Chettinad Cement Corporation Ltd Management Discussions

a) Discussion on financial performance with respect to operational performance

The Production and Sale of Cement during the financial year 2014-15 was 5551684 MT and 5552297 MT, a reduction of 4.6% and 5.2% respectively over the previous year. The Gross Turnover of the company for the financial year 2014-15 stood at 280803 lakhs as against 255748 lakhs in the previous year, a growth of 9.8% over the previous year. During the year, the net revenue from operations of your Company increased by 11%, from 220618 lakhs to 244934 lakhs. For FY2015, your Companys profit after tax stood at 21043 lakhs vis-a-vis 10604 lakhs in the previous year, registering a growth of 98%. The Networth of the Company as on 31.03.2015 is 146644 lakhs as against 127850 lakhs in the previous year, an increase of 14.70%.

b) Economic Scenario and Future Outlook

Even as the major economies looms under an environment of uncertainty, the Indian Economy has continued to emerge as the one with the most promising outlook based on the foundation of stable inflation levels, rise in demand and decline in the oil prices. The Indian economy has successfully got past the worst face of economic downturn and the progress over the last couple of years show that India is definitely into the path of stable growth. The Indian economy grew at more than 7 per cent in 2014-15 and Inflation has again come down to 4% levels.

The Governments focus on investments in infrastructure development, mainly the initiative of promoting concrete roads in place of bitumen roads, would provide a great opportunity to the Cement Industry at the same time improve the longevity of the road infrastructure with minimal maintenance cost. Further the development of Tier II cities would give a boost to the dormant real estate sector and in turn the Cement sector.

The demand for Cement in India is still driven primarily by housing sector which account for more than 50% of Cement consumption. There lies a vast potential for growth of Cement Industry in the Industry and Infrastructure sector. With the economy again in the part of growth, we may soon expect the Infrastructure and Industry sector to dominate the consumption of Cement.

c) Internal Control system and their adequacy

The Company has got an adequate system of internal control in place commensurate with the size of its operation and is properly designed to protect and safeguard the assets of the Company. There is a proper system for recording all the transactions which ensures that every transaction is properly authorized and executed according to the norms.

The company had also appointed M/s C. Muthukumar & Co., M/s J. Karthik Bharathi & Co., M/s M. Karuppiah & Co., M/s M Bhaskara Rao & Co. Chartered Accountants as Internal Auditors to conduct the Systems audit and compliance Audit of the company.

d) Material developments in Human resources / Industrial relations front, including number of people employed

As always, the Industrial relation during the current year also has been very cordial and contributed to mutual development.

Your Company continuously invests in retention and development of talent on an ongoing basis. A number of programs that instill focused people attention are currently underway. Your Company thrust is on the promotion of talent internally through job rotation and job enlargement.

The total manpower count in the Company as on 31.03.2015 is 1483

CAPTIVE THERMAL POWER PLANTS [CPP]

a) KARIKKALI WORKS

The Gross power generation from the 1 x 15 MW and 2 x 30 MW Captive Thermal Power Plants during the year under review was 3545.49 lakhs Units as against 2054.99 lakhs Units for the last year. The auxiliary power consumption for the current year is 281.09 lakhs units as against 171.47 lakhs units for the last year. Out of the Net Generation of 3264.4 lakhs Units, 1531.39 lakhs units were captively consumed by the Cement Plant thereat and the remaining 1733.01 lakhs units were sold under Power Purchase Agreements.

b) PULIYUR WORKS

The Gross power generation from the 15 MW Captive Thermal Power Plant during the year under review was 962.85 lakhs Units as against 1004.02 lakhs Units in the previous year, with an auxiliary consumption of 80.25 lakhs units as against 82.58 lakhs units in the previous year. The Net generation for the current year was 882.59 lakhs units as against 921.44 Units last year. Out of the Net Generation of 882.59 lakhs Units, 846.52 lakhs units were captively consumed by the Cement Plant thereat and the remaining 36.07 lakhs units were sold under Power Purchase Agreements.

c) ARIYALUR WORKS

The Gross power generation from the 3 x 15 MW Captive Thermal Power Plants during the year under review was 2759.20 lakhs as against 2234.66 lakhs Units last year, with an auxiliary consumption of 224.04 lakhs units as against 188.77 lakhs units last year. The Net generation during the year was 2535.16 lakhs Units. Out of the Net Generation of 2535.16 Lakhs Units, 1175.93 lakhs units were captively consumed by the Cement Plant thereat and the remaining 1359.23 units were sold under Power Purchase Agreements.

d) KALLUR WORKS

The Gross power generation from the 1 x 30 MW Captive Thermal Power Plants during the year under review was 972.70 lakhs as against 735.60 lakhs Units last year, with an auxiliary consumption of 87.40 lakhs units as against 68.62 lakhs units last year. The Net generation during the year was 885.30 lakhs Units. Out of the Net Generation of 885.30 lakhs Units, 698.39 lakhs units were captively consumed by the Cement Plant thereat and the remaining 186.91 units were sold under Power Purchase Agreements.

