Your Directors present herewith the Twenty Fourth Annual Report & the Audited Financial Statements of the Company for the financial year ended March 31, 2022.
FINANCIAL HIGHLIGHTS
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Rs. in Crore
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Particulars
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Financial Year
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2021-22
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2020-21
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Gross Sales
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3216.84
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1681.70
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Revenue from Operations
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2152.54
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1234.67
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Earnings Before Interest, Depreciation, Tax & Amortization (EBIDTA)
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79.66
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31.25*
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Cash Profit/ (Loss)
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48.66
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(289.33)
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Net Profit/ (Loss)
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2357.39
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(350.71)
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Total Comprehensive income
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2351.53
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(350.18)
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*regrouped/ reclassified to meet current years classification. Members will be pleased to note that as a result of the successful debt resolution, the Company has returned to profit after several years.
DIVIDEND
Directors do not propose any dividend for the year ended March 31, 2022, in order to conserve resources.
RESERVES
No amount is proposed to be transferred to Reserves.
IMPACT OF COVID-19
While the delta variant has caused severe disruption in the economic activity and loss of human life, subsequent variant however has been milder leading to gradual return of normalcy.
OPERATIONS
Capacity utilization at steel plant went up from 44% to 68% driven by higher captive sourcing. Tube plants too attained pre pandemic level with capacity utilization going up from 30% to 45% on account of higher Automobile and Energy sectors demand.
DEBT RESOLUTION
Members are aware that the Company along with lenders has been working towards satisfactory debt resolution which had became inevitable due to mismatch of cash flows arising from economic slowdown, dumping of tubes by China, regulatory changes etc.
Accordingly, various processes as mandated by RBI guidelines were undertaken by Banks from time to time, but could not be concluded for various reasons beyond the Company’s control including RBI circular dated February 12, 2018 and subsequently COVID-19 pandemic.
Debt resolution was finally attained on March 12, 2022 and the Company repaid entire outstanding debt to lenders by way of One-time Settlement (OTS) of Rs. 670 Crore along with change in management. Kirloskar Ferrous Industries Limited (KFIL), a part of 130 years old Kirloskar group acquired majority stake in the Company by investing Rs. 476.63 Crore in the equity share capital of the Company and further extended unsecured loan of Rs. 194 Crore towards OTS.
The Company on its part ensured that the value of the business was preserved despite numerous challenges leading to successful debt resolution.
The operations of the Company continued to be sustained and in fact increased during the entire pendency of the debt resolution period. Thus, the turnover of the Company was increased from Rs. 968.44 Crore in FY2015-16 to Rs. 2,123.41 Crore in FY2021-22 with corresponding EBITDA increased from Rs. 33.66 Crore to Rs. 79.66 Crore.
The Company is deeply thankful to all lenders for their unstinted support and co-operation. We are especially thankful to our business associates viz. customers, suppliers, vendors etc. who stood by the Company during this difficult period. Most of all, this has been made possible by dedicated hard work of the employees of the Company across all the levels.
AUTHORIZED SHARE CAPITAL
Authorized share capital of the Company was Rs. 158.50 Crore comprising of 17.50 Crore equity shares of Rs. 5/- each aggregating to Rs. 87.50 Crore & unclassified shares aggregating to Rs. 71 Crore.
The Board at its meeting held on November 25, 2021 approved classification of the aforesaid unclassified shares into 14.20 Crore equity shares of Rs. 5/- each, ranking pari passu in all respect with the existing equity shares of the Company. Accordingly, the revised authorized share capital of the Company is Rs. 158.50 Crore comprising of 31.70 Crore equity shares of Rs. 5/- each. The shareholders of the Company approved the aforesaid classification at the Extra-ordinary General Meeting (EGM) held on December 22, 2021.
PREFERENTIAL ALLOTMENT
Pursuant to the Share Subscription Agreement dt. November 25, 2021, executed with KFIL, the Board at its meeting held on March 10, 2022 allotted 15,40,00,000 equity shares, on preferential basis, to KFIL for Rs 476.63 Crore and that the Company became a subsidiary of KFIL. Post the aforesaid allotment, paid up share capital of the Company stood at Rs. 150.25 Crore. UTILIZATION OF FUNDS RAISED VIA PREFERENTIAL ISSUE
The entire issue proceeds of the funds raised via preferential issue has been utilized by the Company for the purposes/ objects as stated in the Explanatory Statement to the notice of the EGM held on December 22, 2021, wherein the shareholders’ approval was given for the aforesaid issue.
