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Directors Report of Ferro Alloys Corporation Ltd.

Mar 31, 2014

Dear members,

The directors are delighted to present the 58th Annual Report of your Company and the Audited Statement of Accounts for the year ended 31st March, 2014.

FINANCIAL RESULTS

The Board takes pleasure and pride to announce that despite sluggish business phase in the last Financial Year, the Company yet performed reasonably well to post positive figures for the year. The results are as under:

(Rs. in lacs)

Particulars For the For the year ended year ended 31st March, 2014 31st March, 2013

Profit before tax 4296.57 3094.59

Depreciation/Amortization 926.60 919.25

Provision for taxation 1160.28 515.47

Net Profit/(Loss) for the year 3136.29 2579.12

Transfer to General 5000.00 - Reserve

Balance carried to 4560.38 6424.09 Balance Sheet

OPERATIONS

The Indian ferro alloy industry has evolved gradually and now employs highly qualified manpower, latest equipments and technology. This evolution has led to quality produce which has strengthened its position over the years.

Reaching such position and earning recognition has not come easy for Indian ferro alloy industry given the fact that out of 12 billion tones of global reserves; about 95% of resources are geographically concentrated in Kazakhstan, South Africa, Turkey and other countries.

Notwithstanding the above, Indian chrome enjoys premium over others due to higher chrome content compared to glo- bal average and has higher Cr/ Fe ratio. Furthermore, Indian ores are also more amenable to beneficiation and upgradation than South African ores and because of the higher Cr/ Fe and higher Cr2O3, chrome alloys made from Indian ores have higher percent of chrome ore. South Africa is the largest chrome ore producer followed by Zimbabwe, Kazakhstan and India. Despite high grade of ores Indian Chrome falls short in competition owing to high input costs, escalating power tariff and unavailability of quality raw materials. Owing to the aforesaid factors Indian ferro alloys producers are operating at levels well below their installed capacity.

Your company''s turnover for the current financial year, 2013-14 stands at Rs. 63262.91 lacs as against Rs. 51787.13 lacs last year, an increase of 22.16% over the previous year. Exports during the year were Rs. 45483.70 lacs. Further, your company has posted a profit before tax of Rs. 4296.57 lacs this year as against. Rs. 3094.59 lacs in the previous year, reflecting an increase of 38.84%. DIVIDEND Keeping in view the future requirement of funds in working capital and other purposes, the Directors do not recommend any dividend in the financial year ended 31st March, 2014.

FINANCE

Your Company has not raised any deposit from public during the year.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard 21 on Consolidated Financial Statements read with Accounting Standard 23 on Accounting for Investments in Associates, the audited consolidated financial statement is provided in the Annual Report for the year.

PROSPECTS

Prospects of Ferro Alloys industry are saddled to the growth and progress of Steel Industry. With Steel Industry contributing substantially to the growth of Indian Economy, India has emerged as the 4th largest producer of crude steel in the world as against the 8th position it occupied in 2003and expects to become the 2nd largest producer of crude steel soon.

As per official estimates, the Iron and Steel Industry contributes close to 3 per cent of the Gross Domestic Product (GDP). World crude steel production stood at 1547.8 million tonnes during 2012, an increase of 1.2 per cent over 2011. During 2012, Chinese crude steel production reached 716.5 million tonnes, a growth of 3.1 per cent over 2011. Further, during FY 2012-13 India''s share in the production of High Carbon Ferro Chrome stood at 1.12 million tonnes.

China has remained the largest crude steel producer in the world, accounting for 72 per cent of Asian and 46 per cent of world crude steel production during 2012. With low per capita consumption of steel of 59 kg in India compared to the world average of estimated 200 kg there is a strong feeling that the domestic steel industry has a huge growth potential.

India, with 5-7% share of Global Ferro Alloys Industry, is amongst the ten largest producers of the material in the world. Indian Bulk ferro alloys supply constitutes of ferro chrome about 32%, ferro manganese and silico manganese about 62% and rest others. Further, Indian enjoys a natural advantage as it has the 5th largest chrome ore with 100 million tones estimated reserve and the 6th largest in Manganese ore with estimated 176 million tones reserve.

