DIRECTORS' REPORT AND
We are pleased to present the Annual Report of the Company for the year 2013.
1. INDIAN ECONOMY
A Year of Challenges
Slowing growth, rising inflation and the depreciating rupee marked the onset of 2013setting in motion a challenging year for the Indian economy. Growth rate continued toslide despite attempts by the government to stem the tide with a host of traditional andinnovative measures. Efforts were further constrained due to global headwinds.
To boost investor confidence, the Cabinet Committee on Investments approvedinfrastructure projects entailing huge investments.
However, given the weak start, we expect that real GDP growth would average at 4.5-5%in 2013-14.
FLAT GROWTH FOR CEMENT INDUSTRY
The cement industry witnessed flat growth in 2013 due to several reasons - a prolongedmonsoon that extended until the festive season, natural calamities (floods and cyclone)that hit many parts of India and low demand due to financial crunch and slowdown in realtyand infrastructure sectors.
In the first half of 2013, industry demand was slow due to fall in constructionactivity and a virtual halt in government spending. During the second half, the earlyarrival of the monsoon compared with the previous year did not augur well.
The cement industry also faced rising costs, high interest rates, land acquisition andclearance issues. An overall weak macro environment and ban on sand mining continued toworry the industry.
Increase in freight rates for several commodities has had a cascading impact on thecement industry. An increase in freight rates for coal and cement drove up transportationcost as well as the landed cost of imported goods. Moreover, the rupees weaknessagainst the U.S. dollar and other global currencies prevented India from taking advantageof the decline in commodity prices in the world market.
Over the past few years, the cement industry witnessed huge capacity addition (almost90 million tones on the available supply basis), which substantially increased the gapbetween demand and supply and consequently lowered capacity utilization.
We expect demand to gradually revive over 2014 and 2015 with a new government andrecovery in construction activity.
2. FINANCIAL RESULTS 2013
AT A GLANCE (STAND ALONE RESULTS):
Cement production decreased by 3% to reach 20.96 million tonnes, from 21.62million tonnes while clinker production decreased to 14.27 million tonnes, 10% down from15.81 million tonnes in year 2012.
Domestic cement sales volume continued with sluggish demand by recording adecrease of 2% at 20.94 million tonnes from 21.31 million tonnes in year 2012. Cementexports decreased to 0.10 million tonnes from 0.12 million tonnes in year 2012. Clinkersales (including exports) were up at 0.56 million tonnes from 0.55 million tonnes in 2012.
Net sales at Rs. 9,087 crores were 6% lower than that of previous yearsRs. 9,675 crores. Average sales realisation decreased by around 4% at Rs.4,208 per tonneagainst approx Rs.4,400 per tonne in 2012.
Total (operating) expenses for the year 2013 increased by 2% over that of year2012.
The Company achieved an absolute EBITDA of Rs.1651 crores in year 2013. This islower by 33% over the corresponding Rs.2473 crores of the year 2012.
Profit before tax at Rs.1,514 crores was down by 20% over corresponding figureof Rs.1902 crores for year 2012.
Net Profit at Rs.1,295 crores was down by 0.2% over corresponding figure ofRs.1297 crores for the year 2012.
| || || |
Amount in Rs. crores
| ||Stand alone ||Consolidated |
| ||Current Year ||Previous Year ||Current Year ||Previous Year |
| ||31.12.2013 ||31.12.2012 ||31.12.2013 ||31.12.2012 |
|Sales (Net of excise duty) ||9086.84 ||9674.94 ||9118.00 ||9739.54 |
|Pro t before interest and depreciation ||2044.45 ||2821.84 ||2033.91 ||2821.95 |
|Less: Finance Cost ||65.08 ||75.66 ||66.75 ||78.46 |
|Gross pro t ||1979.37 ||2746.18 ||1967.16 ||2743.49 |
|Less: Depreciation and amortisation expense ||490.07 ||565.22 ||493.67 ||568.68 |
|Pro t before Exceptional Items and Tax ||1489.30 ||2180.96 ||1473.49 ||2174.81 |
|Exceptional items ||(24.82) ||279.13 ||(24.82) ||279.13 |
|Pro t before tax ||1514.12 ||1901.83 ||1498.31 ||1895.68 |
|Less: Tax expense ||219.55 ||604.77 ||219.87 ||603.86 |
|Pro t after tax but before minority Interest ||1294.57 ||1297.06 ||1278.44 ||1291.82 |
|Less: Minority interest || || ||(0.13) ||(1.39) |
|Pro t for the Year ||1294.57 ||1297.06 ||1278.57 ||1293.21 |
|Add: Balance as per the last financial statements ||737.01 ||284.75 ||1048.09 ||598.72 |
|Pro t available for appropriation ||2031.58 ||1581.81 ||2326.66 ||1891.93 |
|Appropriations: || || || || |
|Consequent to change in groups interest ||- ||- ||- ||(0.96) |
|General Reserve ||150.00 ||200.00 ||150.00 ||200.00 |
|Dividend on Equity Shares (including interim) ||556.34 ||554.80 ||556.34 ||554.80 |
|Corporate Dividend Tax ||94.55 ||90.00 ||94.55 ||90.00 |
|Total Appropriations ||800.89 ||844.80 ||800.89 ||843.84 |
|Balance carried forward to Balance Sheet ||1230.69 ||737.01 ||1525.77 ||1048.09 |
The Company has paid an interim dividend of 70% (Rs.1.40 per share) during the year.The Directors are pleased to recommend a final dividend of 110% (Rs.2.20 per share). Thusthe aggregate dividend for the year 2013 works out to 180% (Rs.3.60 per share) and thetotal payout will be Rs.648.37 crores, including dividend distribution tax of Rs.92.71crores. This represents a payout ratio of 50%.
4. MARKET DEVELOPMENTS
The Companys domestic cement sales in 2013 declined by 1.7% to 20.94 milliontonnes as compared to 21.31 million tonnes achieved in 2012. Total cement sales (includingexports) declined by 1.8% to 21.04 million tonnes as compared to 21.43 million tonnesachieved in 2012.
REGION-WISE SALES VOLUME / GROWTH
In the North region, domestic cement sales of the Company declined by 1.7% to 8.64million tonnes in 2013 compared to 8.79 million tonnes in 2012.
In the East region, the Company achieved sales of 4.21 million tonnes of cement in thedomestic market, registering a decline of 0.2% over the previous year sales of 4.22million tonnes.
In the West & South region, the Companys domestic cement sales in 2013declined by 2.5% to 8.09 million tonnes as compared to 8.30 million tonnes achieved in2012.
Cement exports in 2013 reduced further to 0.10 million tonnes as compared to 0.12million tonnes in 2012.
GROWING THE DISTRIBUTION FOOTPRINT
The Company continues to develop and leverage its large and able network of around8,500 dealers and 27,000 retailers across India. Their reach and penetration helps theCompany in core rural and semi-urban markets across the country. This, coupled with thestrong brand equity and efficient channel management, has significantly helped the Companyto withstand severe competition in an over-supplied market.
The Companys network of ports, bulk cement terminals and captive ships on thewest coast has supported a sustainable and strong market position in Mumbai, Surat andCochin. The Mangalore Bulk Cement Terminal that commenced its commercial operations in2013 will further strengthen the Companys position and enhance its footprint in theSouth region.
ENHANCING OUR SYSTEMS
The Company embarked on the Marketing and Commercial Excellence (MaCX) programme tofurther sharpen its marketing, sales and distribution functions. This ambitious programmeis part of the comprehensive Holcim Leadership Journey (HLJ), announced by Holcimmanagement across the globe to deliver gains and create value in a competitive environmentover the next few years. MaCX aims to supplement in-house skills with global expertise ofHolcim and that of advisory firms, to revamp customer interfacing functions by focusing oncore value levers. This is an investment to future proof the Company and to promote anenvironment of innovation and excellence.
5. COST DEVELOPMENTS
During the year 2013, the economy witnessed upward movement in overall cost structureand volatile foreign exchange rates. However, the Company implemented cost optimisationinitiatives which helped in containing inflationary impact to some extent.
MAJOR COST MOVEMENTS:
i) Cost of major raw material, fly ash, increased by 7% on per tonne basis. However,strategy to change in mix of gypsum resulted in cost decrease by 2% on per tonne basis.Overall, the absolute raw material cost decreased by approx. 6% over the previous yearincluding the impact of lower volumes.
ii) Power and fuel costs account for approximately 26% of the total operating cost ofthe Company. Coal cost for kiln and captive power plants reduced by 8% and 10%respectively, due to reduced usage of imported coal and also substitution of high costcoal by pet coke usage. Besides, there was increased usage of Alternate fuels by 3% overthe usage for the year 2012.
