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Directors Report of Sandur Manganese & Iron Ores Ltd.

Mar 31, 2015

Dear Memers,

The Directors are pleased to present their Report and Audited Statement of Accounts for the year ended 31 March 2015:

FINANCIAL RESULTS Current Previous Year Year sl. Particulars Rs. lakh Rs. lakh

a) Net Sales / Income 29,469.93 29,970.89

b) Other Income 402.37 1,582.45

Total 29,872.30 31,553.34

c) Expenditure

(i) Variable 18,200.27 17,904.55

(ii) Fixed 8,830.27 6,929.39

(iii) Depreciation / Amortization 489.41 920.58

(iv) Interest 235.24 1.57

Total 27,755.19 25,756.09

d) Profit before taxes 2,117.11 5,797.25

e) Less:

(i) Current Tax 1,000.00 1,590.00

(ii) Deferred Tax (318.52) 370.00

f) Net Profit 1,435.63 3,837.25

g) Add: Balance brought forward from the previous year 31,927.13* 28,803.84

h) Profit before appropriation 33,362.76 32,614.09

i) Less: Appropriations

(i) Proposed dividend on Equity Shares 262.50 262.50

(ii) Tax on Dividend 53.44 44.61

(iii) Transfer to General Reserve - 383.73

Total 315.94 690.84

j) Profit carried to Balance Sheet 33,046.82 31,950.25

*After adjusting depreciation on transition to Schedule II of the Companies Act, 2013 on tangible fixed asset with NIL remaining useful life (net of deferred tax)

The Company earned profit before tax of Rs.2,117.11 lakh after charging Rs.489.41 lakh towards depreciation on fixed assets and Rs.235.24 lakh towards interest.

After taking into account charging off income tax of Rs.1,000 lakh for current year and deferred tax credit of Rs.318.52 lakh, the profit for the current year of Rs.1,435.63 lakh along with brought forward profits of Rs.31,927.13 lakh aggregating to Rs.33,362.76 lakh is carried to the Balance Sheet.

Current Year Previous Year (Tonnes) (Tonnes)

Manganese Ore:

Production 1,60,909 1,02,372

Internal Consumption 30,344 30,292

Sales 99,113 62,029

Iron Ore:

Production* 5,16,285 7,12,362

Sales* 5,62,186 5,04,100

*Excludes 87,990 (Previous year 4,05,856) tonnes salvaged from dumps and sold

The production of manganese ore and iron ore during the financial year 2014-15 was 1,60,909 and 5,16,285 tonnes respectively as against 1,02,372 and 7,12,362 tonnes produced during the previous year. Excluding the ores salvaged from dumps, the Company sold 99,113 tonnes of manganese ore and 5,62,186 tonnes of iron ore during the year under review.

MINING OPERATIONS

The Government of Karnataka has vide notifications No.CI 214 MMM 2014 and No.CI 213 MMM 2014 both dated 23 September 2014 accorded sanction for third renewal of Company's Mining Leases No.2580 and 2581 for extraction of manganese and iron ores over an extent of 2,837 ha and 378 ha in Swamimalai and Ramanamalai Blocks, Sandur Taluk, Bellary district for a further period of 20 years effective from 1 January 2014 and valid till 31 December 2033 under the provisions of Section 8 of the Mines & Minerals (Development & Regulation) Act, 1957.

In furtherance of the same, keeping about 1,210 hectares for future use by the Company after obtaining Forest Clearance under Section 2 of the Forest (Conservation) Act, 1980, Mining Lease Deeds No.2678 and No.2679 for 1,860.10 hectares and 139.20 hectares respectively, were executed on 20 March 2015 by the Director, Department of Mines & Geology, Government of Karnataka in favour of the Company and the same have been duly registered on 25 March 2015 with the jurisdictional Sub-Registrar at Sandur as Documents No.2787 and No.2788.

In the meanwhile, the Government of India promulgated the Mines and Minerals (Development and Regulation) (Amendment) Ordinance, 2015 on 12 January 2015 under Article 123(1) of the Constitution amending certain provisions of the MMDR Act, 1957. The Ordinance seeks to bring in transparency and weed out discretion and accordingly, the grant of mineral concessions under the Ordinance shall only be through auctions. Unlike in the 1957 Act, henceforth, no renewal of any mining concessions shall be granted. Further, the tenure of the mineral concessions has been extended from the existing 30 years to 50 years; thereafter, the Mining Lease would be put up for auction (and not for renewal as in the earlier system).

The Government has provided for transition period in sub-section 5 and 6 of Section 8A of the Ordinance in accordance with which Mining Leases would be deemed to be extended from the date of their last renewal to 31 March 2030 (for the captive miners) and till 31 March 2020 (for the merchant miners) or till the completion of the renewal already granted, if any, whichever is later.

Accordingly, the Company's Mining Leases No.2678 and 2679 having been renewed with effect from 1 January 2014 are valid upto 31 December 2033.

The Ministry of Environment, Forest and Climate Change (MoEFCC) has issued a Circular dated 1 April 2015 amending Para 4.16 of the Guideines issued by it under the Forest (Conservation) Act, 1980 and extended the already granted Forest Clearance for a period co-terminus with the period of Mining Leases in accordance with the provisions of Section 8A(1) of the Mines & Minerals (Development & Regulation) Amendment Act, 2015.

Further, by another Circular dated 1 May 2015 the MoEFCC clarified that no further renewals or approvals would be required if Forest Clearance under Section 2 of the Forest (Conservation) Act, 1980 has been granted by MoEFCC either during the original lease period or previous renewal(s) of the mining lease.

Forest Clearance which was granted to the Company's Mining Leases No.2678 (Old No.2580) and No.2679 (Old No.2581) for a period of 20 years expiring in December 2026 stands extended to 31 December 2033 in light of the above circulars dated 1 April 2015 and 1 May 2015. However, the question of validity of this Forest Clearance is pending before the Hon'ble Supreme Court for confirmation.

SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY

No significant and material orders were passed by any Regulator(s) or Court(s) or Tribunal(s) which would impact the going concern status of the Company.

MATERIAL CHANGES AND COMMITMENT, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

No material changes and commitment affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate and the date of this report.

DIVIDEND

Directors are pleased to recommend a dividend of Rs.3 per share for the current financial year. The dividend if approved and declared in the forthcoming Annual General meeting would result in a cash outflow of Rs. 315.94 lakh (including tax).

SUBSIDIARY

Star Metallics and Power Private Limited (SMPPL), a subsidiary of the Company commenced its commercial operations on 9 January 2011. It has two ferroalloy furnaces and also a 32 MW thermal power plant which is used as a captive unit for its ferroalloy operations.

Further, a statement containing the salient features of the financial statement of SMPPL in the prescribed format is appended as Annexure- 'A' to this Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report.

The details of the loans and guarantees given and investments made by the Company are in Note Nos.9 and 25 of the audited financial statements.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

In terms of clause (h) of sub-section (3) of section 134 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the Company is required to furnish particulars of the contract entered into by the Company with its related parties in the Report of the Board.

The Company has entered into a Conversion Contract with its subsidiary, SMPPL for conversion of the Company's manganese ore ('Mn ore') into Silicomanganese ('SiMn') / ferro manganese at SMPPL's ferroalloys plant. In terms of the Contract, requisite quantity and quality of Mn ores, reductants and electrode paste, are made available to SMPPL without any cost, for conversion of the same into SiMn (or any other ferro alloy). The balance materials and consumables are procured by SMPPL, the cost of which is included in the conversion cost. The entire SiMn (or any other ferro alloys) so produced by SMPPL is supplied to SMIORE. Silicomanganese is being sold to SMPPL to enable it to export the same to fulfill the export obligation commitment, as per the requirements of Export Promotion Capital Goods (EPCG) Scheme. SMPPL, being a subsidiary company, is a related party in accordance with the provisions of Section 2(76)(viii)(A) of the Companies Act, 2013.

During the year under review, the Company purchased 2.2 acres of land at Sandur, from Skand Private Limited. The Company proposes to construct quarters, to accommodate its senior executives, on the said land. Skand Private Limited, is a related party of the Company by virtue of Section (76)(iv) of the Companies Act 2013, since the Boards of both the Companies have three common directors.

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. All Related Party Transactions are placed before the Audit Committee and also the Board for approval. The policy on Related Party Transactions can be accessed on the Company's website at www.sandurgroup.com.

Details of the contracts or arrangements made with related parties are given in the prescribed format as Annexure - 'B'.

DEPOSITS

The Company has not accepted fixed deposits from the public during the financial year under review. The Company did not have any deposits at the beginning of the financial year. Thus, provisions of Section 73 of the Companies Act 2013 are not applicable to the Company.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements and in terms of provisions of Section 129(3) of the Companies Act, 2013, consolidated financial statements of the Company and its subsidiary are forming part of the Annual Report.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements including consolidated financial statements along with the Auditors Report and Directors' Report thereon are available on the Company's website, www.sandurgroup.com. Further, separate audited accounts in respect of the subsidiary are also placed on the website.

These documents will also be available for inspection during business hours at the registered office of the Company. DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board is constituted of two managing directors, four whole-time directors and six independent directors including a woman director. Chairman of the Board is an executive director. There has been no change in the composition of the Board in the year 2014-15.

The Company has a Company Secretary and a Chief Financial Officer who along with the managing directors and whole time directors constitute the Key Managerial Personnel.

APPOINTMENT/RE-APPOINTMENTS

The Listing Agreement with Bombay Stock Exchange Limited was amended on 17 April 2014, fixing a maximum tenure for independent directors for the first time. Clause 49(M)(B)(3)(a) allowed an independent director to hold office for a term up to five consecutive years on the Board of a company and provided for reappointment for another term of up to five consecutive years on passing of a special resolution by the company. Further, an independent director who had already served for more than five years in a company as on October 1,2014, on completion of his present term, could be appointed for one more term of up to five years only.

Accordingly, shareholders approval was sought at the 60th Annual General Meeting held on 27 September 2014 for re-appointment of R. Subramanian (who was appointed on 28 May 2009 and completing more than five years as on 1 October 2014) for a term of four consecutive years expiring at the Annual General Meeting for the financial year 2017-18 i.e., before the end of September 2018.

Subsequently, the aforesaid Clause was amended on 15 September 2014 to bring it in line with the Companies Act, 2013. In terms of amended Clause 49 and Section 149(10) of the Companies Act, 2013 an independent director can hold office for a term up to five consecutive years on the Board of a company and be eligible for reappointment for another term of up to five consecutive years on passing of a special resolution by the Company. Further, no independent director shall be eligible to hold office for more than two consecutive terms. Further, in accordance with explanation to Section 149(11) of the said Act, tenure of an independent director on the date of commencement of the Act shall not be counted as a term.

In view of the aforementioned provisions, other five Independent Directors - V. Balasubramaian, P. Vishwanatha Shetty, B. Ananda Kumar, S. S. Rao and Vatsala Watsa have been appointed for a term of four consecutive years expiring on 31 March 2019, by the shareholders vide resolution dated 31 March 2015 passed by postal ballot.

