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DIRECTOR'S REPORT

Prakash Steelage Ltd.

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Market Cap. (₹) 4.38 Cr. P/BV -0.02 Book Value (₹) -15.32
52 Week High/Low (₹) 1/0 FV/ML 1/1 P/E(X) 0.32
Bookclosure 28/09/2018 EPS (₹) 0.79 Div Yield (%) 0.00
Year End :2015-03 

To
The Members

Prakash Steelage Limited

Dear Members,

The Directors have pleasure in presenting their 24th Annual Report on the business and operations of the Company and the audited financial statements for the Financial Year ended March 31, 2015.

Corporate Overview :

Prakash Steelage Limited is a Company that manufactures and exports stainless steel tubes and pipes. It has its Registered Office located at Mumbai, Maharashtra and plants located at Umbergaon, Gujarat and Silvassa (UT- Dadra & Nagar Haveli ).

Financial Highlights of the Company :

The financial highlights of the Company, for the year ended 31st March, 2015 are summarized below:

                                                        (Rs. in Lacs)

                             Standalone                Consolidated

Particulars            FY 2014-15   FY 2013-14   FY 2014-15   FY 2013-14
Total Revenue 1,08,455.17 94,833.55 1,13,529.55 1,02,955.72

Less: Expenditure 1,05,179.52 91,493.44 1,10,188.70 99,130.31

Profit Before Tax and Depreciation 3,275.65 3,340.11 3,340.84 3,825.41

Less: Depreciation       1,135.96       808.66     1,135.96       808.66

Profit Before Tax 
(PBT)                    2,139.69     2,531.45     2,204.87     3,016.74

Less: Tax                  733.69       876.53       733.69       876.53

Net Profit 
After Tax (PAT)          1,406.00     1,654.92     1,471.18     2,140.21
Financial Performance :

On Standalone Basis the income from operations fo r the year has increased to Rs.1,08,455.17 Lacs as compared to Rs.94,833.55 Lacs of previous year reflecting a growth of 14.36%. The Profit Before Ta x for the year was Rs.2,139.69 Lacs as against Rs.2,531.45 Lacs. The Net Profit after Tax is Rs.1,406.00 Lacs as compared to Rs.1,654.92 Lacs during previous year. The profit percentage both of PBT and PAT were decreased on account of the increased cost of production and operations and due to exceptional item.

Subsidiaries :

In accordance with Section 129 (3) of the Companies Act, 2013 and Accounting Standard (AS) 21, the Company has prepared the Consolidated Financial Statements of the Company and all its subsidiaries, which forms part of this Annual Report.

The Company has its Wholly-Owned Foreign Subsidiary at U.A.E. in the name of Pioneer Stainless & Alloy, F.Z.C. The details with respect to operations of Wholly-owned Foreign Subsidiary during the year under review are covered in the Management Discussion and Analysis Report.

The Statement in form AOC-1 (Annexure 1) containing salient features of the financial statements of Company's Subsidiaries is attached to this report.

- Wholly-owned Subsidiary / Associate Company :

The Company entered into a Joint Venture Agreement dated 13th February, 2015, executed between theCompany and Tubacex S.A. Spain. Accordingly, the Company incorporated Joint Venture (JV) Company 'Tubacex Prakash India Private Limited' as a Wholly Owned Subsidiary, and transferred its seamless stainless steel tubes and pipes business to JV Company, in accordance with the provisions of the Business Transfer Agreement dated 25th July, 2015 executed between the Company and the JV Company.

The Company utilized the said consideration in the following manner:

i) Rs.20,601.30 Lac has been utilized towards the repayment of Bank debts, creditors of seamless division and incidental expenses; and

ii) Rs.314.70 Lac towards investment in the Equity Share Capital in the JV Company.

The JV Company on July 27, 2015, allotted Equity Shares as per the JV Agreement, resulting in Tubacex S.A., Spain holds 67.53% and the Company holds 32.47% of the Equity Share Capital in the JV Company. Subsequent to the said allotment, the JV Company which had been incorporated as a Wholly Owned Subsidiary of the Company has become an Associate Company.

