Hindalco Industries Directors Report, Hindalco Reports by Directors
Hindalco Industries
BSE: 500440|NSE: HINDALCO|ISIN: INE038A01020|SECTOR: Aluminium
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Directors Report Year End : Mar '13    « Mar 12
Dear Shareholders,
 The Directors are pleased to present the 54th Annual Report along with
 the audited annual standalone and consolidated accounts of your Company
 for the year ended 31st March, 2013.
 1.  Financial Performance
 The FY 13 was one of the toughest years for non-ferrous metal industry.
 Globally Aluminum prices continued to remain depressed, plagued with
 overcapacity, inventory overhang to add to the weak sentiments for the
 In the Indian context, slowdown in manufacturing sector and power
 sector impacted demand in a low pricing (LME) scenario, the cost
 continued to remain high, primarily driven by high crude prices. While
 the prices of crude and its derivatives continued to remain globally
 high, depreciating rupee resulted in an additional burden. The coal
 prices continued to increase in India, even as the Global coal prices
 cooled off.
 Financial Performance Summary                              (Rs. Crore)
 Standalone Consolidated
                        Year         Year         Year         Year
                        Ended        Ended        Ended        Ended
 Particulars            31/03/2013   31/03/2012   31/03/2013   31/03/2012
 Revenue from Operations   26,057       26,597       80,193       80,821
 EBITDA                     2,204        3,105        7,837        8,184
 Other income                 983          616        1,012          783 
 Profit Before Interest, 
 Tax, Depreciation and
 Amortisation               3,187        3,721        8,849        8,967
 Depreciation                 704          690        2,861        2,864
 Finance Costs                436          294        2,079        1,758
 Profit Before Tax          2,047        2,737        3,909        4,345
 Tax Expenses                 348          500          886          786
 Net Profit Before 
 Minority Interest and
 Share in Associates        1,699        2,237        3,023        3,559
 Share in Profit/(Loss) 
 of Associates (Net)                                    (16)          50
 Minority Interest                                      (20)         211
 Net Profit for the Period  1,699        2,237        3,027        3,397
 Basic EPS                   8.88        11.69        15.81        17.74
 2.  Standalone Results
 The Standalone revenue for the year is flat at Rs.  26,057 crore as in
 FY 12. Profit before interest and depreciation was Rs. 3,187 crore vs.
 Rs. 3,721 crore in FY 12. This was achieved despite a significantly
 lower LME and a constant escalation of input costs, largely mitigated
 by improved efficiencies and higher other income.
 Net profit for the year stood at Rs. 1,699 crore vs. Rs. 2,237 crore in
 FY 12.
 The Financial Year 2013 was marked by consistently low Aluminium LME
 and constantly increasing costs. As a result, Aluminium companies
 across the globe suffered during this year. However, Hindalco was able
 to mitigate impact of the above factors by improved efficiencies and
 higher volumes. Consequently, the Company''s results in this business
 segment stand out on almost every parameter in the peer group - both
 domestic and international.
 3.  Consolidated Results
 Despite a sluggish market and headwinds in all businesses of the
 Company, the Consolidated Revenue as well as Profit before
 Depreciation, Interest and Tax for the year at Rs. 80,193 and Rs. 8,849
 crore, respectively, compare well with last year''s corresponding
 figures. With regard to segment results, Aluminium Segment has done
 particularly well by maintaining its EBIT at Rs. 4,388 crore on
 consolidated basis.
 Net profit attributable to the shareholders stood at Rs. 3,027 crore.
 4.  Dividend
 For the year ended 31st March, 2013, the Board of Directors of the
 Company have recommended dividend of Rs. 1.40 per share (Previous year
 Rs. 1.55 per share) to equity shareholders aggregating to Rs. 313.60
 crore (Previous year Rs. 344.89 crore) including Dividend Distribution
 Tax of Rs. 45.56 crore for the year ended 31 st March, 2013.
 5.  Appropriations:
 Allocation and Appropriations of surplus in the statement of Profit and
 Loss account in FY13 are as under:
 Summary of appropriation                    FY 13           FY 12 
 of Profit and Loss Account
 Balance as at the beginning of the year    400.00          350.00
 Add: Profit for the year                 1,699.20        2,237.20
 Less: Transferred to Debenture 
 Redemption Reserve                        (150.00)              -
 Less: Dividend on Equity Shares - (a)     (268.05)        (296.76)
 Less: Dividend Distribution 
 Tax - (a) & (b)                            (31.67)         (38.41)
 Less: Transferred to General Reserve      (899.48)      (1,852.03)
 Balance as at the end of the year          750.00          400.00
 (a) Dividend on Equity Shares and Tax on Dividend include Rs. 0.01
 crore (Previous year Rs. 0.01 crore) pertaining to previous year for
 Equity shares issued before the record date of dividend.