It may be noted that in accordance with the provisions of sub-section (13) of Section 149 of the Companies Act, 2013, none of the Independent Directors shall be liable to determination to retirement by rotation henceforth.

K. Raman- Director (Finance) & Chief Financial Officer is liable to retire by rotation at the ensuing meeting and being eligible is offering himself for re-appointment. He is not disqualified from being appointed as a director as specified under Section 164 of the Companies Act, 2013.

NUMBER OF MEETINGS OF THE BOARD

The Board met five times during the financial year, the details of which are given in the Corporate Governance Report forming part of this report.

The intervening gap between any two consecutive meetings of the Board did not exceed one hundred and twenty days as prescribed under the Companies Act, 2013 and the Listing Agreement.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The Board is committed to maintain its independence and accordingly, half of the Board is constituted by Independent Directors; thereby, ensuring separation of governance and management.

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 of the Companies Act, 2013, adopted by the Board is appended as Annexure- 'C'to the Report.

DECLARATION BY INDEPENDENT DIRECTORS

All six independent directors of the Company meet the criteria of independence as provided under sub-section (6) of Section 149 of the Companies Act, 2013. Declarations to this effect have also been received from them.

BOARD EVALUATION

The Companies Act, 2013 vide Section 134(3)(p) read with Rule 8 of Companies (Accounts) Rules 2014, requires the Board to carry out formal annual evaluation of its own performance, of Committees and of individual directors.

Further, all the listed companies and public companies with paid-up share capital of Rs.25 crore or more are required to indicate the manner & criteria of formal Board evaluation in Board's Report.

Also, Schedule IV of the Companies Act, 2013 read with clause 49(II)(B)(5) of the Listing Agreement requires performance evaluation of independent directors to be done by the entire Board of Directors, excluding the director being evaluated (based on the criteria laid down by the Nomination and Remuneration Committee). On the basis of the report of performance evaluation, it is required to be determined whether to extend or continue the term of appointment of the independent director.

As mandated by the aforementioned provisions, a mechanism for formal annual evaluation has been devised by the Company. Evaluation of the Board, its Committees and the directors for the year 2014-15 has been done based on this mechanism. The mechanism provides for annual evaluation at the end of each year. The performance of the Board, Committees and individual directors are evaluated based on reviews/ feedback of the directors themselves. The feedback forms have been prepared based on the broad parameters as set out in the 'Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and other employees'. A Report, prepared based on completed feedback form, is then placed before the Board for its review.

TRAINING OF INDEPENDENT DIRECTORS

On induction, the new independent directors on Board are familiarized with the nature of Industry and the Company's business operations. They are updated on a frequent basis with regard to operations of the Company. Any material development is intimated promptly. The Management encourages participation by the independent directors and accordingly, any clarification sought by the independent directors with regard to the Company's operations is duly addressed.

Presently, no formal training programme exists. Until now, learning for the independent directors has been a pervasive ongoing phenomenon via participation.

Further, at the time of appointment of a director, the company issues a formal letter of appointment entailing his/her role, function, duties and responsibilities as a director. The terms and conditions of appointment of independent directors is available on the Company's website .

COMMITTEES OF THE BOARD

Currently, the Board has six committees - namely, Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Environment Committee, Corporate Social Responsibility Committee and Risk Management Committee.

DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM

The Audit Committee is constituted of five Independent Directors namely, R. Subramanian as its Chairman and V. Balasubramanian, B. Ananda Kumar, S. S. Rao and Vatsala Watsa as its members.

The Company believes in conduct of its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. The Company has established a vigil mechanism towards this end.

In accordance with sub-section (9) of Section 177 read with Section Rule 7(2) of the Companies (Meetings of Board and its Powers) Rules, 2014, the Company's Audit Committee is required to oversee the vigil mechanism.

The Committee oversees the vigil mechanism which has been established to address genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct and Ethics expressed by the employees and other Directors.

The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the Chairman of the Audit Committee in matters concerning financial/accounting and concerns relating to personnel belonging to levels above Senior General Manager.

The Whistleblower Policy along with other Policies of the Company is available on the Company's website.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013, your directors state that:

(a) in the preparation of the accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) the Directors 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 as at 31 March 2015 and of the profit and loss of the Company for the year ended 31 March 2015;

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

(d) the Directors have prepared the annual accounts for the financial year ended 31 March 2015 on a 'going concern' basis;

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

(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SUB-SECTION (12) OF SECTION 143 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

Auditors have not reported any frauds during the year under review.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS

Company's internal financial controls are deployed through an internally evolved framework that address material risks in the Company's operations and financial reporting objectives, through a combination of entity level controls (including Enterprise Risk Management, Legal Compliance Framework and Anti-fraud Mechanism such as Ethics Framework, Code of Conduct, Whistle Blower Policy, etc.), process controls (both manual and automated), information technology based controls, period end financial reporting and closing controls and through internal audit.

It is an irrebuttable presumption that internal financial controls, no matter how well conceived and operated, cannot provide absolute assurance of achieving financial, operational and compliance reporting objectives because of its inherent limitations. Also, projections of any evaluation of the internal financial controls to future periods are subject to the risk that the internal financial control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Further, the Company has appointed a practicing chartered accountancy firm M/s. P. Chandrashekar as internal auditors to look into various process in areas pertaining to purchases, sales, creditors, receivables, contracts, sub-contracts, inventory, cash management, payroll, labour contracts, expenses, Reclamation & Rehabilitation (R&R), core drilling and taxation.

The Company is also undertaking the implementation of a structured framework on Internal Controls to further strengthen the internal control environment in the Company. This will provide a benchmark approach for evaluating the adequacy of controls and monitoring the operating effectiveness of those controls on an ongoing basis. During the implementation of the structured framework on internal controls, there is a possibility of identifying weaknesses or improvements in the design and / or operation of the existing controls and the underlying processes. Those will be dealt with as they are identified.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return pursuant to the provisions of Section 92(3) read with Rule 12 of the Companies (Management and administration) Rules, 2014 is furnished as Annexure - 'D' attached to this Report.

AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, Bangalore (ICAI Registration No.008072S) are the Statutory Auditors of the Company.

M/s. Deloitte Haskins & Sells have already completed the maximum tenure of two terms of five consecutive years as stipulated in Section 139 of the Companies Act, 2013. However, in terms of proviso to sub-section (2) of Section 139 of the Companies Act, 2013, three years time has been granted from the commencement of the Act i.e. 1 April 2014, for complying with the aforesaid requirement.

Accordingly, M/s. Deloitte Haskins & Sells were appointed as statutory auditors at the 60th Annual General Meeting held on 27 September 2014 in terms of the said proviso, to hold office until the conclusion of 63rd Annual General Meeting, subject to ratification at each Annual General Meeting. As per provisions of Section 139(1) of the Act, their appointment as Statutory Auditors of the Company to hold office from the conclusion of this meeting until the conclusion of next Annual General Meeting is subject to ratification by Members.

AUDITORS' REPORT

Auditors' Report on the financial statements of the Company is forming part of this Annual Report and there are no qualifications in the said report. No qualifications, reservations or adverse remarks have been made by the Satutory Auditors in the said Report.

SECRETARIAL AUDIT

Pursuant to provisions of sub-section (1) of Section 204 of the Companies Act 2013, the Company is required to annex with its Board's Report a secretarial audit report, given by a company secretary in practice.

Sathya Prasad Yadav, Practicing Company Secretary (ICSI Membership No.18755 and Certificate of Practice No.6775) has been appointed as Secretarial Auditor of the Company for the financial year 2014-15. The Secretarial Audit Report is forming part of this Annual Report as Annexure- 'E'.

The Secretarial Auditor has in his Report observed that there has been a delay in filing of returns with the Registrar of Companies on a few occasions. In this regard, the Board hereby states that the said delays were inadvertent due to the circumstances prevailing during the period. There are no further qualifications or adverse remarks in the Report which require reply from the Board of Directors.

COST AUDITORS

In terms of Section 148(2) of the Companies Act, 2013 read with Rule 4 of the Companies (Cost Records and Audit) Rules, 2014 issued by the Ministry of Corporate Affairs (MCA), the Company is required to gets its cost accounting records audited by a cost auditor.

M/s. K. S. Kamalakara & Co. was appointed as Cost Auditors for the Financial Year 2014-15 by the Board at its meeting held on 9 August 2014.

In accordance with Rule 6(5) of the Companies (Cost Records and Audit) Rules, 2014, the cost auditor is required to submit his report within 180 days from the date of closure of the financial year. Further, the due date for filing the Cost Audit Report for the FY 2014-15 is thirty days from the date of receipt of a copy of the cost audit report. Accordingly, the same shall be filed with the Ministry of Corporate Affairs (MCA) on or before 30 October 2015. The Cost Audit Report for the FY 2013-14 was filed with the MCA on 28 October 2014.

CORPORATE GOVERNANCE

The Directors' Report on Corporate Governance is annexed to this Report. The certificate of the Auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is also annexed.

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT

The management discussion and analysis report forms part of the Annual Report in Compliance with Clause 49 of the Listing Agreement.

STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY

Company has adopted a risk management framework to ensure early identification and management of various critical risks, which accrue to its business model and the risk management framework adopted by the Company ensures continuous focus on identifying, assessment & evaluation, and adequate mitigation of various risks affecting the Company.

The Audit committee reviews the Company's critical risks, overall risk exposure and timely changes to overall exposure, and status of various risk mitigation plans on a periodic basis.

The Board at its 256th meeting held on 28 October 2005 prescribed the Risk Management and Minimisation procedures. The same is reviewed on a regular basis by the Board. Risk management includes identifying types of risks and its assessment, risk handling and monitoring and reporting.

DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The Company has been, for close to six decades, consciously contributing towards Corporate, Social and Environmental improvement.

Being socially, environmentally and ethically responsible in governance of operations and also to add value to the operations while contributing towards the long term sustainability of business, the Board of Directors has further strengthened its resolve to do more for the development of the area improvement of living conditions of the surrounding rural population.

The Annual Report on Company's CSR activities of the Company undertaken during the year under review are furnished in Annexure-'F' attached to this report.

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

Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is not applicable since the Company does not have any manufacturing activities.

No foreign exchange was earned during the year and particulars of the foreign exchange outgo during the year in terms of actual outflows appear as Note No.31 in the Notes forming part of Financial Statements.

EMPLOYEES

Pursuant to the provisions of sub-section (12) of Section 197 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars are set out in Annexure - 'G' to the Directors' Report.

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

The Government of India has enacted the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 for prevention of sexual harassment of women at workplace and also for providing a redressal mechanism. In furtherance of the same, the Government has also notified the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013. The Act and the Rules came into force from 9 December 2013.

The Company has constituted an Internal Complaints Committee (ICC) for the prevention and redressal of complaints related to sexual harassment at workplace.

No complaints pertaining to sexual harassment were received during the year ended 31 March 2015.

ACKNOWLEDGEMENTS

The directors wish to thank members of judiciary, its associates and legal fraternity for their strong commitment to justice, fairness and equity. The directors also extend its gratitude to the Central and State Governments for the confidence bestowed on the Company.

