Burnpur Cement Ltd Management Discussions

Industry Structure & Developments

India is the second-largest cement producer in the world and accounts for over 8% of the global installed capacity. Of the total capacity, 98% lies with the private sector and the rest with the public sector. As the country experiences rapid economic growth and urban migration, the demand for robust infrastructure and modern urban living spaces has increased. Urbanization is a de??ning phenomenon, with millions of individuals relocating from rural areas to cities in search of better employment opportunities, education, and improved lifestyles. This mass movement has led to an increased need for housing, transportation networks, healthcare facilities, and educational institutions. Also, the governments various mission re??ects this shift, aiming to transform numerous cities into technologically advanced, sustainable, and liveable urban centres. This initiative encompasses a wide spectrum of projects, from building e??cient public transportation systems and waste management solutions to creating green spaces and digital infrastructure. All these endeavours are underpinned by the pivotal role of cement as a primary construction material.

Between 2012 and 2023, the installed cement production capacity grew by 61 per cent to 570 MT from 353 MT. The Indian cement sectors capacity is expected to expand at a compound annual growth rate (CAGR) of 4-5 per cent over the ??ve-year period up to the end of 2028. The expected cement production capacity in 2028 will be nearly 720 MT. The Indian cement industry added 82 million tonnes by 2024, the highest in the last 10 years, driven by increasing spending on housing and infrastructure activities. Cement consumption is expected to reach 480 million tonnes by the end of 2028.

This increase is the result of the industrys response to growing demand from the housing and infrastructure sectors. For the cement industry in India, the next few years affords it an opportunity of scalability. An upturn in the economy would amount to a further increase in infrastructural spends thereby boosting cement demand. That would enhance the adage of Building More, Building Well and Building Right.

Opportunity & Threats

The countrys cement demand increased by around 10% over ??scal year 2024, as reported by a leading ratings agency. India is investing heavily on large-scale projects for its economic resilience and unlocking new avenues for investments. The country is growing at a rapid pace by boosting connectivity, strengthening logistics, and coming up with residential and commercial projects to meet its current and future needs. Cement, which is a critical ingredient in all infrastructure projects and backbone of construction is set to witness a massive demand uptick. The continued large investments in roads and infrastructure projects will fuel more cement demand.

The growing housing sector, which typically accounts for 60% to 65% of Indias cement consumption, will also continue to remain a key demand driver. In the Union Budget 2023–24, the government has allocated US $1.8 billion for the creation of safe housing, clean drinking water, and sanitation, and increasing road and telecom connectivity, among other initiatives. The government has also allocated US $9.6 billion to address housing shortages.

In FY24, infrastructure and affordable rural housing segments are having propel growth, where the highest traction is from roads, where the total annual outlay for the Ministry of Road Transport and Highways and the National Highways Authority of India ("NHAI") has seen an increase of 25% and 14%, respectively.

The government has also increased budget outlay for affordable rural housing under the Pradhan Mantri Awas Yojana – Gramin ("PMAY-G") by 12.5% in FY24. Launched in 2015, PMAY-G is part of the Pradhan Mantri Awas Yojana ("PMAY"), a massive government scheme promoting affordable housing in India.

The cement sector is a major contributor to the countrys greenhouse gas (GHG) emissions. The Indian cement industry is also taking steps to reduce its environmental impact through the adoption of new technologies. The cement industry is one of the largest industrial emitters of greenhouse gases (GHGs), accounting for around 7 per cent of global CO2 emissions. This is due to the energy-intensive process of cement production, which involves heating limestone and clay to over 1400 degrees Celsius.

The shift towards sustainable cement manufacturing is also pressing, given that cement production is one of the highest-emitting industries globally, contributing to 7 per cent of global CO2 emissions. It is one of the most widely used products worldwide, with applications ranging from residential to urban construction, making it indispensable for societal progress. Hence, swift adoption of sustainable practices is necessary to mitigate environmental impact and contribute to achieving sustainability targets, such as Indias goal of becoming carbon-neutral by 2070.

On the other hand, the interest rates rising globally to tame in??ation may impinge on the consumption in the near term. The cost of energy inputs is at elevated levels for some time, and this has resulted in considerable increase in cost.

Rising competition in limiting price increases, which have largely remained range bound despite good demand numbers in FY23-24. This is leading to a focus on volume push by the manufacturers coupled with e??ciency improvement projects.

