MANAGEMENT DISCUSSION & ANALYSIS
To the Shareholders
Your Directors have pleasure in presenting their annual report on the business andoperations of your Company together with the audited accounts of the Company and itssubsidiaries for the year ended 31st March 2015.
The summarized standalone and consolidated results of your Company are given in thetable below :
(Rs in Crores)
| || |
|PARTICULARS ||31.03.2015 ||31.03.2014 ||31.03.2015 ||31.03.2014 |
|Revenue from Operations (Gross) ||3692.17 ||3477.92 ||3692.17 ||3477.92 |
|Total Revenue ||3365.83 ||3141.26 ||3365.97 ||3141.57 |
|Profit before Finance Costs Tax || || || || |
|Depreciation Amortization and || || || || |
|Exceptional items ||457.55 ||381.38 ||457.61 ||382.03 |
|Finance Costs ||78.37 ||85.59 ||78.37 ||85.60 |
|Profit before Tax Depreciation || || || || |
|Amortization and Exceptional items ||379.18 ||295.79 ||379.24 ||296.43 |
|Depreciation and Amortization Expense ||153.46 ||132.58 ||153.75 ||133.06 |
|Exceptional items ||12.84 ||10.93 ||12.84 ||10.93 |
|Tax Expense (Net) ||37.44 ||22.52 ||37.41 ||22.61 |
| ||203.74 ||166.03 ||204.00 ||166.60 |
|Minority Interest || || ||- ||0.01 |
|Profit for the year ||175.44 ||129.76 ||175.24 ||129.82 |
|Other adjustment || || ||0.13 || |
|Surplus as per last Financial Statements ||196.11 ||149.91 ||196.55 ||150.29 |
| ||371.55 ||279.67 ||371.92 ||280.11 |
|Appropriations : || || || || |
|Debenture Redemption Reserve ||11.50 ||16.50 ||11.50 ||16.50 |
|Proposed Dividend ||46.21 ||46.21 ||46.21 ||46.21 |
|Corporate Div. Tax on proposed Div. ||9.40 ||7.85 ||9.40 ||7.85 |
|General Reserve ||100.00 ||13.00 ||100.00 ||13.00 |
| ||167.11 ||83.56 ||167.11 ||83.56 |
|Net Surplus ||204.44 ||196.11 ||204.81 ||196.55 |
Your Directors are pleased to recommend a dividend of Rs 6 per share (i.e.60%) on77005347 ordinary shares for the year ended 31st March 2015 aggregating to Rs 55.61crores including Corporate Dividend Tax of Rs 9.40 crores as compared to Rs 54.06 crores(including Corporate Dividend Tax of Rs 7.85 crores) in the previous year.
1.1 CEMENT DIVISION
(a) Industry Structure and Developments :
India's potential in infrastructure is vast and cement plays a vital role in the growthand development of the nation. The Indian cement industry is the second largest producerwith a capacity about 390 million tons accounting for about 8% of the total globalproduction. The per capita consumption of cement in India is about 195 kg. which issubstantially lower when compared with the world average of 520 kg. This underlines thetremendous scope for growth in Indian cement industry in the long term.
Though India has witnessed sustained cement consumption growth in last 14 about yearssince 2001 the cement volume growth has been weakening in last 3/4 years led by a slumpin infrastructure commercial and housing sector.
The capacity in the cement industry doubled in last decade with as much as 70 milliontons added in last three years. The cement demand however remained low during this periodwhen the capacity was getting added leading to surplus capacity.
The Financial Year 2014-15 had a number of positive factors supporting the cementindustry such as formation of stable government at the centre de-regulation of dieselprices auctioning of coal blocks ambitious Make in India campaign andsubstantial reduction in international crude prices. With the bold and innovative measuresof new Government at the Centre particularly for the infrastructure development somegreen shoots of the revival of the economy were visible and it was hoped that the trendwould continue. This was also reflected in the growth of cement industry. The growth ofcement industry which was muted for two years picked up during the initial part of theyear under review but could not sustain.
(b) Review of performance :
The details of production of clinker and cement at various locations of the Company areas follows :
| ||2014-15 (Lac Ts.) ||2013-14 |
|Change % |
|Clinker production || || || |
|Satna ||26.87 ||25.51 ||5.33 |
|Chanderia ||26.02 ||23.40 ||11.20 |
|Total ||52.89 ||48.91 ||8.14 |
|Cement production || || || |
|Satna ||20.93 ||20.80 ||0.63 |
|Raebareli ||6.27 ||5.86 ||7.00 |
|Chanderia ||33.01 ||31.81 ||3.77 |
|Durgapur ||16.03 ||15.00 ||6.87 |
|Total ||76.24 ||73.47 ||3.77 |
|Blended Cement ||64.78 ||62.73 ||3.27 |
|% of total cement production ||84.97 ||85.38 ||(0.41) |
The cement capacity utilisation during the year was at 75.49% as against the industryaverage of 68%.
During the year under review your Company has registered a growth of 3% in cementsales. In absolute terms the sale of cement has increased to 76.05 Lac tons compared to73.63 Lac tons in the previous year. The net sales during the year has increased to Rs3152.25 crores as against Rs 2970.54 crores in the previous year an increase of 6%.
