not for circulation serial number strictly confidential · 2018. 2. 19. · vardhman special steels...

Placement Document

Not for Circulation

Serial Number _______

Strictly Confidential

VARDHMAN SPECIAL STEELS LIMITED

Vardhman Special Steels Limited was incorporated as a public limited company pursuant to a certificate of incorporation dated May 14, 2010, and subsequently received a certificate of commencement of business on June 15, 2010, under the relevant provisions of the Companies Act, 1956. For further details, please see “General Information”.

Registered & Corporate Office: Vardhman Premises, Chandigarh Road, Ludhiana - 141010, Punjab, India. CIN: L27100PB2010PLC033930 Website: www.vardhmansteel.com

Telephone: +91 161 222894348; Fax: +91 161 2601048; Email: [email protected];

Vardhman Special Steels Limited (the “Company”) is issuing up to 35,72,000 equity shares of face value Rs. 10 each, (the “Equity Shares”) at a price of Rs. 140.00 per Equity Share, including a premium of Rs. 130.00 per Equity Share, aggregating up to Rs. 5,000.80 lakhs (the “Issue”). For further details, please see “Summary of the Issue”.

ISSUE IN RELIANCE UPON SECTION 42 OF THE COMPANIES ACT, 2013, READ WITH RULE 14 OF THE COMPANIES (PROSPECTUS AND

ALLOTMENT OF SECURITIES) RULES, 2014, AS AMENDED, AND CHAPTER VIII OF THE SECURITIES AND EXCHANGE BOARD OF

INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS AMENDED

THE ISSUE AND THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT IS BEING MADE TO QUALIFIED INSTITUTIONAL BUYERS (“QIB”) AS DEFINED UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS

AMENDED (THE “ICDR REGULATIONS”) IN RELIANCE UPON SECTION 42 OF THE COMPANIES ACT, 2013, READ WITH RULE 14 OF THE COMPANIES

(PROSPECTUS AND ALLOTMENT OF SECURITIES) RULES, 2014, AND CHAPTER VIII OF THE ICDR REGULATIONS. THIS PLACEMENT DOCUMENT IS

PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO THE

PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER THAN QIBs, BEING ENTITIES RESIDENT IN INDIA.

THIS PLACEMENT DOCUMENT WILL BE CIRULATED ONLY TO SUCH QIBs WHOSE NAMES ARE RECORDED BY OUR COMPANY PRIOR TO MAKING AN

INVITATION TO SUBSCRIBE TO EQUITY SHARES OFFERED IN THE ISSUE.

YOU ARE NOT AUTHORISED TO AND MAY NOT (1) DELIVER THIS PLACEMENT DOCUMENT TO ANY OTHER PERSON; (2) REPRODUCE THIS

PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER; OR (3) RELEASE ANY PUBLIC ADVERTISMENT OR UTILIZE ANY MEDIA, MARKETING OR

DISTRIBUTION CHANNELS OR AGENTS TO INFORM THE PUBLIC AT LARGE ABOUT THE ISSUE. ANY DISTRIBUTION OR REPRODUCTION OF THIS

PLACEMENT DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION

OF THE ICDR REGULATIONS OR OTHER APPLICABLE LAWS OF INDIA AND OTHER JURISDICTIONS.

INVESTMENTS IN EQUITY AND EQUITY-RELATED SECURITIES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT

INVEST ANY AMOUNT IN THE ISSUE UNLESS THEY ARE PREPARED TO BEAR THE RISK OF LOSING ANY PART OR ALL OF THE AMOUNT INVESTED

BY THEM. PROSPECTIVE INVESTORS ARE ADVISED TO CAREFULLY READ “RISK FACTORS” BEFORE MAKING AN INVESTMENT DECISION RELATING TO THE ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS ADVISORS ABOUT THE PARTICULAR CONSEQUENCES OF AN

INVESTMENT IN THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS PLACEMENT DOCUMENT.

All of our Company’s outstanding Equity Shares, are listed on the BSE Limited (the “BSE”) and the National Stock Exchange of India Limited (the “NSE”, and together with the BSE, the “Stock Exchanges”). The closing price of the outstanding Equity Shares on the BSE and the NSE on February 16, 2018, was Rs. 145.90 and Rs. 146.45 per Equity Share, respectively. In-principle approvals under Regulation 28(1) of the Listing Regulations (as defined hereinafter) for listing of the Equity Shares have been received from the BSE and the NSE on February 14, 2018. Applications will be made to the Stock Exchanges for obtaining final listing and trading approvals for the Equity Shares offered through the Issue. The Stock Exchanges assume no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares to trading on the Stock Exchanges should not be taken as an indication of the merits of the business of our Company or the Equity Shares.

A copy of this Placement Document (which includes disclosures prescribed under Form PAS-4 (as defined hereinafter) has been delivered to the Stock Exchanges. This Placement Document has not been reviewed by the Securities and Exchange Board of India (the “SEBI”), the Reserve Bank of India (the “RBI”), the Stock Exchanges or any other regulatory or listing authority and is intended only for use by QIBs. A copy of the Placement Document (which will include disclosures prescribed under Form PAS-4) will be filed with the Stock Exchanges in accordance with the ICDR Regulations. Our Company shall make the requisite filings with the Registrar of Companies, Punjab and Chandigarh (the “RoC”) and the SEBI within the stipulated period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014, as amended. This Placement Document has not been and will not be registered as a prospectus with the RoC, and will not be circulated or distributed to the public in India or any other jurisdiction and will not constitute a public offer in India or any other jurisdiction. The Issue is meant only for QIBs, being entities resident in India, by way of a private placement and is not an offer to the public or to any other class of investors. This Placement Document has been prepared by our Company solely for providing information in connection with the Issue. Invitations, offers and sales of the Equity Shares shall only be made pursuant to the Preliminary Placement Document together with the respective Application Form (defined hereinafter), this Placement Document and the CAN (as defined hereinafter). The distribution of this Placement Document or the disclosure of its contents to any person, other than QIBs and persons retained by QIBs to advise them with respect to their purchase of the Equity Shares, is unauthorized and prohibited. Each prospective investor, by accepting delivery of this Placement Document, agrees to observe the foregoing restrictions and make no copies of this Placement Document or any documents referred to in this Placement Document. See “Issue Procedure”.

The information on our Company’s website or any website directly or indirectly linked to our Company’s website does not form part of this Placement Document and prospective investors should not rely on such information contained in, or available through, such websites.

This Issue is being made only to eligible QIBs, being entities resident in India, and the Equity Shares in this Issue will not, in any circumstance, be

offered to persons in any country or jurisdiction, other than India. The Equity Shares have not been and will not be registered under the U.S. Securities

Act of 1933, as amended (the “U.S. Securities Act”), or the laws of any state of the United States. For further details, see “Selling Restrictions” and “Transfer Restrictions”.

This Placement Document is dated February 19, 2018.

BOOK RUNNING LEAD MANAGER

IIFL Holdings Limited

10th Floor, IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013, Maharashtra, India

http://www.vardhmansteel.com/

mailto:[email protected]

TABLE OF CONTENTS

NOTICE TO INVESTORS .................................................................................................................................... 1

REPRESENTATIONS BY INVESTORS .............................................................................................................. 3

DISCLAIMER CLAUSE OF THE STOCK EXCHANGES ................................................................................. 8

GLOSSARY OF TERMS / ABBREVIATIONS .................................................................................................... 9

DISCLOSURE REQUIREMENTS UNDER THE COMPANIES ACT .............................................................. 14

PRESENTATION OF FINANCIAL, INDUSTRY, MARKET AND OTHER DATA ....................................... 16

FORWARD-LOOKING STATEMENTS ............................................................................................................ 19

ENFORCEMENT OF CIVIL LIABILITIES ....................................................................................................... 20

RISK FACTORS .................................................................................................................................................. 21

SUMMARY OF THE BUSINESS ....................................................................................................................... 42

INDUSTRY OVERVIEW .................................................................................................................................... 46

SUMMARY OF THE ISSUE ............................................................................................................................... 54

USE OF PROCEEDS ........................................................................................................................................... 56

BUSINESS ........................................................................................................................................................... 57

CAPITALIZATION ............................................................................................................................................. 68

CAPITAL STRUCTURE ..................................................................................................................................... 69

MARKET PRICE INFORMATION .................................................................................................................... 70

MAJOR SHAREHOLDERS ................................................................................................................................ 74

DIVIDENDS ........................................................................................................................................................ 78

AUDITORS .......................................................................................................................................................... 79

SELECT FINANCIAL INFORMATION ............................................................................................................ 80

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..................................................................................................................................................... 86

FINANCIAL STATEMENTS ............................................................................................................................ 110

TAXATION ....................................................................................................................................................... 111

MANAGEMENT ............................................................................................................................................... 120

DESCRIPTION OF EQUITY SHARES ............................................................................................................ 127

REGULATIONS AND POLICIES .................................................................................................................... 131

SECURITIES MARKET IN INDIA .................................................................................................................. 133

LEGAL PROCEEDINGS ................................................................................................................................... 137

PLACEMENT AND LOCK-UP ........................................................................................................................ 140

ISSUE PROCEDURE ........................................................................................................................................ 142

SELLING RESTRICTIONS .............................................................................................................................. 152

TRANSFER RESTRICTIONS ........................................................................................................................... 153

GENERAL INFORMATION ............................................................................................................................. 154

DECLARATION ................................................................................................................................................ 156

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NOTICE TO INVESTORS

Our Company has furnished and accepts full responsibility for all of the information contained in this Placement Document and having made all reasonable enquiries, confirms, to the best of its knowledge and belief, that this Placement Document contains all information with respect to our Company and the Equity Shares, which is material in the context of the Issue. The statements contained in this Placement Document relating to our Company and the Equity Shares are, in all material respects, true and accurate and not misleading. The opinions and intentions expressed in this Placement Document with regard to our Company and the Equity Shares are honestly held, have been reached after considering all relevant circumstances, are based on information presently available to our Company and are based on reasonable assumptions. There are no other facts in relation to our Company and the Equity Shares, the omission of which would, in the context of the Issue, make any statement in this Placement Document misleading in any material respect. Further, all reasonable enquiries have been made by our Company to ascertain such facts and to verify the accuracy of all such information and statements. The Book Running Lead Manager, having made reasonable enquiries, has not separately verified all of the information contained in this Placement Document (financial, legal or otherwise) except its own information. Accordingly, neither the Book Running Lead Manager nor any of its shareholders, employees, counsel, officers, directors, representatives, agents or affiliates makes any express or implied representation, warranty or undertaking, and no responsibility or liability is accepted, by the Book Running Lead Manager, as to the accuracy or completeness of the information contained in this Placement Document or any other information supplied in connection with the Equity Shares. Each person receiving this Placement Document acknowledges that such person has neither relied on the Book Running Lead Manager nor on any of its shareholders, employees, counsels, officers, directors, representatives, agents or affiliates in connection with its investigation of the accuracy of such information or its investment decision, and each such person must rely on its own examination of our Company and the merits and risks involved in investing in the Equity Shares. Any prospective investor should not construe anything in this Placement Document as legal, business, tax, accounting or investment advice. No person is authorised to give any information or to make any representation not contained in this Placement Document and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of our Company or the Book Running Lead Manager. The delivery of this Placement Document at any time does not imply that the information contained in it is correct as at any time subsequent to its date. The distribution of this Placement Document or the disclosure of its contents without the prior consent of our Company to any person, other than QIBs whose names are recorded by our Company prior to the invitation to subscribe to the Issue (in consultation with the Book Running Lead Manager or its representatives) and those retained by QIBs to advise them with respect to their purchase of the Equity Shares is unauthorized and prohibited. Each prospective investor, by accepting delivery of this Placement Document, agrees to observe the foregoing restrictions and to make no copies of this Placement Document or any documents referred to in this Placement Document.

This Issue is being made only to eligible QIBs, being entities resident in India, and the Equity Shares in this

Issue will not, in any circumstance, be offered to persons in any country or jurisdiction, other than India.

The Equity Shares have not been and will not be registered under the U.S. Securities Act or the laws of any state of the United States, and will not be offered or sold in the United States. The Equity Shares are transferable only in accordance with the restrictions described in the sections titled “Selling Restrictions” and “Transfer

Restrictions”. Purchasers of the Equity Shares will be deemed to make the representations set forth in the sections titled “Representations by Investors” and “Transfer Restrictions”.

The distribution of this Placement Document and the issue of the Equity Shares in certain jurisdictions may be restricted by law. As such, this Placement Document does not constitute, and may not be used for or in connection with, an offer or solicitation by anyone in any country or jurisdiction, other than India. In particular, no action has been taken by our Company or the Book Running Lead Manager which would permit an Issue of the Equity Shares or distribution of this Placement Document in any country or jurisdiction, other than India. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither this Placement Document nor any Issue materials in connection with the Equity Shares may be distributed or published in or from any country or jurisdiction, other than India. See the sections titled “Selling Restrictions” and “Transfer Restrictions”. In making an investment decision, investors must rely on their own examination of our Company and the terms

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of the Issue, including the merits and risks involved. Investors should not construe the contents of this Placement Document as legal, tax, accounting or investment advice. Investors should consult their own counsel and advisors as to investment, legal, tax, accounting and related matters concerning the Issue. In addition, neither our Company nor the Book Running Lead Manager is making any representation to any offeree or purchaser of the Equity Shares regarding the legality of an investment in the Equity Shares by such offeree or purchaser under applicable legal, investment or similar laws or regulations..

Each subscriber of the Equity Shares in the Issue is deemed to have acknowledged, represented and agreed

that it is eligible to invest in our Company under Indian law, including Section 42 of the Companies Act

2013, read with Rule 14 of the PAS Rules, and Chapter VIII of the ICDR Regulations and that they are not

prohibited by the SEBI or any other statutory authority from buying, selling or dealing in securities

including the Equity Shares. Each purchaser of the Equity Shares also acknowledges that it has been

afforded an opportunity to request from our Company and review information pertaining to our Company

and the Equity Shares. The information on our Company’s website or any website directly or indirectly linked to our Company’s website i.e www.vardhmansteel.com or the website of the Book Running Lead Manager or its affiliates, does not constitute or form part of this Placement Document. Prospective investors should not rely on the information contained in, or available through such websites. This Placement Document contains summaries of certain terms of certain documents, which summaries are qualified in their entirety by the terms and conditions of such documents.

http://www.vardhmansteel.com/

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REPRESENTATIONS BY INVESTORS

References herein to “you” or “your” is to a prospective investor in the Issue. By Bidding for and/or subscribing to any Equity Shares offered in the Issue, you are deemed to have represented, warranted, acknowledged and agreed with/to the Company and the Book Running Lead Manager as follows: 1. you are an eligible QIB, as defined in Regulation 2(1)(zd) of the ICDR Regulations and not excluded

pursuant to Regulation 86 of the ICDR Regulations and/or other applicable law, having a valid and existing registration under the applicable laws and regulations of India and undertake to acquire, hold, manage or dispose of any Equity Shares that are Allocated to you in accordance with Chapter VIII of the ICDR Regulations;

2. you undertake to comply with the ICDR Regulations, the Companies Act and all other applicable laws,

including any reporting requirements prescribed under such laws; 3. you are an entity resident in India, and are not (i) an FPI, including an FII, or (ii) a multilateral or bilateral

development financial institution, or (iii) an FVCI; 4. you are eligible to invest in India under applicable laws, including the FEMA Regulations, and any

notifications, circulars or clarifications issued thereunder, and have not been prohibited by the SEBI or any other regulatory authority, from buying, selling or dealing in securities;

5. you will make all necessary filings with appropriate regulatory authorities, including the RBI, as maybe

required under applicable laws; 6. you confirm that if you are Allotted the Equity Shares pursuant to the Issue, you shall not, for a period of

one year from the date of Allotment, sell the Equity Shares so acquired except on a recognised stock exchange. Please see the section “Transfer Restrictions”;

7. you are aware that the Equity Shares have not been and will not be offered and/or sold through a prospectus

under the Companies Act, the ICDR Regulations or under any other law in force in India. Further, you are aware that this Placement Document has not been verified or affirmed by the RBI, the SEBI, the RoC, the Stock Exchanges or any other regulatory or statutory authority and is intended only for use by QIBs;

8. you are aware that this Placement Document has been filed with the Stock Exchanges for record purposes

only and has been displayed on the websites of our Company and the Stock Exchanges. Further, you are aware that the Company is required to make the requisite filings in relation to the Issue with the RoC and the SEBI within the time periods prescribed under the Companies Act and the PAS Rules;

9. you are entitled to subscribe for and acquire the Equity Shares under the laws of India that apply to you

and that you have fully observed such laws and you have necessary capacity, have obtained all necessary consents, governmental or otherwise, and authorisations and complied and shall comply with all necessary formalities, to enable you to participate in the Issue and to perform your obligations in relation thereto (including, without limitation, in the case of any person on whose behalf you are acting, all necessary consents and authorisations to agree to the terms set out or referred to in this Placement Document), and will honour such obligations;

10. you are able to purchase the Equity Shares in compliance with the legal requirements described in the

section titled “Selling Restrictions”. You have made, or are deemed to have made, as applicable, the representations set forth under sections “Selling Restrictions” and “Transfer Restrictions”;

11. you confirm that, either: (i) you have not participated in or attended any investor meetings or presentations

by our Company or its agents (“Company’s Presentations”) with regard to our Company or the Issue; or (ii) if you have participated in or attended any Company’s Presentations: (a) you understand and acknowledge that the Book Running Lead Manager may not have knowledge of any information, answers, materials, documents and statements that our Company or its agents may have made at such Company’s Presentations and are therefore unable to determine whether the information provided to you at such Company’s Presentations may have included any material misstatements or omissions, and, accordingly you acknowledge that the Book Running Lead Manager has advised you not to rely in any way on any

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information that was provided to you at such Company’s Presentations, and (b) confirm that you have not been provided any material information that was not publicly available;

12. neither our Company nor the Book Running Lead Manager nor any of its shareholders, directors, officers,

employees, counsels, representatives, agents or affiliates is making any recommendations to you or advising you regarding the suitability of an investment in the Equity Shares offered in the Issue and that participation in the Issue is on the basis that you are not and will not, up to the Allotment, be a client of the Book Running Lead Manager and that the Book Running Lead Manager or any of its shareholders, employees, counsels, officers, directors, representatives, agents or affiliates have no duties or responsibilities to you for providing the protection afforded to their clients or for providing advice in relation to the Issue and are in no way acting in a fiduciary capacity to you;

13. you are aware that our Company is required to disclose details such as your name, address and the number

of Equity Shares Allotted to you to the RoC and the SEBI in accordance with applicable laws, and you consent to such disclosures. Further, if you are one of the top ten shareholders of our Company, our Company will be required to make a filing with the RoC within 15 days of the Allotment as per Section 93 of the Companies Act, 2013;

14. you are aware that if you are Allotted more than 5% of the Equity Shares in the Issue, our Company shall

be required to disclose your name and the number of Equity Shares Allotted to you to the Stock Exchange, and they will make the same available on their websites and you consent to such disclosures;

15. you understand that all statements other than statements of historical fact included in this Placement

Document, including, without limitation, those regarding our Company’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to our Company’s business), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our Company’s present and future business strategies and environment in which our Company will operate in the future. Thus, you understand that you should not place undue reliance on forward-looking statements, which speak only as of the date of this Placement Document. You understand and acknowledge that the Company and the Book Running Lead Manager assume no responsibility to update any of the forward-looking statements contained in this Placement Document;

16. you have been provided a serially numbered copy of this Placement Document and have read this

Placement Document in its entirety, including, in particular, the sections titled “Risk Factors” and

“Forward-Looking Statements”; 17. you are aware and understand that the Equity Shares are being offered only to QIBs, being entities resident

in India, and are not being offered to the general public and the Allotment of the same shall be on a discretionary basis;

18. that in making your investment decision, (i) you have relied on your own examination of our Company,

the Equity Shares and the terms of the Issue, including the merits and risks involved, (ii) you have consulted your own independent advisors or otherwise have satisfied yourself concerning without limitation, the effects of local laws and taxation matters, (iii) you have relied solely on the information contained in this Placement Document, which has been independently prepared and provided solely by our Company, and no other disclosure or representation by our Company or any other party; (iv) you have received all information that you believe is necessary or appropriate in order to make an investment decision in respect of the Equity Shares; (v) you have made, and will continue to make, your own assessment of our Company, the Equity Shares and the terms of the Issue based solely on the information contained in this Placement Document and no other disclosure or representation by our Company, its Directors, Promoters and affiliates or any other party; and (vi) you have relied upon your own investigation and resources in deciding to invest in this Issue;

19. you are a sophisticated investor and have such knowledge and experience in financial investment and

business matters as to be capable of evaluating the merits and risks of the investment in the Equity Shares. You and any accounts for which you are subscribing the Equity Shares (i) are each able to bear the economic risk of the investment in the Equity Shares; (ii) will not look to our Company and/or the Book

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Running Lead Manager or any of their respective shareholders, employees, counsel, officers, directors, representatives, agents or affiliates for all or part of any such loss or losses that may be suffered; (iii) are able to sustain a complete loss on the investment in the Equity Shares; (iv) you have sufficient knowledge, sophistication and experience in financial and business matters so as to be capable of evaluating the merits and risk of the purchase of the Equity Shares; (v) have no need for liquidity with respect to the investment in the Equity Shares, and (vi) have no reason to anticipate any change in your or their circumstances, financial or otherwise, which may cause or require any sale or distribution by you or them of all or any part of the Equity Shares. You seek to purchase the Equity Shares in the Issue for your investment purposes and not with a view for resale or distribution;

20. you understand that our Company or the Book Running Lead Manager or any of its shareholders, directors,

officers, employees, counsels, representatives, agents or affiliates have not provided you with any tax advice or otherwise made any representations regarding the tax consequences of subscription, ownership or disposal of the Equity Shares (including but not limited to the Issue and the use of the proceeds from the Equity Shares). You will obtain your own independent tax advice and will not rely on the Book Running Lead Manager or any of its shareholders, employees, counsels, officers, directors, representatives, agents or affiliates or our Company when evaluating the tax consequences in relation to the Equity Shares (including but not limited to the Issue and the use of the proceeds from the Issue). You waive and agree not to assert any claim against the Book Running Lead Manager or any of their shareholders, employees, counsels, officers, directors, representatives, agents or affiliates or our Company with respect to the tax aspects of the Equity Shares or as a result of any tax audits by tax authorities, wherever situated;

21. that where you are acquiring the Equity Shares for one or more managed accounts, you represent and

warrant that you are authorised in writing by each such managed account to acquire the Equity Shares for each managed account and to make (and you hereby make) the representations, acknowledgements and agreements herein for and on behalf of each such account, reading the reference to “you” to include such accounts;

22. you are not a ‘promoter’ (as defined under the ICDR Regulations) of the Company or a person related to

any ‘promoter’, either directly or indirectly, and your Application does not directly or indirectly represent the Promoter(s) or Promoter Group or group companies of the Promoter(s) of our Company;

23. you have no rights under any shareholders’ agreement or voting agreement with the ‘promoter’ (as defined

under the ICDR Regulations) or a person related to any ‘promoter’, nor any veto right or right to appoint any nominee director on the Board of Directors other than the rights you may have acquired in the capacity of a lender, and where such acquisition has not and will not result in you being deemed to be a ‘promoter’, a person related to the Promoter(s) or Promoter Group or group companies of the Promoter(s) of our Company;

24. you are aware, understand and agree that you have no right to withdraw your Application after the Bid/Issue

Closing Date; 25. you are eligible, including without limitation under applicable law, to apply for and hold the Equity Shares

so Allotted and together with any securities of our Company held by you prior to the Issue. You further confirm that your aggregate holding in our Company upon the issue and Allotment shall not exceed the level permissible as per any applicable laws;

26. that the Application Form submitted by you would not at any stage result, directly or indirectly, in triggering

any requirement to make a public announcement to acquire Equity Shares in accordance with the Takeover Regulations;

27. to the best of your knowledge and belief, your aggregate holding together with other Allottees belonging

to the same group or are under common control as you, pursuant to the Allotment shall not exceed 50% of the Issue Size. For the purposes of this representation:

the expression ‘belonging to the same group’ shall have the same meaning as derived from sub-section (11) of Section 372 of the Companies Act, 1956; and

‘control’ shall have the same meaning as is assigned to it by clause 1(e) of Regulation 2 of the Takeover Regulations.

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28. you understand that the Equity Shares will, when issued, be credited as fully paid and will rank pari passu

in all respects with the existing Equity Shares including the right to receive all dividends and other distributions declared, made or paid in respect of the Equity Shares after the date of issue of the Equity Shares;

29. you are aware that (i) applications for in-principle approval, in terms of Regulation 28(1) of the Listing

Regulations, for listing and admission of the Equity Shares and for trading on the Stock Exchanges, were made and such approval has been received from the Stock Exchanges, and (ii) the application for the final listing and trading approval will be made only after Allotment. Our Company shall not be responsible for any delay or non-receipt of such final approvals or any loss arising from such delay or non-receipt;

30. you shall not undertake any trade in the Equity Shares credited to your beneficiary account until such time

that the final listing and trading approval for the Equity Shares are issued by the Stock Exchanges; 31. you are aware and understand that the Book Running Lead Manager has entered into the Placement

Agreement with our Company whereby the Book Running Lead Manager has, subject to the satisfaction of certain conditions set out therein, undertaken to use its reasonable endeavours to seek to procure subscription for the Equity Shares on the terms and conditions set forth therein;

32. you understand that the contents of this Placement Document are exclusively the responsibility of our

Company and that neither the Book Running Lead Manager nor any person acting on its behalf has or shall have any liability for any information, representation or statement contained in this Placement Document or any information previously published by or on behalf of our Company and will not be liable for your decision to participate in the Issue based on any information, representation or statement contained in this Placement Document or otherwise. By participating in the Issue, you agree to the same and confirm that the only information you are entitled to rely on, and on which you have relied in committing yourself to acquire the Equity Shares is contained in this Placement Document, such information being all that you deem necessary to make an investment decision in respect of the Equity Shares and you have neither received nor relied on any other information, representation, warranty or statement made by or on behalf of the Book Running Lead Manager or our Company or any other person and neither the Book Running Lead Manager nor our Company nor any other person will be liable for your decision to participate in the Issue based on any other information, representation, warranty or statement that you may have obtained or received;

33. you understand that the Book Running Lead Manager does not have any obligation to purchase or acquire

all or any part of the Equity Shares purchased by you in the Issue or to support any losses directly or indirectly sustained or incurred by you for any reason whatsoever in connection with the Issue, including non-performance by us of any of our respective obligations or any breach of any representations or warranties by us, whether to you or otherwise;

34. any dispute arising in connection with the Issue will be governed by and construed in accordance with the

laws of the Republic of India and the courts at Mumbai, India shall have exclusive jurisdiction to settle any disputes that may arise out of or in connection with the Issue;

35. that each of the representations, warranties, acknowledgements and agreements set forth above shall

continue to be true and accurate at all times up to and including the Allotment, listing and trading of the Equity Shares in the Issue;

36. you agree to indemnify and hold our Company and the Book Running Lead Manager harmless from any

and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, undertakings, and agreements in this section. You agree that the indemnity set forth in this section shall survive the resale of the Equity Shares by or on behalf of the managed accounts;

37. You understand that the Equity Shares have not been and will not be registered under the U.S. Securities Act or with any securities regulatory authority of any state of the United States, and unless so registered, may not be offered or sold within the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and any applicable U.S. state securities laws;

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38. you understand that our Company, the Book Running Lead Manager, its respective affiliates and others

will rely on the truth and accuracy of the foregoing representations, agreements, warranties, acknowledgements and undertakings, which are given to the Book Running Lead Manager on its own behalf and on behalf of our Company and are irrevocable and it is agreed that if any of such representations, warranties, acknowledgements and undertakings are no longer accurate, you will promptly notify our Company and the Book Running Lead Manager; and

39. you have made, or been deemed to have made, as applicable, the representations set forth in this section,

namely “Representations By Investors”.

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DISCLAIMER CLAUSE OF THE STOCK EXCHANGES

As required, a copy of this Placement Document has been submitted to the Stock Exchanges. The Stock Exchanges do not in any manner: 1. warrant, certify or endorse the correctness or completeness of any of the contents of this Placement

Document; or 2. warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges; or 3. take any responsibility for the financial or other soundness of the Company, its Promoters, its

management or any scheme or project of the Company; and it should not for any reason be deemed or construed to mean that this Placement Document has been cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquire any Equity Shares may do so pursuant to an independent inquiry, investigation and analysis and shall not have any claim against the Stock Exchanges whatsoever, by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition, whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.

9

GLOSSARY OF TERMS / ABBREVIATIONS

The following list of certain capitalized terms used in this Placement Document is intended for the convenience of the reader/prospective investor only and is not exhaustive. The terms defined in this Placement Document shall have the meaning set forth in this section and unless the context otherwise implies, references to any statute or regulations or policies shall include amendments thereto, from time to time.

Company Related Terms

Term Description

“Company” or “Issuer” or “our” or “VSSL” or “we” or “us”

Vardhman Special Steels Limited, a public limited company incorporated under the Companies Act, 1956 and having CIN L27100PB2010PLC033930.

“Articles” or “Articles of Association” or “AoA”

The articles of association of our Company, as amended from time to time

Auditors The statutory auditors of our Company, namely M/s S. S. Kothari Mehta & Company, Chartered Accountants

“Board” or “Board of Directors” The board of directors of our Company or any duly constituted committee thereof

Compliance Officer The compliance officer of our Company

Director(s) The director(s) of our Company

Equity Share(s) The equity share(s) of our Company having a face value of Rs. 10 each

Employee Stock Option Plan 2016 The employee stock option plan as approved by the Shareholders at the AGM dated September 28, 2016.

“Memorandum” or “Memorandum of Association” or “MoA”

The memorandum of association of our Company, as amended from time to time

Promoter The promoters of our Company

Promoter Group The promoter group of our Company as determined in terms of Regulation 2(1)(zb) of the ICDR Regulations

Registered & Corporate Office The registered and corporate office of our Company is located at Vardhman Premises, Chandigarh Road, Ludhiana - 141010, Punjab, India

Scheme The Scheme of Arrangement and Demerger between Vardhman Textiles Limited and our Company, as approved by Punjab and Haryana High Court Chandigarh vide its order dated January 12, 2011.

Shareholder(s) Shareholders of our Company

Industry Related Terms

Term Description

2W Two-wheeler(s)

4W Four-wheeler(s)

LCV Light commercial vehicle(s)

MHCV Medium-heavy commercial vehicle(s)

OEM Original equipment manufacturer(s)

Issue Related Terms

Term Description

“Allocated” or “Allocation” The allocation of the Equity Shares following the determination of the Issue Price to QIBs on the basis of the Application Form submitted by them, by our Company in consultation with the Book Running Lead Manager and in compliance with Chapter VIII of the ICDR Regulations

“Allot” or “Allotted” or “Allotment”

Unless the context otherwise requires, the issue and allotment of the Equity Shares to be issued pursuant to the Issue

Allottees QIBs to whom the Equity Shares are issued and Allotted

10

Term Description

“Application Form” or “Bid-Cum Application Form”

The form (including any revisions thereof) pursuant to which a QIB shall submit a Bid for the Equity Shares in the Issue

Application An offer by a QIB pursuant to the Application Form for subscription of the Equity Shares under the Issue

Audited Financial Statements The audited financial statements of the Company, as of and for the financial years ended March 31, 2015 and 2016, prepared in accordance with Indian GAAP and the Companies Act, and the audited financial statement of the Company as of and for the financial year ended March 31, 2017, prepared in accordance with Ind AS and the Companies Act

Bid(s) Indication of interest of a Bidder, including all revisions and modifications thereto, as provided in the Application Form, to subscribe for the Equity Shares in the Issue

Bid/Issue Closing Date February 19, 2018

Bid/Issue Opening Date February 14, 2018

Bid/Issue Period The period between the Bid/Issue Opening Date and the Bid/Issue Closing Date inclusive of both days, during which prospective Bidders can submit their Bids

Bidder(s) Any prospective investor, being a QIB, who makes a Bid by submitting an Application Form in accordance with the provisions of the Preliminary Placement Document

“Book Running Lead Manager” IIFL Holdings Limited

“Confirmation of Allocation Note” or “CAN”

The note or advice or intimation sent to QIBs confirming the Allocation to such QIBs after discovery of the Issue Price and requesting payment of the entire applicable Issue Price for the Equity Shares Allocated to such QIBs

Closing Date The date on which Allotment shall be made, i.e. on or about Wednesday, February 21, 2018

Cut-off Price The minimum price at which the Issue Price shall be determined by our Company in consultation with the Book Running Lead Manager

Designated Date The date of credit of the Equity Shares to the Allottee’s demat account, as applicable to the respective Allottees

Escrow Account

The bank account opened by our Company with the Escrow Collection Bank pursuant to the Escrow Agreement, into which the application monies received towards subscription of the Equity Shares shall be deposited by the QIBs

Escrow Agreement Agreement dated February 14, 2018, entered into amongst our Company, the Escrow Collection Bank and the Book Running Lead Manager for collection of the Bid Amounts and for remitting refunds, if any, of the amounts collected, to the Bidders

Escrow Collection Bank Yes Bank Limited

Financial Statements The Audited Financial Statements and the Interim Financial Results

Floor Price The floor price for the Issue, as calculated in accordance with Regulation 85 of the ICDR Regulations, is Rs. 146.11 per Equity Share with reference to February 14, 2018, as the Relevant Date. In accordance with the Shareholders’ special resolution dated December 6, 2017, and Regulation 85(1) of the ICDR Regulations, the Board may at its absolute discretion, offer a discount of up to 5.00% to the Floor Price.

Interim Financial Results The unaudited financial results of the Company for the quarter and nine-months ended December 31, 2017, prepared in accordance with Ind AS and the provisions of the Listing Regulations

Issue The offer and placement of the Equity Shares to QIBs, pursuant to Section 42 of the Companies Act, 2013, read with Rule 14 of the PAS Rules, and Chapter VIII of the ICDR Regulations

Issue Price Rs. 140.00 per Equity Share

Issue Size The issue of up to 35,72,000 Equity Shares aggregating up to Rs. 5,000.80 lakhs

Mutual Fund A mutual fund registered with the SEBI under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996

11

Term Description

Mutual Fund Portion 10% of the Equity Shares proposed to be Allotted in the Issue, which is available for Allocation to Mutual Funds

Pay-in Date The last date specified in the CAN sent to the Bidders, by which the Issue Price for the Equity Shares Allocated has to be paid

Placement Agreement The placement agreement dated February 14, 2018, between our Company and the Book Running Lead Manager

Placement Document This placement document dated February 19, 2018, issued by our Company in accordance with the provisions of Section 42 of Companies Act, 2013, read with Rule 14 of the PAS Rules, and Chapter VIII of the ICDR Regulations

Preliminary Placement Document The preliminary placement document dated February 14, 2018, issued by our Company in accordance with the provisions of Section 42 of Companies Act, 2013, read with Rule 14 of the PAS Rules, and Chapter VIII of the ICDR Regulations

“QIB” or “Qualified Institutional Buyers”

A qualified institutional buyer as defined under Regulation 2(1)(zd) of the and not excluded pursuant to Regulation 86(1)(b) of the ICDR Regulations

QIP Qualified institutions placement under Chapter VIII of the ICDR Regulations

Relevant Date February 14, 2018, being the date of the meeting in which the Board, decided to open the Issue

Stock Exchanges The BSE and NSE

Conventional and General Terms/Abbreviations

Term Description

AGM The annual general meeting of the Shareholders

AIF Alternative investment funds as defined in the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012

AS Accounting standards issued by the Institute of Chartered Accountants of India

AY Assessment year

BSE BSE Limited

Calendar Year Period of 12 months ended December 31 of that particular year

CARO The Companies (Auditor’s Report) Order, 2015

Category III FPIs An FPI registered as a category III foreign portfolio investor under the FPI Regulations

CPC The Code of Civil Procedure, 1908

CIN Corporate identity number

CIT Commissioner of Income Tax

Companies Act The Companies Act, 2013 and the Companies Act, 1956, as the context requires

Companies Act, 1956 The Companies Act, 1956, to the extent not repealed

Companies Act, 2013 The Companies Act, 2013, as amended and the rules and clarifications thereunder, to the extent notified

Depositories Act The Depositories Act, 1996

Depository A depository registered with the SEBI under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996

Depository Participant A depository participant as defined under the Depositories Act, 1996

DIN Director identification number

EGM An extraordinary general meeting of the shareholders

Equity Listing Agreement The erstwhile listing agreement as had previously been entered into by our Company with each of the Stock Exchanges for the listing of the Equity Shares. In accordance with the requirements of Regulation 109 of the Listing Regulations, a listed entity which has previously entered into agreement(s) with recognised stock exchange(s)to list its securities is required to execute

12

Term Description

the Uniform Listing Agreement with such stock exchange(s) within six months of the date of notification of the Listing Regulations.

FDI Foreign direct investment

FEMA The Foreign Exchange Management Act, 1999 and the rules, regulations, notifications and circulars issued thereunder

FEMA Regulations The Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017

FII(s) Foreign institutional investors as defined under the FPI Regulations

FII Regulations The Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995

“Financial Year” or “Fiscal” Period of 12 months ended March 31 of that particular year, unless otherwise stated

FPI(s) Foreign portfolio investors as defined under the FPI Regulations and includes a person who has been registered under the FPI Regulations. Any FII who holds a valid certificate of registration is deemed to be an FPI till the expiry of the block of three years for which fees have been paid as per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995

FPI Regulations The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014

Form PAS-4 The Form PAS-4 prescribed under the PAS Rules

FVCI A foreign venture capital investor as defined and registered with the SEBI under the Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000 registered with the SEBI under the applicable laws in India

GAAP Generally accepted accounting principles

GDP Gross domestic product

“Government” or “GoI” The Government of India, unless otherwise specified

ICAI Institute of Chartered Accountants of India

ICDR Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

IFRS International Financial Reporting Standards of the International Accounting Standards Board

IND AS Indian Accounting Standards (Ind AS) 101 “First-time Adoption of Indian Accounting Standards” as notified by the Ministry of Corporate Affairs, Government, on February 25, 2011

India The Republic of India

Indian GAAP The generally accepted accounting principles followed in India

Insider Trading Regulations Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015

ISIN International Securities Identification Number

IT Information technology

IT Act The Income Tax Act, 1961

ITAT Income Tax Appelate Tribunal

Listing Regulations The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 as notified by the SEBI, on September 2, 2015.

MCA Ministry of Corporate Affairs

NRI Non-resident Indian, being an individual resident outside India who is a citizen of India or is an ‘overseas citizen of India’ cardholder, within the meaning of Section 7(A) of the Citizenship Act, 1955

NSE National Stock Exchange of India Limited

p.a. Per annum

P/E Ratio Price/Earnings Ratio

PAN Permanent Account Number

PAS Rules The Companies (Prospectus and Allotment of Securities) Rules, 2014

RBI The Reserve Bank of India

13

Term Description

RoC The Registrar of Companies, Punjab and Chandigarh

Re./ Rs./ Rupee(s)/ ₹ The legal currency of India

RTGS Real-Time Gross Settlement

R&D Research and development

SC Supreme Court of India

SCRA The Securities Contracts (Regulation) Act, 1956

SCRR The Securities Contracts (Regulation) Rules, 1957

SEBI The Securities and Exchange Board of India

SEBI Act The Securities and Exchange Board of India Act, 1992

STT Securities transaction tax

Takeover Regulations The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

Uniform Listing Agreement The uniform listing agreement as notified by the SEBI, on October 13, 2015. Our Company has entered into the uniform listing agreement for continuing the listing of its Equity Shares with each of the Stock Exchanges pursuant to requirements of Regulation 109 of the Listing Regulations.

Unpublished Price Sensitive Information

Unpublished price sensitive information as defined in the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015

“USA” or “US” or United States United States of America

US$/U.S. dollar/USD United States Dollars

VCF A Venture Capital Fund as defined and registered with SEBI under the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996

14

DISCLOSURE REQUIREMENTS UNDER THE COMPANIES ACT

The table below sets out the disclosure requirements as provided in Form PAS-4 under the PAS Rules and the

relevant pages in this Placement Document where these disclosures, to the extent applicable, have been provided.

# Disclosure Requirement Relevant Page of

This Document

1. GENERAL INFORMATION

a. Name, address, website and other contact details of the company indicating both registered office and corporate office;

Cover Page

b. Date of incorporation of the company; 154

c. Business carried on by the company and its subsidiaries with the details of branches or units, if any;

57

d. Brief particulars of the management of the company; 120

e. Names, addresses, DIN and occupations of the directors; 120

f. Management’s perception of risk factors; 21

g. Details of default, if any, including therein the amount involved, duration of default and present status, in repayment of –

(i) statutory dues; 142

(ii) debentures and interest thereon; 142

(iii) deposits and interest thereon; 142

(iv) loan from any bank or financial institution and interest thereon. 142

h. Names, designation, address and phone number, email ID of the nodal / compliance officer of the company, if any, for the private placement offer process;

155

2. PARTICULARS OF THE OFFER

a. Date of passing of board resolution; 154

b. Date of passing of resolution in the general meeting, authorizing the offer of securities; 154

c. Kinds of securities offered (i.e. whether share or debenture) and class of security; Cover Page and 54

d. Price at which the security is being offered including the premium, if any, along with justification of the price;

Cover Page and 54

e. Name and address of the valuer who performed valuation of the security offered; Not Applicable

f. Amount which the company intends to raise by way of securities; Cover Page and 54

g. Terms of raising of securities:

(i) Duration, if applicable; Not Applicable

(ii) Rate of dividend; or Not Applicable

(iii) Rate of interest; Not Applicable

(iv) Mode of payment; and Not Applicable

(v) Repayment; Not Applicable

h. Proposed time schedule for which the offer letter is valid; 10

i. Purposes and objects of the offer; 56

j. Contribution being made by the promoters or directors either as part of the offer or separately in furtherance of such objects;

56

k. Principle terms of assets charged as security, if applicable; Not Applicable

3. DISCLOSURES WITH REGARD TO INTEREST OF DIRECTORS, LITIGATION ETC.

i. Any financial or other material interest of the directors, promoters or key managerial personnel in the offer and the effect of such interest in so far as it is different from the interests of other persons.

56

ii. Details of any litigation or legal action pending or taken by any Ministry or Department of the Government or a statutory authority against any promoter of the offeree company during the last three years immediately preceding the year of the circulation of the offer letter and any direction issued by such Ministry or Department or statutory authority upon conclusion of such litigation or legal action shall be disclosed.

139

iii. Remuneration of directors (during the current year and last three financial years). 123

iv. Related party transactions entered during the last three financial years immediately preceding the year of circulation of offer letter including with regard to loans made or, guarantees given or securities provided.

126

v. Summary of reservations or qualifications or adverse remarks of auditors in the last five financial years immediately preceding the year of circulation of offer letter and of their impact on the financial statements and financial position of the company and the corrective steps taken and proposed to be taken by the company for each of the said reservations or qualifications or adverse remark.

106

vi. Details of any inquiry, inspections or investigations initiated or conducted under the Companies Act, 2013 or any previous company law in the last three years immediately

139

15

# Disclosure Requirement Relevant Page of

This Document

preceding the year of circulation of offer letter in the case of company and all of its subsidiaries. Also if there were any prosecutions filed (whether pending or not) fines imposed, compounding of offences in the last three years immediately preceding the year of the offer letter and if so, section- wise details thereof for the company and all of its subsidiaries.

vii. Details of acts of material frauds committed against the company in the last three years, if any, and if so, the action taken by the company.

139

4. FINANCIAL POSITION OF THE COMPANY

a. the capital structure of the company in the following manner in a tabular form-

(i)(a)

the authorized, issued, subscribed and paid up capital (number of securities, description and aggregate nominal value);

69

(b) size of the present offer; 69

(c) paid up capital: (A) after the offer; (B) after conversion of convertible instruments (if applicable).

69

(d) share premium account (before and after the offer). 69

(ii) the details of the existing share capital of the issuer company in a tabular form, indicating therein with regard to each allotment, the date of allotment, the number of shares allotted, the face value of the shares allotted, the price and the form of consideration.

69

Provided that the issuer company shall also disclose the number and price at which each of the allotments were made in the last one year preceding the date of the offer letter separately indicating the allotments made for considerations other than cash and the details of the consideration in each case.

69

b. Profits of the company, before and after making provision for tax, for the three financial years immediately preceding the date of circulation of offer letter.

80

c. Dividends declared by the company in respect of the said three financial years; interest coverage ratio for last three years (Cash profit after tax plus interest paid/interest paid).

78

d. A summary of the financial position of the company as in the three audited balance sheets immediately preceding the date of circulation of offer letter.

80

e. Audited Cash Flow Statement for the three years immediately preceding the date of circulation of offer letter.

80

f. Any change in accounting policies during the last three years and their effect on the profits and the reserves of the company.

107

5. A DECLARATION BY THE DIRECTORS THAT

a. the company has complied with the provisions of the Act and the rules made thereunder. 157

b. the compliance with the Act and the rules does not imply that payment of dividend or interest or repayment of debentures, if applicable, is guaranteed by the Central Government.

157

c. the monies received under the offer shall be used only for the purposes and objects indicated in the Offer letter.

157

16

PRESENTATION OF FINANCIAL, INDUSTRY, MARKET AND OTHER DATA

Certain Conventions

In this Placement Document, unless otherwise specified or the context otherwise indicates or implies, references to “you”, “your”, “offeree”, “purchaser”, “subscriber”, “recipient”, “investors”, “prospective investors” and “potential investor” are to the prospective investors of Equity Shares in the Issue, and references to the “Issuer” or “our” or “our Company” or “us” or “VSSL” or “we”, are to the Vardhman Special Steels Limited. References in this Placement Document to “India” are to the Republic of India and its territories and possessions and the “Government” or the “central government” or the “state government” are to the Government of India, central or state, as applicable. References to the singular also refer to the plural and one gender also refers to any other gender, wherever applicable.

Financial and Other Information

Our audited financial statements as of and for the financial years ended March 31, 2015 and 2016, prepared in accordance with Indian GAAP and the Companies Act, and our audited financial statement as of and for the financial year ended March 31, 2017, prepared in accordance with Ind AS (along with comparatives for the year ended March 31, 2016, with a transition date as at April 1, 2015) and the Companies Act (collectively, the “Audited Financial Statements”), together with the respective audit reports issued by the Auditors thereon, have been included in this Placement Document. See “Financial Statements”. Pursuant to a meeting of its Board on February 3, 2018, our Company has adopted and filed with the Stock Exchanges, the unaudited financial results for the quarter and nine-months ended December 31, 2017, prepared in accordance with Ind AS and the provisions of the Listing Regulations (the “Interim Financial Results”). The Auditors have conducted a limited review of the Interim Financial Results, which together with the report issued by the Auditors thereon, have also been included in this Placement Document. For further information, please refer to the Interim Financial Results included in the section titled “Financial Statements” in this Placement Document. The Interim Financial Results, together with the Audited Financial Statements, are referred to hereinafter as the “Financial Statements”). The Interim Financial Results are presented in a form specified under the requirements of the Listing Regulations, and are not comparable to the presentation of our Audited Financial Statements, included elsewhere in this Placement Document. Accordingly, investors are cautioned against placing undue reliance on the Interim Financial Results for their investment decision. Our Company has prepared its Financial Statements in Rupees in accordance with Indian GAAP, Ind AS, the Companies Act, as applicable, and have been audited or reviewed, as applicable, by the Auditors in accordance with the applicable generally accepted auditing standards in India prescribed by the ICAI. The Financial Statements prepared in accordance with Indian GAAP and Ind AS differ in certain important aspects from U.S. GAAP or IFRS and other accounting principles with which prospective investors may be familiar in other countries. We have not attempted to quantify the impact of U.S. GAAP or IFRS on the financial data included in this Placement Document, nor do we provide a reconciliation of our Financial Statements to those of U.S. GAAP or IFRS. Accordingly, the degree to which the Financial Statements prepared in accordance with Indian GAAP and Ind AS included in this Placement Document will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian GAAP and Ind AS. Any reliance by persons not familiar with Indian GAAP or Ind AS on the financial disclosures presented in this Placement Document should accordingly be limited. In this Placement Document, references to “US$”, “USD” and “U.S. dollars” are to the legal currency of the United States and references to, “Rs.” , “₹” and “Rupees” are to the legal currency of India. References to “lakhs” and “crores” in this Placement Document are to the following:

one lakh represents 100,000 (one hundred thousand); and

one crore represents 10,000,000 (ten million).

17

In this Placement Document, certain monetary thresholds have been subjected to rounding adjustments; accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them. The fiscal year of our Company commences on April 1 of each calendar year and ends on March 31 of the succeeding calendar year. Unless otherwise stated, references in this Placement Document to a particular year are to the calendar year ended on December 31, and to a particular “fiscal year” or “financial year” are to the 12 months ended on March 31.

Industry and Market Data

Information regarding market position, growth rates, other industry data and certain industry forecasts pertaining to the businesses of our Company contained in this Placement Document consists of estimates based on data reports compiled by government bodies, data reports compiled by professional organisations and analysts, data from other external sources and knowledge of the markets in which we compete. Unless stated otherwise, the statistical information included in this Placement Document relating to the industry in which we operate has been reproduced from various trade, industry and government publications and websites. This data is subject to change and cannot be verified with certainty due to limits on the availability and reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. Neither our Company nor the Book Running Lead Manager has independently verified this data and do not make any representation regarding accuracy or completeness of such data. Our Company takes responsibility for accurately reproducing such information but accept no further responsibility in respect of such information and data. In many cases, there is no readily available external information (whether from trade or industry associations, government bodies or other organizations) to validate market-related analyses and estimates, so our Company has relied on internally developed estimates. The information and publications used to prepare the Industry section in this Placement Document is based on information as of a specific date and may no longer be current or reflect current trends. Finally, the sources and publications used to prepare this information may also base their information on estimates, projections, forecasts and assumptions that may prove to be incorrect. Accordingly, investors should not place undue reliance on, or base their investment decision on, any such information included in this Placement Document.

The extent to which the market and industry data used in this Placement Document is meaningful depends

on the reader’s familiarity with and understanding of the methodologies used in compiling such data.

Exchange Rate Information

Fluctuations in the exchange rate between the Rupee and foreign currency will affect the foreign currency equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the conversion into foreign currency of any cash dividends paid in Rupees on the Equity Shares.

The following table sets forth, for the periods indicated, information with respect to the exchange rate between the Rupee and the U.S. dollar (in Rupees per U.S. dollar), for the periods indicated.

(Rs. per US$)

Period Period End Average* High* Low*

Fiscal

2017 64.84 67.09 68.72 64.84

2016 66.33 65.46 68.78 62.16

2015 62.59 61.15 63.75 58.43

Month Ended

January 31, 2018 63.69 63.64 63.98 63.35

December 31, 2017 63.93 64.24 64.54 63.93

November 30, 2017 64.43 64.86 65.52 64.41

October 31, 2017 64.77 65.08 65.55 64.76

September 30, 2017 65.36 64.44 65.76 63.87

August 31, 2017 64.02 63.97 64.24 63.63

18

Period Period End Average* High* Low*

Quarter Ended

December 31, 2017 63.93 64.74 65.55 63.93

September 30, 2017 65.36 64.29 65.76 63.63

June 30, 2017 64.74 64.46 65.04 64.00

Source: www.rbi.org.in

*Note:

1. If the RBI reference rate is not available on a particular date due to a public holiday, exchange rate of the

previous working day has been disclosed;

2. No representation is made that the Rupee amounts actually represent such U.S. Dollar amounts or could

have been, or could be, converted into U.S. Dollars at any particular rate, the rates indicated as above, or

at all; and

3. Exchange rates are based on the RBI reference rates and rounded off to two decimal places.

The exchange rate on February 16, 2018 was Rs. 63.91 per US$ 1.

19

FORWARD-LOOKING STATEMENTS

All statements contained in this Placement Document that are not statements of historical fact constitute ‘forward-looking statements’. Investors can generally identify forward-looking statements by terminology such as ‘aim’, ‘anticipate’, ‘are likely’ ‘believe’, ‘continue’, ‘can’, ‘could’, ‘estimate’, ‘expect’, ‘expected to’, ‘intend’, ‘is likely’, ‘may’, ‘objective’, ‘plan’, ‘potential’, ‘project’, ‘pursue’, ‘shall’, ‘should’, ‘will’, ‘will achieve’, ‘will continue’, ‘will likely result’, ‘would’, or other words or phrases of similar import. Similarly, statements that describe the strategies, objectives, plans or goals of our Company are also forward-looking statements. However, these are not the exclusive means of identifying forward-looking statements. All statements regarding our Company’s expected financial conditions, results of operations, business plans and prospects are forward-looking statements. These forward-looking statements include statements as to our Company’s business strategy, planned projects, revenue and profitability (including, without limitation, any financial or operating projections or forecasts), new business and other matters discussed in this Placement Document that are not historical facts. These forward-looking statements contained in this Placement Document (whether made by our Company or any third party), are predictions and involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of our Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. All forward-looking statements are subject to risks, uncertainties and assumptions about our Company that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause the actual results, performances and achievements of our Company to be materially different from any of the forward-looking statements include, among others:

significant dependence and interruptions at manufacturing facility;

dependence on a limited number of clients, and a loss of or significant decrease in business from them;

fluctuation in the prices of raw materials;

slowdown in end-user industries;

failure in implementing our strategies;

inability to accurately forecast demand for our products and plan production schedules in advance;

volatility in the cost and availability of raw materials;

general, political, social and economic conditions in India and elsewhere;

inability to attract or retain senior management and key managerial personnel;

exchange rate fluctuation;

changing laws, rules, regulations, Government policies and legal uncertainties; and

slowdown in economic growth in India or the other countries in which we operate. Additional factors that could cause actual results, performance or achievements of our Company to differ materially include, but are not limited to, those discussed under the sections titled “Risk Factors”, “Industry

Overview”, “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. By their nature, market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains, losses or impact or net interest income and net income could materially differ from those that have been estimated, expressed or implied by such forward-looking statements or other projections. The forward-looking statements contained in this Placement Document are based on the beliefs of the management, as well as the assumptions made by, and information currently available to, the management of our Company. Although our Company believes that the expectations reflected in such forward-looking statements are reasonable at this time, it cannot assure investors that such expectations will prove to be correct. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. In any event, these statements speak only as of the date of this Placement Document or the respective dates indicated in this Placement Document, and neither our Company nor the Book Running Lead Manager undertakes any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. If any of these risks and uncertainties materialize, or if any of our Company’s underlying assumptions prove to be incorrect, the actual results of operations or financial condition of our Company could differ materially from that described herein as anticipated, believed, estimated or expected. All subsequent forward-looking statements attributable to our Company are expressly qualified in their entirety by reference to these cautionary statements.

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ENFORCEMENT OF CIVIL LIABILITIES

Our Company is a limited liability public company incorporated under the laws of India. The majority of our Company’s Directors and key managerial personnel are residents of India and all or a substantial portion of the assets of our Company and such persons are located in India. As a result, it may not be possible for investors to affect service of process upon our Company or such persons in India, or to enforce judgments obtained against such parties in courts outside of India. India is not a signatory to any international treaty in relation to the recognition or enforcement of foreign judgments. However, recognition and enforcement of foreign judgments is provided for under Sections 13, 14 and 44A of the Code of Civil Procedure, 1908, as amended (the “CPC”). Section 13 of the CPC provides that a foreign judgment shall be conclusive regarding any matter directly adjudicated upon between the same parties or parties litigating under the same title, except (i) where the judgment has not been pronounced by a court of competent jurisdiction, (ii) where the judgment has not been given on the merits of the case, (iii) where it appears on the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable, (iv) where the proceedings in which the judgment was obtained were opposed to natural justice, (v) where the judgment has been obtained by fraud, or (vi) where the judgment sustains a claim founded on a breach of any law then in force in India. A foreign judgment which is conclusive under Section 13 of the CPC may be enforced either by a fresh suit upon the judgment or by proceedings in execution. Pursuant to Section 14 of the CPC, an Indian court shall, on production of any document purporting to be a certified copy of a foreign judgment, presume that the judgment was pronounced by a court of competent jurisdiction unless the contrary appears on the record. However, such presumption may be displaced by proving want of jurisdiction. Section 44A of the CPC provides that where a foreign judgment has been rendered by a superior court, within the meaning of such section, in any country or territory outside India which the Government of India has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the CPC is applicable only to monetary decrees not being of the same nature as of any amounts payable in respect of taxes, other charges of a like nature or in respect of a fine or other penalties and does not apply to arbitration awards. The United Kingdom, Singapore and Hong Kong among other jurisdictions have been declared by the Government to be reciprocating territories for the purposes of Section 44A of the CPC but the United States has not been so declared. A judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings in execution. The suit must be brought in India within three years from the date of the foreign judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with public policy of India or Indian practice. Further, any judgment or award for payment of amounts denominated in a foreign currency would be converted into Indian Rupees on the date of such judgment or award and not on the date of payment which could also increase risks relating to foreign exchange. A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI to repatriate outside India any amount recovered. Any such amount may be subject to income tax in accordance with applicable law.

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RISK FACTORS

This offering and an investment in Equity Shares involve a high degree of risk. This section describes the risks

that we currently believe may materially affect our business and operations. You should carefully consider the

following, in addition to any forward-looking statements and the cautionary statements in this Placement

Document and the other information contained in this Placement Document, before making any investment

decision relating to the Equity Shares. Prospective investors should read this section in conjunction with the

sections ‘Business’, ‘Industry Overview’ and ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ as well as other financial and statistical information contained in this Placement

Document. Prospective investors should carefully consider the risks and uncertainties described below, in

addition to the other information contained in this Placement Document before making any investment decision

relating to our Equity Shares. The occurrence of any of the following events, or the occurrence of other risks that

are not currently known or are now deemed immaterial, could cause our business, results of operations, cash

flows, financial condition and prospects to suffer and could cause the market price of our Equity Shares to decline

or fall significantly and you may lose all or part of your investment.

The risks described below are not the only ones relevant to us or the Equity Shares. Additional risks that may be

unknown to us and some risks that we do not currently believe to be material could subsequently turn out to be

material. Although we seek to mitigate or minimize these risks, one or more of a combination of these risks could

materially and adversely impact our business, financial condition and results of operations. Investors should pay

particular attention to the fact that our Company is an Indian company and is subject to a legal and regulatory

regime which in some respects may be different from that applicable in other countries. Investors should consult

tax, financial and legal advisors about the particular consequences of an investment in the Issue.

Unless otherwise indicated, all financial information included in this section has been derived from our Audited

Financial Statements and the Interim Financial Results, included elsewhere in this Placement Document.

Risks relating to our Business Operations

Our business is significantly dependent on our manufacturing facility, and any loss or shutdown of operations

at our manufacturing facility may have a material adverse effect on our business, financial condition, results

of operations and cash flows.

All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. Our manufacturing facility is subject to operating risks, such as (i) the risk of substantial disruption or shutdown due to breakdowns or failure of equipment, natural disasters, storms, fires, explosions, earthquakes, floods and other catastrophic events, which could cause power interruptions and water shortages, actual, potential or suspected epidemic outbreaks, terrorist attacks and wars, labor disputes, strikes, lock-outs, loss of services of our external contractors, and industrial accidents, (ii) performance below expected levels of output or efficiency, and (iii) obsolescence. Our manufacturing facility is also subject to operating risks arising from any failure to comply with the directives of relevant government authorities or any changes in governmental regulations affecting our business and our facilities, such as any change in the zoning of the land on which our manufacturing facility is located into a residential or other non-industrial use, which could lead to a loss of licenses, certifications, permits and the ability to continue operating our current manufacturing facility. Furthermore, because our only manufacturing facility is located in Ludhiana, Punjab, the risk of substantial disruption or shutdown due to a single significant natural calamity or other catastrophic event is more pronounced. Our facility and equipment would be difficult and costly to replace on a timely basis. Moreover, catastrophic events could also destroy any inventory located at our facility. If there is any prolonged disruption or shutdown of operations at our manufacturing facility, we may not be able to replace the equipment or inventories, or use different facilities to continue our operations in a timely and cost-effective manner or at all. We may not be able to recover from damages or interruptions caused to our manufacturing facility in a timely manner or at all. Further, our manufacturing facility contain both locally procured and imported machinery and equipment. Any non-availability and/or delay of spare parts or skilled personnel to maintain aforesaid machinery and equipment could result in disruptions to our production processes. The occurrence of any such event could result in the temporary or long-term closure of our manufacturing facility, severely disrupt our business operations and materially and adversely affect our business, results of operations, financial condition and cash flows.

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We derive a significant portion of our revenue from a few major customers. We do not have long term

contractual arrangements with any such customers, and the loss of one or more of them or a reduction in their

demand for our products could adversely affect our business, results of operations, financial condition and

cash flows.

We currently generate a significant portion of our revenues from limited number of major customers. For the nine months ended December 31, 2017, and Fiscal 2017, our top 10 customers contributed 46.71% and 46.33%, of our total revenues from operations, respectively. Further, we currently do not have long-term contractual arrangements with any of our significant customers, and conduct business with them on the basis of purchase orders that are placed from time to time. Our reliance on a select group of customers may constrain our ability to negotiate our arrangements, which may have an impact on our profit margins and financial performance. Although we have long-standing relationships with these customers, failure to meet customer requirements could lead to penalties, damages and cancellation/ non-renewal of purchase orders that could result in the loss of any of these customers or a significant reduction in demand which could have an adverse effect on our business, results of operations and financial condition. Further, any loss of one or more of such customer or a reduction in the demand for our products or any adverse impact on the business of our customers could adversely impact our revenues. We cannot assure you that we will be able to maintain historic levels of business from our significant customers, or that we will be able to significantly reduce customer concentration in the future. In addition, as a consequence of our reliance on these major customers, any adverse change in their financial condition may also have an adverse effect on our business.

We rely on our raw material suppliers for our business, which exposes us to risks associated with volatility or

fluctuations in prices of raw materials, and reductions in the availability of raw material supplies could

materially disrupt our operations and financial position.

The principal raw materials we use to manufacture our products include shredded scrap, sponge iron, directly reduced iron, pig iron, mild steel turning boring and various types of ferrous alloys. These raw materials have historically been available from a number of independent suppliers, although we cannot assure you that this will continue to be the case in the future. Pricing volatility for raw materials or commodities or an increase in the price of key raw materials could result in increased costs and may significantly affect our financial condition, results of operations and cash flows. For instance, the prices of graphite electrodes have significantly increased recently. In the recent past, India has experienced fluctuating wholesale price inflation as compared to historical levels due to the global economic downturn. An increase in inflation in India could cause a rise in the price of raw materials and wages, or any other expenses that we incur. If this trend continues, we may be unable to accurately estimate or control our costs of production and this could have an adverse effect on our business and results of operations. While we continue to pursue global sourcing and cost-reduction initiatives, any further increase in the prices of raw materials, to the extent that such increases cannot be passed on to our customers, could severely impact demand and affect our financial condition. We may be adversely affected by fluctuations in the price of any of the aforesaid or other raw materials that have been subject to historical periods of rapid and significant price movements. Price volatility for steel and other raw materials contributes to a difficulty in managing the costs of raw materials. Increasing costs for raw material supplies will increase our production costs and affect our margins if we are unable to pass the higher production costs on to our customers in the form of price increases. A reduction in, or lack of availability of, raw materials or interruptions in the supply chain could also impact our profitability to the extent we are required to pay higher prices for, or are unable to secure adequate supplies of, the necessary raw materials. If we are unable to manage price volatility of raw materials or are unable to obtain adequate supplies of raw materials in a timely manner or at prices that we can pass on to our customers, our business could be interrupted and our results of operations and cash flows could be materially and adversely affected. Furthermore, the ability of suppliers to deliver raw materials in a timely manner and in sufficient quantities could be restricted, in part due to certain industry issues faced by suppliers.

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Underutilization of our existing manufacturing capacities may adversely affect our business, results of

operations and financial condition.

All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. At the aforesaid facility, we have set up an advanced electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA. We cannot assure that we shall be able to utilize our existing manufacturing facility to its full capacity or up to an optimum capacity, and non-utilization of the same may lead to loss of profits or can result in losses, and may adversely affect our business, results of operations and financial condition. Moreover, even the use of our existing capacities is subject to several variables, including inter alia, availability of raw material, power, water, proper working of machinery, orders in hand, supply/demand and manpower.

Our inability to accurately forecast demand or price for our products and manage our inventory may have an

adverse effect on our business, results of operations and financial condition. Our business depends on our estimate of the demand for our products from customers and on the basis of purchase orders that are placed from time to time. A significant number of our customers operate within the automotive sector, and our products find end-use in a host of automotive components including, inter alia, axles, gears, springs and shafts. The demand for the products manufactured by our customers is linked to a variety of factors, including customers’ attempts to manage their inventory, design changes, changes in their product mix, manufacturing strategy and growth strategy, and macroeconomic factors affecting the economy in general and our customers in particular. While our customers may share annual or quarterly forecasts with us, we do not have any recourse against our customers in the event of a reduction in the forecasted volume. If we underestimate demand or have inadequate capacity due to which we are unable to meet the demand for our products, we may manufacture fewer quantities of products than required, which could result in the loss of business. While we forecast the demand and price for our products and accordingly plan our production volumes, any error in our forecast could result in a reduction in our profit margins and surplus stock, which may result in additional storage cost and such surplus stock may not be sold in a timely manner, or at all. At times when we have overestimated demand, we may have incurred costs to build capacity or purchased more raw materials and manufactured more products than required. Our inability to accurately forecast demand for our products and manage our inventory may have an adverse effect on our business, results of operations and financial condition.

A significant portion of our products are sold to tier-I suppliers that cater to the raw material requirements of

major global and Indian automotive OEMs in India, and any failure to maintain the relationship with these

tier-I suppliers or OEMs or find competent replacements could affect the sales of our products.

A significant number of our products are primarily sold to tier-1 suppliers that cater to the raw material requirements of major global and Indian automotive OEMs in India, such as 2W, 4W, LCV, MHCV and other vehicle manufacturers. The sale of special and alloy steel products that find end-use in the 2Ws and 4Ws space constitutes the largest portion of our products sold, both in terms of value and volume. We may be unable to maintain or renew relationships with tier-I suppliers and/or OEMs or we may not be able to obtain orders from our tier-I suppliers at the current levels. We may also be unsuccessful in competing for desired OEMs to approve our products. If any of these relationships were to be so altered or terminated and we are unable to obtain sufficient replacement orders on comparable terms, our business, financial condition, results of operations, cash flows and business prospects could be materially and adversely affected.

If purchases of new vehicles decline, it could significantly decrease the demand for our products.

The demand for our products is dependent, among other things, on the conditions of the global and, in particular, the Indian economy. For instance, the demand for our products is significantly affected by the demand of 2Ws, 4Ws and other vehicles in India. A decline in economic activity in India or in international markets may have an adverse effect on consumer and industrial demand for new vehicles. Sales of new vehicles in India varies at different times of the year, weather, interest rates, fuel prices and the overall economic environment. If industrial or consumer demand for new vehicles decreases, it would have a corresponding impact on the demand for our products and may materially and adversely affect our business, financial condition, results of operations, cash flows and business prospects. Further, recent public announcements indicate that the Government of India has plans to have a major shift towards electric vehicles by 2030, which may adversely impact the demand for alloy steel in light of the lower consumption of alloy steel in electric vehicles.

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Our operations are hazardous and could expose us to the risk of liabilities, loss of revenue and increased

expenses.

Our operations are subject to various hazards associated with the production of special and alloy steels, such as the use, handling, processing, storage and transportation of scrap metal, alloys and chemicals, as well as accidents such as leakage or spillages. In addition, our employees operate heavy machinery at our manufacturing facility and accidents may occur while operating such machinery. These hazards can cause personal injury and loss of life, severe damage to and destruction of property and equipment, environmental damage and may result in the suspension of operations and the imposition of civil and criminal liabilities. As a result of past or future operations, claims for damages from our customers along with claims of injury by employees or the public due to exposure, or alleged exposure, to the hazardous materials involved in our business may arise. Events like these could result in liabilities, or adversely affect our reputation with suppliers, customers, regulators, employees and the public, which could in turn affect our financial condition and business performance. While we maintain general insurance against these liabilities, insurance proceeds may not cover or may not be adequate to fully cover the substantial liabilities, lost revenues, loss of reputation or increased expenses that we might incur.

As a manufacturing business, our success depends on the smooth supply and transportation of raw materials

from our suppliers, and also on the smooth delivery of our products to our customers, both of which are subject

to various uncertainties and risks.

We procure our raw materials from domestic as well as international suppliers. Any disruption of our suppliers’ operations and/or inadequate or interrupted transportation of raw materials and products to our facility could adversely affect our business, financial condition, results of operations and cash flows. We depend on external suppliers for the supply of raw materials for our products. Any failure on the part of these suppliers to supply raw materials or components could have a significant adverse impact on our manufacturing process. We may not have any formal agreements with some of these suppliers in connection with the supply of such raw materials. Further, we depend principally on trucking and railways for the delivery of raw materials to our manufacturing facility and the delivery of our products from our manufacturing facility to our warehouses and customers. We rely on third parties to provide such services. These transportation providers may not be adequate to support our existing and future operations. Any failure by any of our suppliers to adhere to our technical specifications, quality requirements and production and delivery schedules could disrupt our manufacturing process, which could have a material adverse effect on our results of operations and financial condition. Further, disruptions of transportation services because of weather-related problems, strikes, lock-outs, inadequacies in the road infrastructure and port facilities, geopolitical events, or other events could impair our ability to supply our products to our customers. In the event of any of the foregoing, we may be required to buy raw materials in the spot market at unfavorable prices, which could materially and adversely affect our business and results of operations and cash flows.

We are subject to risks associated with product liability, warranty and recall due to defects in our products or

related services, which could generate adverse publicity and adversely affect our business, results of operations

and financial condition.

