JSW ISPAT Steel Ltd Merged Directors Report

JSW ISPAT STEEL LIMITED ANNUAL REPORT 2011-2012 DIRECTORS REPORT Your Directors present the twenty-seventh Annual Report on the operations of your Company, together with the standalone and consolidated audited financial results for the year ended 30tn June 2012. FINANCIAL RESULTS (Rs. in Crores) Standalone Consolidated Yearended Yearended Yearended Yearended Revenue from operations 12123.55 8994.64 12123.55 8994.64 Less: Excise Duty 1019.44 763.43 1019.44 763.43 Revenue (net) from Operations 11104.11 8231.21 11104.11 8231.21 Other Income 424.24 319.78 424.24 320.42 Total Income 11528.35 8550.99 11528.35 8551.63 Total Expenditure 10335.16 7901.56 10335.41 7902.75 Profit before Interest 1193.19 649.43 1192.94 648.88 and Finance costs and Depreciation Less: Interest and Finance 1076.00 1022.91 1076.01 1022.91 costs Profit/(Loss) before 117.19 (373.48) 116.93 (374.03) Depreciation Depreciation 626.83 596.26 626.83 596.26 Profit/(Loss) before (509.64) (969.74) (509.90) (970.29) Tax and Exceptional Items Add: Exceptional Items 586.46 1180.62 533.02 1247.06 Profit/(Loss) before tax (1096.10) (2150.36) (1042.92) (2217.35) Tax Expenses: - Current Tax - - - - - Deferred Tax Charge/ (779.18) (344.48) (779.18) (344.48) (Credit) Total Tax Expenses (779.18) (344.48) (779.18) (344.48) Loss after tax (316.92) (1805.88) (263.74) (1872.87) Profit on disposal/ - - 0.10 0.58 cessation of subsidiary Net Profit/(Loss) (316.92) (1805.88) (263.64) (1872.29) Add: Balance brought forward (3940.11) (2134.23) (4014.14) (2141.85) from previous year Amount carried to next year (4257.03) (3940.11) (4277.78) (4014.14) a. Standalone Results Revenue from operations during the year under review was Rs. 12123.55 Crores representing growth of 35% over previous year. Profit before interest and finance costs and depreciation was k 1193.19 Crores. After providing for interest and finance costs of Rs. 1076.00 Crores, profit before depreciation was Rs. 117.19 Crores, compared to loss before depreciation of Rs. 373.48 Crores during the previous year, registering marked improvement in operations during the year. After providing for depreciation of Rs. 626.83 Crores, loss before considering exceptional items was Rs. 509.64 Crores. Exceptional items (details of which are set-out in Note No. 28 of the Notes forming part of the accounts) aggregating to Rs. 586.46 Crores have been provided for in the accounts and, consequently, loss before tax was Rs. 1096.10 Crores. After considering Deferred Tax Credit of Rs. 779.18 Crores, net loss during the year under review was Rs. 316.92 Crores. The loss is proposed to be carried to next years accounts. b. Consolidated Results In terms of the Consolidated Financial Statements for the year under review, Revenue from operations was Rs. 12123.55 Crores. Profit before interest and finance costs and depreciation was Rs. 1192.94 Crores. After providing for interest and finance costs of Rs. 1076.01 Crores, profit before depreciation was Rs. 116.93 Crores. After providing for depreciation of Rs. 626.83 Crores, loss before exceptional items was Rs. 509.90 Crores. Considering exceptional items of Rs. 533.02 Crores, loss before tax was Rs. 1042.92 Crores. After considering Deferred Tax Credit of Rs. 779.18 Crores, loss after tax was Rs. 263.74 Crores. In accordance with Accounting Standard (AS) 21 Consolidated Financial Statements, the audited Consolidated Financial Statements are provided in the Annual Report. DIVIDEND In view of the accumulated losses, the Board of Directors does not recommend any dividend on the Equity Shares. The Board of Directors does not declare dividend on the Cumulative Redeemable Preference Shares. OPERATIONS Production of Hot Rolled Coils at 2.48 Million MTs was higher by 13% compared to the previous year. Production of Direct Reduced Iron (Sponge Iron) at 1.27 Million MTs and production of Hot Metal at 1.59 Million MTs were respectively higher by 5% and 17% compared to previous year. Availability of administered price gas and natural gas continues to be extremely restricted with consequent severe adverse impact on input prices and production of Direct Reduced Iron. Production of Cold Rolled Steel Coils/Sheets and Galvanized Coils/ Sheets was higher at 0.33 Million MTs and 0.26 Million MTs, respectively, compared to previous year. Sales of Hot Rolled Coils at 2.50 Million MTs was higher by 20%, compared to previous year. Sales of Galvanized Coils/Sheets at 0.23 Million MTs was higher by 117% compared to previous year. Sales of PVC Coated Sheets at 0.06 Million MTs had improved by 21 % compared to previous year. While prices of coke and coal had moderated, cost of iron ore and pellets had increased substantially during the year under review. As a result, steel production cost had registered marked increase during the year. Various initiatives have been undertaken for improving operating efficiencies and also ensuring raw material security. The Company has undertaken rolling of thinner gauge coils upto 1.22 mm, which would result in multiple product applications. Alternate cost-effective sources of supply have been identified for critical inputs, such as iron ore, coke etc. During the year, Maharashtra State Electricity Distribution Company Limited (MSEDCL) had accorded open access permission to the Company for wheeling of 220 MW power from one of the units (captive to the Company) of JSW Energy Limited. The approval was granted during January, 2012 and the Company has entered into an Energy Wheeling Agreement with JSW Energy Limited to ensure availability of power supply on long term basis. The Company has, therefore, been receiving power from JSW Energy Limited since January, 2012 and excess power, if any, is sold to MSEDCL. Consequently, the Company has been able to achieve valuable savings in cost of power. Due to depreciation in value of Indian Rupee against foreign currencies, the Company had incurred net foreign exchange fluctuation loss of Rs. 379 Crores during the year on operating balance/forward exchange contracts and Mark-to-Market position on derivative contracts. EXPORTS Global steel demand has been slack due to negative economic indicators in various economies. Export earnings during the year under review was X 138 Crores, signifying reduction of 72% over the previous year. The Company would continue to integrate its export strategies with global steel demand conditions. ECONOMIC SCENARIO Global economy continues to be volatile and faces constraints owing to the Eurozone debt crisis and the slow recovery of US economy. There has been a marked deterioration in the overall environment in Europe leading to sharp contraction in steel demand. US economy, meanwhile, has been registering slow growth and demand for steel is expected to improve. Chinese GDP growth appears to have moderated, though its economy is expected to benefit in 2013 due to the easing of credit conditions and fresh investments in large projects. Indian GDP is widely expected to grow by 6% during the current year. Indian economy is facing an outflow of investment funds, lower industrial production and delays in start-up of major privately-financed projects. Manufacturing output is lower by 4% year-to-year. Current account deficit is a major concern and the Indian Rupee has weakened sharply. Inflationary threat looms large and limits the ability of Reserve Bank of India to reduce interest rates. Policy initiatives aimed at speeding-up of infrastructure projects are likely to accelerate steel demand in the country. Steel prices have been depressed owing to overall global economic condition. Steel capacity utilization has been below 80% and margin continues to remain under intense pressure. Iron ore and coking coal prices, however, remain stable and the volatility witnessed in the previous year appears to have moderated. PROJECTS Speedy progress is being made in implementation of the Companys planned projects, namely, power plant of the capacity of 55 MW, lime calcining plant of