Visa Steel Ltd Management Discussions.


During FY 2020-21, the performance of the Company has been adversely affected due to non-availability of working capital for operations and other external factors beyond the control of the Company and its management, including the outbreak of Covid-19 pandemic.


Industry Overview

The global High Carbon Ferro Chrome production was at approx. 12.47 million tonnes in 2020, out of which Indias Ferro Chrome production stood at approx. 1 million tonnes. India exported approx. 65% of its Ferro Chrome production, primarily to China, South Korea, Japan and Taiwan. China accounted for approx. 70% of global Ferro Chrome consumption.

Indias Chrome Ore production dropped from approx. 3.92 million tonnes in FY 2019-20 to approx. 2.78 million tonnes in FY 2020-21. OMC produced only approx. 1 million tonnes of Chrome Ore in FY 2020-21 against an EC limit of 1.53 million TPA resulting in a huge supply-demand imbalance for Chrome Ore.

Iron Ore production in Odisha dropped from 142 million tonnes in FY 2019-20 to approx. 111 million tonnes in FY 2020-21, out of which 65 million tonnes was from captive mines. The exports of Iron Ore from Odisha also increased from 17.4 million tonnes in FY 2019-20 to 29 million tonnes in FY 2020-21. As a result, the merchant supply of Iron Ore got reduced drastically in FY 2020-21 creating a supply-demand imbalance which has resulted in an unprecedented increase in Iron Ore prices.

The Chrome Ore and Iron Ore production volume and price fixing mechanism by OMC for end user industries remains a key challenge.

Company Overview

Your Company has established manufacturing assets for production of Ferro Alloys at Kalinganagar in Odisha.



In view of some of the Governments initiatives with focus on implementing reforms to revive the economy, the demand for Ferro Alloys and Iron & Steel products is expected to grow.


The Company is under stress due to non-availability of Chrome Ore at viable prices, shortage in availability of Chrome Ore due to low production at OMCs mines, high prices of Chrome Ore being fixed by OMC through e-auction, high electricity duty & Coal Cess, high logistics costs including road transport rates, non-availability of working capital, high interest rates and delays in debt resolution. The long-term competitiveness of the Ferro Alloy Industry in India will depend on the cost of doing business including raw material costs, energy costs, regulatory costs, logistics costs for inbound and outbound transportation of raw material and finished goods, interest costs etc. There has been significant increase in levies,


duties and regulatory costs in the recent years. However, your Company is determined to face these challenges going forward.


Your Company is engaged in the manufacturing of Ferro Alloys.

During the year under review, the operational performance of your Company has been adversely affected due to non-availability of working capital for operations and challenges due to other external factors including the outbreak of Covid-19 pandemic.

Your Company has achieved Ferro Chrome sales quantity of 66,720 MT in FY 2020-21 compared to 54,278 MT in FY 2019-20. The main raw material for Ferro Chrome is Chrome Ore which is being sourced mainly from OMC.

The spread of Covid-19 Pandemic since mid-March 2020 and subsequent lockdowns has resulted in an unprecedented crisis creating huge uncertainty for business, markets and the economy.

In view of the drop in production of Chrome Ore and the price fixing mechanism of OMC, the outlook remains uncertain. The Companys furnaces have become very old and are overdue for major refurbishment and relining. The Company is operating under conversion arrangement effective Q4 FY 2020-21. The Company has been taking support of operational creditors including related parties to continue plant operations under conversion arrangement without which such operations as a going concern would be impossible.


The volatility in the Global economy and the increasingly complex interplay of factors influencing a more globally integrated business makes Risk Management an inevitable exercise and to cater to the same, your Company has identified major focus areas for risk management to ensure organisational objectives are achieved and has a well-defined and dynamic structure and proactive approach to assess, monitor and mitigate risks associated with these areas, briefly enumerated below:

a) Operations – The price and availability of key raw materials, non-availability of working capital and regulatory changes such as duties / taxes / cess etc. have an impact on the operations. Moreover, the stocks are also subject to the other foreseeable risks. Necessary coverage has been taken in the form of a comprehensive Industrial All Risk (IAR) policy which covers plant, machinery, buildings (with contents), tools & equipment and stocks (raw materials, stores & spares and finished goods) against fire, allied perils and all other foreseeable risks. The Company also has coverage in form of a Sales Turnover policy which provides all-risk transit insurance cover to the finished goods produced and sold by your Company and also covers transit of all the incoming raw materials.

b) Foreign Exchange – Your Company deals in foreign exchange in imports of raw materials and exports of finished products.

A comprehensive forex policy has been formulated for managing its foreign exchange exposure.

c) Systems – Your Company has implemented SAP, the leading software for Enterprise Resource Planning, to integrate its operations and to use best business and commercial practices.

d) Statutory compliances – Procedure is in place for periodical reporting of compliance of statutory obligations and is reported to the Board of Directors at its meetings.


Your Company has in place detailed and well spelt internal control systems, which commensurate with the size and nature of its operations and periodic audits are conducted in various disciplines to ensure adherence to the same. During the year, M/s. L. B. Jha, & Co. Internal Auditor of your Company had independently evaluated the adequacy and efficacy of the audit controls. The direct reporting of the Internal Auditors to the Audit Committee of the Board ensures independence of the audit and compliance functions. The Internal Auditor regularly reports to the Audit Committee on their observations on your Companys processes, systems and procedures ascertained during the course of their audit. Your Company has also appointed Cost Auditors for the cost audit of its manufactured products and the Cost Auditors also report to the Audit Committee on their observations. Your Company has appointed Auditors to report on arms length pricing policy and its compliance with the Companies Act, SEBI regulations on related party transactions. Concerted efforts towards stabilisation of SAP have also contributed to tightening of control systems. Your Company has been able to adapt adequately to this ERP package and is placed to derive significant benefits from the same. Your Company has successfully migrated to cloud which will reduce the IT Cost and will also protect from data loss in case of hardware failure. Emphasis is placed on adequacy, reliability and accuracy of dissemination of financial data and information. Compliance issues are given utmost importance and reported regularly to the Board.

