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UltraTech Cement Ltd.

BSE: 532538 Sector: Industrials
NSE: ULTRACEMCO ISIN Code: INE481G01011
BSE 00:00 | 18 Sep 4061.40 -44.35
(-1.08%)
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4103.50

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4111.00

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4028.25

NSE 00:00 | 18 Sep 4059.95 -43.55
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OPEN

4102.00

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OPEN 4103.50
PREVIOUS CLOSE 4105.75
VOLUME 16290
52-Week high 4594.30
52-Week low 3566.45
P/E 53.55
Mkt Cap.(Rs cr) 111,538
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 4103.50
CLOSE 4105.75
VOLUME 16290
52-Week high 4594.30
52-Week low 3566.45
P/E 53.55
Mkt Cap.(Rs cr) 111,538
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

UltraTech Cement Ltd. (ULTRACEMCO) - Director Report

Company director report

Dear Shareholders

Your Directors present the Eighteenth Annual Report together with the Audited Accountsof your Company for the year ended 31st March 2018.

OVERVIEW AND THE STATE OF THE COMPANY'S AFFAIRS

The global cyclical upswing since mid - 2016 strengthened during the year. Among theadvanced economies notably Germany Japan Korea and the United States growth in thethird quarter of 2017 was higher than projected. Key emerging markets and developingeconomies like Brazil China and South Africa also posted impressive growth. Global tradewas significantly higher supported by a good flow of investment particularly amongadvanced economies and increased Asian manufacturing output. The stronger momentumexperienced in 2017 is expected to carry into 2018 and 2019 with global growth rising to3.9% for both years.

The International Monetary Fund (IMF) remained optimistic of India's potential andretained GDP growth forecast for the country at 6.7% in 2017 and 7.4% in 2018. In itsWorld Economic Outlook Update it also estimated that the Indian economy could grow 7.8%in 2019 making it the world's fastest-growing economy in 2018 and 2019 a ranking that itbriefly lost to China in 2017. The economy's growth trajectory was sustained on the backof a series of reforms undertaken over the past year.

India is the world's second largest cement producer. In anticipation of demand ~ 90million tonnes of capacity was added during the past five years. During the year theindustry reported a rise in cement demand and after seven years' the industry is likely toreport historical demand growth multiple against GDP. The Government's thrust oninfrastructure development remained the key growth driver. Besides revival in ruralhousing demand and accelerated execution under the low cost housing program bolsteredvolume off-take. However demand from urban housing remained sluggish owing to theimplementation of Real Estate (Regulation and Development) Act 2016 (RERA) and thelingering impact of demonetisation. FY 2017-18 was also a year of challenges as majorStates imposed a ban on sand mining arising out of environmental concerns and entry ofthe unorganised sector. Sand is used as raw material by the construction industry and theban impacted construction activity in Uttar Pradesh Madhya Pradesh Bihar Tamil NaduMaharashtra and Rajasthan. The Hon'ble Supreme Court of India introduced a ban on the useof petcoke in Haryana Rajasthan and Uttar Pradesh to curb pollution and even though therestriction was subsequently relaxed there was a hike in import duty on petcoke from 2.5%to 10%. An increase in diesel prices pushed freight cost northwards. All of this resultedin increased operating costs.

India's cement sector growth is projected at around 8% in FY 2018-19 which is good ascompared to the trends of the last few years. This is likely to be driven by a slew ofinfrastructure projects which have been announced by the government among which are theconstruction of around 84000 kilometers of roads by 2022 including the BharatmalaProject construction of rural roads under the Pradhan Mantri Gram Sadak Yozana by 2019Housing for All by 2022 the metro rail networks in several cities bullet train andvarious irrigation projects. Regardless the sector could face some headwinds in the formof higher fuel prices that could have a negative impact on margins.

It is against this background that we share your Company's performance during 2017-18.The major highlight was the successful acquisition of the cement plants of JaiprakashAssociates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL). This enabled yourCompany to further consolidate its position in the domestic cement industry. Moreinformation on the acquisition is detailed in the Corporate Development section of thisreport.

BUSINESS PERFORMANCE

Production and Capacity Utilisation (grey cement):

Particulars FY18 FY17 % change
Installed capacity (MTPA) 85.00 66.25 28
Production (MMT) 57.23 47.91 19
Capacity Utilisation 71% 72% (1)

MTPA – Million Metric Tonnes Per Annum. MMT– Million Metric Tonnes.

With the acquisition of the cement plants of JAL and JCCL having cement capacity of21.2 MTPA; including 4.0 MTPA under installation your Company's total cement capacity wasaugmented to 85.00 MTPA. Cement production improved from 47.91 million tonnes in theprevious year to 57.23 million tonnes a growth of 19%. Capacity utilisation remainedalmost on par with the previous year despite a 28% increase in the capacity base. Thisincludes a gradual ramp-up of acquired capacities which operated at an average capacityutilisation of ~ 53%.

