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Sri Chakra Cement Ltd.

BSE: 518053 Sector: Industrials
NSE: N.A. ISIN Code: INE827D01020
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Sri Chakra Cement Ltd. (SRICHAKRACEM) - Director Report

Company director report

Dear Members

We have pleasure in presenting this 34th Annual Report of the Companytogether with the Audited Statements of Accounts Management Discussion and Analysis forthe year ended 31st March 2016.

FINANCIAL RESULTS :

SI.No. Particulars 2015-16 2014-15
1 Revenue from operations 253 203
2 Profit Before Interest Depreciation and Taxes 28.89 11.19
3 Profit before tax 20.76 2.85
4 Provision for tax 2.78
5 Net profit after tax 18.24 6.34
6 Balance brought forward from previous year (11.39) (11.34)
7 Net Surplus 18.24 6.34

STATE OF AFFAIRS OF THE COMPANY:

SI. No Particulars UNIT 2015-16 2014-15 +/- Annualised
1 Clinker Production Lac Mts 404353 354212 14 51%
2 Cement Production Lac Mts 495333 460238 1.625%
3 Cement Sale Lac Mts 507811 459658 10.47%
4 Revenues-Cement Rs Cr 253.00 203.00 24.63%
5 Operating profit Rs Cr 28.89 11.19 17.7
6 EBITA margin to Net Sales % 15.20% 7.16% 8.04%
7 Net Profit RS Cr 18.24 6.34 11.9%
8 Earnings Per Share Rs/per Share 19.99 7.00 12.99

During the year under review the Cement production was increased by 1.625% salesvolume by 10.47-% compared to the previous year. The Sales Revenue was also increased by24.63% during 2015-16. This was largely on account of increased volumes. The overall netmargin was increased by 11.90% compared to that of previous year due to the costrationalisation and strategic planning in controlling the cost of production which helpedto maintain profitability during the year under review. The Company lays more emphasis onefficiency and productivity improvements. It continued its efforts for rationalising costsacross its operations to maintain its competitiveness.

NEW PRODUCTS / PROJECTS

During the year under review the Company has initiated for setting up of 5 MW captivesolar power plant at SriKalahasthi Chittoor District of Andhra Pradesh to be completed ina phased manner over an extent of 30 acres. In the first phase 2 MW capacity solar plantis being executed at an estimated cost of 12 Crores and the same is expected to becommissioned soon.

STATUS OF THE COMPANY WITH HON'BLE BIFR:

The company is undergoing rehabilitation process as per the directions of the Hon'bleBIFR. Your directors further inform you that as per the audited accounts for the yearended 31.03.2016 the

Company's net worth has become positive and the accumulated losses have been wiped outas on 31.03.2016.

INDUSTRY STRUCTURE AND

DEVELOPMENTS.

Cement is a cyclical commodity with a high correction to Gross Domestic Product. TheIndian housing sector is the biggest demand driver of Cement accounting for about 64% oftotal consumption. The other major consumers of Cement include infrastructure 17%commercial construction 13% and industrial construction 6%. Low capacity utilizationcoupled with weak prices and increasing input costs have all significantly impacted theperformance of Cement Industry in India. It is not an uncommon sight to find some Indianproducers who had a record of subdued operating profits and high debt service obligationsdeferring their expansion plans. With improved demand resulting from infrastructure andhousing sectors coupled with limited capacity additions the Company envisages asignificant upswing in demand for its product given the fact that construction of newcapital for Andhra Pradesh will throw up lot of opportunities for the Cement Industry asthe Company's Plant is quite proximate to the Capital Region of Andhra Pradesh. Theprospects are expected to be better than plants located outside the State of AndhraPradesh. The track record established by your Company for a period of more than threedecades with regard to its quality and post delivery service will play as a major factorin targeting bulk orders from Telangana and Andhra Pradesh. As a result of the abovefactors the Company envisages that the demand for its product is expected to increase inthe the years to come.

