DIRECTORS' REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS
Your Directors are pleased to present the 22 Annual Report together with the AuditedFinancial Statements of the Company for the Financial Year ended 31 March 2018.
| || ||( Rs in Lakh) |
| ||2017-18 ||2016-17 |
|Sales & Other Income ||38607.96 ||9770.95 |
|Profit / (Loss) before Interest & Depreciation ||2180.75 ||385.23 |
|Profit / (Loss) before Depreciation ||(4557.32) ||369.90 |
|Depreciation ||3032.48 ||489.20 |
|Profit / (Loss) before Exceptional Items & Tax ||(7589.80) ||(119.30) |
|Exceptional Items - Net Income ||273.83 ||404.12 |
|Deferred Tax ||(3000.00) ||- |
|Other Comprehensive Income/(Loss) ||(54.88) ||(10.82) |
|Total Comprehensive Income/(Loss) ||(4370.85) ||274.00 |
After commissioning of its integrated cement plant in March 2017 your Company hassuccessfully run the plant operation and launched its "PLATINUM HEAVY DUTYCEMENT" brand which gained well acceptance in the nearby market. During the FinancialYear 2017-18 the production scaled a new high at 10.72 Lakh tonnes with sales at 10.74Lakh tonnes. The Company's EBIDTA stood higher at Rs 2180.75 Lakhs during the Yearcompared to Rs 385.23 Lakhs in the previous Year. However due to higher depreciation andfinance cost the Company suffered a net Loss of Rs 4370.85 Lakhs against a net profit ofRs 274.00 Lakh in the previous Financial Year.
OUTLOOK FOR INDIAN ECONOMY
Indian economic growth after hitting a three-year low of 5.7% in the first Quarter ofthe Financial Year 2017-18 made an impressive comeback in the second Quarter to 6.3%which further increased to 7.2% in the third Quarter and continued its upward climb to7.7% in the fourth Quarter on the back of strong performance in manufacturing sector. Withthis Indian Economy has regained its momentum and reclaimed 'world's fastest growingeconomy' tag from China. It is heartening to note that during the Year there has beennotable reduction in the fiscal deficit as a percentage of GDP.
Lower inflation coupled with healthy growth in direct as well as in indirect taxcollection is a good sign for the industry as well for the economy. With emphasis oninfrastructure and housing we expect that cement demand will bounce back to respectablelevels signs of which are already visible during last a few months.
Yet there are some signs of worry as well. Weakening of Rupee against Dollar and risingcrude oil prices will impact the industry and economy in terms of rising costs andreducing operating margins. To offset these cost pressure it is important that there ishealthy growth in demand which would lead to better capacity utilization and consequentreduction in the fixed cost. A good monsoon combined with robust growth in rural incomeand rural demand could well be the key to sustain the growth momentum.
Your Company has adequate systems and processes to continuously monitor the economicenvironment at macro and micro level analyze the impact on the industry in general andthe Company in particular such that proactive actions can be taken either to mitigate therisks or to make use of the arising opportunities.
INDUSTRY OVERVIEW - THREAT & OPPORTUNITIES
Government spending on large infrastructure development projects such as HighwaysFreight Corridors Industrial Corridors Inland Water Ways Ports etc. has always beenthe key driver of growth in cement demand and boosting of industry sentiments. In additionto these private spending on housing and real estate is also significant contributor tooverall demand for cement in the country. Though the tough economic reforms such asdemonetization in November 2016 and GST implementation in July 2017 did turn out to bedampener in demand growth but it now appears that the worst is over and the tide isgradually turning back.
Since last six months or so there has been a healthy growth in Cement Demand and weexpect that this momentum shall now continue for a considerable long duration. This tosome extent may provide some respite to the industry which at an aggregate level hasnearly 40% surplus capacity however as witnessed in past industry capacity utilizationlevels reaching in the vicinity of 80% provide a fresh trigger for new capacity additions.Hence surplus capacity of ~20%+ seems to be a new industry norm. A reasonable surpluscapacity is a good sign as it provides industry with a cushion to absorb unexpected surgein demand; especially when last a few years have seen a small percentage cement demandbeing substituted with other alternative construction materials. It is also an opportunityfor the Industry to strive hard and expand the markets to those who till now have been nonusers.
The 'Housing for All' initiative of the government of India and especially the rural isone such opportunity for the industry to reach out to those who would perhaps be the firsttime user of cement. This indeed is a very challenging task; as to reach out to this newemerging segment of the market. The distribution and logistics will have to penetrate deepinside into the pockets where they have never been before. It is satisfying to note thatyour Company is putting its best foot forward to tap these emerging segments of thedemand. We are working to strengthen our distribution network in our core markets and infact in a short span of one year more than 70% of our sales are achieved throughdistribution network which in industry parlance is better known as trade channel.
