expect any material liability on the Company on this account.
F] Industry Outlook, Developments and Concerns:
India was the worlds second largest steel producer in the year 2018. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore, fines, non-coking coal, strong domestic demand and cost-effective labour. Consequently, the steel sector which is part of the Core Sector has been a major contributor to Indias manufacturing output.
Steel industry and its associated mining and metallurgy sectors have seen a number of major investments and developments in the recent past in India. The Indias National Steel Policy (2017), which projected crude steel production capacity to increase to 300 MT per year by 2030-31, seeks to create a globally competitive steel industry in India and to domestically meet entire demand of high-grade automotive steel, electrical steel, special steels and alloys for strategic applications.
Over the last five years, the output of long products in the country grew at a CAGR of 4.8% and that of flat grew at a CAGR of 3.9%. The output of long products increased to 45 million tonnes and that of flat products rose to 49.8 million tonnes.
The likely growth in the rural economy and infrastructure is expected to lead to growth in demand for steel. Further the Government of India has also launched e-platform which will facilitate sale of finished and semi-finished steel products.
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. The higher consumption is crucially dependent on infrastructure investment from the public and private sources in port, rail and road-led development, more spending by the household and the government in real estate, affordable housing and the smart cities.
The Companys Steel Plant is primarily into Alloy Steel Production. Alloy Steel production is specialty steel production against confirmed orders of various grades, shapes and sizes of Long products. Alloy steel is not a commodity and it has a structured market. The Alloy Steel Industry has witnessed growth rate in India of 6% to 12% in the last decade. Alloy Steel Industry demand comes from - (a) Automobile Industries (Auto Component players and OEMs) (b) Railways (c) Defence (d) Component Export (e) Non-auto segment like electrodes, shafting, cathode bar, etc.
Alloy Steel market is presently approx. 6.5 million ton/annum in the organized sector. Alloy steel production in India is set to rise up to 13 MTPA by FY 2025. Indian Alloy Steel production accounts for 5% share in the global alloy steel production.
The Alloy steel sector has faced headwinds from the end of November, 2018 as the Indian automobile sector continues to be in a slow lane as is evident from March, 2019 volume numbers. The slowdown is principally attributable to the multiple challenges such as increase in the total cost of ownership of vehicles due to mandatory long-term third-party insurance and implementation of stringent safety regulations, higher cost of retail finance, liquidity squeeze with the NBFCs, farm distress, revision in the Axle Load norms and moderate economic activities ahead of elections.
The long-term Auto Sector outlook however continues to be positive, primarily due to the governments focus on construction and infrastructure and increase in mining activities and strong macroeconomic fundamentals of the country.
According to Society of Indian Automobile Manufacturers (SIAM), the commercial vehicle industry is expected to grow by 10 to 12 per cent in FY20. The growth projection is largely based on the expected pre-buying which is anticipated to kick in during H2 FY20 due to implementation of BS VI norms from 1st April, 2020.
The passenger vehicle sales are projected to grow between 3-5 per cent. The two-wheeler segment is expected to grow between 5-7 percent and three-wheeler segment is pegged to grow between 7-9 percent.
Driving this growth will be overall infrastructure and Gross Domestic Product that is estimated to grow at 7 percent during FY20. As per SIAM, the Auto Industry growth will likely to remain intact with positive GDP growth outlook and infrastructure expenditure.
However, despite positive outlook projections, key concerns relating to below normal monsoons, political uncertainty and dipped consumer sentiment continue to be challenges for the auto industry.
As per SIAM, the Indian automotive industry saw marginal increase of 5 per cent at 26,267,783 units in FY19.
The Commercial Vehicle (CV) sector, mostly a cyclical industry, for the first time crossed one million domestic sales mark in FY 18-19, even as the sector struggled in the second half of the fiscal. The segment was mainly driven by demand due to new infrastructure projects and fleet replacement. The H1 of FY19 saw the segment obtaining a strong double-digit growth of 37.82 per cent which shrank to 3.3 per cent in the H2 of the fiscal.
