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Star Cement Ltd.

BSE: 540575 | NSE: STARCEMENT |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE460H01021 | SECTOR: Cement - Major

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Jul 10, 16:00
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30-Day
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18,937
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91.85 2.25 (2.51%)
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10-Day
229,550
30-Day
232,960
312,063
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  • Open Price

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  • Bid Price (Qty.)

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  • Offer Price (Qty.)

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Annual Report

For Year :
2018 2017

Director’s Report

Dear Member’s

The Directors have pleasure in presenting Seventeenth Annual Report of the Company together with the Audited Balance Sheet as at March 31, 2018 and the Statement of Profit & Loss for the year ended on that date.

FINANCIAL PERFORMANCE

The highlights of the financial performance of the Company for the financial year ended March 31, 2018 as compared to the previous financial year are as under:

(Rs. in Lacs)

Particulars

Consolidated

Standalone

2017-18

2016-17

2017-18

2016-17

Net Sales / Income

1,63,349.21

1,55,427.61

1,48,759.25

1,34,558.25

Profit before Interest, Depreciation and Tax

52,573.74

41,076.99

32,872.77

18,259.92

Interest & Finance Charges

5,245.74

7,806.14

4,343.37

5,615.49

Depreciation

12,068.65

11,791.15

5,745.45

4,035.36

Profit/(Loss) before Tax

35,259.36

21,479.70

22,783.95

8,609.07

Provision for taxation:

- Current Tax

7,326.93

4,177.11

4,877.74

1,706.63

- Deferred Tax

(5,685.62)

(2,787.28)

(3,171.44)

(1,100.00)

Net Profit after Tax

33,618.05

20,089.87

21,077.65

8,002.44

Other comprehensive income for the year, net of tax

(28.29)

5.16

(13.18)

9.10

Total comprehensive income for the year

33,589.76

20,095.03

21,064.47

8,011.54

Net profit attributable to:

Owners of the company

33,065.62

19,472.35

-

-

Non-controlling interest

552.43

617.52

-

-

Total

33,618.05

20,089.87

-

-

Other Comprehensive Income attributable to:

Owners of the company

(27.43)

5.93

-

-

Non-controlling interest

(0.86)

(0.77)

-

-

Total

(28.29)

5.16

-

-

Total Comprehensive Income attributable to:

Owners of the company

33,038.19

19,478.28

-

-

Non-controlling interest

551.56

616.76

-

-

Total

33,589.76

20,095.03

-

-

Proposed Dividend:

Proposed Dividend @ Rs.1/- per share

4,192.29

-

4,192.29

-

INDIAN ACCOUNTING STANDARDS

As per notification dated 16th February, 2015 issued by the Ministry of Corporate Affairs, the Company has adopted the Indian Accounting Standards (“Ind AS”) notified under the Companies (Indian Accounting Standards) Rules, 2015 with effect from 1st April, 2017. Accordingly, Financial statements for the year ended 31st March, 2017 have been restated to conform to Ind AS. The reconciliations and descriptions of the effect of the transition from IGAAP to Ind AS have been provided in the notes to accounts in both the Standalone and Consolidated Financial Statements.

OPERATIONAL REVIEW

Despite challenges faced by the economy on account of introduction of Goods & Service Tax (GST) during first two quarters of the financial year, your company has been able to maintain the operational performance. During the year under review, your Company has manufactured 5,15,350

MT of Cement Clinker as against 5,67,241 MT recorded during the FY 2016-17. Company’s subsidiary M/s. Star Cement Meghalaya Limited produced 15,41,945 MT of Clinker as against 15,79,345 MT during the FY 2016-17. On consolidated basis total clinker production during the year was at 20,57,295 MT as against 21,46,586 MT during FY 2016-17.

There has been recorded decrease in volume of sales but sharp improvement in profit. During the year under review the Company has received subsidies from the Central Government under Capital Subsidy Scheme and the said amount has been utilized towards prepayment of loan. It is expected that your Company will be a debt free Company in next year.

In terms of capacity utilization, clinkerization unit of your Company was able to utilize 65.07% of its installed capacity as against 71.60% during the FY 2016-17. Similarly, the capacity utilization of clinkerization unit of its subsidiary M/s. Star Cement Meghalaya Limited was at 88.16% during FY 2017-18 as against 90.30% during the FY 2016-17. On consolidated basis, the capacity utilization of clinkerization units was at 80.96% during the FY 2017-18 as against 84.48% during FY 2016-17.

Your Company has been able to maintain the performance on grinding front too. During the year under review, total cement production on consolidated basis was at 24,07,955 MT (including volume from hired grinding units) as against 27,08,430 MT during the FY 2016-17.

Similarly, your Company has been able to achieve sales volume of 24,04,423 MT of Cement as against 27,37,437 MT during the previous financial year.

Due to sluggish market demand, devastating flood in Bihar, Assam, North Bengal and reverse sand availability in Bihar there was fall in volume of sales and under utilisation of capacity. However, your Company expects to improve its operational performance during the ensuing financial year.

