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Kakatiya Cement Sugar & Industries Ltd.

BSE: 500234 Sector: Industrials
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OPEN 202.95
CLOSE 195.35
52-Week high 432.50
52-Week low 179.40
Mkt Cap.(Rs cr) 154
Buy Price 0.00
Buy Qty 0.00
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Kakatiya Cement Sugar & Industries Ltd. (KAKATCEM) - Director Report

Company director report



The Members

Your Directors have pleasure in presenting the 39th Annual Report together with theAudited Financial statements for the year ended 31st March 2018.


The Financial Results for the year ended 31st March 2018 are summarized below:

(Rs. in lakhs)

Particulars 2017-18 2016-17
Income (Sales and other Income) 17280.10 25078.90
Profit before Depreciation Interest & Taxes 1950.59 5128.80
Depreciation 218.12 236.12
Interest 250.44 171.15
doubtful debts 0.00 196.07
Taxation 534.68 2128.69
Deferred Taxation (100.61) (486.43)
TOTAL 902.63 2245.60
Profit after Tax 1047.96 2883.20
Other Comprehensive Income 44.94 7.18
Total Comprehensive Income 1092.90 2890.38
Share Capital (No. of shares) 7773858 7773858
EPS (Rs.) 13.48 37.09


Your Directors are pleased to recommend for your consideration a Dividend of Rs. 3.00per equity share for the year ended 31.03.2018 which aggregates to Rs. 233.22 lacsexcluding dividend distribution Tax. Your directors felt that it shall be appropriate torecommend dividend at Rs. 3.00 per equity share at par with the dividend declared for thelast year despite the fact that the financial performance of the company suffered asetback due to closure of cement plant for almost six months during the year under review.


The company has decided not to transfer any sum to reserves from out of the currentyear's profits. However a sum of Rs. 287.19 lacs was transferred to reserves from out ofits profits in the preceding year.


According to Section 205C of the Companies Act 2013 read with Investor Education andProtection Fund (Awareness and Protection of Investors) Rules 2001 the company hastransferred unclaimed dividend amounting to ' 93150 to the Investor Education andProtection Fund established by the Central government during the year under review. Thesaid transfer is in respect of the unclaimed dividends for the financial year 2009-2010.


In terms of Section 134 (3) (l) of the Companies Act 2013 there are no materialchanges and commitments affecting the financial position of the company which haveoccurred between the end of the financial year of the company to which the financialstatements relate and the date of the Report except the revocation of closure directionsissued by the pollution control authorities. The company has recommenced operations at itscement plant located at Dondapadu Village Chintalapalem Mandal Suryapet DistrictTelangana state on 19th April 2018.


The company has not accepted any deposits during the year under review and there wereno outstanding deposits as at the end of the year.


There are no significant and material orders passed by the Regulators or courts ortribunals in the year under review impacting the going concern status or company'soperations in future.


Shri C Madhusudana Rao an Independent Director of the company has resigned from thedirectorship with effect from 24th July 2017. The Board places on record its appreciationfor the services rendered by Shri C Madhusudana Rao during his tenure.


In accordance with the provisions of the Companies Act 2013 Shri J S Rao Directorretires by rotation at the ensuing Annual General Meeting and being eligible offershimself for re-appointment.

The brief profile of Shri J S Rao director who is seeking re-appointment at theensuing Annual General Meeting is presented elsewhere in this Annual Report.


As on 31st March 2018 7356514 shares were dematerialised with National SecuritiesDepository Limited and Central Depository Services Limited which constitutes 94.64% of theshares of the company. Members may please note that it is a mandatory requirement that thecompany shall endeavour to ensure that at least 50% of the shareholding of the publicshareholders is in the dematerialised mode.

The company therefore once again requests such of the public shareholders who havenot yet dematerialised their shares to initiate immediate steps to complete the process ofdematerialisation.


During the year under review the Cement Division has produced 164207 MT as against281852 MT in the year ago period thereby registering a steep fall of 41.74% consequentto the closure of operations of the plant pursuant to the directions issued by CPCB NewDelhi for not providing online connectivity to CPCB server.

