Annual Report 2013-14 - Bombay Stock Exchange
Annual Report 2013-14
ContentsOverviewCreating long term shareholder value throughvalue addition of natural resources01Special Steel Business 02Ferro Alloy Business 04Coke Business 06About VISA Steel 08Forward-looking statementsIn this Annual Report, we have disclosed forward-lookinginformation to enable investors to comprehend our prospectsand take investment decisions. This report and otherstatements - written and oral – that we periodically makecontain forward-looking statements that set out anticipatedresults based on the management’s plans and assumptions.We have tried wherever possible to identify such statementsby using words such as ‘anticipate’, ‘estimate’, ‘expects’,‘projects’, ‘intends’, ‘plans’, ‘believes’, and words of similarsubstance in connection with any discussion of futureperformance.We cannot guarantee that these forward-looking statementswill be realised, although we believe we have been prudentin assumptions. The achievements of results are subject torisks, uncertainties, and even inaccurate assumptions. Shouldknown or unknown risks or uncertainties materialise, or shouldunderlying assumptions prove inaccurate, actual resultscould vary materially from those anticipated, estimated, orprojected. Readers should keep this in mind.Strategic Goals and Mission10Financial and Operational Highlights12Chairman’s Statement 14Vice Chairman & Managing Director’s Review16Board of Directors 18Corporate Social Responsibility 20Statutory ReportsReport of the Directors 22Management Discussion and Analysis34Report on Corporate Governance 40Financial StatementsStandalone 57We undertake no obligation to publicly update any forwardlooking statements, whether as a result of new information,future events or otherwise.Consolidated 99
Creating long termshareholder valuethrough valueaddition of naturalresourcesVISA Steel Limited has created a world classfacility for production of Special Steel, FerroAlloys and Coke at Kalinganagar in Odisha.Kalinganagar is one of the upcoming major Steel hubs in Indiaand is strategically located in the mineral rich State of Odisha,which accounts for 33% of total Iron Ore reserves, 28% ofcoal reserves and 97% of Chrome Ore reserves in India. VISASteel’s Plant is in close proximity to vital raw material - Iron Ore,Chrome Ore & Coal and deep draft Ports of Paradip & Dhamra.It is considered to be a preferred investment destination withexcellent infrastructure - Road, Railway and Port connectivity.The Company is pursuing Special Steel business, Ferro Alloys& Captive Power business and Coke business at Kalinganagar.In order to facilitate fund raising, the Company plans to unlockvalue in the Special Steel & Ferro Alloy business throughstrategic / financial investor as it has done by inducting astrategic investor in Coke business.
A n n u a l Re p o r t 2 0 1 3 - 1 4Special Steel BusinessThe 0.5 millionTPA Special Steelbusiness includesproduction of HotMetal / Pig Iron,DRI / SpongeIron, Special SteelBlooms / Billets, Bar& Wire Rods andRebars for supplyto the , railwayand defence sectors.2Overview
Statutory ReportsFinancial StatementsThe Company is awaiting grant ofCaptive Iron Ore Mines in Odisha.The Company plans to set up an IronOre Sinter Plant in order to improveproductivity of the Blast Furnaceand reduce cost of raw material. TheCompany also plans to set up Producergas plant to reduce the energy cost inRolling Mill.1 million TPAExpected Capacity Expansion ofSpecial Steel at Kalinganagar, OdishaThe Company envisages transferof Special Steel Undertaking withall its assets and liability into VISASpecial Steel Limited (a subsidiary ofthe Company) through a Scheme ofArrangement in order to improve focusand facilitate fund raising throughstrategic / financial investor. TheCompany plans to expand its capacityfrom 0.5 million TPA to 1 million TPASpecial Steel at Kalinganagar in Odisha.3
A n n u a l Re p o r t 2 0 1 3 - 1 4Ferro Alloy BusinessThe Business comprises of 180,000TPA Ferro Alloy Plant & 75 MW CaptivePower Plant4Overview
