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UltraTech Cement Directors Report, UltraTechCement Reports by Directors
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UltraTech Cement
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Download Annual Report PDF Format 2014 | 2013 | 2012 | 2011
Directors Report Year End : Mar '14    « Mar 13
Dear Shareholders,
 
 The Directors present the Fourteenth Annual Report together with the
 Audited Accounts of your Company for the year ended 31st March, 2014.
 
 FINANCIAL RESULTS
 
                                                      (Rs.in crores)
 
                                              2013-14       2012-13
 
 Net Turnover                                  20,078        20,023
 
 Profit before Depreciation, 
 Interest and Tax (PBDIT)                       4,147         4,980
 
 Depreciation                                   1,052           945
 
 Profit before Interest and Tax (PBIT)          3,095         4,035
 
 Interest                                         319           210
 
 Profit before Tax (PBT)                        2,776         3,825
 
 Tax Expenses                                     631         1,170
 
 Profit after Tax                               2,144         2,655
 
 OVERVIEW AND REVIEW OF OPERATIONS
 
 The Indian cement industry was impacted by the developments in the
 global and domestic economy. Although the year began with expectations
 of the rise in demand for cement in the hope of government spending in
 the run up to the general elections, demand remained sluggish.  The
 prolonged monsoon and low offtake from the infrastructure and housing
 sectors, subdued the demand. This resulted in prices remaining under
 pressure. On the supply side, overcapacity continued to hurt the
 industry. The demand-supply mis-match is expected to stay on. Further,
 logistics and raw material costs continued to rise, driven by the
 increase in railway freight and high diesel prices.
 
 Although the outlook in the short term continues to remain challenging,
 demand growth in the long term is likely to be around 8%. Housing and
 infrastructure spends as outlined in the 12th five year plan offer much
 encouragement.
 
 The performance of your Company during the year under review must
 therefore be viewed against this backdrop.
 
 Your Company produced 40.79 MMT of cement as against 40.13 MMT in the
 previous year. The effective capacity utilisation was 79% as against
 82%. The aggregate sales volume increased by 2% from 40.65 MMT to 41.47
 MMT.
 
 Your Company''s net turnover stood at Rs. 20,078 crores vis-a-vis Rs. 20,023
 crores achieved in the previous year. Profit before interest and tax
 was at Rs. 3,095 crores as against Rs. 4,035 crores.
 
 DIVIDEND
 
 Your Directors recommend that dividend be maintained at Rs. 9/- per
 equity share of Rs. 10/- each for the year ended 31st March, 2014. The
 dividend distribution would result in a cash outgo of Rs. 289 crores
 (including tax on dividend of Rs. 42 crores) which is identical to the
 amount in the year 2012-13.
 
 CAPITAL EXPENDITURE
 
 Your Company has commissioned –
 
 - Clinkerisation plant of 3.30 MMTPA, 25 MMTPA and 1.45 MMTPA cement
 plant at Rajashree Cement Works in Karnataka;
 
 - 1.6 MMTPA cement mill at Jharsuguda Cement Works in Odisha;
 
 - 25 MW TPP in Andhra Pradesh Cement Works;
 
 - 30 MW TPP at Rawan Cement Works in Chhattisgarh; and
 
 - 6.5 MW Waste Heat Recovery System at Awarpur Cement Works in
 Maharashtra.
 
 With these projects the cement capacity of your Company stands at 53.95
 MMTPA.
 
 Your Company has earmarked around Rs. 10,000 crores to be incurred in
 setting up the remaining
 
 grinding units, clinkerisation plants, cement terminals and other capex
 in the current round of expansions. These are likely to be commissioned
 in a phased manner by 2015. A judicious mix of internal accruals and
 borrowings has been used for funding the projects.
 
