Ambuja Cements Directors Report, Ambuja Cements Reports by Directors
Ambuja Cements
BSE: 500425|NSE: AMBUJACEM|ISIN: INE079A01024|SECTOR: Cement - Major
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Directors Report Year End : Dec '13    « Dec 12
 A Year of Challenges
 Slowing growth, rising inflation and the depreciating rupee marked the
 onset of 2013 setting in motion a challenging year for the Indian
 economy.  Growth rate continued to slide despite attempts by the
 government to stem the tide with a host of traditional and innovative
 measures. Efforts were further constrained due to global headwinds.
 To boost investor confidence, the Cabinet Committee on Investments
 approved infrastructure projects entailing huge investments.
 However, given the weak start, we expect that real GDP growth would
 average at 4.5-5% in 2013-14.
 The cement industry witnessed flat growth in 2013 due to several
 reasons - a prolonged monsoon that extended until the festive season,
 natural calamities (floods and cyclone) that hit many parts of India
 and low demand due to financial crunch and slowdown in realty and
 infrastructure sectors.
 In the first half of 2013, industry demand was slow due to fall in
 construction activity and a virtual halt in government spending. During
 the second half, the early arrival of the monsoon compared with the
 previous year did not augur well.
 The cement industry also faced rising costs, high interest rates, land
 acquisition and clearance issues.  An overall weak macro environment
 and ban on sand mining continued to worry the industry.
 Increase in freight rates for several commodities has had a cascading
 impact on the cement industry. An increase in freight rates for coal
 and cement drove up transportation cost as well as the landed cost of
 imported goods. Moreover, the rupee''s weakness against the U.S.
 dollar and other global currencies prevented India from taking
 advantage of the decline in commodity prices in the world market.
 Over the past few years, the cement industry witnessed huge capacity
 addition (almost 90 million tones on the available supply basis), which
 substantially increased the gap between demand and supply and
 consequently lowered capacity utilization.
 We expect demand to gradually revive over 2014 and 2015 with a new
 government and recovery in construction activity.
 - Cement production decreased by 3% to reach 20.96 million tonnes,
 from 21.62 million tonnes while clinker production decreased to 14.27
 million tonnes, 10% down from 15.81 million tonnes in year 2012.
 - Domestic cement sales volume continued with sluggish demand by
 recording a decrease of 2% at 20.94 million tonnes from 21.31 million
 tonnes in year 2012. Cement exports decreased to 0.10 million tonnes
 from 0.12 million tonnes in year 2012. Clinker sales (including
 exports) were up at 0.56 million tonnes from 0.55 million tonnes in
 - Net sales at '' 9,087 crores were 6% lower than that of previous
 year''s '' 9,675 crores.  Average sales realisation decreased by around
 4% at ''4,208 per tonne against approx ''4,400 per tonne in 2012.
 - Total (operating) expenses for the year 2013 increased by 2% over
 that of year 2012.
 - The Company achieved an absolute EBITDA of '' 1651 crores in year
 2013. This is lower by 33% over the corresponding '' 2473 crores of the
 year 2012.
 - Profit before tax at '' 1,514 crores was down by 20% over
 corresponding figure of'' 1902 crores for year 2012.
 - Net Profit at '' 1,295 crores was down by 0.2% over corresponding
 figure of'' 1297 crores for the year 2012.
 Amount in '' crores
                            Stand alone            Consolidated 
                  Current Year   Previous Year   Current Year  Previous
                  31.12.2013     31.12.2012      31.12.2013    31.12.2012
 Sales (Net of 
 excise duty)        9086.84        9674.94         9118.00       9739.54
 Profit before 
 interest and 
 depreciation        2044.45        2821.84         2033.91       2821.95
 Less: Finance 
 Cost                  65.08          75.66           66.75         78.46
 Gross profit        1979.37        2746.18         1967.16       2743.49
 expense               490.07        565.22          493.67        568.68
 Profit before 
 Items and Tax        1489.30       2180.96         1473.49       2174.81
 items                 (24.82)       279.13          (24.82)       279.13
 before tax           1514.12       1901.83         1498.31       1895.68
 Less: Tax 
 expense               219.55        604.77          219.87        603.86
 Profit after 
 tax but before 
 Interest             1294.57       1297.06         1278.44       1291.82
 Less: Minority 
 interest                -             -              (0.13)       (1.39)
 Profit for 
 the Year             1294.57       1297.06         1278.57      1293.21 
 Add: Balance 
 as per
 the last 
 statements            737.01         284.75        1048.09       598.72
 Profit available 
 appropriation        2031.58        1581.81        2326.66      1891.93
 Consequent to 
 change in 
 interest                -              -              -          (0.96)
 General Reserve       150.00         200.00         150.00       200.00 
 Dividend on 
 Equity Shares
 interim)              556.34         554.80         556.34       554.80
 Dividend Tax           94.55          90.00          94.55        90.00
 Appropriations        800.89         844.80         800.89       843.84
 forward to 
 Balance Sheet        1230.69         737.01        1525.77      1048.09
 The Company has paid an interim dividend of 70% ('' 1.40 per share)
 during the year. The Directors are pleased to recommend a final
 dividend of 110% (''2.20 per share). Thus the aggregate dividend for the
 year 2013 works out to 180% (''3.60 per share) and the total payout will
 be ''648.37 crores, including dividend distribution tax of ''92.71
 crores. This represents a payout ratio of 50%.
 The Company''s domestic cement sales in 2013 declined by 1.7% to 20.94
 million tonnes as compared to 21.31 million tonnes achieved in 2012.
 Total cement sales (including exports) declined by 1.8% to 21.04
 million tonnes as compared to 21.43 million tonnes achieved in 2012.
 In the North region, domestic cement sales of the Company declined by
 1.7% to 8.64 million tonnes in 2013 compared to 8.79 million tonnes in
 In the East region, the Company achieved sales of 4.21 million tonnes
 of cement in the domestic market, registering a decline of 0.2% over
 the previous year sales of 4.22 million tonnes.
