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Updated:24 May, 2019, 15:57 PM IST

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Updated:24 May, 2019, 16:01 PM IST

DIRECTORS REPORT

TO

THE MEMBERS OF JSW STEEL LIMITED,

Your Directors take pleasure in presenting the Twenty Second Annual Report of your Company, together with the Standalone and Consolidated Audited Financial Statements for the year ended March 31, 2016

2. RESULTS OF OPERATIONS

The financial year FY 2015–16 was marked by structural excess steel capacity globally, falling demand and steep drop in prices. Indian steel industry, in–spite of growth in demand faced severe stress and fall in margins caused by surge in steel imports at predatory prices. In these challenging conditions, the Company's profitability was also impacted.

(A) STANDALONE RESULTS

The Company recorded Crude Steel production at 12.56 million tonnes, lower by 1% YoY while Saleable Steel sales volume stood at 12.13 million tonnes, up by 1%. The current year volumes were lower, as the  second half of the year was marked by the shutdowns of three of its furnaces for relining/modification and capacity expansion at the Vijayanagar, Dolvi and Salem units of the Company. The Blast Furnaces at Vijayanagar and Salem works were re–commissioned in February 2016 and the Blast Furnace at Dolvi works was re–commissioned in March 2016. On completion of these projects, the installed capacity of the Company has increased by about 25% – from 14.3 million tonnes per annum to 18 million tonnes per annum.

The gross turnover and net turnover for the year under review stood at Rs. 40,354 crores and Rs. 36,202 crores, respectively – registering a decline of 19% and 20%.

The topline was impacted by lower steel prices due to lower commodity prices, accentuated by elevated level of imports at predatory prices. Consequently, the operating EBITDA at Rs. 5,723 crores, was lower by 35% mainly due to weaker price realisations. EBIDTA margin was at 15.60%. The net loss after tax was at Rs. 3,498 crores after considering exceptional item charge of Rs. 5,860 crores. The exceptional item includes provisioning for diminution in value of investments, other than temporary, in the value of certain investments, loans and advances and towards certain guarantees for borrowing by the subsidiaries. The Company's net worth was Rs. 21,753 crores as on March 31, 2016 as compared to Rs. 25,725 crores as on March 31, 2015. The Company's net debt gearing stood at 1.41x (compared to 1.02x as on March 31, 2015) and net debt to EBIDTA was at 5.35x (compared to 2.97x as on March 31, 2015).

(B) CONSOLIDATED RESULTS

The consolidated gross turnover and consolidated net turnover for the year under review was Rs. 45,642 crores and Rs. 41,217 crores, respectively, both showing a reduction of 19% and 21% respectively, primarily on account of lower steel prices. The consolidated Operating EBIDTA declined by 35% to Rs. 6,073 crores. The net loss after tax was at Rs. 742 crores, after considering exceptional item charge of Rs. 2,125 crores.

As a result, the consolidated net worth decreased to Rs. 21,651 crores as on March 31, 2016, from Rs. 23,152 crores as on March 31, 2015. The net debt gearing was at 1.78x (compared to 1.55x as on March 31, 2015) and net debt to EBIDTA was at 6.33x (compared to 3.81x as on March 31, 2015).

In accordance with the Accounting Standards AS–21, on Consolidated Financial Statements, read with Accounting Standard AS–23 on Accounting for Investment in Associates and AS–27 on Financial Reporting of Investment in Joint Ventures, the audited Consolidated Financial Statements are provided in the Annual Report.

In terms of Section 134(3)(l) of the Companies Act, 2013, except as disclosed elsewhere in this report, no material changes or commitments affecting the financial position of the Company have occurred between the end of the financial year and the date of this Report.

DIVIDEND

The Board has, subject to the approval of the Members at the ensuing Annual General Meeting, recommended dividend at the stipulated rate of Rs. 1 per share on the 10% Cumulative Redeemable Preference Shares of Rs. 10 each of the Company, for the year ended March 31, 2016. Considering the Company's performance and financial position for the year under review, the Board has also recommended a dividend of Rs. 7.50 (75%) per fully paid–up Equity Share of Rs. 10 each of the Company, for the year ended March 31, 2016, subject to the approval of the Members at the ensuing Annual General Meeting. Together with Corporate Tax on dividend, the total outflow, on account of equity dividend, will be Rs. 218.20 crores, vis­a–vis Rs. 320.02 crores paid for FY 2014–15.

4. PROSPECTS

The global economic growth remained largely subdued in CY 2015. The year was marked by: a) gradual slowdown and rebalancing in China b) lower investments and subdued global trade flow growth, c) declining prices of energy and other commodities, and d) a hawkish stance by US Fed. Despite the sustained monetary easing by most of the economies, the global growth remained sluggish. The global economy saw a sizeable leg down in the last quarter of CY 2015 – in both advanced and emerging markets/developing economies. The world finished steel demand declined by 3% to 1,500 million tonnes in CY 2015 amidst the subdued economic environment. The world crude steel production decreased by 2.9% to 1,621 million tonnes. The global steel industry continued to be impacted by large overcapacities and exports from the steel surplus countries especially from China, Japan, Korea and CIS flooded the global steel markets. As steel surplus countries resorted to dumping in other countries, the margins were severely impacted. Most of the countries responded with trade remedial measures to a provide level playing field to their respective domestic steel industry.

It appears that a pickup in global activity levels will be more gradual as downside risks to growth have increased with issues related to: a) persistent deflationary environment, b) political uncertainty in EU and risk of Brexit, c) a lack of confidence on sustainability of commodity prices, and d) volatile capital flows and currencies. Developed markets prospects' remains subdued due to low investment, unfavourable demographics, and weak productivity growth. The Euro Area and the US both face certain unfavourable factors. The Chinese economic growth is slowing down as it is transitioning to a consumption base growth path after a decade of strong credit and investment growth. The emerging economies also remain vulnerable to volatility in commodity prices, currency fluctuations and geo–political factors. The International Monetary Fund (IMF) has revised down its projections for CY 2016 World Economic Growth yet again to 3.2%.

The weakness in global steel demand is expected to continue with lower investment pipeline and weak manufacturing activities across the regions. The World Steel Association forecasts Chinese steel demand to drop by 4% in CY 2016 leading to a decline in global steel demand by 0.8% to 1,488 million tons. Amidst the environment of subdued demand and surplus capacities, mainly in China, trade remedial action will continue to intensify across the regions. Meanwhile, the iron ore and coking coal market are also expected to remain range bound.

INDIAN SCENARIO

Despite muted private Capex/investments, weakening rural consumption and depleting exports, India has emerged as the fastest growing major Global economy during FY 2015–16 – GDP grew by 7.6% as against 7.3% in FY 2014–15. – India was the only major steel consuming market globally which witnessed a demand growth at 4.5% during the year.

However, the country suffered from an unprecedented, unbridled and unfair inflow of steel imports from steel surplus countries. The steel imports sharply increased to 12.69 million tonnes up by 27%. The steel imports pressure turned severe in second half of the year. The surge in imports at predatory pricing led the Indian government to first increase import duty on carbon steel by 5% (in two steps). Subsequently, it also imposed a safeguard duty on certain hot rolled steel products. In February 2016, when these measures were ineffective, the Government imposed a minimum import price (MIP) on various steel products for a period of six months to create a level playing field for the domestic steel industry.

The Indian steel industry remains one among the most competitive steel industries in the world. However, there is a need to create a fair and level playing field amidst supply glut caused by surplus capacities in steel surplus countries. The preferential treatment to Japan, Korea and ASEAN countries, offering advantage of concessional duty rates under the free trade agreements, is also one of the major impediments in creation of fair and level playing field. The Indian steel industry continues to call for exclusion of steel from the purview of all FTA's.

