MANAGEMENT DISCUSSION AND ANALYSIS REPORT Industry Structure and Development The Indian Cement Industry with an installed capacity of around 360 million tonnes has registered a cumulative growth in production at around 6 percent during the period April 2014 to March 2015 as against around 3 percent during the corresponding period of last year. The cumulative growth for the eight core industries, which comprise nearly 38 percent of the weight of items in the IIP (coal, crude oil, natural gas, refinery products, fertilisers, steel, cement & electricity) is 3.5 percent during the period April 2014 to March 2015 as against 2.6 percent during the corresponding period of last year. The surplus capacity available in the states of Gujarat & Rajasthan and the lower export volumes due to unrenumerative prices are the two major factors affecting the sustained profitability of cement companies in the state of Gujarat. The entry of new manufactures and consolidation of existing players is resulting in high price volatility and variations in prices are experienced very frequently in different regions and different periods of time. Future Outlook With the stable political scenario and the Government's determination to bring in reforms, gradual increase in economic activity is expected with major infrastructure projects. Cement and construction materials are critical for the housing need of the population and for the basic infrastructure like roads, bridges, schools, hospitals, airports and many other facilities. The medium term to long term future of the cement industry is optimistic and positive. However, due to addition of new plants with large capacities, the capacity utilization is likely to be on the lower side and old plants with less efficient process and machinery is likely to experience fierce competition in the market places. In the state of Gujarat, there is likely to be a large surplus of capacity over demand for the near future, which may affect the stability of cement prices. A large part of production therefore will need to be exported or transported to longer distances, in other states like Maharashtra, Karnataka and Kerala. Opportunities & Threats The cement consumption growth in the state of Gujarat is likely to be maintained and is expected to give ample opportunities for growth in the cement industry. With the government policy of deregulating the sale of diesel oil is likely to affect the cost delivery, though it is favorable as of now due to the fall in international price of crude. The rail freight continued to be high and the transportation by rail is unviable. The infrastructural constraints and high cost of handling of cement at public ports continue to pose threats to the sustainability and stability of the industry in Gujarat. The environment regulations are already amended, where the emission levels are drastically reduced in line with the norms achieved in the equipments with latest technology and design. This calls for substantial additional investments in a short span of time to upgrade the pollution control equipments with that of latest design and technology. Although, Gujarat state is likely to continue to be surplus in cement production, the company can access coastal markets economically being close to the sea. Segment Review and Analysis During the year, the company has produced and sold mainly cement of different varieties like Ordinary Portland Cement (OPC) and Portland Pozzolana Cement (PPC). The company also sold small quantities clinker, which is the intermediate product for the manufacture of cement. The bulk of the revenue and profitability comes from the sale of cement. Risks and Concerns Over capacity of cement versus the demand is resulting in very volatile market conditions and profitability of cement business. The escalation of input costs, cost of delivery and the high rates of government levies (royalty of limestone, excise, sales tax, octroi, local body tax and other miscellaneous levies) continue to be a major concern for our company. Internal Control systems and their adequacy Your Company has adequate systems of internal controls commensurate with the size and nature of its operations. The internal audit team continuously monitors the effectives of internal control systems. The Management periodically reviews the Reports of the Internal Auditor highlighting suggested improvements, cost control measures and need of policy modification and assuring its adherence. The Audit Committee reviews the financial results, adequacy of disclosures and adherence of accounting principles. The corrective steps and suggestions of the Audit Committee are implemented and the Internal Auditor reviews the same and reports of any deviations and other recommendations to formulate management policies, risk management procedures. Human Resource Development / Industrial Relations Your Company recognizes people as the primary source of its competitiveness and continues to focus on people development by leveraging technology and developing a continuously learning human resource base to unleash their potential and fulfill their aspirations. The business environment is rapidly changing, bringing in its own set of opportunities and challenges. The shifting environments of the businesses demand the need to brpare our current and future leaders to face and overcome such business adversities and opportunities. In view of manpower development as a key focus, it continues to take new initiatives to further align its HR policies to meet the growing needs of its business. We have embarked upon employee engagement as a tool to create conducive working environment that will facilitate employee commitment. The Industrial relations at the plant were cordial. The Management places on record the contribution of employees at all levels during the year and their whole-hearted co-operation, which has resulted in improved results. Corporate Social Responsibility Your Company firmly believe in commitment to all stakeholders and is aware of its commitment to local communities for ensuring sustainable development. Therefore, your company lay high emphasis on understanding the requirements of the local community and embark on initiatives, expending considerable resources, which create long-term societal benefits. Your company takes utmost care in the selection of community interventions we initiate. The prime endeavor is to remain focused on creating long-term wealth creation for all local community members irrespective oftheir gender, ethnic and religious backgrounds. Health Care The factory has a health care center providing medical aid to the Company's employees and the family members, workers as well as patients from the near by areas. The Company conducts various Immunization programmes, family welfare education, health care, safety as well as various periodical health check up and first aid training programmes for employees and workers. Your company continues to contribute towards the Medical Centre and occupational health services. Education The Company has a full-fledged primary school for the children of the employees and local people staying in nearby areas. In order to enable the children studying in English medium schools or Colleges in Porbandar, the company provides school bus facility. Your company also provides extra coaching classes to the under - privileged students near and around Ranavav. Afforestation The Company is committed to the protection of environment and maintenance of bio diversity. A green belt has been developed in the plant and nearby areas. Many saplings were planted at various places in the plant and mines area. Your company has planted more than one lac trees in last one decade with survival rate of more than 80%. The team at the plant has made lot of efforts in conservation and propagation of rare species of trees, increasing forest cover and fruit garden. Cautionary Statement Statements in this report on Management's Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or brdictions may be forward looking statements within the meaning of applicable security laws and regulations. The Statements are based on certain assumptions and expectation of future events. Actual results could however differ from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and domestic demand supply position, raw material, fuel, transport cost and availability, changes in Government regulations and tax structure, economic development in India. The Company assumes no responsibility in respect of forward-looking statements, which may be amended or modified in future on the basis of subsequent developments, information or events. On behalf of the Board of Directors M. S. Gilotra Managing Director Jay Mehta Executive Vice Chairman Place : Mumbai Dated: 14th May, 2015 |