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Shree Cement Ltd.

BSE: 500387 Sector: Industrials
NSE: SHREECEM ISIN Code: INE070A01015
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P/E 35.79
Mkt Cap.(Rs cr) 94,239
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OPEN 26300.00
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VOLUME 509
52-Week high 32050.00
52-Week low 22600.00
P/E 35.79
Mkt Cap.(Rs cr) 94,239
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Shree Cement Ltd. (SHREECEM) - Director Report

Company director report

#MDStart#

Management Discussion and Analysis

Dear Members

The Directors take pleasure in presenting their 42nd Report and the AuditedFinancial Statements of the Company for the financial year 2020-21. Management Discussionand Analysis has also been incorporated into this report.

1. FINANCIAL PERFORMANCE

A brief of financial performance for the year gone by and its comparison with previousyear is given below: -

Particulars Standalone Consolidated
2020-21 2019-20 2020-21 2019-20
Revenue from Operations 12588.39 11904.00 13476.33 12868.39
Other Income 458.00 271.62 466.33 274.40
Total Income 13046.39 12175.62 13942.66 13142.79
Total Expenditure 8633.67 8229.47 9424.95 9109.29
Profit Before Interest 4412.72 3946.15 4517.71 4033.50
Depreciation and Taxes (PBIDT)
Finance Costs 247.10 286.52 251.29 291.43
Depreciation and Amortisation expenses 1139.90 1699.42 1262.34 1807.81
Profit Before Tax 3025.72 1960.21 3004.08 1934.26
Tax Expense 713.79 390.03 714.49 390.20
Profit After Tax 2311.93 1570.18 2289.59 1544.06
Profit attributable to Owners of the Company - - 2285.87 1535.85
Profit attributable to Non-Controlling Interest - - 3.72 8.21

Key highlights of the year (Standalone basis):

• Sale volume (cement and clinker) witnessed an increase of 7.7% to 26.84 milliontons in 2020-21 from 24.92 million tons of previous year. This is despite COVID-19impacting the sale volumes in the early part of the year. Increase in volume was observedacross all regions where Company operates. However increase in cement sales from Kodlaunit in Southern India went up significantly from 1.47 million tons to 2.19 million tons.

• Increase in sales volumes led to Revenue from operations growing by 5.7% fromRs.11904 crore to Rs.12588 crore. Company's continued focus on raising share of itspremium products along with continuous efforts to position its brands led to maintainingprice realisation.

Key Cost components: Company has a sustained program to drive efficiencyand mitigate cost headwinds across various cost items which has made it one of the lowestcost cement producers in the country.

(a) Raw material: On account of continued optimisation in our limestone miningoperations and higher in-house production of gypsum helped mitigate the increase in costof fly ash and other materials. As a result raw material cost remained at the same levelof previous year.

(b) Power & Fuel: Increase in share of low cost renewable energy and efficientenergy management practices helped the Company reduce its power cost during the year.Company's pro-active procurement strategy and use of multiple fuels coupled with increasedusage of alternative fuels helped Company keep fuel cost static despite increasing pricesof coal / petcoke in international markets.

(c) Logistic Cost: Logistics and transportation cost increased mainly on account ofincrease in diesel prices. Company continues to work on efficiency improvementinitiatives rationalising routes and lead distances enhancing direct dispatches andraising use of technological tools in supply management etc. to keep the cost under check.

(d) Finance Cost: Finance cost came down by 13.9% from Rs.287 crore to Rs.247 croreon account of repayment of long-term borrowings and efficient working capital management.

• Earnings Before Interest Depreciation and Tax (EBIDTA) rose to Rs.4413 crore by11.8% compared to Rs.3946 crore of previous year on account of growth in volumes highershare of premium products and cost optimisation measures.

Key Financial Ratios

Key financial ratios of the Company in terms of showing the financial performance areas under: -

Particulars 2020-21 2019-20 % Change Remarks

Operating Profit Margin 31.42% 30.87% 1.77% No significant change (without otherincome) (%) Net Profit Margin (%) 18.37% 13.19% 39.23%

Improved due to lower depreciation charge

Return on Net Worth (%) 15.71% 11.77% 33.43%

Interest Coverage Ratio 17.86 13.77 29.66% Improved due to higher operating profit &reduction in interest cost Debtors Turnover (Days) 14.09 25.40 -44.54% Reduced due toefficiency in collection process Inventory Turnover (Days) 42.83 43.78 -2. 17% Reduced dueto increase in turnover Current Ratio (Times) 2.05 1.79 14.28% Improved due to reductionin current maturity of long-term debts

Debt-Equity Ratio (Times) 0.11 0.20 -43.75% Repayment of Long Term Debts

2. DIVIDEND AND RESERVES

The Board of directors of the Company has recommended final dividend of Rs.60/- perequity share of Rs.10/- each for the Financial Year 2020-21.

For previous year 2019-20 the Company had paid total dividend of Rs.110/- per share(which included Rs.70/- per equity share as normal dividend and Rs.40/- per equity shareas additional dividend).

In terms of the provisions of the Finance Act 2020 dividend shall be taxed in thehands of the shareholders and the Company shall withhold tax at source at the applicablerates.

Total dividend relating to the year 2020-21 amounts to Rs.216.48 crore as againstRs.478.47 crore (including dividend distribution tax of Rs.81.58 crore) for the year2019-20.

During the year 2020-21 an amount of Rs.500 crore was transferred to General Reserves.

The Board of Directors of the Company in line with provisions of Regulation 43A ofSecurities

Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 (as amended) had approved Dividend Distribution

Policy on August 12 2016. The policy is uploaded on Company's website and can beaccessed at the link https://www.shreecement.com/uploads/cleanupload/dividend-distribution-policy.pdf.

