Board’s Report

1.00 The Board hereby presents its Report for the year ended 31st March 2016.

3.00 DIVIDEND:

3.01 In the month of January, 2016 the Company declared an Interim Dividend of Rs. 10/- per share. Your Directors are pleased to recommend a Final Dividend of Rs. 10/- per share aggregating Rs. 20/- per share (inclusive of interim and final) for the current financial year. The Final Dividend if approved and declared in the forthcoming Annual General Meeting, would result in a total outflow of Rs. 884.98 lacs, including the Dividend Distribution Tax.

4.00 STATE OF COMPANY AFFAIRS AND OPERATIONS:

4.01 The adverse economic conditions continued to prevail during the year under report. Capital investment was low and competition was intense. In spite of this, your Company has grown, both in revenue as well as in profits, due to continued and intensive efforts towards up-gradation of technology, value engineering, cost control and increase in productivity.

4.02 The order book at the close of the year was healthy. The Company could sustain and also improve market share in most of its business lines.

4 ISGEC HEAVY ENGINEERING LIMITED

4.03 Focus on exports continued during the year. The efforts include participation in various Industrial Exhibitions and Conferences in India and overseas. The Company could enter into new countries and increase the order booking due to these efforts. Export turnover was, however, marginally lower than last year.

BOILERS:

4.04 The first Pulverized Coal Fired Boiler of 180 MW was commissioned in June 2015. The customer is highly satisfied.

4.05 Your Company continues to maintain its leading position in the range of Boilers that it operates in.

4.06 With the commissioning of three Waste Heat Recovery Boilers, during the year under report, the Company has successfully entered into the Waste Heat Recovery Boiler market.

4.07 The first order for a Pin Hole Grate Biomass Boiler was executed during the year and is working well.

4.08 The Company has also secured its first order for Re-Heat type Circulating Fluidized Bed Combustion (CFBC) Boiler. This is likely to be commissioned early next year.

4.09 As reported in last year’s report, the Government has decided to implement “Zero Effluent Discharge” Policy for Distilleries. The Company has booked many orders for Slop (Highly Polluting Distillery Effluent) Fired Boilers. Three of the Slop Fired Boilers supplied by the Company have successfully operated during the year. This is a promising line for the future.

4.10 In order to reduce rework, both in-house and at site, the Company has started making 3-Dimensional Drawings. The Company participated in a competition and its 3-Dimensional Drawings model project namely, SIDI Bennour, Morrocco was selected for “The Innovation in Power Generation of the 2015 Be Inspired Awards” from Bentley Sustaining Infrastructure, United States of America.

4.11 With technology from Envirotherm GmbH, Germany, your Company has supplied 45 Electrostatic Precipitators (ESP) during the year. The ESPs supplied include the largest ESP for the 180 MW PC Boiler and the same is working well.

SUGAR PLANTS & MACHINERY:

4.12 The Company continues to be a global leader for the supply of Sugar Plants and Machinery.

4.13 The Company successfully commissioned seven Complete Sugar Plants during the year under report.

4.14 The Company completed a project consisting of Sugar Plant of 3500 Tonnes Per Day capacity and 15 Mega

Watt Co-generation Plant on a turnkey basis, including civil work, in a record time of little over 11 months.

4.15 The Company has also entered into supplying of Sugar Refinery projects and two such projects are under execution.

4.16 Supply of Bio-Ethanol (Distillery) projects is turning out to be a promising line. Three such projects are under execution.

4.17 The Company continues to focus on Spares, Repairs & Maintenance and Operation & Management business for Boilers and Sugar Plants and has booked substantial orders.

EPC POWER PLANTS:

4.18 Your Company has achieved leadership position in the Indian market. It has also secured orders from the overseas market. Three such orders are under execution.

4.19 As Captive Power Generation capacity addition continues to be on a decline, the Company has taken steps to enter into EPC work for Railways, Waste Water Treatment Plants and Bulk Material Handling for Mines and Ports.

PRESSES & CONTRACT MANUFACTURING:

4.20 The Automobile Sector, the main user industry for Presses, remained stagnant both in India and abroad during the year. However, the Company could retain its market share in the domestic market.

4.21 Due to sustained efforts in developing the export market, particularly in North America where the Company has its own representative, it could book substantial export orders during the year under report.

4.22 The first CNC Vertical Turning Lathe Machine is expected to be delivered during the current year.

4.23 The Company could secure good orders for Contract Manufacturing of sophisticated equipment to be supplied to the Indian Railways.