India has emerged as one of the brightest spots in a world grappling with economic turbulence and fragile growth. It is expected to be one of the fastest growing economies in the world in FY 2017 with a growth rate estimated between 7.5%–8.0% – driven by the fundamentals of strong consumption and the government's push for streamlining business processes. Focus on infrastructure creation, extensive urbanization/Smart Cities (outlay of Rs. 2.21 lakh crore), Make in India & promoting affordable housing policy initiatives by the Government of India augers well for the Steel demand pick up in India. The consumption demand is expected to benefit from the upcoming Pay Commission award, continued low commodity prices, recent interest rate cuts, and measures announced in the Union Budget FY 2016–17 to transform the rural sector. The consumer confidence remains upbeat, while the corporate sector's expectations of business conditions also remain positive. The monsoon, after two years of drought, is expected to be normal this year and this is likely to drive consumer discretionary spending in rural areas. Overall, the Indian economy is poised to realize the benefits of higher government spending, & policy initiatives, rural demand and continuing reforms.

The Indian government's measures to pump prime the economy and progress on various policy reforms underpin a constructive medium term demand outlook. However, this also makes India an attractive export destination for steel surplus countries. Imposition of minimum import price on various steel products has provided some relief; however, the industry sees the need for adequate, swifter and longer shelf–life trade remedial measures to check unbridled and unfair imports of steel in to India. As per the World Steel Association (WSA), the Indian steel demand growth rate in CY 2016 is expected to be the highest amongst the top 10 steel consuming regions/ countries which account for more than 85% of the world steel consumption. The Company expects Indian steel demand to grow by about 6% in FY 2016–17.

5. PROJECTS AND EXPANSION PLANS (A) PROJECTS COMMISSIONED DURING

FY 2015–16 VIJAYANAGAR

• Reconstruction of Blast Furnace no. 1 to increase the capacity from 0.9 MTPA to 1.9 MTPA.

• The second Continuous Annealing lines (CAL) with a capacity of 0.95 MTPA.

• Electrical Steel Complex to produce 0.2 MTPA of Cold Rolled Non Grain Oriented (CRNGO) products along with annealing and coating lines (ACL).

• Slab Auto Scarfing for removing surface and sub–surface defects.

• Slab sizing press at HSM–2 to provide flexibility in caster operations and increase throughout of the slab casters.

• I–Shop to machine and fabricate precision components in–house with a capacity of 2000 tons per year.

• 600 TPD Lime Kiln–12 to provide calcined lime and dolomite for steel making.

DOLVI

• Expansion work at Dolvi plant to increase its capacity from 3.3 MTPA to 5 MTPA which includes commissioning of 2.5 MTPA new Sinter Plant and capacity enhancement of Blast Furnace from 2 MTPA to 3.5 MTPA, 1.5 MTPA Billet Caster and 1.4 MTPA Bar Mill.

SALEM

• The Blast Furnace – 2 was re–commissioned successfully after completion of the capital repair.

• Installation of Hot Saw no–3 at Blooming Mill for improving quality of cut ends in final products.

(B) PROJECTS UNDER IMPLEMENTATION VIJAYANAGAR

• SMS–1, SMS–2 and SMS–3 augmentation: The facilities include modification of ladles, additional convertors, RH, Ladle heating furnaces, KR unit, additional casters, 6th Strand Biller Caster and other supporting facilities. This augmentation of casting capacities are expected to be commissioned during the FY 2016–17.

• Slitting Line–1 (5000 T/Month), part of Electrical Steel Service Center expected to be commissioned in the FY 2016–17.

• New covered yard for raw material handling system at Jetty.

• Fuel conversion from Coal to mixed gas at Lime Calcination Plant.

SALEM

• Installation of new Bloom caster.

• Expansion of EOF–1 capacity from 45 Ton to 65 Ton.

• Annealing lines for increasing the volume of Bar  Rod Mill Products.

• A 31.5 tonne per hour waste heat recovery boiler at coke oven battery #2 to utilise COP waste heat for generating power is expected to be commissioned in FY 2016–17.

(C) KEY NEW PROJECTS VIJAYANAGAR

Pipe Conveyor System:

A pipe conveyor system for transporting Iron ore from the yard near the mines to the Vijayanagar plant would be set up with a capacity of 20 MTPA. This will be an environment friendly solution and reduce transportation costs of iron ore to the plant. The estimated project cost is Rs. 650 crores and is expected to be commissioned in a period of 24 months.

Water Reservoir:

The Company would build a water reservoir facility to augment the storage capacity of water at its Vijayanagar Plant. This investment is strategic in nature for un–interrupted operations of the plant. The estimated project cost is Rs. 520 crores and is expected to be commissioned in a period of 26 months.

SUBSIDIARY, JOINT VENTURE (JV) AND ASSOCIATE COMPANIES

The Company had 42 direct and indirect subsidiaries, 10 Joint Ventures and 3 Associates as on March 31, 2016.

No subsidiary companies were acquired or formed during the year.

During the year under review, Everbest Steel and Mining Holdings Limited, Argent Independent Steel (Holdings) Ltd. and JSW Mali Resources SA. ceased to be the Company's subsidiaries. JSW Steel East Africa Limited ceased to be subsidiary w.e.f. April 8, 2016.

The details of major subsidiaries, JV and associate companies are given below:

A. INDIAN SUBSIDIARIES

1. JSW STEEL COATED PRODUCTS LIMITED (JSW

STEEL COATED)

JSW Steel Coated Products Limited is the Company's wholly–owned subsidiary. It has three manufacturing facilities in the State of Maharashtra at Vasind, Tarapur and Kalmeshwar. It is engaged in the manufacture of value added steel products which mainly consists of Galvanized and Galvalume Coils/Sheets and Colour Coated Coils/Sheets. JSW Steel Coated caters to both domestic and international markets.

The production of Galvanising / Galvalume products stood at 1.48 Million tonnes and sales at 1.53 Million tonnes during FY 2015–16. Domestic sales increased by 0.25 Million tonnes over the previous year, witnessing a 36% growth.

The gross turnover and net turnover for the year under review was Rs. 7,683 crores and Rs. 7,105 crores respectively. The operating EBITDA during FY 2015–16 was Rs. 345 crores as compared to the EBITDA of Rs. 326 crores in FY 2014–15. The operating EBIDTA margin improved to 5% from 4% in FY 2014–15. The net profit after tax stood at Rs. 50 crores, compared to net loss after tax of Rs. 25 crores  in FY 2014–15.

KEY NEW PROJECTS

Tarapur Complex – Tin Plate Mill:

JSW Steel Coated Products Limited is setting up a Tin Plate Mill and related facilities at its Tarapur works to cater to the increasing demand for the tin plate. The estimated project cost is Rs. 650 crores and is expected to be commissioned in a period of 24 months.

2. AMBA RIVER COKE LIMITED (ARCL)

Amba River Coke Limited (ARCL) is a wholly owned subsidiary of the Company. ARCL has set up a 1 MTPA Coke Oven Plant and a 4 MTPA pellet plant in June 2014 and September 2014, respectively. ARCL has produced 0.95 Million tonnes of coke and 2.51 Million tonnes of pellet during FY 2015–16. The coke and pellets produced are being supplied to Dolvi unit of the Company. The profit after tax for FY 2015–16 was Rs. 115 crores as compared to Rs. 119 crores in FY 2014–15.

3. JSW STEEL (SALAV) LIMITED (JSW SALAV)

JSW Steel Limited acquired 99.87% stake in JSW Steel (Salav) Limited (formerly known as Welspun Maxsteel Limited) on October 31, 2014. JSW Salav has a DRI plant with a capacity of 0.9 MTPA, along with a captive jetty and railway sliding.

The loss after tax for FY 2015–16 was Rs. 225 crores, compared to loss after tax of Rs. 133 crores in FY 2014­15. The operations of JSW SALAV were temporarily suspended since August 2015, due to shutdown of Dolvi plant for capacity expansion coupled with subdued market conditions. JSW SALAV restarted its operations in March 2016.

4. JSW STEEL PROCESSING CENTRES LIMITED (JSWSPCL)

JSW Steel Processing Centres Limited (JSWSPCL) is the Company's wholly owned subsidiary. JSWSPCL was set up as a steel service centre, comprising HR/ CR slitter and cut–to–length facility, with an annual slitting capacity of 6.5 lakh tonnes. The Company processed 4.81 lakh tonnes of steel during FY 2015­16, compared to previous year's 5.97 lakh tonnes, mainly due to planned shutdown of Vijaynagar plant. The profit after tax for FY 2015–16 was Rs. 15 crores, compared to Rs. 24 crores in FY 2014–15.

