MIRA INFORM REPORT

 

 

Report Date :

07.11.2006

 

IDENTIFICATION DETAILS

 

Name :

BALASORE ALLOYS LIMITED

 

 

Formerly Known As :

ISPAT ALLOYS LIMITED

 

 

Registered Office :

Balgopalpur, District Balasore - 756020, Orissa, India.

 

 

Country :

India

 

 

Financials (as on) :

30.09.2005

 

 

Date of Incorporation :

31.05.1984

 

 

Com. Reg. No.:

1354

 

 

CIN No.:

[Company Identification No.]

L271010R1984PLC001354

 

 

TAN No.:

[Tax Deduction & Collection Account No.]

BBNB00256E

 

 

Legal Form :

A Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges.

 

 

Line of Business :

Manufacturing and Selling of Silicone, Alloys and Ferro Alloys.

 

RATING & COMMENTS

 

MIRA’s Rating :

B

 

RATING

STATUS

PROPOSED CREDIT LINE

26-40

B

Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.

Small

 

Maximum Credit Limit :

 

 

 

Status :

Improving

 

 

Payment Behaviour :

Slow but Correct

 

 

Litigation :

Clear

 

 

Comments :

Subject is a well – established and reputed company and showing signs of improvements. The company has wiped – off all its previous losses during 2004-2005. Directors are reported as experienced and respectable businessmen. Trade relations are fair. Business is active. Payments are however reported as slow but correct.

 

The company can be considered for small business dealings at usual trade terms and conditions.  

 

LOCATIONS

 

Registered Office :

Balgopalpur, District Balasore - 756020, Orissa, India.

Tel. No.:

91-678-2275781/82/83/84/85

Fax No.:

91-678-2375724

E-Mail :

ispatcal@vsnl.com, ispatalloys@yahoo.co.in, ispat_alloys@rediffmail.com

Website :

http://www.ial.co.in

 

 

Head/Administrative Office :

Park Plaza, 71, Park Street, Kolkata - 700 016, West Bengal

Tel. No.:

91-33-22493119 / 2213 /22291011/22495102

Fax No.:

91-33-22493050/4216/22291956

E-Mail :

ispatcal@vsnl.com

 

 

Mines office

At. & P.O.Dala, Jajpur Road,

District Jajpur – 755019,

Tel.No: 91-6726-2224274

Fax No: 91-6726-2224384

 

DIRECTORS

 

Name :

Mr. Pramod Mittal

Designation :

Chairman

 

 

Name :

Mr. L. K. Poddar

Designation :

Managing Director

Date of Birth/Age :

10.07.1958

Qualification :

B.Com, LLB, FCS

Experience :

Possesing rare blend of management, administration, finance, commercial and legal expertise

Date of Appointment :

28.10.2003

Other Directorship

Gontermann – Peipers (India) Limited

 

 

Name :

Mr. V.K. Mittal

Designation :

Director

Date of Birth/Age :

03.08.1957

Qualification :

B.Com, D.B.M.,

Experience :

Managing Large Projects and Steel Plants

Date of Appointment :

31.05.1984

Other Directorships

Ispat Metallics India Limited, Ispat Industries Limited, Central India Power Company Limited, Gontermann Peipers (India) Limited, GPI Textiles Limited, Ispat Energy Limited, Vemagiri Power Services Limited

 

 

Name :

Mr. Mahesh Trivedi

Designation :

Director

 

 

Name :

Mr. S. Mohapatra

Designation :

Director

 

 

Name :

Mr. R. P. Panda

Designation :

IPICOL Nominee

Date of Birth/Age :

08.06.1952

Qualification :

M.Tech (Metallurgical)

Experience :

Industrial Promotion and Investment Corporation of Orissa Limited – Nominee

Date of Appointment :

27.09.1991

Other Directorship

Inno Tech Powders Limited, Orissa Sponge Iron Limited

 

Name :

Mr. S. K. Pal

Designation :

Director

Date of Birth/Age :

03.01.1943

Qualification :

B.Sc. (Hons), M.Tech (Chemical Engineering and Chemical Technology)

Experience :

He is a retired General Manager (Credit) Allahabad Bank

Date of Appointment :

27.06.2003

 

 

Name :

Mr. S. K. Sharma

Designation :

Executive Director

 

 

Name :

Dr. A.K.Bhattacharya

Designation :

Director

Date of Birth/Age :

11.04.1950

Qualification :

B.Com (Hons.), M.Com, FCA, FICWA, Diploma in Management Accountancy, D. Phil.