Total domestic consumption may reach 1 million metric tonnes by 2015 from about 4,50,000 tonnes, while output may rise at a slower pace of 44% to 1.3 million tones.

The Indian ferro alloy industry has, since inception, laid emphasis on research & development, backward integration in terms of setting up of captive power plants, operating mines, thereby creating large scale employment and bringing development to the local populace.

FUTURE STRATEGY AND GROWTH

With power being a major cost element in production of ferro chrome, your Company, as a measure for backward integration, is setting up a 100 MW Captive Power Plant. While phase-I (One Turbine of 50MW and One Boiler) and phase-II (2nd Turbine of 50MW and 2nd Boiler) have been completed, Commissioning of the third boiler is expected by October/ November, 2014.

Currently, the captive power plant is generating about 30-35 MW power as per the requirement of your Company.

Further, your company also remains committed to forward integration as well by way of setting up green field projects, acquisitions, joint ventures etc.

INDUSTRIAL RELATIONS

Industrial relations with workers, trade unions, and with local populace remained amicable and pleasant throughout the year.

DIRECTORS

Mr.Rohit Saraf and Mr. Ashish Saraf shall retire by rotation at the ensuing 58th Annual General Meeting and, being eligible, offer themselves for re-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.

SUBSIDIARIES

The Report and Accounts of the Company are prepared in con- solidated form and contains results of its subsidiaries, Facor Power Limited, Facor Realty and Infrastructure Limited and Facor Energy Limited. The annual accounts of the subsidiaries shall be available on request to the members of the Company and are available for inspection at the registered office of the Company.

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 along with proper explanations;

ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the 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

Audit Committee of the Company comprises of Mr A.S. Kapre, Mr M.B. Thaker, and Mr. S.B. Mishra, all Independent Directors. The committee has been constituted in strict compliance with the provisions of Clause 49 of the Listing agreement and assumes all responsibilities provided therein, discharging their duties diligently with transparency and accountability as their sole motivation.

AUDITORS

M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the ensuing 58th Annual General Meeting. 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 58th Annual General Meeting till the conclusion of the 61st 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.

You are requested to appoint Auditors for the current year and to fix their remuneration.

AUDITOR''S REPORT

The observations made in the Auditors'' Report are self explanatory and therefore, do not call for any further comments u/s 217(3) of the Companies Act, 1956.

COST AUDITORS

Your Directors had, in accordance with the General Circular from the Ministry of Corporate Affairs appointed M/s Niran & Co., Cost Accountants, as Cost Auditors for Financial Year ended 31st March, 2014, for which Central Government approval had been received by the Company. The report on Cost audit for Financial Year ended 31st March, 2014 would be filed with Central Government before 30th September, 2014. Further, your Directors have appointed M/s Niran & Co., Cost Accountants, as Cost Auditors of the Company for Financial year ended 31st March, 2015 as well for which Central Government approval has also been received.

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

A 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 as Annexure ''A'' which forms part of this Report.

PARTICULARS OF EMPLOYEES

In terms of the provisions of section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees are set out in the annexure to the Directors'' Report. Having regard to the provisions of section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such particulars may write to the Company Secretary of the Company.

CORPORATE GOVERNANCE

In terms of clause 49 of the Listing Agreement, a separate report on Corporate Governance, Management Discussion and Analysis along with your Company''s Statutory Auditors'' Certificate dated 26th May, 2014 confirming the above compliance is annexed to and forms part of the Directors'' Report.

HUMAN RESOURCE DEVELOPMENT

Your Company takes great pride in the commitment, competence and vigour shown by its workforce in all realms of business. The Company continues to take new initiatives to further align its HR policies to meet the growing needs of its business.

ACKNOWLEDGEMENTS

Directors of the Company wish to thank the Central and State Governments for their continued support and co-operation extended towards the business as well as the company''s social functions. The Management also thanks the shareholders, Business Associates, Financial Institutions & Banks, Customers and Suppliers for the faith reposed in the Company and in them. The Board expresses its sincere appreciation to the dedicated and committed team of employees and workmen without whom reaching this far and maintaining the stan- dard and quality of the products for which the company is famous, would not have been possible. We look forward to all of your continued support. Let''s grow and move ahead together.

