Shah Alloys Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the 27th Annual Report of your company on the operations and performance along with the Audited Financial Statements for theyear ended on 31st March 2017.

FINANCIAL HIGHLIGHTS

Rs. in Crores
Particulars

March 31, 2017

March 31, 2016

Total Revenues

312.28

262.37

Less: Total Expenditure

312.72

279.05

Profit / (Loss) before interest, depreciation, extraordinary item and tax

(0.44)

(16.68)

Less: Depreciation and Interest

28.07

41.30

Profit / (Loss) after depreciation and Interest but before extraordinary item and Tax.

(28.51)

(57.98)

Less: Extraordinary item

(80.98)

(247.12)

Profit after Extraordinary item but before tax

52.47

189.14

Less: Tax Expense / Deferred tax

10.11

64.76

Net Profit available for Appropriation

42.36

124.38

Balance to be carried forward

(628.73)

(671.09)

STATE OF COMPANYS AFFAIRS / PERFORMANCE OVERVIEW

During the year under review Total revenue from Operations and from other operating income increased from Rs. 262.37 crores in the previous yearto Rs. 312.28 crores. Company has registered a profit of Rs. 42.36 crores in comparison to the profit of Rs. 124.38 crores during previous year.

During the year under review settlement agreement executed with Edelweiss Assets Reconstruction Company Limited (EARC) for the entire dues of Bank of Baroda, Oriental Bank of Commerce and Axis Bank. Company has been in constant touch with the lenders, financial institution and ARCs for settlement of remaining dues.

DIVIDEND

Due to high accumulated losses, your Directors have not recommended dividend for the financial year 2016-17.

BUSINESS ACTIVITY

The company is engaged in manufacturing of wide range of Stainless Steel, alloy & Special steel, Carbon/Mild Steel and Armour Steel in Flat and Long products. There has been no change in the nature of business of the Company.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The company is not having holding or subsidiary company during the year and no other company has become holding / subsidiary/ joint venture. However, it has one associate company as per details as under:

Sr. No. Name of the Company CIN/GLN Concern

% of shares held by Company

Applicable Section
1. S.A.L. Steel Limited L29199GJ2003PLC043148 Associate 35.61% 2(6)

The Consolidated Financial Statements of the Company and its Associate, viz., SAL Steel Ltd., has beenprepared inaccordance with the relevant Accounting Standards of the Institute of Chartered Accountants of India, duly audited by theStatutory Auditors and form part of the Annual Report and are reflected in the Consolidated Accounts.

Pursuant to the provisions ofSection 129(3) of the Act, a statement containing salient featuresof the financial statements of the Companys associate in Form AOC-1 is attached to this report as Annexure- 1.

DEPOSIT

The Company has not accepted any public deposit during the year under review and no amount against the same was outstanding at the end of the year.

DETAILS OF LOANS, GUARANTEES AND INVESTMENTS U/S 186 OF THE COMPANIES ACT, 2013

During the year under review the Company has not made any inter corporate loans, investments, given any corporate guarantee to any other body corporate, subsidiary, associate or any other company.

REGULATORY STATEMENT

In conformity with provision of regulation 34(2)(c) & 53(b) of SEBI (LODR), Regulations 2015, the Cash Flow Statement for the year ended 31.03.2017is annexed hereto. The equity shares of the Company are listed on the BSE Ltd. and the National Stock Exchange of India Ltd. (NSE).

The Company has paid listing fees for the year 2017-18 to above stock exchanges.

DETAILS OF DIRECTORS OR KMPs APPOINTMENT OR RESIGNATION

During the year under reviewthere is no other change in the Composition of the Board and Key Managerial Personnel. However, in the current year Shri Yashpal Mehta, Chief Financial Officer(Key Managerial Personnel) resigned from the post w.e.f. 30th June, 2017. The Board appreciates the valuable services rendered by him during his tenure.

MEETINGS OF THE BOARD

The Board met four times during the financial year. Details of meetings are given in the Corporate Governance Report annexed herewith and forms part of this report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declarations from each Independent Director of the Company confirming that he/she meets with the criteria of independence as laid out in sub-section (6) of Section 149 of the Companies Act, 2013 and under Regulation 16(1)(B) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

BOARD DIVERSITY

A diverse Board enables efficient functioning through differences in perspective and skill, and also fosters differentiated thought processes at the back of varied industrial and management expertise, gender, knowledge and geographical background. The Company follows diverse Board structure.

BOARD EVALUATION

As per the provisions of the Companies Act, 2013 and SEBI(Listing Obligation and Disclosure Requirements) Regulations2015, the formal annual evaluation was carried out for theBoards own performance, its committee & Individual directors. The manner and detail in which evaluation was carried out isstated in the Corporate Governance Report which is annexedand forms a part of this report.

