Varun Industries Ltd Directors Report.


To the Members,

Your Directors have pleasure in presenting the 17th Annual Report on the business and operations of your Company for the year ended 31st March 2013. In compliance with Clause 49 of the Listing Agreement, a separate section on Management Discussion and Analysis Report forms part of this Annual Report.


(Rs. in Crore)
Year ended 31st March 2013 Year ended 31st March 2012
Income 339.99 3132.27
Profit before Tax (35.72) (157.76)
Less: Provision for Taxation (1.24) 0.04
Profit after Tax (34.48) (157.80)
Add: Balance brought forward (62.96) 94.83
Disposable Profit (97.44) (62.96)
Transfer to General Reserve -
Proposed Dividend - -
Tax on Dividend - -
Balance carried to Balance Sheet (97.44) (62.96)


In view of the worldwide recessionary factors, the Companys financials have been affected to a greater extent resulting in approach to the Consortium of Bankers for approving Corporate Debt Restructuring (CDR) package for the Company.

In view of several constraints, there was delay in complying with the requirements of CDR mechanism. This has result in adverse financial results primarily arising out of the low level of operations of the Company.

However, efforts are under way to revive the operations including exports of the Company.


The Company is hopeful of improving its financial position. The Company is also undertaking all necessary efforts to reduce costs and increase profitability.


In view of the net loss incurred by the Company in the financial year 2012-13, the Directors do not recommend any dividend.


As on March 31, 2013, Promoter & Promoter Group were holding 1,14,63,518 shares representing 39.37% of the equity share capital of the Company, out of which 1,14,56,579 shares representing 39.35% of the Promoter & Promoters Group holding were pledged.


The Company was referred to the Corporate Debt Restructuring Forum, a non-statutory voluntary mechanism set up under the aegis of the Reserve Bank of India ("RBI"), for the efficient restructuring of corporate debt (hereinafter referred to as the "CDR"). Pursuant thereto, the CDR Empowered Group ("CDR EG") approved a restructuring package in terms of which the existing facilities were restructured as set out in the Letter of Approval (LOA) dated 28th December, 2012 issued by Corporate Debt Restructuring Cell ("CDR Cell").


The Company has held an Extra Ordinary General Meeting of Members on 18th April, 2013 for issuing shares on preferential basis to Mr. Kiran N. Mehta, Promoter Director of the Company as per CDR Scheme as approved by the CDR EG on 28th December, 2012. The Company has made an application to BSE Ltd. and National Stock Exchange of India Limited for their In Principal Approval. The Company will allot the equity shares to said Mr. Kiran N. Mehta only after getting BSE & NSE approval.


A Report on Corporate Governance as per the requirements of Clause 49 of the Listing Agreement with the stock exchanges. forms part of the Annual Report.

As per the requirements of the said Clause, a Certificate from the Auditors of the Company, M/s. Chunnilal & Company, Chartered Accountants conforming compliance to the conditions of Corporate Governance is annexed to this Report.


During the year under review, Varun Petroleum SARL, Oil and Gas Incorporation SARL, Varun International SARL, Madagascar Energy Corporation SARL, Varun Energy Corporation SARL, Varun SARL and Varun Torian International SARL, Madagascar ceased to be subsidiaries of the Company.

During the year, the investments in the aforesaid subsidiary Companies were disposed of at cost due to non-payment of share application money and subsequent cancellation of the Share Purchase Agreement between the Parties and the disposal proceeds were set off against the amount due to related party. Hence the Company did not prepare consolidated financial statements for the aforesaid subsidiary companies for the year under review.

In accordance with the general circular issued by the Ministry of Corporate Affairs (MCA), Government of India (GOI), Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not attached with the Balance Sheet of the Company. The Company shall make available the copies of annual accounts of the subsidiary companies and related detailed information to the shareholders of the Company seeking the same. The annual accounts of the subsidiary companies will also be kept for inspection by any shareholder at the Registered Office of the Company and that of respective subsidiary companies.

Further, pursuant to Accounting Standard (AS)-21 prescribed under the Companies (Accounting Standards) Rules, 2006 and the Listing Agreement, Consolidated Financial Statements presented herein by the Company include financial information of subsidiary companies, which forms part of this Annual Report.


In terms of the provisions of Section 217(2AA) of the Act, your Directors confirm that:

i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

ii) 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 your Company at the end of the financial year and of the profit of your Company for that year;

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

iv) the Directors had prepared the annual accounts on a going concern basis.


Mr. Kiran N. Mehta, Chairman & Managing Director, Mr. Kailash S. Agarwal, Managing Director and Mr. Varun K. Mehta, Whole-Time Director of the Company have informed the Company that in view of the current financial difficulties being faced by the Company, they will render services to the Company free of any remuneration w.e.f. 1st March 2012 till the improvement in the financial position of the Company.

