Udaipur Cement Works Ltd Management Discussions.

Dear Shareholders,

Your Directors are pleased to present the 25th Annual Report together with the Audited Financial Statements of the Company for the Financial Year ended 31st March 2021.

FINANCIAL RESULTS AND STATE OF COMPANY AFFAIRS

2020-21 2019-20
Sales & Other Income 737.66 686.88
Profit before Interest & 151.28 126.04
Depreciation
Profit/(Loss) before 97.50 61.09
Depreciation
Profit/(Loss) after Tax 54.74 14.89
Surplus/(Deficit) brought forward (29.05) (43.94)
Surplus/(Deficit) carried to 25.69 (29.05)
Balance Sheet

PERFORMANCE

The Financial Year 2020-21 would go down as one of the most memorable year in the Companys history. The year as we all know started with continued lockdown from last month of the previous financial year on account of first wave of the global pandemic. Despite this lockdown upto 17th May 2020, when everything was looking too bleak, we could achieve a capacity utilization of 71% in the first quarter, thanks to rural demand and our ability to leverage the same. This performance gave us the hope and built enthusiasm in the team that despite uncertain year looming ahead, we can convert a tough situation into an opportunity and strive to achieve a good performance. Your Company precisely did the same and achieved still better.

During the year varying segments gave us opportunities at different times and we could grab all the possible opportunities because of effective coordination and agility of our teams, whether it is sales and marketing at the front end or manufacturing/support functions at the back end. During this pandemic year our Manufacturing/R&D team also developed one of the best premium products i.e. Platinum Supremo that we launched in March 21. The most satisfactory part is that in its very first month of launch, product has got very enthusiastic acceptance from our customers. This same customer satisfaction acts as tonic for us to bring further improvement in our portfolio of various products and services.

During Financial Year 2020-21, the Companys Cement Production & Sales stood at 9.64 and 9.66 Lakh tonnes respectively. Additionally, we sold 5.81 Lakh tonnes of Platinum Heavy Duty Cement through trading activities and 4.89 Lakh tonnes of clinker. Thereby, Company recorded an all-time High Sales of Rs.737.66 Crores, showing a jump of 7% over sales of Rs.686.88 Crores achieved in the previous Financial Year.

Your Company has been working very aggressively on various operational efficiency improvement levers. Financial Year 2020-21 has seen significant uptick in improvement in our geo and product mix besides improvement in our supply chain efficiency. In Financial Year 2020-21, despite significant diesels price rise, Company has been able to contain its logistics cost by reducing its lead and improving its direct deliveries from Plant significantly. All these levers combined resulted into a healthy EBIDTA numbers for the Financial Year 2020-21 i.e. Rs.151.28 Crores against Rs.126.04 Crores achieved in the previous Financial Year, this corresponds to a satisfactory rise of 20 %. After providing for Interest, Depreciation & Tax, the Profit After Tax (PAT) for the Financial Year 2020-21 stood at Rs.54.74 Crores as against Rs.14.89 Crores recorded in the previous Financial Year, registering a rise of 268 %.

Based on the stupendous performance of the Company during the Financial Year 2020-21, the Market Cap of the Company has also jumped from Rs.234 Crores as of 31st March 2020 to over

Rs.800 Crores as on date.

PROGRESS OF THE PROJECTS & EXPANSION

As mentioned last year, the Company had taken up for implementation a De-bottlenecking & Balancing Scheme wherein the Clinker Capacity was being enhanced from 1.20 Million Tonnes to 1.50 Million Tonnes and the Cement Capacity from 1.60 Million Tonnes to 2.20 Million Tonnes by September 2021. Despite all adversities posed by the COVID-19 crisis, your Company has successfully commissioned the capacity augmentation Project. Some minor left out jobs are under progress and shall be completed as per the target.

Your Company, is also working towards installation of new Clinkerization Line and Grinding Unit at Udaipur. This shall boost Clinker Capacity by additional 1.5 Million Tonnes and Cement Grinding Capacity by another 2.5 Million Tonnes. After the completion of the Expansion, the Companys total Clinker Capacity shall be 3.00 Million Tonnes and Cement Capacity shall be 4.7 Million

Tonnes. This Project has an estimated capital outlay of

Rs.1,400 Crores and expected to be commissioned over a period of 3 years. The Company has received Environmental Clearance for the Project and other clearances like approval from the Airport Authority of India, Rajasthan State Pollution Control Board etc. are in process.

