Pradeep Metals Ltd

DIRECTORS' REPORT

Your Directors are pleased to present the Forty First Annual Report together with the Audited Financial Statements for the year ended 31st March, 2024.

1. FINANCIAL RESULTS:

The Company's standalone financial performance for the year ended 31st March, 2024 is summarized below:

*Exceptional Items represent provision made for impairment in the value of investment in Pradeep Metals Limited Inc., Houston, USA (WOS) of Rs. Nil Lakhs (previous year Rs. 135.00 Lakhs).

2. REVIEW OF OPERATIONS AND THE STATE OF COMPANY'S AFFAIRS:

The Company has achieved Revenues from Operations and Other Income of Rs. 25,627.85 Lakhs during the Financial Year ended 31st March, 2024, an increase of 2.46% over the previous year. Profit before Exceptional Items and Taxes for the year has decreased by 7.84 % and Profit after Exceptional Items and Taxes decreased by 2.79% during the year.

The consolidated Income of the Company is Rs. 28,039.46 Lakhs in the current year as compared to Rs. 27,038.07 Lakhs in the previous year, i.e. an increase of 3.70%. The consolidated Profit before Exceptional Items but after Taxes for the current year is Rs. 2,228.42 Lakhs as compared to Rs. 2,730.28 Lakhs in the previous year.

Profit after Tax of the Company has declined due to (a) reduction in sales price; (b) increase in Depreciation because of addition / replacement of new machineries & installation of Solar Plant; and (c) increase in the finance cost.

The Company has added new customers & products, but the sales revenue has increased during the year by 2.46% as compared to previous year. It is mainly due to fall in sales price due to variance in steel prices.

Detailed analysis and future outlook of the Company's business are dealt in the Management Discussion and Analysis Report, which forms part of this Report.

3. DIVIDEND:

The Directors have recommended a Final Dividend of 20 % i.e., Rs. 2/- per Equity Share of Rs. 10/- each for the Financial Year ended 31st March, 2024 at the Board Meeting held on 17th May, 2024.

4. TRANSFER TO RESERVES:

No amount has been transferred to the General Reserve.

5. CHANGE IN THE NATURE OF BUSINESS, IF ANY:

There was no change in the nature of business of the Company during the year under review.

6. MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT:

Management's Discussion and Analysis Report for the year under review, in terms of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "Listing Regulations") and SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018 (the "Amended Listing Regulations"), forms part of this report.

7. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES:

The Company has one Wholly-Owned Subsidiary namely Pradeep Metals Limited, Inc., Houston, USA (WOS) and one Wholly-Owned Step-Down Subsidiary namely Dimensional Machine Works, LLC, Houston, USA (SDS). The financials of both the Subsidiaries are included in the Consolidated Financial Statements which are prepared in accordance with the relevant Accounting Standards issued by the Institute of Chartered Accountants of India and form part of this Report.

The WOS is engaged in trading of the products manufactured by the Company. The WOS is also engaged in the agency business for marketing of the products of the Company in international market. Apart from adding new business, this has helped the Company to serve the customers falling in different time zones by faster response and service.

The SDS has been engaged in manufacturing, trading and warehousing of components for Engineering industry in the USA market.

The total income of the WOS and the SDS was Rs. 3,024.37 Lakhs (USD 3.651 Million) and Rs. 4,307.26 Lakhs (USD 5.200 Million) for the current year as compared to Rs. 3,179.65 Lakhs (USD 3.947 Million) and Rs. 3,451.98 Lakhs (USD 4.285 Million) for the previous year, respectively. The combined profit before Exceptional items and Taxes of both the Subsidiaries amounted of Rs. 384.87 Lakhs (USD 0.465 Million) for the year as compared to Rs. 554.43 Lakhs (USD 0.688 Million) in the previous year.

The total income of WOS decreased in the current year due to reduction in customer's demand and sales price margin due to lower steel prices in comparison to the previous year.

During the year, the WOS has also earned the Agency Commission Income of Rs. 500.96 Lakhs (USD 0.608 Million) as compared to Rs. 487.39 Lakhs (USD 0.608 Million) during the previous year.