Statutory ReportsFinancial Statements180,000 TPAFerro Alloy Productionoperating VISA BAO’s Ferro Alloys Plant ondry lease basis.Out of six Furnaces, four Furnaces are inoperation (two Furnaces of VISA SteelLimited and two Furnaces of VISA BAOLimited). The Company is having a200,000 TPA Chrome Ore Beneficiationand Chrome Ore Grinding Plant atGolagaon. The Company is in the processof merging VISA BAO Limited with itselfand in the interim period, the Company isThe 75 MW Captive Power Plant issufficient to cater majority of therequirement of power for 180,000 TPAFerro Alloy production. Power is a key costcomponent in Ferro Alloy business, andlow cost & uninterrupted availability ofCaptive Power for Ferro Alloys productionis critical to the cost competitiveness andfacilitating stable operations.VISA Steel is a leading player in the FerroAlloys industry in India and globally andgoing forward, it plans to further expandits Ferro Alloys production and CaptivePower generation capacities.5
A n n u a l Re p o r t 2 0 1 3 - 1 4Coke BusinessThe Coke Businesscomprises of a400,000 TPACoke Oven Plantwith associatedsteam generatingunits operatingthrough Company’ssubsidiary, VISASunCoke Limited,a joint venturebetween VISASteel Limited andSunCoke Energy,USA, in which theCompany holds 51%stake and SunCokeholds remaining49% stake.400,000 TPAProduction Capacity at CokeOven Plant6Overview
Statutory ReportsFinancial StatementsVISA SunCoke has established itself asthe best quality Coke manufacturer andenjoys advantage over imported Cokefrom China. In view of improvementin availability of Iron Ore, domesticdemand of Coke from Blast Furnacesis likely to improve. Being a debt freeCompany VISA SunCoke Limited is set toleverage its operating and technologicalexpertise to serve customers across Indiawith the best quality Coke.The Company is evaluating the optionof growing the Coke business throughexpansion at Kalinganagar to 800,000 TPA.7
A n n u a l Re p o r t 2 0 1 3 - 1 4OverviewAbout VISA SteelVisionValues“Create long term shareholdervalue through value addition ofnatural resources”Transparency – We are transparentand honest in our profession withall our stakeholdersTeam Work – We work togetheras a team to benefit from ourcomplementary strengthsPassion – We are passionatelycommitted to delivering excellencein performanceGovernance – We are committedto best standards of safety,corporate social responsibility andcorporate governanceAttitude – We demonstrateownership in our attitude tocreate sustainable value forshareholdersRegistered office in Bhubaneswar, Corporate Office in Kolkata and manufacturingfacilities at Kalinganagar and Golagaon in Odisha.Shares listed in the BSE Limited and the National Stock Exchange of India Limited.8
Statutory ReportsFinancial StatementsSpecial Steel BusinessFACILITYCAPACITYPig Iron Plant225,000 TPASponge Iron Plant300,000 TPASteel Melt Shop500,000 TPABar & Wire Rod Mill500,000 TPAFerro Alloy BusinessFACILITYCAPACITYFerro Alloy Plant180,000 TPACaptive Power Plant75 MWCoke BusinessFACILITYCAPACITYCoke Oven Plant400,000 TPA9
A n n u a l Re p o r t 2 0 1 3 - 1 4OverviewStrategic Goals and MissionStrategic GoalsIntegrate across value chain with captive mines.Build partnerships with customers and suppliers.Family of capable, motivated and happy employees.Leadership in business segment through market share.Maximise shareholder value by Market Cap and ROCE.10
Statutory ReportsFinancial StatementsStrategy and MissionIntegrate across value chain withcaptive mines and powerSecuring mining leases for key rawmaterials – iron ore, chrome ore & coal.Build captive power plants.Select technologies with long-termcompetitiveness.Leadership in business segmentthrough market shareUnderstand the steel market, identifyproducts with demand growth and setmarket share goalsDevelop strong sales & distributionnetworkMaximise shareholder value byMarket Cap and ROCEEnsure capital allocation for growth togenerate better ROCE and Market Capthan industry peersCreate assets at competitive capitalcosts and operate efficiently.Build partnerships with customersand suppliersBe preferred supplier throughcompetitive pricing and high standardsof quality and serviceBuild and sustain long-termrelationships with strategic customersand suppliers.Family of capable, motivated andhappy employeesRecruit effectively.Train and develop people continually.Provide safe and clean workingenvironment.Develop sense of organisationalownership and teamwork.11