The Company is gradually ramping up the operations of its new Steel Melting Shop and Rolling Mill, however finding market for the products amidst subdued demand and shortage of working capital remain its key concerns.
The Law and order problems in the Iron Ore Mining belts in the State of Chhattisgarh is still continuing to be a matter of concern for the Company creating serious problems for governmental and social machineries, although the company has commenced mining from couple of its iron ore mines .
G] Internal Control Systems:
The Board of Directors of the Company is responsible for ensuring that Internal Financial Controls have been laid down in the Company and that such controls are adequate and operating effectively.
The Company has an Internal Control System, commensurate with the size, scale and nature of its business. Its a risk focused system, analysing and reporting to the management on the day to day operations of the Company.
The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with the operating systems, accounting procedures, policies and rules & regulations at all the locations of the Company.
On the basis of the report of the Internal Audit Department, the respective department or functional head undertakes corrective action in their respective areas and thereby strengthens the controls. The Internal Audit Department presents audit observations and corrective actions thereon to the Audit Committee of the Board.
H] Industrial Relations:
Industrial Relations in all the Divisions of the Company remained cordial and harmonious. During the year, average number of persons working in the Company was around 7806.
I] Material Development in Human Resources, Programs Designed and Undertaken for Development of Human Resource:
The following measures were taken to develop Human Resources in the organization:
i) Performance parameter for PMS evaluation has been modified to TPM target from a conventional balance score card. Improvement project aimed at involving each employee in the process of innovation / excellence in the organisation made mandatory.
ii) To enhance skill set and knowledge level of employees two-pronged action initiated i.e at least attending of two training man-days during the appraisal cycle and imparting two training programs for colleagues/ junior / peer within or outside the department arena.
iii) Awareness on ISO functioning and involvement made obligatory and credits given on the intensity of involvement / participation.
iv) Multi skilling introduced in major production department for horizontal growth of Employees as well bringing flexibility in the work site.
v) As a part of Employee welfare measure, benevolent scheme has been introduced to mitigate the financial hardship of the family member in the event of death of an employee on any account while in service.
vi) Organisation has made a Skill Development centre functional at the plant site for providing employable skill to 170 youth in seven trades to the unemployed and underprivileged youth of Dharsiwa block through the State Government project under the aegis of Mukhya Mantri Kaushal Vikash Yojana.
vii) Company has been bestowed with 4 National level awards in the arena of Human Resource and CSR activities which includes:
1) NIPM National Runners Award-2018 for Best HR Practices and
2) India CSR community initiative service Award 2018 for initiating action on skill development centre for the local youth.
viii) Activated summer internship program for a span of 2 months covering 235 students under summer internship program for the technical and professional colleges of Chhattisgarh.
J] Corporate Social Responsibility:
The Corporate Social Responsibility for our Company entails much more than social outreach programs and is an integral part of the way the Company conducts its business. As a part of the social responsibility and as a good corporate citizen, the Company regularly undertakes various programs and projects with a view to promote and protect a congenial and eco-friendly atmosphere in and around the Plants and Mines. We pledge to serve and contribute to the welfare of the society in general and the surrounding areas of the working site in particular. During the year under review, the Board of our Company approved a comprehensive CSR Budget and as such the CSR activities planned for the financial year 2018-19 as per the recommendation of CSR Committee and since then it is pursuing the CSR programs and projects as per its approved Corporate Social Responsibility Policy.