the capacity of 600 Tons per day, railway siding at Dolvi steel complex and the second colour coating line of the capacity of 0.1 Million Tons per annum at Kalmeshwar complex. The lime calcining plant, railway siding and second colour coating line are scheduled to be completed during the current financial year of the Company. The power plant is likely to be commissioned during the first quarter of next fiscal. The coke oven project of the capacity of 1 Million Tons per annum being set up at the Companys Dolvi steel complex, through a Special Purpose Vehicle company, is expected to be commissioned by March 2014. Financial closure has already been achieved and project activities are presently in progress. Iron ore pellet project of the capacity of 4 Million Tons per annum is also being set-up at the Companys Dolvi steel complex, through a Special Purpose Vehicle company. The project is expected to be commissioned by September, 2014. Additionally, the Company is planning to install a 6 Hi Mill of the capacity of 0.2 Million Tons per annum at its Kalmeshwar complex. Addition of the mill would increase coating volume by over 15000 MTs per month by utilising existing coating capacities. The project is expected to be commissioned by December 2013. SUBSIDIARY COMPANIES During the year under review, the Company has acquired the entire outstanding equity shares of Peddar Realty Private Limited and, consequently, Peddar Realty Private Limited has become a wholly-owned subsidiary of the Company effective 16th May, 2012. The equity shares have been acquired with a view to ensure, inter-alia, higher degree of control over the amount due by Peddar Realty Private Limited to the Company. During the year under review, the Company divested its equity holdings in Ispat Jharkhand Steels Limited, since the Memorandum of Understanding entered into by Ispat Jharkhand Steels Limited with Government of Jharkhand for setting-up an integrated steel plant is not being pursued. Consequently, Ispat Jharkhand Steels Limited ceased to be a subsidiary of the Company effective 29th June, 2012. In terms of the general exemption granted by Ministry of Corporate Affairs, Government of India, vide General Circular No. 2/2011 dated 8th February, 2011, the Balance Sheet and Profit and Loss Account of the Companys subsidiaries for the financial year ended 31s March, 2012 are not being attached. The requisite information, in terms of the aforesaid General Circular, are contained in the Consolidated Financial Statement of the Company and its subsidiaries. The aforesaid Annual Accounts of the subsidiaries and the related detailed information shall be made available to any member of the Company or its subsidiary companies, upon request. The Annual Accounts of the Subsidiary Companies will also be kept open at the Registered Office of the Company as well as the Registered Offices of the Subsidiary Companies, for inspection by any member. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements of the Company and its subsidiaries, prepared and presented in accordance with Accounting Standard (AS) 21, are attached to and form part of the Annual Report. DEBT REFINANCING AND EXIT FROM CORPORATE DEBT RESTRUCTURING SCHEME The Company has exited from the Corporate Debt Restructuring Scheme effective September, 2011, upon arranging refinance of the CDR debts. The debt consolidation undertaken by the Company helps in creating a simple and uniform security structure, under a consortium arrangement. REDEMPTION OF 12% AND 10% CUMULATIVE REDEEMABLE PREFERENCE SHARES (CRPS) During the year, the Company has fully redeemed the 12% Cumulative Redeemable Preference Shares (CRPS) amounting to Rs. 328.31 Crores and 10% CRPS amounting to Rs. 155.11 Crores, pursuant to approval granted by CDR Empowered Group and consent of the CRPS holders. ISSUE OF EQUITY SHARES, UPON EXERCISE OF CONVERSION OPTION BY LENDERS During the year, the Company has allotted 13,00,31,371 equity shares of the face value Rs. 10 each, on preferential basis, at a premium of Rs. 4.74 each to the CDR lenders of the Company, upon conversion of their loans into equity shares. This has resulted in increase in Equity Share Capital by Rs. 130.03 Crores and Securities Premium Account by Rs. 61.63 Crores, aggregating to Rs. 191.66 Crores. SHIFTING OF REGISTERED OFFICE OF THE COMPANY The Company proposes to shift its Registered Office from the State of West Bengal to the State of Maharashtra. Requisite approval has already been obtained from the shareholders of the Company. Necessary action has been initiated for obtaining approval of the relevant regulatory authorities. DIRECTORS As earlier reported, Mr. B K Singh, Whole-time Director designated as Executive Director (Steel Plant) has been re-designated as Chief Executive Officer with effect from 22nd July, 2011. The nomination of Mr. M Sankaranarayanan as Director on the Board of the Company was withdrawn by UTI with effect from 4th October, 2011. The nomination of Ms. Manju Jain as Director on the Board of the Company was withdrawn by IFCI Limited with effect from 10th October, 2011. The Board of Directors wish to place on record its appreciation for the valuable services rendered by Mr. M Sankaranarayanan and Ms. Manju Jain during their tenure as Directors of the Company. Mr. Vinod Mittal relinquished office as Executive Vice Chairman of the Company with effect from 20 June, 2012. However, Mr. Vinod Mittal continues to be non-executive Vice Chairman of the Company. Mr. Suhail Nathani, who was alternate to Mr. Pramod Mittal, ceased to be an Alternate Director with effect from 11th October, 2011. Mr. Pramod Mittal, Mr. Vinod Kothari and Mr. Haigreve Khaitan, Directors, retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that:- (i) in the preparation of the annual accounts for the financial year ended 30th June, 2012, the applicable accounting standards have been followed and there have been no material departures; (ii) the Directors have selected such accounting policies and applied them consistently and made judgements 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 or loss of the Company for the year; (iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and (iv) the Directors have prepared the annual accounts for the financial year ended 30th June, 2012 on a going concern basis. AUDITORS The Auditors, M/s S R Batliboi & Co., Chartered Accountants, retire at the ensuing Annual General Meeting and have expressed their willingness to be re-appointed. The Company has obtained a letter from the Auditors to the effect that the re-appointment, if made, will be in conformity with the limits specified in Section 224 (1B) of the Companies Act, 1956. AUDITORS REPORT The Auditors in their report have, while drawing attention to Note No.15 of the Notes forming part of the accounts for the year, commented on their inability to express any opinion on the virtual certainty of achieving the future profitability projections made by the Company and the consequential impact, if any, on Deferred Tax Asset recognized in the said accounts. The Auditors, in their statement under Companies (Auditors Report) Order, 2003 annexed to the aforesaid Report, have observed the following;- a. The Companys accumulated losses at the end of the financial year are more than fifty percent of its net worth and it has incurred cash losses in the current and immediately preceding financial year. b. The Company has delayed in repayment of working capital dues to banks during the year to the extent of Rs. 771.77 Crores (the delay in such repayments for more than 15 days is Rs. 174.64 Crores). However, no such dues were in arrear as at the balance sheet date. The Company did not have any outstanding dues of debentures during the year. c. Short term funds to the extent of Rs. 1689.04 Crores, have been used in funding of a portion of accumulated losses and deferred tax assets. In the opinion of the Board of Directors, based on various measures taken by the Company for enhancing operating