INDIA CEMENTS LIMITED
ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting their Sixtysixth Annual Report
together with audited accounts for the year ended 31st March 2012.
Rs. in Crores
For the year ended 31st March
Profit before Interest & Depreciation 922.64 473.30
Less: Interest & Other charges 286.73 141.72
Less: Depreciation / Amortization 251.29 244.03
Less: Forex Fluctuation Loss / (Gain) 3.64 (2.32)
Profit Before Tax 380.98 89.87
Deferred Tax 50.24 5.00
Provision for Taxation (net) 37.77 16.77
Profit after Tax for the year 292.97 68.10
Add : Balance brought forward from last year 954.48 986.11
Less : Proposed dividend on Equity Capital
(including Dividend Distribution Tax) 71.40 53.73
Less : Transfer to General Reserve 40.00 10.00
Less: Transfer to Contingency Reserve - 36.00
Less: Transfer to Debenture Redemption Reserve 47.58 -
Balance carried forward 1088.47 954.48
The Board of Directors has recommended a dividend of Rs.2/- on 30,71,76,747
equity shares of Rs.10/- each for the year ended 31st March, 2012 and
proportionate dividend on shares having calls in arrears, as compared to
Rs.1.50 per equity share for the year ended 31st March, 2011.
The Company issued during the year 1,500 equity shares at a price of
Rs.50/- per share (including premium of Rs.40/- per share) on exercise of
options in terms of India Cements Employees Stock Option Scheme, 2006
(ESOS, 2006). Further, the Company has adjusted a dividend of Rs.1,055
towards calls in arrears. Consequently, the paidup equity share capital of
the Company has increased to Rs.307,17,67,470 as on 31st March, 2012
comprising 30,71,76,747 equity shares of Rs.10/- each and 1,910 equity
shares on which a sum of Rs.13,360 has been paidup. The balance amount of
Rs.5,740 represents calls in arrears.
EMPLOYEES STOCK OPTION SCHEME
Details of options granted / exercised and other disclosures as required
under Clause 12 of the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
are set out in the Annexure `G` to this Report.
No options have been granted under India Cements Employees Stock Option
DIRECTORS` RESPONSIBILITY STATEMENT
Your Directors make the following statement in terms of Section 217 (2AA)
of the Companies Act, 1956. "We confirm
1. That in the preparation of the accounts for the year ended 31st March,
2012, the applicable accounting standards have been followed.
2. That such Accounting Policies have been selected and applied
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company as at 31st March, 2012 and of the profit of the Company for the
year ended on that date.
3. That proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.
4. That the annual accounts for the year ended 31st March, 2012 have been
prepared on a going concern basis." MANAGEMENT DISCUSSION AND ANALYSIS
Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and
Analysis Report is given as addition to this report. CORPORATE GOVERNANCE
Pursuant to Clause 49 of the listing agreement with Stock Exchanges, a
report on Corporate Governance along with Auditors` Certificate of its
compliance is included as part of the Annual Report and is given in
Annexure `C` and Annexure `D` respectively. Further, a declaration on Code
of Conduct signed by the Vice Chairman & Managing Director in his capacity
as the Chief Executive Officer of the Company is given as Annexure `E`.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
A report on CSR activities is given in Annexure F.
OPERATIONS COMPANY PERFORMANCE
The details relating to the performance of the Company have been outlined
in the Management Discussion and Analysis Section. As mentioned therein
while there was a marginal growth of 6.6% for cement demand on an all India
basis, the Southern region registered practically nil growth during the
year and had a negative growth of 3% upto December 2011. With substantial
increase in capacity in the region, the overall capacity utilization was
lesser than that of all India at 63% only in the South. Given the back drop
of the tight market conditions, the cement production of the Company was
lower than that of previous year.
The overall clinker production was at 71.95 lakh tons (76.34 lakh tons)
while the grinding was at 94.63 lakh tons (99.80 lakh tons). The sale of
cement was at 94.51 lakh tons as opposed to 99.32 lakh tons with a clinker
sale of 0.76 lakh tons as compared to 0.32 lakh tons in the previous year.
With better selling prices prevailing, the total sales and other income for
the year was higher at Rs.4222.69 crores registering a growth of 19% over
that of previous year. The cost of production was higher on account of the
increase in the prices of materials, fuel, power, transport charges and
consequently the EBIDTA was at Rs.922.64 crores as compared to Rs.473.30
crores in the previous year. Interest charges were higher at Rs.286.73
crores as compared to Rs.141.72 crores in the previous year due to loans
taken for redemption of FCCB and higher utilization of cash credit. The
depreciation / amortization charges were marginally higher at Rs.251.29
crores as compared to Rs.244.03 crores due to higher capitalization. The
foreign currency translation difference resulted in an expenditure of
Rs.3.64 crores as compared to a gain of Rs.2.32 crores in the previous
year. The provision for current tax was at Rs.37.77 crores (Rs.16.77
crores) while the deferred tax provision as per AS 22 was at Rs.50.24
crores as compared to Rs.5 crores in the previous year. The resultant
profit after tax was at Rs.292.97 crores as compared to Rs.68.10 crores in
the previous year.