As part of its initiatives under "Corporate Social Responsibility" (CSR), the Company has undertaken projects and programs in the areas such as Healthcare, Sanitation, Provision of Safe Drinking Water,mitigate Malnutrition, Promotion of Education and Imparting Training, Women Empowerment, Promotion of Traditional Art and Culture, Environmental Sustainability, Development of Rural Sports, Programs and Training for development and upliftment of rural masses especially women, youths and girls and Development of Infrastructural facilities in rural areas. During the year under review some of the CSR activities undertaken by the Company in and around the Plants and Mining areas which are largely in accordance with Schedule VII of the Companies Act, 2013 are as follows:
1. Four numbers of Health & Eye check-up/awareness camp in association with SMC Heart Institute and Research Centre, MGM Eye Hospital and District Health Services etc, two numbers of Blood donation camp with the support of Vilasa Blood Bank, Medicine supply to the poor in the village of Metabodeli, free Ambulance services for needy patients of nearby villages of Mining areas, Construction of a toilet in Chargaon village, Distribution of Garbage Bins for collection of garbage from Schools, Provision of safe drinking water, Installation/repairing of hand pumps, solar water tanks, solar water pumps, submersible pumps and drilling of ten numbers of Borewells in peripheral villages of Mines, water supply by tankers to villages during Summer, distribution of nutritious food and fruits to the malnourished children of mines peripheral villages.
2. Provided Computer Training to five numbers of needy youths, awards and fifty-two numbers of scholarship to academic meritorious students, financial assistance for honorarium to three teachers, distribution of stationaries to the students & computer printer to schools.
3. Organising of Road Safety Awareness program, providing skill development training to 186 unemployed youths of Dharsiwa Block, Raipur.
4. Organized educational tours and free coaching to school children.
5. Organizing sports activities, sports ground maintenance and providing financial assistance and distribution of sports items for promotion of rural /nationally recognized sports.
6. Development of tailoring training center in four peripheral villages of Mines for imparting training to rural women, providing tailoring material and sewing machines to needy women.
7. Protection of ecological balance through landscaping & garden development, tree plantation and distribution of plants.
8. Promotion of traditional art & culture of state through financial assistance to organise traditional cultural programs in peripheral villages and providing various articles and materials in such programs and distribution of blankets to weaker sections of the society including senior citizens, retarded and physically handicapped children, orphans and mobile assistance to blind children.
9. Financial Assistance for local development work, renovation of Government school, installation of solar street lights in villages, construction of Community Hall and Samadhan Kendra in villages, providing Hume Pipes in drains for maintenance of culverts, construction and maintenance of village roads etc.
10. Our company have been conferred with one national and state award each for our CSR notable action in the field CSR.
11. Besides the above, Company has also given financial assistance to the District Collectors CSR fund for the socioeconomic development work in the Raipur district.
Your Directors wish to inform:
i. That as per the provisions of Section 135 (5) of the Companies Act, 2013, Company was not required to spend any amount during the Financial Year 2018-19 on the CSR Activities.
ii. That the CSR Budget for the Financial Year 2018-19 as approved by the CSR Committee and the Board was of Rs. 323.85 lacs.
iii. That during the financial year 2018-19, the actual expenditure incurred by the Company on the CSR activities was of Rs. 220.73 lacs.
During the Financial Year 2018-19, the Company spent Rs. 220.73 lacs on CSR activities and thus has been able to increase the amount spent on the CSR activities during the Financial Year 2018-19 as compared to previous financial years Rs. 209.24 lacs.
The Annual Report on CSR activities is attached as "Annexure A" and forms part of this report.
4. AUDITORS REPORT:
Auditors Report on the financial statements of the Company for the year ended31 st March, 2019 is self-explanatory except a qualification which have been specified herein below along with Boards explanations thereto:
AUDITORS QUALIFICATION (if any)
As mentioned in Note No.18.10 to the Financial Statements, Non-Current Borrowings include an amount of Rs. 230,954.89 Lakhs due to certain banks and Assets Reconstruction Company. During the year, banks holding 94.20% (by value) of the total principal debt, equivalent to Rs. 339353.50 Lakhs, assigned all their rights, title and interests in financial assistances granted by them to the Company in favour of Assets Care & Reconstruction Enterprise Limited, acting in its capacity as Trustee of eight different Trusts (ACRE). Until the revised terms and condition will be agreed between the Company and ACRE, the arrangement with those banks are valid and as per the arrangements with those banks, the Company is required to comply with certain covenants as referred in the said note and non-compliance with these covenants may give rights to the banks/ACRE to demand repayment of the loans. As at 31st March, 2019, the Company has not complied with certain covenants and they have not been provided with any confirmation from those lenders for extension of time to comply with these covenants. The Company has not classified these liabilities as current liabilities as required by Indian Accounting Standards (Ind AS) 1 - "Presentation of Financial Statements".
