Steelco Gujarat Ltd Directors Report.

To

The Members,

Your Directors are pleased to present the 29th Annual Report of your Company together with the Audited Financial Statements for the year ended 31st March, 2019.

1. FINANCIAL HIGHLIGHTS

(Rs in Lakhs)

Particulars Current Year Ended Previous Year Ended
31.03.19 31.03.18
Sales / Other Income
(Net of Excise Duty) 7,401.96 47,571.81
Profit / (Loss) before
Depreciation & Interest (5,421.26) (2,432.17)
Less : Depreciation 614.44 717.78
Profit / (Loss) before interest & financial charges (6,035.70) (3,149.95)
Less : Interest & financial charges 2646.01 2,264.45
Profit / (Loss) after interest & financial charges (8,681.71) (5,414.40)
Less:Exceptional & extraordinary items (1059.63) (291.82)
Profit / (Loss) after exceptional & extraordinary items (9,741.34) (5,706.22)
Net profit / (loss) before tax (9,741.34) (5,706.22)
Less : Tax 0.00 0.00
Net profit / (loss) after tax (9,741.34) (5,706.22)
Less : Items that will not be reclassified
to profit / (loss) (net of tax) (32.07) (19.00)
Items that will be reclassified to
profit / (loss) (net of tax) 0.00 0.00
Total Other Comprehensive
Income / (Loss) (net of tax) (9,773.41) (5,725.22)
Less: Carried Forward Losses (23,617.29) (17,892.07)
Balance carried to Balance Sheet (33,390.70) (23,617.29)

2. CHANGE IN THE NATURE OF BUSINESS

There was no material change in the nature of business of the Company during the year. However, due to working capital non-availability, the Company has carried out the business / operations mainly on job work basis.

3. CHANGE IN SHARE CAPITAL

There was no change in the capital structure of the Company during the financial year under review. The equity paid up capital as on 31st March, 2019 was 42,56,18,220.

4. AMOUNT TRANSFERRED TO RESERVES:

In view of the losses, your Directors do not recommend to transfer any amount to the reserves.

5. DIVIDEND

Your Directors do not recommend any dividend on the equity shares of the Company in view of carried forward losses.

6. DEPOSITS

The Company has not accepted / renewed any deposit within the meaning of the Companies (Acceptance of Deposits) Rules, 2014.

7. LOANS, GUARANTEES OR INVESTMENTS

The Company, as such, has not given any guarantees or securities covered under the provisions of Section 186 of the Companies Act, 2013 (‘the Act). The aggregate of Investments, Loans, Guarantees and Securities is within the limit of Section 186 of the Companies Act, 2013.

8. REVIEW OF OPERATIONS & PERFORMANCE

The overall sales in revenue including other income during FY 2018-19 stood at 74.02 crores and net loss of 97.73 crores. This is against the revenue of FY 2017-18 of 475.52 crores and a net loss of 57.06 crores in the previous year. The decrease was a result of the company focusing on job work in the current year.

The other reasons for reduction in the revenue as well as the profits, was lower production volumes with the own production of only around 4900 MT during the year due to paucity of working capital. The Company had to move to job work operations in view of lack of adequate working capital facilities due to stoppage of utilization of working capital facilities by the lenders, since the account became NPA with all the lenders, which were beyond the control of the Company. The lower volumes also significantly increased cost of production, mainly the power cost, which increased by around 2.40 per unit with additional cost of 2.50 crores, adding to losses.

The debt restructuring proposal, viz. One Time Settlement Proposal when concluded will improve the operations in volumes as well as in margins. It is the endeavor of the Board of Directors of your Company to strengthen the financial structure of the Company. The Company has already submitted the OTS proposal and subsequent to Balance Sheet date, on the receipt of the funds for initial deposit from the Ultimate Holding Company, M/s. Spica Business Corp., Panama, under the Loan Facility Agreement, the Company had also deposited the initial deposit of 5% with the lenders for their consideration of OTS proposal. The same is at the advanced stage and the Company is hopeful for OTS approval and revival of operations shortly. The Board of Directors is cautiously optimistic of a turnaround in the performance with better outlook of the Company in long run.

For detailed performance review and industry outlook, please refer Management Discussion & Analysis Report, forming part of the Boards Report.

9. INFORMATION ABOUT SUBSIDIARY COMPANY / JOINT VENTURE / ASSOCIATE COMPANY

Neither the Company has any Subsidiary, Joint Venture or Associate Company nor has any other Company become or ceased to be Subsidiary / Joint Venture / Associate Company.