5. PEDDAR REALTY PRIVATE LIMITED (PRPL)

Peddar Realty Private Limited (PRPL) is the Company's wholly–owned subsidiary.

Profit after tax for FY 2015–16 was Rs. 2 crores, compared to Rs. 4 crores in FY 2014–15.

6. JSW BENGAL STEEL LIMITED (JSW BENGAL), ITS SUBSIDIARIES BARBIL BENEFICIATION COMPANY LIMITED, BARBIL IRON ORE COMPANY LIMITED, JSW NATURAL RESOURCES INDIA LIMITED, JSW ENERGY (BENGAL) LIMITED (JSWEBL) AND  JSW NATURAL RESOURCES (BENGAL) LIMITED (JSWNRBL)

As a part of the Company's overall growth strategy, JSW Bengal Steel's Salboni project was planned to set up 10 MTPA capacity Steel plant in phases. All enabling work to take up implementation of the project are in place.

However, due to uncertainties in the availability of key raw materials like iron ore and coal, post cancellation of allotted coal blocks, the implementation of the project is currently put on hold. In the meantime, efforts are being made to secure long term linkages of raw materials. In the light of the new policy on the allocation of coal blocks and coal linkages from Coal India Ltd., and auction of the Iron ore mines under the Mines and Minerals Development and Regulation (MMDR) Act, the Company is hopeful of establishing raw material linkages.

7. JSW JHARKHAND STEEL LIMITED

JSW Jharkhand Steel Limited was incorporated for setting up a 10 million tonnes (in phases) steel plant in Jharkhand. It is pursuing for various approvals and clearances for setting up the project. for subsidiaries based in the US, the UK, Chile and East Africa. It also has 49% equity holding of Georgia–based Geo Steel LLC, incorporated under the laws of Georgia.

(a) JSW Steel Holding (USA) Inc. and its subsidiaries viz. JSW Steel (USA) Inc – Plate and Pipe Mill Operation and Periama Holdings LLC and its subsidiaries – West Virginia, USA–based Coal Mining Operation Plate and pipe mill operation During FY 2015–16, the US plate and pipe mill's performance continued to be impacted due to lack of orders for pipes from oil & gas sector. This unit produced 197,408 net tonnes of plates and 54,262 net tonnes of pipes with capacity utilisation of 21% and 10%, respectively.

In view of the continuing losses at the plate and pipe mill operations, JSW Steel USA Inc. carried out an impairment assessment of its fixed assets. Since the recoverable amount determined based on the estimated discounted future cash flows was lower than the carrying value of the fixed assets and due to an ongoing antitrust law suit, JSW Steel USA Inc. has recognised an impairment and other provisions aggregating to Rs.905 crores.

Net loss after tax for FY 2015–16 was Rs. 1,361 crores, compared to Rs. 302 crores in FY 2014–15.

Coal mining operation

JSW Steel Holding (USA) Inc. has 100% equity interest in coal mining concessions in West Virginia, USA. During the year, the operation of the Company was minimal due to subdued market conditions.

During the year ended March 31, 2016, Periama Holdings LLC performed impairment tests considering coal demand supply and pricing outlook. The impairment testing indicated that estimated future discounted cash flows were lower than the carrying value for certain asset groups and accordingly, the Company recorded assets impairment charge and provision towards certain advances aggregating to Rs. 172 crores.

Loss after tax for FY 2015–16 was Rs. 175 crores, compared to Rs. 61 crores in FY 2014–15.

(b) JSW Panama Holdings Corporation (JPHC) and Chilean subsidiaries, namely Inversiones Eurosh Limitada (IEL), Santa Fe Mining (SFM) and Santa Fe Puerto S.A (SFP)

Due to weak iron ore prices in the international market, the Company has undertaken a temporary suspension of mining operations since May 2015. During FY 2015–16, the production was 83,774 tonnes as compared to 818,671 tonnes in FY 2014–15.

During the fiscal year under review, the subsidiary Inversiones Eurosh has decided not to continue with the development of the Daniel and Catalina mining assets in view of the falling international iron–ore prices and hence has made a provision of Rs. 407 crores towards these mining assets.

Loss after tax for FY 2015–16 was Rs. 507 crores, compared to Rs. 114 crores in FY 2014–15.

(c) JSW Steel UK Limited and its subsidiaries, namely Argent Independent Steel (Holdings) Limited and JSW Steel Service Centre (UK) Limited

As a part of the consolidation process, Argent Independent Steel (Holdings) Limited was dissolved on November 17, 2015 and JSW Steel Service Centre (UK) Limited is in the process of being dissolved.

(d) JSW Steel East Africa Limited

As a part of consolidation process, JSW Steel East Africa Limited was dissolved on April 8, 2016.

2. JSW Natural Resources Limited (JSWNRL) and its subsidiaries JSW Natural Resources Mozambique Lda (JSWNRML), JSW ADMS Carvao Lda and JSW Mali Resources SA

JSW Natural Resources Limited formed a wholly–owned subsidiary – JSW Natural Resources Mozambique Lda in Mozambique. This initiative was taken to acquire coal assets and engage in prospecting and exploring coal, iron ore and manganese. JSW Natural Resources Mozambique Lda completed the exploration activities in Mutara District of Tete Province and is in the process of obtaining the necessary approvals for lease of certain mining assets.

JSW ADMS Carvao Lda, a subsidiary of JSW Natural Resources Mozambique Lda, has a coal mining licence in Zumbo District of Tete province. The Company hascompleted exploration activities and is in the process of making various applications for obtaining the necessary approvals for mining operations. As a part of consolidation process, JSW Mali resources SA was dissolved on June 18, 2015.

3. Nippon Ispat Singapore (PTE) Limited, Erebus Limited, Arima Holdings Limited, Lakeland Securities Limited, JSW Mali Resources S.A.

There were no significant operations during the financial year.

C. JOINT VENTURE COMPANIES

1. GEO STEEL LLC

Georgia–based JV, Geo Steel LLC, in which the Company holds 49% equity through JSW Steel (Netherlands) B.V., has set up a steel rolling mill in Georgia, with 175,000 tonnes production capacity. Geo Steel produced 85,548 tonnes of rebars and 120,613 tonnes of billets, during FY 2015–16.

Profit after tax for FY 2015–16 was Rs. 7 crores, compared to Rs. 2 crores in FY 2014–15.

2. ROHNE COAL COMPANY PRIVATE LIMITED

Rohne Coal Company Pvt. Ltd. is a JV for developing Rohne coal block. While Rohne coal block was under development, the Hon'ble Supreme Court of India cancelled the allocation of coal blocks by the Government of India to State and private sectors during the financial year 2014–15. Consequently, the allocation of Rohne coal block to Rohne Coal Company Private Limited stood cancelled.

3. MJSJ COAL LIMITED (MJSJ)

The Company, along with other partners agreed to participate in the 11% equity of MJSJ Coal Limited, Odisha. This was in accordance with the JV agreement to develop Utkal–A and Gopal Prasad (West) thermal coal block in Odisha.

The Hon'ble Supreme Court of India cancelled the allocation of coal blocks by the Government of India to state and private sectors in during the financial year 2014–15. Consequently, the allocation of coal block to MJSJ stood cancelled.

The Ministry of Coal, Government of India, has not yet commenced the auction of these Coal blocks.

4. GOURANGDIH COAL LIMITED

Gourangdih Coal Ltd. (GCL) is a 50:50 JV between JSW Steel Limited and Himachal EMTA Power Corporation Ltd. (HEPL). It was incorporated to develop and mine coal from West Bengal's Gourangdih, ABC thermal coal block. The Hon'ble Supreme Court of India cancelled the allocation of coal blocks by the Government of India to state and private sectors during the financial year 2014–15. Consequently, the allocation of the coal block to GCL stood cancelled. Gourangdih Coal block has been re–allocated to West Bengal Mineral Development & trading corporation by Ministry of Coal vide its notice dated 16th March, 2016.

