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Directors Report of Facor Alloys Ltd.

Mar 31, 2015

DEAR MEMBERS,

The Directors submit the TWELFTH ANNUAL REPORT on the business and operations of the Company and the Audited Statements of Accounts for the year ended 31st March, 2015.

FINANCIAL RESULTS

For the year For the year ended ended 31-3-2015 31-3-2014 (Rs. in Lacs) (Rs. in Lacs)

Gross Profit/(Loss) (1739.20) (1387.00)

Depreciation 291.60 329.25

Provision for taxation - -

Tax for earlier years (24.78) 0.26

Deferred Tax (1198.66) (69.80)

Net Profit/(Loss) for the year (807.36) (1646.71)

Balance brought forward (649.36) 997.35 from last year

Balance Carried to Balance Sheet (1456.72) (649.36)

OVERALL PERFORMANCE

As mentioned in the last year's Annual Report, a lock out was declared in the plant w.e.f. 04th February, 2014 due to labour unrest. As per directions of the State Government though the lock out was uplifted w.e.f. 26th December, 2014 but the production activities are yet to be resumed. As a result of this during the financial year 2014-15 there was no production/no sale except some minor depot sales. Due to fixed overheads company has incurred a loss of Rs. 807.36 net of write back of deferred tax and income on sale of fixed assets including interest income of Rs. 1198.66 Lacs and Rs. 1518.02 Lacs respectively.

DIVIDEND

In view of the losses during the year, the Directors regret their inability to recommend any dividend for the financial year ended 31st March 2015 on Equity Shares of the company.

STATE OF COMPANY'S AFFAIRS

As mentioned above the production activities are yet to be resumed. Due to non operation of the plant the fund flow position of the company is in very bad shape.

EXTRACT OF THE ANNUAL RETURN

An extract of annual return for the financial year ended on 31st March, 2015 in Form MGT-9 pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12 (1) of the Companies (Management and Administration) Rules, 2014 is attached as Annexure-1.

NUMBER OF MEETINGS OF THE BOARD

The Board met five times in FY 2014-15 viz. on 29th May, 2014, 26th July, 2014, 10th November, 2014, 29th December, 2014 and 13th February, 2015. The maximum interval between any two meetings did not exceed 120 days.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard (AS)-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

SUBSIDIARIES

Pursuant to Section 129 (3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of the Company's Subsidiaries and Associates' (in Form AOC-1) is attached to the financial statements as Annexure-2. The company will make available the Annual Accounts of the subsidiary companies and related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the Company and that of the respective subsidiary companies as well will also be kept open for inspection at the Registered Office of the Company. Further, the Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to provisions under Section 134 (5) of the Companies Act, 2013, your Directors hereby confirm:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2015, the applicable accounting standards read with requirements set out under schedule III of the Companies Act, 2013 have been followed and there are no material departures from the same;

(ii) that they have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 loss for the year under consideration;

Name of the entity Relation Amount Rs. in Crore

Cati Madencilik, Ithalat Step down 10.16 (USD VeIhracat A.S. Subsidiary 1.6 Million)

Sarang Securities Ltd. N.A. 7.50

Facor Minerals Subsidiary 4.09 (Netherlands) B.V.

Name of the entity Particulars of loans, guarantees and investments

Cati Madencilik, Ithalat Guarantee given for availing VeIhracat A.S. loan from BOI, London

Sarang Securities Ltd. Loan given

Facor Minerals Investment in the (Netherlands) B.V. equity shares

Name of the entity Purpose for which the loan, guarantee and investment are proposed to be utilised

Cati Madencilik, Ithalat To secure the due repayment of VeIhracat A.S. loan together with interest

Sarang Securities Ltd. To meet out business commitments

Facor Minerals To meet the expenses/liabilities (Netherlands) B.V.

(iii) that 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 frauds and other irregularities;

(iv) that they have prepared the annual accounts of the Company for the financial year ended 31st March, 2015 on a going concern basis;

(v) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(vi) that they had devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DECLARATION GIVEN BY INDEPENDENT DIRECTORS

The Independent Directors have given declaration that they meet the criteria specified under Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The Policy of the Company on Directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under sub-Section (3) of Section 178, is attached as Annexure-3 to this Report.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors

The Auditors' Report to the Shareholders for the year under review does not contain any qualification.

Secretarial Auditor

There are no qualifications, reservations or adverse remarks or disclaimers made in the Secretarial Audit Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

The Company has provided following guarantee and made following Loan and investment pursuant to Section 186 of the Companies Act, 2013 :

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

There are no contracts/arrangements/transactions which are not at arm's length basis and there are no material contracts/arrangements/ transactions which are at arm's length basis.

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

A SBLC for USD 10 Million issued by Bank of India, Visakhapatnam in favour of Bank of India, Jersey for sanctioning a loan of USD 10 Million to Facor Minerals (Netherlands) B.V., an overseas subsidiary of the Company has been invoked. Company is approaching the BOI with a request to arrange to provide the time to the Company to pay back the guarantee invoked amount to the bank in instalments.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 are set out in Annexure-4 hereto forming part of this report.

RISK MANAGEMENT POLICY

The Company's Risk Management framework is designed to identify, assess and monitor various risks related to key business and strategic objectives and lead to the formulation of a mitigation plan. Major risks in particular are monitored regularly at Executive meetings and the Board of Directors of the Company is kept abreast of such issues.

DISCLOSURE AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has formed a Committee and adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder.

CORPORATE SOCIAL RESPONSIBILITY

Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company at the Board Meeting held on 29th May, 2014 approved a Policy on CSR and the Policy was hosted on the website of the Company.

Company is not having average net profits in the immediately preceding three years.

ANNUAL BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, Independent Directors at their meeting without the participation of the Non-independent Directors and Management, considered/evaluated the Boards' performance, Performance of the Chairman and other Non-independent Directors.

The Board subsequently evaluated its own performance, the working of its Committees (Audit, Nomination and Remuneration and Stakeholders Relationship Committee) and Independent Directors (without participation of the relevant Director).

VIGIL MECHANISM/WHISTLE BLOWER POLICY

Pursuant to Section 177 (9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement, the Board of Directors had approved the Policy on Vigil Mechanism/ Whistle Blower and the same was hosted on the website of the Company. This Policy inter- alia provides a direct access to the Chairman of the Audit Committee.

Company hereby affirms that no Director/ employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

FINANCE

The Company has not invited any deposit from public during the year. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

In terms of the provisions of Section 197 (12) of the Companies Act, 2013 read with Rules 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, during the year under review there were no employees receiving remuneration of or in excess of Rs. 60,00,000/- per annum or Rs. 5,00,000/- per month requiring disclosure.

