shree cement ltd Management discussions


Dear Members,

The Directors take pleasure in presenting their 44th Report and Audited Financial Statements of the Company for the financial year 2022-23. Management Discussion and Analysis has also been incorporated into this report.

1. FINANCIAL PERFORMANCE

A brief of financial performance for the year gone by and its comparison with previous year is given below: -

Particulars Standalone Consolidated
2022-23 2021-22 2022-23 2021-22
Revenue from Operations 16,837.49 14,305.88 17,852.33 15,009.56
Other Income 431.51 537.34 459.08 545.89
Total Income 17,269.00 14,843.22 18,311.41 15,555.45
Total Expenditure 13,895.23 10,658.04 14,892.83 11,301.63
Profit Before Interest, Depreciation 3,373.77 4,185.18 3,418.58 4,253.82
and Taxes (PBIDT)
Finance Costs 268.93 217.78 262.87 216.12
Depreciation and Amortization expenses 1,546.20 1,036.48 1,660.67 1,145.88
Profit Before Tax 1,558.64 2,930.92 1,495.04 2,891.82
Tax Expense 230.51 554.30 225.90 555.21
Profit After 1,328.13 2,376.62 1,269.14 2,336.61
Profit attributable to Owners of the Company - - 1,270.70 2,331.94
Profit attributable to Non-Controlling Interest - - (1.56) 4.67

Key highlights of the year (Standalone performance):

Sale volume (cement and clinker) witnessed a healthy increase of 15% from 27.74 million tons in FY 2021-22 to 31.82 million tons in FY 2022-23.

Companys Eastern and Southern India operations led the increase with significant growth in YoY sales volumes.

Net revenue from operations grew by 18% from Rs. 14,306 Crore in FY 2021-22 to Rs. 16,837 Crore in FY 2022-23.

Key cost components: Overall input costs remained high during FY 2022-23 significantly led by fuel cost inflation. Key cost details for FY 2022-23 were as below:

(a) Raw material cost: There was steep rise observed in Fly Ash and Slag prices during the year which led to overall increase in raw material cost. Resultantly, overall raw material cost increased by 30% from

Rs. 1,002 Crore in FY 2021-22 to Rs. 1,300

Crore in FY 2022-23.

(b) Power & Fuel: Elevated prices of pet coke and imported coal as a result of geo-political events adversely impacted the entire cement industry. As a result, the power and fuel cost shot up significantly during 2022-23 compared to the previous year. The impact was mitigated to some extent by enhanced sourcing of domestic linkage coal, higher consumption of alternate fuels and augmentation of fuel supply sources.

Companys focus on energy management practices helped reduce power consumption per ton of cement from 67.15 kWh in FY 2021-22 to 64.93 kWh in FY 2022-23. It also increased its share of green power in total power consumption from 48.3% in FY 2021-22 to 51.1% in FY 2022-23.

(c) Logistics cost: Company has been able to contain increase in its transportation costs during 2022-23 through route rationalization efforts, digitalization measures and other efficiency improvement initiatives. The Company also stepped up its efforts towards developing rail connectivity for its cement plants which will augment its bulk transport capacity and help contain transportation cost.

Overall during FY 2022-23, owing to higher fuel costs, Earnings Before Interest Depreciation and Tax (EBIDTA) for the FY 2022-23 came down 19% to Rs. 3,374 Crore from Rs. 4,185 Crore of previous year 2021-22.

Key Financial Ratios

Key financial ratios showing the financial performance of the Company are as under: -

Particulars 2022-23 2021-22 % Change Remarks
Operating Profit Margin 17.47 25.50 (31.47)% Increase in Power & Fuel Cost
(without other income) (%)
Net Profit Margin (%) 7.89 16.61 (52.52)% Increase in Power & Fuel Cost and
Return on Net Worth (%) 7.26 13.76 (47.23)% Depreciation
Interest Coverage Ratio (Times) 12.55 19.22 (34.72)% Decrease in EBIDTA & increase in Finance Cost
Debtors Turnover (Times) 28.45 33.58 (15.29)% Increase in Trade Receivables
Inventory Turnover (Times) 7.35 7.86 (6.58)% Increase in Inventory
Current Ratio (Times) 1.23 1.69 (26.90)% Increase in Current Borrowings
Debt-Equity Ratio (Times) 0.09 0.10 (12.56)% Repayment of Long-Term Debts

2. DIVIDEND AND RESERVES

During the FY 2022-23, the Board of Directors declared Interim Dividends of Rs. 45/- and Rs. 55/-per share. The total dividend for FY 2022-23 aggregates to Rs. 100/-per equity share amounting to Rs. 360.81 Crore. During the year 2021-22, the Company had paid dividend of Rs. 90/- per share

(Interim & Final) amounting to Rs. 324.73 Crore. The Board has not recommended any final dividend for the FY 2022-23.

The Board of Directors do not propose to transfer any amount to the Reserves for the year 2022-23.

The Board of Directors of the Company in line with provisions of Regulation 43A of Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended) had approved Dividend Distribution Policy on 12th August, 2016. The policy is uploaded on Companys website and can be accessed at https://www.shreecement.com/investors/policies.

3. MANAGEMENT OUTLOOK OF MACRO ECONOMY AND INDUSTRY

I. Indian Economy-Developments and

Outlook

In the face of global headwinds, there is one bright spot - India. By most standards, India sailed through 2022-23 relatively unscathed and has really come out as a clear outperformer. Measured in dollars at current prices, India is now the worlds fifth biggest economy surpassing United Kingdom.

Gross Domestic Product (GDP) as per the

Second Advance Estimates for the year 2022-23 is estimated to have grown at 7.0 percent on top of 9.1 percent achieved in 2021-22. Apparently, it may look muted.

