Your Directors are pleased to present their Fortieth Report together with the auditedStand-alone and Consolidated financial statements of the Company for the year ended 31stMarch 2021.
This discussion on the financial condition and results of operations of your Companyfor the year ended 31st March 2021 which are summarized below should be read inconjunction with its audited stand-alone and the consolidated financial statementscontaining financials and notes thereto of Sagar Cements Limited and its subsidiariesnamely Sagar Cements (R) Limited Satguru Cement Private Limited and Jajpur CementsPrivate Limited:
| || || || ||Rs In lakhs |
|Description ||Stand-alone ||Consolidated |
| ||2020-21 ||2019-20 ||2020-21 ||2019-20 |
|Revenue from operations ||100170 ||84758 ||137132 ||117515 |
|Other Income ||2069 ||1632 ||778 ||403 |
|Total income ||102239 ||86390 ||137910 ||117918 |
|Total expenses ||69855 ||72868 ||97088 ||98965 |
|Operating Profit before Interest Depreciation and Tax ||30315 ||11890 ||40044 ||18550 |
|Less: Finance Cost ||2525 ||3392 ||4656 ||6099 |
|Depreciation ||5620 ||5507 ||8055 ||7887 |
|Profit before tax ||24239 ||4623 ||28111 ||4967 |
|Total Tax ||8043 ||1150 ||9551 ||2314 |
|Profit after Tax ||16196 ||3473 ||18560 ||2653 |
|Other Comprehensive Income ||8 ||(42) ||7 ||(39) |
|Total Comprehensive Income ||16204 ||3431 ||18567 ||2614 |
|Basic & Diluted Earnings per share of Rs 10 each ||70.02 ||16.17 ||80.24 ||12.36 |
Despite the adverse effect of Covid-19 your company achieved a stellar performanceresulting in an operational profit of '400 crores which is an all time high for yourcompany. To avoid repetition in the Directors' Report further details about other aspectsof the performance of the Company during the year 2020-21 have been furnished in theManagement Discussion and Analysis Report as annexure to this report.
Dividend is recommended by your Board taking into consideration the factors likeoverall profitability cash flow capital requirements and other business consideration aswell as the applicable regulatory requirements and the dividend distribution policyadopted by your company which is available on your company's website. Your Directors havealready declared and paid two interim dividends aggregating to '4.00 per share (40%) forthe year 2020-21. With this background your Board of Directors is pleased to recommend afurther dividend at '2.50 per equity share (25%) on the 23500000 equity shares of '10/-each of your company. The said two interim dividends already paid as well as the furtherdividend since recommended by our directors thus aggregating to a dividend of '6.50 pershare for the year 202021 are subject to the confirmation by the shareholders at theAnnual General Meeting.
TRANSFER TO RESERVES
No transfer to any reserve is proposed and accordingly the entire balance available inthe Statement of Profit and Loss is retained in it.
As on 1st April 2020 the share capital of your company was '222750000/- dividedinto 22275000 equity shares of '10/- each and with the conversion of the remaining1225000 warrants
during the year the share capital of your company went up to '235000000/- dividedinto 23500000 equity shares of '10/- each as at 31st March 2021.
Your company proposes to split the nominal value of its equity shares of '10/- each into '2/- per share and necessary approvals for the same and its related matters are beingsought from you at the ensuing Annual General Meeting. Your Directors hope that thismeasure would apart from ensuring more liquidity for the shares would also make themmore affordable for active participation by small investors.
UTILISATION OF FUNDS COLLECTED THROUGH ISSUE OF WARRANTS
Pursuant to the approval accorded by you at the Extraordinary General Meeting held on8th January 2019 your board had allotted 3100000 warrants at an issue price of '730/-per warrant. Your company had raised a sum of '226.30 crores through the above allotmentand the same was being utilized inter-alia for investment in the subsidiary companies topart fund the setting up of a fully integrated green field cement plant of 1 MTPA capacityin Madhya Pradesh and a grinding station of 1.5 MTPA capacity in the State of Odisha.
Further details as required under Regulation 32(7A) of the SEBI (LODR) Regulations 2015regarding the collection and utilization of the funds referred to have been givenelsewhere in the report on corporate governance which forms part of the Annual Report.