With depletion of high cement grade limestone, presently Indian cement industry is facing an acute cement raw material problem for smooth plant operation and manufacture of higher grades of cement. Although India is bestowed with huge limestone deposits but most of the deposits in India presently available for cement manufacture are either marginal grade or low grade. The situation is further aggravated due to allocation of low grade coal to the cement industries. Some of the cement plants start with a simple limestone deposit with more or less uniform quality of limestone however with the consumption of the high grade limestone, the deposits are converted into intricate leaving behind low heterogeneous grade.

The cement industry outlook is mixed with near-term challenges weighing on the mind of cement companys executives. The rise in energy and transportation costs, along with continued pressures from environment regulations, are top concerns. Additionally, overcapacity in China has led to increased exports of cement to other countries, which further complicates the global market landscape. Despite these challenges, there are also opportunities for growth in the coming years as demand for cement is projected to grow faster than the announced capacity additions. Organisations which are able to capitalize on these trends will be well positioned for success in the future

At present, the Company has sold all the assets and plants, which are the only source of generating revenue. The Company is exploring avenues for acquiring new plants in the State of Jharkhand, West Bengal and Asansol to revive the Companys production.

Segmentwise, Financial and Operational Performance

Since January, 2017, your Company operates in Single Segment i.e. Cement Segment. The discussion on Financial Performance with respect to Operational Performance forms a part of the Directors Report.

Future Outlook

The Indian cement industry is destined to play a unique part in building the new India due to its important role in creating the infrastructure that drives growth, generating employment, contributing tax revenues, attracting foreign direct investment (FDI) in manufacturing, and ensuring environmentally sustainable development.

In the years to 2030, cement-intensive infrastructure development will be key to sustaining the high-level of broad-based GDP growth that India requires to lift the livings standards of a population that will have passed 1.5 billion people.

In the process, the cement industry will generate much needed skilled employment across the country,

particularly in areas away from large cities that currently suffer from a lack of good job opportunities.

The high levels of investment that the Government will commit in the coming years to building a new India will be dependent on robust revenue streams. As the third largest contributor of tax revenues, a growing and successful cement industry is vital to ??nancing a better future for the country.

Further, as India seeks global capital to accelerate ‘Make in India, the cement industrys strong long-term growth fundamentals will be a major attraction for FDI given the necessity to locate cement production close to the sources of demand.

Risk & Concern

I. To meet the future demand for cement in 2030 the Indian cement industry will need to invest in 368 MMT additional capacity - an increase of 83%. This will not only require setting up new plants but also acquiring adequate land, securing raw material supplies and hiring additional talent. Insu??cient investment in the sector can be seen as a cause of concern.

II. Major policy changes including demonetization, RERA and GST is going to affect the pricing and demand in the sector. Further the bans on sand mining will lead to lower availability of sand and that would halt or slow construction activities, thus having a cascading impact on cement demand.

III. Increase in cost of ??nance (rate of borrowing) and increase in cost of raw materials, energy, delivery cost, and continuous increase in crude prices, duties and taxes are pushing the cost of production without a corresponding increase in the price realizations due to excess supply, which will pose a threat to improving the overall scenario in cement sector. The increase in costs may be di??cult to pass on to the customers as the prices would remain under pressure due to the excess capacity.

IV. The cement industry is associated with signi??cant negative externalities, notably high CO2 emissions. The increase in emissions is di??cult to handle and the industry have to buy carbon credits or use alternative sources of energy for nations growth and environment sustainability.

V. With more and more dependence on information technology, there have been risks associated thereon. In addition to data loss, the cyber security also assumes importance as any attack can impact the business operation and all its assets

Internal control system and its adequacy :

Your Company has in place an adequate system of internal controls, with documented procedures covering all corporate functions and its operating units. Systems of internal controls are designed to provide reasonable assurance regarding the effectiveness and e??ciency of operations, the adequacy of safeguards for assets, the reliability for ??nancial controls, and compliance with applicable laws and regulations. Adequate internal control measures are in the form of various policies and procedures issued by the Management covering all critical and important activities viz. Revenue Management, Operations, Purchase, Finance, Human Resources, Safety, etc. Adequate measures are taken from time to time to monitor energy e??ciencies, safety and security as well as the hygiene standards maintained in the plant and corporate o??ce. During the ??nancial year, the standard terms of reference for Internal Audit which de??nes the framework for conduct of Internal Audits was updated incorporating latest changes to regulatory requirements and the evolving business context. Moreover, the Audit Committee of the Board reviews the ??ndings of the Internal Auditor and closely monitors the implementation of their recommendations by reviewing the compliance reports furnished.

