Star Cement Ltd.
|BSE: 540575||Sector: Industrials|
|NSE: STARCEMENT||ISIN Code: INE460H01021|
|BSE 15:41 | 19 Mar||113.90||
|NSE 15:31 | 19 Mar||114.05||
|Mkt Cap.(Rs cr)||4,775|
|Mkt Cap.(Rs cr)||4774.69|
Star Cement Ltd. (STARCEMENT) - Director Report
Company director report
Your Directors have pleasure in presenting Sixteenth Annual Report ofthe Company together with the Audited Balance Sheet as at 31st March 2017 and theStatement of Profit & Loss for the year ended on that date.
CHANGE OF NAME
Pursuant to shareholders' approval obtained at the Extra-ordinaryGeneral Meeting held on 24th May
2016 the name of the Company was changed from 'Cement ManufacturingCompany Limited' to 'Star Cement Limited' with effect from 21st June 2016.
The highlights of the financial performance of the Company for thefinancial year ended 31st March
2017 as compared to the previous financial year are as under:
(Rs. in Lacs)
EXPANSION AND MODERNISATION
During the year under review your Company has installed a Pre-GrinderUnit with the existing Clinker Grinding Ball Mill at its Lumshnong unit. With installationof pre-grinder the ball mill will be fed with pre-ground clinker and other additives inorder to produce cement. The main equipment has been sourced from M/s. Humboldt WedagIndia with German Technology. The installation of Pre Grinder unit has resulted intoincrease in clinker grinding capacity of Lumshnong unit from existing 1800 TPD of cementto 3000 TPD. The installation of pre-grinder will result into reduction in powerconsumption in clinker grinding. The capex has been funded partly with Bank borrowing andpartly through internal resources. The Pre-Grinder Unit has commenced commercialproduction from 31st March 2017.
Despite challenges faced by economy on account of liquidity crunch inthe market place on account of demonetization during last two quarters of financial yearyour Company has been able to maintain the operational performance. During the year underreview your Company manufactured 567241 MT of Cement Clinker as against 492055 MTduring FY 2015-16 and thereby recording a growth of 15.3% over previous year. Company'ssubsidiary M/s. Star Cement Meghalaya Limited produced 1579345 MT of Clinker as against1629025 MT during the FY 2015-16. On consolidated basis total clinker production duringthe year was at 2146586 MT as against 2121080 MT during FY 2015-16.
In terms of capacity utilization clinkerization unit of your Companywas able to utilize 71.6% of its installed capacity as against 62.1% during the FY2015-16. Similarly the capacity utilization of clinkerization unit of its subsidiary M/s.Star Cement Meghalaya Limited was at 90.30% during FY 201617 as against 93.1% during theFY 2015-16. On consolidated basis the capacity utilization of clinkerization units was at84.4% during the FY 2016-17 as against 83.4% during FY 2015-16.
Your Company has been able to maintain the performance on grindingfront too. During the year under review total cement production on consolidated basis wasat 2708430 MT (including volume from hired grinding units) as against 2670287 MTduring the FY 2015-16.
Similarly your Company has been able to achieve sales volume of2737438 MT of Cement as against 2629695 MT during the previous financial year.
Your Company expects to further improve its operational performanceduring the ensuing financial year.
INDIAN ECONOMY AND OUTLOOK - AT A GLANCE
Under current geo-political environment across globe India as aneconomy presents one of the brightest spot in otherwise dim global economy and remains oneof the fastest growing emerging market economies driven by key structural reforms normalmonsoon and reduced external vulnerabilities. India's economy is underpinned by a stablemacro-economy with declining inflation and improving fiscal and external balances.According to IMF World Economic Outlook Update (January 2016) Indian economy is expectedto grow at 7-7.75 per cent during FY 2016-17 despite uncertainties in the global market.The Economic Survey 2015-16 had forecasted that the Indian economy will be growing by morethan seven per cent for the third successive year 2016-17 and can start growing at eightper cent or more in next two years.
In the backdrop above FY 2016-17 has been an eventful year for IndianEconomy. Hurdles faced in implementation of much awaited uniform indirect tax regime inform of Goods and Service Tax (GST) were removed and has achieved progress towardsimplementation at a very fast pace. The new tax regime is now likely to be realty in FY2017-18. Since independence this would be largest tax reform in country. In line withcommitment of Central Government towards cashless economy the demonetization scheme wasrolled out in November 2016 which was aimed at transparency in financial transaction.Initiatives like "Housing for All" "Financial Inclusion programmestargeting poors at large" "Smart Cities" "Make in India" etc.by Government are expected to provide acceleration towards economic growth and is likelyto have long term positive impact on Indian Economy in general and on Indian CementIndustry in particular. FY 2016-17 is likely to post GDP growth of 7%. With Government'sinitiatives GDP growth rate is likely to get further boost.
On the monetary front the average retail inflation in form of ConsumerPrice Index (CPI) was at 4.9% as on December 2016 and Average Wholesale Price Index (WPI)inflation improved from negative territory to 3.4 percent.
India's diversified financial sector is undergoing rapid expansionboth in terms of strong growth of existing financial services firms and new entitiesentering the market. The expected growth momentum in service sector of 8.8% andinfrastructure sector viz. crude oil coal refinery products etc. of 4.9% has helpedIndia to achieve GDP growth.
