38th annual report 2009-2010 · 38th annual report 2009-2010 vbc industries limited 6-2-913/914,...

38th Annual Report

2009-2010

VBC Industries Limited

6-2-913/914, 3rd Floor, Progressive Towers,Khairatabad, HYDERABAD - 500 004,

Andhra Pradesh, India.

1234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789

1234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789

CONTENTS

Notice .............................................................................................................................. 2-3

Directors' Report ........................................................................................................... 4-8

Management Discussion & Analysis ....................................................................... 9-10

Corporate Governance .............................................................................................11-19

Auditors' Report .........................................................................................................20-23

Balance Sheet ................................................................................................................ 24

Profit & Loss Account ................................................................................................... 25

Schedules, Accounting Policies & Notes on Accounts ......................................26-38

Cash Flow Statement ................................................................................................... 39

Balance Sheet Abstract ................................................................................................. 40

THIRTY EIGHTH ANNUAL GENERAL MEETING

Day : Thursday

Date : 15.07.2010

Time : 03.00 P.M.

Venue : Surana Udyog Auditorium, FAPCCI, 11-6-841Red Hills, HYDERABAD - 500 004.

REGISTERED OFFICE

6-2-913/914, Third Floor, Progressive Towers, Khairatabad,HYDERABAD - 500 004. ANDHRA PRADESH, INDIA.

Tel +91 40 23320904-08 / 23301230, Fax +91 40 23321217

WORKS

Dinnedevarapadu Village, NH-7, Kurnool-518 002, Andhra Pradesh.Tel: 08518-237845, Fax: 08518-237848


Members are requested to bring this Annual Report to the Meeting.

BOARD OF DIRECTORS

Dr. M.V.V.S. Murthi Chairman (Non-Executive)Sri G.L. Tandon, Padma Bhushan DirectorSri R.K.R. Gonela, I.A.S. (Retd.) DirectorSri J. Kameswara Sarma DirectorSri M.K. Raju DirectorSri M.V. Ananthakrishna DirectorSri V.S. Rao DirectorSri M.S. Lakshman Rao Managing Director

AUDIT COMMITTEE

Sri R.K.R. Gonela, I.A.S. (Retd). Chairman (Non-Executive)Sri J. Kameswara Sarma MemberSri V.S. Rao Member

INVESTORS' GRIEVANCE AND SHARE TRANSFER COMMITTEE

Dr. M.V.V.S. Murthi Chairman (Non-Executive)Sri M.S. Lakshmana Rao MemberSri J. Kameswara Sarma Member

REMUNERATION COMMITTEE

Sri R.K.R. Gonela, I.A.S. (Retd). Chairman (Non-Executive)Sri G.L. Tandon Non-Executive Member

COMPANY SECRETARY

Sri D.S. Sarma GM (Corporate Affairs) &CS/Compliance Officer

AUDITORS : BANKERS :

M/s. BRAHMAYYA & CO., UCO BANKChartered Accountants, Zonal OfficeVISAKHAPATNAM. 8-2-624, Ground Floor

Road No.10, Banjara HillsHYDERABAD-500 034.

SHARE TRANSFER AGENTS

VENTURE CAPITAL & CORPORATE INVESTMENTS PVT. LIMITED12-10-167, Bharat Nagar, HYDERABAD - 500 018.

Tel: +91 40 23818475 / 76, Fax: +91 40 23868024e-mail : [email protected]

1

NOTICE is hereby given that the THIRTY EIGHTH Annual General Meeting of members of VBC INDUSTRIESLIMITED be convened to be held on Thursday, the 15th day of July, 2010 at 3-00 P.M. to be held at SuranaUdyog Auditorium of The Federation of Andhra Pradesh Chambers of Commerce and Industry, situatedat 11-6-841, Red Hills, Hyderabad-500 004 to transact the following business:

ORDINARY BUSINESS:

1. To receive, consider and adopt the Balance Sheet as at 31st March, 2010 together with the Profitand Loss Account as on that date and the Reports of Auditors and Directors thereon.

2. To appoint a Director in place of Sri V.S. Rao, who retires by rotation, and being eligible, offershimself for re-appointment.

3. To appoint a Director in place of Sri R.K.R. Gonela, who retires by rotation, and being eligible,offers himself for re-appointment.

4. To appoint Auditors for the financial year 2010-2011 to hold office till the conclusion of the nextAnnual General Meeting and fix their remuneration. M/s. Brahmayya & Co., Chartered Accountants(Firm Regd. No. 000513S), the retiring Auditors, being eligible, offer themselves for re-appointment.

SPECIAL BUSINESS:

ITEM NO. 5

To consider, and if thought fit, to pass with or without modification(s), the following Resolutionas an Ordinary Resolution:

“RESOLVED THAT Sri Mocherla Venkata Ananthakrishna, who was co-opted as an Additional Directorof the Company and who holds office up to the date of this Annual General Meeting of the Companyin term(s) of Section 260 of the Companies Act, 1956(“Act”), and in respect of whom the Companyhas received a notice under Section 257(1) of the Act proposing his candidature for the office of theDirector, be and is hereby appointed as a Director of the Company, whose term of office is liable todetermination for retirement by rotation.”

BY ORDER OF THE BOARDFor VBC INDUSTRIES LIMITED

Sd/-Place : Hyderabad (D.S. SARMA)Date : 15-05-2010 COMPANY SECRETARY

NOTES:

1. ANY MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINTA PROXY TO ATTEND AND VOTE ON A POLL AND SUCH PROXY NEED NOT BE A MEMBEROF THE COMPANY. IN ORDER TO BE EFFECTIVE, THE PROXIES SHOULD BE RECEIVED BY THECOMPANY AT ITS REGISTERED OFFICE AT LEAST 48 HOURS BEFORE THE MEETING.

2. Explanatory Statement in respect of item No. 5 of the notice is annexed hereto in pursuance ofSection 173(2) of the Companies Act, 1956 and the same forms part of the notice.

3. The Register of Members and Share Transfer Books of the Company shall remain closed from 8thJuly, 2010 to 15th July, 2010 (both days inclusive).

NOTICE OF 38th ANNUAL GENERAL MEETING OF THE COMPANY

2


4. Members holding shares in electronic form who wish to change their address are requested tointimate the same to the Registrars and Share Transfer Agents M/s.Venture Capital and CorporateInvestments Private Limited, 12-10-167, Bharat Nagar, Hyderabad – 500 018. (Tele: No. 040-23818475/ 2386 8023; Fax No.040- 2386 8024).

5. Members desirous of making Nomination in respect of their shareholding are requested to submitForm 2B to the Registrars and Share Transfer Agents.

6. Shareholders are requested to convert their physical shareholdings into electronic shareholdingsfor their own convenience.

7. Members/Proxies are requested to bring duly filled in attendance slips to the meeting.

8. Statutory Registers, Records and other documents relating to the proposed resolution(s) are availablefor inspection by the members at the place of meeting till the conclusion of the meeting.

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956.

ITEM NO. 5

Name of the Director : M.V. AnanthakrishnaDate of Birth : 15.02.1958Occupation : Management ConsultantExpertise in specific functional areas : Implementation of Power Projects, Energy Management,

Management Monitoring and Cost ImprovementDirectorships in other Companies : 2Committee positions held in other Companies : NILShareholding in the Company : NIL

Brief Profile:M.V. Ananthakrishna is an MBA from the University of Michigan, Ann Arbor, USA and a BE in Electronicsand Communications Engineering from the College of Engineering Guindy, University of Madras. He workedas a consultant for the Environmental Protection Agency in the USA and was responsible for setting upthe Design Automation Center for Texas Instruments Inc.USA in Bangalore in 1986. He is actively involvedin developing Renewable Energy Projects using biomass gasification technology from USA. He is a memberof the Rotary Club of Madras, Executive Committees of Andhra Chamber of Commerce, Madras Chamberof Commerce, the Institute for Energy Studies, Anna University and the International Process and PerformanceInstitute, USA. He is a certified Management Consultant and an Immediate Past President of the Instituteof Management Consultants, Chennai Chapter.

He is an Executive Director of M.K.Raju Consultants Private Limited (MKRC) which has completed over100 CHP studies and implemented 121MW of CHP Projects with an annual savings of Rs 125 Crores.MKRC has carried out over 500 Energy Studies with an annual savings of Rs.250 Crores. He is alsoa Director in VBC Ferro Alloys Limited.

In order to utilize his experience and expertise in Power Sector, the Board of Directors at their Meetingheld on 28th January, 2010 appointed him as an Additional Director on the Board in accordance with theprovisions of Article 94 of the Articles of Association of the Company and Section 260 of the CompaniesAct, 1956.

The Company has received a notice from a Member under Section 257 of the Companies Act, 1956proposing the candidature of Shri. M.V. Ananthakrishna as a Director. Board considers it to be beneficialin the interest of the Company to have the guidance and advice of Shri. M.V. Ananthakrishna and accordinglyrecommend his appointment as a Director.

Your Directors commend the Resolution at item No.5 as an Ordinary Resolution for its approval by themembers of the Company.

None of the Directors of the Company except Shri M.V. Ananthakrishna and M. Kanaka Raju, being arelative, are concerned or deemed to be interested in the above said resolution.

By order of the Boardfor VBC INDUSTRIES LIMITED

Sd/-Place : Hyderabad (D.S. SARMA)Date : 15-05-2010 COMPANY SECRETARY

3

DIRECTORS' REPORT

Dear Shareholder,

Your Directors take pleasure to present the 38th Annual Report of VBC Industries Limited together withAudited Financial Statements for the financial year ended 31st March 2010.

Financial Results (Highlights):

Particulars Current year Previous year2009-2010 2008-2009

(Rs. In Lakhs) (Rs. In lakhs)

Gross Revenue 4870.84 4663.82

Profit before Interest Depreciation & Tax (PBIDT) 701.76 582.02

Less: Interest & Financial Charges 234.83 218.84

Profit before depreciation and Tax (PBDT) 466.93 363.18

Less: Depreciation 96.41 95.72

Profit before tax(PBT) 370.52 267.46

Less: Provision for taxation including Deferred Tax Charge for the year 42.93 94.70

Profit after Tax(PAT) 327.59 172.76

Profit brought forward from previous year 560.24 387.48

Profit available for appropriation and carried to balance sheet 887.83 560.24

DIVIDEND :

The members are kindly aware that the Companyis setting up an integrated Ferro Alloys plant atAkkillapalle Village, Bhimini Mandal, Adilabad District.Accordingly to conserve the resources, the Boardof Directors are constrained not to recommend anydividend for the year 2009-10 even though theCompany’s performance is on the growth path.

