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Directors Report of Sunflag Iron & Steel Company Ltd.

Mar 31, 2015

The Shareholders,

The Board of Directors hereby present the 29th Annual Report together with the Audited Financial Statements for the year ended 31st March, 2015. During the year under review, the Steel Industry as well as Automobile and Auto component sectors continued to remain in the market with sluggish demand in addition to this there is a sudden surge in import of iron ore and coal, resulted in the high input costs, which have adversely affected the profitability resulting into lesser margin. However, with the continuous efforts by the Company's Management towards strict cost reduction and better financial /working capital management, has helped to improve its overall performance in order to survive in the difficult market conditions.

1. FINANCIAL RESULTS

Summarised financial results for the year are as follows : in |_acs)

Sr For the financial year ended S Particulars No 31st March 2015 31st March 2014

1 Total Income 176,259 159,090

2 Total Expenditure 158,731 143,841

3 Gross Profit 17,528 15,249

4 Finance Cost 7,144 7,299

5 Profit before Depreciation 10,384 7,950

6 Depreciation 5,113 6,118

7 Profit / (Loss) before Tax 5,271 1,832

2. FINANCE

Your Company has ended the financial year with a profit after tax of Rs. 2,441 Lacs. After taking into account the brought forward profit of Rs. 33,849 Lacs, your Company has carried forward an amount of Rs. 36,290 Lacs.

3. DIVIDEND

The Company is in need of more funds through internal accruals to cope with the terms and conditions of the lending banks financing ongoing capital projects under expansion programmes, which will enable future growth of the Company. As such, Board of Directors does not recommend dividend on the equity share of the Company for the Financial Year 2014 - 2015.

4. SHARE CAPITAL

During the year under review, the authorised share capital of the Company was reclassified, with creation of additional 40,000,000 (Four crore) equity shares of Rs. 10/- (Rs. Ten) each, against cancellation of 4,000,000 (Forty lacs) 10% cumulative preference shares of Rs. 100/- (Rs. One hundred) each, lying unissued and forming part of the authorised share capital of the Company and consequent amendments to the capital clause of the Memorandum and Articles of Association of the Company under Section 13, 14, 61 and 64 of the Act.

Further, during the year under review, the Company has issued and allotted 18,021,945 equity shares of face value of Rs. 10/- (Rs. Ten) each, at a premium of Rs. 21/- (Rs. Twenty one) each to Non-promoter foreign body corporate namely M/s Daido Steel Co. Ltd., Japan on preferential allotment basis on 11th September 2014.

Accordingly, the issued, subscribed and paid-up share capital of the Company increased from Rs. 1,621,975,030 to Rs. 1,802,194,480 as on 31st March, 2015.

5. MARKET SCENARIO

During the year under review, there was no substantial increase of demand in Automobile and Auto Component Industries. However, SUNFLAESTEEL is continuing to develop new high value grades of alloy steel to cater the needs of other domestic as well as international markets than its present market. There is no significant change in current market scenario however it is expected to improve in the days to came after slow down in the past previous year/s.

6. COMPANY'S WORKING / OPERATIONS

During the year under review, the production details of Plants are as under : (Production : MT)

Sr Particulars Financial Year 2014 - Financial No 2015 Year 2013 - 2014

1 Direct Reduction Plant (I II) 130,762 114,026

2 Steel Melt Shop 319,969 296,702

3 Rolled products 312,839 296,564

4 Mini Blast Furnace / Pig Iron 234,841 219,980

5 Sinter Plant 295,794 339,301

6 Coal (Belgaon Coal Block) 196,380 148,000

7 Power Plant (Lacs-kWh) 1609.56 1573.13

7. The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future :

No such orders passed during the year, hence not applicable.

8. BELGAON COAL BLOCK

During the year 2005 - 2006, the Company was allocated Belgaon coal block in the State of Maharashtra for captive use at the Company's steel plant at Bhandara in the State of Maharashtra.

As per the order of the Hon'ble Supreme Court of India dated 24th September 2014, the Belgaon coal block which was allocated to the Company stand de-allocated effective 31st March, 2015 with an additional levy of Rs. 295/- per ton on the quantity of coal extracted from the said Coal Block.

Further, as per decision, the Nominated Authority, Ministry of Coal, Government of India have auctioned the coal block/s so cancelled including the Belgaon coal block. Your Company has participated in the e-auction and was declared as a successful bidder for re-allocation of the said coal block at a Final Price Offer (FPO) of Rs. 1785/- per MT.

9. PROJECTS Steel Plant :

As reported in previous year the Company has undertaken to commission the online inspection system for hot rolled round bars. The project consists of ultrasonic testing machine and 2 Roll straightening machine. The project is expected to be in operation in the current financial year 2015 - 2016.

Further, the Company has undertaken alloy feeding system in Ladle re-heating furnace - 2 of Steel Melt Shop wherein alloy materials will be weighted and fed through automatic process in to steel ladle in re-heating process. The project is expected to be commissioned in the current financial year 2015 - 2016.

Subsidiary Companies :

Sunflag Power Limited : Requisite approvals are being sought for the implementation of Hydro Power Project at Hanol-Tuini in the state of Uttarakhand.

Sunflag Special Steels Limited : The management is exploring the business opportunities for the Company.

Khappa Coal Company Private Limited : As per the order of the Hon'ble Supreme Court of India dated 24th September 2014, the Khappa & Extn coal block which was allocated to Khappa Coal Company Private Limited, being at initial stage and non-operating one, stand de-allocated with immediate effect. The management will take appropriate steps once the final decision regarding fate of bank guarantee is resolved.

Joint Venture Companies (JVC) :

Madanpur (North) Coal Company Private Limited and C T Mining Private Limited :

As per the order of the Hon'ble Supreme Court of India dated 24th September 2014, the coal block/s which were allocated to Madanpur (North) Coal Company Private Limited in the state of Chhattisgarh and to C T Mining Private Limited in the state of Jharkhand, being at initial stage and non-operating ones, stand de-allocated with immediate effect. The management will take appropriate steps once the final decision regarding fate of bank guarantee is resolved.

Gujarat State Mining and Resources Corporation Limited : In absence of allocation of coal block to the JVC and non-viability of integrated coke oven project, the board of directors of the Company at its meeting held on 19th March, 2015 unanimously resolved to strike-off the name of the JV Company subject to requisite approval/s.

Daido D.M.S. India Private Limited : Your Company has formed and incorporated a joint venture Company at Faridabad in the National Capital Territory of Delhi with two JV partners namely Daido Steel Co. Ltd., Japan and Daido Die & Mold Steel Co. Ltd., Japan on 10th March, 2015. The JVC is in the process of commencement of its proposed business and commercial activities. The object of the Company is to carry on the business as manufacture (processing, heat treatment, surface treatment), import, export, distribute or otherwise deal in die and mold steel (tool steel and other metallic materials), processed products thereof and mold parts.

10. DEMATERIALISATION OF SHARES

As on 31st March, 2015, there were approximately 1072 lacs equity shares dematerialised through depositories viz. National Securities Depository Limited and Central Depository Services (India) Limited, which represents about 59.49% of the total paid-up capital of the Company.

11. LISTING OF SHARES

During the year, 18,021,945 equity shares in the capital of the Company issued and allotted on 11th September, 2014 to Daido Steel Co. Ltd., Japan were got listed, subject to lock in period of one (1) year, with BSE Limited (BSE) and The National Stock Exchange of India Limited (NSE) effective 9th October, 2014.

The Equity shares of your company continued to be listed with / traded on the BSE Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing fees have been paid to both Stock Exchanges (BSE & NSE) for the financial year 2015 - 2016.

12. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGES EARNINGS AND OUTGO

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are given in the Annex - C to this report.

13. DIRECTORS & KEY MANAGERIAL PERSONNEL

I. APPOINTMENT & CESSATION OF KEY MANAGERIAL PERSONNEL (KMP)

a) The existing managerial personnel of the Company namely, Mr. Ravi Bhushan Bhardwaj (DIN : 00054700), Vice-Chairman & Managing Director; Mr. Pranav Bhardwaj (DIN : 00054805), Joint Managing Director and Mr. Surendra Kumar Gupta, Whole-time Director, designated as Director & CEO of the Company have been re-classified (recognised) as the key managerial personnel (KMP) of the Company effective 1st April, 2014.

b) Mr. Ravi Bhushan Bhardwaj ceased to be the Managing Director & Key Managerial Personnel (KMP) of the Company effective 12th August, 2015. However, continued as a Non-Executive Vice-Chairman of the Company.

c) Mr. Pranav Bhardwaj, Joint Managing Director is re-designated as Managing Director of the Company effective 12th August, 2015.

d) Mr. Surendra Kumar Gupta, Whole-time Director designated as Director & CEO is re-designated as Deputy Managing Director of the Company effective 12th August, 2015.

e) Mr. R. Muralidhar, Executive Director (Finance) of the Company was appointed as the Key Managerial Personnel (KMP) of the Company effective 1st April, 2014.

CS Mukesh D Parakh (ICSI Membership No. FCS-4343) Company Secretary was also re-classified (recognised) as the Key Managerial Personnel (KMP) of the Company effective 1st April, 2014. f ) CS Mukesh D Parakh, (Membership No. FCS-4343) Company Secretary of the Company has resigned and in his place, CS Pranab Panigrahi (Membership No. ACS-16186) was appointed as the Company Secretary & Compliance Officer of the Company effective 5th August, 2014.

II. RETIREMENT BY ROTATION

Pursuant to Section 152 of Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014, Mr. Pranav Bhardwaj (DIN : 00054805), Managing Director retire by rotation and, being eligible, offers himself for re-appointment. The Board recommends his re-appointment in the interest of the Company.

III. NOMINATION & CESSATION OF NOMINEE DIRECTOR

IDBI Bank Limited has withdrawn nomination of Mr. Sonam Bodh (DIN - 06731687) from the Board and instead appointed Mr. P. K. Das (DIN - 06593113) (Chief General Manager - RBG, IDBI Bank Limited, Nagpur), effective 12th December, 2014. Further, IDBI Bank Limited has also withdrawn nomination of Mr. P. K. Das (DIN - 06593113), effective 11th February, 2015. The Board places on record its appreciation for valuable services and wide contributions made by Mr. Sonam Bodh and Mr. P. K. Das during their respective tenure as a Nominee Director/s of the Company.