On behalf of Board of Directors,

R.K. SARAF CHAIRMAN & MANAGING DIRECTOR

Place : Noida - 201 301 Dated : 26th July, 2014


Mar 31, 2013

The directors are delighted to present the 57th Annual Report of your Company and the Audited Statement of Accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS

The Board takes pleasure and pride to announce that despite difficult and testing times faced in the last Financial Year, the Company performed marvellously to post positive figures for the year. The results are as under:

(Rs. in lacs)

Particulars For the year For the year ended 31st ended 31st March, 2013 March, 2012

Gross Profit/(Loss) 4013.84 767.18

Depreciation/Amortization 919.25 975.86

Provision for taxation 515.47 131.54

Net Profit/(Loss) for the year 2579.12 (340.22)

Transfer to General Reserve

Balance carried to Balance Sheet 6424.09 3844.97

OPERATIONS

The Indian ferro alloy industry has evolved over time and now fosters highly qualified manpower, latest equipments and technology. This evolution has led to quality produce which has made its position as one of the best in the world.

Making that position and earning recognition has not been an easy task for Indian ferro alloy industry as out of 12 billion tones of global reserves; about 95% of resources are geographically concentrated in Kazakhstan, South Africa, Turkey and other countries.

The edge that Indian chrome en joys over others is that it has higher chrome content compared to global average and has higher Cr/ Fe ratio of 2.4 compared to 1.7. Furthermore, Indian ores are also more amenable to beneficiation and upgradation than South African ores and because of the higher Cr/ Fe and higher Cr 2O3, chrome alloys made from Indian ores have higher percent of chrome ore. South Africa is the largest chrome ore producer followed by India and Kazakhstan.

Despite high grade of ores Indian Chrome falls short in competition owing to high input costs, escalating power tariff and unavailability of quality raw materials. Owing to the aforesaid factors Indian ferro alloys producers are operating at 50% of their installed capacity (i.e. installed capacity is 1584000 tonnes whereas production was only 792000 tonnes). The average production of the Indian ferro alloys industry during the year was 2.4 Million tonnes with peak produce of 2.89 Million Tonnes, which represented 56% capacity utilization.

Your company''s turnover for the current financial year, 2012-13 stands at Rs. 51787.13 lacs as against Rs. 47604.17 lacs last year. Exports during the year saw a slight decline against last year. Further, your company has posted a profit before tax of Rs. 3094.59 lacs this year as against loss of Rs. 208.68 lacs in the previous year.

DIVIDEND

Keeping in view the future requirement of funds in working capital and other purposes, the Directors do not recommend any dividend in the financial year ended 31st March, 2013.

FINANCE

Your Company has not raised any deposit from public during the year.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard 21 on Consolidated Financial Statements, this Annual Report also includes Consolidated Financial Statements for the financial year 2012-13.

PROSPECTS

The Indian ferro alloy industry has, since inception, laid emphasis on research & development, backward integration in terms of setting up of captive power plants, operating mines, thereby creating large scale employment and bringing development to the local popuilace. The prospects of ferro alloys industry are tied up to that of steel industry and swing in the direction the latter takes. However, despite measures to achieve cost efficiency by backward integration, the same could not be achieved, especially for units which have set up captive power units. This is due to the factor that the coal allocation for thermal plants have been lax, prices of imported coal has increased with Indonesia and Philippines imposing export duty on coal. The producers are currently operating at 50% capacity to minimize their losses due to escalating costs. The global demand is predominantly met by produce of South Africa and Kazakhstan with China being the largest importer of both chrome ore and ferro chrome. Further, the Euro Zone crisis, recessionary phase continuing in the US, tsunami in Japan and contraction in global auto sector has negatively impacted steel demand. However, projections and forecast for 2013 and 2014 remain promising with global consumption pegged to increase by 2.9% to 1454 million tonne and 3.2% to 1500 million tonne in 2014 as against 1.2% growth of 2012. Apparent steel use in China is expected to grow by 3.5% in 2013 to 668.8 million tonne following a 1.9% increase in 2012. In 2014, steel demand is expected to grow by 2.5% as the Chinese government''s measures to control investment in an effort to rebalance the economy will remain in place.

