PRAKASH INDUSTRIES LIMITED
ANNUAL REPORT 2011-2012
Your Directors present the 31st Annual Report together with the Audited
Statement of Accounts of the Company for the year ended 31st March, 2012.
(Rs. in Crores)
For the year ended For the year ended
31st March, 2012 31st March, 2011
Net Sales & Other Income 2,109.39 1,672.83
EBIDTA 368.14 349.25
Depreciation 75.56 67.26
Financial Expenses 13.86 5.69
Expenses Amortised 2.69 2.69
Profit before tax 276.03 273.61
Provision for Taxes 7.87 6.53
Profit after tax 268.16 267.08
Balance brought forward 14.61 13.16
Transfer to General Reserve 250.00 250.00
Proposed Dividend 13.45 13.45
Tax on Dividend 2.18 2.18
Carried over to next year 17.14 14.61
During the year under review, the Company has achieved net sales revenue of
Rs. 2,109 crores as against Rs. 1,673 crores in the previous year. After
providing for interest, depreciation and tax, the net profit of the Company
stands at Rs. 268 crores during the year under review.
The Board has recommended dividend of 10% i.e. Rs. 1 per equity share on
13,44,88,514 equity shares of Rs. 10 each of the Company for the year ended
31st March, 2012, subject to the approval of the Members at the ensuing
Annual General Meeting.
Your Directors are pleased to inform you that the performance in all
segments of the integrated steel plant of the Company has been quite
satisfactory. During the year the Company has successfully commissioned a
Sponge Iron kiln which has resulted in further integration of capacities
and substantial cost reduction. Further the Company has made additions in
its power generation capacities also. These capacity additions have helped
the Company achieve highest ever production in the Sponge Iron and Power
segments. In the steel segment the turnover has registered impressive
growth resulting from stable demand and much higher realisation. Captive
coal mining operations and production have been as per the targets. Rigid
PVC Pipes has improved upon the performance and has achieved highest ever
production during the year. The Company`s products are strongly placed in
the market due to their superior quality which gives them a distinct edge
The Company has undertaken further expansion in its Sponge Iron capacity
and is setting up an additional module. In addition, the Company has also
taken up expansion in its Steel Billet and Ferro Alloys capacity to reach
the next level of integration and to captively utilise the surplus power
generation arising out of the new capacity set up in this year.
The Company is in the midst of a major expansion the Power Generation
capacity and is implementing a total capacity of 625 MW in a phased manner.
The first phase of 100 MW has been commissioned towards the end of the last
fiscal year and the balance capacity shall be taken in a phased manner in
due course of time.
The Company is planning to further improve upon the capacity utilization in
the TMT division of the Company in the current financial year. The iron ore
mines allotted to the Company are under advanced stages of clearances with
the Government departments. With the mines becoming operational, the
Company shall be fully self reliant in terms of raw material requirement.
All these steps are expected to give further boost to the profitability of
the Company in the coming year.
ENVIRONMENT AND SOCIAL RESPONSIBILITY:
Company firmly believes that it should behave as a good corporate citizen,
by recognizing its responsibility towards the society and the environment.
It respects the expectations of the society and attempts to provide maximum
contribution to the society while making profit. It recognises the
importance of minimising the impact its business has on the environment and
works hard to implement policies and procedures which have both immediate
and long term positive effects on our environment.
As a responsible corporate citizen, the Company has taken effective
measures in the areas of waste management, effective resource utilisation,
pollution control and also initiated several waste reduction mechanisms.
The plant has also implemented de-dusting system, fume extraction system,
fog systems, electrostatic precipitators and coal dust injection system in
its integrated steel plant to minimize pollution. The Company has developed
thick green belts inside and around the plant for maintaining the
ecological balance and to provide green and clean environment to its
As a responsibility towards the society, the company is continually
involved in various social efforts and initiatives for upliftment of the
people in the areas around the plant like organising health camps, free
medical aids, maintaining temples and recreational facilities, providing
aid to educational institutions and adopting villages.
In accordance with the provisions of section 256 of the Companies Act,
1956, Shri Vikram Agarwal, Dr. S.L. Keswani and Shri K.C. Mehra are liable
to retire by rotation at the ensuing Annual General Meeting. Being eligible
for re-appointment, they offer themselves for re-appointment.
Shri P.L. Gupta and Shri M.L. Pareek were appointed as additional Directors
designated as Whole-time Directors of the Company w.e.f. 7th November, 2011
and 4th August 2012 respectively by the Board of Directors and hold office
upto the date of the ensuing Annual General Meeting. Notices in terms of
Section 257 of the Companies Act, 1956 have been received from two members
proposing their names to be Directors of the Company. Their appointment as
Directors is to be approved by the members in the ensuing Annual General
Meeting. Shri G.L. Mohta, Whole time Director, has resigned from the Board
w.e.f. 25th July, 2012.