IV. APPOINTMENT OF INDEPENDENT DIRECTOR

Pursuant to Section 149, 152, Schedule IV of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement/s, Mrs. Neelam Kothari (DIN - 06709241) was appointed as an Additional Director (Non-executive, Independent Director) effective 29th September, 2014 and her term is expiring at the conclusion of ensuing Annual General Meeting of the Company.

The Company has received a notice in writing under Section 160 of the Companies Act, 2013 from a member proposing her candidature for office of the Director (Non-executive, Independent Director) of the Company.

The Board recommends her appointment as a Non-executive, Independent Director for a fixed term of consecutive five (5) years i.e. from the conclusion of 29th Annual General Meeting up to the conclusion of 34th Annual General Meeting of the Company in the calendar year 2020.

Except the above, there is no change in the composition of Board of Directors including Key Managerial Personnel during the period under review.

14. EVALUATION OF BOARD'S PERFORMANCE

In compliance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement entered with the Stock Exchange/s, the performance evaluation of the Board was carried out during the year under review, the details of which are given in the Corporate Governance Report, forms an integral part of this report.

15. BOARD MEETINGS

Details about Board Meetings held during the Financial Year 2014 - 2015 are given in the Corporate Governance Report, which forms an integral part of this report.

16. DECLARATION BY INDEPENDENT DIRECTORS

The Independent Directors have confirmed that they meet the criteria of 'Independence' as stipulated under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement/s with the Stock Exchanges.

17. REMUNERATION POLICY

Details about the remuneration policy are given in the Corporate Governance Report, which forms an integral part of this report.

18. PUBLIC DEPOSITS

During the year under review, the Company has not accepted any Public Deposits within the meaning of the Companies Act, 2013 read with rules made there under.

19. PERSONNEL / PARTICULARS OF EMPLOYEES

The information required under Section 197 of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:

a) The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year 2014 - 2015 :

Executive Directors Ratio to Median remuneration

Mr. Ravi Bhushan Bhardwaj - Vice- Chairman & Managing Director 12.86%

Mr. Pranav Bhardwaj - Joint Managing Director 12.50%

Mr. Surendra Kumar Gupta - Whole-time Director designated as Director & CEO 7.97%

b) The percentage increase in remuneration of each director, chief executive officer, chief financial officer, company secretary in the financial year :

Directors, Chief Executive Officer, Chief % increase in remuneration Financial officer and Company Secretary in the financial year

Mr. Ravi Bhushan Bhardwaj - Vice Chairman & Managing Director 14.75%

Mr. Pranav Bhardwaj - Joint Managing Director 16.97%

Mr. Surendra Kumar Gupta - Whole-time Director designated as Director & CEO 15.14%

Mr. R. Muralidhar - Chief Financial Officer --

CS Mukesh D Parakh - Company Secretary --

CS Pranab Panigrahi - Company Secretary --

c) The percentage increase in the median remuneration of employees in the financial year : 11.11%

d) The number of permanent employees on the rolls of Company as on 31st March, 2015 : 1440

e) The explanation on the relationship between average increase in remuneration and Company performance :

On an average, employees received an annual increase of 10% in India. The individual increments varied from 5% to 20%, based on individual performance. In order to ensure that remuneration reflects company performance, the performance pay is also linked to organization performance, apart from an individual's performance.

Employees outside India receiving wage increase : Not Applicable

f) Comparison of the remuneration of the key managerial personnel against the performance of the Company of the financial year 2014 - 2015 :

Aggregate remuneration of key managerial personnel (KMP) - Rs. 46,422,199

Revenue - Rs. 17,625,913,853

Remuneration of KMPs (as % of revenue) - 0.26%

Profit before Tax (PBT) - Rs. 527,126,080

Remuneration of KMP (as % of PBT) - 8.80%

g) Variations in the market capitalisation of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year :

Particulars 31st March, 2015 31st March, 2014 % Change

Market Capitalization (Rs. in lacs) 40,639.48 34,548.07 17.63

Price Earnings Ratio # 15.88 15.89 -0.06

# Based on the official market price quoted at BSE

h) Percentage increase or decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer :

Particulars 31st March, 2015 IPO Date / first IPO Price (Rs.) listing date (Rs.)

Market Price (BSE) 22.55 29.03.1988 10.00

Market Price (NSE) 23.70 29.03.1988 10.00

Particulars Adjusted IPO Price % by considering CA * Change

Market price BSE N.A. 125

MARKET price NSE N.A. 137

* Adjusted for Corporate Action (CA)

i) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration :

The average annual increase was around 10%. However, during the course of the year, the total increase is approximately 10%, after accounting for promotions and other event based compensation revisions.

Increase in the managerial remuneration for the year was 11.11%.

j) Comparison of each remuneration of the key managerial personnel against the performance of the Company :

Particulars Mr. Ravi Bhushan Mr. Pranav Mr. Surendra Kumar Bhardwaj, Bhardwaj Gupta, Whole-time Vice-Chairman & Joint Managing Director designated Managing Director Director as Director & CEO

Remuneration (Rs.) 12,903,968 12,539,720 7,993,461

Revenue (Rs.) 17,625,913,853 17,625,913,853 17,625,913,853

Remuneration as % of 0.073 0.071 0.045 revenues

Profit before Tax (PBT) (Rs.) 527,126,080 527,126,080 527,126,080

Remuneration (as % of PBT) 2.448 2.379 1.516



Particulars Mr. R. Muralidhar CS Mukesh D CS Pranab Chief Financial Parakh Panigrahi Officer Company Company Secretary Secretary

Remuneration (Rs.) 6,326,400 2,057,079* 1,501,328*

Revenue (Rs.) 17,625,913,853 17,625,913,853 17,625,913,853

Remuneration as % of revenues 0.036 0.012* 0.009*

Profit before Tax (PBT) (Rs.) 527,126,080 527,126,080 527,126,080

Remuneration (as % of PBT) 1.200 0.390* 0.285*

* Not Comparable as figures pertains to part of the financial year

k) The key parameters for any variable component of remuneration availed by the directors :

Variable component of remuneration was based on the prevailing policy of the Company.

l ) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year : NIL, Hence Not Applicable

m) Affirmation that the remuneration is as per the remuneration policy of the Company :

The Company affirms remuneration is as per the remuneration policy of the Company.

n) Information as per Section 197 of the Companies Act, 2013 ("the Act") and 5(2) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014, as amended, forms part of this report. However, in terms of Section 136(1) of the Act, the Report and Accounts are being sent to all the shareholders and others entitled to receive the same, excluding the Statement of Particulars of Employees. The Statement is available for inspection by the members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.

20. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The dividend declared by the Company which remains unpaid / unclaimed for a period of seven (7) years is required to be transferred to the Investor Education & Protection Fund (IEPF) established by the Central Government pursuant to Section 125 of the Companies Act, 2013.

Therefore, Dividend declared / paid at the 22nd Annual General Meeting held on 23rd September, 2008 and remaining unpaid / unclaimed for Seven (7) years will liable to be transferred to the credit of IEPF Account on 22nd September, 2015. The members are requested to claim their unpaid / unclaimed dividends, if any.

The details of dividends declared and transferred to the credit of IEPF for the earlier financial years is as under :

S Particulars of Dividend Due Date of Transfer Amount Credited No to IEPF to IEPF (Rs.)

1 Dividend for financial year 2005 - 2006 - Twentieth (20th) 27.09.2013 1,592,685.00 Annual General Meeting held on 28th September, 2006

2 Dividend for financial year 2006 - 2007 - Twenty-first (21st) 24.09.2014 1,171,767.00 Annual General Meeting held on 25th September, 2007

21. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company's steel plant is located at Bhandara Road, Warthi Village, Tahsil Mohadi, District Bhandara. It is located at a distance of about 12 kilometers from the district place Bhandara. The unit is surrounded by about 3 villages in the radius of about 5 Kms. The Company is having its captive coal mines at Belgaon, near village Aathmurdi in Chandrapur district. The residents of these localities are directly or indirectly associated with the Company. The Company has primarily focused on the development of the residents of these localities.

All the activities / programmes are covered under SISCO CSR are being monitored by the CSR Committee and are implemented by the delegated CSR Sub-committee.

As required, the Annual Report on Corporate Social Responsibility (CSR) activities together with details of expenditure is enclosed herewith as Annex - A attached to this Report.

22. ANNUAL RETURN

The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is furnished in Annex D attached to this Report, which forms an integral part of this report.

23. AUDITORS

I. STATUTORY AUDITORS AND THEIR REPORT :

M/s. Patel, Shah & Joshi, Chartered Accountants, Mumbai (Firm Registration No. 107768W) - the Statutory Auditors of the Company are eligible and recommended for re-appointment as the Statutory auditors from the conclusion of this meeting untill the conclusion of next Annual General Meeting.

The Statutory Auditors have furnished a Certificate of their eligibility for re-appointment under Section 139 of the Companies Act, 2013 read with rules and regulations made there under and are not disqualified for such re-appointment within the meaning of Section 139 and Section 141 of the Companies Act, 2013.

The Auditors' Report to the shareholders for the year under review do not contain any qualification. The observations made by the Auditors in their report are self-explanatory and have also been further amplified in the Notes to the Accounts and do not call for any explanation

II. COST AUDITORS AND THEIR REPORT :

Pursuant to Section 148 of the Companies Act 2013, the Board of Directors of the Company on the recommendations of the Audit Committee, appointed M/s. G. R. Paliwal & Company (Membership No. 7815), Cost Accountants, Nagpur as the Cost Auditors of the Company for the financial year 2015-2016 and has recommended their remuneration to shareholders for their ratification at the ensuing Annual General Meeting.

The Cost Auditors have furnished a Certificate of their eligibility for appointment pursuant to Sub-section 3(g) of Section 141 read with Sub-section (5) of Section 148 of the Companies Act, 2013, Certificate for independence and arms length relationship with the Company and are not disqualified for such appointment within the meaning of Section 141(3) of the Companies Act, 2013. Pursuant to Cost audit (Report) Rules 2001, the Cost Audit Report for the financial year 2013-2014 was filed vide SRN : S31210669 dated 16th September, 2014.

