odisha cement ltd share price Management discussions

COMPANY OVERVIEW

Dalmia Bharat Limited is a leading cement manufacturer in India with a wide range of products catering to customers across 22 states in the country. Our operations are spread across 14 plants with a production capacity of 38.6 MTPA, and as making us the fourth-largest cement player in India. Our extensive distribution network comprising 41,000+ channel partners has resulted in a wider reach of products and rapid growth for the Company.

At Dalmia Bharat Limited, we remain committed to expanding our Cement production capacity to reach 46.6 MTPA by FY24. As part of this commitment, we have recently signed a definitive agreement with Jaiprakash Associates for the acquisition of a cement manufacturing unit with a production capacity of 9.4 MTPA, clinker with a capacity of 6.7 MTPA and a thermal power plant of 280 MW. These plants are strategically located and will provide us with an entry into the high-growth market of central India.

GLOBAL ECONOMIC OVERVIEW

The year 2022 started with the recovery momentum gained in the previous year. However, it was soon marred by the onset of the war between Russia and Ukraine. This further contributed to the mounting inflation pressure, witnessed across the world. Central banks continued to increase interest rates to curb demand and control inflation. However, the global economy displayed signs of resilience in the third quarter, largely driven by buoyant private consumption. As a result, as predicted by the IMF, the global economy grew by 3.4% in 2022. On the supply side, the removal of bottlenecks, reduced transportation costs and re-opening of borders in China created favourable conditions that enabled key sectors of the global economy to rebound. The economy reported a 6.2% growth in 2021.

Global growth (%)

Particulars	Estimate	Projections
	2022 :	2023
World output	3.4	2.8
Advanced Economies	2.7	1.3
United States	2.1	1.6
Euro Zone	3.5	0.8
Emerging Market and Developing Economies	4.0	3.9
China	3.0	5.2
India	6.8	5.9

Source: IMF, World Economic Outlook Update, January 2023

Outlook

The global economy has faced significant challenges in recent times, but there is a positive development on the horizon that is cause for optimism. It is anticipated that the deceleration of global economic growth will begin to rise in 2024, signalling a gradual recovery.

The April 2023 edition of the World Economic Outlook by the International Monetary Fund (IMF) forecasts a decline in growth rates from 3.4 percent in 2022 to 2.8% in 2023, followed by a stabilisation at 3.0% in 2024. The slowdown in growth is anticipated to be particularly prominent in advanced economies, with an expected decrease from 2.7% in 2022 to 1.3% in 2023. In an alternative scenario involving additional strain on the financial sector, global growth would decrease to approximately 2.5% in 2023, with growth in advanced economies falling below 1%.

The report highlights positive developments in some major economies, such as the US, where the implementation of fiscal stimulus measures is expected to boost economic growth. Additionally, the global vaccination drive has progressed significantly, providing hope for an eventual end to the pandemic and a more robust economic recovery.

While challenges remain, there are reasons for optimism about the global economys growth outlook for 2023. The IMF reports projections suggest that the world is gradually emerging from the pandemics grip, and the expected uptick in economic growth is a positive development. Policymakers and business leaders are

more vigilant and continue to implement measures to support the economic recovery and mitigate potential risks.

INDIAN ECONOMIC OVERVIEW

The Indian economy has shown remarkable resilience and continues to recover despite facing challenges such as rising inflation and supply shocks resulting from external events. Indias growth for 2022-23 is pegged at 7%, against 9.1% reported in 2021-22. This growth is testimony to the effectiveness of the governments proactive fiscal policy measures However, the persistent inflation led the RBI to increase policy rates.

India is witnessing robust growth in demand and an increase in capital investments. With a steady recovery, overall Gross Value Added (GVA) grew 4.6% in Q3 FY23¹. PMI Manufacturing has been in the expansion zone and registered at 55.3 and PMI Services at 59.4 in February 20 2 3². As per National Statistics Office, Indias Industrial Production Index (IIP) grew to 5.2% in January backed by electricity and manufacturing output. Following the governments impetus on infrastructure growth, infrastructure, and capital goods grew at a robust 8.1% and 10.95%, respectively.

Increasing Goods and Services Tax (GST) collections are a testimony to the Indian economys resilience. The country collected 18.10 lakh crore in 2022-23, the highest since the launch of this regime. The monthly GST revenues remained more than 1.4 lakh crore for 12 consecutive months.

The Union Government has maintained its focus on capital expenditure (Capex) and has steadily increased it from a long-term average of 1.7% of GDP (FY09 to FY20) to 2.7% of GDP in FY23. The government has incentivised State Governments through interest- free loans and higher borrowing ceilings to prioritise Capex spending, particularly in infrastructure-intensive sectors such as roads, railways, and housing and urban affairs. This increase in Capex is expected to have significant positive implications for medium-term growth. Ultimately, the Governments Capex-led growth strategy will help India maintain a positive growth-interest rate differential and achieve sustainable debt-to-GDP ratios in the medium term.

Outlook

The Indian economy demonstrated remarkable resilience and remained largely insulated from the global uncertainties. The current Economic Survey pegs the countrys real GDP growth at 6.5% in FY24, fuelled by a favourable regulatory environment, a robust industrial policy (through the PLI scheme), a private sector that has reduced its leverage, and increased capital spending, especially on critical infrastructure projects.

