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Hindalco Industries Directors Report, Hindalco Reports by Directors
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Hindalco Industries
BSE: 500440|NSE: HINDALCO|ISIN: INE038A01020|SECTOR: Aluminium
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Directors Report Year End : Mar '14    Mar 13
Dear Shareholder,
 
 The Directors have pleasure in presenting the 55th Annual Report and
 the Audited Accounts of the Company for the year ended 31st March,
 2014.
 
 As the Management Discussion and Analysis Section of the Annual Report
 focuses on your Company''s strategies for growth and the performance
 review of the businesses/operations of the Company in depth, your Board
 is providingonly a brief overview in this Report.
 
 FY 2014, was a watershed year for your company. All the Greenfield
 projects viz. Aditya Aluminium and Mahan Aluminium as well as Alumina
 Refi nery under Utkal Alumina International Ltd, a wholly owned
 subsidiary of the Company, have commenced operations. All these
 projects are ramping up their capacity utilization.
 
 In July 2013, Novelis began the commissioning phase of two automotive
 sheet finishing lines at Oswego, its New York facility. The
 construction of new automotive sheet finishing plant in Changzhou,
 China is also on track.
 
 In December 2013, Novelis announced plans to further expand its global
 production of aluminium automotive sheet products by building a third
 finishing line at its Oswego, New York facility and a second fi
 nishing line at its Nachterstedt, Germany facility. These projects are
 expected to begin commissioning in late calendar year 2015. Each of
 these will add approximately 120 kt of auto-finishing capacity. With
 these expansions, the Novelis'' global automotive sheet capacity will
 rise to approximately 900 kt per year.
 
 FINANCIAL PERFORMANCE
 
 Standalone performance for the year ended March 31, 2014 witnessed the
 net sales grew by 7% with Profi t before depreciation, interest and tax
 growth at 13%.  Interest costs went up significantly consequent to
 higher borrowing and capitalization of some assets at projects. Due to
 higher interest cost and exceptional items, the standalone Net Profi t
 was lower at Rs. 1,413 crore.
 
 An exceptional item of Rs. 396 crore relates to a liability of Rs. 324
 crore under The UP Tax on Entry of Goods into Local Areas Act, 2007 (UP
 Entry Tax) and a Liability of Rs. 72 crore under The Madhya Pradesh
 Gramin Avsanrachna Tatha Sarak Vikas Adhiniyam (MPGATSVA). Both these
 levies have been contested by the Company and appeals against these are
 pending before the Hon''ble Supreme Court.
 
 The Consolidated Revenue as well as Profi t before Depreciation,
 Interest and Taxes extended by 9% and 5% respectively in comparison to
 the last year''s corresponding fi gures. Net profi t was lower at Rs.
 2,175 crore, because of higher interest and depreciation and
 exceptional items.
 
 BUSINESS RECONSTRUCTION RESERVE
 
 The Company had formulated a scheme of financial restructuring under
 sections 391 to 394 of the Companies Act 1956 (the Scheme) between
 the Company and its equity shareholders approved by the High Court of
 judicature of Bombay to deal with various costs associated with its
 organic and inorganic growth plan. Pursuant to this, a separate reserve
 account titled as Business Reconstruction Reserve (BRR) was created
 during the year 2008-09 by transferring balance standing to the credit
 of Securities Premium Account of the Company for adjustment of certain
 expenses as prescribed in the Scheme. Accordingly, the Company has
 transferred Rs. 8,647.37 crore from Securities Premium Account to BRR and
 till 31st March, 2013, Rs. 66.98 crore has been adjusted against BRR.
 
 During the year, a provision of Rs. 86.06 crore has been made for
 diminution in value of investment in Hindalco-Almex Aerospace Limited,
 a subsidiary of the Company. The entire amount of provision has been
 adjusted against BRR.
 
 DIVIDEND
 
 For the year ended 31st March, 2014, the Board of Directors of the
 Company have recommended dividend of Rs. 1.00 per share (Previous year Rs.
 1.40 per share) to equity shareholders aggregating to Rs. 241.55 crore
 (Previous year Rs. 313.60 crore) including Dividend Distribution Tax.
 
 Equity shares that may be allotted upon exercise of Options granted
 under the Employee Stock Option Scheme and out of the Share Capital
 Suspense, and before the Book Closure for payment of dividend will rank
 paripassu with the existing shares and shall also be entitled to
 receive the aforesaid dividend.
 