OPPORTUNITES AND THREATS:

Huge construction and infrastructure activity that is expected to take place inTelengana and Andhra Pradesh might provide significant opportunities to the company inshorting up business operations of its cement division.The benefits may manifest in thecurrent year or in the years to come.On a similar note the impetus given to the Housingand Infrastructure sectors by the Government of India will also act as a positive factorfor the company's cement plant and thereby aid its growth and development. The companywill make effort to overcome the bottlenecks in achieving the

targeted operations in sugar and power divisions and is confident of attaining theoperational targets.

FUTURE OUTLOOK:

With bifurcation of the state of Andhra Pradesh the company clearly visualizes verygood potential and good prospects for its cement division in the context of building up anew capital city for Andhra Pradesh.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

The company is mainly engaged in the business of manufacturer of OPC and 53/ 43 and PPCcement. Accordingly this is the only Single Reportable Segment.

RISK MANAGEMENT:

The Company considers risk management as a tool to identify risks as well asopportunities and has imbibed it as an integral part of its overall business strategy. TheCompany has framed its policy for identifying assessing and mitigating various risksassociated with the business. The Audit committee monitors the risk management plan of theCompany and reviews the same periodically.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

In order to ensure orderly and efficient conduct of business the company has put inplace necessary internal control systems commensurate with its business requirementsscale of operations geographical spread and applicable statutes. The Company has designedthe necessary internal financial controls and systems with regard to adherence tocompany's policies safeguarding of its assets prevention and detection of frauds anderrors accuracy and completeness of the accounting records and timely preparation ofreliable financial information. The function of designing and implementation of internalcontrol systems and policies of the company will be carried out by the audit committee.The committee holds regular discussions wit the auditor to ensure adequacy andeffectiveness of the internal control systems and monitors implementation of auditrecommendations.

HUMAN RESOURCES DEVELOPMENT AND INDUSTRIAL RELATIIONS:

The main focus of the company is to attract develop and retain talented employees inorder to achieve the business objectives. The company has made efforts in the field oftraining and development congenial work environment providing challenging workopportunities etc. The Company has framed HR practices in order to strengthen and buildingpeople talent for achieving the business objectives. Initiatives to develop leadershiplines as well as enhance technical and functional capability with special focus onnurturing young talent are taken. Young managers are groomed by providing higherresponsibilities Focus remains on gaining cross functional knowledge to enable meaningfulparticipation of employees all across of the company in innovation and processimprovement. With the company entering in next phase of growth the nurtured talent poolwill enable smooth transition to new growth trajectory.

During the year employee relations remained cordial. This has enabled company to buildhealthy relationship and resolve issues through dialogue and discussions.

CORPORATE SOCIAL RESPONSIBILITY:

The Company has considered Corporate Social Responsibility (CSR) as a voluntaryactivity and a part of its long term vision o creating value for all stakeholders andsociety Accordingly CSR is an integral part of the company's business. In order tooversee all its CSR activities and objectives such as healthcare education womenempowerment and rural development and conservation of natural resources the company hasconstituted a Board level Committee " Corporate Social Responsibility Committee"in terms of section 135 and Schedule VII of the Companies Act 2013 read with theprovisions of the listing agreement/ regulations.

During the year under review the Company has spent Rs 41 Lakhs towards CSR activitiesas detailed in a separate annexure to this annual report as required under Companies(Corporate Social Responsibility Policy) Rules 2014 along with the CSR Policy videAnnexure - 1 and the same may also be accessed on the company's website.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 134 (5) of Companies Act 2013 the Board of Directors to the bestof their knowledge and belief state that:

(a) In the preparation of annual accounts for the year ended 31st March2016 the applicable accounting standards had been followed along with proper explanationrelating to material departures;

(b) The directors had selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andFairview of the state of affairs of the company at the end of the financial year and theprofit and loss of the company for that period.

(c) The directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities

(d) The director had prepared and annual accounts on a going concern basis. and

(e) In the case of listed company directors had laid down internal financial controlsto be followed by the company and that such internal financial controls are adequate andwere operating effectively.

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

BOARD OF DIRECTORS. KEY MANAGERIAL PERSONNEL AND CHANGES DURING THE YEAR:

The Board is duly constituted and balanced as required under the Companies Act 2013and the Listing Regulations/Agreement read with the policy of the Board on directorsappointment and remuneration in terms of the provisions of Section 134(3)(e) read withsub-section (3) of Section 178 of the Companies Act 2013. During the year under reviewSri. V V S R Anjaneyulu and Sri K Vijay Kumar Directors of the company will retire byrotation and being eligible offers themselves for reappointment at the ensuing annualgeneral meeting.