Consolidated profitability of the Subsidiaries has decreased mainly due to (a) reduction in sales prices, (b) increase in the finance cost and (c) increase in employee benefit cost due to yearly increments in SDS.

The Company doesn't have any Joint Venture or Associate Company.

As required by the Companies (Accounts) Rules, 2014, a report on performance and financial position of each of the subsidiaries, included in the Consolidated Financial Statements, is annexed to this Report as Annexure A (Form No. AOC-1).

Material Subsidiaries:

Pursuant to amended Regulation 16(1)(c) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, "Material Subsidiary" means a Subsidiary whose income or net worth exceeds ten percent of the consolidated income or net worth, respectively, of the Company and its Subsidiaries in the immediately preceding accounting year.

The Board of Directors of the Company has approved a Policy for determining material subsidiaries which is in line with the Listing Regulations as amended from time to time. The Policy has been uploaded on the Company's website https://www.pradeepmetals.com/policies/.

Pradeep Metals Limited, Inc., Houston, USA, a Wholly-Owned Subsidiary and Dimension Machine Works LLC, Wholly-Owned Step-Down Subsidiary fall under the definition of Material Subsidiaries as mentioned above.

8. DEPOSITS:

The Company has not invited nor accepted any fixed deposits from the public and hence, no amount of principal or interest was outstanding in respect thereof, on the date of the Balance Sheet.

9. CREDIT RATING:

The Company's financial discipline and prudence is reflected in the credit ratings ascribed by the rating agency as given below:

10. SHARE CAPITAL:

During the year under review, there was no change in the Company's Issued, Subscribed and Paid-up Equity Share Capital which consisted of 1,72,70,000 Equity Shares of Rs. 10/- each as on 31st March, 2024. The Company has issued only one class of Equity Shares and it has not issued Shares with differential rights.

The Company has not issued any Equity Shares under Sweat Equity Share Capital or Employee Stock Option Scheme.

11. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

As on 31st March, 2024, the Company has Eight (8) Directors consisting of Four (4) Independent Directors (of which one is Woman Director), One (1) Executive Director and Three (3) Non-Executive Non-Independent Directors (of which one is Woman Director).

Re-appointment:

1. In accordance with the provisions of Section 152(6) of the Companies Act, 2013 ("the Act"), Mrs. Neeru P. Goyal (DIN: 05017190), Non-Executive Non-Independent Director, retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible, has offered herself for reappointment. Details of her background are given in the Corporate Governance Report, which forms part of this Annual Report.

Key Managerial Personnel:

Pursuant to the provisions of Section 203 of the Act, Mr. Pradeep Goyal, Chairman & Managing Director, Ms. Kavita Choubisa Ojha, Chief Financial Officer and Mr. Abhishek Joshi, Company Secretary and Compliance Officer are the Key Managerial Personnel of the Company as on the date of this Report.

12. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:

The information required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this Report as Annexure B.

13. DIRECTORS' RESPONSIBILITY STATEMENT:

In terms of the provisions of Section 134(3)? read with Section 134(5) of the Companies Act, 2013 ("the Act"), the Board of Directors, in respect of the year ended 31st March, 2024, hereby confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

b. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period;

c. they have taken proper and sufficient care for the 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 fraud and other irregularities;

d. they have prepared the annual accounts on a going concern basis;

e. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

14. a) DECLARATION BY INDEPENDENT DIRECTORS:

• The Company has received declarations from all Independent Directors of the Company, confirming that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and the Listing Regulations.

• In terms of Regulation 25(8) of SEBI Listing Regulations, they have confirmed that they are not aware of any circumstance or situation which exists or may be reasonably anticipated that could impair or impact their ability to discharge their duties as Independent Director.