 In the West & South region, the Company''s domestic cement sales in
 2013 declined by 2.5% to 8.09 million tonnes as compared to 8.30
 million tonnes achieved in 2012.
 Cement exports in 2013 reduced further to 0.10 million tonnes as
 compared to 0.12 million tonnes in 2012.
 The Company continues to develop and leverage its large and able
 network of around 8,500 dealers and 27,000 retailers across India.
 Their reach and penetration helps the Company in core rural and
 semi-urban markets across the country. This, coupled with the strong
 brand equity and efficient channel management, has significantly helped
 the Company to withstand severe competition in an over-supplied market.
 The Company''s network of ports, bulk cement terminals and captive
 ships on the west coast has supported a sustainable and strong market
 position in Mumbai, Surat and Cochin. The Mangalore Bulk Cement
 Terminal that commenced its commercial operations in 2013 will further
 strengthen the Company''s position and enhance its footprint in the
 South region.
 The Company embarked on the Marketing and Commercial Excellence (MaCX)
 programme to further sharpen its marketing, sales and distribution
 functions. This ambitious programme is part of the comprehensive Holcim
 Leadership Journey (HLJ), announced by Holcim management across the
 globe to deliver gains and create value in a competitive environment
 over the next few years. MaCX aims to supplement in-house skills with
 global expertise of Holcim and that of advisory firms, to revamp
 customer interfacing functions by focusing on core value levers. This
 is an investment to future proof the Company and to promote an
 environment of innovation and excellence.
 During the year 2013, the economy witnessed upward movement in overall
 cost structure and volatile foreign exchange rates. However, the
 Company implemented cost optimisation initiatives which helped in
 containing inflationary impact to some extent.
 i) Cost of major raw material, fly ash, increased by 7% on per tonne
 basis. However, strategy to change in mix of gypsum resulted in cost
 decrease by 2% on per tonne basis. Overall, the absolute raw material
 cost decreased by approx.  6% over the previous year including the
 impact of lower volumes.
 ii) Power and fuel costs account for approximately 26% of the total
 operating cost of the Company.  Coal cost for kiln and captive power
 plants reduced by 8% and 10% respectively, due to reduced usage of
 imported coal and also substitution of high cost coal by pet coke
 usage.  Besides, there was increased usage of Alternate fuels by 3%
 over the usage for the year 2012.
 Cost of grid power continued its upward movement with per kwh rate
 increasing by approximately 22% over the previous year. In 2013,
 captive power generation which supports 66% of the total power
 requirements of the Company, reduced by 10%.
 Overall, the reduction in dependence on grid, increase usage of captive
 power and reduction in fuel prices have helped the Company in
 registering a decrease of 11% in absolute cost of power and fuel as
 compared to the year 2012.
 iii) Freight and forwarding cost works out to 30% of total operating
 costs. During the year, the same hardened by 6% on per tonne basis over
 the year 2012 due to an increase in diesel prices.
 iv) The cost of packing bags went up by around 14%, driven by increase
 in PP granule prices.
 i) Keeping in line with the corporate philosophy, focus on production
 of fly ash based PPC was maintained.
 ii) The Company launched its first fully automatic one million tonne
 capacity terminal in Mangalore.  This will help the Company in reducing
 the negative seasonality effect of the Company''s Gujarat plant.
 Besides, the logistic costs will be reduced as there will be an
 opportunity to optimise by using the same vessel for both Mangalore and
 Cochin terminals in one trip.  It will also help the Company enhance
 its footprint in the southern part of India.
 With the launch of this terminal, all states along the country''s west
 coast are covered by Ambuja Bulk Cement Terminals.
 iii) The new Ulwe channel at Panvel, Navi Mumbai was successfully made
 operational during the year. This will lead to handling of higher cargo
 and thus result in savings in coastal freight cost.
 iv) A mechanised wagon loading system at Farakka was put to use during
 the year. This helps in reducing loading charges while loading cement
 from truck to rake as well as reduction in the transportation cost from
 packing plant to railway siding.
 v) With the introduction of the SCOPE (Supply Chain Optimisation
 Project for Excellence) project, a supply chain excellence initiative,
 the Company is trying to derive operational efficiencies in logistics.
 This is targeted by improvisation in direct despatches to customers by
 undertaking fleet optimisation measures such as installation of Radio
 Frequency Identification (RFID), Global Positioning System (GPS) on
 trucks to monitor movement and improving turnaround time etc.
 vi) The efforts by the Company for the usage of cost efficient fuel mix
 are part of the ''GEO 20'' project which will be operational in the first
 half of year 2014. Here, as a result of handling, storing and
 processing of waste materials, the Company will be able to ensure more
 usage of Greener Fuels thereby reducing energy cost.
 The Company took up several projects to serve its customers in a more
 efficient, cost-effective, reliable and environment-friendly manner,
 while bolstering its market Dosition in the industrv.
 The new Bulk Cement Terminal (BCT) at Mangalore commissioned this year
 will help the Company expand its footprint in the southern markets of
 Getting better at being the best The Company focused on consolidation
 and optimisation of its existing capacities in all the three regions.
 Capital investments kept flowing in during the year, to ensure the
 highest standards of safety in order to meet the Company policies of
 ''Zero Harm'', clean and energy efficient infrastructure, cost efficient
 and environment- friendly material handling systems and process
 Achievements at a glance
 i) A Waste Heat Recovery (WHR) plant at Rabriyawas with an approved
 investment of '' 75 crores is being installed to bring efficiency in
 fuel utilisation, optimise power costs and meet our Renewable Power
 ii) In order to strengthen logistics capability and extend its reach to
 customers, a new railway siding project has been initiated at the
 Rabriyawas unit in Rajasthan. The total project cost is ''250 crores. So
 far 40% work of the Railway Project is completed and our timelines for
 completion are within the second quarter of 2016.
 iii) An automatic wagon loading system constructed at the Farraka unit
 in West Bengal built at a cost of approximately ''32 crores was
 completed and made operational during the year. This system will reduce
 cost and improve efficiency of material handling.