In Accordance with section 149(7) of the Companies Act 2013 each Independent Directorhas given declaration to the company confirming that he meets the criteria of independencelaid down in section 149(6) of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure

Requirements) Regulations 2015. During the year under review there is no change inthe Board composition and key managerial personnel.

PERFORMANCE EVALUATION OF BOARD- COMMITTEES. INDIVIDUAL DIRECTORS AND FAMILIARISATIONPROGRAMME FOR INDEPENDENT DIRECTORS:

BOARD EVALUATION: During the year under review the Board carried out an annualevaluation of its own performance on the basis of criteria such as Board compositionstructure effectiveness of the Board Processes information flow to the Board andfunctioning of the Board etc. Considering the requirements of the relevant statutes.

EVALUATION OF COMMITTEES: Performance of Committees of the Board was evaluated on thebasis of composition effectiveness of working and independence etc.

EVALUATION OF INDIVIDUAL DIRECTORS:

The Board and nomination and Remuneration Committee evaluated the performance ofindividual directors on the basis of criteria such as attendance contribution ofDirectors at Board/ Committee Meetings adherence to ethical standards and code of conductof the Company interpersonal relations with other directors meaningful and constructivecontribution and inputs in the Board/committee meeting etc.

During the year under review the Board noticed the excellent performance andcontribution of Sri K Vijay Kumar Joint Managing Director and Sri V V S R AnjaneyuluDirectors of the Company in achieving results and targets set by the Board and shown theirexcellent talent in maintaining employee relations and motivation at all levels of theorganisation cost reduction and increased profitability etc and appreciated them.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS: A detailed presentation coveringthe role duties and responsibilities of the independent directors company objectivesstrategy operations organisation structure etc made at the time of their appointment issent to the existing independent directors every year.

CONSERVATIN OF ENERGY. TECHNOLOGY ABSORPTION. FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information relating to the conservation of energy technology absorption foreignexchange earnings/outgo as required under the Companies Act 2013 and the rules madethere under is set out in Annexure 2 which forms part of this Annual Report. The Boardnoticed that the company has invested in installing in equipments at plant which resultedin bringing down the power consumption to 81-82 units per tonne of cement while the coalconsumption was reduced and calorific value was brought down to 750 Kcal/kg clinker.

DISCLOSURE OF PARITUCLARS OF EMPLOYEES AND RELATED MATTERS:

The information required pursuant to Section 197 of the Companies Act 2013 read withRule 5(1) of the Companies (Appointment and Remuneration of Managing Personnel) Rules2014 and Companies (Particulars of Employees) Rules 1975 in respect of employees of theCompany and Director is given in a separate Annexure-6 to this Report. Particulars ofemployees as per the Rule-5(2) of The Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are not applicable to the company.

AUDITORS:

(a) Statutory Auditors: During the Annual General Meeting held on 30thSeptember 2014 M/s G Satyanarayana & Co. Chartered Accountants were appointed asstatutory auditors of the company till 2017 subject to ratification at each AGM.Accordingly their appointment is placed for ratification by the shareholders at theensuing Annual General Meeting as their reappointment if approved would be in accordancewith the provisions of Section 141 of the Companies Act 2013.

(b) Cost Auditors: M/s Bisati & Co Cost Accountants are the Cost Auditorsappointed by the company Board for auditing the cost accounts of the company for the yearended 31.03.2016 and the cost audit report for the year 2015-16.

(c) Secretarial Auditor: M/s K. Swamy & Co. Company Secretaries in practice arethe Secretarial Auditors appointed by the board of directors of the company for the year2015-16 and the Report is attached to this Directors' Report vide Annexure-3 in therespective form MR-3.

STATUTORY AUDITORS COMMENT IN THE INDEPENDENT AUDITORS' REPORT AND REPLY :

With regard to the observations of the Statutory Auditors regarding the confirmationsfrom some of the parties it is hereby clarified that the company has obtainedconfirmations from major accounts and some minor accounts the Board felt it was notrequired as there is no impact on the account.

