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Directors Report of IFGL Refractories Ltd.

Mar 31, 2019

Directors'' cum Management Discussion and Analysis Report

Your Directors present the Statement of Profit and Loss for Financial Year (FY) ended on 31st March 2019 (FY 2018-19) and Balance Sheet as on that date along with Notes, Cash Flow Statement and Auditor''s Report forming part thereof.

Financial Results

Summary of Financial Results on Consolidated and Standalone basis, for FY 2018-19 are as follows :

(Rs. in Millions)

Consolidated

Standalone

Revenue from Operations

9,402.62

4,791.27

Other Income

57.87

37.63

Total Revenue

9,460.49

4,828.90

Profit before Depreciation, Interest and Tax (PBDIT)

1,145.16

755.21

Depreciation and Amortisation

460.20

388.70

Finance Cost

44.47

40.98

Profit before Tax

640.49

325.53

Tax Expense

135.89

65.90

Profit for the year after Tax

504.60

259.63

Other Comprehensive Income for the year, Net of Tax

(1.22)

(3.81)

Total Comprehensive Income for the year

503.38

255.82

Proposed Dividend Proposed Dividend @ Rs. 2.50 per Equity Share

—

900.98

Basic and Diluted Earnings per Share

14.00

7.20

Disclosures under Regulation 34(3) read with Clause B of Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR, 2015)

i) Debtors Turnover Ratio

3.7:1

2.7:1

ii) Inventory Turnover Ratio

3.6:1

3.6:1

iii) Interest Coverage Ratio

15.4:1

8.9:1

iv) Current Ratio

2.6:1

2.1:1

v) Debt Equity Ratio

0.11

0.13

vi) Operating Profit Margin (%)

6.7%

6.9%

vii) Net Profit Margin (%)

5.4%

5.4%

viii) Return on Net Worth (%)

6.3%

5.1%

Aforesaid Financial Results achieved, in the opinion of your Directors, are satisfactory. Although there has been an increased demand in India and abroad, for refractories manufactured by your Company, the margins were under pressure due to selling price and cost of raw materials.

PAT is higher by 7.1% and 15.0% on Consolidated and Standalone basis compared to those of preceding FY 2017-18. Correspondingly EPS on Consolidated and Standalone basis has also been higher.

Dividend

Following your Company''s policy of distributing profits, your Directors have recommended payment of Dividend @ 25% i.e. Rs. 2.50 per Equity Share for FY 2018-19, which is higher by 5% i.e. Rs. 0.50 per Equity Share than that paid for preceding FY 2017-18. If approved at the ensuing Annual General Meeting scheduled to be held on Saturday, 27th July 2019, will be distributed amongst eligible Shareholders on and after Thursday, 1st August 2019. Dividend including Dividend Distribution Tax (DDT) will entail outflow of Rs. 108.62 millions.

Industry Review, Future Outlook and Expansion Plans

During FY 2018-19, your Company having its manufacturing facilities in India and abroad in Peoples Republic of China, UK and USA, continued primarily to be a manufacturer of Specialized Refractories and Operating Systems for the Iron and Steel Industry and the German Subsidiary focused on foundry ceramics. With such a spread of manufacturing facilities, your Company has been catering to customers across the Globe selling in 58 Countries spanning 6 continents.

There has been a turnaround in the Steel sector during FY 2018-19 because of several remedial and proactive measures taken by the Governments in India and abroad. This has resulted in increased production as well as demand for Steel products particularly in Asia

Pacific. In India, Steel sector has also been a major beneficiary of Insolvency and Bankruptcy Code (IBC) which has resulted in release of idle capacities of several debt ridden entities. Improved plant utilisation and increased demand for Steel products also augurs well for your Company.

Uncertainty about BREXIT, ongoing global trade frictions, weakening of demand especially in Europe and China, are some of the concerns for FY 2019-20 and being closely monitored by your Company. However your Directors are of view that the positives outweigh the negatives in as much as Global Refractories market is expected to grow at CAGR of more than 5.2% till 2023. These have led your Directors to increase commitments towards capital expenditure inasmuch as your Company is now in the process of setting up new greenfield manufacturing facility in Visakhapatnam (India) and expanding manufacturing facility at Kandla Special Economic Zone, Gujarat (India) by creating additional capacities.

This optimism is also supported by World Steel Association''s projection that Steel production will increase over next 3 to 5 years. Demand for Steel in India is also projected to grow by 7% or more in near term as the economy is expected to achieve faster growth from second half of FY 2019-20 post General Elections.

Your Company during FY 2018-19 derived 55.7% of Revenue from Operations on Standalone basis from exports. On Consolidated basis, 51.4% only of Revenue from Operations has been from Asia Pacific Region including India.

Subsidiaries

All subsidiaries of your Company performed satisfactorily during FY 2018-19. Total Revenue and PBT on consolidated basis for FY 2018-19 of your Company''s immediate subsidiary, IFGL Worldwide Holdings Limited, Isle of Man are higher by 12.5% and 5.2% respectively than those of immediately preceding FY 2017-18. Further steps are being taken by the Management of your German and one of the US subsidiaries to improve their performance. As a part of ongoing corporate simplification, UK non-operating subsidiary, Hofmann Ceramic Limited was dissolved during FY 2018-19.

Corporate Governance/Vigil Mechanism etc

Report on Corporate Governance (CG Report) and related Report of the Statutory Auditors form part of this Report and are annexed hereto as Annexure ''A''. CG Report is in conformity with provisions of Regulation 34 of the SEBI LODR, 2015, amended to date.