Figures in MMT
Particulars FY18 FY17 % change
Domestic Sales 57.75 47.62 21
Exports & Others 2.90 2.56 13
Total Sales Volume 60.65 50.19 21

Domestic sales volume jumped 21% from 47.62 MMT to 57.75 MMT. This was supported by theadditional volumes from the acquired assets the robust volume growth from institutionalsales increased penetration in rural markets and a higher contribution from UltraTechBuilding Solutions (UBS) outlets. At the end of the year the total number of UBS outletsrose to ~ 1600. They are a key segment for connecting with the end consumer.

FINANCIAL PERFORMANCE

(` in crores)

Standalone

Consolidated

2017-18 2016-17 2017-18 2016-17
Net Turnover 29363 23616 30973 25092
Domestic 27866 23191 27866 23191
Exports 475 425 3108 1901
Other Income 1022 936 1021 931
Total Expenditure 23907 18922 25266 20163
Profit before Interest Depreciation and Tax (PBIDT) 6478 5629 6729 5861
Less: Depreciation 1764 1268 1848 1349
Profit before Interest and Tax (PBIT) 4714 4361 4881 4512
Interest 1186 571 1233 640
Profit before Impairment and Tax Expenses / share 3528 3790 3648 3872
in profit of Associates
Stamp duty on acquisition of assets (226) - (226) -
Provision for diminution in value of Investment - (14) - -
Impairment of assets - - (75) -
Impairment on deconsolidation of subsidiary - - (46) -
Profit before Tax Expenses 3302 3776 3301 3872
Tax Expenses 1071 1148 1077 1158
Profit after Tax 2231 2628 2224 2714
Profit attributable to Non-controlling Interest - - 2 (1)
Profit attributable to Owner of the parent 2231 2628 2222 2715

(Note: the figures for 2017-18 include those of the acquired cement units of JAL andJCCL and are therefore not strictly comparable with the previous years' figures.)

Net Turnover:

Your Company's net turnover at ` 29363 crores is higher over the previous year drivenby higher sales volume and improvement in cement prices.

Other Income:

Other income is 9% higher compared to the previous year. Your Company received higherfiscal incentives under the Industrial Promotion Schemes of various States.

Operating Profit (PBIDT) and Margin:

PBIDT for the year at ` 6478 crores is higher by 15% over the previous year. Theoperating margin declined marginally due to increase in operating costs.

Cost Highlights:

(i) Energy Cost:

Overall energy cost rose by 23% from ` 763/t to ` 938/t attributable to substantialincrease in petcoke and coal prices. Imported petcoke prices went up by 45% from $66/t to$96/t. Energy costs were also impacted due to the ban on petcoke usage in thermal powerplants in Rajasthan Uttar Pradesh and Haryana.

Controlling costs is an on-going exercise at your Company. To mitigate the impact ofrising fuel prices your Company was engaged in a cost control program leading to thefollowing efficiencies:

- Reduction in power consumption at cement plants by 3%;

- Improved thermal power plant efficiency by reducing auxiliary consumption power by10%;

- Enhanced usage of waste heat recovery power to 8%;

- Increased power wheeling from integrated plants to grinding units to reducedependency on grid;

- Entering into solar power purchase agreements to cut power costs at grinding unitsand to meet renewable energy obligations;

- Improved petcoke usage in acquired units in line with your Company's standards;

- Use of low cost fuels viz. industrial waste and lignite increased from 2% in theprevious year to 5%. Around 2.52 lmt industrial waste has been used in the kilns.

(ii) Input material cost:

Raw materials cost saw a marginal uptick from ` 467/t to ` 473/t inspite of increase inslag and fly-ash prices and additional limestone royalty for the acquired assets.

This was achieved by shifting to alternative additives and identifying new sources ofmaterial.

(iii) Freight and Forwarding expenses:

Logistics cost increased from ` 1074/t to ` 1124/t due to 7% higher diesel prices.Its impact was partially restricted with the reduction in average lead distance by 3% as aresult of improved utilisation of new cement grinding capacities and integration ofacquired capacities.

(iv) Employee costs:

Employee costs extended by 21% from ` 1413 crores in the previous year to ` 1706crores on account of normal annual increments commissioning of new plants and acquiredplants.

Depreciation:

Depreciation for the year at ` 1764 crores is higher by ` 496 crores over the previousyear mainly on account of the acquired assets and capitalisation of new assetscommissioned.

Finance Cost:

Finance cost at ` 1186 crores is up by ` 615 crores vis-a-vis ` 571 crores mainly dueto the debt taken for acquiring the JAL and JCCL assets.

Your Company does not accept any fixed deposits from the public falling under Section73 of the Companies Act 2013 (the Act) and the Companies (Acceptance of Deposits) Rules2014.

