The Ramco Cement Director Discussions


Your Directors have pleasure in presenting their 65th Annual Report and the Audited Accounts of the Company for the year ended 31st March 2023. (Rs. in crores)

Separate Financial Statements

31-03-2023 31-03-2022

Total Income

8,171.97 6,010.62

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

1,218.65 1,314.48
Less: Interest 240.52 112.40

Profit Before Depreciation & Tax (PBDT)

978.13 1,202.08
Less: Depreciation 504.44 400.84

Profit Before Tax (PBT)

473.69 801.24
Less: Tax Expenses
Current Tax 24.37 165.48
Current Tax adjustment of earlier years 1.31 6.67
Deferred Tax 105.20 41.22
MAT credit reversal of earlier years - 4.63
Deferred Tax adjustment of earlier years (0.73) (309.46)

Profit After Tax (PAT)

343.54 892.70
Other Comprehensive Income [Net of tax credit of Rs. 1.48 crores (PY: Rs. 0.83 crores)] (3.91) (2.65)

Total Comprehensive Income (TCI)

339.63 890.05

Changes in Capital and Debt Structure

The paid-up capital of the Company is Rs. 23,62,92,380/- consisting of 23,62,92,380 shares of Rs. 1/- each. There has been no change in the Capital Structure of the Company during the year under review.

The Company does not have any Scheme for issue of sweat equity to the employees or Directors of the Company.

The details of Employees Stock Option Schemes (ESOS) are provided in this Report.

The details of Secured Redeemable Non-Convertible Debentures issued during the year under review are given below:

(a) Name of the Series 7.90% Series - I 7.90% Series - J 7.90% Series - K
(b) Date of issue of the securities 28-03-2023 28-03-2023 28-03-2023
(c) Date of allotment of the securities 29-03-2023 29-03-2023 29-03-2023
(d) Number of securities 15,000 15,000 20,000
(e) Type of issue Private Placement Private Placement Private Placement

(f) Details of the debt restructuring pursuant to which the securities are issued

Not Applicable Not Applicable Not Applicable
(g) Issue price – per instrument Rs.1.00 lakh Rs.1.00 lakh Rs.1.00 lakh
(h) Coupon rate 7.90% 7.90% 7.90%
(i) Maturity date 29-03-2027 29-09-2027 29-03-2028
(j) Amount raised Rs.150.00 crores Rs.150.00 crores Rs. 200.00 crores

Dividend

Your Directors have pleasure in recommending a dividend of Rs. 2/- per share [PY: Rs. 3/- per share] on the equity capital of the Company. This would entail an outflow of Rs.47.31 crores with a pay-out ratio of 15.04% of Companys consolidated post tax profit. As per the Dividend Distribution Policy of the Company, the Company should strive to distribute at least 10% of consolidated post tax profit as dividend.

The payment of dividend is in accordance with the "Dividend Distribution Policy" of the Company. The Policy is available on the website of the Company under the weblink: https://www.ramcocements.in/investors/codes-and-policies

The Dividend Distribution Policy forms part of this Report.

Transfer to General Reserves

After appropriations, a sum of Rs. 200 crores has been kept as retained earnings of the Company and a sum of Rs. 268.19 crores has been transferred to General Reserve. As on 31-03-2023, the General Reserve stands at Rs. 6,512.25 crores.

Taxation

The Company has made current tax provision of Rs.24.37 crores for the year ended 31-03-2023 as against Rs.165.48 crores in the previous year.Current tax adjustments of earlier years is Rs.1.31 crores as against Rs.6.67 crores during the previous year.

The deferred tax for the year ended 31-03-2023 is Rs.105.20 crores as against Rs.41.22 crores in the previous year.

As per Section 115BAA of the Income Tax Act, 1961, the Company had an irrevocable option of shifting to a lower tax rate and simultaneously forgo certain tax incentives, deductions and accumulated MAT credit. In view of the overall tax benefits available under the said option, the company had opted for shifting to lower tax rate from the FY22 onwards. Consequently, the company had written back the excess deferred tax provision of Rs.305.58 crores from Deferred Tax Liability to profit and loss in the previous year and also reversed MAT Credit relating to earlier years of Rs.4.63 crores.

Deferred tax credit adjustments pertaining to earlier years other than impact on account of Section 115BAA for the year ended 31-03-2023 is Rs.0.73 crores as against Rs.3.88 crores during the previous year.

Management Discussion & Analysis Report Macro Economic Review Global Economy

The year 2022 was marked with certain challenges such as the geopolitical risk arising from the Russia and Ukraine war, inflationary pressures and the resurgence of COVID-19 in China. These factors adversely impacted the economic growth trajectory in 2022 and are expected to impact the growth of the global economy in 2023 as well. The global growth in 2022 is estimated to have slowed down to 3.4% compared to 6.2% in 2021. However, the second half of the year saw nascent signs of recovery of the global economy. The emerging markets and developing economies are estimated to have grown their gross domestic product (GDP) at an average of 4.0% in 2022 compared to 6.9% in 2021. On the other hand, the advanced economies are estimated to have grown at an average of 2.7% in 2022 compared to 5.4% in 2021.

With the escalation of Russia-Ukraine war, there has been a continued disruption in the global trade quantum. Further, prices of gas, fuel and food increased, translating into rising inflation. The global inflation in 2022 is estimated at 8.7%. Of this, the inflation for emerging economies and advanced economies are estimated at 7.3% and 9.8% in 2022, compared to 3.1% and 5.9% respectively in 2021. However, with the focus of Governments across the world on securing global disinflation, containing the return of COVID-19, ensuring financial stability and restoring debt stability, the global economy is expected to stabilise in 2024 with a GDP growth of 3.0%, before dipping slightly in 2023 with a GDP growth rate of 2.8%. The policy initiatives are expected to successfully reduce global inflation to 7.0% in 2023 and further to 4.9% in 2024.

Indian Economy

The inflationary pressure across the entire world has impacted the Indian economy as well. As per its 1st advance estimates, the Government has estimated the Indian economy to have grown at 7% in 2022-23 compared to 8.7% in 2021-22. The year saw rising power, fuel and food cost. The Consumer Price Index (CPI) of India is estimated at 6.8% in 2022-23, compared to 5.5% in 2021-22. The target range for inflation during the fiscal was fixed at 4% with an upper tolerance of 6%. However, between April and October 2022 the CPI was outside the target range set by the Centre. To bring inflation under control, RBI increased the policy repo rate under the liquidity adjustment facility (LAF) by 250 basis points from 4.0% to 6.5% between May 2022 and March 2023. Additionally, the Government cut down import duty on major inputs such as ferronickel, coking coal, among others, to zero; rolled out phase-wise reduction in excise duty of petrol and diesel; waived off customs duty on cotton; and prohibited export of wheat.

With the increasing thrust of Government on infrastructure and capital expansion, the country is poised for a sustained growth in the foreseeable future. The Union Budget 2023-24 speaks volumes of the Governments focus on infrastructure, financing new businesses, and making India more self-reliant and self-employed. The GDP growth of the country in 2023-24 is projected between 6 and 6.8%.

Cement Industry Review

India stands tall as the second largest cement producer in the world with its installed capacity crossing 600 million tonnes (MT), carving 7% of the worlds capacity. According to CARE, the countrys cement production is estimated at 380-390 MT in 2022-23, growing at 8-9% y-o-y, riding on the optimism from the government thrust on infrastructure and increasing housing demand across the country. In 2021-22, the cement production of the country was pegged at 356 MT compared to 296 MT in 2020-21, registering a y-o-y growth of 20%, owing to normalisation of the economy and macro sectors post the pandemic.

As stated by CARE, the average wholesale cement prices in H1 2022-23 has seen a 7% growth y-o-y. Though the cement prices were on the rise in the first half of the fiscal, the EBITDA margin of most cement manufacturers in India were on the downward trajectory owing to the rising inflation and the increase in price of fuel and power costs. However, the prices of imported coal and pet coke has dulled down in the 3rd quarter of 2022-23, thereby providing some relief on the cost of production. Despite the relief, the severe competition in the cement sector owing to the excess supply resulted in continuous pressure on selling prices.

The increasing population along with the continuous thrust by the Government on the infrastructure of the country and ensuring housing for all is expected to keep driving the cement demand in India for the foreseeable future. The thrust by the Government on the infrastructure of the country is validated by a 36% y-o-y growth in capital allocation for road infrastructure, 66% y-o-y growth in capital allocated for affordable housing, and a 33% y-o-y growth in capital allocation of capital expenditure in the Union Budget 2023-24. Riding on these tailwinds, CRISIL has stated that the Indian cement industry is expected to see a addition of ~80 MT capacity by 2023-24, to support the increasing demand of cement in the country. Further, with the normalisation of life, post the COVID-19 pandemic, offices started opening on full-time basis, with increasing demand for commercial space, which is expected to drive the cement demand for the next few years.