Your Company has adopted and put in place several Policies including on Vigil Mechanism (Whistle Blower), Prevention of Sexual Harassment, Insider Trading, Internal Control, Risks Management and Transfer Pricing etc commensurate to nature and size of business of your Company. These Policies have been hosted on your Company''s website www.ifglref.com and are reviewed and updated from time to time. During FY 2018-19, no complaint and or alert was received either under Vigil Mechanism (Whistle Blower) or for Sexual Harassment. The Internal Complaints Committee in place is following provisions of Sexual Harrassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Disclosures

Extract of Annual Return, being Form MGT 9, form part of this Report as Annexure ''B'' -this has also been hosted on your Company''s website www.ifglref.com. Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are given in Annexure ''C''. Your Company entered into transactions with related parties in ordinary course of its business and at arms length only. Thus Form AOC-2 has not been annexed with details of these transactions. During FY 2018-19, your Company did not give loans, guarantees or investments under Section 186 of the Companies Act, 2013 (the Act). Evaluation of performance of your Company''s Board of Directors and its Committees and Individual Directors including Independent Directors and Chairman of Board has been carried out. Outcome of such evaluation is that the Board and its Committees continued to function satisfactorily and flow of information thereto has been befitting nature of business and size of your Company. From time to time, Directors received briefings on key matters including regulatory, which furthered their performance.

Following Announcement of Quarterly and Annual Results, your Company made quarterly presentations, conference calls and interactions, resulting in enhanced confidence of Investors in your Company. Investor Relations Advisor, Strategic Growth Advisors Private Limited co-ordinated and/or facilitated these. As on 31st March 2019, 16.21% of your Company''s shares was held by Mutual Funds.

A statement in Form AOC-1 having financial information of Subsidiary Companies form part of this Report as Annexure ''D''. Your Company does not have any Indian Subsidiary. Shareholders of your Company who are desirous of having complete Statement of Accounts and related detailed information of Subsidiary Companies, may send their request therefor to your Company''s Registered Office. They are being kept for inspection at Registered Office of your Company and its Subsidiaries Companies and also available on Company''s website www.ifglref.com.

Information including those to be provided following Section 134(3) of the Act read with relevant provisions of the Companies

(Accounts) Rules, 2014 and Regulation 34 and 53 of SEBI LODR, 2015 have been included in Annexures hereto including Audited Financial Statements and notes forming part thereof and have not been reproduced herein again. During FY 2018-19 your Company neither invited nor accepted Deposits.

Particulars of meetings of the Board of Directors and Committees held during FY 2018-19 and attendance are given in CG Report. Gap between two meetings of your Directors did not exceed one hundred twenty days. Between end of FY 2018-19 and date of this Report, there has been no material changes and commitments, if any, in financial position of your Company. There have also not been Orders, save those mentioned in Audited Statements and Report of the Statutory Auditors, passed by the regulators or courts or tribunals likely to impact going concern status or operations in future of your Company.

Following Regulation 17(8) read with Part B of Schedule II of SEBI LODR, 2015, Certificate on Financial Statements has been received from Director and Chief Executive Officer and Chief Financial Officer of your Company.

Directors Responsibility Statement

Your Directors state that:

a) in preparation of Annual Accounts, applicable Accounting Standards have been followed.

b) Accounting Policies selected and applied are consistent and judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the Profit and Loss of your Company for that period.

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of your Company and for preventing and detecting fraud and other irregularities.

d) the Annual Accounts have been prepared on a Going Concern basis.

e) Internal Financial Controls i.e. policies and procedures for ensuring orderly and efficient conduct of business, including adherence to Company''s Policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information, have been laid down and that such controls are adequate and operating effectively.

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

Financial Statements for FY 2018-19 have been audited in accordance with Generally Accepted Accounting Principles as indicated in Report of Statutory Auditors. CSR, Human Resource and Industrial Relations

CG Report include details of your Company''s CSR Committee and Annual Report in compliance of Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is forming part as Annexure ''E''.

Particulars of Nomination and Remuneration Committee have also been included in CG Report. Nomination and Remuneration Policy adopted by your Directors based on recommendation of the Committee is hosted on your Company''s website www.ifglref.com. Said Policy inter-alia provide for matters concerning Directors appointment and remuneration including criteria for determining qualifications, positive attributes, Independence of Directors and those provided in Section 178(3) of the Act. For the sake of brevity said Policy has not been reproduced here.

An Annexure having information following provisions of Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of this Report as Annexure ''F''. Said Annexure as per provisions of Section 136 of the Act is not being circulated amongst Shareholders. However, Shareholders desirous of having said Annexure may write to the Company Secretary at the Registered Office of your Company and obtain copies thereof.

During FY 2018-19, 4(Four) persons (including Executive Directors) employed with your Company received remuneration of Rs. 102 lacs per annum or more or Rs. 8.50 lacs per month or more. As on 31st March 2019, your Company have had 627 regular employees in India and 921 worldwide.

During FY 2018-19 also, Industrial Relations in your Company remained cordial. Working environment provided to employees was conducive. Trainings were imparted, whereby employees achieved skills befitting their roles and responsibilities ultimately resulting in increased productivity. Compensation packages and benefits provided have been comparable with those of the peers and continued to motivate employees at large.

Consolidated Financial Statements

In accordance with IND AS 110 and other relevant provisions particularly Section 129(3) of the Act, Consolidated Financial Statements duly audited by Statutory Auditors, M/s Deloitte Haskins & Sells form part of this Annual Report. Consolidated Financial Statements have been prepared considering Financial Statements of Subsidiary Companies and Reports of Auditors relating thereto.