Experience :

Professor, Finance and Control, Indian Institute of Management, Kolkata, West Bengal

Date of Appointment :

30.06.2004

Other Directorship

Escorts Asset Management Company Limited

 

 

Name :

Mr. R. K. Jena

Designation :

Director - Operations

Date of Birth/Age :

04.08.1967

Qualification :

Degree in Mechanical Engineering and MBA in Finance

Experience :

Manufacturing of Ferro Alloys

Date of Appointment :

28.07.2004

 

 

Name :

Mr. Trilochan Sharma

Designation :

Assistant Company Secretary

 

MAJOR SHAREHOLDERS

 

Names of Shareholders

No. of Shares

Percentage of Holding

Promoters, Directors and their Relatives

12167548

27.48

Mutual Funds and UTI, Banks, Flls and Insurance Cos.

3376547

7.62

NRIs/OCBs

982837

2.22

Private Corporate Bodies, Public & Others

27763479

62.68

Grand Total

44290411

100.000

 

 

BUSINESS DETAILS

 

Line of Business :

Manufacturing and Selling of Silicone, Alloys and Ferro Alloys.

 

 

Products :

v      Ferro-Silico-Manganese – 72023000

v      Ferro-Chromium Containing by Weight more than 4 % of Carbon – 72024100

v      Ferri-Manganese Containing by Weight more than 2 % of Carbon - 72021100

 

PRODUCTION STATUS

 

Particulars

Unit

 

Installed Capacity

Actual Production

Silicon & Ferro Alloys

MT

 

100000

116990

 

GENERAL INFORMATION

 

No. of Employees :

2000

 

 

Bankers :

v      State Bank of India

v      State Bank of Hyderabad

v      Allahabad Bank

 

 

Facilities :

Secured Loans

30.09.2005

Term Loans: -

 

Term Loans from a Scheduled Bank

 

Rupee Loans

1046.060

Funded Interest Term Loans (Not Bearing Interest)

329.900

 

 

Other Loans from Scheduled Banks

 

On Cash Credit Account

90.137

Working Capital Demand Loan

127.601

 

 

Interest Accrued and Due

12.522

Total

1606.220

Term loans are secured by a first mortgage on all the Company's immovable properties, both present and future, and / or by way of hypothecation of all the movable assets (save and except book debts) including movable machinery, machinery spares, tools and accessories, present and future, subject to prior charges in favour of the company's bankers on stocks for securing working capital requirements. The above term loans are further guaranteed by Mr. Pramod Mittal and Mr. V. K. Mittal, Directors of the Company. Cash Credit and Working Capital Demand Loan facilities are secured by hypothecation of the Company's stocks and book debts, and also by a second & subsequent charge on the company's immovable properties, both present & future. All the mortgages and charges created in favour of the Banks for Term and other Loans rank pari passu inter se.

Unsecured Loans

 

Foreign Currency Term Loan:

 

From IKB Deutsche Industries Bank

146.968

 

 

Other Loans (not bearing Interest)

 

From Bodies Corporate

39.000

Under Sales Tax Deferment Scheme

26.224

Total

212.192

 

 

 

Banking Relations :

Satisfactory 

 

 

Auditors :

S. R. Batliboi and Company

Chartered Accountants

Address:

22, Camac Street, Block ‘C’, 3rd Floor,  Kolkata – 700 013, West Bengal

Tel. No.:

91-6726-2224274

Fax No.:

91-6726-2224384

 

 

Associates/Subsidiaries :

v      Gontermann Peippers (India) Limited

v      Ispat Industries Limited

v      Ispat Energy Limited

v      Ispat Finance Limited

v      Ispat Metallics India Limited

v      Ispat Profiles India Limited

v      Ispat Urja Limited

v      Mudra Ispat Limited

 

CAPITAL STRUCTURE

 

Authorised Capital :

No. of Shares

Type

Value

Amount

77854794

Equity Shares

Rs. 10/- Each

Rs. 778.548 Millions

44290412

Equity Shares

Rs. 5/- Each

Rs. 221.452 Millions

 

Total

 

Rs. 1000.000 Millions

 

Issued, Subscribed & Paid-up Capital :

No. of Shares

Type

Value

Amount

44290411

Equity Shares

Rs. 10/- Each

Rs. 221.452 Millions

Add

Shares Forfeited 

 

Rs. 15.186 Millions

 

Total

 

Rs. 236.638 Millions

 

 

FINANCIAL DATA

[all figures are in Rupees Millions]

 

 

ABRIDGED BALANCE SHEET

 

SOURCES OF FUNDS

 

30.09.2005 (18th Month)

31.03.2004

(18th months)

30.09.2002

(18th months)

SHAREHOLDERS FUNDS

 

 

 

1] Share Capital

236.638

458.091

458.024

2] Share Application Money

135.525

0.000

0.000

3] Reserves & Surplus

2095.211

987.711

1070.135

4] (Accumulated Losses)

0.000

(1333.749)

(845.354)

NETWORTH

2467.374

112.053

682.805

LOAN FUNDS

 

 

 

1] Secured Loans

1606.220

1548.992

1575.789

2] Unsecured Loans

212.192

694.000

621.248

TOTAL BORROWING

1818.412

2242.992

2197.037

DEFERRED TAX LIABILITIES

0.000

0.000

0.000

 