A n n u a l Re p o r t 2 0 1 3 - 1 4OverviewFinancial and Operational HighlightsAll amount in Rs. Million, unless otherwise statedFinancial HighlightsFY 2014FY 2013Revenue14,68510,444EBIDTA1,247(67)EBIDTA Margin8.49%(0.64%)PAT(1,478)(1,076)1,1001,100FY 2014FY 201370,56836,344435312105,718854Share CapitalOperational HighlightsFerro Alloys (in MT)Power (in Million Units)Hot Metal (in MT)12Sponge Iron (in MT)156,08280,514Coke (in MT)370,099309,565
Statutory ReportsFinancial Statements13
A n n u a l Re p o r t 2 0 1 3 - 1 4OverviewChairman’s StatementSpecial Steel BusinessVishambhar SaranChairmanDear Shareholders,The financial year 2013-14 has onceagain been an extremely challengingyear for the Iron & Steel industry dueto global slowdown in demand anddomestic challenges of non-availabilityof vital raw material at viable prices. Thishas adversely impacted your Companyas well. Nevertheless your companycontinues to pursue its interests in CokeBusiness, Ferro Alloys Business andSpecial steel businesses.Coke BusinessIn order to unlock value and to continueto focus and grow this business,the Company had transferred itsMetallurgical Coke and associatedsteam generation business into asubsidiary (VISA Coke Limited) whereinthe Company has made a strategicalliance with SunCoke Energy Inc, USA.The Company has divested 49% stakein this subsidiary and raised Rs.367.50Crores. This joint venture company hassince been renamed – “VISA SunCokeLimited” which continues to be a 51 percent subsidiary of VISA Steel Limited.As a result company’s performance14has significantly improved and yourcompany has gradually ramped upto achieve over 100 percent capacityutilisation with consistent qualitycoke production.Ferro Alloy BusinessThe business comprises of 180,000 TPAFerro Alloy Plant (including the Furnacestaken on lease from VISA BAO Limited,a Subsidiary of the Company) & 75MW Captive Power Plant. In order toconsolidate the Ferro Alloys & CaptivePower generation business, the Companyis in the process of amalgamating VISABAO Limited into VISA Steel Limited.Meanwhile volume of Ferro Chromeproduced and sold domestically/exported has increased quitesignificantly. However the availabilityof Chrome Ore & Chrome Concentratesat viable prices from OMC Ltd and TataSteel Ltd remains a big challenge foryour company. Tata Steel’s ChromeOre mining operations have been shutsince May, 2014. Your company iscontinuously pursuing with the Govt.of Odisha and OMC Limited for grantof captive mining lease and supply ofChrome Ore and Chrome Concentrates.In order to unlock value and to continueto focus and grow this business, yourCompany is in the process of transferringits Special Steel business undertakinginto a – VISA Special Steel Limited,which for the time being will remaina subsidiary of your Company. In duecourse, your Company may exploreoptions to enter into strategic alliancewith a world class Steel player to unlockvalue, have clear focus and also raisefunds to grow this business from 0.5million TPA to at least 1 million TPA.Availability of Iron Ore at viable price forthis business continued to be a majorchallenge and as a result the company’sunits for this business operated waybelow their installed capacities andwere intermittently shut. Your companyis continuously pursuing with theGovernment of Odisha and OMC Limitedfor grant of captive mining lease andsupply of iron ore from Daitari minesrespectively. For last three years, supplyof Iron Ore from OMC’s Daitari Mineswas heavily restricted for want of ForestClearance which has since been received.Going forward, your Company expectssupplies of Iron Ore at viable pricesfrom OMC’s Daitari Iron Ore Mines tosignificantly improve the performance ofthe Company. In the meantime, certainclarity has also started to emerge withregard to grant of Captive Iron OreMining Lease in favour of existing steelcompanies including your Company.Annual ResultsFor the year ended 31 March 2014, theCompany recorded consolidated revenueof Rs.14,685.38 Million, operating profitof Rs.1,247.20 Million and loss after taxof Rs.1,478.28 Million. The revenueshave been driven mainly by coke and
