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Hemadri Cements Ltd.

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Hemadri Cements Ltd. (HEMADRICEMENTS) - Director Report

Company director report

To the Members of Hemadri Cements Limited

The Directors have pleasure in presenting the 34th Annual Report of HemadriCements Limited together with the audited Financial Statements for the financial yearended 31st March 2016.

COMPANY PERFORMANCE:

Your Company has made a Net Profit of Rs. 650.00 Lakhs during the year as against NetProfit of Rs. 681.00 Lakhs in the previous year. No transfer was made to General Reserveduring the year under review.

The Cement industry scenario in India is encouraging and the "make in India"and " start up" initiatives by Govt are favoring our company's future growth inthe years to come.

FINANCIAL HIGHLIGHTS:

(Rs in Lakhs)

Particulars Year ended 2015-16 Year ended 2014-15
Sales and other Income 9298.94 8500.05
Profit/ (Loss) before Interest and Depreciation 1172.03 1102.08
Interest 15.95 4.96
Profit/ (Loss) before Depreciation 1156.08 1097.12
Depreciation 106.12 91.82
Profit / (Loss) before Tax 1049.96 1005.30
Tax Expenses:
Current Tax 382.00 290.00
Deferred Tax 17.56 34.30
Profit/ (Loss) after Tax 650.00 681.00

DIVIDEND:

The board reviewed the financial performance and the Capital Expenditure requirementfor the near future of the company. To meet the recently revised Pollution Control normsyour company has proposed to upgrade the "Plant & Machinery". Further as acost reduction measure your company focused its attention to replace the out dated andinefficient equipment(s) to save power cost and to improve efficiency in production. Yourcompany has already initiated the erection and commissioning of a new cement packing plantwith modern technology to reduce the weight differences as per weights and measuresstandard norms. In view of above your directors are unable to propose the dividend forthe year under review.

MANAGEMENT DISCUSSION AND ANALYSIS:

The Indian economy registered a growth rate of 8.68% for the year under review whencompared to 7.4% for the year 2014-15. The Cement industry is line with the growth of theeconomy.

The Government of India has undertaken various policy initiatives such as newamendments in Mines and Minerals (Developement and Regulation) Act 1957 and furtherliberalized foreign direct investment. Many broad based set of initiatives aimed atencouraging "starts up" and tax holiday for new SMEs are expected to give animpetus to the manufacturing sector. It is expected that the benefits from various policyinitiatives will have a positive impact on the manufacturing sector including CementIndustries in the coming years.

The construction activity which directly related to Cement Industry has been growingmarginally during the year. Your Company may face the market more competitive due to thisfactor but the infrastructure Sector growth will ease the situation in the positivedirection in the near future.

Your directors are confident of overcoming the adverse tactors by appropriate decisionand the stake holder support.

DIRECTORS AND KEY MANAGERIAL PERSONNEL:

The Board of Directors met four (4) times once in every quarter during the year toreview and consider the financial results and operation of the Company. More details areprovided in the Corporate Governance Report which form part of this report.

Pursuant to the provisions of the Companies Act 2013 Shri. P.Ravi and Shri. SivaramanVivekanandan Murugan Directors retire by rotation and are eligible for reappointment. TheBoard recommends their reappointment and accordingly resolution seeking approval of themembers for their re-appointment have been included in the notice of the forthcomingAnnual General Meeting of the company along with their brief profile.

The Key Managerial Personnel of the company presently are Shri. K. Gopi Prasad ManagingDirector Shri. Vivek Sivaraman Director & CEO and Mr. Velli Paramasivam CompanySecretary.

DIRECTORS' RESPONSIBILITY STATEMENT:

On the basis of internal financial controls and systems relating to compliancemaintained by the company work done by the internal statutory and secretarial auditorsthe reviews performed by the management and the relevant Board Committees including theAudit Committee the Board is of the opinion that the company's internal financialcontrols were adequate and effective during the financial year 2015-16.

Pursuant to Section 134 (3) (c) and 134 (5) of the Companies Act 2013 and based onthe representations received from the management the directors hereby confirm that:

a) in the preparation of the Annual Accounts for the year 2015-16 the applicableaccounting standards had been followed and there are no material departures;

b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year 31stMarch 2016 and of the profit of the company for that period;

c) the directors had taken proper and sufficient care to the best of their knowledgeand ability for the maintenance of adequate accounting records in accordance with theprovisions of the Act for safeguarding the assets of the company and for preventing anddetecting fraud and other irregularities.

d) the directors had prepared the annual accounts on a going concern basis;

e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and operating effectively;

f) the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

INDEPENDENT DIRECTORS DECLARATION:

Shri G.Rajan Shri D.B.N.Rao Shri B.Ramachandra Rao Shri R.A.Nadesan and Smt.R.AnandaPriya who are independent directors have submitted a declaration that each of them meetsthe criteria of independence as provided in sub-section (6) of section 149 of the Act andrevised clause 49 of the listing agreement.

