AND MANAGEMENT DISCUSSION AND ANALYSIS
The Directors are pleased to present the 78 th Annual Report together withthe Audited Financial Statements of the Company for the Financial Year ended 31stMarch 2018.
| ||2017-18 ||2016-17 |
|Sales & Other Income ||3582.29 ||3329.93 |
|Profit before Interest & Depreciation ||479.46 ||435.22 |
|Profit before Depreciation ||281.98 ||246.57 |
|Profit / (Loss)after Tax ||83.96 ||82.00 |
|Transfer to Debenture || || |
|Redemption Reserve ||- ||35.00 |
|Surplus brought forward ||199.63 ||156.17 |
|Amount available for appropriation ||283.59 ||203.17 |
|Appropriations || || |
|- Dividend paid during the year || || |
|(Pertaining to Previous Year) ||10.63 ||3.54 |
|Surplus carried to Balance Sheet ||272.96 ||199.63 |
| ||283.59 ||203.17 |
Your Directors are pleased to recommend a dividend of ' 0.75 per Equity Share of ' 5each (1 5%) for the Financial Year ended 31st March 201 8. The Dividend outgosubject to approval at the ensuing Annual General Meeting will be ' 8.83 Crore (inclusiveof Dividend Distribution Tax of ' 1.81 Crore).
The Company has its manufacturing plants located in two distinctive markets namelyEast comprising the states of Chhattisgarh Odisha Eastern & Central MP and Vidarbharegion in Maharashtra; and North West that mainly comprises Rajasthan Gujarat HaryanaDelhi Punjab Western UP Western MP and some parts of Maharashtra bordering Gujarat. Eventhough the Financial Year 201 7-18 has been a relatively tough year for the CementIndustry on the whole and your Company was no exception; yet cement being a regionalcommodity the performance of the Company operating in multiple markets must be viewed withrespect to the performance of the industry in those markets.
In East where the Company has entered in FY 201 6. In the last Financial Yearrepresented first full year of stabilized performance in these markets. The installedcapacity of its Durg Plant for clinker and cement was increased by 22% and 39%respectively mainly due to in-house innovations and optimization of plant operatingparameters without incurring any major capital investments. This capacity creation alsogot reflected in higher production and higher sales.
In terms of capacity utilization growth in sales and operational efficiencies Durgplant is now amongst the best plant. With commissioning of Waste Heat Recovery Boiler of7.50 MW capacity and expected commissioning of captive power plant of 20 MW capacity inFinancial Year 201 8-1 9; the power cost per MT of cement shall drastically be reduced andwould make Durg plant amongst the most efficient plants in the cement industry. All theseinitiatives related to power shall lead to substantial savings when fully operationalizedand stabilized.
Coming to the North - West part of the operations; where the Company's manufacturingplants are in operation for quite some time; the focus in Financial Year 201 7-18 had beenon consolidation both in terms of improving the efficiencies in manufacturing operationsand in distribution. On power and fuel consumption from the Sirohi plant of the Company isone amongst the best in the industry and its associated grinding units at Kalol and Jharlitoo are leaders in power efficiency. The recently commissioned cement grinding unit atSurat is now fully stabilized and is continuously setting up new benchmarks on operationalparameters. The Grinding units at Surat and Jharli are also producing Solar Power at muchlower cost to partly meet their own consumption needs by utilizing the available space toinstall solar panels.
The demand situation in Northern & Western parts of India has rather been subduedin the concluded Financial Year as compared to a relatively better growth seen in Eastern& Central parts of India. As a consequence of this the production of clinker andcement sales have seen a marginal increase 3% and 6% respectively.
The Company has recently taken various initiatives to improvise its distribution partlyaided by implementation of GST such as increase in direct dispatches enhancing thedispatches from Grinding Units optimization of dumps which will result in lower logisticcost and thereby increasing the profitability margin of Company.
The Company's EBIDTA stood at ' 479.46 Crore which compares favorably with the EBIDTAof ' 435.22 in the previous Financial Year. Company's net profit stood at ' 83.96 Crore asagainst a Profit of ' 82.00 Crore in the previous fiscal.