On the domestic front steel demand is also expected to pick up growth is expected to be up by 5.9% to 75.8 million tone in 2013 following 2.5 % growth in 2012 as monetary easing is expected to support investment activities. In 2014, growth in steel demand is expected to further accelerate to 7.0%, owing to the reform measures aimed at narrowing the fiscal deficit, coupled with measures to improve the foreign direct investment climate.

FUTURE STRATEGY AND GROWTH

As reported earlier, your Company, as a measure for backward integration, was setting up a 100 MW Captive Power Plant. The phase-I (One Turbine of 50MW and One Boiler) of the project was successfully synchronized on 8th July 2011. The erection & commissioning activities for phase-II (2nd Turbine of 50MW and 2nd Boiler) have been completed. Commissioning of the third boiler is expected by September/October, 2013.

Once the Power plant is fully operational the Company shall benefit by continuous supply of quality power and shall also help realize a good return on its investment by selling the excess in open market.

Also, your company is also looking at forward integration by way of setting up green field projects, acquisitions, joint ventures etc.

INDUSTRIAL RELATIONS

Industrial relations with workers, trade unions, and with local populace remained amicable and pleasant throughout the year.

DIRECTORS

During the year, Mr. Harish Salve and Mr. Vineet Saraf have resigned from the Board of your Company. The Board places on record its gratitude for the services rendered by Mr. Harish Salve and Mr. Vineet Saraf during their tenure as members of the Board.

Mr. S. Sridhar was appointed as a Director on the Board of the Company w.e.f 28th July, 2012 as a director in casual vacancy caused by the resignation of Mr. Harish Salve.

Further, during the year Mr. Vinod Saraf was appointed as an Additional Director w.e.f 19th January, 2013 and the Joint Managing Director of the Company subject to approval of the members of the Company.

Mr. Arye Berest, Mr. M.B. Thaker, Mr. A.S. Kapre and Mr. N.L. Ajwalia shall retire by rotation at the ensuing 57th Annual General Meeting and, being eligible, offer themselves for re-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.

SUBSIDIARIES

The Report and Accounts of the Company are prepared in consolidated form and contains results of its subsidiaries, Facor Power Limited, Facor Realty and Infrastructure Limited and Facor Energy Limited. The annual accounts of the subsidiaries shall be available on request to the members of the Company and are available for inspection at the registered office of the Company.

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 along with proper explanations;

ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the 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

Audit Committee of the Company comprises of Mr A.S. Kapre, Mr M.B. Thaker, and Mr. S.B. Mishra, all Independent Directors. The committee has been constituted in strict compliance with the provisions of Clause 49 of the Listing agreement and assumes all responsibilities provided therein, discharging their duties diligently with transparency and accountability as their sole motivation.

AUDITORS

M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the ensuing 57th Annual General Meeting. The Company has received a requisite Certificate pursuant to Section 224 (1B) of the Companies Act 1956 regarding their eligibility for reappointment as Auditors of the Company. You are requested to appoint Auditors for the current year and to fix their remuneration.

AUDITOR''S REPORT

The observations made in the Auditors'' Report are self explanatory and therefore, do not call for any further comments u/s 217(3) of the Companies Act, 1956.

COST AUDITORS

Your Directors had, in accordance with the General Circular from the Ministry of Corporate Affairs appointed M/s Niran & Co., Cost Accountants, as Cost Auditors for Financial Year ended 31st March, 2013, for which Central Government approval had been received by the Company. The report on Cost audit for Financial Year ended 31st March 2012 was filed on 28th December, 2012 and in respect of Financial Year ended 31st March, 2013 would be filed with Central Government before 30th September, 2013. Further your Directors have appointed M/s Niran & Co., Cost Accountants, as Cost Auditors of the Company for Financial year ended 31st March, 2014 as well subject to the approval of the Central Government.

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

A 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 as 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) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

CORPORATE GOVERNANCE

In terms of clause 49 of the Listing Agreement, a separate report on Corporate Governance, Management Discussion and Analysis along with your Company''s Statutory Auditors'' Certificate dated 27th May,

2013 confirming the above compliance is annexed to and forms part of the Directors'' Report.