Your Company has adequate liquidity and a strong Balance Sheet. CRISIL and IndiaRatings and Research has re-affirmed their credit rating as CRISIL AAA and IND AAA forLong Term and CRISIL A1+ IND A1+ for Short Term.

Income Tax:

Income tax expenses decreased in line with the decrease in taxable income.

Net Profit:

Profit after tax declined by 15% from ` 2628 crores to ` 2231 crores. The normalisedPAT for the year is ` 2420 crores after adjusting the impact of stamp duty charged onacquired assets and a one-time charge for deferred tax due to the change in income-taxrates. Net profit is also impacted on account of an additional interest charge of ` 725crores and depreciation of ` 500 crores related to acquired assets.

Cash Flow Statement

(` in crores)
FY18 FY17
Sources of Cash
Cash from operations 4885 4222
Non-operating cash flow 187 138
Proceeds from issue of share capital 16 7
Proceeds from sale of Investment 3540 -
Decrease in working capital - 501
Total 8628 4868
Uses of Cash
Net capital expenditure 1836 1233
Increase in investment - 1270
Increase in working capital 1267 -
Repayment of borrowings (net) 4027 1535
Interest 1154 547
Dividend 331 308
Total 8615 4893
Increase / (Decrease) in cash & cash equivalents 13 (25)

Sources of Cash Cash from operations:

Cash from operations was higher compared to the previous year as a result of higherrevenues.

Non-Operating Cash Flow:

Cash from non-operations was higher due to higher interest income coupled with higherincome from the sale of investment in Mutual Funds.

Uses of Cash Borrowings:

During the year your Company raised ` 10189 crores for repayment of transferred loansrelating to the acquisition of JAL and JCCL's cement capacity. Your Company also redeemed` 3125 crores of debentures and ` 500 crores of preference shares issued in terms of theScheme of Arrangement between JAL JCCL your Company and their respective shareholdersand creditors (Scheme of Arrangement). Besides this your Company raised ` 322 crores oflong term debt in the form of external commercial borrowings for meeting its capexrequirement.

Your Company has repaid the existing long-term borrowings of ` 884 crores in keepingwith repayment schedule.

Net Capital Expenditure:

Your Company spent over ` 1900 crores on various capital expenditure during the year.These include the green field project at Manavar District Dhar in Madhya Pradesh; Baragrinding unit in Uttar Pradesh; Waste Heat Recovery System (WHRS) in Chhattisgarh andcapex related to modernisation.

Increase in Working Capital:

Working capital increased on account of initial working capital infusion for theacquired assets including the upfront royalty payment for transfer of mines.

Transfer to General Reserve:

Your Company proposes to transfer an amount of ` 1600 crores to the General Reserve.

DIVIDEND

Despite completing a major acquisition during the year your Directors have recommendeda dividend of ` 10.50 per equity share (` 10 per equity share in the previous year) of `10/- each for the year ended 31st March 2018. The dividend distribution wouldresult in a cash outgo of ` 347.61 crores (including tax on dividend of ` 59.27 crores)compared to ` 330.41 crores (including tax on dividend of ` 55.89 crores) paid for2016-17.

In terms of the provisions of Regulation 43A of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 (ListingRegulations) your Company has formulated a dividend distribution policy. The policy isgiven in Annexure I to this Report. It is also accessible from your Company'swebsite www.ultratechcement.com.

CAPITAL EXPENDITURE PLAN

Your Company commissioned a greenfield clinker capacity of 2.5 MTPA at ManawarDistrict Dhar Madhya Pradesh. Your Company also commissioned a cement grinding facilityof 1.75 MTPA capacity and an auto loading facility. This state-of-the-art manufacturingfacility has been built with best in class safety standards. Another cement grindingfacility of 1.75 MTPA capacity as well as a WHRS of 13 MW capacity is under erection andboth are expected to be completed before September 2018. The plant has been commissionedin record time of less than 365 days setting a global benchmark for size of suchcapacity. Yet another benchmark is setting up the greenfield plant at a capital cost ofless than $90/mt.

During the year your Company's Board of Directors approved the setting up of a 3.5MTPA integrated cement plant at Pali Rajasthan at an investment of around ` 1850crores. Commercial production from the plant is expected to commence by June 2020.

Capital expenditure during the next financial year is estimated at approximately `2500 crores. This is for capacity expansion projects waste heat recovery systemsregulatory requirements plant infrastructure and routine maintenance.

CORPORATE DEVELOPMENT

TheSchemeofArrangementfortheacquisitionofsixintegrated cement plants and five grindingunits of JAL and JCCL spread across Himachal Pradesh Uttar Pradesh Uttarakhand MadhyaPradesh and Andhra Pradesh with a capacity of 21.2 MTPA was made effective on 29thJune 2017. Consequently the acquired cement plants of JAL and JCCL stood transferred toyour Company. This transaction valued at ` 16189 crores ($ 2.5 bn) is the largest deal tobe concluded so far.

