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Directors Report of Ambuja Cements Ltd.

Dec 31, 2016

The implementation of IND AS in 2017 will be a major change process and the company is well

Amount in Rs, crore

Standalone

Consolidated

Current Year 31-12-2016

Previous Year 31-12-2015

Current Year 31-12-2016

Previous Year 31-12-2015*

Sales (Net of excise duty)

9160.40

9,368.30

20,093.95

9,388.00

Profit before Interest and Depreciation

2258.92

1,889.66

3,598.73

1,895.48

Less: Finance costs

71.48

91.79

140.54

92.47

Gross profit

2,187.44

1,797.87

3,458.19

1,803.01

Less: Depreciation and Amortisation Expense

850.13

625.66

1,463.18

629.76

Profit before Tax

1,337.31

1,172.21

1,995.01

1,173.25

Less: Tax Expense

367.22

364.65

576.00

365.37

Profit after Tax but before Minority Interest

970.09

807.56

1,419.01

807.88

Add: Share of Profit in Associates

-

-

8.79

-

Less: Minority Interest

-

-

306.67

-

Profit for the year

970.09

807.56

1,121.13

807.88

Add: Balance as per the last Financial Statements

1,833.87

1,655.93

2,117.13

1,941.15

Add: Addition pursuant to Amalgamation of HIPL

41.19

-

229.60

-

Transfer from general reserve (net)

850.00

-

834.98

-

Less: Adjustment for Depreciation and Amortization

2591.85

106.63

2,591.85

108.91

Profit available for appropriation

1,103.30

2,356.86

1,710.99

2,640.12

Appropriations:

Dividend on Equity Shares (including interim)

678.35

434.53

678.35

434.53

Corporate Dividend Tax

95.77

88.46

128.43

88.46

Intercompany elimination of Dividend pursuant to scheme of Amalgamation of HIPL with the company

74.69

_

131.02

_

Balance carried forward to Balance Sheet

403.87

1,833.87

1,035.23

2,117.13

*Figures are not comparable with corresponding figures of current year as they do not include consolidated numbers of AGO Limited.

positioned to ensure a seamless transition on the back of early completion of impact assessment.

4. Dividend

The company has a very robust track record of rewarding its shareholders with a generous dividend payout (both interim & final). Continuing with this practice, the company paid an interim dividend of Rs, 1.60 per share (80%) during the year 2016. In the light of the overall improved financial performance including Profit After Tax for the full year as compared to the year 2015, the Directors have recommended a final dividend of Rs, 1.20 per share (60%). Thus, the aggregate dividend for the year 2016 is Rs, 2.80 per share (140%) and the payout (net) will be Rs,733.43 crore, including dividend distribution tax of Rs, 95.77 crore.

This represents a payout ratio of 76%.

5. Market developments

The market offers huge potential for development in the housing infrastructure and construction segments, to provide impetus to cement market growth. A good monsoon, after two consecutive droughts, also augured well for cement demand, especially for the rural sector. The overall national cement demand grew with double digits in the first quarter of 2016 but moderated in the closing months of the year due to demonetisation.

The company’s cement sales in 2016 declined by 2% to 21.1 million tonnes, as compared to 2015. Our focus is on the retail segment, with retail sales more than 85%, thereby ensuring broad customer base and higher realisation.

The company - with a strong network of 8,500 dealers & 40,000 retailers, enjoys a strong brand equity Index (BEI 5) and is the preferred brand for individual house builders.

Dividend distribution policy

Regulation 43A of the SEBI Listing Regulations (“LODR”), requires that the top 500 listed companies based on the market capitalization to formulate Dividend Distribution Policy. In compliance of the said requirement, the company has formulated its Dividend Distribution Policy, the details of which are available on the company’s website at: http://ambujacement.com/Upload/PDF/ dividend-distribution-policy.pdf.

Logistics

Logistics continued to focus on safety, service, operational efficiencies, and cost optimisation through various initiatives.

Outbound logistics cost was lower in the first half of the year compared to 2015, mainly due to stable rail and fuel charges, coupled with operational performance improvements coming from higher direct dispatches and lead management. However, the second half affected costs and efficiencies due to a steep increase in fuel prices and a heavy monsoon. Demonetisation was an opportunity to lead drivers and transporters to imbibe cashless transactions without affecting logistics operations. In spite of all the challenges our overall distribution costs reduced marginally over 2015 levels, mainly mitigated by collaborative efforts between Sales and Logistics to focus on operational levers and cost drivers.

To improve forecasting and least cost to serve compliance, Sales and Operations Planning (S&OP) was implemented. Under the Logistics turntable initiatives, saving opportunities were identified and benefit accrued.

Commercial transformation Customer discovery

2016 was indeed a challenging year for the cement industry as multiple brands vied for brand attention. While some companies resorted to price reduction, others provided various value propositions.

Ambuja chose a relatively simple, albeit time-consuming but enriching path, to get close to the consumer - by understanding the needs, designing solutions and then helping to fulfil it.

Our in-house engagement programs and knowledge initiatives were well received. Several onsite service interventions were offered for the individual house builder and good knowledge initiatives shared through our Ambuja Knowledge Centre (AKC) network.

Under the guidance of LafargeHolcim, various commercial transformational activities have commenced. Offering a better value proposition to customers, improved construction practices and providing a transformational framework, to meet evolving cement demand in sync with the various initiatives kick-started by the Government.

Customer excellence

With demonetisation, an action plan was drawn where finance, sales and technical field officers along with community workers of the Ambuja Cement Foundation and bank officials initiated awareness camps with dealers, Authorised Retail Stockists (ARS) and retailers connected with our commercial network to showcase various cashless options. Next, the company launched the ‘Go Cashless’ campaign - where network partners were assisted in opening current accounts and tie-ups with major banks leading to the installation of POS machines to facilitate transactions.

Our branding team conceived a digital campaign on social media as well as on radio, focused on promoting various cashless options.

A combination of these initiatives helped the company reach out to over one lakh partners (dealers, retailers, contractors and masons) across India in a short span of 50 days.

Sustainable construction practices

Building a greener tomorrow

Water is an important aspect of construction.

In the Indian context, with most regions facing inadequate water supply, it is indeed a challenge as constructing even a three-bedroom house consumes around 50,000 litres of water.

Realising and understanding this issue, engineers from Ambuja’s technical services team designed two innovative solutions for the roof - a customised modular curing sheet covering the slab on the roof during construction that would save at least 12000 litres; and fitting a rainwater harvesting system on the roof, making it a permanent source of storing potable water.

In 2016,75 million litres of water were saved at construction sites and 14 million litres through installing rainwater harvesting systems across 519 towns.

6. Cost developments

The company maintained significant focus on cost optimisation during the year through various initiatives it optimised, on both variable as well as fixed costs. The company also benefited through favourable fuel prices during the initial quarters. Internal cost optimisation measures coupled with such favourable external factors, helped to offset the cost increase resulting from increasing diesel prices, railway freight, prices of some raw materials as well as an increase on account of inflation. As a result, the company’s total cost per tonne remained flat when compared to the previous year.

Major Cost Movements

i) Cost of major raw materials reduced by 5% over the previous year on per tonne basis. Despite an increase in Fly Ash prices by 6%, the company was able to consume gypsum at 10% lower cost than the previous year and further mitigated through cost reduction from using alternative raw materials.

ii) Power and fuel costs account for approximately 22% of the total expenses.

The company’s initiatives to optimise fuel mix as well as higher usage of captive power helped restrict the power and fuel costs to 12% lower level as compared to previous year on per tonne basis. Fuel Cost for the kiln reduced by 16% while the same for captive power plants reduced by 14%, mainly due to higher use of pet coke in both areas and other low cost fuels. Usage of alternate fuels also accounted for 5% of total thermal energy consumption in 2016.

Although the cost of grid power increased by 4% on per unit basis, increased use of captive power which was 13% cheaper than previous year, helped to reduced the overall electricity cost by 7%. The company consumed 70% of the total power requirement from captive sources, including increased usage of the Waste Heat Recovery System.

iii) Freight and forwarding cost constituted 29% of total expenses.

On per tonne basis, cost increase was restricted to just 1% due to the positive impact of various logistic optimisation efforts despite 5% increase in diesel cost over the previous year.

iv) Other expenses which constitute 23% of the total expenses were restricted to an increase of just 1% over 2015. This was possible on account of reductions in the cost of packing bags which came down by 9% over the previous year, on the back of decrease in PP granule prices. Further, the fixed cost optimisation programme also contributed in keeping fixed cost in check.

Cost mitigation measures / efficiency improvement initiatives:

i) Keeping in line with the company''s philosophy of sustainable operations,

a focus on production of fly ash based PPC was maintained and a lot of initiatives were taken up to enhance fly ash consumption in PPC.

ii) The company has worked on fuel flexibility to mitigate risk associated with the dynamic fuel market and developing the ability to switch to the most economical fuel mix. The company has increased the focus on usage of low cost fuels like petcoke. iii A new E-mill was commissioned at Darlaghat for petcoke grinding which helped in increasing petcoke consumption in Suli kiln, iv) A limestone feeding system in the boiler was initiated, to increase petcoke consumption and maintain SOx emission limit in the captive power plant at Rabriyawas and Bhatapara. The company commissioned a carbon black bulk unloading system to increase carbon black usage and improve housekeeping.

Capacity expansion during the year. Getting better at being the best.

7. Expansion projects and new investments

The company focused on consolidation and optimisation of its existing capacities in all the three regions. Capital investments kept flowing in during the year, to ensure the highest standards of safety in order to meet the company policies of‘Zero Harm’, clean and energy efficient infrastructure, cost efficiency, environment-friendly material handling systems, process optimisation and sustainability initiatives.

Achievements at a glance

i) A Waste Liquid Feeding System at Bhatapara was commissioned to utilise alternate fuel in the plant and reduce traditional fuel consumption.

ii) In June, 2016, legal case pertaining to 99 HA of mining land at Darlaghat has been decided in favour of the company, pursuant to which taking possession of the said mining land is in progress. As a result, the company has been able to successfully secure and increase its limestone resources.

iii) In order to strengthen logistics capability and extend its reach to customers, a new railway siding project is in progress at the Rabriyawas unit in Rajasthan. Purchase of land is in progress for line laying.

iv) A brown-field expansion project of master packer and auto wagon loading was commissioned at Sankrail, West Bengal. New packer and auto loaders will add an additional 1.8 million tonnes dispatch capacity.

Upcoming Capacities and Investments

i) A new coal block, at Gare-Palma in the state of Chhattisgarh was acquired in 2015 through e-auctions conducted by the Government of India. The block has an extractable reserve of 50 million tonnes and will secure the long term requirement of fuel. Land Acquisition and various clearances are in progress and the mining operation is expected to commence in the year 2018.

ii) In order to secure longterm limestone requirement of the Bhatapara plant, a new mining lease, at Maldi Mopar Mines was allotted. Environmental clearance and other required approvals for the mining lease were acquired. To operationalise this limestone mine, two projects are in progress:

- Commencement of limestone mining operations with infrastructure.

- Installation of limestone transportation system.

Detailed engineering and equipment orders for both projects have been completed and delivery of a limestone crushing system is in progress.

iii) Clinkerisation capacity addition of 1.7 million tonnes by setting up green field clinkerisation plant at Marwar Mundwa, Nagaur district in Rajasthan has now been undertaken.

The company will commence, in 2017, the site development, infrastructure, engineering, tendering and contracting of the project. While the majority of the mining and plant land is already in possession and the rest is under an advanced stage of acquisition.

iv) The company also acquired a new mining lease at Loadhva mines in order to secure longterm limestone requirement of Ambujangar Plant. Environmental clearance and other required approvals for the mining lease have been secured.

v) The company is taking up various projects to comply with new Environmental Regulations issued by Ministry of Environment and Forest related to Dust Emission, SOx & NOx emissions.

8. Outlook

We expect good cement growth in 2017, supported by the Government''s continued focus on housing and infrastructure development, and going forward remonetisation should result in growth normalising during the first quarter of the year. The announcement of interest subsidy schemes and an interest rate cut, the recent announcement in the union budget for infrastructure development, including the award of infrastructure status to affordable housing and the increased budget allocation for roads, railways and irrigation will all be key drivers for cement demand.

With continuing operational excellence programs, combined with its segmented marketing and value added special cements products and building solutions, the company is well placed to benefit from the plans being initiated by the Government.

9. Risks and areas of concern

The organisation has a comprehensive framework for risk management covering financial, business and sustainability-related risks through the Business Risk Management (BRM) process.

Risk Management Policy has been formally framed to identify and assess the key risk areas, monitor and report compliance and effectiveness of the policy and procedure in line with the new regulatory requirements. A Risk Management Committee under the chairmanship of Mr. Rajendra Chitale, Independent Director, has also been constituted to oversee the risk management process in the company.

The BRM exercise at Ambuja is a bi-annual event to analyze the company’s overall risk exposure and supports management in strategic decision-making process. Therefore, it is an integral part of management reporting cycle. Well-defined risk management mechanism covering trend analysis, risk exposure, potential impact and risk mitigation process has been laid down by the company. The overall risk exposure is assessed from both top-down and bottom-up, which is then consolidated to get a bird’s eye view.

We have been able to improve upon our risk exposure due to the combined efforts of all functions, supported with tight monitoring of action plans and their implementation.

Based on a detailed review, the following key risks have been identified:

Ensuring Raw Material Security

Sustainability is well reflected in the organisation''s Vision, Values, Policies and Strategies.

However, to remain sustainable, concerns continue around raw material availability such as limestone, which is a basic input for manufacturing cement and securing additional reserves are critical for future growth of the company. The company is keeping watch on all limestone auctions across India and participating in relevant blocks which are close to our operations.

Reinitiating Demand

The cement demand growth has moderated from an average of around 6-7% in the previous years to the present 5%. Currently the demand-suppiy situation in the cement industry is skewed, with the latter being significantly higher by over 90 million tonnes. However, the gap is expected to narrow down due to the Government push on infrastructure and housing sectors, which will help in enhancing cement consumption. The speedy remonetisation by the Government will also help revamp cement demand growth.

Cement Import

Currently, there is no customs duty on cement import, which is an area of concern as this provides encouragement for import of cement which impacts domestic industry and adds to the demand and supply mismatch.

Taxation and Administrative Burden

High taxes and administrative burden continues to remain a major concern for the cement industry; along with steel, the two form an

10. Human Resources

Human Resources function plays a pivotal role in realising business objectives by leading organisational change, fostering innovation and effectively mobilizing talent to sustain the organisation''s competitive edge. At Ambuja, the HR function has made a paradigm shift from being a support function to a core and strategic business partner. The HR function is constantly evolving and transforming as it embraces the philosophy that people are the foremost factor in the success of an organisation. Our people strategy, systems and processes are aimed at making the company an employer of choice. It has been our endeavor to design progressive HR policies and other welfare measures that would enhance all aspects of the ‘employment experience’. important raw material for the infrastructure and real estate sectors. However, steel falls under the category of‘Goods of Special Importance’, and attracts a lower tax rate @ 4%, whereas cement does not and this makes cement subject to higher tax in comparison to other building materials. The solution to this issue lies in the rolling out of a uniform tax regime through the implementation of the Goods and Services Tax (GST).

The government has taken strides towards getting Cabinet approval of the GST Bill that is slated to play a critical role in the next level of growth and truly realise the full extent of the country’s potential.

Demonetisation Impact of Q4 2016

The current phase of remonetisation has resulted in the slackening of demonetisation effect and hence is expected to result in growth normalisation in the first quarter. Rapid adoption of cashless payment methods in the last quarter of 2016 helped to mitigate the effects of demonetisation and deliver a strong performance.

The above efforts have led to a significant increase in manpower productivity as compared to 2015. Core manufacturing productivity improvement went up by 16% and the overall productivity improvement went up by 9%.

Some of the highlights of the new initiatives taken in 2016 are:

(i) Culture Building - Aligning ‘I Can’, our core philosophy with LH CRISP Values and ‘ACE’ Behaviour

At Ambuja, we all believe and practice the spirit of‘I Can'' as our core philosophy.

As culture building is a continuous process, several awareness workshops were conducted across Ambuja to familiarise all our employees to LH values - ‘CRISP’ (Customers, Results,

Integrity, Sustainability, People) and behaviour -ACE (Agility & Simplicity, Collaboration & Trust, Empowerment, Accountability & Transparency) which have a strong connection to the ‘I Can’ philosophy. Consistent communication helped create a common understanding of our values and core philosophy in terms of living these values and making it a way of life.

(ii) Enhancing Employee Engagement and Fostering a Participative Culture

Ambuja Cement continues to build a culture of merit and appreciation under our Rewards and Recognition (R&R) program. In 2016 we had 509 employee nominations under various categories of awards and there were 365 employees from across locations and functions rewarded under the program.

In another new initiative, Focussed Group Discussions (FGD) were used across various locations to determine the level of employee engagement, to collect employees'' perceptions on various organisational/ work related matters and to draw a meaningful action plan to address a few opportunity areas that would help our organisation on the path of improving/ enhancing employee engagement. A team of internal facilitators of varied functional expertise helped create an open and participative culture promoting employee engagement.

(iii) Sustainable Talent for Enhanced Performance (STEP)

To inculcate a coaching culture, Ambuja - STEP II was launched in 2015 with 60 participants who underwent an enriching and fulfilling journey of mastering the art of coaching and equipping themselves with essential leadership skills and competencies. The program, which concluded in 2016, focused on initiatives that resulted not just in honing skills but in enhanced performance and higher engagement.

While the second batch has a fresh pool of ''People Coaches’, it has also ensured that the certified People Coaches from the first batch get an opportunity to apply their learning skills and experience with our employees across the organisation.

(iv) Performance Management System (PMS) The new PMS launched in 2016 had even more focus on team objective setting and periodic reviews. Frequent individual dialogues and interactions between managers and employees were encouraged. These discussions helped in better alignment with the company objectives, clarifying business direction and actively contributing in individual target achievements. The new PMS has been designed to completely involve managers and employees to raise levels of performance through collective ownership and responsibility.

(v) HR Transformation

HR Transformation journey continued in 2016 with the setting up of the new shared services centre, Onelndia BSC. ACL adopted the shared services centre model and high transactional HR processes were moved to Onelndia BSC.

This will help focus on strategic areas thereby improving the overall working efficiency and providing solutions on a real time basis. Employees experienced a self-service culture enabled through enhanced/ new technologies for various employee related services.

A big step towards digital transformation is also underway in the form of the ‘Workday’ system, which is a cloud based global HR system, initiated by LafargeHolcim. ‘Workday’ would greatly support effective talent management through an online real-time master data source.

11. Health and Safety

Health and Safety continues to be the overarching value for Ambuja and is top priority for all of us. We are steadily progressing towards our goal of Zero Harm. After a successful run of 13 months without onsite fatality, there were two unfortunate on-site fatalities that occurred after October 2016. We Care - our Health and Safety Excellence Journey continues to drive H&S improvements since 2014 and its impact on the ground is visible. We focussed on participation, involvement and engagement of our people. More emphasis was given on sensitising people on safe behaviour, training, capability building on risk assessment and reward & recognition schemes to encourage teams as well as individuals for their contribution in H&S improvements.

The leadership team developed an effective Health & Safety Improvement Plan (HSIP) for 2016, including six strategic objectives, along with one Fatality Prevention control.

For a safer workplace, it is imperative to build on Health and Safety competencies of people. As part of the competency building initiative, Hazard Identification and Risk Assessment (HIRA) workshops were conducted for senior management team. This training helped recognise hazards associated with tasks, recognise risks, and their likelihood and consequence. Later, this workshop was extended to more than 900 line managers across plants and offices. Of the 64 Health and Safety team members who underwent NEBOSH Training, 27 participated in IOSH training. NEBOSH & IOSH are internationally recognised certification programs which will help Health and Safety professionals to effectively provide solutions to deal with Health and Safety aspects in day to day functioning. Around 9000 front line employees were trained through tool box talks on Do’s and Don’ts for critical operations such as working at height, vehicle & traffic safety, electrical safety and lockout procedure.

Vehicle and Traffic Safety (V&TS) has been a matter of concern for us. With a renewed focus towards on ground implementation, ‘Logistics Safety Vision - 2020’ has been prepared along with a road map and milestones. Initiatives such as GPS Installations, Defensive Driving Course (DDO), NO DDO NO LOAD policy and e-Passport were implemented in 2016. Around 44,000 drivers are covered under No DDC No LOAD Policy. Over 400 drivers were awarded Safety Hero and on-the-spot awards and over 1000 sales force employees trained in Defensive Driving courses with on road practical assessment. Workshops were conducted for over 6200 personnel of Warehouses and Branches. In 2016, the Model Warehouses project was kick-started to convert 50 Warehouses.

Our senior leadership team has taken the lead and owns one warehouse for each member.

So far, over 2500 warehouse workers were sensitised through tool box talks. More than 1000 school children from nearby communities were also sensitised through the Road Safety awareness program.

We Care - an umbrella initiative which covers all stakeholders - has played a seminal role in transforming Ambuja Cement’s operations as well as attitudes towards safety. The We Care initiative has led the way in training and capability building, and has been spearheading the company’s efforts to achieve the goal of Zero Harm.

All the manufacturing units of the company are certified as per OHSAS18001 World Standard.

At Ambuja, we look forward to adopting innovative technology to enhance the experience of our customers, business partners and employees. With this philosophy and direction, the company embarked on a path in 2016 that made it stand apart from its peers in the industry. Besides having the best-in-class information technology set up, the company has taken the lead in new areas and paved a path for others to follow:

12. Leveraging technology to drive business value

- Providing intelligent analytics for Safety at work, as the safety of our employees, contractors and vendors has always been a top priority at Ambuja.

- Integrated Security Systems:

At manufacturing facilities, we have autonomous safety and security systems like OCTV, turnstile, biometric and smartcard access control and attendance systems. These systems are controlled individually, report and serve specific business needs.

As a first, at Magdalla, we conducted a successful proof of concept of integrating CCTV, Attendance & Access Control Systems and Public announcement systems.

- Journey Risk Management:

We have been using GPS technologies for quite some time now for monitoring vehicle tracking and safety parameters. These systems generate a huge amount of data.

As of now, we leverage information on speeding, harsh braking, sudden acceleration and sudden manoeuvres. In 2016,

Ambuja took the initiative to identify potential risk points on our dispatch routes using intelligent analytics on the GPS data. This has helped us to enhance the truck driver’s safety on the road by educating them about accident prone points, ahead of the scheduled trips.

- Retailer POS (Point Of Sales):

In our constant endeavour to serve our customers better, Ambuja rolled out a mobile application for retailers to help them interact with the distributers. The mobile application enables retailers to place orders on distributers and get the order acknowledgements. The distributers can view these orders and respond. This will result in seamless co-ordination between primary and secondary channels. Additionally, it records the stocks at the Retailer counters. The stock visibility enables us to do better market planning.

13. Sustainability and environment

The company’s journey with sustainability is giving encouraging results year after year, with improved performance on several parameters of governance, environment protection as well as social responsiveness. This would have not been possible without sustained efforts over the years and a variety of initiatives together with systems and processes in place to keep pace with the long term objective to be a sustainable company. Today when we map the initiatives against the Sustainable Development Goals (SDGs) and targets therein, Ambuja has interventions to address almost all 17 Goals and as many as 125 of the 169 sub goals or targets in its core business and CSR activities. We are committed to continue with our sustainability journey and meeting the remaining targets.

To endorse the principles of United Nations’ Global Compact (UNGC), Ambuja became the Life Member of Global Compact Network India (GCNI) in 2016.

Make the Earth a Better Place

As part of our product stewardship, the year saw the completion of Life Cycle Assessment (LCA) of Portland Pozzolana Cement (PPC) produced at our Suli plant, Darlaghat facility as per ISO 14040 and IS014044 requirements. The ‘Cradle to Grave'' approach was adopted and the system boundary and geographical scope included: materials (sourcing), upstream transport (inbound), manufacturing process, downstream transport (outbound), use and disposal. LCA outcomes were taken ahead to develop Environment Product Declaration (EPD) and scenario analysis in accordance with the Product Category Rules (POR- UN CPC 3744) for cement.

Ambuja had earlier signed the declaration of India Business and Biodiversity Initiative (IBBI) which is an initiative of Confederation of Indian Industry (Oil) - India’s largest industry association. In 2016, the company voluntarily reported against the IBBI Declaration Commitments (comprehensive). This reporting covered our biodiversity mapping, relevance of biodiversity and ecosystem services in various phases of our value chain (own operations, suppliers, use phase, end-of-life, transport), training and awareness activities for biodiversity protection, risks, opportunities and impacts etc. This year, the company has been active in Leader for Nature (LfN) initiative of International Union for Conservation of Nature (IUCN) and partnerships with Cll and other organisations in India for biodiversity related policy development, biodiversity assessment and reporting guidelines. The company invited IUCN experts for field training to create biodiversity champions in the Biodiversity Indicator and Reporting System (BIRS).

Ambuja continued its ‘Water Positive’journey contributing further to conserve water resources. Since 2012, we are assessing and targeting not only the intensity of our water consumption but also how we can augment water recharges through community structures. Up from the water positive index of ‘2’ we are well on our way of becoming 5 times water positive. More importantly, almost all the units are now water positive on their own. Considering the growing scarcity of water witnessed in several regions of the country, the company commits to continue ‘Water Positive’ efforts with the same vigour and enthusiasm.

The year also saw the company defining new targets for forthcoming years (2020 & 2030) to align with the Sustainable Development targets defined by LafargeHolcim at group level, termed as The 2030 Plan - Building for Tomorrow’ in the thrust areas of climate change, circular economy, water & nature, and people & community.

All our plants have continued online reporting of ambient air quality and process emissions on real-time basis on websites of regulatory authorities for transparency and public information.

Recognition for Sustainability efforts

The company’s sustainability performance has been recognised by external assessments and awards, the company was once again recognised at the prestigious Cll Sustainability Award 2016, in one of the highest award categories -''Outstanding Accomplishment in Corporate Excellence’. This is the sixth time in a row Ambuja has attained this award in its various categories. In the Oil Sustainability Plus rating of the NSE listed companies; we received the ‘Gold’ rating.

Partnering for Sustainability

In the sphere of our collaboration with various stakeholders for the cause of environment protection and sustainability; we played an active member of the Cement Sustainability Initiative (CSI) India of World Business Council for Sustainable Development (WBCSD) for implementation of the India specific ‘Low Carbon Technology Road Map for Cement Industry’.

Cll and FICCI remained the other industry associations we partnered with in the current year as well. Besides policy dialogue, we participated in a number of training and awareness programmes conducted by these agencies on environment, health and safety and sustainability topics such as emissions control and monitoring, biodiversity management, water management and environment product declaration to enhance the capability of managers for environmentally responsible operations.

Sustainability Reporting

Ambuja Cement shared its 9th Annual Corporate Sustainability Development Report on triple bottom line performance for the year

2015 following Global Reporting Initiative (GRI) G4 (Comprehensive) guidelines with Assurance’ by an independent certifying agency as per AA1000 assurance standard. We have responded to the Metal and Mining Sector Supplement of the GRI while reporting on our Sustainability performance to our stakeholders. The company has also been issuing a Business Responsibility Report (BRR) as a part of its Annual Report since 2012. The process also entailed a detailed Materiality Review with our internal as well as external stakeholders.

Other Reporting and Disclosures

The company participated and further improved its performance from the previous year in the Dow Jones Sustainability Index (DJSI) [Emerging Markets Index] in the Construction Materials industry. This exercise provided us an opportunity to benchmark ourselves with the leading global companies in this sector. Ambuja also continued its good performance in Carbon Disclosure Project (CDP) and received ‘B’ rating in the newly changed methodology of CDP. We are voluntarily reporting under CDP since 2010.

True Value Journey

Ambuja Cement continued its focus for creating a positive impact on the environment and society through environmental and social activities and strive to increase its ‘True Value’ [Social & Environment Profit and loss Assessment-to value our externalities] year on year. This valuation of social, environmental and economic performance, which was initiated in 2012, has helped us to focus on our social and environment performance. In fact, in 2016, a net positive contribution of more than Rs, 1050 crore to the environment and society was evaluated as compared to that of Rs, 750 crore in 2012 which was, however, lower than Rs, 1250 crore in 2014. Major contributors to this increase include: co-processing of wastes generated by other industries, increased water credits, reduced water usage at our plants, and activities related to agro-based livelihood.

14. Corporate Social Responsibility (CSR)

Since its inception, the company has been striving to become a neighbour of choice.

The company considers the community as an important stakeholder and has been investing in its wellbeing with a belief that people around us should prosper at the same pace as the business does. The company has meticulously taken up social development as a core responsibility, long before the mandate brought in by The Companies Act, 2013. Ambuja Cement established Ambuja Cement Foundation (ACF) as its CSR arm in 1993 to carry out its community engagement.

For the last 24 years, ACF has been closely working with the communities and currently reaches out over 1.8 million people across all our manufacturing sites. As a proactive initiative, far earlier than the company starts commissioning its plant, ACF begins with the need assessment amongst the affected people for the prospective project. ACF’s main focus areas are: Water Resource Management, Livelihoods (agriculture-and skill-based), Health & Sanitation, Women Empowerment and Education.

All development initiatives endeavour to magnify impact through building longterm partnerships with State and local government bodies, agencies, as well as community-based organisations and PRIs, with stringent monitoring and evaluation.

The one thing that never runs dry are our ideas for water conservation.

ACF took a holistic approach to achieve all-year-round water for farmers, families and communities by building infrastructure for mass water harvesting, mobilising and collectivising farmers, and promoting drinking water solutions to ensure sufficient drinking water.

ACF’s water resource management model focuses on three areas - Water Harvesting (check dams, interlinking rivers, watershed development, etc.), Drinking Water (roof rain water harvesting structures, pond deepening, in-village distribution system, water quality surveillance, etc.) and Water Use Efficiency (Water User Association, participatory irrigation management, promotion of micro irrigation).

Cumulative Achievements

375 check dams 6080 RRWHS 78 Km canal linkage

51.97 MCM water storage capacity created

ACF, through the adoption of a participative approach and customised solutions, has been catering to different challenges in varied geographies. The program began in Gujarat to address salinity gradually expanded to other locations, striving to give back more water than is being utilised. In Rabriyawas, located in the heart of the Thar Desert of Rajasthan, frequent famines brought huge agricultural losses, often causing mass migration in the area. ACF, through a mix of traditional knowledge and technological methods has focused on building/renovating traditional water reservoirs and structures to recharge groundwater and harvest surface water. On the other hand, Kodinar in Gujarat is a cyclic drought prone area, with constant ingress of saline water in inland groundwater and coastal agricultural land. Currently, we have permanently reversed the trend of salinity on over 15600 hectares of agricultural land in 83 villages of Gir-Somnath district.