The company has installed Waste Heat Generation Plant with a capacity of 7.3 MW at its kallur works. The Production during the financial year 2014-15 is 60.23 lakhs Units.

INDUSTRIAL RELATIONS:

The Employees at all ranks of the Company have been extending their fullest co-operation for the smooth conduct of the affairs of the Company and maintenance of cordial industrial relations. The Directors wish to place on record their appreciation to the employees of the Company at all levels.

Details of Board meetings

During the year, Board meetings were held, details of which are given below:

Date of the meeting	No. of Directors attended the meeting
22.07.2014	6
30.07.2014*	6
04.09.2014	5
16.12.2014	4
20.03.2015	6

*The Meeting held on 22.07.2014 was adjourned on 30.07.2014.

Committees of Board

The details of composition of the Committees of the Board of Directors are as under:-

a. Audit Committee

Audit Committee was reconstituted pursuant to the provisions of the Section 177 of the Companies Act, 2013 with the undermentioned directors as members.

The members of Audit Committee are

1. L Muthukrishnan, Chairman

2. A Mohankrishna Reddy, Independent Director

3. Bhavana G Desai, Independent Director

During the year, the Audit Committee had met on 14.05.2014, 21.07.2014, 16.12.2014 and 20.03.2015.

b. Vigil mechanism

Pursuant to the requirement of Section 177(9) and (10)of the Companies Act, 2013, the Company has established vigil mechanism and the vigil mechanism policy has been approved by the Audit Committee. Vigil mechanism policy is uploaded in the Companys website www.chettinad.com

c. Nomination & Remuneration Committee

Nomination & Remuneration Committee was reconstituted pursuant to the provisions of Section 178 of the Companies Act, 2013 with the undermentioned directors as members.

The members of Nomination & Remuneration Committee are

1. Sri. L Muthukrishnan, Director

2. Sri. K Ganapathy, Director

3. Sri. MohanKrishna Reddy, Independent Director

4. Ms. Bhavana G Desai, Independent Director

The Company has framed Nomination and Remuneration policy.

Nomination & Remuneration Policy is uploaded in the Companys website www.chettinad.com. During the year, the Nomination & Remuneration Committee met on 28.04.2014.

d. Corporate Social Responsibility Committee

Corporate Social Responsibility Committee was constituted pursuant to the provisions of the Companies Act, 2013 with the undermentioned directors as members.

The members of Corporate Social Responsibility Committee are

1. Sri. M A M R Muthiah, Managing Director

2. Sri. L Muthukrishnan, Director

3. Sri. MohanKrishna Reddy (Independent Director)

The Company has framed Corporate Social Responsibility policy and has been approved by the Board at its meeting held on 20^th March 2015.

Corporate Social Responsibility Policy is uploaded in the Companys website www.chettinad.com.

During the year, the Committee had met on 20.03.2015 to recommend the Corporate Social Responsibility Policy as well as Corporate Social Responsibility Programme to the Board.

Further, the Report on CSR Activities/ Initiatives is enclosed as Annexure 3.

e. Stakeholders Relationship Committee

During the year, the Committee had met seven times on 01.04.2014, 30.06.2014, 22.08.2014, 31.10.2014, 07.01.2015, 10.02.2015 and 20.03.2015. On 30.06.2014 the name of the Committee has changed from Share transfer Committee to the Stakeholders Relationship Committee.

Extract of Annual Return

Pursuant to section 92(3) of the Companies Act, 2013 (the Act) and rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return is Annexed as Annexure 1 .

Directors Responsibility Statement

Pursuant to the requirement of clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Statutory Auditors

In the last AGM held on 27^th August 2014 M/s. Raghavan & Muralidharan Chartered Accountants have been appointed Statutory Auditors of the Company for a period of five years. As required under the Companies Act, 2013, the appointment of statutory Auditors is placed before the members in the General Meeting for their ratification. Accordingly, a Resolution seeking Members ratification for the appointment of Statutory Auditors is included as Item no. 5 of the Notice convening the Annual General meeting.