efficiency, tie-up of reliable alternate source of power and critical inputs, setting-up of crucial projects aimed at achieving raw material integration and major savings in input costs as weli as the future profitability projections, the Company is virtually certain that there would be sufficient taxable income in the future, to claim the Deferred Tax Credit. Further, the Board of Directors informs that:- a. Pursuant to the provisions contained in Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985, the Company has reported to Board for Industrial and Financial Reconstruction the fact of erosion of more than fifty percent of its net worth, as at 30th June, 2010, compared to the peak net worth during the immediately preceding four financial years. b. Delays in repayment of working capital dues to banks were due to mismatches in cash flows; however, there is no such due in arrear as at the Balance Sheet date. c. The observations arise out of consideration of Deferred Tax Assets (net) as application of funds for long-term purposes. Deferred Tax Asset, being non-cash flow impacting, there is no usage of short-term funds for long- term purposes. CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, the Management Discussion and Analysis and Corporate Governance Report together with the Certificate from the Auditors of the Company confirming compliance of the conditions of Corporate Governance form part of this Report. SECRETARIAL COMPLIANCE REPORT The Company had engaged M/s Robert Pavrey & Associates, Practising Company Secretaries, to review Secretarial Compliance for the financial year ended 30th June, 2012. Though not mandatory, the Secretarial Compliance Certificate was obtained during the year, on a quarterly basis, from the aforementioned Practising Company Secretaries, and reviewed by the Board. CODE OF CONDUCT The Board has laid down a Code of Conduct for all Board Members and Senior Management of the Company. The Code of Conduct has been posted on the Companys website. Board Members and Senior Management personnel have affirmed compliance with the Code for the financial year 2011-12. A separate declaration to this effect is annexed to the Corporate Governance Report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO In accordance with the requirements of Section 217(1 )(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the particulars with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are annexed to and form part of this Report. (Annexure A). PERSONNEL Employee relations continued to be harmonious during the year. The Companys Human Resource Policies seek to ensure a high level of employee engagement and motivation. The Board wishes to place on record its appreciation for the efforts of all its employees. Information in terms of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report. (Annexure B). APPRECIATION Your Directors wish to place on record their appreciation for the support extended to the Company by its lenders, the Central and State Governments as well as its business associates. Your Directors also thank the members for their continued support. For and on behalf of the Board Seshagiri Rao MVS B K Singh Director Chief Executive Officer Mumbai, the 25th July, 2012. Annexure A to Directors Report STATEMENT CONTAINING PARTICULARS PURSUANT TO THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF DIRECTORS REPORT A. CONSERVATION OF ENERGY a. Steel Complex at Dolvi > Installation and commissioning (2 Nos.) energy savers in conveyors in Sponge Iron Plant. > Fixing timer for conveyor lighting and provision of timer circuit for new dust collection system lighting in Sponge Iron Plant. > LT capacitor installation (2 Nos.) for conveyor motors in Sponge Iron Plant. > Replacement of conventional motor with energy efficient type motors (3 Nos.) in Sponge Iron Plant. > Fixing timer for light fittings and replacement of faulty conventional Ballast by Electronic Ballast (40 Nos.) at Blast Furnace. > Automatic switching of Blast Furnace T6-Lub Oil heater-Earlier it was switched manually. > Replacement of Filament type indication lamp by LED type indication lamp (20 Nos.) in Blast Furnace. > Ph-2 LF GCP duct interconnection (i.e. GCP, LF-1&2 on single Booster fan) in Steel Melting Shop. > Installation of WF drive for 55KW motor in Sinter Plant. > Fixing timer for light fittings and replacement of well glass with other fittings in Sinter Plant. > Replacement of conventional 7.5KW motor with energy efficient type motor at Sinter Plant. > Replacement of total 30 units 150 watt well glass 400 watt high bay fitting with timer in Sinter Plant. > Energy audit has been carried out by external energy auditor for entire Dolvi steel complex to identify further potential areas of thermal and electrical energy conservation opportunities. b. Cold Rolling Mill, Galvanizing and Colour Coating Complex at Kalmeshwar > 6 Hi Rolling Mill; Variable Frequency Drive provided for Fume Exhaust and DCM updraft fan. > Mill and Galvanizing line 4 exit cranes - Variable Frequency Drive provided at LT & CT & Hoist. > Energy saver panel installed in Cold Rolling Mill and Galvanizing line 1 complex for lighting. > Galvanizing tine 1 - Pump house cold well pump replaced with efficient pump. > Ten burners of non-ox furnace isolated and blocked to save propane in Galvanizing lines 1 and 4 and Galvalume. > Galvalume - For processing 0.35 mm, 2 CAG blowers put off to save power. > Colour Coated Line - One additional burner removed to save propane. > Colour Coated Line - Removal of one degreasing pump through optimization of degreasing unit. > Slitter nos. 2 & 5 - Halogen light (16 Nos.) of 1000 watt replaced with 150 Watt Metal Halide > Air compressor common line provided for effective use between CRM and CGL and kept one compressor off in Galvalume. > Boiler automation done for Boiler No.1 to save power and fuel. > Cut To Length 5 - Two air blowers replaced with single air blower to save energy. c. Proposals for reduction of energy consumption i. Steel Complex at Dolvi > Installation of regenerative burner for ladle preheating at Steel Melting Shop. > Installation and commissioning of VFDs in following motors of Sponge Iron Plant: i. 225 KW Air Blower ii. 225 KW Auxiliary Air Blower > Installation and commissioning of VFD in the following HT motors: i. 3500 KW ID Fan at Steel Melting Shop (2 Nos). ii. 1700 KW main air blower Fan at Sponge Iron Plant. iii. 700 KW ID Fan at Coal injection Plant. > Waste heat recovery from CONARC off gas. ii. Cold Rolling Mill, Galvanizing and Colour Coating Complex at Kalmeshwar > Installation of Liquid Natural Gas facility for use of cost effective and clean fuel i.e LNG. > Re-sizing pump impellors in cooling water pumps. > VFD in fume exhaust blowers in 4 Hi Rolling Mills, FD & ID fans of Boiler No.2 and blowers in CGL 1. > Provide auto steam regulating valves for temperature control at all places in CPL. > Installation of energy saving panels in Galvalume. > Installation of energy efficient Spencer blowers in place of Rootz blowers in CGL1 and CGL 4. > Replacing HPSV (Sodium Vapour) and HPMV (Mercury) lights with Metal Halide/ LED type. The above steps initiated by the Company have enabled savings in energy consumption as well as savings in costs. The Company constantly undertakes energy saving measures at its plant locations. The required data with regard to Conservation of Energy, as applicable to our Industry, is furnished below:- Particulars For year ended For year ended 30th June, 2012 30th June, 2011 POWER AND FUEL CONSUMPTION Electricity a) Purchased (Units in000 kwh) 1741154 1556256 Total Amount (Rs. in Crores) 1008.50 864.15 Rate/Unit (Rs.) 5.79 5.55 b) Own generation (Units in 000 kwh) Units through Furnace Oil 39399 61075 Unit/Ltr of Furnace Oil 4.42 4.18 Cost/Unit (Rs.) 8.21 6.27 Coal (Low ash coal in process) Quantity (MT) 242759 223490 Total Cost (Rs. in Crores) 245.13 213.27 Avg. Rate/Unit (Rs.) 10097 9543 Coke (including fines) Quantity (MT) 954059 761016 Total Cost (Rs. in Crores) 1923.42 1621.60 Avg. Rate/Unit (Rs.) 20160 21308 Furnace Oil & LDO Quantity (Ltrs in000) 674 1225 Total amount (Rs. in Crores) 2.89 4.58 Avg. Rate/Unit (Rs.) 42.92 37.39 LPG/PROPANE Quantity (MT) 8537 5736 Total amount (Rs. in Crores) 46.80 25.00 Avg. Rate/Unit (Rs.) 54818 43595 NG/RLNG Quantity (SCM in 000) 410577 420868 Total amount (Rs. in Crores) 813.09 464.58 Avg. Rate/Unit (Rs.) 19.80 11.04 Others Quantity (Ltrs) 774593 777162 Total amount (Rs. in Crores) 3.35 3.12 Avg. Rate/Unit (Rs.) 43.26 40.11 CONSUMPTION PER M.T. OF PRODUCTION Galvanised Sheets Electricity (in Units) 86 114 Furnace Oil (Ltrs.) 0.20 0.27 LPG/Propane(Kgs.) 18.64 18.42 Cold Rolled Steel Sheets Electricity (in Units) 124 151 Furnace Oil (Ltrs.) 0.54 2.95 Coal (Kgs.) 33.08 42.01 LPG/Propane( Kgs.) 1.17 2.13 Colour Coated Sheets Electricity (in Units) 66 76 Furnace Oil (Ltrs.) 0.04 0.04 LPG/Propane (Kgs.) 22.46 24.01 Tube Mill Electricity (in Units) 96 94 Furnace Oil (Ltrs.) - 0.03 Pipe Mill Electricity (in Units) 0 39 Galvalume Electricity (in Units) 215 262 Furnace Oil (Ltrs.) 0.06 0.08 LPG/Propane (Kgs.) 21.30 21.52 Sponge Iron Electricity (in Units) 101.16 96.70 Gas (Natural Gas/RLNG) (M3) 284.62 279.51 Hot Strip Mill Electricity (in Units) 521.25 538.05 Furnace Oil (Ltrs.) 0.17 0.19 Coal (Kgs.) 8.34 5.46 Coke (Kgs.) 15.93 13.16 Propane (Kgs.) 0.01 - Gas (Natural Gas/RLNG) (M3) 19.69 23.95 Blast Furnace Electricity (in Units) 174.09 183.31 Furnace Oil (Ltrs.) 0.01 0.09 Coal (Kgs.) 132.89 149.62 Coke (Kgs.) 575.81 541.27 LPG/Propane (Kgs.) 0.12 0.24 Gas (Natural Gas/RLNG) (M3) 3.39 22.22 Note: i. Details for the year ended 30th June, 2011 have been recast and includes relevant particulars of facilities at the respective manufacturing units. ii. Power consumption is net of excess power units received from M/s JSW Energy Ltd. and sold to MSEDCL. B. RESEARCH AND DEVELOPMENT AND TECHNOLOGY ABSORPTION Research and Development activities undertaken by the Company have resulted in:- a. Steel Complex at Dolvi > Online drying of coke before charging in Blast Furnace to reduce coke rate and increase productivity of Blast Furnace. > Feasibility study of using Coke Oven waste gas in DRI process for energy conservation and pollution control at Sponge Iron Plant. > Productivity improvement of Sinter Plant by increasing volume of sinter making area through in-house design, engineering and fabrication. > Quality improvement of sinter through various in-house modifications. > Reduction of emissions to reduce air pollution at Sinter Plant by partial replacing of coke fines with RLNG through in- house design, engineering and fabrication. > Thermo- mechanical simulation of hot rolling and continuous casting parameters for optimising alloy design and rolling parameters of different grades to reduce development cost. > Improvement of recovery of B alloy addition in B - alloyed CG04BC grade by Fe-B wire injection. b. Cold Rolling Mill, Galvanizing and Colour Coating Complex at Kalmeshwar i) Colour Coated Line > Development of SMP paint RAL 5012 and RAL 9002 as a single back coat in existing 3 bake system. > Development of wrinkle textured finish in RAL 6011 and RAL 3007. > Development of TOP COAT with and without primer with the help of BRUGAL GM 6N without pre-treatment in colour coating. ii) Continuous Galvanizing/Galvalume Line > Development of 0.40 mm thickness material for export consignment, processed first time at CGL-4. > Development of coloured acrylic Galvalume for Roofing application. > Development of 0.25 mm thickness Galvalume material for Roofing application. > Development of differential edge corrugated sheet (one side up and one side down). > Development of 0.30 mm thick Al-Zn coated 100 gsm material for consumer durable segment. > Processing combination of PVDF paint and top and SMP paint on bottom through 3 bake system. > In-house scrapper designed for scrapping (cleaning) of metal pickup on sinker roll during process. > Redesigned arms of sinker rolls for Galvanising. > Improvement in capability of 6Hi and 4Hi Rolling Mills to process coil OD with 2000 mm (previous capability -1865 mm). > Integrated effluent processing unit for ensuring zero liquid discharge from plant consisting of Plate Reverse Osmosis (PTRO), Multi Effect Evaporator for first time in Steel industry in India. c. Future plans for technology absorption, research etc. > Coordination with various Research Institutes and Technical Universities in India and abroad. > New product and market development (Green or energy-efficient Steel, wider range products, particularly, APIX70 > 12 mm, API X80, DP590, SPF540, SPF590, Domex750, Electrical Steel etc.), Product re-engineering and Brand development. > Development of 1.2 mm CG04BC HRC for direct cold rolling to 0.09 mm thin sheet. > Process re-engineering for more lean, efficient and effective process. > New top lance for Shell #1. > Modification of electrode guide column in EAF and saving of electrical energy at SMS. > Increase F1 stand gear ratio in Mill to increase productivity. > Usages of alternate source (high Sulphur) of lump for DRI making. > Air shock blowers for online cleaning of connecting channel of rectangular Kiln. > Alternate material for enhancing life of coal lances (SS 310 v/s. 253 MA). Technology absorption plans for the future also include:- Sponge Iron Plant: > Use of Coke Oven Gas at DRI process. > Hot DRI discharge to SMS. > Waste water treatment. Sinter Plant: > Modification of steam generating boiler to increase steam production. > In-house design and installation of coke screening system in Sinter Plant. Hot Strip Mill: > Independent top lance for each shell. > In-house design and development of high pressure inter-stand de-scaler in Stand No. 1 and Stand No. 2. d. Expenditure on Quality Assurance & Research and Development a) Capital : Nil b) Recurring : Expenses incurred are charged to normal heads and not allocated separately. c) Total : Not determinable d) Total R&D : Not determinable expenditure as a percentage of total turnover C. FOREIGN EXCHANGE EARNINGS AND OUTGO (Rs. in Crores) 2011-12 2010-11 > Foreign Exchange Earnings Export (FOB Value) 137.81 486.16 > Foreign Exchange Outgo a) CIF Value of Imports - Raw Materials, Components, Spare Parts & Production Consumables 2644.05 2461.99 - Capital Goods 61.31 4.44 b) Other Expenditure 110.34 94.51 For and on behalf of the Board Seshagiri Rao MVS B K Singh Director Chief Executive Officer Mumbai, the 25th July, 2012. Management Discussion and Analysis INDUSTRY STRUCTURE AND DEVELOPMENTS Global Steel Scenario The global steel industry has been significantly impacted due to the Eurozone crisis and imbalances in several major economies. The overall fall in real disposable income in major economies and high degree of unemployment have impacted business confidence levels. Financially restricted conditions across the world have reduced many manufacturing companies optimism and a sizable number of enterprises are reassessing their capital spending plans. In the prevailing economic and political global situation, the steel industry faces unique challenges and uncertainties. The major challenge for steel manufacturers is insufficient demand to sustain cost-effective operations and the battle for market share. Steel buyers are challenged to find the perfect timing to finalize deals over fear of either suffering inventory losses or missing procurement at appropriate prices. Risks for the steel mills are expected to intensify in the second half of 2012. Economic indicators in developed nations, with USA being one of the major exceptions, seem to be worsening. Outside of Germany, the European Union appears to be sliding into a deeper recession. Among BRIC Countries, Brazils economy appears to be stagnating and growth prospects in Russia look mixed. The Indian economy is suffering profoundly from an outflow of investment funds and lower industrial production. More worrying is the fact that Chinese economic indicators seem to be slackening. The