Disclosures pertaining to remuneration and other details as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annexure forming part of the Annual Report. Having regard to the provisions of Section 136 (1) read with its relevant proviso of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, Mr. M. D. Saraf, Vice Chairman & Managing Director, Mr. Gautam Khaitan, Independent Director stepped down from the Board w.e.f. 26-07-2014 and 31-01-2015 respectively. Mr. Arye Berest ceased as a director of the company w.e.f. 22-04- 2015 due to his sudden demise. The Board wishes to place on record its deep sense of appreciation for the valuable contributions made by them to the Board and the Company during their tenure as Directors. Mr. Anurag Saraf, Joint Managing Director, retires by rotation at the forthcoming Annual General Meeting, and being eligible offers himself for re-appointment.

Mrs. Urmila Gupta was appointed as Additional Director (Independent) on the Board with effect from 13th February, 2015. We seek your confirmation for appointment of Mrs. Urmila Gupta as Independent Director for a term upto five consecutive years i.e. from, 13th February, 2015 to 12th February, 2020 on non-rotational basis. Members are requested to refer to the Notice of the Annual General Meeting and the Explanatory Statement for details of the qualifications and experience of the Director and the period of her appointment.

The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/ executives have affirmed compliance with the said code.

At the Board Meeting held on 29th May, 2014 Mr. Ashim Saraf, Joint Managing Director, Mr. O. P. Saraswat, Dy. Chief Financial Officer and Mr. S. S. Sharma, Company Secretary were designated as "Key Managerial Personnel" of the Company pursuant to Sections 2 (51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

SECRETARIAL AUDIT REPORT

The Company has appointed Mr. Nilesh Jain of N.V. Jain & Associates, Company Secretaries to conduct secretarial audit and his Report on Company's Secretarial Audit is appended to this Report as Annexure-5.

CORPORATE GOVERNANCE

Management Discussion and Analysis, Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

AUDIT COMMITTEE

The Audit Committee formed by the Board of Directors of the Company consists of Mr. K. Jayabharath Reddy, Mr. P.V.R.K. Prasad & Mr. A.S. Kapre who are Non-Executive Independent Directors of the Company and Mr. R.K. Saraf. Mr. K. Jayabharath Reddy is its Chairman. The Committee's role, terms of reference and the authority and powers are in conformity with the requirement of the Companies Act, 2013 and the Listing Agreement.

AUDITORS

M/s Salve & Co., Chartered Accountants, the existing Auditors, will retire at the ensuing Annual General Meeting and are eligible for re- appointment. Based on the recommendation of the Audit Committee, the Board of Directors of the Company have proposed the appointment of M/s Salve & Co., Chartered Accountants, as the Auditors of the Company from the conclusion of the forthcoming 12th Annual General Meeting till the conclusion of the 14th Annual General Meeting. M/s Salve & Co., have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 141 of the Companies Act, 2013.

COST AUDITOR

Mr. Prakash Uppalapati, Cost Accountant has been appointed by the Board as Cost Auditor of the Company to conduct audit of cost records of the Company for the year ended 31st March, 2016. Pursuant to the provisions of Section 148 of the Companies Act, 2013 and the Rules made there under, Members are requested to consider the ratification of the remuneration payable to Mr. Prakash Uppalapati.

The due date for filing of the Cost Audit Report for the financial year 2013-14 was 30th September, 2014. The Company has filed the Report with the Ministry of Corporate Affairs on 25-09-2014.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors place on record their gratitude for the support and co- operation received from Central and State Governments, Financial Institutions & Banks, Customers, Suppliers and Shareholders and for their continued support. The Board also expresses its sincere appreciation to the dedicated and committed team of employees and workmen.

On behalf of Board of Directors,

Place : Noida (U.P) R.K. SARAF Dated : 08th August, 2015 Chairman & Managing Director


Mar 31, 2014

THE MEMBERS

The Directors submit the ELEVENTH ANNUAL REPORT on the business and operations of the Company and the Audited Statements of Accounts for the year ended 31st March, 2014.

FINANCIAL RESULTS

For the For the year ended year ended 31-3-2014 31-3-2013 (Rs. in Lacs) (Rs. in Lacs)

Gross Profit/(Loss) (1387.00) 566.79

Depreciation 329.25 358.52

Provision for taxation - 160.42

Tax for earlier years 0.26 43.43

Deferred Tax (69.80) (75.18)

Net Profit/(Loss) for the year (1646.71) 79.60

Balance brought forward from last year 997.35 917.75

Balance Carried to Balance Sheet (649.36) 997.35

OVERALL PERFORMANCE

As mentioned else where in the report that the plant of the company is under lock out since February, 2014. On account of lock out and other factors, during the year under consideration the production and sale of ferro chrome were lower as compared to the previous year 2012-2013. However, due to better sales realization the overall turnover of the Company increased from Rs.219.73 crores in 2012-2013 to Rs. 240.03 crores in 2013-14. Exports were Rs. 111.36 crores as against Rs. 132.07 crores in the previous year and during the year under review foreign currency earnings in rupee terms was Rs 99.14 crores. The Company derived 46% of its total sales from exports. Despite increased turnover, there is a loss of Rs. 17.16 crores before tax as compared to Rs. 2.08 crores profit before tax in the previous year. The loss of Rs. 17.16 crores during the year is mainly due to closure of the plant, burdening the company heavily by way of claims for Fuel Surcharge Adjustment (FSA) to the extent of Rs. 23.11 crores including arrears for earlier years and steep hike in the power tariff.

DIVIDEND

In view of the losses during the year, the Directors regret their inability to recommend any dividend for the financial year ended 31st March 2014 on Equity Shares of the company. PROSPECTS

Ferro Chrome imparts the non-corrosive property to stainless steel and thus, there is a deep correlation between the outlook for both the industries. During the first 6 months of 2013, stainless steel crude production reached an all time high of 18.6 million tonne- up 4.6% for the first half of 2012, according to ISSF. Global stainless steel crude production is expected to hit a new high of 36.4 million tonne in 2013 registering an increase of 2.9%. However the ferro chrome industry has not particularly benefited from the growth seen in the stainless steel industry due to several factors including rising costs, infrastructural constraints and over capacity. India has seen an enigma as far as the ferro chrome industry is concerned. Redistribution of chrome ore reserves in the late 90s led to a paradigm shift and rapid growth in output which though, stagnated around the 1 million tonne per annum mark. Constraints in ore out put, rising electricity tariff though several producers now either have captive power generation or are planning to set it up, high internal logistics costs have somewhat dampened sentiments although the outlook for fully integrated producers is decidedly better. To summarise, while stainless steel out put continues to increase mainly on strength of robust growth in China the ferro chrome industry is passing though an uncertain phase.

FINANCE

The Company has not invited any deposit from public during the year.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard (AS) -21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

SUBSIDIARIES

In terms of the general circular issued by the Ministry of Corpo- rate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary com- panies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The company will make available the Annual Accounts of the subsidiary companies and related detailed infor- mation to any member of the Company who may be interested in obtaining the same. The annual accounts of the Company will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies as well. Further, the Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies.