CHANGE IN MANAGEMENT
Consequent upon allotment of 15.40 Crore equity shares, KFIL acquired majority stake in the Company (i.e. 51.25% of post issue paid-up share capital). Accordingly, KFIL appointed its representatives on the Board w.e.f. March 10, 2022. Simultaneously, Mr. B R Taneja, Promoter and Managing Director of the Company, stepped down from the Board. KFIL, a 25 years old entity, is a major producer of pig iron and castings with turnover of Rs. 2,038.08 Crore and net profit of Rs. 302.11 Crore in FY2020-21. Its future plans include setting up of steel making facility.
CAPTIVE POWER PLANT
Captive Power Plant (CPP) continued to be inoperative throughout the year in absence of banking facility from Maharashtra State Electricity Distribution Company Ltd. (MSEDCL).
The Company’s appeal against wrongful denial of banking facility is pending in Supreme Court. The Company in the past had pursued various options viz. for selling CPP or operating as group captive without success.
Consequent upon change in management on March 10, 2022, the Company is again evaluating these options. However, while demand for power is showing increasing trend, recent spurt in commodity prices including coal prices has affected the economics of thermal power generation.
IMPORTS
Anti dumping duty on imports from China was provisionally extended until October 31,2021 and the Ministry of Finance vide notification dated October 28, 2021 extended the duty for further
5 years until October 27, 2026.
Steep increase in raw material cost has resulted in the domestic setting price being higher than the reference price and an effective Anti Dumping Duty needs to address the impact of this increase in input cost.
RAW MATERIAL
The Company has also witnessed sudden and steep increase in international scrap prices as well as in the prices of domestically procured raw materials.
Effective implementation of the New Vehicle Scrappage policy will increase domestic availability of scrap at competitive price
6 considerably enhance the viability of steel making by EAF. The Company is entirely dependent on high cost power from the State grid. Availability of power at competitive rates is key to success of Atmanirbhar Bharat and suitable steps need to be taken at both Central and State Governments levels to facilitate-
(a) Special tariff for EAF route;
(b) Free market for sale of power across India;
(c) Removal of cross subsidy and other State levies on captive power generation; and
(d) Banking of energy on the lines of renewable.
RESEARCH & DEVELOPMENT
Details of R&D activities undertaken are enumerated in Annexure ‘A’ attached to this Report.
DIRECTORS & KEY MANAGERIAL PERSONNEL
Consequent upon change in management, Mr. B R Taneja, Promoter and Managing Director stepped down from the Board after serving the Company for over four decades.
Under the leadership of Mr. B R Taneja-
i. The Company, which started with initial capacity of 3,000 Tons at single location, has now reached 4,65,000 Tons of tube making at three locations and 3,50,000 Tons of Steel making capacity in addition to 40 MW CPP;
ii. Turnover has grown from Rs. 4 Crore in the first year to over Rs. 2,000 Crore;
iii. The Company provided direct and indirect employment to over 10,000 people; and
iv. The Company has built a strong reputation for quality and is globally a recognized producer of precision seamless tubes.
The Board places on record its whole-hearted appreciation for the yeoman services rendered by Mr. B R Taneja.
In accordance with the provisions of the Companies Act, 2013 (Act) and the Articles of Association of the Company, Mr. Rajiv Goel, Director retires by rotation and being eligible, offers himself for re-appointment.
The term of Mr. Rajiv Goel as Whole-time Director expired on September 30, 2021 & he was further re-appointed upto September 30, 2022.
Mr. Rahul Kirloskar & Mr. Ravindranath Gumaste were appointed as Directors (Non-Executive, Non-Independent) of the Company w.e.f March 10, 2022, designated as Chairman and Vice-Chairman, respectively.
Mr. Nishikant Ektare was appointed as Managing Director of the Company w.e.f March 10, 2022.
Dr. Shalini Sarin & Mr. S. Venkataramani were appointed as Independent Directors of the Company w.e.f March 10, 2022.
