FINANCIAL RESULTS

The company's financial performance for the year ended March 31, 2015 is summarized below:

                                                     Rs. in lakhs

Particulars                               2014-15        2013-14

PROFIT BEFORE TAX                          252.43        1463.14 
Less: Current tax

Deferred tax                               (84.02)        (48.26)

PROFIT FOR THE YEAR                        336.45        1511.40

Add: Balance in Profit and 
Loss Account                              5532.24        4200.68

Sub-total                                 5868.69        5712.08 
LESS: Appropriation 
General Reserves

Proposed Dividend                            --            69.21

Proposed Dividend on equity                  --            84.51

Corporate Dividend 
Tax - Preference                             --            11.76

Corporate Dividend Tax Equity                --            14.36

Adjustment relating to Fixed
Assets                                       --             ---

Total                                      5868.69       5532.24 

The Board of Directors of the Company have not recommended any dividend on the equity shares in view of financial health of the Company and the need for conserving and sloughing back the funds in the business for modernization /expansion activities.

OPERATIONAL REVIEW

Gross revenues decreased to Rs.28838.61 lacs, a short fall of around 18% against Rs.34158.44 lacs in the previous year due to sluggish market conditions and effect of hudhud cyclone in the coastal area of Andhra Pradesh. Profit before depreciation and taxation was Rs.537.97 lacs against Rs.1717.65 lacs in the previous year and the profit after providing for depreciation and taxation of Rs.336.15 lacs against Rs.1511.40 lacs in the previous year.

The Company is expecting bright prospectus for the Ferro Alloys Products due to Government policies and encouragement to the infrastructure project. Moreover, the Company tied up with Harsco for recovery of Metal from the slag which is accumulated over years. Harsco installed the required equipment adjacent to company's plant and commenced its operations from December 2014 for recovery of Metal from the slag. These operations are under stabilization and once it is streamlined, the Company will derive the benefits by way of additional income to the Company.

FIXED DEPOSITS

No fresh / renewal of deposits were accepted during the financial year 2014-15.

DIRECTORS' RESPONSIBILITY STATEMENT Section (5) 134

Your Directors confirm that :

- In the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same;

- They have 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 the Company at the end of the financial year and of the profits of the Company for that period;

- They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- They have prepared the annual accounts on a going concern basis;

- They have laid down internal financial controls for the Company and such internal financial controls are adequate and operating effectively; and

- They have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

The Company's Internal Auditors have conducted periodic audit to provide reasonable assurance that the company's established policies and procedures have been followed. The Audit Committee constituted by the Board reviews the internal control and financial reporting issues with Internal Auditors.

MANAGEMENT DISCUSSIONS AND ANALYSIS

a. Industry structure and developments

Steel is the most versatile material, which has made the progress in every aspect on this earth possible. Numerous varieties of steel are required with specific properties to suit different applications and to get the most optimum usage. Hence, the basic constituent of steel is Iron, in proportion of other elements in it, which gives each type of steel certain specific properties. These elements known as Ferro Alloys are added to molten iron to get the desired composition and properties. Thus Ferro Alloys are important additives in the production of steel and as such ferro alloys industry's growth and development is linked to that of the steel industry.

The year witnessed a marked slowdown in global growth. Emerging markets were characterized by a sharp fall in growth rates especially in China, Europe and Japan continued to be under pressure through the year, while US showed tepid signs of improvement.

The performance, during the year, of your Company may be analyzed from the above impact.

The sales have come down to Rs.288 crore comparing to last year Rs.341 crore. Export sales have come down to Rs.14 crore against last year Rs.35 crore.

b. Opportunities and Threats

The key end-user of Ferro chrome is stainless steel and alloy steel industry with a share of 90% of Ferro chrome consumption. The growth of stainless steel is predominantly driven by the growth in its end user segments. The low consumption of stainless steel can be attributed to

- Lack of awareness about its use and benefits

- Non-availability of skilled fabricators

- User developed production technology

This low per capita consumption of stainless steel in India presents immense opportunities for growth in Indian Stainless Steel market. The micro drivers for the growth of Indian stainless industry are-