Power Plant :
The details of power generated at various plants are as under:
| ||2014-15 (Lac Units) ||2013-14 (Lac Units) ||Change % |
|Thermal Power Plant: || || || |
|Satna ||1470.00 ||1719.00 ||(14.50) |
|Chanderia ||1575.75 ||1747.79 ||(9.85) |
|WHRS : || || || |
|Satna ||707.00 ||648.30 ||9.10 |
|Chanderia ||324.24 ||324.82 ||- |
|Solar Power : ||28.00 ||17.00 ||64.70 |
Thermal Power Plant :
The thermal power plants could not be run optimally due to non-availability of linkagecoal. At Chanderia the short generation from Thermal power plant during the year was alsodue to higher utilization of cheaper power in open market through IEX.
Waste Heat Recovery System (WHRS) :
Performances of WHRS at Satna and Chanderia were satisfactory. Both the WHRS operatedas per heat availability from kilns.
Solar Power :
Performance of the Solar Power Unit was satisfactory during the year.
Cost and profitability :
The profitability of the Company during the year was impacted due to the outsourcing oflimestone at higher prices. Though substantial quantity of limestone could be raised bymechanical means it was still short of the total requirement which had to be outsourcedat substantially high rates. Due to non-availability of required quantities of limestoneclinker production at Chanderia had to be curtailed resulting in higher production cost.Consequent to reduction in availability in linkage coal Company had to procure coal fromopen market as well as take recourse to imports. This has resulted in substantially highercost of coal. The grid power rates have gone up. Also the cost of power generation by theCompany had gone up owing to the purchase of coal from the open market. The cost ofgypsum fly ash and other materials had gone up substantially. Though the Companybenefited on account of reduced road freight due to softening of the diesel prices thebenefit was negated on account of higher railway freight. The depreciation cost has goneup from Rs 132.58 crores to Rs 153.75 crores due to the addition of assets during the yearand also due to change in basis of charging depreciation based on the remaining usefullife of the assets as per the requirement of Schedule - II of the Companies Act 2013. TheCompany continues to take various measures to improve operational efficiency includinghigher uses of fly ash and slag and reduction of power and fuel consumption.
Cement demand and prices :
Cement prices continued to remain under pressure during the year. Though many attemptswere made to raise prices during the year most of the price hikes undertaken werepartially or fully reversed.
Barring the First Quarter of the current fiscal the demand for cement as well asprices remained sluggish. North and Central markets in particular were the worst hit.Weak monsoon and wide spread unseasonal rain during the last quarter of the year in northand central parts of the country pushed the demand down especially in the non-urban belt.
Historically the March quarter is the strongest for cement demand and prices butdemand in the recently concluded quarter remained muted.
Launch of Premium Brand cement :
i) Birla Samrat Ultimate Cement :
The premium Portland Pozzolana Cement (fly ash-based) brand Birla Samrat ULTIMATE hasbeen well received by the market. The brand introduced in Patna was subsequentlylaunched at Lucknow Kolkata and Jaipur during the year under review. Trade associateshave welcomed the premium product which it is felt will cater to the demands ofdiscerning consumers and help in capturing the premium segments of the market.
ii) Birla Samrat Unique Cement :
The market share of this Premium Portland Slag Cement brand has been improving sinceits introduction in 2011.
Mining operations at Chanderia :
The Mining Operations (through blasting) at the Chanderia plant had been suspendedsince August 2011 owing to the Order of Jodhpur High Court (Rajasthan) which waschallenged by the Company before Hon'ble Supreme Court. During the last financial year asa partial relief the Supreme Court allowed mining operations beyond 2 kilometers from theChittorgarh Fort by using heavy earth moving machinery. The Hon'ble Supreme Court hadfurther directed Central Building Research Institute (CBRI) to submit a report aftercomprehensive study of all relevant aspects and facets relating to full-scale miningoperations and its impact if any on the Chittorgarh Fort. The report of CBRI submittedon 30th September 2014 has concluded that vibrations and air pressures induced by minesof Birla Cement Works and adjoining mines are well within safe limits as per national andinternational standards. The respondents in the matter submitted theirobservations/objections on the report and reply to the objections was filed by theCompany. The Respondent thereafter filed certain additional documents. The matter wouldcome up for hearing before the Hon'ble Supreme Court shortly. In the meanwhile miningthrough mechanical means as permitted by the Hon'ble Court continues.
Deallocation of Coal Block :
The Hon'ble Supreme Court vide it's decision dated 24th September 2014 heldallocation of various coal blocks as arbitrary and illegal and hence liable to becancelled. Subsequently the Government promulgated The Coal Mines (Special Provisions)Ordinance 2014 which intends to take appropriate action to deal with the situationarising pursuant to the Hon'ble Supreme Court's decision. In respect of Bikram Coal Blockin the state of Madhya Pradesh allotted to the Company the management has submitted itsclaim for compensation to the government for the investments made on the block.Consequential adjustments if any will be made on settlement of the claim
c) Threats Risks and Concerns :
Setting up new cement capacity is becoming more challenging due to tougher landacquisition process higher capital cost increased gestation period requirement ofseveral regulatory clearances and non-availability of new limestone mines.
Cement Industry continues to face rising input costs. Freight costs have significantlyincreased over the past two years as a result of a rise in freight rates by railways anddependence on expensive road transport (due to a shortage of railway wagons).
The rise in domestic coal prices has resulted in an increase in the cost of power andfuel. Prices of raw materials such as limestone and gypsum have also increased. Howeverdeclining international coal and pet coke price have provided some benefits to Indiancement companies but the extent of this benefit has partly been offset by rupeedepreciation.
The availability of railway rakes has come down significantly resulting in shortage ofcoal delivery affecting the generation of Captive Power which in turn increased cost.
