TO THE MEMBERS OF ACC LIMITED
The Directors are pleased to present the Eighty First Annual Report of the Companytogether with audited financial statements for the year ended December 31 2016.Management Discussion and Analysis forms part of this report.
1. FINANCIAL RESULTS
| ||Consolidated ||Standalone |
| ||Rs. Crore ||Rs. Crore |
| ||2016 ||2015 ||2016 ||2015 |
|Revenue from Operations (Net) and Other Income ||11274.75 ||11916.94 ||11271.05 ||11916.18 |
|Profit before Tax ||805.32 ||765.53 ||808.87 ||783.97 |
|Provision for Tax ||209.60 ||189.98 ||206.47 ||192.40 |
|Profit After Tax (PAT) ||604.38 ||587.60 ||602.40 ||591.57 |
|Balance brought forward from previous year ||4605.50 ||4433.04 ||4634.07 ||4456.64 |
|Profit available for appropriations ||5210.88 ||5020.64 ||5236.47 ||5048.21 |
|Appropriations: || || || || |
|Interim Dividend ||206.57 ||206.52 ||206.57 ||206.52 |
|Proposed Final Equity Dividend ||112.67 ||112.65 ||112.67 ||112.65 |
|Tax on Equity Dividend ||64.99 ||64.97 ||64.99 ||64.97 |
|Transfer to General Reserve ||30.00 ||30.00 ||30.00 ||30.00 |
|Surplus carried to the next year's account ||4796.65 ||4606.50 ||4822.24 ||4634.07 |
2. OVERVIEW OF COMPANY'S FINANCIAL PERFORMANCE
Consolidated income comprising Revenue from Operations (Net) and other income for theyear was Rs. 11274.75 crore 5.39% lower as compared to Rs. 11916.94 crore in 2015.
Total consolidated Revenue from operations (Net) decreased to Rs. 11167.55 crore fromRs. 11797.16 crore in 2015.
Other operating revenue
Other Operating revenue for the year 2016 on a like-for-like basis remained flat at Rs.221.93 crore.
Consolidated profit before tax
Consolidated profit before tax for the year was Rs. 805.32 crore as compared to Rs.765.53 crore in 2015.
Consolidated Profit after tax
Consolidated Profit after Tax for the year was Rs. 604.38 crore as compared to Rs.587.60 crore in 2015.
No material changes or commitments have occurred between the end of the calendar yearand the date of this Report which affect the financial statements of the Company inrespect of the reporting year.
The Board of Directors of the Company had approved the Dividend Distribution Policy onDecember 17 2016 in line with the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015. The Policy is uploaded on the Company's website athttp://www.acclimited.com/assets/new/new_pdf/Dividend_Distribution_Policy.pdf In line withthe said Policy the Board of Directors has recommended payment of final dividend at Rs.6/- per Equity Share of Rs. 10 face value aggregating to Rs. 112.67 crore. The totaldividend for the year including interim dividend of Rs. 11/- per Equity Share paid inAugust 2016 adds up to Rs. 17/- per Equity Share involving a total outflow of Rs. 384.23crore (including tax on dividend). The dividend payout ratio is 64%. The dividend perEquity Share for the year 2016 is the same as in the previous year.
During the year unclaimed dividend pertaining to the 71st final dividendfor the year 2008 and the 72nd Interim dividend for the year 2009 totaling Rs.2.15 crore was transferred to the Investor Education & Protection Fund.
4. TRANSFER TO RESERVES
The Company proposes to transfer an amount of Rs. 30 crore to the General Reserves. Anamount of Rs. 4796.65 crore is proposed to be retained in the Consolidated Statement ofProfit and Loss.
5. SHARE CAPITAL
The Company's paid-up Equity Share Capital as on December 31 2016 was Rs. 187.79 croreas compared to Rs. 187.75 crore in the previous year. Pursuant to the Orders passed by TheSpecial Court - Trial of Offences Relating to Transactions in Securities (TORTS) duringthe year the Company was required to allot 41907 Equity Shares of Rs. 10 face value intothe "Custodian Account - Jyoti Harshad Mehta" out of the shares which were keptin abeyance of "Right Issue - 1999" as then directed by the Special Court(TORTS).
The Company has neither issued shares with differential rights as to dividend votingor otherwise nor issued shares (including sweat equity shares) to the employees orDirectors of the Company under any Scheme. As on December 31 2016 none of the Directorsof the Company hold shares in the Company except Mr Shailesh Haribhakti who holds 3100Equity Shares of the Company. No disclosure is required under Section 67(3)(c) of the Actin respect of voting rights not exercised directly by the employees of the Company as theprovisions of the said Section are not applicable. The Company has not issued anyconvertible instrument during the year.
6. FINANCIAL LIQUIDITY
Cash and cash equivalent as at December 31 2016 was Rs. 1944 crore (Previous year Rs.1389 crore). The Company's working capital management is based on a well-organizedprocess of continuous monitoring and controls on Receivables inventories and otherparameters.
7. CREDIT RATING
The Company enjoys a good reputation for its sound financial management and the abilityto meet its financial obligations. CRISIL a reputed Rating Agency has reaffirmed thehighest credit rating of CRISIL AAA/ STABLE for the long term and CRISIL A1+ for the shortterm financial instruments of the Company.
The Company's Fixed Deposit Scheme was discontinued in the year 2001-02. The totalamount of fixed deposits matured and remaining unclaimed as on December 31 2016 is Rs.0.02 crore. The Company has not accepted deposits from the public falling within the ambitof Section 73 of the Companies Act 2013 and the Rules framed thereunder.
9. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.
10. ECONOMIC SCENARIO AND OUTLOOK
Indian economy followed a path of recovery registering growth in the first threequarters of the year 2016. The prospect for economic growth became buoyant with theagrarian and rural economy benefiting from a good monsoon after two successiverain-deficient years. The growth was affected in the last two months of the year by theimpact of the demonetization scheme. The calendar year is expected to end with GDP growthestimated at around 7.0%.
2016 closed as a momentous year for the country marked by two landmark economic reformseven as the global economic scenario was indifferent. The first is the Goods and ServicesTax (GST) a single tax intended to replace the existing Central and State indirect taxeswhich is expected to come into force in 2017. The second reform was the rollout of thedemonetization scheme in early November. In the long run this reform aims to usher ingreater transparency in financial transactions and a transition towards a cashlesseconomy; in the short term it has squeezed liquidity and consumption across the economynotably in the construction sector.
The wholesale and consumer price inflation rates rose to ~ 1.8 % and ~5.1% in 2016 fromlast year's (2.8) % and 4.9% following a rise in global fuel and commodity prices nearflat domestic demand conditions and an increase in food inflation. In 2016 manufacturinggrowth was ~8.5% at par with 2015 while growth in agriculture mining and constructionwas lower at 2.4%
2.5% and 3.1% respectively. The Cement sector which grew at over 6% in the first threequarters tapered off in the last quarter due to the effect of demonetization to end theyear with growth of ~5% in 2016. The outlook for 2017 brightens as liquidity in theeconomy moves towards normalization with expectations for early revival and growth inoverall consumption across several sectors including construction and building materials.The Union Budget for 2017-2018 was welcomed for its thrust on the rural sectorinfrastructure development housing and a boost to the overall investment climate. If 2017also experiences a normal monsoon GDP growth is likely to rebound in the second half ofthe year. Better liquidity and improved tax collections will enhance government's abilityto spend on infrastructure and other development projects leading to faster growth.