Mr. O P Kakkar & Ms. Deepa Mathur resigned as Directors of the Company w.e.f. March 10, 2022.
The Board placed on record its sincere appreciation and gratitude for services rendered by Mr. O P Kakkar & Ms. Deepa Mathur during their association with the Company.
Ten meetings of the Board were held during the year under review. Detailed information is given in the Corporate Governance report as enclosed herewith.
Independent Directors have given declarations pursuant to Section 149(7) of the Act & Regulation 25(8) of the SEBI (LODR), Regulations, 2015 (Listing Regulations), stating that they meet the criteria of independence. The Board is assured that Independent Directors posses adequate proficiency, experience, expertise and integrity. Pursuant to Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, Independent Directors have confirmed that they hold valid registration certificate with the Databank of Independent Directors.
The recent infrastructure push could create new opportunities for green field project like Tridem Port and Power Company Private Limited (Tridem), wholly owned subsidiary of the Company. Consequent upon change in management on March 10, 2022, the Company will evaluate fresh potential opportunities for Tridem as well.
FIXED DEPOSITS
The Company has not accepted deposits from the public. MANAGEMENT DISCUSSION & ANALYSIS & CORPORATE GOVERNANCE REPORT
Pursuant to Listing Regulations, a separate section on Management Discussion & Analysis & Corporate Governance’ Report is forming part of this Report.
The Managing Director & CFO has certified to the Board with regard to the financial statements & other matters as required under Regulation 17(8) of the Listing Regulations.
Certificate from Auditors regarding compliance of conditions of Corporate Governance is also annexed to this Report.
ANNUAL RETURN
Latest Annual Return of the Company in Form MGT-7 is available on website: www.ismt.co.in CONSERVATION OF ENERGY ETC Information required under Section 134(3)(m) of the Act is forming part of this Report as Annexure ‘A’.
DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to Section 134(3)(c) read with Section 134(5) of the Act, your Directors make the following statement:
i) That in preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;
ii) That Directors have selected such accounting policies & applied them consistently & made judgments & estimates, that are reasonable & prudent so as to give a true & fair view of the state of affairs of the Company at end of the financial year March 31, 2022 & of the Profits of the Company for that period;
iii) That Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
iv) That the Directors have prepared the annual accounts on a going concern basis;
v) That the Directors had laid down internal financial controls to be followed by the Company & that such internal financial controls are adequate & were operating effectively; and
vi) That the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
The Company has devised Policy for annual performance evaluation of the Board, Committees & Directors which include criteria for performance evaluation of non-executive & executive directors. The Board evaluates performance of the Committees & of the Independent Directors whereas the Chairman of the Board evaluates performance of the Board. The Independent Directors evaluate the performance of Non-Independent Directors.
Details of familiarization Programme of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of industry in which the Company operates, business model of the Company and related matters are on website of the Company: www.ismt.co.in
AUDITORS
Tenure of the Auditors of the Company will expire at the ensuing Annual General Meeting (AGM) of the Company.
The Auditors have discussed the key matters separately as per the Annexure A to the Independent Auditors Report as enclosed herewith.
COST AUDITORS
The Company is required to maintain cost records as specified u/S 148(1) of the Act & accordingly such accounts/ records are made & maintained.
Pursuant to Section 148 of the Act, the Board, on recommendation of Audit Committee, has approved the appointment & remuneration of the following Cost Auditors, for FY2021-22:
(i) M/s. Dhananjay V. Joshi & Associates; and
(ii) M/s. Parkhi Limaye & Co.
Payment of remuneration for FY2021-22 to the aforesaid Cost Auditors is subject to ratification by Members at ensuing AGM.
The Cost Audit Report for FY2020-21 was filed within the prescribed time limit as per the Companies (Cost Record and Audit Rules), 2014.
SUBSIDIARIES
As on date of this report, the Company has ten direct & indirect subsidiaries. In accordance with Section 129(3) of the Act, statement containing salient features of financial statements of subsidiaries in Form AOC-1 & report on performance & financial position of each subsidiary is forming part of enclosed financial statements for FY2021-22. The Company has framed Policy for determining Material Subsidiaries which is available on: www. ismt.co.in
Consequent upon the change in management on March 10, 2022, the Company has initiated review of its subsidiary’s viz. Structo Hydraulics AB, Sweden (Structo) with regard to its operations and future opportunities. With positive net-worth and strong balance sheet of the Company, Structo can expect to have better market access and availability of working capital. Recent geopolitical developments, however, together with steep increase in ocean freight, create fresh business challenges.
