Management Discussion and Analysis
The Indian cement industry will add 80-100 million tonnes capacity by FY25 driven byincreased spending on housing and infrastructure. With the Union Budget 2022-23 providinghigher allocation for infrastructure affordable housing and road projects the cementindustry is poised for a volume surge.
Your Directors present the 22nd Annual Report together with the auditedaccounts of your Company for the year ended 31st March 2022.
OVERVIEW AND THE STATE OF YOUR COMPANY'S AFFAIRS
The International Monetary Fund ("IMF") lowered its global growth forecast by0.8 percentage points to 3.6% as inflation rises and supply chains continue to be indisarray. With ongoing supply chain disruptions and high energy prices continuing in 2022inflation is expected to remain elevated for an extended period of time and is likely tocome down only gradually as supply - demand imbalances wane and the effects of monetarypolicy responses in major economies kick in.
Towards the end of FY22 the war in Ukraine and subsequent sanctions that disruptedglobal commodity markets and supply chains further aggravated the situation. Further morethe frequent and wide-ranging lockdowns in China - including in key manufacturing hubs -have also had a far reaching impact on global supply chains. Other global risks maycrystallise as geopolitical tensions remain high.
India is expected to remain the fastest growing major economy over 2021-24 accordingto the World Bank the IMF and the Asian Development Bank. The country recorded GDP of8.7% for FY22 with the industrial sector staging a sharp rebound from a contraction of 7%in FY21. The services sector expanded by 8.2% owing to the rapid growth in software andIT-enabled services exports while agriculture and allied sectors grew by 3.9% with foodgrain production for the kharif season at a record level of 150.5 million tonnes.
The recent times have put to test the resilience of health systems economiesgovernments across the globe in face of the pandemic. With the pandemic continuing toevolve the need for an effective global health strategy has never been so pronounced.Worldwide access to vaccines tests and treatments is essential to reduce the risk fromother COVID-19 variants.
Since the onset of the COVID-19 pandemic in March 2020 monetary policies have beengeared towards mitigating the adverse impact of the unprecedented demand and supply-sideshocks inflicted on the economy. This in turn led to an overall stable economicenvironment. Several high frequency indicators such as electricity consumption PMImanufacturing exports and e-way bill creation GST collections reflect this. This bodeswell for the Indian economy in 2022-23 barring any geopolitical and economic surprises.
Cement Industry FY22
The first half of FY22 witnessed a sharp recovery in demand supported by the low baseof the pandemic-hit H1FY21. However H2FY22 was impacted as the demand for cement declineddue to unexpected rains in different parts of the country ban on construction activitiesin the National Capital Region ("NCR") and shortages of labour and sand in theeastern region.
Although the macroeconomic factors around India's cement industry remain positive andwill be driven by a revival in demand the sector is facing headwinds from a surge incosts. The key cost constituents - coal pet coke and diesel have seen a significantescalation in prices.
The increase in diesel prices resulted in an increase in transport and logistics costsputting further pressure on businesses. These commodity prices are not under the controlof any constituent and there is little that the efficiency improvement programs can do tocushion the impact of rising costs.
As per a recent report by a credit rating agency the Indian cement industry will add80-100 million tonnes capacity by FY25 driven by increased spending on housing andinfrastructure. With the Union Budget 2022-23 providing higher allocation forinfrastructure affordable housing and road projects the cement industry is poised for avolume surge. Further the Union Government's thrust on developing and improving publicinfrastructure (roads highways metros and railways airports ports logistics) throughprojects like PM GatiShakti National Infrastructure Pipeline ("NIP") UrbanRejuvenation Mission: AMRUT and Smart Cities Mission is likely to boost cement demand.Demand for affordable houses with ticket size <' 4050 lakhs is expected to rise inTier 2 and 3 cities. The affordable rental housing scheme which is a sub-scheme under thePradhan Mantri Awas Yojana ("PMAY") is also likely to drive demand for cementin low-cost housing.
Given its PAN India presence your Company has the advantage to cater to demand acrossthe country. This coupled with its focus on controlling costs conserving cash advancingemployee well-being and sustainability makes your Company well placed to tide over theuncertainties arising out of the pandemic and deliver a robust performance.
Production and capacity utilisation (grey cement)
|Particulars ||FY22 ||FY21 ||% change |
|Installed capacity in India (MTPA) ||114.55 ||111.35 ||2.87 |
|Production (MMT) ||86.98 ||79.70 ||9.13 |
|Capacity Utilisation ||77% ||71% ||6 |
MTPA - Million Metric Tonnes Per Annum;
MMT- Million Metric Tonnes
Cement production in FY22 was higher by 9% at 86.98 million tonnes as compared to FY21while capacity utilisation was at 77% as against 71%.
| || |
(Figures in MMT)
|Particulars ||FY22 ||FY21 ||% change |
|Grey Cement - India ||87.25 ||80.18 ||8.8 |
|Grey Cement - Overseas ||4.93 ||4.90 ||4.8 |
|White Cement ||1.46 ||1.32 ||11.2 |
|Others ||0.35 ||- ||- |
|Total Sales Volume ||93.99 ||86.42 ||8.8 |
Domestic sales volume registered a growth of 9% in FY22.
Cement consumption started improving on the back of consistent rural demand and pick-upin infrastructure activities.
| || || || ||(Rs. in crores) |
| || |
| ||FY22 ||FY21 ||FY22 ||FY21 |
|Net Turnover ||49729 ||42677 ||51708 ||44239 |
|Domestic ||49479 ||42363 ||49528 ||42264 |
|Exports ||250 ||314 ||2180 ||1975 |
|Other income ||1546 ||1300 ||1399 ||1221 |
|Total Expenditure ||39727 ||32224 ||41084 ||33158 |
|Profit before Interest Depreciation and Tax (PBIDT) ||11548 ||11754 ||12022 ||12302 |
|Depreciation ||2457 ||2434 ||2715 ||2700 |
|Profit before Interest and Tax (PBIT) ||9091 ||9319 ||9307 ||9602 |
|Interest ||798 ||1259 ||945 ||1486 |
|Profit before Impairment and Tax Expenses/share in profit of Associates ||8293 ||8060 ||8363 ||8116 |
|Rates and Taxes ||- ||(164) ||- ||(164) |
|Impairment on Advances Given ||- ||- ||- ||(97) |
|Share in Profit/(Loss) of Associates and Joint Venture (net of tax) ||- ||- ||2 ||2 |
|Profit before Tax Expenses ||8293 ||7896 ||8364 ||7858 |
|NormaNsed Tax Expenses ||2744 ||2554 ||2708 ||2539 |
|Reversal of Tax Provision of Earlier Years ||(1518) ||- ||(1518) ||- |
|Profit after Tax ||7067 ||5342 ||7174 ||5319 |
|Profit Attributable to Non-controlling interest ||- ||- ||(10) ||(1) |
|Profit Attributable to Owner of the Parent ||- ||- ||7184 ||5320 |
Note: In this Report the figures for the previous year have been regrouped/rearrangedwherever necessary to confirm to the current period's classification to comply with therequirements of the amended Schedule Ill to the Companies Act 2013.
Your Company's Net Turnover at Rs.49729 crores was 17% higher than the previous year.
Other income rose marginaiiy mainly on account of greater government grants ascompared to the previous year.
Operating Profit (PBIDT) and Margin
PBIDT at Rs.11548 crores was 1.7% lower than the previous year. Lower operating marginwas attributable to higher input costs partly offset by volume growth and better salesrealisations.
(i) Energy Cost
Overall energy cost increased by 31% from Rs.950/t to Rs.1240/t mainly due to higherfuel prices.
(ii) Input Material Cost
Raw material cost rose from Rs.504/t to Rs.531/t as a result of increase in additiveand fly ash prices. increase in diesel prices impacted inbound transportation resultingin higher raw material cost. Your Company is continuously working on improving the shareof blended and premium products in its product mix which is expected to result in animprovement in overall profitability.
(iii) Freight and Forwarding Expenses
Logistics cost increased marginaNy from Rs.1158/t to Rs.1214/t due to increase indiesel cost. Reduction in lead distance mainly on account of a change in the market mixand synergies arising out of the integration of acquired assets aided in lowering theimpact of rising diesel costs.
Employee cost increased to Rs.2359 crores as compared to Rs.2182 crores in theprevious year primarNy due to the annual increments.
At Rs.2457 crores depreciation was higher by Rs.23 crores on account of fewer assetsbeing capitalised during the year.
Repayment of borrowings led a decrease in finance cost from Rs.1259 crores to Rs.798crores.
Your Company has adequate liquidity and a strong balance sheet. CRiSiL and IndiaRatings and Research reaffirmed their credit rating as CRiSiL AAA/Stable and iNDAAA/Stable for Long Term and CRiSiL A1+ and iND A1+ for Short Term respectively. This isa testament of your Company's sound financial management as well as its ability to servicefinancial obligations in a timely manner.
Your Company has also obtained its credit rating for its foreign currency bondissuances from Fitch and Moody's and has been rated by them as BBB- and Baa3respectively.