EXPLANATION TO AUDITORS QUALIFICATION (if any)
Your Directors submit the following explanation to the above qualification of the Auditors:
"The Management is of the view that the non-compliance of the loan covenants will not affect the continuity of the Companys operations. It has been actively engaged with its lead lender-ACRE ARC to get its debts restructured and is hopeful to get it finalized this year. Hence the Company continues to classify these borrowings as non-current."
5. DIRECTORS AND KEY MANAGERIAL PERSONNEL:
During the period under review, the Members at the 45th Annual General Meeting of the Company, pursuant to the provisions of Sections 149, 152 read with Schedule IV of the Companies Act, 2013 consented to the appointment of Shri Rajendra Prasad Mohanka (DIN 00235850) as an Independent Director of the Company not liable to retire by rotation for the period of 5 (Five) years w.e.f. 27th July, 2018 and also approved the continuance of Shri Basant Lall Shaw as the Director of the Company liable to retire by rotation and continuance of Shri Darshan Kumar Sahni as an Independent Director of the Company for the remaining tenure upto 21st September, 2021.
On 10th of September, 2018, IDBI Bank Limited withdrew the nomination of Smt. Kanika Sharma (DIN 07902750) and appointed Smt.Vaishali Nemlekar (DIN 02474433) as its nominee.
In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Shri Basant Lall Shaw (DIN 00249729), Chairman of the Company is liable to retire by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment.
Pursuant to provisions of Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Shri B. K. Agrawal is to be re-appointed as an Independent Director of the Company not liable to retire by rotation to hold office for further 5 (Five) consecutive years w.e.f. 22nd September, 2019 subject to approval of shareholders in the ensuing Annual General Meeting of the Company.
Necessary information on the Director(s) seeking appointment/ reappointment will be given in the Notice of the ensuing Annual General Meeting.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under Section 149 (6) of the Companies Act, 2013 and the SEBI Listing Regulations.
KEY MANAGERIAL PERSONNEL
The following are the Key Managerial Personnel of the Company:
i) Shri Arbind Jayaswal (DIN 00249864), Managing Director and Chief Executive Officer (Foundry Division),
ii) Shri Ramesh Jayaswal (DIN 00249947), Joint Managing Director and Chief Executive Officer (Steel Plant Division),
iii) Shri P. K. Bhardwaj (DIN 03451077), Executive Director and CFO,
iv) Shri Megh Pal Singh (DIN 02635073), Executive Director (Steel) and Chief Operating Officer (Steel Plant Division) and
v) Shri Vikash Kumar Agarwal, Company Secretary and Compliance Officer.
The Board of Directors of the Company is committed to get its performance evaluated in order to identify its strengths and areas in which it may improve its functioning. To that end, the Nomination and Remuneration Committee has established the process for evaluation of performance of Directors including Independent Directors, the Board and its Committees. The evaluation of performance of Executive Directors is done by Independent Directors.
The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria and process for performance evaluation of the Non-Executive Directors and Executive Directors through questionnaire to judge the knowledge to perform the role, time and level of participation, performance of duties, professional conduct, independence etc. The appointment/re-appointment/ continuation of Directors on the Board shall be based on the outcome of evaluation process.
During the year under review, as per the policy for the performance evaluation, formal evaluation of performance of Directors including Independent Directors, the Board and its Committees was made by the Independent Directors and the Nomination and Remuneration Committee in their respective meetings and the evaluation result was placed before the Board for its information and consideration.
