Samruddhi Cement Ltd merged Share Price directors Report
SAMRUDDHI CEMENT LIMITED
ANNUAL REPORT 2009-2010
DIRECTORS REPORT
To
The Members
Dear Shareholders,
Your Company was incorporated on 4th September, 2009. As such, your
Directors present the First Annual Report of your Company together with the
Audited Accounts for the period ended 31st March, 2010.
SCHEME OF ARRANGEMENT:
As you are aware, the Cement Business of Grasim Industries Limited
(Grasim), the holding company, has been demerged into your Company w.e.f.
1st October, 2009, being the Appointed Date fixed for this purpose,
pursuant to a Scheme of Arrangement under Sections 391 to 394 of the
Companies Act, 1956 (the Scheme of Arrangement). Pursuant to the Scheme
of Arrangement and in consideration thereof, your Company shall issue 1
(one) equity share of the face value of Rs. 5/- credited as fully paid up,
to the shareholders of Grasim for every equity share they hold in Grasim as
on 28th May, 2010, being the Record Date fixed for this purpose. The Scheme
of Arrangement has become effective on 18th May, 2010, having received the
regulatory approvals, interalia, the sanction of the Honble High Court of
Madhya Pradesh, Indore and Honble High Court of Gujarat, Ahmedabad.
MERGER WITH ULTRATECH CEMENT LIMITED:
As a separate matter, the Board of Directors of your Company and that of
UltraTech Cement Limited (UltraTech), another subsidiary of Grasim, have
decided to amalgamate your Company with UltraTech under a Scheme of
Amalgamation under Sections 391 to 394 of the Companies Act, 1956 (Scheme
of Amalgamation), subject to necessary approvals, w.e.f. 1st July, 2010,
being the Appointed Date fixed for the purpose. In terms of the Scheme, the
shareholders of the Company will receive 4 (four) equity shares of
UltraTech of the face value of Rs.10 each, credited as fully paid up, for
every 7 (seven) equity shares of the Company of the face value of Rs.5 each
held on the record date to be fixed for the purpose. The Scheme of
Amalgamation is pending for sanction before the Honble High Courts of
Bombay and Gujarat.
The amalgamation of your Company with UltraTech will result in UltraTech
emerging as the largest Cement Company in India and the 10th largest in the
world.
FINANCIAL PERFORMANCE:
The results of your Company on consolidated basis for the period ended 31st
March, 2010 are as under.
As the Company has been incorporated during the year under review, the
figures of the previous year are not available.
(Rs. Crores)
Consolidated Stand-alone
2009-10 2009-10
Gross Turnover 4,745.70 4,745.70
Gross Profit (PBDT) 1,155.07 1155.11
Less: Depreciation 213.12 213.12
Profit before Tax 941.95 941.99
Tax Expenses 324.03 324.03
Surplus available for Appropriation 617.92 617.96
Appropriation:
General Reserve 200.00 200.00
Debenture Redemption Reserve 12.50 12.50
Proposed Dividend 45.79 45.79
Corporate Tax on Dividend 7.61 7.61
Balance carried to Balance Sheet 352.02 352.06
617.92 617.96
OPERATIONS:
A review of operations of your Company for the period ended 31st March,
2010 is provided in the Management Discussion and Analysis Section, which
forms part of this Annual Report.
DIVIDEND:
Your Directors are pleased to recommend a maiden Dividend @ Rs. 1.75 per
fully paid-up equity share of Rs. 5 each for the period ended on 31st
March, 2010. The total outgo of the dividend to be paid to the shareholders
will be Rs. 53.40 crores (inclusive of Corporate Tax on Dividend).
EMPLOYEE STOCK OPTION SCHEME (ESOS):
Pursuant to the Scheme of Arrangement between Grasim Industries Limited
(Grasim), the Company and their respective shareholders and creditors
under the provisions of Sections 391 to 394 of the Companies Act, 1956
(Scheme of Arrangement), the Cement Business of Grasim was transferred to
the Company. Grasim had constituted an employees stock option scheme in
2006 (ESOS-2006) under which Grasim had granted options to its eligible
employees. In respect of the stock options granted by Grasim under ESOS-
2006, the Company is required to offer one (1) employee stock option for
every employee stock option held by an employee in Grasim, as on the date
as may be determined by Grasim for this purpose, under the Compensatory
Stock Option Scheme created by the Company (ESOS-2010), pursuant to the
Scheme of Arrangement.
The details of Employee Stock Options granted pursuant to ESOS - 2010, as
also the disclosures in compliance with Clause 12 of the Securities and
Exchange Board of India (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999, are set out in the Annexure to this
Report.
DEBENTURES AND TERM LOANS:
Your Company has raised long term loans aggregating Rs.450 Crores to meet
the requirements of capital expenditure and other approved purposes.
AWARDS & ACCOLADES:
Your Company has earned several honours. Some of the significant accolades
received include:
* National Energy Conservation Award 2009 in Cement Sector : Birla White
Division.
* CAPEXIL Export Award - Certificate of Merit for Export Recognition :
Birla White Division.
* IMC - Ramakrishna Bajaj National Quality Award for Outstanding
Achievement Trophy 2009 : Birla White Division.
RESEARCH AND DEVELOPMENT:
In an increasingly competitive business environment, your Company
recognizes the importance of Research & Development (R&D) to maintain its
leadership position. To further its competitive edge through product
innovations and quality upgradation as part of its customer-centric
endeavors, your Company pursues a focused R&D strategy. Its R&D efforts
also aim at ensuring cost optimization and environment protection.