III. SECRETARIAL AUDITORS AND THEIR REPORT :

CS Mukesh D Parakh (Membership No. FCS-4343 & Certificate of Practice No.13693), Practicing Company Secretary has been appointed as the Secretarial Auditors of the Company for the financial year 2014-2015. The Secretarial Audit Report given by Secretarial Auditor is annexed herewith as an Annex - B, which is self explanatory and do not call for any further explanation. Further, the said Report do not contain any qualification.

24. AUDIT COMMITTEE

The Audit Committee of the Board is under Chairmanship of Dr. E.R.C. Shekar, Non-executive, Independent Director of the Company and consists of CA Jayesh Madhavji Parmar & Mr. S. Gajendran, Non-executive, Independent Directors and Mr. Sonam Bodh (upto 12th December 2014), Nominee Director of IDBI Bank Limited, as the Members, as a practice of good Corporate Governance. Secretary : CS Mukesh D Parakh - Company Secretary (up to 05.08.2014)

Secretary : CS Pranab Panigrahi - Company Secretary (effective 05.08.2014)

25. NOMINATION AND REMUNERATION COMMITTEE

Chairman : Dr. E.R.C. Shekar, Independent - Non-executive Director

Members : Mr. S. Gajendran and CA Jayesh M Parmar, (Independent, Non-executive Directors) and Mr. Sonam Bodh (Nominee - IDBI Bank Limited) (up to 12.12.2014) and Executive Directors viz Mr. Ravi Bhushan Bhardwaj, Vice Chairman & Managing Director and Mr. S. K. Gupta, Whole-time Director, designated as Director & CEO of the Company. Secretary : CS Mukesh D. Parakh - Company Secretary (up to 05.08.2014)

Secretary : CS Pranab Panigrahi - Company Secretary (effective 05.08.2014)

26. VIGIL MECHANISAM - WHISTLE BLOWER POLICY

With the rapid expansion of business in terms of volume, value and geography, various risks associated with the business have also increased considerably. One such risk identified is the risk of fraud / misconduct. The Audit Committee is committed to ensure fraud-free work environment and to this end the Committee has laid down the Whistle Blower Policy providing a platform to all the employee, vendors and customers to report any suspected or confirmed incident of fraud / misconduct through any of the following reporting protocols :

The details about Vigil Mechanism- Whistle Blower Policy are given in the Corporate Governance Report, which is forms an integral part of this report.

The Whistle Blower Policy is also available at the Company's website www.sunflagsteel.com

27. RISK MANAGEMENT POLICY

The revised Clause 49 of the Listing Agreement mandates constitution of the Risk Management Committee (RMC) by the Company. The Committee is required to lay down the procedures to inform to the Board about the risk assessment and minimization procedures and the Board shall be responsible for framing, implementing and monitoring the risk management plan of the Company.

The Business Risk Evaluation and Management (BREM) is an ongoing process within the organization. The Company has a robust risk management framework to identify, monitor and minimize risks as also identify business opportunities. The details viz objectives and scope, committee member and their attendance, are given in the Corporate Governance Report which is forming part of the Annual Report. The Risk Management Policy is also available at the Company's website www.sunflagsteel.com

29. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES UNDER SECTION 188 OF THE COMPANIES ACT, 2013

a) Details of contracts or arrangements or transactions not at arm's length basis :

There are no such transactions and hence not applicable.

b) Details of contracts or arrangements or transactions at arm's length basis :

30. CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI through listing agreement executed with the stock exchanges/s. The Company has also implemented several best corporate governance practices as prevalent globally.

Your Directors are pleased to report that your Company has complied with the SEBI Guidelines on Corporate Governance as of 31st March, 2015 relating to Clause 49 of the Listing Agreement with concerned Stock Exchange(s). A Certificate from Statutory Auditors - M/s Patel, Shah & Joshi, Chartered Accountants (Firm Registration No. 107768W), confirming compliance with conditions as stipulated under Clause 49 is annexed to the Corporate Governance Report, which forms an integral part of this report.

31. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDER TRADING AND OTHER CODES / POLICIES

Your Directors are pleased to report that your Company has complied with the :

1. Code of Conduct of Business Principles and Conduct and Policy on Material Subsidiary

2. Code of Prevention of Insider Trading in Sunflag securities by the designated persons / officers (insider) (as amended from time to time)

3. Code for Whistle Blower Policy

4. Risk Management Policy

5. Code for Independent Directors; and

6. Code for Corporate Social Responsibility

The aforesaid policies are also available on the Company's website www.sunflagsteel.com

32. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate internal control systems and procedures commensurate with the size and nature of business. These procedures are designed to ensure :

a) that all assets and resources are used efficiently and are adequately protected;

b) that all the internal policies and statutory guidelines are complied with; and

c) the accuracy and timing of financial reports and management information is maintained.

33. Material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report :

There are no such material changes during this period, hence not applicable.

34. DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors confirms :

1. that in the preparation of the Annual Financial Accounts, the applicable Accounting Standards had been followed along with proper explanation, relating to material departures;

2. that the Directors had 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 and of the financial year and of the profit of the Company for that financial year;

3. that the Directors had taken proper and sufficient care for the maintenance of adequate Accounting records in accordance with the provisions of this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

4. that the Directors had prepared the Annual Financial Statements on a going concern basis;

5. that the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls were adequate and operating effectively; and

6. that the Directors had devised proper system to ensure compliance with the provisions of all applicable laws and regulations and that such systems were adequate and operating effectively.

35. MATERIAL DEVELOPMENT IN HUMAN RESOURCES INDUSTRIAL RELATIONS

During the year under review, industrial relations remained cordial. Employees' competencies and skills were enhanced by exposing them to several internal and external training programmes. Various measures were taken to improve motivation level of employees. Additional efforts are continued to be implemented with a view to obtain commitment and loyalty towards the organization.

SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

Sunflag Iron and Steel Company Limited ("the Company") has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the workplace (Prevention, Prohibition & Redressal) Act, 2013 and Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees etc) are covered under this Policy. The Certificate by Managing Director and Deputy Managing Director to that effect is enclosed herewith Annex E and forms part of this report.

HEALTH AND SAFETY

Departmental safety coordinators are identified for monitoring & training on safety related matter at shop-floor. Safety Committee and Apex Committee are available for periodical review on safety, health & environment of all departments.

Regular Training on Safety is being organized for new joinee, regular employees & contract labour. Mock-drills are conducted for practical exposure to meet emergency need on quarterly basis.

Hand book on safety awareness are distributed to all employees

36. ENCLOSURES

a) Annex - A : Annual Report on Corporate Social Responsibility (CSR) Activities together with expenditure details as Annex-I

b) Annex - B : Secretarial Auditors Report

c) Annex - C : Report on Energy Conservation, Technology Absorption and Foreign Exchanges Earnings and Outgo

d) Annex - D : Extract of Annual Return as of 31st March, 2015 in the prescribed Form MGT-9

e) Annex - E : Certificate on Sexual Harassment of Women at the Workplace and its Prevention, Prohibition & Redressal

37. ACKNOWLEDGEMENT

The Directors acknowledge with thanks co-operation and assistance received by the Company from the Members, Central & State Government and Banks. The Directors also record their appreciation of the dedication of all the employees of the Company for their support and commitment to ensure that the Company continues to grow.

For and on behalf of the Board

Pranav Bhardwaj Surendra Kumar Gupta Nagpur Managing Director Deputy Managing Director 12th August, 2015 DIN : 00054805 DIN : 00054836




Mar 31, 2014

The Shareholders,

The Board of Directors hereby present the 28th Annual Report together with the Audited Financial Statements for the year ended 31st March 2014. During the year under review, the Steel Industry as well as Automobile and Auto component sectors continued to remain in the market with sluggish demand. Further, the high input costs have adversely affected the profitability resulting into lesser margin. However, with the continuous efforts by the Company''s Management towards strict cost reduction and better financial / working capital management, has helped to improve its overall performance in order to survive in the difficult market conditions.

1. FINANCIAL RESULTS

Summarised financial results for the year are as follows :

(Rs. in Lacs)

For the financial year ended Sr. Particulars No. 31st March 2014 31st March 2013

a) Total Income 159,090 157,713

b) Total Expenditure 143,841 145,085

c) Gross Profit 15,249 12,628

d) Finance Cost 7,299 8,233

e) Profit before Depreciation 7,950 4,395

f) Depreciation 6,118 5,645

g) Profit/(Loss) before Tax 1,832 (1,250)

2. FINANCE

Your Company has ended the financial year with a profit after tax of Rs. 2,168 Lacs. After taking into account the brought forward profit of Rs. 31,681 Lacs, your Company has carried forward an amount of Rs. 33,849 Lacs.

3. DIVIDEND

The Company is in need of more funds through internal accruals to cope with the terms and conditions of the lending banks financing ongoing capital projects under expansion programmes, which will enable future growth of the Company. As such, Board of Directors do not recommend Dividend on the Equity Shares of the Company for the Financial Year 2013-2014.

4. MARKET SCENARIO

During the year under review, no substantial increase of demand was seen in Automobile and Auto Component Industries. The profitability of the steel industry have been affected due to high input cost of basic raw materials viz Iron Ore and Coal and also due to Government policies on these basic raw materials. However, SUNFLAE STEEL is continuing to develop new high value grades of alloy steel to cater the needs of other domestic as well as international markets than its present market. The current market scenario is expected to be favorable to Steel Industries after slow down in the previous year/s.

5. OPERATIONS

i. During the financial year under review :

a) The total production for Direct Reduction Plant (I II) was 114,026 MT as against 118,030 MT of the previous financial year.

b) The total production of 296,702 MT in Steel Melt Shop as against 269,152 MT of the previous financial year.

c) The total production of Rolled products was 296,564 MT as against 273,019 MT of the previous financial year.

d) The total production of Mini Hot Metal / Pig Iron was 219,980 MT as against 193,200 MT of the previous financial year.

e) The total production of Sinter Plant was 339,301 MT as against 340,389 MT of the previous financial year.

ii. The power plant generated 1,573.13 Lacs kWh as compared to 1,601.03 Lacs kWh of the previous financial year. iii. The total coal production at Belgaon Coal Block is 148,000 as against 248,350 MT of the previous financial year.