In the initial part of the year there were expectations that due to demand pick uputilisation level will improve. However the demand remained sluggish due to sheermismatch between supply and demand.
(d) Opportunities :
The government's thrust on housing and infrastructure creation to boost the overalleconomic growth should augur well for industry. In order to accelerate decision makingfast track investments and revive manufacturing in the country the Prime Minister hastaken direct control of the Project Monitoring Group (PMG). This move is expected to bringback the stalled project on track and boost investments.
The proposed implementation of Goods and Services Tax (GST) with effect from 1st April2016 is expected to simplify the tax structure and enhance the GDP growth rate.
India has a lot of potential for development in the infrastructure and constructionsector and the cement sector will largely benefit from it. Some of the recent majorgovernment's initiatives such as development of 100 smart cities and rejuvenate another500 in the country allocating close to Rs 1 lakh crore for a period of five years for theproject are expected to provide a major boost to the sector.
The Road Transport and Highways Ministry has decided to build concrete cement roads inplace of traditional bitumen roads which too should aid growth of demand of cement.
We expect a pick-up in infrastructure activities led by Government focus oninfrastructure development schemes like "Housing for All by 2022"modernization of existing and operational airports and building new ones proposed metroprojects across the country which should create additional demand for cement.
(e) Outlook :
Despite another challenging year India's cement industry is cautiously optimistic. Thedemand-supply mismatch is expected to reduce in the next three years with slower pace ofcapacity addition and likely improvement in the demand. Increased energy-efficientinvestments rising demand due to population growth improved supply chain management andmore transparent government policies and introduction of GST are expected to providetailwinds for higher growth of the industry.
As per the India Development Update Report presented by the World Bank recentlyIndia's economic growth is expected to rise to 7.5 per cent in 2015-16 followed byfurther acceleration to 7.9 per cent in 2016-17 and 8 per cent in 2017-18. The aboveprojection by the World Bank bodes well for cement industry as the growth in the demandfor cement is closely linked to GDP growth rate.
The concerns of the industry in respect of energy and land are being taken care by thegovernment by way of e-auctions of coal blocks and the introduction of land bill.
With the prediction of weak monsoon in the current financial year the demand from therural market may be impacted adversely. However initiatives by the new government such ashousing for all smart cities Swachh Bharat and Make in India campaign Clean GangaProject infrastructure planning concrete roads initiative and an increase in allocationof funds to states are expected to have a positive impact on the demand in the times tocome. While the intentions are positive ground level actions will help rev-up the economyin general.
1.2 JUTE DIVISION
(a) Industry Structure and Developments :
Jute Industry occupies an important place in the economy of West Bengal. It is one ofthe major industries of Eastern Region. It supports nearly 4 million farm familiesbesides providing direct employment to about 2.5 lakh industrial workers.
India and Bangladesh are the main producers of jute goods in the world. A substantialportion of India's production is consumed domestically. Bangladesh exports major portionof its production to various countries including India.
(b) Performance :
The Jute Division had to resort to production cuts on account of demand slump as aresult of poor off-take by the Government. Production during the year has been 33248 MTagainst 38015 MT during the previous year. Export during the year was 6230 MT against 6966MT in the previous year.
(c) Opportunities and Threats; Risks and Concerns :
At present the jute industry is going through tough time due to competition fromsynthetic bags and lack of modernisation. Many mills have cut down work hours and areoperating five days a week.
The recent agreement providing for increase in minimum wage would further add to theproduction cost.
A part of raw jute sowing area has been diverted to other cash- crops requiring lowermanual labour as compared to raw jute. The size of raw jute crop during the year has beensubstantially less than usual. This has caused higher prices and lower availability forraw jute.
As reported earlier The Jute Packaging Materials (Compulsory use in PackagingCommodities) Act 1987 [JPMA] has been diluted. As a result demand for jute goods hassubstantially reduced. Further unabated duty free import of jute goods from Bangladeshhas adversely affected the capacity utilization of Indian jute mills.
Moreover export of jute goods from India has substantially reduced as compared toprevious year due to inadequate support by government for export. The industry had toresort to substantial production cuts. Jute goods are not fetching remunerative prices dueto lack of demand.
(d) Outlook :
As a result of dilution in compulsory use of jute bags under JPMA demand of juteproducts has substantially reduced. All the jute mills are running at low capacity. Unlessthe compulsory JPMA requirements are restored the demand for jute goods is expected to bemuch less than total capacity of jute mills.
To overcome vagaries of government orders under JPMA the jute division is layingemphasis on production of diversified jute goods and improving export of jute goods.
1.3 VINDHYACHAL STEEL FOUNDRY
Steel Foundry produces iron & steel castings primarily for internal consumption.The total production of castings during the year has been 1213 Ts. as against 1346 Ts. inthe previous year.
PLANT OPTIMISATION AND INFRASTRUCTURE DEVELOPMENT
During the year under review the Company has taken up projects for plant optimizationand infrastructure development to maintain its market position in the industry besidesfocusing on various other efficiency improvements initiatives.
The execution of 5 Lac Tons Per Annum blending unit at Raebareli is in advanced stageand is expected to be commissioned by July 2015. Installation of New Coal Mill VRM for petcoke grinding at Satna is expected to be completed by June 2015. Work for installationof Clinker silo at Birla Vikas Cement (BVC) Satna and Raebareli plant was completedduring the year.
At Durgapur covering of slag storage with reclaimer system was set up during the year.
Water Cooled Condenser of 27 MW Thermal Power Plant was replaced with Air CooledCondenser at Chanderia Unit.