Mr. Varun K. Mehta ceased to be a director and wholetime director of the Company w.e.f. 25th March, 2013.

In accordance with the act and the Articles of Association of the Company, Mr. Raaja Jain and Mr. Mahender Tahilramani

retire by rotation and being eligible offer themselves for re-appointment.

As required by Clause 49 of the Listing Agreement, brief profiles of the above referred Directors, nature of their expertise in specific functional areas and names of companies in which they are directors, are provided in the Corporate Governance Report forming part of the Annual Report.

12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: Pursuant to the provisions of Section 217(1)(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, particulars relating to energy conservation, technology absorption and foreign exchange earnings and outgo, are given in Annexure A to this Report.


During the year under review, the Company has not accepted any fixed deposits.


The Auditors of the Company, M/s. Chunnilal & Company, Chartered Accountants, Mumbai holds office until the conclusion of the ensuing Annual General Meeting and being eligible, offers themselves for re-appointment. The Company has received a letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limits under Section 224(1 B) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of Section 226 of the said Act.


Auditors have remarked on the following aspect, which are being explained hereunder:

a) Short Provisions of Rs. 51.33 Crore towards bank interest: The Companys proposal for CDR has been approved by CDR EG vide its letter dated 28th December, 2012 and confirming minutes letter dated 23rd January, 2013. Before the CDR Scheme becoming effective, the Master Restructuring Agreement (MRA) has been executed and signed between the Company and the Consortium of Bankers on 29th March, 2013 upon certain terms and conditions to be complied with by the Company and therefore there is a short provision of Rs. 51.33 Crore towards bank interest. The Company has already given effect as per MRA dated 29th March, 2013 signed with Consortium of Bankers.

b) Increase in Companys Borrowing Powers U/s. 293(1)(d): The Companys Board has approved the increase in limit of Borrowing Powers U/s. 293(1)(d) of the Companies Act, 1956 from Rs. 20,00,00,00,000/- to Rs. 30,00,00,00,000/- subject to approval of Members at the ensuing 17th Annual General Meeting. The enabling resolution for the same has already been included in the Notice calling Annual General Meeting to be held on 26th September, 2013 for the approval of Members.

c) Settlement deed dated 15th April, 2012 with two overseas debtors agreeing to allow the discount of Rs. 160.60 Crore and to defer the balance export realization of Rs. 1460.97 Crore for five years: The Company is in the process, of seeking permission for the deferment of export receivables.

d) Confirmation of balances of debtors, creditors, loans & advances, deposit, other receivables and payables:

There are differences in balances due to the ongoing litigations of the Company. Certain balances are in the process of reconciliation and the same shall be completed in due course of time.

e) Ascertainment of Contingent liabilities on account of ongoing litigations in various courts/tribunals: The

explanation given by the Auditor is self-explanatory and need not require any further explanation by the Management.


In pursuance of Section 233-B of the Companies Act, 1956 and directives of Central Government, your Directors have appointed M/s. Joshi Apte & Associates, Cost Accountants, as the Cost Auditors to conduct cost audit of the product "Steel" for the years 2012-13 and 2013-14 in place of M/s. Mehta N. & Associates who have expressed their inability to continue as Cost Auditors due to their pre-occupation. The Company has received confirmation from M/s. Joshi Apte & Associates that their appointment, if made, will be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956. The Cost Audit Report for the year ended 31.3.2013 will be filed on or before 27.9.2013, the due date.


Your Companys shares are listed on the BSE Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE) and the listing fees for these two exchanges have been paid by the Company.


Information as prescribed by Section 217(2A) of the Act, read with Companies (Particulars of Employees) Amendment Rules, 2011 is given as an annexure to this Report. However, pursuant to the provisions of Section 219(1)(b)(IV) of the Act, the Report and Accounts are being circulated to all the Members without the said annexure. Members interested in the said information may write to the Company Secretary at the Registered office of the Company.


Your Directors would like to express their sincere appreciation to the Companys Bankers and Financial Institutions, Government Authorities, Regulatory Bodies, Customers,Vendors and Investors for their continued assistance and co-operation during the year under review. Your Directors also wish to place on record their deep sense of appreciation of the committed services displayed by all the executives, staff and workers of the Company at all levels and also highly appreciate their hard work and co-operation to take the challenge in order to accomplish the Companys mission.

For and on behalf of the Board of Directors
Place : Mumbai Kiran N. Mehta
Date : May 30, 2013 Chairman & Managing Director
Registered Office:
13, Shankheshwar Darshan,
A. G. Pawar Cross Lane,
Byculla (East),
Mumbai - 400 027.


Pursuant to the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.