BUSINESS PERFORMANCE:

During the financial year under review, yourcompany has produced 7915 MT of Ferro Siliconas against the production of 6912 MT of FerroSilicon during the previous year. The targetedproduction could have been achieved but forsevere power cuts imposed by the powerdistribution companies in Andhra Pradesh.

The value of sales were increased from Rs.4504.50 lacs to Rs.4659.69 lacs during the yearunder review.

PROSPECTS:

The demand for steel is steadily growing in ourcountry on account of steady demand from sectorssuch as automobiles, white goods and infrastructure

industries. The domestic demand for steel will resultin more demand for Ferro Alloys and benefit yourCompany in the years to come.

NEW PLANT:

Your company’s plans to set up a modern integratedFerro Alloys plant at Adilabad district with acapacity of 45,000 MTS of Ferro Silico Manganeseinitially, is progressing on several fronts likeacquiring 225 acres of land at Akkallapale Village,Bhimini Mandal, Adilabad District, obtainingnecessary permission from the Ministry ofCommerce & Industry, Government of India, for themanufacture of Bulk Ferro Alloys, Calcium Carbideand Pig Iron etc. And is in the process ofenvironmental clearances, obtaining permission forwater and power supply from Government ofAndhra Pradesh.

The Techno-Economic Viability (TEV) study of ourDetailed Project Report (DPR) was conducted byAndhra Pradesh Industrial & Technical ConsultancyOrganization Limited (APITCO) and your Companyis approaching Financial Institutions and Banks forearly Financial closure enabling to meet the timeschedules for the project completion.

4


The new project outlay as envisaged is Rs. 192.00crores as per the DPR and your Company is puttingup every effort to meet the time schedule of twentyfour months from the date of financial closure.

CONSERVATION OF ENERGY & TECHNOLOGYABSORPTION:

In compliance with the requirements of Section217(1) (e) of the Companies Act, 1956, read withthe Companies (Disclosure of particulars in thereport of Board of Directors) Rules, 1988, thestatement showing the particulars in relation toconservation of energy, technology absorbed andforeign exchange earnings and outgoings isfurnished and forms part of this report.

CORPORATE GOVERNANCE:

As required under Clause 49 of the ListingAgreement, Reports on Management Discussion &Analysis and Corporate Governance together withthe Certificate of Auditors on Corporate Governanceare provided separately in this Annual Report andforms part of Directors’ Report.

FIXED DEPOSITS :

The company has not accepted any fixed deposits.

PERSONNEL :

Your Company is maintaining cordial relations withall the employees. Your Directors and Managementexpress happiness for commitment and dedicationshown by the employees.

PARTICULARS OF EMPLOYEES READ WITH THECOMPANIES (PARTICULARS OF EMPLOYEES)RULES, 1975, AS AMENDED

There is no employee covered under Section 217(2A) of the Companies Act, 1956.

INSURANCE :

Your company’s movable and immovable assetshave been adequately insured against various risks.

DIRECTORS :

During the year under review, Sri K.S. Purohit hadrelinquished the office of Director and yourDirectors would like to express their sinceregratitude and thanks for the valuable servicesrendered by him during his long association withthe Company and in guiding its course of destiny.

With a view to strengthening the Board, Mr.Mocherla Venkata Ananthakrishna was co-optedas an Additional Director by the Board of Directorsat its meeting held on 28th January, 2010 and histerm of office concludes at the ensuing AnnualGeneral Meeting.

Mr. Mocherla Venkata Ananthakrishna is holding apost-graduation degree in Master of BusinessAdministration(MBA) from University of Michigan,Ann Arbor and B.Tech from University of Madras.Mr. Mocherla Venkata Ananthakrishna is a CertifiedManagement Consultant having more than 20 yearsextensive experience of working in India, Indonesiaand the US, conducting consultancy assignmentsand business development initiatives in the US,Canada, Singapore, Indonesia, Thailand and India.He is an Executive Director of M.K. Raju &Consultants Pvt. Limited. Mr. Mocherla VenkataAnanthakrishna, being eligible, offers himself forappointment and considering his experience andexpertise, the Board considers it as essential toappoint him as an independent non-executiveDirector of the Company.

None of the Directors other than Mr. MocherlaVenkata Ananthakrishna and Sri MocherlaKanakaraju, father of Sri Mocherla VenkataAnanthakrishna is concerned or interested in theproposed appointment of Mr. Mocherla VenkataAnanthakrishna to the extent of his appointmentas an Independent non-executive Director of theCompany.

In accordance with the provisions of Section 255of The Companies Act, 1956 and clause 105 of theArticles of Association of the Company, Sri V.S. Raoand Sri R.K.R. Gonela, who are liable to retire byrotation and being eligible, offer themselves for re-appointment. Board recommends their re-appointment. In accordance with the provisions ofClause 49 of the Listing Agreement with theBombay Stock Exchange Limited, the details of SriV.S. Rao and Sri R.K.R. Gonela are as under:

Sri V.S. Rao is an Engineering Graduate in Miningfrom college of Engineering, Osmania University. Hehas worked in TISCO for nearly 36 years in variouscapacities and has acquired vast skill, knowledgeand experience during the tenure of his service.He has also served as the Managing Director ofVBC Industries Limited for more than 10 years. SriV.S. Rao, being eligible offers himself for re-appointment and your Directors recommend the re-appointment of Sri V.S. Rao as a non-executiveDirector of the Company.

5

For and on behalf of the Boardfor VBC INDUSTRIES LIMITED

Sd/-Place : Hyderabad Dr. M.V.V.S. MURTHIDate : 15.05.2010 Chairman

None of the Directors is concerned or deemed tobe interested in the proposed re-appointmentexcept Sri V.S. Rao to the extent of his re-appointment as a non-executive Director of theCompany.

Sri R.K.R. Gonela, a graduate from MadrasUniversity is also possessing a degree in law fromDelhi University. He joined the Indian AdministrativeService in 1963 in AP Cadre. During the tenure ofhis services, he held the positions of Secretaryto Government of Andhra Pradesh, Secretary forFinance, Industries and Social Welfare, ChairmanVPT, Vice-Chairman and Managing Director ofAPIDC, Managing Director of Godavari Fertilizersand Chemicals Limited, Commissioner LandRevenue. He retired in the year 1997 as SpecialChief Secretary to Government of Andhra Pradesh.While holding the positions in different capacities,Sri R.K.R. Gonela was involved in Industrial Policy,Industrial Development and Industrial Managementof Andhra Pradesh Government. Sri R.K.R. Gonela,being eligible, offers himself for re-appointment andyour Directors recommend the re-appointment ofSri R.K.R. Gonela as an Independent non-executive Director of the Company.

None of the Directors is concerned or deemed tobe interested in the proposed re-appointmentexcept Sri R.K.R. Gonela to the extent of his re-appointment as an Independent non-executiveDirector of the Company.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, theStatutory Auditors of the Company, holds office upto the conclusion of the forthcoming Annual GeneralMeeting and have expressed their willingness to bere-appointed as the Statutory Auditors of theCompany. The Company has received a writtenconfirmation from M/s Brahmayya & Co., to theeffect that their appointment, if made, would be inconformity with the limits prescribed in Section224(1B) of the Companies Act, 1956.

Your Directors recommend their re-appointment forthe financial year 2010-11.

DIRECTORS’ RESPONSIBILITY STATEMENT:

Pursuant to the requirements under Section217(2AA) of the Companies Act, 1956, with respect

to Directors’ Responsibility Statement, it is herebyconfirmed that:

(i) In the preparation of annual accounts for thefinancial year ended 31st March, 2010, theapplicable accounting standards have beenfollowed along with proper explanationrelating to material departures.

(ii) Such accounting policies have been selectedand applied and that such judgments andestimates have been made as are reasonableand prudent so as to give a true and fair viewof the state of affairs of the company at theend of the financial year and of the profit orloss of the company for the period.

(iii) Proper and sufficient care for themaintenance of adequate accounting recordshave been taken in accordance with theprovisions of the Companies Act, 1956, forsafeguarding the assets of the Company andfor preventing and detecting fraud and otherirregularities.

(iv) The annual accounts of the company hasbeen prepared on a ‘going concern’ basis.

DECLARATION

The Company has been regular in filing all Formsand Returns with the Registrar of Companies asrequired under the Companies Act, 1956 and hasnot defaulted in repayment of deposits, payment ofdividend, redemption of debentures and preferenceshares. Accordingly, the company has notcommitted any of the defaults specified underSection 274(1)(g) of the Companies Act, 1956 (asamended by the Companies Amendment Act, 2000)disqualifying its Directors to act as Directors of otherPublic Companies.

ACKNOWLEDGEMENTS:

Your Directors thank all Members, Customers,Vendors, Regulatory & Government Authorities andthe Bankers of the Company for the full supportextended by them. Your Directors place on recordtheir deep appreciation for the support andcontribution of employees through their dedication,hard work and commitment and look forward to thefuture with confidence.

6


A. CONSERVATION OF ENERGY :

Ferro Alloy Industry is highly power intensive and energy charges constitute a majorelement in the cost of production. Company, therefore, gives importance to energyconservation measures.

POWER AND FUEL CONSUMPTION Current Year Previous Year2009-10 2008-09

1. Electricitya. Purchase Units (KWH) 7,11,27,170 6,79,45,000

Total Amount (Rs. in lacs) 1745.75 1836.09*Rate / Unit (in Rs.) 2.45 2.70*Including load factor shortfall charges.

b. Own Generationi) Through diesel generator :

Units (KWH) Nil NilUnits per ltrs. of Diesel Oil Nil NilCost / Unit (Rs.) (Fuel + Oil) Nil Nil

ii) Through steam Turbine / Generation :Units Nil NilUnits per ltrs. of fuel oil / gas Nil NilCost / Unit Nil Nil

2. Coal (specify quality & where used)Quantity (Tones) Nil NilTotal Cost Nil NilAverage Rate Nil Nil

3. Furnace OilQuantity (K.ltrs.) Nil NilTotal Amount Nil NilAverage Rate Nil Nil

4. Other internal generation Nil Nil

CONSUMPTION PER UNIT OF PRODUCTION

Electricity KWH/MT - Ferro Silicon 8,986 9830Furnace Oil Nil NilCoal (specify quality) Nil NilOthers (specify) Nil Nil

ANNEXURE TO DIRECTORS' REPORT

7

B. TECHNICAL ABSORPTION :

1. RESEARCH AND DEVELOPMENT (R&D)a. Specify areas in which R&D is carried

out by the Company Nil Nil

b. Benefits derived as a result of the above R&D Nil Nil

c. Future plan of action:a) Production of special gradeFerro Silicon for high grade Steelsb) Improvements in preparation of rawmaterial facilities.

d. Expenditure on R&Di) Capital Nil Nilii) Recurring Nil Niliii) Total Nil Niliv) Total R&D Expenditure as a percentage

of Total Turnover Nil Nil

2. TECHNOLOGY ABSORPTION, ADOPTATION &INNOVATION :

a. Efforts, in brief, made towards technology, absorption,adaptation and innovation -- --

b. Benefits derived as a result of the above efforts, e.g.,product improvement, cost reduction, productdevelopment, import substitution etc. -- --

c. In case of imported technology (imported duringthe last 5 years reckoned from the beginningof the financial year), following informationmay be furnished :i) Technology Imported Nil Nilii) Year of Import Nil Niliii) Has technology been fully absorbed Nil Niliv) If not fully absorbed, areas where this has

not taken place, reasons there for andfuture plans of action Not Applicable

d. Foreign Exchange Earnings & Outgoi) Foreign Exchange Earnings at FOB Value-(Rs.) 2,34,05,274 Nilii) Foreign Exchange Outgo -A] CIF Value of Imports :

Raw Materials, Components and Spares Nil NilCapital Goods Nil Nil

B] Others Nil Nil



8


1. BACKGROUND

The Management Discussion and Analysis sets out the developments in the business environmentand the Company’s performance since our last report. This analysis supplements the Directors’Report and the Audited Financial Statements forming part of this Annual Report.