 

 

 

TOTAL

4285.786

2355.045

2879.842

 

 

 

 

APPLICATION OF FUNDS

 

 

 

 

 

 

 

FIXED ASSETS [Net Block]

4025.035

1914.453

2405.162

Capital work-in-progress

34.743

15.323

1.013

 

 

 

 

INVESTMENT

21.347

53.935

53.935

DEFERREX TAX ASSETS

218.205

325.204

169.958

 

 

 

 

CURRENT ASSETS, LOANS & ADVANCES

 

 

 

 

Inventories
541.667

328.572

320.126

 

Sundry Debtors
11.699

50.197

59.267

 

Cash & Bank Balances
9.795

21.519

3.322

 

Other Current Assets
0.000

0.000

0.000

 

Loans & Advances
345.956

197.668

389.665

Total Current Assets
909.117

597.956

772.380

Less : CURRENT LIABILITIES & PROVISIONS
 

 

 

 

Current Liabilities
908.395

542.550

547.201

 

Provisions
14.266

9.276

6.785

Total Current Liabilities
922.661

551.826

553.986

Net Current Assets
(13.544)

46.130

218.394

 

 

 

 

MISCELLANEOUS EXPENSES

0.000

0.000

31.380

 

 

 

 

TOTAL

4285.786

2355.045

2879.842

 

PROFIT & LOSS ACCOUNT

 

PARTICULARS

 

30.09.2005 (18th Month)

31.03.2004

(18th months)

30.09.2002

(18th months)

Sales Turnover [including other income]

4186.280

2566.649

826.683

 

 

 

 

Profit/(Loss) Before Tax

671.338

(683.627)

736.072

Provision for Taxation

108.465

155.232

242.070

Profit/(Loss) After Tax

562.873

(528.395)

494.002

 

 

 

 

Export Value

2292.645

343.327

24.686

 

 

 

 

Import Value

299.317

78.289

NA

 

 

 

 

Total Expenditure

3819.868

2802.296

1374.434

 

QUARTERLY

 

PARTICULARS

 

31.12.2005

 (1st Quarter)

31.03.2006 (2nd Quarter)

30.06.2006

(3rd Quarter)

30.09.2006

(4th Quarter)

Sales Turnover

652.800

642.100

648.300

721.500

Other Income

12.400

2.800

0.700

8.800

Total Income

665.200

644.900

649.000

730.300

Total Expenditure

586.000

567.600

545.900

621.300

Operating Profit

79.200

77.300

103.100

109.000

Interest

36.300

30.800

38.600

41.700

Gross Profit

42.900

46.500

64.500

67.300

Depreciation

36.600

36.000

36.400

37.400

Tax

0.500

1.000

2.700

2.700

Reported PAT

0.900

6.100

15.300

15.900

 

200512 Quarter 1  - Net Sales Includes Domestic Rs 286.181 million Exports Rs. 366.612 million Expenditure Includes (Increase) / Decrease in Stock in Trade Rs. 10.510 million Materials Purchased / Consumed Rs. 261.712 million Power & Fuel Cost Rs. 194.678 million Personnel Cost Rs. 25.201 million Other Expenditure Rs. 93.874 million Tax Includes Provision for Current Tax Rs. 0.003 million Deferred Tax (Assets)/Liability Rs. 4.938 million Fringe Benefit Tax Rs 0.450 million EPS is Basic & Diluted Status of Investor Complaints for the quarter ended 31.12.2005 Complaints Pending at the beginning of the quarter 02 Complaints Received during the quarter 274 Complaints disposed off during the quarter 276 Complaints unresolved at the end of the quarter Nil 1. The Company has only one business segment Ferro Alloys. 2. No provision of Minimum Alternate Tax (MAT) has been considered in view of clause (vii) of sub section 2 of Section 115JB of the Income Tax Act, 1961. 3. Export sales include Rs 49.453 million being the incentive receivable under 'Target Plus Scheme' for the year 2004-2005. Which as a matter of abundant caution was not provided last year. However due to prevailing economies in imports of inputs, the company intends to use this incentives for import of materials and hence this credit has now been accounted for. 4. Depreciation indicated above is net of Rs. 33.917 million being the amount of additional depreciation arising out of revalued assets, appropriated from General Reserves to which the revaluation reserve was transferred last year as per High Court Order. 5. The auditors in their report on the company's accounts for the 18 months period ended 30.09.2005, have commented upon their inability to ascertain the impact, if any rising out of Deferred Tax Assets of Rs 218.206 million recognised in the accounts. As per the management, Deferred Tax Asset has been recognised based on future profitability projections which it is confident of achieving. 6. Previous period figures have been regrouped/ rearranged where considered necessary. 7. The above results for the quarter ended 31.12.2005 were reviewed by the Audit Committee and taken on record by the Board of Directors at their respective meeting held on 20.01.2006. A limited review of these results has been carried out by the Company's Statutory Auditor.