OUTLOOK FOR INDIAN ECONOMY, INDUSTRY STRUCTURE AND DEVELOPMENTS

In the just concluded Quarter of Jan to Mar 2021, the demand recovery across the country was clearly visible and believing that the Covid disaster is behind us, the Industry was bracing itself to meet surge of demand in the new Financial Year. However, the Second Wave has hit us with a ferocity and suddenness that has taken the entire country completely unaware and unprepared, bringing us back to almost similar position which was experienced from 3rd week of March, last year or even worse in some markets.

The Second wave has given us a grim reminder that uncertainty, as we are presently experiencing is a likely situation that we are going to be in for some time to come. However, despite these uncertainties it is also obvious that deficiencies in the infrastructure and not just health even otherwise have added to woes of our country in the two Covid waves that we have witnessed and therefore as soon some semblance of normalcy is restored, correction of these deficiencies would assume top priority. Construction activities can therefore be one of the first economic activity to commence as soon this Wave subsides. So, while Q1 can be expected to follow more or less pattern of last years Q1, the famed resilience our economy will propel Q2 and subsequent quarters to perhaps more than make up for shortfall in Q1.

We also expect that some of the behavioral changes induced by the pandemic would have long term impact on the composition of demand especially in residential and institutional sectors. Permanently, Work From Home being adopted in certain sectors would create the new market for low rise and larger residential units slightly away from the congested urban centers. This auger well for the Cement industry in the short to medium terms.

OPPORTUNITIES & THREATS

The pandemic has induced behavioural changes in the life and work styles; some of which may become permanent. Such changes are both opportunities and threats for the industry. Work From Home is increasingly being adopted across various sectors in the industry so much so that a few of them have already announced this as a permanent option for their work force. This move on one hand would reduce the demand for large office spaces but at the same time would create the need for a larger homes for many families. Less visits to market place on one hand would reduce the need for retail space but at the same time would create the need for larger warehouses and redistribution centres. Developers and Builders will look forward to undertake a fewer projects but would strive to complete them fast and in defined time frame. These changes would call for a big change in the construction technologies, construction practices and products used in construction. ‘Time Saved shall now have a realistic tangible value assigned to it as the pressure to reduce Stock in Process and Working Capital locked in it, builds up.

RISKS AND CONCERNS

Since March20, COVID-19 has impacted the SocioEconomic and Financial fabric of the economy, both at macro as well as at micro level. Due to pandemic, the Central Government reforms have not been able to fully unleash themselves to their full potential. Some of the projects will either remain deferred or postponed at least for the near future. Resources are getting dried up in combatting the pandemic and sustaining rather than growth. We see Construction and Real Estate as being one of the worst hit sectors. Globally, we see second wave badly hitting nations like us and some countries are now reeling under a third wave impact. To add to the woes, fuel/coal prices have seen exorbitant rise globally, thereby increasing variable costs. Distribution channels and supply chains in all sectors are hit. Needless to say, this has resulted in increase in input costs.

However, your Company through its prudent management and efficient and economic use of resources has managed to mitigate the risk and has been able to present the said financial results.

A lingering concern for the Cement Industry viz. High GST Slab of 28% does still remain. The Industry has already made several representations to the government in the past for reduction in the GST rates on Cement from 28% to 18%. In the backdrop of the slowdown of the Economy, the Industry is ever hopeful that the government will reduce the GST rate of Cement which will help it to come out of this current difficult phase.

KEY CHANGES IN FINANCIAL INDICATORS

On account of improved performance and profitability, there was significant improvement in the following financial ratios in comparison to previous year as given hereunder:

Sl. Ratios No. Unit of measure As on 31.3.2021 As on 31.3.2020
1 Operation Profit Margin % 20.2 18.2
2 Net Profit Margin % 7.45 2.17
3 Return on Net Worth % 25.44 8.48
4 Current Ratio Times 0.99 0.36
5 Interest Times 2.81 1.94
Coverage ratio
6 Debt Service Times 2.08 1.88
Coverage Ratio
7 Debt Equity Ratio Times 2.31 3.09
8 Net Debt Equity Ratio Times 1.88 2.95
9 Debtors Turnover Times 237 157
10 Inventory Times 12 13
Turnover

HUMAN CAPITAL MANAGEMENT

Your Company is known for its people centric approach i.e., caring for their people. The year under report is characterized by unprecedented pandemic (COVID-19) of epic proportion. Your Company has responded strongly to the crisis and fought against this pandemic at several fronts in collaboration with the District Authorities, Local Panchayats etc., by supporting the local communities around its plant and mines, helping migrants and contractual labours and other needy sections of the society. The outstanding work being carried out by your Company has been appreciated by the local administration too.