Normalised income tax expenses increased in line with increase in taxable income.
Normalised Profit after Tax increased by 3.9% from Rs.5342 crores to Rs.5549 crores.
Significant changes in key financial ratios along with detailed explanations:
|Particulars ||FY22I ||FY21 ||% Change |
|Debtors Turnover (Days) ||18 ||18 ||- |
|Inventory Turnover (Days) ||33 ||32 ||(1) |
|Interest Coverage Ratio ||12.72 ||7.20 ||77 |
|Current Ratio ||1.30 ||1.77 ||27 |
|Debt Equity Ratio (Gross) ||0.20 ||0.40 ||50 |
|Debt Equity Ratio (Net) ||0.07 ||0.08 ||12 |
|Operating Profit Margin (%) ||22 ||26 ||(14) |
|Net Profit Margin (%) ||11.2 ||12.5 ||(11) |
|Return on Net Worth (%) ||11.3 ||12.3 ||(9) |
|Return on Capital Employed (ROCE) (%) ||14.4 ||14.4 ||- |
|Earnings per Share (EPS) ||192 ||185 ||4 |
Detailed explanation of ratios
(i) Debtors Turnover (Days) is used to quantify a company's effectiveness incollecting its receivables or money owed by customers. The ratio shows how well a companyuses and manages the credit it extends to customers. The ratio is calculated by dividingaverage trade receivables by average per day turnover.
(ii) Inventory Turnover (Days) represents the average number of days a companyholds its inventory before selling it. it is calculated by dividing average inventory byaverage per day turnover.
(iii) Interest Coverage Ratio measures how many times a company can cover itscurrent interest payment with its available earnings. it is calculated by dividing PBIT byfinance cost. Your Company's interest Coverage Ratio improved by 77% over the previousyear mainly on account of lower interest outgo as loans were repaid during the years.
(iv) Current Ratio is a liquidity ratio that measures a company's ability to payshort-term obligations or those due within one year. it is calculated by dividing thecurrent assets by current NabNities (excluding current borrowings).
CRISIL and India Ratings and Research reaffirmed their credit rating as CRISILAAA/Stable and IND AAA/Stable for Long Term and CRISIL A1+ and IND A1+ for Short Termrespectively.
(v) Debt Equity Ratio is used to evaluate a company's financial leverage. It isa measure of the degree to which a company is financing its operations through debt versuswholly-owned funds. It is calculated by dividing a company's total liabilities by itsshareholder's equity. Your Company's Debt Equity Ratio (Net) has improved by 50% mainly onaccount of reduction in Net Debt during the year.
(vi) Operating Profit Margin (%) is a profitability or performance ratio used tocalculate the percentage of profit a company generates from its operations. It iscalculated by dividing the PBIDT (excluding Other Income) by turnover. Your Company'sOperating Profit Margin decreased by 3.7% mainly on account of higher costs and partlyset-off by higher volume and higher realisations during the year.
(vii) Net Profit Margin (%) is equal to how much net income or profit isgenerated as a percentage of revenue. It is calculated by dividing the profit for the yearby turnover. Your Company's Net Profit Margin decreased by 1.4% mainly on account ofhigher costs and partly set-off by higher volume lower interest outgo and higherrealisations during the year.
(viii) Return on Net Worth ("RONW") is a measure of profitability of acompany expressed in percentage.
It is calculated by dividing Net Profit from continuing operations for the year byaverage Net Worth during the year.
(ix) Return on Capital Employed ("ROCE") is a financial ratio thatmeasures a company's profitability and the efficiency with which its capital is used. Inother words the ratio measures how well a company is generating profits from its capital.It is calculated by dividing profit before interest exceptional items and tax by averagecapital employed during the year.
(x) Earnings Per Share ("EPS") is the portion of a company's profitallocated to each share. It serves as an indicator of a company's profitability. It iscalculated by dividing profit for the year by weighted average number of sharesoutstanding during the year. For your Company the EPS improved on account of increase inNet Profit by 3.9% over that of the previous year.
Cash Flow Statement
| || ||(Rs. in crores) |
| ||FY221 ||FY21 |
|SOURCES OF CASH || || |
|Cash from Operations ||9237 ||9569 |
|Non-operating Cash Flow ||286 ||172 |
|Proceeds from Issue of Share Capital ||4 ||7 |
|(Increase)/Decrease in Working Capital ||(567) ||1979 |
|Total ||8960 ||11728 |
|USES OF CASH || || |
|Net Capital Expenditure ||5422 ||1724 |
|(Redemption)/Increase in Investments ||(5925) ||7433 |
|Repayment of Borrowings (net) ||7360 ||891 |
|Repayment of Lease Liability including ||160 ||121 |
|Interest thereof || || |
|(Issue)/Sale of Treasury Shares (net) ||83 ||(7) |
|Interest ||838 ||1213 |
|Dividend ||1065 ||375 |
|Total ||9002 ||11749 |
|Increase/(Decrease) in Cash & Cash Equivalents ||(42) ||(21) |
Sources of Cash
Cash from Operations
Cash from operations was lower compared to the previous year due to rise in costswhich was partly set-off by higher volume and sales realisation.
Non-Operating Cash Flow
Cash from other activities was higher due to increased interest income on bank depositsand intercorporate deposits.
Increase in Working Capital
Increase in working capital is attributed to increase in inventories and tradereceivables on account of inflationary impact on fuel inventory and higher salesrespectively.
Uses of Cash
Net Capital Expenditure
Your Company spent Rs.5422 crores on various capex during the year primarily towardsgrowth and maintenance capex as well as Waste Heat Recovery Systems.
Decrease in Investments
Your Company's liquid investment was used for the repayment of borrowings.
Repayment of Borrowing
In line with its endeavour to maintain optimal capital structure your Company repaidhigh-cost long-term debt amounting to Rs.7531 crores.
The loan repayments have been done out of free cash flows that your Company hasgenerated during the year. The aforesaid steps have resulted in improved Net Debt/Equityratio and Net Debt/EBITDA ratio.
Transfer to General Reserves
Your Company proposes to transfer an amount of Rs.5000 crores to the General Reserves.
Your Directors recommended a dividend of Rs.38 per equity share (as compared to Rs.37per equity share in the previous year) of Rs.10 each for the year ended 31stMarch 2022. The recommended dividend is in line with your Company's dividend policywhich is given in Annexure I of this Report and is also available on your Company'swebsite.
In terms of the provisions of the Finance Act 2020 dividend shall be taxed in thehands of shareholders at applicable rates of tax and your Company shall withhold tax atsource appropriately.
Unclaimed dividend for the year ended 31st March 2014 aggregating toRs.1.40 crores has been transferred to the Investor Education and Protection Fund("IEPF"). Your Company has also credited to the IEPF set up by the Government ofIndia equity shares in respect of which dividend had remained unpaid/unclaimed for aperiod of seven consecutive years within the timelines laid down by the Ministry ofCorporate Affairs Government of India. Unpaid/unclaimed dividend for seven years or morehas also been transferred to the IEPF pursuant to the requirements under the CompaniesAct 2013 (the "Act").
DIRECTORS' RESPONSIBILITY STATEMENT
The audited accounts for the year under review are in conformity with the requirementsof the Act and the Indian Accounting Standards. The financial statements reflect fairlythe form and substance of transactions carried out during the year under review andreasonably present your Company's financial condition and results of operations.
Your Directors confirm that:
In the preparation of the Annual Accounts applicable accounting standards havebeen followed along with proper explanations relating to material departures if any.
The accounting policies selected have been applied consistently and judgmentsand estimates are made that are reasonable and prudent to give a true and fair view of thestate of affairs of your Company as on 31st March 2022 and of the profit ofyour 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 Act for safeguarding the assets of yourCompany and for preventing and detecting frauds and other irregularities.
The Annual Accounts of your Company have been prepared on a going concern basis.
Your Company had laid down internal financial controls and that such internalfinancial controls are adequate and were operating effectively.
Your Company has devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
CAPITAL EXPENDITURE PLAN
Your Company's current expansion programme is on track and estimated to reachcompletion by the end of FY23.
During the year your Company commissioned cement capacity of 3.2 MTPA at the followinglocations which is the first phase of the 19.5 MTPA capacity expansion announced inDecember 2020:
Patliputra Cement Works Bihar - Additional cement capacity of 0.6 MTPAcommissioned taking the Unit's capacity to 2.5 MTPA.
Dankuni Cement Works West Bengal - Additional cement capacity of 0.6 MTPAcommissioned taking the Unit's capacity to 2.2 MTPA.
Line II of the Bara Grinding Unit Uttar Pradesh it's cement capacitystands at 4 MTPA. Line I was earlier commissioned in January 2020.
This additional capacity will help your Company service the increasing demand forcement in the Eastern and Central regions of India.