Details of Signi??cant changes in Key Financial Ratios

Current Ratio :

The Current ratio for the year is 0.004 times as compared to previous year of 0.022 times. It shows negative change of 80 % during the current ??nancial year as compared to the previous ??nancial year. The reason includes the impact of ??nance charges of Rs 7303.98 lacs on cumulative basis due and the repayment schedule is also very low.

Debt Equity Ratio :

The Debt equity ratio for the year is -0.92 times; whereas it was -1.47 times in the previous ??nancial year. It shows signi??cant change of 37 % during the current ??nancial year as compared to the previous ??nancial year. The reason being decrease in shareholders fund (28.09%) because the company has incurred losses of INR.9911.22 Lakhs during the current ??nancial year whereas, there is a reduction in debt by 19.64 % in comparison to previous year due to adjustment of sale proceeds of unit of Rs. 169.79 Crores has been adjusted against the outstanding loan account balance standing in the books of the Company in the name of UVARCL.

Debt Service Coverage Ratio :

The Debt Service Coverage Ratio for the year is -0.068 times as compared to previous year ??gure of

0.002 times which shows change of 3220 % as compared to the Previous Financial Year and the reason is decrease in Debts by 19.63 % whereas EBIT is reduced by 2607.60 % and the reason behind negative EBIT is loss on sale of Assets of Rs 2613.45 lacs.

Return on equity ratio :

The return on equity ratio for the year is -0.25 times as compared to previous year ??gure of -0.22 times. The reason being increase in Net loss by 39.92 % whereas Average Shareholders Equity is decrease by 26.77 %. Further, the main reason behind increase in net loss is ??nance charges of Rs 7303.98 lacs charged on cumulative basis and loss on sale of Assets of Rs 2613.45 lacs.

Inventory turnover ratio :

The inventory turnover ratio for the year is 12.22 times. It shows the signi??cant negative changes of 2

% during the current ??nancial year as compared to the previous ??nancial year (i.e. 12.50 times). The inventory turnover ratio shows the positions upto Nov-23, from Dec-23 onwards company do not have any Inventories as the functional manufacturing unit of the company is sold out to Ultratech Cement Limited on 29.11.2023 including all Inventories.

Trade payable turnover ratio :

The Trade payable turnover ratio for the year is 0.22 times as compared to previous year of 0.97 times. It shows negative change of 77 % during the current ??nancial year as compared to the previous ??nancial year (i.e., 0.97 times). The reason being, trade payable of the company has been reduced by 87.62 % in comparison to previous year.

Net Capital Turnover Ratio :

The Net Capital turnover ratio for the year is- 0.31 times as compared to previous year of -0.28 times. It shows positive change of 14.13 % during the current ??nancial year as compared to the previous ??nancial year (i.e., -0.28 times). The reason being, impact of reduction in short term borrowings which tends to increase Average working capital by 19.49 % in comparison to the previous year.

Net pro??t Margin :

The net pro??t margin for the current ??nancial year is -0.74 %. It shows negative change of 53 % during the current ??nancial year as compared to the previous ??nancial year (i.e, -0.48 %). The main reason

being ??nance cost of Rs 7303.98 lakhs charged on cumulative basis and loss on sale of Assets of Rs

2613.45 Lacs (By selling entire movable and immovable assets).

Return on Capital employed :

The return in capital employed is -0.066 times however it was -0.003. It shows negative change of 2012

% during the current ??nancial year as compared to the previous ??nancial year (i.e, -0.003 times). The reason being decrease in EBIT by 2607.60% as compared to previous year and the main reason behind negative EBIT is loss on sale of assets of Rs 2613.45 lacs (By selling entire movable and immovable assets) which tends negative EBIT of Rs 2811.69 lacs.

Cautionary Statement

Statement made in the Management Discussion and Analysis, describing the Companys objectives, projections, estimates, predictions and expectations may be forward looking statement with the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

For and on behalf of the Board

Place : Kolkata Date : 28th May, 2024	Indrajeet Kumar Tiwary Wholetime Director	Ritesh Aggarwal Director
	DIN : 06526392	DIN : 07671600