The directors wish to place on record their appreciation for all its employees for their commendable team work and professionalism. And ultimately, we wish to thank all the Government agencies, the promoters, business associates, banks and investors and look forward to their continued support and contribution.

for and on behalf of the Board

Place : Bangalore S. Y. Ghorpade Date : 27 May 2015 Chairman & Managing Director




Mar 31, 2014

Dear Shareholders,

The Directors are pleased to present their Report and Audited Statement of Accounts for the year ended 31 March 2014:

Financial results (in lakh) Sl Particulars Current Previous Year Year

a) Net Sales / Income 29970.92 16,118.92

b) Other Income 1582.44 2,263.92

Total 31553.36 18,382.84

c) Expenditure

(i) Variable 17904.56 8,365.04

(ii) Fixed 6861.85 5,022.69

(iii) Depreciation/ Amortisation 920.59 1,125.69

(iv) Interest 1.57 235.97

Total 25688.57 14,749.38

d) Profit before taxes 5864.79 3,633.46

e) Less: 25688.57 14,749.38 (i) Current Tax 1610.00 730.00 (ii) MAT Credit - (60.00) (iii) Deferred Tax 370.00 (288.00) (iv) Earlier years f) Net Profit 3884.79 3,251.46

g) Add: Balance brought forward from the previous year 28803.84 25,552.38 h) Profit carried to Balance Sheet 32688.63 28,803.84

The Company earned profit before tax of H5,864.79 lakh after charging H920.59 lakh towards depreciation on fixed assets and amortisation of mining lease rights and H1.57 lakh towards interest.

After taking into account charging off income tax of H1,610.00 lakh for current year and deferred tax credit of H370.00 lakh, the profit for the current year of H3,884.79 lakh along with brought forward profits of H28,803.84 lakh aggregating to H32,688.63 lakh is carried to the Balance Sheet.

Financial results Current Previous Previous Year Year (Tonnes) (Tonnes) Manganese Ore:

Production 1,02,372 25,534

Salvaged from dumps

Internal Consumption 30,292 16,032

Sales 62,029 69,919

Iron Ore:

Production 7,12,362 1,58,467

Salvaged for dumps 4,05,856 -

Sales 9,09,956 2,33,813

With the resumption of mining operations from 25 January 2013, the Company has been able to produce both iron ore and manganese ore up to the limits prescribed by the Central Empowered Committee (CEC) constituted by the Hon''ble Supreme Court and the production of iron ore and manganese ore during the financial year 2013-14 was 7,12,362 and 1,02,372 tonnes respectively as against 1,58,467 and 25,534 tonnes produced during the previous year. Taking into account the ores salvaged from the dumps, the Company sold 9,09,956 tonnes of iron ore and 62,029 tonnes of manganese ore during the year under review.

Mining operations

In the face of allegations of rampant illegal mining in the state, which brought the industry under the scanner, the mining industry finds itself faced with a host of challenges and pressures. Against the background of urgent need to re-visit and re-draw sustainable mining plan for the state as a whole, the Company finds itself at cross roads of change.

With the acceptance of the recommendation of the Central Empowered Committee, the Hon''ble Supreme Court by order dated 3 September, 2012 allowed the Company to resume mining in both its leases, ML Nos. 2580 and 2581 over an area of 1863.02 hectares and 142.58 hectares respectively, from 24 January 2013.

The Hon''ble Supreme Court passed its final order in this matter on 18 April 2013. In accordance with the order, iron ore and manganese ore produced on resumption of mining operations is sold through e-auction by the Monitoring Committee for domestic consumption only. However, the iron ore rejected by the domestic industries has been permitted to be exported at a price not lower than the average price realised by the Monitoring Committee for corresponding grades of fines/lumps of the existing stock of iron ore.

Iron ore and manganese ore produced by the Company, required for either captive consumption or its subsidiaries has been exempted from e-auction.

Pursuant to the aforesaid order, 90% of the sale consideration is directly received from the buyer and the balance 10% along with requisite levies is deposited by the buyer with the Monitoring Committee. Further, the Company is ensuring total and strict implementation of the Supplementary Environment Management Plan (SEMP) prescribed for Category ''A'' mining leases.

The Government of Karnataka through a Special Purpose Vehicle (SPV) Company is required to implement a Comprehensive Environment Plan for Mining Impact Zone (CEPMIZ). The plan entails socio-economic development of the area / local population, infrastructure development, conservation and protection of forest, developing common facilities for transportation of iron ore such as maintenance and widening of existing road, construction of alternate road, conveyor belt, railway siding and improving communication system, etc. The Company being a Category ''A'' mining leaseholder was required to provide an undertaking to comply with any liabilities, financial or otherwise, that may arise under the CEPMIZ.

Further, the Hon''ble Supreme Court, to safeguard environment from further degradation, directed the Government of Karnataka to scale down the iron ore production from 82.97 Million Tonnes Per Annum (MTPA) to 25 Million Tonnes (MT) of iron ore from all the mining leases in Bellary District and 5 MT of iron ore from all the mining leases in Chitradurga and Tumkur districts, till the Reclamation & Rehabilitation (R&R) Plans and the proposed CEPMIZ are implemented. Consequently, the Company was directed to restrict the production of iron ore at 0.74 MTPA and manganese ore at 0.1874 MTPA as against the statutory clearances for production of 1.6 MTPA and 0.6 MTPA respectively.

During the year, the Company faced minor setback when it had to suspend its operations briefly on two occasions. The Company''s Mining Leases No. 2580 and 2581, duly renewed (second time) for a period of 20 years effective from 1 January 1994, were due to expire on 31 December 2013. In compliance with the relevant rules, the Company had applied for its renewal on 10 December 2012, more than 12 months prior to its expiry. In pursuance of the rules, the period of Mining Leases stood automatically extended and the Company was entitled to continue its mining operations in the said Mining Leases.

However, without taking cognisance of the aforesaid statutory provisions and ignoring the fact that the Forest Clearance granted in March 2007 for a period of 20 years was valid till December 2026, the mining operations of the Company were suspended by the forest department with effect from 1 January 2014. Following the representation made by the Company, the Company was allowed to resume its operations from 20 January 2014. However, in view of a different interpretation of legal provisions by the Ministry of Environment & Forests (MoEF), Government of India, the Company had to once again suspend its mining operations on 29 January 2014. Thereafter, the Company filed an Interlocutory Application before the Hon''ble Supreme Court on 3 February 2014 for resolving the issue pertaining to interpretation of the relevant provisions. Considering the Company''s plea, the Hon''ble Supreme Court was pleased to stay the directions of MoEF resulting in permitting the Company to continue its mining operations.

Dividend

The Company, in the recent past has witnessed a lot of instability in its mining operations. In the crusade against illegal mining, the Hon''ble Supreme Court vide its order dated 29 July 2011 imposed a general ban on mining in the State of Karnataka. The Company though was not involved in any illegalities/ irregularities, faced collateral damage and was forced to suspend its operations for over 18 months. The Company was allowed to resume its operations in both the mining leases, when the Hon''ble Supreme Court, vide order dated 3 September 2012, permitted resumption of operations in 18 Category ''A'' Mining leases subject to compliance with certain conditions.

Delays in statutory clearances and tardy approvals caused another 5-6 months delay, before the Company could actually resume its operations from 25 January 2013. As reported earlier, drastic reduction in the permissible production limits poses yet another challenge.

Though the Company was confident of sustaining its profits; as a matter of abundant caution, to meet the exigencies in future, if any, the Board in their financial prudence had decided to conserve the resources and did not recommend any dividend for the financial years ended 31 March 2012 and 31 March 2013. But considering the performance during the financial year ended 31 March 2014, the Board is pleased to recommend a dividend of H3/- per share

Investments

No investments were made during the financial year under review.

Subsidiary

SMPPL''s 32 MW captive thermal power plant situated at Vyasanakere, Near Hospet in Bellary District, which commenced its commercial operations on 9 January 2011 is generating power which is being captively used for its ferroalloy operations and the surplus power is being sold in the market.

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.

Directors

The Company witnessed a change in the composition of its Board of Directors. During the year, N. Viswanathan resigned from the directorship on Board with effect from 1 July 2013. The Board appointed B. Ananda Kumar, a non-executive and independent director on 15 July 2013, which was approved by the shareholders at the 59th Annual General Meeting, held on 31 August 2013.

Subsequently, Syed Abdul Aleem and M. S. Rama Rao having attained the retirement age of 75 years (fixed by the Board for the non-executive directors), who were also liable to voluntarily retire by rotation at the 59th Annual General Meeting, did not offer themselves for re-appointment. Accordingly, both of them ceased to be directors on the Board of the Company with effect from 31 August 2013. The Company inducted two other non-executive and independent directors namely, S. Seshagiri Rao and Vatsala Watsa with effect from 1 September 2013.

U. R. Acharya is liable to retire by rotation and being eligible offers himself for re-election. He is not disqualified from being appointed as director as specified under Section 164 of the Companies Act, 2013.

Further, pursuant to the provisions of Section 149 of the Companies Act, 2013, your directors seek the re-appointment of R. Subramanian as an independent director for a term of four consecutive years up to September 2018.

Directors'' responsibility statement

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, your directors state that:

In the preparation of accounts, the applicable accounting standards have been followed.

Accounting policies selected were applied consistently. Reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of 31 March 2014 and of the profit for the year ended on that date.

Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

The annual accounts of the Company have been prepared on a going concern basis.

Auditors

M/s Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of this Annual General Meeting and, being eligible, offer themselves for re-appointment. The Statutory Auditors have already completed the maximum tenure of two terms of five consecutive years for being eligible for re-appointment. However, in terms of proviso to sub-section (2) of Section 139 of the Companies Act, 2013, the Company has three years time for complying with the aforesaid requirement. Accordingly, the re-appointment, if made, would be in compliance with the provisions of Section 139 of the Companies Act, 2013

Corporate governance

The Directors'' Report on Corporate Governance is annexed to this report. The certificate of the Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants, regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is also annexed.

Further, Ministry of Corporate Affairs has introduced Corporate Governance Voluntary Guidelines, 2009 for voluntary adoption by the corporate sector. It was observed by the Board that various practices of the Company are similar to the procedures / provisions prescribed in the said Guidelines.

Auditors'' report

Auditors'' Report on the financial statements of the Company is forming part of this Annual Report and there are no qualifications in the said report.

Cost auditors

In terms of Companies (Cost Accounting Records) Rules, 2011 and Cost Audit Order dated 6 November 2012 issued in supercession of the earlier orders dated 3 May 2011, 30 June 2011 and 24 January 2012, the Company is required to gets its cost accounting records audited by a cost auditor.

M/s. K. S. Kamalakara & Co. were appointed as Cost Auditors for the Financial Year 2013-14 by the Board at its meeting held on 30 May 2013, which has been approved by the Central Government.

The due date for filing the Cost Audit Reports for the FY 2013-14 is 30 September 2014.

The Cost Audit Report for the FY 2012-13 was filed with the Ministry of Corporate Affairs on 8 November 2013.

Corporate social responsibility

The Company has been, for close to six decades, consciously contributing towards Social and Environmental improvement.