 Upcoming Capacities and Investments
 i) A new brown-field expansion project was announced in 2011 at
 Sankrail grinding unit in the eastern region comprising a roller press
 and related logistics. The project is underway, with extended scope to
 include advanced technical specifications. It is slated to cost '' 325
 crore and aimed for completion by 2016. So far, equipment orders have
 been placed and civil work is in progress. This project would add 0.80
 million tonne grinding capacity to the unit, along with other
 ii) Significant cement capacity addition of approximately 4.50 million
 tonnes with associated clinkerisation capacity of 2.17 million tonnes
 is coming up at the proposed integrated plant at Marwar Mundwa, Nagaur
 district in Rajasthan with cement capacity of
 1.5 MTPA; and with similar capacity grinding units at Osara (M.P.) and
 Dadri (U.P.), the total project cost is estimated at ''3500 crores.
 Environmental clearances for the project were acquired but kept in
 abeyance for Marwar Mundwa by the MoEF. Part of the mining land is
 already in possession and the rest is under an advanced stage of
 acquisition. The Company is also in the process of tying-up water
 sources required for construction and operations. Full-fledged
 construction work is expected to commence in the latter part of 2014.
 iii) Last year, the Company had taken up 13 new ambitious projects at
 different locations worth '' 272 crores to optimise and enhance
 efficiency.  These projects have a quick payback of two and half years
 to four years. Work is progressing well and most are likely to be
 completed in the first half of 2014.
 iv) A new brown-field expansion project to set up a roller press at a
 cost of '' 70 crore at the Rabriyawas unit in Rajasthan, will add 0.80
 million tonne grinding capacity in the first half of 2014.
 The year 2014 will see capital expenditure worth ''802 crores, over and
 above the ''725 crores investment made in 2013. The entire proposed
 expenditure would be financed by internal accruals.
 Keeping the planet green through cement
 Ambuja envisions being the most sustainable Company in the cement
 industry and draws heavily on Holcim''s sustainability policy on CO2 and
 energy, eco-efficient products, atmospheric emissions, sustainable
 construction, etc. The strategic stress on environmentally-friendly and
 cost-effective resources resulted in the establishment of the Geocycle
 department to focus on Alternative Fuels and Raw Material (AFR).
 An ambitious project, named ''Geo20'' has been taken up by the
 Company last year, which involves a capital investment of '' 200 crores.
 The project that is meant to substitute costlier traditional fossil
 fuels with Alternative Fuels (AF), is nearing completion and slated to
 be operational at all of our integrated plants by end of 2014. Holcim
 is actively supporting our efforts by making available its global
 experience and technical expertise in the area of clean and green
 technology and burning all sorts of waste materials without the
 corresponding release of harmful gases and CO2 in the air.  Holcim''s
 rich experience in this area has helped to devise innovative ways of
 During 2013, the Company increased its use of Greener Fuels in its
 kilns from 1.4% in 2012 to 3.65% in 2013. The Company is determined to
 achieve higher thermal energy substitution rates in the coming years.
 Economic growth accelerated to 4.8% in the second fiscal quarter from
 4.4% in the first due to higher output in both industry and agriculture
 and a rebound in exports. However, it is less likely that we will see a
 complete turnaround in the economy as the domestic demand remains weak
 and both consumption and investment continue to grow sluggishly. We
 expect growth to remain soft in the first quarter of year 2014 owing to
 delayed investment announcements in the run-up to general elections.
 Further, it is expected to be supported by export recovery and likely
 sustained growth in capital expenditure after the second quarter of
 FY2014, once political stability has been re-established.
 We expect the Indian economy to grow at 5% during year 2014 and driven
 by India''s strong economic fundamentals - high saving and investment
 rates, rapid workforce growth, a quickly expanding middle class, and
 the start of a shift from low-productivity agriculture to high-
 productivity manufacturing. However, given the country''s large
 external financing needs, domestic expansion will be affected by the
 global availability of capital.
 Economic growth could exceed our forecasts if the Administration''s
 reform efforts are sustained, infrastructural development accelerates
 and the government enjoys success in its bid to develop a
 labour-intensive manufacturing sector in India.
 The Cement Industry Outlook
 In the period 2011 to 2013 cement consumption grew at an average of 4%
 compared to the golden period of 2008-2010, when consumption grew at a
 CAGR of 8%. The multiplier of cement demand growth to GDP growth not
 only declined below one in 2011 to 2013 but also lost its relevance.
 Balancing growth with economic reforms Mid-term outlook appears
 challenging in the current scenario. However, there are reasons to
 assume it will be more positive with a potential towards 6-7% growth
 per annum after 2015 provided the new central government pushes
 economic reforms.
 We expect the capacity utilization rate of the industry to improve
 gradually from current 73% to ~80% by 2018 given the slowdown in pace
 of capacity addition and gradual recovery in cement demand.
 Cement demand emanates from four key segments - housing which accounts
 for 67% of cement demand, infrastructure (13%), commercial construction
 (11%) and industrial construction (9%). Economic reforms announced by
 the Government and RBI, including the expected lowering of interest
 rates in 2013, will surely boost sentiment and rejuvenate the economy.
 Long-term growth prospects
 The cement industry is looking for an up-cycle backed by an increase in
 rural consumption and recovery in infrastructure activity after a muted
 growth for the last three years. Recent government measures to
 fast-track infrastructure projects ahead of general elections that are
 just around the corner; construction activity is expected to pick up
 steam leading to strong demand for cement.
 Long-term growth prospects for cement demand are favourable, riding on
 the back of a growing economy and the impetus provided to the housing
 and infrastructure construction activities in the 12th Five-Year Plan
 period (2012-17). The total investment in infrastructure sectors in the
 12th Five Year Plan is estimated to be Rs 56 lakh crores (one trillion
 OH&S is given top priority within the organisation.  The Company aims
 to achieve ''Zero Harm'' through the implementation of formal
 directives, improvement in logistics flow and visible leadership by
 line management. Plant workers/ contractors and our own management
 staff have put in every effort to imbibe and ensure safety in their
 day-to- day activities.
