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Sri Chakra Cement Ltd.

BSE: 518053 Sector: Industrials
NSE: N.A. ISIN Code: INE827D01020
BSE 05:30 | 01 Jan Sri Chakra Cement Ltd
NSE 05:30 | 01 Jan Sri Chakra Cement Ltd

Sri Chakra Cement Ltd. (SRICHAKRACEM) - Director Report

Company director report

Dear Members

We have pleasure in presenting this 35th Annual Report of the Companytogether with the Audited Statements of Accounts Management Discussion and Analysis forthe year ended 31st March 2017.

Financial Results:

(Rs. In Crs)

Sl.No. Particulars 2016-17 2015-16
1 Revenue from operations 247.34 253.00
2 Profit Before Interest Depreciation and Taxes 12.40 28.89
3 Profit before tax 5.66 20.76
4 Provision for tax 2.10 2.78
5 Net profit after tax 3.43 18.24
6 Balance brought forward from previous year 6.85 (11.39)
7 Net Surplus 10.28 6.85

Review of Operations:

Sl. No. Particulars UNIT 2016-17 2015-16
1 Clinker Production Mts 387293 404353
2 Cement Production Mts 499730 495333
3 Cement Sale Mts 499630 507811
4 Earnings Per Share Rs/ Share 4.02 19.99

During the year under review the cement production quantity has gone up by 0.88% whileCement sale quantity declined by 1.61% which resulted in decrease in sales revenue by2.37%. The Company has earned a net profit of Rs 3.43 Cr as against Rs 18.24 Cr during2015-16 representing a decline of 14.81 Crores due to mainly rise in the coal power andother input costs low sales realisation and non provision of concessions etc. Despite therise in the coal price the coal consumption has been reduced from 17.11% to 16.55% during2016-17 while power consumption got reduced to 81.07 units per mt of cement.

Board of directors key managerial personnel and changes during the year:

The Board is duly constituted and balanced as required under the Companies Act 2013and the Listing R gulations/Agreement read with the policy of the Board of directorsappointment and remuneration in terms of the provisions of Section 134(3)(e) read withsub-section (3) of Section 178 of the Companies Act 2013. During the year under reviewSrmt K V Nagalalitha and Sri N Krishna Mohan Directors of the company will retire byrotation and being eligible offers themselves for reappointment at the ensuing annualgeneral meeting.

Further w.e.f. 01.10.2016 Sri N Krishna Mohan and Sri V V SR Anjaneyulu have beenappointed by the board as Chairman cum Managing Director and Executive Directorsrespectively with a remuneration while fixed the remuneration of Sri K Vijay Kumar JointManaging Director as specified in the notice of AGM mentioned supra subject to theapproval of the shareholders at the ensuing Annual General Meeting. There is no change inthe key managerial personnel appointments.

Performance Evaluation Of Board Committees Individual Directors And FamiliarisationProgramme For Independent Directors:

• Board Evaluation: During the year under review the Board carried out anannual evaluation of its own performance on the basis of criteria such as Boardcomposition structure and effectiveness of the Board

Processes information flow to the Board and functioning of the Board etc. Consideringthe requirements of the relevant statutes.

Evaluation of Committees: Performance of Committees of the Board wasevaluated on the basis of composition effectiveness of working and independence etc.

Evaluation of Individual Directors: The Board and nomination andRemuneration Committee evaluated the performance of individual directors on the basis ofcriteria such as attendance contribution of Directors at Board/Committee Meetingsadherence to ethical standards and code of conduct of the Company interpersonal relationswith other directors meaningful and constructive contribution and inputs in theBoard/committee meeting etc.

Familiarisation programme for Independent Directors: A detailedpresentation covering the role duties and responsibilities of the independent directorscompany objectives strategy operations organisation structure etc made at the time oftheir appointment is sent to the existing independent directors every year.

• In Accordance with section 149(7) of the Companies Act 2013 each IndependentDirector has given declaration to the company confirming that he meets the criteria ofindependence laid down in section 149(6) of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.

Directors' responsibility statement:

Pursuant to Section 134 (5) of Companies Act 2013 the Board of Directors to the bestof their knowledge and belief state that:

(a) In the preparation of annual accounts for the year ended 31st March2017 the applicable accounting standards had been followed along with proper explanationrelating to material departures.

(b) The directors had selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andFairview of the state of affairs of the company at the end of the financial year and theprofit and loss of the company for that period.

(c) The directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities

(d) The director had prepared and annual accounts on a going concern basis. and

(e) In the case of listed company directors had laid down internal financial controlsto be followed by the company and that such internal financial controls are adequate andwere operating effectively.