In view of the Voluntary Guidelines on Corporate Social Responsibility issued by the Ministry of Corporate Affairs in December 2009 for voluntary adoption by the corporate sector to be socially, environmentally and ethically responsible in governance of operations, and also to add value to the operations while contributing towards the long term sustainability of business, the Board of Directors has further strengthened its resolve to do more for the development of the area and improvement of living conditions of the surrounding rural population. The Company has prepared plans to contribute generally in construction of roads, adopt the Sandur Town and improve internal roads, drains and public toilets (with water) facilities.

As part of its Corporate Social Responsibility (CSR) and as prescribed in the SEMP, the Company plans to contribute towards developmental activities in the "buffer zone" around its mines, which comprises of 22 villages, and also the town of Sandur. An extensive social survey has been done in these villages around the Mines where such projects are likely to improve the quality of life of its inhabitants. It is proposed to utilise the facilities of Sandur Laminates Limited (SLL) and Sandur Micro Circuits Limited (SMCL), to provide Street Lighting, Home lighting, Community Centre Lighting, Students Hostel Lighting and Solar Power Pump Sets.

These, ''Green Energy Projects'' are expected to benefit the inhabitants of the village by way of free and uninterrupted power supply to remote villages; much needed street lighting; power during day time to pump drinking and irrigation water and also, reduce the load on the public utility system and State Electricity Boards.

Various initiatives taken by the Company towards CSR are enumerated below:

The Company directly and indirectly supports three schools at the mines, four schools at Vyasankere (where it proposes to set up the new projects) and six schools and colleges in and around Sandur. The institutions have been catering to the educational needs of employees'' children as well as the children of Sandur and surrounding villages.

Under Akshaya Patra programme, Company provides free mid-day meals to children studying in some of the aforesaid schools and two government schools at Sandur.

The Company''s Community Health Centre namely "Arogya" at Sandur, meets the medical requirements of employees free of cost and at very affordable and actual cost to the general public of Sandur and other adjacent villages. In association with Vittala of Bangalore, Arogya provides specialised eye care facility. Further, in association with Bhagwan Mahaveer Jain Hospital, camps were organised for cancer detection, diabetes, orthopedic and women & child care.

The Company''s welfare organisation called Sandur Kushala Kala Kendra was established for nurturing and development of traditional handicrafts, upliftment and gainful employment of rural artisans.

The Company continues to provide every month a package of essential food grains, to suffice needs of a family of about five, at 1972 prices, to all its employees and workmen.

The Company has constructed 762 houses at a total cost of H12.53 crore for the victims in flood affected regions of the State. Further, the Company has undertaken construction / development of roads in Sandur region.

The Company has already planted millions of trees and continues to do so.

Secretarial audit

The Company has not undergone secretarial audit per se but while obtaining certification from a Practicing Company Secretary for filing Annual Return with the Ministry of Corporate Affairs in compliance with the provisions of Section 159 of the Companies Act, 1956, Parameswar G. Hegde has undertaken a review of all the requisite secretarial compliances. Further, in accordance with Regulation 55A of SEBI (Depositories and Participants) Regulations, 1996 and Securities and Exchange Board of India (SEBI) Circular No. D&CC/FITTC/CIR-16/2002, SEBI/MRD/Policy/Cir-13/2004 and CIR/MRD/DP/30/2010 dated 31 December 2002, 3 March 2004 and 6 September 2010 respectively, the Company has subjected itself to Reconciliation of Share Capital Audit for all the quarters during the financial year under review and certificates issued by a Company Secretary in practice in this regard were submitted to Stock Exchanges in compliance with the requirements of the said circulars and copies placed before the Board of Directors at the subsequent meetings.

Conservation of energy, technology absorption and foreign exchange earnings and outgo

Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is not applicable since the Company does not have any manufacturing activities. However the particulars relating to conservation of energy and technology absorption at the Metal and Ferroalloy plant which forms part of the subsidiary''s Directors'' Report have been included in the Annual Report.

The particulars regarding expenditure and earnings in foreign exchange appear as items No. 29 and 31 respectively in the Notes forming part of Financial Statements.

Employees

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended vide Notification No. GSR 289(E) dated 31 March 2011, the names and other particulars are set out in the Annexure to the Directors'' Report.

Acknowledgements

The directors wish to thank members of judiciary, its associates and legal fraternity for their strong commitment to justice, fairness and equity. The directors also extend its gratitude to the Central and State Governments for the confidence bestowed on the Company.

The directors wish to place on record their appreciation for all its employees for their commendable team work and professionalism. And ultimately, we wish to thank all the Government agencies, the promoters, business associates, banks and investors and look forward to their continued support and contribution.

for and on behalf of the Board

Place : Bangalore S. Y. Ghorpade Date : 28 May 2014 Chairman & Managing Director


Mar 31, 2013

The Directors are pleased to present their Report and Audited Statement of Accounts for the year ended 31 March 2013:

FINANCIAL RESULTS

Current Year Previous Year SI. Particulars Rs. lakh Rs. lakh

a) Net Sales / Income 16,118.92 18,064.37

b) Other Income 2,263.92 1,278.25

Total 18,382.84 19,342.62

c) Expenditure

(i) Variable 8,365.04 9,247.79

(ii) Fixed 5,022.69 6,327.36

(iii) Depreciation / Amortization 1,125.69 1,105.01

(iv) Interest 235.97 0.53

Total 14,749.38 16,680.69

d) Profit before taxes 3,633.46 2,661.93

e) Less :

(i) Current Tax 730.00 1,400.00

(ii) MAT Credit (60.00)

(iii) Deferred Tax (288.00) (572.00)

(iv) Earlier years 985.00

Net Profit 3,251.46 848.93

g) Add: Balance brought forward from the previous year 25,552.38 24,703.45

h) Profit carried to Balance Sheet 28,803.84 25,552.38

The Company earned profit before tax of Rs.3,633.46 lakh after charging ^1,125.69 lakh towards depreciation on fixed assets and amortization of mining lease rights and Rs.235.97 lakh towards interest.

After taking into account charging off income tax of Rs.730.00 lakh for current year, MAT credit of Rs.(60.00) lakh, deferred tax credit of Rs.(288.00) lakh, the profit for the current year of Rs.3,251.46 lakh along with brought forward profits of Rs.25,552.38 lakh aggregating to Rs.28,803.84 lakh is carried to the Balance Sheet.

OPERATIONS

Current Year Previous Year (Tonnes) (Tonnes)

Manganese Ore:

Production 25,534 81,594

Salvaged from dumps 6,920

Sales 69,919 65,320

Iron Ore:

Production 1,58,467 2,99,203

Sales 2,33,813 5,14,791

Subsequent to the Hon''ble Supreme Court''s (SC) order dated 3 September 2012, lifting its earlier ban imposed on mining operations of all the mining leases in the districts of Bellary, Tumkur and Chitradurga, in respect of the 18 ''Category-A'' mines, the Company resumed its operations with effect from 25 January 2013 only after having complied with all the conditions as laid down by the Hon''ble SC in its orders dated 20 April 2012 and 3 September 2012.

Thus, production of both iron ore and manganese ore was restricted to 1,58,467 and 25,534 tonnes respectively as against the 2,99,203 and 81,594 tonnes produced during the previous year. During the year under review, 2,33,813 tonnes of iron ore and 69,919 tonnes of manganese ore was sold.

RESUMPTION OF MINING OPERATIONS

As reported in the last Annual Report, the Hon''ble Supreme Court of India had, while dealing with the Public Interest Litigation filed by Samaj Parivartana Samudaya in the form of a Writ Petition (WP) Civil (C) No.562/2009 with regard to alleged rampant illegal mining being carried in the States of Andhra Pradesh and Kamataka, invoked the provisions of Article 21 of the Constitution of India and vide its order dated 29 July 2011 suspended all mining operations in the Bellary district of Karnataka State, including the operations of the Company. This order of the Hon''ble Supreme Court was later extended to the districts of Chitradurga and Tumkur on 26 August 2011.

The Joint Team constituted by the Hon''ble Supreme Court conducted survey of all the mining leases in the districts of Bellary, Tumkur and Chitradurga of Karnataka State. The Joint Team had reported that the Company was not involved into any illegalities and accordingly, the Central Empowered Committee (CEC), constituted by the Hon''ble Supreme Court, classified both the mining leases of the Company under Category ''A. The Hon''ble Supreme Court, vide order dated 3 September 2012, permitted resumption of 18 Category ''A'' Mining leases, which included both the mining leases of the Company, subject to compliance with certain conditions.

The Company, having complied with the conditions stipulated by the Hon''ble Supreme Court, could resume its operations with effect from 25 January 2013.

In the interest of protection of environment and intergenerational equity, the Hon''ble Supreme Court has prescribed implementation of Supplementary Environment Management Plan (SEMP) which is estimated by the Company to cost about Rs.76 crore.

Further, to safeguard the environment from further degradation and in the interest of intergenerational equity, the Hon''ble Supreme Court has directed the Government of Karnataka to scale down the iron ore production from the present 82.97 Million Tonnes Per Annum (MTPA) to 30 MTPA in the aforesaid three districts of Karnataka. Accordingly, the Company''s Annual Permissible Production limits have been prescribed at 0.74 MTPA of iron ore and 0.1874 MTPA of manganese ore as against the statutory clearances for production of 1.6 MTPA and 0.6 MTPA respectively.

DIVIDEND

In accordance with the policy to pay sustainable dividend linked with long term performance, the Company had paid dividend for three continuous financial years 2008-09, 2009-10 and 2010-11. However, owing to suspension of mining operations of the Company as per the general order passed by the Hon''ble Supreme Court suspending all mining operations and transportation in the Bellary District of Karnataka, the Company could not declare any dividend for the financial year 2011-12.

Having been permitted to resume its operations from 24 January 2013, the Company has operated for mere 2 months in the financial year 2012-13. Considering the circumstances and in light of the financials, the Board is unable to recommend any dividend for the financial year ended 31 March 2013.

INVESTMENTS

No investments were made during the financial year under review.

SUBSIDIARY

SMPPL''s 32 MW captive thermal power plant situated at Vyasanakere, near Hospet in Bellary District, which commenced its commercial operations on 9 January 2011 is producing power which is being captively used for its ferroalloy operations and the surplus power is being sold in the market.

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.

DIRECTORS

Syed Abdul Aleem, M. S. Rama Rao and S. R. Sridhar are liable to retire by rotation.

In keeping up with good corporate governance practices, the Board has fixed the retirement age at 70 years for executive directors (other than promoter directors) and 75 years for non-executive directors. Syed Abdul Aleem and M. S. Rama Rao, having completed 76 years and 79 years of age respectively, have crossed the stipulated age of retirement for the non-executive directors and accordingly have not offered for their re-appointment.

S. R. Sridhar being eligible, offers himself for re-election. He is not disqualified from being appointed as director as specified under Section 274 of the Companies Act, 1956.

DIRECTORS'' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, your directors state that:

- In the preparation of accounts, the applicable accounting standards have been followed.

- Accounting policies selected were applied consistently.

- Reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of 31 March 2013 and of the profit for the year ended on that date.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

- The annual accounts of the Company have been prepared on a going concern basis.

AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of this Annual General Meeting and, being eligible, offer themselves for re-appointment.

