JINDAL SOUTH WEST HOLDINGS LIMITED ANNUAL REPORT 2009-2010 DIRECTOR'S REPORT Dear Members, Your Directors have pleasure in presenting the Ninth Annual Report together with the Audited Annual Accounts of your Company for the year ended 31st March, 2010. 1. Financial Results: Your Company has achieved a reasonably good financial performance during the financial year 2009-10, which is summarized below: Financial Highlights (Rupees in Thousands) Particulars Current Year Previous Year ended ended 31.03.2010 31.03.2009 Total Income 7,03,41 40,87,89 Profit Before Depreciation & Tax 5,78,83 39,67,97 Less: Depreciation 29 39 Profit Before Tax 5,78,54 39,67,58 Tax 1,40,23 3,33,00 Profit After Tax 4,38,31 36,34,58 Add: Balance brought forward 72,69,03 43,61,45 from previous year Amount available for Appropriation 77,07,34 79,96,03 Less: Appropriations: Transfer 87,70 7,27,00 to Reserve Fund Balance carried to Balance Sheet 76,19,64 72,69,03 2. Dividend: Your Directors have deemed it prudent not to recommend any dividend on equity shares for the year ended 31st March, 2010, in order to conserve the resources for future years. 3. Review of Operations: Your Company has recorded a reasonably good performance during the year under review. Inclusive of Income by way of Dividend of Rs.206.64 lakhs and Interest of Rs.496.77 lakhs, the Total Income is Rs. 703.41 lakhs as against Total Income of Rs.4087.89 lakhs in the previous year. The decrease was mainly on account of subdued performance of the Investee Companies which resulted in receipt of lower dividends by your Company during the year. The Profit before depreciation and tax is Rs.578.83 lakhs. After providing for depreciation of Rs. 0.29 lakh and Tax of Rs.140.23 lakhs, the Net Profit is Rs.438.31 lakhs. An amount of Rs. 87.70 Lakhs was transferred to Statutory Reserve Fund pursuant to section 45-IC of the Reserve Bank of India Act, 1934, during the financial year under review. 4. Future Prospects: Your Company continues to hold significant investments in Equity Shares of JSW Steel Limited besides certain other Investments in other O.P. Jindal Group of Companies. The financial year under review saw the economy recovering from the severe recession witnessed in the earlier year. The Steel Sector in India also is on the growth path and the performance of the Investee Companies are expected to substantially improve in the current financial year, which is expected to result in higher dividend payouts in the coming year. The anticipated infrastructure development being undertaken in the country is expected to give a further boost to the Steel industry and your Company is looking forward for a sustainable growth in its Investee Companies in the coming year which would enhance the shareholders' value. Your Company will continue to focus on making long-term strategic investments in various New Ventures promoted by JSW Group, a part of O.P. Jindal Group, besides consolidating the existing investments through further investments in the existing companies. Considering the further forecasted recovery in the economy and the prospects of the economy as a whole and the steel industry in particular, your Company expects to restore its value with a hope of further enhancement in the long term for the benefit of the shareholders at large. 5. Holding & Subsidiary Company: Your Company has neither any holding company nor a subsidiary company. 6. Fixed Deposits: Your Company has neither accepted nor renewed any deposits within the meaning of Section 58A of the Companies Act, 1956 and the rules made there under. 7. Directors: Mr. Sajjan Jindal, Director, retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. Your Directors have at their meeting held on 21st January 2010, re- appointed Mr. K. N. Patel as the Managing Director of the Company, designated as 'Jt. Managing Director & CEO', for a further period of 5 years with effect from 28th April, 2010 to 27th April, 2015, subject to your approval. The proposals regarding the appointment/ re-appointment of the aforesaid Directors are placed for your approval. 8. Auditors: M/s. Shah Gupta & Co., Chartered Accountants, Mumbai, Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Your Company has received confirmation that their appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956, and that they are not disqualified for such appointment within the meaning of section 226 of the Companies Act, 1956. Your Directors recommend re- appointment of M/s. Shah Gupta & Co. as the Statutory Auditors of the Company for the current financial year and fixation of their remuneration. 9. Reserve Bank of India's Guidelines: Your Company has duly complied with all applicable rules, regulations, directions and guidelines issued by Reserve Bank of India for Non-Banking Financial Companies from time to time. 10. Particulars regarding Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo: As your Company is not engaged in any manufacturing activity, particulars under Section 217(1)(e) of the Companies Act, 1956, regarding conservation of energy, technology absorption are not applicable. There were no foreign exchange transactions during the year. 11. Particulars of Employees: The particulars of employees as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are set out in the annexure to the Directors' Report. 12. Corporate Governance: Your Company has complied with the requirements of Clause 49 of the Listing Agreement on Corporate Governance. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Report on Corporate Governance along with the Auditors' Certificate on its compliance is annexed separately to this Annual Report. 13. Management Discussion and Analysis Report: The Management Discussion and Analysis Report on the operations of your Company for the year under review, as required under Clause 49 of the Listing Agreement with the Stock Exchanges, is provided in a separate section and forms part of this Annual Report. 14. Human Resources: Your Company continues to put due emphasis on appropriate human resource development for its business. The employees of your Company and the Group fully identify with the Company's and Group's vision and business goals. 