PROGRESS OF THE PROJECTS & EXPANSIONS
The Company is well on its way to complete all major growth related capitalinvestments as planned by end of the Financial Year 201 8-19. The 1.35 Million Tonnesper annum grinding unit at Surat Gujarat had been commissioned and is now fullystabilized. The work on Company's Grinding Unit project in Orissa with an annual capacityof 0.8 Million Tonne is progressing satisfactorily and is expected to be completed byfourth Quarter of Financial Year 2018-1 9. 7.50 MW Waste Heat Recovery Project at Durg hasbeen successfully commissioned in November 2017 and is generating power at rated capacity.The Company has already enhanced its Cement Capacity at Durg Plant from 1.80 MillionTonnes to 2.70 Million Tonnes and Clinker Capacity from 1.49 Million Tonnes to 1.95Million Tonnes at a nominal Capital expenditure of ' 50 Crore only.
Udaipur Cement Works Limited (UCWL) Company's Subsidiary had successfully startedcommercial production and with this commissioning the Company's overall operatingcapacity including that of UCWL stands increased to 12.5 Million Tonnes as on 31stMarch 2018.
OUTLOOK FOR INDIAN ECONOMY
With the series of major economic reforms undertaken by Central Government such asdemonetization in November 201 6 introduction of RERA and implementation of GST in July201 7; though caused some temporary disruptions; the Indian economy appears to be at thecusp of major transformation. The Indian Economy seems to be picking up steadily on arobust trajectory. Appearing bullish on India's potential the World Bank has projectedthe country's economic growth to reach 7.3 per cent in Financial Year 2018-19 outpacingthat of China's. Besides several propoor and pro-rural initiatives announced by theGovernment in the recent Budget will lead to spur in the demand and contribute towardsfuture economic growth. Even though the short term cost associated with Demonetizationspilled over into the Financial Year 2017-18 in the shape of hardship and inconvenienceespecially in the informal and cash intensive sectors who bore the brunt most in the formof loss in income and employment it has also brought the digital payment agenda to thefore like never before. GST also upon introduction added to challenges as there were manysectors of the economy especially the MSME and small retail sector were not ready for it.While these disruptions caused hardships in short run the long term benefits are graduallyemerging to show. It is reported that for the first time since the introduction in July201 7 gross GST collections have crossed ' 1 Lakh Crore in March 201 8; and now insubsequent months are stabilizing towards this figure. The operation clean money isresulting in significant additions to tax base and direct taxes collections. Healthyfinances of the government bodes well for the economy and especially for those sectors ofthe economy where the government spending and investments create substantial impact.
Additionally speedy resolution of the long outstanding problem of stressed companiesby implementing new Indian Bankruptcy Code major recapitalization package implementationto strengthen the public sector banks further liberalization of Foreign DirectInvestments measures to uplift export etc. are expected to improve the investmentclimate significantly. India for the first time in its history has breached the 1 00 markbarrier to be amongst top 1 00 economies in the ease of doing business. All of these areindicators of an impending turnaround in the economy.
INDUSTRY OVERVIEW - THREATS OUTLOOK & OPPORTUNITIES
Cement Industry has overcapacity demand is not rising as it should as or was expectedinput costs are going up regulatory environment is becoming increasingly strictcustomers more demanding competition increasing etc.; are common refrains when it comesto explaining reducing margins and reducing returns on capital employed. Clearly there isneed to see beyond the obvious.
Industry in last 2 - 3 years has witnessed some major structural changes. The industryis witnessing a sort of consolidation in which the total capacity in the hands of largeand mid size players is gradually rising. For instance nearly about 1 5% of industrycapacity in last 2 - 3 years has changed hands and has largely gone into the hands of theplayers who already dominate the industry landscapes. As a consequence of thisconsolidation while 10 years ago large and mid size players in the industry controlled40% of the industry capacity today more than 70% of industry capacity is with large andmid sized players. This consolidation undoubtedly on one hand has changed costcompetitiveness equation for the industry; on the other hand it has also put pressure onothers to tighten the belt and be more cost competitive. Improving competitiveness is agood news for all and is also an opportunity for others to learn improve and adopt.
Another expected positive aspect of the consolidation in the industry is moreresponsible behavior and reducing volatility which has been one of its foremostcharacteristics. We are already witnessing the same in terms of a better price parityacross markets and barring a few exceptions the market is gradually getting used to pay aprice per bag of cement which is more uniform across the country. GST will also contributeto it in no small measure. Though such a change is likely to cause some pain anddiscomfort initially but is also an opportunity for the industry to be more focused andconcentrate on markets which are natural to them in terms of cost and pricecompetitiveness. Stability in prices is also likely to result in stable markets and stabledemand. A system that is stable and running in steady state is always more efficient andeffective as compared to a system full of uncertainties and volatility.
