ANNUAL REPORT

2018-19
History
PHYSICAL SUMMARY 1977 - 1980
ISMT began life as ‘The Indian Seamless Metal Tubes Limited’. Incorporated on 29th July 1977 as a public limited
company, raised Rs. 45 lacs through Initial Public Offering and commenced production of Seamless Tubes in the
year 1980 with an installed capacity of 15,000 MTPA.

1985
Seamless Tube manufacturing capacity increased to 30,000 MTPA.

1992
Seamless Tube manufacturing capacity further increased to 50,000 MTPA.
Promoted ‘Indian Seamless Steels and Alloys Ltd.’ (ISSAL) to produce 1,50,000 MTPA Alloy Steel giving the
Company better control over product quality as well as deliveries.
Successfully completed Public Issue of ISSAL which was hugely oversubscribed.

1993-1994
Rights issue of Rs. 28 Crore in the year 1993 followed by rights issue of Rs. 58 Crore, for modernization and tech-
nology upgradation of Seamless Tube plant.
Seamless Tubes & Technologies (India) Ltd, a group Company amalgamated with the Company.
‘Indian Seamless Steels and Alloys Ltd.’ (ISSAL) commenced commercial production of Steel Rounds.

1998
Steel manufacturing capacity at ISSAL increased to 190,000 MTPA.

1999
Merged into Kalyani Seamless Tubes Ltd., (KSTL), a competing Seamless Tube manufacturer with 90,000 MTPA
capacity. The combined entity, which retained the name The Indian Seamless Metal Tubes Ltd., not only had a
larger capacity (1,58,000 MTPA) but also a much wider size range (from 6 mm to 273 mm).

2004-2005
Steel manufacturing capacity at ISSAL increased from 190,000 MTPA to 250,000 MTPA.
‘The Indian Seamless Metal Tubes Ltd.’ and ‘Indian Seamless Steels and Alloys Ltd.’ merged to form ‘ISMT Ltd’.
Exports cross Rs. 100 Crore mark.

2006 - 2007
Raised USD 20 Million through Foreign Currency Convertible Bonds issue.
Acquired Structo Hydraulics AB (based in Storfors, Sweden), Europe’s leading supplier of tubes and engineering
products for the hydraulic cylinder industry.

2010
ISMT added a PQF Mill, increasing its tube making capacity to 465,000 MTPA.
Simultaneously, Steel making capacity was increased from 250,000 MTPA to 350,000 MTPA.

2011
Exports cross Rs. 500 Crore mark.
Redeemed Foreign currency convertible Bonds (FCCB’s) amounting to USD 20 Million along with redemption
premium.

2012
Commissioned 40 MW Captive Power Plant located at Chandrapur district (Maharashtra).

2013
Raised long term working capital loans of Rs. 235 Crore.

2014
Operations of Captive Power Plant were suspended due to non-availability of coal & denial of energy banking
facilities by MSEDCL.
Leavy of Safeguard Duty on imports of seamless tubes into India.
JLF approved and disbursed Corporate Term Loans of Rs. 405 Crore under corrective Action Plan

2016
Levy of Anti-Dumping Duty for a period of 5 years on imports of seamless tubes from China.
 Annual Report 2018-19

COMPANY INFORMATION

Board of Directors

S C Gupta - Chairman (upto March 28, 2019)

O P Kakkar - Chairman (w.e.f. June 14, 2019)
B R Taneja - Managing Director
Rajiv Goel - Chief Financial Officer
Deepa Mathur - Director
Shyam Powar - Director
Shashank Dixit - Nominee Director of IDBI Bank Ltd. (upto January 17, 2019)
Kanakraj M - Director (w.e.f. March 1, 2019)
R Poornalingam - Director (w.e.f. December 28, 2018)

Company Secretary
Chetan Nathani

Auditors Cost Auditors

DNV & Co. M/s. Dhananjay. V. Joshi & Associates, Cost Accountants
M/s. Parkhi Limaye & Co., Cost Accountants