INTERNAL FINANCIAL CONTROL SYSTEM AND THEIR ADEQUACY:

The details in respect of internal financial control and their adequacy are included in Management Discussion and Analysis Report, which forms part of this report.

CORPORATE GOVERNANCE REPORT

The Company is committed to observe good corporategovernance practices. The report on Corporate Governancefor the financial year ended March 31, 2017, as per regulation34(3) read with Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations, 2015 forms part ofthis Annual Report. The requisite Certificate from the Practicing Company Secretary of the Company confirming compliance with theconditions of Corporate Governance is annexed to this Report.

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

As required under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, particulars relating to conservation of Energy, R & D, Technology absorption and foreign Exchange earnings / outgo are separately provided in the annexure to this report as Annexure - 2.

RISK MANAGEMENT POLICY

The Company had put in place an enterprise wide risk management framework. This holistic approach provides the assurance that, to the best of its capabilities, the Company identifies, assesses and mitigates risks that could materially impact its performance in achieving the stated objectives. The Audit committee ensures that the Company is taking appropriate measures to achieve prudent balance between risk and reward in business activities. The Committee reviews strategic decisions of the Company on regular basis, reviews the Companys portfolio of risks and considers it against the Companys Risk Appetite.

VIGIL MECHANISM POLICY

The Company had implemented a vigil mechanism, whereby employees, directors and other stakeholders can report matters such as generic grievances, corruption, misconduct, fraud, misappropriation of assets and non-compliance of code of conduct to the Company. The policy safeguards the whistleblowers to report concerns or grievances and also provides a direct access to the Chairman of the Audit Committee. During the year under review none of the personnel has been denied access to the Chairman of Audit Committee.

CORPORATE SOCIAL RESPONSIBILITY

Company has earned a profit in the year under review. However, the average net profit calculated as per section 197 of the Companies Act 2013 of last three preceding years is negative, therefore, provisions related to expenditure of atleast two percent of the average net profits in CSR activities is presently not applicable to the Company.

DIRECTORS RESPONSIBILITY STATEMENT

In Compliance with Section 134(5) of the Companies Act, 2013, the Board of Directors to the best of their knowledge and hereby confirm the following:

a) In the preparation of the annual accounts for the financial year ended 31st March 2017, as far as possible and to the extent, if any, accounting standards mentioned by the auditors in their report as not complied with, all other applicable accounting standards have been followed along with proper explanation relating to material departure;

b) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and profit and loss account of the Company for that period;

c) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The Directors had prepared the annual accounts on a going concern basis; and

e) The directors in the case of a listed company had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

f) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION

The policy of the Company on Directors appointment and remuneration, including criteria for determining qualifications, independence and other matters as provided under subsection(3) of Section 178 of the Companies Act, 2013 is available on the Companys website at www.shahalloys.com.

DISCLOSURE UNDER SECTION 22 OF THE SEXUALHARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL), ACT,2013

There were no complaints pending for the redressal at the beginning of the year and no complaints received during the financial year.

PARTICULARS OF THE EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this Report as Annexure- 3. Further, particulars of employees remuneration, as required under section 197(12) of the Companies Act, 2013, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are not applicable since there was no employee of the Company including Executive Directors was in receipt of remuneration in excess of the limits set out in the said rules.

DETAILS OF RELATED PARTIES TRANSACTIONS PURUSANT TO SECTION 188(1) OF THE COMPANIES ACT, 2013

During the financial year, all transactions entered into with the Related Parties as defined under Companies Act, 2013, were in the ordinary course of business on arms length basis and as such did not attract provisions of Section 188 (1) of Companies Act, 2013. Company has formulated policy on related party transactions. Particulars of related party transactions pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC-2 is attached at Annexure - 4. Approvals from the Audit Committee are obtained even for transactions which are in ordinary course of business and repetitive in nature. Further, on quarterly basis, disclosures are made to the Audit Committee and to the Board in its meetings. Details of related party transactions are given in the notes to financial statements.

STATUTORY AUDITORS

M/s. Talati & Talati, Chartered Accountants were appointed as Statutory Auditors of the Company in the 18th Annual General Meeting of the Company and eligible to continue till 27th Annual General Meeting. As such M/s Talati & Talati, Chartered Accountants will be discontinuing as Statutory Auditors from 27th Annual General Meeting.

On the recommendations of the Audit Committee, Board of Directors has recommended appointment of M/s. Parikh & Majmudar (Firm Reg. No. 107525W) as the Statutory Auditors of the Company for a period of five consecutive years from the conclusion of the 27th Annual General Meeting of the Company, till the conclusion of the 31st Annual General Meeting to be held in the year 2022, subject to the approval of the shareholders of the Company. On approval of the shareholders in the forthcoming Annual General Meeting, new firm will audit financial statements for the year ending 31st March 2018. However, the new firm will be auditing quarterly financial statements from the quarter ended 30th September 2017.