DECLARATION OF LOCK OUT IN PLANT

Agitation of lorry loading workers was going on since last Febru- ary, 2013. This agitation has resulted in short supply of raw ma- terials to the plant. Further, bilateral discussions were going on between the management and batch leaders but the dispute is not yet resolved. As a result plant operations are badly hit due to acute shortage of raw material. Due to disruption of further sup- plies of raw materials to the plant, the existing raw material stocks available in the plant has exhausted and the operations at the plant have been put to a complete halt, since night shift of 10.01.2014. Accordingly a lock out has been declared in the plant w.e.f. 04-02-2014.

Further company has already taken required possible/necessary steps to resolve the impasse at the earliest and is in dialogue with the casual workers. Company is monitoring the situation and all required possible/ necessary steps in uplifting the lock- out will be taken as permitted by the circumstances.

DIRECTORS

Mr. Arye Berest and Mr. Ashim Saraf, Directors of the Company, retire by rotation and, being eligible offer themselves for re-election.

As per provisions of Section 149 of the Act, which has come into force with effect from 1st April, 2014, an Independent Director shall hold office for a term up to five consecutive years on the Board of a company and is not liable to retire by rotation. In compliance with the provisions of Section 149 read with Sched- ule IV of the Act, the appointment of Mr. K Jayabharat Reddy,

Mr. P.V.R.K. Prasad, Mr. A. S. Kapre, Mr. K. L. Mehrotra, Mr. Gautam Khaitan & Mr. Keshaorao Pardhey as Independent Directors is being placed before the Members in General Meet- ing for their approval. In the opinion of the Board, they fulfill the conditions specified in the Act and the Rules made there under for appointment as Independent Directors and are independent of the management. Members are requested to refer to the No- tice of the Annual General Meeting and the Explanatory State- ment for details of the qualifications and experience of the Direc- tors and the period of their appointment.

The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/ executives have affirmed compliance with the said code.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of Companies Act, 1956, your Directors confirm that -

i) in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanations;

ii) they have selected such accounting policies and applied them consistently and made judgements 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 that period;

iii) they 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) they have prepared the annual accounts on a going concern basis.

AUDIT COMMITTEE

The Audit Committee formed by the Board of Directors of the Company consists of Mr. K. Jayabharath Reddy, Mr. P.V.R.K. Prasad & Mr. A.S. Kapre who are Non-Executive Independent Directors of the Company and Mr. R.K. Saraf. Mr. K. Jayabharath Reddy is its Chairman. The Committee''s role, terms of reference and the authority and powers are in conformity with the requirement of the Companies Act, 1956 and the Listing Agreement.

AUDITORS

M/s Salve & Co., Chartered Accountants, the existing Auditors, will retire at the ensuing Annual General Meeting and are eligible for re-appointment. Based on the recommenda- tion of the Audit Committee, the Board of Directors of the Company have proposed the appointment of M/s Salve & Co., Chartered Accountants, as the Auditors of the Company from the conclusion of the forthcoming 11th Annual General Meeting till the conclusion of the 14th Annual General Meeting. M/s Salve & Co., have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Sec- tion 141 of the Companies Act, 2013.

COST AUDITOR

Mr. Prakash Uppalapati, Cost Accountant has been appointed by the Board as Cost Auditor of the Company to conduct audit of cost records of the Company for the year ended 31st March 2015. Pursuant to the provisions of Section 148 of the Compa- nies Act, 2013 and the Rules made there under, Members are requested to consider the ratification of the remuneration pay- able to Mr. Prakash Uppalapati.

The due date for filing of the Cost Audit and Compliance Reports for the financial year 2012-13 was 30th September, 2013. The Company has filed the Reports with the Ministry of Corporate Affairs on 26-09-2013.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The statement giving details of conservation of energy, technol- ogy absorption, foreign exchange earnings and outgo, in accor- dance with the Companies (Disclosure of Particulars in the Re- port of Board of Directors) Rules, 1988 is annexed and marked Annexure A'' which forms part of this Report.

PARTICULARS OF EMPLOYEES

During the year under review there were no employees receiv- ing remuneration of or in excess of Rs. 60,00,000/- per annum or Rs. 5,00,000/- per month requiring disclosure as per the provi- sions of Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975.

CORPORATE GOVERNANCE

Management Discussion and Analysis, Corporate Governance Report and Auditors'' Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors place on record their gratitude for the support and cooperation received from Central and State Governments, Financial Institutions & Banks, Customers, Suppliers and Shareholders and for their continued support. The Board also expresses its sincere appreciation to the dedicated and commit- ted team of employees and workmen.

On behalf of Board of Directors,

Place : Noida (U.P.) R.K. SARAF

Dated : 26th July, 2014 Chairman & Managing Director


Mar 31, 2013

TO THE MEMBERS

The Directors submit the TENTH ANNUAL REPORT on the business and operations of the Company and the Audited Statements of Accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS For the year ended For the year ended 31-3-2013 31-3-2012 (Rs.in Lacs) (Rs.in Lacs)

Gross Profit/(Loss) 566.79 1427.16

Depreciation 358.52 411.51

Provision for taxation 160.42 266.45

Ta x for earlier years 43.43 0.21

Deferred Tax (75.18) 77.61

Net Profit/(Loss) for the year 79.60 671.38

Balance brought forward from last year 917.75 246.37

Balance Carried to Balance Sheet 997.35 917.75

OVERALL PERFORMANCE

Ferro Alloy is a crucial intermediates to Steel Industry, hence growth of Ferro Alloys industry is primarily driven by the growth and progress of Steel Industry. The estimated production capacity of ferro alloys in India is more than double of the domestic demand, making the industry partially dependent on domestic market and more on export market. The main market for Indian ferro chrome is China, Japan and South Korea and the current economic situation in all the three countries is not that good. Japan''s capacity utilization is low around 60-70% which provides little opportunity for export from India. As far as Korea is concerned, it was doing well till the first half of 2012 and it had some plans of increasing production of Stainless steel, but from the later half of the year they started going down and their capacity utilization too started coming down eventually. And China which was kind of pulling the world, has also become uncertain because of the inflation problem. At present China is importing Chrome Ore as well as Charge Chrome from South Africa in huge quantities and the current situation is such that China has become a bigger producer of Chrome Alloys compared with South Africa, riding on some inherent advantages like availability of Coal and Coke among others. Further a number of Ferro Chrome Producer in South Africa had recently been forced to stop or cut down production due to lower availability of power coupled with continued weak demand. Despite sharp fall in total production of Ferro Chrome due to power restriction in South Africa, the overall availability of the material is still higher than the demand.

As far as domestic market is concerned, the stainless steel market in India particularly 200 series is passing through a bad phase due to credit squeeze in the market, high inflation, higher power cost, uncertainty of power supply and delay in several projects. The weakness in ferro alloys prices in India has happened largely due to weakness in Export demand. Most ferro alloys producers in India are currently passing through a difficult financial position because of significant fall in prices in recent months and increase in power cost. Lack of demand both in domestic and export markets, coupled with weak price trend and higher cost of power and Chrome Ore are primarily responsible for hardship faced by ferro alloys producers. Further the ongoing power crisis in Andhra Pradesh manifesting in unprecedented power cuts and steep tariff hike have hit the company hard. Besides this, the Company is also burdened heavily by way of claims for Fuel Surcharge Adjustment (FSA) including arrears for earlier years.

