REPORT OF THE BOARD OF DIRECTORS Dear Shareholders, The Board of Directors of Usha Martin Limited present the 30th Annual Report and Audited Accounts for the Financial Year ended 31st March, 2016. Review of Operations The turnover for the year was Rs. 4,147.92 crores on consolidated basis and Rs. 3,447.47 crores on standalone basis as compared to Rs. 4,561.10 crores and Rs. 3,746.05 crores respectively in the previous year. The operating profit got reduced on consolidated basis from Rs.753.48 crores in previous year to Rs. 389.34 crores in the current financial year and on standalone basis from Rs. 646.38 crores to Rs. 335.57 crores. The detailed review of operations under Steel and Wire & Wire Rope businesses has been discussed in Management Discussion and Analysis which forms part of this report. Dividend & Reserves In view of there being no profits, the directors are unable to recommend dividend for the year under review, nor do they propose to carry any amount to reserves. Outlook and business Steel business outlook is likely to stay challenging over the near term due to overcapacities in the sector. According to World Steel Association (WSA) global steel demand is likely to contract by 0.8% in 2016 and expand by only 0.4% in 2017. Demand in China, which produces more than 50% of the global steel, is seen as contracting at 4% and 3% in 2016 & 2017 respectively. At 626 million tons, the steel demand in China in 2017 would be 15% lower compared to 2016. In India, though the demand of steel is expected to grow at a healthy 5.4% both in 2016 and 2017, the sector is likely to be weighed down by global excess capacities and contraction in aggregate demand. Wire ropes business continues to do reasonably well despite various headwinds, though margins are under continuous pressure. The demand has been weighed down by a collapse in project lead demand in oil sector and slow-down in mining activity globally. The Company managed to increase volumes in some of the other product segments within Wire Ropes business, though the loss of volumes in oil and mining sector could not be compensated and therefore the profitability was affected adversely when compared to the last financial year and the year before. Given the Company's reputation, marketing and distribution strengths in this business, we expect to weather this slowdown by focussing on new areas. No material changes and commitments have taken place since the close of the previous financial year and till the date of this report which may significantly affect the financial position of the Company adversely. TPM & Quality Steel Division and Wire Ropes & Specialty Products Division continue to have certification for its quality management systems in accordance with ISO 9001 2000 from BVQI. The TQM journey of Wire & Wire Rope Division for further strengthening competitiveness is progressing well to enable the Company to reap long term benefits. Subsidiaries & Joint Ventures The international subsidiaries provide significant synergy and support to the Company's wire rope business and performance. Further, all the operating subsidiaries of the Company have continued to perform reasonably well in the economic and business circumstances which prevailed during the year under review. A key joint venture formed by the Company namely, Pengg Usha Martin Wires Private Limited has reported satisfactory results in the year under review. During the year under review, with a view to reduce non - core assets of the Company, the Board has decided to divest its' entire shareholding of 50% in Dove Airlines Private Limited (a joint venture company) ["DAPL"] and the same is under process. During the year under review, no company has become or has ceased to be subsidiary, joint venture or associate company. A statement covering report on the performance and financial position of each of the subsidiaries, associates and joint ventures is provided separately and forms part of this Report. Environment Steel Division and Wire Ropes & Speciality Products Division operate under ISO 14001 Environment Management Systems (EMS) Standards from Det Norseke Veritas (DNV) of U.K. The effectiveness of these systems is evident from reduced oil and water consumption, reuse of waste oils and water and utilisation of iron containing wastes. Wire Rope & Specialty Products Division is driving improvements in effluent treatment plant to eliminate sludge carry over by incorporation of filter press, the output of which is being used for non-critical applications and continues to target zero discharge condition. The Division is also focused on reducing air pollution by converting from oil to LPG and eliminating emission of un-burnt fuels in atmosphere. Deposits During the year the Company has not accepted any deposit under Section 73 of the Companies Act, 2013 ("the Act") and the Companies (Acceptance of Deposits) Rules, 2014. As on 31st March, 2016, there are no unclaimed deposits with the Company. Further the Company has not defaulted in repayment of deposits or payment of interest thereon in the past. Share Capital The Paid-up Equity Share Capital as on 31st March, 2016 stood at Rs.30.54 crores. The Company has not during the year under report, issued any shares with or without differential voting rights, granted stock options or issued sweat equity shares. Subsequent to Shareholder's approval obtained at the Extra Ordinary General Meeting held on 16th March, 2015 the Company had, during the year under review, issued and allotted 34,285,600 convertible equity warrants each convertible into one Equity Share of face value of Re. 1 each at the option of the allottees, to certain persons from Promoter and Promoter Group. Further out of the aforesaid warrants, 750,000 convertible equity warrants lapsed as on 31st March, 2016 due to non-exercising of the option for conversion. Significant and material orders passed by regulators or courts or tribunals