Joint Venture :

- Development of Industrial Park :

During the financial year 2013-14, the Company had formed strategic alliance with Kargwal Developers Private Limited (Co-promoter Omkar Group) for developing an Industrial Park in the name of "Krishna Industrial Park" on its idle land located at Palgam, Umbergaon, Gujarat. The profit generated through construction business has been shown as other income of the Company.

Share Capital :

The Paid-up Share Capital of the Company as at 31st March, 2015 stood at 17.50 Crore. During the year under review, the Company has not issued shares with or without differential voting rights nor has granted any stock option or sweat equity. As on 31st March, 2015, none of the Directors of the Company hold instruments convertible into Equity Shares of the Company.

Dividend :

The Board has, subject to the approval of members at the ensuing Annual General Meeting, recommended a dividend of Paise 0.50 (Previous Year Re. 1/-) per Equity Share on the 1,75,00,039 fully paid-up Equity Shares of Rs.10/- each, for the financial year ended 31st March, 2015.

Details in respect of adequacy of internal financial controls with reference to the Financial Statements :

The Company has in place adequate internal financial controls with reference to financial statements, some of which are outlined below.

Your Company has adopted accounting policies which are in line with the Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 that continue to apply under Section 133 and other applicable provisions, if any, of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and relevant provisions of the Companies Act, 1956, to the extent applicable. These are in accordance with generally accepted accounting principles in India. Changes in policies, if any, are approved by the Audit Co mmittee in consultation with the Auditors.

The policies to ensure uniform accounting treatment are prescribed to the subsidiaries of your Company. The accounts of the subsidiary companies are audited and certified by their respective Auditors for consolidation.

Your Company operates in SAP system, and has many of its accounting records stored in an electronic form and backed up periodically.

The Management periodically reviews the financial performance of your Company against the approved plans across various parameters and takes necessary action, wherever necessary. Internal Auditors have been appointed which report on quarterly basis on the operations of the Company. The observations, if any, of the Internal Auditors, are resolved to their satisfaction and are implemented across all the sites.

Credit Rating :

CRISIL has reaffirmed its rating:

1. BBB for long term and

2. A3 for short term

The ratings reflect the Company's financial risk profile, marked by healthy net worth and low gearing, and its established market position in the stainless steel pipes and tubes industry. These rating strengths are partially offset by the Company's working-capita-intensive operations and its susceptibility to volatility in prices of inputs and in foreign exchange rate.

Deposits :

The Company has not accepted any Deposit from the public within the meaning of provisions of Section 73 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014.

Statutory Auditors :

M/s. Khandelwal Jain & Co., (Firm Registration No. 105049W) and M/s. Batliboi & Purohit, (Firm Registration No . 101048W), Chartered Accountants were appointed as the Joint Statutory Auditors of the Company for Financial year 2014-15 and holding office upto the conclusion of the ensuing Annual General Meeting.

However, M/s. Khandelwal Jain & Co., Chartered Accountants (Firm Registration No. 105049W) have intimated their inability to continue and therefore not seeking re-appointment, as the Joint Statutory Auditor at the ensuing Annual General Meeting of the Company.

Your Directors have proposed, on the basis of the recommendation of the Audit Committee the re-appointment of M/s. Batliboi & Purohit, Chartered Accountants, (Firm Registration No. 101048W), as the Statutory Auditor of the Company, and the said firm shall hold office from the conclusion of this Annual General Meeting till conclusion of the AGM to be held for the financial year 2019-20 (i.e., for a term of 5 years) (subject to ratification of the appointment by the Members at every AGM held after this AGM) at such remuneration plus out- of-pocket expenses as may be agreed to between the Board of Directors of the Company and the Auditors of the Company.

In this regard, the Company has received necessary consent letter from M/s. Batliboi & Purohit intimating their consent and eligibility to the effect that their reappointment, if made, will be in accordance with Section 141 of the Companies Act, 2013.

Auditors' Report :

There is no qualification in the Auditors' report on the financial statements of the Company. There is an 'emphasis of matter' regarding non-disclosure of initial disclosures as required by Accounting Standard (AS) 24 'Discontinuing Operations' for the proposed transfer of seamless business. The reason for non-disclosure are mentioned in note no. 40 to the Financial Statements which is self explanatory.