Warranty claims reduce our profitability. Our products are subject to warranties against manufacturing defects, and any failure on our part to adhere to the stringent technical specifications and quality requirements of our customers could may result in our customers rejecting such products. In the event of claimed defects or non-performance of our products, our practice is to accept such genuine claims. In the future, we might also experience recalls or a material number of warranty claims due to defects in our products. Defects, if any, in our products could adversely affect our reputation and demand for our products. In the event that defects, product recalls, or warranty claims become more frequent, there may be an adverse effect on our operating results and financial condition.

If estimates or assumptions used in developing our strategic plan are inaccurate or we are unable to execute

our strategic plan effectively, our profitability and financial position could be negatively impacted.

If the estimates or assumptions used in developing our strategic plan vary significantly from actual conditions, our sales, margins and profitability could be negatively impacted. For instance, sales of 2Ws and 4Ws may not grow as quickly as we currently expect, and we may be incorrect in our assumptions and expectations regarding consumer preferences when researching, developing and introducing new products. Also, the fund requirement

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and deployment for our projects are based purely on management estimates and assumptions, considering the current market scenario and are subject to revision in the light of changes in external circumstances or costs. We have not yet determined all of our expected expenditures, and we, therefore, cannot estimate the exact amounts to be used for our expansion projects and implementation of other aspects of our strategy. The amounts and timing of any expenditure will depend on, among other factors, the amount of cash generated by our operations, competitive and market developments. If we are unsuccessful in executing our strategic plan, or if the underlying estimates or assumptions used to develop our strategic plan are materially inaccurate, our business can also be negatively impacted.

We depend significantly on sales in India, any decrease in which will adversely affect our business, revenue,

results of operations and cash flows.

In the nine-months ended December 31, 2017, and in Fiscal 2017, we derived 94.20% and 94.74% of our revenue from operations from our sales in India, respectively. Existing and potential competitors may increase their focus on India, which could reduce our market share. For example, our competitors may intensify their efforts to capture a larger market share by incurring higher promotional expenses and launching aggressive campaigns. If we are unable to compete effectively in India, it could adversely affect our sales volumes and pricing levels for special and alloy steel products in India, as well as erode our market share. In the event that we experience adverse effects on our sales volumes or pricing levels, or loss of market share, due to increased competition or otherwise, it could adversely affect our business, revenue, results of operations and cash flows.

Our ability to reduce our cost of production and thereby increase our operational efficiency is an essential part

of our business strategy and we cannot assure you that our cost reduction measures will achieve the planned

operational efficiencies we seek.

Reducing our cost of production is essential to our business strategy in a highly competitive market environment. Our cost reduction efforts focus on a combination of measures such as the effective management of our supply chain, the use of third-party logistics providers, value engineering and process and productivity improvements. Our measures to increase our operational efficiency may not yield similar results in the future, which may adversely affect our results of operations.

We require certain regulatory approvals and licenses in the ordinary course of our business, and the failure to

obtain, maintain and renew these approvals and licenses necessary for carrying out our business, in a timely

manner or at all, may adversely affect our operations.

We are subject to various environmental, health and safety, employee-related and other laws and regulations applicable to our business operations, including laws and regulations governing our relationship with our employees in areas such as minimum wages, maximum working hours, overtime, working conditions, hiring and terminating employees, contract labor and work permits, as well as other local laws or regulations in India. The success of our strategy to modernize, optimize and expand our existing operations in the sector in which we operate is contingent upon, among other factors, receipt of all required licenses, permits and authorizations, including local land use permits, building and zoning permits, environmental permits, and health and safety permits. Although we believe that we are in compliance with all environmental, health and safety, employee-related and other applicable laws and regulations currently in force, changes in these laws or regulations may result in us incurring significant costs in order to maintain compliance with such laws and regulations and may also delay or prevent project completion. There can be no assurances that the legal framework, licensing and other regulatory requirements or enforcement trends in our industry will not further change in a manner that does not result in increased costs of compliance, or that we will be successful in responding to such changes. Moreover, as we grow our business, the potential for violating these laws and regulations may also increase. If we fail to comply with any existing laws and regulations, or fail to obtain, maintain or renew any of the required licenses or approvals, the relevant regulatory authorities may impose fines and penalties on us, revoke our business licenses and approvals and/or require us to discontinue our business or impose restrictions on the affected portion of our business. For instance, we have submitted an application to the Punjab Pollution Control Board, and are awaiting its approval in respect of the recent increase in the production capacity of the melting shop and rolling mill at our manufacturing facility. There can be no assurance that we will be granted such an approval, in a timely manner or at all. Any action brought against us for alleged violations of laws or regulations, even if our defense thereof is successful, could cause us to incur significant legal expenses and divert our management’s attention

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from the operation of our business. Any determination that we have violated, or the public announcement that we are being investigated for possible violations, of these laws or regulations, could harm our reputation, operating results and financial condition. If we are found in violation, we may be subject to any applicable penalties associated with such violations, including civil and criminal penalties, damages and fines, loss of various licenses, certificates, accreditations or authorizations, orders to refund payments received by us, and orders to curtail or cease our operations. If we lose or otherwise are unable to maintain any of our required licenses and approvals under applicable laws and regulations, our business operations will be materially and adversely affected.

We have had negative operating cash flows in Fiscal 2015, may have negative operating cash flows in the

future.

In Fiscal 2015, the net cash used in our operating activities was Rs. 3,274.92 lakhs. Our inability to generate and sustain adequate cash flows from operations in the future could adversely affect our results of operations and financial condition. For further details, see “Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. We cannot assure you that our net cash flows will be positive in the future.

Our continued success depends on our ability to offer quality products on a timely basis and at competitive

prices, which meet technological advances, satisfy changing customer demands and achieve market acceptance.

The quality, supply stability and timely delivery of our products at competitive prices are essential to customer satisfaction and retention. Our ability to sell our products to tier-I suppliers to global and Indian automotive OEMs may be significantly impacted if we do not develop or make available technologies, processes, or products according to consumer demand or which might be developed by our competitors. Unanticipated delays or cost overruns in developing new products, failure to launch a new product or failure in utilize our production capacities to meet customer requirements could materially and adversely impact our results of operations and financial condition. The capital investment in plant and machinery, in addition to product development costs, associated with the development of new products may result in higher levels of depreciation and amortization, and may have an adverse impact on the profitability of the Company. In addition, our customers’ industries are characterized by technological advances, evolving industry standards, changing customer preferences and the constant introduction of new products. Our future success will depend in part on our ability to develop and introduce new products that keep pace with changes in these standards and preferences, our ability to enhance our existing range of products, and our ability to achieve market acceptance. There can be no assurance that we will be successful in developing new products or incorporating evolving technologies into our products on a timely or cost-effective basis or at all, or if these products, services and solutions will be developed by us at our own product development facilities, or that we will be successful in marketing and selling them and achieving market acceptance for such products. If we fail to develop new products that are appealing to our customers, or fail to develop products on time and within budgeted amounts, we may be unable to recover our product development and testing costs. If we cannot successfully use new production or equipment methodologies we invest in, we may also not be able to recover those costs.

If we do not compete successfully against existing and new competitors, we may lose customers and market

share.

We compete with multinational as well as Indian companies in our industry and procure new businesses from our customers. An inability to procure new businesses or to retain or increase our existing businesses may adversely affect our financial performance. In addition, there can be no assurance that we will remain competitive with respect to the technology, design and quality of our products. Some of our competitors may have certain operational advantages, which may enable them to better respond to customer demands. We may incur significant expenses in preparing to meet anticipated customer requirements which may not be recovered. Any major expansion of business and/or technological upgradation by our competitors may require us to incur additional expenditure to keep pace with the growing competition and to meet customer requirements.

Product recalls by OEMs could negatively affect their production levels and have a material impact on their

Tier I suppliers who are our customers, and therefore have a material adverse effect on our business, results

of operations and financial condition.

In the past, there have been significant product recalls by some of the world’s largest OEMs. Recalls may result in decreased production levels due to: (i) an OEM focusing its efforts on addressing the problems underlying the

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recall, as opposed to generating new sales volume; and (ii) consumers electing not to purchase vehicles manufactured by the OEM initiating the recall, or by OEMs in general, while such recalls persist. Any reductions in OEM production volumes, especially the OEMs whose tier I suppliers are our customers, could have a material adverse effect on our business, results of operations and financial condition.

Our business depends on the reputation and consumer perception of the “Vardhman” brand, and any negative publicity or other harm to the brand may materially and adversely affect our business, financial condition,


We believe that our reputation and consumer perception of the “Vardhman” brand is important to our business. Further, we believe that maintaining and enhancing the “Vardhman” brand is essential to our efforts to maintain and expand our customer base. In addition, the brand image may be harmed by negative publicity relating to the aforesaid brand or the companies associated with the “Vardhman” group, regardless of its veracity. Any negative publicity or other harm to the “Vardhman” brand may materially and adversely affect our business, financial condition, results of operations and cash flows.

The discontinuation of, or the loss of business with respect to, or a lack of commercial success of, particular

customer programs for which we are a significant supplier could affect our business, results of operations and

financial conditions.

Our Company has purchase orders from all of our customers. Therefore, the discontinuation of or loss of business with respect to, or a lack of commercial success of, a particular customer program for which we are a significant supplier could reduce our sales and affect our estimates of anticipated sales, which could have an adverse effect on our business, results of operations and financial conditions.

Our products are subject to continued pricing pressure, which may materially and adversely affect our profits,


Pricing pressure has generally been a characteristic of the Indian automotive components industry. In addition, estimating the impact of such pricing pressure is subject to a host of uncertainties as any price reductions are a result of negotiations and other factors. Accordingly, special and alloy steel manufacturers must be able to reduce their operating costs in order to maintain profitability. Such price reductions may affect our revenues and profit margins. If we are unable to offset such price reductions in the future through improved operating efficiencies and other cost reduction initiatives, our business, financial condition and results of operations may be adversely affected. Any failures to obtain adequate and timely price increases or any adverse changes to the terms of sale of our products could materially and adversely affect our sales and profit margins. If we are unable to offset these price pressures through improved operating efficiencies and reduced expenditures, we may suffer declining profit margins and our results of operations and cash flows would suffer.

We do not own all the premises from which we operate, and we have only lease rights over them. In the event

that we lose such rights or are required to negotiate them, our cash flows, business, financial conditions and

results of operations could be adversely affected

Certain of the properties that are used by us are on lease basis. For further details, see “Business – Our Properties”. Termination of the lease or other relevant agreements in connection with premises which are not owned by us, or our failure to renew the same, on favourable conditions and in a timely manner, or at all, could require us to vacate such premises at short notice, and could adversely affect our business and financial condition. We cannot assure you that we will be able to renew any such arrangements when the term of the original arrangement expires, on similar terms or terms reasonable for us or that such arrangements will not be prematurely terminated (including for reasons that may be beyond our control). Further, any adverse impact on the title, ownership rights, development rights of the owners from whose premises we operate or breach of the contractual terms of any lease agreements may materially affect our business operations.

A shortage or non-availability of electricity, fuel or water may adversely affect our manufacturing operations

and have an adverse effect on our business, results of operations and financial condition.

Our manufacturing operations require a significant amount and continuous supply of electricity, fuel and water and any shortage or non-availability may adversely affect our operations. We currently source our water requirements from bore wells and water tankers, and we depend on state electricity board for our energy requirements. Although we have diesel/furnace oil generators to meet exigencies at certain of our facilities, we

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cannot assure you that our facilities will be operational during power failures. Any failure on our part to obtain alternate sources of electricity, fuel or water, in a timely fashion, and at an acceptable cost, may have an adverse effect on our business, results of operations and financial condition.

Any inability to manage our export business may adversely affect our results of operations. Further, we are

also subject to risks associated with expansion into new segments and geographies.

Our growth strategy relies on leveraging the expanded reach of our geographical footprint. The costs associated with entering into and establishing in new markets, and expanding such operations, may be higher than expected, and we may face significant competition in these regions. Our products may not be accepted or we may not be successful in capturing market share in any of the new product segments that we enter into which could adversely impact our results of operations. In addition, our international business is subject to many actual and potential risks, including language barriers, cultural differences and other difficulties in staffing and managing overseas operations. Further, there are inherent difficulties and delays in contract enforcement and the collection of receivables under the legal systems of some foreign countries, the risk of non-tariff barriers, other restrictions on foreign trade or investment sanctions, and the burdens of complying with a wide variety of foreign laws and regulations. If we are unable to manage risks related to our expansion and growth, our business, returns on investment, results of operations and financial condition could be adversely affected. We currently export to six countries, and plan to expand our international operations further in the future. Consequently, we are subject to various risks associated with conducting our business outside domestic markets and our operations may be subject to political instability, wars, terrorism, regional and/or multinational conflicts, natural disasters, fuel shortages, epidemics and labor strikes in the international markets in which we operate. Any significant or prolonged disruptions or delays in the operations due to these risks could adversely impact our results of operations and financial condition.

Our indebtedness and the conditions and restrictions imposed by our financing agreements could adversely

affect our ability to conduct our business and operations

Our indebtedness and the restrictive covenants imposed upon us with certain debt facilities could restrict our ability to conduct our business and grow our operations, which would adversely affect our financial condition and results of operations. We may in the future incur additional indebtedness in connection with our operations. Our indebtedness could have several important consequences on our future financial results and business prospects, including but not limited to the following:

a substantial portion of our cash flow will be used towards servicing and repayment of our existing debt, which will reduce the availability of cash flow to fund working capital, capital expenditures, acquisitions and other general corporate requirements;

our ability to obtain additional financing in the future or renegotiate or refinance our existing indebtedness on terms favorable to us may be limited;

fluctuations in market interest rates will affect the cost of our borrowings;

we may be more vulnerable to economic downturns, may be limited in our ability to withstand competitive pressures and may have reduced flexibility in responding to changing business, regulatory and economic conditions;

we may have difficulty satisfying payment and other obligations under our existing financing arrangements and an inability to comply with these requirements could result in an event of default, acceleration of our repayment obligations and enforcement of related security interests over our assets; and

we may be restricted from making dividend payments to our shareholders under certain circumstances. There are certain restrictive covenants in the arrangement we have entered into with our lenders. Under the terms of certain of our Company’s debt agreements, we are required to send an intimation to our lenders for creating, assuming or incurring any additional long-term indebtedness. There can be no assurance that we have, or will, at all times, complied with all of the terms of the said financing documents. Any failure to service our Company’s indebtedness and/or to comply with all of the terms of the said financing documents could have an adverse effect on our results of operations and/or profitability.

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Our Company is dependent on the continued efforts of our senior management team and the loss of key

members or failure to attract skilled personnel may adversely affect our business.

Our future success depends on the continued services and performance of the members of our management team and other key employees. Competition for senior management in the industry is intense, and we may not be able to retain our existing senior management or attract and retain new senior management in the future. The loss of the services of key persons in the organization could seriously impair our ability to continue to manage and expand our business. Further, the loss of any other member of our senior management or other key personnel may adversely affect our business, results of operations, financial condition and cash flows. The success of our business will also depend on our ability to identify, attract, hire, train, retain and motivate skilled personnel. Demand for qualified professional personnel is high and these personnel are in limited supply. Our professionals are highly sought after by our competitors as well as other Indian companies, particularly as India’s economy continues to grow and mature. If we fail to hire and retain sufficient numbers of qualified personnel for functions such as manufacturing, technical, finance, marketing, sales, operations and research and development, our business operating results and financial condition could be adversely affected.

If we are subject to product liability claims, it could expose us to costs and liabilities and adversely affect our

reputation, revenues and profitability.

We are exposed to risks associated with product liability claims. Such claims may arise if any of our products are deemed or proven to be unsafe, ineffective or defective. There can be no assurances that we will not become subject to product liabilities claims or that we will be able to successful defend ourselves against any such claims. If we are unable to defend ourselves against such claims, among other things, we may be subject to civil liability for physical injury, death or other losses caused by our products and to criminal liability and the revocation of our business licenses if our products are found to be defective. In addition, we may be required to recall the relevant products, suspend sales or cease sales. Other jurisdictions in which our products are, or may in the future be, sold, may have similar or more onerous product liability and regulatory regimes, as well as more litigious environments that may further expose us to the risk of product liability claims. Even if we are able to successfully defend ourselves against any such product liability claims, doing so may require significant financial resources and the time and attention of our management. Moreover, even the allegation that our products are dangerous or of inferior quality, whether or not ultimately proven, may adversely affect our reputation and sales volumes.

Any slowdown in the automotive sector or any adverse changes in the conditions affecting the growth of

transportation sector could adversely impact our business, results of operations, financial condition and cash

flows.

Our business is heavily dependent on the performance and market trends of the automotive sector, particularly the 2W, 4W and other spaces within the automotive markets. Automotive sales and production are historically cyclical and exhibit fluctuations from year to year and are subject to many factors beyond our control, including, but not limited to, economic growth rates, consumer confidence, employment levels, risk of equipment failure, fuel prices, interest rates, labor relations issues, technological developments, regulatory requirements and trade agreements, which are not within our control. Any economic downturn in the manufacture and sale of vehicles, whether in India or any other geography in which we operate, may significantly affect our business, financial condition, results of operations, cash flows and growth.

We will continue to be controlled by our Promoters after the completion of the Issue

After the completion of the Issue, our Promoter and Promoter Group will continue to exercise control over us, including being able to influence the composition of our Board and influence matters requiring shareholder approval. Our Promoter and Promoter Group may take or block actions with respect to our business, which may conflict with our interests or the interests of our minority shareholders. Through their influence, our Promoter and Promoter Group may be in a position to delay, defer or cause a change of our control or a change in our capital structure, delay, defer or cause a merger, consolidation, takeover or other business combination involving us, discourage or encourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

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Any delays and/or defaults in payments from our customers could result in increase of working capital

investment and/or reduction of our profits, thereby affecting our operation and financial condition. Further,

our accounts receivable collection cycle exposes us to client credit risk.

We are exposed to payment delays and/or defaults in payments by our customers and our financial position and financial performance are dependent on the creditworthiness of our customers. Any delays in payments may require us to make a working capital investment. Further, we cannot assure that payments from all or any of our customers will be received in a timely manner or to that extent will be received at all. For the nine-month period ended December 31, 2017, 2017, and Fiscal 2017, our trade receivables were Rs. 18,731.25 lakhs and Rs. 18,897.16 lakhs, respectively, which constituted 28.80% and 24.90% of our total income for the same periods. If a customer defaults in making its payments on an order on which we have devoted significant resources, or if an order in which we have invested significant resources is delayed, cancelled or does not proceed to completion, it could have a material adverse effect on our Company’s results of operations and financial condition. Our credit terms vary according to market practices and typically, the credit period ranges between 7 days to 90 days. If any of our customers fail to make payments to us or become insolvent, we would suffer losses and our financial condition and results of operations could be adversely affected. Moreover, sales of our products are not always supported by letters of credit or bank guarantee. In case of any disputes or differences or default with regard to our payments, we would have to initiate appropriate recovery proceedings and which may be costly and time consuming. There is no guarantee on the timelines of all or any part of our customers’ payments and whether they will be able to fulfil their obligations, which may arise from their financial difficulties, cash flow difficulties, deterioration in their business performance, or a downturn in the global economy. If such events or circumstances occur, our financial performance and our operating cash flows may be adversely affected.

We have entered into certain transactions with related parties in the past and may continue to do so in the

future. These transactions or any future transactions with our related parties could potentially involve conflicts

of interest.

Our Company has entered into transactions with several related parties, including our Promoters, Directors and Key Managerial Personnel, which were conducted in compliance with applicable laws and on arm’s length basis. Furthermore, it is likely that our Company will enter into related party transactions in the future. There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations. The transactions that the Company has entered into and any future transactions with our related parties have involved or could potentially involve conflicts of interest. For further details, please see “Financial Statements”.

There are outstanding legal proceedings against us and our Promoters which if determined adversely, could

affect our business, results of operations and financial condition.

There are certain outstanding legal proceedings initiated against us and our Promoters. These proceedings are pending at different levels of adjudication, before various courts and tribunals. The amounts claimed in these proceedings have been disclosed to the extent ascertainable as on the date of this Placement Document and includes the amounts claimed jointly and severally from us and other parties. Should there be any new developments, such as any change in applicable laws or, any rulings against us by appellate courts or tribunals, we may need to make provisions in our financial statements that could increase expenses and current liabilities. There can be no assurance that these proceedings will be determined in our favor or that penal or other action will not be taken against us. Any adverse decision in such proceedings may have an adverse effect on our business, results of operations and financial condition. For further information, along with the disclosures including, inter

alia, the amount involved, period for which such demands or claims are outstanding, financial implications and the status of the proceedings, see the section titled “Legal Proceedings” of this Placement Document.

We have certain contingent liabilities that have not been provided for in our financial statements, which, if

they materialize, may adversely affect our financial condition.

As of March 31, 2017, our contingent liabilities that have not been provided for are as set out in the table below:

# Particulars

As of March 31,

2017

(In Rs. Lakhs)

(a) Claims against the Company not acknowledged as debts

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# Particulars

As of March 31,

2017

(In Rs. Lakhs)

- Excise duty/ Custom duty/Service tax in respect of matters in disputes 88.95

- Income tax liability that may arise in respect of matters in disputes 267.50

- Sales tax/ VAT/ liability in respect of matters in disputes 3.92

- Other matters* 370.71

(b) Bank Guarantees and letters of credit outstanding 5461.23

(c) Commitments

-Contracts remaining to be executed on capital account 635.49

- Export commitments against import of capital goods under EPCG scheme (Duty saved amount)

1,552.49

*Other matters include contingent liability of Rs. 370.71 lakhs (P.Y. Rs. 370.71 lakhs) relating to matters on

Power/electricity with PSPCL

If a significant portion of these liabilities materialize, it could have an adverse effect on our business, financial condition and results of operations. For details, see “Financial Statements”.

Certain of our Promoters, Directors and key managerial personnel have interests in us other than

reimbursement of expenses incurred and normal remuneration or benefits.

Certain of our Promoters, Directors and key managerial personnel may be regarded as having an interest in our Company other than reimbursement of expenses incurred and normal remuneration or benefits. Certain Directors and Promoters and key managerial personnel may be deemed to be interested to the extent of Equity Shares held by them, as well as to the extent of any dividends, bonuses or other distributions on such Equity Shares. We cannot assure you that our Promoters, Directors and our key management personnel, if they are also our shareholders, will exercise their rights as shareholders to the benefit and best interest of our Company. For further details, see “Capital Structure” and “Our Management”.

We may be subject to claims of infringement of third-party intellectual property rights, which could adversely

affect our business.

While we take care to ensure that we comply with the intellectual property rights of third parties and that there are no pending claims against us for infringement of third party intellectual property rights, we cannot determine with certainty whether we are infringing upon any existing third-party intellectual property rights. Any claims of infringement, regardless of merit or resolution of such claims, could force us to incur significant costs in responding to, defending and resolving such claims, and may divert the efforts and attention of our management and technical personnel away from our business. As a result of such infringement claims, we could be required to pay third party infringement claims, alter our technologies, obtain licenses or cease some portions of our operations. The occurrence of any of the foregoing could result in unexpected expenses. In addition, if we alter our technologies or cease production of affected items, our revenue could be adversely affected.

Our business is cyclical in nature and a substantial decrease in sales during certain quarters could have a

material adverse impact on financial performance.

The sales volumes and prices for vehicles, in particular for 2Ws and 4Ws, are influenced by cyclicality and seasonality of demand. In addition, it is observed that consumer demand for vehicles is generally depressed towards the end of a calendar year as customers seek to avoid vehicles purchased being classified as older models based on the year of manufacture. As a result, consumers prefer to delay the purchase of a vehicle to January of the next calendar year. For further details, see "Management's Discussions and Analysis of Financial Condition

and Results of Operations". This seasonality and cyclicality of the demand for our products may cause a substantial decrease in sales during certain periods, thereby adversely affecting our results of operations and financial condition. Due to the seasonality of our business, our quarterly financial results may not be comparable on a quarter to quarter basis.

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We rely on our IT systems in managing our supply chain, production process, logistics and other integral parts

of our business.

We rely on our information technology systems in connection with order booking, customer management, material procurement, accounting and production. Therefore, the reliability of our network infrastructure is critical to our business. Any failure in our information technology systems could result in business interruptions, including disruption in our supply management, the loss of buyers, damaged reputation and weakening of our competitive position, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are required to comply with environmental laws and regulations that could cause us to incur significant

costs.

Our manufacturing operations are subject to numerous laws and regulations designed to protect the environment, and we expect that additional requirements with respect to environmental matters will be imposed in the future. Material future expenditures may be necessary if compliance standards change, if material unknown conditions that require remediation are discovered or if required remediation of known conditions becomes more extensive than expected. If we fail to comply with present and future environmental laws and regulations, we could be subject to future liabilities or the suspension of production, which could harm our business, results of operations or cash flows. Environmental laws could also restrict our ability to expand our facility or could require us to acquire costly equipment or to incur other significant expenses in connection with our manufacturing processes.

We currently avail benefits under the Government of India’s Export Promotion Capital Goods (EPCG) scheme.

In order to continuously avail the benefits we are required to export goods of a defined amount. Any failure in

meeting the obligations, may result in adversely affect our business operations and our financial condition.

We have imported some of our equipment under licenses pursuant to the Government of India’s Export Promotion Capital Goods (EPCG) scheme. As per the licensing requirement under the aforesaid scheme, we are required to export goods of a defined amount, failing which, we may have to pay the Government, a sum equivalent to the duty benefit enjoyed by us under the said schemes along with interest. Any reduction or withdrawal of benefits or our inability to meet any of the conditions prescribed under any of the schemes would adversely affect our business, results of operations and financial condition.

We generate revenue and incur expenses in multiple currencies, hence exchange rate movements may have an

adverse effect on our results of operations, financial condition.

We have foreign currency exposure related to foreign-denominated revenues, including export sales and costs of imported raw materials and equipment. We expect that our foreign currency exposure will increase as our business grows. Significant currency exchange rate fluctuations and currency devaluations could have an adverse effect on our results of operations and cash flows from period to period.

Information relating to the historical capacities of our production facility included in this Placement Document

is based on various assumptions and estimates and future production and capacity may vary.

Information relating to the historical capacities of our production facility included in this Placement Document is based on various assumptions including those relating to availability of raw materials, consumables, raw material mix and operational efficiencies. Actual production levels and rates may differ significantly from the production capacities. Undue reliance should therefore not be placed on our historical capacities information for our existing facility included in this Placement Document.

Increased staff costs could negatively affect our ability to operate efficiently and adversely affect our

profitability, results of operations and cash flows.

The cost of labor in India has been increasing over the past years due to increasing competition for quality employees among manufacturing companies as well as growth in inflation and general wage increases. Many aspects of our strategies and business growth may require us to hire additional employees. Due to the nature of our operations, a significant proportion of our employees are contract labor, which is more cost-efficient for us and provides us with some flexibility in managing our labor pool. If competitive forces require us to hire proportions of permanent, full-time employees and/or convert existing contract employees into permanent, full-

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time employees, our staff costs could increase without corresponding increases in our revenue, which could adversely affect our profitability, results of operations and cash flows.

We appoint contract labour for carrying out certain of our operations and we may be held responsible for

paying the wages of such workers, if the independent contractors through whom such workers are hired default

on their obligations, and such obligations could have an adverse effect on our results of operations and

financial condition.

In order to retain flexibility and control costs, we appoint independent contractors who in turn engage on-site contract labor for performance of certain of our operations. Although we do not engage these laborers directly, we may be held responsible for any wage payments to be made to such laborers in the event of default by such independent contractor. Any requirement to fund their wage requirements may have an adverse impact on our results of operations and financial condition. In addition, under the Contract Labor (Regulation and Abolition) Act, 1970, as amended, we may be required to absorb a number of such contract laborers as permanent employees. Thus, any such order from a regulatory body or court may have an adverse effect on our business, results of operations and financial condition.

Our results of operations could be adversely affected by strikes, work stoppages or increased wage demands by

our employees. While we have not experienced any significant employee related issues in the past, there can be no assurance that we will not experience any strikes, work stoppages or other industrial actions or that these situations will not disrupt our business and operations in the future. In the event that we are unable to manage any employee related issues or negotiate any settlement with our workers on acceptable terms, it could result in strikes, work stoppages or increased operating costs as a result of higher than anticipated wages or benefits. In addition, such industrial disruptions or work stoppages may result in production losses and delays in delivery of products, which may adversely affect our business prospects, reputation, and results of operations.

Our insurance coverage may not be sufficient to cover all of our potential losses.

Our business may involve risks and hazards which could adversely affect our profitability, including natural calamities, breakdowns, failure or substandard performance of equipment, third party liability claims, labor disturbances, employee fraud and infrastructure failure. Our Company cannot assure you that the operation of our business will not be affected by any such incidents or hazards. In addition, our insurance may not provide adequate coverage in such circumstances including those involving claims by third parties and is subject to certain deductibles, exclusions and limits on coverage. If our arrangements for insurance or indemnification are not adequate to cover claims, including those exceeding policy aggregate limitations or exceeding the resources of the indemnifying party, our Company may be required to make substantial payments and our results of operations and financial condition may be adversely affected.

Our ability to pay dividends in the future will depend upon future earnings, financial condition, cash flows,

working capital requirements, capital expenditures and restrictive covenants in our financing arrangements.

The amount of our future dividend payments, if any, will depend upon various factors including our future earnings, financial condition, cash flows, working capital requirements, capital expenditures and restrictive covenants in our financing arrangements. There can be no assurance that we will be able to declare dividends. Any future determination as to the declaration and payment of dividends will be at the discretion of our Board of Directors and will depend on various factors. Accordingly, realization of a gain on shareholder investments will depend on the appreciation of the price of the Equity Shares. There is no assurance that the Equity Shares will appreciate in value. We cannot assure you that we will be able to pay dividends in the future. For details of dividend paid by our Company in the past, see “Dividends”.

Any damages caused by fraud, theft or other misconduct by our employees could adversely affect our

profitability, results of operations and cash flows. We are exposed to operational risk arising from inadequacy or failure of internal processes or systems or from fraud or theft. We are susceptible to fraud or misappropriation by our employees or outsiders. Our management information systems and internal control procedures are designed to monitor our operations and overall compliance. However, they may not be able to identify non-compliance and/or suspicious transactions in a timely manner or at all. As a result, we may suffer monetary losses, which may not be covered by our insurance and may

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thereby adversely affect our profitability, results of operations and cash flows. Such a result may also adversely affect our reputation. For additional details, please see “Legal Proceedings”.

We are exposed to market risks from our hedging activities, and the use of hedging instruments could result in

financial losses that may adversely affect our results of operations, financial condition and cash flows.

We engage in foreign currency hedging with banks through derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. If, in the future, foreign exchange rates or interest rates move contrary to our expectations, or if our risk management procedures prove to be inadequate, we could incur derivative related or other charges and opportunity losses independent of the relative strength of our business, which could affect our results of operations, financial condition and cash flows.

Increases in interest rates may materially impact our results of operations.

As our business is capital intensive, we are exposed to interest rate risks. Interest rates for borrowings have been volatile in India in recent periods. Some of our current debt facilities carry interest at variable rates with periodic resets of interest rates. Although we may decide to engage in interest rate hedging transactions or exercise any right available to us under our financing arrangements to terminate the existing debt financing arrangement on the respective interest rate reset dates and enter into new financing arrangements, there can be no assurance that we will be able to do so on commercially reasonable terms, that our counterparties in hedging transactions will perform their obligations, or that such agreements, if entered into, will protect us adequately against interest rate risks. Accordingly, the increase of our interest expense may have an adverse effect on the cost of our debt funding and our results operations and financial condition may be adversely affected.

Statistical and industry data in this Placement Document may be incomplete or unreliable.

We have not independently verified data obtained from industry publications and other sources referred to in this Placement Document and therefore, while we believe them to be true, we cannot assure you that they are complete or reliable. Such data may also be produced on different bases from those used in the industry publications we have referenced. Therefore, discussions of matters relating to India, its economy and the automotive industry are subject to the caveat that the statistical and other data upon which such discussions are based may be incomplete or unreliable. For more details, see “Industry Overview”

Risks Relating to India

A slowdown in economic growth in India could adversely affect our business, results of operations, financial

condition and cash flows.

We are dependent on domestic, regional and global economic and market conditions. Our performance, growth and market price of our Equity Shares are and will be dependent to a large extent on the health of the economy in which we operate. There have been periods of slowdown in the economic growth of India. Demand for our products may be adversely affected by an economic downturn in domestic, regional and global economies. Economic growth in the countries in which we operate is affected by various factors including domestic consumption and savings, balance of trade movements, namely export demand and movements in key imports of raw materials, global economic uncertainty and liquidity crisis, volatility in exchange currency rates, and annual rainfall which affects agricultural production. Consequently, any future slowdown in the Indian economy could harm our business, results of operations, financial condition and cash flows. Also, a change in the government or a change in the economic and deregulation policies could adversely affect economic conditions prevalent in the areas in which we operate in general and our business in particular and high rates of inflation in India could increase our costs without proportionately increasing our revenues, and as such decrease our operating margins.

Changing laws, rules and regulations and legal uncertainties, including adverse application of tax laws, may

adversely affect our business and financial performance. Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing, or the promulgation of new laws, rules and regulations applicable to us and our business. Please refer to “Regulations and Policies” for details of the laws currently applicable to us.

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There can be no assurance that the Government of India may not implement new regulations and policies which will require us to obtain approvals and licenses from the Government of India and other regulatory bodies or impose onerous requirements and conditions on our operations. Any such changes and the related uncertainties with respect to the applicability, interpretation and implementation of any amendment to, or change to governing laws, regulation or policy in the jurisdictions in which we operate may have a material adverse effect on our business, financial condition and results of operations. In addition, we may have to incur expenditures to comply with the requirements of any new regulations, which may also materially harm our results of operations. Any unfavorable changes to the laws and regulations applicable to us could also subject us to additional liabilities. GST has been implemented with effect from July 1, 2017 and has replaced the indirect taxes on goods and services such as central excise duty, service tax, central sales tax, state VAT and surcharge currently being collected by the central and state governments. The GST is expected to increase tax incidence and administrative compliance. Given the limited availability of information in the public domain concerning the GST, we are unable to provide any assurance as to the tax regime following implementation of the GST. The implementation of this new structure may be affected by any disagreement between certain state Governments, which could create uncertainty. Any future amendments may affect our overall tax efficiency, and may result in significant additional taxes becoming payable. Further, the general anti avoidance rules (“GAAR”) provisions have been made effective from assessment year 2018-19 onwards, i.e.; financial Year 2017-18 onwards and the same may get triggered once transactions are undertaken to avoid tax. The consequences of the GAAR provisions being applied to an arrangement could result in denial of tax benefit amongst other consequences. In the absence of any precedents on the subject, the application of these provisions is uncertain. The application of various Indian tax laws, rules and regulations to our business, currently or in the future, is subject to interpretation by the applicable taxation authorities. If such tax laws, rules and regulations are amended, new adverse laws, rules or regulations are adopted or current laws are interpreted adversely to our interests, the results could increase our tax payments (prospectively or retrospectively) and/or subject us to penalties. Further, changes in capital gains tax or tax on capital market transactions or sale of shares could affect investor returns. As a result, any such changes or interpretations could have an adverse effect on our business and financial performance.

Significant differences exist between Ind AS and other accounting principles, such as Indian GAAP, U.S.

GAAP and IFRS, which investors may be more familiar with and may consider material to their assessment of

our financial condition, cash flows and results of operations.

Our audited financial statements as of and for the financial years ended March 31, 2015 and 2016, prepared in accordance with Indian GAAP and the Companies Act, and our audited financial statement as of and for the financial year ended March 31, 2017, prepared in accordance with Ind AS (along with comparatives for the year ended March 31, 2016, with a transition date as at April 1, 2015) and the Companies Act (collectively, the “Audited Financial Statements”), together with the respective audit reports issued by the Auditors thereon, have been included in this Placement Document. See “Financial Statements”. Pursuant to a meeting of its Board on November 4, 2017, our Company has adopted and filed with the Stock Exchanges, the unaudited financial results for the quarter and nine-months ended December 31, 2017, prepared in accordance with Ind AS and the provisions of the Listing Regulations (the “Interim Financial Results”). The Auditors have conducted a limited review of the Interim Financial Results, which together with the report issued by the Auditors thereon, have also been included in this Placement Document. For further information, please refer to the Interim Financial Results included in the section titled “Financial Statements” in this Placement Document. Our Company has prepared its Financial Statements in Rupees in accordance with Indian GAAP, Ind AS, the Companies Act, as applicable, and have been audited or reviewed, as applicable, by the Auditors in accordance with the applicable generally accepted auditing standards in India prescribed by the ICAI. The Financial Statements prepared in accordance with Indian GAAP and Ind AS differ in certain important aspects from U.S. GAAP or IFRS and other accounting principles with which prospective investors may be familiar in other countries. We have not attempted to quantify the impact of U.S. GAAP or IFRS on the financial data included in this Placement Document, nor do we provide a reconciliation of our Financial Statements to those of U.S. GAAP or IFRS. Accordingly, the degree to which the Financial Statements prepared in accordance with Indian GAAP and Ind AS included in this Placement Document will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian GAAP and Ind AS. Any reliance by persons not familiar with Indian GAAP or Ind AS on the financial disclosures presented in this Placement Document should accordingly be limited.

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Inflation in India could have an adverse effect on our profitability and if significant, on our financial condition.

Inflation is typically impacted by factors such as governmental policies, regulations, commodity prices, liquidity and global economic environment. Any change in the government or a change in the economic and deregulation policies could adversely affect the inflation rates. Continued high rates of inflation may increase our costs such as salaries, travel costs and related allowances, which are typically linked to general price levels. There can be no assurance that we will be able to pass on any additional costs to our clients or that our revenue will increase proportionately corresponding to such inflation. Accordingly, high rates of inflation in India could have an adverse effect on our profitability and, if significant, on our financial condition.

Increases in the prices of crude oil could adversely affect the Indian economy, which could adversely affect

our business, financial condition, results of operations and cash flows.

India imports a substantial portion of its crude oil requirement. While oil prices have declined from their peak levels, any sharp increase in oil prices and the pass-through of such increases to Indian consumers could have a material negative impact on the Indian economy and on the Indian financial system in particular, including through a rise in inflation and market interest rates and a higher trade deficit, which could adversely affect our business, financial condition, results of operations and cash flows.

A significant change in the Government’s economic liberalization and deregulation policies could disrupt our business.

We are incorporated in India and derive a significant portion of our revenues from India. Consequently, our performance and liquidity of the Equity Shares is affected by changes in exchange rates and controls, interest rates, Government policies, taxation, social and ethnic instability and other political and economic developments affecting India. The Government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Our business and the market price and liquidity of the Equity Shares may be affected by changes in exchange rates and controls, interest rates, changes in Government policy, taxation, social and civil unrest and political, economic or other developments in or affecting India. In recent years, India has been following a course of economic liberalization and our business could be significantly influenced by economic policies followed by the Government. Further, our businesses are also impacted by regulation and conditions in the various states in India where we operate. There can be no assurance as to the policies a new elected government will follow or that it will continue the policies of the outgoing government. The rate of economic liberalization could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well. A significant change in India’s economic liberalization and deregulation policies, in particular, those relating to our business, could disrupt business and economic conditions in India generally and our business in particular.

Our performance is linked to the stability of policies and the political situation in India. Any political instability

in India may adversely affect the Indian economy and the Indian securities markets in general, which could

adversely affect our business, our results of operations and could also affect the trading price of our shares.

The Government has pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. Any political instability could delay the reform of the Indian economy and could have a material adverse effect on the market for our Equity Shares. There is no assurance that these liberalization policies will continue if there is a change in political climate. Protests against privatization could slow-down the pace of liberalization and deregulation. The rate of economic liberalization could change, and specific laws and policies affecting companies in the steel sector, foreign investment, currency exchange rates and other matters affecting investment in our securities could change as well. Further, if there is any political unrest or political instability or change of policies as a result of the introduction of any new political regime in India, which is not in advancement of the steel sector or in furtherance of our business activities, then our business, results of operations and financial position may be adversely affected.

Any downgrading of India's debt rating by an independent agency may harm our ability to raise financing.

Any adverse revisions to India's credit ratings for domestic and international debt by domestic or international rating agencies may adversely affect our ability to raise additional financing and the interest rates and other commercial terms at which such additional financing is available. This could have an adverse effect on our capital expenditure plans, business and financial performance and the price of our Equity Shares.

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The occurrence of natural or man-made disasters may adversely affect our business, results of operations and

financial condition.

The occurrence of natural disasters, including hurricanes, floods, tsunamis, earthquakes, tornadoes, fires, explosions, pandemic disease and man-made disasters, including acts of terrorism and military actions, may adversely affect our financial condition or results of operations. The potential impact of a natural disaster such as the H5N1 "avian flu" virus, or H1N1, the swine flu virus, MERS (Middle East Respiratory Syndrome), Zika, the mosquito virus, on our results of operations and financial position is speculative, and would depend on numerous factors. Although the long-term effect of such diseases cannot currently be predicted, previous occurrences of avian flu, swine flu, MERS and Zika had an adverse effect on the economies of those countries in which they were most prevalent. In the case of any of such diseases, should the virus mutate and lead to human-to-human transmission of the disease, the consequence for our business could be severe. An outbreak of a communicable disease in India or in the particular region in which we have projects would adversely affect our business and financial conditions and the result of operations. We cannot assure prospective investors that such events will not occur in the future or that our business, results of operations and financial condition will not be adversely affected.

If acts of terrorism and other similar threats to security, communal disturbances or riots erupt in India, or if

regional hostilities increase, this would adversely affect the Indian economy, and our business, results of

operations and cash flows. India has experienced communal disturbances, terrorist attacks and riots in the past. If such events recur, our operational and marketing activities may be adversely affected, resulting in a decline in our income. The Asian region has from time to time experienced instances of civil unrest and hostilities among neighboring countries, including those between India and Pakistan. Hostilities and tensions may occur in the future and on a wider scale. Military activity or terrorist attacks in India, as well as other acts of violence or war could influence the Indian economy by creating a perception that investments in India involve higher degrees of risk. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy and could have an adverse effect on the market for securities of Indian companies, including our Equity Shares.

A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian economy, which could adversely impact us. A rapid decrease in reserves would also create risk of higher interest rates

and a consequent slowdown in growth.

Flows to foreign exchange reserves can be volatile, and past declines may have adversely affected the valuation of the Rupee. There can be no assurance that India’s foreign exchange reserves will not decrease in the future. Further, a decline in foreign exchange reserves, as well as other factors, could adversely affect the valuation of the Rupee and could result in reduced liquidity and higher interest rates, which could adversely affect our business, financial condition, results of operations and cash flows.

Financial difficulty and other problems in certain long-term lending institutions and investment institutions in

India could have a negative impact on our business. We are exposed to the risks of the Indian financial system which may be affected by the financial difficulties faced by certain Indian financial institutions because the commercial soundness of many financial institutions may be closely related as a result of credit, trading, clearing or other relationships. This risk, which is referred to as “systemic risk,” may adversely affect financial intermediaries, such as clearing agencies, banks, securities firms and exchanges with whom we interact on a daily basis. Our transactions with these financial institutions expose us to credit risk in the event of default by the counter party, which can be exacerbated during periods of market illiquidity. As the Indian financial system operates within an emerging market, we face risks of a nature and extent not typically faced in more developed economies, including the risk of deposit runs notwithstanding the existence of a national deposit insurance scheme. The problems faced by individual Indian financial institutions and any instability in or difficulties faced by the Indian financial system generally could create adverse market perception about Indian financial institutions and banks. This in turn could adversely affect our business, financial condition, results of operations and cash flows.

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Our ability to raise foreign capital may be constrained by Indian law, which may adversely affect our business,

financial condition, cash flows and results of operations.

As an Indian company, we are subject to exchange controls that regulate borrowing in foreign currencies. Such regulatory restrictions limit our financing sources and hence could constrain our ability to obtain financing on competitive terms and refinance existing indebtedness. In addition, we cannot assure you that the required approvals will be granted to us without onerous conditions, if at all. Limitations on raising foreign debt may have an adverse effect on our business, financial condition, cash flows and results of operations.

Investors in the Equity Shares may not be able to enforce a judgment of a foreign court against us, our directors

or executive officers.

We are a limited liability company incorporated under the laws of India. All of our Directors and key managerial personnel are residents of India and all of our assets and such persons are located in India. As a result, it may not be possible for investors to effect service of process upon us or such persons outside India, or to enforce judgments obtained against such parties in courts outside of India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if that court was of the view that the amount of damages awarded was excessive or inconsistent with public policy. For details, see “Enforcement of Civil Liabilities”. A party seeking to enforce a foreign judgment in India is required to obtain approval from RBI to execute such a judgment or to repatriate outside India any amount recovered. It is uncertain as to whether an Indian court would enforce foreign judgments that would contravene or violate Indian law

A third party could be prevented from acquiring control of us because of anti-takeover provisions under Indian

law.

Indian law and regulations applicable to us may delay, deter or prevent a future takeover or change in control of us, even if a change in control would result in the purchase of your Equity Shares at a premium to the market price or would otherwise be beneficial to you. These provisions may discourage or prevent certain types of transactions involving actual or threatened change in control of us. Under the Takeover Regulations, an acquirer has been defined as any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights or control over a company, whether individually or acting in concert with others. Although these provisions have been formulated to ensure that interests of investors/shareholders are protected, these provisions may also discourage a third party from attempting to take control of us. Consequently, even if a potential takeover of us would result in the purchase of our Equity Shares at a premium to their market price or would otherwise be beneficial to its stakeholders, it is possible that such a takeover would not be attempted or consummated because of Indian takeover regulations. For more information, see “The Securities Market of India”.

Financial instability, economic developments and volatility in securities markets in other countries may also

cause a decline in the price of the Equity Shares.

The Indian market and the Indian economy are influenced by economic and market conditions in other countries, particularly emerging market countries in Asia. Financial turmoil in Europe and elsewhere in the world in recent years has affected the Indian economy. Although economic conditions are different in each country, investors’ reactions to developments in one country can have adverse effects on the securities of companies in other countries, including India. Recently, the currencies of a few Asian countries including India suffered depreciation against the US Dollar owing to amongst other, the announcement by the US government that it may consider reducing its quantitative easing measures. A loss of investor confidence in the financial systems of other emerging markets may cause increased volatility in Indian financial markets and, indirectly, in the Indian economy in general. Any worldwide financial instability could also have a negative impact on the Indian economy. Financial disruptions may occur again and could harm our business, prospects, future financial performance and the prices of the Equity Shares. The global credit and equity markets have experienced substantial dislocations, liquidity disruptions and market corrections in recent years. Since September 2008, liquidity and credit concerns and volatility in the global credit and financial markets increased significantly with the bankruptcy or acquisition of, and government assistance extended to, several major US and European financial institutions. These and other related events, such as the European sovereign debt crisis, have had a significant impact on the global credit and financial markets as a whole, including reduced liquidity, greater volatility, widening of credit spreads and a lack of price transparency in global credit and financial markets. In response to such developments, legislators and financial regulators in the United

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States and other jurisdictions, including India, have implemented a number of policy measures designed to add stability to the financial markets. However, the overall impact of these and other legislative and regulatory efforts on the global financial markets is uncertain, and they may not have the intended stabilizing effects. In the event that the current difficult conditions in the global credit markets continue or if there is any significant financial disruption, such conditions could have an adverse effect on our business, prospects, future financial performance and the trading price of the Equity Shares.

Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.

Our Articles and applicable Indian law govern our corporate affairs. Legal principles relating to these matters and the validity of corporate procedures, Directors’ fiduciary duties and liabilities, and shareholders’ rights may differ from those that would apply to a financial institution or corporate entity in another jurisdiction. Shareholders’ rights under Indian law may not be as extensive as shareholders’ rights under the laws of other countries or jurisdictions. Investors may have more difficulty in asserting their rights as one of our shareholders than as a shareholder of a financial institution or corporate entity in another jurisdiction.

Risks Relating to the Issue

An investor will not be able to sell any of the Equity Shares subscribed in this Issue other than on a recognized

Indian stock exchange for a period of 12 months from the date of the issue of the Equity Shares. The Equity Shares in this Issue are subject to restrictions on transfers. Pursuant to the ICDR Regulations, for a period of 12 months from the date of the issue of Equity Shares in the Issue, QIBs subscribing to the Equity Shares in the Issue may only sell their Equity Shares on the Stock Exchanges and may not enter into any off market trading in respect of these Equity Shares. We cannot be certain that these restrictions will not have an impact on the price of the Equity Shares. Further, allotments made to AIFs in the Issue are subject to the rules and regulations that are applicable to each of them respectively, including in relation to lock-in requirements. This may affect the liquidity of the Equity Shares purchased by investors and it is uncertain whether these restrictions will adversely impact the market price of the Equity Shares purchased by investors.

After this Issue, the price of our Equity Shares may be volatile. The Issue Price will be determined by us in consultation with the Book Running Lead Manager, based on Bids received in compliance with Chapter VIII of the ICDR Regulations, and it may not necessarily be indicative of the market price of the Equity Shares after this Issue is completed. The trading price of our Equity Shares may fluctuate after this Issue due to a variety of factors, including our results of operations and the performance of our business, competitive conditions, general economic, political and social factors, the performance of the Indian and global economy and significant developments in India’s fiscal regime, volatility in the Indian and global securities market, performance of our competitors, the Indian financial services industry and the perception in the market about investments in the financial services industry, changes in the estimates of our performance or recommendations by financial analysts and announcements by us or others regarding contracts, acquisitions, strategic partnerships, joint ventures, or capital commitments. In addition, if the stock markets in general experience a loss of investor confidence, the trading price of our Equity Shares could decline for reasons unrelated to our business, financial condition or operating results. The trading price of our Equity Shares might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. Each of these factors, among others, could adversely affect the price of our Equity Shares. There can be no assurance that an active trading market for the Equity Shares will be sustained after this Issue, or that the price at which the Equity Shares have historically traded will correspond to the price at which the Equity Shares are offered in this Issue or the price at which the Equity Shares will trade in the market subsequent to this Issue.

Fluctuations in the exchange rate between the Indian Rupee and other currencies could have an adverse effect

on the value of our Equity Shares in those currencies, independent of our operating results. Our Equity Shares are quoted in Rupees on the Stock Exchanges. Any dividends in respect of our Equity Shares will be paid in Rupees. Any adverse movement in currency exchange rates during the time it takes to undertake such conversion may reduce the net dividend to investors. In addition, any adverse movement in currency

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exchange rates during a delay in repatriating the proceeds from a sale of Equity Shares outside India, for example, because of a delay in regulatory approvals that may be required for the sale of Equity Shares, may reduce the net proceeds received by investors. The exchange rate between the Indian Rupee and other currencies (such as, the U.S. dollar, the Euro, the pound sterling and the Singapore dollar) has changed substantially in the last two decades and could fluctuate substantially in the future, which may have an adverse effect on the value of our Equity Shares and returns from our Equity Shares in foreign currency terms, independent of our operating results.

Any future issuance of the Equity Shares by us or sales of the Equity Shares by any of our significant

shareholders may adversely affect the trading price of the Equity Shares. Any future issuance of Equity Shares by us, such as a primary offering or pursuant to a preferential allotment, may dilute your shareholding in us, adversely affect the trading price of our Equity Shares and could affect our ability to raise capital through an issuance of our securities. In addition, any perception by investors that such issuances or sales might occur could also affect the trading price of our Equity Shares. Additionally, the disposal of Equity Shares by any of our significant shareholders or our promoters, any future issuance of Equity Shares by any of our significant shareholders or Promoters, any future issuance of Equity Shares by us or the perception that such issuances or sales may occur may significantly affect the trading price of the Equity Shares. Except for the customary lock-up on the Company’s ability to issue equity or equity linked securities discussed in “Placement”, there is no restriction on our ability to issue Equity Shares or our major shareholders’ ability to dispose of their Equity Shares, and we cannot assure you that we will not issue Equity Shares or that any major shareholder will not dispose of, encumber, or pledge, its Equity Shares. Such securities may also be issued at prices below the then current trading price of our Equity Shares. Sales of Equity Shares by our major shareholders may also adversely affect the trading price of our Equity Shares.

Investors may be subject to Indian taxes arising out of capital gains on the sale of our Equity Shares.

Under current Indian tax laws and regulations, capital gains arising from the sale of shares in an Indian company are generally taxable in India. Any gain realized on the sale of listed equity shares on a stock exchange held for more than 12 months will not be subject to capital gains tax in India if Securities Transaction Tax (“STT”) has been paid on the transaction. STT will be levied on and collected by a domestic stock exchange on which the Equity Shares are sold. Any gain realized on the sale of equity shares held for more than 12 months to an Indian resident, which are sold other than on a recognized stock exchange and on which no STT has been paid, will be subject to long term capital gains tax in India. Further, any gain realized on the sale of listed equity shares held for a period of 12 months or less will be subject to short term capital gains tax in India. Capital gains arising from the sale of the Equity Shares will be exempt from taxation in India in cases where the exemption from taxation in India is provided under a treaty between India and the country of which the seller is resident. Generally, Indian tax treaties do not limit India’s ability to impose tax on capital gains. As a result, residents of other countries may be liable for tax in India as well as in their own jurisdiction on a gain upon the sale of the Equity Shares.

Foreign investors are subject to foreign investment restrictions under Indian law that limit our ability to attract

foreign investors, which may adversely impact the market price of the Equity Shares.

Under the foreign exchange regulations currently in force in India, transfers of the Equity Shares between non-residents and residents are freely permitted (subject to certain exceptions) if they comply with the pricing guidelines and reporting requirements specified by the RBI. If the transfer of the Equity Shares is not in compliance with such pricing guidelines or reporting requirements and does not fall under any of the specified exceptions, then the prior approval of the RBI will be required. Additionally, shareholders who seek to convert the Rupee proceeds from a sale of the Equity Shares in India into foreign currency and repatriate that foreign currency from India will require a no-objection or a tax clearance certificate from the income tax authority. We cannot assure you that any required approval from the RBI or any other Government agency can be obtained on any particular terms or at all. These foreign investment restrictions may adversely affect the liquidity and free transferability of the Equity Shares and could result in an adverse effect on the price of the Equity Shares.

There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect a

shareholder’s ability to sell, or the price at which it can sell the Equity Shares at a particular point in time. We are subject to a daily “circuit breaker” imposed by the Stock Exchanges, which does not allow transactions beyond certain specified increases or decreases in the price of the Equity Shares. This circuit breaker operates independently of the index-based market-wide circuit breaker generally imposed by the SEBI on Indian stock exchanges. The maximum movement allowed in the price of the Equity Shares before the circuit breaker is

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triggered is determined by the Stock Exchanges based on the historical volatility in the price and trading volume of the Equity Shares. The Stock Exchanges will inform us of the triggering point of the circuit breaker in effect from time to time, but it may change without our knowledge. This circuit break will limit the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker, there can be no assurance that shareholders will be able to sell the Equity Shares at their preferred price or at all at any particular point in time.

Conditions in the Stock Exchanges may affect the price and liquidity of the Equity Shares.

Indian stock exchanges are smaller than stock markets in developed economies and have in the past experienced substantial fluctuations in the prices of listed securities. Indian stock exchanges have also experienced problems that have affected the market price and liquidity of the securities of Indian companies. These problems have included temporary closure of the stock exchanges to manage extreme market volatility, broker defaults, settlement delays and strikes by brokers. In addition, the governing bodies of Indian stock exchanges have from time to time restricted securities from trading, limited price movements and imposed margin requirements. For more information on the securities market of India, see “The Securities Market of India”

Applicants to the Issue are not allowed to withdraw their Bids after the Bid/Issue Closing Date.

In terms of the ICDR Regulations, applicants in the Issue are not allowed to withdraw their Bids after the Bid/Issue Closing Date. The Allotment of the Equity Shares in this Issue and the credit of such Equity Shares to the applicant’s demat account with depository participant could take approximately seven days and up to 10 days from the Bid/Issue Closing Date. However, there is no assurance that material adverse changes in the international or national monetary, financial, political or economic conditions or other events in the nature of force majeure, material adverse changes in our business, results of operation or financial condition, or other events affecting the applicant’s decision to invest in the Equity Shares, would not arise between the Bid/Issue Closing Date and the date of Allotment of Equity Shares in the Issue. Occurrence of any such events after the Bid/Issue Closing Date could also impact the market price of the Equity Shares. The applicants shall not have the right to withdraw their Bids in the event of any such occurrence. We may complete the Allotment of the Equity Shares even if such events may limit the applicants’ ability to sell the Equity Shares after the Issue or cause the trading price of the Equity Shares to decline.

Investors will be subject to market risks until the Equity Shares credited to the investor’s demat account are listed and permitted to trade.

Investors can start trading the Equity Shares allotted to them only after they have been credited to an investor’s demat account, are listed and permitted to trade. Since the Equity Shares are currently traded on the Stock Exchanges, investors will be subject to market risk from the date they pay for the Equity Shares to the date when trading approval is granted for the same. Further, there can be no assurance that the Equity Shares allocated to an investor will be credited to the investor’s demat account or that trading in the Equity Shares will commence in a timely manner.

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SUMMARY OF THE BUSINESS

We are one of the leading producers of special and alloy steel products in India. Our current product portfolio comprises alloy steel bars and bright bars of various specifications, which finds application in the automotive, engineering, bearings and allied industries. A significant number of our products are primarily sold to tier-1 suppliers that cater to the raw material requirements of a number of major global and Indian automotive OEMs in India, such as 2W, 4W, LCV, MHCV and other vehicle manufacturers. We have obtained approvals from a number of leading OEMs in respect of our products. We also supply special steel with forging applications to the international markets of Thailand, Taiwan, Turkey, Russia, Italy and Spain. Incorporated in Fiscal 2010, our Company was vested with the steel business undertaking of our erstwhile holding company, namely Vardhman Textiles Limited, pursuant to the Scheme in Fiscal 2011. In recent years, we have expanded our production capabilities, product portfolio and customer base. We specialize in the manufacture of steel bars in a variety of sizes, ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. Based on the application needs of tier-1 suppliers to automotive OEMs, we customize the grades of our steel products. Currently, we are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steels. All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. At the aforesaid facility, we have set up an electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA. We own a warehouse in Bilaspur, Haryana. This proximity to one of the major automotive producing hubs of India enables us to provide customized solutions to tier-I suppliers of automotive OEMs, as well as adopt effective supply-chain management strategies to service customer needs in a timely manner. We have leased six warehouses across other key locations in India, and have also engaged one bonded warehouse in Bangkok, Thailand, for our business operations. The sale of special and alloy steel products that find end-use in the 2Ws and 4Ws space constitutes the largest portion of our products sold, both in terms of value and volume. Over the years, we have focused on increasing our customer base, and in Fiscal 2017, we had over 200 customers. We believe that we have strong relationships with our customers, and our top five customers accounted for 36.92% and 32.86% of our total revenues in Fiscal 2016 and Fiscal 2017, respectively. We are driven qualified and dedicated management team, consisting of professionals with experience across various sectors, which is led by our Board of Directors. We believe that our management team’s collective experience and capabilities enable us to understand and anticipate market trends, manage our business operations and growth, leverage customer relationships and respond to changes in customer preferences. Our workforce has grown significantly over the years, and as on December 31, 2017, we had over 350 full-time staff members and over 550 permanent workmen. We believe that our focus on quality, technological upgradation and competitive pricing has helped us in establishing and strengthening our relationships with the tier-I suppliers to a number of major automotive OEMs in India. We maintain a number of prestigious quality management system certificates in line with industry standards, including ISO 14001:2004, ISO 9001:2008, ISO/TS 16949:2009 and OHSAS 18001:2007 certifications. We have also received, and maintain, product certifications from the Bureau of Indian Standards, such as the IS 9550:2001 for bright steel bars, IS 1875:1992 for carbon steel billets, blooms, slabs and bars for forgings, and IS 7283:1992 for hot rolled bars for production of bright bars and machined parts for engineering applications. We also hold product approvals from RDSO for supply of spring steel round for Indian railways application. Over the years, we have won several awards, including the ‘Best Performing Vendor’ from Shriram Pistons & Rings Limited, the ‘Supplier Performance Award’ by Somic ZF Components Limited, the ‘Varroc

Excellence Award – Bronze’ by Varroc, and the first prize in two distinct categories at the Eight National Kaizen Competition held by the Chamber of Industrial & Commercial Undertakings. In accordance with our audited financial statements as of and for the year ended March 31, 2017, prepared in accordance with Ind AS and the Companies Act, (i) our total income for Fiscal 2016 and Fiscal 2017 was Rs. 72,816.65 lakhs and Rs. 75,877.19 lakhs, respectively, (ii) our total comprehensive income for Fiscal 2016 and Fiscal 2017 was Rs. 405.12 lakhs and Rs. 1,891.01 lakhs, respectively. For the nine-month period ended December 31, 2017, our total income from operations was Rs. 65,033.81 lakhs, and our total comprehensive income was Rs. 1,782.19 lakhs.

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Our Strengths

We believe that we have the following competitive strengths:

Efficient Operations with a Greater Responsiveness to Customer Needs All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. At the aforesaid facility, we have set up an electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA. We believe that our electric furnace, being a single route, instills confidence in our customers as it eliminates the possibility of impurities from alternative routes within the same facility. We have also invested in equipment with a relatively small heat size (about 30 MT) as it provides it with the flexibility to meet urgent client demands. Our advanced plant and machinery is enhanced by our robust management processes. We have obtained, and maintain, a number of prestigious quality management system certificates in line with industry standards, including ISO 14001:2004, ISO 9001:2008, ISO/TS 16949:2009 and OHSAS 18001:2007. We believe that one of our key differentiators is our ability to provide customized solutions to automotive OEMs and their tier-1 suppliers, in the form of smaller batch sizes and higher-quality steel grades. Our commitment to quality assurance has resulted in significant investments in sophisticated testing equipment and people training. Our manufacturing facility is equipped with modern testing equipment, including a spectrometer for chemical composition analysis, an immersion tank based UT system for checking steel cleanliness, LECO for gas analysis, XRF machines for anti-mix control, an automatic Magnaflux Leakage Tester and an automatic Ultrasonic Tester. Further, we have a well-equipped on-site chemical lab for wet analysis, an on-site mechanical lab for tensile testing, impact testing, metallurgical lab for evaluation of microstructures, grain size and inclusion analysis of finished material, and a non-destructive testing line. Further, our proximity to Haryana, one of the major automotive producing hubs of India, enables us to adopt effective supply-chain management strategies to service customer needs in a timely manner.

Diversified OEM end-users across the Automotive Sector

We believe that our focus on quality, technological upgradation and competitive pricing has helped us in establishing and strengthening our relationships with the tier-I suppliers to a number of major automotive OEMs in India. A significant part of our products are primarily sold to tier-1 suppliers that cater to the raw material requirements of automotive OEMs in India, such as 2W, 4W, LCV, MHCV and other vehicle manufacturers. We have obtained approvals from a number of leading OEMs in respect of our products. We are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steel, and customize the grades of our steel products based on the application needs of tier-1 suppliers to automotive OEMs. The sale of special and alloy steel products that find end-use in the 2Ws and 4Ws space constitutes the largest portion of our products sold, both in terms of value and volume. Over the years, we have focused on increasing our customer base, and in Fiscal 2017, we had over 200 customers. We believe that we have strong relationships with our customers, and our top five customers accounted for 36.92% and 32.86% of our total revenues in Fiscal 2016 and Fiscal 2017, respectively.

Robust and Expanding Product Portfolio

We specialize in the manufacture of steel bars in a variety of sizes. From Fiscal 2012, when we could produce steel bars ranging from 25 mm to 70 mm, we have significantly expanded our production technologies and production capabilities to enable us to produce steel bars ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. Our current product portfolio comprises alloy steel bars and bright bars of various specifications, and finds applications in the automotive, engineering, bearings and allied industries. These products find end-use in crank-shafts for 2Ws, rear-axle shafts and gear shafts for 4Ws, drive-shafts for LCVs, MHCVs and other vehicles. Based on the application needs of tier-1 suppliers to automotive OEMs, we customize the grades of our steel products. Currently, we are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steel. Further, our marketing team also works closely with OEMs and tier-I suppliers to understand their evolving requirements in respect of special grade steels required for automotive applications, and provides feedback to our R&D team.

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Enhanced Research and Development Capabilities

Our emphasis on research and development (“R&D”) has been a catalyst for the growth of our businesses and contributes significantly to our ability to meet customer needs in a competitive market. Our R&D team, which comprised over 50 individuals as on December 31, 2017, is actively engaged in carrying on normal quality testing of raw materials, work-in-progress and finished goods, as well as optimising process parameters for quality improvement, energy saving and cost reduction. This team includes a number of metallurgists and science graduates, and primarily operates from our in-house R&D centre, which is located at manufacturing facility in Ludhiana, Punjab. For manufacturing superior quality alloy steel, our focus is to improve steel cleanliness at every stage of manufacturing. Our product development and R&D measures have enabled us to receive and maintain product certification from the Bureau of Indian Standards, such as the IS 9550:2001 for bright steel bars, IS 1875:1992 for carbon steel billets, blooms, slabs and bars for forgings, and IS 7283:1992 for hot rolled bars for production of bright bars and machined parts for engineering applications. We also hold product approvals from RDSO for supply of spring steel round for Indian railways application.

Strong Promoters and Experienced Management Team

We are driven by a qualified and dedicated management team, which is led by our Board of Directors. Our management approach is collaborative and function-oriented, and we believe this to be critical to our competitive advantage. Our Promoters have been associated with the Company since its incorporation in 2010, and have played a significant role in the development of our business. Moreover, our senior management consists of experienced and qualified professionals with experience across various sectors. Our management team’s collective experience and capabilities enable us to understand and anticipate market trends, manage our business operations and growth, leverage customer relationships and respond to changes in customer preferences. We will continue to leverage on the experience of our management team and their understanding of the special steels industry, to take advantage of current and future market opportunities.

Our Strategies

Augment our Production Processes and Enhance our Capacities

In 2016, the Indian automotive sector was estimated to be third largest automotive market, by volume, and the automotive industry is forecasted to grow in size by US$ 74 billion in 2015 to US$ 260-300 billion by 2026 (Source: Indian Brand Equity Foundation, Sectoral Report on the Iron and Steel Industry in India – January

2018). Increasing disposable income of the average Indian, fuelling aspiration and easy access to finance is expected to accelerate the demand for automobiles, significantly over the coming years. With increasing capacity addition in the automotive industry, demand for steel from the sector is expected to be robust (Source: Indian

Brand Equity Foundation, Sectoral Report on the Iron and Steel Industry in India – January 2018). We expect continued growth for our products, both in India and globally, spurred by the increasing need for special and alloy steel products in the automotive, engineering, bearings and allied industries. So far, we have been able to meet the growing demand for our products by undertaking periodic debottlenecking, line-balancing and implementation of advanced production technologies. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA at our manufacturing facility located in Ludhiana, Punjab. We manufacture all of our products from this single facility. Going forth, we intend to augment our production processes and enhance our capacities by undertaking capital expenditure. We believe that the augmentation of our production processes and enhancement of our capacities will enable us to address the increasing demand for special and alloy steel products.

Focus on New Product Development and Portfolio Expansion

We aim to leverage our existing portfolio of products, knowhow and manufacturing capabilities to produce niche and higher-margin special and alloy steel products. We will also leverage our in-house R&D team to enable us to continue to undertake new product development. We believe that robust manufacturing capabilities and processes will enable us to successfully manufacture and market a larger variety of products. For instance, from Fiscal 2012, when we could produce steel bars ranging from 25 mm to 70 mm, we have significantly expanded our production technological and production capabilities to enable us to produce steel bars ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. In line with our expansion and growth plans, we intend to

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increase the gamut of products that we currently provide by exploring opportunities to diversifying into non-automotive high value steels.

Increase Global Footprint

To grow our international business, we have created a dedicated marketing team that has enabled us expand our geographical footprint. Currently, we supply special steel with forging applications to the international markets of Thailand, Taiwan, Turkey, Russia, Italy and Spain. While our revenues from exports decreased from Rs. 4,250.67 lakhs in Fiscal 2016 to Rs. 3,953.28 lakhs in Fiscal 2017, the volume of exports of rolled products was significantly higher in Fiscal 2017 as compared to Fiscal 2016. We believe that our recent growth in exports has been driven by our ability to meet the stringent product quality and delivery timelines of our international customers. We intend to continue to focus on increasing our global footprint in the years to come.

Continue to Improve Operations and Profitability through Strategic Initiatives

We believe that our focus on operational excellence and providing customized solutions has contributed to the growth of our business whilst also strengthening the trust and engagement that we share with our customers. We periodically analyse our operational and maintenance processes so as to improve efficiencies, and complement these measures by investing in new technology, superior machines, adequate redundancies and small automation. We believe that the various strategic initiatives that we have implemented, including the continued investment in our manufacturing facilities, developing and enhancing our in-house capabilities, and our supply-chain management protocols will continue to play a critical role in our future success. Accordingly, we intend to build on our existing strategic initiatives to achieve operational excellence that translates into financial strength and performance.

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INDUSTRY OVERVIEW

The information in this section includes extracts from publicly available information, data and statistics and has

been derived from various government publications and industry sources. Neither the Company, nor the BRLM

or any other person connected with the Issue has independently verified this information. Industry sources and

publications generally state that the information contained therein has been obtained from sources believed to be

reliable, but their accuracy, completeness and underlying assumptions are not guaranteed and their reliability

cannot be assured. Industry sources and publications are also prepared based on information as of specific dates

and may no longer be current or reflect current trends. Industry sources and publications may also base their

information on estimates, projections, forecasts and assumptions that may prove to be incorrect. Accordingly,

investors should not place undue reliance on, or base their investment decision on this information.