On account of above and other factors, during the year under consideration the production during the financial year 2012-13 was 38,570 M.T. as against 64,000 M.T. in the previous year recording a steep fall of 40%. Owing to unfavourable market conditions, the overall turnover of the Company declined from Rs. 367.44 crores in 2011-2012 to Rs. 219.73 crores in 2012-2013. Exports were Rs. 132.07 crores as against Rs. 289.19 crores in the previous year. The Company derived 60% of its total sales from exports and during the year under review foreign currency earnings in rupee terms was Rs. 121.79 crores. The profit before tax too was lower at Rs. 2.08 crores as compared to Rs. 10.16 crores in the previous year recording a steep fall of 80%.

DIVIDEND

In order to conserve and plough back the resources, your Directors have not recommended any dividend for the year on Equity Shares of the company.

PROSPECTS

Ferro alloy refers to various alloys of iron, which are used in the production of mild steel, carbon steel, special alloy steel and stainless steel. India''s steel production is increasing every year, thereby the consumption of Ferro Alloys is also increasing. Preliminary figures released by the International Stainless Steel Forum (ISSF) show that worldwide stainless steel crude production has increased after the first nine months of 2012 by 2.9% compared to the same period of 2011. Total production for the first three quarters was 26.1 million metric tons (Mt.). In Asia, China increased its Stainless Steel production in the first 9 months of 2012 by 7.9% to 11.4 Mt. and it now accounts for about 44% of the World''s Stainless Steel Production. After the first 9 months of 2012, Asia accounts for almost 70% of the World''s Stainless Steel Production.

The projected growth of over 8% of stainless steel and carbon steel till 2015 augurs well for the continued growth of ferro alloys production in India. The ferro alloys industry has a capacity of 5.15 million tonnes. It is accounting for nearly 10 % of the world''s ferro alloys production and is among the 10 largest producers of the material in the world. The market situation has become over supply because the supply increased but the consumption decreased. Steel market including stainless steel has been passing through difficult times due to credit squeeze in the market, high inflation, high power cost, uncertainty of power supply and delay in several projects. Nervousness is visible in the sector and production has been lower. The International price of HC Ferro Chrome started moving downwards. The main reason for the decline is lack of demand by the end users.

At the same time, the Indian Ferro Alloys Industry has grappled with various issues, such as non-availability of power with competitive rate, suitable quality and quantity of Chrome Ore/ Coke, minimum duty protection etc. Besides, the Industry has to compete with the integrated producers having captive Mines situated in South Africa, Australia, Brazil, CIS, etc to sell acceptable quality of Chrome Alloys in the world market for earning the valuable foreign exchange for the country. Reductants viz Anthracite Coal, Coke, Charcoal etc. are vital inputs for the Ferro Alloys Industry. The consumption of these reductants for producing one tone of Ferro Alloys varies between 600 to 2,000 kgs, depending on the Ferro Alloys produced. The availability of these items in good quality is declining in the country and the Ferro Alloy Industry may have to totally depend on import of these reductants on regular basis. Further the present Import Duty on Ferro Alloys is 5%, but this is not sufficient, as the import of Ferro Alloys is increasing every year, when the domestic Industry is operating at around 60% of capacity leaving balance 40% lying idle. These cheap imports from China and other countries are steadily grabbing the domestic market share to meet the expected rising demand from steel Industry. Further the problems of this industry are aggravated because of the high input cost of power including FSA charges. The ferro alloy Industry is a power intensive Industry, the power cost is about 35-40 percent of its total production cost. Repeated power tariff hikes by state run power utility company have put the Industry in a fix. In addition to the higher power tariff, the frequent power cuts in Andhra Pradesh are affecting the Industry badly. At such high power tariff, there is hardly any margin and viability in the production of ferro alloys. These issues need to be addressed by the Government to enable the Ferro Alloys Producers to compete in the Domestic as well as International Markets.

FINANCE

The Company has not invited any deposit from public during the year.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard (AS) -21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

SUBSIDIARIES

In terms of the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The company will make available the Annual Accounts of the subsidiary companies and related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the Company will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies as well. Further, the Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies.

INDUSTRIAL RELATIONS

The overall industrial relations in the Company were generally satisfactory.

DIRECTORS

Mr. Yogesh Saraf & Mr. Vibhu Bakhru resigned as Directors of the company effective 01st February, 2013 & 09th April 2013 respectively. The Directors place on record their appreciation for the valuable services rendered by them.

Mr. Anurag Saraf and Mr. Keshaorao Pardhey were appointed as Additional Directors on the Board w.e.f. 15th January, 2013. Notices have been received from members along with a deposit of Rs. 500/- each under Section 257 of the Companies Act, 1956 signifying their intention to propose them as Directors of the Company.

Mr. K. L. Mehrotra, Mr. C. N. Harman and Mr. Gautam Khaitan, Directors of the Company, retire by rotation and, being eligible offer themselves for re-election.

The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/ executives have affirmed compliance with the said code.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of Companies Act, 1956, your Directors confirm that -

i) in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanations;

ii) they have selected such accounting policies and applied them consistently and made judgements 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 that period;

iii) they 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) they have prepared the annual accounts on a going concern basis.

AUDIT COMMITTEE

The Audit Committee formed by the Board of Directors of the Company consists of Mr. K. Jayabharath Reddy, Mr. P.V.R.K. Prasad & Mr. A.S. Kapre who are Non-Executive Independent Directors of the Company and Mr. R.K. Saraf. Mr. K. Jayabharath Reddy is its Chairman. The Committee''s role, terms of reference and the authority and powers are in conformity with the requirement of the Companies Act, 1956 and the Listing Agreement.

AUDITORS

You are requested to appoint Auditors for the current year and to fix their remuneration. M/s SALVE & Co., Chartered Accountants hold office upto the conclusion of the ensuing 10th Annual General Meeting. The Company has received a requisite Certificate pursuant to Section 224 (1B) of the Companies Act 1956 regarding their eligibility for re-appointment as Auditors of the Company.

COST AUDITOR

Pursuant to provisions of Section 233 B of the Companies Act, 1956 and with prior approval of Central Government Mr. Prakash Uppalapati, Cost Accountant, having an arm''s length relationship with the Company and who is free from any disqualification as specified under Section 233 B (5) read with Section 224 and sub-section 3 and sub-section 4 of Section 226 of the Companies Act, 1956 has been appointed by the Board as Cost Auditor of the Company to conduct audit of cost records of the Company for the year ended 31st March 2013. His appointment is in accordance with the limits specified in Section 224 (1B) of the Companies Act, 1956. Cost Audit Reports would be submitted to the Central Government within prescribed time.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The statement giving details of conservation of energy, technology absorption, foreign exchange earnings and outgo, in accordance with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed and marked Annexure Rs.A'' which forms part of this Report.