5. TOSHIBA JSW POWER SYSTEMS PRIVATE LIMITED (FORMERLY KNOWN AS TOSHIBA JSW TURBINE AND GENERATOR PRIVATE LIMITED)

Toshiba JSW Power Systems Private Limited is a JV company with a 75% shareholding by Toshiba Corporation Limited, Japan, 22.52% by JSW Energy Limited and 2.48% by JSW Steel Limited. This Company is into designing, manufacturing, marketing and maintaining of mid to large–size supercritical steam turbines and generators of size 500 MW to 1,000 MW.

6. VIJAYANAGAR MINERALS PRIVATE LIMITED (VMPL)

According to the Hon'ble Supreme Court's order to stop all mining operations in Bellary district in Karnataka, activities from Thimmappanagudi Iron Ore Mines (TIOM), operated by VMPL were halted since July 2011.

The mining operations remained suspended during FY 2015–16. As per the Apex Court direction, the mines are being operated by Mysore Minerals Limited directly.

7. JSW SEVERFIELD STRUCTURES LIMITED AND ITS SUBSIDIARY JSW STRUCTURAL METAL DECKING LIMITED

JSW Severfield Structures Limited (JSSL) is operating a facility to design, fabricate and erect structural steel work and ancillaries for construction projects.

These projects have a total capacity of 55,000 TPA at Bellary, Karnataka. JSSL produced 36,014 tonnes during the year. Its order book stood at Rs. 306 crores (32,396 tonnes), as on March 31, 2016.

The Loss after tax for FY 2015–16 was Rs. 11 crores, compared to Profit after tax of Rs. 1 crores in FY 2014–15.

JSW Structural Metal Decking Limited (JSWSMD), a subsidiary company of JSSL is engaged in thebusiness of designing, roll forming of structural metal decking and accessories like edge trims and shear studs. The plant's total capacity is 10,000 TPA.

The profit after tax for FY 2015–16 was Rs. 2 crores, compared to Rs. 0.4 crores in FY 2014–15.

8. JSW MI STEEL SERVICE CENTRE PRIVATE  LIMITED (MISI JV)

JSW Steel and Marubeni–Itochu Steel signed a JV agreement on September 23, 2011, to set up steel service centres in India.

The JV Company had started the commercial operation of its steel service centre in western India (near Pune), with 0.18 MTPA initial installed capacity in March 2015. MISI JV has also started the project work for its steel service centre in Palval, Haryana, with 0.18 MTPA initial capacity. This facility is expected to be commissioned by end of FY 2016–17. The service centre is equipped to process flat steel products, such as hot rolled, cold rolled and coated products. Such products offer just–in–time solutions to automotive, white goods, construction and other value–added segments.

MISI JV incurred a loss after tax of Rs. 5 crores during FY 2015–16 in view of lower capacity utilisations, compared to profit after tax of Rs. 3 crores in FY 2014­15.

9. JSW VALLABH TINPLATE PRIVATE LIMITED

JSW Steel holds 50% stake in JSWVTPL which is into tinplate business and has a capacity of 1.0 lakh tonnes. JSWVTPL produced 75,846 tonnes during FY 2015­16. Net Profit after tax for FY 2015–16 was Rs. 7 crores, compared to loss after tax of Rs. 6 crores in FY 2014–15.

D. ASSOCIATE COMPANIES

1. JSW PRAXAIR OXYGEN PRIVATE LIMITED (JPOPL) (FORMERLY KNOWN AS JINDAL PRAXAIR OXYGEN COMPANY PRIVATE LIMITED)

JPOPL's oxygen plants have been working satisfactorily, primarily to meet requirements of steel plant operations at Vijayanagar Works.

2. DOLVI MINERAL & METALS PRIVATE LIMITED (DMMPL) AND ITS SUBSIDIARY DOLVI COKE PROJECTS LIMITED (DCPL)

The Company had earlier decided to setup a 3 million tonnes per annum Coke Oven Plant at Dolvi through Dolvi Coke Projects Limited (DCPL). The Company holds 39.996% stake in Dolvi Minerals & Metals Private Limited, which, in turn, holds 100% stake in DCPL. This project was put on hold last year in view of macro economic factors. With the completion of expansion projects and installed steel making capacity increasing to 18 million tonnes per annum, the existing coke making facilities are falling short of the total coke requirement of the Company. Therefore, the Company has decided to setup, in the first phase, a 1.5 million tonnes per annum coke oven plant at Dolvi through DCPL. The total cost for this project will be about Rs. 2,000 crore and is expected to be commissioned in 18 months

E. COAL BLOCK

The Company had entered into three separate JV agreements for the development of Rohne Coal Block, Gopal Prasad (West) and Utkal (A) Coal Block and Gourangdih Coal Block. While the coal blocks were under development, the Hon'ble Supreme Court of India cancelled the allocation of coal blocks by the Government of India to state and private sectors. Consequently, the allocation of coal blocks to these three JVs stood cancelled. Subsequently, the Government of India, promulgated the Coal Mines (Special Provision) Act 2015. As per the provisions of the Act, the investment made in the block by the prior allottee, to the extent permitted under the said provisions will be reimbursed by the successful bidder of the coal block. The Company has made an assessment of recoverable amounts of investments and other assets, impacted by the said order. It has also recognised a provision of Rs. 25.39 crores as on March 31, 2016, (Rs. 21.20 crores as on March 31, 2015) considering the principle of conservatism.

ACQUISITIONS DURING THE YEAR

There were no acquisitions made during the FY 2015–16. However, pursuant to the auction conducted by the Nominated Authority under the Coal Mines (Special Provisions) Act, 2015, the Company has been allotted the Moitra Coal Mine, vide vesting order No 104/21/2015/NA dated April 22, 2015 issued by the Ministry of Coal, Govt. of India. Moitra coal mine is situated in Hazaribagh District, Jharkhand. Moitra Coal Mine has total extractable coal reserves of 29.91 million tonnes.

8. TECHNICAL COLLABORATION WITH JFE STEEL  CORPORATION, JAPAN

FY 2015–16 was the 6th year of strategic collaboration between the Company and JFE Steel Corporation. The strategic partners were engaged in taking customer approvals for various grades and commercializing the grades produced in state–of–the art CRM #2 complex in Vijayanagar Works. The Company has received approvals from several major auto producers for supply of auto grades with the Company's own substrates.

Electrical Steel facility of 0.2 MTPA was commissioned in Vijayanagar works. The major focus was to stabilize and sustain the international standards (quality & properties) in Electrical steel products, with the support of JFE.

9. RISK MANAGEMENT

The Company's robust risk management framework identifies and evaluates business risks and opportunities. The Company recognises that these risks need to be managed and mitigated to protect its shareholders and other stakeholders interest, to achieve its business objectives and enable sustainable growth. The risk framework is aimed at effectively mitigating the Company's various business and operational risks, through strategic actions. Risk management is embedded in our critical business activities, functions and processes. The risks are reviewed for the change in the nature and extent of the major risks identified since the last assessment. It also provides control measures for risks and future action plans.

Pursuant to the requirement of Regulation 21 of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 and Clause 49 of the erstwhile Listing Agreement, the Company has constituted a sub–committee of Directors to oversee Enterprise Risk Management Framework to ensure execution of decided strategies with focus on action and monitoring risks arising out of unintended consequences of decisions or actions and related to performance, operations, compliance, incidents, processes, systems and transactions are managed appropriately.

The Company believes that the overall risk exposure of present and future risks remains within risk capacity.

10. INTERNAL CONTROLS, AUDIT & INTERNAL FINANCIAL CONTROLS OVERVIEW

A robust system of internal control, commensurate with the size and nature of its business, forms an integral part of the Company's governance policies.

INTERNAL CONTROL

The Company has a proper and adequate system of internal control commensurate with the size and nature of its business. Internal control systems are integral to company's corporate governance framework. Some significant features of internal control system are:

• Adequate documentation of policies, guidelines, authorities and approval procedures covering all the important functions of the company.

• Deployment of an ERP system which covers most of its operations and is supported by a defined on–line authorisation protocol.

• Ensuring complete compliance with laws, regulations, standards and internal procedures and systems.

• De–risking the Company's assets/resources and protecting them from any loss.

• Ensuring the integrity of the accounting system; proper and authorised recording and reporting of all transactions.

• Preparation and monitoring of annual budgets for all operating and service functions.

• Ensuring reliability of all financial and operational information.

