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SPONGE IRON LIMITED

Twenty-ninth Annual Report, 2011-12

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BOARD OF DIRECTORS[As on 23rd April, 2012]

Mr. A. M. Misra (Chairman)Mr. N. P. SinhaMr. Dipak Kumar BanerjeeMr. P. C. ParakhMr. S. P. MehrotraMr. K. K. VarugheseMr. Arun MisraMr. Rajesh ChintakMr. Manoj T. ThomasMr. Suresh Thawani (Managing Director)

MANAGEMENT TEAM

Bankers

Auditors

Cost Auditors

Registered Office& Works

Share Registrars

[As on 23rd April, 2012]

Mr. Suresh Thawani Managing Director

Mr. Partha Chattopadhyay Chief Operating Officer(Sponge Business)

Mr. Ujjwal Chatterjee Chief Operating Officer(Coal Business)

Mr. S. K. Mishra Chief (Finance & Accounts)

Mr. S. S. Dhanjal Company Secretary

State Bank of IndiaCanara Bank

M/s. Deloitte Haskins & SellsChartered Accountants

M/s. Shome & BanerjeeCost Accountants

Post - JodaDist - KeonjharOrissa 758 034

Tel No : (06767) 284236Fax No : (06767) 278159 E-mail : [email protected] : www.tatasponge.com

M/s. TSR Darashaw Ltd.6-10 Haji Moosa Patrawala Industrial House20, Dr. E. Moses Road Near Famous StudioMahalaxmi Mumbai - 400 011.

Tel No : (022) 66568484Fax No : (022) 66568494E-mail : [email protected]: www.tsrdarashaw.com

SPONGE IRON LIMITEDTwenty-ninth Annual Report, 2011-12

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CHAIRMAN'S STATEMENT

Dear Shareholders,

In continuation of my half yearly communication, I have now pleasure in presenting to you the performance of your company for full year 2011-12.

During the year the Company produced 2,72,106 MT of sponge iron compared to 3,83,002 MT in the previous year registering a shortfall of 1,10,896 MT in production . As communicated earlier, though there were no operational problems in the plant, only the shortage of Iron Ore forced the company to operate the Kilns at reduced capacity. Prime reason for the shortage of iron ore was unrest by villagers surrounding the supplier's mine leading to disruption in transportation. The situation worsened by disruption in the transportation due to flash floods in September, 2011 leading to erosion of the road. However, the transportation scenario improved to some extent towards the end of the year. Consequent to the lower production of sponge iron, the sales remained at 2,73,766 MT compared to 3,80,273 MT in the previous year. On the power front, the company generated 134.39 million units (previous year - 191.37 million units) and sold 88.31 million units (previous year 133.77 million units). Production and sale of power was in tandem with the sponge iron production as power is produced by recovering heat from the waste gases of the kilns.

The price of two major raw materials, i.e. coal and iron ore, witnessed steep rise during the review period mainly due to higher international prices and demand-supply pressure . There was an increase in the selling price of Sponge Iron albeit not covering the full increase in the raw material cost. An increase in the other income contributed to higher margin. Therefore, despite lower production and dispatches, the company achieved a somewhat satisfactory Profit Before Tax at Rs. 112.07 crore (Rs. 150.28 crore in the previous year) and Profit After Tax at Rs. 75.68 crore (Rs. 101.34 crore in the previous year). Consequently, Earnings Per Share decreased to Rs. 49.14 per share (Rs. 65.80 per share). The Company remained debt free during the year.

Significant progress has been made towards the development of coal block. The first phase of land acquisition was nearing completion when the process took a pause for some time due to some dispute arising out of process being followed by the Government of Odisha. There is considerable progress on the fronts of statutory clearances. The entire funding has so far been made out of internal generations. The coal block is now expected to be operational in next two years.

The commencement of project work for installation of AFBC Boiler based power plant (of 25 MW capacity) is pending for want of necessary statutory clearances, change in eco-dynamics etc. The Board is regularly reviewing the status.

The company continued its march towards improvement of processes as per Tata Business Excellence Model and also won three prestigious awards during the year, namely- HRD Thinker Award, National Quality Award from Indian Institue of Metal and CII(Eastern Region) Quality Award.

I would like to thank the office bearers and members of Tata Sponge Shramik Sangh for their support and cordial industrial relations. I would also like to take this opportunity to acknowledge the unstinted support of all stakeholders - our shareholders, customers, employees and management, suppliers, the community, the state and central government agencies and hope for better times ahead.

A. M. Misra

Chairman

Jamshedpur

23rd April, 2012

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NOTICE

ORDINARY BUSINESS

SPECIAL BUSINESS

THE TWENTY-NINTH ANNUAL GENERAL MEETING OF TATA SPONGE IRON LIMITED will be held at 'Lake View”, th(Officers' Recreation Centre), TSIL Township, Joda, Dist – Keonjhar, Orissa – 758 034, on Friday, the 20 July, 2012, at

10-30 a.m to transact the following business :

st1. To receive, consider and adopt the Audited Statement of Profit and Loss for the year ended 31 March, 2012 and the Balance Sheet as at that date together with the Report of the Board of Directors and the Auditors' Report thereon.

2. To declare a dividend.

3. To appoint a Director in place of Mr. N.P. Sinha, who retires by rotation and is eligible for re-appointment.

4. To appoint a Director in place of Mr. Rajesh Chintak, who retires by rotation and is eligible for re-appointment.

5. To appoint Auditors of the Company and to fix their remuneration

6. To consider and if thought fit to pass, with or without modification, the following Resolutions as Ordinary Resolutions :

“RESOLVED that Mr.S. Srikanth be and is hereby appointed as Director in place of Mr.S.P. Mehrotra, a Director liable to retire by rotation but who does not seek re-election.”

7. To consider and if thought fit to pass, with or without modification, the following Resolution as Ordinary Resolution :

“RESOLVED that Mr.Manoj Thankachan Thomas be and is hereby appointed a Director of the Company.”

8. Commission to Directors other than Managing and Whole-time Directors :

To consider and if thought fit to pass, with or without modification, the following Resolution as Special Resolution :

“RESOLVED that pursuant to the provisions of Section 309 and other applicable provisions, if any, of the Companies Act, 1956, a sum not exceeding one percent per annum of the net profits of the Company calculated in accordance with the provisions of Sections 198, 349 and 350 of the Act, be paid to and distributed amongst the Directors of the Company or some or any of them (other than the Managing Director and the Whole-time Directors) in such amounts or proportions and in such manner and in all respects as may be directed by the Board of Directors and such payments

stshall be made in respect of the profits of the Company for each year of the period of five years commencing 1 April, 2012.”

Notes :

1) A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND ON A POLL, VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER. PROXIES, IN ORDER TO BE EFFECTIVE, MUST BE RECEIVED AT THE REGISTERED OFFICE OF THE COMPANY AT JODA, DIST-KEONJHAR, ORISSA, PIN 758 034, NOT LESS THAN 48 HOURS BEFORE THIS ANNUAL GENERAL MEETING.

th th2) The Register of Members and Share Transfer Books will remain closed from 4 July, 2012 (Wednesday) to 10 July, 2012 (Tuesday) both days inclusive.

3) Dividend, if declared, will be paid to those shareholders, whose names appear on the Company's Register of rd thMembers/Register of Beneficial Owners as on 3 July 2012. The payment will be made on or after 24 July, 2012.

Your dividend warrant is valid for payment by the Company's Bankers for three months from the date of issue. Thereafter, please contact our Share Registrars, M/s. TSR Darashaw Ltd., (formerly Tata Share Registry Ltd.) 6-10 Haji Moosa Patrawala Industrial House, 20, Dr.E. Moses Road, Near Famous Studio, Mahalaxmi, Mumbai – 400 011, for revalidation of the warrants.

Please encash your dividend warrants immediately as the dividend amounts remaining unclaimed/unpaid at the expiry of 7 years from the date that becomes due for payment are required to be transferred by the Company to the Investor Education and Protection Fund established under Section 205C in terms of Section 205A of the Companies Act, 1956, and no payment shall be made in respect of any such unclaimed/unpaid dividend either by the Company or by the Fund.


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4) The unclaimed dividend for the financial years 1993-94 and 1994-95 has been transferred to the General Revenue Account of Central Government and for the years 1995-96 to 2003-04 has been transferred to Investor Education and Protection Fund. Members, who have not encashed their dividend warrant for 1993-94 and 1994-95 are, therefore, requested to claim the amount from the Registrar of Companies, Orissa, Corporate Bhawan, 3rd Floor, Plot No. 9(P), Sector 1, CDA, Cuttack - 753014.

5) Members, who have not encashed their dividend warrants issued for the years 2004-05 to 2010-11 are requested to immediately forward the same for revalidation to our Share Registrars at their address given under (3) above, and get the encashment at the earliest.

6) Shareholders are requested to notify their bank particulars giving the name of the bank and the branch and the nature of account and also any change of address to the Company's Registrar and Share Transfer Agent, M/s.TSR Darashaw Ltd. Shareholders are hereby intimated that under instructions from the Securities and Exchange Board of India, furnishing of bank particulars by the shareholders has become mandatory.

7) In order to provide better service to the shareholders, the Company has introduced Electronic Clearing Service (ECS) for payments of dividend. Shareholders desirous of availing ECS facility may provide the required information to our Share Registrars at their address given under (3) above.

8) Shareholders are hereby informed that the bank particulars given by them at the time of opening a depository account will be used by the Company for printing on the dividend warrants. This would ensure that the dividend warrants cannot be deposited in any account other than the one specified on the warrants. For the safety and interest of the shareholders, it is important that bank account details are correctly provided to the depository participants. The bank mandate for shares held in physical form will not be applied for shares held in electronic form.

9) Section 109 A of the Companies Act, 1956 extends the nomination facility to individual shareholders of the Company. Therefore, the shareholders holding share certificates in physical form and willing to avail this facility may make nomination in Form 2B, which may be sent on request. However, in case of demat holdings, the shareholders should approach to their respective depository participants for making nominations.

10) Members, who have multiple accounts in identical names or joint names in same order are requested to intimate M/s.TSR Darashaw Ltd., the Ledger Folios of such accounts to enable the Company to consolidate all such share holdings into one account.

11) Members will be sent soft copy of the annual report at their e-mail ID with Depository Participants, unless they expressly request for physical copy of the annual report.

By Order of the Board of Directors

S.S. DhanjalCompany Secretary

Jamshedpurrd23 April, 2012

As required by Section 173 of the Companies Act, 1956, (hereinafter referred to as “the Act”) the following Explanatory Statement set out all material facts relating to the business mentioned under item Nos. 6, 7, 8, of the accompanying Notice

rddated 23 April, 2012.

Item No.6

Mr.S.P. Mehrotra, one of the Directors liable to retire by rotation at this meeting, has informed the company that he does not wish to seek re-appointment. Therefore, it is proposed to appoint Mr.S. Srikanth as a Director on the Board of Directors of the company (in place of Mr.S.P. Mehrotra) at the forthcoming Annual General Meeting. The company has received from a member a Notice in writing in terms of Section 257 of the Companies Act, 1956, signifying his intention to propose the appointment of Mr.S. Srikanth as a Director on the Board of Directors of the company at the forthcoming Annual General Meeting.

The Board commends acceptance of the resolution set out in Item No.6 of the convening Notice.

None of the Directors other than Mr.S.P. Mehrotra is concerned or interested in the resolution at Item No. 6 of the Notice.

ANNEXURE TO NOTICE

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Item No.7

The Board of Directors of the company appointed Mr.Manoj Thankachan Thomas as Additional Director of the company thw.e.f. 12 September, 2011, pursuant to Article 109 of the Articles of Association of the company. Mr.Thomas holds office

as Director up to the date of the Twenty-ninth Annual General Meeting and is eligible for appointment. The Company has received from a member a Notice in writing in terms of Section 257 of the Companies Act, 1956, signifying his intention to propose the appointment of Mr.Manoj Thankachan Thomas as a Director on the Board of Directors of the Company at the forthcoming Annual General Meeting.

The Board commends acceptance of the resolution set out in Item No.7 of the convening Notice.

None of the Directors other than Mr. Manoj Thankachan Thomas is concerned or interested in the resolution at Item No.7 of the Notice.

Item No.8thThe shareholders at their meeting held on 14 July, 2008, have authorised the Board by passing a Special Resolution to

remunerate the non-executive directors out of the profits of the company for each year for a period of five years st stcommencing from 1 April, 2007. The said period of five years has expired on 31 March, 2012. Therefore, the Board of

rdDirectors in its meeting held on 23 April, 2012, decided that, subject to approval of the shareholders, in terms of Section 309 (4) of the Companies Act, 1956, the Non-executive Directors be paid for each of the five financial years of the company

stcommencing from 1 April, 2012, remuneration not exceeding 1% per annum of the net profits of the company computed in accordance with the provisions of the Act. This remuneration will be distributed amongst all or some of the Non-executive Directors in accordance with the directions given by the Board.

The Board commends acceptance of the resolution set out in Item No. 8 of the convening Notice.

All the Directors of the company, except Mr.Suresh Thawani, Managing Director, are concerned or interested in the Resolution at Item No.8 of the Notice to the extent of the remuneration that may be received by them.

By Order of the Board of Directors

S.S. Dhanjal Company Secretary

Jamshedpurrd23 April, 2012


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Note : Directors of the company do not have any inter-se relationship

DETAILS OF DIRECTORS SEEKING APPOINTMENT AND RE-APPOINTMENT IN TWENTY-NINTH ANNUAL GENERAL MEETING(In pursuance of Clause 49 of Listing Agreement)

Name of the Director(s) Mr.N.P. Sinha Mr.Manoj T. Thomas Mr.S. Srikanth Mr. Rajesh Chintak

Qualifications B.Sc.Engg. (Elect.), BE (Civil), PGDRM, M.E. Metallurgy B.Tech PGDBM, I&S M.Phil (Economics), Ph.D. Metallurgy (Elec. Engg.)

Fellow (IRMA), Post Doctoral Fellow, Strategic Management McMaster University,

Ontario, Canada.

Date of appointment 18-01-2002 12-09-2011 20-07-2012 01-08-2009

Expertise in specific Engineer Strategic Management, Thermodynamics and Power Engineering, functional areas Resource based Kinetic modeling and Business Excellence,

strategy, measurements of Business Management, Contemporary Metallurgical process, Manganese and Management Extraction of Metals from Greenfield project.practices, etc. lean and complex ores,

Mechano-chemical activation of minerals, Intermediate temperature Solid Oxide Fuel Cells, Failure analysis of engineering components, High temperature corrosion.

List of other Companies in 1] Jamshedpur Utility & Nil Nil T.S. Alloys Ltd.,which Directorship held Services Co.Ltd. Gopalpur Special (excluding in foreign 2] The Indian Steel and Economic Zone Ltd.,companies) Wire Products Ltd. Kalinga Aquatics Ltd.,

3] Steel City Press Ltd. TRL Krosaki Refractories Ltd.

Chairman/Member of the 1] Member of Audit Committee Nil Nil Member of AuditCommittees of the Board and Remuneration Committee Commitee of T.S. Alloysof Directors of other of Jamshedpur Utility & Ltd.Companies in which he is Services Co.Ltd a Director (excluding in 2] Chairman of Audit foreign companies). Committee and Member

of Remuneration Committee of The Indian Steel and Wire Products Ltd. 3] Member of Remuneration Committee of Steel City Press Ltd.

Details of shareholding 1000 shares held in his name Nil Nil Nil(both own or held by/for other persons on a beneficial basis), if any, in the Company

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Looking forward, operational costs would be lowered when the company's captive coal block at Angul gets operational. Certain procedural issues have delayed the process of coal block development, but all these issues are being adequately addressed.

Operations:

Despite constraints, the company produced 2,72,106 tonnes of sponge iron in 2011-12. Operations at the plant were hit due to non-availability of iron ore forcing TSIL to operate its kilns at reduced feed leading to capacity loss. Power production also suffered due to frequent shut downs in the plant. Therefore, the company could produce 134.39 million kwh in 2011-12 compared to191.37 million kwh in the previous year.

While TSIL has 3 kilns there were times when it was difficult to operate even a single kiln due to input scarcity. In the face of such operational constraints, the silver lining was the company's workforce and their 'never say die' attitude. While the grim situation on the raw material front led to a drop in morale, TSIL workforce managed to pick up production seamlessly as soon as availability of iron ore improved. This was clearly a break from the past experience. In more ways than one, it was also perhaps the highpoint of TSIL's achievements in the year. While the company took 21 days to reach full production level of a kiln earlier, this ramp up time has drastically come down to achieve full production in just nine days on an average. This is also the reason why the plant managed to keep its head above water in times of such crisis. A host of human resource initiatives had paved the way for this achievement. The motivation of the workforce was carefully honed through initiatives like Tata Business Excellence Model TBEM), Total Productive Maintenance (TPM), e-associates programme, and a series of confidence-building exercises.

Raw material usage is more or less a standard depending upon its quality and hence, huge changes are not possible in any given year. However, TSIL recorded improvement in specific consumption of raw materials, which was better than the previous year.

TSIL has already set a benchmark in Overall Equipment Efficiency (OEE) in its industry sector. It had reported the longest kiln operating days of 351 in 2010-11. It achieved an OEE of 87% up from 77% in the previous year.

Rising to the occasion

The year 2011-12 was a tough year for Tata Sponge Iron Ltd. (TSIL). The reasons were external - the worst ever man-made raw material crisis affecting logistics, unprecedented floods which led to outage of capacity and lower availability of sponge iron to the customers to the tune of 27%. After a record breaking year of production of 3,83,002 tonnes in 2010-11, the company was hit by severe shortage of one of its key raw materials, namely iron ore, compelling TSIL to operate its kilns at reduced capacity. This led to a slump in production by 1,10,896 tonnes. And, yet TSIL strived against all odds and managed to remain profitable. The adversity taught the company to stretch itself and, in the process, managed to bring out the best in both its men and its machines. What really made the difference was TSIL's ability to make process adjustments, produce consistent quality product that the customers have come to appreciate, a proactive marketing team that kept communication with customers open and last, but not the least, the inner resilience of its people. It is said, 'When the going gets tough, the tough get going.' In 2011 -12, TSIL was a living embodiment of it.

Raw Materials Scenario:

TSIL's two main raw materials, coal and iron ore, account for bulk of production costs. Supply of iron ore from the regular source was affected due to various problems stated above. Hence it was virtually impossible for TSIL to procure iron ore from outside, being a short term player. Scarcity of iron ore also resulted in its higher price.

