MANAGEMENT DISCUSSION AND ANALYSIS
a) Industry structure and developments
The financial year 2011-12 has been one of great challenges to the Indian Economy. Thechallenge of sustaining the economic growth amid constraints of price stability ultimatelyresulted in the slowdown in growth to less than 7 % after nearly five years of consistentgrowth. The Agriculture and Services sector continued to show healthy growth and theslowdown can be fully attributed to the Industries sector. But considering the turmoil inmajor world economies, India still can be said to be in a more healthy scenario poised foran upward movement in growth. The Cement Industry showed a reduced growth of around 7 % intune with the reduced Industrial growth. Cement production and dispatches during thefinancial year 2011-12 grew by about 6.50%. The capacity grew by about 2.5%, but thecapacity utilization was again less than 80%. Your company reached another landmark in itshistory, when it recorded Production and despatch of Cement in excess of 5 Million Tonnesduring the Financial Year 2011-12. Your company commissioned its 2.5 Million Tonnes Cementmanufacturing Unit at Sangam. K Village, Gulbarga District, Karnataka, during thefinancial year 2011-12. With this the total installed capacity of the company stands at11.0 Million Tonnes.
b) Opportunities, Threats, Risks, Concerns and Outlook
It has been estimated that by 2016-17, the Demand for Cement in India would be to thetune of 407 Million Tonnes based on the estimate that the economy would grow at the rateof 9% during the XII Plan period of 2012-13 to 2016-17. This entails a growth chart forCement Industry in excess of 10%. The Cement Industry has been actively advocatingconcretizing / White Topping of roads in the country as Cost effective in terms oflongevity and economical in maintenance. The Central and State Governments is fastrealizing the benefits of Concrete Roads / White topping and it is expected that IndianRoads in the future would be increasingly concrete.
Notwithstanding any major volatility in the world economy and its cascading effect inthe Indian Economy, the future looks to augur well for the Indian Industry and Cement inparticular.
c) Segment wise or Product wise performance
The Company has only one business segments and that is manufacturing and Sale ofCement. The only other segment namely Generation and Sale of Power revolves around theCement segment and is mainly used for Captive consumption by the Cement segment. Givenbelow are the Segment-wise and Product-wise production figures for the financial year2011-12.
|Grades of Cement ||Quantity in M.T |
|OPC -43 Grade & 53 Grade ||1354284 |
|SRC - PC ||30600 |
|PPC ||3560468 |
|Slag PSC ||194023 |
|TOTAL ||5139375 |
|Power ||Generation (in Units) |
|Captive Thermal Power Plant ||536714770 |
d) Internal control system and their adequacy
The Company has got an adequate system of internal control in place commensurate withthe size of its operation and is properly designed to protect and safeguard the assets ofthe Company. There is a proper system for recording all the transactions which ensuresthat every transaction is properly authorized and executed according to the norms.
The Company has developed an in-house Internal Audit Department which is contributingto the continuous process of sharpening the Internal Control mechanism by introduction ofvarious concurrent audit systems and facilitating regular evaluation of the system by themanagement.
The company had also appointed M/s R.G.N. Price & Co., Chartered Accountants asInternal Auditors to conduct the Systems and compliance Audit of the company for thefinancial year 2011-12. e) Discussion on financial performance with respect to operationalperformance.
The financial year 2011-12 again saw your company re-write its history when it recordedProduction and despatch of Cement in excess of 5 Million Tonnes. The Cement Productionduring the financial year was 5.13 Million Tonnes while the despatch of Cement was 5.12Million Tonnes, a growth of 13% over the previous year. The company recorded a GrossTurnover of Rs. 2347 crores, an increase of 33% over the previous year. The Profit beforeTax of the company stood at Rs. 251.20 crores, a record 164% increase contributed equallyby increase in volume and Realisations. f) Material developments in Human resources /Industrial relations front, including number of people employed.
As always, the Industrial relation during the current year also has been very cordialand contributed to mutual development. Various seminars, counseling sessions, trainingsetc., were conducted to improve the quality of the manpower available thereby increasingthe productivity and efficiency of the personnel. The number of personnel employed in thecompany is : 1532.
CAPTIVE THERMAL POWER PLANTS KARIKKALI WORKS
The Gross power generation from the 1 x 15 MW and 1 x 30 MW Captive Thermal PowerPlants during the year under review was 19.08 Crore Units, with an auxiliary consumptionof 1.75 crore units. Out of the Net Generation of 17.33 crore Units, 15.11 crore unitswere captively consumed by the Cement Plant thereat and the remaining 2.22 crore unitswere sold under Power Purchase Agreements.
The Gross power generation from the 15 MW Captive Thermal Power Plant during the yearunder review was 11.63 Crore Units, with an auxiliary consumption of 0.91 crore units. TheNet generation was 10.72 crore Units. Out of the total net generation, 10 crore units wereconsumed captively by the Cement Plant thereat and the remaining 0.72 crore units weresold under Power Purchase Agreements.