2. INDUSTRY STRUCTURE

Ferro Alloy Industry was established to cater the needs of global steel industry. Ferro alloys areused as additives and deoxidizing agents in steel manufacture. Steel producers use Ferro manganese,Silico manganese and Ferro silicon, while stainless steel units use ferro chrome and charge chrome.At present, there is surplus capacity in the country.

Strong growth in steel and stainless steel is expected in the near future with generally healthyeconomic conditions over the next few years. And it is expected that the excess capacity willbe absorbed and further growth is anticipated in Ferro Alloys Industry.

3. OPERATIONS, OPPORTUNITIES & THREATS

OPERATIONS: This has been dealt with in the Directors’ Report.

OPPORTUNITIES: India’s natural resources and geographical position is exceptionally well positionedto benefit from the growing demand for steel making raw materials. The Ferro alloys industry alsothrives with the increased demand for steel. To reap the benefits of growing demand for steel,your Company is setting up a plant at Akkillapali Village in Adilabad District for the manufactureof Ferro Alloys, Calcium Carbide and Pig Iron.

THREATS: The manufacture of Ferro alloys is highly power-intensive and therefore the cost ofpower is critical to the competitiveness. On an average, 50% of the total cost per tonne of Ferroalloys is accounted for by power. This is the only major threat that the industry is facing and inorder to be competitive on a global scale, it is necessary to have stable power supply at aremunerative price.

4. SEGMENT-WISE PERFORMANCE OR PRODUCT-WISE PERFORMANCE

The Company has only one business segment i.e., Ferro Alloys.

5. OUTLOOK

Long term outlook of your company appears to be encouraging because of the following reasons:

a) Your Company is participating in a Power Plant of 65 MW being set up at Village Jagannathpur,Sirpur Kagaznagar Mandal, Adilabad District in the State of Andhra Pradesh by M/s. KarthikRukmini Alloys & Energy Ltd., in association with Group companies and this would enableyour Company to draw the required power at a comparatively lower price than that of theprice being charged by CPDC of AP Limited.

b) Your company had already invested significant funds in 20 MW Dam Based Hydro ElectricPower Project of M/s. Orissa Power Consortium Limited and 445 MW Natural Gas BasedPower Project of M/s. Konaseema Gas Power Limited which are on stream resulting in returns.

6. RISKS & CONCERNS

The following are the risks and concerns that your company may face in future:

a) Delay in setting up of power plant: Management has taken several steps to implement theProject, including land procurement, water allocation, fuel supply, Governmental clearancesincluding environmental clearances etc., to speed up the implementation.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

9

b) Increase in power cuts imposed by CPDC of AP Limited may also affect the profitability ofthe company. The power plant which is under implementation will ensure assured availabilityof power at an affordable cost.

7. INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has sound internal control system, which ensures that all the assets are protectedagainst loss from unauthorized use and all the transactions are recorded and reported correctly.

The internal control system is supplemented by an extensive programme of internal audits andreviews by Management. The internal control systems are designed to ensure that the financialand other records are reliable for preparing financial statements and other data and for maintainingaccountability of assets.

Further, reliance of all internal control functions and its entire gamut of activities are covered byindependent audit, conducted by separate internal auditors, whose findings are reviewed regularlyby the Audit Committee and Management of the Company.

8. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

This has been dealt with in the Directors’ Report.

9. HUMAN RESOURCE DEVELOPMENT

Human capital is one of the key elements of your Company. The Company has employed 157employees who are highly motivated and have been contributing towards the growth of the Company.The company’s human resource policies are aimed at motivating its employees to deliver high qualityperformance and reward talent with adequate compensation and accelerated career growthopportunities.

Company believes that an on-going learning process is vital for growth in the fast changing businessenvironment and for this purpose Company has been conducting various training programmes,motivation programmes for improving the knowledge levels of the employees at all levels.

10. INDUSTRIAL RELATIONS

This has been dealt with in the Directors’ Report.

Cautionary Statement:

Certain statements made in the Management Discussion and Analysis Report relating to the Company’sobjectives, projections, outlook, expectations, estimates, etc. may constitute ‘forward lookingstatements’ within the meaning of applicable laws and regulations. Actual results may differ fromsuch expectations, projections, etc., whether expressed or implied. Several factors could makea significant difference to the Company’s operations. These include climatic conditions, economicconditions affecting demand and supply, Government Regulations and taxation, natural calamitiesetc. over which the Company does not have any control.

for and on behalf of the Board

Place: HyderabadDate : 15.05.2010 Sd/-

Dr. M.V.V.S. MURTHIChairman

10

VBC Industries LimitedREPORT ON CORPORATE GOVERNANCE:

1. A brief statement on the Company’s philosophy on code of governance

Corporate Governance is about directing and controlling the company with the overriding objectiveof optimizing return for the shareholders. A good governance process aims to achieve this byproviding long-term visibility of its business, ensuring effective relationship with stakeholders, establishingsystems that help the Board in understanding risk appetite and monitoring risk at every stage ofcorporate evolution process.

The Company believes that any meaningful policy on corporate governance must provide empowermentto the executive management of the Company and simultaneously create a mechanism of checks& balances which ensure that the decision making powers vested in the executive managementis used with care and responsibility to meet stakeholders aspirations and societal expectations.

2. Board of Directors:

• Composition and Category of Directors as on 31.03.2010

Category No. of Directors %

Executive Directors 1 12.50

Non-Executive Directors :

(i) Promoter Directors 1 12.50

(ii) Others 1 12.50

Independent Non-Executive Directors 5 62.50

Total 8 100.00

The Attendance record of the Directors at the Board Meetings held during the financial year endedon 31st March, 2010, the last Annual General Meeting (AGM) and the details of their other Directorshipsand Committee Chairmanships and Memberships are given below:

Dr. M.V.V.S. Murthi Non Executive,Promoter Chairman Yes 5 5 2 2 1

Shri R.K.R. Gonela Non ExecutiveIndependent Director Yes 5 5 3 2 2

Sri V.S.Rao Non Executive Director Yes 5 4 2 1* NILSri M.K. Raju Non Executive

Independent Director No 5 2 2 NIL NILSri J.K. Sarma Non Executive

Independent Director Yes 4 4 6 2 NILSri K.S.Purohit* Non Executive

Independent Director No 4 1 2 1 1Sri G.L.Tandon Non Executive

Independent Director Yes 5 3 4 NIL 1Sri M.S.Lakshman Rao Executive Managing

Director Yes 5 5 6 1 NILShri M.V. Ananthakrishna** Non Executive Additional

Independent Director N.A. 1 1 Nil Nil NIL

Name of the Director Category Desig-nation

Attendance inBoard

Meetings

No. of Directorships and No. ofCommittee

positions in other public companies

No. ofBoard

Meetingsheld

duringhis

tenure

PresentOther

Director-ships#

CommitteeMember-

ships*

CommitteeChairman-

ships*

Atten-dance

atLastAGM

(YES/NO)

11

* Consequent on resignation by Sri K.S. Purohit as a Director of the Company w.e.f. 28-01-2010,he also cesed to be the member of the Audit Committee. Sri V.S. Rao was appointed as the memberof the Audit Committee by the Boar of Directors at its meeting held on 28-01-2010.

** Shri Mocherla Venkata Ananthakrishna was appointed as an Additional Director by the Board ofDirectors w.e.f. 28th January, 2010..

# Excluding Directorships in Private Limited Companies.

• Number of Board Meetings held, dates on which held:

Five Board Meetings were held during the financial year 2009-10 on 28th April, 2009, 27th July2009, 16th September, 2009, 23rd October 2009 and 28th January 2010.

3. Audit Committee

• Brief description of Terms of Reference

The Audit Committee of the Board is responsible for overseeing the Company’s financial reportingprocess and the disclosure of its financial information to ensure that the financial statement iscorrect, adequate and credible and reviewing with management the annual financial statementsbefore submission to the Board. The Committee periodically reviews with the management, externaland internal auditors about the adequacy of internal control systems.

The Committee periodically interacts with the Statutory auditors to review the manner in which theyare performing their responsibilities. The Committee also holds discussions with the Statutoryauditors before the commencement of statutory audit on the nature and scope of audit and ascertainsany areas of concern and review of their written comments. The Committee reviews the financialand risk management policies of the Company. The Committee has full access to financial data andto the company’s staff. The Committee also reviews the quarterly (un-audited) and annual financialstatements before they are submitted to the Board.

1. Composition of the Audit Committee as on 31st March, 2010:

K.S.Purohit* Chairman Independent Non-executive Director

R.K.R Gonela* Chairman Independent non-executive Director

J.K. Sarma Member Independent Non-executive Director

V.S. Rao Member Non-executive Director

The Company Secretary of the Company acts as the Secretary of the Audit Committee.

* Consequent on resignation of Sri K.S. Purohit to his directorship w.e.f. 28th January, 2010, theAudit Committee was reconstituted by appointing Sri R.K.R. Gonela as the Chairman of the AuditCommittee and appointing Sri V.S. Rao as a member of the Audit Committee.

• Meetings and Attendance during the year

Date K.S.Purohit R.K.R. Gonela J.Kameswara Sarma V.S. Rao

28-04-2009 YES YES N.A. N.A.

27-07-2009 NO YES YES N.A.

23-10-2009 NO YES YES N.A.

28-01-2010 NO YES YES N.A.

12


Remuneration policy:

The remuneration policy followed by the Company is as per the relevant provisions of the CompaniesAct, 1956 read with Schedule XIII.

The payment of sitting fees to the non-executive Directors for attending the meetings of the Board andCommittees of Board will be decided by the Board of Directors in accordance with the provisions ofthe Companies Act, 1956 and as per the stipulations in the Articles of Association of the Company.