During the year truckers disrupted the supply chain by charging higher rates and holding up movement of materials. The district administration also imposed restriction on plying of heavy vehicles during the day time. Rail transportation of iron ore will hopefully make a significant difference and address this problem adequately. The extension of the railway siding (work-in-progress) will help TSIL source iron ore from Joda mines by railway rakes.

In case of the other key raw material, coal, domestic prices shot up by 50-100% over the previous year. The price of imported coal, however, remained stable. In fact the domestic coal prices matched those of imported coal. TSIL has been importing coal from South Africa. It continued to use a mix of imported and domestic coal to meet its requirements.

Riding the tough times

Inner Resilience

Triple Bottom Line Report

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TSIL deployed its surplus cash by investing in short term deposits. This helped the company generate a good interest income. Thus even in a tough year, TSIL managed to declare 80% dividend and offer good returns to its shareholders. TSIL remains a debt-free company and its cash and cash equivalent to nearly Rs.220 crore as on March 31, 2012, are comfortable. It has already invested Rs. 170 crore on developing the coal block. With decent funds TSIL will be in a position to make an additional investment in coal block without recourse to borrowing in near future.

Quality:

Since TSIL could not use its full capacity due to reasons beyond its control, it instead decided to use the opportunity to focus on making its systems and processes more robust. It made a number of changes and improvements in its processes and engineering systems and these positively impacted TSIL's quality drive. It won the Cll (Eastern Region) Quality Award for the second time in a row and the National Quality Award instituted by the Indian Institute of Metals, where it won the first prize under pig iron, rolling mill, DRI category. It also affirmed the company's relentless drive and commitment towards quality in every sphere of activity. In this, reduction in standard deviation of Fe (Metallics) in product from 2.5 to 1.89 was also a significant milestone which could be achieved due to many changes incorporated in the process. This also helped achieve zero customer complaint and having satisfied customers. Several changes were incorporated in the process to achieve better carbon utilisation

With a number of initiatives TSIL has controlled the percentage of carbon in fly ash to a level below 5%. Carbon is better utilized for heat generation in Post Combustion Chamber and in boiler for generation of steam. All these measures have resulted in better utilization of energy from coal and reduction in the coal cost.

From the point of view of customers, TSIL despatched 2,73,766 tonnes of sponge iron without a single complaint. There has been no problem reported by any customer with respect to weight and/or quality - two traditional causes of complaints. To achieve zero complaints in dispatches, TSIL had a single-minded focus on maintenance and planning. The company is trying to bring in the Plan, Do, Check, Act or 'PDCA' culture.

A Relentless Pursuit

Market Scenario:

Finance:

The market for sponge iron was stable during the year. TSIL managed to fetch higher than expected prices due to quality of goods and services. The supply of iron ore was severely constrained during the year. While there was shortage due to ban on iron ore mining in Karnataka and in Odisha, iron ore supplies to TSIL were hit badly too, albeit totally for different reasons. Higher iron ore prices led to closure of a few units leading to a 15-20% shortfall of sponge iron in the market. This led to firming up of sponge iron prices. TSIL stretched itself to fill in the demand and it helped the company remain profitable in an otherwise difficult year.

During the year, the Marketing Department managed to sell the company's waste products in higher volumes. This generated additional revenues of Rs 24 crore on selling iron ore fines and coal fines. These fines come out as a result of screening before feeding to the sponge iron manufacturing process. Since iron ore fines and coal fines cannot be used in its kilns, every year TSIL sells it but in smaller quantities. This year TSIL managed to sell fines in larger quantities and at higher prices. This revenue boosted the bottomline and, to an extent, also made up for the production loss.

Despite a difficult year, TSIL's efforts to work its way around adversities helped it earn decent profits. During the year, the company faced iron ore shortages that forced it to cut down production. The shortage of iron ore compelled closure of a number of smaller units. This increased demand for sponge iron and also firmed up the price.

People Power

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Human Resources & Training:

For TSIL it was a good year in terms of human resource. In what was a difficult year, its people emerged as the company's key strength. During the year following key initiatives were taken :

Over thirty people were appointed. For developing positive bond with new recruits, TSIL made special efforts right from the officers' recruitment, in terms of designing induction programme, mentoring, providing a welcome kit, internet ID, mobile phone SIM and accommodation on joining.

New recruits were asked what should be done to make the living in the township lively. On their suggestions five clubs were formed based on employees' diverse interests in sports, health, entertainment, adventure and movies. These clubs are very active.

In another unique initiative, two number of" Wall of Appreciation" have been set up, one in the Works area and other in the Administrative office. It provides a platform for giving accolades and recognizing big and small efforts that people make in and outside their job functions that may have otherwise gone unnoticed. This has helped boost employee morale in a big way.

TSIL also introduced the concept of Feel Good presentations. Departments that have 12 people or more are encouraged to make a presentation every quarter, highlighting good things achieved by them. This is attended by the Managing Director, Chief Operating Officer and all the heads of the departments. Also the employees of a department are invited to attend the presentation when their departmental presentation is being made. For instance, when the Operations Head is making a presentation, then all his employees would be present. In this, both the achievement and the individual are recognized. This has received a good response and has raised motivation levels and has helped foster a healthy competitive spirit among employees.

TSIL also adopted a model on Competency Mapping in which competency level for each Role was defined. The mapping was done based on three parameters - knowledge, skill and attitude. The first stage of this exercise is over. This also comes in handy during

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recruitment. In the second stage, it would extend to Gap Analysis and then move on to training required to fill in the gap.

Taking a step forward from the Gallup Survey, TSIL introduced the 'Milan' programme for employee engagement, which is already having its impact.

The Managing Director introduced the concept of emotional intelligence in the organization and encouraged employees to take Thomas Emotional Intelligence test. Many officers opted for this behaviour test.

A dedicated e-mail ID was created to provide unrestricted access to all employees of the company to get in touch with the Managing Director directly on any of the issues.

TSIL's dexterity in operations and maintenance came up for acknowledgement from international organizations when overseas organizations chose the company to train their employees in technical areas. The company has a state of the art training centre and spent a good amount in bridging the knowledge and skill gaps of its employees.

The unique 'Jaagruti' programme focuses on Behavioural Safety, TBEM, Management of Business Ethics(MBE) and Climate Change besides TPM. It is a full day module of one and half hours each on the above subjects. There were two sessions per month, one for officers and the other for associates. Every session was followed by a test. This led to a competitive spirit as everyone wanted to know one's score. Every employee has been covered under this initiative.

For contract employees, TSIL launched an audio visual training programme called 'Adhar'. As part of it, these contract employees are invited in a hall and shown a half-an-hour long documentary. These documentaries are made in-house and in the local language (Oriya). The first documentary was on Safety, while the other on Ethics and Environment.

The combined impact of all these measures led to a sharp decline in the company's attrition rate.

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Business and Operational Excellence:

Safety First:

At TSIL, Tata Business Excellence Model (TBEM) continued to be the sustainability mantra. The TBEM Assessment has helped recognize the company's strength and identify the opportunities for improvement. The feedback from the assessors has been used to challenge status quo and improve business and operational processes. The most significant achievement has been to make the company process centric and instill a culture of continuous improvement. TSIL benchmark their processes with competitors and best-in-class players to stretch their ambition for performance excellence. This year 40 employees were exposed to TBEM related training.

TSIL also continued its TPM journey. As one more step towards sustenance of step levels of TPM Circles, regular Jishu Hozen audits were introduced where circles are audited on a periodic basis. In order to reinforce the TPM culture, Jishu Hozen workshops were carried out. Beginning 2011, an overview of TPM has also been imparted to all employees in two different modules for officers and associates. Fortnightly and monthly reviews of TPM Pillars are held which in-turn are reviewed by the Managing Director every month.

The company has embarked on a safety excellence journey with assistance and guidance from Corporate Safety Department of Tata Steel. An Apex Safety Council (ASC) has been formed which will oversee the entire process of the safety excellence journey. This council is assisted by four sub committees to frame the safety related policies, process and procedures to be implemented.

The ASC has 16 members, including the Managing Director as Chairman and Chief Operating Officer (SB) as convener, the president and secretary of the union. The sub-committees consist of five members each of the management and union. The implementation of the policies, process, procedures developed by the ASC and its four sub committees shall be done by four Area Implementation Committee (AlC's).

Before embarking on the safety excellence journey, TSIL had the process of safety audits by officers. There were six such audits by each officer as per his/her Key Result Area. Now, this has given way to safety observation or observation of the plant. Under this, a six-step approach has been taken up which begins with in-group visits to observe

unsafe act and conditions. Earlier, only unsafe conditions were observed. Now, when an unsafe act is identified, the initial step taken is to counsel the individual and then convince him. Following this, the individual enters a pad, which is an assurance that such acts will not be repeated. A major thrust had been given towards bringing about a change in behavior towards safety.

TSIL also strengthened the gate pass system. For improving the behavioral safety among contract employees, first there is a safety induction training on Personal Protection Equipment (PPE) conducted. This is followed by a week's on the job training by the concerned department. Only after this training, contract employees are allotted job.

A new concept, called 'Toolbox meeting', has also been initiated whereby when a supervisor assigns a job to the workmen, they assemble in the work area before proceeding to the site and discuss for a few minutes the unsafe aspects of the job, if any, and discuss the procedure and safety devices that are required to accomplish the job.

A new system of positive isolation was also introduced. Earlier, for a shutdown only electrical department's permission was required. Now a work permit system has been established and ownership defined. While Operations is the owner of the equipment, Maintenance is the supporting department. The work permit form clearly outlines safety precautions and once these are taken, the Operations head gives

clearance to work and the equipment is shutdown. Under the 'lock out tag out' concept there is 100% assurance that the equipment has shutdown and isolated from all energy sources.

Inside the plant, TSIL has adopted area specific Do's and Don'ts written in the local language all over the plant. Other steps taken include guarding the unsafe areas of the plant. Earlier, TSIL had one safety officer in the plant which strength has now been doubled. Consequently, the use of safety appliances is now drastically different from what it used to be even a year back. For example, all women working in the plant are now in close fitting trousers and shirt, fluorescent jacket and safety boots. This is a major achievement as no other company in the region has been able to bring about this change. Under the Safety, Health and Environment (SHE) pillar of TPM, operational safety and environment objectives are combined. The bottom line is 'Nobody must be harmed'.

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Green Drive:At TSIL, one important environmental measure is the Maintaining its track record. The company took up various environment related projects in and around the plant during the fiscal year. In step with the National Ambient Air quality standard, TSIL is stepping up its efforts towards monitoring and controlling ambient air quality. It spent nearly Rs 2.35 crore in improving the ambient air quality monitoring system. It installed three automatic monitoring systems stationed strategically at three locations in the plant. The data from such systems flows on a realtime basis into the server and to the State Pollution Control Board (SPCB) directly over GPRS.

TSIL has also been monitoring stack emissions. While the normal level SPM is 100 mg per metric cube TSIL has achieved a level much below that level at 35 mg due to installation of state of the art ESP. A team of five officers or more now go around the plant noting and video recording the conditions. TSIL also initiated weather monitoring systems to record wind speed, direction, relative humidity and ambient temperature. It also monitors pollutants entering its boundary walls.

It also set up a pneumatic dust extraction system. Earlier, dust was dumped on the ground and then carried by trucks to distant location. This involved double handling, plus dust would create pollution. Now it is pneumatically conveyed through silos, pugged and dispatched to dump.

To conserve precious natural resource like water, TSIL has taken up rain water harvesting. The work is in progress on this front and is slated to be completed shortly.

A visible innovation has been to cut down on the use of paper for the purpose of daily morning meetings which typically used/generated a number of reports. Each report used to consist of print outs numbering some 15 to 18 pages. Now, Quality Information System (information on production and power generation) is on SAP, which helped in saving approx.6000 sheets of A4 size paper and its corresponding printouts. This innovation has taken TSIL's motto of environment-friendly operations a few more steps ahead.

During the year an ergonomic study was conducted by an external agency to survey the working conditions, how the people worked, their gesture and posture. Based on their recommendations, suitable action would be taken to overcome the deficiencies, if any.

Operation Hulla Bol, the theme based 5S drive for the up keep of the plant, was sustained. The entire works is divided into 8 zones and each zonal leader is responsible for taking care of the area assigned. Over the years the township population has increased presenting a sewage handling problem. Therefore, a modern sewage treatment plant was set up. This has helped in saving water which is being used for gardening and dust suppression in the dump yard.

The Ethics Code:

In step with the overall philosophy of the Tata group, the company believes that good corporate governance can only be achieved through ethical business transactions with all stakeholders. It has, therefore, put in place a systematic process for management of business ethics (MBE). This is ensured through Annual MBE Plan which has four important pillars: Leadership, Compliance Mechanism, Communication & Training and Measurement. The Leadership pillar ensures planning and review of MBE activities by Ethics and Compliance Committee of Directors and senior executives, the Compliance pillar ensures making annual MBE plan and deployment of the same, the Communication & Training pillar ensures imparting awareness and re-enforcement training to employees and stakeholders and finally the Measurement pillar ensures obtaining feedbacks, analysis, addressing OFI etc. Every employee, including the Managing Director is subject to Tata Code of Conduct. There is a separate Code of Conduct for all non-executive directors. The Ethics Team in the company comprises five senior officials (one Ethics Counselor and four Ethics Coordinators) one of whom is a female. The company has a committee to deal with complaints of sexual harassment at workplace. This committee is chaired by a female employee. The Whistle Blower Policy empowers all employees who can report their concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct to the Ethics team. While Reward & Recognition Policy ensures reward to genuine whistleblowers, the Whistle Blower Protection Committee ensures the protection of whistle blowers from any kind of harassment.

Nurtured values, Cultivated conduct


12

TSIL's growing CSR footprint is based on Affirmative Action. The activities are divided into the 4Es namely, Education, which involves both financial support and infrastructure support. This was followed by initiatives under Entrepreneurship, Employability and Employment.

Financial support:

At the national level, TSIL contributed to scholarship scheme/ scholarship for MBA course at Hyderabad and NIT Rourkela . At the state level, financial assistance was provided to SC/ST student studying 3 years diploma at Odisha School of Mining Engineering, and one ST student studying 4 year Degree course in Mechanical Engineering at Aryan Institute of Engineering &Technology. At the district level, TSIL extended support to Maa Gramyashree College by providing the tuition fees to two teachers of the same college who are taking extra coaching classes beyond the college session. At the block/panchayat level, educational support provided to below poverty line (BPL) SC/ST students studying in primary schools.

Infrastructure support:

Constructed boundary walls at Putugaon Primary School under Anseikala Gram Panchayat (G.P) and Karnasahi Primary School under Birikala G.P, provided 110 dual desks to various primary schools in Anseikala, Birikala, Deojhar and Kandara G.P, supported for 2 ST teachers' fees and supplemented the government Mid-day meal programme.

Development of Self Help Groups (SHGs): Under this initiative, assistance was given to members of the SC/ST community who were identified to form a Self Help Group (SHG). The group from Ramchandrapur village under Kandara G.P. was provided with a power tiller and encouraged to adopt mechanized agriculture and farming.

Assistance to existing SHGs: Financial and training support was provided for starting additional business opportunities i.e. phenyl, agarbatti.duckery, broom, pickle and papad making.

Development of Vendors : TSIL also focused on development of SC/ST vendors from the local area and assisted the party for getting enlisted in the company's

A. Education:

B. Fostering Entrepreneurship:

Supply Chain. A total of five such vendors were enlisted during the year.

Training: Under the company's Skill development programme, one year in -house on-the-job training with stipend is being provided to 10 ITI Trade Apprentices.

Call centre/BPO Training: In this direction, TSIL took big positive strides during the year. While its CSR activity had so far been confined within a radius of 5 to 8 km around the plant, the company decided to go beyond the periphery of the plant and expand its footprint in Joda, Barbil and Noamundi areas too. TSIL decided to open a BPO training centre, under the aegis of Vidya Shakti Niyas. It was the high point of its community initiatives. The BPO was set up with the idea of supplying trained manpower to Tata Business Support Services (TBSS) in Jamshedpur, which is the call centre caterING to the outsourced needs of some of the group companies. Since attrition rates are as high as 30 to 40% in the call centre industry, they constantly require manpower. TSIL set up a centre at its training centre which was converted into a classroom and provided six-week training to students between the age group of 18 to 26 years, with a minimum qualification of class XII pass. After initial hiccups, TSIL picked up students and put them under Sambhavana training which covered computer training, communication skills and personality development exercises. After training at TSIL, the students were sent to TBSS in Jamshedpur for another month of process training and finally through client interviews.

Till now, six batches have been trained. A total of over 90 students have been absorbed with average salary varying between Rs 5,000 and Rs 10,000. To facilitate students from far off places, the company has provided accommodation in its township and also arranged accommodation for the students, who visit Jamshedpur for the purpose of training. Besides, the basic needs of poor students are supported through an interest free loan for food and travel needs. The whole effort is geared towards initiating these young people towards a life of dignity. Of the 90 students covered so far (primarily girls) 35 are from SC/ST category which also indicates company's commitment towards affirmative action, by addressing the employability issues of youths from its vicinity.

C. Employability:

TSIL's growing CSR foot print

13

D. Employment

COLLABORATIVE APPROACH WITH VIDYA SHAKTI NIYAS (VSN)

Health related initiatives:

TSIL tracks total employee status with respect to SC/ST. While it tracks employment status on permanent role, it also makes positive discrimination for employment while keeping the eligibility criteria equal.

Volunteering: Since CSR is mandatory (not optional) in the company, the company has systematic approach to planning, budgeting, execution of jobs, reviews, etc. Several employees went to nearby villages for volunteering (for Shramdaan) throughout the year.

Clean Drinking Water: Provided 5 ring wells (one each in, Panchananpur, Nizamsahi,Lahanda,Kaliabeda,Sialijoda), 3 bore wells (at Birikala, Sanbadbil and Kaliabeda villages) and 9 tube wells and preventive maintenance was carried out for existing 68 tube wells and repaired 28 numbers.

Vidya Shakti Niyas (VSN), a public charitable trust mainly comprising spouses of employees, has been providing active support to the company's CSR activities for long. Earlier, it started a non-formal school at Munda-sahi, habitating mostly scheduled tribes, scheduled caste and other backward classes mostly in the BPL category. It is now a government school and one of the most progressive ones in the area. Schooling has brought perceptible changes in the lives of the children. In particular, cleanliness is an attribute that these children have passed on to their parents.

Scholarships: During the year, VSN provided scholarships to 34 students pursuing education at various levels at the national, state and district level.

Infrastructure support: VSN supplied slates, books, uniforms, rain

coats, umbrellas, sweaters, caps, scarfs etc., among underprivileged children. VSN also provided duris, steel benches and desks, plastic chairs, steel trays, glasses, water filters to 15 schools in the nearby areas.

