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Directors Report of Steel Exchange India Ltd.

Mar 31, 2014

Dear Members,

The Directors take pleasure in presenting the Fifteenth Annual Report of the Company together with the Audited Statements of Accounts for the year ended March 31,2014.

FINANCIAL RESULTS:

The performance of the Company during year under review is summarised below: (in Lakhs)

PARTICULARS Year ended 9 Months ended 31.03.2014* 31.03.2013*

Total Income 125546.95 98150.66

Total Expenditure

(excluding Depreciation and Interest) 112092.30 86630.99

Profit before Interest & Depreciation 13454.65 11519.57

Less: Interest and other financial charges 8043.98 6309.16

Depreciation 1500.98 1175.94

Profit before Tax 3909.69 4034.47

Less: Tax Expense

- Deferred Tax 222.22 354.79

- Tax Expense for prior years /

(Excess provision written back) 105.25 (1649.20)

Profit after Tax 3582.20 5328.89

Balance brought forward from previous year (21149.29) (26478.18)

Profit /(Loss) available for Appropriation (17567.09) (21149.29)

Balance carried forward (17567.09) (21149.29)

*Note: The current year''s figures are for 12 months period while previous year''s figures are for 9 months period only and hence the same are not comparable.

Review of Operations:

The Company achieved a turnover of Rs. 1255.46 crores for the year ended 31st March 2014 as against Rs. 981.51 crores in the previous 9 months period ended 31st March 2013. The Company earned a Gross Profit of Rs. 134.54 crores before interest and depreciation as against Rs. 115.20 crores in the previous period. After deducting interest of Rs. 80.44 crores, providing a sum of Rs. 15.01 crores towards depreciation and after adjusting deferred tax and excess income tax written back, the operations resulted in a Net Profit of Rs. 35.82 crores as against Rs. 53.29 crores for the previous 9 months period ended 31st March 2013.

Though the company''s manufacturing activity was marginally higher during the year under review, decrease in profit was attributable to decrease in margins in manufacturing activity and trading activity coupled with decrease in steel prices when compared to previous period. Further the net profit also decreased due to increase in the cost of raw materials.

During the period under review, the company continued with low level of operations at the Steel Melting Division at Kothapeta unit by selling the unutilised power produced from the Power Plant. .

EXTENSION OF ANNUAL GENERAL MEETING & SCHEME OF AMALGAMATION:

As you are aware, the company has preferred a petition before the Hon''ble High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh for the sanction of the Scheme of Amalgamation of M/s Simhadri Power Limited with the Company with appointed date 01.04.2013.

In view of the above, the company has applied to the Registrar of Companies at Hyderabad for extension of time for a period of three months i.e up to 31st December, 2014 for holding the Annual General Meeting for consolidation of the accounts for the year ended 31st March, 2014 and got the approval .

The Board of Directors pleased to inform that the Hon''ble High Court has approved the Scheme of Amalgamation by orders dated 18th November, 2014. The Company has yet to receive the certified copies of the orders and on filing certified copies with the Registrar of Companies, the Scheme will come into effect from 01.04.2013. Therefore the accounts of M/s Simhadri Power Limited are not included in the accounts of the company

DIVIDEND:

To conserve the resources for funding the expansion plans, the Board has deemed it prudent not to recommend any dividend for the year ended 31st March 2014.

TRANSFER TO RESERVES:

During the financial year under review, there were no transfers to Reserves.

CAPITAL STRUCTURE:

During the period under review there is no change in the Authorised and paid up capital of the Company.

The allotment of equity shares to the shareholders of GSAL, Rs. 59,827,195 continues to be pending awaiting the clearances from statutory bodies and has been shown under Equity Share Capital suspense account in the financial statements.

DIRECTORS:

In accordance with the provisions of Companies Act, 1956 and the Articles of Association of the Company, Mr. B. Suresh Kumar and Mr. V.V. Krishna Rao retire by rotation and being eligible, offer themselves for re-appointment.

In terms of Sections 149, 152, Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014, the Independent Directors can hold office for a term of up to five (5) consecutive years on the Board of Directors of your Company and are not liable to retire by rotation. Accordingly, it is proposed to appoint Mr. C. Siva Prasad, Mr. K. Krishna Rao, Mr. G. Venkatanarayana Reddy and Mr. R. Ramachandra Rao, as Independent Directors of your Company with effect from 31st December 2014 to 30th December 2019.

Appropriate resolutions for the appointment/ re-appointment of Directors are being placed before you for your approval at the ensuing Annual General Meeting. The brief resume of the aforesaid Directors and other information have been detailed in the Notice. Your Directors recommend their appointment/reappointment as Directors of your Company.

REPORT ON SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

The Company has no subsidiaries for the year ended 31st March 2014 and hence the report on subsidiaries and consolidated financial statements and the statement pursuant to Section 212 of the Companies Act, 1956 are not applicable to the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT:

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

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

(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the year 31st March 2014 and of the profit of the Company for the said year;

(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) they have prepared the accompanying accounts on a going concern basis.

REPORT ON THE CORPORATE GOVERNANCE:

Your Company continues to follow the principles of good Corporate Governance. In pursuance of Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a separate report on Corporate Governance along with a certificate from the Auditors of the Company regarding its compliance is annexed herewith and forms part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis report as required under the Listing agreement entered into with the Stock Exchanges is annexed herewith and forms part of this Report.

AUDITORS and AUDITORS'' REPORT:

M/s Pavuluri& Co, Chartered Accountants bearing ICAI Registration No. 012194S are proposed to be appointed as Statutory Auditors of the Company from the conclusion of the ensuing Annual General Meeting till the conclusion of the sixth Annual General Meeting of the Company held thereafter, subject to ratification of the appointment by the members at every AGM held after the ensuing 15th Annual General Meeting The Notes to Accounts forming part of the financial statements are self-explanatory and need no further explanation. There are no qualifications or adverse remarks in the Auditors'' Report which require any clarification or explanation.

COST AUDITORS:

The Products classified as "Steel and Electricity" manufactured by the Company are subjected to Cost Audit in terms of Sec. 148 of the Companies Act 2013 read with the rules issued there under by the Central Government on 30th June 2014.

Accordingly M/s.DZR & Co., Cost Accountants have been reappointed as the Cost Auditors for the year ending 31st March 2015.

The Cost Audit Report for 9 months period ended 31st March 2013 was reviewed by the Audit Committee at its meeting held on 12.08.2013 and has been filed on 20.09.2013.

The Cost Audit Report for year ended 31st March 2014 was reviewed by the Audit Committee at its meeting held on 11.08.2014 and has been filed on 27.09.2014.

PUBLIC DEPOSITS:

The Company has not accepted any Deposits from the Public during the year under review and, as such, no amount on account of principal or interest on Deposits was outstanding as on 31st March, 2014.