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
In the year 2015 your company acquired the entire equity stake in BMM Cements Limitedwhich has since been re-named as Sagar Cements (R) Limited. This wholly-owned subsidiaryhas a cement plant of 1.25 Million MTs per annum capacity along with a coal based captivepower plant of 25 MW capacity in Gudipadu Village in Ananthapur District A.P.
Though this company initially did face some problems particularly at the time of itsacquisition by Sagar Cements with regard to nonavailability of limestone from its captivesources for its operations the performance of this subsidiary has since improved. It iscurrently operating at around 69% capacity. Its power unit is operating at 33% capacity.As you are aware the cement produced by this subsidiary is sold under the brand name"SAGAR CEMENT". To achieve synergy it is proposed to merge this subsidiary withSagar Cements the holding company and necessary steps have since been initiated for thepurpose.
Your company has acquired majority stake in Satguru Cement Private Limited which iscurrently implementing a green field integrated cement plant of 1 MTPA capacity with awaste heat recovery plant in the State of Madhya Pradesh. Another wholly-owned subsidiaryJajpur Cements Private Limited is currently setting up a 1.5 MTPA capacity grindingstation at Jajpur in Odisha. Barring unforeseen circumstances both these projects areexpected to be commissioned by September 2021.
Salient features of the financials of all the above mentioned subsidiaries have beengiven in Form AOC-1 as Annexure 1 to this report.
Your Company does not have any Joint Ventures or Associate Companies.
GRINDING UNIT IN BAYYAVARAM
This grinding unit of your company located at Bayyavaram in Vizag District post itsacquisition by your company in the year 2016 has expanded its capacity from 0.18 MTPA to1.5 MTPA. This unit utilizes the surplus clinker available at your plant in Mattampallyfor grinding into slag cement to cater to the markets in South Odisha and North Coastaldistricts of Andhra Pradesh where with the identification of Vishakhapatnam and Kakinadain Andhra Pradesh and Bhubaneswar in Odisha which are being developed as smartcities' under the Prime Minister's Smart Cities Mission'.
The present low per capita cement consumption in India and the process of its catchingup with international averages along with rapid economic growth and increased focus oninfrastructure development are expected to drive future growth in the industry.
The cement produced from your company's existing plants is presently catering to themarkets in Telangana Andhra Pradesh Karnataka Tamil Nadu Maharashtra and South Odisha.
However with the cement supplies in the above markets being in excess of the demandthe Demand supply Dynamics does not offer much scope for your company to increase itssales volume in these markets to any significant extent atleast in the near future.Further as these markets are already witnessing heavy competition resulting in widefluctuations in the price impacting the margins with a view to reducing your Company'sdependence exclusively on these markets we are looking for opportunities to set up moreintegrated cement plants / grinding stations in the country where demand for cement isexpected to grow relatively at a faster rate.
As mentioned earlier your company's subsidiaries namely Satguru Cement PrivateLimited and Jajpur Cements Private Limited are setting up a fully integrated cement plantand a grinding unit in Madhya Pradesh and Odisha respectively and barring unforeseencircumstances both these projects are expected to be commissioned by September 2021.Cement to be produced from these plants will cater to demand in the Central and Easternparts of India.
Thus taking an overall view of the above your Board is cautiously optimistic aboutthe future outlook for your company.
RISK MANAGEMENT SYSTEM:
While your Company is subject to normal external business risks that are associatedwith similar companies operating within the cement industry your Company attaches utmostimportance to the assessment of internal risks and the management thereof in all itsdealings. Like any other dynamic business organizations your Company is constantly on thelookout for identifying new opportunities to enhance its enterprise value. Keeping in viewthe need to minimize the risks associated with such efforts every proposal of significantnature is screened and evaluated for the risks involved in it and then approved atdifferent levels in the organization before implementation.
With a view to overcoming the risk of dependence exclusively upon any particularmarketing segment or region your Company is trying to reach out to a wider section of itsultimate consumers and as mentioned earlier is looking for growth opportunities in otherStates where infrastructure spending is set to get a boost.
Your Company has adequate system to manage the financial risks of its operations. Thesystem is implemented through imposition of checks and balances on extending credit to thecustomers audits like internal audit statutory cost and secretarial audit all of whichare periodically carried out through external firms proper appraisal of major capitalexpenditure adherence to the budget norms covering all areas of its operations and byadequate insurance coverage for the company's facilities.