The Global Economy

The global upswing in economic activity is strengthening. Global growth, which in 2016 was the weakest since the global financial crisis at 3.2 percent, is projected to rise to 3.6 percent in 2017 and to 3.7 percent in 2018. The growth forecasts for both 2017 and 2018 are 0.1 percentage point stronger compared with the April 2017 World Economic Outlook (WEO) forecast. Broad-based upward revisions in the euro area, Japan, emerging Asia, emerging Europe, and Russia—where growth outcomes in the first half of 2017 were better than expected—more than offset downward revisions for the United States and the United Kingdom. (Source: “World Economic Outlook, October 2017 Seeking Sustainable Growth: Short-Term Recovery, Long-

Term Challenges” by International Monetary Fund)

The Indian Economy

India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF) and it is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. India’s GDP increased 7.1 per cent in 2016-17 and is expected to reach a growth rate of 7 per cent by September 2018. India's gross domestic product (GDP) grew by 6.3 per cent in July-September 2017 quarter as per the Central Statistics Organisation (CSO). Corporate earnings in India are expected to grow by over 20 per cent in FY 2017-18 supported by normalisation of profits, especially in sectors like automobiles and banks, according to Bloomberg consensus. The tax collection figures between April-June 2017 Quarter show an increase in Net Indirect taxes by 30.8 per cent and an increase in Net Direct Taxes by 24.79 per cent year-on-year, indicating a steady trend of healthy growth. India has improved its ranking in the World Bank's Doing Business Report by 30 spots over its 2017 ranking and is ranked 100 among 190 countries in 2018 edition of the report. Moody’s upgraded India’s sovereign rating after 14 years to Baa2 with a stable economic outlook. India's ranking in the world has improved to 126 in terms of its per capita GDP, based on purchasing power parity (PPP) as it increased to US$ 7,170 in 2017, as per data from the International Monetary Fund (IMF). The World Bank has stated that private investments in India is expected to grow by 8.8 per cent in FY 2018-19 to overtake private consumption growth of 7.4 per cent, and thereby drive the growth in India's gross domestic product (GDP) in FY 2018-19.

(Source: Indian Brand Equity Foundation website at www.ibef.org/economy/indian-economy-overview)

Overview of the Indian Steel Industry

India became the 2nd largest crude steel producer in 2017, as large public and private sector players strengthen steel production capacity in view of rising demand. The total finished steel production in India has increased at a CAGR of 8.39 per cent during FY12–17, with country’s steel production reaching to 111.254 MTPA in FY17. Moreover, the capacity has increased to 128.28 MT in FY17, which is 5.17 per cent more than FY16, while in the coming ten years the country is anticipated to produce 300 MT of steel. India’s comparatively low per capita steel consumption and expected growth in consumption due to growing infrastructure construction, automobile and railways sectors has offered scope for growth. Further, National Mineral Development Corporation is expected to increase the iron ore production 75 MTPA until 2021, indicating new opportunities in the sector.

http://www.ibef.org/economy/indian-economy-overview

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The domestic players’ investments in expanding and upgrading manufacturing facilities, are expected to reduce reliance on imports. In addition, the entry of international players would provide benefits in terms of capital resources, technical knowhow and more competitive industry dynamics. (Source: Indian Brand Equity Foundation, Sectoral Report on the Iron and Steel Industry in India – January

2018)

Structure of the Steel Sector

(Source: Indian Brand Equity Foundation, Sectoral Report on the Iron and Steel Industry in India – January

2018)

Steel Production in India

In FY17, crude steel production in India was 97.42 MT, with the total crude steel production growing at a CAGR of 5.49 per cent over the last 6 years. The steel sector contributes over 2 per cent to the GDP of the nation and provides 20 lakh jobs in the country.

1April to December 2017, 2CAGR is till FY17

During April-December 2017, crude steel and finished steel production in India stood at 75.498 MT and 79.294 MT respectively. As of March 2017, the capacity utilization of steel producers is set to increase with strong export demand and signs of revival in domestic sales. Steel manufacturing output of India is expected to increase to 128.6 MT by 2021, accelerating the country’s share of global steel production from 5.4 per cent in 2017 to 7.7 per cent by 2021. India’s steel output is expected to grow at a CAGR of 8.9 per cent during 2017-21 and India is expected to become top global steel producer

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1April to December 2017, 2CAGR is till FY17


2018)

The Indian Steel Market

In 2015, India was the only large economy in the world where steel demand continued to demonstrate positive growth at 5.3 %, as against negative growth in China -5.4%, and Japan -7.0%. India’s growing urban infrastructure and manufacturing sectors indicate that demand is likely to remain robust in the years ahead. Notwithstanding the current challenges, Indian steel industry still has significant potential for growth, underscored by the fact that the per capita steel consumption in the country at 61 kg (incl. rural consumption at 10 kg) is much lower than the global average of 208 kg. Going forward, the accelerated spend in infrastructure sector, expansion of railways network, development of domestic shipbuilding industry, opening up of defence sector for private participation, anticipated growth in automobile and capital goods industry and the construction in urban and rural areas, are expected to create significant demand for steel in the country. Growth in steel consumption in a country is typically linked to the economic growth and steel intensity. While growth in GDP is a crucial determinant of growth in overall consumption, steel intensity is the definitive parameter for an economy and determines the growth rate of steel demand vis-à-vis consumption over time. (Source:

Ministry of Steel, National Steel Policy 2017)

Steel Consumption in India

Total consumption of steel was 83.9 MT in FY17 as compared to 81.5 MT in FY16. Consumption during April-December 2017 stood at 64.867 MT. Driven by rising infrastructure development and growing demand for automobiles, steel consumption is expected to reach 104 MT by 2017. It is expected that consumption per capita would increase supported by rapid growth in the industrial sector and rising infra expenditure projects in railways, roads and highways, etc.

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The consumption of real steel grew at a CAGR of 5.44 per cent during FY08-FY17.

1FY18 – Up to December, 2CAGR – up to FY17


2018) The demand for finished steel in India is estimated to grow from 81.5 MT in Fiscal 2015-2016 to 230 MT by Fiscal 2030-31. A sector-wise break-up for the aforesaid is as set out below:

Steel Demand

81.5 MT Steel Demand

230 MT

(Source: Ministry of Steel, National Steel Policy 2017)

Trends in Imports and Exports of Steel

India was a net exporter of steel in 2013-14. However, due to global downturn in steel demand and excess capacities in major steelmaking countries such as China and Japan, India witnessed a significant surge in imports in 2014-15, which continued in 2015-16 as well. (Source: Ministry of Steel, National Steel Policy 2017) In April - December 2017, consumption of finished steel grew at a rate of 5.2 per cent to reach 64.867 MT as against 54.487 MT during the same period in 2016. In order to reduce imports and boost domestic steel manufacturing industry, the Central Government extended the minimum import price (MIP) on 19 products, till February 4, 2017. These products include semi-finished products of iron or non-alloyed steel, flat-rolled products of different widths, bars and rods. According to DGFT, the minimum import price (MIP) for these products would range between US$ 643-752 per tonne. The Indian Government imposed Anti-Dumping Duty on 47 steel products for five years beginning from August 2016.

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In FY 2016-17, the country’s steel exports has increased by 102.1 per cent year-on-year to 8.24 million tonnes (MT), as compared to 4.07 MT in 2015-16. In FY 2016-17, the country’s steel imports fell by 36.6 per cent year-on-year to 7.42 MT, as compared to 11.7 MT in 2015-16. Exports and Imports of steel grew 52.9 per cent and 10.9 per cent to reach 7.6 MT and 6.1 MT during April-December 2017, respectively. (Source: Indian Brand Equity Foundation, Sectoral Report on the Iron and Steel Industry in India – January

2018)

1FY18 – Up to December


2018)

Notable Trends in the Indian Steel Industry

Growing investments

Most of the companies in the industry are undertaking modernization and expansion of plants to be more cost efficient;

An Inter-Ministerial Group (IMG) functioning under the Ministry of Steel, is monitoring and coordinating major steel investments across the country.

Increased emphasis on technological innovations

Indian steel companies have now started benchmarking their facilities and processes against global standards, to enhance productivity;

These steps are expected to help Indian companies improve raw material and energy consumption as well as improve compliance with environmental and pollution yardsticks;

Companies are attempting coal gasification and gas-based Direct-Reduced Iron (DRI) production;

Other alternative technologies such as Hlsmelt, Finex and ITmk3 being adopted to produce hot metal;

Ministry of Steel has issued necessary direction to the steel companies to frame a strategy for taking up more R&D projects by spending at least 1 per cent of their sales turnover on R&D to facilitate technological innovations in the steel sector;

Ministry has established a task force to identify the need for technology development and R&D;

Ministry has adopted energy efficiency improvement projects for mills operating with obsolete technologies.


2018)

51

Key Growth Drivers

Growing demand in the automotive sector:

o Automobile production in India expanded at a CAGR of 8.76 per cent during FY10–17;

o The automotive industry is forecasted to grow in size by US$ 74 billion in 2015 to US$ 260-300 billion by 2026;

o With increasing capacity addition in the automotive industry, demand for steel from the sector is expected to be robust;

o In 2016, Indian automotive sector is estimated to be 3rd largest automotive market, by volume.

Recovery of demand in the capital goods industry:

o The capital goods sector accounts for 11 per cent of steel consumption and expected to increase

14/15 per cent by 2025-26 and has the potential to increase in tonnage and market share; o Corporate India’s capex is expected to grow and generate greater demand for steel.

Increasing infrastructure investments:

o The infrastructure sector accounts for 9 per cent of steel consumption and expected to increase 11

per cent by 2025-26; o Due to such a huge investment in infrastructure the demand for long steel products would increase

in the years ahead.

Rising demand for consumer durables and capital goods:

o Over FY05–20F, the consumer durables sector will expand at a CAGR of 12.54 per cent as growth

in disposable income is expected to result in increase in demand for such products; o The consumer durables market is estimated at US$ 15 billion and is projected to reach US$ 20.6

billion in FY20;

o The capital goods sector accounts for 11 per cent of steel consumption and expected to increase 14/15 per cent by 2025-26 and has the potential to increase in tonnage and market share;

o Corporate India’s capex is expected to grow and generate greater demand for steel.

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Opportunities in the railways sector:

o The Dedicated Rail Freight Corridor (DRFC) network expansion would be enhanced in future o Gauge conversion, setting up of new lines and electrification would drive steel demand; o Indian Railways started the PPP mode of funding and has already awarded projects worth around

US$ 1.73 billion during the 1st 7 months (April-October) of FY16; o In January 2017, Crisil estimated that the railways sector could create business opportunities worth

US$ 99.65 billion.

Policy support aiding growth:

National Steel Policy 2017

o New National Steel Policy has been formulated by the Ministry of Steel in 2016, which will retain

the objectives included in National Steel Policy (NSP) 2005. It aims at covering broader aspects of steel sector across the country including environment and facilitation of new steel projects, growth of steel demand in India and raw materials;

o Under the policy, the central government stated that all the government tenders will give preference to domestically manufactured steel and iron products. Moreover, Indian steel makers importing intermediate products or raw materials can claim benefits of domestic procurement provision by adding minimum of 15 per cent value to the product;

o The New steel policy, 2017 aspires to achieve 300MT of steel making capacity by 2030. This would translate into additional investment of Rs 10 lakh Crore (US$ 156.08 billion) by 2030-31;

o New Steel Policy seeks to increase per capita steel consumption to the level of 160 kgs by 2030 from existing level of around 60 kg.

R&D and Innovation

o A new scheme, ‘The scheme for the promotion of R&D in the iron and steel sector’, has been

approved with budgetary provision of US$ 24.6 million to initiate and implement the provisions of the scheme as per the 11th Five-Year Plan which has continued in the 12th Five Year Plan;

o The Ministry of Steel is also actively participating in the Impacting Research Innovation & Technology (IMPRINT) & Uchchatar Avishkar Yojana (UAY) Schemes launched by Ministry of Human Resource Development. IMPRINT scheme aims to solve major engineering and technology challenges and UAY is promoting industry sponsored, outcome-oriented research projects; and

o Ministry of Steel is setting up an industry driven institutional mechanism - Steel Research & Technology Mission of India (SRTMI) – with an initial corpus of US$ 30.89 million. The institute will facilitate joint collaborative research projects in the sector.

Rise in Export Duty

o The government hiked the export duty on iron ore to 30 per cent ad valorem on all varieties of iron

ore (except pellets). Reduction in custom duty on plants and equipment

o The government has reduced the basic custom duty on the plants and equipment required for initial

set up or expansion of iron ore pellets plants and iron ore beneficiation plants from 7.5/5 per cent to 2.5 per cent;

o Customs duty on imported flat-rolled stainless steel products has been increased to 10 per cent from 7.5 per cent;

o Basic customs duty on steel grade dolomite and steel grade limestone is being reduced from 5 per cent to 2.5 per cent. Basic customs duty is being reduced from 10 per cent to 5 per cent on forged steel rings used in the manufacture of bearings of wind-operated electricity generators.

Push due to Make in India initiative

o Going forward, the Make in India initiative and policy decisions taken under it are expected to

augment the country’s steel production capacity and resolve issues related to the mining industry

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Foreign Direct Investment

o 100 per cent FDI through the automatic route is allowed in the Indian steel sector.

Increasing investments:

o Rising investments from domestic and foreign players; o Increasing number of MoUs signed to boost investment in steel; o Foreign investment of nearly US$ 40 billion committed in the steel sector.


2018)

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SUMMARY OF THE ISSUE

The following is a general summary of the terms of the Issue. This summary should be read in conjunction with,

and is qualified in its entirety by, the more detailed information appearing elsewhere in this Placement Document,

including under the sections titled “Risk Factors”, “Use of Proceeds”, “Issue Procedure”, “Description of

Equity Shares” and “Placement and Lock-Up”.

Issuer Vardhman Special Steels Limited

Issue Size

Up to 35,72,000 Equity Shares aggregating up to Rs. 5,000.80 lakhs A minimum of 10% of the Issue Size, or at least 3,57,200 Equity Shares, shall be available for allocation to Mutual Funds only, and the balance 32,14,800 Equity Shares shall be available for allocation to all QIBs, including Mutual Funds. In case of under-subscription or no subscription in the portion available for Allocation only to Mutual Funds, such portion or part thereof may be Allocated to other QIBs.

Face Value Rs. 10 per Equity Share

Floor Price Rs. 146.11 per Equity Share

Issue Price Rs. 140.00 per Equity Share

Date of Board Resolution November 4, 2017

Date of Shareholders

approval December 6, 2017

Eligible Investors

Only QIBs (as defined in regulation 2(1)(zd) of the ICDR Regulations), which are (i) entities resident in India, (ii) not otherwise excluded pursuant to Regulation 86(1)(b) of the ICDR Regulations, (i) not FPIs, including FII, (ii) not multilateral or bilateral development financial institutions, and (iii) not FVCIs, are eligible to invest in the Issue. See “Issue Procedure - Qualified Institutional Buyers”.

Equity Shares issued and

outstanding immediately

before the issue

3,21,25,376 Equity Shares

Equity Shares issued and

outstanding immediately

after the issue

3,56,97,376 Equity Shares

Listing The Company has received in-principle approval from the Stock Exchanges under Regulation 28(1) of the Listing Regulations on February 14, 2018

Dividend For more information, see the sections titled “Description of Equity Shares”, “Dividends” and “Taxation”

Taxation See the section titled “Taxation”

Transfer Restrictions

The Equity Shares being Allotted shall not be sold for a period of one year from the date of Allotment except on the floor of the Stock Exchanges. The Equity Shares are subject to certain selling and transfer restrictions. For details, see the sections titled “Selling Restrictions” and “Transfer Restrictions”

Use of Proceeds

Net proceeds of the Issue (after deduction of fees, commissions and expenses in relation to the Issue) are expected to total approximately Rs. 4,850.80 lakhs

Lock-up See the section titled “Placement and Lock-up”

Risk Factors See the section titled “Risk Factors” for a discussion of factors you should consider before deciding whether to subscribe to the Equity Shares

Pay-in Date Last date specified in the CAN for payment of Bid monies by the QIBs

Closing Date The allotment of the Equity Shares offered pursuant to the Issue is expected to be made on or about Wednesday, February 21, 2018

Status and Ranking Equity Shares being issued shall be subject to the provisions of our Company’s Memorandum and Articles of Association and shall rank pari

55

passu in all respects with the existing Equity Shares, including rights in respect of dividends. The Shareholders will be entitled to participate in dividends and other corporate benefits, if any, declared by our Company after the Closing Date, in compliance with the Companies Act, the Listing Regulations and other applicable laws and regulations. See the section titled “Description of Equity

Shares”

Security Codes for the Equity

Shares

ISIN INE050M01012 BSE Code 534392 NSE Symbol VSSL

56

USE OF PROCEEDS

The total proceeds of the Issue will be Rs. 5,000.80 lakhs. After deducting the Issue expenses of approximately Rs. 150.00 lakhs, the net proceeds of the Issue will be approximately Rs. 4,850.80 lakhs (“Net Proceeds”). Subject to compliance with applicable laws and regulations, our Company intends to use the Net Proceeds towards capital expenditure, which is intended to augment our production processes and enhance our capacities; strategic initiatives, such as investments in our research and development endeavours; repayment of our outstanding indebtedness; funding our working capital requirements; investment in growth opportunities and general corporate purposes. As permissible under applicable law, our management will have flexibility in deploying the Net Proceeds, including the quantum and timing thereof, based on the business requirements of the Company. The Net Proceeds are not proposed to be utilised towards any specific project. Accordingly, the project-specific disclosure requirements under the ICDR Regulations in relation to the break-up of costs, means of financing and proposed deployment status at each stage, are not applicable.

Interim Use of Net Proceeds

Pending utilisation for the purposes described above, the Company intends to temporarily invest funds in creditworthy instruments, including money market mutual funds and deposits with banks and corporates. Such investments would be in accordance with the investment policies as approved by the Board from time to time and all applicable laws and regulations.

Other Confirmations

As on date of this Placement Document, neither the Promoters nor the Directors are making any contribution either as part of the Issue or separately in furtherance of the use of the proceeds. Further, none of the Directors, Promoters or key managerial personnel of our Company have any financial or other material interest in the Issue.

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BUSINESS

The following information should be read together with the more detailed financial and other information

contained in the sections “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements”. Some of the information in this section, including information with respect to our plans and strategies, contains forward-looking statements that involve risks and uncertainties.

You should read the section “Forward-Looking Statements” for a discussion of the risks and uncertainties related to those statements. Our actual results may differ materially from those expressed in or implied by these forward-

looking statements.

In this section, a reference to the “Company”, “our”, “us” or “we” means Vardhman Special Steels Limited. All financial information included herein is based on the Financial Statements included in this Placement Document

in the section “Financial Statements”.

Overview

We are one of the leading producers of special and alloy steel products in India. Our current product portfolio comprises alloy steel bars and bright bars of various specifications, which finds application in the automotive, engineering, bearings and allied industries. A significant number of our products are primarily sold to tier-1 suppliers that cater to the raw material requirements of a number of major global and Indian automotive OEMs in India, such as 2W, 4W, LCV, MHCV and other vehicle manufacturers. We have obtained approvals from a number of leading OEMs in respect of our products. We also supply special steel with forging applications to the international markets of Thailand, Taiwan, Turkey, Russia, Italy and Spain. Incorporated in Fiscal 2010, our Company was vested with the steel business undertaking of our erstwhile holding company, namely Vardhman Textiles Limited, pursuant to the Scheme in Fiscal 2011. In recent years, we have expanded our production capabilities, product portfolio and customer base. We specialize in the manufacture of steel bars in a variety of sizes, ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. Based on the application needs of tier-1 suppliers to automotive OEMs, we customize the grades of our steel products. Currently, we are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steels. All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. At the aforesaid facility, we have set up an electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA. We own a warehouse in Bilaspur, Haryana. This proximity to one of the major automotive producing hubs of India enables us to provide customized solutions to tier-I suppliers of automotive OEMs, as well as adopt effective supply-chain management strategies to service customer needs in a timely manner. We have leased six warehouses across other key locations in India, and have also engaged one bonded warehouse in Bangkok, Thailand, for our business operations. The sale of special and alloy steel products that find end-use in the 2Ws and 4Ws space constitutes the largest portion of our products sold, both in terms of value and volume. Over the years, we have focused on increasing our customer base, and in Fiscal 2017, we had over 200 customers. We believe that we have strong relationships with our customers, and our top five customers accounted for 36.92% and 32.86% of our total revenues in Fiscal 2016 and Fiscal 2017, respectively. We are driven qualified and dedicated management team, consisting of professionals with experience across various sectors, which is led by our Board of Directors. We believe that our management team’s collective experience and capabilities enable us to understand and anticipate market trends, manage our business operations and growth, leverage customer relationships and respond to changes in customer preferences. Our workforce has grown significantly over the years, and as on December 31, 2017, we had over 350 full-time staff members and over 550 permanent workmen. We believe that our focus on quality, technological upgradation and competitive pricing has helped us in establishing and strengthening our relationships with the tier-I suppliers to a number of major automotive OEMs in India. We maintain a number of prestigious quality management system certificates in line with industry standards, including ISO 14001:2004, ISO 9001:2008, ISO/TS 16949:2009 and OHSAS 18001:2007 certifications. We have also received, and maintain, product certifications from the Bureau of Indian Standards, such as the IS 9550:2001 for bright steel bars, IS 1875:1992 for carbon steel billets, blooms, slabs and bars for forgings, and IS 7283:1992 for hot rolled bars for production of bright bars and machined parts for engineering applications. We also hold product approvals from RDSO for supply of spring steel round for Indian railways

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application. Over the years, we have won several awards, including the ‘Best Performing Vendor’ from Shriram Pistons & Rings Limited, the ‘Supplier Performance Award’ by Somic ZF Components Limited, the ‘Varroc


Our Strengths

We believe that we have the following competitive strengths:

Efficient Operations with a Greater Responsiveness to Customer Needs All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. At the aforesaid facility, we have set up an electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA. We believe that our electric furnace, being a single route, instills confidence in our customers as it eliminates the possibility of impurities from alternative routes within the same facility. We have also invested in equipment with a relatively small heat size (about 30 MT) as it provides it with the flexibility to meet urgent client demands. Our advanced plant and machinery is enhanced by our robust management processes. We have obtained, and maintain, a number of prestigious quality management system certificates in line with industry standards, including ISO 14001:2004, ISO 9001:2008, ISO/TS 16949:2009 and OHSAS 18001:2007. We believe that one of our key differentiators is our ability to provide customized solutions to automotive OEMs and their tier-1 suppliers, in the form of smaller batch sizes and higher-quality steel grades. Our commitment to quality assurance has resulted in significant investments in sophisticated testing equipment and people training. Our manufacturing facility is equipped with modern testing equipment, including a spectrometer for chemical composition analysis, an immersion tank based UT system for checking steel cleanliness, LECO for gas analysis, XRF machines for anti-mix control, an automatic Magnaflux Leakage Tester and an automatic Ultrasonic Tester. Further, we have a well-equipped on-site chemical lab for wet analysis, an on-site mechanical lab for tensile testing, impact testing, metallurgical lab for evaluation of microstructures, grain size and inclusion analysis of finished material, and a non-destructive testing line. Further, our proximity to Haryana, one of the major automotive producing hubs of India, enables us to adopt effective supply-chain management strategies to service customer needs in a timely manner.

Diversified OEM end-users across the Automotive Sector

We believe that our focus on quality, technological upgradation and competitive pricing has helped us in establishing and strengthening our relationships with the tier-I suppliers to a number of major automotive OEMs in India. A significant part of our products are primarily sold to tier-1 suppliers that cater to the raw material requirements of automotive OEMs in India, such as 2W, 4W, LCV, MHCV and other vehicle manufacturers. We have obtained approvals from a number of leading OEMs in respect of our products. We are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steel, and customize the grades of our steel products based on the application needs of tier-1 suppliers to automotive OEMs. The sale of special and alloy steel products that find end-use in the 2Ws and 4Ws space constitutes the largest portion of our products sold, both in terms of value and volume. Over the years, we have focused on increasing our customer base, and in Fiscal 2017, we had over 200 customers. We believe that we have strong relationships with our customers, and our top five customers accounted for 36.92% and 32.86% of our total revenues in Fiscal 2016 and Fiscal 2017, respectively.

Robust and Expanding Product Portfolio

We specialize in the manufacture of steel bars in a variety of sizes. From Fiscal 2012, when we could produce steel bars ranging from 25 mm to 70 mm, we have significantly expanded our production technologies and production capabilities to enable us to produce steel bars ranging from lower diameters such as 16 mm to higher

59

diameters such 90 mm to 110 mm. Our current product portfolio comprises alloy steel bars and bright bars of various specifications, and finds applications in the automotive, engineering, bearings and allied industries. These products find end-use in crank-shafts for 2Ws, rear-axle shafts and gear shafts for 4Ws, drive-shafts for LCVs, MHCVs and other vehicles. Based on the application needs of tier-1 suppliers to automotive OEMs, we customize the grades of our steel products. Currently, we are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steel. Further, our marketing team also works closely with OEMs and tier-I suppliers to understand their evolving requirements in respect of special grade steels required for automotive applications, and provides feedback to our R&D team.

Enhanced Research and Development Capabilities

Our emphasis on research and development (“R&D”) has been a catalyst for the growth of our businesses and contributes significantly to our ability to meet customer needs in a competitive market. Our R&D team, which comprised over 50 individuals as on December 31, 2017, is actively engaged in carrying on normal quality testing of raw materials, work-in-progress and finished goods, as well as optimising process parameters for quality improvement, energy saving and cost reduction. This team includes a number of metallurgists and science graduates, and primarily operates from our in-house R&D centre, which is located at manufacturing facility in Ludhiana, Punjab. For manufacturing superior quality alloy steel, our focus is to improve steel cleanliness at every stage of manufacturing. Our product development and R&D measures have enabled us to receive and maintain product certification from the Bureau of Indian Standards, such as the IS 9550:2001 for bright steel bars, IS 1875:1992 for carbon steel billets, blooms, slabs and bars for forgings, and IS 7283:1992 for hot rolled bars for production of bright bars and machined parts for engineering applications. We also hold product approvals from RDSO for supply of spring steel round for Indian railways application.

Strong Promoters and Experienced Management Team

We are driven by a qualified and dedicated management team, which is led by our Board of Directors. Our management approach is collaborative and function-oriented, and we believe this to be critical to our competitive advantage. Our Promoters have been associated with the Company since its incorporation in 2010, and have played a significant role in the development of our business. Moreover, our senior management consists of experienced and qualified professionals with experience across various sectors. Our management team’s collective experience and capabilities enable us to understand and anticipate market trends, manage our business operations and growth, leverage customer relationships and respond to changes in customer preferences. We will continue to leverage on the experience of our management team and their understanding of the special steels industry, to take advantage of current and future market opportunities.

Our Strategies

Augment our Production Processes and Enhance our Capacities

In 2016, the Indian automotive sector was estimated to be third largest automotive market, by volume, and the automotive industry is forecasted to grow in size by US$ 74 billion in 2015 to US$ 260-300 billion by 2026 (Source: Indian Brand Equity Foundation, Sectoral Report on the Iron and Steel Industry in India – January

2018). Increasing disposable income of the average Indian, fuelling aspiration and easy access to finance is expected to accelerate the demand for automobiles, significantly over the coming years. With increasing capacity addition in the automotive industry, demand for steel from the sector is expected to be robust (Source: Indian

Brand Equity Foundation, Sectoral Report on the Iron and Steel Industry in India – January 2018). We expect continued growth for our products, both in India and globally, spurred by the increasing need for special and alloy steel products in the automotive, engineering, bearings and allied industries. So far, we have been able to meet the growing demand for our products by undertaking periodic debottlenecking, line-balancing and implementation of advanced production technologies. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA at our manufacturing facility located in Ludhiana, Punjab. We manufacture all of our products from this single facility. Going forth, we intend to augment our production processes and enhance our capacities by undertaking capital expenditure. We believe that the augmentation of our production processes and enhancement of our capacities will enable us to address the increasing demand for special and alloy steel products.

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Focus on New Product Development and Portfolio Expansion

We aim to leverage our existing portfolio of products, knowhow and manufacturing capabilities to produce niche and higher-margin special and alloy steel products. We will also leverage our in-house R&D team to enable us to continue to undertake new product development. We believe that robust manufacturing capabilities and processes will enable us to successfully manufacture and market a larger variety of products. For instance, from Fiscal 2012, when we could produce steel bars ranging from 25 mm to 70 mm, we have significantly expanded our production technological and production capabilities to enable us to produce steel bars ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. In line with our expansion and growth plans, we intend to increase the gamut of products that we currently provide by exploring opportunities to diversifying into non-automotive high value steels.

Increase Global Footprint

To grow our international business, we have created a dedicated marketing team that has enabled us expand our geographical footprint. Currently, we supply special steel with forging applications to the international markets of Thailand, Taiwan, Turkey, Russia, Italy and Spain. While our revenues from exports decreased from Rs. 4,250.67 lakhs in Fiscal 2016 to Rs. 3,953.28 lakhs in Fiscal 2017, the volume of exports of rolled products was significantly higher in Fiscal 2017 as compared to Fiscal 2016. We believe that our recent growth in exports has been driven by our ability to meet the stringent product quality and delivery timelines of our international customers. We intend to continue to focus on increasing our global footprint in the years to come.

Continue to Improve Operations and Profitability through Strategic Initiatives

We believe that our focus on operational excellence and providing customized solutions has contributed to the growth of our business whilst also strengthening the trust and engagement that we share with our customers. We periodically analyse our operational and maintenance processes so as to improve efficiencies, and complement these measures by investing in new technology, superior machines, adequate redundancies and small automation. We believe that the various strategic initiatives that we have implemented, including the continued investment in our manufacturing facilities, developing and enhancing our in-house capabilities, and our supply-chain management protocols will continue to play a critical role in our future success. Accordingly, we intend to build on our existing strategic initiatives to achieve operational excellence that translates into financial strength and performance.

Our Products

We specialize in the manufacture of steel bars in a variety of sizes, ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. Currently, we are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steel. We currently manufacture the following categories of steel:

Carbon Steel: Plain, Carbon Manganese;

Case Hardening Steel: Chrome, Chrome Manganese, Chrome-Moly, Nickel Chrome Moly;

Through Hardening Steel: Chrome, Chrome Moly, SCM Category, Moly, Chrome/Ni-Moly; and

Other categories: Boron, Micro alloyed, Vanadium. The table below sets out details of the various product size ranges that we currently manufacture:

Product Specification

(in mm)

Round Bar (diameter) 16 to 110

Round Corner Square 45 to 125

Peeled / Peeled and Center-less Ground Bar (diameter)

14 to 78

Drawn / Drawn and Center-less Ground Bar (diameter)

18 to 50

Hexagonal Sizes (across flats) 19.5 to 40.5

Our Operations

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Manufacturing Process

The following diagram sets forth our typical manufacturing process for steel bars:

Manufacturing Facility

All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. At the aforesaid facility, we have set up an electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA. This facility is in close proximity to Haryana, which is one of the major automotive producing hubs of India, and enables us to provide customized solutions to automotive OEMs and their tier-1 suppliers, as well as adopt effective supply-chain management strategies to service customer needs in a timely manner.

Steel making in the Electric Arc Furnace is divided into oxidation and reducing periods, as follows:

Oxidation: In this process, the main elements oxidized are silicon, manganese, phosphorus and carbon. Various fluxes like calcined dololime and colcined lime are used to form slag i.e. impurities. The slag is taken out by tilting the furnace. Tap to tap time in furnace takes about 85 minute per heat.

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Reducing Period: After slag is taken off, part of the additions are made as per the required chemistry of the target grade. Samples are also drawn for chemical analysis. After melting and taking off slag, the liquid metal is tapped into a preheated ladle of matching capacity through the tapping hole. Tap to tap time in furnace takes 60 minute per heat.

Steel Melting Shop

Electric Arc Furnace

The scrap is filled in the charging bucket with the help of a crane fitted with an electromagnet. The scrap mix percentage is decided based on the steel grade to be produced. The scrap is then charged in the Electric Arc Furnace with the help of charging bucket. On completion of the charging process, the three electrodes are lowered through the roof into the Electric Arc Furnace to make a contact with the scrap. The current is switched on, and due to electric arcing, heat is generated which converts the charge into liquid metal. Ladle Refining Furnace

The liquid metal is taken to the Ladle Refining Furnace after tapping into a ladle. While continuous arcing at relatively lower current is taking place to maintain and raise temperature for further processing at this station, alloying of various elements, such as chrome, nickel, moly, aluminium and/or silicon, is undertaken at the same time with relative ferroalloys depending upon the target steel grade. During the process, samples are drawn to be checked on the spectrometer so as to determine the quantum of alloying elements to be added to the liquid metal based on target chemistry of steel grades. The time taken in the Ladle Refining Furnace is 60 minutes per heat.

Vacuum Degassing

After processing at Ladle Refining Furnace, the ladle filled with liquid metal is then taken to the Vacuum Degassing Station. At this station, the liquid metal is placed in a refractory lined vessel which has an air-tight roof. Vacuum is then applied in the vessel (upto one millibar) which has the effect of extracting gases (such as oxygen,

nitrogen and hydrogen) trapped in the liquid metal. After the gas levels in liquid metal have been lowered to the required extent, the vacuum is then broken and liquid metal is ready to go for casting. The time taken in Vacuum Degassing is between 20 to 40 minutes per heat.

Casting

The liquid metal is then cast in the form of billets/blooms in the Continuous Casting Machine. Liquid metal is poured into the tundish lined with refractory. The metal is poured into the moulds through tundish nozzles. The metal is continuously cooled in different cooling zones. After casting, billet is cut into various lengths and sizes. Throughout the process liquid metal is not exposed to atmosphere by using close casting practices. The time taken in casting is between 50 to 60 minutes per heat.

Rolling Mill

As per the requirement of finished product, the input i.e. billet sizes are decided and cut into required lengths. These billets are pushed into reheating furnace with the help of hydraulic pusher. Hot billets are allowed to pass through different passes for getting desired shapes in various mill stands. After finishing, the bars are cut in the hot saw machine as per the required length. The bars are then spread on the cooling bed to cool down and then collected in the cradle. The material is then shifted to conditioning and finishing department for final inspection and allied activities.

Bright Bar Shop

Bright Bar Shop is a step towards manufacturing of value added steel meant for certain critical applications. After rolling of billets/blooms, the black bars are transferred to Bright Bar Shop. The activities carried out in the Bright Bar Shop are straightening, peeling, reeling, centreless grinding, bandsaw cutting, and magnetic particle inspection (MPI).

In the straightening process, hot rolled black bars are straightened on the Straightening Machine and then transferred to Peeling Machine. During the peeling process, the straightened bars are peeled as per the customer’s requirements in order to remove surface defects, if any, and to achieve dimensional accuracy. On the Reeling

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Machine, peeled bars are polished to remove the turning marks left during the peeling process. The bars are also straightened during this process. After reeling, the bars may be ground on the Centreless Grinding Machine, as per the customer’s requirements. After reeling/centreless grinding, the bars are cut in fixed/multiple length as per the customer’s specifications. The bars are then inspected on the MPI machine to detect cracks. After the MPI machine, each bar is checked to ensure dimensional accuracy as per the customer’s specifications and also to avoid mix-ups, before finally stacking the bars for dispatch to our customers.

Non-Destructive Testing (NDT) Line

Shot Blasting

This is an online process where scales are removed from the surface of hot rolled bars. The requisite surface level is achieved as per “Sa” standard, which is helpful for visual inspection and further NDT line processes.

Auto Straightening

This is an online straightening process where the bars are passed through the input cradle to main straightening machine, then two output cradles. Straightening is done as per the customers’ requirement.

Chamfering Machine

This is a process for special application in the automobile sector, whereby the chamfering machine chamfers both side of the bars.

Magnaflux Leakage Test

This test is designed to automatically detect the smallest surface level defects (0.10 x10 mm). This consists of input bar [creedal], the main magnetic flux test machine and then two separate output bar cradle based on the test results. This process works with yokes, test shoes and with magnetic flux.

Auto Ultrasonic Test

Automatic ultrasonic bar testing system supports us to check internal quality of bars without any destruction. It consists of advanced phased array system which makes us capable to meet stringent quality demands of automobile manufacturer. The system is having facility of auto-sorting of bars along with auto marking of suspected portion of bars.

Heat Treatment

All six furnaces are rectangular bell type annealing furnace for heat treatment with electrical resistance heating energy. Heating profile control trough PID controllers. Heat treatment of bars is done to achieve desired metallurgical and mechanical properties of material through change in internal micro-structure of the material.

Raw Materials

The principal raw materials we use to manufacture our products include shredded scrap, directly reduced iron, pig iron, sponge iron, bundled scrap, forging flash, mil steel turning boring and various types of ferrous alloys. We source our raw materials from a pool of vendors in India and internationally. We believe that this helps us reduce our dependence on few large vendors and thereby minimize risks of supply disruption and price. The volume of our imported materials has reduced significantly over the past fiscal years. We engage in foreign currency hedging with banks through derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The aforesaid currency hedging practices do not protect us from all fluctuations in currency exchange rates.

Power and Fuel

Our manufacturing operations require substantial amounts of power and fuel. We depend on power supplied by the state electricity board in Punjab. We also have power generators for meeting emergency power requirement

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for our utilities/bright bar shop and for other general purposes. We require fuel in the form of furnace oil for the functioning of the reheating furnace in our rolling mill, and also for heating of ladle in the melting shop.

Quality Control

We maintain a number of prestigious quality management system certificates in line with industry standards, including ISO 14001:2004, ISO 9001:2008, ISO/TS 16949:2009 and OHSAS 18001:2007. We have also received and maintain product certification from the Bureau of Indian Standards, such as the IS 9550:2001 for bright steel bars, IS 1875:1992 for carbon steel billets, blooms, slabs and bars for forgings, and IS 7283:1992 for hot rolled bars for production of bright bars and machined parts for engineering applications. We also hold product approvals from RDSO for supply of spring steel round for Indian railways application. Our commitment to quality assurance has resulted in significant investments in sophisticated testing equipment and people training. Robust process and product audit and quality rating are conducted, and quality check parameters are laid down to ensure adherence to defined process and product specifications. Audits for new products are also launched at various stages of production. We have specialized tests to ensure the quality of raw materials used help us attain our standards. We also conduct a number of tests on the final product as part of our quality check exercise. Our manufacturing facility is equipped with modern testing equipment, including a spectrometer for chemical composition analysis, an immersion tank based UT system for checking steel cleanliness, LECO for gas analysis, XRF machines for anti-mix control, an automatic Magnaflux Leakage Tester and an automatic Ultrasonic Tester. Further, we have a well-equipped on-site chemical lab for wet analysis, an on-site mechanical lab for tensile testing, impact testing, metallurgical lab for evaluation of microstructures, grain size and inclusion analysis of finished material, and a non-destructive testing line.

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Capacity and Utilization

The following table sets forth details of our aggregate installed capacity and production volumes, during the relevant periods:

Particulars

Installed Capacity

(In MTPA)

Actual Production

(In MTPA)

Capacity Utilization#

(%)

As at

March

31, 2015

As at

March 31,

2016

As at

March

31, 2017

As at

December

31, 2017*

For

Fiscal

2015

For

Fiscal

2016

For

Fiscal

2017

For the nine-

month period

ended

December 31,

2017

For

Fiscal

2015

For

Fiscal

2016

For

Fiscal

2017

For the nine-

month period

ended

December 31,

2017

Melting Capacity

1,25,000 1,60,000** 1,60,000 1,80,000 1,22,232 1,26,396 1,35,884 1,23,321 97.78 94.50 84.93 72.54

Rolling Capacity

1,50,000 1,50,000 1,50,000 1,80,000 1,18,204 1,20,002 1,35,199 1,09,328 78.80 80.00 90.13 66.26

Bright Bar 18,000 30,000*** 30,000 36,000 15,946 19,809 24,243 19,853 88.59 73.36 80.81 60.16

*The melting capacity was increased from 1,60,000 MTPA to 1,80,000 MTPA, the rolling capacity was increased from 1,50,000 MTPA to 1,80,000 MTPA, and the bright bar

capacity was increased from 30,000 MTPA to 36,000 MTPA with effect from October 2017

**The melting capacity was increased from 1,25,000 MTPA to 1,60,000 MTPA with effect from January 2016

***The bright bar capacity was increased from 18,000 MTPA to 30,000 MTPA with effect from July 2015 #Capacity utilization is based on pro-rata installed capacity for the relevant period

Research and Development

Our R&D team, which comprised over 50 individuals as on December 31, 2017, is actively engaged in carrying on normal quality testing of raw materials, work-in-progress and finished goods, as well as optimising process parameters for quality improvement, energy saving and cost reduction. For manufacturing superior quality alloy steel, our focus is to improve steel cleanliness at every stage of manufacturing. Further, our marketing team also works closely with OEMs and tier-I suppliers to understand their evolving requirements in respect of special grade steels required for automotive applications, and provides feedback to our R&D team. Going forth, we intend to continue to further strengthen our R&D activities by inducting reputed metallurgists to our R&D team and acquiring additional equipment for product testing and development activities.

Logistics

We own a warehouse situated at Bilaspur, Haryana. Further, we have leased six warehouses across other key locations in India, and have also engaged one bonded warehouse in Bangkok, Thailand, for our business operations. Our warehouses are responsible for receiving and dispatch of goods to our customers. From time to time, we enter into agreements with certain third-party logistical service providers for the transportation of our products to our warehouses and customers. In accordance with the requirements of our customers and with a view to minimising inventory risk, our products are typically supplied on a just-in-time basis.

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Sales and Marketing

We have continued to focus on establishing a robust marketing footprint. Within India, we believe that we enjoy healthy and growing business relations with a number of tier-I suppliers to the major automotive OEMs. For our international business, we have created a dedicated marketing team. This team has enabled us expand our geographical footprint to six other nations globally, namely Thailand, Taiwan, Turkey, Russia, Italy and Spain.

Risk Management

The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance. Risk management is carried out by the treasury department under policies approved by the Board of Directors. The treasury team identifies, evaluates and hedges financial risks in close co-operation with the Company’s operating units. The board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Human Capital

Our work force is a critical factor in maintaining quality and safety, which strengthens our competitive position and our human resource policies focus on training and retaining our employees. We train our employees on a regular basis to increase the level of operational excellence, improve productivity and maintain compliance standards on quality and safety. As on December 31, 2017, we had over 350 full-time staff members and over 550 permanent workmen. We also engage contract workers for our operations, from time to time. We consider our relationship with our employees to be satisfactory.

Safety, Health and Environment

Manufacturing is subject to a number of national and regional laws and regulations. These include in particular, regulations on technical safety and environment protection, including, among others, restriction of air pollution and noise, discharge of waste products into water above and below the ground and other occupational health and safety regulations. We aim to comply with applicable health and safety regulations and other requirements in our operations and have adopted safety, health and environment procedures that are aimed at complying with legislative requirements, requirements of our licenses, approvals, various certifications and ensuring the safety of our employees and the people working at our manufacturing facility or under our management. For additional details, see the section titled “Regulations and Policies”.

Information Technology

Our IT systems are vital to our business and we have adopted IT procedures to assist us in our operations. The key functions of our IT team include establishing and maintaining enterprise information systems and infrastructure services to support our business requirements and maintaining secure enterprise operations.

Insurance

Our operations are subject to hazards inherent in manufacturing facilities such as risk of equipment failure, work accidents, fire, earthquakes, flood and other force majeure events. We may also be subject to product liability claims if the products that we manufacture are not in compliance with regulatory standards and the terms of our contractual arrangements. The principal types of insurance that we maintain is intended to cover risks associated with marine import export, marine cargo, fire stock (for units), fire (fixed asset), machinery breakdown, electronic equipment, boiler and pressure plant, comprehensive general lability (product liability), baggage, consequential loss (fire), contractor plant and machinery, liability and burglary (for branches). We also maintain group personal accident policies for our permanent employees. We generally maintain insurance covering our assets and operations at levels that we believe to be appropriate for our business. The insurance policies in respect of our plant and machinery, stocks have been endorsed in favour of our lenders those have extended us finance. Although we consider our insurance coverage to be of a type and level that is economically prudent, we cannot assure that we will be able to maintain insurance at rate which we consider commercially reasonable or that such coverage will be adequate to cover all claims that may arise. Our insurance policies may not be sufficient to cover our economic loss.

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Awards and Accolades

Over the years, we have won several awards, including:

the ‘Best Performing Vendor’ from Shriram Pistons & Rings Limited; the ‘Supplier Performance Award’ by Somic ZF Components Limited; the ‘Varroc Excellence Award – Bronze’ by Varroc; and

the first prize in two distinct categories at the Eight National Kaizen Competition held by the Chamber of

Industrial & Commercial Undertakings.

Corporate Social Responsibility

We have adopted a Corporate Social Responsibility (“CSR”) policy in compliance with the requirements of the Companies Act, 2013, and the Companies (Corporate Social Responsibility) Rules, 2014, as notified by the Central Government. Our vision on CSR is to pursue a corporate strategy that enables shareholder value enhancement and societal value creation in a mutually reinforcing and synergistic manner. Towards that end, we have identified promotion of education, environment protection and energy conservation, development of human capital, rural development and other initiatives as our thrust areas for CSR. However, as the average profits of the Company in the last three financial years have been nil, the Company has not undertaken any CSR initiative.

Competition

We operate in a competitive environment, and face competition from a number of domestic steel producers in India. Our position in relation to our competitors will depend upon our ability to anticipate and respond to various competitive factors facing the industry, including pricing strategies by competitors, our ability to source raw materials cost effectively, make required investments to improve our production capacities, eliminate redundancies and increase production at low-cost, high-quality supply sources. In addition to competition in the special steels industry, we may also be affected by competition faced by our customers and end-users in the automotive sector.

Intellectual Property

We have entered into a registered user agreement with one of our Promoters, namely Vardhman Holdings Limited, in relation to the use of the “VARDHMAN” trademark and logo by our Company for its business activities, subject to the adherence of certain conditions and the payment of applicable royalty, up till March 31, 2019. We also rely on unpatented proprietary know-how, continuing technological innovation and other trade secrets to develop and maintain our competitive position. We constantly seek to protect our intellectual property against unauthorised use or infringement, but any such precautions may not provide meaningful protection against competitors or protect the value of our intellectual property. For details, see “Risk Factors”.

Properties

Our Company’s registered and corporate office is located at Vardhman Premises, Chandigarh Road, Ludhiana-141010, Punjab, India. In addition to the properties that we own on a freehold basis, we have leased facilities under cancellable operating leases arrangements, which are subject to renewal at mutual consent after the expiry of the stipulated lease term. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expenses recognized for the Fiscal 2017 and Fiscal 2016, were Rs. 87.13 lakhs and Rs. 78.21 lakhs, respectively.

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CAPITALIZATION

The following table sets forth the Company’s capitalization and total debt as on March 31, 2017, and December 31, 2017, and as adjusted to give effect to the Issue. This table should be read in conjunction with the sections titled “Select Financial Information”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information contained in the section titled “Financial

Statements”.

Particulars

(in Rs. Lakhs)

As on March 31,

2017#

As on December 31,

2017##

As Adjusted for the

Issue*

Short Term Borrowings:

Secured 11,662.40 10,061.70 10,061.70

Unsecured 2,209.07 2,283.55 2,283.55

Long Term Borrowings:

Secured 11,545.50 10,252.23 10,252.23

Unsecured - - -

Current Maturities of Long Term Debt

6,184.95 605.00 605.00

Total Borrowings (A) 31,601.92 23,202.48 23,202.48

Equity:

Equity Share Capital 1,855.54 3,212.54 3,569.74

Other Equity 17,952.55 25,162.74 29,806.34

Total Equity (B) 19,808.09 28,375.28 33,376.08

Total capitalization (A+B) 51,410.01 51,577.76 56,578.56 #As per the Audited Financial Statements ##As per the Interim Financial Results

*This adjustment only includes the face value and share premium due for 35,72,000 Equity Shares to be issued

at Rs. 140.00 per Equity Share pursuant to the Issue, and does not give effect to any long term or short term

debt taken by the Company post December 31, 2017.

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CAPITAL STRUCTURE

The details of the Equity Share capital of our Company is as set forth below:

Particulars

Aggregate Nominal

Value

(in Rs. Lakhs)

A Authorized Share Capital

6,00,00,000 Equity Shares 6,000.00

B Issued, Subscribed and Paid-Up Capital before the Issue

3,21,25,376 Equity Shares 3,212.54

C Present Issue**

35,72,000 Equity Shares aggregating up to Rs. 5,000.80 lakhs 357.20

D Paid-Up Equity Share Capital after the Issue

3,56,97,376 Equity Shares 3,569.74

E Share Premium Account

Before the Issue 5,428.00

After the Issue 10,071.60 **The present Issue has been authorized by the Board vide their resolution dated November 4, 2017, and by the

Shareholders pursuant to their special resolution dated December 6, 2017.

History of Equity Share Capital our Company

The history of the Equity Share capital of our Company is as set forth below:

Date of Allotment

No. of

Equity

Shares

Allotted

No. of

Equity

Shares

(Cumulative)

Face value

per Equity

Share (Rs.)

Issue price

per Equity

Share

(Rs.)

Form of

Consideration

June 30, 2010 50,000 50,000 10 10 Subscribers to Memorandum

January 1, 2011 57,75,000 58,25,000 10 10 Cash

April 8, 2011 1,27,30,376 1,85,55,376 10 10 Other than cash*

May 12, 2017 1,35,70,000 3,21,25,376 10 50 Cash

*Allotted pursuant to the Scheme

Our Company has not made any allotment of Equity Shares for consideration other than cash in the one year immediately preceding the date of filing of the Preliminary Placement Document.

Employee Stock Option Plan 2016

Pursuant to a Shareholders’ resolution dated September 28, 2016, our Company has adopted the Employee Stock Option Plan 2016. Under the Employee Stock Option Plan 2016, the Board is authorized to create, offer and grant from time to time up to 3,71,108 options to eligible employees. Out of a total of 3,71,108 options, the Company has granted 2,10,000 options to its eligible employees. One option entitles the holder to apply for one equity share of the Company, subject to corporate action, after a vesting period of 2 years from the date of grant.

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MARKET PRICE INFORMATION

The Equity Shares have been listed and are available for trading on the BSE and NSE. As of the date of this Placement Document, 3,21,25,376 Equity Shares are issued, subscribed and paid up. On February 16, 2018, the closing price of the Equity Shares on the BSE and NSE was Rs. 145.90 and Rs. 146.45 per Equity Share, respectively. Since the Equity Shares are available for trading on BSE and NSE, the market price and other information for each of BSE and NSE has been given separately. (i) The following tables set forth the reported high, low and average closing prices of the Equity Shares and the number of Equity Shares traded on the days such high and

low closing prices were recorded on Stock Exchanges during the Fiscals 2015, 2016 and 2017:

BSE

Fiscal High

(in Rs.)

Date of

High

Total Volume

on date of

High (No. of

Equity Shares

traded on the

date of high)

Total Volume of Equity

shares traded on the date

of high

Low

(in Rs.) Date of low

Volume on

date of Low

(No. of Equity

Shares traded

on the date of

low)

Total Volume of

Equity shares traded

on the on date of low

Average price

for the year (in

Rs.)

2015 44.00 August 1,

2014 1,485 64,238.00 20.15 April 1, 2014 3,038 59,560.00 34.30

2016 65.70 December 15, 2015

31,105 19,74,115.00 31.70 October 1,

2015 4,900 1,58,225.00 43.08

2017 146.70 March 31,

2017 71,544 1,03,82,979.00 52.50 April 1, 2016 310 16,329.00 86.29

(Source: www.bseindia.com)

NSE

Fiscal High

(in Rs.)

Date of

High

Total Volume

on date of

High (No. of

Equity Shares

traded on the

date of high)


shares traded on the date

of high

Low


Volume on

date of Low

(No. of Equity

Shares traded

on the date of

low)

Total Volume of



Average price

for the year (in

Rs.)

2015 45.00 July 28,

2014 6,552 2,96,610.20 19.60 April 2, 2014 4,362 86,101.25 34.38

2016 65.60 December 15, 2015

68,059 43,47,968.95 31.70 October 1,

2015 7,733 2,49,790.85 42.79

2017 146.15 March 31,

2017 2,17,483 3,13,85,986.35 53.00 April 1, 2016 252 13,388.00 86.23

(Source: www.nseindia.com)

http://www.bseindia/

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Notes:

1. High, low and average prices are based on the daily closing prices.

2. In case of two days with the same high or low price, the date with the higher volume has been considered.

(ii) The following table sets forth the reported high, low and average market prices and the trading volumes of the Equity Shares on the Stock Exchanges on the dates on which such high and

low prices were recorded during each of the last six months:

BSE

Month Year High

(in Rs.)

Date of

High

(Volume on

date of High)

No. of Equity

Shares traded

on the date of

high


shares traded on the

date of high

Low


(Volume on

date of Low)

No. of Equity

Shares traded

on the date of

low

Total Volume of



Average price

for the month

(in Rs.)

August 2017 139.55 August 1,

2017 12,677 17,77,516.00 122.05

August 11, 2017

13,395 16,49,611.00 130.88

September 2017

147.05 September 20, 2017

19,152 28,70,087.00 126.6 September 28, 2017

5,153 6,63,983.00 137.26

October 2017 186.25 October 30,

2017 77,785 1,44,35,784.00 132.15

October 3, 2017

1,121 1,47,681.00 153.35

November 2017

181.90 November

1, 2017 18,960 34,85,767.00 161.15

November 7, 2017

15,601 25,57,805.00 174.20

December 2017

177.50 December

1, 2017 25,910 46,11,568.00 157.95

December 14, 2017

7,480 11,87,358.00 167.03

January 2018 176.75 January 4,

2018 22,100 38,70,889.00 149.45

January 30, 2018

21,628 32,54,663.00 162.32


NSE

Month Year High

(in Rs.) Date of High

(Volume on

date of High)

No. of Equity

Shares traded

on the date of

high

Total Volume of


on the date of high

Low

(in Rs.)

Date of

low

(Volume on

date of Low)

No. of Equity

Shares traded

on the date of

low

Total Volume of



Average

price for the

month

(in Rs.)

July 2017 151.80 July 21, 2017 2,42,984 3,65,82,491.00 109.45 July 3, 2017

1,00,725 1,11,83,961.30 137.89

August 2017 138.20 August 1,

2017 42,543 59,55,937.55 120.00

August 11, 2017

7,35,000 8,82,00,000.00 130.08


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Month Year High

(in Rs.) Date of High

(Volume on

date of High)

No. of Equity

Shares traded

on the date of

high

Total Volume of


on the date of high

Low

(in Rs.)

Date of

low

(Volume on

date of Low)

No. of Equity

Shares traded

on the date of

low

Total Volume of



Average

price for the

month

(in Rs.)

September 2017

147.10 September 20, 2017

1,35,095 2,03,35,714.45 126.10 September 28, 2017

38,262 48,81,988.35 137.19

October 2017

185.95 October 30,

2017 2,51,978 4,64,15,658.05 131.95

October 3, 2017

21,386 28,15,708.25 153.42

November 2017

182.10 November 1,

2017 1,03,219 1,89,27,871.70 160.65

November 7, 2017

74,453 1,21,77,481.90 173.94

December 2017

177.15 December 1,

2017 64,634 1,16,57,570.05 158.40

December 14, 2017

33,801 53,96,539.00 166.97

January 2018 177.50 January 4,

2018 81,841 1,43,98,404.95 149.05

January 31, 2018

13,384 20,00,744.25 162.07


Notes:

1. High, low and average prices are based on the daily closing prices.

2. In case of two days with the same high or low price, the date with the higher volume has been considered.

(iii) The following table set forth the details of the number of Equity Shares traded and the volume of business transacted during the last six months and the Fiscals 2015, 2016 and 2017, on

the Stock Exchanges:

Period BSE NSE

Number of Equity Shares Traded Volume of Business Transacted Number of Equity Shares Traded Volume of Business Transacted

Fiscal 2015 7,02,899 2,45,73,905.00 11,33,691 3,94,45,558.65

Fiscal 2016 10,03,028 4,83,42,857.00 15,17,088 7,24,84,818.85

Fiscal 2017 20,77,205 20,51,99,056.00 2,17,483 3,13,85,986.35

August 2017 1,99,095 2,63,33,231.00 17,98,983 22,85,46,044.85

September 2017 1,76,986 2,46,62,283.00 10,46,950 14,71,24,167.00

October 2017 6,37,587 10,72,20,303.00 34,54,342 57,43,40,042.95

November 2017 3,84,720 6,73,71,692.00 45,30,880 75,89,79,997.95

December 2017 2,70,306 4,51,62,024.00 7,35,904 12,41,06,825.15

January 2018 1,72,886 2,83,41,326.00 8,31,795 13,68,56,552.00

(Source: www.bseindia.com, www.nseindia.com)


73

(iv) The following table sets forth the market price on the Stock Exchanges on November 6, 2017, i.e., the first working day following the approval of the Board of Directors for the Issue:

BSE

Open High Low Close Number of Equity Shares traded Turnover

174.50 174.50 167.85 169.05 19,362 32,86,129.00


NSE

Open High Low Close Number of Equity Shares traded Turnover

177.00 178.40 166.95 169.95 94,877 1,61,78,155.80



74

MAJOR SHAREHOLDERS

The summary statement showing holding of specified securities of our Company as of December 31, 2017, is herein below:

Table I - Summary Statement holding of specified securities

Category Category of

shareholder

Nos. of

shareholders

No. of fully paid up

equity shares held

Total nos.

shares held

Shareholding as a % of total no. of

shares (calculated as per SCRR,

1957)

(VIII)

As a % of (A+B+C2)

Number of equity shares

held in dematerialized form

(A) Promoter &

Promoter Group

20 2,33,86,578 2,33,86,578 72. 80 2,33,86,578

(B) Public 17,920 87,38,798 87,38,798 27.20 85,05,377

(C) Non Promoter-

Non Public

0 0 0 0.00 0

(C1) Shares underlying

DRs

0 0 0 0.00 0

(C2) Shares held by

Employee Trusts

0 0 0 0.00 0

Total 17,940 3,21,25,376 3,21,25,376 100.00 3,18,91,955


The summary statement showing holding of specified securities of the Promoter and Promoter Group in our Company as of December 31, 2017, is herein below:

Table II - Statement showing shareholding pattern of the Promoter and Promoter Group

Category & Name of the

Shareholders

No. of

shareholder


equity shares held

Total nos.

shares held

Shareholding %

calculated as per SCRR,

1957

As a % of (A+B+C2)



(1) Indian

(a) Individuals/Hindu Undivided Family 10 48,92,530 48,92,530 15.23 48,92,530

SHRI PAUL OSWAL 1 2,20,702 2,20,702 0.69 2,20,702

SHAKUN OSWAL 1 51,191 51,191 0.16 51,191

SACHIT JAIN 1 44,18,667 44,18,667 13.75 44,18,667

http://www.bseindia.com/

75



Shareholders

No. of

shareholder


equity shares held

Total nos.

shares held

Shareholding %


1957

As a % of (A+B+C2)



SUCHITA JAIN 1 90,267 90,267 0.28 90,267

SOUMYA JAIN 1 2,660 2,660 0.01 2,660

SAGRIKA JAIN 1 2,580 2,580 0.01 2,580

SHAKUN OSWAL, PARTNER, EASTERN TRADING COMPANY

1 19,680 19,680 0.06 19,680

SHRI PAUL OSWAL, PARTNER, AMBER SYNDICATE

1 28,748 28,748 0.09 28,748

SHRI PAUL OSWAL, PARTNER, NORTHERN TRADING COMPANY

1 27,520 27,520 0.09 27,520

SHRI PAUL OSWAL, PARTNER, PARAS SYNDICATE

1 30,515 30,515 0.09 30,515

(d) Any Others (specify) 10 1,84,94,048 1,84,94,048 57.57 1,84,94,048

DEVAKAR INVESTMENT & TRADING CO PVT.LTD

1 22,15,016 22,15,016 6.89 22,15,016

FLAMINGO FINANCE & INVESTMENT COMPANY LIMITED

1 1,96,836 1,96,836 0.61 1,96,836

RAMANIYA FINANCE & INVESTMENT COMPANY LIMITED

1 1,56,676 1,56,676 0.49 1,56,676

SANTON FINANCE & INVESTMENT COMPANY LIMITED

1 1,68,533 1,68,533 0.52 1,68,533

MAHAVIR SPINNING MILLS PRIVATE LIMITED

1 3,548 3,548 0.01 3,548

VARDHMAN HOLDINGS LIMITED 1 51,34,195 51,34,195 15.98 51,34,195

VARDHMAN TEXTILES LIMITED 1 97,08,333 97,08,333 30.22 97,08,333

VTL INVESTMENTS LIMITED 1 3,78,000 3,78,000 1.18 3,78,000

ADISHWAR ENTERPRISES LLP 1 0 0 0.00 0

MAHAVIR SHARES TRUST 1 5,32,911 5,32,911 1.66 5,32,911

Sub-Total(A)(1) 20 2,33,86,578 2,33,86,578 72.80 2,33,86,578

76



Shareholders

No. of

shareholder


equity shares held

Total nos.

shares held

Shareholding %


1957

As a % of (A+B+C2)



(2) Foreign 0 0 0 0.00 0

Sub-Total (A)(2) 0 0 0 0.00 0

Total Shareholding of Promoter and

Promoter Group (A)= (A)(1)+(A)(2)

20 2,33,86,578 2,33,86,578 72.80 2,33,86,578


The summary statement showing holding of specified securities of public shareholders along with person holding more than 1.00% of the total number of Equity Shares in our Company as of December 31, 2017, is herein below:

Table III - Statement showing shareholding pattern of the Public Shareholders


Shareholders

No. of

shareholder

No. of fully

paid up equity

shares held

Total nos.

shares held

Shareholding %

calculated as per

SCRR, 1957

As a % of

(A+B+C2)

No of

Voting

Rights

Total as a

% of Total

Voting

rights

Number of equity

shares held in

dematerialized form

(1) Institutions

(a) Mutual Fund 10 6,548 6,548 0.02 6,548 0.02 2,262

(b) Foreign Portfolio Investors 14 26,803 26,803 0.08 26,803 0.08 25,065

(c) Financial Institutions/ Banks 19 68,229 68,229 0.21 68,229 0.21 56,225

(d) Insurance Companies 3 41,722 41,722 0.13 41,722 0.13 41,407

(e) Any Other (specify) 1 15 15 0.00 15 0.00 15

BANK FOREIGN 1 15 15 0.00 15 0.00 15

Sub-Total(B)(1) 47 1,43,317 1,43,317 0.45 1,43,317 0.45 1,24,974

(2) Central Government/ State Government(s)/ President of India

0 0 0 0.00 0 0.00 0

Sub-Total (B)(2) 0 0 0 0.00 0 0.00 0

(3) Non-institutions 0 0 0 0.00 0 0.00 0


77

Table III - Statement showing shareholding pattern of the Public Shareholders


Shareholders

No. of

shareholder

No. of fully

paid up equity

shares held

Total nos.

shares held

Shareholding %

calculated as per

SCRR, 1957

As a % of

(A+B+C2)

No of

Voting

Rights

Total as a

% of Total

Voting

rights

Number of equity

shares held in

dematerialized form

(a) Individuals -i. Individual shareholders holding nominal share capital up to Rs. 2 lakhs.

16,900 39,61,008 39,61,008 12.33 39,61,008 12.33 37,54,610

(b) ii. Individual shareholders holding nominal share capital in excess of Rs. 2 lakhs.

33 31,61,837 31,61,837 9.84 31,61,837 9.84 31,61,837

MUKUL AGRAWAL 1 5,00,000 5,00,000 1.56 5,00,000 1.56 5,00,000

ANIL KUMAR GOEL 1 13,27,957 13,27,957 4.13 13,27,957 4.13 13,27,957

(c) NBFCs registered with RBI 3 8,195 8,195 0.03 8,195 0.03 8,195

(d) Any Other (specify) 937 14,64,441 14,64,441 4.56 14,64,441 4.56 14,55,761

CLEARING MEMBERS 44 17,008 17,008 0.05 17,008 0.05 17,008 CORPORATE BODY 390 9,50,644 9,50,644 2.96 9,50,644 2.96 9,42,261 NRI 137 81,036 81,036 0.25 81,036 0.25 80,805

HUF 365 4,12,283 4,12,283 1.28 4,12,283 1.28 4,12,217 TRUST 1 3,470 3,470 0.01 3,470 0.01 3,470

Sub-Total (B)(3) 17,873 85,95,481 85,95,481 26.76 85,95,481 26.76 83,80,403

Total Public Shareholding (B)= (B)(1)+(B)(2)+(B)(3)

17,920 87,38,798 87,38,798 27.20 87,38,798 27.20 85,05,377



78

DIVIDENDS

The declaration and payment of dividends by our Company will be recommended by our Board and approved by our Shareholders at their discretion, subject to the provisions of the Articles and Companies Act. The recommendation, declaration and payment of dividends will depend on a number of factors, including but not limited to our Company’s profits, capital requirements and overall financial condition. The Board may also from time to time pay interim dividends. Our Company has no formal dividend policy, and has not declared dividends during the last three Fiscals.

79

AUDITORS

Our statutory auditors are M/s S. S. Kothari Mehta & Company, Chartered Accountants, who have audited the financial statements of our Company for the Fiscals 2015, 2016 and 2017, and are independent auditors with respect to our Company in accordance with the applicable guidelines issued by the ICAI. M/s S. S. Kothari Mehta & Company, Chartered Accountants, have also examined the Audited Financial Statements included in this Placement Document and their reports on the Audited Financial Statements are also included herein. M/s S. S. Kothari Mehta & Company, Chartered Accountants, have also performed a limited review of our Interim Financial Results as of and for the quarter and nine-months ended December 31, 2017, and the Interim Financial Results along with their report thereon has been included in this Placement Document. See, “Financial Statements”.

80

SELECT FINANCIAL INFORMATION

The following selected financial information is extracted from and should be read in conjunction with, the Audited

Financial Statements, included elsewhere in this Placement Document. You should refer to the section titled

“Management's Discussion and Analysis of Financial Condition and Results of Operations”, for further discussion and analysis of the financial statements of our Company.

The financial information included in this Placement Document does not reflect our Company’s results of operations, financial position and cash flows for the future and its past operating results are no guarantee of its

future operating performance.