 

 

200603 Quarter 2  - Net Sales Includes Domestic Rs 163.222 million Exports Rs 478.840 million Expenditure Includes (Increase) / Decrease in Stock in Trade Rs 3.612 million Materials Purchased / Consumed Rs 247.871 million Power & Fuel Cost Rs 189.697 million Personnel Cost Rs 25.400 million Other Expenditure Rs 101.013 million Tax Includes Provision for Current Tax Rs 0.412 million Deferred Tax /Liability Rs 3.441 million Fringe Benefit Tax Rs 0.600 million EPS is Basic & Diluted Status of Investor Complaints for the quarter ended 31.03.2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 1090 Complaints disposed off during the quarter 1090 Complaints unresolved at the end of the quarter Nil 1. The Company has only one business segment Ferro Alloys. 2. Depreciation indicated above is net of Rs 67.096 million(including Rs 33.179 million for the quarter) being the amount of additional depreciation for the six months period ended 31.03.2006, arising out of revalued assets, appropriated from General Reserves to which the revaluation reserve was transferred last year as per High Court Order. 3. The auditors in their report on the Company's accounts for the 18 months period ended 30.09.2005, have commented upon their inability to 0ascrtain the impact, if any rising out of Deferred Tax Asset of Rs 218.206 million, recognised in the accounts As per the management, Deferred Tax Asset has been recognised based on future profitability projections which it is confident of achieving. 4. Previous period figurs have been regrouped / rearranged where considered necessary. 5. The above results for the quarter ended 31.03.2006 were reviewed by the Audit Committee and taken on record by the Board of Directors at their respective meetings held on 26.04.2006. A Limited Review of these results has been carried out by the Company's Statutory Auditor

 

200606 Quarter 3  - Net Sales Includes Domestic Rs. 247.806 million Exports Rs 400.447 million Expenditure Includes (Increase) / Decrease in Stocks in Trade Rs (13.482) million Materials Purchased / Consumed Rs. 234.234 million Power & Fuel Cost Rs. 190.803 million Personnel Cost Rs. 28.581 million Other Expenditure Rs. 105.724 million Tax Includes Provision for Current Tax Rs. 2.019 million Wealth Tax Rs. 0.006 million Deferred Tax Rs 10.083 million Fringe Benefit Tax Rs 0.687 million Status of Investor Complaints for the quarter ended 30.06.2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 732 Complaints disposed off during the quarter 732 Complaints unresolved at the end of the quarter Nil 1. The Company has only one business segment Ferro Alloys. 2. Depreciation indicated above is net of Rs. 100.646 million (including Rs. 33.550 million for the quarter) being the amount of additional depreciation for the nine months period ended 30.06.2006, arising out of revalued assets, appropriated from General Reserves to which the revaluation reserve was transferred last year as per High Court Order. 3. The auditors in their report on the Company's accounts for the 18 months period ended 30.09.2005, have commented upon their inability to ascertain the impact, if any rising out of Deferred Tax Asset of Rs. 218.206 million, recognised in the accounts. As per the management, Deferred Tax Asset has been recognised based on future profitability projections which it is confident of achieving. 4. Previous period figures have been regrouped / rearranged where considered necessary. 5. The above results for the quarter ended 30.06.2006 were reviewed by the Audit Committee and taken on record by the Board of Directors at their respective meetings held on 31.07.2006. A Limited Review of these results has been carried out by the Company's Statutory Auditor.

 

200609 Quarter 4  - Net Sales Includes Domestic Rs 245.612 million Exports Rs. 475.902 million Expenditure Includes (Increase)/Decrease in stock in Trade Rs (10.191) million Materials Purchased / Consumed Rs. 283.497 million Power & Fuel Cost Rs. 196.450 million Personnel Cost Rs. 28.680 million Other expenditure Rs. 122.874 million Tax Includes Provision for Current Tax Rs 2.10 million Wealth Tax Rs 0.007 million Deferred Tax Rs 11.309 million Fringe Benefit Tax Rs 0.631 million EPS is Basic Status of Investor Complaints for the quarter ended 30.09.2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 624 Complaints disposed off during the quarter 624 Complaints unresolved at the end of the quarter Nil 1. The Company has only one business segment Ferro Alloys. 2. In compliance with the approved Corporate Debt Restructuring scheme, the company has made Preferential issue of 2,00,00,000 Equity shares of Rs 5/- each at a premium of Rs. 7.75/- per share to the Promoters, which is pending allotment subject to necessary compliances. 3. Operations have started in the recently acquired Manganese Ore Mines at Hathoda in Madhya Pradesh. 4. The Company has undertaken various modern Management Initiatives such as Six Sigma, Total Productive Maintenance (TPM), Total Quality Management(TQM), Activity Based Cost Management(ABCM), Just-In-Time(JIT), Performance Management System(PMS) in order to maximize performance efficiency. 5. Depreciation indicated above is net of Rs.134.285 million (including Rs. 33.639 million for the quarter) being the amount of additional depreciation for the twelve months period ended 30.09.2006, on revalued assets and has been appropriated from General Reserve. 6. The auditors in their report on the company's accounts for the 18 months period ended 30.09.2005, have commented upon their inability to ascertain the impact, if any arising out of Deferred Tax Asset of Rs. 218.206 million, recognised in the accounts. As per the management, Deferred Tax Asset has been recognised based on future profitability projections which it is confident of achieving. 7. The Company has resolved to close its Accounting Year from 01.10. 2005 to 31.12.2006, which shall be for a period of fifteen months. 8. The above results for the quarter ended 30.09.2006 were reviewed by the Audit Committee and taken on record by the Board of Directors at their respective meetings held on 27.10.2006. These results are subject to a Limited Review by the Company's Statutory Auditor 9. Previous period figures have been regrouped / rearranged wherever considered necessary.