Bankers / Lenders
Indian Overseas Bank State Bank of India
Bank of Baroda IKB Deutsche Industrie Bank AG
ICICI Bank Limited Edelweiss Asset Reconstruction Co. Ltd.
Andhra Bank Asset Reconstruction Company (India) Ltd. (ARCIL)
Central Bank of India SC Lowy Primary Investment Limited

Registered Office Works

Lunkad Towers, Tube - MIDC Industrial Area, Ahmednagar - 414111
Viman Nagar, Pune - 411014 MIDC Industrial Area, Baramati - 413133
Tel: +91-20-4143 4100/ 6602 4901 Structo Hydraulics AB, Storfors, Sweden
Fax: +91-20-26630779 Steel - Jejuri-Morgaon Road, Jejuri – 412303
E-mail ID: [email protected] Power - Village Kurla, Warora, Chandrapur - 422910
Website: www.ismt.com
CIN: L27109PN1999PLC016417

Registrar & Share Transfer Agent

Karvy Fintech P Ltd
(Formerly known as Karvy Computershare P. Ltd)

1
Directors’ Report
To the Members of ISMT Limited Rs. 541 Crores in 2018-19 while external sales also went up by
Your Directors present herewith the Twenty First Annual Report 20% from Rs. 402 Crores in 2015-16 to Rs. 478 Crores in 2018-
& Audited Financial Statements of the Company for financial 19 despite the slow down in the Auto Industry.
year ended March 31, 2019. FINANCE
FINANCIAL HIGHLIGHTS The turnover of the Company doubled over last 3 years from Rs.
The Company had undergone a very difficult period in last 968 Crores in 2015-16 to Rs. 1,795 Crores in 2018-19. EBIDTA
few years and peak net sales of Rs. 1,879 Crores in 2011- went up more steeply and EBIDTA in 2018-19 of Rs.120 Crores
12 dipped to Rs. 968 Crores in 2015-16 and the net profit of was more than thrice the EBIDTA in 2015-16 of Rs. 34 Crores.
Rs. 29 Crores dipped to net loss of Rs. 382 Crores during the said The cash loss in turn halved from Rs. 301 Crores in 2015-16 to
period. However, a remarkable turnaround has been achieved in Rs. 154 Crores in 2018-19.
last 3 years where the sales have gone back to the same level The Company has continued to be EBIDTA positive throughout
while the net loss also came down by 40% as can be seen from this period and the increasing EBIDTA is a positive for the Lenders
the following: of the Company. The Company is proposing to restructure its
debt on sustainable basis which, inter alia, could necessitate
Rs. in Crore downsizing of debt including interest. However, pending
Particulars Financial Year restructuring, the Company is required to provide full interest in
2018-19 2015-16 its books to comply with the relevant accounting standards and
Net Sales 1795.44 968.44 will give effect to the restructuring once it is implemented.
Gross Sales 2423.39 1331.28 FUNDS UTILIZATION
Profit/ (Loss) before Finance Charges, 119.87 33.65 The internal cash flows are mainly utilized for incremental
Depreciation, Amortization & Tax working capital requirements, essential maintenance capex and