I. Summary Balance Sheet

a. As at March 31, 2017 and 2016, prepared in accordance with Ind AS and the Companies Act:

(Rs. in Lakhs)

Particulars

As at March

31, 2017

As at March

31, 2016

ASSETS 1 Non-current assets

(a) Property, plant and equipment 26,417.88 25,024.80

(b) Capital work-in-progress 111.32 210.84

(c) Other intangible assets 38.62 35.20

(d) Financial assets Investments 67.87 141.97

Loans 46.42 25.97

Others financial assets - -

(e) Other non-current assets 1,077.42 1,220.85

Total non-current assets 27,759.53 26,659.63

2 Current assets (a) Inventories 11,783.09 10,690.38

(b) Financial assets Investments 30.53 1,308.11

Trade receivables 18,897.16 19,416.94

Cash and cash equivalents 594.54 376.54

Bank Balance other than above 0.10 2.52

Loans 69.92 54.00

Other financial assets 81.71 110.70

(c) Current tax assets (Net) 76.36 98.39

(d) Other current assets 1,974.48 2,665.45

Total current assets 33,507.89 34,723.03

Total Assets 61,267.42 61,382.66

EQUITY AND LIABILITIES

Equity

(a) Equity share capital 1,855.54 1,855.54

(b) Other equity 17,952.55 16,061.54

Total Equity 19,808.09 17,917.08

Liabilities 1 Non-current liabilities

(a) Financial liabilities Borrowings 11,545.50 12,902.09

(b) Provisions 80.31 62.88

(c) Other non-current liabilities 19.72 13.89

Total non-current liabilities 11,645.53 12,978.86

2 Current liabilities

(a) Financial Liabilities

Short term borrowings 13,871.47 16,682.35

81

Particulars

As at March

31, 2017

As at March

31, 2016

Trade payable:

(i) Total outstanding dues of micro enterprises and small enterprises - -

(ii)Total outstanding dues of creditors other than micro enterprises and small enterprises 3,490.94 4,099.68

Other financial liabilities 11,718.63 9,042.45

(b) Other current liabilities 706.12 600.10

(c) Short term provisions 26.64 62.14

Total current liabilities 29,813.80 30,486.72

Total Equity And Liabilities 61,267.42 61,382.66

b. As at March 31, 2016 and 2015, prepared in accordance with Indian GAAP and the Companies Act

(Rs. in Lakhs)

Particulars

As at March

31, 2016

As at March

31, 2015

EQUITY AND LIABILITIES

1 Shareholder's funds

Share capital 1,855.54 1,855.54

Reserves and surplus 15,638.76 15,117.48

17,494.30 16,973.02

2 Non-current liabilities

Long-term borrowings 12,955.43 10,440.31

Other long-term liabilities 13.89 19.00

Long-term provisions 62.88 54.43

3,032.20 10,513.74

3 Current liabilities

Short-term borrowings 16,682.35 23,911.98

Trade payables 4,099.68 5,157.10

Other current liabilities 9,691.59 4,843.70

Short-term provisions 62.14 62.22

30,535.76 33,975.00

Total 61,062.26 61,461.76

ASSETS

1 Non-Current Assets

Fixed assets

Tangible assets 25,024.80 22,997.74

Intangible assets 35.20 -

Capital work-in-progress 210.84 2,079.82

Non-current investments 129.69 408.22

Long-term loans and advances 1,345.20 987.39

26,745.73 26,473.17

2 Current Assets

Current investments 1,000.00 1,000.00

Inventories 10,690.38 13,288.98

Trade receivables 19,416.94 17,898.22

Cash and cash equivalents 379.06 864.85

Short-term loans and advances 2,828.85 1,935.16

Other current assets 1.30 1.38

34,316.53 34,988.59

Total 61,062.26 61,461.76

82

II. Summary Statement of Profit and Loss

a. For the Fiscals 2017 and 2016, prepared in accordance with Ind AS and the Companies Act:

(Rs. in Lakhs)

Particulars Fiscal 2017 Fiscal 2016

Revenue from operations 75,651.54 72,932.88

Less: Discount 338.64 381.47

Net sales 75,312.90 72,551.41

Other income 564.29 265.24

I Total income 75,877.19 72,816.65

II Expenses

Cost of materials consumed 36,421.86 32,508.39

Changes in inventories of finished goods, work-in- progress and stock-in-trade (1,164.88) 2,990.96

Excise duty consumed on sales 7,932.08 7,277.29

Employee benefit expense 3,979.68 3,368.67

Finance cost 2,827.97 2,301.62

Depreciation and amortization expense 1,806.70 1,703.11

Other expenses 22,160.36 22,244.96

Total expenses 73,963.77 72,395.00

III Profit before tax (I-II) 1,913.42 421.65

IV Tax expense:

Current tax (Mat) 400.26 -

MAT credit entitlement (393.99) -

Income tax relating to earlier year (6.53) -

Deferred tax - -

Total of tax expenses (0.26) -

V Profit for the period (III-IV) 1,913.68 421.65

VI Other Comprehensive income

A Items that will not be reclassified to profit or loss

Remeasurement of the net defined benefit liability / asset (22.67) (16.53)

Income tax relating to items that will not be reclassified to profit or loss - -

B Items that will be reclassified to profit or loss

Income tax relating to items that will be reclassified to profit or loss - -

Total other comprehensive income (Net) (22.67) (16.53)

VII Total comprehensive income for the period (V+VI) 1,891.01 405.12

b. For the Fiscals 2016 and 2015, prepared in accordance with Indian GAAP and the Companies Act:

(Rs. in Lakhs)


Income


Less : Excise duty 7,277.29 7,258.15

Revenue from operations (Net) 65,655.59 66,159.97

Other income 263.59 739.97

Total Income 65,919.18 66,899.94

Expenses


Purchase of stock-in-trade - -

83


Changes in inventories of finished goods, work in progress and stock-in-trade

2,711.20 (156.93)

Employee benefits expenses 3,383.58 2,836.22

Other expenses 22,458.88 20,912.36

Excise duty on closing stocks 279.76 526.37

Finance cost 2,352.97 2,021.48

Depreciation and amortization expense 1,703.11 1,387.21

Total Expenses 65,397.89 68,411.75

Profit before Exceptional Items, Extraordinary Items and Tax 521.29 (1,511.81)

Exceptional items - -

Profit before Extraordinary Items and Tax 521.29 (1,511.81)

Extraordinary items - -

Profit before tax 521.29 (1,511.81)

Tax expense - -

Current tax - 0.85

Deferred tax - -

Profit for the year after Tax 521.29 (1,512.66)

III. Statement of Cash Flows

a. For the Fiscals 2017 and 2016, prepared in accordance with Ind AS and the Companies Act:

(Rs. in Lakhs)


A Cash Flow From Operating Activities

Profit before tax 1,913.43 421.65

Adjustments for:

Other comprehensive income (22.67) (16.53)

Depreciation 1,806.70 1,703.11

Provision for fall in value of investment 61.79 24.37

Loss on sale of investments 65.51 0.03

Net loss on sale of property, plant and equipment 77.55 111.80

Balances written off 34.10 26.79

Bad debts 51.15 0.02

Provision for doubtful debts 100.00 40.00

Interest expenses 2,827.97 2,301.62

Interest income (111.13) (91.42)

Dividend income from current investments (0.38) (6.28)

Profit on sale of current investments (218.07) (36.23)

Interest income from current investments (60.54) (19.34)

Provision no longer required written back (0.61) (3.15)

Sundry balances written back (153.07) (35.64)

Operating profit before working capital change

Adjustments for:

(Increase)/ decrease in inventories (1,092.70) 2,598.59

(Increase)/ decrease in trade receivables 368.63 (1,558.74)

(Increase)/ decrease in short term loans (15.92) (4.18)

(Increase)/ decrease in other financial current assets 27.69 (0.64)

(Increase)/ decrease in other current assets 690.97 (888.87)

(Increase)/ decrease in non-current financial asset-long-term loans (54.55) (34.76)

(Increase)/ decrease in other financial non-current assets - 0.07

(Increase)/ decrease in other non-current assets 143.42 (351.47)

(Decrease)/ increase in long term provisions 17.43 8.45

84


(Decrease)/ increase in other non-current liabilities 5.82 (5.10)

(Decrease)/increase in trade payables (455.06) (1,018.64)

(Decrease)/ increase in other financial current liabilities 703.26 1,745.96

(Decrease)/ increase in other current liabilities 106.03 (274.89)

(Decrease)/ increase in short term provisions (35.50) (0.08)

Cash (used in)/from operations 6,781.25 4,636.49

Direct taxes 22.29 1.57

Net cash flow (used in)/from operating activities 6,803.54 4,638.06

B Cash Flow From Investing Activities

Purchase of tangible fixed assets (3,261.49) (2,017.62)

Purchase of intangible fixed assets (10.46) (36.38)

Proceeds from sale of fixed assets 90.73 45.81

Dividend income 0.38 6.28

Sale/(purchase) of long term investments (Net) 8.58 1,610.98

Sale/(purchase) of current investments (Net) 1,494.41 (1,276.91)

Interest received 112.43 91.50

Net cash flow from/ (used in) investing activities (1,565.42) (1,576.34)

C Cash Flow From Financing Activities

Proceeds from long term borrowings (Net) 660.36 5,937.88

Proceed from short term borrowings (Net) (2,810.87) (7,229.64)

Interest paid (2,872.03) (2,255.75)

Net cash flow from/ (used in) financing activities (5,022.54) (3,547.51)

Net increase /(decrease) in cash and cash equivalent (A+B+C) 215.58 (485.79)

Cash and cash equivalent at the beginning of the year 379.06 864.85

Cash And Cash Equivalent At The End Of The Year 594.64 379.06

b. For the Fiscals 2016 and 2015, prepared in accordance with Indian GAAP and the Companies Act:

(Rs. in Lakhs)


A Cash Flow From Operating Activities

Net profit before tax and extra ordinary items 521.29 (1,511.81)

Adjustments for:

Depreciation and amortisation 1,703.11 1,387.21

Provision for doubtful debts written back (3.15) (1.10)

Sundry balances written (back) / off (35.64) (21.72)

Interest Expense 2,352.97 2,021.48

Profit on sale of investments (36.23) (523.01)

Exchange rate fluctuation (unrealised) 583.13 431.50


Dividend income (6.28) (2.34)

(Profit)/Loss on sale of fixed assets (Net) 111.80 (8.50)

Operating Profit before working capital changes 5,099.61 1,664.82

Adjustments for:

Decrease/(Increase) in inventories 2,598.59 (1,357.76)

Increase / (Decrease) in liabilities and provisions (79.66) 1,340.25

Decrease /(Increase) in other current assets/loans & advances (1,089.83) 700.49

Decrease/ (Increase) in trade receivables (1,518.72) (5,621.87)

(89.62) (4,938.89)

Cash generated from operations 5,009.99 (3,274.07)

Income tax paid - (0.85)

Net cash generated from/(used in) operating activities 5,009.99 (3,274.92)

85


B Cash Flow From Investing Activities

Purchase of fixed assets and capital work in progress (including capital advances)

(2,471.49) (2,833.60)


Proceeds from sale of investments 314.76 2,290.06


Dividend received 6.28 2.34

Net cash generated from/(used in) investing activities (2,013.17) (365.08)

C Cash Flows From Financing Activities

Inter-corporate deposits taken - -

Proceeds from short term borrowings (7,229.64) 4,416.49

Proceeds from term loan 6,100.00 720.00

Interest paid (2,352.97) (2,021.48)

Net cash generated from/(used in) financing activities (3,482.61) 3,115.01

Net increase in cash and cash equivalents (A+B+C) (485.79) (524.99)

Cash and cash equivalents at the beginning of the period 864.85 1,389.84

Cash and cash equivalents at the end of the period 379.06 864.85

86

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with

the Financial Statements, prepared in accordance with the Indian GAAP, Ind AS, the Companies Act, as

applicable, including the schedules, annexures and notes thereto and the reports thereon, included in the section

“Financial Statements”. Our Audited Financial Statements comprise our audited financial statements as of and for the financial years

ended March 31, 2015 and 2016, prepared in accordance with Indian GAAP and the Companies Act, and our

audited financial statement as of and for the financial year ended March 31, 2017, prepared in accordance with

Ind AS (along with comparative for the year ended March 31, 2016, and the transition date opening balance sheet

as at April 1, 2015) and the Companies Act, together with the respective audit reports issued by the Auditors

thereon. Pursuant to a meeting of its Board on November 4, 2017, our Company has adopted and filed with the

Stock Exchanges, the Interim Financial Results for the quarter and nine-months ended December 31, 2017,

prepared in accordance with Ind AS and the provisions of the Listing Regulations. The Auditors have conducted

a limited review of the Interim Financial Results, which together with the report issued by the Auditors thereon,

have also been included in this Placement Document.

Since April 1, 2016, we prepared our financial statements in accordance with Ind AS. Given that Ind AS is different

in many respects from Indian GAAP, our audited financial statements for Fiscal 2017, may not be comparable to

our audited financial statements for Fiscals 2016 and 2015.

Our fiscal year ends on March 31 of each year. Accordingly, all references to a particular fiscal year are to the

12 months ended March 31 of that year.

Overview

We are one of the leading producers of special and alloy steel products in India. Our current product portfolio comprises alloy steel bars and bright bars of various specifications, which finds application in the automotive, engineering, bearings and allied industries. A significant number of our products are primarily sold to tier-1 suppliers that cater to the raw material requirements of a number of major global and Indian automotive OEMs in India, such as 2W, 4W, LCV, MHCV and other vehicle manufacturers. We have obtained approvals from a number of leading OEMs in respect of our products. We also supply special steel with forging applications to the international markets of Thailand, Taiwan, Turkey, Russia, Italy and Spain. Incorporated in Fiscal 2010, our Company was vested with the steel business undertaking of our erstwhile holding company, namely Vardhman Textiles Limited, pursuant to the Scheme in Fiscal 2011. In recent years, we have expanded our production capabilities, product portfolio and customer base. We specialize in the manufacture of steel bars in a variety of sizes, ranging from lower diameters such as 16 mm to higher diameters such 90 mm to 110 mm. Based on the application needs of tier-1 suppliers to automotive OEMs, we customize the grades of our steel products. Currently, we are well-equipped to produce diverse steel grades, including basic carbon steel, high alloy steel, bearing steel, micro alloy steel and other special steels. All of our products are manufactured at our manufacturing facility located in Ludhiana, Punjab. At the aforesaid facility, we have set up an electric arc furnace, a rolling mill and a bright bar shop. As on December 31, 2017, we had an installed melting capacity of 1,80,000 MTPA, rolling capacity of 1,80,000 MTPA and bright bar capacity of 36,000 MTPA. We own a warehouse in Bilaspur, Haryana. This proximity to one of the major automotive producing hubs of India enables us to provide customized solutions to tier-I suppliers of automotive OEMs, as well as adopt effective supply-chain management strategies to service customer needs in a timely manner. We have leased six warehouses across other key locations in India, and have also engaged one bonded warehouse in Bangkok, Thailand, for our business operations. The sale of special and alloy steel products that find end-use in the 2Ws and 4Ws space constitutes the largest portion of our products sold, both in terms of value and volume. Over the years, we have focused on increasing our customer base, and in Fiscal 2017, we had over 200 customers. We believe that we have strong relationships with our customers, and our top five customers accounted for 36.92% and 32.86% of our total revenues in Fiscal 2016 and Fiscal 2017, respectively. We are driven qualified and dedicated management team, consisting of professionals with experience across various sectors, which is led by our Board of Directors. We believe that our management team’s collective experience and capabilities enable us to understand and anticipate market trends, manage our business operations

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and growth, leverage customer relationships and respond to changes in customer preferences. Our workforce has grown significantly over the years, and as on December 31, 2017, we had over 350 full-time staff members and over 550 permanent workmen. We believe that our focus on quality, technological upgradation and competitive pricing has helped us in establishing and strengthening our relationships with the tier-I suppliers to a number of major automotive OEMs in India. We maintain a number of prestigious quality management system certificates in line with industry standards, including ISO 14001:2004, ISO 9001:2008, ISO/TS 16949:2009 and OHSAS 18001:2007 certifications. We have also received, and maintain, product certifications from the Bureau of Indian Standards, such as the IS 9550:2001 for bright steel bars, IS 1875:1992 for carbon steel billets, blooms, slabs and bars for forgings, and IS 7283:1992 for hot rolled bars for production of bright bars and machined parts for engineering applications. We also hold product approvals from RDSO for supply of spring steel round for Indian railways application. Over the years, we have won several awards, including the ‘Best Performing Vendor’ from Shriram Pistons & Rings Limited, the ‘Supplier Performance Award’ by Somic ZF Components Limited, the ‘Varroc


Significant Factors Affecting Our Results of Operations and Financial Condition

Our business, results of operations and financial condition are affected by a number of factors, including:

Market Conditions Affecting the Automobile Industry

Our business is heavily dependent on the performance and market trends of the automotive sector, particularly the 2W, 4W and other spaces within the automotive markets. Automotive sales and production are historically cyclical and exhibit fluctuations from year to year and are subject to many factors beyond our control, including, but not limited to, economic growth rates, consumer confidence, employment levels, risk of equipment failure, fuel prices, interest rates, labour relations issues, technological developments, regulatory requirements and trade agreements, which are not within our control. Any economic downturn in the manufacture and sale of vehicles, whether in India or any other geography in which we operate, may significantly affect our business, financial condition, results of operations, cash flows and growth.

Capacity Utilization and Operating Efficiencies

Higher capacity utilization results in greater production volumes and higher sales, and allows us to spread our fixed costs over a higher number of units sold, thereby increasing our profit margins. Production in our manufacturing facility is also affected by factors like the number of lost days due to scheduled and unscheduled plant shutdowns. While we continue to focus on improving our operational efficiencies and reducing operating costs, there are a number of factors that are beyond our control and that could impact our ability to effectively utilize our manufacturing facility. Any inability to optimally utilize our existing manufacturing capacities or maintain operating efficiencies could impact our business and results of operations

Price of Raw Materials

The cost of raw materials represents a significant portion of our total expenses. In the event of an increase in the price of raw materials, we may be required to source such materials from other vendors at prices that may be less favourable to us, resulting in an increase in our operating costs. Commodity prices are also influenced by changes in global economic conditions, related industry cycles, demand-supply dynamics, attempts by individual producers to capture market share and by speculation in the market. At times, we may not be able to pass on any increase in commodity or raw material prices to our customers. Any volatility in the prices of raw materials could also affect our ability to price our products competitively

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Ability to Meet Customer Expectations and Retain Business

We are significantly dependent on certain key customers for a significant portion of our sales. Our customers often undertake vendor rationalisation to reduce costs related to procurement from multiple vendors. Additionally, our customers have high and exacting standards for product quantity and quality as well as delivery schedules. There are also a number of factors other than our performance that are beyond our control and that could cause the loss of a customer. Inability to meet customer expectation or loss of business from a customer for any reason could impact our business and results of operations.

Power and Fuel Expenses

Our manufacturing facilities require substantial amounts of power and fuel. Typically, we depend on power supplied by the state electricity boards, as well as power generated through power generators. Any major power interruptions that could occur in the future as a result of any natural calamity, technical fault or power shortages beyond our control may have an effect on our results of operations. Further, in the event that electricity supplied by the state electricity board and from generators are insufficient to meet our requirements or we are unable to procure adequate and uninterrupted power supply in the future at a reasonable cost, our results of operations may be adversely affected. In addition, power and fuel prices are also influenced by changes in global economic conditions which will also have an effect on our results of our operations.

Macroeconomic Conditions

Our business depends on global economic conditions. Macroeconomic factors, both in India and globally, such as economic instability, political uncertainty other force majeure events could influence our performance. In addition, fluctuations in interest rates, exchange rates and inflation rates have a material effect on key aspects of our operations, including the cost of our raw materials and the costs of borrowing required to fund our operations. Our business and results of operations are also affected by evolving regulatory requirements, government initiatives, trade agreements and other factors. We expect that macroeconomic conditions, particularly changes in consumer confidence, spending on vehicles and interest rates will have a significant impact on our business and results of operations in future periods.

Significant Accounting Policies (under Ind AS)

For a detailed description of our significant accounting policies, please refer to the Audited Financial Statements included elsewhere in this Placement Document. The significant accounting policies on the basis of which our audited financial statements for Fiscal 2017 have been prepared are set forth below:

Revenue Recognition

Revenue is recognised at the fair value of the consideration received or receivable. The amount disclosed as revenue is inclusive of excise duty and net of returns, trade discounts, value added tax and amount collected on behalf of third parties. The Company recognizes revenue when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity.

Sale of Goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods are transferred to the buyer and the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.

Export Incentives

Revenue in respect of the export incentives is recognized on post export basis.

Interest Income

Interest income is recognized using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period,

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where appropriate, to the gross carrying amount of the financial asset. While calculating the EIR, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses. Dividend Income

Dividend income is recognized when the right to receive the payment is established which is generally when shareholders approve the dividend.

Insurance and Other Claims

Revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.

Inventory Valuation

Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:

In case of raw materials: at weighted average cost and other costs incurred in bringing the inventories to their present location and condition. In case of stores and spares: at weighted average cost and other costs incurred in bringing the inventories to their present location and condition. In case of work in progress: at raw material cost plus conversion costs depending upon the stage of completion. In case of finished goods: at raw material cost plus conversion costs, packing cost, excise duty (if applicable) and other overheads incurred to bring the goods to their present location and condition.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand, cash at bank and demand deposits with banks with an original maturity of three months or less which are subject to an insignificant risk of change in value.

Property, Plant and Equipment

Under the Indian GAAP, Property, Plant and Equipment were carried in the balance sheet on historical cost. The Company has elected to regard those values as deemed cost under Ind-AS as on transition date i.e. April 1, 2015. Property, plant and equipment are stated at cost, less accumulated depreciation. The Cost of an item of Property, Plant and Equipment comprises: a) Its purchase price including import duties and non-refundable purchase taxes after deducting trade

discounts and rebates;

b) Any attributable expenditure directly attributable for bringing an asset to the location and the working

condition for its intended use; and

c) The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is

located, the obligation for which an entity incurs either when the item is acquired or as a consequence of

having used the item during a particular period for purposes other than to produce inventories during that

period.

Depreciation is provided on Straight Line Method on the basis of useful lives of such assets in accordance with and in the manner specified under Schedule II of the Companies Act, 2013 except the assets costing Rs. 5,000 or below on which depreciation is charged @ 100% per annum on proportionate basis. Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under ‘Capital work-in-progress’. Subsequent expenditures relating to property, plant and equipment

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is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the statement of profit and loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell. Intangible Assets

Intangible assets are stated at cost less accumulated amount of amortization. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, known technological advances and other economic factors. The amortization method and useful lives are reviewed periodically at end of each financial year. The useful life of the computer software is taken as 5 years.

Leases

Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease under which the risks and rewards incidental to ownership are not transferred to lessee is classified as operating lease. Lease payments under operating leases are recognized as an expense in net profit in the statement of profit and loss.

Impairment

Financial assets

The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, ECL are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in statement of profit or loss. Non-financial assets

Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs. If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

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Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Initial recognition and measurement

On initial recognition, all the financial assets and liabilities are recognized at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability except trade receivables which are recognized at transaction price. Subsequent measurement

Non-derivative financial instruments

(i) Financial assets carried at amortised cost

A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. (ii) Financial assets at fair value through other comprehensive income

A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. (iii) Financial assets at fair value through profit or loss

A financial asset which is not classified in any of the above categories is subsequently measured at fair value through profit or loss. (iv) Financial liabilities

The financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments. Derivative Financial Instruments

The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind-AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind-AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss. Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in statement of profit and loss. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.

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Equity Share Capital

(i) Equity shares

Equity shares issued by the Company are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are recognized as a deduction from equity, net of any tax effects. De-recognition of financial instruments

A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind-AS 109. A financial liability is derecognized when the obligation specified in the contract is discharged or cancelled or expired. Fair value measurement of financial instruments

The fair value of financial instruments is determined using the valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Based on the three level fair value hierarchies, the methods used to determine the fair value of financial assets and liabilities include quoted market price, discounted cash flow analysis and valuation certified by the external valuer. In case of financial instruments where the carrying amount approximates fair value due to the short maturity of those instruments, carrying amount is considered as fair value.

Employees Benefits

Short term employee benefits:

Short Term Employee Benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered. Post-employment benefits

Defined contribution plans:

Provident fund

Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. Superannuation

Certain employees of the Company are participants in a defined contribution plan. The Company has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India. Defined Benefit Plans

Gratuity The Company provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan’) covering eligible employees of the Company. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment with the Company. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The Company fully contributes all

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ascertained liabilities to the VSSL Gratuity Fund Trust (the Trust). Trustees administer contributions made to the Trusts and contributions are invested in the schemes as permitted by law of India. The Company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Re-measurements comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognised in Other Comprehensive Income which are not reclassified to profit or loss in subsequent periods. Compensated absences The Company has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.

Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of the asset. Other borrowing costs are recognized as an expense in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.

Earning Per Share

Basic earning per equity share are computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earning per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earning per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.

Income Taxes

Income tax expense comprises current tax and deferred tax. Income tax expense is recognized in net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets and liabilities are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

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Government Grants

The government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in the statement of profit and loss on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate.

Foreign Currency Transactions

Functional and presentation currency

The functional currency of the Company is Indian Rupee. These financial statements are presented in Indian Rupee (rounded off to lakhs). Transaction and balances

The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. The foreign currency monetary items are translated using the closing rate at the end of each reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognised in profit or loss in the period in which they arise. Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statements of profit and loss, within finance cost. All other foreign exchange gains and losses are presented in the statement of profit and loss on net basis.

Dividends

Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors.

Provisions and Contingent Liabilities/Assets

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Contingent Liability is disclosed after careful evaluation of facts, uncertainties and possibility of reimbursement. Contingent liabilities are not recognised but are disclosed in notes. Contingent Assets are not recognised in financial statements but are disclosed, since the former treatment may result in the recognition of income that may or may not be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.

Statement of Cash Flows

Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments

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and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

Significant Accounting Judgments, Estimates and Assumptions (under Ind AS)

In the process of applying the Company’s accounting policies, the management has made the following estimates, assumptions and judgments which have significant effect on the amounts recognized in our audited financial statements for Fiscal 2017:

Contingencies

Judgment of the Management is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.

Allowance for Uncollected Accounts Receivable and Advances

Trade receivables do not carry any interest and are stated at their normal value as reduced by appropriate allowances for estimated irrecoverable amounts. Individual trade receivables are written off when management deems them not collectible. Impairment is made on ECL, which are the present value of the cash shortfall over the expected life of the financial assets.

Defined Benefit Plans

The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in future. These includes the determination of the discount rate, future salary increases, mortality rates and attrition rate. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Fair Value Measurement of Financial Instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Principal Components of Income and Expenditure (under Ind AS)

Income

Our total income consists of revenue from operations, as adjusted for discounts, and other income. Revenue from Operations

Revenue from operations comprises revenue from the sale of the products that we manufacture, namely steel bars, by product and other miscellaneous sales, and export incentives. Other Income

Other income includes, inter alia, interest income, dividend income from current investments, profit on sale of current investments, interest income from current investments, provisions no longer required written back, sundry balances written back and miscellaneous income.

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Expenses

Our expenditure consists of cost of materials consumed, changes in inventories of finished goods, work-in-progress and stock-in-trade, excise duty consumed on sales, employee benefit expense, finance cost, depreciation and amortization expense and other expenses. Cost of Materials Consumed Our cost of materials consumed comprises purchase of raw material scrap and ferro alloys. Changes in Inventories of Finished Goods, Work-in-Progress and Stock-in-Trade Changes in inventories of finished goods, work-in-progress and stock-in-trade represents the net increase or decrease in the opening stock and closing stock of finished goods, as adjusted for excise duty variation on closing stock. Employee Benefits Expense Employee benefit expense consists of salaries, wages and bonus, contributions to provident and other funds, provision for employee benefit and staff welfare expenses. Finance Cost Finance cost consists of interest on term loan and others, and other borrowing cost, such as bank and financial charges. Other Expense

Our other expenses include expenses in relation to, inter alia, consumption of stores and spare parts, power and fuel, packing material, processing charges, rent, repairs and maintenance (building), repairs and maintenance (machinery), insurance, rates and taxes, payment to auditors, loss on fair value of investments, loss on sale of investments, net loss on account of foreign exchange fluctuations, net loss on sale of property, plant and equipment, balances written off, bad debts as deducted for withdrawal from provision for doubtful debts, legal and professional expenses, directors sitting fees, director commission, provision for doubtful debts, provision against slow moving stock, freight and cartage on sale, commission, miscellaneous expenses.

Results of Operations

The following table sets forth certain information with respect to our results of operations as per our Audited Financial Statements for the periods indicated:

For Fiscals 2017 and 2016 (under Ind AS)

Particulars

Fiscal 2017 Fiscal 2016

Amount

(Rs. in

Lakhs)

Percentage of

Total Income

(%)

Amount

(Rs. in Lakhs)

Percentage

of Total

Income

(%)

Revenue from operations 75,651.54 99.70% 72,932.88 100.16%

Less: Discount 338.64 0.45% 381.47 0.52%

Net sales 75,312.90 99.26% 72,551.41 99.64%

Other income 564.29 0.74% 265.24 0.36%

I Total Income 75,877.19 100.00% 72,816.65 100.00%

Expenses

Cost of materials consumed 36,421.86 48.00% 32,508.39 44.64%

Changes in inventories of finished goods, work-in- progress and stock-in-trade

(1,164.88) (1.54)% 2,990.96 4.11%

Excise duty consumed on sales 7,932.08 10.45% 7,277.29 9.99%

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Particulars


Amount

(Rs. in

Lakhs)

Percentage of

Total Income

(%)

Amount

(Rs. in Lakhs)

Percentage

of Total

Income

(%)

Employee benefit expense 3,979.68 5.24% 3,368.67 4.63%

Finance cost 2,827.97 3.73% 2,301.62 3.16%

Depreciation and amortization expense

1,806.70 2.38% 1,703.11 2.34%

Other expenses 22,160.36 29.21% 22,244.96 30.55%

II Total Expenses 73,963.77 97.48% 72,395.00 99.42%

III Profit before Tax 1,913.42 2.52% 421.65 0.58%

IV Tax Expense

Current tax (MAT) 400.26 0.53% - -

MAT credit entitlement (393.99) (0.52)% - -

Income tax relating to earlier year (6.53) (0.01)% - -

Deferred tax - - - -

Total of tax expenses (0.26) 0.00% - -

-

V Profit for the period (III-IV) 1,913.68 2.52% 421.65 0.58%

VI Other Comprehensive Income

A Items that will not be reclassified

to profit or loss

Remeasurement of the net defined benefit liability / asset

(22.67) (0.03)% (16.53) (0.02)%

Income tax relating to items that will not be reclassified to profit or loss

- - - -

B Items that will be reclassified to

profit or loss

Income tax relating to items that will be reclassified to profit or loss

- - - -

Total Other Comprehensive

Income (Net) (22.67) (0.03)% (16.53) (0.02)%

VII Total comprehensive income for

the period (V+VI) 1,891.01 2.49% 405.12 0.56%

The following table provides a reconciliation of the statement of profit and loss for Fiscal 2016:

Particulars

Amount

(Rs. in Lakhs)

Under

Indian

GAAP

Adjustments Under Ind

AS

I Revenue from operations 72,932.88 - 72,932.88

Less: Discount 381.47 - 381.47

Net sales 72,551.41 - 72,551.41

II Other income 263.59 1.65 265.24

III Total Revenue (I + II) 72,815.00 1.65 72,816.65

IV Expenses


Purchases of stock-in-trade - - -

98

Particulars

Amount

(Rs. in Lakhs)

Under

Indian

GAAP

Adjustments Under Ind

AS


2,990.96 -

2,990.96

Excise duty consumed on sales 7,277.29 - 7,277.29

Employee benefit expense 3,383.58 (14.91) 3,368.67

Finance cost 2,352.97 (51.35) 2,301.62

Depreciation and amortization expense 1,703.11 - 1,703.11

Other expenses 22,077.41 167.55 22,244.96

IV Total Expenses 72,293.71 101.29 72,395.00

V Profit/(loss) before exception items and tax (III – IV) 521.29 (99.63) 421.65

VI Exceptional Items - - -

VII Tax Expense

Current tax - - -

Deferred tax - - -

IX Profit/(loss) for the period 521.29 (99.63) 421.65

X Other Comprehensive Income

(i) Items that will not be reclassified to profit or loss - (16.53) (16.53)


- - -

(ii) Items that will be reclassified to profit or loss

Income tax relating to items that will be reclassified to profit or loss

-

-

XI Total Comprehensive Income 521.29 (116.16) 405.12

The following table provides a reconciliation of the total comprehensive income for Fiscal 2016:

Particulars Amount

(Rs. in Lakhs)

Net Profit as per Indian GAAP 521.29

Add/ (less) : Adjustment on account of transition to Ind AS:

Impact of measuring derivative instruments at fair value (143.18)

Impact of measuring investments at fair value (24.37)

Impact of measuring borrowings at amortised cost 51.38

Impact of recognition of actuarial gains/(losses) in Other Comprehensive Income (OCI) 16.53

Net Profit as per Ind AS (A) 421.65

Add: Other Comprehensive Income (B)

Actuarial gains and losses (16.53)

Total Comprehensive Income (A+B) 405.12

For Fiscals 2016 and 2015 (under Indian GAAP)

Particulars


Amount

(Rs. in

Lakhs)

Percentage

of Total

Income

(%)

Amount

(Rs. in

Lakhs)

Percentage

of Total

Income

(%)

Income

Revenue from operations (Gross) 72,932.88 110.64% 73,418.12 109.74%

Less: Excise Duty 7,277.29 11.04% 7,258.15 10.85%

99

Particulars


Amount

(Rs. in

Lakhs)

Percentage

of Total

Income

(%)

Amount

(Rs. in

Lakhs)

Percentage

of Total

Income

(%)

Revenue from operations (Net) 65,655.59 99.60% 66,159.97 98.89%

Other Income 263.59 0.40% 739.97 1.11%

Total Income 65,919.18 100.00% 66,899.94 100.00%

Expenses

Cost of materials consumed 32,508.39 49.32% 40,885.04 61.11%

Purchases of stock-in-trade - - - -


2,711.20 4.11%

(156.93) (0.23)%

Employee benefit expense 3,383.58 5.13% 2,836.22 4.24%

Other expenses 22,458.88 34.07% 20,912.36 31.26%

Excise duty on closing stocks 279.76 0.42% 526.37 0.79%

Finance Cost 2,352.97 3.57% 2,021.48 3.02%

Depreciation and amortisation expense 1,703.11 2.58% 1,387.21 2.07%

Total Expenses 65,397.89 99.21% 68,411.75 102.26%

Profit/(loss) before Exceptional Items,

Extraordinary Items and Tax 521.29

0.79% (1,511.81)

(2.26)%

Exceptional Items - - -

Profit/(loss) before Extraordinary Items and Tax 521.29 0.79% (1,511.81) (2.26)%

Extraordinary Items - - -

Profit/(loss) before Tax 521.29 0.79% 0.00%

Tax Expense - - - -

Current tax – wealth tax - - 0.85 0.00%

Deferred tax - - - -

Profit/(loss) for the year after Tax 521.29 0.79% (1,512.66) (2.26)%

Fiscal 2017 compared to Fiscal 2016 (under Ind AS)

Income

Our total income increased from Rs. 72,816.65 lakhs in Fiscal 2016 to Rs. 75,877.19 lakhs in Fiscal 2017, which represents an increase of 4.20%. This was driven by an increase in revenue from operations and an increase in other income. Revenue from Operations

Revenue from operations increased 3.73%, from Rs. 72,932.88 lakhs in Fiscal 2016 to Rs. 75,651.54 lakhs in Fiscal 2017. This increase was primarily because of the growth in the sale of steel bars, which increased from Rs. 72,539.91 lakhs in Fiscal 2016 to Rs. 75,093.77 lakhs in Fiscal 2017. Additionally, there was an increase in the sale of by products and other miscellaneous sales, which increased from Rs. 239.98 lakhs in Fiscal 2016 to Rs. 419.85 lakhs in Fiscal 2017. Discounts reduced by 11.23%, from Rs. 381.47 lakhs in Fiscal 2016 to Rs. 338.64 lakhs in Fiscal 2017. As a result of the foregoing, net sales increased from Rs. 72,551.41 lakhs in Fiscal 2016 to Rs. 75,312.90 lakhs in Fiscal 2017, which represents an increase of 3.81%. Other Income

Other income increased by 112.75% from Rs. 265.24 lakhs in Fiscal 2016 to Rs. 564.29 lakhs in Fiscal 2017, primarily due to an increase in profit on sale of current investments, sundry balances written back and interest income from current investments, which was partially offset by a decrease in miscellaneous income.

Expenses

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Our total expenses increased by 2.17%, from Rs. 72,395 lakhs in Fiscal 2016 to Rs. 73,963.77 lakhs in Fiscal 2017. While there were increases in the cost of materials consumed, finance cost and employee benefit expenses in Fiscal 2017 as compared to Fiscal 2016, these increases were partially offset by the increase in the inventories of finished goods, work-in-process and stock-in-trade in Fiscal 2017. However, as a percentage of our total income, our total expenses reduced from 99.42% in Fiscal 2016 to 97.48% in Fiscal 2017. Cost of Materials Consumed Our cost of materials consumed grew by 12.04%, from Rs. 32,508.39 lakhs in Fiscal 2016 to Rs. 36,421.86 lakhs in Fiscal 2017. As a percentage of our total income, our cost of materials consumed grew from 44.64% in Fiscal 2016 to 48.00% in Fiscal 2017. The aforesaid increase was primarily driven by the increase in the prices of raw material that could not be passed onwards onto customers. Changes in Inventories of Finished Goods, Work-in-Progress and Stock-in-Trade There was a net increase in inventories of finished goods, work-in-progress and stock-in-trade amounting to Rs. 1,164.88 lakhs in Fiscal 2017, as compared to a net decrease in inventories of finished goods, work-in-progress and stock-in-trade amounting to Rs. 2,990.96 lakhs in Fiscal 2016. Employee Benefits Expense Employee benefit expense increased by 18.14%, from Rs. 3,368.67 lakhs in Fiscal 2016 to Rs. 3,979.68 lakhs in Fiscal 2017. The aforesaid increase was primarily a result of the increase in salaries, wages and bonus, which grew from Rs. 3,047.28 lakhs in Fiscal 2016 to Rs. 3,556.05 lakhs in Fiscal 2017, and staff welfare expenses, which grew from Rs. 26.53 lakhs in Fiscal 2016 to Rs. 75.67 lakhs in Fiscal 2017. The aforesaid increase was driven by the purchase of enhanced employee safety and other equipment in Fiscal 2017. Finance Cost Finance cost increased by 22.87%, from Rs. 2,301.62 lakhs in Fiscal 2016 to Rs. 2,827.97 lakhs in Fiscal 2017. This was driven by the increase in interest on term loans, which increased from Rs. 855.08 lakhs in Fiscal 2016 to Rs. 1,532.41 lakhs in Fiscal 2017. Other Expense

Our other expenses decreased by 0.38%, from Rs. 22,244.96 lakhs in Fiscal 2016 to Rs. 22,160.36 lakhs in Fiscal 2017. While there was an increase in power and fuel expenses, repairs and maintenance (machinery), miscellaneous expenses, processing charges, provision for doubtful debts and legal and professional expenses, these were set-off by the decrease in consumption of stores and spare parts and net loss on account of foreign exchange fluctuations. Further, as a percentage of our total income, our other expenses reduced from 30.55% in Fiscal 2016 to 29.21% in Fiscal 2017.

Profit before Tax

As a result of the above, our profit before tax increased by 353.79% to Rs. 1,913.42 lakhs for Fiscal 2017, from Rs. 421.65 lakhs for Fiscal 2016.

Tax Expense For Fiscal 2017, we had a total tax credit of Rs. 0.26 lakhs, as a result of current tax (MAT) amounting to Rs. 400.26 lakhs, MAT credit entitlement of Rs. 393.99 lakhs and income tax relating to earlier year amounting to Rs. 6.53 lakhs. We did not incur any tax expenses in Fiscal 2016.

Total Comprehensive Income for the Period

As a result of the foregoing, our total comprehensive income increased from Rs. 405.12 lakhs in Fiscal 2016 to Rs. 1,891.01 lakhs in Fiscal 2017, which represents an increase of 366.78%.

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Fiscal 2016 compared to Fiscal 2015 (under Indian GAAP)

Income

Our total income decreased by 1.47%, from Rs. 66,899.94 lakhs in Fiscal 2015 to Rs. 65,919.18 lakhs in Fiscal 2016. This decrease was primarily on account of the decrease in revenue from operations, which was driven by a global decrease in steel prices. However, we recorded an increase in product volumes, which rose from 1,16,400 MT in Fiscal 2015 to 1,21,303 MT in Fiscal 2016. Revenue from Operations

Our revenue from operations (net) decreased by 0.76%, from Rs. 66,159.97 lakhs to Rs. 65,655.59 lakhs. In Fiscal 2016, our revenue from operations (gross) was Rs. 72,932.88 lakhs, which represented a decrease of 0.66% from Rs. 73,418.12 lakhs in revenue from operations (gross) in Fiscal 2015. This decrease was primarily driven by decrease in the cost of steel prices. Other income

Our income decreased by 64.38% from Rs. 739.97 lakhs in Fiscal 2015 to Rs. 263.59 lakhs in Fiscal 2016. This decrease was primarily because we had profit on sale of long term investments amounting to Rs. 502.27 lakhs in Fiscal 2015. Further, there was a decrease in interest income from current investments, which decreased from Rs. 57.88 lakhs in Fiscal 2015 to Rs. 19.34 lakhs in Fiscal 2016, which was offset by the increase in prior period income, from Rs. 0.09 lakhs in Fiscal 2015 to Rs. 51.26 lakhs in Fiscal 2016.

Expenses

Our total expenses decreased by 4.41% from Rs. 68,411.75 lakhs in Fiscal 2015 to Rs. 65,397.89 lakhs in Fiscal 2016. However, total expenses as a percentage of our total income, decreased significantly from 102.26% in Fiscal 2015 to 99.21% in Fiscal 2016.

Cost of materials consumed

The cost of materials consumed decreased by 20.49% from Rs. 40,885.04 lakhs in Fiscal 2015 to Rs. 32,508.39 lakhs in Fiscal 2016, as a result of the decrease in steel prices during Fiscal 2016. Our cost of materials consumed as a percentage of our total income was 49.32% in Fiscal 2016 as compared to 61.11% in Fiscal 2015.

Changes in inventories of Finished Goods, Work-in-Process and Stock-in-Trade

There was a net decrease in the inventories of finished goods, work-in-process and stock-in-trade aggregating to Rs. 2,711.20 lakhs as of the financial year ended March 31, 2016, as compared to a net increase in the inventories of finished goods, work-in-process and stock-in-trade aggregating to Rs. 156.93 lakhs as of the financial year ended March 31, 2015.

Employee Benefits Expenses

Employee benefit expense increased by 19.30% from Rs. 2,836.22 lakhs in Fiscal 2015 to Rs. 3,383.58 lakhs in Fiscal 2016. The aforesaid increase was primarily on account of an increase in salaries, wages and allowances, from Rs. 2,557.12 lakhs in Fiscal 2015 to Rs. 3,080.95 lakhs in Fiscal 2016, which was accompanied by an increase in contribution to provident and other fund, from Rs. 257.34 lakhs in Fiscal 2015 to Rs. 276.10 lakhs in Fiscal 2016.

Other expenses

Our other expenses increased by 7.40%, from Rs. 20,912.36 lakhs in Fiscal 2015 to Rs. 22,458.88 lakhs in Fiscal 2016. However, our other expenses as a percentage of our total income increased from 31.26% in Fiscal 2015 to 34.07% in Fiscal 2016. The key reason for the increase in other expenses was the increase in expenses in relation to repairs to machinery and repairs to building, when maintenance carried out during two planned shutdowns;

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freight and cartage on sale, incurred due to our increased exports; and the net loss on account of foreign exchange fluctuation that impacted the Company’s external commercial borrowings. Excise duty on Closing Stocks

Excise duty on closing stocks amounted to Rs. 279.76 lakhs in Fiscal 2016, as compared to Rs. 526.37 lakhs in Fiscal 2016, which represented a decrease of 46.85%. Finance Cost

Finance costs increased by 16.40% from Rs. 2,021.48 lakhs in Fiscal 2015 to Rs. 2,352.97 lakhs in Fiscal 2016, primarily as a result of the increase in interest expense (net of interest received from banks), other borrowing cost and bank charges. Our finance cost as a percentage of our total income was 3.02% in Fiscal 2015 as compared to 3.57% in Fiscal 2016.

Depreciation and amortization expense

Depreciation and amortization expense increased by 22.77% from Rs. 1,387.21 lakhs in Fiscal 2015 to Rs. 1,703.11 lakhs in Fiscal 2015. As a percentage of our total income, depreciation and amortization expense was 2.07% in Fiscal 2015 as compared to 2.58% in Fiscal 2016.

Exceptional Items and Extraordinary Items

We did not have any exceptional items and extraordinary items in both Fiscal 2016 and Fiscal 2015.

Profit before Tax

As a result of the foregoing, we recorded a profit before tax of Rs. 521.29 lakhs in Fiscal 2016, as compared to a loss of Rs. 1,511.81 lakhs in Fiscal 2015.

Tax Expenses

We did not incur any tax expense in Fiscal 2016, as compared to tax expenses amounting to Rs. 0.85 lakhs in Fiscal 2015.

Profit after Tax

As a result of the foregoing factors, we recorded a profit before tax of Rs. 521.29 lakhs in Fiscal 2016, as compared to a loss of Rs. 1,512.66 lakhs in Fiscal 2015.

Financial Condition

Assets

The following table sets forth the principal components of our assets as of the dates specified:

Particulars

As at March 31,

2017

(Rs. in Lakhs)

As at March 31,

2016

(Rs. in Lakhs)

As at April 1,

2015

(Rs. in Lakhs)

ASSETS

1 Non-current assets

(a) Property, plant and equipment 26,417.88 25,024.80 22,997.74

(b) Capital work-in-progress 111.32 210.84 2,079.82

(c) Other intangible assets 38.62 35.20 -

(d) Financial assets

Investments 67.87 141.97 1,752.98

Loans 46.42 25.97 18.00

Others financial assets - - 0.07

(e) Other non-current assets 1,077.42 1,220.85 869.37

103

Particulars

As at March 31,

2017

(Rs. in Lakhs)

As at March 31,

2016

(Rs. in Lakhs)

As at April 1,

2015

(Rs. in Lakhs)

Total non-current assets 27,759.53 26,659.63 27,717.98

2 Current assets

(a) Inventories 11,783.09 10,690.38 13,288.98

(b) Financial assets

Investments 30.53 1,308.11 -

Trade receivables 18,897.16 19,416.94 17,898.22

Cash and cash equivalents 594.54 376.54 859.33

Bank balances other than above 0.10 2.52 5.52

Loans 69.92 54.00 49.82

Other financial assets 81.71 110.70 110.14

(c) Current tax assets (Net) 76.36 98.39 99.96

(d) Other current assets 1,974.48 2,665.45 1,776.58

Total current assets 33,507.89 34,723.03 34,088.55

TOTAL ASSETS 61,267.42 61,382.66 61,806.53

Liquidity and Capital Resources

Historically, our primary liquidity requirements have been to finance our working capital needs, loan repayments, and our capital expenditures. To fund these requirements we have relied on short-term and long-term borrowings and cash flows from operations. Our business requires a significant amount of working capital. We expect to meet our working capital requirements for Fiscal 2018 primarily from our internal accruals and bank finance, as may be required.

Cash Flows

The following table sets forth certain information relating to our cash flows with respect to operating activities, investing activities and financing activities for the periods indicated:


Particulars Fiscal 2017

(Rs. in Lakhs)

Fiscal 2016

(Rs. in Lakhs)

Net cash provided by / (used in) operating activities 6,803.54 4,638.06

Net cash flow from / (used in) investing activities (1,565.42) (1,576.34)

Net cash flow from / (used in) financing activities (5,022.54) (3,547.51)

Cash and cash equivalents at the end of the year 594.64 379.06

Operating Activities

Net cash generated from operating activities was Rs. 6,803.54 lakhs for the financial year ended March 31, 2017, and consisted of net profit before tax of Rs. 1,913.43 lakhs, as (i) adjusted for depreciation of Rs. 1,806.70 lakhs; (ii) increased by provision for fall in value of investment amounting to Rs. 61.79 lakhs, loss on sale of investments amounting to Rs. 65.51 lakhs, net loss on sale of property, plant and equipment amounting to Rs. 77.55 lakhs, balances written off amounting to Rs. 34.10 lakhs, bad debts amounting to Rs. 51.15 lakhs, provision for doubtful debts amounting to Rs. 100.00 lakhs and interest expenses of Rs. 2,827.97 lakhs; (iii) decreased by other comprehensive income of Rs. 22.67 lakhs, interest income of Rs. 111.13 lakhs, dividend income from current investments amounting to Rs. 0.38 lakhs, profit on sale of current investments amounting to Rs. 218.07 lakhs, interest income from current investments amounting to Rs. 60.54 lakhs, provision no longer required written back amounting to Rs. 0.61 lakhs and sundry balances written back amounting to Rs. 153.07 lakhs; (iv) adjusted for working capital changes; and (v) increased by direct taxes amounting to Rs. 22.29 lakhs. Net cash generated from operating activities was Rs. 4,638.06 lakhs for the financial year ended March 31, 2016, and consisted of net profit before tax of Rs. 421.65 lakhs, as (i) adjusted for depreciation of Rs. 1,703.11 lakhs; (ii) increased by provision for fall in value of investment amounting to Rs. 24.37 lakhs, loss on sale of investments

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amounting to Rs. 0.03 lakhs, net loss on sale of property, plant and equipment amounting to Rs. 111.80 lakhs, balances written off amounting to Rs. 26.79 lakhs, bad debts amounting to Rs. 0.02 lakhs, provision for doubtful debts amounting to Rs. 40.00 lakhs and interest expenses of Rs. 2,301.62 lakhs; (iii) decreased by other comprehensive income of Rs. 16.53 lakhs, interest income of Rs. 91.42 lakhs, dividend income from current investments amounting to Rs. 6.28 lakhs, profit on sale of current investments amounting to Rs. 36.23 lakhs, interest income from current investments amounting to Rs. 19.34 lakhs, provision no longer required written back amounting to Rs. 3.15 lakhs and sundry balances written back amounting to Rs. 35.64 lakhs; (iv) adjusted for working capital changes; and (v) increased by direct taxes amounting to Rs. 1.57 lakhs. Investing Activities

Net cash used in investing activities was Rs. 1,565.42 lakhs for the financial year ended March 31, 2017, driven by the purchase of tangible fixed assets amounting to Rs. 3,261.49 lakhs, and a purchase of intangible fixed assets amounting to Rs. 10.46 lakhs. During the period, proceeds from the sale of fixed assets amounted to Rs. 90.73 lakhs, dividend income was Rs. 0.38 lakhs, proceeds from sale of long term investments (net) were Rs. 8.58 lakhs, proceeds from the sale of current investments (net) were Rs. 1,494.41 lakhs and interest received was Rs. 112.43 lakhs. Net cash used in investing activities was Rs. 1,576.34 lakhs for the financial year ended March 31, 2016, driven by the purchase of tangible fixed assets amounting to Rs. 2,017.62 lakhs, purchase of current investments (net) amounting to Rs. 1,276.91 lakhs and purchase of intangible fixed assets amounting to Rs. 36.38 lakhs. During the period, proceeds from the sale of fixed assets amounted to Rs. 45.81 lakhs, dividend income was Rs. 6.28 lakhs, proceeds from sale of long term investments (net) were Rs. 1,610.98 lakhs and interest received was Rs. 91.50 lakhs. Financing Activities

Net cash used in financing activities was Rs. 5,022.54 lakhs for the financial year ended March 31, 2017, driven by the proceeds from short term borrowings (net) amounting to Rs. 2,810.87 lakhs and interest paid to the extent of Rs. 2,872.03 lakhs. During the period, proceeds from long term borrowings (net) were Rs. 660.36 lakhs. Net cash used in financing activities was Rs. 3,547.51 lakhs for the financial year ended March 31, 2016, driven by the proceeds from short term borrowings (net) amounting to Rs. 7,229.64 lakhs and interest paid to the extent of Rs. 2,255.75 lakhs. During the period, proceeds from long term borrowings (net) were Rs. 5,937.88 lakhs.


Particulars Fiscal 2016

(Rs. in Lakhs)

Fiscal 2015

(Rs. in Lakhs)

Net cash provided by / (used in) operating activities 5,009.99 (3,274.92)

Net cash flow from / (used in) investing activities (2,013.17) (365.08)

Net cash flow from / (used in) financing activities (3,482.61) 3,115.01

Cash and cash equivalents at the end of the year 379.06 864.85

Operating Activities

Net cash generated from operating activities was Rs. 5,009.99 lakhs for the financial year ended March 31, 2016, and consisted of net profit before tax of Rs. 521.29 lakhs, as (i) adjusted for depreciation and amortisation of Rs. 1,703.11 lakhs; (ii) increased by interest expense amounting to Rs. 2,352.97 lakhs, exchange rate fluctuation (unrealised) amounting to Rs. 583.13 lakhs, loss on sale of fixed assets (net) amounting to Rs. 111.80 lakhs; (iii) decreased by provision for doubtful debts written back amounting to Rs. 3.15 lakhs, sundry balances written back amounting to Rs. 35.64 lakhs, profit on sale of investments amounting to Rs. 36.23 lakhs, interest income amounting to Rs. 91.39 lakhs, dividend income of Rs. 6.28 lakhs; (iv) adjusted for working capital changes. Net cash used in operating activities was Rs. 3,274.92 lakhs for the financial year ended March 31, 2015, and consisted of net loss of Rs. 1,511.81 lakhs, as (i) adjusted for depreciation and amortisation of Rs. 1,387.21 lakhs; (ii) increased by interest expense amounting to Rs. 2,021.48 lakhs, exchange rate fluctuation (unrealised) amounting to Rs. 431.50 lakhs; (iii) decreased by provision for doubtful debts written back amounting to Rs. 1.10 lakhs, sundry balances written back amounting to Rs. 21.72 lakhs, profit on sale of investments amounting to Rs.

105

523.01 lakhs, interest income amounting to Rs. 106.89 lakhs, dividend income of Rs. 2.34 lakhs and profit on sale of fixed assets (net) amounting to Rs. 8.50 lakhs; (iv) adjusted for working capital changes; (v) further adjusted for income tax paid amounting to Rs. 0.85 lakhs. Investing Activities

Net cash used in investing activities was Rs. 2,013.17 lakhs for the financial year ended March 31, 2016, driven by the purchase of fixed assets and capital work in progress (including capital advances) amounting to Rs. 2,471.49 lakhs. During this period, proceeds from the sale of fixed assets amounted to Rs. 45.81 lakhs, proceeds from the sale of investments amounted to Rs. 314.76 lakhs, interest was received to the extent of Rs. 91.47 lakhs and dividend was received to the extent of Rs. 6.28 lakhs. Net cash used in investing activities was Rs. 365.08 lakhs for the financial year ended March 31, 2015, driven by the purchase of fixed assets and capital work in progress (including capital advances) amounting to Rs. 2,833.60 lakhs. During this period, proceeds from the sale of fixed assets amounted to Rs. 22.67 lakhs, proceeds from the sale of investments amounted to Rs. 2,290.06 lakhs, interest was received to the extent of Rs. 153.45 lakhs and dividend was received to the extent of Rs. 2.34 lakhs. Financing Activities

Net cash used in financing activities was Rs. 3,482.61 lakhs for the financial year ended March 31, 2016, driven by the proceeds from short term borrowings amounting to Rs. 7,229.64 lakhs and interest paid to the extent of Rs. 2,352.97 lakhs. During the period, proceeds from long term borrowings (net) were Rs. 6,100.00 lakhs. Net cash generated in financing activities was Rs. 3,115.01 lakhs for the financial year ended March 31, 2015, driven by the proceeds from short term borrowings amounting to Rs. 4,416.49 lakhs and proceeds from term loan amounting to Rs. 720.00 lakhs. During the period, interest paid was Rs. 2,021.48 lakhs.

Contingent Liabilities and Commitments

As of March 31, 2017, our contingent liabilities that have not been provided for are as set out in the table below:

# Particulars

As of March 31,

2017

(In Rs. Lakhs)

(a) Claims against the Company not acknowledged as debts

- Excise duty/ Custom duty/Service tax in respect of matters in disputes 88.95

- Income tax liability that may arise in respect of matters in disputes 267.50

- Sales tax/ VAT/ liability in respect of matters in disputes 3.92

- Other matters* 370.71

(b) Bank Guarantees and letters of credit outstanding 5461.23

(c) Commitments

-Contracts remaining to be executed on capital account 635.49

- Export commitments against import of capital goods under EPCG scheme (Duty saved amount)

1,552.49

*Other matters include contingent liability of Rs. 370.71 lakhs (P.Y. Rs. 370.71 lakhs) relating to matters on

Power/electricity with PSPCL

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to various types of market risks during the normal course of business. Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk and commodity risk. We are exposed to commodity risk, liquidity risk, credit risk, interest rate risk and inflation risk in the normal course of our business.

Commodity Risk

The principal raw materials we use to manufacture our products include shredded scrap, sponge iron, directly reduced iron, pig iron, mild steel turning boring and various types of ferrous alloys. These raw materials have historically been available from a number of independent domestic and international suppliers, although we cannot

106

assure you that this will continue to be the case in the future. Pricing volatility for raw materials or commodities or an increase in the price of key raw materials could result in increased costs and may significantly affect our financial condition, results of operations and cash flows. For instance, the prices of graphite electrodes have significantly increased recently. We may be adversely affected by fluctuations in the price of any of the aforesaid or other raw materials that have been subject to historical periods of rapid and significant price movements. Price volatility for steel and other raw materials contributes to a difficulty in managing the costs of raw materials. Increasing costs for raw material supplies will increase our production costs and affect our margins if we are unable to pass the higher production costs on to our customers in the form of price increases.

Credit Risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk from our operating activities, primarily from trade receivables. For the nine-month period ended December 31, 2017, and Fiscal 2017, our trade receivables were Rs. 18,731.25 lakhs and Rs. 18,897.16 lakhs, respectively, which constituted 28.80% and 24.90% of our total revenues for the same periods. If a customer defaults in making its payments on an order on which we have devoted significant resources, or if an order in which we have invested significant resources is delayed, cancelled or does not proceed to completion, it could have a material adverse effect on our Company’s results of operations and financial condition. Our credit terms vary according to market practices and typically, the credit period ranges between 7 days to 90 days.

Interest Rate Risk

As our business is capital intensive, we are exposed to interest rate risks. Interest rates for borrowings have been volatile in India in recent periods. Some of our current debt facilities carry interest at variable rates with periodic resets of interest rates. Although we may decide to engage in interest rate hedging transactions or exercise any right available to us under our financing arrangements to terminate the existing debt financing arrangement on the respective interest rate reset dates and enter into new financing arrangements, there can be no assurance that we will be able to do so on commercially reasonable terms, that our counterparties in hedging transactions will perform their obligations, or that such agreements, if entered into, will protect us adequately against interest rate risks.

Liquidity Risk

Liquidity risk is the risk that we will encounter difficulties in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our approach to managing liquidity is to ensure, as far as possible, that we will have sufficient liquidity to meet our liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to our reputation.

Inflation

In recent years, India has experienced relatively high rates of inflation. Continued high rates of inflation may increase our costs such as salaries, travel costs and related allowances, which are typically linked to general price levels. There can be no assurance that we will be able to pass on any additional costs to our clients or that our revenue will increase proportionately corresponding to such inflation. Accordingly, high rates of inflation in India could have an adverse effect on our profitability and, if significant, on our financial condition.

Foreign Exchange Risk

We are exposed to exchange rate risk as a portion of our revenues and expenditure are denominated in foreign currencies. Any appreciation in the value of the Rupee against U.S. dollar, Euro or other foreign currencies would decrease the realization of Rupee value of our products. The exchange rate between the Rupee and the U.S. dollar has changed substantially in recent years and may continue to fluctuate significantly in the future. Adverse movements in foreign exchange rates may adversely affect our results of operations and financial condition.

Interest Service Coverage Ratio

The following table details the Company’s interest coverage ratio as per its audited financial statements for the

periods indicated:

107



Interest Coverage Ratio 235.69% 197.48%



Interest Coverage Ratio 199.75% 93.46%

Reservations, Qualifications or Adverse Remarks by the Auditors

The following table provides a summary of the reservations, qualifications and adverse remarks in the statutory auditors’ reports, including any matter of emphasis on the audited financial statements of the Company for the preceding five fiscal years, and the limited review financial results for the nine-month period ended December 31, 2017, and their impact on the Company’s financial statements and financial position and corrective steps taken and proposed to be taken by the Company for each of the said reservations or qualifications or adverse remarks:

Period

Qualification /

Reservation / Adverse

Remark/ Emphasis of

Matters

Impact on the Company’s Financial Statements and

Financial Position

Corrective steps taken

and/or proposed to be

taken by the Company

December 31, 2017

Nil Nil Not Applicable

Fiscal 2017


Fiscal 2016


Fiscal 2015


Fiscal 2014


Fiscal 2013

The Company’s liability in respect of ECB was restated as on June 30, 2012 for determining quarterly results. However, as at the year end, it has not been restated, which constitute a departure from accounting standard referred to in section 211(3C) of the Companies Act 1956.

The Company’s records indicate that had management restated the ECB at the end of the year, this would have resulted in gain of an amount of Rs. 220 lakhs for the financial year. Accordingly, liability in respect of ECB would have decreased by Rs. 220 lakhs and Profit Before Tax would have been increased by Rs. 220 lakhs.

As on March 31, 2013, while following the conservative approach, the Company did not provide for notional foreign exchange gains amounting to Rs. 220 lakhs arising because of appreciation of rupee and decided to carry the liability in respect of ECB at a level determined as on June 30, 2012.

Related Party Transactions

We enter into various transactions with related parties in the ordinary course of business. For details in relation to the related party transactions entered by our Company during the last three Fiscal Years, see “Financial

Statements”.

Changes in Accounting Policies

There have been no changes in accounting policies during the preceding three years.

Off-Balance Sheet Arrangements

Except as disclosed in this Placement Document, we do not have any material off-balance sheet arrangements,

108

derivative instruments, swap transactions or relationships with unconsolidated entities or financial partnerships established or contemplated for the purpose of facilitating off-balance sheet transactions.

Unusual or Infrequent Events or Transactions

Except as described in sections “Risk Factors” and “Business Overview”, to our knowledge, there have been no events or transactions to our knowledge which may be described as “unusual” or “infrequent”.

Significant Economic Changes that Materially affect or are likely to affect Income from Continuing

Operations

Our business has been subject, and we expect it to continue to be subject, to significant economic changes that materially affect or are likely to affect income from continuing operations identified above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting our Results of

Operations” and the uncertainties described in the section titled “Risk Factors”.

Future Relationship between Cost and Income

Except as described in the sections titled “Risk Factors”, “Business” and this section, to the best of our knowledge there are no known factors that might affect the future relationship between cost and revenue.

Known Trends or Uncertainties

Our business has been affected and we expect that it will continue to be affected by the trends identified above in “Significant Factors Affecting Our Results of Operations” and the uncertainties described in the section “Risk

Factors” of this Placement Document. To our knowledge, except as described in this Placement Document, there are no known trends or uncertainties that we expect to have a material adverse impact on our results of operations.

Segment Reporting

Our Company has only one operating segment “Steel”, and our operations are mainly within India.

Publicly Announced New Products or Business Segments / Material increases in Revenue due to Increased

Disbursements and Introduction of New Products

We have not publicly announced any new products or business segments nor have there been any material increases in our revenues due to increased disbursements and introduction of new products.

Seasonality of Business

We do not believe our business to be seasonal.

Significant Dependence on Single or Few Customers

We currently generate a significant portion of our revenues from limited number of major customers. For the nine months ended December 31, 2017, and Fiscal 2017, our top 10 customers contributed 46.71% and 46.33%, of our

total revenues from operations, respectively. Further, we currently do not have long-term contractual arrangements any of our significant customers, and conduct business with them on the basis of purchase orders that are placed from time to time. Our reliance on a select group of customers may constrain our ability to negotiate our arrangements, which may have an impact on our profit margins and financial performance. Any loss of one or more of such customer or a reduction in the demand for our products or any adverse impact on the business of our customers could adversely impact our revenues.

Competitive Conditions

We operate in a competitive environment. For further details, please refer to the discussions regarding our competition in sections titled “Risk Factors”, “Forward Looking Statements” and “Business Overview”.

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Significant Developments That May Affect our Future Results of Operations

In the opinion of our Board, except as disclosed in this Placement Document, no circumstances have arisen since December 31, 2017, which materially affect or are likely to affect, the trading and profitability of our Company, or the value of our assets or our ability to pay material liabilities within the next 12 months.

110

FINANCIAL STATEMENTS

Particulars Page

Number

Audited Financial Statements

Auditor’s report on the financial statements for Fiscal 2015 F - 1

Financial statements for Fiscal 2015 F – 4


Financial statements for Fiscal 2016 F - 30


Financial statements for Fiscal 2017 F - 56

Interim Financial Results

Limited review report on the unaudited financial results for the quarter and nine-month period ended December 31, 2017

F - 99

Unaudited financial results for the nine-months ended December 31, 2017 F - 100

33

Vardhman Special Steels LimitedVardhman

To The Member of, Vardhman Special Steels Limited,Ludhiana

Report on the Financial Statements

We have audited the accompanying financial statements of Vardhman Special Steels Limited (“the Company”), which comprise the Balance Sheet as at March 31,2015, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

The Company’s Board of Directors is responsible for the matters in section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding of the assets of the Company and for preventing and detecting the frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Company’s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us,the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2015;

b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2015 (“the Order”) issued by the Central Government of India in terms of sub-section 11 of section 143 of the Act, we give in the Annexure a statement on the matters prescribed in paragraphs 3 and 4 of the Order.

2. As required by section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b) in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books

c) the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of accounts.

d) in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) on the basis of written representations received from the directors as on March 31, 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2015 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the other matters included in the Auditor’s Report and to the best of our information and according to the explanations given to us :

I. The Company does not have any pending litigations which would materially impact its financial position;

II. The Company did not have any long-term contracts including derivatives contracts for which there were any material foreseeable losses;

III. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

For S. S. Kothari Mehta & Co. Chartered Accountants (Firm Regn. No. 022150N)

(CA Dinesh K. Abrol)PLACE: GURGAON PartnerDATE: 2ND MAY, 2015 Membership No.87899

INDEPENDENT AUDITORS’ REPORT

F - 1

34


On the basis of such checks as we considered appropriate and according to the information and explanation given to us during the course of our audit, we report that:

1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

(b) As explained to us, Fixed Assets are verified by rotation every year. No discrepancies were observed in the Fixed Assets physically verified during the financial year.

2. (a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been adequately dealt with in books of accounts.

3. (a) According to the information and explanations given to us and on the basis of our examination of the books of account, the Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 189 of the Companies Act, 2013. Consequently, the provisions of clauses iii (a) and iii (b) of the order are not applicable to the Company.

4. In our opinion and according to the information and explanations given to us, there is generally an adequate internal control procedure commensurate with the size of the Company and the nature of its business, for the purchase of inventories & fixed assets and for sale of goods& services. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

5. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of sections73 to 76 or any other relevant provisions of the Companies Act, 2013 and rules framed thereunder. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal against the Company during the year.

6. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost

records under Section 148 (1) of the Companies Act, 2013 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the said records with a view to determine whether they are accurate or complete.

7. (a) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, Employees’ State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues applicable to it. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, Employees’ State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues were outstanding, as at 31.03.2015 for a period of more than six months from the date they became payable.

(b) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of income-tax / sales tax / wealth tax / service tax / customs duty / excise duty / Value Added Tax / cess which have not been deposited on account of any dispute, except the following:

S. No. Nature of dues (`) Amount due (`) Forum where pending

1. PUNJAB SALE TAX Basic& Penalty ` 186500

JOINT DIRECTOR, ENFORCEMENT, PATIALA

2. PUNJAB SALE TAX Basic & Penalty ` 180000

JOINT DIR ENFORCEMENT PATIALA

3. Punjab VAT Act, 2005

PENALTY ` 595963 AETC MOBILE WING, PATIALA

4. CENVAT – DENIAL OF CENVAT

Basic & Penalty ` 415723 Interest `405723

CHIEF COMMISSIONER EXCISE,CHANDIGARH


Basic ` 45450 Interest `45450

CESTAT



ASSISTANT COMMISSIONER, LUDHIANA


Basic ` 84910 Interest `15283


8. RULE 6 B OF VALUATION RULES-CENTRAL EXCISE


COMMISSIONER APPEALS, CHANDIGARH

9. DENIAL OF CENVAT Basic ` 133333 Interest `133333

REMANDED BACK TO COMMISSIONER APPEALS BY CESTAT

10. DENIAL OF CENVAT Basic & Penalty ` 26938 Interest ` 6667

ASSISTANT COMMISSIONER LUDHIANA





13. DENIAL OF CENVAT Basic & Penalty ` 7284 Interest `1639


14. Entry Tax `8,50,00,000 Punjab & Haryana High Court

THE ANNEXURE REFERRED TO IN PARAGRAPH 1 OF THE OUR REPORT OF EVEN DATE TO THE MEMBERS OF VARDHMAN SPECIAL STEELS LIMITED ON THE ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED 31ST MARCH, 2015.

F - 2

35


(c) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no amount was required to be transferred to investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made thereunder.

8. The Company does not have any accumulated loss and has incurred cash loss during the financial year covered by our audit, however had incurred cash loss in the immediately preceding financial year.

9. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has not defaulted in repayment of dues to a financial institution or bank during the period. As the Company has not issued debentures, clause regarding default to debenture holders does not apply to the Company.

10. According to the information and explanations given to us, the Company has not given any guarantees for loan taken by others from a bank or financial institution.

11. According to the records of the Company examined by us and the information and explanations given to us, term loans availed by the Company during the year have been utilized for the purpose they have been received.

12. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud on or by the Company, noticed or reported during the period, nor have we been informed of such case by the management.

For S. S. Kothari Mehta & Co. Chartered Accountants (Firm Regn. No. 022150N)

(CA Dinesh K. Abrol)PLACE: GURGAON PartnerDATE: 2ND MAY, 2015 Membership No.87899

F - 3

36


BALANCE SHEET as at 31st March, 2015

(` in lac)Particulars Note

No. As at

31st March 2015

As at 31st March

2014 1 EQUITY AND LIABILITIES

I Shareholder’s funds Share capital 3 1,855.54 1,855.54 Reserves and surplus 4 15,117.48 16,719.90

16,973.02 18,575.44 II Share application money pending allotment – –

III Non-current liabilities Long-term borrowings 5 10,440.31 9,982.67 Other long-term liabilities 6 19.00 11.87 Long-term provisions 7 54.43 50.95

10,513.74 10,045.49 IV Current liabilities Short-term borrowings 8 23,911.98 19,495.49 Trade payables 9 5,157.10 4,202.49 Other current liabilities 10 4,843.70 4,062.33 Short-term provisions 11 62.22 21.95

33,975.00 27,782.26 TOTAL 61,461.76 56,403.19

2 ASSETS I Non-current assets Fixed assets

Tangible assets 12 22,997.74 21,037.93 Intangible assets – – Capital work-in-progress 2,079.82 2,954.81

Non-current investments 13 1,408.22 1,675.27 Long-term loans and advances 14 987.39 743.09 Other non-current assets – –

27,473.17 26,411.10 II Current assets Current investments 15 – 1,500.00 Inventories 16 13,288.98 11,931.22 Trade receivables 17 17,898.22 12,276.35 Cash and cash equivalents 18 864.85 1,389.84 Short-term loans and advances 19 1,935.16 2,846.74 Other current assets 20 1.38 47.94 33,988.59 29,992.09 TOTAL 61,461.76 56,403.19 See accompanying notes forming part of the Financial Statements 1-48 – –

As per our separate report of even dateFor S.S.Kothari Mehta & Co. For and on behalf of the Board of Directors Chartered Accountants(Firm Regn No.022150N)

(CA Dinesh K.Abrol) SONAM TANEJA SANJEEV SINGLA NARESH BANSAL SUCHITA JAIN SACHIT JAIN

Partner (Company Secretary) (Chief Financial Officer) (Chief Executive) (Director) (Managing Director) M.No.087899

Place : Gurgaon

Dated : 2nd May, 2015

F - 4

37


Statement of Profit and Loss for the year ended 31st March, 2015

(` in lac)

Particulars NoteNo.