 

KEY RATIOS

 

PARTICULARS

 

30.09.2005

(18th Month)

31.03.2004

(18th months)

30.09.2002

(18th months)

Debt Equity Ratio

1.89

26.12

3.11

Long Term Debt Equity Ratio

1.57

20.17

2.21

Current Ratio

0.92

0.92

0.92

TURNOVER RATIOS

 

 

 

Fixed Assets

0.68

0.68

0.22

Inventory

6.49

5.77

1.38

Debtors

91.27

34.16

7.63

Interest Cover Ratio

3.91

0.28

(0.71)

Operating Profit Margin (%)

26.26

11.05

(19.20)

Profit Before Interest and Tax Margin (%)

21.29

3.29

(23.08)

Cash Profit Margin (%)

18.25

4.85

(25.60)

Adjusted Net Profit Margin (%)

13.28

(2.91)

(29.48)

Return on Capital Employed (%)

19.37

0.00

0.00

Return on Net Worth (%)

34.92

0.00

0.00

 

STOCK PRICES

 

Face Value

Rs.10/-

High

Rs.8.36/-

Low

Rs.7.00/-

 

 

LOCAL AGENCY FURTHER INFORMATION

 

HISTORY

 

The company was incorporated on 31st May 1984 at Balasore in Orissa under the name and style of Ispat Alloys Limited having Company Registration Number 1354, and later changed to the present name.

 

In December 1987, it came out with a public issue of FCDs, aggregating Rs. 999.900 millions to finance its expansion and to strengthen long- term resources. Group companies include P T Ispat Indo, Indonesia, Caribbean Ispat, Nippon Denro Ispat and Ispat Profiles.

 

The company has entered into collaborations with Nippon Denko Manufacturing Company, Japan, Danieli, Italy, Elkem, Norway and Outokumpu, Finland. The company has commissioned two new furnaces and imported D G Sets. It has set up Rs. 1320.000 millions chrome ore pellet plant at Orissa, a Rs. 1000.000 millions project in Tripura and Rs. 6240.000 millions gas based sponge iron project in Maharashtra.

 

The company is setting up a 1-mtpa hot-strip mill in Lysva, Russia, in a joint venture with Lysva Steel Works (cost : $ 700.000 millions). It is also engaged in shipping, looked after by Garuda Carriers and Shipping. It is investing $ 5.000 millions to acquire 41 % equity in a Mexican company, Compania Minera Aultan. It has received various awards such as the EEPC export award, the HRD and Productivity Award for 1993, awarded by CII.

 

During the year 1999-2000, the Company implemented installation of most modern jigging machine resulting in higher metal recovery and yield.

 

In the year 2000-01, the company has successfully commenced chrome mining operations and also taking steps for benefaction and conversion of chrome ore.

 

BUSINESS

 

The company is engaged in manufacturing and selling of Silicone, Alloys and Ferro Alloys.

 

The company has received the ISO 14002/ISO 9002 accreditation from the Bureau of Indian Standards thus establishing its commitments to quality and technological excellence. The company has also increased its captive power generation capacity by installing two new imported DG Sets of 10.5 MW each. Also Company placed order for another DG Set of 11.54 MW from MAN and W at its works at Balgopalpur, Orissa.

 

Government of Orissa has sanctioned for allocation of 50 % area of Chrome Ore Mines in Sukinda Valley. Company has plans to start mining in shortest possible period which will allow the company to source its raw material at comparatively cheaper price and the same shall improve the profitability of Company.

 

 

FINANCIAL REVIEW

 
 
 Income from operations during the period at Rs. 4340.733 Millions represents an increase of approximately 53% over previous period. Profit after tax during the period was Rs. 562.873 Millions  compared to a loss of Rs. 528.395 Millions during the previous period.