Your Companys R&D efforts are focused on development of new products and
processes for creating greater value for its customers. While meeting
customer needs is at the centre of all R&D activities, your Company is
committed to sustainable development and looks for new ways to preserve the
environment and manage resources responsibly. Towards this, your Company
aims to maximise use of industrial waste, alternative sources of fuel and
chemicals and mineral evaluation of captive limestone reserves.
HUMAN RESOURCES:
Your Company continuously strives to foster a culture of high performance.
Your Management has infused a lot of rigor and intensity in its people
development processes and in honing skill sets. Its HR processes are
absolutely aligned to organizational goals.
The implementation of People Soft HRMS (Human Resource Management System),
the variable pay plan and job bands have been institutionalized.
Ongoing learning, refreshing HR systems in line with global benchmarks,
aligning rewards and recognition with performance, have enabled your
Company sustain its reputation of a meritocratic organization.
The Groups Corporate Human Resources function has played and continues to
play an integral role in your Companys Talent Management Processes.
CORPORATE GOVERNANCE:
As required by Clause 49 of the Listing Agreement of Stock Exchanges, the
report on Corporate Governance forms part of this Annual Report. The
Companys Statutory Auditors Certificate dated 18th May, 2010 in terms of
Clause 49 of the Listing Agreement is annexed to and forms part of the
Directors Report.
DIRECTORS RESPONSIBILITY STATEMENT:
As stipulated in Section 217(2AA) of the Companies Act, 1956, your
Directors subscribe to the Directors Responsibility Statement and
confirm that:
i) in the preparation of the accounts for the period ended 31st March,
2010, the applicable accounting standards have been followed along with
proper explanation relating to material departures;
ii) the Directors have 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 or loss of the
Company for that period;
iii) the Directors have taken proper and sufficient care of 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; and
iv) the Directors have prepared the accounts for the period ended 31st
March, 2010 on a going concern basis.
CONSOLIDATED FINANCIAL STATEMENTS:
Upon effectiveness of the Scheme of Arrangement, Harish Cement Limited has
become a wholly owned subsidiary of your Company and Bhaskarpara Coal
Company Limited has become a joint venture of your Company, with effect
from 1st October, 2009.
The Consolidated Financial Statements have been prepared by your Company in
accordance with the applicable Accounting Standards (AS-21 and AS-27)
issued by the Institute of Chartered Accountants of India. Together with
the Auditors Report, these form part of the Annual Report.
PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956:
Information on Conservation of Energy, Technology Absorption and Foreign
Exchange Earnings and Outgo, stipulated under Section 217(1)(e) of the
Companies Act, 1956 is set out in a separate statement, attached to this
report and forms part of it.
In accordance with the provisions of Section 217(2A) ot the Companies Act,
1956 read with the Companies (Particulars of Employees) Rules, 1975, the
names and other particulars of employees are to be set out in the
Directors report, as an addendum thereto. However, in tandem with the
provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report
and Accounts as set out therein, are being sent to all members of the
Company excluding the aforesaid information about the employees. Any
member, who is interested in obtaining these particulars about employees,
may write to the Company Secretary at the Registered Office of the Company.
DIRECTORS:
Your Company had initially three directors, viz., Mr. Adesh Gupta, Mr.
Sanjeev Bafna and Mr. Ashok Malu. Subsequent to the resignation of Mr.
Sanjeev Bafna, Mr. Saurabh Misra was appointed as an additional director of
your Company with effect from 17th September, 2009. Upon the resignation of
Mr. Saurabh Misra, Mr. O.P. Puranmalka was appointed as an additional
director of your Company with effect from 16th February, 2010.
The Directors place on record their appreciation of the services rendered
by Mr. Sanjeev Bafna and Mr. Saurabh Misra during their tenure as members
of the Board.
Upon effectiveness of the Scheme of Arrangement between Grasim and the
Company, whereby the Cement Business of Grasim has been transferred to the
Company pursuant to the Scheme, the appointment of Mr. O.P. Puranmalka as
an Additional Director of the Company was deemed to be treated as Whole
Time Director of the Company with effect from the date of his appointment,
viz. 16th February, 2010 to 31st March, 2010 under the provisions of
Section 269 and 314 read with Schedule XIII and other applicable
provisions, if any, of the Companies Act, 1956.
Mr. Kumar Mangalam Birla, Mr. R.C. Bhargava, Mr. G.M. Dave, Mr. N.J.
Jhaveri and Mr. S.B. Mathur, who were appointed as the Additional Directors
at the Board Meeting held on 18th May, 2010, hold office till the
conclusion of the ensuing Annual General Meeting. The Company has received
the notices in writing from a member proposing their candidature for the
office of Directors, liable to retire by rotation.
Mr. Adesh Gupta retires from office by rotation at the ensuing Annual
General Meeting and being eligible, offers himself for re-appointment.
AUDITORS:
The observations made in the Auditors Report are self explanatory and
therefore do not call for any further comments under Section 217(3) of the
Companies Act, 1956.
The Board, on the recommendation of the Audit Committee, has proposed that
M/s. G.P. Kapadia & Co., Chartered Accountants, Mumbai and M/s. Deloitte
Haskins & Sells, Chartered Accountants, Mumbai, be appointed as the Joint
Statutory Auditors of the Company to hold office from the conclusion of the
ensuing Annual General Meeting till the conclusion of the next Annual
General Meeting of the Company. M/s. G.P. Kapadia & Co., Chartered
Accountants, Mumbai and M/s. Deloitte Haskins & Sells, Chartered
Accountants, Mumbai have forwarded their certificates to the Company,
stating that their appointment, if made, will be within the limit specified
in that behalf in Sub-section (1B) of Section 224 of the Companies Act,
1956.
