DIRECTORS' REPORT AND MANAGEMENT DISCUSSION & ANALYSIS Dear Members, The Directors have pleasure in presenting the 75th Annual Report together with the Audited financial statements of the Company for the financial year ended 31st March 2015. DIVIDEND Your Directors are pleased to recommend a dividend of Rs. 2 per Equity Share of ` 5 each (40%) for the year ended 31st March 2015. The Dividend outgo would amount to Rs. 28.32 crores (inclusive of Dividend Distribution Tax of Rs. 4.79 crores). The Dividend subject to approval at the AGM on 26th September 2015 will be paid to those Shareholders whose names are borne on the Register of Members of the Company as on the date of book closure for the AGM. PERFORMANCE The Company's Operational & Financial performance has been quite satisfactory. It achieved a growth of about 5% in cement volumes as against industry's growth of about 2% in our zone and about 4% on all India basis. The Company achieved better realization than the previous year despite fall in the prices witnessed from second quarter onwards largely on account of company's strategy to grow more in the profitable marketing areas and focusing on the right segments. Company continues to manage its cost quite effectively. The efficiency parameters of the Company in terms of Power & Fuel consumption are today regarded as one of the best in the industry. Based on the improvement in the volume as well as the realisation, the Company's net sales turnover increased from Rs. 2337.86 crore to Rs. 2596.69 crore, viz. an increase of 11%. Company's Operating Profit at Rs. 377.66 crores showed an improvement of 9% over the previous year. Consequent to lower payout of the interest and lower provision for depreciation, the Company's profit before tax registered a healthy growth of 35% at Rs. 175.02 crore. The Company has provided out of abundant caution as exceptional items Rs. 63.25 crores which includes Rs. 49.19 crore towards sales tax exemption for which the legal proceedings are already going on and a one-time advertisement expenditure of Rs. 12.61 crore for setting up of new marketing network in Eastern markets. The Company's Profit after Tax consequently registered on a marginal increase of 3% at Rs. 95.60 crores as against Rs. 93.00 crores in the previous year. Supported by the strong Balance Sheet and well managed Debt Management, Credit Analysis & Research Ltd (CARE) has upgraded Company's Long term rating from AA- (Double A Minus) to AA (Double A). The Company continues to enjoy the highest possible rating of Short term rating of A1+. These Ratings have enabled the Company to raise funds at the most competitive possible interest rates. PROGRESS OF THE PROJECTS During the last quarter the Company commissioned 1.7 million tonne capacity at Durg, Chattisgarh, being the first phase of company's cement plant of 2.7 million tonne capacity. The Ministry of Environment & Forests has also given clearance to the Company's Odisha Grinding Unit project, the work of which is expected to be started shortly and is expected to be completed during FY16-17. The Company has commenced the work on one million tonne capacity in its second Split Location Grinding Unit at in Gujarat. This project is expected to be completed by March 2016. The expansion in the capacity and modernisation of Udaipur Cement Works Ltd, your subsidiary company, is progressing well. Its grinding unit has been in operation now for more than a year and orders for equipment, pertaining to setting up of clinkerization etc. have also been placed. It is expected that this project of 1.4 million tonne capacity would get completed by 3rd quarter FY 16-17. INDUSTRY SCENARIO On the macroeconomic front, India's GDP growth has improved to 7.3% from 6.9% in 2013-14, mainly spurred on by the growth in the services sector and little support from agriculture (only 0.2% growth). The low manufacturing growth seems to have bottomed out, aided by low crude oil and other commodity prices, which also helped the government to rein in the high inflation to well below the RBI's targeted level of 6%. However consumption remains weak which is preventing the take-off in manufacturing growth to the desired level, which is paramount to take India to the long cherished 'double-digit' growth on a sustainable basis. While construction growth has improved to 4.8% from 2.5% the year before, the further growth has been dampened due to subdued capital expenditure both by the government, which has been on a fiscal consolidation path and the private sector due to poor performance of the rural economy. Although immediate recovery in cement demand appears unlikely, there are enough indications that the initiatives taken by the govt. that bodes well for the cement industry. A major fillip to construction activity would come from the initiatives taken by the government to kick-start delayed projects by emphasizing the need to facilitate clearances and by continuing construction work in the industrial corridors and freight corridors. Besides, big-ticket projects like smart cities, Atal Mission for Rejuvenation, Urban Transformation (AMRUT) and affordable housing project will provide a huge boost to private investment in construction sector and help to revive cement demand from second half onwards. Moreover lower prices for raw material, coal and crude oil, coupled with improved demand will lead to higher sales and better profitability in cement business. Over the medium to long term thrust and initiatives for concretization of the roads and