In the hilly terrain of Himachal Pradesh, in partnership with NABARD, ACF continues implementing ''watershed management’ to conserve water and improve quality of livestock and land, while in Maharashtra, where the issue is high surface runoff, the Foundation focuses on groundwater recharge.

The community is now engaged in more productive activities - women utilise saved time for other income generating activities, and every girl is going to school. Improved drinking water quality has improved the health status of the local people.

The efforts also won us the FICCICSR Award in December 2016.

Building Prosperity by Promoting Livelihoods

Optimising Agricultural Potential AGF’s agro-based livelihood program works with a holistic approach by promoting end-to-end solutions. The program fundamentally aims at bridging existing gap in traditional farm practices and recommended practices. ACF’s multi-pronged approach in agro based livelihood has reached over one lakh farmers till date.

AGF focused on extensive training to farmers on a regular basis on varied topics. Each region has its unique features and hence the programme developed into a dynamic whole. In Kodinar, Gujarat and Rabariyawas, Rajasthan, clean and usable water has enabled farmers to grow more than one crop in their fields, directly impacting livelihoods. The use of micro-irrigation methodologies like drip and sprinkler in place of flood irrigation has not only ensured optimum utilisation of water in the fields, but has also increased the yield in the area.

According to the geographical suitability, programmes like organic farming in Punjab & SRI (System of Rice Intensification) in Ohhattisgarh and West Bengal has led to better rice production. SRI is a methodology to give better yield of rice with limited water use. It has given positive results in Bhatapara, Sankrail & Farakka and has till date reached out to over 10,200 farmers. Better Cotton Initiative (BCD has been an important initiative in AOF’s agro-based livelihood program. BCI is a global initiative for sustainable cotton production. The project has shown significant growth from 2500 farmers in 2010 to more than 44000 farmers, which is the highest among BCI implementing agencies in India. In 2016, BCI farmers recorded a significant 22% increase in their net income. ACF’s sustained efforts towards educating farmers and creating a better value chain to increase farm profits has gained us recognition at a global platform.

In 2016, Ambuja Cement Foundation was elected as a member in BCI’s Global Council and will now be playing an instrumental role in setting strategic direction for achieving better cotton and empowering farmers.

ACF has also been focusing on building collective bargaining power of farmers by formation of farmer producer organisations (FPOs). Currently,

11 FPOs have already been formed who are collectively procuring inputs at a lower cost and providing it at a reasonable price to the local farmers in remote areas. FPOs are also gradually shifting to build market supply linkages. For example, the FPO in Chirawa has collaborated with Big Basket to collectively supply vegetables.

Giving the rural youth what they need: Skills ACF has been focusing on developing the vocational skills of our rural youth to prepare them for the professional world and to handle the challenges at work. ACF is doing this through its Skill and Entrepreneurship Development Institutes (SEDI). ACF has established 17 SEDIs in 10 states and has trained over 30,000 rural youth successfully in 12 sectors placing 74% of them in various industries. ACF has also supported SEDI graduates in starting their own business and 2915 enterprises have been formed till date.

SEDI has introduced courses like welding, electrical, security guard, mobile phone repairing, etc. Another aspect that SEDI has been focusing on is to develop skills of physically challenged youth in the community. Till date, SEDI has trained 160 physically challenged youth, with large numbers now gainfully employed.

We Don’t Have a Single Main Priority.

We Have Three: Health, Safety and Sanitation

As health and safety is an overarching value for Ambuja Cement, it is important that we create safety awareness in our neighbouring community too. We aim to develop a healthy and thriving community around all our sites and are working sincerely in this direction.

Ambuja Cement is aligned to the national agenda of promoting sanitation and is mobilising communities to work to build clean and healthy villages. ACF facilitated the formation of Village Development Committees (VDCs) who spearhead the cause of sanitation. Through the Community Led Total Sanitation (CLTS), ACF is ensuring an active involvement of the community in achieving better sanitation practices. The aim is to bring about behavioural changes in the community more than mere construction and repair of toilets.

The two Federations from Chandrapur (Maharashtra) and Kodinar (Gujarat) with 490 SHGs and over 6100 members are driving communities to adopt hygienic practices.

In 2016, ACF supported 6107 households for toilet construction. ACF has covered over 12,000 households and 176 schools under its sanitation initiative.

Stakeholder Engagement for Continuous Improvement

We cater to the opinion shapers: our stakeholders.

Ambuja has created platforms to facilitate open discussion with its stakeholders where we plan projects and review the development initiatives. These forums bring us the opportunity to discuss stakeholders’ concerns and develop a proactive plan of action for enhanced business sustainability.

The Community Advisory Panels (CAP) functional at all sites, consist of opinion leaders from community and members from Ambuja Cements, meet regularly to formally discuss upon the concerns of the community in relation to the units and Ambuja’s initiatives to address the same. These CAPs have now become mature and reciprocal.

The Community Engagement Plans (CEP) are prepared annually by ACF in close consultation with the community and the relevant plant teams based on the concerns raised in the CAPs and other stakeholder meetings.

Annual Report on CSR Activities and Expenditure

The annual report on CSR activities and expenditure as required under Section 134 and 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014 is given as Annexure I to this Report.

(I) Extract of Annual Return:

15. Disclosures under the Companies Act, 2013 and listing regulations

The details forming part of the extract of the annual return in Form MGT-9 is given as Annexure II to this Report

(II) Number of Board Meetings:

The Board of Directors met 6 (six) times in the year 2016. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report.

(III) Changes in Share Capital:

During the year under review, the company allotted 58,44,17,928 equity shares of the face value of Rs,2 each under the Scheme of Amalgamation with Holcim India Pvt. Ltd. (HIPL) to the shareholders of HIPL. At the same time, 150,670,120 equity shares which were held by HIPL were cancelled as cross holding in terms of the said Scheme.

As a result of the allotment of new equity shares and cancellation of cross holding, the equity share capital has increased from Rs,3,103,794,842 divided into 1,551,897,421 equity shares of Rs,2 each to Rs,3,971,290,458 divided into 1,985,645,229 equity shares of Rs,2 each. All the equity shares forming part of the share capital ranks pari-passu in all respect.

(IV) Composition of Audit Committee:

The Board has constituted the Audit Committee which comprises of Mr. Rajendra Chitale as the Chairman and Mr. Nasser Munjee, Dr. Omkar Goswami and Mr. Martin Kriegner as members. More details on the committee are given in the Corporate Governance Report.

(V) Related Party Transactions:

In line with the requirements of the Companies Act, 2013 and Listing Regulations, the company has formulated a Policy on Related Party Transactions which is also available on the website of the company at http://ambujacement.com/Upload/PDF/policy_ on_determining_materiality_of_rpt_28_oct_201 5_revised.pdf.

All the related party transactions are entered on arm’s length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Act and the Listing Regulations. There are no materially significant related party transactions made by the company with Promoters, Directors or Key Managerial Personnel etc. which may have potential conflict with the interest of the company at large or which warrants the approval of the shareholders. All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions. The statement is supported by the certificate from the MD & CEO and the CFO. All related party transactions are subject to half yearly independent review by a reputed accounting firm to establish compliance with the requirements of Arms’ Length Pricing.

In accordance with Section 134(3)(h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contract or arrangement entered into by the company with related parties referred to in Section 188(1) in Form AOO-2 is attached as Annexure III.

(VI) Policy on Sexual Harassment of Women at Workplace:

The company has zero tolerance towards sexual harassment at the workplace and towards this end, has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act - 2013 and the Rules thereunder. All employees (permanent, contractual, temporary, trainees) are covered under the said policy. An Internal Complaints Committee has also been set up to redress complaints received on sexual harassment.

16. Corporate Governance

The company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the Listing Regulations. A separate section on corporate

During the financial year under review, the company has not received any complaints of sexual harassment from any of the women employees of the company.

governance along with a certificate from the auditors confirming compliance is annexed and forms part of this Annual Report.

17. Internal audits and controls

The company has an adequate system of internal controls in place with reference to the Financial Statements. The Management of the company is responsible for ensuring that Internal Financial Controls (IFC) has been laid down in the company and that controls are adequate and operating effectively.

The company’s internal controls system is founded on values of integrity and operational excellence. It supports the vision of the company, “To be the most sustainable and competitive company in our industry”. The foundation of internal control system lies in the corporate strategies, risk management framework and policies and procedures. The company has a robust internal control framework, commensurate with the size, scale and complexity of its operations. The framework has been designed to provide reasonable assurance related to financial and operational information, compliance with applicable laws and safeguarding assets of the company.

To maintain its objectivity and independence, the in-house Internal Audit department functionally reports to the Chairman of the Audit Committee. The scope and authority of the Internal Audit function is defined in the Internal Audit Charter, approved by the Audit Committee. The Internal Audit team develops a ‘Risk Based'' annual audit plan, approved by the Audit Committee, which also monitors compliance to the plan.

The Internal Audit team monitors and evaluates the efficacy and adequacy of internal control system in the company, its compliance with operating system, accounting procedures and policies at all the locations of the company. Significant audit observations and corrective actions thereon are presented to the Audit Committee. The Audit Committee reviews the reports submitted by Internal Audit. Over the years, formal and independent evaluation of internal controls and initiatives for remediation of deficiencies by in house Internal Audit department has resulted in a robust framework for Internal Controls. The Internal Audit department assesses opportunities for improvement in the business processes designed to add value to the organisation and follows up on the implementation of corrective actions and improvements in the business processes after review by the Audit Committee.

This formalised system of internal control and risk management framework facilitate effective compliance of the Listing Regulations, u/s138 of Companies Act, 2013 and relevant statute applicable to the LafargeHolcim group.

It is a matter of pride that the Internal Audit Department of Ambuja Cements Ltd has been awarded the ‘IIA Excellence Award for Application of Internal Audit Technology’. This award is to recognise and encourage excellence in internal audit by corporate in-house internal audit departments. The Institute of Internal Auditors (IIA) is the highest governing body for internal audit professionals, with its global headquarters in Florida, USA.

18. Managing the risks of fraud, corruption and unethical business practices

I. Vigil Mechanism/ Whistle Blower Policy

Fraud and corruption-free work culture has been the core of the company. In view of the potential risk of fraud, corruption and unethical behaviour consequent to rapid growth and geographical spread of operations, which could adversely impact the company’s business operations, performance and reputation, the company has put an even greater emphasis to address these risks. To meet this objective, a comprehensive Ethical View Reporting Policy akin to Vigil Mechanism or the Whistleblower policy has been laid down. In terms of the said Policy, all the reported incidents are reviewed and if required, investigated in an impartial manner and appropriate actions are taken to uphold the highest professional, ethical and governance standards. The Policy also provides for the requisite checks & balances and safeguards to ensure that no employee is victimised or harassed for reporting and bringing up such incidents.

More details about this Policy are given in the Corporate Governance Report, which forms part of this Annual Report. The Ethical View Reporting Policy is available on the company website: www.ambujacement.com

II. Code of Conduct

The company has laid down a robust Code of Business Conduct and Ethics, which is based on the principles of ethics, integrity and transparency. More details about the Code is given in the Corporate Governance Report.

III. Anti Bribery and Corruption Directives (ABCD)

In furtherance to the company’s philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down ABCD’ as part of the company’s Code of Business Conduct and Ethics. As a company, we take a zero-tolerance approach to bribery and corruption and are committed to act professionally and fairly in all our business dealings.

To spread awareness about the company’s commitment to conduct business professionally, fairly and free from bribery and corruption, employee training and awareness workshops were conducted across the organisation during 2016. As part of continuous education on ‘ABCD’ to the employees, a mandatory on-line training through a web-based application tool was also undertaken by approximately 2,000 relevant employees.

The above policies and its implementation are closely monitored by the Audit and Compliance Committees of Directors and periodically reviewed by the Board.

19. Board of Directors and key managerial personnel

I. Retirement By Rotation

In accordance with the provisions of Section 152 and Article 147 of the Articles of Association of the Company, Mr. B. L.Taparia (DIN 00016551) and Mr. Ajay Kapur (DIN 03096416) will retire by rotation at the ensuing Annual General Meeting of the company and being eligible, have offered themselves for re-appointment. The Board recommends their re-appointment.

Further details about the above directors are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

II. Attributes, qualifications & independence of Directors and their appointment

The Nomination & Remuneration Committee of Directors have approved a Policy for Selection, Appointment and Remuneration of Directors which inter-alia requires that the Directors shall be of high integrity with relevant expertise and experience so as to have a diverse Board. The Policy also lays down the positive attributes/ criteria while recommending the candidature for the appointment as Director.

The Board Diversity Policy of the company requires the Board to comprise of set of accomplished individuals, ideally representing a wide cross-section of industries, professions, occupations and functions and possessing a blend of skills, domain and functional knowledge, experience, educational qualifications, both individually and collectively.

Directors are appointed/ re-appointed with the approval of the Members for a term in accordance with the provisions of the law and the Articles of Association. The initial appointment of Managing Director & CEO is generally for a period of five years. All Directors other than Independent Directors are liable to retire by rotation unless otherwise specifically provided under the Articles of Association or under any statute. One-third of the Directors who are liable to retire by rotation, retire at every Annual General Meeting and are eligible for re-appointment.

The relevant abstract of the Policy for Selection, Appointment & Remuneration of Directors is given as Annexure IV.

III. Independent Directors declaration

The Independent Directors have submitted the Declaration of Independence, as required pursuant to Section 149 of the Companies Act, 2013 and provisions of the Listing Regulations, stating that they meet the criteria of independence as provided therein. The profile of the Independent Directors forms part of the Corporate Governance Report.

IV. Evaluation of the Board’s performance

As per provisions of the Companies Act, 2013 and Regulation 17(10) of the Listing Regulations, the evaluation process for the performance of the Board, its committees and individual Directors was carried out internally. Each Board member completed a questionnaire providing feedback on the functioning and overall level of engagement of the Board and its committees on the parameters such as the composition, execution of specific duties, quality, quantity and timeliness of flow of information, deliberations at the meeting, independence of judgement etc.

A one-on-one meeting of the individual Directors with the Chairman of the Board was also conducted as a part of self-appraisal and peer group evaluation and the engagement and impact of individual Directors were reviewed on parameters such as contribution, attendance, decision making, inter-personal relationship, action oriented, external knowledge etc.

The Directors were also asked to provide their valuable feedback and suggestions about the overall functioning of the Board and its committees and the areas of improvement for a higher degree of engagement with the Management.

The Independent Directors met on 17th December, 2016 to review performance evaluation of Non-Independent Directors and the entire Board of Directors including the Chairman, taking into account the views of Executive and Non-Executive Directors. The Independent Directors were highly satisfied with the overall functioning of the Board, its various committees and also of the performance of other

Non-executive and Executive Directors. They also appreciated the exemplary leadership role of the Board Chairman in upholding and following the highest values and standards of corporate governance.

Post review by the Independent Directors, the results were shared with the entire Board and respective committees. The Board expressed its satisfaction with the Evaluation results, which reflects the high degree of engagement of the Board and its committees with the company and its Management.

Based on the outcome of the evaluation and assessment cum feedback of the Directors, the Board and the Management have also agreed on various action points which will be implemented during the year 2017.

V. Remuneration policy

The company follows a Policy on Remuneration of Directors and Senior Management Employees. The policy is approved by the Nomination & Remuneration Committee and the Board.

The main objective of the said policy is to ensure that the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate the Directors, KMP and Senior Management employees. The remuneration involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals. The Remuneration Policy for the Directors and Senior Management employees is given in the Corporate Governance Report.

VI. Induction and familiarisation programme for Directors

The details of induction and familiarisation program for the Directors are given in the Corporate Governance Report.

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors to the best of their knowledge and ability confirm that:

20. Directors’ Responsibility

i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures;

ii) the Directors have selected such accounting policies, judgments and estimates that are reasonable and prudent and applied them consistently, so as to give a true and fair view of the state of affairs of the company as on 31st December, 2016, and of the statement of Profit and Loss and cash flow of the company for the period ended 31st December, 2016;

21. Auditors

I. Auditors and their report

M/s S R Batliboi & Associates, Chartered Accountants were appointed as the Statutory Auditors of the company at the Annual General Meeting held in October, 2003 and thereafter each year till the year 2011. Subsequently in April 2011 S. R. Batliboi & Co and in April 2013 SRBO & Co. LLP, both being the network firms of S. R. Batliboi & Associates were appointed as the statutory auditors of the company. Accordingly, the present statutory auditors, M/s SRBC & Co. LLP (along with its network firms) have completed their tenor of two terms of five consecutive years and also an additional period of 3 years as stipulated under Section 139 of the Companies Act, 2013. M/s SRBO & Co. LLP will thus be holding the office of the Statutory Auditors up to the conclusion of the forthcoming Annual General Meeting.

iii) 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;

iv) the annual accounts have been prepared on an ongoing concern basis;

v) proper internal financial controls to be followed by the company has been laid down and that such internal financial controls are adequate and were operating effectively and

vi) proper systems to ensure compliance with the provisions of all applicable laws has been devised and that such systems were adequate and operating effectively.

The company is proposing to appoint M/s. Deloitte Haskins & Sells LLP (ICAI Firm Registration No.112366W), Chartered Accountants, as Statutory Auditors for a period of 5 years commencing from the conclusion of the 34th Annual General Meeting till the conclusion of the 39th Annual General Meeting. M/s. Deloitte Haskins & Sells LLP have consented to the said appointment, and confirmed that their appointment, if made, would be within the limits mentioned under Section 141(3)(g) of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014.

The Audit Committee and the Board of Directors recommend the appointment of M/s.Deloitte Haskins & Sells LLP, Chartered Accountants as Statutory Auditors of the company from the conclusion of the 34th Annual General Meeting, till the conclusion of the 39th Annual General Meeting.

The Board places on record its appreciation for the contribution of SRBC & Co. LLP, Chartered Accountants, during their tenure as the Statutory Auditors of your company.

The Auditors’ Report to the Shareholders for the year under review does not contain any qualification

II. Cost Auditor and Cost Audit Report

Pursuant to section 148 of the Companies Act 2013, the Board of Directors on the recommendation of the Audit Committee appointed M/s P.M. Nanabhoy & Co. Cost Accountants, as the Cost Auditors of the company for the Financial Year 2017 and has recommended their remuneration to the Shareholders for their ratification at the ensuing Annual General Meeting. M/s P.M. Nanabhoy & Co. have confirmed that their appointment is within the limits of the Section 139 of the Companies Act, 2013, and have also certified that they are free from any disqualifications specified under Section 141 of the Companies Act, 2013.

22. Compliance with secretarial standards on Boardand Annual General Meetings

The company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.

The Audit Committee has also received a certificate from the Cost Auditor certifying their independence and arm’s length relationship with the company. Pursuant to Cost Audit (Report) Rules 2001, the Cost Audit Report for the financial year 2015, was filed with the Ministry of Corporate Affairs on 25th May 2016 vide SRN No. G04022380.

III. Secretarial Auditor and Secretarial Audit Report

The Board had appointed M/s Rathi & Associates, Company Secretaries in Whole-time Practice, to carry out Secretarial Audit under the provisions of Section 204 of the Companies Act, 2013 for the financial year 2016. The report of the Secretarial Auditor is annexed to this report as Annexure V. The report does not contain any qualification.

IV. Reporting of fraud

The Auditors of the company have not reported any fraud as specified under Section 143(12) of the Companies Act, 2013.

During the first quarter of 2016, based on certain allegations of fraud and malpractices in the conduct and operations, SEBI investigated the affairs of M/s Sharepro Services (India) Pvt. Ltd. (‘Sharepro’), who has been the Registrar and Share Transfer (R&T) Agent of the Company for a long period. The SEBI vide its Order dated March 22,2016 restrained Sharepro from conducting R&T activities and also directed all its client companies to conduct an audit of the records and systems relating to share transfer, transmission, payment of dividend etc. carried out by Sharepro on behalf of these companies.

23. Registrar and share transfer agent

Accordingly, the Assurance Audit of records and systems of Sharepro carried out by M/s Rathi & Associates, Practicing Company Secretaries, at the behest the company did not reveal any irregularity or violations with respect to transfer of securities or payment of dividend during the audit period from 2006 to 2015.

Subsequently, in pursuance of the advisory issued by SEBI and in order to protect the interest of the shareholders, the company appointed M/s Link Intime India Private Ltd as the new R&T Agent w.e.f. 1st July, 2016.

24. Significant and material orders passed by the courts or regulators

Order Passed by the Competition Commission of India (CCI)

Acting on the complaint filed by Builders Association of India (BAD, the Competition Commission of India (CCI) held the Cement Manufacturers Association (CMA) and its member-cement companies, including the company, guilty of violating provisions of the Competition Act and imposed a penalty of Rs,1163.91 crore. On Appeal, the Competition Appellate Tribunal (COMPAT) remanded the matter back to CCI for fresh hearing vide Order dated 11th December, 2015.

OCI heard the matter afresh and vide its Order dated 31st August, 2016 once again held OMA and its member-cement companies including the company guilty and imposed the same amount of penalty as levied in its previous Order. The company immediately filed an appeal before the COMPAT and the obtained a stay against the operation of the said Order, subject to deposit of 10% penalty amount which was forthwith complied by the company.

Other than the aforesaid, there have been no significant and material orders passed by the courts or regulators or tribunals impacting the going concern status and company’s operations. However, members’ attention is drawn to the statement on contingent liabilities and commitments in the notes forming part of the Financial Statements.

Particulars of loans, guarantees given and investments made during the year as required under Section 186 of the Companies Act, 2013 and Schedule V of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirement) Regulations, 2015 are provided in Notes 12,29 and 45 of the Standalone Financial Statements.

25. Particulars of loans, guarantees or investments

Treasury operations

During the year, the company’s treasury operations continued to focus on cash forecasting and deployment of excess funds on the back of effective portfolio management of funds within a well-defined risk management framework.

All investment decisions in deployment of temporary surplus liquidity continued to be guided primarily by the tenets of safety of Principal and liquidity. Despite Interest Rates coming down in calendar year 2016, a proactive management of portfolio helped improve treasury yield performance.

During the year, the investment portfolio mix was continuously rebalanced in line with the evolving interest rate environment.

26. Transfer of unclaimed dividend and unclaimed shares

The details relating to Unclaimed Dividend and Unclaimed shares forms part of the Corporate Governance Report.

27. Energy, technology and foreign exchange

Information on conservation of energy, technology absorption, foreign exchange earnings and out go, is required to be given pursuant to provision of Section 134 of the

Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 is annexed hereto marked Annexure VI and forms part of this report.

There were 5183 permanent employees of the company as of 31st December, 2016.

28. Particulars of employees

The disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report at Annexure VII.

Further, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits as set out in the Rules 5(2) and 5(3) of the aforesaid Rules forms part of this report. However, in terms of first proviso to Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection by the members at the Registered Office of the company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent. Further, the details are also available on the company’s website: www.ambujacement.com/investors

29. Subsidiaries and joint ventures

The company has 6 subsidiaries and 2 joint ventures as on 31st December, 2016. During the year, one non-functional subsidiary viz. Kakinada Cements Ltd. was dissolved and the name of the company has been struck off from the Registrar of Companies, Gujarat under the easy exit scheme.

As reported elsewhere, with the effectiveness of the Scheme of Amalgamation with Holcim

India Pvt. Ltd., ACC Limited (along with its subsidiaries), has become the subsidiary of the company w.e.f. 12th August, 2016.

The Policy for determining Material Subsidiaries, adopted by the Board, pursuant to Regulation 16 of the Listing Regulations can be accessed on the company''s website at: www.ambujacement.com/investors

As stipulated by Regulation 33 of the Listing Regulations, 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.

30. Consolidated financial statements

Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing the salient features of the financial statements of each of the subsidiary and joint venture in the prescribed Form AOC-1 is annexed to this report at Annexure VIII.

Pursuant to Section 136 of the Companies Act, 2013, the financial statements of the subsidiary and joint venture companies are kept for inspection by the shareholders at the Registered Office of the company. The company shall provide free of cost, the copy of the financial statements of its subsidiary and joint venture companies to the shareholders upon their request. The statements are also available on the website of the company www.ambujacement.com/investors.

The consolidated net profit of the company and its subsidiaries amounted to Rs, 1,121.13 crore for 2016 as compared to Rs, 807.88 orore for 2015.

31. Equal opportunity employer

The company has always provided a congenial atmosphere for work to all employees that is free from discrimination and harassment including sexual harassment. It has provided

32. Other disclosures

No disclosure or reporting is made in respect of the following items as there were no transactions during the year under review:

- Details relating to deposits covered under Chapter V of the Act.

- Issue of equity shares with differential rights as to dividend, voting or otherwise.

equal opportunities of employment to all without regard to their caste, religion, colour, marital status and sex.

- Issue of shares to the employees of the company under any scheme (sweat equity or stock options).

- The company does not have any scheme or provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.

- Neither the Managing Director nor the whole-time Directors of the company receive any remuneration or commission from any of its subsidiaries.

- No material fraud has been reported by the

33. Awards and accolades

The company’s efforts towards building a sustainable company were well recognised at major award ceremonies. We won the prestigious Cll Sustainability Award for ‘Outstanding Accomplishment’, under the category of Corporate Excellence.

Our Bhatapara and Chandrapur units have also bagged awards in the domains of Environment Management & CSR.

34. Cautionary statement

Statements in the Directors’ Report and the Management Discussion and Analysis 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

Auditors to the Audit Committee or the Board.

- There was no revision in the financial statements.

- There was no change in the nature of business.

We have also been conferred with the FICCI CSR Award for our initiatives under the water resource management program. These awards recognise India''s most sustainable companies for their outstanding achievements and commitment to shaping a future that is more sustainable and inclusive. For a complete list of the awards that Ambuja won in 2016, please refer to the initial part of the Annual Report.

operations include: global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country, and other factors which are material to the business operations of the company.

35. Acknowledgements

The Directors take this opportunity to express their deep sense of gratitude to the Banks, Central and State Governments and their Departments, and the Local Authorities, for their continued guidance and support.

We would also like to place on record our sincere appreciation for the commitment, dedication and hard work put in by every member of the Ambuja family. To them goes the credit for the company’s achievements. And to you, our Shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the Board of Ambuja Cements Limited

N. S. Sekhsaria

Chairman & Principal Founder Mumbai

20th February, 2017


Dec 31, 2015

Dear Members,

We are pleased to present the Annual Report of the Company for the year 2015.

1. FINANCIAL RESULTS 2015 AT A GLANCE (STAND-ALONE RESULTS):

- Cement production increased by 0.5% to reach 21.5 million tonnes, from 21.4 million tones while clinker production decreased by 3% to 14.4 million tonnes, from 14.9 million tonnes in 2014.

- Domestic cement sales volume in 2015 increased marginally to 21.5 million tones. Clinker sales (including exports) decreased from 0.61 million tonnes in 2014 to 0.27 million tonnes in 2015.

- Net sales at - 9,368 crores were down by 5.5% than that of the previous year's - 9,911 crores. Average sales realization decreased by around 3.9% at - 4,297 per tonne against approx - 4,474 per tonne in 2014.

- Total (operating) expenses for the year 2015 were marginally lower than the previous year.

- The Company achieved an absolute EBITDA of - 1,531 crores which was lower by 20.6% over the corresponding EBITDA of - 1,928 crores of the year 2014. This was mainly on account of lower cement sales realization.

- Profit before Tax at - 1,172 crores was down by 34.3% over corresponding Profit before Tax of

- 1,783 crores for the year 2014. Fall in Profit before Tax was due to lower EBITDA and additional depreciation charge on account of implementation of the provisions of new Companies Act, 2013. - Net Profit at - 808 crores was down by 46% over corresponding Net Profit of - 1,496 crores for the year 2014. This was mainly due to lower Profit before Tax coupled with write back of tax provision in previous year of - 176 crores as against additional tax pertaining to previous years of - 56 crores during current year.

Amount in Rs, crores

Stand alone Consolidated

Current previous current previous Year year Year year 31.12. 31.12.2014 31.12 31.12 2015 2014 2015 2014

Sales (Net of excise duty) 9,368.30 9,910.70 9,388.00 9,930.54

Profit before interest, depre- ciation and excep- tional item 1,889.66 2,357.42 1,895.48 2,352.60

Less: Finance costs 91.79 64.48 92.47 65.55

Gross profit 1,797.87 2,292.94 1,803.01 2,287.05

Less: Depre- ciation and Amor- tization Expense 625.66 509.53 629.76 513.03

Profit before Tax 1,172.21 1,783.41 1,173.25 1,774.02

Less: Tax Expense 364.65 287.05 365.37 287.51

Profit after Tax but before Minority Interest 807.56 1,496.36 807.88 1,486.51

Less : Minority Interest - - - (0.01)

Profit for the Year 807.56 1,496.36 807.88 1,486.50

Add : Balance as per the last Financial Statements 1,655.93 1,230.69 1,941.15 1,525.77

Profit available for appro- priation 2,463.49 2,727.05 2,749.03 3,012.27

Appro- priations:

General Reserve - 150.00 - 150.00

Adjustment for Depre- ciation and Amorti- zation as per Schedule II of the Companies Act, 2013 106.63 - 108.91 -

Dividend on Equity Shares (including interim) 434.53 774.61 434.53 774.61

Corporate Dividend Tax 88.46 146.51 88.46 146.51

Total 629.62 1,071.12 631.90 1,071.12

Balance carried forward to Balance Sheet 1,833.87 1,655.93 2,117.13 1,941.15

2. DIVIDEND

The Company paid an interim dividend of 80% (Rs, 1.60 per share) during the year. In view of the substantial decline in the Profit after Tax for the full year and with a view to conserve resources for the future requirements, the Directors have recommend a final dividend of 60% ( Rs,1.20 per share). Thus, the aggregate dividend for the year 2015 is 140% (Rs, 2.80 per share) and the total payout will be Rs, 522.99 crores, including dividend distribution tax of Rs, 88.46 crores. This represents a payout ratio of 65%.

3. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company has made conscious efforts to involve communities in its development journey through Ambuja Cement Foundation (ACF), the CSR arm of the company. ACF realized its responsibility to co-exist peacefully with the host communities, and over the past two decades has kick-started multiple programmers at 21 locations across 11 states.

ACF's programs are focused on: Water Management, Skill and Entrepreneurship Development, Healthcare, Education, Women Empowerment and Agro-based Livelihoods. Detailed report on CSR activities including amount spent is given in Annexure I.