11. CEMENT INDUSTRY - OUTLOOK AND OPPORTUNITIES
With available capacity of approximately more than 375 million tonnes per annum in theIndian Cement Industry overall domestic consumption during 2016 is estimated at ~283million tonnes. Cement demand is estimated to have grown at the rate of ~5% in 2016 ascompared to ~1.5% in 2015. Effective capacity utilisation in the industry remained low at~75%; while cement plants in the northern central and eastern regions of the country wereable to produce at levels above 85% of capacity excess capacity in the south dragged downthe industry's average capacity utilisation.
In 2017 we foresee that the cement industry will continue to be dogged by the challengeof excess capacity leading to intense competition. Overall demand for cement is likely togrow at ~5% in 2017. If government is successful in increasing its investment expenditureon large infrastructure and other development projects as announced in the Union Budget2017-2018 it will further energize construction activity. Any cut in interest rates onhousing loans is likely to boost investment in the housing sector. Together thesedevelopments can give a much-needed fillip to demand for cement and concrete in the comingyear.
The critical challenges before your Company in 2017 would include the following:
To pursue a judicious value-cum-volume strategy so as to maximise utilization ofexisting capacity including the additional capacity from the newly expanded Jamul plant.
To continue to step up the sale of value creating Premium products
To further streamline channel management and strengthen marketing activities ina manner that leverages the Company's brand equity
To continue promotion and facilitation of cashless transactions in the retailnetwork with a view to ensure uninterrupted retail offtakes.
To develop the means to foresee changes in the value chain and the agilityneeded to keep strict control on the costs of fuel and raw materials amid volatile globalprices
The above initiatives together with your Company's continued focus on cost efficiencyand other customer excellence initiatives should help in presenting an improvedperformance.
12. CEMENT BUSINESS PERFORMANCE
| ||2016 ||2015 ||Change % |
|Production - million tonnes ||23.18 ||23.84 ||(2.8) |
|Sales Volume - million tonnes ||22.99 ||23.62 ||(2.7) |
| ||2016 || |
2015 Change %
|Net Sale Value (Rs. crore) ||10068.26 ||10652.60 ||(5.5) |
|Operating EBITDA (Rs. crore) ||1342.23 ||1482.88 ||(9.5) |
|Operating EBITDA Margin (%) ||13.33 ||13.92 || |
12.1 Sales Volume & Pricing
Domestic sales in 2016 decreased by 2.7% to 22.99 million tonnes from 23.62 milliontonnes achieved in 2015.
Individual House Builders (IHB) remain the largest customer segment in terms of volumeand profitability. In addition the Company gainfully utilizes its core strengths as apioneer in cement and concrete technology to demonstrate its techno-promotion capabilitiesin the nation-building sectors of growing importance in infrastructure commercial andinstitutional projects such as smart cities urban rejuvenation roads highways portsairports power plants dams and irrigation schemes.
The cement market continued to witness vigorous price competition. Average sellingprices of cement reduced by ~3 % in 2016 over 2015.
12.2 Costs Cement Business
During the year 2016 the Company maintained a close focus on effective cost managementthrough various initiatives.
a) Cost of materials consumed
A combination of cost efficiency measures and lower input costs helped bring down thecost of materials consumed by 14.2% in 2016 as compared to 2015. The cost of materialsconsumed as a share of total income from operations came down from 12.3% in 2015 to 11.3%in 2016.
The cost of gypsum reduced by 10.8% as a result of changes made in the mix optimizationas well as due to the lower landed cost of imported gypsum.
Continuous efforts were made to reduce the clinker factor by producing a higher shareof blended cements using flyash and slag. Procurement costs of flyash and slag werere-negotiated and brought down. This coupled with changes in source and mix optimizationenabled a reduction of 5.9% in the cost of flyash. In respect of slag a reduction of14.3% was achieved as compared to the previous year.
b) Power & Fuel
Power & Fuel efficiencies enabled a cost reduction of 10% in 2016 as compared to2015. The Power & Fuel spend in 2016 was Rs. 2142.55 crore as compared to Rs.2377.85 crore spent in 2015.
To take advantage of softening global prices of petcoke vigorous efforts were made toimplement the ongoing plans already in place since the previous year to achieve a highershare of petcoke in the overall fuel mix and thus moderate the Company's dependence ondomestic and imported coal. This enabled the consumption of petcoke to leap from a levelof 18% in 2015 to as much as 62% in 2016.
The cost of generation at our Captive Power Plants (CPP) was brought down by 2.4 % toRs. 4.56 per KWh in 2016 against Rs. 4.67 per KWh in 2015 mainly due to betterefficiencies.
The average cost of purchased power during the year was Rs. 6.3 per KWh as compared toRs. 6.5 per KWh in the preceding year.
c) Freight & Forwarding expenses
Despite an increase in rail tariffs Freight and Forwarding expenses during the yearwere Rs. 2560.02 crore as compared to Rs. 2640.76 crore in 2015 registering a decreaseof 3.1%.
This was partly on a account of lower despatches but also on account of theManagement's proactive intervention such as changes in the rail-road mix increase indirect ex-factory despatches greater penetration and expansion into home markets andmarkets with shorter leads as well as through renegotiation of road transport and C&Frates.
d) Employee costs
Employee costs during the year increased by 3.3% on a like-for-like basis. Overallemployee costs as a share of total income from operations increased from 6.5% in 2015 to7.0% in 2016. Various initiatives taken under India Manufacturing Transformation programmeare expected to continue to reflect improvement in employee costs.
e) Packing materials
Packing material cost reduced by Rs. 51 crore on account of renegotiation of commercialterms with suppliers a fall in the prices of Poly Propylene granules and otherinitiatives like standardization of bags across plants.
13. READY MIXED CONCRETE (RMX)
| ||2016 ||2015 ||Change % |
|RMX Production Lakh Cubic Metres ||24.43 ||22.15 ||10.3 |
|RMX Sales volume Lakh Cubic Metres ||25.90 ||23.44 ||10.5 |
|Net Sale value (Rs. crore) ||1054.62 ||967.50 ||9.0 |
|Operating EBITDA (Rs. crore) ||74.77 ||54.29 ||37.7 |
|Operating EBITDA Margin (%) ||7.09 ||5.61 || |
The Company's Ready Mixed Concrete business performed well during the year maintainingits spotlight on infrastructure commercial and realty segments and a sharp focus onpromoting value-added special products that are more customer service-oriented. Thisenabled it to follow a consistent course of growth with an increase of 10.5 % in sales byvolume and 9.0 % in sales by value. Operating EBITDA of RMX business rose by 37.7% fromRs. 54.29 crore in 2015 to Rs. 74.77 crore during the year.
RMX business expanded its footprint adding plants in the new markets of Lucknow Nagpurand Raipur and a dedicated plant at a power project site in Aligarh. Four plants werephased out. At year-end the nationwide network comprised 50 state-of-the-art concreteplants catering mainly to major metro cities state capitals and Tier II cities.
Your Company has shaped its RMX business to perform as a solution provider with aspecial thrust on serving different customer segments ranging from prestigious metro railprojects roads and highways irrigation schemes power plants high-rise buildings andtownships each with their own varied requirement of concrete applications.
With its experience and expertise the Company expects to be well-positioned to servemajor construction projects materializing out of Government's plans for Infrastructuredevelopment Smart cities urban rejuvenation projects and the growing trends incommercial and realty segments.
14. NEW JAMUL INTEGRATED PROJECT
The integrated Jamul Project was commissioned during the year; It comprises a newclinkering line of capacity 2.79 million tonnes per annum at Jamul and cement grindingunits of capacity 1.10 million tonnes at Jamul and 1.35 million tonnes at Sindri. Withthis the Company's total cement capacity has now risen to 33.41 million tonnes per annum.
