Electrosteel Steels Limited Unlisted Shares

Annual Report Summary

ESL STEEL LIMITED Annual Report 2020-21 Summary:

Corporate Information: ESL Steel Limited, with CIN: U27310JH2006PLC012663, formerly known as Electrosteel Steels Limited, is a public limited company engaged in the manufacture and supply of steel products. The registered office is located at Village Siyaljori, P.O - Jogidih, P.S - Chandankyari, Dist - Bokaro, Pin - 828 303, Jharkhand. The corporate office is located at Lohanchal Colony, Plot No. 10, Beside Sector 12, Bokaro Steel City, Jharkhand Pin - 827013. Vedanta Limited (VEDL) is the 'Holding Company' of ESL Steel Limited, holding 95.49% of share capital.

Board of Directors: The Board of Directors includes Mr. Mahendra Singh Mehta, Mr. Prasun Kumar Mukherjee, Mr. Navnath Laxman Vhatte, and Ms. Poovannan Sumathi. Key managerial personnel include Mr. Navnath Laxman Vhatte (CEO) and Mr. Mahesh Iyer (CFO).

Financial Performance (FY2021): The company's financial performance for the year ended March 31, 2021, includes revenue from operations of INR 4,77,142.77 Lakhs (compared to INR 4,37,750.81 Lakhs in FY2020), other income of INR 12,780.64 Lakhs (compared to INR 10,364.45 Lakhs in FY2020), and finance costs of INR 37,652.67 Lakhs (compared to INR 38,413.55 Lakhs in FY2020). Profit after tax was INR 2,73,201.20 Lakhs (compared to a loss of INR 2,180.92 Lakhs in FY2020), with an EPS of INR 14.78 (compared to INR -0.11 in FY2020). ESL achieved the lowest ever cost during the year since acquisition. EBITDA margin increased 28% y-o-y compared to previous period from INR 5,514 per tonne to INR 7,070 per tonne mainly on account of increase in average sales realization 3% y-o-y from INR 35,109 per tonne in FY2019 to INR 36,197 per tonne and reduction in cost by 1.5% from INR 29,563 to INR 29,127.

Significant Developments: The company name changed to "ESL Steel Limited" on September 26, 2020. The registered office shifted to Village Siyaljori, Post – Jogidih, O.P. – Bangaria, PS- Chandankyari, Dist. Bokaro – 828303, Jharkhand on October 1, 2020. Amendments were made to the Memorandum & Articles of Association of the Company to reflect this change.

Equity Share Capital: The Authorised Share Capital is INR 1,00,20,00,00,000 divided into 10,02,00,00,000 Equity Shares of INR 10 each. The Issued, Subscribed and Paid-Up Share Capital is INR 18,49,03,02,240 divided into 1,84,90,30,224 Equity Shares of INR 10 each fully paid up. No dividend was recommended due to ongoing capacity expansion.

Corporate Governance: The Board of Directors met seven times during the year. Several committees, including the Audit Committee, Nomination & Remuneration Committee, and Stakeholders' Relationship Committee, were re-constituted. There were changes in directors and key managerial personnel, including appointments and resignations.

Director's Responsibility Statement: The directors confirm compliance with Section 134 (5) of the Companies Act, 2013, regarding the preparation of financial statements, selection of accounting policies, maintenance of records, and internal financial controls.

Internal Financial Controls: The Company has Standard Operating Procedures (SOP) for procurement, expenditure, human resources, sales, marketing, finance, treasury, compliance, and Health, Safety and Environment (HSE). The Audit Committee and the Board review these internal control systems.

Legal and Regulatory Matters: The Consent to Operate (CTO) renewal was initially denied but subsequently allowed by the Supreme Court pending further orders. Renaissance Steel Private Limited's appeal was dismissed by the Supreme Court. Several claims and demands by Statutory Authorities are pending resolution. The company approached SEBI against the penalty imposed for alleged non-disclosure of material information in the prospectus during IPO of the Company. Hon'ble Supreme Court has passed an order in Company's favour stating that all pre-acquisition liability which is not a part of the resolution plan will stand extinguished.

Annual Evaluation of the Board: The Board had adopted Schedule IV to the Companies Act, 2013 as criteria for evaluating performance of Independent Directors. The Independent Directors evaluated the performance of the Non-Independent Directors, the Board, and Committees.

COVID-19 Initiatives: The company undertook COVID relief initiatives, including supplying liquid medical oxygen, vaccinating employees and villagers, organizing a field hospital, and distributing sanitizer bottles and oxygen cylinders. About 500 MT of Liquid Medical Oxygen supplied to Jharkhand, Bihar, and Punjab. More than 4000 employees, business partners, and 579 villagers have been vaccinated

Energy Conservation, Technology Absorption & Foreign Exchange: The report includes information on energy conservation measures, technology absorption, and foreign exchange earnings and outgo. Conservation efforts are being made to ensure that the technology is absorbed and necessary measures to minimize energy consumption are incorporated in the Plant. Energy Management system for bulk energy data collection and analysis across the plant initiated, work toward achieving ISO 50001 energy management certification also initiated. Foreign Exchange earnings amounted to Rs. 45,236.42 Lakhs, while Foreign Exchange outgo amounted to Rs. 90,368.87 Lakhs.

Statutory Auditors: M/s. Lodha & Co. are the Statutory Auditors, and M/s. Sanjiban & Co. are the Cost Auditors. M/s. Chandrasekaran Associates is the Secretarial Auditor. M/s. KPMG were appointed by the Board of Directors as Internal Auditors of the Company for the FY 2020-21.

Vigil Mechanism/Whistle Blower Policy: The Company has a Whistle Blower Policy, with complaints reported to the Director – Management Assurance.

Awards & Recognitions: ESL Steel Limited received several awards, including 'GreenTech Corona Warrior Award 2020' and 'GreenTech Safety Award 2020'. The Company has been included in Global list of Integrated Management System after getting IMS Certification of ISO 9001:2015, 14001:2015 & 45001:2018 in the month of June'21.

Auditor's Report: The Auditor's Report notes a material uncertainty related to going concern due to pending regulatory approvals. Key Audit Matters identified include impairment of assets, recognition of deferred tax assets, statutory claims and liabilities, non-renewal of Consent to Operate, and determination and valuation of inventories.