This acquisition was essentially towards a geographic market expansion enabling yourCompany's entry into the high growth markets of India where it needed greaterreinforcement. Upon acquiring the plants your Company has injected the much neededworking capital strengthened operations by upgrading technology and plant maintenance.This has resulted in improving efficiencies enhancing capacity utilisation and bringingthe cement manufactured at these plants up to your Company's standard. New dealers havebeen appointed to penetrate the markets and completing a successful transition of theacquired cement plants to the ‘UltraTech' brand. Furthermore economies of scale andreduced lead-time to markets will enhance your Company's competitiveness benefitcustomers and in turn create value for all stakeholders.

In terms of the Scheme of Arrangement your Company has allotted 150010 UnlistedNon-Convertible Cumulative Redeemable Preference Shares having a face value of `100000/- each and 31249 Unsecured Unlisted Redeemable Non-Convertible Debentures with aface value of ` 1000000/- each to JAL and JCCL.

Your Company now has 19 Integrated Plants 1 clinkerisation unit 25 Grinding Units and7 bulk terminals. With the commissioning of the grinding units at Dhar and at Bara yourCompany's cement manufacturing capacity will stand augmented to 96.5 MTPA.

In a separate development your Company participated in an insolvency resolutionprocess under the Insolvency and Bankruptcy Code 2016 and submitted a resolution plan forthe acquisition of Binani Cement Limited (BCL). BCL's assets which are proposed to beacquired fall in line with your Company's long-term strategy to expand grow andconsolidate its position in an economically efficient manner in the markets of Rajasthanand Gujarat. Currently hearings are pending before regulatory authorities like theNational Company Law Tribunal the National Company Law Appellate Tribunal and the SupremeCourt of India. That said your Company has received the requisite approval from theCompetition Commission of India (CCI) for the proposed transaction.

CORPORATE GOVERNANCE

Your Directors reaffirm their continued commitment to good corporate governancepractices. During the year under review your Company was in compliance with theprovisions relating to corporate governance as provided under the Listing Regulations. Thecompliance report is provided in the Corporate Governance section of this Annual Report.The auditor's certificate on compliance with the conditions of corporate governance of theListing Regulations is given in Annexure II to this Report.

EMPLOYEE STOCK OPTION SCHEMES ESOS – 2006

The Nomination Remuneration and Compensation Committee (the NRC) allotted 8791 equityshares of ` 10/- each of your Company upon exercise of Stock Options by the employees.

ESOS – 2013

During the year 47374 Stock Options and 11848 Restricted Stock Units (RSUs) havebeen vested in eligible employees. The NRC allotted 97288 equity shares of ` 10/- each ofyour Company upon exercise of Stock Options and RSUs by the employees.

The paid-up equity share capital of your Company increased from 274507906 equityshares of ` 10/- each to 274613985 equity shares of ` 10/- each.

In terms of the provisions of the SEBI (Share Based Employee Benefits) Regulations2014 the details of the Stock Options and RSUs granted under the above mentioned Schemesare available on your Company's website viz. www.ultratechcement.com.

A certificate from the Statutory Auditor on the implementation of your Company'sEmployee Stock Option Schemes will be placed at the ensuing Annual General Meeting (AGM)for inspection by the Members.

AWARDS

Your Company's efforts in various areas of its operations continue to receiverecognition. Some of the prestigious awards and recognition conferred on your Companyduring the year comprise of:

- Golden Peacock National Quality Award: Aditya Cement Works;

- Gold Medal for ‘National Awards for Manufacturing Competitiveness (NAMC)2015-16' in Building Material & Cement Sector: Aditya Cement Works;

- National Energy Conservation Awards-2017 (TPP - Certificate of Merit): Andhra PradeshCement Works;

- 14th National Award for Excellence in Energy Management Conducted byConfederation of Indian Industry: Dalla Cement Works;

- National Energy Conservation Award (Thermal Power Plant): Kotputli Cement Works.

RESEARCH AND DEVELOPMENT

Your Company's Research and Development (R&D) activities are aimed at facilitatingsustained growth of the business by developing new cement and concrete products providingenvironment friendly and innovative solutions to cement manufacturing Units and to theever increasing customer demands in concrete applications. Continuous product qualityimprovement customisation and enhancing cement plant productivity are its main forte asit leads to greater profitability customer value and delight.

Your Company's R&D Centre has a clear mission of integrating the latest scientificand technological developments in the field of cement and concrete. With this objectiveyour Company's R&D Centre provides comprehensive technical and analytical support tothe business.

Your Company's R&D activities include basic as well as applied research for:

- Fostering a better understanding of advanced building materials based on cement;

- Providing a forum for closer customer-manufacturer interaction;

- Increased customer delight;

- Demonstrating and encouraging development of low cost energy-saving materials; and

- Bridging the gap between theory and practice.