Various HR initiatives, in the times of COVID-19 for developing learning culture were taken. Your Company organized number of online programmes/discussions for the employees on Emerging Leadership, Strengthening PMS system through SMART based KRAs, programmes on energy saving, employees Skill development both on functional and leadership aspects etc.

In order to retain talent in your Company, we have focused on various key parameters like recruitment, career development, performance management, award and recognition, executive coaching and mentoring, motivating employees, employee survey, exit interviews etc. In view of increasing digitalization, developing HR modules online and making HR technology employee friendly, involving IT modern techniques have been a focus area for HR interventions. Your Company also focusses on job enrichment/rotation to ensure retention.

Workers are given adequate opportunities/ encouragement to share new ideas. Company also gives due weightage to job enrichment of workers and their contributions. Fair and consistent HR Policies followed by the Management ensure that Industrial Relations continue to be peaceful and cordial.

Your Company is constantly improving on People Management Practices and taking every step to enrich our major HR thrust areas which in turn has helped the Company in getting excellence in development of Human Capital and as a result during the year the Company was awarded with “Certificate of Excellence” under the “Best Employer Award” by Employers Association of Rajasthan.

ENVIRONMENT, HEALTH AND SAFETY

Environment, Health and Safety have always been at the core of Your Companys operations. Use of state of art pollution control equipment, extensive plantation, sourcing of power from Renewable sources replacing conventional non-renewable sources of energy are some of the key strengths of the Company. Occupational Health and Safety improvement programs for employees are regular features. Various initiatives with regard to protection of employees and business associates from COVID-19 have been taken like distribution of face masks, installation of sanitizer dispenser for hand sanitization, playing of pre- recorded safety instructions with regard to COVID-19 at various locations, office sanitization and fumigation and installation of awareness posters in and around the plant etc.

Your Company uses IT based portal for recording and analysing the safety performance. Various agencies have appreciated our efforts toward EHS and have recognized by awarding the Company.

The Following awards/recognitions were received during FY 2020-21 :

Special Recognition certificate for “Green Belt” developed in UCWL premises from SDM, Mavli received on 26th January 2021.

National Winner in “CII EnerCon 2020” under category of “Creating Awareness on Efficiency & Energy Conservation” for “Prime Generation of Green Energy”.

Won Gold Award for “Best Practices in Industrial Security” at 8th Exceed Occupational Health, Safety, Security & HR Award and Conference organised by Sustainable Development Foundation.

Winner at “Industry Sector Safety Excellence” at 19th Annual Greentech Safety Summit held on 12th February 2021.

Secured 7th Position in the category of Specific Power Consumption upto Clinkerisation in the List of Top Ten Energy Efficient Plants in the CII Study based on Energy Award Performance.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place adequate Internal Control System commensurate with the size and level of operations of the Company and the same were operating effectively throughout the year. The Company has an independent Corporate Internal Audit Department which carries-out the Internal Audit of its Plant, Sales depots & registered office. This Internal Audit Department submits its report on the Efficacy & Adequacy of Internal Control Systems to the Chairman of Audit Committee of the Board. There are adequate checks & balances in place, wherein deviation from the systems laid-out are clearly identified and corrective actions are taken in respective areas, wherever required.

During the year, the Companys Budgetary Control System and MIS were working effectively to map the actual performance viz-a-viz Budget for taking corrective actions in the areas where deviations were found.