CORPORATE GOVERNANCE

The Directors'' Report on Corporate Governance is annexed to this report. The certificate of the Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants, regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is also annexed.

Further, Ministry of Corporate Affairs has introduced Corporate Governance Voluntary Guidelines, 2009 for voluntary adoption by the corporate sector. It has been observed by the Board that various practices of the Company are similar to the procedures / provisions prescribed in the said Guidelines.

AUDITORS'' REPORT

Auditors'' Report on the financial statements of the Company is forming part of this Annual Report and there are no qualifications in the said report.

CORPORATE SOCIAL RESPONSIBILITY

The Company has been, for close to six decades, consciously contributing towards Corporate, Social and Environmental improvement. In the past five years (2006-07 to 2010-11) the Company had spent about Rs.38.67 crore in the form of contributions to community health centres, tree plantation, compensation to farmers, de-silting of tanks, construction of houses for flood affected victims, construction of roads, construction of community centres, temples, masjids and churches, mid-day meal schemes for school children, contributions to Government of Karnataka''s ''Bellary Agenda Task Force'' for development of roads in Bellary district, etc.

In view of the Voluntary Guidelines on Corporate Social Responsibility issued by the Ministry of Corporate Affairs in December 2009 for voluntary adoption by the corporate sector to be socially, environmentally and ethically responsible in governance of operations and also to add value to the operations while contributing towards the long term sustainability of business, the Board of Directors has further strengthened its resolve be socially responsible in the years to come and apart from proposing to contribute about T37.50 crore for construction of 17 roads, has committed to adopt the Sandur Town and take up all internal roads, drains and public toilets (with water) facilities, and complete the same over the next three years.

Various initiatives taken by the Company towards CSR are enumerated below:

- The Company directly and indirectly supports three schools at the mines, four schools at Vyasankere (where it proposes to set up the new projects) and six schools and colleges in and around Sandur. These institutions have been catering to the educational needs of employees'' children as well as the children of Sandur and surrounding villages.

- Under Akshaya Patra programme, the Company provides free mid-day meals to children studying in some of the aforesaid schools and two government schools at Sandur.

- The Company''s Community Health Centre namely "Arogya" at Sandur, meets the medical requirements of employees free of cost and at very affordable and actual cost to the general public of Sandur and other adjacent villages. In association with Vittala of Bangalore, Arogya provides specialized eye care facility. Further, in association with Bhagwan Mahaveer Jain Hospital, camps were organized for cancer detection, diabetes, orthopedic and women & child care.

- The Company''s welfare organisation called Sandur Kushala Kala Kendra was established for nurturing and development of traditional handicrafts, upliftment and gainful employment of rural artisans.

- The Company continues to provide a package of essential food grains, to suffice needs of a family of about five per month, at 1972 prices, to all its employees and workmen, including temporary workmen.

- The company has constructed 762 houses at a total cost of Rs.12.53 crore for the victims in flood affected regions of the State. Further, the Company has undertaken construction / development of roads in Sandur region by spending about Rs.20 crore.

- The Company has already planted millions of trees and continues to do so.

SECRETARIAL AUDIT

The Company has not undergone secretarial audit per se but while obtaining certification from a Practicing Company Secretary for filing Annual Return with the Ministry of Corporate Affairs in compliance with the provisions of Section 159 of the Companies Act, 1956, Parameswar G. Hegde has undertaken a review of all the requisite secretarial compliances. Further, in accordance with Regulation 55A of SEBI (Depositories and Participants) Regulations, 1996 and Securities and Exchange Board of India (SEBI) Circular No. D&CC/FITTC/ CIR-16/2002, SEBI/MRD/Policy/Cir-13/2004 and CIR/ MRD/ DP/ 30/ 2010 dated 31 December 2002, 3 March 2004 and 6 September 2010 respectively, the Company has subjected itself to Reconciliation of Share Capital Audit for all the quarters during the financial year under review and certificates issued by a Company Secretary in practice in this regard were submitted to Stock Exchanges in compliance with the requirements of the said circulars and copies placed before the Board of Directors at the subsequent meetings.

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

Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is not applicable since the Company does not have any manufacturing activities. However the particulars relating to conservation of energy and technology absorption at the Metal and Ferroalloys plant which forms part of the subsidiary''s Directors'' Report have been included in the Annual Report.

The particulars regarding expenditure and earnings in foreign exchange appear as items No.29 and 31 respectively in the Notes forming part of the Financial Statements.

EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended vide Notification No.GSR 289(E) dated 31 March 2011, the names and other particulars are set out in the Annexure to the Directors'' Report.

ACKNOWLEDGEMENTS

The directors wish to thank members of judiciary, its associates and legal fraternity for their strong commitment to justice, fairness and equity. The directors also extend its gratitude to the Central and State Governments for the confidence bestowed on the Company.

The directors wish to place on record their appreciation for untiring efforts put in by its employees in seeing that the Company resumed its operations at the earliest. And ultimately, we wish to thank the promoters, business associates, banks and investors and look forward to their continued support and contribution.

for and on behalf of the Board

Place : Bangalore S. Y. Ghorpade

Date : 30 May 2013 Chairman & Managing Director


Mar 31, 2012

Dear Members,

The Directors are pleased to present their Report and Audited Statement of Accounts for the year ended 31 March 2012:

FINANCIAL RESULTS

Current Year Previous Year SI. Particulars Rs. lakh Rs. lakh

a) Net Sales / Income 18,064.37 34,859.54

b) Other Income 1,278.25 973.43

Total 19,342.62 35,832.97

c) Expenditure

(i) Variable 9,247.79 14,009.98

(ii) Fixed 6,327.36 6,922.90

(iii) Depreciation/Amortization 1,105.01 1,066.28

(iv) Interest 0.53 202.97

Total 16,680.69 22,202.13

d) Profit before taxes 2,661.93 13,630.84

Less: i) Current Tax 1,400.00 5,800.00

ii) Deferred Tax (572.00) (1,393.00)

iii) Earlier years 985.00 55.00

f) Net Profit 848.93 9,168.84

g) Add: Balance brought forward from the previous year 24,703.45 16,960.08

h) Profit before appropriation 25,552.38 26,128.92

Less: Appropriations:

(i) Dividend on equity shares - 437.50

(ii) Tax on dividend - 70.97

(iii) Transfer to General Reserve - 917.00

Total - 1,425.47

j) Profit carried to Balance Sheet 25,552.38 24,703.45

The Company earned profit before tax of Rs.2,661.93 lakh after charging Rs.1,105.01 lakh towards depreciation on fixed assets and amortization of mining lease rights and Rs.0.53 lakh towards interest.

After taking into account charging off income tax of Rs.1,400.00 lakh for current year and Rs.985.00 lakh for earlier years, deferred tax credit of (Rs.572.00 lakh), the profit for the current year of Rs.848.93 lakh along with brought forward profits of Rs.24,703.45 lakh aggregating to Rs.25,552.38 lakh is carried to the Balance Sheet.

OPERATIONS

Current Year Previous Year (Tonnes) (Tonnes)

Manganese Ore:

Production 81,594 2,60,779

Salvaged from dumps 6,920 40,498

Sales 65,320 2,40,675

Iron Ore:

Production 2,99,203 15,78,230

Sales 5,14,791 11,07,680

Operations of the Company were restricted to just about four months during the year under consideration due to suspension of mining operations and transportation in the district of Bellary by the Hon'ble Supreme Court vide its order dated 29 July 2011. Thus, production of both iron ore and manganese ore was restricted to 2,99,203 and 81,594 tonnes respectively as against the 15,78,230 and 2,60,779 tonnes produced during the previous year. 6,920 tonnes of manganese ore was salvaged from old waste dumps. 5,14,791 tonnes of manganese ore and 2,40,675 tonnes of iron ore were sold and export constituted about 2.46% of revenue and sales volume.

SUSPENSION OF MINING OPERATIONS DUE TO GENERAL ORDERS PASSED BY THE HON'BLE SUPREME COURT OF INDIA

The Hon'ble Supreme Court of India has, while dealing with the Public Interest Litigation filed by Samaj Parivartana Samudaya in the form of a Writ Petition (WP) Civil (C) No.562/2009 with regard to rampant illegal mining being carried in the States of Andhra Pradesh and Karnataka expressed its concern towards the degradation of environment due to excessive mining. Invoking the provisions of Article 21 of the Constitution of India the Hon'ble Supreme Court, vide its order dated 29 July 2011, suspended all mining operations in the Bellary district of Karnataka State, including the operations of the Company. This order of the Hon'ble Supreme Court was later extended to the districts of Chitradurga and Tumkur on 26 August 2011.

The Company, in order to protect its interests, impleaded itself by filing Interlocutory Application (I.A. No.7) in WP (C) No.562 of 2009 before the Hon'ble Supreme Court and represented the matter. The Joint Team, constituted by the Hon'ble Supreme Court to verify the illegalities in conduct of mining operations in the districts of Bellary, Chitradurga and Tumkur, has conducted survey of all the mining leases including the Company's mining leases and made the following observations, pertaining to the Company, in its Record of Proceedings dated 10 November 2011:

(a) The Joint Team has not found any illegality vis-a-vis the sanctioned lease boundaries;

(b) The owners of the lessee company have voluntarily handed over more than 2,000 hectares of forest land owned by them to the State Government and which has no parallel in the State;

(c) The lessee company has an excellent track record of undertaking mining operations in accordance with the law.

With completion of survey of all mining leases in the districts of Bellary, Tumkur and Chitradurga by the Joint Team, the CEC filed its Report (Final) dated 3 February 2012 to the Hon'ble Supreme Court wherein it has classified all the mining leases in three categories i.e., Category A', 'B' and 'C. Mining Leases with either no illegality or marginal illegality i.e., encroachment by way of pits up to 5% of the sanctioned mining lease area or encroachment by way of dumps up to 10% have been classified in Category A'. Mining Leases having encroachment by way of pits up to 10% or encroachment by way of dumps up to 15% have been classified in Category 'B' and the Mining Leases having encroachment by way of pits exceeding 10% or encroachment by way of dumps exceeding 15% have been classified in Category 'C. Comapny's both the mining leases are in Category 'A.

Considering the recommendations of the CEC, the Hon'ble Supreme Court has vide its order dated 20 April 2012 permitted mining leases under Category 'A' to resume their operations subject to (a) Approval of Rehabilitation & Reclamation (R&R) Plan by CEC (b) Mining Lessee providing an undertaking to implement the R&R Plan (c) Demarcation of boundaries as per the findings of the Joint Team and as modified by CEC, if any; and (d) Mining Lessee having all approvals like Environmental Clearance (EC), Forest Clearance (FC), Approved Mining Plan and Consent to Operate.

Since Company's mining leases are in Category 'A', in compliance with the directions of the Hon'ble Supreme Court, the Company has submitted the requisite inputs to Federation of Indian Mineral Industries (FIMI) for preparation of R&R Plan and submission to Indian Council for Forestry Research & Education (ICFRE) who have been entrusted with the responsibility of preparing the R&R Plans in accordance with the guidelines prescribed by CEC, which have been approved by the Hon'ble Supreme Court vide its order dated 13 April 2012. FIMI is expected to submit the R&R Plan to ICFRE shortly. The order for resumption of operations has come as a big relief to the Company since it has been maintaining its large workforce by paying full salary without lay-off or retrenchment of any of its employees.