WATER MANAGEMENT

With the motive of 'giving more than we take', ACF has been working in Gujarat, dry arid territories of Rajasthan, hilly regions of Darlaghat and the water scarce state of Andhra Pradesh. To date, ACF has reached out to more than 400,000 people across locations. Initiatives like renovation of traditional water reservoirs, pond deepening, roof rain water harvesting structures (RRWHS) and reverse osmosis plants, among others have improved accessibility to healthy drinking water. In addition, these initiatives have improved the quality of land and environment.

THE ONLY WATER POSITIVE CEMENT COMPANY IN INDIA.

As a result of these efforts, the Company was certified as 4.03 times water positive. ACL's Rabriyawas plant, located in middle of a desert in Rajasthan, has been certified 13 times water positive. For Rabriyawas, water has changed the landscape in the region, with improvement in not just biodiversity and land quality, but also the livelihoods and lifestyle of people.

Ambuja Cement is the only water positive cement Company in India with total water credits of 31 million cubic metres.

AGRO-BASED LIVELIHOODS

Strengthening community through sustainable livelihoods programmers has changed the lives of youth, women and farmers in nearby communities.

The agro-based livelihood generation programmed to make agriculture and allied activities a sustainable source of livelihood has introduced the farmers to new technologies and created market linkages reaching out to over 85,000 farmers. Crop specific programmers - Better Cotton Initiative (BCI) reached out to more than 26,000 farmers covering 40,000 hectares of land and System for Rice Intensification (SRI) project has covered 800 farmers, and is in an expansion mode. The initiative to promote animal care has changed lives of many women in Darla hat. The local women are trained as para-veterinarians or Pashu Swasthya Sevikas (PSS), thus providing the much needed access to cattle care, improving the status of agriculture allied activities. To promote allied farming livelihoods, the farmers were introduced to Alternative Fuel Resource (AFR), where they get paid by Ambuja to provide bio-wastes like sugarcane trash, leaves, cotton stalk, wheat straw and other crop residues as biomass.

To enhance alternative means of livelihood and develop the skills of community youth, ACF has established 16 Skill and Entrepreneurship Development Institutes (SEDI) across 10 states that provides vocational training in 12 sectors. Till date, SEDI has trained almost 26,400 youth, of which 70% have been successfully placed in various industries.

SEDI, Nagaur (Rajasthan) has trained 60 physically challenged youth, of which 90% have started their independent enterprises.

HEALTH AND SANITATION

ACF has been actively working on clinical, preventive and promotive healthcare through mobile medicare units, community health clinics, diagnostic centres and specialised health camps. The health projects are implemented in close coordination with Public Health Departments, panchayats, Village Development Committees and led by a cadre of voluntary health workers or "sakhis", who work as the interface between the public health system and the community. Today, sakhis are active participants in the village health and sanitation committees, vocal at gram sabhas about healthcare issues and are resource persons promoting awareness on rural health and hygiene.

KEEPING IT CLEAN

ACF along with Women's Federations in Chandrapur (Maharashtra) and Kodinar (Gujarat) encouraged people to construct toilets in their households to improve health and sanitation. The two Federations, with 435 self help groups (SHG) and over 4800 members are driving communities to adopt hygienic practices. In Darlaghat (Himachal Pradesh), children from the community ensured an open defecation free (ODF) village. Known as "Swachata Doot" (Messengers of Cleanliness), these children spread the message by demonstrating hygiene and cleanliness in their allocated area.

As part of the sanitation project, more than 22,000 toilets have been constructed in 130 villages in different locations of the Company. ACF aims to make all the villages that they are working in 100% ODF by 2020. Under the school sanitation programme, ACF has resolved issues in 172 schools. Each of these schools have a vigilance committee with school children as committee members, ensuring cleanliness and sanitation in their school premises.

AMBUJA MANOVIKAS KENDRA (AMK)

pAt this special facility for intellectually challenged children in Ropar, Punjab, two students brought glory to their school at the Summer Special Olympics 2015 organized in Los Angeles, USA. Meera Kumari and Pawandeep Singh won the gold and bronze medals in the cycling and basketball categories respectively. This has added yet another credit to AMK with seven of its students to date, having won 11 medals at the Summer Special Olympics under different categories.

STAKEHOLDER ENGAGEMENT

ACL's communities and stakeholders participate in identifying issues and evolving solutions in a systematic and continuous manner.

- Community Advisory Panels (CAP) consisting of community members and members from Ambuja Cement, meet regularly to discuss the community concerns.

- Community Engagement Plans (CEP) are prepared annually by ACF in close consultation with the community and ACL units, based on concerns raised at CAPs and other stakeholder meetings.

- Social Engagement Scorecard (SES) is conducted annually at all locations, to provide a review of programs in the form of group discussions and opinion leader interviews.

- Site Specific Impact Assessments (SSIA) are conducted cyclically to apprehend the insights and needs of all stakeholders of the Company.

4. HEALTH & SAFETY (H&S)

Health & Safety is an overarching value for all of us at Ambuja. The Company is committed to ensure safety of all its employees, contractors and everyone associated with it. It firmly believes in the policy of "Zero Harm. Our onsite performance has gradually improved since 2013. From ten fatalities in 2013, it was three in 2014 and one in 2015. The 'We Care' - our Health & Safety Excellence Journey initiative launched across the Company the previous year has remarkably helped in changing the mindset of our people and strengthening the safety culture in the Company.

It was observed that everyone across the plants was speaking the language of safety. Under 'We Care', Health & Safety was made a line responsibility and not the functional obligation. This led to standardization of processes, increased participation, involvement and engagement of people on the ground.

For capability building, a mass training program was rolled out for 6500 employees and contractors involved in high risk activities; also conducted certification programs with the help of external experts. With the objective of emotional engagement and changing mind-set towards safety, 12000 people were connected through sensitization workshops and behaviour-based training (BBS) for over 900 front-line staff and workers. A Reward & Recognition program was introduced where 374 individuals and 31 teams were rewarded for proactive interventions.

Even as our efforts in 2015 have been good, we need to continue the momentum in the coming year especially in improving H&S engagement and accountability. In 2016, our focus will be on implementation which would include enforcing on-ground learning's and demonstrating it too. Besides rewards, there is a need to introduce consequence management for any non-compliance on safety. A matter of concern has been Vehicular & Traffic Safety, which will be incorporated this year as part of our larger strategy.

So far, we have been on the right track on our H&S journey and our teams are committed to achieve the goal of Zero Harm.

5. MERGER OF HOLCIM LTD. SWITZERLAND AND LAFARGE SA FRANCE

On 10th July, 2015 Holcim Ltd. Switzerland and Lafarge SA, France announced the completion of their global merger to create LafargeHolcim Ltd. (LH), a world leader in cement and building material industry. LH is present in 90 countries with around 1,15,000 employees. LH is the ultimate holding Company and Ambuja continues to receive all-round support from them in various facets of the Company's business and support functions.

6. ORDER OF COMPETITION APPELLATE TRIBUNAL (COMPAT)

In June 2012, the Competition Commission of India (CCI) passed an Order levying a penalty of -1163 crores on the Company in connection with a complaint filed by the Builders Association of India against leading cement companies (including Ambuja) for alleged violation of certain provisions of the Competition Act, 2002. The Company filed an appeal before the COMPAT for setting aside the said Order of CCI. The COMPAT granted stay on levying the penalty imposed on the Company by CCI against deposit of 10% of the penalty amount.

In December 2015, the COMPAT finally set aside the said Order of CCI and remanded back to CCI for fresh adjudication of the issues and passing of fresh Order. It also allowed the Company to withdraw the amount of 10% deposit kept with the CCI.

7. TREASURY OPERATIONS

During the year, the Company's treasury operations continued to focus on cash forecasting and deployment of excess funds on the back of effective portfolio management of funds within a well-defined risk management framework.

All investment decisions in deployment of temporary surplus liquidity continued to be guided primarily by the tenets of safety of Principal and liquidity. Proactive management of portfolio helped improve treasury yield performance. During the year, the investment portfolio mix was continuously rebalanced in line with the evolving interest rate environment.

8. DEPOSITS

The Company has not accepted any deposits from the public/members under Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014 during the year.

9. PURCHASE OF SHARES IN HOLCIM INDIA PVT. LTD. (HIPL) AND AMALGAMATION OF HIPL WITH THE COMPANY

The members may be aware that the Company had proposed to acquire 24% equity shares of HIPL from Holderind Investment Limited, Mauritius and subsequently amalgamating HIPL with the Company under the Scheme of Amalgamation. The Scheme has been approved by the requisite majority of the Members and has also received assent from the Hon'ble High Courts at Gujarat and Delhi. However, the Scheme will be effective upon receipt of approval from the Foreign Investment Promotion Board (FIPB), Government of India which is yet to be received.

On the scheme being effective, the Company will hold 50.01% equity shares in ACC Limited and consequently ACC Limited and all its subsidiaries will become the subsidiary of the Company.

10. EMPLOYEE STOCK OPTION SCHEME (ESOP)

During the year, the last ongoing ESOP scheme got closed and the Company did not grant any fresh stock option to its employees. Henceforth, information on stock options will be given only when fresh options are granted by the Company.

11. DISCLOSURES UNDER THE COMPANIES ACT, 2013 AND LISTING REGULATIONS

(I) EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the annual return is given in Annexure II.

(II) NUMBER OF BOARD MEETINGS:

The Board of Directors met 7 (seven) times in the year 2015. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report.

(III) CHANGES IN SHARE CAPITAL:

During the year under review, the Company allotted 21,51,635 equity shares of the face value of - 2 each upon exercise of stock options under various Employee Stock Option Schemes. Consequently the equity share capital has increased from - 309,94,91572 divided into 154,97,45,786 equity shares of - 2 each to - 310,37,94,842 divided into 155,18,97,421 equity shares of - 2 each. All the equity shares forming part of the share capital rank pari-passu in all respect.

(IV) CONTINUANCE OF THE EXISTING FINANCIAL YEAR: Pursuant to the requirement of consolidation of the Company's accounts with the ultimate Holding Company, Lafarge Holmic Ltd., the Company will continue to follow the Calendar Year (1st January – 31st December) as its Financial Year. Necessary approval from the Company Law Board has been obtained in this regard.

(V) COMPOSITION OF AUDIT COMMITTEE:

The Board has constituted the Audit Committee which comprises of Mr Rajendra Chitale as the Chairman and Dr Omkar Goswami, Mr Nasser Munjee and Mr Bernard Terver (since resigned) as members. More details on the committee are given in the Corporate Governance Report.

(VI) RELATED PARTY TRANSACTIONS:

All the related party transactions are entered on arm's length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Regulations. There are no materially significant related party transactions made by the Company with Promoters, Directors or Key Managerial Personnel etc. which may have potential conflict with the interest of the Company at large or which warrants the approval of the shareholders. Accordingly, no transactions are being reported in Form AOC-2 in terms of Section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014. However, the details of the transactions with Related Party are provided in the Company's financial statements in accordance with the Accounting Standards.

All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions. The statement is supported by the certificate from the MD & CEO and the CFO.

The Related Party Transactions Policy as approved by the Board is uploaded on the Company's website at http://www.ambujacement.com/ wpcontent/uploads/2015/12/policy_on_determ ining _materiality _of_rpt_28_oct_2015_revised.pdf

(VII) POLICY ON SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:

The Company has zero tolerance towards sexual harassment at the workplace and towards this end, has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. All employees (permanent, contractual, temporary, trainees) are covered under the said policy. An Internal Complaints Committee has also been set up to redress complaints received on sexual harassment.

During the financial year under review, the Company has not received any complaints of sexual harassment from any of the women employees of the Company.

12. CORPORATE GOVERNANCE

The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the listing regulations. A separate section on corporate governance under the listing regulations, along with a certificate from the auditors confirming the compliance, is annexed and forms part of this Annual Report.

13. BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report for the year ended 31st December 2015, as stipulated under regulation 34 of the Listing Regulations is annexed and forms part of the Annual Report.

14. INTERNAL CONTROL SYSTEM

INTERNAL AUDITS AND CONTROLS

The Company's internal controls system has been established on values of integrity and operational excellence and it supports the vision of the Company "To be the most sustainable and competitive Company in our industry". Over the years, formal and independent evaluation of internal controls and initiatives for remediation of deficiencies by in house Internal Audit department have resulted in a robust framework for Internal Controls, commensurate with the size and complexity of the business.

The internal control framework essentially has two elements: (1) structures, policies and guidelines designed to achieve efficiency and effectiveness in operations and compliance with laws and regulations; (2) an assurance function provided by Internal Audit.

The Company also has well-documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted due to business needs. The Internal Audit department continuously monitors the efficiency of the internal controls/compliance with SOPs with the objective of providing to Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organization's risk management, control and governance processes. This formalized system of internal control facilitates effective compliance of Section 138 of Companies Act, 2013, the Listing Regulations and also the relevant statutes applicable to the parent organization.

KEEPING AN EYE ON OURSELVES

The scope and authority of Internal Audit activity are well-defined in the Internal Audit Charter, approved by the Audit Committee. The Internal Audit department develops the risk based annual audit plan with inputs from business risk management, prominent stakeholders and previous audit reports. The annual internal audit plan is approved by the Audit committee.

The Audit Committee meets regularly to review reports, including significant audit observations and follow-up actions thereon. The Audit Committee also meets the Company's Statutory Auditors to ascertain their views on financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of internal control system.

The Internal Audit department also assesses opportunities for improvement in the business processes, designed to add value to the organization and follows up on the implementation of corrective actions and improvements in the business processes after review by the Audit Committee.

15. MANAGING THE RISKS OF FRAUD, CORRUPTION AND UNETHICAL BUSINESS PRACTICES

I. VIGIL MECHANISM/ WHISTLE BLOWER POLICY

Fraud and corruption-free work culture has been the core of the Company. In view of the potential risk of fraud, corruption and unethical behaviour consequent to rapid growth and geographical spread of operations, which could adversely impact the Company's business operations, performance and reputation, the Company has put an even greater emphasis to address these risks. To meet this objective, a comprehensive Ethical View Reporting Policy akin to vigil mechanism or the whistleblower policy has been laid down. More details about this Policy are given in the Corporate Governance Report, which forms part of this Annual Report. The Ethical View Reporting Policy is available on the Company website: www.ambujacement.com

II. ANTI BRIBERY AND CORRUPTION DIRECTIVES (ABCD)

In furtherance to the Company's philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down ABCD as part of the Company's Code of Business Conduct and Ethics. As a Company, we take a zero- tolerance approach to bribery and corruption and are committed to act professionally and fairly in all our business dealings.

To spread awareness about the Company's commitment to conduct business professionally, fairly and free from bribery and corruption, employee training and awareness workshops were conducted across the organization during 2015. As part of continuous education on ABCD to the employees, a mandatory on-line training through a web-based application tool was also undertaken by approximately 4,000 employees.

The above policies and its implementation are closely monitored by the Audit and Compliance Committees of Directors and periodically reviewed by the Board.

16. DIRECTORS AND KEY MANAGERIAL PERSONNEL

I. DEMISE OF CHAIRMAN EMERITUS

Mr. Suresh Neotia, one of the founder promoters of the Company left for heavenly abode on 7th May, 2015. As Chairman of the Company (1988 - 2009) and thereafter as Chairman Emeritus, Mr. Neotia played a pivotal role in the setting-up of Ambuja and raising it to be among the most successful cement companies of India. His contribution in the growth and development of the Company will always be remembered. The Board placed on record their rich tributes for the unparalleled and precious contribution made by Mr. Neotia to the Company in particular and society at large.

II. CESSATION

Mr. Bernard Fontana (DIN 00009181), Director (representing erstwhile Holcim Ltd.) resigned from the Board w.e.f. 17.07.2015 upon his stepping down as the CEO of Holcim Ltd.

Mr. Bernard Terver (DIN 06771125), Vice Chairman (representing LafargeHolcim Ltd.) resigned from the Board w.e.f. 11.02.2016 in view of his proposed retirement from Lafarge Holmic Ltd., the ultimate Holding company.

The Board placed on record its appreciation for the valuable services rendered by Mr. Fontana and Mr. Terver.

III. RETIREMENT BY ROTATION

In accordance with the provisions of Section 152 and Article 147 of the Articles of Association of the Company, Ms. Usha Sangwan (DIN 02609263) will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, has offered herself for re-appointment. The Board recommends her re-appointment.

IV. APPOINTMENT

Mr. Eric Olsen (DIN 07238383)

Mr. Eric Olsen has been appointed as an Additional Director (Non Independent) under Section 161 of the Companies Act, 2013 w.e.f. 27th July, 2015. Consequent to the stepping down of Mr. Bernard Tever, Mr. Olsen has been appointed as the Vice Chairman of the Board w.e.f. 11th February, 2016.

Mr. Olsen, aged 51 is the CEO of Lafarge Holmic Ltd. He is a business graduate from the University of Colorado, Certified Public Accountant (Chicago, USA) and holds a Master of Business Administration from HEC International Business School in Paris. He possesses more than 25 years of experience in the fields of Finance, M&A, Business Development and Human Resource.

Mr. Christof Hassig (DIN 01680305)

Mr Christof Hassig has been appointed as an Additional Director (Non Independent) under Section 161 of the Companies Act, 2013 w.e.f. 9th December, 2015.

Mr. Hassig, aged 56 is currently the Head of Corporate Strategy and Mergers & Acquisitions at LafargeHolcim Ltd. He is a professional banker and did his Masters in Banking and Advanced Management Program at Harvard Business School. He possesses more than 30 years of experience in the fields of Banking, Finance and M&A.

Mr. Martin Kriegner (DIN 00077715)

Mr. Martin Kriegner has been appointed as an Additional Director (Non Independent) under Section 161 of the Companies Act, 2013 w.e.f. 11th February, 2016.

Mr. Kriegner, aged 54 who is currently the Area Manager of Central Europe region of LafargeHolcim has been now appointed as the Head of India. He is a Doctorate of Law and MBA from Austrian Universities. He joined the erstwhile Lafarge group in 1990. Prior to his current role, he was the CEO of Lafarge India Pvt. Ltd. from 2012 to 2015.

As Additional Directors, Mr. Olsen, Mr. Hassig and Mr. Kriegner shall hold office up to the date of the ensuing Annual General Meeting. The Company has received a Notice as per the provisions of Section 160 (1) of the Companies Act, 2013 from the Members along with the requisite deposit for proposing their appointment as Directors. The Board of Directors recommends their appointment.

Further details about the directors are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

V. ATTRIBUTES, QUALIFICATIONS & INDEPENDENCE OF DIRECTORS AND THEIR APPOINTMENT

The Nomination & Remuneration Committee of Directors have approved a Policy for Selection, Appointment and Remuneration of Directors which inter-alia requires that the Directors shall be of high integrity with relevant expertise and experience so as to have diverse Board.

The Policy also lays down the positive attributes/ criteria while recommending the candidature for the appointment as Director.

Our Leadership Blueprint

The Board Diversity Policy of the Company requires the Board to comprise of set of accomplished individuals, ideally representing a wide cross-section of industries, professions, backgrounds, occupations and functions and possessing a blend of skills, domain and functional knowledge, experience, educational qualifications, both individually and collectively.

Directors are appointed/re-appointed with the approval of the Members for a term in accordance with the provisions of the law and the Articles of Association. The initial appointment of Managing Director & CEO is generally for a period of five years. All Directors other than Independent Directors are liable to retire by rotation unless otherwise specifically provided under the Articles of Association or under any statute. One-third of the Directors who are liable to retire by rotation, retire at every Annual General Meeting and are eligible for re-appointment.

The relevant abstract of the Policy for Selection, Appointment & Remuneration of Directors is given in Annexure III.

VI. INDEPENDENT DIRECTORS DECLARATION

The Independent Directors have submitted the Declaration of Independence, as required pursuant to Section 149 of the Companies Act, 2013 and provisions of the Listing Regulations, stating that they meet the criteria of independence as provided therein. The profile of the Independent Directors forms part of the Corporate Governance Report.

VII. EVALUATION OF THE BOARD'S PERFORMANCE

In compliance with the Companies Act, 2013, and Regulation 17 of the Listing Regulations, the performance evaluation of the Board and its Committees were carried out during the year under review. More details on the same are given in the Corporate Governance Report.

VIII. REMUNERATION POLICY

The Company follows a Policy on Remuneration of Directors and Senior Management Employees. The policy is approved by the Nomination & Remuneration Committee and the Board. The main objective of the said policy is to ensure that the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate the Directors, KMP and senior management employees. The remuneration involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals. The Remuneration Policy for the Directors and senior management employees is given in the Corporate Governance Report.

IX. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

The familiarization programmed aims to provide Independent Directors with the cement industry scenario, the socio-economic environment in which the Company operates, the business model, the operational and financial performance of the Company, significant developments so as to enable them to take well informed decisions in a timely manner. The familiarization programmed also seeks to update the Directors on the roles, responsibilities, rights and duties under the Act and other statutes.

The policy on Company's familiarization programmed for Independent Directors is posted on the Company's website at:

www.ambujacement.com

X. KEY MANAGERIAL PERSONNEL

During the year under review, Mr. Sanjeev Churiwala resigned from the post of the CFO of the Company w.e.f. 15.11.2015. The Board placed on record its appreciation for the valuable services rendered by Mr. Churiwala.

The Board of Directors, based on the recommendation of the Nomination & Remuneration Committee and the Audit Committee, appointed Mr. Suresh Joshi as the new CFO of the Company w.e.f. 1st February, 2016. Mr. Joshi, aged 54, is a Commerce Graduate and a qualified Chartered Accountant and has more than 30 years of experience (including 19 years with Ambuja) in the areas of finance & controlling, taxation, commercial & business strategy and M&A. He also possesses global exposure to LafargeHolcim group's finance and controlling function for around four years.

17. DIRECTORS' RESPONSIBILITY

Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors to the best of their knowledge and ability confirm that:

i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures;

ii) the Directors have selected such accounting policies and applied them consistently, except for the change in accounting policies stated in notes to the accounts and 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 on 31st December, 2015, and of the statement of profit and loss and cash flow of the Company for the period ended 31st December, 2015;

iii) 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;

iv) the annual accounts have been prepared on an ongoing concern basis;

v) proper internal financial controls to be followed by the Company has been laid down and that such internal financial controls are adequate and were operating effectively and;

vi) proper systems to ensure compliance with the provisions of all applicable laws has been devised and that such systems were adequate and operating effectively.

18. AUDITORS

I. AUDITORS AND THEIR REPORT

M/s. SRBC & Co. LLP (ICAI Firm Registration No.324982E), the Statutory Auditors of the Company, will hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment as per Section 139 of the Companies Act, 2013.

M/s. SRBC & Co. LLP have expressed their willingness to get re-appointed as the Statutory Auditors of the Company and has furnished a certificate of their eligibility and consent under Section 141 of the Companies Act, 2013, and the rules framed there under. In terms of the Listing Agreement/Regulations, the Auditors have confirmed vide their letter dated 11th January, 2016 that they hold a valid certificate issued by the Peer Review Board of the ICAI. The Board, based on the recommendation of the Audit Committee, recommends the appointment of M/s. SRBC & Co. LLP as the Statutory Auditors of the Company.

The members are requested to appoint M/s. SRBC & Co. LLP, Chartered Accountants as Auditors from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting in 2017 and to authorise the Board to fix their remuneration for the year 2016.

The Auditors' Report to the Shareholders for the year under review does not contain any qualification.

II. COST AUDITOR AND COST AUDIT REPORT

Pursuant to section 148 of the Companies Act 2013, the Board of Directors on the recommendation of the Audit Committee appointed M/s. P.M. Nanabhoy & Co. Cost Accountants, as the Cost Auditors of the Company for the Financial Year 2016 and has recommended their remuneration to the Shareholders for their ratification at the ensuing Annual General Meeting.

The Audit Committee has also received a certificate from the Cost Auditor certifying their independence and arm's length relationship with the Company. Pursuant to the Companies (Cost Audit Report) Rules, 2011, the Cost Audit Report for the financial year 2014, was filed with the Ministry of Corporate Affairs on 12.05.2015 vide SRN No. S37794351.

III. SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

The Board had appointed M/s. Rathi & Associates, Company Secretaries in Whole-time Practice, to carry out Secretarial Audit under the provisions of Section 204 of the Companies Act, 2013 for the financial year 2015. The report of the Secretarial Auditor is annexed to this report as Annexure IV. The report does not contain any qualification.

19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS OR REGULATORS

Except as stated elsewhere about passing of Order by the Competition Appellate Tribunal, there have been no significant and material orders passed by the courts or regulators or tribunals impacting the going concern status and Company's operations. However, members' attention is drawn to the statement on contingent liabilities and commitments in the notes forming part of the Financial Statements.

18. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Particulars of loans, guarantees given and investments made during the year as required under Section 186 of the Companies Act, 2013 and Schedule V of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirement) Regulations, 2015 are provided in Notes 11, 28 (I)(vi) and 47 of the Standalone Financial Statements.

19. TRANSFER OF UNCLAIMED DIVIDEND AND UNCLAIMED SHARES

UNCLAIMED DIVIDEND

The Company has transferred a sum of - 132 lakh during the financial year 2015 to the Investor Education and Protection Fund established by the Central Government, in compliance with Section 205C of the Companies Act, 1956. The said amount represents unclaimed dividends which were lying with the Company for a period of seven years from their respective due dates of payment. Prior to transferring the aforesaid sum, the Company has sent reminders to the shareholders for submitting their claims for unclaimed dividend.

UNCLAIMED SHARES

During the year the Company transferred 24,96,378 undelivered unclaimed equity shares of - 2 each belonging to 17,365 shareholders to the Unclaimed Suspense Account out of the two issues made by the Company viz - shares issued to the shareholders of Ambuja Cement Rajasthan Ltd. on merger and simultaneous issue of Bonus shares and subdivision of the face value of shares from - 10 to - 2. These shares were transferred to the Unclaimed Suspense Account on 14th December, 2015 after sending three reminders in compliance with Clause 5A of the Listing Agreement & Regulation 39(4) of the Listing Regulations, 2015.

Company is holding these shares in a Demat – 'Unclaimed Suspense Account' with HDFC Bank on behalf of the allottees of these shares. The voting rights in respect of these shares would remain frozen till the rightful owner claims it as per the procedure laid down under the Listing Regulations.

20. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information on conservation of energy, technology absorption, foreign exchange earnings and out go, is required to be given pursuant to provision of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 is annexed hereto marked Annexure V and forms part of this report.

21. PARTICULARS OF EMPLOYEES

The disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report at Annexure VI.

Further, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits as set out in the Rules 5(2) and 5(3) of the aforesaid Rules, forms part of this report. However, in terms of first proviso to Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection by the members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent. Further, the details are also available on the Company's website: www.ambujacement.com

22. SUBSIDIARIES AND JOINT VENTURES

At present, the Company does not have any material subsidiary. During the year, one subsidiary company, viz. Kakinada Cements Ltd., which was not engaged into any business activities, has applied to the Registrar of Companies, Gujarat, under the Easy Exit Scheme of erstwhile Companies Act 1956, for striking off its name. During the year, One India BSC Pvt. Ltd. became the joint venture Company. The Policy for determining Material Subsidiaries, adopted by the Board, pursuant to Regulation 16 of the Listing Regulations can be accessed on the Company's website at www.ambujacement.com

23. CONSOLIDATED FINANCIAL STATEMENTS

As stipulated by Regulation 33 of the Listing Regulations, 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.

Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing the salient features of the financial statements of each of the subsidiary and joint venture in the prescribed Form AOC-1 is annexed to this report at Annexure VII.

Pursuant to Section 136 of the Companies Act, 2013, the financial statements of the subsidiary and joint venture companies are kept for inspection by the shareholders at the Registered Office of the Company. The Company shall provide free of cost, the copy of the financial statements of its subsidiary and joint venture companies to the shareholders upon their request. The statements are also available on the website of the Company www.ambujacement.com under the Investor Relations section.

The consolidated net profit of the Company and its subsidiaries amounted to - 807.88 crores for the corporate financial year ended on 31st December, 2015 as compared to - 1,486.50 crores for the previous year.

24. EQUAL OPPORTUNITY EMPLOYER

The Company has always provided a congenial atmosphere for work to all employees that is free from discrimination and harassment including sexual harassment. It has provided equal opportunities of employment to all without regard to their caste, religion, color, marital status and sex.

25. AWARDS AND ACCOLADES

CORPORATE AWARDS

- Ambuja Cement was awarded the 'Best Sustainability Risk Management Company' of the year be CNBC TV18. The India Risk Management Awards recognizes those organizations and teams that have significantly added to the understanding and practice of risk management in the country.

- Ambuja Cements bagged 'Eco Corporate of the Year 2014' by Yes Bank's Natural Capital Awards: Yes Bank honored corporate and photographers who have exemplified 'action for the environment' in their own capacities.

- CM Sustainability Award 2015 for 'Corporate Excellence-Commendation' for Significant Achievement in category 'A'. Ambuja has bagged this award for the 5th consecutive year.

REGIONAL AWARDS

- Maratha Cement Works (MCW) and Rabriyawas jointly bagged the 2nd prize for Excellence in Water Management & Conservation at the 3rd edition of FICCI Water Awards held in the national capital. This award is yet another recognition of ACL's commitment towards water conservation efforts in keeping with its vision to achieve sustainability.

- Ambujanagar won the Best Environment Excellence Award for 2013-14 and 2014-15 at the 14th International Council for Cement & Building Material International Seminar at New Delhi.

- Maratha Cement Works (MCW) bagged the Electrical Safety Best Performer Certification

organized by Industry, Energy and Labor department of Government of Maharashtra. The MCW unit was identified for incorporating best practices in Electrical Safety that has led to Zero Harm

- Rabriyawas recognized and rewarded by Rajasthan Renewable Energy Corporation Limited (an undertaking of Rajasthan Govt.) for Remarkable Performance in Energy Conservation in the Cement Sector.

- Ropar been declared winner of the 'Genentech Environment Award - 2015' in the Silver Category in Cement Sector for outstanding achievement in Environment Management.

- Ambuja Cement Foundation (Ropar) was awarded the Best HIV Project for Intravenous Drug Users by the State Institute of Health and Family Welfare, Punjab.

- Ambuja Cement Foundation – Darlaghat bags NABARD's 'Best Partnership Award' for its Watershed Development Projects in Himachal Pradesh.

- Bhatapara was conferred 'Domain Excellence in Corporate Social Responsibility' and 'Commendation for Significant Achievement in Environment Management' at the CII Sustainability Award 2015.