INTERNAL FINANCIAL CONTROLS

The Company has also institutionalized its Internal Financial Control Systems, Policies & Procedures in line with the size and the complexity of its operations. This ensures accuracy & comprehensiveness of the Accounting records. These Internal Financial Control Systems are adequate for safeguarding the Assets of the Company and are effective towards prevention & detection of frauds & errors. The Policies & Procedures are also adequate for orderly and efficient conduct of business of the Company. The Company has in place specific Standard Operating Practices (SOPs) for its various functional areas. These SOPs are periodically reviewed by the Internal Audit Team; and exceptions, if any, are reported. The Company also has a robust management information system for the timely preparation of reliable financial information. No reportable material weaknesses were observed in the system during the previous fiscal.

ANNUAL RETURN

The Annual Return as required under Section 92 and Section 134 of the Companies Act, 2013 (Act) read with Rules made thereunder is available on the website of the Company www.udaipurcement.com

RELATED PARTY TRANSACTIONS

During the Financial Year ended 31st March 2021, all the contracts or arrangements or transactions entered into by the Company with the Related Parties were in the ordinary course of business and on an arms length basis and were in compliance with the applicable provisions of the Act and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations).

Form AOC-2 containing the details of the material Related Party Transactions entered into during the Financial Year 2020-21 as per the Related Party Transactions Policy is attached as Annexure ‘A to this Report and forms a part of it. The Related Party Transaction Policy as approved by the Board is available on the website of the Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT

The particulars of loans given, guarantees or securities provided and investments made as required under Section 186 of the Act are given in the Notes to Financial Statements.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Pursuant to Section 152 of the Act, Smt. Vinita Singhania

(DIN: 00042983) retires by rotation at the ensuing Annual General Meeting (AGM) and being eligible offers herself for re-appointment. The Board recommends her re-appointment.

The Board of Directors of the Company, on the recommendation of the Nomination and Remuneration Committee has re-appointed Shri Naveen Kumar Sharma (DIN: 08152305) as Whole-time Director, for a further term of 3 years w.e.f. 1st October 2021, subject to requisite approval of Members of the Company. The Board has recommended necessary Special Resolution in this behalf, for approval of the Members at the ensuing AGM.

The Board has taken on record the declarations and confirmations received from all the Independent Directors regarding their independence pursuant to Section 149 of the Act and Regulation 16 of Listing Regulations.

There are no changes in the Directors/Key Managerial Personnel of the Company during the year under review.

CONSERVATION OF ENERGY ETC.

The details as required under Section 134(4)(m) of the Act read with the Companies (Accounts) Rules, 2014 are annexed to this Report as Annexure B and forms part of it.

DEPOSITS

The Company has neither invited nor accepted any deposits from the public.

AUDITORS

(a) Statutory Auditors

In accordance with the provisions of the Act and Rules thereunder, M/s Bansilal Shah & Co., Chartered Accountants (Firm Registration Number: 000384W), were appointed as the Statutory Auditors of the Company for their second term of five consecutive years to hold office from the conclusion of the 23rd AGM held on 17th August 2019 until the conclusion of the 28th AGM to be held in the year 2024.

The observations of the Auditors in their Report on Accounts and the Financial Statements, read with the relevant notes are self-explanatory. The Auditors Report does not contain any qualifications, reservations or adverse remarks.

(b) Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Act, the Board of Directors appointed Shri Namo Narain Agarwal, Company Secretary in Practice, as Secretarial Auditor to carry out Secretarial Audit of the Company for the Financial Year 2020-21.

The Report given by him for the said Financial Year in the prescribed format is annexed to this Report as Annexure C. The Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks.

(c) Cost Auditor and Cost Audit Report

M/s. HMVN & Associates, Cost Accountants, conducted the Audit of cost records of the Company for the Financial Year ended 31st March 2020 and as required, Cost Audit Report was duly filed with the Ministry of Corporate Affairs, Government of India. The Company has duly maintained requisite Cost Records pursuant to Section 148(1) of the Act.

The Audit of the Cost Records of the Company for the Financial Year ended 31st March 2021 is being conducted by the said Firm and the Report will be duly filed.

CORPORATE SOCIAL RESPONSIBILITY

Serving the Society towards improving the quality of life of the community at large has always been a priority of the Company. The concept of socially responsible business is deeply ingrained into our corporate DNA right from the initial years and till date we have pioneered and delivered several CSR projects for needy and vulnerable communities and families.