4.24 The Company entered into a Collaboration Agreement with Neuson Hydrotec GmbH, GaisbergerstraBe 52, 4030 Linz, Austria for manufacture and sale of Nosing Press Plant, Forging Plant, Forging Complex Press and Straightening Press.

PROCESS EQUIPMENT:

4.25 The fall in crude prices caused a slow down in the demand for Process Equipment for the Oil & Gas Sector. The diversification in the product range helped securing substantial orders from domestic as well as export markets for Fertilizer Plants. In order to offer faster delivery, the Company added equipments to de-bottleneck the plant.

4.26 The Company successfully manufactured Low Pressure and Medium Pressure Decomposers for the Fertilizer Industry. In addition, the Company, for the first time, supplied Chain Type Heat Exchangers for a Fertilizer Plant and also Low Pressure Heaters for the Nuclear Power Corporation of India Limited.

TUBING AND PIPING:

4.27 The Company continues to do well in the Tubing & Piping business. The Company increased its Piping manufacturing capacity substantially. In order to cater to the high end market including the Oil & Gas sectors, the Company installed a Cold Pipe Bending Machine to bend pipes up to 200 nb (nominal bore) x 25 mm thick. An Induction Bending Machine for bending 600 nb (nominal bore) x 60 mm thick pipes is expected to be installed in the second quarter of the current year.

CONTAINERS:

4.28 The Company continues to have substantial market share in India and abroad and is doing well. The Company supplied a record number of Containers during the year.

IRON FOUNDRY:

4.29 The Iron Foundry, which manufactures specialized Ferrous and Gray Iron Castings, secured substantial orders and it has a record order book. The expansion scheme started last year was completed during the year on time. The Company started exports last year and this has shown high potential. More orders have been booked during the year under report.

STEEL FOUNDRY:

4.30 The Steel Castings market remained depressed for most of the year. In the latter part of the year some of the projects in Steam and Hydro sector took off. This resulted in the booking of good orders.

4.31 The thrust on Pumps and Valve Castings enabled the Company to book good orders from this Sector.

4.32 The Company could book development orders for Nodular Iron Pedestals from BHEL, which are being manufactured in India for the first time.

6 ISGEC HEAVY ENGINEERING LIMITED

4.33 The export market has been dull as the European customers also struggled for business.

4.34 The Company is developing exotic grades such as Duplex, Super Duplex and Nickel based Alloys, for increasing its market share.

5.00 REPORT ON THE PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES AND JOINT VENTURE COMPANIES:

A) SARASWATI SUGAR MILLS LIMITED (WHOLLY OWNED SUBSIDIARY COMPANY):

(i) The imbalance between sugarcane prices and sugar prices continued during the year under report and the Company suffered a loss of Rs. 15.37 crores during the year. It may be pertinent to note that unless sugarcane prices and sugar prices are linked, the Sugar Sector will continue to be in a difficult situation.

Season 2015-16:

(ii) As the situation was not good, your Company represented, both by way of letters written to the Haryana Government and also personally at the meetings of Sugarcane Control Board as well as with the officials of the Haryana Government, that the factory would not buy sugarcane in case the amount payable by the Mills towards cane price was more than its capacity to pay. Similar representations were made by all the sugar mills in Haryana.

(iii) This led to uncertainty among the farmers and affected the planting of sugarcane.

(iv) Realizing the difficult position, the Haryana Government did not increase the State Advised Sugarcane price. The Industry was also successful, indirectly, in linking the sugarcane prices with sugar prices.

Depending on the price of sugar every month, the mills were required to disburse a portion of sugarcane price themselves and the balance portion was to be disbursed after receipt of an equivalent amount as interest free loan from the Haryana Government. The repayment of loan is to be made annually to the extent of 30% of the net profit every year. The Haryana Government agreed to treat the portion of the loan remaining unpaid after a period of 10 years as subsidy.

(v) The Haryana Government also promised remission of Purchase Tax.

(vi) Based on the above decisions of the Haryana Government, your factory started crushing operations on 28th November, 2015.

 (viii) Your Company has cleared all the cane dues except an amount of Rs. 45 crores. This will be disbursed on receipt of loan (as described above) from the Haryana Government. A representation has been made to the Haryana Government for early disbursement to avoid hardship to the farmers.

