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JK Lakshmi Cement Ltd.

BSE: 500380 Sector: Industrials
NSE: JKLAKSHMI ISIN Code: INE786A01032
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OPEN 418.95
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VOLUME 3470
52-Week high 535.00
52-Week low 326.75
P/E 60.36
Mkt Cap.(Rs cr) 4,930
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 418.95
CLOSE 417.90
VOLUME 3470
52-Week high 535.00
52-Week low 326.75
P/E 60.36
Mkt Cap.(Rs cr) 4,930
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

JK Lakshmi Cement Ltd. (JKLAKSHMI) - Director Report

Company director report

Dear Members

The Directors have pleasure in presenting the 76th Annual Report together with theAudited financial statements of the Company for the financial year ended 31st March 2016.

FINANCIAL RESULTS

RS. in Crore

2015-16 2014-15
Sales & Other Income 2999.63 2596.69
Profit before Interest & Depreciation 330.41 377.66
Profit before Depreciation 138.11 286.92
Profit after Tax 6.28 95.60
Transfer from Debenture Redemption Reserve (Net) 1.91 7.19
Surplus brought forward 179.81 130.46
Amount available for appropriation 188.00 233.25
Appropriations
- Dividend (inch tax on Dividend) 3.54 28.32
- General Reserve - 25.12
Surplus carried to Balance Sheet 184.46 179.81
188.00 233.25

DIVIDEND

Your Directors are pleased to recommend a dividend of X 0.25 per Equity Share of X 5each (5%) for the year ended 31st March 2016. The Dividend outgo would amount to X 3.54crores (inclusive of Dividend Distribution Tax of X 0.60 crores). The Dividend subject toapproval at the AGM on 7th September 2016 will be paid to those Shareholders whose namesare borne on the Register of Members of the Company as on the date of book closure for theAGM.

PERFORMANCE

The Company's performance during the Financial Year 2015-16 has been satisfactory interms of better capacity utilization at 82% as against the Industry average of 66%.

The Company has been able to increase its Production and Sales by 26% and 23%respectively. The Company continues to be one of the least cost producers and has laidgreat emphasis on cost optimization at all levels. Its fuel consumption was at 76 Kg/Tonnein FY 2015-16 as against 81 Kg/Tonne in the previous FY 2014-15.

The Durg Plant has performed satisfactorily in the very first full year of itsoperations and achieved 104% capacity utilization in the last quarter of FY 2015-16.Company has become a third largest player in Chhattisgarh market in a short span of time.

During the year the Company witnessed a sharp fall in the cement prices in most of itsmarkets. Consequently its sales realisation too registered a steep decline. As a resultdespite a good volume growth of 23% turnover of the Company rose by only 16% from X2596.69 Crore to X 2999.63 Crore. The Company's Operating Profit was lower atT 330.41Crore as against X 377.66 Crore in the previous year. Besides substantially lower pricesthe Company's profitability got impacted due to the additional burden of interest anddepreciation relating to commissioning of the first phase of the integrated GreenfieldCement plant at Durg. After recognizing Deferred Tax Assets the Company's Net Profitstood at Rs. 6.28 Crore as against X 95.60 Crore achieved in FY 2014-15.

PROGRESS OF THE PROJECTS & EXPANSIONS

Durg plant commissioned last year has been fully operational. Work of split grindingunit at Surat got completed in March 2016 and trials are going on. This will add 1.35million tonnes to the total capacity of your Company. Work at Orissa Grinding Unit is alsoprogressing gradually. Project related to setting up clinkerization facility at theCompany's Subsidiary Udaipur Cement Works Ltd. (UCWL) is expected to be completed by Q4of FY 2016-1 7. Company's total capacity which stood at 8.6 million tonnes as at end ofMarch 2016 is expected to grow to about 11 million tonnes besides 1.6 million tonnes ofUCWL by March 2017.