Directors and Key Managerial Personnel (KMP''s)

Following provisions of Section 203 of the Act, your Company have Key Managerial Personnel, particulars whereof are appearing at Note 35 of Audited Statement of Accounts. During FY 2018-19 your approval was obtained through postal ballot for uninterrupted holding of office of Independent Director by Mr D G Rajan (DIN : 00303060), Mr K S B Sanyal (DIN : 00009497), Prof B Ray (DIN : 06965340) and Prof S Munshi (DIN : 03558948) till completion of their term i.e. upto conclusion of 15th Annual General Meeting of your Company, following provisions of Regulation 17 of SEBI LODR, 2015. All of the Independent Directors have given their statement of declaration under Section 149(7) of the Act. The Board is also of the opinion that Independent Directors continue to fulfil independence criteria and all conditions specified in the Act and SEBI LODR, 2015.

At the ensuing Annual General Meeting of your Company, Managing Director, Mr P Bajoria (DIN : 00084031) and Director and Chief Executive Officer, Mr K Sarda (DIN : 03151258) will retire by rotation and being eligible, have offered themselves for re-appointment for further period also liable to retire by rotation. Your Board and Nomination and Remuneration Committee have recommended said re-appointments and commended passing of resolutions proposed for the said purpose and more fully included in Notice of forthcoming Annual General Meeting.

All of your Directors and Senior Management Personnel as on 31st March 2019 have confirmed having complied with Code of Conduct for Board of Directors including Independent Directors and Senior Management Personnel of your Company. This code has continued to help your Company maintain standard of ethics and ensure compliance of legal requirements applicable.

Cost Auditor

For FY 2018-19, your Company has maintained accounts and records to the extent provisions of Section 148 of the Act were applicable. Your Directors have re-appointed M/s Mani & Co., as Cost Auditors of your Company for FY 2019-20 too and are seeking your approval for payment of remuneration not exceeding Rs. 3 lacs to them for that FY. In this regard your Directors commend passing of Ordinary Resolution proposed and included in Notice of forthcoming Annual General Meeting.

Secretarial Auditor

Secretarial Audit Report in Form MR-3 following provisions of Section 204 of the Act of M/s S M Gupta & Co., Practicing Company Secretaries forming part hereof as Annexure ''G''. Following Regulation 24A of SEBI LODR, 2015 they have also carried out Secretarial Compliance Audit for FY 2018-19. Both of said Report and Certificate are free of qualifications, reservations or adverse remarks.

Auditors'' Report and Auditors

Report of the Statutory Auditors, M/s Deloitte Haskins & Sells (Regn No. 302009E), Chartered Accountant on Statement of Accounts for FY 2018-19 is self-explanatory. They have made no qualification, reservation or adverse remark or disclaimer in their Report. They have not reported any frauds under Section 143(12) of the Act. They will retire at conclusion of forthcoming Annual General Meeting and have not communicated their willingness to be re-appointed for further period, possibly because of provisions relating to rotation of Statutory Auditors in the Act and Rules framed thereunder. They, prior to being appointed as Statutory Auditors of your Company, were also Statutory Auditors of erstwhile IFGL Refractories Limited.

Your Board based on recommendation of Audit Committee, commend that in the vacancy caused following retirement of M/s Deloitte Haskins & Sells as Statutory Auditors of your Company, M/s S R Batliboi & Co. LLP (Regd No. 301003E/E300005) are appointed as Statutory Auditors of your Company for a period of five years i.e. from immediately after conclusion of ensuing 12th Annual General Meeting to conclusion of 17th Annual General Meeting. M/s S R Batliboi & Co. LLP have confirmed in writing their willingness to be so appointed and that they comply with all requirements and criteria specified and qualified to act as Auditors of your Company. Your Directors place on record their appreciation for services and professional advise received from M/s Deloitte Haskins & Sells over the years.

Acknowledgement

Your Directors thank all concerned particularly you the Shareholders for your continued support.

On behalf of the Board of Directors

S K Bajoria

P Bajoria

Kolkata

(DIN : 00084004)

(DIN : 00084031)

11th May 2019

Chairman

Managing Director


Mar 31, 2018

Dear Shareholders

The Directors have pleasure in presenting 11th Annual Report together with Statement of Profit and Loss for Financial Year (FY) ended on 31st March 2018 (FY 2017-2018) and Balance Sheet as on that date along with Notes, Cash Flow Statement and Auditors’ Report forming part thereof.

Financial Statements for FY 2017-2018 have been audited by Statutory Auditors, M/s Deloitie Haskins & Sells and highlights thereof are the following :

(Rs. in Millions)

Consolidated

Standalone

Total Revenue

8,436.88

4,492.05

Total Expenses

7,333.78

3,737.27

EBIDTA

1,103.10

754.78

Finance Costs

39.68

35.73

Depreciation and Amortisation Expense

437.96

379.72

Profit before Tax

625.46

339.33

Provision for Current Tax/Deferred Tax

154.25

113.53

Profit a”er Tax

471.21

225.80

Earning per Share (Rs.)

13.08

6.27

Cash EPS per Share (Rs.)

25.23

16.80

Financial Results include results of operation of erstwhile IFGL Refractories Limited (IFGL), amalgamated with your Company following passing of an Order by the Hon’ble National Company Law Tribunal, Kolkata Bench on 3rd August 2017, after write off of Rs. 266.99 million towards amortisation of goodwill useful life of which has been estimated to be ten years. These Financial Results are best ever achieved by your Company. Several factors have contributed in achieving these results. All round improvement in the performance in the Indian factories and also in the overseas Subsidiaries. This was further helped by the overall performance of the Steel Industry resulting in increased refractory off take.

