| Your Director's are presenting the Thirteenth Annual Report of your
Company together with the Audited Statement of Accounts for the year
ended 30th June, 2001.
1. FINANCIALS
THE FINANCIAL RESULTS
Rupees in Thousands
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2000-2001 1999-2000
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Financial Results for the year ended
30th June, 2001
Total Income 1782064 7911312
Gross Profit/(Loss) (15019) 89300
Less : Interest - -
Depreciation 2772 2941
Profit/ (Loss) before tax (17791) 86359
Less : Provision for taxation - -
Profit / (Loss) after taxation (17791) 86359
Prior Period Adjustments - -
Add : Profit for the earlier years 138486 138486
Profit / (Loss) available for appropriation 120695 224845
Debenture Redemption Reserve - 86359
Balance carried to Balance Sheet 120695 138486
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Since your company has not made any profits during the year under
review, your Directors have not recommended any dividend.
2. INDUSTRIAL PERFORMANCE
The domestic and global steel industry is in an un-prevented sate of
recession for the longest period over. Correspindgly trading operations
has also be marginal.
3. PROJECT IMPLEMENTATION
Both the Blast Furances were operative till 1997-98 and had to be shut
down for want of funds coupled with depressed market conditions and
correspondingly low sales realisation and the adverse impact of
anti-dumping duty on coke. With support of the Financial Institutions,
the company is taking steps to re-start both the Blast Furances in
phased manner and it is expected that the commissioning of the first
Blast Furnace shall taken place by May, 2002 and the second Blast
Furance by Sept. 2002.
The anti-dumping duty for coke has since been withdrawn. The prevailing
and potential price of foundry pig iron in Northern India in particular
provides opportunity for generation of gross margin. This can be
achieve with highest level of productivity and specific consumption with
corresponding low cost of production.
Presently the participating Financial Institutions have reviewed the
status along with Lender's Engineers and Auditors and have given the
clearance for completion of the steel project, which includes the 2 LD
Convertors, Lime Calcining Plant, Oxygen Plant, Ladle Furance and
Continuous Casting Plant. On the basis of the review, appraisal,
sanction and disbursement of the funds, the steel project is now
expected to be completed by March, 2003.
4. FUTURE OUTLOOK
Though industry has not been able to quantity the exact quantum of
growth in the steel sector, a recent report put out by consultancy
major mokinsey and Company, has pointed out that the domestic steel
sector overall would soon see a 8 to 10% surge in demand mainly on the
back of a good performance by the housing, construction and retail
sectors. This view is reinforced by the 15% growth posted by the Cement
Sector. The price of long product has also increased lately by around
7%. Scrap prices are also on the increase and Electric Arc/Induction
Furance user would be more inclined to buy Pig Iron.
We are also exploring the market for both Billet and Bars. Our
strategic advantage of having the plant in Northern India helps us to
economically self our products in Punjab, U.P. Haryana and Rajasthan
markets and generate contributions and help in generation of cash of
sustaining the business.
The Director's wish to point out that barring unforeseen circumstances,
the anticipated turnaround and the proposed project implementation plan
depend substantially upon the availability of finance and the related
disbursements becoming available in accordance with the time schedule
presently adopted.
5. RESTRUCTURING OF MANAGEMENT AND CAPITAL
The members may be aware that the integrated Steel Project of the
company at Jagdishpur has undergone time and cost overruns. The
Promoters could not bring in further funds for the Project and the
Financial Institutions were requested again for additional financial
assistance for competition of the Project. The Financial Institutions
as a condition for further financial assistance to the Company for
completion of its integrated Steel Project situated at Jagdishpur,
U.P., amongst other things, asked the Company for both Management and
Capital restructuring. Accordingly the Board of Directors of the
Company was re-structured and Dr. S. K. Gupta, a renowned figure in
steel industry, was appointed as non-executive Chairman of the Company.
Besides Dr. Bhaskar Dutta, holding a doctorate in Metallurgy from U.K.
and having three decades of experience in the Steel Industry in India
and abroad has been appointed as Managing Director. Mr. Anil Rai,
Co-chairman, Mr. S.K. Mittal Managing Director and other Directors
mentioned elsewhere in the report resigned from the Board.
As regards capital restructuring as advised by the Financial
Institutions, steps are already underway for approval by you and the
concerned authorities of a scheme for restructuring of Financial
liabilities by : -
1. Converting 40% of the existing equity share capital into 0.0001%
Cumulative Redeemable Preference Shares (CRPS) to be redeemed in 5
equal annual installments commencing in the year 2016.
2. Conversion of Institutional loans to the extent of Rs. 2,800 million
into equity shares of Rs. 10 each.
6. DIRECTORS
Dr. S. K. Gupta, whose nomination has been withdrawn by IFCI Ltd., has
been appointed as additional director (independent) and non-executive
Chairman of the Company.
Dr. Bhaskar Dutta and Mr. Rajeshwar Singh and Dr. Ramesh C. Vaish
were appointed by the Board as Additional Directors of the Company. Dr.
Bhaskar Dutta and Mr. Rajeshwar Singh have also been appointed as
Managing Director and Whole time Director respectively of the Company.