HUMAN RESOURCE DEVELOPMENT

Your Company takes great pride in the commitment,competence and vigour shown by its workforce in all realms of business. The Company continues to take new initiatives to further align its HR policies to meet the growing needs of its business.

ACKNOWLEDGEMENTS

Directors of the Company wish to thank the Central and State Governments for their continued support and co-operation extended towards the business as well as the company''s social functions The

Management also thanks the shareholders, Business Associates, Financial Institutions & Banks, Customers and Suppliers for the faith reposed in the Company and in them. The Board expresses its sincere appreciation to the dedicated and committed team of employees and workmen without whom reaching this far and maintaining the standard and quality of the products for which the company is famous, would not have been possible. We look forward to all of your continued support. Let''s grow and move ahead together.

On behalf of Board of Directors,

Place : New Delhi R.K. SARAF

Dated : 27th May, 2013 Chairman & Managing Director


Mar 31, 2012

The Directors have pleasure in presenting the 56th Annual Report of your Company and the Audited Statement of Accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS

(Rs. in lacs)

Particulars For the year For the year ended 31st ended 31st March, 2012 March, 2011

Gross Profit/(Loss) 767.18 6867.18

Depreciation/Amortization 975.86 997.84

Provision for taxation 131.54 2125.02

Net Profit/(Loss) for the year (340.22) 3744.32

Transfer to General Reserve - 2000.00

Balance carried to Balance Sheet 3844.97 4185.19

OPERATIONS

Ferro alloys industry is a part of core sector, which supplies crucial intermediaries to the steel industry. Its growth is primarily related to the growth of steel industry domestically as well as globally. Steel Industry is marking a century since stainless steels were first created, patented and produced. During the 100 years, stainless steel has grown to be an integral part of our modern word. World's crude stainless steel production in 2011 was 32.1 million tonnes, up by 3.3% from 2010. Production in China of crude stainless steel in 2011 was 12.5 million tones, up by 11.9% from 2010. The production of crude stainless steel in 2012 is expected to reach 34 million tonnes. The biggest growth will again be in China, followed by India. The international steel industry is growing at a rapid pace resulting in robust demand for various Ferro Alloys like Ferro Chrome, Ferro Manganese, Ferro Silicon, Silico Manganese and noble Ferro Alloys. Indian Ferro Alloys industry has also grown during the year 2011-12. Also, the world crude steel production reached 1,527 million tonnes (M.T.) reflecting an increase of 6.8% over 2010 and was a record for global crude steel production. Annual production for Asia was 988.2 million MT for 2011, an increase of 7.9% compared to 2010. In India the end users of steel are primarily infrastructure projects, construction of dams, malls railway stations, utensils, auto industry, defence sector etc. The major part of consumption is in infrastructure and auto industry.

Power cost continue to plague the ferro alloys industry, and forms almost 40% of the cost of production. Ever increasing price is affecting revenue and as such has rendered Indian ferro alloys product non competitive in the international market. Due to lack of proper coal allocation and high cost of coal the captive power plant setup also suffers from high cost of production which is passed on to the ferro alloys produce. Your Company, however, is a fully integrated producer owning chrome ore mines and access to captive power through its subsidiary viz. Facor Power Limited.

Your company's turnover for the current financial year, 2011-12 stands at Rs.47604.17 lacs as against Rs.48786.54 lacs last year. Exports during the year saw a slight decline against last year. Further, your company has posted a loss of Rs.208.68 lacs this year as against profit of Rs.5869.34 lacs in the previous year.

DIVIDEND

Keeping in view the future requirements of funds in working capital and other purposes, the Directors do not recommend any dividend in the financial year ended 31st March, 2012.

FINANCE

Your Company has not raised any deposit from public during the year.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements 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 highlighted above, prospects of ferro alloys industry is dependent on the growth of steel industry. Infrastructure and auto industry are the major consumers, consequently, developing countries are major customers of all type of steel for their growth. Prospect for ferro alloys industry seems bright and is expected that demand of steel shall be doubled by 2015. As per world steel forecast, 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 the 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% reaching 3.4 million tonnes per annum by 2015, outstripping global consumption growth of 6% to 34.12 million tonnes which is a welcome sign for the ferro alloys industry as consumption of ferro alloys will increase.