DIVIDEND

Your Directors are pleased to recommend a Final dividend @ 100% i.e., RS.1/- each per Equity Share of Face Value of RS.1/-each (exclusive of applicable Dividend Distribution Tax) for the Financial Year ended 31st March, 2018.The Final dividend, subject to approval of members at the ensuing Annual General Meeting, will be paid within the statutory period.

AMALGAMATION

Your Company has taken a proposal for merger of Megha Technical & Engineers Private Limited, a wholly owned subsidiary Company with the Company with effect from 1st April, 2018, i.e., the Appointed Date. The Scheme is subject to necessary statutory and regulatory approvals including approval of the Hon’ble National Company Law Tribunal. Since both the Companies are engaged in the business of cement manufacturing, upon the scheme becoming effective the business of both the Company can be carried more efficiently and economically as one entity.

INDIAN ECONOMY AND OUTLOOK - AT A GLANCE

Indian economy has been appeared as the fastest growing economy in the world as per report of Central Statistics Office and International Monetary Fund. Over the next 10-15 years, Indian economy is expected to be one of the top 3 economic powers of the world. With the Government’s thrust to reform, GDP have increased to 6.6% and it is expected to grow around 7.3% in 2018-19. There has been significant growth in tax collection figures. Foreign Direct Investment reached to USD 208.99 billion during April 2014-December 2017 and foreign exchange reserve was USD 422.53 billion till week ended March 23, 2018.

The Union Budget for the financial year 2018-19 mainly focused on strengthening agricultural sector, health care for under privileged sector, infrastructure development and education of the Country. There has been all time high budget allocations for rail and road sectors and budgetary allocation for infrastructure sector has been set to RS.5.97 lakh crore. Government allocation of RS.4,200 crore towards Green Energy Corridor Project alongwith other wind and solar power projects.

Government initiatives for ‘Make in India’ and ‘Digital India’ attracts foreign companies for setting up their business in India. ‘Make in India’ initiative boost the manufacturing sector as a result helping development of the country. Contributions from the manufacturing sector expected to rise to 25% of GDP from present level of 17%.

With the initiatives of the Government by way of globaisation, digitization and reforms, country’s Gross Domestic Product is expected to reach USD 6 trillion by the Financial Year 2027. For the reasons India is expected to be third largest consumer economy in the world.

CEMENT INDUSTRY OVERVIEW

India is occupying second position amongst the cement producer countries in the world and the industry plays a vital role in the development of the country’s economy. Post deregulation, sector attracted huge investment from the country and abroad and thereby created a large number of direct and indirect employment.

The country has a huge scope for development in cement sector as there are lot of potential for development in housing and construction sector. Government’s initiatives for development of ‘Smart cities’ and ‘Housing for all’ will boost the development of the cement sector. Government’s focus for development of infrastructure sector is expected to grow cement industry in 6-7%. However, country’s per capital consumption of cements still at around 225 kg. The Government has launched missions like the Pradhan Mantri Awas Yojana, Atal Mission for Rejuvination and Urban Transformation and Swachh Bharat Mission in order to ensure living habitation for poor. In view of increasing domestic demand in certain specified sector like industrial construction, commercial construction and housing sector, the capacity of the cement industry of the country is expected to reacRs.500-600 MTPA by 2025.

NORTHEAST SCENARIO - GATEWAY OF OPPORTUNITIES

The North Eastern Region of the Country comprising of eight states are very rich in natural resources. Post-independence era and after partition the region became land locked and lost its easy access to ports and rest parts of the country. As a result, it witnessed lack of development in comparison with other states of the country. The Government of India has taken several measures to accelerate growth of the North East Region (NER).

On the infrastructure fonts, long awaited attention has been given for the development. The total budgetary allocation for the NER for the financial year 2018-19 has been set RS.47,994.88 crores which is significantly higher of RS.7,023.19 crores for the financial year 2017-18. The budget of Development of North Eastern Region (DoNER) Ministry has also been hiked from RS.2,737 crores for the financial year 201718 to RS.3,060 crores. As a result, certain mega infrastructure projects, roads, bridges, expansion of existing power projects have been undertaken in the region. A total of 20 major railway projects for laying of 13 new rail lines, gauge conversions, laying of double tracks, construction of new stations have been initiated. The budget also provided RS.1,014.09 crores under UDAN scheme for construction of new and expansion of present and revival of defunct airports, heliports and advanced landing grounds. Under the Bharatmala Pariyojana, construction of 5301 km of roads have been approved and out of whicRs.3,246 km road for development of Economic Corridor in NER. Works for India-Myanmar-Thailand Trilateral Highway has been awarded in December, 2017. New 92 routes will be opened under the UDAN Scheme. Educational and medical facilities have improved a lot in the region during last few years. Connectivity within NER States and with rest of India has also improved with initiatives taken towards infrastructure development. This has resulted into improved purchasing power with people at large in the Region.

