REPORT OF THE DIRECTORS ON CORPORATE GOVERNANCE FOR THE YEAR 2014-15
1. Company's philosophy on code of governance
The Company believes that corporate governance is directing and controlling the business with the overriding objective of optimising return for the shareholders. The Company aims to achieve this by providing long-term visibility of its business, ensuring effective relationship with stakeholders, establishing systems that help the Board in understanding risk appetite and monitoring risk at every stage of corporate evolution process.
The Company further believes in and implicitly adopts values such as efficiency with transparency and accountability and integrity with fairness and kindness in Corporate Governance.
2. Board of Directors
• Composition and category of Directors
As on 31 March 2015, the Board comprises of twelve members, of whom six are whole-time directors, viz., Chairman & Managing Director, Joint Managing Director, Executive Director (Projects), Executive Director (Mines), Director (Commercial) and Director (Finance) and the remaining six are independent non-executive directors. Chairman & Managing Director is one of the promoters of the Company. All the directors are highly qualified, professional and have vast experience in industry.
Meetings of the Board of Directors are generally held at the Company's Corporate Office in Bangalore and are scheduled well in advance. The Board meetings are held at least once in a quarter to review the quarterly performance and the financial results apart from transacting other items of business requiring the Board's attention. The Company Secretary in consultation with the Chairman & Managing Director and the Joint Managing Director prepares agenda for the meetings. The Board papers are circulated to directors in advance. Senior management personnel are invited to attend the Board meetings and provide clarifications as and when required.
The Company has an Executive Chairman and half of the Board comprise of independent directors. The Company had no pecuniary relationship or transactions with any of the non-executive directors during the year under review except for payment of sitting fee for attending meetings of the Board and its Committees.
The information as required under Annexure 1A to Clause 49 of the listing agreements (or Annexure X to the amended Clause 49 of the listing agreements) is being regularly placed before the Board. The Board also reviews the declaration made by the Chairman & Managing Director and the Company Secretary regarding compliance with all laws applicable to the Company on a quarterly basis.
The Board of Directors met five times during the financial year on 28 May 2014, 9 August 2014, 27 September 2014, 8 November 2014 and 14 February 2015. The interval between any two successive meetings did not exceed four months.
3. Audit Committee
• Powers of the Audit Committee:
a) to investigate any activity within its terms of reference;
b) to seek information from any employee;
c) to obtain outside legal or other professional advice; and
d) to secure attendance of outsiders with relevant expertise, if it considers necessary.
• Terms of reference of the Audit Committee:
a) Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible.
b) Recommending the appointment, remuneration and terms of appointment of auditors of the company.
c) Approval of payment to statutory auditors for any other services rendered by the statutory auditors.
d) Reviewing with the management the annual financial statements and auditor's report thereon before submission to the Board for approval, with particular reference to:
- Matters required to be included in the Directors Responsibility Statement to be included in the Board's report in terms of clause (c) of sub-section 3 of section 134 of the Companies Act, 2013
- Changes, if any, in accounting policies and practices and reasons for the same
- Major accounting entries based on the exercise of judgment by management
- Significant adjustments made in the financial statements arising out of audit findings
- Compliance with listing and other legal requirements relating to financial statements
- Disclosure of any related party transactions
- Qualifications in the draft audit report
e) Reviewing with the management, the quarterly financial statements before submission to the Board for approval.
f) Reviewing, with the management, the statement of uses/ application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer documents/prospectus/notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this matter.
g) Review and monitor the auditor's independence and performance and effectiveness of audit process.
h) Approval or any subsequent modification of transactions of the company with related parties.
i) Scrutiny of inter- corporate loans and investments.
j) Valuation of undertakings or assets of the company, wherever it is necessary.
k) Evaluation of internal financial controls and risk management systems.
l) Reviewing with the management, performance of statutory and internal auditors, adequacy of the internal control systems.
m) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit.
n) Discussion with internal auditors of any significant findings and follow up there on.
o) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.
p) Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as having post-audit discussion to ascertain any area of concern.
q) To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors.
r) To review the functioning of the Whistle Blower mechanism.
s) Approval of appointment of CFO (i.e., the whole time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications, experience and background, etc. of the candidate.
The constitution of the Audit Committee is in compliance with the Listing Agreement at all times. The Company Secretary acts as Secretary to the Committee.