- Per capita income growth

- Higher GDP growth

- Huge investment by Indian Government in infrastructure

- New stainless steel application identification

As every industry facing threats, ferro alloys industry is not barred from this. Threats like substitution of products and importing at cheaper rates.

c. Segment-wise or product-wise performance

The Company has only one segment Iron & steel, Ferro Alloys Products. During the year, under review, the Company introduced the production of Ferro Silicon, Silico Manganese . The overall production comparing last year production was dropped due to Hudhud cyclone and other factors .

d. Outlook

The steel has recorded high growth rates in both production and consumption over the past few years benefiting from soaring steel demand in automobile and construction sectors before the recession. Moreover, cost effective and highly efficient steel making technologies have lifted the demand from US to the Middle Eastern and Asian countries.

Stainless steel is the largest consumer of Ferro chrome and as such a change in the dynamics of the stainless steel industry has impact of Ferro chrome industry. According to ISSF and KMPG, the recent significant improvement in global stainless steel consumption comes on account of global economic recovery and strong end user demand.

Risks and concerns

The global economic climate continues to be volatile, uncertain and prone to geo-political risks. The marked slowdown in global markets is expected to continue in 2015. The divergence in developed market growth as a result of the US recovery is expected to add to the volatility in the currency markets. In this global backdrop, India is expected to perform better, aided by improving macroeconomic fundamentals. However, execution of the reform and kick starting the investment cycle will be the key determinants of India's economic performance. Currently inflation is benign, upside pressures on inflation from the vagaries of monsoon or sudden changes in the rupee, could have a significant bearing on inflation.

e. Internal control systems and their adequacy

Internal control is an essential part of corporate governance and any weakness or inadequacy can have a greater impact on the profit of the Company. The Company remains committed in its endeavor to ensure an effective internal control environment that provides assurance on the efficiency and effectiveness of operations, reliability of financial reporting, statutory compliance and security of assets.

The Company has a well established and robust internal control systems and processes in place to ensure smooth functioning of the operations.

f. Discussion financial performance with respect to operational performance

The production during the year has dropped due to Hudhud cyclone and sluggish market conditions. The input costs raw material, freights and other overheads increased, whereas prices of Finished Goods not increased commensurate with the input costs. The finance cost Rs.724.66 lacs slightly increased comparing last year's Rs.694.93 lacs .

g. Material development in Human Resources /Industrial front, including number of people employed Your company is value based organization with a culture that promotes empowerment and freedom. In a challenging and competitive environment, the organization believes people are key to success.

Research and Development

Your Company continues to derive sustainable benefit from the tradition of Research & Development and many such innovation has helped significantly to develop for better product with cost effective.

Technology Absorption

The Company maintains interaction with experts globally which has facilitated for better management. Periodical up gradation of Technology and new developments in the industry.

Environment, Safety, Health and Energy Conservation

Your Company has a vision of being 'Zero' accident plant. This has been achieved through a combination of training and hardware up gradation leveraging core technology concepts and safety standards.

Corporate Governance

Your Company is renowned for exemplary governance standards over the years and continue to lay a strong emphasis on transparency, accountability and integrity.

Your Company has in place all the statutory committees required under the law. Details of Board committees along with their terms of reference, composition and meetings of the Board and Committees held during the year are provided in the Corporate Governance Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance is attached to this report Annexure 'A'.

Corporate Social Responsibility (CSR)

During the year, your Company has adopted new policies and amended existing policies such as Policy on related Party transaction, CSR Policy and Whistle Blower Policy in line with the new governance requirements. The Company has established a vigil mechanism for Managing Director/Whole-time Directors and employees to report their genuine concerns and details are given in the Corporate Governance Report attached to this report Annexure 'B'.

The Company has identified neighboring villages in and around Ravivalasa for solutions for developing infrastructure viz., Road, drinking water supply, quality education, providing computers and addressing poverty, hunger and malnutrition.

During the year, the Company has spent Rs.78.58 lakhs [around 2.71% of the average net profits of last three financial years ] on CSR activities is annexed herewith to this report - Annexure 'C'.

