Your Directors are pleased to present the 23 Annual Report together with the AuditedFinancial Statements of the Company for the Financial Year ended 31 March 2019.
|FINANCIAL RESULTS || || |
| || ||( Rs. in Lakh) |
| ||2018-19 ||2017-18 |
|Sales & Other Income ||58044.67 ||38607.96 |
|Profit/(Loss) before Interest & ||4108.54 ||2180.75 |
|Depreciation || || |
|Profit/(Loss) before Depreciation ||(2742.61) ||(4557.32) |
|Profit/(Loss) after Tax ||(4085.02) ||(4370.85) |
|Surplus/(Deficit) brought forward ||(309.36) ||4061.49 |
|Total Surplus/(De cit) ||(4394.38) ||(309.36) |
Within two years of commissioning of the integrated cement plant your Company has beenable to launch its PLATINUM HEAVY DUTY CEMENT brand in three nearby states andcommands a premium over other brands. During the FY 2018-19 the cement production scaleda new high at 10.78 Lakh tonnes with plant cement despatches at 10.77 Lakh tonnes. Inaddition to the above your Company has been able to sell 2.39 Lakh tonnes of PlatinumHeavy Duty Cement through trading activities and also sell 3.40 Lakh tonnes of clinker.The Company's Revenue for the FY 2018-19 reported an all-time high of Rs. 58044.67 Lakhagainst previous year's Revenue of Rs. 38607.96 Lakh showing an upsurge of 50%. TheCompany's EBIDTA stood higher at Rs. 4108.54 Lakh during the Year compared to Rs.2180.75 Lakh in the previous year showing a growth of 88%. However due to higherdepreciation and finance cost the Company suffered a net Loss of Rs. 4085.02 Lakhagainst previous year's net loss of Rs. 4370.85 Lakh.
OUTLOOK FOR INDIAN ECONOMY AND CEMENT
The Indian economy retained its tag of the fastest growing major economy in the worldin FY 19 for a second year in a row as it continued its climb on an upward growth path.The economy registered a growth rate of 7% during this period as per advance estimates ofthe Central Statistical Of ce.
The economy is projected to grow at the rate of 7.5% during FY 20 expanding further to7.7% during FY 21 as per the International Monetary Fund (IMF) World Economic OutlookJanuary update. The growth rates for the economy are pegged much higher than the globalgrowth rates for the same years at 3.5% and 3.6% for the corresponding periodsrespectively thus placing the economy on a solid footing even amidst growing globaluncertainties.
The manufacturing sector is expected to post robust growth with the sector's GVA growthprovisionally estimated at 6.9% in FY 19 as compared to 5.9% during FY 18. Growth in thesectors including trade hotel transport communication and services related tobroadcasting which moderated during the first half of the year is expected to pick up onaccount of improved domestic demand conditions. GVA growth for these sectors isprovisionally estimated to be at 6.9% in FY 19 in contrast to 6.2% in FY 18. Constructionsector is also expected to grow by 8.7% during FY 19 as compared to 5.6% during FY 18.Overall trade including services reached US$ 540 billion for the scal.
All the factors mentioned above should lead to increase in employment and consequentincrease in incomes and discretionary spending. Demand for affordable housing underPradhan Mantri Awas Yojana (PMAY) in both urban as well as in rural is expected to getfurther boost as the consumers spend more on housing. It is already visible from thegrowth in construction sector. In addition the continuing focus and growth ininfrastructure sector the pace at which new highways are being built rail network isbeing expanded new airports expansion of existing airports inland water ways portdevelopment and so on would provide much needed momentum to growth in cement consumptionand demand.
THREAT & OPPORTUNITIES
India is the second largest producer of cement in the world. No wonder India's cementindustry is a vital part of its economy providing employment to more than a millionpeople directly or indirectly. In addition cement is vital part of any construction andconstruction sector is the second largest creator of employment in the country afteragriculture. Ever since it was deregulated in 1982 the Indian cement industry hasattracted huge investments both from Indian as well as foreign investors.
India has a lot of potential for development in the infrastructure and constructionsector and the cement sector is expected to largely benefit from it. Some of the recentmajor initiatives such as development of 98 smart cities are expected to provide a majorboost to the sector.
Expecting such developments in the country and aided by suitable government foreignpolicies several foreign players have invested in the country in the recent past. Asignificant factor which aids the growth of this sector is the ready availability of theraw materials for making cement such as limestone and coal. According to data released bythe Department of Industrial Policy and Promotion (DIPP) cement and gypsum productsattracted Foreign Direct Investment (FDI) worth US$ 5.28 billion between April 2000 andDecember 2018.