INDUSTRY SCENARIO

The Cement Industry currently having a capacity of more than 400 million tonnes perannum is gradually moving towards consolidation. The leading 4 players on all India basisas well as on regional basis account for about 50% of the total capacity as also themarket share. Cement business being capital intensive with longer gestation period andinvestment cycles consolidation helps the industry to meet Nation's emerging needs inorderly fashion and in time.

We expect that the new capacity additions shall be considerably lower may be lessthan 5% per annum over the next few years thereby narrowing the existing largesupply-demand imbalance.

OPPORTUNITIES

In the year 2015 India for the first time in its recent history surpassed China toemerge as top FDI destination in the world. It attracted more than 40 Billion US $ ofinvestment during April to December 2015. With the Indian economy growing at current paceand with other favorable micro indicators such as inflation budget & trade deficitexchange & interest rates growth of nonfood credit etc. there are huge expectationsof significant turn-around in the industry fortunes in FY 2016-17.

The Prime Minister in the recent past has laid considerable emphasis on the schemes andpolicies such as 'Smart Cities' 'Swacch Bharat' 'AMRUT' and most ambitiously'FHousingfor All by 2022'. These schemes when fully implemented are expected to revive the cementconsumption all over the country. Further increase of 46% in the budget allocations forinfrastructure segment in the Union Budget for FY 17 and the emphasis being laid by thepresent Government on the FHighway Projects and Concrete Roads Construction augurs wellfor cement consumption in all 4 key segments viz. FHousing Infrastructure CommercialReal Estate and Industry on a sustainable basis.

These initiatives will help to absorb the excess capacity to the extent of 40 to 50% incertain regions and above 25% for the country on the whole.

The lastquarterof FY 2015-16 has seen some upsurge in cement demand in certain pocketsof the country with corresponding improvement in prices and margins. With the expectationsof overall GDP growth of above 7.5% the Industry is hopeful of seeing at least 8% growthin cement demand in the FY 2016- 1 7 with a possible 2% upside on account of the policiesand schemes announced by the Government.

THREATS & CHALLENGES

The continued imbalance in the cement demand and supply has led to considerably lowersales realization. Fresh increase in the cost by way of mandatory contribution of 30% ofroyalty on limestone to District Mineral Foundation (DMF) and the rising cost of powerhas resulted in substantial shrinking of EBITDA margins. The capital cost of the newcapacities additions is also expected to go up due to higher cost of acquisition of newmining leases and land. With current capital cost of approx. Rs. 750 Crores required tocreate a fresh 1 million tonne per annum cement capacity the industry needs considerablyhigher EBITDA margins for a sustained growth of the industry.

STRATEGIC IMPERATIVES & OUTLOOK

With the industry experiencing a certain structural changes in terms of consolidationcost economics demand patterns and increasing barriers for new capacity additions etc.the strategy can no longer be singularly focused on investing to create more capacitiesfor growth. It is imperative for the Company to adopt a short term a medium term and along term vision to remain relevant and competitive in the industry .

The Company having already made substantial investments in building capacities theimmediate short term focus now shall be on meaningful absorption of such capacities andfurther improving all round operational efficiencies. With the expected improvement in thecement prices it is hoped that the Company will achieve better operating margins andprofitability on a sustainable basis over the next few years.

In the medium term the Company shall strive to consolidate on market share and tofurther raise brand positioning through introduction of premium and differentiated valueadded products among others.

Our premium Cement Brand Pro + which was introduced in October 2014 in existingmarket has been well accepted and achieved stable and sustainable volumes. Anotherpremium Cement brand namely "Platinum" was launched in the East last yearwhich has also evoked satisfactory response.

Keeping in mind changing construction practices efforts are being made to create morevalue added products and services which can increase the pace of construction and improvethe quality of construction.

Your directors are fairly optimistic about the future of the industry in general andthe Company in particular. The cement demand is highly dependent on private consumption.The success of 'Make in India' 'Skill India' 'Stand up India' is likely to be largelydriven by private investments and entrepreneurship. India due to its vast pool of youngpopulation is in unique position to harvest much talked about demographic dividend. On thewhole with the silver linings already on the horizon the hopes of a brighter future arefar stronger than the gloom at the dawn.