A total of 28 medical camps were held by VSN and 2947 patients availed the services during the year, conducted 21 health awareness camps in which 2040 people

participated. This includes First Aid and AIDS awareness camps.

Mother and Child Care programmes were conducted; Rural Shishu Kalyan Prtiyogita organized; nutritional supplements were distributed among expectant mothers and toddlers. Family planning operations, providing mid-morning snacks, supporting mid-day meal etc. also done in the nearby villages. Sprouted grams was distributed as mid-morning snacks to the children of Anganwadi of Munda-sahi at Lahanda village and hygiene products were distributed to villagers.

Development of SHGs: VSN adopted a nearby Lahanda village located 4 km from the plant. With incentives, farmers are now growing other crops in contrast to the situation earlier when they were only cultivating a Rabi crop. VSN has also directed women's self help groups (SHGs) by providing them with training to make phenyl, a highly marketable product. Education and entrepreneurship has not only eased some of their hardship but also made both the villages, Lahanda and Munda-sahi, self-reliant and confident.

Assistance to existing SHGs: Income generating training programmes include a two-day training for Maa Durga SHG for production and marketing of phenyl at Munda-sahi at Lahanda, extensive training on production of seasonal vegetables, agarbattis, broom, pickle and papad making. It also gave support to set up a cloth store cum stitching centre at Kanhupur by SHG of ladies trained by VSN, this led to a total of 68 beneficiaries during the year.



14

DIRECTORS' REPORT

FINANCIAL RESULTS

The Directors take pleasure in presenting the Twenty-ninth Annual Report on the business and operations of stthe company and its financial results for the year ended 31 March, 2012.

Current year Previous year(Rs. Lac) (Rs. Lac)

2. (i) Sales (Net of Excise Duty) and other income 65693 69487

(ii) Profit before depreciation 13044 16880

(iii) Depreciation and amortisation expenses 1837 1852

(iv) Profit before taxes 11207 15028

(v) Current Tax 4290 5560

(vi) Deferred Tax (651) (666)

(vii) Profit after tax 7568 10134

(viii) Profit brought forward from previous year 1434 1232

(ix) Profit available for appropriation 9002 11366

(x) Dividend: 80% (2010-2011 : 80%) 1232 1232

(xi) Tax on Dividend 200 200

(xii) Transfer to General Reserve 6100 8500

(xiii) Surplus carried to Balance Sheet 1470 1434

3. The Board has recommended a dividend of Rs. 8/- per share (i.e. 80%) on 1,54,00,000 equity shares of Rs.10 each for the financial year ended 31st March, 2012, subject to approval of the shareholders at the ensuing Annual General Meeting. The total outgo on account of dividend (ex-taxes) will be Rs. 1232 lac, which is equal to previous year.

4. During the year, all the three kilns produced 2,72,106 MT of sponge iron compared to 3,83,002 MT in the previous year. The capacity utilisation was lower at 70% as compared to 98% in the previous year. The under-utilistion of capacity was mainly due to frequent disruptions in supply of iron ore due to factors beyond company's control which prevailed over last three quarters of the year.

Supply of linkage coal has been stopped by Ministry of Coal. The company had to largely source coal from domestic market through e-auctions and imports. The indigenous coal was optimally used along with imported coal. Planned operations could not be carried out due to paucity of iron ore and frequent shutdown of the kilns. However, the down-time was gainfully used to maintenance and modification projects.

The despatch of sponge iron during the year was 2,73,766 MT as compared to 3,80,273 MT in the previous year. Reduction in the despatch was consequent to lower production due to the reasons stated above.

5. During the year, the total generation of power from the two power plants (of 7.5MW and 18.5 MW capacity) was 134.39 million kwh out of which 88.31 million kwh of surplus power was exported to the State Grid compared with generation of 191.37 million kwh and sale of 133.77 million kwh in the previous year. The downfall in the generation and sale of power was consequential to lower availability of waste gas from the kilns due to lower production of sponge iron.

DIVIDEND

OPERATIONS

POWER

The Board in its meeting held in March, 2011, had approved the installation of an AFBC boiler based power plant with a capacity of 25 MW to utilise the waste. This was subject to obtaining necessary approvals / clearances etc. The project implementation has not started till date because of the undue delay in getting statutory clearances, change in eco-dynamics and identification of a long term buyer.

6. The market for steel and therefore sponge iron was stable with little fluctuations in demand. Disruption in supply of iron ore led to short-fall in production and despatch. The price of Sponge Iron improved in the later part of the year. Price of iron ore and coal registered sharp increase during the year and these reflected in the price of Sponge Iron too. Earning per share dropped to Rs.49.14 as compared to previous year (Rs. 65.80). The company continued to be debt free during the year. The loss in revenue due to lower production was partly compensated by sale of waste materials and earning from financial activities.

7. The work in connection with development of coal block at Radhikapur (East) and Utkal-F in Talcher coalfields was started in 2006-07. The Company has made significant progress in land acquisition and has deposited requisite money with Government of Orissa for 1st phase of land requirement. After a good progress, the land acquisition process took a pause due to technical reasons of land acquisition process being followed. The coal block is expected to become operational from end 2013-14. So far all expenditure has been funded out of internal generations only.

8. Further efforts were made by the company to improve its business processes across all functions. During the year the company participated in JRD-QV Quality Award competition and scored over 550 marks twice in a row. During the year. the management emphasised the need to implement the Business Excellence Plans at all relevant areas.

9. The company continued to maintain Integrated Management System (IMS) comprising of Quality Management System(ISO : 9001). Environment Management System(ISO:14001) and Occupational Health, Safety & Accountability Management System(ISO: 18001). The performance on these fronts has been mentioned in the Triple Bottom Line report given elsewhere in the Annual Report.

10. CII (Eastern Region) Quality Award - The company has yet again won the CII (ER) Quality Award 2012 in an industry wide contest.

11. IIM National Quality Award - The Company, for the sixth time, won the National Quality Award instituted by the Indian Institute of Metals for the year 2010-11 under the category of Pig Iron/Rolling Mill/DRI.

12. HRD Thinker Award - The company won the 'HRD Thinker Award ( a cash award and gold medal) instituted by the Indian Society of Training & Development, New Delhi, on its unique internal training programme of employees called 'Empowered Associate' or e-associate.

13. The Annual Listing Fee for the year 2011-12 had been paid to those Stock Exchanges where the company's shares are listed.

14. Mr.N.P. Sinha retires by rotation and, being eligible, offers himself for re-appointment.

15. Mr.S.P. Mehrotra, who is due to retire at the forthcoming Annual General Meeting, had informed the company that he did not wish to seek reappointment. Therefore, it is proposed to appoint Mr.S. Srikanth as a Director on the Board of Directors of the company at the forthcoming Annual General Meeting in place of Mr.S.P. Mehrotra.

FINANCE

DEVELOPMENT OF COAL BLOCK

TATA BUSINESS EXCELLENCE MODEL (TBEM)

INTEGRATED MANAGEMENT SYSTEM (IMS) FOR QMS,EMS,AND OHSAS:

AWARDS

LISTING FEES

DIRECTORS

15


16

16. Mr. Rajesh Chintak retires by rotation and, being eligible, offers himself for re-appointment.

The company has received notice from a member of the company proposing the candidature of Mr.S. Srikanth as Director of the company.

The Board placed on record its deep appreciation of the sincere services and invaluable advice rendered to the company by Mr.S.P. Mehrotra during his association as Director on the Board of Directors of the company.

17. Mr.Manoj Thankachan Thomas, who was appointed Additional Director w.e.f. 12th September, 2011, and who holds office up to the date of the forthcoming Annual General Meeting of the company, has been proposed in writing by a shareholder for the office of Director.

The Board commends appointment of Mr.N.P. Sinha, Mr.S. Srikanth, Mr. Rajesh Chintak and Mr.Manoj Thankachan Thomas.

18. As a member of Tata Group and as a responsible corporate citizen the company has been undertaking steps towards welfare of society around it, community initiatives, periphery development, environment protection and improvement in harmony with the normal business and contributing to exchequer through various taxes/duties etc. At the same time, the company continued its focus on employees' health and safety, skill development and superior living conditions. The company has taken a serious note of threat of global warming and climate change. Through a specific study, the company has measured carbon foot print of its operations and is taking steps to reduce the Green House Gas emissions.

Corporate sustainability is aligned with Triple Bottom Line approach by complying with -

lthe UN Global Compact by addressing its ten principles

lGuidelines of Tata Council for Community Initiatives (TCCI)

A detailed report on Corporate Sustainability based on Triple Bottom Line approach is appearing elsewhere in the Annual Report.

19. The concept of inclusive growth through Affirmative Action has been adopted by the company in the past. Further efforts have been made by the company during the year to strengthen this concept.

20. As required under Sub-section 1(e) of Section 217 of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, particulars regarding conservation of energy, technology absorption, foreign exchange earnings and outgo are annexed to this report.

21. As required under Sub-section 2A of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, the particulars of such employees are given in a statement annexed to this report.

22. Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that: -

(i) in the preparation of annual accounts, the applicable accounting standards have been followed and that there are no material departures;

CORPORATE SUSTAINABILITY

INCLUSIVE GROWTH

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

PARTICULARS OF EMPLOYEES

DIRECTORS' RESPONSIBILITY STATEMENT

17

(ii) they have, in the selection of accounting policies, consulted the statutory Auditors and have 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 2011-12 and of the profit of the company for that period;

(iii) they have taken proper and sufficient care, to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, 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.

23. Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, the followings form part of this Annual Report :

(i) Managing Director's declaration regarding compliance of Code of Conduct by Board Members and Senior Management personnel;

(ii) Management Discussion and Analysis;

(iii) Report on the Corporate Governance;

(iv) Auditors' Certificate regarding compliance of conditions of Corporate Governance.

24. The Equity Shares of the company have been voluntarily delisted from The Stock Exchange, Ahmedabad and The Delhi Stock Exchange Association Ltd. during 2004-05, from Bhubaneswar Stock Exchange during 2006-07 and from Calcutta Stock Exchange Association Ltd. during the year 2008-09.

Shares of the company are actively traded in the National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd.

25 (a) The Auditors, Messrs Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and, being eligible, offer themselves for reappointment.

(b) During the year, the Central Government prescribed the Cost Accounting Records to be maintained by the Company and also mandated that Cost Audit of eligible products/services be carried out. Therefore, the Board had appointed M/s.Shome & Banerjee as Cost Auditors for the year 2011-12 and also for 2012-13.

The Board takes this opportunity to sincerely thank all its stakeholders namely, shareholders, customers, suppliers/contractors, bankers, employees, government agencies, local authorities, and the immediate society for their un-stinted support and co-operation during the year.

REPORT ON CORPORATE GOVERNANCE

VOLUNTARY DELISTING OF THE COMPANY'S EQUITY SHARES FROM CERTAIN STOCK EXCHANGES

AUDITORS

ACKNOWLEDGEMENT

On behalf of the Board of Directors

(A.M. Misra)Chairman

Jamshedpur, rd23 April, 2012


18

ANNEXURE TO THE DIRECTORS' REPORT

CONSERVATION OF ENERGY :

2011 - 2012

Unit AmountKWH Rupees

123,000 880,856

– 7.16

1,050 85,160– 81.10

43,768,674 45,824,527– 1.05

Unit Amount (MT) Rupees

348,622 2,285,410,940

Unit Amount (Ltr.) Rupees

– –– –

110.10 –1.28 –0.01 –

Statement pursuant to Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

A) Research and Development

1) Specific areas in which R & D was carried out by the Company : Nil

2) Benefits derived as a result of the above : Does not arise

3) Future plan of action : Not yet decided

4) Expenditure on R & D : Nil

a) Capital

b) Recurring

c) Total

d) Total R & D expenditure as a Percentage of total turnover

B) Technology absorption, adaptation and innovation :

1) Efforts in brief, made towards technology absorption, adaptation and innovation :

The plant has adopted Tisco Direct Reduction Process, which has been absorbed in full.

2) Benefit derived as a result of the above efforts, e.g. product improvement, cost reduction, product development, import substitution etc.

A) Power and Fuel Consumption 2010 - 2011

1) ELECTIRCITY Unit AmountKWH Rupees

a) PurchasedUnit / Amount 24,600 160,385

Rate per unit – 6.52

b) Own Generation

i) Through Diesel GeneratorUnits per litre of Diesel (Kwh/Ltr.) – –Cost per unit – –

ii) Through Steam Turbine GeneratorUnit / Amount (Consumption) # 55,075,284 39,891,046Cost per unit – 0.72

#Consumption includes 13810727 KWH consumed in generating power plant, but excludes 88307000 KWH sold and 2319626 KWH consumed in the township.

2) COAL Unit Amount

(MT) Rupees

Consumption 483,028 2,360,073,710Coal is used in the manufacturing process as reductant (Please refer to Schedule N of Accounts)

3) DIESEL OIL Unit Amount

(Ltr.) Rupees

a) High Speed DieselQuantity / Value – –

Rate / Unit – –

B) Consumption per unit of production

Electricity (KWH) 100.30 –Coal (MT) 1.26 –Diesel Oil (Ltr.) – –

Note : Figures of the previous year have been regrouped wherever necessary.

TECHNOLOGY ABSORPTION :

19

The Company achieves the metallisation acceptable to the user industry.

The Company is constantly endeavouring to bring about further development in the product. Sponge Iron produced by the Company has helped the country in saving the outgo of scarce foreign exchange resources by way of import substitution.

3) In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year) following information may be furnished :

a) Technology imported : Nil

b) Year of import : Not applicable.

c) Has technology been fully absorbed : Not applicable.

d) If not fully absorbed, areas where this has not takenplace, reasons therefor and the plan of action : Not applicable.

Earnings : Rs.24,42,240/-

Outgo : Rs.131,46,53,009/-


(A.M. Misra)Chairman

Jamshedpur 23rd April, 2012

1. Gross remuneration comprises salary, commission, allowances, monetary value of perquisites, Company's contribution to Provident Fund and Superannuation Fund, but excludes contribution to Gratuity Fund on the basis of acturial valuation as separate figures are not available.

2. The nature of employment of the above managerial personnel is contractual.

This is to confirm that the Company has adopted Tata Code of Conduct for its employees including the Managing Director. In addition, the Company has adopted a Code of Conduct for its Non-Executive Directors. Both these Codes are available on the Company's website, www.tatasponge.com.

I confirm that the Company has in respect of the financial year ended March 31, 2012, received from the senior management team of the Company and the Members of the Board a declaration of compliance with the Code of Conduct as applicable to them.

FOREIGN EXCHANGE EARNINGS AND OUTGO

STATEMENT PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT,1956 AND THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES,1975

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH THE COMPANY'S CODE OF CONDUCT

Sl. Name of the Designation/ Age Gross Qualification Experience Last Commen-No. Employee Nature of duties Remuneration in No. of employment cement of

received (Rs.Lac) years held Employment

1 Thawani, Managing Director 61 90.00 B. Tech (Hons) 39 Jamshedpur Injection 10-03-2007Suresh Metallurgical Engg. Powder Ltd.

Diploma in Electrical Managing Director & Mechanical Engineering.

NOTES:


Jamshedpur (A. M. Misra)23rd April, 2012 Chairman

For TATA SPONGE IRON LIMITED

Jamshedpur Suresh Thawani23rd April, 2012 Managing Director


20

MANAGEMENT DISCUSSION & ANALYSIS

INDUSTRY STRUCTURE AND DEVELOPMENTS

OPPORTUNITIES AND THREATS

SEGMENT-WISE/PRODUCT-WISE PERFORMANCE

Sponge iron is an intermediate product as source of metalics for electric steel making. Other sources of metalics are either steel scrap or hot metal produced in blast furnace.

The sponge iron industry in India is divided into two types of producers, those who are integrated with steel making and those in merchant sector. Merchant sector amounts to about 20% of the total capacity. Tata Sponge belongs to this sector.

Further, sponge iron industry is also divided into two segments, those who use gas and those who use coal as reductant and fuel. There are only three producers in gas based segment and their product is known as Hot Briquetting Iron (HBI). In coal based sector there are roughly about 400 units across the entire country and the product is known as Sponge Iron. Tata Sponge is a coal based sponge iron producer. During the year under review the industry produced 21.40 million tonnes of sponge iron/HBI with coal based units producing 16 million tonnes and gas based units producing 5.4 million tonnes.

During the year, the production of HBI/Sponge Iron shrank due to acute shortage of iron ore and gas. Gas shortage mainly due to lower production in KG Basin is there to stay. Iron Ore availability is slated to improve this year. If the steel market improves, production of HBI/Sponge Iron should rise in financial year 2012-13.

The company operates three kilns with an installed capacity of 3,90,000 tonnes per annum to produce sponge iron. The waste gas from sponge iron making kilns has significant energy in the form of heat. This energy is recovered in waste heat recovery boilers to generate steam, which then passes through the generator for producing power. Two power plants, based on waste heat from kilns with a combined generation capacity of 26 MW were installed by the company in the past. These plants operated at lower capacity during the course of the year due to problems described in (3) ahead. Entire surplus power, which was about two third of generation, was sold to the State Grid. This revenue also contributed to bottom line.

For producing targeted quantity and desired quality of sponge iron, it is important to use right quality of prime raw materials i.e. iron ore and coal. Tata Steel normally supplies full quantity of iron ore, but due to external factors beyond the control, full quantity of ore could not be received by the Company during the year. A part of coal was sourced from indigenous sources like CIL collieries and open market procurements and balance from overseas markets. Costly imported coal being low in ash content, improves the average quality of coal used in sponge iron making. High ash content in indigenous coal is injurious to the operating conditions of kilns.

Ministry of Corporate Affairs (MCA) has prescribed maintenance of Cost Accounting records w.e.f. 1st April, 2011 and also to carry out cost audit of the cost accounting records w.e.f. 2011-12.

2. a) Opportunities :

Growth in the steel demand has strong correlation with growth in GDP of nation. The Indian economy was expected to grow at a spectacular growth rate of 9% of GDP; but unfortunately the same could not happen. As a result, the steel demand is unlikely to grow at the expected pace. The demand for sponge iron in medium term shall be at healthy level due to closure of many sponge iron plants for want of iron ore. Steel through induction furnace route is set to reduce. Consequently merchant sponge iron suppliers will be under pressure on account of market demand. The company therefore has vision to shift focus to steel making from present sponge making only.