Keeping, however, the global uncertainties and high commodity prices in perspective, this is considered commendable. Growth was underpinned by strong investment activity bolstered by the governments capex push and buoyant private consumption. High GST and direct tax collections have provided the government with necessary ammunition to step up its capital expenditure, cushion the impact of the impending global slowdown and keep the economy buoyant. The credit growth also saw revival as a result of improvements in asset quality of the banks and other financial intermediaries. RBI played a key role in tackling the risks arising because of capital flight and mounting measured increase in the key interest rates to continue growth momentum simultaneous to tackling the inflation.

Going forward, with geopolitical uncertainties continuing unabated, theres wide consensus among economists that the global economy is on the verge of entering a phase of slowdown. Amid this uncertain environment, with rate hiking cycle almost coming to an end, softening commodity prices, high tax collections and overall buoyancy in domestic demand, Indias GDP growth is expected to remain resilient. It is expected to post a growth of around 6.5 percent in the FY 2023-24. The general election next year and

State elections in some of the major States are expected to provide necessary impetus to the economic activities in the current challenging environment.

II. Cement Industry Development and

Outlook

Cement industry continued with its growth momentum this year as well and cement demand estimated to have reached 393-398 Mn Tons level showing a healthy growth of ~11-12% in FY 2022-23. The solid growth is attributed mainly to the tailwinds observed in demand from infrastructure and rural housing segments.

Demand from infrastructure segment maintained its strong undertone as a result of higher government spending across different infra segments. Within infrastructure, demand from roads segment was the highest contributor followed by railways, irrigation and urban infrastructure. In fact, over the years, there has been a steady rise in share of infrastructure in total cement demand. Its share, which was around 11-13% in FY 13 has risen to 26-28% in FY23.

Rural housing segment witnessed improved demand owing to higher rural incomes resulting from better yields and rise in crop prices. Also, there was strong demand observed from "Pradhan Mantri Awas Yojana Gramin" as well as "Pradhan Mantri Awas Yojana Urban" which are part of GOIs "Housing for All by 2022" mission.

In FY 2022-23, housing construction from

PMAY-G witnessed construction of around 40 lakh dwelling units while that in PMAY-U witnessed the same at around 16 lakh units.

On the supply side, industry is estimated to have added ~30 MTPA of new cement capacity during FY 2022-23. The overall capacity utilization levels are estimated to be around 68-69% for year 2022-23. As regards, industry margins, the same saw contraction on account of elevated power & fuel costs. Going forward, in FY 2023-24 the cement demand is expected to maintain its healthy momentum. The demand growth is expected to be majorly led by Governments thrust on Infra spending and its flagship housing schemes under PM Awas Yojana. Demand is also likely to witness enhanced government spending before the Lok Sabha election in 2024. Infrastructure segment, as a result of ~24% enhanced outlay in budgeted spending of central government on key infra sectors, shall be main demand driver. New projects and capacity expansion plans announced by players in capital intensive sectors such as steel and start of work in PLI led projects &

Data Centers, are likely to spur demand from the industrial and commercial segments.

Expectation of normal monsoon and muted impact of El Nino along with continuation of healthy prices for farm produce suggests that overall demand in general and rural cement demand in particular should be healthy.

Industry margins are also expected to improve because of softening of international coal prices and declining crude oil prices. All in all, FY 2023-24 is expected to witness continuation of healthy cement demand.

4. NEW/EXPANSION PROJECTS

As part of its aim of enhancing its market share across markets, Company has been continually expanding its capacity. During the year, while it continued its work on setting-up its ongoing projects at Nawalgarh in Rajasthan and at Purulia in West Bengal (through its Wholly-owned subsidiary), it also started work of setting up integrated unit in Guntur district of Andhra Pradesh. Continuing with its proven track record of completing its project ahead of schedule and within budgeted cost, Company has expedited project work and preponed scheduled commissioning of its projects. Status of projects under implementation is as below:

Upcoming unit Type of Unit Scheduled Timeline Revised Timeline
Nawalgarh, Rajasthan Integrate Cement Unit Q4 – FY 2023-24 Q3 – FY 2023-24
Purulia, West Bengal (through WOS) Clinker Grinding Unit Q4 – FY 2022-23* Q1 – FY 2023-24
Guntur, Andhra Pradesh Integrate Cement Unit Q3 FY 2024-25 Q2 FY 2024-25

* Plant commissioning got delayed due to certain clearances.

Also, the Company undertook capacity upgradation work of cement grinding unit in Saraikela Kharsawan district of Jharkhand to enhance its capacity from 2.50 MTPA to 3.00 MTPA and completed the same in April 2023 through process optimization, de-bottlenecking and productivity enhancement initiatives. With this initiative along with new projects, the capacity of the Company (including Subsidiary) within India shall increase to ~56 MTPA by end of calendar 2024.

5. RISK MANAGEMENT

Companys risk management process is designed to identify and mitigate risks that have the potential to materially impact its business objectives and maintains a balance between managing risks and making most of the opportunities. The Board is responsible for overseeing the overall risk management framework of the Company. Risk Management Committee of Board keeps an eye on execution of the risk management plan of the company and advises the management on strengthening mitigating measures wherever required. The actual identification, assessment and mitigation of risks are however done by respective management teams of the company in a systematic manner. The risks are prioritised according to significance and likelihood. Risks having high likelihood and high significance are classified as ‘key risk.