PROJECTS UNDERTAKEN DURING THE YEAR
> Steel silo for storage of cement at Chanderia and additional Fly ash silo atDurgapur.
> Bucket Elevator for transfer of cement in place of Pneumatic Conveying System atChanderia.
> Project for development of infrastructure collection storage and transportationof alternative fuel for Satna and Chanderia Units.
> Modification of existing Vertical Roller Pre-Grinder Mill at Raebareli.
> Covered yard for storage of Raw Material at Satna Chanderia and Durgapur Units.
> Coal mill upgradation at Durgapur.
The Company has received environmental clearance for second phase expansion of NewChittor Cement Works from 1.2 MTPA to 2.7 MTPA. The project will be implemented once thelimestone mining issue is resolved and environmental clearance for additional limestonemining is received.
The process of merger of Talavadi Cements Limited a 98% subsidiary with BirlaCorporation Limited is pending for approval at the Hon'ble Calcutta High Court.
Pursuant to the MoU signed by the Company with the Assam Mineral DevelopmentCorporation (AMDC) to set up 1-million-ton cement plant at Umrangsu Assam theShareholders' Agreement has been signed between the Company and AMDC. The matter is beingfollowed-up with AMDC for mining lease of limestone reserves.
Considering factors such as market potential proximity to fly-ash sourcesavailability of tax incentives etc. setting up of grinding/blending units in MadhyaPradesh in Bihar in Uttar Pradesh and Jharkhand has been approved by the Board ofDirectors in the last financial year. Land for the grinding unit at Barnagar and blendingunit at Mundi has already been acquired and environment clearance is expected in next 3 to4 months.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 as requiredunder Section 92 of the Companies Act 2013 is marked as Annexure - A which is annexedhereto and forms part of the Directors' Report.
NUMBER OF MEETINGS OF THE BOARD
The details of the number of meetings of the Board held during the financial year2014-15 forms part of the Corporate Governance Report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required by Section 134(3) (c) of the Companies Act 2013 your Directors state that:
(a) in the preparation of the annual accounts for the year ended 31st March 2015 theapplicable accounting standards have been followed with proper explanation relating tomaterial departures if any;
(b) the accounting policies adopted in the preparation of the annual accounts have beenapplied consistently except as otherwise stated in the Notes to Financial Statements andreasonable and prudent judgments and estimates have been made so as to give a true andfair view of the state of affairs of the Company at the end of the Financial Year 2014-15and of the profit for the year ended 31st March 2015;
(c) 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) the annual accounts for the year ended 31st March 2015 have been prepared on agoing concern basis.
(e) that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.
(f) that systems to ensure compliance with the provisions of all applicable laws werein place and were adequate and operating effectively.
DECLARATION BY INDEPENDENT DIRECTORS
Shri Vikram Swarup Shri Anand Bordia Shri Brij Behari Tandon Shri Dhruba NarayanGhosh Dr. Deepak Nayyar and Smt. Shailaja Chandra are Independent Directors on the Boardof the Company. The Company has received declarations from all the Independent Directorsof the Company confirming that they meet the criteria of independence as prescribed bothunder the Companies Act 2013 and Clause 49 of the Listing Agreement with the StockExchanges.
COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
Pursuant to provisions of Section 178 of the Companies Act 2013 and Clause 49 of theListing Agreement the Board of Directors of the Company based on the recommendation ofthe Nomination and Remuneration Committee has formulated a Remuneration Policy.
The remuneration policy of the Company inter alia includes the aims and objectivesprinciples of remuneration guidelines for remuneration to Executive Directors andNon-Executive Directors fixed and variable components in the remuneration packagecriteria for identification of the Board Members and appointment of senior management.
The criteria for identification of the Board Members including that for determiningqualification positive attributes independence etc. are summarily given hereunder :
> The Board Member shall possess appropriate skills qualification characteristicsand experience. The objective is to have a Board with diverse background and experience inbusiness government academics technology human resources social responsibilitiesfinance law etc. and in such other areas as may be considered relevant or desirable toconduct the Company's business in a holistic manner.
> Independent director shall be person of integrity and possess expertise andexperience and/or someone who the Committee/Board believes could contribute to thegrowth/philosophy/strategy of the Company.
> In evaluating the suitability of individual Board Members the Committee takesinto account many factors including general understanding of the Company's businessdynamics global business social perspective educational and professional background andpersonal achievements.
> Director should possess high level of personal and professional ethics integrityand values. He should be able to balance the legitimate interest and concerns of all theCompany's stakeholders in arriving at decisions rather than advancing the interests of aparticular constituency.
> Director must be willing to devote sufficient time and energy in carrying outtheir duties and responsibilities effectively. He must have the aptitude to criticallyevaluate management's working as part of a team in an environment of collegiality andtrust.
> The Committee evaluates each individual with the objective of having a group thatbest enables the success of the Company's business and achieve its objectives.
PARTICULARS OF LOANS GUARANTEES OR 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.
CRfSIL has re-affirmed "A1+" rating to the Company for Rs 50 crores ShortTerm Debt Programme and "AA+/Stable" rating in respect of outstandingNon-Convertible Debentures of Rs 400 crores issued by the Company. This rating indicateshigh degree of safety with regard to timely payment of interest and principal of theinstrument. Further CRfSIL has assigned "A1 +" rating for Rs 150 crores ShortTerm Debt Programme.