26. CAUTIONARY STATEMENT

Statements in the Directors' Report and the Management Discussion and Analysis 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 demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country, and other factors which are material to the business operations of the Company.

27. ACKNOWLEDGEMENTS

The Directors take this opportunity to express their deep sense of gratitude to the banks, Central and State governments and their departments and the local authorities for their continued guidance and support.

We would also like to place on record our sincere appreciation for the commitment, dedication and hard work put in by every member of the Ambuja family.

To them goes the credit for all of the Company's achievements. And to you, our Shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the board of

Ambuja Cements Limited

N. S. Sekhsaria

Chairman

Mumbai, 25th February, 2016


Dec 31, 2014

Dear Members,

It is our pleasure to present the Annual Report of the company for the year 2014.

1. INDIAN ECONOMY:

NEED FOR CHANGE MANAGEMENT GROWTH

Promoting reforms and policies key to economic revival.

Due to several factors, the Indian economy witnessed sluggish growth in first half of 2014. On the domestic front, policy paralysis of the last couple of years continued right up to the national elections in May 2014; added to that was a virtual stoppage of all infrastructure projects, both in the private and public sectors as well as through public-private partnership. Also, there were continuing inflationary pressures; interest rates remained far too high for financing long term projects. Nevertheless, the current account deficit, while better than a year earlier, was still in danger zone; and entrepreneurial ''animal spirits'' — so essential for economic growth — were at their nadir. On the external front, there were uncertainties regarding growth of the Euro Zone, the conflict in Ukraine, increasing militant activities in the Middle East and concerns about the falling growth in China.

Thankfully, the second half of 2014 showed signs of improvement. For one, the Lok Sabha election results which brought the BJP-led National Democratic Alliance into power at the centre with a comfortable majority in the Lok Sabha created its own optimism. After a long time, there was positive talk of growth; of infrastructure development; unblocking of coal mines; allocation of telecom spectrum; deregulation of diesel prices; and of the promises of an ambitious ''Make in India'' campaign. For another, the external economic front became more benign. Crude oil prices, which averaged USS 108 per barrel even in June 2014, started moving south — steadily reducing to under USS 50 per barrel. This, in turn, reduced the oil import bill as well as the cost of imported naphtha, resulting in both fiscal comfort and lesser pressure on the current account. Moreover, inflation started dropping, creating hope for the easing of interest rates. Thus, by early 2015, there were many more positive drivers for growth, both economic and political, than those that existed in 2014. If anything, there seems to be a sense that a better future awaits the Indian economy in 2015 and, hopefully, with it, your company

CEMENT INDUSTRY:

GOVERNMENT SUPPORT ESSENTIAL FOR REVIVAL Cement and cementitious materials are critical for meeting society''s needs of housing and basic infrastructure such as bridges, roads, water treatment facilities, schools, hospitals, airports, ports, factories and many other facilities.

The operating environment for the cement industry was no different from that of the macro economy In the first half of 2014, the industry suffered due to muted demand and rising cost pressures on account of rising freight (-5%) and raw material costs (-8%). It was also affected by the shortage and ban of essential construction materials like sand, bricks, water and the like, along with very heavy rains in most parts of the country Infrastructure bottlenecks further added to the woes. Major infrastructure projects got log jammed in policy paralysis, depressing demand.

However, with the beginning of an economic turnaround and riding on the back of moderating inflation amidst gradually improving consumer sentiment, industry showed some recovery in consumption, which was also reflected in improved despatch numbers.

Groundwork to expedite the growth prospects of all end-use segments of cement - housing, infrastructure, commercial - are being worked upon by the Central Government. Concerns on energy and land are being taken care via e-auction of coal blocks and the Land Ordinance signed by the President of India. All these along with the policy push for good governance augur well for the future of the cement industry

2. FINANCIAL RESULTS 2014

AT A GLANCE (STAND-ALONE RESULTS):

Cement production increased by 2% to reach 21.43 million tonnes, from 20.96 million tonnes while clinker production increased to 14.84 million tonnes, 4% up from 14.27 million tonnes in year 2013.

Domestic cement sales volume recorded increase of 3% at 21.46 million tonnes from 20.94 million tonnes in year 2013. Cement exports decreased to 0.08 million tonnes from 0.10 million tonnes in year 2013. Clinker sales (including exports) were up at 0.61 million tonnes from 0.56 million tonnes in 2013.

Net sales at Rs.9,911 crores were 9% up than that of previous year''s Rs. 9,079 crores. Average sales realisation increased by around 7% at Rs. 4,475 per tonne against approx Rs.4,208 per tonne in 2013.

Total (operating) expenses for the year 2014 increased by 7% over thatofyear 2013.

The company achieved an absolute EBITDA ofRs. 1928 crores. This is higher by 16% over the corresponding Rs. 1,667 crores of the year 2013.

Amount in Rs. crores

Stand-alone Consolidated

Current Year Previous Year Current Year Previous Year 31.12.2014 31.12.2013 31.12.2014 31.12.2013

Sales (Net of excise duty) 9,910.70 9,078.74 9,930.54 9,109.88

Profit before interest and deprecia- tion and excep- tional item 2,357.42 2,044.45 2,352.60 2,033.91

Less: Finance Cost 64.48 65.08 65.55 66.75

Gross profit 2,292.94 1,979-37 2,287.05 1,967.16

Less: Deprecia- tion and amortisa- tion expense 509.53 490.07 513-03 493-67

Profit before Excep- tional Items and Tax 1,783.41 1,489.30 1,774.02 1,473.49

Less/ (Add): Excep- tional items - (24.82) - (24.82)

Profit before tax 1,783.41 1,514.12 1,774.02 1,498.31

Less: Tax expense 287.05 219.55 287-51 219.87

Profit after tax but before minority Interest 1,496.36 1,294.57 1,486.51 1,278.44

Less: Minority interest - - (0.01) 0.13

Profit for the Year 1,496.36 1,294.57 1,486.50 1,278.57

Add: Balance as per the last financial statements 1,230.69 737.01 1,525.77 1,048.09

Profit available for appropria- tion 2,727.05 2,031.58 3,012.27 2,326.66

Appropria- tions: General Reserve 150.00 150.00 150.00 150.00

Dividend on Equity Shares (including interim) 774.61 556.34 774.61 556.34

Corporate Dividend Tax 146.51 94.55 146.51 94-55

Total 1,071.12 800.89 1,071.12 800.89

Balance carried forward to Balance Sheet 1,655.93 1,230.69 1,941.15 1,525.77

Profit before tax at Rs. 1,783 crores was up by 18% over corresponding figure of Rs. 1,514 crores for the year 2013.

Net Profit at Rs. 1,496 crores was up by 16% over corresponding figure ofRs. 1,295 crores for the year 2013.

3. DIVIDEND

The company paid an interim dividend of 90% (Rs. 1.80 per share) during the year. The Directors are pleased to recommend a final dividend of 160% (Rs.3.20 per share). Thus, the aggregate dividend for the year 2014 is 250% (Rs.5/- per share) and the total payout will be Rs. 921.12 crores, including dividend distribution tax of Rs. 146.51 crores. This represents a payout ratio of 62%.

4. MARKET DEVELOPMENTS

The company''s domestic cement sales in 2014 grew by 2.5% to 21.46 million tonnes versus 20.94 million tonnes in 2013. Total cement sales (including exports) grew by 2.4% to 21.54 million tonnes compared to 21.04 million tonnes in 2013.

REGION WISE SALES VOLUME / GROWTH:

In the North region, domestic cement sales of the company grew by 1.2% to 8.74 million tonnes in 2014 compared to 8.64 million tonnes in 2013.

In the East region, the company achieved sales of 4.45 million tonnes of cement in the domestic market, registering a growth of 6% over the previous year sales of 4.21 million tonnes.

In the West & South region, the company''s domestic cement sales in 2014 grew by 2.2% to 8.27 million tonnes as compared to 8.09 million tonnes achieved in 2013.

Cement exports were reduced to 0.08 million tonnes in 2014 as compared to 0.10 million tonnes in 2013.

DISTRIBUTION FOOTPRINT

Our product range is marketed through a countrywide network of sales units, area offices and warehouses. This is backed by a distribution network of over 8,700 dealers and 29,000 retailers. Their reach and penetration helps the company to cater to rural and semi-urban markets. This, coupled with the strong brand equity and efficient channel management, helped the company withstand severe price and volume competition. The company''s network of ports, bulk cement terminals and captive ships on the west coast has supported a sustainable and strong market position in Mumbai, Surat and Cochin. Similarly, the Mangalore Bulk Cement Terminal, with its commercial operations has helped in expanding the company''s footprints in the southern region.

CREATING VALUE THROUGH OUR SYSTEMS Preserving our most valued resource - knowledge.

To live by its ''I CAN'' spirit, Ambuja started with ''Foundations'' - a knowledge initiative, called Ambuja Knowledge Centre (AKC) for all from the construction fraternities. AKC aspires to create a holistic resource base on the subject of cement and concrete. It stems from Ambuja''s belief in the continuous evolution of architecture, engineering and construction industries, thereby offering its professionals various platforms for information, inspiration and interaction.

Raising our own high standards.

The company has also embarked upon a Customer Excellence programme (CE) (its erstwhile Marketing and Commercial Excellence) to sharpen its marketing, sales and distribution functions. CE has now become a way of life at Ambuja. Excellence is what we seek and what we strive for in every aspect under Marketing and Sales. Since all along we have had customer centricity in our DNA, it is imperative that we reiterate our commitment and continue to walk the talk! This is also in line with the global strategy of Holcim - the vision of Holcim CE to be the most customer focused company with the highest customer loyalty in our industry thus creating more value for our customers.

5. COST DEVELOPMENTS

Upward movement in costs led to increased cost of production. The company''s cost optimisation initiatives partly mitigated inflationary pressures and restricted overall cost increases.

MAJOR COST MOVEMENTS:-

i) Cost of major raw materials, fly ash and gypsum, increased by 2% on per tonne basis. During the year, royalty on limestone was hiked by 27% from Rs. 63 to Rs. 80 per tonne. Overall, the raw material cost per tonne increased by approximately 13% over the previous year.

ii) Power and fuel costs account for approximately 26% of the total operating cost of the company Coal cost for kiln and captive power plants increased by 4% and 10% respectively, mainly due to higher cost of imported coal. However, substitution of high cost coal by pet coke usage helped restricting the overall cost increase. Besides, there was increased usage of alternate fuels by 5% over the usage for the year 2013. Usage of alternate fuels accounted for 4% of total thermal energy consumption in 2014.

The cost of grid power remained stable on a per unit basis. However, cost of captive power increased by 10% in 2014 mainly due to higher coalprices. Captive power generation contributed 67% of the total power requirements.

Overall, power and fuel cost increasedby 7% on per tonne basis as compared to the year 2013.

iii) Freight and forwarding cost works out to 28% of total operating costs. On per tonne basis, cost increase was restricted to 4% due to positive impact of various logistic optimisation efforts and declining diesel prices during latter part of the year.

iv) The cost of packing bags went up by around 7%, driven by increase in PP granule prices. Declining prices of PP granule in latter part of the year helped restricting overall price increase.

COST MITIGATION MEASURES / EFFICIENCY

IMPROVEMENT INITIATIVES:

i) Keeping in line with the company''s philosophy of Sustainable Operation, focus on production of fly ash based PPC was maintained and several initiatives were taken up to enhance fly ash consumption in PPC with quality

ii) The company worked on fuel flexibility to mitigate risk associated with dynamic fuel market and developing the abilities to switch to most economical fuel mix.

iii) The ''GEO 20'' project is a part of the efforts by the company for creating a cost efficient fuel mix. It is in operation now and will be stabilised by Qi 2015. Here, as a result of handling, storing and processing of waste materials, the company will be able to ensure more usage of greener fuels thereby reducing energy cost.

iv) The revision of load lines for captive ships will lead to handling of higher cargo in environment friendly mode of sea transportation with savings in coastal freight cost.

v) Replacement of MP turbine with HP turbine at Maratha Cement should help to improve efficiency of captive thermal power plant and lower power generation cost. The company has also replaced most of major drives with VVFDs which will help to get lower power consumption thereby reducing energy cost.

vi) With the introduction of the SCOPE (Supply Chain Optimisation Project for Excellence), a supply chain excellence initiative, the company is expected to derive operational efficiencies in logistics. This is targeted by improvisation in direct despatches to customers by undertaking fleet optimisation and route optimisation mode (rail/ road/ sea) among others.

6. EXPANSION PROJECTS AND NEW INVESTMENTS

MOVING FORWARD RESPONSIBLY The company took up several projects to serve its customers in a more efficient, cost-effective, reliable and environment-friendly manner, while bolstering its market position in the industry

CAPACITY EXPANSION DURING THE YEAR The new Roller Press commissioning at Rabriyawas will help to increase grinding capacity by 0.8 Mio T and also result in reduction in energy consumption. One additional silo will also be constructed by 2015, which will help in diversifying product portfolio.

Getting better at being the best.

The company focused on consolidation and optimisation of its existing capacities in all the three regions. Capital investments kept flowing in during the year, to ensure the highest standards of safety in order to meet the company policies of ''Zero Harm'', clean and energy efficient infrastructure, cost efficient and environment friendly material handling systems, process optimisation and sustainability initiatives.

Increasing productivity, one major step at a time.

i) A Waste Heat Recovery (WHR) plant at Rabriyawas in Rajasthan with an investment of Rs. 92 crores is in progress to bring efficiency in fuel utilisation, optimise power costs and meet our renewable power targets.

ii) We have completed the Geocycle platform projects at four integrated plants which will help increase the co-processing of waste. With

a total investment of over Rs. 240 crores on these platforms, this showcases our commitment for sustainable and environment friendly operations.

iii) We have successfully completed the ambitious fast return projects that the company had taken up in 2013 to optimise and enhance efficiency The company has already started benefitting from these initiatives.

UPCOMING CAPACITIES AND INVESTMENTS

i) Significant cement capacity addition of approximately 4.50 million tonnes with associated clinkerisation capacity of 2.70 million tonnes is expected at the proposed integrated plant at Marwar Mundwa, Nagaur district in Rajasthan with cement capacity of 1.5 MTPA; and with similar capacity grinding units at Osara (M.P.) and Dadri (U.P.).The total project cost is estimated at Rs.4,000 crores.

Environmental clearances for the project were acquired but kept in abeyance for Marwar Mundwa by the MoEF. Part of the mining land is already in possession and the rest is under an advanced stage of acquisition. The company is also in the process of tying-up water sources required for construction and operations. Full- fledged construction work is expected to commence in the later part of 2015.

ii) The new brown-field expansion project of Roller Press with master packer and auto wagon loading is in full swing at Sankrail and will be completed during 2015. This will help increase grinding capacity by 0.8 million tonnes and also result in reduction in energy consumption. New packer and auto loaders will improve despatch capacity.

iii) To mitigate the increase in logistic cost, the Rabariyawas unit in the State of Rajasthan is constructing a railway line to connect the plant location with the nearest railway junction. It is likely to get operational in the year 2016.

The year 2015 will see capital expenditure worth Rs.523 crores. The entire proposed expenditure would be financed by internal accruals.

7. OUTLOOK

TANGIBLE POLICY ACTIONS TO FACILITATE ECONOMIC GROWTH

The bigger picture is looking favourable.

To facilitate rapid economic growth, it will be necessary to see big ticket structural reforms, faster approvals on the supply side, with major support of fiscal and monetary policy on the demand side. After nine months plus of the new government in the Centre, tangible policy actions are required to facilitate investment and sustained growth.

Medium to long-term economic growth depends on ensuring macroeconomic stability and on creating an enabling environment for the private sector to invest. Fundamentally, India''s medium-term growth prospects looks to be promising, and a medium-term trend rate of growth of about 7% to 8% should be within reach in view of favourable tailwinds, both domestic and external, supported by active policy push in all three areas of good governance, fiscal and monetary management. Despite headwinds of a global slowdown in some parts of the world, India has the ability to grow faster and be a leading growth engine in the near to medium-term.

GROWTH PROSPECTS FOR THE CEMENT INDUSTRY

A positive trickle-down effect.

Investment in infrastructure and housing segments are most likely to propel demand for the cement industry, in which road sector would act as major end user segment. Housing will continue to remain key end-user segment for cement demand and grow at 5-7% over the next few years.

The Government of India is starting to make efforts to provide conducive environment for the industry by bringing out key policy measures on ease of doing business, energy related reforms, fiscal consolidation and the like which, along with reasonably accommodative monetary policy, ought to open up growth opportunities for the cement industry

Cement demand growth bears a strong correlation with GDP growth, particularly government revenue expenditure. As GDP growth revives, we believe, growth in government spending (which has been curtailed for some time to arrest fiscal deficit) will also improve, leading to a higher cement demand. We factor -7% growth in demand for year 2015.

8. RISKS AND AREAS OF CONCERN

Staying one step ahead of risk.

The company has laid down a well-defined risk management mechanism covering the risk mapping and trend analysis, risk exposure, potential impact and risk mitigation process. A detailed exercise is being carried out to identify, evaluate, manage and monitoring of both business and non-business risks. The Board periodically reviews the risks and suggests steps to be taken to control and mitigate the same through a properly defined framework.

In line with the new regulatory requirements, the company has formally framed a Risk Management Policy to identify and assess the key risk areas, monitor and report compliance and effectiveness of the policy and procedure. A Risk Management Committee under the Chairmanship of Mr. Rajendra Chitale, Independent Director, has also been constituted to oversee the risk management process in the company. Based on the detailed review, the following key risks have been identified.

LAND ACQUISITION

New laws bring new hope.

Restrictions on buying land, under a law championed by the previous Government, were among barriers holding up projects worth almost U.S.D. $300 billion or nearly Rs. 20 lakh crores in infrastructure, industrial and housing sectors. The present Government, realising the flaws has been working on the subject and has come up with a new land acquisition Bill to kick-start pending projects. With this Bill not being taken up in the previous session of the Rajya Sabha, the President of India signed an ordinance on land acquisition on 7th January 2015, which aims at easing land acquisition rules to kick-start hundreds of billions of dollars in stalled projects. This land ordinance protects the interests of farmers and lifts curbs on five categories of projects including defence, national security, rural infrastructure and low-cost housing. We hope that the Bill will soon become law, and land can again be acquired for economic growth.

Ambuja Cement has appointed a dedicated function at the corporate level to look into risks relating to the land, which will help in improved land acquisition and management.

ENERGY

Moving beyond coal.

Depleting coal linkages and volatility in the Indian rupee is escalating concerns regarding coal. The company is constantly working on efficiency improvement measures by plugging heat loss at every possible stage of coal consumption, looking at cost- effective fuel mixes and also increasing the usage of alternative fuels and pet coke.

As a long term solution to energy security, the company has invested in project Geocycle, under the banner of ''Geo2o''. Waste Heat Recovery (WHR) systems that improve fuel utilisation, by tapping renewable energy sources are top priorities. New AFR pre-processing platforms are running at our plant location to increase the usage of the AFR.

Taxation / Administrative Burden

Resolving the taxing problems of the cement industry.

Cement, along with steel, forms an important raw material for the infrastructure and real estate sectors. However, steel, being included under the category of ''Goods of Special Importance'', attracts a lower tax rate at 4%. Even other raw materials such as clay bricks, fly ash bricks, attract sales taxes ranging from

4% to 6%. Unfortunately, cement attracts a high rate of tax ranging from 12.5% to 15% in the various states, which makes it subject to higher tax in comparison with other building materials.

A solution to this lies in rolling out a uniform tax regime through the implementation of Goods and Services Tax (GST). So far, the Government has taken some positive steps by getting the Cabinet approval. The central implementation of GST will play a critical role in next level of growth and truly realise the country''s potential.

De-allocation of Coal Blocks

On 25th August 2014, the Supreme Court had ruled that the allotment of captive coal blocks since 1993, was done with an "ad-hoc and casual" approach "without the application of mind". The ruling further added that, "common good and public interest suffered heavily in the unfair distribution of the national wealth — coal". The Supreme Court termed the allocation of these coal blocks as arbitrary and illegal and cancelled 214 of the 218 blocks. Some 40 companies were asked to pay a fine of Rs. 295 per tonne and surrender their coal blocks.

The Government is now addressing the issue and to this effect, has cleared a Bill on coal block auctions to replace an ordinance that was promulgated to begin auction of coal mines that were cancelled by the Supreme Court. This move will boost investor confidence due to transparency in the process and reduce fuel availability risks. The e-auction of coal mines will be open to private companies while state- run companies would be allocated mines directly In Phase I, the cancelled blocks will be opened for e-auction to three end users: steel, power and cement.

ORDER OF THE COMPETITION COMMISSION OF INDIA

On 20th June 2012, the Competition Commission of India (CCI) passed an order imposing unprecedented penalties of more than Rs.6,300 crores against some cement manufactures of the country, including the company, in the matter of a complaint filed by

the Builders Association of India for the alleged contravention of the Competition Law. Following the penalty imposed on the company ofRs. 1,164 crores, the company filed an Appeal before the Competition Appellate Tribunal (COMPAT) against the order and for granting a stay against deposit of penalty The matter is pending before COMP AT and the next hearing is scheduled in February 2015. The management, backed by legal opinion from the external legal counsel, strongly believes that the company has a good case to succeed before COMPAT and accordingly, no provision has been made in the books of accounts. However, the amount of penalty has been considered as contingent liability.

9. HUMAN RESOURCES

SUSTAINABLE TALENT MANAGEMENT Human resources (HR) at Ambuja plays a vital role in realising business objectives by leading organisational change, fostering innovation and effectively mobilising talent to sustain the organisation''s competitive edge.

The HR strategy is aimed at integrating HR processes to result in overall organisational effectiveness, which consequently affects the business growth. HR in line with business clarifies the business direction, performance expectations and actively contributes to decide what tactics are required for managing talent to achieve business goals.

How do we maintain our competitive edge-

By honing our talent.

HR at Ambuja has been driving various Talent Management initiatives. Talent Management plays a vital role in combination with other business processes in not only driving shareholder value but also in managing, developing and retaining superior talent that defines the prime source of competitive advantage.

Structured talent reviews across levels supported by individualised development plans and cross- functional and cross-location assignments have helped develop wholesome leadership skills. All the development efforts are showing good results with more and more senior positions being filled internally, while maintaining a healthy external talent intake. Thus succession planning has helped create a talent pipeline for key positions and a strong growth avenue for our developing leaders.

Carving out leaders from the best talent.

The core values of the organisation also emphasised the need to develop and build leaders that will take the organisation to the path of high performance. Keeping this in mind along with the other Talent Management initiatives, the STEP (Sustainable Talent for Enhanced Performance) programme was institutionalised in 2012. The prime objective of STEP (Sustainable Talent for Enhanced Performance) is to develop a sustainable pool of leaders equipping them with essential leadership skills and competencies and enhancing their coaching skill capacity to be internal coaches. The first batch of 96 managers who were part of the STEP journey have successfully completed the programme.

Our people strategy, systems and processes are aimed towards making us an employer of choice with sustainable talent and concrete action plans to enhance employee engagement. The employee engagement survey administered this year saw 98% employee participation with an improvement in the engagement score.

We also continued in our efforts to provide a congenial work environment, innovative recruitment and retention practices, and continuous learning opportunities to employees (management and non- management staff) for their future growth and development. As part of the Workforce Development initiative - a key initiative to build the capability and competence of workmen and to ensure safety, productivity and quality training opportunities have been provided to 70% of our workmen.

These efforts have led to a significant increase in manpower productivity Efforts have also been made to design progressive and empower HR policies and other welfare measures.

10. SUSTAINABILITY AND ENVIRONMENT

Making the Earth a better place.

We are committed to the path of corporate sustainability, with a legacy of a responsible and ethical organisation. It is driven by our senior management in a sustainability framework comprising of our sustainability committees, with the mandate to assess sustainability risks and opportunities at corporate and unit levels to monitor and drive sustainability initiatives. Sustainability is a regular item in our board meetings. The company sustainability initiatives are aimed inter-alia at low carbon emissions, water positivity, and use of biomass / industrial wastes as alternative fuels as well as fly ash as blending material.

Gaining recognition for staying light on our feet.

We improved our sustainability performance over the previous years. This has been recognised by independent audits, and the company won the prestigious CII Sustainability Award 2013 for ''Significant Achievement on the Journey towards Sustainable Development''. This is the fourth time in a row Ambuja Cements has received this award. In addition, for Domain Excellence, our Bhatapara unit was conferred the CII Sustainability Award for ''Commendation for Significant Achievement in CSR''. Furthermore, this year we won the YES BANK - Saevus Natural Capital Awards 2014 as the ''Eco-Corporate of the "Year - Manufacturing'' for the commendable work towards environmental sustainability

We have been ranked amongst the top 10 participants of the Carbon Disclosure Leadership Index (CDLI), the highest in the Cement Sector, under the Carbon Disclosure Project (CDP) in their recently released CDP India 200 Report.

The year 2014 saw us achieving sustainability product certification ''Pro-Sustain'' for cement production (PPC) from our Darlaghat plant from an independent third party DNV-GL. The product Stewardship Standard of Pro-Sustain certification is aligned with the objective and principle of internationally recognised standard encompassing environmental, social and economic aspects of our operations and product traceability.

A new way to equate our self-worth. And our worth to the world.

To further strengthen our commitment to build competitiveness through sustainability, we launched the True Value Project, a unique initiative that takes into account the value of environmental and social impacts in monetary terms along with financial parameters. This makes Ambuja Cement the first Indian company to carry out such an elaborate exercise of assessment.

We are glad to report that in our journey to Water Positivity, we achieved the water positive factor of ''4'' in 2014 by way of meticulous accounting of our water consumption (debit) and water harvesting or recharges (credit) taking place from rain water harvesting structures at our plants, colony, mines and community We give back to nature four times what we draw.

We are frequently reported. By ourselves.

Carbon Conscious Growth - The company monitors and reports its Carbon emissions as per the World Business Council for Sustainable Development''s (WBCSD)''s Cement Sustainability Initiative (CSI) protocol. We reduced our Green House Gas (GHG) emissions by around 28% in 2013 from the 1990 level. To further reduce the use of natural resources and consequently our carbon emissions, our focus remained on the fly ash based cement (PPC) as our major product. A 6.5 MW Waste Heat Recovery (WHR) based power generation system is under installation at our Rabriyawas plant at Rajasthan which will further lessen our carbon footprint.

Environment Management - The company ensured availability of Continuous Emission Monitoring Systems (CEMS) at all the kiln stacks with above 95% availability round the year for online monitoring of all vital pollution parameters.

As a part of our consistent effort to ensure sustainable ecology by way of biodiversity conservation, a Biodiversity Action Plan (BAP) has been prepared for our Ambujanagar site in Gujarat. A Wildlife Conservation Plan has also been prepared for our Darlaghat plant at Himachal Pradesh. We have completed the installation of water meters in all the plants as per the Holcim Water Protocol.

During the year, one more integrated plant and one grinding unit attained the Energy Management System as per ISO 50001 certification — adding up to total two integrated plants and four grinding units to be certified. The company has taken steps to meet its commitments under the PAT scheme and RPO- REC obligations. Further, we are taking all necessary actions to monitor and control our emissions to ensure that we comply with the requirement of New Emission Standards as notified in 2014.

Partnering the environment.

Collaboration with Global Community - ACL is

one of the active co-chairs of World Business Council for Sustainable Development (WBCSD) CSI India for implementation of the India specific ''Low Carbon Technology Road Map for Cement Industry''.

We have been partnering with WBCSD for the development of India Water Tool (IWT) since 2012. The tool will help companies to understand and respond to their growing challenges of managing water effectively and identify water risk areas.

We actively collaborate with Leader for Nature (LFN) Initiative of International Union for Conservation of Nature (IUCN) and the CII''s India Business and Biodiversity Initiative (IBBI) on Policy dialogue and capacity building on Biodiversity Conservation.

Sustainability Awareness & Reporting - Train the Trainer (ToT) training was imparted during the year covering all the plants. Various training and awareness programmes were conducted on environment and sustainability topics, emission / environment monitoring, biodiversity management and water management to build capacities for environmentally responsible operations.

Read all about it: our sustainability efforts.

We released our 71h Annual Corporate Sustainability Report, presenting our efforts towards sustainable development for the year 2013, the report also provided the glimpses of ''True Value Project''. The report is aligned with Global Reporting Initiative (GRI) G3 guidelines for A Level of reporting, having been ''assured'' by an independent certifying agency We have responded to the Metal and Mining Sector Supplement of the GRI while reporting on our sustainability performance to our stakeholders. As in the previous year, the report has been accorded the ''GRI Check'' to enhance credibility by Global Reporting Initiative (GRI), Netherlands. The company has been issuing Business Responsibility Report (BRR) as a part of its Annual Reports since 2012.

11. CORPORATE SOCIAL RESPONSIBILITY (CSR)

At Ambuja, the CSR has been an integral part of the way in which we have been doing business since inception. The founders of the company always believed it imperative for surrounding communities and stakeholders to progress with the company This vision was translated into the establishment of the Ambuja Cement Foundation (ACF) which is the CSR arm of the company

The ACF operates in 12 states and 22 locations, reaching out to more than 14 lakh people over 860 villages. ACF programmes are in line with its mission statement - ''Energise, involve and enable communities to realise their potential''.

IMPROVING LIVES THROUGH INVOLVEMENT.

At Ambuja, stakeholder engagement is the key to implement CSR programmes and several tools and processes have been established to aid this objective. To integrate business and community needs, Community Engagement Plans (CEP) are prepared in close engagement with the community and then the unit. The Community Advisory Panels consists of community members and members from the company to deliberate upon programmes and decide for the future. The Social Engagement Scorecard assesses the work done in communities. The Site Specific Impact Assessment (SSIA) captures perceptions and feelings of all stakeholders at sites and enables the Foundation to address potential risks. These processes ensure that programmes introduced are relevant and dynamic in nature. Based on assessment of needs, the ACF works in thrust areas namely - water resource management, agro - based and skill- based livelihoods, and socio-economic development.

WATER RESOURCE MANAGEMENT The ACF''s work on water resource management has ensured access to quality water in its neighbouring communities. The work was initiated in salinity ingress areas of Kodinar which has now spread to the dry arid territories of Rajasthan and hilly regions of Darlaghat. Programme adaptability according to the topography of the region has increased ground water table, and better water availability in farms. Micro irrigation has ensured optimum utilisation of water and is being widely adopted by farmers. Continued water management programmes undertaken by the ACF have contributed significantly for the company to be four times water positive.

AGRO BASED LIVELIHOOD

Supporting the backbone of the nation''s economy.