 CORPORATE DEVELOPMENTS
 
 – Jaypee Cement Corporation Limited
 
 During the year, the Board of Directors of your Company approved the
 acquisition of the Gujarat Cement Unit of Jaypee Cement Corporation
 Limited (“JCCL”), comprising of an integrated cement unit at Sewagram
 and Grinding Unit at Wanakbori at an enterprise value of Rs. 3,800 crores
 besides the actual net working capital at Closing (“the Unit”). JCCL is
 a wholly-owned subsidiary of Jaiprakash Associates Limited (“JAL”).
 
 The transaction is being carried out by way of a Scheme of Arrangement
 in terms of the provisions of the Companies Act, 1956 (“the Act”)
 between your Company, JCCL and their respective shareholders and
 creditors (“the Scheme”). The Scheme has been approved by the
 shareholders and creditors of both JCCL and your Company, the Hon''ble
 Bombay High Court and the Hon''ble Allahabad High Court. The Competition
 Commission of India has also approved the proposed combination. The
 Scheme is now subject to the approval of the Securities and Exchange
 Board of India (SEBI).
 
 Upon its effectiveness, your Company will take over all the assets and
 the liabilities of the Unit and the net amount of enterprise value less
 liabilities taken over will be the consideration for the Scheme. Such
 consideration will be discharged by allotment of equity shares of your
 Company to the shareholders of JCCL, subject to a maximum value of such
 equity shares being Rs. 150 crores.
 
 – Madanpur (North) Coal Block
 
 Your Company alongwith seven other allottees was allotted a coal block
 in Madanpura North, Chhattisgarh. In terms of the allocation letter, a
 joint venture company viz. Madanpur (North) Coal Company Private
 Limited was incorporated with your Company holding around 11% of the
 equity.  The joint venture Company was in the process of achieving the
 milestones in terms of the letter of allocation. However, during the
 year, the Ministry of Coal, Government of India based on the
 recommendation of the Inter-Ministerial Group issued an order for
 de-allocation of the coal block.  The joint venture company
 incorporated by the allottees for mining coal has filed a petition
 against the de-allocation order in the Delhi High court. The Court has
 ordered maintaining status-quo after the de-allocation and has also
 directed the government not to re-allocate the same coal block nor
 create any third party interest therein till further orders.
 
 - Competition Commission of India
 
 The Competition Commission of India (CCI) upheld the complaint of
 alleged cartelisation against certain cement manufacturing companies
 including your Company. The CCI has imposed a penalty of Rs. 1,175.49
 crores on your Company.  Your Company has filed an appeal against the
 Order before the Competition Appellate Tribunal (COMPAT).
 
 COMPAT has granted stay on the CCI order on condition that your Company
 deposit 10% of the penalty, amounting to Rs. 117.55 crores, which has
 been deposited.
 
 Your Company, backed by a legal opinion, continues to believe that it
 has a good case and accordingly no provision has been made in the
 accounts.
 
 CORPORATE GOVERNANCE
 
 Your Directors reaffirm their continued commitment to good corporate
 governance practices. During the year under review, your Company was in
 compliance with the provisions of Clause 49 of the Listing Agreement
 with the stock exchanges relating to corporate governance.
 
 The compliance report is provided in the Corporate Governance section
 of the Annual Report. The auditor''s certificate on compliance with the
 provisions of Clause 49 of the Listing Agreement is given in Annexure I
 to this Report.
 
 EMPLOYEE STOCK OPTION SCHEME ESOS - 2006
 
 During the year 15,440 Stock Options were vested in eligible employees.
 The ESOS Compensation Committee allotted 61,470 equity shares of Rs. 10/-
 each of your Company upon exercise of Stock Options by the employees.
 
 ESOS - 2013
 
 The Board of Directors of your Company had approved the formulation of
 a new Stock Option
 
 Scheme viz. ESOS - 2013 in terms of the Securities and Exchange Board
 of India (Employee Stock Option Scheme and Employee Stock Purchase
 Scheme) Guidelines, 1999(“SEBI Guidelines”) and had mandated the
 existing ESOS Compensation Committee to implement and administer ESOS -
 2013. At the Annual General Meeting held on 29th July, 2013, the
 shareholders of your Company approved the formulation of ESOS - 2013.
 