Resolutions seeking your approval on these items are included in the Notice
of the ensuing Annual General Meeting.
COST AUDITORS:
In pursuance of Section 233-B of the Companies Act, 1956, your Directors
have appointed M/s R.J. Goel & Co., Delhi, M/s K.G. Goyal & Co., Jaipur and
M/s N.D. Birla & Co., Ahmedabad, as the Cost Auditors for the year 2010-11,
subject to the approval of the Central Government.
APPRECIATION:
Your Directors wish to place on record their appreciation of the dedication
and commitment of your Companys employees to the growth of your Company.
Your Directors express their gratitude to the Central and State
Governments, banks, financial institutions, shareholders and business
associates for their ongoing co-operation and support.
For and on behalf of the Board
Adesh Gupta O.P. Puranmalka
Directors
Place : Mumbai
Date : 18th May, 2010
ANNEXURE A TO THE DIRECTORS REPORT:
In terms of the Scheme of Arrangement for demerger of the Cement Business
of Grasim Industries Limited (Grasim) to the Company (Scheme of
Arrangement), the Company is required to offer one (1) employee stock
option for every employee stock option held by the eligible employees in
Grasim, as on the date as may be determined by Grasim for this purpose,
under the Compensatory Stock Option Scheme created by the Company (ESOS-
2010), pursuant to the Scheme of Arrangement. The stock options enumerated
in the table below are in accordance with the Scheme of Arrangement.
Nature of disclosure : Particulars
a) Options granted : 1,85,654
b) The pricing formula : Exercise Price:
1st Tranche : Rs. 405 per option
2nd Tranche : Rs. 606 per option
In terms of the Scheme of
Arrangement, the Exercise Price of
the stock options granted by Grasim
under its Stock Option Scheme
(ESOS-2006) has been divided
between its stock options under
ESOS-2006 and the stock options of
the Company. The Exercise Price as
aforesaid has been determined
accordingly.
c) Options vested : 97,534
d) Options exercised : Nil
e) The total number of shares : Nil
arising as a result of exercise
of options
f) Options lapsed : Nil
g) Variation of terms of options : None
h) Money realized by exercise of : Nil
options
i) Total number of options in force : 1,85,654
j) Employee-wise details of options :
granted
i) Senior managerial personnel : Mr. O.P. Puranmalka : 9,430
(Whole-Time Director till
31.03.2010)
ii) Any other employee who receives : None
agrant in any one year of option
amounting to 5% or more of option
granted during that year
iii) Identified employees who were : None
granted option, during any one year,
equal to or exceeding 1% of the
issued capital (excluding
outstanding warrants and
conversions) of the Company at the
time of grant
k) Diluted Earnings Per Share (EPS) : Rs. 55.90
pursuant to issue of shares on
exercise of options calculated
in accordance with Accounting
Standard (AS) 20 Earning per
share.
l) Difference between the employee : Rs. 0.13 crore
compensation cost computed using
the intrinsic value of the
stock options and the employee
compensation cost that shall have
been recognized if the fair
value of the options had been used.
The impact of this difference on profits and on EPS of the company:
Particulars Rs. Crores
Net Profit 617.96
Add: Intrinsic value Compensation Cost 0.17
Less: Fair Value Compensation Cost 0.30
Adjusted Net Profit 617.83
Earnings Per share (Rs.) (Basic and diluted) Basic Diluted
As reported : 55.92 55.90
As adjusted : 55.91 55.89
m) Weighted-average exercise prices and weighted average fair values of
options whose exercise price either equals or exceeds or is less than the
market price of the stock:
Options granted under 1st Tranche:
Weighted average exercise price : (Rs.) 405.00
Weighted average fair value : (Rs.) 276.19
Options granted under 2nd Tranche:
Weighted average exercise price : (Rs.) 606.00
Weighted average fair value : (Rs.) 231.87
As the shares of the Company are currently not listed, the market price
thereof is not available. Hence, the classification is not applicable
n) A description of the method and
significant assumptions used to
estimate the fair values of
options, including the following
weighted average information :
(i) risk-free interest rate (%) : 7.78
(ii) expected life (No. of years) : 5
(iii) expected volatility (%) : 33.40
(iv) dividend yield (%) : 2.38
(v) the price of the underlying : Not applicable, as the shares of
share in market at the time of the Company are currently not
option grant listed
ANNEXURE B TO DIRECTORS REPORT:
Information under Section 217(1)(e) of the Companies Act, 1956 read with
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rule, 1988 and forming part of the Directors Report for the year ending
31st March, 2010:
A. CONSERVATION OF ENERGY:
a) Energy Conservation measures taken:
The Company is continuously engaged in the process of energy conservation
through improved operational and maintenance practices. Following measures
have been taken by different units of the company:
- Use of grinding aids for increasing blended cement production and fly ash
absorption in blended cement.
- Process Optimization in Raw Mill, Coal Mill and Cement Mills.
- Installation of Variable Frequency Drives.
- Modification in Compressed Air System and Cooling Tower.
- Installation of reject recirculation system and increasing filtration
area of bag house.
- Modification in Pre-heater cyclones, immersion tube and guide vanes for
Kiln.
- Usage of thermal power plant ash as fuel to recover residual heat value
from petcoke.
b) Additional investment and proposals, if any, being implemented for
reduction of consumption of energy:
- Installation of waste heat recovery systems in pre heater and cooler.
- Cooler modification for recovery of cooler heat losses.
- Use of Solar Lighting System with LED lights.
- Improve efficiency of process fans.
- Installation of additional Air Heater Module for waste heat recovery at
Kiln.