After consecutive years of drought the normal monsoon and variouspolicy initiatives taken by the Government helped to break the past records of food grainproduction. India's food grain harvest is estimated to be 8% higher than the production oflast year with the estimate that the productions of key crops like rice wheat and pulseswill be at higher level. This also indicated towards higher agriculture growth rate duringthe year under review as compared to previous year.
On export front too India grew at faster pace in the recent years. Thesurge in Commodity price in the first half of the Fiscal year and revival of growth inIndian economy and other developed economies boosted the Indian shipment of export andimport even though the rupee was low as against foreign currency.
CEMENT INDUSTRY OVERVIEW
Indian cement industry is the second largest producer of cement in theworld. Despite being second largest producer India's per capita consumption of cement iseven less than 200 Kgs which is much lower to developed nations. Lower per capitaconsumption of cement is explained in form of underdeveloped infrastructure in country.Even after 70 years of independence the country still lacks good connectivity withindifferent geography of country across road waterways rail and air. On the housing fronttoo still a lot more needs to be done to provide shelter to all. Underdevelopedinfrastructures scope in Housing and with huge population of more than 130 Crores coupledwith annual growth rate of more than 1.25% approx. India as a country presents a brightfuture for cement industry.
During the recent years with Government's initiatives infrastructuresector has received much awaited attention. The Road Transport & Highways Ministry hasinvested more than US$ 45 billion while the Shipping Ministry has invested around '80000crores (US$ 12.0 billion) in the past two and a half years for building world classhighways and shipping infrastructure in the country. More than 6500 km out of the 15000km of target set for national highways in 2016-17 has been constructed by the end ofFebruary 2017. In the union Budget of 2017-18 also Central Government has madeconsiderable allocations for development of infrastructure. Additionally with the recentGovernment initiatives like "Smart cities" "Housing for All' cementdemand is likely to accelerate in near to medium term.
On the Capacity side during the period FY 2011 to FY 2016 it hasgrown with a CAGR of close to 6%. The capacity has increased to 430 mn tonnes. On theproduction side during the same period it increased at a CAGR of 5.5% from 210 mn tonnesin FY11 to 274 mn tonnes in FY16. Slower growth in infrastructure sector weak ruraldemand and slowdown in real estate sector have been the factors responsible for low demandgrowth of cement. Fresh capacity addition is not likely to take place at a faster pace innear term on account of comparatively longer timelines required in acquiring land andmining rights and in obtaining environment clearances apart from surplus capacities.Regional imbalances in demand and supply situation is also likely to be witnessed inmedium term.
Lower ocean freight coupled with remunerative pet coke prices ininternational market has resulted into lower fuel cost for Indian Cement Industry duringthe FY 2016-17. Industry has been able to manage the cost of fuel by importing Pet Cokeand low ash coal from international markets. Other major costs like power and fuel havewitnessed growth during FY 2016-17.
With increased focus on housing and infrastructure coupled with slowpace of fresh capacity addition Indian Cement Industry presents a promising future.
NORTHEAST SCENARIO - GATEWAY OF OPPORTUNITIES
The North East India is located at crossroads between three majoreconomies - East Asia South Asia and Southeast Asia. The region comprises of eightstates namely Arunachal Pradesh Manipur Meghalaya Mizoram Nagaland Sikkim Tripuraand Assam occupying eight per cent of India's geographical spread where 4% of country'spopulation resides. The geopolitical advantage has however not really translated intoregion's economic development. North East Region has not been able to integrate andbenefit from various regional and sub-regional initiatives that neighboring countries havecreated.
The North Eastern Region (NER) of the Country is bestowed with immensenatural resources and hydroelectric potential. Despite this the region lags behind otherStates of India. Government is taking steps to accelerate the pace of the socio-economicdevelopment of the NER by strengthening the economic and strategic relations with thenations of South East Asia through the Look East Policy. With change of guard at Centre inMay 2014 the Look East Policy (now known as Act East Policy) is likely to emerge as a biginitiative towards promoting trade technology investment opportunities and developmentof North Eastern States being gateway to East
and South East Asia. India's connectivity with the ASEAN countries andthe rest of South East Asia would result in sustainable development in the North EasternStates. The development of the trilateral highway would ensure seamless connectivitybetween India Myanmar and Thailand. The highway project which runs from Moreh inManipur to Mae Sot in Thailand via Mandalay in Myanmar will ensure that India's easternborder is opened to a new bus route from Imphal to Mandalay.
Initiatives undertaken by successive Governments towards development ofNER in form of better infrastructure and connectivity has started getting reflected inform of improvement in socio-economic status of populace living in the region. Educationaland medical facilities have improved a lot in the region during last few years.Connectivity within NER States and with rest of India has also improved with initiativestaken towards infrastructure development. This has resulted into improved purchasing powerwith people at large in the Region. With improvement in disposal surplus income cementdemand for housing sector has received a boost in the region. The housing sector accountsfor a large share of cement consumption in the Northeast Region.