3. MANAGEMENT OUTLOOK OF MACRO ECONOMY AND INDUSTRY

I. Indian Economy-Developments and Outlook

Indian economy faced one of its most challenging years during 2020-21. Lockdown imposedby Central Government to contain spread of coronavirus brought the economic activities toa standstill. Following its six-year low performance of 4.2% in 2019-20 GDP growthexpectedly nosedived with sharp contraction of 24.4% (on constant prices) in first quarterwhich further continued by 7.3% in second quarter of 2020-21. Government of

India announced various stimulus measures to generate job opportunities and provideliquidity support to various sectors including construction infrastructure developmentand housing. This was subsequently followed by slew of announcements made in the UnionBudget of 2021-22 to boost economic growth. The fiscal deficit expansion and therebycreating extra room for investing in infrastructure development with

34.5% increase in the capital expenditure helped improve sentiments. The supportprovided by RBI in terms of easy liquidity moratorium of loan recovery and a benigninterest rate environment helped push up the consumption. All these measures and pent updemand helped sharp recovery in the economic activities in second half of year 2020-21.Economic Survey 2020-

21 also showed a sharp recovery due to resurgence in high frequency indicators such aspower demand rail freight e-way bills

GST collection steel consumption etc. The second advance estimates for year 2020-21released by National Statistical Office projects a contraction of 8.0% in real GDP growthwhich came lower than initial assessments.

Sector-wise manufacturing services and construction were hit while agriculturegovernment consumption and net exports helped contain the deceleration of growth.

Just as the economy appeared to be inching back to normalcy India has been hit by asecond wave of Covid-19 infections in early

April. This time the Covid-19 has been more infectious. Spiraling cases of infectionshave overwhelmed the health system in the country. The Government both at central andstate level are working relentlessly to counter the situation and mitigate its impact.

While there is no complete lockdown the restrictive measures adopted by States havestarted denting the economic activities. RBI IMF and various Rating agencies had inApril projected GDP growth of upwards of 11% for FY 2021-22 have started revising theirprojection downward to below 10%.

Overall despite the challenging environment the growth-story of India remains intact.

India remains a preferred investment destination for FDI amidst global asset shiftstowards emerging economies. Faster containment of second wave and successfulimplementation of vaccine program can help faster mitigation of the impact of Covid-19.

Proactive and decisive measures taken by governments and policy makers will certainlyhelp kick-off growth bandwagon again and put the economic recovery back on rails. The

“Atma-Nirbhar Bharat Abhiyan” (Self-reliant

India Mission) which entails greater focus on local manufacturers and service providerswill help country reduce its dependence on imports and boost exports thereby givingimpetus to economic growth. Further both the India Meteorological Department (IMD) andSkymet have predicted a normal monsoon for 2021. Normal rains will offset the demandcontraction induced by the pandemic. In view of the above while there are severalfavourable factors for positive outlook for the Indian economy for FY 2021-22 the biggestchallenge in terms of uncertainty around duration and impact of Covid-19 led restrictionsmay make such assessment erratic.

II. Cement Industry – Development and Outlook

Cement industry started the year 2020-21 with cement demand witnessing disruption dueto suspension of production stalled construction activities and non-availability oflabour due to lockdown. The outlook seemed uncertain with continued extension of lockdownrestrictions. With gradual unlocking of economic activities sentiment started picking updue to pent-up demand specially from rural areas. With enhanced government spending andnormalisation of labour availability the demand from infrastructure segment alsowitnessed steady pick-up. In later part of the year Real estate sector also emerged as amajor contributor to the demand revival due to increased housing requirement decline inhousing loan rates and stamp duty reduction announced by some States. All in all year2020-21 ended on a positive note led by a solid increase in the construction activitiesacross rural and urban areas as well as elevated spending from Governments towardsinfrastructure projects. While the final data for the cement industry for 2020-21 are yetto come out considering the momentum witnessed towards the later part of the year allIndia cement production is likely to have exceeded the level of approx. 333 million tonsrecorded in 2019-20.

Cement demand is closely linked to the overall economic growth particularly of thehousing and infrastructure sector. With the

GDP growth for FY 2021-22 is projected to be in higher single digit the cementindustry is also expected to achieve healthy growth.

The accommodative stance of RBI to push economic growth is incentivising businesseswith higher credit offtake and business activities. A benign interest rate policy coupledwith “work from home” practice adopted by businesses has led to increasedhousing construction activities. Also focus on infrastructure sector and housing for allscheme shall be the drivers of the demand. In light of the above while there arecontinued uncertainties in terms of impact and duration of Covid-19 related restrictionsconsidering that present Covid-19 infections are likely to peak out soon and economicactivities will start returning to normalcy the outlook for the cement industry isconsidered cautiously optimistic.

4. NEW / EXPANSION PROJECTS

During the year 2020-21 Company commissioned commercial operations of Clinker GrindingUnit having capacity of 3.0 Million Ton Per Annum (MTPA) at Athagarh Tehsil in CuttackDistrict of Odisha. The completion of Clinker Grinding Unit of 3.0 MTPA at village Patasin Pune District of Maharashtra has however got delayed because of Covid-19 and Right ofWay issues. The same is now expected to commence commercial production by September 2021.

Further Company is setting-up upto 12000 Ton Per Day (TPD) brownfield clinkerisationunit at village Khapradih in Baloda Bazar district of Chhattisgarh. The project activitiesare running on track and the project is likely to be completed in first half of FY2022-23.