PARTICULARS OF EMPLOYEES

During the year under review there were no employees receiving remuneration of or in excess of Rs. 60,00,000/- per annum or Rs. 5,00,000/- per month requiring disclosure as per the provisions of Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975.

CORPORATE GOVERNANCE

Management Discussion and Analysis, Corporate Governance Report and Auditors'' Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors place on record their gratitude for the support and co operation received from Central and State Governments, Financial Institutions & Banks, Customers, Suppliers and Shareholders and for their continued support. The Board also expresses its sincere appreciation to the dedicated and committed team of employees and workmen.

On behalf of Board of Directors,

Place : New Delhi R.K. SARAF

Dated : 27th May, 2013 Chairman & Managing Director


Mar 31, 2012

The Directors submit the NINTH ANNUAL REPORT on the business and operations of the Company and the Audited Statements of Accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS

For the year For the previous ended year ended 31-3-2012 31-3-2011 (Rs. in Lacs) (Rs. in Lacs)

Gross Profit/(Loss) 1427.16 5196.69

Depreciation 411.51 216.35

Provision for taxation 266.45 1430.06

Tax for earlier years 0.21 0.65

Deferred Tax 77.61 237.85

Net Profit/(Loss) for the year 671.38 3311.78

APPROPRIATIONS

Transfer to General Reserve 0.00 250.00

Dividend on Equity Shares 0.00 391.09

Corporate Tax on Dividend 0.00 63.45

671.38 2607.24

Balance brought forward from last year 246.37 (2360.87)

Balance Carried to Balance Sheet 917.75 246.37

OVERALL PERFORMANCE

Ferro Alloys is one of the intermediate products used as additives and de-oxidising/de-sulfurizing agents in steel making. The growth of the Ferro Alloy industry is directly linked to the growth of the steel industry. During the first half of year under review overall the global steel industry witnessed steady growth. Despite financial turbulence in the Euro zone, weak private demand in the United States and events in Japan and the Middle East, the growth in global steel demand was driven by increased demand from key steel end-user industries specially from automotive sector. This resulted in increase in demand for Ferro Chrome.

However the second half of 2011-12 witnessed weakness in international demand due to a slowdown in China combined with the effects of the European debt crisis. In fact, the second half saw prices go down to the low 90's (cents per pound of chrome content).

The prolonged economic slowdown in the developed world, particularly in the European Union and the UK has resulted in a significant decline in steel consumption in several geographies in the western hemisphere. Steel plants are being closed or mothballed to conserve costs and to control over-supply. In the first few months of 2012-13 also, apparent Ferro Chrome demand from steel plants remained subdued due to the uncertain economic climate. On account of this, the demand and prices of chrome products in the domestic market too were adversely affected.

On account of above and other factors, during the year under consideration the production and sale of ferro chrome were lower as compared to the previous year 2010-2011. Owing to unfavourable market conditions, the overall turnover of the Company declined from Rs.388.59 crores in 2010-2011 to Rs.367.44 crores in 2011-2012. Exports were Rs.287.13 crores as against Rs.309.90 crores in the previous year. The Company derived 78% of its total sales from exports and during the year under review foreign currency earnings in rupee terms was Rs 262.17 crores. The profit before tax too was lower at Rs. 10.16 crores as compared to Rs. 49.80 crores in the previous year recording a steep fall of 80%.

DIVIDEND

In order to conserve and plough back the resources, your Directors have not recommended any dividend for the year on Equity Shares of the company.

FINANCE

The Company has not invited any deposit from public during the year.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investment in Associates the audited Consolidated Financial Statements are provided in the Annual Report.

SUBSIDIARIES

In terms of the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The company will make available the Annual Accounts of the subsidiary companies and related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the Company will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies as well. Further, the Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies.

PROSPECTS

As mentioned above Ferro Chrome is a value added intermediate product which imparts the noncorrosive property to stainless steel, hence growth of Ferro Alloys industry is primarily driven by the growth and progress of Steel Industry. Growth in the Indian economy is expected to remain strong. The automotive segment, is expected to grow by 11-13% in Financial Year 2012-13. As per world steel forecasts, steel demand in India should grow by 6.9% in 2012 and the growth should accelerate to 9.4% in 2013. Further the low per capita consumption of stainless steel in India which was 2.1 kg as compared to 7.5 kg in China and a world average of 4 kg, all in the 2011-12 fiscal year, constitutes a huge opportunity for growth in this sector. Indian stainless steel consumption will grow at a compounded annual growth rate of 9.7 percent reaching 3.4 million tons per annum (mtpa) by 2015, outstripping global consumption growth of 6 percent to 34.12 million tons which is a welcome sign for the Ferro Alloys Industry as consumption of Ferro Alloys will also increase. India's total annual production of ferro chrome is around 1.2 million tons (mt), of which around 0.7 mt is exported. As against monthly export of around 60.000 tons on an average current export is only around 40,000 to 45.000 tons per month as the long term contract materials are still going, while spot deals are not there. Further, out of the total export of around 0.7 mt of ferro chrome annually, the maximum quantity goes to China. On an average around 70 percent of the total export goes to Far East Asian countries and the balance 30 percent to Europe, US and other places. However, the prices of ferro alloys have improved by about 10 to 30 percent in second half of the year 2012-13 on slight improvement in demand from steel makers in Europe and the US even as demand from China continued to remain weak. Presently, the supply of ferro chrome is higher than domestic demand and unless 40-50 percent of ferro chrome that is produced in India is exported, the price will continue to remain under pressure.

The global economy is also on a recovery path due to concerted policy actions around the world. Chinese GDP growth and targets remains strong. Chinese steel demand growth is expected to be moderate as the government pursues economic restructuring. As such, steel demand in China is projected to grow by 4% every year in the next two years. Overall, the world GDP is expected to grow by 3.3% in 2012. Steel prices have recovered from the lows reached in December last year with increased buying activity seen across regions. However, the momentum seems to have lost steam and with the economic conditions in many parts of the world not looking strong, steel capacity utilisation remains below 80%. Looking ahead, global steel market developments are likely to remain generally positive, but with lower growth in 2012 compared to 2011. For 2012 as a whole, global steel demand is forecasted to grow by a further 4% to reach 1,422 million tonnes. China, India and other emerging markets will continue to drive demand but recent market developments suggest likely slackening of demand. South Africa has a crucial role to play in the ferro chrome industry. There has been significant increase in power tariffs over the last 4 years. As a result, South Africa's share of the total ferro chrome production worldwide now stands at approximately 40%.

At the same time, the Indian Ferro Alloys Industry is concerned about the insufficient availability of good quality raw-material mainly Chrome Ore, Coke and availability of cheaper imported Ferro Alloys. Further the problems of this industry are aggravated because of the high input cost of power as well as ore and stiff competition in the domestic and export markets. Since the ferro alloy industry is a power intensive unit, the power cost is about 35-40 percent of its total production cost and repeated power tariff hikes by state run power utility company have put the industry in a fix. In addition to the higher power tariff, the frequent power cuts in Andhra Pradesh are affecting the industry badly. At such high power tariff, there is hardly any margin and viability in the production of ferro alloys. These issues need to be addressed by the Government to enable the Ferro Alloys Producers to compete in the Domestic as well as International Markets.