impacting the going concern status and Company's operations in future. During the year, no material orders were passed by any regulatory authority or court which may affect the status of going concern of the Company. Details in respect of adequacy of internal financial controls with reference to the financial statements. Based on the framework of internal financial controls and compliance systems established and maintained by the Company (with its inherent weaknesses), work performed by the internal, statutory and secretarial auditors and external consultants specially appointed for this purpose, including audit of internal financial controls over financial reporting by the statutory auditors, and the reviews performed by management and the relevant board committees, including the audit committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the period ended on 31st March, 2016. Directors Mr. Prashant Jhawar (DIN: 00353020) is retiring by rotation and being eligible, offers himself for re - appointment. His brief profile is given in the Notice convening the forthcoming Annual General Meeting. During the year, Mr. R Venkatachalam (DIN: 02194830) was appointed on the Board effective 4th November, 2015 as a nominee of State Bank of India. Mrs. Ramni Nirula, (DIN: 0001 5330) an Independent Director resigned as Director of the Company effective 4th April, 2016. The Board places on record its appreciation for Mrs. Nirula's active participation and the guidance provided by her during her tenure as Director of the Company. Directors' Responsibility Statement Pursuant to requirements under Section 134(5) of the Companies Act, 2013 the Board, to the best of it's knowledge and belief, confirms that (i) the applicable accounting standards have been followed in preparation of annual accounts for financial year ended 31st March, 2016 and proper explanations have been furnished relating to material departures; (ii) accounting policies have been selected and applied consistently and prudent judgments and estimates have been made so as to give a true and fair view of state of affairs of the Company at end of financial year and of loss of the Company for year under review; (iii) proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with provisions of the Act for safeguarding assets of the Company and for preventing and detecting fraud and other irregularities; (iv) the annual accounts for financial year ended 31st March, 2016 have been prepared on a going concern basis; (v) internal financial controls are in place and that such financial controls are operating effectively. (vi) adequate systems to ensure compliance with the provisions of all applicable laws are in place and are operating effectively. Board Evaluation Criteria has been formulated for formal evaluation of the individual Directors, Board as a whole and the Board Committees. Every Director evaluated the performance of other Directors (excepting himself / herself), the Board as a whole and it's Committees and provided feedback to the Nomination & Remuneration Committee. The Nomination & Remuneration Committee reviewed the feedback and made it's recommendation to the Board for final evaluation. Nomination & Remuneration Policy In accordance with the provisions of the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (erstwhile Clause 49 of the Listing Agreement), the Board of Directors of the Company on recommendation of the Nomination & Remuneration Committee have adopted the criteria for determination of qualification, positive attributes and independence of Directors along with Policies on Remuneration of Directors, Remuneration of Senior Management Personnel (including Key Management Personnel) and Remuneration of Other Employees. The above mentioned criteria and Policies are available at www.ushamartin com/investor. Vigil Mechanism and Whistle Blower Policy The Company has a coded Vigil Mechanism and Whistle Blower Policy available at www.ushamartin.com/investor. This Policy provides a framework to promote responsible and secure reporting of undesirable activities ("whistle blowing"). Through this Policy, the Company seeks to provide a mechanism to all employees or directors of the Company ("whistleblower") to disclose any misconduct, malpractice, unethical and improper practice taking place in the Company for appropriate action and reporting, without fear of any kind of discrimination, harassment, victimisation or any other unfair treatment or employment practice being adopted against the whistleblower. Particulars of Employees & Managerial Remuneration The required disclosures in accordance with Section 197 of the Act read with Rule 5 of Companies (Appointment and Remunaration of Managerial Personnel) Rules, 2014 are provided separately and forms part of this report. CEO and CFO Certification In accordance with the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (erstwhile Clause 49 of the Listing Agreement), the Managing Director and Chief Financial Officer of the Company have submitted a certificate for the year ended 31st March, 2016 to the Board of Directors. Additional Disclosures In line with requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and Accounting Standards issued by the Institute of Chartered Accountants of India, the Company has made additional disclosures in respect of Consolidated Financial Statements, Related Party Transactions and Segmental Reporting. Auditors In accordance with the provisions of Section 139 of the Act and the transition period mentioned therein, Price Waterhouse, Chartered Accountants were appointed as Statutory Auditors of the Company at the 28th Annual General Meeting of the Company held on 31st July, 2014 for a period of two years and upto the conclusion of the 30th Annual General Meeting. The Board of Directors recommend to the shareholders the appointment of S.R. Batliboi & Co. LLP, Chartered Accountants (Firm Registration No. 