Barak Valley Cements Ltd Management Discussions.

ECONOMIC OVERVIEW

Indian economy in 2018 began its journey to recovery as it reclaimed the position as the fastest growing economy. Macro-economic policies and structural reforms along with the improved consumer sentiments, strengthened economic growth which led to a swifi revival post the temporary disruption caused due to demonetization and Goods & Services Tax (GST).

The Indian economic growth forecast is estimated 7.3% in FY20 as per IMF, benefiting from moderating oil prices and expected fiscal push. India is less exposed to a slowdown in global manufacturing trade growth than other major Asian economies and emerging markets and is poised to grow at a relatively stable pace. During FY19 (up to February, 2019), merchandise exports from India have increased 8.85% year-on-year to US$ 298.47 billion, while services exports have grown 8.54% year-on-year to US$ 185.51 billion. Net employment generation in the country reached a 17-month high in January, 2019. With a stable Government at the Centre, the country should continue on its path of economic reforms leading to an increase in employment opportunities and consumption.

Performance across sectors (agriculture, manufacturing and services) improved, which was well refiected in the World Banks Ease of Doing Business 2019 survey where India climbed 23 places and ranked 77th among 190 countries. is made India the only country among the top 10 improvers for the second consecutive year; and this sharp rise in ranking will further burnish the reformist credentials of the Government. During the year long journey, the economy did face a growth risk due to fiuctuation in rupee and crude price; however, this continued volatility will not impact Indias sovereign credit profile as per Moodys analysis; as the rupee-denominated government bonds and robust foreign exchange reserves will help mitigate the risk.

Indias medium-term growth prospects continue to be robust. Significant reforms undertaken in the recent years such as GST and insolvency code would raise Indias growth potential in the coming years, amplifying the efiect of the long-term structural cornerstones of the Indian growth story such as demography and urbanization. In the near-term, however, uncertainty over the forthcoming monsoon season and the heightened global risks present headwinds for FY20. Accordingly, the outlook for the Indian economy in FY-20 is one of cautious optimism at this juncture.

I. CEMENT INDUSTRY STRUCTURE & DEVELOPMENT

India is the second largest producer of cement in the world. No wonder, Indias cement industry is a vital part of its economy, providing employment to more than a million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian cement industry has attracted huge investments, both from Indian as well as foreign investors.

Cement industry demand is expected to grow at 7% for fiscal 2019-20. As per Crisil, with the addition of 23 million tons per annum cement production capacity in fiscal 2019, the total production capacity increased to 478 million tons. Further, it is estimated that capacity may increase to 502 million tons by 2020. The growth in Cement demand is mainly driven by Government initiatives towards housing for all and other infrastructure developments.

Government ‘Housing for All - Rural and Urban is a major source of cement consumption. House approved under PMAY scheme touched 8 million mark in urban area of which only 1.9 million houses were completed under Pradhan Mantri Awas Yojana PMAY-Urban and in case of construction under PMAY-Rural 7.5 million houses were completed out of 10 million approved. Further, Real Estate Regulation and Development Act (RERA)2016 and Benami transaction act brought more transparency in the construction sector, in all giving boost to construction activity.

India is fastest highway developer in the world with 27 kms of highway built each day. With the uses of paver blocks/concrete tiles, construction of fiyover and other structure in road project would lead to increase in cement demand. Further, Government has allocated US$ 2.67 billion in the budget for Pradhan Mantri Gram Sadak Yojana (PMGSY).

Demand from infrastructure is witnessing growth at a fast pace, backed by Governments thrust on infrastructure development viz. construction of roads, metro rail projects, airports renovation, irrigation projects etc. Besides, there has been a significant improvement in low-cost houses constructed under the Pradhan Mantri Awas Yozana ("PMAY") in rural areas. The government has successfully achieved its target of constructing 10 million houses in Phase I and has accelerated the target for Phase II to 18.5 million houses by FY 22. Similarly, the afiordable housing segment in the urban areas also gained momentum in the last year. On the individual home building ("IHB") front, the rural housing market has shown demand traction in major markets; however, Tier 2 and Tier 3 urban markets are yet to pick-up. Implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) too brought a paradigm shifi in the construction sector by making the sector transparent. With robust demand, capacity utilization in

2018 improved by 2-3% as compared to 2017 despite capacity expansion during the year.

