India Cements

The Directors have pleasure in presenting their sixtysecond Annual
 Report together with audited accounts for the year ended 31st March
 2008.
 
                                                      Rs. in Crores
                                            For the year ended 31st March
                                                 2008           2007
 FINANCIAL RESULTS
 
 Profit before Interest & Depreciation          1130.56        744.39
 Less: Interest & Other Charges                  109.86        149.80
 Less: Depreciation                              127.92        102.63
 Add: Transfer from General Reserve               -            294.05
 Less: Reversal of Sales tax deferral 
 assignments                                      -            294.05
 Add: Transfer from Share Premium                12.68          59.01
 Less: Shares/Bond issue expenses                12.68          59.01
 Less: Extraordinary item                        48.14            -
 Profit before Tax                              844.64         491.96
 Fringe Benefit Tax                               9.60           1.70
 Deferred Tax                                   182.70          11.43
 Provision for Taxation (net)                    14.80             -
 Profit after tax                               637.54         478.83
 Add: Balance brought forward from last year     46.57        (262.53)
 Less: Dividend on Preference Capital 
 (including Dividend Tax)                          -            19.65
 Less: Dividend proposed on
 Equity Capital (including Dividend Tax)         65.89          30.46
 Less: Transfer to Capital Redemption Reserve      -            25.00
 Less: Transfer to Debenture Redemption Reserve    -            34.62
 Less: Transfer to General Reserve               90.00          60.00
 Less: Transfer to tonnage tax reserve            0.90            -
 Balance carried in Profit & Loss A/c           527.32          46.57
 
 DIVIDEND
 
 The Board of Directors.has recommended a dividend at the rate of 20%
 equivalent to Rs. 2/- per equity share of Rs.10/- each including on
 2,07,89,000 equity shares allotted to Qualified Institutional Buyers
 (QIBs) and 7,18,500 equity shares allotted to option grantees in terms
 of India Cements Employees Stock Option Scheme, 2006.
 
 SHARE CAPITAL
 
 The paid up equity share capital of the Company has increased to
 Rs.281.87 crores as on 31st March, 2008 comprising 28,18,69,157 shares
 of Rs.10/- each on allotment in August 2007 of 4,00,00,000 equity
 shares of Rs.10/- each to the erstwhile shareholders of Visaka Cement
 Industry Limited pursuant to the scheme of amalgamation approved by the
 Honble High Court of Madras and consequent to placement of 2,07,89,000
 equity shares at a price of Rs.285/- per share (including premium of
 Rs.275/- per share) by way of Qualified Institutional Placement made in
 December 2007 and issue of 7,06,500 equity shares at a price of Rs.50/-
 per share (including premium of Rs.40/- per share) in December 2007 on
 exercise of options in terms of India Cements Employees Stock Option
 Scheme, 2006. Further, the Company has allotted in April 2008 12,000
 equity shares of Rs.10/- each on exercise of options by more option
 grantees in terms of the said Scheme.
 
 EMPLOYEE STOCK OPTION SCHEME
 
 As stated above, 7,18,500 equity shares of Rs.10/- each were issued and
 allotted in December 2007 and April 2008 upon exercise of equivalent
 number of options by the eligible employees in terms of India Cements
 Employees Stock Option Scheme, 2006. The said shares rank pari passu
 with other equity shares of the Company.
 
 Details of options granted / exercised and other disclosures as
 required under Clause 12 of the Securities and Exchange Board of India
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999 are set out in Annexure F to this Report.
 
 Messrs. Brahmayya & Co., Statutory Auditors of the Company have
 certified that the aforesaid Scheme has been implemented in accordance
 with the Securities and Exchange Board of India (Employee Stock Option
 Scheme and Employee Stock Purchase Scheme) Guidelines. 1999 and the
 resolutions passed by the members approving the Scheme.
 
 The members of the Company approved during the year offer and issue
 upto 25 lakh equity shares of Rs. 10/- each under a new Employee Stock
 Option Scheme. The Compensation Committee of the Board will be meeting
 in due course to grant options under the new Scheme to eligible
 employees.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Your Directors make the following statement in terms of Section 217
 (2AA) of the Companies Act, 1956 with respect to Directors
 responsibility.  We confirm: 
 
 1.  That in the preparation of the accounts for the year ended 31st
 March, 2008, the applicable accounting standards have been followed.
 