15. Directors Responsibility Statement: Pursuant to the requirements under Section 217(2AA) of the Companies Act, 1956, your Directors hereby state and confirm that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed; ii. they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year on 31st March, 2010, and of the profit of the Company for that period; iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. they have prepared the annual accounts on a going concern basis. 16. Appreciation & Acknowledgements: Your Directors wish to express their sincere appreciation of the valuable support and guidance provided by Securities Exchange Board of India, the Stock Exchanges and all other Regulatory bodies. Your Directors also take this opportunity to acknowledge the continued assistance and co-operation received from Banks, the Reserve Bank of India and other Government Agencies and Shareholders. Your Directors also wish to place on record their appreciation for the valuable services rendered and the commitment displayed by the employees of the Company and look forward to their continued support in the future as well. For and on behalf of the Board of Directors Place: Mumbai Sajjan Jindal Date : 4th May, 2010 Chairman MANAGEMENT DISCUSSION AND ANALYSIS A) Overview - Financial Performance: The Company during the Financial Year 2009-10 has posted a reasonably good financial performance. Inclusive of Income by way of Dividend of Rs.206.64 lakhs and Interest of Rs.496.77 lakhs, the Total Income is Rs. 703.41 lakhs as against Total Income of Rs.4087.89 lakhs in the previous year. The decrease was mainly on account of subdued performance of the Investee Companies which resulted in receipt of lower dividends by the Company during the year. The Profit before depreciation and tax is Rs.578.83 lakhs. After providing for depreciation of Rs. 0.29 lakh and Tax of Rs.140.23 lakhs, the Net Profit is Rs.438.31 lakhs. The Share Capital of the Company as on 31st March, 2010 stood at Rs.11.10 crores and Reserves and Surplus at Rs.610.74 crores resulting in Net worth of Rs.621.84 crores. B) Outlook: Major activities and Future Prospects:- The Company is registered as a Non Banking Financial Company (NBFC) with Reserve Bank of India under the provisions of Section 45 IA of the Reserve Bank of India Act, 1934. In terms of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007, the Company is a Systemically Important Non-Deposit Taking Non- Banking Financial Company' (i.e a non-banking financial company not accepting / holding public deposits and having an asset size of more than Rs.100 crores) having total assets of Rs.621.84 crores. Your Company continues to hold significant investments in Equity Shares of JSW Steel Limited besides certain other Investments in other O. P. Jindal Group of Companies. The financial year under review saw the economy recovering from the severe recession witnessed in the earlier year. The Steel Sector in India also is on the growth path and the performance of the Investee Companies are expected to substantially improve in the current financial year, which is expected to result in higher dividend payouts in the coming year. The anticipated infrastructure development being undertaken in the country is expected to give a further boost to the Steel industry and your Company is looking forward for a sustainable growth in its Investee Companies in the coming year which would enhance the shareholders' value. The Company will continue to focus on making long-term strategic investments in various New Ventures promoted by JSW Group, a part of O.P. Jindal Group, besides consolidating the existing investments through further investments in the existing companies. Considering the further forecasted recovery in the economy and the prospects of the economy as a whole and the steel industry in particular, the Company expects to restore its value with a hope of further enhancement in the long term for the benefit of the shareholders at large. Opportunities & Threats:- Considering that the economy on the whole is on the path of growth, the Company foresees a lot of opportunities coming up for equity participation in new projects/expansion of existing projects of the Investee companies in the future. The Company can also explore other opportunities in the Capital market, which may come up. The Company holds significant investments in equity of Steel Companies. The steel industry is characterized by cyclical fluctuations in prices. Downward movement in the Steel prices could adversely affect margins of the Steel Companies, which could be a major threat to the Companys fortunes. C) Risk and Concerns: The Company is mainly exposed to market risks in the form of reduction in value of its investments and fall in returns due to dip in the investee Company's performance. The Company is also exposed to the fluctuations of economy and industry cycles/ downturns. D) Internal Control Systems: The Company has adequate internal control systems for the business processes in respect of all operations, financial reporting, compliance with laws and regulations etc. The management information system forms an effective and sound tool for monitoring and controlling all operating parameters. Regular internal audits ensure that responsibilities are executed effectively. The Audit Committee reviews the Internal Audit Reports and the adequacy of internal controls on regular basis. E) Human Resources Management: The Company presently has 2 employees who are professionals in their field and are given independent responsibilities to perform significant roles in the Company's development. The Company will strengthen its operative staff as and when the need arises. F) Cautionary Statement: Statement in this Management Discussion and Analysis Report, describing the Company's outlook, projections, estimates, expectations or predictions may be 'Forward Looking Statements' within the meaning of applicable securities laws or regulations. Actual results could differ materially from those expressed or implied.