During the year under review, the company has shown a stable off take and decreased
revenue when compared with previous financial year. Due to increase in the input (power
and fuel) costs, the net profit is lower.
We summaries below the Managements view on the Performance of the Company for the
financial year 2022- 23 and on the future outlook for the Company:
Indian Economy:
Indias economic activity is gaining momentum amid continuing global uncertainties. The
GDP growth in Q4 of FY 2022-23 has pushed up the full-year GDP growth of FY 2022-23 to
7.2%, 200 basis points (bps) higher than the earlier estimate. While the overall growth
was broad-based, many sectors such as construction and agriculture experienced more than
the estimated growth. The Annual Economic Review for the month of May 2023 highlighted
that the postpandemic quarterly trajectories of consumption and investment have crossed
pre-pandemic levels.
Overall, the first-quarter data of FY 2023-24 instils confidence in the improving
health of the economy. Inflation in the first quarter was 4.5%, the lowest since the
quarter of September 2019. Goods and Services Tax collections remain strong. It is
expected that India will grow between 6% and 6.3% in FY
2023- 24 and have a stronger outlook thereafter. In fact, if global uncertainties
recede, the growth may surpass 7% over the next two years.
Industry Structure and Developments:
The demand of Cement during FY 2022-23 was good. However, due to high input cost,
primarily in power and fuel expenses and in the freight expenses, the profit margin were
adversely impacted during FY 2022-23 in comparison to FY 2021-22.
Spending by the Governments on infrastructure projects, housing schemes under PM Awas
Yojana, and keeping in view the State Assembly elections in various states and general
election in 2024, going forward, in FY 2023-24 the demand of cement is expected to be
good. It is expected that the Central Government as well as the respective State
Governments will either enhance their spendings or make plan for spendings in various
public infrastructures projects before the respective State Assembly Elections and General
Election in 2024. Also, expectation of normal monsoon will improve the demand of cement in
rural areas. The demand of cement mainly from the infrastructure and housing segment
continued to be strong in FY 2023-24.
Opportunities:
In budget 2023-24, the Central Government proposed to enhance the capital expenditure
by 33 per cent to Rs.10 lakh crore for infrastructure development for FY 2023-24 and the
same will be at 3.3 per cent of the GDP Further, it is proposed to establish
infrastructure finance secretariat which will assist in attracting more private investment
in infrastructure developments. Infrastructure development is widely acknowledged as a key
for achieving growth, which has also been the focus of the Government of India. Indias
Capital Expenditure has increased 5 times compared to 2013-14 and the government is moving
with a target of investing Rs.110 lakh crore under the National Infrastructure Pipeline.
On 13th October 2021, the Prime Minister has launched the Gati Shakti - National Master
Plan, aimed at developing an integrated infrastructure to reduce logistics costs. All
logistics and connectivity infrastructure projects, entailing an investment of over Rs.
500 crore, are routed through the Network Planning Group (NPG), constituted under the PM
Gati Shakti initiative. The
PM Gati Shakti National Master Plan is a critical tool for integrating economic and
infrastructural planning and development. Under the PM Gati Shakti Master Plan, 100
critical infrastructure gap projects have been prioritized for development in FY 202324
and Rs.75,000 Cr. have been allocated for the same. With multimodal infrastructure
development, Indias logistics cost will reduce further, and improve ease of doing
business in the country. The Central Government encouraged the States to continue taking
elevated responsibility in infrastructure development, which will be supported by the
one-year extension of interest-free loans up to 50 years. The continued emphasis on
infrastructure projects is expected to lead to a very good demand for cement country wide.
Threats:
• Excess production facilities in a region may lead to tougher competition.
• The cement industry greatly relies on construction activities. Therefore, any
problem in construction activities will affect the cement industry to a large extent.
• Scarcity in supply of raw material, such as limestone, coal.
• Increase of power and fuel cost.
• Increase in steel and other building material cost will have impact on cement
consumption.
However, at present the demand of cement is encouraging and expected to continue in
future.
Segment-wise or product-wise performance:
The Company operates in a single product segment and the product is a generic one with
small variations in the form of OPC, PPC, SRC etc., and it does not require much
elaboration on segment wise / product wise performance.
Outlook:
Considering the overall situation and the developments taking place in Industry, the
outlook for the future is expected to be stable.
The management of your company is working for the increasing the cement production
capacity by 2.2 Million Tons in the existing cement plant location. The company has
already finalized and tied up with various banks for part financing of the project and
started drawing the required funds from the respective banks. The Civil work for the new
cement production facility is expected to be completed in a couple of months, thereafter,
mechanical work will start, and the entire project is expected to be completed by January
2025.
During FY 2021-22, your Company had participated in the auction process for the purpose
of grant of Limestone Mining Lease in Rata Mandha-1A (RM- 1A) Block, Shri Mohangarh
Tehsil, Jaisalmer District, Rajasthan. However, the auction process shall remain subject
to the decision of the Honble High Court of Rajasthan in SB Civil WP No.16345/2018.
Though, the Company was declared as the preferred bidder in December 2021, the Letter of
Intent (LOI) was issued in March 2023. Your company is in the process of obtaining the
statutory approvals required for the mining operations.
Risks and Concerns:
The company can be said to have the following risks and concerns which are commonly
applicable to any cement unit.