The performance could have been better but for the bout of cost increases
as detailed below:
a. Increase in wages due to All India Wage Settlement which along with the
cost of living index by 356 points and this together with the increased
provision for unavailed leave as per Accounting Standard 15.
b. Increase in the price of diesel during the year which impacted the
inward and outward freight cost and raw material prices.
c. Increase in the price of coal by Singareni Colleries Ltd. from April
d. Fuller impact of increase in price of fly-ash by the state owned thermal
plants in Tamil Nadu and Andhra Pradesh.
e. Fuller impact of power tariff increases by the State Electricity Boards
in the previous year.
f. Depreciation of rupee against dollar impacting the coal price.
The improvement in selling price together with cost reduction initiatives
taken in improving the operating parameters and improvement in blending
ratio have more than offset the above cost increases.
The Company`s Sankari cement factory was granted Licence for Quality
Management Systems in accordance with IS/ISO 9001:2008 by the Bureau of
Indian Standards, Chennai and that the said Licence would be valid from
28th November, 2011 to 27th November, 2014.
The Birth Centenary of Sri T.S.Narayanaswami, one of the Founders of the
Company, was celebrated on Friday, the 11th November, 2011 and in
commemoration of the Centenary, Dr.B.S.Adityan, Director, unveiled the
Portrait of Sri T.S.Narayanaswami at the Corporate Office and released a
Special Issue of the Company`s In-house Magazine `Compass`. A sum of Rs.30
lakhs was donated on the occasion to Jeevan Blood Bank and Research Centre
for stem cell banking.
Pursuant to General Circular No.2/2011 No.51/12/2007-CL-III dated
08.02.2011 issued by the Ministry of Corporate Affairs, Government of
India, the Company has passed a resolution for sending the Balance Sheet
without attaching a copy of the Balance Sheet, Profit and Loss Account,
Report of the Board of Directors and the Report of the Auditors of the
Subsidiary Companies namely Industrial Chemicals and Monomers Limited, ICL
Financial Services Limited, ICL Securities Limited, ICL International
Limited, Trishul Concrete Products Limited, Trinetra Cement Limited,
Coromandel Electric Company Limited, PT. Coromandel Minerals Resources,
Indonesia and Coromandel Minerals Pte. Limited, Singapore. However,
pursuant to Accounting Standard 21 issued by the Institute of Chartered
Accountants of India, Consolidated Financial Statements presented by the
Company include the financials of the subsidiaries. The Company will make
available these documents/details upon request by any member of the Company
and its subsidiaries interested in obtaining the same. The annual accounts
of the Subsidiary Companies will also be kept for inspection by any member
at the Registered / Corporate Offices of the Company and its Subsidiary
TRINETRA CEMENT LIMITED
The Company`s 1.5 million tonne per annum cement plant which commenced its
operations in January 2011 stabilised in stages and has crossed one million
tonne mark in its first full year of operation. The captive power plant of
the Company of 20 MW has since been commissioned towards end of the last
quarter of the financial year. By creating necessary infrastructure through
completion of the enhanced capacity of stacker and reclaimer and
installation of the fly-ash handling system at Wankbhori Thermal Power
Plant in Gujarat during the year the unit could achieve gradual increase in
the capacity utilization.
TRISHUL CONCRETE PRODUCTS LIMITED
A Scheme of Amalgamation of Jubilee Cements Limited (JCL) with Trishul
Concrete Products Limited (TCPL) was sanctioned by Hon`ble High Court of
Judicature at Madras on 15.02.2012. The said Scheme became effective on
19.03.2012 on filing of the Court Order with Registrar of Companies,
Chennai, Tamil Nadu. Consequent to the said Scheme Of Amalgamation, the
shareholders of erstwhile JCL were allotted 5 equity shares of Rs.10/- each
of TCPL for every equity share of Rs.10/- each of erstwhile JCL.
COROMANDEL ELECTRIC COMPANY LIMITED
Coromandel Electric Company Limited became a subsidiary during the year.
With continued availability of adequate natural gas, the plant was able to
generate (net) 198 Million kwh (205 Million kwh) which was wheeled and used
by the cement plants of your Company in Tamil Nadu. The generation could
have been better but for the stoppage of the engines for upgradation of
instrumentation/process control systems for nearly 20 days. The total
revenue earned by the unit was at Rs.71.08 crores (Rs.64.44 crores) while
the net profit after tax was at Rs.12.48 crores as compared to Rs.10.87
crores in the previous year. The Company maintained its dividend pattern of
9% on equity shares besides declaring dividend at the respective coupon
rates for the participating/ non-participating preference share capital.