(f) The director had devised proper system to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Auditors:

(a) Statutory Auditors: As per the Companies Act 2013 the term of the Existingstatutory Auditors M/s Satyanarayana & Co. Chartered Accountants would expire at theensuing Annual General Meeting and in compliance with the requirements of the Act M/s DVR& Co Chartered Accountants Hyderabad are proposed to be appointed as StatutoryAuditors for the year 2017-18 in place of the existing auditors. The Company received adeclaration stating that M/s DVR & Co Chartered accountants if appointed would bein accordance with the provisions of Section 141 of the Companies Act 2013.

(b) Cost Auditors: M/s Bisati & Co Cost Accountants are the Cost Auditorsappointed by the company Board for auditing the cost accounts of the company for the yearended 31.03.2017.

(c) Secretarial Auditors: M/s K. Swamy & Co. Company Secretaries inpractice are the Secretarial Auditors appointed by the board of directors of the companyfor the year 2016-17.

Disclosure of particulars of employees and related matters:

The information required pursuant to Section 197 of the Companies Act 2013 read withRule 5(1) of the Companies (Appointment and Remuneration of Managing Personnel) Rules2014 and Companies (Particulars of Employees) Rules 1975 in respect of employees of theCompany and Director is given in a separate annexure to this Report--. Particulars ofemployees as per the Rule-5(2) of The Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are not applicable to the company.

Statutory auditors comment in the independent auditors' report and reply :

With regard to the observations of the Statutory Auditors regarding the confirmationsfrom some of the parties it is hereby clarified that the company has obtainedconfirmations from major accounts and some minor accounts the Board felt that it wasrequired as there is no impact on the accounts.

Other Disclosures

Board Committees : The details of composition terms of Reference meetings andattendance particulars of various committees of Board such as Audit Committee Nominationand Remuneration Committee Corporate Social Responsibility Committee StakeholdersRelationship Committee Share Transfer Committee are provided in the Corporate GovernanceReport vide annexure No 5 to this Directors report. The intervening gap between themeetings of the Committees are within the prescribed period under the Companies Act 2013and the listing regulations. The Audit Committee consists of 2 independent directors i.e.Sri P Ramamoorthy and Sri P Ramakrishnaiah and one non executive director i.e Smt K VNagalalitha.

Loans Guarantees or Investments: There were no loans/guarantees given by thecompany during the financial year 2016-17.

Contracts or arrangements with Related Parties: All related party transactions thatwere entered into during the financial year 2016-17 were on an arms length basis and inthe ordinary course of business and were in compliance with the applicable provisions ofthe Companies Act 2013 and the listing regulations. There were no material related partycontracts or arrangements or transactions made by the company. During the year that wouldhave require shareholders approval under section 188 or of the Listing Regulations. TheCompany has adopted a related party transactions policy duly approved by the Board whichis uploaded on the Companies Website. Details of the related parties disclosures(transactions) are provided in the accompanying financial statements.

Deposit from the Public: the company has not accepted any deposits from publiccovered under chapter V of the Companies Act 2013 and as such no amount on account ofprincipal or interest on deposits from public was outstanding as on the date of balancesheet.

Vigil Mechanism/ Whistle Blower Policy: The Company has adopted a whistle blowerpolicy ad has established a clear vigil mechanism and directors to report concerns unethical behaviour. The policy provides for adequate safeguards against victimisation ofemployees who avail of the mechanism and also provides for direct access to the chairmanof the audit committee. The whistle blower policy may be accessed on the website of thecompany.

Prevention of Sexual Harassment at Workplace: The company has adopted a policy onprevention prohibition and redressal of sexual harassment at the work place in line withthe provisions of the "The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 and Rules made there under your Company hasconstituted Internal Complaints Committee (ICC). The Committee has four members and ischaired by a senior women member of the organisation. It is stated that there are no suchcomplaints received by the committee/company during the year under review.

Material changes after close of the financial year: There have been no materialchanges and commitments which have occurred after the close of the year till date of thisreport effecting the financial position of the company.

Significant and material orders passed by the Regulators or Courts: No significantmaterial orders have been passed by the regulators or courts or tribunals which wouldimpact the going concern status of the company and its future operations.

Listing with Stock Exchanges: The equity shares of the company are listed on theBSE. The listing is under suspension and your directors have already initiated steps forrevocation of suspension with the stock exchange. The company confirms that it has paidthe Annual Listing Fees for the year 2017-18.