- Modification in Pre-heater cyclones and installation of higher efficiency
fan at Dryer and Decoloriser at Kiln.
c) Impact of Measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:
- The above measures have resulted/will result in reduction in fuel & power
consumption, increase in productivity and reduction in energy cost.
d) Total Energy Consumption and Energy Consumption per Unit of Production:
As per Form A attached.
B. TECHNOLOGY ABSORPTION:
Efforts made in Technology Absorption in Form B.
RESEARCH & DEVELOPMENT (R&D):
FORM B:
1. Specific areas in which R&D carried out by the Company:
- Development of variants of wall care putty.
2. Future Plan of Action:
- Development of new variants of value added products
3. Expenditure on R & D:
Expenditure Rs. Crs.
a. Capital 0.87
b. Recurring 1.99
2.86
c. Total R & D Expenditure as a percentage of turnover 0.07%
4. Technology Absorption, Adoption and Innovation:
The Company continuously strives to adopt latest technology for improving
productivity and product quality and reducing consumption of scarce raw
material, energy and other inputs.
Information regarding technology imported during the last five years:
- Installation of Loop Duct and TCS System through M/s Taiheiyo Engineering
Corporation, Japan for both kiln lines.
C. FOREIGN EXCHANGE EARNINGS AND OUTGO:
(a) Activities related to Exports:
Exports on F.O.B. basis during the year were Rs. 10.39 Crores
(b) Total Foreign Exchange used and earned:
Foreign Exchange used : Rs. 5.21 Crores
Foreign Exchange earned : Rs. 10.43 Crores
FORM A:
Total Energy Consumption and Energy Consumption per unit of Production:
(A) POWER & FUEL CONSUMPTION:
Unit Current Year
1. Electricity:
a) Purchased - Unit 000 168449
Total amount Rs. in lacs 7942
Rate per Unit Rs./Unit 4.72
b) Own Generation:
I) Through Diesel Generator - Unit 000 52465
Unit per Liter of Diesel Oil Units/Ltr. 3.62
Cost / Unit Rs./Unit 8.06
II) Through Steam Turbine - Units 000 644967
Units per Kg. Of Steam Co-generation of
Steam & Power
Cost / Unit Rs./Unit 3.28
(Cost of fuel and duties only)
2. Coal (Slack, Steam & ROM
including Lignite Coal & other
Alternative Fuel):
For Co-generation of Steam &
Power Tonne 775841
For Process in Cement Plants Tonne 1039120
Total amount Rs. in lacs 68121
Average rate Rs./Tonne 3753.33
3. Furnace Oil (Including LSHS):
Quantity K. Ltrs. 13986
Total amount Rs. in lacs 3534
Average rate Rs./K. Ltrs. 25266
4. Light Diesel Oil (LDO):
Quantity K. Ltrs. 0
Total amount Rs. in lacs 0
Average rate Rs./K. Ltrs. 40833
5. High Speed Diesel Oil (HSD):
Quantity K. Ltrs. 2284
Total amount Rs. in lacs 761
Average rate Rs./K. Ltrs. 33327
(B) CONSUMPTION PER UNIT OF PRODUCTION:
Electricity (units) Coal/Petcoke
Current Current
Unit Year Year
Name of the Product
Cement:
Grey Cement:
Electricity
Standard Per Tonne 100 -
Actual Per Tonne 81 -
Coal/Petcoke
Standard K.Cal Per - 710-800
Kg of Clinker
Actual K.Cal Per - 709
Kg of Clinker
White Cement:
Electricity:
Actual Per Tonne 119 -
Coal/Petcoke
Actual Kg Per Tonne - 132
MANAGEMENT DISCUSSION AND ANALYSIS:
OVERVIEW:
This is the first year of operation of your Company. The Cement business of
Grasim Industries Ltd. (Grasim) was demerged and vested into your Company
effective from 1st October, 2009. Therefore, the business operations are
only for six month during the current financial year.
During the year, Cement demand saw a double digit growth of 11%, one of the
highest in the decade, recording total despatches of around 200 million
tons. The growth was supported by economic recovery, reduction in excise
duty, Governments initiatives viz. National Rural Employment Guarantee and
low cost housing. The demand upturn has been generally broad based, with
all regions recording double digit growth, except Southern Region which was
impacted due to floods and political unrest in Andhra Pradesh during part
of the year.
BUSINESS PERFORMANCE REVIEW:
2009-10*
Unit (from 1st October 2009 to
31st March 2010)
Grey Cement
Capacity** Mn. TPA 25.65
Production Mn. MT 9.85
Sales Volumes$ Mn. MT 10.03
Average Realisation Rs./MT 3,390
White Cement:
Capacity** TPA 560,000
Production MT 276,416
Sales Volumes$$ MT 273,172
Average Realisation Rs./MT 8,499
* This being the first financial year of the Company since incorporation,
disclosure of previous year figures is not applicable.
** Production quantity is for six months only, whereas the installed
capacity given above is for full year.
$ Includes captive consumption for RMC.
$$ Includes captive consumption for value added products.
Your Company completed its ongoing cement expansion. The 3.1 million TPA
grinding capacity at Kotputli, Rajasthan became operational during quarter
ended March, 2010. Cement production was 9.85 million tons during the six
months ended March, 2010. The sales volumes were 10.03 million tons. The
bunching of new capacities created a downward pressure in cement prices
across the regions during the quarter ended December, 2009. The decline was
more pronounced in the Southern Region. Unavailability of railway wagons in
various pockets of the country resulted in under utilisation of capacity.