 (ix) The Central Government, in order to improve sugar prices, notified the Minimum Indicative Export Quota (MIEQ) Scheme for export of a minimum quantity of sugar by each factory from 1st October 2015 to 30th September 2016. The Central Government also notified a scheme for extending Production Subsidy @ Rs. 4.50 per quintal of cane crushed during the Season 2015-16 to enable factories to clear cane arrears. The payment of subsidy was subject to export of at least 80% of the quota notified under the MIEQ Scheme.

(x) Due to drought conditions prevailing in sugar producing States, the estimated production for the season is less than the production estimated at the beginning of the season. There has been export of some sugar under the MIEQ Scheme. This has resulted in increase in the sugar prices in the last few months. The Government of India, therefore, vide Notification dated 19th May 2016 has withdrawn the Production Subsidy Scheme with immediate effect.

(xi) The Industry understands that there is no further obligation to export under MIEQ Scheme and also that the Production Subsidy will be disbursed proportionately to the sugar exported till 19th May, 2016.

Season 2016-17:

(xii) In various meetings held with the Haryana Government officials and also by written submissions, the Company has impressed upon the Haryana Government to find a long term solution and decide a methodology for linking sugarcane price with sugar price so that the factory can take decisions about bonding of cane and start of crushing operations for the coming season.

(xiii) It has further been stated that decision should be made at the earliest in the interest of both the farmers, as well as the factories.

B) ISGEC HITACHI ZOSEN LIMITED (IHZL) [SUBSIDIARY AND JOINT VENTURE COMPANY]:

(i) The Joint Venture Company made a reasonable profit during the year in spite of a lower turnover.

(ii) The Company started the year with a lower order book as compared with the previous year and it was under loaded in the first quarter and part of the second quarter. However, some of the orders, booked with shorter cycle time, could be dispatched resulting in full utilization of capacity for the latter part of the year.

(iii) During the year the Joint Venture Company, for the first time, successfully supplied several critical equipment such as Ammonia Converter as per Haldor Topsoe Process for a Refinery, Carbamate Condenser for the Fertilizer Industry and Hydro Processing Reactor as per CLG (Chevron Lummus Global) Process for the Petroleum Industry.

(iv) As for the current year, due to substantial orders booked by the Company in the recent past, the order book is looking good. The important orders include orders for a Reactor in Vanadium Modified Material for a Refinery, one Urea Reactor and one Carbamate Condenser as per Casale Process for a Fertilizer Plant and a repeat order from Toyo for a Urea Reactor and Stripper for an overseas project.

C) ISGEC TITAN METAL FABRICATORS PRIVATE LIMITED [SUBSIDIARY AND JOINT VENTURE COMPANY]:

(i) The Joint Venture with Titan Metal Fabricators, a US company, has been formed to manufacture Heat Exchangers, Vessels and other related products in exotic metals such as Titanium, Tantalum, Zirconium, Niobium and Hastelloy.

(ii) Until the volume of manufacturing increases, the equipments will be manufactured in your Company.

The reimbursement of the cost of manufacture and the sharing of profit will be in accordance with an agreed formula provided in the Joint Venture Agreement.

 (iii) The first order has been booked and is likely to be supplied by June 2016.

D) ISGEC FOSTER WHEELER BOILERS PRIVATE LIMITED [SUBSIDIARY AND JOINT VENTURE COMPANY]:

(i) Your Company has multiple Collaboration Agreements with Amec Foster Wheeler of USA. The Joint Venture was formed for doing the engineering services for both Isgec, as well as Foster Wheeler.

(ii) In absence of any project for which engineering services were required, the Joint Venture Company did not commence any activity.

(iii) Amec Foster Wheeler is likely to be awarded a major project and the engineering activity may have to be undertaken by the Joint Venture Company during the current year.

E) OTHER WHOLLY OWNED SUBSIDIARY COMPANIES:

(i) Free Look Software Private Limited & Isgec Exports Limited:

There was no commercial activity during the year.

(ii) Isgec Engineering & Projects Limited:

The property purchased by the Company at Kasauli has been let out. There was no other commercial activity during the year.

(iii) Isgec Covema Limited:

The Company executed one construction project during the year.

6.00 EXTRACT OF ANNUAL RETURN:

6.01 An extract of the Annual Return of the Company in prescribed form MGT-9 is annexed herewith, as Annexure-1.

7.00 NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS:

7.01 The Board met four times in the financial year 2015-16 viz. on 26th May, 2015, 8th August, 2015, 31st October, 2015 and 30th January, 2016.