Your Company commenced operations from its 7th bulk terminal at KalamboliNavi Mumbai. The other 6 are located at Cochin in Kerala; Mangalore and Doddaballapur inKarnataka; Uran and Pune in Maharashtra and Shankarpalli in Telangana. With a capacity tohandle ~1.2 MTPA cement and considering the large infrastructure development projects inand around Mumbai the bulk terminal will strengthen your Company to further increase itssales and distribution of cement in bulk. This will effectively help in reducing freightcost with increase in the usage of rail transportation. For your Company this is onemore step towards reducing carbon emissions and driving sustainable growth.
The Board further approved capex of Rs.12886 crores towards increasing capacity by22.6 MTPA with a mix of brownfield and greenfield expansion. This would be achieved bysetting-up integrated and grinding units as well as bulk terminals. The additionalcapacity will be created across the country. Commercial production from these newcapacities is expected to go on stream in a phased manner by FY25.
With these expansions your Company's total grey cement manufacturing capacity willstand augmented to 159.25 MTPA globally.
Your Directors reaffirm their commitment to good corporate governance practices. Duringthe year under review your Company was compliant with the provisions relating tocorporate governance. The compliance report is provided in the Corporate Governancesection of this Integrated Annual Report. The Auditor's Certificate on compliance with theconditions of corporate governance forming part of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") is provided in Annexure II of this Report.
EMPLOYEE STOCK OPTION SCHEMES
The Nomination Remuneration and Compensation Committee ("the NRC Committee")allotted 17449 equity shares of Rs.10 each of your Company upon exercise of stock optionsand Restricted Stock Units ("RSUs") by the grantees.
During the year the NRC Committee:
Granted 63684 stock options at an exercise price of Rs.7424.70 per stockoption exercisable into the same number of equity shares of Rs.10 each and 18869 RSUsat an exercise price of Rs.10 each on 22nd July 2021.
Granted 33525 stock options at an exercise price of Rs.7269.10 per stockoption exercisable into the same number of equity shares of Rs.10 each and 8538 RSUs atan exercise price of Rs.10 each on 27th October 2021.
Vested 38855 stock options and 37537 RSUs to eligible employees subject tothe provisions of ESOS - 2018 statutory provisions as may be applicable from time to timeand the rules and procedures set out by your Company in this regard.
Your Company transferred 35988 equity shares during the year upon receipt ofapplications from some option grantees for the transfer of equity shares of your Companyin their account from the Trust account which also include 1043 equity shares pendingfor transfer for the year ended 31st March 2022.
Your Company's current expansion programme is on track and estimated to reachcompletion by the end of FY23.
In terms of the provisions of the Securities and Exchange Board of India (Share BasedEmployee Benefits and Sweat Equity) Regulations 2021 ("SEBI SBEB & SERegulations") the details of the stock options and RSUs granted under theaforementioned schemes are available on your Company's websitehttps://www.ultratechcement.com/ investors/financials.
A certificate from the Secretarial Auditors on the implementation of your Company'sEmployee Stock Option Schemes will be available at the ensuing Annual General Meeting("AGM") for inspection by the Members.
The Board of your Company based on the recommendation of the NRC Committee approvedformulation of a new Scheme viz. UltraTech Cement Limited Employee Stock Option andRestricted Stock Unit Scheme 2022' ("ESOS-2022") in terms of the SEBI SBEB &SE Regulations. ESOS-2022 will be adminstered by the NRC Committee through a Trust viz.the UltraTech Employees Welfare Trust'.
Resolutions seeking your approval for approving ESOS-2022 and related matters form partof the Notice of the AGM.
During the year your Company allotted 17449 equity shares of Rs.10 each to optiongrantees upon exercise of stock options and RSUs in terms of ESOS-2013. As a result thepaid-up equity share capital of your Company stood at Rs.2886708470 comprising of288670847 equity shares of Rs.10 each.
Transfer of unclaimed dividend and shares: The details relating to unclaimed dividendand shares are given in the Corporate Governance section that forms part of thisIntegrated Annual Report.
Your Company's constant endeavour to optimise operational procedures and build greaterefficiencies continue to win recognition and prestigious awards. Here is a glimpse of someawards received during the year.
International Safety Awards 2022 by British Safety Council - Balaji CementWorks;
Indian Chamber of Commerce Social Impact Award 2022 - Birla White;
National Award for Excellence in Energy Management 2021 Excellent EnergyEfficient Unit - Power Sector - Kotputli Cement Works;
National Awards for Excellence in Corporate Social Responsibility - SiddhiCement Works;
15 of your Company's limestone mines have been awarded a five-star rating forsustainable mine management by the Ministry of Mines and Indian Bureau of Mines. This wasawarded for last three years (2017-18 2018-19 and 2019-20). With a total of 30 such5-star rating awards this is the highest number awarded to any company in India for allmajor minerals such as bauxite copper iron ore manganese lead & zinc andlimestone. The ratings are based on the adoption of best practices for exhaustive anduniversal implementation of Sustainable Development Framework in mining.
Leaders Award - Mega Large Business Process Sector - This is the highest awardin that category by Frost & Sullivan and the Energy and Resources Institute("TERI") for the year 2021.
The award is in recognition of your Company's efforts to build a sustainable business.This award recognises the Sustainability Excellence on People Purpose Partnership andPlanet pillars along with Sustainability Analytics and the Renewable Energy Consumptioninitiatives of organisations in India.
One Gold and two Silver trophies for the Chance Na Lo' campaign atExchange4Media's Prime Time Awards. The Gold trophy was conferred under the Best useof influencers' category. The two Silver trophies were conferred in Best IntegratedTV Campaign' and Best use of TV' to create brand awareness categories.
RESEARCH AND DEVELOPMENT
Your Company's Research and Development (R&D) efforts focus on creating advanceapplication value for customers by continuously exploring and incorporating innovativefeatures and functionalities in newer cement and concrete variants. Enhancing customersatisfaction while increasing sustainability is the guiding principle for your Company'sR&D activities.
Devising solutions around themes of reducing water consumption for cement improveddurability of concrete enhanced environmental performance in terms of reduced green-houseemissions and natural resource intensiveness increasing use of alternative raw materialsin cement making have resulted in significant progress in development of new types ofcement.
Your Company's R&D centre is engaged in closely monitoring and incorporating latestdevelopments digital interventions and advance techniques in the field ofcement-concrete technology in your Company's product offerings. With this objective yourCompany's R&D is committed to provide comprehensive technological support to yourCompany's policy of promoting sustainable construction and development.
Customers Quality and Cost are the governing attributes of all R&D projects forachieving process optimisation and debottlenecking raw material conservation and use ofalternative fuels and raw material. Towards this objective your Company is activelydeveloping alternatives for minimising usage of mineral gypsum and development of costeconomic grinding additives and new generation chemicals while maintaining targetedproduct attributes and functionality.
Your Company's R&D efforts in the ready mix concrete and building products divisionhave resulted in development of new products viz.
(i) Ultrahigh performance concrete ("UHPC"): For ductile thin precastconcrete panels and repair overlays;
(ii) Concrete for 3D Printing: For emerging use of 3D printers in buildingconstruction;
(iii) Antiwashout concrete: For enabling high quality construction during rainy seasonand in waterlogged situations;
(iv) Corrosion resistant concrete: For longer life of structure by resistingreinforcement corrosion;
(v) High strength Grout: For precision filling of Sonic Pipe;
(vi) Low and high Gun Grade Grout: For easier filling of tie rod holes;
(vii) Machine applied Spray Ready-mix Plaster: For faster completion of plastering workthat enables cost and time saving.
As a member of the Global Cement and Concrete Association ("GCCA") yourCompany is also part of the Global Cement and Concrete Research Network formed by theGCCA to accelerate global collaboration on cement and concrete innovation an importantstep in taking climate action. The efforts are directed at adopting key trends driving thelow-carbon emission initiatives for the Indian cement sector by actively participating inthe mission with other partners to keep abreast on innovation trends latest scientificdevelopments in carbon footprint reduction and identifying potential routes for adoptingnewer ideas in its sustainability objective with following key areas of interest:
carbon capture and usage technologies
alternative calcination technologies in cement manufacturing process
carbon use in the construction supply chain
improved recycling of concrete utilisation
developing alternative SCMs
Your Company is also closely engaged with the Aditya Birla Science and TechnologyCompany Private Limited the corporate research and development centre for the AdityaBirla Group for developing technological solutions to model cement process equipmentdevising predictive cement quality modelling CFD Modelling enhancing equipmentproductivity using engineering simulations and devising special concrete products.
Your Company is steering from the traditional sustainability models to an innovativeapproach that is consistent with its vision to build a sustainable business. It is alsoaligned to global goals such as the Paris agreement and UN's Sustainable DevelopmentGoals ("SDGs"). Your Company is committed to contributing to the protection ofthe environmental and upliftment of society while also balancing various stakeholderexpectations and maintaining its lead ahead of the curve.