The Survey highlights several positive developments in the Indian economy, including the governments efforts to create a conducive regulatory environment that encourages investment and growth. The Production Linked Incentive (PLI) scheme has also played a critical role in promoting the manufacturing sector, creating jobs, and increasing exports.

Business-Standard Article: "Indias GDP growth slows to 4.4% in Q3; manufacturing woes remain" ²Trading Economics

The private sectors reduction in leverage is another positive development that has strengthened the economys resilience, reducing the risks of financial instability. The increased capital spending on infrastructure projects is expected to provide a significant boost to economic growth, creating employment opportunities and improving the countrys infrastructure.

Indias economic prospects are looking positive, and the country is expected to achieve strong economic growth in the coming years. The governments efforts to create a conducive business environment coupled with increased capital spending are expected to drive growth and create employment opportunities for millions of people.

GOVERNMENT INITIATIVES

The Indian government is committed to introducing and implementing reforms and making it easier for companies to do business. Manufacturing and Infrastructure continue to remain the key focus areas on which the government is concentrating. It plans to reboot Indias infrastructure cycle using the three-pronged strategy of emphasising asset creation (NIP), asset recycling (NMP) and integrated planning (Gati Shakti).

Capital Outlay

The Central government increased capital outlay by 33% to 10 lakh crore in Union Budget 2023-24. This is viewed as a positive boost to infrastructure and construction companies.

The Indian government is committed to providing long-term sustainable economic growth and infrastructure development plays a key role in achieving this growth.

Urban Infrastructure Development Fund (UIDF)

The Union Budget has proposed the establishment of an Urban Infrastructure Development Fund (UIDF) to develop urban infrastructure in Tier II and III cities using the priority sector lending shortfall and an allocation of 10,000 crore per year.

This initiative is expected to enhance connectivity, leading to an increase in demand for housing in these up-and-coming cities.

Pradhan Mantri Awas Yojana

Pradhan Mantri Awas Yojana (Housing for all) is a government initiative launched in 2015 aimed at providing affordable housing to eligible beneficiaries by 2024. The programme has two components: PMAY (Urban) and PMAY (Gramin), offering financial assistance to urban poor households and rural households, respectively. It provides credit-linked subsidies and interest subsidies at 6.50% p.a. to make housing more affordable. PMAY has been successful in providing affordable housing to millions of beneficiaries, particularly economically weaker sections, low- income groups, and women. The Union Budget 2023-24 allocated 79,000 crore towards the initiative to further bolster growth in the segment.

Smart Cities

The Smart Cities Mission is a government initiative launched in 2015 aimed at developing 100 cities in India into smart cities.

The mission focuses on developing sustainable and inclusive

urban infrastructure with the use of technology and innovation to improve the quality of life of citizens. The Central Government allocated 16,000 crore to drive the initiative ahead.

Production Linked Incentive (PLI) Scheme

The Production Linked Incentive (PLI) Scheme aims to promote domestic manufacturing and reduce dependence on imports by providing financial incentives to eligible companies. It covers various sectors, including electronics, pharmaceuticals, automobiles, and textiles, among others. The scheme is expected to boost economic growth, create job opportunities, and enhance Indias competitiveness in global markets, in line with the Atmanirbhar Bharat initiatives goal of achieving self-reliance.

In the Union Budget 2023-24, a sum of 8,083 crore has been allocated to PLI schemes, with most of the funding being directed towards large-scale production in electronics manufacturing, pharmaceuticals, automobile and automobile components, as well as food processing.

Gati Shakti - a National Master Plan for Multi-modal Connectivity - Logistics & Transport Network

PM Gati Shakti National Master Plan is a 100 lakh crore project launched by the Indian government to develop holistic infrastructure in India. The PM Gati Shakti scheme targets seamless multimodal connectivity to facilitate easy movement of goods and people, improved prioritisation, optimal usage of resources, timely creation of capacities, and resolution of issues such as disjointed planning, standardisation, and clearances. The goal of the plan is to make products manufactured in India more competitive by cutting down logistics costs and improving supply chains.

National Monetisation Pipeline (NMP)

The National Monetisation Pipeline (NMP) is a plan developed by NITI Aayog in consultation with infrastructure line ministries to monetise the core assets of the central government, with an estimated potential of 6 lakh crore over four years from FY22 to FY25. The plan aims to engage the private sector in unlocking value in brownfield projects without transferring ownership of the projects. The funds generated from the monetisation will be used for infrastructure creation across the country.

CEMENT INDUSTRY

India is the second largest producer and consumer of cement, with a capacity of ~600 MTPA. The industry is an essential contributor to the Indian economy, providing employment to millions of people and driving infrastructure development. From the fiscal year 2013 to 2022, Indian cement manufacturers have significantly increased their capacity by 217 MT³. Of this, despite pandemic- related interruptions, the last five fiscal years up to 2022 saw an additional 109 MT increase in capacity.

As per Crisils estimate, Indian cement companies plan to expand and increase their capacity by 145-155 MT between FY23 and FY27 at a 4-5% CAGR on a high base. A 6-7% CAGR in cement demand during these five fiscal years will support the increase in supply.

Driven by the swift implementation of infrastructure projects and robust growth in real estate and affordable housing sectors in rural areas, cement demand rose by 11% YoY in the first ten months of FY23. This positive trend is expected to continue during the rest of the fiscal year, as it is a peak season for construction activity across all regions.