Further, there are indications that there may be power shortage in South Africa, which may directly affect the production of ferro alloys to some extent. This factor may help Indian Ferro Alloys industry to utilize its idle capacity to take seize the opportunity of meeting the shortfall by South Africa. However, full utilization of capacity may happen provided raw materials are readily available and the power cost is made internationally comparable with peers like South Africa and CIS countries.

South Africa is exporting large quantities of Chrome Ore to China and making China highly competitive to South African Ferro Chrome production. Therefore, Government of South Africa is seriously planning to impose export duty on Chrome Ore thereby the landed cost of Chrome ore in China will be exorbitant resulting in higher cost of production of Ferro Chrome. Hence, there are good prospects of export of Indian High Carbon Ferro Chrome to China.

FUTURE STRATEGY AND GROWTH

As reported earlier, your Company, as a measure for backward integration, was setting up a 100 MW Captive Power Plant. The phase-I (One Turbine of 50MW and One Boiler) of the project was successfully synchronized on 8th July 2011 and the same was under testing till 30th September 2011. The erection & commissioning activities for phase-II (2nd Turbine of 50MW and 2nd Boiler) of the Project are in full swing and expected to be synchronized by July/August, 2012.Commissioning of 3rd boiler is expected by June/July, 2013.

Once the Power plant is fully operational the Company shall benefit by continuous supply of quality power and shall also help realize a good return on its investment by selling the excess in open market.

Further, measures are being taken to increase the capacity of production to 115000 MT p.a. from present 65000 MT p.a. New Furnace with high quality yield are being considered for capacity enhancement. This is in line with our focus on upgradation of technology for sustained growth and better utilization of resources.

Also, your company is also looking at forward integration by way of setting up green field projects, acquisitions, joint ventures etc.

INDUSTRIAL RELATIONS

Apart from the lockout carried out by the Company on its plant located at Randia, from 29.06.11 to 10.07.11 industrial relations with the labour union were peaceful and satisfactory. The lockout was called due to unlawful activities by the labour union which resulted in non conducive and potentially unsafe work environment.

DIRECTORS

Mr. S.B. Mishra, Mr. M.D. Saraf, Mr. Rohit Saraf and Mr. Ashish Saraf shall retire by rotation at the ensuing 56th Annual General Meeting and, being eligible, offer themselves for re-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 along with proper explanations;

ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the 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

Audit Committee of the Company comprises of Mr A.S. Kapre, Mr M.B. Thaker, and Mr. S.B. Mishra, all Independent Directors. The committee has been constituted in strict compliance with the provisions of Clause 49 of the Listing agreement and assumes all responsibilities provided therein, discharging their duties diligently with transparency and accountability as their sole motivation.

AUDITORS

M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the ensuing 56th Annual General Meeting. The Company has received a requisite Certificate pursuant to Section 224 (1B) of the Companies Act 1956 regarding their eligibility for reappointment as Auditors of the Company. You are requested to appoint Auditors for the current year and to fix their remuneration.

COST AUDITORS

Your Directors had, in accordance with the General Circular from the Ministry of Corporate Affairs appointed M/s Niran & Co., Cost Accountants, as Cost Auditors for Financial Year ended 31st March, 2012, for which Central Government approval had been received by the Company. The report on Cost audit for Financial Year ended 31st March, 2012 would be filed with Central Government before 30th September, 2012. Further, your Directors have appointed M/s Niran & Co., Cost Accountants, as Cost Auditors of the Company for Financial year ended 31st March, 2013 as well for which Central Government approval has also been received.

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

A 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 as 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) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

CORPORATE GOVERNANCE

In terms of clause 49 of the Listing Agreement, a separate report on Corporate Governance, Management Discussion and Analysis along with your Company's Statutory Auditors' Certificate dated 28th July, 2012 confirming the above compliance is annexed to and forms part of the Directors' Report.

