Barak Valley Cements Ltd Management Discussions.


The global economy grew 2.9% in 2019 compared to 3.6% in 2018. This sharp decline was precipitated by an increase in global trade disputes that affected the cross-border movement of products and services, a slowdown in the global manufacturing sector, weak growth coming out of some of the largest global economies and the impact of Brexit. The result was that global trade grew a mere 0.9% in 2019, pulling down the overall economic growth average. The Great Lockdown, as a result of the COVID-19 pandemic, is projected to shrink the global growth significantly starting from the calendar year 2020.

(Source: World Economic Outlook, April 2020, CNN, Economic Times, trading economics, Statista, CNBC)

Global growth over the years

Year World output Advanced economies Developing and emerging
2015 3.5 2.3 4.3
2016 3.4 1.7 4.6
2017 3.9 2.5 4.8
2018 3.6 2.2 4.5
2019 2.9 1.7 3.7


At the start of fiscal year 2019-20, there were hopes of Indian economy regaining the growth momentum, mainly buoyed by the large domestic driven consumption. But the fiscal year began on a tough note with a five-year lower GDP growth rate of 5.1% (later revised to 5.6%) in the first quarter with global headwinds casting its shadow on the economy. The slowdown continued in the subsequent quarters with official estimates pegging GDP in the first nine months (April-December) at 5.1% against 6.3% in the same period in 2018-19. Though the country experienced prolonged rainfall in the two main monsoon seasons resulting in higher farm output, manufacturing activity was hit hard with weak demand and lower capacity utilisation. Construction sector saw subdued growth. Investment in terms of gross capital formation declined. The persisting slowdown was aggravated by the sudden outbreak of coronavirus pandemic and nation-wide lock down from March 25, 2020. This led to the country clocking a moderate GDP growth of 4.2% in 2019-20 against 6.1% in 2018-19, as per official estimates.

Y-o-Y growth of the Indian economy

FY 16-17 FY 17-18 FY 18-19 FY 19-20
Real GDP growth (%) 8.3 7 6.1 4.2
Q1, FY 19-20 Q2, FY 19-20 Q3, FY 19-20 Q4, FY 19-20
Real GDP growth (%) 5.2 4.4 4.1 3.1

(Source: Economic Times, CSO, Economic Survey, IMF, EIU) 32 INDIAN CEMENT INDUSTRY OVERVIEW

The Cement Industry after witnessing a healthy demand growth of 13% in the previous year 2018-19, remained sluggish during the year under review and slumped to register a marginal negative growth. As earlier mentioned, the Indian economy which grew at 7.2% and 6.8% in the previous two fiscal, witnessed a slowdown coupled with the out-break of COVID -19 pandemic during the last quarter to register an approximate growth of only 4%. Apart from general economic slowdown, the cement demand was also affected post the general elections in May19 due to stalling of some of the existing projects for review, extended monsoons, low capital outgo on infrastructure and road activities and was compounded by the stress in the financial sector and thereby low growth in housing sector. Though there was some recovery in cement demand from December19, the momentum could not be sustained with the out-break of COVID-19 pandemic which impaired the construction activities in total. The emergence of this virus has crippled the economic activities worldwide with experts predicting negative GDP growth ranging from 3 to 5% worldwide for the Financial Year 2020-21. The selling price of cement which started improving from February19 went down after the first quarter of the financial year under review resulting in lower realization adversely affecting the bottom line. The industry, during March 2020 alone had witnessed a decline in growth by 25% in production as compared to earlier year. The cement industry in South with supply overhang had a negative growth of 15% during the 4th quarter and a de-growth of around 8% during the year under review. To combat the spread of the virus, the union government announced a nationwide lockdown from the last week of March2020 resulting in complete stalling of all activities. The lockdown has also been extended with some relaxations. The lockdown could have a near/long term impact on the cement industry with migrant labour in the construction industry returning to their home towns stopping the work then and there. The positive indicator for the year was softening of the fuel prices which helped in mitigating the impact on account of the decline in demand. The volatility of the exchange rate of rupee against dollar continued to haunt the industry reducing the benefit of softening fuel price. However, with the relaxation of restrictions from the month of May 2020, the cement demand has started recovering and the new initiatives announced by some of the State Governments like construction of roads, irrigation projects, low cost housing etc have further improved the prospects for the cement industry. The outlook for the industry for the foreseeable future appears to be cautiously optimistic given the smart recovery of cement prices and softening of the crude prices further.

