Visa Steel Ltd Management Discussions.


During FY 2019-20, 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.


Industry Overview

Ferro Chrome is used in varying proportions to produce different grades of Stainless Steel. The global Stainless Steel production was approx. 52.22 million tonnes in 2019, out of which Indias production stood at approx. 3.92 million tonnes. The global High Carbon Ferro Chrome production was at approx. 14.73 million tonnes in 2019, out of which Indias Ferro Chrome production stood at approx. 1.28 million tonnes. India exports approx. 50% of its Ferro Chrome production, primarily to China, South Korea, Japan and Taiwan. China accounts for approx. 60% of global Ferro Chrome consumption.

Indias Chrome Ore production dropped to approx. 4.06 million tonnes in 2019 out of which approx. 1 million tonne is produced by OMC. The Chrome Ore price fixing mechanism by OMC through auction has resulted in high prices of Chrome Ore. Meanwhile, the Government of Odisha auctioned three Chrome Ore mining blocks which has been won by Tata Steel Mining and the availability and price scenario of Chrome Ore going forward remains uncertain.

Company Overview

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



India has favourable demographic factors and in view of some of the Governments initiatives including Atma Nirbhar Bharat Abhiyaan, the Indian Stainless Steel Sector is expected to grow in the future and the demand for Ferro Chrome is expected to continue to grow consistently driven by Stainless Steel production and your Company can benefit from this opportunity as a supplier of Ferro Chrome.


The Ferro Chrome producers not having captive Chrome Ore mines including your Company are 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 and also high interest rates and infrastructural challenges including logistics costs due to road and railways infrastructure.

However, your Company is determined to face these challenges going forward by adjusting to the new rules of the game for the Industry.


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 other external factors including challenges arising out of high prices of Chrome Ore being fixed by OMC through e-auction, shortage in availability of Chrome Ore due to low production at OMCs mines, high energy costs, high electricity duty and coal cess, high road transport rates etc. Your Company has achieved Ferro Chrome sales quantity of 54,278 million tonnes in FY 2019-20 compared to 107,501 million tonnes in FY 2018-19. The main raw material for Ferro Chrome is Chrome Ore which is being sourced mainly from OMC & Misrilall Mines. Ferro Chrome produced by your Company is mainly exported.

The spread of COVID-19 Pandemic since mid-March 2020 has resulted in an unprecedented crisis and global recession, creating huge uncertainty for business, financial markets and economy. In view of the expected slowdown in growth due to COVID-19 Pandemic and the likely production drop in Chrome Ore due to mining lease transition, the outlook remains uncertain.


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 and equipment and stocks (raw materials, stores & spares and finished goods) against fire, allied perils and all other foreseeable risks. The policy also covers loss of profit to the business arising from any accidental event. 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 transaction. 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 OHSAS 18001 (Occupational Health and Safety Management System) Certification by BSI (British Standards Institution). It has also been accredited with the ISO 9001 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 2020 and have been audited and certified by the Statutory Auditor.


Your Company reported Standalone Revenues of Rs. 3,478.79 Million. The standalone EBITDA was Rs. (197.25) Million.

Highlights (Standalone)

(Rs. In Million)
Particulars 2019-20 2018-19
Revenue from operations 3,478.79 8,053.11
Other Income 397.22 153.19
Total Income 3,876.01 8,206.30
Raw Materials consumed 2,133.55 5,047.55
(Increase) / decrease in stock 85.23 164.27
Employee Cost 284.50 347.65
Other expenses 1,569.98 2,721.82
Operating Profit (197.25) (74.99)
Finance Cost 168.06 131.23
Depreciation 483.15 455.40
Profit/(Loss) before Tax (848.46) (661.62)
Tax Expenses
Profit/(Loss) after Tax (848.46) (661.62)
Other Comprehensive Income (5.65) (1.18)
Total Comprehensive Income (854.11) (662.80)

Sales & Other Income: Sales Revenue has decreased due to lower production of Ferro Chrome.

Expenditure: The raw material expenditure has decreased due to lower procurement of Chrome Ore, Coal & Coke etc. due to lower production.

Finance Cost: Your Company did not provide majority part of the finance cost as per details mentioned in Note 16D 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 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 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 recognises Human Resource as its most important assets and is constantly engaged in enriching the value and developing competencies of Human Resources through various development & training programmes. We improve our team building and encourage family bonding 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 2020 was 384.


As a responsible C orporate, your Company is focused on the happiness of people living in its larger neighboring 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 endeavors to be one of the most respected enterprises across the world in terms of providing a safe work place 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.


2019-20 2018-19
Debtors Turnover 39.03 28.19
Inventory Turnover 8.49 11.77
Interest Coverage Ratio (4.05) (4.04)
Current Ratio 0.29 0.36
Debt Equity Ratio 38.28 11.41
Operating Profit Margin (0.18) (0.06)
Net Profit Margin (0.22) (0.08)
Return on Networth (2.41) (0.55)

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 cutback by lenders in excess of EBITDA, high energy costs, high electricity duty/coal cess, high road transport rates etc.


The Government focus to implement reforms to attract investment and encourage manufacturing in India is expected to increase consumption of Steel, Stainless Steel and Ferro Alloys 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 unprecedented crisis and global recession due to spread 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 negotiations.