The key risks identified by the Company and their mitigation measures are as under:

Risk title Risk Description Impact Mitigation Strategy
Climate Change The rising temperature as a result of high GHG emissions is the biggest threat humanity is currently facing. Many countries across the globe are working on reducing these emissions. India has committed to be carbon neutral by 2070. Cement production being regarded as carbon intensive process faces risks of restrictions and penal consequences from regulatory bodies. While we have taken carbon reduction targets and initiatives, not meeting the targets imposed by regulatory bodies may be a risk for us. This also includes the shifts in climate change related regulations impacting business continuity and the focus of investor community, proxy firms including shareholders over climate change action impacting market capitalization. • Identifying and implementing energy efficiency projects and initiatives, enhanced usage of renewable energy and waste heat recovery power generation. Targeting increased usage of AFR. Collaborating with industries and academic institutions to work on carbon capture, usage and storage (CCUS) and low carbon products. Defining roles and responsibilities including monitoring framework for achievement of ESG related targets.
Consolida- tion and Intense Com- petition The Indian cement industry has presence of several large players medium and small players. Over the years, supply has outpaced demand in the cement sector. Further, the industry is on a regular expansion mode. This has led to intense competition and affected capacity utilization across the industry. The continuous expansion and consolidation in the industry might impact our market share. Additionally, lower capacity utilization and margins because of intense competition also poses risk to our profitability. • Expanding capacity regularly at strategic locations to increase market share. Reviewing and aligning the market strategy to maintain and improve our market share.
Succession Planning Succession planning helps organizations identify required talent necessary for sustaining operations and achieving future growth To maintain business continuity, we need to ensure continued availability of right talent to address the risk of disruption in operational activities due to loss of talent. • Fostering and creating a culture of assigning responsibility to younger talent to groom as future leaders.
Regular trainings for succession planning.
• Cross functional and techno-commercial working experience for employees to develop & enhance business acumen for taking leadership roles.
• Strengthening existing practices and building roadmap for identification of critical positions, possible successors, their development plans.
Privacy and Cyber Security an important role in providing support to business processes including sales, logistics and production. Therefore, cyber security forms an integral part of the group wide IT security strategy. robust and advanced IT systems are essential part of the business. Further, in order to maintain business continuity, it is important to have robust IT systems and prevent data breaches as well as the risk of cyber- attacks. meet current and future needs. Strengthening the established practices and procedures for IT security and governance across the organisation. • Regular monitoring and tracking of licensed products, unauthorized software usage, tracking of data leakage, etc. across the organisation through best-in-class technology and process.
Assessment of IT infrastructure (e.g. Vulnerability Assessment and Penetration Testing - VAPT) followed by cyber security awareness sessions for employees.
Fuel Procurement The cement operations are predominantly dependent upon coal/ petcoke to meet fuel requirement. Being dependent on conventional source, can hinder the growth and create business continuity risks as well. Abrupt movements in fuel prices and abrupt changes in its availability due to geo- political reasons affect our business. Continued usage of conventional fuels pose regulatory risks. Designing plants and processes allows us to operate on multi-fuels and give flexibility to choose type of fuel basis the availability and at competitive cost. Enhancing share of alternative fuels to replace the usage of coal and petcoke.
• Procuring coal from domestic sources (linkage and captive coal block) to reduce dependency on imported coal.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The internal control systems includes the policies, processes, tasks, behaviors and other aspects of the Company, which when combined, facilitate effective and efficient operation, quality of internal and external reporting, compliance with applicable laws and regulations.

The Companys objectives, its internal organisation and the environment in which it operates are constantly evolving and as a result, the risks it faces are continuously changing as well. To make its internal controls effective and sound, the Company thoroughly and regularly evaluates the nature and extent of such risks to which the Company is exposed.

The Company has put in place adequate internal control systems commensurate with its size of operations. Companys internal control systems include policies and procedures, IT systems, delegation of authority, segregation of duties, internal audit and review framework, etc. Company has laid down internal financial controls and systems with regard to adherence to Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. The framework is in compliance with the requirements of the Companies Act, 2013. The Company periodically assesses design as-well-as operational effectiveness of its internal controls across multiple functions and locations through extensive internal audit exercises.

For carrying out internal audit, Company has an experienced in-house team manned by professionals who collectively possess the necessary skills, technical knowledge, objectivity, and understanding of the Company, industries and markets in which it operates, Further, to improve and strengthen processes, finding opportunities for automation and optimizing costs, the Company has appointed different external agencies for conducting internal audit of different geographical locations of the Company. For this purpose, three renowned independent audit firms have been engaged. These audit firms bring in their domain expertise for optimization and improvement of various business processes which can then be replicated throughout the organization.

Based on the assessment and observations of internal audit, process owners undertake corrective action in their respective areas of operations, and thereby strengthen the processes and controls. Significant audit observations and corrective actions thereon are presented to the

Audit Committee of the Board on the periodical basis. The Audit Committee evaluates the adequacy and effectiveness of internal financial control systems periodically.

7. HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Business environment is constantly evolving. In order to build a resilient organization that continues to succeed in the new world order, businesses need to build a management system that is flexible and responsive, built around four interrelated trends – more connection, high automation, lower transaction costs and demographic shifts. This requires revisiting the basic tenets of an organization to build models that are creative and adaptable. Models that enable business moves defined by corporate purpose, network of teams instead of hierarchies and where talent is the only differentiator. To usher in this new evolving world order, Company has undertaken an organization wide transformation powered by smart technology and the three words that defined all its processes including the people processes this year are –

Performance, Effectiveness and Optimization. Key initiatives and achievements for the year are as under:-Project ARISE: HR Transformation is enabled by smart technology. With the help of a renowned consulting partner and unicorn HR technology platform darwinbox, Company has undertaken HR transformation with objective of reviewing its existing HR processes and policies, benchmarking them with the best in industry and implementing policies most suited to our context. This project is aimed at building an organization that is Agile, Revolutionary, Innovative, Simple and Empowered (ARISE).

Indias Best Workplaces for Building a Culture of Innovation for All: Great Place to Work India released a new category of awards to recognize organizations that have built a culture of innovation, and the Company has been awarded and recognized as the only one in cement and building materials sector in this category.

Among Indias Top 50 Best Places to Work:

During the year, the Company was certified as a Great Place to Work, consequently for the 4th year. Apart from this, the Company also featured among Indias Top 50 Best Places to Work for, an upgrade from previous Top 100 league, across all sectors by the "Great Place to Work India". Additionally, it featured among Indias Top 25 employers in the Manufacturing Sector for the 4th consecutive year and among the best companies in Cement and Building Materials under Great Place to Work India survey.