(a) Energy conservation measures taken:

Jodhpur Plant

1. Installation of Fuel Saving Instrument for improvement of Oil Consumption.

2. Using Metal Saver Chemical for improvement of Acid Consumption as well as Metal Loss.

3. Variable Frequency Drives are provided for all rolling mills, blowers & furnaces to reduce energy consumption.

4. Air cooling system has been installed for Electric panels to minimize the breakdown of VFD & other electric parts.

5. Using Energy efficient Gear Oil in Gear Box.

6. Power Capacitor has been installed to improve power factor.

7. Installation of energy efficient lighting & optimizing the ventilation system.

8. Timely maintenance of machinery & equipment to ensure that energy consumption is as minimal as possible.

9. High efficiency AC Motors have been installed.

10. Using Copper Cable for Control & Power System for energy efficiency as well as low maintenance.

Vasai Plant

1. Installation and commissioning of voltage stabilizer for APFC panel to control the power factor automatically and hence avoided the probability of paying penalty charges due to drop in power factor.

2. All new purchased motors are energy efficient motors.

3. Timely maintenance of machines and equipment to ensure optimum energy consumption.

4. Replacement of underloaded/overloaded motors with proper size motors and installation of high efficiency motors.

5. All new electrical installations are of copper cables for control and power system thereby achieving energy efficiency and low maintenance.

6. Prevented idle running of motors by providing limit switches for auto cut-off.

7. All newly purchased hydraulic power machines are of Revised Hydraulic Circuit System and with low capacity motors thereby consuming less power for same desired work.

8. Implemented so many energy saving suggestion and ideas recommended by Energy Management Committee and brought awareness among the workers about energy saving.

Nasik Plant

1. Maximum use of natural light by providing transparent panels on roof has done.

2. Automatic power factor control panel is installed to get the maximum power factor.

3. Hard anodised plant blower will be repaired, thus reduce the power consumption of compressor.

4. Maximum use of turbo ventilation to save the energy.

5. Regular checking of capacitor & capacitor bank.

6. Installed pic controlled compressor to achieve maximum efficiency.

(b) Additional investments and proposals for reduction of energy consumption being implemented: N. A.

(c) Impact of measures in (a) & (b):

The above energy conservation measures undertaken by Vasai, Jodhpur and Nasik Plants have ensured uninterrupted power supply and improvement in quality of power productivity. The cost of energy has also been optimized to the extent feasible. Our efforts continue to further optimize energy productivity & efficiency.

(d) . Total energy consumption and energy consumption per unit of production:

Details are given in Form A.

FORM A (See Rule 2)


Year ended 31st March 2013 Year ended 31st March 2012
1. Electricity
a) Purchased Units Thousand KWH 2,588.31 3,003.74
Total amount Rs. in Thousand 17,361.66 17,530.70
Rate/unit (KWH) 6.71 5.84
b) Own Generation
i) Through Diesel Generator (HSD)
Units Thousand KWH 76.59 87.06
Total Amount Rs. in Thousand 1,138.07 1,269.33
Cost/Unit (KWH) 14.86 14.58
ii) Through Generator (furnace oil)
Units Thousand KWH - -
Units per liter of furnace oil KWH - -
Cost/Unit (KWH) , - -
iii) Through Generator (gas) -
Units Thousand KWH - -
Units per M3 of Natural gas KWH - -
Cost/Unit (KWH) Rs. - -
2. Coal - -
3 i) Furnace oil (Hot Mill)
Quantity KL 253.40 330.97
Total amount Rs. in Thousand 10,151.55 13,565.72
Rate/unit (KL) Rs. 40.06 40.99
ii) CBFS oil (Hot & Cold Furnace)
Quantity KL 457.83 604.33
Total amount Rs. in Thousand 20,246.00 24,337.46
Rate/unit (KL) Rs. 44.22 40.27
4. Natural gas
Quantity Cu. mts. - -
Total amount Rs. in Thousand - -
Rate/unit (Cu. mt.) - -
Unit 2012-13 2011-12
Electricity / Own Generation KWH 347.07 257.82
Furnace Oil Litres 34.72 34.76
CBFS Oil Litres 62.73 63.47



Year ended 31st March 2013 Year ended 31st March 2012
1. Total Foreign Exchange Earned:
i) FOB Value of export 4,657.02 2,91,488.17
ii) Rig Hiring Charges 273.44 1,567.72
Total 4,930.46 2,79,650.02
2. Total Foreign Exchange Used:
i) On Import of Raw Material / Finished Goods - 1,09,435.55
ii) On Import of Capital Goods, Spares and Components - -
iii) Expenditure in Foreign Currencies for business travels,
Subscription, commission on exports etc. 32.83 165.74
Total 32.83 1,09,601.29


For and on behalf of the Board of Directors
Place : Mumbai Kiran N. Mehta
Date : May 30, 2013 Chairman & Managing Director