There was partial recovery in cement prices in the last quarter due to
renewed construction activity and increase in taxes and energy prices.
White Cement division registered an impressive performance and achieved 99%
capacity utilisation. The Ready mix concrete division is emerging out of
the sluggishness, with recovery in the real estate segment.
On the cost front, the business gained from the global softness in energy
prices in the first three months. It has petered off in the last quarter.
Outlook:
Cement demand is expected to remain buoyant with increased domestic
consumption, both in the government as well as the private sector. The
government has reiterated its commitment to infrastructure spending in the
budget. The Planning Commission in its midterm appraisal of the 11th year
plan has envisaged an expenditure of Rs. 20.5 trillion on infrastructure
during the plan period. Additionally, the broad based economic growth will
continue to drive cement demand from semi urban and rural India with their
rising prosperity levels. With the economy having recovered from the slow
down, revival in organised real estate and corporate capex are also
expected to add to the buoyancy in demand. Overall, cement demand is
expected to grow at a robust 10% + for the next five years.
The surplus supply scenario, however, is expected to create short term
pressure. New capacities commissioned during FY10 are in various stages of
ramp up while additional capacities continue to be set up. This might lead
to a surplus scenario after peak demand in Q1FY11, which may last for 6 to
8 quarters.
On the cost front, higher coal prices are likely to exert pressure on
margins in FY 11. The Companys focus on higher volume growth, better
logistics support, together with cost efficiency, should help in partially
mitigating the impact.
Your Company continues to focus on achieving greater than industry growth
and building sustainable competitive advantage through its reach, service
and cost competitiveness. Its distribution network is being further
expanded throughout India particularly in rural areas to increase the
reach. Customer responsiveness is being further improved with the
implementation of online order booking and tracking system.
Capex Plan:
An overall capital outlay of Rs. 2,375 Crores has been earmarked. This will
be spent over the next 2 years on logistics infrastructure, waste heat
recovery systems, completion of existing projects and modernization.
FINANCIAL REVIEW AND ANALYSIS:
(Rs. in Crores)
2009-10
(from 4th September
2009* to 31st March 2010)
Net Turnover 4,290.6
Other Operating Income and Other Income 50.0
Profit Before Interest, Depreciation and Tax 1,242.2
PBIDT Margin (%) 28.6
Interest 87.1
Depreciation 213.1
Profit before Tax Expenses 942.0
Total Tax Expenses 324.0
Net Profit 618.0
During the current period ended 31st March 2010, your Company has recorded
a net turnover of Rs. 4,291 Crores and net profit of Rs. 618 Crores. It
earned a healthy 28.6% PBIDT margin.
CASH FLOW ANALYSIS:
(Rs. in Crores)
2009-10
(from 4th September
2009* to 31st March 2010)
Sources of Cash:
Cash from Operations 1,029
Non-operating Cash Flow
(Dividend Income) 10
Proceeds from Equity 85
Increase in Debts 409
Decrease in Working Capital 181
Decrease in Cash and Cash equivalent 28
1,742
Uses of Cash:
Net Increase in Investments 1,265
Capital Expenditure (net) 376
Interest 101
1,742
* Date of Incorporation
Sources of Cash:
Cash from Operations:
Cash from operations was Rs. 1,029 Crores during the six months of
operation.
Increase in Debts:
Term Loans of Rs.450 Crores were raised to fund capacity expansion. Short
term loan of Rs. 42 Crores were repaid.
Proceeds from Equity:
17 Crores equity shares of Rs.5 each were issued at par to Grasim, the
Holding Company.
Decrease in Working Capital:
Reduction in trade receivables and inventories and increase in trade
payables led to decrease in working capital.
Uses of Cash:
Net Increase in Investments:
Your Company invested Rs. 1,234 Crores in the debt scheme of various mutual
funds. An investment of Rs.3.9 Crores was made in equity share capital of
Bhaskarpara Coal Company Ltd., a joint venture of the Company. Further, a
sum of Rs.27 Crores was advanced to Harish Cement Ltd., a subsidiary of the
Company.
Capital Expenditure (Net):
Your Company have spent Rs. 376 Crores towards the completion of expansion
projects and normal modernisation.
RISKS AND CONCERNS:
Upon transfer of Cement business from Grasim (Holding Company), your
Company has adopted its risk management policy. The risk management policy
inter alia provides for risk identification, assessment, reporting and
mitigation procedure. The risk management framework actively supports the
Board in its strategic decision making.
An analysis of the Companys key business risks and mitigation plans is as
follows:
Competitor Risk:
The market is highly competitive with no fiscal barriers and entry of large
MNCs into the country with inorganic growth strategies. Your Company
continues to focus on increasing its market share and taking marketing
initiatives that help create differentiation and provide optimum service to
its customers.
Human Resource Risk:
Your Companys ability to deliver value is shaped by its ability to
attract, train, motivate, empower and retain the best professional talents.
Your Company continuously benchmarks HR policies and practices with the
best in the industry and carries out the necessary improvements to attract
and retain the best talent.
Foreign Exchange Risk:
Your Companys policy is to hedge all long-term foreign exchange risk as
well as short-term exposures within the defined parameters. The long-term
foreign exchange liability is fully hedged and hedges are on held to
maturity basis.
Interest Rate Risk:
The Company is exposed to interest rate fluctuations on its borrowings. It
uses a judicious mix of fixed and floating rate debts within the stipulated
parameters to mitigate the interest rate risk and whenever required, uses
hedging tools to minimise interest rate risk.