Opportunities and Threats, Risks and Concerns

Eastern India accounts for 18% of Indias cement capacity. Almost all eight north- eastern states in India are growing in 7-8%. To achieve the targeted approach of bringing the rest of India closer to the North-East, an action plan was formulated by the Ministry of Development of North Eastern Region (DoNER). DoNER planned to operationalise 200 projects worth about Rs. 3,000 Crore in the North Eastern Region, an average two project comprising Rs.30 Crore per day. The Government allocated 30% of North Eastern Councils budget for new projects under the existing schemes of North- Eastern Council for focused development of deprived areas; neglected sections of society and emerging priority sectors in the North-Eastern States. A portion of the funds can be utilised for building roads in remote hill regions and for addressing climate change challenges in the North- east. The Government allocated Rs. 5,559 Crore for the construction of North East Gas Grid project across the eight states, Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura. The budgetary allocation for FY 20-21 was pegged at Rs. 3,049 Crore compared to Rs. 2,670 Crore in the Revised Estimate (RE) FY 19-20. (Source: Economic Times, Live Mint, Deccan Herald, CMA India)

Growth Drivers

Increasing population: India is the second most populous country after China, with a population of 1.36 Bn in 2019, validating the need for more houses and cement.

Increasing incomes: The nominal per- capita net national income in FY 19-20 was estimated at Rs. 1,35,050 a rise of 6.8% compared to Rs. 1,26,406 in FY 18-19, driving consumption.

Urbanization: By 2030, approximately 40% of the global population could reside in urban India (34% today), catalyzing the demand for cement in the country.

Infrastructure development: There has been steady growth in the implementation and completion of large infrastructure projects, especially in Northern and Central India. The Central Government-backed mega-infrastructure projects like Bharatmala, Sagarmala and Smart Cities are beginning to report increased traction in terms of project award and implementation, a trend that is likely to sustain and further drive the cement sector in the foreseeable future.

Affordable housing: The Indian housing and real estate segment is being driven by the demand emerging from Indias affordable segment across rural and urban geographies. Rs. 1.53 Crore houses were constructed under the Pradhan Mantri Awas Yojana between 2014 to 2018.

Housing shortage: According to Ministry of Housing and Urban Affairs, there was an affordable housing shortfall of approximately 10 Mn houses. With the government addressing this housing shortage, the cement industry is expected to receive huge traction.

Highway construction: In FY 19-20 ( From April to January), highway construction and expansion reached at 27 km per day. The Central Government has estimated that 65,000 km of highways will be constructed at a cost of > Rs. 5.35 Lacs Crore by 2022. (Source: Times of India)

Rural roads: Since 2014, 200,000 km of new roads were built across rural India at a rate of 109 km per day. In the year under review, a sum of Rs.19,500 Crore has been allocated in the Union Budget FY 20-21 towards Pradhan Mantri Gram Sadak Yojana (PMGSY). (Source: PMGSY)

Metro railways: Currently, 10 cities in India have a functional metro rail network spanning >500 km with the construction of >660 km across 15 cities under consideration. (Source: Economic Times)

Airport: The Government of India has planned on exponentially increasing the number of flights in its fleet to 1,200 airplanes by FY 23-24. In order to support these airplanes, the number of airports in the country will also be increased by 100, which would warrant increasing demand of cement. (Source: Economic Times)

Port development: A sum of Rs. 550 Crore was allocated under Sagarmala to develop Indias ‘blue economy, a 44% increase from the Rs. 381.08 Crore allocated in the previous year. Sagarmala, the Central Governments flagship programme to develop and modernise ports, was launched in 2015 with the prime objective of developing industrial hubs along the countrys 7,500-km long coastline. (Source: Kotak Securities)


In the Union Budget FY 20-21, the Government allocated 9% of total railway budget 2020 for the North Eastern states. The outlay includes a number of projects for laying new tracks, doubling of railway lines in the region including the newly proposed doubling of 381 km long Lumding- Tinsukia- Dibrugarh line at an estimated cost of Rs. 3,810 Crore. The three states namely Mizoram, Manipur and Sikkim are expected to be connected by railways by 2022.

The Government aims to electrify the railway lines in the seven north eastern states by 2021.