INDUSTRIAL RELATIONS

The overall industrial relations in the Company were generally satisfactory.

DIRECTORS

Mr. Vibhu Bakhru was appointed as Additional Director on the Board w.e.f. 20th March, 2012. Notice has been received from member along with a deposit of Rs.500/- under Section 257 of the Companies Act, 1956 signifying his intention to propose him as Director of the Company. Mr. K. Jayabharath Reddy, Mr. A.S. Kapre and Mr. Arye Berest, Directors of the Company, retire by rotation and, being eligible offer themselves for re-election.

The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/ executives have affirmed compliance with the said code.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of Companies Act, 1956, your Directors confirm that -

i) in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanations;

ii) they have selected such accounting policies and applied them consistently and made judgements 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 that period;

iii) they 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) they have prepared the annual accounts on a going concern basis.

AUDIT COMMITTEE

The Audit Committee formed by the Board of Directors of the Company consists of Mr. K. Jayabharath Reddy, Mr. P.V.R.K. Prasad & Mr. A.S. Kapre who are Non-Executive Independent Directors of the Company and Mr. R.K. Saraf. Mr. K. Jayabharath Reddy is its Chairman. The Committee's role, terms of reference and the authority and powers are in conformity with the requirement of the Companies Act, 1956 and the Listing Agreement.

AUDITORS

You are requested to appoint Auditors for the current year and to fix their remuneration. M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the ensuing 9th Annual General Meeting. The Company has received a requisite Certificate pursuant to Section 224 (1B) of the Companies Act 1956 regarding their eligibility for re-appointment as Auditors of the Company.

COST AUDITOR

Pursuant to provisions of Section 233B of the Companies Act,1956 and with prior approval of Central Government Mr. Prakash Uppalapati, Cost Accountant, having an arm's length relationship with the Company and who is free from any disqualification as specified under Section 233 B(5) read with Section 224 and sub-section 3 and sub-section 4 of Section 226 of the Companies Act, 1956 has been appointed by the Board as Cost Auditor of the Company to conduct audit of cost records of the Company for the year ended 31st March 2012. His appointment is in accordance with the limits specified in Section 224 (1B) of the Companies Act, 1956. Cost Audit Reports would be submitted to the Central Government within prescribed time.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The statement giving details of conservation of energy, technology absorption, foreign exchange earnings and outgo, in accordance with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed and marked Annexure 'A' which forms part of this Report.

PARTICULARS OF EMPLOYEES

During the year under review there were no employees receiving remuneration of or in excess of Rs.60,00,000/- per annum or Rs.5,00,000/- per month requiring disclosure as per the provisions of Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975.

CORPORATE GOVERNANCE

Management Discussion and Analysis, Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors place on record their gratitude for the support and co- operation received from Central and State Governments, Financial Institutions & Banks, Customers, Suppliers and Shareholders and for their continued support. The Board also expresses its sincere appreciation to the dedicated and committed team of employees and workmen.

On behalf of Board of Directors,

Place : New Delhi R.K. SARAF

Dated: 28th July, 2012 Chairman & Managing Director


Mar 31, 2011

DIRECTORS’ REPORT TO THE MEMBERS

The Directors submit the EIGHTH ANNUAL REPORT on the business and operations of the Company and the Audited Statements of Accounts for the year ended 31st March, 2011.

FINANCIAL RESULTS

For the For the year previous ended Year 31-3-2011 ended 31-3-2010 (Rs. in (Rs. in Lacs) Lacs)

Gross Profit/(Loss) 5199.69 2414.14

Depreciation 216.35 227.85

Provision for taxation (including 1433.06 536.53 MAT/ /Wealth Tax)

Tax for earlier years 0.65 (0.21)

Deferred Tax 237.85 246.86

Net Profit/(Loss) for the year 3311.78 1403.11 APPROPRIATIONS

Transfer to General Reserve 250.00 75.00

Dividend on Equity Shares 391.09 293.32

Corporate Tax on Dividend 63.45 48.72

2607.24 986.07

Balance brought forward from last year (2360.87) (19680.88)

246.37 (18694.81)

Less : General Reserve – 16333.94

Balance Carried to Balance Sheet 246.37 (2360.87)

OVERALL PERFORMANCE

The world economy has demonstrated continued recovery post the financial meltdown in 2008. The financial year of 2010-11 was a year of steady improvement in our top line and bottom line figures. The domestic ferro alloys capacity has increased considerably in the last couple of years. These additional capacities coupled with high energy cost put pressure on the demand and prices of ferro chrome resulting into lower demand in the domestic market. Despite Low domestic demand of ferro chrome coupled with higher priced ores, company’s profitability was not affected due to better price realization from exports as the major global producers South Africa was not yet producing at full capacity.

On account of above and other factors, during the year under consideration the production and sale of Ferro Chrome were higher as compared to that of the previous year 2009-2010. Owing to better market conditions, the overall turnover of the Company increased from Rs. 261.94 crores in 2009-2010 to Rs. 388.59 crores in 2010-2011 recording an impressive increase of 48%. Exports were also higher at Rs. 309.90 crores as compared to Rs. 215.19 crores in the previous year registering a phenomenal growth of 44%. Profit before tax too surged to Rs.49.83 crores as compared to Rs. 21.86 crores in the previous year recording a spectacular increase of 128%.

DIVIDEND

Your Directors have recommended payment of dividend of Rs. 0.20 per equity share of Rs. 1/- each (20%) on the equity share capital of Rs. 19,55,47,355/- (2009-10 Rs. 0.15 per equity share of Rs. 1/- each (15%) on the equity share capital of Rs.19,55,47,355/-) for the year ended 31st March, 2011 aggregating to Rs.3,91,09,471/- and to pay dividend tax of Rs. 63,44,534/-. The dividend if approved by the shareholders will be paid to those members or their mandates whose name appear on the Register of Members on 13th September, 2011 for those holding shares in physical form and as per the details furnished by the depositories as at the end of business hours on 2nd September, 2011 for those holding shares in dematerialized form.

PROSPECTS

Ferro Alloys is a crucial intermediates to Steel Industry, hence growth of Ferro Alloys industry is primarily driven by the growth and progress of Steel Industry. Steel market including Stainless Steel (SS) has been passing through difficult times since April 2011. Nervousness is visible in the sector and production has been lower across the world compared to Q1 CY 2011. There is overcapacity of Stainless steel as demand for stainless steel is around 5-6 Million tons against the production capacity of 8-9 Million tons.

Further, the international prices of H C Ferro Chrome started moving downwards. The main reason for the decline is lack of demand by the end users. China still holds about 3.50 million tons of Chrome ore stock. There are fears of oversupply in the market as bearish market sentiment sees a slow reduction in the high stockpiles.