During the year, the Company has redeemed the first / second annual
instalments of redeemable cumulative participating/non-participating
preference shares on the due dates.
PT. COROMANDEL MINERALS RESOURCES, INDONESIA AND COROMANDEL MINERALS PTE.
The companies are in an advanced stage of commencing the mining in the coal
concession acquired by the companies. The necessary infrastructure works -
laying of roads and construction of bridges for facilitating the mining and
transportation of coal are likely to be completed in the next two months.
The mining contractor has already been appointed, who will commence the
development of mines immediately after completion of the infrastructure
CONSOLIDATED FINANCIAL STATEMENTS
As prescribed by Accounting Standard 21 issued by the Institute of
Chartered Accountants of India, the audited consolidated financial
statements of India Cements Group are annexed.
ASSOCIATE COMPANIES COROMANDEL SUGARS LIMITED
Coromandel Sugars Limited has achieved a record crushing of 8.01 lakh mts
of sugarcane (7.84 lakh mts) during the year under review. Improved cane
price paid to growers in the earlier season has increased area under
sugarcane plantation. Consequent to higher cane availability during the
season, the crushing is continued beyond financial year and it is expected
till end May 2012. With expanded plant capacity of 4000 tonnes crushing per
day (tcd) in place, higher sugarcane availability with reasonable sugar
recovery was ensured and the Company was able to maintain the better
performance than achieved during the earlier years.
Though the Company could achieve higher crushing vis-a-vis last year, it
could produce marginally lesser volume of 78693 tonnes of sugar, as against
79757 tonnes in the earlier year, consequent to lower sugar recovery of
9.82% (10.17%). Further, the Company could export power to the grid of 294
lakh kwhs during the year compared to 297 lakh kwhs.
Sales and Other income have grown by 10% to Rs.228 crores mainly on account
of increase in volume of free sale sugar of 72552 tonnes as compared to
64268 tonnes in the previous year and also on account of marginal increase
in average free sale price realization.
Based on unaudited financials, the Profit before Interest and Depreciation
was Rs.37.53 crores (Rs.35.85 crores) and Net Profit during the year was
Rs.19.16 crores (Rs.23.03 crores). The net profit during the year was
lesser due to the higher provision of interest of Rs.11.87 crores as
against Rs.6.55 crores in the previous year.
INDIA CEMENTS CAPITAL LIMITED (ICCL)
The main focus of the Company continues to be on various fee-based
activities such as, Full Fledged Money Changing [FFMC], Travel & Tours and
Forex Advisory Services. The wholly owned subsidiary viz. India Cements
Investment Services Limited (ICISL) is in Stock Broking. The FFMC division
operates out of 20 branches and Travels division operates at Chennai as an
IATA accredited branch. The subsidiary ICISL has 22 branches. The Gross
Income from operations of ICCL was Rs.416.11 lakhs and that of ICISL was
Rs.176.66 lakhs for the year ended 31st March, 2012.
EXPANSION / MODERNISATION
The upgraded new capacities at Chilamakur and Malkapur stabilized during
the year and have come upto their targeted levels of outputs. The 48 MW
power plant at Sankarnagar was commissioned in January 2012 and after
stabilization the commercial production started from the end of March 2012.
The total amount of fixed deposits including cumulative deposits, which had
not become due but outstanding as at 31st March, 2012 stood at Rs.1346.02
Lakhs. Deposits totalling Rs.26.67 Lakhs that matured for repayment were
neither claimed by the Depositors nor instructions for renewal were
received by the Company. Reminders were issued to the depositholders and
since the close of the financial year ended 31st March, 2012, deposits
aggregating to Rs.5.32 Lakhs out of the above have either been claimed and
paid or have been renewed or transferred to Investor Education and
CONSERVATION OF ENERGY ETC.
The prescribed details as required under Section 217(1)(e) of the Companies
Act, 1956 are set out in the Annexure `A`.
RESEARCH & DEVELOPMENT
During the year, your Company spent Rs.66.38 Lakhs towards revenue
expenditure of the R&D department besides contributing a sum of Rs.70.97
Lakhs to National Council for Cement and Building Materials (NCCBM), which
carries out research on behalf of the Industry.
Industrial relations continued to remain cordial during the year.
Housing and Urban Development Corporation Limited (HUDCO) vide its letter
No.Co.Sec./Nominee Director/2011 dated 07.12.2011 withdrew the nomination
of Sri K.Subramanian on the Board of our Company. The Board expresses its
appreciation of the valuable contribution made by Sri K.Subramanian during
the tenure of his Directorship.
Under Article 109 of the Articles of Association of the Company, Sri
N.Srinivasan (F&R), Sri V.Manickam and Sri A.Sankarakrishnan retire by
rotation at the ensuing Annual General Meeting of the Company and are
eligible for reappointment.