For the year ended31st March, 2015


INCOME

Revenue from Operations (Gross) 21 73,418.12 40,865.50

Less: Excise Duty 7,258.15 3,805.92

Revenue from Operations (Net) 66,159.97 37,059.58

Cost of Material Transfer To Trial Run (Rolling Mill) – 19,336.52

Other Income 22 739.97 1,576.18

Total Income 66,899.94 57,972.28

EXPENSES –

Cost of Materials Consumed 23 40,885.04 30,632.94

Purchase of Stock-in-trade – –

Changes in Inventories of Finished Goods, Work in Progress and Stock-in-Trade

24 (156.93) 7,018.76

Employee Benefit Expenses 25 2,836.22 2,126.34

Other Expenses 26 20,912.36 17,289.48

Excise Duty on Closing Stocks 526.37 461.13

Finance Cost 27 2,021.48 1,189.72

Depreciation and Amortisation Expense 28 1,387.21 570.45

Total Expenses 68,411.75 59,288.82

Profit before Exceptional Items, Extraordinary Items and Tax (1,511.81) (1,316.54)

Exceptional Items: – –

Profit before Extraordinary Items and Tax (1,511.81) (1,316.54)

Extraordinary Items – –

Profit before Tax (1,511.81) (1,316.54)

Tax Expense

Current tax - Wealth Tax 0.85 1.07

Deferred tax – (375.97)

Profit for the year after Tax (1,512.66) (941.64)

Earnings per share (`)

Basic - Par value of ` 10 per share (8.15) (5.07)

Diluted - Par value of ` 10 per share (8.15) (5.07)

See accompanying notes forming part of the Financial Statements 1-48




Place : Gurgaon


F - 5

38


Cash Flow Statement for the year ended 31st March, 2015

(` in lac)Particulars For the year ended

31st March, 2015For the year ended

31st March, 2014A Cash flow from operating activities

Net profit before tax and Extra Ordinary Items (1,511.81) (1,316.54)Adjustments for:Depreciation 1,387.21 570.45 Provision for Doubtful Debts written back (1.10) (34.46)Sundry Balances Written (back) / off (21.72) (2.27)Interest Expense 2,021.48 1,340.88 Profit on sale Investments (523.01) (1,038.51)Exchange Rate Fluctuation (unrealised) 431.50 718.05 Interest income (106.89) (216.26)Dividend Income (2.34) (22.57)(Profit)/Loss on Sale of Fixed Assets (Net) (8.50) (324.45)Operating Profit before working capital changes 1,664.82 (325.68)Adjustments for: Decrease/(Increase) in Inventories (1,357.76) (560.91)Increase / (Decrease) in liabilities and provisions 1,340.25 412.32 Decrease /(Increase) in other Current assets/Loans & Advances 700.49 (1,154.63)Decrease/ (Increase) in Trade Receivables (5,621.87) (1,934.22)

(4,938.89) (3,237.44)Cash Generation from Operations (3,274.07) (3,563.12)Income tax paid (0.85) (26.41)Net cash used in operating activities (3,274.92) (3,589.53)

B Cash flow from investing activities Purchase of fixed assets and capital work in progress (including capital advances) (2,833.60) (5,747.56)Proceeds from sale of Fixed Assets 22.67 417.58 Purchase of Investments – (323.61)Proceeds from sale of Investments 2,290.06 10,338.51 Interest Received 153.45 529.99 Dividend Received 2.34 22.57 Net cash used in investing activities (365.08) 5,237.48

C Cash flows from financing activities Proceeds from Short Term Borrowings 4,416.49 (1,944.72)Proceeds from Term loan 720.00 – Interest paid (2,021.48) (1,340.88)Net cash generated from financing activities 3,115.01 (3,285.60)Net increase in cash and cash equivalents (A+B+C) (524.99) (1,637.65)Cash and cash equivalents at the beginning of the period 1,389.84 3,027.49 Cash and cash equivalents at the end of the period 864.85 1,389.84 Components of cash and cash equivalents:Cash in hand & Others 2.21 4.29 Cheques in hand – – Balances with scheduled banks: - on current accounts 857.12 1,004.91 - on fixed deposit accounts 5.52 380.64

864.85 1,389.84

Note: The above Cash Flow Statement has been prepared under the indirect method set out in Accounting Standard - 3 on Cash Flow Statement prescribed by the Companies (Accounting Standards) Rules, 2006.




Place : Gurgaon


F - 6

39


Notes to the Financial Statements for the Year Ended 31st March, 2015

Note 1. CORPORATE INFORMATION

Vardhman Special Steels Limited is a Public Limited Company incorporated under the provisions of the companies Act, 1956 on 14th May, 2010. The Company is engaged in the Manufacturing of Billet, Steel bars & rods and Bright bars of various categories of special and alloy steels.

Note 2. SIGNIFICANT ACCOUNTING POLICIES:

a) Accounting Convention:

The accounts are prepared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in section 133 of Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules 2014 and other relevant provisions of the said Act.

b) Revenue Recognition:

i) Sales:

Revenue from sale of goods is recognized:

a) When all the significant risks and rewards of ownership are transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership; and

b) No significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods.

c) Domestic Sales (Gross) include excise duty and freight and is recognized on dispatch of goods to customers.

ii) Insurance and Other Claims:

The revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realised and the ultimate collection thereof.

iii) Benefit under Duty Entitlement Pass Book/Duty Drawback Scheme:

Revenue in respect of the above benefits is recognized on post export basis.

c) Retirement Benefits:

i. Gratuity : Provision for gratuity, which is a defined benefit plan, is made on the basis of an actuarial valuation, as per AS-15 issued by Institute of Chartered Accountants of India, carried out by an independent actuary at the balance sheet date, using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Profit and Loss Account.

ii. Leave Encashment: As per the Company’s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either utilise during the service or encash. Encashment can be made during the service, on early retirement, on withdrawal of scheme, at resignation by employee or upon death of employee. The Company accounts for the liability for compensated absences payable in future based on an independent actuarial valuation, as per AS-15 issued by Institute of Chartered Accountants of India, carried out at the end of the period.

iii. Provident Fund : Contribution to Provident Fund is made in accordance with the provisions of the Provident Fund Act, 1952 and is treated as revenue expenditure.

iv. Superannuation: The liability in respect of eligible employees covered under the scheme is provided through a policy taken from Life Insurance Corporation of India by an approved trust formed for the purpose. The premium in respect of such policy is recognized as an expense in the period in which it falls due.

d) Fixed Assets:

Fixed Assets are stated at historical cost less depreciation.

e) Intangible Assets:

Intangible assets are stated at cost less accumulated amount of amortization.

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f) Depreciation:

i) Depreciation is provided on straight line method in accordance with and in the manner specified in Schedule II to the Companies Act, 2013.

ii) Depreciation on assets costing ` 5000 or below acquired during the year is charged @ 100% on proportionate basis

keeping in view materiality aspect.

g) Amortization:

i) Intangible assets are amortized on straight line method over their estimated useful life.

ii) Right to use Power Lines is amortised on straight line method over their estimated useful life.

h) Investments:

Long term Investments are carried at cost less provision for diminution, other than temporary, in the value of investment. Current investments are carried at lower of cost and fair value.

i) Inventories:

Inventories are valued at cost or net realisable value, whichever is lower. The cost in respect of various items of inventories is computed as under:

o In case of raw materials-at weighted average cost plus direct expenses.

o In case of stores & spares-at weighted average cost plus direct expenses.

o In case of finished goods-at raw material cost plus conversion cost, packing cost, excise duty and other overheads incurred to bring the goods to their present condition and location.

j) Subsidy:

Government grants available to the company are recognised when there is a reasonable assurance of compliance with the conditions attached to such grants and where benefits in respect thereof have been earned and it is reasonably certain that the ultimate collection will be made. Government subsidy in the nature of promoter’s contribution is credited to capital reserve. Government subsidy received for a specific asset is reduced from the cost of the said asset.

k) Foreign Currency Conversion/Translation:

o Foreign currency transactions are recorded on initial recognition at the rate prevailing on the date of the transaction. Where export bills are negotiated with the bank, the export sales are recorded at the rate on the date of negotiation as the said rate approximates the actual rate on the date of transaction.

o Foreign Currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at the closing rate as at the balance sheet date are recognised as income or expense in the period in which they arise.

o The premium or discount arising at the inception of forward exchange contracts is amortised as an expense or income over the life of the contract.

o Exchange differences on the aforesaid forward exchange contract are recognised in the statement of profit & loss in the reporting period in which the exchange rates change. Profit or loss arising on cancellation or renewal of such contracts is recognised as income or expense in the period in which such profit or loss arises.

l) Borrowing Costs:

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as expense in the period in which they are incurred.

m) Expenditure incurred during construction period:

In respect of major expansion, the indirect expenses incurred during construction period up to the date of commercial production is capitalised on various categories of fixed assets on proportionate basis.

n) Provisions and contingencies:

A provision is recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation

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and reliable estimate can be made of the amount of the obligation. A contingent liability is disclosed where there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resource.

o) Operating Leases:

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals paid for such leases are recognised as an expense on systematic basis over the term of lease.

p) Employee benefits

Short Term Benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, short term compensated absences and bonus, etc. are recognized in the profit and loss account in the period in which the employee renders the related service.

q) Earnings per share

Basic earnings per share is calculated by dividing the net profit/(loss) for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of equity and dilutive potential equity shares outstanding during the period, except where the results would be anti-dilutive.

r) Accounting for Tax on Income:

The accounting treatment followed for taxes on income is to provide for Current Tax and Deferred Tax. Current Tax is the amount of income-tax determined to be payable in respect of taxable income for a period. Deferred Tax is the tax effect of all timing differences.

s) Impairment of Assets

At each Balance Sheet date, an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of accounts.

t) Segment Information:

The Company has only one reporting segment i.e. manufacturing of Steel. The Company is mainly operating in India which is considered to be the only reportable geographical segment.

u) Cenvat Credit:

Cenvat credit of excise duty paid on inputs, capital assets and input services is recognised in accordance with the Cenvat Credit Rules, 2004.

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(` in lac)

3. SHARE CAPITAL

Particulars

As at 31st March, 2015 As at 31st March, 2014

Number of shares

Amount Number of shares

Amount

Authorised

Equity shares of ` 10 each 35,000,000 3,500.00 35,000,000 3,500.00

35,000,000 3,500.00 35,000,000 3,500.00

Issued, subscribed and paid up

Equity shares of ` 10 each fully paid up

At the beginning of the year 18,555,376 1,855.54 18,555,376 1,855.54

Add: Issued during the year – – – –

At the end of the year 18,555,376 1,855.54 18,555,376 1,855.54

Total 18,555,376 1,855.54 18,555,376 1,855.54

3(a) The Aggregate number of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash in the last five years immediately preceeding the balance sheet date is NIL.

3(b) Equity Shares calls unpaid by Directors and Officers of the Company is NIL.

3(c) Shares held by holding Company or its ultimate holding Company or subsidiaries or associates of the holding Company or the ultimate holding Company in aggregate.

Particulars


Number of shares

Amount Number of shares

Amount

Equity shares of ` 10/- each fully paid up held by

Ultimate Holding Company – – – –

Holding Company – – – –

Subsidiary of ultimate Holding Company or Holding Company

– – – –

Associate of ultimate Holding Company or Holding Company

– – – –

Total – – – –

3 (d) Details of shareholders holding more than 5% shares of the Company

Particulars


Number of shares

% holding in the class

Number of shares



- Vardhman Textiles Limited. 5,825,000 31.39 5,825,000 31.39

- Vardhman Holding Limited. 3,080,517 16.60 3,080,517 16.60

- Adishwar Enterprises LLP (formerly Adinath Investment and Trading Company)

2,522,655 13.60 2,522,655 13.60

- Devakar Investment and Trading Company (P) Ltd 1,108,175 5.97 1,108,175 5.97

Total 12,536,347 67.56 12,536,347 67.56

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(` in lac)

4. RESERVES AND SURPLUS

Particulars As at31st March, 2015

As at31st March, 2014

a) General reserve At the beginning of the year 13,890.62 13,890.62 Add/Less : Transfer from Surplus in Profit & Loss Statement – – At the end of the year 13,890.62 13,890.62 b) (Deficit)/ surplus in the Statement of Profit & Loss Balance at the beginning of the year 2,829.28 3,770.92 Add/ (less): Depreciation charged to reserves as per schedule-II

of Companies Act, 2013 (refer note-42) (89.76) –

Add/ (less): Profit/ (loss) for the year (1,512.66) (941.64) Balance at the end of the year 1,226.86 2,829.28 Total 15,117.48 16,719.90

5. LONG-TERM BORROWINGS



Bank - Foreign currency denominated loans (ECB)#

10,414.17 9,982.67

Less : - Current Maturities of long term borrowings (refer note -10) 693.86 9,720.31 – 9,982.67 Bank - Term Loan 720.00 –

Total 10,440.31 9,982.67

(a) The above mentioned ECB is secured by mortgage created or to be created on all the immovable assets of the Company, both present and future and hypothecation of all the movable assets including movable machinery, machinery parts, tools and accessories and other movables both present and future (except book debts), subject to charges created or to be created in favour of the Bankers for securing the working capital limits.

# Refer Note No. 33 on restatement of External Commercial Borrowings

(b) Terms of repayment of term loans

Repayment Period Instalments Outstanding Periodicity of repayment

As at31st March

2015

As at31st March

2014

CurrentYear

(Years)

PreviousYear

(Years)

CurrentYear(No.)

PreviousYear(No.)

CurrentYear

PreviousYear

720.00 – 5.00 – 20 – Quarterly –

10,414.17 9,982.67 2.25 2.25 9 9 Quarterly Quarterly

11,134.17 9,982.67

* Figures of term loan stated above in para (b) includes current maturities of long term debt shown separately in note 10

6. OTHER LONG-TERM LIABILITIES



Securities Received 12.29 6.57 Superannuation Payable 6.71 5.30 Total 19.00 11.87

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Notes to the Financial Statements for the Year Ended 31st March, 2015(` in lac)

7. LONG-TERM PROVISIONS



Provision for employee benefits Gratuity (funded) – –

Leave Encashment (unfunded) 54.43 50.95 Total 54.43 50.95

8. SHORT TERM BORROWINGS



Loans repayable on demandFrom banks* Secured 21,357.41 18,148.99 From related parties Unsecured

- Vardhman Textiles Limited 2,554.57 1,346.50 Total 23,911.98 19,495.49

* includes Working Capital Borrowings from Consortium Banks which are secured by hypothecation of entire present and future tangible current assets of the Company as well as a second charge on the entire present and future fixed assets of the company.

9. TRADE PAYABLES



Trade Payables 5,150.03 4,202.49 Trade Payables : Related Party 7.07 – Total 5,157.10 4,202.49

10. OTHER CURRENT LIABILITIES



Current Maturity of Long Term Debt 693.86 – Interest accrued but not due on borrowings 47.98 61.16 Other Payables -Statutory Dues 761.46 722.43 -Security Deposits 28.61 43.90 -Payable on Purchase of Fixed Assets 449.01 695.16 -Advances from Customers 113.51 225.72 -Dues to Employees 183.96 115.09 -Expense Payable 2,565.31 2,198.87

Total 4,843.70 4,062.33

11. SHORT-TERM PROVISIONS



Provision for employee benefits : Gratuity (funded) 43.61 7.70 Leave Encashment (unfunded) 18.61 14.25

Total 62.22 21.95

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12. TANGIBLE ASSETS

Cost Depreciation Net Block

Description As at 1st April, 2014

Additions Deletions/ adjustments

As at 31st March, 2015

As at 1st April, 2014

For the year Deletions/ adjustments#




Land Freehold 844.94 – – 844.94 – – – – 844.94 844.94

Buildings 3,574.30 578.05 – 4,152.35 943.59 109.28 (74.30) 1,127.17 3,025.18 2,630.71

Plant and machinery 21,218.20 2,818.57 15.40 24,021.37 4,028.45 1,194.98 1.11 5,222.32 18,799.05 17,189.75

Furniture and fixtures 133.61 0.44 – 134.05 51.80 11.39 (0.55) 63.74 70.31 81.81

Vehicles 278.15 9.19 7.00 280.34 69.74 38.04 4.27 103.51 176.03 208.41

Office equipment 168.88 44.70 – 213.58 86.57 33.52 (12.07) 132.16 81.02 82.31

Total 26,218.08 3,450.95 22.40 29,646.63 5,180.15 1,387.21 (81.54) 6,648.90 22,997.73 21,037.93

Previous year 9,722.43 17,577.53 1,081.88 26,218.08 5,598.45 570.45 988.75 5,180.15 21,037.93 4,123.98

Notes :-

- Plant and Equipment amounting to ` Nil (Previous Year ` 851.70 lacs) and Building amounting to ` Nil (Previous Year ` 82.44 lacs) has been adjusted for the amounts allocated out of Development & trial run expenses.

- # Includes depreciation of ` 89.76 Lacs charged to reserves as per Schedule-II of The Companies act, 2013.

- Borrowing cost amounting to ` Nil (Previous Year ` 207.13 lacs) has been capitalised during the year.

13. NON-CURRENT INVESTMENTS (valued at cost unless otherwise stated)



Trade investments – – Other than Trade

Debt Funds/ Fixed Maturity Plans (QUOTED ) 10,000,000 units (Previous year 10,000,000) of ` 10/- each Birla Sunlife Fixed Term Plan -Series (1185 Days)

1,000.00 1,000.00

Bonds / Debentures (UNQUOTED ) 680,937 units (previous year 680,937) of ` 56.904 each (previous year ` 96.073) of IIFL Real Estate Fund (Domestic) Series-I

408.22 675.27

1,408.22 1,675.27

Total 1,408.22 1,675.27 Aggregate book value of quoted investments 1,000.00 1,000.00 Aggregate Market value of quoted investments 1,213.68 1,098.58 Aggregate book value of unquoted investments 408.22 675.27 Aggregate provision for Dimunition in the value of investments – –

14. LONG-TERM LOANS AND ADVANCES



Secured, considered good – –

Unsecured, considered goodCapital advances 73.92 62.43 Security deposits 783.87 564.00 Other loans and advances :

- Loans to employees 21.81 29.90 - Prepaid expenses 7.83 4.07 - Advance Income Tax {net of provision for tax ` 4.51 lacs (Previous year ` 3.67 lacs)

99.96 82.69

Total 987.39 743.09

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15. CURRENT INVESTMENTS (VALUED AT COST OR MARKET VALUE WHICHEVER IS LOWER)



Other than Trade

Equity Linked Mutual Funds / Liquid Funds (QUOTED )*Nil units (Previous year 15000000 of ` 10 each of HDFC FMP 36 M October 2011(1)-Growth Fund * #

– 1,500.00

– 1,500.00

– 1,500.00 Aggregate book value of quoted investments – 1,500.00 Aggregate Market value of quoted investments – 1,889.76 Aggregate book value of unquoted investments – – Aggregate provision for Dimunition in the value of investments – –

* Lien Marked in Favor of Deutshe Bank AG against the overdraft facility sanction by it. # Non Current Investment having maturity period less than 12 months as on date of balance sheet have been shown

under the head Current Investment.

16. INVENTORIES (AT COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER)



Raw materials 1,956.14 1,150.83

Raw materials in Transit 389.91 357.28

Stores and spares 1,926.51 1,483.81

Stores and spares in Transit 174.30 254.11

Finished goods 8,842.12 8,685.19

Total 13,288.98 11,931.22

17. TRADE RECEIVABLES



Debts outstanding for a period exceeding six months from the date they are due for payment

Unsecured, considered good 251.76 260.40 Unsecured, considered doubtful 60.00 38.00 Less: Provision for doubtful debts 60.00 38.00

251.76 260.40 Other debts

Unsecured, considered good 17,646.46 12,015.95

Total 17,898.22 12,276.35

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18. CASH AND BANK BALANCES



Cash and cash equivalents

Balance with banks in

Current accounts 857.12 1,004.91

Fixed deposits 5.52 375.54

Cash in hand 2.21 4.29

864.85 1,384.74

Other bank balances

Fixed Deposits with maturity of more than 12 months – 5.10

864.85 1,389.84

19. SHORT-TERM LOANS AND ADVANCES



Unsecured considered good, unless stated otherwise Security deposits

Secured, considered good – 4.59 Other loans and advances

Loans to employees 54.42 43.41 Other Current Assets 216.56 239.80 Balance with government authorities 971.17 1,379.91 Prepaid expenses 82.73 27.29 Advances to suppliers & Contractors 610.28 1,151.74

Total 1,935.16 2,846.74

20. OTHER CURRENT ASSETS



(Unsecured considered good, unless otherwise stated ) Interest accrued on fixed deposits 1.38 47.94

Total 1.38 47.94

21. REVENUE FROM OPERATIONS

Particulars For the year ended31st March, 2015


Sale of products Own manufactured :

Steel Bars 73,032.20 40,535.41 By Products/Waste – 20.90 Miscellaneous Sales 273.00 233.79

Other operating Revenue : Export Incentives 112.92 75.40 Revenue from operations (Gross) 73,418.12 40,865.50

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22. OTHER INCOME



Interest income on

Others 106.89 65.11

Dividend Income From Current Investments 2.34 22.57

Profit on sale Investments :

- Current Investments 20.74 5.10

- Long Term Investments 502.27 1,033.41

Interest income from current Investments 57.88 64.31

Net Gain on sale of Fixed assets 8.50 324.44

Provision no longer required written back 1.10 34.46

Sundry Balances Written Back 21.72 2.27

Prior Period Income 0.09 0.85

Miscellaneous Income 18.44 23.66

Total 739.97 1,576.18

23. COST OF RAW MATERIALS CONSUMED



Raw Material Scrap & Ferro Alloys 40,885.04 30,632.94 Total 40,885.04 30,632.94

24. CHANGES IN INVENTORIES OF FINISHED GOODS, WORK IN PROGRESS AND STOCK-IN-TRADE



Opening stockFinished goods 8,685.19 8,969.14

8,685.19 8,685.19 8,969.14 8,969.14 Add : Material Transferred from Trial Run 6,734.81 Less : Closing stock Finished goods :- 8,842.12 8,685.19

8,842.12 8,842.12 8,685.19 8,685.19 Net (Increase) / Decrease (156.93) 7,018.76

25. EMPLOYEE BENEFIT EXPENSE



Salaries, wages and Bonus 2,557.12 1,918.39 Contribution to provident and other fund 257.34 165.51 Staff welfare expense 21.76 42.45 Total 2,836.22 2,126.35

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26. OTHER EXPENSES



Consumption of stores and spare parts 5,385.89 3,844.04

Power and fuel 10,372.60 7,472.69

Packing material 116.65 115.35

Processing Charges 606.43 2,058.84

Rent 46.09 13.39

Repairs to Building 107.93 76.44

Repairs to Machinery 858.11 667.35

Insurance 51.89 28.36

Rates and taxes, excluding taxes on income 14.46 12.06

Payment to Auditors ** 3.74 3.31

Net loss on account of foreign exchange fluctuation (Refer Note-33)

724.69 1,475.10

Bad Debt/Other Assets/Balances Written off 0.04 –

Provision for doubtful debts 22.00 –

Freight & Cartage on Sale 1,500.92 842.69

Cash and Other Discount, Commission 405.16 317.70

Miscellaneous expenses 695.76 362.16

Total 20,912.36 17,289.48

** Payment to Auditors

As auditor

Audit fee 2.00 2.00

Tax audit fee 0.50 0.50

Cost Audit Fees 0.36 0.31

For reimbursement of expenses 0.88 0.50

Total 3.74 3.31

27. FINANCE COST

Interest expense (Net of Interest Received from Banks) 1,903.44 1,085.07 Other borrowing cost 15.39 33.01 Bank charges 102.65 71.64 Total 2,021.48 1,189.72

28. DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation on tangible assets 1,387.21 570.45 Total 1,387.21 570.45

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29. NOTES TO FINANCIAL STATEMENTS

i) There are contingent liabilities in respect of:



a) Bank Guarantees and Letters of Credit outstanding 7414.05 3122.20

b) Other contingent liabilities 232.61 83.14

c) Claims Against the Company Not Acknowledged as Debts 371.13 258.73

ii) Estimated amount of capital contracts remaining to be executed is ` 1407.88 Lac (Previous Year ` 120.13 Lac).

iii) Other Contingent Liabilities include additional demands in respect of Income Tax/Excise Duty/Service Tax /Sale Tax/VAT amounting to ` 232.61 Lac (Previous Year ` 83.14 Lac) in different cases, which have been contested by the Company and various appeals have been filed with the Appellate Authorities. No provision has been made in the books of accounts in respect thereof.

30. Leases

The Company has leased facilities under cancellable operating leases arrangements with a lease term ranging from one to five years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expenses recognised during the year amounts to ` 46.09 Lacs (Previous year ` 13.39 lacs).

31. In the opinion of the Board, Current Assets, Loan & Advances have a value in the ordinary course of business at least equal to that stated in the Balance Sheet.

32. Balances of Sundry Debtors and Sundry creditors are subject to reconciliation and confirmation.

33. The Liability in respect of External Commercial Borrowing (ECB) was re-stated as on 31st March, 2015 and foreign exchange loss of ` 431.49 Lac (Previous Year `718.05 Lac) has been provided in books of account for the year ended 31st March 2015.

34. Sundry creditors include amount of ̀ Nil owed to Small Scale Industries Undertakings, to the extent such enterprises have been identified, out of which amount outstanding for a period of more than 30 days is ̀ Nil. The Company has not made any delays in settlement of balance due to Small Scale Industrial undertakings and hence no provision for interest on delayed payment is required. Further, there are no outstanding amount payable beyond the agreed period to Micro, Small and Medium Enterprises as on the Balance Sheet date to the extent such enterprises have been identified, based on the information available with the Company.

35. Employee Benefits :

The summarized position of Post-employment benefits and long term employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard (AS) 15 are as under:-

Particulars Leave (Unfunded) Gratuity (Funded)

Current Year

Previous Year

Current Year

Previous Year

(a) Changes in the present value of the obligations :Present value obligation as at March 31, 2014 50.95 47.59 335.14 306.62Interest cost 3.55 4.00 25.15 27.00Past Service cost – – – – Current service cost 27.46 25.40 40.48 32.05Curtailment cost – – – – Settlement cost – – – – Benefits Paid (11.88) (7.34) (33.57) (19.86)Actuarial (gain)/ loss on Obligations (15.65) (18.70) 48.91 (10.67)Present value obligation as at March 31, 2015 54.43 50.95 416.11 335.14

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Current Year

Previous Year

Current Year

Previous Year

(b) Change in Fair Value of Plan Asset:

Fair value of Plan Assets as at beginning of the year – – 327.45 264.34

Actual Return on Plan Assets – – 35.98 20.83

Contributions – – 9.07 42.28

Benefits Paid (11.88) (7.34) – –

Fair value of Plan Assets as at end of the year – – 372.50 327.45

Funded Status – – (43.61) (7.70)

(c) Amount recognized in Balance Sheet :

Present value obligation as at March 31, 2015 54.43 50.95 416.11 335.15

Fair value of Plan Assets as at March 31, 2015 – – 372.50 327.45

Funded Status (54.43) (50.95) (43.61) (7.70)

Present value of unfunded obligation as at March 31, 2015 – –

Unfunded Actuarial (gains)/ losses – –

Unfunded Net Asset/ (Liability) recognised in Balance Sheet. (54.43) (50.95) (43.61) (7.70)

(d) Expenses Recognized in Statement of Profit & Loss

Current service cost 27.46 25.41 40.48 32.05

Past Service cost – – – –

Interest cost 3.56 4.00 25.15 27.00

Expected Return on Plan Assets – – (32.23) (21.87)

Net Actuarial (gain)/ loss recognised during the year (15.65) (18.70) 45.15 (9.63)

Total Expenses recognised in Profit & Loss Account 15.37 10.71 78.55 27.55

(e) Investment details of Fund:

Central Govt. Securities – – 184.94 168.72

Investment in PSU – – 30.70 20.13

Other Investments – – 25.31 12.50

Bank Balance – – 131.55 126.10

Total – – 372.50 327.45

(f) Principal actuarial assumption at the Balance Sheet Date (expressed as weighted average)

Discount Rate (per annum) 7.90% 9.10% 7.90% 9.10%

Rate of increase in compensation levels (per annum) 6.00% 6.50% 6.00% 6.00%

Rate of return on plan assets (per annum) NA NA 9.26% 7.66%

Expected Average remaining working lives of employees (years)

21.66 21.33 21.66 21.33

Method Used Projected Unit Credit

Projected Unit Credit



The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in employee market.

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(g) Other short term employee’s benefits (Un-Funded)

Particulars Short term Leave Leave Travel Encashment Ex-Gratia

Current Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Opening Liability 14.25 11.01 9.00 8.90 18.19 13.26

Closing Liability 18.61 14.25 11.91 9.00 23.25 18.19

Benefits Paid during the period 0.00 0.00 5.90 5.36 18.19 25.66

Amount debited to P& L Account

4.36 3.24 8.81 5.46 23.25 30.59

(h) During the year, the Company has recognized an expense of ` 120.97 Lacs (Previous year ` 89.39 Lacs) in respect of Contribution to Provident Fund and ` 6.70 Lacs (Previous Year ` 5.30 Lacs ) in respect of Contribution to superannuation Scheme.

36. Segment Reporting:

The Company operates only in one business segment viz. “Steel” which is the reportable segment in accordance with the requirements of Accounting Standard (AS-17) on Segment Reporting issued by The Institute of Chartered Accountants of India.

37. Related Party Disclosure:

Details of transactions entered into with related parties during the year as required by Accounting Standard (AS) - 18 on “Related Party Disclosures” issued by The Institute of Chartered Accountants of India are as under:

Particulars Key Management Personnel (KMP)

Enterprises over which KMP is able to exercise

significant influence

Total

Current Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Purchase/Processing of goods – – 77.79 83.90 77.79 83.90

Purchase of DEPB licenses – – 58.57 32.33 58.57 32.33

Sales/Processing of goods – – 3.15 1.57 3.15 1.57

Logo Charges (Inc. Service Tax) – – 14.05 14.05 14.05 14.05

Interest received – – – – – –

Managerial Remuneration – 24.00 – – 24.00

Common Corporate Charges (Inc. Service Tax)

111.97 102.25 111.97 102.25

Loan Given Including opening Balance

– – – 687.00 – 687.00

Closing Balance of Loan – – – 687.00 – 687.00

Interest Paid – – 286.17 216.44 286.17 216.44

Loan taken including opening balance

– – 66425.50 87357.61 66425.50 87357.61

Loan Repayment – – 63870.93 96011.11 63870.93 96011.11

Closing Balance of Loan – – 2554.57 1,346.50 2554.57 1,346.50

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Note :

Particulars Current Year Previous Year

1. Holding Company Nil Nil

2. Fellow Subsidiary Companies Nil Nil

3. Key Management Personnel Mr Sachit Jain (MD) Mr Sachit Jain (MD)

4. Enterprises over which Key Management Personnel (KMP) is able to exercise significant influence

Vardhman Textiles LimitedVardhman Holdings LimitedVardhman Acrylics Limited

Vardhman Textiles LimitedVardhman Holdings LimitedVardhman Acrylics Limited

Vardhman Nisshinbo Garments Vardhman Nisshinbo Garments

Company Limited Company Limited

Vardhman Yarns & Threads Limited Vardhman Yarns & Threads Limited

VTL Investments Limited VTL Investments Limited

VMT Spinning Company Limited VMT Spinning Company Limited

38. Earnings Per Share :

The calculation of Earnings Per Share (EPS) as disclosed in the Profit & Loss Account has been made in accordance with the requirements of Accounting Standard (AS-20) on Earnings Per Share issued by the Institute of Chartered Accountants of India.

39. Deferred Tax:

Accounting entries for deferred tax have been passed in accordance with the provisions of Accounting Standard (AS)-22 on ‘Accounting for Taxes on Income’ issued by the Institute of Chartered Accountants of India.



Deferred tax liabilities (a)

Accelerated depreciation (1934.01) (1,340.49)

Deferred tax assets

Deferred Tax Asset arising on account of expenses allowable for tax purposes when paid u/s 43B

349.05 329.55

Unabsorbed losses and depreciation 3153.52 2,112.83

Total Deferred tax asset 3542.57 2,442.38

Deferred tax assets recognised (b) * 1934.01 1340.49

Net deferred tax assets/(liability) [(a)-(b)] Nil Nil

* The Company has incurred losses in the current year. Accordingly, in the absence of virtual certainty of realisability of deferred tax assets, the deferred tax assets have been recognized only to the extent of deferred tax liability.

40. No asset qualifies for impairment for the current year according to AS-28 issued by The Institute of Chartered Accountants of India.

41. Figures in brackets indicate deductions. Figures have been rounded off to nearest lacs. Figures for previous year have been recast/regrouped, wherever necessary to make them comparable with current year’s figures.

42. Depreciation for the year has been provided on Straight Line Method on the basis of useful lives specified in the Schedule-II of the Companies Act, 2013 as against the amount of depreciation calculated on the basis of rates of depreciation in respect of various assets contained in Schedule XIV to the Companies Act 1956.

In view of this change, carrying amounts of various tangible fixed assets as at 1st April, 2014 after retaining the residual value an amount of ` 89.77 lacs has been recognized in the opening balance of retained earning (net of deferred tax) where the useful life of an asset is Nil. In other cases, the carrying amounts as at lst April, 2014 have been depreciated over the revised remaining useful life of the asset as per Schedule II. The depreciation for the

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year ended 31st March, 2015 would have been higher by ` 154.62 lacs, had the Company continued with the previously prescribed depreciation rates as per Schedule-XIV of Companies Act, 1956.

43. The company uses forward contracts to hedge its risk associated with fluctuation in foreign currency relating to foreign currency assets and liabilities, firm commitment and highly probable forecast transactions. The use of the aforesaid financial instruments is governed by the company’s overall strategy. The company does not use forward contracts and options for speculative purposes. The detail of the outstanding forward contracts as at 31st March, 2015 is as under:


No. of Contracts

Amount in Foreign

Currency (Lac)

No. of Contracts

Amount in Foreign Currency

(Lac)

a) Category wise quantitative data

Forward contracts against imports (USD) 44 99.63 28 81.00

Put and call options against imports (USD) 1 4.00 – –

Forward contracts against foreign currency loan (USD) 18 99.61 – –

Forward contracts against imports (SEK) 1 59.16 3 59.53

Forward contracts against imports (EURO) – – 1 0.58

Forward contracts against exports (EURO) 8 4.27 6 4.72

Forward contracts against exports (USD) 17 18.61 31 35.46

b) Details of foreign currency exposure that has not been hedged by a derivative instrument or otherwise is given below :

Against Creditors (CHF) 0.02 –

Against Creditors (EURO) 0.26 0.18

Against foreign currency loan (USD) 175.57 282.97

44. PROJECT AND PRE-OPERATIVE EXPENSES


Development Account –

Rent – 25.69

Salary and Incentive – 203.75

Insurance – 13.80

Travelling, Lodging and Boarding – 221.75

Professional Charges – 4.89

Bank Charges – 240.91

Miscellaneous – 30.24

Interest – 201.87

Total (A) – 942.90

Trial Run Expenses –

Material Transfer for Trial Run – 19,336.52

Power and Fuel – 1,148.94

Store and Spares Consumed – 89.26

Repair to Machinery and Building – 147.66

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55


Particulars Current Year Previous YearContractor Labour – 112.06

Salary and Wages – 183.57

Rent Rates and Taxes – 17.90

Insurance – 20.43

Legal and Professional – 14.46

Selling Expenses – 366.17

Miscellaneous – 163.16

Interest – 207.13

Total (B) – 21,807.26

Total C = (A+B) – 22,750.16

Less: Sale of Finished Goods – 14,109.81

Export Benefits Received – 28.50Finished Goods Transfer From Trial Run – 6,734.81

Total of Trial Run Income (D) – 20,873.12Net Expenditure during –Trial Run (C–D) – 1,877.04Less : Allocated to Plant and Machinery

– 1,580.34

Building – 152.96 Capital Work in Progress – 143.74

Total Allocation – 1,877.04Pending Allocation Nil Nil

45. CIF VALUE OF IMPORTS



Components & Spare Parts 703.50 509.85Capital Goods 581.63 3,043.97Raw Material 11,877.02 7,607.35Total 13,162.15 11,161.17

46. EXPENDITURE IN FOREIGN CURRENCY



Traveling out of India* 11.98 21.39Interest on ECB/Buyer Credit* 509.80 471.19Total 521.78 492.58

*Interest on ECB Includes `Nil (Previous Year ` 256.71 lacs) being capitalised, and Travelling Outside India Includes `Nil (Previous Year ` 2.28 Lac) being Capitalised.

47. FOB VALUE OF EXPORT 2,864.36 2,729.13


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Place : Gurgaon


48. VALUE OF RAW MATERIALS, COMPONENTS AND SPARE PARTS CONSUMED



Amount % Amount %

1. Raw Material

Imported 11,452.34 27.14 7,936.90 25.91

Indigenous 30,749.29 72.86 22,696.05 74.09

Total 42,201.63 100.00 30,632.95 100.00

2. Component & Spare Parts

Imported 449.54 5.32 548.60 13.38

Indigenous 7,995.28 94.68 3,550.45 86.62

Total 8,444.82 100.00 4,099.05 100.00


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Vardhman Special Steels Limited

INDEPENDENT AUDITORS’ REPORT

To the members of Vardhman Special Steels LimitedLudhiana

Report on the Financial Statements

We have audited the accompanying financial statements of VARDHMAN SPECIAL STEELS LIMITED (“the Company”), which comprise the Balance Sheet as at 31st March, 2016, the Statement of Profit and Loss & the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information.


The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.


Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with

ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2016;

b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.


1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

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b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c) The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) On the basis of the written representations received from the Directors as on 31st March, 2016 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2016 from being appointed as a Director in terms of Section 164 (2) of the Act;

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure B”.

g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule

11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 29 to the financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts – Refer Note 43 to the financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

For S. S. Kothari Mehta & Co.Chartered Accountants

(Firm’s Registration No. 022150N)

CA DINESH K. ABROLPlace: Gurgaon (Partner)Date: 29th April, 2016 Membership No. 087899

ANNEXURE A TO THE INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VARDHMAN SPECIAL STEELS LIMITED DATED 29TH APRIL, 2016

physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and on the basis of our examination of the records, the Company is generally maintaining proper records of its inventories. The discrepancies noticed on verification between the physical stocks and the book records have been adequately dealt with in books of accounts.

(iii) The Company has not granted loans, secured or unsecured to Companies, Firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013.

(iv) The Company has complied with the provisions of section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees, and security.

(v) In our opinion and according to the information and explanations given to us, the Company has

Report on the matters specified in paragraph 3 of the Companies (Auditor’s Report) Order, 2016 (“the Order’) issued by the Central Government of India in terms of section 143(11) of the Companies Act, 2013 (“the Act”) as referred to in paragraph 1 of ‘Report on Other Legal and Regulatory Requirements’ section -

(i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) As explained to us, Fixed Assets are verified by rotation every year. Discrepancies observed during physical verification of fixed assets during the financial year were adequately dealt with in books of accounts;

(c) The title deeds of immovable properties are held in the name of the Company.

(ii) (a) As explained to us, inventories have been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) In our opinion and according to the information and explanations given to us, the procedures of

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not accepted any deposits within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and rules framed thereunder. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal against the Company during the year.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 148 (1) of the Companies Act, 2013 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the said records with a view to determine whether they are accurate or complete.

(vii) (a) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the Company is generally regular, except delay in few cases, in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, Employees’ State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other statutory dues were outstanding as at 31st March, 2016 for a period of more than six months from the date they became payable.

(b) According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Customs Duty / Excise Duty / Value Added Tax / Cess which have not been deposited on account of any dispute, except the following:

S.No. Nature of dues Amount due (`) Forum where pending

1. Punjab VAT Act,

2005

Penalty ` 595,963 AETC MOBILE WING,

PATIALA

2. CENVAT – DENIAL

OF CENVAT

Basic & Penalty

` 415,723

Interest ` 405,723

CHIEF COMMISSIONER

EXCISE,CHANDIGARH

S.No. Nature of dues Amount due (`) Forum where pending


OF CENVAT

Basic ` 45,450

Interest ` 45,450

CESTAT


OF CENVAT

Basic & Penalty

` 25,394

Interest ` 5,713

CESTAT


OF CENVAT

Basic ` 84,910

Interest ` 22,924

CESTAT

6. RULE 6 B OF

VALUATION

RULES-CENTRAL

EXCISE

Basic & Penalty

` 2,778,084

Interest ` 1,739,042

COMMISSIONER APPEALS

CHANDIGARH

7. DENIAL OF

CENVAT

Basic ` 133,333

Interest ` 133,333

REMANDED BACK TO

COMMISSIONER APPEALS

BY CESTAT

8. DENIAL OF

CENVAT

Basic & Penalty

` 26,938

Interest ` 9,091

CESTAT

9. DENIAL OF

CENVAT

Basic & Penalty

` 145,529

Interest ` 26,196

CESTAT

10. DENIAL OF

CENVAT

Basic & Penalty

` 26,756

Interest `11,438

CESTAT

11. DENIAL OF

CENVAT

Basic & Penalty

` 7,284

Interest ` 2,295

CESTAT

12. Entry Tax ` 85,000,000 PUNJAB & HARYANA

HIGH COURT

(viii) Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that, the Company has not defaulted in repayment of dues to a Financial Institution, Bank or Government during the period. As the Company has not issued debentures, clause regarding default to debenture holders does not apply to the Company.

(ix) The moneys raised by way of debt instruments and term loans were applied for the purposes for which those are raised.

(x) During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, we have neither come across any instance of fraud by the Company or fraud on the Company by its officers or employees, noticed or reported during the period, nor have we been informed of such case by the management.

(xi) The managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act.

(xii) The Company is not a Nidhi Company, hence clause (xii) of the Order is not applicable to the Company;

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(xiii) All transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013, as applicable and the details have been disclosed in these Financial Statements as required by the applicable accounting standards.

(xiv) The Company has not made any preferential allotment or private placement of shares or debentures during the year under review, hence clause (xiv) of the Order is not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has not entered into non-cash transactions with Directors and persons

connected with them, hence clause (xv) of the Order is not applicable to the Company.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.




ANNEXURE B TO THE INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VARDHMAN SPECIAL STEELS LIMITED DATED 29TH APRIL, 2016

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”), as referred to in paragraph 2(f) of ‘Report on Other Legal and Regulatory Requirements’ section.

We have audited the Internal Financial Controls over Financial Reporting of VARDHMAN SPECIAL STEELS LIMITED (“the Company”) as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on “the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India”. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit.

We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting were established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

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Meaning of Internal Financial Controls Over Financial Reporting

A Company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal financial control over financial reporting includes those policies and procedures that:

a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and Directors of the Company; and

c) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company’s assets that could have a material effect on financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility

of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on “the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by The Institute of Chartered Accountants of India”.




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BALANCE SHEET as at 31st March, 2016

(` in lac)

Particulars Note No.

As at 31st March

2016

As at 31st March

2015

1 EQUITY AND LIABILITIES

I Shareholder’s fundsShare capital 3 1,855.54 1,855.54

Reserves and surplus 4 15,638.76 15,117.48

17,494.30 16,973.02

II Non-current liabilities Long-term borrowings 5 12,955.43 10,440.31

Other long-term liabilities 6 13.89 19.00

Long-term provisions 7 62.88 54.43

13,032.20 10,513.74

III Current liabilities Short-term borrowings 8 16,682.35 23,911.98

Trade payables 9 4,099.68 5,157.10

Other current liabilities 10 9,691.59 4,843.70

Short-term provisions 11 62.14 62.22

30,535.76 33,975.00

TOTAL 61,062.26 61,461.76

2 ASSETS

I Non-current assets Fixed assets

Tangible assets 12 25,024.80 22,997.74

Intangible assets 12 35.20 -

Capital work-in-progress 210.84 2,079.82

Non-current investments 13 129.69 408.22

Long-term loans and advances 14 1,345.20 987.39

26,745.73 26,473.17

II Current assets Current investments 15 1,000.00 1,000.00

Inventories 16 10,690.38 13,288.98

Trade receivables 17 19,416.94 17,898.22

Cash and cash equivalents 18 379.06 864.85

Short-term loans and advances 19 2,828.85 1,935.16

Other current assets 20 1.30 1.38

34,316.53 34,988.59

TOTAL 61,062.26 61,461.76

See accompanying notes forming part of the financial statements 1-48

As per our separate report of even dateFor S.S.Kothari Mehta & Co. For and on behalf of the Board of DirectorsChartered Accountants (Firm Regn No.022150N)

CA DINESH K. ABROL SONAM TANEJA SANJEEV SINGLA NARESH BANSAL SUCHITA JAIN SACHIT JAIN (Partner) (Company Secretary) (Chief Financial Officer) (Chief Executive) (Director) (Managing Director) M.No.087899 DIN : 00746471 DIN : 00746409

Place : Gurgaon

Dated : 29th April, 2016

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Statement of Profit and Loss for the year ended 31st March, 2016

(` in lac)

Particulars NoteNo.



INCOME

Revenue from operations (Gross) 21 72,932.88 73,418.12

Less: Excise Duty 7,277.29 7,258.15

Revenue from operations (Net) 65,655.59 66,159.97

Other Income 22 263.59 739.97

Total Income 65,919.18 66,899.94

EXPENSES

Cost of materials consumed 23 32,508.39 40,885.04

Purchase of stock-in-trade - -

Changes in inventories of finished goods, work in progress and stock-in-trade

24 2,711.20 (156.93)

Employee benefit expenses 25 3,383.58 2,836.22

Other expenses 26 22,458.88 20,912.36

Excise Duty on closing stocks 279.76 526.37

Finance Cost 27 2,352.97 2,021.48

Depreciation and amortisation expense 28 1,703.11 1,387.21

Total Expenses 65,397.89 68,411.75

Profit before Exceptional Items, Extraordinary Items and Tax 521.29 (1,511.81)

Exceptional Items - -

Profit before Extraordinary Items and Tax 521.29 (1,511.81)

Extraordinary Items - -

Profit before Tax 521.29 (1,511.81)

Tax Expense - -

Current tax - Wealth tax - 0.85

Deferred tax - -

Profit for the year after Tax 521.29 (1,512.66)

Earnings per share (`)

Basic - Par value of ` 10 per share 2.81 (8.15)

Diluted - Par value of ` 10 per share 2.81 (8.15)

See accompanying notes forming part of the financial statements 1-48



Place : Gurgaon


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Cash Flow Statement for the year ended 31st March, 2016

(` in lac)Particulars For the year ended

31st March, 2016For the year ended

31st March, 2015A Cash flow from operating activities

Net profit before tax and Extra Ordinary Items 521.29 (1,511.81)Adjustments for:Depreciation and Amortisation 1,703.11 1,387.21Provision for Doubtful Debts written back (3.15) (1.10)Sundry Balances Written (back) / off (35.64) (21.72)Interest Expense 2,352.97 2,021.48 Profit on sale of Investments (36.23) (523.01)Exchange Rate Fluctuation (unrealised) 583.13 431.50Interest income (91.39) (106.89)Dividend Income (6.28) (2.34)(Profit)/Loss on Sale of Fixed Assets (Net) 111.80 (8.50)Operating Profit before working capital changes 5,099.61 1,664.82Adjustments for:Decrease/(Increase) in Inventories 2,598.59 (1,357.76)Increase / (Decrease) in liabilities and provisions (79.66) 1,340.25 Decrease /(Increase) in other Current assets/Loans & Advances (1,089.83) 700.49 Decrease/ (Increase) in Trade Receivables (1,518.72) (5,621.87)

(89.62) (4,938.89)Cash generated from operations 5,009.99 (3,274.07)Income tax paid - (0.85)Net cash generated from/(used in) operating activities 5,009.99 (3,274.92)

B Cash flow from investing activitiesPurchase of fixed assets and capital work in progress (including capital advances)

(2,471.49) (2,833.60)

Proceeds from sale of Fixed Assets 45.81 22.67Proceeds from sale of Investments 314.76 2,290.06Interest Received 91.47 153.45Dividend Received 6.28 2.34 Net cash generated from/(used in) investing activities (2,013.17) (365.08)

C Cash flows from financing activitiesInter-corporate deposits taken - - Proceeds from Short Term Borrowings (7,229.64) 4,416.49Proceeds from Term loan 6,100.00 720.00 Interest paid (2,352.97) (2,021.48)Net cash generated from/(used in) financing activities (3,482.61) 3,115.01Net increase in cash and cash equivalents (A+B+C) (485.79) (524.99)Cash and cash equivalents at the beginning of the period 864.85 1,389.84 Cash and cash equivalents at the end of the period 379.06 864.85 Components of cash and cash equivalents:Cash in hand & Others 6.37 2.21 Balances with scheduled banks:- in current accounts 370.17 857.12 - in fixed deposit accounts 2.52 5.52

379.06 864.85

Note: The above Cash Flow Statement has been prepared under the indirect method set out in Accounting Standard - 3 on Cash Flow Statement prescribed by the Companies (Accounting Standards) Rules, 2006.



Place : Gurgaon


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Note 1. CORPORATE INFORMATION:

Vardhman Special Steels Limited is a Public Limited Company incorporated under the provisions of the Companies Act, 1956 on 14th May, 2010. The Company is engaged in the Manufacturing of Billet, Steel bars & rods and Bright bars of various categories of special and alloy steels.

Note 2. SIGNIFICANT ACCOUNTING POLICIES:

a) Accounting Convention:

The accounts are prepared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules 2014 and other relevant provisions of the said Act.

b) Use of Estimates:

The preparation of financial statements, in conformity with the generally accepted accounting principles, requires estimates and assumptions to be made that affect the reported amount of assets and liabilities as of the date of the financial statements and the reported amount of the revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results materialize.

c) Revenue Recognition:

i) Sales:

Revenue from sale of goods is recognized:

a) When all the significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred to a degree usually associated with ownership; and

b) No significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods.

c) Domestic Sales (Gross) include excise duty and freight and is recognized on dispatch of goods to customers.

ii) Export Incentives:

Revenue in respect of the above benefits is recognized on post export basis.

iii) Insurance and Other Claims:

The revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realised and the ultimate collection thereof.

iv) Interest:

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

d) Employee Benefits:

i) Short Term Employee Benefits:

Short term employee benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related services are rendered.

ii) Post Employment Benefits:

a) Defined Contribution Plans

i) Provident Fund: Contribution to Provident Fund is made in accordance with the provisions of the Provident Fund Act, 1952 and is treated as revenue expenditure.

ii) Superannuation: The liability in respect of eligible employees covered under the scheme is provided through a policy taken from Life Insurance Corporation of India by an approved trust formed for the purpose. The premium in respect of such policy is recognized as an expense in the period in which it falls due.

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b) Defined Benefit Plans

i) Gratuity: Provision for gratuity, which is a defined benefit plan, is made on the basis of an actuarial valuation, as per AS-15 issued by The Institute of Chartered Accountants of India, carried out by an independent actuary at the balance sheet date, using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Profit and Loss Account.

ii) Leave Encashment: As per the Company’s policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either utilise during the service or encash. Encashment can be made during the service, on early retirement, on withdrawal of scheme, at resignation by employee or upon death of employee. The Company accounts for the liability for compensated absences payable in future based on an independent actuarial valuation, as per AS-15 issued by The Institute of Chartered Accountants of India, carried out at the end of the period.

e) Fixed Assets:

i) Fixed Assets are stated at historical cost less depreciation.

ii) Cost of fixed assets comprise its purchase price and any attributable expenditure (both direct and indirect) for bringing an asset to its working condition for its intended use.

f) Intangible Assets:


g) Depreciation:

i) Depreciation is provided on straight line method in accordance with and in the manner specified in Schedule II to the Companies Act, 2013.

ii) Depreciation on assets costing ` 5,000 or below acquired during the year is charged @ 100% on proportionate basis keeping in view materiality aspect.

h) Amortization:

i) Intangible assets are amortized on straight line method over their estimated useful life.

ii) Right to use Power Lines is amortised on straight line method over their estimated useful life.

i) Investments:

Long term Investments are carried at cost less provision for diminution, other than temporary, in the value of investment. Current investments are carried at lower of cost and fair value.

j) Inventories:

Inventories are valued at cost or net realisable value, whichever is lower. The cost in respect of various items of inventories is computed as under:

i) In case of raw materials-at weighted average cost plus direct expenses.

ii) In case of stores & spares-at weighted average cost plus direct expenses.

iii) In case of finished goods-at raw material cost plus conversion cost, packing cost, excise duty and other overheads incurred to bring the goods to their present condition and location.

k) Subsidy:

Government grants available to the Company are recognised when there is a reasonable assurance of compliance with the conditions attached to such grants and where benefits in respect thereof have been earned and it is reasonably certain that the ultimate collection will be made. Government subsidy in the nature of promoter’s contribution is credited to capital reserve. Government subsidy received for a specific asset is reduced from the cost of the said asset.

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43



l) Cenvat Credit:

Cenvat credit of excise duty paid on inputs, capital assets and input services is recognised in accordance with the Cenvat Credit Rules, 2004.

m) Foreign Currency Conversion/Translation:

i) Foreign currency transactions are recorded on initial recognition at the rate prevailing on the date of the transaction.

ii) Foreign currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at the closing rate as at the balance sheet date are recognised as income or expense in the period in which they arise.

iii) The premium or discount arising at the inception of forward exchange contracts is amortised as an expense or income over the life of the contract.

iv) The exchange difference to the extent of loss, arising on forward contracts and put and call derivative options to hedge the transactions in the nature of firm commitments and /or highly probable forecast transactions is recognised in the statement of Profit and Loss. The profit, if any, arising thereon is ignored.

v) Exchange differences on the aforesaid forward exchange contract are recognised in the statement of profit & loss in the reporting period in which the exchange rates change. Profit or loss arising on cancellation or renewal of such contracts is recognised as income or expense in the period in which such profit or loss arises.

n) Borrowing Costs:

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as expense in the period in which they are incurred.

o) Expenditure incurred during construction period:

In respect of major expansion, the indirect expenses incurred during construction period up to the date of commercial production is capitalised on various categories of fixed assets on proportionate basis.

p) Provisions and Contingencies:

i) Provision is recognized (for liabilities that can be measured by using a substantial degree of estimation) when:

a) The Company has present obligation as a result of a past event;

b) A probable outflow of resources embodying economic benefits is expected to settle the obligation; and

c) The amount of the obligation can be reliably estimated.

ii) Contingent liability is disclosed in case there is:

a) 1) possible obligation that arises from past events and existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or

2) a reliable estimate of the amount of the obligation cannot be made.

b) a present obligation arising from the past events but is not recognised

1) when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

2) a reliable estimate of amount of the obligation cannot be made.

q) Operating Leases:

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals paid for such leases are recognised as an expense on systematic basis over the term of lease.

F - 35

44


r) Earnings per share:

Basic earnings per share is computed by dividing the net profit/(loss) for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by taking into account the aggregate of the weighted average number of equity shares outstanding during the period and the weighted average number of equity shares which would be issued on conversion of all the dilutive potential equity into equity shares.

s) Accounting for Tax on Income:

The accounting treatment followed for taxes on income is to provide for Current Tax and Deferred Tax. Current Tax is the amount of income-tax determined to be payable in respect of taxable income for a period. Deferred Tax is the tax effect of all timing differences.

t) Impairment of Assets:

At each Balance Sheet date, an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of accounts.

u) Segment Information:

The Company has only one reporting segment i.e. manufacturing of Steel. The Company is mainly operating in India which is considered to be the only reportable geographical segment.


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45



(` in lac)

3 SHARE CAPITAL

Particulars


Number of shares (in Lacs)

Amount Number of shares(in Lacs)

Amount

Authorised Equity shares of ` 10 each 350.00 3,500.00 350.00 3,500.00

350.00 3,500.00 350.00 3,500.00

Issued, subscribed and paid upEquity shares of ` 10 each fully paid up

At the beginning of the year 185.55 1,855.54 185.55 1,855.54

Add: Issued during the year – – – –

At the end of the year 185.55 1,855.54 185.55 1,855.54

Total 185.55 1,855.54 185.55 1,855.54

3(a) The Aggregate number of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash in the last five years immediately preceding the balance sheet date is NIL

3(b) Equity Shares calls unpaid by Directors and Officers of the Company is NIL

3(c) Shares held by holding company or its ultimate holding company or subsidiaries or associates of the holding company or the ultimate holding company in aggregate.

Particulars


Numberof shares(in Lacs)

Amount Number of shares (in Lacs)

Amount


Ultimate Holding Company – – – –Holding Company – – – –Subsidiary of ultimate Holding Company or Holding Company

– – – –

Associate of ultimate Holding Company or Holding Company

– – – –

Total – – – –

3(d) Details of shareholders holding more than 5% shares of the Company

Particulars


Numberof shares(in Lacs)


Number of shares(in Lacs)


Equity shares of ` 10/- each fully paid up held by - Vardhman Textiles Limited 58.25 31.39 58.25 31.39- Vardhman Holdings Limited 30.81 16.60 30.81 16.60- Adishwar Enterprises LLP (formerly Adinath Investment and Trading Company)

25.23 13.60 25.23 13.60

- Devakar Investment and Trading Company (P) Ltd 11.08 5.97 11.08 5.97

Total 125.36 67.56 125.36 67.56

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46



4 RESERVES AND SURPLUS



a) General reserve

At the beginning of the year 13,890.62 13,890.62

Add/Less : Transfer from Surplus in Profit & Loss Statement - -

At the end of the year 13,890.62 13,890.62

b) (Deficit)/ surplus in the Statement of Profit and Loss

Balance at the beginning of the year 1,226.86 2,829.28

Add/ (less): Depreciation charged to reserves as per schedule-II of Companies Act, 2013 (refer note-42)

- (89.76)

Add/ (less): Profit/ (loss) for the year 521.28 (1,512.66)

Balance at the end of the year 1,748.14 1,226.86

Total 15,638.76 15,117.48

5 LONG-TERM BORROWINGS



Banks - Foreign currency denominated loans (ECB)#

10,303.43 10,414.17

Less : - Current Maturities of long term borrowings (refer note -10) 4,168.00 6,135.43 693.86 9,720.31

Bank - Term Loan 6,820.00 720.00

Total 12,955.43 10,440.31

a) The above mentioned borrowings are secured by mortgage created or to be created on all the immovable assets of the Company, both present and future and hypothecation of all the movable assets including movable machinery, machinery parts, tools and accessories and other movables, both present and future (except book debts), subject to charges created or to be created in favour of the Bankers for securing the working capital limits.

# Refer Note No. 33 on restatement of External Commercial Borrowings

b) Terms of repayment of term loans*

Repayment Period Instalments Outstanding Periodicity of repayment

As at31st March

2016

As at31st March

2015

CurrentYear

(Years)

PreviousYear

(Years)

CurrentYear(No.)

PreviousYear(No.)

CurrentYear

PreviousYear

720.00 720.00 5 5 20 20 Quarterly Quarterly

1,600.00 – 8 – 32 – Quarterly –

1,500.00 – 7 – 28 – Quarterly –

3,000.00 – 5.5 – 22 – Quarterly –

10,303.43 10,414.17 2.25 2.25 8 9 Quarterly Quarterly

17,123.43 11,134.17

* Figures of term loan stated above in para (b) includes current maturities of long term debt shown separately in note 10.

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6 OTHER LONG-TERM LIABILITIES



Securities received 5.55 12.29

Superannuation payable 8.34 6.71

Total 13.89 19.00

7 LONG-TERM PROVISIONS



Provision for employee benefits

Leave encashment (unfunded) 62.88 54.43

Total 62.88 54.43

8 SHORT-TERM BORROWINGS



Loans repayable on demand

From banks (Secured)* 15,182.35 21,357.41

From related parties (Unsecured)

- Vardhman Textiles Limited 1,500.00 2,554.57

Total 16,682.35 23,911.98

*Includes Working Capital Borrowings from Consortium Banks which are secured by hypothecation of entire present and future tangible current assets of the Company as well as a second charge on the entire present and future fixed assets of the Company.

9 TRADE PAYABLES



Trade payables 4,010.69 5,150.03

Trade payables : related party 88.99 7.07

Total 4,099.68 5,157.10

10 OTHER CURRENT LIABILITIES



Current maturity of long term debt 4,168.00 693.86

Interest accrued but not due on borrowings 93.84 47.98

Other payables

-Statutory dues 495.52 761.46

-Security deposits 40.48 28.61

-Payable on purchase of fixed assets 157.55 449.01

-Advances from customers 101.63 113.51

-Dues to employees 323.16 183.96

-Expense payable 4,311.41 2,565.31

Total 9,691.59 4,843.70

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11 SHORT-TERM PROVISIONS



Provision for employee benefits :

Gratuity (funded) 40.58 43.61

Leave encashment (unfunded) 21.56 18.61

Total 62.14 62.22

12 (a) TANGIBLE ASSETS






For the year Deletions/ adjustments




Land Freehold 844.94 - - 844.94 - - - - 844.94 844.94

Buildings 4,152.35 818.81 - 4,971.36 1,127.17 135.89 - 1,263.06 3,708.10 3,025.18

Plant and machinery 24,021.37 2,973.94 404.06 26,591.25 5,222.32 1,483.35 248.04 6,457.63 20,133.62 18,799.05

Furniture and fixtures 134.05 4.33 8.04 130.34 63.74 10.55 7.91 66.38 63.96 70.31

Vehicles 280.35 24.08 - 304.43 103.51 36.13 - 139.64 164.79 176.84

Office equipment 213.58 65.44 10.72 268.30 132.16 36.01 9.26 158.91 109.39 81.42

Total 29,646.64 3,886.60 422.82 33,110.43 6,648.90 1,701.93 265.21 8,085.62 25,024.80 22,997.74

Previous year 26,218.08 3,450.95 22.39 29,646.64 5,180.15 1,387.21 (81.54) 6,648.90 22,997.74 21,037.93

12 (b) INTANGIBLE ASSETS






For the year Deletions/ adjustments




Computer Software - 36.38 - 36.38 - 1.18 - 1.18 35.20 -

Total - 36.38 - 36.38 - 1.18 1.18 35.20 -

Previous year - - - - - - - - - -

13 NON-CURRENT INVESTMENTS (VALUED AT COST UNLESS OTHERWISE STATED)



Bonds / Debentures (Unquoted )

IIFL Real Estate Fund (Domestic) Series-I 129.69 408.22

129.69 408.22

Less: Provision for diminution in value of investment - -

Total 129.69 408.22

Aggregate book value of quoted investments - -

Aggregate market value of quoted investments - -

Aggregate book value of unquoted investments 129.69 408.22

Aggregate provision for dimunition in the value of investments - -

Note: Non-Current Investment having maturity period less than 12 months as on date of balance sheet have been shown under the head Current Investment.

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49



14 LONG-TERM LOANS AND ADVANCES



Secured, considered good - -

Unsecured, considered good

Capital advances 199.95 73.92

Security deposits 1,007.78 783.87

Other loans and advances :

-Loans to employees 31.52 21.81

-Prepaid expenses 7.56 7.83

-Advance Income Tax 98.39 99.96

{net of provision for tax ` 4.51 lacs (Previous year ` 3.67 lacs)

Total 1,345.20 987.39

15 CURRENT INVESTMENTS (VALUED AT COST OR MARKET VALUE WHICHEVER IS LOWER)



Other than trade

Debt Funds/ Fixed Maturity Plans (Quoted )

10,000,000 units (previous year 10,000,000) of ` 10/- each of Birla Sunlife Fixed Term Plan -Series * #

1,000.00 1,000.00

1,000.00 1,000.00

1,000.00 1,000.00

Aggregate book value of quoted investments 1,000.00 1,000.00

Aggregate market value of quoted investments 1,308.11 1,213.68

Aggregate book value of unquoted investments - -

Aggregate provision Dimunition in the value of investments - -

* Lien Marked in Favor of Deutsche Bank AG against the overdraft facility sanction by it. # Non Current Investment having maturity period less than 12 months as on date of balance sheet have been shown under the head Current Investment.

16 INVENTORIES (AT COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER)



Raw materials 880.77 1,956.14

Raw materials in transit 1,538.08 389.91

Stores and spares 1,896.49 1,926.51

Stores and spares in transit 244.12 174.30

Finished goods 6,130.92 8,842.12

Total 10,690.38 13,288.98

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17 TRADE RECEIVABLES



Debts outstanding for a period exceeding six months from the date they are due for payment


Unsecured, considered good 734.38 251.76

Debts due from related parties, unsecured - -

Unsecured, considered doubtful 100.00 60.00

Less: provision for doubtful debts 100.00 60.00

734.38 251.76

Other debts

Unsecured, considered good 18,682.56 17,646.46

Total 19,416.94 17,898.22

18 CASH AND BANK BALANCES





Current accounts 370.17 857.12

Fixed deposits 2.52 5.52

Cash in hand 6.37 2.21

379.06 864.85

19 SHORT-TERM LOANS AND ADVANCES

Unsecured considered good, unless stated otherwise



Security deposits


Other loans and advances

Loans to employees 60.30 54.42

Other Current assets 186.41 216.56

Balance with government authorities 1,096.65 971.17

Prepaid expenses 53.11 82.73

Advances to suppliers & contractors 1,432.38 610.28

Total 2,828.85 1,935.16

20 OTHER CURRENT ASSETS

(Unsecured considered good, unless otherwise stated)



Interest accrued on fixed deposits 1.30 1.38

Total 1.30 1.38

F - 42

51



21 REVENUE FROM OPERATIONS



Sale of products

Own manufactured :

Steel Bars 72,539.91 73,032.20

Miscellaneous sales 239.98 273.00

Other operating revenue : Export incentives 152.99 112.92

Revenue from operations (Gross) 72,932.88 73,418.12

22 OTHER INCOME



Interest income on

Others 91.39 106.89

Dividend income from Current Investments 6.28 2.34

Profit on sale of Investments :

-Current Investments 36.23 20.74

-Long Term Investments - 502.27

Interest income from current Investments 19.34 57.88

Net gain on sale of fixed assets - 8.50

Provision no longer requied written back 3.15 1.10

Sundry Balances Written Back 35.64 21.72

Prior Period Income 51.26 0.09

Miscellaneous Income 20.30 18.44

Total 263.59 739.97

23 COST OF RAW MATERIALS CONSUMED



Raw material scrap & ferro alloys 32,508.39 40,885.04

Total 32,508.39 40,885.04

24 CHANGES IN INVENTORIES OF FINISHED GOODS, WORK IN PROGRESS AND STOCK-IN-TRADE



Opening stock

Finished goods 8,842.12 8,842.12 8,685.19 8,685.19

Closing stock

Finished goods 6,130.92 6,130.92 8,842.12 8,842.12

Net (Increase) / Decrease 2,711.20 (156.93)

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52


25 EMPLOYEE BENEFIT EXPENSE



Salaries, Wages and Bonus 3,080.95 2,557.12

Contribution to provident and other fund 276.10 257.34

Staff welfare expense 26.53 21.76

Total 3,383.58 2,836.22

26 OTHER EXPENSES




Power and fuel 10,755.53 10,372.60


Processing charges 292.47 606.43

Rent 78.21 46.09

Repairs to building 239.21 107.93

Repairs to machinery 1,326.90 858.11


Rates and taxes, excluding taxes on income 51.55 14.46

Payment to Auditors ** 4.81 3.74

Net loss on account of foreign exchange fluctuation (Refer Note-33) 873.22 724.69

Net Loss on sale of Fixed assets 111.80 -

Bad debt/other assets/balances written off 26.79 0.04


Freight & cartage on sale 1,947.87 1,500.92

Cash and other discount, commission 387.61 405.16


22,458.88 20,912.36

** Payment to Auditors

As auditor

Audit fee 2.75 2.00

Tax audit fee 0.75 0.50

Cost audit fees 0.35 0.36

For reimbursement of expenses 0.96 0.88

Total 4.81 3.74

27 FINANCE COST



Interest expense (Net of Interest Received from Banks) 2,179.58 1,903.44

Other borrowing cost 50.32 15.39

Bank charges 123.07 102.65

Total 2,352.97 2,021.48


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28 DEPRECIATION AND AMORTIZATION EXPENSE



Depreciation on tangible assets 1,701.93 1,387.22

Amortisation of intangible assets 1.18 -

Total 1,703.11 1,387.22

29 NOTES TO FINANCIAL STATEMENTS

i) There are contingent liabilities in respect of:



a) Bank Guarantees and Letters of Credit Outstanding 5,498.69 7,414.05

b) Other Contingent Liabilities 2,209.93 232.61

c) Claims Against the Company Not Acknowledged as Debts 73.87 371.13

ii) Estimated amount of capital contracts remaining to be executed is ` 2,436.44 Lac (Previous Year ` 1,407.88 Lac).

iii) Other Contingent Liabilities include additional demands in respect of Income Tax/Excise Duty/Service Tax /Sale Tax/VAT amounting to ` 2,209.93 Lac (Previous Year ` 603.74 Lac) in different cases, which have been contested by the Company and various appeals have been filed with the Appellate Authorities. No provision has been made in the books of accounts in respect thereof.

30 Leases

The Company has leased facilities under cancellable operating leases arrangements with a lease term ranging from one to five years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expenses recognised during the year amounts to ` 78.20 Lacs (Previous Year ` 46.09 Lacs).

31 In the opinion of the Board, Current Assets, Loan & Advances have a value in the ordinary course of business at least equal to that stated in the Balance Sheet.

32 Balances of Sundry Debtors and Sundry Creditors are subject to reconciliation and confirmation.

33 The Liability in respect of External Commercial Borrowing (ECB) was re-stated as on 31st March, 2016 and foreign exchange loss of ` 583.12 Lac (Previous Year ` 431.49 Lac) has been provided in books of account for the year ended 31st March 2016.

34 Sundry creditors include amount of ̀ Nil owed to Small Scale Industries Undertakings, to the extent such enterprises have been identified, out of which amount outstanding for a period of more than 30 days is ̀ Nil. The Company has not made any delays in settlement of balance due to Small Scale Industrial undertakings and hence no provision for interest on delayed payment is required. Further, there are no outstanding amount payable beyond the agreed period to Micro, Small and Medium Enterprises as on the Balance Sheet date to the extent such enterprises have been identified, based on the information available with the Company.


F - 45

54


35 Employee Benefits:

The summarized position of Post-employment benefits and long term employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard (AS) 15 are as under:-


Current Year

Previous Year

Current Year

Previous Year

(a) Changes in the present value of obligations:

Present value obligation as at beginning of the year 54.43 50.95 416.11 335.14

Interest cost 4.08 3.55 32.40 25.15


Benefits Paid (7.01) (11.88) (22.23) (33.57)

Actuarial (gain)/ loss on obligations (19.16) (15.65) 14.71 48.91

Present value obligation as at end of the year 62.88 54.43 487.72 416.11

(b) Change in Fair Value of Plan Asset:

Fair value of Plan Assets as at beginning of the year - - 372.50 327.45

Expected Return on Plan Assets - - 31.03 35.98

Contributions - - 43.61 9.07

Fair value of Plan Assets as at end of the year - - 447.14 372.50

Funded Status - - 40.58 43.61

(c) Amount recognized in Balance Sheet:

Present value of funded obligation as at end of the year - - 487.72 416.11

Fair value of Plan Assets as at end of the year - - 447.14 372.50

Funded Status - - (40.58) (43.61)

Present value of unfunded obligation as at end of the year

62.88 54.43 - -

Unfunded Actuarial (gains)/ losses - - - -

Unfunded Net Asset/ (Liability) recognised in Balance Sheet.