PARTICULARS OF EMPLOYEES:

The information required under Section 217(2A) of the Companies Act, 1956 read with Rules thereunder is provided in the Annexure forming part of this report. However, in terms of Section 219(1)(b)(iv) of the Companies Act 1956, the Report and Accounts are being sent to the Members, excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company.

CORPORATE SOCIAL RESPONSIBILITY:

The company has taken up a series of a charitable works as part of its Corporate Social Responsibility. It focuses on 4 thrust areas viz, natural resource management, education, health and women empowerment. It seeks to bring corporate sector with an overall aim to create equitable, sustainable, and accessible developmental opportunities for the communities we serve..

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE:

Details of energy conservation along with the information required in accordance with the provisions of Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, as amended from time to time, are given in Annexure ''A'' to the Directors'' Report and forms part of this report.

INDUSTRIAL RELATIONS:

The Industrial relations have been cordial during the year ended 31st March 2014 and your Directors wish to place on record their sincere appreciation to employees at all levels for their dedication, commitment and teamwork who have been instrumental in enabling your Company to achieve higher growth levels during the period.

ACKNOWLEDGEMENTS:

Your Directors take this opportunity to express their appreciation for the continued support and assistance received from the Company''s Bankers. The Directors also thank the Business Associates, Financial Institutions and various Central and State Government Departments and Government Authorities for their continued co-operation and support.

The Directors also wish to place on record their gratitude for the continued support and cooperation received from the valued Customers, Vendors, Members, and Investors of the Company and look forward to the same in greater measure in the coming years.

For and on behalf of the Board of Directors

Place: Visakhapatnam B. SATISH KUMAR Date: December 03, 2014 Chairman & Managing Director (DIN:00163676)


Mar 31, 2013

To the Members,

The Directors take pleasure in presenting the Fourteenth Annual Report of the Company together with the Audited Statements of Accounts for the 9 months period ended March 31, 2013.

FINANCIAL RESULTS:

The performance of the Company during period under review is summarised below:

(Rs. in Lakhs)

PARTICULARS 9 Months ended 15 Months ended 31.03.2013* 30.06.2012*

Total Income 98150.66 170209.42

Total Expenditure

(excluding Depreciation and Interest) 86630.99 153931.27

Profit before Interest & Pepreciation 11519.57 16278.15

Less: Interest and other financial charges 6309.16 10781.06

Depreciation 1175.94 1716.46

Profit before Tax 4034.47 3780.63

Less: Provision for Tax

- Current and earlier year Taxes 1062.50

- Deferred Tax 354.79 989.05

- Tax Expense for prior years / (Excess provision written back) (1649.20) 69.80

- MAT Credit Entitlement (1027.85)

Profit after Tax 5328.89 2687.13

Profit brought forward from previous year (26478.18) 4469.17

Profit available for Appropriation/(Loss) (21149.29) 7156.30

Appropriations: Transfer to General Reserve 75.00

Proposed Dividend on Preference Shares 4.70

Tax on Dividend as above 0.76

Transfer to Capital Redemption Reserve 55.04

Balance 7020.80

Balance of GSAL (India) Ltd on amalgamation (33498.98)

Balance carried forward (21149.29) (26478.18)

*Note: The current period''s figures are not comparable with the previous period''s figures as the current period''s figures are for 9 months where as the previous period''s figures are for 15 months.

Review of Operations:

The Company achieved a turnover of Rs.. 981.51 crores for the 9 months period ended 31st March 2013 as against Rs.. 1702.09 crores in the previous period ended 30th June 2012. The Company earned a Gross Profit of Rs.. 115.20 crores before interest and depreciation as against Rs.. 162.78 crores in the previous period. After deducting interest of Rs.. 63.09 crores, providing a sum of Rs.. 11.76 crores towards depreciation and after adjusting deferred tax and excess income tax written back, the operations resulted in a Net Profit of Rs.. 53.29 crores as against Rs.. 26.87 crores for the previous 15 months period ended 30th June 2012.

Though the company''s manufacturing activity was marginally lower during the period under review, higher net profit was attributable to increase in margins in manufacturing activity and trading activity coupled with increase in steel prices when compared to previous period. Further the net profit also increased with write back of excess provision of income tax of earlier years. However decrease in the turnover was mainly on account of sluggish market conditions and frequent and long power cuts imposed in the state.

During the period under review, the company continued with low level of operations at the Steel Melting Division at Kothapeta unit. The Company sold the unutilised power produced from the Power Plant. The power sales were less in comparison due to the reduced supply of Natural gas.

During the period under review, the Company has extended corporate guarantee of Rs.. 58 crores for the working capital credit facilities sanctioned to Simhadri Power Limited subject to the approval of members which will be sought through the Postal Ballot in the due course.

The Board of Directors have approved the sale/disposal of rolling unit situated at Parawada, Visakhapatnam and wire drawing unit situated at IDA, Auto Nagar, Visakhapatnam in their meeting held on 03.07.2013 subject to the approval of members which will be sought through the Postal Ballot in the due course.

LISTING OF SECURITIES ON BOMBAY STOCK EXCHANGE (BSE) :

The Company''s Securities are traded in the IndoNext Segment on the Bombay Stock Exchange since January 2005.Your Directors are pleased to inform you that the BSE has approved the direct listing of Company''s Securities vide notice no. 20121129-15 dated 29th November, 2012 and trading of Securities commenced on BSE with effect from 3rd December, 2012 under “B" Segment with scrip code 534748.

VOLUNTARY DELISTING OF SECURITIES FROM THE CALCUTTA STOCK EXCHANGE LIMITED:

At present the equity shares of the company are listed on The Bombay Stock Exchange Limited, Mumbai and the Calcutta Stock Exchange Limited, Kolkata. As the trading volume is NIL on the Calcutta Stock Exchange and as a part of cost reduction measure, the Board of Directors in their meeting held on 03.07.2013 agreed to delist the securities from the Calcutta Stock Exchange subject to requisite approvals. The securities of the company will continue to be listed and traded on the Bombay Stock Exchange Limited, Mumbai.

CHANGE OF ACCOUNTING YEAR:

In order to align the accounting year of the Company with the practices followed in India, it was decided that the accounting year of the Company for financial year 2012-13 will be for 9 months. Accordingly, the accounting period of the Company for the period under review was up to 31 March 2013.

SCHEME OF AMALGAMATION OF SIMHADRI POWER LIMITED (SPL) WITH THE COMPANY (SEIL):

Members are aware that the Company (SEIL) has promoted Simhadri Power Limited (SPL) as a Special Purpose Vehicle and has set up 60 MW captive power plant. The Power Plant of SPL is located on the land taken on lease from SEIL and is close to the major manufacturing facilities of SEIL.

The draft Scheme of Amalgamation of SPL with SEIL was approved by the Board in its meeting held on 03.07.2013 subject to various statutory approvals, the consent of members and confirmation by the High Court. The proposed Scheme will enable the amalgamated entity to reduce the overall costs and offer economies of scale and would also lead to reduction in overall operative costs, taxes and administrative cost.