On the infrastructure side too the region has witnessed much awaitedattention. The North East Council (NEC) has taken up lot of initiatives forinfrastructural development of the region. In a bid to boost its road redevelopmentprogramme in India's northeast Central Government has approved 4884 km of new roadsduring first quarter of FY 17 under the Special Accelerated Road Development Programme inNorth East (SARDP-NE). Under SARDP-NE the connectivity through road has been planned tobe improved in three phases. Development of Roads in first phase is almost over during theFY 17. With the accelerated speed of work happening in this sector in NER it is expectedthat in years to come NER is likely to have a better road connectivity. Similarly theGovernment has initiated actions for better connectivity through air and water ways also.In immediate future dredging of Brahmaputra River is likely to be undertaken in a timebound manner. This will prove a boon for NER in achieving a much awaited logistic solutionfor domestic as well as international cargo movement through river route.
The aforesaid developments and initiatives present a promising futurefor cement industry in the North East Region.
Realizing potential of Region NER remained focus market for yourCompany. First half of FY 2016-17 turned out to be very positive for cement industry inthe Region and witnessed double digit growth in demand. However with absence of liquidityduring second half on account of demonetization in line with other businesses cementdemand also got impacted. Despite very weak cement demand during second half of financialyear on a full year basis your Company was able to maintain the volume in NER at par withvolume sold during immediate previous year. During the year under review your Company wasable to sale 1739263 MT of cement on consolidated basis in the markets of NER as against1703415 MT during the FY 2015-16. During the year under review too around 15% of totalcement demand of NER was catered through import of cement from outside units based outsideregion including Bangladesh and Bhutan.
Similarly in the markets of West Bengal and Bihar your Company hasbeen able to sale 998175 MT of cement during the financial year 2016-17 on consolidatedbasis as against 926280 MT during the financial year 2015-16. Your Company hasarrangements with three grinding units in the State of West Bengal which helps to reducethe logistic time to make the product available in these markets.
In line with the Company's endeavor to focus trade segment of thebusiness your Company continued adding dealer and retail network across the length andbreadth of the North East Region as well as in the States of West Bengal and Bihar to makeits footprint more visible in these markets.
During the year under review your Company has undertaken variousmarketing initiatives in order to make the brand "Star Cement" more visible andattain top of mind recall. In the markets your Company has taken a special initiative ofcrossing branding through kiosks consoles & surrogates throughout the year. This hashelped the brand to stay in top of the mind of consumers. Special branding initiatives atthe retail level like cuboids & skirting were launched in Bihar & Bengal to standout compared to competition. In North East a brand theme campaign was launched with TVbeing the focus. To make the brand more visible in remote areas a block level brandingcampaign was undertaken through wall wraps rural vans & rural theatres. In additionyour Company has conducted various knowledge sharing events mainly related to constructiontechniques in form of "Engineers' Workshop" and "Star Tech" to imparttraining to engineers. Your Company has also conducted more than 50 "MasonCertification Programme" wherein masons were trained and their construction skillswere certified jointly by your Company and local engineering institutes. These initiativeshave helped your Company to promote the brand "STAR CEMENT" in a more effectivemanner in these markets and has also resulted in creation of a better informed category ofmasons and engineers.
PRODUCTION AND COST DEVELOPMENTS
During the year under review your Company has been able to leverage onthe fixed cost on account of better volumes of production and sales and better capacityutilization.
Your Company continued to promote environment friendly blended cementusing fly ash and produced 1812691 MT of Portland Pozzolana Cement (PPC) (including fromhired grinding units) on consolidated basis out of total production of 2708430 MT ofcement during FY 2016-17. Usage of fly ash in cement is not friendly to environment onlybut also provides cost optimization. Your Company has been able to utilize the fly ashgenerated by power plant of its subsidiary M/s. Meghalaya Power Limited and such closeaccess to fly ash provides competitive edge to your Company in term of cost. In additionyour Company has also made arrangements with major power plants like NTPC Tata Power andfew others to ensure its long term requirement of fly ash.
During the year under review too your Company continued to source itspower requirement for its Lumshnong unit from its subsidiary M/s. Meghalaya Power Limitedunder long term arrangement for supply of quality power at competitive rates and thus hasbeen able to reduce dependency on grid power. To optimize the power cost and to reducedependency on State supplied grid power your Company has been able to source its powerrequirement of its Grinding Unit at Guwahati from Indian Energy Exchange (IEX) inaddition to sourcing of power from State Grid. The blend of sourcing has not only reducedpower cost for your Company but also its quality and dependability.
Logistics & Freight
Your Company has taken initiatives towards cost efficiencies in theSupply Chain system. Warehousing network has been reorganized to bring efficiency and costeffectiveness. Actions have been initiated towards construction of Private Railway Sidingat Company's Grinding Unit at Guwahati. Once the private siding gets operational it wouldhave a distinct cost advantage in logistic operations of the Company.
KEY PERFORMANCE HIGHLIGHTS
Consolidated cement production (including purchase from hiredgrinding units) was at 27.08 Lac MT during the year as against 26.70 MT during theprevious financial year.
Consolidated net sales at '1728.00 Crores during the year underreview as compared to '1715.03 Crores during the financial year 2015-16.
Consolidated EBIDTA was at '410.97 Crores during the year underreview as compared to '400.69 Crores during the immediate previous financial year.
Consolidated profit before tax during the year 2016-17 was at'191.80 Crores as against a profit of '145.30 Crores in the year 2015-16 registering agrowth of 32%.