Dividend

Your Directors following the Company’s policy of distributing profits, recommended payment of Dividend at the rate of 20% i.e. Rs. 2/- per Equity Share for FY 2017-2018. If approved at ensuing Annual General Meeting scheduled to be held on Saturday, 25th August 2018, Dividend including Dividend Distribution Tax will result in outflow of Rs. 86.89 million.

Amalgamation

During FY 2017-2018, your Company completed all formalities relating to amalgamation of IFGL referred above. Equity Shares of your Company were listed both on BSE Limited and National Stock Exchange of India Limited and trading thereof commenced on and from 14th November 2017. Name of your Company was changed to IFGL Refractories Limited w.e.f 25th October 2017 and Registrar of Companies, West Bengal issued a Fresh Certificate of Incorporation. Consequent to change of name, the Registered Office of your Company was shifted from the State of West Bengal to State of Odisha on and from 24th November 2017.

Industry Review, Future Outlook and Expansion Plans

Your Company and its Subsidiaries are engaged in manufacture of products primarily for Iron and Steel producers and foundries. Anything concerning Iron and Steel Industry have a bearing on the performance of your Company.

In the year 2017-2018, the steel production recorded a positive growth in all regions of the world. This happened after a gap of many years. In the recent years the growth was mainly in China and India, with other regions negative. The World Steel Association has forecasted the steel demand to grow by 1.8% in 2018 and once again in all the regions.

On the Indian front the economy has been growing at a steady rate and after marginally loosing the ‘fastest growing big economy’ tag for a short while it is well poised to regain the same at 7.7%. The forecast is to achieve a growth rate of 8% during the year 2018-2019. This rate of growth is likely to generate an additional demand of approximately 15 million tonnes per annum.

The World Bank forecasts is the World Domestic Product would grow at 3.1% in 2018, thereby maintaining the 2017 growth. All this augurs well for the refractory industry.

The only dampener is the rise in oil prices. While on one hand demand for energy went up with the all round growth, but other political factors also caused a reduction in crude output resulting in a spurt in price. While increase in energy cost is a dampener but this has also resulted in a collateral advantage for the Steel Industry in the USA due to increase in shale oil & gas out resulting in additional demand for steel.

Subsidiaries

Your Company has operational subsidiaries in Peoples Republic of China, Germany, UK and USA. As a part of corporate restructuring and simplification, the non operating subsidiaries in USA and Germany have been amalgamated with their respective operating Companies. Performance of your Company’s immediate overseas subsidiary, IFGL Worldwide Holdings Limited, Isle of Man has been satisfactory inasmuch as Total Revenue, PBT and PAT on consolidated basis for FY 2017-2018 have been GBP 47.40 million, GBP 3.27 million and GBP 2.81 million respectively.

Corporate Governance/Vigil Mechanism etc

As required under Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR, 2015), a Report on Corporate Governance along with a Certificate of Compliance from the Statutory Auditors form part of this Report as Annexure ‘A’.

Your Company has adopted and put in place policies and procedures including Vigil Mechanism (Whistle Blower) Policy, Policy for Prevention of Sexual Harassment etc. Your Directors are pleased to report that no complaint was received during FY 2017-2018. Your Company follows philosophy for effective management and discharge of social responsibility for sustainable development especially of the areas where it undertake manufacturing. Policies and Systems for Internal Control including Financial, Risk Management and Transfer Pricing commensurate to nature of business and size of your Company are also in place and are reviewed and updated as and when necessary.

Disclosures

Form MGT 9, being extract of Annual Return, form part of this Report as Annexure ‘B’. Several matters including those provided at Section 134(3) of the Companies Act, 2013 read with relevant provisions of the Companies (Accounts) Rules, 2014 and Regulation 34 and 53 of the SEBI LODR, 2015 required to be included herein, have been dealt in Annexures hereto including Audited Financial Statements and Notes forming part thereof and have not been included herein again for brevity. Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are given in Annexure ‘C’. Transactions with related parties have been in ordinary course of business of your Company and at arms length and hence details thereof have not been given in Form AOC-2. Formal Annual Evaluation of your Company’s Board of Directors and its Committees and Individual Directors (including Independent Directors) was carried out at Board Meeting held on Saturday, 19th May 2018. Further details are appearing in Report on Corporate Governance, being Annexure ‘A’ hereto.

Your Company made Quarterly Presentations, Conference Calls and Interactions, following Announcement of Quarterly and Annual Results and these enhanced confidence of Investors therein.

Your Company does not have any Indian Subsidiary. A statement in Form AOC-1 having financial information of Subsidiary Companies form part of this Report as Annexure ‘D’. Shareholders of your Company who are desirous of having complete Statement of Accounts and related detailed information of Subsidiary Companies, may send their request therefor to your Company’s Registered Office. The same are being kept for inspection at Registered Office of your Company and its Subsidiaries Companies and also available on Company’s website i.e. www.ifglref.com.

Directors Responsibility Statement

Your Directors state that :

a) in preparation of Annual Accounts, applicable Accounting Standards have been followed.

b) Accounting Policies selected and applied are consistent and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the Profit and Loss of your Company for that period.

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of your Company and for preventing and detecting fraud and other irregularities.

d) the Annual Accounts have been prepared on a Going Concern basis.

e) Internal Financial Controls i.e. policies and procedures for ensuring orderly and efficient conduct of business, including adherence to Company’s Policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information, have been laid down and that such controls are adequate and operating effectively.

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

Audit of the Statement of Accounts is in accordance with Generally Accepted Accounting Principles as indicated in Report of Statutory Auditors.

CSR, Human Resource and Industrial Relations

Your Company has a CSR Committee and details have been mentioned in Corporate Governance Report i.e. in Annexure ‘A’. Annual Report in compliance of Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is forming part as Annexure ‘E’.