Cost of grid power continued its upward movement with per kwh rate increasing byapproximately 22% over the previous year. In 2013, captive power generation which supports66% of the total power requirements of the Company, reduced by 10%.
Overall, the reduction in dependence on grid, increase usage of captive power andreduction in fuel prices have helped the Company in registering a decrease of 11% inabsolute cost of power and fuel as compared to the year 2012.
iii) Freight and forwarding cost works out to 30% of total operating costs. During theyear, the same hardened by 6% on per tonne basis over the year 2012 due to an increase indiesel prices.
iv) The cost of packing bags went up by around 14%, driven by increase in PP granuleprices.
COST MITIGATION MEASURES / EFFICIENCY IMPROVEMENT INITIATIVES:
i) Keeping in line with the corporate philosophy, focus on production of fly ash basedPPC was maintained.
ii) The Company launched its first fully automatic one million tonne capacity terminalin Mangalore. This will help the Company in reducing the negative seasonality effect ofthe Companys Gujarat plant. Besides, the logistic costs will be reduced as therewill be an opportunity to optimise by using the same vessel for both Mangalore and Cochinterminals in one trip. It will also help the Company enhance its footprint in the southernpart of India.
With the launch of this terminal, all states along the countrys west coast arecovered by Ambuja Bulk Cement Terminals.
iii) The new Ulwe channel at Panvel, Navi Mumbai was successfully made operationalduring the year. This will lead to handling of higher cargo and thus result in savings incoastal freight cost.
iv) A mechanised wagon loading system at Farakka was put to use during the year. Thishelps in reducing loading charges while loading cement from truck to rake as well asreduction in the transportation cost from packing plant to railway siding.
v) With the introduction of the SCOPE (Supply Chain Optimisation Project forExcellence) project, a supply chain excellence initiative, the Company is trying to deriveoperational efficiencies in logistics. This is targeted by improvisation in directdespatches to customers by undertaking fleet optimisation measures such as installation ofRadio Frequency Identification (RFID), Global Positioning System (GPS) on trucks tomonitor movement and improving turnaround time etc.
vi) The efforts by the Company for the usage of cost efficient fuel mix are part of theGEO 20 project which will be operational in the first half of year 2014. Here,as a result of handling, storing and processing of waste materials, the Company will beable to ensure more usage of Greener Fuels thereby reducing energy cost.
6. EXPANSION PROJECTS AND NEW INVESTMENTS
The Company took up several projects to serve its customers in a more efficient,cost-effective, reliable and environment-friendly manner, while bolstering its marketposition in the industry.
CAPACITY EXPANSION DURING THE YEAR
The new Bulk Cement Terminal (BCT) at Mangalore commissioned this year will help theCompany expand its footprint in the southern markets of India.
EFFICIENCY IMPROVEMENT MEASURES:
Getting better at being the best
The Company focused on consolidation and optimisation of its existing capacities in allthe three regions. Capital investments kept flowing in during the year, to ensure thehighest standards of safety in order to meet the Company policies of ZeroHarm, clean and energy efficient infrastructure, cost efficient andenvironment-friendly material handling systems and process optimisation.
Achievements at a glance
i) A Waste Heat Recovery (WHR) plant at Rabriyawas with an approved investment of Rs.75crores is being installed to bring efficiency in fuel utilisation, optimise power costsand meet our Renewable Power Obligation.
ii) In order to strengthen logistics capability and extend its reach to customers, anew railway siding project has been initiated at the Rabriyawas unit in Rajasthan. Thetotal project cost is Rs.250 crores. So far 40% work of the Railway Project iscompleted and our timelines for completion are within the second quarter of 2016.
iii) An automatic wagon loading system constructed at the Farraka unit in West Bengalbuilt at a cost of approximately Rs.32 crores was completed and made operational duringthe year. This system will reduce cost and improve efficiency of material handling.
Upcoming Capacities and Investments
i) A new brown-field expansion project was announced in 2011 at Sankrail grinding unitin the eastern region comprising a roller press and related logistics. The project isunderway, with extended scope to include advanced technical specifications. It is slatedto cost Rs.325 crore and aimed for completion by 2016. So far, equipment orders have beenplaced and civil work is in progress. This project would add 0.80 million tonne grindingcapacity to the unit, along with other facilities.
ii) Significant cement capacity addition of approximately 4.50 million tonnes withassociated clinkerisation capacity of 2.17 million tonnes is coming up at the proposedintegrated plant at Marwar Mundwa, Nagaur district in Rajasthan with cement capacity of1.5 MTPA; and with similar capacity grinding units at Osara (M.P.) and Dadri (U.P.), thetotal project cost is estimated at Rs. 3500 crores. Environmental clearances for theproject were acquired but kept in abeyance for Marwar Mundwa by the MoEF. Part of themining land is already in possession and the rest is under an advanced stage ofacquisition. The Company is also in the process of tying-up water sources required forconstruction and operations. Full-fledged construction work is expected to commence in thelatter part of 2014.
iii) Last year, the Company had taken up 13 new ambitious projects at differentlocations worth Rs.272 crores to optimise and enhance efficiency. These projects have aquick payback of two and half years to four years. Work is progressing well and most arelikely to be completed in the first half of 2014.
iv) A new brown-field expansion project to set up a roller press at a cost of Rs. 70crore at the Rabriyawas unit in Rajasthan, will add 0.80 million tonne grinding capacityin the first half of 2014.
The year 2014 will see capital expenditure worth Rs.802 crores, over and above theRs.725 crores investment made in 2013. The entire proposed expenditure would be financedby internal accruals.
ACHIEVING SUSTAINABILITY OBJECTIVES WITH GREENER ENERGY
Keeping the planet green through cement
Ambuja envisions being the most sustainable Company in the cement industry and drawsheavily on Holcims sustainability policy on CO2 and energy, eco-efficient products,atmospheric emissions, sustainable construction, etc. The strategic stress onenvironmentally-friendly and cost-effective resources resulted in the establishment of theGeocycle department to focus on Alternative Fuels and Raw Material (AFR).
An ambitious project, named Geo20 has been taken up by the Company lastyear, which involves a capital investment of Rs.200 crores. The project that is meant tosubstitute costlier traditional fossil fuels with Alternative Fuels (AF), is nearingcompletion and slated to be operational at all of our integrated plants by end of 2014.Holcim is actively supporting our efforts by making available its global experience andtechnical expertise in the area of clean and green technology and burning all sorts ofwaste materials without the corresponding release of harmful gases and CO2 in the air.Holcims rich experience in this area has helped to devise innovative ways ofsourcing.
During 2013, the Company increased its use of Greener Fuels in its kilns from 1.4% in2012 to 3.65% in 2013. The Company is determined to achieve higher thermal energysubstitution rates in the coming years.
REFORMS FOR AN ECONOMIC REVIVAL
The Economic Outlook
Economic growth accelerated to 4.8% in the second fiscal quarter from 4.4% in the firstdue to higher output in both industry and agriculture and a rebound in exports. However,it is less likely that we will see a complete turnaround in the economy as the domesticdemand remains weak and both consumption and investment continue to grow sluggishly. Weexpect growth to remain soft in the first quarter of year 2014 owing to delayed investmentannouncements in the run-up to general elections. Further, it is expected to be supportedby export recovery and likely sustained growth in capital expenditure after the secondquarter of FY2014, once political stability has been re-established.
We expect the Indian economy to grow at 5% during year 2014 and driven by Indiasstrong economic fundamentals - high saving and investment rates, rapid workforce growth, aquickly expanding middle class, and the start of a shift from low-productivity agricultureto high-productivity manufacturing. However, given the countrys large externalfinancing needs, domestic expansion will be affected by the global availability ofcapital.
Economic growth could exceed our forecasts if the Administrations reform effortsare sustained, infrastructural development accelerates and the government enjoys successin its bid to develop a labour-intensive manufacturing sector in India.
The Cement Industry Outlook
In the period 2011 to 2013 cement consumption grew at an average of 4% compared to thegolden period of 2008-2010, when consumption grew at a CAGR of 8%. The multiplier ofcement demand growth to GDP growth not only declined below one in 2011 to 2013 but alsolost its relevance.
Balancing growth with economic reforms
Mid-term outlook appears challenging in the current scenario. However, there arereasons to assume it will be more positive with a potential towards 6-7% growth per annumafter 2015 provided the new central government pushes economic reforms.
We expect the capacity utilization rate of the industry to improve gradually fromcurrent 73% to ~80% by 2018 given the slowdown in pace of capacity addition and gradualrecovery in cement demand.
