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Updated:22 May, 2019, 15:59 PM IST

BSE
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Change Change %
1.60 1.72%

Updated:22 May, 2019, 16:01 PM IST

Dear Shareholders,

I have great pleasure in welcoming you all to the 52nd Annual General Meeting of the Company and present to you the Annual Report of your Company for the financial year 2009–10.

The Directors' Report and the Audited Balance sheet of your Company for the period ended 31st March, 2010 have already been provided to all the shareholders of the Company. With your permission, I take them as read.

ECONOMIC SCENARIO WORLDWIDE

The year gone by in 2009–10 was a year of stabilization and recovery for the global economy post global economic meltdown and subsequent economic recession. After plunging into the steepest economic contraction since the great depression, the global economy witnessed significant improvement during the year. Although the process of recovery continues, the recent sovereign debt crisis in a few European economies poses new obstacles towards sustained growth and stability on a long term basis. According to the latest world economic outlook published by International Monetary Fund (IMF) in April 2010, world economy is expected to grow by 4.2% in 2010 as against a decline of 0.6% in 2009.

At the heart of this recovery was the co–ordinated fiscal action by the world powers, including India, to stimulate the economies. In a sign of shifting economic might, China and India were at the forefront of this recovery added by their relatively stable domestic demand.

ECONOMIC SCENARIO INDIAN

India was one of the first countries to recover from the global economic crisis on account of its strong domestic demand. In India, the economic growth exceeded expectations and grew by an impressive 7.4% GDP growth rate during FY 2009–10. The financial year 2009–10 saw large volatility in inflation numbers with food prices witnessing the steepest increase.

As per estimates, the outlook for the 2010–11 looks encouraging backed by normal monsoon, higher agriculture productivity and buoyancy in industrial output and exports. In the year 2010–11, the GDP is likely to grow by 8.5%.

WORLD IRON & STEEL SCENARIO 2009

Global crude steel production during the year 2009 was 1.22 billion tonnes down 8% over 2008 driven mainly by growth in China. During 2009, China's crude steel production was about 569 million tonnes as against 500 million tonnes in 2008 registering an impressive growth of 13.5%. Rest of the world (world – China) showed a decrease of 21% in crude steel production to 652 million tonnes in 2009 compared to 826 million tonnes during 2008. Meanwhile, world iron ore production reached (estimated) 1.83 billion tonnes during 2009 registering an increase of 2.8% over 2008 production level of 1.78 billion tonnes.

INDIAN IRON & STEEL SCENARIO – 2009–10

India registered impressive growth of 11% in steel production during 2009–10 and its crude steel production increased to 64.88 million tonnes during 2009–10 compared to 58.44 million tonnes of crude steel production during 2008–09. India's iron ore production during the year 2009–10 is estimated to be 226 million tonnes registering an increase of about 5% over 2008–09 iron ore production of 215.44 million tonnes.

THE POSITION OF NMDC

For NMDC, the year 2009–10 had been one of challenges and endeavours to overcoming them. In May 2009, the slurry pipeline, laid by a major customer of the company, through which around 7 million tonnes of materials are evacuated from Bailadila sector, was damaged reportedly by the Maoists. With this, evacuation of about 30% of total material from Bailadila got directly affected. Disruption of railway services due to frequent bandhs compounded the problem. Further, as a consequence of the global recession, international prices of iron ore dipped by 32.95 % for fines and 44.47 % for lumps. With the fall in bench mark prices, the domestic prices were also readjusted downwards. Consequently, the company faced a challenge both in respect of maintaining the level of sales as well as the level of revenue. I am happy to state that your company has put in all its endeavour to overcome the situation and has been successfal to a large extent. Through continuous coordination with railways and through mid–term adjustment of price structure, your company has been able to restrict drop in sales to less than 10% and drop in revenue to less than 18%. On the other hand, the company continued its initiative for horizontal and vertical expansion of its activities. Your company achieved an excellent progress in taking forward its project for construction of an integrated steel plant of 3 million ton capacity in Nagarnar. In order to overcome the difficulty of evacuation, the company has decided to set up a 12 million ton capacity slurry pipeline from Bailadila to Vizag and put this project on fast track. The construction of a new mine at Bailadila 11B is now in the last stage of completion and work on construction of a new mechanised mine at Kumarswamy in Karnataka is just going to commence. Simultaneously, the company's value addition project of 1.2 million ton capacity pellet plant is progressing satisfactorily. Your company has also set up a new division called "NMDC Global" to aggressively work in the area of acquisition of mineral assets especially of iron ore and coal in different parts of the world. The sustained efforts of the company have started giving results in 2010–11. The company has already marched ahead in recording the highest ever first quarter profit. The dream of NMDC has been to continuously strengthen its core area of mining and also to expand in other fields, both in the areas of mining and value addition so as to improve the company's value not only for its shareholders but also for the nation, it is created by.

COMPANY'S PERFORMANCE

The Company's performance for the year under review are summarized as under:

Turnover for the year under review was Rs.6239 crores.

Profit before tax was Rs.5207 crores. Profit After Tax (PAT) was Rs.3447 crores.

Net worth increased to Rs. 14250 crores as on 31.03.2010,23% higher than Rs. 11615 crores in the previous financial year.

Interim Dividend @ 75% on the equity shares of Re.1/– each aggregating Rs.297.35 crores was paid. The Board has recommended subject to shareholder's approval, payment of final dividend @100% of Rs.396.47 crores. (Total dividend aggregating Rs.693.82 crores)

Supply of IronOre to domestic industries recorded 206.53 lakh tonnes. Total exports of IronOre during the year was 34.32 lakh tonnes.