The aforesaid developments and initiatives present a promising future for cement industry in the North East Region.

Market Development

North East Market as a strategy continued as focus market for your company. Cement demand was good in 1st quarter but was impacted during the 2nd quarter after implementation of GST. Your company organized seminars for dealers and sub dealers giving training on GST and enabled them to understand the benefits of GST. The Second half of FY 201718 was very positive and the Company recorded growth of approximately 7% YOY Your company was able to maintain volume in NER, and closed a little higher compared to the previous year. During the year under review your company was able to sell 17,51,508 MT of cement in NER market as against 17,39,263 MT during the FY 2016-17. During the year under review around 14 % of the total cement demand in NER was catered to by the industry through imports from other regions including Bangladesh and Bhutan.

Clinker demand was good in Eastern Nepal and Bhutan. Your company grabbed this opportunity and has achieved export of 1,38,508 MT Cement Clinker during the entire year under review as against 51,406 MT recorded in previous year.

As a market leader in NER your company has further consolidated dealers and sub dealer’s network. Sub dealers were given status as ‘Rising Star’ with a nominal security deposit. All such sub dealers are linked with a particular dealer. This exercise is yielding good results and further strengthening our reach throughout our areas of operation.

During the year under review your Company has undertaken various marketing initiatives in order to make the brand “Star Cement” more visible and attain top of mind recall. A unique Brand Campaign named “Bhaag North East Bhaag” was launched in North East. This was North East’s first International Half Marathon and people in thousands participated in the event with the Honourable Chief Minister of Assam Mr. Sarbananda Sonowal and Bollywood Star Bipasha Basu flagging off the event. The uniqueness was that all participants were offered 50% discounts on groceries to encourage people to participate. The Half Marathon also has a social cause of “Clean India” associated with it. Other initiatives included retail and mass branding initiatives in the form of retail boards, cuboids, hoarding at shop, TV, Radio, Print and OOH ads. To make the brand more visible in remote areas, a block level branding campaign was undertaken through wall wraps, rural vans and rural theatres.

PRODUCTION AND COST DEVELOPMENTS Fly Ash

Your Company continued to promote environment friendly blended cement using fly ash and produced 17,01,504 MT of Portland Pozzolana Cement (PPC) (including from hired grinding units) on consolidated basis out of total production of 24,07,955 MT of cement during FY 2017-18. Usage of fly ash in cement is not friendly to environment only but also provides cost optimization. Your Company has been able to utilize the fly ash generated by power plant of its subsidiary M/s. Meghalaya Power Limited and such close access to fly ash provides competitive edge to your Company in term of cost. In addition, your Company has also made arrangements with major power plants like NTPC, Tata Power and few others to ensure its long term requirement of fly ash.

Power cost

During the year under review too, your Company continued to source its power requirement for its Lumshnong unit from its subsidiary M/s. Meghalaya Power Limited under long term arrangement for supply of quality power at competitive rates and thus, has been able to reduce dependency on grid power. To optimize the power cost and to reduce dependency on State supplied grid power, your Company has been able to source its power requirement of its Grinding Unit at Guwahati from Indian Energy Exchange (IEX), in addition to sourcing of power from State Grid. The blend of sourcing has not only reduced power cost for your Company but also its quality and dependability.

Logistics and Freight

Logistics function faced serious cost pressures during the year under review. Diesel price increased by 17% during the year. Such cost pressures were braved out by re-aligning distribution network resulting in 14% reduction in Wtd. Avg. Lead to 283 KM as against 329 KM during previous year. Wtd. Avg. Freight marginally increase by 1.8% to RS.1,133/- as against RS.1,113/- during previous year.

As a new initiative, cost effective “Inland Water Transport” was used as a pilot project in collaboration with IWAI for transportation of cement from Guwahati plant to various destination. Inauguration of such maverick effort of IWAI and your company was done by The Union Transport Minister Sri Nitin Gadkari and The Chief Minister of Assam Sri Sarbananda Sonowal. Such efforts are being taken forward and more movement by Waterways are undertaken.

Construction of Railway Siding at Guwahati Grinding Unit is at very advance stage and expected to commission by July’18. Once the private siding gets operational, it would have a distinct cost advantage in logistic operations of the company.

KEY PERFORMANCE HIGHLIGHTS

- Consolidated cement production (including purchase from hired grinding units) was at 24.07 Lac MT during the year as against 27.08 Lac MT during the previous financial year.

- Consolidated net sales at RS.1,633.49 Crores during the year under review as compared to RS.1,554.27 Crores during the financial year 2016-17.

- Consolidated EBIDTA was at RS.525.73 Crores during the year under review as compared to RS.410.76 Crores during the immediate previous financial year.

- Consolidated profit before tax during the year 2017-18 was at RS.352.59 Crores as against a profit of RS.214.79 Crores in the year 2016-17, registering a growth of 64%.