Cement demand emanates from four key segments - housing which accounts for 67% ofcement demand, infrastructure (13%), commercial construction (11%) and industrialconstruction (9%). Economic reforms announced by the Government and RBI, including theexpected lowering of interest rates in 2013, will surely boost sentiment and rejuvenatethe economy.
Long-term growth prospects
The cement industry is looking for an up-cycle backed by an increase in ruralconsumption and recovery in infrastructure activity after a muted growth for the lastthree years. Recent government measures to fast-track infrastructure projects ahead ofgeneral elections that are just around the corner; construction activity is expected topick up steam leading to strong demand for cement.
Long-term growth prospects for cement demand are favourable, riding on the back of agrowing economy and the impetus provided to the housing and infrastructure constructionactivities in the 12th Five-Year Plan period (2012-17). The total investment ininfrastructure sectors in the 12th Five Year Plan is estimated to be Rs 56 lakh crores(one trillion USD).
8. RISKS AND AREAS OF CONCERN
OH&S - OPERATIONAL HEALTH & SAFETY
OH&S is given top priority within the organisation. The Company aims to achieveZero Harm through the implementation of formal directives, improvement inlogistics flow and visible leadership by line management. Plant workers/ contractors andour own management staff have put in every effort to imbibe and ensure safety in theirday-today activities.
Demand for cement is closely related to overall economic development and tends to varyacross States within the country, depending on the level of industrialisation andinfrastructure development. Fall in demand has been a concern for both the industry andthe organisation but with strong economic fundamentals, we are hopeful to see a revival ofdemand in the near to medium term.
Domestic and global cement majors are strengthening their production bases across Indiato mitigate the location risk associated with cement operation but at the same time thishas also led to a rise in additional capacity. With decrease in exports, there isconsistent pressure on the
Company to beat competition. The Company counts on its resources and various othermarketing and service elements that will help the organization stay afloat and deliverimproved performance.
Logistics is another area of concern for the industry and distribution cost is one ofthe major costs for the industry. The industry has witnessed a rise in movement of cementthrough the sea route to optimise distribution cost. Ambuja is continuously workingtowards strengthening their distribution network along the coast of India, while at thesame time concurrently trying to bring down distribution and logistics costs.
Energy is one of the major expenses faced by the cement industry and it is constantlyworking towards reducing its traditional energy consumption through measures such as useof greener fuels, setting up captive power plants and increasing the production of blendedcements. Energy Activation across Regional Network (EARN), is an in-house initiative thatAmbuja has embarked upon, to build a lean energy culture across the Company.
9. HUMAN RESOURCES
FOR A TRANSFORMING ORGANISATION
The Human Resource function at Ambuja strives to provide the People Edge tobusiness through continuous process improvement and innovation. Our people strategy,systems and processes are aimed at making the Company an employer of choice withsustainable talent by attracting, retaining and developing talent in the organisation andworking on concrete actions plans to enhance employee engagement. This is in perfectalignment with the Companys vision of being the most sustainable and competitivecompany in the industry.
RECRUITING THE BEST TALENT
To keep pace with the competitive, dynamic business environment that we operate in, astructured Campus Recruitment process with a long term perspective was created to help inthe induction of Management Trainees and Graduate Engineer Trainees from the best Businessand Engineering Schools in India.
KEY RESULT AREAS (KRAS): RAISING THE BAR
The people processes have been designed to completely involve managers and employees toraise levels of performance through ownership and responsibility. Competency and KeyResult Area (KRA) based Performance Management System (PMS) constitute our persistenteffort to build an achievement-oriented culture. Periodic discussions through dialogues onwork performance against the set KRAs help focus not only on individual performance, butalso on work processes, resources and other issues that may have had a bearing onperformance. Continuous efforts are made to enhance manpower productivity by creating andmanning an optimised organisation structure and ensuring the right fit and skills inbenchmarking the best in the industry.
It is our endeavour to consistently facilitate the learning of employees to enable acontinuous business transformation, and hence employee development is focused at differentstages of the employee life-cycle from recruitment to retention. Through this process ofcontinued learning, the Company intends to boost strategic behaviour and capabilities soas to sustainably achieve the Companys objectives and outcomes. Our training anddevelopment initiatives are directed at enriching leadership, behavioural, functional andtechnical skills as well as bringing about a change in the attitude, knowledge and skillof employees. Through various leadership and management development programmes conductedin association with premier business schools based in India and abroad, we continue tofocus on creating leaders across levels and in the early stages of an employeescareer. A separate organisational intervention was launched last year to develop asustainable pool of leaders, equip them with essential leadership skills and competenciesin creating a coaching culture.
CREATING FUTURE LEADERS
Structured talent reviews across levels supported by individualised development plansand cross-functional and cross-location assignments have helped develop wholesomeleadership skills. All development efforts show good results with more and more seniorpositions being filled internally, while maintaining a healthy external talent intake.Thus, succession planning has helped to create a talent pipeline for key positions and astrong growth avenue for our developing leaders. Renewed focus is also being given to thecareer path and movement as a critical component of talent development.
Employee engagement surveys conducted in the recent past to gauge the pulse of theorganisation, recorded 98% participation. Feedback from the survey has translated toaction planning and implementation and now been institutionalised within the Company.
Ambujas people processes has been appreciated and recognised. The Company baggedthe CII National HR Award 2013 for Strong Commitment for HR Excellence.
10. SUSTAINABILITY AND ENVIRONMENT
SUSTAINABILITY A WAY OF LIFE
We continued to progress on our path towards Sustainable Development in line with ourvision to be the most sustainable and competitive Company in our industry.
Our Sustainability framework comprising Sustainability Steering Committees continued toassess Sustainability risks and opportunities both at the unit and corporate levels andmonitor the various sustainability initiatives. Enhancing the focus on embeddingsustainability at the highest level, it has been made a regular item in our Board MeetingAgendas. In requirement of the newly introduced Clause 55 of SEBI, we have released ourfirst Business Responsibility Report (BRR) as a part of the Annual Report for 2012. TheCompany continues to take on initiatives aimed at low carbon emissions, water positive,use of alternative fuel, renewable energy, bio-mass, plastic reuse, etc.
We released our 6th Corporate Sustainable Development Report covering ourSustainability endeavours for the year 2012. The report is aligned with Global ReportingInitiative (GRI) G3 guidelines for A+ Level of reporting, having been Assuredby an independent certifying agency. We have responded to the Metal & Mining SectorSupplement of the GRI while reporting on our Sustainability performance to ourstakeholders. Like last year, this years report too has been accorded the GRI checkfor A+ level by Global Reporting Initiative, Netherlands.
We continue to focus on developing our renewable energy portfolio in line withRenewable & Clean Energy Roadmap till 2020. In 2012, 330 KV of solar energy has beeninstalled at Bhatapara, in addition to the existing 7.5 MW of wind energy commissioned atKutch, Gujarat, the year before last. A 6.5 MW Waste Heat Recovery-based power generationsystem is being installed and is slated to be operational by 2014.
STEPPING LIGHTLY ON OUR CARBON FOOTPRINT
The Company is currently monitoring and reporting CO2 emissions as per the WorldBusiness Council for Sustainable Developments (WBCSD) Cement SustainabilityInitiative (CSI) protocol. We have been able to reduce our Green House Gas emissions byover 26% taking 1990 as the reference year. To reduce the carbon footprint and avoid theuse of natural resources, we continue to produce fly ash-based cement as our majorproduct. The Company is one of the co-chairs of CSI India and has been part of the WorkingGroup that released the Low Carbon Technology Road Map for Indian Cement Industry.
A LEGACY OF SUSTAINABILITY HONOURS
For the third year in a row, we bagged the CII Sustainability Award in recognition ofour endeavours in streamlining Corporate Sustainability within our operations. In 2013, wewere recognised in the category of commendation for significant achievementsimilar to the previous year. Further, we achieved Gold Level in the Sustainability Plusrating conducted by the CII in 2012 where 100 largest companies (by market cap and marketshare) were rated along ESG indicators by CII for the Sustainability Plus rating.
PROACTIVE ENVIRONMENT MANAGEMENT
The Company ensured availability of Continuous Emission Monitoring Systems (CEMS) atall the nine kiln stacks above 95% round the year for online monitoring of all vitalpollution parameters. Apart from this, trainings were also conducted on emissionmonitoring, biodiversity and water management to build capacities for environmentallyresponsible operations,
Three of our grinding units have attained certifications to the Energy ManagementSystem as per ISO 50001:2011. The Rabriyawas plant has become the first integrated unit inAmbuja to implement the international standard. This was also our first pilot conducted ata plant to estimate Scope 3 emissions (limited) emanating from our operations.