Shri V.P. Agarwal, Chairman and Managing Director has been redesignated as
Chairman of the Company and Shri Vikram Agarwal, Joint Managing Director
has been redesignated as Managing Director w.e.f. 29th May 2012. The terms
of appointment of Shri Vikram Agarwal is also expiring and he is being re-
Appropriate resolutions for the re-appointment/appointment of the aforesaid
Directors which the Board recommends are being moved at the ensuing Annual
General Meeting for your approval.
Company has not accepted any deposits during the year under review.
DIRECTORS` RESPONSIBILITY STATEMENT:
Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956 with respect to Director`s Responsibility Statement, it is hereby
i) . That in the preparation of the annual accounts for the financial year
ended 31st March, 2012 the applicable accounting standards have been
followed along with proper explanation relating to material departures;
ii) That the Directors have selected such accounting policies and applied
them consistently and made judgments and estimates that were reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit or loss of the
Company for the year under review;
iii) That the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
iv) That the Directors have prepared the accounts for the financial year
ended 31st March, 2012 on a `going concern` basis.
M/s Chaturvedi and Partners, Auditors of the Company, retire at the
forthcoming Annual General Meeting, and being eligible, offer themselves
for reappointment. The Company has received a certificate from the Auditors
to the effect that their re-appointment, if made, would be within the limit
prescribed under Section 224(1B) of the Companies Act, 1956. Your Directors
recommend their re-appointment as Auditors of the Company.
M/s N.K. Jain and Associates were appointed as Cost Auditors for auditing the Cost Accounts of the Company for the financial year 2011-12.
The Cost Audit reports are required to be filed within 180 days from the
end of financial year. The Cost Audit reports for the financial year ended
31st March, 2012 will be filed in due course.
As regards Auditors` observations in their Report, the relevant Notes on
the Accounts are self-explanatory.
PARTICULARS OF EMPLOYEES:
As required by the provisions of section 217(2A) of the Companies Act,
1956, read with the Companies (Particulars of Employees) Rules, 1975, as
amended, the names and other particulars of employees are set out in the
annexure `A` to the Directors` report.
CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO:
As required under Section 217(1)(e) of the Companies Act, 1956 read with
the Companies (Disclosure of Particulars in the report of the Board of
Directors) Rules, 1988, a statement showing the information relating to the
Conservation of Energy, Research and Development, Technology Absorption and
Foreign Exchange Earnings and Outgo is enclosed as annexure `B` to this
The significance of Corporate Governance has always been recognized by the
Company. A separate report on Corporate Governance and Management
Discussion and Analysis alongwith a certificate from the Practicing Company
Secretary regarding compliance of the conditions of Corporate Governance as
stipulated under Clause 49 of the Listing Agreement of Stock Exchanges is
attached and forms part of this Report.
Your Directors take this opportunity to offer their sincere thanks to
shareholders, various departments of Central and State Governments,
Financial Institutions, Banks, Customers and Suppliers for their continued
support and look forward to having the same support in all our future
Your Directors place on record their sincere appreciation of the dedicated
and significant contribution made by officers, staff and workers of the
Company at all levels and look forward to their continued support.
By Order of the Board
Place: New Delhi V. P. Agarwal
Dated: 4th August, 2012 Chairman
MANAGEMENT DISCUSSION AND ANALYSIS
Industry Structure & Developments:
The Indian Steel Industry has huge growth potential in the coming years.
Rapid rise in production has resulted in India becoming the 4th largest
producer of crude steel and the largest producer of sponge iron or DRI in
the world and is expected to rise to the position of 2nd largest crude
steel producer by 2016. As per the report of the Working Group on Steel for
the 12th Plan, there is substantial scope for raising the per capita steel
consumption in the country significantly in the light of estimated huge
infrastructure investment , increase in urban population, emergence of the
rural market for steel buoyed by projects like Bharat Nirman, Pradhan
Mantri Gram Sadak Yojana, Rajiv Gandhi Awaas Yojana among others. Based on
the assessment of the current ongoing projects, it is estimated that the
crude steel capacity in the county is likely to be 140 mt by 2016-17 and
based on the status of MOUs signed by the private producers with the
various State Governments, it is expected that India`s steel capacity would
exceed 200 mt by 2020. On the whole, the outlook for the domestic operating
environment appears to be positive.
Opportunities and Threats:
Steel consumption in India will continue its strong growth trends in the
coming years. Compared to the global average per capita consumption of 150
kgs, India`s per capita consumption is as low as 40 kgs, which reflects
enormous scope of growth potential for the steel industry. It is estimated
that the growth rate would accelerate significantly in 2013 on the back of
urbanisation, surging infrastructure investment and expansion of industrial
production in the country and the steel consumption is expected to double
by 2020. However, the major hurdles which the Indian steel industry still
faces are the shortage of basic inputs like coal, iron ore and power, which
translate into high input costs.