The coal block which is under development will ensure reduction in the manufacturing cost of the sponge iron.

b) Threats:

The cost of iron ore and coal constitute more than 80% of cost of production. Therefore the profitability of the Company depends on market price of these raw materials vis-à-vis price of sponge iron. The only way to substantially reduce the cost of iron ore and coal is to have captive mines for these raw materials. The Coal block which is under development will meet most of the coal requirements. Delay in starting the mining operations is only due to external factors. Further, the coal linkage has been discontinued forcing the company to procure the required coal through e-auctions of Coal India and overseas markets at high cost. The company does not have any iron ore mine.

The infrastructural constraints at ports and rail-rake availability do pose problems at times in getting imported coal from ports by rails. The road transportation cost, both for iron ore and coal, is extremely high due to existence of transport unions in the state of Orissa. The socio-economic factors around the plant posed problems in getting iron ore from nearby Tata Steel mines. These factors might cause serious disruptions in future unless the conditions improve.

The crisis in Middle East, as stated previous year, continued pushing up crude oil price further. This has resulted in steep increase in price of thermal coal that company purchases from international markets. Coal India Ltd. raised price of coal to nearly that of international price of coal but now based on GCV. Both high cost of imported and indigenous coal and increase in the price of iron ore put pressure on the profitability of the company.

Global warming and climate change have been recognised by the Company as serious concerns. During the year under review, the company has attempted to reduce its carbon footprint. Further, installation of energy saving equipment /devices, measuring of carbon footprint, etc. are some of the steps taken by the Company to address these concerns.

3) During the year, company was engaged mainly in the manufacture of sponge iron which is the only reportable segment in accordance with the Accounting Standard 17 issued pursuant to the Companies (Accounting Standards), Rules, 2006. The production of sponge iron during the year was 2,72,106 MT as compared to 3,83,002 MT in the previous year. The sales during the year was 2,73,766 MT compared to 3,80,273 MT in the previous year. Production and sales quantity was lower by 29% and 28%

1)

21

respectively compared to previous year. The under-utilisation of capacity was solely due to frequent disruption in supply of iron ore due to external factors beyond the control of the company. These external factors prevailed over last three quarters of the year.

Two power plants generated 134 million KWH of power and exported 88 million KWH (net) of power as against 191 million KWH and 134 million KWH respectively in the previous year. This got a revenue of Rs. 24.17 crore for the company compared to Rs.36 crore in the previous year. The lower generation and sale were due to lower availability of kilns supplying the waste heat to the power plant.

4) The outlook of the company is broadly described in Vision and Mission statements of the Company. Options of shifting focus to steel making , separate power plant at pit head of coal block etc. are being examined to optimise the revenue in future.

5) The process of Risk Management in the company identifies inherent risks in its operations and records residual risk after taking specific risk mitigation steps. The company has identified and categorised risks in the areas of Operations, Finance & Marketing, Regulatory Compliances and Corporate matter. Internal Auditor expresses his opinion on the level of risk identified during the audit of particular area which is reported to the Audit Committee through the Internal Audit Reports. Societal issues pose critical problems in connection with land acquisition for coal mining and also obstructing iron ore supply to sponge iron plants at Joda. Wherever possible and necessary, appropriate insurance cover is taken for financial risk mitigation. The recovery of economy has been reasonable during the year. However, another economic slowdown can adversely affect the demand-supply equation in the sponge iron industry. The price of sponge iron is sensitive to the demand-supply position of steel scrap in the country and selling prices of long products.

On the financial front, the Company has not borrowed any amount in foreign currency and thus has no exposure to exchange rate fluctuation risk. However, the company has a Foreign Exchange Policy approved by the Board. Credit policy of the company is primarily based on the customer profile. The Management does not perceive any major technological, environmental and/or financial risks for the Company in the near future.

The Company has contingent liability as disclosed in Point No.24 of Notes to the Financial Statements.

6) The Company has proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorised, recorded and reported properly, applicable statutes, the Tata Code of Conduct and Corporate policies are duly complied with.

The Company has an Audit Committee with majority of independent directors as members to maintain the objectivity. The Audit Charter is the guiding document in this connection. The Company has an Internal Audit Department which conducts audit in various functional areas as per audit programme approved by the Audit Committee. Audit planning and executions are oriented towards a review of internal controls and risks in the functional areas of the company. The Internal Audit Department reports its findings and observations to the Audit Committee which met four times during the year to review the audit issues and to follow up implementation of corrective actions.

The Audit Committee also seeks the views of statutory auditors on the adequacy of the internal control systems in the Company. The Auditors' report regarding adequacy of internal controls can be seen in Clause No. (v) of the Annexure to the Auditors' Report.

7) (a) Financial performance of the Company has been summarised in the table below followed by explanatory remarks for significant changes in 2011-12 compared to previous year.

2011-12 2010-11 Change* % change Remarks

Total income 65693 69487 (3794) (5.46%) 1

Consumption of raw material 43748 44501 753 1.69 2

Employee cost 2031 1994 (37) (1.86) 3

Other expenses 6316 6113 (203) (3.32%) 4

Depreciation & amortisation expenses 1837 1852 15 (0.81%)

Finance cost 553 - (553) 5

Profit after tax 7568 10134 (2566) (25.32%)

Earning per share Rs 49.14 65.80 (16.66) (25.32%)

Reserves & Surplus 55305 49169 6136 12.48%

Current Liabilities 12745 8983 (3762) (41.88%) 6

Fixed Assets 18981 20064 (1083) (5.40%)

Current Assets 37706 31670 6036 19.05% 7

OUTLOOK

RISKS AND CONCERNS

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

(Rs in lac)

* figures within bracket denote adverse change.


22

(1) Reduction in total income is mainly due to lower production and sales.

(2) Despite lower production, the value of raw material consumed has not reduced significantly due to

(i) increase in price of raw materials which has an adverse impact of Rs.121 crore.

(ii) reduction in volume of consumption due to lower production resulted in a favourable impact of Rs. 129 crore.

(3) Increase in Employee cost during the year is primarily due to increase in salary and wages.

(4) Other expenses during the current year include provision against demand of indirect taxes of Rs. 743.90 lac.

(5) Finance cost during the year is mainly on account of interest on direct and indirect tax demand.

(6) Increase in current liabilities is mainly due to availment of higher credit period from one of the key raw material suppliers and and provision made against direct and indirect tax demanded by the authorities concerned.

(7) The increase in current assets is mainly due to increase in raw material inventory and cash accumulation.

7) (b) Operational performance of the Company has been summarised in the table below followed by explanatory remarks for significant changes in 2011-12 compared to previous year.

2011-12 2010-11 Change % change Remarks

Sponge iron Tonnes Tonnes Tonnes

Production 272106 383002 (110896) (29) A

Despatches 273766 380273 (106507) (28) B

Capacity utilisation (kilns) 70% 98% (28%) (28) C

Power Million KWH Million KWH Million KWH

Generation (gross) 134 191 (57) (30) D

Export 88 134 (46) (34) E

A, B & C – The downfall was mainly due to lower availability of iron ore during the year due to socio, political & government restrictions due to illegal mining affecting availability and transportation of iron ore.

D & E – Reduction in generation and consequently sale of power was also due to lower availability of waste heat from kilns.

st st8) The company had 451 employees as on 31 March, 2012 as compared to 444 as on 31 March, 2011. A number of training programmes were conducted to develop human resources. An innovative one day training programme called 'Jaagruti' was carried out during the year for giving awareness to employees on Ethics, Tata Business Excellence Model, Total Plant Maintenance, Environment and Safety. The Corporate Balanced Score Card approach was adopted by the company for aligning individual goals with organisational goals. The company focussed on enhancing employees' engagement plans. Reward and recognition policies created a positive work environment. The company is giving extra importance to safety of permanent and contract employees. During the year a special programme called “Journey to Excellence in Safety” has been launched to enhance culture of safety in the organisation.

Industrial relations remained cordial throughout the year.

9) The above Management Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include external economic conditions affecting demand/supply influencing price conditions in the market in which the Company operates, changes in Government regulations, statutes, tax laws, currency rate fluctuations and other incidental factors.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

CAUTIONARY STATEMENT

23

AUDITORS' REPORT

TO THE MEMBERS OF TATA SPONGE IRON LIMITED

1. We have audited the attached Balance Sheet of Tata Sponge Iron Limited ("the Company") as at 31st March, 2012, the Statement of Profit and Loss and Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether 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. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

(i) 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;

(ii) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

(iii) the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(iv) in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in compliance with the accounting standards referred to in Section 211(3C) of the Companies Act 1956;

(v) in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2012;

(b) in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date;

(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

5. On the basis of written representations received from the directors as on 31st March 2012 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2012 from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956.

For Deloitte Haskins & SellsChartered Accountants

(Registration No.302009E)

Abhijit BandyopadhyayPartner

Membership No. 054785

Jamshedpur, 23rd April, 2012


24

ANNEXURE TO THE AUDITORS' REPORT(Referred to in paragraph 3 of our report of even date)

(i) Having regard to the nature of the Company's business/activities/result paragraphs 4(vi), (x), (xii), (xiii), (xiv), (xv) and (xix) of the Companies (Auditor's Report) Order, 2003 are not applicable.

(ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets were physically verified during the year by the management in accordance with a regular program of verification, which, in our opinion, provides for physical verification of all the fixed assets at regular intervals. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

(iii) In respect of its inventories:

(a) As explained to us, inventories were physically verified during the year by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

(iv) The Company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties listed in the Register maintained under section 301 of the Companies Act, 1956.

(v) In our opinion and according to the information and explanations given to us, having regard to the explanation that some of the items purchased are of special nature and suitable alternative sources are not readily available for obtaining comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and the sale of goods and services. During the course of our audit we have not observed any major weaknesses in the internal control system.

(vi) In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to in section 301 that need to be entered into the register maintained under the said section have been so entered.

(b) Where each of such transaction is in excess of rupees five lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time except in respect of certain purchases for which comparable quotations are not available and in respect of which we are unable to comment.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and the nature of its business.

(viii) We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) According to the information and explanations given to us in respect of statutory dues:

(a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other material statutory dues applicable to it with the appropriate authorities.

(b) there were no undisputed amounts payable in respect of Income tax, Sales-tax, Wealth tax, Service tax, Custom duty, Excise stduty and Cess and other material statutory dues in arrears as at 31 March, 2012 for a period of more than six months from the

date they became payable except for sales tax of Rs. 450.86 lakhs which is outstanding for more than six months.

25

(c) details of dues of Income tax, Sales tax, Service tax, Customs duty, Wealth tax, Excise duty and Cess which have not been stdeposited as at 31 March, 2012 on account of any dispute are given below:

For Deloitte Haskins & Sells

Chartered Accountants (Registration No.302009E)


Membership No. 054785

Jamshedpur, 23rd April, 2012

Name of Statute Nature of dues Amount Period to which the Forum where dispute (Rs. Lacs) amount relates is pending

Central Sales Tax Central Sales Tax 6.74 1987-88,1992-93, Orissa Sales Tax Act 1956 1993-94,1994-95, Tribunal

1997-98

66.71 2005-06 High Court of Orissa

1226.89 2006-07, 2007-08 Supreme Court of India

Orissa Sales Tax Act Sales Tax 4.86 1987-88,1992-93, Orissa Sales Tax 2000-01 Tribunal

5.60 1989-90, 1990-91 Commercial Tax Officer

Orissa Entry Tax Act Entry Tax 102.62 2005-06 High Court of Orissa

165.50 2006-07, 2007-08 Supreme Court

Orissa Value Added Value Added Tax 7.14 2005-06 Commissioner of Tax Act, 2004 Commercial Taxes

129.89 2006-07 Supreme Court

Central Excise Act, Excise Duty 1733.70 2008-09 Central Excise and Service 1944 Tax Appellate, Tribunal

Excise Duty 17.65 2008-09 Commissioner of Central Excise

Income tax Act, 1961 Income tax 257.24 2005-06 Commissioner of Income tax (Appeals)



(x) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to banks.

(xi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were prima facie applied by the Company during the year for the purposes for which the loans were obtained other than temporary deployment pending application.

(xii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, in our opinion, funds raised on short term basis have not been used for long term investment.

(xiii) According to the information and explanations given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

(xiv) The Company has not raised any money by public issue.

(xv) To best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company was noticed or reported during the year.


26

BALANCE SHEET

(I) EQUITY AND LIABILITIES

(II) ASSETS

AS AT 31ST MARCH 2012Rs. In lacs

Notes As at 31.03.2012 As at 31.03.2011

(1) SHAREHOLDERS' FUNDS

a) Share Capital 03 1,540.00 1,540.00

b) Reserves and Surplus 04 55,304.89 49,168.73

56,844.89 50,708.73

(2) NON-CURRENT LIABILITIES

(a) Deferred tax liabilities (net) 34 3,275.83 3,926.60

(b) Long term liabilities 05 - 0.55

(c) Long-term provisions 06 270.58 319.61

3,546.41 4,246.76

(3) CURRENT LIABILITIES

(a) Trade payables 07 4,635.86 2,533.97

(b) Other current liabilities 08 1,545.90 1,577.76

(c) Short-term provisions 06 6,562.98 4,871.47

12,744.74 8,983.20

TOTAL EQUITY AND LIABILITIES 73,136.04 63,938.69

(1) NON-CURRENT ASSETS

(a) Fixed assets

(i) Tangible assets 09 17,342.59 18,767.58

(ii) Intangible assets 10 26.77 105.57

(iii) Capital work-in-progress 1,611.48 1,191.28

18,980.84 20,064.43

(b) Non-current investments 11 80.00 80.00

(c) Other non-current assets 12 1.75 1.50

(d) Long-term loans and advances 14 16,367.10 12,123.13

35,429.69 32,269.06

(2) CURRENT ASSETS

(a) Current investments 13 2,437.44 3,355.24

(b) Inventories 16 8,873.99 6,266.68

(c) Trade receivables 15 2,751.65 2,232.91

(d) Cash and cash equivalents 17 22,065.55 18,804.73

(e) Short-term loans and advances 14 1,079.39 768.66

(f) Other current assets 15 498.33 241.41

37,706.35 31,669.63

TOTAL ASSETS 73,136.04 63,938.69

See accompanying notes forming part of the financial statements

In terms of our report attached


Abhijit BandyopadhyayPartnerJamshedpur, 23rd April 2012

For and on behalf of the Board of Directors

A. M. Misra - Chairman

N.P. Sinha - Director

Suresh Thawani - Managing Director

S. S. Dhanjal - Company Secretary

Jamshedpur, 23rd April 2012

27

STATEMENT OF PROFIT AND LOSS

IV EXPENSES

V PROFIT BEFORE TAX (III-IV)

VI TAX EXPENSE

VII PROFIT AFTER TAX FOR THE YEAR (V - VI)

VIII EARNINGS PER EQUITY SHARE (RUPEES):

FOR THE YEAR ENDED 31ST MARCH, 2012

Rs. In lacs

Year Ended Year EndedNotes 31.03.2012 31.03.2011

I Revenue from operations 18 63,394.73 68,116.67

II Other Income 19 2,298.65 1,370.53

III Total Revenue (I + II) 65,693.38 69,487.20

(a) Cost of materials consumed 20 43,747.57 44,500.72

(b) Changes in inventories of finished and semi finished goods 26.73 (497.53)

(c) Employee benefit expense 21 2,031.32 1,994.11

(d) Finance costs 22 553.39 0.24

(e) Depreciation and amortisation expense 1,837.25 1,851.50

(f) Other expenses 23 6,289.87 6,610.29

Total Expenses 54,486.13 54,459.33

11,207.25 15,027.87

(1) Current tax 4,290.00 5,560.00

(2) Deferred tax 34 (650.77) (665.67)

Total tax expense 3,639.23 4,894.33

7,568.02 10,133.54

Basic and Diluted 33 49.14 65.80

See accompanying notes forming part of the financial statements












28

CASH FLOW STATEMENT

A. CASH FLOW FROM OPERATING ACTIVITIES:

B. CASH FLOW FROM INVESTING ACTIVITIES:

C. CASH FLOW FROM FINANCING ACTIVITIES:

FOR THE YEAR ENDED 31ST MARCH 2012

Rs. In lacsYear Ended Year Ended31.03.2012 31.03.2011

Profit before taxes 11,207.25 15,027.87 Adjustments for:

Depreciation 1,837.25 1,851.50 Income from investments (88.00) (132.00)(Profit)/Loss on sale of capital assets (net of discarded assets written off) 0.25 1.67 Interest Income (1,712.19) (935.49)Finance costs 553.39 0.24 Provision no longer required written back (2.85) (31.88)Unrealised foreign exchange gain (0.10) - Bad Debts written off 143.75 - Inventory write- down 34.97 18.48 Provision for wealth tax 6.05 4.00

Operating profit before working capital changes 11,979.77 15,804.39 Changes in Working Capital:

Adjustments for (increase) / decrease in operating assets:Movements in trade and other receivables (1,057.61) 1,967.67 Movements in inventories (2,642.28) 542.75

Adjustments for increase / (decrease) in operating liabilities:Movements in trade and other payables 2,684.39 663.31

Cash generated from operations 10,964.27 18,978.12 Direct taxes paid (4,018.14) (4,814.01)Net cash from operating activities 6,946.13 14,164.11

Capital Expenditure on fixed assets (4,916.98) (958.67)Proceeds from sale of Fixed Assets 5.67 7.93 Bank balances not considered as Cash and cash equivalents (15,164.01) (3,111.00)Interest received from banks and others 1,455.27 714.85 Dividend received from investments 88.00 132.00 Net cash utilised in investing activities (18,532.05) (3,214.89)

Proceeds from short term borrowings 1,457.25 —Repayment of borrowings from external agencies (Bank etc.) (1,457.25) (14.81)Finance cost paid (14.91) (0.24)Dividend paid (1,220.16) (1,216.62)Net cash utilised in financing activities (1,235.07) (1,231.67)

Net increase or decrease in cash or cash equivalents (12,820.99) 9,717.551Cash and cash equivalents as at 1st April 16,458.97 6,741.42

1Cash and cash equivalents as at 31st March 3,637.98 16,458.97

Notes: 1. Includes cash and drafts on hand, balance in current and deposit accounts with banks having original maturity of less than three months out of which restricted balance is Rs. 127.12 lacs (31.03.2011: Rs. 115.28 lacs).

2. Figures in brackets represent outflows.











29

NOTES TO THE FINANCIAL STATEMENTS01 CORPORATE INFORMATION

02 SIGNIFICANT ACCOUNTING POLICIES

Tata Sponge Iron Limited which has its manufacturing facility at Bileipada Odisha is engaged in production of sponge iron by direct reduction method of iron ore and generation of power from waste heat.

a). Basis of accounting and preparation of financial statements

The financial statements have been prepared under the historical cost convention on an accrual basis. The financial statements are presented in accordance with Generally Accepted Accounting principles in India, provisions of Companies Act, 1956, Accounting Standards notified by the Central Government under the Companies (Accounting Standards) Rules, 2006. The accounting policies followed in these financial statements are same as those followed in the financial statements for the year ended 31st March 2011.