 SUMMARY FINANCIALS
 
                                                  Rs. Crore
 
                               Consolidated          Standalone
 
                             2013-14    2012-13   2013-14    2012-13
 
 Revenue from 
 Operations (Net)           87,695.5    80,192.8  27,850.9   26,056.9
 
 Profit before Interest, 
 Depreciation/ 
 Amortisation and Tax        9,303.5     8,849.0   3,616.3    3,186.8
 (PBIDT)
 
 Less: Finance Costs         2,701.6     2,079.1     711.7      436.0
 
 Less: Depreciation and 
 Amortisation                3,552.8     2,861.1     823.3      704.2
 
 Profit before Exceptional 
 Item and Tax                3,049.1     3,908.8   2,081.4    2,046.6
 
 Exceptional Item              396.0       -         396.0
 
 Profit Before Tax           2,653.1     3,908.8   1,685.4    2,046.6
 
 Tax Expense                   524.9       885.7     272.1      347.4
 
 Profit After Tax            2,128.2     3,023.1   1,413.3    1,699.2
 
 Add: Share in Profit/(Loss) 
 of Associates                  66.8       (15.8)   
 
 Less: Minority Interest        20.0       (19.6)
 
 Profit for the Year         2,175.0     3,026.9   1,413.3    1,699.2
 
 Balance brought forward from 
 Previous Year               2,853.0     1,182.3     750.0      400.0
 
 Adjustment on Acquisition, 
 disposal and change 
 in holding                     (0.2)       (0.1)
 interest in Group Companies
 
 Surplus available for 
 Appropriation               5,027.8     4,209.1   2,163.3    2,099.2
 
 Appropriations:
 
 - General Reserve           1,062.9       901.8   1,056.0      899.5
 
 - Debenture Redemption 
 Reserve                       151.0       150.6     150.0      150.0
 
 - Proposed Dividend           206.5       268.1     206.5      268.1
 
 - Corporate Dividend Tax       37.7        34.8       0.9       31.7
 
 - Transfer on Capital 
 Reduction                     (86.1)        -
 
 - Special Reserve               1.0         0.8
 
 - Balance carried to Balance
   Sheet                     3,654.8     2,853.0     750.0      750.0
 
                             5,027.8     4,209.1   2,163.3    2,099.2
 
 ESOS 2006
 
 During the year ended 31st March, 2014, the Company has allotted 4,800
 fully paid-up equity share of Rs. 1/- each of the Company (Previous year
 40,760) on exercise of options under ESOS 2006 for which the Company
 has realisedRs. 0.05 crore (Previous year Rs. 0.40 crore) as exercise
 money. The weighted average share price for the year ended 31st March,
 2014 over which options exercised was Rs. 115.20 (Previous year Rs.
 117.41).
 
 ESOS 2013
 
 During this year, the Company has instituted Employee Stock Option
 Scheme 2013 (ESOS 2013), under which the Company may grant 5,462,000
 stock options and restricted stock units (RSU) to the permanent
 employees in the management cadre and Managing/Whole time Directors of
 the Company and its subsidiary companies in India and abroad, in one or
 more tranches. The ESOS 2013 is administered by the Compensation
 Committee of the Board of Directors of the Company (the Committee).
 The option exercise price would be determined by the Committee whereas
 the RSU exercise price shall be the face value of the equity shares of
 the Company as on the date of grant of RSUs. Each option and each RSU
 entitles the holders to apply for and be allotted one fully paid-up
 equity share of Rs. 1/- each of the Company upon payment of exercise
 price during exercise period. The options will vest in 4 equal annual
 instalments after one year of the date of grant whereas RSU will vest
 at the end of three years from the date of grant.  The maximum period
 of exercise is 5 years from the date of vesting and these option/ RSU
 do not carry rights to dividends or voting rights till the date of
 exercise. Further, cancelled/ lapsed options and RSU are also available
 for grant.
 
 In terms of ESOS 2013, during the year ended 31st March, 2014 the
 Company has granted 1,930,004 stock options and 1,931,289 RSUs to the
 eligible employees of the Company and some of its subsidiary companies.
 
 Disclosure pursuant to the provisions of the Securities and Exchange
 Board of India (Employee Stock Option Scheme) Guidelines, 1999 is given
 in Annexure A.
 