6. PROJECTS

Project under Construction :

The Company has undertaken to commission Online Inspection system. The project consists of Ultrasonic Testing Machine and Roll Straighteners together with hot rolled black bar handling equipment. This facility is proposed to be installed at finished product unit to verify the material for defect free. This will eliminate the customer rejections on quality issues. Also,SUNFLAESTEEL will continue to retain major auto giants.

Subsidiary Companies :

Sunflag Power Limited : Requisite approvals are being sought for the implementation of Hydro Power Project at Hanol Tuini in the state of Uttarakhand.

Sunflag Special Steels Limited : The management is exploring the business opportunities for the Company.

Khappa Coal Company Private Limited : The Ministry of Coal, Government of India pursuant, to its order bearing no. 13016/56/ 2008-CA-I dated 6th January 2014, conveyed its decision to de-allocate the Khappa & Extension Coal Block in the State of Maharashtra.

Sunflag Iron and Steel Company Limited, thereafter filed a writ petition before the High Court of Judicature at Bombay, Nagpur Bench against the order of de-allocation. The High Court, through an order dated 24th January 2014, has granted an ad-interim relief that "no coercive steps be taken against the petitioner".

Joint Venture Companies (JVC) :

Madanpur (North) Coal Company Private Limited : The Ministry of Coal, Government of India, pursuant to its order bearing no. 13016/76/2006-CA-I (Part-I) dated 17th February 2014, conveyed its decision to de-allocate the Madanpur (North) Coal Block in the State of Chhattisgarh.

Madanpur (North) Coal Company Private Limited, thereafter filed a writ petition against the order of de-allocation before Delhi High Court at New Delhi. The High Court of Delhi has passed an interim order dated 17th February 2014 directing that "since the coal block is stated to have been de-allocated by the Government, the respondent shall maintain status quo till the next date of hearing and no further steps shall be taken by the Government to re-allocate the coal block nor shall any third party interest be created therein till further orders".

C T Mining Private Limited : The Ministry of Coal, Government of India, pursuant to its order bearing no. 38011/4/2006-CA-I dated 22nd November 2012, conveyed its decision to de-allocate the Choritand-Taliya Coal Block in the State of Jharkhand.

Sunflag Iron and Steel Company Limited, thereafter filed a writ petition against the order of de-allocation before the High Court of Jharkhand at Ranchi. The High Court of Jharkhand has passed an interim order in 12th December 2012 that "no coercive steps be taken against the petitioners pursuant to the impugned order".

Gujarat State Mining and Resources Corporation Limited : In absence of allocation of coal block to the JVC, the proposed integrated coke oven project in the state of Gujarat is under active consideration of the Management.

7. DEMATERIALISATION OF SHARES

As on 31st March 2014, there were approximately 891 lacs equity shares dematerialised through depositories viz. National Securities Depository Limited and Central Depository Services (India) Limited, which represents about 54.916% of the total paid- up capital of the Company.

8. LISTING OF SHARES

The equity shares of your Company continued to be listed with / traded on the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing fees have been paid to both Stock Exchanges (BSE & NSE) for the financial year 2013-2014.

9. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed 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 are given in the Annex to this report.

10. SUBSIDIARY COMPANIES

In pursuance of general circular issued by the Ministry of Corporate Affairs, Government of India and on compliance of terms and condition for availing the general exemption U/s. 212(8) of the Companies Act, 1956, the audited Financial Statements of the subsidiary companies are not attached with the annual report of the Company. The audited Financial Statements of these subsidiary companies are available for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of accounts of subsidiary company may write to the Company Secretary of the Company.

11. DIRECTORS

i. IDBI Bank Limited has withdrawn nomination of Mr. B.W. Ramteke from the Board and instead appointed Mr. Sonam Bodh (Deputy General Manager-CBG, IDBI Bank Limited, Mumbai), effective 24th October 2013. The Board places on record its appreciation for Mr. B.W. Ramteke''s valuable services and wide contributions made during his tenure of Directorship of the Company.

ii. Pursuant to Section 152 of Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014, Mr. P.B.Bhardwaj, Non-executive Chairman retire by rotation and, being eligible, offered himself for re-appointment.

iii. Pursuant to Section 152 of Companies Act, 2013, read with Companies (Appointment and Qualification of Directors) Rules, 2014, Mr. Ravi Bhushan Bhardwaj, Vice-Chairman and Managing Director retire by rotation and, being eligible, offered himself for re-appointment.

iv. Pursuant to Section 149, 152, Schedule IV of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and pursuant to Listing Agreement/s, Dr. E R C Shekar, Mr. S Gajendran and CA Jayesh M Parmar, Non-executive, Independent Directors, in respect of whom the Company has received a notice in writing under Section 160 of the Companies Act, 2013 from a member proposing their candidature for office of the Director have been recommended for appointment as Non-executive, Independent Director for a fixed term of consecutive three (3) years i.e. from the conclusion of 28th Annual General Meeting up to the conclusion of 31st Annual General Meeting of the Company in the calendar year 2017.

v. Pursuant to Section 149, 152, Schedule IV of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and pursuant to Listing Agreement/s, Mr Kumar Jitendra Singh has been appointed as an Additional

Director (Non-executive, Independent) of the Company effective 5th August 2014 and his term is expiring at the conclusion of ensuing Annual General Meeting. The Company has received a notice in writing under Section 160 of the Companies Act, 2013 from a member proposing his candidature for office of the Director have been recommended for appointment as Non-executive, Independent Director for a fixed term of consecutive three (3) years i.e. from the conclusion of 28th Annual General Meeting up to the conclusion of 31st Annual General Meeting of the Company in the calendar year 2017.

vi. Subject to approval of the Central Government, the Board of Directors recommends for approval of the Members, payment of remuneration over and above minimum remuneration as provided under Schedule XIII to the Companies Act, 1956 and waiver of excess remuneration paid during the financial year 2013-2014 to the managerial personnel/s of the Company.

vii. Except the above, there is no change in the composition of Board of Directors during the period under review.

12. INDUSTRIAL RELATIONS

During the year under review, industrial relations remained cordial. Employees'' competencies and skills were enhanced by exposing them to several internal and external training programmes. Various measures were taken to improve motivation level of employees. Additional efforts are continued to be implemented with a view to obtain commitment and loyalty towards the organisation.

13. PERSONNEL / PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this report. However, as permitted by Section 219(1)(b)(iv) of the Companies Act, 1956, the report and accounts are being sent to all shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary at the Registered Office of the Company.

14. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The dividend declared by the Company which remains unpaid / unclaimed for a period of seven (7) years is required to be transferred to the Investor Education & Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the Companies Act, 1956.

As such, the dividend for the financial year 2005-2006 declared at Twentieth (20th) Annual General Meeting held on 28th September 2006 and remaining unpaid / unclaimed for Seven (7) years amounting to Rs. 1,592,685/- had been transferred to the credit of IEFP Account on 27th September 2013. The members are requested to claim their unpaid / unclaimed dividends, if any.

15. AUDITOR''S REPORT

The observations made by the Auditors in their report are self-explanatory and have also been further amplified in the Notes to the Accounts.

16. AUDITORS

i. M/s. Patel, Shah & Joshi, Chartered Accountants, Mumbai - the Statutory Auditors of the Company are eligible and recommended for re-appointment as the Statutory auditors till the conclusion of the next Annual General Meeting.

The Statutory Auditors have furnished a Certificate of their eligibility for re-appointment under Section 139 of the Companies Act, 2013 and Rules and Regulations made thereunder and are not disqualified for such appointment within the meaning of Section 139 and Section 141 of the Companies Act, 2013.

ii. M/s. G. R. Paliwal & Company, Cost Accountants, Nagpur has been appointed by the Board of Directors of the Company on the recommendations of the Audit Committee, as the Cost Auditors of the Company for the financial year 2014-2015.

The Cost Auditors have furnished a Certificate of their eligibility for appointment pursuant to Sub-section 3(g) of Section 141 read with Sub-section (5) of Section 148 of the Companies Act, 2013, Certificate for independence and arms length relationship with the Company and are not disqualified for such appointment within the meaning of Section 141(3) of the Companies Act, 2013.

The Board recommends his remuneration to members for ratification at the 28th Annual General Meeting of the members of the Company.

17. AUDIT COMMITTEE

The Audit Committee of the Board is under Chairmanship of Dr. E. R. C. Shekar, Non-executive, Independent Director of the Company and consists of CA Jayesh Madhavji Parmar & Mr. S. Gajendran, Non-executive, Independent Directors and Mr. B. W. Ramteke (Upto 24th October 2013) and Mr. Sonam Bodh (effective 11th November 2013), Nominee Director of IDBI Bank Limited, as the Members, as a practice of good Corporate Governance.

18. CORPORATE GOVERNANCE REPORT

The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The Company has also implemented several best corporate governance practices as prevalent globally.

Your Directors are pleased to report that your Company has complied with the SEBI Guidelines on Corporate Governance as of 31st March 2014 relating to Clause 49 of the Listing Agreement with concerned Stock Exchange(s). A Certificate from Statutory Auditors – M/s Patel, Shah & Joshi, Chartered Accountants, confirming compliance with conditions as stipulated under Clause 49 is annexed to the Corporate Governance Report.

19. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDER TRADING

Your Directors are pleased to report that your Company has complied with the :

i. Code of Conduct of Business Principles and Conduct; and

ii. Prevention of Insider Trading in Sunflag securities by the designated persons / officers (insider)

20. DIRECTORS'' RESPONSIBILITY STATEMENT

The Board of Directors confirms :

i. that in the preparation of the Annual Financial Statements, the applicable Accounting Standards had been followed along with proper explanation, relating to material departures;

ii. that the Directors had 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 and of the financial year and of the profit of the Company for that financial year;

iii. that the Directors had taken proper and sufficient care for the maintenance of adequate Accounting records in accordance with the provisions of this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

iv. that the Directors had prepared the Annual Financial Statements on a going concern basis.

