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Updated:13 Dec, 2019, 16:01 PM IST

DIRECTORS' REPORT

To,

The Members of

PSL LIMITED

Your Directors present this Twenty Seventh Annual Report of the Company together with the Audited Statements of Accounts for the Financial Year 2014–15.

ACCOUNTING YEAR

Members may recall that Financial Year 2012–13 comprised of 18 months period commencing from 1st April, 2012 to 30th September, 2013. As a consequential effect of extension of the said Financial Year by a period of six months, the following Financial Year i.e. Financial Year 2013–14 comprised of only six months period i.e. 1st October, 2013 to 31st March, 2014. Members may note that the Financial Year 2014–15 under review however comprised of usual 12 months period commencing from 1st April, 2014 to 31st March, 2015.

RESTRUCTURING OF COMPANY'S DEBTS

Members may kindly recall that during the aforesaid extended Financial Year 2012–13, your company had suffered a serious blow in its operations due to various external and internal reasons most of which were beyond the control of your management. It is because of such adverse effect on company's operations that profitability had substantially fallen down, as a direct result of which even the cash flows were affected very adversely. Hence your company had no choice but to apply to Corporate Debt Restructuring Cell in March, 2013 for restructuring of your company's debt in accordance with a policy of Reserve Bank of India then in vogue.

Finally the restructuring scheme approved by the CDR Empowered Group as communicated to the company on 23rd September, 2013 started getting implemented by way of execution of a Master Restructuring Agreement (MRA) between the company and its various lenders on 19th November, 2013. Since post sanction of the said scheme most of the lenders of the company started adopting a conservative approach towards sanctioning of additional fund and non–fund based facilities to the company, profits of the company had to substantially fall as is evident from the table depicting the financial results hereunder:

In view of the period of the two financial years above being different the data of current financial year is not comparable with last financial year straightway. As can be observed during the year under review the gross sales & total income have substantially fallen down, resulting into your company incurring a loss of Rs.477 Crores. Such situation is the direct after effect of what is stated in foregoing paragraphs.

b) On Consolidated Basis

The consolidated income from operations of the Company and its various subsidiaries excluding the two subsidiaries in USA for the year ended on March 31, 2015 got decreased from Rs. 807.04 Crores in the last financial year to Rs. 305.47 crores as a result of which the net loss of the Company got increased form Rs. 352.43 crores in the last financial year to Rs. 579.04 Crores in the financial year under review i.e. 2014–15.

DIVIDEND

Keeping in mind the losses registered by the Company during the year under review, your Directors have not recommended any dividend for the said year.

TRANSFER TO RESERVES

In view of absence of profits during the financial year under review your Directors were unable to transfer any amount to the General Reserve Account.

INCREASE OF PAID UP CAPITAL

Since an essential condition of the restructuring of company's debt was conversion of part of the debt of different lenders into equity, your company issued 45638441 equity shares of the face value of Rs.10/– per share to the lenders at a premium of Rs.16/– per share in accordance with a SEBI formula prescribed for this purpose. Such issuance of additional equity resulted into enhancement of paid up capital of the Company from its earlier level of Rs.5329.68 Lacs to 9893.53 Lacs.

In addition to the above, the process for allotment of 50619233 equity shares at the same total price of Rs.26/– per share to a Creditor and few promoters group entities has already been initiated and after completion of the said allotment process your company's paid up share capital would get further enhanced from Rs. 9893.53 lacs to Rs.14955.45 Lacs which will be well within the present Authorized Capital of Company of Rs.180 crores.

OPERATIONAL PERFORMANCE

As is evident from the financial results stated above, the Company's performance has been very adversely affected due to the financial crunch that the Company faced during the financial year 2012­13. Apart from the ripple effect of the aforesaid Company specific problem, your company also had to suffer due to certain issues which directly affected the pipeline industry in general. Delay in implementation of the country wide projects such as national gas grid and water distribution projects etc. added fuel to the fire as the demand for steel pipes (the manufacturing of which is core competence of your Company) got drastically reduced thereby straight away adversely affecting the business prospects in a big way.

REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTIONS (BIFR)

Your Company suffered substantial operational losses during the financial year 2012–13 as a result of which the Company's net worth was eroded, (since the accumulated losses exceeded the entire net worth). As a result of such erosion the relevant provisions of Sick Industrial Companies (Special Provision) Act, 1985 got triggered and therefore your Company, in order to comply with section 15 of the said Act, had to make reference to the Board for Industrial and Financial Reconstructions (BIFR) for determination of the measures which shall be adopted with respect to the Company. Such reference is currently being processed at the Delhi office of BIFR.