The Board has reappointed Sri N.Srinivasan as Managing Director for a
period of 5 years from 15th September, 2012 and resolutions for approval of
his reappointment and terms of reappointment have been included in the
notice convening the Sixtysixth Annual General Meeting of the Company.
Brief particulars of Directors eligible for reappointment in terms of
Clause 49 of the Listing Agreement are annexed to the Notice dated 25th
April, 2012 convening the 66th Annual General Meeting.
Messrs Brahmayya & Co. and P.S.Subramania Iyer & Co., Chennai, the Auditors
of the Company, retire at the ensuing Annual General Meeting and are
eligible for reappointment.
Sri S.A.Murali Prasad, Cost Accountant, Chennai, has been appointed as Cost
Auditor for the year 2012-13 subject to approval by the Government of
Messrs Capri, Gopalaiyer & Subramanian, Kalyanasundaram & Associates and
Bala & Co., Chennai, have been appointed as Internal Auditors for the year
The Directors are thankful to the Financial Institutions and the Bankers
for their continued support. The Directors also thank the Central
Government and the various State Governments for their support. The
stockists continued their excellent performance during the year and the
Directors are appreciative of this. The continued dedication and sense of
commitment shown by the employees at all levels during the year deserve
On behalf of the Board
N.Srinivasan Rupa Gurunath
Vice Chairman & Managing Director Wholetime Director
Place : Chennai
Date : 25th April, 2012
ANNEXURE `A` TO DIRECTORS` REPORT FOR THE YEAR ENDED 31st MARCH, 2012
Information pursuant to Section 217(1)(e) of the Companies Act, 1956 read
with the Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988.
A. Conservation of Energy:
(a) Energy conservation measures undertaken:
i. Dynamic separator in coal mill circuit improved the utilization of
petcoke and resulted in reduced power consumption.
ii. Old Reciprocating type compressor & Rotary air compressors being phased
out with energy efficiency screw compressors to reduce power consumption.
iii. Closed circuiting of cement mill at one of the plants ensured
improvement in the mill output and reduction in power.
iv. Installation of classifying liners instead of conventional liners
resulting in improved productivity and lower power consumption.
v. Additional power capacitors installed to improve the power factors at
the Andhra Pradesh plants.
vi. Modification of the hot air ducts from pre-heaters to coal mill for
increasing coal mill inlet temperature to utilise the low cost high
moisture imported coal.
vii. Soft Starters provided for energy saving in the kiln feed bucket
elevators and clinker deep bucket conveyors.
viii. Air volume optimization of compressors and cooler done to reduce
ix. Mechanical conveying system for cement mills along with weigh feeders
installed to reduce power.
x. Modification of outlet diaphragm in coal mill resulted in marginal
saving in power consumption.
xi. Variable frequency drives for cooler fans introduced resulting in less
xii. Replacement of MOCB with VCBS in phased manner at various plants.
xiii. Commissioned the 48 MW power plant in Tamil Nadu to ensure
uninterrupted power at relatively cheaper cost.
(b) Additional investments and proposals, if any, being implemented for
reduction of consumption of energy:
i. Modification of pre-heaters top stage cyclones for higher efficiency and
low pressure drop.
ii. Pre-Calciner M duct modification to increase the consumption of
iii. Closed circuiting for 3 more cement mills at Andhra Pradesh plants to
improve output and reduce the power consumption.
iv. Introduction of stepped liners for cement mills to optimize the output
and reduce power.
v. Introduction of dynamic separators in the coal mill circuit for two of
the Andhra Pradesh plants for improvement of output and for enabling low
cost fuel usage.
vi. VFD for raw mill, coal mill and cooler drives at one of the plants to
optimize power consumption.
vii. To improve the output of raw mill and to reduce power, tertiary
crusher is to be introduced in one of the plants.
viii. Cooler mid air tapping for increasing the hot air temperature to
circumvent the higher moisture in raw material and to ensure higher output
ix. Installation of fly-ash drier (in the advanced stage of completion) to
ensure optimum utilization of hot gas and to improve the higher
availability of fly-ash.
x. Installation of electronic packers, wagon loading arrangements at three
of the plants to improve packer output and reduce power and labour cost.
xi. Installation of one more power plant of 48 MW at Vishnupuram in Andhra
(c) Impact of measures at (a) and (b) above for reduction of energy
consumption and consequent impact on cost of production of goods:
The measures that are proposed to be taken/under implementation are
expected to reduce the power consumption by nearly 3 to 4 units/Tn of
cement and overall heat consumption by around 10-15 k.cals per kg of
clinker. However, during the year, the power was brought down by 1 unit
despite lower capacity utilization while heat consumption was reduced by 4
k.cals per kg of clinker.
(d) Total energy consumption and energy consumption per unit of production:
Given in Form `A` annexed.