OPPORTUNITIES AND THREATS, RISKS AND CONCERNS

India stood second position in cement producing countries in the world. Country’s cement industry is expected to grow at CAGR of 9-10% during the financial year 2014-15 to 2018-19. Per capita cement consumption is much lower than the world per capita consumption. Government several initiatives in the areas of development of Ports, Roads and Highways, dedicated Freight Corridors, Gauge conversion Projects undertaken by Railways, development in the area of alternative source of energy viz. Hydro and Solar Power and other infrastructure projects is expected to boost Cement and Power Demand of the country. Make in India initiatives, positive moves on the policy front, in areas related to ease of doing business, promoting start-ups, rationalising the tax structure and administration, and opening up more areas for foreign investment through the automatic route will also increase the demand of cement and power.

Cement demand is very much linked to the economic growth and development of infrastructure and housing sector. In case growth rates affected by any unforeseen reasons, cement demand may also be affected. Cement and power industry being majorly dependent upon availability of raw materials at affordable cost. Policies of the Government as well as Central and State Laws may adversely affect the availability of lime stone, coal etc. Any major changes in Government’s Environmental and Forest regulations may affect limestone availability to cement plants. Competition from the foreign players may lead to tougher competition to the domestic players. The Company enjoys various subsidies from the Government, roll back of any subsidies may have a negative impact on the profitability.

Your Company has evolved a risk management framework to identify, assess and mitigate the key risk factors of the business .The Board of Directors of the Company is kept informed about the risk management of the Company.

LISTING OF SHARES AND SHARE CAPITAL

Your Company got listed with National Stock Exchange of India Limited and BSE Limited with effect from 16th June, 2017.

Pursuant to merger of erstwhile Star Ferro and Cement Limited into the Company, the Authorized Share Capital of the Company has increased to RS.83,00,00,000 divided into 83,00,00,000 Equity Shares of RS.1/- each. In line with terms of Scheme of Amalgamation, 29,54,90,077 (Twenty Nine Crore Fifty Four Lakh Ninety Thousand Seventy Seven) equity shares of the Company were allotted on 8th April, 2017 to the shareholders of erstwhile Star Ferro and Cement Limited in the ratio of 1.33 equity shares of RS.1 each of the Company for every 1 (one) equity share of RS.1 each of erstwhile Star Ferro and Cement Limited held by them as on the record date i.e. 3rd April, 2017. After the said allotment the total number of equity shares of the Company has aggregated to 41,92,28,997 of RS.1 each.

The paid up Equity Share Capital of the Company as on March 31, 2018 was RS.41,92,28,997/- divided into 41,92,28,997 equity shares of RS.1/- each.. During the year under review, the Company has neither issued any shares with differential voting rights nor granted stock options or sweat equity shares.

EXTRACT OF ANNUAL RETURN

In terms of requirement of section 134 (3) (a) of the Companies Act, 2013, the extract of the Annual return in form MGT-9 is annexed herewith and marked Annexure-1.

MEETINGS OF THE BOARD

During the year six (6) Board Meetings and four (4) Audit Committee Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. The details of the Board meeting and the Committee meeting are provided in the Corporate Governance Report.

MEETINGS OF INDEPENDENT DIRECTORS

During the year under review, a meeting of Independent Directors was held on 06th March, 2018 wherein the performance of the Non-Independent Directors and the Board as a whole was reviewed. The Independent Directors at their meeting also inter alia assessed the quality, quantity and timeliness of flow of information between the Company management and the Board of Directors of the Company.

COMMITTEES OF THE BOARD

The composition and terms of reference of the Audit Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee have been furnished in the Corporate Governance Report forming part of this Annual Report. There has been no instance where the Board has not accepted the recommendations of the Audit Committee and Nomination and Remuneration Committee.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Company has a Whistle Blower Policy/ Vigil Mechanism as required under Section 177 of the Companies Act, 2013 and as per Listing Obligations and Disclosures Requirements Regulations, 2015 formulated by Securities and Exchange Board of India (SEBI). The Vigil (Whistle Blower) mechanism provides a channel to the employees and Directors to report to the management, concerns about unethical behavior, actual or suspected fraud or violation of the Code of Conduct or policy. The mechanism provides for adequate safeguards against victimization of employees and Directors to avail the mechanism and also provide for direct access to the Chairman of the Audit Committee in exceptional cases. The said policy may be referred to at the Company’s website at the web link: http://starcement.co.in/wp-content/uploads/Whistle-Blower-Policy.pdf

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND SENIOR MANAGEMENT EMPLOYEES

The Board has framed a Remuneration Policy for selection, appointment and remuneration of Directors, Key Managerial Personnel and Senior Management Employees. The remuneration policy aims to enable the Company to attract, retain and motivate highly qualified members for the Board and at other executive levels. The remuneration policy seeks to enable the Company to provide a well-balanced and performance-related compensation package, taking into account shareholder interests, industry standards and relevant Indian corporate regulations. The details on the same are given in the Corporate Governance Report. The said policy may be referred to at the Company’s website at the web link: http://starcement.co.in/wp-content/uploads/ Remuneration-policy.pdf

