The Directors have pleasure in presenting their Seventy-first Annual Report together with audited accounts for the year ended 31st March 2017.
Rs. in Crore
For the year ended 31st March
Profit before Interest, Depreciation & Exceptional Items
Less : Finance costs
Less : Depreciation / Amortization
Less : Exceptional Items
Profit Before Tax
MAT credit entitlement
Profit After Tax
Other comprehensive income (net)
Total comprehensive income
Add : Surplus brought forward from last year
Less : Dividend on Equity Capital (including Dividend Distribution Tax) paid during the year
Less : Transfer to General Reserve
Surplus carried forward
The Hon''''ble National Company Law Tribunal (NCLT), Division Bench, Chennai, has, vide its Orders dated April 13, 2017 and April 20, 2017 sanctioned the Scheme of Amalgamation and Arrangement between Trinetra Cement Limited (TCL) (First Transferor Company) and Trishul Concrete Products Limited (TCPL) (Second Transferor Company) with The India Cements Limited (Transferee Company) and their respective shareholders, subject to the directions given by the Hon''''ble High Court of Madras on 31.01.2017 in C.PNo.171 of 2015. The said Orders were filed with the Registrar of Companies, Tamil Nadu, Chennai, on 28.04.2017 and accordingly, the Scheme became effective from the appointed date i.e. 01.01.2014.
The aforesaid results for 2016-17 include financials of the TCL and TCPL, which stands amalgamated with your Company and are therefore not strictly comparable with those of the previous year.
As per Ministry of Corporate Affairs (MCA) notification dated 16.02.2015, the Indian Accounting Standards (Ind AS) are mandatory for the Company for the Financial year commencing 01.04.2016. Accordingly the Company has adopted Ind AS from 01.04.2016 and the financial statements for the year ended 31.03.2017 are prepared in accordance with the principles laid down in the said Ind AS. The financial statements for the corresponding year ended 31st March, 2016 is restated under Ind AS.
The Board of Directors has recommended a dividend of Re.1 per Equity Share of Rs.10/- each on 30,81,53,074 Equity Shares of Rs.10/- each for the year ended 31st March, 2017, including on 9,74,417 equity shares of Rs.10/- each issued for allotment to the shareholders of TCL and TCPL and proportionate dividend on 1,317 Equity shares having calls in arrears. The proposed dividend, on approval by the Shareholders at the ensuing Annual General Meeting will be met out of surplus in the Statement of Profit and Loss in the Balance Sheet.
The authorized share capital of the Company has gone up to Rs.1419.81 Crores from Rs.535 Crores in terms of the approved Scheme of Amalgamation referred to earlier in the report. The paid-up equity share capital has further increased to 30,81,53,074 shares of Rs.10/- each in April 2017, on issue of 9,74,417 equity shares of Rs.10/- each to the shareholders of TCL and TCPL in terms of the said Scheme of Amalgamation as sanctioned by the Hon''''ble National Company Law Tribunal, Division Bench, Chennai.
EMPLOYEES STOCK OPTION SCHEME
The Compensation Committee at its meeting held on 15th March, 2017 approved the ‘Employees Stock Option Scheme, 2016’ (Scheme) and granted 18.35 lakh stock options to certain eligible employees of the Company, effective from 01.04.2017. In terms of this Scheme, options granted to employees will vest on 1st April 2018. Each option on such vesting can be exercised by applying for an equity share of Rs.10/- each fully paid-up for a sum of Rs.50/- (inclusive of premium of Rs.40/-) on or before 1st April, 2019 in not more than two tranches.
TRANSFER TO RESERVES
The Company proposes to transfer Rs.60 crores to the General Reserve and to retain Rs.939 crores as surplus in the Profit and Loss Account.
MANAGEMENT DISCUSSION AND ANALYSIS
Pursuant to Regulation 34(2) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations, 2015, (SEBI (LODR) Regulations, 2015) a Management Discussion and Analysis Report is given in Annexure ''''B''''.
Pursuant to Regulation 34(3) of SEBI (LODR) Regulations, 2015, a report on Corporate Governance along with Auditors'''' Certificate confirming 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 Chief Executive Officer of the Company is given in Annexure ''''E''''.
BUSINESS RESPONSIBILITY REPORT (BRR)
Pursuant to Regulation 34(2)(f) of SEBI (LODR) Regulations, 2015, a Business Responsibility Report is given in Annexure ''''F''''.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
A report on CSR activities of the Company during 2016-17 is given in Annexure ''''G''''.