Cost Auditor :

As per Section 148 read with Companies (Audit and Auditors) Rules, 2014 and other applicable provisions, if any, of the Companies Act, 2013 the Board of Directors of your Company has appointed M/s. Amish Parmar & Associates, Cost Accountants as the Cost Auditor of your Company for the financial year 2015-16 on the recommendations made by the Audit Co mmittee. The remuneration proposed to be paid to the Cost Auditors, subject to the ratification by the members at the ensuing Annual General Meeting, would be Rs.95,000/- plus Service Ta x and out of pocket expenses, if any. Necessary resolution seeking your ratification for the proposed remuneration to be paid to the Cost Auditor has been included in the notice of the Annual General Meeting.

The Co st Audit Report fo r the year ended 31st March, 2014 in XBRL format has been filed on 29th November, 2014.

Significant and Material Orders :

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

Extract of the annual return :

The details forming part of the extract of the Annual Return in Form MGT- 9 in accordance with Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, are set out herewith as 'Annexure 2' to this Report.

Disclosure under Section 134 (3) (l) of the Companies Act, 2013 :

Except as disclosed elsewhere in this report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year of the Company and date of this report.

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

a. Conservation of energy, technology absorption

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as stated in Annexure 3 of this report.

b. Foreign exchange earnings and Outgo

The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflows (as attached Annexure 3) to this report.

Directors and Key Managerial Personnel :

a. Meetings of the Board of Directors and Audit Committee held during the year 2014-15 :

The details of the number of Board meetings and Audit Committee Meetings of your Company are set out in the Corporate Governance Report which forms part of this Report.

b. Changes in Directors and Key Managerial Personnel

In compliance with the provisions of Sections 149, 152, Schedule IV and other applicable provisions, if any, of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014, D r. Bipin C. Doshi, Mr. Himanshu J. Thaker, M r. Gautam C. Jain and M r. A. Prakashchandra Hegde were appointed as Independent Directors on the Board of Directors of your Company at the 23rd AGM held on September 26, 2014 to hold office upto March 31, 2019.

Further during the financial year 2014-15, Ms. Neetta K. Bokaria, was appointed as Additional/Non-Executive Director of your Company at the meeting of the Board of Directors held on March 30, 2015 and subsequently her appointment was approved as a Non-Executive (Independent) Director by The shareholders through Postal Ballot.

Dr. Bipin C. Doshi, resigned as the Independent Director of the Company with effect from 31st May, 2015.

Further in terms of Clause 8.1 of the Joint Venture Agreement executed between the Company and Tubacex S.A., Mr. Ashok M. Seth, resigned as the Whole-Time Director and Chief Financial Officer of the Company with effect from 01st August, 2015, on his proposed appointment as an Executive Director of Tubacex Prakash India Private Limited, and M r. Kamal P. Kanugo, resigned as a Whole-time Director of the Company with effect from 01st August, 2015, on his proposed appointment as an Executive Director of Tubacex Prakash India Private Limited. Subsequent to the above-mentioned resignation, M r. Ashok M Seth and Mr. Kamal P. Kanugo are continuing only as Directors on the Board of Directors of your Company.

Mr. Hemant Kanugo has been appointed as the Chief Financial Officer of the Company with effect from 14th August, 2015.

Mr. Prakash C. Kanugo, the Chairman & Managing Director of the Company is liable to retire by rotation at the ensuing AGM pursuant to the provisions of the Companies Act, 2013 read with Companies (appointment and Qualification of Directors) Rules, 2014 and the Articles of Association of the Company and being eligible has offered himself for re-appointment. Resolution for his re-appointment is being placed for your approval at the ensuing AGM. The brief resume of the Director and other related information has been detailed in the Notice convening 24th AGM. Your Directors recommend his re-appointment.

Mr. Prakash C. Kanugo, Managing Director, M r. Hemant Prakash Kanugo, Chief Financial Officer are the Key Managerial Personnel of your Company in accordance with the provisions of Sections 2(51), 203 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Ms. Pallavi. P. Shedge tendered her resignation as the Company Secretary and Compliance Officer of the Company effective from August 19, 2015.

c. Declaration by an Independent Director(s) and re- appointment, if any :

Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Clause 49 of the Listing Agreement.

d. Formal Annual Evaluation :

In terms of the provisions of the Companies Act, 2013 read with Rules issued thereunder and Clause 49 of the Listing Agreement, the Board of Directors on recommendation of the Nomination and Remuneration Committee, have evaluated the effectiveness of the Board/Director(s) for the financial year 2014-15.