The proposed Amalgamation of SPL with SEIL would bring the entire operations under one roof which would integrate itself into a bigger economic entity giving greater financial strength and also enhances shareholders'' wealth.

As per the proposed Scheme of Amalgamation:

---With effect from the appointed date i.e. 1st April 2013, the transfer of and vesting of the Undertaking of SPL including all its movable and immovable properties such as buildings, plant & machinery and other assets of whatsoever nature but subject to all mortgages and charges and hypothecation and guarantees, if any, and all other rights whatsoever affecting the properties of SPL shall without any further act or deed be transferred to and be vested in SEIL.

---With effect from the appointed date all liabilities, debts, duties and obligations of whatsoever nature of SPL shall without any further Act or Deed be transferred to and taken over by SEIL.

---In consideration of the transfer of and vesting of the Undertaking by SPL to SEIL, the Company shall allot 2,73,56,467 equity shares of Rs.. 10/- each in the ratio of 1 (One) equity share of Rs.. 10/- each fully paid up of the Company for every 2 (Two) equity shares of Rs.. 10/- each held by such members in "SPL".

The detailed scheme and other information will be informed to the members in the due course.

DIVIDEND:

To conserve the resources, the Board has deemed it prudent not to recommend any dividend for the 9 months period ended 31st March 2013.

CAPITAL STRUCTURE:

During the period under review, there is no change in the paid up equity share capital of the Company i.e. Rs.. 519,500,000 comprising of 51,950,000 Equity Shares of Rs.. 10/- each.

Pending the allotment of equity shares to the shareholders of GSAL, Rs.. 59,827,195 has been shown under Equity Share Capital suspense account in the financial statements.

DIRECTORS:

Mr. B. Satish Kumar was re-appointed as Managing Director for a further period of three years w.e.f 01.03.2013 by the Board of Directors in their meeting held on 11.02.2013 subject to the approval of members which will be sought through the Postal Ballot in the due course.

Mr. B. Suresh Kumar was re-appointed as Joint Managing Director for a further period of three years w.e.f 27.10.2013 by the Board of Directors in their meeting held on 03.07.2013 subject to the approval of members which will be sought through the Postal Ballot in the due course.

In accordance with the provisions of Companies Act, 1956 and the Articles of Association of the Company, Mr. V.V. Krishna Rao and Mr. R. Ramachandra Rao retire by rotation and being eligible, offer themselves for re-appointment.

FUTURE OUTLOOK:

The long term outlook of the Steel Industry continues to be promising and challenging. With increased manufacturing base, your Company expects to better the revenues with improved margins.

REPORT ON SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

The Company has no subsidiaries as on 31st March 2013 and hence the report on subsidiaries and consolidated financial statements and the statement pursuant to Section 212 of the Companies Act, 1956 are not applicable to the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT:

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

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

(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the 9 months period ended 31st March 2013 and of the profit of the Company for the said period;

(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) they have prepared the accompanying accounts on a going concern basis.

REPORT ON THE CORPORATE GOVERNANCE:

Your Company continues to follow the principles of good Corporate Governance. In pursuance of Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a separate report on Corporate Governance along with a certificate from the Auditors of the Company regarding its compliance is annexed herewith and forms part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis report as required under the Listing agreement entered into with the Stock Exchanges is annexed herewith and forms part of this Report.

AUDITORS and AUDITORS'' REPORT:

M/s Pavuluri& Co, Chartered Accountants, the Company''s Auditors will retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment and have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 224 (1B) of the Companies Act, 1956.

The Notes to Accounts forming part of the financial statements are self-explanatory and need no further explanation. There are no qualifications or adverse remarks in the Auditors'' Report which require any clarification or explanation.

COST AUDITORS:

The Products classified as "Steel and Electricity" manufactured by the Company are subjected to Cost Audit in terms of Sec.233B of the Companies Act, 1956 read with the Central Government Rules.

M/s.DZR & Co., Cost Accountants have been reappointed as the Cost Auditors for the year ending 31st March 2014 subject to the approval of Central Government having been appointed for the FY 2011-12 & 2012-13.

The Cost Audit Report for the 15 months period ended 30th June 2012 was reviewed by the Audit Committee at their meeting held on 09.11.2012 and has been filed on 28.01.2013 well within the due date of 28.02.2013.

The Cost Audit for the 9 months period ended 31st March 2013 is in progress and the Cost Audit Report will be filed within the stipulated time.

FIXED DEPOSITS:

The Company has not accepted any Fixed Deposits from the Public within the meaning of Section 58-A, of the Companies Act, 1956 and the rules made there under during the 9 months period ended 31st March 2013 and, as such, no amount on account of principal or interest on Fixed Deposits was outstanding as on 31st March, 2013.

PARTICULARS OF EMPLOYEES:

The information required under Section 217(2A) of the Companies Act, 1956 read with Rules thereunder is provided in the Annexure forming part of this report. However, in terms of Section 219(1)(b)(iv) of the Companies Act 1956, the Report and Accounts are being sent to the Members, excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE:

Details of energy conservation along with the information required in accordance with the provisions of Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, as amended from time to time, are given in Annexure ''A'' to the Directors'' Report and forms part of this report.

INDUSTRIAL RELATIONS:

The Industrial relations have been cordial during the 9 months period ended 31st March 2013 and your Directors wish to place on record their sincere appreciation to employees at all levels for their dedication, commitment and teamwork who have been instrumental in enabling your Company to achieve higher growth levels during the period.

ACKNOWLEDGEMENTS:

Your Directors take this opportunity to express their appreciation for the continued support and assistance received from the Company''s Bankers. The Directors also thank the Business Associates, Financial Institutions and various Central and State Government Departments and Government Authorities for their continued co-operation and support.

The Directors also wish to place on record their gratitude for the continued support and cooperation received from the valued Customers, Vendors, Members, and Investors of the Company and look forward to the same in greater measure in the coming years.

For and on behalf of the Board of Directors

Place: Visakhapatnam B. SATISH KUMAR

Date: July 03, 2013 Chairman & Managing Director


Jun 30, 2012

The Directors take pleasure in presenting the Thirteenth Annual Report of the Company together with the Audited Statements of Accounts for the 15 months period ended June 30, 2012.