• Audit committee of Board of Directors, comprising of Independent Directors. The Audit committee regularly reviews audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards etc.

• A comprehensive Information Security Policy and continuous updation of IT Systems.

The internal control systems and procedures are designed to assist in the identification and management of risks, the procedure–led verification of all compliance as well as an enhanced control consciousness.

INTERNAL AUDIT

The Company has an internal audit function that inculcates global best standards and practices. The Company has a strong internal audit department reporting to Audit Committee comprising of Independent Directors. The Company successfully integrated the COSO framework with its audit process to enhance the quality of its financial reporting, compatible with business ethics

AUDIT PLAN AND EXECUTION

Internal Audit department prepares a risk–based Audit Plan. The frequency of audit is decided by risk ratings of areas / functions. The audit plan is carried out by the internal team. The audit plan is reviewed periodically to include areas which have assumed significant importance in line with the regulatory changes, emerging industry trend and value of the transactions. In addition, the Audit Committee also places reliance on internal customer feedback and other external events for inclusion of areas into the audit plan.

INTERNAL FINANCIAL CONTROLS

As per Section 134(5)(e) of the Companies Act 2013, the Directors have an overall responsibility for ensuring that the Company has implemented robust system and framework of Internal Financial Controls. This framework provides the Directors with reasonable assurance regarding the adequacy and operating effectiveness of controls with regards to reporting, operational and compliance risks. The framework ensures that the Company has policies and procedures for ensuing orderly and efficient conduct of the business, safeguarding of assets of the Company, prevention and detection of frauds, accuracy and completeness of accounting records, and timely preparation of reliable financial information. The Company has devised appropriate systems and framework including proper delegation of authority, effective IT systems aligned to business requirements, risk based internal audits, risk management framework and whistle blower mechanism.

The Company has also developed and implemented a framework for ensuring internal controls over financial reporting. This framework includes a risks and control matrix covering entity level controls, process & operating level controls and IT general controls.

The entity level policies include anti–fraud policies such as code of conduct, conflict of interest, confidentiality and whistle blower policy and other policies (viz. organization structure, insider trading policy, HR policy, IT security policy, treasury policy and business continuity and disaster recovery plan). The Company has also prepared Standard Operating Procedures (SOP) for each of its processes like procure to pay, order to cash, hire to retire, treasury, fixed assets, inventory, manufacturing operations etc.

During the year, controls were tested and no reportable material weakness in design and effectiveness was observed. There have been no significant changes in the Company's internal financial controls during the year.

11. CREDIT RATING

During the year, Fitch Ratings downgraded the Company's Long Term Issuer Default Rating (IDR), senior unsecured rating and rating on the outstanding USD 500 million senior unsecured fixed rate notes due 2019 (Notes) by one notch from "BB+" to "BB". Moody's Investors Service has also downgraded the Corporate Family Rating and rating on the Notes by 2 notches from Ba1 to Ba3. Outlook on the ratings by both the agencies is negative.

The domestic credit rating for long term debt/facilities/ NCD's by CARE and ICRA has also been downgraded by one notch from "AA" to "AA–", while the short term debt/ facilities continue to be rated at the highest level of "A1+". The outlook on the long term rating by ICRA is negative.

Your Company obtained long term credit rating from India Ratings for the first time during the year. India Ratings has assigned long term issuer rating and rating for the outstanding non–convertible debentures of the Company is "AA" with stable outlook.

The downward rating actions were driven by falling sales realizations due to continued import of steel products into the country at predatory prices affecting the operating performance of the Company during the year, adverse impact on leverage matrix due to lower EBIDTA, demand–supply imbalance in the global steel industry and negative outlook on the sector.

12. INDIAN ACCOUNTING STANDARDS (IND AS)

As per the roadmap announced by the Ministry of Corporate affairs, the Company will comply with the new Accounting Standards, IND AS in preparation of its financial statements for accounting periods beginning on April 1, 2016, along with the comparatives for the period ending March 31, 2016. IND AS will also be applicable to subsidiary Companies, Joint venture or associates of the Company. Hence the Company and JSW Steel group would prepare and report results/ financial statements under IND AS from April 1, 2016, including restatement of the opening balance sheet.

13. FIXED DEPOSITS

The Company has not accepted any fixed deposits from the public. Therefore, it is not required to furnish information in respect of outstanding deposits under Non–banking, Non–financial Companies (Reserve Bank) Directions, 1966 and Companies (Accounts) Rules, 2014.

14. SHARE CAPITAL

There was no change in the Company's share capital during the year under review.

The Company's paid up equity share capital remained at Rs. 2,41,72,20,440 comprising of 24,17,22,044 equity shares of Rs. 10 each. The aggregate preference share capital remained at Rs. 76,44,49,511 comprising of 27,90,34,907, 10% cumulative redeemable preference shares of Rs. 10 each fully paid up and 48,54,14,604, 0.01% cumulative redeemable preference shares of Rs. 10 each fully paid up.

15. FOREIGN CURRENCY BONDS (FCBS)

During the year 2014–15, the Company had allotted 2,500, 4.75% Fixed Rate Senior Unsecured Notes of US$ 2,00,000 each of the Company due 2019 (the "Notes") aggregating to US$ 500 million to eligible investors. The Bonds issued by the Company in the International Market are listed on the Singapore Exchange Securities Trading Limited (the "SGX–ST").

16. CORPORATE GOVERNANCE

Your Company has complied with the requirements of Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 and Clause 49 of the erstwhile Listing Agreement regarding Corporate Governance. A report on the Corporate Governance practices, the Auditors' Certificate on compliance of mandatory requirements thereof are given as an annexure to this report.

17. MANAGEMENT DISCUSSION & ANALYSIS

A detailed report on the Management Discussion & Analysis is provided as a separate section in the Annual Report.

18. BUSINESS RESPONSIBILITY / SUSTAINABILITY

REPORTING

The Company is deeply committed to growing the business sustainably, as well as to the nine principles enshrined in the National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business notified by the Ministry of Corporate Affairs, Government of India, in July 2011. It has also been voluntarily disclosing its sustainability performance anchored to the framework of the Global Reporting Initiative (GRI), and further embellished by third party assurance as per the International Standards for Assurance Engagements (ISAE 3000). The Company has adopted policies for each NVG principle, as approved by the Board of Directors in its meeting held on January 28, 2013 which is available at the Company's website (<http://www.jsw.in/investors/investor–relations–steel>). A Committee of the Board consisting of three Independent Directors and three Executive Directors (as on March 31, 2016) review the Company's performance in terms of Business Responsibility / Sustainability Reporting on a quarterly basis. The Group Chief Sustainability

Officer is responsible for planning and implementing the sustainability initiatives as well as the stakeholder grievance redressal mechanism.

The Securities and Exchange Board of India (SEBI) has, vide its circular dated August 13, 2012, mandated the inclusion of a Business Responsibility Report (BRR) as a part of the Annual Report for the top 100 listed entities based on their market capitalisation on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited, as on March 31, 2012, and is aligned to the NVGs. Furthermore, the requirements as per Regulation 34 (f) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 have been fulfilled.

Pursuant to the press release PR No. 48/2013 and FAQs dated May 10, 2013, issued by SEBI, the Company's BRR is hosted on its website (<http://www.jsw.in/investors/> investor–relations–steel) and forms a part of this Annual Report. Any stakeholder interested in obtaining a copy of the same may write to the Company Secretary.

19. DIRECTORS AND KEY MANAGERIAL PERSONNEL

In accordance with the provisions of Section 152 of the Companies Act, 2013 and in terms of the Articles of Association of the Company, Mr. Sajjan Jindal (DIN 00017762), retires by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re–appointment.

Mr. Malay Mukherjee (DIN 02861065) who was appointed as an Additional Director of the Company in the category of Independent Director, by the Board of Directors with effect from July 29, 2015 in terms of Section 161 of the Companies Act, 2013 and in terms of Article 123 of your Company's Articles of Association, holds office until the date of the ensuing Annual General Meeting. Your Company has received a notice under Section 160 of the Companies Act, 2013 from a shareholder of your Company, signifying his intention to propose the name of Mr. Malay Mukherjee, for appointment as a Director of your Company.