Customers Quality and Cost are core to all R&D product and process projects. Thisresults in process optimisation and debottlenecking natural raw materials conservationand promotion of alternative fuels while complying with the increasingly stringent qualityand environmental norms. It not only explores newer ways of preserving the environment andnon-renewable resources but also encourages all the stakeholders to utilise resourcesresponsibly. Towards this end your Company has developed premium products that aid inlimestone deposits and clinker conservation energy savings ensuring enhanced concretedurability and maintaining top product attributes and functionality.

Your Company's R&D Centre has:

- Developed and patented a new variant of green and low-temperature clinker; - new typeof high early and long-term strength cement;

- 3 types of high-early strength water saving cement.

Your Company has implemented in-house grinding aids technology in the Eastern Clusterto further reduce the clinker factor (clinker content in cement) extend the life of itslimestone deposits and significantly reduce its carbon footprint.

Your Company's R&D has become future ready. It has created totally new capabilitiesin the area of Pollution Abatement and Carbon Capture Nanotechnology of Cement andConcrete Concrete Durability Concrete Rheology 3D printable Concrete GeopolymerConcrete Modelling Cement & Concrete hydration and Chemical Admixtures for Cement andConcrete.

Your Company has successfully completed the application process for the NABL (NationalAccreditation Board for Testing and Calibration Laboratories) accreditation i.e. the testresults of your Company's Central R&D Laboratories will automatically be recognised bythe Bureau of Indian Standards the Government of India and all its regulatory bodies aswell as by your Company's customers and competitors. Your Company's R&D test resultswill be issuable with NABL accreditation stamp.

Your Company's R&D actively collaborates with Aditya Birla Science and TechnologyCompany Private Limited (ABSTCPL) and Academia. It represents your Company in national andinternational cement and concrete conferences and seminars.

HUMAN RESOURCES

Your Company's human resources is the strong foundation for creating many possibilitiesfor its business. During the year your Company added greater employee talent throughseamless integration of acquired assets. The rapid ramp-up of manufacturing units andmarkets was the highlight of our people effort.

Continuous people development through the Sales & Service Academy and CementManufacturing Excellence Academy for developing knowledge and skills coupled with theTalent Management practices will deliver the talent needs of the organisation. YourCompany's employee engagement score reflects high engagement and pride in being part ofthe organisation. The first batch of participants of StepAhead your Company's flagshipprogram for developing Sales leaders created in association with Xavier School ofManagement (earlier Xavier Labour Relations Institute) graduated during the year.

As on 31st March 2018 your Company's employee strength stood at 19681employees.

SAFETY

The Safety excellence journey is a continuing process at your Company. Safety of thepeople working for and on behalf of your Company is an integral part of business. YourCompany's Managing Director chairs the Safety Board they review the safety performance ofyour Company on a regular basis. In addition there are eight safety sub-committees headedby senior leaders to closely monitor various key performance indicators related to safety.During the year more than 600000 safety observations have been carried out. Corporatesafety audit by cross functional teams and structural stability assessment by thirdparties is carried out across your Company's locations and around 95% of identifiedhigh-priority points have been completed to ensure that the structures across our unitsare safe.

CORPORATE SOCIAL RESPONSIBILITY

In terms of the provisions of Section 135 of the Act read with Companies (CorporateSocial Responsibility Policy) Rules 2014 the Board of Directors of your Company hasconstituted a Corporate Social Responsibility (CSR) Committee which is chaired by Mrs.Rajashree Birla. The other Members of the Committee are Mr. G. M. Dave IndependentDirector; Mr. O. P. Puranmalka Non-Executive Director and Mr. K. K. Maheshwari ManagingDirector. Dr. Pragnya Ram Group Executive President Corporate Communication & CSR isa permanent invitee to the Committee. Your Company also has in place a CSR Policy which isavailable on your Company's website viz. www.ultratechcement.com.

Your Company's CSR activities are focused on Social Empowerment & WelfareInfrastructure Development Sustainable Livelihood Health Care and Education. Variousactivities have been initiated during the year in neighboring villages around its plantlocations. It infused over ` 60.71 crores over 2% of the average net profits of the lastthree years for the purposes of CSR.

A report on CSR activities is attached as Annexure III forming part of thisreport.

SUBSIDIARY JOINT VENTURE OR ASSOCIATE COMPANIES

In the matter of your Company's wholly-owned subsidiary Gotan Lime Stone Khanij UdyogPrivate Limited (GKUPL) the Supreme Court of India has directed the State of Rajasthan toframe and notify its policy relating to transfer of mining lease and thereafter passappropriate order in respect of the mining lease of GKUPL. The State Government hasnotified the new policy related to transfer of new mining lease based on which yourCompany has requested the Government to consider reinstatement of the mines in its favour.