No remuneration has been paid to the Managing Director and other Directors.

The Company has paid only sitting fees and reimbursement of actual expenses to other non-executivedirectors for attending the meetings of Board and Committee of Directors. The details of sitting paid tothe directors are as under:

(in Rupees)

Name Designation Sitting Fee Salary Benefits Total

Dr.M.V.V.S. Murthi Non-ExecutiveChairman 500 NIL NIL 500

Sri R.K.R. Gonela IndependentNon-ExecutiveDirector 1000 NIL NIL 1000

Sri J.K. Sarma IndependentNon-ExecutiveDirector 800 NIL NIL 800

Sri V.S. Rao Non-ExecutiveDirector 500 NIL NIL 500

Sri G.L. Tandon IndependentNon-ExecutiveDirector 300 NIL NIL 300

Sri K.S. Purohit IndependentNon-ExecutiveDirector 200 NIL NIL 200

Sri M.K.Raju IndependentNon-ExecutiveDirector 200 NIL NIL 200

Sri M.V. Ananthakrishna IndependentNon-ExecutiveDirector 100 NIL NIL 100

Sri M.S. Lakshman Rao Managing Director NIL NIL NIL NIL

5. Investors’ Grievances and Share Transfer Committee:

The Shareholders’ Grievances Committee was constituted by the Board of Directors at its meeting heldon 27.01.2001 to redress the grievances of the shareholders and also to protect their interest. The ShareTransfer Committee was also constituted in the year 1994 to consider the approval of share transfer,transmission, issue of duplicate shares, split, consolidation of shares etc. The Share Transfer Committeemeets twice in a month on an average to consider the aforesaid matters.

13

However, the Board of Directors have decided to constitute investors grievance andshare transfercommittee w.e.f 28th January, 2010 instead of the above two committees with the following Directorsas the members of the Committee:

Name of member Category Status

Dr. M.V.V.S. Murthi INEC Chairman

Sri M.S. Lakshman Rao MD Member

Name and designation of compliance officer:

Sri D.S. SARMACompany Secretary

The above investors grievance and share transfer committee met on 28th January, 2010.

Shareholders’ complaints:

As soon as complaints are received from the shareholders, the same will be redressed by the Registrarand Share Transfer Agents and also by the Secretarial Department of the Company within one weekfrom the receipt of complaints. There are no complaints remained unsolved to the satisfaction ofshareholders.

Number of shares pending for transfers:

No Equity Shares remain pending for transfer as on 31st March, 2010.

6. General Body Meetings

a) Details of the Last 3 AGMs

Year Location Date Time Special Resolution

2006-2007 A-4 Unit 31-12-2007 11.00 a.m. No special resolution wasIndustrial Estate passed during the yearVisakhapatnam530 007

2007-2008 As above 29-09-2008 11.00 a.m. One special resolution waspassed to shift the registeredoffice from Visakhapatnam toHyderabad.

2008-2009 Surana Udyog 16-09-2009 11.00 a.m. No special resolution wasAuditorium, passed during the yearFAPCCI11-6-841, Red HillsHYDERABAD-500 004.

14


b) Special Resolution passed through Postal Ballot during 2007-08:

Particulars of Resolution Applicable No. and % of No. and % ofResolution Passed on Section of the Votes in Votes

Companies Favour againstAct, 1956

To Shift the 29-09-2008 Section 192A 1,96,63,201 900Registered Office and all other (99.99%) (00.01%)of the Company applicablefrom Visakhapatnam provisions ofto Hyderabad the Companies

Act, 1956.

i) Profile and other information regarding the Directors being appointed / re-appointed as requiredunder Clause 49 IV (G) (i) of the Listing Agreement have been given in the Notice of the AnnualGeneral Meeting annexed to this Annual Report.

7. Management Discussion & Analysis Report

Management Discussion & Analysis Report is separately given in this Report.

8. Disclosures:

• There are no transactions, which may have potential conflict with the interests of the Company.Schedule 18 of the Annual Accounts contains the details of related party transactions as requiredby the Accounting Standard 18 (AS-18) on ‘Related Party Disclosures’ issued by the Institute ofChartered Accountants of India.

• There is no non-compliance by the company and no penalties, strictures have been imposed onthe company by Stock Exchange or SEBI or any statutory authority, on any matter related to capitalmarkets, during the last three years.

• The Company has complied with all mandatory requirements of Clause 49 and is in the processof implementation of Non-mandatory requirements.

• A Certificate duly signed by the Managing Director & CEO and General Manager(Finance) relatingto financial statements and internal control systems for financial reporting as per the format providedin Clause 49(V) of the listing agreement was placed before the Board, who took the same onrecord.

9. Means of communication:

The means of communication to the shareholders are through quarterly financial results which arenormally published in Business Standard/Financial Chronicle and Andhra Prabha/Andhra Bhoomi dailynewspapers, both in English and Telugu language respectively having wide circulation.

10. General Shareholders information:

i) Date, Time and Venue of the 38th Annual General Meeting

The 15th day of July,2010 at 3.00p.m.at Surana Udyog Auditorium of the Federation of Andhra PradeshChambers of Commerce and Industry (FAPCCI), at 11-6-841, Red Hills, Hyderabad-500 004.

15

ii) Financial Calendar (tentative and subject to change)

Financial Reporting for the quarter ended 30th June, 2010 13th August, 2010Financial Reporting for the quarter ended 30th September, 2010 14th November, 2010Financial Reporting for the quarter ended 31st December, 2010 13th February, 2011Financial Reporting of Audited Results for the year ended 31st March, 2011 30th May, 2011

iii) Dates of Book Closure

8th July, 2010 to 15th July, 2010 (both days inclusive)

iv) Dividend Payment date : Not Applicable

v) Listing on Stock Exchanges

The Bombay Stock Exchange LimitedPhiroze Jeejeebhoy Towers, Dalal StreetMumbai – 400 021

vi) Stock Code VBC IND

vii) Scrip Code: 524310

Listing Fees

The Company has paid annual listing fee for the year 2010-11 to the Bombay Stock Exchange Limited,where the securities are listed.

viii) Monthly High and Low Quotation of Shares traded on The Stock Exchange, Mumbai

Month High (Rs.) Low (Rs.) Close (Rs.) No. of Shares

Apr 2009 18.46 12.85 18.46 5,49,266

May 2009 22.70 16.75 21.45 5,84,308

June 2009 22.95 16.35 18.15 6,15,565

July 2009 20.55 15.25 17.70 5,19,322

Aug 2009 26.05 17.40 24.00 14,68,919

Sep 2009 35.50 23.60 28.95 21,11,445

Oct 2009 29.45 23.60 24.90 5,47,479

Nov 2009 25.70 22.25 23.30 3,87,704

Dec 2009 27.70 23.15 23.85 3,86,410

Jan 2010 27.80 21.05 22.25 5,98,337

Feb 2010 23.70 18.30 19.30 2,20,203

Mar 2010 24.25 18.05 20.60 5,09,985

16


ix) a. Registrar and Share Transfer Agents

M/s Venture Capital and Corporate Investments Private Limited having registered office at12-10-167, Bharat Nagar, Hyderabad – 500 018, Ph:040-23818475/6 are the Company’s ShareTransfer Agents in both physical and dematerialized form.

b. Share Transfer System

The average time taken for processing of share transfers including dispatch of sharecertificates was approximately 15 days, if the documents are clear in all respects. As theCompany’s shares are currently traded in dematerialized form the transfers are processedand approved in the electronic form by NSDL/CDSL through their depository participants.

There are no pending share transfer requests as on 31st March, 2010.

x) (a) Distribution of Shareholding as on 31st March, 2010

Category No. of % Shares held %

From To shareholders

Up to 500 30,516 88.17 47,56,048 10.55

501 1000 2,251 6.50 20,34,874 4.51

1001 2000 1,032 2.98 16,69,152 3.70

2001 3000 267 0.77 6,92,610 1.53

3001 4000 119 0.34 4,36,785 0.97

4001 5000 129 0.38 6,16,514 1.36

5001 10000 140 0.41 10,12,307 2.24

10001 And above 155 0.45 3,38,25,519 75.09

Total 34,609 100.00 4,50,43,809 100.00

(b) Distribution of Shareholding according to categories of shareholders as on 31st March, 2010

Categories No. of % toShares Total

Promoters, Directors / Relatives and associated Persons 3,21,17,728 71.30

Financial Institutions & Banks -- --

Foreign Institutional Investors -- --

Non-resident Indians 33,164 0.07

Private Corporate Bodies 18,18,689 4.04

Indian Public 1,10,74,228 24.59

TOTAL 4,50,43,809 100.00

xi) Dematerialisation of Shares and Liquidity

Trading of securities of your Company has been made compulsorily in dematerialized form underrolling settlement with effect from 26th January, 2001 and are available for trading under boththe Depository Systems in India - NSDL (National Securities Depository Limited) and CDSL (CentralDepository Services Limited). Under the Depository System, the International Securities IdentificationNumber (ISIN) allotted to the Company’s shares is INE809C01012.

As at 31st March 2010, 25.51% of the Equity Share Capital, representing 1,14,92,445 shares wereheld in depository mode.

Investors who wish to exercise the option of dematerialization of their shares are required to submitDematerialization Request Form (DRF) duly filled along with the original optional letter to the DepositoryParticipant (DP).

17

For guidance on Depository services, shareholders may write to the Company or to the Registrarsand Share Transfer Agents.

xii) There are no outstanding GDRs / ADRs / Warrants or any Convertible Instruments due for conversion.

xiii) Plant Location: Dinnnedevarapadu Village, NH-7Kurnool -518002Andhra Pradesh.

xiv) Address for Correspondence: Contact Numbers:Company Secretary Phone : 040-23328653VBC Industries Limited 040-23320904-086-2-913/914, 3rd Floor, Progressive Towers, Fax : 040-233921217/23390721Khairatabad HYDERABAD -500 004 Email : [email protected]

xv) Investor Relations

All the queries received from shareholders during the financial year 2009-10 have been respondedto. The Company generally replies to the queries within a week of their receipt. The Companyhas designated e-mail [email protected] for investor services.

xvi) Nomination Facility

Shareholders holding shares in physical form and desirous of making a nomination in respect oftheir shareholding in the Company, as permitted under Section 109A of the Companies Act, 1956,are requested to submit to the Company’s Share Transfer Agents M/s Venture Capital & CorporateInvestments Limited, 12-10-167, Bharat Nagar, Hyderabad – 500 018, Ph:040-23818475/6. Nominationfacility in respect of shares held in Electronic form is also available with the Depository Participant(DP) as per the Byelaws and Business rules applicable to NSDL and CDSL.