The Company has a policy for selection and appointment of Directors, Key Managerial Personnel and Senior Management Personnel and for determination of their remuneration. The Nomination & Remuneration Policy details are stated in the Corporate Governance Report.
During the year 4 (Four) Board Meetings and 4 (Four) 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 / SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
RELATED PARTY TRANSACTIONS:
During the period under review, all related party transactions that were entered were on an arms length basis and were in the ordinary course of business. As a matter of abundant precaution, the transactions between the Company and one of its related parties M/s. NSSL Private Limited during the financial year 2018-19 and 2019-20 has been duly approved by the shareholders of the Company as it has exceeded the limits prescribed under Section 188 of the Companies Act, 2013. 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 conflict with the interest of the Company at large.
The policy on Related Party Transactions duly approved by the Board on the recommendation of the Audit Committee has been posted on the Companys website.
6. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is attached as "Annexure B" and forms part of this report.
7. PARTICULARS OF EMPLOYEES:
The information required pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended in respect of employees of the Company forming part of Directors Report is given in "Annexure F" to this Report.
8. SUBSIDIARY COMPANY AND ASSOCIATE COMPANY:
During the period under review, the Company did not have any Subsidiary Company. Further, Statement in respect of Maa Usha Urja Limited, an Associate Company under Section 129 of the Companies Act, 2013, read with Rule 5 of the Companies (Accounts) Rules, 2014 in Form AOC-1, is attached as "Annexure C" and forms part of this report. The Company has formulated a policy for determining material subsidiaries and the said policy has been posted on the website of the Company.
9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.
10. CORPORATE GOVERNANCE REPORT:
The report on Corporate Governance as stipulated under Regulation 34 (3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 along with the requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance is appended and forms a part of this report.
11. RISK MANAGEMENT:
The Company has a comprehensive Risk Management framework in place to identify, assess, monitor and mitigate various risks to the business.
The Risk Management Committee and the Board periodically reviews the Companys risk assessment and Action taken report as per the Risk Management Policy and Plan to ensure that the Management identifies, and controls risks through a properly defined framework.
12. VIGIL MECHANISM / WHISTLE BLOWER MECHANISM:
The Company has established a Vigil Mechanism that enables the Directors and Employees to report genuine concerns. The Vigil Mechanism provides for (a) adequate safeguards against victimization of persons who use the Vigil Mechanism; and (b) direct access to the Chairperson of the Audit Committee of the Board of Directors of the Company in appropriate or exceptional cases. Details of the Vigil Mechanism Policy are made available on the website of the Company and have also been provided in the Corporate Governance Report forming part of this Report.
13. DIRECTORS RESPONSIBILITY STATEMENT:
As required under section 134 (3) (c) of the Companies Act, 2013, your Directors confirm and state: year ended 31
a. that in the preparation of the annual financial st March, 2019, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;
b. that such accounting policies as mentioned in Note 1 of the Notes to the Financial Statements have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2019 and of the profit and loss of the Company for the year ended on that date;
c. that proper and sufficient care has been taken for 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 fraud and other irregularities;
d. that the annual financial statements have been prepared on a going concern basis;
e. that proper internal financial controls have been in place and that the internal financial controls are adequate and have been operating effectively;
f. that systems to ensure compliance with the provisions of all applicable laws have been in place and are adequate and operating effectively.
14. INTERNAL FINANCIAL CONTROL SYSTEMS:
The Company has formulated its SOPs & Policies related to Internal Financial Control over Financial Reporting.
There are sufficient controls and checks and balances established for all the material transactions. The Company has also fixed process flows for all the transactions. The Company has also designed strong Management Information System (MIS) for proactive controls and monitoring. reference to Financial Statements. During the TheCompanyhasin placeadequate internal financial year, such controls were operating effectively.
15. EXTRACT OF ANNUAL RETURN:
The particulars forming part of the extract of the Annual Return in Form MGT - 9 is attached as "Annexure D" and forms a part of this report.
