REPORT AND MANAGEMENT DISCUSSION & ANALYSIS Dear Members, Your Directors have pleasure in presenting the 19th Annual Report along with the Audited financial statement of the Company for the financial year ended 31st March 2015. SCHEME OF REHABILITATION As you are aware, the Company has been moving progressively towards implementation of its Scheme of Rehabilitation sanctioned by the Hon'ble Board for Industrial and Financial Reconstruction (BIFR) vide its Order dated 13th January 2012. After commissioning the Cement Mill in July 2013, the Company has been progressing in full swing for installation of its Pyroprocessing Plant with Waste Heat Recovery System, Overland Cross Country Belt Conveyor from captive mines to plant, Limestone Crusher at Mines etc. in the second phase of its modernization and upgradation. All major orders have been placed and many of the equipment have already been received at plant. Our Civil work is progressing as per schedule OPERATIONS During the year under review, the Company's cement production stood at 2.80 Lac tonnes & the sales at 2.84 Lac tonnes. The Company posted a net profit of Rs. 995.16 Lacs. CAPEX The Company has so far spent a sum of Rs. 162.70 Crores towards Capex (including Capital Advances) on its ongoing modernization and upgradation of Cement Plant. ECONOMY AND BUSINESS ENVIRONMENT The Indian economy has emerged as one of the largest economies with promising economic outlook on the back of controlled inflation, rise in domestic demand, increase in investments, decline in oil prices and reforms among others. With the easing of inflationary conditions, the RBI signaled softening of monetary policy stance by cutting repo rates by 25 basis points (bps) to 7.5% in March 2015 which led to reduction of interest rates by Banks. Reduction in interest rates by RBI intervention would stimulate demand in the housing sector. These factors contributed to the increase in Country's GDP growth which stood at 7.4% in 201415, compared to 6.9% growth in 2013-14. In spite of overall growth in the Indian Industry during the current year, construction and mining activities continued to show slowdown. As a result of slowdown in construction and mining activities, low government spending on infrastructure projects, land acquisition and clearance issues, Indian Cement industry grew at a lower rate of around 5% in the Financial Year 2014-15. However, the long term prospects for the economy are optimistic. OUTLOOK FOR CEMENT INDUSTRY & STRATEGIC IMPERATIVES The macroeconomic situation in India has improved significantly during the current year. Also acceleration in services and manufacturing growth in the face of subdued global demand conditions point to the strengthening of domestic demand. However, concerns surrounding the construction and mining activities in the country still continues due to Land acquisition and clearance issues. In the light of the government's commitment to reforms, the outlook for domestic macroeconomic parameters is generally optimistic with a growth of around 8.5% is in realm of possibility in 2015-16. The Central Government is now committed to implement the declared schemes which are major demand drivers for cement industry like Dedicated Freight Corridor (DFC), building of Smart Cities, bigger expansion of National Highway Projects, Rural Housing Schemes, construction of toilets under Swachh Bharat Abhiyan and a lot more foreign investments under Make in India concept. This shall result in increased spending on the infrastructure sector which is expected to a higher growth in the total Cement demand in near future. It is hoped that the Company shall achieve higher volumes with increased sales realization during the year because of bouncing back of cement demand. INDIAN CEMENT INDUSTRY Cement Industry which had shown growth at merely 3% in F.Y. 2013-14 had recorded a growth of about 5% in the financial year 2014-15. However, notwithstanding these intermittent years of lower growth, long term portends of the Indian cement industry are good and is expected to grow at 8 to 9% for the next one to two decades to meet the construction requirement of the growing Indian economy, both in the housing as well as infrastructure sectors. SHARE CAPITAL The Authorised share capital of the Company was increased from Rs.125 Crores to Rs. 200 Crores as approved by the Members at the Annual General Meeting of the Company held on 18th August 2014.The Company had allotted 6,000 5% Cumulative Redeemable Preference Shares of Rs.1 lac each aggregating to Rs. 60 Crores, at par to JK Lakshmi Cement Limited (JKLC), Holding Company against the amount invested by JKLC in the Company towards Rehabilitation Programme pursuant to the Scheme of Rehabilitation sanctioned by the Hon'ble Board for Industrial and Financial Reconstruction (BIFR). Accordingly total paid up capital of the Company has been increased from Rs.123 Crores to Rs.183 Crores. INTERNAL FINANCIAL CONTROLS The Company has in place adequate internal financial controls with reference to financial statements and no material reportable weakness was observed in the system. Further, the Company has in place adequate internal financial controls commensurate with the size and nature of its operations. The Company also has robust Budgetary