 2.  That such accounting policies have been selected and applied
 consistently and made judgements and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company at the financial year ended 31st March, 2008 and of the
 profit of the Company for that year.
 
 3.  That 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.
 
 4.  That the annual accounts for the year ended 31st March, 2008 have
 been prepared on a going concern basis.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 Pursuant to Clause 49 of the Listing Agreement, a Management Discussion
 and Analysis Report is given as addition to this report.
 
 CORPORATE GOVERNANCE
 
 Pursuant to Clause 49 of the listing agreement with Stock Exchanges, a
 report on Corporate Governance along with Auditors Certificate of its
 compliance is included as part of the Annual Report and is given in
 Annexure C and Annexure D respectively. Further, a declaration on
 Code of Conduct signed by the Managing Director in his capacity as the
 Chief Executive Officer of the Company is given in Annexure E.
 
 OPERATIONS
 
 COMPANY PERFORMANCE
 
 Your Directors are happy to report that the company has achieved its
 best ever performance both in terms of operational and financial
 parameters in the 62 years history of the company.
 
 The clinker production for the year 2007-08 of your company was at
 72.13 lakh tonnes (67.33 lakh tonnes) while cement production was at
 92.34 lakh tonnes representing a capacity utilisation of 105% as
 compared to 84.24 lakh tonnes in the previous year. Cement sales was
 also brisk at 92.15 lakh tonnes as against 84.14 lakh tonnes in the
 previous financial year. The clinker sales was further brought down to
 0.08 lakh tonnes (0.18 lakh tonnes) and the overall sales of clinker
 and cement for the company was at 92.23 lakh tonnes as compared to
 84.32 lakh tonnes in 2006-07.
 
 With the firm demand, the cement prices further improved during the
 year under review and this together with substantial increase in the
 volume, contributed to a jump in sales and other income to Rs.3605.61
 crores during the year as against Rs.2620.88 crores in 2006-07,
 registering an increase of 38%. Despite the onslaught of increase in
 input costs of coal and gypsum, your company could contain its impact
 with the significant improvement in operations converting most of the
 increases in top line to flow directly to the bottom line. Accordingly,
 the income from operations surged to Rs.1130.56 crores from Rs.744.39
 crores in 2006-07. The operating margin of the company has further
 improved to 36.5% from 32.8% in the previous year.
 
 The interest charge for the year was contained at Rs.109.86 crores as
 compared to Rs.149.80 crores in the previous year while the
 depreciation charge was higher at Rs.127.92 crores as compared to
 Rs.102.63 crores in the previous year. Consequently, the Net Profit
 Before Tax and exceptional items rose to a record Rs.892.78 crores as
 against Rs.491.96 crores in the previous year. There was an
 extraordinary item of expenditure representing charges paid on One Time
 Settlement of loans of Rs.48.14 crores during this year.
 
 The deferred tax liability as per Accounting Standards 22 resulted in a
 tax liability of Rs.182.70 crores while the Fringe Benefit Tax
 accounted for Rs.9.60 crores during the year and the net current tax
 liability for the year was at Rs.14.80 crores and the Net Profit After
 Tax was a record Rs.637.54 crores against Rs.478.83 crores in the
 previous year.
 
 The performance of the company would have been still better but for the
 routine bouts of cost increase which included the following:
 
 - The All India Cement Wage Board Settlement - provision for increase
 in wages for workers Rs.450/- per month in addition to the cost of
 living index increasing by 160 points. The salaries of Management Staff
 also had to be revised in line with the industry which all together
 meant an impact of around Rs.40 crores.
 
 - The increase in ocean freight and the firming up of imported coal
 price during the year meant a substantial increase of Rs.65 crores in
 fuel costs.
 
 - The average increase in Excise Duty which was revised from 1st March
 2007 had an additional outgo of Rs.122 crores during the year,
 
 - Introduction of terminal charges, development charges and busy season
 surcharges by Railways had an impact of Rs.19 crores.
 
 - The increase in the prices of domestic coal and increased dependence
 on e-auction / open market coal due to restricted supply by domestic
 coal companies had an additional charge of Rs.12 crores.
 
 - The frequent upward revision in the price of gypsum had an impact of
 Rs.20 crores.
 