Commodity Price Risk:
Your Company is exposed to the risk of price fluctuation on raw materials,
energy sources as well as finished goods. However, considering the normal
correlation in the prices of raw materials and finished goods, the risk is
reduced. Setting up of captive power plants helps control the effect of
rise in energy cost, a major cost element for cement manufacturing. Forward
integration in value added products e.g., ready mix concrete in cement,
wall care putty in white cement, help reduce the impact of price
fluctuation in finished goods.
Input Availability Risk:
Availability of natural resource for current needs and future growth
requirements is a key risk. Indian coal availability continues to be
insufficient to meet the current and growing demand in the country. To meet
the shortfall, your Company procures coal from various sources including
imports, open market purchases and pet coke. One coal block has also been
allocated by Government of India to our joint venture with other
corporates. This coal block will, however, meet only a small part of our
requirement on becoming operational. Your Company has intensified its
efforts to increase use of various alternative fuels. Waste heat recovery
systems are being planned to reduce energy consumption. Your Company has
sufficient limestone reserves at its existing facilities. Prospecting and
acquiring leases of new limestone mines are being undertaken on a regular
basis to ensure future growth.
INTERNAL CONTROL SYSTEM:
The Company has appropriate internal control systems for business
processes, with regards to efficiency of operations, financial reporting,
compliance with applicable laws and regulations, etc. Clearly defined roles
and responsibilities down the line for all managerial positions have also
been institutionalised. All operating parameters are monitored and
controlled. Regular internal audits and checks ensure that responsibilities
are executed effectively. The Audit Committee of the Board of Directors
reviews the adequacy and effectiveness of internal control systems and
suggests improvement for strengthening them, from time to time.
CONCLUSION:
Your Company has decided to amalgamate with UltraTech Cement Ltd., another
subsidiary of Grasim with effect from 1st July, 2010 under a scheme of
amalgamation, subject to receipt of requisite approvals. The merger will
create largest Cement Company in India creating a platform that will help
in pursuing aggressive growth going forward.
CAUTIONARY STATEMENT:
Statement in this Management Discussion and Analysis describing the
Companys objectives, projections, estimates, expectations or predictions
may be forward looking statements within the meaning of applicable
securities laws and regulations. Actual results could differ materially
from those expressed or implied. Important factors that could make a
difference to the Companys operations include global and Indian demand
supply conditions, finished goods prices, feedstock availability and
prices, cyclical demand and pricing in the Companys principal markets,
changes in Government regulations, tax regimes, economic developments
within India and the countries within which the Company conducts businesses
and other factors such as litigation and labour negotiations. The Company
assumes no responsibility to publicly amend, modify or revise any forward
looking statements, on the basis of any subsequent development, information
or events or otherwise.
SUSTAINABILITY REPORT/INCLUSIVE GROWTH:
Corporate Social Responsibility Policy:
For us in the Aditya Birla Group, reaching out to underserved communities
is part of our DNA. We believe in the trusteeship concept. This entails
transcending business interests and grappling with the quality of life
challenges that underserved communities face, and working towards making a
meaningful difference to them.
Our vision is - to actively contribute to the social and economic
development of the communities in which we operate. In so doing build a
better, sustainable way of life for the weaker sections of society and
raise the countrys human development index (Mrs. Rajashree Birla,
Chairperson, Aditya Birla Centre for Community Initiatives and Rural
Development).
Implementation process:
Identification of projects:
All projects are identified in a participatory manner, in consultation with
the community, literally sitting with them and gauging their basic needs.
We recourse to the participatory rural appraisal mapping process.
Subsequently, based on a consensus and in discussion with the village
panchayats, and other influentials, projects are prioritized.
Arising from this, the focus areas that have emerged are Education, Health
care, Sustainable livelihood, Infrastructure development, and espousing
social causes. All of our community projects are carried out under the
aegis of The Aditya Birla Centre for Community Initiatives and Rural
Development.
In Education, our endeavour is to spark the desire for learning and
knowledge at every stage through * Formal schools * Balwadis for elementary
education * Quality primary education * Aditya Bal Vidya Mandirs * Girl
child education * Adult education programmes.
In Health care, our goal is to render quality health care facilities to
people living in the villages and elsewhere through our Hospitals. *
Primary health care centres * Mother and Child care projects * Immunization
programmes with a thrust on polio eradication * Health care for the
visually impaired, and physically challenged * Preventive health through
awareness programmes.
In Sustainable Livelihood, our programmes aim at providing livelihood in a
locally appropriate and environmentally sustainable manner through *
Formation of Self Help Groups for women empowerment * Vocational training
through Aditya Birla Rural Technology Parks * Agriculture development and
better farmer focus * Watershed development * Partnership with Industrial
Training Institutes.
In Infrastructure Development, we endeavour to set up essential services
that form the foundation of sustainable development through * Basic
infrastructure facilities * Housing facilities * Safe drinking water *
Sanitation & hygiene * Renewable sources of energy.
To bring about Social Change, we advocate and support * Dowryless marriage
* Widow remarriage * Awareness programmes on anti social issues * De-
addiction campaigns and programmes * Espousing basic moral values.
Activities, setting measurable targets with time frames and performance
management:
Prior to the commencement of projects, we carry out a baseline study of the
villages. The study encompasses various parameters such as - health
indicators, literacy levels, sustainable livelihood processes, population
data - below the poverty line and above the poverty line, state of
infrastructure, among others. From the data generated, a 1-year plan and a
5-year rolling plan are developed for the holistic and integrated
development of the marginalized. These plans are presented at the Annual
Planning and Budgeting meet. All projects are assessed under the agreed
strategy, and are monitored every quarter, measured against targets and
budgets. Wherever necessary, midcourse corrections are effected.