The audited financial statements of your Company's subsidiaries and joint ventures viz.Dakshin Cements Limited Harish Cement Limited GKUPL Bhagwati Lime Stone Company PrivateLimited UltraTech Cement Middle East Investments Limited UltraTech Cement Lanka (Pvt.)Limited PT UltraTech Mining Indonesia and PT UltraTech Investments Indonesia as well asrelated information are available on the website of your Company viz.www.ultratechcement.com and also available for inspection during business hours at theregistered office of your Company. During the year UltraTech Cement SA (PTY) and UltraTechCement Mozambique Limitada subsidiaries of your Company were closed.

Any Member who is interested in obtaining a copy of the audited financial statementsof your Company's subsidiaries may write to the Company Secretary at the Registered Officeof your Company.

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 or associate companies is attached as 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 the Notes to 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 pertaining to remuneration and other details as required under Section197(12) read with the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 are attached as Annexure VI. In accordance with the provisions ofSection 197(12) of the Act read with the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 the names and other particulars of employees drawingremuneration in excess of the limits set out in the aforesaid Rules forms part of thisReport. However in line with the provisions of Section 136(1) of the Act the Report andAccounts as set out therein are being sent to all Members of your Company excluding theaforesaid information. Any Member who is interested in obtaining these particulars maywrite to the Company Secretary at the Registered Office of your Company.

BUSINESS RESPONSIBILITY REPORT

In terms of Regulation 34(2)(f) of the Listing Regulations a Business ResponsibilityReport forms part of the Annual Report.

CONTRACT AND ARRANGEMENT WITH RELATED PARTIES

During the financial year your Company entered into related party transactions whichwere on arm's length basis and in the ordinary course of business. There are no materialtransactions with any related party as defined under Section 188 of the Act read with theCompanies (Meetings of Board and its Powers) Rules 2014. All related party transactionshave been approved by the Audit Committee of your Company and are reviewed by it onperiodic basis.

The policy on Related Party Transactions as approved by the Audit Committee and theBoard is available on your Company's website viz. www.ultratechcement.com.

The details of contracts and arrangement with related parties of your Company for thefinancial year ended 31st March 2018 is given in Note 38 to the standalonefinancial statements of your Company.

RISK MANAGEMENT

The Risk Management Committee of your Company is mandated to review the risk managementplan / process of your Company. Through the annual risk report processes which are basedupon Business Environment Operational Controls and Compliance Procedures your Companyaims to assess and prioritise risks according to their significance and likelihood. Therisk assessment is not limited to threat analysis but also identifies potentialopportunities. The Risk Management Committee oversees the risk management processes toanalyse the risks more deeply and to define risk mitigation actions where necessary. Therisk horizon considered includes long term strategic risks short to medium term risks aswell as single events.

Key Business Risks identified by your Company –

Market Demand

The risk that the cement demand growth in the country may remain muted due to loweconomic activity. The demand for the construction material is fundamentally driven byeconomic growth / contraction in the country. Over the last couple of financial year'sgrowth in construction activity in the country has been slow impacting the cement demand.In a scenario where incremental capacity exceeds incremental demand the Government's pushon infrastructure and housing will help in increasing cement consumption and reduce thedemand-supply gap.

Energy costs

The risk of rising prices for power and fuel. Changes in fuel prices can significantlyalter the production costs as cement industry is extremely energy intensive. The fuelprices have been rising continuously during the year driven by global demand supplyscenario. Your Company continuously optimises its fuel mix and energy efficiency as wellas explores alternative fuels for use in the plants.

Raw Materials and Mineral Components

The risk that the raw materials cannot be supplied at economical cost or of suitablequality. Limestone being the primary raw material required for production of cement itscontinuous and long term availability is critical particularly under the dynamicregulatory environment. Your Company currently possesses sufficient limestone reserves.Securing additional reserves is critical to address your Company's expansion plans. Apartfrom preservation and elongation of existing reserves a range of measures includingstrategic sourcing and changing input mix are adopted by your Company.

Legal and Compliance

The risk that your Company is found to have inadvertently violated laws coveringbusiness conduct. The country's regulatory framework is ever evolving and the risk ofnon-compliance and penalties may increase for your Company leading to reputational risks.A comprehensive risk based compliance program involving inclusive training and adherenceto Code of Conduct is institutionalised by your Company. Periodic and ad hoc reporting tovarious internal committees for oversight ensures effectiveness of such program.

Competition Risks

The risk that your Company loses market share. The cement industry in India is a myriadaggregation of small and large players. With the expanding capacities of existing playersand also the emergence of new entrant's competition is a sustained risk. Strategicinitiatives to enhance brand equity through enhanced marketing activities and continuousefforts in enhancing the product portfolio and value adding services have been the thrustareas of your Company.

Financial Risks

The risk of exposure to interest rates foreign exchange rates and commodity pricefluctuations. Your Company has elaborate financial risk management policies which arefollowed for every transaction undertaken. Your Company's policies to counter such risksare reviewed periodically and aligned with the financial market practices and regulations.