Mr. Anil Rai, Mr. Vijay Bhushan, Mr. Y.P. Sharma, Mr. J.R. Gupta, Mr.
S.K. Mittal, Mr. M.F. Mehta and Mr. K. C. Gupta resigned from the
directorship of the Company. The Board places on record its
appreciation for the services rendered by them during their tenure as
Directors of the Company.
Nomination of Mr. Mr. S. G. Gulati, nominated by IDBI and Mr. P.K.
Sengupta nominated by IFCI Ltd on the Board of the company, were
subsequently withdrawn by IDBI and IFCI Ltd respectively. The IDBI has
nominated Mr. K. Raghavan and IFCI Ltd has nominated Mr. D. U. Rao as
Directors on the Board of the Company.
7. AUDIT COMMITTEE
The Board has in pursuance of Section 292A of the Companies Act, 1956,
constituted an Audit Committee consisting of Mr. M. Sankaranaryanan
(UTI Nominee), M. D.U. Rao (IFCI Nominee) and Dr. R. C Vaish, Director
of the Company.
8. CORPORATE GOVERNANCE
The Stock Exchange have introduced clause 49 on corporate Governance in
the Listing Agreement. As per this clause the Corporate Governance has
to be implemented by the Company during the financial year 2001-2002.
Your Company has already initiated steps to put in place system of
Corporate governance in right earnest.
9. STOCK OPTIONS TO THE EMPLOYEES OF THE COMPANY.
An Employee Stock option Scheme (ESOS) for the employees of the
company, prepared in accordance with the SEBI (Employee Stock option
Scheme and Employee Stock purchase Scheme) Guidelines, 1999 notified by
the SEBI, and approved by the members of the company, was introduced
during the last year.
In accordance with the scheme, a total of 18,84,680 stock options have
been granted to the eligible employees and directors of the Company on
14.04.200 and each option is convertible into one equity share .25% of
the options granted shall vest after one year, another 25% of the grant
after two years and balance 50% of the grant after three years from the
date of grant mentioned above. The exercise price is at pa i.e. Rs. 10/-
per share with a power to the Board to decide the premium, if any, in
subsequent grants.
It may be informed here that the company has not received application
from any option holder so far for excecise of the option of converting
the options into shares of the company.
10. HUMAN RESOURCES
In our previous report we had mentioned about the formation of cross
functional core teams to enable your company to utilize the Human
Resource potential. With the fund flow for the project coming to a
hall, these core teams of Jagdishpur were utilized for various
construction and lubrication work which should have otherwise been
contracted to outside agencies. Activities elated to maintenance of
equipment and machinery were also carried out by these core teams.
With the induction of new management an exercise is being carried out to
bring the manpower requirement to such levels that the productivity are
at par with the international norms. This would involve re-building the
management structure where responsibilities are well defined and
hierarchy barriers are reduced. Parallely positional manning is to be
replaced by the concept of total work load.
11. DEPOSITORY
The Company's shares are also now admitted to the Central Depository
Services (India) Ltd., (CDSL) for dematerlisation. As you are aware the
company has already joined the National Securities Depository Limited
(NSDL). This enables your to hold your shares in dematerialsed form.
The holding of shares in demat form facilitates quicker transfers and
prevents forery. Accordingly the shareholders who have not opted yet
for this facility are advised to dematerialise their shares in their
own interest.
Alankit Assignments Limited, New Delhi are the R & T agents for the
purpose of dematerilisation of shares of the company.
12. LISTING
The Company's Shares are listed at the Uttar Pradesh, Mumbai and Delhi
Stock Exchanges. The Company has paid listing fee to these Stock
Exchanges upto the year 1997-98. The Mumbai Stock Exchange has
suspended the trading in securities of the Company for non-payment of
annual listing fee. Application for delisting has been made in January,
1997 to the Stock Exchanges at Ahmedabad, Madras, Calcutta and Jaipur
for reasons of infrequent and low volumes of trading in the Company's
shares at these Stock Exchanges.
13. DEPOSITS
The Company has not accepted any Public Deposits during the year. There
are no outstanding public deposits.
14. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO.
Information pursuant to Section 217(1)(e) of the Companies Act, 1956
read with Rule 2 of the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988 is annexed and forms part of
this report.
15. AUDIT REPORT
The Auditors comments regarding note no. 6 & 14 state the factual
position and the relevant notes are self explanatory. Due to closure of
trading activities at the Ghaziabad branch, the relevant books of
accounts and records could not be available and the relevant accounts
were compiled on the basis of data available in computerized system.
No provision is made for claim for rent and charges for equipment lying
in the bonded warehouse at this stage since the necessary adjustments
are proposed to be made when the matter is finalized and the equipment
is cleared.
16. AUDITORS
M/s Bansal & Co., Chartered Accountants, the retiring auditors of the
Company have expressed their unwillingness for re-appointment. The
board of Directors of the Company have in their meeting held on 5th
November, 2001 considered the appointment of M/s Ray & Ray, chartered
accountants, as statutory auditors of the company and recommend the
same for your approval. The Company has relieved certificate from the
from viz. M/s Ray & Ray to the effect that their appointment, if made,
will be within the permissible limits specified under Section 224(1B)
of the Companies Act, 1956.