The Cement Division has earned Profit Before Tax (PBT) of Rs. 4.81 crores in the yearunder review in comparison with Rs. 13.27 crores earned in the previous year. This worksout to a fall of 63.75% over the previous year. The Company secured revocation order fromCPCB and thereafter complied with other formalities and procedures. The power connectionwas restored and operations were restarted on April 19 2018 in the cement plant.

Sugar Division:

The Sugar Division produced 152074 Qtls in the year under review as against 244290Qtls in the previous year there by recording a significant decline of 37.75%. During theyear under review reorganization of zonal areas was effected by the department resultingin a very disadvantageous situation to the company as the plant has lost many productiveareas. The inadequate availability of water sources has also impacted the cane productionand by extension even the production of sugar to a significant level. The fluid situationin respect of the zonal allocation matter has also affected the cane developmentprogrammes of the cane growers.

Due to the cumulative factors cited above the sugar division has clocked a turnover of' 89.33 cores in 2017-2018 in comparison with Rs. 122.31 crores in the preceding yearthereby registering a decline of 26.96% over the year ago period. The sugar divisionrecorded profit before tax (PBT) of ' 5.32 crores as against profit before tax (PBT) of '6.18 crores in the preceding year resulting in a decline of 24.11% in the year underreview.

Power Division:

The Power Division has generated 24404891 KWH in 2017-18 as against 37492394 KWHof power in the preceding year thereby recording a decline of 34.91%. As has been statedin our earlier reports the company has not been able to generate power during off-seasonperiod in the sugar division since the Government of Telangana has not been conceding tothe request of the power entities to generate power using coal as an alternative fuel as amatter of policy. In view of this and coupled with lower quantum of crushing operationsthe power division has generated lower number of units compared to the previous year. Theshut-down of the operations in the cement division during October 2017 to March 2018 isanother important factor for lower generation of power in the year under review.

In the circumstance therefore the power Division could earn a meagre Profit before tax(PBT) of Rs. 4.69 crores as against Rs. 25.68 crores in the previous year thus recording adecline of 81.73% for the year.


Cement Division:

In the year under review the company has produced 164207 MT only as against 281852M T produced in the preceding year there by recording a decline of 41.74%. This isconsequent to the closure of operations of the plant pursuant to the directions issued byCPCB New Delhi for reasons stated in the preceding paras.

The company has set a target of its cement production at 175000 M T in the currentyear considering the present scenario from various aspects.

Sugar Division:

Availability of adequate water is a crucial factor in the sugar cane development and inthis connection proper allocation of cane development areas to the company by theDirector of Sugar and Cane Commissioner assumes paramount importance for the developmentof the sugar division.

As the company was deprived of many fertile areas apart from loosing many mandals andvillages consequent to the zonal allocation order issued by Director of Sugar and CaneCommissioner Hyderabad the company preferred an appeal before the Principal SecretaryIndustries and commerce Hyderabad. The company is still awaiting the outcome in thismatter.

Taking into account the critical factors your company has set a target of 100000 MTof crushed cane in the current year.

Power Division:

The Company will make best endeavors to achieve enhanced level of power generation.However since it is largely related to government policy and to various legal andadministrative issues a great deal of uncertainty still remains as a sour factor.


All the properties of the Company including its buildings Plant and Machinery andStocks wherever required have been adequately insured.

Disclosures under the Companies Act 2013


The extract of the Annual Return as per provisions of section 92 of the Companies Act2013 and Rule 12 of Companies (Management and Administration) Rules 2014 in form MGT 9 isannexed to this Report. (Annexure - 1)


During the year under review 4 (Four) Board Meetings were held. The details of theBoard Meetings and the attendance of the Directors are furnished elsewhere in theCorporate Governance Report.


There is no change in the Share Capital during the year under review.