Your Company also has a Nomination and Remuneration Committee of the Directors details are contained in Corporate Governance Report i.e. in Annexure ‘A’ hereto. Based on recommendation of the Committee, your Board has adopted a Nomination and Remuneration Policy, which is hosted on your Company’s website www.ifglref.com. For the sake of brevity said Policy has not been reproduced here.

During FY 2017-2018, 3 (three) persons employed (including one employee for part of the year) with your Company received remuneration of Rs. 102 lacs per annum or more or Rs. 8.50 lacs per month or more. Your Company have had 605 permanent employees in India as on 31st March 2018.

An Annexure having information following provisions of Section 134(3)(q) and 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of this Report. Remuneration paid has been as per Nomination and Remuneration Policy of your Company. As per provisions of Section 136 of the Act, this Annexure is not being sent to Members.However, Members desirous of having the Annexure may write to Company Secretary at the Registered Office. The Annexure will also be available for inspection by the Members at Company’s Registered Office upto conclusion of forthcoming Annual General Meeting. None of the person mentioned in said annexure is relative of any Director of the Company. None of the Employees either directly or indirectly held/hold more than two percent of Total Equity Share Capital of your Company other than your Chairman, Mr S K Bajoria.

Industrial Relations in your Company remained cordial during FY 2017-2018. Conducive working environment was continued to be provided and employees were empowered by training. Compensation packages and benefits provided were more or less favourable than those of the peers.

Consolidated Financial Statements

In accordance with IND AS 110 and other relevant provisions particularly Section 129(3) of the Act, Consolidated Financial Statements duly audited by Statutory Auditors, M/s Deloitte Haskins & Sells form part of this Annual Report. Consolidated Financial Statements have been prepared based on Financial Statements (including Consolidated) of immediate Subsidiary Company i.e. IFGL Worldwide Holdings Limited, Isle of Man.

Directors and Key Managerial Personnel (KMP’s)

During FY 2017-2018, Mr Hisatake Okumura ceased to be a Director of your Company on and from 6th May 2017. In the vacancy arising, Mr Yuzo Kawatsu, a Senior Executive of Krosaki Harima Corporation, Japan (KHC) was appointed as an Additional Director of your Company on and from 11th May 2017. He was appointed as a Director liable to retire by rotation at your last general meeting held on Saturday, 23rd December 2017. Mr Kiyotaka Oshikawa, another Senior Executive of KHC was appointed as an Additional Director on 9th December 2017 and thereafter on 23rd December 2017. He will cease to hold office of Director at ensuing Annual General Meeting and being eligible, has offered himself for re-appointment for further period liable to retire by rotation. Your Board and Nomination and Remuneration Committee have recommended re-appointment of Mr Oshikawa.

Following the Amalgamation becoming effective from 5th August 2017, your Board of Directors was re-constituted effective that date and requisite resolutions in connection therewith were passed at the last Annual General Meeting. Chairman, Mr S K Bajoria is retiring by rotation at ensuing Annual General Meeting and being eligible, has offered himself for re-appointment for further period liable to retire by rotation. Your Nomination and Remuneration Committee and also the Board have recommended re-appointment of Mr Bajoria.

Details of meetings of the Board of Directors held during FY 2017-2018 and the attendance details are given in Corporate Governance Report - Annexure ‘A’. Following provisions of Section 173(1) of the Act, gap between two Board Meetings did not exceed one hundred twenty days.

Independent Directors, Mr KSB Sanyal, Mr D G Rajan, Mr Debal Kumar Banerji, Prof Bharati Ray, Prof Surendra Munshi and Mr Sudhamoy Khasnobis of your Company have given their statement of declaration under Section 149(7) of the Act that they continue to meet the criteria of Independence as provided in Section 149(6) of the Act and their declarations have been taken on record.

Following provisions of Section 203 of the Act, your Company have appointed Key Managerial Personnel, details whereof are appearing at Note 35 of Audited Statement of Accounts. During FY 2017-2018, Mr Sikander Yadav, FCA, was appointed as Chief Financial Officer on and from 10th February 2018.

The Board of Directors have adopted a Code of Conduct for the Board Members (including Independent Directors) and Senior Management Employees of your Company. This Code helps your Company to maintain standard of Business Ethics and ensure compliance with legal requirements applicable to your Company. All Board Members and Senior Management Personnel as on 31st March 2018 have confirmed compliance with this Code.

Cost Auditor

Cost Auditor, M/s Mani & Co., have been appointed as Cost Auditor of your Company for FY 2018-2019 too. Your Directors are seeking your approval for payment of remuneration not exceeding Rs. 3 lacs per annum for FY 2018-2019 at ensuing Annual General Meeting.

Secretarial Auditor

M/s S M Gupta & Co., Practicing Company Secretaries have carried out Secretarial Audit following provisions of Section 204 of the Act for FY 2017-2018. Their Report in Form MR-3, free of qualifications, form part hereof as Annexure ‘F’.

Auditors’ Report and Auditors

Report of the Auditors, including references made to the Notes forming part of the Statement of Accounts, are self explanatory. Auditors, M/s Deloitte Haskins & Sells (Regn No. 302009E), Chartered Accountant will retire at conclusion of 12th Annual General Meeting of your Company.

Acknowledgement

Your Directors place on record their sincere appreciation for continued support received from all stakeholders particularly you the Shareholders.

On behalf of the Board of Directors

S K Bajoria P Bajoria

Kolkata (DIN : 00084004) (DIN : 00084031)

19th May 2018 Chairman Managing Director


Mar 31, 2017

Dear Shareholders

The Directors present the 10th Annual Report together with Statement of Profit & Loss for Financial Year (FY) ended on 31st March 2017 (FY 2016-2017) and Balance Sheet as on that date along with Notes, Cash Flow Statement and Auditors’ Report forming part thereof.