Mr. Haigreve Khaitan (DIN 00005290), who was appointed as an Additional Director of the Company in the category of Independent Director, by the Board of Directors with effect from September 30, 2015 in terms of Section 161 of the Companies Act, 2013 and in terms of Article 123 of your Company's Articles of Association, holds office until the date of the ensuing Annual General Meeting. Your Company has received a notice under Section 160 of the Companies Act, 2013 from a shareholder of yourCompany, signifying his intention to propose the name of Mr. Haigreve Khaitan, for appointment as a Director of your Company.

The proposals regarding the appointment/re–appointment of the aforesaid Directors are placed for your approval.

Mr. Uday M. Chitale, who was appointed as an Independent Director in the Company's 20th Annual General Meeting held on July 31, 2014, would complete his term upon the conclusion of the ensuing 22nd Annual General Meeting of the Company and being not eligible for re–appointment in terms of the Company's policy for appointment/re–appointment of Independent Directors, has not offered himself for re–appointment.

There were no changes in the Key Managerial Personnel of the Company during the year.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

Matching the needs of the Company and enhancing the competencies of the Board are the basis for the Nomination and Remuneration Committee to select a candidate for appointment to the Board.

The current policy is to have a balanced mix of executive and non–executive Independent Directors to maintain the independence of the Board, and separate its functions of governance and management. As at 31.03.2016, the Board of Directors comprises of 12 Directors, of which 8 are non­executive, including 1 woman director. The number of Independent Directors is 6, which is one half of the total number of Directors.

The policy of the Company on directors' appointment, including criteria for determining qualifications, positive attributes, independence of a director and other matters, as required under sub–section (3) of Section 178 of the Companies Act, 2013, is governed by the Nomination Policy read with Company's policy on appointment/re–appointment of Independent Directors. The remuneration paid to the directors is in accordance with the remuneration policy of the Company.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received necessary declaration from each of the independent directors, under Section 149(7) of the Companies Act, 2013, that he / she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

20. BOARD EVALUATION

The Board carried out an annual performance evaluation of its own performance, the Independent Directors individually as well as the evaluation of the working of the Committees of the Board. The performance evaluation of all the Directors was carried out by the Nomination and Remuneration Committee. The performance evaluation of the Chairman and the Non–Independent Directors was carried out by the Independent Directors. Details of the same are given in the Report on Corporate Governance annexed hereto.

21. AUDITORS AND AUDITOR'S REPORT 1.1 STATUTORY AUDITORS

At the Company's 20th Annual General Meeting (AGM) held on July 31, 2014, M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, Mumbai, were appointed as the Company's Statutory Auditors from the conclusion of the 20th AGM till the conclusion of the 23rd AGM.

In terms of Section 139 (1) of the Companies Act, 2013, the appointment of the statutory auditors to hold office from the conclusion of the 20th AGM until the conclusion of the 23rd AGM, is placed for your ratification.

The Auditors Report to the shareholders for the year under review does not contain any qualification.

No frauds have been reported by the Auditors under Section 143(12) of the Companies Act, 2013 requiring disclosure in the Board's Report.

EXPLANATION TO AUDITOR'S COMMENT:

Auditors have in their report drawn attention to (i) note 10(1) to the Abridged Standalone Financial Statements and note 25(4)(a) to the Standalone Financial Statements regarding provision of Rs. 5,855.52 crores for other than temporary diminution in the value of investments, loans and advances doubtful of recovery and guarantees for borrowings, relating to certain subsidiaries and (ii) note 9(a) to the Abridged Consolidated Financial Statements and note 27(4)(a) to the Consolidated financial statements regarding provision of Rs. 1,829.69 crores pertaining to corresponding fixed assets, goodwill, mine development cost of the projects in the consolidated financial statements.

In the opinion of the Board, the recoverable amount of the said investments, loans and advances (in the case of standalone financial statements) and the recoverable amount of the corresponding fixed assets, goodwill, mine development and related assets (in the case of consolidated financial statements) have been arrived based on the estimate of value of businesses / assets of the said subsidiaries by independent valuers and cash flow projections considering capacity utilisation of the plants, mining plans, analyst's commodity consensus estimates of long term prices and other factors. Based on the estimated recoverable amounts, the Board has concluded that no further provision is necessary as of 31st March, 2016, except as considered in the standalone and consolidated financial statements. These assumptions will be reviewed periodically by the respective subsidiaries and the management of the Company and adjustments if any, will be made to the amount of provisions, if conditions related to the assumptions indicate that such adjustments are appropriate

Auditors have in their report drawn attention to (i) note 11 to the Abridged Standalone Financial Statements and note 25(5) to the Standalone Financial Statements regarding Company's assessment that no provision is necessary against the carrying amount of investments (net of provisions) and loans and advances amounting to Rs. 883.42 crores relating to certain subsidiaries and joint ventures and (ii) note 10 to the Abridged Consolidated Financial Statements and note 27(5) to the Consolidated Financial Statements regarding Company's assessment that carrying amount of Rs. 938.19 crores relating to corresponding fixed assets (including capitalwork in progress), Mining Development and Projects, advances, goodwill and inventories in the Consolidated Financial Statements is considered fully recoverable.

In the opinion of the Board, the recoverable amount of these investments and loans relating to the said subsidiaries and joint ventures (in the case of standalone financials) and corresponding fixed assets, capital work in progress, advances, goodwill, inventories, mine development expenses and licence fees (in the case of consolidated financial statements) have been derived based on the estimate of value of businesses / assets , considering estimates in respect of capacity utilisation, operating performance, future raw material prices, foreign exchange rates, operating margins, terminal value etc. the plans for commencing construction of the projects and commencing mining operations and valuation of the residential complex of a subsidiary carried out by an independent valuer. The Board has concluded  that no provision is required for these assets as the recoverable amounts derived as explained above are higher than the carrying amount of these assets.

21.2 COST AUDITORS

Pursuant to Section 148(2) of the Companies Act, 2013 read with the Companies (Cost Records and Audit), Amendment Rules 2014, your Company is required to get its cost accounting records audited by a Cost Auditor.

Accordingly, the Board at its meeting held on May 18, 2016, has on the recommendation of the Audit Committee, re–appointed M/s. S.R. Bhargave & Co., Cost Accountants to conduct the audit of the cost accounting records of the Company for FY 2016–17 on a remuneration of Rs. 12 lacs plus service tax as applicable and reimbursement of actual travel and out of pocket expenses. The remuneration is subject to the ratification of the Members in terms of Section 148 read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014 and is accordingly placed for your ratification.

21.3 SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M/s. S. Srinivasan & Co., a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit carried out is annexed herewith as Annexure "C". The report does not contain any observation or qualification requiring explanation or comments from the Board under Section 134(3) of the Companies Act, 2013.

The Board at its meeting held on May 18, 2016, has re–appointed M/s. Srinivasan & Co., Practicing Company Secretaries, as Secretarial Auditor, for conducting Secretarial Audit of the Company for FY  2016–17.

22. RELATED PARTY TRANSACTIONS

All Related Party Transactions (RPT) that were entered into during the financial year were on arm's length basis and in the ordinary course of business. There were no material Related Party Transactions entered during the  FY 2015–16.

The policy on dealing with Related Party Transactions as approved by the Board is uploaded on the Company's website <http://www.jsw.in/investors/steel/related–>  party–policy. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties. This Policy specifically deals with the review and approval of Related Party Transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All Related Party Transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for Related Party Transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at Arm's Length. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the requirements of Related Party Transactions under the Companies Act, 2013 and Regulation 23 of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 and Clause 49 of the erstwhile Listing Agreement.

The disclosure of material Related Party Transactions is required to be made under Section 134(3) (h) read with Section 188(2) of the Companies Act, 2013 in Form AOC 2. Accordingly, Related Party Transactions, that, individually or taken together with previous transactions during a financial year, that exceed ten percent of the annual consolidated turnover as per the last audited financial statements, which were entered into during the year by your Company, is given in 'Annexure E' to this report.

Your Directors draw your attention to Note 15 to the Abridged Standalone financial statements and Note No. 25(13) to the Standalone financial statements which sets out related party disclosures.