Further details on this are available in the Management Discussion and Analysis Report.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:
Your Board of Directors are satisfied with the adequacy of the internal control systemcurrently in force in all major areas of operations of the Company which is supported byan ERP and compliance management systems. The audit committee assists the board ofdirectors in monitoring the integrity of the financial statements reservations if anyexpressed by the company's auditors including the financial cost internal andsecretarial auditors and based on their inputs your board is of the opinion that thecompany's internal controls are adequate and effective.
HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS
Your Company continues to enjoy cordial relationship with all its personnel at itsPlants Offices and on the field.
Your company is organizing training programmes wherever required for the employeesconcerned to improve their skill. They are also encouraged to participate in the seminarsorganized by the external agencies related to the areas of their operations.
Your company continues to focus on attracting and retaining competent personnel andproviding a holistic environment where they get opportunities to grow and realize theirfull potential. Your company is committed to providing all its employees with a healthyand safe work environment.
Regarding the Sexual Harassment of Women at the work place (Prevention Prohibition& Redressal) Act 2013 your company has an Internal Complaints Committee. Nocomplaints were received or disposed off during the year under the above Act and nocomplaints were pending either at the beginning or at the end of the year.
AWARDS AND RECOGNITIONS
Your company has already achieved ISO Certification ISO 9001:2015 for QualityManagement System Standard ISO 14001:2015 for
Environmental Management System Standard and ISO 45001:2018 for Occupational Health andSafety Management System Standard.
As the shareholders are aware your company's Laboratory at its Plant in Mattampally isthe recipient of the Accreditation by the National Accreditation Board for Testing andCalibration Laboratories (NABL) which is the sole accreditation body for testing andcalibration laboratories under the aegis of Department of Science and TechnologyGovernment of India.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 134 (5) of the Companies Act 2013 your board of directors to thebest of their knowledge and ability confirm that:
i. i n the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;
ii. the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit of the company for that period;
iii. t he directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
iv. the directors have prepared the annual accounts on a going concern basis;
v. the directors have laid down internal financial controls to be followed by thecompany and such internal financial controls are adequate and operating effectively;
vi. the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Andhra Pradesh Industrial Development Corporation has appointed Mrs. Sudha RaniNaga as nominee director on your Board in the place of its earlier nominee Shri T.NageshReddy.
In accordance with the provisions of Section 152 of the Companies Act 2013 ShriS.Sreekanth Reddy and Mrs.S.Rachana will be retiring by rotation at the ensuing AnnualGeneral Meeting and being eligible offer themselves for re-appointment. FurtherDr.S.Anand Reddy and Shri S.Sreekanth Reddy will be holding their current office asManaging Director and Joint Managing Director respectively till 30th October 2021 andyour Board on the recommendation of its Nomination and Remuneration Committee hasre-appointed these directors in their respective office. The resolutions seeking theapproval of the members for the above said re-appointments have been incorporated in thenotice of the annual general meeting of the company.
Excepting Mrs. S. Rachana who is a director in Panchavati Polyfibres Limited and R VConsulting Services Private Limited whose transactions with the company have beenreported under the related parties disclosure in the notes to the accounts none of theother nonexecutive directors has had any pecuniary relationship or transactions with thecompany other than the receipt of sitting fee for the meetings of the Board andCommittees thereof attended by them.
INDEPENDENT DIRECTORS DECLARATION
The company has received necessary declarations from all the Independent Directors ofthe Company in accordance with Section
149 (7) of the Companies Act 2013 that they meet the criteria of independence as laidout in section 149(6) of the said Act and Regulation 16 (1) (b) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 ("SEBI ListingRegulations"). There has been no change in the circumstances affecting their statusas an Independent Director during the year.
NUMBER OF MEETINGS OF THE BOARD
During the year 2020-21 five meetings of the board were held and the details of thesemeetings of the Board as well as its Committees have been given in the corporategovernance report which forms part of the Annual Report.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS
The company's policy on directors' appointment and remuneration and other mattersprovided in Section 178 (3) of the Act have been disclosed in the corporate governancereport.
Under Section 178 (3) of the Companies Act 2013 the Nomination and RemunerationCommittee of the board has adopted a policy for nomination remuneration and other relatedmatters for directors and senior management personnel. A gist of the policy is availablein the Corporate Governance Report.