In order to insulate itself against the price vagaries of the basic inputs,
the only option left before the steel players is to achieve next level of
integration in their operations. In this direction, your company has
significantly improved upon its self reliant quotient by procuring captive
coal mines and setting up captive power capacities. The only challenge
which the Company faces today is the shortage of iron ore, which
impediments its growth rate as iron ore costs constitute significant
portion of the total cost. However, this hindrance is expected to be short
lived as the Company has been allotted captive iron ore mines in
Chhattisgarh and Orissa, which are under approval stage with the government
departments. Company is making all efforts to expedite the clearances and
commence the mining operations.
Segment Wise/Product Wise Performance/Outlook:
The Company is primarily engaged in steel, power and mining operations. The
performance of the integrated steel and power operations have been
satisfactory during the year. The Company augmented its Sponge Iron
capacity by setting up an additional kiln during the year, which shall
contribute to significant cost savings in the steel operations in the
coming times. The performance of the power division was also satisfactory.
Out of the total 625 MW power capacity expansion plan, the Company also
successfully commissioned first 100 MW power plant during the last
financial year and the balance capacities shall be implemented gradually in
a modular fashion. The performance of the Wire Rod Division of the Company
continued to be satisfactory. The operations of the TMT Bar Mill were also
resumed during the later half of the year on revival of demand. Captive
coal mining operations continued at optimal level throughout the year.
Company is also into manufacture of Rigid PVC Pipes which has further
improved upon the performance and achieved highest ever production levels.
Risks and Concerns:
All businesses are marked by risks; however, the ability to timely
identifing and effectively managing risks forms an integral part of
strategic corporate management. The Company falls in the steel industry
which is highly cyclical in nature; however, with its foray into the power
sector it has been reasonably able to counteract the impact of the cyclic
nature of the steel industry. In view of the surmounting power deficit
scenario in the country, Power sector has high potential for growth
opportunities in the coming times.
The raw material availability continues to be an area of deep concern for
the steel industry; however, with availability of captive coal and power,
the Company has been able to smoothly sail through the difficult times
which witnessed acute coal and power shortages. Iron ore, which has been
witnessing a highly volatile trend coupled with short supplies for past
many years, continues to be a sensitive issue for the steel players. With
the Company`s iron ore mines becoming operational in the coming times, it
shall become fully self reliant in terms of raw materials.
Internal Control System and their Adequacy:
The Internal Control System aims to assure the adequacy of the Company`s
processes with reference to their effectiveness and efficiency, soundness
and fairness of the book-keeping entries and of the financial reporting
system and preserving the corporate assets and assuring the compliance of
operations to laws, rules and regulations, both internal and external,
aiming to grant a sound and efficient management.
Company has well defined and adequate internal control systems to ensure
that all the assets are safeguarded as well as are productive. These
controls are supplemented by periodic internal audits by Independent
Internal Auditors which are quarterly reviewed by the Audit Committee which
comprises of members of Board of Directors. The Audit Committee reviews the
adequacy and efficiency of internal controls and recommends any
improvements or corrections. Performance Budgets are prepared, actual
performance is appraised against the same and shortfalls are identified.
The internal control systems has been reported to be commensurate with the
size and nature of the business by the Statutory Auditors in their report.
Human Resources/Industrial Relations:
The Company believes that human resources are at the heart of any
organisation, so the ability to manage and develop these resources, ensure
their welfare and understand changing employment legislation is essential
for business survival. With this approach, the management has created a
team of able and experienced professionals for advancement of personal &
professional skills, knowledge and abilities of employees by regularly
conducting employees training programmes, workshops and monitoring sessions
which phenomenally contributes to improvement in the quality of the
employees. Company`s Human Resource Department (HRD) ensures that all
applicable regulatory and statutory laws are being complied with as
applicable to the factories/operations. HRD constantly works to ensure good
working conditions to the staff at the work place and keeps a strict vigil
on safety measures to ensure the safety of its work force. HRD makes all
its efforts to set up and maintain required civic amenities to take care of
the needs of the employees. The Company believes that cordial employee
management relation is the key to the success of any organization. With
this focused approach, the Company has been able to maintain cordial
employees management relations throughout the year.
ANNEXURES TO THE DIRECTORS` REPORT:
ANNEXURE - `B`
PARTICULARS AS REQUIRED UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE
REPORT OF BOARD OF DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF
ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO FOR
THE YEAR ENDED 31ST MARCH, 2012.
