Chairman’s speech – 79th AGM, 24th July 2017
Good afternoon everybody. On behalf of the Board, I welcome you all to the 79th Annual General Meeting of your Company. As always, it is a pleasure to meet you all and be reassured of your support to this company.
I am sure you have all gone through the Annual Report. As you may have noticed that the profit before tax adjustments pertaining to earlier years rose marginally, although the revenues of your company from operations decreased marginally by 1.01% from the previous year. This is mainly as a result of lower demand due to demonetization which affected the sales between November 2016 and March 2017. Tax adjustments represent the tax credits pertaining to earlier years amounting to Rs.49.21 Crore which were reversed as they lapsed as at 31st March 2017.
I would like to draw your attention to one more factor which affected the performance of the Company for the year under report, namely, volatility in prices of coking coal and Low Ash Metallurgical Coke. The prices of Coke moved up sharply after October 2016 from USD 250/Tonne to USD 350 Per MT due to upsurge in demand of steel. Anti-Dumping Duty on Coke from China of around USD 25 Per MT was levied from 25th November 2016. This volatility severely affected the performance of the Company during the last two quarters of the year under report. Prices continue to remain high.
The year in running has started on a better note. Raw material prices have come down a little in the first quarter of this year in running and the rupee dollar rate has also stabilized. Barring unforeseen circumstances, Net Revenue for FY 2017-18 is estimated at Rs.3,200 Crore as compared to Rs.2,697 Crore for FY 2016-17, an increase of around 19%. The revenue will get restructured on implementation of the scheme of arrangement and amalgamation for alloy steel rolling and finishing business.
The National Steel Policy was released in the month of May 2017. The policy talks about the Government’s determination to increase steel production to 300 million tonnes per year by 2030 from the current 122 million tones per year. A very ambitious goal but perhaps achievable if many other factors fall into place.
The Goods and Services Tax or GST introduced from 1st July 2017 is one of the biggest fiscal reforms in India since independence. GST has number of advantages, viz., lower costs and increased efficiency in logistics, fast movement of goods across the state level and reduction in transport cost. Replacing state wise multiple indirect taxes by one tax throughout the country, makes our tax system simple, less paper work, fast Assessments and quick refund. GST will also make our products more competitive all over India. It is expected to boost investments and GDP growth in lesser developed states.
The Auto sector is the largest consumer of the steel produced by your company. We hope to see an accelerated growth in this sector with the implementation of GST. The growth of the Auto Component industry in India is projected at a CAGR of 12 – 14%. All major automobile companies have announced expansion plans to cater to the growing domestic and also the export markets.
Teams from several of these automobile companies have been coordinating with our product development teams to develop value added products that will meet the stringent requirements of the automobile companies. The success of such coordination and the capability of your company to meet these ever changing needs is seen in the fact that the sales from new products is around 23% of the entire sales.
On the other hand, the growth of the capital goods sector has been sluggish. That being said, this sector is expected to turn around soon, with the public sector spend showing progressive growth and the private sector investments expected to further boost the overall growth of the sector.
It is a great pleasure that your company and Sumitomo Corporation of Japan have agreed to enter into a joint venture called MASPL to engage in the business of rolling and finishing of alloy steel products. This business is currently carried out by Mukand and will be transferred to a subsidiary which will amalgamate into MASPL through a scheme of arrangement and amalgamation, subsequent to which Sumitomo shall invest in MASPL. Sumitomo Corporation is a leading Fortune 500 company with presence in 66 countries in the world and we are really happy that they will be our partners in this new company.
The progress on transfer of this business is as under:
- The Competition Commission of India has given it’s in principle approval to this Joint Venture.
- The Stock Exchanges have given their in principle NOC to this scheme. Majority of secured creditors (bankers) have also given their NOC to this scheme.
- National Company Law Tribunal (NCLT) has called meetings of shareholders and unsecured creditors on 16th August 2017 for seeking their approval.
- Notices have been issued to regulatory authorities to file their objections, if any to the scheme before NCLT.
On completion of these formalities, formal hearings for approval of the scheme shall take place at NCLT.
You may recollect that your company already has in place another joint venture with Sumitomo Corporation called Mukand Sumi Metal Processing Ltd for the business of cold finished bars and wires which I am happy to inform you is steadily growing in profit.
With the immediate negative effect of demonetization and a bad monsoon all behind us, I think we can now look forward with greater optimism at the Indian economy. A stable policy environment and concrete efforts by the government on the ground to implement the well thought out policies will indeed put us all on a growth path.
At present, Company prepares its financial statements under Indian GAAP. To make Indian Companies report under IFRS regime i.e., comparable with other Global Companies, Government of India has introduced new Accounting Standards IND AS which are applicable to your Company with effect from 1st April 2017. Therefore, commencing from 1st quarter of FY 2017-18 your company will be adopting IND AS for preparation of its financial statements.
As usual, I request the members wishing to offer their comments on the Annual Report of FY 2016-17, must please first announce their name and then start their comments / suggestions.
I thank you all for your continued support to Mukand.