The Railway Ministry would execute 491 projects (189 new railway lines, 55 gauge conversion and 247 doubling projects) in seven north eastern states at a cost of Rs. 6.48 Lacs Crore. The total length of these projects is 48,861 km and the total expenditure incurred (upto March, 2020) is Rs. 1.43 Lacs Crore and length commissioned is 9,113 km.

The Government aims to complete the 51.38 km Bhairabi-Sairang project in Mizoram by 2023.

There are plans to extend railway lines to three remaining capital cities of northeast India - Imphal (Manipur), Aizawl (Mizoram) and Kohima (Nagaland), excluding Meghalayas Shillong and Sikkims Gangtok by 2020.

The Government aims to connect all capitals of North Eastern Indian states by a broad gauge rail link by end 2020.

North-east India and Bangladesh is expected to be connected by Indian Railways line by 2021. (Source: Economic Times, Live Mint, Financial Express)


The construction of four new bridges over the Brahmaputra, namely Majuli- Jorhat, Dhakuakhana Tekeliphuta- Disangmukh, Gohpur-Numaligarh and one near Tezpur are at different stages of implementation.

DoNER undertook 49 projects of Rs. 1,231 Crore for setting up of a bamboo industrial park in Dima Hasao district in Assam at a cost of Rs. 50 Crore and construction of eight new projects for Rs.586.3 Crore under North East Road Sector Development Scheme (NERSDS) and North East Special Infrastructure Development Scheme (NESIDS).

The average rate of highway construction in north east India stood at 1.5 km per day in 2019.

Under NLCPR scheme, 577 projects worth Rs. 64,664 Mn (as of May 2019) have been approved for construction under NLCPR.

The Government approved an amount of Rs.53,370 Crore for infrastructure and socio and economic development of North eastern region during the FY 19-20.

Under the North East State Road Improvement Project (NESRIP), Rs. 9 Crore for four road projects (Rs. 3 Crore for Garobadha to Dalu (93.5 km) Tranche-1 road in Meghalaya, Rs. 76 Lacs for Serchhip to Buarpui (55 km) Tranche-II road in Mizoram, Rs. 2.63 Crore for Barpeta to Kalitakuchi (58.5 km) Tranche-1 road in Assam and Rs. 2.61 Crore for Udaipur (NH 44) to Melaghar (20.3 km) Tranche-2 road in Tripura) has been released. (Source: Economic Times, Business Standard, the Print, NDTV).

Risk Management

Risk Management is to identify, monitor and take precautionary measures with respect to events that may pose risks for the business. The Board of Directors of the Company periodically review the same and plan for action to be taken. The risk management policy in general encompasses assessment process covering projects, raw materials, occupational health, environment, regulatory rules, competition, demand, substitute products and other operational risk related to the business. Periodical meetings are held by the senior management to identify business risks and to formulate plan for managing the same which helps in strategic decision making by the Board easily.

Demand risk: A less-than-optimal demand growth in the region can lower revenues.

Mitigation: Infrastructural development activities in North Eastern India mostly from the rural area have progressed at a fair clip and the Company has capitalised on these incipient opportunities to emerge as the largest player in the region with a market share of >23%.

Raw material risk: Unavailability of raw material could decelerate production and lead to customer attrition.

Concentration risk: Concentration of operations in a particular location could lead to price under-cutting.

Cement industry being majorly dependent upon availability of quality coal at affordable cost. Policy of the Government may impact availability of coal. Policies of the Government as well as regulatory role may affect the industry to a great extent. Indias cement sector has high resource risk as limestone, which is an important raw material used in the production of cement is considered as scarce mineral and extraction of limestone is regulated by various State and Central Laws. Any major changes in Governments Environmental and Forest regulations may affect limestone availability to cement plants. In order to boost the cement sector, the Government of India has allowed FDI in the sector which will attract foreign players in the country and this may lead to tougher competition to the domestic players.

Regulatory changes have been proceeding at a rapid pace across countries due to changes in climate and environment. Non-compliance to new standards imposes high degree of complexity as it may lead to reputational and financial consequences. To meet business challenges, transformation, upgradation, modification etc. are the different tools which are used to comply with the regulatory changes but these come at a cost.

Your Company has evolved a risk management framework to identify, assess and mitigate the key risk factors of the business .The Board of Directors of the Company is kept informed about the risk management of the Company.