8.00 DIRECTORS’ RESPONSIBILITY STATEMENT:

8.01 Your Directors hereby confirm that:

(a) In the preparation of the Annual Accounts for the financial year 2015-16, the applicable Accounting Standards have been followed and there are no material departures;

(b) The Directors have selected such accounting policies with the concurrence of the Statutory Auditors 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 at the end of the financial year and of the profit of the Company for the financial year;

(c) The Directors have taken proper and sufficient care, to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013. They confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The Directors have prepared the Annual Accounts on a going concern basis;

(e) The Directors have laid down internal financial controls to be followed by the Company, and these financial controls are adequate and are operating effectively; and

(f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

9.00 INDEPENDENT DIRECTORS:

9.01 All the Independent Directors have furnished declarations that each of them meets the criteria of independence as provided in Sub-section (6) of Section 149 of the Companies Act, 2013.

10.00 POLICY ON DIRECTORS’ APPOINTMENT/REMUNERATION OF DIRECTORS/KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES:

10.01 The Nomination and Remuneration Committee constituted by the Company has formulated criteria for determining qualifications, positive attributes and independence of the Directors. The Committee has also recommended to the Board a Policy relating to remuneration ensuring:

(i) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate key managerial personnel of the quality required to run the company successfully;

(ii) relation of remuneration to performance is clear and meets appropriate performance benchmarks; and

(iii) remuneration to key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives, appropriate to the working of the Company and its goals.

10.02 Under this Policy the Company retained a third party agency to assess the attributes of employees.

11.00 EXPLANATION OR COMMENTS ON QUALIFICATION ETC., BY AUDITORS AND COMPANY SECRETARY IN PRACTICE:

11.01 There is no qualification, reservation or adverse remark or disclaimer made by the Auditors in the Auditors’ Report or by the Company Secretary in Practice in Secretarial Audit Report needing explanation or comments by the Board.

11.02 The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.

12.00 PARTICULARS OF LOANS / GUARANTEES / INVESTMENTS:

12.01 Particulars of Loans given, Investments made or Securities provided under section 186 of the Companies Act are annexed as Annexure-2.

13.00 PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

13.01 The Company has formulated a Policy on Materiality of Related Party transactions and also on dealing with Related Party transactions as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Policy on Related Party transactions has been disclosed on the website of the Company.

13.02 The particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, are given in the prescribed Form AOC-2, annexed as Annexure-3.

14.00 MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY AFTER THE CLOSE OF THE YEAR:

14.01 There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

10 ISGEC HEAVY ENGINEERING LIMITED 15.00 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO:

15.01 The required information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is annexed hereto as Annexure-4.

16.00 RISK MANAGEMENT POLICY:

16.01 The Board has developed and implemented a Risk Management Policy for the Company, including for identifying elements of risk, which in the opinion of the Board may threaten the existence of the Company.

In terms of the Policy, a detailed risk review is done by Unit Level Committee or Corporate Level Committee (depending upon value of the order) before accepting any order. All the terms and conditions, both financial and technical, are reviewed. All steps are taken to mitigate risks.

16.02 In addition, the Board has laid down a Foreign Exchange Risk Management Policy, which is implemented for hedging Forex risk.

16.03 The Company also takes adequate insurance to protect its assets.

17.00 CORPORATE SOCIAL RESPONSIBILITY:

17.01 The Company has constituted a Corporate Social Responsibility Committee of the Board of Directors as under:-

Sl.No. Name of the Committee Member Position

1. Mr. Ranjit Puri (DIN: 00052459) Chairman

2. Mr. Aditya Puri (DIN: 00052534) Member

3. Mr. Vinod Kumar Sachdeva (DIN: 00454458) Member

17.02 In addition to the amount of Rs. 172.76 lacs pertaining to the previous year, the Company was required to spend a further amount of Rs. 257.60 lacs for the year ended 31st March 2016 i.e. an aggregate amount of Rs. 430.36 lacs for the two years.

17.04 Balance amount of Rs. 110.63 lacs, provided in the Profit & Loss Account, will be spent during the current year in accordance with the CSR Policy of the Company.

17.05 The annual report on Corporate Social Responsibility is given in the prescribed format annexed as Annexure-5.

18.00 ANNUAL EVALUATION BY THE BOARD:

18.01 The evaluation framework for assessing the performance of the Board, Committees and Directors comprises of the following key areas:

(i) Attendance of Board Meetings and Committee Meetings by the Directors;

(ii) Quality of contribution and deliberations towards growth of the Company, guidance to the management; and

(iii) Commitment to shareholders’ and other stakeholders’ interests.