(Source: CMA, CARE, CRISIL)

Growth drivers

Growing housing demand:

An ever-increasing population has been continuously driving housing demand in the country. The country saw residential sales of ~3,64,900 units in 2022, compared to 2,36,500 units in 2021, clocking a y-o-y growth of a whopping 54%, indicating huge upstream demand of cement

Favourable demographics:

Indias urbanisation rate in 2022 was estimated at 35.9%, and is expected to reach 50.9% by 2047, thereby, driving the demand of cement in urban locales

Underpenetrated cement consumption:

The per capita cement consumption in India is pegged at 216 kg compared to a global average of 525 kg, which indicates the huge headroom available for growth in the near future

Rising per capita income:

The per capita net national income in India is estimated to have increased from Rs. 1,50,007 in 2021-22 to Rs. 1,70,620 in 2022-23, at current prices, thereby, indicating the increasing ability to spend

Rising office space demand:

During 2022, the Indian office sector clocked a gross absorption of 56.6 mn sq ft, growing 40% y-o-y, as stated by CBRE. Simultaneously, supply of office space also saw an uprise from 49.7 million sq ft in 2021 to 50.6 million sq ft in 2022, marking the increasing upstream consumption of cement

Government impetus through Union Budget 2023-24 Roads

• The Ministry of Road Transport and Highways (MoRTH) has set a target of completing 25,000 km road development in the Union Budget 2023-24

• MoRTH has been allocated an outlay of Rs. 2.7 lakh crores to ensure completion of its target, a 36% growth over the previous budget

Railways

• The Government has announced its highest-ever capital outlay for railways in this Budget, standing at Rs.2.40 lakh crores

Housing

• The Government has revised its allocation towards PM Awaas Yojana (PMAY) to over Rs. 79,000 crores in its Union Budget, a 66% rise over the previous budget

Infrastructure

• An investment of Rs. 75,000 crores was announced, including Rs. 15,000 crores from private sources, for 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertiliser, and food grains sectors

Capital investment

• The capital expenditure earmarked by the Government saw a substantial growth of 33% to reach Rs. 10 lakh crores, forming 3.3% of GDP

• The ‘Effective Capital Expenditure of Centre was announced to be Rs. 13.7 lakh crores, forming 4.5% of GDP(Source: CMA, PIB, IBEF, World Bank)

Company Review Cement Division

The Division has sold 148.21 lakh tons of cement during the year compared to 110.48 lakh tons in the previous year, registering a y-o-y growth of 34%. The revenue including other operating income from this division for the current year is Rs. 7,937.27 crores (net of applicable taxes) compared to Rs. 5,835.21 crores (net of applicable taxes) during the previous year, showing an increase of 36%.

Out of the above, the Companys cement exports accounts for 0.67 lakh tons for a value of Rs.32.68 crores as against 0.34 lakh tons for a value of Rs.13.39 crores during the previous year.

The Company increased its market share across most of its operating markets. During the year under review, the Company had made further inroads in the fast growing infrastructure and large project segments.

The Company continued its focus on reinforcing its philosophy of ‘Right Cement for Right Application during the year under review. Further, the company is focussing on its premium products, thereby increasing their share in the sales mix, which in turn, contributed towards the increase in sales.

Dry Mortar Division

The Division has sold 2.03 lakh tons of Dry Mortar products accounting for a revenue of Rs. 135.42 crores (net of applicable taxes) during the year as against 0.92 lakh tons of Dry Mortar products accounting for a revenue of Rs. 70.42 crores (net of applicable taxes) during the previous year.

Out of the above, the Companys dry mortar exports accounted for 123 tons for a value of Rs.0.14 crores as against 92 tons for a value of Rs.0.09 crores during the previous year.

Ready Mix Concrete Division

The Division has sold 26,983 cu.m. of concrete during the year, accounting for a revenue of Rs. 14.45 crores (net of applicable taxes) compared to 30,567 cu.m. of concrete accounting for a revenue of Rs. 14.81 crores (net of applicable taxes) during the previous year.

Wind Farm Division

The Division has generated 2,233 lakh units as compared to 2,325 lakh units in the previous year. Out of this, 2,162 lakh units were generated from the wind farms in Tamil Nadu and another 71 lakh units from the wind farms in Karnataka. Out of the units generated in Tamil Nadu, 648 lakh units were meant for adjustment against the power consumed in our plants and balance 1,514 lakh units were sold to Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) for a value of Rs. 45.70 crores. Including previous balances, a sum of Rs. 119.12 crores was outstanding from TANGEDCO as on 31st March 2023.

The 71 lakh units generated during the year under review in Karnataka have been banked with Bangalore Electricity Supply Company Limited (BESCOM). Including the units that have been banked during the previous year, the Company sold 76 lakh units to third parties for a value of Rs. 2.78 crores (net), and the same had been realised.

77 lakh units generated in the year 2021-22, remained unbilled.

The income during the year from the Division was Rs. 48.13 crores compared to Rs. 59.54 crores in 2021-22.

Other Income

Other income during the year was Rs. 36.70 crores compared to Rs. 30.64 crores in 2021-22.

Net Revenue

The net revenue for the company for current year is Rs. 8,171.97 crores (net of applicable taxes) compared to Rs. 6,010.62 crores (net of applicable taxes) during the previous year, showing an increase of 36%. The companys net revenue has crossed the eight mille crores mark for the first time.

Power Plants

The Companys thermal power plants aggregating to a capacity of 175 MW are located at its cement manufacturing plants. The thermal power plants act as source for captive power for the Company, and the power generated from the thermal power plants are used for self-consumption in cement manufacturing.

Capital Expenditure Programmes – New Projects

The status of the projects is given below.

Cement Plants Kolimigundla

In the Boards Report of the Company for the year ended 31st March 2022, it was informed about the progress of establishment of the Companys new cement plant at Kalavatala village, Kolimigundla Mandal, Nandyal District, Andhra Pradesh.

The Kiln was commissioned in June 2022 and Cement Mill was commissioned in September 2022. The first phase of the WHRS of 6 MW capacity, comprising of Steam Turbine Generator along with Air Quenched Cooler boiler was commissioned in December 2022. The second phase of the WHRS of 3 MW capacity comprising of preheater boiler was commissioned in March 2023. The third phase of WHRS of 3.15 MW capacity would be commissioned in July 2023. With this, the total aggregate capacity of the WHRS would be 12.15 MW.

The Thermal Power plant of 18 MW is under erection and expected to be commissioned in 2023-24.

Railway siding of 34.936 kms to provide flexibility in logistics is under erection and expected to be commissioned in 2023-24.

The Clinkerisation capacity has been re-assessed from 2.25 Million Tons Per Annum (MTPA) to 2.50 MTPA and Cement manufacturing capacity has been re-assessed from 1 MTPA to 1.50 MTPA.

Increase in Cost: Civil

We had installed additional structures such as coal shed for thermal power plant, linear limestone shed, hoppers for Line II and separate clinker truck loading. There were also other infrastructure developments like internal roads, drains, etc.

Mechanical

We had installed additional equipments in cement wagon loading system, wagon tippler, clinker wagon loading system and belt conveyors.

Because of the above and increase in interest and pre-operative expenditure the cost of the project has increased to Rs. 3,000 crores.

Ramasamy Raja Nagar

In the Boards Report of the Company for the year ended 31st March, 2022, it was informed about the progress of Companys Modernisation of the Ramasamy Raja Nagar Plant, involving establishment of Line III and a limestone benefication plant at the Pandalgudi Mines. The modernisation and establishment of Line III has been completed in March 2023 and subsequently the clinkerisation capacity of the plant has increased from 1.10 MTPA to 2.14 MTPA and the cement manufacturing capacity of the plant has increased from 2 MTPA to 3 MTPA.

During the execution of the project, the existing limestone yard was converted into additive storage yard. Hence, we established two circular limestone yards for storing separately the blended limestone and washed kankar. Further there was increase in the scope of the project, which had led the cost of the project to increase from Rs. 550 crores to Rs. 817 crores. Besides increase in the clinkerisation capacity the project has helped the Company to achieve better power and fuel efficiencies, thereby, conserving energy, and reducing fugitive dust emissions and carbon emissions.

The establishment of limestone benefication plant at the Pandalgudi Mines is in progress and is expected to be commissioned in July 2023.

Establishment of Line II at Odisha Grinding Unit

In the Companys efforts to continually enhance its grinding capacity, it is proposed to establish Line II at its existing Odisha Grinding Unit, located at Haridaspur, Jajpur District. The cost of the project is Rs. 130 crores. The capacity of Line II would be 0.90 MTPA. The additional output would help the company to enhance its market share in Odisha and other Eastern States.

Dry Mortar Plants

In the Boards Report of the Company for the year ended 31st March, 2022, it was informed about the establishment of four new dry mortar plants at a cost of Rs. 75 crores each.