Significant Achievement in HR Excellence: The Confederation of Indian Industries (CII) recognized the Company under category ‘Significant

Achievement in HR Excellence, for the second consecutive year. This recognition is based on a detailed examination of the Companys policies and practices as per the framework designed by CII followed by an onsite audit by senior members of the industry.

Industrial Relations: Company considers its employees as its biggest asset. We, therefore, always strive to build a healthy relationship with them and resolve issues through dialogue and discussions. As a result, employee relations remained cordial during the year.

Total number of employees as on 31st March, 2023 were 6,451.

8. OCCUPATIONAL HEALTH AND SAFETY

Following a ‘Safety First approach, health and safety is a top priority area of the Company. Company has built a robust safety management system based on the globally recognized and practiced OHSAS 18001 standard to institutionalize the organisation-wide focus on Occupational Health and Safety.

Safety Committees have been formed at all manufacturing units with equal representation from both management and non-management categories. These committees play a pivotal role in achieving the objective of ‘Safety First by undertaking assessment of safety issues on an ongoing basis and implementing suitable initiatives and programs for the same. To transform the way workers look at safety and make them aware and adopt best practices related to safety, these Committees periodically organise online and offline trainings, mentoring and coaching with the help of internal and external safety experts. This has helped bringing about a consistent positive change to the workers safety performance. Such interactions are also helping the plant level safety committees get feedback from workers and thereby identifying hazards and minimise the recurrence of the same. The Company has established a structured hazard identification and risk assessment process which helps it to identify potential risks which could have resulted in production disruptions and liabilities. To provide its employees and contractual workers access to quality and instant healthcare services, Company has established ‘Wellness Management Centres (WMC) at all its major plant locations. WMCs are equipped with qualified doctors and facilities which help carry out day to day health-care services and also conduct annual health check-ups for employees & contract workers. Health talks by experts and specialists are also organised to propagate awareness on chronic and lifestyle diseases.

All safety initiatives and employee engagement programs have been designed to ensure their continuous review and monitoring. Through a regular internal audit protocol, the Company assesses the overall safety performance and examines the existing procedures, systems and control measures for fire & safety hazards. Observations and recommendations are implemented by concerned departments within set timelines. As part of the process, monthly safety performance of all grinding units are reviewed and discussed with all safety professionals for implementation of common safety system and practices.

9. SUSTAINABILITY

The Company has imbibed Sustainability as a core element in its business model. It primarily focuses on conservation of environment, natural resources and energy efficiency. For this purpose, it promotes experimentation and implementation of new ideas for improving efficiencies, optimizing the use of input resources and promote circular economy in the process. Over the past year the role of the cement industry in carbon emissions has received a lot of attention in public discourses. The Government of India is also considering the introduction of setting carbon standards and carbon trading. Our company has taken this into account from an early stage and the details of its work on this issue are given in the key initiatives / developments as mentioned below:

-a) Increasing use of power from green resources: Company continued with its leadership position with regard to use of green power (WHR, wind and solar) in its total power consumption. It substantially enhanced its green power capacity to 385.6 MW in FY 2022-23 from 263.1 MW during FY 2021-22. As a result, Company has been able to increase share of green energy in total energy consumption to 51.1% from 48.3% during the previous year. It is in process to set up additional green power capacity of 83 MW at different locations to further enhance its share of green power for meeting its captive requirement. The

Company continues its recognition of having the largest WHR capacity in World Cement Industry excluding China. This apart, in terms of operational efficiency of WHRP, Company is regarded as one of the best in the industry.

b) Energy Conservation: Energy conservation is at the extreme focus of the Company and has seen numerous innovations and initiatives over the years ranging from shop-floor experiments to large capex. This has yielded multiple benefits including reduction in carbon intensity and rationalization of production costs. More details on initiatives taken in the area of energy conservation are given in Annexure 3 to this report.

Companys performance in energy conservation is getting exemplified at public forums like "Perform, Achieve & Trade" (PAT) scheme of the Govt. of India wherein the Company overachieved its targets in PAT

Cycle I, II and III continuously. The Company was awarded the ‘Best Performer award for obtaining maximum number of energy saving certificates under PAT Cycle I as well as PAT cycle II by Bureau of Energy Efficiency.

c) Alternative Fuels and Raw Materials:

Company is constantly working on to increase usage of alternative raw materials and fuels in its operations. Company uses wastes of various industries such as Pharma, Chemical, Sponge Iron, fertilizer, thermal power plant and others as alternative raw materials and alternative fuels. Company is also utilizing MSW (Municipal Solid Waste), RDF (Refused Derived Fuel) and Agriculture Crop Residue as alternate fuel to conserve fossil fuel. These measures have helped the Company to improve its Thermal Substitution Rate to 3.50% in FY 2022-23 from 2.41% in FY 2021-22. Companys share of alternate raw material consumption in total raw material consumption stood at 27.96% in FY 2022-23.

d) Greenproducts: The Company has been producing blended cement in the category of

Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC) and Composite Cement

(CC) conforming strictly to the specified BIS norms. Blended cement contributes to sustainable design by making concrete stronger and durable, reducing consumption of natural resources such as limestone, lowering greenhouse gas emissions, and contributes to a circular economy by utilizing wastes from power, iron and steel plants. Use of blended cement also has cost benefits for Companys customers. The share of blended cement in total cement production is 76.97% in FY 2022-23. During the year, Companys blended cement products manufactured at all its locations have been certified under renowned Greenpro certification by Confederation of Indian Industry (CII). We are also exploring feasibility of another sustainable alternative to OPC i.e., Limestone Calcined Clay Cement (LC3).