Responsible Stewardship: This key pillar facilitates the transition from currentlegal standards to international standards like International Finance Corporation("IFC") the Organisation for Economic Cooperation and Development("OECD") the International Standards Organisation ("ISO")Occupational Health and Safety Advisory Services ("OHSAS") the Global ReportingInitiative ("GRI") the Forestry Stewardship Council and others. The AdityaBirla Group's Sustainable Business Framework of Policies Technical Standards andGuidance Notes help us reach higher standards of performance.
The Group Sustainable Business Framework is currently certified to 14 internationalstandards. The framework has given success with respect to reduction in carbon footprintenergy use water use and implementing nature- based solution projects.
Your Company's commitment to the pledge of World Business Council for SustainableDevelopment's Water and Sanitation and Hygiene' ("WASH") to provide safedrinking water sanitation and hygiene across all its operations has resulted in theconstruction of over 600 new bathrooms many of these for women and the differently abled.This is a significant initiative towards the wellbeing of people and communities.
Through stakeholder engagement your Company gains further insights into the potentialopportunities and business risks. These are leveraged for enhancing business modelsstrategies and risk profiles in order to future-proof them and the value chains in themedium to long term which is beneficial to the stakeholders.
Disclosures and ESG: Your Company has adopted the recommendation of Task Force forClimate related Financial Disclosure ("TCFD") and has integrated its findingsinto risk management business planning and strategy. This year your Company continuedconsideration of carbon US$ 10 per tCO2 which has enabled it to consider theimpact on environment of project/capex in its evaluation and decision making.
Your Company's performance in S&P's Dow Jones Sustainability Index("DJSI") improved by 11 points to 79 as per DJSI results released this year.This is a 16% increase from the previous year and your Company now is ranked 7thglobally in the Construction Material category. This disclosure has helped your Company tobenchmark itself against world best companies in sustainability performance and will beusing this to identify opportunities to excel in sustainability performance.
Green Initiatives: Your Company has been consistently adopting new technologiesthat are cleaner and greener. There is constant effort across all plants and processes tobecome more energy efficient given your Company's goal to become better stewards ofnatural resources.
Climate Change: Your Company has committed to deliver Net Zero Concrete by 2050 orearlier and will work together with value chain partners to accelerate decarbonisation.Further your Company has joined the Science-Based Targets Initiative and got its targetssuccessfully validated.
Under the SBTi target your Company aims to achieve 27% reduction in its Scope 1 carbonintensity by 31st March 2032 against the carbon emission from March 2017. YourCompany has achieved 9.1% of Scope 1 carbon intensity reduction till FY22 from the baseyear of 2017. In energy efficiency your Company has overachieved the target set by theGovernment of India for the first Perform Achieve and Trade ("PAT") cycle.
Green Energy: As part of RE100 commitment led by the Climate Group in partnershipwith CDP your Company aims to meet 100% of its electricity requirement through renewablesources by 2050. Your Company also continues to increase the use of renewable energy aspart of its energy mix and has increased the consumption of RE by more than 30% ascompared to previous year.
Circularity: With its thrust on the use of alternative fuels your Company has beenrelentlessly striving to reduce consumption of fossil fuels by substituting these withwastes from other industries. These efforts have resulted in around 4.6% of your Company'sfuel requirements being met using alternative fuels. Your Company continues to scale itscontribution to the circular economy by utilising 23.6 million tonnes of Alternative RawMaterial ("ARM") as part of its operations. Your Company has reinforced itscommitments and has taken further strides towards being a more sustainable business.
Water Positive: Your Company aims to be 5x water positive by 2024 which means thatit will replenish five times the amount of water it consumes. The volume of waterreplenished is ~168% over five-years (from 27.4 million m3 in FY17 to 73.6million m3 in FY22) as compared to the total volume of water consumed.
Sustainable Products: As part of its continuing initiatives in sustainable growthyour Company has completed Life Cycle Assessment ("LCA") studies for fourproducts. Your Company is amongst few companies to conduct the LCA study and has used thisas input to identify hotspots over the value chain to reduce environmental impact. YourCompany has 73 products with GreenPro Certification. This is one of the largest greenproduct portfolios in the building material industry in India. Your Company has alsoconducted Environment Product Declaration ("EPD") studies as part of its productstewardship pillar and published its EPD documents for the four major categories ofcement.
Other Initiatives: Your Company has embarked on digital transformation during theyear that has the potential to decouple emissions and resource use from economic growth aswell as making its operations safer and more reliable. Your Company launched itsSustainability
Culture building program-Project Jagruti and under the program on sustainabilityawareness sessions an extensive e-module was launched reaching more than 5000employees.
Your Company's digital solutions keep customers at the core of innovation to achieve aconnected and smart ecosystem. With deep understanding of customers the teams learn fastpivot rapidly leveraging the best possible technologies to design state-of-the-artdigital solutions. These solutions provide enhanced customer experience by empoweringinternal stakeholders and partners improving efficiencies and driving collaborationsamongst teams.
Your Company further enhanced existing solutions and launched new digital solutions forcustomers partners and employees.
Customer First: We put customers at the centre of our conversations andcontinuously innovate to meet their current and evolving needs. Last year your Companylaunched UltraTech Trade Connect an app that provides unparalleled convenience to itschannel partners. The app has been well received with a high-level adoption and has becomean integral part of daily business operations.
During the year UltraTech Trade Connect was extended to its Construction Chemicals andReady-Mix Concrete division making it a single interface for channel partners. Byintroducing the app your Company replaced several paper-based processes helping savetime and improving the speed of operations for customers partners and internal teams in asustainable manner
Our Institutional Customers are engines of India's infrastructure growth. Keeping themin mind your Company launched an industry-first digital solution - UltraTech CustomerConnect. This solution helps customers plan their site operations better throughvisibility of supplies and test certificates. The sites can provide electronic proof ofdelivery (ePOD) and access to finance documents enabling a seamless payment process.
Empowering Partners: Our driver and transport partners are a crucial link forsuperior delivery experience to customers. The digital solution empower transporters forbidding bill submission and faster payments.
To bring driver partners on to the digital ecosystem your Company launched afuture-ready mobile application Eye-to-track. This multilingual app is convenient fordrivers and connects them with customers and transporters. The delivery ratings receivedfrom our customers are visible to the drivers and transporters which helps them tofurther improve delivery experience.
Empowering Internal Stakeholders: Our integrated information hub Logistics ControlTower ("LCT") which provides a single version of the truth and end-to-endvisibility to logistics is also extended on mobile phones ("LCT Lite") to ourfront-end sales teams for driving collaboration to improve logistics efficiencies.
Smart Manufacturing: Your Company has accelerated adoption of digital and industry4.0 technologies in its operations encouraged by incremental value delivered throughvarious initiatives. Your Company is investing in setting up of cloud infrastructure as akey foundation for smart and connected factories.
Energy Optimisation and Enhanced Productivity:
During the year your Company focused on scaling up and adopting algorithmic advisorysolutions to improve process stability and efficiency across all energy metrics mainlyfocusing on increasing alternative fuel consumption and improving WHRS power generationamong others. These initiatives were helped and complemented by investments in expertcontrol systems over the last few years.
Other initiatives around digital mining management and optimisation are also underwayto realise gains through better operational efficiencies.
Reliable Operations and Process stability: Reliability teams are being empowered bycomplementing existing preventive procedures with predictive and early alerts generatedusing AI platforms.
Your Company has instituted mechanisms to monitor and sustain process stability usingcombination of software and AI solutions. Through combination of domain knowledge anddigital tools it continues to improve long term process reliability.
Safer Operations: Each employee in your Company is a safety officer. Use of digitaltools allow improving effectiveness and collaboration of efforts on safety. Computervision AR VR and other sensors are being adopted or scaled to support safety objectivesat the Units.
Empowering Teams: Use of digital solutions for dynamic planning and sourcing ofpackaging materials is improving central synergies and efficiency. In addition yourCompany is working on end-to-end fuel sourcing planning and control platform. Theprocurement team has adopted procure to pay' digital platform and is exploring spendanalytics solutions to drive efficiency over and above current capabilities.
Your Company's Shared Services Centre viz. UltraTech Knowledge Service Centre("UKSC") has a strength of 675 people processing payments performingaccounting transactions ensuring controls and managing tax compliance for all of yourCompany's operations. UKSC is a digitally-enabled "Centre of Excellence" whichwill also serve as a platform to create future finance leaders and a best-in-classknowledge hub.
UKSC currently processes ~1.7 million vendor invoices annually and maintains 1.25million customer/vendor master records. This model helps your Company seamlessly absorbaccounting work for any new cement capacity expansion.
Collaborating with the information technology and other related functions andleveraging state of the art technology applications UKSC is currently executing variousdigital initiatives for people process and compliance which will not only make it moreefficient but also create business value by creating an Analytics CoE for the future. Thisdigital journey is expected to further accelerate in the coming months yieldingsignificant benefits for your Company and its stakeholders.
In FY22 your Company continued to witness pandemic- led challenges which includedmobility restrictions and consequent attendance at work. Units had controlled entryregulated movement and assembly to minimise contact and ensure employee safety withoutadversely impacting operations. Offices allowed minimal entry with most of the employeesoperating from home.