 FINANCE
 
 We continued with further fi nancing initiatives to strengthen our
 balance sheet and progress on the chartered growth path. During the
 year, Your Company refi nanced project loans for all three greenfield
 projects and this resulted in an annual savings to the tune of Rs. 350
 Crore in interest payments.
 
 In accordance with the provisions of Chapter VII of the SEBI (Issue of
 Capital and Disclosure Requirements) Regulations 2009, the Company had
 allotted 150,000,000 warrants on a preferential basis to the Promoter
 Group on 22nd March, 2012 entitling them to apply for and obtain
 allotment of one equity share of Rs. 1/- each fully paid-up at a price of
 Rs. 144.35 per share against each such warrant at any time after the date
 of allotment but on or before the expiry of 18 months from the date of
 allotment in one or more tranches for which the Company has received Rs.
 541.31 crore being 25% against these warrants. The Promoter Group
 Companies applied for conversion of warrants into equity shares at
 predetermined price, accordingly the Company has issued and allotted
 150,000,000 equity shares of Rs. 1/- each at a premium of Rs. 143.35 per
 share on 20th September, 2013 to the Promoter Group on payment of
 balance amount of these warrants. The entire amount so received has
 been utilised for various Greenfield and brownfield projects
 expenditure.
 
 FIXED DEPOSITS
 
 The Company has not accepted any public deposits and, as such, no
 amount on account of principal or interest on public deposits was
 outstanding as on the date of the Balance Sheet.
 
 AWARDS & RECOGNITIONS
 
 Renukoot Aluminum Complex wins Greentech HR Platinum Award, in the Best
 Strategy category, the highest in this segment.
 
 Renukoot Aluminium Complex wins Greentech Silver award for CSR
 presented by the Greentech Foundation New Delhi
 
 Renukoot Aluminium Complex wins Greentech Platinum Environment Award
 for environmental excellence, presented by the Greentech Foundation,
 New Delhi
 
 Renukoot Complex wins the Janeshwar Mishra Exports Award, for 2009-10,
 First Prize in Engineering & Builders Hardware Category, presented by
 the Uttar Pradesh Export Promotion Bureau, Department of MSME,
 Government of U.P. in September 2013.
 
 Renusagar Power Division wins the Greentech Safety Gold Award-2013 in
 the Thermal Power Sector, presented by the Greentech Foundation, New
 Delhi, for its outstanding achievements in the field of Occupational
 Health and Safety.
 
 Renusagar Power Division wins the Safety Innovation Award-2013 in Power
 Plant category, presented by the Institute of Engineers (India) for its
 outstanding innovative achievements in the field of Occupational
 Health and Safety.
 
 Renusagar Power Division Hospital wins the FICCI Healthcare Excellence
 Award 2013''.
 
 Dahej Copper Complex wins Greentech Environment Platinum Award 2013,
 for its environmental initiatives such as water conservation by
 recycling of plant effl uents, utilization of solid wastes,
 installation of continuous ambient air quality monitoring stations,
 development of green belt at plant and township .
 
 Dahej Copper Complex wins Greentech Silver Award-2013 for its
 outstanding CSR work in the 85 surrounding Government Schools, where
 Dahej has contributed towards improvement in education.
 
 Hirakud Smelter wins the CII (ER) Quality Award in the Large & Medium
 Scale category, in recognition of its pursuit of Total Quality
 Management.
 
 Hirakud Smelter wins 2nd Prize in Longest Accident free period till
 2009 from Directorate of Factories & Boilers, presented at Bhubaneswar
 in February 2014
 
 Talabira-I Coal Mines wins the IME Journal Mining Innovation Award 2012
 for Innovative Mine Development and Production System with blast free
 coal mining
 
 Taloja Rolling Plant was awarded the Employers'' Federation of India
 (EFI) National Award- 2013, for Excellence in Employee Relations.
 
 Taloja Rolling Plant wins National Safety Awards presented by the
 National Safety Council (Maharashtra Chapter) for Longest Accident Free
 Period 2012 and Lowest Accident Frequency Rate, 2012.
 
 Taloja Rolling Plant awarded Best Supplier in aluminum metal category
 by Tata Toyo Radiators for the year 2013-14.
 
 Alupuram Extrusions team earned third place in the Productivity
 Competition conducted by the Indian Institution of Industrial
 Engineering, Kerala Chapter, held in April 2013.
 
 Muri Alumina Plant wins Greentech Environment Gold Award for
 environmental excellence, in recognition of its achieving a major
 target to reduce water and energy consumption.
 