In order to help the private sector companies thrive in the industry the governmenthas been approving their investment schemes like setting up of an Affordable Housing Fundof Rs. 25000 Crore (US$ 3.86 billion) under the National Housing Bank (NHB) which will beutilised for easing credit to home buyers. The move is expected to boost the demand ofcement from the housing segment. Further the eastern states of India are likely to be thenewer and virgin markets for cement companies and could contribute to their bottom line infuture. In the next 10 years India could also become exporter of clinker and grey cementto the Middle East Africa and other developing nations of the world.
Due to the increasing demand in various sectors such as housing commercialconstruction infrastructure and industrial construction cement demand which is about 330Million Tonnes Per Annum (MTPA) currently is expected to reach 550-600 MTPA by the year2025. This provides a huge opportunity to the industry to invest and grow. Howeverindiscriminate investments to add capacity can also lead to creation of huge surpluscapacities which can hurt the industry in short run. Such a situation was witnessedrecently a few years ago between 2008 till 2015; when the industry capacity almost doubledduring this period and surplus capacities exceeded 50% of total capacity in certain zones.
Your Company has adopted the strategy of treading cautiously in capacity expansion andis putting more focus on increasing market presence and market share in its core marketingzones. This approach is with the view of being ready to expand and add capacity when thetime is right as the Company has all the necessary ingredients to take such steps atappropriate time.
RISKS AND CONCERNS
Energy (Power & Fuel) Supply Chain Costs and Taxes account for more than 60% ofwhat a cement company gets from the customer as price or revenue from sales. Any majorvariation in these with adverse demand situation is a source of major risk and cause ofconcern. We would like to discuss and elaborate on each of these.
The cost of energy is largely impacted by global factors such as global supplysituation global economy global politics and so on. It is more so for a country likeours which heavily depends on energy imports more speci cally the cement industry whichgets almost 50% of its fuel requirements through imports. So even a minor change inexchange rates owing to any change in trade balance can significantly impact theprofitability of the industry. Luckily for the industry the conditions in past have beenfavourable though there are some signs of hardening of energy prices in global market. Inorder to hedge against these volatilities the cement companies are now gradually movingtowards alternate forms of energy and fuels. In coming time the industry hopes to meetsignificant requirements of power from renewable sources though there is still a long wayto go in terms of alternative fuels.
Transportation is a major component in Supply Chain and this again is largely dependentof cost of fuel that is imported. As the lead distances are becoming shorter the share ofroad transport is increasing and thus the industry today is more vulnerable to variationsin supply chain costs with respect to variations in fuel prices as compared to past whenrail movement accounted for more than 50% of total. However the positive aspect is thatlead distances are shrinking and the gains of shortening the distribution distances arerelatively higher than the incremental per KM cost. Hence those who can reduce the leaddistances aggressively would stand to gain in medium to long run.
Finally the taxes - each time whenever GST Council meets the industry eagerly hopesthat the cement will be put under lower tax slabs than the sin slab of 28%. Ever sinceintroduction of GST the GST Council is periodically reviewing the tax rates and isconsistently bringing more and more commodities under lower tax slabs. Cement is now oneoffivery few commodities which is in highest tax slab and understandably because it is noteasy for the governments of the day to let lose the tax cow. Though recently thegovernment has provided some relief to the users in terms of reducing GST on underconstruction property a reduction in GST on cement would make the commodity moreaffordable to masses; especially those who are first time building homes under PMAY. Itshall also help to bridge the gap in per capita cement consumption from global averages.With the general elections coming to an end and GST collections continuously improving;the industry is still hopeful for a favourable outcome.
Your Company had made various efforts to increase its market presence and market sharein its natural markets and in markets that are more economically bene cial. It is puttingall efforts to considerably shrink the lead distances to optimize logistics cost furtherand increase the share of blended cement in its product portfolio. These measures wouldprovide the Company cushion to absorb the impact of increase in various costs.
HUMAN CAPITAL MANAGEMENT
The Company is known for its people centric approach ever since its inception. TheCompany has adopted best HR practices for retaining talents in the Organisation. To name afew we have been able to initiate HR initiatives afresh for developing learning cultureand starting programmes on Emerging Leadership Strengthening PMS system through SMARTbased KRAs 360 degree feedback launching of various employee engagement activities viz.Quality Circles SGAs CFTs 5S activities etc. Besides suggestion scheme and structuredcommunication process various training programmes for employee skill development both onfunctional and behavioral aspects are being organised in a structured way be ttingbenchmark practices.