Your Company continued to focus on employee core connect engagement learning anddevelopment to build a workplace that is safe engaging and productive. It undertookdigitalisation of the entire talent management processes for regular communication. Allemployees were presented with various learning opportunities to enhance career growth.Learning and Development teams ensured learning of employees and leveraged virtual mediumto organise learning sessions for the employees. Wellness sessions dealing with topicsrelated to safety and health helped create awareness among employees and their familiesabout key areas related to their well-being. Throughout the year employees remainedconnected through planned events such as seminars learning programs and self-learningmodules.
Your Company's employee strength stood at 21921 as on 31st March 2022(compared to 21909 in 2021).
To ensure that the organisational objective of "zero harm" gains momentumyour Company undertook the following initiatives under six major elements: Assurance;Contractor safety; Safety inspection; Capability building; Digital intervention andProject safety. This resulted in more than 90% of the manufacturing sites remaining LostTime Injury ("LTI") free during the year.
Safety Assurance by using gadget - Virtual third- party safety assessment:
Assurance is one of the key elements of safety management system that helps inidentifying discrepancies within the system and addressing them. While on-site safetyaudits were not possible on account of the pandemic independent virtual safetyassessments were conducted by third-party expert agencies across the manufacturinglocations to assess the degree of implementation vis-a-vis requirements of the varioussafety standards. Prior to assessment a calibration workshop was organised for theauditors to ensure uniformity and consistency in their approach and to express theexpectation out of the exercise. Post assessment reports were shared with the Units toenable them take corrective measures. Unit-wise compliance of audit findings was reviewedby the OHS Board.
Contractor Connect Initiative (i^ ^^^t #):
To correct "at risk" behaviour of a huge size of continuously changingcontract workforce the Unit Head and Functional Head (Technical) of one of the integratedUnits established fortnightly virtual connect with contract workmen from other Units asper rosters prepared and shared in advance. The agenda was to discover any gaps in safetyprocesses through regular conversations with contract workers. Weekly observations werecirculated across Units through mailers to encourage safe behaviour at work.
Walk Through Inspection ("WTI"):
To make your Company's workplaces free from unsafe conditions WTI has beeninstitutionalised through development of standard inspection checklists for 41 sections(including RMC) and integrating those with the organisational safety management systemportal for ease of reporting and analysis.
Pratibimb ("Leaders Connect with employees") to review Walk ThroughInspection:
To review and improve effectiveness of Walk-Through Inspections each Cluster Headvirtually connected with any four employees on a weekly basis. Through this 16 employeesof 4 Units learned about the focus areas and methods for improvement towards workplacesafety.
Safety Standard Champions Training:
To build a pool of competent in-house resource employees across Units were trained on18 safety standards through virtual "Standard Champions training" programme.This enabled them to further impart training to employees and ensure compliance. 515employees qualified as standard champions through this program.
a. Addressing high-risk operations through augmented process knowledge:
To enhance technical knowledge of employees associated with specific high-riskoperations e-learning modules have been developed and uploaded in the learning managementplatform.
Employees were mandatorily required to complete the e-learning course which helped themto become fully aware of the processes to prevent any incident.
b. Data analytics:
By integrating mySetu (your Company's safety portal) with Tableau your Company'sonline reporting platform in-depth analysis of various leading indicators was carried outand focused action was taken for improvement of identified areas. This resulted inreducing high-risk unsafe conditions related to machine guarding and acts related toprocedure violation across Units.
c. "Speech to text" for Walk Through Inspection:
To facilitate line team members in making walk through inspection reports speech totext feature was added in the process thereby bringing more ease and comfort. Thisresulted in substantial reduction of time required for doing the exercise. While themanual method took around one hour with this intervention WTI takes only 25 minutes.
d. Virtual inspection using gadget ("Realwear"):
Cluster Heads conducted virtual safety inspection of respective Units by using gadgets(Realwear) identified discrepancies and monitored compliance. This led to reduction inhigh-risk unsafe conditions relating to housekeeping electrical safety work at height.
To give greater thrust to safe execution of multiple projects going on simultaneouslymultilayer monitoring was introduced over and above existing safety management systems.Virtual training on Vishwakarma (project safety guidelines) was imparted to all employeesdeployed at various project sites. Safety Experts were deployed at Pali Dhar and Hirmiand rigging and scaffolding experts were deployed at project sites to support safeexecution.
CORPORATE SOCIAL RESPONSIBILITY
In terms of the provisions of Section 135 of the Act read with the Companies (CorporateSocial Responsibility Policy) Rules 2014 the Board of Directors of your Company hasconstituted a Corporate Social Responsibility ("CSR") Committee chaired by Mrs.Rajashree Birla. Other Members of the Committee are Mrs. Sukanya Kripalu IndependentDirector and Mr. K. C. Jhanwar Managing Director. Dr. (Mrs.) Pragnya Ram Group ExecutivePresident CSR Legacy Documentation & Archives is a permanent invitee to theCommittee. Your Company has in place a CSR Policy which is availableat-https://www.ultratechcement.com/ investors/corporate-governance#policies.
Your Company's CSR activities are focused on Social Empowerment and WelfareInfrastructure Development Sustainable Livelihood Healthcare and Education. Variousactivities across these segments have been initiated during the year around its plantlocations and adjacent villages. During the year your Company spent Rs.96.40 crores onCSR activities and set-off Rs.6.60 crores from the excess spent during FY21 aggregatingto Rs.103 crores resulting in 2% of the average net profits of your Company during thelast three financial years. A report on CSR activities is provided in Annexure III whichforms part of this Report.
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES
The audited financial statements of your Company's subsidiaries and joint ventures viz.Harish Cement Limited Gotan Lime Stone Khanij Udyog Private Limited Bhagwati Lime StoneCompany Private Limited UltraTech Nathdwara Cement Limited ("UNCL") UltraTechCement Middle East Investments Limited ("UCMEIL") UltraTech Cement Lanka(Private) Limited PT UltraTech Mining Indonesia and PT UltraTech Investments Indonesiaand their related information are available for inspection on your Company's website. AnyMember who is interested in obtaining a copy of the audited financial statements of yourCompany's subsidiaries may write to the Company Secretary.
During the year ended 31st March 2022 UNCL entered into an agreement withGalata Chemicals Holding Gmbh Germany ("Galata") for restructuring of 3B BinaniGlassfibre SARL ("3B") as per which Galata along with its affiliates has madenecessary payments to UNCL for the purposes of refinancing the loans given to 3B andacquisition of entire shareholding of UNCL in 3B.
UNCL has inter alia transferred its entire shareholding in 3B to Galata as on 31stMarch 2022. Consequent to the transaction 3B has ceased to be a wholly owned subsidiaryof UNCL.
UCMEIL acquired 29.79% equity share capital of RAK Cement Co. for White Cementand Construction Materials PSC' ("RAKWCT') a company listed on the Abu Dhabi andKuwait stock exchanges for a consideration of US$ 101.10 million. RAKWCT is engaged in themanufacture and sale of white cement clinker white cement and construction materials.
This strategic acquisition strengthens your Company's position in the white cementbusiness in India while also providing access into the GCC and African markets. The whitecement market in India is witnessing robust growth propelled by demand in whitecement-based putty as well as other emerging new applications in coatings and constructionsecters. The acquisition provides opportunity to tap operational synergies between yourCompany and RAKWCT to improve shareholder value apart from exploring cost efficienciesand expansion of markets.
In accordance with the provisions of Section 129(3) of the Act read with the Companies(Accounts) Rules 2014 a report on the performance and financial position of each of thesubsidiaries joint venture and associate companies is provided in Annexure IV tothis Report.
PARTICULARS OF LOAN GUARANTEE AND INVESTMENT
Details of Loan Guarantee and Investment covered under the provisions of Section 186of the Act read with the Companies (Meetings of Board and its Powers) Rules 2014 aregiven in Notes forming part of the standalone financial statements.
ENERGY TECHNOLOGY AND FOREIGN EXCHANGE
Information on conservation of energy technology absorption and foreign exchangeearnings and outgo required to be disclosed pursuant to Section 134(3)(m) of the Act readwith the Companies (Accounts) Rules 2014 is given in Annexure V to this Report.
PARTICULARS OF EMPLOYEES
Disclosures relating to remuneration and other details as required under Section197(12) read with the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 are given in Annexure VI. In accordance with the provisions of theaforementioned section the names and other particulars of employees drawing remunerationin excess of the limits set out in the aforesaid rules form part of this Report. Howeverin line with the provisions of Section 136(1) of the Act the Report and Accounts as setout therein are being sent to all Members of your Company excluding the aforesaidinformation. Any Member who is interested in obtaining these particulars may write tothe Company Secretary.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
The Securities and Exchange Board of India ("SEBI") in its circular dated 10thMay 2021 introduced new sustainability related reporting requirements to be reported inthe specific format of Business Responsibility and Sustainability Report("BRSR"). SEBI vide the aforesaid circular has made BRSR mandatory for the top1000 listed companies (by market capitalisation) from fiscal 2023 while disclosure isvoluntary for fiscal 2022. Your Company has adopted the BRSR voluntarily for FY22 and alsopublishes a comprehensive Sustainability Report annually based on GRI standards. TheSustainability Report is available at https://www.ultratechcement.com/about-us/sustainability/sustainability.
