ANNUAL REPORT 36TH CONTENTS BOARD OF DIRECTORS. Chairman & Whole Time Director Mr. Amarjit Goyal. Managing Director & CEO Mr. Krishan Kumar Goyal

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3 ANNUAL REPORT 36TH BOARD OF DIRECTORS Chairman & Whole Time Director Mr. Amarjit Goyal Managing Director & CEO Mr. Krishan Kumar Goyal Prof. Triloki Na Kapoor Mr. Beant Singh Mr. D.S. Gill Mr. Partap K. Aggarwal Mr. Aditya Goyal - Whole Time Director Mr. P.L.Talwar - Director (Operations) GM (SECRETARIAL) & COMPANY SECRETARY Mr. Ashish Sharma AUDITORS M/s A. Goel & Associates Chartered Accountants CONTENTS Notice Director s Report Corporate Governance Report Auditor s Report Balance Sheet Profit & Loss Account Cash Flow Statement Schedules BANKERS State Bank of India Punjab National Bank State Bank of Patiala Canara Bank CORPORATE OFFICE SCO 98-99, Sub City Centre, Sector 34, Chandigarh India REGISTERED OFFICE & WORKS G.T. Road, Mandi Gobindgarh, Distt. Fatehgarh Sahib, Punjab REGISTRARS & SHARE TRANSFER AGENTS M/s MCS Limited F-65, First Floor, Okhla Industrial Area, Phase 1, New Delhi

4 MODERN STEELS LIMITED NOTICE Notice is hereby given at e 36 Annual General NOTES:- i) A member entitled to attend and vote at e meeting is Meeting of e members of Modern Steels Limited entitled to appoint a proxy to attend and vote (on a poll) will be held on Wednesday, e 29 September, instead of himself and e proxy need not be a member 2010 at a.m. at e Registered Office of e of e Company. A proxy in order to be effective must Company at G.T. Road, Mandi Gobindgarh, Distt. be received by e Company not less an 48 hours Fatehgarh Sahib, Punjab to transact e before e meeting. A proxy so appointed shall not following business:- have any right to speak at e meeting. As Ordinary Business: ii) Explanatory Statement under Section 173(2) of e 1. To consider and adopt e Audited Balance Sheet Companies Act, 1956 relating to Special Business to st as at 31 March, 2010, e Profit and Loss be transacted at e Meeting is annexed hereto. Account of e Company for e year ended on at date and e Reports of e Directors and iii) The Register of Members and share transfer books of Auditors ereon. e Company will remain closed from 27 September, 2. To appoint a Director in place of Mr. D.S. Gill who 2010 to 29 September, 2010 (bo days inclusive) for retires by rotation and being eligible, offers e purpose of Annual General Meeting. himself for re-appointment. iv) Members holding shares in e dematerialised mode 3. To appoint Auditors of e Company and to fix are requested to intimate all changes wi respect to eir remuneration. The retiring Auditors eir addresses, bank details, mandate etc., to eir M/s. A. Goel & Associates, Chartered Accountants, respective Depository Participant (DP). These are eligible for re-appointment. changes will be automatically reflected in Company s records, which will help e Company to provide As Special Business: efficient and better services to e members. 4. To consider and if ought fit, to pass wi or v) Members who wish to obtain any information on e wiout modifications e following resolution as Company or view e Accounts for e financial year a SPECIAL RESOLUTION: st ended 31 March, 2010, may send eir queries at RESOLVED THAT subject to e provisions of least 10 days before e Annual General Meeting to Sections 198, 269, 309 and 310 read wi e Company Secretary at Company s Office at SCO Schedule XIII of e Companies Act, 1956, and 98-99, Sub City Centre, Sector-34, Chandigarh oer applicable provisions, necessary consents and approvals, if any, approval of e vi) Details under Clause 49 of e Listing Agreement wi Company be and is hereby given to e e Stock Exchange in respect of Directors seeking appointment of Mr. Amarjit Goyal as Whole appointment/re-appointment at e Annual General Time Director of e Company for a period of Meeting, is annexed hereto. ree years w.e.f. 29 June, 2010 on e remuneration and on such terms and conditions as set out in e Explanatory Statement By order of e Board of Directors attached hereto and approved by e Ashish Sharma Remuneration Committee wi e liberty and Place : Chandigarh GM (Secretarial) & auority to e Board of Directors of e Dated : 30 August, 2010 Company Secretary Company to alter and vary such terms and conditions including remuneration as agreed by EXPLANATORY STATEMENT PURSUANT TO e Board of Directors of e Company and SECTION 173 (2) OF THE COMPANIES ACT, 1956 Mr. Amarjit Goyal subject to e conformity wi ITEM NO. 4 e provisions of e Companies Act, Mr. Amarjit Goyal has been at e helm of affairs of e By order of e Board of Directors Company since inception. His last appointment as Chairman & Managing Director was made on 29 June, Ashish Sharma Place : Chandigarh GM (Secretarial) & Mr. Goyal s present term of office expired on Dated : 30 August, 2010 Company Secretary 28 June, Having regard to his outstanding 2