23. EMPLOYEE STOCK OPTION PLAN (ESOP)

The Board of Directors of the Company at its meeting held on January 29, 2016 formulated the JSWSL Employees Stock Ownership Plan – 2016 ("ESOP Plan"), with an objective of enabling the Company to attract and retain talented human resources by offering them the opportunity to acquire a continuing equity interest in the Company which will reflect their efforts in building the growth and the profitability of the Company. More than being a compensation element, the plan will have a strategic significance and will act as a key enabler to achieve long–term business objectives.

At the said meeting, the Board authorized the JSWSL ESOP Committee for the superintendence of the ESOP Plan. Grant of stock options under the ESOP Plan shall be as per the terms and conditions as may be decided by the JSWSL ESOP Committee from time to time in accordance with the provisions of Companies Act, 2013, the rules made thereunder and the Securities and Exchange Board of

India (Share Based Employee Benefits) Regulations, 2014 ("ESOP Regulations"). The new ESOP Plan is proposed to be implemented through the JSW Steel Employees Welfare Trust ("ESOP Trust"). The ESOP Trust will acquire equity shares of the Company from the secondary market for this purpose.

Under the provisions of the Companies Act, 2013 and the ESOP Regulations, approval of the members by way of a special resolution vide a postal Ballot was obtained on March 24, 2016 for the ESOP plan involving acquisition of shares of the Company from the secondary market.

A total of 28,68,700 (Twenty–Eight Lakhs Sixty–Eight Thousand Seven Hundred) options would be available for grant to the eligible employees of the Company and its director(s) excluding independent directors and a total of 3,16,300 (Three Lakh Sixteen Thousand Three Hundred) options would be available for grant to the eligible employees of the Indian Subsidiaries of the Company and their director(s) excluding independent directors, under  the ESOP Plan.

7,43,685 options have been granted under this plan by the JSWSL ESOP Committee in its meeting held on 17th May 2016 under the 1st Grant to the eligible employees of the Company and its Indian Subsidiaries, including the Whole–time Directors of the Company. The Grant of ESOPs to Whole–time Directors of the Company has been approved by the Nomination and Remuneration Committee and the Board. Mr. Seshagiri Rao M.V.S, Dr. Vinod Nowal and Mr. Jayant Acharya, Whole–time Directors of the Company have been granted 19,268, 17,983 and 17,983 options respectively towards the first grant under the ESOP Plan. As per the ESOP Plan 50% of these options will vest at the end of the third year and the balance 50% at the end of the fourth year.

The appplicable disclosures relating to the earlier JSWSL Employees Stock Ownership Plan – 2012 as stipulated under the ESOP Regulations pertaining to the year ended March 31, 2016 is hosted on the Company's website at <http://www.jsw.in/investors/investor–relations–steel> and forms a part of this Report.

Voting rights on the shares, if any, as may be issued to employees under the JSWSL Employees Stock Ownership Plan – 2012 are to be exercised by them directly or through their appointed proxy, hence the disclosure stipulated under Section 67(3) of the Companies Act, 2013 is not applicable. As no grants have been made under the new ESOP Plan during the period under review, disclosures in respect of the new plan are not applicable.

There is no material change in the aforesaid ESOP Plans and the same are in compliance with the ESOP Regulations.

The Certificate from the Statutory Auditors of the Company certifying that the Company's Stock Option Plans are being implemented in accordance with the ESOP Regulations and the resolution passed by the Members, would be placed at the Annual General Meeting for inspection by Members.

24. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

JSW Steel believes in inclusive growth to facilitate creation of a value–based and empowered society through continuous and purposeful engagement with society around.

The Company is well on its course to execute programs under the theme 'Janam Se Janani Tak (JSJT) – JSW Aap Ke Saath', a long term commitment extending services to meet the pressing needs towards empowering women and children living in the Direct Influence Zone of JSW Steel's plant locations and beyond. Through JSJT our efforts are directed towards enabling an ideal scenario where women and girls have access to quality education, healthcare and livelihood skills to build their own destinies while taking vital decisions in their families and society at large.

Guided by the belief that every life is important and must be given fair opportunities to make best out of it, the Company is working towards eradicating poverty & hunger, tackling malnutrition, promoting social development, addressing social inequalities by empowering the vulnerable section of society, addressing environmental issues, preserving national heritage and promoting sports training.

The Company is committed to:

• Continue allocating at least 2 percent of Profit Before Tax (PBT) towards special corpus for Corporate Social Responsibility as per the categories of the Companies  Act 2013.

• Transparent and accountable system for social development and impact assessments through an external agency.

• Concentrate on community needs and perceptions through social processes and related infrastructure development.

• Provide special thrust towards empowerment of women through a process of social inclusion.

• Promote arts, culture and sports; and conserve cultural heritage.

• Spread the culture of volunteerism through the process of social engagement.

JSW Foundation administers the planning and implementation of all our CSR interventions. All the CSR initiatives are approved by the committee in line with the CSR policy approved by the Board on May 27, 2014 and the same are reviewed periodically. The CSR policy formulated is uploaded on the website of the Company at <http://www.jswin/investors/investor–relations–steel>.

Taking a note of the importance of synergy and interdependence at various levels, JSW Steel has adopted a strategy that combines working with multi–stakeholders as well as directly, depending on the appropriateness and some of this are:

• Priority is given to the villages in the immediate vicinity of the plant locations defined as Direct Influence Zone (DIZ). The policy enables plants to define their own DIZ with the provision that this could be expanded as per the size of operations. However, certain programs might be expanded beyond this geographical purview and upscaled. This context is defined as Indirect Influence Zone (IIZ).

• All the interventions shall be formulated based on need assessment using different quantitative and qualitative methods that lead to measurable impact.

• All these interventions shall be implemented either directly or in partnership with both Government and civil society organizations at various levels.

• All the interventions shall be adopted based on concurrent evaluation and knowledge management through process documentation and sharing.

• Social Mobilization, advocacy at various levels, and/ or appropriate policy changes shall form part of the interventions in each sector.

Following are the Company's thematic interventions as per Schedule VII of the Companies Act 2013:

• Improving living conditions (eradication of hunger, poverty, malnutrition etc.)

• Promoting social development (education, skill development, livelihood enhancements etc.)

• Addressing social inequalities (gender equality, women empowerment etc.)

• Ensuring environmental sustainability

• Preserving national heritage

• Sports training

• Supporting technological incubators

• Rural development projects

The disclosure as per Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed to this Report as Annexure D.

25. ENVIRONMENTAL INITIATIVES

The Company has always been a frontrunner in continually improving its operational performance in all areas like safety and use of natural resources. These initiatives have been taken across all production facilities to ensure they become the culture at JSW. All the stack emissions, ambient air quality, effluent quality and work zone air quality are generally within the norms.

The Company has undertaken various measures to address environmental issues at its plant locations.

ENVIRONMENTAL INITIATIVES

VIJAYANAGAR

The following are the highlights of the year:

AIR POLLUTION CONTROL:

• Efforts were further intensified towards reduction of air pollution by installing six additional bag filters.

• Five numbers of projects are underway in Steel Melt Shop (SMS) to reduce the roof top emissions.

• With this, the specific dust emissions have been reduced by 24%.

WATER POLLUTION CONTROL:

• Intensive reuse of fresh water has helped in reuse of more than 50,000 m3/day of blow down water in certain applications.

• The existing sewage treatment plant was upgraded to double the capacity i.e. 3000 m3/d with a new technology based on membrane process (Membrane

Bio Reactor). The quality of treated water meets the new standards mandated by CPCB/KSPCB. The treated water is being used in CRM–2, there by resulting in a savings of 3000 m3/d.

• The commissioning of the world's largest (224 m3/ hr) ceramem water treatment was completed during the year. This system is being implemented for the first time in India and treats the oily contaminated alkaline water in cold rolling mills to give a permeate, which can be recycled.

• In view of the severe water crisis, due to deficient monsoon, several measures were taken to intensify recycling of blow down water. This has helped in reducing the specific water consumption by 16%.

SOLID WASTE MANAGEMENT:

During the year under review, waste utilization was given a fillip with the commissioning of the "waste to wealth" plant. These processes iron bearing dusts & sludge to produce value added material for use in pellet plant. The plant achieved a maximum production of 600 TPD in

March 2016.