(EBIDTA) other need based capex and also for payment to Lenders of the
Cash Profit/ (Loss) (154.35) (300.99) Company.
Gross Profit/ (Loss) (156.59) (246.47) The Company is also regular in payment of its statutory dues.
Profit/ (Loss) Before Tax (228.78) (372.82) DEBT RESOLUTION
Taxation - (9.39) The Company and the Bankers had been looking at various
Net Profit/ (Loss) (228.78) (382.21) options permitted by Reserve Bank of India Circular in force
Re-measurement Gains/ (Losses) on (0.84) - from time to time and has finally decided to explore assignment
Defined Benefit Plans of debt to Asset Reconstruction Company (ARC) as a Resolution
Total Comprehensive income for the (229.62) (382.21) Plan. Pursuant to the same, erstwhile Lead Bank viz. Indian
year Overseas Bank and other major Banks agregatating to about 71%
DIVIDEND have assigned their debt to ARCs with ARCIL acquiring most of
this debt. ARCIL has initiated the process for restructuring the
Your Directors are unable to recommend dividend for the year debt on a sustainable basis.
ended March 31, 2019 in view of the losses.
IMPORTS
RESERVES
An effective import duty levied in 2016 provided immediate and
No amount is proposed to be transferred to Reserves. much needed relief. After the initial dip, imports from China have
OPERATIONS again started increasing. There is also increase in non Chinese
There has been gradual improvement in utilization at all the imports. The Company will seek continuation and widening of
plants. Steel plant utilization has gone up from 38% in 2015-16 to the tariff regime to address increasing imports.
50% in 2018-19. There is a quantum jump in tube plant utilization ENERGY BANKING
which went up from 22% in 2015-16 to 48% in 2018-19. Captive Power Plant of the Company continued to be inoperative
MARKET throughout the year in the absence of banking facility from
Total tube sales went up from Rs. 566 Crores in 2015-16 to Rs. MSEDCL. The Company has contested the wrongful denial of
1,317 Crores in 2018-19 i.e. an increase of 133%. In fact the the banking facility and the Company’s appeal in this regard is
domestic sales increased 2.5 times from Rs. 456 Crores in 2015- pending in the Supreme Court.
16 to Rs. 1,122 Crores in 2018-19 while the exports sales nearly NON CORE ASSETS
doubled from Rs. 110 Crores in 2015-16 to Rs. 195 Crores in Captive Power Plant in Maharashtra had in the past been
2018-19. identified as asset held for sale. Given the continuing weakness
Steel despatches went up from Rs. 609 Crores in 2015-16 to Rs. in the economic environment, the Company does not foresee
1,020 Crores in 2018-19. Most of the increase was driven by the disposal of the same in the short term. Hence, it has been decided
captive sales which increased from Rs. 207 Crores in 2015-16 to to reclassify the said asset as non-current asset under the head
“Property, Plant & Equipment”.