With a view to develop belongingness amongst the employees and considering need ofsocial cultural and spiritual developments planned welfare activities are beingconducted in the plant. In order to retain talent in the Organisation we have focused onvarious key parameters like recruitment career development performance management award& recognition executive coaching & mentoring motivating employees employeesurvey exit interviews etc.
CSR activities are being carried out mainly in eight nearby villages of Plant and Minesareas. Your Company focuses on five basic community needs such as Education HealthSustainable Livelihood Rural Development and Social Causes at large.
Way forward the Company has reviewed its earlier twelve Core Competencies for talentassessment and adopted seven Core Competencies for its executive development plan. TheCompany is constantly improving on People Management Practices and taking every step toenrich our major HR thrust areas which in turn has helped the Company in gettingexcellence in development of Human Capital. This has also paved way for CII and Green TechFoundation Awards for environment health and safety.
Fair and consistent HR Policies followed by the Management ensure that IndustrialRelations continue to be peaceful and cordial. Workers are given adequateopportunities/encouragement to share new ideas. Company also gives due weightage to jobenrichment of workers and compensation.
ENVIRONMENT HEALTH AND SAFETY
Occupational health safety and environment has always been on the priority agenda ofthe Management. The Company has taken up mass plantation in and around its factory colonyand mines area. The Company has conducted periodic medical and health check-up of itsemployees. As a social responsibility the Company has also provided free medicalfacilities to nearby residents around its plant and mines area by conducting medicalcamps. It is gratifying to note that your Company has received the First Prize forPublicity & Propaganda Second Prize for Mineral Conservation and Third Prize forReclamation & Rehabilitation under Category-A2 during 29 Mines Environment and MineralConservation Week 2018-19.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
The Company has in place adequate Internal Control System commensurate with the sizeand level of operations of the Company and the same were operating effectively throughoutthe year. The Internal Audit Team apart from submitting its Reports on the AuditObservations also submits its Report on the ef cacy and adequacy of Internal ControlSystems to the Chairman of Audit Committee of the Board. There are adequate checks &balances in place wherein deviation from the systems laid-out are clearly identified andcorrective actions are taken in the respective areas wherever required.
INTERNAL FINANCIAL CONTROLS
The Company has in place adequate Internal Financial Control Policies and Procedures inrelation to the size and nature of operations of the Company. This ensures accuracy andcomprehensiveness of the Financial & Accounting Records. These are adequate forsafeguarding of its assets and effective towards prevention and detection of frauds anderrors. The Policies and Procedures are also adequate for orderly and efficient conduct ofbusiness of the Company. During the year under review no reportable material weaknesseswere observed in the system.
KEY CHANGES IN FINANCIAL INDICATORS
The key financial ratios of the Company are as under:-
|S. No. ||Ratios ||Unit of measure ||As on 31.3.2019 ||As on 31.3.2018 |
|1 ||Debtor Turnover ||Times ||230 ||121 |
|2 ||Inventory Turnover ||Times ||14 ||10 |
|3 ||Current Ratio ||Times ||0.5 ||0.8 |
|4 ||Interest Coverage ||Times ||0.6 ||0.3 |
|5 ||Operation profit margin ||% ||7% ||6% |
|6 ||Net profit margin ||% ||-7% ||-11% |
|7 ||Return on Net Worth ||% ||-24% ||-20% |
EXTRACT OF ANNUAL RETURN
The extract of the Annual Return as on 31 March 2019 in the prescribed Form MGT-9 isattached as Annexure 'A' to this Report and forms a part of it. The same is also availableon the website of the Company at www.udaipurcement.com.
RELATED PARTY TRANSACTIONS
During the Financial Year ended 31 March 2019 all the contracts or arrangements ortransactions entered into by the Company with the Related Parties were in the ordinarycourse of business and on an arm's length basis and were in compliance with the applicableprovisions of the Companies Act 2013 (Act) and the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 (Listing Regulations).