e) Carbon reduction: Company has been constantly working upon ways to reduce its carbon emissions. Over the years, measures such as installation of waste heat recovery plants, increased production of blended cement, increased usage of renewable energy, etc. have been taken by the Company in this direction. Its Specific Net Scope 1

emissions (kg CO2/ton of cementitious

material) has come down from 530 during FY 2021-22 to 521 during FY 2022-23. As part of Science based targets (SBTi), the Company has committed to reduce Scope 1 GHG emissions by 12.7% per ton of cementitious materials by 2030 from a 2019 base year and scope 2 GHG emissions by 27.1% per ton of cementitious materials within the same timeframe. The company is progressing well on the path to achieve its GHG emission reduction targets.

f) Water Conservation: Water is a precious natural resource. The Company has been working on two-pronged approach of optimising its water consumption as well as increasing availability of water through water harvesting and recharging. Companys initiatives in this regard such as installation of Air Cooled Condensers in all its thermal power plants and setting-up Waste Heat Recovery based power plants have been a great success. Other initiatives include construction of rain water harvesting structures around operating sites and mining area, installation of Sewage Treatment Plants for treating domestic waste water, use of recycled water in operations, online monitoring of ground water level, installation of water sensors & fixtures, etc. which help in reducing water consumption, increase water availability and reduce dependence on ground water. To augment the water supply from natural sources, the company also obtained treated sewage water from municipalities at few of its locations which was then further treated and used for manufacturing and other purposes.

As a result, Company is more than six times water positive.

g) Environment, Social and Governance

Reporting: Company released its first

Integrated Annual Report in FY 2021-22 including ESG disclosures based on GRI and other relevant guidelines. The Company also published its 18th annual Corporate Sustainability Report for the reporting period 2021-22, prepared in accordance with the "GRI Standards Comprehensive Option" assured by an independent certifying agency.

The Company has also issued its Business

Responsibility Report as part of Annual

Report since year 2012-13 disclosing its performance with respect to various Business Responsibility principles. This apart, it has been consistently participating in various benchmarking and rating exercises such as Dow Jones Sustainability Index, CDP Climate Change and CDP Water Security, etc. to gauge and improve its ESG performance.

10. CORPORATE GOVERNANCE

Your Directors reaffirm their continued commitment to good corporate governance practices. During the year under review, Company was in compliance with the provisions relating to corporate governance as provided under the Securities Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations, 2015 (as amended). The compliance report is provided in the Corporate Governance section of this Annual Report. The Auditors Certificate on Corporate Governance is enclosed at Annexure - 1.

11. BUSINESS RESPONSIBILITY AND

SUSTAINABILITY REPORT

In terms of Regulation 34 of Securities Exchange

Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended) read with relevant SEBI Circulars, Company is also releasing Business Responsibility and Sustainability Report (‘BRSR) as part of this Annual Report covering new reporting requirements on ESG parameters. The BRSR seeks disclosure on the performance of the Company against nine principles of the "National Guidelines on Responsible Business Conduct (‘NGRBCs). As per the SEBI Circulars, effective from the financial year 2022-23, filing of BRSR is mandatory for the top 1000 listed companies by market capitalisation. Accordingly, for the financial year ended 31st March, 2023, Company is publishing BRSR instead of Business Responsibility Report.

12. CORPORATE SOCIAL RESPONSIBILITY

As part of its triple bottom-line approach to its business, Company has always considered the community as its key stakeholder. It believes that the community around its operations should also grow and prosper in the same manner as does its own business. Accordingly, Corporate Social Responsibility forms an integral part of the Companys business philosophy. To oversee all its CSR initiatives and activities, the Company has constituted a Board-level Committee - CSR and Sustainability Committee. The major thrust areas of the Company include healthcare, education, women empowerment, infrastructure support, integrated rural development, etc. which are aligned to the areas specified under Schedule VII to the Companies Act, 2013. The Annual Report on CSR activities of FY 2022-23 with requisite details in the specified format as required under Companies (Corporate Social Responsibility Policy)

Rules, 2014 (as amended) is enclosed at Annexure

2 and forms part of this report. The CSR Policy of the Company may be accessed on website of the Company at https://www.shreecement.com/ investors/policies.

13. SUBSIDIARY COMPANIES

The Company has following subsidiaries:

S.No. Name of Subsidiaries Nature of Interest
1 Shree Global FZE
2 Raipur Handling and Infrastructure Private Limited
3 Shree Cement East Private Limited Wholly Owned Subsidiaries
4 Shree Cement North Private Limited
5 Shree Cement South Private Limited
6 Shree Enterprises Management Ltd
7 Shree International Holding Ltd Step-down
8 Union Cement Company PrJSC Subsidiaries
9 U C N Co. Ltd LLC (earlier Union Cement Norcem Co. Ltd. LLC)
10 Shree Cement East Bengal Foundation Subsidiary Company (Incorporated under section 8 of the Companies Act, 2013)

the Company are available on the website of the Company. The shareholders, who wish to receive a copy of Annual Accounts of the Subsidiary

Companies, may request the Company Secretary for the same. The policy for determining material subsidiaries as approved by the Board can be accessed on the website of the Company at https://www.shreecement.com/investors/policies. Pursuant to section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules,

2014, a statement containing salient features of the financial statements of the subsidiary companies in prescribed Form AOC-1 is given in the Consolidated Financial Statements of Company and forms part of this Annual Report.

14. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the

Company have been prepared as required in terms of provisions of Companies Act, 2013 and Securities Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations, 2015 (as amended) by following the applicable Accounting Standards notified by the Ministry of Corporate Affairs and forms part of this Annual Report.

15. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to section 134(5) of the Companies Act,

2013, the Board of Directors of the Company, to the best of their knowledge and belief and according to the information and explanations obtained by them, state that:

• In the preparation of the annual accounts for the year ended 31st March, 2023 the applicable accounting standards have been followed and there are no material departures from the same;

They have selected such accounting policies, judgments and estimates that are reasonable and prudent and have applied them consistently so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2023 and of the statement of Profit and Loss as well as Cash Flow of the company for the year ended on that date;

Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

The annual accounts have been prepared on a going concern basis;

Necessary internal financial controls have been laid down by the Company and the same are commensurate with its size of operations and that they are adequate and were operating effectively; and

Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

16. PERFORMANCE EVALUATION OF BOARD, ITS COMMITTEES & INDIVIDUAL DIRECTORS

In terms of requirements of Securities Exchange

Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended) and provisions of Companies Act, 2013, Nomination cum Remuneration Committee of the Board of Directors of the Company specified the manner for effective evaluation of performance of Board, its Committees and Individual Directors.