The meetings are scheduled well in advance and the whole-time directors and senior management personnel of the Company, the statutory auditors and internal auditors are invited to attend the meetings.
The Audit Committee members are financially literate and have relevant finance and/or audit exposure. R. Subramanian, a financial expert, is the Chairman of the Committee. Pursuant to the Listing Agreement, the Chairman of the Audit Committee was present at the Annual General Meeting to answer the queries of the shareholders.
Meetings held during the year 2014-15:
The Audit Committee met four times during the financial year on 28 May 2014, 9 August 2014, 8 November 2014 and 14 February 2015. The interval between any two successive meetings did not exceed four months. The quorum as required under the Listing Agreement was maintained at all the meetings.
4. Nomination and Remuneration Committee
• Brief description of terms of reference:
Remuneration Committee was constituted in April 2002 to consider and recommend to the Board, appointment, re-appointment and remuneration payable to whole-time directors. In accordance with the provisions of Section 178 of the newly notified Companies Act, 2013 the Committee has been renamed as 'Nomination and Remuneration Committee'.
• Composition, names of the members and Chairman and their attendance:
Remuneration Committee comprised of all the six non executive and independent directors as on 1 April 2014. The Committee was reconstituted by the Board at its meeting held on 8 November 2014 to comprise of five non-executive and independent directors namely, P. Vishwanatha Shetty as its Chairman, R. Subramanian, V. Balasubramanian, S. S. Rao and Vatsala Watsa as its Members.
The Company Secretary acts as Secretary to the Committee.
No meeting of the Nomination and Remuneration Committee has been held during the financial year subsequent to its last meeting held on 29 March 2014.
• Remuneration policy:
The remuneration policy is to pay salary / compensation and benefits adequately so as to attract, motivate and retain talent. Detailed policy on Nomination and Remuneration of Directors, Key Managerial Personnel (KMP) and other employees is annexed to the Directors' Report.
The Company does not have stock option scheme, there is no variable component in the remuneration except the payment of commission as a percentage of profit and there is no severance fee. Service contracts exist with the whole-time directors which contain their terms and conditions including remuneration, notice period etc., as approved by the members. The agreements may be terminated by either party at any time by giving three months' notice to the other party.
Remuneration to non-executive directors during the financial year 2014-15:
The non-executive directors received sitting fee for attending meetings of the Board and its Committees thereon and reimbursement of expenses incurred on travelling and stay in case of outstation directors.
5. Stakeholders' Relationship Committee
Investors' Grievance and Share Transfer Committee was constituted on 26 July 2006 to oversee the redressal of shareholders' and investors' complaints, if any, and to consider and approve transfer and transmission of shares and issue of duplicate share certificates. In accordance with the provisions of Section 178 of the newly notified Companies Act, 2013 the Committee has been renamed as 'Stakeholders' Relationship Committee'.
The four member Committee comprised of S. Y. Ghorpade, Nazim Sheikh, V. Balasubramanian and B. Ananda Kumar as at 1 April 2014. The Committee was reconstituted by the Board with effect from 8 November 2014 with P. Vishwantha Shetty, an independent non-executive director as its Chairman and S.Y. Ghorpade, Nazim Sheikh and B. Ananda Kumar as its members.
The Company Secretary acts as Secretary to the Committee.
To expedite the process of share transfers / transmissions, authority has been delegated by the Board severally to the Chairman & Managing Director, Joint Managing Director and the Company Secretary, who regularly attends to share transfers and transmissions, issue of fresh share certificates in lieu of old share certificates lost / mutilated or on transfer, sub-division, consolidation, renewal, exchange etc., subject to the related deeds / documents being in order.
Venture Capital and Corporate Investments Private Limited (VCCIPL), one of the leading SEBI registered Category - I Registrar and Transfer Agents has been appointed as Share Transfer Agent of the Company to process share transfer requests on behalf of the Company with effect from 18 January 2008. The Chairman & Managing Director or Joint Managing Director or Company Secretary approves the share transfer registers and a statement of share transfers / transmissions effected, share certificates issued in each quarter are placed before the Stakeholders' Relationship Committee for approval and are also placed before the Board of Directors for ratification at their next meeting.