Familiarisation Programme for Independent Directors :

Pursuant to provisions of Clause 49 (II) (B) (7) (b) of the Listing Agreement, during the year under review the Company prepared and pursued the Familiarization Programme for Independent Directors as hosted on Company's website at www.prakashsteelage.com.

Audit Committee :

The Company has its Audit Committee constituted under the provisions of Section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, with enhanced scope and functions as stipulated under the law. The Audit Committee of the Company comprises Mr. Gautam C. Jain as Chairman of the Committee, Mr.A.Prakashchandra Hegde, Mr. Himanshu J. Thaker and Mr. Ashok M. Seth as members of the Committee. The scope and functions of the Committee are available on Company's website www.prakashsteelage.com. All the recommendations of the Audit Committee were accepted by the Board of Directors during the year.

Vigil Mechanism :

The Company has adopted vigil mechanism details of which have been provided in the Corporate Governance Report and policy on vigil has been posted on the website of the Company i.e., www.prakashsteelage.com.

Nomination and Remuneration Committee :

In Compliance with the provisions of Section 178 of Companies Act, 2013, your Company re-constituted its "Nomination and Remuneration Committee" with enhanced scope and functions as stipulated under the law. The Nomination and Remuneration Committee of the Company comprises of Mr. Himanshu J. Thaker as Chairman of the Committee, Ms. Neetta K. Bokaria and Mr. A. Prakashchandra Hegde as members of the Committee. The scope and functions of the Committee are available on Company's website www.prakashsteelage.com.

The Nomination and Remuneration Policy as approved by the Board is attached herewith as Annexure 4 to this report.

Policy for Selection, Appointment and Remuneration of Directors including criteria for their performance evaluation :

Clause 49 of the Listing Agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The Performance Evaluation of the Directors, the Board and its Committees was carried out based on the criteria /manner recommended by the Nomination & Remuneration Committee and approved by the Board of Directors. Further details in respect of the criteria of evaluation has been provided in the Corporate Governance Report.

The performance evaluation of the Independent Directors was also carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors who reviewed the performance of the Secretarial Department. Your directors express their satisfaction with the evaluation process.

Stakeholders' Relationship Committee :

In Compliance with The provisions of Section 178 of Companies Act, 2013, your Company re-constituted its 'Stakeholders' Relationship Committee', wi th an enhanced scope and functioning. The stakeholders Relationship Committee of the Company comprises of M r. A. Prakashchandra Hegde as Chairman of the Committee and Mr. Himanshu J. Thaker and Mr. Ashok M. Seth as Members of the Committee. The scope and functions of the Committee are available on Company's website www.prakashsteelage.com.

Corporate Social Responsibility Committee :

Your Company has constituted CSR Committee considering the requirements of the Companies Act, 2013. Details regarding constitution of the Committee and its meetings have been provided in the Corporate Governance Report.

The Company has not made any expenditure on CSR as the Company is still in the process of identifying the eligible project. The Company intends to contribute the money for CSR activities as soon as the project is identified.

Risk Management Committee :

Your Company has constituted Risk Management Committee in Compliance with the Clause 49 of Listing Agreement. The details with respect to constitution, scope and functions of the Committee are available on Company's website www.prakashsteelage.com.

Executive Committee :

Your Company has constituted its Executive Committee comprising of Executive Directors with an enhanced scope and functioning. The Executive Committee of the Company comprises of M r. Prakash C. Kanugo as Chairman of the Committee and Mr. Ashok M. Seth, Mr. Hemant P. Kanugo and Mr. Kamal P. Kanugo as Members of the Committee.

Loans, Guarantees or Investments :

Details of Loans, Guarantees and Investments, if any covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.

Particulars of contracts or arrangements with related parties:

The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto is appended in Form No. AOC - 2 as per Annexure 5 to this report.