However the government has indicated its commitment for achieving a sustained GDP growth of 8% to 9% which would call for sustained double digit growth in steel consumption. Hence the long term outlook for the industry continues to remain positive as India progresses to achieve stronger economic position in the world scenario. One of the crucial beneficiaries of this includes the ferro alloy industry.

Further the stainless steel industry is expected to continue witnessing good growth going ahead which will largely be driven by demand emanating from China and India. Apart from being the largest consumers, these countries are also emerging as the largest stainless steel producers. Stainless steel demand in India is likely to be very high going ahead given rising per capita income. With steel production set to grow in coming years, domestic consumption of ferro alloys is also expected to increase. India has the potential to become a major player in the global ferro alloy industry in the coming years. The industry will play a significant role in exports, considering the low profile on exports by China. China will be importing more bulk ferro alloys, particularly ferro chrome, which will give India an advantage, due to closer proximity, as compared to other major ferro alloy producing countries like South Africa, Zimbabwe and so on.

Ferro alloy production cost is principally constituted of ore, reductants and power accounting in the aggregate for about 90% of the cost. As such, integrated producers with captive mines and power generation facility are well placed and insulated against volatile market trends.Indian ferro alloy industry has very few integrated players and most of the producers depend on public sector mining companies for their requirement of ore and on local power utilities for their energy requirement.

Further as mentioned above electrical energy is one of the major inputs in production of ferro alloys and high power tariff is a threat for the industry. Over and above the high power tariff, the frequent power cuts in Andhra Pradesh are also affecting the industry performance. Apart from electrical energy, the industry faces challenges of acquiring good quality raw materials like chrome ore and coke along with delay in getting rakes for transporting the material from the mines to the plants. The bigger challenge is the soaring costs, especially the cost of fuel and petroleum prices, which has a bearing on the cost of production, cost of power as well as on the logistic costs. It is hoped that the Government would recognise these challenges which hamper growth in this industry and need to be addressed urgently to enable the Ferro Alloys Producers to compete in the domestic as well as international markets.

FINANCE

The Company has not invited any deposit from public during the year.

SUBSIDIARY

The Report and Accounts of Best Minerals Limited, a subsidiary of the Company, for the year 1st April, 2010 to 31st March, 2011 are annexed alongwith statement pursuant to Section 212 of the Companies Act, 1956.

INDUSTRIAL RELATIONS

The overall industrial relations in the Company were generally satisfactory.

DIRECTORS

During the year Bank of India vide their letter ref. VMCB/PTS/11- 12/112 dated 13-07-2011 has informed that Mr. G.L.N. Sastry has ceased as a nominee Director of the bank on the Board of the company w.e.f. 13-07-2011 due to his retirement from the services of the bank. The Directors place on record their appreciation for the valuable services rendered by him.

Mr. K.L. Mehrotra was appointed as Director on the Board w.e.f. 18th September, 2010 to fill the casual vacancy. Mr. M.D. Saraf, Mr. Yogesh Saraf and Mr. P.V.R.K. Prasad, Directors of the Company, retire by rotation and, being eligible offer themselves for re-election.

The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/ executives have affirmed compliance with the said code.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of Companies Act, 1956, your Directors confirm that -

i) in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanations; (Refer Note No. 11 of Schedule K).

ii) they have selected such accounting policies and applied them consistently and made judgements 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 that period;

iii) they 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) they have prepared the annual accounts on a going concern basis.

AUDIT COMMITTEE

The Audit Committee formed by the Board of Directors of the Company consists of Mr. K. Jayabharath Reddy, Mr. P.V.R.K. Prasad & Mr. A.S. Kapre who are Non-Executive Independent Directors of the Company and Mr. R.K. Saraf. Mr. K.Jayabharath Reddy is its Chairman. The Committee’s role, terms of reference and the authority and powers are in conformity with the requirement of the Companies Act, 1956 and the Listing Agreement.

AUDITORS

You are requested to appoint Auditors for the current year and to fix their remuneration. M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the ensuing 8th Annual General Meeting. The Company has received a requisite Certificate pursuant to Section 224 (1B) of the Companies Act 1956 regarding their eligibility for re-appointment as Auditors of the Company.

AUDITORS’ REPORT

With reference to the comments made by the Auditors in their Report, the Directors wish to state that the relevant notes forming part of the Company’s Accounts are self-explanatory and hence do not require any explanation from the Board.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The statement giving details of conservation of energy, technology absorption, foreign exchange earnings and outgo, in accordance with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed and marked Annexure `A’ which forms part of this Report.

PARTICULARS OF EMPLOYEES

During the year under review there were no employees receiving remu- neration of or in excess of Rs.60,00,000/- per annum or Rs. 5,00,000/- per month requiring disclosure as per the provisions of Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975.

CORPORATE GOVERNANCE

Management Discussion and Analysis, Corporate Governance Report and Auditors’ Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors place on record their gratitude for the support and co- operation received from Central and State Governments, Financial Institutions & Banks, Customers, Suppliers and Shareholders and for their continued support. The Board also expresses its sincere appreciation to the dedicated and committed team of employees and workmen.

On behalf of Board of Directors,

R.K. SARAF Chairman & Managing Director

Place : New Delhi Dated : 1st August, 2011


Mar 31, 2010

The Directors submit the SEVENTH ANNUAL REPORT on the business and operations of the Company and the Audited Statements of Accounts for the year ended 31st March, 2010.

FINANCIAL RESULTS

For the For the previous year ended Year ended

31-3-2010 31-3-2009

(Rs. in Lacs) (Rs. in Lacs)

Gross Profit/(Loss) 2414.14 4300.41

Depreciation 227.85 176.13

Provision for taxation 536.53 255.35

(MAT/Fringe Benefit/Wealth Tax)

Tax for earlier years (0.21) (5.22)

Deferred Tax 246.86 59.45

Net Profit/(Loss) for the year 1403.11 3814.70 APPROPRIATIONS

Transfer to General Reserve 75.00 195.00

Dividend on Equity Shares 293.32 293.32

Corporate Tax on Dividend 48.72 49.85

Balance Carried Forward to

Balance Sheet 986.07 3276.53



OVERALL PERFORMANCE

During the first half of Financial Year 2009-10, the Ferro Alloys Industry was passing through critical times due to the slow down in the demand and lack of new orders from domestic as well as export markets as a result of the Global Financial Meltdown. The Meltdown had a serious impact in all sectors of industries, with the steel sector being no exception. Ferro Alloys, the intermediate products used in the making of steel as de-oxidants and for rust proofing, have seen their fortunes take a steep dive. The deepest recession during the first half hit the Ferro Alloys Industry hard, coupled with shrinking demand, sliding prices and sweeping cutbacks. Hence performance of the company was also adversely affected during the first half of the financial year 2009-10.

However during the second half of the financial year 2009-10, revival of local demand for steel products happened due to a series of economic stimulus measures announced by the Government. Around the same time, similar measures announced across the world led to a revival of global demand as well.