5 ANNUAL REPORT 36TH contribution, experience and inspiring leadership 3. OTHER TERMS AND CONDITIONS e Board of Directors of e Company has (i) Contribution to Superannuation Fund and appointed him as Whole Time Director of e Provident Fund: As per Company s rules. Company for a period of ree years w.e.f. 29 June, The Board of Directors while approving (ii) Gratuity: Gratuity payable shall not exceed one appointment of Mr. Goyal, also approved half mon s salary for each completed year of remuneration by way of salary, perquisite and oer service. terms & conditions of his appointment as given herein below: (iii) Car: Free use of company s car for company s TERMS & CONDITIONS work as well as for personal purposes along wi driver. 1. SALARY (iv) Telephone: Telephone, telefax and oer ` 2,50,000/- (Rupees Two Lacs Fifty Thousand communication facilities at company s cost. Only) per mon. (v) Sitting Fees: The Whole Time Director shall 2. PERQUISITES not be entitled to payment of any sitting fee for Perquisites shall be allowed in addition to salary. attending e Board/Committee of Directors However, it shall be restricted to an amount of meetings. ` 50,000/- (Rupees Fifty Thousand Only) per (vi) Reimbursement of Expenses: Reimbursement mon. Perquisites are classified as follows: of all entertainment, traveling, hotel and oer (i) Accommodation: The Company shall expenses incurred by Mr. Amarjit Goyal during provide rent free furnished accommodation. e course of and in connection wi e All expenses related to housing/house rent business of e Company. shall be borne by e Company. (vii) Oers: Subject to any statutory ceilings, (ii) Gas, Electricity and Water: The Mr. Amarjit Goyal may be given any oer Company shall provide gas, electricity and allowances, perquisites and facilities as e water free of cost. Board of Directors may decide from time to (iii) Medical Reimbursement: Expenses time. incurred for him and his family shall be reimbursed in full. The terms and conditions can be varied wi mutual agreement of bo parties subject (iv) Leave and Leave Travel Concession: however to e stipulation at e changes Leave as per rules of e Company. Leave should be in conformity wi e provisions of Travel concession for self and family once e Companies Act, 1956 read wi Schedule in a year shall be reimbursed. XIII or any amendment ereof. (v) Club Fees: Fees of e Club subject to a maximum of two clubs. 4. MINIMUM REMUNERATION (vi) Personal Accident Insurance: Personal In e event of loss or inadequacy of profits in any accident insurance of an amount e financial year during e tenure of appointment, e Chairman & Whole Time Director shall be paid annual premium of which does not exceed remuneration by way of salary and perquisites as set ` 20,000/- Rupees Twenty Thousand Only). out above, as minimum remuneration, subject to For e purpose of calculating e above restrictions, if any, set out in Schedule XIII of e ceiling, perquisites will be evaluated as per Companies Act, 1956, from time to time. Income Tax rules, wherever applicable. In This Explanatory Statement togeer wi e notice e absence of any such rules, perquisites may be treated as an abstract of e terms of e shall be evaluated at actual cost. agreement and e Memorandum of interest under Section 302 of e Companies Act,

6 MODERN STEELS LIMITED The documents referred herewi and Explanatory 2. Name of e Director : Mr. Amarjit Goyal Statement are open for inspection by any member at Date of Bir : e registered office of e Company during Date of Appointment : business hours on any working day of e Company upto and including e date of meeting. Expertise in specific functional Area : Mr. Amarjit Your Directors commend e resolution as given at Goyal is e Promoter Director of e Company. He is a item no. 4 of e notice for your approval. well known personality in e Indian Iron & Steel Industry, having experience in manufacturing, rolling & MEMORANDUM OF INTEREST marketing of Iron & Steel products. He has rich experience of management and administration and is Except Mr. Amarjit Goyal (himself), Mr. Krishan st also a Director in Modern Dairies Limited. As on 31 Kumar Goyal and Mr. Aditya Goyal (son & grand son March, Mr. Amarjit Goyal is holding 10,99,250 respectively of Mr. Amarjit Goyal), no oer Director equity shares of e Company. is eier concerned or interested in e aforesaid resolution. Qualification: F. Sc By order of e Board of Directors List of outside Directorships held : Ashish Sharma Place : Chandigarh GM (Secretarial) & Dated : 30 August, 2010 Company Secretary Information regarding details of e Directors seeking Appointment/ Re-appointment in Annual General Meeting fixed on 29 September, 2010 pursuant to Clause 49 of e Listing Agreement 1. Name of e Director : Mr. D. S. Gill i. Modern Dairies Limited ii. Bharat Forgings Pvt. Ltd iii. Mala Builders Pvt. Ltd. iv. Nabha Finance Pvt. Ltd. Chairman/Member of e Committee of Board of Directors of e Company: NIL Chairman/Member of e Committee of Directors of oer Companies: NIL : Date of Bir By order of e Board of Directors Date of Appointment : Expertise in specific functional Area: Mr. D. S. Gill has a very rich knowledge and experience in e field of Industrial Management and he has been st associated wi e company since As on 31 March, 2010, Mr. D. S. Gill is holding 500 equity shares in e Company. Qualification: M.Sc in Metallurgical Engineering. List of outside Directorships held : Modern Automotives Limited Chairman/Member of e Committee of Board of Directors of e Company: Audit Committee Chairman Investors Grievances Committee Member Remuneration Committee Member Banking & Finance Committee Chairman Chairman/Member of e Committee of Directors of oer Companies: NIL Place : Chandigarh Dated : 30 August, 2010 Ashish Sharma GM (Secretarial) & Company Secretary 4