2
 Annual Report 2018-19

Directors’ Report (Contd.)

Despite non operation for last 5 years, the Captive Power Plant performances of independent directors have been evaluated by
has been kept in good working condition. It also has easy access to Chairman of the Nomination & Remuneration Committee (NRC)
raw material being located close to the coal mines. The Company with inputs from all directors. The performance of the Board
also has surplus land and other infrastructure for increasing as a whole is evaluated by the Chairman with inputs from all
the capacity. The Company is also evaluating the possibility of directors. The performance evaluation of Chairman of NRC is
restarting the Power Plant. evaluated by Chairman with inputs from all the directors.
Port and Power project in Tamil Nadu does have long term The above evaluations have been carried out once during the
potential. The Company, through its wholly owned subsidiary, year.
has also got about 1,000 acres of freehold land which can be The details of familiarization Programme of Independent
put to alternate use once there is improvement in the investment Directors with the Company, their roles, rights, responsibilities
scenario. in the Company, nature of the industry in which the Company
RESEARCH & DEVELOPMENT operates, business model of the Company and related matters are
As part of Company’s overall strategy, Company remained put up on the website of the Company at www.ismt.co.in
focused on developing new products for all its market segments AUDITORS REMARKS
including Energy, OCTG, Bearing, Auto & Mining Sectors. In respect of the Qualified Opinion and Emphasis of Matter by
R&D activities also focused on process cost reductions. Details the Auditors on the Financial Statements of the Company, it has
of R&D activities undertaken are enumerated in Annexure ‘B’ been explained in the Notes forming part of the said Financial
attached to this Report. Statements i.e. Note Nos. 1.31, 3.12, 3.16, 3.17, 3.18, 3.19 and
DIRECTORS & KEY MANAGERIAL PERSONNEL 3.20 which are self-explanatory and therefore do not call for any
Mr. R Poornalingam & Mr. Kanakraj Madhavan were appointed further comments.
as Additional Directors (Independent) of the Company w.e.f. The Auditors have discussed the key matters for each of the
December 28, 2018 & March 1, 2019 respectively. qualifications.
Mr. Shyam Powar is re-appointed as Independent Director of the COST AUDITORS
Company, subject to shareholders approval at the ensuing AGM. The Company is required to maintain cost records as specified
Post completion of the tenure as Independent Directors, Mr. S C u/S 148(1) of the Act and accordingly such accounts and records
Gupta and Ms. Deepa Mathur continued on the Board as Non- are made and maintained by the Company.
Executive Directors (Non-Independent) till the ensuing AGM. Pursuant to Section 148 of the Act read with Rules framed
Mr. Shashank Dixit, Nominee Director & Mr. S C Gupta, Non- thereunder, your Directors had, on recommendation of the Audit
executive Director resigned as Directors of the Company w.e.f. Committee, approved the appointment & remuneration of the
January 18, 2019 & March 29, 2019 respectively. following Cost Auditors of the Company for FY2018-19:
The Board placed on record its sincere appreciation and gratitude (i) M/s Dhananjay V. Joshi & Associates; and
for services rendered by Mr. Shashank Dixit and Mr. S C Gupta (ii) M/s Parkhi Limaye & Co.
during their respective association with the Company.
The payment of remuneration for FY2018-19 to aforesaid Cost
The term of Mr. Rajiv Goel as Whole-time Director expired on Auditors is subject to ratification by the Members at the ensuing
September 30, 2018. He was further re-appointed as such upto Annual General Meeting.
September 30, 2019.
The Cost Audit Report for FY2017-18 was filed within the
The term of Mr. B R Taneja as Managing Director expired on prescribed time limit as per the Companies (Cost Record and
November 30, 2018. He was further re-appointed as such upto Audit) Rules, 2014.
November 30, 2020.
SUBSIDIARIES
Eight (8) meetings of the Board of Directors were held during the
As on date of this report, the Company has ten direct and indirect
year. Detailed information is given in the Corporate Governance
subsidiary companies. In accordance with Section 129(3) of
report.
the Act, a statement containing salient features of the financial
The Independent Directors have given a Declaration pursuant to statements of subsidiaries in Form AOC-1 is provided separately
Section 149(7) of the Companies Act, 2013 (Act). in this Annual Report. A report on performance & financial
The Company has devised a Policy for annual performance position of each of the subsidiaries is provided in financial
evaluation of the Board, its Committees & individual Directors statements forming part of this Annual Report. The Company has
which include criteria for performance evaluation of the non- also framed a Policy for determining Material Subsidiaries which
executive & executive directors. is available on website: www.ismt.com.
The performances of non-independent directors & Committees FIXED DEPOSITS
of the Board have been evaluated by independent directors. The The Company has not accepted any deposits from the public.