 Demand for cement is closely related to overall economic development
 and tends to vary across States within the country, depending on the
 level of industrialisation and infrastructure development.  Fall in
 demand has been a concern for both the industry and the organisation
 but with strong economic fundamentals, we are hopeful to see a revival
 of demand in the near to medium term.
 Domestic and global cement majors are strengthening their production
 bases across India to mitigate the location risk associated with cement
 operation but at the same time this has also led to a rise in
 additional capacity. With decrease in exports, there is consistent
 pressure on the Company to beat competition. The Company counts on its
 resources and various other marketing and service elements that will
 help the organization stay afloat and deliver improved performance.
 Logistics is another area of concern for the industry and distribution
 cost is one of the major costs for the industry. The industry has
 witnessed a rise in movement of cement through the sea route to
 optimise distribution cost. Ambuja is continuously working towards
 strengthening their distribution network along the coast of India,
 while at the same time concurrently trying to bring down distribution
 and logistics costs.
 Energy is one of the major expenses faced by the cement industry and it
 is constantly working towards reducing its traditional energy
 consumption through measures such as use of greener fuels, setting up
 captive power plants and increasing the production of blended cements.
 Energy Activation across Regional Network (EARN), is an in-house
 initiative that Ambuja has embarked upon, to build a lean energy
 culture across the Company.
 The Human Resource function at Ambuja strives to provide the ''People
 Edge'' to business through continuous process improvement and
 innovation.  Our people strategy, systems and processes are aimed at
 making the Company an employer of choice with sustainable talent by
 attracting, retaining and developing talent in the organisation and
 working on concrete actions plans to enhance employee engagement. This
 is in perfect alignment with the Company''s vision of being the most
 sustainable and competitive company in the industry.
 assess Sustainability risks and opportunities both at the unit and
 corporate levels and monitor the various sustainability initiatives.
 Enhancing the focus on embedding sustainability at the highest level,
 it has been made a regular item in our Board Meeting Agendas. In
 requirement of the newly introduced Clause 55 of SEBI, we have released
 our first Business Responsibility Report (BRR) as a part of the Annual
 Report for 2012. The Company continues to take on initiatives aimed at
 low carbon emissions, water positive, use of alternative fuel,
 renewable energy, bio-mass, plastic reuse, etc.
 We released our 6th Corporate Sustainable Development Report covering
 our Sustainability endeavours for the year 2012. The report is aligned
 with Global Reporting Initiative (GRI) G3 guidelines for A  Level of
 reporting, having been Assured by an independent certifying agency.
 We have responded to the Metal & Mining Sector Supplement of the GRI
 while reporting on our Sustainability performance to our stakeholders.
 Like last year, this year''s report too has been accorded the GRI
 check for A  level by Global Reporting Initiative, Netherlands.
 We continue to focus on developing our renewable energy portfolio in
 line with Renewable & Clean Energy Roadmap till 2020. In 2012, 330 KV
 of solar energy has been installed at Bhatapara, in addition to the
 existing 7.5 MW of wind energy commissioned at Kutch, Gujarat, the year
 before last. A 6.5 MW Waste Heat Recovery-based power generation system
 is being installed and is slated to be operational by 2014.
 monitoring and reporting CO2 emissions as per the World Business
 Council for Sustainable Development''s (WBCSD) Cement Sustainability
 Initiative (CSI) protocol. We have been able to reduce our Green House
 Gas emissions by over 26% taking 1990 as the reference year. To reduce
 the carbon footprint and avoid the use of natural resources, we
 continue to produce fly ash- based cement as our major product. The
 Company is one of the co-chairs of CSI India and has been part of the
 Working Group that released the Low Carbon Technology Road Map for
 Indian Cement Industry.
 For the third year in a row, we bagged the CII Sustainability Award in
 recognition of our endeavours in streamlining Corporate Sustainability
 within our operations. In 2013, we were recognised in the category of
 commendation for ''significant achievement'' similar to the previous
 year. Further, we achieved Gold Level in the Sustainability Plus rating
 conducted by the CII in 2012 where 100 largest companies (by market cap
 and market share) were rated along ESG indicators by CII for the
 Sustainability Plus rating.
 The Company ensured availability of Continuous Emission Monitoring
 Systems (CEMS) at all the nine kiln stacks above 95% round the year for
 online monitoring of all vital pollution parameters. Apart from this,
 trainings were also conducted on emission monitoring, biodiversity and
 water management to build capacities for environmentally responsible
 Three of our grinding units have attained certifications to the Energy
 Management System as per ISO 50001:2011. The Rabriyawas plant has
 become the first integrated unit in Ambuja to implement the
 international standard. This was also our first pilot conducted at a
 plant to estimate Scope 3 emissions (limited) emanating from our
 The Company has taken steps to ensure it meets its commitments under
 the PAT scheme and RPO-REC obligations. Further, we are anticipating
 emission standards to be notified for SO2 & NOx emissions.  We are
 taking all steps to monitor and control our emissions so that we can
 meet the requirements of the new standards as and when they are
 Ambuja Cement Foundation celebrated two decades of work with the host
 communities where it has been involved in development with a spending
 of well over 2% of Profit before Tax (PBT). The programmes at the
 Foundation successfully address community needs in a sustainable
 Water resource management has changed the landscape of Kodinar
 (Gujarat) which is marked by saline water and the water scarce region
 of Rajasthan. Innovative projects involving the revival of traditional
 water conservation - roof rain water harvesting, building check dams
 and customised irrigation methods - has ensured water availability for
 domestic and agricultural use, winning the FICCI Water Award under
 ''Community Initiative, Industry'' category. External auditors also
 declared Ambuja as water positive and it is now hoped that each one of
 our Ambuja sites would raise their bar on water sustainability.