FINANCIAL RESULTS:

The performance of the Company during period under review is summarised below:

(Rs. Lakhs)

PARTICULARS 15 Months ended Year ended 30.06.2012* 31.03.2011

Total Income 170209.42 115749.02

Total Expenditure (excluding Depreciation and Interest) 153931.27 107107.63

Profit before Interest & Depreciation 16278.15 8641.39

Less: Interest and other financial charges 10781.06 4792.16

Depreciation 1716.46 1114.09

Profit before Tax 3780.63 2735.14

Less: Provision for Tax

- Current and earlier year Taxes 1062.50 897.38

- Deferred Tax 989.05 616.71

- Tax Expense for prior years 69.80 -

- MAT Credit Entitlement (1027.85) (478.61)

Profit after Tax 2687.13 1699.66

Profit brought forward from previous year 4469.17 2876.00

Profit available for Appropriation 7156.30 4575.66

Appropriations:

Transfer to General Reserve 75.00 100.00

Proposed Dividend on Preference Shares 4.70 5.64

Tax on Dividend as above 0.76 0.85

Transfer to Capital Redemption Reserve 55.04 -

Balance 7020.80 4469.17

Balance of GSAL (India) Ltd on amalgamation (33498.98) -

Balance carried forward (26478.18) 4469.17

*Note: The current period's figures are not comparable with the previous year's figures on account of:

1. Extension of the accounting year by the Company. The current period's figures are for 15 months where as the previous year's figures are for 12 months.

2. The current period's figures include the accounts of GSAL (India) Limited consequent to the amalgamation as per the approval of BIFR, where as the previous year's figures relate to the company only.

Review of Operations:

The Company achieved a turnover of Rs. 1702.09 crores for the 15 months period ended 30th June, 2012 as against Rs. 1157.49 crores in the previous year ended 31st March 2011. The Company earned a Gross Profit of Rs. 162.78 crores before interest and depreciation as against Rs. 86.41 crores in the previous year. After deducting interest of Rs. 107.81 crores, providing a sum of Rs. 17.16 crores towards depreciation, tax provision of Rs. 11.32 crores and after adjusting deferred tax and MAT Credit, the operations resulted in a Net Profit of Rs. 26.87 crores as against Rs. 16.99 crores for the previous year.

The company's manufacturing activity was higher during the period under review and coupled with the increase in prices of steel products resulted in higher turnover and higher net profit when compared to previous year. However the margins were largely effected on account of volatility in the exchange rate and frequent and long power cuts imposed in the state.

During the period under review, the company continued with low level of operations at the Steel Melting Division at Kothapeta unit. The Company sold the unutilised power produced from the Power Plant.

As informed in the last Annual report, the Company has promoted Simhadri Power Limited (SPL) as a Special Purpose Vehicle (SPV) which will set up the 60 MW Power Plant based on waste heat recovery, coal char, fines and fresh coal in which the Company shall hold not less than 26% equity and 51% of the power generated will be captively consumed by the units of the Company.

The proposed power plant is being set up at Malliveedu, L.Kota Mandal, Vizianagaram District, Andhra Pradesh. The works are in advanced stage of completion and the commercial production is expected as per schedule in October 2012. During the period under review, the Company has invested Rs. 18.60 crores in SPL by subscribing to 18,600,000 Equity shares of Rs. 10/- each fully paid and the total investments in SPL as on 30th June 2012 is Rs. 35.29 crores .

With the setting up of the power project, the Company expects to improve its manufacturing levels on the back of regular and continuous power supply. The waste heat recovery, and utilisation of coal fines and char will also contribute to the margins of the company.

During the period under review, the company has disposed the 6000 TPA Wire drawing unit -1 situated at Autonagar, Vishakapatnam. Pending the approval of the working capital lenders, the same is continues to be shown under fixed assets.

CHANGE OF ACCOUNTING YEAR:

The Board of Directors approved the extension of the financial year 2011-12 by 3 months to take the effect of hearing scheduled on 08.05.2012 before the Hon'ble Board for Industrial and Financial Reconstruction for the proposed merger of GSAL (India) Limited with the Company. Accordingly, the current accounting period of the Company is for 15 months starting from 1 April 2011 and up to 30 June 2012.

In order to align the accounting year of the Company with the practices followed in India, it was decided that the accounting year of the Company for financial year 2012-13 will be for 9 months. Accordingly, the accounting period of the Company for the ensuing period will be up to 31 March 2013.

SCHEME OF MERGER OF GSAL (INDIA) LIMITED (GSAL) WITH THE COMPANY:

Your Directors pleased to inform you that The Hon'ble Board for Industrial and Financial Reconstruction, New Delhi (BIFR) vide its order dated 06.08.2012 approved the Scheme of Merger of M/s GSAL (India) Limited with the Company (SEIL).

GSAL was engaged in the business of manufacture and sale of sponge iron and has been declared as a sick industrial company within the meaning of Section 3 (1) (o) of the Sick Industrial Companies (Special Provisions) Act, 1985 by BIFR.

The members of the Company approved the revised Scheme of Merger through Postal Ballot on 23rd March 2011. As per the Scheme of Merger, all the assets and liabilities pertaining to GSAL (India) Limited stood transferred to the Company w.e.f 1st April, 2010.

As per the Scheme of Merger:

---With effect from the appointed date i.e. 1st April 2010, the transfer of and vesting of the Undertaking and the Liabilities of the GSAL including all its movable and immovable properties such as land, buildings, plant & machinery and other assets of whatsoever nature but subject to all mortgages and charges and hypothecation and guarantees, if any, and all other rights whatsoever affecting the properties of GSAL shall without any further act or deed be transferred to and be vested in SEIL.

---With effect from the appointed date all liabilities, debts, duties and obligations of whatsoever nature of GSAL shall without any further Act or Deed be transferred to and taken over by SEIL.

---In consideration of the transfer of and vesting of the Undertaking and the Liabilities of GSAL to SEIL, the Company shall allot 59,82,720 equity shares of Rs. 10/- each in the ration of 1 (One) equity share of Rs. 10/- each fully paid up for every 10 (Ten) equity shares of Rs. 10/- each held by such members in "GSAL". And the Paid up Equity share capital of the Company will be Rs. 57.93 Crores as against Rs. 51.95 Crores before the merger.

Effects of Merger on the financial statements of the Company:

The accumulated losses of GSAL amounting to Rs.334.98 crores were set off against the surplus in profit & loss account and the balance loss has been carried forward in the financial statements. However the company will benefit from the carry forward of losses of GSAL and expects lower tax outflows in the ensuing years.

The additions to capital and other reserves are on account of the implementation of the Draft Rehabilitation Scheme of GSAL as approved by the Board of Industrial and Financial Reconstruction (BIFR).

The management has revalued the land of GSAL (India) Limited at fair market value of as valued by a certified valuer and the difference in value of Rs. 102.56 crores has been reflected under the revaluation reserve in the financial statements.

The Scheme of Merger has strengthened the manufacturing activity of the Company with the addition of the manufacturing capacities of the GSAL and also added huge asset base to the Company.

TRANSFER TO RESERVES:

The Company transferred Rs. 75.00 Lakhs to the General Reserve out of the amount available for appropriation for the 15 months period ended 30th June, 2012 as against Rs. 100.00 Lakhs in the previous year ended 31st March 2011.

DIVIDEND:

The Board has, subject to the approval of the Members at the ensuing Annual General Meeting, recommended a dividend at the stipulated rate of 10.25 % on 5,50,400 Preference Shares of Rs. 10/- each of the Company for the period 01.04.2011 to 30.01.2012 on pro rata basis (the said preference shares were redeemed on 30.01.2012).