DIVIDEND DISTRIBUTION POLICY

In terms of Regulation 43A of the Listing Regulations, your Board has framed and adopted a Dividend Distribution Policy. The object of the policy is to share profit of the Company with the shareholders appropriately and also to ensure funds are available for the growth of the Company. The policy inter alia describes the circumstances under which the shareholders may or may not expect dividend, the financial parameters that shall be considered while declaring dividend, internal and external factors that shall be considered for declaration of dividend, policy for utilization of retained earnings and the parameters with respect to different classes of shares for the purpose of declaration of dividend. The said policy may be referred to at the Company’s website at the web link: http:// starcement.co.in/wp-content/uploads/Dividend-policy.pdf

COMPLIANCE WITH THE SECRETARIAL STANDARDS

The Company has complied with the applicable Secretarial Standards as recommended by the Institute of Company Secretaries of India.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to requirement of Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, the Directors hereby confirm and state that:

- In the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with the proper explanation relating to material departures, if any;

- The Directors have selected such accounting policies and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2018 and of the profit of the Company for the year under review;

- The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

- The Directors have prepared the annual accounts on going concern basis;

- The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

- The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

AUDITORS AND AUDITORS’ REPORT

M/s. D. K. Chhajer & Co., Chartered Accountants (Firm Registration no. 304138E) Statutory Auditors of the Company, have been appointed by the members at the Sixteenth Annual General Meeting and shall hold office for a period of 5 years from the date of such meeting held on 11th September, 2017.

The notes to the accounts referred to in the Auditors’ Report are self-explanatory and, therefore, do not call for any further comments.

COST AUDITORS

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its manufacturing activity is required to be audited. Your Directors have, on the recommendation of the Audit Committee, re-appointed M/s. B. G. Chowdhury & Co., Cost Accountants, (Firm Registration number 000064) as Cost Auditors of the Company for the financial year ended 31st March, 2018 in the Board Meeting held on 30th May, 2017. The remuneration proposed to be paid to them for the financial year 2017-18, as recommended by audit committee, was ratified in the meeting of shareholders held on 11th September, 2017.

M/s. B. G. Chowdhury & Co., Cost Accountants, (Firm Registration number 000064) have expressed their willingness and confirmed their eligibility to be appointed as Cost Auditors of the Company for ensuing financial year. The Board, on recommendation of the Audit Committee, has appointed M/s. B. G. Chowdhury & Co., Cost Accountants, (Firm Registration number 000064) as Cost Auditors of the Company for the financial year 2018-19 subject to ratification of their remuneration by shareholders in the General Meeting of the Company.

The cost audit report for the Financial Year 2016-17 was filed with the Ministry of Corporate Affairs on 23.09.2017.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. MKB & Associates, a firm of Company Secretaries in Practice, to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith and marked Annexure-2. The report is self-explanatory and do not call for any further comments.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

During the year under review, your Company has not given any loan to any person falling under ambit of Section 186 of the Companies Act, 2013.

Details of Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 and the loans received from the Directors of the Company are given in the notes to the Financial Statements.

RELATED PARTY TRANSACTIONS

All related party transactions are entered on arm’s length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Companies Act, 2013. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial

Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. Accordingly, no transactions are being reported in Form AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014. However, the details of the transactions with the Related Party are provided in the Company’s financial statements in accordance with the Accounting Standards.

All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions.

A policy on ‘Related Party Transactions’ has been devised by the Company which may be referred to at the Company’s website at the web link http://starcement.co.in/wp-content/ uploads/Related-Party-policy.pdf

RESERVES

During the year under review no amount was transferred to reserves.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated in section 134 (3) (m) of the Act and rules framed there under is mentioned below:

(A) Steps taken toward Conservation of energy:

- Expansion joints of Pre-heater outlet, raw mill inlet duct, coal mill hot air and Coal Mill booster fan inlet replaced resulting in a saving of 1 Kwh /MT of Clinker.

- Replacement of HPSV Light fitting with LED light fittings resultant saving of 1.85 lacs Kwh Per year

- Modification of EBC -05 Belt (Clinker feeding belt) leading to direct saving of drive Power of Clinker Bucket Elevator.

- Modified the shale hopper for easy flow of material to minimize the quality variation.

- Reduce Air requirement in raw mill discharge Bucket Elevator air slide by optimizing air material ratio, resulting one air blower stopped in the circuit.

- Installation of capacitor 50 KVAR in all 3 compressors

- Installation of 100 nos. LED for street lighting reducing wattage from 15 KW to 5 KW

(B) Steps taken toward Technical Absorption:

- National Counsel for cement and building material conducted diagnostic study for minimizing kiln builds ups Cement rotary kiln.

- Online monitoring of all 3 Compressors parameter through Modbus on plant SCADA

- The Company has developed a Research & Development cell for carrying out R&D Projects in the plant with specific objective of development of advanced systems for quality improvement. During the year under review, your Company incurred Capital expenditure of RS.6.38 Lacs and Revenue Expenditure of RS.34.43 Lacs in Research & Development.