Managerial Remuneration:

The table containing the names and other particulars of employees in accordance with the provisions of Section 197 (12) of the Companies Act, 2013, read with the Rule 5(1) and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure 6 to this report.

Secretarial Audit Report :

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company has appointed M/s. S. Anantha & Co., Practising Company Secretary to conduct the Secretarial Audit of your Company. The Secretarial Audit Report is annexed herewith as Annexure 7 to this report.

Necessary explanation to the observations made in the Secretarial Audit Report are given below:

Non-filing of E-Form-MGT10 i.e., Return to be filed with Ministry of Corporate Affairs, whenever there is an increase or decrease of two percent or more in the shareholding of the Promoters and top ten shareholders within 15 days of such change by the Company.

Though the Company has filed the Annual Return on Foreign Liabilities and Assets with Reserve bank of India, the return of Annual Performance Report with respect to the foreign subsidiary is not filed.

Reply: The Company is required to file e-Form MGT-10 in case of any change of increase / decrease of 2% or mo re in the shareholding of shareholding of the Promoters and the top ten shareholders and 2% or more is calculated on the paid up share capital of the Company.

During the year there was no change in The shareholding of the promoters and the change, if any, in the shareholding of the top ten shareholders is less than 2% of the paid-up share capital of the Company.

The return of Annual Performance Report with respect to the foreign subsidiary was not filed due to oversight. Proper systems and processes have been introduced to ensure that the Annual Performance Report is filed within the stipulated time in the subsequent years.

Corporate Governance Certificate :

The Compliance certificate from The auditors or practicing company secretaries regarding compliance of conditions of corporate governance as stipulated in Clause 49 of the Listing agreement shall be annexed with the report.

Internal Control Systems :

Your Company has an effective internal control and risk mitigation system, which is constantly assessed and strengthened with new / revised standard operating procedures.

The Company has entrusted the internal audit to M/s. Anand Jain & Associates, Chartered Accountants. The initial object of the internal audit process is test and review of controls, independent appraisal of risks, business process and benchmarking internal controls with best practices.

The Audit Committee of the Board of Directors actively reviews, the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen them.

The Company has a robust Management Information System, which is an integral part of the control mechanism.

The Audit Committee of the Board of Directors and Statutory Auditors are periodically apprised of the Internal Audit findings and corrective action taken. Internal audit plays a key role in providing assurance to the Board of Directors.

Policy on Prevention of Sexual Harassment :

The Company has in place Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Co mmittee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

During the financial year 2014-2015, no complaints were received regarding sexual harassment.

Directors' Responsibility Statement :

Pursuant to Section 134 (3)(c) of the Companies Act, 2013, the Board of Directors confirm that:

(a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

(b) the Directors have approved the accounting policies and have been applied consistently and have made judgment and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the profit of the Company for the year ended on that date;

(c) proper and sufficient care has been taken 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;

(d) the annual accounts have been prepared on a 'going concern' basis;

(e) proper internal financial controls are followed by the Company and that such financial controls are adequate and are operating effectively; and

(f) proper systems to ensure compliance with the provisions of all applicable laws are in place and such systems are adequate and operating effectively.

Acknowledgements :

Your Directors place on record their sincere appreciation to Stock Exchanges, shareholders, banks, government authorities, business associates and other stakeholders. The Board also recognizes the contribution of the valued customers in the growth of the Company and takes this opportunity to pledge the Company's commitment to serve them.

Your Directors also wish to place on record their deep sense of appreciation for the hard work, cooperation, solidarity, dedication and commitment displayed by all executives, officers and staff during the year, resulting in the successful performance of the Company.

Regd. Office :                 On Behalf of the Board of Directors

1402, 14th Floor,                  For Prakash Steelage Limited
A Wing, Naman Midtown,

Senapati Bapat Marg,

Elphinstone Road,

Mumbai - 400 013

                                                  Sd/- 

Place: Mumbai                                Prakash C. Kanugo 
Date: 14th August, 2015 (Chairman & Managing Director)

CIN: L27106MH1991PLC061595                  DIN: 00286366 
Tel.: 022 6613 4500

Fax: 022 6613 4599

Website: www.prakashsteelage.com

E-Mail: investorsgrievances@prakashsteelage.com

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