To conserve the resources for funding the expansion plans, the Board has deemed it prudent not to recommend any dividend on the Equity Shares of the Company for the 15 months period ended 30th June, 2012.

ISSUE OF SHARES AND SHARE WARRANTS:

During the period under review, the Company, on 8th April, 2011 has allotted 40,00,000 equity shares of the Company at a price of Rs. 38/- (Rupees Thirty Eight) per share upon conversion of share warrants which were allotted on 23rd July 2010 on preferential basis to M/s Umashiv Garments Private Limited (Promoter Group Company).

During the period under review, the Company, on 8th April, 2011 has allotted 51,00,000 share warrants of the Company at a price of Rs. 45/- (Rupees Forty Five) per share warrant on preferential basis to M/s Umashiv Garments Private Limited (Promoter Group Company) pursuant to the members' approval obtained through Postal Ballot. Each of these warrants is convertible into 1 (one) Equity Share of par value of Rs. 10/- each at the option of the Warrant holder within a period of 18 months from the date of allotment (i.e latest by 7th October, 2012).

Accordingly, the Company, on 2nd April, 2012 has allotted 51,00,000 equity shares of the Company at a price of Rs. 45/- (Rupees Forty Five) per share upon conversion of share warrants which were allotted on 8th April, 2011 on preferential basis to M/s Umashiv Garments Private Limited (Promoter Group Company).

The amount raised through the issue was fully utilised for the purpose for which it was raised.

CAPITAL STRUCTURE:

During the period under review, the Authorised Equity share capital of the Company has increased from Rs. 990,000,000 to Rs. 1,590,000,000 and the Authorised Preference share capital of the Company has increased from Rs. 10,000,000 to Rs. 740,000,000 respectively with the addition of Authorised Capitals of GSAL (India) Limited.

During the period under review, the paid up equity share capital of the Company has increased from Rs. 428,500,000 to Rs. 519,500,000 comprising of 51,950,000 Equity Shares of Rs. 10/- each with the allotment of 4,000,000 (Forty Lakhs) Equity Shares of Rs. 10/- each upon conversion of the share warrants on 8th April, 2011 and with the allotment of 5,100,000 (Fifty one Lakhs) Equity Shares of Rs. 10/- each upon conversion of the share warrants on 2nd April, 2012 respectively.

Pending the allotment of equity shares to the shareholders of GSAL, Rs. 59,827,195 has been shown under Equity Share Capital suspense account in the financial statements.

PREFERENCE SHARES:

The Company had issued 5,50,400 10.25 % Redeemable Preference Shares of Rs. 10/- each in the year 2005 redeemable at the end of seven years .

During the period under review, your Board of Directors in its meeting held on 1st February 2012 approved the redemption of 5,50,400 10.25% Redeemable preference shares of Rs. 10 each along with pro-rata dividend till the date of redemption. The Preference shares were fully redeemed and payment was made on 27th June 2012 to the shareholder.

DIRECTORS:

Mr. B. Suresh was re-appointed as Director (Finance) by the members of the Company in their Extraordinary General Meeting held on 30th November 2009 for a period of three years with effect from 1st September 2009 and his tenure will be completed on 31st August 2012. Mr. B. Suresh informed of his inability to continue as Whole Time Director owing to his other occupations and will continue to hold the office of the Director of the Company effective from 1st September 2012, who shall be liable to retire by rotation. The Board placed on record its appreciation for the services rendered by Mr. B. Suresh as Director (Finance) of the Company.

In accordance with the provisions of Companies Act, 1956 and the Articles of Association of the Company, Mr. B. Suresh Kumar and Mr. B. Suresh retire by rotation and being eligible, offer themselves for re-appointment.

Mr. G. Venkata Narayana Reddy has been appointed as Additional Director of the Company by the Board of Directors with effect from 30th July, 2012 in their meeting held on the even date and now Mr. G. Venkata Narayana Reddy is being proposed to be appointed as Director of the Company, liable to retire by rotation, in the ensuing Annual General Meeting of the Company. The Company has received a notice from the shareholder proposing his candidature.

During the period under review, Mrs. Nilam Sawhney, IAS nominee director of M/s Andhra Pradesh Industrial Development Corporation (APIDC) has resigned and the same was approved in the Board meeting held on 30th July, 2012. The Board placed on record its appreciation for the services rendered by Mrs. Nilam Sawhney as a Director.

FUTURE OUTLOOK:

The long term outlook of the Steel Industry continues to be promising and challenging. With increased manufacturing base, your Company expects to better the revenues with improved margins.

REPORT ON SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

The Company has no subsidiaries for the 15 months period ended 30th June 2012 and hence the report on subsidiaries and consolidated financial statements and the statement pursuant to Section 212 of the Companies Act, 1956 are not applicable to the Company.

As on the date of reporting, the company holds 41,152,566 shares of Rs. 10/- each in M/s Simhadri Power Limited (SPL) (SPV promoted by the Company), by virtue of which SPL has become the subsidiary of the Company as informed by SPL.

DIRECTORS' RESPONSIBILITY STATEMENT:

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

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

(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the 15 months period ended 30th June 2012 and of the profit of the Company for the said period;

(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) they have prepared the accompanying accounts on a going concern basis.

REPORT ON THE CORPORATE GOVERNANCE:

Your Company continues to follow the principles of good Corporate Governance. In pursuance of Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a separate report on Corporate Governance along with a certificate from the Auditors of the Company regarding its compliance is annexed herewith and forms part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis report as required under the Listing agreement entered into with the Stock Exchanges is annexed herewith and forms part of this Report.

AUDITORS and AUDITORS' REPORT:

M/s Pavuluri& Co, Chartered Accountants, the Company's Auditors will retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment and have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 224 (1B) of the Companies Act, 1956.

The Notes to Accounts forming part of the financial statements are self-explanatory and need no further explanation. There are no qualifications or adverse remarks in the Auditors' Report which require any clarification or explanation.

COST AUDITORS:

During the period under review, in terms of Section 233B of the Companies Act, 1956 and as per the directives of the Central Government vide circular F. NO. 52/26/CAB-2010; dated the 3rd May, 2011, M/s DZR & Co., Cost and Management Accountants, Hyderabad are appointed as the Cost Auditors of the Company on 12.08.2011 to conduct cost audit of Steel and Power divisions of the Company for the financial year 2011-12 ending 30th June 2012 and the same was approved by the Central Government.

The due date to submit Cost Audit Reports to the Central Government for the period under review is 27th December 2012 i.e. 180 days from the close of the financial year.

FIXED DEPOSITS:

The Company has not accepted any Fixed Deposits from the Public within the meaning of Section 58-A, of the Companies Act, 1956 and the rules made there under during the 15 months period ended 30th June 2012 and, as such, no amount on account of principal or interest on Fixed Deposits was outstanding as on 30th June, 2012.