As an MOU signing PSE with the Government of India, your Company's performance during the year qualifies for Excellent rating.

IRON ORE SALES

In respect of iron ore, the Company has achieved production of 238.03 lakh tonnes in the financial year 2009–10 against 285.15 lakh tonnes in the previous financial year 2008–09. On the side of sales, the performance in the year 2009–10 has been 240.85 lakh tonnes as against 264.72 lakh tonnes in the previous financial year. MERGER OF SPONGE IRON INDIA LIMITED I am happy to announce that consequent upon filing of the order of merger as issued by Ministry of Corporate Affairs, Government of India with the Registrar of Companies, Andhra Pradesh, Sponge Iron India Ltd (SIIL) got merged with NMDC w.e.f. 01.07.2010 being the Effective Date as Sponge Iron Unit. Accordingly, SIIL stands dissolved without the process of winding up. The Company is taking all possible steps to improve the performance of Sponge Iron Unit. It may be appreciated that with the merger of SIIL with NMDC, the Company has ventured into value added products utilizing the surplus land of 433.69 acres available there.

NEW PROJECTS & BUSINESS DIVERSIFICATION

Apart from ramping up production capacity of its core activity of iron mining, your Company is also planning to diversify into value added projects. NMDC has chalked out projects worth over Rs.24000 crores over the next five years. It is planning to expand its iron ore mining capacity to 50 million tonnes from the existing 30 million tonnes. Apart from setting up of 3 M.T. Integrated Steel Plant at Nagarnar, Chhattisgarh, the Company also plans to set up pellet plants, iron ore nugget plants and beneficiation facilities. Evacuation of iron ore is posing a major hurdle basically on account of damage to Essar's slurry pipe line and constraints in rail movement on account of Maoist activities. To offset the problem of evacuation of iron ore, the Company also plans to set up a new pipeline connecting Bailadila Complex with RINL's Vizag Steel Plant site with an outlay of about Rs.3000 crores. This will also enable the Company to transport pellets as feed to Vizag for meeting the requirement of steel producers. The Company is also planning a proposal for setting up of a 2 Million Tonne steel plant at Karnataka in terms of an MOU signed with Government of Karnataka.

The Company is making conscious efforts to increase its resource base of minerals, both in India and abroad. The Joint Venture Company NMDC–CMDC Ltd with CMDC Ltd is taking necessary steps to develop Bailadila Deposit–13 as a stand alone project of 10 MTPA. NMDC has entered into strategic alliances with Kopano Ke Matla Investment Company, South Africa and Tata Steel over exploration & exploitation of mineral resources, setting up of steel plants and other value added projects.

The basic need of India today is basically three fold– securing energy requirement, infrastructure development and ensuring food security. To achieve the aforesaid goals, NMDC is focusing on exploration and exploitation of coal, lime stone, rock phosphate etc either on its own or with other Companies having related business activities.

CORPORATE SOCIAL RESPONSIBILITY

Your Company sincerely believes that CSR activities plays a pivotal role in achieving inclusive growth. NMDC is in the forefront in various CSR initiatives over the past many years before it importance dawned on corporate India. The focus of NMDC's CSR initiatives is integrated development of community in the villages surrounding our establishments which are among the most backward tribal villages of India. NMDC has initiated integrated development of villages to facilitate sustainable income generation through employment / self employment by targeting education and skill development. NMDC is also offering facilities in healthcare and infrastructure to enable the beneficiaries engage in income generation activities. CSR activities are mentioned in detail in the Director's Report.

CORPORATE GOVERNANCE

A separate section on Corporate Governance forms part of the Director's Report. Your Company has complied with Corporate Governance norms as stipulated by the Listing Agreement/DPE Guidelines.

ENVIRONMENT MANAGEMENT

As a mining Company, NMDC is conscious of its role in preservation of environment and maintaining ecological balance. The four major production projects, Bailadila Dep–14/11C, Dep–5, Donimalai and Diamond Project have been accredited with IS0 14001–2004 EMS by M/s DNV, Hyderabad.

DISINVESTMENT OF SHARES BY GOVERNMENT OF INDIA

During the year under review, Government of India disinvested 8.38% of its holding in the Company aggregating 332,243,200 equity shares of the face value of Re.1/– each through an Offer for Sale. The Government of India received Rs. 9930.42 crores out of the said disinvestment process. Accordingly, the equity shareholding of President of India in NMDC stands at 90%.

LOOKING AHEAD

Outlook for iron & steel industry during 2010–11 is very encouraging. World crude steel production during the first six months (Jan/10 – June '10) of 2010 has increased by 29% to 708 million tonnes compared to CPLY production level of 548 million tonnes. During the period of (Jan/10 – June'10), China has registered a growth of 17% in crude steel production whereas India has shown a growth of 11%. According to World Steel Association, world finished steel consumption is to increase by 10.7% in 2010 and 5.3% in 2011. The year ahead holds much promise to NMDC. The commissioning of a new mine, i e, Bailadila–11/B, is expected by the end of this year. Despatches are likely to improve, bringing in better realization, higher turnover and better profit. NMDC, it is hoped, will excel its performance and achieve all–time high records.

ACKNOWLEDGEMENT

To conclude, I acknowledge that all these achievements have been possible only due to relentless and dedicated efforts, made by the employees of the Company. On behalf of the shareholders and management of the Company, I thank the Government of India, Ministry of Steel for the confidence and trust bestowed upon your Company and the opportunity given for its continued growth and expansion. I sincerely assure you that the Company will continue to grow in the years ahead. Thank you and Jai hind.

Rana Som

Chairman–cum–Managing Director

Place: Hyderabad

Date: 05.08.2010

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