 Belgaum Alumina Plant wins the Government of Karnataka State Export
 Excellence Gold Awards, under the product category Chemicals & Plastics
 for medium/large enterprises for the years 2011-12 and 2012-13. The
 award was presented on 21st February 2014.
 
 Belgaum Plant - Boilers is awarded First Prize in Best Safe
 Industrial Boiler, by the Karnataka State Safety Institute, Department
 of Factories & Boilers, Government of Karnataka, at the State Level
 Safety Competition held on the eve of 43rd National Safety Day
 Celebrations - 2014.
 
 Lohardaga Mines Division wins 1st Prize of Overall performance during
 Metalliferous Mine Safety Week Celebration-2013 held under the aegis of
 Directorate General of Mines Safety, Ranchi Region.
 
 Lohardaga Mines Division wins 1st and 2nd Prize respectively of Overall
 performance under the category of Fully Mechanized mines during Mine
 Environment and Mineral Conservation Week Celebration 2013-14, held
 under the aegis of Indian Bureau of Mines, Ranchi Region.
 
 ENVIRONMENT PROTECTION AND POLLUTION CONTROL
 
 Your Company is committed to sustainable development. Your Company is a
 signatory to the Global Compact and subscribes to the principle of
 triple-bottom line accountability.
 
 A separate chapter in this report deals at length with your Company''s
 initiatives and commitment to environment conservation.
 
 HUMAN RESOURCES
 
 Several innovative people - focused initiatives have been instituted at
 the Group level, and these are translated into action at all of the
 Group Companies.  Our basic objective is to ensure that a robust talent
 pipeline and a high-performance culture, centredaround accountability
 is in place. We feel this is critical to enable us retain our
 competitive edge.
 
 CORPORATE GOVERNANCE
 
 Your Directors reaffirm their continued commitment to good corporate
 governance practices. Your Company fully adheres to the standards set
 out by the Securities and Exchange Board of India for Corporate
 Governance practices and has implemented all of its stipulations.
 
 As required by Clause 49 of the Listing Agreement of Stock Exchanges, a
 separate section on Corporate Governance, together with a certifi cate
 from your Company''s statutory auditors, forms part of this Annual
 Report.
 
 There has been news item about pending investigation in respect of
 allocation of a coal block to the Company.  Your Directors wish to
 reassure you that the project fully deserved allocation of coal block
 on its own merits and that no illegality has been committed in this
 regard. Your Company has produced all documents in support thereof to
 the investigating agencies.
 
 BUSINESS RESPONSIBILITY REPORT
 
 As per Clause 55 of the Listing Agreement with the Stock Exchanges, a
 separate section of Business Responsibility Report forms part of this
 Annual Report.
 
 DIRECTORS'' RESPONSIBILITY STATEMENT
 
 As stipulated in Section 217(2AA) of the Companies Act, 1956, your
 Directors subscribe to the Directors'' Responsibility Statement and
 confirm that:
 
 i) in the preparation of the annual accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 material departures;
 
 ii) the accounting policies selected have been applied consistently,
 and judgements and estimates are made that are reasonable and prudent
 so as to give a true and fair view of the state of affairs of your
 Company as at the end of the financial year and of the profi t or loss
 of your Company for that period;
 
 iii) proper and suffi cient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of this
 Act for safeguarding the assets of your Company and for preventing and
 detecting fraud, and other irregularities; and
 
 iv) the annual accounts have been prepared on a going concern basis.
 
 CONSOLIDATED FINANCIAL STATEMENTS AND RESULTS OF SUBSIDIARY COMPANIES
 
 Consolidated Financial Statements have been prepared by your Company in
 accordance with the applicable Accounting Standards (AS-21, AS-23 and
 AS-27) issued by the Institute of Chartered Accountants of India and
 the provisions of the listing agreement with the Stock Exchanges.
 Together with the Auditors'' Report, these form part of the Annual
 Report.
 
 In terms of the General Circular of the Ministry of Corporate Affairs
 (MCA), Government of India, the copy of Balance Sheet, Statement of
 Profi t and Loss, Directors'' Report, Auditors'' Report, etc., of the
 subsidiary companies is not attached with the Annual Report of the
 Company. The related information on the Annual Accounts of the
 subsidiary companies shall be made available to the shareholders of the
 Company and of the subsidiary companies, who shall seek such
 information at any point of time. The Annual Accounts of the subsidiary
 companies will also be kept for inspection by any shareholder at the
 Registered Offi ce of the Company and that of the subsidiary companies
 concerned. The Statement pursuant to Section 212 of the Companies Act,
 1956, containing the details of the Company''s subsidiaries and the gist
 of the financial performance of the subsidiary companies forms part of
 the Consolidated Financial Statements of this Annual Report.
 