3
Directors’ Report (Contd.)
MANAGEMENT DISCUSSION & ANALYSIS AND NOMINATION & REMUNERATION POLICY
CORPORATE GOVERNANCE REPORT The Nomination & Remuneration Policy of the Company on
Pursuant to SEBI (LODR) Regulations, 2015 (Listing director’s appointment & remuneration including criteria for
Regulations), a separate section on Management Discussion & determining qualifications, positive attributes, independence of a
Analysis & Corporate Governance’ Report is forming part of this director & other matters is available on website of the Company
Report. at www.ismt.com.
The Managing Director & CFO have certified to the Board with The criteria for performance evaluation as laid down by the
regard to the financial statements & other matters as required Nomination & Remuneration Committee have been defined in
under Regulation 17(8) of the Listing Regulations. the Nomination & Remuneration Policy.
Certificate from Auditors of the Company regarding compliance Details pertaining to Section 197(12) of the Act read with Rules
of conditions of Corporate Governance is also annexed to this framed thereunder are forming part of this Report as Annexure
Report. ‘C’.
EXTRACT OF ANNUAL RETURN A statement showing details of employees in terms of Rule 5(2)
The extract of Annual Return in Form MGT-9 is forming part of and (3) of the Companies (Appointment and Remuneration of
this Report as Annexure ‘A’. Managerial Personnel) Rules, 2014 forms part of this Report.
However, in terms of Section 136 of the Act, the Annual Report
Further, the latest Annual Return of the Company in Form MGT-
excluding the aforesaid information is being sent to the members
7 is placed on website of the Company at www.ismt.com
and other entitled thereto. The said statement is available for
CONSERVATION OF ENERGY, TECHNOLOGY inspection by the Members at the Registered Office of the
ABSORPTION AND FOREIGN EXCHANGE EARNINGS Company during business hours on working days up to the date
& OUTGO of the ensuing AGM. If any Member is interested in obtaining a
Information required under Section 134(3)(m) of the Act is copy thereof, such Member may write to the Company Secretary
forming part of this Report as Annexure ‘B’. in this regard.
DIRECTORS’ RESPONSIBILITY STATEMENT SECRETARIAL AUDIT REPORT
Pursuant to the provisions of Section 134(3)(c) read with Section Pursuant to Section 204 of the Act & Rules made thereunder
134(5) of the Act, your Directors make the following statement: the Board has appointed M/s. MRM Associates, Company
i) That in preparation of annual accounts, the applicable Secretaries as Secretarial Auditors to undertake Secretarial Audit
accounting standards have been followed along with proper of the Company for the period ended March 31, 2019.
explanation relating to material departures; The Report of the Secretarial Auditors in Form MR-3 is forming
ii) that the Directors have selected such accounting policies & part of this Report as Annexure ‘D’.
applied them consistently & made judgments & estimates, In respect of the Audit observations, following are the comments
that are reasonable & prudent so as to give a true & fair view of the Board:
of the state of affairs of the Company at end of financial i. Delay in submission of financial Results:
year March 31, 2019 and of the Loss of the Company for
Submission of the financial results got delayed only by 2
that period;
weeks due to delay in financials of foreign subsidiaries.
iii) That the Directors have taken proper and sufficient care
ii. Inadequate Board composition:
for the maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, Listing Regulations usually provide 3 months to fill vacancy
2013 for safeguarding the assets of the Company and for of independent directors.
preventing and detecting fraud and other irregularities; Accordingly, the Company within 3 months filled the
iv) That the Directors have prepared the annual accounts on a vacancy of Independent Director.
going concern basis; iii. Promoter shareholding not in demat form:
v) That the Directors had laid down internal financial controls One Promoter Group (holding 0.02% shares in physical
to be followed by the Company & that such internal financial form) was classified as such by virtue of being related to a
controls are adequate & were operating effectively; and former promoter of the Company.
vi) That the Directors had devised proper systems to ensure The Company proposes to take steps to reclassify the said
compliance with the provisions of all applicable laws and promoter group to public category.
that such systems were adequate and operating effectively.

4
 Annual Report 2018-19

Directors’ Report (Contd.)