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act, 2013 and the Rules made there under M/s. Ashish Bhavsar & Associates, Cost Accountants were appointed for auditing cost accounting records of the Company for the year ending 31stMarch, 2017. Board has further appointed M/s. Ashish Bhavsar & Associates, Cost Accountants as Cost Auditors for the year ending 31stMarch 2018 subject to approval of remuneration in the forthcoming Annual General Meeting.

Internal Auditor

The Company has appointed an Independent firm of Chartered Accountants to act as an Internal Auditor as per suggestion of auditors and recommendation of the Audit Committee in order to strengthen the internal control system for the Company.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with rules made thereunder, the Board of Directors has appointed M/s Kamlesh Shah & Co., Practicing Company Secretaries, as Secretarial Auditor to conduct Secretarial Audit of the Company for the Financial Year 2017-18. The report submitted by the Secretarial Auditor in Form MR-3 for the financial year ended as on 31st March, 2017 is attached to this report as Annexure - 5.

BOARDS RESPONSE ON the REMARKS MADE BY STATUTORY Auditors

The Directors submit their explanations to then various observations made by the Auditors in their report for the year 2016-17. Para nos.of Auditors Report and reply are us under:

Basis for Qualified Opinion – Para 1 of Standalone and Consolidated Independent Auditors Report

On account of maturity of foreign currency convertible Bonds (FCCB) on 22.09.2011, dues have been frozen. On 13.09.2010 the Company was declared as SickUnit by Honble BIFR u/s 3(1)(0) of SICA. It was taken a conscious decision that the principal amount be frozen on the date of maturity and no further exchange gain / loss and interest to be provided on FCCB. This liability was frozen on the maturity.

Annexure A to Independent Auditors Report – Para 7 (i)

Payments of Statutory dues were marginally delayed on account of slow recovery / collection. However, the same has been paid.

Annexure A to Independent Auditors Report – Para 8

As per the scheme sanctioned by CDR (EG), consortium bankers were required to give working capital for the optimal utilization of production capacity. However, in the absence of non availability of funds from the lenders, the accruals were not in line with the sanctioned scheme and hence Company could not utilize optimally its production capacity. In view of this, company was not able to make payments to banks/institutions and debenture holders as per the sanctioned scheme. However, before due date of repayment, Company had approached Honble BIFR for declaring it as a Sick company under Section 3(1)(0) of the SICA and was declared so before the due date, i.e., September 2011. On account of sick status of the company, payments will be made as per the scheme as may be approved by the Honble BIFR.

Most of the banks assigned the debts to various Asset Reconstruction Companies (ARCs). Company has entered into Settlement Agreements with INVENT in connection with dues of Union Bank of India and State Bank of India.

Subsequently, during the last quarter Company entered into Settlement Agreement with Edelweiss Asset Reconstruction Company Limited (EARC) in connection with dues of Axis Bank, Oriental Bank of Commerce, Bank of Baroda.

Company has made proposal settlement with other banks, financial institution and ARCs. Company is actively negotiating with lenders and ARCs for settlement of debts and expecting a settlement soon.

On account of maturity of Foreign Currency Convertible Bonds (FCCB) on 22.09.2011 dues have been frozen on maturity since company was declared Sick company by Honble BIFR u/s 3(1)(o) of SICA. In view of the insufficient accruals of the Company the cash flow is not sufficient enough to pay to the FCCB holders. The companys operations are not profitable and market conditions of steel industries are very bad. All the steel industries in India at large is facing crisis due to dumping of material from China and Company is also not an exception to that.

MATERIAL CHANGES / INFORMATION:

1. No material changes have taken place after the closure of the financial year up to the date of this report which may have substantial effect on the business and financial Position of the Company. However, company does not have status of Sick company due to repeal of SICA.

2. No significant and material orders have been passed by any of the regulators or courts or tribunals impacting the going concern status and companies operations in future.

EXTRACT OF ANNUAL RETURN

An extract of the Annual Return in Form MGT-9 in compliance with Section 92 of the Companies Act 2013 read with applicable rules made thereunder is annexed to this report at Annexure - 6.

APPRECIATION

Your Directors place on record their sincere appreciation for the valuable support and co-operation as received from government authorities, Financial Institutions, Banks and ARCs during the year. Directors are also thankful for the support extended by Customers, Suppliers and contribution made by the employees at all level. Directors would also like to acknowledge continued patronage extended by Companys shareholders in its entire endeavor.

For and on behalf of the Board
Date : 5thAugust 2017 Rajendra V. Shah
Place : Santej Chairman
(DIN: 00020904)