The new Jamul Plant has state-of-the-art features to enable high performance levels inenvironment management and pollution control systems safety and quality excellence.
With excellent connectivity by rail and road the new integrated plant will complementthe Company's existing network in Eastern India strengthening its presence in importantmarkets with the supply of environment-friendly blended cements.
15. SUSTAINABLE DEVELOPMENT
During the year your Company was felicitated with the prestigious CII-ITCSustainability Award 2016 for "Outstanding Accomplishment" in recognition of itscontinued effort and commitment to the cause of Sustainable Development. This award amongthe country's most coveted in the field of corporate sustainability development has beenreceived by ACC three times in the last four years which is an external endorsement of thesustainable manner in which your Company conducts its business. Over the years theCompany's business model has incorporated practices and systems geared towards goodgovernance customer excellence environment conservation human resource managementcommunity development and value creation for all stakeholders.
The Sustainable Development Report for 2015 conforming to Global Reporting InitiativeGRI-G4 principles in accordance with "Comprehensive Option" was released duringthe year. The Report is available on the company's website at www.acclimited.com.
During the year the Company participated for the first time in the Dow JonesSustainability Indices (DJSI) under "Emerging markets" category.
Your Company is aligning its Sustainable Development agenda to the GroupsSustainability Strategy which is supportive of the UN "Sustainable DevelopmentGoals". The Plan incorporates measurable targets related to the following significantareas:
Climate Reduction of Net specific CO2 emissions
Circular Economy Enhanced utilization of waste-derived resources
Water & Nature Reduction of specific freshwater withdrawal in cementoperations & enhancing the biodiversity in all operating mines Implementation of WaterAccess Sanitation and Health (WASH) pledge
People & Communities Improving performance gender diversity Lowcost shelter & sanitation solutions
15.1 Climate Emissions CO2
Your Company is a prominent member of the India chapter of the Cement SustainabilityInitiative (CSI) set up under the auspices of the World Business Council for SustainableDevelopment (WBCSD) a global partnership effort. All CSI member companies havevoluntarily charted for themselves the "Low Carbon Technology Roadmap for the IndianCement Industry" with time bound targets leading to the year 2050. This incorporatesa commitment to reduce CO2 emissions.
The Company's carbon footprint continues to be among the industry's best-in-classthough specific emissions during the year 2016 was 545 kg CO2 per tonne ofcement as against 533 kg CO2/tonne of cement in 2015 representing anincrease of ~2%. This was mainly due to prevailing market conditions increased demand forOPC and lower capacity utilization.
Your Company is among the leading Indian business houses that have participated in theCarbon Disclosure Project (CDP) a global not-for-profit organization and continued to beranked high in terms of its disclosure forming part of the Carbon Disclosure Projectindex.
15.2 Clinker Factor
Reducing the clinker factor in cement is an important pillar of the Low CarbonTechnology Roadmap for the Indian Cement Industry. Your Company strives to achieve thisthrough the promotion of blended cements using slag and flyash. Increasing demand forOrdinary Portland Cement (OPC) during the year 2016 has resulted in decrease in share ofBlended Cements in the total product portfolio to 83.5%.
When fully stabilized the newly commissioned Jamul Integrated project with itsgrinding units in Jamul and Sindri geared to offer superior varieties of Portland SlagCement will augment the Company's overall blended cements portfolio which will in turnserve to reduce the overall clinker factor and thus help in cutting Specific CO2 emissionsin the coming years.
15.3 Alternative Fuels and Raw Materials (AFR):
Your Company is leading the initiative to provide waste management solutions to wastegenerating industries and organizations in the country through co-processing of wastes incement kilns.
The co-processing infrastructure was strengthened following the establishment of twopre-processing facilities at Wadi in Karnataka and Kymore in Madhya Pradesh in 2014. Asthese facilities stabilize and pick up momentum they serve to increase the Company'scapacity to handle larger volumes of waste with greater ease and safety while ensuringzero harm to the environment communities and ensuring product quality. A thirdpreprocessing facility at Madukkarai Tamil Nadu is under execution.
Your Company is redoubling its efforts to expand its capacity to manage higher wastevolumes in the near future thereby increasing thermal substitution rates and securingalternative fuels & resources for use in cement manufacturing process to replacenaturally mined materials.
With the conviction that co-processing ensures a safe and environmentally sustainablesolution for the disposal of hazardous and non-hazardous wastes the Company has beenmaking consistent efforts through advocacy and stakeholder awareness programmes to ensurethat this technology gains more legal traction in the country. These efforts have bornefruit; a legislation brought into force in 2016 recognizes co-processing as a preferredtechnology for waste management for all types of waste generated in the country.
15.4 Green Energy
Your Company's renewable energy portfolio consists of 19 MW in the form of wind farmsacross three States viz. Tamil Nadu Rajasthan and Maharashtra. During the year 201636.51 million units of renewable energy came from these captive sources.
Additional green power of 1.67 million units was procured through Power PurchaseAgreement.
In all the total Green Energy used was 38.18 million units representing an increaseof 9% as compared to the previous year.
15.5 Power generation through Waste Heat recovery system
The Waste Heat recovery system at Gagal Cement Works generated 49.45 million kWh ofelectrical energy during the year. This resulted in financial savings of about Rs. 21crores.
15.6 Controlling Emissions
The Indian cement industry is facing increasing stringency from regional state andcentral authorities with regard to regulations and standards formulated by them forpermissible levels of various types of emissions including SOx NOx and particulateairborne emissions.
Your Company endeavours to keep its performance in this respect at levels far betterthan the regulatory requirement so as to maintain good ambient air quality in itsenvirons. Accordingly various measures were implemented across all operations of theCompany to control stack emissions by upgradation/modification/installation of new airpollution control equipments to ensure compliance with new environment regulations andfugitive emissions by installing dust extraction and dust suppression systems.
During the year 2016 your Company had commissioned Hybrid Electrostatic Precipitators(ESP) at Jamul and upgraded Coal Mill Bag House and Cooler ESP at Gagal. Implementation ofprimary measures for NOx reduction is underway at various plants. Orders for Selective NonCatalytic Reduction (SNCR) were placed for NOx emissions reduction at Kymore and Gagal.Online reporting of emissions and effluents are being uploaded on Central PollutionControl Board (CPCB) website and respective State Pollution Control Boards whereveravailable.
15.7 Circular Economy
During the year your Company utilized 3.90 million tonnes of flyash 2.67 milliontonnes of slag 1.10 million tonnes of crushed rock fines 0.32 million tonnes ofalternative materials thus providing sustainable environmental friendly services to thenation.
15.8 Water & Nature:
With an objective to continuously improve water performance and to achieve a waterpositive status efforts were focused on the following:
(i) Reduction of fresh water intake by lowering water demand in process and non-processareas
(ii) Process optimization and upgradation to water efficient technologies whereverfeasible
(iii) Installation of Sewage treatment plants (STP) Effluent Treatment Plants (ETP)Zero Liquid Discharge (ZLD) systems for effective reutilization of waste water. During theyear 2016 the Company ordered ZLDs for Wadi and Chanda Cement Works STPs for Lakheri andDamodhar Cement Works
(iv) Conservation of water by rain water harvesting in plants mines coloniescommunity areas and sustained water harvesting measures
Your Company is committed to the conservation of biodiversity and mine rehabilitation.Efforts on biodiversity conservation are focused on following areas:
(i) To study and assess biodiversity around the limestone mines operated by theCompany. During the year biodiversity assessment studies were conducted by an independentthird party at Jamul and Chanda Cement Works. With this the Company has completed thebiodiversity assessment at all its mining sites
(ii) A biodiversity action plan developed for Gagal Cement Works
(iii) On-ground implementation of activities which conserves biodiversity.