OPPORTUNITIES & THREATS RISKS AND CONCERNS
Indian Cement Industry is expected to grow at CAGR of 9-10 % during thefinancial year 2014-15 to 2018-19 on the back of increasing demand from infrastructure andreal estate sector. With the recent Government initiatives like '98 Smart cities''Housing for All' etc. initiatives in the areas of Development of Ports Roads andHighways dedicated Freight Corridors Gauge conversion Projects undertaken by Railwaysdevelopment in the area of alternative source of energy viz. Hydro and Solar Power andother infrastructure projects is expected to boost Cement and Power Demand in the regionwhere your Company operates as well as in other parts of the country too.
Cement and power industry being majorly dependent upon availability ofquality coal at affordable cost. Policy of the Government may impact availability of coal.Policies of the Government as well as regulatory role may affect the industry to a greatextent. India's cement sector has high resource risk as limestone which is an importantraw material used in the production of cement is considered as scarce mineral andextraction of limestone is regulated by various State and Central Laws. Any major changesin Government's Environmental and Forest regulations may affect limestone availability tocement plants. In order to boost the cement sector the Government of India has allowedFDI in the sector which will attract foreign players in the country and this may lead totougher competition to the domestic players.
Your Company has evolved a risk management framework to identifyassess and mitigate the key risk factors of the business. The Board of Directors of theCompany is kept informed about the risk management of the Company.
SCHEME OF AMALGAMATION AND SHARE CAPITAL
The Hon'ble National Company Law Tribunal at Guwahati vide its orderdated 7th February 2017 approved amalgamation of erstwhile holding company M/s. StarFerro and Cement Limited with your Company effective from 22nd February 2017. Theappointed date for amalgamation was 1st April 2016.
Pursuant to merger of erstwhile Star Ferro and Cement Limited into theCompany the Authorized Share Capital of the Company has increased to '830000000divided into 830000000 Equity Shares of '1/- each. In line with terms of Scheme ofAmalgamation 295490077 (Twenty Nine Crore Fifty Four Lakh Ninety Thousand SeventySeven) equity shares of the Company were allotted on 8th April 2017 to the shareholdersof erstwhile Star Ferro and Cement Limited in the ratio of 1.33 equity shares of '1 eachof the Company for every 1 (one) equity share of '1 each of erstwhile Star Ferro andCement Limited held by them as on the record date i.e. 3rd April 2017. After the saidallotment the total number of equity shares of the Company has aggregated to 419228997of '1 each. Your Company has initiated steps to list its shares with National StockExchange of India Limited and BSE Limited.
During the year under review the Company has neither issued any shareswith differential voting rights nor granted stock options or sweat equity shares.
EXTRACT OF ANNUAL RETURN
In terms of requirement of section 134 (3) (a) of the Companies Act2013 the extract of the Annual return in form MGT-9 is annexed herewith and markedAnnexure-1.
MEETINGS OF THE BOARD
During the year eight (8) Board Meetings and six (6) Audit CommitteeMeetings were convened and held. The intervening gap between the Meetings was within theperiod prescribed under the Companies Act 2013. The details of the Board meeting and theCommittee meeting are provided in the Corporate Governance Report.
MEETINGS OF INDEPENDENT DIRECTORS
During the year under review a meeting of Independent Directors washeld on 18th March 2017 wherein the performance of the Non-Independent Directors and theBoard as a whole was reviewed. The Independent Directors at their meeting also inter aliaassessed the quality quantity and timeliness of flow of information between the Companymanagement and the Board of Directors of the Company.
COMMITTEES OF THE BOARD
The composition and terms of reference of the Audit CommitteeNomination and Remuneration Committee and Stakeholders Relationship Committee have beenfurnished in the Corporate Governance Report forming part of this Annual Report. There hasbeen no instance where the Board has not accepted the recommendations of the AuditCommittee and Nomination and Remuneration Committee.
WHISTLE BLOWER POLICY/ VIGIL MECHANISM
The Company has a Whistle Blower Policy/ Vigil Mechanism as requiredunder Section 177 of the Companies Act 2013 and as per Listing Obligations andDisclosures Requirements Regulations 2015 formulated by Securities and Exchange Board ofIndia (SEBI). The Vigil (Whistle Blower) mechanism provides a channel to the employees andDirectors to report to the management concerns about unethical behavior actual orsuspected fraud or violation of the Code of Conduct or policy. The mechanism provides foradequate safeguards against victimization of employees and Directors to avail themechanism and also provide for direct access to the Chairman of the Audit Committee inexceptional cases. The said policy may be referred to at the Company's website at the weblink: http://starcement.co.in/wp-content/uploads/Whistle-Blower-Policy.pdf
POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS KEY MANAGERIALPERSONNEL AND SENIOR MANAGEMENT EMPLOYEES
The Board has framed a Remuneration Policy for selection appointmentand remuneration of Directors Key Managerial Personnel and Senior Management Employees.The remuneration policy aims to enable the Company to attract retain and motivate highlyqualified members for the Board and at other executive levels. The remuneration policyseeks to enable the Company to provide a well-balanced and performance-relatedcompensation package taking into account shareholder interests industry standards andrelevant Indian corporate regulations. The details on the same are given in the CorporateGovernance Report. The said policy may be referred to at the Company's website at
Pursuant to requirement of Section 134 (3) (c) read with Section 134(5) of the Companies Act 2013 the Directors hereby confirm and state that:
In the preparation of Annual Accounts the applicable AccountingStandards have been followed along with the proper explanation relating to materialdepartures if any;
The Directors have selected such accounting policies and haveapplied them consistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at 31stMarch 2017 and of the profit of the Company for the year under review;
The Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
The Directors have prepared the annual accounts on going concernbasis;
The Directors have devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.
