R Electrosteel Steels Ltd - NSE steel business. The Company is engaged in selling thermo...

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Transcript of R Electrosteel Steels Ltd - NSE steel business. The Company is engaged in selling thermo...

  • Stakeholders’ Education | Corporate Governance Research | Corporate Governance Score | Proxy Advisory

    STAKEHOLDERS EMPOWERMENT SERVICES

    1 | P A G E

    SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017

    ELECTROSTEEL STEELS LTD www.electrosteels.com

    www.electrosteels.com

    Electrosteel Steels Ltd NSE Code - ESL TABLE 1 - MARKET DATA (STANDALONE) (AS ON 10TH AUGUST, 2017)

    Sector - Steel NSE Market Price (`) 4.05 NSE Market Cap. (₹ Cr.) 980.56

    Face Value (`) 10.00 Equity (` Cr.) 2,409.24

    Business Group – N.A. 52 week High/Low (₹) 6.80/2.70 Net worth (₹ Cr.)* 3.09

    Year of Incorporation - 2006 TTM P/E (TTM) N.A. Traded Volume (Shares) 26,71,879

    TTM P/BV N.A. Traded Volume (lacs) 108.21

    Registered Office - Source - Capitaline, TTM - Trailing Twelve Months, N.A. - Not Applicable | * As on 30th September, 2016

    801, Uma Shanthi Apartments, COMPANY BACKGROUND

    Kanke Road, Electrosteel Steels Limited is an India-based company, which is engaged in basic iron and

    steel business. The Company is engaged in selling thermo mechanically treated (TMT) bars,

    billets, ductile iron (DI) pipes, pig iron and wire rod. The Company is engaged in setting up a

    2.51 million ton per annum (MTPA) capacity Greenfield Integrated Steel and DI Pipes Plant in

    the district of Bokaro, Jharkhand. It produces TMT bars in Fe500, Fe500D and Fe500D

    corrosion resistance steel (CRS) variants. It manufactures DI pipes in sizes ranging from 100

    millimetres (mm) to 1,200 mm. Its billets offer applications, such as general engineering,

    structural, rerolling and high tensile applications. Its wire rods have applications in

    engineering, construction, power and automobile sectors. It consists of a sinter plant, pellet

    plant, coke oven, blast furnace, basic oxygen furnace, billet caster, wire rod mill, bar mill and

    power plant.

    Ranchi – 834 008, Jharkhand

    Company Website:

    www.electrosteels.com

    Revenue and Profit Performance

    The revenue of the Company decreased from ₹593.95 crores to

    ₹582.93 crores from quarter ending Sep’15 to quarter ending

    Sep’16. The Company made a loss of ₹485.89 crores in quarter

    ending Sep’16 vis-a-vis making a loss of ₹201.49 crores in

    quarter ending Sep’15.

    Source - Money Control

    Performance vis-à-vis Market

    TABLE 2- Returns

    1-m 3-m 6-m 12-m

    Electrosteel Steels Ltd -7.95% -38.27% -14.74% 19.12%

    Nifty -0.72% 3.82% 11.69% 13.87%

    NIFTY Metal 5.56% 10.52% 8.94% 28.03%

    Source – Capitaline / NSE

    0.50

    0.70

    0.90

    1.10

    1.30

    1.50

    1.70

    1.90

    Aug 16 Oct 16 Dec 16 Feb 17 Apr 17 Jun 17 Aug 17

    Electrosteel Steels Ltd NIFTY NIFTY METAL

    582.93 859.32

    593.95

    -485.89

    284.37 -201.49

    -1000

    -500

    0

    500

    1000

    Sep'16 Mar'16 Sep'15

    Quarterly revenue and Profit (₹ CRORE)

    Revenue Profit

    http://www.electrosteels.com/ http://www.electrosteels.com/ http://www.electrosteels.com/

  • Stakeholders’ Education | Corporate Governance Research | Corporate Governance Score | Proxy Advisory

    STAKEHOLDERS EMPOWERMENT SERVICES

    2 | P A G E

    SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017

    ELECTROSTEEL STEELS LTD www.electrosteels.com

    www.electrosteels.com TABLE 3 - FINANCIALS

    (₹ Cr.) Sep’16 Mar’16 Sep’15

    % Change

    Sep ’16 vs Mar’16 Mar’16 vs

    Sep’15

    Net Worth 3.09 766.29 703.55 -99.60% 8.92%

    Current Assets 1,267.42 1,477.78 1,603.78 -14.23% -7.86%

    Non-Current Assets 11,862.35 12,144.48 11,997.74 -2.32% 1.22%

    Total Assets 13,129.77 13,622.25 13,601.52 -3.62% 0.15%

    Investments - - - N.A. N.A.

    Finance Cost 324.38 134.01 134.35 142.06% -0.25%

    Long Term Liabilities 7,677.05 8,170.38 8,622.96 -6.04% -5.25%

    Current Liabilities 5,449.63 4,685.58 4,275.01 16.31% 9.60%

    Turnover 556.93 826.02 571.56 -32.58% 44.52%

    Profit After Tax (PAT) -485.89 284.37 -201.49 -270.87% N.A.

    EPS (₹) -2.02 1.18 -0.84 -271.19% N.A.

    Source - Money Control/ Stock Exchange Filing

    Discussion by the Company in quarterly results for the period ended on 30th September, 2016–

    In view of the Company incurring losses continuously & current liabilities exceeding the current assets, there has been an

    erosion of net worth by more than fifty percent. Due compliance of the sanctioned CDR package could also not be met with. The

    lenders have since Invoked the 'Strategic Debt Restructuring (SOR) pursuant to RBI Circulars dated June 08, 2015 and Sept 24,

    2015, and the implementation thereof is under progress. Considering the above developments, the company has presented

    these financial statements on going concern basis.

    AUDIT QUALIFICATIONS

    Audit Qualifications in last 3 years: There are no Audit Qualifications by Statutory Auditor for the three financial years viz.

    FY2015-16, FY2014-15 and FY2013-14. However, Statutory Auditors has drawn attention on the following matters:

    Emphasis of Matters for FY 2015-16:

    1. “Note No. 27, regarding the revenue recognized as “Exceptional Item”. The company, consequent to the delayed

    execution of contracts by certain vendors/suppliers/service providers of plant, equipment’s, civil and erection

    commissioning etc. has incurred “Loss of Profit” in past. The part of such claim of “Loss of Profit” as assessed by the

    Company has been recovered from the available balance in the respective Supplier's Accounts and recognized as income

    in the Statement of Profit and Loss for the year. The unrecovered such “Loss of Profit” will be accounted for in the year

    significant certainty of recovery is established.

    2. Note No. 41, regarding the preparation of these financial statements on a “going concern basis”. The Company incurred

    a net loss of ₹326.55 Cr during the year ended March 31, 2016 and, as of that date, the Company's current liabilities

    exceeded its current assets by ₹3,207.80 Cr, further the Company's net worth has also been substantially eroded as at

    the balance sheet date. Since the full compliance of the sanctioned CDR package could not be made with, the lenders

    have invoked Strategic Debt Restructuring (SDR) pursuant to RBI circulars dated 08.06.2015 & 24.09.2015, the

    implementation is under progress. However, in view of the increase in the operations of the production facilities and the

    Company's EBIDTA being positive also in this year, these financial statements have been prepared on a “going concern

    basis” and no adjustment has been made to the carrying value of the assets and liabilities. “

    Response Comment

    Frequency of Qualifications Not Applicable

    Have the auditors made any adverse remark in last 3 years? No

    Are the material accounts audited by the Principal Auditors? As per Annual Report for FY 2015-16, the

    Company do not have any Subsidiary, Holding or

    Associate Company. Do the financial statements include material unaudited financial

    statements?

    http://www.electrosteels.com/ http://www.electrosteels.com/

  • Stakeholders’ Education | Corporate Governance Research | Corporate Governance Score | Proxy Advisory

    STAKEHOLDERS EMPOWERMENT SERVICES

    3 | P A G E

    SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017

    ELECTROSTEEL STEELS LTD www.electrosteels.com

    www.electrosteels.com

    TABLE 4: BOARD PROFILE (AS PER ANNUAL REPORT 2015-16)

    Regulatory Norms Company

    % of Independent Directors on the Board 33% 44%

    % of Promoter Directors on the Board - 0%

    Number of Women Directors on the Board At least 1 1

    Classification of Chairman of the Board - Independent Director

    Is the post of Chairman and MD/CEO held by the same person? - No

    Average attendance of Directors in the Board meetings (%) - 91.11%

    Source - Annual Report 2015-16

    Composition of Board: As per Regulation 17(1)(b) of the Listing Regulations, 2015, the Company should have at least 33%

    Independent Directors as the Chairman of the Board is a Non-Executive Director. The Company has 44% of Independent

    Directors and hence, it meets the regulatory requirements.

    Board Diversity: The Company has 9 directors out of which 1 is Women Director.

    TABLE 5 - FINANCIAL RATIOS

    Ratios Sep’16 Mar’16 Sep’15

    % Change

    Sep ’16 vs

    Mar’16

    Mar’16 vs

    Sep’15

    Tu rn

    o ve

    r

    R at

    io s

    Inventory Turnover 0.66 1.12 0.70 -41.45% 59.74%

    Debtors Turnover 3.94 3.29