ACCOUNTS STATEMENTS OF SUBSIDIARY COMPANIES

Your Company has five wholly owned subsidiaries in addition to two step down subsidiaries and seven associate Companies.

Pursuant to the provisions of Section 129(3) of the Companies Act,2013 a statement containing salient features of Financial statements of the Company's subsidiaries (excluding the two subsidiaries in USA) in form AOC–1 is attached to the financial statements of the Company.

As During the financial year 2014–15 PSL USA Inc.–the Company's subsidiary in USA and its stepdown subsidiary namely PSL North America LLC filed voluntary petitions for relief under chapter XI of The United States Bankruptcy code State of Delaware USA since the said subsidiary Company suffered heavy losses in the last three years. Hence financial results of these two companies have not been included.

ASSOCIATION WITH JINDAL TUBULAR – A SUBSIDIARY COMPANY OF JINDAL SAW LIMITED

Consequent upon substantial reduction in the operations of the Company, most of the manufacturing facilities of the Company in different locations in the country were not getting optimally utilized. Moreover even the fixed expenses including the payroll expense of the manpower deployed at such locations were causing an additional drain on Companies financial position. In order to mitigate the effect of these two important factors, your company has executed an "Operation Maintenance and Management" contract with Jindal Tubular Limited (JTL) by way of which not only the valuable machinery installed at these locations would remain continuously functional but even certain fixed costs including the cost of man power at the said location would be recovered from the revenue generated by Jindal Tubular Limited due to the aforesaid contract.

DIRECTORATE

At the beginning of the Financial Year under review the strength of your company's Board of Directors was 14 Directors which included Six Whole Time Directors, One Non–executive Director, Five Independent Directors and Two Nominee Directors.

However during the year under review the Directorate got changed due to following reasons:

1. On 31st May, 2014 Shri M. M. Mathur, Whole Time Director ceased to be on the Board consequent upon resignation submitted by him earlier.

2. On 15th July, 2014, Shri. G. Gehani, Whole Time Director & Company Secretary ceased to be on the Board consequent upon resignation submitted by him earlier..

3. On 15th November, 2014, Shri P. V. Apte, Independent Director left for his heavenly abode.

4. On 28th November, 2014, Smt. Geeta Poojary, Nominee Director resigned from the Board.

As a result of the aforesaid changes, at the end of the Financial Year 2014–15 your Board comprised of only Ten Directors including Four Whole Time Directors, One Non–executive Director, Four Independent Directors and One Nominee Director.

Woman Director

Members may note that in accordance with notifications issued by SEBI sometime back it is now compulsory for every listed company to have atleast one Woman Director on its Board. Since the earlier woman Director Mrs. Geeta Poojary (who also happened to be a nominee of EXIM Bank) had resigned some time back, your Board of Directors in its meeting held on 13th May, 2015 (which date is although after close of the Financial Year under review but is before the date of this report) appointed Mrs. Manjula Bhatia who has adequate exposure in finance, accounting and administrative functions as Non–executive Additional Director holding the said office till the conclusion of the ensuing Annual General Meeting. Since the company has received a notice under Section 149(1) of Companies Act, 2013 for her appointment as a Director, the Members would be requested to consider and if agreed to appoint her as a Director on company's Board liable to retire by rotation.

In view of what is stated above the aforesaid requirement of SEBI for a Woman Director on every listed Company's Board has been fully complied with. Now the total strength of your Directors is Eleven Directors with adequate mix of Whole Time Directors, Non– executive Directors, Independent Directors, Nominee Director and Woman Director. The number and ratio of the said Directors on Board is well in accordance with the prescribed norms of Companies Act and Listing Agreement for the purpose.

KEY MANAGERIAL PERSONNEL

A. Company Secretary

Consequent upon resignation of Shri G. Gehani effective 15th July,2014 from the post of Whole Time Director and Company Secretary of the Company, your Board had appointed Mr. Shashi Ranjan as a Company Secretary of the Company with effect from 20th December, 2014.

However since Mr. Shashi Ranjan in order to join a Public Sector Company, had also submitted his resignation from the post of Company Secretary as a result of which he was relieved off his duties on 11th May, 2015.