 - With the mandatory provisioning for Accounting Standards 15 issued by
 ICAI, the Company had to provide for un-availed leave balances to the
 tune of Rs. 16.70 crores and also had to absorb an amount of Rs. 18.25
 crores towards the differential value for the Employees Stock Options
 Scheme which was exercised by the employees during the year as
 mentioned in this Report.
 
 Your companys sustained efforts towards cost reduction has mitigated
 the impact of the cost increases.
 
 REVIEW AND ANALYSIS OF OPERATIONS
 
 CEMENT
 
 Production and sale of cement during the financial year 2007-08 as
 compared to previous year is as under:
 
                                                 In Lakh Tonnes
                                               Year ended 31st March
                                                 2008       2007
 
 Production:     Clinker                        72.13       67.33
 Cement                                         92.34       84.24
 Sales           Clinker                        00.08       00.18
 Cement                                         92.15       84.14
 Total sales                                    92.23       84.32
 
 The overall capacity utilisation of the company was at a record 105%
 and was higher than the capacity utilisation of some of the majors in
 the country. During the year, the company had successfully completed
 the conversion of the Sankaridurg Unit from wet process to dry process
 and the new plant has stabilised quickly.
 
 SHIPPING
 
 While the company is making every effort to improve the performance,
 there have been, as earlier mentioned, steep increase in the cost of
 coal which substantially impacts the profitability. It is, in this
 context, the company has initiated steps to bring down this cost. The
 company depends on imported coal to an extent of nearly 60% and the
 international price of coal has been on the increase in the last one
 year and the availability has also become scarce due to huge demand
 from China which turned an importer from an exporter status. The
 average price of imported coal which was around 35 - 39 dollars two
 years back went to a level of 60 dollars in 2006-07 and has moved upto
 110 -120 dollars by March 2008.  One of the main reasons for steep
 increase is the multifold increase in Shipping Freight which has
 touched levels never witnessed before by this industry. With the steep
 hike in demand for coal from industrial sector which is booming, the
 possibility of disruption in the supply of this main fuel cannot be
 ruled out. 
 
 In view of the above reasons, the Company has revived its Shipping
 business with the purchase of two ships (Dry bulk carriers) with a
 total capacity of 79843 DWT which will be primarily utilised for
 captive movement of coal and other raw materials also to partake in the
 upswing in the Shipping Industry. This would ensure an uninterrupted
 supply of coal in case of disruption, simultaneously paving way for
 reduced incidence of freight.
 
 The other details like operational highlights, energy efficiency and
 cost reduction, opportunities, threats, risks and concerns etc., are
 covered in the Management Discussion and Analysis report annexed.
 
 SUBSIDIARIES
 
 The Company has been exempted by the Central Government vide its letter
 No.47/99/2008-CL-llI dated 09.04.2008 under Section 212 (8) of the
 Companies Act, 1956, from attaching a copy of the Balance Sheet, Profit
 and Loss Account, Report of the Board of Directors and the Report of
 the Auditors of the Subsidiary Companies namely Industrial Chemicals &
 Monomers Limited, ICL Financial Services Limited, ICL Securities
 Limited and ICL International Limited. However, pursuant to Accounting
 Standard 21 issued by the Institute of Chartered Accountants of India.
 Consolidated Financial Statements presented by the Company include the
 financial information of the subsidiaries. The Company will make
 available these documents/details upon request by any member of the
 Company and its subsidiaries interested in obtaining the same. The
 annual accounts of the Subsidiary Companies will also be kept for
 inspection by any member at the registered offices of the Company and
 its Subsidiary Companies.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 As prescribed by Accounting Standard 21 issued by the Institute of
 Chartered Accountants of India, the audited consolidated financial
 statements of India Cements Group are annexed.
 