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956. Based on the nature of services rendered by the Company and the time between the cost incurred for rendering the services and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

b). Revenue Recognition

i). Sale of goods

Revenue from the sale of goods is recognised in the statement of profit and loss when the significant risks and rewards of ownership have been transferred to the buyer. Revenue includes consideration received or receivable, excise duty but net of discounts and other sales related taxes.

ii). Sale of power

Revenue from the sale of power is recognised on bills raised to Power Transmission Company.

iii). Dividend and Interest income

Dividend income is recognised when the company’s right to receive dividend is established. Interest income is recognised on a time proportion basis based on the amount outstanding and the rate applicable.

c). Tangible Assets

All tangible assets are valued at cost less depreciation. The cost of an asset includes the purchase cost of materials, including import duties and non refundable taxes, and any directly attributable costs of bringing an asset to the location and condition of its intended use. Interest on borrowings used to finance the construction of qualifying assets are capitalised as part of the cost of the asset until such time that the asset is ready for its intended use.

d). Capital work-in-progress:

Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost and attributable interest.

e). Intangible assets

Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any import duties and non refundable taxes, and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates.

f). Depreciation

Assets given on lease are depreciated on a straight line basis applying the rates specified in Schedule XIV to the Companies Act, 1956 or based on the lease period whichever is higher. Freehold land is not depreciated. Premium paid on leasehold land and land development expenses are amortised over the primary lease period. Other fixed assets are depreciated on a straight line basis applying the rates specified in Schedule XIV to the Companies Act, 1956 or based on estimated useful life whichever is higher. Intangible assets are amortised over a period of three to five years. The estimated useful life for each category is as under :

i). Buildings : 30 to 61 Years

ii). Plant and Machinery : 14 to 21 Years

iii). Furniture fixture, Air Conditioners and Office equipment : 5 Years

iv). Computers : 3 Years

v). Vehicles : 5 Years

g). Investments

Long term investments are carried at cost less provision for diminution other than temporary ( if any) in value of such investments.

Current investments are carried at lower of cost and fair value.


30

h). Inventories

Raw materials are valued at cost comprising purchase price, freight and handling, non refundable taxes and duties and other directly attributable costs.

Finished products are valued at lower of cost and net realisable value.

Stores and spares are valued at cost comprising of purchase price, freight and handling, non refundable taxes and duties and other directly attributable costs.

Value of inventories are generally ascertained on the “weighted average” basis.

i). Cash and cash equivalents (for purposes of Cash Flow Statement)

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

j). Cash flow statement

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

k). Foreign Currency Transactions

Foreign Currency transactions are recorded on initial recognition in the reporting currency i.e. Indian rupees, using the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities in currencies other than the reporting currency and foreign exchange contracts remaining unsettled are remeasured at the rates of exchange prevailing at the balance sheet date. Exchange difference arising on the settlement of monetary items, and on the remeasurement of monetary items, are included in statement of profit and loss.

Foreign Currency forward contracts, other than those entered into to hedge foreign currency risk on unexecuted firm commitments or highly probable forecast transactions are treated as foreign currency transactions and accounted accordingly as per Accounting Standard (AS) 11 - Effects of Changes in Foreign Exchange Rates. The difference between the contract rate and spot rate on the date of transaction is recognised as premium/discount and recognised over the life of the contract. Exchange differences arising from remeasurement of contracts are included in the profit and loss for the year. Gains and losses arising on account of roll over/cancellation of forward contracts are recognised in the statement of profit and loss.

l). Borrowing Costs

Borrowing costs that are attributable to the acquisition, construction of qualifying assets are capitalised as part of the cost of such assets till such time the asset is ready for its intended use or sale. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing costs are recognised as an expense in the statement of profit and loss in the period in which they are incurred.

m). Employee Benefits

i). Short term benefits

Short term employee benefits are recognised as an expense at the undiscounted amount in the statement of profit and loss for the year in which the related service is rendered.

ii). Post employment benefits

Defined Contribution plans

Defined contribution plans are those plans where the Company pays fixed contributions to a separate entity. Contributions are paid in return for services rendered by the employees during the year. The company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay employee benefits. The Company provides Provident Fund facility to all employees and Superannuation benefits to selected employees. The contributions are expensed as they are incurred in line with the treatment of wages and salaries.

Defined Benefit Plans

The Company provides Gratuity and Leave Encashment Benefits to its employees. Gratuity liabilities are funded through a separate trust with its funds managed by Life Insurance Corporation of India. The liability towards leave is funded with Life Insurance Corporation of India. The present value of these defined benefit obligations are ascertained by an independent actuarial valuation as per the requirement of Accounting Standards 15 - Employee Benefits. The liability recognised in the balance sheet is the present value of the defined benefit obligations on the balance sheet date less the fair value of the plan assets (for funded plans), together with adjustments for unrecognised past service costs. All actuarial gains and losses are recognised in the Statement of Profit and Loss in full in the year in which they occur.

n). Taxes on Income

Current Taxes

Provision for Current tax is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.

Deferred Taxes

Deferred tax assets and liabilities are recognised by computing the tax effect on timing differences which arise during the year and reverse in the subsequent periods. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

31

o). Leases

Amounts due under finance leases are recorded as receivables at the amount of the Company’s net investment in the leases . Finance lease income is allocated to accounting periods so as to reflect a constant period rate of return on the Company’s net investments standing in respect of the leases.

Rental income from operating leases is recognised on a straight line basis over the terms of the relevant leases.

p). Earnings Per Share

The Company reports basic and diluted earnings per share in accordance with Accounting Standard (AS) 20- Earnings Per Share. Basic earnings per equity share have been computed by dividing net profit after tax attributable to equity share holders by the weighted average numbers of equity shares outstanding during the year. Diluted earnings during the year adjusted for the effects of all dilutive potential equity shares per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

q). Impairment

Wherever events or changes in circumstances indicate that the carrying value of fixed assets may be impaired, the company subjects such assets to a test of recoverability, based on discounted cash flows expected from use or disposal of such assets. If the assets are impaired, the company recognises an impairment loss as the difference between the carrying value and value in use.

r). Provision, Contingent Liabilities and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.

s). Government Grants

Government grants which are given with reference to the total investments in an undertaking and no repayment is ordinarily expected in respect thereof, the grants are treated as capital reserve which can be neither distributed as dividend nor considered as deferred income.

As at As at31.03.2012 1.03.2011Rs. In Lacs Rs. In Lacs

Authorised:

- 25,000,000 Equity Shares of Rs. 10 each 2,500.00 2,500.00 (31.03.2011: 25,000,000 Equity Shares of Rs. 10 each)

2,500.00 2,500.00

Issued, Subscribed and Fully Paid up:

- 15,400,000 Equity Shares of Rs. 10 each 1,540.00 1,540.00 (31.03.2011: 15,400,000 Equity Shares of Rs. 10 each)

1,540.00 1,540.00

Share Capital

Reconciliation of Number of shares

As at 31.03.2012 As at 31.03.2011

No. of Shares Amount No. of Shares Amount

Issued, Subscribed and Fully paid Rs. lacs Rs. lacs

At the beginning of the year 15,400,000 1,540.00 15,400,000 1,540.00

Issued during the year - -

At the end of the year 15,400,000 1,540.00 15,400,000 1,540.00

Details of shareholders holding more than 5% of outstanding shares

As at 31.03.2012 As at 31.03.2011

Shareholder No. of Shares % Nos. shares %

(1) Tata Steel Limited 6,119,960 39.74% 6,119,960 39.74%

Rights, preferences and restrictions attached to shares

The company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

03 SHARE CAPITAL


32

04 RESERVES AND SURPLUS

05 LONG TERM LIABILITIES

06 PROVISIONS

07 TRADE PAYABLES

08 OTHER CURRENT LIABILITIES

Rs in Lacs

Capital General Surplus in TotalReserve Reserve Profit

and Loss

As at 31.03.2011 35.00 47,700.00 1,433.73 49,168.73

Profit for the year - - 7,568.02 7,568.02

Proposed Dividend - - (1,232.00) (1,232.00)

Tax on Dividend - - (199.86) (199.86)

Transfer to General Reserve - 6,100.00 (6,100.00) -

As at 31.03.2012 35.00 53,800.00 1,469.89 55,304.89

As at 31.03.2010 35.00 39,200.00 1,232.05 40,467.05

Profit for the year - - 10,133.54 10,133.54

Proposed Dividend - - (1,232.00) (1,232.00)

Tax on Dividend - - (199.86) (199.86)

Transfer to General Reserve - 8,500.00 (8,500.00) -

As at 31.03.2011 35.00 47,700.00 1,433.73 49,168.73

As at As at31.03.2012 31.03.2011Rs. In Lacs Rs. In Lacs

Creditors for supplies / services - 0.55

Total Long term Liabilities - 0.55

As at 31.03.2012 As at 31.03.2011Rs in lacs Rs in lacs

Long Term Short Term Long Term Short Term

(a) Provision for employee benefits 270.58 - 319.61 -

(1) Post-employment Defined Benefits 234.80 - 249.77 -

(i) Pension Obligations 202.33 - 215.68 -

(ii) Post retirement medical benefits 32.47 - 34.09 -

(2) Other Employee Benefits :

(i) Provident Fund liability 35.78 - - -

(ii) Leave Encashment - - 69.84 -

(b) Provision for tax (net of Advance Tax of - 3,411.32 - 2,955.51 Rs. 17634.14 lacs [ previous year Rs. 15768.07 lacs]

(c) Proposed dividends - 1,232.00 - 1,232.00

(d) Other Provisions - 1,919.66 - 683.96

Excise duty, Sales tax, Entry tax and intereston Income tax

Total Provisions 270.58 6,562.98 319.61 4,871.47

As at As at 31.03.2012 31.03.2011Rs. In Lacs Rs. In Lacs

(a) Creditors for supplies / services 4,110.56 2,016.32

(b) Creditors for accrued wages and salaries 525.30 517.65

Total Trade Payables 4,635.86 2,533.97

(a) Unpaid dividends 127.12 115.28

(b) Advances received from customers 271.23 458.99

(d) Creditors for accrued wages and salaries - -

(c) Creditors for capital liability 128.46 105.17

(d) Creditors for other liabilities 1,019.09 898.32

Total Other current liabilities 1,545.90 1,577.76

33

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34

10 INTANGIBLE ASSETS

11 NON-CURRENT INVESTMENTS

12 OTHER NON-CURRENT ASSETS

13 CURRENT INVESTMENT

Rs. In Lacs

As at 31.03.2012 Mining Geological Software Total report Costs Intangible

Assets

Cost at beginning of year 468.90 165.71 634.61

Additions - 16.15 16.15

Disposals - - -

Cost at end of year 468.90 181.86 650.76

Amortisation at beginning of year 363.56 165.48 529.04

Charge for the year 93.55 1.40 94.95

Disposals - - -

Amortisation at end of year 457.11 166.88 623.99

Net book value at beginning of year 105.34 0.23 105.57

Net book value at end of year 11.79 14.98 26.77

As at 31.03.2011 Mining Geological Software Total report Costs Intangible

Assets

Cost at beginning of year 468.90 165.71 634.61

Additions - - -

Disposals - - -

Cost at end of year 468.90 165.71 634.61

Amortisation at beginning of year 269.78 162.31 432.09

Charge for the year 93.78 3.17 96.95

Disposals - - -

Amortisation at end of year 363.56 165.48 529.04

Net book value at beginning of year 199.12 3.40 202.52

Net book value at end of year 105.34 0.23 105.57

As at 31.03.2012 As at 31.03.2011Rs. In lacs Rs. In lacs

Long Term Investments at cost

Trade investments (unquoted) 80.00 80.00

800,000 equity shares of Rs. 10 each in Jamipol Limited, fully paid up

80.00 80.00

Fixed Deposit with banks with maturity period more than 12 months 1.75 1.50

( Above Deposits are pledged with government authorities)

1.75 1.50

As at 31.03.2012 As at 31.03.2011

Particulars Units Rs. in Lacs Units Rs. in Lacs(Lower of cost and fair value)

Canara Robeco Liquid Fund- Institutional Daily Dividend Reinvestment - - 6,118,410 615.21

SBI-Magnum Insta Cash Fund- Daily Dividend Option - - 2,394,249 401.04

Sundaram Money Fund Super Inst.-Daily Dividend Reinvestment - - 4,065,785 410.45

TATA Liquid Super High Investment Fund-Daily Dividend 54,946 612.39 63,286 705.34

Templeton India SuperInstitutional Plan- Daily Dividend Option 82,178 822.33 50,910 509.45

L & T Liquid Inst Daily Dividend Reinvestment Plan - - 5,055,126 511.39

35

Peerless Liquid Fund-Super Institutional Plan- Daily Dividend 2,002,845 200.31 2,023,278 202.36

Reliance Liquid Fund - Treasury Plan - Institutional Option - Daily Dividend Option 5,248,815 802.41

Total Current Investments 2,437.44 3,355.24

Additional Details:

Aggregate value of Unquoted Investments 2,437.44 3,355.24

Note:Current investments includes investments in the nature of “Cash and cash equivalents” (as defined in AS 3 Cash Flow Statements) amounting to Rs. 2437.44 lacs(As at 31 March, 2011 Rs. 3355.24 lacs), considered as part of Cash and cash equivalents in the Cash Flow Statement

Rs. in Lacs

As at 31.03.2012 As at 31.03.2011

Long Short Total Long Short TotalTerm Term Term Term

Loans and advances

(a) Capital advances 15,905.90 - 15,905.90 11,725.21 - 11,725.21

(b) Security deposits 23.24 171.80 195.04 16.11 199.50 215.61

(c) Advance with public bodies - 362.62 362.62 - 143.51 143.51

(d) Other loans and advances 437.96 567.54 1,005.50 381.81 448.22 830.03

(1) Loans 5.93 3.94 9.87 10.52 4.95 15.47

(2) Finance lease receivable - - - - 0.71 0.71

(3) Other advances and prepayments 11.79 529.89 541.68 12.73 402.99 415.72

(4) Advance payment of taxes(net of provision of Rs. 2929.92 lacs : previous year Rs. 1348.54 lacs ) 337.59 - 337.59 358.56 - 358.56

(5) Retirement Benefit Assets 82.65 33.71 116.36 - 39.57 39.57

(i) Retiring Gratuities - 33.71 33.71 - 39.57 39.57

(ii) Leave Encashment 82.65 - 82.65 - - -

Gross Loans and advances 16,367.10 1,101.96 17,469.06 12,123.13 791.23 12,914.36

Less: Allowances for bad and doubtful loans and advances

(a) Security deposits - 22.57 22.57 - 22.57 22.57

Total provision for bad and doubtful loans and advances - 22.57 22.57 - 22.57 22.57

Total Loans and advances 16,367.10 1,079.39 17,446.49 12,123.13 768.66 12,891.79

Classification of loans and advances

Secured, considered good - - - - - -

Unsecured, considered good 16,367.10 1,079.39 17,446.49 12,123.13 768.66 12,891.79

Doubtful - 22.57 22.57 - 22.57 22.57

Gross Loans and advances 16,367.10 1,101.96 17,469.06 12,123.13 791.23 12,914.36

As at 31.03.2012 As at 31.03.2011Rs. In lacs Rs. In lacs

Long Short Total Long Short TotalTerm Term Term Term

Trade receivables

(Unsecured, considered good)

(a) Current trade receivables

More than six months - - - - 633.39 633.39

Others - 2,751.65 2,751.65 - 1,599.52 1,599.52

Gross Current Trade Receivables - 2,751.65 2,751.65 - 2,232.91 2,232.91

14 LOANS AND ADVANCES

15 TRADE RECEIVABLES AND OTHER CURRENT ASSET


36

Less: Allowances for bad and doubtful debts - - - - - -

Net Trade Receivables - 2,751.65 2,751.65 - 2,232.91 2,232.91

(b) Other current assets

Interest accrued on deposits, loans and advances - 498.33 498.33 - 241.41 241.41

Total Other current assets - 498.33 498.33 - 241.41 241.41

As at As at31.03.2012 31.03.2011Rs. In lacs Rs. In lacs

(a) Raw materials (At cost) 6,786.71 4,178.79

(b) Finished goods (At lower of cost or net realisable value) 888.83 915.57

(c) Stores and spares (At cost less provision for obsolescence) 1,198.45 1,172.32

Total Inventories 8,873.99 6,266.68

(a) Cash on hand 1.70 2.03

(b) Balances with banks

(1) In Current Accounts 548.84 365.71

(2) In Deposit Accounts 21,515.01 18,436.99

Total cash and cash equivalents 22,065.55 18,804.73

Note :Out of above, the balances that meet the definition of Cash and cash equivalents as per AS 3 - Cash Flow Statements is:

Cash on hand 1.70 2.03

Balances with banks

(1) In Current Accounts 548.84 365.71

(2) In Deposit Accounts 650.00 12,735.99

1,200.54 13,103.73

Year Ended Year Ended31.03.2012 31.03.2011Rs. In lacs Rs. In lacs

(a) Sale of sponge iron 64,170.86 69,924.41

(b) Sale of power 2,416.66 3,603.45

(c) Other operating income 2,349.30 538.31

Gross Revenue from Operations 68,936.82 74,066.17

(d) Less: Excise duty 5,542.09 5,949.50

Total Revenue from Operations 63,394.73 68,116.67

(a) Dividend Income

(1) From other non-current investments 88.00 132.00

(2) From current investments 316.15 107.01

(b) Interest Income

(1) Interest received on term deposits, customers’ balances etc. 1,710.35 932.47

(2) Finance income on Finance Leases 1.84 3.03

(c) Other non operating Income 182.31 196.02

Total Other Income 2,298.65 1,370.53

16 INVENTORIES

17 CASH AND CASH EQUIVALENTS

18 REVENUE FROM OPERATIONS

19 OTHER INCOME

37

20 COST OF MATERIALS CONSUMED

21 EMPLOYEE BENEFIT EXPENSE

22 FINANCE COSTS

23 OTHER EXPENSES

Year Ended Year Ended31.03.2012 31.03.2011

Raw Materials consumed Rs. In lacs Rs. In lacs

Opening Stock 4,178.79 5234.85

Add: Purchases 46,355.49 43,444.66

50,534.28 48,679.51

Less: Inventory at the end of the year 6,786.71 4,178.79

43,747.57 44,500.72

Raw material consumption comprises

(a) Iron Ore 20,616.97 20,805.00

(b) Iron Pellet 189.68 -

(c) Coal 22,854.11 23,600.76

(d) Dolomite 86.81 94.96

Total Raw Material Consumed 43,747.57 44,500.72

(a) Salaries and wages, including bonus 1,660.13 1,619.90

(b) Contribution to provident and other funds 195.31 231.65

(c) Staff welfare expenses 175.88 142.56

Total Employee Benefit Expense 2,031.32 1,994.11

(a) Interest expense

(1) Interest on Others# 553.39 0.24

Total finance costs 553.39 0.24

Included above#

(i) Interest on short payment of Advance Tax 173.56 -

(ii) Interest on excise demand 364.92 -

(a) Consumption of stores and spare parts 314.06 230.49

(b) Repairs to buildings 271.86 304.11

(c) Repairs to machinery 1,306.01 1,590.46

(d) Fuel oil consumed 70.17 26.18

(e) Purchase of power 26.27 5.85

(f) Freight and handling charges 310.63 428.05

(g) Rent 76.23 40.81

(h) Rates and taxes 96.48 117.89

(i) Insurance 32.67 39.65

(j) Commission, discounts and rebates 36.19 48.41

(k) Provision for wealth tax 6.05 4.00

(l) Packing and forwarding 354.49 460.73

(m) Excise duty on Change in Finished Goods (Refer Note 35) 24.20 54.09

(n) Sales Tax 742.03 680.82

(o) Other expenses 2,622.53 2,578.75

Total Other Expenses 6,289.87 6,610.29

Other expenses include:

(1) Net loss / (gain) on foreign currency transactions 176.56 152.26

(2) VAT, Entry Tax and Excise Duty Demand 743.90 302.57

(3) Auditors remuneration and out-of-pocket expenses# 16.71 14.86

(i) As Auditors 15.00 14.50

(ii) For other services 1.50 -

(iii) Auditors’ out-of-pocket expenses 0.21 0.36

Note #: The above amount excludes service tax.