The Company works towards overall development and welfare of the society by focusing on areas such as Health, Sanitation, Water, Education, Skill Development and Livelihood Interventions to name a few. As the beginning of Financial Year saw outbreak of COVID-19 Pandemic, your Company responded to this unprecedented crisis, taking several initiatives in collaboration with local panchayats and district administration. Number of food kits, sanitizers, cotton masks and hand wash were distributed to the needy families as well as sessions and meetings were organized to create awareness on COVID-19.

Your Company also undertook multiple CSR activities like medical camps; skills training for the women and girls and supporting them for income earning under its flagship project “Swavalamban”, among others. Projects like farmers trainings, exposure visits and veterinary camps were organized to improve agricultural and cattle rearing practices, to strengthen livelihoods of the marginalized families. These CSR projects have impacted positively the lives of the beneficiaries around the Plant.

PARTICULARS OF REMUNERATION

Disclosure of the ratio of the remuneration of each Director to the median employees remuneration and other requisite details pursuant to Section 197(12) of the Act read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this Report as

Annexure D.

Further, particulars of Employees pursuant to Rule 5(2) & (3) of the above Rules, form part of this Report. However, in terms of provisions of Section 136 of the Act, the Report and Accounts are being sent to all the Members of the Company and others entitled thereto, excluding the said Particulars of Employees. The said information is available for inspection at the Registered Office of the Company during business hours on working days of the Company up to the ensuing AGM. Any Member interested in obtaining such particulars may write to the Company Secretary.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

During the Financial Year under review, there were no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations.

CHANGE IN THE NATURE OF BUSINESS

During the Financial Year under review, there was no change in the nature of business.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34(2)(f) of the Listing

Regulations, the Business Responsibility Report of the Company for the Financial Year 2020-21 ended 31st March 2021 in the prescribed format, giving an overview of the initiatives taken by the Company from an environmental, social and governance perspective is given in a separate section of the Annual Report and forms a part of it.

CORPORATE GOVERNANCE

Your Company reaffirms its commitment to the highest standards of corporate governance practices. Pursuant to Regulation 34 of the Listing Regulations, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made a part of this Report. The Corporate Governance Report also covers the following:

(a) Particulars of the four Board Meetings held during the Financial Year under review.

(b) Salient features of the Nomination and Remuneration Policy, including changes therein.

(c) The manner in which formal annual evaluation of the performance of the Board of Directors, of its Committees and of individual Directors has been made.

(d) The details with respect to composition of Audit Committee & establishment of Vigil Mechanism;

(e) Details regarding Risk Management.

(f) Disclosures in relation to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

COMPLIANCE OF SECRETARIAL STANDARDS

Based on the Secretarial Audit Report of the Secretarial Auditor, the Company has duly complied with the applicable Secretarial Standards on Meetings of the Board of Directors and General Meetings issued by the Institute of Company Secretaries of India.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 134(3)(c) of the Act your Directors state that:-

(a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) such accounting policies have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period;

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

(d) the annual accounts have been prepared on a going concern basis;

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

(f) the proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and operating effectively.

ACKNOWLEDGEMENTS

The Board gratefully acknowledge the continuing faith reposed in the Company by the Financial Institutions, Banks, Government Authorities, Dealers, Suppliers, Business Associates and esteemed Shareholders, who have extended their splendid co-operation and support to the Company. The Directors also take this opportunity to thank Companys valued Customers who have patronized its products.

The Board places on record its appreciation towards “Team UCWL” for their dedication and excellence displayed in conducting all operations of the Company and without whose whole-hearted efforts and solidarity, the Companys consistent growth would not have been possible in these challenging times. Last but not the least, the Board also wish to place on record their sincere gratitude towards JK Lakshmi Cement Limited, our Holding Company and Hansdeep Industries & Trading Company Limited, a Fellow subsidiary, for all the financial, technical, marketing and operational assistance extended by them to make turnaround and revival of the Company a realty.

CAUTIONARY STATEMENT

The Directors Report & Management Discussion and Analysis contains forward-looking statements, which may be identified by the use of words in that direction, or connoting the same. All statements that address expectations or projections about the future including but not limited to statements about your Companys strategy for growth, product development, market positions, expenditures and financial results are forward looking statements.

Your Companys actual results, performance and achievements could thus differ materially from those projected in such forward looking statements. 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.

On behalf of the Board of Directors
Place: New Delhi Vinita Singhania
Date: 15th May 2021 Chairperson