HUMAN RESOURCES

Our sustained focus and best-of-the class HR practices have strengthened a culturewhere commitment towards results are very high. The contributions of our human capitalduring the year were amply demonstrated through numerous efficiency parameters andeffective outcomes besides continued accomplishments in soft metrics such as motivationsatisfaction and engagement scores. Notable achievements were made in capacity utilizationand cost optimization. Stabilisation of the Company's Creenfielc cement plant at Durg in arecord time as compared tc industry standards is a manifestation of our people's higtlevel of ownership and personal motivation at work.

In the area of marketing excellence against an industry average growth of 2% in ourexisting market the Company grew by 5% in cement sales for the year under report. Ouiin-house R&D has helped to achieve edge in market through initiation development andproduction of premium cemen and value added products. Our empowered human capita hasplayed a significant role in all above achievements Utilizing the in-house talentsnurturing and developing expertise over the years through sustained processes and systemswith emphasis on learning development competency assessments improvement projects crossfunctional teams coaching and other HR intervention: have proven to be realdifferentiators.

NEW MARKETS

It is a matter of great pleasure that the planned strategy o your Company to enter intoEastern Market at a premium positioning has worked well and within a year it ha; reachedto top 3 positions in terms of volumes in the homt market. A very strong dealer networkhas been developec and the same is expanding. It is heartening that the Company in itsvery first year of operations has bagged the "Most Trusted Brand Award" fromHon'ble Chief Ministei of Chattishgarh.

INTERNAL CONTROL SYSTEM

The Company has in place a robust Internal Control System under which its IndependentInternal Audit Departmen carries out extensive audit covering all significant areas oCompany's operations throughout the year. The Company has also appointed External Auditorsto carry out Interna Auditforits key locationsand marketing offices. The Interna Auditorsregularly review the adequacy and effectivenes: of Company's Internal Control Systems.Reports of the Internal Auditors are placed before the Audit Committer on Quarterly basisfor review. The Audit Committee alsc monitors the implementation of the recommendations othe Auditors on Systems improvement as well as Proces: improvement.

The Company also has a robust Budgetary Control System & MIS System umder whichactual operatiomal performancr are mapped agaimst the Budget amd the variamce are amalyzedto take corrective actioms. Further am enterprise wide Legal Compliance MonitoringSoftware Tool has beer implemented to monitor and ensure timely compliances o allapplicable statutory requirements.

INTERNAL FINANCIAL CONTROLS

The Company has established adequate Internal Financia Controls commensurate with itssize scale and complexity of its operations. These are designed to ensure adherence tothe Company's policies safeguarding of its assets and prevention & detection offrauds & errors accuracy & completeness of financial records and timelypreparation of reliable financial information.

The Controls & Systems of the Company have over the years have been furtherstrengthened with the Implementation of ERP (SAP) which connects all the plants as well asoffices & Marketing offices to ensure seamless data and information flow. The Companyhas also implemented Standard Operating Procedures (SOPs) for its various areas ofoperations.

With a view to ensure that such Controls & Systems are reinforced on an on-goingbasis compliances thereto including SOPs are regularly monitored and also periodicallyreviewed by the Internal Auditors and exceptions reported.

EXTRACT OF ANNUAL RETURN

An extract of the Annual Return as on 31st March 2016 in the prescribed form MCT -9 isattached as Annexure 'A' to this Report and forms part of it.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENT

The particulars of loans guarantees or securities and investments covered under theprovisions of Section 186 of the Companies Act 2013 are given in the financialstatements.

RELATED PARTY TRANSACTIONS

During the financial year ended 31st March 2016 all the contracts or arrangements ortransactions entered into by the Company with the Related Parties were in the ordinarycourse of business and on arms' length basis and were in compliance with the applicableprovisions of the Companies Act 2013 and the SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015.