Further Credit Analysis and Research Limited (CARE) has also re-affirmed "CAREAA+" rating for the Company's Long Term Bank facilities and "CARE A1+" forthe Company's Short Term Bank facilities aggregating to Rs 1298 crores. The ratingCommittee of CARE has also re-affirmed "CARE AA+" for the outstandingNon-Convertible Debentures of Rs 400 crores and "CARE A1 +" rating for the ShortTerm Debt programme of Rs 50 crores.
The high financial discipline and prudence and the strong credit rating has enabled theCompany to reduce its cost of working capital borrowings. The Company continuouslyundertakes review of liability management so as to reduce cost.
During the year the Company has repaid the Secured Redeemable NonConvertibleDebentures aggregating to Rs 100 crores.
Further the Company efficiently manages its surplus funds by investing in highly rateddebt securities and debt schemes of mutual funds considering safety liquidity and return.
The Company has complied with the Corporate Governance Code as stipulated under theListing Agreement with the Stock Exchanges. A separate section on Corporate Governancealong with certificate from the auditors confirming the compliance is annexed and formspart of the Annual Report.
RELATED PARTY TRANSACTIONS
All transactions entered with Related Parties during the financial year were on anarm's length basis and were in the ordinary course of business and the provisions ofSection 188 of the Companies Act 2013 are not attracted. Thus disclosure in Form AOC-2is not required. Further there are no materially significant related party transactionsduring the year under review made by the Company with Promoters Directors Key ManagerialPersonnel or other designated persons which may have a potential conflict with theinterest of the Company at large.
All Related Party Transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee is obtained for the transactions which areof a foreseen and repetitive nature. The transactions entered into pursuant to the omnibusapproval so granted along with a statement giving details of all related partytransactions is placed before the Audit Committee.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website and may be accessed at the linkhttp://www.birlacorporation.com/investors/related-partp-transactions- poIicp.pdf.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
As required under provisions of the Companies Act 2013 and Rule 8(3) of Companies(Accounts) Rules 2014 details relating to Conservation of Energy Technology Absorptionand Foreign Exchange Earnings and Outgo are given in the Annexure - B which is annexedhereto and forms part of the Directors' Report.
Risk management is the process of identification assessment and prioritisation ofrisks followed by coordinated efforts to minimise monitor and mitigate/control theprobability and / or impact of unfortunate events or to maximise the realisation ofopportunities. The Company has laid a comprehensive Risk Assessment and MinimizationProcedure which is reviewed by the Audit Committee and approved by the Board from time totime. These procedures are reviewed to ensure that executive management controls riskthrough means of a properly defined framework. The major risks have been identified by theCompany and its mitigation process/measures have been formulated in the areas such asbusiness project execution event financial human environment and statutorycompliance.
AWARDS & RECOGNITIONS
During the year Company's Cement Unit: Satna Cement Works has been conferred theGreentech Gold Award 2014 for Outstanding Achievement in the areas of EnvironmentManagement and Corporate Social Responsibility. The Unit has received 5S certificate on5th August 2014 from Quality Circle Forum of India Hyderabad.
Further Birla Cement Works has received the Greentech Safety Gold Award-2014 fromGreentech Foundation New Delhi for outstanding achievement in safety management and hasalso bagged Greentech Silver Award for Outstanding Achievement in Environment Management.
OCCUPATIONAL HEALTH & SAFETY
Employees of the Company play an important role in the industrial operation andcompany's growth and are considered as the most valuable assets and their personal andprofessional development along with their robust health and safety is one of the toppriorities of the organization.
To get good results in the accident prevention we have included safety programmes likeinvestigation & analysis of all serious and fatal accidents recommendations /remedial measures to prevent similar accidents. Near- miss situation / incident with noinjury is accorded serious consideration for planning of preventive measures. As a part ofsafety measures we are ensuring almost cent percent use of Personal Protective Equipmentby developing voluntary safety culture. Various periodical health check up programmes areconducted from time to time so as to monitor health hazards if any.
The Company is complying with all the Statutory Provisions as required under theFactories Act. Competent persons carry out compulsory testing / examination of liftingtools pressure vessels cranes safety belts etc. as per statutory requirement. Safetyposters slogans are widely displayed in the conspicuous places at the factory includingwork places canteen and plant gates to continuously remind everyone about safe workingpractices and environment so as to inculcate a culture of safety amongst the workers.Safety day / week celebration is being organized every year with a view to arouse andmotivate safety consciousness amongst the employees.
CORPORATE SOCIAL RESPONSIBILITY
In line with the provisions of the Companies Act 2013 the Company has framed itsCorporate Social Responsibility (CSR) policy for the development of programmes andprojects for the benefit of weaker sections of the society and the same has been approvedby the CSR Committee and the Board of Directors of the Company. The Corporate SocialResponsibility (CSR) policy of the Company provides a road map for its CSR activities. Thepurpose of CSR Policy is to devise an appropriate strategy and focus its CSR initiativesand lay down the broad principles on the basis of which the Company will fulfill its CSRobjectives. As per the said policy the Company continues the strategy of discharging partof its CSR responsibilities related to social service through various trusts/societies inaddition to its own initiatives and donations made to other non-government organizations.
The CSR Policy has been uploaded on the Company's website and may be accessed at thelink http://www.birlacorporation.com/investors/csr- policp.pdf.
Pursuant to the requirement under Section 135 of the Companies Act 2013 and Rules madethereunder a report on CSR activities and initiatives taken during the year in theprescribed format is given in Annexure - C which is annexed hereto and forms part of theDirectors' Report.