• Lower demand growth leading to Lower Capacity utilization;
• Drop in realizations which may impact the margins;
• Regular increases in cost of inputs leading to impact on margins;
• Probable Uncertainties in Coal supplies and increase in the prices;
• Upward revisions in international crude prices leading to Increase in
transportation cost, for both input materials and finished goods;
• Adverse Changes in Government Policies impact the costs, demand and supply;
Internal Control Systems and their Adequacy:
The internal control system in place in the Company has a process designed to take care
of various controls and audit requirements. It aims at effectiveness in the operations and
protection of the companys assets from any possible loss and unauthorised use. It also
helps proper and correct data being recorded, ensuring transparency. The design of the
processes is such that there is an adequate, appropriate and need based control on the
activities / business operations of the Company.
The Internal Control system is backed by an established and adequate Internal Audit
System which is carried out by an independent firm of Chartered Accountants of repute and
experience. The internal auditors review periodically to ensure robust control systems for
effective control. The internal auditors submit their reports to the Audit Committee of
the Board of Directors for their review. The Internal Control system ensures that the
Internal Audit Scope is adequate and their reviews are well directed to achieve the
desired objectives. The Audit Committee also reviews the adequacy and effectiveness of
internal control systems and suggests improvements from time to time.
The compliance of the legal and statutory requirements is given utmost importance to
ensure efficiency in operations / reporting and controls. All parameters in all operations
/ activities are monitored regularly to ensure desired results.
Financial and Operational Performance:
During the year under review, the Companys operational performance was satisfactory.
During FY 2022-23 the Company has sold 17.92 Lakh MTs of cement, as against 17.90 Lakh
MTs during FY 202122, which is about 0.11% higher in FY 2022-23. The revenue from Cement
sales in FY 2022-23 stands at Rs.77,270.51 Lakhs, as against Rs.78,048.08 Lakhs in FY
2021-22, which is about 1.00% lower in FY 2022-23.
The scenario of demand for the product and the price fluctuations can be gauged from
the fact that the volume of cement sale was increased by 0.11%, whereas, the revenue was
decreased by 1.00% during the year.
Details of the Companys Performance on the basis of sale of products are given in the
Note No.20 to the Financial Statements forming part of this Annual Report.
Inspite of increase in the Volume of sales, the revenue from operations declined by
1.30%. Further, due to increase in input cost the EBIDTA margin decreased by 38.10%, and
Profit before Tax and Exceptional items decreased by 50.99%.
The Profit after Tax for the year stood at Rs.4,929.52 Lakhs compared to 8,757.44 Lakhs
for the previous year (a decrease of about 43.71%).
As per the requirement, the company is required to comment upon the changes in the
specified ratios beyond a threshold limit (i.e. change of 25% or more as compared to the
immediately previous financial year) along-with a detailed explanation thereof.
The details of ratios and the variance are as given below:
| Particulars (Ratio) |
2022-23 |
2021-22 |
Variance |
| Debtors Turnover Ratio |
30.18 |
32.52 |
(7.20%) |
| Inventory Turnover Ratio |
8.09 |
10.65 |
(24.04%) |
| Interest Coverage Ratio |
6.34 |
14.32 |
(55.71%) |
| Current Ratio |
1.58 |
1.80 |
(12.22%) |
| Debt Equity ratio |
0.36 |
0.26 |
38.46% |
| Operating profit Margin ratio (%) |
10.12% |
18.45% |
(45.16%) |
| Net profit margin ratio (%) |
6.31% |
11.06% |
(42.97%) |
| Return on Equity / Net worth |
0.07 |
0.14 |
(50.00%) |
Decrease in profit, due to increase in input cost, resulted in low Interest Coverage
Ratio, Operating Profit Margin Ratio, Net Profit Margin Ratio, and Return on Equity.
Due to more utilization of working capital funds from various banks, as well as on
account of increase in borrowings for the expansion project, the Debt Equity Ratio
increased.
Human Resources & Industrial Relations:
The Company believes that the people are its assets and continues its focused attention
on nurturing and developing its human resources through continuous training, motivation
and engagement initiatives. The relationship with employees continues to be cordial and
harmonious and always provides a positive and conducive environment to improve efficiency.
Emphasis on competency improvement through skill and capability development, training
programs and rationalization of work methods, has improved employees productivity and
morale. The Companys Health and Safety Policy aims at providing a healthy and safe
working environment for the employees. As on 31st March 2023, the Company has 386
employees who are engaged in its various units and corporate office.
Cautionary Statement:
Statements in the "Management Discussion & Analysis Report" which seek to
describe the Companys objective, projections, estimates, expectations or predictions may
be considered to be "forward looking statements" within the meaning of
applicable securities laws or regulations. Actual results could differ materially from
those expressed or implied. Important factors that could make a difference to the
Companys operations include demand- supply conditions, increase in installed capacities
prices of input materials, cyclical demand, pricing in the Companys markets, changes in
Government regulations, tax regimes etc., besides other factors such as litigation and
labour related issues.
| For and on behalf of the Board of Directors, |
|
| Deccan Cements Limited |
|
|
Sd/- |
|
P Parvathi |
| Place: Hyderabad |
Chairperson and Managing Director |
| Date: 11th August 2023 |
DIN :00016597 |
+91-9892691696