Further the Company has not entered into any contract or arrangement or transactionwith the Related Parties which could be considered material in accordance with the Policyof the Company on materiality of Related Party Transactions. In view of the abovedisclosure in form AOC-2 is not applicable.

The Related Party Transaction Policy approved by the Board is available on the websiteof the Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Dr. Raghupati Singhania retires by rotation and being eligible offers himself forre-appointment at the ensuing AGM.

The Board of Directors of the Company has re-appointed

Shri Bharat Hari Singhania and Smt. Vinita Singhania as Managing Directors for a termof 5 years each w.e.f. 1st October 2016 and 1st August 2016 respectively. The Board hasalso re-appointed Dr. Shailendra Chouksey and Shri Sushil Kumar Wali as Whole-timeDirectors of the Company for a term of 3 years each w.e.f. 1 st August 2016. These aresubject to requisite approval of members of the Company at the ensuing AGM. The Boardrecommends their re-appointments.

There has been no change in the Key Managerial Personnel of the Company during theyear under review.

All the Independent Directors of the Company have given requisite declarations thatthey meet the criteria of independence as provided in Section 149(6) of the Companies Act2013 and also Regulation 16 of SEBI (Listing Obligations & Disclosure Requirements)Regulations 201 5.

CONSERVATION OF ENERGY ETC.

The details as required under Section 134(3)(m) read with the Companies (Accounts)Rules 2014 is annexed to this Report as Annexure 'B' and forms part of it.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements have been prepared by the Company in accordancewith the applicable Accounting Standards. The Audited consolidated financial statementstogether with Auditors' Report form part of the Annual Report.

A report on the performance and financial position of each of the subsidiaries andassociates included in the consolidated financial statements is presented in a separatesection in this Annual Report. Please refer AOC-1 annexed to the financial statements inthe Annual Report.

Pursuant to the provisions of Section 136 of the Act the financial statementsconsolidated financial statements alongwith relevant documents and separate auditedaccounts in respect of subsidiaries are available on the website of the Company.

During the financial year under review no company has become or ceased to be yourCompany's subsidiary or joint venture or associate.

DEPOSITS

Pursuant to the approval of members by means of a Special Resolution at the AnnualGeneral Meeting held on 4th September 2014 the Company has continued to accept depositsfrom the public in accordance with the provisions of the Companies Act 2013 (Act) andthe Rules made thereunder.

The Particulars in respect of the deposits covered under Chapter V of the said Act forthe financial year ended 31st March 2016 are- (a) Accepted during the year- Rs. 4.59crores;

(b) Remained unclaimed as at the end of the year- Rs. 0.18 crores; (c) Default inrepayment of deposits or payment of interest thereon at the beginning of the year and atthe end of the year- NIL and (d) Details of deposits which are not in compliance with therequirements of Chapter V of the said Act- NIL.

AUDITORS

(a) Statutory Auditors and their Report

M/s Lodha & Co. Chartered Accountants have been appointed as Auditors of theCompany to hold the office from the conclusion of the 74th Annual General Meeting held on4th September 2014 until the conclusion of the 77th Annual General Meeting to be held inthe Year 201 7 subject to ratification of their appointment by the members at therespective AGMs to be held in the years 2015 and 2016. Accordingly being eligible matterrelating to the appointment of the Auditors will be placed for ratification by members atthe forthcoming Annual General Meeting. The observations of the Auditors in their reporton Accounts and the financial statements read with the relevant notes are selfexplanatory.

(b) Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act 2013 the Board ofDirectors appointed Shri Namo Narain Agarwal Company Secretary in Practice as SecretarialAuditor to carry out Secretarial Audit of the Company for the financial year 2015-16. TheReport given by him for the said financial year in the prescribed format is annexed tothis Report as Annexure 'C'. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.