The Stakeholders' Relationship Committee met four times during the financial year on 28 May 2014, 9 August 2014, 8 November 2014 and 14 February 2015. The interval between any two successive meetings did not exceed four months.
• Numberof shareholdercomplaints received, numbersolved to the satisfaction of the shareholder and number of pending transfers:
The Company had no complaints pending on 1 April 2014, and no further complaints were received during the year. No complaints were pending as on 31 March 2015.
There were no pending share transfer requests as on 31 March 2015.
6. Environment Committee
Reclamation & Rehabilitation Plans Implementation Review Committee was constituted on 10 August 2012 for ensuring effective implementation of Reclamation & Rehabilitation (R&R) plans for the Company's Mining Leases No.2580 and 2581.
The Hon'ble Supreme Court had, while dealing with Public Interest Litigation (PIL) in the form of Writ Petition (Civil) No.562 of 2009 with regard to rampant illegal mining being carried in the States of Andhra Pradesh and Karnataka, vide its order dated 13 April 2012 prescribed certain guidelines for preparation of R&R Plans for all the mining leases in Bellary, Tumkur and Chitradurga.
Accordingly, the Committee was formed for implementing and monitoring the progress of implementation of the R&R Plans that may be prescribed and approved by the Central Empowered Committee for the Company's Mining Leases. The Committee was renamed as 'Environment Committee' in order to enlarge the scope and also provide an opportunity for the Committee to consider exploring and implementing new avenues for preserving the environment and contribute towards improvement of environment in the region of our presence.
The Committee at the beginning of the year consisted of five directors with S. Y. Ghorpade, as its Chairman, Nazim Sheikh, S. R. Sridhar, V. Balasubramanian and K. Raman as its members. The Board reconstituted the Committee w.e.f. 8 November 2014 by nominating U. R. Acharya, as its member in place of K. Raman.
The Company Secretary acts as Secretary to the Committee.
The Committee has met once during the financial year on 26 September 2014.
7. Corporate Social Responsibility Committee:
In terms of the newly notified Section 135 of the Companies Act, 2013 every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year is required to constitute a Corporate Social Responsibility (CSR) Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
In order to comply with the provisions of Section 135 of the Companies, Act 2013, the Board of Directors of the Company constituted the CSR Committee at its meeting held on 29 March 2014 with S. Y. Ghorpade, as its Chairman, Nazim Sheikh, S. R. Sridhar, V. Balasubramanian, K. Raman and S. S. Rao as its members. The Board at its meeting held on 8 November 2014 reconstituted the Committee with V. Balasubramanian as its Chairman, Nazim Sheikh, S. H. Mohan, S. R. Sridhar, K. Raman and S. S. Rao as its members. The Committee has been re-constituted by the Board at its meeting held on 27 May 2015 to include P. Vishwanatha Shetty as its member and once again elected S.Y. Ghorpade as its Chairman.
The Company Secretary acts as Secretary to the Committee.
The Committee has formulated and recommended to the Board, the Policy on Corporate Social Responsibility indicating the activities to be undertaken by the Company as specified in Schedule VII of the Companies Act, 2013. The Policy on Corporate Social Responsibility is available at the Company's website.
The Committee is required to recommend the amount of expenditure to be incurred on the said activities and monitor the Corporate Social Responsibility Policy of the Company from time to time. The Committee is further required to institute a transparent monitoring mechanism for implementation of the CSR projects / programs / activities undertaken by the Company.
The Committee met twice during the financial year on 26 September 2014 and 14 February 2015.
8. Risk Management Committee:
The Risk Management Committee was constituted by the Board in its meeting held on 28 May 2014 in terms of Clause 49(VI) of the amended Listing Agreement with the Stock Exchanges wherein, the Board has delegated the monitoring and reviewing of the risk management plan to the Committee.
The Committee was originally constituted with S. Y. Ghorpade as its Chairman, Nazim Sheikh, K. Raman, V. Balasubramanian, B. Ananda Kumar, S. S. Rao and Vatsala Watsa as its members. The Board reconstituted the Committee w.e.f. 8 November 2014 with S. Y. Ghorpade, continuing as its Chairman, S. H. Mohan, R. Subramaniam, K. Raman, U. R. Acharya, B. Ananda Kumar and Vatsala Watsa as its members. The Company Secretary acts as Secretary to the Committee.
No meeting of the Committee has been held during the financial year.