18.02 The Board evaluates performance of the Audit Committee on the basis of the Audit Reports and Financial Statements approved by the Audit Committee.

18.03 The performance of the Managing Director is evaluated by the Board on the basis of the working reports given by the Managing Director at regular intervals. The operating results are also considered for evaluating performance of the Managing Director.

19.00 DETAILS OF DIRECTORS / KEY MANAGERIAL PERSONNEL:

19.01 Mr. Sidharth Prasad (DIN: 00074194) was appointed as Additional Director during the year.

20.00 NAMES OF COMPANIES WHICH HAVE BECOME OR CEASED TO BE SUBSIDIARIES, JOINT VENTURE AND ASSOCIATES:

Isgec Titan Metal Fabricators Pvt. Limited was incorporated as a Joint Venture Company along with Titan Metal Fabricators, USA. The total paid-up capital is Rs. 1,00,00,000/-. Your Company has contributed Rs. 51,00,000 i.e. 51% and Titan Metal Fabricators, USA has contributed Rs. 49,00,000, i.e. 49% subscription towards capital in August, 2015.

21.00 DETAILS OF SIGNIFICANT & MATERIAL ORDERS:

21.01 There is no significant or material order passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

22.00 INTERNAL FINANCIAL CONTROLS:

22.01 The Company has adequate internal financial controls with reference to financial statements and these are working effectively.

23.00 COMPOSITION OF AUDIT COMMITTEE:

23.01 The composition of Audit Committee is as below:-

Sl.No. Name of the Committee Member Position

1. Mr. Vinod K. Nagpal (DIN: 00147777) Chairman

2. Mr. Arun Kathpalia (DIN: 00177320) Member

3. Mr. Aditya Puri (DIN: 00052534) Member

23.02 There is no recommendation by the Audit Committee which has not been accepted by the Board.

24.00 MANAGEMENT DISCUSSION & ANALYSIS REPORT AND REPORT ON CORPORATE GOVERNANCE:

24.01 The Management Discussion & Analysis Report and Report on Corporate Governance for the year under review, as stipulated under the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, are annexed as Annexure-6 and 7 respectively.

25.00 CONSOLIDATED FINANCIAL STATEMENTS:

25.01 In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report.

25.02 Further, as required under Rule 5 of the Companies (Accounts) Rules 2014, a statement in form AOC-1 containing salient features of the financial statements of the subsidiary companies is attached as Annexure-8.

26.00 DISCLOSURE REGARDING REMUNERATION AS REQUIRED UNDER SECTION 197 (12) OF THE COMPANIES ACT, 2013:

26.01 Disclosures regarding remuneration as required under Section 197 (12) of the Companies Act, 2013 are annexed as Annexures-9 and 10.

27.00 VIGIL MECHANISM:

27.01 The Company has established a Vigil Mechanism for Directors and Employees in accordance with Sub-section (9) and (10) of Section 177 of the Companies Act, 2013. Details of Vigil Mechanism are given in the Corporate Governance Report. The Vigil Mechanism has been disclosed on the website of the Company.

28.00 SECRETARIAL AUDIT REPORT:

28.01 The Board of Directors of the Company has appointed M/s. Ranjeet Verma & Associates, Company Secretaries, to conduct the Secretarial Audit.

28.02 Pursuant to Section 204 of the Companies Act, 2013, a Secretarial Audit Report given by Mr. Ranjeet Kumar Verma of M/s. Ranjeet Verma & Associates, Company Secretaries, is annexed as Annexure-11.

29.00 PERSONNEL:

29.01 The Board wishes to express its appreciation to all the employees of the Company for their contribution to the operations of the Company during the year.

30.00 INDUSTRIAL RELATIONS:

30.01 Industrial relations remained peaceful.

31.00 ACKNOWLEDGEMENTS:

31.01 Your Directors take this opportunity to thank the Financial Institutions, Banks, Government Authorities, Regulatory Authorities and the Shareholders for their continued co-operation and support to the Company.

32.00 With these remarks, we present the Accounts for the year ended March 31, 2016.

BY ORDER OF THE BOARD

Vinod Kumar Director(DIN: 00454458)

Sachdeva Aditya Puri Managing Director  (DIN: 00052534)

Place: Noida.

Date: 26th May, 2016