(62.88) (54.43) (40.58) (43.61)

(d) Expenses Recognized in Profit & Loss


Past Service cost - - - -

Interest cost 4.08 3.55 32.40 25.15

Expected Return on Plan Assets - - (32.92) (32.23)

Net Actuarial (gain)/ loss recognised during the year (19.16) (15.65) 16.53 45.15

Total Expenses recognised in Profit & Loss Account 15.46 15.37 62.74 78.55

(e) Investment details of Fund:

Central Govt. Securities - - 207.99 184.94

Investment in PSU - - 60.91 30.70

Other Investments - - 37.29 25.31

Bank Balance - - 140.95 131.55

Total - - 447.14 372.50


F - 46

55


(f) Principal actuarial assumptions at the Balance Sheet Date (expressed as weighted average)

Particulars Leave (Unfunded) Gratuity (Funded)Current

Year Previous

YearCurrent

Year Previous

YearDiscount Rate (per annum) 8.00% 7.90% 8.00% 7.90%Rate of increase in compensation levels (per annum) 6.00% 6.00% 6.00% 6.00%Rate of return on plan assets (per annum) NA NA 8.35% 9.26%Expected Average remaining working lives of employees (years)

21.44 21.66 21.44 21.66

Method Used Projected Unit Credit




The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in employee market.

(g) Other short term employee’s benefits (Un-Funded)

Particulars Short term Leave Leave Travel Encashment Ex-GratiaCurrent

Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Opening Liability 18.61 14.25 11.91 9.00 23.25 18.19Closing Liability 21.55 18.61 13.80 11.91 7.02 23.25Benefits Paid during the period - - 7.36 5.90 23.38 18.19Amount debited to P&L Account 2.94 4.36 9.25 8.81 7.15 23.25

h) During the year, the Company has recognized an expense of ` 149.38 Lacs (Previous year ` 120.97 Lacs) in respect of Contribution to Provident Fund and ̀ 8.34 Lacs (Previous Year ̀ 6.70 Lacs ) in respect of Contribution to Superannuation Scheme.

36 Segment Reporting:

The Company operates only in one business segment viz. “Steel” which is the reportable segment in accordance with the requirements of Accounting Standard (AS-17) on Segment Reporting issued by The Institute of Chartered Accountants of India.

37 Related Party Disclosure:

Details of transactions entered into with related parties during the year as required by Accounting Standard (AS) - 18 on “Related Party Disclosures” issued by The Institute of Chartered Accountants of India are as under:




Total

Current Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Purchase/Processing of goods - - 70.26 77.79 70.26 77.79

Purchase of FOCUS/DEPB licenses - - 368.50 58.57 368.50 58.57

Sales/Processing of goods - - - 3.15 - 3.15

Logo Charges (Inc. Service Tax) - - 14.31 14.05 14.31 14.05

Interest received - - 0.03 - 0.03 -

KMP Remuneration 158.18 52.62 - - 158.18 52.62

Common Corporate Charges (Inc.

Service Tax) 98.16 111.97 98.16 111.97

Interest Paid - - 71.50 286.17 71.50 286.17


F - 47

56





Total

Current Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Loan taken including opening

balance - - 7,254.57 66,425.50 7,254.57 66,425.50

Loan Repayment - - 5,754.57 63,870.93 5,754.57 63,870.93

Closing Balance of Loan - - 1,500.00 2,554.57 1,500.00 2,554.57

Note :

Current Year Previous Year

1. Holding Company Nil Nil

2. Fellow Subsidiary Companies Nil Nil

3. Key Management Personnel Mr. Sachit Jain (MD) Mr. Sachit Jain (MD)

Mr. Naresh Bansal (CE) Mr. Naresh Bansal (CE)

Mr. Sanjeev Singla (CFO) Mr. Sanjeev Singla (CFO)

Ms. Sonam Taneja (CS) Ms. Sonam Taneja (CS)

4. Enterprises over which Key Management Personnel (KMP) is able to exercise significant influence

Vardhman Textiles Limited Vardhman Textiles Limited

Vardhman Holdings Limited Vardhman Holdings Limited

Vardhman Acrylics Limited Vardhman Acrylics Limited

Vardhman Nisshinbo Garments Vardhman Nisshinbo Garments

Company Limited Company Limited

Vardhman Yarns & Threads Limited Vardhman Yarns & Threads Limited

VTL Investments Limited VTL Investments Limited

VMT Spinning Company Limited VMT Spinning Company Limited

38 Earnings Per Share:

The calculation of Earnings Per Share (EPS) as disclosed in the Profit & Loss Account has been made in accordance with the requirements of Accounting Standard (AS-20) on Earnings Per Share issued by the Institute of Chartered Accountants of India.

39 Deferred Tax:

Accounting entries for deferred tax have been passed in accordance with the provisions of Accounting Standard (AS)-22 on ‘Accounting for Taxes on Income’ issued by the Institute of Chartered Accountants of India.



Deferred tax liabilities (a) Accelerated depreciation (2,709.22) (1,934.01)

Deferred tax assetsDeferred Tax Asset arising on account of expenses allowable for tax purposes when paid u/s 43B

421.99 339.36

Deferred Tax Asset arising on account of provision for doubtful debt 34.61 9.69Unabsorbed losses and depreciation 3,569.03 3,153.52

Total 4,025.63 3,542.57

Deferred tax assets (b) * 2,709.22 1,934.01

Net deferred tax assets/(liability) [(a)-(b)] NIL Nil

*In the absence of virtual certainity of realisability of deferred tax assets, the deferred tax assets have been recognized only to

the extent of deferred tax liability.


F - 48

57


40 No asset qualifies for impairment for the current year according to AS-28 issued by The Institute of Chartered Accountants of India.

41 Figures in brackets indicate deductions.

42 During the previous year, depreciation calculations had undergone a change w.e.f. 1st April 2014 in accordance with the provisions of Schedule-II of the Companies Act, 2013 as against Schedule XIV to the Companies Act, 1956.

In view of that change, carrying amounts of various tangible fixed assets as at 1st April, 2014 after retaining the residual value, an amount of ` 89.77 lacs had been recognized in the opening balance of retained earnings (net of deferred tax) where the useful life of an asset was Nil. In other cases, the carrying amounts as at 1st April, 2014 is being depreciated over the revised remaining useful life of the asset as per Schedule-II.

43 The Company uses forward contracts to hedge its risk associated with fluctuation in foreign currency relating to foreign currency assets and liabilities, firm commitment and highly probable forecast transactions. The use of the aforesaid financial instruments is governed by the Company’s overall strategy. The Company does not use forward contracts and options for speculative purposes. The detail of the outstanding forward contracts as at 31st March, 2016 is as under:


No. of Contracts


(Lac)

No. of Contracts


(Lac)

a) Category wise quantitative data

Forward contracts against imports (USD) 43 83.04 44 99.63

Put and call options against imports (USD) 2 2.66 1 4.00

Forward contracts against foreign currency loan (USD)

12 142.86 18 99.61

Forward contracts against imports (SEK) - - 1 59.16

Forward contracts against imports (EURO) 1 0.12 - --

Forward contracts against exports (EURO) - - 8 4.27

Forward contracts against exports (USD) 39 54.28 17 18.61

b) Details of foreign currency exposure that has not been hedged by a derivative instrument or otherwise is given below :

Against Creditors (USD) - 1.14 -

Against Creditors (CHF) - - 0.02

Against Creditors (EURO) - 0.73 0.26

Against Creditors (GBP) - 0.01 -

Against foreign currency loan (USD) - 26.70 175.57

Against foreign currency loan (EURO) - 5.22 -

44 Figures have been rounded off.


F - 49

58



45 CIF VALUE OF IMPORTS:



Components & Spare Parts 743.22 703.50

Capital Goods 1,113.56 581.63

Raw Material 9,878.56 11,877.02

Total 11,735.34 13,162.15

46 EXPENDITURE IN FOREIGN CURRENCY



Traveling out of India 39.22 11.98

Technical Know how 26.35 -

Interest on ECB/Buyer Credit 576.91 509.80

Total 642.48 521.78

47 FOB VALUE OF EXPORTS 3,935.19 2,864.36

48 VALUE OF RAW MATERIALS, COMPONENTS AND SPARE PARTS CONSUMED



Amount % Amount %

1 Raw Material

Imported 11,110.79 37.09 11,452.34 27.14

Indigenous 18,842.00 62.91 30,749.29 72.86

Total 29,952.79 100.00 42,201.63 100.00

2 Components & Spare Parts

Imported 1,175.12 15.70 449.54 5.32

Indigenous 6,308.20 84.30 7,995.28 94.68

Total 7,483.32 100.00 8,444.82 100.00



Place : Gurgaon


F - 50

73

Annual Report 2016 - 17

INDEPENDENT AUDITOR’S REPORT

To the members of Vardhaman Special Steels Limited

Report on the Ind-AS Financial Statements

We have audited the accompanying Ind-AS financial statements of Vardhman Special Steels Limited (‘the

Company’) which comprise the Balance Sheet as at March

31, 2017, the statement of profit and loss (including other comprehensive income), the Statement of Cash Flow and

the Statement of Changes in Equity for the year then ended

and a summary of significant accounting policies and other explanatory information.


The Company’s Board of Directors is responsible for the

matters stated in Section 134(5) of the Companies Act, 2013

(“the Act”) with respect to the preparation and presentation of

these Ind-AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income and cash flows and changes in equity of the Company in accordance with the accounting principles

generally accepted in India, including the Indian Accounting

Standards (Ind-AS) specified under Section 133 of the Act, read with relevant rules issued thereunder.

This responsibility also includes maintenance of adequate

accounting records in accordance with the provisions of

the Act for safeguarding the assets of the Company and for

preventing and detecting frauds and other irregularities,

selection and application of appropriate accounting policies,

making judgments and estimates that are reasonable and

prudent, and design, implementation and maintenance of

adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of

the accounting records, relevant to the preparation and

presentation of the Ind-AS financial statements that give a true and fair view and are free from material misstatement,

whether due to fraud or error.


Our responsibility is to express an opinion on these Ind-AS

financial statements based on our audit.

We have taken into account the provisions of the Act, the

accounting and auditing standards and matters which

are required to be included in the audit report under the

provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards

on Auditing specified under sub-section 10 of section 143 of the Act. Those Standards require that we comply with

ethical requirements and plan and perform the audit to obtain

reasonable assurance about whether the Ind-AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and the disclosures in the Ind-

AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks

of material misstatement of the Ind-AS financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal financial control relevant to the Company’s preparation of the Ind-AS financial statements that give a true and fair view in order to design

audit procedures that are appropriate in the circumstances.

An audit also includes evaluating the appropriateness of

the accounting policies used and the reasonableness of the

accounting estimates made by the Company’s Directors,

as well as evaluating the overall presentation of the Ind-AS

financial statements.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit opinion on the Ind-AS financial statements.

Opinion

In our opinion and to the best of our information and according

to the explanations given to us, the aforesaid Ind-AS financial statements give the information required by the Act in the

manner so required and give a true and fair view in conformity

with the accounting principles generally accepted in India

including the Ind-AS, of the financial position of the Company as at March 31, 2017, and its financial performance including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.


1. As required by the Companies (Auditor’s Report) Order,

2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of

the Act, we give in the ‘Annexure A’ a statement on the

matters specified in paragraphs 3 and 4 of the order.

2. As required by section 143 (3) of the Act, we report that:

(a) we have sought and obtained all the information and

explanations which to the best of our knowledge and

belief were necessary for the purpose of our audit;

F - 51

74

Vardhaman Special Steels Limited

(b) in our opinion proper books of account as required by

law have been kept by the Company so far as it appears

from our examination of those books;

(c) the Balance Sheet, the Statement of profit and loss and the cash flow statement and statement of change in equity dealt with by this report are in agreement with

the books of account;

(d) in our opinion, the aforesaid Ind-AS financial statements comply with the Accounting Standards specified under Section 133 of the Act read with relevant rule issued

thereunder;

(e) on the basis of written representations received from

the Directors as on March 31, 2017 taken on record

by the Board of Directors, none of the Directors is

disqualified as on March 31, 2017 from being appointed as a Director in terms of sub-section 2 of section 164 of

the Act;

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our

separate Report in “Annexure B”; and

(g) with respect to the other matters to be included in the

Auditor’s Report in accordance with Rule 11 of the

Companies (Audit and Auditors) Rules, 2014, in our

opinion and to the best of our information and according

to the explanations given to us:

i. the Company has disclosed the impact of pending

litigations on its financial position in its Ind-AS financial statements – refer note 33 to the Ind-AS financial statements.

ii. the Company has made provision, as required under the

applicable law or Accounting Standards, for material

foreseeable losses, if any, on long-term contracts

including derivative contracts to the Ind-AS financial statements.

iii. there were no amounts which were required to be

transferred to the Investor Education and Protection

Fund by the Company.

iv. the Company has provided requisite disclosures in its

Ind-AS financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016. Based

on audit procedures and relying on the management

representation we report that the disclosures are in

accordance with books of account maintained by the

Company and as produced to us by the management–

refer note 42 to the Ind-AS financial statements.

for S S Kothari Mehta & Company Chartered Accountants

Firm’s Registration Number : 022150N

Harish Gupta

Place: Gurugram Partner

Date: April 28, 2017 Membership Number: 098336

“Annexure A” to the Independent Auditor’s Report

The Annexure as referred in paragraph (1) ‘Report on Other

Legal and Regulatory Requirements of our Independent

Auditors’ Report to the members of Vardhman Special Steels

Limited on the financial statements for the year ended March 31, 2017, we report that:

i. (a) The Company has maintained proper records showing

full particulars, including quantitative details and

situation of fixed assets.

(b) The fixed assets have been physically verified by the management according tothe programme of periodical

verification in phased manner over a period of three years which, in our opinion, is reasonable having regard

to the size of the Company and the nature of its fixed assets. The discrepancies, if any, noticed on such physical

verification have been properly dealt with in the books of accounts.

(c) According to the information and explanations given to

us and on the basis of our examination of records of the

Company, the title deeds of immovable properties are

held in the name of the Company.

ii. We have been explained by the management that the

inventory have been physically verified at reasonable intervals during the year. As far as we can ascertain

and according to information and explanations given

to us, the discrepancies, whenever material noticed on

such physical verification of inventory as compared to book records were properly dealt within the books of

accounts.

iii. The Company has not granted any loans, secured

or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the Register

maintained under section 189 of the Act. Accordingly,

the provisions of clause 3 (iii) (a) to (c) of the Order are

not applicable to the Company.

F - 52

75


iv. According to the information and explanations given to

us, the Company have complied with the provisions of

section 185 and I86 of the Act with respect to the loans,

investments made.

v. In our opinion and according to the information and

explanations given to us, the Company has not accepted

any deposits with public consequently, the directives

issued by the Reserve Bank of India, the provisions of

Section 73 to 76 or any other relevant provisions of the

Act and the rules framed there under are not applicable

to the Company.

vi. We have broadly reviewed the books of account

maintained by the Company pursuant to the rules made

by Central Government for the maintenance of cost records under section 148(1) of the Act in respect to

the Company’s products to which said rules are made

applicable and are of the opinion that prima facie, the

prescribed records have been made and maintained. We

have however not made a detailed examination of the

said records with a view to determine whether they are

accurate or complete.

vii. (a) According to the information and explanations given

to us and on the basis of examination of the records

of the Company, the Company is generally regular

in depositing undisputed statutory dues including

provident fund, employees’ state insurance, sales-tax,

income tax, service tax, custom duty, excise duty, value

added tax, cess and any other material statutory dues

with the appropriate authorities to the extent applicable

and further, there are no undisputed statutory dues

payable for a period of more than six months from the

date they become payable as at March 31, 2017.

(b) According to the records and information and

explanations given to us, there are no dues in respect

of income tax, sales tax, service tax, duty of excise, duty

of custom, or value added tax which have not been

deposited on account of any dispute except as given

below:

Name of the statute

Nature of dues

Period to

which amount

relates

Amount

involved

(₹ In Lakhs)*

Forum where dispute is pending

Sales Tax Act VAT& CST 2014-15 2.75 The Assistant Commissioner, Uttar Pradesh

Central Excise Act, 1944 Excise Duty 1994-95 4.16 Chief Commissioner Excise, Chandigarh

2000-01 0.45 CESTAT, Chandigarh

2000-01 34.78 Commissioner Appeals, Chandigarh

2005-06 1.33 Remanded back to Commissioner Appeals by CESTAT

in Aug 2010

2014-15 1.46 Assistant Commissioner, Ludhiana






Income Tax Act, 1961 Income Tax 2012-13 520.89 Deputy Commission of Income Tax, Circle I, Ludhiana

Entry Tax Punjab VAT

& CST

2011-12, 2012-

13 & 2013-14

1,450.00 Punjab & Haryana High Court

*Net of Payment

F - 53

76


viii. In our opinion, on the basis of audit procedures and

according to the information and explanations given to

us, the Company has not defaulted in repayment of loan

or borrowing to any banks and financial institutions as at Balance Sheet date.

As per information and explanation given to us the

Company had not taken any loan or borrowings from the

government. Further, the Company had not issued any

debenture.

ix. According to the information and explanations given

to us, the Company has not raised money by way of

initial public offer or further public offer (including debt

instruments)during the year. The term loans have been

applied for the purpose for which they were raised.

x. According to the information and explanations given

to us, no instance of fraud by the Company or on the

Company by its officers or employees has been noticed or reported during the year.

xi. According to the information and explanations given

to us and based on our examination of the records

of the Company, the Company has paid/ provided

for managerial remuneration in accordance with the

requisite approvals mandated by the provisions of

section 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and

explanations given to us, the Company is not a Nidhi

Company. Accordingly, paragraph 3(xii) of the Order is

not applicable.

xiii. According to the information and explanations given to

us and based on our examination of the record of the

Company, transactions with the related parties are in

compliance with section 177 and 188 of the Act where

applicable and details of such transactions have been

disclosed in the Ind-AS financial statements as required by the applicable Accounting standards.

xiv. Based upon the audit procedures performed and the

information and explanations given to us, the Company

has not made any preferential allotment of shares during

the year under review. Consequently, requirements of

clause (xiv) of Paragraph 3 of the order are not applicable.

xv. According to the information and explanations given to

us and based on our examination of the records of the

Company, the Company has not entered into non-cash

transactions with directors or persons connected with

him. Accordingly, paragraph 3(xv) of the Order is not

applicable.

xvi. The Company is not required to be registered under

Section 45-IA of the Reserve Bank of India Act, 1934.



Harish Gupta



“Annexure B” to the Independent Auditor’s Report

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”) as referred to in paragraph 2(f) of ‘Report on Other Legal and Regulatory Requirements’ section.

We have audited the internal financial controls over financial reporting of Vardhman Special Steels Limited (“the Company”)

as of March 31, 2017 in conjunction with our audit of the Ind-

AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing

and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of

internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued

by the Institute of Chartered Accountants of India (ICAI).

These responsibilities include the design, implementation

and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly

and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the

prevention and detection of frauds and errors, the accuracy

and completeness of the accounting records, and the timely

preparation of reliable financial information, as required under the Companies Act, 2013.


Our responsibility is to express an opinion on the Company’s

internal financial controls over financial reporting based on our audit.

F - 54

77


We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial

Reporting and the Standards on Auditing, issued by ICAI

and deemed to be prescribed under section 143(10) of the

Companies Act, 2013, to the extent applicable to an audit

of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute

of Chartered Accountants of India. Those Standards and

the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain

reasonable assurance about whether adequate internal

financial controls over financial reporting was established and maintained and if such controls operated effectively in all

material respects.

Our audit involves performing procedures to obtain audit

evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and

evaluating the design and operating effectiveness of internal

control based on the assessed risk. The procedures selected

depend on the auditor’s judgement, including the assessment

of the risks of material misstatement of the Ind-AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company’s internal financial control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of Ind-AS financial statements for external purposes in accordance with generally accepted accounting

principles. A Company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable

detail, accurately and fairly reflect the transactions and

dispositions of the assets of the Company; (2) provide

reasonable assurance that transactions are recorded as

necessary to permit preparation of Ind-AS financial statements in accordance with generally accepted accounting principles,

and that receipts and expenditures of the Company are being

made only in accordance with authorisations of management

and directors of the Company; and (3) provide reasonable

assurance regarding prevention or timely detection of

unauthorised acquisition, use, or disposition of the Company’s

assets that could have a material effect on the Ind-AS financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls,

material misstatements due to error or fraud may occur and

not be detected. Also, projections of any evaluation of the

internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with

the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an

adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2017,

based on the internal control over financial reporting criteria established by the Company considering the essential

components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial

Reporting issued by the Institute of Chartered Accountants

of India.



Harish Gupta



F - 55

78


ParticularsNote

As at March 31, 2017

As at March 31, 2016

As at April 1, 2015

ASSETS1 Non-current assets

(a) Property, plant and equipment 3 26,417.88 25,024.80 22,997.74 (b) Capital work-in-progress 111.32 210.84 2,079.82 (c) Other intangible assets 3.1 38.62 35.20 - (d) Financial assets Investments 4 67.87 141.97 1,752.98 Loans 5 46.42 25.97 18.00 Others financial assets 6 - - 0.07 (e) Other non-current assets 7 1,077.42 1,220.85 869.37 Total non-current assets 27,759.53 26,659.63 27,717.98

2 Current assets(a) Inventories 8 11,783.09 10,690.38 13,288.98 (b) Financial assets Investments 9 30.53 1,308.11 - Trade receivables 10 18,897.16 19,416.94 17,898.22 Cash and cash equivalents 11 594.54 376.54 859.33 Bank balances other than above 12 0.10 2.52 5.52 Loans 13 69.92 54.00 49.82 Other financial assets 14 81.71 110.70 110.14 (c) Current tax assets (Net) 76.36 98.39 99.96 (d) Other current assets 15 1,974.48 2,665.45 1,776.58 Total current assets 33,507.89 34,723.03 34,088.55 TOTAL ASSETS 61,267.42 61,382.66 61,806.53

EQUITY AND LIABILITIESEquity(a) Equity share capital 16 1,855.54 1,855.54 1,855.54 (b) Other equity 17,952.55 16,061.54 15,656.42 Total equity 19,808.09 17,917.08 17,511.96 Liabilities

1 Non-current liabilities(a) Financial liabilities Borrowings 17 11,545.50 12,902.09 10,438.36 (b) Provisions 18 80.31 62.88 54.43 (c) Other non-current liabilities 19 19.72 13.89 19.00 Total non-current liabilities 11,645.53 12,978.86 10,511.79

2 Current liabilities(a) Financial liabilities Short term borrowings 20 13,871.47 16,682.35 23,911.98 Trade payable: 21 (i) Total outstanding dues of micro enterprises and small enterprises - - - (ii) Total outstanding dues of creditors other than micro enterprises and small enterprises

3,490.94 4,099.68 5,157.10

Other financial liabilities 22 11,718.63 9,042.45 3,776.50 (b) Other current liabilities 23 706.12 600.10 874.98 (c) Short term provisions 24 26.64 62.14 62.22 Total current liabilities 29,813.80 30,486.72 33,782.78 TOTAL EQUITY AND LIABILITIES 61,267.42 61,382.66 61,806.53

Balance Sheet as at March 31, 2017

The accompanying notes form an integral part of the financial statements 1-47

As per our report of even date attached

for S S KOTHARI MEHTA & COMPANY For and on behalf of the Board of DirectorsChartered Accountants

Firm’s registration number : 022150N

Harish Gupta Sachit Jain Suchita Jain Subhasis DeyPartner (Vice- Chairman & Managing Director) (Director) (President & CE)

Membership No. : 098336 DIN No. : 00746409 DIN No. : 00746471

Place: Gurugram Sanjeev Singla Sonam TanejaApril 28, 2017 (Chief Financial Officer) (Company Secretary)

Membership No. : A34338

(All amounts in ₹ Lakhs)

F - 56

79


ParticularsNote

For the year ended March 31, 2017


Revenue from operations 25 75,651.54 72,932.88

Less: Discount 338.64 381.47

Net sales 75,312.90 72,551.41

Other income 26 564.29 265.24

I. Total income 75,877.19 72,816.65

II. Expenses : Cost of materials consumed 27 36,421.86 32,508.39


28 (1,164.88) 2,990.96

Excise duty consumed on sales 7,932.08 7,277.29

Employee benefit expense 29 3,979.68 3,368.67

Finance cost 30 2,827.97 2,301.62

Depreciation and amortization expense 3 1,806.70 1,703.11

Other expenses 31 22,160.36 22,244.96

Total expenses 73,963.77 72,395.00 III. Profit before tax (I-II) 1,913.42 421.65

IV. Tax expense:Current tax (MAT) 400.26 -

MAT credit entitlement (393.99)

Income tax relating to earlier year (6.53) -

Deferred tax - -

Total of tax expenses (0.26) -

V. Profit for the period (III-IV) 1,913.68 421.65

VI. Other Comprehensive Income

A Items that will not be reclassified to profit or lossRemeasurement of the net defined benefit liability / asset (22.67) (16.53)


- -

B Items that will be reclassified to profit or lossIncome tax relating to items that will be reclassified to profit or loss - -

Total Other Comprehensive Income (Net) (22.67) (16.53)VII. Total comprehensive income for the period (V+VI) 1,891.01 405.12

Earnings per share (₹)Basic - Par value of B10 per share 10.31 2.27

Diluted - Par value of B10 per share 10.31 2.27

Statement of Profit and Loss for the year ended March 31, 2017










F - 57

80


Particulars For the year ended March 31, 2017


A Cash flow from operating activities

Profit before tax 1,913.43 421.65

Adjustments for:

Other comprehensive income (22.67) (16.53)

Depreciation 1,806.70 1,703.11

Provision for fall in value of investment 61.79 24.37


Net Loss on sale of property, plant and equipment 77.55 111.80


Bad debts 51.15 0.02


Interest expenses 2,827.97 2,301.62


Dividend income from current investments (0.38) (6.28)

Profit on sale of current investments (218.07) (36.23)

Interest income from current investments (60.54) (19.34)

Provision no longer required written back (0.61) (3.15)

Sundry balances written back (153.07) (35.64)

Operating profit before working capital change

Adjustments for:

(Increase)/ decrease in inventories (1,092.70) 2,598.59

(Increase)/ decrease in trade receivables 368.63 (1,558.74)

(Increase)/ decrease in short-term loans (15.92) (4.18)

(Increase)/ decrease in other financial current assets 27.69 (0.64)

(Increase)/ decrease in other current assets 690.97 (888.87)

(Increase)/ decrease in non current financial asset - long-term loans (54.55) (34.76)

(Increase)/ decrease in other financial non current assets - 0.07

(Increase)/ decrease in other non-current assets 143.42 (351.47)

(Decrease)/ increase in long term provisions 17.43 8.45

(Decrease)/ increase in other non current liabilities 5.82 (5.10)

(Decrease)/increase in trade payables (455.06) (1,018.64)

(Decrease)/ increase in other financial current liabilities 703.26 1,745.96

(Decrease)/ increase in other current liabilities 106.03 (274.89)

(Decrease)/ increase in short term provisions (35.50) (0.08)

Cash (used in)/from operations 6,781.25 4,636.49

Direct taxes 22.29 1.57

Net cash flow (used in)/from operating activities 6,803.54 4,638.06

Statement of Cash Flow for the year ended March 31, 2017 (All amounts in ₹ Lakhs)

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81


Particulars For the year ended March 31, 2017


B Cash flow from investing activities

Purchase of tangible fixed assets (3,261.49) (2,017.62)

Purchase of intangible fixed assets (10.46) (36.38)


Dividend income 0.38 6.28

Sale/(purchase) of long term investments (Net) 8.58 1,610.98

Sale/(purchase) of current investments (Net) 1,494.41 (1,276.91)


Net cash flow from/ (used in) investing activities (1,565.42) (1,576.34)

C Cash flow from financing activities

Proceeds from long term borrowings (Net) 660.36 5,937.88

Proceed from short term borrowings (Net) (2,810.87) (7,229.64)

Interest paid (2,872.03) (2,255.75)

Net cash Flow from/ (used in) financing activities (5,022.54) (3,547.51)

Net increase /(decrease) in cash and cash equivalent (A+B+C) 215.58 (485.79)

Cash and cash equivalent at the beginning of the year 379.06 864.85

Cash and cash equivalent at the end of the year 594.64 379.06


Current accounts 589.84 370.17

Cash on hand 4.70 6.37

Bank deposits 0.10 2.52

Cash and cash equivalent at the end of the year 594.64 379.06








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82


Statement of Changes in Equity

a. Equity Share Capital (All amounts in ₹ Lakhs)

Particulars As at March 31, 2017 As at March 31, 2016 As at April 1, 2015

Balance at the beginning of the reported period 1,855.54 1,855.54 1,855.54

Changes in the equity share capital during the year - - -

Balance at the closing of the reported period 1,855.54 1,855.54 1,855.54

b. Other Equity (All amounts in ₹ Lakhs)

Particulars Reserves & Surplus Other comprehensive income

Total General

Reserve

Retained

Earnings Other items of other

comprehensive income

Balance as at April 1, 2015 13,890.62 1,765.80 - 15,656.42

Profit for the year - 421.65 - 421.65

Other comprehensive income for the year - - (16.53) (16.53)

Total comprehensive income for the year - 421.65 (16.53) 405.12

Balance as at March 31, 2016 13,890.62 2,187.45 (16.53) 16,061.54

Profit for the year - 1,913.68 - 1,913.68

Other comprehensive income for the year - - (22.67) (22.67)

Total comprehensive income for the year - 1,913.68 (22.67) 1,891.01

Balance as at March 31, 2017 13,890.62 4,101.13 (39.20) 17,952.55









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Notes to Financial Statements for the year ended March 31, 2017

1. CORPORATE INFORMATION

Vardhman Special Steels Limited (the Company) is a public company incorporated under the provisions of the Companies Act,

1956 on 14th May, 2010. The Company is engaged in manufacturing of Billets, Steel bars & Rods and Bright bars of various

categories of special and alloy steels.

These financial statements were approved and adopted by Board of Directors of the Company in its meeting held on April 28, 2017.

I. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

(i) Statement of Compliance The Financial Statements have been prepared in accordance with Indian Accounting Standards (Ind-AS) as prescribed under

Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 and Companies

(Indian Accounting Standards) (Amendment) Rules, 2016 and relevant provisions of the Companies Act, 2013.

(ii) Basis of PreparationThese financial statements have been prepared in accordance with Ind-AS 101, “First Time Adoption of Ind-AS”, as these are the Company’s first Ind-AS compliant Financial Statements for the year ended March 31, 2017.

The Financial Statements correspond to the classification provisions contained in Ind-AS 1 (Presentation of Financial Statements). The transition to Ind-AS has been carried out from the Accounting Principles generally accepted in India (Indian GAAP), which is considered as the “Previous GAAP”, for purposes of Ind-AS 1.

The preparation of these Financial Statements resulted in changes to the Company’s Accounting Policies as compared to the most

recent Annual Financial Statements prepared under Previous GAAP, wherever necessary. All Accounting Policies and applicable Ind-AS have been applied consistently and retrospectively to all periods, including the previous financial year presented and the Ind-AS opening balance sheet as at April 1, 2015 (Transition Date). The resulting difference between the carrying amounts under

Ind-AS and Previous GAAP as on the Transition Date has been recognised directly in Equity.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a

revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The financial statements are presented in INR and all values are rounded to the nearest INR Lakhs, except when otherwise indicated.

(iii) Use of EstimatesThe preparation of the financial statements in conformity with Ind-AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported

amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting

estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note.

Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes

in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in

estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.

(iv) Classification of Assets and Liabilities as Current and Non-CurrentAll Assets and Liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of product & activities of the Company and

their realisation in cash and cash equivalent, the Company has determined its operating cycle as twelve months for the purpose

of current and non-current classification of assets and liabilities. Deferred tax assets and liabilities are classified as non-current assets and liabilities.

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2. SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR ENDED MARCH 31, 2017.

(I) REVENUE RECOGNITION

Revenue is recognised at the fair value of the consideration received or receivable. The amount disclosed as revenue is inclusive

of excise duty and net of returns, trade discounts, value added tax and amount collected on behalf of third parties. The Company

recognizes revenue when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity.

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods are transferred to the buyer and the entity retains neither continuing managerial involvement to the degree usually associated with ownership

nor effective control over the goods sold.

Export Incentives

Revenue in respect of the export incentives is recognized on post export basis.

Interest Income

Interest income is recognized using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. While calculating the EIR, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.

Dividend Income

Dividend income is recognized when the right to receive the payment is established which is generally when shareholders approve the dividend.

Insurance and Other Claims

Revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.

(II) INVENTORY VALUATION

Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:

In case of raw materials: at weighted average cost and other costs incurred in bringing the inventories to their present location

and condition.

In case of stores and spares: at weighted average cost and other costs incurred in bringing the inventories to their present

location and condition.

In case of work in progress: at raw material cost plus conversion costs depending upon the stage of completion.

In case of finished goods: at raw material cost plus conversion costs, packing cost, excise duty (if applicable) and other overheads

incurred to bring the goods to their present location and condition.

(III) CASH AND CASH EqUIVALENTS

Cash and cash equivalents comprise cash on hand, cash at bank and demand deposits with banks with an original maturity of

three months or less which are subject to an insignificant risk of change in value.

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(iv) PROPERTY, PLANT AND EQUIPMENT

Under the Indian GAAP, Property, Plant and Equipment were carried in the balance sheet on historical cost. The Company has elected to regard those values as deemed cost under Ind-AS as on transition date i.e. April 1, 2015.

Property, plant and equipment are stated at cost, less accumulated depreciation. The Cost of an item of Property, Plant and

Equipment comprises:

a) Its purchase price including import duties and non-refundable purchase taxes after deducting trade discounts and rebates;

b) Any attributable expenditure directly attributable for bringing an asset to the location and the working condition for its

intended use; and

c) The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the

obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a

particular period for purposes other than to produce inventories during that period.

Depreciation is provided on Straight Line Method on the basis of useful lives of such assets in accordance with and in the manner

specified under Schedule II of the Companies Act, 2013 except the assets costing ₹5,000/- or below on which depreciation is

charged @ 100% per annum on proportionate basis.

Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under

‘Capital work-in-progress’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the statement of profit and loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.

Intangible Assets


Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, known technological advances and other economic factors. The amortization method and useful lives are reviewed periodically at end of each financial year.

The useful life of the computer software is taken as 5 years.

(v) LEASES

Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease, whichever is lower.

Lease under which the risks and rewards incidental to ownership are not transferred to lessee is classified as operating lease. Lease payments under operating leases are recognized as an expense in net profit in the statement of profit and loss.

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(vi) IMPAIRMENT

a) Financial assets

The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss.

Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, ECL are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or

reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is

recognized as an impairment gain or loss in statement of profit or loss.

b) Non-financial assets

Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances

indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount

(i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset

does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.

If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment

loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not

exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

(VII) FINANCIAL INSTRUMENTS

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Initial recognition and measurement

On initial recognition, all the financial assets and liabilities are recognized at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability except trade receivables which are recognized at transaction price.

Subsequent measurement

Non-derivative financial instruments

(i) Financial assets carried at amortised cost

A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(ii) Financial assets at fair value through other comprehensive income

A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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(iii) Financial assets at fair value through profit or loss

A financial asset which is not classified in any of the above categories is subsequently measured at fair value through profit or loss.

(iv) Financial liabilities

The financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short

maturity of these instruments.

Derivative financial instruments

The Company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.

Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify

for hedge accounting under Ind-AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so

designated but is ineffective as per Ind-AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.

Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in statement of profit and loss. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.

Equity Share Capital

(i) Equity shares

Equity shares issued by the Company are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are recognized as a deduction from equity, net of any tax effects.

De-recognition of financial instruments

A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind-AS 109. A financial liability is derecognized when the obligation specified in the contract is discharged or cancelled or expired.

Fair value measurement of financial instruments

The fair value of financial instruments is determined using the valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Based on the three level fair value hierarchies, the methods used to determine the fair value of financial assets and liabilities include quoted market price, discounted cash flow analysis and valuation certified by the external valuer.

In case of financial instruments where the carrying amount approximates fair value due to the short maturity of those instruments, carrying amount is considered as fair value.

(VIII) EMPLOYEES BENEFITS

Short term employee benefits:

Short Term Employee Benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.

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Post-employment benefits

Defined contribution plans:

Provident fund

Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service.

Superannuation

Certain employees of the Company are participants in a defined contribution plan. The Company has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with

the Life Insurance Corporation of India.

Defined benefit plans

Gratuity

The Company provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan’) covering eligible employees of the Company. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment with the

Company.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the VSSL

Gratuity Fund Trust (the Trust). Trustees administer contributions made to the Trusts and contributions are invested in the schemes as permitted by law of India.

The Company recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Re-measurements comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net

defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognised in Other Comprehensive Income which are not reclassified to profit or loss in subsequent periods.

Compensated absences

The Company has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected

cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each

balance sheet date using projected unit credit method. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.

(IX) BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of the asset. Other borrowing costs are recognized as an expense in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing

cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.

(X) EARNING PER SHARE

Basic earning per equity share are computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earning per equity share is computed

by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earning per equity share and also the weighted average number of equity shares that could have

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been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the

proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding

equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later

date. Dilutive potential equity shares are determined independently for each period presented.

(XI) INCOME TAXES

Income tax expense comprises current tax and deferred tax. Income tax expense is recognized in net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income.

Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred

income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets and liabilities are reviewed at each reporting date and are reduced to the extent

that it is no longer probable that the related tax benefit will be realized.

Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively

enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences

are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset

is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

(XII) GOVERNMENT GRANTS

The government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in the statement of profit and loss on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate.

(XIII) FOREIGN CURRENCY TRANSACTIONS

Functional and presentation currency

The functional currency of the Company is Indian Rupee. These financial statements are presented in Indian Rupee (rounded off to lakhs).

Transaction and balances

The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying to the foreign

currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

The foreign currency monetary items are translated using the closing rate at the end of each reporting period. Non-monetary

items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date

of the transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates

different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognised in profit or loss in the period in which they arise.

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Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the statements of profit and loss, within finance cost. All other foreign exchange gains and losses are presented in the statement of profit and loss on net basis.

(XIV) DIVIDENDS

Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are

recorded as a liability on the date of declaration by the Company’s Board of Directors.

(XV) PROVISIONS AND CONTINGENT LIABILITIES/ ASSETS

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of

profit and loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Contingent Liability is disclosed after careful evaluation of facts, uncertainties and possibility of reimbursement. Contingent

liabilities are not recognised but are disclosed in notes.

Contingent Assets are not recognised in financial statements but are disclosed, since the former treatment may result in the recognition of income that may or may not be realised. However, when the realisation of income is virtually certain, then the

related asset is not a contingent asset and its recognition is appropriate.

(XVI) STATEMENT OF CASH FLOWS

Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses

associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

In the process of applying the Company’s accounting policies, management has made the following estimates, assumptions and

judgments which have significant effect on the amounts recognized in the financial statement:

a) CONTINGENCIES

Judgment of the Management is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.

b) ALLOWANCE FOR UNCOLLECTED ACCOUNTS RECEIVABLE AND ADVANCES

Trade receivables do not carry any interest and are stated at their normal value as reduced by appropriate allowances for

estimated irrecoverable amounts. Individual trade receivables are written off when management deems them not collectible.

Impairment is made on ECL, which are the present value of the cash shortfall over the expected life of the financial assets.

c) DEFINED BENEFIT PLANS

The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from

actual developments in future. These includes the determination of the discount rate, future salary increases, mortality rates

and attrition rate. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

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d) FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow

(DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible,

a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity

risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

RECENT ACCOUNTING PRONOUNCEMENTS

a) Standards Issued but not yet effective

Amendments to Ind-AS 7, ‘Statement of cash flows’ as per notification issued by the Ministry of Corporate Affairs in March, 2017 in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7,

‘Statement of Cash Flows’ is applicable to the Company from April 1, 2017.

b) Amendment to Ind-AS 7

The amendment to Ind-AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for

liabilities arising from financing activities, to meet the disclosure requirement. The Company is evaluating the requirements of the amendment.

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3 Property, plant & equipment (All amounts in ₹ Lakhs)

Particulars Land-

FreeholdBuildings Plant &

Equipment

Furniture &

Fixtures VehiclesOffice

EquipmentsTotal

Gross carrying value:- As at April 01, 2015 844.94 4,152.34 24,021.38 134.05 280.34 213.59 29,646.64 Additions - 818.81 2,973.94 4.33 24.09 65.44 3,886.61

Disposals - - (404.06) (8.04) - (10.72) (422.82)

Acquisitions through business

combinations

- - - - - - -

Other adjustments - - - - - - -

As at March 31, 2016 844.94 4,971.15 26,591.26 130.34 304.43 268.31 33,110.43

Additions - 161.45 2,942.11 6.40 214.73 36.32 3,361.01

Disposals - - (141.05) - (168.78) - (309.83 )

Other adjustments - 2.95 61.20 (44.84) (53.95) 29.29 (5.35)

As at March 31, 2017 844.94 5,135.55 29,453.52 91.90 296.43 333.92 36,156.26

Depreciation:-As at April 01, 2015 - 1,127.18 5,222.30 63.74 103.52 132.16 6,648.90 Charge for the year - 135.89 1,483.35 10.55 36.13 36.01 1,701.93

Disposals - - (248.04) (7.91) - (9.26) (265.21)

Others - - - - - - -

As at March 31, 2016 - 1,263.07 6,457.61 66.38 139.65 158.91 8,085.62

Charge for the year - 167.23 1,557.77 6.61 29.85 36.93 1,798.39

Disposals - - (38.56 ) - (102.98) - (141.54)

Others - 2.82 26.25 (22.26) (24.74) 13.85 (4.09)

As at March 31, 2017 - 1,433.11 8,003.07 50.73 41.78 209.69 9,738.38 Net carrying value:-As at April 1, 2015 844.94 3,025.16 18,799.08 70.31 176.82 81.43 22,997.74 As at March 31, 2016 844.94 3,708.08 20,133.65 63.97 164.78 109.40 25,024.80

As at March 31, 2017 844.94 3,702.43 21,450.45 41.17 254.65 124.23 26,417.88

3.1 Other intangible asset

Particulars Computer SoftwareGross carrying value:- As at April 01, 2015 -

Additions 36.38

Disposals -

Acquisitions through business combinations -

Other adjustments -

As at March 31, 2016 36.38

Additions 10.46

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Particulars Computer SoftwareDisposals -

Other adjustments 5.35

As at March 31, 2017 52.19 Depreciation:-As at April 01, 2015 -

Charge for the year 1.18

Disposals -

Others -

As at March 31, 2016 1.18

Charge for the year 8.32

Disposals -

Others 4.08

As at March 31, 2017 13.58

Net carrying value:-As at April 1, 2015 -

As at March 31, 2016 35.20

As at March 31, 2017 38.62

3.2 Capital work in progress

Particulars Amount of Capital Work in ProgressAs at April 01, 2015 2,079.82 Additions 2,054.01

Amount transferred from CWIP (3,922.99)

Other Adjustments -

As at March 31, 2016 210.84

Additions 3,272.53

Amount transferred from CWIP (3,372.05)

As at March 31, 2017 111.32

4 Investments (non - current financial asset) (All amounts in ₹ Lakhs)

Particulars As at March

31, 2017

As at March

31, 2016

As at April 1,

2015

Financial assets measured at fair value through profit and loss Investments in debentures/ bond

Debt funds/ fixed maturity plans (quoted ) Birla sunlife fixed term plan -series - - 1,213.68

(CY: Nil; March 31, 2016: Nil; April 1, 2015: 1,00,00,000 of ₹10/- each)

Others (unquoted) Alternate Investment Fund IIFL real estate fund (domestic) series-I 67.87 141.97 539.30

Total 67.87 141.97 1,752.98 Aggregate amount of quoted Investments - - 143.68

Aggregate amount of unquoted Investments 67.87 141.97 539.30

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5 Loans: Non-current financial asset (Unsecured considered good, unless otherwise stated)(All amounts in ₹ Lakhs)


Financial assets at amortized cost

Loans to employees 46.42 25.97 18.00

Total 46.42 25.97 18.00

6 Other financial assets (non-current) (All amounts in ₹ Lakhs)


Financial assets at amortized cost

Other recoverable - - 0.07

Total - 0.07

7 Other non current assets (All amounts in ₹ Lakhs)


Capital advances 48.63 199.95 73.92

Advances other than capital advances:

-Security deposits 885.36 885.34 749.39

Others

-Prepaid expenses 3.20 7.57 7.83

-Prepaid (Deferred) expenses

for employee benefits 17.39 5.55 3.82

-Other recoverable 122.84 122.44 34.41

Total 1,077.42 1,220.85 869.37

8 Inventories (At cost or net realizable value, whichever is lower) (All amounts in ₹ Lakhs)


Raw material 1,133.86 880.77 1,956.14

Raw material in transit 951.86 1,538.08 389.91

Stores and spares 1,980.82 1,896.49 1,926.51

Stores and spares in transit 42.88 244.12 174.30

Finished goods 7,673.67 6,130.92 8,842.12

Total 11,783.09 10,690.38 13,288.98

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9 Current investments (All amounts in ₹ Lakhs)


31, 2017

As at March

31, 2016

As at April

1, 2015

Financial assets measured at fair value through profit and loss

Investments in debt funds

Debt funds/ Fixed maturity plans (quoted )

Birla sunlife fixed term plan -series * - 1,308.11 -

(CY: Nil, March 31, 2016: 1,00,00,000, April 1, 2015: Nil) of Rs. 10/- each

Baroda pioneer liquid fund plan 30.01 - -

(CY: 2997.71 Units, March 31, 2016: Nil, April 1, 2015: Nil)

Equity instruments (quoted)

GNA Axles ltd. 0.52 - -

(CY: 235 Shares, March 31, 2016: Nil, April 1, 2015: Nil)

Total 30.53 1,308.11 -

* Lien marked in favour of Deutsche Bank AG against the overdraft facility sanctioned by it.

10 Trade receivables (All amounts in ₹ Lakhs)


Unsecured, considered good 18,897.16 19,416.94 17,898.22

Unsecured, considered doubtful 100.00 100.00 60.00

18,997.16 19,516.94 17,958.22

Less: Provision for doubtful debts 100.00 100.00 60.00

Total 18,897.16 19,416.94 17,898.22

11 Cash and cash equivalents (All amounts in ₹ Lakhs)




Current accounts 589.84 370.17 857.12

Cash on hand 4.70 6.37 2.21

Total 594.54 376.54 859.33

12 Bank balances other than cash and cash equivalents (All amounts in ₹ Lakhs)


Other bank balance

Bank deposits * 0.10 2.52 5.52

Total 0.10 2.52 5.52

* Lien marked on fixed deposit of ₹10,000 in favour of Sale Tax Department of Himachal Pradesh.

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13 Loans ( current) (All amounts in ₹ Lakhs)


Financial assets at amortized costOther loans

Loans to employees 69.92 54.00 49.82

Total 69.92 54.00 49.82

14 Other financial assets (current) (All amounts in ₹ Lakhs)


Financial assets at amortized cost Interest accrued on fixed deposits - 1.30 1.38

Others 80.88 105.79 105.78

Advances to employees 0.83 3.61 2.98

Total 81.71 110.70 110.14

15 Other current assets (Unsecured considered good, unless otherwise stated) (All amounts in ₹ Lakhs)


Other advances

Advances to suppliers & contractors 368.58 1,432.38 610.28

Others

Prepaid expenses 83.72 53.11 82.73

Other current assets 54.88 80.62 110.78

Prepaid (deferred) expenses for employee benefits 2.27 2.69 1.62

MAT Credit entitlement 393.99 - -

Balance with government authorities 1,071.04 1,096.65 971.17

Total 1,974.48 2,665.45 1,776.58

16 Share capital (All amounts in ₹ Lakhs)

ParticularsAs at March 31, 2017 As at March 31, 2016 As at April 1, 2015

Number of shares

AmountNumber of

shares Amount

Number of shares

Amount

Authorised

Equity shares of ₹10 each 6,00,00,000 6,000.00 3,50,00,000 3,500.00 3,50,00,000 3,500.00

6,00,00,000 6,000.00 3,50,00,000 3,500.00 3,50,00,000 3,500.00

Issued, subscribed and paid up

Equity shares of ₹10 each fully paid

up

At the beginning of the year 1,85,55,376 1,855.54 1,85,55,376 1,855.54 1,85,55,376 1,855.54

Add: Issued during the year - - -

At the end of the year 1,85,55,376 1,855.54 1,85,55,376 1,855.54 1,85,55,376 1,855.54

F - 74

97



Equity Shares:The equity shareholders have:-

- The right to receive dividend out of balance of net profits remaining after payment of dividend to the preference shareholders. The dividend proposed by Board of Directors is subject to approval of shareholders in the ensuing general meeting.

- The Company has only one class of Equity Shares having face value of ₹10/- each and each shareholder is entitled to one

vote per share.

- In the event of winding up, the equity shareholders will be entitled to receive the remaining balance of assets if any, after

preferential payments and to have a share in surplus assets of the Company, proportionate to their individual shareholding

in the paid up equity capital of the Company.

16 (a) The aggregate number of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash

in the last five years immediately preceding the balance sheet date is NIL

16 (b) Equity Shares calls unpaid by directors and officers of the Company is NIL

16 (c) Shares held by holding company or its ultimate holding company or subsidiaries or associates of the holding company or

the ultimate holding company in aggregate is NIL

16 (d) Details of shareholders holding more than 5% shares of the Company:

ParticularsAs at March 31, 2017 As at March 31, 2016

Number of shares


Number of shares


Equity shares of ₹10/-each fully paid up held by

- Vardhman Textiles Limited 58,25,000 31.39 58,25,000 31.39

- Vardhman Holdings Limited 30,80,517 16.60 30,80,517 16.60

- Adishwar Enterprises LLP (Formerly Adinath Investment

and Trading Company)

25,22,655 13.60 25,22,655 13.60

- Devakar Investment and Trading Company (P) Limited 13,29,012 7.16 11,08,175 5.97

Total 1,27,57,184 68.75 1,25,36,347 67.56

17 Non current financial liabilities: long-term borrowings (All amounts in ₹ Lakhs)


Secured

Term loans (refer note 17.1) From banks 11,685.50 6,766.66 718.05

External commercial borrowings- Axis Bank 6,044.95 10,303.43 10,414.17

17,730.45 17,070.09 11,132.22

Less: Current maturities of long term borrowings 6,184.95 4,168.00 693.86

Total 11,545.50 12,902.09 10,438.36

F - 75

98



98


17.1 The requisite particulars in respect of secured borrowings are as under:- (All amounts in ₹ Lakhs)


31, 2017

As at March

31, 2016

Particulars of security / guarantees / default Terms of Repayment

SBI - Term Loan ₹7.20 Crs

Balance Outstanding

Current Maturity

Non-Current Maturity

678.74

60.00

618.74

718.38

40.00

678.38

PRIMARY SECURITY:

1st Pari Pasu charge on

Land & Building and

hypothecation charge on

P & M of the Company

(Both present & future).

1. 2016-17- 4 no's of quarterly

instalments of ₹10,00,000/- each








instalmenst of ₹1,10,00,000/- each

C O L L A T E R A L

SECURITY: 2nd pari passu

charge on entire current

assets of the Company.

SBI - Term Loan ₹28.00 Crs (Reduced to ₹16.00 Crs)

Balance Outstanding

Current Maturity


1,590.81

80.00

1,510.81

1,590.10

-

1,590.10

PRIMARY SECURITY:

1st Pari Pasu charge on

Land & Building and

hypothecation charge on

P & M of the Company

(Both present & future).





3. 2019-20- 4 no’s of quarterly












C O L L A T E R A L

SECURITY: 2nd pari passu

charge on entire current

assets of the Company.

SBI - Term Loan ₹65.00 Crs

Balance Outstanding

Current Maturity


6,434.98

-

6,434.98

1,477.02

–

1,477.02

PRIMARY SECURITY:

1st pari pasu charge

on Land & Building

and hypothecation

charge on P & M of the

Company (Both present

& future).


instalments of ₹ 1,00,00,000/- each












instalments of ₹3,75,00,000/- each

C O L L A T E R A L

SECURITY: 2nd pari

Passu charge on entire

current assets of the

Company.

F - 76

99



99




31, 2017

As at March

31, 2016

Particulars of security / guarantees / default Terms of Repayment

YES Bank - Term Loan ₹75.00 Crs

Balance Outstanding

Current Maturity


2,980.97

-

2,980.97

2,981.16

-

2,981.16

PRIMARY SECURITY:

1st pari pasu charge on

entire movable fixed assets of the borrower

(Both present & future)

including Land &

Building situated at Focal

Point Ludhiana & Pioneer

Industrial Park Pathredi.

1. 2018-19- 3 no’s of quarterly instalments of ₹ 1,12,50,000/- each; 2. 2019-20- 1 no of quarterly instalment of ₹1,12,50,000/- each & 3 no’s of quarterly instalments of ₹1,64,30,000/- each 3. 2020-21- 1 no of quarterly instalment of ₹1,64,30,000/- each & 3 no’s of quarterly instalments of ₹2,16,10,000/- each 4. 2021-22- 1 no of quarterly instalment of ₹2,16,10,000/- each & 3 no’s of quarterly instalments of ₹2,67,90,000/- each 5. 2022-23-1 no of quarterly instalment of ₹2,67,90,000/- each & 3 no’s of quarterly instalments of ₹3,19,60,000/- each 6. 2023-24- 1 no of quarterly instalment of ₹3,19,60,000/- each & 3 no’s of quarterly instalments of ₹ 3,71,40,000/- each 7. 2024-25- 1 no of quarterly instalment of ₹3,71,40,000/- each & 3 no’s of quarterly instalments of ₹4,23,20,000/- each 8. 2025-26- 1 no of quarterly instalment of ₹4,23,20,000/-

C O L L A T E R A L

SECURITY: 2nd pari

Passu charge on entire

current assets of the

Company (Both present

& future).

Axis Bank - ECB Loan $ 16.66 Million

Balance Outstanding

Current Maturity


6,044.95

6,044.95

–

10,303.43

4,128.00

6,175.43

PRIMARY SECURITY:

1st charge by way of EM

on Land & Building and

hypothecation of plant &

machinery of Company’s

Ludhiana Unit (Both

present & future).

1. 2015-16- 1 no of quarterly instalment of $1,110,000 on 15th March 2016 2. 2016-17- 1 no of quarterly instalment of $1,110,000 on 15th June 2016, 2 no’s of quarterly instalments of $1,560,000 on 15th September & 15th December 2016 & 1 no. of quarterly instalment of $2,000,000 on 15th March 2017 3. 2017-18- 1 no of quarterly instalment of $2,000,000 on 15th June 2017 & 3 no’s of quarterly instalments of $2,440,000 on 15th September 2017, 15th December 2017 & 15th March 2018, respectively.

C O L L A T E R A L

SECURITY: 2nd charge

on entire current assets

of the Company by way

of hypothecation both

present & future.

Balance Outstanding Current Maturity Non-Current Maturity

17,730.45

6,184.95 11,545.50

17,070.09 4,168.00

12,902.09

F - 77

100



18 Non current: long-term provisions (All amounts in ₹ Lakhs)


Leave encashment (unfunded) 80.31 62.88 54.43

Total 80.31 62.88 54.43

19 Other non current liabilities (All amounts in ₹ Lakhs)


Superannuation payable 4.57 8.34 6.71

Securities received 15.15 5.55 12.29

Total 19.72 13.89 19.00

20 Short-term borrowings (All amounts in ₹ Lakhs)


Loan repayable on demand Secured:

From banks* 11,662.40 13,856.37 21,357.41

Unsecured

From related parties (refer note no:38) 1,500.00 1,500.00 2,554.57

Buyer credit 709.07 1,325.98 -

Total 13,871.47 16,682.35 23,911.98 *includes Working Capital Borrowings from Consortium Banks which are secured by hypothecation of entire present and future

tangible current assets of the Company as well as a second charge on the entire present and future fixed assets of the Company.

21 Trade Payables (All amounts in ₹ Lakhs)


31, 2017

As at March

31, 2016

As at April

1, 2015

Trade Payables

(i) Total outstanding dues of micro enterprises and small enterprises - - -

(ii) Total outstanding dues of creditors other than micro enterprises and small

enterprises.

3,490.94 4,099.68 5,157.10

Total 3,490.94 4,099.68 5,157.10

* Includes dues to Related Party Nil in CY; ₹88.99 Lakhs (March 31, 2016) and ₹7.07 Lakhs (April 1 , 2015) refer note 38)

22 Other financial current liabilities (All amounts in ₹ Lakhs)

Particulars As at March 31,

2017

As at March 31,

2016

As at April 1,

2015

Financial liabilities at amortized cost Current maturity of long term debt 6,184.95 4,168.00 693.86

Interest accrued but not due on borrowings from banks 49.79 93.84 47.98

Others

-Capital creditors 27.69 157.55 449.01

-Dues to employees 376.39 323.16 183.97

F - 78

101



Particulars As at March 31,

2017

As at March 31,

2016

As at April 1,

2015

-Expense payable 4,302.39 4,078.07 2,353.39

-Security deposits 6.81 40.48 28.61

Financial liabilities measured at fair value through profit and loss Derivative financial instruments 770.61 181.35 19.68

Total 11,718.63 9,042.45 3,776.50

23 Other current liabilities (All amounts in ₹ Lakhs)


Advances from customers 45.29 101.64 113.50

Statutory dues 659.57 495.52 761.48

Other liabilities 1.26 2.94 -

Total 706.12 600.10 874.98

24 Short-term provisions (All amounts in ₹ Lakhs)


Provision for employee benefits : Gratuity (funded) (refer note no. 37) 1.48 40.58 43.61

Leave encashment (unfunded) 25.16 21.56 18.61

Total 26.64 62.14 62.22

25 Revenue from operations (All amounts in ₹ Lakhs)

Particulars For the year ended March 31, 2017 For the year ended March 31, 2016

Sale of products Own manufactured : Steel Bars 75,093.77 72,539.91

By Product and other miscellaneous sales 419.85 239.98

Export Incentives 137.92 152.99


26 Other income (All amounts in ₹ Lakhs)


Interest income 111.13 91.42

Dividend income from current investments 0.38 6.28

Profit on sale of current investments 218.07 36.23

Interest income from current investments 60.54 19.34

Provision no longer required written back 0.61 3.15

Sundry balances written back 153.07 35.64

Miscellaneous income 20.49 73.18

Total 564.29 265.24

F - 79

102



27 Cost of raw materials consumed (All amounts in ₹ Lakhs)


Raw material scrap & ferro alloys 36,421.86 32,508.39

Total 36,421.86 32,508.39

28 Changes in inventories of finished goods, work in progress and stock-in-trade (All amounts in ₹ Lakhs)

Particulars For the year ended March 31, 2017 For the year ended March 31, 2016 Opening stock Finished goods 6,130.92 8,842.12

6,130.92 8,842.12

Closing stock Finished goods 7,673.67 6,130.92

7,673.67 6,130.92 Excise duty variation on closing stock 377.87 279.76

Net (Increase) / Decrease (1,164.88) 2,990.96

29 Employee benefit expense (All amounts in ₹ Lakhs)

Particulars For the year ended March 31, 2017 For the year ended March 31, 2016 Salaries, wages and bonus 3,556.05 3,047.28

Contribution to provident and other fund 247.94 213.29

Provision for employee benefit (Refer note no 37) 100.02 81.57

Staff welfare expense 75.67 26.53

Total 3,979.68 3,368.67

30 Finance cost (All amounts in ₹ Lakhs)

Particulars For the year ended March 31, 2017 For the year ended March 31, 2016 Interest on

Term loan 1,532.41 855.08

Others 1,209.28 1,324.53

Other borrowing cost Bank & financial charges 86.28 122.01

Total 2,827.97 2,301.62

31 Other expenses (All amounts in ₹ Lakhs)

ParticularsFor the year ended

March 31, 2017



Power and fuel 10,948.43 10,755.53


Processing charges 385.53 292.47

Rent 87.13 78.21

F - 80

103



ParticularsFor the year ended

March 31, 2017


Repairs & maintenance (Building) 190.42 239.21

Repairs & maintenance (Machinery) 1,476.07 1,326.90


Rates and taxes 38.21 51.70

Payment to auditors (refer note no. 41) 9.22 4.81

Loss on fair value of investments 61.79 24.37


Net loss on account of foreign exchange fluctuations 616.85 1,016.40

Net Loss on sale of property, plant and equipment 77.55 111.80


Bad debts 151.15

Less: Withdrawal from provision for doubtful debts 100.00 51.15 0.02

Legal & professional expenses 150.88 74.95

Directors sitting fees 5.65 5.36

Director Commission 10.10 -


Provision against slow moving stock 72.92 -

Freight & cartage on sale 2,074.41 1,947.87

Commission 19.82 6.14


TOTAL 22,160.36 22,244.96

32 Earning per share (EPS)

Year ended March 31, 2017 Year ended March 31, 2016

a) Net profit attributable to equity shareholders (₹ in lakhs) 1,913.68 421.65

b) Weighted average number of equity shares outstanding 1,85,55,376 1,85,55,376

c) Nominal Value of Equity Shares (₹ per share) 10/- 10/-

d) Earning Per Equity Share (₹)

Basic 10.31 2.27

Diluted 10.31 2.27

33 Contingent liabilities & commitments (To the extent not provided for) (All amounts in ₹ Lakhs)

As at March 31, 2017 As at March 31, 2016

a) Claim against the Company not acknowledged as debtsExcise duty/ Custom duty/Service tax in respect of matters in dis-

putes

88.95 89.76

Sales tax/ VAT/ liability .in respect of matters in disputes 3.92 5.96

Income tax liability that may arise in respect of matters in disputes 267.50 602.49

F - 81

104




Other matters* 370.71 370.71

b) Bank Guarantees and letters of credit outstanding 5,461.23 5,498.36c) Commitments:

Contracts remaining to be executed on capital account 635.49 2,209.93

Export commitments against import of capital goods under EPCG scheme (Duty saved amount)

1,552.49 1,549.68

*Other matters include contingent liability of ₹370.71 lakhs (P.Y. ₹370.71 lakhs) relating to matters on power/electricity with

PSPCL.

34 Leases

The Company has leased facilities under cancellable operating leases arrangements with a lease term ranging from one to five years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either

party after giving due notice. The lease rent expenses recognized for the year ended March 31, 2017 amounts to ₹87.13 Lakhs

(PY ₹78.21 Lakhs).

35 Segment information

The Company has only one operating segment i.e. ‘STEEL’ and operations are mainly within India. Hence, it is the only reportable

segment under Ind-AS 108 ‘Operating Segments’. Entity wide disclosure required by Ind-AS 108 are made as follows:


a) ParticularsYear ended March 31, 2017 Year ended March 31, 2016

Domestic Foreign Domestic Foreign

Revenues from sale of products to external customers 71,140.49 3,953.28 68,289.24 4,250.67

Non - Current assets :

Property, Plant and Equipment 26,417.88 - 25,024.80 -

Capital work in progress 111.32 - 210.84 -

Intangible Assets 38.62 - 35.20 -

Other non current assets 1,077.42 - 1,220.85 -

b) Major Customers

16-17 Revenue from a major customer represented 12.47% of the total sales of the Company.

15-16 Revenues from 2 major customers represented 10.63% and 10.49% (21.12% in aggregate) of the total sales of the

Company.

36 The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006

Based on the information available, there are no vendors who have confirmed that they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. Disclosures as required by section 22 of ‘The Micro, Small and Medium Enterprises

Development Act, 2006, are given below:

Particulars As at March 31, 2017 As at March 31, 2016

a) Principal amount and Interest due thereon remaining unpaid to any

supplier as on March 31

- -

b) Interest paid by the Company in terms of Section 16 of the MSMED Act

along with the amounts of the payment made to the supplier beyond the

appointed day during the accounting year

- -

F - 82

105



Particulars As at March 31, 2017 As at March 31, 2016

c) the amount of interest due and payable for the year of delay in making

payment (which have been paid but beyond the appointed day during

the year) but without adding the interest specified under this Act

- -

d) the amount of interest accrued and remaining unpaid - -

e) the amount of further interest remaining due and payable even in the

succeeding years, until such date when the interest dues above are

actually paid to the small enterprise for the purpose of disallowance as a

deductible expenditure under section 23 of this Act.

– –

37 Employee benefits

a) Defined contribution plans:-

During the year, the Company has recognized an expense of ₹173.01 Lakhs (Previous year 149.38 Lakhs) in respect of

Contribution to Provident Fund and ₹4.57 Lakhs (Previous Year ₹8.34 Lakhs) in respect of Contribution to Superannuation

Scheme.

b) Defined benefit plans - as per actuarial valuation (All amounts in ₹ Lakhs)


Gratuity Gratuity(Funded) (Funded)

I Change in present value of obligation during the yearPresent value of obligation at the beginning of the year 487.72 416.11

Included in profit and loss:- Current service cost 52.77 46.73

- Interest cost 39.02 32.40

- Past service cost - -

Included in OCI:

Actuarial losses/(gains) 31.37 14.71

Others

Benefits paid (77.21) (22.23)

Present value of obligation as at year-end 533.67 487.72

II Change in Fair Value of Plan Assets during the yearPlan assets at the beginning of the year 447.14 372.50

Included in profit and loss:Expected return on plan assets 35.77 32.85

Included in OCI:

Actuarial Gain/(Loss) on plan assets 8.70 (1.82)

Others:

Employer's contribution 40.58 43.61

Benefits paid - -

Plan assets at the end of the year 532.19 447.14

The plan assets are managed by the Gratuity Trust formed by the Company.

F - 83

106





III Reconciliation of Present value of Defined Benefit Obligation and Fair Value of Plan Assets

1 Present value of obligation as at year-end 533.67 487.72

2 Fair value of plan assets at year -end 532.19 447.14

3 Funded status {Surplus/(Deficit)} (1.48) (40.58)

Net Asset/(Liability) (1.48) (40.58)IV Expenses recognised in the Statement of Profit and Loss1 Current service cost 52.77 46.73

2 Interest cost 39.02 32.40

3 Past service cost - -

4 Expected return on plan assets (35.77) (32.85)

Total expense 56.02 46.28

V Expenses recognised in the Statement of Other Comprehensive Income

1 Net actuarial (Gain)/Loss 22.67 16.53

Total Expense 22.67 16.53

VI Constitution of Plan Assets1 Equity instruments 10.79% -

2 Debt instruments 62.40% 60.14%

3 Bank balances 7.71% 31.52%

4 Others 19.10% 8.34%

VII Bifurcation of PBO at the end of the year1 Current liability 142.28 123.41

2 Non-current liability 391.39 364.31

TOTAL 533.67 487.72

VIII Actuarial Assumptions1 Discount rate 7.54% 8.00%

2 Expected rate of return on plan assets 7.04% 8.35%

3 Mortality table IALM (2006-08) IALM (2006-08)

4 Salary escalation 6.00% 6.00%

IX The expected expense for Defined Benefit Plan for the next financial year will be ₹81.48 Lakhs

X Sensitivity Analysis

ParticularsYear ended March 31, 2017 Year ended March 31, 2016

Increase Decrease Increase Decrease

GratuityDiscount rate (.50 % movement) (15.43) 16.55 (13.94) 14.90

Future salary growth ( .50 % movement) 16.72 (15.72) 15.10 (14.24)

F - 84

107



XI Maturity profile of Defined Benefit Obligation

ParticularsYear ended March 31, 2017 Year ended March 31, 2016


April 2016 - March 2017 - 123.41

April 2017 - March 2018 142.28 26.90

April 2018 - March 2019 18.86 40.15

April 2019 - March 2020 19.09 22.19

April 2020 - March 2021 18.52 32.82

April 2021 - March 2022 23.65 26.98

April 2022 onwards 311.27 215.27

Total 533.67 487.72

38 Related party disclosures

a) Related party relationships

i. Associate of Vardhman Textiles Limited

ii. Key Management Personnel (KMP) NAME DESIGNATION

Mr. Sachit Jain Vice Chairman & Managing

Director

Mr. Naresh Bansal Chief Executive

(Resigned effective 13.07.2016)

Mr. Subhasis Dey ( w.e.f. 10.06.2016) President & Chief Executive

Mr. Sanjeev Singla Chief Financial Officer

Ms. Sonam Taneja Company Secretary

Non- Executive DirectorsMr. Sanjeev Pahwa

Mr. Prafull Anubhai

Mr. Rajinder Kumar Jain

Mr. Sanjoy Bhattacharyya

Mr. Jayant Davar

Mr. Rajeev Gupta

Mr. Bal Krishan Choudhary

Mrs. Suchita Jain

iii. Enterprise over which KMP’s have significant influence

Vardhman Holdings Limited

Vardhman Acrylics Limited

Vardhman Nisshinbo Garments Company Limited

Vardhman Yarns and Threads Limited (up to

31.08.2016)

VTL Investments Limited

VMT Spinning Company Limited

F - 85

108



b) The following transactions were carried out with related parties in the ordinary course of business: (All amounts in ₹ Lakhs)

Particulars Related party involved 2016-17 2015-16

(i) Purchase/Processing of goods VMT Spinning Company Ltd. 0.56 4.83

Vardhman Yarns and Threads Ltd. 2.99 10.07

Vardhman Textiles Ltd. 34.07 55.36

Vardhman Nisshinbo Garments Company Ltd. 0.63 -

38.25 70.26

(ii) Purchase of FOCUS/DEPB licenses Vardhman Textiles Ltd. - 368.5

- 368.5

(iii) Sale of FOCUS/DEPB licenses VMT Spinning Company Ltd. 6.55 -

6.55 -

(iv) Sale of car Vardhman Textiles Ltd. 48.54 -

48.54 -

(v) Logo Charges (Inc. Service Tax) Vardhman Holdings Ltd. 14.38 14.31

14.38 14.31

(vi) Interest received VMT Spinning Company Ltd. - 0.03

Vardhman Textiles Ltd. 0.02 -

0.02 0.03

(vii) Common Corporate Charges (Inc.

Service Tax)

Vardhman Textiles Ltd. 108.38 98.16

108.38 98.16

(viii) Interest Exp / Payable Vardhman Textiles Ltd. 117.28 71.50

VMT Spinning Company Ltd. 0.30 -

117.58 71.50

(ix) Loan taken : Vardhman Textiles Ltd.