In the meanwhile the Hon'ble Supreme Court vide its order dated 2 September 2011 constituted a Monitoring Committee and directed for sale of existing stock of iron ore through e-auction. Thereafter considering the Affidavit filed by the Company in its Interlocutory Application (IA) No.7 in Writ Petition (WP) Civil (C) No.562/2009, the Hon'ble Supreme Court has vide its order dated 4 May 2012 permitted the manganese ore mined by the Company in its both the mining leases to be sold through e-auction but supply of manganese ore for captive consumption and to the subsidiary companies has been exempted from e-auction.

FUTURE PROSPECTS

In the 57th Annual Report for the year 2010-11, the Company informed its shareholders' about the in-principle approvals accorded by the Government of Karnataka (GoK) for the Company to set up an iron ore beneficiation plant at Vyasankere at a cost of about Rs.165 crore, a Rs.2.5 lakh TPA mini integrated special alloy steel plant at Vyasankere with an investment of about Rs.500 crore, and 4.2km long ropeway costing about Rs.30 crore.

In addition to the above proposals, the Company proposed to set up a plant to manufacture 1.1 lakh TPA steel powder at Vysankere at an estimated project cost of about Rs.200 crore which can provide employment to about 50 persons. This project is proposed to be implemented in association with a foreign technological partner who is expected to contribute 70% of the cost and the balance is proposed to be contributed by the Company.

Further, the Company has obtained approval of the GoK for increasing the capacity of the proposed integrated special alloy steel plant from Rs.2.5 lakh TPA to Rs.3.5 lakh TPA. The project is now estimated to cost about Rs.731 crore and will generate employment opportunities for 678 persons.

DIVIDEND

The Board has not recommended any dividend for the financial year ended 31 March 2012 in view of the suspension of mining operations with effect from 29 July 2011 as per the general order of the Hon'ble Supreme Court and Company's need for capital investments in the proposed projects which the Company intends to finance through internal accruals to the maximum extent possible.

INVESTMENTS

During the financial year under review, Star Metallics and Power Private Limited (SMPPL) allotted Rs.427.40 lakh fully paid up equity shares of Rs.10/- each at a premium of Rs.10/- per share. With this allotment the Company holds 7.524 crore equity shares constituting 81.24% of SMPPL's paid up equity share capital.

SUBSIDIARY

SMPPL's 32 MW captive thermal power plant situated at Vyasanakere, Near Hospet in Bellary District, which commenced its commercial generation on 9 January 2011, has achieved stabilisation in its power plant operations. Apart from captively using the power for its ferroalloy operations, the surplus power is being sold in the market. A statement pursuant to Section 212(1 )(e) of the Companies Act, 1956 has been annexed and is forming part of this report.

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.

CHAIRMAN EMERITUS

M. Y. Ghorpade, Chairman Emeritus of the Company breathed his last on 29 October 2011. He was closely associated with the Company ever since its establishment in 1954 and has made significant contributions in nurturing and developing it into one of the finest professionally managed mining and metallurgical company of India. He used to freely mix and mingle with the labour and took pains in understanding their work conditions and their requirements, resulting in the Company developing and implementing well designed welfare measures for employees, especially the almost interest free housing loan, subsidized ration supply which resulted in 100% food security and free cloth supply, which have been highly appreciated and also resulted in a very low attrition in employment; and it is a matter of pride that the present work force of the Company includes some second and third generation of the first employees.

M. Y Ghorpade stood by his ideals and principles, whether it be as a Minister of the Karnataka State or the Managing Director of SMIORE. Under his stewardship, his nobility, concern for the employees, high standard of ethics in business, and adherence and compliance of rules and law, have earned SMIORE a much deserved reputation of being a business house of high ethical standards and; the Joint Team appointed by the Hon'ble Supreme Court and the Central Empowered Committee (CEC) constituted by the Hon'ble Supreme Court which were entrusted with the responsibility of investigating illegalities in mining, state in their Record of Proceedings dated 10 November 2011 that:

(a) The Joint Team has not found any illegality vis-a-vis the sanctioned lease boundaries;

(b) The owners of the lessee company have voluntarily handed over more than 2,000 hectares of forest land owned by them to the State Government and which has no parallel in the State;

(c) The lessee company has an excellent track record of undertaking mining operations in accordance with the law.

M. Y Ghorpade and SMIORE have been synonymous and earned great amount of goodwill due to the steadfastly implemented philosophy of emphasis on welfare of its employees, development of the local area and its people and special concern for health and education. M. Y Ghorpade's message to the Company before he breathed his last was 'what is earned from the soil of Sandur in one form or the other should be primarily used to benefit Sandur'.

The Company could sail through the very difficult times for almost ten years from 1996-97 till 2006-07 and honorably survive only because of its impeccable track record of honesty, ethical business practices, M. Y Ghorpade's value system, his stature as a principled and honest man and the goodwill he and SMIORE earned in every quarter, be it the banks, institutions, government offices or general public. SMIORE was eventually discharged from BIFR in January 2007; all its liabilities cleared and is now a debt free Company.

The Board of Directors has pledged that the Company will abide by the noble values of M. Y Ghorpade and uphold them even at any distressful time of the Company in future and will strive hard to keep up the legacy it has inherited from the Patron. They have expressed that they are well determined to adhere to the values and principles of M. Y. Ghorpade and strive to achieve the goals set by him, as detailed in his address to the Board in the form of an informal 'WILL' which he had read out and declared to the Board at its 282nd meeting held on 9 April 2011.

DIRECTORS

S. H. Mohan, N. Viswanathan and R. Subramanian are liable to retire by rotation and, being eligible, offer themselves for re-election.

None of the directors of the Company are disqualified from being appointed as directors as specified under Section 274 of the Companies Act, 1956.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, your directors state that:

- In the preparation of accounts, the applicable accounting standards have been followed.

- Accounting policies selected were applied consistently.

- Reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of 31 March 2012 and of the profit for the year ended on that date.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

- The annual accounts of the Company have been prepared on a going concern basis.

AUDITORS

M/s. Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of this Annual General Meeting and, being eligible, offer themselves for re-appointment.

CORPORATE GOVERNANCE

The Directors' Report on Corporate Governance is annexed to this report. The certificate of the Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants, regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is also annexed.

Further, Ministry of Corporate Affairs has introduced Corporate Governance Voluntary Guidelines, 2009 for voluntary adoption by the corporate sector. It has been observed by the Board that various practices of the Company are similar to the procedures / provisions prescribed in the said Guidelines.

AUDITORS' REPORT

Auditors' Report on the financial statements of the Company is forming part of this Annual Report and there are no qualifications in the said report.

CORPORATE SOCIAL RESPONSIBILITY

The Company has been, for close to six decades, consciously contributing towards Corporate, Social and Environmental improvement.

In the past five years (2006-07 to 2010-11) alone, the Company had spent about Rs.38.67 crore in the form of contributions to community health centres, tree plantation, compensation to farmers, de-silting of tanks, construction of houses for flood affected victims, construction of roads, construction of community centres, temples, masjids and churches, mid-day meal schemes for school children, contributions to Government of Karnataka's 'Bellary Agenda Task Force' for development of roads in Bellary district, etc.

In view of the Voluntary Guidelines on Corporate Social Responsibility issued by the Ministry of Corporate Affairs in December 2009 for voluntary adoption by the corporate sector to be socially, environmentally and ethically responsible in governance of operations and also to add value to the operations while contributing towards the long term sustainability of business, the Board of Directors has further strengthened its resolve to be socially responsible in the years to come and apart from proposing to contribute about Rs.37.50 crore for construction of 17 roads, has committed to adopt the Sandur Town and take up all internal roads, drains and public toilets (with water) facilities, and complete the same over the next three years.

Various initiatives taken by the company towards CSR are enumerated below:

- The Company directly and indirectly supports three schools at the mines, four schools at Vyasankere (where it proposes to set up the new projects) and six schools and colleges in and around Sandur. The institutions have been catering to the educational needs of employees' children as well as the children of Sandur and surrounding villages.

- Under Akshaya Patra programme, Company provides free mid-day meals to children studying in some of the aforesaid schools and two government schools at Sandur.

- The Company's Community Health Centre namely "Arogya" at Sandur, meets the medical requirements of employees free of cost and at very affordable and actual cost to the general public of Sandur and other adjacent villages. In association with Vittala of Bangalore, Arogya provides specialized eye care facility. Further, in association with Bhagwan Mahaveer Jain Hospital, camps were organized for cancer detection, diabetes, orthopedic and women & child care.

- The Company's welfare organisation called Sandur Kushala Kala Kendra was established for nurturing and development of traditional handicrafts, upliftment and gainful employment of rural artisans.

- The Company continues to provide a package of essential food grains, to suffice needs of a family of about five persons per month at 1972 prices, to all its employees and workmen, including temporary workmen.

- The company has constructed 762 houses at a total cost of Rs.12.53 crore for the victims in flood affected regions of the State. Further, the Company has undertaken construction / development of roads in Sandur region by spending about Rs.6.35 crore and would be required to additionally contribute about Rs.11.23 crore.

- The Company has already planted millions of trees and continues to do so. SECRETARIAL AUDIT

The Company has not undergone secretarial audit per se but while obtaining certification for filing Annual Return with the Ministry of Corporate Affairs in compliance with the provisions of Section 154 of the Companies Act, 1956, a practicing company secretary has undertaken a review of all the requisite secretarial compliances. Further, in accordance with Regulation 55A of SEBI (Depositories and Participants) Regulations, 1996 and Securities and Exchange Board of India (SEBI) Circular No. D&CC/FITTC/CIR-16/2002 and SEBI/MRD/Policy/ Cir-13/2004 and CIR/NRD/DP/30/2010 dated 31 December 2002, 3 March 2004 and dated 6 September 2010 respectively, the Company has subjected itself to Reconciliation of Share Capital Audit for all the quarters during the financial year under review and certificates issued by a Company Secretary in Practice in this regard were submitted to Stock Exchanges in compliance with the requirements of the said circulars and copies placed before the Board of Directors at the subsequent meetings.

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

Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is not applicable since the Company does not have any manufacturing activities. However the particulars relating to conservation of energy and technology absorption at the Metal and Ferroalloys plant which forms part of the subsidiary's Directors' Report, have been included in the Annual Report.

The particulars regarding expenditure and earnings in foreign exchange appear as items No.29 and 31 respectively in the Notes.

EMPLOYEES

Pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended vide Notification No.GSR 289(E) dated 31 March 2011, the names and other particulars are set out in the Annexure to the Directors' Report.

ACKNOWLEDGEMENTS

The directors wish to thank the Central and State Governments for the support extended during the financial year to the Company.