 ASSOCIATE COMPANIES COROMANDEL SUGARS LIMITED
 
 Coromandel Sugars Limited has crushed 6.27 lakh tonnes of cane during
 the year under review as against 6.59 lakh tonnes in the previous year.
 The crushing would have been higher but for the delayed start of the
 season on account of capacity expansion program. During the year under
 review, the sugar recovery has improved to 9.70% as against 9.49% in
 the previous year, resulting in sugar production of 6.03 lakh quintals
 (PY- 6.25 lakh quintals). Power exported to grid was 185 lakh units as
 against 143 lakh units in the previous year. The company was able to
 sell higher quantity of sugar of 5.68 lakh quintals as compared to 4.61
 lakh quintals in the previous year. Based on the unaudited financials,
 the company has recorded a gross sales turnover of Rs. 84.14 crores as
 against Rs.85.82 crores in the previous year. The net loss for the year
 was Rs.  5.78 crores as against net profit of Rs. 0.67 crores in the
 previous year. Earnings Before Interest and Depreciation was lower at
 Rs. 7.33 crores as against Rs. 12.17 crores in the previous year. The
 Companys performance during the year was affected because of steep
 drop in the average selling price of free sale sugar to Rs.
 1219/quintal from Rs.1553/quintal in the previous year. The Company was
 able to mitigate the loss of revenue on account of drop in price to a
 significant extent by reducing the cane price. However, towards the end
 of the financial year under review the prices have started improving
 and are stable at present. The company has modernized one of the two
 boilers during the year under review and plans to invest Rs. 5.80
 crores during the current year to modernize the second boiler and to
 add some balancing equipments to stabilize crushing at 3500 tod level.
 With better price realization for sugar and molasses; Capacity
 expansion to 3500 tod, higher volume of cane, it is expected that the
 company would achieve better results during the current financial year.
 
 INDIA CEMENTS CAPITAL LIMITED (ICCL)
 
 The main focus of the Company continues to be on various fee-based
 activities such as, Full Fledged Money Changing [FFMC], Travel & Tours,
 Forex Advisory Services. The wholly owned subsidiary India Cements
 Investment Services Limited (ICISL) is rendering the service of Stock
 Broking. The FFMC division is operating out of 28 branches and Travels
 division has 7 IATA accredited branches including branches in all
 metros. The subsidiary ICISL is operating out of 23 branches. The Gross
 income from operations of ICCL is Rs.534.89 lakhs (unaudited) and that
 of ICISL is Rs.426.51 lakhs (unaudited) for the year ended 31st March,
 2008.
 
 TRISHUL CONCRETE PRODUCTS PRIVATE LIMITED
 
 Consequent to purchase of 7,58,000 equity shares of the Company on 9th
 June, 2008 by ICL Financial Services Limited (ICLFS) (India Cemerts
 Subsidiary), the Company has become a subsidiary of ICLFS and as such a
 subsidiary of India Cements also. During the year the company achieved
 a turnover of Rs.105.23 Crores (Rs.93.93 Crores) by selling a quantity
 of 3.87 Lakh Cu.M (3.75 Lakh Cu.M). The unit achieved a profit before
 tax of Rs.347 lakhs (unaudited) as compared to Rs.224.83 lakhs in
 2006-07.
 
 COROMANDEL ELECTRIC COMPANY LIMITED (CECL)
 
 Due to reduced availability of gas during the year the unit could
 generate only 17.37 Crore Units of power during the year as compared to
 20.75 Crore Units in the previous year, which was wheeled and used at
 the cement plants of your company in Tamil Nadu. The total revenue
 earned by the company was Rs.39.66 Crores (Rs.44.37 Crores) and the
 profit after tax was at Rs.7.57 Crores (Rs.8.99 Crores). The company
 maintained its dividend pattern of 9% on equity shares besides
 declaring dividend at the respective coupon rates for the participating
 / non-participating preference share capital. During the year, your
 company has bought out all the redeemable participating preference
 shares of CECL.
 
 CURRENT PERFORMANCE
 
 The country witnessed a slightly lower growth of 5.2% in the cement
 production during the first two months of this financial year. With
 planned stoppages during April-May in some of your units, the clinker
 production was marginally lower at 11.93 Lakh Ts (12.06 Lakh Ts). The
 cement production was maintained at 15.51 Lakh Ts (15.48 Lakh Ts) while
 the cement sales was at 15.36 Lakh Ts as compared to 15.58 Lakh Ts in
 the corresponding two months of the previous year.
 
 EXPANSION / MODERNISATION
 
 The conversion of the Sankari plant from wet process to dry process was
 completed and commissioned during the second quarter of this financial
 year and the plant has stabilized quickly. The new MMD Crusher and
 additional cement grinding mill at Dalavoi was also commissioned during
 the fourth quarter of this year. Work is in advanced stage of
 completion at the Chennai Grinding Unit which is also likely to be
 commissioned during the second quarter of 2008-09. Work is apace on the
 expansion of capacity at Vishnupuram through upgradation of Kiln-1,
 Second Line at Malkapur Plant and Grinding Unit at Parli, Maharashtra,
 which are expected to be commissioned during the third quarter of FY
 09. All these capital expenditure proposals will be funded out of the
 proceeds of the FCCB issue made in 2006 and through internal
 generation. The capacity of your cement plants presently at 9 million
 tonnes would go up to 14 million tonnes with the completion of these
 projects. Your company has also announced proposals for setting up
 plants in Rajasthan which are also being actively pursued and with the
 completion of these projects the capacity is expected to go up to 18
 million tonnes by the year 2010.
 