 

OPERATIONS 
 
 At the backdrop of fast recovery from long recession experienced by the steel industry, the performance of the steel industry during most of the period under review is encouraging. Production during the period under review was 116990 mt as against 101449 mt during the previous period, thereby registering impressive growth of 15.32% during the period under review. With the installation of COB plant and coke driers etc, the operating margins are expected to improve and strengthen the bottom line of the Company. Of late, the major stainless steel makers in different parts of the world announced cut in production capacities with a view to maintaining stable prices. Notwithstanding the combating mechanism adopted by the industry, downward trend in prices became inevitable and similar situation prevailed for most of steel related items, especially for the ferro alloys of both manganese and ferro chrome. The Company, with the foresightedness and visualization of the future of the industry, has drawn out strategy and initiated counter measures like lowering consumption norms without compromising on product quality, achieving higher productivity, coupled with the drive for cost reduction through implementation of management initiatives such as Total Productive Maintenance (TPM), Six Sigma, Performance Management System (PMS) and Activity Based Costing Management (ABCM) to be able to mitigate the effect of slide in prices of its products and also sustain the growth in overall performance of the Company. 
 
 EXPORTS 
 
 The Ministry of Commerce has conferred the Company with the status of Two Star Export House. Further, as in the past couple of years, it has also been awarded with the Certificate of Excellence in the field of exports. 


 
 The Company continues to strive to become a global player and has, in the process, identified major export markets. Its marketing thrust is geared towards becoming a world class producer of Ferro Chrome. This effort has eventually resulted in the Company exporting 71252 mt valued at Rs. 2537.645 Millions , in the period under review as against 14246.71 mt valued at Rs. 411.159 Millions in the previous period, thereby touching new heights. The Company's thrust for exports will continue, as its avowed strategy is to make globally competitive products of international class coupled with registering impressive growth in the future. 


 
 FUTURE PROSPECTS 


 
 Global stainless steel industry continues to grow in rapid strides. With production set to touch 25.800 million metric tonnes, a growth of 5% is envisaged in 2005. What is more heartening is that growth in the Asia Region is expected to be the strongest. With massive developments in infrastructure sector, particularly in India and other Asian countries being envisaged, there is a definite situation of rising per capita steel consumption. With growth of steel industry in China reaching saturation levels, India could possibly be one of the major steel hobnob with phenomenal growth projections. Recent entries of reputed global steel manufacturers in India are a clear indication of the potential of untapped opportunities in the country. The heightened activity in sectors such as roads, ports and sea-bridges is expected to send annual steel consumption rocketing from current levels of about 36 million tonnes per year. 


 
 The trend is definitely a good omen for Ferro Alloys industry as a whole. However, with steel manufacturers elsewhere setting up Ferro Alloys units for captive consumption and high levels of steel inventory worldwide, the Ferro Alloy consumption may be slightly retarded in future. You will be assured to note that in spite of above unfavourable situation prevailing in the market, the Company continues to produce at 100% capacity and cater to the needs of valued customers worldwide including Indian buyers, because of certain distinct business advantages the Company enjoys over its competitors in the form of Captive Mining Sources, Long term Power Purchase Agreement with Power supply company and relentless pursuit for qualitative excellence etc. Further, in order to face the current situation & meet future challenges, the Company has evolved strategies and initiated a number of steps like development of special products, long term tie-ups with buyers and value addition by acquiring Manganese Ore mines to quickly adapt to the changing environment. 


 
 The Company has been successful in penetrating into niche market segments of the world to enhance sales realization.

  
 
 The Company's product is not only admired among highly quality conscious customers located in countries like Japan, Korea, USA but is also targetted to reach to end users, for which the Company is reasonably equipped with. 


 
 FINANCIAL & CAPITAL RESTRUCTURING 


 
 As members are aware, severe recession faced by steel industry worldwide had a deleterious effect on the Indian steel industry, which, in turn, resulted in deterioration of financial position of the Company. Accordingly, the Company approached the lenders for restructuring of its credit facilities and in response, State Bank of India, the lead lender of the Company made a reference to Corporate Debt Restructuring (CDR) cell under the Corporate Debt Restructuring mechanism instituted by the Reserve Bank of India for this purpose. 


 
 The Directors are pleased to inform that the CDR cell has since approved the Corporate Debt Restructuring package of the Company in the month of March 2005, with the cut off date being 31st March, 2004. The restructuring package, inter-alia, includes :- 


 
 Reduction in rate of interest on Rupee Loans, 


 Reschedulement of repayment of Term Loans, 


 Conversion of part of working capital limits into Term Loans, 


 Conversion of differentials/unapplied interest into Funded Interest Term Loan, and 


 Reduction in margin of working capital limits. 


 
 With the said sanction of restructuring package, coupled with the supportive market, financial performance of the Company would further improve in the coming years. The Company has also entered into a Waiver and Restructuring Agreement with IKB Deutsche Industrie Bank for settlement of its dues. 
 