B. Technology Absorption:
Efforts made in technology absorption: Particulars given in Form `B`
C. Foreign exchange earnings and outgo:
(a) Activities relating to exports, initiatives taken to increase exports,
development of new export market for products and services and export
plans: There was no significant export sales during the year under review.
(b) Total foreign exchange used and earned:
Current Year Previous Year
Used Rs. lakhs 3516.36 2795.80
Earned Rs. lakhs 254.47 159.71
FORM - A
FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY
A. POWER & FUEL CONSUMPTION
Units - KWH - Lakhs 8027.06 8374.20
Total amount - Rs. Lakhs 32884.15 29616.56
Rate per unit - Rs. 4.10 3.54
(b) Own Generation
(1) Through Diesel/Furnace Oil Genset *
Units - KWH - Lakhs 697.66 907.14
Unit per Litre of Diesel/Furnace Oil-KWH 3.31 3.79
Cost per unit - Rs. 2.69 3.83
(2) Through Steam Turbine/Genset
Units - KWH - Lakhs - -
Unit per Litre of Furnace Oil/Gas-KWH
Cost per unit - Rs.
2. Coal for Kilns (various grades incl. Lignite)
Quantity Tonnes 1165984 1209023
Total Cost Rs.Lakhs 74367 68549
Average Rate Rs./Tonne 6378 5670
3. HSD/Furnace Oil for Kilns
Quantity K.Litres 739.87 820.91
Total Cost Rs.Lakhs 314.30 343.74
Average Rate Rs./K.Litre 42480 41873
4. Consumption per unit of Production Standards
Electricity (KWH/Tn of Cement) 110 92.40 93.19
Coal Consumption Per Tn of Clinker 20-25 16.21 15.84
(Depending on Quality of Coal)
Diesel Oil/Furnace Oil per Tn of
Cement (Litres) 0.08 0.08
* Including Power from Waste Heat Recovery Plant.
FORM - B
FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION
Research and Development (R & D):
1. Specific areas in which R&D The Company has started an inhouse
carried out by the Company R&D department during December 1999
with a specified objective of
2. Benefits derived as a result carrying of R&D Projects in
of above R & D development of expert systems for
the mills and kilns optimisation,
3. Future plan of action Benchmark studies of our Cement
Plants, optimisation of process
Systems and Parameters ensuring
Product improvement and cost
4. Expenditure on R & D:
(a) Capital : Nil
(b) Recurring : A sum of Rs.66.38 lakhs has been spent
during the year for the functioning of
R & D department. Besides this, a sum
of Rs.70.97 lakhs is the contribution
to National Council for Cement and
Building Materials (NCCBM) which
carries out Research on behalf of the
(c) Total : Rs.137.35 lakhs
(d) Total R&D expenditure
as a percentage of total
turnover : 0.03
Technology absorption, adaptation and innovation:
1. Efforts, in brief, made }
towards technology absorption, }
adaptation and innovation. }
2. Benefits derived as a result }
of above efforts e.g. product }
improvement, cost reduction, }
product development, import }
substitution etc. }
} Not applicable
3. In case of imported }
technology (imported during }
the last 5 years reckoned }
from the beginning of the }
financial year), following }
information may be furnished: }
(a) Technology imported }
(b) Year of import }
(c) Has technology been fully }
(d) If not fully absorbed, }
areas where this has not }
taken place, reasons }
therefor and future plans }
of action. }
MANAGEMENT DISCUSSION AND ANALYSIS
ECONOMY - AN OVERVIEW:
Against the backdrop of the Eurozone crisis, turmoil in West Asia and spike
in crude prices, the fiscal year 2011-12 was a year of "recovery
interrupted" for the Indian economy. India`s GDP growth is estimated at
6.9% in 2011-12 - a sharp fall from 8.4% in the last year.
While the estimated growth of 6.9% in the fiscal year 2011-12 can be
considered reasonably healthy in view of the adverse global developments
mentioned above, it would be unwise to ignore the fact that domestic
factors like high inflation, depressed investment climate and unaddressed
manufacturing bottlenecks also slowed down industrial activity. India`s
slow down in 2011-12 can be attributed almost entirely to weak industrial
growth with the good performance of the services and agricultural sectors.
In 2011-12 the growth is estimated to be 2.5% in agriculture, 3.9% in
industry and 9.4% in services.
Industrial growth however witnessed a sharp fall to 4.1% in February 2012
as against 6.7% growth in the corresponding month of the previous fiscal.