The plants would produce high value products, such as water proofing, repair products, flooring screeds, liquid products, besides other regular dry mix products.

The projects at Salem and Ramasamy Raja Nagar had been commissioned during December 2022 and February 2023 respectively.

The projects at Jayanthipuram and Haridaspur are underway and are expected to be commissioned during the year 2023-24.

During the year under review, the Company had incurred Rs.1,765 crores towards capital expenditure.

Financial Performance

Analysis of the Statement of Profit and Loss – Separate Financials

The summary of key components of the Statement of Profit and Loss for the financial year 2022-23 is detailed below:

Particulars

2022-23 2021-22 Variance
Rs. in crores Rs. in crores Rs. in crores %

Income

Sale of Products 8,052.28 5,897.19 2,155.09 37
Income from Wind power 48.13 59.54 -11.41 -19
Other Operating revenue 34.86 23.25 11.61 50
Other Income 36.70 30.64 6.06 20

Total Income

8,171.97 6,010.62 2,161.35 36

Operational Expenses

Cost of material consumed 1,357.07 896.80 460.27 51
Change in inventories of finished goods & work-in-progress -14.10 -6.41 -7.69 -
Employee Benefits Expenses 460.00 456.73 3.27 1
Transportation and Handling 1,602.98 1,214.41 388.57 32
Power and Fuel 2,661.60 1,388.76 1,272.84 92
Other Expenses, net of captive consumption of finished goods 885.77 745.85 139.92 19

Total Operational Expenses

6,953.32 4,696.14 2,257.18 48

EBITDA

1,218.65 1,314.48 -95.83 -7
Depreciation & Amortization Expense 504.44 400.84 103.60 26
Finance Costs 240.52 112.40 128.12 114

Profit Before Tax

473.69 801.24 -327.55 -41
Tax Expenses 130.15 -91.46 221.61 -

Profit After Tax

343.54 892.70 -549.16 -62
Other Comprehensive Income -3.91 -2.65 -1.26 -

Total Comprehensive Income

339.63 890.05 -550.42 -62

Revenue

The total revenue surpassed Rs. 8,000 crores during the year. The company has sold 15.02 MT of cement (including dry mix) as against 11.14 MT during the previous year, with a growth in volume of 35%. During the year, the average net realisable sale price of cement has improved by 1%. The share of premium products in terms of volume stands at 25% for the current year as against 22% during the previous year. The Companys strategy of right cement for right applications yielded positive results. The company continue to focus on this to make its brand stronger.

During the current year, the Company witnessed decrease of 4% in the net generation of wind power from 23.25 crore units to 22.33 crore units. The revenue from wind power has decreased by 19% when compared to previous year due to change in utility for a capacity of 16.5 MW from Sale to Board to captive use. Other Operating income increased mainly due to recognition of grant income in respect of soft loans availed during the year at concessional rate. Other income has increased due to increase in exchange gain, dividend receipts and other non-operating income.

Cost of materials consumed

During the year, cost of materials consumed has increased by 51% compared to the previous year. The main reason for increase is due to higher clinker production by 35% and increase in cement production by 34% during the year. There was an increased inter-unit movement of clinker to grinding plants by 30% during the year, besides increase in diesel prices by 3% has also impacted the cost of movement. In addition, cost of materials consumed for FY23 also reflect inflationary impact on cost of other raw materials viz. Fly ash, Slag, Gypsum and other additives.

As a percentage of revenue, cost of materials consumed for the year under review accounted for 16.61% as against 14.92% in the previous year.

Change in inventories of finished goods / work-in-progress

The increase in inventories of finished goods / work-in-progress was due to increase in process inventory including clinker.

Employee Benefits Expenses

The employee cost for employees other than directors for the year increased by 6% due to increment in the annual salaries and increase in head count from 3,326 as at 31st March 2022 to 3,507 as at 31st March 2023. Due to improved operating leverage, the absorption of employee benefits expenses was better. As a percentage of revenue, the employee cost for the year under review stood at 5.63% as against 7.60% in the previous year.

Transportation and Handling expenses

During the year, Transportation and Handling expenses increased by 32% compared to the previous year mainly due to increase in sale volume by 35%. Besides, increase in diesel price by 3% and levy of busy season surcharge at 15% on rail freight with effect from 1st October 2022 has pushed up the overall transportation cost. The lead distance for the current year for cement is 298 KMs as against 324 KMs during the previous year. The rail co-efficient for the current year is 11% as against 13% during the previous year. There has been an increase in handling expenses due to annual increase of labour cost pertaining to handling of cement. As a percentage of revenue, transportation and handling expenses for the year under review remains at 19.62% as against 20.20% in the previous year.

Power and Fuel

During the year, power and fuel cost have increased by 92% compared to the previous year. The main reason is, due to increase in fuel prices. During the current year, the average index price of pet coke has increased from $ 164 in FY22 to $ 194 in FY23. Besides, increase in clinker production by 35% and increase in cement production by 34% resulted in higher incidence of power and fuel cost. The average increase in diesel prices by 3% and rupee depreciation by 8% during FY23 also contributed for increase in fuel cost. The Company uses both pet coke and coal for the kiln operations depending upon cost per Kcal of the respective fuel. The pet coke usage increased from 40% in FY22 to 55% in FY23 whereas coal usage is reduced from 40% in FY22 to 32% in FY23.

The WHRS capacity of 27 MW in Jayanthipuram, 8 MW in Kolimigundla, 2 MW each in RR Nagar and Alathiyur helped to contain the overall power & fuel cost. Wind power capacity of 16.5 MW allocated to captive use from sale to board during the current year has helped to moderate the fuel cost and carbon foot print. During the year, 56% of the total power requirements were met from captive thermal power plants, 22% from electricity grids and 22% from Green Power viz. Wind Power and WHRS. The Overall green power usage has increased from 15% in FY22 to 22% in FY23.

The Profitability was significantly impacted by increase in power and fuel cost due to elevated fuel prices during the current year. The power & fuel cost per ton of cement has increased by Rs. 539 per ton of cement during the year. Power and fuel cost accounted for 32.57% of revenue in FY23 as against 23.11% in the previous year.

Other expenses

Other expenses increased by Rs. 139.92 crores i.e by 19%. The packing material cost has increased by Rs. 59.66 crores due to increase in sale volume by 35% and increase in

Insurance, Repairs & Maintenance, Stores & Spares, Rates & Taxes, Outsourcing cost, Security charges by Rs. 29.25 crores mainly due to establishment of Line III at Jayanthipuram, Integrated Cement Plant at Kolimigundla and Dry Mortar Plants at Salem and R R Nagar.

Due to COVID related restrictions, previous year figures were comparatively lower with respect to advertisement / sales promotion expenses by Rs. 19.97 crores and Traveling expenses by Rs. 8.11 crores and other general expenses by Rs. 2.43 crores. The company has made political contribution for Rs. 20.50 crores during the year (FY22: Nil).

Other expenses accounted for 10.84% of the revenue in FY23 as against 12.41% in FY22.

Depreciation & Amortization

Depreciation and Amortization has increased from Rs. 400.84 crores to Rs. 504.44 crores. The reason for increase is mainly due to depreciation arising out of commissioning of integrated plant at Kolimigundla, R R Nagar Line III, Dry Mortar Plants at Salem and R R Nagar. Besides, Amortization of Mine development under Intangible Assets has increased by Rs. 20.36 crores due to increase in clinker production by 34%. Depreciation & Amortization accounted for 6.17% of revenue in FY23 as against 6.67% in FY22.

Finance Costs

Finance costs have increased by 114% from Rs. 112.40 crores in FY22 to Rs. 240.52 crores in FY23 mainly due to increase in average borrowings and increase in interest rates due to repo rate increase by 250 bps compared to previous year. The weighted average cost of interest bearing borrowings for the current year stood at 6.66% as against 5.54% in the previous year. The total borrowings as at 31st March 2023 has increased by Rs. 578.97 crores and stood at Rs. 4,487.42 crores. The Net Debt to EBITDA stood at 3.57 times as against 2.88 times in the previous year.

The interest coverage ratio decreased from 4.25 times in the previous year to 2.06 times in the current year, due to reduced operating margin in view of elevated fuel prices. The Gross interest on the borrowings for the current year was Rs. 346.44 crores and out of which, Rs. 105.92 crores was capitalised as part of eligible qualifying assets.

Finance costs accounted for 2.94% of the revenue as against 1.87% in the previous year.

Tax Expenses

The overall effective tax rate has increased from 25.80% to 27.35% mainly due to increase in ineligible expenditure viz. donation / CSR amounting to Rs.43.36 crores as against Rs.24.89 crores in the previous year.

Current tax charge and deferred tax credit relating to earlier years was Rs. 1.31 crores and Rs. 0.73 crores respectively.