Cement companies in FY23 witnessed input cost inflation. Power and fuel expenses form a major part of the sectors variable cost. After peaking in March 2022, international petcoke has corrected by 32%⁴. With a drop in thermal coal prices, the cement industry

is set to benefit from increased margins. Despite these cost challenges, many manufacturers are unveiling long-term capacity growth plans to capture more of the market.

The Union Budgets emphasis on infrastructure has also boosted the cement industry, which is expected to experience its third consecutive year of growth with an anticipated 7-9% increase to approximately 425 million tonnes (MT) in FY24. The most significant growth is projected to come from the roads sector, as both the Ministry of Road Transport and Highways and the National Highways Authority of India have reported a YoY increase of 25% and 14% in their total outlay, respectively.

 

BUSINESS REVIEW

At Dalmia Bharat Limited, we are committed to a sustainable future where profitability and environmental responsibility go hand in hand. We believe that by prioritising sustainability, we can set new standards for our industry and positively impact the world around us. To achieve this goal, we have set ambitious targets, including becoming carbon negative by 2040. We are actively working towards this by doubling our energy productivity by 2030 and participating in the RE100 campaign alongside other leading corporations. We are proud to have been recognised as a COP26 & COP27 Business leader, and to have been invited to participate in both the UN Climate Action Summit and the UN Climate Ambition Summit. We have also been named one of the top five climate defenders globally by BBC World and ranked #1 by CDP in the global cement sector for our business readiness in transitioning to a low-carbon economy. As members of The Alliance of CEO Climate Leaders by the World Economic Forum, we are committed to a long-term transition to renewable energy.

One of our key focuses has been on utilising energy resources efficiently and optimally. This has resulted in improved production efficiency per MW of energy utilised and reduced greenhouse gas emissions per MT of production. We remain committed to protecting the environment and reducing the serious effects of global warming. Our efforts to reduce carbon footprints have generated exceptional results, making us one of the lowest carbon footprint-producing companies across the world.

At Dalmia Bharat Limited, we have developed a diverse portfolio of value-added products with strong brand recognition for various consumers and institutions. Our most preferred consumer brands include Dalmia DSP, a premium product in the AA+ category for high-strength concrete applications, Dalmia Cement, produced using superior ingredients to provide high-strength construction, and Konark Cement, which protects the construction from harsh environmental conditions. Our institutional brands include Dalmia Infra Pro, Dalmia Infra Green, and Dalmia Insta Pro, each designed to meet the specific needs of our customers. Additionally, we are the largest manufacturer of Portland Slag Cement (PSC) in India. Our portfolio also includes special cement for airstrips and nuclear power plant construction. We are proud to be associated with the construction of some of the key projects in India like the Hirakud Dam and Chennai Metro.

Our products are widely trusted for their quality and reliability. With an extensive distribution network, we can cater to our customers over a wide geography. In addition to our technical services, we also prioritise customer and dealer relationships through digital initiatives, ensuring that we remain top-of-mind for our customers.

To reduce the risks associated with the supply chain of raw materials, we have strategically placed captive mines and plants

for the smooth supply of raw materials. Furthermore, we have reduced our dependence on power suppliers by meeting 2/3rd of our power needs through our 10 captive power plants with a power generation capacity of 364 MW.

E13,540 E2,316

Revenue in FY23 EBITDA

E1,079

Net Profit

SUSTAINABILITY INITIATIVES

At Dalmia Bharat Limited, sustainability lies at the core of our business strategy. We acknowledge the critical need of combating climate change and actively working towards a sustainable future. Aligned with our commitment to the Paris Agreement, we have implemented a comprehensive set of sustainability initiatives that encompass our operations, lobbying activities, public policy engagements, and climate change positions.

For real change to occur, advocacy and teamwork are crucial. We have set up a management system that controls our advocacy actions and trade association memberships to ensure that they are in line with our sustainability goals. This system ensures transparency, accountability, and adherence to sustainable practices throughout our engagements. One example of our advocacy activities is advocating for renewable energy policies as we believe in the importance of transitioning to clean energy sources to reduce greenhouse gas emissions. We actively engage with policymakers to promote the adoption of favourable policies, such as incentives and subsidies, for renewable energy development. By advocating for renewable energy, we aim to accelerate the transition to a low-carbon economy and support the global efforts outlined in the Paris Agreement.

Our advocacy on behalf of stronger emission standards and laws is another illustration. Dalmia is dedicated to reducing carbon emissions and advancing green manufacturing methods. To ensure that our public policy actions are in line with our sustainability goals, we have put in place a strong governance structure for public policy frameworks. With our dedication to the Paris Agreement, it allows us to make a conscious decision.

We have developed a clear approach to handle any inconsistencies between trade groups and our policy views on climate change. This framework gives us the ability to spot any inconsistencies and fix

them, ensuring that our stance on climate change is constant and unwavering.

The Company has demonstrated a commitment to sustainability through several initiatives. In FY23, our carbon footprint was 463 CO₂ emission-Kg/ton, which is significantly lower than the industry average. We have set a goal to become carbon negative by 2040, making us the first cement company in the world to do so.

The Company has joined EV100, a global initiative to transition to electric vehicles, becoming the first triple joiner globally of RE100, EP100, and EV100. This transition will help reduce the Companys carbon footprint even further.