• On the basis of declarations received from all Independent Directors and after undertaking a due assessment of the veracity of the same, the Board of Directors has confirmed that they meet the criteria of independence as mentioned under Regulation 16(1)(b) of the SEBI Listing Regulations and that they are independent of the Management.

b) Mr. Advait Kurlekar (DIN: 00808669) was appointed as Independent Director during the Financial Year 2023-24 at the Annual General Meeting (AGM) held on 4th August, 2023 for a period of 5 years with effect from 10th May, 2023 upto 9th May, 2028. The said appointment was based on the recommendation of the Nomination and Remuneration Committee.

c) Ms. Nandita Nagpal Vohra (DIN: 06962408) was re-appointed as Independent Director during the Financial Year 2023-24 at the Annual General Meeting (AGM) held on 4th August, 2023 for a further period of 5 years with effect from 28th December, 2023 upto 27th December, 2028. The said appointment was based on the recommendation of the Nomination and Remuneration Committee.

15. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION ETC:

The Company has put in place appropriate policy on Directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of Directors and other matters provided in Section 178(3) of the Companies Act, 2013.

The salient features of Company's policy on Directors' remuneration have been disclosed in the Corporate Governance Report, which forms part of this Report.

16. ANNUAL EVALUATION OF BOARD'S PERFORMANCE, IT'S COMMITTEES AND INDIVIDUAL DIRECTORS:

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time, evaluation of the Board as a whole, individual Directors, Committees and Chairman was undertaken by circulating structured questionnaire to all the Directors, taking into consideration the guidelines issued by SEBI.

The Nomination and Remuneration Committee reviewed the performance of Individual Directors, the Board as a whole, Committees of the Board and Chairman & Managing Director after taking into consideration feedback received from the Directors. The evaluation was done on various parameters such as vision and strategy, participation, disclosures of interests, review of risk management policies and evaluating plans with reference to risk and return, good governance, leadership skills, operations, business development, human resources development, corporate communication, etc. as per the structured questionnaire circulated. The feedback received from the Directors were then consolidated and discussed at the Board Meeting held on 17th May, 2024. The Directors expressed their satisfaction with the evaluation process and the performance.

17. CORPORATE GOVERNANCE AND VIGIL MECHANISM:

A detailed Report on Corporate Governance, pursuant to the requirements of Regulation 34(3) of the Listing Regulations, forms an integral part of this Report. A Certificate from the Auditors of the Company, M/s. N.A. Shah Associates LLP, Chartered Accountants, confirming compliance with the conditions of Corporate Governance as stipulated under Schedule V (E) of the Listing Regulations, is annexed to this Report as Annexure C.

The Business Responsibility Report, as required by Regulation 34(2) of the Listing Regulations, is not applicable to the Company for the Financial Year ending 31st March, 2024.

The Vigil Mechanism of the Company also incorporates a Whistle Blower Policy in terms of the Listing Regulations thereby establishing a vigil mechanism for the Directors and permanent employees for reporting genuine concerns, if any. Protected disclosures can be made by a whistle blower through an email or a letter to the Chairman of the Audit Committee. The policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: https://www.pradeepmetals.com/policies/.

18. RISK MANAGEMENT:

The Directors had constituted a Risk Management Committee which was entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company's risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, Legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. However, since constitution of Risk Management Committee is not applicable to the Company as per the Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time, the Risk Management Committee was dissolved w.e.f. 13th May, 2017 and the Audit Committee currently looks into the Risk Management functions.

19. CORPORATE SOCIAL RESPONSIBILITY (CSR):

The Company has formulated, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company. It has been approved by the Board and the same has been hosted on the Company's website: https://www.pradeepmetals.com/policies.

The key philosophy of all CSR initiatives of the Company is guided by three core commitments of Scale, Impact and Sustainability. During the year, the Company has spent Rs. 40.25 Lakhs against the annual requirement of Rs. 40.02 Lakhs for the year 2023-24 on CSR activities.

Pursuant to the amendments in the CSR Rules dated 22nd January, 2021, the constitution of CSR Committee is not applicable where the CSR amount to be spent by a Company doesn't exceed Rs. 50 Lakhs and the functions of such Committee are to be discharged by the internal Committee formed by the Board of Directors.