iv. Disqualification of Director CONTRACTS & ARRANGEMENTS WITH RELATED
The concerned director was erroneously disqualified PARTIES
by ROC. Nevertheless, on the date of appointment in During the year, the Company has not entered into any contract/
the Company, the said Director was not disqualified. arrangement/ transaction with related parties which were either
Subsequently, he has resigned from the Board on becoming not at an arm’s length or not in the ordinary course of business &
aware of his disqualification. further could be considered material in accordance with the policy
v. Non-filing of forms with ROC of the Company on materiality of related party transactions.
Due to pre-scrutiny/ technical error on MCA website, the Hence, there is no information to be provided in Form AOC-2
Company could not file few forms with ROC. However, the while particulars of Related Party Transactions in terms of Ind
said forms were subsequently filed through form GNL-2, AS-24 are forming part of the enclosed financial statements.
which were duly approved by ROC. The Policy on materiality of related party transactions and
PARTICULARS OF LOANS, GUARANTEES AND dealing with related party transactions as approved by the Board
INVESTMENTS may be accessed on the website at www.ismt.com
Particulars of Loans, Guarantees and Investments covered under GENERAL
Section 186 of the Act have been mentioned in the Notes to the 1. No significant or material orders were passed by Regulators
Financial Statements forming part of this Annual Report. or Courts or Tribunals which impact the going concern
RISK MANAGEMENT status & Company’s operations in future.
The Company has constituted a Risk Management Committee 2. The Company has complied with the provisions relating
to address organization wide risk including credit, security, to the constitution of Internal Complaints Committee
property, regulatory and other risks. The Committee is assisting under the Sexual Harassment of Women at Workplace
the Board in ensuring that there is adequate risk management (Prevention, Prohibition & Redressal) Act, 2013 and during
policy in place capable of addressing those risks. the year, there were no cases filed/pending under the said
Act.
INTERNAL FINANCIAL CONTROLS
3. The Company has complied with the applicable secretarial
The Company has an internal financial control framework which
standards.
is commensurate with the size, scale and complexity of its
operations. The Statutory Auditors of the Company review the ACKNOWLEDGEMENTS
same on periodical basis. Your Directors take this opportunity to express its sincere
CORPORATE SOCIAL RESPONSIBILITY gratitude for continued support & co-operation received by
the Company from Government of India, Government of
Pursuant to Section 135 of the Act a CSR Committee has been
Maharashtra, Reserve Bank of India, Stock Exchanges, other
constituted by the Board consisting of three directors including
regulatory agencies & shareholders. The Board would also like
one independent director.
to acknowledge continued support of its bankers, vendors, clients
Pursuant to the provisions of Section 135 of the Act, no profits & investors. The Directors also wish to place on record their
were available for spending on CSR activities. appreciation of all employees for their dedication & team work.
AUDIT COMMITTEE & VIGIL MECHANISM For and on behalf of
Pursuant to Section 177 of the Act, an Audit Committee the Board of Directors
constituted by the Board consists of at least three directors with
independent directors forming a majority.
Pune O P Kakkar
The Whistle Blower Policy/ Vigil Mechanism of the Company
was established by the Board & available on website at www. June 14, 2019 Chairman
ismt.com.

5
Management Discussion and Analysis
Company Performance (F.Y. 2018-19): ISMT is predominantly engaged in the manufacturing of
specialty alloy and bearing Steel. The end user segments are largely
Total Revenue : Rs. 1832.04 Crore Bearing, Automotive, Engineering and Forging Customers apart
EBDITA : Rs. 119.87 Crore from some customers requiring steel for specialized application.
The fortunes of the specialty and alloy steel products is closely
Cash Profit/ (Loss) : Rs. (154.35) Crore
linked to automotive and auto component industry.
Profit/ (Loss) after Tax : Rs. (228.78) Crore
Captive Power Plant
The operations of the Captive Power Plant remained suspended
during the year on account of non-availability of energy banking
facility from Maharashtra State Electricity Distribution Company
Limited (MSEDCL).
MARKET
ISMT is a diversified value added Seamless Tube supplier
catering to following major industries:
a. Oil and gas : As casings & Tubings during oil/
gas exploration.
b. Power : In Boilers & Heat Exchangers
c. Construction Equip- : In mining and earth moving
ment equipment
Sales of Domestic and Export seamless tubes and pipes increased
by 31% and 51% respectively in the current year over previous d. Automotive & Gen- : Applications in two wheeler to
year. eral Engineering four wheeler as front forks, axel,
Steeling columns, Air bag system
Growth in Domestic demand and lower imports consequent on etc.
levy of Anti Dumping Duty on imports of the seamless tubes
and pipes from China resulted in Domestic seamless tube sales e. Bearings : Inner and outer races of Bearings
volumes increase over previous year. f. Others : In greenfield projects for fluid trans-
Rs. in Crore portation, Construction of Stadiums
and airports, gas cylinders, crane
Particulars 2018-19 2017-18 Change booms etc.
Net Sales 1795 1437 25%
Domestic Industry Mix
30%
- Tube 1122 858 31% 23% 23% 23%
26% 25%
25%
- Steel 478 450 6% 20% 18%
Tube Exports 195 129 51% 15%
14% 13%
11% 10%
10% 8%
6%
INDUSTRY STRUCTURE AND DEVELOPMENTS 5%
Seamless Tubes Industry 0%
Automobile & General OCTG & Construction Power Trade & Others
Seamless Tube is a capital intensive industry and deploys high Bearing Engineering Projects