301003E) as the Auditors of the Company to hold office from the conclusion of 30th Annual General Meeting till the 35th Annual General Meeting of the Company. Cost Auditors Pursuant to Section 148 of the Act and Rules made there under, the Board has appointed Messers. Guha, Ghosh, Kar & Associates, Cost Accountants, to conduct cost audit of the Company for the Financial Year 2015-16 and had recommended their remuneration to the shareholders which was ratified at the Annual General Meeting held on 30th July, 2015. The Board of Directors have appointed Messers Guha, Ghosh and Kar & Associates as the Cost Auditors for the Financial Year 2016-17 and their remuneration is sought to be ratified from the shareholders at the forthcoming Annual General Meeting. Secretarial Audit and Corporate Governance Report During the year under review, the Board of Directors had appointed M/s A K Labh & Co. firm of Practicing Company Secretaries for conducting secretarial audit in accordance with the provisions of the Act and theRules framed there under. The Secretarial Audit Report is annexed and forms part of this Report. The Company has complied with the applicable requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (erstwhile Clause 49 of Listing Agreement) and followed the practice of getting disclosures from directors and senior management personnel relating to any material financial and commercial transactions where they have any personal interest with a potential conflict of interest with the Company at large. A detailed Report on Corporate Governance is annexed and forms part of this Report. Further, your attention is drawn to the observations made in the Secretarial Audit Report and Auditors' Certificate on Corporate Governance Report with regard to Independent Directors for which appropriate explanation has been provided in Disclosure XI of the Report on Corporate Governance. Corporate Social Responsibility (CSR) Usha Martin Limited has been constantly involved in sustainable development of communities around its plants & mines. It has expanded its CSR activities to the other districts of Jharkhand. Commitment of founders of Usha Martin Limited towards sustainable development has led KGVK, a non - profit seeking organization, CSR arm of the Company, to reach more than 190 villages of Jharkhand. The CSR Committee consists of the following Members: Mr. B K Jhawar - Chairman (Non - executive director) Mr. Brij K Jhawar - Member (Non - executive director) Mrs. Ramni Nirula - Member (Independent Director) [till 4th April, 2016] Mr. P S Bhattacharyya - Member (Independent Director) [effective 25th May, 2016] The contents of the CSR Policy of the Company is available at www. ushamartin.com/investor. The CSR activities undertaken by KGVK on behalf of the Company (including the Annual Report on CSR activities) has been annexed separately and forms part of this Report. Extract of Annual Return The details forming part of the extract from the Company's Annual Return in Form MGT 9 are annexed separately with this Report. Number of Meetings of Board and it's Committees The details regarding Meetings of the Board and its Committees have been provided in the Corporate Governance Report. Statement on declaration given by independent directors under Section 149 of the Companies Act, 2013 As required under provisions of the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all Independent Directors of the Company have confirmed that they meet the requisite criteria of independence. Particulars of loans, guarantees and investments The particulars of loans, guarantees or investments are provided in the Financial Statement. Particulars of contracts or arrangements with related parties The related party contracts or arrangements entered into by the Company during the year under review do not fall under the ambit of Section 188 (1) of the Act and all related party transactions during the financial year were at arm's length basis and in the ordinary course of business. In compliance with the Act and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 all related party transactions had been placed before the Audit Committee for prior approval. The related party transaction policy as approved by the Board is hosted on the Company's website. Further, Form AOC - 2 is not attached with this Report as there were no such related party transactions for which disclosure under Rule 8 of the Companies (Accounts) Rules, 2014 was required. Conservation of energy, technology absorption, foreign exchange earnings and outgo: Information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134 (3) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed seperately and forms part of this report. Risk Management The Company has a Risk Management Committee to assist the Board in discharging its responsibilities towards management of material business risk (material business risks include but is not limited to operational, financial, sustainability, compliance, strategic, ethical, reputational, product quality, human resource, industry, legislative or regulatory and market related risks) including monitoring and reviewing of the risk management plan / policies in accordance with the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and erstwhile Clause 49 of the Listing Agreements. The Committee consists of the following members : Mr. P S Bhattacharyya - Chairman (Independent Director) Mr. Rajeev Jhawar - Member (Managing Director) Mr. P K Jain - Member (Jt. Managing Director [Wire & Wire Rope Business]) Appreciation Your Directors place on record their appreciation for the valuable co-operation and support of its employees, customers, suppliers, contractors, shareholders, investors, government authorities, financial institutions, banks, partners and collaborators. On behalf of the Board of Directors B.K. Jhawar R. Jhawar Chairman - Emeritus Managing Director Place : Kolkata Date : 25th May, 2016 |