Accordingly, the responsibility for implementation of the CSR projects / activities has been delegated to the Managing Director, Chief Financial Officer and the Company Secretary.

The Company has identified focus areas of engagement which have been enumerated in Annexure D to this Report.

20. AUDIT COMMITTEE:

The details in respect of the Audit Committee are included in the Corporate Governance Report, which forms part of this Report.

a. Statutory Auditors

Pursuant to the provisions of Section 139(1) of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, M/s. N. A. Shah Associates LLP, Chartered Accountants (Registration No. 116560W/W100149), [formerly known as M/s. N. A. Shah Associates] were appointed in 37th AGM as the Statutory Auditors of the Company, for a term of 5 years i.e., till the conclusion of 42nd AGM of the Company to be held in the year 2025.

Auditors' Report

The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments.

No frauds were reported by the Auditors under Sub-section (12) of Section 143 of Companies Act, 2013.

b. Cost Auditors

As per the requirement of Central Government and pursuant to the provisions of Section 148 of the Companies Act, 2013 (the Act) read with the Companies (Cost Records and Audit) Rules, 2014, as amended from time to time, the Company has been carrying out audit of its cost records every year.

The Board of Directors, on the recommendation of the Audit Committee, has re-appointed M/s. Vishesh Naresh Patani, Cost & Management Accountants, (Firm Registration No. 101108), as Cost Auditors to audit the cost accounts of the Company for the Financial Year 2024-25 at a remuneration of Rs.1,35,000/- (plus applicable taxes and reimbursement of out-of-pocket expenses at actuals).

Pursuant to Section 148 of the Act, a resolution seeking Members' approval for the remuneration payable to the Cost Auditors forms part of the Notice convening the ensuing AGM.

The relevant Cost Audit Report for the Financial Year 2022-23 was filed with the Ministry of Corporate Affairs on 18th October, 2023. No adverse comments have been made in the said Report.

c. Secretarial Auditors and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Rules made thereunder, M/s. Shweta Gokarn & Co., Practicing Company Secretaries, Navi Mumbai (Certificate of Practice Number: 11001; Peer Review No. 1693/2022) were appointed as the Secretarial Auditors to conduct Secretarial Audit for the Financial Year 2023-24.

The Secretarial Auditors' Report for the Financial Year is annexed to this Report as Annexure E.

The Board has also re-appointed M/s. Shweta Gokarn & Co. as Secretarial Auditor to conduct the Secretarial Audit of the Company for Financial Year 2024-25.

22. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED:

During the Financial Year under review, Company has applied for 2,24,167 Equity Shares for Rs. 2,236.80 Lakhs of Pradeep Metals Limited Inc., U.S.A., (PmL Inc.) the Wholly Owned Subsidiary of the Company.

The said application was in lieu of conversion of Outstanding Loan given by Pradeep Metals Limited to PML Inc., as on date amounting to USD 26,90,000 (Equivalent to Rs. 2,236.80 Lakhs, basis a conversion rate of Rs. 83.15/USD as on 21st December, 2023).

As on the date of this report, Company's investment in WOS in the form of Equity Shares stands at Rs. 3,579.32 Lakhs (USD 4.67 Million).

23. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES:

All contracts / arrangements / transactions entered by the Company during the Financial Year with related parties were in the ordinary course of business and on an arm's length basis. The Company has entered into an agency agreement with WOS for International marketing and support to the customers.

During the year, the Company did not enter into any contract / arrangement / transaction with related parties, other than the Wholly Owned Subsidiary, which could be considered material, in accordance with the policy of the Company on materiality of related party transactions.

The Policy on materiality of related party transactions and dealing with related party transactions, as approved by the Board, may be accessed on the Company's website https://www.pradeepmetals.com/policies/.

The particulars as required under the Act along with the statement containing transactions with any person or entity belonging to the Promoter / Promoter Groups which hold(s) 10% or more shareholding, if any, are furnished in Annexure F (Form No. AOC-2) to this Report.