10. BOARD OF DIRECTORS

Shri Lakshminarayanan Venkataraman, who was appointed as an Additional Director (Independent Director) of the Company, w.e.f. 28th March, 2018, not liable to retire by rotation, to hold office up to next Annual General Meeting, ceased to be Director of the Company w.e.f. 6th July, 2018 due to his resignation. Shri Ajay Pratapray Shanghavi has been appointed as an Independent Director of the Company, w.e.f. 4th August, 2018, for a period of five years, not liable to retire by rotation.

During the year, for better compliance of newly amended SEBI Listing Regulations, Shri Praful Chandaria, resigned as a Non-Executive Director effective from 30th March, 2019. However, he has been appointed as a Non-Executive Director, by the Shareholders of the Company at their 1st Extra Ordinary General Meeting held on 15th May, 2019, by way of Special Resolution in compliance with the amended Listing Regulations.

Shri Amish H. Mehta, Non-Executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

Smt. Ameeta Trehan, Independent Director is proposed to be reappointed for tenure of five (5) years from 16th May, 2020 to 15th May, 2025.

The Company has also received a certificate of non-disqualification of Directors from M/s. Devesh Pathak & Associates, Practising Company Secretaries, Vadodara.

11. TRANSFER OF AMOUNT TO INVESTOR EDUCATION AND

PROTECTION FUND

Since there was no unpaid/unclaimed amount, required to be transferred to Investor Education & Protection Fund (IEPF) during the year under review, no amount was transferred to IEPF.

12. MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments affecting the financial position of the Company have occurred between the end of financial year to which this financial statement relates and the date of this report and hence not reported.

13. KEY MANAGERIAL PERSONNEL

The details of Key Managerial Personnel (KMP) including change in the KMPs during the years under review are as under:

Name of person Designation
1 Shri Mitesh H. Shah Managing Director
2 Shri Abhishek Jajoo Chief Financial Officer (upto 6th July, 2018)
3 Shri Saurabh Jog Chief Financial Officer (from 7th July, 2018 to
15th September, 2018)
4 Shri Hament Kumar Nandawat Chief Financial Officer (from 17th September, 2018)
5. Shri Achal S. Thakkar Company Secretary

14. INDEPENDENT DIRECTORS

As on 31st March, 2019 the Independent Directors on the Board of the Company were, viz. Smt. Ameeta Trehan (Woman Director) and Shri Ajay Pratapray Shanghavi. The Company has received confirmation / declarations from both the Independent Directors of the Company to the effect that they are compliant of attributes under Section 149(6) of the Companies Act, 2013 and Regulation

16 (1)(b) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

15. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, as may be applicable, a structured questionnaire was prepared after taking into consideration of the various aspects of the Boards functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations, governance, etc. Respective member of the Board did not participate in the discussion of his / her evaluation. The separate meeting of Independent Directors was held on 14th February, 2018 and also on 14th June, 2019 and the Board of Directors expressed their satisfaction with the evaluation process.

16. NUMBER OF MEETINGS OF THE BOARD

The Company has complied with the provisions for holding Board Meetings and the gap between any two meetings did not exceed 120 days. Five meetings (including one adjourned meetings) of the Board of Directors of the Company were held during the year under review on 05.07.2018, 08.08.2018, 17.09.2018 (adjourned), 12.12.2018 & 14.02.2019.

17. WHISTLE BLOWER POLICY / VIGIL MECHANISM

The Company has a Whistle Blower Policy pursuant to Section 177 of the Companies Act, 2013 and the rules made there under and Regulation 22 of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, to report genuine concerns of Directors and Employees. The Policy has been posted on website of the Company at www.steelcogujarat.com.

18. CODE OF PRACTICES AND PROCEDURES FOR FAIR

DISCLOSURE OF UNPUB LISHED PRICE SENSITIVE INFORMATION

Pursuant to amended SEBI (Prohibition of Insider Trading) Regulations, 2015 read with SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018, the Board of Directors of the Company approved the updated Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information. The Policy has been posted on website of the Company at www.steelcogujarat.com.

19. NOMINATION AND REMUNERATION POLICY

The Policy of the Company has been framed on Directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and remuneration of Key Managerial Personnel and other employees of the Company pursuant to Sub-section (3) of Section 178 and Regulation 19 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The Policy has been posted on website of the Company at www.steelcogujarat.com.

20. CORPORATE GOVERNANCE

Your Company is substantially compliant of all mandatory requirements pursuant to SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. A separate report on Corporate Governance as stipulated by Regulation 34(3) read with Para C of Schedule V to the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, along with the required certificate from a Practicing Company Secretary regarding compliance of the conditions of Corporate Governance as stipulated by para E of LODR is given in Annexure - 3.

21. MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report is given in Annexure - 4.

22. RELATED PARTY TRANSACTIONS

The transactions entered into with related parties during the year under review, if any, were on arms length basis and in ordinary course of business and hence the provisions of Section 188 of the Companies Act, 2013 are not attracted. Further, there is no material related party transaction during the year under review with the promoters, directors or key managerial personnel.

23. DIRECTORS RESPONSIBILITY STATEMENT

To the best of the knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134(4) (c) of the Companies Act, 2013: i. That in preparation of the annual accounts for the year ended 31st March, 2019, the applicable accounting standards read with requirements set out under Schedule III have been followed along with proper explanation relating to material departures, if any; ii. The Directors have 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 as at 31st March, 2019 and of the loss of the Company for the year ended on that date; iii. That the Directors have taken proper and sufficient care 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 regularities; iv. The annual accounts have been prepared on a ‘Going Concern basis; v. That the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively, as such, however, the same needs to be strengthened further. vi. That the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

24. APPOINTMENT OF STATUTORY AUDITORS

Your Directors at their meeting held on 8th August, 2018, on the recommendation of the Audit Committee, approved appointment of M/s. Kedia & Kedia Associates, Chartered Accountants (Firm Registration No. 104954W), as Statutory Auditors to fill up the casual vacancy caused by the resignation of M/s. Walker Chandiok & Co LLP, Chartered Accountants (Firm Registration No. 001076N/ 500013). The said appointment has been approved by the shareholders at the 28th Annual General Meeting held on 28th September, 2018.

Shareholders of the Company at their 28th Annual General Meeting held on 28th September, 2018 appointed M/s. Kedia & Kedia Associates, Firm Registration No. 104954W as the Statutory Auditors of the Company, to hold the office for a period of 5 years i.e. from the conclusion of ensuing 28th Annual General Meeting to the conclusion of 33rd Annual General Meeting to be held in 2023. Pursuant to amended section 139(1) of the Companies Act, 2013, the requirement of ratification of appointment of Auditors at every Annual General Meeting is done away with. Accordingly, no resolution for ratification of appointment of auditors is proposed.

25. COST AUDITORS & COST RECORDS MAINTENANCE

The maintenance of cost records as specified by the Central Government under Section 148(1) of the Companies Act, 2013 is required by the Company and accordingly such accounts and records are made and maintained.

Your Directors have appointed M/s. Y. S. Thakar & Co., Cost & Management Accountants, as Cost Auditors in compliance with the Companies (Cost Accounting Records) Rules, 2011. Pursuant to provisions of Section 148 of the Companies Act, 2013 read with the Companies (Audit & Auditors) Rules, 2014, and the

Companies (Cost Records and Audit) Rules, 2014 and other applicable provisions, if any, the Board on the recommendation of the Audit Committee, has approved the appointment of M/s. Y. S. Thakar & Co., Cost & Management Accountants, as the Cost Auditors and remuneration payable to them, to conduct the audit of the cost records of the Company for the financial year ending 31st March, 2020. The Company has received a letter from M/s. Y. S. Thakar & Co., Cost & Management Accountants showing their willingness to be appointed as Cost Auditors, certifying that they are not disqualified under section 148(5) read with section 141(3) of the Companies Act, 2013.

The Cost Auditors have filed the Cost Audit Report for the financial year ended 31st March, 2018 within the due date.

26. SECRETARIAL AUDITORS

The Company has received consent and requisite certificate from M/s. Devesh Pathak & Associates, Practicing Company Secretaries, Vadodara, the present Secretarial Auditors, to the effect that their re-appointment, if made, would be within the prescribed limit, confirming their eligibility for re-appointment as Secretarial Auditors of the Company. Accordingly, M/s. Devesh Pathak & Associates has been re-appointed to act as Secretarial Auditors of the Company for the FY 2019-20.

27. QUALIFICATIONS / OBSERVATIONS OF STATUTORY

AUDITORS REPORT AND SECRETARIAL AUDIT REPORT

The observations of the auditors, viz. Statutory Auditors and Secretarial Auditors, when read together with the relevant notes to the financial statements, are self-explanatory and do not call for any further comment.

28. SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the rules made thereunder, the Company had appointed M/s. Devesh Pathak & Associates, Practicing Company Secretaries, Vadodara to undertake the Secretarial Audit of the Company for the financial year 2018-19. The Secretarial Audit Report is included as Annexure –5 and forms an integral part of this report.

29. COMPLIANCE WITH SECRETARIAL STANDARDS

The Secretarial Standards issued and notified by the Institute of Company Secretaries of India has been generally complied with by the Company during the Financial Year 2018-19 under review.

30. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9, as required under section 92 of the Companies Act, 2013 forms an integral part of this report as Annexure - 6. The said information is also available on the website of the Company at www.steelcogujarat.com.

31. INTERNAL FINANCIAL CONTROLS

The Company has designed and implemented a process driven framework for Internal Financial Controls ("IFC") within the meaning of the explanation to section 134(5)(e) of the Act. For the year ended on 31st March, 2019, the Board is of the opinion that the Company has in all material respects sound Internal Financial Control system in place, commensurate with the size, scale and complexity of its business operations, however, they are required to be strengthened further and its operative effectiveness requires improvement. The Company has a process in place to continuously monitor the same and identify gaps, if any, and implement new and / or improved internal controls whenever the effect of such gaps would have a material effect on the Companys operations.

32. ENVIRONMENT & SAFETY

The Company is conscious of the importance of environmentally clean and safe operations. The Companys policy requires conduct of operations in such a manner so as to ensure safety of all concerned compliances environmental requirement regulations and preservation of natural resources.

33. ANTI-SEXUAL HARASSMENT POLICY

As required by the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has formulated and implemented a policy as well as the constituted Internal Complaints Committee on prevention of sexual harassment at workplace with a mechanism of lodging complaints, under the Sexual Harassment of Women under Workplace (Prevention Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women under Workplace (Prevention Prohibition and Redressal) Act, 2013.

34. HUMAN RESOURCES & INDUSTRIAL RELATIONS

The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. The Company has structured induction process and management development programs to upgrade skills of managers. Objective appraisal systems based on Key Result Areas (KRAs) / Key Performance Areas (KPAs) are in place for management staff. The Company is committed to nurturing, enhancing and retaining top talent through superior learning & organizational development.

35. CREDIT RATING

M/s. Brickwork Ratings India Pvt. Ltd. had awarded BWR ‘B in respect of long term debts and BWR ‘A4 in respect of Short term Debts during FY 2015-16 and during the year under review; there has been no update on the rating renewal.

36. DISCL OSURE OF PA RTICULA RS REGA RDING

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

The disclosure of particulars relating to conservation of energy and technology absorption and foreign exchange earnings and outgo as required by Section 134 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 is given in Annexure - 1.

37. CORPORATE SOCIAL RESPONSIBILITY

The Company does not fall in any of the criteria as set out in Section 135 (1) of the Act and accordingly, the company is not required to comply with the same in respect of Corporate Social Responsibility.

38. PARTICUL ARS OF EMPL OYEES A ND RELA TED

DISCLOSURES

In terms of the provisions of Section 197(12) of the Act read with Rules 5(1), 5(2) and Rules 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees and the Disclosure pertaining to remuneration and other details are set out in Annexure – 2 to the Boards Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.

None of the employees listed in the said Annexure - 2 is a relative of any Director of the Company. None of the employees hold (by himself or along with his / her spouse and dependent children) more than two percent of the equity shares of the Company.

39. NO SIGNIFICANT OR MATERIAL ORDER PASSED

There were no significant and material orders passed by any Regulator or Court or Tribunal impacting the going concern status and Companys Operations in future during the year under review.

40. GENERAL DISCLOSURES

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: a) Details relating to deposits covered under Chapter V of the Act. b) Details of remained, unpaid or unclaimed dividend at the end of year. c) Issue of equity shares with differential right as to dividend, voting or otherwise. d) Issue of shares (including Sweat Equity Shares) to employees of the Company under any scheme. e) Neither the Managing Director nor the Whole Time Directors of the Company receive any remuneration or commission from any of its subsidiaries. f) No significant or material order, is passed by the Regulators or Courts or Tribunals, which impact the going concern status and Companys operations in future.

41. ACKNOWLEDGEMENT

Your Directors take this opportunity to express their appreciation for the co-operation and assistance received from the Government of India, Government of Gujarat, Financial Institution, the Companys Bankers, Electricity Companies, Palej Gram Panchayat, other Government Agencies, Customers, Suppliers and Investors. Your Directors express gratitude to the investors for their confidence reposed in the Company and Co-operation, and especially to the employees for their dedicated service and support.

42. CAUTIONARY STATEMENT

Statement in the Boards Report and Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be ‘Forward Looking Statements within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied. Important factors that may make difference to the Companys operations include raw material availability and its prices, cyclic demand and the pricing in the Companys principal markets, changes in government policies, regulations, tax regimes, economic developments within India and countries in which the Company conducts business.

By order of the Board
For Steelco Gujarat Limited
Place : Mumbai Amish H. Mehta Mitesh H. Shah
Date : 19th July, 2019 Director Managing Director