The Directors have laid down internal financial controls to befollowed by the Company and that such internal financial controls are adequate and wereoperating effectively.
AUDITORS & AUDITORS' REPORT
M/s. Kailash B. Goel & Co. Chartered Accountants (FirmRegistration no. 322460E) Statutory Auditors of the Company have completed their tenureof two terms of five consecutive years and also an additional window period of 3 years asstipulated under section 139 of the Companies Act 2013. Therefore the terms of office ofthe existing Statutory Auditors will conclude from the close of the forthcoming AnnualGeneral Meeting of the Company.
The Board of Directors places on record its appreciation for theservices rendered by M/s Kailash B. Goel & Co. as the Statutory Auditors of theCompany.
M/s. D. K. Chhajer & Co. Chartered Accountants (Firm Registrationno. 304138E) have expressed their willingness to be appointed as Statutory Auditors of theCompany and have confirmed that their appointment if made would be within the limitsmentioned under section 141(3)(g) of the Companies Act 2013 and the Companies (Audit andAuditors) Rules 2014.
Subject to the approval of shareholders the Audit Committee and theBoard of Directors of the Company have recommended the appointment of M/s. D. K. Chhajer& CO. Chartered Accountants (Firm Registration no. 304138E) as Statutory Auditors ofthe Company pursuant to Section 139 of the Companies Act 2013 for a period of five yearscommencing from the conclusion of 16th Annual General Meeting till the conclusion of 21stAnnual General Meeting subject to the ratification of their appointment by the members atevery Annual General Meeting.
The Auditors' Report to the Shareholders for the year under review doesnot contain any qualification.
Pursuant to Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Amendment Rules 2014 the cost audit recordsmaintained by the Company in respect of its manufacturing activity is required to beaudited. Your Directors have on the recommendation
of the Audit Committee appointed M/s. B. G. Chowdhury & Co. CostAccountants (Firm Registration number 000064) as Cost Auditors of the Company for thefinancial year ended 31st March 2017 in the Board Meeting held on 2nd May 2016. Theremuneration proposed to be paid to them for the financial year 2016-17 as recommended byaudit committee was ratified in the meeting of shareholders held on 22nd August 2016.
M/s. B. G. Chowdhury & Co. Cost Accountants (Firm Registrationnumber 000064) have expressed their willingness and confirmed their eligibility to beappointed as Cost Auditors of the Company for ensuing financial year. The Board onrecommendation of the Audit Committee has appointed M/s. B. G. Chowdhury & Co. CostAccountants (Firm Registration number 000064) as Cost Auditors of the Company for thefinancial year 2017-18 subject to ratification of their remuneration by shareholders inthe General Meeting of the Company.
The cost audit report for the Financial Year 2015-16 was filed with theMinistry of Corporate Affairs on 21st September 2016.
Pursuant to the provisions of Section 204 of the Companies Act 2013and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany has appointed M/s. MKB & Associates a firm of Company Secretaries inPractice to undertake the Secretarial Audit of the Company. The Secretarial Audit Reportis annexed herewith and marked Annexure-2. The report is selfexplanatory and do not callfor any further comments.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
During the year under review your Company has not given any loan toany person falling under ambit of Section 186 of the Companies Act 2013.
Details of Guarantees and Investments covered under the provisions ofSection 186 of the Companies Act 2013 and the loans received from the Directors of theCompany are given in the notes to the Financial Statements.
RELATED PARTY TRANSACTIONS
All related party transactions are entered on arm's length basis inthe ordinary course of business and are in compliance with the applicable provisions ofthe Companies Act 2013. There are no materially significant related party transactionsmade by the Company with Promoters Directors Key Managerial Personnel or otherdesignated persons which may have a potential conflict with the interest of the Company atlarge. Accordingly no transactions are being reported in Form AOC-2 in terms of Section134 of the Act read with Rule 8 of the Companies (Accounts) Rules 2014. However thedetails of the transactions with the Related Party are provided in the Company's financialstatements in accordance with the Accounting Standards.
All Related Party Transactions are presented to the Audit Committee andthe Board. Omnibus approval is obtained for the transactions which are foreseen andrepetitive in nature. A statement of all related party transactions is presented beforethe Audit Committee on a quarterly basis specifying the nature value and terms andconditions of the transactions.
A policy on 'Related Party Transactions' has been devised by theCompany which may be referred to at the Company's
During the year under review no amount was transferred to reserves.
In order to conserve resources for future operations your Directors donot recommend any dividend for the Financial Year 2016-17.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO
The information on conservation of energy technology absorption andforeign exchange earnings and outgo as stipulated in section 134 (3) (m) of the Act andrules framed there under is mentioned below:
(A) Steps taken toward Conservation of energy:
Change in mode of operation of Bag Filters from timer todifferential pressure has resulted into reduction in consumption of compressed air.