The directors wish to place on record their appreciation for the confidence reposed on the Company, by its promoters, business associates, employees and investors, despite the blanket ban on mining industry. This confidence has served as a repertoire of strength and has come a long way in helping the Company sail through the tough time.

for and on behalf of the Board

Place : Bangalore S. Y. Ghorpade

Date : 26 May 2012 Chairman & Managing Director




Mar 31, 2011

Dear Members,

The Directors are pleased to present their Report and Audited Statement of Accounts for the year ended 31 March 2011:

FINANCIAL RESULTS

Current Year Previous Year Sl. Particulars lakh lakh

a) Net Sales / Income 34,835.78 28,747.07

b) Other Income 997.19 1,542.82

Total 35,832.97 30,289.89

c) Expenditure

(i) Variable 14,009.98 19,673.66

(ii) Fixed 6,922.90 5,119.55

(iii) Depreciation/Amortization 1,066.28 1,042.12

(iv) Interest 202.97 153.53

Total 22,202.13 25,988.86

d) Profit before taxes 13,630.84 4,301.03

e) Less: i) Current Tax 5,800.00 1,900.00

ii) Deferred Tax (1,393.00) (516.00)

iii) Earlier years 55.00 -

f) Net Profit 9,168.84 2,917.03

g) Add: Balance brought forward from the previous year 16,960.08 14,641.15

h) Profit before appropriation 26,128.92 17,558.18

(i) Less: Appropriations:

(ii) Dividend on equity shares 437.50 262.50

(iii) Tax on dividend 70.97 43.60

(iii) Transfer to General Reserve 917.00 292.00

Total 1,425.47 598.10

j) Profit carried to Balance Sheet 24,703.45 16,960.08

The Company earned profit before tax of 13,630.84 lakh after charging 1,066.28 lakh towards depreciation on fixed assets and amortization of mining lease rights and 202.97 lakh towards interest.

After taking into account charging off income tax of 5,800.00 lakh for current year and 55.00 lakh for earlier years, deferred tax credit of ( 1,393.00 lakh), dividend on shares of 437.50 lakh, tax on dividend of 70.97 lakh and transfer to general reserve of 917.00 lakh, the profit for the current year of 7,743.37 lakh along with brought forward profits of 16,960.08 lakh aggregating to 24,703.45 lakh is carried to the Balance Sheet.

OPERATIONS Current Year Previous Year (Tonnes) (Tonnes)

Manganese Ore: Production 2,60,779 1,97,078

Salvaged from dumps 40,498 28,678

Sales 2,40,675 2,83,445

Iron Ore: Production 15,78,230 14,46,954

Salvaged from dumps - 36,234

Sales 11,07,680 15,35,929

Compared with the previous year, manganese ore production during the financial year 2010-11 increased by 32% from 1,97,078 tonnes to 2,60,779 tonnes. 40,498 tonnes were salvaged from old waste dumps. Sale was 2,40,675 tonnes, including drawal from stock, which is 15% less than the previous year. Export constituted about 6% of revenue though about 9% of sales volume.

Production of Iron Ore increased by 95,042 tonnes compared to that of the previous year.

FUTURE PROSPECTS

As stated in the previous Annual Report, the Company proposes to set up an iron ore beneficiation plant at Vyasankere at a cost of about 165 crore, a 2.5 lakh tonnes per year mini integrated special alloy steel plant at Vyasankere with an investment of about 500 crore, 4.2 km long ropeway costing about 30 crore. In-principle approvals from the Government of Karnataka (GoK) have also been obtained. The Company is in the process of seeking further approvals in this regard and also proposes to seek from the GoK revision of in-principle approval for the steel plant with 3.5 lakh tonnes capacity instead of existing approval for 2.5 lakh tonnes capacity.

DIVIDEND

Board of Directors recommend a dividend of 5/- per equity share of 10/- each for the financial year ended 31 March 2011, aggregating to 437.50 lakh. Subject to the approval of the shareholders at the Annual General Meeting, the dividend will be paid to members whose names appear in the Register of Members as on 10 September 2011 and in respect of shares held in dematerialized form, it will be paid to members whose names are furnished as beneficial owners, by National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), as on that date.

The dividend pay out for the year under review has been formulated in accordance with the Company's policy to pay sustainable dividend linked to long term performance. The amount of dividend has also been considered keeping in view the Company's need for capital investments in the proposed projects which the Company intends to finance through internal accruals to the maximum extent possible.

INVESTMENTS

During the financial year under review, Star Metallics and Power Private Limited (SMPPL) allotted 75 lakh equity shares of 10/- each at a premium of 10/- per share against part of the amounts due from them to the Company towards one 20MVA furnace sold by the Company. With this allotment the Company holds 3.25 crore equity shares constituting 74.29% of SMPPL's paid up equity share capital.

Further, in accordance with the approvals accorded under Section 372A of the Companies Act, 1956, the Company has extended long term secured loan of 82.98 crore to SMPPL for the purpose of operating ferroalloys plant and setting up 32 MW coal based power plant.

SUBSIDIARY

SMPPL's 32 MW captive thermal power plant situated at Vyasanakere, Near Hospet, Bellary District, was formally inaugurated by M. Y. Ghorpade, Chairman Emeritus of the Company on Thursday, 9 December 2010.

The operations of the plant have been stabilized. Apart from using the generated power for its ferroalloy operations, the surplus power is being sold in the market.

Considering the equity contribution and the financial assistance extended to SMPPL, Board of Directors of both the companies have accorded their in-principle approval for exploring the possibilities of merging SMPPL with the Company.

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.

DIRECTORS

S. R. Sridhar and M. S. Rama Rao are liable to retire by rotation and, being eligible, offer themselves for re-election.

E. B. Desai, director of the Company expired on 24 December 2010. Board placed on record its appreciation for the valuable contribution made by E. B. Desai.

V. Balasubramanian, P. Vishwanatha Shetty, U. R. Acharya and K. Raman were co-opted as Additional Directors. U. R. Acharya and K. Raman are proposed to be appointed as Director (Commercial) and Director (Finance) respectively with effect from 9 April 2011. Notices under Section 257 of the Companies Act, 1956 have been received from members signifying their intention to propose the names of aforesaid Directors and resolutions for their election have been included in the notice convening the Annual General Meeting.

S. Y. Ghorpade, Nazim Sheikh, S. H. Mohan and S. R. Sridhar, being whole-time directors of the Company, are proposed to be re-appointed at the proposed remuneration with effect from 1 April 2011. Nazim Sheikh is being proposed to be re-designated as Joint Managing Director.

Board has commended payment of certain percentage of profits as commission to all the directors.

None of the directors of the Company are disqualified from being appointed as directors as specified under Section 274 of the Companies Act, 1956.

Board commends for passing of the respective resolutions proposed in the Notice of the Annual General Meeting.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, your directors state that:

- In the preparation of accounts, the applicable accounting standards have been followed.

- Accounting policies selected were applied consistently.

- Reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of 31 March 2011 and of the profit for the year ended on that date.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

- The annual accounts of the Company have been prepared on a going concern basis.

AUDITORS

Messrs Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of this Annual General Meeting and, being eligible, offer themselves for re-appointment.

CORPORATE GOVERNANCE

The Directors' Report on Corporate Governance is annexed to this report. The certificate of the Auditors, Messrs

Deloitte Haskins & Sells, Chartered Accountants, regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is also annexed.

Further, Ministry of Corporate Affairs has introduced Corporate Governance Voluntary Guidelines, 2009 for voluntary adoption by the corporate sector. It has been observed by the Board that various practices of the Company are similar to the procedures / provisions prescribed in the said Guidelines.

AUDITOR'S REMARKS ON CORPORATE GOVERNANCE

Pursuant to the provisions of clause 49(11)(A)(iv) of the Listing Agreements, the Chairman of the Audit Committee was required to be present at the Annual General Meeting to answer the queries of the shareholders. However, as stated in the Corporate Governance Report, for the reasons beyond his control, R. Subramanian was not present at the Annual General Meeting but Syed Abdul Aleem another member of the Audit Committee was present at the Annual General Meeting to answer the queries of the shareholders.

CORPORATE SOCIAL RESPONSIBILITY

The Ministry of Corporate Affairs (MCA) has issued Voluntary Guidelines on Corporate Social Responsibility in December 2009 for voluntary adoption by the corporate sector to be socially, environmentally and ethically responsible in governance of operations and also to add value to the operations while contributing towards the long term sustainability of business. The Company has always been socially responsible as enumerated below. The Board of Directors has resolved to continue to be socially responsible in the years to come.

- The Company directly and indirectly supports three schools at the mines, four schools at Vyasankere (where it proposes to set up the new projects) and six schools and colleges in and around Sandur. The institutions have been catering to the educational needs of employees' children as well as the children of Sandur and surrounding villages. During the financial year under review the Company has donated 90 lakh, in addition to 100 lakh donated during the previous financial year, to Shivapur Shikshana Samithi, Sandur which runs many educational institutions including Sandur Residential School (SRS), which has developed into a premier institution of the region and a member of the prestigious Indian Public Schools' Conference (IPSC) which comprises of about 75% schools in the Country.

- Under Akshaya Patra programme, Company provides free mid-day meals to children studying in some of the aforesaid schools and two government schools at Sandur.

- The Company's Community Health Centre namely "Arogya" at Sandur meets the medical requirements of employees free of cost and at very affordable and actual cost to the general public of Sandur and other adjacent villages. In association with Vittala of Bangalore, Arogya provides specialized eye care facility. Further, in association with Bhagwan Mahaveer Jain Hospital, camps were organized for cancer detection, diabetes, orthopedic and women & child care.

- The Company's welfare organisation called Sandur Kushala Kala Kendra was established for nurturing and development of traditional handicrafts, upliftment and gainful employment of rural artisans.

- The Company continues to provide a package of essential food grains, to suffice needs of a family of about five per month, at 1972 prices, to all its employees and workmen, including temporary workmen.

- The construction of 900 houses undertaken by the Company costing about 10 crore for the victims in flood affected regions of the State is nearing completion. Further, the Company has undertaken construction / development of roads in Sandur region by spending about 6.5 crore.

- The Company has already planted millions of trees and continues to do so.

SECRETARIAL AUDIT

The Company has not undergone secretarial audit per se but while obtaining certification from a practicing company secretary for filing Annual Return with the Ministry of Corporate Affairs in compliance with the provisions of Section 154 of the Companies Act, 1956, Parameswar G. Hegde has undertaken a review of all the requisite secretarial compliances. Further, in accordance with Regulation 55A of SEBI (Depositories and Participants)

Regulations, 1996 and Securities and Exchange Board of India (SEBI) Circular No. D&CC/FITTC/CIR-16/2002 and SEBI/MRD/Policy/Cir-13/2004 dated 31 December 2002 and 3 March 2004 respectively, the Company has subjected itself to Reconciliation of Share Capital Audit for all the quarters during the financial year under review and certificates issued by a Company Secretary in Practice in this regard were submitted to Stock Exchanges in compliance with the requirements of the said circulars and copies placed before the Board of Directors at the subsequent meetings.

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

Particulars relating to conservation of energy and technology absorption stipulated in the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 are not applicable as the Metal & Ferroalloys Plant was not operated by the Company. The particulars regarding expenditure and earnings in foreign exchange appear as items No.7 and 8 respectively in the Notes to the Accounts.