The year began on a grim note with lockdown from March 25, 2020 and stringent measures to restrict the spread of Coronavirus (COVID-19) severely disrupting the economic activity. World Bank expects a significant contraction of 5.2% in world economy in 2020 while IMF expects it to shrink by 3%. Indian economy is also expected to contract by 4.5% in 2020-21 following longer period of lockdown and slower recovery than expected in April.

While the Government has announced a series of stimulus and monetary policy measures, they are largely aimed at easing supply side constraints.

Economy is still facing downside risks to growth and the recovery in demand mainly hinges on pick-up in economic activity with focus on job creation and income generation.

The expected good rabi crop and the forecast of normal south west monsoon augur well for the rural economy. Given that Indias economy is driven by its high domestic consumption and a strong rural base, it is expected that the economy will bounce back once the pandemic situation is under control.

According to experts, there are also reports of green shoots in terms of certain economic indicators in some sectors reflecting the economic recovery. It is hoped that the Government will pursue the ambitious plan to give push to big ticket investments in the infrastructure projects identified across the sectors as part of National Infrastructure pipeline which has envisaged an investment of over Rs. 102 lakh crore over five years till 2025.

There are expectations of increased public spending on rural infrastructure, irrigation, road building and other projects. This along with pick up in individual home building activity is expected to improve the cement demand.

The Budget for 2020-21 has also proposed a new tax regime for personal income with revised tax rates and has extended the tax benefits for affordable housing. These measures are expected to stimulate the housing and construction activity and improve the cement demand with better prices.


The following are the highlights of the performance of the Company (Standalone):

(Rs. in Lacs)

Particulars 2019-20 2018-19
Net Sales 15496.98 13966.71
Profit/(Loss) after Tax 422.31 302.72
Net Worth 8870.32 8461.27
Borrowings(Long Term) 5223.77 3739.77
Earning Per Share 1.91 1.37
Production(MT) 2,48,061 2,36,223
Dispatches(MT) 2,47,982 2,36,044

During the year under report, your Company has earned net profit of Rs. 422.31 Lacs in comparison to net profit of Rs. 302.72 Lacs in the previous year.


Your Company has a diversified customer base in Tripura, Mizoram and Barak Valley Region consisting of potential customers, contractors, builders, institutions, Government Agencies. Your Companys brand "Valley Strong" is a brand of trust and reliance for the people of North East since inception and therefore the entire production of the Company is sold in north east region. During the year the Gross Revenue from operations were Rs. 15496.98 Lacs in comparison of previous year Rs. 13966.71 Lacs. Your Company had also incurred Rs. 241.46 Lacs in the year 2019-20 as compared to Rs. 185.28 Lacs in the year 2018-19 on the Advertisement, Publicity & Sales Promotion expenses.


(a) Raw Material

(i) Lime Stone :

During the year, the Company has consumed of 232,929 MT of Limestone as compared to 232,479 MT of Limestone during last year. Meghalaya Minerals & Mines Ltd. The Company had incurred Rs. 918.54 per MT an average acquisition cost of Limestone as compared to Rs. 917.57 per MT in last year.

(ii) Fly Ash:

During the year, the Company has consumed 32,082 MT of Fly ash against 39,120 MT during last year. The average acquisition cost per MT of Fly ash has been Rs. 1,779.19 per MT in current year as compared to Rs. 853 per MT in the last year. The total cost of fly ash consumed in the year 2019-20 is Rs. 570.81 as compared to 2018-19 was Rs. 333.67 Lacs.

(iii) Gypsum:

Gypsum consumption of the Company in the year 2019-20 was NIL.

(b) Salaries, Wages and Labour Cost

In current year 2019-20, the Company has incurred Rs. 1,257.97 Lacs on salaries, wages and labour cost as against Rs. 1,117.58 Lacs in 2018-19.

(c) Transportation Cost

The Company has dispatched 248,061 MT of cement in the Year 2019-20 as compared to 236,223 MT of cement in the previous financial year. Due to this the overall transportation cost had increased to Rs. 2,304.51 Lacs as compared to Rs. 2,288.55 Lacs in the last year.

(d) Financial Costs

During the year the Company had incurred Rs. 772.19 Lacs in Interest & Financial Costs as compared to Rs. 801.10 Lacs in the previous year 2018-19.