As per Section 115BAA of the Income Tax Act, 1961, the Company had an irrevocable option of shifting to a lower tax rate and simultaneously forgo certain tax incentives, deductions and accumulated MAT credit. In view of the overall tax benefits available under the said option, the company had opted for shifting to lower tax rate from FY22 onwards. Consequently, the company had written back the excess deferred tax provision of Rs. 305.58 crores from Deferred Tax Liability to profit and loss in the previous year.

Overall Tax expenses without considering the impact of change in tax rate during the previous year accounted for 1.59% of the revenue in FY23 as against 3.56% in FY22.

Other Comprehensive Income (OCI)

Other comprehensive income represent loss arising out of re-measurement of defined benefit plans, net of taxes amounting to Rs. 4.39 crores, which is mainly due to increase in salary escalation rate assumption from 5.50% to 6% and increase in discount rate, considering long term estimates, during the year. Fair value gain on equity investments amounting to Rs.0.48 crores is also recognised under OCI, during the year.

Profitability

EBITDA dropped by 7% from Rs. 1,314.48 crores in FY22 to Rs. 1,218.65 crores in FY23. EBITDA margin impacted mainly due to elevated fuel prices during the current year. The average cement price for the year has increased marginally by 1% and it was not sufficient to cover the fuel cost-push. The EBITDA margin for the current year stood at 14.91% as against 21.87% in the previous year. Blended EBITDA per ton have decreased by 31% from Rs. 1,190 per ton to Rs. 823 per ton.

PBT for the current year is Rs.473.69 crores as against Rs. 801.24 crores during the previous year, with a de-growth of 41%. PAT down by 62% from Rs. 892.70 crores to Rs. 343.54 crores mainly on account of write back of deferred tax liability during the previous year and lower operating margin for FY23. The PAT margin stood at 4.20% as against 14.85% in the previous year.

Financial Position

Analysis of the Balance Sheet – Separate Financials

The summary of the financial position as at 31-03-2023 is detailed below:

Particulars

2022-23 2021-22 Variance
Rs. in crores Rs. in crores Rs. in crores %

Assets

Non-current Assets 12,629.50 11,350.95 1,278.55 11
Current Assets 1,887.39 1,704.56 182.83 11

Total Assets

14,516.89 13,055.51 1,461.38 11

Equity & Liabilities

Equity 6,793.53 6,524.86 268.67 4
Non-current liabilities 4,639.67 3,752.23 887.44 24
Current liabilities 3,083.69 2,778.42 305.27 11

Total Equity and Liabilities

14,516.89 13,055.51 1,461.38 11

Non-current Assets

Non-current assets have increased by Rs. 1,278.55 crores due to the following reasons:

(a) The company incurred a capital expenditure of Rs. 1,765.14 crores towards establishment of integrated unit at Kolimigundla, Line III at Ramasamy Raja Nagar, Dry Mortar Plants in Salem, Ramasamy Raja Nagar, Odisha and Jayanthipuram besides regular capital expenditure. This is after adjusting non-cash adjustments / accruals viz. Depreciation of Rs. 505.39 crores (including capitalisation of depreciation of Rs. 0.95 crores) and increase in capital payables of Rs. 2.69 crores. Besides the Company has derecognised WDV of Rs. 1.88 crores towards sale of asset during the year.

(b) The company has subscribed the rights issue of equity shares of an Associate company viz. Rajapalayam Mills Limited, for a value of Rs.0.52 crores.

(c) The loans to subsidiaries and associates have decreased by Rs. 56.96 crores due to loan repayment by subsidiaries / associates. The said loans carry interest at an arms-length basis.

(d) Deposits under protest in appeals have increased by Rs. 19.97 crores and ‘Balance with Government Departments increased by Rs. 40.31 crores for upfront payment made to Department of Mines and Geology, Government of Karnataka for having declared as the preferred bidder for the Bommanalli Limestone block in Kalburgi district, Karnataka.

(e) Other non-current assets have increased by Rs. 13.20 crores mainly due to increase in prepaid expenses and deposits with government departments and related parties.

Current Assets

Current assets increased during the year by Rs. 182.83 crores mainly due to the following reasons:

(a) Inventories increased by Rs. 49.01 cores mainly because of increase in inventory of pet coke due to high prices and increase in stores and spares. Inventory turnover ratio had decreased from 44 days to 39 days due to increased turnover in FY23.

(b) Trade receivable increased by Rs. 115.19 crores.

The receivables turnover has come down from 22 days in the previous year to 18 days in the current year due to tightened recovery measures and factoring of certain receivables on non-recourse basis, by assigning its rights and privileges with counterparty.

(c) Unadjusted input tax credits availed under GST has decreased to the extent of Rs. 43.97 crores in view of input adjustment during the current year.

(d) Decrease in cash and bank balances by Rs. 7.45 crores and increase in claims receivable from government / semi-government bodies by Rs. 64.65 crores.

(e) There was an increase in other current assets to the extent of Rs. 5.40 crores mainly due to increase in prepaid expenses.

Equity

(a) There is no change in the equity share capital during the year.

(b) The total comprehensive income for the year is Rs. 339.63 crores. The Company has paid dividend for the FY22 during the current year amounting to Rs. 70.96 crores. The Companys return on net worth decreased from 15% to 5%. The increase in the overall cost of production and specifically the increase in the fuel cost have contributed to the reduction in the profitability. During the previous year, there was a write back of deferred tax liability of Rs. 305.58 crores as one off item.

Non-current liabilities

(a) Long-term Borrowings have increased by Rs. 764.87 crores, to fund the capital expenditure for ongoing capacity expansion projects. The debt-equity ratio and Net Debt to EBITDA stood at 0.66 times and 3.57 times respectively as at 31st March 2023 as against 0.60 times and 2.88 times as at 31st March 2022. Return on capital employed is down from 10% to 5% mainly due to decrease in profitability. The decline in Debt-Service Coverage Ratio from 1.35 times in previous year to 1.31 times in current year is mainly due to relatively higher interest cost compared to previous year amid decrease in EBITDA by 7% on account of increase in power and fuel cost compared to previous year.

(b) Deferred Tax Liabilities increased by Rs. 104.47 crores due to recognition of temporary differences of Rs. 105.20 crores and tax credit adjustments of earlier years of Rs. 0.73 crores.

(c) Provisions have increased by Rs. 12.09 crores due to increase in provision for mines restoration obligation. Other liabilities have increased by Rs. 6.01 crores mainly due to recognition of deferred grant in respect of soft loans availed during the year at concessional rate for Rs. 22.37 crores and further offset by recognition of grant income by Rs. 15.13 crores, incremental classification of current portion of deferred government by Rs. 1.13 crores and lease liability reduction by Rs. 0.10 crores in respect of Right-of-Use Asset for non-cancellable leases adjusted for lease payments and interest on liability.

Current liabilities

(a) Short-term Borrowings other than current maturities of long-term borrowings decreased by Rs. 26.73 crores.

(b) Current maturities of long-term borrowings decreased by Rs. 180.67 crores, which is due within one year as per repayment schedule.

(c) Security deposits from customers / Customers credit balance with customers have increased by Rs. 305.58 crores mainly because of increase in customer deposits and accruals of customer rebates available for adjustment in subsequent periods.

(d) Trade payables increased by Rs. 153.67 crores because of negotiation of better credit terms with suppliers and supplier financing facility through reverse factoring arrangement for early payments to suppliers. Consequently, the average payable days has decreased marginally from 26 days in previous year to 25 days in current year.

(e) Statutory liabilities increased by Rs. 51.05 crores mainly due to increased sale volume in the month of March 2023 compared with sale in the month of March 2022.

(f) Provisions increased by Rs. 3.07 crores due to increase in provision for compensated absences by Rs. 5.08 crores which is offset by decrease in provision for disputed income tax liabilities by Rs. 2.01 crores towards liability provided based on recent assessment orders.

(g) Other liabilities decreased by Rs. 0.70 crores mainly due to decrease in financial guarantee obligation upon repayment of borrowings by the related party and decrease in book overdraft.

(f) Current ratio for the year stood at 1.08 times as against 1.14 times during the previous year.

Analysis of the Cash flows – Separate Financials

The summary of the Cash flows for the year ended 31-03-2023 is given below:

(Rs. in crores)

Particulars

31-03-2023 31-03-2022
Net cash flows from Operating Activities 1,405.00 1,129.05
Net cash flows used in Investing Activities (1,686.93) (1,810.31)
Net cash flows from Financing Activities 274.48 715.44

Net increase/(decrease) in cash & cash equivalents

(7.45) 34.18

Net cash flows from Operating Activities

Net cash flows from operating activities increased mainly due to improved operating leverage.

Net cash flows used in Investing Activities

Net cash flows used in investing activities is mainly for Capex incurred towards establishment of integrated unit at Kolimigundla, Line III at Ramasamy Raja Nagar, Dry Mortar Plants in Salem, Ramasamy Raja Nagar, Odisha and Jayanthipuram and general capex.