15.9 Green Building Centres
As part of the ongoing programme to promote green cost-effective and affordableconstruction in semi-urban and rural India through Green Building Centres your Companysupports local micro-entrepreneurs and small businesses to make and distribute affordablecement-based home building components and pre-fabricated materials such as concreteblocks sanitation and toilet units tiles pavers roofing walling and frames inpursuit of promoting the cause of sustainable construction.
16. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
ACC was chosen from among several leading companies to receive the first ever"ICSI CSR Excellence Awards 2016" instituted by The Institute of CompanySecretaries of India to recognize the good practices undertaken by Corporates under theCSR umbrella.
Your Company continued the social development schemes initiated in previous years alongwith some new interventions to address the developmental needs of host communities aroundthe Company's operations. These projects covered the broad thematic areas of LivelihoodEducation Health & Sanitation that are compliant with Companies Act 2013.
Total CSR expenditure incurred during the year was Rs. 22.27 crore which is higher thanthe statutory requirement of 2% of the average profit of the last three years.
The Company's community development projects reached out to benefit more than 4.23 lakhpeople residing in 202 villages across the country.
Education initiatives in the vicinity of plants addressed needs of 36709 studentsduring the year. Scholarships were awarded to 465 meritorious students belonging to weakersections of society. Modern methods of learning such as smart classes and interactivekiosks benefited students of 70 rural schools. Efforts were made to provide education to1495 girl children as part of the "ACC ki Laadli" project. Support continued tobe extended to seven government-run Industrial Training Institutes under the PublicPrivate Partnership Scheme with Ministry of Labour and Employment Government of India.
About 4234 unemployed youth received skill development training under the Company'sDISHA programme; as on the date of this report over 60% of them had received jobplacements in various manufacturing and service sector enterprises. Support was providedfor the establishment of 129 new Self Help Groups (SHGs) while existing 1233 SHGs weretrained in institutional strengthening; many of them were assisted in setting up afederation and obtaining registration for it.
Health and nutrition initiatives benefited 28566 people. 9731 children receivedaccess to better health and nutrition through the support provided to 201 anganwadicentres. Valuable assistance was provided to nearly 5400 persons through counselingtesting and treatment for HIV/AIDS.
Four villages were declared Open Defecation Free (ODF) during the year in thecorporate campaign to promote access to water sanitation and improved hygiene practices.The programme which supports Government's Swachh Bharat Abhiyan includes the creationrepair and maintenance of toilet and wash facilities in local communities.
Your Company's CSR Footprint has been audited by a third party Social Audit teamcomprising renowned experts from development sector led by Head of DOC ResearchInstitute an independent international think-tank organization.
The Corporate CSR Policy has been re-stated making it more comprehensive and inaddition to alignment with the requirements of the Companies Act 2013 and Global Goals ithas also been aligned with the LH Group's CSR Policy. The CSR Policy Statement and Reporton the activities undertaken during the year is annexed to the Board's Report in AnnexureA'
17. HEALTH & SAFETY (H&S)
17.1 H&S Improvement Plan
The key focus area during the year was implementation of the Health & SafetyImprovement Plan (HSIP). This was prepared based on the feedback and involvement of theCompany's senior management. The plan contained seven Health & Safety (H&S)objectives clearly indicating the ownership of each objective assigned to a seniorexecutive. Salient aspects of the HSIP comprised H&S Leadership & AccountabilityPeople's H&S Capability H&S management systems Road Safety and ElectricalSafety.
The launch of Visible Personal Commitment (VPC) - a systematic tool for seniorexecutives and management staff to interact with shop floor people on safety matters andtake feedback - has helped demonstrate enhanced safety leadership capabilities andManagement's commitment. This initiative is expected to be critical in the endeavour toreach the goal of Zero Harm.
H&S audits were conducted during the year. Electrical Safety audits were conductedat all cement manufacturing units by external experts with an objective to carry out asystematic critical appraisal of all potential electrical hazards involving personnelpremises services and operation method and to review compliance of electrical(installation & maintenance) with reference to the statutory regulationsinternational standards and Industry best practices.
A drive to use Personal Protective Equipment (PPE) was strengthened with the initiationof a reward and consequence management approach.
A number of specialized training programs were organized targeting different workgroups to enhance their H&S capability. These included topics like NEBOSHInternational General Certificate Risk Assessment H&S auditing IncidentInvestigations and behavior based training on "Developing Safety Commitment".
Employees and workmen of contractors at all locations participated enthusiastically inthe Group's Global H&S days campaign "I care I share I act" which includedcompetitions for poster drawing and slogan writing. During the campaign the Company'sleadership team also connected with all employees over a webcast to re-emphasize theimportance of H&S in the organization.
17.2 Health Initiatives
Your Company pursued its well-structured approach to reduce health risk factors amongemployees and their families. Numerous steps were taken to enhance medical facilities atplants and engage with employees and their families to create awareness and buildcapabilities.
Infrastructure and facilities were upgraded at the hospitals of four plants. EmergencyMedical Response (EMR) capabilities have been optimized at all cement manufacturing unitsthrough steps such as outsourcing ambulance services which ensures round-the-clockavailability of trained EMR technicians. Other arrangements are also being tied up tosecure excellent pre-hospital care in the event of any medical emergency trauma or anyother health care issue concerning employees such as the use of air ambulances.
Significant steps were initiated to induct digitization in the field of employeehealth. An on-line health management system is being developed which will standardizehealth processes across all units. It will facilitate the management and retrieval ofhealth data of all employees during their life cycle; this is scheduled to Go live inMarch 2017.
Other effective measures included the regular use of the Company intranet todisseminate health awareness conducting health sensitization programmes personalizedhealth care identifying health peers from among Shopfloor Associates (SFA) to spreadhealth awareness among employees and their families. Training in office ergonomics wasimparted to 500 line managers. 200 teachers from all township schools were trained as partof the "H&S promoting schools initiative" to proliferate and spreadawareness among more than 10000 students.
17.3 Logistics Safety
Logistics is among the most challenging areas in safety a large part of which relatesto offsite situations and environments that cannot be easily influenced. The Company hasdeveloped a logistics safety roadmap for 2020 which encompasses an analysis of pastincidents current initiatives and wide-ranging activity-based risk assessments spanningvarious stages of the shipping cycle from the point a vehicle approaches a plant to itsend destination.
The plan also prioritizes focus areas based on likelihood consequencecontrollability.
Driver Management Centres were implemented at nine cement plants to educate drivers onvarious H&S matters and inculcate the right behaviours seen in the context of thethree pillars of Driver Vehicle and Journey Management. Efforts were continued to creategreater alertness and awareness among drivers and employees using simulator training seatbelt convincer training and defensive driver training techniques.
External audits were conducted at all cement plants to check the efficacy of logisticssafety management.
18. HUMAN RESOURCES
During the year the Company took many initiatives to increase organizationalcapability and productivity so as to be value driven and future-ready.
18.1 Productivity improvement
In 2015 the Company implemented its "India Manufacturing Transformation"initiative to introduce a more responsive efficient and lean organisation design in allcement plants; it incorporated a new way of working with streamlined work practicesenhanced people skills and capabilities and centres of excellence (CoEs) for continuousimprovement through exchange of best practices. This was initiated after carefulbenchmarking of best in class practices of LafargeHolcim plants across the globe. ThisOrganizational reform continued to show its benefits with improvement in productivity by30%. This is a continuous process through which your Company proposes to transform itselfinto becoming one of the most productive companies in the country.