Statutory ReportsFerro Chrome businesses. The revenueswere lower than its potential, mainlybecause the Company had extremelylow production volumes in its iron andsteel making facilities which was solelydue to non-availability and high cost ofIron Ore.The IndustryMarket sentiments in US and Europehave started to show signs of recoveryand with the newly elected Governmentin India, the overall business sentimentacross Indian Steel, Power and otherInfrastructure sectors have significantlyimproved.India is poised to be a dominantplayer in the Global Steel industry witha strong demand for Steel products,being driven primarily by infrastructureand consumption led sectors includingconstruction, automobile, white goodsand oil & gas. However, the Steel industryin India has suffered due to the nonavailability and high prices of Iron Ore,high interest rates and foreign exchangevolatility.The export tax on Iron Ore and ChromeOre remain at 30% to dis-incentiviseexports of such primary raw material andto encourage value addition of naturalresources within the country. This hasencouraged capacity addition for IronOre Sinter & Pellet Plants within thecountry which is expected to graduallyease the supply constraints in availabilityof Iron Ore.There is a huge growth potential inSteel making in India. The States ofOdisha, Chhattisgarh & Jharkhand whichaccount for majority of the Iron Ore andCoal reserves continue to remain mostFinancial Statementsattractive locations for setting upSteel plants.Vision & StrategyThe Company is committed to its visionto emerge as an efficient producerof high quality value added productsincluding Coke, Ferro Alloys and SpecialSteel (long products).Having set up state of the art valueaddition facilities, the Company is nowfocused on securing allotment of captiveIron Ore and Chrome Ore mines in orderto improve margins. Since the Companyhas already fulfilled all the requiredcriteria, it is confident of securing captiveIron Ore and Chrome Ore mining leasesin Odisha. The Company has alsobeen granted a Prospecting Licence forChrome Ore bearing Area in Manipur. Forits future projects in Chhattisgarh, theCompany is pursuing grant of a CaptiveIron Ore Mining Lease in Chhattisgarhas well.Going forward the Company’sSubsidiary – VISA SunCoke Limited isevaluating options of doubling its Cokemaking capacity from 0.4 million TPAto 0.8 million TPA. VISA Special SteelLimited is exploring options to unlockvalue by inducting a Strategic Investorand doubling its Special Steel makingcapacity from 0.5 million TPA to 1 millionTPA. Likewise VISA Steel Limited, afterconsolidating its Ferro Alloys business(by amalgamating VISA BAO Limitedinto VISA Steel Limited) will be exploringoptions to expand its capacity forproduction of Ferro Alloys from 180,000TPA to 250,000 TPA and Captive PowerPlant capacity from 75 MW to 125 MW.OutlookRevenues and margins fromMetallurgical Coke, Ferro Alloy &Special Steel Businesses shall driveyour Company forward. With the newlyelected Government at the centre, weexpect clarity with regard to grant ofCaptive Mining Leases for vital mineralslike Iron Ore, Chrome Ore, ManganeseOre & Coal to existing steel companies.We also expect interest rates to comedown to further boost the marketsentiment & reduce cost of production.We are confident of seeing betterbusiness scenario ahead.I would like to place on record my sincereappreciation and gratitude to the entireteam of VISA Steel Group for theirrelentless commitment inspite of thechallenging business environment. I amgrateful to the members of the Boardof the Company for their invaluableguidance and contribution. I would alsolike to convey my sincere thanks to allthe stakeholders for their confidenceand faith and to all the Government,Regulatory Authorities & Banks for theirvalued support.Warm Regards,Vishambhar Saran15