 (b) Tax on Dividend is net of Rs. 13.89 crore (Previous year Rs. 9.73
 crore) being dividend distribution tax paid by a subsidiary.
 6.  Growth Plans underway in Aluminium
 Your Company is pursuing various brownfield and greenfield growth
 oppurtunities in Aluminium as described below:
 Projects - in India
                                        Estimated   Actual or estimated
 Location   Description of Expansion   (at full     Commission Date/
                                        capacity)   Progress Update
 Odisha     Smelter Expansion              52 Kt
            Captive Power Plant           100 MW    Under Commissioning
            Rolling Plant                 135 Kt    Partially 
 Odisha     Alumina Refinery             1500 Kt
 Alumina)                                           Under Commissioning
            Captive Power Plant            90 MW
 Bargawan,  Aluminium Smelter             360 Kt    First Metal Tapped,
 Pradesh                                            commissioning being
 Aluminium) Captive Power Plant           900 MW    undertaken in phased
 Odisha     Aluminium Smelter             360 Kt    2013
 Aluminium) Captive Power Plant           900 MW
 All these ongoing projects of the Company with a cumulative investment
 of around Rs. 28,000 crores have either been commissioned or are in
 advanced stages of commissioning/implementation.
 Project - Overseas
                                            Estimated   Actual or
 Location       Description of Expansion   (at full     Commission Date/
                                            capacity)   Progress Update
 North America
 Oswego, NY     Automotive Sheet               200 Kt   Mid CY 2013
                Finishing Plant
 Germany        Recycling Expansion            250 Kt   Mid CY 2014
 Ulsan and 
 Yeoungiu,      Rolling Expansion              350 Kt   Mid CY 2013
 South Korea
 South Korea    Recycling Expansion            265 Kt   October 12
 China          Automotive Sheet               120 Kt   End CY 2014
                Finishing Plant
 South America
 Pinda Brazil   Rolling Expansion              220 Kt   December 12
 Pinda, Brazil  Can coating line               100 Kt   End CY 2013
 Pinda, Brazil  Recycling expansion            190 Kt   End CY 2013
 7.  Finance
 Financial closure of Aditya Smelter was achieved of Rs. 9,896 crore.
 The tenure of the loan has been kept at 12.50 years to allow the
 project to have enough operational cash surplus for servicing the loan.
 The Company received an overwhelming response from the lenders despite
 a tight credit market.
 Debenture Issue: To further augment financial resources, the Company
 has issued 10-year 9.55 per cent and 9.60 per cent secured redeemable
 non-convertible debentures for a total amount of Rs. 4,500 crore and
 Rs. 1,500 crore respectively on private placement basis. These
 debentures are listed on the wholesale debt market segment of National
 Stock Exchange (NSE).  Repayment of Term Loan: During the year, your
 Company also repaid the loan taken earlier of Rs. 5,143 crore.
 8.  Consolidated Financial Statements
 In accordance with Accounting Standards AS-21 on Consolidated Financial
 Statements read with Accounting Standard AS-23 on Accounting for
 investments in Associates and AS-27 on Financial Reporting of Interest
 in Joint Ventures, the audited Consolidated Financial Statements are
 provided in the Annual Report.
 9.  Management Discussion and Analysis Report
 The Management Discussion and Analysis Report forming part of
 Directors'' Report for the year under review, as stipulated under Clause
 49 of the Listing Agreement with the Stock Exchange(s), forms part of
 the Annual Report.  The report provides a strategic direction and a
 more detailed analysis on the performance of individual businesses and
 their outlook.
 10.  Corporate Governance
 Your Directors reaffirm their commitment to the corporate governance
 standards as prescribed by the Listing Agreement with the Stock
 Exchange(s). A separate section on Corporate Governance together with a
 certificate from the Auditors of the Company regarding full compliance
 of conditions of Corporate Governance as stipulated under Clause 49 of
 the Listing Agreement forms part of the Annual Report.