 In terms of ESOS - 2013, the ESOS Compensation Committee has approved a
 grant of 237,953 Stock Options at an exercise price of Rs. 1,965/- per
 Stock Option exercisable into the same number of equity shares of Rs.
 10/- each and 84,056 Restricted Stock Units at an exercise price of Rs.
 10/- each to the eligible employees of your Company.  The Disclosures,
 under Clause 12 of the SEBI Guidelines is set out in Annexure II to
 this Report.  A certificate from the Statutory Auditor on the
 implementation of your Company''s Employees Stock Option Schemes will be
 placed at the ensuing Annual General Meeting for inspection by the
 Members.
 
 AWARDS
 
 Your Company was the recipient of the following
 
 Awards:
 
 Safety Award 2013 (2013-14) UNNATHA SURAKSHA PURASKARA AWARD from
 National Safety Council, Karnataka Chapter for Rajashree Cement Works
 (RC); 3 Star Rating in appreciation towards Safety Practice for the
 year 2013 (2013-14) from Confederation of Indian Industry (CII) for RC;
 National Award for Excellence in Energy Management - 2013 Cement
 Plant from CII for Kotputli Cement Works; Golden Peacock Innovation
 Management Award (2013) for Birla White; Energy Conservation and
 Efficiency Award (2012-13) from the New And Renewable Energy
 Development Corporation of Andhra Pradesh Ltd. for Andhra Pradesh
 Cement Works; National Energy Award 2013 (for Power Plant) from CII
 for Hirmi Cement Works.  IMC Ramakrishna Bajaj National Quality
 Performance Excellence Trophy 2013 in Manufacturing Category for
 Vikram Cement Works;
 
 Top Exporter Award from CAPEXIL for the 17th consecutive year.
 
 RESEARCH AND DEVELOPMENT
 
 Your Company''s Research & Development (R&D) activities have been
 progressively increasing as an intellectual resource centre to support
 sustained growth of business. Continuous product customisation and
 process upgradation is its main forte, aimed at creating greater
 customer value.
 
 The R&D activities of your Company are engaged in basic and applied
 research, material characterisation and mutual compatibility, mineral
 securitisation and process debottlenecking. Your Company is focused on
 sustainable development and strives to unearth new techniques for
 conservation of non-renewable resources, upkeep of environment and
 waste utilisation, use of alternative fuel and optimal consumption of
 captive limestone reserves. These have resulted in preservation of
 natural and non-renewable resources, conservation of energy and
 improved durability features of the product.
 
 Your Company is engaged with Aditya Birla Science and Technology
 Company Limited (ABSTCL), which is the corporate research and
 development centre for the Aditya Birla Group.
 
 ABSTCL supports the broad diversity of the Group''s businesses through
 multi-disciplinary teams of experts, scientists and engineers who lead
 fundamental and applied research projects.
 
 HUMAN RESOURCES
 
 Your Company strives to foster a culture of high performance. Ongoing
 learning, aligning HR systems in line with global benchmarks, aligning
 rewards and recognitions with performance have enabled your Company
 sustain its reputation of being a meritocratic organisation.
 
 The Group''s Corporate Human Resources function continues to play an
 integral role in your Company''s talent management programme.
 
 SAFETY
 
 Your Company is committed to safety of its employees, contractors,
 vendors, customers and the people residing in proximity of its
 operations.  The continuous focus on safety has not only positively
 impacted people''s behaviour but is also building confidence about your
 Company being a safety oriented organisation. Your Company continues
 its engagement with DuPont Sustainable Solution team on its Safety
 Excellence Journey.
 
 The year witnessed high level of people involvement across the
 hierarchy in safety improvement processes and has resulted in
 significant upgradation of safety practices and performance.
 