We are also making strides towards water positivity, with a waterpositive ratio of 14 in FY23. Our goal is to achieve a ratio of 20x by 2025. This demonstrates our commitment to reducing water consumption and replenishing the water it does use.

In terms of the production processes, we have made significant strides in reducing our clinker factor and increasing the use of recycled waste. The Companys clinker factor percentage is 58.5%, which is lower than the Indian average of 68%. Similarly, the Companys green fuel percentage is 17%, which is significantly higher than the Indian average of changes this according to 17%.

We have also been recognised for our efforts towards sustainability. We were ranked #1 by CDP in 2018 in the global cement sector on business readiness for a low-carbon economy transition. This demonstrates our commitment to reducing its carbon footprint and transitioning towards a more sustainable future.

We have also been awarded the Platinum Award for Sustainability and in total six awards at NCB International Conference.

We are also the first ever Cement Manufacturing recipient of The DL Shah Quality Gold Award for promoting green blended cement and green binders.

BUSINESS STRATEGY a. Marketing and Branding

During the year, we undertook numerous initiatives to engage with our customers and strengthen our brand visibility across markets. During the year, we undertook a flagship campaign Shubh Shubh Banao - focused on curating emotional engagement to depict the feeling of auspicious for our channel partners. This one-of-a-kind activation Campaign has spread positive word of mouth in the market and successfully touched 3,000+ stakeholders in 66 cities.

b. Robust Supply Chain Model

We introduced a supply chain optimiser in FY22 to optimise our distribution. We enforced stock transfer through highersized vehicles to improve efficiency and institutionalised reverse auctions across plants. We have an extensive fleet of 8000+ trucks serving 200+ districts. With 300+ warehouses, there is a daily truck movement of 2,300+ vehicles.

DBL is implementing a "green" supply chain initiative by deploying the nations first fleet of LNG trucks in partnership with GreenLine Logistics⁶. We have ordered 35 LNG trucks for its Chandrapur Plant in Maharashtra, and an additional 25 trucks will be deployed in Tamil Nadu in April. By adding LNG and EV trucks, we aim to replace 10% of our current fleet of 3,000 vehicles with LNG trucks by the end of FY24 to reduce transportation fleet emissions. GreenLine Logistics LNG trucks reduce CO₂ emissions by about 28% and lower other harmful emissions by up to 100%, making them a more environmentally-friendly option.

c. Going Green (MoU with FLSmidth, Denmark)

We have entered into a memorandum of understanding (MoU) with FLSmidth, Denmark, as part of the Green Strategic Partnership between the Indian and Danish governments. This collaboration aims to develop groundbreaking innovations that promote sustainability in the cement industry.

 

RISK EXPOSURE AND CONCERN

We understand that effective risk management is necessary to protect our capital and earnings from the risk we are exposed to. We have robust risk management practices which are inter-aligned with Strategic & Operational decision-making. In our Group, we have operationalised risk function at the granular level to integrate risk and compliance management for sustainable business performance. Our Risk Management Committee comprises independent directors and is the highest governing body in addressing risk challenges and reviewing mitigation plans. We have a resource allocation policy with due consideration to Enterprising risk.

The Company is prone to risks as highlighted below:

Input Cost Risk: The Company is exposed to the risk of inflation and fluctuations in the cost of coal, petcoke, power and other fuels which are market driven. Provided that the cement industry is energy-intensive, fluctuations in fuel price are paramount in

production cost and hence well-designed plans have been laid down to tackle the input cost risks.

Compliance Risk (Legal Risk): With the ever-evolving regulatory framework, there exists a risk of abiding by the law of conduct, thereby leading to fines, charges, etc. Proper committees have been formed to create awareness about the same in employees to plummet the risk.

Climate Change Risk: As a socially and environmentally responsible Company, your Company consistently adopts sustainable practices. It follows the philosophy of "Clean and Green is profitable and Sustainable," making the Company a powerful and distinctive brand. The Company has already subscribed to one of the most stringent voluntary emissions reduction programmes.

Financial Risk: Risk of exposure to interest rates, foreign exchange rates and commodity price fluctuations pose a financial risk for the Company. To minimise the risk, an appropriate

financial risk management policy is adopted followed by regular monitoring and reporting.

Information Technology Risk: To tackle the risk arising from the IT systems, data integrity, and physical assets, our Company uses backup procedures and stores information at different locations and ensures regular updating of the systems with the latest security standards. Since all the business data starting from production to sales are computerised, data manipulation or loss of information may arise.

Logistics risks: To manage the Infrastructure to cater to growing needs, Increased logistics costs, evolving regulatory mandates for zero carbon targets, limited government support towards rail freight requirements of the cement industry, restrictions of heavy vehicle movement during peak hours, agitations/strikes by transportation unions. We have adopted measures such as rate contracts with transporters, implementation of a supply chain optimiser tool, conversion of HSD Trucks to CNG/LNG Trucks, launch of e-trucks, utilisation of other companys railway sidings and increased fleet capability among others.

Sales and Marketing risks: To manage the risk of the fragmented market, rapid capacity additions by existing players and new entrants, limited distribution network, adverse sales mix due to increasing share of the non-trade segment, increasing industry preference towards alternative cement products, benchmarking analysis with competing brands, market positioning w.r.t benchmarked brands, assessment of competitive actions for proactive actions, benchmarking margins for DBL Channels, transplanting dealer from one location to required location has

been adopted followed by Developing innovative new products for niche markets and resource prioritisation to trade sales.