Further, the report of the Statutory Auditors forms part of the Annual Report.

Cost Audit

Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its cement activity is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed Messrs Geeyes & Co., Cost and Management Accountants to audit the cost accounts of the Company for the financial year 2015-16 on a remuneration of 3.2 lakhs. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in the Annual general meeting for their ratification. Accordingly, a Resolution seeking Members ratification for the remuneration payable to M/s Geeyes & Co. Cost and Management Accountants is included as Item No. 6 of the Notice convening the Annual General Meeting.

Secretarial audit

In terms of Section 204 of the Companies Act, 2013 and Rules made there under, M/s. V Mahesh & Associates, Company Secretaries have been appointed Secretarial Auditors of the Company. The report of the Secretarial Auditors is enclosed as Annexure 5 to this report.

Explanations or Comments by the Board on every Qualification, Reservation or Adverse Remarks or Disclaimer made in Statutory Audit Report

Nil

Explanations or Comments by the Board on every Qualification, Reservation or Adverse Remarks or Disclaimer made in Secretarial Audit Report

This is with reference to the remark regarding the appointment of Chief financial Officer, as per the Companies Act, 2013.

The Company has appointed Joint President (Finance) prior to the commencement of Companies Act, 2013 who was performing the role of Chief Financial Officer. The Company however did not redesignate him as the Chief Financial Officer at the Board Meeting.

The Company has since appointed Chief Financial Officer at its Board Meeting held on 12th August 2015.

Anti Sexual Harassment Policy

The Company has framed Anti Sexual Harassment Policy. The same is available in the website of the Company www.chettinad.com.

No complaint was filed during the financial year 2014-15.

Occupational Health and Safety Policy (OH&S)

Safety is one of our core values and part of the Companys vision statement. The Company is committed to strive for Zero Harm Environment and firmly believe safety as one of the most important criteria to achieve the goal of being the Most Sustainable and Competitive Company. The Company is making continuous efforts to reduce OH&S risks through the integration of OH&S requirements with other business processes.

Material Changes & Commitments affecting financial position of the Company, occuring between date of Financial Statements and the Boards Report

Nil

Annual Performance Evaluation of Directors

Pursuant to the provisions of the Companies Act, 2013 the Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its various Committees. A structured questionnaire was prepared after taking into consideration various aspects of the Boards functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgement and safeguarding the interest of the various stakeholders of the Company. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was also carried out by the Independent Directors .

Particulars of loans, guarantees or investments

During the year

1. The Company has not given any loans

2. The Company has invested in its subsidiary M/s Anjani Portland Cement Limited aggregating to 8517 lakhs.

3. The Company has provided guarantees to

(a) HDFC Bank for 9000 lakhs as security for term loan and working capital facilities availed by its subsidiary M/s Anjani Portland Cement Limited for business purpose

(b) IDBI trusteeship Services Limited for 6000 lakhs as security for issue of secured Non convertible debentures by its subsidiary M/s Anjani Portland Cement Limited.

All the statutory Compliance stipulated under Companies Act, 2013 have been complied with.

Related party transactions

All transactions with Related Parties entered during the financial year were in the ordinary course of business and on an arms length basis. There are no materially significant related party transactions made by the Company with its Promoters, Directors, Key Managerial Personnel or their relatives which may have a potential conflict with the interest of the Company at large. There are no contracts or arrangements entered into with Related Parties during the year to be disclosed under sections 188 (1) read with 134 (h) of the Companies Act, 2013 in form AOC-2.

Subsidiary Company

During the year under review, the Company has acquired 13792197 equity shares in M/s Anjani Portland Cement Limited constituting 75% of the paid up share capital of Anjani Portland Cement Limited. On account of this investment, Anjani Portland Cement Limited has become the subsidiary of the Company.

Statement containing salient features of financial statements of subsidiaries

Pursuant to sub-section (3) of section 129 of the Act, the statement containing the salient feature of the financial statement of the companys subsidiary M/s Anjani Portland Cement Limited is given as Annexure-2.

Further, brief about the business of M/s Anjani Portland Cement Limited is given hereunder:-

The genesis of Anjani Portland Cement Limited (APCL) was inspired and motivated by the pioneer of the cement industry, Padma Bhushan Dr. BV Raju (former chairman of Cement Corporation of India), who has been instrumental in the growth of the cement industry in India, especially Andhra Pradesh. Trained and sculpted by this cement luminary, the architects of APCL have built its organizational structure on a very strong pedestal of infrastructure, technology, experienced human resource and strong social commitment.