Further all the Related Party Transactions entered into by the Company with JK LakshmiCement Ltd. the Holding company (JKLC) and Hansdeep Industries & Trading CompanyLtd. the Fellow subsidiary (HITCL) during the FY 2018-19 were within the limits of Rs.750 Crore each as authorized by the Members at the Annual General Meeting of the Companyheld on 9 August 2018 (AGM). A Statement showing particulars of such contracts orarrangements entered into with JKLC & HITCL in the prescribed Form AOC-2 pursuant toSection 134(3)(h) of the Act is attached as Annexure 'B' to this Report. The RelatedParty Transaction Policy approved by the Board is available on the website of the Company.
JKLC and HITCL continue to provide all requisite assistance and support includingtechnical financial marketing and operational support to the Company in the normalcourse of business. The Board has recommended Resolution seeking fresh omnibus approval ofthe Members upto an amount of Rs. 1500 Crore on an annual basis for the Related PartyTransaction(s) to be entered into with JKLC for the FY 2019-20 and onwards in theordinary course of business and on arm's length basis subject to requisite approval ofthe Audit Committee of Directors of the Company from time to time.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENT
The particulars of loans given guarantees or securities provided and investments madeas required under the provisions of Section 186 of the Companies Act 2013 are given inthe Notes to Financial Statements.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Pursuant to Section 152 of the Companies Act 2013 (Act) Smt. Vinita Singhania (DIN:00042983) retires by rotation at the ensuing Annual General Meeting (AGM) and beingeligible offers herself for re-appointment. The Board recommends her re-appointment.
The first term of office of Shri Onkar Nath Rai (DIN:00033142) as an IndependentDirector of the Company shall determine at the ensuing AGM. He is eligible forre-appointment as Independent Director of the Company for a second term of upto fiveconsecutive years. The Board of Directors has recommended for the approval of the Membersthrough Special Resolution in the ensuing AGM re-appointment of Shri Onkar Nath Rai asIndependent Director of the Company for a second term as mentioned in the AGM Noticeforming part of the Company's Annual Report 2018-19.
All the Independent Directors of the Company have given requisite declarations conrming that they meet the criteria of independence as provided in Section 149 of the Actand Regulation 16 of SEBI (Listing Obligations & Disclosure Requirements) Regulations2015.
Ms. Poonam Singh Independent Director had due to preoccupation and other commitmentstendered her resignation as Director of the Company w.e.f. 1 October 2018. Further ShriRohni Kumar Gupta Whole-time Director Chief Financial Of cer and Secretary of theCompany resigned from all above positions from 30 September 2018. The Board places onrecord its appreciation of the valuable contributions made by them during the course oftheir respective tenures with the Company.
The Board had appointed Mr. Pranav Chitre as the Chief Financial Of cer and Ms. HemaKumari as Secretary of the Company w.e.f. 6 February 2019.
CONSERVATION OF ENERGY ETC.
The details as required under Section 134(3)(m) read with the Companies (Accounts)Rules 2014 are annexed to this Report as Annexure 'C' and forms part of it.
The Company has neither invited nor accepted any deposits from the public.
(a) Statutory Auditors and their Report M/s Bansilal Shah & Co. CharteredAccountants (Firm Registration Number: 000384W) were appointed as the Statutory Auditorsof the Company for a term of 2 (two) consecutive years to hold Of ce from the conclusionof the 21 Annual General Meeting (AGM) till the conclusion of the 23 AGM to be held in theYear 2019. Accordingly the term of Office of M/s. Bansilal Shah & Co. as StatutoryAuditors of the Company shall expire at the conclusion of the ensuing AGM. Beingeligible the Audit Committee and Board of Directors of the Company have recommendedre-appointment of M/s Bansilal Shah & Co. Chartered Accountants as the StatutoryAuditors of the Company for a second term of five consecutive years from the conclusion ofensuing 23 AGM till the conclusion of the 28 AGM. Requisite Resolution regarding theirre-appointment is included in the Notice of ensuing AGM for approval of the Members.
The observations of the Auditors in their report on Accounts and the FinancialStatements read with the relevant notes are self-explanatory. The Auditors' Report doesnot contain any quali cations reservations or adverse remarks.
(b) Secretarial Auditor and Secretarial Audit Report
Pursuant to the provisions of Section 204 of the Companies Act 2013 the Board ofDirectors appointed Shri Namo Narain Agarwal Company Secretary in Practice asSecretarial Auditor to carry out Secretarial Audit of the Company for the FY 2018-19.
The Report given by him for the said Financial Year in the prescribed format is annexedto this Report as Annexure 'D'. The Secretarial Audit Report does not contain any qualications reservations or adverse remarks.