PARTICULARS OF EMPLOYEES:

None of the employees of the Company is in receipt of remuneration for whole/ part of the 15 months period ended 30th June 2012 exceeding the limits as prescribed under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE:

Details of energy conservation along with the information required in accordance with the provisions of Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, as amended from time to time, are given in Annexure 'A' to the Directors' Report and forms part of this report.

INDUSTRIAL RELATIONS:

The Industrial relations have been cordial during the 15 months period ended 30th June 2012 and your Directors wish to place on record their sincere appreciation to employees at all levels for their dedication, commitment and teamwork, who have been instrumental in enabling your Company to achieve higher growth levels during the period.

ACKNOWLEDGEMENTS:

Your Directors take this opportunity to express their appreciation for the continued support and assistance received from the Company's Bankers. The Directors also thank the Business Associates, Financial Institutions and various Central and State Government Departments and Government Authorities for their continued co-operation and support.

The Directors also wish to place on record their gratitude for the continued support and cooperation received from the valued Customers, Vendors, Members, and Investors of the Company and look forward to the same in greater measure in the coming years.

For and on behalf of the Board of Directors

Place: Visakhapatnam B. SATISH KUMAR

Date:August 27, 2012 Chairman & Managing Director


Mar 31, 2011

To the Members,

The Directors take pleasure in presenting the Twelfth Annual Report of the Company together with the Audited Statements of Accounts for the year ended March 31, 2011.

FINANCIAL RESULTS:

The performance of the Company during 2010-2011 is summarised below:

(Rs. in Lakhs)

PARTICULARS 2010-2011 2009-2010

Total Income 115609.10 69697.92

Total Expenditure (excluding Depreciation and Interest) 106922.88 65042.03

Profit before Interest & Depreciation 8686.22 4655.89

Less: Interest and other financial charges 4792.16 3159.40

Depreciation 1114.09 318.11

Profit before Prior period items 2779.97 1178.38

Less/(Add): Expenditure pertaining to previous year 44.83 1.26

Profit before Tax 2735.14 1177.12

Less: Provision for Tax

- Current Tax and Earlier Year Taxes 897.38 176.57

- Deferred Tax 616.71 504.51

- MAT Credit Entitlement (478.61) -

Profit after Tax 1699.66 496.04

Profit brought forward from previous year 2876.00 2410.60

Profit available for Appropriation 4575.66 2906.64

Appropriations:

Proposed Dividend on Preference Shares 5.64 5.64

Tax on Dividend as above 0.85 -

Transfer to General Reserve 100.00 25.00

Balance carried forward 4469.17 2876.00

Review of Operations:

The Company achieved a turnover of Rs. 1156.09 crores for the year ended 31 st March, 2011 as against Rs. 696.98 crores in the previous year. The Company earned a Gross Profit of Rs. 86.86 crores before interest and depreciation as against Rs. 46.56 crores in the previous year. After deducting interest of Rs. 47.92 crores, providing a sum of Rs. 11.14 crores towards depreciation, tax provision of Rs. 8.97 crores and after adjusting deferred tax and MAT Credit, the operations resulted in a Net Profit of Rs. 16.99 crores as against Rs. 4.96 crores for the previous year.

The company's manufacturing activity was higher during the year under review and coupled with the increase in prices of steel products resulted in higher turnover and higher net profit when compared to previous year.

During the year under review, the company continued with low level of operations at the Steel Melting Division at Kothapeta unit as the input costs continued to be high throughout the year. The Company sold the unutilised power produced from the Captive Power Plant.

The setting up of the 2,40,000 SMS plant in the premises of GASL (India) Limited was completed during the year under review and the commercial production commenced in August' 2010.

As informed in the last Annual report, the Company has promoted Simhadri Power Limited (SPL) as a Special Purpose Vehicle (SPV) which will set up the 60 MW waste heat recovery based power generation unit in which the Company shall hold not less than 26% equity in SPL and 51% of the power generated will be captively consumed by the units of the Company. The proposed power plant is being set up at Malliveedu, L.Kota Mandal, Vizianagaram District, Andhra Pradesh and the setting up of the Power plant is in progress as per the schedule and the commercial production is expected as per schedule in October 2012. During the year under review, the Company has invested Rs. 16.69 crores in M/s. Simhadri Power Limited by subscribing to 1,66,87,066 Equity shares of Rs. 10/- each fully paid.

The acquisition of GSAL (India) Limited is in progress with the DRS being filed with the Hon'ble BIFR for its consideration. Subject to the approval of the Hon'ble BIFR, the proposal inter-alia is for merger with the Company in line with the revised Scheme of Amalgamation already approved by the members through Postal Ballot held on 23rd March 2011.

DIVIDEND:

The Board has, subject to the approval of the Members at the ensuing Annual General Meeting, recommended a dividend at the stipulated rate of 10.25 % on 5,50,400 Preference Shares of Rs. 10/- each of the Company for the year ended 31st March, 2011.

To conserve the resources for funding the expansion plans, the Board has deemed it prudent not to recommend any dividend on the Equity Shares of the Company for the year ended 31 st March, 2011.

TRANSFERTO RESERVES:

The Company transferred Rs. 100 Lakhs to the General Reserve out of the amount available for appropriation and Rs. 44.69 crores is retained in the Profit and Loss Account.

ISSUE OF SHARES AND SHARE WARRANTS:

During the year under review, the Company, on 23rd July, 2010 has allotted 35,50,000 equity shares of Rs. 10/- each at a price of Rs. 37/- (Rupees Thirty Seven) per share and also 40,00,000 share warrants at a price of Rs. 38/- (Rupees Thirty Eight) per warrant on preferential basis to M/s Umashiv Garments Private Limited belonging to Promoter Group pursuant to the members' approval obtained in the Extraordinary General Meeting held on 9th July, 2010. Each of these warrants is convertible into 1 (one) Equity Share of par value of Rs. 10/- each at the option of the Warrant holder within 18 months from the date of their allotment.

During the current year 2011 -12, the Company, on 8th April, 2011 has allotted 40,00,000 equity shares of the Company at a price of Rs. 28/- (Rupees Twenty Nine) per share consequent upon conversion of share warrants which were allotted on 23rd July 2010 on preferential basis to M/s Umashiv Garments Private Limited (Promoter Group Company).

During the current year 2011-12, the Company, on 8th April, 2011 has allotted 51,00,000 share warrants of the Company at a price of Rs. 45/- (Rupees Forty Five) per share warrant on preferential basis to M/s Umashiv Garments Private Limited (Promoter Group Company) pursuant to the members' approval obtained through Postal Ballot. Each of these warrants is convertible into 1 (one) Equity Share of par value of Rs. 10/- each at the option of the Warrant holder within a period of 18 months from the date of allotment (i.e latest by 7th October, 2012).