Based on the same, the Board carries out annual evaluation of its own performance, performance of its Committees, Individual Directors including Independent Directors. Company adopted the evaluation parameters as suggested by the Institute of Company Secretaries of India and Securities and Exchange Board of India with suitable changes from Companys perspective. The performance of the Board is evaluated by the Board on the basis of criteria such as Board composition and structure, effectiveness of Board processes, information flow to Board, functioning of the Board, etc. The performance of Committees is evaluated by the Board on the basis of criteria such as composition of Committees, effectiveness of Committee working, independence, etc. The Board evaluates the performance of individual Director on the basis of criteria such as attendance and contribution of Director at Board/Committee Meetings, adherence to ethical standards and code of conduct of the Company, inter-personal relations with other Directors, meaningful and constructive contribution and inputs in the Board/ Committee meetings, etc.

Company appoints an External Facilitator for the purpose of carrying out the performance evaluation in a fair and transparent manner.

Structured questionnaires are circulated to Board

Members for providing feedback on various parameters (as stated above) including on performance of Board / Committees / Directors, engagement levels, independence of judgment and other criteria. This is followed with review and discussions at the level of Board.

In a separate meeting of the Independent

Directors, performance evaluation of Non-Independent Directors, the Board as a whole and performance evaluation of Chairman is carried out, taking into account the views of Executive and Non-Executive Directors. The quality, quantity and timeliness of flow of information between the Company Management and the Board which is necessary for the Board to effectively and reasonably perform their duties are also evaluated in the said meeting.

17. DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year:-

(i) The Board of Directors of the Company in its meeting held on 21st May, 2022, on the recommendation of Nomination cum Remuneration Committee appointed

Mr. Zubair Ahmed (DIN: 00182990) as an Independent Director of the Company w.e.f. 21st May, 2022 for a term of 5 (five) years, subject to approval of the members. Approval of Members was obtained at the 43rd Annual General Meeting held on 28th July, 2022.

(ii) Mr. Benugopal Bangur (DIN: 00244196) resigned as Chairman and Director of the

Company from the close of Business Hours on 14th October, 2022.

(iii) The Board of Directors of the Company in its meeting held on 14th October, 2022, on the recommendation of Nomination cum

Remuneration Committee, subject to the approval of members:-

(a) appointed Mr. Neeraj Akhoury (DIN: 07419090) as Managing Director of the Company w.e.f. 14th October, 2022, for a period of 5 (five) years; (b) changed the designation of Mr. Hari Mohan Bangur (DIN: 00244329) from "Managing Director" to "Chairman" effective from 15 th October, 2022;

(c) changed the designation of Mr. Prashant Bangur (DIN: 00403621) from "Joint Managing Director" to "Vice Chairman" effective from 14th October, 2022; Approval of Members for the above was obtained by passing of Resolution(s) through Postal Ballot on 7th December, 2022.

(iv) Dr. Yoginder K. Alagh (DIN: 00244686) and Mr. Ratan Lal Gaggar (DIN: 00066068) resigned from the position of the Independent Directors of the Company effective from the close of Business Hours on 10th August, 2022 & 15th December, 2022 respectively, due to their personal reasons.

Further, at the time of resignation, they had confirmed that there were no material reasons for their decision to resign.

(v) Mr. Prakash Narayan Chhangani (DIN: 08189579), Whole Time Director of the Company resigned as Director of the Company from the close of Business Hours on 13th February, 2023.

In accordance with section 149(7) of the Companies Act, 2013 and Regulation 25(8) of the

Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations, 2015 (as amended), each Independent Director has given a declaration to the Company confirming that he/she meets the criteria of independence as specified under section 149(6) of the Companies Act, 2013 and

Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations, 2015 (as amended). They have also confirmed the compliance of Rule 6 of the Companies (Appointment and Qualification of

Directors) Rule, 2014 regarding inclusion of their names in the data bank of Indian Institute of Corporate Affairs (IICA).

The Board is of the opinion that the Independent Directors of the Company including those appointed during the year, possess requisite qualifications, expertise and experience and they hold highest standards of integrity.

In accordance with the provisions of the

Companies Act, 2013 and Articles of Association of the Company, Mr. Hari Mohan Bangur (DIN: 00244329), Director [‘Chairman of the Company (in whole time capacity)] of the Company will retire by rotation in the ensuing Annual General Meeting (AGM) and being eligible, offers himself for re-appointment. The Board recommends the re-appointment of Mr. Hari Mohan Bangur. His re-appointment at the 44th AGM as a director retiring by rotation would not constitute break in his tenure of appointment.

18. FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

In order to acquaint the new directors with the Company, a detailed presentation is given to them at the time of their appointment which covers their role, duties and responsibilities, Companys strategy, business model, operations, markets, organizational structure, products, etc. A detailed presentation along similar lines is sent to existing

Independent Directors every year to keep them apprised of the above details.

As part of Board discussions, presentation on performance of the Company is shared with the Board during its meeting(s). Plant visits are also arranged for Independent Directors from time-to time for better understanding of the Companys operations. The details of such familiarisation programmes for Independent Directors are posted on the website of the Company and can be accessed at link https://www.shreecement.com/ investors/disclosure-regulation.

19. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the

Companies (Appointment and Remuneration of

Managerial Personnel) Rules, 2014 are provided at Annexure - 4.

In terms of the provisions of section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names of employees and other particulars of the top ten employees and employees drawing remuneration in excess of the limits as provided in the said rules are set out in the Boards Report as an addendum thereto. However, in terms of provisions of the first proviso to section 136(1) of the Companies Act, 2013, the Annual Report is being sent to the members of the Company excluding the aforesaid information. The said information is available for inspection at the Registered Office of the Company during such working hours as are provided under the Articles of Association of the Company and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.