Subsidiary Companies: The Company has no subsidiary companies.

Global Economy: Growth of global economy continued to stagnate following slowtrades low investments and policy uncertainties in advanced economies and the politicaldevelopments in United State of America and United Kingdom are expected to have long-termeffects on the global economy. Supported by the growth in Industry and service sectorsGlobal Economic activity is picking up and the growth is expected to rise from 3.1% inyear 2016 to 3.5% in 2017 and 3.6% in 2018.

Indian Economy: Indian economy followed a path of recovery during the year 2016-17registering growth in the first three quarters with the Agrarian and Rural economybenefiting from a good monsoon after two successive rain deficit years and the favourablepolicy as well as executive reforms by the Government to support strong and sustainablegrowth the prudent fiscal regime and calibrated monetary easing that reigned ininflation have helped to strengthen macroeconomic stability. However according toestimates India's GDP growth has moderated in FY 2016-17 to 7.1% from 7.6% recorded inthe previous financial year. This happened largely owing to the demonetization initiativethat led to temporary de-circulation of money and the situation has largely normalizedfollowing the Government's re-monetization process.

Outlook: The growth momentum in Indian economy should rise driven by theGovernment's policy initiatives in areas such as Taxation (GST) Foreign Direct Investment(FDI) and the ease of doing business and a well- regulated monetary policy by the ReserveBank of India to stabilize prices and improving fiscal Condition. According to the Reportof Asian Development Bank (ADB) The India's economy is set to grow at 7.4% in the currentfiscal year 2017-18 against 7.1% in the previous year. As per research Cement demand isexpected to increase by 5-6% y-o-y in FY18 on account of increased spends on roads andrailways push on affordable housing by central govt. Further materialization of pent-updemand particularly in rural housing and low base is expected to support modest increasein demand. Over a five-year period cement demand is projected to increase at 6-7% CAGRled by revival in government spending in housing (esp. affordable housing) marginaluptick in private housing and fast growth in infrastructure spends like urbaninfrastructure road and irrigation. The impact of major reform in taxation i.e. GSTlegislation is yet to be felt.

Opportunities and Threats: The industrial environment of the country offers severalopportunities for further improvement in the performance of the company. Given the size ofpopulation in the country there are reasonable opportunities for the demand to pick upfurther. The need for creation of more and more houses specifically in the affordablesegment sea ports airports and other such infrastructure facilities to improve thestandard of living of the vast population has a large potential for the country. All thedevelopment efforts of the Governments are aimed at the welfare and well being of themasses and hence the need for and demand of cement is expected to go up. Throughopportunities are there it cannot be presumed that it is going to be an easy journey.There are number of challenges which have to be tackled carefully in order to ensure asmooth journey the increase in the price of coal and other inputs poses a threat to theindustry. Normally all the increases in the costs of inputs are expected to be passed onto the buyers but in the case of an oversupply situation the supplier is compelled toabsorb some of the increases in costs. This has already happened in 2016-17 and theindustry's ability increased input costs have been tested in the year and the industry isonly partially successful. That fact that most of the ingredients/ raw materials are underGovernment controlled mechanism it makes life difficult for the industry to resist theincrease in the input costs. The Mines and Minerals ( Development and regulation) Act2015 though brought positive impact in terms of the increased lease periods it has alsobrought additional levies such as District Mineral Foundation national MineralExploration trust etc which have major impact on the cost structure of the cementindustry and it has been difficult to increase the prices of cement to take care of suchadditional costs and incase of any attempt to increase prices it triggers pressure fromConsumers and Governments.

Segment-wise or product-wise performance: The Company is mainly engaged in thebusiness of manufacturer of OPC 53/ 43 and PPC grade cement. Accordingly this is the onlySingle Reportable Segment.

Risk and concerns: The risks and concerns which are applicable to all industriesand specially to cement industry can be said to be prevalent in the case of your companyas well. Few of the major risks are given below. Periodical increases in the cost ofinputs leading to impact on margins

• Uncertainty in coal supplies and increases in the prices.

• Failure or deficiency in the monsoon which may lead to reduction/ loss ofrevenue due to reduction in demand for cement

• Changes in Government policy impact the costs demand and supply.