The BRSR forms part of this Integrated Annual Report.
CONTRACT AND ARRANGEMENT WITH RELATED PARTIES
Related party transactions entered into by your Company during the financial year werecompletely on an arm's length basis and in the ordinary course of business. There were nomaterial transactions with any related party as defined under Section 188 of the Act readwith the Companies (Meetings of Board and its Powers) Rules 2014. All related partytransactions have been approved by the Audit Committee of your Company and reviewed by iton a periodic basis.
The policy on Related Party Transactions as approved by the Audit Committee and theBoard is available at https://www.ultratechcement.com/investors/corporate-governance#policies.
The details of contracts and arrangements with related parties of your Company for thefinancial year ended 31st March 2022 is provided in Note No. 38 to thestandalone financial statements of your Company.
Risk is an integral and unavoidable component of business. Given the challenging anddynamic environment of your Company's operations it is committed to proactively managingrisk in accomplishing its ambitious goals. Though risks cannot be eliminated an effectiverisk management program ensures that risks are reduced avoided mitigated or shared.
To maintain oversight of your Company's risks the Risk Management and SustainabilityCommittee ("RMS Committee") of your Company is mandated to review its EnterpriseRisk Management Framework (including plan/process) analyse the risks more deeply anddefine risk mitigation actions where necessary. Through the Annual Risk Report processeswhich are based upon the business environment operational controls and complianceprocedures your Company aims to assess and prioritise risks according to theirsignificance and likelihood.
The key risks identified by your Company include economic environment and marketdemand; inflation and cost of production; legal and compliance with local laws; financialand accounting; environment climate and sustainability; information technology and talentmanagement. Needless to mention with the challenges presented by the COVID-19 outbreakpandemic and epidemic-related business risks have been identified by your Company.Further the Ukraine war has resulted in geopolitical tension thereby impacting fuelprices which would have an adverse impact on the operations of your Company.
The risk horizon considered includes long-term strategic risks short to medium-termrisks as well as single events. The risks are analysed considering likelihood and impactas a basis to determine their management.
Key Business Risks identified by your Company:
Economic Environment and Market Demand
The demand for construction material is fundamentally driven by the economic growth inthe country. Economic slowdown and subdued infrastructural development might lead to aslowdown in construction projects thus leading to a reduction in cement consumption inthe country. The growth in construction activity in the country has been slow over thelast few years impacting the cement consumption. In a scenario where incremental capacityaddition exceeds incremental cement demand the government's push for infrastructure andhousing will aid the growth in cement consumption and reduce the overcapacity gap.
The cement industry in India is an aggregation of small and large companies. In such anenvironment the risk of protecting market share is optimal. With the expanding capacitiesof existing players and the emergence of new entrants competition is a sustained risk. Tomitigate this continuous endeavours to enhance brand equity through innovative marketingactivities enhancement in the product portfolio and value-add services have been thethrust areas for your Company. The engineering expertise of your Company and its emphasison quality also minimise its risk against market fluctuations considerably.
Inflation and Cost of Production
Your Company faces the risk of inflation and price fluctuations in the cost of coalpet coke power and other fuels since these are market driven. The cement industry isextremely energy intensive changes in fuel prices can significantly impact productioncost. To derisk your Company has established specific policies of long deliveries and itcontinuously optimises its fuel mix and energy efficiency while exploring the use ofalternative fuels.
The procurement of raw materials at an economical cost or of suitable quality faces ahigh degree of inflationary certainty. Your Company mitigates this risk through theestablishment of exhaustive policies for procurement of specific raw materials and storesand those amenable to just in time inventories.
Limestone being the primary raw material required to produce cement its continuous andlong-term availability is critical particularly under the dynamic regulatory environment.Your Company currently possesses sufficient limestone reserves. Securing additionalreserves is critical to address your Company's expansion plans. Apart from thepreservation and extension of existing reserves a range of measures including strategicsourcing and changing input mix are adopted by your Company to mitigate the risk ofunavailability of limestone.
Legal and Compliance
This risk relates to any inadvertently violated laws covering business conduct.
The country's regulatory framework is ever-evolving and the risk of non-compliance andpenalties may increase for your Company leading to reputational risks.
A comprehensive risk-based compliance programme involving inclusive training andadherence to the Code of Conduct is thus institutionalised by your Company.
As a step to mitigate the legal and compliance risk your Company's managementencourages its employees to place their reliance on professional guidance and opinion todiscuss the impact of any changes in laws and regulations to ensure total compliance.Periodic and ad- hoc reporting to various internal committees for oversight ensures theeffectiveness of such a programme.
This comprises the risk of exposure to interest rates foreign exchange rates andcommodity price fluctuations. The risk management strategy is to identify the riskexposure measure and evaluate the financial impact and decide on steps to mitigate therisks together with ensuring regular monitoring and reporting.
With the objective of minimising risks arising from uncertainty and volatility offoreign exchange fluctuations an elaborate financial risk management policy is followedfor every transaction undertaken in foreign currency. Your Company's policies to countersuch risks are reviewed periodically and constantly aligned with the financial marketpractices and regulations.
Changing laws rules regulations and standards relating to accounting corporategovernance public disclosure and listing regulations are generating newer and unforeseenrisks for companies. The new or changed laws regulations and standards may lackprecedence and are subject to varying interpretations. Their application in practice mayevolve as new guidance is provided by regulatory and governing bodies. Thus your Companymaintains a high standard of corporate governance and public disclosure to de-risk itselffrom such dynamic regulatory changes.
This comprises risks associated with environmental pollution through the discharge ofwaste and GHG emissions which may cause damage to the local ecology and environment.
Various initiatives such as sewage treatment plants recycling of industrialwastewater bag-house WHRS and extensive plantation and creation of green belts have beenundertaken by your Company to de-risk and protect the environment.
Apart from a targeted reduction of CO2 emissions (Scope 1 by 27% and Scope 2by 69% by 2032) your Company's risk mitigation strategy includes a change in product mixenergy efficiency use of alternative fuels and raw materials WHRS and the increased useof renewable energy. Your Company has also adopted measures such as rainwater harvestingand water recharge that help it overcome challenges related to water availability.
Climate and Sustainability
Sustainability-related climate change risks and opportunities are assessed in line withyour Company's risk management policy and have been integrated in its multi-disciplinaryRisk Management Framework. Classified as ESG risks these relate to energy emissions andwater among other issues. Sectoral review and relevant stakeholder interactions areconducted regularly to develop a list of climate-related risks specific to business andlocation. Identified risks are then mapped to your Company's risk matrix which classifiesthe risk according to its impact and likelihood.
Prioritised climate risks are managed through Unit-level committees. Unit andFunctional Heads are responsible for identifying risks developing mitigation plansupdating and reviewing their respective risk registers as per the defined process. Theconsolidated risk report is submitted to the Board-level committee.
Scenario based analysis has been conducted for physical as well as transition risks.For physical risks four scenarios have been considered that are linked to RepresentativeConcentration Pathway ("RCP") which is a GHG concentration trajectory adoptedby the Intergovernmental Panel on Climate Change ("IPCC"). These include RCP8.5 RCP 6 RCP 4.5 and RCP 2.6 scenarios. The pathways describe four possible climatefutures on the basis of the volume of GHG emitted in the coming years. All four scenarioshave been considered to assess the impact of temperature and precipitation changes inareas where your Company operates. Maximum possible impact has been considered based onprojections up to the year 2100.
Your Company has conducted risk assessment exercise to identify climate-relatedphysical and transition risks. Risks are assessed based on the defined time horizons overshort term (0-3 years) medium term (3-10 years) and long term (10-30 years). Thecategorisation of risks into physical and transition risks has been done in alignment withTCFD guidelines.
In case of assessing the impact of transition risks on your Company scenario analysishas been conducted in alignment with ETP B2DS and IPCC 1.5-degree scenarios. The potentialimpact of the evolution of climate policies has been considered under both scenarios toassess the resilience of your Company as well as the potential pathways fordecarbonisation so that it can comply with policy mechanisms such as emission tradingschemes.
Product mix is an important variable in managing climate- related risks. Your Companyis not only focused on developing sustainable products but also aims to embedsustainability in the entire construction value chain. As many as 73 UltraTech productsare certified by GreenPro the largest Ecolabel in India which enables end users in thebuilt environment sector to choose sustainable materials for reducing the environmentalimpact during construction operation as well as use phase of buildings.
Your Company's approach is highlighted below:
Enhancing resilience of the building sector: Extreme weather events due toclimate change such as floods cyclones and heat waves may impact the building sectorconsiderably. To mitigate the impact of physical risks on the building sector and societyat large your Company is working with the built environment sector to make buildings moreresilient to climate change effects.