18.2 Strengthening core values and performance
Your Company is respected for its strong values and ethics which are embedded in itscorporate culture. During the year the Company adopted a new set of core values alignedwith those introduced by the LafargeHolcim group worldwide. The new code is abbreviatedsimply as CRISP an acronym that enjoins emphasis on five distinct values viz. CustomerResults Integrity Sustainability and People which now form the basic dimensions of thehigh performance culture the Company wants its employees to demonstrate in all theiractions. These values were cascaded in the Organization through various workshops andactivities at all locations for the benefit of all employees and contract labour. Thevalues are recommended to be demonstrated with Agility Collaboration and Empowerment(ACE) also a new internal motto adopted for desirable behaviours.
Along with the new set of values a new Performance Management System has also been putin place.
18.3 Talent Development
Several initiatives were taken to identify develop and nurture talent at all levelswithin the Organization through various training programmes and exposure to make themfuture ready for various positions in the Organization.
A leadership convention was conducted to transform the leadership team in theManufacturing function. Similarly for the Sales & Marketing function an assessment wasundertaken for the front line sales team with a view to benchmark individuals against aglobal high performer for that role. This behaviour and skill assessment was completed for1036 sales profiles. The assessment helped in understanding key motivators that driveperformance and retention enabling the preparation of individual development plans forthe sales team.
These interventions have enabled the Company to create succession plans for leadershippositions so that the Company's talent pipeline is kept ready to meet future requirementsand contingencies.
Talent development efforts are also made in respect of Shopfloor Associates withinterventions to help build up-skilling and multitasking capabilities.
18.4 Prevention of Sexual Harassment of Women at the Workplace
The Company is an equal opportunity provider and consciously strives to build a workculture that promotes the dignity of all employees. As required under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 andRules framed thereunder the Company has implemented a policy on prevention prohibitionand redressal of sexual harassment at the workplace. All women - permanent temporary orcontractual including service providers - are covered under the policy. This has beenwidely communicated internally and is uploaded on the Company's intranet portal. Aninternal Committee comprising four management staff is in place which includes three womento redress complaints relating to sexual harassment. Besides in each of the units there isone nodal person to receive and forward complaints to the "First Instance Person(FIP) who is a woman" or directly to the Committee.
During the year the Company received one complaint which was investigated and closedwithin 90 days.
Awareness programmes were conducted across the Company to sensitize employees to upholdthe dignity of their colleagues at the workplace particularly with respect to preventionof sexual harassment. A few employees also attended training programmes conducted by anexternal agency.
18.5 Industrial Relations
The Company continued to enjoy peaceful industrial relations during the year. YourCompany is known for its best in class workplace practices that has ensured 81 years ofindustrial harmony considered to be one of the best in the country. The Company is proudof its work culture which emphasizes safety high productivity good health quality oflife and overall wellbeing of employees. During the year an amicable settlement wasreached with Pragatisheel Cement Shramik Sangathan (PCSS) a trade union representing asection of contract workers in the old Jamul Plant. The settlement paved the way toresolve their long pending issue in a cordial and mutually beneficial manner.
Your Company's unique track record of innovative research and development has led toits recognition as a pioneer and trendsetter with several breakthroughs in cement andconcrete applications over the years. More recently the Company has added many newproducts that have widened its portfolio of value-added varieties of cement and concretefor special and customized applications. The spirit of innovativeness has helped theCompany achieve cost efficiencies in the areas of energy raw materials sourcinglogistics customer excellence and manpower optimization leading to productivityimprovement.
20. BUSINESS RISKS & OPPORTUNITIES
The Company has a robust Business Risk Management (BRM) process which systematicallyidentifies risks and opportunities and supports the Executive Committee in strategicdecision-making. This is a rolling process reviewed periodically at regional and corporatelevel. It involves mapping of all the risk elements on two parameters viz. likelihood ofthe event and the impact it is expected to have on the Company's operations andperformance. The risks that fall under high likelihood and high impact are identified askey risks for which detailed mitigation plans are developed and integrated with theMid-Term Planning Cycle and the Audit plan.
Key business risks and their mitigation plans are as described hereinbelow:
Fuel Risk: The manufacture of cement is an energy intensive process requiringlarge quantities of thermal and electrical energy. Coal and pet coke are the principalfuels used by the Indian cement industry to produce thermal energy. The Company requiresmore than 5 million tonnes of coal and pet coke to meet the requirements of its kilns andcaptive power plants. Linkage coal has continued to be in short supply leaving theCompany to source its requirements at higher prices from the domestic open market and fromimports. In recent years pet coke emerged as a viable substitute for coal on account ofattractive prices and supply. There is a likelihood that the prices of both coal andpetcoke would increase significantly. To mitigate this risk the Company has alreadyinitiated steps to progressively increase the usage of Alternative Fuels improving fuelmix at certain plants entering into firm contracts for part volume and balance on spot tocapture opportunities spread out purchases throughout the year and explore long termofftake from local refineries.
Fair Competition Directive: The Competition law in India is still evolving andan intensely competitive industry like cement is vulnerable to various interpretations ofits provisions which expose it to significant risks that may include administrative civilor criminal proceedings financial consequences such as fines and penalties or loss ofreputation. The Company has in place a Fair Competition Directive which entails compulsoryadherence by identified employees. Regular training is imparted to all relevant employeesthrough e-learning modules and face-to-face sessions.
Market Actions: The Indian Cement Industry is becoming intensely competitivewith the foray of new entrants and existing players expanding inorganically. This couldpotentially impact the sales volumes market share and profitability.
To mitigate this risk the Company is leveraging its newly created capacity at Jamuland Sindri to increase its market share enhance its brand equity and visibility enlargeits product portfolio and service offerings. The Company is also exploring asset lightoptions such as tolling and de-bottlenecking at some of its existing plants to increasevolume and market share.
Limestone: As limestone is the primary raw material required in the manufactureof cement the security of its uninterrupted long-term availability is criticalparticularly in view of changing regulations. Under the new Mines and Minerals(Development & Regulation) Amendment Act 2015 (MMDR) leases granted before thecommencement of the Act for captive use are extended upto a period ending on March 312030 or till the completion of their renewal period whichever is later. Most of theCompany's limestone leases thereby get an extension up to March 31 2030 by virtue of thisAct. For new leases the period of lease will be fifty years from the date of grant.
With the new Act the earlier policy of deemed renewal has been discontinued and allthe mining leases will henceforth be allotted through an auction which has made itdifficult to retain existing leases /acquire new leases. Forest & Wild Life clearancesare now a pre-requisite and land acquisition is becoming more challenging and expensive.
To address this risk the Company plans to secure new mining leases for its existingplants as well as for new expansions at different locations. Further the Company continuesto increase consumption of pet coke and additives which enables it to use low gradelimestone and thereby conserve minerals and increase the life of the mine.
21. INTERNAL CONTROL SYSTEMS
21.1 Internal Audit and their adequacy
The Internal Audit (IA) function reports to the Audit Committee of the Board whichhelps the function to maintain its objectivity and independence. The scope and authorityof the IA function is defined in the Internal Audit Charter. The IA Department evaluatesthe efficacy and adequacy of internal control system its compliance with operatingsystems and policies of the Company and accounting procedures at all locations of theCompany. Based on the report of internal audit function process owners undertakecorrective action in their respective areas and thereby strengthen the controls.Significant audit observations and corrective actions thereon are presented to the AuditCommittee of the Board.
21.2 Internal Controls Over Financial Reporting (ICFR)
The Company has in place adequate internal financial controls commensurate with thesize scale and complexity of its operations. During the year such controls were testedand no reportable material weakness in the design or operations were observed. The Companyhas policies and procedures for ensuring the orderly and efficient conduct of itsbusiness including adherence to Company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information.