The Gross power generation from the 3 x 15 MW Captive Thermal Power Plants during theyear under review was 22.95 Crore Units, with an auxiliary consumption of 1.99 croreunits. Out of the Net Generation of 20.96 crore Units, 14.71 crore units were captivelyconsumed by the Cement Plant thereat and the remaining 6.25 crore units were sold underPower Purchase Agreements.
PROGRESS REPORT ON ONGOING PROJECTS
INTEGRATED CEMENT PLANT PROJECT AT KARNATAKA
Your company has commissioned the Greenfield Integrated Cement manufacturing Unit atSangam.K Village, Chincholi Taluk, Gulbarga District, Karnataka with a capacity of 2.5MTPA during the financial year 2011-12.
The Employees at all ranks of the Company have been extending their fullestco-operation for the smooth conduct of the affairs of the Company and maintenance ofcordial Industrial relations. The Directors wish to place on record their appreciation tothe employees of the Company at all levels.
The company has no unmatured/unpaid Fixed Deposits at the end of financial year2011-12.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
As required under Section 217 (1) (e) of the Companies Act, 1956, the details regardingEnergy Conservation, Technology Absorption, Foreign Exchange earnings and outgo are givenin the Annexure hereto.
STATUTORY INFORMATION REGARDING EMPLOYEES
The particulars regarding employees falling within the purview of Section 217 (2-A) ofthe Companies Act, 1956 and the Rules made there under, are mentioned in annexure hereto.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 217 (2- AA) of the Companies Act, 1956, the Directors confirm that:
(i) in the preparation of the Annual Accounts, the applicable accounting standards hadbeen followed.
(ii) The Directors had selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the Financial Year and ofthe profit or loss of the Company for that period.
(iii) The Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities.
(iv) The Directors had prepared the Annual Accounts on a going concern basis.
As per the provisions of the Listing Agreement with Madras Stock Exchange Ltd. and theNational Stock Exchange of India Ltd., where the Companys Equity Shares are listed,a Report on Corporate Governance is given in an Annexure hereto.
Dr. M.A.M. Ramaswamy, Chairman and Sri. K. Ganapathy, Director retire under Clause 102of the Articles of Association of the Company and being eligible, offer themselves for reappointment.
Sri. L. Muthukrishnan, appointed as Additional Director under section 260 of theCompanies Act, 1956 retires in the ensuing Annual General Meeting. The company hasreceived a Notice from a member under section 257 of the Companies Act, 1956, proposingthe candidature of Sri. L. Muthukrishnan for appointment as Director in the ensuing AnnualGeneral Meeting.
The Auditors, M/s P. B. Vijayaraghavan & Co., M/s Soundararajan & Co., and M/sKrishaan & Co., Chartered Accountants retire at the ensuing Annual General Meeting andthey are eligible for re-appointment.
Due to the increase in the volume of work for the Auditors, the Board has recommendedan increase in the remuneration of the Auditors from Rs. 2,25,000/- to Rs.3,00,000/- each,besides their out of pocket expenses.
The Cost Audit of the Company is conducted by M/s Geeyes & Co., Chennai.
The Cost Audit Report for the financial year 2010-11 was due to be filed by 27thSeptember, 2011 and the same has been filed on 24th September, 2011. The CostAudit Report for the financial year 2011-12 is due to be filed within 180 days from theclosure of the financial year and will be filed within the stipulated period.
Statements made in this Report, including those stated under the caption"Management Discussion and Analysis" describing the companys objectives,expectations or projections may constitute "forward looking statements" withinthe meaning of applicable securities laws and regulations.
Important factors that could influence the Companys operations include global anddomestic supply and demand conditions affecting the selling prices of finished goods,availability of inputs and their prices, changes in the government regulations, tax laws,economic developments within the country and outside and other factors such as litigationsand Industrial relations.
The Company assumes no responsibility in respect of the forward looking statementswhich may undergo changes in the future on the basis of subsequent developments,information or events.
The Board of Directors wish to thank all the Shareholders, Government Authorities andFinancial Institutions and Bankers, Suppliers, Customers and all the categories ofEmployees for the continued assistance, support and direction to the company during theyear under review.
Auditors Report :
Regarding the liability, if any, under the provisions of Jute Packaging Materials(Compulsory use in the Packing Commodities) Act, 1987, the Note No. 38 of the Notesforming part of the Accounts is self-explanatory and the Directors opine that as theamount of liability is not ascertainable, necessary provision can be made in the year inwhich the actual liability would arise.
| ||For and on behalf of the Board, |
| ||M.A.M. RAMASWAMY |
| ||Chairman |
|Place : Chennai || |
|Date : 29th ||May, 2012. |