Installation of Grizzly in Raw Mill outlet has resulted intosteady coal flow and reduction in flushing from FK pump thereby reducing downtime ofKiln.
Arrest of false air from pyro and mill circuit resulted intoreduction in fuel and power consumption.
Automation of plant lights and centralized control from CCRresulted into reduced power consumption in plant lighting.
(B) Steps taken toward Technical Absorption:
Installation of Pre-Grinder unit with existing Ball Mill for
Clinker Grinding has resulted into lower specific power consumption.
Installation of new roto-packer at Guwahati Grinding Unit withHuman Manual Interface (HMI) system has resulted into reduced human errors in packingoperations.
Installation of Ethernet based intelligent relays in place ofdevice net based relays has made it possible to programme from remote.
Installation of dry fly-ash cutting and feeding system to anewly constructed steel hopper has resulted into reduction in fly ash feeding circuitlength.
Installation of belt conveyors from truck tippler - 2 hasresulted into reduction in material handling.
Use of grinding aid has resulted into increase in grindingefficiency and better fly ash absorption.
The Company has developed a Research & Development cell forcarrying out R&D Projects in the plant with specific objective of development ofadvanced systems for quality improvement. During the year under review your Companyincurred Capital expenditure of '2.20 Lacs and Revenue Expenditure of '56.25 Lacs inResearch & Development.
(C) Foreign Exchange Earnings And Outgo
During the period under review Foreign Exchange Earning was '79.99Lacs (Previous Year '15.50 Lacs and the Foreign Exchange Outgo was '888.51 Lacs (PreviousYear '8030.64 Lacs).
CORPORATE SOCIAL RESPONSIBILITY INITIATIVES (CSR)
As a responsible corporate citizen Company's CSR initiatives have beenplaying a significant role in bringing steady transformation of the society with specialfocus on marginalized and underprivileged section. Business decisions of the Company havealways linked to the ethical values of "do good for the community" and respectfor people communities and environment around the operational area and in nearbylocalities. Under the CSR purview your Company along with its subsidiaries hadprioritized need of the community under the following verticals:
The Company has taken up livelihood enhancement projects throughAgriculture Allied Sector intervention in Meghalaya and Assam. The component broadlyincludes following interventions for enhancement of secondary source of income:
Bee keeping in Sonapur area as eco-friendly initiative with highemployment potential;
Pig rearing project was initiated in Lumshnong area to enhanceincome of farmers;
Support to Eri Silk farmers with know-how trainingsmonitoring linkages and providing seed seedling and eggs for silk worm production;
Providing Vocational training to build and upgrade skills ofyouth to better compete with the emerging needs of different sectors.
Promoting Preventive Healthcare and Sanitation
Your Company has provided effective healthcare solution to the ruralpeople in and around the plant locations and nearby region as a whole through thefollowing means:
Contribution towards Swachh Bharat Abhiyan by constructing morethan 100 toilets in Sonapur and Lumshnong area;
The Company has organized series of awareness programs on PublicHealth Promotion and WASH Programs family planning in Lumshnong and Sonapur;
Providing medical aid to communities and other medical support;
Providing safe drinking water into local areas.
Your Company has contributed towards rural education infrastructure forensuring quality education. Overall initiatives revolved around contributing towardseffective learning. The major initiatives undertaken during the year are as follows:
Supporting One Teacher School i.e. Ekal Vidyalaya for augmentingprimary education for children of remote areas of Eastern India;
Your Company continued providing support to Guwahati BlindSchool in managing their hygiene and sanitation facilities;
Construction and maintenance of school buildings providinglearning materials for students and Induction of teachers & financial support formanaging the schools.
Emergency Relief & Rural Development
Your Company participated actively in efforts by Dorbar Shnong ofvillage Lumshnong in Meghalaya and other local institutions by addressing basicrequirements of rural community at Lumshnong village. The major activities carried outduring the year are as follows:
Construction of bus stands concrete steps shops and outletsfor enhancement of local livelihood and drainage facility within the village habitation;
Development of playground for development of rural sports;
Basic relief items to the people of Assam and Bihar in time ofdevastating flood.
Annual Report on CSR as required to be annexed in terms of requirementof Section 135 of Companies Act 2013 and rules framed thereunder is annexed herewith andmarked Annexure- 3.
EVALUATION OF THE BOARD'S PERFORMANCE
In accordance with the requirements of the Companies Act 2013 theperformance evaluation of the Board was carried out during the year under review. TheBoard follows a formal mechanism for the evaluation of the performance of the Board aswell as Committee. The evaluation reflected the overall engagement of the Board and theCommittee.
A structured questionnaire was prepared after taking into considerationinputs received from the Directors covering various aspects of the Board's functioningsuch as adequacy of the composition of the Board and its Committees Board cultureexecution and performance of specific duties obligations and governance.
The Nomination and Remuneration Committee at its meeting establishedthe criteria based on which the Board evaluate the performance of the Directors.
A separate exercise was carried out to evaluate the performance ofindividual Directors including the Chairman of the Board on parameters such as level ofengagement and contribution independence of judgment safeguarding the interest of theCompany and its minority shareholders etc. The performance evaluation of theNon-Independent Directors and Board as a whole was also carried out by the IndependentDirectors.