22. INDIAN ACCOUNTING STANDARDS (IND AS) IFRS CONVERGED STANDARDS
Pursuant to the notification issued by The Ministry of Corporate Affairs datedFebruary 16 2015 relating to the Companies (Indian Accounting Standard) Rules 2015 theCompany and its subsidiaries and joint venture company will adopt "IND AS" witheffect from January 01 2017 with the comparatives for the periods ending December 312016.
The implementation of IND AS is a major change process for which the Company hadestablished a project team and had dedicated considerable resources. The impact of thechange on adoption of IND AS has been assessed and the Company is ready to adopt IND AS .
23. VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has a vigil mechanism named "EthicalView Reporting Policy" (EVRP)to report concerns about unethical behavior actual/ suspected frauds and violation ofCompany's Code of Conduct and/or Ethics Policy. Protected disclosures can be made by awhistle blower through several channels. The Audit Committee of the Board oversees thefunctioning of the EthicalView Reporting Policy. The Company has disclosed the details ofthe EthicalView Reporting Policy on its website http://www.acclimited.com/assets/new/pdf/ethicalViewPolicy.pdf
During the year the Company reached out extensively to employees to conduct greaterawareness on Fair Competition Directive and on Anti Bribery and Corruption Directive(ABCD) through e-learning modules and face-to-face training sessions achieving a highlevel of engagement and compliance. This reflected your Company's strong commitment to"Zero tolerance" for non-compliance in this regard and to do business withintegrity.
24. SUBSIDIARY ASSOCIATE AND JOINT VENTURE COMPANIES
Bulk Cement Corporation (India) Limited (BCCI)
During the year under review BCCI handled cement volumes of 10.13 lakh tonnes asagainst 10.02lakhtonnesin2015.TheProfitbeforetaxand exceptional items for the year 2016was Rs. 3.89 crore as against Rs. 3.04 crore in the year 2015.
ACC Mineral Resources Limited (AMRL)
This Company had entered into a Joint Venture with Madhya Pradesh State MiningCorporation Limited (MPSMC) for the development of four coal blocks allotted to MPSMC bythe Government of India. Pursuant to Orders of the Supreme Court passed in August 2014 andSeptember 2014 the allocations of four coal blocks to MPSMC were cancelled by theGovernment of India along with all other coal blocks. AMRL did not have any operatingincome during the period under review.
The Company has three other Subsidiary Companies viz. Lucky Minmat Limited NationalLimestone Company Private Limited and Singhania Minerals Private Limited. These arelimestone deposit companies.
24.2 MATERIAL SUBSIDIARIES
None of the subsidiaries mentioned in para 24.1 above is a material subsidiary whoseincome or net worth in the immediately preceding accounting year exceeds twenty percent ofthe consolidated income or net worth respectively of the Company and its subsidiaries.
The Board of Directors of the Company has approved a Policy for determining materialsubsidiary in line with the SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015. The Policy has been uploaded on the Company's website athttp://www.acclimited.com/assets/ new/pdf/CG/Determiningmaterialsubsidiaries.pdf
24.3 JOINT VENTURE /ASSOCIATE COMPANIES
OneIndia BSC Private Limited is a Joint Venture Company with equal participation withAmbuja Cements Limited to provide back office services to the two Companies with respectto routine transactional process.
As on December 31 2016 the following is a list of Associate Companies:
Alcon Cement Company Private Limited
Aakaash Manufacturing Company Private Limited
Asian Concretes and Cements Private Limited
25. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company for the year 2016 are prepared incompliance with the applicable provisions of the Companies Act 2013 and as stipulatedunder Regulation 33 of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. The audited consolidated financial statements together with the Auditors' Reportthereon form part of the Annual Report.
Pursuant to Section 129(3) of the Companies Act 2013 a Statement containing salientfeatures of the financial statements of each of the Subsidiaries Associates and JointVenture Companies in the prescribed Form AOC-1 is attached.
Pursuant to the provisions of Section 136 of the Companies Act 2013 the FinancialStatements of the subsidiary and joint venture companies are kept for inspection by theMembers at the Registered Office of the Company. The Company shall provide free of cost acopy of the financial statements of its subsidiary companies to the Members upon theirrequest. The statements are also available on the website of the Company atwww.acclimited.com under the Investors section. The consolidated net profit of the Companyand its subsidiaries amounted to Rs. 604.38 crore for the Company's financial year endedDecember 31 2016 as compared to Rs. 587.60 crores for the previous year.
26. AMALGAMATION OF HOLCIM INDIA PRIVATE LIMITED WITH AMBUJA CEMENTS LIMITED
Through a Scheme of Amalgamation between Holcim (India) Private Limited and AmbujaCements Limited your Company has become a subsidiary of Ambuja Cements Limited witheffect from August 12 2016 while the ultimate Holding Company remains unchanged viz.LafargeHolcim Ltd.
27. CHANGES IN PROMOTER HOLDING
During the year Holderind Investments Limited one of the Promoters of the Company haspurchased through the Stock Exchange 7870000 Equity Shares of the Company constituting4.19% of the Equity Share Capital. The total Promoter shareholding of the Company hencestands increased to 54.53% from 50.34%.
28. DIRECTORS & KEY MANAGERIAL PERSONNEL
28.1 Change in Directorate
The Board of Directors has accepted the resignation of Mr Harish Badami ChiefExecutive Officer & Managing Director of the Company with effect from February 42017.
The Board of Directors has placed on record its warm appreciation of the richcontribution made by Mr Harish Badami and the leadership provided by him during his tenureas CEO&MD of the Company.
The Board of Directors has appointed Mr Neeraj Akhoury as an Additional Director on theBoard of the Company with effect from December 16 2016 and has nominated him asMD&CEO (Designate). Mr Neeraj Akhoury takes charge as Managing Director & CEO witheffect from February 4 2017 upon Mr Harish Badami demitting his office.
28.2 Directors coming up for retirement by rotation
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr N S Sekhsaria and Mr Martin Kriegner retire by rotation andbeing eligible offer their candidature for reappointment as Directors.
28.3 Independent Directors
The Independent Directors hold office for a fixed period of five years from the date oftheir appointment at the Extraordinary General Meeting held on September 10 2014 and arenot liable to retire by rotation.
In accordance with Section 149(7) of the Companies Act 2013 each Independent Directorhas given a written declaration to the Company confirming that he/she meets the criteriaof independence as mentioned under Section 149(6) of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015.
28.4 Board Effectiveness
a. Familiarization Program for the Independent Directors
In compliance with the requirements of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has put in place a Familiarization Programmefor Independent Directors to familiarize them with the working of the Company theirroles rights and responsibilities vis--vis the Company the industry in which theCompany operates business model etc. Details of the Familiarization Programme areexplained in the Corporate Governance Report and are also available on the Company'swebsite at http://www.acclimited.com/assets/new/pdf/CG/Familiarization-Programme-for-Independent-Directors.pdf
b. Board Evaluation
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board has carried out an annualperformance evaluation of its own performance the Directors individually as well as theevaluation of the working of its Audit Nomination & Remuneration and ComplianceCommittees. The criteria applied in the evaluation process are explained in the CorporateGovernance Report.
28.5 Key Managerial Personnel
Pursuant to the provisions of Sections 2(51) 203 of the Companies Act 2013 read withThe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 thefollowing are the Key Managerial Personnel:
Mr Sunil Nayak Chief Financial Officer
Mr Burjor D Nariman Company Secretary & Head Compliance
Mr Harish Badami CEO & Managing Director (upto February 3 2017)
28.6 Criteria for selection of candidates for appointment as Directors Key ManagerialPersonnel and Senior leadership positions.