The Board of directors have carried out an evaluation of its own performance and of itscommittees as well as its individual directors on the basis of criteria such ascomposition of the board / committee structure effectiveness its process informationflow functioning etc.
M/s. Deloitte Haskins & Sells Chartered Accountants (FR No.008072S) who werere-appointed as Statutory Auditors of the company by the Shareholders at their 39th AnnualGeneral Meeting held on 9th September 2020 for a second consecutive term of 5 years willbe holding their said office from the conclusion of the said Annual General Meeting tillthe conclusion of the 44th Annual General Meeting to be held in the year 2025 at suchremuneration as may be mutually agreed between the Board of Directors of the Company andthe said Auditors.
AUDITORS' REPORT AND SECRETARIAL AUDITORS' REPORT
The auditors' report does not contain any qualifications reservations or adverseremarks and it is an unmodified one.
Secretarial Auditors' Report
In accordance with Section 204 (1) of the Companies Act 2013 the report furnished bythe Secretarial Auditors who carried out the secretarial audit of the company under thesaid Section is given in the Annexure 2 which forms part of this report. There are noadverse remarks in the said report excepting to the extent of delayed appointment of anindependent women director which is self-explanatory. Your company has complied with theSecretarial Standards applicable for holding Board and General Meetings.
Your company has devised proper systems to ensure compliance with the provisions of allapplicable Secretarial Standards issued by the Institute of Company Secretaries of Indiafrom time to time and that such systems are adequate and operating effectively.
M/s.Narasimha Murthy & Co. Cost Auditors of the company have been appointed asCost Auditors of the company for the year ending 31st March 2022. A resolution seekingshareholders' ratification of the remuneration payable to the Cost Auditors has beenincluded in the notice of the AGM. The reports submitted by the Cost Auditors are dulyfiled with the appropriate authorities under Section 148 of the Companies Act 2013.
Details in respect of frauds reported by Auditors under Section 143 (12) other thanthose which are reportable to the Central Government.
No frauds were reported by the Statutory Auditors under sub-section 12 of Section 143of the Companies Act 2013 read with the Rules made there under.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
The particulars of loans guarantees and investments have been disclosed in thefinancial statements at appropriate places.
TRANSACTIONS WITH RELATED PARTIES
Information on transactions with related parties pursuant to Section 134 (3) (h) of theAct read with rule 8 (2) of the Companies (Accounts) Rules 2014 are given in Annexure-3in Form AOC-2 as part of this report.
All related party transactions entered into during the financial year were on an arm'slength basis and in the ordinary course of business. There were no materially significantrelated party transactions entered into by the company with the promoters key managementpersonnel or other designated persons that may have potential conflict with the interestsof the company at large. All related party transactions had prior approval of the AuditCommittee and were later ratified wherever required.
During the year 2020-2021 your Company had not entered into transactions with anyperson or entity belonging to it promoter / promoter group which holds 10% or moreshareholding in the Company.
CORPORATE SOCIAL RESPONSIBILITY
A brief outline of the Corporate Social Responsibility (CSR) Policy of the companyalong with the initiative taken by your company are set out in Annexure-4 to this reportin the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules2014. This policy is also available on the website of the company www.sagarcements.in.
EXTRACT OF ANNUAL RETURN
As required under Section 92(3) of the Act an extract of the Annual Return for theyear 2020-21 has been given in the Annexure - 5 in the prescribed format which forms partof this report and Annual return in Form MGT-7 is also available on the company's websiteand can be accessed at https://sagarcements.in/wp-content/uploads/2021/07/SCL_Annual-Return_2020-21.pdf
PARTICULARS OF EMPLOYEES
The information required under Section 197 of the Act read with Rule 5 (1) and 5 (2) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules has been givenin the Annexure-6 which forms part of this report.