LICENCES & RECOGNITIONS
The Company''''s Vishnupuram plant has been granted license by American Petroleum Institute (API), USA, to use the official API Monogram on manufactured products and in accordance with the provisions of the License Agreement, the API Monogram shall be used in conjunction with the Certificate Number: 10A-0138.
The Company''''s Banswara plant has obtained the license for Environment Management Systems Certification (IS/ISO14001:2015) and Quality Management System Certification (IS/ISO 9001:2015) and Occupational Health Management System Certification IS18001:2007 valid for 3 years.
The Company''''s Chilamkur plant has been honoured by the Andhra Pradesh State Government with Best Management Award for Congenial and Cordial Industrial Relations and putting in extraordinary efforts for the welfare of labour and CSR activities.
The company''''s in-house magazine "Compass" earned Certificate of Merit in the in-house magazine competition held in Mumbai and continues to remain among the top 100 meritorious magazines.
The performance of the company for the year has been discussed in detail in the Management Discussions and Analysis section. The industry which has created capacity well ahead of demand reeled under pressure with practically nil growth during the year following a meagre growth in the previous year as per the information published by Department of Industrial Policy and Promotion (DIPP). The production during the year according to the report was 280 million tons against the capacity of over 375 million tons resulting in an average capacity utilization of around 75%. According to DIPP reports, while the industry had witnessed a growth of over 5% in the first half of the fiscal, overall for the year was a negative growth of 1.2% caused partially by demonetization exercise done in November 2016.
The industry in north, central and western regions clocked a capacity utilization of over 80% while the industry in south could operate only at around 60%. With this backdrop, the performance of the company can be considered to be satisfactory with a capacity utilization of around 70% for the year. As mentioned elsewhere, the current year figures of operations and financial performance includes that of the merged entities of Trinetra Cement Limited and Trishul Concrete Products Limited and hence they are not strictly comparable with that of previous year. The sales volume for the year under review including clinker was at 11.04 million tons and the total revenue for the year was at Rs.5794 crores. With the softening of the international price of coal and with higher usage of cost effective petcoke in the fuel mix and with improved clinker to cement ratio, the EBIDTA for the year net was Rs.877.54 crores. The interest charges were at Rs.360.46 crores while the depreciation was at Rs.257.06 crores resulting in profit before tax of Rs.260.02 crores. The tax expenses for the year was Rs.86.67 crores. The profit after tax was at Rs.173.35 crores. The other comprehensive income for the year was (Rs.5.47 crores) net and overall comprehensive income was Rs.167.88 crores for the year. Given the poor demand for cement and the negative growth in consumption, the performance can be considered to be satisfactory.
The shipping division continued to operate its ship mainly in coastal movement of cargo. The total earnings of the division during the year was at Rs.13.98 crores. With the construction sector taking a hit during the year and with negative growth in cement demand, the operations of the RMC division was also subdued with a sale of 2.56 lakh cu.m. of concrete during the year as against 2.54 lakh cu.m. achieved in the previous year. The total revenue generated was at Rs.101 crores as compared to Rs.102 crores achieved in the previous year.
EXPANSION / MODERNISATION
The Company has already obtained approvals from the environmental authorities for installing new energy efficient cement grinding facility at Sankarnagar replacing some of the old cement mills. The Company has also got approval from the authorities for enhancing capacity of Sankari and Dalavoi plants in Tamil Nadu. The Company has also initiated steps for obtaining necessary approval for enhancing the capacities of one of its plants in Andhra Pradesh and that of one of its grinding units.
CHENNAI SUPER KINGS CRICKET LIMITED (CSKCL)
The Company was informed that CSKCL had sought the permission of BCCI, for the distribution of its shares by India Cements Shareholders Trust to the non-promoter shareholders of India Cements and India Cements Ex-Cricketers Trust. The Company has also been informed that the approval of BCCI is awaited.
CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to Section 129(3) of the Companies Act, 2013 read with Rules, the Audited Consolidated Financial Statement of the Company and of all the Subsidiary and Associate Companies is enclosed. A separate statement containing the salient features of the audited financial statement of all the Subsidiary and Associate Companies is also enclosed in Form AOC-1, (Annexure ''''H'''') as prescribed under the Companies Act, 2013 and the Rules made there under.