Risk Management

During the year, your Directors have constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in overseeing and approving company's enterprise wise risk management framework and risk that the organization faces. The strategic, financial, liquidity, legal, regulatory and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

Secretarial Auditor

During the year, Secretarial Audit was carried out by Sri Ramaswamy K, Company Secretary in Practice, the Secretarial Auditor of the Company for the financial year 2014-15. There were no qualification, reservation or adverse remarks given by the Secretarial Auditor and the report is appended to this report - Annexure 'D'.

Extract of Annual Return

The extract of annual return in Form MGT 9, as required under Section 92(3) and rule 12 of the Companies [Management and Administration] Rules, 2014, is appended to this report - Annexure 'E'.

Related Party Transactions

In line with requirements of the Companies Act, 2013 and listing agreement, proper reporting, approval and disclosure process are in place for all transactions between related parties and the Company. All transactions entered were in ordinary course of the business and on arm's length basis. No material related party transactions i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements were entered during the year. Accordingly, related party transactions, as required under section 134(3)(h) of the Companies Act, 2013, in Form AOC 2 is not applicable.

Board of Directors and Key Managerial Personnel

During the year, the Board appointed Sri Chikali Nagarju as Whole-time Director and Smt Sarita Boorugu as an Additional Director with effect from 13.11.2014 and 17.06.2015 respectively. Smt Sarita Boorugu hold office up to the date of forthcoming AGM and being eligible, offered herself to be appointed as Director.

The Independent Directors have given the certificate of Independence to your Company stating that they meet the criteria of independence as mentioned under Section 149, 161 of the Companies Act, 2013.

The details of training and familiarization programmes and annual board evaluation process for directors have been provided under the Corporate Governance Report.

Statutory Auditors

M/s Nekkanti Srinivasu & Company [Firm Regn No. 008801S] were appointed as Statutory Auditors by the members for three years and hold office till the conclusion of the ensuing AGM and are eligible for re-appointment. They have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for re-appointment.

Cost Auditor

M/s Krishna Mohan Reddy, Cost Accountants carried out the cost audit during the year. The Board of Directors have appointed M/s. Jithendra Kumar & Company, Cost Accountants for the year 2015-16.

Conservation of Energy, Technology Absorption and Foreign Exchange Earning and Outgo

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required under the Act, is attached to this report - Annexure 'F'.

Human Resources

Your Company's human resources remained focused on reinforcing the key thrust areas viz., building strong, talent and capabilities in the Company, driving greater employee engagement and continuing focus on progressive employee relation policies to develop them as future leaders.

None of the employees is covered for disclosures, as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Disclosures with respect to the remuneration of Directors and employees, as required under Section 197 of Companies Act, 2013 and Rule 5(1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, has been appended as annexure to the repor t.

Details of employees remuneration, as required under Section 197 of Companies Act, 2013 and Rule 5(1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are available at the Registered Office of the Company during working hours before 21 days of AGM and shall be made available to any shareholder on request.

General

Your Directors state that no disclosure of reporting is required in respect of the following items as there were no transactions on these items during the year, under review:

a. Details relating to deposits covered under Chapter V of the Act

b. Issue of equity shares with differential rights as to dividend, voting or otherwise

c. Issue of shares [including sweat equity shares] to employees of the Company under any scheme

d. Neither the MD nor the whole-time Director of the Company receive any remuneration or commission from any of subsidiaries

e. No significant or material orders were passed by the Regulators or Courts or Tribunal which impact the going concern status and Company operations in future.

Appreciation and Acknowledgement

Your Directors place on record their deep appreciation to employees, at all levels, for their hard work, dedication and commitment.

Your Directors also like to acknowledge the excellent support and co-operation your Company has been receiving from its bankers, suppliers, stakeholders, investors, clients, vendors, Government and Regulatory authorities.

                           For and on behalf of the Board of Directors

                                                          S. Gajendran

Bengaluru                    Chairman of the Meeting and Non Executive
                                                  Independent Director

August 14, 2015                                          DIN: 00250136