The disappointing growth was mainly due to rather poor performance of the
manufacturing sector especially consumer goods. As per the revised IIP
data, the industrial production grew only by a marginal 1.1% during the
year under review that too driven by the 4.1% growth in February 2012. The
marginal uptrend in the growth towards the end of the year was witnessed
due to increase in the consumption of processed foods in the food and
Owing to buoyant demand from diversified overseas markets, exports,
according to provisional figures released by the Industry, Chemicals &
Textiles Ministry, exceeded the targeted US$ 300 billion for the fiscal
year 2011-12. The sectors that posted impressive growth included
engineering, gems & jewellery, textiles and pharmaceuticals.
Imports during 2011-12 clocked a high of US$ 485 billion mainly on account
of rising global oil prices with oil imports touching US$ 150 billion. The
trade deficit widened to US$ 185 billion and the Government faces a stiff
challenge to keep it under control in the current fiscal.
During the period April-December 2011, the Current Account Deficit (CAD) -
an indication of the gap between foreign exchange inflows and outflows,
surged to US$ 53.7 billion (4% of the GDP) from 3.30% of GDP in the same
period last year - reflecting higher trade deficit on account of imports of
petrol, oil, lubricants, gold and silver.
Inflation which had raged at double digit levels over the last two years is
now lower. The decline in inflation has provided some relief and the time
is ripe therefore to boost investment in the economy. The Prime Minister`s
Economic Advisory Council has opined that inflation would drop further and
hover around 5% to 6% in the current fiscal 2012-13.
Demand for cement in the country improved during the current year under
review, registering a 6.60% growth better than 4.70% registered in the
previous year. Given the long term nature of business and also since it
takes, of late, 24-30 months to set up capacity, Industry created capacity
much ahead of demand and this led to lower capacity utilization - more so
in South, where substantial capacity came into play - Capacity utilization
in South was 63% as against All India Capacity utilization of 75%. It is
expected that capacity utilization will improve steadily in line with
growth in demand in the coming years.
Demand growth was healthy in regions where Infrastructure and Housing
activities were brisk on the back of progressive policy of State
Government. Western region registered significant growth of 13.80% followed
by North of 11%, Central of 9.30% and East of 2.90%. However, in Southern
region, growth was flat primarily due to lack of infra and housing projects
in Andhra Pradesh and Karnataka.
It is heartening to note that during January - March `12 quarter, demand
has grown sharply at 10% as opposed to 5.60% in the preceding 9 months.
South has shown a remarkable growth of 9.40% as compared to negative growth
of 3% in the preceding three quarters.
Southern cement industry which has the highest capacity in the country,
have been striving hard to access Northern & Eastern markets in the
interest of improving the capacity utilization, but is constrained due to
Rail Rakes availability.
Given that supply-demand imbalance in South is relatively higher, it is
expected that demand will catch up with supply by
With a pronounced GDP growth of around 7.50% next year, the industry can
expect a reasonable growth rate of 8% - 9% in the coming years which should
enable the industry to operate at around 80% of its capacity.
In addition to the supply overhang, the industry had also to bear the
substantial cost push in the form of increase in the price of coal, diesel
price revision, increase in the Sales Tax on cement by 2% in Tamil Nadu,
heavy depreciation of Rupee against Dollar of more than 13% from Rs.45 to
Rs.51 impacting coal prices, revision in power tariff in Andhra Pradesh and
continued power cut and load shedding in the States of Tamil Nadu and
Andhra Pradesh necessitating usage of high cost DG and purchased power. In
addition, the Union Budget 2012 proposes to increase the Excise Duty from
10% to 12% and steep increase in railway freight on inward and outward
movement of materials ranging from 20% to 30% and a steep 35% increase in
power tariff in Tamil Nadu from 1/4/2012. Given all these adverse factors
your Company`s main challenge during the year under review was to manage
volumes and cost of production on the one hand and optimize selling prices
on the other to improve the bottom line.
The performance of the Company in terms of production and sale was as
In Lakh Ts
Clinker 71.95 76.34
Cement 94.63 99.80
Cement Sales 94.51 99.32
Clinker Sales 0.76 0.32
Overall sales including Clinker 95.27 99.64
The overall production was impacted due to the negative / practically nil
growth in the markets served by the Company`s plants. The Andhra Pradesh
markets witnessed a further drop of around 8% in demand over and above the
17% negative growth recorded in the previous year and with the bunch of new
capacities arising in that region, the severe competition for market space
resulted in the lower capacity utilization of the Andhra Pradesh plants
including that of your Company. Towards the end of the year the power
scenario further worsened in both Tamil Nadu and Andhra Pradesh resulting
in power holidays besides zero power during peak hours which curtailed the
availability of clinker despite higher generation through captive power
sets. The situation is likely to improve as the 48 MW power plant at
Sankarnagar has since been commissioned and is expected to go on full
stream during the financial year 2012-13. Towards the close of the
financial year your Company has commissioned railway sidings at its two
grinding units at Chennai and Parli and the consequent reduction in the
transportation cost of clinker by rail (instead of road as hitherto) will
have its full impact during FY 13. The depreciation in the value of Rupee
and increase in the ocean freights coupled with the volatility in the FOB
price of imported coal resulted in higher cost of fuel. The expanded
capacity of Chilamakur Cement Plant and the second line at Malkapur has
stabilized and it is expected that the overall operating efficiencies would
improve further with the stabilized run of these plants.