The Company has taken steps to ensure it meets its commitments under the PAT scheme andRPO-REC obligations. Further, we are anticipating emission standards to be notified forSO2 & NOx emissions. We are taking all steps to monitor and control our emissions sothat we can meet the requirements of the new standards as and when they are notified.
11. CORPORATE SOCIAL RESPONSIBILITY (CSR)
BEING A GOOD NEIGHBOUR
Ambuja Cement Foundation celebrated two decades of work with the host communities whereit has been involved in development with a spending of well over 2% of Profit before Tax(PBT). The programmes at the Foundation successfully address community needs in asustainable manner.
CONSERVING THE EARTHS MOST PRECIOUS RESOURCE
Water resource management has changed the landscape of Kodinar (Gujarat) which ismarked by saline water and the water scarce region of Rajasthan. Innovative projectsinvolving the revival of traditional water conservation - roof rain water harvesting,building check dams and customised irrigation methods - has ensured water availability fordomestic and agricultural use, winning the FICCI Water Award underCommunity Initiative, Industry category. External auditors also declaredAmbuja as water positive and it is now hoped that each one of our Ambuja sites would raisetheir bar on water sustainability.
SOWING THE SEEDS OF DEVELOPMENT
Krishi Vigyan Kendra (KVK) at Ambujanagar (managed by the Foundation) is much soughtafter by farming communities for the latest and best technologies in agriculture. KVK alsoconducts regular meetings, training programmes and other extension programmes todisseminate information. Ambujanagar has also introduced weather insurance protecting thefarmers from unforeseen weather conditions.
Better Cotton Initiative (BCI) is being implemented in five states to grow cotton in asustainable manner and through eco- friendly methodologies. Through this initiative,farmers are able to sell their produce at a better rate without any middlemen. In 2013,the Foundation was conferred with the Best NGO Award by the Northern IndiaCotton Association Ltd. Livelihoods like animal husbandry are encouraged. In Darlaghat,women are trained as pashu swasthya sevikas (PSS) and learn the latest techniques inanimal care. The work of the PSS is complemented by cattle camps and immunisationsprogrammes conducted regularly.
MEETING THE CHALLENGES OF EMPLOYMENT
The Skill and Entrepreneurship Development Institutes (SEDI) at the Foundation tries tobridge the gap between drop-out or undertrained youth and high demand by industry ofskilled personnel. SEDI provides relevant skill training to youth through the courses heldat 16 centres established across India; and have to date transformed the lives of over11,000 youth through wage employment encouraging them to become entrepreneurs. These 45courses are designed specific to the requirement of that region and also incorporatessessions on soft skill development. Today, SEDI courses are affiliated to the NationalCouncil of Vocational Training and Modular Employment Scheme of Central Government.
To ensure round-the-clock health services in the far flung rural areas, sakhis (villagehealth functionaries) are provided home-based neo natal care for the numerous mothers andchildren across locations. Their services are complemented by regular health checks bydoctors and health camps. Ambuja Cements also works extensively towards the prevention ofHIV & AIDS in and around its plants and locations and works towards reducing stigma onthose affected by it. Programmes are held with truckers and workers raising awareness;counselling sessions are also organised in some locations; 10 Targeted Interventionprojects are implemented in collaboration with the state AIDS Control Societies and fourhealth care centres established in partnership with Apollo Tyres Foundation.
Nurturing The Nations Talent
The Company has been promoting education through the non-profit Ambuja Vidya NiketanTrust (AVNT), to provide educational facilities through its schools in each of its fiveintegrated plants. The schools provide education to the wards and dependants of Ambujaemployees as well as children of nearby villages.
In addition, educational intervention is done by the Foundation through Balmitras(members from the community and trained by the Foundation) who are appointed to helpchildren enjoy studies and understand subjects like math, science and English using variedteaching and learning methods. Training is also provided to school teachers for betterteaching methodologies. Innovations like using sport for life skills and e-learningmethodologies have been used in schools to make curriculum interesting for children. Inlocations where children are either drop-outs or not going to school at all, theFoundation has introduced non-formal education centres to aid students to enter themainstream education system.
The Foundation also runs the Ambuja Manovikas Kendra (AMK), a special school formentally challenged children in Ropar, Punjab. With 100 children on its rolls, the schoolworks to improve the quality of life of children with mental disabilities. A range ofactivities and programmes at AMK help them grow as independent and productive individuals.The children at AMK once again did us proud by winning the Overall ChampionshipTrophy in Punjab State Special Olympics 2013, for the eighth time in a row. Theinstitution was also adjudged the Best Institution in Sports. In the past oneyear, the school has extended its services to children who cannot travel to school throughits Home Base Rehabilitation Programme.
Stakeholders In Creating A Difference
The Foundation ensures Stakeholder Engagement where all programmes are decided after adetailed deliberation. Well-defined processes ensure that all stakeholders are involved toidentify key concerns by the community and Community Engagement Plans are implemented thesubsequent year. Meanwhile, the Community Advisory Panel established in locations compriseof Company and community leaders. It is a platform to discuss issues faced by thecommunity and achieve a consensus to implement programmes for them.
All programmes are rigorously monitored through the Social Engagement Scorecard whichthrough detailed group discussions and interviews with community representatives maintainsa score on activities and programmes of the Foundation. In 2013, all locations scoredbetween 75% to 100%, reflecting positive reviews.
Active Volunteer Engagement programmes has ensured employees become a part of thedevelopment journey of the communities along with the Foundation by actively engaging involunteering participating in activities like cleaning beaches, painting anganwadis,planting saplings, participating in community projects on health, safety, HIV & AIDS,skill training, school activities etc. So far, 2,000 Ambujas volunteers have clockedin over 26,000 hours through their participation in activities.
12. OCCUPATIONAL HEALTH AND SAFETY (OH&S)
WORKING TOWARDS ZERO HARM FOR OUR PEOPLE
Our OH&S journey of 2013 was mixed achievements and incidents that highlighted bothour strengths and areas of improvement. Going forward, there is a need to capitalise onour strong points and work on development areas to ensure utmost efficiency to preventfuture incidents.
Safety is one of our core values and part of the Companys vision statement. Weare committed to strive for Zero Harm and firmly believe safety as one of themost important primary criteria for us to achieve the goal of being the MostSustainable and Competitive Company.
LEARNING FROM THE PAST
As part of a structured approach and setting up the OH&S objectives, the Companyhas reviewed its past performance. Situations have been assessed and learning incorporated- we believe all incidents are preventable especially if we can alter our mindset andbehaviour.
Some key focus action areas include an increase in the visible leadership in OH&Sby the Front Line Management. To achieve this objective, we have kick-started a newinitiative We Care a holistic approach to safety that encompasses allconnected with Ambuja across different levels of management, within and outside locationsincluding third party contractors. As part of this initiative, two concepts Model SafetyZone and Safety Ambassador have been launched that will help engage and connect with allpeople onsite and establish common objectives between OH&S and line teams.
Meanwhile, all operational sites have taken one OH&S wave based on the targetedFatality Prevention Element (FPE). These include working at height, isolation and lockout,vehicle and traffic safety, machine guarding, lifting and supporting loads and hot work.
A formal OH&S management system, aligned with the Holcim OH&S Pyramid Systemand other directives, has been established over the past few years across theorganisation. FPEs are implemented across all sites and quality of implementation assessedthrough an external certifying agency. Peer Reviews are scheduled and conducted withinAmbuja and also with ACC.
Each plant has taken steps to ensure no recurrence of fatal incidents and appropriatessteps taken at sites. To reduce Risk Exposure, several actions were initiated throughincreasing interface between departments, developing a road map to implement ContractorSafety Management (CSM) activity, initiating process for integration of OH&Srequirements during the planning and execution of a shutdown, conducting Risk Assessmentsduring shutdown; Safety audits and analysis to ensure safety while handling coal; and astructural integrity survey by the Companys technical arm, Techport. Meanwhile,Risk-specific and Competency-based trainings are conducted as per requirements of targetedFPEs and other OH&S directives.
In addition, the Company is making continuous efforts to reduce OH&S risks throughthe integration of OH&S requirements with other business processes.
13. PURCHASE OF SHARES IN HOLCIM INDIA PVT. LTD. (HIPL) AND AMALGAMATION OF HIPL WITHTHE COMPANY
A SYNERGY THAT WILL PROMOTE
The Companys promoter, Holcim has proposed a restructuring exercise with a viewto simplify its investment structure as well as unlock synergies in the operations of twoof its subsidiaries in India Ambuja and ACC. Under this exercise, the Company will acquire24% equity shares of Holcim India Pvt. Ltd. (HIPL) from Holderind Investments Limited(Holderind) for a consideration of approximately Rs.3,500 crores and HIPL will thenamalgamate with the Company. Upon completion of the amalgamation, the Company will hold50.01% equity shares in ACC and consequently, ACC and all its subsidiaries will become thesubsidiary of Ambuja. Holderind will hold 61.39% equity shares in Ambuja.