The amount raised through the issue was fully utilised for the proposed expansion plans of the Company.

CAPITAL STRUCTURE:

During the year under review, the paid up equity share capital of the Company was increased from Rs. 393,000,000 to Rs. 428,500,000 comprising of 42,850,000 Equity Shares of Rs. 10/- each with the issue and allotment of 3,550,000 (Thirty five lakh fifty thousands) Equity Shares of Rs. 10/- each of the Company on 23rd July, 2010.

During the Current year 2011-12, the paid up equity share capital of the Company has increased from Rs. 428,500,000 to Rs. 468,500,000 comprising of 46,850,000 Equity Shares of Rs. 10/- each with the allotment of 4,000,000 (Forty Lakhs) Equity Shares of Rs. 10/- each of the Company consequent upon conversion of the share warrants on 8th April, 2011,

DIRECTORS:

In accordance with the provisions of Companies Act, 1956 and the Articles of Association of the Company, Mr. C. Siva Prasad and Mr. K. Krishna Rao retire by rotation and being eligible, offer themselves for re-appointment.

During the year under review, M/s Andhra Pradesh Development Corporation (APIDC) has nominated Mr. V. Nagf Reddy, IAS as its nominee in the place of Mr. Vinod Kumar Agrawal, IAS with effect from 20th August, 2010. The Board placed on record its appreciation for the services rendered by Mr. Vinod Kumar Agrawal.

During the current year 2011-12, M/s Andhra Pradesh Development Corporation (APIDC) has nominated Mrs. Nilam Sawhney, IAS as its nominee in the place of Mr. V. Nagi Reddy, IAS with effect from 7th July, 2011.

FUTURE OUTLOOK:

The long term outlook of the Steel Industry continues to be promising and challenging. With increased manufacturing base, your Company expects to better the revenues with improved margins.

REPORT ON SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS:

The Company has no subsidiaries for the year under review and hence the report on subsidiaries and consolidated financial statements and the statement pursuant to Section 212 of the Companies Act, 1956 are not applicable to the Company.

DIRECTORS' RESPONSIBILITY STATEMENT:

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

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

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

(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

REPORT ONTHE CORPORATE GOVERNANCE:

Your Company continues to follow the principles of good Corporate Governance. In pursuance of Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a separate report on Corporate Governance along with a certificate from the Auditors of the Company regarding its compliance is annexed herewith and forms part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis report as required under the Listing agreement entered into with the Stock Exchanges is annexed herewith and forms part of this Report.

AUDITORS and AUDITORS' REPORT:

M/s Pavuluri& Co, Chartered Accountants, the Company's Auditors will retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment and have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 224 (1B) of the Companies Act, 1956.

The Notes to Accounts forming part of the financial statements are self-explanatory and need no further explanation. There are no qualifications or adverse remarks in the auditors' report which require any clarification or explanation.

COST AUDITORS:

During the Current year 2011-12, in terms of Section 233B of the Companies Act, 1956 and as per the directives of the Central Government vide circular F. NO. 52/26/CAB-2010; dated the 3rd May, 2011, M/s DZR & Co., Cost and Management Accountants, Hyderabad are appointed as the Cost Auditors of the Company to conduct cost audit for the financial year 2011 -12 subject to the approval of Central Government.

FIXED DEPOSITS:

The Company has not accepted any Fixed Deposits from the Public within the meaning of Section 58-A, of the Companies Act, 1956 and the rules made there under during the financial year under review and, as such, no amount on account of principal or interest on Fixed Deposits was outstanding as on 31st March, 2011.

PARTICULARS OF EMPLOYEES:

None of the employees of the Company is in receipt of remuneration for whole/ part of the year exceeding the limits as prescribed under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE:

Information required under Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, as amended from time to time, forms part of this report. However, as per the provisions of Section 219 (1) (b) (iv), the report and the accounts are being sent to all members of the Company excluding the information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo. Any member interested in obtaining such particulars may inspect the same in the Registered Office of the Company or write to the Company Secretary for a copy.

INDUSTRIAL RELATIONS:

The Industrial relations have been cordial through out the year under review and your Directors wish to place on record their sincere appreciation for the dedication, commitment and teamwork of employees at all levels, who have been instrumental in enabling your Company to achieve higher growth levels during the year.

ACKNOWLEDGEMENTS:

Your Directors take this opportunity to express their appreciation for the continued support and assistance received from the Company's Bankers. The Directors also thank the Business Associates, Financial Institutions and various Central and State Government Departments and Government Authorities for their continued co-operation and support.

The Directors also wish to place on record their gratitude for the continued support and cooperation received from the valued Customers, Vendors, Members, and Investors of the Company and look forward to the same in greater measure in the coming years.

For and on behalf of the Board of Directors

Place: Malliveedu, LKota (Mandal) B. SATISH KUMAR

Date:August 27, 2011 Chairman & Managing Director


Mar 31, 2010

The Directors take pleasure in presenting the Eleventh Annual Report of the Company together with the Audited Statements of Accounts for the year ended March 31, 2010.

FINANCIAL RESULTS:

The performance of the Company during 2008-2009 is summarised below: (Rs. in Lakhs)

PARTICULARS 2009-2010 2008-2009

Total Income 69697.92 68385.05

Profit before Interest & Depreciation 4655.89 3599.54

Less: Interest 3159.40 2525.22

Depreciation 318.11 282.79

Profit before Prior period items 1178.38 791.53

Less/(Add): Expenditure pertaining to previous year 1.26 (3.73)

Profit before Tax 1177.12 795.26

Less: Provision for Tax

- Current Tax 176.57 175.00

- Fringe Benefit Tax - 9.00

- Deferred Tax 504.51 131.89

Profit after Tax 496.04 479.37

Profit brought forward from previous year 2410.60 2347.87

Profit available for Appropriation 2906.64 2827.24

Appropriations:

Proposed Dividend on Preference Shares 5.64 5.64

Dividend on Equity Shares - 329.11

Tax on Dividend as above - 56.89

Transfer to General Reserve 25.00 25.00

Balance carried forward 2876.00 2410.60

Review of Operations:

The Company achieved a turnover of Rs.696.98 crores for the year ended 31 st March, 2010 as against Rs. 683.85 crores in the previous year. The Company earned a Gross Profit of Rs. 46.56 crores before interest and depreciation as against Rs. 35.99 crores in the previous year. After deducting interest of Rs. 31.59 crores, providing a sum of Rs. 3.18 crores towards depreciation, tax provision of Rs. 1.76 crores and after adjusting a sum of Rs. 5.04 crores towards deferred tax, the operations resulted in a Net Profit of Rs. 4.96 crores as against Rs. 4.79 crores for the previous year.

Steel prices remained at low levels in the year under review also while the input costs continued to remain high and consequently the increase in profits was only marginal compared to previous year. Higher provision for deferred tax, high interest costs also added to the pressure on the margins.