Your Company has been accredited with ISO 14001 (Environmental Management System) and OHSMS 45001 (Occupational Health and Safety Management System) Certification by BSI (British Standards Institution). It has also been accredited with the ISO 9001 (Quality Management System) certification. It shows commitment to quality, customers, and a willingness to work towards improving efficiency.

Your Company has an adequate internal financial control system over financial reporting which were operating effectively as at 31 March 2021 and have been audited and certified by the Statutory Auditor.


Your Company reported Standalone Revenues from operations of Rs 5,666.73 Million. The standalone EBITDA was (Rs 90.08) Million.

Highlights (Standalone)

( Million)

Particulars 2020-21 2019-20
Revenue from operations 5,666.73 3,478.79
Other Income 438.13 397.22
Total Income 6,104.86 3,876.01
Raw Materials consumed 3,150.94 2,133.55
(Increase) / decrease in stock 16.91 85.23
Employee Cost 267.49 284.50
Other expenses 2,759.60 1,569.98
Operating Profit (90.08) (197.25)
Finance Cost 196.06 168.06
Depreciation 465.16 483.15
Exceptional Item 2,151.17 -
Profit/(Loss) before Tax (2,902.47) (848.46)
Tax Expenses - -
Profit/(Loss) after Tax (2,902.47) (848.46)
Other Comprehensive Income (12.88) (5.65)
Total Comprehensive Income (2,915.35) (854.11)

Sales & Other Income: Sales Revenue increased due to increase in the sales quantity of Ferro Chrome.

Expenditure: The raw material expenditure has increased due to increase in the price of raw material and higher production in comparison to previous year.

Finance Cost: Your Company did not provide majority part of the finance cost as per details mentioned in Note 15B of the Standalone Financial Statements.

Your Company has been under financial stress since 2011-12 due to various external factors beyond the control of your Company and its management. The Lenders have not disbursed sanctioned limits for operations and adjusted the same with interest resulting in complete depletion of working capital and it now appears that the whole exercise of purported restructuring was mere evergreening of debt without even considering its adverse effect on the Companys operations.

Your Company has reserved its right to claim losses suffered due to the actions and inactions of Banks including arising out of breaches and violations of contractual and other arrangements and such amount shall be claimed as a set-off against any dues.

Your Company has been requesting lenders to implement a Resolution as per RBI Guidelines. Several Banks including Vijaya Bank (since merged with Bank of Baroda), SIDBI, Bank of Baroda, Dena Bank (since merged with Bank of Baroda), Indian Overseas Bank, Central Bank of India, UCO Bank and State Bank of Travancore (since merged with State Bank of India) have already implemented Resolution through sale of debt to ARCs. Other Banks are also in various stages of implementing Resolution through sale of debt to ARCs.


Your Company has formulated a detailed Code of Conduct in order to practice ethical behaviour and sound conduct to establish the principles that guide our daily actions. Ethical conduct is the cornerstone of how your Company does business. Your Company is committed to creating a healthy work environment that enables employees to work without fear of prejudice, gender bias, sexual harassment and all forms of intimidation or exploitation. It is committed to provide a work environment that ensures every employee is treated with dignity and respect.

Your Company has been focused on ensuring safety of employees and compliance of guidelines issued by Government of India and Government of Odisha for prevention of Covid-19. The Company recognises Human Resource as its most important assets and is constantly engaged in developing its employees through various development & training programmes. We improve our team building through various employee engagement social activities.

The total number of employees in your Company, including those inducted as trainees in your Company, as on 31 March 2021 was 386.


As a responsible Corporate, your Company is focused on the happiness of people living in its larger neighbouring communities. Your Companys CSR team has directed its community development work in the areas of education, healthcare, rural development, sports & culture and your Company wishes to continue its support and focus on these issues.


Your Company endeavours to be one of the most respected enterprises across the world in terms of providing a safe workplace to its employees, contractors and other stakeholders. The management is making every possible effort to ensure that its employees and contractors adopt, practice and enjoy world class health and safety standards.


2020-21 2019-20
Debtors Turnover - 39.53
Inventory Turnover 30.55 8.60
Interest Coverage Ratio (2.83) (4.05)
Current Ratio 0.26 0.29
Debt Equity Ratio - 38.28
Operating Profit Margin (0.09) (0.18)
Net Profit Margin (0.48) (0.22)
Return on Net worth - (2.41)

During the current year, the key financial ratios have been adversely affected due to non- availability of working capital for operations and other external factors including challenges arising out of shortage & high prices of Chrome Ore being fixed by OMC through e-auction, high energy costs, high electricity duty/coal cess, high road transport rate and other external factors including outbreak of Covid-19 pandemic.


The Government initiatives with focus to implement reforms to revive the economy is expected to increase demand for Ferro Alloys and Iron & Steel products going forward. However, the outcome of mine auctions with extremely high bid premium is likely to impact the availability and price of raw material. The high energy, logistics & finance costs and huge uncertainty due to second and third waves of Covid-19 pandemic are areas of concern and will remain a challenge going forward.


Statements in this "Management Discussion & 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 could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand supply conditions, finished goods prices, input 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 negotiation.