Human Resource or Talent Management Risk: To engage the right person at the right time in the right job is the Companys objective. To retain the talents in the Company is the main challenging task and to mitigate the risk arising from it, specialised training courses are adopted to enhance and reskill employees to prepare them for future roles and create a talent pipeline.

And there is always going to be the risk of unforeseen pandemics and other events as we witnessed during COVID-19.

INFORMATION TECHNOLOGY

At Dalmia, the focus is on strengthening supply chain management through automation, mobility, and cloud solutions. An in-house app has been developed to track and control the entire logistical value chain. It integrates data from multiple applications using process automation and provides real-time insights.

Tech Stack - We have incorporated software such as SAP, Python, QlikView, and Power BI amongst others to increase our operational and reporting efficiency.

Logistics & Delivery - Our Driver Sathi app enables us to track the delivery times and status when there are multiple deliveries across several points. This means that we can ensure secure delivery by generating one-time passwords (OTPs) for each delivery, ensuring that the right product is delivered to the right place at the right time.

Sales - Smart-D serves as a one-stop solution and helps the sales teams streamline their processes, improve customer relationships, and ultimately drive more sales and revenue for the business.

Distributors/Dealers -Suvidha app enables the dealer to track their earnings and monitor their payment status on a real-time basis. It helps dealers manage their financial information more efficiently and effectively, which can help them optimise their earnings and drive more sales for their business.

HUMAN RESOURCES AND SAFETY

The Company is committed to ensuring that all are treated with dignity and respect. We have been taking utmost care of our people and providing them with the best working facilities equipped with modern technologies. The Human Resources and the Legal and Secretarial departments in collaboration with other functions ensure protection against sexual harassment of women and men in the workplace and for the prevention and redressal of complaints in this regard.

We also aim to build a safe environment to work in and to ensure a sense of belongingness, that they are heard here, among the workers. We provide various learning opportunities to enhance the skills and knowledge the workers already possess.

The health and safety practices are continuously improved to ensure zero harm and to activate safety measures and achieve safety goals across the manufacturing unit, a multi-year roadmap of guidelines has been developed.

We believe that Fit India is the best India and for that, we ensure sound physical and mental health. We run the FIT Dalmia Wellness Programme through a popular module called WIN which works on the body, mind and soul not only for the employees but also for their families.

As of March 31, 2023, we employ 5,642 employees in India⁷.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

We believe in the concept of giving back and sharing it with the underprivileged sections of society. The Corporate Social Responsibility interventions of the Group are based on the principle of Gandhian Trusteeship. For over eight decades, the Group has addressed the issues of livelihood, water for productive use and social infrastructure development. The prime objective of our Corporate Social Responsibility policy is to hasten social, economic and environmental progress.

Dalmia Bharat Foundation (DBF) is responsible for the implementation of the CSR programmes of the Group. The Foundation implements programmes in the domains of sustainable

livelihood and social infrastructure across 23 locations. Through our flagship programme on skilling, the Dalmia Institute of Knowledge and Skill Harnessing (DIKSHa) centres provided skill training to 2,496 people. Along with this, we also work for providing sustainable livelihoods in farm and non-farm sectors to farmers, women, and youth. This financial year we have provided training, credit access, capacity building, etc. to more than 30,583 beneficiaries to explore additional livelihood opportunities.

Through our initiatives in Water Conservation, our efforts this financial year have resulted in creating an additional water harvesting and conservation potential of 322.75 lakh KL annually

Please refer to CSR Report and Social and Relationship Capital section in the IR for further details.

617.14

Total annual water harvesting capacity

INTERNAL CONTROL SYSTEMS AND THEIR ADVOCACY

DBL has a well-placed internal control system commensurate to the size, scale and complexity of our operations. We have a well-defined organisational structure and management procedures to ensure all internal financial controls are adequate and operating effectively. It has in-built policies and procedures to safeguard our assets, maintain proper accounting records and provide financial information. The internal control and risk management systems are systematically structured and applied per the corporate governance code of our organisation. The corporate governance practices in DBL are driven by strong Board oversight, timely disclosures, transparent accounting policies and high levels of integrity in decision-making. Internal audit functions are looked at by the internal audit department, which carries out the internal audit of the group operations as per Board approved plans and presents our findings to the audit committee. Our management has evaluated the operative effectiveness of these controls and noted no significant deficiencies or material weaknesses that might impact the financial statements as of March 31, 2023.

OUTLOOK

The governments unwavering attention to the infrastructure and housing sectors in India reflects a deep-rooted optimism in the nations growth trajectory. With successive budgets, we witness a steadfast commitment to augment capital expenditure and drive the manufacturing industry through initiatives like the PLI scheme. These endeavours, coupled with a resolute focus on the housing sector, are poised to propel the demand for cement within the country.

In alignment with the governments vision of fortifying India, our organisation has pledged a substantial capital investment for the forthcoming years. Our strategic approach entails the establishment of greenfield units and the enhancement of existing facilities to meet our targeted capacity expansion goals. Embracing a sustainable ethos, our growth trajectory is underpinned by a decisive shift from thermal energy and electricity to renewable alternatives by 2030. Already, we have commenced the substitution of fossil fuels with alternatives derived from municipal waste and industrial by-products encompassing chemicals, pharmaceuticals, and other sectors.