(C) Foreign Exchange Earnings And Outgo

During the period under review, Foreign Exchange Earning was NIL (Previous Year - NIL) and the Foreign Exchange Outgo was RS.914.60 Lacs (Previous Year RS.1203.01 Lacs).

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES (CSR)

As a responsible corporate citizen, Company’s CSR initiatives have been playing a significant role in bringing steady transformation of the society with special focus on marginalized and underprivileged section. Business decisions of the company have always linked to the ethical values of “do good for the community” and respect for people, communities and environment around the operational area and in nearby localities. Under the CSR purview, your Company along with its subsidiaries had prioritized need of the community under the following verticals:

SUSTAINABLE LIVELIHOOD

Your company has taken up sustainable livelihood programs in village areas where employment opportunities barely exist. These programmes were initiated to enhance the source of secondary income of individual households in Meghalaya and Assam. The component broadly includes the following interventions for ensuring sustainable livelihood for farm families

- Bee keeping project has been taken up in Sonapur and Lumshnong area as skill oriented initiative with low investment and high employment potential.

- Pig rearing project was initiated in Lumshnong and Sonapur area. Beneficiary households were supported with low cost pigsty in a shared value mode with distribution of high breed piglets (at free of cost) including training and veterinary support to enable the farmers for earning substantial income.

- Support to Eri Silk farmers in Assam with scientific trainings, linkages with provision of seed, seedling and eggs for silk worm production

- Training in Tailoring and Embroidery were offered to unemployed needy women of Sonapur and Lumshnong area in technical collaboration with M/s Usha International Ltd. for providing professional training.

- Development of backyard ponds to develop as fisheries under Fishery Project of Sonapur area as a source of food security and sustainable livelihood.

HEALTH AND SANITATION

Your Company as a good corporate citizen provided basic health care services in and around plant location.

- Periodic Health camps were organised to diagnose health problems and patients were supported with basic drugs for minor ailments needed for taking care of essential health needs of men, women and children. Company had taken up necessary measures to render eye care services in Assam and Meghalaya where free medicines, spectacles were distributed to the needy patients. Surgeries were carried out free of cost for proper eye care to the neighboring needy people in Assam and Meghalaya.

- Company has made drinking water supply system to the households of Chamata Pathar village

EDUCATION

Your Company had made necessary contribution in the area of education by extending the necessary support to the educational institutes in nearby plant areas of Assam and Meghalaya:

- Supporting one teacher School i.e. Ekal Vidyalaya for augmenting primary education for children of remote areas. The projects aims to reach the education to every doorstep of the country. The Company has contributed to the Gyan Sagar Foundation.

- Company had rendered necessary financial support for hiring teachers.

- Company had taken up students support program targeting to encourage the students to attend their classes on regular basis. Under Students Support Program students were supported with exercise books, dictionaries and pencil boxes etc.

- To promote quality education in and around plant operational area, your company has organised remedial classes for HSLC appearing students

- Company has initiated for developing a computer fitted Bus for ensuring computer literacy among students and youths during journey.

EMERGENCY RELIEF

Your Company has supported the flood affected people by providing foods, drinking water, medicines etc., in Assam, North Bengal as a part of flood relief programme.

Annual Report on CSR as required to be annexed in terms of requirement of Section 135 of Companies Act, 2013 and rules framed thereunder is annexed herewith and marked Annexure- 3.

EVALUATION OF THE BOARD’S PERFORMANCE

In accordance with the requirements of the Companies Act 2013, the performance evaluation of the Board was carried out during the year under review. The Board follows a formal mechanism for the evaluation of the performance of the Board as well as Committee. The evaluation reflected the overall engagement of the Board and the Committee.

A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering various aspects of the Board’s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

The Nomination and Remuneration Committee at its meeting established the criteria based on which the Board evaluate the performance of the Directors.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its minority shareholders, etc. The performance evaluation of the Non-Independent Directors and Board as a whole was also carried out by the Independent Directors.

The Directors expressed their satisfaction over the evaluation process and results thereof.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Manindra Nath Banerjee resigned as Independent Director with effect from 6th September, 2017.

The Board places on record its appreciation for the services rendered by Mr. Banerjee during his tenure with the Company.

On the recommendation of the Nomination and Remuneration Committee, the Board of Directors at its meeting held on 13th November, 2017 appointed Mr. Pramod Kumar Shah (DIN: 00343256) as Additional Director in the Independent category with effect from 13th November, 2017 for a term of 3 years subject to regularization/approval of the shareholders in the ensuing Annual General Meeting.

Mr. Manoj Agarwal resigned as Company Secretary and Key Managerial Personnel with effect from 2nd August, 2017. The Board places on record its appreciation for the services rendered by Mr. Agarwal during his tenure as Company Secretary. On the recommendation of the Nomination and Remuneration Committee, the Board of Directors at its meeting held on 3rd August, 2017 appointed Mr. Debabrata Thakurta as Company Secretary and Key Managerial Personnel of the Company.