 Novelis Inc (wholly owned subsidiary)
 
 Shipments of fl at rolled products increased from 2,786 kt in fiscal
 2013 to 2,895 kt in fiscal 2014. The recent rolling expansion in
 Pindamonhangaba (Pinda) facility, coupled with the strong demand in
 Brazil, contributed to the higher shipments and strong operating
 results in South America. Shipments were also up in Europe in fiscal
 2014 compared to fiscal 2013, driven by higher automotive and can
 product shipments. The recent rolling expansion project in South Korea
 contributed to the higher shipment levels in Asia region. Shipments in
 North America were down compared to the prior year, as can product
 shipments were lower.
 
 Under US GAAP, Novelis reported Net income of 4 million for the
 year ended March 31, 2014, compared to 3 million in the year ended
 March 31, 2013. Cash fl ow provided by operating activities was 2
 million compared to 3 million in the previous year.
 
 Aditya Birla Minerals Limited (51 per cent subsidiary)
 
 Aditya Birla Minerals Limited, Australia reported a net loss of AUD 0.2
 million in FY14 compared to loss of AUD 8.3 million in FY13. Mount
 Gordon mines operations is currently placed under care and maintenance
 and various strategic options are being evaluated including divestment.
 Nifty mines is currently under suspension post development of a sink
 hole on March 20, 2014.
 
 PARTICULARS AS PER SECTION 217 OF THE COMPANIES ACT, 1956
 
 Information on Conservation of Energy, Technology Absorption and
 Foreign Exchange Earnings and Outgo, stipulated under Section 217(1)(e)
 of the Companies Act, 1956, is set out in a separate statement,
 attached to this Report and forms part of it as Annexure B.
 
 In accordance with the provisions of Section 217(2A) of the Companies
 Act, 1956, read with the Companies (Particulars of Employees) Rules,
 1975, as amended, the names and other particulars of employees are to
 be set out in the annexure to the Directors'' Report.  Having regard to
 the provisions of Section 219(1)(b)(iv) of the said Act, the Report and
 Accounts as set out therein are being sent to all members of the
 Company excluding the information about the employees. Any member,
 interested in obtaining such particulars, may write to the Company
 Secretary at the Registered Offi ce of the Company.
 
 AUDITORS
 
 The observations made in the Auditors'' Report are self- explanatory and
 do not call for any further comments under Section 217 (3) of the
 Companies Act, 1956.
 
 COST AUDITORS
 
 The Board of Directors of your Company have on the recommendation of
 Audit Committee appointed M/s R. Nanabhoy & Co. Cost Accountants,
 Mumbai to conduct the cost audit of your Company for the financial
 year ending 31st March, 2015 at a remuneration as Mentioned in the
 Notice convening the AGM, subject to ratifi cation of remuneration by
 Members of your Company.
 
 The Audit Committee has received a certifi cate from Cost Auditors
 certifying their independence and arm''s length relationship with your
 Company in accordance with the Companies (Cost Audit Report) Rules 2011
 the due date for fi ling Cost Audit Report in XBRL for the financial
 year ended 31st March 2013 was 30th September 2013 vide SRN No.
 S22374656 with the Ministry of Corporate Affairs, New Delhi.
 
 APPRECIATION
 
 Your Directors place on record their sincere appreciation for the
 assistance and guidance provided by the Honorable Ministers,
 Secretaries and other offi cials of the Ministry of Mines, Ministry of
 Coal, the Ministry of Chemicals and Fertilizers and various State
 Governments. Your Directors thank the Financial
 
 Institutions and Banks associated with your Company for their support
 as well.
 
 Your Company''s employees are instrumental in your Company scaling new
 heights, year after year. Their commitment and contribution is deeply
 acknowledged.
 
 Your involvement as Shareholders is greatly valued.  Your Directors
 look forward to your continuing support.
 
                                   For and on behalf of the Board
 
                              D. Bhattacharya  Managing Director
 
                                           M.M. Bhagat  Director
 
 Mumbai
 
 Dated : 29th day of May, 2014
 
Source : Dion Global Solutions Limited
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