While the market landscape is bound to witness fierce competition, our brands robust equity stands out as a key distinguishing factor. We have garnered a reputation for unparalleled quality and reliability in the markets we serve.

Our extensive distribution network enables us to cater to even the most remote corners, while we relentlessly explore new geographies to broaden our reach. Moreover, our commitment to superior technical services empowers our customers to achieve exceptional construction quality. Simultaneously, we remain firmly connected with our customers and dealers through innovative digital initiatives, ensuring our brand remains at the forefront of their minds.

Looking ahead, we anticipate that our concerted efforts will culminate in the creation of substantial value for all our stakeholders. As we embark on this transformative journey, we remain dedicated to fostering sustainable growth, delivering exceptional products and services, and further fortifying our position in the industry.

FINANCIAL OVERVIEW

Consolidated results

Crore

Description	FY23	FY22	Change (%)
Revenue from operations	13,540	11,286	20%
Expenses
Cost of raw materials consumed	1,906	1,530	25%
Purchases of stock in trade	52	7	643%
Changes in inventories of finished goods, stock in trade and work-in-progress	23	(65)	(135%)
Employee benefits expense	771	744	4%
Power and fuel	3,679	2,570	43%
Freight charges
- on finished goods	2,498	2,056	21%
- on internal clinker transfer	304	299	2%
Other expenses	1,991	1,719	16%
Total expenses	11,224	8,860	27%
Operating EBITDA	2,316	2,426	(5%)
Operating EBITDA Margin (%)	17.1%	21.5%
Other income	138	160	(14%)
Finance costs	234	202	16%
Depreciation and amortisation expense	1,305	1,235	6%
Profit before share of profit in associate and joint venture and exceptional items	915	1,149	(20%)
Share of profit in associate and joint venture accounted for using equity method (net)	554	5	9,991%
Exceptional items (net)	(144)	(2)	5,683%
Profit before tax from continuing operations	1,325	1,152	15%
Total tax expense	242	315	(23%)
Profit after tax from continuing operations	1,083	837	29%
Profit/(loss) from discontinued operations	(4)	8	(150%)
Profit After Tax (PAT)	1,079	845	28%
PAT %	8.0%	7.5%

During FY23, the Group recorded EBITDA of 2,316 crore (previous years 2,426 crore) registering a decline of 4.5% over FY22. This is primarily on account of higher fuel prices adversely impacting the variable cost of production. The positive impact of incremental volume and selling price was offset by increased costs on account of the surge in fuel price.

In spite of a marginal reduction in EBITDA, the Group recorded an increase in profit after tax from continuing operations by 246 crore (29%) to 1,083 crore (previous years 837 crore).

The increase in PAT was on account of an increased proportionate share of profit in associates, which is partially offset by exceptional loss recognised during the year.

The basic and diluted earnings from continuing operations for the FY23 were at 55.44 per share and 55.41 per share, respectively (previous year: basic and diluted: 43.15 per share and 43.10 per share, respectively).

1. Revenue from operations

The Groups total revenue has grown by 20% to 13,540 crore in FY23 from 11,286 crore in FY22.

Crore

Particulars	FY23	FY22	Change (%)
Cement and its related products	13,212	11,003	20%
Power	11	33	-67%
Management service charges	14	24	-42%
Total sale of products and	13,237	11,060	20%
services
Other operative revenue	303	226	34%
Total revenue from operations	13,540	11,286	20%

The cement sales volume of the Group was 25.7 MnT in FY23 registering a growth of 15.9% as compared to 22.2 MnT in FY22. The average selling price (net of discount and taxes) increased by 3.7% in FY23 over FY22.

The Group continued to retain a strong leadership presence in the Southern, Eastern and North Eastern markets.

Other operating revenue mainly includes subsidies on the sale of finished goods and scrap sales.

2. Other income

Other income primarily comprises interest income, dividend income, gain on sale and fair valuation of financial instruments and others.

Other income was reduced by 22 crore to 138 crore mainly attributed due to lower (a) dividend income, and (b) writeback of liabilities no longer required.

3. Cost of raw materials consumed

The cost of raw materials consumed increased by 25% in FY23 when clinker and cement production increased by 9.0% and 14.9%, respectively. An increase in blended cement (%) from 79% to 84% and higher rates of input materials, contributed to the increase.

The cost of raw materials consumed accounted for 14.1% of revenue in FY23 as against 13.6% in FY22.

4. Employee benefits expenses

The employee cost increased by 4% in FY23 mainly due to an increment in the annual salaries which was in line with the industry. This is partly offset by and lower ESOP expense (152,640 ESOP granted in FY22) and recognition of the voluntary separation scheme at one of the manufacturing units during the previous year.

Employee benefits expense accounted for 5.7% of revenue in FY23 as against 6.6% in FY22.

5. Power and fuel cost

Power and fuel costs of the Group have increased by 43% from 1,157/T in FY22 to 1,429/T in FY23 due to increased prices of coal and petcoke during the year.

Power and fuel costs accounted for 27.2% of revenue in FY23 as against 22.8% in the previous year.

6. Freight charges on finished goods

Cost increased on account of increased sales volume by 16% as compared to the previous year. Further, freight on cement increased from 1,060/T to 1,088/T of cement sold in 2023 (up by 2.6%).