The terms of reference of the Audit Committee encompasses the requirements of Section177 of Companies Act 2013 and Regulation 18 of the Listing Regulations and inter aliaincludes:

a. To hold periodic discussions with the Statutory Auditors and Internal Auditors ofthe Company concerning the financial reports of the company and internal control systems.Examination of scope of audit and observations of the Auditors / Internal Auditors andoverseeing that the Company's financial reporting process and the disclosure of itsfinancial information to ensure that the financial statements are correct sufficient andcredible.;

b. To call for the comments of the auditors about internal control systems scope ofaudit including the observations of the auditors and review of financial statementsbefore their submission to the Board and also to discuss any related issues with theinternal and statutory auditors and the management of the company;

c. To evaluate internal financial controls and risk management systems;

d. To inter-alia review Management Discussion and Analysis of financial conditionresults of operations and Statement of Significant Related Party transactions submitted bythe management before submission to the Board;

e. To investigate into any matter in relation to the items referred to it by the Boardand for this purpose obtain professional advice from external sources if required;

f. To make recommendations to the Board on any matter relating to the financialmanagement of the company including the Audit Report;

g. To approve Related Party Transactions.

h. Reviewing the functioning of the Whistle Blower mechanism;

i. Recommending the appointment re-appointment and if required the replacement orremoval of the statutory auditors and fixation of audit fee and approval for payment forany other services.

More details of the Audit Committee are furnished in the Corporate Governance Report.


The Company follows a policy on remuneration of Directors and Senior Managementpersonnel. The Policy is approved by the Nomination and Remuneration Committee and theBoard.

More details on the same are given elsewhere in the Corporate Governance Report.



The main scope of the Nomination and Remuneration Committee is to determine andrecommend to the Board the persons to be appointed / re-appointed as Executive Directors /Non-Executive Directors.

The committee also determines and recommends to the Board the financial component. Thecompensation of the Executive Directors comprises of fixed component and also commissionbased on the profits earned by the company.

The compensation is determined based on the levels of responsibility and the parametersprevailing in the industry. The Executive Directors are not paid any sitting fee for Board/ Committee meetings attended by them. The Non-Executive Directors are paid sitting feefor Board / Committee Meetings attended by them and no other payment is made to them.

The Nomination and Remuneration Committee examines and devises a policy on Boarddiversity and to formulate criteria for determining qualifications experience positiveattributes and independence. It also recommends to the Board the factors to be reckonedwith in determining the remuneration payable to the Directors.

More details of the Nomination and Remuneration Committee are furnished elsewhere inthe Corporate Governance Report.


Particulars of contracts / arrangements entered into by the company with RelatedParties referred to in Section 188 (1) of the Companies Act 2013 have been provided inForm No.AOC-2 pursuant to clause (b) of sub Section (3) of Section 134 of the Act and Rule8(2) of the Companies (Accounts) Rules 2014 and the same are annexed to this Report. (Annexure- 2)


The statement of particulars of Appointment and Remuneration of Managerial Personnel asper Section 197(12) of the Companies Act 2013 read with Rule 5 of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 is annexed to this Report. (Annexure- 3)


The independent Directors have submitted the declaration of independence as requiredpursuant to section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in section 149(6) of the Companies Act 2013.


The information relating to conservation of energy technology absorption and foreignexchange outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is annexed to this Report.


The Composition and other details of the Nomination and Remuneration CommitteeStakeholders Relationship Committee and Risk Management Committee are furnished in theCorporate Governance Report. The other details in respect of Audit Committee and CorporateSocial Responsibility Committee are also furnished in the Corporate Governance Report.


Pursuant to the requirement under section 134 (3) (c) and 134 (5) of the Companies Act2013 with respect to the Directors' Responsibility statement the Board of Directors ofthe Company hereby confirm:

a. That in the preparation of annual accounts the applicable accounting standards havebeen followed and that there were no material departures therefrom.

b. That the Directors have selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as on 31st March 2018and of Profit of the Company for that period.

c. That the Directors have taken proper and sufficient care for maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

d. That the Directors have prepared the Annual Accounts for the Financial Year ended31st March 2018 on a going concern basis.

e. That the Directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

f. That the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.


In compliance with the provisions of Section 134 (3) (p) of the Companies Act 2013and Regulation 25 of SEBI (Listing obligations and Disclosure Requirements) Regulations2015 the performance evaluation of the Board was carried out during the year underreview.