 11.  Directors'' Responsibility Statement
 Your Directors affirm that the audited accounts containing financial
 statements for the financial year 2012-13 are in full conformity with
 the requirements of the Companies Act, 1956.  They believe that the
 financial statements reflect fairly, the form and substance of
 transactions carried out during the year, and reasonably present the
 Company''s financial condition and results of operations. These
 statements were audited by the statutory auditors of the Company, M/s.
 Singhi & Co., Chartered Accountants.
 Your Directors further confirm that:
 (i) In the preparation of the annual accounts, the applicable
 accounting standards have been followed, along with proper expl
 anations rel ating to material departures, if any;
 (ii) the accounting policies have been selected and applied
 consistently and judgements and estimates have been made that are
 reasonable and prudent so as to give a true and fair view of the state
 of affairs of the Company at the end of the financial year and of the
 profit of the Company for the financial year;
 (iii) proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Act for safeguarding the assets of the Company and for preventing and
 detecting fraud and other irregularities; and
 (iv) the annual accounts have been prepared on a going-concern basis.
 Your Company''s internal Auditors have conducted periodic audits to
 provide reasonable assurance that the established policies and
 procedures have been followed.
 12.  Novelis Inc. (wholly owned subsidiary)
 The performance of Novelis was negatively impacted by pricing pressures
 from competitors, supply chain disruptions due to the implementation of
 a new ERP system in two North American plants, as well as production
 challenges and softer demand.
 Shipments of flat rolled products are marginally lower at 2,786 Kt for
 the year ended 31st March, 2013, compared to 2,838 Kt in the prior
 year. Net sales was 11% lower, primarily driven by a 15% decline in
 average aluminium prices and a fall in flat rolled product volumes by
 13.  Aditya Birla Minerals Limited (51 per cent subsidiary)
 The Company''s copper production extended by 16% mainly on account of
 restart of Mt Gordon mine. Sales volume is up by 14% compared to the
 previous year. The revenue in value terms was sustained. Profitability
 was adversely affected given lower realisation of copper compared to
 the previous year and higher average unit cost of production, because
 of higher volume from Mt Gordon operations at higher cost.
 At Nifty, the ore mined was 2.27 million tonnes up by 8% over the
 previous year. At Mt Gordon, the ore mined was 1.10 million tonnes
 representing a step up of 59% over the previous year.
 Mt Gordon mines operations is currently placed under care and
 14.  Employee Stock Options Scheme ESOS-2006
 The shareholders of the Company has approved an Employee Stock Options
 Scheme (ESOS-2006), formulated by the Company, under which the
 Company may issue 6,475,000 options to its permanent employees in the
 management cadre, in one or more tranches, whether working in India or
 out of India, including the Whole-Time Directors of the Company. Each
 option when exercised would be converted into one fully paid-up equity
 share of Rs.  1/- each of the Company.  The ES0S-2006 is administered
 by the Compensation Committee of the Board of Directors of the Company
 (the Committee).  Under the ESOS 2006, the Committee has granted
 3,545,550 options to its eligible employees in three tranches.
 Disclosure pursuant to the provisions of the Securities and Exchange
 Board of India (Employee Stock Options Scheme) Guidelines, 1999, is
 given in Annexure-A.
 At a meeting held on 28th May, 2013, the Board of Directors approved
 the formulation of a new Employee Stock Options Scheme, viz., Hindalco
 Industries Limited Employee Stock Options Scheme-2013 (ESOS-2013) in
 terms of the SEBI Guidelines. The Board mandated the existing ESOS
 Compensation Committee to implement and administer the ESOS-2013.
 Resolutions seeking your approval for introduction and implementation
 of ESOS- 2013 and granting such number of Stock Options exercisable
 into not more than 54,62,000 equity shares of Rs. 1/- each to the
 permanent employees, including any Managing or Whole-time Director(s)
 of your Company and its holding and/or subsidiary companies are
 included in the Notice convening the Annual General Meeting together
 with the Explanatory Statement.
 15.  Particulars as per Section 217 of the Companies Act, 1956
 The information relating to the conservation of Energy, Technology
 Absorption and Foreign Exchange Earnings and Outgo required under
 Section 217 (1)(e) of the Companies Act, 1956, is set out in a separate
 statement attached to this report (Annexure B).