7 ANNUAL REPORT 36TH DIRECTOR S REPORT To The Members Modern Steels Limited PROJECTS The company has strengened its Quality Control in line wi e requirements of OEM s. The company has commissioned e state-of-e-art Automatic Ultrasonic Testing Machine. Dear Members, CURRENT OPERATIONS Your directors are pleased to report at e current year Your Directors hereby present eir 36 Annual started on a strong note wi an all round demand in Report and audited accounts of e Company for e automotive and engineering industry. st year ended 31 March, Wi e present scenario and e encouraging forecasts FINANCIAL HIGHLIGHTS from e Industry & Government, it is expected at e Industry will do fairly well in e time ahead. This augurs ` in Lacs well for your Company. Year Ended Year Ended During e first quarter, e Company has achieved Net Sales of ` Crores as compared to ` Crores in Gross Sales & oer Receipts e same period, previous year. It has earned profit before Excise Duty tax of ` 3.90 Crores as compared to ` 1.68 Crores in e Net Sales & Income from Operations same quarter, previous year. Operating Profit ISSUE OF WARRANTS TO PROMOTERS Interest Cash Profit / Loss 1403 (210) In April 2010, e Promoter & Promoter group were Depreciation allotted 14,00,000 warrant on preferential basis (subject Profit before Tax (PBT) 949 (641) to BSE approval) convertible into equity shares at a price Net Profit / Loss 615 (472) of ` 33 per share (price being not less an e SEBI PERFORMANCE price) to be converted wiin a period of 18 mons from e date of BSE s approval and allotment. During e year under review, e Company KAIZEN & TS ACCREDITATION achieved gross sales and oer receipts of ` During e year e company continued implementation Crores as compared to ` Crores in e of Kaizen project and conducted a number of workshops. previous year. The Company has achieved a net Your Company s manufacturing facilities continue to profit of ` 6.15 Crores as compared to net loss of maintain TS Certification by DNV Neerlands, a ` 4.72 Crores in e previous year. leading international Certification Company. In e backdrop of e global recession during e DIRECTORS fiscal , e year under review started on a Mr. Amarjit Goyal, Chairman & Mg. Director of e difficult note. The first half of e year did not show company s tenure has ended on The Board significant improvement in operations. But in e of Directors has appointed him as Whole Time Director for second half, wi e revival of domestic demand, a period of ree years wi effect from specially from e Automobile & Engineering subject to approval of shareholders at e ensuing Annual Industry, e company could show better General Meeting. performance. The Rolled product s sales volume Mr. Goyal will continue to remain e Chairman of e increased from 53,108 MT in e year to Board. 68,495 MT in e year Mr. Beant Singh s term will end by e ensuing Annual During e year your company has taken initiative to General Meeting and he is not seeking re-appointment. explore e new market segments. It has worked The directors place on record eir sincere appreciation towards getting approval from OEM s for Two for e valuable contributions made by Mr. Beant Singh Wheelers & Car Segments. This initiative will help in during his long association wi e Company. e better performance of e company in e times Mr. D.S. Gill, Director shall retire by rotation at e ensuing ahead. Annual General Meeting, and being eligible, offers himself for re-appointment. 5

8 MODERN STEELS LIMITED AUDITORS applicable accounting standards have been M/s A. Goel & Associates, Auditors of e Company, followed and at ere were no material hold office until e conclusion of e forcoming departures; Annual General Meeting and being eligible, offer ii) The accounting policies selected by em have emselves for re-appointment. been applied consistently, and ey have made Your Directors have appointed M/s V. Kumar & judgements and estimates at are reasonable and Associates as Cost Auditors of e Company for e prudent so as to give a true and fair view of e year to conduct e cost audit subject to e state of e Company as on 31st March 2010 and approval of e Central Government. profit of e Company for e year ended 31st March 2010; AUDITOR S REPORT iii) They have taken proper and sufficient care for e All e comments of e Statutory Auditors on e maintenance of adequate accounting records in Annual Accounts of e Company are selfaccordance wi e provisions of e Companies explanatory and require no furer comments. Act, 1956 to safeguard e assets of e Company FIXED DEPOSITS and for preventing and detecting fraud and oer The outstanding deposits at e end of e year under irregularities; review amount to ` Lacs (Previous year iv) The annual accounts have been prepared on a ` Lacs). There are no overdue deposits. going concern basis. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSIONS & ANALYSIS A separate report on Corporate Governance and Management Discussions & Analysis is attached herewi and forms part of is report. HUMAN RESOURCES Harmonious employee relations prevailed roughout e year. Your Directors place on record eir appreciation of all employees for eir hard work and dedication. APPRECIATION Your Directors wish to place on record eir sincere anks to e Company s Bankers for eir valuable support. Place : Chandigarh Dated: 30 August, 2010 For & on behalf of e Board AMARJIT GOYAL Chairman & Whole Time Director MANAGEMENT DISCUSSIONS AND ANALYSIS The statement showing particulars of employees as 1. Industry s Structure and Developments required under Section 217 (2A) of e Companies The Indian Steel Industry has passed rough e Act, 1956 read wi e Companies (Particulars of global recession well. Wi e robust GDP grow Employees) Rules, 1975, as amended, is enclosed as and growing demand from e Automobile & Annexure A and forms part of is report. Engineering Industry, e Steel Industry is on e CONSERVATION OF ENERGY, TECHNOLOGY pa of higher grow rate. ABSORPTION & FOREIGN EXCHANGE EARNING The special steel produced by your company AND OUTGO mainly caters demand of Automotive segment of Information as per Section 217 (1) (e) of Companies industry. We expect e alloy steel industry to see Act, 1956 read wi Companies (Disclosure of better times ahead. particulars in e Report of Board of Directors) Rules, Last year, e Indian automotive industry showed 1988, is given in e Annexure B forming part of e a positive grow while on e oer hand ere e report. international market was still struggling to recover DIRECTOR S RESPONSIBILITY STATEMENT e shortage in demand. In e current scenario, Pursuant of Section 217 (2AA) of e Companies Act, when e country s GDP is moving towards a 1956 e Directors confirm at: double digit grow, e automotive segment is i) expected to sustain e accelerated demand in e In e preparation of annual accounts for e time ahead. financial year ended 31st March 2010, e 6

9 ANNUAL REPORT 36TH 2. Opportunities & Threats During e current financial year, your Company Key Opportunities include: took various strategic initiatives to improve its Higher grow in e auto segments, and volumes and profitability, which helped e Government s continued focus on building Company to post an impressive performance for infrastructure augurs well for industry. e year despite e adversities. Key Threats include: 6. Human Resources Volatility of raw material prices. Human resources are e most valuable assets of Being away from e ports and major raw e Company and e Company recognizes material producers, any increase in freight employees contributions to e grow of e would put margins under pressure. Company. The Company is having professionalized Steel industry is subject to cyclical swings and motivated work force. arising from factors such as excess capacity, regional demand & supply imbalance and 7. Cautionary statement volatile swings in market demand. The statement in is management discussion and 3. Risks and concerns e management perceives analysis describing e Company s objectives, projections, estimates, expectations may be The steel industry is now integrated wi forward looking statements wiin e meaning of international steel markets and any major change applicable laws and regulations. Actual results in e global demand & supply scenario shall affect could differ materially from ose expressed & e steel industry in India. implied. Important factors at could make 4. Internal control system and eir adequacy difference to e Company s decisions include To provide reasonable assurance at assets are economic conditions effecting demand & supply safeguarded against loss or damage and at accounting records are reliable for preparing financial statements, management maintains a system of accounting and controls including an and price conditions in e domestic market. For & on behalf of e Board internal audit process. Internal controls are Place : Chandigarh AMARJIT GOYAL supported by Management reviews. Dated : 30 August, 2010 Chairman & Whole Time Director The Board of Directors have an Audit Committee at is chaired by an Independent Director. The committee meets periodically wi Management, Internal Auditor, Statutory Auditors to review e Company s programme of internal controls, audit plans and results, recommendations of e auditors and management s responses to ose recommendations. 5. Performance During e year under review, e company achieved gross sales / oer receipts of ` Crores as compared to ` Crores in e previous year. The company has achieved a net profit of ` 6.15 Crores as compared to net loss of ` 4.72 Crores in e previous year. 7