Loan taken including opening balance 1,500.00 7,254.57

Less: Loan Repayment - 5,754.57

Closing Balance of Loan 1,500.00 1,500.00

(x) Remuneration: Key Managerial Personnel (KMP)

Short-term employee benefits * 227.82 158.18

Termination benefits 13.82 -

241.64 158.18

*Including sitting fees, commission and value of perquisites

The above said remuneration is excluding provision for Gratuity & Leave Encashment, where the actuarial valuation is done on overall Company basis.

The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. This

assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Outstanding balances at the year- end are unsecured.

F - 86

109



39 Deferred tax: (All amounts in ₹ Lakhs)


Deferred tax liabilities (a) (2,323.62) (2,709.22)

Accelerated depreciation

Deferred tax assets

Deferred tax asset arising on account of expenses allowable for tax

purposes when paid u/s 43B

471.87 421.99

Deferred tax asset arising on account of provision for doubtful debt 34.61 34.61

Fair valuation loss on investments 21.39 -

MTM forex fluctuation on forward contracts 137.07 -

Unabsorbed losses and depreciation 3,218.09 3,569.03

Total 3,883.03 4,025.63

Deferred tax assets (b) 2,323.62 2,709.22

Net deferred tax assets/(liability) [(a)-(b)] Nil Nil

40 Impairment review

Assets are tested for impairment whenever there are any internal or external indicators of impairment. Impairment test is

performed at the level of each Cash Generating Unit (‘CGU’) or groups of CGUs within the Company at which the assets are monitored for internal management purposes, within an operating segment. The impairment assessment is based on higher of

value in use and value from sale calculations. During the year, the testing did not result in any impairment in the carrying amount

of other assets. The measurement of the CGUs’ value in use is determined based on financial plans that have been used by management for internal purposes. The planning horizon reflects the assumptions for short to- mid-term market conditions. Key assumptions used in value-in-use calculations:

- Operating margins (Earning before interest and taxes)

- Discount rate

- Growth rate

- Capital expenditures

41 Other disclosures required by statute (All amounts in ₹ Lakhs)

Particulars Year ended March 31, 2017 Year ended March 31, 2016

a) Auditors Remuneration (excluding service tax)

1. Statutory auditors

i. Audit fee 2.75 2.75

ii. Tax audit fee 0.75 0.75

iii. Other certification charges 5.00 -

iii. Reimbursement of expenses 0.36 0.96

Total 8.86 4.46

2. Cost auditors

Audit fee 0.36 0.35

Total 0.36 0.35

F - 87

110



42 Disclosure of Specified Bank note

During the year, the Company had specified bank notes or other denomination notes as defined in the MCA notification G.S.R 308(E) dated March 30, 2017, on the details of specified bank notes (SBN) held and transacted during the period from November 8, 2016 to December 30, 2016, the denomination wise SBNs and other notes as per the notification is given below:-


SBN’s* Other denomination notes Total

Closing cash in hand as on 08.11.2016 ** 3.10 0.02 3.12

Add: Permitted receipts - 9.08 9.08

Less: Permitted payments - 7.09 7.09

Less: Amount deposited in Banks 3.10 - 3.10

Closing cash in hand as on 30.12.2016 - 2.01 2.01

** including imprest with employees

* For the purpose of this disclosure, the term ‘Specified Bank Note’ (SBN) shall have the same meaning as provided in the notification number S.O. 3407 dated November 8, 2016 issued by the Department of Economic Affairs, Ministry of Finance, Government of India.

43 Financial instruments

Financial Assets (All amounts in ₹ Lakhs)

S.

NoParticulars Fair value

hierarchy

As at March 31, 2017 As at March 31, 2016 As at April 1, 2015

CarryingAmount

Fair

Value

CarryingAmount

Fair

Value

CarryingAmount

Fair

Value

1 Financial assets

designated at fair value through profit and loss

a) Long term investments Level-1 - - - - 1,213.68 1,213.68

b) Long term investments Level-2 67.87 67.87 141.97 141.97 539.30 539.30

c) Current investments Level-1 30.53 30.53 1,308.11 1,308.11 - -

2 Financial assets

designated at amortised cost

a) Long term loans and

advances

46.42 46.42 25.97 25.97 18.00 18.00

b) Other financial non current assets

- - - - 0.07 0.07

c) Trade receivables 18,897.16 18,897.16 19,416.94 19,416.94 17,898.22 17,898.22

d) Cash and bank balances 594.64 594.64 379.06 379.06 864.85 864.85

e) Short term loans 69.92 69.92 54.00 54.00 49.82 49.82

f) Other financial current assets

81.71 81.71 110.70 110.70 110.14 110.14

- - - -

Total 19,788.25 19,788.25 21,436.75 21,436.75 20,694.08 20,694.08

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Financial Liabilities (All amounts in ₹ Lakhs)

S.

NoParticulars

Fair

value

hierarchy


CarryingAmount

Fair

Value

CarryingAmount

Fair

Value

CarryingAmount

Fair

Value

1 Financial liability designated at fair value through profit and loss

a) Derivatives - not designated

as hedging instruments

Level-2 770.62 770.62 181.35 181.35 19.68 19.68

2 Financial liability designated at amortised cost

a) Long term borrowings

(including current maturity)

17,730.45 17,730.45 17,070.09 17,070.09 11,132.22 11,132.22

b) Short term borrowings 13,871.47 13,871.47 16,682.35 16,682.35 23,911.98 23,911.98

c) Trade payables 3,490.94 3,490.94 4,099.68 4,099.68 5,157.10 5,157.10

d) Other financial current liabilities (excluding

Derivatives and current

maturity)

4,763.07 4,763.07 4,693.10 4,693.10 3,062.96 3,062.96

Total 40,626.55 40,626.55 42,726.57 42,726.57 43,283.94 43,283.94

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties in an orderly market transaction, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:-A The fair values of derivatives are on MTM as per Bank

B Company has opted to fair value its long term and current investments through profit & loss

C Company has adopted effective rate of interest for calculating interest. This has been calculated as the weighted average

of effective interest rates calculated for each loan. In addition processing fees and transaction cost relating to each loan has

also been considered for calculating effective interest rate.

D The carrying amounts of current assets/ liabilities are to be the same as their fair values due to short term nature.

Fair value hierarchy Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

44 Derivative financial instruments

The Company holds derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place.

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The following table gives details in respect of outstanding foreign exchange forward contracts:

ParticularsAs of March 31, 2017 As of March 31, 2016

FC In lakhs ₹ In lakhs FC In lakhs ₹ In lakhsAssets

Forward contracts

In U.S. dollars 37.74 2,469.81 54.28 3,595.93

In Euros 6.72 468.71 - -

LiabilitiesForward contracts

In U.S. dollars 257.46 17,037.73 225.91 14,966.57

In Euros 0.95 66.39 0.12 9.20

302.87 20,042.64 280.31 18,571.70

The table below analyses the outstanding foreign exchange forward contracts into relevant maturity groupings based on the

remaining period as of the balance sheet date:


Particulars As of March 31, 2017 As of March 31, 2016Not later than one month 2,374.47 2,363.74

Later than one month but not later than three months 4,784.53 2,367.16

Later than three months but not later than one year 12,883.64 7,663.36

Later than one year - 6,177.44

20,042.64 18,571.70

The Company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the Company intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

45 Financial risk management objectives and policies

45.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers.

i. Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: currency rate risk, interest rate risk and other price risks, such as equity price

risk and commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, investments and

derivative financial instruments. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. This is based on the financial assets and financial liabilities held as at March 31, 2017 and March 31, 2016.

ii. Credit Risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

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iii. Liquidity Risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without

incurring unacceptable losses.

The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes.

Risk management is carried out by the treasury department under policies approved by the Board of Directors. The treasury

team identifies, evaluates and hedges financial risks in close co-operation with the Company’s operating units. The board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

MARKET RISK

a) Foreign Currency Risk and Sensitivity

The functional currency of the Company is Indian Rupee (INR). The Company is exposed to foreign exchange risk through its sales

in international markets and purchases from overseas suppliers in various foreign currencies. The Company has obtained foreign

currency loans and has foreign currency trade payables and receivables and is therefore, exposed to foreign exchange risk. The

Company holds derivative financial instruments such as foreign exchange contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in

recent years and may fluctuate substantially in the future. Consequently, the results of the Company’s operations are affected as the rupee appreciates/ depreciates against these currencies.

The following table analyses foreign currency risk from financial instruments as of March 31, 2017: (FC in Lakhs)

Particulars USD Euro CHF SEK

Trade receivables 19.72 1.95 - -

Trade payables 30.43 0.53 - -

Long term loans - External commercial borrowings 93.20 - - -

Short term loans 96.60 - - -

Net assets / (liabilities) (200.51) 1.42 - -

The following table analyses foreign currency risk from financial instruments as of March 31, 2016: (FC in Lakhs)



Trade payables 41.67 0.57 - 17.89


Short term loans - - - -

Net assets / (liabilities) (175.21) (0.21) - (17.89)

The following table analyses foreign currency risk from financial instruments as of April 1, 2015: (FC in Lakhs)



Trade payables 70.17 0.26 0.02 53.43


Short term loans - - - -

Net assets / (liabilities) (225.77) 1.16 (0.02) (53.43)

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For the year ended March 31, 2017 and March 31, 2016, Company has hedged its entire foreign currency exposure, therefore

any depreciation / appreciation in the exchange rate between the Indian Rupee and other currencies, would not have any impact

on the Company’s operating margins.

Summary of Exchange difference accounted in Statement of profit and loss: (All amounts in ₹ Lakhs)

Particulars Year ended March 31, 2017 Year ended March 31, 2016

Currency fluctuationsNet foreign exchange (gain)/ losses shown as operating expenses 27.59 873.22

Net foreign exchange (gain)/ losses shown as finance cost - -

Net foreign exchange (gain)/ losses shown as other income - -

DerivativesDerivatives (gain) / losses shown as operating expenses 589.26 143.18

Total 616.85 1,016.40

CREDIT RISK

The following table gives details in respect of percentage of revenues generated from top customer and top five customers:

(in %)

ParticularsYear ended March 31 April, 1

2017 2016 2015

Revenue from top customer 12.47 10.63 11.51

Revenue from top five customers 32.86 36.92 33.64

Ageing analysis of trade receivables (All amounts in ₹ Lakhs)

As at March 31, 2017 As at March 31, 2016Not Due and Not Impaired

Upto Six Months

Six to Twelve Months

Above 12 Months Total

Not Due and Not Impaired

Upto Six Months

Six to Twelve Months

Above 12 Months Total

13,653.60 4,309.71 461.58 472.27 18,897.16 11,523.58 7,195.22 540.52 157.62 19,416.94

CASH AND CASH EQUIVALENTS

Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid

mutual fund units, quoted bonds issued by government and quasi government organizations and certificates of deposit which are funds deposited at a bank for a specified time period.

Liquidity risk

The Company’s approach in managing liquidity risk is to ensure that , as far as possible, it will have sufficient liquidity to meet its liabilities as and when they fall due under both normal and stressed conditions, without incurring unacceptable losses or risking

damage to company’s reputation.

The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2017:

(All amount in ₹ Lakhs)

Particulars Upto 1 year 1-2 years 2-4 years 4-9 years TotalLong term borrowings including current maturity 6,184.95 497.50 3,158.00 7,984.50 17,824.95

Trade payables 3,490.94 - - - 3,490.94

Other financial liabilities (excluding derivatives) 4,763.07 - - - 4,763.07

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The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2016:


Particulars Upto 1 year 1-2 years 2-4 years 4-9 years Total

Long term borrowings including current maturity 4,168.00 6,315.43 1,762.90 4,877.10 17,123.43

Trade payables 4,099.68 - - - 4,099.68

Other financial liabilities (excluding derivatives) 4,693.10 - - - 4,693.10

45.2 Competition and price risk

The Company faces competition from local and foreign competitors. Nevertheless, it believes that it has competitive advantage

in terms of high quality products and by continuously upgrading its expertise and range of products to meet the needs of its

customers.

45.3 Capital risk management

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity

reserves attributable to the equity shareholders . The primary objective of the Company’s capital management is to maximise the

shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the

requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing

ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and

borrowings, trade and other payables, less cash and cash equivalents, excluding discontinued operations.



Borrowings 31,601.92 33,752.44 35,044.20

Trade payables 3,490.94 4,099.68 5,157.10

Other payables 5,595.86 5,432.11 4,073.59

Less: cash and cash equivalents 594.64 379.06 864.85

Net debt 40,094.08 42,905.17 43,410.04

Equity 19,808.09 17,917.08 17,511.96

Capital and net debt 59,902.17 60,822.25 60,922.00 Gearing Ratio 66.93% 70.54% 71.26%

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets

financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

45.4 Further issue of share capital

In order to strengthen the capital structure of the Company, the Committee of Directors (Right Issue) of the Company, in its

meeting held on March 28, 2017 have approved final letter of offer for Right Issue. The Company would be raising equity of ₹6,785 lakhs. The necessary announcements have been made on the Stock exchanges and details of the issue can be accessed

from websites of the stock exchanges.

46 First time adoption of Ind-AS

These financial statements, for the year ended March 31, 2017, are the first the Company has prepared in accordance with Ind-AS. For periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

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Accordingly, the Company has prepared financial statements which comply with Ind-AS applicable for period ending on March 31, 2017, together with the comparative period data as at and for the year ended March 31, 2016, as described in the summary

of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1, 2015, the Company’s date of transition to Ind-AS. This note explains the principal adjustments made by the Company

in restating its Indian GAAP financial statements, including the balance sheet as at April 1, 2015 and the financial statements as at and for the year ended March 31, 2016.

Exemptions applied : Ind-AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind-AS. The Company has, accordingly, applied following exemptions:

a) The Company has elected to consider carrying amount of all items of Property, Plant and Equipments (PPE) and Intangible

assets per Indian GAAP, as deemed cost at the date of transition.b) The Company has availed the exemption of fair value measurement of financial assets or liabilities at initial recognition

and accordingly will apply fair value measurement of financial assets or liabilities at initial recognition prospectively to transactions entered into on or after April 1, 2015.

c) The estimates at April 1, 2015 and at March 31, 2016 are consistent with those made for the same dates in accordance

with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items under Indian GAAP did not require estimation:

- Fair value of investments in unquoted equity instruments

- Impairment of financial assets based on expected credit loss model - Discount rates

The estimates used by the Company to present these amounts in accordance with Ind-AS reflect conditions that existed as at April 1, 2015 and March 31, 2016.

Notes to the reconciliation of equity as at April 1, 2015 and March 31, 2016 and Total Comprehensive Income for the year ended March 31, 2016:-

1. Fair valuation of investmentsUnder Indian GAAP, investments in equity instruments, mutual funds and debt securities were classified as long term investments or current investments based on the intended holding period and realisability. Long term

investments were carried at cost less provision for other than temporary diminution in the value of investments.

Current investments were carried at lower of cost and fair value. Ind-AS requires such investments to be measured

at fair value except investments in subsidiaries, associates and joint venture for which exemption has been availed.

Accordingly, the Company has designated investments in equity instruments and mutual funds as FVTPL investments. The

difference between the instrument’s fair value and Indian GAAP carrying amount has been recognized in retained earnings.

2. Financial instruments measured at amortized costUnder Indian GAAP, interest free loan to employees are recorded at their transaction value. Under Ind-AS, these loans are to be measured at amortized cost on the basis of effective interest rate method. Due to this, long term loans to employees and short term loans to employees has been decreased and difference between carrying amount and amortized cost has been recognized as ‘Deferred employee cost’ under the head 'Other non-current assets' / 'Other current assets'.

3. Derivative instrumentsDerivative instruments at fair value through profit or loss reflect the positive change in fair value of those foreign exchange forward contracts that are not designated in hedge relationships, but are, nevertheless, intended to reduce the level of foreign

currency risk for expected sales and purchases.

4. BorrowingsUnder Indian GAAP, transaction costs incurred in connection with borrowings are amortised upfront and charged to profit or loss for the period. Under Ind-AS, transaction costs are included in the initial recognition amount of financial liability and charged to profit or loss using the effective interest method. Therefore, borrowings as at April 1, 2015 and March 31, 2016 have been reduced with corresponding adjustment in retained earnings.

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5. Defined benefit obligationBoth under Indian GAAP and Ind-AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gain and loss, are charged to profit and loss. Under Ind-AS, such actuarial gain and loss is to be recognized separately through Other Comprehensive Income. Thus, employee cost has been reduced and actuarial gain/loss has been recognized in OCI net of taxes.

6. Sale of goodsUnder Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind-AS, sale of goods includes excise duty. Thus, sale of goods under Ind-AS has increased by the excise duty with a corresponding increase in other expenses.

7. Deferred taxIndian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind-AS requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet

and its tax base. The application of Ind-AS has resulted in recognition of deferred tax on temporary differences which was not

required under Indian GAAP. In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognised in correlation to

the underlying transaction either in retained earnings or a separate component of equity.

8. Statement of cash flowsThe transition from Indian GAAP to Ind-AS has not had a material impact on statement of cash flows.

46.1 Reconciliation of Equity as previously reported under IGAAP to Ind-AS (All amounts in ₹ Lakhs)

ParticularsAs at March 31, 2016 As at April 1,2015

IGAAP Adjustments Ind-AS IGAAP Adjustments Ind-AS

I ASSETS

1 Non-Current Assets

a Property, Plant and Equipment 25,024.80 - 25,024.80 22,997.74 - 22,997.74

b Capital work-in-progress 210.84 - 210.84 2,079.82 - 2,079.82

c Intangible assets 35.20 - 35.20 - - -

d Financial assets -

Investments 129.69 12.28 141.97 1,408.22 344.76 1,752.98

Loans 31.52 (5.55) 25.97 21.81 (3.82) 18.00

Other financial assets - - - 0.07 - 0.07

e Other non-current assets 1,215.29 5.56 1,220.85 865.56 3.82 869.37

TOTAL 26,647.34 12.29 26,659.63 27,373.22 344.76 27,717.98

2 Current Assets

a Inventories 10,690.38 - 10,690.38 13,288.98 - 13,288.98

b Financial assets

Investments 1,000.00 308.11 1,308.11 - - -

Trade receivables 19,416.94 - 19,416.94 17,898.22 - 17,898.22

Cash and bank balances 379.06 - 379.06 864.85 - 864.85

Loans 56.69 (2.69) 54.00 51.44 (1.62) 49.82

Other financial assets 110.70 - 110.70 110.14 - 110.14

c Current tax assets (Net) 98.39 - 98.39 99.96 - 99.96

d Other current assets 2,662.76 2.69 2,665.45 1,774.96 1.62 1,776.58

TOTAL 34,414.92 308.11 34,723.03 34,088.55 (0.00) 34,088.55

Total Assets 61,062.26 320.40 61,382.66 61,461.77 344.76 61,806.53

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ParticularsAs at March 31, 2016 As at April 1,2015

IGAAP Adjustments Ind-AS IGAAP Adjustments Ind-AS

II EQUITY AND LIABILITIES

1 EquityEquity share capital 1,855.54 - 1,855.54 1,855.54 - 1,855.54

Other equity 15,638.76 422.78 16,061.54 15,117.48 538.94 15,656.42

TOTAL 17,494.30 422.78 17,917.08 16,973.02 538.94 17,511.96 2 Liabilities1 Non-Current Liabilitiesa Financial Liabilities

Borrowings 12,955.43 (53.34) 12,902.09 10,440.32 (1.96) 10,438.36

Other financial liabilities - - - - - -

b Provisions 62.88 - 62.88 54.43 - 54.43

c Deferred tax liabilities (Net) - - - - - -

d Other non-current liabilities 13.89 - 13.89 19.00 - 19.00

TOTAL 13,032.20 (53.34) 12,978.86 10,513.75 (1.96) 10,511.79 3 Current Liabilitiesa Financial Liabilities

Borrowings 16,682.35 - 16,682.35 23,911.98 - 23,911.98

Trade payables 4,099.68 - 4,099.68 5,157.10 - 5,157.10

Other financial liabilities 9,051.02 (8.57) 9,042.45 3,940.11 (163.61) 3,776.50

b Other current liabilities 640.57 (40.47) 600.10 903.59 (28.61) 874.98

c Provisions 62.14 - 62.14 62.22 - 62.22

d Current Tax Liabilities - - - - - -

TOTAL 30,535.76 (49.04) 30,486.72 33,975.00 (192.22) 33,782.78

Total Equity and Liabilities 61,062.26 320.40 61,382.66 61,461.77 344.76 61,806.53

Reconciliation of Statement of Profit & Loss as previously reported under IGAAP to Ind-AS for the year ended March 31, 2016 (All amounts in ₹ Lakhs)

Particulars IGAAP Adjustments Ind-AS

I Revenue from operations 72,932.88 - 72,932.88

Less: Discount 381.47 - 381.47

Net sales 72,551.41 - 72,551.41

II Other income 263.59 1.65 265.24

III Total Revenue (I+II) 72,815.00 1.65 72,816.65

IV ExpensesCost of materials consumed 32,508.39 - 32,508.39

Purchases of stock-in-trade - - -

Changes in inventories of finished goods, stock-in -trade and work-in-progress 2,990.96 - 2,990.96

Excise duty consumed on sales 7,277.29 - 7,277.29

Employee benefits expenses 3,383.58 (14.91) 3,368.67

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Particulars IGAAP Adjustments Ind-AS

Finance costs 2,352.97 (51.35) 2,301.62

Depreciation and amortization expense 1,703.11 - 1,703.11

Other expenses 22,077.41 167.55 22,244.96

Total expenses 72,293.71 101.29 72,395.00 V Profit/(loss) before exceptional items and tax (III-IV) 521.29 (99.63) 421.65

VI Exceptional items - - -

VII Profit/(loss) before tax (V-VI) 521.29 (99.63) 421.65

VIII Tax expense Current Tax - - -

Deferred tax - - -

IX Profit/(loss) for the period 521.29 (99.63) 421.65

X Other Comprehensive Income -

(i) Items that will not be reclassified to profit or loss - (16.53) (16.53)

Income tax relating to items that will not be reclassified to profit or loss - - -

(ii) Items that will be reclassified to profit or loss - - -

Income tax relating to items that will be reclassified to profit or loss - - -

XI Total Comprehensive Income (IX+X) 521.29 (116.16) 405.12

Reconciliation of total comprehensive income for the year ended 31st March, 2016 (All amounts in ₹ Lakhs)

Net Profit as per Indian GAAP 521.29 Add/ (less) : Adjustment on account of transition to Ind-AS:

Impact of measuring derivative instruments at fair value (143.18)

Impact of measuring investments at fair value (24.37)

Impact of measuring borrowings at amortised cost 51.38

Impact of recognition of actuarial gains/(losses) in Other Comprehensive Income (OCI) 16.53

[A] Net Profit as per Ind-AS 421.65

[B] Add: Other Comprehensive IncomeActuarial gains and losses (16.53)

Total Comprehensive Income (A+B) 405.12

46.2 Reconciliation of Other Equity as at April 1, 2015 (All amounts in ₹ Lakhs)

Particulars Retained Earnings General Reserve Total

As at April 1, 2015 ( IGAAP) (A) 1,226.86 13,890.62 15,117.48

Adjustments:

Impact of measuring derivative instruments at fair value 192.23 - 192.23

Impact of measuring investments at fair value 344.76 - 344.76

Impact of measuring borrowings at amortised cost 1.95 - 1.95

Total Ind-AS Adjustments (B) 538.94 - 538.94As at April 1, 2015 ( Ind-AS) [A+B] 1,765.80 13,890.62 15,656.42

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Reconciliation of Other Equity as at March 31, 2016 (All amounts in ₹ Lakhs)

Particulars Retained Earnings General Reserve Total

As at March 31, 2016 ( IGAAP) (A) 1,748.14 13,890.62 15,638.76

Adjustments :

Impact of measuring derivative instruments at fair value 49.06 - 49.06

Impact of measuring investments at fair value 320.39 - 320.39

Impact of measuring borrowings at amortised cost 53.33 - 53.33

Total Ind-AS Adjustments (B) 422.78 422.78

As at March 31, 2016 ( Ind-AS) [A+B] 2,170.92 13,890.62 16,061.54

47 Previous year figures have been regrouped/rearranged, wherever considered necessary to conform to current year’s classification.As per our report of even date attached







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111

TAXATION

The information provided below sets out the possible tax benefits available to the potential shareholders of the

Company in a summary manner only and is not a complete analysis or listing of all potential tax consequences of

the subscription, ownership and disposal of the Equity Shares, under the tax laws presently in force in India.

Several of these benefits are dependent on the potential shareholders fulfilling the conditions prescribed under

the relevant tax laws. Hence the ability of any shareholder to derive the tax benefits is dependent upon fulfilling

such conditions, which based on business imperatives it faces in the future, it may not choose to fulfil. The

following overview is not exhaustive or comprehensive and is not intended to be a substitute for professional

advice. Investors are advised to consult their own tax consultant and advisors with respect to the tax implications

of an investment in the Equity Shares.

112

STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO VARDHMAN SPECIAL STEELS

LIMITED AND ITS SHAREHOLDERS

To,

The Board of Directors

Vardhman Special Steels Limited Vardhman Premises, Chandigarh road, Ludhiana – 141010, Punjab, India. (hereinafter referred to as the “Company”)

Re: Proposed qualified institutions placement of equity shares of face value of Rs. 10/- each (the “Equity

Shares”) of Vardhman Special Steels Limited (the “Company”) in reliance upon Section 42 of the Companies Act, 2013, as amended, read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rule, 2014 and Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 as amended (“ICDR”)(the “Issue”).

Sub: Certificate on possible tax benefits available to the Company and its potential shareholders.

Please find enclosed the certificate on possible tax benefits available to the Company and its potential shareholders under the Income Tax Act, 1961 (read with Income Tax Rules, circulars, notifications) as amended by the Finance Act, 2017 (hereinafter referred to as the “Income Tax Regulations”), as an annexure hereto. Our certificate is based on the understanding of the law and applicable regulations prevailing as on the date of this certificate. Any change or amendment in the law would necessitate a review of our certificate. Unless specifically requested, we have no responsibility to carry out any review of our certificate for change in law occurring after the date of issue of the certificate. This certificate is intended for your information and for inclusion in the Preliminary Placement Document and the Placement Document to be prepared in connection with the proposed issuance of securities of the Company to qualified institutional buyers.

For S. S. Kothari Mehta & Company

Chartered Accountants Firm Registration Number: 022150N Sd/-

Harish Gupta

Partner Membership Number: 098336 Date: February 14, 2018 Place: New Delhi

113

ANNEXURE TO THE STATEMENT OF TAX BENEFITS

A. SPECIAL TAX BENEFITS

Special Tax Benefits available to the Company

The Company had entered into a Memorandum of Agreement with State Government of Punjab, for availing the benefits under the Industrial Policy of the Government of Punjab FIIP (R) – 2013 towards its capital investments for expansion in the Rolling Mill, Melting Shop, and Bright Bar Shop. The benefits available under the said Industrial Policy are as under: (i) Exemption of 50% of the Electricity Duty. The present rate of electricity duty is 8%. So the

Company will get exemption for 4% of the electricity duty. (ii) Exemption of 35% of VAT payable and 37.50% of CST payable. It has been mentioned in the

policy that these incentives will be modified on implementation of GST, accordingly. However, notification in respect of above modification is yet to come.

(iii) Exemption of 50% of the Property Tax payable to the Municipal Corporation. Presently, the

Company is paying Rs. 5.45 lacs p.a. All the above benefits will be available to the Company for 8 years from the date of approval and also the aggregate of all the above benefits will be maximum of total investment made by the company under the expansion projects duly approved under the scheme.

B. GENERAL TAX BENEFITS

Under the Income Tax Act, 1961 ("the Act")

General Tax Benefits Available to the Company

1. Subject to the fulfilment of conditions prescribed under the sections mentioned hereunder, the Company

shall be eligible, inter-alia, for the following specified exemptions/deductions/benefits in respect of its total income: a) As per the provisions of Section 10(34) read with Section 115-O of the Act, dividend (both interim

and final), if any, received by the Company on its investments in shares of another domestic company is exempt from tax. However, as per Section 94(7) of the Act, losses arising from purchase and sale of securities, where such securities are bought or acquired within a period of three months prior to the record date and such securities are sold or transferred within three months from the record date, will be disallowed to the extent of the amount of dividend claimed as exempt.

b) Any amount declared, distributed or paid by the Company to shareholders by way of dividends on or after 1 April 2003, whether out of current or accumulated profits, shall be charged to distribution tax at the rate of 15 percent (plus applicable surcharge and cess) under Section 115-O of the Act, payable by the distributing company.

c) In view of the amendment brought in by Finance (No.2) Act, 2014, for the purpose of determining

the tax on distributed profits payable by the distributing company in accordance with Section 115-O of the Act, the amount of dividends needs to be increased to such amount as would, after reduction of tax on such increased amount at the specified rate, be equal to the net distributed profits.

d) Any income received from distribution made by any mutual fund specified under Section 10(23D)

of the Act or from the administrator of the specified undertaking or from the units of specified company referred to in Section 10(35) of the Act, is exempt from tax in the hands of the Company under Section 10(35) of the Act. However, as per Section 94(7) of the Act, losses arising from the sale/redemption of units purchased within three months prior to the record date (for entitlement to receive income) and sold within nine months from the record date, will be disallowed to the extent of the amount of income claimed exempt.

114

2. Under section 10(38) of the Act, long term capital gains arising on transfer of equity shares held in another Company or an unit of an equity oriented fund (as defined which has been set up under a scheme of a mutual fund specified under Section 10(23D) would be exempt from tax where the sale transaction has been entered into on a recognized stock exchange of India and is liable to securities transaction tax. However, when the company is liable to tax on book profits under section 115JB of the Act, the said income is required to be included in book profits and taken into account in computing the book profit tax payable under section 115 JB. However, as per provisions of section 10(38), if any equity share of a company, acquisition of which has been entered into on or after 1-10-2004 and such transaction was not subject to STT, then transaction of sale of such equity share will not be considered as exempt income as per the said section.

3. Under section 32 of the Act, the deduction for depreciation will be available at the prescribed rates on

tangible assets such as building, plant and machinery, furniture and fixtures, etc. and intangible assets such as patents, trademarks, copy rights, know how, licenses, franchise or any other business or commercial rights of similar nature. Also additional depreciation of 20% of the cost of plant & machinery shall be allowed u/s 32(1)(iia) of the Act subject to the plant being purchased and put to use in the same previous year and should be used for a period of more than 180 days. However, In case the machinery is used for less than 180 days then additional depreciation shall be allowed @ 10% only. However, balance 10% additional depreciation shall be allowed in immediately succeeding previous year. As per Income Tax Rules, the maximum rate of depreciation available on tangible and intangible assets has been restricted to 40% of the WDV from AY 2017-18 and onwards.

4. Under section 32(2) of the Act, the unabsorbed depreciation arising due to absence/ insufficiency of profits or gains chargeable to tax can be carried forward. The amount is allowed to be carried forward and set off for the succeeding years until the amount is exhausted without any time limit. Unabsorbed business losses can be carried forward and set off against business profits for eight subsequent years.

5. Under section 35D of the Act, the deduction, subject to prescribed limits, will be available in respect of the expenditure incurred of the nature specified in the said section, including expenditure in connection with the present issue, such as underwriting commission, brokerage and other expenses, as specified in the said section, by way of amortization over a period of five years.

6. Under section 80G of the Act, the Company is entitled to deduction either for whole of the sum paid as donation to specified funds or institutions or fifty percent of sums paid, subject to limits and conditions as provided in the section 80 G (5). Also, under section 80GGB of the Act, the company is entitled to a deduction of the amount contributed by it to any political party or an electoral trust. No donation exceeding Rs. 2000/- will be allowable U/s 80G unless such sum is paid by any mode other than cash.

7. Under section 115JAA (1A) of the Act, tax credit shall be allowed in respect of Minimum Alternate Tax

(MAT) paid under section 115JB of the Act for any assessment year commencing on or after 1st April, 2006. The credit eligible for carry forward is the difference between MAT paid and the tax computed as per the normal provisions of the Act. Such MAT credit shall not be available for set off beyond fifteen years immediately succeeding the year in which the MAT credit initially arose.

8. Under the provisions of section 35(1) (i) of the Act read with clause (iv) of this subsection, the Company shall be eligible for 100% deduction of any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business.

9. Under the provisions of section 35(1) (ii) of the Act, the Company shall be eligible for a weighted deduction of 150% of any sum paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research subject to fulfilment of the prescribed conditions.

10. Under the provisions of section 35(1) (iia) of the Act, the Company shall be eligible for a deduction of 100% of any sum paid to a company to be used by it for scientific purpose, subject to fulfilment of the prescribed conditions.

11. Under the provisions of section 35(1) (iii) of the Act, the Company shall be eligible for a deduction of

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100% of any sum paid to a research association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research, subject to fulfilment of the prescribed conditions.

12. Under the provisions of section 35AC of the Act, the Company shall be entitled to deduction of 100% for payment of any sum to a public sector company or to a local authority or to an association or institution approved by the National Committee for carrying out any eligible project or scheme or for any expenditure directly made by it on the eligible project or scheme subject to fulfilment of the prescribed conditions.

13. Under the provisions of section 35CCA of the Act, the Company shall be entitled to deduction of 100% for payment of any sum to an association or institution which has as its object the undertaking of any programme of rural development or training of persons for implementing such programmes approved by the prescribed authority or to a rural development fund or to the National Urban Poverty Eradication Fund set up and notified by the Central Government in this behalf subject to fulfilment of the prescribed conditions.

14. Under the provisions of section 35CCB of the Act, the Company shall be entitled to deduction for any expenditure by way of payment of any sum to an association or institution which has as its object the undertaking of any programme of conservation of natural resources or afforestation or to a fund for afforestation set up and notified by the Central Government subject to fulfilment of the prescribed conditions.

General Benefits Available to person other than company

1. As per the provisions of Section 10(34) of the Act, dividend (both interim and final), if any, received by

the members/shareholders from the Company is exempt from tax. The Company will be liable to pay dividend distribution tax on the amount distributed as dividend. However, the Finance Act 2016 has introduced Section 115BBDA which provides that the aggregate of dividends received by specified assessee resident in India from domestic companies in excess of INR 10 lakh will be taxed at the rate of 10 percent on a gross basis and no deduction will be available for any expenditure.

2. Under section 10(38) of the Act, long term capital gains arising to a shareholder on transfer of equity shares in the Company would be exempt from tax where the sale transaction has been entered into on a recognized stock exchange of India and is liable to securities transaction tax. Provided, if any equity share of a company, acquisition of which has been entered into on or after 1-10-2004 and such transaction was not subject to STT, then transaction of sale of such equity share will be considered as income as per the said section.

3. Under section 111A of the Act, capital gains arising to a shareholder from transfer of short term capital assets, being an equity share in the company or unit of an equity oriented Mutual fund, entered into on a recognized stock exchange in India on which securities transaction tax has been paid will be subject to tax at the rate of 15% (plus applicable surcharge, educational cess and Secondary & Higher Education Cess on income tax).

4. Under section 54EC of the Act and subject to the conditions and to the extent specified therein, long-term capital gains (other than those exempt under section 10(38) of the Act) arising on the transfer of shares of the Company would be exempt from tax if such capital gains is invested, subject to a maximum amount of Rs. 50 Lacs, within six months after the date of such transfer in the bonds (long term specified assets) issued by: a) National Highway Authority of India constituted under section 3 of The National Highway

Authority of India Act, 1988;

b) Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956.

5. Like the provision under section 54EC under which long term capital gains upto Rs 50 Lakhs can get

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tax exemption, Finance Act, 2016 has introduced section 54EE to provide exemption from capital gains tax if the long term capital gains proceeds are invested by an assessee in units of such specified fund, as may be notified by the Central Government in this behalf, subject to the condition that the amount remains invested for three years failing which the exemption shall be withdrawn. The investment in the units of the specified fund shall be allowed up to Rs. 50 lakh. This specified fund shall be set up specifically for the startups in India.

6. Under section 54F of the Act and subject to the conditions specified therein, long-term capital gains (other than those exempt from tax under section 10(38) of the Act) arising to an individual or a Hindu Undivided Family on transfer of shares of the Company will be exempt from capital gains tax subject to certain conditions, if the net consideration from transfer of such shares are used for purchase of residential house property within a period of one year before or two years after the date on which the transfer took place or for construction of residential house property within a period of 3 years after the date of such transfer. If only part of the capital gains is so reinvested, the exemption available shall be in the same proportion as the cost of long term specified assets bears to the whole of the capital gains. The cost of the long term specified assets, which has been considered under this section for calculating capital gains, shall not be allowed as a deduction from the income -tax under section 80C of the Act.

Tax Treaty Benefits

As per section 90(2) of the Act, provisions of the Double Taxation Avoidance Agreement between India and the country of residence of the non-resident shareholder would prevail over the provisions of the Act to the extent they are more beneficial to the non-resident shareholder.

i. Taxation of income from investment and long term capital gains (other than those exempt under section 10(38) of the Act).

1. A non-resident Indian i.e. an individual being a citizen of India or person of Indian origin has an option

to be governed by the specific provisions contained in Chapter XII-A of the Act, i.e. "Special provisions relating to certain income of non-residents".

2. In accordance with section 115E, income from investment or income from LTCG on transfer of assets other than specified asset shall be taxable at the rate of 20 percent (plus applicable cess). Income by way of LTCG in respect of a specified asset (as defined in Section 115C(f) of the Act), shall be chargeable at 10 percent (plus applicable cess).

3. As per the provisions of Section 115F of the Act, LTCG [not covered under Section 10(38) of the Act] arising to an NRI on transfer of a foreign exchange asset is exempt from tax if the net consideration from such transfer is reinvested in specified assets or in savings certificates referred to in Section 10(4B) of the Act within six months of the date of transfer, to the extent and subject to conditions specified in that Section. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently if the specified assets or saving certificates referred in Section 10(48) of the Act are transferred or converted into money within three years from the date of their acquisition.

4. Under the provisions of Section 115G of the Act, it shall not be necessary for an NRI to furnish his return of income if his only source of income is investment income or LTCG or both and tax deductible at source under provisions of Chapter XVII-B has been deducted from such income.

5. Under the provisions of Section 115H of the Act, where a person who is an NRI in any previous year, becomes assessable as a resident in India in respect of its total income for any subsequent year, he/she may furnish a declaration in writing to the assessing officer, along with his/her return of income under Section 139 of the Act for the assessment year in which he/she is first assessable as a resident, to the effect that the provisions of the Chapter XII-A shall continue to apply to him/her in relation to investment income derived from the specified assets for that year and subsequent years until such assets are transferred or converted into money.

6. Under the provisions of Section 115-I of the Act, an NRI may elect not to be governed by the provisions

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of Chapter XII-A for any assessment year by furnishing his return of income under Section 139 of the Act declaring therein that the provisions of the Chapter shall not apply to him for that assessment year. In such a situation, the other provisions of the Act shall be applicable for the purposes of determining the taxable income and the tax liability arising thereon.

Benefits available to Foreign Institutional Investors (FIIs)

1. As per the provisions of Section 10(34) of the Act, dividend (both interim and final), if any, received by

the shareholder from a domestic company is exempt from tax. The Company will be liable to pay dividend distribution tax at the rate of 15 percent (plus applicable surcharge and cess) on the amount distributed as dividend. However, as per Section 94(7) of the Act, losses arising from purchase and sale of securities, where such securities are bought or acquired within a period of three months prior to the record date and such securities are sold or transferred within three months from the record date, will be disallowed to the extent of the amount of dividend claimed as exempt.

2. In Finance Act (No.2), 2014 it was provided that any securities held by a FII which has invested in such

securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 would be capital asset. Consequently, the income arising to a FII from transactions in securities would always be in the nature of capital gains. Provided, if any equity share of a company, acquisition of which has been entered into on or after 1-10-2004 and such transaction was not subject to STT, then transaction of sale of such equity share will not be considered as exempt income as per the said section.

3. In accordance with Section 115AD, FIIs will be taxed at 10 percent (plus applicable surcharge and cess)

on LTCG (computed without indexation of cost and not taking into consideration foreign exchange rates fluctuation), if STT is not payable on the transfer of the shares.

4. LTCG arising to shareholder on transfer of long term capital asset being listed equity shares of a company will be exempt from tax under Section 10(38) of the Act provided that the transaction is entered in on or after 1 October 2004 and STT has been paid on such transfer.

5. As per the provisions of Section 111A of the Act, STCG arising on sale of short term capital asset, being listed equity shares in a company, shall be chargeable to tax at the rate of 15 percent (plus applicable surcharge and cess) provided the transaction is chargeable to STT. If the provisions of Section 111A are not applicable to the STCG, then the tax will be charged at the rate of 30 percent (plus applicable surcharge and cess).

6. The benefits of exemption under Section 54EC of the Act mentioned above in case of the Company are also available to FIIs.

7. The benefits of exemption under Section 54EE of the Act mentioned above in case of the Company are also available to FIIs.

8. In accordance with the provisions of Section 90 of the Act, FIIs being non-residents will be entitled to choose the provisions of Act or the provisions of tax treaty entered into by India with other foreign countries, whichever are more beneficial, for determining their tax liability in India (subject to furnishing of Tax Residency Certificate).

9. An explanation has been inserted in Section 115JB stating that the provisions of Section 115JB shall not be applicable and shall be deemed never to have been applicable to a foreign company if: a) It is a resident of a country or a specified territory with which India has a tax treaty referred to in

sub-section (1) of Section 90 and it does not have a permanent establishment in India; or

b) It is a resident of a country with which India does not have a tax treaty and it is not required to seek registration under any law for the time being in force relating to companies.

Tax Benefits available to Mutual Funds.

1. In terms of Section 10(23D) of the Act, all Mutual funds set up by public sector banks or public sector

financial institutions or Mutual Funds registered under the Securities and Exchange Board of India

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Act/Regulations there under or Mutual Funds authorized by the Reserve Bank of India, subject to the conditions specified, are eligible for exemption from income taxes on all their income, including income from investment in the shares of the Company.

2. However, the Mutual Funds would be required to pay tax on distributed income to unit holders as per the provisions of Section 115R of the Act. However, w.e.f. 1 October 2014, for the purpose of determining additional income tax, the amount of distributed income shall be increased to such amount as would after reduction of additional income tax on such increased amount at the rate specified be equal to the amount of income distributed by mutual fund.

Benefits Available to Venture Capital Companies/Funds

In terms of Section 10(23FB) of the Act, all venture capital companies/funds registered with Securities and Exchange Board of India, subject to the conditions specified therein, are eligible for exemption from income tax on any income from investment in a venture capital undertaking. Further, the Finance Act, 2015 has inserted a proviso providing that nothing contained in this clause shall apply in respect of any income of a venture capital fund or venture capital company, being an “investment fund” of the previous year relevant to the assessment year beginning on or after 1st April 2016. “Investment fund” has been defined in clause (a) of Explanation 1 to Section 115UB of the Act to mean any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992.

Benefits available to Investment Fund under the Act:

The Finance Act, 2016 has amended Chapter XII-FB in the Act, which provides for special taxation regime for Category I and Category II Alternative Investment Funds referred to as “investment fund” as per clause (a) of Explanation 1 to Section 115UB of the Act. Further, the said Act has also inserted Section 10(23FBA) specifying that income of any investment fund other than income chargeable under the head “Profits and gains of business or profession” shall be exempt from income tax.

General Anti-Avoidance Rule (‘GAAR): In terms of Chapter XA of the Act, General Anti-Avoidance Rule may be invoked notwithstanding anything contained in the Act. By this Rule, any arrangement entered into by an assessee where the main purpose of the arrangement is to obtain a tax benefit may be declared to be impermissible avoidance arrangement as defined in that Chapter and the consequence would be inter alia denial of tax benefit, applicable w.e.f FY 2017-18. The GAAR provisions can be said to be not applicable in certain circumstances viz. where the main purpose of arrangement is not to obtain a tax benefit etc. including circumstances enumerated in CBDT Notification No. 75/2013 dated 23 September 2013. The Central Board of Direct Taxes (CBDT) vide Notification No. 49/2016, dated 22 June 2016, has amended the GAAR. The GAAR provisions are not applicable to any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be received by, any person from transfer of investment made before 1 April 2017. Further, GAAR provisions are applicable to any arrangement, irrespective of the date on which it has been entered into, in respect of the tax benefit obtained from an arrangement on or after 1 April 2017.

Benefits under the Wealth Tax Act, 1957

The Finance Act, 2015 has abolished the levy of wealth tax under the Wealth Tax Act, 1957 with effect from 1 April 2016.

UNDER THE GIFT TAX ACT, 1958

A gift made after 1 October 1998 is not liable for any gift tax, and hence, gift of shares of the company would not be liable for any gift tax. However, in the hands of the done the same could be treated as

119

income subject to certain conditions unless the gift is from a relative as defined under Explanation to Section 56(2)(vii) of the Act.

Notes:

i. All the above benefits are as per the current direct tax laws relevant for the Assessment Year 2017-

18 (considering the amendments made by Finance Act, 2016). ii. The above statement covers only certain relevant benefits under the Income-tax Act, 1961 and does

not cover benefits under any other law. iii. The possible tax benefits are subject to conditions and eligibility criteria which need to be examined

for tax implications. iv. In view of the individual nature of tax consequences, each investor is advised to consult his/her own

tax advisor with respect to specific tax consequences of his/her participation in the Offer. v. The above Statement of Tax Benefits sets out the provisions of law in a summary manner only and

is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of shares

vi. The stated benefits will be available only to the sole/first named holder in case the shares are held

by joint holders.

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MANAGEMENT

Board of Directors

The Board represents the interests of the Shareholders and is responsible for our general management. The managing director of the Company, subject to the supervision and control of the Board, has the overall responsibility for the administration of our day-to-day activities. In accordance with the Articles and subject to the provisions of Section 149 of the Companies Act, 2013, we currently have 8 (eight) Directors on our Board, comprising of 1 (one) Vice-Chairman and Managing Director, 3 (three) Non-Executive and Non-Independent Directors, and 4 (four) Independent Directors. The following table sets forth details of the composition of the Board as of the date of this Placement Document:

#

Name,

Occupation

and Nationality

Age

(in

years)

Designation DIN Term Address

1.

Mr. Rajeev Gupta

Occupation:

Business Executive

Nationality: Indian

59 Chairman and Independent

Director 00241501

Five years, from the 7th AGM to the

12th AGM

Krishna Kutir, Ground Floor, 28 Union Park, Bandra (West) Mumbai – 400 050, India

2.

Mr. Sachit Jain

Occupation:

Business Executive

Nationality: Indian

51

Vice-Chairman and

Managing Director

00746409

Five years, from April 1, 2015 to March 31, 2020

H. No. 2722, Auro Mirra Bhawan, Gurdev Nagar, Pakhowal Road, Ludhiana – 141 001, Punjab, India.

3.

Mrs. Suchita Jain

Occupation:

Business Executive

Nationality: Indian

50

Non-Executive and

Non-Independent

Director

00746471 Liable to retire by

rotation

H. No. 2722, Auro Mirra Bhawan, Gurdev Nagar, Pakhowal Road, Ludhiana – 141 001, Punjab, India.

4.

Mr. Rajinder Kumar Jain

Occupation:

Retired General Manager, Indian Railways.

Nationality: Indian

78

Non-Executive and

Non-Independent

Director


rotation

B-708, Rail Vihar, Sector 15-II, Gurgaon-122 001, Haryana, India.

121

#

Name,

Occupation

and Nationality

Age

(in

years)

Designation DIN Term Address

5.

Mr. B.K. Choudhary

Occupation:

Business Executive

Nationality: Indian

66

Non-Executive and

Non-Independent

Director


rotation

H. No.–1099, Sector-14, Faridabad – 121 007, Haryana, India

6.

Mr. Jayant Davar

Occupation:

Industrialist

Nationality: Indian

56 Independent

Director 00100801


12th AGM

50, Sultanpur Farms, Prakriti Marg, M.G. Road, New Delhi – 110030, India.

7.

Mr. Sanjeev Pahwa

Occupation:

Industrialist

Nationality: Indian

51 Independent

Director 00022674


12th AGM

B XX/3192, Gurdev Nagar, Pakhowal Road, Ludhiana – 141 002, India

8.

Mr. Sanjoy Bhattacharyya

Occupation:

Business Consultant

Nationality: Indian

57 Independent

Director 00059480


11th AGM

B-302, Beau Monde, Appa Saheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India

Borrowing Powers of the Directors

Pursuant to a special resolution passed by the Shareholders by way of postal ballot dated September 11, 2014, and in accordance with the provisions of the Companies Act, our Board has been authorised to borrow money for the purposes upon such terms and conditions with/without security as the Board of Directors may think fit, provided that the money or monies to be borrowed together with the monies already borrowed by our Company (apart from the temporary loans obtained from our Company’s bankers in the ordinary course of business) shall not exceed Rs. 200 Crores (Rupees Two Hundred Crores) over and above the aggregate of the paid up share capital and free reserves of the Company.

Interest of the Directors

Our Directors may be deemed to be interested to the extent of any fees payable to them for attending meetings of the Board or a committee thereof as well as to the extent of any reimbursement of expenses payable to them under our Articles of Association. Our Directors may also be deemed to be interested to the extent of remuneration paid to them for services rendered as an officer or employee of our Company and to the extent of any commission payable to them. Our Directors may also be deemed to be interested to the extent of the Equity Shares, if any, held by them or their relatives and/or associates or held by any bodies corporate, firms, trusts, partnerships or entities in which they are interested as a director, member, partner, trustee or officer and / or have beneficial economic interest and to extent of benefits arising out of such shareholding.

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As of March 31, 2017, there were no outstanding transactions other than in the ordinary course of business undertaken by our Company in which the Directors were interested parties. For details relating to contracts, agreements or arrangements entered into by our Company during the three years preceding the date of this Placement Document, in which the Directors are interested directly or indirectly and for payments made to them in respect of such contracts, agreements or arrangements, see the section titled “Financial Statements”.

Relationships with other Directors

Except Mr. Sachit Jain, Mrs. Suchita Jain and Mr. Rajinder Kumar Jain none of the Directors are related to each other, as per the provisions of the Companies Act. Mr. Sachit Jain is son of Mr. Rajinder Kumar Jain and Mrs. Suchita Jain is wife of Mr. Sachit Jain and the daughter-in-law of Mr. Rajinder Kumar Jain.

Directors’ Shareholdings

Shareholding of Directors

The following table details the shareholding of the Directors in the Company as on December 31, 2017:

Name of the Director Number of Equity Shares Percentage of pre-Issue

Share Capital (%)

Sachit Jain 44,18,667 13.75

Suchita Jain 90,267 0.28

Rajinder Kumar Jain 52,197 0.16

Sanjoy Bhattacharyya 10 0.00

Terms of appointment of the Managing Director

Pursuant to a resolution passed by the Shareholders at their AGM held on September 4, 2015, Mr. Sachit Jain was re-appointed as the Managing Director of our Company for a term of five consecutive years, starting from April 1, 2015, to March 31, 2020. In furtherance of the aforesaid resolution and a resolution passed by the Shareholders at their AGM held on September 28, 2016, and pursuant to a resolution passed by the Shareholders at their AGM held on September 22, 2017, the remuneration payable to Mr. Sachit Jain from April 1, 2017 to March 31, 2020, is as follows:

# Remuneration Details

1. Salary Salary will be in the scale of Rs. 8,00,000 – Rs. 1,00,000 – Rs. 10,00,000 per month

2. Commission Commission equals to:

1.5% of the Net Profit of the Company if return on average net worth* for that year is up to 15%.

3% of the Net Profit of the Company if return on average net worth* for that year exceeds 15%.

3. Perquisites Perquisites in addition to salary and commission shall be restricted to an amount equal to one year’s salary during each year as per details given below:

(a) Housing Free residential accommodation or House Rent Allowance equal to 40 per cent of the salary. Free furnishing is provided by the Company along with other amenities.

(b) Other Allowance

Rs. 4,70,000 per month for Fiscal 2018 Rs. 5,30,000 per month for Fiscal 2019 Rs. 5,90,000 per month for Fiscal 2020

(c) Club Fees Fees of clubs subject to a maximum of two clubs. This will not include admission and life membership fees.

(d) Personal Accident Insurance

Premium not to exceed Rs. 5,000 per annum

(e) Gratuity

Gratuity payable not exceeding half a month’s salary for each completed year of service and this shall not be included in the computation of ceiling on perquisites. This will, however, be subject to the ceiling prescribed by the Central Government from time to time

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# Remuneration Details

(f) Car and Telephone

Free use of Company’s car for official work as well as for personal purposes and telephone at Company’s cost.

* ‘average net worth' means average of the opening and closing net worth of the financial year

Remuneration/Compensation paid to the Directors

Executive Directors

The aggregate remuneration (including compensation, other terms and benefits) paid to the executive Directors is within the limits set by the Shareholders in their general meetings and the Companies Act as amended. The table below sets forth the details of the aggregate remuneration (including compensation, other terms and benefits) paid by our Company to its executive Directors during the current Fiscal and each of the preceding three Fiscals:

(in Rs. Lakhs)

Name of Director Aggregate Remuneration Paid in Fiscal Year

2018* 2017 2016 2015

Sachit Jain 143.10 94.05 92.50 -

*Aggregate remuneration paid from April 1, 2017 to December 31, 2017

Non-Executive Directors

The table below sets forth the details of the aggregate compensation (including sitting fees and commission) paid by our Company to its non-executive Directors during the current Fiscal and each of the preceding three Fiscals:

(in Rs. Lakhs)

Name of Director Aggregate Remuneration Paid in Fiscal Year

2018* 2017 2016 2015

Rajeev Gupta 1.10 0.80 0.95 0.70

Rajinder Kumar Jain 1.30 1.30 1.00 1.00

Jayant Davar 0.90 0.30 0.55 0.55

Sanjeev Pahwa 1.60 1.00 1.20 0.65

Sanjoy Bhattacharyya 1.15 0.55 0.45 -

Prafull Anubhai** 1.60 11.70 1.20 1.30

Mukund Choudhary** Not Applicable Not Applicable Not Applicable 0.50

*Aggregate remuneration paid from April 1, 2017 to December 31, 2017

**No longer Directors on the Board of the Company

Corporate Governance

Our Company is in compliance with the requirements of the applicable corporate governance norms, including the Listing Regulations, the Companies Act, 2013 and the ICDR Regulations, in respect of corporate governance including constitution of the Board and committees thereof. The Board of Directors consists of 8 (eight) Directors and thus, in compliance with the requirements of the Listing Regulations and the Companies Act, 2013, the Board includes four (4) independent Directors.

Committees of the Board of Directors

A. Audit Committee

The members of the audit committee are:

# Name of the Director

1. Mr. Sanjoy Bhattacharyya (Chairman)

2. Mr. Sanjeev Pahwa

3. Mr. Rajinder Kumar Jain

The terms of reference of the audit committee are as per the Companies Act, 2013, and the Listing Regulations.

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B. Nomination and Remuneration Committee

The members of the nomination and remuneration committee are:

# Name of the Director

1. Mr. Sanjoy Bhattacharyya (Chairman)

2. Mr. Rajeev Gupta

3. Mr. B.K. Choudhary

The terms of reference of the nomination and remuneration committee are identifying persons who are qualified to become directors and who may be appointed in senior management, recommend to the Board their appointment and removal and carrying out evaluation of every director’s performance. The role of the nomination and remuneration committee is, inter alia, (i) the formulation of criteria for determining qualifications, positive attributes, independence of a Director and recommend to the Board of Directors a policy relating to, the remuneration of Directors, key managerial personnel and other employees; (ii) formulation of criteria for evaluation of performance of Independent Directors and Board of Directors; and (iii) devising a policy on diversity of Board of Directors.

C. Stakeholders’ Relationship Committee

The members of the stakeholders’ relationship committee are:

Sr. No Name of the Director

1. Mr. Sanjeev Pahwa (Chairman)

2. Mrs. Suchita Jain

3. Mr. B.K. Choudhary

The functions of the stakeholders’ relationship committee include, inter alia, (i) consideration and redressal of grievances of the security holders of the Company, including complaints in respect of transfer of shares, non-receipt of declared dividends, balance sheets of the Company, etc.; (ii) approval of transfer or transmission of equity shares, debentures or any other securities; (iii) issue of duplicate certificates and new certificates on split/consolidation/renewal, etc.; and (iv) carrying out any other function contained in the equity listing agreements as and when amended from time to time.

D. Corporate Social Responsibility Committee

The members of the corporate social responsibility committee are:

Sr. No Name of the Director

1. Mr. Sanjeev Pahwa (Chairman)

2. Mr. Sachit Jain

3. Mrs. Suchita Jain

The terms of reference of the corporate social responsibility committee include, inter alia, formulating and monitoring the corporate social responsibility policy of the Company.

Key Managerial Personnel

Apart from the Directors, whose details are set out herein above, the following are the other Key Managerial Personnel of the Company:

# Name Age

(in years) Designation

1. Mr. Subhasis Dey 56 President & Chief Executive

2. Mr. Sanjeev Singla 42 Chief Financial Officer

3. Ms. Sonam Taneja 29 Company Secretary & Compliance Officer

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Key Managerial Personnels’ Shareholding

The following table details the shareholding of the key managerial personnel (other than Directors) in the Company as on December 31, 2017:

Name of the Director Number of Equity Shares Percentage of pre-Issue

Share Capital (%)

Mr. Subhasis Dey 7,000 0.02

Mr. Sanjeev Singla 6,109 0.02

Ms. Sonam Taneja 500 0.00

Interest of the Key Managerial Personnel

Except as otherwise stated in this Placement Document and to the extent of remuneration or benefits to which they are titled as per the terms of their appointment and reimbursement of expenses incurred by them in the ordinary course of business, our Company’s key managerial personnel do not have any other interest in our Company.

Payment or Benefit to Directors and Key Managerial Personnel of our Company

The perquisites and allowances that may be payable to the Directors are in accordance with the Companies Act, 2013. The perquisites and allowances that may be payable to the key managerial personnel of our Company are in accordance with our Company’s human resources policies. Except as disclosed above, our Directors and key managerial personnel are not entitled to any other non-salary related amount or benefit.

Organization Structure

Senior Management

Apart from the KMPs, the following are the members of the senior management of the Company:

# Name Age


1. Mr. M.K. Srivastav 54 Sr. Vice President

2. Mr. S.K. Tuli 65 Sr. General Manager (Projects & Technical)

3. Mr. Deepinder Singh Kalra 48 General Manager (Projects & Materials)

4. Mr. Mukesh Gupta 43 Vice President (Technical)

5. Mr. Jagdish Chand 48 Vice President (Engineering Services)

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# Name Age


6. Mr. Amit Chopra 43 Vice-President (Export Marketing & Business

Development)

7. Mr. Davinder Singh 44 Vice-President (Domestic Marketing)

Related Party Transactions

For details in relation to the related party transactions entered by our Company during the last three Fiscal Years, see “Financial Statements”.

Employee Stock Option Plan 2016

Pursuant to a Shareholders’ resolution dated September 28, 2016, our Company has adopted the Employee Stock Option Plan 2016. Under the Employee Stock Option Plan 2016, the Board is authorized to create, offer and grant from time to time up to 3,71,108 options to eligible employees. Out of a total of 3,71,108 options, the Company has granted 2,10,000 options to its eligible employees. One option entitles the holder to apply for one equity share of the Company, subject to corporate action, after a vesting period of 2 years from the date of grant.

Policy on Disclosures and Internal Procedure for prevention of Insider Trading

Regulation 9(1) of the Insider Trading Regulations, 2015 applies to us and our employees and requires us to implement a Code of Internal Procedures and Conduct for the Prevention of Insider Trading. Our Company is in compliance with the same and has implemented a Code of Conduct for Insider Trading for our employees. Ms. Sonam Taneja, acts as the Compliance Officer of our Company under the aforesaid Code of Conduct for the Prevention of Insider Trading.

Other Confirmations

Neither the Company nor any of its Promoters or Directors has been categorized as a wilful defaulter (as defined under the ICDR Regulations) by any bank or financial institution or consortium thereof, in accordance with the guidelines on wilful defaulters issued by RBI. None of the Directors, Promoters or key managerial personnel of our Company have any financial or other material interest in the Issue. None of the Directors have been debarred from accessing the capital markets under any order or direction made by SEBI.

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DESCRIPTION OF EQUITY SHARES

Set forth is a brief summary of some of the existing provisions of the Memorandum and Articles, the Companies

Act, 2013 and certain other related legislation relating to the rights attached to the Equity Shares. Prospective

investors are urged to read the Memorandum and Articles carefully, and consult with their advisers, as the

Memorandum and Articles and applicable Indian law, and not this summary, govern the rights attached to the

Equity Shares.

General

As on the date of this Placement Document, our Company’s authorized share capital is Rs. 60,00,00,000 divided into 6,00,00,000 Equity Shares of Rs. 10 each. As on date of this Placement Document, our Company’s issued, subscribed and paid-up share capital is Rs. 32,12,53,760 divided into 3,21,25,376 Equity Shares of Rs. 10 each. For details, please see “Capital Structure”. The Equity Shares are listed on the Stock Exchanges. The security identification codes for the Equity Shares are as follows:

ISIN INE050M01012 BSE Code 534392 NSE Symbol VSSL

Articles of Association

Our Company is governed by the Articles.

Dividends

The Articles provide that dividend may be paid upon a recommendation of the Board and approval by a majority of the Shareholders, who shall not increase the amount of the dividend recommended by the Board. However, the Board is not under an obligation to recommend a dividend. According to the Articles, the dividend shall be paid in proportion to the amount paid up or credited as paid up on each share where a larger amount is paid up or credited as paid up on some shares than on others, but where capital is paid up in advance of calls carrying interest, such capital whilst carrying interest shall not confer a right to participate in profits or dividend. The Directors may declare interim dividend as justified by the profits of our Company. A transfer of share shall not pass the right to any dividend declared thereon before the registration of the transfer by the Company. No dividend shall be payable except in cash provided that nothing in the foregoing shall be deemed to prohibit the Capitalisation of profits or reserves of the Company for the purpose of issuing fully paid-up bonus shares or paying up any amount for the time being unpaid on the shares held by the members of the Company No dividend shall be paid in respect of any shares except to the registered holder of such share or to his order or to his bankers but nothing contained in this Article shall be deemed to require the bankers of a registered shareholder to make a separate application to the Company for the payment of the dividend. Unless otherwise directed, any dividend may be paid by electronic mode, cheque or by warrant sent through post to the registered address of the Shareholder and in the case of joint holders to any one of them first named in the register of Shareholders; and our Company shall not be liable for cheque or warrant or dividend lost in transmission or lost due to forged endorsement or fraudulent recovery.

Increase, Reduction and Alteration of Share Capital

The Articles provide that where it is proposed to increase the subscribed capital of our Company by allotment of further shares, such shall be issued upon the terms and conditions and with such rights and privileges annexed thereto as the resolution creating the same shall direct and if no direction be given, in the manner provided in Section 62 of the Companies Act, 2013. The Articles provide that our Company may from time to time by a special resolution, reduce its capital and any share premium account or capital redemption reserve account in any manner and with and subject to any incident authorized and any consent required by law. Except as so far otherwise provided by the conditions of the issue or by the Articles, any capital raised by the creation of new shares shall be considered as a part of the existing capital and shall be subject to the provisions herein contained with reference to the payment of dividends, calls and

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instalments, transfer and transmission, forfeiture, lien, surrender and otherwise. Our Company has the power to modify rights and privileges attached to a class of shares with the consent of the holders of three-fourths of that class in writing or with the sanction of a special resolution passed at a separate meeting of the shareholders of that class. The Articles provide that our Company may from time to time, by ordinary resolution in a general meeting:

consolidate and divide all or any of its share capital into shares of larger amount; sub-divide its shares or any of them into shares of smaller amount than the amount fixed by the memorandum

so, however, that in the sub-division the proportion between the amount paid and the amount, if any unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; or

cancel any shares which, at the date of the passing of the resolution have not been taken up or agreed to be taken up by any person and diminish the amount of its share capital by the amount of the shares so cancelled;

convert all or any of its fully paid shares into stock and reconvert that stock into fully paid up share of any denomination.

General Meetings of Shareholders

Our Company is required to hold an AGM every fifteen months in addition to any other general meetings. Not less than 21 days’ notice in writing of a general meeting is to be given, but shorter notice may be given if consent is given in writing or by electronic mode by not less than ninety-five per cent of the members entitled to vote at such meeting. No meeting shall be competent to enter upon, discuss or transact any business, which has not been specifically mentioned in the notice, or notices upon which it was convened. Every Shareholder is entitled to attend a meeting and vote either in person or by proxy. All businesses to be transacted at an AGM shall be deemed special except the consideration of accounts, balance sheet and reports of the Board and Auditors, declaration of dividend, appointment of Directors in place of those retiring, the appointment of and fixation of remuneration of the Auditors. In case of an EGM all business is deemed special. A statement setting out all material facts, including the nature of concern or interest, financial or otherwise in respect of every Director and manager; every other key managerial personnel and relatives of such persons, in respect of special business to be transacted at the meeting, shall be annexed to the notice. The Board may also call an EGM whenever it thinks fit and it shall do so upon a requisition in writing by any Shareholder(s) holding in aggregate not less than one-tenth of the issued and paid-up capital upon which all calls or other sums then due have been paid. Where any resolution requires special notice, notice of the intention to move the resolution should be given to our Company by such number of members not less than one percent of total voting power that has been paid-up and our Company shall immediately on receipt of the notice of intention give its members notice of the resolution in the same manner as it gives notice of the meeting. The quorum requirements for a general meeting are as prescribed under Section 103 of the Companies Act, 2013. If the quorum is not present within half an hour of the time appointed for a meeting, the meeting, if convened upon such requisition as aforesaid, shall be dissolved; but in any other case it shall stand adjourned to the same day in the next week at the same time and place or to such other day and at such other time and place as the Board may determine and if at such adjourned meeting, a quorum is not present at the expiration of half an hour from the time appointed for holding the meeting, the members present shall be a quorum and may transact the business for which the meeting was called. The Articles further provide that no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. The meetings should be convened in the presence of a chairman. A resolution put to vote shall be decided on a show of hands, unless a poll is ordered to be taken by the chairman. At every AGM of our Company there shall be laid before the meeting, the Directors’ report and audited statement of accounts, Auditor’s report, proxies and the register of Directors’ and key managerial personnels' shareholding and a register of contracts or arrangements in which the Directors and key managerial personnel is interested as required under Section 170 of the Companies Act, 2013. Minutes of the AGM are to be maintained and shall be evidence of the proceedings recorded therein.

Voting Rights

Every Shareholder present in person shall have one vote on a show of hands, and on poll, the Shareholder present in person or by proxy shall have voting rights in proportion to his share of the paid-up capital of our Company held by him, subject to any rights or restrictions for the time being attached to any class or classes of shares. The instrument appointing a proxy and the power of attorney (or other authority, if any) under which it is signed is required to be deposited at the registered office at least 48 hours before the time of the meeting. Provided

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nevertheless that the Chairperson of any meeting shall be entitled to require such evidence as he may in his discretion think fit, of the due execution of an instrument of proxy and that the same has not been revoked. A vote given in accordance with the terms of an instrument appointing a proxy shall be valid notwithstanding the prior death or insanity of the principal or revocation of the proxy, or transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, insanity, revocation or transfer of the share shall have been received by our Company at the registered office before the meeting. Further, no Shareholder shall be entitled to exercise any voting right personally or by proxy at any meeting of our Company in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid or in regard to which the Company has exercised any right of lien. No objection to the validity of a vote shall be made except during the meeting or poll and every vote not disallowed shall be deemed valid for all purposes of such meeting or poll. The chairman of the meeting shall be the judge of the validity of the vote.

Register of Members

Our Company is required to maintain a register of members wherein the particulars of the Shareholders are entered. For the purpose of determining the Shareholders, the register may be closed for such period not exceeding 45 days in any one year or 30 days at any one time at such times, as the Board may deem expedient.

Directors

The Articles provide that the number of Directors shall not be less than three and not be more than fifteen. The Directors shall be appointed by our Company in the general meeting subject to the provisions of the Companies Act and the Articles. Two-thirds of the total number of Directors (barring independent Directors) is subject to retirement by rotation. Of such Directors, one-third, or if their number is not three or multiples of three, then the number nearest to one-third, must retire every year. The Directors to retire are those who have been the longest in office. As provided under Section 161 of the Companies Act, 2013, the Director may be appointed by the Board or by the general meeting of the Shareholders. The Directors have the power to appoint any other persons as an additional Director but any Director so appointed shall hold office only up to the date of the next following AGM of our Company but the total number of Directors shall not at any time exceed the maximum strength. The Board shall also have the power to appoint any person to act as an alternate Director for a Director during the latter’s absence for a period of not less than three months from India. The alternate Director shall vacate the office if and when the original Director returns to India and in case the office of the original Director is determined before he returns, the provisions of the Companies Act, 2013, and the Articles for automatic reappointment shall apply to the original Director and not the alternate Director. Our Company must have at least one Director who has stayed in India for at least 182 days in the previous calendar year (i.e. is an Indian resident). Our Company is required to have at least one-third of its Directors as independent Directors. The quorum for meetings of the Board is one-third of the total number of Directors (any fraction contained in that one-third being rounded off as one) or two Directors, whichever is higher. The participation of the Directors by video conferencing or by other visual means will be counted towards quorum. However, where the number of interested Directors is equal to or exceeds two-thirds of total strength, the remaining number of Directors (i.e. Directors who are not interested) present at the meeting, being not less than two shall be the quorum during such time. In case there is no quorum for a Board meeting, the remaining Directors may act only for the purpose of increasing the number of Directors to meet the quorum requirements or to summon a general meeting.

Capitalization of profits

The Articles provide that any general meeting may resolve that whole or any part of our Company’s undivided profit for the time being, (which expression shall include any premiums received on issue of Equity Shares and any profits or other sums which have been set aside as a reserve or reserves or have been carried forward without being dividend) be capitalised and distributed amongst such of the members as would be entitled to receive the same if distributed by way of dividend. The capitalization may be done among Shareholders in the same proportions on the footing that they become entitled thereto as capital and that all or any part of such capitalised fund be applied on behalf of such Shareholders (a) in paying up any amounts for the time being unpaid on any shares held by such members respectively; (b) paying up in full, unissued shares of the Company to be allotted and distributed, credited as fully paid-up, to and amongst such members in the proportions aforesaid; (c) partly in the way specified in sub-clause (a) and partly in that specified in sub-clause (b); subject to the fact that a securities

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premium account and a capital redemption reserve account may, for the purposes of this regulation, be applied in the paying up of unissued shares to be issued to members of the Company as fully paid bonus shares.