Net cash flows from Financing Activities

Net cash flows from Financing Activities represent net proceeds from borrowings for funding capex programs and payment of interests, dividend and lease liabilities.

Movement in Key Financial Ratios

Particulars

UOM 31-03-2023 31-03-2022 Variation in %

Formula adopted

What does it signify

Debtors Turnover Ratio

Days 18 22 -18

365 Days / (Net Revenue from sale of products / Average Trade Receivables)

It indicates the average collection period and measures the efficiency of the company in managing its accounts receivables

Inventory Turnover Ratio

Days 39 44 -11

365 Days / (Net Revenue from sale of products / Average Inventories)

It indicates the average inventory holding period and measures the efficiency with which the company utilizes or managing its inventory

Interest Coverage Ratio

Times 2.06 4.25 -52

(Profit before Tax + Interest) / (Gross Interest)

It indicates the companys ability in terms of earnings to meet the interest obligations

Current Ratio

Times 1.08 1.14 -5

Current Assets / (Total Current Liabilities - Security Deposits payable on demand - Current maturities of Long term debt)

It indicates the level of current assets to meet the current liabilities

Debt-Equity Ratio

Times 0.66 0.60 10

Total Debt / Total Equity

It indicates the measure to which the Company is financing its operations through debt versus shareholders funds

Operating Profit Margin

% 15 22 -7

EBITDA / Net Revenue

It indicates the percentage of profit after all expenses except for interest, depreciation and taxes on the total revenue

Net Profit Margin

% 4 15 -11

Net Profit / Net Revenue

It indicates the percentage of profit after all expenses including interest, depreciation and taxes on the total revenue

Return on Networth

% 5 15 -10

Total Comprehensive Income / Average Net worth

It indicates the percentage of return generated to equity shareholders

Net Debt / EBITDA

Times 3.57 2.88 24

(Total Debt - Cash and Cash equivalents) / EBITDA

It indicates the relevance of companys operating income to its debt

Return on Capital employed

% 5 10 -5

(Total Comprehensive Income + Interest) / Average of (Equity + Total Borrowings)

It indicates the percentage of return generated on equity capital and debt capital

Price Earnings Ratio

Times 52 20 160

Market Price per share / Earnings per share

It indicates the relevance of the companys share price to the earnings per share.

Blended EBITDA per Ton

In Rs. 823 1,190 -31

EBITDA / Sale Volume

It indicates the operating profit per ton of cement sold

Debt Service Coverage Ratio

Times 1.31 1.35 -3

(EBITDA - Current Tax) / (Principal repayment excluding repayments towards debt replacement + Gross Interest)

It indicates the availability of operating profit to pay its current maturities of debts and interest obligations

Reasons for variations in excess of ? 25%

(a) The decline in Interest Service Coverage Ratio by 52% due to increase in borrowings for funding capex towards capacity expansion projects amid increase in interest rate owing to repo rate hike

(b) PE Ratio increased due to decrease in profitability on account of elevated fuel prices during FY23

(c) Blended EBITDA per Ton decreased mainly due to increase in power and fuel cost per ton from Rs. 1,257/- in previous year to Rs. 1,796/- in current year

Human Resources

At Ramco, our people are our greatest asset and we believe that in our roadmap for building the future, employee involvement is crucial to be continually creative and drive organizational excellence.

Our organizational excellence depends on the quality of people employed. Therefore, we focus on the culture of recognition, innovation in technology, engagement of right people for the right job and process improvements. Our companys ethics, principles and ideals have fostered a positive work culture among the employees.

Talent Acquisition

The company believes in maintaining a lean organisation to ensure optimum utilisation of manpower. Also, we have created various recruitment strategies in order to attract the best talent from the market and to retain our top performers and high potentials. Our robust talent acquisition mechanism including a software in the talent acquisition domain helped us to attract the right candidates in consonance with the culture of our organisation.

Performance Management System (PMS)

Our company introduced an objective based PMS three decades back, which is used for rewarding the high performing people and also for the development of people. Counselling is one of the key feature of our PMS, which ensures proper performance dialogue between the appraiser and appraisee and it provides a platform for better understanding between employees and superiors.

All our Training needs are captured in PMS portal during the Annual performance appraisal and subsequently our training calendar is rolled out for the year to impart continuous learning and development programmes for the employees. Our PMS system also ensures fair remuneration to all employees which encourages them to demonstrate their full potential.

Learning and Development

Our Company holds robust talent development strategies to keep the workforce equipped to face any kind of challenges in this VUCA world. Also we focus on developing the talent through various modes of training in the areas of Behavioural, Functional, Organisational, Work Life Balance and Safety. Our company not only plans and implements the development strategies but also encourages employees to come up with suggestions in nominating them for the trainings required.

Leadership Development Programmes

Short term and Long term Leadership development programmes are conducted in association with external agencies like KoeN Meta Consulting, Pune, Flame University, Pune and quite a lot of In-House programs through external faculties to unleash and enrich the potential of the leadership team. Systems are deployed to track and analyse the training programs across the organisation. We conduct various modes of training like direct interactive sessions and virtual sessions that are focussed to improve the emotional, social and physical well-being of our employees.

Welfare Policies

Our Company is equipped with various employee-centric welfare policies that are curated from time to time like housing loan, asset building loan and various other soft loans not only for the welfare of employees but also for their families. Ramco has holistic medical approach when it comes to health of employees. We have provided Group Medical Insurance to cater medical needs of our employees and their family members, Group Personal Accident Scheme and Group term Policy to cover the life of employees.

Employee Engagement Initiatives

At Ramco, Employee Engagement initiatives like 5S, Quality circles, IMS, suggestion scheme and KAIZEN has been institutionalized. Engagement activities are conducted at Unit level to celebrate festivals and events, which includes sports, cultural and spiritual programs.

Digitalisation

Ramcos ERP - Human Capital Management module, has been developed and implemented successfully across the company integrating all the HR functions. In addition, the Company has developed many standalone applications as add on to this software like HR Dash board, Statutory Compliances, HR audit, Contract Labour Management System, RAMCONNECT (Employee Portal), HR Kiosk, Cementor – Mentor – Mentee and E-suggestions.

Retention

The companys employee oriented policies, transparent working atmosphere, encouraging innovation, excellent digital environment, performance based reward system, high quality work place practices, opportunities to uphold good work life balance and HR excellence go a long way in consistently maintaining the employees retention ratio of above 90% which substantiate that we remain employee-centric in all our practices.

Employee Recognition

The senior leaders in the organisation who have been working with the Company for more than 3 decades exhibits our successful career progression of our internal talents. Additionally, company values the employees esteemed years of association with Long Service Awards to recognise and create sense of belongingness. Last year, we felicitated a huge count of 425 employees with Long Service Awards which remains on top in the past 16 years.

Risk Management Policy

Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of LODR, the Company has developed and implemented a Risk Management Policy. The Policy envisages identification of risk and procedures for assessment and strategies to mitigate / minimisation of risk thereof. The Risk Management Policy of the Company is available at the Companys website, at the following weblink –https://www.ramcocements.in/investors/codes-and-policies

Risk Management

The Companys risk management system is designed to identify the potential risks that can impact the business and device a framework for its mitigation along with periodical reviews to reflect changes in market conditions and the Companys activities. The Companys Board of Directors has the overall responsibility for the establishment and oversight of risk management framework. The Audit committee and Risk management committee periodically review the execution of risk management plan and advice the management wherever necessary. The key risks and their mitigation measures are detailed below:

Key Risk

Mitigation measures

Fuel availability risk

The Company uses non-calcined petroleum coke, a downstream by-product of the oil refinery, as fuel for cement kiln. It is available from indigenous sources as well as from Middle East, USA & Venezuela, thus exposing the risk of availability

The Company adopts both structured and unstructured procurement strategies to mitigate the risk. It has long-term fuel supply arrangements with manufacturers under structured plan and also procures from spot or open markets during favourable pricing conditions to stay dynamic in fluctuating market. The Company uses non-coking or thermal coal as a fuel at its captive thermal power plants (TPP). It is mainly imported from Indonesia, the worlds largest exporter of coal, on spot basis. The Companys plants, being close to the East Coast, ensures proximity to Indonesia, making it economical to import. The Company also imports coal from Russia.

In case of supply disruption of imported coal, the Company can choose alternates from indigenous sources or use lignite. Besides, the Companys production process is fungible and supports usage of different types of fuels like pet coke, coal, lignite and other alternate fuels; it facilitates the usage of most economical fuel. The Company also commissioned waste heat recovery plants to produce power which is helping to reduce overall power costs while insulating from the overall risks on fuel. The Company has started steps to switch over to green power generated from its windmills which are presently connected to grid.

Limestone Reserve / Expiration Risk

The Indian cement industry is prone to limestone shortage risk since limestone is the prized resource. Reserve degradation, deeper mining may raise the mining cost / operating cost for the industry in the upcoming period.

The Company has sufficient reserve base in south with long mine life. The Company also participates in auction to bid the additional reserves at the low auction premium.