Organizational mechanism and responsibilities:
The Aditya Birla Centre for Community Initiatives and Rural Development
provides the vision under the leadership of its Chairperson, Mrs. Rajashree
Birla. This vision underlines all CSR activities. Every Manufacturing Unit
has a CSR Cell. Every Company has a CSR Head, who reports to the Group
Executive President (Communications & CSR) at the Centre. At the Company,
the Business Director takes on the role of the mentor, while the onus for
the successful and time bound implementation of the projects is on the
various Unit Presidents and CSR teams. To measure the impact of the work
done, a social satisfaction survey / audit is carried out by an external
agency.
Partnerships:
Collaborative partnerships are formed with the Government, the District
Authorities, the village panchayats, NGOs and other like-minded
stakeholders. This helps widen the Companys reach and leverage upon the
collective expertise, wisdom and experience that these partnerships bring
to the table.
In collaboration with FICCI, we have set up Aditya Birla CSR Centre for
Excellence to make CSR an integral part of corporate culture.
The Company engages with well established and recognized programmes and
national platforms such as the CII, FICCI, ASSOCHAM to name a few, given
their commitment to inclusive growth.
Budgets:
A specific budget is allocated for CSR activities. This budget is project
driven.
Information dissemination:
The Companys engagement in this domain is disseminated on its website,
Annual Reports, its house journals and through the media.
Management Commitment:
Our Board of Directors, our Management and all of our employees subscribe
to the philosophy of compassionate care. We believe and act on an ethos of
generosity and compassion, characterized by a willingness to build a
society that works for everyone. This is the cornerstone of our CSR policy.
Our Corporate Social Responsibility policy conforms to the Corporate Social
Responsibility Voluntary Guidelines spelt out by the Ministry of Corporate
Affairs, Government of India in collaboration with FICCI (2009).
Towards inclusive growth:
A snapshot of your Companys work:
Your Companys CSR activities extend to 310 villages, in proximity to its
plants, across the country.
Health Care:
At the rural medical camps organized for general health check-ups 15,388
villagers were examined. Over 91,400 patients were treated at our
hospitals. Those afflicted with serious ailments were taken to the
Companys hospitals for treatment.
Intra Ocular lens surgery benefited 3,662 cataract patients at Khor (M.P.),
Shambhupura (Rajasthan) and Kharia Khangar (Rajasthan).
More than 35,050 truck drivers, their helpers and migrant workers were
sensitized to the dangers of HIV/AIDS.
The DOTS centre at Kotputli continues to treat patients with TB.
596 patients were treated for dental problems.
Over 3,630 villagers benefited from specific disease camps organized for
cardiac checkup, skin diseases, arthritis and other specific health
problems.
A special programme for drug de-addiction organized at Bhatinda was
attended by 550 people.
Mother and Child Care:
We administered 1,19,457 polio doses to children at Birla White, Kharia
Khangar and Vikram Cement, Khor.
Nearly 10,000 children were immunized against diphtheria, tetanus, measles
and hepatitis-B across the locations mainly in Khor, Shambhupura, Kharia
Khangar and Kotputli.
More than 1,886 couples have opted for planned families and responsible
parenting at Rawan, Kotputli, Khor, Kharia Khangar, Sawa, Malkhed and
Reddipalayam.
Over 1,500 mothers were provided pre and post natal care at Reddipalayam,
Khor, Shambhupura, Kotputli, Rawan and Kharia Khangar.
Education:
Over 507 students were enlisted this year in our Balwadis at Khor,
Nawalgarh, Shambhupura and Reddipalayam.
To encourage the spirit of excellence, 361 children from the adopted rural
schools were awarded scholarships at Rawan and Malkhed.
This year we were able to persuade the parents of 290 girls who had dropped
out from their schools in the villages to get back to their studies at
Malkhed and Kharia Khangar.
To focus on the girl child we support the Kasturba Gandhi Balika
Vidhyalayas (KGBV) - residential schools for girls at Kharia Khangar.
More than 15 education centres across Rawan and Kharia Khangar provide
bridge education to girls who had dropped out from the education stream,
mid-way. So far, 290 girls have been successfully placed in KGBVs and other
Government schools.
Over 80 people have joined our adult literacy classes at Malkhed.
More than 8,100 students at various Government schools have been provided
educational aids such as school bags, notebooks, stationery and utensils
for mid-day meal support at Kharia Khangar, Neemuch, Shambhupura, Rawan and
Malkhed.
At the Kagina Industrial Training Centre, which we are running at Malkhed,
171 students have been trained as fitters, welders, electronic, electric
and mechanical repairmen. They have been successfully placed. This centre
is recognized by the Department of Employment & Training of the Government
of Karnataka.
Free coaching classes for underprivileged students were conducted at Rawan.
Safe drinking water and sanitation:
Water tanks have been set up at Neemuch, Chittorgarh, Kharia Khangar and
Reddipalayam.
Under the Nirmal Gram Yojana, your Company facilitated the construction of
individual toilets in villages around Khor and Shambhupura plants.
At schools around Shambhupura, 8 roof rain water harvesting structures were
constructed.
Sustainable Livelihood:
Towards fostering renewable energy, 50 bio-gas units have been promoted in
villages around our Vikram Cement Plant near Khor.
Immunized 9,061 animals in animal husbandry and other veterinary camps at
Vikram Cement, Khor, Grasim Rawan, Birla White Kharia Khangar and Aditya
Cement Shambhupura.
Farm based income generation activities have benefitted 70 farmers at
Kharia Khangar, Khor and Shambhupura.