20. AUDITORS

I. Statutory Auditors

M/s. B R Maheswari & Co LLP, Chartered Accountants (Firms Registration No. 001035N/N500050) were appointed as Statutory Auditors of the Company, in the Annual General Meeting held on 28th July, 2022, for a consecutive term of five years from the conclusion of 43rd Annual General

Meeting till the Conclusion of 48th Annual General Meeting. They have given their report on the Annual Financial Statements for Financial Year 2022-23.

The Audit Report does not contain any qualification, reservation or adverse remark.

II. Secretarial Auditors

The Board had appointed M/s. Pinchaa & Co.,

Company Secretaries as Secretarial Auditor of the Company to conduct Secretarial Audit for the Financial Year 2022-23. They have submitted their report in prescribed format and the same is enclosed at Annexure - 5.

The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

III. Cost Auditors

The Cost Auditors are in process of conducting the audit of cost records for year 2022-23 and shall submit their report in due course.

In terms of the provisions of section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Board of

Directors of the Company have appointed M/s. K. G. Goyal & Associates, Cost Accountants, Jaipur (Firm Registration No.

000024) to conduct the cost audit for the financial year ending 31st March, 2024 at a remuneration as stated in the Notice convening the 44th Annual General Meeting of the members. As required under the

Companies Act, 2013, the remuneration payable to cost auditors has to be placed before the Members at the general meeting for ratification. Hence, a resolution seeking ratification of remuneration by the Members, payable to the Cost Auditors, forms part of the Notice of the ensuing 44th AGM.

21. OTHER DISCLOSURES

(a) C omposition of Audit Committee: The

Audit Committee comprises of Mr. Shreekant Somany as Chairman, Mr. Nitin Desai, Mr. Sanjiv Krishnaji Shelgikar and Mr. Zubair Ahmed as other Members. More details are given in the Corporate Governance Report. All the recommendations made by the Audit Committee were accepted by the Board.

(b) Details of Meetings of Board and its Committees: The Board of Directors of your Company met 4 times during the year to deliberate on various matters. The meetings were held on 21st May, 2022, 28th July, 2022, 14th October, 2022 and 8th February, 2023. Further details are available in the Corporate Governance Report forming part of this Annual Report. The intervening gap between the meetings was within the period prescribed under the Companies

Act, 2013 and the Securities Exchange

Board of India (Listing Obligations and

Disclosure Requirements) Regulations,

2015 (as amended).

(c) Annual Return: In terms of section 92(3) of the Companies Act, 2013 and Rule

12 of the Companies (Management and Administration) Rules, 2014, the Annual

Return of the Company is available on the website of the Company at link https:// www.shreecement.com/investors/ shareholder-information.

(d) Particulars of Loans, Guarantees or Investments: Details of Loans, Guarantees and Investments covered under the provisions of section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 are given in Notes to the standalone financial statements.

(e) Related Party Transactions: All Related

Party Transactions during the financial year 2022-23 were on arms length basis and in ordinary course of business. They were all in compliance with the applicable provisions of the Companies Act, 2013 and the Securities

Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,

2015 (as amended). All such transactions are placed before the Audit Committee for review/approval. The necessary omnibus approvals have been obtained from Audit Committee wherever required. There were no material Related Party Contracts/ Arrangements/Transactions made by the Company during the year 2022-23 that would have required Shareholders approval under provisions of section 188 of the Companies Act, 2013 or of the Securities Exchange

Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended). The Company has adopted a Related Party Transactions Policy duly approved by the Board, which is uploaded on the Companys website & may be accessed at https://www.shreecement.com/ investors/policies.

Further, in terms of Securities and Exchange

Board of India (Listing Obligations and

Disclosure Requirements) (Amendment)

Regulations, 2018, the transactions with person/entity belonging to the promoter/ promoter group holding 10% or more shareholding in the Company are as under:

Name of the Entity % Holding in the Company Amount Rs. ( in Crore) Nature of Transaction
Shree Capital Services Ltd. 24.90% 0.50 Payment of Office Rent

(f) D eposits from Public: The Company has not accepted any deposits from public covered under Chapter V of the Companies Act, 2013 during the year and as such, no amount on account of principal or interest on deposits from public was outstanding.

(g) M anaging the Risk of Fraud, Corruption and Unethical Business Practices Vigil Mechanism/Whistle Blower Policy:

The Company has adopted a whistle blower policy and established the necessary vigil mechanism for employees and Directors to report concerns about unethical behaviour. The policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the

Audit Committee. The whistle blower policy may be accessed on the website of the Company at https://www.shreecement.com/ investors/policies.

Code of Conduct: Company believes in the principle of trust which can be derived through ethical practices, transparency and accountability to stakeholders. Keeping the same into account, Company has in place a "Code of Conduct". Every director and employee is required to adhere to the same. The details of the code of conduct can be accessed on the website of the Company at https://www.shreecement.com/ investors/policies.

Anti-Bribery and Anti-Corruption Policy:

To conduct the business in an ethical, honest and transparent manner, the Board of Directors of the Company has adopted

Anti- bribery and Anti-Corruption Policy.

Company has zero tolerance approach toward bribery and corruption. The Policy applies to all the directors and employees of the Company and its subsidiaries including third parties who are working on behalf of Company/its subsidiaries. The details of the policy can be accessed on the website of the Company at https://www.shreecement.com/ investors/policies.