RISK MANAGEMENT POLICY:

The Board takes responsibility in overseeing the risk management plan for the company.The Risk Management Policy facilitates in identifying the risks associated with theoperations of the company and in giving suitable measures/solutions to mitigate the same.Risks identified by the businesses and functions are systematically addressed throughmitigating actions on a continuous basis.

CORPORATE SOCIAL RESPONSIBILITY:

As per the provisions of the Companies Act 2013 the Corporate Social ResponsibilityCogimittee was formed for CSR Activities. Your Company has spent Rs.828304/= towards CSRActivities as approved by the CSR Committee and the Board. The Balance amount of Rs.1541863/= pertaining to the years 2014-15 and 2015-16 will be spent after identificationof projects by the CSR Committee in the future. A detailed CSR Activities of the Companyis furnished as Annexure V to this report.

BOARD EVALUATION:

The performance evaluation of the Board its Committees and individual directors wasconducted and the same was based on questionnaire and feedback from all the Directors onthe Board as a whole committees and self-evaluation.

Directors who were designated held separate discussions with each of the Directors ofthe company and obtained their feedback on overall Board effectiveness as well as each ofthe other directors.

Based on the questionnaire and feedback the performance of every director wasevaluated in the meeting of the Nomination and Remuneration Committee (NRC) and it will beimproved based on the suggestion.

Important key criteria for Directors performance evaluation are as follows :

Attendance at Board or Committee Meetings Contribution at Board or Committee MeetingsGuidance/support to management outside Board/Committee meetings.

AUDITORS:

Statutory Auditors:

In accordance with the provisions of Section 139 the Companies Act 2013 and the rulesframed thereunder M/s. B. Purushottam & Co. Chartered Accountants Chennai havingReg No: 002828S were appointed as statutory auditors of the company till the conclusion ofthe 34th Annual General Meeting (AGM) to be held in the year 2016.The Boardrecommend for their re-appointment for the financial year 2016-17.

Internal Auditor:

M/s DPV & Associates Chartered Accountants Chennai has been appointed as aninternal auditor to conduct the internal audit for the company during the year underreview. Their scope of work includes review of processes for safeguarding the assets ofthe company review of operational efficiency effectiveness of systems and processes andassessing the internal control strengths in all areas. Internal auditor's findings arediscussed with the senior officials and suitable actions taken as directed by the AuditCommittee on a regular basis to improve efficiency of the Company.

Cost Auditor:

The appointment of Cost Auditor is not mandatory as per the applicable statutoryprovisions.

Secretarial Auditor:

Mr.G.Porselvam Practicing Company Secretary Chennai has been appointed as theSecretarial Auditor to conduct the Secretarial audit for the Company during the year underreview. The Secretarial Audit Report provided by him shall form part of this report.

LISTING :

The equity shares of the Company are listed on Bombay Stock Exchange Limited (BSE). Theshares are not quoted in the BSE because the criteria in terms of Minimum paid up capitaland Net worthfor trading are not met by the Company. The Secretarial Auditor hasqualified in their report on non trading of Company equity shares in BSE and its noncompliance. Your company initiated to resolve the issue or other suitable measures uponexperts advise on the issue.

CORPORATE GOVERNANCE:

The Company has been practicing the principles of good Corporate Governance over theyears and lays strong emphasis on transparency accountability and integrity.

A separate section on Corporate Governance annexed which form part ofthis Annual report.

PUBLIC DEPOSIT:

The Company has not accepted any fixed deposits under the provisions of theCompanies Act 2013. DISCLOSURES :

A. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO :

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withthe Companies (Accounts) Rules2014 are given in the Annexure I and forms part ofthis report.

B. EXTRACT OF THE ANNUAL RETURN :

Extract of Annual return in the prescribed form MGT -9 is given as Annexure II tothis report in terms of the requirement of section 134(3)(a) of Act 2013 read withthe Companies (Accounts) Rules2014.

C. PARTICULARS OF EMPLOYEES REMUNERATION :

The information required under section 197( 12) of the Act read with rule5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is furnished in the Annexure to this report.

D. TRANSACTIONS WITH THE RELATED PARTIES :

The particulars of contracts or arrangements with related parties referred to insub-section (1) of section 188 are furnished in Form AOC-2 to this report as AnnexureIII

E. DETAILS OF LOANS / GUARANTEES / INVESTMENTS MADE :

The details of loans / guarantees / investments under Section 186 of the Act 2013 readwith (Meeting of Board and its Powers) rules 2014 for the financial year 2015-2016 aregiven as Annexure IV to this report.

F. OTHER LAWS:

During the year under review there were no cases filed pursuant to the provisions ofSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

There were no significant and material orders passed by the regulators or courts ortribunals affecting the going concern status and future operations of the company.

ACKNOWLEDGEMENTS :

Your directors would like to place on record their appreciation for the guidance andsupport received from various departments of State and Central Governments.

Banks and Financial Institutions have shown cordial understating and support and yourDirectors place on record their appreciation for the same.