Starting with an initial production capacity of 3 lakh tonnes p.a., the production capacity now stands at 12 lakh tonnes p.a. on the strength of added infrastructure and state of the art technology.

The APCL plant has a completely hands free and fully automated production process installed using SIEMENS PCS7-CEMAT Distribution Control System with 24x7 monitoring, sampling and analysis of cement production through its stages from mining to packing. Samples are sent to independent quality analysts to establish quality standards

Risk Management Policy

Risk Assessment and Mitigation procedure: Risk assessment and mitigation procedure is an on-going process. The Company has in place a concurrent process of Risk assessment and mitigation in the form of periodic review meeting of individual divisions of the Company. These review meetings are chaired by the Managing Director where the various risks faced in the operation, its current and future impact both in financial and operational terms, are discussed in detail and steps for minimizing the impact is deliberated, finalized and implemented.

Sri. M A M R Muthiah, Managing Director, primarily in-charge of conduct of the affairs of the Company appraises the Board of Directors regularly about the assessed risks and the measures taken to mitigate the same to ensure smooth conduct of the business of the company

Some of the key business risks identified by the Company and its mitigation plans are as under:

a. Competition Risks:

The Cement Industry is becoming intensely competitive with the foray of new entrants and the existing players adopting inorganic growth strategies. To mitigate this risk, the Company is leveraging on its expertise, experience and its created capacities to increase its market share, enhance brand equity / visibility and enlarge product portfolio and consolidate service offerings.

b. Project Risks:

The Cement Industry is capital intensive in nature. The execution of projects would take considerable time and statutory approvals which has the potential for cost and time over runs. To mitigate these risks, the project management team and the project accounting and governance framework has been further strengthened.

Declaration by independent directors

Sri Mohan Krishna Reddy, Director and Ms. Bhavana G Desai, Director are independent Directors on the Board of your Company. In the opinion of the Board and as confirmed by these Directors, they fulfill the conditions specified in section 149 of the Companies Act 2013 and the Rules made thereunder about their status as Independent Directors of the Company.

Details of significant & material orders passed by the regulators, courts, tribunals impacting the going concern status and companys operations in future

There were no significant and material orders passed by regulators or courts or tribunals impacting the going concern status and company operations in future.

Directors and Key Managerial Personnel

Sri L Muthukrishnan (DIN: 01758013), Director retires by rotation at the forthcoming Annual General Meeting and being eligible, offer himself for reappointment.

Sri K Ganapathy (DIN:00947364), Director retires by rotation, does not seek reappointment and is therefore retired and not appointed as Director.

Sri R Krishnamoorthy, Director resigned from the Board with effect from 01.09.2014.

Sri V Chandramoleeswaran (DIN: 00589090) has been co-opted on 16.12.2014 as Director on the Board of the Company, in the place of Sri R Krishnamoorthy.

Sri. V Srikrishnan, Joint President (Finance) resigned from the services of the Company effective 6^th June 2015. The Board placed on record its appreciation for the services and valuable contribution rendered by Sri. V Srikrishnan during his tenure with this company.

The Board has appointed Sri. R Raghunathan as Chief financial officer of the Company with effect from 12^th August 2015.

Transfer of Amounts to Investor Education and Protection Fund

The unclaimed dividend upto the financial year 2006-07, has been transferred to the said Fund within the stipulated time. The next remittance of dividend declared for the financial year 2007 - 08 to the fund will be made during October / November, 2015. The members who have not claimed/encashed their dividend so far may communicate to the Company/Registrars and get the dividend amount, declared for the Financial years from 2007-08 to 2013-14. [No dividend declared for the year 2009-10].

The Unpaid dividend with respect to disputed cases (from the year 1995-96 to 2005-06) lying in the unpaid dividend account has been transferred to the investor education and protection fund in May 2015.

Fixed Deposits

Your Company has not accepted any deposits from public and has no un-matured / unpaid Fixed Deposits at the end of the financial year 2014-15.

Particulars of Employees

Pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, statement of particulars of employees is Annexed as Annexure 4.