The Company is actively associated with various social and philanthropic activitiesundertaken on its own as well as by different Trusts and Societies. As a constructivepartner in the communities in which it operates the Company has been taking concreteaction to realize its social responsibility objective. The Company has been playing apro-active role in the socioeconomic growth and has contributed to all spheres rangingfrom health education empowerment of women rural infrastructure developmentenvironment conservation etc. In the past nine decades the Company has supportedinnumerable social initiatives in India touching the lives of thousands of peoplepositively by supporting environmental and healthcare projects and social cultural andeducational programs.
Health Educational and Social Initiatives
The Company provides active assistance financial as well as managerial to varioushospitals and educational and philanthropic institutions set up by trusts and societies.
The Company is financially and otherwise contributing to the M/s Madhav PrasadPriyamvada Birla Apex Charitable Trust for construction of a 200 beds multi specialityHospital namely "M. P BIRLA HOSPITAL & RESEARCH CENTRE" which is situatednear cement plant of the Company at Chittorgarh Rajasthan. The total built up area of thehospital building and housing building will be approximately 1.90 lacs Sq. ft. and willhave basement ground and 1st to 4th floors. The hospital shall have a separateresidential building for resident doctors and nurses. Slab casting up to the 4th floor ofthe Hospital Block and Housing Block is under the various stages of completion. Work Orderin respect of Civil Electricals Plumbing & Fire Fighting HVAC (Air Conditioners)Elevators and DG Sets has already been awarded. Awarding of tender in respect of UPS isunder process. Slab casting up to the 4th floor of the Hospital Block and Housing Block isunder the various stages of completion. Brick work Flooring Dados work as well asElectrical Plumbing HVAC and Elevator work is progressing simultaneously. Initiativesare being taken to invite quotations in respect of Equipments for the Hospital. Order inrespect of Medical Gas Pipeline System Central Sterile Services Department EquipmentsScrub Station and Kitchen Equipments has already been awarded. It is expected that thehospital shall start operation in the year 2016.
This apart the CSR activities undertaken include :
01. Health care activities :
The Company supports various social development activities in the area of healthcare byway of providing free medical check up and administer free treatment and medicines for theneedy people "State- of-Art" treatment facility for various critical diseasesin remote areas running voluntary centres and dispensaries providing much-needed medicalservices to the local population at a highly subsidized rate organising free eye Campsincluding eye screening cataract operation and surgery Camps Organizing health awarenesscamps and programs AIDS awareness Wellness Clinics and Mobile Medical Vans contributionfor cleaning work at Mahila and Bal Chikitsalaya etc.
Free health camps are organised in rural areas to provide quality healthcare servicesto the local population as well as to the population of the area surrounding the Company'scement plants at Satna by M.P Birla Hospital and Priyamvada Birla Cancer ResearchInstitute.
02. Education :
The Company provides financial support for free education to children in the schools.The Company has also been providing infrastructural support to the schools located closeto the Company's plants by way of repairing and renovating the buildings from time totime. The Company contributed towards 'Sarv Shiksha Abhiyan'. School dresses winterclothes books stationery and other materials are provided free of cost to needy studentson regular basis. Computer training is provided to the students in the villages in nearbyarea. Students from various educational institutions are allowed to visit the plant andstudy the system as a part of the education course. The Company also provides vocationaltraining to management and engineering students and workers on regular basis.
03. Empowerment of women:
With a view to improve economic condition and help in development and empowerment ofwomen the Company has taken various initiatives to promote skill building and incomegenerating schemes for women in surrounding villages of factory and mining area. Theinitiatives include income generating activities such as Agarbatti making and spicesmanufacturing projects. Necessary training and support is provided to women self-helpgroups under the projects to make them self reliant. The Company also organises ruralwomen sports meet in which women of various villages surrounding company's mining areaparticipate.
04. Animal welfare and livestock development :
With the support of M/s. BAIF Development Research Foundation Pune Livestockdevelopment and improved agricultural programme were undertaken in the villages nearby themining areas of the Company. The programme aims to provide livelihood support and improvesocio-economic condition of the local people and initiate various rural developmentprojects e.g. to help in developing high yielding breeds of cattle goats and sheepimprove agricultural practices by providing good quality of seeds and training on bestpractices to the farmers by agriculture specialists. Promotion of organic vegetable andseasonal crops in our mining areas was initiated. Use of agricultural waste in terms ofenergy conservation and renewable energy development were undertaken. Several sanitationand hygiene programme are organised in schools and villages nearby our factory and miningareas.
05. Promotion of rural sports :
The Company organises sports and games activities for villagers in nearby mining andfactory areas. Financial support is provided for organizing State level Kabaddi ruralsports meet at villages. The Company organises All India Independence Day FootballTournament at Satna which is registered as Class 1 Tournament by All India FootballAssociation New Delhi.
06. Other Social Initiatives :
The Company undertakes other social welfare activities and rural development projectsincluding providing drinking water facility in villages near its Plants repairing of handpumps & submersible pumps maintenance and renovation of heritage buildings and publicparks. The Company has also contributed for development of historical and religious placesRamvan Muktidham Uttarakhand disaster etc. The Company has made contribution towardsvarious art and cultural activities including that of Meera Mahotsav and Hast Shilp Mela.
07. Environmental sustainability :
The Company has undertaken consistent efforts in promoting clean and pollution freeenvironment and making the environment eco friendly. Accordingly various initiatives havebeen taken for Clean Development Mechanism (CDM) and pollution prevention. Sustainabledevelopment and environmental dimension forms an integral part of the Company's businessdecisions.