ACKNOWLEDGEMENTS

Directors of the Company wish to thank the Central and State Governments for their continued support and co-operation extended towards the business as well as the company's social functions. The Management also thanks the shareholders, Business Associates, Financial Institutions & Banks, Customers and Suppliers for the faith reposed in the Company and in them. The Board expresses its sincere appreciation to the dedicated and committed team of employees and workmen without whom reaching this far and maintaining the standard and quality of the products for which the company is famous, would not have been possible. We look forward to all of your continued support. Let us grow and move ahead together.

On behalf of Board of Directors,

Place : New Delhi R.K. SARAF

Dated : 28th July, 2012 CHAIRMAN & MANAGING DIRECTOR


Mar 31, 2011

TO THE MEMBERS

The Directors are delighted to present the 55thAnnual Report of your Company and the Audited Statement of Accounts for the year ended 31st March, 2011.

FINANCIAL RESULTS

Rs. in lacs

Particulars For the year For the year

ended 31st ended 31st March, 2011 March, 2010

Gross Profit/(Loss) 6870.18 3373.27

Depreciation/Amortization 997.84 1024.03

Provision for taxation 2128.02 947.36

Net Profit/(Loss) for the year after tax 3744.32 1401.88

Transfer to General Reserve 2000.00 2000.00

Balance carried to Balance Sheet 4185.19 2979.18



OPERATIONS

2010-11 witnessed both natural and economic disasters which could not keep any company across the globe insulated thus affecting operations in some way or the other. Your company was also affected due to the above.

However, with GDP estimated to have grown at 8.6% in 2010-11 in real terms, the economy has shown remarkable rescillence and so has your company.

During the year 2010-11 operations at the Charge chrome plant and mines showed improved performance. The production of Charge Chrome/Ferro Chrome and chrome ores was higher as compared to that of the previous year. Over the years, the company has also reduced the tonnage under conversion contract with Tata Steel.

Ferro alloy products are used in the production of steel as de-oxidant and alloying agents and the Ferro alloys industry acts an intermediate industry to the Iron & Steel industry. Being an intermediate product its demand and prices move in sync with that of steel.

Power cost forms almost 40% of the cost of production and ever increasing price is affecting revenue and as such has rendered Indian ferro alloys product non competitive in the international market. To tide over this problem your company is in the process of establishing a captive power plant with total capacity of 10 0 MW first phase comprising of 45 MW has now been synchronized and awaits commissioning. Post commissioning your company shall be self reliant for power.

The overall turnover of the Company increased from Rs. 348.58 crores in 2009-2010 to Rs. 487.87 crores in 2010-2011 recording an increase of 39.96%. Exports were also higher at Rs. 282.31 crores as compared to Rs. 208.35 crores in the previous year registering a growth of 35.50%. Profit before tax too surged to Rs. 58.72 crores as compared to Rs..23.49 crores in the previous year recording an increase of 149.98%.

DIVIDEND

Your Directors have, in their meeting held on 1st August, 2011 proposed dividend at the rate of Rs. 0.25 (25%) per share of Rs. 1 each for the financial year ended 31st March, 2011 which shall be paid on or before 11th October, 2011 once approved by the members of the Company at the 55th Annual General Meeting of the Company.

FINANCE

Your Company has not raised any deposit from public during the year.

PROSPECTS

The ferro alloys industry forms part of the core sector under the Ministry of Steel and is engaged in supplying crucial intermediate products to the Steel industry. Consequent to dip in global stainless steel production during the preceding year coupled with cut down in Chinese steel production the demand as well as price of ferro alloys was reduced by 25%. Also, the credit squeeze policy of the Chinese Government has aggravated the situation and the demand for ferro alloys products has reduced during the last two quarters. 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. European markets also do not seem very encouraging with Greece and Spain opting for debt restructuring. Also, the Turkish producers have become aggressive in the chrome ore market and have resulted lower chrome ore prices.

On the domestic front ferro alloys industry has capacity of 4.04 million tons and is working at capacity utilization of 65%. However, Ferro alloys producers are now looking towards the domestic market for sustenance with mega steel projects been approved for installation for various capacities which now are poised to be commissioned at the earliest. Per capita consumption of steel is very low in India as against the global standards and that of developed countries which provides strong growth opportunity. With India on growth path, steel industry shall remain in the focus as it forms the core sector for development, in the light of which the prospects of ferro alloys industry for the coming years are expected to remain good.