Information Technology Risks

Risks related to Information Technology systems; data integrity and physical assets.Your Company deploys Information

Technology systems including ERP SCM Data Historian and Mobile Solutions to supportits business processes communications sales logistics and production. Risks couldprimarily arise from unavailability of systems and/or loss or manipulation of information.To mitigate these risks your Company uses back up procedures and stores information attwo different locations. Systems are upgraded regularly with latest security standards.For critical applications security policies and procedures are updated on a periodicbasis and users educated on adherence to the policies so as to eliminate data leakages.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has in place adequate internal control systems commensurate with the sizeof its operations. Internal control systems comprising of policies and procedures aredesigned to ensure sound management of your Company's operations safekeeping of itsassets optimal utilisation of resources reliability of its financial information andcompliance. Clearly defined roles and responsibilities have been institutionalised.Systems and procedures are periodically reviewed to keep pace with the growing size andcomplexity of your Company's operations.

DIRECTOR'S RESPONSIBILITY STATEMENT

The audited accounts for the year under review are in conformity with the requirementsof the Act and the Accounting Standards. The financial statements reflect fairly the formand substance of transactions carried out during the year under review and reasonablypresent your Company's financial condition and results of operations.

Your Directors confirm that: i. in the preparation of the Annual Accounts applicableaccounting standards have been followed along with proper explanations relating tomaterial departures if any; ii. the accounting policies selected have been appliedconsistently and judgments and estimates are made that are reasonable and prudent so as togive a true and fair view of the state of affairs of your Company as at 31stMarch 2018 and of the profit of your Company for the year ended on that date; iii. properand sufficient care has been taken for the maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of your Company andfor preventing and detecting frauds and other irregularities; iv. the Annual Accounts ofyour Company have been prepared on a going concern basis; v. your Company had laid downinternal financial controls and that such internal financial controls are adequate andwere operating effectively; vi. your Company has devised proper system to ensurecompliance with the provisions of all applicable laws and that such systems were adequateand operating effectively.

DIRECTORS

Re-appointment of Director

Mr. Kumar Mangalam Birla (DIN: 00012813) retires from office by rotation and beingeligible offers himself for re-appointment. A brief resume of Mr. Birla forms part of theNotice of the ensuing AGM.

Meetings of the Board

The Board of Directors of your Company met 6 times during the year to deliberate onvarious matters. The meetings were held on 24th April 2017 18thJuly 2017 18th October 2017 9th December 2017 18thJanuary 2018 and 19th March 2018. Further details on the Board of Directorsare provided in the Corporate Governance Report forming part of this Annual Report.

Independent Directors' Statement

Independent Directors on your Company's Board have submitted declarations ofindependence to the effect that they meet the criteria of independence as provided inSection 149(6) of the Act and Regulation 16(1) (b) of the Listing Regulations.

Formal Annual Evaluation

The evaluation framework for assessing the performance of Directors of your Companycomprises of contributions at the meetings strategic perspective or inputs regarding thegrowth and performance of your Company among others. Pursuant to the provisions of theAct and the Listing Regulations the Directors have carried out the annual performanceevaluation of the Board Independent Directors Non-Executive Directors ExecutiveDirectors Committees and the Chairman of the Board.

The NRC and the Board have laid down the manner in which formal annual evaluation ofthe performance of the Board its Committees and individual Directors has to be made. Itincludes circulation of evaluation forms separately for evaluation of the Board and itsCommittees Independent Directors/Non-Executive Directors/Executive Directors and theChairman of your Company.

The process of the annual performance evaluation broadly comprises:

Board and Committee Evaluation:

Evaluation of Board as a whole and the Committees is done by the individual Directorsfollowed by submission of collation to the NRC and feedback to the Board.

Independent / Non-Executive Directors Evaluation:

Evaluation done by Board members excluding the Director being evaluated is submitted tothe Chairman of your Company and individual feedback provided to each Director.

Chairman/Executive Director Evaluation:

Evaluation as done by the individual Directors is submitted to the Chairperson of theNRC and subsequently to the Board. The details of program for familiarisation ofIndependent Directors of your Company are available on your Company's website viz.www.ultratechcement.com.

Policy on Appointment and Remuneration of Directors and Key Managerial Personnel andRemuneration Policy

The NRC has formulated the Remuneration policy of your Company which is attached as AnnexureVII to this report.

KEY MANAGERIAL PERSONNEL

In terms of the provisions of Section 203 of the Act Mr. K. K. Maheshwari ManagingDirector; Mr. Atul Daga Whole-time Director & Chief Financial Officer and Mr. S. K.Chatterjee Company Secretary are the Key Managerial Personnel of your Company.

AUDIT COMMITTEE

The Audit Committee comprises of Mr. S. B. Mathur Mr. G. M. Dave Mrs. Renuka RamnathMr. D. D. Rathi and Mrs. Alka Bharucha. The Committee comprises of majority of independentdirectors with Mr. Mathur being the Chairman. Mr. K. K. Maheshwari Managing Director andMr. Atul Daga Whole-time Director & CFO are the permanent invitees.