EMPLOYEES

During the year there were no employees whose particulars are required to be disclosed under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended vide Notification No.GSR 289(E) dated 31 March 2011.

ACKNOWLEDGEMENTS

The directors wish to thank the government and the banks for the support extended during the financial year to the Company.

The directors also wish to place on record their appreciation of the cordial labour-management relations and the good work put in by all employees of the Company.

for and on behalf of the Board

S. Y. Ghorpade Chairman & Managing Director

Place : Bangalore Date : 28 May 2011








Mar 31, 2010

The Directors are pleased to present their report and Audited Statement of Accounts for the year ended 31 March 2010:

FINANCIAL RESULTS Current Year Previous Year Rs.lakh Rs. lakh

a) Net Sales/Income 28,747.07 42,781.78

b) Other Income - 1,542.82 286.90

Total 30,289.89 43,068.68

c) Expenditure

(i) Variable 19,673.66 15,096.34

(ii) Fixed 5,119.55 4,478.01

(iii) Depreciation/Amortization 1,042.12 988.51

(iv) Interest 153.53 1.97

Total 25,988.86 20,564.83

d) Profit before taxes 4,301.03 22,503.85

e) Less: i) Current Tax 1,900.00 8,825.00

ii) Deferred Tax (516.00) (1,090.00)

iii) Fringe Benefit Tax - 21.80

f) Net Profit 2,917.03 14,747.05

g) Add: Balance brought forward from the previous year 14,641.15 1,743.66

h) Profit before appropriation 17,558.18 16,490.71

i) Less: Appropriations:

i) Dividend on preference shares - 13.72 ii) Dividend on equity shares 262.50 262.50

iii) Tax on Dividends 43.60 46.94

iv) Transfer to Capital Redempt ion Reserve - 51.40

v) Transfer to general reserve 292.00 1,475.00

Total 598.10 1,849.56

j) Profit carried to Balance Sheet 16,960.08 14,641.15

The Company earned profit before tax of Rs.4,301.03 lakh after charging Rs. 1,042.12 lakh towards depreciation on fixed assets and amortization of mining lease rights and Rs. 153.53 lakh towards interest.

After taking into account charging off income tax of Rs.1,900 lakh, deferred tax of (^516 lakh), dividend on shares of Rs 262.50 lakh, tax on dividends of Rs. 43.60 lakh and transfer to general reserve of Rs.292.00 lakh, the profit carried to the Balance Sheet is Rs.16,960.08 lakh.

OPERATIONS Current Year Previous Year (Tonnes) (Tonnes)

Manganese Ore: Production 1,97,078 2,36,614 Salvaged from dumps 28,678 4,212 Sales 2,83,445 2,95,434

Iron Ore : Production 14,46,954 11,72,845

Salvaged from dumps 36,234 3,32,829

Sales 15,35,929 14,48,817

Compared with the previous year, manganese ore production during the financial year 2009-10 decreased by 17% from 2,36,614 tonnes to 1,97,078 tonnes. 28,678 tonnes were salvaged from old waste dumps. Sale was 2,83,445 tonnes, including drawal from stock, which is 4% less than the previous year. Export constituted about 35% of revenue though about 38% of sales volume.

Production of iron ore increased by 2,74,109 tonnes compared to that of the previous year. Demand for low grade ores enabled usage of 36,234 tonnes of iron ore salvaged from old dumps, which had hitherto been lying unsold for a long period.

FUTURE PROSPECTS

The Company possesses iron ore reserves with varying percentages of Fe. Keeping in mind the fact that the low grade ore may not always find a market, the Board of Directors has approved setting up an iron ore beneficiation plant at Vyasankere at a cost of about Rs.165 crore, to result in value addition of about Rs. 50/55 crore per year. The beneficiation plant would be capable of upgrading 55/56 grade iron ore to about 62/63 grade concentrate for production of sinter or pellets or even sold as it is to others who possess sintering or peptization facilities. Such diversification would result in value addition to its iron ore reserves and also extend the life of the mines.

Further, in order to ensure captive use and value addition to iron ore reserves the Board of Directors has approved setting up a 2.5 lakh tonnes per year medium sized special alloy steel plant at Vyasankere with a total investment of about Rs. 500 crore.

In addition to the above, the Board of Directors has also approved the setting up 4 km ropeway costing Rs.30 crore which will facilitate transporting iron ore from mines to the railway siding.

The Company has sufficient land and water allotment at Vyasankere, about 30 km from the mines, situated on the NH-13 which is also in the close proximity to Hospet-Gunda railway line. Accordingly this would be an ideal location for setting up the said projects.

Further, Government of Karnataka was also pleased to grant its in-principle approval for the said projects.

DIVIDEND

Board of Directors recommend a dividend of Rs.3.00 per equity share of Rs.10/- each for the financial year ended 31 March 2010, aggregating to Rs.262.50 lakh. Subject to the approval of the shareholders at the Annual General Meeting, the dividend will be paid to members whose names appear in the Register of Members as on 29th September 2010 and in respect of shares held in dematerialized form, it will be paid to members whose names are furnished as beneficial owners, by National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), as on that date.

The dividend pay out for the year under review has been formulated in accordance with the Companys policy to pay sustainable dividend linked to long term performance. The amount of dividend has also been considered keeping in view the Companys need for capital investments in the proposed projects which the Company intends to finance through internal accruals to the maximum extent possible.

INVESTMENTS

In accordance with the agreement executed with Star Metallics and Power Private Limited (SMPPL), subsidiary of the Company for extending long term secured loan of ^60.00 crore for the purpose of operating ferroalloys plant and setting up 32 MW coal based power plant, the Company invested Rs.59.98 crore.

During the financial year under review, SMPPL allotted 55 lakh equity shares of Rs.10/- each at a premium of Rs.10/- per share against Rs.11.00 crore share application money which was pending for allotment. Subsequent to the end of financial year, SMPPL has allotted 75 lakh equity shares of Rs.10/- each at a premium of Rs.10/- per share against part of the amounts due from them to the Company towards one 20MVA furnace sold by the Company. With this allotment the Company holds 3.25 crore equity shares constituting 74.29% of SMPPLs paid up equity share capital.

SUBSIDIARY

SMPPL is expected to commission its 32 MW coal based thermal power plant at Vyasankere, near Hospet, during September 2010. Further, Government of Karnataka has accorded its in-principle approval for SMPPL to set up another 32MW thermal power plant at a cost of about Rs.130 crore at the same location.

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.

DIRECTORS

Sushiladevi Ghorpade has ceased to be a director with effect from 29 June 2010.

Nazim Sheikh, Syed Abdul Aleem and E. B. Desai are liable to retire by rotation and, being eligible, offer themselves for re-election.

S. Y. Ghorpade is attaining the age of 70 years on 13 September 2010 and pursuant to the provisions of clause (c) of Part I of Schedule XIII to the Companies Act, 1956, consent of the Company by special resolution is sought for his continuing as Managing Director till the expiry of his current tenure on 30 June 2011 and for such future terms of office as may be decided by the Board and the Shareholders.

None of the directors of the Company are disqualified from being appointed as directors as specified under Section 274 of the Companies Act, 1956 as amended by the Companies (Amendment) Act, 2000.

Board commends for passing of the respective resolutions proposed in the Notice of the Annual General Meeting.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217 (2AA) of the Companies Act, 1956, your Directors state that:

- In the preparation of accounts, the applicable accounting standards have been followed.

- Accounting policies selected were applied consistently.

- Reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the Company as at the end of 31 March 2010 and of the profit for the year ended on that date.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

- The annua! accounts of the Company have been prepared on a going concern basis.

AUDITORS

Messrs Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of this Annual General Meeting and. being eligibie, offer themselves for re-appointment.

CORPORATE GOVERNANCE

The Directors Report on Corporate Governance is annexed to this report. The certificate of the Auditors, Messrs Deloitte Haskins & Sells, Chartered Accountants, regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is being annexed.

Further, Ministry of Corporate Affairs has introduced Corporate Governance Voluntary Guidelines, 2009 for voluntary adoption by the corporate sector. It has been observed by the Board that various practices of the Company are similar to the procedures / provisions prescribed in the said Guidelines. The Company will be reviewing its policies and practices in the context of other parameters / recommendations prescribed in the said Guidelines for appropriate adoption.

CORPORATE SOCIAL RESPONSIBILITY

The Ministry of Corporate Affairs (MCA) has issued Voluntary Guidelines on Corporate Social Responsibility in December 2009 for voluntary adoption by the Corporate Sector to be socially, environmentally and ethically responsible in governance of operations and also to add value to the operations while contributing towards the long term sustainability of business. The Company has always been socially responsible as enumerated below. The Board of Directors has resolved to continue to be socially responsible in the years to come.

- The Company directly and indirectly supports three schools at the mines, four schools at Vyasankere (where it proposes to set up the new projects) and nearly six schools and colleges in and around Sandur. The institutions have been catering to the educational needs of employees children as well as the children of Sandur and surrounding villages. During the financial year under review the Company has donated
- Under Akshaya Patra programme, Company provides free mid-day meals to children studying in some of the aforesaid schools and two Government schools at Sandur.

- The Companys Community Health Centre namely "Arogya" at Sandur meets the medical requirements of employees free of cost and also the general public of Sandur and other adjacent villages. In association with Vittala of Bangalore. Arogya provides specialized eye care facility.

- The Companys welfare organisation called Sandur Kushala Kala Kendra was established for nurturing and development of traditional handicrafts, upliftment and gainful employment of rural artisans.

- The Company continues to provide a package of essential food grains, to suffice needs of a family of about five per month, at 1972 prices, to all its employees and workmen, including temporary workmen.

- The Company has undertaken to construct around 900 houses costing about Rs.10-12 crore for the victims in flood affected regions of the State.

- The Company has contributed about Rs.15 crore to Bellary Area Task Force (BATF) for the development of Bellary District in general and Sandur in particular.

SECRETARIALAUDIT

In accordance with Regulation 55A of SEBi (Depositories and Participants) Regulations, 1996 and Securities and Exchange Board of India (SEBI) Circular No. D&CC/FITTC/CIR-16/2002 and SEBI/MRD/Policy/Cir-13/2004 dated 31 December 2002 and 3 March 2004 respectively, the Company has obtained Secretarial Audit reports for all the quarters during the financial year under review from Ms. P. Renuka, Company Secretary in Practice. The same have been submitted to the stock exchanges and copies placed before the Board of Directors at the subsequent meetings.

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

Particulars relating to conservation of energy and technology absorption stipulated in the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 are not applicable as the Metal & Ferroalloys Plant was not operated by the Company. The particulars regarding expenditure and earnings in foreign exchange appear as items No.7 and 8 respectively in the Notes to the Accounts.

EMPLOYEES

Information as required under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, are given in the Annexure forming part of this report.

ACKNOWLEDGEMENTS

The directors wish to thank the government and the banks for the support extended during the financial year to the Company.

The directors also wish to place on record their appreciation of the cordial labour-management relations and the good work put in by all employees of the Company. for and on beha,f of the Board

Place: Bangalore S. Y. GHORPADE Date : 29 July 2010 Chairman & Managing Director



 
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