 Ambujanagar (managed by the Foundation) is much sought after by farming
 communities for the latest and best technologies in agriculture. KVK
 also conducts regular meetings, training programmes and other extension
 programmes to disseminate information. Ambujanagar has also introduced
 weather insurance protecting the farmers from unforeseen weather
 Better Cotton Initiative (BCI) is being implemented in five states to
 grow cotton in a sustainable manner and through eco- friendly
 methodologies. Through this initiative, farmers are able to sell their
 produce at a better rate without any middlemen. In 2013, the Foundation
 was conferred with the Best NGO Award by the Northern India Cotton
 Association Ltd. Livelihoods like animal husbandry are encouraged. In
 Darlaghat, women are trained as pashu swasthya sevikas (PSS) and learn
 the latest techniques in animal care.  The work of the PSS is
 complemented by cattle camps and immunisations programmes conducted
 Development Institutes (SEDI) at the Foundation tries to bridge the gap
 between drop-out or undertrained youth and high demand by industry of
 skilled personnel.  SEDI provides relevant skill training to youth
 through the courses held at 16 centres established across India; and
 have to date transformed the lives of over 11,000 youth through wage
 employment encouraging them to become entrepreneurs. These 45 courses
 are designed specific to the requirement of that region and also
 incorporates sessions on soft skill development. Today, SEDI courses
 are affiliated to the National Council of Vocational Training and
 Modular Employment Scheme of Central Government.
 To ensure round-the-clock health services in the far flung rural areas,
 sakhis (village health functionaries) are provided home-based neo natal
 care for the numerous mothers and children across locations. Their
 services are complemented by regular health checks by doctors and
 health camps.  Ambuja Cements also works extensively towards the
 prevention of HIV & AIDS in and around its plants and locations and
 works towards reducing stigma on those affected by it. Programmes are
 held with truckers and workers raising awareness; counselling sessions
 are also organised in some locations; 10 Targeted Intervention projects
 are implemented in collaboration with the state AIDS Control Societies
 and four health care centres established in partnership with Apollo
 Tyres Foundation.
 Nurturing The Nation''s Talent
 The Company has been promoting education
 through the non-profit Ambuja Vidya Niketan Trust (AVNT), to provide
 educational facilities through its schools in each of its five
 integrated plants.  The schools provide education to the wards and
 dependants of Ambuj a employees as well as children of nearby villages.
 In addition, educational intervention is done by the Foundation through
 Balmitras (members from the community and trained by the Foundation)
 who are appointed to help children enjoy studies and understand
 subjects like math, science and English using varied teaching and
 learning methods.  Training is also provided to school teachers for
 better teaching methodologies. Innovations like using sport for life
 skills and e-learning methodologies have been used in schools to make
 curriculum interesting for children. In locations where children are
 either drop-outs or not going to school at all, the Foundation has
 introduced non-formal education centres to aid students to enter the
 mainstream education system.
 The Foundation also runs the Ambuja Manovikas Kendra (AMK), a special
 school for mentally challenged children in Ropar, Punjab. With 100
 children on its rolls, the school works to improve the quality of life
 of children with mental disabilities.  A range of activities and
 programmes at AMK help them grow as independent and productive
 individuals. The children at AMK once again did us proud by winning the
 Overall Championship Trophy in Punjab State Special Olympics 2013,
 for the eighth time in a row. The institution was also adjudged the
 Best Institution in Sports. In the past one year, the school has
 extended its services to children who cannot travel to school through
 its Home Base Rehabilitation Programme.
 Stakeholders In Creating A Difference The Foundation ensures
 Stakeholder Engagement where all programmes are decided after a
 detailed deliberation. Well-defined processes ensure that all
 stakeholders are involved to identify key concerns by the community and
 Community Engagement Plans are implemented the subsequent year.
 Meanwhile, the Community Advisory Panel established in locations
 comprise of Company and community leaders. It is a platform to discuss
 issues faced by the community and achieve a consensus to implement
 programmes for them.
 All programmes are rigorously monitored through the Social Engagement
 Scorecard which through detailed group discussions and interviews with
 community representatives maintains a score on activities and
 programmes of the Foundation. In 2013, all locations scored between 75%
 to 100%, reflecting positive reviews.
 Active Volunteer Engagement programmes has ensured employees become a
 part of the development journey of the communities along with the
 Foundation by actively engaging in volunteering - participating in
 activities like cleaning beaches, painting anganwadis, planting
 saplings, participating in community projects on health, safety, HIV &
 AIDS, skill training, school activities etc. So far, 2,000 Ambuja''s
 volunteers have clocked in over 26,000 hours through their
 participation in activities.
 Our OH&S journey of 2013 was mixed - achievements and incidents that
 highlighted both our strengths and areas of improvement. Going forward,
 there is a need to capitalise on our strong points and work on
 development areas to ensure utmost efficiency to prevent future
 Safety is one of our core values and part of the Company''s vision
 statement. We are committed to strive for ''Zero Harm'' and firmly
 believe safety as one of the most important primary criteria for us to
 achieve the goal of being the ''Most Sustainable and Competitive''
 As part of a structured approach and setting up the OH&S objectives,
 the Company has reviewed its past performance. Situations have been
 assessed and learning incorporated - we believe all incidents are
 preventable especially if we can alter our mindset and behaviour.
 Some key focus action areas include an increase in the visible
 leadership in OH&S by the Front Line Management. To achieve this
 objective, we have kick-started a new initiative ''We Care'' - a
 holistic approach to safety that encompasses all connected with Ambuja
 - across different levels of management, within and outside locations
 including third party contractors. As part of this initiative, two
 concepts - Model Safety Zone and Safety Ambassador - have been launched
 that will help engage and connect with all people onsite and establish
 common objectives between OH&S and line teams.
 Meanwhile, all operational sites have taken one OH&S wave based on the
 targeted Fatality Prevention Element (FPE). These include working at
 height, isolation and lockout, vehicle and traffic safety, machine
 guarding, lifting and supporting loads and hot work.
 A formal OH&S management system, aligned with the Holcim OH&S Pyramid
 System and other directives, has been established over the past few
 years across the organisation. FPEs are implemented across all sites
 and quality of implementation assessed through an external certifying
 agency. Peer Reviews are scheduled and conducted within Ambuja and also
 with ACC.