US economy so far has remained stronger than expected. Steel demand has been up 7% year-over-year. However, domestic hot-rolled spot price slipped to about $649 per ton in late-May 2012, down from the recent high of $740 per ton in late-January 2012, which is a reflection on the prevailing market sentiments. For 2012, Chinese steel demand is expected to rise 6% to 685 million tons, with net exports at about 40 million tons. In the first quarter of 2012, net exports were over 9 million tons. Chinese economy in 2013 is expected to benefit from governments easing of credit conditions. Less restrictive credit is likely to lead to rise in capital spending and apparent steel consumption. Indian Steel Scenario Price stability and growth are major challenges facing the Indian policy makers. Indian economy is expected to grow at 6% during the current year down from over 8% in 2010-11. While GDP growth has been low, the growing trade deficit, inflationary pressures and weakening currency have led to a weak investment sentiment and slowed industrial growth. Crude steel production during 2011-12 was 74 Million tons, registering a growth of 4% over the previous year. Steel demand in the country is expected to grow by 6% during the current year, in tandem with growth in GDP. The steady depletion in availability of key raw material sources is a matter of significant concern for Indian steel makers. Domestic supply of iron ore has been significantly impacted due to environmental concerns. As a result, Indian steel makers are exposed to the vagaries of international demand pulls and price fluctuations. Supply of coking coal has also been limited in domestic markets leading to surge in imports. Volatility in prices of key inputs threaten stability of operations of steel majors in the country. High fiscal deficit levels have cast doubts on the countrys ability to meet the budget goals. Price pressures remain elevated and infrastructure output growth has further slowed down. The domestic demand-driven economy has been steadily slowing down and governments revenue receipts have been severely impacted. Contraction in key sectors of the economy, namely, natural gas, cement, coal and infrastructure are reflected in weakening industrial activity. Growth of capital goods sector is vital for stability of the steel industry. High level of investment in the capital goods sector is crucial for industrial growth. The dip in index of Industrial Production and the current inflationary pressures have resulted in slow growth of the capital goods sector during last few months. Thrust on infrastructure spending is essential to revive the growth pattern in the capital goods sector in the coming months. OPPORTUNITIES AND THREATS Opportunities The projected Indian GDP growth and increased government spending on core infrastructure projects are expected to drive domestic steel consumption in the medium term. Steel demand in India is likely to reach 100 Million MTs in the next few years, offering tremendous scope to domestic steel producers to tap the huge potential. Sustained growth in infrastructure, automotive, manufacturing and consumer durables sectors would ensure a steady demand growth for all grades of steel products. With a perceptible improvement in demand from semi-urban and even rural segments, hitherto unexplored markets are being looked into. Thrust is accorded on retail penetration and service centres are being set-up by most steel companies to reach all major consumption points. Some of the other major opportunities are:- * Development of captive mining facilities and upstream integration which can result in higher productivity and lower cost of production and can also reduce incidence of price volatility of raw materials. * Achieve better margins and realisation from value-added and branded products. Efforts need to be made to produce premium brands to add product value. * Achieve cost competitiveness through access to cheaper iron ore / coal and sustained efforts towards achieving operation and process improvements. Threats * Sharp increase in prices of raw materials, such as, iron ore, coke and coal. * Increase in power tariff. * Infrastructure constraints and bottlenecks in development of roads, railways and ports leading to high logistics costs. * Various statutory challenges in acquiring land for green-field steel projects, leading to delays in capacity-accretion. * Dumping of cheap steel products into India and the consequent pressure on domestic prices. * Depletion of raw material reserves and rising raw material cost. OUTLOOK AND COMPANYS STRATEGIES Macro economic policy-making in our country is expected to be driven largely by the twin issues of growth and inflation control. While continuing its efforts to achieve price stability, the government has not been able to fast-track policies on accelerating economic growth. Meanwhile, global economic under-currents continue to impact our countrys growth prospects. Domestic steel consumption would be driven by the growth in manufacturing, infrastructure and consumer durable segments. Steel demand is expected to grow structurally, notwithstanding downside risks of slower growth in the short term, due to macro economic deficiencies. Increasing urbanization and infrastructure growth opportunities are likely to propel domestic steel demand. The Company is committed to ensuring timely implementation of its projects, so as to achieve rationalization in input costs. The Company is taking proactive steps to reduce cost and improve its operating processes. The Company shall focus on improving the market share of its products. The Companys strategic initiatives are:- * Set-up a coke oven project of the annual capacity of 1 Million MTs at Dolvi Steel Complex to be implemented by a Special Purpose Vehicle Company. * Set-up an Iron Ore Pellet project of the annual capacity of 4 Million MTs at Dolvi Steel Complex to be implemented by a Special Purpose Vehicle Company. * Commission Lime Calcining Plant of the capacity of 600 tons per day and gas-based power plant of the capacity of 55 MW at Dolvi Steel Complex. * Set-up railway siding facility adjacent to Dolvi Steel Complex to ensure economic transportation of inputs as well as finished steel products. * Set-up additional Colour Coating Line of the annual capacity of 0.1 Million MTs at Kalmeshwar Complex. * Install a 6 Hi-Mill of the capacity of 0.2 Million Tons per annum at Kalmeshwar Complex. * Enhance production of value added grades and products. Steady progress is being made in implementation of the projects and they are expected to be commissioned as scheduled. PRODUCT/SEGMENT PERFORMANCE Production of Hot Rolled Coils at 2.48 Million MTs was higher by 13% compared to previous year. Production of Direct Reduced Iron (Sponge Iron) at 1.27 Million MTs and production of Hot Metal at 1.59 Million MTs were respectively higher by 5% and 17% compared to previous year. Availability of administered price gas and natural gas continues to be extremely restricted with consequent severe adverse impact on input prices and production of Direct Reduced Iron. Production of Cold Rolled Steel Coils/Sheets and Galvanized Coils/ Sheets was higher at 0.33 Million MTs and 0.26 Million MTs, respectively, compared to previous year. Sales of Hot Rolled Coils at 2.50 Million MTs was higher by 20%, compared to previous year. Sales of Galvanized Coils/Sheets at 0.23 Million MTs was higher by 117% compared to previous year. Sales of PVC Coated Sheets at 0.06 Million MTs had improved by 21 % compared to previous year. While prices of coke and coal had moderated, cost of iron ore and pellets had increased substantially during the year under review. As a result, cost of steel production had registered marked increase during the year. Various initiatives have been undertaken for improving operating efficiencies and also ensuring raw material security. Alternate cost- effective sources of supply have been identified for critical inputs, such as iron ore, coke etc. -The