Financial Results and Merger of IFGL Refractories Limited (IFGL)

Hon’ble National Company Law Tribunal, Kolkata Bench (Hon’ble Tribunal) by passing an Order on 3rd August 2017 sanctioned a Scheme for Amalgamation of IFGL with your Company on and from 1st April 2016. Accordingly, aforesaid Statements, highlights of the Financial Results given below, audited by Statutory Auditors, M/s Deloitte Haskins & Sells include results of operation of IFGL for FY 2016-2017 and thus not comparable with Audited Statements relating to preceding FY 2015-2016.

(Rs. in Millions)

Consolidated

Standalone

Total Revenue

7,682.66

3,756.58

Total Expenses

6,707.56

3,232.37

EBIDTA

975.10

524.21

Finance Costs

45.27

39.35

Depreciation and Amortisation Expense

441.50

371.09

Profit before Tax

488.33

113.77

Provision for Current Tax/Deferred Tax

46.49

(60.10)

Profit after Tax

*441.84

173.87

Earning Per Share (Rs.)

12.26

4.82

* including Minority Interest of Rs.0.08

Pursuant to the Scheme sanctioned by Hon’ble Tribunal, your Company has inter-alia :

a) Accounted for amalgamation under the ‘Purchase Method’ as per Accounting Standard 14 - Accounting for Amalgamation and Rs.26,699 lacs, being the excess of the value of Equity Shares issued by your Company over fair value of assets and liabilities of IFGL transferred and or vested in your Company and cancellation of Equity Shares of your Company held by IFGL has been recognised as Goodwill.

b) Useful life of said Goodwill has been estimated to be 10 years and is being accordingly amortised.

c) Your Company has on 18th September 2017 issued and allotted 34,610,472 Equity Shares of Rs.10/- each fully paid up to the Shareholders of IFGL on the record date, 15th September 2017.

d) Equity Shares of your Company will be listed both on BSE Limited and National Stock Exchange of India Limited.

Profit before Tax mentioned hereinabove is after providing for Rs.266.99 millions towards amortisation of said Goodwill.

Industry Review, Future Outlook and Expansion Plans

Market for refractories have a very strong link with the demand for Steel in as much as Iron and Steel Industry contribute more than 60% of demand for refractories in volume terms. Global Market for refractories said to be around USD 45 billions in 2016 is slated to grow at a CAGR of 3.23% to USD 53 billions by 2021, as Global Steel Production has also been increasing. In India new policy on steel has been announced, which has set a target capacity of 300 million tonnes of steel by 2030. This new policy envisages increased per capita steel consumption of 160 kgs by 2030 from present level of 60 kgs and increased demand for high automotive steel, electrical steel and special steels, improvement of productivity in MSME steel sector by adoption of newer technologies. Demand for domestically manufactured steel is also likely to increase because of several policy initiatives announced by the Indian Government, some of those being preference to locally produced steel in projects, imposition of CVD for five years on import of certain stainless steel products. The global steel production is also on a positive trajectory, with the USA, most European countries and Japanese economies performing well. All these factors coupled with increased consumption of steel for infrastructure building are likely to have positive impact on your Company.

Following the merger, your Company has emerged and got transformed to an entity with greater financial and economic strengths and better financial and operational business prospects with simplified corporate structure, increased costs competitiveness, improved administrative controls, pooling of cash for deployment both for organic and inorganic growth opportunities etc. All these added factors will go on to maximize Shareholders value.

Your Company continues to be primarily manufacturer of specialized Refractories for use by producers of Iron and Steel with strategically located manufacturing facilities in India and Overseas. The Company is well known amongst Iron and Steel Industry globally and is supported by established brands and well trained marketing, selling and after sales team with an extensive network of facilitators, dealers and distributors.

Your Company has taken several measures for expanding its operations including capital expenditure to boost performance. About Rs.100 million will be spent at Company’s Kalunga (Odisha) manufacturing facilities to augment manufacturing of Slide Gate Refractories and Zirconia Nozzles. About Rs.100 millions is also going to be spent to enhance manufacturing capacity of ISO products by 50% at it’s Kandla (Gujarat) facility. The German Subsidiary, Hofmann Ceramic GmbH is also doing capital expenditure to expand capacity and increase efficiency by automation. Your Company continues with initiatives for cost reduction and synergisation of resources available within the Group for optimization of revenues and margin expansion.

Subsidiaries

Following merger of IFGL, your Company has now operational subsidiaries in Peoples Republic of China, Germany, UK and USA. Immediate Subsidiary of your Company is IFGL Worldwide Holdings Limited (IWHL), Isle of Man. Total Revenue, PBT and PAT on consolidated basis for FY 2016-2017 of IWHL, which holds all the overseas subsidiaries, have been GBP 46.27 millions, GBP 4.23 millions and GBP 3.02 millions respectively.

Dividend

Following your Company’s policy of distributing profits amongst the Shareholders, your Directors have recommended payment of Dividend @ 20% i.e. Rs.2/- per Equity Shares for FY 2016-2017. Dividend will be paid on expanded 36,039,312 Equity Shares of Rs.10/each of your Company i.e. including 34,610,472 Equity Shares of Rs.10/- each of your Company issued and allotted to holders of Equity Shares of IFGL. Total amount involved together with Dividend Distribution Tax is Rs.86.75 millions.

Corporate Governance/Vigil Mechanism etc

During FY 2016-2017, provisions of Corporate Governance applied to your Company inasmuch as IFGL was listed on BSE and NSE. A Report on Corporate Governance compliances by IFGL duly certified by your Company’s Statutory Auditors form part of this Report as Annexure ‘A’.