POLICY ON DETERMINATION OF MATERIAL SUBSIDIARIES
The India Cements Limited has, as on date, 9 subsidiaries controlled through shareholdings in such Companies none of which is material.
COROMANDEL ELECTRIC COMPANY LIMITED
The power generation from the Gas power plant despite being affected during the year due to shortfall in natural gas supply from GAIL (India) Limited the plant was able to generate 169 million KWH as against 163 million KWH in the previous financial year. The plant load factor was maintained at 75.18% against 72.08% achieved in corresponding previous year. During the year the Company had sold 46 million KWH of power to the cement plants of The India Cements Limited located in Tamil Nadu State while the balance power of 123 million KWH was sold to other group captive consumers. In March 2017 the Company has got additional allocation from Oil and Natural Gas Corporation Limited through E-Tendering basis to meet its shortage of natural gas and this will help in improving the capacity utilization of the plant further in the coming years. The net income from operations earned by the Company was at Rs.85.62 Crores (Rs.86.43 Crores) and the net profit after tax was at Rs.18.16 Crores against Rs.5.40 Crores in the previous year.
COROMANDEL TRAVELS LIMITED
The Company owns an aircraft and is engaged in the business of chartering aircrafts as a Non-scheduled operator. The Company has earned a total revenue of Rs.12.75 Crores and has chartered aircraft for 254 flying hours. The Company has broken even at EBIDTA Level.
PT COROMANDEL MINERALS RESOURCES, INDONESIA AND COROMANDEL MINERALS PTE LTD, SINGAPORE
Since the beginning of this year, the international prices of coal have started improving and as on date, the prices remain firm.
Consequent to this, the Company has recommenced mining activity during the current year. Going forward, the Company is expected to derive the benefits from its investments in the mines, with stable international price of coal.
INDIA CEMENTS INFRASTRUCTURES LIMITED
The Company has taken up for joint development a property in Coimbatore. Necessary approvals for the project have been obtained and the first phase of the work is in an advanced stage of completion. As for the remaining phase of this project, it is proposed to consider revising the plan to suit the current market situation and the regulatory changes to improve the marketability. Meanwhile to gainfully employ its workforce, the Company has offered their services to other companies.
ASSOCIATE COMPANIES COROMANDEL SUGARS LIMITED
During the year under review, in spite of severe drought conditions in Karnataka impacting the cane availability, cane yield and recovery, the company, could take advantage of the favorable market prices and hence posted an EBIDTA of Rs.34.3 crores (as against Rs.21.08 crores in FY16) and a profit of Rs.0.90 crores (as against a loss of Rs.0.29 lakhs in FY16)
While the crushing saw a steep reduction to 3.81 lakh Tns (7.47 lakh tns in FY16) with consequent reduction in sugar production to 3.39 lakh quintals (as against 7.09 lakh quintals in FY16), the Company achieved a sale of 4.47 lakh quintals (as against 8.33 lakh quintals) by drawing from the opening stock. This coupled with higher price realization of Rs.3374 as against Rs.2519 per quintal in FY16 had enabled the company to achieve better working results.
However, the Company could not take full advantage of the increased capacity in the newly installed 30MW Cogen Plant, which suffered due to lower cane crushing and it is expected that during the current year, the Company will be able to derive higher benefits from the 30MW Cogen plant. With the prediction of favorable monsoon, the Company expects improved performance in the current 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 Company''''s FFMC division continues to enjoy the status of Authorised Dealers, Category II. The wholly owned subsidiary viz. India Cements Investment Services Limited (ICISL) is in Stock Broking. The Gross income from operations of ICCL was Rs.445.85 lakhs and that of ICISL was Rs.154.04 lakhs for the year ended 31st March, 2017.
ADEQUACY OF INTERNAL FINANCIAL CONTROLS
In accordance with Section 134(5)(e) of the Companies Act, 2013 and Rule 8(5)(viii) of Companies (Accounts) Rules, 2014, the Company has an Internal Financial Control Policy and Procedures commensurate with the size and nature of operations and financial reporting. The Company has defined standard operating procedures covering all functional areas like sales, marketing, materials, fixed assets etc.
The Company has engaged the services of Chartered Accountant firms for carrying out internal audit of all its plants as well as marketing offices. The internal auditors have been given the specific responsibility to verify and report on compliance of standard operating procedures. The auditors have reported that there are adequate financial controls in place and are being followed by the Company. This has been further explained in the Management Discussion and Analysis Report.