Despite all these adversities, during the year under consideration the production and sale of Ferro Chrome were slightly higher as compared to that of the previous year 2008-2009. The overall turnover of the Company marginally increased from Rs.255.95 crores in 2008-2009 to Rs.261.94 crores in 2009-10. Exports were also higher at Rs.215.19 crores as compared to Rs.163.75 crores in the previous year registering a growth of 31%. Despite increased turnover, profit before tax was lower to Rs.21.86 crores as compared to Rs.41.24 crores in the previous year recording a fall of 47% on account of above and other factors.

DIVIDEND

Your Directors have recommended payment of dividend at Re.0.15 per equity share of Re.1/- each (15%) on the equity share capital of Rs.19,55,47,355/- for the year ended 31st March, 2010 aggregating to Rs.2,93,32,103/- and to pay dividend tax of Rs.48,71,696/-. The dividend if approved by the shareholders will be paid to those members or their mandates whose name appear on the Register of Members on 18th September, 2010 for those holding shares on physical form and as per the details furnished by the depositories as at the end of business hours on 10th September, 2010 for those holding shares on dematerialized form.

PROSPECTS

Ferro Alloys is a crucial raw material of the Steel Industry and hence growth of Ferro Alloys Industry is largely dependent on growth of Steel Industry. The Indian economy is expected to grow at an accelerated growth rate of 8–10 percent, Steel production would also simultaneously witness a growth. Moreover with the massive expansion plans in both Steel & Stainless Steel segment in leading markets including China and India, the outlook of steel industry is quite optimistic which is a welcome sign for the Ferro Alloys Industry as consumption of Ferro Alloys will also increase. Steel production in 2008 -2009 was 54.5 Million To n (MT) which has increased and is estimated to be around 60 MT in 2009-10. Globally Steel Industry is expected to grow at 5–6 percent this year. Further, the Global Stainless Steel production is likely to reach 25 M T. The demand as well as production of Ferro Alloys is likely to see an increase of around 8–10 percent in fiscal year 2010-11.

On a Global Platform China, South Africa, CIS and India are the major producers of Ferro Alloys. At present, South Africa and Kazakhstan are the two leading Ferro Alloys Producers in the World. Ferro Chrome production in the World is around 7–8 MT per annum. South Africa is the largest producer of Ferro Chrome, producing around 3–3.5 M T, China and Kazakhstan follow behind and India is the forth largest producer of Ferro Chrome in the World. Previously the Ferro Alloys requirement of Europe was being largely met by South Africa which has around 65 percent of the World’s Chrome Ore reserves. With power shortage in South Africa hitting its Ferro Alloys Manufacturers hard, India is now being seen as a Ferro Alloys Industry hub. Since the Steel capacity is not adequate to consume the entire Ferro Alloys Production in the Country, Export is an important Life-line for survival of the Industry. A considerable amount of Ferro Alloys produced in the country is being exported. Earlier China used to be a net exporter but it has now become a net importer. Generally Ferro Alloys is exported to China which is the biggest importer. In addition to this, other prime importers include Europe, Turkey, Italy, Portugal, Spain, European Union, Japan, Taiwan, Korea and Brazil.

At the same time, the Indian Ferro Alloys Industry is concerned about the insufficient availability of good quality raw-material mainly Chrome Ore, Coke and availability of cheaper imported Ferro Alloys. Further, Power is a prime input in the production of Ferro Alloys and higher power tariff is a threat for the industry. In addition to the higher power tariff, the power cuts in Andhra Pradesh is affecting the industry badly. These issues need to be addressed by the Government to enable the Ferro Alloys Producers to compete in the Domestic as well as International Markets.

FINANCE

The Company has not invited any deposit from public during the year.

SUBSIDIARY

The Report and Accounts of Best Minerals Limited, a subsidiary of the Company, for the year 1st April, 2009 to 31st March, 2010 are annexed alongwith statement pursuant to Section 212 of the Companies Act, 1956.

INDUSTRIAL RELATIONS

The overall industrial relations in the Company were generally satisfactory.

DIRECTORS

During the year Bank of India has nominated Mr. G.L.N. Sastry, Zonal Manager as a Director of the company in place of Mr. R. Sampath w.e.f. 23-10-2009. Mr. V.J. Trivedi ceased to be a Director of the company w.e.f. 28th May, 2010 due to his demise. The Directors place on record their deep sense of sorrow at the passing away of Mr. V.J. Trivedi. They also place on record their appreciation for the sincere and valuable services rendered by them.

Mr Vinod Saraf resigned as Alternate Director of the company effective 28th April, 2010. The Directors place on record their appreciation for the valuable services rendered by him.

Mr. Ashim Saraf, Mr. Gautam Khaitan and Mr.C.N. Harman, Directors of the Company, retire by rotation and, being eligible offer themselves for re-election.

The Company has formulated a code of conduct for all members of the Board and Senior Management Personnel. All concerned members/ executives have affirmed compliance with the said code.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of Companies Act, 1956, your Directors confirm that -

i) in the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanations; (Refer Note No 10 of Schedule K)

ii) they have selected such accounting policies and applied them consistently and made judgements 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 that period;

iii) they 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) they have prepared the annual accounts on a going concern basis.

AUDIT COMMITTEE

The Audit Committee formed by the Board of Directors of the Company consists of Mr. K. Jayabharath Reddy, Mr. P.V.R.K. Prasad & Mr. A.S. Kapre who are Non-Executive Independent Directors of the Company and Mr. R.K. Saraf. Mr. K. Jayabharath Reddy is its Chairman. The Committee’s role, terms of reference and the authority and powers are in conformity with the requirement of the Companies Act, 1956 and the Listing Agreement.

AUDITORS

You are requested to appoint Auditors for the current year and to fix their remuneration. M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the ensuing 7th Annual General Meeting. The Company has received a requisite Certificate pursuant to Section 224 (1B) of the Companies Act 1956 regarding their eligibility for re-appointment as Auditors of the Company.

AUDITORS REPORT

With reference to the comments made by the Auditors in their Report,

the Directors wish to state that the relevant notes forming part of the Companys Accounts are self-explanatory and hence do not require any explanation from the Board.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The statement giving details of conservation of energy, technology absorption, foreign exchange earnings and outgo, in accordance with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed and marked Annexure `A’ which forms part of this Report.

PARTICULARS OF EMPLOYEES

During the year under review there were no employees receiving remu- neration of or in excess of Rs.24,00,000/- per annum or Rs.2,00,000/- per month requiring disclosure as per the provisions of Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975.

CORPORATE GOVERNANCE

Management Discussion and Analysis, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made a part of the Annual Report.

ACKNOWLEDGEMENT AND APPRECIATION

Your Directors place on record their gratitude for the support and co- operation received from Central and State Governments, Financial Institutions & Banks, Customers, Suppliers and Shareholders and for their continued support. The Board also expresses its sincere appreciation to the dedicated and committed team of employees and workmen.

On behalf of Board of Directors,

Place : New Delhi R.K. SARAF

Dated: 24th July, 2010 Chairman & Managing Director

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