CONSERVATION OF ENERGY:
In pursuance of journey of Energy Excellence the Company has implemented
the International Energy Management System - ISO-50001:2011 and became the
"FIRST STEEL INDUSTRY IN INDIA" having this Prestigious Energy Management
System Certification by M/s BSI, Delhi. While implementing the same the
Company has aligned all its processes towards Energy Conservation and
identified the list of opportunities for Energy Conservation and prepared
an action plan for converting those opportunities into achievement through
Energy Improvement Management Programmes.
The Company is also focusing on water conservation and has engaged the best
Water Auditors - M/s CII, Hyderabad for carrying out a detailed water audit
for identifying the potential for water conservation. The CII team has
already conducted a preliminary assessment and identified substantial
potential for water conservation.
In line with the Company`s Energy Policy, the Company has carried out an
Energy Audit by M/s CII and executed all feasible energy conservation
proposals in all divisions recommended by CII team during detailed Energy
Audit. To pursue Energy Conservation in a more focused manner the Company
has formulated a Energy Cell and also inducted an experienced and competent
"Energy Manager" for regularly carrying out the Energy Audit of all
divisions for identifying and implementing the energy conservation
proposals more effectively.
INFORMATION AS PER PRESCRIBED FORM `A`:
Billets TMT Mills Wire Rod Mill
Division Division Division
2011-12 2010-11 2011-12 2010-11 2011-12 2010-11
Units in Lacs 66 729 93 46 452 531
(Rs./Lacs) 625 2,124 373 173 1,804 1,774
Rate/Unit (Rs.) 9.50 2.91 4.02 3.71 3.99 3.34
2. Furnace Oil
(K. Ltrs.) 341 295 518 576 1,138 3,722
(Rs./Lacs) 124 85 168 168 1,005 1,005
(Rs.) 36,272 28,922 35,351 29,171 35,980 27,002
(B) Consumption per unit of production Product:
Steel Billets TMT Mills Wire Rod Mill
Division Division Division
2011-12 2010-11 2011-12 2010-11 2011-12 2010-11
(KWH) Units 923 894 116 117 108 112
Ltrs. 0.76 0.60 13 15 9 11
A) Research & Development (R&D)
(a) Specific areas in which R&D carried out by the Company:
The Company has always emphasized on Research and Development in various
areas to make the products cost effective as well as to develop a system
for identifying areas where continual improvement can lead to over all
improvement particularly lower cost of production, better productivity,
better efficiencies and optimum human resource utilization.
The Company has initiated research and development activities in various
areas including the following:-
1. Modification of of air injection tube for increasing its life in the
2. Use of char coal in power plant to utilize the solid waste.
3. Installation of cooler in SAF to minimize pollution and improve the
efficiency of bag filters and increase productivity.
4. Optimization of equipment efficiencies for reducing the auxiliary
consumption in power plant.
5. Achieve higher productivity, cost effectiveness, quality improvement,
waste reduction through WCM continual Improvement project planned and
b) Benefit derived as a result of above R & D:
Company has experienced multiple benefits through various R&D activities
including cost reduction, higher productivity, improved efficiency and
optimum utilization of human resources.
c) Future Plan of Action:
Company has initiated many WCM and Energy Conservation Projects which are
developed in house to achieve cost reduction and higher productivity in
various manufacturing units which is a continual process. The Company has
also planned TPM/Lean Six Sigma projects for further improvement in the
cost effectiveness and increase in productivity. Apart from this it has
also strengthened the R&D cell which will lead to more R&D projects in the
company with participation of all employees on concept of "5 S", KAIZEN,
Energy Management and Water Conservation through Water Audit.
d) Expenditure on R & D:
Expenditure on R & D has been charged in primary heads of accounts.
B) Technology Absorption, Adaption & Innovation:
a) Efforts in brief made towards Technology Absorption, Adaption and
Company had initially setup Sponge Iron Kilns based on SL/RN technology of
Lurgi, Germany. Over the time, SL/RN process for making Sponge Iron was
reviewed and matched with deficiencies in present operating system. Company
is undertaking expansion in Steel & Power capacities, for which efforts are
being made to adopt the best possible state of art technology available.
b) Benefits derived as a result of the above efforts:
Higher production achieved in Sponge Iron Kilns.
c) Particulars of Technology Year of Has Technology
Technology Imported Imported Import been fully absorbed.
during last 5 years:
Nil Nil Nil Nil
FOREIGN EXCHANGE EARNINGS AND OUTGO:
a) Activities relating to Exports and Export Plans:
The Company is making efforts to develop markets for exports.
b) Total foreign exchange used and earned:
This Year Previous Year
(Rs. in lacs) (Rs. in lacs)
i) Foreign exchange used 2,165 2,817
ii) Foreign exchange earned 2,879 -