24. MATERIAL CHANGES AND COMMITMENTS:

No material changes have occurred and no commitments were given by the Company, thereby affecting its financial position between the end of the Financial Year to which these financial statements relate and the date of this Report.

25. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure G to this Report.

26. INTERNAL FINANCIAL CONTROL SYSTEM:

The Company has in place adequate internal financial controls, commensurate with the activities and the size of the Company. During the year, such controls were tested and no reportable material weaknesses in the design or operations were observed.

27. SECRETARIAL STANDARDS:

The Company has in place proper system to ensure compliance with the provisions of the applicable Secretarial Standards (SS-1 and SS-2) issued by the Institute of Company Secretaries of India.

28. HUMAN RESOURCES:

The Company recognizes its human resources as one of its prime and critical resources for its growth and hence it strives to align human resource policy and initiatives to meet business plans. The relations between the Management and the workers and Staff Members remained very cordial throughout the year under review. As on 31st March, 2024, the Company had 535 employees on its payroll at its manufacturing plant and administrative office at Rabale, Navi Mumbai.

29. DISCLOSURE AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has zero tolerance towards sexual harassment at the workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in accordance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder.

During the year under review, no case was filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the Financial Year 2023-24, five Meetings of the Internal Complaints Committee were held on 25th April, 2023, 17th July, 2023, 5th September, 2023, 5th December, 2023 and 15th March, 2024.

30. EXTRACT OF ANNUAL RETURN AS ON 31st MARCH, 2024:

The Annual Return for the FY 2023-24 may be accessed on the Company's website https://www.pradeepmetals.com.

31. BOARD MEETINGS HELD DURING THE FY 2023-24:

During the Financial Year 2023-24, 5 (five) Board Meetings were held on 10th May, 2023, 4th August, 2023, 4th November, 2023, 21st December, 2023, and 10th February, 2024 the details of which are furnished in the Corporate Governance Report forming part of this Report. The gap between any two Meetings did not exceed 120 days.

Change in Promoter and Promoter Group Shareholding:

Shares held by Mr. Pradeep Goyal, Mrs. Neeru Goyal and M/s. Nami Capital Private Limited form part of the Promoter Group Shareholding.

During the year under review, there was no change in the Shareholding of Promoter / Promoter Group.

As on date, the total shareholding of Nami Capital Private Limited stands at 59.03%, while the overall shareholding of Promoter group stands at 73.48 %. The total shareholding of the Promoters is within the maximum permissible limit of 75% as stated under the SEBI SAST Regulations.

33. PARTICULARS OF EMPLOYEES:

In terms of the provisions of Sub-Rule 2 of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, none of the employees except Mr. Pradeep Goyal, Chairman & Managing Director of Company, drew remuneration in excess of the limits prescribed under the Act. Relevant particulars are given in Annexure B to this Report. The Report and the Accounts are being sent to the Members excluding the statement containing the names of top ten Employees in terms of remuneration drawn. In terms of Section 136 of the Act, the details of top ten Employees are open for Inspection at the Registered Office of the Company. Any Member interested in obtaining a copy of the same may write to the Company Secretary.

34. SPECIAL BUSINESS:

As regards the items in the Notice of the Annual General Meeting relating to Special Business, the resolutions incorporated in the Notice and the Explanatory Statement relating thereto, fully indicate the reasons for seeking the approval of Members to those resolutions.

The following resolutions are proposed to be passed as Special Business:

1. To approve the remuneration of the Cost Auditors for the Financial Year ending 31st March, 2025.

2. To approve Payment of Commission to Directors other than Managing Director and Directors from Promoter Group.

35. GENERAL:

The Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year:

• No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

• There were no frauds reported by the Auditors under Sub section (12) of Section 143 of the Companies (Amendment) Act, 2015, to the Audit Committee, Board of Directors or Central Government.

• There were no applications made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year and at the end of the Financial Year.

• The details of the difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof- Not applicable.

36. ACKNOWLEDGEMENT:

The Directors wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by the Government authorities, Union Bank of India (bankers), customers, vendors, employees and Members during the year under review and look forward to their continued support.