Commodity price risk

Commodity price risk arises on account of fluctuations in price of raw materials and fuels viz. coal and pet coke, which are linked to various external factors. Since these are primary costs in cement production, any adverse fluctuation in these prices can lead to significant drop in operating profitability.

To mitigate this risk, the Company closely observes the prices and buy when the prices tend to come down and also taken steps to maintain three to four months inventory to beat the impact of upward cycle of commodity index by setting high re-order levels to cushion on price volatility to some extent, usage of other alternate fuels and optimum fuel mix to manage fuel cost. The Company also enters into long term contracts with suppliers at competitive prices. These processes and procedures are reviewed by the management at regular intervals and measures have been taken to curb the risk.

Currency fluctuation risk

The Company has exposure to USD and other foreign currency denominated transactions for import of capital goods, spares and fuel, besides exports of finished goods and borrowings in foreign currency. Any unfavourable movement in currency prices can impact profitability.

The Company has policies to ensure that the decisions are driven to keep the cost comparable while borrowing in foreign currency and hedging thereof, both interest and exchange rate risk and the quantum of coverage. The Company practices hedging foreign currency loans, imports and exports transactions by forward contracts after taking into consideration the anticipated foreign exchange inflows/outflows, timing of cash flows, tenure of the forward contract and prevailing foreign exchange market conditions

Market risk

The cement industry is prone to the innate risk of demand supply mismatch. So, cement is susceptible to the price volatility, which sometimes slips to unviable levels.

The Company prudently plans and establishes its cement plants and grinding units in markets where demand-supply conditions are relatively favourable. Its strategy of segmenting the market by offering right products for right applications facilitates in creating niche markets.

The Company also strongly focusses on creating loyalty among the customers by offering high quality, value-added products backed by innovative R&D and efficient supply chain. Regular branding activities are undertaken with deployment of technical services for customer support and education.

Information Technology Risk

The Companys operations are completely dependent on IT systems, which requires careful management of the information that is in our possession to ensure data privacy. The cyberattack threat of unauthorised access and misuse of sensitive information or disruption to operations continue to increase across the world. Such an attack would affect the business operations in a number of ways, including disruption to sales, production and cash flows, ultimately impacting our results.

To reduce the impact of cyberattack on our business, we have firewalls and threat monitoring systems in place, with immediate response capabilities to mitigate identified threats. The Company also maintains a system for the control and reporting of access to our critical IT systems, which is supported by a periodical testing of access controls. The Company has IT security policy covering the protection of both business and personal information, as well as the use of IT systems and applications by our employees. The hardware that runs and manages core-operating data is fully backed up in satellite locations with separate systems to provide real-time backup operations.

Interest rate Risk

Interest rate risk arises from long-term borrowings with variable rates, which exposed the company to cash flow interest rate risk. The Companys fixed rate borrowing are carried at amortized cost and therefore are not subject to interest rate risk as defined in Ind AS 107 since neither the carrying amount nor the future cash flows will fluctuate because of the change in market interest rates. The Company is exposed to the evolution of interest rates and credit markets for its future refinancing, which may result in a lower or higher cost of financing.

This risk is addressed through the management of the fixed/floating ratio of financial liabilities. The Company constantly monitors credit markets to strategize a well-balanced maturity profile in order to reduce both the risk of refinancing and large fluctuations of its financing cost. The Company believes that it can source funds for both short term and long term at a competitive rate considering its strong fundamentals on its financial position and better credit ratings.

Liquidity Risk

Liquidity Risks are those risk that the Company will not be able to settle or meet its obligations on time or at reasonable price.

Liquidity risk is mitigated through financial planning and analysis, forecasting cash flows regularly, monitoring and optimizing net working capital and managing existing credit facilities. Monitoring and optimizing working capital is achieved through tightened control measures in collection of receivables, negotiation of credit periods with suppliers, maintain adequate inventory based on business requirements and thereby maintaining a level of cash and cash equivalents deemed adequate to finance the companys operations.

Due to the dynamic nature of the underlying business, the Company maintains flexibility in funding by keeping both committed and uncommitted credit lines available. The Company has laid well- defined policies and procedures facilitated by robust information system for timely and qualitative decision making by the management including its day-to-day operations.

Credit Risk

Credit Risk is the risk of financial loss to the Company if the customer or counterparty to the financial instruments fails to meet its contractual obligations and arises principally from the Companys receivables, treasury operations and other operations that are in the nature of lease. The Companys exposure to credit risk is influenced mainly by the individual characteristic of each customer. The Company extends credit to its customers in the normal course of business by considering the factors such as financial reliability of customers. The Company evaluates the concentration of the risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets.

The Company maintains adequate security deposits from its customers in case of wholesale and retail segment. In case of institutional segment, credit risks are mitigated by way of enforceable securities. The exposures with the Government are generally unsecured but they are considered as good. However, unsecured credits are extended based on creditworthiness of the customers on case-to-case basis. Besides insurance cover for credit risk is taken to mitigate the possible open risk. Trade receivables are written off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the company and where there is a probability of default, the company creates a provision based on Expected Credit Loss for trade receivables under simplified approach.

Logistics Risk

(a) Road Movement

With the increase in the crude oil prices, diesel prices are likely to go up further. For every Re.1/- increase in the diesel cost, our road freight increases by Rs. 7/- PMT. Besides, with the laying of new roads for faster movement, more number of toll plazas are being added resulting in increase in the cost of transportation.

We are using alternate fuel oil for heavy vehicles used in mines. As the availability of these oils is restricted, we use these oils to the extent they are available. In addition, since the tolls are installed for maintenance of roads, these additional costs can be partly offset in the transportation rates in view of higher throughput.

(b) Rail Movement

The last rail freight revision was implemented during 2015 and with the huge increase in the fuel prices; there could be another upward revision in the rail freights in the near future. For every 1% increase in the rail freight, our additional impact would be Rs. 3 crores per annum.

We shall evaluate other alternate logistics models, such as coastal shipping, road movements, etc.

Marketing Risk

Cement industry is a highly competitive industry, especially in South India. This is primarily because of the predominance of lime stone availability in south and consequently, more manufacturing capacities have sprung up. As cement is logistics sensitive and therefore, cannot be carted long distances, the capacities tend to get marketed in south India.

Branding, Right product for Right application and continuous engagement with all segments of construction industry by our MACE team is helping us get the edge over competition.

Human Resource Risk

Loss of key employees due to resignation or retirement, overstaffing / understaffing, higher attrition rate, inadequate training for employees, employee wellness, and disturbances in industrial relations are identified as the key risk factors in human resource

Human Resource risk is mitigated by forecasting annual manpower to hire right people at right time. Various retention methodologies are followed like employee friendly benefits like extending loan schemes, transfer option to preferred location in genuine cases, Group Medical Insurance and Group Personal Accident Insurance Scheme and buffer scheme. Training programmes are conducted to employees based on functional roles. Periodic Wellness sessions on health related topics are being conducted with expert doctors from reputed hospitals. Maintaining cordial relationship with Unions, local leaders and carrying out CSR projects relevant to the local needs have ensured that there were no loss of man-days due to such disturbances.

Subsidiary Companies

The Company has two subsidiaries, viz. Ramco Windfarms Limited and Ramco Industrial and Technology Services Limited.

The Company has no material subsidiaries.

Ramco Windfarms Limited (RWL)

The Share Capital of RWL is Rs. 1 crore, out of which 71.50% is held by the Company. The rest of the share capital is held by Ramco Group of Companies.

The installed capacity of RWL was 39.835 MW as on 31-03-2023 comprising of 127 Wind Electric Generators.

The Company had generated 331.27 lakh units of power as compared to 333.65 lakh units of power during the previous year.

The revenue and profit after tax for the Company for the year ended 31-03-2023 were Rs. 13.51 crores and Rs. 2.25 crores compared to Rs. 13.41 crores and Rs. 2.29 crores respectively of the previous year. The Total Comprehensive Income of the Company for the year is Rs. 2.25 crores as against Rs. 2.29 of the previous year.

Ramco Industrial and Technology Services Limited (RITSL)

The Share Capital of RITSL is Rs. 4.78 crores, out of which 94.11% is held by the Company. The rest of the share capital is held by Ramco Group of Companies.

The Company provides Transport services, Manpower services and Information Technology related services, mainly involving Software Implementation services.

The revenue of the Company for the year ended 31-03-2023 on standalone basis was Rs. 40.13 crores as against Rs. 40.47 crores for the previous year. The Company had incurred a loss after tax of Rs. 3.65 crores as against the loss of Rs. 1.86 crores for the previous year. The Total Comprehensive Income of the Company for the year is Rs. (3.85) crores as against Rs. (2.01) of the previous year.

In accordance with Rule 5 of Companies (Accounts) Rules, 2014, a statement containing the salient features of the Financial Statements of the Subsidiaries and Associates is attached in Form AOC-1 as Annexure-1.