Micro pellet plant and mill scale briquetting plants operated above their designed capacities.

The utilization of solid waste (dust & sludge) was enhanced to 97.35%.

Efforts to provide processed granulated blast furnace slag as an alternate to river sand in 2015–16 showed encouraging results & its acceptance, with nearly one lakh tonnes of slag sand sold to construction industry.

Steam aging process has been developed by R&D department for accelerated weathering of steel slag using steam to convert steel slag into high quality aggregates. Further, an analytical method for determining the effectiveness of the weathering has been developed & included in BIS 383.

DOLVI

To increase the efficiency of the dust extraction system and improve the work zone air quality, following measures were taken:

• Installed new dust suppression system with dry fog at Jetty.

• Installed new de–dusting system in waste material recycling area, sinter fines return conveyor and product conveyer at Sinter plant.

• Improved the efficiency of existing gas cleaning plants by installation of high temperature quenching tower 4 nos. at EAF Shell 1 & 2 and Shell 3 & 4.

• Installed new de–dusting systems at Blast Furnace Cast House and Stock house.

• Installed retractable telescopic chute at Lime Calcination Plant (LCP) at lime loading points.

• Installed Industrial Vacuum Cleaner (IVC) to extract spillage of dust at various working platforms in the Jetty and LCP.

• Installed additional dust extraction system with venturi scrubbing in Sponge Iron Plant.

• Optimizing the combustion of fuel gas in Coke Oven for better efficiency and lesser emission.

Dolvi works has been conferred with Greentech Environment Award–2015 in Gold Category from Greentech Foundation, New Delhi.

SALEM

• To increase the effectiveness of monitoring and effective air pollution control, additional 62 online continuous emission monitoring systems were commissioned and connected real–time to Care Air Centre (CAC), TNPCB, Chennai.

• Flow details of wastewater (collection and reuse) was connected online along with CCTV camera to Water Quality Watch (WQW), TNPCB, Chennai.

• Liquid Chlorine (hazardous substance) in Captive Power Plant was replaced by Chlorine dioxide in cooling water treatment at CPP II for safer and better handling.

• BF gas fired reheating furnace at Bar & Rod Mill was commissioned for maximizing BF gas consumption thereby reducing the usage of furnace oil.

• As a major initiative in enhancing the use of renewable energy, Solar energy for street light of 5 KW capacity was installed in the plant.

• Chemical consumption in main raw water treatment plant was reduced by 10% through periodical monitoring of input water quality.

• Secondary de–dusting system was commissioned at LRF to reduce fugitive emissions.

• As a part of green belt development, 10000 nos. of trees were planted inside the plant including 5000 Bheema Bamboo trees which would consume more Carbon dioxide than the other trees.

• Rain water harvesting pond of 2200 m3 capacity was constructed near Coke Oven Plant for collection and re–using the water in the process to minimize the consumption of raw water.

• Initiative taken to install 3 numbers of continuous Air Quality Monitoring Station for continuous monitoring of ambient air quality.

• I nitiative taken to eliminate DM plant regeneration wastewater by installing R.O. plant in CPP II. The Company is dedicated to constantly improving its performance on the prevention & control of Pollution, the proper use of natural resources and the minimisation of any hazardous impact stemming from the production, development, use and disposal of any of the products and services of the Company.

26. AWARDS AND ACCOLADES

Over the years, JSW Steel has participated and won many rewards and recognitions. This includes in areas like Business Excellence, Sustainability, Industry Leadership, etc. The award won during FY 2015–16 include the following:

1. Platts Global Metals Awards– (Industry Leadership Award) JSW Steel 2015.

2a. Porter Prize for Creating Shared Value.

2b. Porter Prize of Leveraging Unique Activities –Weathering the Iron Ore crisis.

3. CII–EXIM Bank Business Excellence Award – 2015 awarded by Confederation of Indian Industries (CII): Commendation Certificate for Significant Achievement.

4. National Sustainability Award–2015: First Prize amongst the Integrated Steel Plants Category by Indian Institute of Metals.

5. CII–ITC Sustainability Award 2014: Awarded Outstanding Accomplishment in category F.

6. Steel Minister's Trophy for the year 2013–14: Announced.

7. Governor of Karnataka Mr. Vaju Bhai Vala conferred a honorary Doctorate to Mr.Sajjan Jindal Chairman & Managing Directoratat the 4th Convocation of the Vijayanagar Sri Krishna Devara University held at Joladarashi Doddanagouda Ranga Mandir in Ballari on March 30, 2016.

CERTIFICATION

The surveillance audit was conducted for the IMS (Integrated Management System) which includes all the ISO–9001, ISO–14001 & BS–OHSAS–18001 for the JSW works and the JSW Township.

27. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 134 sub­section 3(c) and sub–section 5 of the Companies Act, 2013, your Directors hereby state and confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures.

(ii) Such accounting policies have been selected and applied consistently and judgements and estimates have been made that are reasonable and prudent to give a true and fair view of the Company's state of affairs as at March 31, 2016 and of the Company's profit or loss for the year ended on that date.

(iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The annual financial statements have been prepared on a going concern basis.

(v) That internal financial controls were laid down to be followed and that such internal financial controls were adequate and were operating effectively.

(vi) Proper systems were devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

28. DISCLOSURES

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

During the year six Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and Regulations 17 of the Securities and Exchange Board o4f India (Listing Obligation and Disclosure Requirements) Regulation, 2015.

AUDIT COMMITTEE

The Audit Committee comprises of Three Non–Executive Directors, all of whom are Independent Directors. Mr. Uday M. Chitale is the Chairman of the Audit Committee. The Members possess adequate knowledge of Accounts, Audit, Finance, etc. The composition of the Audit Committee meets the requirements as per the Section 177 of the Companies Act, 2013 and Regulation 18 of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 and Clause 49 of the erstwhile Listing Agreement.

There are no recommendations of the Audit Committee which have not been accepted by the Board.

EXTRACT OF ANNUAL RETURN

In accordance with the provisions of Section 134(3)(a) of the Companies Act, 2013, the extract of the annual return in Form No. MGT–9 is annexed (Annexure "B") hereto and forms a part of this report.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

The Company has a vigil mechanism named Whistle Blower Policy / Vigil Mechanism to deal with instance of fraud and mismanagement, if any. Details of the same are given in the Corporate Governance Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE

There are no significant or material orders passed by the Regulators/ Courts/ Tribunals which could impact the going concern status of the Company and its future operations.

PARTICULARS REGARDING CONSERVATION

OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information in accordance with the provisions of Section 134(3)(m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo, is given in the statement annexed (Annexure "A") hereto and forms a part of this report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The information required to be disclosed in the Directors' Report pursuant to Section 197 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is set out as Annexure "F" to this Report.

Having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, an abridged version of the Annual Report, excluding the aforesaid information, is being sent to the members of the Company and others entitled thereto. For those persons who have registered their e–mail addresses with the Company, the full version of the Annual Report containing the aforesaid information is being sent to them electronically. Members and other entitled persons who have not registered their e–mail addresses with the Company may access the full version of the Annual Report up to the date of the ensuing Annual General Meeting on the website of the Company; or by physically inspecting the full version of the Annual Report at the Registered Office of the Company on all working days of the Company, between 10.00 a.m. and 01.00 p.m; or by requesting a physical copy by writing to the Company Secretary.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place an Anti–Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention,

Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

No complaints pertaining to sexual harassment were received during FY 2015–16.

OTHER DISCLOSURES / REPORTING

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOPs referred to in this Report.

4. Neither the Managing Director nor the Whole–time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

29. APPRECIATION

Your Directors take this opportunity to express their appreciation for the cooperation and assistance received from the Government of India, Republic of Chile, Kenya, Mauritius, Mozambique, Mali, the USA and the UK; the State Governments of Karnataka, Maharashtra, Tamil Nadu, West Bengal and Jharkhand; the financial institutions, banks as well as the shareholders and debenture holders during the year under review. The Directors also wish to place on record their appreciation of the devoted and dedicated services rendered by all employees of the Company.

For and on behalf of the Board of Directors

SAJJAN JINDAL

Chairman

Place : Mumbai,

dated: May 18, 2016

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