11. Compliance:

The Company shall obtain a certificate from the Auditors of the Company regarding compliance ofconditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with stockexchanges and annexed the certificate with the Directors’ report, which is sent annually to all theshareholders of the company.

Auditor’s Certificate is annexed to the Report of the Directors.



DECLARATION

All the Board members and the Senior Management Personnel have affirmed their compliance of the ‘Codeof Conduct for the Members of the Board and Senior Management’ for the period from 1st April, 2009to the 31st March, 2010 in terms of the clause 49(1)(D)(ii) of the Listing Agreement with the Stock Exchange.

Sd/-Place : Hyderabad M.S. LAKSHMAN RAODate : 15.05.2010 Managing Director & CEO

18


AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE

ToThe Members ofVBC Industries Limited,Hyderabad.

We have examined the compliance of conditions of Corporate Governance by VBC Industries Limited,Hyderabad for the year ended 31st March 2010, as stipulated in Clause 49 of the Listing Agreement ofthe Company with stock exchange.

The compliance of conditions of Corporate Governance is the responsibility of the management. Ourexamination was limited to procedures and implementation thereof, adopted by the Company for ensuringthe compliance of the conditions of the Corporate Governance. It is neither an audit nor an expressionof opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certifythat the company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement.

We state that generally no investor grievances are pending for a period exceeding one month againstthe Company as per the records maintained by the Company.

We further state that such compliance is neither an assurance as to the future viability of the Companynor the efficiency or effectiveness with which the management has conducted the affairs of the company.

For Brahmayya & Co.,Chartered Accountants

(Firm Regd. No. 000513S)

Sd/-(C.V. Ramana Rao)

Camp : Hyderabad PartnerDate : 15-05-2010 Membership No. 018545

19

AUDITORS' REPORT

ToThe Members ofVBC Industries Limited,Hyderabad

We have audited the attached Balance Sheet of VBC Industries Limited, Hyderabad as at 31st March,2010, the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexedthereto. These financial statements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these financial statements based on our audit.

1. We have conducted our audit in accordance with auditing standards generally accepted in India.These Standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

2. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Governmentof India in terms of sub-section (4A) of Section 227 of ‘The Companies Act, 1956 of India (the`Act’) and on the basis of such checks as we considered appropriate and according to the informationand explanations given to us, we set out in the Annexure a statement on the matters specifiedin paragraphs 4 and 5 of the said Order.

3. Further to our comments in the Annexure referred to above, we report that:a. We have 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, the company has kept proper books of account, as required by law so far,

as appears from our examination of such books.c. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement

with the books of account.d. In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report

comply with the accounting standards referred to in Sub Section (3c) of Section 211 of theCompanies Act, 1956.

e. In our opinion and to the best of our information and according to the explanations givento us, the said accounts give the information required by the Companies Act, 1956 in themanner so required and give a true and fair view, in conformity with the accounting principlesgenerally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the company as at31st March 2010.

ii) in the case of the Profit and Loss account, of the Profit for the year ended on thatdate.

iii) in case of the cash flow statement, of the cash flows for the year ended on thatdate.

f . On the basis of written representations received from the Directors as on March, 31, 2010and taken on record by the Board of Directors, we report that none of the directors isdisqualified as on March 31, 2010 from being appointed as a director in terms of clause (g)of sub-section (1) of section 274 of the Act.



Sd/-C.V. RAMANA RAO


20

VBC Industries LimitedAnnexure to the Auditors' Report referred to in Paragraph 2 of our Report of even date :

1.1 The company has maintained proper records showing full particulars including quantitative detailsand situation of fixed assets.

1.2 The fixed assets have been physically verified by the management during the year in accordancewith a phased programme of verification which, in our opinion, is reasonable having regard to thesize of the Company and the nature of its assets. According to the information furnished to us,no material discrepancies have been noticed on such verification.

1.3 The fixed assets disposed-off by the company during the year do not form a substantial partthereof.

2.1 Physical verification of inventory has been conducted during the year by the management atreasonable intervals.

2.2 The procedures of physical verification of inventory followed by the management are reasonableand adequate in relation to the size of the Company and the nature of its business.

2.3 On the basis of our examination of the records of inventory, we are of the opinion that the Companyis maintaining proper records of inventory. The discrepancies noticed on such verification betweenthe physical stocks and the book records were not material.

3.1 The company has not granted any loans; secured or unsecured to Companies, firms or other partiesto whom the provisions of Section 301 of the Companies Act, 1956 apply. Accordingly, sub clauses(b), (c) and (d) of clause (iii) of paragraph 4 of the order are not applicable.

3.2 The Company has not taken any loans, secured or unsecured from companies, firms, or otherparties to whom the provisions of section 301 of the Companies Act apply. Accordingly, sub clauses(f), (g) and (h) of clause (iii) of paragraph 4 of the order are not applicable.

4.1 In our opinion and according to the information and explanations given to us, there are adequateinternal control procedures commensurate with the size of the Company and the nature of its businesswith regard to purchase of inventory and fixed assets and sale of goods and services. Duringthe course of our audit, no major weakness has been noticed in the internal controls.

5.1 According to the information and explanations given to us, we are of the opinion that the particularsof contracts or arrangements that need to be entered into the register maintained under section301 of the Companies Act, 1956 have been so entered.

5.2 In our opinion and according to the information and explanations given to us, the transactions madein pursuance of such contracts or arrangements have been made at prices which are reasonablehaving regard to prevailing market prices at the relevant time.

6.1 The company has not accepted any deposits from public. Accordingly, the Clause 4(vi) of the orderis not applicable to the company.

7.1 In our opinion, the Company has an internal audit system commensurate with its size andnature of its business.

8.1 According to the information and explanations given to us, maintenance of cost records is notrequired under section 209(1) (d) of the Companies Act, 1956 in respect of the businessactivities carried out by the company.

9.1 According to the records of the company, the company is generally regular in depositing withappropriate authorities undisputed statutory dues including provident fund, investor education andprotection fund, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess andother material statutory dues applicable to it.

21

9.2 According to the information and explanations given to us, no undisputed amounts payable in respectof income tax, wealth tax, sales tax, service tax, customs duty, excise duty and cess or any othermaterial statutory dues applicable to it.

9.3 As at 31st March 2010, there have been no disputed dues, which have not been deposited withthe respective authorities in respect of Sales tax, Income-tax, Wealth-tax, Service tax, Excise Dutyand Cess, except the following:

Name of the Nature of the Amount Period to which Forum whereStatute dues (Rs. in Lakhs) the matter the dispute is

relates pending

Central Excise Demand for 40.68 01-03-1994 CESTAT,Act differential duty to Bangalore Bench

on finalisation 31-08-1997of price list.

Central Excise Demand for 0.86 1997-98 CESTAT,Act interest & Bangalore Bench

penalty.

Sales tax Demand for 18.93 Assessment Sales TaxAct Sales Tax on years - Appellate

lease rentals of 1996-97 & Tribunal,bottles & crates. 1997-98 Hyderabad.

10.1 The company has no accumulated losses and has not incurred any cash loss during the financialyear covered by our audit and the immediately preceding financial year.

11.1 The Company has neither taken any loans from a financial institution or a bank nor issued anydebentures. Accordingly, clause 4(xi) of the order is not applicable.

12.1 The Company has not granted any loans or advances on the basis of security by way of pledgeof shares, debentures and other securities. Accordingly, clause 4(xii) of the order is not applicable.

13.1 In our opinion, the Company is not a chit fund or a nidhi /mutual benefit fund/society. Accordingly,clause 4(xiii) of the order is not applicable.

14.1 In our opinion, the Company is not dealing in or trading in shares, debentures and other instruments.Accordingly, clause 4 (xiv) of the order is not applicable.

15.1 According to the information and explanation given to us, the company has given two guaranteesfor loans taken by two body Corporates from financial institutions. The guarantees given by thecompany along with other co-promoters to financial institutions on behalf of these two companiespromoted by them are with the approval of shareholders in a general meeting and in accordancewith the promoters’ agreements. Having regard to the information and explanations given to us,the said guarantees are not prejudicial to the interest of the company.

16.1 In our opinion, the company has not obtained any term loans. Accordingly, clause (xvi) of the orderis not applicable.

17.1 According to the information and explanations given to us and on overall examination of the BalanceSheet of the company, we report that no funds raised on short-term basis have been used forlong-term investment.

18.1 During the year, the Company has not made any allotment of shares. Accordingly, clause 4(xviii)of the order is not applicable.

22


19.1 The Company has not issued any debentures. Accordingly, clause 4(xix) of the order is notapplicable.

20.1 During the year, the Company has not raised money by Public issue. Accordingly, clause 4 (xx)of the order is not applicable.

21.1 According to the information and explanations given to us, no fraud on or by the Company hasbeen noticed or reported during the course of our audit.



Sd/-C.V. RAMANA RAO


23

Balance SheetAs at 31st March, 2010

As at As atParticulars Schedule 31-03-2010 31-03-2009

No. Rupees Rupees

I. SOURCE OF FUNDS :1. Shareholders' Funds :

a) Share Capital 1 45,18,34,840 45,18,34,840b) Reserves and Surplus 2 55,47,83,867 53,85,72,686

-------------------- --------------------100,66,18,707 99,04,07,526

-------------------- --------------------2. Loan Funds :

a) Secured Loans 3 9,91,80,821 9,12,99,942b) Unsecured Loans 4 3,50,00,900 -

-------------------- --------------------134,18,1721 9,12,99,942

-------------------- --------------------TOTAL 114,08,00,428 108,17,07,468

-------------------- --------------------II. APPLICATION OF FUNDS :

1. Fixed Assets :a) Gross Block 5 54,84,30,965 55,13,97,594b) Less : Depreciation 15,38,74,594 13,01,63,475

-------------------- --------------------c) Net Block 39,45,56,371 42,12,34,119d) Capital work in progress 15,98,58,353 20,90,873(including capital advances) -------------------- --------------------

55,44,14,724 42,33,24,992-------------------- --------------------

2. Investments 6 70,59,02,834 65,42,01,8343. Deferred Tax Asset 88,10,462 1,26,33,000

4. Current Assets, Loans and Advances :a) Inventories 7 12,20,84,915 12,69,41,164b) Sundry Debtors 8 55,53,730 48,56,974c) Cash and Bank Balances 9 77,11,921 65,35,946d) Interest Receivable 27,72,895 13,87,536e) Loans and Advances 10 7,14,41,792 6,83,54,576

-------------------- --------------------20,95,65,253 20,80,76,196

-------------------- --------------------Less : Current Liabilities and Provisionsa) Liabilities 11-A 32,93,13,046 21,17,34,928b) Provisions 11-B 85,79,799 47,93,626

-------------------- --------------------33,78,92,845 21,65,28,554

-------------------- --------------------Net Current Assets (12,83,27,592) (84,52,358)