RISK MANAGEMENT POLICY
Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of SEBI (LODR) Regulations, 2015, the Company has developed and implemented a Risk Management Policy. The Policy envisages identification of risk and procedures for assessment and mitigation thereof.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
In accordance with Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of SEBI (LODR) Regulations, 2015, the Company has established a Vigil Mechanism and has a Whistle Blower Policy. The Policy has been uploaded on the Company''''s website www.indiacements.co.in.
India Cements has always been encouraging its employees to give constructive criticism and suggestions, which will better the overall prospects of the Company and its various stakeholders. India Cements will continue to adopt this as a corner stone of its Personnel Policy.
THE SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The Company has in place an anti-sexual harassment policy in line with the requirements of the captioned Act and Rules made there under. There was no complaint of harassment, reported during the year.
POLICY ON DEALING WITH RELATED PARTIES
All related party transactions that were entered into during the financial year were on arm''''s length basis and were in the ordinary course of business. There are no materially significant related party transactions entered by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also the Board for its approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseeable and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The policy on Related Party Transactions as approved by the Board has been uploaded on the Company''''s website. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company other than remuneration in the case of whole time directors or sitting fee in the case of others.
TRANSACTIONS WITH RELATED PARTIES
Particulars of contracts or arrangements with related parties in Form AOC-2 along with justification are given in Annexure ''''J''''.
LOANS / INVESTMENT / GUARANTEES ETC UNDER SECTION 186 OF THE COMPANIES ACT, 2013
Details of loans, investments and guarantees covered under Section 186 of the Companies Act, 2013 are given in Note No.40.13 on accounts for the financial year 2016-17.
ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS
There has been no order passed by any Regulatory authority or Court or Tribunal impacting the going concern status and future operations of the Company.
MATERIAL CHANGES AND COMMITMENTS
There have been no material changes and commitments affecting the financial position of the Company which have occurred between 1st April 2017 and the date of this report other than those disclosed in the financial statements.
Extract of the Annual Return in Form No. MGT-9 is attached with this Report as Annexure ''''K''''.
Your Company has not been accepting deposits from public and shareholders since 16th September 2013. Deposits totalling Rs.11.59 lakhs have not so far been claimed by the depositors.
CONSERVATION OF ENERGY, ETC.
Necessary particulars regarding conservation of energy etc. as per provisions of Section 134 of the Companies Act, 2013 are set out in Annexure A.
RESEARCH & DEVELOPMENT
During the year your Company spent Rs.159.34 Lakhs towards revenue expenditure on the R&D department besides a contribution of Rs.19.06 lakhs to National Council for Cement and Building Materials (NCCBM) which carries out research on behalf of cement industry as a whole.
Sri R.K.Das and Sri PL. Subramanian resigned as Director with effect from 24th June 2016 and 17th June 2016 respectively. The Board expresses its appreciation of the valuable contribution made by them during their tenure of office.
Under Article 109 of the Articles of Association of the Company, Smt. Chitra Srinivasan retires by rotation at the ensuing Annual General Meeting of the Company and she is eligible for re-appointment.
Sri M.R.Kumar was appointed as a Nominee Director by Life Insurance Corporation of India in the place of Sri Basavaraju and he will hold the office upto the date of the ensuing Annual General Meeting and the resolution for his election as director liable to retire by rotation is included under Special Business in the Notice convening the 71st Annual General Meeting of the Company.
Sri K.Balakrishnan and Sri V.Ranganathan were appointed as Independent Directors by the Board of Directors at their meeting held on 29.08.2016 and the resolutions for their election as Independent Directors for a term of three years from 29.08.2016 to 28.08.2019 are included under Special Business in the Notice convening the 71st Annual General meeting of the Company.
Brief particulars of Directors eligible for appointment / re-appointment are annexed to the Notice convening the 71st Annual General Meeting of the Company.
Sri N.Srinivasan, Vice Chairman & Managing Director and Smt. Rupa Gurunath, Wholetime Director of the Company are related to Smt.Chitra Srinivasan and are also related to each other. No other director is related to them or each other.
The details of shares and convertible instruments held by non-executive directors are given in Annexure ''''C''''.
A declaration given by independent directors under Section 149(7) of the Companies Act, 2013 that they meet the criteria of independence as provided under Section 149(6) of the Companies Act, 2013, has been received by the Company. The details of familiarization programme for independent directors can be had from the Company''''s website www.indiacements.co.in.