 CORPORATE DEBT RESTRUCTURING
 
 During the year, the Company has settled some of the restructured loans
 and is presently left with only few CDR lenders, with whom the Company
 is in negotiation for settlement.
 
 PUBLIC DEPOSITS
 
 The total amount of fixed deposits including cumulative deposits, which
 had not become due but outstanding as at 31st March, 2008 stood at Rs.
 1879.22 Lakhs. Deposits totalling Rs.61.49 Lakhs that matured for
 repayment were neither claimed by the Depositors nor instructions for
 renewal were received by the Company. Reminders were issued to the
 deposit holders and since the close of the financial year ended 31st
 March,- 2008, deposits aggregating to Rs.30.72 Lakhs out of the above
 have either been claimed and paid or have been renewed or transferred
 to Investor Education and Protection Fund.
 
 CONSERVATION OF ENERGY ETC.
 
 The prescribed details as required under Section 217(1)(e) of the
 Companies Act, 1956 are set out in the Annexure A.  RESEARCH &
 DEVELOPMENT
 
 During the year, your Company spent Rs. 38.18 Lakhs towards revenue
 expenditure of the R&D department besides contributing a sum of Rs.71
 lakhs to National Council for Cement and Building Materials (NCCBM)
 which carries out research on behalf of the industry.
 
 PERSONNEL
 
 Industrial relations continued to remain cordial during the year.
 
 In terms of 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 the employees are to be
 annexed to the Directors Report. However, as per the provisions of
 Section 219 (1)(b)(iv). of the said Act, the Annual Report excluding
 the aforesaid information is being sent to all members of the Company
 and others entitled thereto. A member interested in obtaining such
 particulars may write to the Company Secretary.
 
 DIRECTORS
 
 Mr.N.Sankar, Chairman and Mr.N.Kumar resigned as directors with effect
 from 15 September, 2007 and the Board expresses its appreciation of the
 valuable contribution made by Mr.N.Sankar and Mr.N.Kumar during their
 tenure of office.
 
 Mr.N.R.Krishnan, Mr.A.Sankarakrishnan and Ms.Rupa Gurunath were
 appointed by the Board as additional Directors of the Company with
 effect from 24.09.2007.
 
 Under Article 109 of the Articles of Association of the Company, Mr.
 R.K.Das retires by rotation at the ensuing Annual General Meeting of
 the Company and is eligible for reappointment.
 
 Information on Directors eligible for appointment/ reappointment in
 terms of Clause 49 of Listing Agreement is annexed to the Notice
 convening the 62nd Annual General Meeting.
 
 AUDITORS
 
 Messrs. Brahmayya & Co., and P.S.Subramania Iyer & Co., Chennai, the
 Auditors of the Company, retire at the ensuing Annual General Meeting
 and are eligible for reappointment.
 
 Mr.S.A.Muraliprasad of Sam Services, Cost Accountant, Chennai has been
 appointed as Cost Auditor for the year 2008-09 subject to approval by
 the Government of India.
 
 ACKNOWLEDGEMENT
 
 The Directors are thankful to the Financial Institutions and the
 Bankers for their continued support. The Directors also thank the
 Central Government and the various State Governments for their support.
 The stockists continued their excellent performance during the year and
 the Directors are appreciative of this. The continued dedication and
 sense of commitment shown by the employees at all levels during the
 year deserve special mention.
 
                                                 On behalf of the Board
                                                      N. Srinivasan  
                                                       B.S. Adityan
                                  Vice Chairman & Managing Director
                                                      N. Srinivasan
                                                           R.K. Das   
                                                         Arun Datta
                                                     N. R. Krishnan 
                                                      V. Nachiappan
                                                 A. Sankarakrishnan 
                                                     K. Subramanian
 Place : Chennai 600 002                              Rupa Gurunath
 Date : 30th June, 2008                                   Directors