Your directors also place on record their appreciation of the services rendered andco-operation extended by all the employees of the Company.

The Directors also thank the investors and stake holders for their continued support tothe Company.

Place : Chennai For and on behalf of the Board
Date : 31.5.2016 P. Ravi
Chairman

ANNEXURE I TO DIRECTORS'REPORT

FORM- A

CONSERVATION OF ENERGY

A. POWER AND FUEL CONSUMPTION : 2015-2016 2014-15
1. ELECTRICITY:
a) Purchased
Units 27693240 27177480
Total Amount 178086887 174781040
Average Rate / Unit (Rs.) 6.43 6.43
b) Own Generation
Through Diesel Generation Unit
Units Per Ltr. of Diesel Generation
Cost / Unit (Rs.)
2. COAL:
Quantity (Tons) 48529 46948
Total Cost Rs. 286403541 240180300
Average Rate (Rs.) 5901.70 5193.31
3. FURNACE OIL: NA NA
Quantity (Tons)
Total Cost
Average Rate
4. OTHER /INTERNAL GENERATION : NA NA
Quantity
Total Cost (Rs.)
Rate / Unit

B. CONSUMPTION PER UNIT PRODUCTION :

Standards (If any)
Electrical Consumption Per ton of Cement 140.00 units 103.01 units 104.24 units
Coal Consumption Per ton of Cement 0.25 MTS 0.18 MTS 0.20 MTS

TECHNOLOGY ABSORPTION FROM FOREIGN COUNTRIES :

During the year the Company had no occasion to absorb any foreign technology.

FOREIGN EXCHANGE EARINGS AND OUTGO :

During the year the Company had no foreign exchange earnings and out go.

FORM- B

A. RESEARCH AND DEVELOPMENT ( R & D) : 2015-2016 2014-2015
1. Specific areas in which R & D carried out by the Company NIL NIL
2 Benefits derived as a result of the above R & D NIL NIL
3. Future plan of action NIL NIL
4. Expenditure on R & D NIL NIL
a) Capital
b) Recurring
c) Total
d) Total R & D expenditures as a percentage of total turnover NIL NIL

B. TECHNOLOGY ABSORPTION ADOPTION INNOVATION :

1. Efforts in brief made towards Technology absorption adoption and innovation NIL NIL
2 Benefits derived as a result of the above efforts e. g product improvement cost reduction Products development import substitution etc. NIL NIL
3 In case of imported technology (Imported during the

last 5 years reckoned from the beginning of the financial year) following information may be furnished

NIL NIL

a) Technology imported :

b) Year of import :

c) Has technology been fully absorbed :

d) If not fully absorbed areas where this has not taken place reasons therefor andfuture plans of action :

BY ORDER OFTHE BOARD OF DIRECTORS
Place : Chennai P. Ravi
Date : 31.05.2016 Chairman

ANNEXURE III TO DIRECTORS' REPORT

Form No. AOC-2

Pursuant to clause (h) of sub-section (3) of section 134 of the Companies Act 2013 andRule 8 (2) of the Companies (Accounts) Rules 2014)

Form for disclosure of particulars of contracts / arrangements entered into by thecompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arms length transaction under third proviso thereto.

1. Details of Contracts or arrangements or transactions not at arm's length basis :

(a) Names of the related party and nature of relationship SRM Global Cements Corporation Ltd. Directors Interested Company SRM Transport India Pvt Ltd. Directors Interested Company
(b) Nature of Contracts / arrangements / transactions Sale of Cements Transport of Cements
(c) Duration of Contracts / arrangements / transactions 2015-16 2015-16
(d) Salient terms of the contracts or arrangements or transactions including the value if any. Irrespective of market fluctuations to sell the Cement at decided Quantity at fixed price per bag. Transport of Cements to other states on regular basis at the agreed price per MT without any interruption
(e) Justification for entering into such contracts or arrangements or transactions Company ensures the production schedule Sales and funds flow management. Company ensures the Sales schedule at the fixed cost.
(0 Date of approval by the Board if any Approved Approved
(g) Amount paid as advances if any Nil Nil

2. Details of material contracts or arrangement or transactions at arm's length basis.

The Cement sales to SRM Civil Works Pvt. Ltd. and Loan to HCL Agro Povyer Limited areat arm's length basis and reported to Board periodically in which directors areinterested.

Place : Chennai
Date : 31.05.2016 Chairman

ANNEXURE IV

DETAILS OF LOANS AND GUARANTEES UNDER SECTION 186 OF THE ACT 2013 FOR THE FINANCIALYEAR 2015-16

S.No. Name of the body corporate Nature of relationship Purpose of loan/ acquisition/ guarantee / security Rate of interest Amount of loan / security / guarantee (Rs.in laks) % to free Reserves Purpose for which the loan/ guarantee utilised by the recipient
1. HCL Agro Power Ltd Directors Interested Company Inter Corporate loan Existing Bank Rate 47.19 1.04 For Business purpose