 Further, members may be pleased to note that subsequent to their approval to the Scheme of Arrangement, at their meeting held on 13th May, 2005, the Hon'ble High Court of Orissa has sanctioned the said Scheme by its order dated 25th October, 2005, which has become effective after due completion of necessary formalities. 


 
 As a cumulative effect of the above, the financial position of the Company has improved significantly. 
 
 DE-REGISTRATION FROM BIFR 


 
 In view of the financial and capital restructuring measures undertaken by the company as mentioned hereinabove, the net worth of the Company has become positive. Consequently, the improved financial position no longer warrants continuance of reference of the Company to the Board for Industrial and Financial Reconstruction (BIFR). Necessary application to BIFR will therefore have to be made for securing immediate deregistration from the Agency. 


 
 MANAGEMENT INITIATIVES 


 
 As has been informed to you in the previous Annual Report, the company has been imparting extensive training to its employees at all levels in operational efficiency programmes such as Six Sigma, Total Productivity Management (TPM), Performance Management System (PMS) etc. The said programmes have now been fully integrated with the Personnel & Human Resource Development policies of the Company. Necessary Benchmarking has also been provided for giving of awards, rewards and promotions. The Directors are happy to report to you that the Company has made significant progress by implementing these management initiatives

 

MANAGEMENT DISCUSSION AND ANALYSIS 

 
 INDUSTRY STRUCTURE AND DEVELOPMENTS 


 
 The Indian Steel Industry continued its exponential performance during the year 2004-2005 resulting in all the major steel companies outperforming their targets in terms of production, sales and profitability. This scenario is expected to continue in the years to come. The total crude Steel Production in India in the financial year 2005 was 34.82 Mt, registering a growth of 1.67% of the previous year. With the growth anticipated in the domestic housing, construction and automobile sectors, the consumption for the steel has been projected by the Ministry of Steel, Government of India at 55 MTPA - 60 MTPA by 2011-12 and to 100 MTPA by 2020. 


 
 Globally also, the steel industry witnessed robust growth with demand overtaking the supply. Total world crude steel production for the first six months of 2005 is 546.3 Mt, a rise of 7.6% on the same period of 2004. This phenomenal growth in the international as well as domestic steel industry has augured well for the Ferro alloy industry and buoyant international market for Ferro alloy products prompted the company to give increased thrust on exports. 


 
 OPPORTUNITIES AND THREATS 


 
 Lifting itself out of the quagmire of prolonged recession, the Steel Industry made an encouraging performance during the period under review. Compared to the same period in previous year, the total stainless crude steel production in the first quarter of 2005 was 6.5 Mt, i.e. a rise of 7.4%. Growth in the stainless steel production was the strongest in the Asia region with production reaching 3.3 Mt in the first quarter of 2005, registering a growth of 14.2% over the first quarter of 2004. India has a per capita consumption of steel of only around 30 kgs as against 230 kgs in China and an average of over 400 kgs in the developed countries. This wide gap in relative steel consumption indicates that the potential ahead for India to raise its steel consumption is high and this trend augurs well for the Ferro Alloys industry as well. China continues to remain one of the key determinants of how the performance of the sector would pan out over the next couple of years, as any shortfall in demand/imports from the country would lead to increased availability of steel for the international markets. This belief is further strengthened by the fact that as per reports, China was a net steel exporter in the closing monthsof 2004 despite the fact it has increasingly met its metal demand internally. Of late, the major stainless steel producers in different parts of the world have announced cut in production capacities with a view to maintain stable prices. Notwithstanding the combating mechanism adopted by the industry, downward trend in prices could not be arrested and similar situation prevailed in the Ferro Alloys sector, a steel related product. Rising cost of power and fuel and other inputs during the last couple of years have caused strain on the profitability of the Company. However appropriate measures, including tapping of alternate sources of power supply, long term tie-ups with various suppliers are under process to mitigate the effect of such concerns. 
 
 MANAGEMENT OF RISKS AND CONCERNS 


 
 Power being the principal constituent of product cost of the company; availability of economic & quality power remains an area of concern, where monopoly in future can be envisaged. However, the issue has been taken up with the concerned authority to arrange for supply of adequate and quality power. The company has initiated measures to tackle the future concerns by wheeling-in cheaper power from available sources and setting up own Power plant. These actions will largely minimize the total dependency on a sole power supply source. The Company, with the foresightedness and visualization of the future of the Industry, has also drawn out strategy and initiated counter measures like lowering consumption norms without comprising on product quality, achieving higher productivity, coupled with the drive for cost reduction through implementation of modern management tools like TPM, PMS ABCM and Six-Sigma to be able to mitigate the effect of drop in prices and also sustain the growth in overall performance of the company. 