Mr. Dilip Kumar Agarwal resigned as Chief Financial Officer and Key Managerial Personnel with effect from 13th November, 2017. The Board places on record its appreciation for the services rendered by Mr. Agarwal during his tenure with the Company. On the recommendation of the Audit Committee and Nomination and Remuneration Committee, the Board of Directors at its meeting held on 13th November, 2017 appointed Mr. Manoj Agarwal as Chief Financial Officer and Key Managerial Personnel of the Company.

The tenure of Mr. Sajjan Bhajanka, Mr. Rajendra Chamaria and Mr. Sanjay Agarwal, Managing Directors of the Company were due to expire on 31st March, 2018. The Board at its meeting held on 6th February, 2018, on the recommendations of Nomination and Remuneration Committee, re-appointed Mr. Sajjan Bhajanka, Mr. Rajendra Chamaria and Mr. Sanjay Agarwal as the Managing Directors of your Company for further period of three years with effect from 1st April, 2018 subject to necessary approvals of the shareholders at the ensuing Annual General Meeting.

In accordance with the provisions of Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company, Mr. Prem Kumar Bhajanka will retire by rotation and being eligible, offer himself for re-appointment. In view of his considerable experience, your Directors recommend his re-appointment as Director of the Company.

DECLARATION BY INDEPENDENT DIRECTORS

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013. Mr. Mangilal Jain, Mr. Pramod Kumar Shah, Mr. Santanu Ray, Mrs. Ibaridor Katherine War and Mrs. Plistina Dkhar are Independent Directors on the Board of your Company. In the opinion of the Board and as confirmed by these Directors, they fulfill the conditions specified in section 149 of the Act and the Rules made thereunder about their status as Independent Director of the Company.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

In order to enable the Independent Directors to perform their duties optimally, the Board has devised a familiarization programme for the Independent Directors to familiarize them with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc. They are periodically updated about the development which takes place in the Company. At the time of appointment of an Independent Director, the Company issues a formal letter of appointment setting out in detail, the terms of appointment, duties, responsibilities and commitments etc. The familiarization program is available on the Company’s website under the web link: http://starcement.co.in/wp-content/uploads/Familiarization-Programme.pdf

SUBSIDIARIES AND ASSOCIATE COMPANY

M/s. Star Cement Meghalaya Limited, M/s. Megha Technical & Engineers Private Limited, M/s. Meghalaya Power Limited, M/s. NE Hills Hydro Limited and Star Century Global Cement Private Limited continue to remain subsidiaries of the Company.

Star Cement Meghalaya Limited is engaged in manufacturing of Cement Clinker and has a Clinkerization plant with an installed capacity of 1.75 MTPA. During the year under review, the Company manufactured 15,41,945 MT of clinker as against 15,79,345 MT in FY 2016-17.

Megha Technical & Engineers Private Limited is engaged in the manufacture of cement. During the year under review, the Company produced 33,004 MT of Cement.

Meghalaya Power Limited is engaged in generation of Power. During the year under review the Company generated 1,901 KWH Lac units of power.

NE Hills Hydro Ltd., wholly owned subsidiary of your Company is currently not operational.

Star Century Global Cement Private Limited a wholly-owned subsidiary in Myanmar is yet to commence its operations.

AUDITED FINANCIAL STATEMENTS OF THE COMPANY’S SUBSIDIARIES

Pursuant to sub-section (3) of section 129 of the Act, the statement containing the salient features of the financial statement for the year ended March 31, 2018 for each of the Company’s subsidiaries viz. Star Cement Meghalaya Limited (SCML), Megha Technical & Engineers Private Limited (MTEPL), Meghalaya Power Limited (MPL), NE Hills Hydro Limited (NHHL) and Star Century Global Cement Private Limited (SCGCPL) are annexed in the Form AOC - 1 and marked as Annexure-4.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company have been prepared in accordance to the requirement of Indian Accounting Standards, as prescribed by the Institute of Chartered Accountants of India and has been included as a part of this Annual Report.

The detailed financial statements and audit reports of each of the subsidiaries of the Company are available for inspection at the Registered Office of the Company during office hours between 11 A.M. and 1 P.M. The Company will arrange to send the financial statements of the subsidiaries upon written request from a shareholder to the registered address of the said shareholder.

DEPOSITS

During the year under report, the Company has not accepted any deposits from public or from any of the Directors of the Company or their relatives falling under ambit of Section 73 of the Companies Act, 2013.

CHANGES IMPACTING GOING CONCERN STATUS AND COMPANY’S OPERATIONS

During the year under review, there have been no material orders passed by the Regulators/Courts impacting materially the going concern status or future operations of the Company.

There were no material changes and commitments affecting the financial position of the Company during the period under review.

CREDIT RATINGS

Your Company enjoys a sound reputation for its prudent financial management and its ability to meet financial obligations. ICRA Limited, has upgraded the Company’s short term rating to [ICRA]A1 (pronounced ICRA A one plus) and reaffirmed the long term rating at [ICRA]A (pronounced ICRA A plus). The outlook on the long-term rating has been revised from ‘Stable’ to ‘Positive’.