However rising fuel cost is one of the worry that the industry will have to grapplewith for quite some time in this environment of global uncertainties. At the same time itis also an opportunity for the industry to be more efficient and explore new alternatives.The potential of using municipal solid waste and other industrial waste materials as fuelis a bit under-explored in India and hence is an opportunity. Industry has taken a pledgeto increase the usage of alternative fuels including the plastic waste and the recentlynotified Plastic Waste Management Rules 2016 provide industry an opportunity to work withlocal municipal bodies and turn the waste into wealth.
Your company is continuously striving to maximize the leveraging of emergingopportunities and also minimizing the impact of these threats. As the manufacturingoperations are gradually stabilizing and are expected to improve the operationalefficiencies our efforts of consolidating our presence in the market would certainly leadto better operating performance in the times to come.
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 befittingbenchmark 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 focussed 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 on 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 environment health and safety has always been on the priority agenda ofthe Management. It is gratifying to note that your Company has received the 'GreentechSafety Gold Award-2017' Certificate of appreciation from National Safety Council of Indiafor appreciable achievement in Occupational Safety & Health for three years period:2013-15 First Runner up for CII Northern Region Inter Industry Competition onEnvironment Health and Safety Management and also received the First Prize for Publicity& Propaganda in Mechanized Opencast Mines (Group-A1) during Mine Safety Cleanlinessand Silicosis Awareness Week 2017.
During the Year the Authorized Share Capital of the Company increased from Rs 200Crore to Rs 250 Crore. As approved by the Members at the Annual General Meeting held on 10August 2017 the Company issued 5000000 6% Optionally Convertible Cumulative RedeemablePreference Shares of Rs 100 each (OCCRPS) aggregating upto Rs 50 Crore to JK LakshmiCement Limited the Holding Company (JKLC) on preferential basis on 10 August 2017.
As per the Terms of Issue of OCCRPS JKLC has exercised its right to convert 4500000OCCRPS (part conversion out of 5000000 OCCRPS held) into Equity Shares of the Company.Consequently 16204537 Equity Shares of Rs 4 each fully paid-up of the Company wereallotted to JKLC on 10 May 2018 @ Rs 27.77 per Share pursuant to SEBI (Issue of Capitaland Disclosure Requirements) Regulations 2009 and the paid-up Equity Share Capital of theCompany has increased from Rs 118.08 Crore to Rs 124.56 Crore.
INTERNAL CONTROL SYSTEM
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 efficacy 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 no reportable material weaknesses were observedin the system.
EXTRACT OF ANNUAL RETURN
An extract of the Annual Return as on 31 March 2018 in the prescribed Form MGT-9 isattached as Annexure 'A' to this Report and forms a part of it.
RELATED PARTY TRANSACTIONS
All the Related Party Transactions entered into by the Company with JK Lakshmi CementLtd. (JKLC) the Holding Company and Hansdeep Industries & Trading Company Ltd.(HITCL) the Fellow Subsidiary during the Financial Year 2017-18 were within the limitsof Rs 750 Crore each as authorized by the Members at the Annual General Meeting of theCompany held on 17 September 2016 (AGM) and were in due compliance with the applicableprovisions of the Companies Act 2013 (Act) and the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015. A Statement showing particulars of suchcontracts or arrangements entered into with JKLC & HITCL in the prescribed Form AOC-2pursuant to Section 134(3)(h) of the Act is attached as Annexure 'B' to this Report.
JKLC and HITCL continue to provide all requisite assistance and support includingtechnical financial and operational support to the Company in the normal course ofbusiness. The Board has recommended Resolutions seeking fresh omnibus approval of theMembers by way of renewal for the Financial Year 2018-19 and onwards within the limitsalready approved by the Members at the above AGM in respect of Related Party Transactionsthat may be entered into with JKLC & HITCL on an annual basis as approved by theAudit Committee of Directors from time to time in the ordinary course of business and onarm's length basis. The Related Party Transaction Policy approved by the Board isavailable on the website of the Company.
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 Financial Statements.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Board of Directors of the Company has re-appointed Shri Rohni Kumar Gupta as aWhole-time Director of the Company for a period of six months w.e.f. 1 April 2018subject to requisite approval of the Members at the forthcoming Annual General Meeting(AGM). Pursuant to Section 152 of the Companies Act 2013 (Act) Shri Rohni Kumar Guptaalso retires by rotation at the forthcoming AGM and being eligible offers himself forre-appointment. The Board recommends re-appointment of Shri Rohni Kumar Gupta.
Shri Ganpat Singh Non-executive Director resigned from the Directorship of theCompany w.e.f. 20 June 2018 owing to personal reasons. The Board places on record itsappreciation of the valuable services rendered by him during the course of his tenure withthe Company.
Shri Vinit Marwaha a Director liable to retire by rotation was appointed as anIndependent Director of the Company by the Board w.e.f. 10 May 2018 to hold office for aterm of 5 consecutive years subject to requisite approval of the Members at theforthcoming AGM. The Company has received requisite Notice pursuant to Section 160 of theAct from Member and declaration from Shri Vinit Marwaha regarding his independencepursuant to Section 149 of the Act and Regulation 16 of SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 (Listing Regulations). The Board recommendsappointment of Shri Vinit Marwaha as an Independent Director of the Company not liable toretire by rotation.