5. RISK MANAGEMENT

Company's risk management process is designed to identify and mitigate risks that havethe potential to materially impact its business objectives and maintains a balance betweenmanaging risk and making most of the opportunities. The Board is responsible foroverseeing the overall risk management framework of the Company. The Audit and RiskManagement Committee of Board keeps an eye on execution of the risk management plan ofthe Company and advises the management on strengthening mitigating measures whereverrequired. The actual identification assessment and mitigation of risks are however doneby key executives of the Company in a systematic manner through regular meetings anddialogue and engagement

/ consultation with relevant stakeholders. The risks are prioritised according tosignificance and likelihood. Risks having high likelihood and high significance areclassified as ‘key risk'. The key risks identified by the Company and theirmitigation measures are as under:

S. No. Risks Risk component and mitigation measures
1. Over- capacity in the industry Continued over capacity in the industry poses risk of under- utilisation of production capacities loss of market share and output prices falling to non-remunerative levels. As mitigation strategy for this risk Company has invested in building customer loyalty through consistent high quality products faster delivery to consumers focus on premium segment and continued customer engagement. It has also been continuously adding capacity in markets where demand-supply conditions are considered to be relatively favourable so as to increase overall market share.
2. Availability of limestone and other natural resources Limestone is the principal raw material for cement production and its consistent availability at optimum cost is essential for existing and future plant requirements. With depleting reserves at existing mines and acquisition of new limestone mines getting uncertain due to regulatory and competition issues conservation of limestone has become paramount. Company has been making all efforts to optimise its usage thereby conserving the deposits and enhancing their life. These include use of additives in clinker production without compromising the quality enhanced production of blended cement deployment of latest mining techniques to reduce overburden and wastage etc. Water is an essential component of environment human life and economy. Company's plants in Rajasthan are located in water deficient areas with continuously depleting water tables and as such conserving water becomes very important. In power generation Company installed Air Cooled Condensers (ACC) in all its thermal power plants which though involve additional capital expenditure have helped Company reduce water consumption significantly. Additionally Company has installed Waste Heat Recovery Systems in all its clinker units thereby eliminating the need for cooling of waste hot gases and thus saving water. Water harvesting reservoirs have also been constructed within plant and mines area.
3. Fuel cost Company meets its fuel requirement by sourcing from open market and hence is exposed to volatility of market prices of the fuel. As mitigation measures Company has deployed multi-fuel usage strategy as well as state-of-the-art technology in its operations which allows it to use different fuels and most economical fuel among a basket of different fuels as per prevailing trends in the market. Company also participates in auction for securing coal linkage as and when organised by relevant authorities. Company has secured coal linkages for its Baloda Bazar cement plant(s). Additionally to reduce reliance on conventional fuel for power generation Company has extensively invested in Waste Heat Recovery Power Plants which do not entail usage of any fuel and thereby cushioning itself from fuel price volatility to that extent. It has also been continuously investing in expanding its renewable portfolio (wind solar) for meeting its energy requirements.
4. Economic slowdown COVID-19 pandemic has impacted the business and economy across the world. Restrictions and lockdown imposed in India to contain spread of virus have brought the business activities to a standstill and inducing economic slowdown all across. Company has taken the risks of such external factors into its business strategy and have taken necessary steps in terms of devising plans for mitigating such risk. It has prepared contingency plans such as work from home enhanced safety measures strategies for continuity of business and rapid restoration of operations.
5. Cyber security Owing to increasing importance of digitisation majority of business activities of the Company have been witnessing digital transformation including logistics marketing and manufacturing. Significant advantages of digitisation reflect in the form of faster customer servicing enhanced process efficiency better controls and speedy decision making. Digitisation is however fraught with risk of misuse of hardware and software cyber-attacks unauthorised access data loss etc. which can impact business operations. Company has been taking necessary measures like systematic back-up procedures firewall systems better monitoring & control mechanism to mitigate any risks arising due to digitisation.
6. Climate change Global warming and consequent impact in the form of erratic and frequent climate change has emerged as a major risk across globe. This impacts Company's operations also as cement manufacturing is an energy and resource intensive process and releases CO2 due to calcination process and combustion of fuels. Efforts to address climate change by reducing emissions of Greenhouse Gases (GHG) through National State and regional laws and regulations as well as international agreements will bring about various regulatory requirements impacting the way Company carry out its operations. New legislative or regulatory controls may pose risks which could include costs to purchase allowances or credits to meet GHG emission caps costs required to procure advanced equipment to reduce emissions to comply with GHG limits or required technological standards or higher production costs. In addition physical risks arising from extreme weather or high temperatures may impact any manufacturing sector in terms of property damage and disruption to operations. While combating climate change require collaborative and coordinate efforts from all the Company has been continuously making efforts in this field. Efforts towards conservation of natural resources enlarging renewable energy portfolio at various plant locations use of efficient and state-of-art technologies in operations etc. are testimony to the same. We have integrated sustainability as core to our operations and are thus prepared to meet new regulatory and legislative requirements resulting from climate change risks.
7. Health and safety of employees Health and safety of our employees and workers remains our utmost priority specially during the pandemic time. To mitigate the risk the Company continues to work on institutionalising operational discipline particularly observing the safety procedures and protocols both for employees and workers. Safety Committees have been formed to oversee safety related issues and implementing best safety practices. Wellness Management Centres have been established at plant level to meet any medical emergency requirement and oversee health related issues of the employees. To mitigate COVID-19 related challenge required protocols and practices have been stringently implemented and compliance is ensured.
8. Impact of regulatory changes In developing and dynamic economy such as India regulatory environment keeps on progressing to keep pace the global dynamics in the fields of environment taxation competition governance etc. Non-compliance of applicable regulations may lead to imposition of penalties suspension of operations among others apart from reputational damage. This may also hinder the pace of innovation upgradation transformation within the organisation. To mitigate the same the Company keeps a strict vigil and regularly tracks on the regulatory environment and take necessary actions. Wherever required it amends/ upgrade its operational practices and incur capex to ensure the compliance.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Company has put in place adequate internal control systems commensurate with its sizeof operations. Company's internal control systems include policies and procedures ITsystems delegation of authority segregation of duties internal audit and reviewframework etc. Company has laid down internal financial controls and systems with regardto adherence to Company's policies safeguarding of its assets prevention and detectionof frauds and errors accuracy and completeness of the accounting records and timelypreparation of reliable financial information. The framework is in compliance with therequirements of the Companies Act 2013. The Company periodically assesses design as wellas operational effectiveness of its internal controls across multiple functions andlocations through extensive internal audit exercises. Based on the assessment of internalaudit function process owners undertake corrective action in their respective areas andthereby strengthen the controls. Significant audit observations and corrective actionsthereon are presented to the