-------------------- --------------------TOTAL 114,08,00,428 108,17,07,468

============= =============Significant Accounting Policies and Notes on accounts 18

Per our report of even date For and on behalf of the Boardfor BRAHMAYYA & Co.,Chartered Accountants Sd/- Sd/-

Sd/- M.S. LAKSHMAN RAO R.K.R. GONELAC.V. RAMANA RAO Managing Director Director

PartnerMembership No.018545

Sd/- Sd/-Place : Hyderabad J.K. SARMA D.S. SARMADate : 15-05-2010 Director Company Secretary

24

VBC Industries LimitedProfit and Loss Accountfor the year ended 31st March, 2010

Particulars Schedule Year ended Year endedNo. 31.03.2010 31.03.2009

Rupees Rupees

I INCOME :Sales : 46,59,69,769 45,04,50,067Less : Excise Duty and VAT collections 3,63,34,298 2,83,09,568

---------------- ----------------Net Sales 42,96,35,471 42,21,40,499Increase / (Decrease) in Stocks 12 (15,37,123) (82,47,131)Other Income 13 2,11,14,439 1,59,31,979

---------------- ----------------TOTAL 44,92,12,787 42,98,25,347

---------------- ----------------II EXPENDITURE :

Raw Materials Consumed 14 14,01,23,646 13,80,28,216Power and Fuel 17,45,74,694 18,36,09,289Staff Cost 15 2,31,12,496 1,83,04,357Manufacturing Expenses 16 1,71,42,097 1,64,57,534Administrative & Selling Expenses 17 2,40,83,558 1,52,23,449

---------------- ----------------TOTAL 37,90,36,491 37,16,22,845

---------------- ----------------Profit before Interest, Depreciation and Tax 7,01,76,296 5,82,02,502Interest and Finance Charges paid to Banks & Others 2,34,83,158 2,18,83,984

---------------- ----------------Profit before Depreciation and Tax 4,66,93,138 3,63,18,518Depreciation 2,61,88,868 2,61,19,908Less: Transfer from Revaluation Reserve 1,65,47,535 1,65,47,535

-------------- 96,41,333 -------------- 95,72,373---------------- ----------------

Profit before Tax 3,70,51,805 2,67,46,145Provision for :Current tax - MAT (67,00,000) (32,00,000)Mat Credit entitlement 62,29,449 30,35,000Deferred Tax (38,22,538) (91,05,000)Fringe Benefit Tax - (2,00,000)

---------------- ----------------III. PROFIT AFTER TAXATION 3,27,58,716 1,72,76,145

Balance of surplus brought forward from previous year 5,60,24,107 3,87,47,962---------------- ----------------

Surplus carried over to Balance Sheet 8,87,82,823 5,60,24,107=========== ===========

Earning per Share - Rs. Basic and Diluted 0.73 0.38

Significant Accounting Policies and Notes on accounts 18





25

As at As at31-03-2010 31-03-2009

Rupees Rupees

1. Share Capital :

Authorised :8,00,00,000 Equity Shares of Rs. 10/- each 80,00,00,000 80,00,00,000

============ ============

Issued, Subscribed and Paid-Up:4,50,43,809 Equity Shares of Rs. 10/- each 45,04,38,090 45,04,38,090fully paid-up

Add : Amount received on 2,79,100 forfeitedEquity Shares 13,96,750 13,96,750

------------------ ------------------TOTAL 45,18,34,840 45,18,34,840

============ ============Notes: 1. Of the above, 2,78,42,000 Equity shares

alloted to erstwhile shareholders ofBharat Alloys & Energy Ltd. consequentto its amalgamation.

2. Of the above, 8,10,909 Equity Shares areissued as fully paid up Bonus Sharesby way of Capitalisation of Reserves.

2. Reserves and Surplus : As at Additions Deletions As at31.03.2009 31.03.2010

Rupees Rupees Rupees Rupees

a) Capital Reserve 8,77,99,952 - - 8,77,99,952b) Share Premium 3,69,64,724 - - 3,69,64,724c) Revaluation Reserve 29,80,78,022 - 1,65,47,535 28,15,30,487d) General Reserve 5,97,05,881 - - 5,97,05,881e) Surplus in Profit & Loss Account 5,60,24,107 - - 8,87,82,823

TOTAL 53,85,72,686 55,47,83,867

3. Secured Loans :

Cash Credit from a bank on hypothecation of stock of 9,91,80,821 9,12,99,942finished goods, Raw Materials, Stores and Spares andbook debts and a first charge on all fixed assets ofthe Company and guaranteed by Managing Directorand a Shareholder of the Company in theirpersonal capacity.

---------------------- ----------------------TOTAL 9,91,80,821 9,12,99,942

=============== ===============

4. Unsecured Loans :From : Corporate Bodies 2,53,00,900 -

Others 97,00,000 ----------------------- ----------------------

3,50,00,900 -=============== ===============

Schedules to Balance Sheet

26

VB

C In

du

stri

es L

imit

ed

Sch

edu

le -

5 :

Fix

ed A

sset

s(I

n R

up

ees)

PA

RT

ICU

LA

RS

1.La

nd3,

99,6

5,50

8-

-3,

99,6

5,50

8-

--

-3,

99,6

5,50

83,

99,6

5,50

8

2.Le

aseh

old

Land

22,1

71-

-22

,171

9,52

725

3-

9,78

012

,391

12,6

44

3.Bu

ildin

gs5,

02,6

7,80

71,

06,9

2022

,99,

944

4,80

,74,

784

1,00

,89,

573

17,8

2,60

610

,92,

173

1,07

,80,

006

3,72

,94,

778

4,01

,78,

234

4.P

lant

& M

achi

nery

45,4

9,97

,875

30,9

1314

,36,

630

45,3

5,92

,158

11,6

8,84

,382

2,39

,48,

038

13,8

5,57

613

,94,

46,8

4431

,41,

45,3

1433

,81,

13,4

93

5.Fu

rnitu

re&

Fixt

ures

24,2

2,67

15,

16,5

78-

29,3

9,24

910

,94,

935

1,83

,302

-12

,78,

237

16,6

1,01

213

,27,

736

6.Ve

hicl

es37

,21,

562

1,15

,533

-38

,37,

095

20,8

5,05

82,

74,6

69-

23,5

9,72

714

,77,

368

16,3

6,50

4

TOTA

L55

,13,

97,5

947,

69,9

4437

,36,

574

54,8

4,30

,965

13,0

1,63

,475

2,61

,88,

868

24,7

7,74

915

,38,

74,5

9439

,45,

56,3

7142

,12,

34,1

19

GR

OS

S B

LO

CK

DE

PR

EC

IATI

ON

NE

T B

LO

CK

As

at01

.04.

2009

As

on31

.03.

2010

As

at01

.04.

2009

On

Ded

uctio

nsA

s at

31.0

3.20

10A

s at

31.0

3.20

09U

p to

31.0

3.20

10Ad

ditio

nsD

educ

tions

For

the

Year

Sl.

No

.

27

Schedules to Balance Sheet

6. Investments - (Long term - At Cost) Trade Investments

A) QUOTED:

Equity Shares of Rs.10/- each fully paid up in : 25000M/s VBC Ferro Alloys Ltd (25000) 31,25,000 31,25,000

B) UNQUOTED

Equity Shares of Rs.10/- each fully paid up in :# M/s Konaseema Gas Power Ltd 36872700 39,87,27,000 30,87,27,000

(30872700)@ M/s Orissa Power Consortium Ltd 19594723 19,59,47,230 14,59,47,230

(14594723)M/s IIC Hotels Pvt. Ltd 8056000 8,05,60,000 8,05,60,000(Formerly known as India International Construction Pvt. Ltd.) (8056000)M/s Hillfort Palace Pvt. Ltd 2709000 2,70,90,000 2,70,90,000(Formerly known as Varsha Hill Fort Resorts Pvt. Ltd) (2709000)Share Application Money with :M/s Karthik Rukmini Alloys & Energy Ltd - 8,82,99,000Non Trade:(I) Equity Shares:Equity Shares of Rs.10/- each fully paid up inM/s VBC Exports Limited 45000 4,50,000 4,50,000

(45000)(II) Trust Securities: 357.134 3,604 3,604In ICICI Prudential Mutual Fund (357.134)

Total 70,27,77,834 65,10,76,834

Total (A+B) 70,59,02,834 65,42,01,834

Note : # Includes 8486000 (P.Y. 2486000) sharesacquired, the title in respect of which isin the process of transfer. 60 lakhs ofshares acquired during the year.

Aggregate value of :Quoted Investments: Book value 31,25,000 31,25,000

Market Value 74,18,750 48,42,500Unquoted Investments: Book value 70,27,77,834 65,10,76,834

7. Inventories:(As valued and certified by the Managing Director)Stores & Spares 1,00,36,949 99,24,584Stores in Transit 6,39,692 2,58,025Raw Materials 10,40,05,427 10,76,11,112Stock in process 31,49,273 33,20,619Finished goods 42,53,574 58,26,824

Total 12,20,84,915 12,69,41,1648. Sundry Debtors (Unsecured and Considered Good)

- Due for over six months 13,30,047 22,54,034- Other debts 42,23,683 26,02,940

Total 55,53,730 48,56,974

No.of As at As atShares/ 31-03-2010 31-03-2009

Units Rupees Rupees

28

VBC Industries LimitedSchedules to Balance Sheet

As at As at31-03-2010 31-03-2009

Rupees Rupees

9. Cash & Bank Balances :Cash & Cheques in hand 1,98,377 53,256Balances with Scheduled Banks:- in Current Accounts 17,93,852 18,04,421- in Margin Deposit Accounts 57,19,692 46,19,692- in Fixed Deposit Accounts - 58,577

---------------- -----------------Total 77,11,921 65,35,946

=========== ===========10. Loans and Advances :

(Unsecured, considered good recoverable incash or in kind or for value to be received)

Advances Recoverable 35,94,568 1,87,15,430Deposits Recoverable 3,54,74,910 2,98,12,929Claims Receivable 1,33,55,679 1,29,02,402Balance with Central Excise Authorities 12,06,928 21,11,972Advance Income Tax (including tax deducted at source) paid 13,42,037 17,76,843MAT Credit Entitlement 92,02,352 30,35,000Income tax refund receivable 72,65,318 -

---------------- -----------------Total 7,14,41,792 6,83,54,576

=========== ===========

11. Current Liabilities :A. Liabilities

Creditors for : Capital works 8,57,67,310 16,40,735Purchases 4,06,22,326 4,31,08,172Expenses 10,64,46,313 10,49,03,915

Advances received against supplies 3,99,62,372 1,49,38,783Other Liabilities 18,66,726 1,33,74,043Deposits Refundable 26,48,000 26,48,000Acceptances 5,20,00,000 3,11,21,280