introduction of Bharat Mala project, involving construction of 5300 Km road will go a long way to boost demand in near future. INTERNAL FINANCIAL CONTROLS The Company has in place adequate internal financial controls commensurating with the size and nature of its operation. No material reportable weakness was observed in the system. The Company also has robust Budgetary Control System and Management Information System (MIS) which are backbone of the Company for ensuring that your Company's assets and interests are safeguarded. GROWTH THROUGH GREAT WORKPLACE PRACTICES JK Lakshmi Cement is focused on enriching the quality of life of its employees, developing their competencies and maximizing their productivity. With cultural pillars as bedrock, a strong industrial harmony of over three decades also stand evidence to the robust people practices of the company. The best people practices, as embedded in the culture, are designed to nurture a sense of ownership & accountability in the human capital. SMART: Specific, Measurable, Attainable, Realistic and Time Bound goals are formulated to align individual and business objectives and to achieve the goals, company arranges various training programmes, on-the-job training & support in higher education. Consequently, the environment is marked by high performing human resources duly rewarded & recognized with ample opportunity for career development and growth. Continuous employee engagement including strengthening bond with new blood through Open House Communication meetings; Skip-Level meetings; Knowledge Sharing Sessions; Work Anniversary celebrations; BANDHAN - an employee connect initiative; UDAAN Competition; MET (My Exclusive Time), We-Care, SPARK (Stimulating Passion in Achievers for excellent Results & enhanced Knowledge) and many more forums have helped the company to highly enrich the professional & personal lives of its people. The results of sustained people practices, highly motivated and engaged human capital has been instrumental in JK Lakshmi Cement being chosen among 100 most admired brands of Asia in Infrastructure category. This has been possible due to its differentiating work culture. Employee motivation and satisfaction, a testimony of work culture and practices, is amply reflected in the Employee Satisfaction Survey for 2015 which was conducted by globally renowned M/s TNS. 98% of MCS participated in the survey and TRI*M score is 92 (91 in 2013; 85 in 2011; 81 in 2009) etc. As per the report the company is performing better than the average top 10% of the organization in India. OUTLOOK & STRATEGIC IMPERATIVES While the economy grew by 7.3% (as per provisional estimates for GDP growth) in 2014 - 15, the growth in cement demand was estimated at 5% in the same period. Seen in long term perspective this marks fourth consecutive year in which cement demand growth has lagged the overall economic growth in the country. Growth in demand for cement is closely linked to growth in construction sector which includes housing, infrastructure, institutions, industries etc. Increase in construction activities of buildings for housing, institutions, and factories; and infrastructure development is key to drive the growth in demand for cement and construction materials. There are early signs of green shoots emerging in the infrastructure construction like commencement of work at Dedicated Freight Corridor as well as some of the road projects,etc. The construction activities are bound to pick up the pace based on the government focus on "Make in India", "Industrial Corridors" and "Industrial Townships" etc., which will lead to increased infrastructure development activities and building of new factories. The country faces huge shortage of quality housing -especially in lower income groups, both in urban as well as in rural areas. In addition as per census 2011 data, nearly 47% of the existing residential buildings are in urgent need of repairs. Cement is a vital input to build a quality house at an affordable cost. PM's vision of providing house to every citizen of the country also raises considerable hope of increase in cement demand. The Company will therefore need to explore all the options to make a stronger foothold in these emerging consumption centres. LOGISTIC COSTS Logistics cost or supply chain costs in terms of packaging, transportation, handling, warehousing, information processing, distribution, channel margins etc. forms a significant component of the cost that the customer has to bear. In certain cases it can go up as high as 30% of the total price a customer has to pay. Taking a cue from the government's initiative to rationalize the coal linkages to the power plants so as to reduce the unnecessary movement & costs, the cement industry too in general need to work on reducing cost and irrational movements of cement. This will not only help in cutting cost but will also help in improving the constrained availability of transportation resources like trucks and rail wagons, which in turn will further help in bringing the costs down. Inevitable implementation of GST will help in creating of common markets by removal of artificial political or administrative boundaries of a state. The each individual player industry needs to seize on this opportunity to focus on its core zone of competitiveness, thus reducing the cost, make cement affordable & available to every nook and corner in the country, and expand the market for cement. The product offerings by the industry also needs to be augmented and supported