A well-defined criteria is in place for the selection of candidates for appointment asDirectors Key Managerial Personnel and senior leadership positions. The relevantinformation has been given in Annexure B' which forms part of the Board's Report.
28.7 Remuneration Policy for Directors
The policy for remuneration of directors Key Managerial Personnel and ExCo Members isset out in Annexure C' which forms part of the Board's Report.
29.1 Board Meetings
During the year seven Board Meetings were convened and held the details of which aregiven in the Corporate Governance Report.
29.2 Audit Committee
The Audit Committee comprises five members. The Chairman of the Committee is anIndependent Director. The Committee met seven times during the year. Details of the roleand responsibilities of the Audit Committee the particulars of meetings held andattendance of the Members at such Meetings are given in the Corporate Governance Report.
29.3 CSR Committee
The CSR Committee comprises four members of which three are Independent Directors. TheChairman of the Committee is an Independent Director. The Committee met twice during thereporting period. Details of the role and functioning of the Committee are given in theCorporate Governance Report.
30. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All transactions with Related Parties are placed before the Audit Committee as also theBoard for approval. Prior omnibus approval of the Audit Committee and the Board isobtained for the transactions which are of a foreseen and repetitive nature. Thetransactions entered into pursuant to the omnibus approval so granted are audited and astatement giving details of all related party transactions is placed before the AuditCommittee and the Board of Directors for their approval on a quarterly basis. Thestatement is supported by a certificate from the CEO & MD and the CFO. Your Companyhas developed a Related Party Transactions Manual Standard Operating Procedures for thepurpose of identification and monitoring of Related Party transactions.
All transactions entered into with related parties during the year were on arm's lengthbasis in the ordinary course of business and in line with the threshold of materialitydefined in the Company's policy on Related Party Transactions which can be accessedthrough weblink http:// www.acclimited.com/assets/new/pdf/CG/ PolicyonRPT.pdf. Inparticular there were no material transactions with related parties (i.e. transactionsexceeding 10% of the annual consolidated turnover entered into during the year as per thelast audited financial statements). Accordingly no transactions are required to bereported in Form AOC 2. The details of transactions entered into with related parties isgiven in Note No. 34 of the Notes to Accounts.
None of the Directors and the Key Managerial Personnel has any pecuniary relationshipsor transactions vis--vis the Company.
31. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
Appeal before Competition Appellate Tribunal (COMPAT)
The Competition Commission of India (CCI)had originally passed an Order in June 2012against several cement manufacturing companies including the Company in the matter of acomplaint filed by the Builders' Association of India for alleged violation of theprovisions of Sections 3 and 4 of the Competition Act and in terms of the said Orderimposed a penalty of 0.5 times of the profit of the Company for the year 2009 (calculatedprorata from May 20 2009) and for the full year 2010. For the Company the penaltyamounted to Rs. 1147.59 crore.
CCI had also passed an Order directing the Company to "cease and desist" fromindulging in any activity relating to agreement understanding or arrangement on priceproduction and supply of cement in the market.
Pursuant to an Appeal filed by the Company before the Competition Appellate Tribunal(COMPAT) the said order of CCI of June 2012 was stayed subject to deposit of 10% of theamount of penalty. Thereafter COMPAT by its order dated December 11 2015 set aside CCI'sOrder of June 20 2012 remanding the matter back to the CCI for a fresh hearing andadjudication. Further in terms of the said Order the deposit amount along with interestthereon was refunded to the Company.
CCI on rehearing the arguments by its order dated August 31 2016 once again heldthat the cement companies and the Cement Manufacturers' Association (CMA) are guilty andin violation of the Sections 3(1) read with 3(3)(a) and 3(3)(b) of the Competition Act andimposed the same penalty which in the case of the Company again works out to Rs. 1147.59crore. The usual order for cease and desist was also imposed.
The Company thereafter approached the COMPAT which by its order dated November 7 2016stayed the operation of the CCI order of August 31 2016 subject to deposit of 10% of thepenalty amount within one month. The Company accordingly deposited an amount of Rs. 114.76crore in December 2016 in the form of a bank Fixed Deposit in favour of COMPAT on behalfof the Company. The case is now pending before the COMPAT.
As at December 31 2016 the penalty amount of Rs. 1147.59 crore and interest thereonis disclosed as a contingent liability in the Notes to Accounts (Refer Note 36(A)(d)(i)).
CCI's Order on Complaint filed by Director Supplies & Disposals State of Haryanain 2013
In January 2017 the Competition Commission of India (CCI) passed an Order againstseven cement manufacturers including the Company imposing a penalty calculated at the rateof 0.3% of the average turnover of the last three years viz. 2012-13 2013-14 and 2014-15.In respect of the Company the amount of penalty works out to Rs. 35.32 crore. The saidOrder was issued on the basis of a complaint filed in 2013 by the Director Supplies &Disposals State of Haryana before the CCI.
The Company believes it has a strong case on merits to challenge the Order and plans tofile an appeal before the Competition Appellate Tribunal (COMPAT) As at December 31 2016the penalty amount of Rs. 35.32 crore is disclosed as a contingent liability in the Notesto Accounts (Refer Note 36(A)(d)(ii)).
32.1 Statutory Auditors
As per the provisions of Section 139 of the Companies Act 2013 the term of office ofM/s S R B C & CO LLP as Statutory Auditors of the Company will conclude from theclose of the forthcoming Annual General Meeting of the Company.
The Board of Directors places on record its appreciation for the services rendered byM/s S R B C & CO LLP as the Statutory Auditors of the Company.
Subject to the approval of the Members the Board of Directors of the Company hasrecommended the appointment of Deloitte Haskins & Sells LLP Chartered Accountants(ICAI Firm Registration Number 117366W/W-100018) as the Statutory Auditors of the Companypursuant to Section 139 of the Companies Act 2013.
Members' attention is drawn to a Resolution proposing the appointment of DeloitteHaskins & Sells LLP as Statutory Auditors of the Company which is included at Item No5 of the Notice convening the Annual General Meeting.
32.2 Cost Auditors
On the recommendation of the Audit Committee the Board of Directors appointed M/s D CDave & Co. Cost Accountants (Firm Registration No 30611) as Cost Auditors of theCompany for the year 2017 under Section 148 of the Companies Act 2013 read with TheCompanies (Cost Records and Audit) Amendment Rules 2014. M/s D C Dave & Co haveconfirmed that they are free from disqualification specified under Section 141 (3) andproviso to Section 148 (3) read with Section 141 (4) of the Companies Act 2013 and thattheir appointment meets the requirements of Section 141 (3) (g) of the Companies Act 2013.They have further confirmed their independent status and an arm's length relationship withthe Company.
M/s N I Mehta & Co. Cost Accountants (Firm Registration No. 000023) who wereearlier the Cost Auditors of the Company have given their "No Objection"certificates for the appointment of M/s D C Dave & Co as the Cost Auditor for the year2017.
The Board of Directors has placed on record its appreciation of the service rendered byM/s N I Mehta & Co.
The remuneration payable to the Cost Auditor is required to be placed before theMembers in a general meeting for their ratification. Accordingly a Resolution for seekingMembers' ratification for the remuneration payable to M/s D C Dave & Co Cost Auditoris included at item No 8 of the notice convening the Annual General Meeting.
32.3 Secretarial Audit
The Company has appointed Messrs Pramod S Shah & Associates a firm of CompanySecretaries in Practice to undertake the Secretarial Audit of the Company pursuant to theprovisions of Section 204 of the Companies Act 2013 and The Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014. The Report of the Secretarial Auditor isannexed to the Board's Report as Annexure D'.