10 MODERN STEELS LIMITED Annexure A to Directors Report Statement pursuant to Section 217(2A) of e Companies Act, 1956 and e Companies (Particulars of Employees) Rules, 1975 S. Name Age Designation/ Gross Qualification Total Date of Previous No (Years) Nature of Remune- Experi- Commence employment/ Duties ration ence -ment of position held ` (Years) Employment 1 Mr. Amarjit Goyal 74 Chairman 23,82,600 FSC Rainbow Steels & Whole Time Ltd. - Technical Director Director (2 Years) 2 Mr. Krishan Kumar 53 Mg. Director 66,25,691 B.Com., LLB Goyal & CEO Notes: (1) Gross remuneration comprises salary, allowances, monetary value of perquisites and e Company s contribution to Provident and Superannuation Funds. (2) The nature of employment is contractual. (3) Mr. Krishan Kumar Goyal is also Chairman & Mg. Director of Modern Dairies Limited. For & on behalf of e Board Place : Chandigarh Dated : 30 August, 2010 AMARJIT GOYAL Chairman & Whole Time Director 8

11 Annexure B to Directors Report ANNUAL REPORT 36TH INFORMATION AS PER SECTION 217(1) (e) READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR ST THE YEAR ENDED 31 MARCH, FORM A A) POWER AND FUEL CONSUMPTION Current Year Previous Year Electricity Purchased Units (kwh) 6,87,91,000 5,58,30,000 Total Amount ` 31,39,43,981 24,08,54,020 Rate Per unit ` Furnace Oil Quantity (Kgs) 36,72,760 26,51,106 Total Amount ` 8,86,61,900 6,46,52,017 Rate Per Unit ` Propane Gas Quantity (Kgs) 4,78,035 6,71,245 Total Amount ` 1,41,33,014 2,94,24,674 Rate Per Unit ` B) CONSUMPTION PER UNIT OF PRODUCTION 1. Production (Concast Billets) MT 53,868 41,478 a. Electricity Units b. Furnace Oil (Kgs) FORM B 2. Production (Ingots) MT 32,285 28,743 a. Electricity Units b. Furnace Oil (Kgs) Production (Rolled Products wi Oil) MT 42,699 35,714 Production (Rolled Products wi Gas) MT 88,13 13,266 a. Electricity Units b. Furnace Oil (Kgs) c. Propane Gas ( Kgs) TECHNOLOGY ABSORPTION Research & Development a. Areas in which R&D carried out by e Company. b. Looking at e customer requirement, e Company is developing new alloy steels products. Technology Absorbtion, Adaptation and Innovation a. Commissioned e state-of-e-art Automatic Ultrasonic Testing Machine. 2. FOREIGN EXCHANGE EARNING AND OUTGO Particulars wi regard to Foreign Exchange earning and outgo appear on e relevant Schedule of e Balance Sheet. For & on behalf of e Board Place : Chandigarh Dated : 30 August, AMARJIT GOYAL Chairman & Whole Time Director

12 CORPORATE GOVERNANCE REPORT In line wi e requirement for providing a Report on Corporate Governance as per Clause 49 of e revised Listing Agreement of e Stock Exchanges as applicable, given below is a report on e Company s Corporate Governance norms. COMPANY S PHILOSOPHY ON CODE OF GOVERNANCE Modern Steels Limited is committed in adopting e best practices of Corporate Governance. The Company endeavours to act on e principles of transparency, accountability, trusteeship and integrity. The ultimate objective being of realizing long term shareholder. 1 BOARD OF DIRECTORS MODERN STEELS LIMITED A. Composition of e Board of Directors A list of Directors including e Chairman of e Board and eir status as Executive / Non-Executive and st Independent / Non-Independent during e year ended 31 March, 2010 is set out below:- Name of e Category of e Director No of No of oer No. of Last Director Board Directorships Commitee AGM meetings in Public co. positions held attended attended Chairman Member Mr. Amarjit Goyal Chairman & Whole Time Director - Non Independent (Promoter Director) YES Mr. Krishan Kumar Goyal Managing Director & CEO - Non Independent (Promoter Director) YES Prof. Triloki Na Kapoor Non Executive - Independent Director NO Mr. Beant Singh Non Executive - Independent Director YES Mr. D.S.Gill Non Executive - Independent Director YES Mr. Partap K Aggarwal Non Executive - Independent Director NO Mr. D.N. Pandit Non Executive - Independent Director N.A Mr. Aditya Goyal Whole Time Director Executive - Non Independent Director NO Mr. P.L. Talwar Director (Operations) YES Executive - Non Independent Director Disclosure of change :- Mr. Amarjit Goyal has been appointed as Chairman & Whole Time Director for a period of 3 years w.e.f 29 June, Mr. D.N. Pandit having successfully completed his tenure as Director retired at e Annual General Meeting held on and did not seek reappointment. Mr. Beant Singh having successfully completed his tenure as Director shall retire at e ensuing Annual General Meeting and is not seeking reappointment. The Committee composition of Directors underwent e following changes: Prof Triloki Na Kapoor was re-designated as Chairman of e Investors Grievances Committee in place of Mr. Beant Singh, while Mr. D.S. Gill joined Investors Grievances Committee as a member w.e.f. 28 July, Mr. Partap K. Aggarwal replaced Mr. Beant Singh as member of e Audit Committee w.e.f. 28 July, B. Board Meeting and Attendance st During e financial year ended 31 March, 2010, seven meetings of Board of Directors were held. The details of Board Meetings held during e year are as under:- 10