Over the last few years, both Companies have been working on a common platform fortechnical support, major procurement and IT functions. However, there are many areas wheresynergies are yet to be unlocked. This amalgamation will help realise these synergies.This process along with the alignment of critical back-end functions will help bothCompanies improve their competitive position in the current challenging market.
The proposal was extensively debated and deliberated by the Independent Directors. Onbeing satisfied that the proposal of restructuring is in the interest of the Company andits stakeholders, they recommended the same to the Board. The Board of Directors has takenan independent view over the restructuring proposal and the scheme of amalgamation and hasreached the conclusion that these are in the overall interests of all stakeholders.
The Scheme of Amalgamation was to be approved by the Stock Exchanges as well as SEBI.In terms of their approval, the Company has sought the approval of Public Shareholders(i.e. excluding Promoter and Promoter Group Shareholders) through Postal Ballot for twoseparate resolutions i.e. approval for the acquisition of 24% shares of HIPL and approvalof the Scheme of Amalgamation.
The Directors are pleased to inform that both resolutions were passed with requisitemajority of Public Shareholders.
Subsequently, the Scheme of Amalgamation has also been approved by the requisitemajority of Shareholders as required under Section 391(2) of the Companies Act, 1956, atthe Court Convened Meeting of the Equity Shareholders held on 23rd November, 2013.
Both Ambuja and HIPL have filed the Scheme of Amalgamation with the Honble HighCourts at Gujarat and Delhi respectively for their final approval. These petitions haveyet to be heard by the Honble Courts.
14. EMPLOYEE STOCK OPTION SCHEME
During the year, the Company has not granted any fresh stock option to its employees.
The particulars as on 31st December 2013 as required to be disclosed pursuant to Clause12 of SEBI (Employees Stock Option Scheme) Guidelines 1999, in respect of past ESOS are asfollows:
CUMULATIVE POSITION AS ON 31ST DECEMBER, 2013:
|Nature of disclosure ||Particulars || |
|a. Options granted ||37776800 || |
|b. The pricing formula ||2007 to 2010 || |
| ||The exercise price was determined by averaging the daily closing price of the Company's equity shares during 7 (seven) days on the National Stock Exchange immediately preceding the grant. || |
| ||2004-05 & 2005-06 || |
| ||The exercise price was determined by averaging the daily closing price of the Company's equity shares during 15 (fteen) days on the National Stock Exchange immediately preceding the grant. 2003-2004 || |
| ||The exercise price was determined by averaging two weeks' High and Low price of the Company's equity shares on the National Stock Exchange immediately preceding the grant. || |
| ||1999-2000 to 2002-2003 || |
| ||The exercise price was the average of the daily closing price of equity shares of the Company on the Stock Exchange, Mumbai during the period of 30(thirty) days immediately preceding the date on which the options were granted. || |
|c. Options vested ||32738375 || |
|d. Options exercised ||26356750 || |
|e. The total number of shares arising as a result of exercise of options ||Total number of shares arising as a result of exercise of options shall be 55532532 shares of Rs.2 each || |
|f. Options lapsed / surrendered ||5038425 || |
|g. Variation of terms of option || || |
|h. Money realised by exercise of options ||Rs.340.71 crores || |
|i. Total number of options in force ||6381625 || |
|j. Details of options granted/exercised by the Managing Director and Whole-time Directors ||No. of options granted ||No. of options exercised (Post Bonus adjustments) |
|Mr. Ajay Kapur, Dy MD & CEO ||1,62,500 ||1,88,750 |
|Any other employee who received a grant in any one year of 5% or more of options granted during that year ||NIL ||NIL |
|k. Employees who were granted options during any one year, equal to or exceeding 1% of the issued capital of the Company at the time of grant ||NIL || |
|l. Diluted earning per share (EPS) pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard AS-20 ||Rs.8.37 || |
| ||2003-04 ||2004-05 ||2005-06 ||2007 ||2008 ||2009 ||2010 |
|m. Weighted average exercise price of options in Rs. ||310* ||443* ||69.60** ||113** ||82** ||96** ||119** |
|Weighted average fair value of options in Rs. ||67.44* ||96.73* ||19.23** ||29.28** ||16.95** ||26.38** ||39.37** |
* Options related to Equity Shares of the face value of Rs.10/-.** Options related toequity shares of the face value of Rs.2/-.
As required under SEBI guidelines on ESOS, the information disclosed in respect of item(m) is for grants made after June 30, 2003.
15. NEW COMPANIES ACT, 2013
The historic Companies Act, 2013 which replaces more than five decades old CompaniesAct, 1956 was passed by the Parliament. Subsequent to receiving the PresidentsAssent, the Ministry of Corporate Affairs notified 98 sections and also put up variousRules under the new Act for the public comment. The objective behind the 2013 Act islesser Government approvals and enhanced self-regulations coupled with emphasis oncorporate democracy. The 2013 Act delinks the procedural aspects from the substantive lawand provides greater flexibility in Rules making to enable adaptation to the changingeconomic environment. This will lead to improved compliance and accountability from thecorporate sector and will provide further transparency in the disclosure.
16. CORPORATE GOVERNANCE
The Company has complied with the corporate governance requirements as stipulated underthe listing agreement with the stock exchanges. A separate section on corporategovernance, along with a certificate from the auditors confirming the compliance, isannexed and forms part of the Annual Report.
CORPORATE GOVERNANCE VOLUNTARY GUIDELINES:
The majority of the Corporate Governance Voluntary Guidelines, 2009, stand compliedwhile complying with the requirements under the Companies Act, 1956, the ListingAgreement, and the Companys own governance policies.
17. BUSINESS RESPONSIBILITY REPORT
The Business Responsibility Report for the year ended 31st December, 2013 as stipulatedunder clause 55 of the Listing Agreement is annexed and forms part of the Annual Report.
18. INTERNAL CONTROL SYSTEM
The Company has documented a robust and comprehensive internal control system for allthe major processes to ensure reliability of financial reporting, timely feedback onachievement of operational and strategic goals, compliance with policies, procedures,laws, and regulations, safeguarding of assets and economical and efficient use ofresources.
The formalised systems of control facilitate effective compliance as per Clause 49 ofthe Listing Agreement, and article 728 (a) of the Swiss Code of Obligations applicable tothe Holcim Group.
The Companys Internal Audit department tests, objectively and independently, thedesign and operating effectiveness of the internal control systems to provide a credibleassurance about their adequacy and effectiveness to the Board and the Audit Committee. TheInternal Audit function assesses the effectiveness of controls to provide an objective andindependent opinion on the overall governance processes within the Company, including theapplication of a systematic risk management framework.
The scope and authority of the Internal Audit activity are well defined in the InternalAudit Charter, approved by the Audit Committee. Internal Audit plays a key role byproviding an assurance to the Board of Directors and value adding consultancy service tobusiness operations.
19. MANAGING THE RISKS OF FRAUD, CORRUPTION AND UNETHICAL BUSINESS PRACTICES
Protecting our strongest product:
Fraud and corruption-free work culture has been the part of the Company's DNA allalong. In view of the potential risk of fraud and corruption due to rapid growth andgeographical spread of operations, the Company has put even greater emphasis to addressthis risk. To meet this objective a comprehensive Fraud Risk Management Policy (FRMP)almost akin to whistle-blower policy has been laid down. More details on FRMP have beengiven in the Corporate Governance Report.
Corruption: The one area we aim for zero
In furtherance to the Companys philosophy of conducting business in an honest,transparent and ethical manner, the Board has laid down the Anti-Bribery and CorruptionDirectives (ABCD) as part of the Companys Code of Business Conduct and Ethics. As aCompany, we take a zero-tolerance approach to bribery and corruption and we are committedto acting professionally and fairly in all our business dealings.
To spread awareness about the Companys commitment to conduct businessprofessionally, fairly and free from bribery and corruption, training and awarenessworkshops were conducted through an independent consulting firm wherein more than 1,700employees participated and got trained. Apart from this face-to-face training, over 3,500employees were also given online ABCD training through a web-based application tool during2013.
In order to further spread awareness about ABCD, face-to-face training workshops willalso be conducted during the current year for select vendors, based on their risk profileand business relationship with the Company.
These above policies and its implementation are closely monitored by the Audit andCompliance Committees of Directors and reviewed by the Board at regular intervals.