Control System and Management Information System (MIS) which are backbone of the Company for ensuring that your Company's assets and interests are safeguarded. HUMAN RESOURCES Your Company is known for its people centric approach. Ever since its inception and particularly after becoming a subsidiary of JK Lakshmi Cement Limited, we have been practising on various HR initiatives being adopted by our Holding Company which has earned name for HR culture in the cement industry. With the introduction of various HR interventions we had been able to gradually establish new HR culture in the organisation and start our operations effectively. To name a few, we have been able to initiate HR initiatives afresh for developing learning culture and starting programmes on Emerging Leadership, Strengthening PMS system through SMART based KRAs, 360° Assessment, Launching of Quality Circles, 5S Activities and introducing Cross Functional and Self Directed teams. Besides suggestion scheme and structured communication process, various training programmes for employee development, both on functional and behavioural aspects are being organised in a structured way befitting benchmark practices. With a view to develop belongingness amongst the employees and considering need of social, cultural and spiritual developments, planned welfare activities are being conducted in the plant. Other social activities include blood donation camps, medical check-up and examination of employees, extending support to nearby villages for enhancing their employability. The new paradigm shift in our industrial relations had been a major dimension of our new approach in IR arena. With our constant interactions with workers and their union representatives, the leadership at the unit level has been in a position to effectively demonstrate discipline and matured approach for cordial industrial relations and committed workforce. BUSINESS RISK MANAGEMENT The Company has a Business Risk Management team to identify, evaluate business risks and opportunities. This team ensures transparency across the organisation to minimize adverse impact on the business objectives and enhance the Company's competitive advantage. Project Risks: The Cement Industry is capital intensive in nature. In the execution of modernisation and upgradation project there could be exposure to time and cost overruns. To mitigate these risks, the project management team and the project accounting and governance team has been further strengthened. Whilst the Company continues to draw on JK Lakshmi Cement's expertise, a separate Organization structure at Project site with defined roles and accountability is put in place. Competition Risks: The Cement Industry is becoming intensely competitive with the entry of new players and some of the existing players adopting inorganic growth strategies. To mitigate this risk, the Company is leveraging on its expertise and experience to increase market share, enhance brand equity and service offerings. It would also leverage on its Infrastructure, Commercial and Institutional Sales team to offer value to large customers. Occupational Health & Safety Risks: Safety of employees and workers is of utmost importance to the Company. To reinforce the safety culture among the employees of the Company, it has identified Occupational Health & Safety as one of its focus areas. Various training programmes and competitions are conducted at the plant to spread the message on health & safety. EXTRACT OF ANNUAL RETURN An extract of the Annual Return as on 31st March 2015 in the prescribed form MGT-9 is attached as Annexure 'A' to this Report and forms part of it. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS During the year under review, the Company did not give any loan or guarantee or provided any security or made any investments covered under Section 186 of the Companies Act, 2013. RELATED PARTY TRANSACTIONS As you are aware, the Company sources clinker from JK Lakshmi Cement Ltd. (JKLC), Holding Company and also sells cement to JKLC, besides directly selling cement in the market under the brand name "JK Lakshmi Cement", in the ordinary course of business and on arms' length basis and in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Agreement. Particulars of contracts or arrangements with JKLC pursuant to Section 134 (3) (h) of the Act in the prescribed Form AOC-2 is attached as Annexure 'B'. The Board has recommended a resolution for approval of the Shareholders by means of Special Resolution in respect of material Related Party transactions entered into / to be entered into with JKLC in the ordinary course of business and on arm's length basis from the Financial Year 2014-15 and onwards, upto the limits specified in the said resolution. The Related Party Transaction Policy approved by the Board is available on the website of the Company. DIRECTORS AND KEY MANAGERIAL PERSONNEL Pursuant to Section 149 of the Companies Act, 2013 (Act), the Shareholders at the Annual General Meeting (AGM) of the Company held on 18th August 2014, had appointed Shri O.N. Rai as Independent Director of the Company for a term of five consecutive years commencing from the date of the AGM. Shri Rai has given requisite declaration that he meets the criteria of independence as provided