 The Apex Safety Committee, headed by the Whole-time Director and the
 six strategic subcommittees and Site level Safety Apex Committees, have
 taken several measures to strengthen the safety management system.
 These include, among others, development and implementation of safety
 standards in its mines and marine operations, finalising policy and
 facilitating implementation to improve people''s behaviour outside
 workplace including family involvement.
 
 A new program to engage front level employees in safety improvement
 process through self and peers correction under the “Employee Action in
 Improving Safety (EAIS)” program has also been started. To obtain high
 level of safety commitment from contractors, your Company has
 strengthened contracting process by integrating pre, periodic and post
 job contractor''s performance evaluation.  Corporate Safety Audits are
 conducted at regular intervals to validate enforcement of safety
 standard in the manufacturing Units.
 
 These actions have resulted in your Company improving on the Lost Time
 Injury Frequency Rate (LTIFR) which at 0.67 is 32% lower as compared to
 the previous year''s performance of 0.99.
 
 SUBSIDIARY COMPANIES
 
 The annual accounts of your Company''s subsidiaries viz. Dakshin Cements
 Limited, Harish Cement Limited, Gotan Lime Stone Khanij Udyog Private
 Limited, Bhagwati Lime Stone Company Private Limited, UltraTech Cement
 Middle East Investments Limited, UltraTech Cement Lanka (Pvt) Limited,
 PT UltraTech Mining Indonesia and PT UltraTech Investments Indonesia
 and the related detailed information shall be made available to
 shareholders of your Company and its subsidiaries, upon receipt of a
 request from them. They will also be kept open for inspection at the
 Registered Office of your Company and its subsidiaries during business
 hours.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 The Consolidated Financial Statements have been prepared in accordance
 with the applicable Accounting Standards and the provisions of the
 Listing Agreement with the stock exchanges and forms part of the Annual
 Report.
 
 FINANCE
 
 Your Company has adequate liquidity and a strong balance sheet. CRISIL
 has re-affirmed the “CRISIL AAA/Stable and CRISIL A1 ” rating for your
 Company''s long term borrowings and bank loan facilities respectively.
 Your Company has a debt outstanding of Rs. 5,199 crores, treasury
 investments of Rs. 4,841 crores and net debt of Rs. 358 crores.
 
 Your Company has raised long term borrowings of Rs. 571 crores by way of
 External Commercial Borrowings (ECBs). These are being utilised for
 financing the various projects of your Company.  All Foreign Currency
 borrowings outstanding are hedged.
 
 Your Company has repaid Long Term borrowings (Non-Convertible
 Debentures and External Commercial Borrowings) amounting to Rs. 510
 crores during the year.
 
 Your Company has not accepted any fixed deposits and, as such, no
 amount of principal or interest on fixed deposit was outstanding as of
 the balance sheet date.
 
 ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
 
 Information on conservation of energy, technology absorption and
 foreign exchange earnings and outgo, required to be disclosed pursuant
 to Section 217(1)(e) of the Act read with the Companies (Disclosure of
 Particulars in the Report of the Board of Directors) Rules, 1988 is
 given in Annexure III to this Report
 
 PARTICULARS OF EMPLOYEES
 
 In accordance with the provisions of Section 217(2A) of the Act 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, in line with the provisions of
 
 Section 219(1)(b)(iv) of the Act, the Report and Accounts as set out
 therein, are being sent to all Members of your Company excluding the
 aforesaid information about the employees. Any Member, who is
 interested in obtaining these particulars about employees, may write to
 the Company Secretary at the Registered Office of your Company.
 
 BUSINESS RESPONSIBILITY REPORT
 
 In terms of Clause 55 of the Listing Agreement executed with stock
 exchanges, a Business Responsibility Report forms part of the Annual
 Report.
 
 DIRECTOR''S RESPONSIBILITY STATEMENT
 
 The Audited Accounts for the year under review are in conformity with
 the requirements of the Act and the Accounting Standards. The financial
 statements reflect fairly the form and substance of transactions
 carried out during the year under review and reasonably present your
 Company''s financial condition and results of operations.
 