NOMINATION & REMUNERATION POLICY
The Nomination & Remuneration Policy of the Company on director’s appointment & remuneration including criteria for determining qualifications, positive attributes, independence of a director & other matters is available on website: www.ismt.co.in.
The criteria for performance evaluation as laid down by the Nomination Remuneration Committee have been defined in the Nomination & Remuneration Policy.
Details pertaining to Section 197(12) of the Act read with Rules thereunder are forming part of this Report as Annexure ‘B’.
Pursuant to Section 197(9) of the Act, Mr. B R Taneja, erstwhile Managing Director has, pending lenders approval, refunded remuneration due for refund during the year under review.
A statement showing details of employees in terms of Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. However, in terms of Section 136 of the Act, Annual Report excluding the aforesaid information is being sent to members and others entitled thereto. The same is available for inspection by Members at the Registered Office of the Company during business hours on working days upto the date of ensuing AGM. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary.
SECRETARIAL AUDIT REPORT
Pursuant to Section 204 of the Act & Rules made thereunder, the Board has appointed M/s. KPRC & Associates, Company Secretaries as Secretarial Auditors to undertake Secretarial Audit of the Company for the period ended March 31,2022. The Report of the Secretarial Auditors in Form MR-3 is forming part of this Report as Annexure ‘C’.
In respect of the Audit observations, following are the comments of the Board:
i. Delay in submission of Financial Results:
Submission of financial results for Quarter ended March 31, 2021 and September, 2021 got delayed on account of delay in the financial statements of the foreign subsidiaries & delay in finalization of the financial results, respectively.
ii. Promoter shareholding not in demat form:
The Company has requested the concerned promoter group entity, from time to time, to Demat shareholding or reclassify to Public Category which remained unattended.
iii. Non-filing of Annual Performance Report (APR):
The Company has initiated corrective steps for filing the APR.
PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS
Particulars of Loans, Guarantees & Investments covered under Section 186 of the Act have been mentioned in Notes to the enclosed Financial Statements.
RISK MANAGEMENT
The Company has constituted a Risk Management Committee to address organization wide risk including credit, security, property, regulatory and other risks. The Committee is assisting the Board in ensuring that there is adequate risk management policy in place capable of addressing those risks.
INTERNAL FINANCIAL CONTROLS The Company has an internal financial control framework which is commensurate with the size, scale and complexity of its operations. The Statutory Auditors of the Company reviews the same on periodical basis.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Pursuant to the provisions of Section 135 of the Act, no profits were available for spending on CSR activities.
AUDIT COMMITTEE & VIGIL MECHANISM Pursuant to Section 177 of the Act, an Audit Committee has been constituted by the Board consisting of three Independent directors.
Whistle Blower Policy/ Vigil Mechanism of the Company was established by the Board & available on website: www.ismt. co.in.
CONTRACTS WITH RELATED PARTIES
During the year under review, the Company has not entered into any contract/ arrangement/ transaction with related parties which were either not at arm’s length or not in the ordinary course of business & further could be considered material in accordance with the policy of the Company on materiality of related party transactions.
Hence, there is no information to be provided in Form AOC-2 while particulars of Related Party Transactions in terms of Ind AS-24 are forming part of the enclosed financial statements.
The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on website: www.ismt.co.in GENERAL
1. No significant or material orders were passed by Regulators or Courts or Tribunals which impact the going concern status & the Company’s operations in future.
2. The Company has complied with the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and during the year under review there were no cases filed under the said Act.
3. The Company has complied with the applicable secretarial standards.
ACKNOWLEDGEMENTS
Your Directors take this opportunity to express its sincere gratitude for continued support & co-operation received by the Company from the Government of India, Government of Maharashtra, Reserve Bank of India, Stock Exchanges, other regulatory agencies & shareholders. The Board would also like to acknowledge continued support of its bankers, vendors, clients & investors. The Directors also wish to place on record their appreciation of all employees for their dedication & team work.
For and on behalf of the Board of DirectorsPune Rahul Kirloskar
May 09, 2022 Chairman
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