Alternative Fuel and Raw Material System (AFRS) - During the year the Company hastaken major initiative for setting up of AFRS at its cement plants at Satna and Chanderiaorders for which has already been placed. The Company proposes to use alternative fuel inthe form of agricultural waste which is available in the vicinity of our cement plants.The alternative fuel can be used in the Kiln to the extent of 10-15% which would reducethe consumption of coal and lead to cost saving.
Extensive plantation and gardening have been undertaken at all the Units of the Companyboth in and around mining plant and residential areas. Regular inspection and maintenanceof pollution equipment are done and emission levels are maintained within the statutorylimits.
Measures have been taken during the year for further improving the environmentalperformance such as installation of Bag Dust Collectors and new water spray system forcontrolling dust emission. Sheds are constructed for maintaining good house keeping insidethe plant premises. SO2 & NOx gas analyzer in kiln stack has been installed for closemonitoring.
Water tankers pumps rain guns and water spray system have been provided forpressurized spray in order to control dust pollution around mining area and roads.Measures have also been taken for conservation of limestone reserves.
The Waste Heat Recovery System at Satna and Chanderia plants of the Company has beenimplemented which uses the waste hot gases coming out of the pre-heater and clinker coolerto generate substantial power thereby reducing GHG emissions into the atmosphere. Grindingaid is introduced in all the units to improve consumption of Fly Ash and Slag. Further toprotect the environment the Company has consumed 15.53 lac tonnes of Fly ash during theyear 2014-15 at various cement plants of the Company. This has resulted in reduction ofclinker usage which in turn reduced Green House Gas (GHG) emissions at our plantswithout compromising on the quality and strength of cement.
Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the ListingAgreement the Board has carried out an annual evaluation of its own performance theDirectors individually as well as the evaluation of the working of various Committees. TheIndependent Directors also carried out the evaluation of the Chairman and theNon-Independent Directors the details of which are covered in the Corporate GovernanceReport.
CRITERIA FOR EVALUATION OF DIRECTORS
For the purpose of proper evaluation the Directors of the Company have been dividedinto 3 (three) categories i.e. Independent Non-Independent & Non-Executive andExecutive.
The criteria for evaluation includes factors such as engagement strategic planning andvision team spirit and consensus building effective leadership domain knowledgemanagement qualities team work abilities result/ achievements understanding andawareness motivation/ commitment/ diligence integrity/ethics/values andopenness/receptivity.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
i) On the recommendation of the Nomination and Remuneration Committee the Board ofDirectors of the Company during its Meeting held on 5th February 2015 appointed Ms.Shailaja Chandra as an Additional Independent Woman Director on the Board of the Company.The requirement under Section 149 of the Companies Act 2013 and Clause 49 of the ListingAgreement also stands complied with this appointment.
ii) Shri Pracheta Majumdar Whole-time Director designated as Chief Management Advisorretires from the Board by rotation and being eligible offers himself for re-appointment.
The above are subject to the approval of the shareholders in the ensuing Annual GeneralMeeting of the Company.
In view of the provisions of Section 203 of the Companies Act 2013 Shri Bachh RajNahar Managing Director Shri Pracheta Majumdar Wholetime Director designated as ChiefManagement Advisor Shri Aditya Saraogi Chief Financial Officer and Shri Girish SharmaCompany Secretary were identified and appointed as Key Managerial Personnel of theCompany.
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
The Board of Directors of the Company has decided to wind-up the subsidiary companynamely "Birla Corporation Cement Manufacturing PLC1 Ethiopia. The above decision wastaken as the project was not commercially viable in view of the surplus cement capacitiescreated which are far in excess of the demand. The two subsidiary companies namelyThiruvaiyaru Industries Limited and Birla North East Cement Limited are under the processof voluntary winding up. In view of the aforesaid these subsidiaries have not beenconsidered in preparing the consolidated Balance Sheet.
During the previous financial year the Board of Directors approved the Scheme ofAmalgamation of Talavadi Cements Limited a 98% Subsidiary Company with Birla CorporationLimited with an appointed date of 1st April 2013. A Court Convened Meeting of the EquityShareholders of the Company was held during the year for approving the Scheme ofAmalgamation of Talavadi Cements Limited a subsidiary with Birla Corporation Limited. Thematter is pending before Hon'ble High Court at Calcutta for its approval.
No company has become a joint venture during the financial year 2014-15.
A report on the performance and the financial position of 6 (six) subsidiary companiesalong with 2 (two) associate companies as per Companies Act 2013 forms part of theconsolidated financial statement and hence not repeated here for the sake of brevity.
The Company has discontinued the Deposit scheme in the financial year 2014-15 and nofresh Deposits have been accepted during the year. The amount of Deposit lying with theCompany at the beginning of the year has been fully repaid and there is no outstandingbalance as on 31st March 2015.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS COURTS ANDTRIBUNALS
No significant and material order has been passed by the regulators courts tribunalsimpacting the going concern status and company's operations in future.
INTERNAL CONTROL AND SYSTEMS
The Company has adequate internal control procedures commensurate with its size andnature of business. The objective of these procedures is to ensure efficient use andprotection of the Company's resources accuracy in financial reporting and due complianceof statutes and corporate policies and procedures.
Internal Audit is conducted periodically across all locations by firms of CharteredAccountants who verify and report on the efficiency and effectiveness of internalcontrols. The adequacy of internal control systems are reviewed by the Audit Committee ofthe Board in its periodical meetings.