13 ANNUAL REPORT 36TH S.No. Date of Board Meeting Board s Streng No of Directors Present May, nd 22 June, July, September, October, January, March, C. Board s Processes It has always been e Company s policy and practice at apart from matters requiring Board s approval by statute, all major decisions including quarterly results of e Company, financial restructuring, capital expenditure proposals, collaborations, material investment proposals in joint venture/promoted companies, sale and acquisition of material nature of assets, mortgages, guarantees, donations etc., are regularly placed before e Board. The information as required under Corporate Governance is being made available to e Board. 2. COMMITTEES OF THE BOARD A. Audit Committee a. i) The Company has Audit Committee as per e provisions of e Listing Agreement and under Section 292A of e Companies Act, 1956, which consists of Independent and Non-Executive Directors namely Mr. D.S. Gill, Prof. Triloki Na Kapoor and Mr. Partap K. Aggarwal*. ii) The Chairperson of Audit Committee Mr. D.S. Gill is a Non-Executive Independent Director. iii) All of e above Directors are financially literate and have accounting and related financial management expertise. iv) The Chairperson was present at e last Annual General Meeting to answer e shareholders queries. v) The Company Secretary of e Company Mr. Ashish Sharma is e Secretary of e Audit Committee. * Mr. Partap K. Aggarwal, who is a Non Executive Independent Director, replaced Mr. Beant Singh as a member of e Audit Committee w.e.f. 28 July, nd b. The Committee met six times during e year on 26 May 2009, 22 June 2009, 30 July 2009, 9 September 2009, 28 October 2009 and 30 January The status of attendance of members at e Audit Committee meetings was as under:- Name of Director No. of Meetings attended during Mr. D.S. Gill 6 Prof. Triloki Na Kapoor 5 Mr. Beant Singh* 6 Mr. Partap K Aggarwal* N.A., as he was not a member during e year * Mr. Partap K. Aggarwal, who is a Non Executive Independent Director, replaced Mr. Beant Singh as a member of e Audit Committee w.e.f. 28 July,

14 MODERN STEELS LIMITED c. Powers of Audit Committee: The Audit Committee has e following powers as amended from time to time:- 1. To investigate any activity wiin its terms of reference. 2. To seek any information from any employee. 3. To obtain outside professional legal advice. 4. To secure attendance of outsiders wi relevant expertise, if considered necessary. d. Role of Audit Committee: 1. Oversight of e Company s financial reporting process and e disclosure of its financial information to ensure at e financial statement is correct, sufficient and credible. 2. Recommending to e Board, e appointment, re-appointment and, if required, e replacement or removal of e Statutory Auditor and e fixation of audit fee. 3. Approval of payment to e Statutory Auditors for any oer services rendered by e Statutory Auditors. 4. Reviewing, wi management, e annual financial statements before submission to e Board for approval wi particular reference to: a) Matters required to be included in e Directors Responsibility Statement to be included in e Board s Report in terms of clause (2AA) of Section 217 of e Companies Act, b) Changes, if any, in accounting policies and practices and reasons for e same. c) Major accounting entries involving estimates based on e exercise of judgement by management. d) Significant adjustments made in e financial statements arising out of e audit findings. e) Compliance wi Listing and oer legal requirements relating to financial statements. f) Disclosure of any related party transactions i.e. transactions of e Company of material nature, wi promoters or e management, eir subsidiaries or relatives etc. at may have potential conflict wi e interests of Company at large. g) Qualifications in draft audit report. 5. Reviewing wi e management, e quarterly financial statements before submission to e Board for approval. 6. Reviewing wi e management, performance of e Statutory and Internal Auditors, adequacy of internal control systems. 7. Reviewing e adequacy of internal audit function, if any, including e structure of e internal audit department, staffing and seniority of e official heading e department, reporting structure coverage and frequency of internal audit. 8. Discussion wi e Internal Auditors on any significant findings and follow-up ereon. 9. Reviewing e findings of any internal investigations by e Internal Auditors into matters where ere is suspected fraud or irregularity or a failure of internal control system of a material nature and reporting e matter to e Board. 10. Discussion wi e Statutory Auditors before e audit commences, about e nature and scope of audit as well as post-audit discussion to ascertain any area of concern. 11. To look into e reasons for substantial defaults in e payment to e depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors. 12. To review e functioning of Whistle Blower mechanism, in case e same is existing. 13. Carrying out any oer function, which may be specified as a role of e Audit Committee under amendments, if any, from time to time as per e Listing Agreement, e Companies Act, 1956, and oer statutes. 12

15 ANNUAL REPORT 36TH e. Review of information by Audit Committee: The Audit Committee has e power to mandatorily review e following information:- 1. Management discussion and analysis of financial conditions and results of operations; 2. Statement of significant related party transaction (as defined above), as submitted by management; 3. Management letters/ letters of internal control weakness issued by e Statutory Auditors; 4. Internal Audit Reports relating to internal control weakness; and 5. The appointment, removal and terms of remuneration of e Chief Internal Auditors shall be subject to review by e Audit Committee. B. Remuneration Committee The Company has a Remuneration Committee to review and recommend payment of annual salaries, commission, service agreements and oer employment conditions of e Executive Directors. The Committee fixes e remuneration after taking into consideration remuneration practices followed by companies of similar size and standing in e industry. The Committee periodically reviews and recommends suitable revision in remuneration package of e Executive Directors to e Board. All members of e Committee are Non Executive and persons of repute and have sound knowledge of management practices. The power and role of e Remuneration Committee is as per guidelines set out in e Listing Agreement. The Remuneration Committee constituted of Mr. Beant Singh, Chairman and Mr. D.S. Gill, Member which has undergone change is as under: Name of e Director Category of e Director Member / Chairman Prof. Triloki Na Kapoor* Non Executive Independent Chairman Mr. D.S. Gill Non Executive Independent Member Mr. Partap K. Aggarwal* Non Executive Independent Member *Remuneration Committee has been reconstituted by joining of Prof. Triloki Na Kapoor, who replaced Mr. Beant Singh as a Chairman and by joining of Mr. Partap K Aggarwal as a member of e committee w.e.f. 28 July, During e year no meeting of e Remuneration Committee was held. Remuneration Policy The Executive Directors are paid remuneration as per e terms approved by e Board of Directors and confirmed by e shareholders of e Company. Service contracts are entered into in terms of regulations governing eir appointment and terms of remuneration. The Remuneration is fixed considering various factors such as qualification, experience, expertise, prevailing remuneration in e competitive industries, financial position of e Company etc. The remuneration structure comprises Basic Salary, Perquisites and allowances, contribution to Provident Fund and oer funds in accordance wi various related provisions of e Companies Act,