10. Subsidiary Company
Star Metallics and Power Private Limited (SMPPL) is a subsidiary of the Company with 81.24% of its paid up equity share capital held by the Company as on 31 March 2015.
SMIORE, being a major shareholder, has nominated four of its directors as directors on the Board of SMPPL. S. Y. Ghorpade, Chairman & Managing Director of SMIORE is the non-executive chairman of SMPPL; Nazim Sheikh - Joint Managing Director; S. H. Mohan - Executive Director (Projects) and B.Ananda Kumar, Independent director are non-executive directors of SMPPL. Further, V. Balasubramanian and S.S. Rao, Independent directors of SMIORE are the non-executive and Independent directors on the Board of SMPPL.
The operations of SMPPL are being controlled and monitored by SMIORE, inter alia, by the following means:
• Financial statements, in particular the investments made by SMPPL, are being reviewed by the Audit Committee of the Company.
• Minutes of the meetings of SMPPL's Board are being placed before the Company's Board regularly.
• Financial statements showing all significant transactions and arrangements entered into by SMPPL are placed before the Company's Board.
• Related Party Transactions: During the year under review, besides the transactions reported in the Financial Statements in the Annual Report, there are no other material related party transactions by the Company with its promoters, directors or the management or their relatives and associates. Transactions entered into with related parties during the year do not have any potential conflict with the interest of the Company at large. All related party transactions, material and non-material, are being placed before the Audit Committee periodically. Transactions requiring approval of the Board are also placed before it for its consent. The Board in its meeting held on 28 May 2014 adopted a Policy on Related Party Transactions incorporating the relevant provisions prescribed by the amended Listing Agreement dated 17 April 2014. The Board amended the said Policy in its meeting held on 14 February 2015 to incorporate the amendments dated 15 September 2014 to the Listing Agreement. The Policy also, incorporates the provisions of the newly notified Companies Act, 2013 dealing with Related Party Transactions.
• Disclosure of Accounting Treatment: The Company follows Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013/ the Companies Act, 1956 and has not adopted a treatment different from that prescribed in any Accounting Standard.
• Disclosure by Senior Management: Senior management has made disclosures to the Board confirming that they have not entered into material financial and commercial transactions with the Company wherein they have personal interest that could result in a conflict with the interest of the Company at large.
• Details of Non-Compliance: There have been no instances of non-compliance by the Company and no penalties, strictures have been imposed on the Company by Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years.
• Risk Management: The Company is committed to strengthen its risk management capability in order to protect and enhance shareholder value. Accordingly, the Company has laid down procedures to prevent the risk from occurring and if it cannot be prevented, to minimize the adverse impact of such risk. The Board responds to the Executive Management's need for enhanced risk information and improved governance and has an effective internal control and management reporting system.
The Audit Committee of the Board reviews Internal Audit findings, if any, and provides strategic guidance on internal controls. The Company follows the framework to attain a balanced approach that considers risk and return. The Risk Management Committee has been constituted by the Board to monitor and review the Risk Management Plan.
• Whistle Blower Policy: The Company has put in place a mechanism of reporting illegal or unethical behaviour. Employees are free to report violations of laws, rules, regulations or unethical conduct to their immediate supervisor/notified persons. The reports received from any employee will be reviewed by the audit committee. It is affirmed that no personnel has been denied access to the audit committee in this respect. The Directors and senior management are to maintain confidentiality of such reporting and ensure that the whistle blowers are not subjected to any discriminatory practice.
12. Means of Communication
• Quarterly financial results are being regularly sent to Bombay Stock Exchange Limited. No returns/ documents have been filed with Bangalore Stock Exchange (BgSE) since 16 January 2015, after the BgSE informed us of their voluntary surrender of recognition under the Exit Scheme of Securities and Exchange Board of India (SEBI). The SEBI has passed the Exit Order on 26 December 2014, thereby our listing agreement with BgSE stands terminated.
• Quarterly financial results are generally published in The Financial Express and Sanjevani newspapers and also placed on the website of the Company.
• No presentation has been made to institutional investors or to the analysts.
• Management Discussion and Analysis is forming part of this Annual Report.
