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Sharda Ispat Ltd.

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Sharda Ispat Ltd. Accounting Policy

REPORT ON CORPORATE GOVERNANCE

I. COMPANY'S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE:

The Company conducts its business under the governance of the set of principles and beliefs through its "brain-trust", the Board. The Board being the "Sparking Chamber of the Company plays its crucial role in the conduct of the business of the Company adhering to certain ethics viz., truth, honesty, promptness, accountability and transparency within the legal frame with aim to achieve consistent growth of the Company maximizing the shareholders' value.

A) Code of Conduct For Members of Board:

1) The members of the Board shall exercise their powers in good faith, honestly and in the interest of the Company.

2) Powers vested in the Board members under the articles of association of the Company and by the Company in general meeting or by a Board resolution must be exercised for the proper purposes and to the extent permissible.

3) The members of the Board should not participate in and vote on any discussion in Board meetings on any resolution or a matter relating to his own affairs or to the affairs of another Company in which he is a Director or a shareholder or relating to a firm in which he is a partner or relating to his proprietary business.

4) Where there is conflict between the Board Members' own interest and the interest of the Company, he must put the interest of the Company first.

5) The Board Members must act honestly and should exercise reasonable skill and diligence in the discharge of their duties.

6) The Board Members shall review and monitor the statutory compliance by the Company from time to time.

7) The Board members should delegate the work with adequate empowerment and necessary accountability.

8) The members while working for the Company should follow a proper leadership and set of standards for working.

9) The members of the Board should also ensure from time to time the due implementation of the aforesaid code.

B) Code of Conduct For Senior Management Personnel:

1) They should ensure proper maintenance of books, records, files etc. and suitable system procedures and practice for the purpose.

2) The officers shall not involve themselves in fraudulent dealing in securities.

3) They should discharge their department duties and responsibilities with due observation of the relevant statutory provision.

4) They should avoid the government officials from making undue/improper benefits through the Company.

5) The officers shall not indulge themselves in any anti-competitive conduct.

6) The officers should respect each other and create a congenial atmosphere.

7) The officers should extend their full co-operation during investigations of alleged violation of law, if any.

8) The officers shall not misuse the name of the Company.

9) The officers shall ensure from time to time that their working is within frame work of the code of conduct so laid down for them.

II. MANAGEMENT DISCUSSION & ANALYSIS ECONOMY:

Across the nature economies, year 2014 economic growth outlook has improved significantly to 2.2 percent compared to 1.3 percent in 2013. The uptick is primarily due to United States with growth by more than 1 percent, from 1.9 percent in 2013 to 3 percent in 2014. The recovery of Eurozone from its negative growth of (0.3) percent in 2013 to 1 percent in 2014 also contributed to this improvement in mature economies. India's economic growth rate in the current financial year has been estimated at 4.9 percent, a faster pace than in the previous year, mainly on an improved performance in the agriculture and allied sectors. The growth in GDP during 2013-14 is estimated at 4.9 percent as compared to the growth rate of 4.5 percent in 2012-13.

OVERVIEW:

During the financial year 2013-2014 the Company witnessed decline in its sales performance over the previous year due to lesser demand for the products. Nevertheless, the profitability of the Company has been getting affected largely due to high cost of raw materials.

INDUSTRY STRUCTURE AND DEVELOPMENTS / STEEL INDUSTRY OVERVIEW:

During the fiscal 2013-2014 India witnessed slow average annual Industrial growth primarily due to slowdown in industrial growth rate. As such, the industry growth rate in India has been registering steady growth over the past years. This has given a major boost to the Indian economy. The Government of India must continue to make efforts to boost the industrial sector in the country. This will in turn help to grow the Country' economy. Huge constructions, high consumption of industrial goods in the country added with substantial export thereof have contributed to industrial growth.

STEEL INDUSTRY:

Post liberalisation in 1991 Indian steel industry has attained a substantial growth on domestic as well as global platform. Growing in pace with the economy Indian steel industry has positioned itself as the largest sponge iron producer and the fourth largest crude steel producer in the world. Though effect of global economic recession post 2008 was witnessed by steel sector globally, but Indian steel industry showed resilience and growth due to robust domestic demand. The credit of Indian steel industry's growth goes to policies of government and Indian public and private sector steel producers.

FUTURE OUTLOOK BRIGHTER PROSPECTS:

The future of the Indian steel industry is bright. The government plans to increase infrastructure spending from the current 5 per cent GDP to 10per cent by 2017, and the country is committed to investing US$ 1 trillion in infrastructure during the 12th Five-Year plan. "Taking 15 percent as stee! component in the total investment, then it can generate additional demand worth USS 75 billion of steel in the next few years or US$ 15 billion worth of additional demand a year or in terms of quantity, an additional demand of 18.75 MT per annum.

With urban population increasing globally, there is a greater need for steel to build public-transport infrastructure. Emerging economies will also continue to be a major driver of demand as these necessitate a huge amount of steel for urbanisation and industrialisation.

OPPORTUNITIES AND THREATS:

Your Company is poised to seize the opportunities in the Iron & Steel Industry (both for steel & intermediary saleable products) through its strengths of locational and logistical advantages, raw material linkages, technology edge and management expertise. These opportunities will be linked directly to the growing demand from the automobile and auto components, infrastructure, construction and power sectors. Your Company's strategic location in Nagpur offer scope for seamless value addition in its manufacturing process from hot metal to stainless steel. Your Company is also well positioned in its conscious adherence to a modular project implementation, thereby enabling ploughing of internal accruals in future projects, thereby reducing costs related to financing. The threats for your Company would come from adverse fluctuations in input and capital costs, foreign exchange variations and taxes & duties. The buoyancy in the Iron & Steel Sector has attracted many players, resulting in reduced availability of skilled manpower and contractor workforce. Delay in implementation of project may lead to opportunity loss in revenue generation and rise in costs.

RISK MANAGEMENT:

Your Company has identified major focus areas for risk management to ensure achievement of the organisational objectives, and has a well defined structure and proactive approach to assess, monitor and mitigate risks associated with these areas, briefly enumerated below:

a) Systems - Your Company has implemented ERP, the software for Enterprise Resource Planning and integrated its operations to use best business and commercial practices.

b) Statutory Compliances • Procedure is in place for monthly reporting of compliance of statutory obligations and reported to the Board of Directors at its meetings.

FINANCE REVIEW AND ANALYSIS:

During the period under review the Company posted sales turnover of Rs. 8284.83 Lacs (Own Unit 8242.52 Lacs and Conversion / Service 42.30 Lacs) as against Rs. 9018.41 Lacs (Own Unit 8997.89 Lacs and Conversion / Service 20.52 Lacs) during the previous year. After providing Rs. 74.11 Lacs for depreciation and Rs. 152.30 Lacs against interest and further providing Rs. 70,598/- towards taxation (Net), the Company earned net profit after tax of Rs 2.17 Lacs as against Rs. 1.27 Lacs during the previous year. The decline in operational as well as financial performance of the company has been due to slackened demand for the products and inflationary trend in the cost of inputs.

DEVELOPMENTS IN HUMAN RESOURCES & INDUSTRIAL RELATIONS:

Your Company recognizes the fact that manpower is one of the vital constituents of a successful organisation. The success of any business lies under the qualified, trained & motivated Human Resources. The company gives more importance to the development of Human Resources than any other Resources. The company updates its HR policy in line with the changing system in the industry as a whole the company takes adequate steps for maintaining safety and healthy environment for the workers. The Industrial relations continue to be cordial, throughout the year. Your Directors place on record their sincere appreciation for the excellent team work displayed by the employees of the Company.

INTERNALCONTROLANDSYSTEMS:

The internal control systems in your Company commensurate with the size and nature of its operations and periodic audits are conducted in various disciplines to ensure adherence to the same. During the year Internal Auditors of your Company had independently evaluated the adequacy and efficacy of the audit controls. The Board and the management review the findings and recommendations of the auditors and take corrective actions, whenever necessary. The Board considers risk assessment, identification of mitigating actions and internal control procedure to ensure that business risks are identified, managed and regularly reviewed at all levels and that Directors are periodically appraised of the key risks.

OUTLOOK:

Indian steel industry requires reliable and economical raw material supplies to remain competitive on global platform. Being deficient in coal and rich in iron ore fines India needs to adapt steel making technologies which are suitable for low grade Indian coal and iron ore fines. India requires technology inputs and investments to increase sintering and pelletisation facility for making use of iron ore fines. Indian companies need to acquire coking coal assets overseas to assure uninterrupted and economic supply of coking coal for its steel Industry.

With open trade policy for steel, Indian steel industry faces global competition, hence to remain competitive and profitable it has to adapt latest and efficient technologies. Using latest technologies can boost steel companies business with advantages of scale, quality, productivity, safety and higher margins. As overall exposure of Indian steel industry to latest technology remains low, so there is a huge potential for increase in production and process optimisation. Also with development and use of technologies suitable for steel making using iron ore fines and low grade Indian coal, Indian steel Industry can have advantage of raw material security and sustainability. Indian steel industry is aiming for high growth during the next 5-7 years, supported by economic growing and positive change in consumption behavior of the large and growing population. The prime factors which will support growth of Indian steel Industry are demand driving factors, government policies and capacity addition plan for steel.

CAUTIONARY STATEMENT:

Statements in this "Management Discussion & Analysis" describing the Company's objectives, projections, estimates, expectations or predictions may be 'forward looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include global and Indian demand supply conditions, finished goods prices, input availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations.

III. CHAIRMAN & MANAGING DIRECTOR'S CERTIFICATION:

In terms of the provisions of Clause 49 of the Listing Agreement, as amended, the Chairman & Managing Director of the Company hereby certifies to the Board that:

a) They have reviewed financial statements and the cash flow statement for the year and that to the best of their knowledge and belief

i) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading

ii) These statements together present true and fair view of the Company's affairs and are in compliance with existing accounting standards, applicable laws and regulation.

b) There are, to the best of their knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company's Code of Conduct

c) They accept responsibility for establishing and maintaining internal controls for financial reporting and that they have evaluated the effectiveness of internal control systems of the Company pertaining financial reporting and they have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which they are aware and the steps they have taken or propose to take to rectify these deficiencies.

d) They have indicated to the auditor's and the Audit Committee

i) Significant changes in internal control over financial reporting during the year.

ii) Significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements., and

iii) instances of significant fraud of which they have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Company's interna! control system over financial reporting.

III. BOARD OF DIRECTORS:

A. Composition:

During the year under review, the Board of Directors of the Company comprised of total 5 (Five) Directors, out of which 3 (Three) Directors are Non-executive and Independent. The Chairman of the Board is a Executive Director. The presence of 3 (Three) independent Directors on the Board as stated above is in conformity with the provisions of Corporate Governance.

Note:

Shri. N.K. Sarda & Smt. Poonam Sarda are entitled to contribution to provident fund, gratuity and encashment of leaves in addition in salary and perquisites.

Re- appointments:

Shri. H.K. Dass is liable to retire by rotation and being eligible, offers himself for re-appointment atthe ensuing Annual General Meeting.

IV. AUDIT COMMITTEE:

Your Company has an Audit Committee at the Board level with the powers and the role that are in accordance with Clause 49 II (C) and (D) of the Listing Agreement. The Committee acts as a link between the management, the statutory auditors and internal auditors and the Board of Directors and oversees the financial reporting process

C. Powers & Functions:

The terms of reference stipulated by the Board to Audit Committee are, as contained in Clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956, as follows

a. Oversight of the Company's financial reporting process and the disclosure of its financial information.

b. Recommending the appointment and removal of the external auditors, fixation of audit fee and also approval for payment for any other services.

c. Reviewing with management the quarterly, half yearly and annual financial statement before submission to the Board. Focusing primary on (i) any changes in accounting policies and practices, (ii) major accounting entries based on the exercise of judgment by management, (iii) qualification in draft audit report, (iv) significant adjustments arising out of audit, (v) the going concern concept, (vi) compliance with accounting standard (vii) compliance with Stock Exchange and legal requirements concerning financial statements and (viii) any related party transactions i.e. transactions having conflict with the interest of the company at large.

d. Reviewing with management, the performance of external and internal auditors, the adequacy and compliance of internal control system.

e. Reviewing the adequacy of internal audit functions.

f. Discussion with internal auditors any significant finding and follow up there on.

g. Discussion with external auditors regarding nature and scope of audit as well as post audit discussion to ascertain any area of concern.

h. Reviewing of Company's financial and risk management policies.

V. REMUNERATION COMMITTEE:

In view of complying the provisions of the Companies Act, 1956 as regards to payment of remuneration to the Executive Directors of the Company, the Board of Directors of the Company had constituted the Remuneration Committee with composition as under

Terms of reference:

i) To frame policy as regards to specific remuneration packages for executive Directors.

ii) To evaluate services of the executive Directors and decide on remuneration payable to them.

iii) To review the remuneration packages from time to time.

iv) To ensure that the remuneration being paid to executive Directors are in conformity with the legal provisions.

No meeting of the committee was held during the year under review since there was no relevant matter to be dealt with by the Committee.

VI. SHARE TRANSFER AND SHAREHOLDERS/INVESTORS GRIEVANCES COMMITTEE

The Board of the Company has constituted a Shareholders' / Investors' Grievance Committee in Compliance with Clause 49 of the Listing Agreement. The Committee inter alia, approves the various aspects of Transfer/Transmission of Shares, consolidation/split of shares, issue of duplicate share certificates and other allied matters including redressal of Inventors' complaints. The committee monitors the entire share transfer working, assigned to the R & T Agent "Adroit Corporate Services Private Limited" and recommends measures for overall improvement in the quality of investor services. The composition of the Committee is as under:

VIII. OTHER DISCLOSURES:

During the period under review:

i) There were no materially significant transactions with the related parties viz, promoters, Directors or the management, their Subsidiaries or relatives conflicting with the Company's interest.

ii) No penalties or restrictions have been imposed on the Company by the Stock Exchanges, SEBI or any statutory authority on any matter related to Capital markets.

X. GENERAL SHAREHOLDERS INFORMATION :

1. Annual General Meeting : Monday, the 29lh September, 2014 at 10 A.M. at the Registered Office of the Company at Kamptee Road, Nagpur-440026.

2. Tentative Calendar for the Financial Year ending March 31,2015.

The tentative dates for Board Meetings to consider and take on record the quarterly financial results are as follows:

1 First Quarter Results ending 30.06.14 : On or before Second week of August, 2014

2 Second Quarter & Half Yearly Results ending 30.09.2014 : On or before Second week of November, 2014

3.Third Quarter and Nine Months Results ending 31.12.2014 : On or before Second week of February, 2015

4 Fourth Quarter and Annual Results ending 31.03.2015 : On or before Second week of May, 2015

3. Book Closure Date: 26m September, 2014 to 29* September, 2014

4. Dividend Payment Date: Not Applicable

5. Listing on Stock Exchanges:

The company's shares are listed on The Bombay Stock Exchange Ltd., The Calcutta Stock Exchange, Ahmedabad Stock Exchange and Pune Stock Exchange.

The Listing fees for the year 2013-2014 have been paid to Bombay Stock Exchange only.

6. As per Grading

(a) The Stock Exchange, Mumbai 513548

(b) The Stock Exchange, Kolkata 029292

(c) The Stock Exchange, Pune 13548

(d) The Stock Exchange, Ahmedabad 52710

8. Registrar and Transfer Agent : Adroit Corporate Services Pvt. Ltd, 19/20, Jaferbhoy  Industrial Estate, Makwana Road Marol Naka, Marol, Andheri, (E), Mumbai 400059.

9. Share Transfer and inventors' Grievances Redressal System:

The Shareholders / Investor Grievances Committee approves and monitors the transfer and transmission of shares, and allied matters relating thereto. As regards to execution of share transfer work and dematerialization of shares the Company avails services of M/s. Adroit Corporate Services Private Limited, which have got adequate Infrastructure to process the share transfers and effect dematerialization and rematerialization of shares. The share transfers, dematerialization / rematerialization requests are received and processed promptly subject to transfer documents/DRF requests are valid and complete in all respects. The said Company is having adequate facility to respond and attend investors' grievances at the earliest

12. Dematerialisation of Shares and Liquidity

The Company's securities i.e. equity shares are already admitted on both the Depositories i.e. Central Depository Sen/ices India Ltd.,(CDSL) and National Securities Depository Ltd. (NSDL) on 11th January2012.

13. Plant Locations:

Kamptee Road, Nagpur 440026 (Maharashtra)

14. Address of Correspondence Registered Office: Kamptee Road, Nagpur 440026 (Maharashtra)

For and on behalf of the Board of Directors,

N.K.Sarda Smt.  

Chairman & Managing Director

Poonam Sarda

Whole-Time Director

Date: 30.05.2014

Place: Nagpur