After a period of initial turbulence caused by major disruptive economic reformsundertaken by the government riding on the initiatives such as infrastructure developmentand Housing for all; cement demand is now witnessing a gradual but steady revival. Housingand infrastructure have always been the mainstay of cement consumption and both thesesectors put together account for nearly 80% of cement consumption. Hence a revival ofthese sectors even though in select pockets is overall a good news for the industry.Though this revival would certainly bridge the gap between the industry capacity which isinching towards 500 million mark and demand which is crossing 300 million mark; there islittle to believe that new capacity shall not be added in the industry before existingcapacities are fully absorbed or are absorbed to the extent of 90 - 95% utilization levelsseen by the industry in past.
Hence moving forward with consolidation of capacities consolidation of market presenceand market share would be a major factor that would derive the capability to compete inthe industry. Your company has taken various measures in this regard which will result infurther consolidation of its presence and growth in market share in its operative markets.This combined with improvements in operational efficiencies should lead to better marginsaccretion of wealth and thereby further reinvestment in future.
HUMAN CAPITAL MANAGEMENT
With increasing complexity in the competitive landscape proactive and effectivemanagement of Human Capital has become even more crucial. We believe in 'War with Talent'rather than waging war for talents which is also aptly reflected in having one of thelowest attrition level in the industry. With agility responsiveness and cutting-edgetechnology emerging as key drivers of business growth and sustenance through talent thisyear the Company has placed significant emphasis on these critical drivers. Right fromfocussed skill and competency based training and development programmes includingself-driven e-learning portals/kiosks to increased employee engagement activities premiumwas placed on improving capacity capability and inner drive of the human capital. TheCompany also ensured that these behaviours demonstrating key drivers of agilityresponsiveness and cutting-edge technology are recognized and rewarded in the mostappropriate ways so as to bolster the sense of achievement and pride both in terms of theCompany as well as individual and teams. For instance the new initiative of 'DistrictPremier League' in marketing function encompassing focus on trade sales target journeyplans dealer productivity direct dispatches and premium products including value addedproducts has yielded into desired tangible and intangible results both in short as well aslong term.
The contributions of human capital were reflected in terms of continued best-in-classhard as well as soft metrics. On people front the Company was recognized as "Best inthe Industry: Manufacturing and Production 2018" by Great Place to Work InstituteIndia which amplifies the premium Company has placed on its human capital and the way theyare groomed nurtured developed and retained. With culture as its backbone the Companycontinues with its acceleration towards excellence through limitless human possibility andcontributions of its greatest resource- the talented agile and strategic pool of managersand committed workforce.
INTERNAL CONTROL SYSTEMS
The Company has in place Internal Control Systems commensurate with the nature of itsbusiness size and complexity of its operations. These Systems are regularly tested fortheir effectiveness by Statutory as well as Internal Auditors. The Company has a Strongand Independent Corporate Internal Audit Team comprising of Qualified Professionals whoreview the Internal Control Systems on regular basis to check its effectiveness and alsoto verify all statutory compliances. The Company has also appointed External Auditors tocarry-out Internal Audit for its key locations and some of the Marketing offices. Based onthe Internal Audit Programme approved by the Audit Committee of the Board the InternalAuditors carry-out regular Internal Audits covering all offices factories and key areasof business. These Internal Auditors report directly to the Chairman of the AuditCommittee and their Reports are placed before the Audit Committee on Quarterly basis forreview. The Audit Committee reviews the findings of the Internal Auditors and monitors theImplementation of the recommendation of the Auditors.
The Company also has a robust Budgetary Control System and MIS System under whichactual Periodic Operating and Financial Performances are mapped against the Budget andvariances are analyzed to take corrective actions.