INTERNAL FINANCIAL CONTROL SYSTEM
The Company has a robust and comprehensive Internal Financial Control systemcommensurate with the size scale and complexity of its operations. The system encompassesthe major processes to ensure reliability of financial reporting compliance withpolicies procedures laws and regulations safeguarding of assets and economical andefficient use of resources.
The policies and procedures adopted by the company ensures the orderly and efficientconduct of its business and adherence to the company's policies prevention and detectionof frauds and errors accuracy and completeness of the records and the timely preparationof reliable financial information.
The Internal auditors and the Management Audit Department continuously monitors theefficacy of Internal Financial Control system with the objective of providing to the AuditCommittee and the Board of Directors an independent objective and reasonable assuranceon the adequacy and effectiveness of the organisation's risk management with regard to theInternal Financial Control system.
Audit Committee meets regularly to review reports submitted by the Internal auditors.The Audit Committee also meet the Company's Statutory Auditors to ascertain their views onthe financial statements including the financial reporting system and compliance toaccounting policies and procedures followed by the Company.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
In compliance with provisions of Section 177(9) of the Companies Act 2013 and Clause49 of the Listing Agreement the Company has framed a Vigil Mechanism/Whistle BlowerPolicy to deal with unethical behaviour actual or suspected fraud or violation of thecompany's code of conduct or ethics policy if any. The Vigil Mechanism/Whistle BlowerPolicy has also been uploaded on the website of the Company.
PARTICULARS OF EMPLOYEES
As required under provisions of the Companies Act 2013 and Rule 5(2) and 5(3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 particularsof the employees concerned forms a part of the Directors' Report. Having regard to theprovisions of Section 136 of the Companies Act 2013 the Annual Report excluding theaforesaid information is being sent to the members of the Company. Any member interestedin obtaining such particulars may write to the Company Secretary of the Company.
DETAILS RELATING TO REMUNERATION OF DIRECTORS KEY MANAGERIAL PERSONNEL AND EMPLOYEES
Disclosure pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is marked as Annexure - D which isannexed hereto and forms part of the Directors' Report.
HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATIONS
There is a continuous effort for better Human Resource (HR) service delivery in orderto better serve the customers with simpler well executed processes with proper use oftechnology. HR service delivery has become all the more critical in the organization dueto rise in customer expectation.
The organization has a mechanism to provide employees with feedback on a continuousbasis. Based on the organization's strategic plan HR planning processes map the capacityof the organization. The knowledge skills and abilities of the employees are identified.
The strategic thrust of HR has been improvement of the performance of the employeesthrough training & development and also to identify high performers who are havingpotential for taking higher responsibilities.
The Company had 6325 permanent employees on its rolls at the close of business hours on31st March 2015. Industrial relations continued to remain cordial throughout the year atall the units. Suspension of Operation continues at Soorah Jute Mills Auto Trim DivisionBirlapur and at Birla Vinoleum Birlapur. Workers of Auto Trim Division at BirlapurChakan Gurgaon and Birla Vinoleum at Birlapur have availed separation.
AUDITORS & AUDITORS' REPORT
Statutory Auditor :
The Company's Auditors Messrs H.P Khandelwal & Co. Chartered Accountants retireat the ensuing Annual General Meeting of the Company and are eligible for reappointment.The members are requested to appoint the auditors and to fix their remuneration.
The notes on accounts referred to in the Auditors' Report are self-explanatory andtherefore do not call for any further comments.
Secretarial Auditor :
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board hadappointed Ms. Mamta Binani Practising Company Secretary to conduct Secretarial Audit ofthe Company for the Financial Year 2014-15. The Secretarial Audit Report for the FinancialYear ended 31st March 2015 is annexed herewith and marked as "Annexure - E".The Report is self-explanatory and do not call for any further comments.
Cost Auditors :
Pursuant to Section 148 of the Companies Act 2013 in terms of the CentralGovernment's approval the Board of Directors on the recommendation of the Audit Committeeappointed Shri Somnath Mukherjee Cost Accountant as the Cost Auditor of the Company forthe year under review relating to Cement and Jute Goods manufactured by the Company. Theremuneration proposed to be paid to the Cost Auditor requires ratification of theshareholders of the Company. In view of this your ratification for payment ofremuneration to the Cost Auditor is being sought at the ensuing Annual General Meeting.
Shri Somnath Mukherjee has confirmed that his appointment is within the limits of theSection 139 of the Companies Act 2013 and has certified that he is free from anydisqualifications specified under Section 148(5) and all other applicable provisions ofthe Companies Act 2013.
The Audit Committee has also received a Certificate from the Cost Auditor certifyinghis independence and arm's length relationship with the Company.
The Company submits its Cost Audit Report with the Ministry of Corporate Affairs withinthe stipulated time period.
Statements in this Report particularly those which relate to Management Discussion& Analysis describing the Company's objectives projections estimates expectationsor predictions may be'forward looking statements' within the meaning of applicable laws orregulations. Actual results could however differ materially from those expressed orimplied. Important factors that could make a difference to the Company's operationsinclude global and domestic demand-supply conditions finished goods prices raw materialsandfuels cost & availability transportation costs changesin Government regulationsand tax structure economic developments within India and the countries with which theCompany has business contacts and other factors such as litigation andindustrialrelations.
We wish to place on record our appreciation for the continued assistance andco-operation extended to the Company by the Government of India State GovernmentsFinancial Institutions and Banks Dealers and Customers Shareholders and to all otherswho are continuing their assistance to the Company.
For and on behalf of the Board of Directors
|Harsh V. Lodha ||Chairman |
|Bachh Raj Nahar ||Managing Director |
Dated the 7th day of May 2015