Audit and Risk Management Committee of the Board on periodical basis. The Audit andRisk Management Committee evaluates the adequacy and effectiveness of internal financialcontrol systems periodically.

7. HUMAN RESOURCES / INDUSTRIAL RELATIONS

In today's fiercely competitive business environment attracting retaining andnurturing the best talent is key to attaining the strategic objective of the Company. Inthis respect the

Company continues to take necessary measures and create a conducive atmosphere for thesame. Major initiatives taken during the year were: -

(a) Offline to Online:The process of talent acquisition and learning was madeonline within 10 days of the COVID-19 induced lockdown in April 2020. The Companylaunched AI based learning platform STEPS and used Webex and Zoom platforms to deliverlive training programmes. Learning was a focus in this year and average man hoursincreased by 53%. The interview and selection process which used to be conducted in personhave shifted to online platforms and was successfully managed even when volumes increased.

(b) Focus on automation: There has been an increased focus on automation. MultipleHR processes have been automated thereby bringing in a significant reduction in cycletime and incidence of errors. The focus was

SPARQ an app internally developed by the

IT team with inputs from HR. It is a one stop solution for all employee queries leavebalance attendance management policy related solutions and a lot more. These solutionshave been extremely well received within the organisation and the team is working towardsimproving it further based on the feedback received.

(c) Health & Wellness: As important as it is in all times the year gone byshowed how important health and wellness of employees are. Company conducted programmes onholistic health and wellness staying fit at home mental health yoga by industry expertsetc. The in-house coach also conducted virtual exercise classes encouraging people to stayfit. The efforts were well appreciated when the Company was recognised as a winner in theHealth and Wellness category by Society of Human

Resource Management India.

(d) Among India's Best Companies to Work for: The Company's team has been makingconsistent efforts to make the Company a more receptive inclusive and employee friendlyorganisation. Company conducts formal and informal surveys throughout the year to get thepulse of employees. The most important of these is through participation in “GreatPlace to Work” Survey. Company's scores in the “Great Place to Work” Surveyhas consistently been at par with the top

100 companies in India. During the year the Company was again certified as a GreatPlace to Work continuously for the third time. It was adjudged Best in Cement and Building

Materials category stood among the Top 30 in the Manufacturing and Production sectorcategory and was among the Top 100 Organisations to Work for across sectors.

(e) Occupational Health and Safety- Following a ‘Safety First' approachhealth and safety is a top priority area of the Company. To institutionalise theorganisation-wide focus on Occupational Health and Safety Company has built a robustsafety management system based on the globally recognised and practised OHSAS 18001standard.

‘Safety Committees' have been formed at all manufacturing units with equalrepresentation from both management and non-management categories. These committees play apivotal role in achieving the objective of ‘Safety First' by undertaking assessmentof safety issues on an ongoing basis and implementing suitable initiatives and programsfor the same. To transform the way workers' look at safety and make them aware and adoptbest practices related to safety these Committees periodically organise online andoffline trainings mentoring and coaching with the help of internal and external safetyexperts. This has helped bring about a positive change to the workers' safety performance.Such interactions also help the plant level safety committees get feedback from workersand thereby identify hazards and minimise the recurrence of the same. Company hasestablished a structured hazard identification and risk assessment process which helps usidentify potential risks which could have resulted in production disruptions andliabilities.

To provide its employees and contractual workers access to quality healthcare servicesCompany has established ‘Wellness Management Centres' (WMC) at all the locations.WMCs are equipped with qualified doctors and modern facilities which help carry out day today health-care services and also conduct annual health check-ups for employees &contract workers. Health talks by experts and specialists are also organised to propagateawareness on chronic and lifestyle diseases.

All safety initiatives and employee engagement programs have been designed to ensuretheir continuous review and monitoring. Through a regular internal audit protocol theCompany assesses the overall safety performance and examines the existing proceduressystems and control measures for fire & safety hazards.

Observations and recommendations are implemented by concerned departments within settimelines. As part of the process monthly safety performance of all grinding units arereviewed and discussed with all safety professionals for implementation of common safetysystem and practices.

(f) Industrial Relations - Employee relations remained cordial during the year.This has enabled

Company to build healthy relationship and resolve issues through dialogue anddiscussions.

Total number of employees as on March 31 2021 were 6259.