16 MODERN STEELS LIMITED st Details of Remuneration paid to e Directors during e financial year ended 31 March, Amount in ` Name of e Director Salary Benefits Perquisites Stock Option Sitting Fee Total Mr. Amarjit Goyal 21,00,000 2,61,000 21,600 Nil - 23,82,600 Mr. Krishan Kumar Goyal* 60,00,000 9,360 6,16,331 Nil - 66,25,691 Prof. Triloki Na Kapoor Nil 75,000 75,000 Mr. Beant Singh Nil 80,000 80,000 Mr. D.S.Gill Nil 65,000 65,000 Mr. Partap K. Aggarwal Nil 10,000 10,000 Mr. D.N.Pandit** Nil 15,000 15,000 Mr. Aditya Goyal 18,00,000 9,360 21,600 Nil - 18,30,960 Mr. P.L. Talwar 15,00,000 9,360 2,45,745 Nil - 17,55,105 *The company has received e approval of e Central Government under Section 309 of e Companies Act, 1956 vide letter no A CL.VII dated for e payment of e remuneration to Mr. Krishan Kumar Goyal. **Mr. D.N. Pandit having successfully completed his tenure as Director retired at e Annual General Meeting held on and didn't seek re-appointment. Mr. D.S. Gill holds 500 equity shares in e Company. No oer Non-Executive Director is holding any shares in e Company. C. Shareholders/ Investors Grievances Committee The Company has formed a Shareholders/Investors Grievances Committee which looks into e redressing of shareholders and investors complaints like transfer of shares, non receipt of balance sheet, change of address etc. The Committee met four times during e year on 26 May 2009, 30 July 2009, 28 October 2009 and 30 January The Chairman of e Committee Prof. Triloki Na Kapoor* is a Non-Executive Independent Director nominated by e Board. The functioning and terms of reference of e Committee are as prescribed under e Listing Agreement wi e Stock Exchange. The constitution of e Shareholders/Investors Grievances Committee is as under: Name of e Director Category of e Director Member / Chairman Prof. Triloki Na Kapoor* Non Executive Independent Chairman Mr. Krishan Kumar Goyal Executive Non Independent Member Mr. D.S. Gill* Non Executive Independent Member *Investors Grievances Committee has been reconstituted by re-designating Prof. Triloki Na Kapoor as Chairman in place of Mr. Beant Singh, who ceases to be a member of e Committee and also by joining of Mr. D.S. Gill as a member of e committee w.e.f. 28 July, D. Share Transfer Committee For e expeditious disposal of e share transfer and allied services, Company has formed a Share Transfer Committee to look into and decide matters pertaining to share allotment, transfer, duplicate share certificates and related matters. 14

17 ANNUAL REPORT 36TH E. Banking & Finance Committee The Company has also constituted a Banking & Finance Committee under e chairmanship of Mr. D.S. Gill, a Non-Executive Independent Director. Mr. Beant Singh and Mr. Aditya Goyal are e member of e Committee. The Committee oversees e Company s banking operations and borrowing from banks and financial institutions and allied matters, which oerwise require e consent of Board of Directors. 3. Mr. Ashish Sharma, GM (Secretarial) & Company Secretary is e Compliance Officer of e Company. 4. Details of last ree Annual General Meetings (AGMs) Financial Year Location Date Time Regd.office: G.T. Road, Mandi Gobindgarh (Pb) a.m Regd.office: G.T. Road, Mandi Gobindgarh (Pb) a.m Regd.office: G.T. Road, Mandi Gobindgarh (Pb) a.m. Special Resolutions passed in previous ree AGMs rd (i) In e 33 AGM dated e following Special resolutions were passed: a) The appointment and remuneration of Mr. Amarjit Goyal as Chairman & MD of e Company. b) Allotment of Bonus Shares to e existing shareholders of e Company in e ratio of 3:2. (ii) In e 34 AGM dated e following Special resolution was passed: a) The appointment and remuneration of Mr. Aditya Goyal as Whole time Director of e Company. (iii) In e 35 AGM dated e following Special resolution was passed: a) The appointment and remuneration of Mr. P.L. Talwar as Director (Operations) of e Company. During e year e Company passed no resolution rough postal ballot. 5. Disclosures 1. None of e transactions wi any of e related parties were in conflict wi e interests of e Company at large. Transaction wi related parties are disclosed in Notes to e Accounts in e Annual Report. 2. There has been no non-compliance penalties/strictures imposed on e Company by Stock Exchange(s) or SEBI or any oer statutory auority, on any matter related to capital markets, during e last ree years. 3. The Company has complied wi e above Mandatory Requirements of Corporate Governance & e Company has not adopted any Non Mandatory Requirements of Corporate Governance except Remuneration Committee and Banking and Finance Committee. 6. Means of Communication The quarterly /Half yearly/ Yearly results of e Company, Notice of Board Meeting and information relating to Annual General Meeting, Book Closures is published in The Financial Express (all editions)/financial World and Punjabi Tribune i.e in English and regional language newspaper and is also notified to e Stock Exchange as required under e Listing Agreement. In addition, e Company also files quarterly results, Shareholding Pattern etc. in such form so as to enable Stock Exchange to put it on eir website. Management Discussion and Analysis forms part of e Annual Report, which is posted to e shareholders. 15