With healthy volume ofi-take and comparatively lesser new capacity addition of 12 MTPA during FY19, capacity utilization for the industry improved to 71%, about 5% higher over the previous year. is is expected to improve further on likely sustained demand growth with incremental new supplies at a slower pace vis--vis increment demand.

With 502 million tonnes per year (MTPA) of cement production capacity as of 2018, India is the second largest cement producer in the world. The cement production capacity is estimated to touch 550 MT by 2020. Of the total capacity, 98 per cent lies with the private sector and the rest with the public sector. The top 20 companies account for around 70 per cent of the total production. In FY19, cement demand is expected to grow by 7-8 per cent.

A total of 210 large cement plants together account for 410 million tonnes of installed capacity in the country, while 350 mini cement plants make up the rest. Of the total 210 large cement plants in India, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu. Cement production in India increased from 230.49 million tonnes in 2011-12 to 297.56 million tonnes in 2018-19. In-dias exports of cement, clinker and asbestos cement increased at CAGR of 10.37 per cent between FY12-FY18 to reach US$ 433.87 million. During the same period imports of cement, clinker and asbestos cement increased at a CAGR of 11.14 per cent to US$ 174.36 million in FY18. Cement, clinker and asbestos cement exports and imports of India stood at US$ 434.96 million and US$ 146.91 million during April 2018 -February 2019, respectively.

The Government of India is strongly focused on infrastructure development to boost economic growth and is aiming for 100 smart cities. The government also intends to expand the capacity of the railways and the facilities for handling and storage to ease the transportation of cement and reduce transportation costs. ese measures would lead to increased construction activity thereby boosting cement demand. In Union Budget 2019-20, the Government of India has extended benefits under Section 80 - IBA of the Income Tax Act till March 31, 2019 to promote afiordable housing in India. Housing and real estate sectors accounts for nearly 65 per cent of the total cement consumption in India.

Source: IBEF

Opportunities and reats, Risks and Concerns

The North Eastern Region of the Country comprising of eight states are very rich in natural resources. Post-independence era and After partition the region became land locked and lost its easy access to ports and rest parts of the country. As a result, it witnessed lack of development in comparison with other states of the country. The Government of India has taken several measures to accelerate growth of the North East Region (NER). Your Company is one among the leading Cement Producing Company in the North-Eastern Region. The North-Eastern Region of India is growing and developing its infrastructure at rapid rate and the abundant resources is the region leads to the cost effective production. The demand for cement in India can be attributed to three main sectors viz Housing and Real Estate, Public Infrastructure and Industrial Development. The factors that will lead to increase in demand from these sectors include:

Housing and Real Estate

• Government initiatives like Housing For All to push demand in the sector.

• Real Estate market in India is expected to reach US$ 1 trillion by 2023 from US$ 120 billion in 2017.

• Strong growth in rural housing and low-cost housing to amplify demand.

Public Infrastructure

• Strong focus of Government of India

• Projects like Dedicated Freight Corridors and ports under development.

• Metro rail projects already underway in most major cities.

• Government of Indias push with Smart Cities Mission and AMRUT.

Industrial Development

• Strong economic growth is expected to lead to growth of the industrial sector and in turn increase in demand in the long run.