The Directors expressed their satisfaction over the evaluation processand results thereof.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. B. B. Agarwal and Mrs. Clara Suja resigned as Director with effectfrom 7th June 2016 and 5th April 2017 respectively. The Board places on record itsappreciation for the services rendered by Mr. B. B. Agarwal and Mrs. Clara Suja duringtheir tenure with the Company.
The Board of Directors at its meeting held on 8th April 2017appointed Mr. Santanu Ray (DIN: 00642736) Mrs. Ibaridor Katherine War (DIN: 03107920) andMrs. Plistina Dkhar (DIN: 01375361) as Additional Directors in the Independent categorywith effect from 8th April 2017 for a term of 5 years subject to regularization/approvalof the shareholders in the ensuing Annual General Meeting.
In accordance with the provisions of Companies Act 2013 and in termsof the Memorandum and Articles of Association of the Company Mr. Sanjay Agarwal willretire by rotation and being eligible offer himself for re-appointment. In view of hisconsiderable experience your Directors recommend his re-appointment as Director of theCompany.
The following personnel are Key Managerial person of the Company:
DECLARATION BY INDEPENDENT DIRECTORS
All Independent Directors have given declarations that they meet thecriteria of independence as laid down under Section 149(6) of the Companies Act 2013. Mr.Mangilal Jain Mr. Manindra Nath Banerjee Mr. Santanu Ray Mrs. Ibaridor Katherine Warand Mrs. Plistina Dkhar are Independent Directors on the Board of your Company. In theopinion of the Board and as confirmed by these Directors they fulfill the conditionsspecified in section 149 of the Act and the Rules made thereunder about their status asIndependent Director of the Company.
FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS
In order to enable the Independent Directors to perform their dutiesoptimally the Board has devised a familiarization programme for the Independent Directorsto familiarize them with the Company their roles rights responsibilities in theCompany nature of the industry in which the Company operates business model of theCompany etc. They are periodically updated about the development which takes place in theCompany. At the time of appointment of an Independent Director the Company issues aformal letter of appointment setting out in detail the terms of appointment dutiesresponsibilities and commitments etc. The familiarization program is available on theCompany's
SUBSIDIARIES AND ASSOCIATE COMPANY
M/s. Star Cement Meghalaya Limited M/s. Megha Technical &Engineers Private Limited M/s. Meghalaya Power Limited and M/s. NE Hills Hydro Limitedcontinue to remain subsidiaries of the Company.
Star Cement Meghalaya Limited is engaged in manufacturing of CementClinker and has a Clinkerization plant with an installed capacity of 1.75 MTPA. During theyear under review the Company manufactured 1579345 MT of clinker as against 1629025MT in FY 2015-16.
Megha Technical & Engineers Private Limited is engaged in themanufacture of cement. During the year under review the Company produced 317161 MT ofCement.
Meghalaya Power Limited is engaged in generation of Power. During theyear under review the Company generated 2016.24 Lac units of power.
NE Hills Hydro Ltd. wholly owned subsidiary of your Company iscurrently not operational.
During the year the Company incorporated a wholly-owned subsidiaryStar Century Global Cement Private Limited in Myanmar on 28th June 2016 and the Companyis yet to commence its operations.
AUDITED FINANCIAL STATEMENTS OF THE COMPANY'S SUBSIDIARIES
Pursuant to sub-section (3) of section 129 of the Act the statementcontaining the salient features of the financial statement for the year ended March 312017 for each of the Company's subsidiaries viz. Star Cement Meghalaya Limited (SCML)Megha Technical & Engineers Private Limited (MTEPL) Meghalaya Power Limited (MPL) NEHills Hydro Limited (NHHL) and Star Century Global Cement Private Limited (SCGCPL) areannexed in the Form AOC - 1 and marked as Annexure-4.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company have been preparedas per Accounting Standards- AS 21 as prescribed by the Institute of CharteredAccountants of India and has been included as a part of this Annual Report.
The detailed financial statements and audit reports of each of thesubsidiaries of the Company are available for inspection at the Registered Office of theCompany during office hours between 11 A.M. and 1 P.M. The Company will arrange to sendthe financial statements of the subsidiaries upon written request from a shareholder tothe registered address of the said shareholder.
During the year under report the Company has not accepted any depositsfrom public or from any of the Directors of the Company or their relatives falling underambit of Section 73 of the Companies Act 2013.
CHANGES IMPACTING GOING CONCERN STATUS AND COMPANY'S OPERATIONS
During the year under review there have been no material orders passedby the Regulators/Courts impacting materially the going concern status or futureoperations of the Company.
There were no material changes and commitments affecting the financialposition of the Company during the period under review.
ADEQUACY OF INTERNAL FINANCIAL CONTROL
The Company has an Internal Control System commensurate with the sizescale and complexity of its operations. To maintain its objectivity and independence theInternal Audit function reports to the Chairman of the Audit Committee of the Board.