The Joint Statutory Auditors M/s. Pathak H. D. & Associates, Chartered Accountants, Mumbai, and M/s. Naresh Patadia & Co., Chartered Accountants, Nagpur hold office for the Meeting (AGM) held on 29th September, 2016 and the Annual General Meeting (AGM) held on 27th September, 2017 respectively.
17. COST AUDITOR:
In pursuance of Section 148 of the Companies Act, 2013, your Directors appointed M/s. Manisha & Associates, Cost Accountants, Nagpur to conduct the Audit of the Cost Accounting records for the financial year 2018-2019.
The Board of Directors of the Company on the recommendation of the Audit Committee, at its meeting held on 22nd May 2019 has re-appointed M/s. Manisha & Associates as the Cost Auditors of the Company, to conduct the Audit of the Cost Accounting records for the financial year 2019-2020 on the remuneration of Rs. 1,43,750 /- plus applicable taxes and reimbursement of out of pocket expenses at actuals. As required under Section 148 (3) of the Companies Act, 2013 read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014, the remuneration payable to the Cost Auditors istoberatifiedby the shareholders. Therefore, the Board of Directors recommend the remuneration payable to M/s. Manisha & Associates, Cost Auditors for the financial year 2019-20 for the ratification by the Members at the ensuing Annual General Meeting.
18. SECRETARIAL AUDITOR:
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Board appointed M/s. R. A. Daga and Co., Company Secretaries, Nagpur to conduct Secretarial Audit for the financial year 2018-19.
The Board of Directors of the Company on the recommendation of the Audit Committee, at its meeting held on 22nd May, 2019 has re-appointed M/s. R. A. Daga and Co., Company Secretaries, Nagpur to conduct Secretarial Audit for the financial year 2019-20 on the remuneration of Rs. 46,000 /- plus out of pocket expenses at actuals. The Secretarial Audit Report for the financial year ended 31st March, 2019 in Form MR-3 is attached as "Annexure E" and forms part to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.
19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS or material orders were Nosignificant passed by the Regulators or Courts or Tribunals which impact the going concern status and Companys operations in future.However,theothersignificantand material orders passed by the Regulators/Courts/Tribunals have been covered under points 3 (D) Restructuring of Term Loans, 3 (E) Projects and 20 (2) of this Report.
Your Directors state that during the year under review:
1. The Company had no deposits covered under Chapter V of the Companies Act, 2013.
2. The Company Petition No.11 of 2015, under section 434 of Companies Act, 1956, was filed before the Bombay High Court, Nagpur Bench, Nagpur by Corporate Ispat Alloys Limited (CIAL), through its Director, Shri Manoj Kumar Jayaswal, against the Company (JNIL) claiming an amount of Rs. 1,02,26,78,728/- as payable to CIAL.
The Company has challenged the maintainability of the winding up petition and presently the hearing in the matter has been completed. The Petition is still at pre-admission stage.
Further the Company had filed a civil suit claiming a sum of Rs. 70027.00 lakhs from CIAL towards the loss suffered by it due to delay/with holding the merger of StripMillDivisionofCIALwith which is pending before the Honble Civil Judge Senior Division, Nagpur.
3. No cases have been filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. There has been no incidence/complaint related to sexual harassment of women at workplace during the period under review.
4. The Company has complied with the applicable Secretarial Standards under the Companies Act, 2013.
Your Directors place on record, their sincere appreciation and gratitude for all the co-operation extended by Government Agencies, Lenders, Financial Institutions, Business Associates and Shareholders. The Directors also record their appreciation for the dedicated services rendered by all the Executive Staff and Workers of the Company at all levels in all units and for their valuable contribution in the working of the Company.
|For and on behalf of Board of Directors|
|Date: 22nd May, 2019||Arbind Jayaswal||P.K. Bhardwaj|
|Place: Nagpur||Managing Director &||Executive Director & CFO|
|CEO (Foundry Division)||(DIN 03451077)|