Self Help Groups and Income Generation:
Our 120 Self Help Groups empower 1,200 rural households financially and
socially at Malkhed, Kharia Khangar and Reddipalayam. Most of these groups
have been linked with the economic schemes of NABARD and the District
Industries Centre.
Vocational training programmes were conducted for 637 youngsters. Among
these were two-wheeler repairing, driving, domestic electric fitting, motor
rewinding, mobile repairing, training on refrigeration, computer training
and beauty parlour courses in Khor, Shambhupura, Kharia Khangar,
Reddipalayam, Malkhed and Rawan.
At the various tailoring centres across our Units, linkages with
entrepreneurs have been developed to close the marketing loop. Over 36
women have been the beneficiaries.
Infrastructure Development:
To augment the ground water storage by minimizing the excess runoff, two
water harvesting structures in the form of Anicuts were constructed at
Kharia Khangar.
A community hall has been provided for Segwa village in Neemuch to
facilitate informative and cultural exchanges among communities.
School buildings, boundary walls, anganwadi centres, panchayat offices,
Primary Health Centre and cattle sheds have been constructed/renovated at
the Companys Neemuch, Chittorgarh, Kharia Khangar, Rawan and Kotputli
plants.
Your Company has repaired the village approach roads at Rawan and
Shambhupura.
Vikram Cement has set up a 20-bed maternity ward at the District Hospital.
Public sanitation facilities have been provided at Neemuch and other units.
At the Navjeevan Gaushala at Kharia Khangar, 3,500 cattle were vaccinated.
The vermin compost pits produce manure which is supplied to farmers. The
Gaushala also serves as a demonstration site for better bred cattle and
farming practices.
Social Welfare:
Under the mass marriage programme, 104 couples have wed.
We helped more than 120 new beneficiaries at Reddipalayam, Malkhed and
Rawan access Government pension funds for old age widows and the physically
handicapped. Other social security programmes were facilitated by us.
The drug de-addiction campaign organized at Bhatinda, was attended by 8,000
people so far, of which 250 addicts have been cured and successfully
rehabilitated.
At the week long Yoga and Sanskar classes organized for school children at
Malkhed 1,177 children participated.
Our Board of Directors, our Management and all of our employees subscribe
to the philosophy of compassionate care and to the upliftment of our rural
societies.
ENVIRONMENT REPORT:
The challenges that the world faces on environment conservation, are indeed
alarming. Just to highlight a few - climate change, the severity of
droughts and floods, their impact on rain fed agriculture, the emission of
greenhouse gases and our ability to pursue sustainable development. We in
India are no exception to these issues. Environment conservation and
sustainable development are continuously on your Companys radar. Hence
these are integrated into its business strategies as well as its efforts
towards fostering inclusive growth through its rural development and
community initiatives.
All of your Companys plants are ISO14001 EMS, OHSAS 14001 and SA8000
certified.
A rigorous in-depth environment audit of each of our plants is conducted by
external specialists in this domain. Among the auditors enlisted by us are
KPMG Peat Maverick, Det Norkse Veritas and Environmental Systems Auditors.
Alongside these experts, the State Pollution Control Boards certified
auditors also carry out these audits. They reconfirm our commitment to
environment conservation as a major operating principle.
Your Company has developed and implemented measures to monitor and reduce
green house gas (GHG) emissions from its manufacturing operations. The GHG
emission details and mitigation plan are being audited by KPMG as
Independent Third Party Auditors. This is work-in-progress. We expect to
publish their findings in the 3rd quarter of FY 2010-11. Whatever course
correction or innovative suggestions emanate from the report, will be
implemented. Their findings will be published by mid 2010-11.
Your Company is greatly advantaged by its linkages with its parent Company,
Grasim Industries Limited, which is a voluntary member of the Cement
Sustainability Initiative (CSI). The CSI sets common measures and is a
knowledge networking forum on environmental impact issues. Your Companys
sustainable development program is in sync with the parameters of the CSI.
Your Company is a voluntary member of the Cement Sustainability Initiative
(CSI). The CSI sets common measures and is a knowledge networking forum on
environmental impact issues. Your Companys sustainable development program
is in sync with the parameters of the CSI.
Your Companys Cement plants continue to validate its energy efficiency,
kiln reliability and productivity based on data from Global Benchmarking
Surveys, conducted annually by Whitehopleman - an independent UK based
consulting firm.
Your Companys thrust on use of alternate fuels is gaining momentum. We
have been continuing our efforts to reduce consumption of fossil fuels by
substituting these with wastes from other industries. It is difficult for
the waste generating industries to safely dispose these wastes generated
and the only other choice is through incineration.
We have saved using coal by recoursing to alternate fuels such as processed
municipal solid waste, agro waste, tyre chips and used polythene and
plastics. In 2009-10, we substituted the use of natural resources with
18,000 tons of waste materials as fuel, equivalent to 9,000 tons of coal
burning. This has helped our environmental conservation efforts
significantly. We are building competency and installing machinery at our
plants to handle waste fuels in the most eco-friendly manner.
Rain water harvesting continues to be a priority area. Water bodies in the
catchment areas for rainwater storage and ground water recharging have been
set up. At the same time in shopping complexes, hospital roofs, school and
mine offices at our plant locations, rain water harvesting system has been
instituted. This effectively recharges rain water in the bore wells and
helps maintain ground water levels.
The greenbelt at our plants is simply awesome and is surrounded by trees
all around. At some points, you cannot even see the skyline. Only the
leaves and the flowers and hear the cacophony of the birds. When you walk
through this wooded ambience, you can never imagine that there would be a
plant in the midst of nature. Our Board, our Management and all of our
colleagues are committed to living in harmony with nature.