The Company adheres to the prescribed Accounting Standards for the purpose of preparation of Financial Statements. The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 under the provisions of the Act and subsequent amendments thereof.

The financial statements are prepared on a going concern basis and are presented in Indian Rupees and all values are rounded off to the nearest million except when otherwise indicated. The financial statements have been prepared under the historical cost basis except for derivative financial instruments and certain other financial assets and liabilities that have been measured at fair value.


The Company has discussed the performance of following segments:

Name of Segment



Segment Revenue (Rs. in Lacs) Segment Profit/Loss (Rs. in Lacs) Segment Revenue (Rs. in Lacs) Segment Profit/Loss ( Lacs)
Cement 15496.98 1171.11 13966.71 1151.48
Unallocated/Others 703.85 37.55 878.55 44.11
Total 16200.83 1208.66 14845.26 1195.59

During the year, the revenue and profit from Cement division have increased as compared to the previous year.


The Company believes that a strong internal control framework is an important pillar of Corporate Governance. It has established internal control mechanisms commensurate with the size and complexity of its business. A strong Internal Control framework is established through right tone at the top for good corporate governance which serves as a foundation for excellence and the same is embedded in operations through its policies and procedures.

The Company has laid down Internal Financial Controls as detailed in the Companies Act, 2013 and has covered all major processes commensurate with the size of business operations. These have been established at the entity & process levels and are designed to ensure compliance to internal control requirements, regulatory compliance and appropriate recording & reporting of financial & operational information. The Company has reviewed and sustained internal financial controls by adopting a systematic approach to evaluate, control design and operating effectiveness. BVCL has deployed a vigorous Internal Controls and Audit Mechanism to facilitate an accurate and fair presentation of its financial results. This process not just ensures adherence to regulatory standards and meets statutory compliance requirements, but also confirms that our reporting is complete, reliable and understandable. In addition, there is a specific impetus on safeguarding investor interests with deployment of the highest levels of governance and regular communication with them.

Further, Internal Audit Function is looked by Internal Audit Department which reports to the Audit Committee of the Board. Internal Audit function works independently and evaluates the efficacy and adequacy of internal control system, its compliance with operating system and policies of the company and accounting procedure at all location, i.e. plant, marketing office & depots. Based on the input of internal audit report, designated process owner takes corrective actions in their respective area thereby strengthening controls and checks. In case any significant observations are noticed same is brought to the knowledge of members of audit committee for corrective actions.


The role of Human Resources has evolved in recent years. Today, it operates in complete partnership with senior leadership and business functions translating strategic priorities into action. The end result: to develop and sustain a culture where every employee is respected and valued for their good work.

The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills, enabling them to seamlessly evolve with ongoing technological advancements. During the year, the Company organised training programmes in different areas such as technical skills, behavioural skills, business excellence, general management, advanced management, leadership skills, customer orientation, safety, values and code of conduct.

The Company provides a culture of freedom for the employees where an employee is able to speak his / her mind for the organizational improvements. The Leaders conduct meetings to provide a platform to the team where they can share their concern and get solutions.

Your Company provides regular skill and personnel development trainings to enhance productivity. This also includes creating the first line of leaders, internal job posting and high level of promotions, ensuring low attrition rates. Your Company emphasizes on good governance and has in place the whistle blower and anti-sexual harassment policies. The arrangement creates an amicable growth scenario for both the employees and organizational goals. The Companys number of employees as at March 31, 2020 on consolidated basis stood at 284 (Previous Year 244).


Particulars March 31, 2020 March 31, 2019
Debtor Turnover Ratio 11.76 12.26
Inventory Turnover Ratio 20.50 26.00
Interest Coverage Ratio 1.57 1.45
Current Ratio 0.76 0.68
Debt Equity Ratio 0.59 0.44
Operating Profit Margin (%) 7.93 8.10
Net Profit Margin (%) 2.72 2.17
Return on Net Woth (%) 4.76 3.58


Statements in the Management Discussion and Analysis Report describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic supply and demand conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.

(Kamakhya Chamaria) (Santosh Kumar Bajaj)
Vice Chairman & Managing Director Director
DIN: 00612581 DIN: 00045759
Add: 48/72, West Punjabi Bagh, Add: Bajaj Engineering Co Compound
New Delhi-110026 F A Road, Kumarpara Guwahati, Assam- 781009
Place: New Delhi
Date: 12.11.2020