Bheema Cements Ltd Management Discussions.


Industry Structure and Developments:

Cement is indispensable for nation building and has a direct linkage with the nation’s health and growth. The Indian economy has certainly performed creditably compared to most developed and emerging markets of the world in the past year. With a current production capacity of around 366 million tonnes (MT), India is the second largest producer of cement in the world and fueled by growth in the infrastructure sector, the capacity is expected to increase. Even as the economy has made progress, this has yet to show a positive impact on significant demand revival and improved corporate earnings.

Overview & Operations of the Company:

Your Company is primarily engaged in manufacture and sale of Cement including Ordinary Portland Cement and Portland Pozolana Cement. In the domestic market the company operates through a network of dealers and agents for sale of its products. Its major markets include Telangana, Andhra Pradesh, Tamilnadu, Orissa, Kerala, Chhattisgarh, Karnataka, Pondicherry, Andaman & Nicobar and other nearby states. The word "BHEEMA" has captured a sizeable market place in the country.

Opportunities and Threats:

Cement consumption and demand in India has been growing during the last few years due to Government’s continuous thrust on infrastructure development. Increase in construction activities of buildings for housing, institutions, and factories; and infrastructure development is key to drive the growth in demand for cement and construction materials. The construction activities are bound to pick up the pace based on the government focus on "Industrial Corridors" and "Industrial Townships" etc., New capital city in A.P, Polavaram Dam Project & Satellite cities across India which will lead to increased infrastructure development activities. The threats of the Industry arise from rising input costs, restricted availability of coal from domestic market, restricted wagon availability and increase in logistics costs due to increase in fuel cost and railway freight.

Future Outlook:

While the Government’s commitment of fiscal conservatism and higher expenditure on salaries on account of Pay Commission may likely to have an impact on capital expenditure, it is also expected to lead to demand generation. India has to remain competitive and be able to pass on the benefits to its domestic audience for inclusive and sustained growth. The Government’s focus on infrastructure and ’Make in India’ are well-placed and the planned expenditure/initiatives will surely benefit the cement industry. Investments in education, training, manufacturing and infrastructure are the need of the hour. We expect much of this incremental demand to come from Government-backed projects. Concretization of roads, dedicated freight corridors, development of Smart Cities, Metro Rail projects, construction of toilets under ’Swachh Bharat Abhiyan’ are major thrust areas which can drive cement consumption. Given the enormous need for infrastructure and housing, which require large quantities of cement as a basic building material, the prospect of industry over the medium term is bright. Consistent increase in demand should absorb the excess supply and also improve the utilization of the industry.

Risks and Concerns:

Risk management has always been an integral part of the corporate strategy which complements the organizational capabilities with business opportunities, robust planning and execution. The market conditions, the selling price has picked up nicely during the year under review and at present the price has come down by a margin. The series of recent increase in interest rates, fuel prices and key raw materials are the major constraining factors for increase in demand and have significant impact on the profitability margins of the industry. The threats of the Industry arise from rising input costs, restricted availability of coal from domestic market, restricted wagon availability and increase in logistics costs due to increase in fuel cost and railway freight.

Internal Control Systems and their adequacy:

The Company has adequate system of Internal Financial Controls in place. It had adopted policies pick and procedures regarding financial and operating functions for ensuring the orderly and efficient conduct of its business including adherence to Company’s assets, prevention & detection of frauds and errors and timely preparation of reliable financial information

Cautionary Statement:

Statement in this "Management Discussion & Analysis" may be considered to be "forward looking statements" within the meaning of applicable securities laws or regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations including global and Indian demand and supply conditions, increased installed capacities, finished goods prices, raw materials supply and availability and their prices, cyclical demand and pricing in the companys markets, changes in Government regulations, tax regimes, besides other factors such as litigations and labor negotiations.