Company has undertaken rolling of thinner gauge coils upto 1.22 mm, which would result in multiple product applications. Exports Export earnings during the year under review was Rs. 138 Crores, signifying decrease of 72% compared to previous year. This was owing to slack global steel demand and unremunerative prices. FINANCIAL PERFORMANCE (STANDALONE) IN RELATION TO OPERATIONAL PERFORMANCE The highlights of the financial results (standalone) for the year are as under: (Rs. in Crores) Particulars For year ended For year ended 30th June, 2012 30th June, 2011 Revenue from operations 12123.55 8994.64 Less: Excise Duty 1019.44 763.43 Revenue (net) from Operations 11104.11 8231.21 Other Income 424.24 319.78 Total Revenue 11528.35 8550.99 Total Expenditure 10335.16 7901.56 Profit before Interest and Finance 1193.19 649.43 costs and Depreciation Less: Interest and Finance costs 1076.00 1022.91 Profit/(Loss) before Depreciation 117.19 (373.48) Depreciation 626.83 596.26 Profit/(Loss) before Tax and (509.64) (969.74) Exceptional Items Add: Exceptional Items 586.46 1180.62 Profit/(Loss) before tax (1096.10) (2150.36) Tax expenses - Current Tax - - - Deferred Tax Charge/(Credit) (779.18) (344.48) Total Tax expenses (779.18) (344.48) Net Profit/(Loss) after Tax (316.92) (1805.88) Add: Balance brought forward from (3940.11) (2134.23) previous year Amount carried to next year (4257.03) (3940.11) Revenue from operations during the year under review was Rs. 12123.55 Crores representing growth of 35% over previous year. Profit before interest and finance costs and depreciation was Rs. 1193.19 Crores. After providing for interest and finance costs of Rs. 1076.00 Crores, profit before depreciation was 7117.19 Crores, compared to loss before depreciation of Rs. 373.48 Crores during the previous year. After providing for depreciation of Rs. 626.83 Crores, loss before considering exceptional items was Rs. 509.64 Crores. Exceptional items (details of which are set-out in Note No.28 of the Notes forming part of the accounts) aggregating to Rs. 586.46 Crores have been provided for in the accounts and, consequently, loss before tax was 7 1096.10 Crores. After considering Deferred Tax Credit of Rs. 779.18 Crores, net loss during the year under review was Rs. 316.92 Crores. The loss is proposed to be carried to next years accounts. MANAGEMENT OF RISKS AND CONCERNS The Companys Risk Management process ensures a dynamic approach to all business risks and defines robust processes to support operations and executive decisions. Identification of risks and formulation of mitigation plans is a continuous process. The risk mitigation plans are subject to regular internal monitoring. The Companys Enterprise Risk Management (ERM) framework helps to:- a) develop risk intelligence and ownership to ensure timely assessment of future business trends, and b) provide platform to discuss with all concerned on future risks and opportunities and also develop a balanced perspective on forward path which serves as guide to executive management to take prudent and consistent judgmental calls, so as to:- i) Maximize positive impact of opportunities by taking timely decisions and actions ; ii) Minimize surprises and avoid negative impact of risks on business objectives, such as : * Timely execution of projects. * Uninterrupted operations. * Ensure availability and optimum productivity of resources, such as technology, skills, funds, assets, materials etc. * Carrying together all stakeholders for spontaneous contribution towards common organizational goals. * Protecting environment. * Ensuring compliance. iii) Convert risk into opportunity through innovation, improvement and differentiation. The ERM framework further seeks to dynamically define future trends, such as: a) Global Inter Linkages in economy and interdependence on other sources. b) Technological innovations, future needs of end consumers, changes in regulations etc. c) Systemic risks observed during global crisis. d) Big investments, deals and volume growth opportunities. As a part of Enterprise Risk Management (ERM) process, a comprehensive Risk Management Policy has been framed. The Risk Management Policy ensures:- * Anticipation of pre-determined milestones. * Scenario planning and analysis. * Early risk warning and identify risk threshold limits. * Capturing risk information. * Analysis of risks. * Identifying risk mitigation strategies and risk monitoring and reporting. The ERM framework sets-out an integrated approach to risk management, while clearly specifying the roles and responsibilities of all key personnel with regard to risk management. The risk management procedures involve, apart from identification of risks, defining risk ownership, integration of risks to avoid overlaps and a clearty defined risk oversight process. The Risk Management Structure identifies key internal stakeholders responsible for creating, implementing and sustaining the ERM initiative. The structure leverages existing organizational set-up and seeks to align individuals, teams and departments with the intent of establishing responsibility and accountability. The Risk Management Committee of the Board reviews, periodically, all risk management and mitigation procedures and adequacy of mitigation plans. The Company has internal Risk Management teams which meet periodically and review identified risks, their root causes and mitigation plans. High risk issues are deliberated and are subsequently reported to the Risk Management Committee of Board of Directors. Annual plans are drawn in advance and submitted to the Risk Management Committee. The Companys Business Plans are subject to review by the Board of Directors. Projects under implementation are also subject to review by the Board of Directors. The Company regularly monitors its Foreign Exchange positions and exposure to current and capital account transaction risks. A comprehensive Forex Risk Management Policy has been developed and our internally constituted Forex Risk Management Committee reviews all forex operations. Control measures, authorization levels, procedures, organizational set-up etc., are clearly defined in the Forex Risk Management Policy. Status of Foreign Exchange exposure are periodically reviewed by the Board of Directors. Confirmation of compliance with applicable statutory requirements are obtained from the respective units/divisions and subjected to an elaborate verification process. Quarterly Reports on Statutory Compliances, duly certified, are submitted to the Audit Committee as well as the Board of Directors for review. Compliance(s) with exception(s), if any, are reported to the Audit Committee and the Board of Directors. Status of Demands/Notices on the Company, under various acts and rules, as well as status of litigations are reported to the Board of Directors, every quarter. In the process of undertaking reviews of financial projections, statutory litigations etc., the Board of Directors and the Audit Committee are entitled to independent expert opinions, wherever felt appropriate. Revenue-related litigations are subject to detailed risk-evaluation by independent experts, each quarter, and their reports are furnished to the Board of Directors. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Senior Management of the Company comprising of the Chief Executive Officer, Jt. Chief Executive Officer, Chief Operating Officer, Executive Director and Directors are supported by Presidents, Senior Vice Presidents, Vice Presidents and General Managers who are individually heading various Departments and assisting the Senior Management in various decision making process to attain the corporate objectives set out in the Corporate Plan formulated each year. In order to attain the corporate objectives, strict internal control systems are required to be implemented across the organization. The same is ensured by the Senior Management through a mix of periodic reviews, implementation of Standard Operating Procedures, defining Delegation of Powers and constant upgradation of IT systems. The efficacy of internal control systems is ensured as a combined result of the following activities: i. Operational Performance is reviewed each month by an Executive Committee comprising members of Senior Management. ii. Performance of each function is closely monitored by the Senior Management through various Daily / Weekly / Monthly Review Meetings. Reviews of all independent functions are regularly undertaken. Simultaneously, cross-functional activities are also subject to periodic reviews. iii. Various internal Committees, such as, HR Committee, CAPEX Committee, Pricing Committee, Working and Steenncommittees for Risk Management etc. have been constituted, coThprising of Senior Management members to review domain performance and take all operational and strategic decisions. This is with a view to ensure larger participation in the decision - making process and pooling of all available resources. iv. Various policies are introduced, from time to time, to ensure effective functioning of various independent departments, such as, Marketing, Finance, HR, etc. v. Delegation of Powers is regularly reviewed and revised, based on feedback received from Directors and Process Owners. The documents clearly specify the authorities of various divisional / functional heads etc. Hence, the financial and non-financial authorities stand clearly defined. vi. Advanced SAP ERP has been implemented and most of the major functions are covered under various modules of SAP. Consequently, ERP systems are in place and stand continuously upgraded. vii. My SAP Business Process application has also been implemented. Reports of Internal Audit Department and management response thereto are subject to regular review by Audit Committee of Board of Directors. Reports of Management Auditors and Branch Auditors are also reviewed by the Audit Committee. Adequacy of internal control systems is also reviewed by the Audit Committee. The annual Audit Plan of the Internal Audit Department is reviewed and approved by the Audit Committee. Audit Committee also undertakes review of status of completion of previous Audit Plans to identify gaps, if any, in implementation. HUMAN RESOURCES AND INDUSTRIAL RELATIONS The Companys Human Resource policies and strategies seek to ensure a high level of motivation among employees so that they play a significant role in achieving the Companys goals. The Company has a robust system for periodic review of all Human Resources issues. The Performance Management System adopted by the Company is continuously strengthened to ensure that employee appraisals are transparent and aligned to corporate goals. The Employee of the Month scheme adopted by the Company seeks to ensure that performing team members are properly recognized and rewarded. Career development plans of individuals are carried out, as a part of succession plan, based on their past performance, potential and the competency gaps. The Company has robust variable pay structure and incentive scheme. The Company has constituted various in-house training programmes for skill advancement. Employees are also deputed to various external training programmes for enhancing competencies. The Company has also significant changes in its training processes to properly address issues of skill advancement. The Company accords highest priority to ensure safety and protection of health of its employees. The Company believes that safety and health are essential to, and form an integral part of, every HR development endeavour. Various employee welfare schemes have been formulated, such as: * Family Help Groups, run by spouses of employees. * Recreational Centers. * Departmental get-togethers. * Cricket and Football Tournaments. * Felicitation of meritorious children of employees. * Mediclaim/hospitalization schemes etc. The Company has a full-fledged Medical Centre at its Dolvi Complex for providing round-the-clock medical assistance to its employees. Specialist Doctors visit the Medical Centre, every fortnight, for rendering medical help. Health check-ups are carried out, periodically, for all employees. The Company had 3289 employees on its roll at various locations. The Company firmly believes that an organization must play an important role in supporting the communities in which it operates. Accordingly, Corporate Social Responsibility (CSR) programs play a pivotal role in the Companys growth initiatives. Industrial relations continued to be harmonious in all units of the Company. MANAGEMENT OF ENVIRONMENT The Company is constantly improving its Environmental performance on the prevention of pollution, the proper use of natural resources and the minimization of any hazardous impact stemming from the production, development, use and disposal of any of its products. The Company seeks to:- * Ensure that its vision and mission statement, which explicitly states its Environmental policy are observed and complied. * Communicate environmental policy to all employees, suppliers, contractors, customers, stakeholders and the community. * Set up environmental management systems and programmes at the organizational level. * Train employees and create awareness among suppliers, contractors, customers, stakeholders and the community at large. * Train workforce on environmental issues and assign management representatives and facilitators to the task of monitoring environmental systems. * Set quantitative objectives and targets for continuous improvement. * Review environmental performance at different levels in the management hierarchy. With a view to create environmental awareness amongst its stakeholders, the following steps are taken by the Company: * All purchase orders, letterheads, envelopes etc., used for external/ internal communications bear printed environmental slogans. * Sub-contractors have been advised to use environmental friendly technology for recycling of wastes like scrap, used oil etc. * Preference is given to environment friendly/proactive suppliers while purchasing raw material and consumables. * All inter-office memos, approvals etc., are being processed through electronic media with a view to reduce paper consumption. * World Environment Week is celebrated every year. The major focus of World Environment Week celebrations is to create awareness and sensitize employees on caring for the environment. Numbers of activities are undertaken during the week long programme, such as Tree plantation, Quiz Competition, Essay Competition and Green Plant Competition. The Company fully complies with all environmental parameters prescribed under various Acts, Rules, Standards etc. The parameters are well within the standards prescribed by Ministry of Environment and Forests, Central Pollution Control Board and Maharashtra Pollution Control Board. Consent to operate has been obtained from Maharashtra Pollution Control Board under applicable Acts and Rules for all the Companys units. At Dolvi Steel Complex Greening Drive The Company has planted large number of trees in the plant premises, in terms of the guidelines of Maharashtra Pollution Control Board. The Company is maintaining a full-fledged Nursery, managed by qualified Horticulture Officers, to develop plants for its in-house requirement. Details of tree plantation are:- Total No. of big trees - 178147 Total No. of medium and small trees - 364287 15 water fountains, waterfalls and water bodies have been developed and commissioned in the plant premises. Resource Conservation * Utilization of natural resource like water, energy, raw material and natural gas are optimally used, as compared to Industry norms. * Full-fledged effluent treatment plant is provided to treat and reuse waste water generated in process. * Adequate air pollution control systems are provided. All pollution control equipments are designed for outlet emission as per statutory norms. * Solid wastes generated in the process are recycled in sinter plant. * Waste gas generated from process is used for power generation