38

24 CONTINGENT LIABILITIES

25

26

27 SALES TAX

28 CONSUMPTION OF IMPORTED AND INDIGENOUS MATERIALS

29 CIF VALUE OF IMPORTS

30. EXPENDITURE IN FOREIGN CURRENCY (ON ACCRUAL BASIS)

31. EARNINGS IN FOREIGN EXCHANGE

31.03.2012 31.03.2011Rs. In lacs Rs. In lacs

Contingent Liabilities not provided for

a). Income tax 484.47 589.22

b). VAT/CST 1,001.96 2,001.28

c). Entry tax - 260.97

d). Central Excise Duty 702.04 -

Estimated amounts of contracts remaining to be executed on capital account and not provided for : Rs.918.99 lacs (As at 31.3.2011: Rs. 658.98 lacs ) [Net of advances Rs. 6.10 lacs (As at 31.03.2011 Rs.10.90 lacs)].

The Company had been allotted a Coal block along with two other companies in 2006-07. The investment and the operation of the mine would be done by the company as the leader of the group. The company has paid advance payments for acquisition of land. The Company has arranged for bank guarantee of Rs. 3250.00 lacs as at 31.03.2012 ( As at 31.03.2011 Rs.3250.00 lacs ).

a). The Company had filed a writ petition before the High Court of Orissa for sales tax exemption for a period of two years w.e.f. 10th June 1997 as a Pioneer Unit. The High Court initially ruled that the Company should pay the sales tax under dispute pending disposal of the writ petition. Accordingly, the Company paid Sales tax, which had not been collected from customers, and amounts aggregating to Rs 573.73 lacs had been charged to the Profit & Loss Account during the years 1997-98 to 1999-2000.

The High Court directed the Sales Tax Authorities to refund the amount after ascertaining that the said refund shall not unjustly enrich the Company. The Sales Tax Officer passed the order stating that the refund shall unjustly enrich the Company against which the Company has filed a writ petition in the High Court challenging the correctness of the assessment and the same is pending. No credit has been taken in the accounts, as the matter has not reached finality.

b). As per Industrial Policy Resolution 1992 of Government of Orissa, the company has to pay a minimum sales tax of Rs. 252.56 lacs before availing exemption from sales tax on incremental sale of Sponge Iron from Kiln 1 and 2. The company was paying the above amount until the rate of sales tax was reduced. With reduction in rate of sales tax, the company contends that the above limit of Rs. 252.56 lacs has to correspondingly reduce and accordingly is making reduced payment. The company however has provided for the differential amount of Rs. 513.83 lacs as at 31st March 2012 (As at 31.03.2011 Rs. 397.92 lacs).

Year ended 31.03.2012 Year ended 31.03.2011

% Amount % Amount(Rs. In lacs) (Rs. In lacs)

a). Raw Materials consumed

- Indigenous 73.95% 32,352.98 64.42% 28,665.90

- Imported 26.05% 11,394.59 35.58% 15,834.82

100.00% 43,747.57 100.00% 44,500.72

b). Stores and Spare parts

- Indigenous 99.74% 762.23 91.53% 1,054.93

- Imported 0.26% 1.99 8.47% 97.57

100.00% 764.22 100.00% 1,152.50

Less: Charged to repairs to Building and Plant and Machinery 450.16 922.01

314.06 230.49

a). Raw Materials 13,144.54 8,586.14

b). Components, Stores and Spares 1.45 59.96

a). Others - Travelling Expenses 0.54 5.87

a). Service income 24.42 12.71

39

32. RELATED PARTY TRANSACTION

33. EARNINGS PER SHARE

34. DEFERRED TAX LIABILITY

35. Details of Excise duty pertaining to (accretion)/reduction to stock of finished goods is as under:

a). List of Related Parties and Relationship

Name of the Related Party Relationship

i). Tata Steel Limited Promoter Company holding more than 20%

ii). Key Management Personnel

Mr. Suresh Thawani Managing Director

b). Related party transactions

Name of the related party Nature of transactions Year ended Year ended 31.03.2012 31.03.2011

Amount Amount(Rs. In lacs) (Rs. In lacs)

Tata Steel Limited Purchase of goods 20,603.23 20,312.53

Services received 29.13 24.64

Leasing arrangements 2.90 32.62

Services rendered 23.48 1.38

Dividend Paid 489.60 489.60

31.03.2012 31.03.2011


Amounts payable 2,791.22 385.36

Amounts receivable 7.88 11.67

Key Management Personnel Year ended Year ended31.03.2012 31.03.2011


Remuneration:

Mr. Suresh Thawani 90.00 76.98

Year ended Year ended31.03.2012 31.03.2011

Net Profit for the Year (Rs. In lacs) 7,568.02 10,133.54

Weighted average number of equity shares (Face value Rs. 10/- each) 15,400,000 15,400,000

Basic and diluted earnings per share (Rs.) 49.14 65.80

Rs. In lacs

Deferred tax Current Year Deferred taxliability/ Charge/ liability/

(Asset) as at (Credit) (Asset) as at 01.04.2011 31.03.2012

Deferred Tax Liabilities

i). Difference between book and tax depreciation 4,550.26 (325.63) 4,224.63

4,550.26 (325.63) 4,224.63

Deferred Tax Assetsi) Provision for Leave Salary (97.78) (4.39) (102.17)

ii). Others (525.88) (320.75) (846.63)

(623.66) (325.14) (948.80)

Deferred Tax Liability (net) 3,926.60 (650.77) 3,275.83

2011-12 2010-11


On Opening Stock 121.49 67.40

On Closing Stock 145.69 121.49

24.20 54.09


40

36. EMPLOYEE BENEFITS

Defined Contribution Plans

The Company has recognised, in the Profit and Loss Account for the current year an amount of Rs. 188.08 lacs(Previous year : Rs. 178.58 lacs) expenses under defined contribution plans.

2011-12 2010-11


i). Contribution to Provident Fund 119.39 111.26

ii). Contribution to Superannuation Fund 68.69 67.32

188.08 178.58

Defined Benefits Plans

Details of the Gratuity and Leave Encashment Benefit are as follows

Description 2011-12 2010-11

Gratuity Leave Gratuity Leave(Funded) (Funded) (Funded) (Funded)

Amount Amount Amount Amount(Rs. In lacs) (Rs. In lacs) (Rs. In lacs) (Rs. In lacs)

1. Reconciliation of opening and closing balances of obligation

a. Obligation as at 01.04.2011 814.14 279.25 738.12 235.89

b. Current service cost 48.43 42.66 45.77 36.79

c. Interest cost 63.33 21.08 56.88 17.20

d. Acquisition adjustment - - 1.52 1.36

e. Actuarial (gain)/loss (26.34) 8.72 25.94 29.84

f. Benefits paid (45.02) (31.44) (54.09) (41.83)

g. Obligation as at 31.03.2012 854.54 320.27 814.14 279.25

2. Change in fair value of plan assets

a. Fair value of plan assets as at 01.04.2011 853.71 209.41 731.05 193.71

b. Acquisition adjustment - - 1.52 -

c. Expected return on plan assets 78.20 27.49 70.93 18.21

d. Actuarial gain/(loss) - - 4.59 (2.51)

e. Contributions made by the company 1.36 197.46 99.71 41.83

f. Benefits paid (45.02) (31.44) (54.09) (41.83)

g. Fair value of plan assets as at 31.03.2012 888.25 402.92 853.71 209.41

3. Reconciliation of fair value of plan assets and obligations

a. Present value of obligation as at 31.03.2012 854.54 320.27 814.14 279.25

b. Fair value of plan assets as at 31.03.2012 (888.25) (402.92) (853.71) (209.41)

c. Amount recognised in the balance sheet (Assets)/ Liability (33.71) (82.65) (39.57) 69.84

4. Expenses recognised during the year

a. Current service cost 48.43 42.66 45.77 36.79

b. Interest cost 63.33 21.08 56.88 17.20 c. Expected return on plan assets (78.20) (27.49) (70.93) (18.21)

d. Actuarial (gains)/loss (26.34) 8.72 21.35 32.35

e. Expenses recognised during the year 7.22 44.97 53.07 68.13

5. Investment details

a. Others (Funds with Life Insurance Corporation of India) 888.25 402.92 853.71 209.41

6. Assumptions

a. Discount rate (per annum) 8.40% 8.40% 8.00% 8.00%

b. Estimated rate of return on plan assets (per annum) 9.40% 9.40% 9.40% 9.40%

c. Rate of escalation in salary 8.00% 8.00% 8.00% 8.00%

41

7. Experience adjustments

2011-12 2010-11 2009-10 2008-09 2007-08

Gratuity

a. Present value of obligation as at the end of the year 854.54 814.14 738.12 610.50 395.43

b. Fair value of plan assets as at the end of the year (888.25) (853.71) (731.05) (549.32) (410.57)

c. (Surplus)/Deficit in the plan (33.71) (39.57) 7.07 61.18 (15.14)

d. Experience adjustments on plan liabilities (loss/(gains)) 4.40 25.94 95.33 12.82 1.41

e. Experience adjustments on plan assets ((loss)/gain) - 4.59 16.29 (7.40) 0.68

Leave


b. Fair value of plan assets as at the end of the year (402.92) (209.41) (193.71) (177.76) (261.11)

c. (Surplus)/Deficit in the plan (82.65) 69.84 42.18 36.36 (100.70)

d. Experience adjustments on plan liabilities (loss/(gains)) 20.81 29.84 (1.27) (38.73) (1.03)

e. Experience adjustments on plan assets ((loss)/gain) - (2.51) 0.84 6.39 -

Details of the Defined Pension and Post Retirement Medical Benefit (PRMB) are as follows

Description 2011-12 2010-11

Pension PRMB Pension PRMB

Amount Amount Amount Amount(Rs. In lacs) (Rs. In lacs) (Rs. In lacs) (Rs. In lacs)

1. Reconciliation of opening and closing balances of obligation

a. Obligation as at 01.04.2011 215.68 34.09 244.30 40.80

b. Current service cost - - - -

c. Interest cost 16.45 2.68 18.74 3.15

d. Actuarial (gain)/loss (9.92) (3.24) (27.48) (6.92)

e. Benefits paid (19.88) (1.06) (19.88) (2.94)

f. Obligation as at 31.03.2012 202.33 32.47 215.68 34.09

2. Change in fair value of plan assets

a. Fair value of plan assets as at 01.04.2011 - - - -

b. Expected return on plan assets - - - -

c. Actuarial gain/(loss) - - - -

d. Contributions made by the company 19.88 1.06 19.88 2.94

e. Benefits paid (19.88) (1.06) (19.88) (2.94)

f. Fair value of plan assets as at 31.03.2012 - - - -

3. Reconciliation of fair value of plan assets and obligations

a. Present value of obligation as at 31.03.2012 202.33 32.47 215.68 34.09

b. Fair value of plan assets as at 31.03.2012 - - - -

c. Amount recognised in the balance sheet 202.33 32.47 215.68 34.09

4. Expenses recognised during the year

a Current service cost - - - -

b Interest cost 16.45 2.68 18.74 3.15

c Expected return on plan assets - - - -

d Actuarial (gains)/loss (9.92) (3.24) (27.48) (6.92)

e Expenses recognised during the year 6.53 (0.56) (8.74) (3.77)


42

5. Assumptions

a. Discount rate (per annum) 8.40% 8.40% 8.00% 8.00%

b. Estimated rate of return on plan assets NA NA NA NA(per annum)

c. Rate of escalation in pension 4.00% NA 4.00% NA

d. Medical cost - % of annual entitlement utilised NA 20.00% NA 20.00%

6. Experience adjustments 2011-12 2010-11 2009-10 2008-09 2007-08

Pension


b. Fair value of plan assets as at the end of the year - - - - -

c. (Surplus)/Deficit in the plan 202.33 215.68 244.30 194.84 139.72

d. Experience adjustments on plan liabilities (loss/(gains)) (3.74) (27.48) 56.07 1.66 (11.17)

e. Experience adjustments on plan assets ((loss)/gain) - - - - -

Post Retirement Medical Benefit


b. Fair value of plan assets as at the end of the year - - - - -

c. (Surplus)/Deficit in the plan 32.47 34.09 40.80 42.25 42.05

d. Experience adjustments on plan liabilities (loss/(gains)) (2.38) (6.92) (1.84) (2.40) 7.96

e. Experience adjustments on plan assets ((loss)/gain) - - - - -

The Company is engaged in production and sale of Sponge Iron and hence Sponge Iron is the only reportable segment in accordance with Accounting Standard 17 - Segment Reporting.

Based on and to the extent of information obtained from suppliers regarding their status as Micro, Small or Medium enterprises under Micro, Small and Medium Enterprises Development Act, 2006, there are no amounts due to them as at the end of the year.

The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations. The use of foreign currency forward contracts is governed by the Company’s strategy approved by the Board of Directors, which provide principles on the use of such forward contracts consistent with the Company’s Risk Management Policy. The Company does not use forward contracts for speculative purposes.

Outstanding Short Term Forward Exchange contracts entered in to by the Company on account of firm commitments

As at No. of Contracts US Dollar Equivalent INR Equivalent (Rs. lacs)

31.03.2012 - - -

31.03.2011 3 4,000,000 1,817.70

The foreign currency exposures at the year end that have not been hedged by a derivative instrument or otherwise are given below:

31.03.2012 31.03.2011

US Dollar Amount US Dollar AmountEquivalent (Rs. In lacs) Equivalent (Rs. In lacs)

Amount receivable in foreign currency on account of Outstanding receivables 48,000 24.42 31,325 14.08

Provisions for Sales tax and Entry tax have been recognised in the financial statements considering the following:

i). The company has a present obligation as a result of past event

ii). It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

iii). A reliable estimate can be made of the amount of the obligation

37.

38.

39. DERIVATIVE INSTRUMENTS

40. DISCLOSURE AS REQUIRED UNDER AS 29

43

Particulars Interest on Excise Duty Entry VAT and Income Tax Sales tax

Carrying amount as at 01.04.2011 Nil Nil Rs. 683.96 lacs

Provision made during the year Rs.173.56 Lacs Rs. 1049.31 lacs Rs. 342.06 lacs

Amount paid during the year Nil Nil Rs. 46.67 lacs

Unused amount reversed during the year Nil Nil Rs.282.56 lacs

Carrying amount as at 31.03.2012 Rs.173.56 Llcs Rs. 1049.31 lacs Rs. 696.79 lacs

Nature of obligation Interest on Income Tax Demand for Excise duty Demand for sales tax

Expected timing of resultant outflow On decision by On decision by On decision by thecompetent authority competent authority competent adjudicating

authorities

Indication of uncertainty The above matters are The above matters are The above matters areabout those outflows under dispute with under dispute with under dispute

authorities authorities with authorities

Major assumptions concerning The matter is with The matter is with The matter is withfuture events higher authorities for higher authorities for higher authorities for

adjudication. On the adjudication. On the adjudication. On thegrounds of prudence grounds of prudence grounds of prudence

provision is made. provision is made. provision is made.

Amount of any expected Nil Nil Nil reimbursement, i.e.., amount of any asset that has been recognised for that expected reimbursement

The Revised Schedule VI has become effective from 1 April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification / disclosure.

41








44

REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2011-12

1. COMPANY'S PHILOSOPHY ON CODE OF GOVERNANCE

(as required under Clause 49 of the Listing Agreements entered into with the Stock Exchanges)

Table - 1 As on 31st March, 2012

Attendance Attendance No of Directorship No of committee Sl. Name of the Status Category at Board at the last in other public positions held in other No Director Meetings AGM held on companies public companies*

15th July, 2011 Chairman Member Chairman Member

1 2 3 4 5 6 7 8 9 10

1 Mr. A.M. Misra Chairman Promoter's (Tata 4 P 1 - - -Steel) nominee,Non-executive &Not Independent

P = Present, NP = Not Present, NA = Not applicable

No of Board Meetings held during the year = 4

Dates on which held =

Tata Sponge Iron Limited (TSIL) is committed to good corporate governance in order to enhance shareholders' value and promote national interest.

In order to achieve the objectives of good corporate governance, TSIL follows the principles of transparency, disclosure, fairness, independent supervision, healthy competition, provision of equal opportunity in employment, political non-alignment, promotion of health, safety and welfare, production of quality products and services, compliance with all relevant laws, rules and regulations, improvement in quality of life and meeting social responsibility.

It is expected that good corporate governance by TSIL would protect and enhance the trust of shareholders, customers, suppliers, financiers, employees, government agencies and the society, in TSIL.

The Company has a Non-Executive Chairman who is also a nominee of promoter company. One-half of the Board of Directors of the company comprises of independent Directors. The number of Non-Executive Directors (NEDs) is more than 50% of the total number of Directors.