a. The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:
|Particulars ||Ratio to Median Remuneration |
|Non-Executive Directors ||Non-Executive Directors are not paid any remuneration other than sitting fee |
|Executive Directors:- || |
|Dr.S.Anand Reddy ||142.37 |
|Shri S.Sreekanth Reddy ||138.18 |
b. The percentage increase in remuneration of each director chief executive officerchief financial officer company secretary in the financial year:
|Director Chief Executive Officer Chief Financial Officer and Company Secretary ||% increase in remuneration in the financial year |
|Shri O.Swaminatha Reddy Non-Executive ||These non-executive |
|Chairman (up to 24.6.2020) ||directors were not paid any |
|Shri K.Thanu Pillai Non-Executive ||remuneration other than |
|Director ||the sitting fee which was |
|Mrs.O.Rekha Non-Executive Director (with effect from 30.6.2020) ||increased from '20000/- to '40000/- with effect from |
|Shri T.Nagesh Reddy (APIDC Nominee Director) (up to 30.12.2020) ||meeting of the Board or Committee thereof attended |
|Mrs.Sudha Rani Naga (APIDC Nominee Director (with effect from 20.1.2021) ||by them |
|Shri John Eric Bertrand Non-Executive Director || |
|Shri V.H.Ramakrishnan Non-Executive Director || |
|Mrs.S.Rachana Non-Executive Director || |
|Dr.S.Anand Reddy Managing Director ||137.93 |
|Shri S.Sreekanth Reddy Joint Managing Director ||148.32 |
|Shri R.Soundararajan Company Secretary ||7.80 |
|Shri K.Prasad Chief Financial Officer ||22.31 |
c. The percentage increase in the median remuneration of employees in the financialyear: 5.62
d. The number ofpermanent employees on the rolls of Company: 556
e. Percentage increase or decrease in the market quotations of the shares of thecompany comparison to its price at which the company came out with its last public offer:
|Particulars ||On March 31 2021 (') ||On June 22 1992 (') ||% Change |
|Market Price in NSE ||715.05 ||Not listed ||- |
|Market Price in BSE ||714.15 ||45.00 ||1487 % |
f. Affirmation that the remuneration is as per the remuneration policy of the Company:
The Company affirms that remuneration is as per its remuneration policy.
Policy on transaction with related parties:
Policy on dealing with related party transactions is available on the website of thecompany (www.sagarcements.in).
WHISTLE BLOWER POLICY
The company has formulated and published a Whistle Blower Policy to provide VigilMechanism for employees of the company to report their genuine concerns if any. Theprovisions of this policy are in line with the provisions of the Section 177 (9) of theAct and the SEBI Listing Regulations and the same is available on the company's web sitewww.sagarcements.in.
DEPOSITS FROM PUBLIC
The company does not accept any deposits from public during the year.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:
The particulars required under Section 134 (3) (m) of the Companies Act 2013 have beenprovided in the Annexure 7 which forms part of this Report.
All the properties of the Company have been adequately insured. POLLUTION CONTROL
Your company is committed to keep the pollution at its plant within the acceptablenorms and as part of this commitment it has inter-alia adequate number of bag filtersin the plant.
SUB COMMITTEES OF THE BOARD
The Board has Audit Committee Nomination and Remuneration Committee InvestmentCommittee Corporate Social Responsibility Committee Stakeholders' Relationship Committeeand Securities Allotment Committee. The composition and other details of these committeeshave been given in the Report on the Corporate Governance which forms part of the AnnualReport.
A certificate as stipulated under Schedule V (E) of the SEBI Listing Regulations fromthe Statutory Auditors of the Company regarding
compliance with the conditions of Corporate Governance is attached to this Report alongwith our report on Corporate Governance.
MATERIAL CHANGES AND COMMITMENTS SINCE THE END OF THE FINANCIAL YEAR
There were no material changes or commitments between the end of the financial year andthe date of this report.
Statements in this report and its annexures describing company's projectionsexpectations and hopes are forward looking. Though these are based on reasonableassumption their actual results may differ.
Your Directors wish to place on record their appreciation of the valuable co-operationextended to the Company by its bankers and various authorities of the State and CentralGovernment. They thank the Distributors Dealers Consignment Agents suppliers and otherbusiness associates of your Company for their continued support. Your Board also takesthis opportunity to place on record its appreciation of the contributions made by theemployees of company at all levels and last but not least of the continued confidencereposed by you in the Management.
For and on behalf of the Board of Directors
|Hyderabad ||Dr. S. Anand Reddy ||S. Sreekanth Reddy |
|1st July 202 ||1 Managing Director ||Joint Managing Director |