---------------- ----------------Total 32,93,13,046 21,17,34,928

=========== ===========B. Provisions :

Provisions for Gratuity 15,14,059 12,04,292Provisions for Leave Encashment 3,38,670 1,89,334Provisions for Taxation 67,00,000 32,00,000Provisions for Fringe Benefit Tax 27,070 2,00,000

---------------- ----------------Total 85,79,799 47,93,626

=========== ===========

29

Schedules to Profit and Loss Account

Year ended Year ended31.03.2010 31.03.2009

Rupees Rupees

12 Increase / (Decrease) in Stocks :Closing Stock:- Finished Goods 42,53,574 58,26,824- Stock in process 31,49,273 33,20,619

---------------- ----------------74,02,847 91,47,443

---------------- ----------------LESS: Opening stock- Finished Goods 58,26,824 1,60,71,116- Stock in process 33,20,619 27,47,916

---------------- ----------------91,47,443 1,88,19,032

---------------- ----------------Increase / (Decretion) in stocks (17,44,596) (96,71,589)Adjustment for Excise Duty on Stocks 2,07,473 14,24,458

---------------- ----------------Total (15,37,123) (82,47,131)

---------------- ----------------

13 Other Income:Interest received from Banks & Others 24,57,623 13,70,203Rent Received 78,54,448 67,41,356Dividends received 50,000 50,000Claims Received - 24,72,994Miscellaneous Income 1,07,52,368 50,81,826Provisions no longer required - 2,15,600

---------------- ----------------Total 2,11,14,439 1,59,31,979

---------------- ----------------

14 Raw Materials Consumed:Opening Stocks 10,76,11,112 8,38,80,721Add : Purchases 13,65,17,961 16,17,58,607

---------------- ----------------24,41,29,073 24,56,39,328

Less: Closing Stocks 10,40,05,427 10,76,11,112---------------- ----------------

Total 14,01,23,646 13,80,28,216---------------- ----------------

15 Staff Cost:Salaries, Wages & Allowances 1,94,81,128 1,53,25,250Contribution to Provident Fund and other Funds 21,69,169 16,77,856Workmen & staff welfare Expenses 10,93,835 8,03,890Gratuity 3,68,364 4,97,361

---------------- ----------------Total 2,31,12,496 1,83,04,357

---------------- ----------------

30


16 Manufacturing Expenses:Stores & Spares Consumed 76,13,043 79,81,443Repairs & Maintenance to Plant & Machinery 17,58,114 13,19,663Insurance 2,14,869 2,72,801Other Manufacturing Expenses 75,56,071 68,83,627

---------------- ----------------Total 1,71,42,097 1,64,57,534

---------------- ----------------

17 Administrative & Selling Expenses:Rent 12,23,400 9,62,400Taxes and Licences 9,55,394 4,34,664Printing and Stationery 4,76,205 6,57,800Communication Expenses 5,92,899 7,07,393Travelling & Conveyance 14,59,528 11,38,817Directors’ Fees and Expenses 1,73,147 2,77,454Auditors Remuneration:- Statutory Audit 1,35,000 1,00,000- Tax Audit 30,000 60,000- Income Tax Matters 1,15,000 1,12,500- Certification charges 1,15,000 1,24,000Advertisements 68,365 93,312Selling & Other Distribution Expenses 97,29,012 53,49,844Sales Commission 4,51,528 4,78,488Donations 17,62,948 -Miscellaneous Expenses 55,37,308 45,19,440Bad debts & Irrevocable Advances - Written off - 2,07,337Assets written off 12,58,824 -

---------------- ----------------Total 2,40,83,558 1,52,23,449

=========== ===========


Rupees Rupees

Schedules to Profit and Loss Account

31

Schedule – 18 Accounting Policies and Notes on Accounts:

Annexed to and forming part of Balance Sheet as at 31st March, 2010 and Profit and Loss accountfor the year ended on that date.

I. ACCOUNTING POLICIES

I General:

Financial Statements are prepared on accrualbasis under the historical cost conventionand in accordance with the AccountingStandards, specified in sub section (3C) ofsection 211 of the Companies Act, 1956.

II Fixed Assets:

Fixed Assets are stated at cost lessaccumulated depreciation. Cost of acquisitionof Fixed Assets is net of credit under Cenvatscheme and inclusive of freight, duties,taxes, incidental expenses relating to the costof acquisition, the cost of installation/erectionas applicable and interest on relatedborrowings up to the date of acquisition/capitalization.

III Investments:

Investments are stated at cost, inclusive ofall expenses relating to acquisition. Provisionfor diminution in the market value of long-terminvestments is not made, if in the opinion ofthe management such diminution is temporaryin nature. Interest and Dividend income frominvestments is accounted on accrual basis.

IV Inventories :

(a) Finished goods are valued at cost,inclusive of excise duty, or market valuewhichever is lower.

(b) Stocks of raw materials, stores, spareparts, materials-in-transit etc are valuedat cost after providing for cost ofobsolescence. Cost includes expensesfor procurement, excise and customsduty and is net of credits under CENVATand VAT schemes.

(c) Scrap, including by-products, is valuedat estimated realizable value.

V Revenue recognition:

(a) Sales are inclusive of excise duty,export incentives and net of trade adquantity discounts and rebates.

(b) Interest and Dividend income frominvestments is accounted on accrualbasis.

(c) Insurance and other claims/refunds andexport incentives and accounted for asand when admitted by appropriateauthorities.

VI Depreciation on Fixed Assets:

(a) Depreciation is charged under straightline method applying the rates specifiedin Schedule XIV of the Companies Act,1956.

(b) Value of appreciation on account ofrevaluation of fixed assets is chargedas depreciation on straight line methodunder the Companies Act, 1956.

VII Employee Benefits:

(i) Defined Contribution Plans:

Employee Benefits in the form ofEmployee Provident & Pension Fundsand Employee State Insurance Schemeare considered as Defined Contributionplans and the contributions are chargedto the Profit & Loss Account of the yearwhen the contributions to the said fundsare due.

(ii) Defined Benefit Plans:

Retirement Benefit in the form of Gratuityis considered as Defined BenefitObligation and is provided for on thebasis of an actuarial valuation using theprojected unit credit method as at thedate of Balance Sheet.

(iii) Other Long Term Benefits:

Long-Term Compensated Absences areprovided on the basis of an actuarialvaluation using the Projected Unit CreditMethod as at the date of Balance Sheet.

Actuarial gain/losses, if any, areimmediately recognized in the Profit &Loss Account.

32


Particulars Unit 2009-2010 2008-2009Year Year

1. Estimated amount of contracts remainingto be executed on Capital Account andnot provided for (net of advances) Rs. Nil Nil

2. Contingent Liabilities :a) Unexpired Bank Guarantees and Rs. 99,71,600 1,00,83,178

Letters of Credit opened

b) Demands of Central Excise disputed by Rs. 56,84,230 56,84,230the Company in appeals before higher authorities :

c) Demands of Income Tax disputed by theCompany in appeals before higher authorities : Rs. - 1,54,47,433

d) Demands of Sales Tax disputed by theCompany in appeals before higher authorities : Rs. 18,93,000 18,93,000An amount of Rs.15.30 Lakhs paid under protest(P.Y.-64.36 Lakhs) against item Nos. b, c & d isgrouped under loans and advances.

e) Demands towards Load factor short fall chargesfor the period from September, 2005 to August,2006 during which the Ferro Alloys Unit of the Rs. 18,55,29,665 18,55,29,665Company was closed, disputed by the Company.

f ) The Company together with two other Promotercompanies has furnished an undertaking on behalfof Konaseema Gas Power Limited jointly promotedby them to the financial institutions to finance thecost over-run,if any,in respect of the power projectbeing executed by the said Company.

g) The Company together with another Promoter companyhas furnished an undertaking on behalf of OrissaPower Consortium Limited,jointly promoted by themto the financial institutions to finance the cost over-run,if any,in respect of the power project being executedby the said Company.

3 As per Accounting Standard 15 'Employees Benefits’ thedisclosure of Employee Benefits as defined in the AccountingStandard are given hereunder:

Defined Contribution Plan

Contribution to Defined Contribution plan, recognized asexpense for the year, are as under:

Employer’s Contribution to Provident and Pension Funds Rs. 15,04,715 15,67,043Employer's Contribution to Employee State Insurance Scheme Rs. 6,64,454 5,19,687

II. NOTES ON ACCOUNTS

33

Defined Benefit Plans

I. Reconciliation of opening and closing balances ofDefined Benefit obligation

a. Gratuity (Non-funded) :Defined Benefit obligation at beginning of the year 12,04,292 7,58,854Interest Cost 82,250 60,710Current Service Cost 4,26,071 4,84,680Actuarial loss/(gain) on obligation (1,98,554) (99,952)

Defined Benefit obligation at year end 15,14,059 12,04,292

b. Compensated Leaves (Non-funded) :Defined Benefit obligation at beginning of the year 1,89,334 4,04,934Interest Cost 13,253 32,394Current Service Cost 2,79,825 2,88,210Actuarial loss/(gain) on obligation (1,43,742) (5,36,204)

Defined Benefit obligation at year end 3,38,670 1,89,334

II Reconciliation of opening and closing balances of fairvalue of plan assets and fair value of assets andobligations does not arise as the company has no plannedassets in respect of its obligation towards Gratuity.

III Expenses recognized during the year (in the statementof Profit & Loss Account)

Current Service Cost :a. Gratuity 3,09,767 4,45,438b. Compensated Leaves* 1,49,336 (2,15,600)

*Credited to Profit & Loss account as provisionsno longer required

IV Principal Actuarial Assumptions

a. Gratuity (Non-funded) :

Discount Rate 8% 7%Salary Escalation Rate 5% 5%Attrition Rate 3% 3%Expected Rate of return on Plan assets 0% 0%

b. Compensated Leaves (Non-funded) :

Discount Rate 8% 7%Salary Escalation Rate 5% 5%Attrition Rate 3% 3%Expected Rate of return on Plan assets 0% 0%

The above information is certified by an Actuary.


34


4 The Company operates in only one business segment ofFerro Alloys and there is no geographical segment to bereported.

5. Micro small and Medium enterprises to the extent suchparties have been identified from the available informationand there are no Micro Small and Medium enterpriseswhere the outstandings are due for more than 45 daysare Nil.