Cement industry being majorly dependent upon availability of quality coal at afiordable cost. Policy of the Government may impact availability of coal. Policies of the Government as well as regulatory role may afiect 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 afiect 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 difierent 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. II. OUTLOOK

Growth in the cement sector is expected to be around 7.3% in FY 2019-20, Supported by high level of activity going on in real estate and high government spending on smart cities and urban infrastructure. Cement production capacity of 502 MTPA as of 2018 and the Capacity addition of 20 million tonnes per annum (MTPA) is expected in FY19- FY21. III. FINANCIAL PERFORMANCE

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

Particulars 2018-19 (Rs. in Lacs) 2017-18 (Rs. in Lacs)
Net Sales 13,966.71 15,178.64
Profit/(Loss) After Tax 302.72 282.91
Net Worth 8,461.27 8,160.17
Borrowings(Long Term) 3,783.32 3,704.33
Earning Per Share 1.37 1.28
Production(MT) 2,36,223 MT 2,38,681
Despatches(MT) 2,36,044 MT 2,39,354

During the year under report, your Company has earned net Profit of Rs. 302.72 Lacs in comparison to net Profit of Rs. 282.91 Lacs in the previous year.

SALES & MARKETING

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. 13,966.71 Lacs in comparison of previous year Rs. 15,178.64 Lacs. Your Company had also incurred Rs. 185.28 Lacs in the year 2018-19 as compared to Rs. 140.27 Lacs in the year 2017-18 on the Advertisement, Publicity & Sales Promotion expenses.

COSTS

(a) Raw Material (i) Lime Stone :

During the year, the Company has consumed of 2,32,479 MT of Limestone as compared to 2,08,137 MT of Limestone during last year. The main source of Limestone is from wholly owned subsidiary i.e. Meghalaya Minerals & Mines Ltd. The Company had incurred Rs. 918/- per MT an average acquisition cost of Limestone as compared to Rs. 1048/- in last year.

(ii) Fly Ash:

During the year, the Company has consumed 39,120 MT of Fly ash against 30,523 MT during last year. The average acquisition cost per MT of Fly ash has been Rs. 853/- per MT in current year as compared to Rs. 1005/- per MT in the last year. The total cost of fiy ash consumed in the year 2018-19 was Rs. 333.67 Lacs as compared to Rs. 306.64 Lacs in 2017-18.

(iii) Gypsum:

Gypsum consumption of the Company in the year 2018-19 was NIL. (b) Salaries, Wages and Manpower Cost

In current year 2018-19, the Company has incurred Rs. 1,117.58 Lacs on salaries, wages and Manpower cost as against Rs. 968.14 Lacs in 2017-18.

(c) Transportation Cost

The Company has dispatched 2,36,044 MT of cement in the Year 2018-19 as compared to 2,39,354 MT of cement in the previous financial year. Due to this the overall transportation cost is decreased to Rs. 2,288.55 Lacs as compared to Rs. 3,009.28 Lacs in the last year.

(d) Financial Costs

During the year the Company had incurred Rs. 801.10 Lacs in Interest & Financial Costs as compared to Rs. 929.88 Lacs in the previous year 2017-18.

IV. DISCLOSURE OF ACCOUNTING TREATMENT:

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 ofi 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. V. SEGMENT WISE PERFORMANCE(BASED ON CONSOLIDATED):

The Company has discussed the performance of following segments:

2018-19 2017-18
Name of Segment Segment Revenue(Rs. Segment Profit/ Segment Revenue Segment Profit/Loss
in Lacs) Loss(Rs. in Lacs) (Rs. in Lacs) (Rs.in Lacs)
Cement 13,966.71 289.44 15,178.64 107.24
Power - (77.56) - (127.90)
Unallocated/Others 878.55 (178.28) 771.33 (207.45)
Total 14,845.26 33.60 15,949.97 (228.11)

During the year, the revenue and Profit from Cement division have decreased as compared to the previous year. The losses from Power division have decreased by Rs. 50.34 Lacs. VI. INTERNAL CONTROL SYSTEM & THEIR ADEQUACY

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. ese 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. is 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 functions is looked by Internal Audit department which reports to the Audit Committee of the Board. Internal Audit function works independently and evaluates the eficacy 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.

VII. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

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.

Your Company believes that human resources are the most critical element responsible for growth of a business. The Company continued to show signs of positivity and growth, providing the Management an appetite for enhancing its potential and driving growth and development of its people. Engaging with excellence was the key objective in FY 2018- 19, with focus on HR process automations with a vision to build an eficient and error-free function.