Your Company received numerous awards and felicitations during the year fromdistinguished bodies for achievements in fields as diverse as Health & Safetyfinancial reporting excellence sustainable development CSR and business communication.Notable among these are the first ever award instituted for excellence in CSR by TheInstitute of Company Secretaries of India and the CII-ITC Sustainability Award 2016 forCorporate Excellence.
First ICSI CSR Excellence Awards 2016' instituted by The Institute ofCompany Secretaries of India in the Award Category Best Corporate Medium'
FIMI - Sita Ram Rungta Social Awareness Award' to the Company's JamulLimestone Mine conferred by the Federation of Indian Mineral Industries (FIMI)
BT-CSR Excellence Award 2016' awarded by CII to the Company's Jamul plantas CSR Company of the Year' for its CSR initiatives particularly DISHA.
CII-ITC Sustainability Awards 2016 for Corporate Excellence -OutstandingAccomplishment -in category "A Large Companies" by the CII-ITC Centre ofExcellence for Sustainable Development
The Company's featured in CII's list of ten Sustainable Plus Platinum 2015companies and rated "India's Most Sustainable"
CII National Award in the category Energy Efficient Unit' for Excellencein Energy Management 2016 conferred on Chanda Kymore Thondebhavi and Wadi Cement Worksat the 17th CII National Award Function
4 Star Rating' by the Ministry of Mines Government of India awarded toJamul Limestone Mines
HEALTH & SAFETY
NSCI Shreshtha Suraksha Puraskar awarded to ACC Sindri by the National SafetyCouncil
FIMI - Health & Safety Award 2015-16' received by ACC's Wadi LimestoneMine instituted by the Federation of Indian Mineral Industries (FIMI)
State level Safety award for Plant safety performance & State level BestSafe Worker award from Dept. of Factories Boilers Industrial Safety & Health Govt.of Karnataka presented to ACC Kudithini plant.
GreenCo Best Practices Award 2016 for the best practices in waste management toKymore plant
Clean & Green India 2016 Award for solid waste management initiatives of thecompany awarded to Madukkarai plant.
The Company's Annual Report 2015 won the highest award for excellence inFinancial Reporting from the institute of Chartered Accountants in India.
13th National award for Excellence in Cost Management conferred byThe Institute of Cost Accountants of India
Your Company has been adjudged Second Runner-Up (Joint) in the ManufacturingSector as the recipient of Best Presented Annual Report Awards 2015 by South AsianFederation of Accountants (SAFA)
ACC was awarded for logistics excellence in "Supply Chain TechnologyAdvancement/Solution Implementation" category at the Manufacturing Supply ChainAwards 2016.
Association of Business Communicators of India (ABCI) - Gold award to "ACCCommunity Counts" - A Collection of Case Studies Silver to "Together forCommunities" ACC's CSR newsletter and Silver to ACC's "Sustainable DevelopmentReport 2015" at the 56th ABCI Awards
Association of Business Communicators of India (ABCI) - Gold award to ACCLogistics Safety Excellence programme Silver to ACC Parivar (Hindi) and Bronze toSustainable Development Report 2014 at the 55th ABCI Awards.
National Institute of Industrial Engineering's Lakshya Avartan - On theJob Achiever's Contest' Award to ACC Concrete - Sales and Marketing.
34. ENHANCING SHAREHOLDERS VALUE
The creation of maximum value for shareholders is among your Company's principalobjectives of strategic planning. Central to the Company's decision-making process is asystematic focus on the allocation and utilization of all corporate resources in the mostprofitable and productive manner so as to create value for all its stakeholders. YourCompany's strategic operations are managed with a view to achieve the highest possiblelevels of operating performance and cost competitiveness strengthening its productiveassets and resource base building for growth while nurturing corporate reputation. Inthis the Company is guided by the philosophy of ensuring that all of its strategiccorporate actions are aligned towards sustainable development and thus have a positiveimpact on the economic societal and environmental dimensions.
35. CORPORATE GOVERNANCE
The Annual Report contains a separate section on the Company's corporate governancepractices together with a certificate from the Company's Auditors confirming complianceas per SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
36. BUSINESS RESPONSIBILITY REPORTING
A separate section on Business Responsibility forms part of this Annual Report asrequired under Regulation 34(2)(f) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
37. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated in Section 134(3)(m) of the Companies Act 2013 read withRule 8 of The Companies (Accounts) Rules 2014 is provided in Annexure E' to theDirectors' Report.
38. EXTRACT OF ANNUAL RETURN
Details forming part of the extract of the Annual Return in form MGT 9 is enclosed asAnnexure F'.
39. PARTICULARS OF EMPLOYEES
Disclosure pertaining to the remuneration and other details as required under Section197(12) of the Act and the Rules framed thereunder is enclosed as Annexure G' tothe Board's Report. The information in respect of employees of the Company requiredpursuant to Rule 5 of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 will beprovided upon request. In terms of Section 136 of the Companies Act 2013 the Report andAccounts are being sent to the Members and others entitled thereto excluding theaforesaid Annexure which is available for inspection by the Members at the RegisteredOffice of the Company during business hours on working days of the Company up to the dateof the ensuing Annual General Meeting. If any Member is interested in obtaining a copythereof such Member may write to the Company Secretary in this regard.
40. DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement in terms ofSection 134 of the Companies Act 2013:
a. that in the preparation of the annual financial statements for the year endedDecember 31 2016 the applicable accounting standards have been followed along withproper explanation relating to material departures if any;
b. that such accounting policies as mentioned in Note 2 of the Notes to the Accountshave been selected and applied consistently and judgment and estimates have been made thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company as on December 31 2016 and of the profit of the Company for the year endedon that date;
c. that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d. that the annual accounts have been prepared on a going concern basis;
e. that proper internal financial controls laid down by the Directors were followed bythe Company and such internal financial controls are adequate and were operatingeffectively; and
f. that proper systems to ensure compliance with the provisions of all applicable lawshave been devised and such systems were adequate and were operating effectively.
41. INTEGRATED REPORTING
Your Company believes in transparent reporting that is value-friendly to shareholdersand investors. The Company's Annual Reports including the last one for the year 2015have received the highest awards for excellence in financial reporting from the Instituteof Chartered Accountants of India (ICAI) several times in recent years. The Annual Reportfor 2015 was forwarded by ICAI to the South Asian Federation of Accountants (SAFA) whoadjudged it as one of the winners.
The Annual Report carries a detailed section containing the "BusinessResponsibility Report". Since 2007 the Company also publishes an annual CorporateSustainable Development Report conforming to the guidelines of the Global ReportingInitiative. The reports for 2014 and 2015 were based on the GRI G4 guidelines inaccordance with the "Comprehensive" option and were externally assured.
As one of the Top 500 listed companies the Company is studying the requirements of theIntegrated Reporting Framework and will place an integrated report on its website in duecourse.
The Directors gratefully acknowledge the support received by the Company from theCentral and
State Government Ministries and Departments shareholders customers businessassociates bankers employees trade unions and all other stakeholders.
43. CAUTIONARY STATEMENT
The Board's Report and Management Discussion & Analysis may contain certainstatements describing the Company's objectives expectations or forecasts that appear tobe forward-looking within the meaning of applicable securities laws and regulations whileactual outcomes may differ materially from what is expressed herein. The Company is notobliged to update any such forward-looking statements. Some important factors that couldinfluence the Company's operations comprise economic developments pricing and demand andsupply conditions in global and domestic markets changes in government regulations taxlaws litigation and industrial relations.
For and on behalf of the Board of Directors
February 03 2017