21. ACKNOWLEDGEMENT

The Directors acknowledge with thanks co-operation and assistance received by the Company from the Members, Central & State Government and Banks. The Directors also record their appreciation of the dedication of all the employees of the Company for their support and commitment to ensure that the Company continues to grow.

For and on behalf of the Board

Nagpur Ravi Bhushan Bhardwaj

5th August 2014 Vice-Chairman & Managing Director


Mar 31, 2013

To The Members of Sunflag Iron and Steel Company Limited

The Board of Directors hereby present the Twenty-seventh (27th) Annual Report together with the audited accounts for the financial year ended 31st March 2013. During the year under review, the Steel industry as well as Automobile and Auto component sectors witnessed stagnant demand. At SUNFLAG STEEL, the high input cost of basic raw materials coupled with lower sales realisation have reduced the profits considerably resulting into the losses. Still, the unstinted efforts by the Company''s management continued for strict cost reduction and better financial / working capital management helped to restrict its overall performance in order to sustain minimum damage to survive in the difficult market conditions.

1. FINANCIAL RESULTS

Summarised financial results for the year are as follows : ^ in Lacs)

Sr For the financial year ended Particulars No. 31st March 2013 31st March 2012

a) Total Income 157,713 162,346

b) Total Expenditure 145,085 149,782

c) Gross Profit 12,628 12,564

d) Finance Cost 8,233 5,305

e) Profit before Depreciation 4,395 7,259

f) Depreciation b 5,645 4,244

g) Profit / (Loss) before Tax (1,250) 3,015

2. FINANCE

During the financial year under review, the net turnover is lower by about 3% as compared to corresponding previous financial year. Your Company has ended the financial year with a loss after tax of ? 1,250 Lacs. After taking into account the brought forward profit of ? 32,931 Lacs, your Company has carried forward an amount of ? 31,681 Lacs.

3. DIVIDEND

Due to losses incurred and further decrease in the cash accruals, there is an increased pressure on the cash flows in the financial year under review. Also, due to the additional borrowings made for implementing the capital projects under expansion, there is an increase in the commitments towards repayments to the lending banks. As such, the Board of Directors feels appropriate not to recommend any dividend for the financial year 2012-2013.

4. MARKET SCENARIO

The current market scenario is not favourable to Steel Industry as well as Automobile and Auto component sectors due to general slow down in Indian and Global ecomony coupled with policies of Government. However,SUNFLAGSTEEL is continuing to develop new high value grades of alloy steel to cater the needs of domestic as well as international markets.

5. OPERATIONS

i. During the financial year under review :

a) The total production for Direct Reduction Plant (I II) was 118,030 MT as against 142,444 MT of the previous financial year.

b) The total production of 269,152 MT in Steel Melt Shop as against 302,532 MT of the previous financial year.

c) The total production of Rolled products at BSM & ASM was 273,019 MT as against 303,732 MT of the previous financial year. (Previous year production includes outside conversion of 7,624 MT).

d) The total production of Hot Metal / Pig Iron was 189,640 MT as against 205,089 MT of the previous financial year.

e) The total production of Sinter Plant was 340,389 MT as against 339,900 MT of the previous financial year.

f) The total production of Blooming Mill was 30,206 MT including semis. The production for the previous year nil as it was commissioned in the financial year under review.

ii. The power plant generated 1,601.03 Lacs kWh as compared to 1,714.21 Lacs kWh of the previous financial year. iii. The total coal production at Belgaon Coal Block is 248,350 as against 159,905 MT of the previous financial year.

6. PROJECTS Steel Plant :

The Company has commissioned commercial production of Blooming Mill during the financial year. Additionally, the Company is in the process of installation of Variable Reduction Mill (VRM) which will give close dimension, tolerance and good surface finish. Also, the Company is in process of installation of Bar Conditioning system.

These new projects will add wider product range, value addition and more competitive products and in particular, in achieving economy in the cost of production.

Also, the Company had installed Fume Extraction System in its Steel Melt Shop area as a measure of reducing the pollution.

Subsidiary Companies :

Sunflag Power Limited : Requisite approvals are being sought and underway for implementation of Hydro Power Project at

Hanol Tuini in the state of Uttarakhand. Recent disaster in the state of Uttarakhand may delay the progress of implementation of

Company''s Hydro Power Project at Hanol Tuini.

Sunflag Special Steels Limited : The management is exploring the business opportunities for the Company.

Khappa Coal Company Private Limited : The Company has initiated various activities well in time and is striving harder to pave its way to success. The activities to be initiated by the Company are almost over and different matters are pending with various departments of Government of Maharashtra and Government of India. The operations of the Khappa & Extension Coal Block will depend on delay in execution of project approvals and clearances, for hich regular follow up action is being taken by the

Company.

Joint Venture Companies :

Madanpur (North) Coal Company Private Limited : Earlier, the project was declared as ''No Go Area'' which was later withdrawn by the Ministry of Environment & Forest, Government of India for the purpose of forest clearances. As such, various approvals / clearances are being sought from the concerned authorities for effective implementation of the Madanpur (North) Coal Project in the state of Chhattisgarh.

C T Mining Private Limited : The Ministry of Coal, Government of India vide its order dated 22nd November 2012 de-allocated the Coal Block allocated to the Joint Venture Company. The said joint venture company together with the promoter companies viz., M/s Sunflag Iron & Steel Company Limited and M/s Rungta Mines Limited have separately filed Writ Petition/s before the Hon''ble High Court of Jharkhand at Ranchi and got stay order on 12th December 2012. The matter is now sub-judice before the Hon''ble High Court of Jharkhand at Ranchi.

Gujarat State Mining and Resources Corporation Limited : The management efforts are underway for getting allocation of coal block for development of integrated coke oven plant in the state of Gujarat.

7. DEMATERIALISATION OF SHARES

As on 31st March 2013, there were 88,971,299 equity shares (which represents 54.854% of the total paid-up capital of the Company) dematerialised through depositories viz. National Securities Depository Limited and Central Depository Services (India) Limited.

8. LISTING OF SHARES

The equity shares of your Company continued to be listed with / traded on the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing fees have been paid to both Stock Exchanges (BSE & NSE) for the financial year 2013-2014.

9. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The requisite particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the Annex to this report.

10. SUBSIDIARY COMPANIES

In pursuance of general circular issued by the Ministry of Corporate Affairs, Government of India and on compliance of terms and condition for availing the general exemption U/s. 212(8) of the Companies Act 1956, the audited accounts of the subsidiary companies are not attached with the annual report of the Company. The audited accounts of these subsidiary companies are available for inspection at the registered office of the Company. Any shareholder interested in obtaining a copy of accounts of subsidiary company may write to the Company Secretary of the Company.

11. DIRECTORS

i. Pursuant to Article 151 of the Articles of Association of the Company, Mr. S. Gajendran retires by rotation and, being eligible, offered himself for re-appointment. ii. Subject to approval of the Central Government, the Board of Directors recommends for approval of the Members, viz.,

a) payment of remuneration over and above minimum remuneration as provided under Schedule XIII till the existing tenure of appointment / re-appointment, but not exceeding three (3) years, and waiver of excess remuneration paid during the financial year 2012-2013 to the managerial personnel/s of the Company

b) the re-appointment of and payment of existing remuneration to Mr. Ravi Bhushan Bhardwaj as the Vice-Chairman & Managing Director of the Company for a further period of three (3) years effective 14th November 2013.

Except the above, there is no change in the composition of Board of Directors during the period under review.

12. INDUSTRIAL RELATIONS

During the year under review, industrial relations remained cordial. Employees'' competencies and skills were enhanced by exposing them to several internal and external training programmes. Various measures were taken to improve motivation level of employees. Additional efforts are continued to be implemented with a view to obtain commitment and loyalty towards the organisation.

13. PERSONNEL / PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act 1956 read with Companies (Particulars of Employees) Rules 1975, as amended, forms part of this report. However, as permitted by Section 219(1)(b)(iv) of the Companies Act 1956, the report and accounts are being sent to all shareholders excluding the statement of particulars of employees under Section 217(2A) of the Comapies Act 1956. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary at the registered office of the Company.

14. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The dividend declared by the Company which remains unpaid / unclaimed for a period of seven (7) years is required to be transferred to the Investor Education & Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the Companies Act 1956.

As such, the dividend for the financial year 2005-2006 declared at 20th Annual General Meeting held on 28th September 2006 remaining unpaid / unclaimed is due for transfer to Investor Education and Protection Fund on 27th September 2013.

The members are requested to claim their unpaid / unclaimed dividend, if any, declared and paid for the financial year 2005-2006 together with for the financial years 2006-2007, 2007-2008, 2008-2009, 2009-2010 and 2010-2011.

15. AUDITOR''S REPORT

The observations made by the Statutory Auditors in their report are self-explanatory and have also been further amplified in the Notes to the Accounts.

16. AUDITORS

i. M/s. Patel, Shah & Joshi, Chartered Accountants, Mumbai - the statutory auditors of the Company are eligible and recommended for re-appointment as the statutory auditors till the conclusion of the next Annual General meeting.

The statutory auditors have furnished a certificate of their eligibility for re-appointment U/s. 224(1-B) of the Companies Act, 1956 and are not disqualified for such appointment within the meaning of section 226 of the Companies Act, 1956.

ii. M/s. G R. Paliwal & Company, Cost Accountants, Nagpur has been appointed by the Board of Directors of the Company on the recommendations of the audit committee, as the cost auditors of the Company for the financial year 2013-2014.

The cost auditors have furnished a Certificate of their eligibility for appointment U/s. 224(1-B) of the Companies Act, 1956, Certificate for independence and arms length relationship with the Company and are not disqualified for such appointment within the meaning of section 226 / 233B(5) of the Companies Act, 1956.

17. AUDIT COMMITTEE

The audit committee of the Board is under chairmanship of Dr. E. R. C Shekar, an independent, non-executive director of the Company and consisting of other independent, non-executive directors viz. Mr. S Gajendran, CA Jayesh Madhavji Parmar and IDBI Nominee - Mr. Naresh Gwalani (till 28th May 2012) & Mr. B. W. Ramteke (effective 29th May 2012), as the members, as a practice of good corporate governance.