Assured availability of quality water has enabled farmers to grow more than one crop on their fragmented lands impacting the economic status of their families. The farmers have also benefitted from the numerous training programmes conducted by the ACF. For instance, the Foundation manages the Krishi Vigyan Kendra at Ambujanagar, a one-stop-shop for latest and best agriculture technologies in the region, and has reached out to 265 villages through training programmes and fairs. The ACF also works with farmers to promote animal care by organising regular camps. In Darlaghat, the Pashu Swasthya Sevika (PSS) have been trained by the Foundation to ensure animal care.

Based on geographical suitability, programmes like organic farming in the north and Systemic Rice Intensification (SRI) in the east have enhanced agricultural practices. The Better Cotton Initiative (BCI), a global initiative for sustainable cotton production, reaches out to over 17,200 farmers. Implementing BCI practices has guaranteed work ethics on farms, ensured soil health and better profit margins coupled with safe environment practices. In 2014, 70,565 tonnes of cotton was produced by our farmers, all licensed as ''Better Cotton''.

The ACF has also partnered with farmers through establishment of Producer Companies to provide biomass to the company to be used as Alternate Fuel Resource (AFR). It is hoped that this supply chain will appear as an inclusive business model in the near future.

SKILL TRAINING

Ensuring talent doesn''t go wasted.

Skill training through the ACF''s 16 Skill and Entrepreneurship Development Institute (SEDI) has changed the social and economic dynamics through assured jobs and by addressing the industry demand of skilled personnel. In Kodinar, young girls contribute to their family income after training in bedside attendant course. In Chandrapur, unemployed youth have gained jobs in industries or have gained construction assignments in nearby villages after being trained as masons. In 2014, SEDI also provided supplementary skills training and valid certification to the company''s workers. SEDI not only imparts training in 45 different trades but complements these by providing training in computer, English and soft skills. A number of courses at SEDI are government affiliated. Till date, SEDIs have reached out to more than 20,000 youth with a placement rate of 76%.

SOCIO ECONOMIC DEVELOPMENT

Building stronger communities.

The ACF ensures holistic development of its communities by focusing on health, education and women development. Clinical health care is met through Mobile Medicare Units, Community Health Clinics, Diagnostic Centres and specialised health camps. The training of village health functionaries (Sakhis) has ensured maternal and child care for women and 24 x 7 health access at their doorstep. The Sakhi has also developed relevant linkages with government to ensure services for her village. ACF trained Sakhis are much sought after as much as the ASHAs of the government cadre. Till date, 337 Sakhis have been trained of which 110 have been absorbed as ASHA workers.

The Sakhi has also become the forerunner to initiate other programmes like tobacco control, nutrition programme and child development for villages.

The ACF has been working rigorously to ensure complete sanitation in its host communities. The programme is being run in a campaign mode and till date 11 villages have received the Nirmal Gram Puraskar. The ACF has facilitated construction of over 12,000 individual and community toilets apart from soak pits and drains.

HIV and AIDS prevention programme at Ambuja reaches out to truckers in the plant and communities through counselling sessions, street plays, camps etc. The ACF implements io targeted intervention projects in collaboration with state-level AIDS Control Societies and four health care centres at truck halt points neighbouring our sites.

Looking out for the next generation.

The company promotes education in the five integrated plants through Ambuja Vidya Niketan Trust (AVNT). The ACF also conducts programmes in nearby government schools through teacher training programmes. The methodologies introduced in schools have made subjects interesting and easier to understand. ACF-trained Balmitra supports children in understanding mathematics and science. ACF also provides infrastructural support to schools like the establishment of science centres and libraries.

The Ambuja Manovikas Kendra (AMK) is a special school for mentally challenged children in Ropar. A range of activities and programmes like therapies, sports and cultural activities, etc. at the AMK help them grow as independent and productive individuals. The children have won awards at the state-level Olympics Championship since the past nine years and at the World Special Olympics. The school also extends its services to children who cannot travel to school through its Home-based Rehabilitation Programme.

Women''s Empowerment is a part of the ACF''s DNA and is interwoven in all its programmes. Assured access to water, developing a cadre of women to ensure health and education and relevant skills training provide an opportunity to women to showcase their leadership. Access to finance and knowledge of running small businesses has also boosted the confidence of many women. In Kodinar and Chandrapur, women have federated from small self-help groups of 15-20 members, to form a federation consisting of 2,000-3,000 women. The Sorat Mahila Mandal in Kodinar, Gujarat, has opened its retail outlet, and runs a stitching course for its members. The government reached out to the group for its insurance scheme giving it the much needed recognition. The federation extends its support to members in times of emergencies as well. These initiatives have played a critical role in ensuring an elevated status of women. Since the process has been participatory, the changes brought forth are irreversible and have become a permanent feature.

PURSUING CSR AS A PASSION INSTEAD OF A MANDATE.

CSR has been an integral part at Ambuja Cements much before the passing of Companies Act, 2013. The company has made conscious efforts to involve communities in its development journey with a spending of more than 2% since manyyears. Continuous and meaningful community engagement since 22 years has made the company the ''neighbour of choice''. ''Ambuja Cements'' has received appreciations from the government, as well as other stakeholders, which makes us feel a sense of pride and an encouragement to continue our resolve further and better.

Pursuant to Section 135 of the Companies Act, 2013, and the relevant rules, the Board has constituted the Corporate Social Responsibility (CSR) Committee under the Chairmanship of the Board Chairman, Mr. N. S. Sekhsaria. The other members of the Committee are Mr. Nasser Munjee, Mr. Rajendra Chitale, Mr. Bernard Terver, Mr. B.L. Taparia and Mr. Ajay Kapur. A detailed CSR Policy has also been framed which is placed on the company''s website. Other details of the CSR activities as required under Section 135 of the Companies Act, 2013, are given in the CSR Report at Annexurel.

i2. OCCUPATIONAL HEALTH & SAFETY (OH&S)

After a disappointing OH&S performance in 2013, we had a very deep introspection and detailed management review. Based on this, we kick-started the ''We Care'' initiative to transform our OH&S culture.

Although we did significant work in establishing good OH&S standards and organisation over the last 5-6 years, we found significant gaps in real implementation on ground. We have significant complexity of having 17 operating sites, some 15,000 people of which most are not adequately literate and have a culturally poor OH&S mind set. We thought that the best way to deal with this was to engage our people emotionally and make them very much the building blocks of Ambuja''s OH&S transformation journey, while, at the same time, working with subject experts to prioritise and address all issues related to both unsafe conditions and unsafe acts.

''We Care'' is a big change management programme. The primary objective of this initiative is to achieve our OH&S ambitions by making it a People''s Movement. We believed that this could be possible only when we connected and engaged with 100% people entering our sites; reinforced that OH&S is primarily a line accountability; achieved a right balance between people aspects, engineering solutions and OH&S systems; and created the right organisation and processes to achieve our OH&S ambitions.

In our ''We Care'' programme, each plant was divided into total manageable zones; each Zone owner was supported by 7 - 9 Safety Ambassadors. We trained some 250 Zone Owners and 1,600 Safety Ambassadors to implement the programme and directly connected to 100% of our workforce (approximately 15,000 people) through 4-6 hours of sensitisation and idea generation workshops. We introduced a company- wide reward and recognition programme to encourage safe behaviour and exceptional contribution to safety

Safety results show when nothing happens.

The result was very evident with a significant improvement in OH&S performance with no onsite fatality for 10 months and very visible change in the safety behaviour of our people at all levels.

For 2015, we have prepared a clear strategy and implementation plan to keep the momentum and drive the next level of Initiatives to further strengthen ''We Care''. This year, we will have a very intensive focus on Workmen Capability building, effective implementation of Fatality Prevention Elements & Contractor Safety Management directives, simplifying procedures to achieve scale and speed and are in the process of preparing a structure to address Occupational Health related issues proactively

We will again directly connect to all our people entering our sites to update them about the progress, plan for 2015 and listen to them so that we can collectively transform our OH&S culture.

13. PURCHASE OF SHARES IN HOLCIM INDIA PVT. LTD. (HIPL) AND AMALGAMATION OF HIPL WITH THE COMPANY

The Members may be aware that the company had proposed to acquire 24% equity shares of HIPL from Holderind Investment Limited, Mauritius and subsequently amalgamating HIPL with the company under the Scheme of Amalgamation.

The Scheme of Amalgamation has been approved by the requisite majority of the Members and has also received ascent from the Hon''ble High Courts at Gujarat and Delhi. However, the scheme will be effective upon receipt of approval from the Foreign Investment Promotion Board, Government of India which is yet to be received.

On the Scheme being effective, the company will hold 50.01% equity shares in ACC Limited and consequently ACC Limited and all its subsidiaries will become the subsidiary of the company

14. EMPLOYEE STOCK OPTION SCHEME

During the year, the company has not granted any fresh stock option to its employees.

i5. DISCLOSURES UNDER THE COMPANIES ACT, 2013

i) Extract of Annual Return:

The details forming part of the extract of the annual return is enclosed in Annexure II.

ii) Number of Board Meetings:

The Board of Directors met 5 (five) times in the year 2014. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report.

iii) Changes in Share Capital:

During the year under review, your company allotted 38,85,500 equity shares of the face value of Rs.2/- each upon exercise of stock options under various Employee Stock Option Schemes. Consequently the equity share capital has increased from Rs.309,17,20,572/- divided into 154,58,60,286 equity shares of Rs.2/- each to Rs.309,94,91,572/- divided into i54,97,45,786 equity shares of Rs.2/- each.

iv) Composition of Audit Committee:

The Board has constituted the Audit Committee which comprises of Mr. Rajendra Chitale as the Chairman and Dr. Omkar Goswami, Mr. Nasser Munjee and Mr. Bernard Terver as the members. More details on the committee are given in the Corporate Governance Report.

v) Related Party Transactions:

All the related party transactions are entered on arm''s length basis and are in compliance with the applicable provisions of the Act and the Listing Agreement. There are no materially significant related party transactions made by the company with Promoters, Directors or Key Managerial Personnel etc. which may have potential conflict with the interest of the company at large. During the year, the Board reviewed the Technology and Know-how (TKH) Agreement and decided that the rate of TKH Fees be maintained at 1% of the Net Sales of the company for the remaining three years period commencing from 1st January, 2015. This disclosure is being made as a matter of prudence.

All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms and conditions of the transactions. The statement is supported by the certificate from the MD & CEO and the CFO.

The Related Party Transactions Policy as approved by the Board is uploaded on the company''s website at the web link:

http ://www.ambujacement.com/wp-content/uploads/2014/Related_Party_ Policy_30.10.2014.pdf.

The details of the transactions with Related Party are provided in the accompanying financial statements.

16. CORPORATE GOVERNANCE

The company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the listing agreement with the stock exchanges. A separate section on corporate governance under the Listing Agreement, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report.

17. BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report for the year ended 31st December 2014, as stipulated under clause 55 of the Listing Agreement is annexed and forms part of the Annual Report.

18. INTERNAL CONTROL SYSTEM

A strong internal control culture is pervasive in the company: The company has documented a robust and comprehensive internal control system for all the major processes to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources. The formalised systems of control facilitate effective compliance as per Clause 49 of the Listing Agreement, and article 728 (a) of the Swiss Code of Obligations applicable to the Holcim Group. The company also has well documented Standard Operating Procedures (SOPs) for various processes which is periodically reviewed for changes warranted due to business needs. The Internal Audit department continuously monitors the efficacy of internal controls / compliance with SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance on the adequacy and effectiveness of the organisation''s risk management, control and governance processes.

The scope and authority of the Internal Audit activity are well defined in the Internal Audit Charter, approved by the Audit Committee. Internal Audit department develops a risk based annual audit plan with inputs from business risk management, prominent stack holders and previous audit reports. The Internal audit plan is approved by the Audit Committee. During the year, the Audit Committee met regularly to review reports submitted by the Internal Audit department. All significant audit observations and follow-up actions thereon were reported to the Audit Committee. The Audit Committee also met the company''s Statutory Auditors to ascertain their views on the financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of the internal controls and systems followed by the company

The Internal Audit department also assesses opportunities for improvement in business processes, systems and controls, provides recommendations, designed to add value to the organisation and follows up on the implementation of corrective actions and improvements in business processes after review by the Audit Committee.

19. MANAGING THE RISKS OF FRAUD, CORRUPTION AND UNETHICAL BUSINESS PRACTICES

i) Vigil Mechanism / Whistle Blower Policy

Fraud-free and corruption-free work culture has been core to the company In view of the potential risk of fraud and corruption due to rapid growth and geographical spread of operations, the company has put an even greater emphasis to address this risk.

To meet this objective, a comprehensive Fraud Risk Management (FRM) Policy akin to vigil mechanism or the whistleblower policy has been laid down. More details about the FRM Policy are given in the Corporate Governance Report, which forms part of this Annual Report.

ii) Anti Bribery and Corruption Directives (ABCD)

In furtherance to the company''s philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down ABCD as part of the company''s Code of Business Conduct and Ethics. As a company, we take a zero-tolerance approach to bribery and corruption and are committed to act professionally and fairly in all our business dealings.

To spread awareness about the company''s commitment to conduct business professionally, fairly and free from bribery and corruption, training and awareness workshops were extended to select vendors of the company based on their risk profile and business relationship with the company.

As part of continuous education on ABCD to the employees, a mandatory on-line training through a web-based application tool was undertaken during 2014 by approximately 4,000 employees.

The above policies and its implementation are closely monitored by the Audit and Compliance Committees of Directors and periodically reviewed by the Board.

20. DIRECTORS AND KEY MANAGERIAL PERSONNEL

I. CESSATION

Mr. Onne van derWeijde, (DIN 00009181) Managing Director decided to return to the parent company Holcim and accordingly resigned from the Board w.e.f. 25th April, 2014. Mr. Onne joined the Board in January 2009 and in May 2010 was appointed as the Managing Director of the company

The Board placed on record its appreciation for the valuable services rendered by Mr. Onne van der Weijde.

II. RETIREMENT BY ROTATION

In accordance with the provisions of Section 152(6) and Article 147 of the Articles of Association of the company, (i) Mr. Ajay Kapur (DIN 03096416) and (ii) Mr. B. L. Taparia (DIN 00016551) will retire by rotation at the ensuing Annual General Meeting of the company and being eligible, offer themselves for re-appointment. The Board recommends their re-appointment.

III. APPOINTMENT

Mr. Ajay Kapur (DIN 03096416)

Mr. Ajay Kapur who was holding the position of the Dy Managing Director & CEO of the company since August, 2013, was appointed as the Managing Director & CEO we.f. 25th April, 2014, for a period of five years.

Ms. Usha Sangwan (DIN 02609263)

Ms. Usha Sangwan has been appointed as an Additional Director (Non Independent) under Section 161 of the Companies Act, 2013 w.e.f. 24th April, 2014.

Ms. Usha Sangwan is the Managing Director of Life Insurance Corporation of India and holds a Master''s Degree in Economics and a Post Graduate Diploma in Human Resource Management. She joined LIC as Direct Recruit Officer in 1981. She has worked in almost all core areas of life insurance including Marketing, Personnel, Operations, Housing

Finance, Group Business, Direct Marketing, International Operations and Corporate Communications. She has been awarded the ''Women Leadership Award'' in BFSI sector by Institute of Public Enterprise and ''Brand Slam Leadership Award'' by CMO Asia.

As an Additional Director, Ms Sangwan shall hold office up to the date of the ensuing Annual General Meeting. The company has received a notice as per the provisions of Section 160(1) the Companies Act, 2013, from a member proposing her appointment as Director. The Board of Directors recommends her appointment.

Further details about the above directors are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

IV. APPOINTMENT OF INDEPENDENT DIRECTORS With coming into the force of the Companies Act, 2013, the Board appointed all the existing Independent Directors viz. Mr. Nasser Munjee, Mr. Rajendra Chitale, Mr. Shailesh Haribhakti, Dr. Omkar Goswami and Mr. Haigrieve Khaitan as Independent Directors under section 149 of the Companies Act, 2013 for a term up to 31st March, 2019. The shareholders at their Extra Ordinary General Meeting held on nth September 2014, approved their appointment.

The Independent Directors have submitted the Declaration of Independence, as required pursuant to section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in sub-section (6). The profile of the Independent Directors forms part of the Corporate Governance Report.

V. EVALUATION OF THE BOARD''S PERFORMANCE In compliance with the Companies Act, 2013, and Clause 49 of the Listing Agreement, the performance evaluation of the Board was carried out during the year under review. More details on the same is given in the Corporate Governance Report.

VI. REMUNERATION POLICY

The company follows a policy on remuneration of Directors and Senior Management Employees. The policy is approved by the Nomination & Remuneration Committee and the Board. More details on the same is given in the Corporate Governance Report.

21. DIRECTORS'' RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended, the Directors confirm that:

i) In the preparation of the financial statements, the applicable accounting standards have been followed along with proper explanations relating to material departures.

ii) Appropriate accounting policies have been selected and applied consistently, except for the change in accounting policies stated in notes to the accounts 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 as on 31st December, 2014, and of the statement of profit and loss and cash flow of the company for the period ended 31st December, 2014.

iii) 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.

iv) The financial statements have been prepared on a going concern basis.

22. AUDITORS

I. AUDITORS AND THEIR REPORT: - M/s SRBC & Co. LLP (ICAI Lirm Registration N0.324982E), the Statutory Auditors of the company, will hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment as per Section 139 of the Companies Act, 2013.

M/s SRBC & Co. LLP have expressed their willingness to get re-appointed as the Statutory Auditors of the company and has furnished a certificate of their eligibility and consent under Section 141 of the Companies Act, 2013, and the rules framed thereunder.In terms of the Listing Agreement, the Auditors have confirmed vide their letter dated 22nd January, 2015, that they hold a valid certificate issued by the Peer Review Board of the ICAI. The Board, based on the recommendation of the Audit Committee, recommends the appointment of M/s SRBC & Co. LLP as the Statutory Auditors of the company.

The members are requested to appoint M/s SRBC & Co. LLP, Chartered Accountants as Auditors from the conclusion of the ensuing annual general meeting till the conclusion of the next Annual General Meeting in 2016 and to authorise the Board to fix their remuneration for the year 2015.

The Auditors'' Report to the Shareholders for the year under review does not contain any qualification.

II. COST AUDITOR AND COST AUDIT REPORT Pursuant to section 148 of the Companies Act 2013, the Board of Directors on the recommendation of the Audit Committee appointedM/s P.M. Nanabhoy & Co. Cost Accountants, as the Cost Auditors ofthe company for the Linancial Year 2015 and has recommended their renumeration to the Shareholders for their ratification at the ensuing Annual General Meeting. M/s P.M. Nanabhoy & Co. have confirmed that their appointment is within the limits of the Section 224 (iB) of the Companies Act, 1956, and have also certified that they are free from any disqualifications specified under Section 233B (5) read with Section 224 sub-section (3) or sub-section (4) of Section 226 ofthe Companies Act 1956.

The Audit Committee has also received a certificate from the Cost Auditor certifying their independence and arm''s length relationship with the company. Pursuant to Cost Audit (Report) Rules 2001, the Cost Audit Report for the financial year 2013, was filed on 28th April, 2014 vide SRN N0.Q31060932 on the Ministry of Corporate Affairs website.

III. SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

The Board had appointed M/s Rathi & Associates, Company Secretaries in Whole-time Practice, to carry out Secretarial Audit under the provisions of Section 204 of the Companies Act, 2013 for the financial year 2014. The report of the Secretarial Auditor is annexed to this report as Annexure III. The report does not contain any qualification.

23. TRANSFERTO INVESTOR EDUCATION AND PROTECTION FUND

The company has transferred a sum of Rs.207.88 lakh during the financial year 2014 to the Investor Education and Protection Fund established by the Central Government, in compliance with Section 205C of the Companies Act, 1956. The said amount represents unclaimed dividends which were lying with the company for a period of seven years from their respective due dates of payment. Prior to transferring the aforesaid sum, the company has sent reminders to the shareholders for submitting their claims for unclaimed dividend.

24. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information on conservation of energy, technology absorption, foreign exchange earnings and out go, is required to be given pursuant to provision of Section 134 of the Companies Act, 20i3,read with the Companies (Accounts) Rules, 2014 is annexed here to marked Annexure IV and forms part of this report.

25. PARTICULARS OF EMPLOYEES

The information required under Section 217 (2A) of the Companies Act, 1956 ("the old Act") and corresponding Section 197 of the Companies Act, 2013 ("the new Act") and the rules thereunder forms part of this Report. However, in terms of Section 2i9(i)(b)(iv) of the old Act and Section 136(1) of the new Act, the Report and Accounts are being sent to the members and others entitled there to, excluding the Statement of Particulars of Employees. The Annexure is available for inspection by the members at the Registered Office of the company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy there of, such member may write to the Company Secretary, whereupon a copy would be sent.

26. SUBSIDIARY COMPANIES

Pursuant to the circular dated 8th February, 2011, issued by the Ministry of Corporate Affairs, Government of India and Section 136 of the Companies Act, 2013, which has exempted companies from attaching the Annual Reports and other particulars of its subsidiary companies along with the Annual Report of the company, the Annual Reports of the subsidiary companies viz. (1) Chemical Limes Mundwa Pvt. Ltd. (2) M.G.T. Cements Pvt. Ltd. (3) Kakinada Cements Ltd. (4) Dang Cement Industries Pvt. Ltd. and (5) Dirk India Pvt. Ltd. are not attached with this Annual Report. However, a statement giving certain information as required vide aforesaid circular is placed along with the Consolidated Accounts.

The financial statements of the subsidiary Companies are kept for inspection by the shareholders at the Registered Office of the company The company shall provide free of cost, the copy of the financial statements of its subsidiary companies to the shareholders upon their request. The statements are also available on the website of the company www.ambujacement.com

27. CONSOLIDATED FINANCIAL STATEMENTS

As stipulated by Clause 32 of the listing agreement with the stock exchanges, 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.

The consolidated net profit of the company and its subsidiaries amounted to Rs. 1486.50 crores for the corporate financial year ended on 31st December, 2014 as compared to Rs. 1496.36 crores on a standalone basis.

28. EQUAL OPPORTUNITY EMPLOYER

The company has always provided a congenial atmosphere for work to all employees that is free from discrimination and harassment including sexual harassment. It has provided equal opportunities of employment to all without regard to their caste, religion, colour, marital status and sex. The company has also framed a policy on ''Prevention of Sexual Harassment'' at the workplace. There were no cases reported during the year under review under the said Policy

29. AWARDS AND ACCOLADES

- ACF Darlaghat bags NABARD''s Best Partnership Award.

- Ambuja bags CII-ITC Sustainability Award - 2014.

- Roorkee Grinding Unit has been awarded with the ''CERTIFICATE of MERIT'' for ''Energy Conservation in Cement Sector for the year 2013''.

- Ambuja Cement Foundation - Chirawa has won the UNESCO supported Water Digest Water Award 2013-14.

- Ambuja Cement bags Bronze at the Flame Awards 2013 for Rural Marketing Initiative.

- Ambuja Cement bagged the 1st runner up award at the ASSOCHAM CSR Excellence award during the 6th Global Corporate Social Responsibility Summit held in Delhi.

- ACEs Rabriyawas Unit won the 14th Annual Greentech Environment award in the Gold Category

- Greentech Environmental Excellence Gold Award 2013.

- Ambuja Cements - Rabriyawas Plant won Productivity Excellence Award 2011-12, presented by Rajasthan State Productivity Council.

- Ambuja Cement Foundation - Bathinda won the NABARD ''Partnership Excellence Award'' in the category of''Improving productivity of crops''.

30. CAUTIONARY STATEMENT

Statements in the Directors'' Report and the Management Discussion and Analysis 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 demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country, and other factors which are material to the business operations of the company

31. DISCLAIMER

The Ministry of Corporate Affairs vide Circular No. 08/2014 dated 4th April, 2014 clarified that the financial statements and the documents required to be attached thereto, the Auditor''s and Directors'' report in respect of the financial year under reference shall continue to be governed by the relevant provisions of the Companies Act, 1956, schedules and rules made there under. However, the company has made efforts to provide the information in the Directors'' Report and the Corporate Governance Report as per the Companies Act, 2013, to the extent possible as a matter of prudence and good governance.

32. ACKNOWLEDGEMENTS

Your Directors take this opportunity to express their deep sense of gratitude to the banks, Central and State governments and their departments and the local authorities for their continued guidance and support.

We would also like to place on record our sincere appreciation for the commitment, dedication and hard work put in by every member of the Ambuja family. To them goes the credit for the company''s achievements. And to you, our shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the Board of Ambuja Cements Limited

N. S. Sekhsaria Chairman

Mumbai, 18 February, 2015


Dec 31, 2013

1. INDIAN ECONOMY

A Year of Challenges

Slowing growth, rising inflation and the depreciating rupee marked the onset of 2013 setting in motion a challenging year for the Indian economy. Growth rate continued to slide despite attempts by the government to stem the tide with a host of traditional and innovative measures. Efforts were further constrained due to global headwinds.

To boost investor confidence, the Cabinet Committee on Investments approved infrastructure projects entailing huge investments.

However, given the weak start, we expect that real GDP growth would average at 4.5-5% in 2013-14.

FLAT GROWTH FOR CEMENT INDUSTRY

The cement industry witnessed flat growth in 2013 due to several reasons - a prolonged monsoon that extended until the festive season, natural calamities (floods and cyclone) that hit many parts of India and low demand due to financial crunch and slowdown in realty and infrastructure sectors.

In the first half of 2013, industry demand was slow due to fall in construction activity and a virtual halt in government spending. During the second half, the early arrival of the monsoon compared with the previous year did not augur well.

The cement industry also faced rising costs, high interest rates, land acquisition and clearance issues. An overall weak macro environment and ban on sand mining continued to worry the industry.

Increase in freight rates for several commodities has had a cascading impact on the cement industry. An increase in freight rates for coal and cement drove up transportation cost as well as the landed cost of imported goods. Moreover, the rupee''s weakness against the U.S. dollar and other global currencies prevented India from taking advantage of the decline in commodity prices in the world market.

Over the past few years, the cement industry witnessed huge capacity addition (almost 90 million tones on the available supply basis), which substantially increased the gap between demand and supply and consequently lowered capacity utilization.

We expect demand to gradually revive over 2014 and 2015 with a new government and recovery in construction activity.

2. FINANCIAL RESULTS 2013

AT A GLANCE (STAND ALONE RESULTS):

- Cement production decreased by 3% to reach 20.96 million tonnes, from 21.62 million tonnes while clinker production decreased to 14.27 million tonnes, 10% down from 15.81 million tonnes in year 2012.

- Domestic cement sales volume continued with sluggish demand by recording a decrease of 2% at 20.94 million tonnes from 21.31 million tonnes in year 2012. Cement exports decreased to 0.10 million tonnes from 0.12 million tonnes in year 2012. Clinker sales (including exports) were up at 0.56 million tonnes from 0.55 million tonnes in 2012.

- Net sales at '' 9,087 crores were 6% lower than that of previous year''s '' 9,675 crores. Average sales realisation decreased by around 4% at ''4,208 per tonne against approx ''4,400 per tonne in 2012.

- Total (operating) expenses for the year 2013 increased by 2% over that of year 2012.

- The Company achieved an absolute EBITDA of '' 1651 crores in year 2013. This is lower by 33% over the corresponding '' 2473 crores of the year 2012.

- Profit before tax at '' 1,514 crores was down by 20% over corresponding figure of'' 1902 crores for year 2012.

- Net Profit at '' 1,295 crores was down by 0.2% over corresponding figure of'' 1297 crores for the year 2012.

Amount in '' crores

Stand alone Consolidated

Current Year Previous Year Current Year Previous Year

31.12.2013 31.12.2012 31.12.2013 31.12.2012

Sales (Net of excise duty) 9086.84 9674.94 9118.00 9739.54

Profit before interest and depreciation 2044.45 2821.84 2033.91 2821.95

Less: Finance Cost 65.08 75.66 66.75 78.46

Gross profit 1979.37 2746.18 1967.16 2743.49

Less: Depreciation and amortisation

expense 490.07 565.22 493.67 568.68

Profit before Exceptional Items and Tax 1489.30 2180.96 1473.49 2174.81

Exceptional items (24.82) 279.13 (24.82) 279.13

Profit before tax 1514.12 1901.83 1498.31 1895.68

Less: Tax expense 219.55 604.77 219.87 603.86

Profit after tax but before minority Interest 1294.57 1297.06 1278.44 1291.82

Less: Minority interest - - (0.13) (1.39)

Profit for the Year 1294.57 1297.06 1278.57 1293.21

Add: Balance as per the last financial

statements 737.01 284.75 1048.09 598.72 Profit available for appropriation 2031.58 1581.81 2326.66 1891.93 Appropriations:

Consequent to change in group''s interest - - - (0.96)

General Reserve 150.00 200.00 150.00 200.00 Dividend on Equity Shares

(including interim) 556.34 554.80 556.34 554.80

Corporate Dividend Tax 94.55 90.00 94.55 90.00

Total Appropriations 800.89 844.80 800.89 843.84

Balance carried forward to Balance Sheet 1230.69 737.01 1525.77 1048.09 3. DIVIDEND

The Company has paid an interim dividend of 70% ('' 1.40 per share) during the year. The Directors are pleased to recommend a final dividend of 110% (''2.20 per share). Thus the aggregate dividend for the year 2013 works out to 180% (''3.60 per share) and the total payout will be ''648.37 crores, including dividend distribution tax of ''92.71 crores. This represents a payout ratio of 50%.

4. MARKET DEVELOPMENTS

The Company''s domestic cement sales in 2013 declined by 1.7% to 20.94 million tonnes as compared to 21.31 million tonnes achieved in 2012. Total cement sales (including exports) declined by 1.8% to 21.04 million tonnes as compared to 21.43 million tonnes achieved in 2012.

REGION-WISE SALES VOLUME / GROWTH

In the North region, domestic cement sales of the Company declined by 1.7% to 8.64 million tonnes in 2013 compared to 8.79 million tonnes in 2012.

In the East region, the Company achieved sales of 4.21 million tonnes of cement in the domestic market, registering a decline of 0.2% over the previous year sales of 4.22 million tonnes.

In the West & South region, the Company''s domestic cement sales in 2013 declined by 2.5% to 8.09 million tonnes as compared to 8.30 million tonnes achieved in 2012.

Cement exports in 2013 reduced further to 0.10 million tonnes as compared to 0.12 million tonnes in 2012.