 In accordance with the provisions of Sections 217 (2A), read with the
 Companies (Particulars of Employees) Rules, 1975, the names and other
 particulars of employees are to be set out in the Directors'' Report, as
 an addendum thereto. However, as per the provisions of Section 219
 (1)(b)(iv) of the Companies Act, 1956, the report and accounts, as
 therein set out, are being sent to all members of the Company excluding
 the aforesaid information about employees. Any member, who is
 interested in obtaining such particulars about employees, may write to
 the Company Secretary at the Registered Office of the Company.
 16.  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.
 17.  Directors
 In accordance with Article 146 of the Articles of Association of the
 Company, Mr. Kumar Mangalam Birla, Mr. Askaran Agarwala retire from
 office by rotation and, being eligible, offer themselves for
 Mr. Jagdish Khattar was appointed as a Director in casual vacancy
 caused due to demise of Mr. E.B. Desai and holds office upto the
 forthcoming Annual General Meeting, and is eligible for reappointment.
 The term of appointment of Mr. D. Bhattacharya as Managing Director is
 expiring on 30th September, 2013. The Board has reappointed him as
 Managing Director for the further period of five years w.e.f 30th
 September, 2013. The approval of the members in the ensuing Annual
 General Meeting would be sought for his reappointment.
 During the year, Mr. Satish Pai was appointed as an Additional Director
 under Section 260 of the Companies Act, 1956, and as a Whole-time
 Director for a period of five years. The approval of the members in the
 ensuing Annual General Meeting would be sought for his appointment,
 subject to approval of Central Government.
 18.  Awards and Recognitions
 Several accolades have been conferred upon your Company, in recognition
 of its contribution in diverse fields. A selective list:
 - Renukoot Complex wins Greentech Safety Gold Award-2012 in the
 Mining & Metals category, for exemplary efforts towards Occupational
 Health and Safety, presented by Greentech Foundation, New Delhi.
 - Renukoot Complex wins the Safety Innovation Award-2012, for
 implementing innovative safety management systems, presented by the The
 Institute of Engineers (India).
 - Renukoot Complex wins the Greentech CSR Gold Award-2012, presented
 by Greentech Foundation, New Delhi. The award recognises the noteworthy
 efforts towards Land and Watershed Management carried out in
 various villages surrounding Renukoot, Renusagar and Mines Division -
 Jharkhand & Chattisgarh.
 - Renukoot Complex wins the Greentech Environment Excellence Gold
 Award-2012 under the category of Mining & Metal Sector for its
 outstanding efforts towards Environment Management by Greentech
 Foundation, New Delhi.
 - Renukoot Complex is conferred the Golden Peacock National Quality
 Award- 2012, in the Mining & Metals sector, presented by the Institute
 of Directors, for its efforts towards Quality, meeting international
 - Renukoot Complex wins Greentech Platinum Award for Best HR
 Practices 2012-13, in the Best Strategy category, presented by
 Greentech Foundation, New Delhi.
 - Renusagar Power Plant wins the Greentech Environment Excellence
 Gold Award-2012, for the fifth consecutive year, for its outstanding
 contribution towards Environment Management System, presented by
 Greentech Foundation, New Delhi.
 - Renusagar Power Plant wins Greentech Safety Gold Award-2012, in the
 power Plant category, for exemplary efforts in Occupational Health and
 Safety, presented by Greentech Foundation, New Delhi.
 - Renusagar Power Division wins the Safety Innovation Award-2012, in
 the Power Sector category, for outstanding achievement in safety
 management, presented by Institute of Directors.
 - Renusagar was awarded the Greentech Training Excellence Gold
 Award-2012 and 3rd Annual Greentech HR Award-2013 for Training
 Excellence, by Greentech Foundation, Delhi.
 - Dahej Harbour & Infrastructure Ltd.  (DHIL), wins the Gujarat Star
 Award (Runners Up) 2011-12, as the Dry Bulk/ Break Bulk Handling Port
 of the Year, for its impressive performance and improvements in the
 areas of vessel turnaround time in port, increased productivity and
 accident-free operations.
 - Dahej Copper Complex wins the Greentech Gold Environment Award-
 2012, for its outstanding achievement in Environment Management.
 - Muri Alumina Plant wins the Greentech Gold Environment Award-2012,
 presented by Greentech Foundation, New Delhi.
 - Hirakud Power Plant wins CII Odisha Award- 2012 (2nd Runners Up),
 for Best Practices in Environment, Safety and Health.
 - Taloja Rolling Plant wins the overall title for Maharashtra Safety
 Awards-2011, competition organised by the National Safety Council -
 Maharashtra Chapter, in the Heavy Engineering category for its
 commendable safety performance, Scheme-I, Lowest Average Accident
 Frequency Rate.