ENERGY EFFICIENCY AND COST REDUCTION
Despite the lower capacity utilization caused by lower demand in the
market, sustained efforts made by your company resulted in marginal
reduction in power consumption per Tn of cement and maintaining the fuel
consumption/Tn of clinker on par with the previous year. The ever
increasing cost of fuel and increase in power tariff by State Electricity
Boards imposed additional burden which could however be controlled through
fuller utilization of the power from the Company`s gas based power plant at
Ramanathapuram and also from the low cost power availed from Andhra Pradesh
Gas Power Corporation Limited (APGPCL) in Andhra Pradesh. The Company also
utilized the wind power generated by its wind farms of a total of 279 Lakh
Units (315 Lakh units) and power from its Waste Heat Recovery System at
Vishnupuram which accounted for 539 Lakh units (475 Lakh units). Towards
the end of the last quarter the Company`s captive power plant of 48 MW at
Sankarnagar has been commissioned.
During the year, your Company obtained ISO 9001 certification for quality
assurance for its Sankari Plant in addition to its already certified plants
at Sankarnagar, Dalavoi, Chilamakur and Vishnupuram. The ISO certification
for its Yerraguntla Cement Plant is in progress.
Your Company has also implemented Total Productive Management (TPM) for
productivity improvement in its plants at Sankarnagar, Dalavoi, Chilamakur,
Yerraguntla, Vishnupuram and Malkapur.
CLEAN DEVELOPMENT MECHANISM (CDM)
Waste Heat Recovery System at Vishnupuram continues to earn certified
emission reductions as a CDM project. OPPORTUNITIES, THREATS, RISKS AND
The demand supply mismatch arising out of burst of new capacity additions
(and not majorly out of lack of normal demand growth) has constricted the
capacity utilization levels of the industry for the last two years in
particular. Given the resilient nature of the economy, India has been able
to achieve reasonable GDP growth of 6.9% in FY 12 which is expected to
increase to 7.5% to 8% in FY 13 is expected to translate into a demand
growth of 8% to 10% over the next few years. While demand for cement grew
by 6.6% in FY 12, there are already encouraging signs of a pick-up in
demand with demand spurting by over 10% in the last quarter of FY 12. It is
therefore expected capacity utilization to gradually increase over the next
3 years with parity between supply and demand being restored by then. While
this being the overall scenario, there are still pockets of high demand
growth in certain regions of the country and your Company is already moving
significant quantities of cement to the Eastern markets as far as Assam &
Nepal to optimize capacity utilization, given the overall surplus. Your
Company`s attempts in the short run will be towards striking an optimum
balance between volumes and profitability and achieve best results.
The availability of power from the State Electricity Boards is another area
of concern with acute shortages in power availability in Tamil Nadu and
Andhra Pradesh. Your Company has already addressed this concern by putting
a 48 MW thermal power plant at Sankarnagar to take care of the full
requirements of power of all the cement plants and grinding unit in Tamil
Nadu and this power plant has been commissioned towards the end of FY 12
and has started supplying power. Work has already been commenced on the
installation of 48 MW thermal power plant at Vishnupuram which is expected
to be commissioned towards the end of FY 13 and will thereafter fully meet
the power requirements of the cement plants in Andhra Pradesh. With its
share of power available from the gas based power plants of APGPCL and
Coromandel Electric Company Limited, Company`s own windmills, diesel
generating sets, waste heat recovery system at Vishnupuram, the Company has
ensured that it will be fully self-sufficient in meeting its power
Availability of indigenous coal from the nationalized coal companies and
the quality of supplies is another area of concern. This problem has
however been mitigated to a large extent due to the coal linkages obtained
during the last two years to cater to the requirements of the recent
capacity expansions in Andhra Pradesh. The Company imports coal to meet its
cement plants` requirements thereby adequately addressing the quantity,
quality and cost aspects. Mining rights obtained in Indonesia should
fructify with infrastructure of roads and bridges under completion to
ensure timely coal supplies.
The ever rising cost of energy in the form of petroleum products will also
have its impact on the power and transportation costs, which it is hoped to
be neutralized by increasing the selling prices.
The Prime Minister`s Economic Advisory Council (PMEAC) has projected a 7.5%
to 8% growth for the fiscal year 2012-13.
Economic experts are banking on the domestic market to sustain growth
through a Government led initiative to boost private sector infrastructure
investments. With industrial growth exhibiting signs of a revival and given
the Government`s intention to boost agriculture development and give a
fillip to infrastructural growth, the clocking of a GDP growth of 7.5% in
2012-13 could well be achievable.