in Section 149 (6) of the Act and also Clause 49 of the Listing Agreement with the Stock Exchange. Shri Ganpat Singh, retires by rotation and being eligible offers himself for re-appointment at the ensuing AGM. The Board of Directors appointed Ms.Kumud Pahuja as an Additional Director of the Company pursuant to Section 161 of the Companies Act, 2013 effective from 21st March 2015. She shall hold office upto the date of the ensuing AGM. Further, in terms of Section 203 of the Act, Shri Rohni Kumar Gupta, Whole-time Director, Chief Financial Officer & Company Secretary was appointed as "Key Managerial Personnel" (KMP) of the Company on the terms and conditions approved by the Shareholders in the aforesaid AGM. CONSERVATION OF ENERGY ETC. The details as required under Section 134 (3) (m) read with the Companies (Accounts) Rules, 2014 is annexed to this Report as Annexure 'C' and forms part of it. DEPOSITS In terms of the provision of Section 73 and 74 of the Companies Act, 2013 (earlier Section 58A of the Companies Act, 1956) read with the relevant Rules, the Company does not accept any deposits. AUDITORS (a) Statutory Auditors and their Report M/s. Om Prakash S. Chaplot & Co., Chartered Accountants, have been appointed as Auditors of the Company to hold the office from the conclusion of the 18th Annual General Meeting held on 18th August 2014 until the conclusion of the 21st Annual General Meeting to be held in the year 2017, subject to ratification of the appointment by the members at the respective AGMs to be held in the years 2015 and 2016. Accordingly, being eligible, matter relating to the appointment of the Auditors will be placed for ratification by members at the forthcoming Annual General Meeting. The observations in their Report on Accounts and the financial statements, read with the relevant notes are self-explanatory. (b) Secretarial Auditor and Secretarial Audit Report Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Board of Directors appointed Shri Namo Narain Agarwal, Company Secretary in Practice as Secretarial Audit or to carry out the Secretarial Audit of the Company for the financial year 2014-15. The Report given by him for the said financial year in the prescribed format is annexed to this Report as Annexure 'D'. The Secretarial Audit Report does not contain any qualification reservation or adverse remark. (c) Cost Auditor and Cost Audit Report The Cost Audit for the financial year 2012-14 ended 31st March 2014 (18 months) was conducted by M/s. HMVN & Associates, Cost Accountants, Delhi and as required Cost Audit Report was duly filed with Ministry of Corporate Affairs, Government of India.The Audit of the cost accounts of the Company for the financial year ended 31st March 2015, is being conducted by the said firm and their Report will also be filed. PARTICULARS OF REMUNERATION Information in accordance with the provisions of Section 197 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 regarding remuneration and other is annexed to this Report. However, as per the provisions of Section 136 of the said Act, the Report and Accounts are being sent to all the members of the Company and others entitled thereto, excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company. The said information is available for inspection at the Registered Office of the Company during working hours. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS During the financial year under review, there were no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations. CORPORATE GOVERNANCE - including details pertaining to Board Meetings, Nomination and Remuneration Policy, Performance Evaluation, Audit committee and Vigil Mechanism Your Company reaffirms its commitment to the highest standards of corporate governance practices. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made a part of this Report. The Corporate Governance Report which forms part of this Report, also covers the following: a) Particulars of the four Board Meetings held during the financial year under review. b) Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and Senior Management including, inter alia, the criteria for performance evaluation of Directors. c) The manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual Directors. d) The details with respect to composition of Audit Committee and establishment of Vigil Mechanism. e) Details regarding Risk Management. DIRECTORS' RESPONSIBILITY STATEMENT As required under Section 134 (3) (c) of the Companies Act, 2013, your Directors state that:- a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) the accounting policies have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the said Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the annual accounts have been prepared on a going concern basis; e) the internal financial controls to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and f) the proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems were adequate and operating effectively. ACKNOWLEDGEMENTS The Directors wish to thank the Bankers, Financial Institutions, Government Authorities, Shareholders, Debentureholders and the Employees of the Company for their continued support. On behalf of the Board of Directors O.N. Rai Chairman New Delhi Date: 22ndJuly 2015 |