Further details relating to the Audit Committee are provided in the CorporateGovernance Report forming part of this Annual Report.

During the year under review all recommendations made by the Audit Committee wereaccepted by the Board.

VIGIL MECHANISM

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 is available on your Company's website viz.www.ultratechcement.com.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

The CCI by its order dated 31st August 2016 imposed a penalty on elevencompanies including your Company. The CCI order is pursuant to the directions issued bythe Competition Appellate Tribunal (COMPAT) by its Order dated 11th December2015 setting aside the original CCI order dated 20th June 2012 and remittingthe matter to CCI for fresh adjudication of the issue and passing a fresh order. YourCompany filed an appeal against the CCI Order before COMPAT. COMPAT has granted stay onthe CCI order on condition that your Company deposit 10% of the penalty amounting to `117.56 crores which has since been deposited.

In a separate matter the CCI by its order dated 19th January 2017 hasimposed a penalty of ` 68.30 crores on your Company pursuant to a reference filed by theGovernment of Haryana. Your Company has filed an appeal against the said CCI order beforeCOMPAT. COMPAT has granted stay on the said CCI order.

The Government has made changes in the constitution and operations of Tribunals underwhich all matters with COMPAT have been transferred to the National Company Law AppellateTribunal (NCLAT). Hearing of order dated 31st August 2016 is completed atNCLAT and the order is awaited.

Your Company backed by a legal opinion believes that it has a good case in both thematters and accordingly no provision has been made in the accounts.

AUDITORS

Statutory Auditors

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 (Registration No: 101248W/W-100022) andM/s. Khimji Kunverji & Co. Chartered Accountants Mumbai (Registration No: 105146W)hadbeenappointedasJointStatutoryAuditorsofyourCompany for a term of five years until theconclusion of the 20th and 21st AGM respectively. In terms of theprovisions of the Act your ratification to their appointment as Joint Statutory Auditorsof your Company is being sought at the ensuing AGM and forms part of the Notice conveningthe AGM. The Joint Statutory Auditors have confirmed that they are not disqualified to actas Auditors and are eligible to hold office as Auditors of your Company.

The observations made in the Auditor's Report are self-explanatory and therefore donot call for any further comments under Section 134(3)(f) of the Act.

Cost Auditors

In terms of the provisions of Section 148 of the Act read with the Companies (CostRecords and Audit) Amendment Rules 2014 the Board of Directors of your Company have onthe recommendation of the Audit Committee appointed M/s. D. C. Dave & Co. CostAccountants Mumbai and M/s. N. D. Birla & Co. Cost Accountants Ahmedabad toconduct the cost audit of your Company for the financial year ending 31stMarch 2019 at a remuneration as mentioned in the Notice convening the AGM.

As required under the Act the remuneration payable to cost auditors has to be placedbefore the Members at a general meeting for ratification. Hence a resolution seeking yourratification for the remuneration payable to the Cost Auditors forms part of the Notice ofthe ensuing AGM.

Secretarial Auditor

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 hasappointed M/s. BNP & Associates Company Secretaries Mumbai as Secretarial Auditorsfor conducting Secretarial Audit of your Company for the financial year ended 31stMarch 2018. The report of the Secretarial Auditor is attached as Annexure VIII.The

Secretarial Audit Report does not contain any qualification reservation or adverseremark.

Your Company is in compliance with the Secretarial Standards specified by the Instituteof Company Secretaries of India.

EXTRACT OF ANNUAL RETURN

In terms of the provisions of Section 92 (3) of the Act read with the Companies(Management and Administration) Rules 2014 an extract of the Annual Return of yourCompany for the financial year ended 31st March 2018 is given in AnnexureIX to this Report.

OTHER DISCLOSURES

– There were no material changes and commitments affecting the financial positionof your Company 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.

– During the year your Company has not received any complaints under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

CAUTIONARY STATEMENT

Statements in the Directors Report and the Management Discussion and Analysisdescribing the Company's objectives projections estimates expectations or predictionsmay be "forward looking statements" within the meaning of applicable securitieslaws and regulations. Actual results could differ materially from those expressed orimplied. Important factors that could make a difference to your Company's operationsinclude global and Indian demand supply conditions finished goods prices feed stockavailability and prices cyclical demand and pricing in your Company's principal marketschanges in Government regulations tax regimes economic developments within India and thecountries within which your Company conducts business and other factors such as litigationand labour negotiations. Your Company is not obliged to publicly amend modify or reviseany forward looking statements on the basis of any subsequent development information orevents or otherwise.

ACKNOWLEDGEMENT

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 future. We thank our employeesfor their contribution to your Company's performance. We applaud them for their superiorlevels of competence dedication and commitment to your Company.

For and on behalf of the Board

Kumar Mangalam Birla

Chairman

(DIN: 00012813)

Mumbai 25th April 2018