During the year under review, the company continued with low level of operations at the Steel Melting Division at Kothapeta unit as the input costs remained high throughout the year. The Company has sold the unutilised power produced from the 10 MW Power Plant.

The expansion plans of the Company i.e. setting up of 2,25,000 TPA Rolling Mill and 2,40,000 SMS plant in the premises of GASL (India) Limited are completed and the Rolling mill commenced commercial production in March 2010. The billet unit is slated for commencement of commercial production in August 2010.

The Company has promoted Simhadri Power Private Limited (SPPL) as an SPV which will set up the 60 MW waste heat recovery based power generation unit. The Company shall hold not less than 26% equity in SPPL and 51% of the power generated will be captively consumed by the units of the Company. The Company has entered into a memorandum of understanding with SPPL to this effect. The proposed power plant is being set up Maliveedu, L.Kota Mandal, Vizianagaram District, Andhra Pradesh.

The acquisition of GSAL (India) Limited is in progress with DRS being filed with the Honble BIFR for its consideration. Subject to the approval of the Honble BIFR, the proposal inter-alia is for merger with the Company in line with the Scheme of Amalgamation already approved by the members in the Extraordinary General meeting held on 26th February 2010.

Dividend:

The Board has, subject to the approval of the Members at the ensuing Annual General Meeting, recommended a dividend at the stipulated rate of 10.25 % on 5,50,400 Preference Shares of Rs. 10/- each of the Company for the year ended 31st March, 2010.

To conserve the resources for funding the expansion plans, the Board has deemed it prudent not to recommend any dividend on the Equity Shares of the Company for the year ended 31st March, 2010.

Issue of Shares and Shares Warrants:

During the year under review, the Company, on 21 st December, 2009 has allotted 29,00,000 equity shares of the Company at a price of Rs. 35/- (Rupees Thirty Five) per share on preferential basis to Others pursuant to the members approval obtained in the Extraordinary General Meeting held on 30th November, 2009.

The Company, on 23rd December, 2009 has also allotted 34,89,090 equity shares of the Company at a price of Rs. 29/- (Rupees Twenty Nine) per share consequent upon conversion of share warrants which were allotted on 27th March 2009 on preferential basis to M/s Umashiv Garments Private Limited (Promoter Group Company) pursuant to the members approval obtained in the Extraordinary General Meeting held on 12th March, 2009.

During the current year 2010-11, the Company, on 23rd July, 2010 has allotted 35,50,000 equity shares of Rs. 10/- each at a price of Rs. 37/- (Rupees Thirty Seven) per share and also 40,00,000 share warrants at a price of Rs. 38/- (Rupees Thirty Eight) per warrant on preferential basis to Bodies Corporate belonging to Promoter Group pursuant to the members approval obtained in the Extraordinary General Meeting held on 9th July, 2010. Each of these warrants will be convertible into 1 (one) Equity Share of par value of Rs.10/- each at the option of the Warrant holder within 18 months from the date of their allotment.

The amount raised through these issues was fully utilised for the proposed and ongoing expansion plans of the Company.

Capital Structure:

During the year under review, the paid up equity share capital of the Company was increased from Rs. 32,91,09,100 to Rs.39,30,00,000 comprising of 3,93,00,000 Equity Shares of Rs. 10/- each with the issue and allotment of 29,00,000 (Twenty Nine Lakhs) Equity Shares of Rs.10/- each of the Company on 21st December, 2009 and 34,89,090 (Thirty Four Lakhs Eighty Nine Thousand Ninety) equity shares of Rs. 10/- each consequent upon conversion of share warrants on 23rd December 2009.

During the Current year 2010-11, the paid up equity share capital of the Company was increased from Rs. 39,30,00,000 to Rs. 42,85,00,000 comprising of 4,28,50,000 Equity Shares of Rs. 10/- each with the issue and allotment of 35,50,000 (Thirty Five Lakhs Fifty Thousands) Equity Shares of Rs.10/- each of the Company on 23rd July, 2010.

Directors:

In accordance with the provisions of Companies Act, 1956 and the Articles of Association of the Company, Mr. V.V. Krishna Rao and Mr. R. Ramachandra Rao retire by rotation and being eligible, offer themselves for re-appointment.

Future Outlook:

The long term outlook of the Steel Industry continues to be promising and challenging. With increased manufacturing base, your Company is continuing its efforts on increase in the revenues with better margins.

Report on Subsidiary Companies and Consolidated Financial Statements:

The Company has no subsidiaries for the year under review and hence the report on subsidiaries and consolidated financial statements and the statement pursuant to Section 212 of the Companies Act, 1956 are not applicable to the Company.

Auditors and Auditors Report:

M/s Pavuluri& Co, Chartered Accountants, the Companys Auditors will retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment and have expressed their willingness to act as auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 224 (1B) of the Companies Act, 1956.

In respect of Item no (f) of the Auditors Report to the members of the Company, the Directors wish to state that no provision has been made in the accounts for doubtful debts amounting to Rs. 79.15 Lakhs (Previous year Rs. 84.65 Lakhs) as the Management expects it to be recovered in the due course.

Fixed Deposits:

The Company has not accepted any Fixed Deposits from the public during the financial year under review and, as such, no amount on account of principal or interest on Fixed Deposits was outstanding as on 31st March, 2010.

Directors Responsibility Statement:

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

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

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

(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

Corporate Governance:

In pursuance of Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a separate report on Corporate Governance along with a certificate from the Auditors of the Company regarding its compliance is annexed and forms part of this Report.

Management Discussion and Analysis:

The Management Discussion and Analysis report as required under the Listing agreement entered into with the Stock Exchanges is annexed and forms part of this Report.

Conservation of Energy, Technology Absorption and Foreign Exchange:

Information required under Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, as amended from time to time, forms part of this report. However, as per the provisions of Section 219 (1) (b) (iv), the report and the accounts are being sent to all members of the Company excluding the information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo. Any member interested in obtaining such particulars may inspect the same in the Registered Office of the Company or write to the Company Secretary for a copy.

Industrial Relations:

The Industrial relations have been cordial through out the year under review and your Directors wish to place on record their sincere appreciation for the dedication, commitment and teamwork of employees at all levels, who have been instrumental in enabling your Company to achieve higher growth levels during the year.

Particulars of Employees:

The information required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 is given in the statement annexed hereto forming part of this report.

Acknowledgements:

Your Directors take this opportunity to express their appreciation for the continued support and assistance received from the Companys Bankers. The Directors also thank the Business Associates, Financial Institutions and various Central and State Government Departments and Government Authorities for their continued co-operation and support.

The Directors also wish to place on record their gratitude for the continued support and cooperation received from the valued Customers, Vendors, Members, and Investors of the Company and look forward to the same in greater measure in the coming years.

For and on behalf of the Board of Directors



Place: Maliveedu, L.Kota (Mandal) B. SATISH KUMAR

Date:August 07,2010 Chairman & Managing Director

 
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