Freight charges on finished goods accounted for 18.4% of revenue in FY23 as against 18.2% in FY22.

7. Finance costs

Finance cost increased by 32 crore to 234 crore mainly due to an increase in gross debt during the year, and further higher weighted average cost of total borrowings from 5.6% p.a. in FY22 to 6.9% p.a. in FY23 on account of an increase in repo rate.

8. Depreciation and amortisation expense

Depreciation and amortisation expenses increased by 69 crore to 1,305 crore in FY23, mainly due to additions in PPE during FY23.

9. Exceptional items

Exceptional loss for the year ended March 31, 2023, is due to reclassification of investment in associate carried at 944 crore to Assets classified as held for sale, consequent to a binding agreement entered into by DCBL during the year for the sale of its entire investment at a consideration of 800 crore to a promoter group company, and the difference between the consideration and carrying value amounting to 144 crore was recognised as an exceptional loss.

10. Tax expense

Tax expense for FY23 as a percentage to profit before share of profit in associate and joint venture and exceptional items is lower than the previous year, mainly on account of lower profit in the current year as compared to the previous year.

Consolidated Balance Sheet 1. Property, plant and equipment (PPE) including Intangibles and Right-of-use assets

(i) Total additions to PPE and Intangible assets were 1,798 crore, mainly on account of:

(a) Commissioning of Waste Heat Recovery System at cement manufacturing plant located at various locations (510 crore)

(b) Additions to Solar plants at various locations (255 crore)

(c) Capacity expansion of cement and clinker by 2.7 MnTPA and 2.8 MnTPA, respectively by debottlenecking at various plants (390 crore)

(d) Acquisition of land for setting up of projects/ expansions at various locations (179 crore)

(e) Other regular additions in PPE mainly consisting of routine maintenance and efficiency/productivity improvement capital expenditure.

(ii) Capital work in progress (CWIP) stood at 1,859 crore as at March 31, 2023 and is largely attributed to (a) installation of pyro upgradation at various plants across the Group, and (b) capacity enhancement/upgradation of cement mills.

(iii) Goodwill: There was no addition in the value of goodwill during the year. The Group continued to amortise goodwill acquired pursuant to the Scheme of Arrangement and Amalgamation sanctioned by Honble National Company Law Tribunal and the amount of amortisation during the year was 203 crore.

(iv) Right-of-use assets: Additions during the year was 135 crore on account of lease contracts of land, buildings (godowns, office and residential premises) and vehicles used in its operations.

(v) Intangible assets under development stood at 12 crore as at March 31, 2023.

(vi) The Group has provided adequate depreciation and amortisation in accordance with the useful lives of the assets determined in compliance with the requirements of the Companies Act, 2013. In certain class of assets, the Group uses different useful life than those prescribed in Schedule II of Companies Act, 2013.

2. Non-current investments

(i) Investments accounted using equity method of

2 crore as at March 31, 2023 consists of investment in a joint venture. Decrease in investments were predominantly on account of (a) reclassification of investment in Dalmia Bharat Refractories Limited, an associate company of DCBL, to Assets classified as held for sale, consequent to binding agreement entered into by DCBL during the year for sale of its entire investment in equity shares of said associate at a consideration of 800 crore to Sarvapriya Healthcare Solutions Private Limited, a promoter group company, and (b) reduction of investment in Radhikapur (West) Coal Mining Private Limited, a joint venture company of DCBL, by 6 crore pursuant to reduction of capital of said joint venture company.

(ii) Other non-current investments of 587 crore as at March 31, 2023 mainly consists of investment in equity shares of a listed entity, optionally redeemable convertible debentures and compulsorily convertible preference shares. Decrease in investments were predominantly on account of (a) fair valuation loss on investment held in equity shares of 210 crore, and (b) reclassification of investment in redeemable nonconvertible debentures (NCDs) of 120 crore issued by Hippostores Technology Private Limited, a promoter group company, to Current investments.

3. Current investments

Current investments of 2,935 crore as at March 31, 2023 mainly consist of investment in equity shares of a listed entity, mutual funds, corporate bonds and redeemable NCDs reclassified from non-current investment. Decrease in investments were predominantly on account of fair valuation loss on investment held in equity shares of 1,288 crore,

and further on reduction of investment in various debt based mutual funds of 324 crore. This is partly offset by as increase in investment in corporate bonds by 29 crore and reclassification of redeemable NCDs of 120 crore from noncurrent investment.

4. Inventories

Inventory as at March 31, 2023 was 1,316 crore compared to 945 crore as at March 31, 2022. The increase was primarily due to an increase of fuel inventory by 330 crore on account of increase in quantity as well as prices. Our inventory days were 31 days in FY23 against 28 days in FY22.

5. Trade receivables

Trade receivables as at March 31, 2023 stood at 700 crore against 673 crore as at March 31, 2022, increased marginally by 27 crore. Our current receivable days (before provision for rebate to customers) has remained broadly stable at 19 days.

6. Other financial assets

Total other financial assets (non-current and current) of 877 crore as at March 31, 2023 primarily consists of subsidies/ incentive receivable of 701 crore, security deposits of 117 crore and other receivables.

Increase in other financial assets by 42 crore mainly on accrual (net of receipts) of subsidies/incentives.