Your Company is committed to developing products and solutions that reducecarbon emissions throughout the lifecycle of the built environment sector. It offersbuilding products and solutions that lead to optimisation of concrete mixing improvingoverall quality and strength of construction and thus alleviating the impact of physicalrisks.
Your Company has introduced many new products that are designed to makebuildings more resilient to dampness.
This also leads to reduced wear and tear of buildings increasing longevity therebyreducing the use of input materials and natural resources during their entire lifetime.
Acute physical risks: Such risks can potentially impact sales volumes because ofdisruption of business operations due to interruption in supply chain rise in logisticscosts power outage infrastructure damages and manpower shortage among other aspects.
Few sites of your Company have been exposed to extreme weather events during the lastfew years such as floods and cyclones. In the last three years sites located inBhubaneswar Chennai and Gujarat have been impacted due to extreme weather events. Some ofyour Company's sites are in geographies that are susceptible to periodic heat waves.
However your Company has implemented several measures to mitigate the impact ofphysical risks.
Given its pan-India presence your Company's sites are highly diversifiedgeographically. If a manufacturing plant faces business disruption or shutdown due toextreme weather events alternative plants in other locations can serve the market need.Also its wide logistics network with warehouses across different parts of the countryenable flexibility in your Company's operations.
Annual weather forecasts are considered in supply chain decisions in order to mitigatethe risk of delays in sourcing of fuels. Your Company has developed strategic partnershipswith geographically diverse global vendors for fuels. Regular monitoring of environmentalpolitical and regulatory developments coupled with flexible contracts mitigate risks ofsupply chain disruptions. Inventory norms for fuels are periodically reviewed consideringprobability and expected impact of likely supply chain disruptions due to abovedevelopments. Insurance coverage is in place to protect against damages to business assetsor loss of material in warehouses due to extreme weather events.
Your Company has not witnessed any impact of heat waves on its facilities.Nevertheless it ensures that its employees are protected during peak summer days. It iscommitted to the WASH Pledge ensuring adequate availability of safe drinking water toworkers. Warehouses are also secured with early morning and late evening operationalhours.
Disaster management plans health and safety protocols and adequate communicationprotocols during extreme weather events ensure safety at sites and minimise the impact onthe workforce.
The financial impact of physical risks is estimated to be less than 1% of EBITDA. Riskmitigation measures have largely insulated your Company from the impact of extreme weatherevents.
Chronic physical risks
Your Company's vast geographical presence makes it vulnerable to long-term chronicphysical risks such as variation in temperature precipitation and water scarcity.Potential impact of variation in temperature and precipitation patterns has been assessedthrough scenario analysis across all four scenarios. Less than a quarter of your Company'scement plants are in sites with extremely high water-stress combined with a projectedlong-term decrease in precipitation patterns.
Your Company has implemented several measures which protect the business from theidentified chronic risks. Rainwater harvesting systems have also been installed acrosssites. Harvested rainwater is either used within the sites or recharged into the groundfor raising groundwater levels. In addition your Company's manufacturing sites are ZeroLiquid Discharge ("ZLD") and they reuse 100% of treated water within the sites.As a result nearly 43 out of 58 sites are water positive. The endeavour is to make allsites water positive enabling your Company to be future- ready for mitigating risks ofwater stress.
Emerging climate-related regulations and carbon pricing mechanisms may financiallyimpact business in the long run. For example Emission Trading Scheme ("ETS")and Carbon Tax have been adopted in several geographies around the world. India hascommitted to reducing its emission intensity by 33-35% by 2030 and is on track to achievethis target five years in advance (2025). National level commitments may in the futurecascade down to various industry sectors through the introduction of new climate changepolicies. The estimated impact of a policy such as ETS on your Company is estimated to beless than 1% of EBITDA considering commitments already made to decarbonise the business.
Your Company is prepared to mitigate emerging risks pertaining to climate change policychanges through its existing voluntary GHG reduction targets which are SBTi validatedsustainability-linked bonds its commitment to the GCCA announced 2050 ClimateAmbition' and so on.
Delay in adopting low-carbon technologies may lead to increased indirect operatingcosts. This could be through early retirement of existing assets. Your Company hasstrategically reduced its dependence on coal-based power generation and is focused onincreasing the share of WHRS and renewable energy. Further initiatives to utilise wasteor by-products from other industries and reducing clinker ratio are driving downemissions intensity. There are also efforts to track the technology and cost trends inemerging areas such as carbon capture utilisation and storage ("CCUS") andhydrogen and kiln electrification. Also your Company is committed to aligning with theParis Agreement Goals and is judiciously monitoring climate change performance at theBoard-level Unit-level and across all relevant functions.
Information Technology Risks
This comprises risks related to Information Technology ("IT") systems; dataintegrity and physical assets. Your Company deploys IT systems including ERP SCM DataHistorian and Mobile Solutions to support its business processes communications saleslogistics and production. Risks could primarily arise from the unavailability of systemsand/or loss or manipulation of information. To mitigate these risks your Company usesbackup procedures and stores information at two different locations. Systems are upgradedregularly with the latest security standards. For critical applications security policiesand procedures are updated periodically and users are educated on adherence to thepolicies to eliminate data leakages.
Your Company's growth has been driven by its ability to attract and retain top-qualitytalent while effectively engaging them in the right jobs. The risks in talent managementare mitigated by following a policy of being an employer of choice and inculcating a senseof belonging. Specialised training courses are adopted to enhance and reskill employees toprepare them for future roles and create a talent pipeline.
Pandemic-linked Disruptions in Global Markets
The COVID-19 outbreak caused a huge impact on people's lives families and communities.Your Company continues to update and expand its crisis management and business continuityplans with an emphasis on employees customers supply chain contacts other stakeholdersand business assets.
The rising fuel prices in the wake of geopolitical tensions have had an adverse impacton the cost of manufacturing cement owing to increased raw material fuel and energycosts. For your Company's business raw material fuel and logistics account for a majorshare of the manufacturing cost. The anticipated rise in the procurement of raw materialsand high consumption of energy is likely to lead to the need for prioritising localdependence for raw material and energy fulfilment in order to mitigate the disruptioncaused due to such global geopolitical tension.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
Your Company has put in place adequate internal control systems that are commensuratewith the size of its operations. Internal control systems comprising policies andprocedures are designed to ensure sound management of your Company's operationssafekeeping of its assets optimal utilisation of resources reliability of its financialinformation and compliance. Clearly defined roles and responsibilities have beeninstitutionalised and systems and procedures are periodically reviewed to keep pace withthe growing size and complexity of your Company's operations.
Retiring by rotation and continuing as Director
In accordance with the provisions of the Act and Articles of Association of yourCompany Mr. Krishna Kishore Maheshwari (DIN: 00017572) retires by rotation and beingeligible offers himself for re-appointment.
Re-appointment of Managing Director
The existing term of Mr. Kailash Chandra Jhanwar (DIN:01743559) Managing Director isupto 31st December 2022. The Board at its meeting held on 22ndJuly 2022 based on the recommendation of the NRC Committee and considering thecontributions made by Mr. Jhanwar during his term of appointment re-appointed Mr. Jhanwarfor a further period of two years with effect from 1st January 2023.
Resolutions seeking their re-appointment along with a brief profile forms part of theNotice convening the AGM.
Meetings of the Board
Your Company's Board of Directors met five times during the year to deliberate onvarious matters. The meetings were held on 7th May 2021; 22nd July2021; 18th October 2021; 27th October 2021 and 17thJanuary 2022. Additional details relating to the meetings of the Board of Directors areprovided in the Report on Corporate Governance which forms part of this Integrated AnnualReport.
Your Company has the following six Board-level Committees established in compliancewith the requirements of the business and relevant provisions of applicable laws andstatutes:
Nomination Remuneration and Compensation Committee
Stakeholders Relationship Committee
Corporate Social Responsibility Committee
Risk Management and Sustainability Committee
Details with respect to the composition terms of reference number of meetings heldetc. of the above Committees are included in the Report on Corporate Governance whichforms part of this Integrated Annual Report.
Your Company's Independent Directors have submitted requisite declarations confirmingthat they continue to meet the criteria of independence as prescribed under Section 149(6)of the Act and Regulation 16(1)(b) of the Listing Regulations. The Independent Directorshave also confirmed that they have complied with the provisions of Schedule IV of the Actand your Company's Code of Conduct.
Your Company's Board is of the opinion that the Independent Directors possess requisitequalifications experience and expertise in industry knowledge; innovation; financialexpertise; information technology; corporate governance; strategic expertise; marketing;legal and compliance; sustainability; risk management; human resource development andgeneral management and they hold highest standards of integrity. All IndependentDirectors of your Company have registered their name in the data bank maintained with theIndian Institute of Corporate Affairs Manesar in terms of the provisions of the Companies(Appointment and Qualification of Directors) Rules 2014.