ADEQUACY OF INTERNAL FINANCIAL CONTROL

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and recommendations, if any, along with corrective actions thereon are presented to the Audit Committee of the Board.

INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company has in place adequate internal financial controls commensurate with the size, scale and complexity of its operations. During the year, such controls were tested and no reportable material weakness in the design or operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

MANAGERIAL REMUNERATION AND PARTICULARS OF EMPLOYEES

The disclosures with respect to the remuneration of Directors and employees as required under Section 197 of Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 along with a statement containing particulars of employees as required under Section 197 of Companies Act, 2013 read with Rule 5 (2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith and marked Annexure-5 and forms part of this report.

POLICY ON PREVENTION OF SEXUAL HARASSMENT

The Company values the integrity and dignity of its employees. The Company has put in place a ‘Policy on Prevention of Sexual Harassment’ as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Sexual Harassment Act”). We affirm that adequate access has been provided to any complainants who wish to register a complaint under the policy. No complaint was received during the year.

CORPORATE GOVERNANCE

The Company has complied with the corporate governance requirements as stipulated under the Listing Obligations and Disclosures Requirements Regulations, 2015 formulated by Securities and Exchange Board of India (SEBI). A separate section on corporate governance, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report. This certificate will be forwarded to the Stock Exchanges along with the Annual Report of the Company.

CHIEF EXECUTIVE OFFICER (CEO) /CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION

As required under Regulation 17(8) of the Listing Obligations and Disclosures Requirements Regulations, 2015 formulated by Securities and Exchange Board of India (SEBI), the CEO/ CFO certification has been submitted to the Board and a copy thereof is contained in this Annual Report.

RISK MANAGEMENT

Risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce the risk. The Company has evolved a risk management framework to identify, assess and mitigate the key risk factors of the business. The Board of the Company is kept informed about the risk management of the Company.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS

Ever since the inception, Star Cement has been a benchmark of unprecedented success over the past decade and the voyage has been momentous with glorious milestones and incredible feats. The company today is not only the market leader and the most preferred brand in North Eastern India, but is also the fastest growing company in Eastern India. Our dedicated Human Capital, best of its kind Practices and Innovative Processes are the cornerstones which have contributed in paving the path to the zenith of success, thus making Star Cement one of the most sought after places to work in the cement sector in Eastern India.

With an objective to develop a strong employer value proposition and enhance the brand awareness and reputation, hiring at leadership positions is being done from other leading Cement Companies .Campus recruitment from some of the Best B Schools of Eastern India including IIM Shillong, IIM Ranchi and IIM Bodh Gaya also plays an integral role to help in differentiating the employer brand.

It has been a constant endeavor of Human Resource Department of Star Cement to create a high performing organization. A structured and robust Performance Management System has helped in aligning the workforce, building competencies, improving employee performance and development, and driving better business results. It has also created a work environment that empowers employees to work to the best of their abilities. Over the years, people have grown and evolved with the organization and has been bestowed with the best of rewards, accolades, compensation and benefits, both fixed and variable.

Another area is the blue collared workforce management, especially the Local employees in our Plants, has witnessed transformational changes in their existing People Practices and gives a whole new dimension to employee life cycle management. Several interventions in the areas of Performance tracking and enhancement, Training, Performance Coaching for local employees and dedicated Counseling have led to a dynamic change in the culture of the organization and mindset of local employees, resulting in a marked improvement in the productivity and overall engagement levels.

During the year under review, there has not been any material changes in human resources and industrial relations.

GREEN INITIATIVES IN CORPORATE GOVERNANCE

Ministry of Corporate Affairs has permitted Companies to send copies of Annual report, Notices, etc., electronically to the email IDs of shareholders. Your Company has arranged to send the soft copies of these documents to the registered email IDs of the shareholders, wherever applicable. In case, any shareholder would like to receive physical copies of these documents, the same shall be forwarded upon receipt of written request in this respect.

CAUTIONARY STATEMENT

Statements in this report describing the Company’s objectives, expectations or predictions, may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company’s operations include: global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in Government policies and tax laws, economic development of the country and other factors which are material to the business operations of the Company.

ACKNOWLEDGEMENT

Your Directors take this opportunity to express their deep sense of gratitude to Banks, Central and State Governments and their departments and the local authorities, customers, vendors, business partners/associates for their continued guidance and support.

Your Directors would also like to place on record their sincere appreciation for the commitment, dedication and hard work put in by every member of the Company and dedicates the credit for the Company’s achievements to them. Last but not least, your Directors express their gratitude to the shareholders of the Company for reposing their confidence and faith in the Management of the Company.

For and on behalf of the Board of Directors

Sajjan Bhajanka

Place: Kolkata Chairman

Date: 17 May, 2018 (DIN: 00246043)

Director’s Report