by appropriate use of technologies and services which is aligned to the changing needs of the customers. This in time to come would call for total solution approach in place of vanilla product offerings currently practiced in the industry. Those who would be quick to respond and proactively bring these changes would stay ahead of competition in this increasingly competitive industry which faces challenge not only by the entry of new players but also from the substitutes. Technology, especially information technology, software, sensors, algorithms etc. would play vital role in the way industry would compete for share of customers' mind in the future. Your company has taken lead in bringing industry first practices in many of these areas. There are many more initiatives which are on anvil and would roll out in due course of time. Our investments in expansion of capacities, new plants, new products, new technologies etc. are as much a testimony to our capabilities as for increasing consumption of this vital input. These along with long anticipated and long overdue positive revival of demand should have positive impact on the performance of the company and its place in the industry. EXTRACT OF ANNUAL RETURN An extract of the Annual Return as on 31st March 2015 in the prescribed form MGT -9 is attached as Annexure 'A' to this Report and forms part of it. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT The particulars of loans, guarantees or securities and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the financial statements. RELATED PARTY TRANSACTIONS During the financial year ended 31st March 2015, all the contracts or arrangements or transactions entered into by the Company with the Related Parties were in the ordinary course of business and on arms' length basis and were in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Agreement. Further, the Company has not entered into any contract or arrangement or transaction with the Related Parties which could be considered material in accordance with the Policy of the Company on materiality of Related Party Transactions. In view of the above, disclosure in FORM AOC-2 is not applicable. The Related Party Transaction Policy approved by the Board is available on the website of the Company. DIRECTORS AND KEY MANAGERIAL PERSONNEL Pursuant to Section 149 of the Companies Act, 2013 (Act), the Shareholders at the Annual General Meeting (AGM) of the Company held on 4th September 2014, had appointed Shri K.N. Memani, Shri B.V. Bhargava, Shri N.G. Khaitan, Shri Pradeep Dinodia and Shri Ravi Jhunjhunwala as Independent Directors of the Company for a term of five consecutive years commencing from the date of the AGM. All the Independent Directors of the Company have given requisite declarations that they meet the criteria of independence as provided in Section 149(6) of the Act and also Clause 49 of the Listing Agreement with the Stock Exchanges. During the year, IDBI had withdrawn nomination of Shri R.K. Bansal, its nominee on the Board of Directors of the Company, w.e.f. 26th August 2014. The Board placed on record its sincere appreciation of the valuable contributions made by Shri R.K. Bansal during the course of his tenure as a Director of the Company. Shri S.K.Wali retires by rotation and being eligible offers himself for re-appointment at the ensuing AGM. Further, in terms of Section 203 of the Companies Act, 2013, Shri Bharat Hari Singhania, Chairman & Managing Director; Smt. Vinita Singhania, Vice-Chairman & Managing Director; Dr. Shailendra Chouksey and Shri S.K. Wali, Whole- time Directors; Shri S.A. Bidkar, Chief Financial Officer and Shri B.K.Daga, Vice President & Company Secretary were appointed as "Key Managerial Personnel" (KMP) of the Company on their existing terms and conditions. CONSERVATION OF ENERGY ETC. The details as required under Section 134(3)(m) read with the Companies (Accounts) Rules, 2014 is annexed to this Report as Annexure 'B' and forms part of it. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements have been prepared by the Company in accordance with the applicable Accounting Standards. The Audited consolidated financial statements together with Auditors' Report form part of the Annual Report. A report on the performance and financial position of each of the subsidiaries and associates included in the consolidated financial statements is presented in a separate section in this Annual Report. Please refer AOC-1 annexed to the financial statements in the Annual Report. Pursuant to the provisions of Section 136 of the Act, the financial statements, consolidated financial statements alongwith relevant documents and separate audited accounts in respect of subsidiaries are available on the website of the Company. During the financial year under review, no company has become or ceased to be your Company's subsidiary or joint venture. With the coming into effect of the Companies Act, 2013, Dwarkesh Energy Ltd. has become an associate of the Company. DEPOSITS Pursuant to the approval of members by means of a Special Resolution at the Annual General Meeting held on 4th September 2014, the Company has continued to accept deposits from the public, in accordance with the provisions of the Companies Act, 2013 (Act) and the Rules made thereunder. The Particulars in respect of the deposits covered under Chapter V of the said Act, for the financial year ended 31st March 2015 are- (a) Accepted during the year- Rs. 1.52 crores; (b) Remained unclaimed as at the end of the year- Rs. 0.15 