INTERNAL FINANCIAL CONTROLS
The Company has laid down Internal Financial Control Systems Policies and Procedureswhich ensure accuracy and completeness of the Accounting records and the timelypreparation of reliable financial statements. These Internal Financial Control Systems areadequate for safeguarding the assets and for prevention and detection of errors and fraudscommensurate with the size nature and complexity of
the operations of the Company. The Policies and Procedures are adequate for orderly andefficient conduct of Business of the Company. The Company also has a Strong BudgetaryControl System and Management Reporting System which serve as the backbone to not onlycheck the adequacy and effectiveness of the Internal Financial Controls but also tomonitor the existing operating systems to ensure that Business results are achieved andcorrective remedial actions are taken wherever necessary. No reportable materialweaknesses were observed in the system during the previous financial year.
EXTRACT OF ANNUAL RETU RN
An extract of the Annual Return as on 31st March 2018 in the prescribed FormMGT -9 is attached as Annexure 'A' to this Report and forms a part of it.
RELATED PARTY TRANSACTIONS
During the Financial Year ended 31st March 201 8 all the contracts orarrangements or transactions entered into by the Company with the Related Parties were inthe ordinary course of business and on an arms' length basis and were in compliance withthe applicable provisions of the Companies Act 2013 and the SEBI (Listing Obligations& Disclosure Requirements) Regulations 201 5.
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 asapproved by the Board is available on the website of the Company. PARTICULARS OF LOANSGUARANTEES OR INVESTMENTS
The particulars of loans given guarantees or securities provided and investments madeas required under the provisions of Section 1 86 of the Companies Act 201 3 are given inthe financial statements.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Pursuant to Section 152 of the Companies Act 2013 Dr. Shailendra Chouksey retires byrotation at the ensuing Annual General Meeting (AGM) and being eligible offers himself forre-appointment. The Board recommends his reappointment.
All the Independent Directors of the Company have given requisite declarationsconfirming that they meet the criteria of independence as provided in Section 149(6) ofthe Companies Act 2013 and Regulation 16 of SEBI (Listing Obligations & DisclosureRequirements) Regulations 201 5.
There has been no change in the Directors and Key Managerial Personnel of the Companyin terms of the provisions of the Companies Act 2013 during the year under review.
CONSERVATION OF ENERGY ETC.
The details as required under Section 134(3)(m) read with the Companies (Accounts)Rules 2014 are annexed to this Report as Annexure 'B' and forms part of it.
CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements of yourCompany for the Financial Year 2017-18 have been prepared in accordance with the CompaniesAct 201 3 ("Act") read with the Rules made thereunder and applicable IndianAccounting Standards. The Audited consolidated financial statements together withAuditors' Report form part of the Annual Report.
In compliance with Section 1 29(3) of the Act and Rule 8 of the Companies (Accounts)Rules 2014 a report on the performance and financial position of each of thesubsidiaries and associate included in the consolidated financial statements is presentedin a separate section in the Annual Report. Please refer AOC-1 annexed to the financialstatements in the Annual Report.
Pursuant to the provisions of Section 136 of the Act the financial statements andconsolidated financial statements along with relevant documents of the Company andseparate audited accounts in respect of subsidiaries are available on the website of theCompany.
During the Financial Year under review no company has become or ceased to be yourCompany's subsidiary or joint venture or associate.
Pursuant to the approval of members by means of a Special Resolution passed at theAnnual General Meeting held on 4*1 September 2014 the Company has continued toaccept deposits from the public in accordance with the provisions of the Companies Act2013 (Act) and the Rules made thereunder.
The Particulars in respect of the deposits covered under Chapter V of the said Act forthe Financial Year ended 31st March 2018 are: (a) Accepted during the year - '24.63 Crore; (b) Remained unclaimed as at the end of the year - ' 0.22 Crore; (c) Defaultin repayment of deposits or payment of interest thereon at the beginning of the year andat the end of the year - Nil and (d) Details of deposits which are not in compliance withthe requirements of Chapter V of the said Act- Nil.
(a) Statutory Auditors and their Report
M/s S.S. Kothari Mehta & Co. Chartered Accountants were appointed as StatutoryAuditors of the Company to hold office from the conclusion of the 77 th AnnualGeneral Meeting (AGM) held on 7 th September 2017 until the conclusion of the80 th AGM to be held in the year 2020 subject to ratification by the Membersat every subsequent AGM to be held during their said term in accordance with theprovisions of the Companies Act 201 3. However pursuant to the Companies (Amendment)Act 2017 the requirement of ratification of appointment of the Auditors on yearly basishas been dispensed with. The observations of the Auditors in their report on Accounts andthe 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 asSecretarial Auditor to carry out Secretarial Audit of the Company for the Financial Year201 7-18. The Report given by him for the said Financial Year in the prescribed format isannexed to this Report as Annexure 'C'. The Secretarial Audit Report does not contain anyqualifications reservations or adverse remarks.