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. is 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, 2019 on consolidated basis stood at 269 (Previous Year 229).

The Company places a strong emphasis on the work ethics in order to foster a healthy corporate culture in the Company. With this belief, the Company has adopted a Code of Conduct which extends to all its Board Members and Senior Management personnel. Additionally, the Company has framed a policy which deals with Code of Conduct by all the employees across the levels, including its subsidiaries. The Code intends to forbid any activity / association / relationship by Directors / employees which is detrimental to the Companys interest.

VIII. CORPORATE SOCIAL RESPONSIBILITY

The Company is a socially responsible corporate citizen committed to deliver a positive impact across social, economic and environmental parameters. The Company acknowledges its responsibility in the manner that its activities infiuence its consumers, employees and stake holders, as well as the environment. The Company seeks to achieve its corporate and social objectives by focusing on the following strategic areas:-: a) Health Care Initiatives

The Company has established its initiatives for "better health care" and in pursuance to which one Free Health Care Centre is set up at Debendra Nagar, Badarpur Ghat, Distt. Karimganj, Assam for the welfare of Local Community. Health Awareness programmes and other Health care activities like pulse polio Immunization programme, family planning programme, vaccination for child, provisions of safe drinking water, Yoga camp, Diabetic Camp are also being organized in this health care centre. b) Educational Initiatives

Your company has been constantly providing assistance, support and has been bearing the maintenance expenses for the schools which were previously constructed the company and operating in the name of "Vivekananda Kendra Vidyalaya" in the view of the company to provide modern day schooling, students of Debendra Nagar, Badarpurghat, Assam. The Company has been sponsoring the students of this locality for education at V.K.V. School, Debendra Nagar with provided Furniture, Black Board etc. c) Environmental Initiatives

The Company in view of the ‘Mass Trees Plantation motto has utilized the unused/waste lands lying in the area and taken up for plantation of various types of Trees through mutual understanding with landlords and have given a significant environmental impact.

Recognizing the importance of environment, the Company celebrated and planted more variety of trees with the collaboration of various organizations and forest department on 5th of June, 2015. d) Community Welfare Initiatives

Under community welfare concerns the Company has undertaken various initiatives like:

• e Company is continuously repairing and maintaining the various waiting sheds constructed in the previous year for common mass people at Badarpurghat, Silchar and Ziribam.

• e Company is also bearing an expense incurred in maintaining the park constructed in the previous year at Valley Strong Island at Badarpurghat at tri-junction on NH-44 and NH-53.

IX. STATEMENT OF KEY FINANCIAL RATIOS

Particulars March 31, 2019 March 31, 2018
Debtor Turnover Ratio 12.26 10.47
Inventory Turnover Ratio 26.00 17.52
Interest Coverage Ratio 1.45 1.38
Current Ratio 0.69 0.62
Debt Equity Ratio 0.45 0.45
Operating Profit Margin (%) 8.10 8.42
Net Profit Margin (%) 2.10 1.86

X. CAUTIONARY STATEMENT

Statements in the Management Discussion & Analysis Report detailing the Companys objectives, projections, estimates, expectations or predictions may be forward looking statements. ese statements being based on certain assumptions and expectations of future events, actual results could difier materially from those expressed or implied. Important factors that could make a difierence to the Companys operations include economic conditions afiecting domestic demand-supply conditions, finished goods prices, changes in Government regulations and tax regime etc. the Company assumes no responsibility to publicly, modify or revise any forward looking statements on the basis of subsequent developments, information or events.

For BARAK VALLEY CEMENTS LIMITED
Sd/- Sd/-
Kamakhya Chamaria Santosh Kumar Bajaj
(Vice Chairman & Managing Director) (Director)
DIN : 00612581 DIN: 00045759
Add: 48/72, West Punjabi Bagh Add: Bajaj Engineering Co
New Delhi-110026 Compound
F A Road, Kumarpara Guwahati,
Assam- 781009
Place: New Delhi
Date: 13.08.2019