Details of conservation of energy, technology absorption, foreign exchange earnings and outgo (a) Conservation of energy

(i) the steps taken or impact on conservation of energy	Puliyur
	Modification of Preheater II & III Cyclone
	Modification of Preheater IV & V Cyclone
	Installation of SPRS System for RABH FAN
	New Oil Firing system for Kiln
	Installation of VFD Control for Cooler Drive
	Installation of VFD Control for RABH Reverse air fan.
	Installation of New Feed Rotary Airlock system for Cement Mill
	Modification of Coal Mill2 O/L diapharm
	Modification of Cement mill separator discharge airslide
	Karikkali
	Installation of Hot Air Duct from line- 2 cooler to Line- 1 Cement mill to avoid consumption of furnace oil during Kiln stoppage
	Installation of SPRS PreHeater Fan
	Installation of VFD for 412FN1 Bag filter fan power.
	Installation of VFD for 542FNC Bag filter fan power
	Installation of VFD for 553FN3 Bag filter fan power
	Installation of VFD for 312FN1 Bag filter fan power
	Usage of 100 % LED Lamps.
	Ariyalur:
	Conversion of 66DBC2A, 66DBC4A, 66EBC2A, 66FBC4A belt
	Conveyors from Delta to Star Connection.
	Removal of inlet Damper of the FD Fan in the Boiler to avoid the damper loss
	Reduction in the speed of Line 2 Raw mill bag house Fan motor from 65% to 62%
	Optimisation of the plant lighting voltage by reducing the tap in the transformer
	Replacement of Submersible pumps in WTD with End suction pumps for the improving the efficiency of pumps.
	Kallur
	Usage of pet coke Usage to reduce the fuel cost.
(ii) the steps taken by the company for utilizing alternate sources of energy	Puliyur
	Usage of Alternate fuel in Cement plant and CPP- 11134 MT
	Karikkali
	16294 MT Alternative fuel used in Cement Plant.
	Kallur
	Usage of Alternative Fuels to reduce the fuel variable costs in Cement Plant and CPF!
(b) Technology absorption
(i) the efforts made towards technology absorption	Puliyur
	Latest versions of Variable Frequency Controllers System
	Latest version of Slip Power Recovery System
	Maintenance Management System
	Automatic Fire Warning & Alarm System
	Energy Efficient Motors
	Numerical Relays for the Electrical System
	Protection Energy Efficient - Magnetic Induction, CFL Lamps
	Kallur
	Improvement in the Operational stability and Output due to Raw Mill Roller
	Ariyalur
	"Fan Control System" was incorporated in DCS which will interface shell cooling fan vs. shell scanner temperature
(ii) the benefits derived like product improvement, cost reduction, product development or import substitution	Kallur
	Raw Mill Roller Press - Roller Profiling done to improve the Operational stability and Output.
	Installation of Additional Super Heater Coils in Waste heat Recovery Plant to improve the Performance.
	Implementation of Rain Water Conservation Pit in Mines to collect the rain water avoiding running of bore wells for Plant Operations.
	Installation of Modified Limestone Crusher Rotor Clamping system to improve the reliable Operations.
	Ariyalur:
	Mobile screen incorporated to improve the quality of limestone for plant operation.
	Provision of heat pump for dormitory for hot water instead of Geysers in the individual rooms.
(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-
(a) the details of technology imported	-
(b) the year of import;	-
(c) whether the technology been fully absorbed
(d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof
(iv) the expenditure incurred on Research and Development	Amount in Lakhs
a. Capital	Nil
b. Recurring	93
c. Total	93

(c) Foreign exchange earnings and Outgo

During the year, the total foreign exchange used was 2076 lakhs (previous year 2203 lakhs) and the total foreign exchange earned was 230 lakhs (previous year 235 lakhs)

CAUTIONARY STATEMENT

Statements made in this Report, including those stated under the caption "Management discussion and Analysis" describing the Companys objectives, expectations or projections may constitute "forward looking statements" within the meaning of applicable laws and regulations.

Important factors that could influence the Companys operations include global and domestic supply and demand conditions affecting and selling prices of finished goods, availability of inputs and their prices, changes in the government regulations, tax laws , economic developments within the country and outside and other factors such as litigations and industrial relations.

The Company assumes no responsibility in respect of the forward looking statements which may undergo changes in the future on the basis of subsequent developments, information or events.

Acknowledgement

The Board of Directors wish to place on record their appreciation for employees at all levels, who have contributed to the growth and performance of your Company.

Your Directors also thank the clients, vendors, bankers, shareholders, Financial Institutions, Suppliers, Customer and advisers of the Company for their continued support.