Formal Annual Evaluation
The evaluation framework for assessing the performance of your Company's Directorscomprises of contributions at meetings and strategic perspective or inputs regarding thegrowth and performance of your Company among others. The NRC Committee and the Board havelaid down the manner in which formal annual evaluation of the performance of the Boardits Committees and individual Directors are to be made. Separate evaluation forms arecirculated to individual directors for evaluation of the Board; its CommitteesIndependent Directors/Non- Executive Directors/Executive Directors and the Chairman ofyour Company. The process broadly comprises:
Board and Committee Evaluation
Evaluation of the Board as a whole and the Committees is done by individual Directors.These are collated for submission to the NRC Committee and feedback to the Board.
Independent/Non-Executive Directors Evaluation
Evaluation done by Board members excluding the Director who is being evaluated issubmitted to the Chairman of your Company and individual feedback provided to eachDirector. The evaluation of the Chairman/Executive Director as done by the individualDirectors is submitted to the Chairman of the NRC Committee and subsequently to the Board.The evaluation framework focuses on various aspects of the Board and Committees such asreview timely information from management and others. Performance of individual Directorsare categorised into Executive Non-Executive and Independent Directors and based onparameters such as contribution attendance decision-making action-oriented externalknowledge etc.
A brief summary of the evaluation exercise is as follows
The Board as a whole functions cohesively. The Committees function well in theirrespective areas and the recommendations of the Committees are considered and have beenaccepted by the Board. The Directors bring to the table their knowledge and experience.Independent Directors are rated high in understanding your Company's business andexpressing their views freely during deliberations. The Non-Executive Directors score wellin all aspects. Executive Directors are action oriented and good in implementing Boarddecisions. The Chairman leads the Board effectively and encourages active participationand contribution by all Board members.
The details of the familiarisation programme for Independent Directors are available athttps://www. ultratechcement.com/about-us/board-of-directors.
Policy on Appointment and Remuneration of Directors and Key Managerial Personnel andRemuneration Policy
Your Company's Directors are appointed/re-appointed by the Board on the recommendationsof the NRC Committee and approval of the shareholders.
In accordance with the Articles of Association of your Company provisions of the Actand the Listing Regulations all Directors except the Executive Directors and IndependentDirectors are liable to retire by rotation and if eligible offer themselves forre-appointment.
The Executive Directors are appointed for a fixed tenure and are not liable to retireby rotation. The Independent Directors can serve a maximum of two terms of five years eachand their appointment and tenure are governed by provisions of the Act and the ListingRegulations.
The NRC Committee has formulated the remuneration policy of your Company which isprovided in Annexure VII to this Report.
KEY MANAGERIAL PERSONNEL
In terms of the provisions of Section 203 of the Act Mr. K.C. Jhanwar ManagingDirector; Mr. Atul Daga Whole- time Director and Chief Financial Officer and Mr. SanjeebKumar Chatterjee Company Secretary are the Key Managerial Personnel of your Company.
The Audit Committee comprises Mr. S.B. Mathur Mr. Arun Adhikari Mrs. Alka Bharuchaand Mr. K.K. Maheshwari majority of whom are Independent Directors with Mr. Mathur beingthe Chairman. Mr. K.C. Jhanwar Managing Director and Mr. Atul Daga Whole-time Directorand CFO are permanent invitees. Further details relating to the Audit Committee areprovided in the Report on Corporate Governance which forms part of this Integrated AnnualReport. During the year under review all recommendations made by the Audit Committee wereaccepted by the Board.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
Your Company has in place a vigil mechanism for Directors and employees to reportinstances and concerns about unethical behaviour actual or suspected fraud or violationof your Company's Code of Conduct. Adequate safeguards are provided against victimisationof those who avail of the mechanism and direct access to the Chairman of the AuditCommittee in exceptional cases is provided to them.
The vigil mechanism/whistle blower policy is available at https://www.ultratechcement.com /investors/corporate- governance#policies.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
Your Company had filed appeals against the orders of the Competition Commission ofIndia ("CCI") dated 31st August 2016 (Penalty of Rs.1449.51 crores)and 19th January 2017 (Penalty of Rs.68.30 crores). Upon the National CompanyLaw Appellate Tribunal ("NCLAT") disallowing its appeal against the CCI orderdated 31st August 2016 your Company filed an appeal before Hon'ble SupremeCourt which has by its order dated 5th October 2018 granted a stay againstthe NCLAT order. Consequently your Company has deposited an amount of Rs.144.95 croresequivalent to 10% of the penalty of Rs.1449.51 crores. Your Company backed by legalopinions believes that it has a good case in both the matters and accordingly noprovision has been made in the accounts.
Pursuant to the provisions of Section 139 of the Act and the Companies (Audit andAuditors) Rules 2014 M/s. BSR & Co. LLP Chartered Accountants Mumbai (RegistrationNo: 101248W/W-100022) and M/s. KKC & Associates LLP Chartered Accountants (formerlyKhimji Kunverji & Co.) Mumbai (Registration No: 105146W/W100621) have been appointedas Joint Statutory Auditors of your Company for a second term of five years until theconclusion of the 25th and 26th AGMs respectively. In accordancewith the provisions of the Act the appointment of Statutory Auditors is not required tobe ratified at every AGM.
The Joint Statutory Auditors have however confirmed that they are not disqualified tocontinue as Auditors and are eligible to hold office as Auditors of your Company.
The observations made in the Auditor's Report are selfexplanatory and therefore do notcall for any further comments under Section 134(3)(f) of the Act.
The Cost Accounts and records as required to be maintained under Section 148(1) of theAct are duly made and maintained by your Company.
In terms of the provisions of Section 148 of the Act read with the Companies (CostRecords and Audit) Rules 2014 the Board of Directors of your Company have on therecommendation of the Audit Committee appointed M/s. D.C. Dave & Co. CostAccountants Mumbai and M/s. N.D. Birla & Co. Cost Accountants Ahmedabad to conductthe Cost Audit of your Company for the financial year ending 31st March 2023at a remuneration as mentioned in the Notice convening the AGM.
As required under the Act the remuneration payable to the Cost Auditors has to beplaced before the Members at a general meeting for ratification. Hence a resolutionrelating to the same forms part of the Notice convening the AGM.
In terms of the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board hadappointed M/s. Makarand M Joshi & Co. LLP Company Secretaries as Secretarial Auditorsfor conducting Secretarial Audit of your Company for the financial year ended 31stMarch 2022.
The report of the Secretarial Auditor is provided in Annexure VIII which doesnot contain any qualification reservation or adverse remark.
Compliance with Secretarial Standards
Your Company is compliant with the Secretarial Standards specified by the Institute ofCompany Secretaries of India. Your Company has complied with all applicable provisions ofSecretarial Standard - 1 and Secretarial Standard - 2 relating to Meetings of theBoard of Directors' and General Meetings' respectively issued by the Institute ofCompany Secretaries of India.
In terms of the provisions of Section 92 and Section 134 of the Act read with Rule 12of the Companies (Management and Administration) Rules 2014 the Annual Return isavailable at - https://www.ultratechcement.com/investors/ financials.
No material changes and commitments affected the financial position of yourCompany between the end of the financial year and the date of this Report.
Your Company has not issued any shares with differential voting rights.
There was no revision in the financial statements.
There has been no change in the nature of business of your Company.
Your Company has not issued any sweat equity shares.
Disclosures as per the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013 ("POSH Act"):
Your Company has adopted zero tolerance for sexual harassment at workplace and hasformulated a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the POSH Act and the rules framed thereunderfor prevention and redressal of complaints of sexual harassment at workplace. Your Companyhas complied with provisions relating to the constitution of the Internal Committee underthe POSH Act. During the year under review your Company received three complaints ofsexual harassment of which for one complaint there was no evidence of harassment andtwo complaints have been resolved.
Statements in the Directors' Report and the Management Discussion and Analysisdescribing your Company's objectives projections estimates expectations or predictionsand plans for navigating the COVID-19 impact on your Company's performance its employeescustomers and other stakeholders may be forwardlooking statements' within themeaning of applicable securities laws and regulations.
Actual results could differ materially from those expressed or implied. Importantfactors that could make a difference to your Company's operations include global andIndian demand- supply conditions finished goods prices feed stock availability andprices cyclical demand and pricing in your Company's principal markets changes ingovernment regulations tax regimes economic developments within India and the countrieswithin which your Company conducts business geopolitical tensions risks related to aneconomic downturn or recession in India the efforts of the government and other measuresseeking to contain the spread of COVID-19 and other factors such as litigation and labournegotiations. Your Company is not obliged to publicly amend modify or revise anyforward-looking statements on the basis of any subsequent development information orevents or otherwise.
Your Directors express their deep sense of gratitude to the banks financialinstitutions stakeholders business associates central and state governments for theirsupport and look forward to their continued assistance in the future. We thank ouremployees for their contribution to your Company's performance. We applaud them for theirsuperior levels of competence dedication and commitment to your Company.
| ||For and on behalf of the Board |
| ||Kumar Mangalam Birla |
| ||Chairman |
| ||(DIN: 00012813) |
|Mumbai || |
|22nd July 2022 || |