In accordance with Regulation 46(2)(s) of LODR, separate audited financial statements of the above subsidiary companies are placed in the website of the Company.

Consolidated Financial Statements

The Company has 5 Associate Companies, viz. Rajapalayam Mills Limited, Ramco Industries Limited, Ramco Systems Limited, Lynks Logistics Limited and Madurai Trans Carrier Limited.

As per provisions of Section 129(3) of the Companies Act, 2013 and Regulation 34 of LODR, Companies are required to prepare a consolidated financial statement of the Company and of all the Subsidiaries and Associate Companies, which shall also be laid before the Annual General Meeting of the Company.

Accordingly, the consolidated financial statements incorporating the accounts of Subsidiary Companies and Associate Companies, along with the Auditors Report thereon, forms part of this Annual Report.

As per Section 136(1) of the Companies Act, 2013, the financial statements including consolidated financial statements are available at the Companys website at the following link https://www.ramcocements.in/investors/financials

Separate audited accounts in respect of the subsidiary companies are also made available at the Companys website. The Company will provide a copy of separate audited financial statements in respect of its Subsidiary Companies to any shareholder of the Company who asks for it.

The consolidated net profit after tax of the Company amounted to Rs. 314.52 crores for the year ended 31-03-2023 as compared to Rs. 881.48 crores of the previous year.

The consolidated total comprehensive income for the year ended 31-03-2023 was Rs. 313.43 crores as against Rs.878.88 crores of the previous year.

Directors

Pursuant to Rule 8(5)(iii) of Companies (Accounts) Rules, 2014, it is reported that, there have been no changes in the Directors and Key Managerial Personnel during the year under review and after the end of the year and upto the date of the report.

SEBI had brought in amendments in LODR Regulations for separation of the roles of Non-executive Chairperson & Managing Director, which is considered to be one of the highest standards of Corporate Governance. However, companies were given an option to adopt this provision on voluntary basis. To ensure greater Corporate Democracy and in order to have a better and more balanced governance structure and for providing a structural advantage for the board to act independently, the Board of Directors at their meeting held on 23-05-2022 had unanimously decided to separate the two posts and elected Shri.M.F.Farooqui, IAS (Retd.), Independent Director, as the Chairman of the Board of Directors, effective from 04-06-2022.

Based on the recommendations of Nomination and Remuneration Committee, the Board of Directors have re-appointed Shri.P.R.Venketrama Raja as Managing Director for a period of 5 years starting from 04-06-2022. His re-appointment was approved by way of a Special Resolution at the AGM held on 10-08-2022. His reappointment consequent to retirement by rotation has been included as an Ordinary Resolution, in the Notice convening the AGM scheduled to be held on 10-08-2023.

The Independent Directors hold office for a fixed term of 5 years from the date of their appointment and are not liable to retire by rotation.

The Company has received necessary declarations from all the Independent Directors under Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013. Independent Directors have complied with the Code for Independent Directors prescribed in Schedule IV of the Companies Act, 2013.

The Company had formulated a Code of Conduct for the Directors and Senior Management personnel and the same has been complied with.

The Company has a policy relating to appointment and remuneration of Directors, Key Managerial Personnel and other employees duly approved by the Board of Directors, based upon the recommendation of Nomination and Remuneration Committee, in accordance with Section 178(3) of the Companies Act, 2013.

As per Proviso to Section 178(4) of the Companies Act, 2013, the salient features of the Nomination and Remuneration Policy should be disclosed in the Boards Report. Accordingly, the following disclosures are given:

Salient Features of the Nomination and Remuneration Policy:

The objective of the Policy is to ensure that:

(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully;

(b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

(c) remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.

The Nomination and Remuneration Committee and this Policy are in compliance with the Companies Act, 2013 and LODR. The web address of the Policy is –https://www.ramcocements.in/investors/codes-and-policies

As required under Regulation 25(7) of LODR, the Company has programmes for familiarisation for the Independent Directors about the nature of the industry, business model, roles, rights and responsibilities of Independent Directors and other relevant information. As required under Regulation 46(2)(i) of LODR, the details of the Familiarisation Programme for Independent Directors are available at the Companys website, at the following link –https://www.ramcocements.in/investors/management

The details of familiarisation programme are explained in the Corporate Governance Report also.

Board Evaluation

Pursuant to Section 134(3)(p) of the Companies Act, 2013, and Regulation 25(4) of LODR, Independent Directors have evaluated the quality, quantity and timeliness of the flow of information between the Management and the Board, performance of the Board as a whole and its Members and other required matters.

Pursuant to Schedule II, Part D of LODR, the Nomination and Remuneration Committee has laid down evaluation criteria for performance evaluation of Independent Directors, which is based on attendance, expertise and contribution brought in by the Independent Director at the Board and Committee Meetings, which shall be taken into account at the time of reappointment of Independent Director.

Pursuant to Regulation 17(10) of LODR, the Board of Directors have evaluated the performance of Independent Directors and observed the same to be satisfactory and their deliberations beneficial in Board / Committee meetings.

Pursuant to Regulation 4(2)(f)(ii)(9) of LODR, the Board of Directors have reviewed and observed that the evaluation framework of the Board of Directors was adequate and effective.

The Boards observations on the evaluations for the year under review were similar to their observations for the previous year. No specific actions have been warranted based on current year observations.

The Company would continue to familiarise its Directors on the industry, technology and statutory developments, which have a bearing on the Company and the industry, so that Directors would be effective in discharging their expected duties.

Meetings

During the year, 5 Board Meetings were held. The details of Meetings of the Board and Committees held during the financial year including the number of Meetings attended by each Director are given in the Corporate Governance Report.

Secretarial Standards

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and that such systems are adequate and operating effectively.

Public Deposits

The Company has stopped accepting deposits from 01-04-2014 and have repaid / transferred to IEPF the deposits as the case may be and no deposit amount is pending with the company.

Orders Passed by Regulators

Pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014, it is reported that, no significant and material orders have been passed by the Regulators or Courts or Tribunals, impacting the going concern status and Companys operations in future.

Internal Financial Controls

In accordance with Section 134(5)(e) of the Companies Act, 2013, the Company has Internal Financial Controls by means of Policies and Procedures commensurate with the size & nature of its operations and pertaining to financial reporting. In accordance with Rule 8(5)(viii) of Companies (Accounts) Rules, 2014, it is hereby confirmed that the Internal Financial Controls are adequate with reference to the financial statements.

Particulars of Loans, Guarantees and Investments

Pursuant to Section 186(4) of the Companies Act, 2013, the details of loans, guarantees and investments along with the purposes are provided under Notes No. 12, 14, 21 and 49 of Notes to the Separate Financial Statements.

Audits Statutory Audit

The Members at the Annual General Meeting held on 10-08-2022 have appointed M/s.Ramakrishna Raja And Co., Chartered Accountants, (FRN: 005333S) and M/s.SRSV & Associates, Chartered Accountants, (FRN: 015041S), as the Statutory Auditors of the company for their second term of five years from the conclusion of the 64th Annual General Meeting, till the conclusion of the 69th Annual General Meeting of the Company.

In accordance with Regulation 33(1)(d) of SEBI (LODR) Regulations, 2015, the auditors have submitted the necessary certificates issued by Peer Review Board of the Institute of Chartered Accountants of India.

The report of the Statutory Auditors for the year ended 31st March 2023 does not contain any qualification, reservation or adverse remark. No fraud has been reported by the Companys Auditors.

Cost Audit

As per Rule 3 of Companies (Cost Records and Audit) Rules, 2014, the Company is required to maintain cost records and accordingly such records and accounts are made and maintained.

The Board of Directors had approved the appointment of M/s. Geeyes & Co., Cost Accountants as the Cost Auditors of the Company to audit the Companys Cost Records for the year 2023-24 at a remuneration of Rs.6,50,000/- (Rupees Six lakhs fifty thousand only) exclusive of GST and out-of-pocket expenses.

The remuneration of the cost auditor is required to be ratified by the members in accordance with the provisions of Section 148(3) of the Companies Act, 2013 and Rule 14 of Companies (Audit and Auditors) Rules, 2014. Accordingly, the matter relating to their remuneration had been included in the Notice convening the 65th Annual General Meeting scheduled to be held on 10-08-2023, for ratification by the Members.

The Cost Audit Report for the financial year 2021-22 due to be filed with Ministry of Corporate Affairs by 01-09-2022, had been filed on 25-08-2022. The Cost Audit Report for the financial year 2022-23 due to be submitted by the Cost Auditor within 180 days from the closure of the financial year will be filed with the Ministry of Corporate Affairs, within 30 days thereof.

Secretarial Audit

M/s.S.Krishnamurthy & Co., Company Secretaries, have been appointed to conduct the Secretarial Audit of the Company. Pursuant to Section 204(1) of the Companies Act, 2013, the Secretarial Audit Report submitted by the Secretarial Auditors for the year ended 31st March 2023 is attached as Annexure-2. The report does not contain any qualification, reservation or adverse remark.