18. CORPORATE GOVERNANCE REPORT

Your directors are pleased to report that your Company has complied with the SEBI guidelines on Corporate Governance as of 31st March 2013 relating to clause 49 of the listing agreement with concerned stock exchange(s). A certificate from statutory auditors - Messers Patel, Shah & Joshi, Chartered Accountants, confirming compliance with conditions as stipulated under the aforesaid clause 49 is annexed to this report.

19. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDER TRADING

Your Directors are pleased to report that your Company has complied with :

1. the code of conduct of business principles and conduct; and

2. the prevention of insider trading in Sunflag securities by the designated persons / officers (insider).

20. DIRECTORS'' RESPONSIBILITY STATEMENT

The Board of Directors confirms :

i. That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departure;

ii. That the Directors had 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 year;

iii. That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. That the Directors had prepared the annual accounts on a going concern basis.

21. ACKNOWLEDGEMENT

The Directors acknowledge with thanks co-operation and assistance received by the Company from the shareholders, central and state government, financial institutions and banks. The directors also record their appreciation of the dedication of all the employees of the Company for their support and commitment to ensure that the Company continues to grow.

For and on behalf of the Board

Nagpur Ravi Bhushan Bhardwaj

3rd August 2013 Vice Chairman & Managing Director


Mar 31, 2012

To, The Members of Sunflag Iron and Steel Company Limited,

The Board of Directors hereby present the 26th Annual Report together with the Audited Statement of Accounts for the financial year ended 31st March 2012. During the year under review, the Steel Industry as well as Automobile and Auto component sectors witnessed stagnant demand and the high input costs have reduced the profits considerably. The unstinted efforts by the Company's Management continued for strict cost reduction and better financial / working capital management helped to maintain its overall performance in order to survive in the difficult market conditions.

1. FINANCIAL RESULTS

Summarised financial results for the year are as follows :

Rs. in Lacs

Sr. For the financial year ended Particulars No 31st March 2012 31st March 2011

a) Total Income 162,346 154,967

b) Total Expenditure 149,782 138,177

c) Gross Profit 12,564 16,790

d) Interest 5,305 3,744

e) Profit before Depreciation 7,259 13,046

f) Depreciation 4,244 3,964

g) Profit before Tax 3,015 9,082

2. FINANCE

Your Company has ended the financial year with a profit after tax of Rs. 1,937 Lacs. After taking into account the brought forward profit of Rs. 30,994 Lacs, your Company has carried forward an amount of Rs. 32,931 Lacs.

3. DIVIDEND

Due to the reduced profits and the decrease in the cash accruals, there is an increased pressure on the cash flows. Also, due to the additional borrowings made for implementing the capital projects under expansion, there is an increase in the commitments towards repayments to the lending banks. As such, Board of Directors feel appropriate not to recommend any dividend for the Financial Year 2011-2012.

4. MARKET SCENARIO

SUNFLABSTEEL is continuing to develop new high value grades of alloy steel to cater to the needs of domestic as well as international markets. During the financial year under review, the growth in the net turnover is about 5% as compared to previous financial year.

5. OPERATIONS

i. During the year under review :

a) A new Direct Reduction Plant (DRP-II) was commissioned on 24th June 2011. The total production of Direct Reduction Plant (I II) was 142,444 MT as against 92,774 MT of the previous year.

b) The total production was 302,532 MT in Steel Melt Shop as against 304,936 MT of the previous year.

c) The total production of Rolled products was 303,732 MT as against 311,131 MT of the previous year. (These production includes outside conversion of 7,624 MT of the current year and 19,219 MT of the previous year).

d) The total production of Hot Metal / Pig Iron was 205,089 MT as against 193,992 MT of the previous year.

e) The total production of Sinter Plant was 339,900 MT as against 333,201 MT of the previous year.

ii. The power plant generated 1,714.21 Lacs kWh as compared to 1,276.20 Lacs kWh of the previous year.

iii. The total coal production at Belgaon Coal Block was 159,905 MT as against 114,000 MT of the previous year.

6. PROJECTS Steel Plant :

The Company has commissioned its Direct Reduction Plant (DRP-II) with a capacity of 350 TPD together with WHRGS boiler to generate 8 MW power for captive consumption. Besides, the commercial production of Blooming Mill was commissioned on 1st April 2012.

These new projects will add wider product range, value addition and more competitive products and in particular, achieve economy in the cost of production.

Subsidiary Companies :

Sunflag Power Limited : Requisites approvals are being sought for the implementation of Hydro Power Project at Hanol-Tuini in the state of Uttarakhand.

Sunflag Special Steels Limited : The management is exploring the business opportunities for the Company. Khappa Coal Company Private Limited : The Company has initiated various ancillary activities and applied for various government approvals in accordance with the schedule itemized in the allocation letter issued by the Ministry of Coal. The Company has procured plots of land for the purpose of incline drivage and other civil construction. The Company is striving harder to pave its way to success and the operations of the Khappa & Extension Coal Block in the state of Maharashtra are expected to start within the scheduled time line.

Joint Venture Companies :

Madanpur (North) Coal Company Private Limited : Various approvals / clearances are being sought from the concerned authorities for effective implementation of the Madanpur (North) Coal project in the state of Chhattisgarh.

C T Mining Private Limited : Various approvals / clearances are being sought from the concerned authorities for effective implementation of the Choritand - Taliya Coking Coal project in the state of Jharkhand.

Gujarat State Mining and Resources Corporation Limited : Requisite approval is sought from the concerned authorities for allocation of Coal Block for development of integrated coke oven plant in the state of Gujarat.

7. DEMATERIALISATION OF SHARES

As on 31st March 2012, there were approximately 887 lacs equity shares dematerialised through depositories viz. National Securities Depository Limited and Central Depository Services (India) Limited, which represents about 54.702% of the total paid-up capital of the Company.

8. LISTING OF SHARES

The equity shares of your Company continued to be listed with / traded on the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing fees have been paid to both Stock Exchanges (BSE & NSE) for the financial year 2012-2013.

9. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The requisite particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the Annex to this report.

10. ANNUAL ACCOUNTS OF SUBSIDIARY COMPANIES

In pursuance of General Circular of the Ministry of Corporate Affairs, Government of India and on compliance of terms and conditions for availing the general exemption Under Section 212(8) of the Companies Act, 1956, the Annual Accounts of the Subsidiary Companies, are not attached with the Annual Report of the Company. The Annual Accounts of these Subsidiary Companies are available for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of accounts of subsidiary companies may write to the Company Secretary of the Company.

11. DIRECTORS

i. Pursuant to Article 151 of the Articles of Association of the Company, Dr. E.R.C. Shekar retires by rotation and being eligible, offers himself for re-appointment.

ii. IDBI Bank Limited has withdrawn nomination of Mr. Naresh J. Gwalani from the Board and instead appointed Mr. B.W. Ramteke (General Manager, Management Information System Department, IDBI Bank Limited, Mumbai) effective 28th May 2012. The Board places on record its appreciation for Mr. Naresh J. Gwalani's valuable services and wide contributions made during his tenure of Directorship of the Company.

iii. The Board of Directors recommends for approval of the members, the re-appointment of Mr. Surendra Kumar Gupta as the Whole-time Director, designated as Director & CEO, of the Company for a further period of five (5) years effective 30th July 2012.

Except the above, there is no change in the constitution of the Board of Directors during the period under review.

12. INDUSTRIAL RELATIONS

During the year under review, industrial relations remained cordial. Employees' competencies and skills were enhanced by exposing them to several internal and external training programmes. Various measures were taken to improve motivation level of employees. Additional efforts are continued to be implemented with a view to obtain commitment and loyalty towards the organisation.

13. PERSONNEL / PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this report. However, as permitted by Section 219(1 )(b)(iv) of the Companies Act 1956, the report and accounts are being sent to all shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary at the Registered Office of the Company.

14. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The dividend declared by the Company which remain unpaid / unclaimed for a period of Seven (7) years from the date they became due for payment are required to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the Companies Act, 1956.

The Members are requested to claim their unpaid / unclaimed Dividend(s), if any, declared and paid for the financial years 2005-2006, 2006-2007, 2007-2008, 2008-2009, 2009-2010 and 2010-2011.

15. AUDITOR'S REPORT

The observations made by the Statutory Auditors in their report are self-explanatory and have also been further amplified in the Notes to the Accounts.

16. AUDITORS

i. M/s. Patel, Shah & Joshi, Chartered Accountants, Mumbai - the Statutory Auditors of the Company are eligible and recommended for re-appointment as the Statutory auditors till the conclusion of the next Annual General Meeting. The Statutory Auditors have furnished a Certificate of their eligibility for re-appointment Under Section 224(1 -B) of the Companies Act, 1956 and are not disqualified for such appointment within the meaning of Section 226 of the Companies Act, 1956.

ii. M/s. G. R. Paliwal & Company, Cost Accountants, Nagpur has been appointed by the Board of Directors of the Company on the recommendations of the Audit Committee, as the Cost Auditors of the Company for the financial year 2012-2013.

The Cost Auditors have furnished a Certificate of their eligibility for appointment Under Section 224(1-B) of the Companies Act 1956, Certificate for independence and arms length relationship with the Company and are not disqualified for such appointment within the meaning of Section 226 / 233-B(5) of the Companies Act, 1956.

17. AUDIT COMMITTEE

The Audit Committee of the Board is under Chairmanship of Dr. E. R. C. Shekar, an Independent, Non-executive Director of the Company and consisting of other Independent, Non-executive Directors viz. CA Jayesh Madhavji Parmar, Mr. S. Gajendran and Mr. Naresh Gwalani (up to 28th May 2012) & Mr. B.W. Ramteke (effective 28th May 2012) as the Members, as a practice of good Corporate Governance.

18. CORPORATE GOVERNANCE REPORT

Your Directors are pleased to report that your Company has complied with the SEBI Guidelines on Corporate Governance as of 31st March 2012 relating to Clause 49 of the Listing Agreement with concerned Stock Exchange(s). A Certificate from Statutory Auditors - Messers Patel, Shah & Joshi, Chartered Accountants, confirming compliance with conditions as stipulated under Clause 49 is annexed to the Corporate Governance Report.

19. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDER TRADING

Your Directors are pleased to report that your Company has complied with :

i. the Code of Conduct of Business Principles and Conduct; and

ii. the Prevention of Insider Trading in Sunflag Securities by the designated persons / officers (insider).

20. DIRECTORS' RESPONSIBILITY STATEMENT The Board of Directors confirms :

i. that in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departure;

ii. that the Directors had selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit of the Company for that financial year;

iii. that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

iv. that the Directors had prepared the Annual Accounts on a going concern basis.

21. ACKNOWLEDGEMENT

The Directors acknowledge with thanks co-operation and assistance received by the Company from the Members, Central & State Government and Banks. The Directors also record their appreciation of the dedication of all the employees of the Company for their support and commitment to ensure that the Company continues to grow.

For and on behalf of the Board

Nagpur Ravi Bhushan Bhardwaj

27th July 2012 Vice Chairman & Managing Director


Mar 31, 2011

The Shareholders,

The Board of Directors hereby present the 25th Annual Report together with the Audited Statement of Accounts for the financial year ended 31st March 2011. During the year under review, though the Steel Industry as well as Automobile and Auto component sectors witnessed better demands in the improved market conditions, high input costs have reduced the profits considerably. The unstinted efforts by the Company's Management continued for strict cost reduction and better financial / working capital management helped to maintain its overall performance.

1. FINANCIAL RESULTS

Summarised financial results for the year are as follows :

Rs. in Lacs

For the financial year ended Sr. Particulars 31st March 2011 31st March 2010 No.

a. Total Income 154,967 135,459

b. Total Expenditure 138,177 115,857

c. Gross Profit 16,790 19,602

d. Interest 3,744 3,004

e. Profit before Depreciation 13,046 16,598

f . Depreciation 3,964 3,788

g. Profit before Tax 9,082 12,810

2. FINANCE

Your Company has ended the financial year with a profit after tax of Rs. 7,053 Lacs. After taking into account the brought forward profit of Rs. 24,884 Lacs and appropriations of Rs. 943 Lacs, your Company has carried forward an amount of Rs. 30 994 Lacs.

3. DIVIDEND

The Company is in need of additional funds through internal accruals to meet requirement of the lending banks financing ongoing capital projects under expansion programme, which will enable future growth of the Company. As such, Board of Directors feel appropriate to recommend Dividend @ 5% i.e. Rs. 0.50 per equity share of the Company for the Financial Year 2010-2011, subject to approval of the members in the ensuing 25th Annual General Meeting of the Company.

4. MARKET SCENARIO

SUNFLAG STEEL continues to develop new high value grades of alloy steel to cater the needs of domestic as well as international markets. During the financial year under review, the growth in the net turnover is about 14.24% as compared to previous financial year.

5. OPERATIONS

i. During the year under review :

a.Direct Reduction Plant during the year under review produced 92,774 MT as against 126,336 MT in the previous year.

b.The total production of Billets was 304,936 MT in our Steel Melt Shop as against 326,141 MT of the previous year.

c.The total production of Rolled products was 311,131 MT as against 309,596 MT of the previous year.

d.The total production of Pig Iron was 193,992 MT as against the previous year production of 205,502 MT.

e.The total production of Sinter Plant was 333,201 MT as against 191,385 MT previous year.

ii.The power plant generated 1,276.20 Lacs kWh as compared to 1,461.03 Lacs kWh in the corresponding previous year.

iii. The total coal production at Belgaon Coal Block is 114,000 MT as against 140,147 MT in the previous year.

6. PROJECTS

Steel Plant :

The Company has taken effective steps for the implementation of the Blooming Mill and Sponge Iron Plant II with WHRGS projects. The same are under installation stage and expected to be commissioned for their commercial production during the year 2011-2012.

Subsidiary Companies :

Sunflag Power Limited : The necessary approvals are being sought for the implementation of Hydro Power Project at Hanol-Tuini, in the state of Uttarakhand

Sunflag Special Steels Limited : The management is exploring the business opportunities for the Company.

Khappa Coal Company Private Limited : In respect of Khappa & Extn Coal Block in the state of Maharashtra, the Company has taken effective steps for getting various approvals / clearances viz. mining and closure plan from Coal Ministry, terms of references from Forest & Environment Ministry, reports of subsidence prediction study and survey from CIMFR, etc. Further, the procurement of land for incline drivage and other infrastructure has commenced. Certain applications have been made to concerned authorities and their approvals and clearances are awaited.

Joint Venture Companies :

Madanpur (North) Coal Company Private Limited : Various approvals / clearances are being sought from the concerned authorities for effective implementation of the Madanpur (North) Coal project in the state of Chhattisgarh.

C T Mining Private Limited : Various approvals / clearances are being sought from the concerned authorities for effective implementation of the Choritand - Taliya Coking Coal project in the state of Jharkhand.

Gujarat State Mining and Resources Corporation Limited : A State Government Company by virtue of subsidiary of GMDC Limited, wherein the share of the Company is 49%, was formed during the period under review, for development of integrated coke oven plant in the state of Gujarat.

7. DEMATERIALISATION OF SHARES

As on 31st March 2011, there were 88,450,719 equity shares, which represents 54.533% of the total paid-up capital of the company, dematerialised through depositories viz., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSIL).

8. LISTING OF SHARES

The equity Shares of your Company continued to be listed with / traded on the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing fees have been paid to both Stock Exchanges (BSE & NSE) for the current financial year 2011 - 2012.

9 . ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGES EARNINGS AND OUTGO

The requisite particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the Annex to this report.

10. SUBSIDIARY COMPANIES

In pursuance of General Circular No. 2/2011 dated 8th February 2011 issued by the Ministry of Corporate Affairs, Government of India and on compliance of terms and condition for availing the general exemption Under Section 212(8) of the Companies Act, 1956, the Annual Accounts of the Subsidiary Companies, viz. 'Sunflag Power Limited', 'Sunflag Special Steels Limited' and 'Khappa Coal Company Private Limited' are not attached with the Annual Report of the Company. The Annual Accounts of these Subsidiary Companies are available for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of subsidiary Company's accounts, may write to the Company Secretary at the Registered Office of the Company.

11. DIRECTORS

i. Pursuant to Article 151 of the Articles of Association of the Company, CA Jayesh M. Parmar retire by rotation and being eligible, offered himself for re-appointment.

ii. During the period under review, the Board of Directors has appointed Mr. Kailash Chander Vijh and Mr. Suhrit Bhardwaj as Additional Directors of the Company effective 27th July 2011. The Board recommends for the approval of the members, the appointment of Mr. Kailash Chander Vijh and Mr. Suhrit Bhardwaj as Directors of the Company.

Except the above, there is no change in the constitution of the Board of Directors of the Company during the period under review.

12. PAYMENT OF REMUNERATION TO NON-EXECUTIVE DIRECTOR/S

The members are requested to approve, by way of Special Resolution as set out in Item No. 7 of the Notice, the payment of remuneration by way of commission @1% of net profits to Non-executive Director/s of the Company for a period of five (5) years effective from the financial year 2011-2012.

13. INDUSTRIAL RELATIONS

During the year under review, industrial relations remained cordial. Employees' competencies and skills were enhanced by exposing them to several internal and external training programmes. Various measures were taken to improve motivation level of employees. Additional efforts are continued to be implemented with a view to obtain commitment and loyalty towards the organisation.

14. PERSONNEL / PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this report. However, as permitted by Section 219(1)(b)(iv) of the Companies Act 1956, the report and accounts are being sent to all shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary at the Registered Office of the Company.

15. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

The Dividend declared by the Company which remain unpaid / unclaimed for a period of Seven (7) years are required to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the Companies Act, 1956.

The Members are requested to claim their unpaid/unclaimed Dividend(s), if any, declared and paid for the financial years 2005-2006, 2006-2007, 2007-2008, 2008-2009 and 2009-2010.

16. AUDITOR'S REPORT

The observations made by the Statutory Auditors in their report are self-explanatory and have also been further amplified in the Notes to the Accounts.

17. AUDITORS

i. M/s. Patel, Shah & Joshi, Chartered Accountants, Mumbai - the Statutory Auditors of the Company are eligible and recommended for re-appointment as the Statutory auditors till the conclusion of the next Annual General Meeting.

The Statutory Auditors have furnished a Certificate of their eligibility for re-appointment Under Section 224(1-B) of the Companies Act, 1956 and are not disqualified for such appointment within the meaning of Section 226 of the Companies Act, 1956.

ii. M/s. G. R.Paliwal & Company, Cost Accountants, Nagpur has been appointed by the Board of Directors of the Company on the recommendations of the Audit Committee, as the Cost Auditors of the Company for the financial year 2011-2012.

The Cost Auditors have furnished a Certificate of their eligibility for appointment Under Section 224(1-B) of the Companies Act, 1956, Certificate for independence and arm length relationship with the Company and are not disqualified for such appointment within the meaning of Section 226 / 233-B(5) of the Companies Act, 1956. Accordingly, the Company has made an application in E-form No. 23C to the Central Government for their approval to the appointment of Cost Auditors of the Company.

18. AUDIT COMMITTEE

The Audit Committee of the Board is under Chairmanship of Dr. E. R. C. Shekar, an Independent, Non-executive Director of the Company and consisting of other Independent, Non-executive Directors viz. CA Jayesh Madhavji Parmar, Mr. Naresh Gwalani (Nominee - IDBI Bank Limited, Mumbai) and Mr. S. Gajendran as the Members, as a practice of good Corporate Governance.

19. CORPORATE GOVERNANCE REPORT

Your Directors are pleased to report that your Company has complied with the SEBI Guidelines on Corporate Governance as of 31st March 2011 relating to Clause 49 of the Listing Agreement with concerned Stock Exchange(s). A Certificate from Statutory Auditors - Messers Patel, Shah & Joshi, Chartered Accountants, confirming compliance with conditions as stipulated under the aforesaid Clause 49 is annexed to the Corporate Governance Report.

20. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDER TRADING

Your Directors are pleased to report that your Company has complied with :

i.The Code of Conduct of Business Principles and Conduct; and

ii.The Prevention of Insider Trading in Sunflag Securities by the designated persons/officers (insider).