crores; (c) Default in repayment of deposits or payment of interest thereon at the beginning of the year and at the end of the year- NIL and (d) Details of deposits which are not in compliance with the requirements of Chapter V of the said Act- NIL. AUDITORS (a) Statutory Auditors and their Report M/s Lodha & Co., Chartered Accountants, have been appointed as Auditors of the Company to hold the office from the conclusion of the 74th Annual General Meeting held on 4th September 2014 until the conclusion of the 77th Annual General Meeting to be held in the Year 2017, subject to ratification of their appointment by the members at the respective AGMs to be held in the years 2015 and 2016. Accordingly, being eligible, matter relating to the appointment of the Auditors will be placed for ratification by members at the forthcoming Annual General Meeting. The observations of the Auditors in their report on Accounts and the financial statements, read with the relevant notes are self explanatory. (b) Secretarial Auditor and Secretarial Audit Report Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Board of Directors appointed Shri Namo Narain Agarwal, Company Secretary in Practice as Secretarial Auditor to carry out Secretarial Audit of the Company for the financial year 2014-15. The Report given by him for the said financial year in the prescribed format is annexed to this Report as Annexure 'C'. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. (c) Cost Auditor and Cost Audit Report The Cost Audit for the financial year ended 31st March 2014 was conducted by M/s R.J. Goel & Co., Cost Accountants, Delhi and as required Cost Audit Report was duly filed with Ministry of Corporate Affairs, Government of India. The Audit of the cost accounts of the Company for the financial year ended 31st March 2015, is being conducted by the said Firm and their Report will also be filed. PARTICULARS OF REMUNERATION Information in accordance with the provisions of Section 197 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 regarding remuneration and other details is annexed to this Report. However, as per the provisions of Section 136 of the said Act, the Report and Accounts are being sent to all the members of the Company and others entitled thereto, excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company. The said information is available for inspection at the Registered Office of the Company during working hours. CORPORATE SOCIAL RESPONSIBILITY Your Company has been one of the foremost proponents of inclusive growth and since inception, has been continuing to undertake projects for overall development and welfare of the society in the fields of environment, conservation of natural resources, health, education, rural development, etc. The Company has framed Corporate Social Responsibility (CSR) Policy in accordance with the provisions of the Companies Act 2013 and rules made thereunder. The contents of the CSR Policy are disclosed on the website of the Company. The annual report on the CSR activities undertaken by the Company during the financial year under review, in the prescribed format is annexed to this Report as Annexure 'D.' SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS During the financial year under review, there were no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations. CORPORATE GOVERNANCE - including details pertaining to Board Meetings, Nomination and Remuneration Policy, Performance Evaluation, Risk Management, Audit Committee and Vigil Mechanism Your Company reaffirms its commitment to the highest standards of corporate governance practices. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made a part of this Report. The Corporate Governance Report also covers the following: (a) Particulars of the four Board Meetings held during the financial year under review. (b) Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and Senior Management including, inter alia, the criteria for performance evaluation of Directors. (c) The manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual Directors. (d) The details with respect to composition of Audit Committee and establishment of Vigil Mechanism. (e) Details regarding Risk Management. DIRECTORS' RESPONSIBILITY STATEMENT As required under Section 134(3)(c) of the Companies Act, 2013, your Directors state that:- (a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) the accounting policies have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; (c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the said Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) the annual accounts have been prepared on a going concern basis; (e) the internal financial controls to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and (f) the proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems were adequate and operating effectively. ACKNOWLEDGEMENT Your Directors wish to place on record and acknowledge their appreciation for the continued support and valuable co-operation received from the Financial Institutions, Banks, Government Authorities, dealers, suppliers, business associates and Company's valued customers and the esteemed Shareholders for the faith they continue to repose in the Company. The Directors also express their gratitude to the 'team- JK Lakshmi' for their significant efforts and collective contribution to enable the Company maintain steady progress. On behalf of the Board of Directors Bharat Hari Singhania Chairman & Managing Director New Delhi Date: 11th August 2015 |