Following scheme of Amalgamation sanctioned by the Hon’ble Tribunal, your Company has taken steps to list its Equity Shares both on BSE and NSE. ISIN allotted by Depositories, NSDL and CDSL to your Company’s Equity Shares is INE133Y01011. Your Company has also adopted Corporate Governance Policies and Procedures practiced by IFGL and will continue to follow the philosophy for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.

Effective 5th August 2017, your Company has also adopted and put in place Vigil Mechanism/Whistle Blower Policy, Policy for Prevention of Sexual Harassment of Women at work place etc followed by IFGL. During FY 2016-2017, no complaint was received under these Policies by IFGL. Policies and Systems for Internal Control including Financial, Risk Management and Transfer Pricing in place were/are commensurate to nature of business and size of your Company and are reviewed and updated from time to time as and when necessary.

Disclosures

Form MGT 9, being extract of Annual Return, form part of this Report as Annexure ‘B’. Said Form also provide information of IFGL wherever relevant and necessary. Several matters including those provided at Section 134(3) of the Companies Act, 2013 read with relevant provisions of the Companies (Accounts) Rules 2014 and Regulation 34 and 53 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR, 2015) required to be included herein, have been dealt in Annexures hereto including Audited Financial Statements and Notes forming part thereof to the extent are related with IFGL. Those matters have not been included herein again for brevity. Information Regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are given in Annexure ‘C’ which also include those of IFGL. Transactions with related parties have been in ordinary course of business of your Company as well as IFGL and at arms length. Hence details thereof have not been given in Form AOC-2. Formal Annual Evaluation of the Board of IFGL and its Committees and Individual Directors (including Independent Directors) was carried out at IFGL’s Board Meeting held on 6th May 2017. Further details are appearing in Report on Corporate Governance, being Annexure ‘A’ hereto.

IFGL regularly made Quarterly Presentations, Conference Calls and Interaction, following Announcement of Quarterly and Annual Results and these enhanced confidence of Investors therein. All said practices have also been adopted by your Company and will be pursued.

Following aforesaid merger, your Company has ceased to be the Subsidiary of IFGL and all Subsidiaries of IFGL have become Subsidiaries of your Company. Accordingly your Company does not have any Indian Subsidiary. A statement in Form AOC-1 having financial information of Subsidiary Companies form part of this Report as Annexure ‘D’. Shareholders of your Company who are desirous of having complete Statement of Accounts and related detailed information of Subsidiary Companies, may send their request therefor to your Company’s Registered Office. The same are being kept for inspection at Registered Office of your Company and its Subsidiaries Companies and also available on Company’s website i.e. www.ifglref.com.

Directors Responsibility Statement

Your Directors state that :

a) In preparation of Annual Accounts, the Applicable Accounting Standards have been followed.

b) Accounting Policies selected and applied are consistent and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the Profit and Loss of your Company for that period.

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of your Company and for preventing and detecting fraud and other irregularities.

d) the Annual Accounts have been prepared on a Going Concern basis.

e) Internal Financial Controls i.e. Policies and Procedures for ensuring orderly and efficient conduct of business, including adherence to Company’s Policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information, have been laid down and that such controls are adequate and operating effectively.

f) proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and operating effectively

Your Company’s Statutory Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants have Audited the Statement of Accounts in accordance with Generally Accepted Accounting Standards and Practices as indicated in their Report.

CSR, Human Resource and Industrial Relations

Your Company as well as IFGL constituted Committee of the Directors on Corporate Social Responsibility. Following merger of IFGL with your Company, CSR Committee of your Company has been reconstituted and details relating thereto have been mentioned in Corporate Governance Report i.e. in Annexure ‘A’ hereto. Annual Report in compliance of Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is forming part hereof as Annexure ‘E’.

Your Company as well as IFGL also have had Nomination and Remuneration Committee of the Directors (effective 5th August 2017, Remuneration Committee of your Company renamed as Nomination and Remuneration Committee) following provisions of Section 178(1) of the Act. Subsequent to merger, said Committee has also been re-constituted and details thereof are also contained in Corporate Governance Report i.e. in Annexure ‘A’ hereto. Based on recommendation of said Committee, your Board has adopted a Nomination and Remuneration Policy, which is hosted on your Company’s website www.ifglref.com. For the sake of brevity said Policy has not been reproduced here.

During FY 2016-2017, 3 persons employed with your Company (including IFGL) received Remuneration of Rs.102 lacs per annum or more or Rs.8.50 lacs per month or more. Mr S K Bajoria and Mr P Bajoria who have been Whole-time Directors of IFGL have been paid “minimum remuneration” for FY 2016-2017 with the approval of the Central Government as per provisions of Section 197(3) and other relevant applicable Sections of the Act. Your Company (including IFGL) have had 645 permanent employees in India. An Annexure having information following provisions of Section 134(3)(q) and 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of this Report. This Annexure is however not being sent to Members as per provisions of Section 136 of the Act. Members desirous of having the Annexure may write to Company Secretary at the Registered Office. However the Annexure will also be available for inspection by the Members at Company’s Registered Office upto conclusion of forthcoming Annual General Meeting. None of the Employee listed in said annexure is relative of any Director of the Company. None of the Employees either directly or indirectly held/hold more than two percent of Total Equity Share Capital of your Company (including IFGL) other than your Executive Chairman, Mr S K Bajoria.

Industrial Relations in your Company as well as IFGL remained cordial during FY 2016-2017. Conducive working environment was continued to be provided and employees were empowered by training. Compensation packages and benefits provided were also no less favourable than those of the peers.