More details on the same are furnished elsewhere in the Corporate Governance Report.


M/s. Ramanatham & Rao Chartered Accountants (Regn. No.S-2934) Secunderabad havebeen appointed as Statutory Auditors of the company at the 38th Annual General Meetingheld on September 25 2017 in accordance with the provisions of Section 139 and Section142(1) of the Companies Act 2013 read with the companies (Audit and Auditors) Rules 2014and other applicable rules if any (including any statutory modifications or re-enactmentthereof for the time being in force).

The appointment as Statutory Auditors was for a period of five years from theconclusion of the 38th Annual General Meeting till the conclusion of the 43rd AnnualGeneral Meeting to be held in the year 2022 subject to ratification of the appointment bythe members at every Annual General Meeting held after the appointment made at 38th AnnualGeneral Meeting in September 2017.

However the Ministry of Corporate Affairs (MCA) vide its notification dated May 72018 has omitted the requirement under first proviso to Section 139 of the Companies Act2013 and Rule 3 (7) of the companies (Audit and Auditors) Rules 2014 regardingratification of appointment of Statutory Auditors by the shareholders at every subsequentAnnual General Meeting.

Consequently M/s. Ramanatham & Rao Chartered Accountants (Regn. No.S-2934)continues to be the Statutory Auditors of the company till the conclusion of 43rd AnnualGeneral Meeting as approved by the shareholders at the 38th Annual General Meeting held onSeptember 25 2017.

As per section 148 of the companies Act 2013 read with the Companies (Cost Records andAudit) Rules Cost records are required to be audited. Based on the recommendation ofAudit Committee your Board has appointed M/s. Narasimha Murthy Cost AccountantsHyderabad as Cost Auditors for the current year and necessary Resolution for ratificationof their remuneration is being placed before the shareholders for their approval in termsof Rule 14 (a) (ii) of the Companies (Audit and Auditors) Rules 2014.

The Board has appointed Smt. Manjula Aleti Company Secretary in whole-time Practice tocarry out Secretarial Audit under the provisions of Section 204 of the Companies Act 2013read with the Companies (Appointment and Remuneration of the Managerial Personnel) Rules2014 for the financial year 2017-2018.

The Secretarial Audit Report issued by Smt. Manjula Aleti practicing Company Secretaryin Form-MR 3 is annexed to this Report. The Secretarial Audit Report does not contain anyqualifications reservations or adverse remarks. (Annexure - 4)


The Company has adopted a Whistle Blower Policy establishing a formal mechanism to theDirectors and employees to report concerns about unethical behavior actual or suspectedfraud or violation of code of conduct and ethics. It also provides for adequate safeguardsagainst the victimization of employees who avail of the mechanism and also envisagesdirect access to the Chairperson of the Audit Committee in exceptional cases. It isaffirmed that no personnel of the Company has been denied access to the Audit Committee.

The whistle blower policy aims at conduct of the affairs in a fair and transparentmanner by adopting highest standards of professionalism honesty integrity and ethicalbehavior. The policy on vigil mechanism and whistle blower policy may be accessed on thecompany's website at:


The objective behind constitution of the Risk Management Committee is to identify riskdevelop appropriate risk mitigation strategies and to monitor activities of theorganization and also to highlight the systematic study safeguards against threats lossand damages of brand reputation and assets of the company. Improvement of level ofawareness and appreciating and managing material business risks are also the objectives ofthe Risk Management Committee.

The Committee besides identifying the risk factors is also expected to manage andmonitor risk and ensure that proper internal systems and processes are in place.

More details of the committee are furnished in the Corporate Governance Report.


The Company has been making endeavors to protect the environment from the evil effectsof pollution from time to time.

Planting of saplings and seedlings in and around the factories and colonies is beingdone on a continuous basis so as to develop green belt around the plant to improve theenvironment.


a) Industry Structure and Development:

The company has a well developed net work of dealers for its cement plant located inthe states of Telengana and Andhra Pradesh and the company therefore is in a reasonablycomfortable position in securing orders from its clients. It is heartening to note thatsome of the dealers have been patronizing the company since inception and the strongbondage that is developed between the company and dealers is one of the prominent featuresof this mutually beneficial relationship.