21.DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors confirms :

i.That in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departure;

ii.That the Directors had selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the State of Affairs of the Company at the end of the financial year and of the Profit of the Company for that financial year;

iii.That the Directors had taken proper and sufficient care for the maintenance of adequate Accounting records in accordance with the provisions of this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

iv.That the Directors had prepared the Annual Accounts on a going concern basis.

22. ACKNOWLEDGEMENT

The Directors acknowledge with thanks co-operation and assistance received by the Company from the Shareholders, Central and State Government, Financial Institutions and Banks. The Directors also record their appreciation of the dedication of all the employees of the Company for their support and commitment to ensure that the Company continues to grow.

For and on behalf of the Board

Ravi Bhushan Bhardwaj Vice-chairman & Managing Director

Nagpur 27th July 2011


Mar 31, 2010

The Board of Directors hereby present the 24th Annual Report together with the Audited Statement of Accounts for the financial year ended on 31st March 2010. During the year under review, the market recovered from the recessionary conditions prevailing in the Global as well as Indian Steel market in the previous year. The Automobile and Auto component sectors also shown improved demands. The unstinted efforts by the Board of Directors continued for effective cost reduction and better financial / working capital management, your Company was able to show the following financial results.

1. FINANCIAL RESULTS

Summarised financial results for the year are as follows :

(Rs. in Lacs)

For the financial year ended Particulars 31st March 2010 31st March 2009

Total Income 135,459.08 110,742.07

Total Expenditure 115,857.27 98,816.25

Gross Profit 19,601.81 11,925.82

Interest 3,004.03 3,043.92 Profit before Depreciation 16,597.78 8,881.90

Depreciation 3,788.35 3,093.74

Profit before Tax 12,809.43 5,788.16

2. FINANCE

Your Company has ended the financial year with a profit before tax of Rs. 12,809.43 Lacs. After taking into account the brought forward profit of Rs. 16,342.45 Lacs, your Company has carried forward an amount of Rs. 24,883.95 Lacs.

3. DIVIDEND

The Company is in need of more funds through internal accruals to cope up with the terms and conditions of the lending banks financing the ongoing capital projects under the expansion programme, which will enable for future growth of the Company.

As such, the Board of Directors feel appropriate to recommend Dividend @5% for the Financial Year 2009-2010, subject to approval of the embers in the ensuing 24th Annual General Meeting of the Company.

4. MARKET SCENARIO SUNFLAG STEEL is continuing to develop new high value grades of alloy steel to cater the needs of domestic as well as international markets. During the financial year under review, the growth in the net turnover is about 23% as compared to previous financial year.

5. OPERATIONS

i. During the year under review :

a. The Direct Reduction Plant produced 126,336 MT as against of 115,299 MT in the previous year, which is about 9.6% higher than the previous year.

b. The Steel Melt Shop produced 326,141 MT as against of 207,757 MT in the previous year, which is about 57% higher than the previous year.

c. The total production of Rolled products was 309,596 MT, which is about 52% higher than the previous year production of 203,663 MT.

d. The total production of Hot Metal / Pig Iron was 205,502 MT which is about 62% higher than the Previous Year production of 127,002 MT.

e. Sinter Plant commenced its operation on 4th September 2009 and produced 191,385 MT in the period under review. ii. During the year under review, the Power plant generated 1,461.03 Lacs kWh as compared to 1,500.02 Lacs kWh in the corresponding previous year. iii. During the year under review, the total coal production at Belgaon Coal Block is 140,147 MT as against of 51,234.41 MT in the previous year, which is about 174% higher than the previous year.

6. PROJECTS

The Company is in the process of executing various new projects for wider product range, value additions and to make its products more competitive. The Company is implementing the following projects :

a. Blooming Mill Project

The Blooming Mill is a part of expansion plans which is underway and will produce 200,000 tpa of heavy rounds of alloy steels. The Blooming Mill will produce in the range of 75 mm dia to 160 mm dia thus widening the product range and making Sunflag, a Company offering a wide range of alloy steels products from 5.5 mm dia to 160 mm dia.

b. Direct Reduction Plant

In view of additional product range and increased steel making capacity, there is a gap between availability and require- ment of sponge iron for the Company itself. Apart, there is a good demand potential for the sponge iron in the domestic markets. To cope up with this, the Company started implementing to install Sponge Iron plant II with a capacity of 350 TPD together with WHRSG as a part of its expansion programme.

c. Mining Projects

The Company has initiated its efforts for due implementation of the mining projects allocated to the Company either independently or jointly with others for development and exploration of coal and other minerals.

7. DEMATERIALISATION OF SHARES

As on 31st March 2010, there were approximately 880 Lacs Equity Shares dematerialised through Depositories viz. National Securities Depository Limited and Central Depository Services (India) Limited, which represents 54.244% of the total Paid-up Capital of the Company.

8. LISTING OF SHARES

Equity Shares of your Company continued to be listed with / traded on the Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE). The listing fees have been paid to both Stock Exchanges (BSE & NSE) for the current financial year 2010 - 2011.

9. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGES EARNINGS AND OUTGO

The requisite particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the Annex to this report.

10. SUBSIDIARY COMPANIES

The Annual Reports of the Subsidiary Companies viz. Sunflag Power Limited, Sunflag Special Steels Limited and Khappa Coal Company Private Limited are attached in accordance with Section 212 of the Companies Act, 1956.

11. DIRECTORS

i. The Board of Directors recommends for approval of the Members, the re-appointment of Mr. Pranav Bhardwaj as the Joint Managing Director of the Company for a further period of 5 (five) years effective 17th January 2011.

ii. Pursuant to Article 151 of the Articles of Association of the Company, Mr. S. Gajendran retires by rotation and, being eligible, offered himself for re-appointment.

iii. CA Jayesh Madhavji Parmar, Non-executive Independent Director has been inducted on the Board as an Additional Director with effect form 23rd June 2009 liable to retire by rotation. Moreover, his appointment as a Director of the Company was duly approved by the Members at the 23rd Annual General Meeting of the Company.

Except the same, there is no change in the constitution of the Board of Directors of the Company during the period under review.

12. INDUSTRIAL RELATIONS

During the year under review, industrial relations remained cordial. Employees competencies and skills were enhanced by exposing them to several internal and external training programmes. Various measures were taken to improve motivation level of employees. Additional efforts are continued to be implemented with a view to obtain commitment and loyalty towards the organisation.

13. PERSONNEL / PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this report. However, as permitted by Section 219(1)(b)(iv) of the Companies Act 1956, the report and accounts are being sent to all shareholders excluding the statement of particulars of employees under Section 217(2A) of the Companies Act, 1956. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary at the Registered Office of the Company.

14. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION & PROTECTION FUND

The Dividends declared by the Company which remain unpaid / unclaimed for a period of Seven (7) years are required to be transferred to the Investor Education & Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the Companies Act, 1956. The Members are requested to claim their unpaid/unclaimed Dividend, if any, declared and paid for the financial years 2005-2006, 2006-2007, 2007-2008 and 2008-2009.

15. AUDITORS REPORT

The observations made by the Statutory Auditors in their report are self-explanatory and have also been further amplified in the Notes to the Accounts.

16. AUDITORS

i. Messers Patel, Shah & Joshi, Chartered Accountants, Mumbai - the Statutory Auditors of the Company are eligible and recommended for re-appointment as the Statutory Auditors till the conclusion of the next Annual General Meeting. The Statutory Auditors have furnished a Certificate of their eligibility for re-appointment Under Section 224(1-B) of the Companies Act, 1956 and are not disqualified for such appointment within the meaning of Section 226 of the Companies Act, 1956.

ii. Messers G. R. Paliwal & Company, Cost Accountants, Nagpur has been appointed by the Board of Directors of the Company on the recommendations of the Audit Committee, as the Cost Auditors of the Company for the financial year 2010 - 2011.

The Cost Auditors have furnished a Certificate of their eligibility for appointment Under Section 224(1-B) of the Companies Act, 1956 and are not disqualified for such appointment within the meaning of Section 226 / 233B(5) of the Companies Act, 1956.

17. AUDIT COMMITTEE

The Audit Committee of the Board is under Chairmanship of Dr. E. R. C. Shekar, an Independent, Non-Executive Director of the Company and consisting of Other Independent, Non-Executive Directors viz. CA Jayesh Madhavji Parmar, Mr. Naresh Gwalani (Nominee - IDBI Bank Limited) and Mr. S. Gajendran as the Members, as a practice of Good Corporate Governance.

18. CORPORATE GOVERNANCE REPORT

Your Directors are pleased to report that your Company has complied with the SEBI Guidelines on Corporate Governance as of 31st March 2010 relating to Clause 49 of the Listing Agreement with concerned Stock Exchange(s). A Certificate from Statutory Auditors Messers Patel, Shah & Joshi, Chartered Accountants, confirming compliance with conditions as stipulated under the aforesaid Clause 49 is annexed to the Corporate Governance Report.

19. CODES OF CONDUCT OF BUSINESS PRINCIPLES & ETHICS AND PREVENTION OF INSIDER TRADING

Your Directors are pleased to report that your Company has complied with :

i. the Code of Conduct of Business Principles and Conduct; and

ii. the Prevention of Insider Trading in Sunflag Securities by the designated persons/officers (insider).

20. DIRECTORS RESPONSIBILITY STATEMENT The Board of Directors confirms :

i. that in the preparation of the Annual Accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departure;

ii. that the Directors had selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the State of Affairs of the Company at the end of the financial year and of the Profit of the Company for that financial year;

iii. that the Directors had taken proper and sufficient care for the maintenance of adequate Accounting records in accordance with the provisions of this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities;

iv. that the Directors had prepared the Annual Accounts on a going concern basis.

21. ACKNOWLEDGEMENT

The Directors acknowledge with thanks co-operation and assistance received by the Company from the Shareholders, Central and State Government, Financial Institutions and Banks. The Directors also record their appreciation of the dedication of all the employees of the Company for their support and commitment to ensure that the Company continues to grow.

For and on behalf of the Board

Nagpur Dr. E. R. C. Shekar Surendra Kumar Gupta

19th July 2010 Director Whole-time Director

 
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