Annual Return

The Annual Return for the year ended 31st March 2022 in Form MGT-7, filed with Ministry of Corporate Affairs, is available in the Companys website at the following link: https://www.ramcocements.in/investors/shareholders

Corporate Governance

The Company has complied with the requirements regarding Corporate Governance as stipulated in LODR. As required under Schedule V(C) of LODR, a Report on Corporate Governance being followed by the Company is attached as Annexure-3

No complaints had been received pertaining to sexual harassment, during the year under review. The relevant statutory disclosure pertaining to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, are available at Point No.10(l) of Corporate Governance Report.

As required under Schedule V(E) of LODR, a Certificate from the Secretarial Auditors confirming compliance of conditions of Corporate Governance is also attached as Annexure-4.

As required under Regulation 34(3) read with Schedule V Para C (10)(i) of LODR, Certificate from the Secretarial Auditor that none of the Companys Directors have been debarred or disqualified from being appointed or continuing as Directors of Companies, is enclosed as Annexure-5.

Corporate Social Responsibility

In terms of Section 135 and Schedule VII of the Companies Act, 2013, the Board of Directors have constituted a Corporate Social Responsibility (CSR) Committee and adopted a CSR Policy which is based on the philosophy that "As the Organisation grows, the Society and Community around it also grows."

The Annual Report on CSR activities as prescribed under Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure–6.

Vigil Mechanism / Whistle Blower Policy

In accordance with Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of LODR, the Company has established a Vigil Mechanism and has a Whistle Blower Policy. The Policy provides the mechanism for the receipt, retention and treatment of complaints and to protect the confidentiality and anonymity of the stakeholders. The complaints can be made in writing to be dropped into the Whistle Blower Drop Boxes or through E-Mail to dedicated mail IDs. The Corporate Ombudsman shall have the sole access to these. The Policy provides to the complainant access to the Chairman of the Audit Committee. The weblink for the Vigil Mechanism is disclosed in the Corporate Governance Report.

Related Party Transactions

Prior approval / omnibus approval is obtained from the Audit Committee for all Related Party Transactions and the transactions are also periodically placed before the Audit Committee for its approval. The details of contracts required to be disclosed in Form AOC-2 are given in Annexure-7.

No transaction with the related party is material in nature, in accordance with Companys "Related Party Transaction Policy" and Regulation 23 of LODR. In accordance with Ind AS-24, the details of transactions with the related parties are set out in the Notes to the Financial Statements.

As required under Regulation 46(2)(g) of LODR, the Related Party Transaction Policy is disclosed in the Companys website and its weblink is –https://www.ramcocements.in/investors/codes-and-policies

As required under 46(2)(h) of LODR, the Companys Material Subsidiary Policy is disclosed in the Companys website and its weblink is –https://www.ramcocements.in/investors/codes-and-policies

Material Changes since 1st April 2023

There have been no material changes affecting the financial position of the Company between the end of the financial year and till the date of this report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Pursuant to Section 134(3)(m) of the Companies Act, 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014, the information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is attached as Annexure-8.

Particulars of Employees and Related Disclosures

The disclosure with respect to remuneration as required under Section 197 of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure-9.

The statement containing names of the top ten employees in terms of remuneration drawn and the particulars of employees as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate Annexure forming part of this report.

However, the annual report is being sent to the Members, excluding the aforesaid Annexure. In terms of Section 136 of the Companies Act, 2013, the said Annexure is open for inspection. Any Member interested in obtaining a copy of the same may write to the Company Secretary.

Employee Stock Option Scheme

At the Annual General Meeting held on 03-08-2018, the Members had approved the following Employee Stock Option Schemes.

Name of the Scheme

Total No. of Options

Exercise Price

Vesting Period Maximum Term Source

ESOS 2018 – Plan A

5,00,000 Rs. 1/- per share One year from 31st December of the immediately succeeding Primary
ESOS 2018 – Plan B 7,00,000 Rs. 100/- per share the date of grant Financial Year, in which the vesting was done.

The purpose of this plan is to facilitate Eligible Persons (Employees with Long Service and Contributed to the growth of the Company) through ownership of Shares of the Company to participate and gain from the Companys performance, thereby acting as a suitable reward. Participation in the ownership of the Company, through share based compensation schemes will be a just reward for the employees for their continuous hard work, dedication and support, which has led the Company to be what it is today.

The Plan is intended to:

Create a sense of ownership within the organisation;

Encourage Employees to continue contributing to the success and growth of the organisation;

Retain and motivate Employees;

Encourage Eligible Persons to align their performance with Company objectives;

Reward Eligible Persons with ownership in proportion to their contribution;

Align interest of Eligible Persons with those of the organisation.

The schemes are in compliance with the SEBI Regulations. During the year under review, no material changes have been made in the schemes.

The relevant disclosures in terms of Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 and Secretarial Standard on Report of the Board of Directors are given below:

Details of Movement of Employee Stock Options during the year:

Sl. No

Particulars

ESOS 2018 – Plan A ESOS 2018 – Plan B
(a) Number of options granted during the year Nil Nil
(b) Number of options vested during the year Nil Nil
(c) Number of options exercised during the year Nil Nil
(d) Number of shares arising as a result of exercise of options Nil Nil
(e) Number of options lapsed during the year Nil Nil
(f) Exercise Price Rs.1/- Rs.100/-
(g) Variation of terms of options Nil Nil

(h)

Money realized by exercise of options (INR), if scheme is implemented directly by the Company

Nil Nil
(i) Total Number of options in force (available for grant, but not yet granted) 1,69,000 3,15,400
(j) Employee-wise details of options granted to
(i) Key Managerial Personnel Nil Nil

(ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year

Nil Nil

(iii) Identified employees who were 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

Nil Nil

A certificate from the Companys Secretarial Auditors, with respect to implementation of the above Employee Stock Option Schemes in accordance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, and the resolution passed by the Members of the Company has been received and the same is attached as Annexure-10.

The details as required under Part F of Schedule I read with Regulation 14 of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, are disclosed on the Companys website and the web link is given below: https://www.ramcocements.in/investors/shareholders

Credit Rating

The ratings for the Companys borrowing are available in Corporate Governance Report.

Awards

The Company has been receiving various awards in Environment, Health & Safety, CSR, Energy Efficiency, etc. More details are available in pages 60 and 61.

Shares

The Companys shares are listed in BSE Limited and National Stock Exchange of India Limited.

Investor Education and Protection Fund (IEPF)

Dividend amount remaining unclaimed/unpaid for a period of over 7 years, transferred to IEPF, during the year under review are detailed below:

Dividend

Amount Date of Transfer

Details

Transferred – Rs. to IEPF
2014-15 22,76,802 26-08-2022
2015-16 44,13,600 28-03-2023

Shares transferred to IEPF, during the year under review are detailed below:

No. of Shares

Date of Transfer to IEPF
80 07-09-2022
15,050 09-09-2022
6,759 27-09-2022
4,000 14-10-2022

Year wise amount of unpaid/unclaimed dividend lying in the unpaid account and corresponding shares, which are liable to be transferred to IEPF and due dates for such transfer, are tabled below:

Year

Type of Dividend Date of Declaration of Dividend Last Date for Claiming Unpaid Dividend Due Date for Transfer to IEP Fund No. of Shares of Rs. 1/- each Amount of Unclaimed / Unpaid Dividend as on 31-03-2023 – Rs.
2016-17 Dividend 04-08-2017 03-08-2024 02-09-2024 15,73,924 47,21,772
2017-18 Dividend 03-08-2018 02-08-2025 01-09-2025 8,33,804 25,01,412
2018-19 Dividend 08-08-2019 07-08-2026 06-09-2026 7,80,731 23,42,193
2019-20 Dividend 03-03-2020 02-03-2027 01-04-2027 7,35,278 18,38,195
2020-21 Dividend 12-03-2021 11-03-2028 10-04-2028 7,69,230 20,84,890
2021-22 Dividend 10-08-2022 09-08-2029 08-09-2029 7,97,761 21,46,344

Directors Responsibility Statement

Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm that

(a) they had followed the applicable accounting standards along with proper explanation relating to material departures, if any, in the preparation of the annual accounts for the year ended 31st March 2023;

(b) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31st March 2023 and of the profit of the Company for the year ended on that date;

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

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

(e) they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

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

Acknowledgement

The Directors are grateful to the various Departments and agencies of the Central and State Governments for their help and co-operation. They are thankful to the Financial Institutions and Banks for their continued help, assistance and guidance. The Directors also wish to place on record their appreciation of employees at all levels for their commitment and their contribution.

On behalf of the Board of Directors, For

THE RAMCO CEMENTS LIMITED,

M.F.FAROOQUI

Chennai Chairman
18-05-2023 (DIN: 01910054)