Some people are irreplaceable
Mr Paul Hugentobler, representative of Holcim (the Companys Promoter), hasconveyed his decision to step down from the Board and will cease to be a Director w.e.f.7th February, 2014.
Mr Hugentobler joined the Board in May 2006 as Holcims Nominee when Holcim tookover the management control of the Company. Over the last eight years, he played a keyrole in providing valuable guidance and expert advice on all facets of the cementbusiness.
The Board placed on record its appreciation for the valuable services rendered by MrHugentobler.
RETIREMENT BY ROTATION
In accordance with the provisions of Article 147 of the Articles of Association of thecompany, (i) Mr Nasser Munjee (ii) Mr Rajendra Chitale and (iii) Dr Omkar Goswami willretire by rotation at the ensuing Annual General Meeting of the Company and beingeligible, offer themselves for re-appointment. The Board recommends their re-appointment.
A company that offers growth even at the top
Mr Ajay Kapur and Mr Bernard Terver have been appointed as Additional Directors underSection 260 of the Companies Act, 1956 to hold office up to the date of the ensuing AnnualGeneral Meeting and being eligible, have offered themselves for appointment. Additionally,Mr Ajay Kapur has also been appointed as the Dy. Managing Director & CEO of theCompany for a period of three years w.e.f. 1st August, 2013.
(i) Mr. Ajay Kapur
Mr Kapur, aged 48 years, is an Economics Graduate from St. Xaviers College, andcompleted his MBA from Somaiya Institute of Management Studies and Research (SIMSR) bothfrom the University of Mumbai. He has also completed the Wharton Advanced ManagementProgram from the University of Pennsylvania, USA. He joined the Company in 1993 fromCitibank, and for the first eight years was the Executive Assistant to the then ManagingDirector, Mr N.S. Sekhsaria. Among several areas, his main focus that time was onMarketing Strategies, Brand and Promotion,
Logistics Management and Commercial issues. In 2007, he was made all India HeadMarketing and Commercial Services at Corporate Office and was also inducted as ExecutiveCommittee member. In the year 2009, he was made Business Head of West & South region.Mr Kapur was elevated to the post of CEO in May, 2012. The Board of Directors haveappointed Mr Kapur as an Additional Director w.e.f. 25th July, 2013 and also as Dy.Managing Director & CEO w.e.f. 1st August, 2013.
(ii) Mr Bernard Terver
Mr Terver, aged 62 years, is a French national. He concluded his studies at the EcolePolytechnique in Paris in 1976. After beginning his career in the steel industry, in 1977he moved to cement producer CEDEST, which was taken over by Holcim France in 1994. In1999, Bernard Terver became CEO of Holcim Colombia and in 2003 he was appointed AreaManager for the Andes nations, Central America and the Caribbean. Since October 2008, hehas been CEO of Holcim US and effective November 2010 CEO of Aggregate Industries US. MrTerver was appointed Area Manager and member of senior management of Holcim Ltd, witheffect April 1, 2010. From September 2012, he was appointed as member of the ExecutiveCommittee and effective January, 2013 has been bestowed the responsibility for the Africa,Middle East and the Indian Subcontinent (comprising India, Sri Lanka and Bangladesh)region of Holcim.
The Board of Directors recommends their appointment. Further details about theseDirectors are given in the Corporate Governance Report as well as in the Notice of theensuing Annual General Meeting being sent to the shareholders along with the AnnualReport.
21. DIRECTORS RESPONSIBILITY
Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended, the Directorsconfirm that:
i) In preparation of the financial statements, the applicable accounting standards havebeen followed along with proper explanations relating to material departures.
ii) Appropriate accounting policies have been selected and applied consistently.Judgments and estimates made are reasonable and prudent, so as to give a true and fairview of the state of affairs of the Company as on 31st December, 2013, and of thestatement of profit and loss and cash flow of the company for the period ended 31stDecember, 2013.
iii) Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
iv) The financial statements have been prepared on a going concern basis.
M/s. S. R. Batliboi & Co. LLP, the Statutory Auditors of the Company, will retireat the ensuring Annual General Meeting and are eligible for re-appointment. M/s. S. R.Batliboi & Co., LLP have expressed their unwillingness to get re-appointed as theStatutory Auditors of the company.
The Board, based on the recommendation of the Audit Committee, recommends theappointment of M/s. SRBC & Co. LLP as the Statutory Auditors of the company, for whomthe company has received a notice u/s. 225 read with Section 190 of the Companies Act,1956, from a shareholder seeking their appointment in place of M/s. S. R. Batliboi &Co. LLP. M/s. SRBC & Co. LLP have confirmed that their appointment, if made, shall bewithin the limits of Section 224(1B) of the Companies Act, 1956.
The Auditors have informed that M/s S.R. Batliboi & Co. LLP and M/s. SRBC & Co.LLP are part of the same group.
COST AUDITORS AND COST AUDIT REPORT
Pursuant to section 233B(2) of the Companies Act 1956, the Board of Directors on therecommendation of the Audit Committee appointed M/s. P.M. Nanabhoy & Co. CostAccountants, as the Cost Auditors of the Company for the Financial Year 2014. M/s. P.M.Nanabhoy & Co. have confirmed that their appointment is within the limits of theSection 224 (1B) of the Companies Act, 1956 and have also certified that they are freefrom any disqualifications specified under Section 233B(5) read with Section 224sub-section (3) or sub-section (4) of Section 226 of the Companies Act 1956.
The Audit Committee has also received a certificate from the Cost Auditor certifyingtheir independence and arms length relationship with the Company. Pursuant to CostAudit (Report) Rules 2001, the Cost Audit Report for the financial year 2012 was filed on6th May, 2013 vide SRN No.S21001375 on the Ministry of Corporate Affairs website.
23. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
The Company has transferred a sum of Rs.123.36 lacs during the financial year 2013 tothe Investor Education and Protection Fund established by the Central Government, incompliance with Section 205C of the Companies Act, 1956. The said amount representsunclaimed dividends which were lying with the Company for a period of seven years fromtheir respective due dates of payment. Prior to transferring the aforesaid sum, theCompany has sent reminders to the shareholders for submitting their claims for unclaimeddividend.
24. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
Information on conservation of energy, technology absorption, foreign exchange earningsand outgo, is required to be given pursuant to Section 217 (1) (e) of the Companies Act,1956 read with the Companies (Disclosure of Particulars in the Report of the Board ofDirectors) Rules, 1988 is annexed hereto marked Annexure I, and forms part of this report.
25. PARTICULARS OF EMPLOYEES
The information required under Section 217 (2A) of the Companies Act, 1956 read withCompanies (Particulars of Employees) Rules, 1975 as amended, in respect of the employeesof the Company, is provided in the Annexure forming part of this Report. In terms ofSection 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the membersand others entitled thereto, excluding the aforesaid Annexure. The Annexure is availablefor inspection by the members at the Registered Office of the Company during businesshours on working days up to the date of the ensuing Annual General Meeting. If any memberis interested in obtaining a copy thereof, such member may write to the Company Secretary,whereupon a copy would be sent.
26. SUBSIDIARY COMPANIES
Ministry of Corporate Affairs, Government of India, vide its circular dated 8thFebruary, 2011 has exempted companies from attaching the Annual Reports and otherparticulars of its subsidiary companies along with the Annual Report of the Companyrequired u/s 212 of the Companies Act 1956. Therefore, the Annual Reports of thesubsidiary companies viz. (1) Chemical Limes Mundwa Pvt. Ltd. (2) M.G.T. Cements Pvt. Ltd.(3) Kakinada Cements Ltd. (4) Dang Cement Industries Pvt. Ltd. (5) Dirk India Pvt. Ltd.and (6) Dirk Pozzocrete (MP) Pvt. Ltd. are not attached with this Annual Report. However,a statement giving certain information as required vide aforesaid circular dated 8thFebruary 2011 is included in Consolidated Financial Statements.
The financial statements of the subsidiary Companies are kept for inspection by theshareholders at the Corporate (Head) Office of the Company. The Company shall provide freeof cost, the copy of the financial statements of its subsidiary companies to theshareholders upon their request.
27. CONSOLIDATED FINANCIAL STATEMENTS
As stipulated by Clause 32 of the listing agreement with the stock exchanges, theconsolidated financial statements have been prepared by the Company in accordance with theapplicable Accounting Standards issued by The Institute of Chartered Accountants of India.The audited consolidated financial statements together with Auditors Report formpart of the Annual Report.
The consolidated net profit of the Company and its subsidiaries amounted to Rs.1278.57crores for the corporate financial year ended on 31st December, 2013 as compared to Rs.1294.57 crores on a standalone basis.