17. PARTICULARS OF EMPLOYEES UNDER SECTION 217(2A) OF THE COMPANIES
ACT, 1956.
The relevant particulars pursuant to Section 217(2A) of the Companies
Act, 1956 and forming part of the Director's Report for the year ended
30.06.2001 are given hereunder:
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Sr. Name Designation Gross
No. Remuneration (Rs.)
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1. Mr. M.F. Mehta(*) Managing Director 680814
2. Mr. Rajeshwar Singh(*) Director (P&O) 925703
3. Mr. K.C. Gupta(*) Wholetime Director 882507
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Sr. Name Qualification / Date of
No. Experience Joining
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1. Mr. M.F. Mehta(*) B.E. Metallurgy - 45 Years 01.05.1993
2. Mr. Rajeshwar Singh(*) B.Tech - 38 Years 01.12.2000
3. Mr. K.C. Gupta(*) B.Com. - Diploma in Casting 10.03.2000
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Sr. Name Age Last
No. (Years) Employment
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1. Mr. M.F. Mehta(*) 69 Indian Iron & Steel Co. Ltd.
2. Mr. Rajeshwar Singh(*) 62 Usha Ispat Ltd.
3. Mr. K.C. Gupta(*) 65 Usha (India) Ltd.
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Notes
1. Gross remuneration includes salary, allowances, value of free
accommodation, medical expenses, provident fund, leave travel
assistance, house rent allowance etc.
2. The nature of employment and other terms and conditions of service
are regular and governed by rules and regulations of the Company as
applicable from time to time.
3. None of the employee is a relative of any Director of the Company.
4. Asterisk against a name indicates that the employee was in service
only for a part of the year.
18. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under sub section 2AA of Section 217 of the
Companies Act, 1956 with respect to the Directors Responsibility
Statement, it is hereby confirmed:
i) That in preparation of the annual accounts for the financial year
ended 30.06.2001, the applicable accounting standards had been followed
along with proper explanations relating to material departures.
ii) That the Directors had 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 financial year and of the
profit of the Company for the year under report.
iii) That the Directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and by preventing and detecting fraud and other
irregularities.
iv) That the Directors had prepared the accounts for the financial year
ended 30.06.2001 on a 'going concern basis'.
19. APPRECIATION
Your Directors wish to acknowledge and thank the Central & State
Government for their support and guidance.
Your Directors wish to place on record their deep appreciation of the
continue support of shareholders, debenture holders and the devoted
services rendered by the executives, staff and workers of the Company
at all levels.
Your Directors also acknowledge with gratitude the co-operation and
assistance given by the Financial Institutions, Mutual Funds, Banks and
Business Constituents.
ANNEXURE TO DIRECTORS' REPORT
(IN COMPLIANCE TO SECTION 217(1)(e) OF THE COMPANIES ACT, 1956
A. CONSERVATION OF ENERGY
(a) Energy Conservation Measures taken: Nil
(b) Additional investment and proposals, if any being implemented for
reduction of consumption of energy: Proposal is to install a Turbo
Generator of 3.5 MW capacity utilizing excess BF gas to generate
Electrical Power to reduce the consumption of purchased electrical
energy. The investment is to the tune of Rs. 3.5 crores.
(c) Impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:
The bought out electrical energy shall be reduced to the extent of 3MW
for 2 Blast Furances operation saving about Rs. 300/- per ton of hot
metal.
(d) Total energy consumption and energy consumption per unit: As per
Form A.
B. TECHNOLOGY ABSORPTION:
(e) Efforts made in technology absorption: As per Form B.
C. FOREIGN EXCHANGE EARNING AND OUTGO
(f) Activities relating to exports; initiatives taken to increase
exports; development of new export markets for products and services
and export plans; NIL
(g) Total foreign exchange earned and used:
Earned : NIL
Used : NIL
FORM B
(See rule 2)
Form for disclosure of particulars with respect to Absorption, Research
and Development (R&D)
1. Specific areas in which R&D Carried out by the Company: None
2. Benefits derived as a result of the above efforts: Not Applicable
3. Future plan of action : To optimize the operation of Blast Furnance
Computer Simulation Model from Rautaruukki shall be implemented.
4. Expenditure on (R&D)
(a) Capital
(b) Recurring
(c) Total
(d) Total R&D expenditure as a percentage of turnover Technology
absorption, adaptation and innovation: NIL
Technology, absorption, adaptation and innovation:
(i) Efforts, in brief, made towards technology absorption, adaptation
and innovation: None
(ii) Benefits derived as a result of the above efforts: None
(iii) In case of imported technology (imported during the last 5 years
reckoned from the beginning of the financial year) following
information may be furnished.
(a) Technology Imported : Mini Blast Furance Data Logging System of
Level II Automation from Rautaruukki Engineering Oy, Finland.
(b) Year of import : 1997
(c) Has technology been fully absorbed ? : No
(d) If no fully absorbed, areas where this has not taken place, reasons
there for and future plans to action: Shall be implemented when BF
operation resumes.
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