 Your Directors confirm that:
 
 i. in the preparation of the Annual Accounts, applicable accounting
 standards have been followed along with proper explanations relating to
 material departures, if any;
 
 ii. the accounting policies selected have been applied consistently and
 judgments 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 31st March, 2014 and of the profit of your Company for the year
 ended on that date;
 
 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 your Company and for preventing and
 detecting frauds and other irregularities;
 
 iv. the Annual Accounts of your Company have been prepared on a going
 concern basis.
 
 DIRECTORS
 
 Mr. Arun Adhikari was appointed Additional Director on the Board of
 your Company with effect
 
 from 3rd December, 2013. Mr. Adhikari holds office upto the date of the
 ensuing Annual General Meeting (AGM). Notice pursuant to Section 160 of
 the Companies Act, 2013 has been received from a Member proposing Mr.
 Adhikari for appointment as Director of your Company.
 
 Mr. D. D. Rathi retires from office by rotation and being eligible,
 offers himself for re-appointment.
 
 The Board recommends these appointment / re-appointment.
 
 Items seeking your approval on the above are included in the Notice
 convening the AGM together with a brief resume of the Directors being
 appointed / re-appointed.
 
 AUDITORS
 
 Deloitte Haskins & Sells LLP, Chartered Accountants, Mumbai and M/s.
 G.P. Kapadia & Co., Chartered Accountants, Mumbai were appointed Joint
 Statutory Auditors of your Company from the conclusion of the previous
 AGM until the conclusion of the ensuing AGM. Being eligible, they offer
 themselves for re-appointment as auditors of your Company.
 
 The Board proposes the re-appointment of Deloitte Haskins & Sells LLP,
 Chartered Accountants, Mumbai and M/s. G.P. Kapadia & Co., Chartered
 Accountants, Mumbai, as Joint Statutory Auditors of your Company based
 on the recommendation of the Audit Committee, to hold office from the
 conclusion of the ensuing AGM until the conclusion of the next AGM.
 
 The Board also proposes the re-appointment of M/s. Haribhakti & Co.,
 Chartered Accountants, Mumbai as the Branch Auditor of your Company''s
 Units at Jafrabad and Magdalla in Gujarat and Ratnagiri in Maharashtra,
 based on the recommendation of the Audit Committee, to hold office from
 the conclusion of the ensuing AGM until the conclusion of the next AGM.
 
 Resolutions seeking your approval on these items are included in the
 Notice convening the AGM.
 
 The observation made in the Auditor''s Report are self-explanatory and
 therefore, do not call for any further comments under Section 217(3) of
 the Act.
 
 COST AUDITORS
 
 The Board of Directors of your Company have on the recommendation of
 the Audit Committee, appointed M/s. N.I. Mehta & Co., Cost Accountants,
 Mumbai and M/s. N. D. Birla & Co., Cost Accountants, Ahmedabad, as Cost
 Auditors, 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 ratification of the remuneration
 by the Members of your Company.
 
 The Audit Committee has received a Certificate from the 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 filing the Cost Audit Report in XBRL for the
 financial year ended 31st March, 2013 was 30th September, 2013 and the
 same was filed on 23rd August, 2013 vide SRN No.  S21929849 with the
 Ministry of Corporate Affairs, New Delhi.
 
 ACKNOWLEDGEMENT
 
 Your Directors place on record their appreciation of the contribution
 made by employees at all levels. We applaud them for their superior
 levels of competence, dedication and commitment to your Company.
 
 Your Directors also express their deep sense of gratitude to the
 Central and State Governments, banks, financial institutions,
 stakeholders and business associates for their co-operation and support
 and look forward to their continued support in future.
 
                                         For and on behalf of the Board
 
                                                Kumar Mangalam Birla 
  
                                                      Chairman
 
 Mumbai, 23rd April, 2014
Source : Dion Global Solutions Limited
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