13. General Shareholder Information
i) Date, Time and Venue of the Annual General Meeting:
19 September 2015 at 11.00 a.m. at Anuradha Hall, Shivapur, Sandur - 583 119.
ii) Financial Year: 1 April 2014 to 31 March 2015
iii) Financial Calendar: (tentative and subject to change)
Financial Reporting for the quarter ending 30 June 2015 : Before 14 August 2015
Financial Reporting for the quarter ending 30 September 2015 : Before 14 November 2015
Financial Reporting for the quarter ending 31 December 2015 : Before 14 February 2016
Financial Reporting for the quarter ending 31 March 2016 : By end of April/May 2016
Dates of Book Closure: 14 September 2015 to 19 September 2015 (Both days inclusive) Dividend Payment Date: On or after 19 September 2015
Listing on Stock Exchanges: The Company's shares are listed on Bombay Stock Exchange Limited, P. J. Towers, Dalal Street, MUMBAI - 400 001. Listing Fee: The Company has paid annual listing fee for the year 2015-16 to Bombay Stock Exchange Limited where the securities of the Company are listed.
vii) Stock Code: Bombay Stock Exchange Limited (BSE) - 504918
xii) Registrar and Share Transfer Agents: Venture Capital and Corporate Investments Private Limited, 12-10-167, Bharatnagar, Hyderabad - 500 018
xiii) Share Transfer System: Venture Capital and Corporate Investments Private Limited (VCCIPL), one of the leading SEBI registered Category - I Registrar and Transfer Agents had been appointed as Share Transfer Agent of the Company to process share transfer requests on behalf of the Company with effect from 18 January 2008. The Chairman & Managing Director or Joint Managing Director or Company Secretary approves the share transfer registers and a statement of share transfers / transmissions effected, share certificates issued in each quarter are placed before the Stakeholders' Relationship Committee for approval and are also placed before the Board of Directors for ratification at their next meeting.
xiv) Dematerialization of Shares and Liquidity: As on 31 March 2015, 85,24,785 equity shares have been dematerialized.
xv) There are no outstanding GDRs / ADRs / Warrants or any Convertible Instruments due for conversion
xvi) Directors seeking appointment / re-appointment: As required under Clause 49(VIII)(E)(1) of the amended Listing Agreement, particulars of Directors seeking appointment / re-appointment, if any, are given in the Explanatory Statement forming part of the Notice of the Annual General Meeting.
xvii) There is no stock option scheme.
xviii) Plant location: Mines at Deogiri and Metal & Ferroalloy plant at Vyasankere
xix) Address for correspondence:
Registered Office: Lakshmipur, Sandur, Bellary District, Karnataka - 583 119
Corporate Office: First & Second Floors, Redifice Signature, No.6, Hospital Road, Shivajinagar, Bangalore - 560 001.
CEO / CFO Certification
The Chairman & Managing Director and the Chief Finance Officer (CFO) have certified to the Board in accordance with clause 49 (IX) of the Listing Agreement pertaining to CEO/CFO certification for the financial year 2014-15, which is annexed thereto.
Affirmation of compliance with code of conduct
The Chairman & Managing Director of the Company has given a certificate confirming that the Company has obtained from all the members of the Board and senior management, affirmation of their compliance with the Code of Conduct for directors and senior management in respect of the financial year 2014-15 and the same were placed before the Board at its meeting held on 27 May 2015. A copy of the said certificate is annexed hereto.
Status of compliance with the non-mandatory requirements of clause 49 of the listing agreement is given below:
(i) Non-Executive Chairman's Office: The Chairman of the Company is an Executive Chairman and hence this provision is not applicable.
(ii) Shareholder Rights: The quarterly and annual financial results of the Company are published in leading newspapers, placed on website of the Company and are provided to stock exchanges in compliance with the provisions of listing agreements. A copy of complete Annual Report is sent to each and every shareholder of the Company.
(iii) Audit qualifications: During the year under review, there was no audit qualification in the Company's financial statements.
(iv) Separate posts of Chairman and CEO: The Company does not have a Chief Executive Officer. Hence, this provision is not applicable.
(v) Reporting of Internal Auditor: The Company has appointed M/s. P. Chandrasekar, Chartered Accountants, as its internal auditor and they report on a quarterly basis to the Audit Committee.
for and on behalf of the Board
S. Y. Ghorpade
Chairman & Managing Director
Place : Bangalore
Date : 27 May 2015