 
 PRODUCTWISE PERFORMANCE 


 
 Production during the period under review was 116990 mt. During the period under review, the company registered an impressive growth of 15.32% over the previous period. With the installation of COB plant and coke driers, the operatingmargins are expected to improve further and strengthen the bottom line of the Company. The company exported 71252-mt worth Rs 2537.645 Millions as against 14246.71 mt worth Rs. 411.159 Millions in the previous period, thereby scaling newer heights. The Company's thrust on exports will continue as its avowed strategy is to make products which are globally competitive and assist in registering impressive growth in the future.

 
 
 FUTURE OUTLOOK 


 
 The International Stainless Steel Forum (ISSF) expects global stainless steel production to grow by 5% to 25.8 Mt in 2005. Growth in the Asia Region is expected to be the strongest. 


 
 Notwithstanding the slow pace of clearance of new proposals by China, the increase in Steel Production capacities globally and in India, the slide in nickel and steel scrap prices, the movement of South African Rand Vs USD, switchover of manganese alloy manufacturers to ferro chrome, etc has slightly dampened the euphoria caused by the phenomenal growth projections made by various agencies in the steel sector. The company has evolved strategy to overcome aforesaid unfavourable market situation and is attempting through quality products to penetrate into niche market segments of the world to enhance sales realization. 


 
 Further, with a view to having flexibility in its Product mix so as to take advantage of the cyclical movements in the prices of the products, the company has taken on long lease manganese ore mines from the Government and expects to commence commercial production shortly. 


 
 QUALITY ASSURANCE 


 
 The company continues to enjoy ISO 9002 accreditation from the Bureau of Indian Standards, besides employing stringent quality assurance procedures and technological excellence. The Company recognizes the value of the quality with utmost sincerity and is committed to sustain high quality of its products. 

 

The company is in trade terms with: -

 

·         Paradeep Oxygen (Private) Limited

·         Nilgiri Polymer

·         Shree Shyam Silicate Udyog

·         Noble Gas Limited

·         Orissa Oxygen (India) Private Limited

·         UMC Engineering Private Limited

·         Premier Iron & Steel Works (Private) Limited

·         Konark Ceramic

·         Utkal Polyware Private Limited

·         Nishi Gases

·         Steel Union Private Limited

 

The company’s fixed assets of important value includes Leasehold Land, Mining Lease, Freehold Land, Buildings, Plant and Machinery, Vehicles, Furniture, Fixtures and Office equipments.

 

CMT REPORT [Corruption, Money laundering & Terrorism]

 

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

 

1]         INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

 

2]         Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

 

3]         Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

 

4]         Record on Financial Crime :

            Charges or conviction registered against subject:                                                  None

 

5]         Records on Violation of Anti-Corruption Laws :

            Charges or investigation registered against subject:                                                          None

 

6]         Records on Int’l Anti-Money Laundering Laws/Standards :

            Charges or investigation registered against subject:                                                          None

 

7]         Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

 

8]         Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

 

9]         Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

 

10]        Press Report :

            No press reports / filings exists on the subject.

 

 

CORPORATE GOVERNANCE

 

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

 

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

 

 

CONTRAVENTION

 

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

 

 

FOREIGN EXCHANGE RATES

 

Currency
Unit

Indian Rupees

US Dollar

1

Rs.45.16

UK Pound

1

Rs.85.99

Euro

1

Rs.57.92

 

 

SCORE & RATING EXPLANATIONS

 

SCORE FACTORS

 

RANGE

POINTS

HISTORY

1~10

6

PAID-UP CAPITAL

1~10

5

OPERATING SCALE

1~10

4

FINANCIAL CONDITION

 

 

--BUSINESS SCALE

1~10

6

--PROFITABILIRY

1~10

3

--LIQUIDITY

1~10

4

--LEVERAGE

1~10

4

--RESERVES

1~10

3

--CREDIT LINES

1~10

3

--MARGINS

-5~5

-

DEMERIT POINTS

 

 

--BANK CHARGES

YES/NO

YES

--LITIGATION

YES/NO

NO

--OTHER ADVERSE INFORMATION

YES/NO

NO

MERIT POINTS

 

 

--SOLE DISTRIBUTORSHIP

YES/NO

NO

--EXPORT ACTIVITIES

YES/NO

YES

--AFFILIATION

YES/NO

YES

--LISTED

YES/NO

YES

--OTHER MERIT FACTORS

YES/NO

YES

TOTAL

 

38

 

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

 

Financial condition (40%)                  Ownership background (20%)                         Payment record (10%)

Credit history (10%)                            Market trend (10%)                                             Operational size (10%)

 

 

RATING EXPLANATIONS

 

 

RATING

STATUS

PROPOSED CREDIT LINE

>86

Aaa

Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums

Unlimited

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

Large

56-70

A

Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums

Fairly Large

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

Satisfactory

26-40

B

Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.

Small

11-25

Ca

Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity

Limited with full security

<10

C

Absolute credit risk exists. Caution needed to be exercised

Credit not recommended

NR

In view of the lack of information, we have no basis upon which to recommend credit dealings

No Rating

 

 

 

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions