The Members, Welspun Corp Limited
Your directors have pleasure in presenting the 18th Annual Report of your Company along with the Audited Financial Statement for the financial year ended March 31,2013.
Production and processing high lights for the year under report on standalone basis are as under:
- Pipes: 631,133MT(473,617 MT).
- Plates: 260,247MT(399,135 MT). This shows lesser indigenous procurement of plates for manufacturing.
- H.R. Coils: 209,546MT(107,880 MT). This shows more indigenous procurement of coils for manufacturing.
- Coating: 4,142 Ksqm(2,096 K sqm). This shows more demand for coated pipes.
- Power: 122,585MWH(173,117MWH).- Pipes:631,133MT(473,617MT).
(For the above aspects on consolidated basis, refer the Management Discussion and Analysis included in the Annual Report)
Depreciation charge for the year under Report increased as compared to the previous year mainly due to capitalization of Offline Pipeline Project at Mandya in Karnataka; full year depreciation effect in respect of LSAW Plant and on increased capital expenditure for enhancing productivity / debottlenecking at Plate and Coil Mill at Anjar.
Finance Costs increased mainly on account of interest on increased borrowings in the form of the External Commercial Borrowings and the Non-Convertible Debentures borrowed/ issued during the year under report and charging of interest on foreign currency convertible bonds which were capitalized earlier as per Accounting Standard 16 on borrowing cost.
Exceptional Items of Rs. 538.20 million is the write off of loan given to Welspun Natural Resources Private Limited (a wholly owned subsidiary of the Company) for contributing the Company's share in the expenditure for Thailand Block of the joint venture Company viz. Adani Welspun Exploration Limited, which has been relinquished during the year after seismic studies and carrying out detailed diligence.
The Board recommends a dividend @ 10% for the year ended March 31, 2013 i.e. Re. 0.50/- per equity share of Rs.5/-each fully paid-up. In respect of the dividend declared for the previous financial years, Rs. 5.30 million remained unclaimed as on March 31,2013.
SCHEME OF ARRANGEMENT IN THE NATURE OF DEMERGER
The Board of Directors of the Company has approved, subject to approval under Sections 391 to 394 and Section 100 of the Companies Act, 1956 and other applicable provisions thereof, a scheme of arrangement for restructuring of business by transfer of all the assets and the liabilities of the infrastructure business (including energy, water, road), the direct reduced iron (DRI) business, oil and gas, and EPC contracting business (the "Other Businesses") to Welspun Infra Enterprises Limited (the "Resulting Company", a wholly owned subsidiary of the Company), by the Company with the Appointed Date being April 1,2012 and the share exchange ratio of 1 (one) equity share of Rs. 10 each fully paid-up of Welspun Infra Enterprises Limited for every 20 (Twenty) equity shares of Rs. 5 each fully paid-up of the Company (the "Scheme").
The Scheme is subject to approval of the shareholders and the creditors of both the Companies and also the regulators and the Court.
Your Board expects that the proposed demerger would enable the Companies to focus on and enhance their respective businesses by streamlining the operations; to carry on and conduct their respective businesses more efficiently and synergetically; and to pursue different business strategies and raise resources for meeting their respective growth requirements.
During the year under report, the Company has raised funds by issuing Secured Non- Convertible Debentures of Rs. 3,428 million, which have been utilized for the purposes as mentioned in the respective Information Memorandum issued for the issue. Un-utilized proceeds have been invested in liquid securities as at March 31,2013.
Out of US$150 million Foreign Currency Convertible Bonds ("FCCB") issued by the Company during the financial year 2009-10, the Company has bought back and cancelled FCCB of US$68.5 million during the year under review by raising external commercial borrowings and out of internal sources. The FCCBs outstanding as at the end of the year under review were US$81.50 million. The proceeds have been utilized for the purpose for which the same was raised and pending utilization, the balance is lying in bank accounts outside India.
CHANGE IN THE CAPITAL OF THE COMPANY
During the year under review, the equity share capital of the Company increased by : I) 128,375 equity shares due to allotment of shares upon exercise of options under the Employee Stock Option Scheme of the Company; and ii) 35,038,889 equity shares upon compulsory conversion of One Compulsorily Convertible Debenture.
Since the last report, the following changes took place in the Board of Directors -
(i) Mr. Utsav Baijal (DIN-02592194) was appointed as a nominee of Insight Solutions Ltd. (the "Investor") w.e.f. November 10,2012 in terms of the Investment Agreement dated June 29,2011.
(ii) Mr. B. K. Goenka relinquished from the position of the Executive Chairman w.e.f. August 14,2012. However, he continued as the Non-Executive Chairman.
In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Ram Gopal Sharma and Mr. Nirmal Gangwal retire by rotation at the forthcoming Annual General Meeting and being eligible, have been recommended for re-appointment.
The term of appointment of Mr. Utsav Baijal expires at the forthcoming Annual General Meeting; the Company has however received notice under Section 257 of the Companies Act, 1956 from a member proposing his candidature for the office of a director.
Details about these Directors are given in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, your directors hereby confirm that:
(i) in the preparation of the accounts for the financial year ended March 31, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures;
(ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the year under review;
(iii) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
(iv) they have prepared the accounts for the financial year ended March 31,2013 on a going concern basis.
Your Company's Auditors M/s. MGB & Co., Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, have given their consent to act as the Auditors of the Company for the forthcoming tenure. Members are requested to consider their re¬appointment as the Auditors of the Company and to fix their remuneration by passing an ordinary resolution under Section 224 of the Companies Act, 1956.
The Auditors' observation read with Notes to Accounts are self-explanatory and therefore do not call for any comment.
COST AUDIT REPORT
The Company had appointed M/s. Kiran J. Mehta & Co., Cost Accountants as the Cost Auditors of the Company. M/s. Kiran J. Mehta & Co., a partnership firm of Cost Accountants, is functioning for last three decades. It started in the year 1977 as a proprietorship concern by Mr. Kiran J. Mehta. Mr. Mehta was awarded Certificate of Merit in, the intermediate as well as the final, examinations of ICWAI at the national level. The firm has its head office at Ahmedabad and a Branch at Vadodara.
The Company has appointed M/s Kiran J. Mehta and Co., (FRN- 000025) Cost Accountants for conducting Cost Audit for the Company for the financial year 2012-13. The Cost Audit for the year is in progress and the report will be e-filed to Ministry of Corporate Affairs, Government of India, in due course. The Cost Audit Report for the year 2011-12 was e-filed on December 26, 2012. The extended due date for e-filing of the Cost Audit report for the year 2011-12 was February 28,2013.
EMPLOYEE STOCK OPTION SCHEME
The Company has granted stock options to eligible directors and employees of the Company and its subsidiary companies.
The particulars required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock Option Scheme) Guidelines, 1999 are given below:
Difference in employee compensation cost based on intrinsic value and fair value:
The Company has adopted intrinsic value method for valuation and accounting of the aforesaid stock options as per SEBI guidelines, and accordingly has accounted credit of Rs. 6.60 million on account of lapse of Options during the year as employee compensation for the year ended March 31,2013.
Had the Company valued and accounted the aforesaid stock options as per the Black Scholes Model, the net profit for the year would have been higher by Rs. 5.05 million and the diluted earnings per share would have been Rs. 2.31 per share instead of Rs. 2.29 per share.
THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988
In terms of the above Rules, your directors are pleased to give the particulars as prescribed therein in the Annexure, which forms a part of the Directors' Report.
PARTICULARS OF EMPLOYEES
As per the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rule, 1975 as amended, the names and other particulars of the employees are set out in the Annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and the Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.
ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the Annexure forming part of Directors' Report.
The Ministry of Corporate Affairs vide its General Circular No. 2/2011 dated February 8,2011 (the "Circular") granted general exemption to the companies from attaching a copy of the Balance Sheet, the Profit and Loss Account and other documents of its subsidiary companies as required to be attached under Section 212 of the Companies Act, 1956 to the Balance Sheet of the holding company subject to fulfillment of conditions stipulated in the Circular.
Therefore, the said documents of the following subsidiary companies viz. (1) Welspun Pipes Limited, (2) Welspun Tradings Limited, (3) Welspun Natural Resources Private Limited, (4) Welspun Plastics Private Limited, (5) Welspun Pipes Inc, (6) Welspun Tubular LLC, (7) Welspun Global Trade LLC, (8) Welspun Mauritius Holdings Limited, (9) Welspun Middle East Pipe Coatings Company LLC, (10) Welspun Middle East Pipe Company LLC, (11) Welspun Middle East DMCC, (12) Welspun Maxsteel Limited, (13) Welspun Infratech Limited, (14) Welspun Road Projects Private Limited, (15) Welspun Projects Limited, (16) Welspun Infra Projects Private Limited, (17) MSK Projects (Himmatnagar Bypass) Private Limited, (18) MSK Projects (Kim Mandavi Corridor) Private Limited, (19) Welspun Water Infrastructure Private Limited, (20) Welspun Energy Transportation Private Limited, (21) Welspun BoT Projects Private Limited (22) Anjar Road Private Limited, (23) Welspun Infra Enterprises Limited and (24) ARSS Bus Terminal Private Limited will not be attached to the Annual Report. However, the aforesaid documents relating to the subsidiary companies and the related detailed information will be made available upon request by any member or investor of the Company. Further, the Annual Accounts of the subsidiary companies will be kept open for inspection by a member or an investor at the Registered Office of the Company or the respective subsidiary company.
As required under the Circular, a statement containing the requisite information for each subsidiary is attached with this Report.
The Company has not accepted any public deposit within the meaning of the Companies (Acceptance of Deposit) Rules, 1975 and, as such, no amount on account of principal or interest on public deposit was outstanding on the date of the Balance Sheet.
LISTING WITH STOCK EXCHANGES
The Company's equity shares are listed on the Bombay Stock Exchange Limited (BSE) and the National Stock Exchange of India Limited (NSE). The Secured Non-Convertible Debentures are listed on the Bombay Stock Exchange Limited. The Foreign Currency Convertible Bonds and the Global Depository Receipts are listed at Singapore Securities Trading Limited (SGX-ST).
Annual listing fees for the year 2013-14 have been paid to BSE, NSE and SGX-ST
A separate report on the Corporate Governance is annexed hereto as a part of this Report. A certificate obtained from the Company Secretary in Practice regarding compliance of the conditions of the Corporate Governance as prescribed under Clause 49 of the Listing Agreement is attached to this Report. A separate report on Management Discussion and Analysis is enclosed as a part of the Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
As stipulated by the Clause 32 of the Listing Agreement with the Stock Exchanges and Circular No. 2/2011 dated February 8,2011 issued by the Ministry of Corporate Affairs under Section 212(8) of the Companies Act, 1956, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards issued by the ICAI. The Audited Consolidated Financial Statements together with Auditors' Report thereon forms a part of the Report.
Your directors express and place on record deep appreciation to Financial Institutions, Banks, Government Authorities, Customers, Suppliers and Shareholders of the Company. Your directors also wish to place on record their sincere appreciation of the dedicated services, hard work, solidarity and profuse support by all the employees of the Company and their families at all levels without which the Company's achievement would not have been possible.
For and on behalf of the Board
Date: May 30, 2013