GROWING THE DISTRIBUTION FOOTPRINT

The Company continues to develop and leverage its large and able network of around 8,500 dealers and 27,000 retailers across India. Their reach and penetration helps the Company in core rural and semi-urban markets across the country. This, coupled with the strong brand equity and efficient channel management, has significantly helped the Company to withstand severe competition in an over-supplied market.

The Company''s network of ports, bulk cement terminals and captive ships on the west coast has supported a sustainable and strong market position in Mumbai, Surat and Cochin. The Mangalore Bulk Cement Terminal that commenced its commercial operations in 2013 will further strengthen the Company''s position and enhance its footprint in the South region.

ENHANCING OUR SYSTEMS

The Company embarked on the Marketing and Commercial Excellence (MaCX) programme to further sharpen its marketing, sales and distribution functions. This ambitious programme is part of the comprehensive Holcim Leadership Journey (HLJ), announced by Holcim management across the globe to deliver gains and create value in a competitive environment over the next few years. MaCX aims to supplement in-house skills with global expertise of Holcim and that of advisory firms, to revamp customer interfacing functions by focusing on core value levers. This is an investment to future proof the Company and to promote an environment of innovation and excellence.

5. COST DEVELOPMENTS

During the year 2013, the economy witnessed upward movement in overall cost structure and volatile foreign exchange rates. However, the Company implemented cost optimisation initiatives which helped in containing inflationary impact to some extent.

MAJOR COST MOVEMENTS:

i) Cost of major raw material, fly ash, increased by 7% on per tonne basis. However, strategy to change in mix of gypsum resulted in cost decrease by 2% on per tonne basis. Overall, the absolute raw material cost decreased by approx. 6% over the previous year including the impact of lower volumes.

ii) Power and fuel costs account for approximately 26% of the total operating cost of the Company. Coal cost for kiln and captive power plants reduced by 8% and 10% respectively, due to reduced usage of imported coal and also substitution of high cost coal by pet coke usage. Besides, there was increased usage of Alternate fuels by 3% over the usage for the year 2012.

Cost of grid power continued its upward movement with per kwh rate increasing by approximately 22% over the previous year. In 2013, captive power generation which supports 66% of the total power requirements of the Company, reduced by 10%.

Overall, the reduction in dependence on grid, increase usage of captive power and reduction in fuel prices have helped the Company in registering a decrease of 11% in absolute cost of power and fuel as compared to the year 2012.

iii) Freight and forwarding cost works out to 30% of total operating costs. During the year, the same hardened by 6% on per tonne basis over the year 2012 due to an increase in diesel prices.

iv) The cost of packing bags went up by around 14%, driven by increase in PP granule prices.

COST MITIGATION MEASURES /

EFFICIENCY IMPROVEMENT INITIATIVES:

i) Keeping in line with the corporate philosophy, focus on production of fly ash based PPC was maintained.

ii) The Company launched its first fully automatic one million tonne capacity terminal in Mangalore. This will help the Company in reducing the negative seasonality effect of the Company''s Gujarat plant. Besides, the logistic costs will be reduced as there will be an opportunity to optimise by using the same vessel for both Mangalore and Cochin terminals in one trip. It will also help the Company enhance its footprint in the southern part of India.

With the launch of this terminal, all states along the country''s west coast are covered by Ambuja Bulk Cement Terminals.

iii) The new Ulwe channel at Panvel, Navi Mumbai was successfully made operational during the year. This will lead to handling of higher cargo and thus result in savings in coastal freight cost.

iv) A mechanised wagon loading system at Farakka was put to use during the year. This helps in reducing loading charges while loading cement from truck to rake as well as reduction in the transportation cost from packing plant to railway siding.

v) With the introduction of the SCOPE (Supply Chain Optimisation Project for Excellence) project, a supply chain excellence initiative, the Company is trying to derive operational efficiencies in logistics. This is targeted by improvisation in direct despatches to customers by undertaking fleet optimisation measures such as installation of Radio Frequency Identification (RFID), Global Positioning System (GPS) on trucks to monitor movement and improving turnaround time etc.

vi) The efforts by the Company for the usage of cost efficient fuel mix are part of the ''GEO 20'' project which will be operational in the first half of year 2014. Here, as a result of handling, storing and processing of waste materials, the Company will be able to ensure more usage of Greener Fuels thereby reducing energy cost.

6. EXPANSION PROJECTS AND NEW INVESTMENTS

The Company took up several projects to serve its customers in a more efficient, cost-effective, reliable and environment-friendly manner, while bolstering its market Dosition in the industrv.

CAPACITY EXPANSION DURING THE YEAR

The new Bulk Cement Terminal (BCT) at Mangalore commissioned this year will help the Company expand its footprint in the southern markets of India.

EFFICIENCY IMPROVEMENT MEASURES:

Getting better at being the best The Company focused on consolidation and optimisation of its existing capacities in all the three regions. Capital investments kept flowing in during the year, to ensure the highest standards of safety in order to meet the Company policies of ''Zero Harm'', clean and energy efficient infrastructure, cost efficient and environment- friendly material handling systems and process optimisation.

Achievements at a glance

i) A Waste Heat Recovery (WHR) plant at Rabriyawas with an approved investment of '' 75 crores is being installed to bring efficiency in fuel utilisation, optimise power costs and meet our Renewable Power Obligation.

ii) In order to strengthen logistics capability and extend its reach to customers, a new railway siding project has been initiated at the Rabriyawas unit in Rajasthan. The total project cost is ''250 crores. So far 40% work of the Railway Project is completed and our timelines for completion are within the second quarter of 2016.

iii) An automatic wagon loading system constructed at the Farraka unit in West Bengal built at a cost of approximately ''32 crores was completed and made operational during the year. This system will reduce cost and improve efficiency of material handling.

Upcoming Capacities and Investments

i) A new brown-field expansion project was announced in 2011 at Sankrail grinding unit in the eastern region comprising a roller press and related logistics. The project is underway, with extended scope to include advanced technical specifications. It is slated to cost '' 325 crore and aimed for completion by 2016. So far, equipment orders have been placed and civil work is in progress. This project would add 0.80 million tonne grinding capacity to the unit, along with other facilities.

ii) Significant cement capacity addition of approximately 4.50 million tonnes with associated clinkerisation capacity of 2.17 million tonnes is coming up at the proposed integrated plant at Marwar Mundwa, Nagaur district in Rajasthan with cement capacity of

1.5 MTPA; and with similar capacity grinding units at Osara (M.P.) and Dadri (U.P.), the total project cost is estimated at ''3500 crores. Environmental clearances for the project were acquired but kept in abeyance for Marwar Mundwa by the MoEF. Part of the mining land is already in possession and the rest is under an advanced stage of acquisition. The Company is also in the process of tying-up water sources required for construction and operations. Full-fledged construction work is expected to commence in the latter part of 2014.

iii) Last year, the Company had taken up 13 new ambitious projects at different locations worth '' 272 crores to optimise and enhance efficiency. These projects have a quick payback of two and half years to four years. Work is progressing well and most are likely to be completed in the first half of 2014.

iv) A new brown-field expansion project to set up a roller press at a cost of '' 70 crore at the Rabriyawas unit in Rajasthan, will add 0.80 million tonne grinding capacity in the first half of 2014.

The year 2014 will see capital expenditure worth ''802 crores, over and above the ''725 crores investment made in 2013. The entire proposed expenditure would be financed by internal accruals.

ACHIEVING SUSTAINABILITY OBJECTIVES WITH ''GREENER'' ENERGY

Keeping the planet green through cement

Ambuja envisions being the most sustainable Company in the cement industry and draws heavily on Holcim''s sustainability policy on CO2 and energy, eco-efficient products, atmospheric emissions, sustainable construction, etc. The strategic stress on environmentally-friendly and cost-effective resources resulted in the establishment of the Geocycle department to focus on Alternative Fuels and Raw Material (AFR).

An ambitious project, named ''Geo20'' has been taken up by the Company last year, which involves a capital investment of '' 200 crores. The project that is meant to substitute costlier traditional fossil fuels with Alternative Fuels (AF), is nearing completion and slated to be operational at all of our integrated plants by end of 2014. Holcim is actively supporting our efforts by making available its global experience and technical expertise in the area of clean and green technology and burning all sorts of waste materials without the corresponding release of harmful gases and CO2 in the air. Holcim''s rich experience in this area has helped to devise innovative ways of sourcing.

During 2013, the Company increased its use of Greener Fuels in its kilns from 1.4% in 2012 to 3.65% in 2013. The Company is determined to achieve higher thermal energy substitution rates in the coming years.

7. OUTLOOK

REFORMS FOR AN ECONOMIC REVIVAL The Economic Outlook

Economic growth accelerated to 4.8% in the second fiscal quarter from 4.4% in the first due to higher output in both industry and agriculture and a rebound in exports. However, it is less likely that we will see a complete turnaround in the economy as the domestic demand remains weak and both consumption and investment continue to grow sluggishly. We expect growth to remain soft in the first quarter of year 2014 owing to delayed investment announcements in the run-up to general elections. Further, it is expected to be supported by export recovery and likely sustained growth in capital expenditure after the second quarter of FY2014, once political stability has been re-established.

We expect the Indian economy to grow at 5% during year 2014 and driven by India''s strong economic fundamentals - high saving and investment rates, rapid workforce growth, a quickly expanding middle class, and the start of a shift from low-productivity agriculture to high- productivity manufacturing. However, given the country''s large external financing needs, domestic expansion will be affected by the global availability of capital.

Economic growth could exceed our forecasts if the Administration''s reform efforts are sustained, infrastructural development accelerates and the government enjoys success in its bid to develop a labour-intensive manufacturing sector in India.

The Cement Industry Outlook

In the period 2011 to 2013 cement consumption grew at an average of 4% compared to the golden period of 2008-2010, when consumption grew at a CAGR of 8%. The multiplier of cement demand growth to GDP growth not only declined below one in 2011 to 2013 but also lost its relevance.

Balancing growth with economic reforms Mid-term outlook appears challenging in the current scenario. However, there are reasons to assume it will be more positive with a potential towards 6-7% growth per annum after 2015 provided the new central government pushes economic reforms.

We expect the capacity utilization rate of the industry to improve gradually from current 73% to ~80% by 2018 given the slowdown in pace of capacity addition and gradual recovery in cement demand.

Cement demand emanates from four key segments - housing which accounts for 67% of cement demand, infrastructure (13%), commercial construction (11%) and industrial construction (9%). Economic reforms announced by the Government and RBI, including the expected lowering of interest rates in 2013, will surely boost sentiment and rejuvenate the economy.

Long-term growth prospects

The cement industry is looking for an up-cycle backed by an increase in rural consumption and recovery in infrastructure activity after a muted growth for the last three years. Recent government measures to fast-track infrastructure projects ahead of general elections that are just around the corner; construction activity is expected to pick up steam leading to strong demand for cement.

Long-term growth prospects for cement demand are favourable, riding on the back of a growing economy and the impetus provided to the housing and infrastructure construction activities in the 12th Five-Year Plan period (2012-17). The total investment in infrastructure sectors in the 12th Five Year Plan is estimated to be Rs 56 lakh crores (one trillion USD).

8. RISKS AND AREAS OF CONCERN

OH&S - OPERATIONAL HEALTH & SAFETY

OH&S is given top priority within the organisation. The Company aims to achieve ''Zero Harm'' through the implementation of formal directives, improvement in logistics flow and visible leadership by line management. Plant workers/ contractors and our own management staff have put in every effort to imbibe and ensure safety in their day-to- day activities.

VULNERABLE DEMAND

Demand for cement is closely related to overall economic development and tends to vary across States within the country, depending on the level of industrialisation and infrastructure development. Fall in demand has been a concern for both the industry and the organisation but with strong economic fundamentals, we are hopeful to see a revival of demand in the near to medium term.

RISING COMPETITION

Domestic and global cement majors are strengthening their production bases across India to mitigate the location risk associated with cement operation but at the same time this has also led to a rise in additional capacity. With decrease in exports, there is consistent pressure on the Company to beat competition. The Company counts on its resources and various other marketing and service elements that will help the organization stay afloat and deliver improved performance.

LOGISTICS COST

Logistics is another area of concern for the industry and distribution cost is one of the major costs for the industry. The industry has witnessed a rise in movement of cement through the sea route to optimise distribution cost. Ambuja is continuously working towards strengthening their distribution network along the coast of India, while at the same time concurrently trying to bring down distribution and logistics costs.

ENERGY COST

Energy is one of the major expenses faced by the cement industry and it is constantly working towards reducing its traditional energy consumption through measures such as use of greener fuels, setting up captive power plants and increasing the production of blended cements. Energy Activation across Regional Network (EARN), is an in-house initiative that Ambuja has embarked upon, to build a lean energy culture across the Company.

9. HUMAN RESOURCES

PROGRESSIVE PRACTICES

FOR A TRANSFORMING ORGANISATION

The Human Resource function at Ambuja strives to provide the ''People Edge'' to business through continuous process improvement and innovation. Our people strategy, systems and processes are aimed at making the Company an employer of choice with sustainable talent by attracting, retaining and developing talent in the organisation and working on concrete actions plans to enhance employee engagement. This is in perfect alignment with the Company''s vision of being the most sustainable and competitive company in the industry.

assess Sustainability risks and opportunities both at the unit and corporate levels and monitor the various sustainability initiatives. Enhancing the focus on embedding sustainability at the highest level, it has been made a regular item in our Board Meeting Agendas. In requirement of the newly introduced Clause 55 of SEBI, we have released our first Business Responsibility Report (BRR) as a part of the Annual Report for 2012. The Company continues to take on initiatives aimed at low carbon emissions, water positive, use of alternative fuel, renewable energy, bio-mass, plastic reuse, etc.

We released our 6th Corporate Sustainable Development Report covering our Sustainability endeavours for the year 2012. The report is aligned with Global Reporting Initiative (GRI) G3 guidelines for A Level of reporting, having been "Assured" by an independent certifying agency. We have responded to the Metal & Mining Sector Supplement of the GRI while reporting on our Sustainability performance to our stakeholders. Like last year, this year''s report too has been accorded the GRI check for A level by Global Reporting Initiative, Netherlands.

We continue to focus on developing our renewable energy portfolio in line with Renewable & Clean Energy Roadmap till 2020. In 2012, 330 KV of solar energy has been installed at Bhatapara, in addition to the existing 7.5 MW of wind energy commissioned at Kutch, Gujarat, the year before last. A 6.5 MW Waste Heat Recovery-based power generation system is being installed and is slated to be operational by 2014.

STEPPING LIGHTLY ON OUR CARBON FOOTPRINT The Company is currently monitoring and reporting CO2 emissions as per the World Business Council for Sustainable Development''s (WBCSD) Cement Sustainability Initiative (CSI) protocol. We have been able to reduce our Green House Gas emissions by over 26% taking 1990 as the reference year. To reduce the carbon footprint and avoid the use of natural resources, we continue to produce fly ash- based cement as our major product. The Company is one of the co-chairs of CSI India and has been part of the Working Group that released the Low Carbon Technology Road Map for Indian Cement Industry.

A LEGACY OF SUSTAINABILITY HONOURS

For the third year in a row, we bagged the CII Sustainability Award in recognition of our endeavours in streamlining Corporate Sustainability within our operations. In 2013, we were recognised in the category of commendation for ''significant achievement'' similar to the previous year. Further, we achieved Gold Level in the Sustainability Plus rating conducted by the CII in 2012 where 100 largest companies (by market cap and market share) were rated along ESG indicators by CII for the Sustainability Plus rating.

PROACTIVE ENVIRONMENT MANAGEMENT

The Company ensured availability of Continuous Emission Monitoring Systems (CEMS) at all the nine kiln stacks above 95% round the year for online monitoring of all vital pollution parameters. Apart from this, trainings were also conducted on emission monitoring, biodiversity and water management to build capacities for environmentally responsible operations,

Three of our grinding units have attained certifications to the Energy Management System as per ISO 50001:2011. The Rabriyawas plant has become the first integrated unit in Ambuja to implement the international standard. This was also our first pilot conducted at a plant to estimate Scope 3 emissions (limited) emanating from our operations.

The Company has taken steps to ensure it meets its commitments under the PAT scheme and RPO-REC obligations. Further, we are anticipating emission standards to be notified for SO2 & NOx emissions. We are taking all steps to monitor and control our emissions so that we can meet the requirements of the new standards as and when they are notified.

BEING A GOOD NEIGHBOUR

Ambuja Cement Foundation celebrated two decades of work with the host communities where it has been involved in development with a spending of well over 2% of Profit before Tax (PBT). The programmes at the Foundation successfully address community needs in a sustainable manner.

CONSERVING THE EARTH''S MOST PRECIOUS RESOURCE

Water resource management has changed the landscape of Kodinar (Gujarat) which is marked by saline water and the water scarce region of Rajasthan. Innovative projects involving the revival of traditional water conservation - roof rain water harvesting, building check dams and customised irrigation methods - has ensured water availability for domestic and agricultural use, winning the FICCI "Water Award" under ''Community Initiative, Industry'' category. External auditors also declared Ambuja as water positive and it is now hoped that each one of our Ambuja sites would raise their bar on water sustainability.

SOWING THE SEEDS OF DEVELOPMENT Krishi Vigyan Kendra (KVK) at Ambujanagar (managed by the Foundation) is much sought after by farming communities for the latest and best technologies in agriculture. KVK also conducts regular meetings, training programmes and other extension programmes to disseminate information. Ambujanagar has also introduced weather insurance protecting the farmers from unforeseen weather conditions.

Better Cotton Initiative (BCI) is being implemented in five states to grow cotton in a sustainable manner and through eco- friendly methodologies. Through this initiative, farmers are able to sell their produce at a better rate without any middlemen. In 2013, the Foundation was conferred with the "Best NGO Award" by the Northern India Cotton Association Ltd. Livelihoods like animal husbandry are encouraged. In Darlaghat, women are trained as pashu swasthya sevikas (PSS) and learn the latest techniques in animal care. The work of the PSS is complemented by cattle camps and immunisations programmes conducted regularly.

MEETING THE CHALLENGES OF EMPLOYMENT The Skill and Entrepreneurship Development Institutes (SEDI) at the Foundation tries to bridge the gap between drop-out or undertrained youth and high demand by industry of skilled personnel. SEDI provides relevant skill training to youth through the courses held at 16 centres established across India; and have to date transformed the lives of over 11,000 youth through wage employment encouraging them to become entrepreneurs. These 45 courses are designed specific to the requirement of that region and also incorporates sessions on soft skill development. Today, SEDI courses are affiliated to the National Council of Vocational Training and Modular Employment Scheme of Central Government.

CHAMPIONING HEALTH

To ensure round-the-clock health services in the far flung rural areas, sakhis (village health functionaries) are provided home-based neo natal care for the numerous mothers and children across locations. Their services are complemented by regular health checks by doctors and health camps. Ambuja Cements also works extensively towards the prevention of HIV & AIDS in and around its plants and locations and works towards reducing stigma on those affected by it. Programmes are held with truckers and workers raising awareness; counselling sessions are also organised in some locations; 10 Targeted Intervention projects are implemented in collaboration with the state AIDS Control Societies and four health care centres established in partnership with Apollo Tyres Foundation.

EDUCATION

Nurturing The Nation''s Talent

The Company has been promoting education

through the non-profit Ambuja Vidya Niketan Trust (AVNT), to provide educational facilities through its schools in each of its five integrated plants. The schools provide education to the wards and dependants of Ambuj a employees as well as children of nearby villages.

In addition, educational intervention is done by the Foundation through Balmitras (members from the community and trained by the Foundation) who are appointed to help children enjoy studies and understand subjects like math, science and English using varied teaching and learning methods. Training is also provided to school teachers for better teaching methodologies. Innovations like using sport for life skills and e-learning methodologies have been used in schools to make curriculum interesting for children. In locations where children are either drop-outs or not going to school at all, the Foundation has introduced non-formal education centres to aid students to enter the mainstream education system.

The Foundation also runs the Ambuja Manovikas Kendra (AMK), a special school for mentally challenged children in Ropar, Punjab. With 100 children on its rolls, the school works to improve the quality of life of children with mental disabilities. A range of activities and programmes at AMK help them grow as independent and productive individuals. The children at AMK once again did us proud by winning the "Overall Championship Trophy" in Punjab State Special Olympics 2013, for the eighth time in a row. The institution was also adjudged the "Best Institution in Sports". In the past one year, the school has extended its services to children who cannot travel to school through its Home Base Rehabilitation Programme.

Stakeholders In Creating A Difference The Foundation ensures Stakeholder Engagement where all programmes are decided after a detailed deliberation. Well-defined processes ensure that all stakeholders are involved to identify key concerns by the community and Community Engagement Plans are implemented the subsequent year. Meanwhile, the Community Advisory Panel established in locations comprise of Company and community leaders. It is a platform to discuss issues faced by the community and achieve a consensus to implement programmes for them.

All programmes are rigorously monitored through the Social Engagement Scorecard which through detailed group discussions and interviews with community representatives maintains a score on activities and programmes of the Foundation. In 2013, all locations scored between 75% to 100%, reflecting positive reviews.

Active Volunteer Engagement programmes has ensured employees become a part of the development journey of the communities along with the Foundation by actively engaging in volunteering - participating in activities like cleaning beaches, painting anganwadis, planting saplings, participating in community projects on health, safety, HIV & AIDS, skill training, school activities etc. So far, 2,000 Ambuja''s volunteers have clocked in over 26,000 hours through their participation in activities.

12. OCCUPATIONAL HEALTH AND SAFETY (OH&S)

WORKING TOWARDS ''ZERO HARM'' FOR OUR PEOPLE

Our OH&S journey of 2013 was mixed - achievements and incidents that highlighted both our strengths and areas of improvement. Going forward, there is a need to capitalise on our strong points and work on development areas to ensure utmost efficiency to prevent future incidents.

Safety is one of our core values and part of the Company''s vision statement. We are committed to strive for ''Zero Harm'' and firmly believe safety as one of the most important primary criteria for us to achieve the goal of being the ''Most Sustainable and Competitive'' Company.

LEARNING FROM THE PAST

As part of a structured approach and setting up the OH&S objectives, the Company has reviewed its past performance. Situations have been assessed and learning incorporated - we believe all incidents are preventable especially if we can alter our mindset and behaviour.

Some key focus action areas include an increase in the visible leadership in OH&S by the Front Line Management. To achieve this objective, we have kick-started a new initiative ''We Care'' - a holistic approach to safety that encompasses all connected with Ambuja - across different levels of management, within and outside locations including third party contractors. As part of this initiative, two concepts - Model Safety Zone and Safety Ambassador - have been launched that will help engage and connect with all people onsite and establish common objectives between OH&S and line teams.

Meanwhile, all operational sites have taken one OH&S wave based on the targeted Fatality Prevention Element (FPE). These include working at height, isolation and lockout, vehicle and traffic safety, machine guarding, lifting and supporting loads and hot work.

A formal OH&S management system, aligned with the Holcim OH&S Pyramid System and other directives, has been established over the past few years across the organisation. FPEs are implemented across all sites and quality of implementation assessed through an external certifying agency. Peer Reviews are scheduled and conducted within Ambuja and also with ACC.

Each plant has taken steps to ensure no recurrence of fatal incidents and appropriates steps taken at sites. To reduce Risk Exposure, several actions were initiated through increasing interface between departments, developing a road map to implement Contractor Safety Management (CSM) activity, initiating process for integration of OH&S requirements during the planning and execution of a shutdown, conducting Risk Assessments during shutdown; Safety audits and analysis to ensure safety while handling coal; and a structural integrity survey by the Company''s technical arm, Techport. Meanwhile, Risk-specific and Competency-based trainings are conducted as per requirements of targeted FPEs and other OH&S directives.

In addition, the Company is making continuous efforts to reduce OH&S risks through the integration of OH&S requirements with other business processes.

13. PURCHASE OF SHARES IN HOLCIM INDIA PVT. LTD. (HIPL) AND AMALGAMATION OF HIPL WITH THE COMPANY

A SYNERGY THAT WILL PROMOTE GREATER DEVELOPMENT

The Company''s promoter, Holcim has proposed a restructuring exercise with a view to simplify its investment structure as well as unlock synergies in the operations of two of its subsidiaries in India - Ambuja and ACC. Under this exercise, the Company will acquire 24% equity shares of Holcim India Pvt. Ltd. (HIPL) from Holderind Investments Limited (Holderind) for a consideration of approximately '' 3,500 crores and HIPL will then amalgamate with the Company. Upon completion of the amalgamation, the Company will hold 50.01% equity shares in ACC and consequently, ACC and all its subsidiaries will become the subsidiary of Ambuja. Holderind will hold 61.39% equity shares in Ambuja.

Over the last few years, both Companies have been working on a common platform for technical support, major procurement and IT functions. However, there are many areas where synergies are yet to be unlocked. This amalgamation will help realise these synergies. This process along with the alignment of critical back-end functions will help both Companies improve their competitive position in the current challenging market.

15. NEW COMPANIES ACT, 2013

The historic Companies Act, 2013 which replaces more than five decades old Companies Act, 1956 was passed by the Parliament. Subsequent to receiving the President''s Assent, the Ministry of Corporate Affairs notified 98 sections and also put up various Rules under the new Act for the public comment. The objective behind the 2013 Act is lesser Government approvals and enhanced self- regulations coupled with emphasis on corporate democracy. The 2013 Act delinks the procedural aspects from the substantive law and provides greater flexibility in Rules making to enable adaptation to the changing economic environment. This will lead to improved compliance and accountability from the corporate sector and will provide further transparency in the disclosure.

16. CORPORATE GOVERNANCE

The Company has complied with the corporate governance requirements as stipulated under the listing agreement with the stock exchanges. A separate section on corporate governance, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report.

CORPORATE GOVERNANCE VOLUNTARY GUIDELINES:

The majority of the Corporate Governance Voluntary Guidelines, 2009, stand complied while complying with the requirements under the Companies Act, 1956, the Listing Agreement, and the Company''s own governance policies.

17. BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report for the year ended 31st December, 2013 as stipulated under clause 55 of the Listing Agreement is annexed and forms part of the Annual Report.

18. INTERNAL CONTROL SYSTEM

The Company has documented a robust and comprehensive internal control system for all the major processes to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources.

The formalised systems of control facilitate effective compliance as per Clause 49 of the Listing Agreement, and article 728 (a) of the Swiss Code of Obligations applicable to the Holcim Group.

The Company''s Internal Audit department tests, objectively and independently, the design and operating effectiveness of the internal control systems to provide a credible assurance about their adequacy and effectiveness to the Board and the Audit Committee. The Internal Audit function assesses the effectiveness of controls to provide an objective and independent opinion on the overall governance processes within the Company, including the application of a systematic risk management framework.

The scope and authority of the Internal Audit activity are well defined in the Internal Audit Charter, approved by the Audit Committee. Internal Audit plays a key role by providing an assurance to the Board of Directors and value adding consultancy service to business operations.

19. MANAGING THE RISKS OF FRAUD, CORRUPTION AND UNETHICAL BUSINESS PRACTICES

Protecting our strongest product:

Ambuja Integrity

Fraud and corruption-free work culture has been the part of the Company''s DNA all along. In view of the potential risk of fraud and corruption due to rapid growth and geographical spread of operations, the Company has put even greater emphasis to address this risk. To meet this objective a comprehensive Fraud Risk Management Policy (FRMP) almost akin to whistle-blower policy has been laid down. More details on FRMP have been given in the Corporate Governance Report.

Corruption: The one area we aim for zero In furtherance to the Company''s philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down the Anti- Bribery and Corruption Directives (ABCD) as part of the Company''s Code of Business Conduct and Ethics. As a Company, we take a zero-tolerance approach to bribery and corruption and we are committed to acting professionally and fairly in all our business dealings.

To spread awareness about the Company''s commitment to conduct business professionally, fairly and free from bribery and corruption, training and awareness workshops were conducted through an independent consulting firm wherein more than 1,700 employees participated and got trained. Apart from this face-to-face training, over 3,500 employees were also given online ABCD training through a web-based application tool during 2013.

In order to further spread awareness about ABCD, face-to-face training workshops will also be conducted during the current year for select vendors, based on their risk profile and business relationship with the Company.

These above policies and its implementation are closely monitored by the Audit and Compliance Committees of Directors and reviewed by the Board at regular intervals.

20. DIRECTORS

CESSATION

Some people are irreplaceable Mr Paul Hugentobler, representative of Holcim (the Company''s Promoter), has conveyed his decision to step down from the Board and will cease to be a Director w.e.f. 7th February, 2014.

Mr Hugentobler joined the Board in May 2006 as Holcim''s Nominee when Holcim took over the management control of the Company. Over the last eight years, he played a key role in providing valuable guidance and expert advice on all facets of the cement business.

The Board placed on record its appreciation for the valuable services rendered by Mr Hugentobler.

RETIREMENT BY ROTATION

In accordance with the provisions of Article 147 of the Articles of Association of the company, (i) Mr Nasser Munjee (ii) Mr Rajendra Chitale and (iii) Dr Omkar Goswami will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer themselves for re-appointment. The Board recommends their re-appointment.

APPOINTMENT

A company that offers growth even at the top

Mr Ajay Kapur and Mr Bernard Terver have been appointed as Additional Directors under Section 260 of the Companies Act, 1956 to hold office up to the date of the ensuing Annual General Meeting and being eligible, have offered themselves for appointment. Additionally, Mr Ajay Kapur has also been appointed as the Dy. Managing Director & CEO of the Company for a period of three years w.e.f. 1st August, 2013.

(i) Mr. Ajay Kapur

Mr Kapur, aged 48 years, is an Economics Graduate from St. Xavier''s College, and completed his MBA from Somaiya Institute of Management Studies and Research (SIMSR) - both from the University of Mumbai. He has also completed the Wharton Advanced Management Program from the University of Pennsylvania, USA. He joined the Company in 1993 from Citibank, and for the first eight years was the Executive Assistant to the then Managing Director, Mr N.S. Sekhsaria. Among several areas, his main focus that time was on Marketing Strategies, Brand and Promotion, Logistics Management and Commercial issues. In 2007, he was made all India Head - Marketing and Commercial Services at Corporate Office and was also inducted as Executive Committee member. In the year 2009, he was made Business Head of West & South region. Mr Kapur was elevated to the post of CEO in May, 2012. The Board of Directors have appointed Mr Kapur as an Additional Director w.e.f. 25th July, 2013 and also as Dy. Managing Director & CEO w.e.f. 1st August, 2013.