8. RESPONSE TO COVID-19 OUTBREAK AND

MEASURES TAKEN

COVID-19 has posed an unprecedented health challenge across the globe. Health andsafety of

Company's employees and of local communities has gained more importance than everbefore. On resumption of operations post relaxation of the nation-wise lockdown imposed byGovernment several measures were taken by the Company. All prescribed COVID-19 relatedprotocols advised by Government industry bodies etc. were immediately implemented andput in place to ensure safe working conditions for employees and workers. Depending uponnature of work facility of ‘work from home' was extended. The

Company focused on enhancing use of digital and online mode of working to cater to thechanged working environment. For nearby communities the Company extended its support inform of regular sanitisation disinfectant sprays distribution of masks & otherhygiene products creating awareness through boards banners etc.

Company provided its support for strengthening and upgrading medical facilities innearby areas and improving working conditions for health workers which includedarrangement of oxygen cylinders ventilators testing machines and other criticallife-savings equipment. Company made financial contributions to Chief Minister Relief

Funds of the State of Rajasthan Chhattisgarh and

Karnataka besides contributing to PM CARES fund to augment government resources.

9. SUSTAINABILITY

Sustainability is at the forefront of the Company since inception. It has beenCompany's constant endeavour to formulate adopt and continuously improve its businessmodel embracing both sustainability and growth agenda. As part of its sustainabilityagenda Company focuses on conservation of environment natural resources and energyefficiency. Company's operational strategy is built on a long- term commitment toexperiment and implement new ideas for improving efficiencies and minimising the use ofinput resources. During the year the Company continued pursuing its sustainability agendawith same intensity and rigour. Key notable initiatives in this area were as follows: -

(a) Generation of power from renewable resources – Focus on renewableenergy (RE) continues to remain a thrust area in our sustainability agenda. This hashelped

Company in conserving precious natural resources and mitigating GHG emissions.

Over the years the Company has been steadily ramping up its RE power generationcapacity spanning across Waste Heat Recovery (WHR) Solar and Wind power plants. TheCompany continues to have largest WHR capacity in World Cement

Industry excluding China. This apart in terms of operational efficiency of WHRPCompany is regarded as one of the best in the industry.

Its total RE power capacity (including WHR) stood at 255 MW at the end of financialyear 2020-21.

(b) Energy Conservation – Energy conservation has been another focus areaof the Company.

As part of “Perform Achieve & Trade” (PAT) scheme of the Govt. of Indiathe Monitoring & Verification Audit for PAT cycle -III (2017-

18 - 2019-20) has been completed and the Company has overachieved its targets andthereby entitled to claim 12623 (Nos) of ESCerts. In PAT Cycle I & II also theCompany had overachieved its targets. The Company was awarded with the ‘BestPerformer' award for energy saving under PAT Cycle I by Bureau of Energy Efficiency. Moredetails on initiatives taken in the area of energy conservation are given in Annexure– 3 to this report.

(c) Alternative Fuels and Raw Materials – Company is constantly working onto increase usage of alternative raw materials and fuels in its operations. Company usesof wastes of various industries such as Pharma Chemical

Sponge Iron as alternate fuel. As alternative raw materials the Company has been usingmarginal grade limestone and quarry rejects with high grade material in a cost effectivemanner.

(d) Water Conservation - Water is increasingly becoming a scarce and preciousnatural resource. The Company has been working on two-pronged approach of optimising waterconsumption as well as increasing availability of water through water harvesting andrecharging. Company's macro level initiatives in this regard such as installation of AirCooled Condensers in all its thermal power plants and setting-up Waste Heat Recovery basedpower plants have been a great success. Micro initiatives include construction of rainwater harvesting structures around operating sites and mining area installation of SewageTreatment Plants for treating domestic waste water use of recycled water in operationswhich help in increasing the availability of water and reduce dependence on ground water.Company is also undertaking a detailed assessment of water flows around its plants toidentify potential areas which are most suited for water harvesting and recharge.

(e) Sustainability Reporting - Company released its 16th annualCorporate Sustainability Report for the reporting period 2019-20 titled “Innovativeto Survive and Collaborative to Thrive”. Company has been advocating its policies andprocedures and is proactive in showcasing its unique practices at the global platform.Company has built a strong collaborative approach with its partners such as supplierscustomers vendors and many other participating bodies. The said report was prepared inaccordance with the “GRI Standards – Comprehensive Option” and assured byan independent certifying agency. The

Company has also consistently issued its Business Responsibility Report as part of

Annual Report since year 2012-13 disclosing its performance with respect to various

Business Responsibility principles.

Company's continued endeavours towards improving productivity and efficiency of allprocesses equipment and systems as well optimisation measures have made it one of themost efficient players in terms of energy consumption and resource utilisation. Withsustained efforts towards greening its operations the Company has been able to keep itsdirect CO2 emission intensity at one of the lowest levels in the cement industry.

10. CORPORATE GOVERNANCE

Your Directors reaffirm their continued commitment to good corporate governancepractices. During the year under review Company was in compliance with the provisionsrelating to corporate governance as provided under the Securities Exchange Board of India(Listing

Obligations and Disclosure Requirements) Regulations 2015 (as amended). The compliancereport is provided in the Corporate Governance section of this Annual Report. TheAuditor's Certificate on Corporate Governance is enclosed at Annexure - 1.

11. BUSINESS RESPONSIBILITY REPORTING

Company is also releasing Business Responsibility Report (BRR) as part of this AnnualReport covering its compliances towards the Business Responsibility Principles enunciatedby the Securities and Exchange

Board of India as required under Regulation 34(2) (f) of Securities Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 (as amended).