The Internal Audit Department monitors and evaluates the efficacy andadequacy of internal control system in the Company its compliance with operating systemsaccounting procedures and policies at all locations of the Company. Based on the report ofinternal audit function process owners undertake corrective action in their respectiveareas and thereby strengthen the controls. Significant audit observations andrecommendations if any along with corrective actions thereon are presented to the AuditCommittee of the Board.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company has in place adequate internal financial controlscommensurate with the size scale and complexity of its operations. During the year suchcontrols were tested and no reportable material weakness in the design or operations wereobserved. The Company has policies and procedures in place for ensuring proper andefficient conduct of its business the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable financial information.
MANAGERIAL REMUNERATION AND PARTICULARS OF EMPLOYEES
The disclosures with respect to the remuneration of Directors andemployees as required under Section 197 of Companies Act 2013 read with Rule 5 (1) of theCompanies (Appointment and Remuneration of Managerial Personnel)
Rules 2014 along with a statement containing particulars of employeesas required under Section 197 of Companies Act 2013 read with Rule 5 (2) and (3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexedherewith and marked Annexure- 5 and forms part of this report.
POLICY ON PREVENTION OF SEXUAL HARASSMENT
The Company values the integrity and dignity of its employees. TheCompany has put in place a 'Policy on Prevention of Sexual Harassment' as per the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013("Sexual Harassment Act"). We affirm that adequate access has been provided toany complainants who wish to register a complaint under the policy. No complaint wasreceived during the year.
The Company has complied with the corporate governance requirements asstipulated under the Listing Obligations and Disclosures Requirements Regulations 2015formulated by Securities and Exchange Board of India (SEBI). A separate section oncorporate governance along with a certificate from the auditors confirming thecompliance is annexed and forms part of the Annual Report. This certificate will beforwarded to the Stock Exchanges along with the Annual Report of the Company.
CHIEF EXECUTIVE OFFICER (CEO) /CHIEF FINANCIAL OFFICER (CFO)CERTIFICATION
As required under Regulation 17(8) of the Listing Obligations andDisclosures Requirements Regulations 2015 formulated by Securities and Exchange Board ofIndia (SEBI) the CEO/ CFO certification has been submitted to the Board and a copythereof is contained in this Annual Report.
Risk management refers to the practice of identifying potential risksin advance analyzing them and taking precautionary steps to reduce the risk. The Companyhas evolved a risk management framework to identify assess and mitigate the key riskfactors of the business. The Board of the Company is kept informed about the riskmanagement of the Company.
HUMAN RESOURCE DEVELOPMENT & INDUSTRIAL RELATIONS
Star Cement's journey over the past decade has been a momentous onefringed with success stories and glorious feats. The Company has not only establisheditself as the market leader and most preferred brand in North Eastern India but is alsosteadily propelling forward as the fastest growing company in Eastern India.
Star Cement owes its burgeoning Success Story to its highly talentedpool of human assets who have strived incessantly to redefine the standard of excellencethrough unparalleled hard-work and unmatched determination. Living true to its MissionStatement Star Cement respects the dignity of its employees and aspires to be respectedfor the highest level of integrity and human values in the corporate arena of EasternIndia. Over the years people have grown and evolved with the organization and has beenbestowed with the best of rewards accolades compensation and benefits.
Besides getting an opportunity to work in an extremely stimulatingenvironment and enriching functional domains Star employees are proud to belong to anorganization which offers them a galore of opportunities - in terms of enhancing theirlearning curve continuous upgradation of their skill- sets professional development asper identified training needs cross-functional career options leadership trainingprograms competency assessment and robust succession plan.
Star Cement promotes a fair and transparent work culture and believesin providing equal opportunities to all its employees. While hiring candidates racecolour religion national origin citizenship geographical positioning age gendermarital status ancestry social standing physical or mental disability medicalcondition socio-economic background or sexual orientation are not taken intoconsideration. The organization provides a conducive environment for its people to thrivein harmony and deliver collectively towards achieving the organizational goal.
AWARDS AND ACCOLADES
Your Directors are pleased to report that during the year under reviewyour Company was awarded National runner up - Driving Positive Change in MahindraTransport Excellence Awards 2016 under Construction and mining segment at a ceremony heldat New Delhi.
GREEN INITIATIVES IN CORPORATE GOVERNANCE
Ministry of Corporate Affairs has permitted Companies to send copies ofAnnual report Notices etc. electronically to the email IDs of shareholders. YourCompany has arranged to send the soft copies of these documents to the registered emailIDs of the shareholders wherever applicable. In case any shareholder would like toreceive physical copies of these documents the same shall be forwarded upon receipt ofwritten request in this respect.
Statements in this report describing the Company's objectivesexpectations or predictions may be forward looking within the meaning of applicablesecurities laws and regulations. Actual results may differ materially from those expressedin the statement. Important factors that could influence the Company's operations include:global and domestic demand and supply conditions affecting selling prices new capacityadditions availability of critical materials and their cost changes in Governmentpolicies and tax laws economic development of the country and other factors which arematerial to the business operations of the Company.
Your Directors take this opportunity to express their deep sense ofgratitude to Banks Central and State Governments and their departments and the localauthorities customers vendors business partners/associates for their continued guidanceand support.
Your Directors would also like to place on record their sincereappreciation for the commitment dedication and hard work put in by every member of theCompany and dedicates the credit for the Company's achievements to them. Last but notleast your Directors express their gratitude to the shareholders of the Company forreposing their confidence and faith in the Management of the Company.
For and on behalf of the Board of Directors