 - The Quality Circles from Renukoot earned Six Gold Medals and one
 Silver Medal at the Kanpur Chapter Convention.
 - The Quality Circles of Renusagar earned Par Excellence awards at
 the national convention of Quality Circle Forum of India.
 - Quality Circle of Birla Copper Dahej won the Bronze medal at
 Gujarat State Level Quality Circle Competition-2012, organised by
 Quality Circle Forum of India.
 - Hirakud Quality Circle won the Best Analysis & Process Award at the
 17th All Odisha Quality Circle Convention.
 - Hirakud members earned the Certificate of Appreciation at the 12th
 CII National Supervisory Skill Competition in Repair & Maintenance
 Jharkhand & Chhattisgarh Mines Division
 - National Safety Awards for 2009-10 and 2010-11 presented to Samri
 Mines Division during 2012.
 - Overall Best in Mines Safety Week-2012 and Minerals Exploration &
 Minerals Conservation Week-2012 Award to Bagru Hill Bauxite Mines
 during 2012-13, for Ranchi region.
 - Mr. D Bhattacharya, Managing Director, received the Fray
 International Sustainability Award for leadership in developing &
 applying new innovative business plans & operations for sustainability
 development of the Company in the environmental economic & social point
 of view.
 19.  Environment Protection and Pollution Control
 Your Company is committed to sustainable development. A separate
 chapter in this report deals at length with your Company''s initiatives
 and commitment to environment conservation.
 20.  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.
 M/s. Singhi & Company, Chartered Accountants and Auditors of the
 Company, retire, and being eligible, offer themselves for appointment.
 Cost Auditors
 For the Financial Year 2012-13 M/s R.  Nanabhoy & Co. and M/s Mani &
 Co. were joint cost auditors of the Company. For timely completion of
 Company level audit as per the new cost audit rules and to avoid
 coordination and logistical issues, your directors have appointed a
 single cost auditor, M/s. R.  Nanabhoy & Co.
 In pursuance to Section 233 B (2) of the Companies Act, 1956, read with
 Ministry of Corporate Affairs, Cost Audit Branch Order dated 6th
 November 2012, your directors have appointed M/s. R. Nanabhoy & Co,
 cost accountants as Cost Auditors, subject to approval of the Central
 Government, to conduct cost audit of the Company, for the financial
 year 2013-14, pertaining to products or activities related to Aluminium
 and Aluminium Products, Inorganic Chemical and their Derivatives,
 Mineral Products, Miscellaneous Chemical Products, Copper and Copper
 Products, Pearl, Diamonds, Stones and Jewellery Articles, Mineral /
 Chemical Fertilizers - Others, and any other products as are covered
 under the subject Order of Ministry of Corporate Affairs.
 The due date for filing Cost Audit Reports for the Financial Year
 2011-12 was February 28, 2013 and the same was filed by the Cost
 Auditors on January 20, 2013.
 21.  General Exemption under Section 212(8) of the Companies Act, 1956
 The Ministry of Corporate Affairs, Government of India vide its
 Circular No.5/12/2007-CL-III dated 8th February , 2011 has granted
 general exemption under Section 212(8) of the Companies Act, 1956, from
 attaching the balance sheet, profit and loss account and other
 documents of the subsidiary companies to the balance sheet of the
 Company provided certain conditions are fulfilled. The Company has
 satisfied the conditions stipulated in the Circular and hence is
 entitled to the exemption.  However annual accounts of the subsidiary
 companies and the related detailed information will be made available
 to the holding and subsidiary companies investor''s seeking such
 information at any point of time. The annual accounts of the subsidiary
 companies are available for inspection by any shareholder''s at the
 Registered office of the Company. The annual accounts of the subsidiary
 companies are also available for inspection at their respective
 registered office. Further, in line with the Listing Agreement and in
 accordance with the Accounting Standard 21 (AS-21), the Consolidated
 Financial Statements prepared by the Company include financial
 information of its subsidiaries.
 22.  Appreciation
 Your Directors place on record their sincere appreciation for the
 assistance and guidance provided by the Honorable Ministers,
 Secretaries and other officials 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
 Your involvement as Shareholders is greatly valued. Your Directors look
 forward to your continuing support.
                                    For and on behalf of the Board
 Mumbai                                                   Chairman
 Dated 13th August, 2013
Source : Dion Global Solutions Limited
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