OTHER DISCLOSURES BOARD COMMITTEES : The details of composition terms of Referencemeetings and attendance particulars of various committees of Board such as AuditCommittee Nomination and Remuneration Committee Corporate Social ResponsibilityCommittee Stakeholders Relationship Committee Share Transfer Committee are provided inthe Corporate Governance Report vide annexure No 5 to this Directors report. Theintervening gap between the meetings of the Committees are within the prescribed periodunder the Companies Act 2013 and the listing regulations. The Audit Committee consists of2 independent directors i.e. Sri P Ramamoorthy and Sri P Ramakrishnaiah and one nonexecutive director i.e Smt K V Nagalalitha.

EXTRACT OF ANNUAL RETURN: An Extract of the Annual Return as required under theprovisions of Section 134(3)(a) of the Companies Act 2013 is annexed herewith asAnnexure-4 which forms part of this report.

CORPORATE GOVERNANCE REPORT :

Pursuant to the Listing Agreement/ regulations the company complied with theguidelines and a statement on the corporate governance report for the year 2015-16 isattached to this Report vide Annexure-5.

LOANS GUARANTEES OR INVESTMENTS:

There were no loans/guarantees given by the company during the financial year 2015-16.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES: All related party transactions thatwere entered into during the financial year 2015-16 were on an arms length basis and inthe ordinary course of business and were in compliance with the applicable provisions ofthe Companies Act 2013 and the listing regulations. There were no material related partycontracts or arrangements or transactions made by the company. During the year that wouldhave require shareholders approval under section 188 or of the Listing Regulations.

The Company has adopted a related party transactions policy duly approved by the Boardwhich is uploaded on the Companies Website. Details of the related parties disclosures(transactions) are provided in the accompanying financial statements.

DEPOSIT FROM THE PUBLIC: The company has not accepted deposits from public coveredunder chapter V of the Companies Act 2013 and as such no amount on account of principalor interest on deposits from public was outstanding as on the date of balance sheet.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY: The Company has adopted a whistle blower policyad has established a clear vigil mechanism and directors to report concerns un ethicalbehaviour. The policy provides for adequate safeguards against victimisation of employeeswho avail of the mechanism and also provides for direct access to the chairman of theaudit committee. The whistle blower policy may be accessed on the website of the company.PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE: The company has adopted a policy onprevention prohibition and redressal of sexual harassment at the work place in line withthe provisions of the "The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 and Rules made there under your Company hasconstituted Internal Complaints Committee (ICC). The Committee has four members and ischaired by a senior women member of the organisation. It is stated that there are no suchcomplaints received by the committee/company during the year under review.

MATERIAL CHANGES AFTER CLOSE OF THE FINANCIAL YEAR: There have been no material changesand commitments which have occurred after the close of the year till date of this reporteffecting the financial position of the company.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:

No significant material orders have been passed by the regulators or courts ortribunals which would impact the going concern status of the company and its futureoperations.

LISTING WITH STOCK EXCHANGES: The equity shares of the company are listed on the BSE.The listing is under suspension and your directors have already initiated steps forrevocation of suspension with the stock exchange. The company confirms that it has paidthe Annual Listing Fees for the year 201617.

SUBSIDIARY COMPANIES: The Company has no subsidiary companies.

ACKNOWLEDGEMENT:

The Directors take this opportunity to place on record there sincere appreciation forthe commitment hard work and high engagement level of every member of the Sri ChakraFamily which has made the company to achieve exemplary performance year after year. TheDirectors would like to thank take this opportunity to express their thanks to variousdepartments of the Central and State Government local authorities for their continuedcooperation and support. They also thank various stakeholders of the company i.e. MaterialSuppliers Customers dealers transporters advisors local community etc for theircontinued committed engagement with the Company.

For and behalf of the Board
For SRI CHAKRA CEMENT LIMITED

 

Sd/- Sd/-
Place : Hyderabad N. Krishna Mohan K Vijay Kumar
Date : 13.08.2016 Chairman Joint Managing Director