A n n u a l Re p o r t 2 0 1 3 - 1 4OverviewVice Chairman &Managing Director’s ReviewVishal AgarwalVC & MDYour Company has established aworld class manufacturing facility forproduction of Special Steel, Ferro Alloysand Metallurgical Coke at Kalinganagarin the State of Odisha, which is India’smost attractive State for Special Steel,Ferro Alloys and Coke manufacturing, sinceit accounts for 33 percent of the totalIron Ore reserves, 28 percent of the coalreserves and 97 percent of the chromeore reserves in India. The KalinganagarIndustrial Complex is not only an upcomingmajor Steel hub in India but also aninvestment destination with excellentRoad, Railway and Port connectivity.The past few financial years werechallenging for the Company dueto various external factors like nonavailability of raw material at viableprice, weak product prices, high interestrates and volatile foreign exchange whichhad adversely affected the performanceof your Company.However, the business scenario is likelyto gain back its momentum as theGovernment of Odisha has approved theproposal of Odisha Mining Corporationfor long term linkage of Iron Ore, ChromeOre & Chrome Concentrates with MoUsigned and State based Steel & Ferro16Alloys producers in Odisha including yourcompany. The Government is workingtowards clearing all hurdles relating toraw material availability at fair marketprice, which had been affecting theSteel industries for the last few years.Your Company is prepared and lookingforward for improving the performancetaking advantage of these measuresbeing taken by Government of Odisha.Special Steel BusinessYour Company has a Special Steelbusiness for production of Hot Metal/Pig Iron, DRI/Sponge Iron, SpecialSteel Blooms/Billets, Bars & Wire Rods,Rebars at Kalinganagar in Odisha forsupply to the automobile, construction,infrastructure, engineering, railway anddefence sectors.During the year, the availability & pricingof Iron Ore and weak product prices havebeen a major challenge for the Companyand has impacted the Special SteelOperations. Steel production was 49,827MT compared to Nil in 2012-13, HotMetal/Pig Iron production was 105,718MT compared to 854 MT in 2012-13 andDRI/Sponge Iron production was 156,082MT compared to 80,514 MT in 2012-13.In the coming days, the Company expectsa steady supply of Iron Ore at viableprices from OMC which would significantlyimprove steel production. Besides, theCompany is confident of securing captiveIron Ore Mining Lease in Odisha as certainamount of clarity has started to emergewith regard to grant of Captive Iron OreMining Lease in favour of existing steelcompanies including your Company. TheCompany plans to set up an Iron OreSinter Plant in order to hedge the Iron Oreprocurement as it is currently buying onlysized Iron Ore. The Company also plans toset up a Producer Gas Plant to reduce theenergy cost in Rolling Mill.The Company is in advanced stage totransfer its Special Steel business toVISA Special Steel Limited (VSSL), inorder to improve help the Companyunlock shareholders value and enableinduction of suitable strategic / financialinvestor. The Board of Directors hasapproved a Scheme of Arrangement fortransfer of Special Steel Undertakingof the Company with all its assetsand liabilities, into VSSL. In-p
Ferro Alloy production. Power is a key cost component in Ferro Alloy business, and low cost & uninterrupted availability of Captive Power for Ferro Alloys production is critical to the cost competitiveness and facilitating stable operations. VISA Steel is a leading player in the Ferro Alloys industry in India and globally and
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