As regards sugar division good rainfall and availability of proper irrigationfacilities will determine the fortunes of sugar industry it being an agro-based industry.

b) Opportunities and Threats:

The company is desirious of reaping the benefits of its well positioned dealer net workacross the states of Telengana and Andhra Pradesh in respect of its cement plant and willmake every effort to overcome the bottlenecks in achieving the targeted operations in itscement plant .

The company will make its best endeavors in resolving the complicated issues in thesugar and power divisions through negotiations with governmental authorities and will alsoliaison with the legal advisers in respect of pending litigations concerning the powerdivision.

c) Segment or product-wise performance:

Segment-wise and product-wise performance has been furnished elsewhere in this Report.

d) Outlook:

Division-wise outlook has been furnished elsewhere in this Report.

e) Risks and concerns:

The Cement Sugar and Power industries being core industries there is no risk ofproduct obsolescence or steep fall in demand by way of product substitution or otherwiseand therefore your Directors do not foresee any major risks and concerns in the nearfuture except as discussed elsewhere in this Report.

However the company shall make its best efforts to position the machinery in all thedivisions in robust condition so as to keep the bottlenecks at bay.

f) Internal control systems and their adequacy:

As stated elsewhere in this Report the Company has adequate internal control systemsand the Reports of Internal Auditors are being placed before the Audit Committee andcorrective measures if any are being taken care of by the Company. The Chief FinancialOfficer will monitor the Internal audit Reports and brief the Audit Committee in case anydeficiency in the system is noticed.

g) Financial Performance with respect to operational performance:

This has been discussed elsewhere in this Report.

h) Human Resource Development and Industrial Relations:

The company believes that the quality of its employees is the key to success and istherefore committed to provide necessary human resource development and trainingopportunities to equip employees with additional skills to enable them to adapt tocontemporary technological advancements.

Industrial Relations during the year continued to be cordial through effectivecommunication meetings and negotiations with the work force.

The Company's strength consists of 787 employees directly and indirectly as on 31stMarch 2018.

i) Corporate Social Responsibility:

In compliance with Section 134(3) (a) of the Companies Act 2013 read with theCompanies Corporate Social Responsibility (CSR) policy Rules 2014 the company hasestablished CSR Committee comprising of Shri K Venkat Rao as Chairperson Shri P Veeraiahand Shri J S Rao as members. The committee is responsible for formulating and monitoringthe CSR policy of the Company.

The annual report of CSR activities forms part of this Report. (Annexure - 5)


There are no loans guarantees or investments made or given under Section 186 of theCompanies Act 2013.


Statements in this "Management Discussion and Analysis" may be considered tobe "forward looking statements" within the meaning of applicable securities Lawsor Regulations. Actual results could differ materially from those expressed or implied.Important factors that could make a difference to the Company's operations include globaland Indian demand-supply conditions finished goods prices raw material availability andprices cyclical demand and pricing in the Company's markets changes in GovernmentRegulations tax regimes besides other factors such as litigations and labournegotiations.


Your Directors take this opportunity to place on record their sincere thanks to theBanks the Transco Authorities of Telangana and Andhra Pradesh States and to variousdepartments of the Central Government and the State Governments of Telangana and AndhraPradesh for their support to the Industry.

The Directors thank the entire net work of dealers who have enabled the Company toachieve the volumes and kept up the rapport and friendly association with the companydespite the fact that the company was under great stress on account of shut-down of itsoperations in the cement plant for a significant period in the year under review.

The Directors record their appreciation for committed support to the Company by all theemployees at all levels throughout the year under reference.

The Directors record their gratitude to all the Shareholders who have been reposingconfidence in the Company and its Management.

By Order of the Board
for Kakatiya Cement Sugar & Industries Limited
B K Prasad
Place : Hyderabad General Manager and
Date : 25th May 2018 Company Secretary