Further with a view to strengthen the Board the Board appointed Smt. VinitaSinghania Shri Shrivats Singhania Shri Surendra Malhotra and Shri Naveen Kumar Sharma asAdditional Directors of the Company w.e.f. 30 June 2018. They shall hold such office ofDirectors upto the date of forthcoming AGM of the Company. Requisite Notices pursuant toSection 160 of the Act have been received from Members of the Company proposing theircandidatures as Directors of the Company. The Board recommends appointment of Smt. VinitaSinghania Shri Shrivats Singhania and Shri Naveen Kumar Sharma as Directors liable toretire by rotation. Approval of the Members is also sought for appointment of Shri NaveenKumar Sharma as Whole-time Director of the Company for period of 3 years w.e.f. 1 October2018. The Board also recommends appointment of Shri Surendra Malhotra as an IndependentDirector of the Company for a term of 5 consecutive years w.e.f. 30 June 2018. The Companyhas received requisite declaration from him regarding his independence pursuant to Section149 of the Act and Listing Regulations. As an Independent Director Shri Malhotra shallnot be liable to retire by rotation.
All the Independent Directors of the Company have given requisite declarationsconfirming that they meet the criteria of independence as provided in Act and ListingRegulations.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUTGO
The details as required under Section 134(3)(m) of the Companies Act 2013 read withthe Companies (Accounts) Rules 2014 are annexed to this Report as Annexure 'C' and formspart 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. Chartered Accountants were appointed as StatutoryAuditors of the Company to hold office from the conclusion of the 21 Annual GeneralMeeting (AGM) held on 10 August 2017 until the conclusion of the 23 AGM to be held in theYear 2019 subject to ratification by the Members at subsequent AGM to be held in the year2018 in accordance with the provisions of the Companies Act 2013. However pursuant tothe Companies (Amendment) Act 2017 the requirement of ratification of appointment of theAuditors on yearly basis has been dispensed with. The observations of the Auditors intheir Report on Accounts and the Financial Statements read with the relevant notes areself-explanatory.
(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 Financial Year2017-18. The Report given by him for the said Financial Year in the prescribed format isannexed to this Report as Annexure 'D'. The Secretarial Audit Report does not contain anyqualifications reservations or adverse remarks.
(c) Cost Auditor and Cost Audit Report
M/s HMVN & Associates Cost Accountants conducted the Audit of cost records of theCompany for st the Financial Year ended 31 March 2017 and as required Cost Audit Reportwas duly filed with the Ministry of Corporate Affairs Government of India.
The Audit of the Cost Records of the Company for the Financial Year ended 31 March 2018is being conducted by the said Firm and their 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 said Act theReport and Accounts are being sent to all the Members of the Company and others entitledthereto excluding the said particulars of employees. The said information is availablefor inspection at the Registered Office of the Company during business hours on workingdays of the Company up to the forthcoming 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 Year under review there was no change in the nature of business.
Your Company reaffirms 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' Certificateregarding 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 four Board Meetings held during the Financial Year under review.
(b) Policy on Nomination and Remuneration of Directors Key Managerial Personnel andSenior Management including inter alia criteria for determining qualificationspositive attributes independence of a Director etc.
(c) The manner in which formal annual evaluation has been made by the Board of its ownperformance and that of its Committees and individual Directors.
(d) The details with respect to composition of Audit Committee and establishment ofVigil Mechanism.
(e) Details regarding Risk Management.
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.
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 accounting policies have been selected and applied consistently and judgmentsand estimates made are reasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the Financial Year and of the profit andloss of the Company for that period;
(c) proper and sufficient care has 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 were adequate and operating effectively.
Your Directors wish to place on record their sincere gratitude and appreciation to theGovernment of Rajasthan other Government Authorities Lending Institutions/ Banks fortheir continued support and cooperation. Your Directors also wish to place on record theirsincere thanks to Dealers Suppliers Vendors Customers and esteemed Shareholders of theCompany for the faith and confidence reposed by them in the Company and its Management.
We also express deep sense of gratitude to JK Lakshmi Cement Limited our Holdingcompany and Hansdeep Industries & Trading Company Limited a Fellow subsidiary forall the timely financial technical and operational support extended and for makingturnaround and revival of the Company possible.
Your Directors also wish to acknowledge and sincerely appreciate Employees at all levelof the Organization who have contributed for the growth of the Company and whose unstintedefforts has enabled the Company to move ahead in tough times.
The Directors' Report & Management Discussion and Analysis contains forward-lookingstatements which may be identified by the use of words in that direction or connotingthe same. All statements that address expectations or projections about the futureincluding but not limited to statements about your Company's strategy for growth productdevelopment market positions expenditures and financial results are forward lookingstatements.
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 |
| ||Vinit Marwaha ||R.K. Gupta |
|Place: New Delhi ||Director ||Whole-time Director |
|Date: 30 June 2018 || ||CFO & Company Secretary |