None of the Directors on the Board is a Member of more than 10 committees and Chairman of more than 5 Committees (as specified in Clause 49), across all the companies in which he is a Director. The necessary disclosures regarding Committee positions have been made by the Directors.

The names and categories of the Directors on the Board, their attendance at Board Meetings during the year and at the last Annual General Meeting, as also the number of Directorships and Committee Memberships held by them in other companies are given below in Table - 1:

2 Mr. N.P. Sinha Non-executive & 4 P - 3 1 1Independent

3 Mr.D.K. Banerjee Non-executive & 2 NP 1 8 4 5Independent

4 Mr.K.K. Varughese Non-executive & 4 P - - - -Not Independent

5 Mr. P. C. Parakh Non-executive & 4 P - - - -Independent

6 Mr.Arun Misra Non-executive & 4 P - - - -Not Independent

7 Mr.S.P. Mehrotra Non-executive & 4 P - - - -Independent

8 Mr.Rajesh Chintak Non-executive & 2 NP - 4 - 1Not Independent

9 Mr.Manoj T. Non-executive & 2 NA - - - -Thomas*** Independent

10 Mr. Suresh Managing Executive & 4 P - - - -Thawani Director Not Independent

11 Mr. P.K. Lahiri** Non-executive & 2 P - 3 1 2Independent

* Represents Chairmanships/Memberships of Audit Committee and Shareholders' Grievance Committee. th** Retired by rotation at the 28 AGM held on 15-7-2011 and did not seek reappointment.

*** Appointed by the Board as Additional Director w.e.f. 12-09-2011

06-05-2011, 15-07-2011, 28-10-2011 & 27-01-2012

2. BOARD OF DIRECTORS

45

● The information as required under Annexure-IA to Clause-49 is being made available periodically to the Board.

● Details of Directors seeking appointment/re-appointment in Twenty-ninth Annual General Meeting are given with the Notice to the Annual General Meeting.

● Directors of the company do not have any inter-se relationship.

The Board periodically reviews compliance reports of laws applicable to the Company. Steps are taken by the Company to rectify instances of non-compliance, if any.

The company has adopted the Tata Code of Conduct for Executive Directors, Senior Management Personnel and other executives of the company. The company has received confirmations from Executive Director (i.e. the Managing Director) as well as the senior management personnel regarding compliance of the Code during the year under review. The company has also adopted the Code of Conduct for the Non-Executive Directors of the company. The company has received confirmations from the Non-Executive Directors regarding compliance of the Code for the

stperiod ended 31 March, 2012. Both the Codes are posted on the website of the Company i.e. www.tatasponge.com.

The Company had constituted an Audit Committee in the year 1987. The broad terms of reference of the Audit Committee were (i) to review reports of the Internal Audit Department and discuss the same with the internal auditors periodically; (ii) to meet Statutory Auditors to discuss their findings, suggestions and other related matters; (iii) to review compliance with system and discuss related observations reported by Internal and Statutory Auditors, etc. The scope of the activities of the Audit Committee has been enlarged to include the areas prescribed by Clause 49(II)(D)

thby the Board of Directors at its meeting held on 27 March, 2001 to inter-alia (a) to review the quarterly, half yearly and annual financial results of the Company before submission to the Board and (b) recommending the appointment of Statutory Auditors and finalisation of their remuneration. At the same meeting the Audit Committee has been granted powers as prescribed under Clause 49 (II) (C).

The company has complied with the requirements of Clause 49 II (A) as regards composition of the Audit Committee.

The chairman of the Audit Committee, Mr.P.K. Lahiri, was present at the Twenty-eighth Annual General Meeting held thon 15 July, 2011.

The composition of the Audit Committee is in line with the requirements of Clause 49 of the Listing Agreement and the details of meetings attended by the Directors are given below in Table – 2.

* Retired from the Board and consequently from the Audit Committee w.e.f. 15-7-2011** The Board nominated Mr.P.C. Parakh as a member of the Audit Committee consequent to the retirement of Mr.P.K. Lahiri*** The Committee elected Mr.N.P. Sinha to be the Chairman of the Audit Committee at its meeting held on 28-10-2011.

25-04-2011, 14-07-2011, 28-10-2011 & 27-01-2012

Audit Committee meetings are attended by the Chief (Finance & Accounts) and the Internal Auditor. The Statutory Auditors are invited to each meeting and the Managing Director/other persons are invited to the meetings as and when required. The Company Secretary acts as the Secretary of the Audit Committee.

The necessary quorum was present at the meetings.

The company does not have any subsidiary company.

The Board of Directors of the company had constituted a Remuneration Committee in 1994. The broad terms of reference of the Remuneration Committee are to recommend to the Board, salary (including annual increments)

3. AUDIT COMMITTEE

4. SUBSIDIARY COMPANIES

5. REMUNERATION COMMITTEE


Sl. No. Name of the Director Status Category No. of meetingsattended

1 Mr P.K. Lahiri* Chairman Non-executive & Independent 2(up to 15.07.2011)

2 MR. N. P. Sinha*** Chairman Non-executive & Independent 4(from 28.10.2011)

3 Mr.D.K. Banerjee Member Non-executive & Independent 2

4 Mr.P.C. Parakh** Member Non-executive & Independent 2

5 Mr. K.K. Varughese Member Non-executive & Not Independent 4

No. of Audit Committee meetings held during the year = 4

Dates on which held =


46

perquisites and commission to be paid to the company's Managing/Whole-time Directors (MD/WTDs) and to finalise the perquisites package within the overall ceiling fixed by the Board, to recommend to the Board appointment/re-appointment of Managing/Whole-time Director and retirement benefits to be paid to the MD/WTDs under the Retirement Benefit Guidelines adopted by the Board.

The composition of the Remuneration Committee and the details of meetings attended by the Directors are given below in Table – 3.

*Consequent to the retirement of Mr.P.K. Lahiri, the Board Reconstituted the Remuneration Committee by nominating Mr.S.P. Mehrotra as Member thand Mr.N.P. Sinha as the Chairman of the Committee w.e.f. 28 October, 2011

25-04-2011

To the extent stated above the company has complied with the non-mandatory requirements of Clause 49 regarding the Remuneration Committee.

Remuneration policy

(a) For Non-Executive Directors

The Non-Executive Directors (NEDs) are paid remuneration by way of sitting fees as per Article 104 of the Articles of Association of the company and Commission.

The company pays sitting fee of Rs.15,000 per meeting for attending the meetings of Board, Audit Committee, Remuneration Committee and Committee of Board. For other Committee meetings, Rs.8,000 per meeting is paid by the Company.

The Commission is payable at a rate not exceeding 1% per annum of the profits of the company (computed in accordance with Section 309(5) of the Companies Act, 1956). The distribution of Commission amongst the NEDs is placed before the Board. The Commission is distributed broadly on the basis of Board meetings and various Committee meetings attended by the NEDs. Extra weightage is given to the Commission payable to Chairman of Board/Committee meetings, keeping in view the greater contribution being made by him at every Board/Committee meeting chaired by him.

(b) For Managing Director (MD) / Whole-time Director (WTD)

The company pays remuneration by way of salary, perquisites and allowances (fixed component) and commission (variable component) to MD/WTD. Salary is paid within the range approved by the Shareholders. Annual increment

steffective from 1 April each year, as recommended by the Remuneration Committee, is approved by the Board. The ceiling on perquisites and allowances as a percentage of salary, is fixed by the Board. Within the prescribed ceiling, the perquisite package is recommended by the Remuneration Committee. Commission is calculated with reference to net profits of the Company in a particular financial year and is determined by the Board of Directors at the end of the financial year based on the recommendations of the Remuneration Committee, subject to overall ceilings stipulated in Sections 198 and 309 of the Companies Act, 1956. Specific amount payable to such directors is based on the performance criteria laid down by the Board which broadly takes into account the profits earned by the company for the year.


Sl. No. Name of the Director Status Category No. of meetings attended

1 Mr. P.K. Lahiri* Chairman Non-executive & Independent 1

2 Mr. N.P. Sinha Chairman Non-executive & Independent 1

3 Mr.A.M. Misra Member Non-executive & Not Independent 1

4 Mr.S.P. Mehrotra Member Non-executive & Independent -

No.of Remuneration Committee meetings held during the year = 1

Date on which held =

Details of remuneration to all the directors Table - 4NON-WHOLE-TIME DIRECTORS Remuneration paid during 2011-2012

(Rs. lac)

Sl. No. Name of the Director Sitting fees (Gross) Perquisites & Allowances Commission (Gross)* Total (Gross)

1 Mr.A.M. Misra 0.90 Nil 3.88 4.782 Mr.N.P. Sinha 1.66 Nil 4.74 6.403 Mr.P.K. Lahiri 0.75 Nil 3.45 4.204 Mr.D.K. Banerjee 0.75 Nil 1.72 2.475 Mr.K.K. Varughese 1.28 Nil 3.45 4.736 Mr.P.C. Parakh 0.98 Nil 2.59 3.577 Mr.Arun Misra 0.60 Nil 1.72 2.328 Mr.S.P. Mehrotra 0.60 Nil 1.72 2.329 Mr.Rajesh Chintak 0.30 Nil 0.87 1.17

10 Mr.Manoj T. Thomas 0.30 Nil 0.86 1.16

Total 8.12 - 25.00 33.12

47

WHOLE-TIME DIRECTOR(S) 2011-12Salary Perquisites & Allowances Commission(Gross)* Total (Gross)

10 Mr. Suresh Thawani 24.24 17.28 48.48 90.00

SERVICE CONTRACT/NOTICE PERIOD/SEVERANCE FEES:

Mr. Suresh Thawani : Initial appointment from 10th March, 2007 to 9th March, 2010.Managing Director

Reappointed for the period 10th March, 2010 to 31st March, 2013.

The agreement may be terminated by either party giving the other party six months' notice or the Company paying six months' salary in lieu thereof.

There is no separate provision for payment of severance fees.

Shareholding of the Directors in the Company as on 31st March, 2012

Table - 5

Sl No Name of the Directors No of Equity Shares of Rs 10/- each held singly and/or jointly.

1 Mr.A.M. Misra Nil

2 Mr. N.P. Sinha 1000

3 Mr.S.P. Mehrotra Nil

4 Mr. D. K. Banerjee Nil

5 Mr. K. K. Varughese Nil

6 Mr. P. C. Parakh Nil

7 Mr.Arun Misra Nil

8 Mr.Rajesh Chintak Nil

9 Mr.Manoj T. Thomas Nil

10 Mr. Suresh Thawani Nil

Total 1000

The Company has a Shareholders' Grievance Committee for redressal of Shareholders' grievances like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividend etc.

The composition of the Shareholders' Grievance Committee and the details of meetings attended by the Directors are given below in Table - 6.



1 Mr.N.P. Sinha Chairman Non-executive & Independent 12 Mr.P.C. Parakh Member Non-executive & Independent 1

No. of Shareholders' Grievance Committee meetings held during the year = 1

Date on which held = 27-01-2012

Name, designation and address : Mr. S.S. Dhanjalof Compliance officer Company Secretary

P.O- Joda, Dist- KeonjharOrissa-758034Phone: (06767) - 284236Fax: (06767) - 278159

- 278129E-mail : [email protected]

No. of complaints pending as on 1st April,2011 0No. of complaints identified and reported under Clause 41of the Listing Agreement during the year 2011-12 6No. of Complaints disposed of during the year ended 31st March, 2012 3Not solved to the satisfaction of shareholders as on 31.3.2012 0No. of pending complaints as on 31-3-2012 3

th* Payable after shareholders' approval at the 29 Annual General Meeting during 2012-13Note: The Company has not yet introduced the Employees' Stock Option Scheme.

6. SHAREHOLDERS' GRIEVANCE COMMITTEE


48

Note:



1 Mr.N.P. Sinha Chairman Non-executive & Independent 12 Mr. K. K. Varughese Member Non-executive & Not-Independent 1

No. of Ethics and Compliance Committee meetings held during the year = 1Date on which held =



1 Mr.A.M. Misra Chairman Non-executive & not independent 12 Mr.N.P. Sinha Member Non-executive & Independent 13 Mr.D.K. Banerjee Member Non-executive & Independent 14 Mr.K.K. Varughese Member Non-executive & not independent -5 Mr.Suresh Thawani Member Executive & not independent 1

No. of Committee of Board meetings held during the year = 1Date on which held = 26-9-2011

a) The details of last three Annual General Meetings of the Company are furnished below

Table - 9

Year Location Date Time

2008-2009 'Lake View' (Officers' Recreation Centre of Tata Sponge Iron Ltd) at TSIL Township, Joda 01-08-2009 04-00 p.m.2009-2010 'Lake View' (Officers' Recreation Centre of Tata Sponge Iron Ltd) at TSIL Township, Joda 24-07-2010 11-00 a.m.2010-2011 'Lake View' (Officers' Recreation Centre of Tata Sponge Iron Ltd) at TSIL Township, Joda 15-07-2011 11-00 a.m.

b) No Extra-Ordinary General Meeting of the shareholders was held during the year.

c)

The correspondence identified as investor complaints are letters received through Statutory/Regulatory bodies and those related to Court/Consumer forum matters, alleged fraudulent encashment and alleged non-receipt of dividend amounts where reconciliation of the payment is in progress/completed after end of the quarter.

In accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as amended (the Regulations), the Board of Directors of the company adopted the Code of Conduct for Prevention of Insider Trading and the Code of Corporate Disclosure Practices (the Code) to be followed by Directors, Officers and other Employees. The Code is based on the principle that Directors and Employees of the company owe a fiduciary duty to, among others, the shareholders of the company to place the interest of the shareholders above their own and conduct their personal securities transactions in a manner that does not create any conflict of interest situation. The Code also seeks to ensure timely and adequate disclosure of Price Sensitive Information to the investor community by the company to enable them to take informed investment decisions with regard to the company's securities. The Committee met once during the year. The Company Secretary is the Compliance Officer under the above-mentioned Code.

The composition of the Ethics and Compliance Committee and the details of meetings attended by the Directors are given below in Table – 7.

28-10-2011

rdThe Board of Directors of the Company at its meeting held on 3 November, 2010, has constituted a Committee of Board for advising/recommending to the Board on strategic and other important business issues.

The composition of the Committee of Board and the details of meetings attended by the Directors are given below in Table – 8.

No Postal Ballot was conducted during the year. None of the resolutions proposed for the ensuing Annual General meeting need to be passed by Postal Ballot.

d) Special Resolutions passed in previous three Annual General Meetings :stAt the Annual General Meeting held on 1 August, 2009, no Special Resolution was passed.

7. ETHICS AND COMPLIANCE COMMITTEE

9. GENERAL BODY MEETINGS

8. COMMITTEE OF BOARD

49

thAt the Annual General Meeting held on 24 July, 2010, no Special Resolution was passed.thAt the Annual General Meeting held on 15 July, 2011, no Special Resolution was passed.

The Board has received disclosures from key managerial personnel relating to financial and commercial transactions where they and/or their relatives have personal interest. There are no materially significant related party transactions, which have potential conflict with the interest of the company at large. The related party transactions have been disclosed in point no. 32 of the notes to the Financial Statements for the year ended

st31 March, 2012.

(B) Disclosure of Accounting Treatment

The applicable Accounting Standards as issued by the Institute of Chartered Accountants of India have been followed in preparation of the financial statements of the company.

(C) Board Disclosures – Risk Management

The procedures for risk assessment and minimisation has been disclosed in point no. 5 of the Management Discussion & Analysis report forming part of the Directors' Report.

(D) Proceeds from public issues, rights issues, preferential issues etc.

The company has not made any capital issues during the financial year.

(E) Matters related to Capital Markets

The company has complied with the requirements of the Stock Exchanges, SEBI and other statutory authorities on all matters relating to capital markets during the last three years. No penalties or strictures have been imposed on the company by any Stock Exchange or SEBI or any statutory authority, on any matter relating to capital markets, during the last three years.

(F) Whistle Blower Policy

The Company has a Whistle Blower Policy that provides a formal mechanism for all employees of the Company to approach the Ethics Counsellor/Chairman of the Audit Committee of the Company and make protective disclosures about the unethical behaviour, actual or suspected fraud or violation of the Company's Code of Conduct. The Whistle Blower Policy is an extension of the Tata Code of Conduct, which requires every employee of the company to promptly report to the Management any actual or possible violation of the Code or an event he becomes aware of that could affect the business or reputation of the company. The disclosures reported are addressed in the manner and within the time frames prescribed in the policy. Under the policy, each employee has an assured access to the Ethics Counsellor/Chairman of the Audit Committee.

(G) Management Discussion & Analysis Report

The Management Discussion & Analysis Report is a part of the Annual Report.

(H) Compliance with Non-mandatory Requirements

The Company has fulfilled the following non-mandatory requirements as prescribed in Annexure ID to Clause 49 of the Listing Agreement with the Stock Exchanges:

(a) The Company has a Remuneration Committee (Please refer to Para 5 above for details).

(b) The Company has adopted a Whistle Blower Policy (Please refer to Para 10 (F) above for details).

(c) The Company already has a regime of unqualified financial statements. Auditors have raised no qualification on the financial statements for the year 2011-12.

The Managing Director and the Chief (Finance & Accounts) of the Company have given a certificate to the Board of stDirectors as prescribed under Clause 49(V) of the Listing Agreement(s) for the year ending 31 March, 2012.

A qualified practicing Company Secretary carried out secretarial audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The audit confirms that the total issued/paid up capital is in agreement with the total number of shares in physical form and the total number of dematerialised shares held in electronic mode with NSDL and CDSL.

(i) Quarterly Results –

The quarterly and annual financial results are normally published in Business Standard (All editions) and the 'Sambad' (Oriya daily) and also posted on the website of the Company (www.tatasponge.com).

(A) Disclosure by key managerial personnel about related party transactions

10. DISCLOSURES

11. CEO/CFO CERTIFICATION

12. SECRETARIAL AUDIT

13. MEANS OF COMMUNICATION


50

(ii) Presentation to Institutional Investors or to Analysts –

Official news releases and presentations made to the Institutional Investors and Analysts are posted on the Company's website. During the financial year 2011-12, press interviews were not made. However, important news is displayed on the website of the Company.