and recycled heating purpose. * Recycling of maximum solid wastes by operation of Sinter Plant and Cold Briquetting Plant. * Maintaining pollution discharge level below national and international norms. The Company has a dedicated Environment Department, well-equipped with sophisticated laboratory equipments and manned with qualified and trained personnel, to handle environmental issues, carrying out analysis of water, air, stack emissions and noise monitoring throughout its integrated Steel Mill complex . At Kalmeshwar Complex The Company complies with all the environmental parameters prescribed under applicable statutes and guidelines of Ministry of Environment and Forests, Central Pollution Control Board and Maharashtra Pollution Control Board. The complex is also well within the environmental norms prescribed under World Bank Policies and Guidelines. Pollution Control and Environment Management efforts undertaken during the year include: * Successful commissioning of Zero liquid Discharge Plant consisting of ETP, Tilted Plate Interceptor, Dissolve Air Floatation, Disc and Tube Reverse Osmosis, Multi Effect Evaporator for treatment of effluent generated from Pickling Line, Rolling Mills and Galvalume Line. * Revamping of pickling line acid fume scrubber, exhaust system and strengthening of standby arrangement to minimize fume emission level. * Construction of 450 square meter elevated level shed with complete roof to store used oil drums with a view to avoid chances of mixing used oil with rain water. * Installation and commissioning of one acidic rinse water storage tank made up of Fiber Reinforced Plastic of 100 cubic meter capacity at elevated level at CPL to avoid underground seepage. * Improving Quality of Boiler Bag House Filter and reduce the stack emission much below MPCB norms. * Conducting different environmental awareness programmes and competitions for school students and employees. * Development of garden in Kalmeshwar Government Hospital (planted 11158 trees and developed 4235 square meter area as a garden). * Installation of solar heater in Guest House to use renewable source of energy and enhance sustainable development. * Installation of Eco ventilators in colour coating line to improve work environment. ENVIRONMENTAL RECOGNITION During June, 2012, the Company received the prestigious Green Rating Project (GRP) award instituted by Centre for Science & Environment (CSE), Government of India. The Company has been rated by CSE as the best among 21 Steel Companies, on 150 different parameters. The prestigious award was received at the hands of the Honble Minister of Environment and Forest, Government of India. CORPORATE SOCIAL RESPONSIBILITY The Company believes in responsible corporate citizenship and hence makes continuous efforts to contribute to the people development activities around its presence. The Companys Steel Complex at Dolvi is located in a rural surrounding and has small towns and villages in the vicinity. The Companys initiatives towards fulfilling its philosophy of Corporate Social Responsibility is done in partnership with government agencies and beneficiaries and has moved beyond philanthropy to providing sustainable livelihood. Development needs are varied and the Company has made major contributions in the following thrust areas : At Dolvi Steel Complex Health * HIV/AIDS Awareness programme conducted for school students/ truck drivers/ women, on regular basis. * Organization of Rural Medical Camps every week. 1612 patients treated during the year. * One day Hasya Yoga camp organized by International Hasya Yoga Trainer. * 42 Anganwadi Workers, ASHA workers and ANMs trained on pre and post natal care. * Drinking water well cleaned at Village Gadab. * 72 women, including Anganwadi Workers, ASHA workers and Mahila Mandals, participated in nutrition workshop on World Food Day. * Fully equipped Ambulance provided to Gram Panchayat, Wadkhal. * Organized Pediatric Health Camps to address malnutrition, in which around 500 children were treated and provided with medicines. Health supplements were given to malnourished children. * 40 wall writings and 20 wall paintings were organized to create awareness on malnutrition, in partnership with ICDS under the Rajmata Jijau Malnutrition free mission. Education * Two days training program conducted for 20 teachers in association with Vindhya Vahini. * 9 meritorious students of Class 10 were given cash prizes under JSW Scholarships programme. * Six days training program conducted on English Grammar for 94 students. * Complete renovation of Anganwadi Center at Khar Dhombhi. * Books donated and financial support provided for upgradation of Science laboratory in Shahbaj School Library. * Provided 80 school benches to schools at Dolvi and Gadab. These benches were made by students of ITI, Nagothane. * Renovation of the toilets of Wadkhal High School for ensuring improved sanitation. Women Empowerment * Establishment of four Women Empowerment Centers (WEC) for training on making readymade garments - 24 sewing machines were provided. * One-day Capacity Building workshop for 8 Self Help Groups on budgeting. * Vocational Training provided for three Self Help Groups on making liquid soap, phenyl, detergent powder and room freshener, in partnership with Bank of India. * Vocational Training provided to 27 women, on readymade garment making at Dolvi. Sustainable Livelihood Fifteen students from the surrounding villages sent to O P Jindal Center at Bellary, Vijaynagar for vocational training in electrical and mechanical fields. Tribal Development * Repairing of 120 meter water supply pipeline at Khapachiwadi, Gadab. * Repairing of 200 meter water supply pipeline at Kamathwadi, Dolvi. * Solar Lamps given to 80 tribal households, in partnership with TERI. * 325 families given smokeless chulha, in partnership with General Carbon. Environment Conservation * Free clean and potable water is being supplied daily to households in over 44 villages, through the Companys pipeline from Nagothane, which is more than 35 kms long from the plant, covering a population of more than 22000. * Celebration of Environment Day - Plantation of 100 plants in four nearby schools. * 1700 families given one CFL each of 18 Watt capacity, during energy conservation week. Youth Development * One day workshop conducted for 56 youths in partnership with Kotak Unnati Foundation. * One day workshop conducted for differently abled persons under welfare schemes. ITI Upgradation Program The Company has partnered with Government under PPP to upgrade 8 ITIs namely Pen, Murud, Srivardhan, Nagothane, Mandangarh, Sangameshwar, Devgad and Savantwadi. At Kalmeshwar Complex * Construction of a reception Room at Police Station, Kalmeshwar. * Garden development at Government Rural Hospital, Kalmeshwar. * Water Kiosk (Pyau) provided at Kalmeshwar. * Donation of Roof Sheets to two of the Hanuman Temples (near Water Tank and Ward No 4) of Kalmeshwar town. * Charity on death anniversary of Late Shri OP Jindal. * Lunch arrangement at Matoshri Vridhashram for old aged people of Dhapewada Village. * Distribution of food packets and stationary items to tribal family members and their children at Village Ladai. * Constructed and handed over the road to Nagar Parishad, Kalmeshwar from Kalmeshwar Railway siding to main approach road for use by local community and for safe driving of trucks. * Organized Health Check up and Awareness Camps for senior citizens at Kalmeshwar. * Provided financial help to the victims of Ketapar - Gond Khari Village road accident. CAUTIONARY STATEMENT Statements in this Management Discussion and Analysis detailing the Companys objectives, projections, estimates, expectations or predictions may be forward - looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations including global and Indian demand - supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the Countries within which the Company conducts business and other factors such as litigation and labour negotiations.