end technology. While the industry competes with other types

of pipes and tubes in certain applications, it clearly is a preferred
choice when it comes to better surface finish, machine-ability, 2017-18 2018-19
strength to weight ratio and longer life. Seamless Tubes find
applications in Oil and Gas exploration industry, Power Sector, Sales value in absolute terms in all the Industry segments
Automotive, Construction Equipment, Bearing, Material increased over previous year.
handling equipment, Structural Components and host of other
OPPORTUNITIES & THREATS
Mechanical applications. The Seamless Tube consumption is
largely dependent on economic developments and with expected Opportunities
long term economic growth, the Company is assured of a secular The imposition of Anti Dumping Duty on Chinese imports of
market in future. seamless tubes and pipes for a period of five years continues to be
Steel Industry an opportunity especially with the growing Indian economy. An
opportunity in increase in export sales can also be expected due
ISMT has integrated Steel Plant which uses the Electric arc
to future increase in demand for seamless pipes from developing
furnace technology to produce Steel.
countries.

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 Annual Report 2018-19

Management Discussion and Analysis (Contd.)

Threats RISKS & CONCERNS
There is a continuous threat of imposition of duties from Your Company regularly evaluates and reviews potential risks on
developed economies. Also strict ecological regulations may lead account of various factors such as government policies, natural/
to technological changes. man-made disasters, and political risks. Apart from above, the
SEGMENT/ PRODUCT INFORMATION Company is exposed to changes in foreign exchange rates and
Your Company is engaged in manufacturing Seamless Tubes commodity prices. Any change in laws & regulations, whether
and Engineering Steels. Seamless Tube accounted for 73% of domestically or internationally could affect the business and
ISMT’s total external sales value while Steel accounted for the financial condition of your Company.
balance 27%. Captive consumption of steel increased to 53% as The long term success of a Company largely depends on
compared to that of 43% for previous year. effectively identifying and analyzing the risks involved. The
Company has adequate risk management system towards
identification and evaluation of potential risks and the same are
evaluated and reviewed regularly by the management so as to
minimize/ eliminate the adverse impact if any.
INTERNAL CONTROL SYSTEMS
The Company has adequate and effective internal control
systems and processes in place, which are designed to provide
reasonable assurance with regards to recording and providing
reliable financial and operational information, safeguarding the
assets, statutory compliance, executing transactions with proper
requisite approvals and ensuring compliance with applicable laws
and regulations. The Audit Committee of Directors on a periodic
basis reviews the effectiveness and adequacy of the internal
control systems and processes and suggests improvements if any.
Total sales quantity of both seamless tube and steel put together
In addition to the Chief Internal Auditor, the Company has also
showed an increasing trend. The same for the year 2018-19 was
appointed an external Chartered Accountants firm as internal
318,121 MT as against 280,959 MT for 2017-18 and 214,975 MT
auditors to conduct internal audit of the function and activities
for 2016-17.
of the Company.
FINANCIAL PERFORMANCE
Some of the key financial parameters are as under:
Finance Cost
The Finance cost for the year was almost same as that for previous
year at Rs. 276 Crore and stood at 15% of Net Revenue.
During the year imported raw material consumption increased
to Rs. 328 Crore from Rs. 235 Crore in the previous year. The
increase is in line with increase in sales turnover.
Exports are expected to continue its growth trend on account of
increase in demand from developing countries. Going forward
this should lead to growing net Foreign Exchange inflows. The
Company’s forex exposure is managed both through a natural
hedge and by contracting appropriate treasury products, with
a view to balancing risks while optimizing borrowing costs.
OUTLOOK
Appropriate hedging tools are used under the board approved
Levy of Final Anti Dumping Duty on import of seamless tube risk management policy framework. The forex risk is reviewed
into India from China coupled with ‘Make in India’ program of periodically and managed in line with the objectives laid in the
the Government of India is likely to lead to increase in volume policy.
of the Company’s product in domestic market.
Foreign Currency Term Loans accounted for over 27% of the
Company’s outstanding term debt as on March 31, 2019. The
same accounted for 26% of total outstanding term debt as on
March 31, 2018.