Senior management personnel of the Company, on a structured basis, interact with directors from time to time to enable them to understand the Company''''s strategy, business model, operations, service and product offerings, markets, organization structure, finance, human resources, technology and risk management and such other areas. The directors also are facilitated to visit Company''''s plants to familiarize themselves with factory operations.
DIRECTORS'''' RESPONSIBILITY STATEMENT
Your Directors make the following statement in terms of Section 134(5) of the Companies Act, 2013.
1. That in the preparation of the annual accounts for the year ended 31st March, 2017, the applicable accounting standards have been followed along with proper explanation relating to material departures.
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, 2017 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, 2013 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, 2017 have been prepared on a going concern basis.
5. That 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.
6. That proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and operating effectively."
As prescribed under Section 197(12) of the Companies Act, 2013 ("Act") and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details are given in Annexure I. In terms of provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing names of the employees and other particulars, drawing remuneration in terms of the said Rules forms part of this report. However, in terms of first proviso to Section 136(1) of the Act, the Annual Report, excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any member who is interested in obtaining these particulars may write to the Company Secretary of the Company.
During the year, five Board Meetings were held. The details of the meetings of the Board and its Committees are given in the Corporate Governance Report (Annexure ''''C'''').
EVALUATION OF BOARD / BOARD COMMITTEES
Pursuant to the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the Board has carried out annual performance evaluation of its own performance, the directors individually as well as evaluation of the working of its Committees.
The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a Policy for selection and appointment of Directors, Key Managerial Personnel (KMP) and other employees and their remuneration for implementation.
Broadly, the performance of the employee concerned and the performance of the Company are the fundamental parameters determining the remuneration payable to an employee. More specifically, there will be reciprocity in the matter of remunerating executive directors, KMPs and other employees.
At the middle and lower levels of management, the yardsticks of assessment are different. The ability to speedily execute policy decisions, sincerity and devotion and discipline are the main attributes expected.
KEY MANAGERIAL PERSONNEL
The Key Managerial Personnel of the Company for the purpose of Companies Act, 2013 are Sri N.Srinivasan, Vice Chairman & Managing Director (Chief Executive Officer), Smt. Rupa Gurunath, Wholetime Director, Sri R.Srinivasan, Executive President (Finance & Accounts) (Chief Financial Officer) and Sri S.Sridharan, Company Secretary.
Industrial relations continued to remain cordial during the year.
As per the provisions of Section 139 of the Companies Act, 2013, the term of office of M/s. Brahmayya & Co., and M/s. PS.Subramania Iyer & Co., Chennai, as Statutory Auditors of the Company, will conclude from the close of the 71st Annual General Meeting of the Company. The Board of Directors places on record its appreciation for the valuable services rendered by M/s. Brahmayya & Co., and M/s. PS.Subramania Iyer & Co., Chennai, as Statutory Auditors of the Company since its inception. Based on the recommendations of the Audit Committee, it is proposed to appoint M/s. K.S.Rao & Co., Chartered Accountants and M/s. S.Viswanathan, LLP, Chartered Accountants as Statutory Auditors of the Company to hold office for a term of five years from the conclusion of the 71st Annual General Meeting until the conclusion of the 76th Annual General Meeting, subject to the approval of shareholders.
M/s. Capri, Gopalaiyer & Subramanian, Kalyanasundaram & Associates and Bala & Co., Chennai, have been appointed as Internal Auditors for the year 2017-18.
Sri S.A.Murali Prasad, Cost Accountant, Chennai, has been appointed as Cost Auditor for the year 2017-18 at a remuneration of Rs. 17 lakhs. The remuneration is subject to ratification of members and hence is included in the Notice convening the 71st Annual General Meeting of the Company.
Smt. PR.Sudha, Practising Company Secretary, has been appointed as Secretarial Auditor of the Company for the year 2017-18.
Secretarial Auditor''''s Report in Form MR-3, as prescribed under Section 204(1) of the Companies Act, 2013 read with Rule-9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure ''''L''''. The Secretarial Audit Report does not contain any qualification, reservation or other remarks.
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 special mention.
On behalf of the Board
N.SRINIVASAN RUPA GURUNATH N.SRINIVASAN
Vice Chairman & Managing Director Wholetime Director Director
Date : 28th July, 2017