B. Chief Financial Officer

Member may note that in accordance with the provisions contained in Companies Act, 2013 which became effective from 1st April, 2014, a CFO was required to be necessarily appointed Mr. V. Subramaniam, who was a qualified Chartered Accountant as well as a Company Secretary was appointed on 1st January, 2014 as the CFO of the Company. However, for certain personal reasons although the said CFO has submitted his resignation from the services of the Company on 29th June,2015 he is yet to be formally released from his duties.

BOARD MEETINGS

The Board of Directors met four times during the financial year 2014–15, the details ofwhich are given in the Corporate Governance Report that is annexed to this Report. The intervening gap between any two meetings was not only within the period prescribed by the Companies Act,2013 but it was also in accordance with relevant provisions of Listing Agreement.

BOARD EVALUATION

As stated above the Board of Directors of your Company not only comprises of appropriate numbers but even ratio of Executive and Non–executive Directors is in accordance with prescribed norms. While inducting fresh members on the Board it is ensured that the Board has appropriate mix of Members with different experience levels, knowledge and educational qualifications in different Sectors and discipline relating to the company's business. Fortunately professionals from different fields having large exposure in their respective fields are contributing very effectively on your Company's Board. Due care has been taken to nominate such members of the Board on different Standing and Non–standing Committees who are professionally close to the mandate of such committees. At each meeting of the Board a chairman from amongst the Independent Directors is chosen to chair the meeting. This methodology helps in ensuring that all the Independent Directors are able to chair the meetings turn by turn. Moreover as a matter of practice the chairman so chosen ensures that the management has taken adequate steps to implement the various decisions taken by the Board in its earlier meetings. Again although the minutes of different meetings of Board of Directors of different subsidiaries of the company are placed at the meeting of the Board of the company for noting, the Board discuss the matter arising out of such minutes to not only understand the progress of different subsidiaries on different fronts but to also appreciate the problems being faced by such subsidiaries in their day to day working as well as issues confronting them for enhancement of their business.

In general the Board of Directors of your company also ensures that:

i) The company duly complies with statutory requirements prescribed in different laws applicable to the company as well to the relevant state laws applicable to specific plant of the company located in different states.

ii) The remunerations paid to Whole Time Directors is in accordance with the recommendation of the Remuneration Committee as well as by the prescribed law.

iii) The overall pay roll expenses of the company is reflective of the size of the company, operations of the company and the capacity of the company to pay.

iv) Due care is also taken to ensure that the remuneration package is in consistent with the recommended best practices in the country.

STATUTORY COMPLIANCES

1. The Company Secretary as "Compliance Officer" ensures timely compliance of SEBI Regulations, Applicable Law, Rules and Regulations and provisions of Listing Agreement. He also responds to different type of grievances and queries (including the ones related to dividend) of shareholders.

2. In compliance of Clause 32 of the Listing Agreement executed by the Company with the different Stock Exchanges the Cash Flow Statement in the format prescribed by SEBI is annexed to this report.

3. In compliance of Clause 32 of the Listing Agreement and Accounting Standard AS–21, the consolidated financial statements are attached, which form part of the Annual Report.

4. In compliance of Clause 49 VI (ii) of the Listing Agreement, Quarterly Compliance Report in the prescribed format is regularly sent to Stock Exchanges.

5. In accordance with statutory obligations, Secretarial Audit is done on quarterly basis to reconcile the total admitted capital with the two depositories in the country namely National Securities Depository Limited (NSDL) & Central Depository Services limited (CDSL) and the total issued and listed capital. A Practicing Company Secretary appointed by the Company for this purpose furnishes Audit Report to this effect which have been regularly submitted to the various Stock exchanges with which the Company's shares are listed.

INTERNAL CONTROL AND ADEQUACY

Your Company has a proper and adequate system of Internal Control to ensure that all assets are safeguarded and protected against losses from unauthorized use or disposition and transactions are authorized, recorded and reported correctly. The Internal Control is designed to ensure that financial and other records are available for timely preparing Financial Statements.

The Internal Control System is supplemented by an extensive audit conducted by well structured Internal Audit Department of the Company. The said audit is by and large conducted on quarterly basis to review the adequacy and effectiveness of internal controls and to suggest improvement for strengthening them. Proper reviews are carried out to ensure follow–up on the audit observations.

RISK MANAGEMENT

Pursuant to the requirement of Clause 49 of the Listing Agreement, the Company has constituted a Risk Management Committee. The Risk Management Committee has been entrusted with the responsibility to assist the Board Members about the risk assessment and its minimization procedure. Detail of the Risk Management is set out in the Corporate Governance Report which forms part of this Report.

CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A separate section on Corporate Governance and Management Discussion Analysis Report forming a part of Director's Report and the certificate from the Company's Auditors confirming compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement is included in the Annual Report.

BOARD COMMITTEES

For assisting the Board of Directors in discharging its responsibilities in various fields effectively & efficiently, various Standing and Non–standing Committees are constituted by the Board from time to time. The detail of all standing committees along with their composition and meeting held during the year under review are given in the Report of Corporate Governance which forms part of this Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in Section 134(3)(C) of the Companies Act, 2013 and subject to disclosures in the Annual Accounts, your Directors state as under:

a) In the preparation of annual accounts of the financial year ended on 31st March,2015, the applicable accounting standards have been followed and there are no material departures.

b) That the Director have selected appropriate accounting policies in consultation with Statutory Auditors are applied consistently to give a true and fair view of the state of affairs of the company at the end of Financial Year under review and Profit & Loss Account of the period under report.

c) Proper and sufficient care has been taken for maintenance of adequate accounting records and for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) Annual Accounts have been prepared on a going concern basis.

e) That the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.

f) That the Directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

DECLARATION BY INDEPENDENT DIRECTOR

The Company has received declarations from all the Independent Directors of the company confirming the they meet the criteria of Independent as prescribed both under the Act and Clause 49 of the Listing Agreement executive by the Company with the Stock Exchanges.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of the business. There are no materially significant related transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large.

STATUTORY AUDITORS AND AUDITORS' REPORT

M/s Suresh C. Mathur & Co. Chartered Accountants, Auditor of the Company retire at the ensuing Annual General Meeting. They have offered themselves for re–appointment for which they are eligible. The Company has received a Certificate from the retiring Auditors to the effect that the appointment if made, would be within the limits prescribed vide Section 139 of the Companies Act, 2013 and that they are not disqualified for re–appointment.

The notes to the accounts referred to in Auditor's Report are self–explanatory and therefore do not call for any further comments by the Board of Directors. Auditor's Adverse Observations and Management Response to Auditor's Adverse Observations are given in the Annexure–1 forming part of this Report.

COST AUDITORS

Pursuant to the provisions of Section 148 of the Companies Act, 2013, the Board of Directors have re–appointed Mr. V.V. Deodhar, a practicing Cost Accountant as a Cost Auditor to conduct the Cost Audit of "Steel Pipe Products" for the Financial Year 2015–16 at a consolidated fees of Rs.4.00 Lacs subject to ratification of the same by Shareholders of the Company.

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 a firm of Practising Company Secretary was appointed to undertake the Secretarial Audit of the Company for the year ended 31st March,2015.

The Secretarial Audit Report for the financial year ended 31st March,2015 is annexed herewith which form a part of this Report as Annexure–II

The Secretarial Audit Report does not contain any qualification, reservation of adverse remark.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has established a vigil mechanism and whistle Blower Policy to deal with instances of fraud and mis–management, if any, and conducting business with integrity, including in accordance with all applicable laws and regulations. The details of the Vigil Mechanism and Whistle Blower Policy are given in the Corporate Governance Report and also posted on the website of the Company.

EXTRACT OF THE ANNUAL REPORT

In accordance with Section 134(3)(a) of the Companies Act,2013 an extract of Annual Return in Form MGT–9 is annexed herewith as Annexure–III to this Report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION

AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed by 134(3)(m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules,2014 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo are given in the Annexure–IV forming part of this Report.

PARTICULARS OF EMPLOYEES

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Act with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in this Annual Report as Annexure–V.

The particulars of employees required to be furnished pursuant to Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Management Personnel) Rules,2014 forms part of this Annual Report.

ACKNOWLEDGEMENTS

Your Directors place on record its appreciation for the assistance and support received from Customers, Suppliers, Dealers,

Government Authorities, Financial Institutions, Lenders, Bankers, Monitoring Committee, Monitoring Institution, Consultants, Solicitors, Auditors & Shareholders and look forward to their continued co–operation.

Your Directors also thanks the employees at all levels for the dedication and hard work put in to surge ahead in these challenging times.

For and on behalf of the Board of Directors PSL LIMITED

Sd/– (ASHOK PUNJ) Managing Director

Sd/–  (ALOK PUNJ) Director

Place: Mumbai

Date: 10th August, 2015

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