(c) Cost Auditor and Cost Audit Report
M/s. HMVN & Associates Cost Accountants conducted the Audit of cost records ofthe Company for the Financial Year ended 31 March 2018 and as required Cost Audit Reportwas duly filed with the Ministry of Corporate Affairs Government of India. The Companyhas duly maintained requisite Cost Records pursuant to Section 148(1) of the CompaniesAct 2013.
The Audit of the Cost Records of the Company for the Financial Year ended 31 March 2019is being conducted by the said Firm and the Report will be duly filed.
PARTICULARS OF REMUNERATION
Disclosure of the ratio of the remuneration of each Director to the median employee'sremuneration and other requisite details pursuant to Section 197(12) of the Companies Act2013 (Act) read with Rule 5 (1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 as amended is annexed to this Report as Annexure 'E'.Further Particulars of Employees pursuant to Rule 5(2) & (3) of the above Rules formpart of this Report. However in terms of provisions of Section 136 of the Act the Reportand Accounts are being sent to all the Members of the Company and others entitled theretoexcluding the said Particulars of Employees. The said information is available forinspection at the Registered Office of the Company during business hours on working daysof the Company up to the ensuing Annual General Meeting. Any Member interested inobtaining such particulars may write to the Company Secretary.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
During the Financial Year under review there were no significant and material orderspassed by the Regulators or Courts or Tribunals which would impact the going concernstatus of the Company and its future operations.
CHANGE IN THE NATURE OF BUSINESS
During the Financial Year under review there was no change in the nature of business.
Your Company reaf rms its commitment to the highest standards of corporate governancepractices. Pursuant to Regulation 34 of SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015 Corporate Governance Report and Auditors' Certi cateregarding compliance of conditions of Corporate Governance are made a part of this Report.The Corporate Governance Report also covers the following:
(a) Particulars of the five Board Meetings held during the Financial Year under review.
(b) Salient features of the Nomination and Remuneration Policy including changestherein.
(c) The manner in which formal annual evaluation of the performance of the Board ofDirectors of its Committees and of individual Directors has been made.
(d) The details with respect to composition of Audit Committee and establishment ofVigil Mechanism.
(e) Details regarding Risk Management.
(f) Disclosures in relation to the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
COMPLIANCE OF SECRETARIAL STANDARDS
Based on the Secretarial Audit Report of the Secretarial Auditor the Company has dulycomplied with the applicable Secretarial Standards on Meetings of the Board of Directorsand General Meetings issued by the Institute of Company Secretaries of India.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 134(3)(c) of the Companies Act 2013 your Directors statethat:-
(a) in the preparation of the Annual Accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
(b) the such accounting policies have been selected and applied consistently andjudgments and estimates made are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the Financial Year and of the profitand loss of the Company for that period;
(c) proper and sufficient care have been taken for the maintenance of adequateaccounting records in accordance with the provisions of the said Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) the annual accounts have been prepared on a going concern basis;
(e) the internal financial controls to be followed by the Company have been laid downand that such internal financial controls are adequate and were operating effectively; and
(f) the proper systems to ensure compliance with the provisions of all applicable lawshave been devised and that such systems are adequate and operating effectively.
Your Directors wish to place on record and acknowledge their appreciation for thecontinued support and valuable co-operation received from the Government of Rajasthanother Government Authorities Lending Institutions/Banks Dealers Suppliers BusinessAssociates and Company's valued Customers and the esteemed Shareholders for the faith theycontinue to repose in the Company.
The Directors also express their gratitude to Team UCWL whose unstintedefforts and collective contribution has enabled the Company to move ahead in tough times.
Last but not the least your Directors wish to place on record their sincere gratitudetowards JK Lakshmi Cement Limited our Holding company and Hansdeep Industries &Trading Company Limited a Fellow subsidiary for all the financial technical marketingand operational assistance extended by them to make turnaround and revival of the Companya realty.
The Directors' Report & Management Discussion and
Analysis contains forward-looking statements which may be identified by the use ofwords in that direction or connoting the same. All statements that address expectationsor projections about the future including but not limited to statements about yourCompany's strategy for growth product development market positions expenditures andfinancial results are forward looking statements.
Your Company's actual results performance & achievements could thus differmaterially from those projected in such forward looking statements. The Company assumes noresponsibility to publicly amend modify or revise any forward-looking statements on thebasis of any subsequent development information or events.
| ||On behalf of the Board of Directors |
|Place: New Delhi ||Vinita Singhania |
|Date: 10 May 2019 ||Chairperson |