18 MODERN STEELS LIMITED 1. Annual General Meeting:- GENERAL SHAREHOLDER INFORMATION Day, Date & Time : Wednesday, e 29 day of September, 2010 at a.m. Venue : G.T. Road, Mandi Gobindgarh, Distt. Fatehgarh Sahib, Punjab Financial Calendar for:- Adoption of Quarterly Results Ended In e Mon of (tentative) 30 June, July, 2010 (Already held) 30 September, 2010 October, 2010 (Last week) st 31 December, 2010 January, 2011 (Last week) st 31 March, 2011 May, 2011 (Last week) Annual General Meeting By September, Book Closure Date:- From 27 September, 2010 to 29 September, 2010 (bo days inclusive) 4. Listing on Stock Exchanges:- Your Company is listed at e Bombay Stock Exchange Limited 5. Stock Code:- BSE: ISIN No. in NSDL & CDSL: INE001F Stock Data:- MONTH Modern Steels Limited at BSE BSE SENSEX 2009 High Low Close Volume High Low Close ` ` ` April , , , May , , , June , , , July , , , August , , , September , , , October , , , November , , , December , , , January , , , February , , , March , , ,

19 ANNUAL REPORT 36TH 7. Registrars and Share Transfer Agents (For Physical as well as for Demat Segment): M/s. MCS Limited F- 65, First Floor, Okhla Industrial Area Phase-I, New Delhi Tel.No. : , Fax No.: , admin@mcsdel.com Website: All shareholders of e Company can avail online services from our Registrar & Share Transfer Agents M/s. MCS Limited, wi regard to Investor Grievances. Please login on e site of MCS Limited and click on Investors Services and you can register your queries/grievances and details as required by you. The registered queries/grievances on e site will be responded by M/s. MCS Limited on priority basis. st 8. Shareholding Pattern of e Company as on 31 March, 2010:- Category No. of shares held %age of shareholding (rounded off) 1. Promoters & Promoter Group 72,20, Mutual Funds and UTI 6, Financial Institutions / Banks 1, Bodies Corporate (not included above) 7,57, Indian Public 39,45, NRIs/OCBs 32, TOTAL 1,19,64, st 9. Distribution of Shareholding as on 31 March, 2010 :- SHAREHOLDING IN ` SHARE HOLDERS NO. OF SHARES From To Number % of total No. of Shares % of total Upto , ,77, ,30, ,92, ,06, ,26, ,02, ,84, and above ,42, TOTAL 8, ,19,64, Dematerialisation of Shares:- The trading in Company s shares is permitted only in dematerialised form. In order to enable e shareholders to hold eir shares in electronic form and to facilitate scripless trading, e Company has enlisted its shares wi National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Share Dematerialisation record: The following data indicates e extent of Dematerialization of st Company s shares as on 31 March, No. of shares 49,92, % of e total Share Capital 17

20 MODERN STEELS LIMITED 11. Plant Locations of e Company:- Registered Office & Works : G.T. Road, Mandi Gobindgarh, Distt. Fatehgarh Sahib, Punjab Investors Correspondence Address:- All queries of investors regarding e Company s shares in Physical / D mat form may be sent at e following addresses: i) Modern Steels Limited Corporate Office: SCO 98-99, Sub City Centre, Sector 34, Chandigarh Tel.: , , , Fax.: secretarial@modernsteels.com, Company s Website: ii) M/s.MCS Limited F- 65, First Floor, Okhla Industrial Area Phase-I, New Delhi Tel.No. : , Fax No.: , admin@mcsdel.com, Website: Declaration under Clause 49.I (D)(ii) by e Executive Director, of affirmation by e Board of Director and Senior Management of compliance wi code of conduct. The Shareholders, I, Krishan Kumar Goyal, Managing Director & CEO of e Company do hereby declare at all e Board members and Senior Management Personnel have affirmed compliance wi e Code of Conduct adopted by e Board of Directors, as applicable to e Board of Directors and Senior Management of e company. Place : Chandigarh Dated : 30 August, 2010 Krishan Kumar Goyal Managing Director & CEO AUDITOR S CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENT To, The Members Modern Steels Limited We have examined e compliance of Corporate Governance by Modern Steels Limited for e year ended st 31 March, 2010, as stipulated in Clause 49 of e Listing Agreement of e said company wi Stock Exchange. The compliance of conditions of e Corporate Governance is e responsibility of e Management. Our examination has been limited to e review of e procedures and implementations ereof adopted by e company for ensuring compliance wi e conditions of e certificate of Corporate Governance as stipulated in e said clause. It is neier an audit nor an expression of opinion on e financial statements of e company. In our opinion and to e best of our information and according to e explanations given to us and e representations made by e Directors and e management, We certify at e company has complied wi e conditions of Corporate Governance as stipulated in Clause 49 of e Listing Agreement. As required by e guidance note issued by e Institute of Chartered Accountants of India, we have to state at no st investor complaint is pending for a period exceeding one mon as on 31 March, 2010 against e company, as per records maintained by e Investors Grievances Committee of e Company. We furer state at such compliance is neier an assurance as to future viability of e company nor of e efficiency or effectiveness wi which e management has conducted e affairs of e Company. FOR A. GOEL & ASSOCIATES Chartered Accountants Place: Chandigarh Dated: 30 August, 2010 ASHOK K. GOEL Partner 18