(c) Cost Auditor and Cost Audit Report

The Cost Audit for the financial year ended 31st March 201 5 was conducted by M/s R.J.Goel & Co. Cost Accountants Delhi and as required Cost Audit Report was duly filedwith Ministry of Corporate Affairs Government of India. The Audit of the cost accounts ofthe Company for the financial year ended 31st March 2016 is being conducted by the saidFirm and their Report will also be filed.

CORPORATE SOCIAL RESPONSIBILITY

Your Company strongly believes in the process of giving back to the society. Sinceinception the Company has taken this as a moral responsibility to build a better societyby focusing on areas such as Health Sanitation Education Skill Development LivelihoodInterventions to name a few.

The Company has undertaken lots of activities for empowering women especially tribalwomen in the areas of Adult Literacy Formation of Self Help Groups for income generationthrough providing them trainings on various trades. During the Financial Year the Companyhas also focused on activities related to Swachh Bharat Mission by constructing IHHLs inthe villages providing Sanitary Napkins especially to adolescent girls by installingNapkin making machines near our Plant locations.

The Company has requisite Corporate Social Responsibility (CSR) Policy in accordancewith the provisions of the Companies Act 2013 and rules made thereunder. The contents ofthe CSR Policy are disclosed on the website of the Company.

The annual report on the CSR activities undertaken by the Company during the financialyear under review in the prescribed format is annexed to this Report as Annexure 'D'.

PARTICULARS OF REMUNERATION

Disclosure of the ratio of the remuneration of each director to the median employee'sremuneration and other requisite details pursuant to Section 197(12) of the Companies Act2013 (Act) read with Rule 5 (1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 as amended is annexed to this Report as Annexure 'E'.Further Particulars of Employees pursuant to Rule 5(2) & (3) of the above Rules formpart of this Report. However in terms of provisions of Section 136 of the said Act theReport and Accounts are being sent to all the members of the Company and others entitledthereto excluding the said particulars of employees. Any member interested in obtainingsuch particulars may write to the Company Secretary. The said information is available forinspection at the Registered Office of the Company during working hours.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

During the financial year under review there were no significant and material orderspassed by the Regulators or Courts or Tribunals which would impact the going concernstatus of the Company and its future operations.

CORPORATE GOVERNANCE - including details pertaining to Board Meetings Nomination andRemuneration Policy Performance Evaluation Risk Management Audit Committee and VigilMechanism.

Your Company reaffirms its commitment to the highest standards of corporate governancepractices. Pursuant to Regulation 34 of SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 a Management Discussion and Analysis CorporateGovernance Report and Auditors Certificate regarding compliance of conditions of CorporateGovernance are made a part of this Report. The Corporate Governance Report also covers thefollowing:

(a) Particulars of the four Board Meetings held during the financial year under review.

(b) Policy on Nomination and Remuneration of Directors Key Managerial Personnel andSenior Management including inter alia the criteria for performance evaluation ofDirectors.

(c) The manner in which formal annual evaluation has been made by the Board of its ownperformance and that of its Committees and individual Directors.

(d) The details with respect to composition of Audit Committee and establishment ofVigil Mechanism.

(e) Details regarding Risk Management.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under Section 134(3)(c) of the Companies Act

2013 your Directors state that:-

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

(b) the accounting policies have been selected and applied consistently and judgmentsand estimates made are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial year and of the profit andloss of the Company for that period;

(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the said Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) the annual accounts have been prepared on a going concern basis;

(e) the internal financial controls to be followed by the Company have been laid downand that such internal financial controls are adequate and were operating effectively; and

(f) the proper systems to ensure compliance with the provisions of all applicable lawshave been devised and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENTS

Your Directors wish to thank and acknowledge the Financial Institutions BanksGovernment authorities Shareholders suppliers dealers business associates and theCompany's esteemed customers for their continued trust and support.

Your Directors also wish to place on record their appreciation of the contribution madeby the Company's employees at all levels but for whose hard work solidarity and supportthe Company's consistent growth would not have been possible.

On behalf of the Board of Directors
New Delhi Bharat Hari Singhania
Date: 11th July 2016 Chairman & Managing Director