 Each plant has taken steps to ensure no recurrence of fatal incidents
 and appropriates steps taken at sites. To reduce Risk Exposure, several
 actions were initiated through increasing interface between
 departments, developing a road map to implement Contractor Safety
 Management (CSM) activity, initiating process for integration of OH&S
 requirements during the planning and execution of a shutdown,
 conducting Risk Assessments during shutdown; Safety audits and analysis
 to ensure safety while handling coal; and a structural integrity survey
 by the Company''s technical arm, Techport.  Meanwhile, Risk-specific
 and Competency-based trainings are conducted as per requirements of
 targeted FPEs and other OH&S directives.
 In addition, the Company is making continuous efforts to reduce OH&S
 risks through the integration of OH&S requirements with other business
 The Company''s promoter, Holcim has proposed a restructuring exercise
 with a view to simplify its investment structure as well as unlock
 synergies in the operations of two of its subsidiaries in India -
 Ambuja and ACC. Under this exercise, the Company will acquire 24%
 equity shares of Holcim India Pvt.  Ltd. (HIPL) from Holderind
 Investments Limited (Holderind) for a consideration of approximately ''
 3,500 crores and HIPL will then amalgamate with the Company. Upon
 completion of the amalgamation, the Company will hold 50.01% equity
 shares in ACC and consequently, ACC and all its subsidiaries will
 become the subsidiary of Ambuja. Holderind will hold 61.39% equity
 shares in Ambuja.
 Over the last few years, both Companies have been working on a common
 platform for technical support, major procurement and IT functions.
 However, there are many areas where synergies are yet to be unlocked.
 This amalgamation will help realise these synergies. This process along
 with the alignment of critical back-end functions will help both
 Companies improve their competitive position in the current challenging
 The historic Companies Act, 2013 which replaces more than five decades
 old Companies Act, 1956 was passed by the Parliament. Subsequent to
 receiving the President''s Assent, the Ministry of Corporate Affairs
 notified 98 sections and also put up various Rules under the new Act
 for the public comment.  The objective behind the 2013 Act is lesser
 Government approvals and enhanced self- regulations coupled with
 emphasis on corporate democracy. The 2013 Act delinks the procedural
 aspects from the substantive law and provides greater flexibility in
 Rules making to enable adaptation to the changing economic environment.
 This will lead to improved compliance and accountability from the
 corporate sector and will provide further transparency in the
 The Company has complied with the corporate governance requirements as
 stipulated under the listing agreement with the stock exchanges.  A
 separate section on corporate governance, along with a certificate from
 the auditors confirming the compliance, is annexed and forms part of
 the Annual Report.
 The majority of the Corporate Governance Voluntary Guidelines, 2009,
 stand complied while complying with the requirements under the
 Companies Act, 1956, the Listing Agreement, and the Company''s own
 governance policies.
 The Business Responsibility Report for the year ended 31st December,
 2013 as stipulated under clause 55 of the Listing Agreement is annexed
 and forms part of the Annual Report.
 The Company has documented a robust and comprehensive internal control
 system for all the major processes to ensure reliability of financial
 reporting, timely feedback on achievement of operational and strategic
 goals, compliance with policies, procedures, laws, and regulations,
 safeguarding of assets and economical and efficient use of resources.
 The formalised systems of control facilitate effective compliance as
 per Clause 49 of the Listing Agreement, and article 728 (a) of the
 Swiss Code of Obligations applicable to the Holcim Group.
 The Company''s Internal Audit department tests, objectively and
 independently, the design and operating effectiveness of the internal
 control systems to provide a credible assurance about their adequacy
 and effectiveness to the Board and the Audit Committee. The Internal
 Audit function assesses the effectiveness of controls to provide an
 objective and independent opinion on the overall governance processes
 within the Company, including the application of a systematic risk
 management framework.
 The scope and authority of the Internal Audit activity are well defined
 in the Internal Audit Charter, approved by the Audit Committee.
 Internal Audit plays a key role by providing an assurance to the Board
 of Directors and value adding consultancy service to business
 Protecting our strongest product:
 Ambuja Integrity
 Fraud and corruption-free work culture has been the part of the
 Company''s DNA all along.  In view of the potential risk of fraud and
 corruption due to rapid growth and geographical spread of operations,
 the Company has put even greater emphasis to address this risk. To meet
 this objective a comprehensive Fraud Risk Management Policy (FRMP)
 almost akin to whistle-blower policy has been laid down. More details
 on FRMP have been given in the Corporate Governance Report.
 Corruption: The one area we aim for zero In furtherance to the
 Company''s philosophy of conducting business in an honest, transparent
 and ethical manner, the Board has laid down the Anti- Bribery and
 Corruption Directives (ABCD) as part of the Company''s Code of
 Business Conduct and Ethics. As a Company, we take a zero-tolerance
 approach to bribery and corruption and we are committed to acting
 professionally and fairly in all our business dealings.
 To spread awareness about the Company''s commitment to conduct
 business professionally, fairly and free from bribery and corruption,
 training and awareness workshops were conducted through an independent
 consulting firm wherein more than 1,700 employees participated and got
 trained. Apart from this face-to-face training, over 3,500 employees
 were also given online ABCD training through a web-based application
 tool during 2013.
 In order to further spread awareness about ABCD, face-to-face training
 workshops will also be conducted during the current year for select
 vendors, based on their risk profile and business relationship with the
 These above policies and its implementation are closely monitored by
 the Audit and Compliance Committees of Directors and reviewed by the
 Board at regular intervals.
 Some people are irreplaceable Mr Paul Hugentobler, representative of
 Holcim (the Company''s Promoter), has conveyed his decision to step
 down from the Board and will cease to be a Director w.e.f. 7th
 February, 2014.
 Mr Hugentobler joined the Board in May 2006 as Holcim''s Nominee when
 Holcim took over the management control of the Company. Over the last
 eight years, he played a key role in providing valuable guidance and
 expert advice on all facets of the cement business.
 The Board placed on record its appreciation for the valuable services
 rendered by Mr Hugentobler.