Annual Report and Financial Results

The annual report is required to be laid before the Shareholders at the AGM. This includes financial information such as the audited financial statements as of the date of closing of the financial year, Directors’ report, management’s discussion and analysis and a corporate governance section, and is sent to the Shareholders in advance in compliance with applicable laws. Our Company is required to file the annual report with the RoC within 30 days from the date of the AGM. Our Company must also publish its financial results in at least one English daily newspaper circulating in the whole or substantially the whole of India and also in a newspaper published in the language of the region where the registered office is situated. Our Company is required to file certain information on-line, including the annual report, financial statements and the shareholding pattern statement, in accordance with the requirements of the Listing Regulations.

Transfer of Equity Shares

The Equity Shares held through Depositories are transferred in the form of book entries or in electronic form in accordance with the regulations laid down by the SEBI. These regulations provide the regime for the functioning of the Depositories and the Depository participants and set out the manner in which the records are to be kept and maintained and the safeguards to be followed in this system. Transfers of beneficial ownership of the Equity Shares held through a Depository are exempt from stamp duty. Our Company has entered into an agreement for such depository services with the National Securities Depository Limited and the Central Depository Services India Limited. The SEBI requires that the Equity Shares for trading and settlement purposes be in book-entry form for all investors, except for transactions that are not made on a stock exchange and transactions that are not required to be reported to the Stock Exchanges.

Acquisition by our Company of its own Equity Shares

A company is empowered to buy-back its own shares or other specified securities out of its free reserves, the securities premium account or the proceeds of any fresh issue of shares or other specified securities (other than

the kind of shares or securities proposed to be bought back) subject to certain conditions. Further, a company

buying back its securities is not permitted to buy back any securities for a period of one year from the date of closure of the preceding offer of buy-back or to issue the same kind of securities for six months subject to certain limited exceptions. Other than as described above, a company is prohibited from acquiring its own shares unless the consequent reduction of capital is effected by an approval of at least 75% of its shareholders, voting on it in accordance with the Companies Act and sanctioned by the National Company Law Tribunal in terms of the Companies Act. Subject to certain conditions, a public company is prohibited from giving, whether directly or indirectly and whether by means of loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person for any shares in the company or its holding company. A company is also prohibited from purchasing its own shares or specified securities through any subsidiary company including its own subsidiary companies or through any investment company or group of investment companies. Further, a company is prohibited from purchasing its own shares or specified securities, inter alia, if the company is in default with respect to the repayment of deposit or interest, in the redemption of debentures or preference shares, in payment of dividend to a shareholder, in repayment of any term loan or interest payable thereon to any financial institution or bank.

Liquidation Rights

In the event of our Company being wound up, whether voluntarily or otherwise, the liquidators may, with the sanction of a special resolution, divide amongst the contributories in specie, any part of the assets of our Company and may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction shall think fit.

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REGULATIONS AND POLICIES

The following is an overview of certain important laws and regulations which are relevant to our business in

India. The description of laws and regulations set out below is not exhaustive, and is only intended to provide

general information, and is neither designed nor intended to be a substitute for professional legal advice. The

statements below are based on the current provisions of Indian law, which are subject to change or modification

by subsequent legislative, regulatory, administrative or judicial decisions.

Labour Laws

We are required to comply with certain labour and industrial laws, including the following:

the Factories Act, 1948;

the Punjab Factories Rules, 1952;

the Contract Labour (Regulation and Abolition) Act, 1970;

the Punjab Contract Labour (Regulation and Abolition) Rules, 1973;

the Industrial Disputes Act, 1947 and Industrial Dispute (Central) Rules, 1957;

the Employees’ Compensation Act, 1923; the Employees State Insurance Act, 1948;

the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952; the Equal Remuneration Act, 1976;

the Maternity Benefit Act, 1961;

the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013;

the Payment of Bonus Act, 1965;

the Minimum Wages Act, 1948;

the Minimum Wages (Punjab) Rules, 1950;

the Payment of Gratuity Act, 1972;

the Payment of Wages Act, 1936;

the Trade Union Act, 1926;

the Punjab Shops and Establishment Act, 1958;

the Employers’ Liability Act, 1938; the Child Labour (Prohibition and Regulation) Act, 1986; and

the Industrial Employment (Standing Orders) Act, 1946.

Environmental Laws

The Environment (Protection) Act, 1986

The Environment (Protection) Act, 1986 (the “EPA”) is an umbrella legislation designed to provide a framework for the Government to co-ordinate the activities of various central and state authorities established under other laws, such as the Water (Prevention and Control of Pollution) Act, 1974, and the Air (Prevention and Control of Pollution) Act, 1981. The EPA vests the Government with various powers including the power to formulate rules prescribing standards for emission of discharge of environment pollutants from various sources, as given under the Environment (Protection) Rules, 1986, inspection of any premises, plant, equipment, machinery, and examination of processes and materials likely to cause pollution.

The Hazardous Wastes (Management Handling and Transboundary Movement) Rules, 2008

The Hazardous Wastes (Management Handling and Transboundary Movement) Rules, 2008 require every occupier and operator of a facility generating hazardous waste to obtain prior approval from the relevant central or state pollution control board. The occupier, the transporter and the operator are liable for damage to the environment resulting from improper handling and disposal of hazardous waste. The operator and the occupier are liable for any fine that may be levied by the relevant pollution control board.

The Public Liability Insurance Act, 1991

The Public Liability Insurance Act, 1991 (the “PLI Act”) imposes liability on the owner or controller of hazardous substances for any damage arising out of an accident involving such hazardous substances. A list of ‘hazardous substances’ covered by the legislation has been notified under the PLI Act. The owner or handler is also required

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to take out an insurance policy insuring against liability under the PLI Act.

Fiscal Regulations

Foreign Trade (Development and Regulation) Act, 1992

The Foreign Trade (Development and Regulation) Act, 1992 (“FTA”) seeks to increase foreign trade by regulating imports and exports to and from India. The FTA read with the Indian Foreign Trade Policy, 2015-20 provides that a person or company can make no exports or imports without having obtained an importer exporter code number unless such person or company is specifically exempt. An application for an importer exporter code number has to be made to the Office of the Joint Director General of Foreign Trade, Ministry of Commerce. An importer-exporter code number allotted to an applicant is valid for all its branches, divisions, units and factories.

Intellectual Property Laws

The Trade Marks Act, 1999 The Trade Marks Act, 1999 which came into force on December 30, 1999 governs the law pertaining to trade marks in India. A trade mark is essentially any mark capable of being represented graphically and distinguishing goods or services of one person from those of others and includes a device, brand, heading, label, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination of colors or combination thereof. In India, trademarks enjoy protection under both statutory and common law. Indian trademarks law permits the registration of trademarks for goods and services. Certification trademarks and collective marks can also be registered under the Trademark Act.

Others

Foreign Investment Regulations

Foreign investment in Indian securities is governed by the provisions of the FEMA read with the applicable FEMA Regulations and the extant consolidated FDI Policy issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government. Foreign investment is permitted (except in the prohibited sectors) in Indian companies either through the automatic route or the approval route, depending upon the sector in which foreign investment is sought to be made. Under the current consolidated FDI Policy, effective from August 28, 2017, issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government (the “Consolidated FDI Policy”), which consolidates the policy framework on FDI, up to 100% FDI through the automatic route is permitted in sectors and activities not specifically restricted under the Consolidated FDI Policy. Therefore, our business is not subject to sectoral investment limits enumerated under the Consolidated FDI Policy.

Sale of Goods Act, 1930

The Sale of Goods Act, 1930 (“Sale of Goods Act”) governs the contracts relating to sale of goods. The contracts for sale of goods are subject to the general principles of the law relating to contracts. The Sale of Goods Act is complimentary to the Indian Contract Act, 1872, and the un-repealed provisions of the Indian Contract Act, 1872, save in so far as they are inconsistent with the express provisions of the Sale of Goods Act, continue to apply to contracts for the sale of goods. A contract of sale may be an absolute one or based on certain conditions. The Sale of Goods Act contains provisions in relation to the essential aspects of such contracts, including the transfer of ownership of the goods, delivery of goods, rights and duties of the buyer and seller, remedies for breach of contract and the conditions and warranties implied under a contract for sale of goods.

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SECURITIES MARKET IN INDIA

The information in this section has been extracted from publicly available documents from various sources,

including officially prepared materials from the SEBI, the Stock Exchanges, and has not been prepared or

independently verified by us, the Book Running Lead Manager, or any of our respective affiliates or advisers.

The Indian Securities Market

India has a long history of organized securities trading. In 1875, the first stock exchange was established in Mumbai. The Stock Exchanges together hold a dominant position among the stock exchanges in terms of the number of listed companies, market capitalization and trading activity.

Stock Exchange Regulation

Indian stock exchanges are regulated primarily by the SEBI, as well as by the Central Government acting through the Ministry of Finance, Capital Markets Division, under the SCRA, SCRR, SEBI Act, the Depositories Act, the Companies Act, and various other rules and regulations framed thereunder. On June 20, 2012, the SEBI, in exercise of its powers under the SCRA and the SEBI Act, notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (the “SCR (SECC) Regulations”), which regulate, inter alia, the recognition, ownership and internal governance of stock exchanges and clearing corporations in India together with providing for minimum capitalization requirements for stock exchanges. The SCRA, the SCRR and the SCR (SECC) Regulations along with various rules, byelaws and regulations of the respective stock exchanges, regulate the recognition of stock exchanges, the qualifications for membership thereof and the manner in which contracts are entered into and enforced between members. The SEBI Act, under which the SEBI was established by the Central Government, granted powers to the SEBI to promote, develop and regulate the Indian securities markets, including stock exchanges and other financial intermediaries in the capital markets, to protect the interests of investors, to promote and monitor self-regulatory organizations, to prohibit fraudulent and unfair trade practices and insider trading and to regulate substantial acquisitions of shares and takeovers of companies. The SEBI has also issued regulations concerning disclosure requirements by listed and to-be listed companies, rules and regulations concerning investor protection, insider trading, substantial acquisition of shares and takeovers of companies, buyback of securities, delisting of securities, employee stock option schemes, stockbrokers, merchant bankers, underwriters, Mutual Funds, FIIs, FPIs, credit rating agencies and other capital market participants.

Listing

The listing of securities on stock exchanges in India is regulated by the applicable Indian laws including the ICDR Regulations, Companies Act, the SCRA, the SCRR, the Listing Regulations, the SEBI Act and various guidelines and regulations issued by the SEBI. Under the SCRA and the SCRR, the governing body of each stock exchange is empowered to suspend or withdraw admission to trading of or dealing in a listed security for breach by a listed company of any of the conditions of admission to dealings or for any other reason, subject to such company receiving prior notice of such intent of the stock exchange and upon granting of a hearing in the matter. The SEBI has the power to vary or veto the decision of the stock exchange in this regard. The SEBI also has the power to amend the byelaws of the stock exchanges.

All listed companies are required to ensure a minimum public shareholding of 25%. Further, where the public shareholding in a listed company falls below 25% at any time, such company is required to bring the public shareholding to 25% within a maximum period of 12 months from the date of such fall. Consequently, a listed company may be delisted from the stock exchanges for not complying with the above-mentioned requirement. Our Company is in compliance with this minimum public shareholding requirement.

Disclosures under the Companies Act, 2013 and Listing Regulations

Public listed companies are required under the Companies Act, 2013 and the Listing Regulations to prepare, file with the registrar of companies and circulate to their shareholders audited annual accounts which comply with the disclosure requirements and regulations governing their manner of presentation and which include sections relating to corporate governance under the Companies Act, 2013, related party transactions and management’s discussion and analysis as required under Listing Regulations. In addition, a listed company is subject to continuing disclosure requirements pursuant to the terms of the Listing Regulations.

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Delisting of Securities

The SEBI has, pursuant to a notification dated June 10, 2009, notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, in relation to the voluntary and compulsory delisting of securities from the stock exchanges. In addition, certain amendments to the SCRR have also been notified in relation to delisting.

Minimum Level of Public Shareholding

Pursuant to an amendment of the SCRR, all listed companies (except public sector undertakings) are required to maintain a minimum public shareholding of 25%. We are in compliance with the minimum public shareholding requirement. Where the public shareholding in a listed company falls below 25% at any time, such company is required to bring the public shareholding to 25% within a maximum period of twelve months from the date of such fall in the manner specified by the SEBI.

Index-Based Market-Wide Circuit Breaker System

In order to restrict abnormal price volatility in any particular stock, the SEBI has instructed stock exchanges to apply daily circuit breakers, which do not allow transactions beyond a certain level of price volatility. The index-based market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement, at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the SENSEX of the BSE or the S&P CNX NIFTY of the NSE, whichever is breached earlier. In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise price bands. However, no price bands are applicable on scrips on which derivative products are available or scrips included in indices.

BSE

Established in 1875, the BSE is the oldest stock exchange in India. In 1956, it became the first stock exchange in India to obtain permanent recognition from the Government under the SCRA. It has evolved over the years into its present status as one of the premier stock exchanges of India. Pursuant to the BSE (Corporatization and Demutualization) Scheme 2005 of the SEBI, with effect from August 19, 2005, the BSE was incorporated as a company under the Companies Act, 1956.

NSE

The NSE was established by financial institutions and banks to serve as a national exchange and to provide nationwide, on-line, satellite-linked, screen-based trading facilities with electronic clearing and settlement for securities including government securities, debentures, public sector bonds and units. It has evolved over the years into its present status as one of the premier stock exchanges of India. The NSE was recognised as a stock exchange under the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994. The capital market (equities) segment commenced operations in November 1994 and operations in the derivatives segment commenced in June 2000.

Internet-Based Securities Trading and Services

The SEBI approved internet trading in January 2000. Internet trading takes place through order routing systems, which route client orders to exchange trading systems for execution. This permits clients throughout the country to trade using brokers’ internet trading systems. Stock brokers interested in providing this service are required to apply for permission to the relevant stock exchange and to comply with certain minimum conditions stipulated by the SEBI and other applicable laws. NSE became the first exchange to grant approval to its members for providing internet-based trading services. Internet trading is possible on both the ‘equities’ as well as the ‘derivatives’ segments of the NSE.

Trading Hours

Trading on both the Stock Exchanges normally occurs Monday through Friday, between 9:15 a.m. and 3:30 p.m. Indian Standard Time. The Stock Exchanges are closed on public holidays. Recently, the stock exchanges have

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been permitted to set their own trading hours (in cash and derivative segments) subject to the condition that (i) the trading hours are between 9 a.m. and 5 p.m.; and (ii) the stock exchange has in place risk management system and infrastructure commensurate to the trading hours.

Trading Procedure

In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line Trading (BOLT) facility in 1995. This totally automated screen based trading in securities was put into practice nation-wide. This has enhanced transparency in dealings and has assisted considerably in smoothing settlement cycles and improving efficiency in back-office work. NSE also provides on-line trading facilities through a fully automated screen based trading system called ‘National Exchange for Automated Trading’ (“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided depth in the market by enabling large number of members all over India to trade simultaneously, narrowing the spreads.

Takeover Regulations

Disclosure and mandatory open offer obligations for listed Indian companies under Indian law are governed by the Takeover Regulations which provide specific regulations in relation to substantial acquisition of shares and takeover. Once the equity shares of a company are listed on a stock exchange in India, the provisions of the Takeover Regulations will apply to acquisitions of the company’s shares/voting rights/control. The Takeover Regulations prescribes certain thresholds or trigger points in the shareholding a person or entity has in the listed Indian company, which give rise to certain obligations on part of the acquirer. Acquisitions up to a certain threshold prescribed under the Takeover Regulations mandate specific disclosure requirements, while acquisitions crossing particular thresholds may result in the acquirer having to make an open offer of the shares of the target company. The Takeover Regulations also provides for the possibility of indirect acquisitions, imposing specific obligations on the acquirer in case of such indirect acquisition. Since, our Company is an Indian listed company, the provisions of the Takeover Regulations apply to our Company.

Insider Trading Regulations

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, (the “Insider

Trading Regulations”) have been notified by SEBI to prohibit and penalize insider trading in India. An “insider” is defined to include any person who has received or has access to unpublished price sensitive information (“UPSI”) or a “Connected Person”. A “Connected Person” includes, inter alia, any person who is or has directly or indirectly, been associated with the company in any capacity whether contractual, fiduciary or employment or has any professional or business relationship with the company whether permanent or temporary, during the six months prior to the concerned act which would allow or reasonably expect to allow access, directly or indirectly, to UPSI. An insider is, inter alia, prohibited from trading in securities of a listed or proposed to be listed company when in possession of UPSI and to provide access to any person including other insiders to the above referred UPSI except where such communication is for legitimate purposes, performance of duties or discharge of legal obligations. UPSI shall include any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities. The Insider Trading Regulations also provide disclosure obligations for shareholders holding more than 5% of equity shares or voting rights, and the changes therein. Initial disclosures are required from promoters, key managerial personnel, directors as well as continual disclosures by every promoter, employee or director in case value of trade exceed monetary threshold of ten lakh rupees over a calendar quarter, within two days of reaching such threshold. The board of directors of all listed companies are required to formulate and publish on the company’s website a code of procedure for fair disclosure of UPSI along with a code of conduct for its employees for compliances with the Insider Trading Regulations.

Depositories

The Depositories Act provides a legal framework for the establishment of depositories to record ownership details and effect transfers in book-entry form. Further, the SEBI framed regulations in relation to, inter alia, the formation and registration of such Depositories, the registration of Depository Participants as well as the rights and obligations of the Depository Participants, companies and beneficial owners. The depository system has

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significantly improved the operation of the Indian securities markets.

Derivatives (Futures and Options)

Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in February 2000 and derivative contracts were included within the term ‘securities’, as defined by the SCRA. Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a separate segment of an existing stock exchange.

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LEGAL PROCEEDINGS

We are, from time to time, involved in various legal proceedings in the ordinary course of business, which involve

matters pertaining to, amongst others, civil, tax, regulatory and other disputes. As on date of this Placement

Document, except as disclosed hereunder, we are not involved in any material governmental, legal or arbitration

proceedings or litigation and we are not aware of any pending or threatened material governmental, legal or

arbitration proceedings or litigation relating to them which may have a material effect on our financial condition,

the results of operations or cash flows. All terms defined in a particular litigation are for that particular litigation

only

All pending criminal proceedings and regulatory action against the Company, its Directors and its Promoters, as

applicable, have been individually disclosed. Given the nature and extent of their respective business and

operations, the following civil and tax proceedings have been individually disclosed:

All civil and tax proceedings, whether threatened or actual, involving the Company that involve an amount

of Rs. 50.00 lakhs or more (to the extent that such an amount is determinable), or in which the amount is

not determinable but where the proceeding is considered material;

All civil and tax proceedings, whether threatened or actual, against the Company’s Promoters (barring Vardhman Textiles Limited and Vardhman Holdings Limited) or Directors, which involve an amount of Rs.

50.00 lakhs or more (to the extent that such an amount is determinable), or in which the amount is not

determinable but where the proceeding is considered material;

All civil and tax proceedings, whether threatened or actual, against Vardhman Textiles Limited that involve

an amount of Rs. 6,712.54 lakhs or more (to the extent that such an amount is determinable), or in which

the amount is not determinable but where the proceeding is considered material; and

All civil and tax proceedings, whether threatened or actual, against Vardhman Holdings Limited that

involve an amount of Rs. 867.04 lakhs or more (to the extent that such an amount is determinable), or in

which the amount is not determinable but where the proceeding is considered material.

A. Proceedings involving our Company

Litigation by our Company

Material Civil Litigation by our Company

1. The Company has, along with other petitioners, filed a civil writ petition before the Hon’ble High

Court of Punjab and Haryana at Chandigarh, challenging the validity of applicability of Punjab Tax on entry of goods into Local Areas Act, 2000. The Court has granted a stay in the matter on April 8, 2011. The Company estimates that its net tax liability will be approximately Rs. 14.57 crores, plus interest, if any, if the matter is decided against it. The matter is currently pending.

2. The Company has filed a writ petition challenging the levy of a minimum monthly charges at Rs. 250 per kW instead of applicable rate of Rs. 100 per kW by the Punjab State Power Corporation Limited (“PSPCL”) in the event of force majeure. The Hon’ble High Court of Punjab and Haryana at Chandigarh vide its order dated December 24, 2014, had dismissed the aforesaid writ petition. Subsequently, the Company challenged the order of Hon’ble High Court dated December 24, 2014, by way of Letters Patent Appeal. During that time, PSPCL issued a demand of approximately Rs. 1.59 crores dated February 9, 2015. Upon hearing the Company’s letters patent appeal, the Hon’ble Judges issued notice to the other party, and stayed the demand subject to depositing 50% of the amount claimed by PSPCL, which the Company has deposited. The matter is currently pending.

3. The Company had filed a civil writ petition against the order of Board Level Review Committee of the Punjab State Electricity Board (“PSEB”) for issuance of direction or order commanding PSEB to apply clause 14(j) of abridged condition of supply for determination of power factor surcharge and in case the power factor, so determined by applying clause 14(j) is above 0.85, the entire amount of Rs. 1.95 crores already paid by the Company be refunded along with interest from the date of respective payments made by the Company to PSEB. The matter has not yet been listed for

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arguments. The Company has moved an application for early hearing in the said petition as the amount involved has already been deposited with the department. The matter is currently pending.

4. The Company has initiated a claim of approximately Rs. 1.06 crores, excluding interest, against the National Insurance Company Limited, before the National Consumer Disputes Redressal Commission, New Delhi. The Company had earlier submitted a claim in respect of loss suffered from a fire at its manufacturing facility under an insurance contract, which had been denied by the National Insurance Company Limited. The matter is currently pending.

5. The Company has filed a review petition before the Hon’ble High Court of Punjab and Haryana, in respect of an order of said court dismissing a civil writ petition filed in relation to a demand notice dated January 21, 2013, issued by PSPCL for an amount of Rs. 1.37 crores in respect of service connection charges. Previously, our Company had challenged the demand notice before the Forum for Redressal for Grievance of Consumers, and the Ombudsman for Electricity, Punjab, who had upheld the demand issued by PSPCL. The matter is currently pending.

Criminal Proceedings

1. The Company has filed four FIRs against various persons in respect of certain thefts involving the

Company’s products, where the aggregate amount involved is Rs. 1.76 lakhs. The matters are currently pending.

2. The Company has filed two criminal complaints under section 138 of the Negotiable Instruments Act, 1881, where the aggregate amount involved is Rs. 3.50 lakhs. The matters are currently pending.

B. Proceedings against our Promoters

I. Proceedings against Vardhman Textiles Limited

Tax Proceedings

1. The Assistant Commission of Income Tax, Ludhiana, has issued a notice of demand to Vardhman

Textiles Limited, demanding a payment of a sum of Rs. 96.40 crores, which has been determined to be payable in respect of assessment year 2011-2012. The matter is currently pending.

Regulatory Action

1. Sharda Sarthe has filed a complaint before the Labour Court against the Vardhman Textiles Limited in relation to alleged violation of sections 10 of the Industrial Dispute Act, 1947. The matter is currently pending.

2. Virendra Giri has filed a complaint before the Labour Court against Vardhman Textiles Limited in under Section 33(c) of the Industrial Dispute Act, 1947, for the recovery of dues claiming suspension allowance. The matter is currently pending.

3. Lal Babu Gupta has filed a claim petition before the Labour Court against the Vardhman Textiles Limited under section 2(A) of the Industrial Dispute Act, 1947, seeking that Vardhman Textiles Limited be retrained from terminating his services, and be directed to make payment of all pending dues along with consequential relief. The matter is currently pending.

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Other Confirmations

Material Frauds

No material frauds have been committed against our Company during the last three years.

Defaults in respect of dues payable

Our Company has been generally regular in depositing undisputed statutory dues in respect of provident fund, investor education and protection fund, employees’ state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, value added tax, and other material statutory dues as applicable with the appropriate authority and there have been no instances of non-payment or defaults in the payment of statutory dues by the Company. Our Company has not defaulted in any deposits accepted and payment of interest or principal on any loan from any bank or financial institution and has not issued any debentures.

Litigation or Legal Action against the Promoters by any Ministry, Government Department or Statutory

Authority

There is no, and has been no, litigation or legal action pending or taken by any ministry or department of the Government or a statutory authority against any Promoter during the last three years immediately preceding the year of this Placement Document. Accordingly, no directions have been issued by any ministry or department or statutory authority upon conclusion of any litigation or legal action against the Promoters.

Inquiries, Inspections or Investigations under the Companies Act

There have been no inquiries, inspections or investigations initiated or conducted under the Companies Act, 2013, or any previous company law in the three years immediately preceding the year of circulation of this Placement Document in the case of the Company. Further, there were no prosecutions filed (whether pending or not), fines imposed, compounding of offences in the last three years immediately preceding the year of this Placement Document.

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PLACEMENT AND LOCK-UP

Placement Agreement

The Book Running Lead Manager and our Company have entered into a placement agreement dated February 14, 2018 (the “Placement Agreement”), pursuant to which the Book Running Lead Manager has agreed to manage the Issue and procure subscriptions for the Equity Shares on a reasonable efforts basis, to QIBs, pursuant to Section 42 of the Companies Act, 2013 read with Rule 14 of the PAS Rules and Chapter VIII of the ICDR Regulations. The Placement Agreement contains customary representations, warranties and indemnities from our Company and the Book Running Lead Manager, and is subject to termination in accordance with the terms contained therein. This Placement Document has not been, and will not be, registered as a prospectus with the RoC and, no Equity Shares will be offered in India or overseas to the public or any members of the public or any other class of investors, other than QIBs. Our Company shall make the requisite filings with the RoC and the SEBI within the stipulated period as required under the Companies Act and the PAS Rules. Applications shall be made to list the Equity Shares issued pursuant to the Issue and admit them to trading on the Stock Exchange. No assurance can be given as to the liquidity or sustainability of the trading market for such Equity Shares, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which holders of the Equity Shares will be able to sell their Equity Shares. The Equity Shares have not been and will not be registered under the U.S. Securities Act or the laws of any state of the United States, and will not be offered or sold in the United States. The Equity Shares are transferable only in accordance with the restrictions described in the sections titled “Selling Restrictions” and “Transfer

Restrictions”. Purchasers of the Equity Shares will be deemed to make the representations set forth in the sections titled “Representations by Investors” and “Transfer Restrictions”.

Relationship with the Book Running Lead Manager

In connection with the Issue, the Book Running Lead Manager or its affiliates may, for their own accounts, subscribe to the Equity Shares or enter into asset swaps, credit derivatives or other derivative transactions relating to the Equity Shares to be issued pursuant to the Issue at the same time as the offer and sale of the Equity Shares, or in secondary market transactions. As a result of such transactions, the Book Running Lead Manager may hold long or short positions in such Equity Shares. These transactions may comprise a substantial portion of the Issue and no specific disclosure will be made of such positions. Affiliates of the Book Running Lead Manager may purchase the Equity Shares or be Allotted Equity Shares for proprietary purposes and not with a view to distribute or in connection with the issuance of offshore derivative instruments. From time to time, the Book Running Lead Manager, and the affiliates and associates of such entity have engaged in or may in the future engage in transactions with and perform services including but not limited to investment banking, advisory, banking, trading services for our Company, group companies, affiliates and the Shareholders, as well as to their respective associates and affiliates, pursuant to which fees and commissions have been paid or will be paid to the Book Running Lead Manager and its affiliates and associates.

Lock-Up

Our Company has undertaken that it will not for a period of 180 days from the date of Allotment under the Issue, without the prior written consent of the Book Running Lead Manager, directly or indirectly, (a) offer, issue, contract to issue, issue or offer any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any Equity Shares or any securities convertible into or exercisable for Equity Shares (including, without limitation, securities convertible into or exercisable or exchangeable for Equity Shares which may be deemed to be beneficially owned), or file any registration statement under the U.S. Securities Act of 1933, as amended, with respect to any of the foregoing, or (b) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences associated with the ownership of any of the Equity Shares or any securities convertible into or exercisable or exchangeable for Equity Shares (regardless of whether any of the transactions described in clause (a) or (b) is to be settled by the delivery of Equity Shares or such other securities, in cash or otherwise), or (c) deposit Equity Shares with any other depositary in connection with a depositary receipt facility, or (d) publicly announce any intention to enter into any transaction falling within (a) to (c) above

or enter into any transaction (including a transaction involving derivatives) having an economic effect similar to

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that of an issue or offer or deposit of Equity Shares in any depositary receipt facility or publicly announce any intention to enter into any transaction falling within (a) to (c) above; provided, however, that the foregoing restrictions do not apply to any issue or offer to the extent such issue or offer is required by Indian law. Further, each of the Promoters of our Company, jointly and severally, have agreed that, without the prior written consent of the Book Running Lead Manager, he or she will not, during the period commencing on the date hereof and ending 180 days after the date of allotment of the Equity Shares, directly or indirectly: (a) offer, lend, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any Promoter shares or, subject to clauses (e)(ii) and (e)(iv) herein below, any securities convertible into or exercisable for Promoter shares or file any registration statement under the U.S. Securities Act of 1933, as amended, with respect to any of the foregoing; or (b) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the economic consequences associated with the ownership of any of the Promoter shares or any securities convertible into or exercisable or exchangeable for Promoter shares (regardless of whether any of the transactions described in clause (a) or (b) is to be settled by the delivery of Promoter shares or such other securities, in cash or otherwise); or (c) deposit Promoter shares with any other depositary in connection with a depositary receipt facility, or (d) publicly announce any intention to enter into any transaction falling within (a) to (c) above or enter into any transaction (including a transaction involving derivatives) having an economic effect similar to that of a sale or deposit of Promoter shares in any depositary receipt facility or publicly announce any intention to enter into any transaction falling within (a) to (c) above; (e) provided, however, that the foregoing restrictions (i) shall only be applicable to any such transactions relating to Promoter shares aggregating more than 2.00% of the share capital of the Company immediately after the Issue; (ii) do not apply to any sale, transfer or disposition of Promoter shares by the Promoter with prior notice to the Book Running Lead Manager to the extent such sale, transfer or disposition is required by Indian law; (iii) do not apply to any bona fide pledge of Promoter shares held by the Promoter, as collateral for loans as normal commercial terms entered into, in the ordinary course of business; and (iv) do not apply to any inter-se transfer of Promoter shares amongst the Promoters.

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ISSUE PROCEDURE

The following is a summary intended to present a general outline of the procedure relating to the application,

payment, Allocation and Allotment of the Equity Shares. The procedure followed in the Issue may differ from the

one mentioned below, and investors are presumed to have apprised themselves of the same from our Company or

the Book Running Lead Manager.

Our Company and the Book Running Lead Manager are not liable for any amendment or modification or change

to applicable laws or regulations, which may occur after the date of this Placement Document. Prospective

investors are advised to make their independent investigations and satisfy themselves that they are eligible to

apply. Investors are also advised to ensure that any single Bid from them does not exceed the investment limits or

maximum number of Equity Shares that can be held by them under applicable law or regulation or as specified

in this Placement Document. Further, prospective investors are required to satisfy themselves that their

Application Forms would not result in triggering a tender offer under the Takeover Regulations.

Investors are advised to inform themselves of any restrictions or limitations that may be applicable to them.

Investors that apply in the Issue will be required to confirm and will be deemed to have represented to our

Company, the Book Running Lead Manager and their respective directors, officers, agents, affiliates and

representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to

acquire the Equity Shares. Our Company and the Book Running Lead Manager and their respective directors,

officers, agents, affiliates and representatives accept no responsibility or liability for advising any investor on

whether such investor is eligible to acquire the Equity Shares. See the sections titled “Selling Restrictions” and “Transfer Restrictions”.

Qualified Institutions Placement

THE ISSUE IS MEANT ONLY FOR ELIGIBLE QIBS, BEING ENTITIES RESIDENT IN INDIA, ON A

PRIVATE PLACEMENT BASIS AND IS NOT AN OFFER TO THE PUBLIC OR TO ANY OTHER

CLASS OF INVESTORS. This Placement Document has not been, and will not be, registered as a prospectus with the RoC and, no Equity Shares will be offered in India or overseas to the public or any members of the public in India or any other class of investors, other than QIBs. The Issue is being made to QIBs in reliance upon Section 42 of the Companies Act, 2013 read with Rule 14 of the PAS Rules, and Chapter VIII of the ICDR Regulations, through the mechanism of a QIP. Under Chapter VIII of the ICDR Regulations and Section 42 of the Companies Act, 2013, a company may Issue equity shares to QIBs subject to certain conditions including:

the Issuer has completed all allotments with respect to any offer or invitation previously made by it or has withdrawn or abandoned any invitation or offer previously made by it;

the Issuer is in compliance with the minimum public shareholding requirements set out in the SCRR;

Under Regulation 82(b) of the ICDR Regulations, equity shares of the same class of such Issuer, which are proposed to be allotted through the QIP, are listed on a stock exchange in India that has nation-wide trading terminals for a period of at least one year prior to the date of issuance of notice to its shareholders for convening the meeting to pass the below-mentioned special resolution;

the shareholders of the Issuer have passed a special resolution approving such QIP. Such special resolution must specify (a) that the allotment of securities is proposed to be made pursuant to the QIP; and (b) the relevant date;

the explanatory statement to the notice to the shareholders for convening the general meeting must disclose the basis or justification for the price (including premium, if any) at which the offer or invitation is being made;

the offer must be made through a private placement offer letter and an application form serially numbered and addressed specifically to the QIB to whom the offer is made and is sent within the prescribed time period after recording the names of such QIBs;

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the offer must not be to more than 200 persons in a financial year. However, an offer to QIBs will not be subject to this limit of 200 persons. Prior to circulating the private placement offer letter, the Issuer must prepare and record a list of QIBs to whom the offer will be made. The offer must be made only to such persons whose names are recorded by the Issuer prior to the invitation to subscribe;

Issuer must offer to each Allottee at least such number of the securities in the Issue which would aggregate to Rs. 20,000, calculated at the face value of the securities;

the aggregate of the proposed Issue and all previous QIPs made by the Issuer in the same financial year does not exceed five times the net worth (as defined in the ICDR Regulations) of the Issuer as per the audited balance sheet of the previous financial year; and

the offering of securities by issue of public advertisements or utilization of any media, marketing or distribution channels or agents to inform the public about the Issue is prohibited.

At least 10% of the Equity Shares issued to QIBs must be Allotted to Mutual Funds, provided that, if this portion or any part thereof to be Allotted to Mutual Funds remains unsubscribed, it may be Allotted to other QIBs. Bidders are not allowed to withdraw their Bids after the Bid/Issue Closing Date. Additionally, there is a minimum pricing requirement under the ICDR Regulations. The Floor Price shall not be less than the average of the weekly high and low of the closing prices of the related Equity Shares quoted on the stock exchanges during the two weeks preceding the Relevant Date as calculated in accordance with Chapter VIII of the ICDR Regulations. However, a discount of up to 5% of the Floor Price is permitted in accordance with the provisions of the ICDR Regulations. The “Relevant Date” referred to above, for the Allotment, will be the date of the meeting in which the Board or the committee of Directors duly authorized by the Board decides to open the Issue and “Stock Exchanges” means the stock exchanges in India on which the Equity Shares of our Company of the same class are listed and on which the highest trading volume in such Equity Shares has been recorded during the two weeks immediately preceding the Relevant Date. Further, in accordance with the resolution passed on December 6, 2017, our Company may offer a discount of not more than 5% on the Floor Price. Our Company has applied for and received the in-principle approval of the Stock Exchanges under Regulation 28(1) of the Listing Regulations for the listing of the Equity Shares on the Stock Exchanges on February 14, 2018. Our Company has also delivered a copy of the Preliminary Placement Document and this Placement Document to the Stock Exchanges. Our Company shall make the requisite filings with the RoC and the SEBI within the stipulated period as required under the Companies Act and the PAS Rules. The Issue was authorised and approved by the Board on November 4, 2017, and approved by the Shareholders by way of their special resolution dated December 6, 2017. The Equity Shares will be Allotted within 12 months from the date of the Shareholders’ resolution approving the Issue and within 60 days from the date of receipt of subscription money from the relevant QIBs. For details of refund of application money, see the section “Pricing and Allocation – Designated Date and Allotment of Equity

Shares”. The Equity Shares issued pursuant to the Issue must be issued on the basis of the Preliminary Placement Document and this Placement Document that contain all material information including the information specified in Schedule XVIII of the ICDR Regulations and the requirements prescribed under Form PAS-4. The Preliminary Placement Document and this Placement Document are private documents provided to only select QIBs through serially numbered copies and are required to be placed on the website of the Stock Exchanges and of our Company with a disclaimer to the effect that it is in connection with an issue to QIBs and no offer is being made to the public or to any other category of investors. The minimum number of Allottees for the Issue shall not be less than:

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Two, where the issue size is less than or equal to Rs. 250 crores; and

Five, where the issue size greater than Rs. 250 crores. No single Allottee shall be Allotted more than 50% of the Issue Size. QIBs that belong to the same group or that are under common control shall be deemed to be a single Allottee. For details of what constitutes “same group” or “common control”, see the section titled “Issue Procedure - Application Process - Application Form”. Securities allotted to a QIB pursuant to the Issue shall not be sold for a period of one year from the date of allotment except on the floor of a recognized stock exchange in India. Allotments made to VCFs and AIFs in the Issue are subject to the rules and regulations that are applicable to them, including in relation to lock-in requirements.



The Equity Shares have not been and will not be registered under the U.S. Securities Act or the laws of any

state of the United States, and will not be offered or sold in the United States. The Equity Shares are

transferable only in accordance with the restrictions described in the sections titled “Selling Restrictions” and “Transfer Restrictions”. For further information, please see the sections titled “Selling Restrictions” and “Transfer Restrictions”.

The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other

jurisdiction outside India and may not be offered or sold, and Bids may not be made by persons in any

country or jurisdiction, other than India.

Issue Procedure 1. Our Company and the Book Running Lead Manager shall circulate serially numbered copies of the

Preliminary Placement Document and the serially numbered Application Form, either in electronic or physical form to the QIBs and the Application Form will be specifically addressed to such QIBs. In terms of Section 42 (7) of the Companies Act, 2013 our Company shall maintain complete records of the QIBs to whom the Preliminary Placement Document, this Placement Document and the serially numbered Application Form have been dispatched. Our Company shall make the requisite filings with the RoC and SEBI within the stipulated period as required under the Companies Act, 2013 and the PAS Rules. The list of QIBs to whom the Preliminary Placement Document and Application Form is delivered will be determined by the Company, in consultation with the Book Running Lead Manager, at its sole discretion.

2. UNLESS A SERIALLY NUMBERED PRELIMINARY PLACEMENT DOCUMENT ALONG

WITH THE SERIALLY NUMBERED APPLICATION FORM IS ADDRESSED TO A

PARTICULAR QIB, NO INVITATION TO SUBSCRIBE SHALL BE DEEMED TO HAVE BEEN

MADE TO SUCH QIB. Even if such documentation were to come into the possession of any person other than the intended recipient, no offer or invitation to offer shall be deemed to have been made to such person and any application that does not comply with this requirement shall be treated as invalid.

3. Bidders shall submit Bids for, and our Company shall Issue and Allot to each Allottee at least such number

of Equity Shares which would aggregate to Rs. 20,000 calculated at the face value of the Equity Shares. 4. QIBs may submit an Application Form, including any revisions thereof, during the Bid/Issue Period to the

Book Running Lead Manager. 5. QIBs will be required to indicate the following in the Application Form:

name of the QIB to whom Equity Shares are to be Allotted;

number of Equity Shares Bid for;

price at which they are agreeable to subscribe for the Equity Shares, provided that QIBs may also indicate that they are agreeable to submit a Bid at the Cut-Off Price which shall be any price as may be determined by our Company in consultation with the Book Running Lead Manager at or above the Floor Price or the Floor Price net of such discount as approved in accordance with ICDR Regulations;

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details of the Depository Participant account to which the Equity Shares should be credited.

it has agreed to certain other representations set forth in the Application Form;

SEBI registration number, if applicable.

6. Once a duly completed Application Form is submitted by a Bidder, such Application Form constitutes an irrevocable offer and cannot be withdrawn after the Bid/Issue Closing Date. The Bid/Issue Closing Date shall be notified to the Stock Exchanges and the Bidders shall be deemed to have been given notice of such date after receipt of the Application Form. The Bids made by asset management companies or custodians of Mutual Funds shall specifically state the names of the concerned schemes for which the Bids are made. In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with the SEBI. Under the current regulations, the following restrictions are applicable for investments by Mutual Funds: No mutual fund scheme shall invest more than 10% of its net asset value in Equity Shares or equity related instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of any company's paid-up capital carrying voting rights. Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by them under applicable laws.

7. Upon receipt of the Application Form, after the Bid/Issue Closing Date, our Company shall determine the

final terms, including the Issue Price of the Equity Shares to be issued pursuant to the Issue and Allocation, in consultation with the Book Running Lead Manager. Upon determination of the final terms of the Equity Shares, the Book Running Lead Manager will send the serially numbered CAN along with the Placement Document to the Bidders who have been Allocated the Equity Shares. The dispatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder to pay the entire Issue Price for all the Equity Shares Allocated to such Bidder. The CAN shall contain details such as the number of Equity Shares Allocated to the Bidder and payment instructions including the details of the amounts payable by the Bidder for Allotment of the Equity Shares in its name and the Pay-in Date as applicable to the respective Bidder.

PLEASE NOTE THAT THE ALLOCATION WILL BE AT THE ABSOLUTE DISCRETION OF

OUR COMPANY AND WILL BE BASED ON THE RECOMMENDATION OF THE BOOK

RUNNING LEAD MANAGER.

8. Pursuant to receiving a CAN, each Bidder shall be required to make the payment of the entire application monies for the Equity Shares indicated in the CAN at the Issue Price, only through electronic transfer to our Company’s designated bank account by the Pay-In Date as specified in the CAN sent to the respective Bidders. No payment shall be made by Bidders in cash. Please note that any payment of application money for the Equity Shares shall be made from the bank accounts of the relevant Bidders applying for the Equity Shares. Monies payable on Equity Shares to be held by joint holders shall be paid from the bank account of the person whose name appears first in the Application. Pending Allotment, all monies received for subscription of the Equity Shares shall be kept by our Company in a separate bank account with a scheduled bank and shall be utilized only after listing of the Equity Shares being offered for the purposes permitted under the Companies Act, 2013, i.e., the Escrow Account. See the section titled “Issue Procedure - Bank

Account for Payment of Application Money”.

9. Upon receipt of the application monies from the Bidders, our Company shall Allot Equity Shares as per the details in the CAN sent to the Bidders.

10. After passing the Board resolution for Allotment and prior to crediting the Equity Shares into the beneficiary accounts maintained with the Depository Participants by the Allottees, our Company shall apply to the Stock Exchanges for listing approval. Our Company will intimate the Stock Exchanges the details of the Allotment and apply for the approval for listing of the Equity Shares on the Stock Exchanges prior to the crediting of the Equity Shares into the beneficiary account maintained with the Depositary Participant by the Bidder.

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11. After receipt of the listing approval of the Stock Exchanges, our Company shall credit the Equity Shares Allotted pursuant to the Issue into the Depository Participant’s accounts of the respective Allottees.

12. Our Company will then apply for the final trading approval from the Stock Exchanges.

13. The Equity Shares that would have been credited to the beneficiary accounts with the Depository Participants of the Allottees shall be eligible for trading on the Stock Exchanges only upon the receipt of final listing and trading approval from the Stock Exchanges.

14. Upon receipt of intimation of final trading and listing approval from the Stock Exchanges, our Company shall inform the Allottees of the receipt of such approvals. Our Company and the Book Running Lead Manager shall not be responsible for any delay or non-receipt of the communication of the final trading and listing permissions from the Stock Exchanges or any loss arising from such delay or non- receipt. Final listing and trading approval granted by the Stock Exchanges is also placed on its website. QIBs are advised to apprise themselves of the status of the receipt of the permissions from the Stock Exchanges or our Company.

Qualified Institutional Buyers Only QIBs (as defined in regulation 2(1)(zd) of the ICDR Regulations), which are (i) entities resident in India, (ii) not otherwise excluded pursuant to Regulation 86(1)(b) of the ICDR Regulations, (i) not FPIs, including FII, (ii) not multilateral or bilateral development financial institutions, and (iii) not FVCIs, are eligible to invest in the Issue.

THIS ISSUE IS BEING MADE ONLY TO ELIGIBLE QIBS, BEING ENTITIES RESIDENT IN INDIA,

AND THE EQUITY SHARES IN THIS ISSUE WILL NOT, IN ANY CIRCUMSTANCE, BE OFFERED

TO PERSONS IN ANY COUNTRY OR JURISDICTION, OTHER THAN INDIA.

Under Regulation 86(1)(b) of the ICDR Regulations, no Allotment shall be made, either directly or indirectly, to any QIB being, or any person related to, the Promoters. QIBs which have all or any of the following rights shall be deemed to be persons related to the ‘promoters’ as defined in the ICDR Regulations:

rights under a shareholders’ agreement or voting agreement entered into with the Promoters or persons related to the Promoters;

veto rights; or

a right to appoint any nominee director on the Board. Provided, however, that a QIB which does not hold any shares in our Company and which has acquired the aforesaid rights in the capacity of a lender shall not be deemed to be related to the “promoters”.

OUR COMPANY AND THE BOOK RUNNING LEAD MANAGER AND THEIR RESPECTIVE

DIRECTORS, OFFICERS, AGENTS, ADVISORS, AFFILIATES AND REPRESENTATIVES ARE NOT

LIABLE FOR ANY AMENDMENT OR MODIFICATION OR CHANGE TO APPLICABLE LAWS OR

REGULATIONS, WHICH MAY OCCUR AFTER THE DATE OF THIS PLACEMENT DOCUMENT.

QIBS ARE ADVISED TO MAKE THEIR INDEPENDENT INVESTIGATIONS AND SATISFY

THEMSELVES THAT THEY ARE ELIGIBLE TO APPLY. QIBS ARE ADVISED TO ENSURE THAT

ANY SINGLE APPLICATION FROM THEM DOES NOT EXCEED THE INVESTMENT LIMITS OR

MAXIMUM NUMBER OF EQUITY SHARES THAT CAN BE HELD BY THEM UNDER APPLICABLE

LAW OR REGULATION OR AS SPECIFIED IN THIS PLACEMENT DOCUMENT. FURTHER, QIBS

ARE REQUIRED TO SATISFY THEMSELVES THAT THEIR BIDS WOULD NOT EVENTUALLY

RESULT IN TRIGGERING A TENDER OFFER UNDER THE TAKEOVER REGULATIONS. Note: Affiliates or associates of Book Running Lead Manager who are QIBs may participate in the Issue in

compliance with applicable laws.

Application Process

Application Form

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Bidders shall only use the serially numbered Application Forms (which are addressed to them) supplied by our Company and the Book Running Lead Manager in either electronic form or by physical delivery for the purpose of making a Bid (including revision of a Bid) in terms of the Preliminary Placement Document. By making a Bid (including the revision thereof) for Equity Shares through Application Form(s) and pursuant to the terms of the Preliminary Placement Document, the Bidder will be deemed to have made the following representations and warranties and the representations, warranties and agreements made under sections titled “Notice to Investors”, “Representations by Investors”, “Selling Restrictions” and “Transfer Restrictions”:

The Bidder confirms that it is a QIB in terms of Regulation 2(1)(zd) of the ICDR Regulations and is not excluded under Regulation 86 of the ICDR Regulations, has a valid and existing registration under the applicable laws in India and is eligible to participate in the Issue;

The Bidder confirms that it is an entity resident in India, and is not (i) an FPI, including an FII, or (ii) a multilateral or bilateral development financial institution, or (iii) an FVCI;

The Bidder confirms that it is not a “promoter” and is not a person related to the “promoters”, either directly or indirectly, and its Application Form does not directly or indirectly represent the “promoters” or “promoter group” or persons related to the “promoters” as defined in the ICDR Regulations;

The Bidder confirms that it has no rights under a shareholders’ agreement or voting agreement with the “promoters” or persons related to the “promoters”, no veto rights or right to appoint any nominee director on the Board other than those acquired in the capacity of a lender which shall not be deemed to be a person related to the “promoters” as defined in the ICDR Regulations;

The Bidder acknowledges that it has no right to withdraw its Bid after the Bid/Issue Closing Date;

The Bidder confirms that if Equity Shares are Allotted, it shall not, for a period of one year from Allotment, sell such Equity Shares otherwise than on the Stock Exchanges;

The Bidder confirms that it is eligible to Bid and hold Equity Shares so Allotted. The Bidder further confirms that the holding of the Bidder, does not and shall not, exceed the level permissible as per any applicable regulations applicable to the Bidder;

The Bidder confirms that its Bids would not eventually result in triggering a tender offer under the Takeover Regulations;

The Bidder confirms that together with other Bidders that belong to the same group or are under the same control, the Allotment to the Bidder shall not exceed 50% of the Issue Size. For the purposes of this statement:

a. the expression “belongs to the same group” shall derive meaning from the concept of “companies

under the same group” as provided in sub-section (11) of Section 372 of the Companies Act, 1956; and

b. “Control” shall have the same meaning as is assigned to it by Regulation 2(1)(e) of the Takeover

Regulations.

The Bidder confirms that it shall not undertake any trade in the Equity Shares credited to its beneficiary account maintained with the Depository Participant until such time that the final listing and trading approvals for the Equity Shares are issued by the Stock Exchanges.

EACH BIDDER MUST PROVIDE ITS DEPOSITORY PARTICIPANT ACCOUNT DETAILS, PAN,

DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER, E-MAIL ID AND BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM.

EACH BIDDER MUST ENSURE THAT THE NAME GIVEN IN THE APPLICATION FORM IS

EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY PARTICIPANT ACCOUNT

IS HELD.

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IF SO REQUIRED BY THE BOOK RUNNING LEAD MANAGER, A QIB MAY ALSO BE REQUIRED

TO SUBMIT REQUISITE DOCUMENT(S) ALONG WITH THE APPLICATION FORM TO THE

LEAD MANAGER TO EVIDENCE THEIR STATUS AS A “QIB” AS DEFINED HEREIN.

IF SO REQUIRED BY THE BOOK RUNNING LEAD MANAGER, COLLECTION BANK(S) OR ANY

STATUTORY OR REGULATORY AUTHORITY IN THIS REGARD, INCLUDING AFTER ISSUE

CLOSURE, THE QIB SUBMITTING A BID AND/OR BEING ALLOTTED EQUITY SHARES IN THE

ISSUE, WILL ALSO HAVE TO SUBMIT REQUISITE DOCUMENT(S) TO FULFILL THE KNOW

YOUR CUSTOMER (KYC) NORMS.

Demographic details such as address and bank account will be obtained from the Depositories as per the Depository Participant account details given above. The submission of an Application Form by a Bidder shall be deemed a valid, binding and irrevocable offer for the Bidder to pay the entire Issue Price for the Equity Shares (as indicated by the CAN) and becomes a binding contract on the Bidder upon the issuance of the CAN by our Company in favor of the Bidder.

Submission of Application Form All Application Forms must be duly completed with information including the number of Equity Shares applied for. All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment letter shall be submitted to the Book Running Lead Manager as per the details provided in the respective CAN. The Application Form shall be submitted to the Book Running Lead Manager either through electronic form or through physical delivery at the following address:

Name Address Contact Persons Email Phone


10th Floor, IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013, Maharashtra, India

Kunur Bavishi / Nishita Mody

[email protected] +91 22 4646

4600

The Book Running Lead Manager shall not be required to provide any written acknowledgement of the same.

Permanent Account Number or PAN Each Bidder should mention its PAN allotted under the IT Act in the Application Form. Applications without this information will be considered incomplete and are liable to be rejected. Bidders should not submit the general index register number instead of the PAN as the Application Forms are liable to be rejected on this ground.

Bank Account Details Each QIB shall mention the details of the bank account from which the payment has been made along with confirmation that the payment has been made from such account.

Pricing and Allocation

Build-up of the Book Bidders shall submit their Bids within the Bid/Issue Period to the Book Running Lead Manager. Such Bids cannot be withdrawn after the Bid/Issue Closing Date. The book shall be maintained by the Book Running Lead Manager.

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Price Discovery and Allocation Our Company, in consultation with the Book Running Lead Manager, shall determine the Issue Price, which cannot be lower than the Floor Price. However, our Company may offer a discount of not more than 5% on the Floor Price, in accordance with Chapter VIII of the ICDR Regulations. After finalization of the Issue Price, our Company will update the Preliminary Placement Document with the Issue details and file the same with the Stock Exchanges as the Placement Document.

Method of Allocation Our Company shall determine the Allocation in consultation with the Book Running Lead Manager on a discretionary basis and in compliance with Chapter VIII of the ICDR Regulations. Bids received from the Bidders at or above the Issue Price shall be grouped together to determine the total demand. The Allocation to all such Bidders will be made at the Issue Price. Allocation to Mutual Funds for up to a minimum of 10% of the Issue Size shall be undertaken subject to valid Bids being received at or above the Issue Price.

THE DECISION OF OUR COMPANY IN CONSULTATION WITH THE BOOK RUNNING LEAD

MANAGER IN RESPECT OF ALLOCATION SHALL BE FINAL AND BINDING ON ALL BIDDERS.

BIDDERS MAY NOTE THAT ALLOCATION IS AT THE SOLE AND ABSOLUTE DISCRETION OF

OUR COMPANY IN CONSULTATION WITH THE BOOK RUNNING LEAD MANAGER AND

BIDDERS MAY NOT RECEIVE ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID

APPLICATION FORMS AT OR ABOVE THE ISSUE PRICE. NEITHER OUR COMPANY NOR THE

BOOK RUNNING LEAD MANAGER IS OBLIGED TO ASSIGN ANY REASON FOR ANY NON-

ALLOCATION. All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment letter shall be submitted to the Book Running Lead Manager as per the details provided in the respective CAN.

CAN Based on the Application Forms received, our Company, in consultation with the Book Running Lead Manager, in its sole and absolute discretion, shall decide the Bidders to whom the serially numbered CAN shall be sent, pursuant to which the details of the Equity Shares Allocated to them and the details of the amounts payable for Allotment in their respective names shall be notified to such Bidders. Additionally, a CAN will include details of the Escrow Account into which such payments would need to be made, details of the Escrow Collection Bank, Pay-in Date as well as the probable designated date, being the date of credit of the Equity Shares to the respective Bidder’s account. The successful Bidders would also be sent a serially numbered Placement Document either in electronic form or by physical delivery along with the serially numbered CAN. The dispatch of the serially numbered Placement Document and the serially numbered CAN to the successful Bidders shall be deemed a valid, binding and irrevocable contract for the successful Bidders to furnish all details that may be required by the Book Running Lead Manager and to pay the entire Issue Price for all the Equity Shares Allocated to such successful Bidders.

QIBS ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE

EQUITY SHARES THAT MAY BE ALLOTTED TO THEM.

Bank Account for Payment of Application Money Our Company has opened the “VSSL – QIP Escrow Account” in terms of the arrangement among our Company and Book Running Lead Manager and Yes Bank Limited as the Escrow Collection Bank. The successful Bidders will be required to deposit the entire amount payable for the Equity Shares Allocated to it by the Pay-in Date as mentioned in, and in accordance with, the respective CAN. Payments are to be made only through electronic fund transfer.

Note: Payments through cheques or demand draft or cash are liable to be rejected.

If the payment is not made favoring the “VSSL – QIP Escrow Account” within the time stipulated in the CAN, the Application Form and the CAN of the successful Bidder are liable to be cancelled.

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Our Company undertakes to utilize the amount deposited in “VSSL – QIP Escrow Account” only for the purposes of (i) adjustment against Allotment; or (ii) repayment of application money if our Company is not able to Allot. Further, our Company undertakes that it shall not utilize the monies raised through the Issue unless allotment is made, and the return of allotment is filed with the RoC in accordance with Section 42 of the Companies Act. In case of cancellations or default by the Bidders, our Company and the Book Running Lead Manager have the right to reallocate the Equity Shares at the Issue Price among existing or new Bidders at their sole and absolute discretion.

Designated Date and Allotment of Equity Shares The Equity Shares will not be Allotted unless the successful Bidders pay the Issue Price to the “VSSL – QIP

Escrow Account” as stated above. The Equity Shares will be issued and Allotment shall be made only in dematerialized form to the Allottees. Allottees will have the option to re-materialize the Equity Shares, if they so desire, as per the provisions of the Companies Act and the Depositories Act. Our Company, at its sole discretion, reserves the right to cancel the Issue at any time up to Allotment without assigning any reason whatsoever. Following the Allotment and credit of Equity Shares into the QIBs’ Depository Participant accounts, our Company will apply for final trading and listing approval from the Stock Exchanges. In the case of a Bidder who has been Allotted more than five per cent of the Equity Shares in the Issue, our Company shall disclose the QIBs’ name and the number of the Equity Shares Allotted to such QIB to the Stock Exchanges and the Stock Exchanges will make the same available on its website. Our Company shall make the requisite filings with the RoC and the SEBI within the stipulated period as required under the Companies Act and the PAS Rules. If you are Allotted any Equity Shares, our Company is required to disclose details such as your name, address and the number of Equity Shares Allotted to the RoC and the SEBI. The Escrow Collection Bank shall release the monies lying to the credit of the Escrow Account to our Company after receipt of final listing and trading approval for the Equity Shares from the Stock Exchanges. After finalization of the Issue Price, our Company shall update the Preliminary Placement Document with the Issue details and filed the same with the Stock Exchanges as the Placement Document. Pursuant to a circular dated March 5, 2010 issued by the SEBI, Stock Exchanges are required to make available on their websites the details of those Allottees in Issue who have been allotted more than 5% of the Equity Shares offered in the Issue, viz. the names of the Allottees, and number of Equity Shares Allotted to each of them, pre and post Issue shareholding pattern of our Company along with the Placement Document. In the event that our Company is unable to Issue and Allot the Equity Shares or there is a cancellation of the Issue within 60 days from the date of receipt of application money from a Bidder, our Company shall repay the application money within 15 days from expiry of the 60 day period, failing which our Company shall repay that money to such Bidders with interest at the rate of 12% per annum from expiry of the sixtieth day. The application money to be refunded by our Company shall be refunded to the same bank account from which application money was remitted by the Bidders.

Other Instructions

Right to Reject Applications Our Company, in consultation with the Book Running Lead Manager, may reject Bids, in part or in full, without assigning any reason whatsoever. The decision of our Company and the Running Lead Manager in relation to the rejection of Bids shall be final and binding.

Equity Shares in Dematerialized form The Allotment shall be only in dematerialized form (i.e., not in physical certificates but be fungible and be represented by the statement issued through the electronic mode). A Bidder that proposes to make a Bid pursuant to the Issue must have at least one beneficiary account with a Depository Participant prior to making the Bid. Allotment to a successful Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the successful Bidder.

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Equity Shares in electronic form can be traded only on stock exchanges having electronic connectivity with the Depositary Participants. The Stock Exchanges where the Equity Shares to be issued pursuant to the Issue are proposed to be listed have electronic connectivity with the National Securities Depositary Limited and the Central Depositary Services (India) Limited. The trading of the Equity Shares to be issued pursuant to the Issue would be in dematerialized form only for all Bidders in the dematerialized segment of the Stock Exchanges. Our Company and Book Running Lead Manager will not be responsible or liable for the delay in the credit of Equity Shares to be issued pursuant to the Issue due to errors in the Application Form or otherwise on part of the Bidders.

Release of Funds to our Company

The Escrow Collection Bank shall not release the monies lying to the credit of the “VSSL – QIP Escrow Account” till such time, that it receives an instruction in pursuance to the Escrow Agreement, along with the listing and trading approval of the Stock Exchanges for the Equity Shares offered in the Issue. The Company shall have access to, and utilize, the Net Proceeds only in accordance with applicable law.

Compliance officer

Ms. Sonam Taneja Vardhman Special Steels Limited Vardhman Premises, Chandigarh Road, Ludhiana-141010, Punjab, India Tel: +91 161 222894348; Fax: +91 161 2601048, +91 161 2220766 E-mail: [email protected]


152

SELLING RESTRICTIONS

The distribution of this Placement Document or any offering material and the offering, sale or delivery of the Equity Shares is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of this Placement Document or any offering material are advised to consult with their own legal advisors as to what restrictions may be applicable to them and to observe such restrictions. This Placement Document may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorized.



Accordingly, no action has been taken or will be taken by the Company or the Book Running Lead Manager that would permit an offering of the Equity Shares to occur in any country or jurisdiction, or the possession, circulation or distribution of this Placement Document or any other material relating to the Company or the Equity Shares in any country or jurisdiction, other than India. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and none of this Placement Document, any offering materials and any advertisements in connection with the offering of the Equity Shares may be distributed or published in or from any country or jurisdiction, other than India. The Issue will be made in compliance with the applicable ICDR Regulations. Each purchaser of the Equity Shares offered in this Issue will be deemed to have made representations, acknowledgments and agreements as described under the sections titled “Notice to Investors”, “Representations by Investors”, “Selling Restrictions” and “Transfer Restrictions”. This Placement Document may not be distributed directly or indirectly in India or to residents of India and any Equity Shares may not be offered or sold directly or indirectly in India to, or for the account or benefit of, any resident of India except as permitted by applicable Indian laws and regulations, under which an offer is strictly on a private and confidential basis and is limited to QIBs and is not an offer to the public. This Issue is a “private placement” within the meaning of Section 42 of the Companies Act, 2013 since the invitation or offer is to be made only to QIBs. This Placement Document is neither a public issue nor a prospectus under the Companies Act, 2013 or an advertisement and should not be circulated to any person other than to whom the offer is made. This Placement Document has not been and will not be registered as a prospectus with the Registrar of Companies in India.

The Equity Shares have not been and will not be registered under the U.S. Securities Act or the laws of any

state of the United States, and will not be offered or sold in the United States.

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TRANSFER RESTRICTIONS

Pursuant to Chapter VIII of the ICDR Regulations, any resale of Equity Shares, except on the Stock Exchange, is not permitted for a period of one year from the date of Allotment. Investors are advised to consult their legal counsel prior to making any resale, pledge or transfer of our Equity Shares. For more information, please see “Selling Restrictions”. Subject to the foregoing, by accepting this Placement Document and purchasing any Equity Shares under this Issue, you are deemed to have represented, warranted, acknowledged and agreed with our Company and the BRLM as follows: 1. you have received a copy of this Placement Document and such other information as you deem necessary

to make an informed decision and that you are not relying on any other information or the representation concerning our Company or the Equity Shares, and neither our Company nor any other person responsible for this document or any part of it or the BRLM will have any liability for any such other information or representation;

2. you are authorized to consummate the purchase of the Equity Shares in compliance with all applicable laws and regulations;

3. you acknowledge (or if you are a broker-dealer acting on behalf of a customer, your customer has confirmed to you that such customer acknowledges) that the Equity Shares have not been and will not be registered under the U.S. Securities Act;

4. you certify that either (A) you are the beneficial owner of the Equity Shares and are an entity resident in India, or (B) you are a broker-dealer acting on behalf of your customer and your customer has confirmed to you that (i) such customer is the beneficial owner of the Equity Shares, and (ii) such customer is an entity resident in India; and

5. our Company and the BRLM, their respective affiliates and others will rely upon the truth and accuracy of your representations, warranties, acknowledgements and undertakings set out in this document, each of which is given to (a) the BRLM on your own behalf and on behalf of our Company, and (b) to our Company, and each of which is irrevocable and, if any of such representations, warranties, acknowledgements or undertakings deemed to have been made by virtue of your purchase of the Equity Shares are no longer accurate, you will promptly notify our Company.

Any resale or other transfer, or attempted resale or other transfer, of the Equity Shares made other than in compliance with the above-stated restrictions will not be recognized by our Company.

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GENERAL INFORMATION

Our Company is incorporated in the Republic of India under the Companies Act, 1956, as a company with limited liability having CIN L27100PB2010PLC033930.

The registered and corporate office of our Company is located at Vardhman Premises, Chandigarh Road, Ludhiana - 141010, Punjab, India.

Our Company’s authorized share capital is Rs. 60,00,00,000 divided into 6,00,00,000 Equity Shares of Rs. 10 each, and our Company’s issued, subscribed and paid-up share capital is Rs. 32,12,53,760 divided into 3,21,25,376 Equity Shares of Rs. 10 each.

The Equity Shares were listed on BSE on May 17, 2012, and NSE on May 17, 2012.

The Issue was authorised and approved by the Board on November 4, 2017, and approved by the Shareholders pursuant to their special resolution dated December 6, 2017.

For the main objects of our Company, please refer to the Memorandum.

Our Company has applied for and obtained in-principle approval in terms of Regulations 28(1) of the Listing Regulations on February 14, 2018, for the listing of the Equity Shares on the Stock Exchanges.

The compliance officer for the purpose of the Issue is Ms. Sonam Taneja.

Copies of the Memorandum and Articles will be available for inspection during usual business hours on any weekday between 11:00 a.m. to 3:00 p.m. (except Saturdays and public holidays), at the Registered & Corporate Office.

Except as disclosed in this Placement Document, there are no significant changes in the financial or trading position of our Company since March 31, 2017, the date of the last audited financial statements, prepared in accordance with Ind AS and the Companies Act included herein.

Except as disclosed in this Placement Document, there are no material litigation or arbitration proceedings against or affecting our Company or our Company’s assets or revenues, nor is our Company aware of any pending or threatened litigation or arbitration proceedings, which are or might be material in the context of the Issue.

Except as disclosed in this Placement Document, our Company has obtained necessary consents, approvals and authorizations required in connection with the Issue.

Our statutory auditors are M/s S. S. Kothari Mehta & Company, Chartered Accountants, who have audited the financial statements of our Company for the Fiscals 2015, 2016 and 2017, and are independent auditors with respect to our Company in accordance with the applicable guidelines issued by the ICAI. M/s S. S. Kothari Mehta & Company, Chartered Accountants, have also performed a limited review of our Interim Financial Results as of and for the quarter and nine-months ended December 31, 2017, and the Interim Financial Results along with their report thereon have been included in this Placement Document.

Our Company confirms that it is in compliance with the minimum public shareholding requirements as specified under the SCRR and as required under the Listing Regulations.

The floor price for the Issue, as calculated in accordance with Regulation 85 of the ICDR Regulations, is Rs. 146.11 per Equity Share with reference to February 14, 2018, as the Relevant Date. In accordance with the resolution of the Shareholders dated December 6, 2017, and Regulation 85(1) of the ICDR Regulations, the Board may at its discretion, offer a discount of up to 5.00% to the Floor Price.

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Details of the Compliance Officer:

Compliance officer

Ms. Sonam Taneja Vardhman Special Steels Limited Vardhman Premises, Chandigarh Road, Ludhiana-141010, Punjab, India Tel: +91 161 222894348; Fax: +91 161 2601048, +91 161 2220766 E-mail: [email protected]


DECLARATION

Our Company certifies that all relevant provisions of Chapter VIII and Schedule XVIII of the ICDR Regulations

have been complied with and no statement made in this Placement Document is contrary to the provisions of

Chapter VIII and Schedule XVIII of the ICDR Regulations and that all approvals and permissions required to

carryon our Company's business have been obtained, are currently valid and have been complied with. Our

Company further certifies that all the statements in this Placement Document are true and correct.

Signed by:

Mr. Sachit Jain

Vice-Chairman and Managing Director

Date: February 19,2018

Place: Ludhiana

Signed by:

~~-L-i:..ieev s:glaChief Financial Officer

Date: February 19,2018Place: Ludhiana

161156

DECLARATION

We, the Directors of the Company certify that:

(i) the Company has complied with the provisions of the Companies Act, 2013 and the rules madethereunder;

(ii) the compliance with the Companies Act, 2013 and the rules does not imply that payment of dividend or

interest or repayment of debentures, if applicable, is guaranteed by the Central Government; and

(iii) the monies received under the offer shall be used only for the purposes and objects indicated in thePlacement Document (which includes disclosures prescribed under Form PAS-4).

Signed by:

Mr. Sachit Jain



Place: Ludhiana

1 am authorized by the duly authorized committee of the Board of Directors of the Company, vide resolutiondated February 14,2018, to sign this form and declare that all the requirements of Companies Act, 2013 and the

rules made thereunder in respect of the subject matter of this form and matters incidental thereto have been

complied with. Whatever is stated in this form and in the attachments thereto is true, correct and complete and

no information material to the subject matter of this form has been suppressed or concealed and is as per the

original records maintained by the promoters subscribing to the Memorandum of Association and the Articles ofAssociation.

It is further declared and verified that all the required attachments have been completely, correctly and legiblyattached to this form.

Signed by:

Mr. Sachit Jain



Place: Ludhiana

162157

VARDHMAN SPECIAL STEELS LIMITED

CIN: L27100PB20 IOPLC033930

Registered & Corporate Office: Vardhman Premises, Chandigarh Road, Ludhiana-141010, Punjab, India

Website: www.vardhmansteel.com

Compliance Officer

Name: Ms. Sonam TanejaTel: +91 1612228943 4S;

Fax: +91 1612601048, +91 1612220766

E-mail: [email protected]

BOOK RUNNING LEAD MANAGER


10th Floor, IIFL Centre, Kamala City,

Senapati Bapat Marg, Lower Parel (West),

Mumbai - 400013, Maharashtra, India

LEGAL COUNSEL TO THE ISSUE

J. Sagar Associates

Vakils House, IS Sprott Road,

Ballard Estate, Mumbai - 400 00I,

Maharashtra, India

AUDITORS TO THE COMPANY

MIs S. S. Kothari Mehta & Company

Chartered Accountants

Chartered Accountants,

SCQ- 19, 1st Floor,

Sector-l l , Panchkula.

163158

not for circulation serial number strictly confidential · 2018. 2. 19. · vardhman special steels...

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