Consolidated Financial Statements

In accordance with Accounting Standard 21 and other relevant provisions particularly Section 129(3) of the Act, Consolidated Financial Statements duly audited by Statutory Auditors, M/s Deloitte Haskins & Sells form part of this Annual Report. Consolidated Financial statements have been prepared based on Financial Statements (including Consolidated) of immediate Subsidiary Company i.e. IFGL Worldwide Holdings Limited, Isle of Man as approved by their Board.

Directors and Key Managerial Personnel (KMP’s)

During FY 2016-2017, there have not been any change in Directors of your Company. Mr Hisatake Okumura ceased to be a Director of your Company on and from 6th May 2017. In vacancy arising, Mr Yuzo Kawatsu, a Senior Executive of Krosaki Harima Corporation, Japan, was appointed as an Additional Director of your Company on and from 11th May 2017. Following merger of IFGL, which became effective on and from 5th August 2017, the Board of Directors of your Company has been re-constituted and following is the composition thereof effective that date. Your Directors record their appreciation for the contribution made by Mr Okumara in his capacity as a Member of the Board.

Sl. No.

Director’s Name

Designation

Appointment Date

1.

Mr Shishir Kumar Bajoria DIN : 00084004

Chairman and Whole-time Director - Promoter

07.09.2007

2.

Mr Pradeep Bajoria DIN : 00084031

Managing Director

07.09.2007

3.

Mr Kamal Sarda DIN : 03151258

Whole-time Director (Designated as Director & Chief Executive Officer and Chief Financial Officer)*

01.04.2012

4.

Mr Kanwar Satyabrata Sanyal DIN : 00009497

Non-Executive Independent Director

30.03.2012

5.

Mr Yuzo Kawatsu DIN : 07818936

Non-Executive Non Independent Director (Additional Director)

11.05.2017

6.

Mr Duraiswamy Gunaseela Rajan DIN : 00303060

Non-Executive Independent Director (Additional Director)

05.08.2017

7.

Mr Debal Kumar Banerji DIN : 03529129

Non-Executive Independent Director (Additional Director)

05.08.2017

8.

Prof Bharati Ray DIN : 06965340

Non-Executive Independent Director - Woman Director (Additional Director)

05.08.2017

9.

Prof Surendra Munshi DIN : 03558948

Non-Executive Independent Director (Additional Director)

05.08.2017

10.

Mr Sudhamoy Khasnobis DIN : 00025497

Non-Executive Independent Director (Additional Director)

05.08.2017

*Designated as Chief Financial Officer on and from 5th August 2017.

Provisions of Section 203 of the Act dealing with appointment of Key Managerial Personnel, became applicable to your Company effective 5th August 2017 and following are the Key Managerial Personnel of your Company.

Sl. No.

Director’s Name

Designation

Appointment Date

1.

Mr Shishir Kumar Bajoria

Chairman

05.08.2017

2.

Mr Pradeep Bajoria

Managing Director

05.08.2017

3.

Mr Kamal Sarda

Director & Chief Executive Officer and Chief Financial Officer*

01.04.2012

4.

Mr Rajesh Agarwal

Company Secretary

05.08.2017

*Designated as Chief Financial Officer on and from 5th August 2017.

Details of meetings of the Board of Directors held during FY 2016-2017 and attendance thereat both of your Company and IFGL is given in Corporate Governance Report - Annexure ‘A’. Following provisions of Section 173(1) of the Act, gap between two Board Meetings did not exceed one hundred twenty days.

All the Additional Directors will cease to hold their office at the ensuing Annual General Meeting and being eligible, have offered themselves for re-appointment for further period. Independent Directors, Mr K S B Sanyal, Mr D G Rajan, Mr Debal Kumar Banerji, Prof Bharati Ray, Prof Surendra Munshi and Mr Sudhamoy Khasnobis of your Company have given their statement of declaration under Section 149(7) of the Act that they meet the criteria of Independence as provided in Section 149(6) of the Act and their declarations have been taken on record.

Effective 5th August 2017, the Board of Directors have adopted a Code of Conduct for the Board Members and Senior Management Employees of your Company. This Code similar to that adopted by IFGL helps your Company to maintain standard of Business Ethics and ensure compliance with legal requirements applicable to your Company. All Board Members and Senior Managerial Key Personnel of IFGL as on 31st March 2017 have confirmed compliance with this Code.

Cost Auditor

Following merger, Cost Auditor, M/s Mani & Co., were appointed as Cost Auditor of your Company for FY 2016-2017 and FY 2017-2018. Your Directors seek your approval for payment of remuneration not exceeding Rs.3 lacs per annum for FY 2017-2018 at ensuing Annual General Meeting.

Secretarial Auditor

M/s S M Gupta & Co., Practicing Company Secretaries have carried out Secretarial Audit following provisions of Section 204 of the Act for FY 2016-2017. Their Report in Form MR 3, free of qualifications, form part hereof as Annexure ‘F’.

Auditors’ Report and Auditors

Report of the Auditors, including references made therein to the Notes forming part of the Statement of Accounts, are self explanatory.

Auditors, M/s Deloitte Haskins & Sells (Regn No. 302009E), Chartered Accountant will retire at conclusion of 12th Annual General Meeting of your Company. Following provisions of Section 139 of the Act, their appointment as Auditors of your Company is required to be ratified at ensuing Annual General Meeting.

Acknowledgement

Your Directors place on record their sincere appreciation for continued support received from all stakeholders particularly you the Shareholders.

On behalf of the Board of Directors

S K Bajoria P Bajoria

Kolkata (DIN : 00084004) (DIN : 00084031)

9th October 2017 Chairman Managing Director

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