28. EQUAL OPPORTUNITY EMPLOYER
The Company has always provided a congenial atmosphere for work to all sections of thesociety. It has provided equal opportunities of employment to all without regard to theircaste, religion, colour, marital status and sex.
29. AWARDS AND ACCOLADES
Recognition for constant innovation
(a) Ambuja won the prestigious CII ITC Sustainability Award for the third year in arow. It won the award for Significant Achievement on journey towards SustainableDevelopment under Large Industry category.
At the same award ceremony, Ambujas two integrated units MCW and Bhatapara alsowon the CII ITC Sustainability Awards in Individual Plant ca tegory for StrongCommitment for proving commitments; adopting appropriate policy and processes.
(b) Ambuja Cement won The Asias Most Promising Brand at the AsianBrand & Leadership Summit Dubai 2013, held in August, 2013. The award was received byAmbujas Dy. MD & CEO Mr Ajay Kapur, who was voted as Asias MostPromising Leader.
(c) Ambuja Cement Foundation bagged the first prize in the Community Initiativesby Industry category at the FICCI Water Awards 2013 by Deputy Chairman, PlanningCommission Montek Singh Ahluwalia at the Federation House, New Delhi in August 2013.
(d) The Foundation also bagged two more National Awards for Excellence in WaterManagement Excellent Water Management Initiatives for work done at MarwarMundwa, Rajasthan and Excellence in Water Management 2012 for Rabriyawas Unit underWithin the Fence category.
(e) Maratha Cement Works was awarded the IPE-Asia Pacific HRM Congress Awards 2013under category Organization with Innovative HR Practices, for its innovativeand good HR practices.
(f) The 4th National HR Excellence Award Confluence 2013 by the Confederation ofIndian Industries (CII) held in New Delhi on 24th September where Ambuja Cements Limitedbagged the recognition award for exhibiting Strong Commitment to HRExcellence.
(g) MCW unit bagged the Safety Award in the Gold category in Cement Sector at the 12thAnnual Greentech Safety Award 2013.
(h) Ambuja Cements Ltd won the ET NOW Talent and HR Leadership Award 2013 for BestTalent Management and the Global HR Excellence Awards 2013 for Organization withInnovative HR Practices by World HRD Congress.
(i) Ambujanagar unit won the 12th Greentech Silver Award in Cement sector category.
(j) RKBA Limestone Mine at Ambujanagar was awarded the prestigious RIO TINTO Health& Safety Award for 2012-2013. The award was presented by the Union Minister of Mines,Dinsha J. Patel.
30. CAUTIONARY STATEMENT
Statements in the Directors Report and the Management Discussion and Analysisdescribing the Companys objectives, expectations or predictions, may be forwardlooking within the meaning of applicable securities laws and regulations. Actual resultsmay differ materially from those expressed in the statement. Important factors that couldinfluence the Companys operations include: global and domestic demand and supplyconditions affecting selling prices, new capacity additions, availability of criticalmaterials and their cost, changes in government policies and tax laws, economicdevelopment of the country, and other factors which are material to the businessoperations of the Company.
The true wealth of Ambuja: Our people and partners
Your Directors take this opportunity to express their deep sense of gratitude to thebanks, Central and State governments and their departments and the local authorities fortheir continued guidance and support.
We would also like to place on record our sincere appreciation for the commitment,dedication and hard work put in by every member of the Ambuja family. To them goes thecredit for the Companys achievements. And to you, our Shareholders, we are deeplygrateful for the confidence and faith that you have always reposed in us.
For and on behalf of the board of
Ambuja Cements Limited
N. S. Sekhsaria
6th February, 2014
Annexure - I
DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE EARNINGS AND OUTGO AS REQUIRED UNDER COMPANIES (DISCLOSURE OFPARTICULARS IN REPORT OF BOARD OF DIRECTORS) RULES, 1988
A) CONSERVATION OF ENERGY
(a) Energy Conservation Measures taken:
(1) Optimisation of Process & Equipments at Various
i. Installation of Godrej made Intelligent Flow Controller along with Metacentre foroptimization of Compressed Air System (Maratha)
ii. Kiln inlet enlargement with inlet seal replacement & riser modification (Suli)
iii. Tipping of Raw Mill Fan and mill inlet duct modification (Rauri)
iv. Modification of various stages cyclones of Preheater (Bhatapara, Suli)
v. Optimisation of cement mill (Farakka)
vi. Elimination of ideal running of equipments (Dadri, Maratha)
vii. Installed Auto start/Stop of Capacitor Bank for HT side to improve power Factor(Dadri)
(2) Installation of Speed Control Devices:
i. Installation of speed control devices like VVF drives in fans of various equipments.(Rabriyawas, Bhatapara Line I and II, Suli, Rauri, Rabriyawas, Maratha)
(3) Energy Conservation Measures for Plant & Township lighting:
i. Energy & Compressed air audit by External agency (Farakka)
ii. Installation of Expert Optimiser for Gaj-1 (Ambujanagar)
iii. Installation of SPRS (Slip Power Recovery System). (Suli,Rabriyawas, Dadri)
iv. Mid Air Tap from Cooler to Raw Mill for heat recovery (Ambuja Unit)
v. Installation of Light Emitting Diode (LED) (Sankrail, Rauri, Rabriyawas, Dadri)
vi. Installation of lightning transformer (Dadri) and Lighting provided with timer(Rauri)
(4) Installation Of Energy Efficient Equipments:
i. Power Transmission Line to Bulk Cement Terminal- Muldwarka from Plant (Ambujanagar)
ii. Installation of high efficiency fans (Suli, Rauri)
iii. Installation of efficient air blowers for Pre Calciner firing (Maratha)
iv. Conversion of Reverse Air Bag House to Pulse Jet Bag Filter (Suli)
(b) Additional investments and proposals, if any, being implemented for reduction ofconsumption of energy:
(1) Optimization of Process & Equipments at various locations:
i. Modification of raw mill inlet duct to reduce pressure drop (Rauri)
ii. Modification of Preheater-1 Calciner (Bhatapara I)
iii. Up-gradation of Raw Mill Fan (Bhatapara I)
iv. Installation of fuzzy/ high level control system for Pyro-processing section(Bhatapara I)
v. Up- gradation of Clinker Cooler (Bhatapara Line II)
vi. Optimisation of compressed air usage (Farakka)
vii. Replacement of Reciprocating Water Cooled compressors with Air Cooled ScrewCompressors (Rabriyawas)
viii. Roller Press Installation to increase output and reduce energy consumption(Rabriyawas)
ix. Solid Waste Pre-processing and feeding system (Ambujanagar, Maratha, Rabriyawas,Bhatapara, Rauri)
x. Coal mill Up-gradation with Dynamic Separator at Gaj- II (Ambujanagar)
xi. Installation of Separate Fly Ash Grinding and Blending System (Ambujanagar)
(2) Installation of Speed Control Devices:
i. Installation of VVVF Drives in various equipments (Ambujanagar, Bhatapara I,Farakka, Rabriyawas, Roorkee)
(3) Energy Conservation Measures for Plant & Township lighting:
i. Installation of Light Emitting Diode (LED) and optimisation of lightning voltage.(Sankrail, Farakka, Dadri)
(4) Installation of Energy Efficient Equipments:
i. Installation of Medium Momentum Burner for Ambuja and Gaj-1 (Ambujanagar)
ii. Installation of LV Capacitor for Power Factor Improvement (Rabriyawas)
iii. Installation of high efficiency cooler fans. (Ambujanagar, Suli)
(c) Impact of the measures at (a) and (b) above for reduction of energy consumption andconsequent impact on the cost of production of goods:
Measures referred to in (a) will result in saving of Rs. 18.3 Crores per annum.Measures referred to in (b) is expected to result in saving of Rs. 88 Crores per annum.
(d) Total energy consumption and energy consumption per unit of production:
Information given in the prescribed Form-A annexed.
B) TECHNOLOGY ABSORPTION
Efforts made in technology absorption are given in prescribed Form-B annexed.
C) FOREIGN EXCHANGE EARNINGS AND OUTGO
(a) Activities relating to exports; initiatives taken to increase exports; developmentof new export markets for products & services; and export plans:
In order to take advantage of the increased realisation (due to depreciation of rupee)& relatively low domestic demand Company has increased its exports to 2.01 lac tonnesof cement (including clinker) as against 1.59 lac tonnes in the previous year. In terms ofvalue, the exports during this year amounted to Rs. 59.98 Crores (FOB) as against Rs.53.02 Crores (FOB) in the previous year.