(ii) Mr Bernard Terver

Mr Terver, aged 62 years, is a French national. He concluded his studies at the Ecole Polytechnique in Paris in 1976. After beginning his career in the steel industry, in 1977 he moved to cement producer CEDEST, which was taken over by Holcim France in 1994. In 1999, Bernard Terver became CEO of Holcim Colombia and in 2003 he was appointed Area Manager for the Andes nations, Central America and the Caribbean. Since October 2008, he has been CEO of Holcim US and effective November 2010 CEO of Aggregate Industries US. Mr Terver was appointed Area Manager and member of senior management of Holcim Ltd, with effect April 1, 2010. From September 2012, he was appointed as member of the Executive Committee and effective January, 2013 has been bestowed the responsibility for the Africa, Middle East and the Indian Subcontinent (comprising India, Sri Lanka and Bangladesh) region of Holcim.

The Board of Directors recommends their appointment. Further details about these Directors are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

21. DIRECTORS'' RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended, the Directors confirm that:

i) In preparation of the financial statements, the

applicable accounting standards have been followed along with proper explanations relating to material departures.

ii) Appropriate accounting policies have been selected and applied consistently. 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 as on 31st December, 2013, and of the statement of profit and loss and cash flow of the company for the period ended 31st December, 2013.

iii) 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.

iv) The financial statements have been prepared on a going concern basis.

22. AUDITORS

STATUTORY AUDITORS

M/s. S. R. Batliboi & Co. LLP, the Statutory Auditors of the Company, will retire at the ensuring Annual General Meeting and are eligible for re-appointment. M/s. S. R. Batliboi & Co., LLP have expressed their unwillingness to get re-appointed as the Statutory Auditors of the company.

The Board, based on the recommendation of the Audit Committee, recommends the appointment of M/s. SRBC & Co. LLP as the Statutory Auditors of the company, for whom the company has received a notice u/s. 225 read with Section 190 of the Companies Act, 1956, from a shareholder seeking their appointment in place of M/s. S. R. Batliboi & Co. LLP. M/s. SRBC & Co. LLP have confirmed that their appointment, if made, shall be within the limits of Section 224(1B) of the Companies Act, 1956.

The Auditors have informed that M/s S.R. Batliboi & Co. LLP and M/s. SRBC & Co. LLP are part of the same group.

COST AUDITORS AND COST AUDIT REPORT

Pursuant to section 233B(2) of the Companies Act 1956, the Board of Directors on the recommendation of the Audit Committee appointed M/s. P.M. Nanabhoy & Co. Cost Accountants, as the Cost Auditors of the Company for the Financial Year 2014. M/s. P.M. Nanabhoy & Co. have confirmed that their appointment is within the limits of the Section 224 (1B) of the Companies Act, 1956 and have also certified that they are free from any disqualifications specified under Section 233B(5) read with Section 224 sub-section (3) or sub-section (4) of Section 226 of the Companies Act 1956.

The Audit Committee has also received a certificate from the Cost Auditor certifying their independence and arm''s length relationship with the Company. Pursuant to Cost Audit (Report) Rules 2001, the Cost Audit Report for the financial year 2012 was filed on 6th May, 2013 vide SRN No.S21001375 on the Ministry of Corporate Affairs website.

23. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

The Company has transferred a sum of '' 123.36 lacs during the financial year 2013 to the Investor Education and Protection Fund established by the Central Government, in compliance with Section 205C of the Companies Act, 1956. The said amount represents unclaimed dividends which were lying with the Company for a period of seven years from their respective due dates of payment. Prior to transferring the aforesaid sum, the Company has sent reminders to the shareholders for submitting their claims for unclaimed dividend.

24. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information on conservation of energy, technology absorption, foreign exchange earnings and outgo, is required to be given pursuant to Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto marked Annexure - I, and forms part of this report.

25. PARTICULARS OF EMPLOYEES

The information required under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, in respect of the employees of the Company, is provided in the Annexure forming part of this Report. In terms of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid Annexure. The Annexure is available for inspection by the members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.

26. SUBSIDIARY COMPANIES

Ministry of Corporate Affairs, Government of India, vide its circular dated 8th February, 2011 has exempted companies from attaching the Annual Reports and other particulars of its subsidiary companies along with the Annual Report of the Company required u/s 212 of the Companies Act 1956. Therefore, the Annual Reports of the subsidiary companies viz. (1) Chemical Limes Mundwa Pvt. Ltd. (2) M.G.T. Cements Pvt. Ltd. (3) Kakinada Cements Ltd. (4) Dang Cement Industries Pvt. Ltd. (5) Dirk India Pvt. Ltd. and (6) Dirk Pozzocrete (MP) Pvt. Ltd. are not attached with this Annual Report. However, a statement giving certain information as required vide aforesaid circular dated 8th February 2011 is included in Consolidated Financial Statements.

The financial statements of the subsidiary Companies are kept for inspection by the shareholders at the Corporate (Head) Office of the Company. The Company shall provide free of cost, the copy of the financial statements of its subsidiary companies to the shareholders upon their request.

27. CONSOLIDATED FINANCIAL STATEMENTS

As stipulated by Clause 32 of the listing agreement with the stock exchanges, the consolidated financial statements have been prepared by the Company in accordance with the applicable Accounting Standards issued by The Institute of Chartered Accountants of India. The audited consolidated financial statements together with Auditors'' Report form part of the Annual Report.

The consolidated net profit of the Company and its subsidiaries amounted to '' 1278.57 crores for the corporate financial year ended on 31st December, 2013 as compared to '' 1294.57 crores on a standalone basis.

28. EQUAL OPPORTUNITY EMPLOYER

The Company has always provided a congenial atmosphere for work to all sections of the society. It has provided equal opportunities of employment to all without regard to their caste, religion, colour, marital status and sex.

29. AWARDS AND ACCOLADES

Recognition for constant innovation

(a) Ambuja won the prestigious CII ITC Sustainability Award for the third year in a row. It won the award for ''Significant Achievement on journey towards Sustainable Development'' under Large Industry category.

At the same award ceremony, Ambuja''s two integrated units - MCW and Bhatapara - also won the CII ITC Sustainability Awards in Individual Plant category for ''Strong Commitment for proving commitments; adopting appropriate policy and processes''.

(b) Ambuja Cement won ''The Asia''s Most

Promising Brand'' at the Asian Brand & Leadership Summit - Dubai 2013, held in August, 2013. The award was received by Ambuja''s Dy. MD & CEO Mr Ajay Kapur, who was voted as ''Asia''s Most Promising Leader''.

(c) Ambuja Cement Foundation bagged the first prize in the ''Community Initiatives by Industry'' category at the FICCI Water Awards 2013 by Deputy Chairman, Planning Commission Montek Singh Ahluwalia at the Federation House, New Delhi in August 2013.

(d) The Foundation also bagged two more National Awards for Excellence in Water Management - ''Excellent Water Management Initiatives'' for work done at Marwar Mundwa, Rajasthan and Excellence in Water Management 2012 for Rabriyawas Unit under "Within the Fence" category.

(e) Maratha Cement Works was awarded the IPE- Asia Pacific HRM Congress Awards 2013 under category ''Organization with Innovative HR Practices'', for its innovative and good HR practices.

(f) The 4th National HR Excellence Award Confluence 2013'' by the Confederation of Indian Industries (CII) held in New Delhi on 24th September where Ambuja Cements Limited bagged the recognition award for exhibiting ''Strong Commitment to HR Excellence''.

(g) MCW unit bagged the Safety Award in the Gold category in Cement Sector at the 12th Annual Greentech Safety Award 2013.

(h) Ambuja Cements Ltd won the ET NOW Talent and HR Leadership Award 2013 for Best Talent Management and the Global HR Excellence Awards 2013 for Organization with Innovative HR Practices by World HRD Congress.

(i) Ambujanagar unit won the 12th Greentech Silver Award in Cement sector category.

(j) RKBA Limestone Mine at Ambujanagar was awarded the prestigious RIO TINTO Health & Safety Award for 2012-2013. The award was presented by the Union Minister of Mines, Dinsha J. Patel.

30. CAUTIONARY STATEMENT

Statements in the Directors'' Report and the Management Discussion and Analysis 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 demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country, and other factors which are material to the business operations of the Company.

31. ACKNOWLEDGEMENTS

The true wealth of Ambuja: Our people and partners

Your Directors take this opportunity to express their deep sense of gratitude to the banks, Central and State governments and their departments and the local authorities for their continued guidance and support.

We would also like to place on record our sincere appreciation for the commitment, dedication and hard work put in by every member of the Ambuja family. To them goes the credit for the Company''s achievements. And to you, our Shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the board of Ambuja Cements Limited

N. S. Sekhsaria

Chairman

Mumbai

6th February, 2014


Dec 31, 2012

Dear Members,

The is a pleasure to present the Annual Report of the Company for the year 2012,

1. THE JOURNEY OF EXCELLENCE CONTINUES

The Company continues to occupy an important and benchmarked position in the cement industry through continual capacity enhancement, operational efficiencies, financial excellence and focused sustainable Hoity efforts which promote the well-being of society. With sound tactical and strategic initiatives and the indomitable spirit of "I can"'' the Company is well poised to continue its journey of excellence in the short and long time frame,

2. BRAVING THE SLOWDOWN

INDIAN ECONOMY LOOKING FOR SILVER LINING IN SPATE OF REFORMS

The Indian economy has shown remarkable resilience compared to other global economies. However, the stress was visible in below 6% projected GDP growth in £012 vis-a-vis aspirations of over 7% growth, in stark contrast to an average of 8% growth achieved during 2007-2011.

Economic growth declined across all the sectors due to domestic and external factors, high inflation, wide fiscal deficit and unfavorable domestic savings and investment rate. Despite strong fundamentals and structural support, uncertainty and consequent lack of confidence held back investments in capital formation. Output was disrupted due to power outages and stalled projects. Services also slowed down due to both cyclical and structural factors.

High inflation was a cause of worry, with wholesale price Index hovering over 7%. The weak rupee. Settling around 7 55 against USD, increased the import bill of crucial fuel supplies, thus driving up the current account deficit.

In an attempt to rekindle India''s economic slowdown, the Government unveiled a series of economic reforms. These have certainly led to a revival in investors'' sentiment. Though the first half of the financial year 2012-13 grew by just 5.4%, the reforms- driven positive sentiment is expected to help achieve growth rate of approx 5.5% by the end of the financial year. Manufacturing PM1 data for December 2012 published by HSBC, reflects this sentiment as it surged to 6-month high, backed by Strong factory Output and a spike in new orders.

Steps taken by the Government to reform the economy has given a positive tone to (he challenging scenario,

A MIXED YEAR FOR THE CEMENT INDUSTRY The first half of £012 augured well with robust demand backed by states holding elections and due to extended construction period owing to a delayed monsoon. This demand was largely driven by rural housing and road construction while other infrastructure activities remained sluggish.

In the second half, demand faltered as construction activities remained sub clued with the onset of the monsoon, which extended till late October and uneven distribution of rain across the country, leading to floods in some parts Of the country while some areas faced drought/drought-like situation.

Cement industry also suffered due to shod age of essential construction materials like sand, bricks, water {due to drought), etc. High interest rates and an overall slowdown in the economy kept demand suppressed

In spite of slowing down of capacity additions, supply side pressures continued to remain. Adverse demand supply situation, mainly post monsoon, resulted m lower capacity utilization.

On the cost front, India''s cement industry continues to reel under the pressure of rising input costs and high inflation rates. In March 2012, the railways rationalized freight rates, by effecting major changes in freight slabs which resulted in approximately 20''25% increase in freight charges. The Government also hiked diesel pence''s by 15/- per later (excluding VAT) in the middle of September, putting further pressure on freight & distribution costs. Some respite came in the form of reduced imported coal prices in the later part of the year, however, the cost benefit was restricted by a volatile rupee. Overall, The cost of coal increased in double digits.

3. FINANCIAL RESULTS 2012

AT A GLANCE (STAND ALONE RESULTS):

- Cement production increased modestly by 3,1% to reach 21.62 million Non tonnes, from 20-97 million tonnes while clinker production went up to 15-91 million tonnes registering growth of 7,5% over 14,7Q million tonnes in the year 2011.

- Domestic cement sales volume reflected sluggish demand scenario by growing at 3.8% to reach 21.31 million tonnes from 20.54 million tonnes a year ago. Cement exports fell to 0.12 million tonnes From 0.37 million tonnes a year ago. Clinker sales (including exports) grew by 2.4%, settling at 0.55 million tonnes from 0.54 million tonnes In 2011.

* Met sales at Rs. 9,675 crores were 13.8% higher than that of previous year * 8,504 crores. Average sales realization improved by around 11% at Rs. 4.400 per tonne against approx Rs. 3,960 per ton in 2011.

* Total {operating) expenses for the year 2012 increased by 11.4% over that of year 201J.

* The company achieved an absolute EBITDA of Rs. 2,473 crores in 2012. This is higher by 25.0&% over the corresponding regrouped figure (Rs. 1.977 crores) of 2011.

* Net Profit at Rs. 1,297 crores improved by 5.6% over corresponding figure of Rs. 1229 crores for previous year:

Amounl in 7 crores

Stand alone Consolidated

Current year Previous Current Year year Previous Year 31,12-2012 31.l2.2011 31.12.2012 31.12.2011

Sales (net of excise duty) 9674.94 8504.32 9739.54 3521.03

Profit before Interest and depreciation 2821.04 2224.9 2021.95 2225.13

Less: Interest 75,66 52.63 78.46 53.44

Gross profit 2746.18 2172.17 2743.49 2171,69

Less: Depreciation 56122 445.15 563.53 446.24

Profit before tax and exceptional item? 2180.96 1727-12 2174,61 1726.49

Less: Exceptional items 279-13 24.25 279.13 24.25

Profit before tax 1991.03 1702.87 1895.68 1701,24

Less: Provision tor tax 694.77 474.01 603.36 473.75

Profit alter lax bill balance minority interest 1297,06 1226.36 1291.02 1227.49

Less: Minority interest - - (1.39} (0.25)

Net profit after tax 1237.06 1228.86 1293.21 1227,74

Add Balance bough lowland form previous year 264.76 325-85 598.72 649.44

Profit available for appropriation 1581.81 1554.21 1891.93 1868.18



Amount in Tenino''s

Stand alone Consolidated

Current Year Previous Year Currant Year Previous Year 31.12.2012 31.12.2011 31.12.2012 31.12,2011

Appropriations:

Consequent to change In group''s interest - - (0.36) -

General reserve 200.00 700.00 200.00 700.00 Provision for dividend distribution

Tax written back - 0.83 - 0.83 Dividend on equity shares (including interim) 554.00 490.69 551.00 490.69

Dividend distribution tax 90,00 79.00 90.00 75.60

Total Appro prialions 844.80 1269.46 843.84 1269.46

Balanoe carried forward to Balance Sneef 737.01 204.75 1043.09 593.72

4. DIVJDEND

The Company has paid an interim dividend of 70%

1.40 per share) during the year. The Directors are pleased to recommend a final dividend of 110% (Rs. 2.20 per share). Thus the aggregate dividend for the year 2012 works out to 100% Rs. 3.60 per share) and the total payout with be Rs. 644.80 crores. including dividend distribution tax of 90 crores. Tiles represents a payout ratio of 50%.

5, MARKET DEVELOPMENTS

That Company''s domestic cement sales in 2012 grew by 3.3% lo 21.31 million lonnes 3$ compared to 20.&4 million tonnes achieved in 2011. Total cement sales (including exports) grew by £.5% lo 21 -43 million tonnes as compared to £0-91 million tonnes achieved in 3011 The company''s clinker sales in 2012 grew by £.4% to 0.55 million loners as compared to 0,54 million tonnes achieved in 2011.

REGION WISE SALES VOLUME / GROWTH In the North region, domestic cement sales of I he Company grew by 8.9% to 8.79 million tonnes in 2012 as compared to B.07 million tonnes in 2011. Clinker safes during 2012 were at 0.10 million loners as compared to 0.12 million tonnes achieved in 2011.

In the Eastern region, the Company achieved sates of 4,22 million tonnes of cement in the domestic market, registering a growth of 7% over the previous year sales of 3.95 million tonnes. Clinker sales also grew by 7% to 0,45 million tonnes in 2012 as compared to 0,42 million tonnes in. 2011.

In I he Weal A South region, the Company''s domestic cement sales in 2012 declined by 2.6% to a.30 million tonnes as compared to 6,52 million lonnes achieved in 2011. This was mainly on account of poor demand ?winy to tile drought-like situation In many parts of Maharashtra, extended shortage of essential construction materials, poor liquidity, fewer new projects, etc.

Cement exports were reduced further lo 0.12 million lonnes as compared to 0-37 million tonnes in 2011 due to adverse international market and diversion of material to domestic market. The Company continues to develop and leverage its large and cable network of around 3000 dealers and 25.00Q retailers across India. Their reach and penetration helps the Company across the country in core rural and semi-urban markets. This, coupled with the strong brand equity and efficient channel management, helped the Company to withstand severe competition in an over-supply market.

While the company''s network of ports, bulk cement terminals and captive ships on (the west coast has supported a sustainable and strong market position in Mumbai, Seurat and Cochin, the Mangalore Bulk Cement Terminal, which is expected to commence commercial operations in the first half of 2013, will further strengthen Company''s position and enhance footprints in the southern region.

With the support of Holcomb''s rich experience of operating in 70 countries, the Company has now added sophisticated IT and channel management tools to its traditional Indian model. This has enhanced Company''s capability to face stiff competition more convincingly and maintain a strong market position.

The Company has embarked upon Marketing and Commercial excellence program {MaCX) lo further Sharpen its marketing, sales and distribution functions, This ambitious program is part of comprehensive Holmic Leadership Journey (HLJ), announced by Holmic management across the globe, to deliver substantial tangible and intangible gains and create value in competitive environment over next few years. MaCX aims to supplement in-house skills with global expertise of Holmic and that of advisory firms, to revamp customer interfacing functions by focusing on core value levers. This is an investment to future proof the company and to promote environment of innovation and excellence-

COST DEVELOPMENTS

The major cost elements of the Company continued their upward movement in line with unyielding inflation in the economy and volatile foreign exchange rates.

MAJOR COST MOVEMENTS:

i} Cost of major raw materials, namely, fly ash and gypsum, increased by 14% and 25% respectively on per ton basis, mainly on account of increase in transportation costs. Excise burden on fly ash introduced In the Union Budget 2011 continues. Overall, the absolute raw material costs increased by approx 15% over the previous year. During the year, the Company did not purchase clinker from open market. Costs on account of raw materials consumed, excluding purchased clinker, increased hy a little over 18% as compared to over 2011 costs.

li) Power and fuel costs registered an Increase of around 16% in terms of absolute costs over last year. These costs account for approximately 30% of total operating costs of the Company and are mainly driven by movement in cost of fuel, especially coal.

Cost of coal used in kilns and power plants increased by 12.5% and 8.6% respectively on an average basis, over the year 2tJt 1. Concerns associated with linkage coal, like non availability commensurate with increased production, inordinate delay in conversion of allotted linkages into Fuel Supply Agreements (FSA) and deteriorating quality continues to be an issue. The Company is proactively taking measures to mitigate expenses by trying cost effective fuel mix, exploring energy efficient technologies, and increasing the use of pet coke in lieu of coal. Significant volatility and devaluation in Indian currency in 2012, especially in the second half, has made imported coal costlier, even when USD denominated coal prices relaxed- Cost of grid power continued its upward movement with per kwh rate Increasing at approximately 6% over the previous year. Expensive thermal power was substituted by relatively cheaper grid power. Captive power generation Supported 60% of total power requirements of the Company in 2012 as against 70% in 2011.

Savings on account of efficiency in operations helped reduction of costs by 2% of total energy costs.

Freight forwarding costs, makes around 29% of total operational cost, also hardened by approx 18% in absolute terms over previous year.

iv) Cost of packing went up by around 15% driven by increase in PP granule prices in line with oil price Increase.

COST MITIGATION MEASURES / EFFICIENCY

IMPROVEMENT INITIATIVES:

I) Tine Company continued to focus on production of fly ash based PPC and maintained an average blending ratio of approximately 1-48.

i) The Company has embarked upon an ambitious journey, named ''Holmic Leadership Journey'' (HLJ), as a pair of global efforts launched by its parent, Holmic, to add higher value for its shareholders.

The Company is channelizing its efforts into exploring and utilizing excellence in the areas of customer development and cost leadership. Focus on customers, products and services Innovation, constructive pricing policies and empowered sales force Is expected to deliver Customer excellence. Incisive studies have been initiated to find the most efficient use of energy resources, maximizing usage Of Alternative Fuels and Raw materials (AFR}, optimization of clinker and cement movement to save on logistics costs.

iii) Railway siding at Bhatinda grinding unit was made operational in mid January 2013. This will help us to optimize transportation costs for the unit and reduce dependence on road transport.

Iv) A dedicated corridor (road), measuring B.5 km, connecting highway to our captive jetty at Muldwarka port has been completed to enable the company to shift the entire transport to Muldwarka port through own road. This would ensure seamless flow of dispatches to coastal markets using jetty at Muldwarka port, which makes 60% of total dispatches from Amhujanagar plant. Besides, this would also address some serious concerns of road safety.

v) Dumas Channel. I he shorter sea route to BCT Surat explored in year 2011, is being used extensively and facilitating transportation cost savings in coastal freight.

7. EXPANSION PROJECTS AND NEW INVESTMENTS

The Company took up several projects to serve Its customers In a more efficient, cost-effective, reliable and environmentally-friendly manner, while bolstering its market position In the industry.

CAPACITY EXPANSION DURING THE YEAR:

In the Eastern region, the Company commissioned a pre-grinder at its Bhatpara unit in the Slate of Chhattisgarh at an approximate cost of Rs. 40 crores resulting in an increase in total cement capacity by 0,60 million tonnes per annum. With the above addition, the Company has achieved cement grinding capacity of 27.95 million tonnes as at 31st December 2012.

EFFICIENCY IMPROVEMENT MEASURES:

The Company focused on consolidation and optimization of its existing capacities in all the three regions. Capital investments kept Mowing in during the year, to ensure the highest standards of safely in order to meet the company policies of ''Zero Harm1, clean arid energy efficient infrastructure, cost efficient and environment-friendly material handling systems and process optimization.

i} Waste Heat Recovery (WHR) project at Rabriyawas umt in Rajasthan was initiated in year 2011 to bring efficiency in fuel utilization and optimize power costs. This is expected to complete by September 2013 at a total cost of Rs. 75 cnores. The Marat ha Cement Works unit in Maharashtra has also taken up this project (or implementation in 2013-14 at approximate cost of Rs. 90 crores,

ii) In order to Strengthen logistics capability and extend, reach to customers, a new railway siding project has been initiated at Rabriyawas unit in Rajasthan.

sis) An automatic wagon loading system at Farrakhan unit in West Bengal being built at a cost of approximately T 32 crores, Is nearing completion. This will reduce the cost and improve the efficiency of material handling,

Upcoming CAPACITIES AND INVESTMENTS:

i) A new Sulk Cement Terminal (SCT) ss nearing completion at Manga)ore. With operations to commence early 2013, it will help I he company to expand its footprints in southern markets of India.

ii) A new brown-field expansion project was announced in 2011 at Sank rail Grinding Unit in the eastern region comprising of a roller press and related logistics. The project has started progressing, with extended scope to include advanced technical specifications. This would add 0.00 million tonne grinding capacity to the unit, along with other facilities.

iii) Significant cement capacity addition of approximately 4.50 MT at proposed integrated plant (with extended grinding capacities) is coming up at Marwar Mundwa, Nagaur district in Rajasthan, with associated dinkerisation capacity of 2.20 million tonnes. Environmental clearances for the project are already in place while mining land acquisition is in an advanced stage. The Company is also in the process of tying-up water sources required for construction and operations. Full-fledged construction work is expected in the later part of year 2013.

Iv) The Company has taken up 13 new ambitious projects at different locations worth f 272 crores to Optimize and enhance efficiency. These projects have a quick payback of 2.5 to 4 years and likely to be completed in first half of 2014.

v) A new brown-field expansion project at the Rabriyawas until in Rajasthan, for commissioning a roller press air a cost of Rs. 70 crores, will add 0.30 million tonne grinding capacity hy the end of the year 2013.

vij Plans are afoot to Set up a state-of-the-art blending facility at Sanand in Gujarat with grinding and mechanized packing facilities at an investment of 7 267 chores. This facility, once operational by the 3rd quarter of 2015, will lend a competitive edge in the nearby central markets of Gujarat.

The year 2013 would see capital expenditure worth T 1100 crores, over and above Rs. 600 crores investment made in the year 2012. The entire proposed expenditure would be financed by internal accruals.

ALTERNATIVE FUELS - THE GREEN ENERGY An ambitious project, named ''GeD20'', taken up by the Company to substitute costlier traditional fossil fuels by Alternative Fuels {AF), is progressing welt and supporting cost-cutting. Holcim is actively supporting our efforts by making available its world-wide experience and technical expertise in the area of clean and green technology and burning all sorts of wastes without corresponding release of harmful gases and CO2 in the air, Besides, Holcim''s rich experience in the area has helped devise in nova live ways of sourcing.

The Company envisions being the most sustainable Company in the cement industry and draws heavily on Holcim''s sustainability policy on CO: and energy, eco-efficient products, atmospheric emissions, sustainable construction, etc. The strategic stress on environment tally-friendly and cost effective resources resulted in the establishment of the Recycle department to focus on Alternative Fuels and Raw Material (AFR).

In order to optimize the furnaces at 5 of the integrated plants, lo support higher utilization Of lower cost, environment tally-friendly. alternative fuels, Ihe Company has planned investments involving capital expenditure of 7 200 crores. Some work on these am bilious projects has already started.

During SOI2, the Company increased use of

alternative fuels in its kilns From 0.59% in 2011 to M0% in 2012. The company is determined to achieve higher thermal energy substitution rates in the coming years.

a, OUTLOOK

REFORMS WILL RESULT IN ECONOMIC REVIVAL India''s growth story remains attractive in comparison with many developed and developing economies, although the nation''s adverse fiscal deficit and negative current account balance calls for some bold rectification measures from the Government. The Government appears to be focusing on consolidation of the economic recovery through expeditious clearances for the projects, selective disinvestment and accelerating foreign direct investments through policy reforms.

While the impact of some recently announced progressive reforms would reflect only in a year and a half, the Company agrees with experts and expects GDP to grow in £013 at around 6% plus and the cement industry at 7,5 - 8%. This optimism relies On the positive outlook for infrastructure and construction, upcoming state and national elections, improvement in monetary conditions and also possible upturn in investments post the structural reforms. Higher agricultural income, lower interest rates, pre-election welfare and Five Year Plan induced spending by the Government is expected to raise private consumption growth and improve capacity utilization in the economy.

GROWTH PROSPECTS FOR THE CEMENT INDUSTRY Cement demand emanates from four key segments. Namely housing, which accounts for approx 67% of cement demand, infrastructure (13%}. commercial construction (11%) and industrial construction (9%), Economic reforms announced by the Government and RBI. including the expected lowering of i rile re si rates in 2013, will surely boost sentiments and rejuvenate the economy.

The cement industry is looking for an up-cycle after muted growth for the last three years, backed by an increase in rural consumption and the recovery in the infrastructure activity. The recent government measures to fast-track infrastructure projects & with general elections a year away, construction activity is expected to pick up steam, leading lo strong demand for cement.

Long-term growth prospects for cement demand are favorable, riding on the back of a growing economy and the impetus provided lo the busing and infrastructure construction activities in the 12th Five-Year Plan period (2012-17}, The total investment in infrastructure sectors m the Twelfth Five Year Plan is estimated to be Rs. 56 lakh crores (one trillion USD).

Rising input costs, particularly energy, raw material, freight & distribution, will remain a key challenge few the cement industry. Any adverse changes to existing laws/taxes may impact the industry. Land acquisition, environment clearances, inadequate supply of raw materials like limestone, linkage coal & fly ash are likely to hamper expansion plans of many cement companies.

The Company plans to militate such cost escalations through varied measures, including the increased use of alternative fuels and higher production of blended cement. The leadership journey adopted by the company will drive cost efficiency and customer excellence to increase margins. The Company will continuously strive to further strengthen its operational platform to manage cost, remain competitive and create value-addition for stake holders with a long-term perspective.

3. RISKS AND AREAS OF CONCERN

ENERGY COSTS

Coal price escalations, stressed supplies and faltering quality continue to remain a major area of concern. Depleting coal linkages and volatility in the Indian rupee is escalating the cost concern. Tine company constantly works on efficiency improvement by plugging heal loss at every possible stage of Coal consumption, looking af cost effective fuel mixes and increasing the usage of alternative fuels These measures would partly address cost concerns. As a long term solution to energy security, capability development in area of utilization of alternative fuels involving large investments has been taken up under the banner of ''Geo20 Waste

Heat Recovery (WHR) systems that improve fuel utilization, and the tapping of renewable energy sources are lop priorities. Going forward the company realizes the importance of technological innovations and the extensive usage of alternative fuels for the sustainable reduction in energy costs.

A long term solution to the problem resides in the development of alternative fuel (AF) sources, in particular industrial and agricultural waste materials, for which the Company is making huge investments under the banner of Geo20 Waste Heat Recovery (WHR) systems to improve fuel utilization efficiency would help mitigate fuel-associated risks. Renewable energy sources, such as wind and hydro, are being tapped as far as possible to mitigate the high costs associated with traditional energy sources. This is in line with the company''s vision and mission and to fulfill the Renewal Power Obligation (RPO) recently imposed by many stales across India.

ORDER OF THE COMPETITION COMMISSION OF INDIA

On 20th June £012, the Competition Commission of India (CCI) passed an order imposing unprecedented penalties Of more than Rs. 6300 erg res against some cement manufacturers of the country, including the Company, in the matter of a complaint filed by the Builders Association ot India for the alleged contravention of the Competition Law, The penalty imposed on the Company is Rs. 1164 crores. The Company has filed an Appeal before the Competition Appellate Tribunal (COMPAT) against the order and for granting stay against deposit of penalty. The matter is pending before the COM PAT. The management, backed up by a legal opinion from the external legal counsel, strongly believes that the Company has a good case lo succeed before the COMPAT and accordingly, no provision has been made in the books of accounts tor the year 2012. However, the amount of penalty has been considered as contingent liability.