12. CORPORATE SOCIAL RESPONSIBILITY

As part of its triple bottom-line approach to its business Company has alwaysconsidered the community as its key stakeholder. It believes that the community around itsoperations should also grow and prosper in the same manner as does its own business.Accordingly Corporate Social Responsibility is an integral part of the Company's businessphilosophy. In order to oversee all its CSR initiatives and activities the Company hasconstituted a Board level Committee - “Corporate Social and Business ResponsibilityCommittee” (CSBR

Committee). The major thrust areas of the Company include healthcare education womenempowerment infrastructure support integrated rural development etc. which are alignedto the areas specified under Schedule VII to the Companies Act 2013. The Annual Report onCSR activities of FY 2020-21 with requisite details in the specified format as requiredunder Companies (Corporate Social Responsibility Policy) Rules 2014 (as amended) isenclosed at Annexure-2 and forms part of this report. The CSR Policy of the Companymay be accessed on website of the Company at linkhttps://www.shreecement.com/uploads/cleanupload/ csr-policy.pdf.

13. SUBSIDIARY COMPANIES

The Company has following subsidiaries:

1. Shree Global FZE Jebel Ali Free Zone Emirate of Dubai U.A.E. Wholly Owned Subsidiaries
2. Raipur Handling and Infrastructure Private Limited Baloda Bazar Chhattisgarh
3. Shree Enterprises Management Ltd Dubai International Financial Centre Emirate of Dubai U.A.E.
4. Shree International Holding Ltd Dubai International Financial Centre Emirate of Dubai U.A.E. Step-down Subsidiaries
5. Union Cement Company PrJSC Emirate of Ras- Al-Khaimah U.A.E.
6. Union Cement Norcem Co. Ltd. LLC Emirate of Ras-Al-Khaimah U.A.E.
7 Shree Cement East Bengal Foundation Subsidiary Company (Incorporated under Section 8 of the Companies Act 2013)

Audited financial statements of the subsidiaries of the Company are available on thewebsite of the Company. The shareholders who wish to receive a copy of Annual Accounts ofthe

Subsidiary Companies may request the Company Secretary for the same. The policy fordetermining material subsidiaries as approved by the Board can be accessed on the websiteof the Company at link https://www.shreecement.com/uploads/cleanupload/policy-determining-material-subsidiaries.pdf.

As required under Section 129(3) of the Companies Act 2013 read with the Companies

(Accounts) Rules 2014 Statement showing the salient features of the financialstatements of the Subsidiary Companies in Form AOC-1 forms part of the ConsolidatedFinancial Statements of

Company.

14. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the

Company are prepared as required in terms of provisions of Companies Act 2013 andSecurities

Exchange Board of India (Listing Obligations and

Disclosure Requirements) Regulations 2015 (as amended) by following the applicableAccounting

Standards notified by the Ministry of Corporate Affairs and forms part of the AnnualReport.

15. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors to thebest of their knowledge and belief and according to the information and explanationsobtained by them state that:

• In the preparation of the annual accounts for the year ended March 31 2021 theapplicable accounting standards have been followed and there are no material departuresfrom the same;

• They have selected such accounting policies judgments and estimates that arereasonable and prudent and have applied them consistently so as to give a true and fairview of the state of affairs of the company as at March 31 2021 and of the statement ofProfit and Loss as well as Cash Flow of the company for the year ended on that date;

• Proper and sufficient care has been taken for the 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;

• The annual accounts have been prepared on a going concern basis;

• Necessary internal financial controls have been laid down by the Company and thesame are commensurate with its size of operations and that they are adequate and wereoperating effectively; and

• Proper systems have been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

16. PERFORMANCE EVALUATION OF BOARD ITS COMMITTEES & INDIVIDUAL DIRECTORS

In terms of requirements of Securities Exchange

Board of India (Listing Obligations and Disclosure

Requirements) Regulations 2015 (as amended) and provisions of Companies Act 2013

Nomination cum Remuneration Committee of the

Board of Directors of the Company specified the manner for effective evaluation ofperformance of Board its Committees and Individual Directors.

Based on the same the Board carried out annual evaluation of its own performanceperformance of its Committees Individual Directors including

Independent Directors during the year. Company had adopted the evaluation parameters assuggested by the Institute of Company Secretaries of India and Securities and ExchangeBoard of India with suitable changes from Company's perspective. The performance of theBoard was evaluated by the Board on the basis of criteria such as Board composition andstructure effectiveness of Board processes information flow to Board functioning of theBoard etc. The performance of Committees was evaluated by the Board on the basis ofcriteria such as composition of Committees effectiveness of Committee workingindependence etc. The Board evaluated the performance of individual Director on the basisof criteria such as attendance and contribution of Director at Board/Committee

Meetings adherence to ethical standards and code of conduct of the Companyinter-personal relations with other Directors meaningful and constructive contributionand inputs in the Board/

Committee meetings etc.

For the above evaluation the Board members completed questionnaires providing feedbackon different parameters as already stated above including on performance of Board /Committees / Directors engagement levels independence of judgment and other criteria.This is followed with review and discussions at the level of Board.

The results of evaluation showed high level of commitment and engagement of Board itsvarious committees and working directors.

In a separate meeting of the Independent Directors performance evaluation ofNon-Independent Directors the Board as a whole and performance evaluation of Chairman wascarried out taking into account the views of Executive and Non-Executive Directors. Thequality quantity and timeliness of flow of information between the Company Management andthe Board which is necessary for the Board to effectively and reasonably perform theirduties were also evaluated in the said meeting.

The Independent Directors well appreciated the functioning of the Board of DirectorsWorking

Directors as well as Committee of the Board. They were also highly satisfied withleadership role played by the Chairman.

Company had appointed an External Facilitator for the purpose of carrying out theperformance evaluation in a fair and transparent manner.

17. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Director retiring by rotation - In accordance with the provisions of theCompanies Act 2013 and Article 112 of the Articles of Association of the Company Shri B.G. Bangur (DIN: 00244196)

Director of the Company will retire by rotation in the ensuing Annual General Meetingand being eligible offers himself for re-appointment. Item seeking approval of membersfor the same is included in the Notice convening the 42nd Annual

General Meeting (AGM). The Board recommends the re-appointment of Shri B. G. Bangur.

Key Managerial Personnel - Shri H. M. Bangur (DIN: 00244329) was re-appointed asManaging

Director of the Company for a period of 5 years from April 1 2016. His tenure asManaging Directors completed on March 31 2021. The

Board of Directors of the Company in its meeting held on January 30 2021 on therecommendation of Nomination cum Remuneration Committee and after evaluating hisperformance and considering the Company's growth under his stewardship approved hisreappointment as Managing Director of the Company for five years w.e.f. April 1 2021subject to approval of the members.

Profile and other information of the aforesaid Directors as required under Regulation36 of

Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements)

Regulations 2015 (as amended) and Secretarial Standard – 2 forms part of theNotice convening the 42nd Annual General Meeting.

Independent Directors - During the year under review Shri Sanjiv KrishnajiShelgikar (DIN: 00094311) was re-appointed as Independent Director for second term of 5years w.e.f. August 5 2020.

In accordance with Section 149(7) of the

Companies Act 2013 and Regulation 25(8) of the

Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements)

Regulations 2015 (as amended) each

Independent Director has given a declaration to the Company confirming that he/shemeets the criteria of independence as specified under Section 149(6) of the Companies Act2013 and

Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations 2015 (as amended).

18. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

In order to acquaint the new directors with the

Company a detailed presentation is given to them at the time of their appointmentwhich covers their role duties and responsibilities Company's strategy business modeloperations markets organisation structure products etc. A detailed presentation alongsimilar lines is sent to existing Independent Directors every year to keep them apprisedof the above details.

As part of Board discussions presentation on performance of the Company is made to the

Board during its meeting(s). Plant visits are also arranged for Independent Directorsfrom time-to-time for better understanding of the Company's operations. The details ofsuch familiarisation programmes for Independent Directors are posted on the website of theCompany and can be accessed at link https://www.shreecement.com/investors/shareholder-information.

19. CONSERVATION OF ENERGY TECHNOLOGY

ABSORPTION AND FOREIGN EXCHANGE

EARNINGS / OUTGO

The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under Section 134(3)(m) of theCompanies Act 2013 read with Rule 8(3) of the Companies (Accounts) Rules

2014 is set out at Annexure - 3 which forms part of this report.

20. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the

Companies (Appointment and Remuneration of

Managerial Personnel) Rules 2014 are provided at

Annexure - 4.

In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel)

Rules 2014 a statement showing the names of employees and other particulars of thetop ten employees and employees drawing remuneration in excess of the limits as providedin the said rules are set out in the Board's Report as an addendum thereto. However interms of provisions of the first proviso to Section 136(1) of the Companies Act 2013 theAnnual Report is being sent to the members of the Company excluding the aforesaidinformation. The said information is available for inspection at the Registered Office ofthe

Company during working hours and any member interested in obtaining such informationmay write to the Company Secretary and the same will be furnished on request.

21. AUDITORS

I. Statutory Auditors

M/s. Gupta & Dua Chartered Accountants (Firm Registration No. 003849N) wereappointed as Statutory Auditors of the

Company in the Annual General Meeting held on July 31 2017 for a consecutive term offive years from the conclusion of 38 th Annual General Meeting till theConclusion of 43rd Annual General Meeting. They have given their report on the AnnualFinancial Statements for Financial Year 2020-21.

The Audit Report does not contain any qualification reservation or adverse remark.

II. Secretarial Auditors

The Board had appointed M/s. P. Pincha

& Associates Company Secretaries as Secretarial Auditor of the Company to conductSecretarial Audit for the Financial

Year 2020-21. They have submitted their report in prescribed format and the same isenclosed at Annexure - 5. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.

III. Cost Auditors

In terms of the provisions of Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Amendment Rules 2014 the Board of

Directors of the Company appointed M/s. K. G. Goyal & Associates Cost AccountantsJaipur (Firm Registration No. 00024) to conduct the cost audit for the financial yearending March 31 2022 at a remuneration as stated in the Notice convening the 42nd

Annual General Meeting of the members. As required under the Companies Act 2013 theremuneration payable to cost auditors has to be placed before the Members at a generalratification. Hence a resolution meetingfor ratification of remuneration by the seekingMembers payable to the Cost Auditors forms part of the Notice of the ensuing 42ndAnnual

General Meeting.

The Cost Auditors are in process of conducting the audit of cost records for year2020-21 and shall submit their report in due course.

22. OTHER DISCLOSURES

(a) Composition of Audit and Risk Management Committee: The Committee comprisesof Shri O. P. Setia as Chairman Shri R. L. Gaggar Dr. Y. K. Alagh Shri Nitin

Desai Shri Shreekant Somany and Shri Sanjiv

Krishnaji Shelgikar as other Members. More details are given in the CorporateGovernance

Report. All the recommendations made by the Audit and Risk Management Committee wereaccepted by the Board.

(b) Details of Meetings of Board and its Committees: The Board of Directors of yourCompany met 4 times during the year to deliberate on various matters. The meetings wereheld on May 8 2020 August 10 2020 November 11 2020 and January 30 2021. Furtherdetails are provided in the

Corporate Governance Report forming part of this Annual Report. The intervening gapbetween the meetings was within the period prescribed under the Companies

Act 2013 and the Securities Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 (as amended).