7
Management Discussion and Analysis (Contd.)
Your Company is consistently focused on achieving higher
energy efficiency across value chain and is simultaneously
committed towards utilising environment friendly means in the
process.
Particulars 2018-19 2017-18 Change
Furnace oil Consumption
(K Ltrs/ Ton of Produc-
tion)
- Steel Division 32 45 29%
- Tube Division 72 70 (3%)
Avg. Furnace Oil rate 36.00 27.19 (32%)
Rs. per Litre
The Company’s major exports are to North America and Europe Increase in furnace oil rate per litre is driven by international oil
and the imports are mainly from USA, Europe, Gulf and South prices which is beyond the scope of the Company.
Africa. Increase in melting shop production led to reduction in furnace
Working Capital oil consumption per Metric Ton of production of steel division
over previous year. Furnace oil consumption of tube division
While the inventory level in absolute term for the current year
increased marginally by 3%.
is same as that for previous year, the debtors level increased by
Rs. 65 Crore over previous year. The increase in debtors was on Significant scope exists for reduction in power and Fuel
account of increase in sales turnover. In term of holding period consumption per unit of production once the capacity utilization
calculated on yearly sales, the inventory level has reduced while at manufacturing plants improve.
debtor level was almost same as that for previous year. KEY FINANCIAL RATIOS
Rs. in Crore Some of the key financial ratios for current year as compared to
previous year are as under:
Particulars 2018-19 2017-18
Particulars 2018-19 2017-18 Change
Inventory 341 334
Stock Turnover (times) 5.27 4.31 Debtors Turnover 6.09 6.38 (5%)
Debtors 295 225 Inventory Turnover 5.27 4.31 22%
Debtors Turnover (times) 6.09 6.38 Interest Coverage Ratio 0.17 0.12 39%
Creditors 100 102 Current Ratio 0.25 0.26 (3%)
Creditors Turnover (times) 12.48 9.90 Debt Equity Ratio -ve -ve N.A.
The Company is making all possible efforts to keep the inventory Operating Profit Margin 6.7% 6.0% 11%
and debtor’s level at the minimum possible in the current stressed Net Profit Margin -ve -ve N.A.
financial scenario. Return on Net Worth -ve -ve N.A.
Energy Cost Owing to the increase in sales turnover and resultant increase in
Energy Cost accounted for 16% of the Company’s net revenues Earnings before Interest and Taxes (EBIT), the interest coverage
at Rs. 289 crore. In the current financial year, operations of the ratio has almost doubled as compared to previous year. While
Captive Power Plant remained suspended. EBIT increased by 39%, Finance Cost remained at almost same
level as that of previous year.
Particulars 2018-19 2017-18 Change
HUMAN RESOURCES DEVELOPMENT AND
Power consumption INDUSTRIAL RELATIONS
(KWH/ Ton of Production)
The Industrial relations continued to remain peaceful throughout
- Steel Division 884 839 (5%)
the year. The personnel expenses increased by 5% during the
- Tube Division 558 546 (2%)
year over previous year on account of yearly increments. The
Avg. Electricity Rate per 8.44 7.44 (13%) Company continues to believe that the culture of sharing
Unit
knowledge within the employees and involving them to be part
from MSEDCL
of the solution, enables the Company curtail costs and excel.
(Rs. / KWH)
In the current economic scenario, the focus was on aligning
There was a increase in electricity rate per unit by 13% as HR to support cost control and conserve cash, while ensuring
compared to previous year on account of increase in power tariff organizational confidence and employee motivation, to enable
by state electricity board. the Company sail through the current challenges and prepare
The power consumption per unit of tube production increased itself for the future opportunities.
marginally by 2% and that of steel division by 5% as compared
to previous year.