Further, the steps taken by the Government of India to boost the sentiments of the manufacturing industry in general and iron & steel industry, in particular,by imposing export duty on chrome ore to ensure availability of this important raw material for production of High Carbon Ferro Chrome provides an indication for the growth of indian ferro alloys industry.

FUTURE STRATEGY AND GROWTH

The first phase covering 45 MW of the 100 MW captive thermal power plant set up by Facor Power Limited has completed the synchronization process and awaits commissioning is likely to go onstream by end of August, 2011 and the second phase by November / December, 2011.

With power deficit in the country your company sees opportunity in the power sector and is on look out for various opportunities in both conventional and renewable sources with varying capacities.

Also, your company is also looking at forward and backward integration. While forward integration is being planned by way of setting up green field projects, acquisitions, joint ventures etc., backward integration is being planned for setting up power projects to contain the power cost, acquisition of chromite mines, enhancement of existing capacities etc.

Further, your company also remains focused on upgradation of technology for a sustained growth.

INDUSTRIAL RELATIONS

Apart from a brief lockout by the Company on its plant located at Randia, from 29.06.11 to 10.07.11 industrial relations with the labour union were peaceful and satisfactory. The lockout was called due to unlawful activities by the labour union which resulted in non conducive and potentially unsafe work environment. The matter was subsequently settled amicably.

DIRECTORS

Mr. M.B. Thaker, Mr. A.S. Kapre, Mr. Vineet Saraf and Mr. N.L. Ajwalia shall retire by rotation at the ensuing 55th Annual General Meeting and, being eligible, offer themselves for re-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.

SUBSIDIARIES

The Report and Accounts of and Facor Realty And Infrastructure Limited, subsidiary of your Company, are annexed along with statement pursuant to section 212 of the Companies Act, 1956.

DIRECTORS REPOSIBILITY 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 along with proper explanations;

ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the 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

Audit Committee of the Company comprises of Mr A.S. Kapre, Mr M.B. Thaker, Mr Umesh Khaitan and Mr. S.B. Mishra, all Independent Directors . The committee has been constituted in strict compliance with the provisions of Clause 49 of the Listing agreement and assume all responsibilities provided therein, discharging their duties diligently with transparency and accountability as their sole motivation.

AUDITORS

M/s Salve & Company, Chartered Accountants hold office upto the conclusion of the ensuing 55thAnnual General Meeting. The Company has received a requisite Certificate pursuant to Section 224 (1B) of the Companies Act 1956 regarding their eligibility for reappointment as Auditors of the Company. You are requested to appoint Auditors for the current year and to fix their remuneration.

AUDITOR'S REPORT

The observations made in the Auditors' Report are self explanatory and therefore, do not call for any further comments u/s 217(3) of the Companies Act, 1956.

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

A 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 as Annexure 'A' which forms part of this Report.

PARTICULARS OF EMPLOYEES

Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of the Report. However, as per the provision of section 219(1)(b)(iv) of the said Act, the Report and Accounts are being sent to all shareholders of the Company excluding the statement of particulars of employees u/s 217(2A) of the said Act. Any shareholder desirous of obtaining a copy of the statement may write to the Company Secretary of the Company.

CORPORATE GOVERNANCE

In terms of clause 49 of the Listing Agreement, a separate report on Corporate Governance, Management Discussion and Analysis along with your Company's Statutory Auditors' Certificate dated 1st August, 2011 confirming the above compliance is annexed to and forms part of the Directors' Report.

ACKNOWLEDGEMENTS

Directors of the Company wish to thank the Central and State Governments for their continued support and co-operation extended towards the business as well as the company's social functions. TheManagement thanksthe shareholders, Business Associates, Financial Institutions & Banks, Customers and Suppliers for the faith reposed in the Company and in them. The Board also expresses its sincere appreciation to the dedicated and committed team of employees and workmen without whom reaching this far and maintaining the standard and quality of the products for which the company is famous, would not have been possible and look forward to continued support.

On behalf of Board of Directors,

Place : New Delhi R.K. SARAF

Dated : 1st August, 2011 CHAIRMAN & MANAGING DIRECTOR

 
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