21 AUDITORS REPORT To The Members, Modern Steels Ltd. MANDI GOBINDGARH ii) iii) ANNUAL REPORT 36TH In our opinion, proper books of accounts as required by law have been kept by e Company so far as appears from our examination of ose books; The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt wi by is report are in agreement wi e books of account; Dear Members, iv) In our opinion, e Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt 1. We have audited e attached Balance Sheet of wi by is report comply wi e applicable MODERN STEELS LTD, MANDI GOBINDGARH st accounting standards referred to in sub- as at 31 March, 2010 and also e Profit & Loss section (3C) of Section 211 of e Companies Account and e Cash Flow Statement for e year Act, 1956; ended on at date annexed ere to. These financial statements are e responsibility of v) On e basis of written representations Company s management. Our responsibility is to received from e Directors as on 31st March, express an opinion on ese financial statements 2010, and taken on record by e Board of based on our audit. Directors; none of e Director is disqualified as on 31st March, 2010 from being appointed 2. We conducted our audit in accordance wi as a Director in term of clause (g) of subauditing standards generally accepted in India. section (1) of Section 274 of e Companies Those standards require at we plan and perform Act, 1956; e audit to obtain reasonable assurance about wheer e financial statements are free of vi) In our opinion and to e best of our material misstatement. An audit includes information and according to e explanations examining, on a test basis, evidence supporting e given to us, e said accounts read wi e amounts and disclosures in e financial Significant Accounting Policies and oer statements. An audit also includes assessing e notes ereon togeer give e information accounting principles used and significant required by e Companies Act, 1956, in e estimates made by management, as well as manner so required and give a true and fair evaluating e overall financial statements view in conformity wi e accounting presentation. We believe at our audit provides a principles generally accepted in India. reasonable basis for our opinion. a) In e case of e Balance Sheet, of e 3. st As required by Companies (Auditors Report) state of affairs of e Company as at 31 Order, 2003 issued by e Central Government of March, 2010; India in term of sub-section (4A) of Section 227 of b) In e case of e Profit & Loss Account, of e Companies Act, 1956 and on e basis of such e profit for e year ended on at date; checks of e books and records of e Company and as we considered appropriate and according to e c) In e case of e Cash Flow Statement, of information and explanations given to us, we e cash flow for e year ended on at enclose in e Annexure a statement on e matters date. specified in paragraphs 4 and 5 of e said order. FOR A. GOEL & ASSOCIATES Furer to our comments in e Annexure Chartered Accountant referred to in paragraph 3 above, we report at: Firm Registration No N i) We have obtained all e information & explanations, which to e best of our Place : Chandigarh ASHOK K. GOEL knowledge and belief were necessary for e Dated : 28 July 2010 M.No purpose of our audit; 19

22 MODERN STEELS LIMITED REFERRED TO PARAGRAPH 3 OF OUR REPORT OF and explanations given to us we have neier came EVEN DATE across nor have been informed of any continuing To e best of our knowledge and belief and according to e failure to correct major weakness in e aforesaid information and explanations given to us, we furer report internal control procedures. at :- 5. To e best of our knowledge and belief and 1. a) The Company has maintained proper records to according to e information and explanations given show full particulars including quantitative details & to us we are of e opinion at e transactions need situation of its fixed assets. to be entered into e register maintained under 2. b) As explained to us, e fixed assets have been Section 301 of e Companies Act, 1956 have been physically verified by e management which in our so entered. In our opinion and according to e opinion is reasonable having regards to size of e information and explanation given to us, e Company and nature of its assets. No material transactions made in Pursuance of Contracts or discrepancies have been noticed during e year. arrangements have been made at prices which are reasonable having regard to prevailing market prices c) During e year substantial part of fixed assets have at e relevant time. not been disposed off by e Company. 6. In our opinion and according to e information and a) The inventory of e Company has been physically explanations given to us, e Company has complied verified by e management during e year. wi e provisions of Section 58A and 58AA of e b) In our opinion and according to e information and Companies Act, 1956 and e rules framed ere explanation given to us, e procedures of physical under wi regard to e deposits accepted from e verification of inventories followed by e public. No order has been passed by e Company management are reasonable and adequate in Law Board or National Company Law Tribunal or relation to e size of e Company and nature of its Reserve Bank of India or any court or any oer business. Tribunal. c) The Company has maintained proper records of its 7. In our opinion e Company s present internal audit inventories and no material discrepancies were system is commensurate wi its size and nature of noticed on physical verification. business. 3. a) The Company has granted loan to five companies 8. On e basis of records produced to us, we are of e covered in register maintained u/s 301 of e opinion at prima facie e cost records prescribed Companies Act, The maximum amount by e Central Government of India under Section involved during e year is ` Crore & year end 209(1)(d) of e Companies Act, 1956 have been outstanding is NIL. The rate of interest and oer made & maintained. We have not carried out any terms & conditions of e above loan is not prima detailed examination of such Account & records. facie prejudicial to e interest of e Company. The 9. a) According to e books and records as produced principal amount and interest are regular. There are and examined by us in accordance wi generally no overdue amount exceeding ` One lakh. accepted auditing practices in India and also b) The Company has taken unsecured loan from two based on Management representations, companies and eight parties covered in e register undisputed statutory dues in respect of Provident maintained under Section 301 of e Companies Fund, Employee s State Insurance dues, Act, The maximum amount involved during Investor Education and Protection Fund, Income e year is ` 2.35 Crore and year end outstanding is Tax, Weal Tax, Service Tax, Cess and oer ` 2.25 Crore. material statutory dues have generally been c) The rate of interest and oer terms and conditions regularly deposited by e Company during e of e unsecured loans taken from e Companies year wi e appropriate auorities in India and covered in e register maintained under Section ere were no arrear outstanding in respect of 301 of e Companies Act, 1956 are not prima facie above for a period of more an six mons as on prejudicial to e interest of e Company. The Company has been regular in e payment of b) According to e records of e Company principal and interest amount. examined by us and e information and 4. There is adequate internal control systems explanation given to us ere are no dues of Sales commensurate wi e size of e Company and e Tax, Income Tax, Custom Duty, Weal Tax, nature of its business wi regard to e purchase of Service Tax, Excise Duty and Cess which have fixed assets, inventory, sale of goods & services. not been deposited on account of any dispute Furer on e basis of our examination of books and oer an e following amounting to records of e Company and according to information ` 2.32 Crore. The details are as under :- 20