7. Other non-financial assets

Other non-financial assets (non-current and current) of 1,113 crore as at March 31, 2023 mainly consists of capital advances, deposits and balances with government departments and other authorities and advance to suppliers. Increase in other non-financial assets were predominantly on account of increase in capital advances by 189 crore, deposit and balances with government departments by 110 crore. This is partly offset by decrease in supplier advances by 40 crore during the year.

8. Assets or disposal group classified as held for sale

Assets or disposal group classified held for sale of 890 crore as at March 31, 2023 mainly comprises of (a) investment in associate using equity method for which Group has entered into a binding agreement for sale of its entire investment at a consideration of 800 crore as mentioned above, (b) PPE of Paper and Solvent Extraction Undertakings (together referred to as disposal groups) aggregating to 83 crore, as these are considered non-core business to the Group and management is committed to sell these disposal groups. The disposal groups

have been stated at fair value less cost to sell (being lower of their carrying amount). There is no liabilities associated with disposal groups held for sale as at March 31, 2023.

9. Share capital

The paid-up share capital of the Company as at March 31, 2023 was 37 crore comprising 18,74,80,361 equity shares of face value 2 each. During the year, Company has further issued 1,11,688 shares to eligible employees under ESOP during the year.

10. Gross debt and Net debt

Gross debt was higher by 623 crore and stood at 3,763 crore as at March 31, 2023, due to availment of long-term Rupee Term loans during the year to fund the capital expenditure for ongoing capacity expansion projects.

Net debt was higher by 2,082 crore and stood at 661 crore as at March 31, 2023. Increase was mainly attributable to increase in gross debt, along with reduction in current investments majorly on account of fair valuation loss on investment held in equity shares of 1,288 crore.

11. Trade payables

Total balance as at March 31, 2023 at 1,135 crore, increased by 285 crore due to increase in business volume in Q4 FY23 and for fuel creditors including petcoke shipment in transit.

12. Other financial liabilities

Other current financial liabilities increased by 56 crore to 1,532 crore as on March 31, 2023, mainly on account of net increase in provision for rebate given to customers by 50 crore which is in line with increase in revenue.

13. Provisions

Total balance (non-current and current) as at March 31, 2023 was 320 crore as compared to balance of 266 crore as at March 31, 2022. The increase was primarily due to increase in mines reclamation liability by 47 crore on account of revising the estimates and capitalised in PPE, and further marginal increase due to employees defined benefits which is based on the valuation from the independent actuary.

14. Other liabilities

Other liabilities primarily consist of liability towards dealer incentives, advance from customers and statutory dues.

Total other liabilities (non-current and current) increased by 63 crore mainly on account of increase in liability towards dealer incentives.

Consolidated Cash Flow

Crore

Particulars	FY23	FY22	Change
Net cash flow from operating activities	2,252	1,932	320
Net cash flow (used) in investing activities	(2,326)	(1,043)	(1,283)
Net cash flow from/(used in) financing activities	168	(942)	1,110
Net increase/(decrease) in cash and cash equivalents	94	(53)	147

Net cash flow from operating activities:

During the year under review, the net cash generated from operating activities was 2,252 crore as compared to 1,932 crore during the previous year. The cash inflow from operating profit before working capital changes during the current year was 2,343 crore as compared to inflow of 2,423 crore during the previous year due to lower operating profits.

Cash outflow from working capital changes in FY23 is mainly due to increase in inventories, trade receivables and financial and other assets by 505 crore, partly offset by increase in trade and other payables/provisions by 428 crore. The income tax paid during the current year was 14 crore (net of refund) as compared to refund of 24 crore (net of payments) during previous year.

Net cash flow (used in) investing activities:

During the year under review, the net cash outflow from investing activities amounted to 2,326 crore as compared to 1,043 crore during the previous year. The outflow during the current year broadly represents capital expenditure of 2,709 crore and investment in fixed deposits of 33 crore, partly offset by proceeds realised on sale of current investments (net of purchase) amounting to 329 crore and receipt of interest and dividend income amounting to 77 crore.

Net cash flow from/(used in) financing activities:

During the year under review, the net cash inflow from financing activities was 168 crore as compared to outflow of 942 crore during the previous year. The inflow during the current year broadly represents availment of borrowings of 667 (net of payments), which is partly offset by payment of interest of 297 crore, principal portion of lease liabilities of 33 and dividends of 169 crore.

Key Financial Ratios are as under:

Particulars	^¦FY23	FY22	Change
Debtors Turnover (in times) *	48.39	47.94	1%
Inventory Turnover (in times)	11.70	12.95	-10%
Interest Coverage Ratio (times)	8.16	10.72	-24%
Current Ratio (times)	1.45	1.58	-8%
Debt Equity Ratio (times)	0.24	0.20	23%
Operating Profit Margin (%)	7.5%	10.5%	-29%
Net Profit Margin (%)	8.0%	7.5%	6%
Return on Net Worth (%)	6.8%	5.7%	19%

* debtors turnover is computed net of provision for rebate to customers and on average of opening and closing debtors.

Explanations for variation of 25% or more in Key Financial Ratios:

1. Operating Profit Margin: The operating profit margin (before exceptional items) decreased due to lower operating profits on account of higher variable cost of production as a result of steep increase in fuel prices, which is partly offset by increased sales volume and improvement in sales realisation, as compared to last year.