(h) Remuneration Policy: Company firmly believes in nurturing a people friendly environment which is geared to drive the organisation towards high and sustainable growth. Each and every personnel working with Company strives to achieve the Companys vision of being the best in the industry. Its remuneration policy is therefore designed to achieve this vision. The policy has been approved by the Board on the recommendation of Nomination cum Remuneration Committee. The policy is applicable to Directors, Key Managerial Personnel and other employees. The policy provides that while nominating appointment of a Director, the Nomination cum

Remuneration Committee shall consider the level and composition of remuneration which is reasonable and sufficient to attract, retain and motivate the Directors for delivering high performance. The Remuneration Policy can be accessed on the website of the Company at https://www.shreecement.com/ investors/policies.

(i) Policy on Prevention, Prohibition and

Redressal of Sexual Harassment at

Workplace: The Company has complied with the provisions of the constitution of the ‘Internal Committee as per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act"), Company is having "Prohibition of Sexual Harassment Policy" which provides the mechanism to redress complaints reported under the said

Act. As provided by the POSH Act, Company has formed Internal Complaints Committees

(ICC) at all work places to cover all Units, Sales offices, Regional office and Corporate offices. The Internal Committee (IC) comprises of internal members and external member who has an extensive experience in the field. Company has not received any complaint of sexual harassment during the financial year 2022-23.

(j) Material Changes after the Close of Financial Year: There have been no material changes and commitments which have occurred after the close of the year till the date of this report, affecting the financial position of the Company.

(k) Significant and Material Orders passed by the Regulators or Courts: No significant material orders have been passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations.

(l) Maintenance of Cost Records: Company is required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013.

Accordingly, such accounts and records are made and maintained by the Company.

(m) Compliance with Secretarial Standards:

Company has complied with the Secretarial Standards issued by Institute of Companies Secretaries of India (ICSI) on Board Meetings (SS- 1) and General Meetings (SS-2).

(n) Adoption of new set of Articles of Association : During the year 2022-23 company has adopted new set of Articles of

Association of the Company in substitution, and to the entire exclusion of the Articles contained in the existing Articles of Association of the Company, to make it consistent and align it with the provisions of the Companies Act, 2013 and the Rules made thereunder.

(o) Alteration in the Object Clause of the Company : The Board of Directors of the Company through circular resolution passed on 4th March, 2023, approved alteration of Clause Ill. (A) of the Objects Clause of the Memorandum of Association of the Company by inserting clause 2 & 3 for covering the mining of coal and other minerals/ materials and commercial activities related thereto that are not specifically covered under the Main Objects. Approval of Members was obtained by passing of Resolution through postal ballot on 9th April, 2023.

(p) Cyberattacks and Cybercrime : On 28th

March, 2023, Company had detected an incident of breach of its IT security on its IT assets. Companys IT team with the help of team of external consultants immediately took all the necessary measures to prevent damage to the IT systems of the Company.

The Companys production facilities were not affected by the incident. However, the dispatches faced some difficulty, which were normalized in a days time. All the critical data have since been recovered and restored. Company has taken all necessary initiative to further strengthen its measures to deal with risks arising out of cyber security related incidents.

22. ACKNOWLEDGEMENT

The Directors take this opportunity to express their deep sense of gratitude to its Central and

State Governments and local authorities for their continued co-operation and support. They also would like to place on record their sincere appreciation for the commitment, hard work and high engagement level of every member of the Shree family without which the exemplary performance of the Company year after year, would not have been possible. The Directors would also like to thank various stakeholders of the Company including customers, dealers, suppliers, lenders, transporters, advisors, local community, etc. for their continued committed engagement with the Company. The Directors would also like to thank the Members of the Company for confidence and trust reposed in them.

For and on behalf of the Board
H. M. Bangur
Date: 22nd May, 2023 Chairman
Place: Gurugram DIN: 00244329

Annexure-1 to the Boards Report

IndependentAuditorsCertificate Governance on Corporate

To,

THE MEMBERS OF

SHREE CEMENT LIMITED

1. We, B.R. Maheswari & Co. LLP, Chartered

Accountants, the Statutory Auditors of Shree

Cement Limited ("the Company"), have examined the compliance of conditions of Corporate

Governance by the Company, for the year ended on 31st March, 2023, as stipulated in regulations 17 to 27 and clauses (b) to (i) of regulation 46(2) and para C and D of Schedule V of the SEBI

Listing (Obligation and Disclosure requirements) Regulations, 2015 (the Listing Regulations).

Managements Responsibility

2. The compliance of conditions of Corporate Governance is the responsibility of the Management. This Responsibility includes the

Design, implementation and maintenance of internal controls and procedures to ensure the compliance with the conditions of the Corporate Governance stipulated in Listing Regulations.

Auditors Responsibility

3. Our responsibility is limited to examining the procedures and implementation thereof, adopted by the Company for ensuring compliance with the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial Statements of the Company.

4. We have examined the books of account and other relevant records and documents maintained by the Company for the purposes of providing reasonable assurance on the compliance with Corporate Governance requirements by the Company.

5. We have carried out an examination of the relevant records of the Company in accordance with the Guidance Note on Certification of Corporate Governance issued by the Institute of the Chartered Accountants of India (the ICAI), the

Standards on Auditing specified under section

143(10) of the Companies Act 2013, in so far as applicable for the purpose of this certificate and as per the Guidance Note on Reports or

Certificates for Special Purposes issued by the ICAI which requires that we comply with the ethical requirements of the Code of Ethics issued by the ICAI.

6. We have complied with the relevant applicable requirements of the Standard on Quality Control (SQC) 1, Quality Control for Firms that Perform

Audits and Reviews of Historical Financial

Information and Other Assurance and Related

Services Engagements.

Opinion

7. Based on our examination of the relevant records and according to the information and explanations provided to us and the representations provided by the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in regulations 17 to 27 and clauses (b) to (i) of regulation 46(2) and para C and D of Schedule V of the Listing Regulations during the year ended 31st March, 2023.

8. We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company.

For B R Maheswari & Co LLP
Chartered Accountants
Firms Registration No.: 001035N/N500050
Date: 22nd May, 2023 Sudhir Maheshwari
Place: Gurugram Partner
UDIN: 23081075BGQYRL7021 Membership No.: 081075