6. Related Party Transactions:Related parties in terms of AS-18 issuedby the Institute of Chartered Accountantsof India :

a. Promoters:

Dr. M.V.V.S. Murthi and others

b. Associates:

1. VBC Ferro Alloys Limited2. Orissa Power Consortium Limited3. Konaseema Gas Power Limited

c. Key Management Personnel:

Sri M.S. Lakshman Rao, Managing Director

d. Relatives of Key Managerial Personnel :

Dr. M.V.V.S. Murthi

e. Others - Enterprises in which key Managerial Personnel ortheir relatives have substantial interest :

1. Techno Infratech Projects (India) Private Limited2. Basil Infrastructure Projects Limited3. Indo-US Coal Washeries Limited


II. NOTES ON ACCOUNTS

35

Summary of transactions carried out with related parties and balances outstanding as onthe balance sheet date:

Nature of transactions Associates Key OthersManagement

Personnel(in Rs.) (in Rs.) (in Rs.)

1. Purchases 3,06,09,201 0 0(45,70,743) (0) (0)

2. Sales 11,31,509 0 0(20,18,767) (0) (0)

3. Remuneration 0 0 0(0) (2,91,976) (0)

4. Rent Received 5,43,972 0 60,000(5,34,000) (0) (2,40,000)

5. Rent Paid 0 0 3,00,000(0) (0) (3,00,000)

6. Amount Receivable as at the end of the year 0 0 0(3,36,612) (0) (0)

Figures in brackets relate to previous year.

7 Earnings per Share (EPS)a) Net profit available to the Shareholders Rs. 5,60,24,107 1,72,76,145b) Weighted Average number of equity

shares used as denominator forcalculating EPS - Basic : Nos 4,50,43,809 4,50,43,809

- Diluted : Nos 4,50,43,809 4,50,43,809c) Earnings Per Share :

Basic Rs. 1.24 0.38Diluted Rs. 1.24 0.38

8 Major component of Deferred tax Asset :a. Deferred Tax Asset:(i) Unabsorbed Depreciation under Income Tax Act Rs. 6,45,43,346 1,91,70,673b. Deferred Tax Liability:

Timing difference between book and Tax depreciation Rs. 3,84,16,998 65,37,673c. Deferred tax Asset (net) Rs. 2,61,26,348 1,26,33,000

9 According to Company’stechnical assessment, there is no impairmentin the carrying cost of cash generating unitsof the Company in terms of AccountingStandard 28 (AS 28) issued by the Instituteof Chartered Accountants of India.

10 Details of Managing Director’s Remuneration :a) Sri.V.S.Rao (upto 17.07.2008)

Salary and Allowances Rs. 0 2,51,794Contribution to Provident & other Funds Rs. 0 10,800Other perquisites Rs. 0 29,382

Total Rs. 0 2,91,976


36


11 Additional information as required under part-II of

Schedule VI to the Companies Act, 1956.

(i) Licensed Capacity :Ferro Alloys (MT) N.A N.A

(II) Installed Capacity : (Per Annum)Ferro Silicon (MT)* 13200 13,200* Being a technical matter, the figures are ascertified by the management and notverified by the auditors.

(iii) Production :Ferro Silicon MT 7,915 6,912

(iv) Opening Stock :Ferro Silicona) Quantity MT 130 309b) Value Rs. 58,26,824 1,60,71,116

(v) Closing Stock:Ferro Silicona) Quantity MT 87 130b) Value Rs. 42,53,574 58,26,824

(vi) TurnoverQuantity:Ferro Silicon MT 7,958 7,091Value :Ferro Silicon Rs. 42,57,95,425 41,95,48,027Others Rs. 38,40,046 25,92,472

Total Rs. 42,96,35,471 42,21,40,499

(vii) Consumption of Raw MaterialsQuantity:Quartz MT 13,312 12,516Charcoal MT 14,176 13,333Carbon Paste MT 495 391

Value :Quartz Rs. 78,83,819 67,35,459Charcoal Rs. 10,79,09,925 10,73,82,916Carbon Paste Rs. 1,22,00,571 1,21,35,494Others Rs. 1,21,29,331 1,17,74,347


37

(viii) Analysis of materials & Stores consumed

IndigenousValue Rs. 14,77,36,689 14,60,09,659Percentage % 100 100

ImportedValue Rs. 0 0Percentage % 0 0

Total Rs. 14,77,36,689 14,60,09,659

(ix) Expenditure in foreign currencyduring the financial year onaccount of travelling Rs. Nil NIL

(x) Earnings in foreign exchange on account ofExports of goods Rs. 2,34,05,274 Nilcalculated on FOB basis(accounted on accrual basis)

12 Previous year’s figures have been regrouped andrearranged wherever necessary.

13 Paise have been rounded off to the nearest rupee.






38



Rupees Rupees

(A) CASH FLOW FROM OPERATING ACTIVITIES :Profit before tax and extraordinary Items 3,70,51,805 2,67,46,145ADD :Depreciation 96,41,333 95,72,373Provision for Gratuity 3,09,767 4,45,438Provision for leave encashment 1,49,336 (2,15,600)Assets written off 12,58,824 0Bad debts & Irrecoverable advances Written off 0 2,07,337Provisions no longer required 0 2,15,600Interest paid 2,34,83,158 2,18,83,985Interest received (24,57,623) (13,70,203)Dividend received (50,000) (50,000)

----------------- 3,23,34,795 ---------------- 3,06,88,930Operating Profit before Working Capital changes 6,93,86,600 5,74,35,075Adjustments for :

Inventories 48,56,249 (1,49,68,934)Trade and other receivables (22,59,286) 25,53,933Trade payables 11,75,78,118 (55,19,105)

------------------ 12,01,75,081 ------------------- (1,79,34,106)Cash used in Operations 18,95,61,681 3,95,00,969Adjustments for :

Interest paid (2,34,83,158) (2,18,83,985)Income tax paid (Net) (24,05,476) (38,94,147)

------------------ (2,58,88,634) ------------------- (2,57,78,132)Net cash used in operating activities (A) 16,36,73,047 1,37,22,837

(B) CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed assets (7,69,944) (23,45,191)Capital Work-in-Progress (15,77,67,480) (14,46,141)Purchase of Investments (14,00,00,000) (5,33,50,000)Sale of Investments /Refund of share application money 8,82,99,000 5,33,00,000Interest received 24,57,623 13,70,203Dividend received 50,000 50,000

-------------- (20,77,30,801) ----------------- (24,21,129)Net cash used in investing activities (B)

(C) CASH FLOW FROM FINANCING ACTIVITIESIncrease/ (decrease) in borrowings 4,28,81,779 (97,79,692)

Net cash generated in Financing activities (C) 4,28,81,779 (97,79,692)Net increase in Cash & Cash equivalents (A+B+C) (11,75,975) 15,22,016Cash & Cash equivalents at the end of the year 77,11,921 65,35,946Cash & Cash equivalents at the beginning of the year 65,35,946 42,29,530

=========== ===========

Cash Flow Statement for the year ended 31st March, 2010

Particulars





39

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE ASPER PART IV TO SCHEDULE VI TO THE COMPANIES ACT, 1956

I. REGISTRATION DETAILS :

Corporate Identity Number (CIN) : L28113AP1971PLC001437State Code 01Balance Sheet Date 31.03.2010

II. CAPITAL RAISED DURING THE YEAR(Amount Rs. in Thousands)Public Issue NilBonus Issue NilRights Issue NilPrivate Placement Nil

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS(Amount Rs. in Thousands)

Total Liabilities : 1140800 Total Assets : 1140800Source of Funds Application of FundsPaid-Up Capital : 451835 Net Fixed Assets : 554415Reserves & Surplus : 554784 Investments : 705903Secured Loans : 99181 Deferred Tax Asset : 8810Unsecured Loans : 35000 Net Current Assets : (128328)

IV. PERFORMANCE OF COMPANY(Amount Rs. in Thousands)

Turnover including Profit before Tax : 37052other income : 450750 Profit after Tax : 32759Total Expenditure : 413698Earnings per sharein Rs. : (0.73) Dividend Rate % : Nil

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY(as per monetary terms)

Item Code No. : 72022100(ITC Code)Product description : Manufacture of Ferro SiliconService of the Company : N.A





40

VBC INDUSTRIES LIMITEDRegd. Office : 6-2-913/914, 3rd Floor, Progressive Towers, Khairatabad, Hyderabad - 4.

PROXY FORM

I/We ..........................................................................................................................................................................

.................................................................................................................... of ........................................................

being a member(s) of the above named Company, hereby appoint the following as my/our Proxy to attendand vote (on a poll) for me/us and on my/our behalf at the 38th Annual General Meeting of the Companyto be held on Thursday the 15th day of July, 2010 at 3.00 p.m. at Surana Udyog Auditorium of The Federationof Andhra Pradesh Chambers of Commerce & Industry, situated at 11-6-841, Red Hills, Hyderabad-500004 and at any adjournment thereof.

1. Mr./Ms. _________________________________ , ________________________ or failing him/her(name of the proxy) (signature of proxy)



I/We direct my/our Proxy to vote on Resolutions in the manner as indicated below :

Number of Shares held ____________________

Signed this _________ day of ___________, 2010

Folio No./DP ID & Client ID No. ...........................

Signature(s) of Members

1. _________________________ 2. _________________________ 3. _________________________

Note: Proxies must reach the Company's Registered Office not less than 48 Hours before the time fixed for the meeting.

VBC INDUSTRIES LIMITEDRegd. Office : 6-2-913/914, 3rd Floor, Progressive Towers, Khairatabad, Hyderabad - 500 004.

ATTENDANCE SLIP

PLEASE COMPLETE THIS ATTENDANCE SLIP AND HAND IT OVER AT THE ENTRANCE OF THE MEETING HALL.

NAME & ADDRESS OF THE SHARE HOLDER Folio No. /DP ID & Client ID No.

................................................................................

................................................................................ ......................................

................................................................................

I hereby record my presence at the 38th ANNUAL GENERAL MEETING of the Company held on Thursday, the15th day of July, 2010 at 3.00 p.m. at Surana Udyog Auditorium of The Federation of Andhra Pradesh Chambersof Commerce & Industry, situated at 11-6-841, Red Hills, Hyderabad-500 004.

SIGNATURE OF THE SHAREHOLDER OR PROXY

��

RESOLUTIONS FOR AGAINST

Item No.1

Item No.2

Item No.3

RESOLUTIONS FOR AGAINST

Item No.4

Item No.5

AffixRevenue

Stamp

Printed at PRINT WORLD., Visakha-3, � 0891-2558274

1234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789

1234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678912345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567891234567890123456789012345678901212345678901234567890123456789012123456789012345678901234567890121234567890123456789012345678901212345678901234567890123456789

BOOK-POST

PRINTED MATTER

If undelivered please return to :

VBC INDUSTRIES LIMITED6-2-913/914, 3rd Floor,

Progressive Towers, Khairatabad,HYDERABAD - 500 004,Andhra Pradesh, India.

To

38th annual report 2009-2010 · 38th annual report 2009-2010 vbc industries limited 6-2-913/914,...

Documents