(c) Cost Auditor and Cost Audit Report
M/s R.J. Goel & Co. Cost Accountants conducted the Audit of cost records of theCompany for the Financial Year ended 31st March 201 7 and as required CostAudit Report was duly filed with Ministry of Corporate Affairs Government of India.
The Audit of the Cost Accounts of the Company for the Financial Year ended 31stMarch 2018 is being conducted by the said firm and the Report will be duly filed.
CORPORATE SOCIAL RESPONSIBILITY
The Company is in the forefront of fostering a socially responsible corporate climate.Towards this end a number of initiatives have been taken to improve the quality of livingstandards of the communities and people residing around the Company's plants.
Company's focus areas include 'protection of environment and conservation of naturalresources health care education skill development water and sanitation plantation andGreen Cover Rehabilitation and rural development among others. Please also see detailsgiven in Principle 4 to the Company's Sustainability & Business Responsibility Reportfor the Financial Year 201 7-1 8.
The Company has a requisite CSR Policy in accordance with the provisions of theCompanies Act 201 3 and rules made thereunder. The contents of the CSR Policy aredisclosed 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 1 36 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. The said information is availablefor inspection at the Registered Office of the Company during business hours on workingdays of the Company upto the ensuing Annual General Meeting. Any member interested inobtaining such particulars may write to the Company Secretary.
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.
CHANGE IN THE NATURE OF BUSINESS
During the year under review there was no change in the nature of business.
SUSTAINABILITY & BUSINESS RESPONSIBILITY REPORT
Pursuant to Regulation 34(2)(f) of the SEBI (Listing Obligations & DisclosureRequirements) Regulations 201 5 the Sustainability & Business Responsibility Reportof the Company for the Financial Year 201 7-18 ended 31st March 2018 in theprescribed format giving an overview of the initiatives taken by the Company from anenvironmental social and governance perspective is given in a separate section of theAnnual Report and forms a part of it.
The Company's first Sustainability Report covering financial years 2014-16 based on theGlobal Reporting Initiatives G4 framework including all aspects of our sustainabilityactivities is available on the Company's Website at www.jklakshmicement. com/www.iklakshmisustainability.com.
Your Company reaffirms its commitment to the highest standards of corporate governancepractices. Pursuant to Regulation 34 of SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 Corporate Governance Report and Auditors Certificateregarding compliance of conditions of Corporate Governance are made a part of this Report.The Corporate Governance Report also covers the following:
(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 criteria for determining qualificationspositive attributes independence of a director etc.
(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.
(f) Dividend Distribution Policy.
COMPLIANCE OF SECRETARIAL STANDARDS
Based on the Secretarial Audit Report of the Secretarial Auditor the Company has dulycomplied with the applicable Secretarial Standards on Meetings of Board of Directors andGeneral Meetings.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 1 34(3)(c) of the Companies Act 201 3 your Directors statethat:-
(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.
Your Directors wish to place on record and acknowledge their appreciation for thecontinued support and valuable co-operation received from the Financial InstitutionsBanks Government Authorities Dealers Suppliers Business Associates and Company'svalued Customers and the esteemed Shareholders for the faith they continue to repose inthe Company.
The Directors also express their gratitude to the "Team JK Lakshmi" for theirsignificant efforts and collective contribution to enable the Company maintain steadyprogress.
The Directors' Report & Management Discussion and Analysis contains forward-lookingstatements which may be identified by the use of words in that direction or connotingthe same. All statements that address expectations or projections about the futureincluding but not limited to statements about your Company's strategy for growth productdevelopment market positions expenditures and financial results are forward lookingstatements.
Your Company's actual results performance & achievements could thus differmaterially from those projected in such forward looking statements. The Company assumes noresponsibility to publicly amend modify or revise any forward-looking statements on thebasis of any subsequent development information or events.
| ||On behalf of the Board of Directors |
| ||Vinita Singhania |
| ||Vice Chairman & Managing Director |
|Place: New Delhi ||Dr. Shailendra Chouksey |
|Date: 16th May 2018 ||Whole-time Director |