(b) Total foreign exchange used and earned:
|Category ||Current Year ||Previous Year |
| ||(Rs. in Crores) ||(Rs. in Crores) |
|Used ||824.27 ||881.32 |
|Earned ||59.50 ||53.34 |
FORM - A
(See Rule 2)
Form for Disclosure of Particulars with respect to Conservation of Energy
| ||Current Year ||Previous Year |
| ||2013 ||2012 |
|A. POwER & FUEL CONSUMPTION || || |
|1 Electricity * || || |
|(a) Purchased || || |
|Units (KWH) Crores ||57.01 ||65.82 |
|Total amount (Rs. in Crores) ||356.87 ||341.91 |
|Rate / Unit (Rs.) ||6.26 ||5.19 |
|(b) Own Generation || || |
|(i) Through Diesel Generator || || |
|Net Units (KWH) Crores ||1.28 ||3.31 |
|Net Units / Ltr of LDO / Furnace Oil ||3.84 ||3.77 |
|LDO / Furnace Oil Cost / Unit Generated (Rs.) ||12.04 ||10.29 |
|(ii) Through Steam Generator || || |
|Net Units (KWH) Crores # ||113.31 ||115.57 |
|Net Units / T of Fuel ||892 ||796 |
|Oil / Gas Cost / Unit ||3.36 ||3.84 |
|(iii) Through Wind Mill / Solar Power || || |
|Net Units (KWH) Crores || |
|Net Units / T of Fuel || |
|Oil / Gas Cost / Unit ||NIL ||NIL |
|2 Coal & Other Fuels || || |
|Quantity (Million K. Cal) ||10481668 ||11643842 |
|Total Cost (Rs. in Crores) ||1132 ||1354 |
|Average Rate (Rs. / Million K. Cal) ||1080.36 ||1162.99 |
|3 Light Diesel Oil / HSD || || |
|Quantity (K. Litres) ||2281.12 ||2577.05 |
|Total Cost (Rs. in Crores) ||12.97 ||11.01 |
|Average Rate (Rs. / K. Litre) ||56848 ||42742 |
|4 Others / Internal Generation || || |
|Quantity || |
|Total Cost ||NIL ||NIL |
|Rate / Unit ||NIL ||NIL |
|B. CONSUMPTION PER UNIT OF PRODUCTION ||Industry Norms || || |
|Electricity (KWH / T of Cement) ** ||100 ||80.5 ||80.9 |
|LDO (Ltr / T of Clinker) ||N.A. ||0.16 ||0.15 |
|Coal & Other Fuels (K.Cal / Kg of Clinker) ||800 ||735 ||736 |
|* Total power consumed includes 0.21 Crore kwh consumed for Capital Work in progress for project work (previous year 0.10 Crore kwh). |
|** Excludes unit consumed in residential colony 0.59 kwh /tonne of cement (previous year 0.58 kwh/Tonne of cement). |
|# Includes 0.67 Crore units of power sold (previous year 1.39 Crores units). |
FORM - B
(See Rule 2)
Form for disclosure of particulars with respect to Technology Absorption
A. RESEARCH AND DEVELOPMENT (R&D)
1) Specific areas in which R & D carried out by the Company:
a. Clinker reactivity improvement by using fluorine based mineraliser (Ambujanagar)
b. Use of soda ash in fuel firing to neutralize SO3 impact (Darlaghat)
c. Separation Alternative Fuel particle from Blast Furnace flue dust (Bhatapara)
d. Use of phospo gypsum as an additive for raw mix optimization (Bhatapara)
2) Benefits derived as a result of above R & D:
a. Optimise raw mix and hence improve cement quality and also life of mines.
b. Protect environment by reducing waste.
c. Improve Thermal Substitute Rate by replacing Traditional fuels in kiln
3) Future plan of action:
a. Optimise Raw Mix to improve cement quality and improve the mines life (Bhatapara,Maratha)
b. Water heating system from Kiln shell radiations to utilise waste heat (Darlaghat)
c. Plant Trial for cement grinding with performance enhancer (Bhatapara, Sankrail)
d. Coal catalyst trial to be taken in CPP and Kiln to reduce fuel cost (Maratha)
4) Expenditure on R&D
| ||Current Year ||Previous Year |
| ||31.12.2013 ||31.12.2012 |
| ||(Rs. Crores) ||(Rs. Crores) |
|Capital Expenditure ||1.01 ||1.25 |
|Recurring Expenditure ||0.00 ||0.02 |
|Total Expenditure ||1.01 ||1.27 |
|Total R & D expenditure as a percentage of total turnover ||0.01% ||0.01% |
|B. TECHNOLOGY ABSORPTION, ADAPTION & INNOVATION |
|1) Efforts, in brief, made towards Technology Absorption, |
|Adaption and Innovation: |
|a. Installation of Mechanical Kiln Monitoring (MKM) system (Gaj, Ambujanagar) |
|b. Installation of DCS to increase in reliability of plant automation system (Gaj, Ambujanagar) |
|c. Installation of latest equipments for Solid Waste Preparation and Handling (Ambujanagar, Maratha, Darlaghat, Rabriyawas and Bhatapara) |
|d. Automation of cyclone draft cleaning point so that hazard is reduced to zero (Rauri) |
|e. Installation of Check measuring panel for Clinker to check the feeding accuracy of clinker (Sankrail) |
|f. Installation of RFID (Radio Frequency Identification) for better coordination of vehicle movements (Ambujanagar, Maratha, Bhatapara, Rabriyawas) |
|g. Installation of Laboratory Information Management System. (Farakka) |
|h. Installation of Technical Information System (Bhatapara) |
|i. Mechanized wagon loading system (Farakka) |
|j. Vibration analyser and Thermal Camera for better monitoring & Conditional analysis of field Equipments & drives (Farakka) |
|k. Retrofitting of new high efficiency ILC PH fans Impellers (Rabriyawas) |
l. Coriolis coal feeding system for fine coal bin (Rabriyawas)
m. Installation of Continuous Ambient Air Quality Monitoring System at mines locationto monitor the ambient air quality (Rabriyawas)
n. Installation of Automatic clinker sampler (Suli, Maratha)
2) Benefits derived as a result of the above efforts in the year 2013
a. Improved operational efficiencies, equipment reliability, productivity and quality.
b. Reduction in manufacturing cost, increase safety and protection of environment.
3) Information regarding Technology Imported during last 5 years
a. DALOG System for Raw Mill gear box monitoring and protection (at Various locations)
b. Installation of Continuous emission monitoring system (at Various locations)
c. Variable speed travel cage and oxy acetylene cutting machine (Ambujanagar, Maratha)
d. Microscope for clinker quality improvement (Ambujangar)
e. Mechanical Kiln Monitoring (MKM) system (Ambujanagar, Bhatapara)
f. Multicore and Vertical Blender for PPC Blending for efficient blending of OPC andground fly ash to produce PPC (Ambujanagar)
g. Medium Momentum Burners for Ambuja and Gaj (Ambujanagar)
h. installation of PGNAA on cross belt analyser for quality control (Rauri, Bhatapara,Maratha)
i. Ultrasonic detector for False Air Detection and usage of Thermal Imaging Camera fordetermining hot spots (Rauri)
j. Simulator based training Center for In house training for PLC & Plant operationfor Automation engineers & operators (Rauri)
k. Automated bulk loading system (Sankrail)
l. Hybrid ESP for of Cement Mills for reduction of emission (Bhatapara)
m. Kima Sound level sensor for Cement Mill (Bhatappara)
n. Installation of Pfister system for Kiln Feed system and Coal firing system.(Bhatapara)
o. Technical Information system for better online information (Bhatapara)
p. Installation of VRPM for Cement Mill No 2 to improve productivity (Bhatapara)
q. Replacement of existing conventional burner pipe with third generation Multi ChannelBurner (Novaflam from Fives Pillard). (Bhatapara)
r. Fuzzy Logic High level control. (Bhatapara line-1, Roorkee)
s. Particle size analyzer. (at Various locations)
t. Modification in packing plants like bag printing machine, increase in spouts etc.(Surat, Rabriyawas, Maratha, Farakka)
u. Installation of Coriolis fine coal feeding system. (Rabriyawas, Ambujanagar)
v. Replacement of reverse air bag house to jet pulse filters, MF HRB -12 for clinkercrushing to hammer crusher New Duo flex Burner. (Rabriyawas, Suli)
w. Installation of 500 TPD Synthetic Gypsum Manufacturing plant, VVVF drives on variousequipments. (Rabriyawas)
x. Rotascale for PC firing. (Maratha)
y. Installation of Kiln shell scanner, Kiln feed actuator, x-ray analyser.(Ambujanagar)