Internal control systems and their adequacy: The Company's internal control systemin place has a process designed to take care of various controls and audit requirements.It ensures effectiveness in the operations and protection of the company's assets from anypossible loss and unauthorised use. It also ensures proper and correct data beingrecorded. The design of the transactions is such that there is an adequate appropriateand need based control on the activities/ business processes of the company. The Internalcontrol system is augmented by an established internal audit system which is carried outby outside chartered accountants of the repute and experience. Regular reviews of internalaudit are carried out to ensure robustness of the systems and control environment. Theinternal auditors submit their reports to the audit committee of the Board of Directorsfor their review. It is also ensured that the internal audit scope is adequate and theirreviews are well directed to achieve the desired objectives. The committee also reviewsthe adequacy and effectiveness of the internal control systems and suggests improvementsfrom time to time. The Compliance to the legal and statutory requirements is given utmostimportance as also to ensure efficiency in operations/ reporting and controls. Allparameters in operations/ activities are monitored regularly to ensure desired results.

Human resources development and industrial relations: The main focus of the companyis to attract develop and retain talented employees in order to achieve the businessobjectives. The company has made efforts in the field of training and developmentcongenial work environment providing challenging work opportunities etc. The Company hasframed HR practices in order to strengthen and building people talent for achieving thebusiness objectives. Initiatives to develop leadership lines as well as enhance technicaland functional capability with special focus on nurturing young talent are taken. Youngmanagers are groomed by providing higher responsibilities Focus remains on gaining crossfunctional knowledge to enable meaningful participation of employees all across of thecompany in innovation and process improvement. With the company entering in next phase ofgrowth the nurtured talent pool will enable smooth transition to new growth trajectory.During the year employee relations remained cordial. This has enabled company to buildhealthy relationship and resolve issues through dialogue and discussions.

Annexures to the Directors' Report

Corporate Social Responsibility: The Company has considered Corporate SocialResponsibility (CSR) as a voluntary activity and a part of its long term vision o creatingvalue for all stakeholders and society Accordingly CSR is an integral part of thecompany's business. In order to oversee all its CSR activities and objectives such ashealthcare education women empowerment and rural development and conservation of naturalresources the company has constituted a Board level Committee " Corporate SocialResponsibility Committee" in terms of section 135 and Schedule VII of the CompaniesAct 2013 read with the provisions of the listing agreement/ regulations. During the yearunder review the Company has spent Rs 21 Lakhs towards CSR activities as detailed in aseparate annexure to this annual report as required under Companies (Corporate SocialResponsibility Policy) Rules 2014 along with the CSR Policy vide Annexure 1 andthe same may also be accessed on the company's website.

Conservation of energy technology absorption foreign exchange earnings and outgo: Theinformation relating to the conservation of energy technology absorption foreignexchange earnings/outgo as required under the Companies Act 2013 and the rules madethere under is set out in Annexure 2 which forms part of this Annual Report. TheBoard noticed that the company has invested in installing in equipments at plant whichresulted in bringing down the power consumption to 81.07 units per tonne of cement whilethe coal consumption was reduced and calorific value was brought down to 750 Kcal/kgclinker.

Secretarial Audit Report: The Company's Secretarial Auditors M/s K Swamy and COhas issued their Report fot the year 2016-17 which is attached to this Directors' Reportvide Annexure-3 in the respective form MR-3

Extract of Annual Return: An Extract of the Annual Return as required under theprovisions of Section 134(3)(a) of the Companies Act 2013 is annexed herewith as Annexure-4which forms part of this report.

Corporate Governance Report : Pursuant to the Listing regulations the company hascomplied with the guidelines and a statement on the corporate governance report for theyear 2016-17 is attached to this Report vide Annexure-5.

Disclosure of Remuneration: A Statement as required under section 197 of CompaniesAct 2013 and Rule 5(1) of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is enclosed as Annexure 6.

A statement of related party transactions took place during the financial year2016-17 is enclosed in Form AOC-2 as an Annexure 7:

Compliance Certification by CEO / CFO: a certificate signed by CEO and CFO of thecompany for the year 2016-17 has been obtained and enclosed as Annexure 8.

Acknowledgement:

The Directors take this opportunity to place on record there sincere appreciation forthe commitment hard work and high engagement level of every member of the Sri ChakraFamily which has made the company to achieve exemplary performance year after year. TheDirectors would like to thank take this opportunity to express their thanks to variousdepartments of the Central and State Government local authorities for their continuedcooperation and support. They also thank various stakeholders of the company i.e. MaterialSuppliers Customers dealers transporters advisors local community etc for theircontinued committed engagement with the Company.

By Order of the Board
For SRI CHAKRA CEMENT LIMITED
Sd/- Sd/-
Place : Hyderabad N. Krishna Mohan K. Vijay Kumar
Date : 14.08.2017 Chairman Joint Managing Director