Both the Central and State Governments have plans to boost investments in
housing for the lower income groups which could help drive cement demand
together with proposed investments on roads and other infrastructural
projects. The recent proposals of the Reserve Bank of India in its Credit
Policy to reduce Repo and Reverse Repo rates by 50 basis points is expected
to soften housing loan interest rates thereby giving a fillip to demand for
housing for the middle income sector.
Given all these positive factors, it is reasonably expected a 8% to 10%
annual growth in cement demand over the next few years and an early
restoration of parity between cement demand and supply which should augur
well for the cement industry.
VALUE ENHANCING STRATEGIES
Through various upgrades / timely expansion at its locations, the Company
has reached a capacity of 14.05 million tonnes from 8.81 million tonnes in
2002. The second strategy of securing uninterrupted supply of power and
fuel is also being achieved through installation of power plants and also
through acquisition of coal mining rights in Indonesia. The Company also
secured additional linkages of domestic coal for two of its Andhra Pradesh
plants and in order to circumvent the volatility in the ocean freight, the
Company has also acquired two ships for transporting coal / other raw
materials based on cost economics. The Company`s strategy of optimizing the
manpower strength has also been achieved through various voluntary
retirement schemes over the years and is presently improving upon the
skills of its workers for doing multi tasking. As North and West markets
have been growing, the Company is on the lookout for further growth
opportunities available in that region. The Company has put in place a
Management Team for infrastructure projects. Based on the demand supply
scenario in the next few years the Company also proposes to increase its
presence in its dominant South market through further capacity creation at
one of its existing location.
HUMAN RESOURCES & INDUSTRIAL RELATIONS
The industrial relations remained cordial throughout the year at all the
units. Training and multi task development skills are given prime
importance. The overall number of employees at the end of the year under
review was 3195 (3220).
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
The Company has a well defined internal control system to support efficient
business operations and statutory compliance. A strong internal audit
function carries out concurrent audit of all the plants and offices.
Suitable internal checks have been built in to cover all monetary
transactions with proper delineation of authority, which provides for
checks and balances at every stage. The Company has a strong system of
budgetary control which covers all aspects of operations, finance, capital
expenditure at a macro level on a monthly basis reporting directly to top
management. All the physical performances and efficiency parameters are
monitored on a daily basis and actions are taken then and there. The
periodical operational review by top management at Head Office also
includes internal audit and cost audit observations and action taken to
resolve / rectify the irregularities and correct the procedures wherever
necessary. The Company has an Audit Committee of Directors to review
financial statements to shareholders. The role and terms of reference of
the Audit Committee cover the areas mentioned under Clause 49 of the
Listing Agreement with Stock Exchanges and Section 292A of the Companies
Act, 1956 besides other terms as may be referred to by the Board of
Directors from time to time.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
HIGHLIGHTS OF FINANCIAL PERFORMANCE
Net Sales/Income from operations 4203.40 3500.72
Other Income 19.29 39.61
Total Income 4222.69 3540.33
Total Expenditure 3300.05 3067.03
Operating Profit 922.64 473.30
Operating Margin % 21.85 13.37
Interest & Finance Charges 286.73 141.72
Gross Profit after Interest but before
Depreciation and Tax 635.91 331.58
Depreciation 251.29 244.03
Profit for the year 384.62 87.55
Foreign Exchange Fluctuation (3.64) 2.32
Profit before Tax 380.98 89.87
Deferred Tax Liability 50.24 5.00
Taxation provision - net 37.77 16.77
Profit after tax 292.97 68.10
Return on Capital Employed (ROCE)* 15.30% 8.83%
* ROCE = Operating Profit/Capital Employed (excluding capital work-in-
progress and revaluation)
Net Sales and Other Income from operations has improved by 19% primarily
due to increase in selling price of cement by 24%. The total expenditure
has gone up by 7.6% primarily on account of the increase in cost of
production due to various factors detailed elsewhere in the report.
Interest charges were higher on account of loans taken for redemption of
FCCB while the depreciation charges are higher on account of higher
capitalization including the power plant. The Deferred Taxation provision
as per AS 22 has resulted in Rs.50.24 Crores (Rs.5 Crores) while the
provision for current tax works out to Rs.37.77 Crores (Rs.16.77 Crores)
and the resultant net profit after tax was Rs.292.97 Crores as compared to
Rs.68.10 Crores during the previous year.
Statements in the Management Discussion and Analysis Report describing the
Company`s objectives, expectations or predictions may be forward looking
within the meaning of applicable securities laws and regulations. Actual
results may differ materially from those expressed in the statement.
Important factors that could influence the Company`s operations include
global and domestic supply and demand conditions affecting selling prices
of finished goods, input availability and prices, changes in government
regulations, tax laws, economic developments within the country and other
factors such as litigation and industrial relations.