(c) Annual Return: In terms of Section 92(3) of the Companies Act 2013 and Rule 12of the Companies (Management and

Administration) Rules 2014 the Annual Return of the Company is available on thewebsite of the Company at link https://www.shreecement.com/investors/shareholder-information.

(d) Particulars of Loans Guarantees or Investments: Details of Loans Guaranteesand Investments covered under the provisions of Section 186 of the Act read with theCompanies (Meetings of Board and its

Powers) Rules 2014 are given in Notes to the standalone financial statements.

(e) Particulars of Contracts or Arrangements with Related Parties: All RelatedParty

Transactions during the financial year

2020-21 were on arm's length basis and in ordinary course of business. They were all incompliance with the applicable provisions of the Companies Act 2013 and the

Securities Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations 2015 (as amended). All suchtransactions are placed before the Audit and

Risk Management Committee for review/ approval. The necessary omnibus approvals havebeen obtained from Audit and Risk

Management Committee wherever required.

There were no material Related Party Contract/Arrangement/Transactions made by theCompany during the year that would have required Shareholders' approval under provisionsof Section 188 of the Companies

Act 2013 or of the Securities Exchange

Board of India (Listing Obligations and

Disclosure Requirements) Regulations 2015 (as amended). The Company has adopted aRelated Party Transactions Policy duly approved by the Board which is uploaded on theCompany's website & may be accessed at link https://www.shreecement.com/uploads/cleanupload/related-party-transaction-policy. pdf.

Further in terms of Securities and Exchange Board of India (Listing Obligations and

Disclosure Requirements) (Amendment)

Regulations 2018 the transactions with person/entity belonging to the promoter/promoter group holding 10% or more shareholding in the Company are as under:

Name of the Entity % Holding in the Company Amount Rs.( Cr.) Nature of Transaction
Shree Capital 24.90% 0.27 Payment of
Services Ltd. Office Rent

(f) Deposits from Public: The Company has not accepted any deposits from publiccovered under Chapter V of the Companies Act 2013 during the year and as such no amounton account of principal or interest on deposits from public was outstanding.

(g) Vigil Mechanism/ Whistle Blower Policy: The Company has adopted a whistleblower policy and has established the necessary vigil mechanism for employees andDirectors to report concerns about unethical behaviour. The policy provides for adequatesafeguards against victimisation of employees who avail of the mechanism and also providesfor direct access to the Chairman of the Audit and Risk

Management Committee. The whistle blower policy may be accessed on the website of the

Company at link https://www.shreecement.com/uploads/cleanupload/whistleblower-policy.pdf.

(h) Remuneration Policy: Company firmly believes in nurturing a people friendlyenvironment which is geared to drive the organisation towards high and sustainable growth.Each and every personnel working with Company strives to achieve the Company's vision ofbeing the best in the industry. Its remuneration policy is therefore designed to achievethis vision.

The policy has been approved by the Board on the recommendation of Nomination cumRemuneration Committee. The policy is applicable to Directors Key Managerial Personneland other employees. The policy provides that while nominating appointment of a Directorthe Nomination cum Remuneration Committee shall consider the level and composition ofremuneration which is reasonable and sufficient to attract retain and motivate theDirectors for delivering high performance. The Remuneration Policy can be accessed on thewebsite of the Company at link https://www.shreecement.com/uploads/cleanupload/remuneration-policy. pdf.

(i) Policy on Prevention Prohibition and

Redressal of Sexual Harassment at

Workplace: The Company has complied with the provisions of the constitution of theInternal Committee under the Sexual Harassment of Women at the Workplace (PreventionProhibition and Redressal) Act

2013 and has adopted a Policy on Prevention

Prohibition and Redressal of Sexual Harassment at the Workplace in line with theprovisions of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and the Rules made thereunder. Company has formed an ‘InternalComplaints Committee' for prevention & redressal of sexual harassment at workplace.

The Committee has four members and is chaired by a senior woman member of theorganisation. The Company has not received any complaint of sexual harassment during thefinancial year 2020-21.

(j) Material Changes after the Close of

Financial Year: There have been no material changes and commitments which haveoccurred after the close of the year till the date of this report affecting the financialposition of the Company.

(k) Significant and Material Orders passed by the Regulators or Courts: Nosignificant material orders have been passed by the Regulators or Courts or Tribunalswhich would impact the going concern status of the

Company and its future operations.

(l) Maintenance of Cost Records: Company is required to maintain cost records asspecified by the Central Government under subsection (1) of section 148 of the Companies

Act 2013 accordingly such accounts and records are made and maintained by the

Company.

(m) Compliance with Secretarial Standards:

Company has complied with the Secretarial Standards issued by Institute of Companies

Secretaries of India (ICSI) on Board Meetings (SS- 1) and General Meetings (SS-2).

23. ACKNOWLEDGEMENT

The Directors take this opportunity to express their deep sense of gratitude to itslenders

Central and State Governments and the local authorities for their continuedco-operation and support. They also would like to place on record their sincereappreciation for the commitment hard work and high engagement level of every member ofthe Shree family without which the exemplary performance of the Company year after yearwould not have been possible. The Directors would also like to thank various stakeholdersof the Company including customers dealers supplies transporters advisors localcommunity etc. for their continued committed engagement with the Company. The Directorswould also like to thank the Members of the Company for confidence and trust reposed inthem.

For and on behalf of the Board

B. G. Bangur

Chairman

DIN: 00244196

Place: Dubai Date : May 21 2021

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