 In accordance with the provisions of Article 147 of the Articles of
 Association of the company, (i) Mr Nasser Munjee (ii) Mr Rajendra
 Chitale and (iii) Dr Omkar Goswami will retire by rotation at the
 ensuing Annual General Meeting of the Company and being eligible, offer
 themselves for re-appointment. The Board recommends their
 A company that offers growth even at the top
 Mr Ajay Kapur and Mr Bernard Terver have been appointed as Additional
 Directors under Section 260 of the Companies Act, 1956 to hold office
 up to the date of the ensuing Annual General Meeting and being
 eligible, have offered themselves for appointment. Additionally, Mr
 Ajay Kapur has also been appointed as the Dy. Managing Director & CEO
 of the Company for a period of three years w.e.f. 1st August, 2013.
 (i) Mr. Ajay Kapur
 Mr Kapur, aged 48 years, is an Economics Graduate from St. Xavier''s
 College, and completed his MBA from Somaiya Institute of Management
 Studies and Research (SIMSR) - both from the University of Mumbai. He
 has also completed the Wharton Advanced Management Program from the
 University of Pennsylvania, USA. He joined the Company in 1993 from
 Citibank, and for the first eight years was the Executive Assistant to
 the then Managing Director, Mr N.S. Sekhsaria.  Among several areas,
 his main focus that time was on Marketing Strategies, Brand and
 Promotion, Logistics Management and Commercial issues. In 2007, he was
 made all India Head - Marketing and Commercial Services at Corporate
 Office and was also inducted as Executive Committee member.  In the
 year 2009, he was made Business Head of West & South region. Mr Kapur
 was elevated to the post of CEO in May, 2012. The Board of Directors
 have appointed Mr Kapur as an Additional Director w.e.f. 25th July,
 2013 and also as Dy.  Managing Director & CEO w.e.f. 1st August, 2013.
 (ii) Mr Bernard Terver
 Mr Terver, aged 62 years, is a French national. He concluded his
 studies at the Ecole Polytechnique in Paris in 1976. After beginning
 his career in the steel industry, in 1977 he moved to cement producer
 CEDEST, which was taken over by Holcim France in 1994. In 1999, Bernard
 Terver became CEO of Holcim Colombia and in 2003 he was appointed Area
 Manager for the Andes nations, Central America and the Caribbean. Since
 October 2008, he has been CEO of Holcim US and effective November 2010
 CEO of Aggregate Industries US. Mr Terver was appointed Area Manager
 and member of senior management of Holcim Ltd, with effect April 1,
 2010.  From September 2012, he was appointed as member of the Executive
 Committee and effective January, 2013 has been bestowed the
 responsibility for the Africa, Middle East and the Indian Subcontinent
 (comprising India, Sri Lanka and Bangladesh) region of Holcim.
 The Board of Directors recommends their appointment. Further details
 about these Directors are given in the Corporate Governance Report as
 well as in the Notice of the ensuing Annual General Meeting being sent
 to the shareholders along with the Annual Report.
 Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended,
 the Directors confirm that:
 i) In preparation of the financial statements, the
 applicable accounting standards have been followed along with proper
 explanations relating to material departures.
 ii) Appropriate accounting policies have been selected and applied
 consistently. 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 as on 31st December, 2013, and of the statement of profit and
 loss and cash flow of the company for the period ended 31st December,
 iii) Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities.
 iv) The financial statements have been prepared on a going concern
 M/s. S. R. Batliboi & Co. LLP, the Statutory Auditors of the Company,
 will retire at the ensuring Annual General Meeting and are eligible for
 re-appointment. M/s. S. R. Batliboi & Co., LLP have expressed their
 unwillingness to get re-appointed as the Statutory Auditors of the
 The Board, based on the recommendation of the Audit Committee,
 recommends the appointment of M/s. SRBC & Co. LLP as the Statutory
 Auditors of the company, for whom the company has received a notice
 u/s. 225 read with Section 190 of the Companies Act, 1956, from a
 shareholder seeking their appointment in place of M/s. S. R.  Batliboi
 & Co. LLP. M/s. SRBC & Co. LLP have confirmed that their appointment,
 if made, shall be within the limits of Section 224(1B) of the Companies
 Act, 1956.
 The Auditors have informed that M/s S.R. Batliboi & Co. LLP and M/s.
 SRBC & Co. LLP are part of the same group.
 Pursuant to section 233B(2) of the Companies Act 1956, the Board of
 Directors on the recommendation of the Audit Committee appointed M/s.
 P.M.  Nanabhoy & Co. Cost Accountants, as the Cost Auditors of the
 Company for the Financial Year 2014.  M/s. P.M. Nanabhoy & Co. have
 confirmed that their appointment is within the limits of the Section
 224 (1B) of the Companies Act, 1956 and have also certified that they
 are free from any disqualifications specified under Section 233B(5)
 read with Section 224 sub-section (3) or sub-section (4) of Section 226
 of the Companies Act 1956.
 The Audit Committee has also received a certificate from the Cost
 Auditor certifying their independence and arm''s length relationship
 with the Company.  Pursuant to Cost Audit (Report) Rules 2001, the Cost
 Audit Report for the financial year 2012 was filed on 6th May, 2013
 vide SRN No.S21001375 on the Ministry of Corporate Affairs website.
 The Company has transferred a sum of '' 123.36 lacs during the financial
 year 2013 to the Investor Education and Protection Fund established by
 the Central Government, in compliance with Section 205C of the
 Companies Act, 1956. The said amount represents unclaimed dividends
 which were lying with the Company for a period of seven years from
 their respective due dates of payment. Prior to transferring the
 aforesaid sum, the Company has sent reminders to the shareholders for
 submitting their claims for unclaimed dividend.
 Information on conservation of energy, technology absorption, foreign
 exchange earnings and outgo, is required to be given pursuant to
 Section 217 (1) (e) of the Companies Act, 1956 read with the Companies
 (Disclosure of Particulars in the Report of the Board of Directors)
 Rules, 1988 is annexed hereto marked Annexure - I, and forms part of
 this report.