(iii) Company's Corporate Website –

The Company's website (www.tatasponge.com) is a comprehensive reference on the company's management, vision, mission, policies, corporate governance, corporate social responsibility, investor relations, operations, financials, news, etc.

st thPursuant to the Special Resolution passed by the Shareholders at their 21 Annual General Meeting held on 26 July, 2004, the Company had made application for voluntary de-listing of its 1,54,00,000 equity shares from Ahmedabad, Delhi, Calcutta and Bhubaneswar Stock Exchanges. Whereas the Ahmedabad, the Delhi and the Bhubaneswar Stock Exchanges had communicated the de-listing effective 15-10-2004, 11-12-2004 and 28-09-2006 respectively, the Calcutta Stock Exchange Association Limited conveyed the delisting vide its letter dated 24-4-2008.

14. GENERAL SHAREHOLDER INFORMATION14.1 29th Annual General Meeting Day/Date : Friday, the 20th July, 2012

Time : 10.30 amVenue : Lake View (Officers' Recreation Centre), TSIL Township, Joda,

Dist - Keonjhar, Orissa, Pin code - 758 034.14.2 Financial calendar for 2011-12

a] Board Meetings for consideration i] July, 2012 for consideration of audited financial results for 3 monthsof financial results ending 30th June, 2012.

ii] October, 2012 for consideration of audited financial results for 3 months/ half year ending 30th September, 2012.

iii] January, 2013 for consideration of audited financial results for 3 months/ 9 months ending 31st December, 2012.

iv] April/May, 2013 for consideration of audited financial results for 2012-13.b] 30th Annual General Meeting Between June - September, 2013

(for the year ending 31-3-2013)14.3 Date of Book closure From 4th July, 2012 to 10th July, 2012, both days inclusive.14.4 Dividend payment date The dividend warrants will be posted on or after 24th July, 2012.14.5 Listing on Stock Exchanges 1] Bombay Stock Exchange Ltd.

Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001.2] National Stock Exchange of India Ltd.

Exchange Plaza (5th Floor), Plot No. C/1, G. BlockBandra-Kurla Complex, Bandra (E), Mumbai - 400 051.[Listed w.e.f. 24-02-2003]

14.6 Stock Code- Equity ShareISIN CODE INE 674A01014 (Electronic form)BSE CODE 13010 (Physical form), 513010 (Demat form)NSE SCRIP CODE TATASPONGE

14.7 Correspondence Address P.O. Joda - 758 034Dist - Keonjhar, Orissa.Phone - 06767-284236, Fax - 06767-278159/278129 E-Mail : [email protected]

14.8 Exclusive e-mail ID for redressal [email protected] investors' complaints.

Note :

14.9 Market price data: Monthly High/Low prices per share during 2011-12 : Table - 10

Months Bombay Stock Exchange Ltd. National Stock Exchange of India Ltd.

High (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

April, 2011 364.80 340.20 364.40 331.65May, 2011 379.00 333.00 378.65 332.60June, 2011 372.80 323.15 372.95 323.10July, 2011 363.60 332.00 363.30 330.00August, 2011 339.00 292.25 339.95 290.10September, 2011 315.00 291.20 316.85 292.00October, 2011 344.25 293.05 344.90 294.00November, 2011 339.00 285.75 348.00 285.00December, 2011 310.00 239.10 315.00 239.00January, 2012 287.70 232.60 291.90 230.55February, 2012 306.00 262.00 309.00 262.00March, 2012 324.50 275.10 324.90 275.20

51

14.10 Stock performance

TSIL vs. BSE

Table - 11

TSIL vs. NSE

Table - 12

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

TSIL Close BSE Smallcap Indices close

0.00

500.00

1000.00

1500.00

2000.00

2500.00

3000.00

3500.00

4000.00

4500.00

5000.00

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

April '11

May '11

June '11

July '11

Aug '11

Sept '11

Oct '11

Nov '11

Dec '11

Jan '12

Feb '12

Mar '12

TSIL Close NSE S&P CNX 500 close

April '11

May '11

June '11

July '11

Aug '11

Sept '11

Oct '11

Nov '11

Dec '11

Jan '12

Feb '12

Mar '12


52

14.11 Share Registrars & Transfer Agents :

REGISTERED OFFICE :M/s. TSR Darashaw Limited(formerly Tata Share Registry Limited) Phone : 022 - 66568484 6-10, Haji Moosa Patrawala Industrial House Fax : 022 - 66568494 / 6656849620, Dr. E. Moses Road, Near Famous Studio Website : www.tsrdarashaw.comMahalaxmi, Mumbai - 400 011 e-mail : [email protected]

BRANCH OFFICES : For the convenience of shareholders based in the following cities, transfer documents and letters will also be accepted at the following branches/agencies of TSR Darashaw Limited :

1) BangaloreM/s. TSR Darashaw Limited(formerly Tata Share Registry Limited) Phone : 080 - 25320321 503, Barton Centre (5th Floor) Fax : 080 - 2558001984, Mahatma Gandhi Road e-mail : [email protected] - 560 001.

2) JamshedpurM/s. TSR Darashaw Limited(formerly Tata Share Registry Limited) Phone : 0657 - 2426616Bungalow No.1, 'E' Road, Northern Town, Fax : 0657 - 2426937Bistupur, Jamshedpur - 831 001. e-mail : [email protected]

3) KolkataM/s. TSR Darashaw Limited(formerly Tata Share Registry Limited) Phone : 033 - 22883087 Tata Centre, 1st Floor, 43, Jawaharlal Nehru Road Fax : 033 - 22883062Kolkata - 700 071. e-mail : [email protected]

4) New Delhi M/s. TSR Darashaw Limited (formerly Tata Share Registry Limited) Phone : 011 - 23271805

Plot No. 2/42, Sant Vihar, Ansari Road, Fax : 011 - 23271802Daryaganj, New Delhi - 110 002. e-mail : [email protected]

5) AhmedabadM/s.Shah Consultancy Services Pvt. Ltd. Telefax : 079 - 26576038Agents : TSR Darashaw Limited, Sumatinath e-mail : [email protected]

Complex, Pritamnagar, Akhada Road, EllisbridgeAhmedabad -380 006.

Note : Name of the Registrars & Share Transfer Agents has been changed from M/s.Tata Share Registry Limited to M/s.TSR Darashaw Limited w.e.f. 12-01-2006.

14.12 Share Transfer System :The Company has retained M/s. TSR Darashaw Limited (formerly Tata Share Registry Ltd.) of Mumbai to carry out the transfer related activities. Authorised personnel are approving the transfer on periodical basis. All valid transfers are affected within stipulated days. Share certificates received at Registered Office are also sent to Registrars and Share Transfer Agents for doing the needful. In case of electronic transfers, the bye laws of Depositories are complied with.

14.13 Distribution of shareholding as on 31-03-2012

Table - 13

Shareholding of nominal value of Shareholders Share Amount

Rs. Rs. Number % to total In Rs. % to total

(1) (2) (3) (4) (5)

1 - 100 3046 9.53 195140 0.13101 - 500 11838 37.05 4766590 3.10501 - 1,000 7790 24.38 7455750 4.84

1,001 - 5,000 7827 24.50 18816880 12.22 5,001 - 10,000 773 2.42 6122010 3.9810,001 - 20,000 357 1.12 5419450 3.5220,001 - 30,000 120 0.38 3015740 1.9630,001 - 40,000 41 0.13 1445480 0.9440,001 - 50,000 45 0.14 2128020 1.3850,001 - 1,00,000 52 0.16 3646960 2.37

1,00,001 and above 61 0.19 100987980 65.58

Total 31950 100.00 154000000 100.00

53

14.14 Categories of shareholders as on 31-03-2012

Table - 14

Sl. No. Category No. of shares held Percentage of shareholding

1 Promoters

(i) Tata Steel Limited (formerly known as The Tata Iron & Steel Company Ltd.) 6119960 39.74

(ii) Kalimati Investment Company Limited 539554 3.50

2 Mutual Funds and UTI 623378 4.05

3 Banks, Financial Institutions, Insurance Companies (Central/State Govt. Institutions/Non-government Institutions) 624920 4.06

4 Private Corporate Bodies 574486 3.73

5 Indian Public 5671188 36.82

6 NRIs/OCBs/FIIs 1243214 8.07

7 Directors & Relatives 1000 0.01

8 Trusts 2300 0.01

TOTAL 15400000 100.00

14.15 Top ten shareholders across all categories as on 31st March, 2012 :

Table - 15

Sr.No. Name of the Shareholder No. of shares held % of holding

1 Tata Steel Limited 6119960 39.742 Pinebridge Investments Asia Limited,

A/c Pinebridge Investments GF Mauritius 707915 4.603 Kalimati Investment Company Limited 539554 3.504 Life Insurance Corporation of India 402208 2.615 Birla Sun Life Trustee Company Private Limited,

A/c Birla Sun Life Dividend Yield Plus 376728 2.456 Reliance Capital Trustee Co. Limited,

A/c. Reliance Small Cap Fund 219050 1.427 General Insurance Corporation of India 213332 1.398 Emergent India Investment Limited,

A/c. Reliance Emergent India Fund 178500 1.169 Prem Chand Jain 89460 0.58

10 Ajai Hari Dalmia 76111 0.49

14.18 Outstanding GDRs/ADRs/Warrants or any convertible instruments, conversion date and likely impact on equity : Not applicable

14.19 Plant Location :Registered Office & Plant :P.O. Joda - 758 034, Dist - Keonjhar, Orissa.Phone - 06767-284236, Fax - 06767-278159/278129, E-Mail : [email protected]: www.tatasponge.com


(Suresh Thawani)Place : Jamshedpur Managing Director Dated : 23rd April, 2012

14.16 DEMATERIALISATION OF SHARES:As per SEBI's direction the Company had signed tripartite agreements with both the Depositories (NSDL & CDSL) and Registrars and Transfer Agents in March, 2000. Accordingly, dematerialisation facility for the shares of the Company is available and it is in the interest of all the shareholders to convert their physical holdings into electronic holdings by dematerialisation.

stAs on 31 March, 2012, 14333187 shares were held in dematerialised form which constitute approx. 93.07 % of total number of subscribed shares.

14.17 LIQUIDITYSince Company's shares are listed (as on 31-3-2012) on Bombay Stock Exchange Limited and National Stock Exchange of India Limited and are compulsorily traded in dematerialised form, these shares enjoy enough liquidity in the market.


54

CORPORATE GOVERNANCE COMPLIANCE CERTIFICATE

To the members of Tata Sponge Iron Limited

Place : CalcuttaDated : 23rd April, 2012

(1) We have examined the compliance of conditions of Corporate Governance by Tata Sponge Iron Limited for the year ended March 31, 2012, as stipulated in Clause 49 of the Listing Agreement(s) of the said company with Stock Exchange(s).

(2) The compliance of conditions of Corporate Governance is the responsibility of the company's management. Our examination was carried out in accordance with the Guidance Note on Corporate Governance Certificate issued by the Institute of Company Secretaries of India and was limited to procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company.

(3) In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement(s).

(4) We further state that such compliance is neither an assurance as to the future viability of the company nor of the efficiency or effectiveness with which the management has conducted the affairs of the company.

(S. M. GUPTA)S. M. GUPTA & CO.

COMPANY SECRETARIES Membership No. : FCS - 896

C. P. Number : 2053

55

F I N A N C I A L S TAT I S T I C S

CAPITAL ACCOUNT

CAPITAL ACCOUNT (Contd.)

REVENUE ACCOUNT

(Rupees in Lac)

Reserves Shareholders'Year Share Capital and Surplus Funds Borrowings Total Funds Gross Block Depreciation

2001-02 1540.00 2911.82 4451.82 4902.82 9354.64 15900.48 5643.14

2002-03 1540.00 4229.77 5769.77 2044.01 7813.78 15962.03 6436.76

2003-04 1540.00 6796.92 8336.92 81.27 8418.19 15986.54 7068.19

2004-05 1540.00 11657.15 13197.15 68.82 13265.97 16241.14 7774.24

2005-06 1540.00 13168.72 14708.72 7066.99 21775.71 23095.83 8526.57

2006-07 1540.00 14297.38 15837.38 14684.14 30521.52 35031.33 9825.67

2007-08 1540.00 22806.20 24346.20 8439.80 32786.00 36892.00 11783.59

2008-09 1540.00 33431.43 34971.43 11.11 34982.54 35914.99 13571.92

2009-10 1540.00 40467.05 42007.05 14.81 42021.86 35924.90 15359.13

(Rupees in Lac)

Percentage ofCapital Current Shareholders' Percentage of

Work-in- Current Liabilities Net Current Funds to BorrowingsYear Net Block Progress Investment Assets & Provisions Assets Total Funds to Total Funds

2001-02 10257.34 7.88 80.00 2174.29 1379.52 794.77 47.59 52.41

2002-03 9525.27 21.79 80.00 2383.50 1891.94 491.56 73.84 26.16

2003-04 8918.35 438.07 80.00 5278.77 4021.18 1257.59 99.03 0.97

2004-05 8466.90 3182.75 80.00 7985.44 4397.78 3587.66 99.48 0.52

2005-06 14569.26 9269.36 80.00 4977.14 4768.36 208.78 67.55 32.45

2006-07 25205.66 1328.70 80.00 13920.83 6941.10 6979.73 51.89 48.11

2007-08 25108.41 1439.17 80.00 20735.97 9281.99 11453.98 74.26 25.74

2008-09 22343.07 2127.73 80.00 20958.19 5493.76 15464.43 99.97 0.03

2009-10 20565.77 12174.48 80.00 21548.76 7754.88 13793.88 99.96 0.04

(Rupees in Lac)

PercentageIncome Percentage of Profit

Produc- from Profit Profit of Profit after Taxtion other Depre- before after after Tax to Total EPS

Year in MT Sales Sources Expenses ciation Tax Tax Tax Dividend to Sales Funds (Rs.)

2001-02 228346 14272.52 477.32 12982.37 739.24 1028.23 387.31 640.92 308.00 4.49 6.85 4.16

2002-03 236432 14208.22 636.97 11486.39 797.66 2561.14 722.00 1839.14 462.00 11.15 23.54 11.94

2003-04 216137 17485.17 819.15 12291.46 706.07 5306.79 1870.98 3435.81 770.00 19.65 40.81 22.31

2004-05 223686 24050.17 945.34 14769.98 716.76 9508.77 3419.35 6089.42 1078.00 25.32 45.90 39.54

2005-06 205552 19303.76 1133.95 16246.46 756.78 3425.64 1211.68 2213.96 616.00 11.47 10.17 14.38

2006-07 282274 27750.81 1937.93 24503.12 1349.19 3294.19 1170.76 2123.43 616.00 7.65 6.96 13.79

2007-08 332264 43329.03 4674.22 33156.54 1964.62 13643.64 4091.05 9552.59 1078.00 22.05 29.14 62.03

2008-09 342074 60813.94 2014.13 42416.36 1831.10 18116.70 6050.09 12066.61 1232.00 19.84 34.49 78.35

2009-10 359333 52001.37 2193.03 39609.75 1937.52 12622.15 4169.91 8452.24 1232.00 16.25 20.11 54.88

Notes :1. The Company started commercial production of Sponge Iron from April 1986 with first kiln.2. The second kiln started commercial production from September, 1998.3. Tax includes Deferred Tax w.e.f. 2001-02.4. The third kiln started commercial production from March, 2006.5. Sales include sale of surplus power net of Excise Duty w.e.f. 2008-09.* Figures are as per revised Schedule VI of the Companies Act, 1956 w.e.f financial year 2011-12

2010-11 1540.00 49168.73 50708.73 — 50708.73 35984.46 17111.31

*2011-12 1540.00 55304.89 56844.89 — 56844.89 35590.58 18247.99

2010-11 18873.15 12904.76 3435.25 28748.10 9325.93 19422.17 100.00 0.00

*2011-12 17342.59 1611.48 80.00 37706.35 12744.74 24961.61 100.00 0.00

2010-11 383002 67578.35 1908.82 52607.56 1851.50 15027.87 4894.33 10133.54 1232.00 15.00 19.98 65.80

*2011-12 272106 63394.73 2298.65 52648.88 1837.25 11207.25 3639.23 7568.02 1232.00 11.94 13.31 49.14


56

QUALITY POLICY

ENVIRONMENTAL POLICY

l

l

l

l

OCCUPATIONAL HEALTH & SAFETY POLICY

CSR POLICY

AFFIRMATIVE ACTION POLICY

Tata Sponge Iron Limited is committed to comply with the requirements of the Quality Management System and to achieve continual improvement in its operations through it for the production and marketing of sponge iron and power.

In order to attain this, the company shall strive to achieve its quality objectives through annual business plans and review the quality policy periodically to ensure its continuing suitability to company operations.

Tata Sponge Iron Limited is committed to continual improvement in its environmental performance activities pertaining to the handling of raw materials, production and dispatch of sponge iron; and generation and evacuation of power; so as to maintain a pollution free, clean and safe environment.

To achieve this, the company shall :

Comply with applicable legal and other requirements relating to its environmental aspects;

Identify the impact of its activities upon the environment;

Prepare and implement an annual environmental improvement plan with targets to meet the objectives and to carry out periodical reviews of its performance; and

Communicate the policy to all persons working for or on behalf of the organization and make it available to public on request.

Tata Sponge Iron Limited is committed to provide a safe workplace to all persons working under its control by taking steps to prevent injury and reduce risk of occupational ill health.

The Company shall continually strive to improve its Occupational Health & Safety performance by setting & pursuing relevant objectives and meeting all legal & other requirements in the area of production and marketing of sponge iron & power.

The Company shall achieve these through awareness, training and effective communication among all interested parties. The Company shall review this policy at periodic intervals.

Tata Sponge recognizes the fact that the long-term future of the company is best served by addressing the interests of all its stakeholders in a balanced manner.

As a responsible corporate citizen, Tata Sponge will consistently strive for opportunities to meet the expectations of its stakeholders by pursuing the concept of sustainable development, with particular emphasis on environment care & periphery development and in the course, promote national interest.

Tata Sponge Iron Limited believes in social equity.

The company adheres to the principle of equal opportunity, irrespective of caste, whether in recruitment or career advancement within the organization.

The company is also committed to directly conducting or supporting initiatives to ensure an equal footing for socially and economically disadvantaged sections in the country at large, and specifically the scheduled caste and scheduled tribe communities.

ORGANISATION CULTURE VALUES

?

?E

?W

?A

Safety above all

nvironment friendly operations

elfare of employees and surrounding community; and

daptability to changing scenario.

T

S

I

L

rust and Team work based on trust, respect

respect and dignity for all

ocial equality No discrimination based on gender,

cast, creed or religion. Tata Sponge

is an equal opportunity employer

ntegrity Integrity in all transactions without

fear or fervor

oyalty Organisation well being before self.

Prin

ted

by P

urni

ma

Prin

ters P

vt. Lt

d. 0

657-2

300148, 2302667

annualreport2011-12

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