 The information required under Section 217 (2A) of the Companies Act,
 1956 read with Companies (Particulars of Employees) Rules, 1975 as
 amended, in respect of the employees of the Company, is provided in the
 Annexure forming part of this Report. In terms of Section 219(1)(b)(iv)
 of the Act, the Report and Accounts are being sent to the members and
 others entitled thereto, excluding the aforesaid Annexure. The Annexure
 is available for inspection by the members at the Registered Office of
 the Company during business hours on working days up to the date of the
 ensuing Annual General Meeting. If any member is interested in
 obtaining a copy thereof, such member may write to the Company
 Secretary, whereupon a copy would be sent.
 Ministry of Corporate Affairs, Government of India, vide its circular
 dated 8th February, 2011 has exempted companies from attaching the
 Annual Reports and other particulars of its subsidiary companies along
 with the Annual Report of the Company required u/s 212 of the Companies
 Act 1956. Therefore, the Annual Reports of the subsidiary companies
 viz. (1) Chemical Limes Mundwa Pvt. Ltd. (2) M.G.T. Cements Pvt. Ltd.
 (3) Kakinada Cements Ltd. (4) Dang Cement Industries Pvt. Ltd. (5) Dirk
 India Pvt. Ltd. and (6) Dirk Pozzocrete (MP) Pvt. Ltd. are not attached
 with this Annual Report. However, a statement giving certain
 information as required vide aforesaid circular dated 8th February 2011
 is included in Consolidated Financial Statements.
 The financial statements of the subsidiary Companies are kept for
 inspection by the shareholders at the Corporate (Head) Office of the
 Company. The Company shall provide free of cost, the copy of the
 financial statements of its subsidiary companies to the shareholders
 upon their request.
 As stipulated by Clause 32 of the listing agreement with the stock
 exchanges, the consolidated financial statements have been prepared by
 the Company in accordance with the applicable Accounting Standards
 issued by The Institute of Chartered Accountants of India. The audited
 consolidated financial statements together with Auditors'' Report form
 part of the Annual Report.
 The consolidated net profit of the Company and its subsidiaries
 amounted to '' 1278.57 crores for the corporate financial year ended on
 31st December, 2013 as compared to '' 1294.57 crores on a standalone
 The Company has always provided a congenial atmosphere for work to all
 sections of the society.  It has provided equal opportunities of
 employment to all without regard to their caste, religion, colour,
 marital status and sex.
 Recognition for constant innovation
 (a) Ambuja won the prestigious CII ITC Sustainability Award for the
 third year in a row.  It won the award for ''Significant Achievement on
 journey towards Sustainable Development'' under Large Industry
 At the same award ceremony, Ambuja''s two integrated units - MCW and
 Bhatapara - also won the CII ITC Sustainability Awards in Individual
 Plant category for ''Strong Commitment for proving commitments;
 adopting appropriate policy and processes''.
 (b) Ambuja Cement won ''The Asia''s Most
 Promising Brand'' at the Asian Brand & Leadership Summit - Dubai 2013,
 held in August, 2013. The award was received by Ambuja''s Dy. MD & CEO
 Mr Ajay Kapur, who was voted as ''Asia''s Most Promising Leader''.
 (c) Ambuja Cement Foundation bagged the first prize in the ''Community
 Initiatives by Industry'' category at the FICCI Water Awards 2013 by
 Deputy Chairman, Planning Commission Montek Singh Ahluwalia at the
 Federation House, New Delhi in August 2013.
 (d) The Foundation also bagged two more National Awards for Excellence
 in Water Management - ''Excellent Water Management Initiatives'' for
 work done at Marwar Mundwa, Rajasthan and Excellence in Water
 Management 2012 for Rabriyawas Unit under Within the Fence
 (e) Maratha Cement Works was awarded the IPE- Asia Pacific HRM Congress
 Awards 2013 under category ''Organization with Innovative HR
 Practices'', for its innovative and good HR practices.
 (f) The 4th National HR Excellence Award Confluence 2013'' by the
 Confederation of Indian Industries (CII) held in New Delhi on 24th
 September where Ambuja Cements Limited bagged the recognition award for
 exhibiting ''Strong Commitment to HR Excellence''.
 (g) MCW unit bagged the Safety Award in the Gold category in Cement
 Sector at the 12th Annual Greentech Safety Award 2013.
 (h) Ambuja Cements Ltd won the ET NOW Talent and HR Leadership Award
 2013 for Best Talent Management and the Global HR Excellence Awards
 2013 for Organization with Innovative HR Practices by World HRD
 (i) Ambujanagar unit won the 12th Greentech Silver Award in Cement
 sector category.
 (j) RKBA Limestone Mine at Ambujanagar was awarded the prestigious RIO
 TINTO Health & Safety Award for 2012-2013. The award was presented by
 the Union Minister of Mines, Dinsha J. Patel.
 Statements in the Directors'' Report and the Management Discussion and
 Analysis describing the Company''s objectives, expectations or
 predictions, may be forward looking within the meaning of applicable
 securities laws and regulations. Actual results may differ materially
 from those expressed in the statement. Important factors that could
 influence the Company''s operations include: global and domestic
 demand and supply conditions affecting selling prices, new capacity
 additions, availability of critical materials and their cost, changes
 in government policies and tax laws, economic development of the
 country, and other factors which are material to the business
 operations of the Company.
 The true wealth of Ambuja: Our people and partners
 Your Directors take this opportunity to express their deep sense of
 gratitude to the banks, Central and State governments and their
 departments and the local authorities for their continued guidance and
 We would also like to place on record our sincere appreciation for the
 commitment, dedication and hard work put in by every member of the
 Ambuja family. To them goes the credit for the Company''s
 achievements. And to you, our Shareholders, we are deeply grateful for
 the confidence and faith that you have always reposed in us.
                                  For and on behalf of the board of 
                                  Ambuja Cements Limited
                                  N. S. Sekhsaria 
 6th February, 2014
Source : Dion Global Solutions Limited
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