0E-ALLOCATION OF COAL BLOCK The Ministry of Coal allotted a coal block in the State of Maharashtra along with 1ST Steel & Power Ltd and Lafarge India Pvt. Ltd. The block was allotted for the captive consumption of the allotters. A joint venture company was formed for coal mining with the company holding 27-27% of shares. The JV company was in the process of achieving various milestones as per the terms of allocation letter. However, alleging delay in achieving the milestones, the Ministry of Coal passed an Order on 15th November, 2012 de allocating the said coal block and invocation of partial bunk guarantee. The Company immediately filed a writ petition in the Delhi High Court against the said order and the Hon''bie High Court was pleased to pass the stay order on 30th November 2012 against the encashment of hank guarantee The Appeal is pending before Hon''bie High Coud- The Company believes that the progress made by the JV company in achieving the milestones was quite satisfactory. The alleged delay is either misconstrued or is for the reasons beyond the control of the JV company. In view of these facts, the management strongly believes that the Company has a good case to succeed in the writ pending before the Hon''bie High Court.

ECONOMIC SLOWDOWN COUPLED WITH SURPLUS CAPACITY IN INDUSTRY

Implementation of various reforms and macro- economic Initiatives being initiated by Government is important. In the absence of the rejuvenation of the national economy, aspired GDP growth may not be achieved, leading to restricted growth in cement demand- ft is perceived that, in this scenario, demand from infrastructure and commercial reality segments would be constricted- Coupled with capacity additions, the adverse demand supply scenario would continue, leading to pressure on volumes and prices.

The Company, having clear sight of this risk, is weJI equipped to continue the growth plan leveraging and building up on its strong brand equity and channel network in the core retail segment. Marketing and Commercial Excellence [MaCX) would give the desired impetus to achieve excellence and provide a clear mitigation plan.

TAXATION / ADMINISTRATIVE BURDEN

External and internal pressures in the economy, the rising fiscal deficit and falling savings and investment rates are some of the challenges before the Government calling for strict fiscal discipline, rollback of incentive and experimentation with tax laws to mobilize additional sources and improve Tax to GOP ratio. Retrospective tax proposals still haunt investors. Introduction of domestic transfer pricing provisions would necessitate change in the way business is conducted in many areas besides entailing administrative costs.

The much awaited reforms in the field of taxation, i.e. the implementation of Goods and Services Tax [GST) and Direct Tax Code (DTC) are yet to come in. Though the Government has taken steps towards GST by introducing negative list in service tax, aligning provisions for excise and service tax. these have incremental cost impact without corresponding simplification and reduction in the overall administrative burden on the Industry. Thus, the lack of uncertainty on tax policies remains a concern,

10. HUMAN RESOURCES

BUSlNE5S EXCELLENCE THROUGH HR LEADERSHIP Our HR systems and processes are aimed towards making us an employer of choice with sustainable talent. This is in perfect alignment with the company vision of being the most sustainable and competitive company in the industry. Towards this end, there have been constant efforts to ensure a capable talent pipeline

The core of achieving business excellence lies in a dedicated and talented employee base. The first step towards (his is attracting the right talent through our streamlined and structured recruitment process. We have structured systems for performance management and for planning individual development with a vision of creating a wealth of high performance employees. The organization also believes in home-grown talent through various management development programs conducted in association with renowned business schools like IIM, ISB, NMIMS as well as international B-Schools. We are focusing on creating leaders across levels and in the early stages of an employee''s career. The company has recently launched an initiative called "Sustainable Talent for Enhanced Performance" [STEP) to develop a sustainable pool of leaders equipping them with essential leadership skills and competencies and enhancing their coaching skill capacity. Our people are also exposed to the Holcim way of working through leadership development programs through talent movements to various

Holcim operating companies across the globe specially in lha areas of finance, safely, projects, manufacturing and commercial.

We believe that the success and milestones achieved during this year has been possible because Of Our people and robust systems and processes across the organization,

PEOPLE POWER

Over the last couple of years, we have initiated a very important and major Change Management program called "People Power", This comprehensive program has evolved to manage plant performance at each of our locations, as well as to develop a very strong leadership pipeline. We have completed the roll out of this program at 16 locations of the Company and have invested significant time and resources for its I''m pie mutation and to make this a "way of life".

During 2012. we made significant progress to strengthen all four basic pillars Of this program vie:

- Organization Structure and Manning

- Performance Management

* Technical Model and Capability Building

* Cultural Change and Sustainability

This program will make the Company a Continuously Improving Organization in a true sense. As a part of this program, we have set up a People Power Academy at different plant locations and have introduced the Academy White Paper and the Academy Certification Program to ensure we get best quality people and offer them a visible career progression towards future leadership. This has now been embedded into our formal HR systems. Like any change management program, there are still tots of challenges that remain to be addressed lo main lain the level of energy and commitment of our people and to this end, we have developed a comprehensive and objective oriented ''People Power Excellence Index". The index comprises of more than 50 Indicators that give a fair idea of where each location stands in terms of sustaining The People Power momentum and what specific actions are required to excel further.

We have also set up a dedicated PMO (Program Management Organization) at the corporate office for driving this change management program. Specific focus is given to capability-building through various customized programs. We have pull In place 7 community practices to replicate proven ideas with the help of plant champions. Conscious efforts are being made on unit-specific cultural aspects to build on their strengths and improve development areas,

We are confident that this program which continue to contribute very significantly to realize our vision "lo he the most sustainable and competitive Company in our industry",

11, SUSTAINABILITY AND ENVIRONMENT

NURTURING SUSTA1NABIUTY AT THE CORE OF THE COMPANY We renewed our commitment to sustainable development by revising our vision to be the most sustainable and com pet I live company in our industry. We continued to pursue our sustainability goals under the overarching ''Sustainability Policy'', In addition we initiated the implementation of Sustainable Procurement Guidelines aimed at our supply chain. This is aligned to the Holmic Supplier Code of Conduct.

To embed sustainability as a strategic factor in our framework, Sustainability Steering Committees were constituted last year. These have continued to assess sultana bilgy risks and opportunities both at the until and corporate level, and monitor the various sustainability initiatives. The Company''s focus among others is on low carbon growth, being water positive, use of alternative I tie], renewable energy, bio-mass etc. Continuing our participation in the Global Programme of Clean Development Mechanism (CDM) we are currently pursuing two CDM projects on Smokeless Chelas in the Community around our plants and Waste Heat Recovery.

We released our 5th Corporate Sustainable Development Report. Tine report is aligned with Global Reporting Initiative (GRI) G3 guidelines for A Level of reporting, having been ''Assured'' by an independent certifying agency. Additionally this year''s repot has also been GR1 checked.

We continue to focus on developing our renewable

energy portfolio in the with Renewable and Clean Energy Roadmap till £020. We installed 330 KV of Solar energy at Bhatapara, Chhattisgarh I his year, in addition to the existing 7.5 MW of wind emery at Kutch, Gujarat comm. is jinxed last year. A 6-5 MW Waste Heat Recovery based power generation system is being installed which is expected 10 be operational by 2013,

The Company is currently monitoring and reporting COS emissions as per the WBCSD Cement Sustainability Initiative (CSI) protocol. The Company is one ot the Co-chairs of CSI India and has been part of the Working Group on a Low Carbon Technology Road Map to the Indian Cement Industry. The Low Carbon Technology Roadmap report has been released in December Z012.

We attained independent third-party assurance tor our water footprint, it was established [hat we are water positive by a factor of two. Further, we meticulously estimated our carbon footprint that included our all operations, bulk cement terminals, shipping activity, and offices, as well as offsets due to our plantation initiatives for the year £010. This was verified independently by a third party in accordance with the international standard ISO 14064:2006.

In recognition of our endeavors in streamlining Corporate Sustainability within our operations, we have been awarded the CM Sustainability Award in the category of commendation for ''significant achievement'' bettering our previous year''s performance where we were adjudged winners in the category of commendation for ''strong commitment''. Further, we have been rated at Gold Level in the Sustainability Plus rating done by Cll. The 100 largest companies by market cap and market share were rated against ESG Indicators by the Cl! for the Sustainability Pius rating. The rating was done across

3 categories, namely Platinum, Gold and Bronze.

PROACTIVE ENVIRONMENT MANAGEMENT

The Company ensured availability of Continuous Emission Monitoring Systems (CEMS) round the year at all the 9 kiln stacks above 95% for online monitoring of all vital pollution parameters.

Three of our grinding units have attained certifications

to the Energy Management System as per ISO 50001:2011. Our Rabriyawas unit is in the process of implementing the standard. In addition to mapping the energy saved, corresponding greenhouse gas mitigation achieved through this initiative shall also be monitored.

The company has taken steps to ensure it meets its commitments under the PAT scheme and RPO-REC obligations. Further, we are anticipating emission standards to be notified for S02 and NOx emissions. We are taking steps to monitor and control our emissions so that we can meet the requirements of the new standard as and when they are notified.

Most of our panels have done well in the Holcim Plant Environment Profile (REP] annual assessment. While the Company average equaled the Holcim average score in the integrated units, 4 of them scored above the Holcim average. Both individually and Company lever I, all the grinding units have scored above the Holcim average PEP 2011 score.

As in previous years, this year we participated in Carbon Disclosure Project to make our carbon emissions public as per CSI protocols.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

STRENGTHENING COMMUNITIES ACROSS THE COUNTRY Ambuja Cements Ltd. is among very few companies that invest more than 2% of their net profit in CSR, much before the new Companies Bill makes it mandatory for the corporate sector. The Company has clearly identified the community as one of the significant stakeholders, and is keenly interested in responding to their needs in a systematic manner. This guides our efforts in community development.

Ambuja Cement Foundation (ACF), (he CSR arm of the Company, has identified a broad spectrum of development initiatives, addressed macro level issues by stratagems a! the micro lever, and subsequently replicated and scaled-up work, leading to larger impact.

When Ambuja Cements initially began identifying the needs of the communities, water emerged as a prime requirement in Gujarat and Rajasthan -

amongst the most ecologically fragile regions of the country. Gujarat faces the problem of sea water intrusion and ingress; while Rajasthan faces perennial droughts and scarcity of water. Our multi-pronged approach resulted in several projects aimed at I water con Enervation and its effective usage, hath for domestic as well as agricultural purposes. This extensive effort in water resource development over a period of time, has resulted in contributing to the water-positive status of the Company. The scale of work has been possible only due to extensive networking with other development organizations and project-based partnerships with various government departments.

In Gujarat this year, aside from continuing to build and interlink water harvesting structures, promoting micro irrigation and creative awareness on elective utilization of water, ACF, in cob I a boo ration with the Government of Gujarat completed construction of a major check dam at Bhekheshwar to help recharge ground water The Bhekeshwar dam has a water storage capacity of 1.01 MCM.

In Rajasthan, ACFs approach consists of reviving

traditional water harvesting systems tike village ponds, khadins - a system of runoff farming, Innovations like sub-surface dykes on sandy river beds and promoting Roof Rainwater Harvesting Systems (RRWHS) in the region. These methods have had an impact on the drinking water availability as well as the irrigation potential 1o increase the area under cultivation, RRWHS has proved itself as a sustainable solution to address the issue of access to drinking water at the household level. Amajuba Cements, with its sustamability agenda, now has a clear goal for each functional unit to be water positive. ACF is now focusing its efforts on various water resource developments in each location,

Lack of employment opportunities and access to skill up gradation is another complex issue taken up at ACF through its livelihood promotion programs. Water agriculture being a primary occupation tor the majority people around our plants, our C5R activities focus on agro-based livelihood programs which include promotion of System of Rice Intensification (SRI), organic farming, mushroom cultivation, honey collection, horticulture promotion, training programme on scientific and recommended agricultural practices through Krishi Vigyan Kendra at Kodinar. Additionally, in Rajasthan, with the support of Rajasthan State Seed Corporation, a large project on seed production is enabling higher returns for farmers.

By way of promoting weather-based insurance. ACF is also enabling farmers to better manage risk in agriculture crops. Since March £010, ACF has participated in the Better Cotton Initiative, a global project lo makes cotton production sustainable for producers and the environment- the projects now reaches out to over 7000 farmers and about 93% of the participating farmers have qualified as per BCI parameters

To create alternate sources of employment and bridge the gap between required and available skills, ACF''s. 17 Shill and Entrepreneurship Development Institutes (SEDI) have trained over 9000 candidates in over 40 different trades. Systematic study, analyzing local demands for skills and maintaining market and Industry linkages has helped these institutes promote gainful employment with a placement rate of over 75%,

Health and Sanitation are important indicators Tor Human Development Index (HDIJ, and have prime significance in ACF''s efforts in the area of social development. The comprehensive program, evolved over a period of time, places emphasis on clinical, preventive, as well as pro motive healthcare. Across locations, a large team of 312 Sakhis (Village Health Functionaries] play a vital role in ensuring improved access to health facilities for all in the communities. These Sakhis are periodically trained by ACF lo enhance their knowledge, capacities and skills in handling primary healthcare needs all the village level, and working closely with the gram pane hay at and village health and sanitation committees (VHSCs) to improve health and sanitation facilities in the villages. Many of our units have taken measures to link Sakhis with government/government Supported programs. Currently over 115 Sikhism have been absorbed as ASHA workers under NRHM, angina workers or as angina helpers.

We have continued to work on education and prevention of HIV/AIDS with truckers and migrant workers around our plants by providing services such as Still treatment, counseling and awareness sessions,

Ambuja (Vlanovikas Kendra (AMK) al Ropar, is a Centre of special education working for the welfare of persons with autism, cerebral palsy, mental retardation and multiple disabilities Since 1999- The school provides various therapies and programmers'' for children along with a strong emphasis on outdoor games To reach the maximum number of special children in need, this year AMK introduced a ''home- based rehabilitation programme'' under which special educators from the school visit children at home on a weekly basis. This way the school creates access for those children in need of specialized services, but cannot go to school.

After the stellar performance of d of our AMK students in World Special Olympics 2011 held in Greece this year, our athletes won 13 Gold, 07 silver and 02 Bronze medals In athletic events in the Special Olympics Bharat. Punjab Chapter Five students from AMK were adjudged best athletes Of the tournament. AMK also won the "''Overall Championship Trophy" of the tournament and was adjudged the Best Institution tn sports in Punjab for a record 7th year in a row.

STAKEHOLDER ENGAGEMENT

Clearly identifying groups of stakeholders helps the Company to respond lo I heir needs in a focused manner. We Endeavour to evolve active participation of various stakeholders in the process of planning, implementation and monitoring of various programs. We set up a Community Advisory Panel (CAP] al each of our locations. This panel has representatives from the Company as well as from the host com main lies, including the local administration, and is constituted to present the views and opinions of the people and discuss and build consensus on initiatives for the Company to implement jointly with the people in the area.

fn the year 2012. all operational sites reviewed our CSR Through our Social Engagement Scorecard (SES), The exercise provided an opportunity for the community lo review and evaluate ACF''s work. The scorecard result this year has been a rating of 75-100% across locations.

The Abuja Volunteerism Program launched Iasi year provides an opportunity for our employees lo engage and participate In the Company''s social development projects. In 2012 Abuja Cements saw 1695 employees dedicating

I heir services. Their value long efforts amounted to approximately 16.885 hours,

12. OCCUPATIONAL HEALTH AND SAFETY (OH&S)

WORKING TOWARDS "ZERO HARM" FOR OUR PEOPLE We believe QH&S is one of our core values and we strive for "Zero Harm" lo our employees, contractors and visitors.

A review of the Company''s OH&S performance has led to addition of some key action areas and a further re iteration of the earlier objectives. The key to us areas are:

t) Increase visible leadership in OH&S by the Front Line Management. Apart from the annual OH45 targets, each operational plant undertook one additional initiative based on the Fatality Prevention Element (FPE) of Ambuja Cement.

2) Fatality Prevention Elements include working at heights, isolation and lockout, vehicle and traffic safety. These were Implemented across our sites with a target of 40-60%. The quality of implementation was assessed through an external certifying agency.

3) A formal OH&S management system, aligned with the Holcim OH&S Pyramid System and other directives, has been established over the past few years across the organization. All sites were assessed for implementation of the Holmic GH&S Pyramid System through an external certifying agency. The scores from the OH&S pyramid assessment were excellent and a clear demonstration of the implementation of an integrated OH£S management system in our operations.

4) Each of our plants has taken steps to ensure there is no reoccurrence of fatal incidents within the organization, on the basis of investigation reports. A similar initiative was also undertaken for fatalities reported within ACL since 1st January 2008, potential fatalities reported within ACL and fatalities reported within Holmic World Since 1st January 2012.

5) To reduce Risk Exposure through the application of the QH&S Management system, the following actions were Initiated:

'' An interface between ACL QH&S Management system. Maintenance Cement (MAC) and the integration of Alternative Fuel A Raw Materials (AFR) OH&S (ACerl requirements) in the ACL OH&S management system was established.

* A road map was developed for the implementation of OH&S directive for the Contractor Safety Management System (CSM). Implementation of CSM was initiated among the high-risk category of contractors.

A process was Initiated tor the integration of QH&S requirements during the planning and elution of a shutdown by applying the ACL OH&S management system. Risk assessments were conducted for all activities during the shutdown,

6) We established risk-specific and competency- based training as per the requirements of the targeted Fatality Prevention Elements and other OH&S directives.

The Company is committed to reduce OH&S risks through continuous efforts and the integration of Obis requirements with other business processes. It makes us proud that two of our integrated plants - Rabriya was and MCW have received National safety awards and FICCI Gold respectively, in recognition of their safety performance.

13. EMPLOYEE STOCK OPTION SCHEME

During the year, the Company has not granted any fresh stock option to its employees.

CUMULATIVE DISCLOSURE

The particulars as on 31st December, 2012 as required to be disclosed pursuant to Clause 12 of SEBF (Employees Stock Option Scheme) Guidelines 1999, in respect of past ESOS are as follows:

CUMULATIVE POSITION AS ON 31ST DECEMBER, 2012:

Nature of disclosure Particulars

a. Options granted 37776300

b. The pricing formula 2007 to 20l0

The exercise price was determined by averaging the daily closing price of the Company''s equity shares during 1 [seven) days on I he National Stock Exchange immediately preceding (the grant

2004-05 & 2006-06

The exercise price was determined by averaging the daily closing price of the Company''s equity shares during is (fifteen) days on the National Stock Exchange immediately preceding the grant

2003-2004

The exercise price was deemed by averaging two weeks'' Hogtie and Low price of the Company''s equity shares on the National Stock Exchange immediately preceding the grant

1999 2000 to 2002-2003

The exercise price was tile Average of the daily closing price of equity shares of I he Company on the Slosh Exchange. Mutual during the period of 30 (Intertie) days immediately preceding the dale on which the options were granted

c. Options vested 32045925

d. Options exercised 22630900

e. The total number of Shares prizing as result Total number of Shares arising as a result of exercise of Options shall of exercise of options be 44041507 shares of Rs.2 each

f. Options lapsed/ surrendered 4030075

g. Variation of terms of option -

h. Money realized by exercised option Rs,303.91 crores

i Total number of option in force 10165025

j (i) Details of options granted/ exercised No. of options granted No. of options exercised

by the former Managing Director and the former Whole- time Directors

32.85.000 26,00,000

ii) Any other employee who received a grant NIL NIL In any one year of 5% or more of option granted during that year

k. Employees who were granted options NIL during any one year, equal to or exceeding 1% of the issued capital of the Company all the time of grant

I Diluted earning prestart (EPS) pursuant to issue shards on exercise of options ealeulted In accordance with Accounting Standard AS-20

2003- 04 2004- 05 2005- 00 2007 2003 2009 2010

m. Weighted average exerts price of options in 310* 443* 69.60 13 62 96 119 Weighted average ** ** ** ** ** fair value of options in 67.44 96.73 19,23 29.28 16.95 26.36 39,37 * * ** ** ** ** **

14. CORPORATE GOVERNANCE

The company has complied with the corporate Governance requirements as stipulated under the listing agreement with the stock exchanges. A separate section on corporate governance, along with a certificate from the auditors confirming the compliance, is annexed and forms part of Ihe Annual Report,

CORPORATE GOVERNANCE VOLUNTARY GUIDELINES:

The majority of the Corporate Governance Voluntary Guidelines, 20Q9. stand complied while complying with the requirements under the Companies Act. 1956, the Listing Agreement, and the Company''s own governance policies.

15. BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report for the year ended 31st December, 2012 as stipulated under clause 55 of the Listing Agreement is annexed and forms part of the Annual Report

16. INTERNAL CONTROL SYSTEM

The Company has documented robust and comprehensive internal control systems for all the major processes to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations, safeguarding of assess and economical and efficient use of resources.

The formalized systems of control facilitate effective compliance as per Clause 49 of the Listing Agreement, and article 728 {a) of the Swiss Code of Obligations applicable to the Holcim Group from 2008,

[The Company''s internal Audit department tests, objectively and independently, the design and operating effectiveness of the internal control systems to provide a credible assurance about their adequacy and effectiveness to the Board and the Audit Committee. The internal Audit function assesses the effectiveness of controls to provide an objective and independent opinion on the overall governance processes within the company, including the application of a systematic risk management framework.

The scope and authority of the Intimae Audit activity are well defined in the Internal Audit Charter, approved by the Audit Committee, Internal Audit plays a key role by providing an assurance to the Board of Directors and value adding consultancy service to the business operations.

17. MANAGING THE RISKS OF FRAUD, CORRUPTION AND UNETHICAL BUSINESS PRACTICES

Fraud and corruption-free work culture has been the part of the Company''s ONA all along. In view of the potential risk of fraud and corruption due to rapid growth and geographical spread of the operations, the Company has put even greater emphasis to address this risk. To meet this objective a comprehensive Fraud Risk Management Policy (FRMP) has been laid down. More details on FRMP have been given in the Corporate Governance Report.

In furtherance to the Company''s philosophy of conducting business in a honest, transparent and ethical manner, the Board has laid down the Anti- Bribery and Corruption Directives (ABCD) as part Of the Company''s Code of Business Conduct and Ethics, As a Company, we lake a ;erectile range approach to bribery and corruption and we are committed to acting professionally and fairly in all our business dealings.

To spread awareness about the Company''s commitment to do its business professionally, fairly and free from bribery and corruption, training and awareness workshops are conducted through an Independent consulting firm for all the relevant employees of the Company.

These policies and their implementation are closely monitored by the Audit and the Compliance Committees of Directors and reviewed by the Board from time to lime.

18. DIRECTORS retirement at rotation

In accordance with the provisions of Artifice 147 of the Articles of Association of the company, (i) Mr. M.L Bhakla (ii) Mr. Naresh Chandra and (iii) Mr. One van deer Weirder will retire by rotation at the ensuing Annual General Meeting of the Company.

(i) Mr, M L Bhakta,

Mr. Bhakla will retire at the ensuing Annual General Meeting of the Company. Mr Bhakta has conveyed that he does not intend to seek re-election and will reline upon completion of his term at the ensuing Annual General Meeting.

Mr. IYI.L. Bhakta joined the Board in September, 1935. He was amongst the first Non-exec utile Independent Directors on the Company''s Board, much before the Term Independent Director became common in the Indian corporate sector. Over I lie tats two-and-a-huff decades, Mr. Bhakta played an active role by providing expert advice and guidance to the Board and its committees on issues ranging from legal, taxation, governance etc.

(it) Mr, Naresh Chandra

Mr. Chandra will retire at the ensuing Annual General M eel mg of the Company. Mr, Chandra has conveyed that he does not intend to seek reflection and will retire upon completion of his term at the ensuing Annual General Meeting, Mr, Naresh Chandra joined the Company''s Board in July, 3003 and during this period he guided the Board and its committees on the issues of governance, compliance, health and safety, etc.

The Board placed on record its appreciation for the valuable services rendered by Mr, M.L Bhakta and Mr. Naresh Chandra.

In terms of Section 256(4) of the Companies Act, 1956. the vacancies created by the retirement Of Mr. M.L Bhakta and Mr. Naresh Chandra shall no! be filled and a resolution to that effect is proposed for the approval Pf the Members at the ensuing Annual General Meeting.

(lit) Mr. One vender Weirder will retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his appointment.

APPOINTMENT

Mr, Haig re ve Khaitan and Mr. 8.L Tapana have been appointed as Additional Directors under; Section 260 of the Companies Act, 1956 to hold office up to the date of ensuing Annual General Meeting and being eligible, has offered themselves for appointment.

(i Mr. Haigreve Khaitan

Mr. Khaitan. aged 42 years is a Law graduate and is a partner of Khaitan 4 Cos Mumbai office. He heads Khaitan & Co''s Mergers £ Acquisition (M&A) practice and over the years he has successfully handled many M&A, private equity and project finance transactions. He has published books and articles on foreign investments and arbitrations and has been a distinguished speaker at various conferences. He is also affiliated with various Bar Councils and Law Institutes of India and abroad. He has been appointed as Non-executive Independent Director on the Board of the Company w.e,f. 27th July, 2012.

(ii) Mr. B.L. Taparia

Mr. Taparia. aged 62 years is Commerce and Law graduate and a fellow member of the Institute of Company Secretaries of India, He has over 40 years of experience in the fields of Legal. Secretarial, Finance and Accounts, Commercial, Corporate Strategies, HR, Health and Safely. CSR, Sustainability, etc. He joined the Company in the year 1905 as a Deputy Company Secretary and after working at different positions, he was appointed as Whole-time Director in the year 1999, where he served till the year 2009 After stepping down from the Board, Mr. Taparia continued on the Executive Committee as a Legal Head, Company Secretary and Head of some key corporate functions. He superannuated from the Company in July, 2012. Considering his vast knowledge and experience and expertise in handling critical functions, he was appointed as Non-executive Director on the Board of the Company w.e,f, 1st September, 2012.

The board of directors recommends their appointment. Further details about these Directors are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report,

19, DIRECTORS''RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies Act, 1056 as amended, the Directors confirm that; i} In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures.

ii) Appropriate accounting policies have been selected and applied consistently, except (or the change in accounting policies stated in notes to the accounts and judgments and estimates made are reasonable and prudent, so as to give a true and fair view of the slate of affairs of the Company as on 31st December 2012, and of the statement of profit £ loss and cash flow of the company for the period ended 31st December, 2012.

iii) 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,

iv) The annual accounts have been prepared on a going concern basis,

20. AUDITORS

STATUTORY AUDITORS

M/s S. R. Balboa & Co. Statutory Auditors, will retire at the ensuing Annual General Meeting and are eligible for re-appointment. M/s S. R. Ballyhoo 4 Co. have confirmed that their re-apartment, if made, shall be within the limits specified under Section 24(10) of the Companies Aprilr 1956.

The Board recommends their re-appointment as Statutory Auditors and to fix their remuneration.

COST AUDITORS AND COST AUDIT REPORT

Pursuant to section 233S(2} of the Companies Act 1956. the Board of Directors on the recommendation of the Audit Committee appointed M/s. PM. Na nab hoy & Co. Cost Accountants, as the Cost Auditors of the Company for the Financial Year 2013. M/s. PM, Na nab hoi & Co. have confirmed that their appointment is within the limits of the Section 224 (18) of the Com pan res Act. 1956 and have also certified that they are free from any disqualifications specified under Section 233B(5) read with Section 224 sub-sect ion (3) or sub-sect ion {4} of Section 225 of the Companies Act 1956

The Audit Committee has also received a certificate from the Cost Auditor certifying Their independence and arm''s length relationship with the Company. Pursuant to Cost Audit (Report) Rules 200T, the Cost Audit Report for the financial year 2012 was filed on 27th December, 2012 vide SRN No. S19608567 on the Ministry of Corporate Affairs website,

21. TRANSFER TO JNVESTOR Education AND PROTECTION FUND

The Company has transferred a sum al 59 50 laces during the financial year 2012 lo the Investor Education and Protection Fund established by the Central Government, in compliance with Section 205C of the Companies Act, 1956, The said amount represents unclaimed dividends which were lying with the Company for a period Of 7 years from Their respective due dates of payment. Prior lo transferring the aforesaid sum. the Company has sent reminders to the shareholders for submitting their claims for unclaimed dividend.

22. ENERGY, TECHNOLOGY AND


Dec 31, 2010

We are pleased to present the Annual Report of the Company for the year 2010.

1. FINANCIAL RESULTS 2010

As a result of volatile market conditions in the second half, the companys operating results were lower than the previous year.

FINANCIAL RESULTS

(Rs. In Crores)

Stand Alone Consolidated Current Year Previous Year Current Year Previous Year 31.12.2010 31.12.2009 31.12.2010 31.12.2009

Sales (net of excise duty) 7390.21 7076.87 7390.21 7076.87

Profit before interest and Depreciation 2071.22 2122.72 2070.60 2121.48

Less: Interest 48.69 22.43 48.69 22.43

Gross profit 2022.53 2100.29 2021.91 2099.05

Less: Depreciation 387.19 296.99 387.21 297.28

Profit before Tax and Exceptional Items 1635.34 1803.30 1634.70 1801.77

Exceptional Items 26.53 - 26.53 -

Profit before Tax 1661.87 1803.30 1661.23 1801.77

Provision for Tax 398.26 584.93 398.26 584.93

Profit after Tax 1263.61 1218.37 1262.97 1216.84

Add: Balance brought forward from previous year 349.23 358.58 664.96 675.84

Profit available for appropriation 1612.84 1576.95 1927.93 1892.68 Appropriations:

Debenture Redemption Reserve(Net) 25.00 - 25.00 -

General Reserve 850.00 800.00 850.00 800.00

Dividend on Equity Shares (including interim) 397.22 365.59 397.22 365.59

Corporate Dividend Tax 65.27 62.13 65.27 62.13

1287.49 1227.72 1287.49 1227.72

Balance carried forward 325.35 349.23 640.44 664.96

1612.84 1576.95 1927.93 1892.68

4. DIVIDEND

The company has paid an interim dividend of 60% (Rs.1.20 per share) during the year. The directors are pleased to recommend a final dividend of 70% (Rs.1.40 per share). Thus the aggregate dividend for the year 2010 works out to 130% (Rs.2.60 per share), and the total payout will be Rs. 462 crore, including dividend distribution tax of Rs. 65 crore. This represents a payout ratio of 37%.

5. MARKET DEVELOPMENTS

India witnessed cement demand growth of 6% in 2010, the slowest growth since 2004. In comparison, the Companys domestic cement sales grew 8.3%, to 19.5 million tonnes as against 18.0 million tonnes in 2009. Total sales including exports increased 6.4%, to 20.0 million tonnes compared to 18.8 million tonnes in 2009.

The Company maintained its strong position of approximately 16.5% market share in its primary markets, and around 10% on an all-India basis. The year saw significant industry capacity additions, totalling approximately 30 million tonnes, following 60 million tonnes already added during the previous two years. The impact of this surplus capacity, together with tepid demand in the second half of 2010, exerted considerable pressure on cement prices.

The Company has built a large network of over 7,500 dealers and 20,000 retailers across 18 states in India. Its reach and penetration helps the Company to manage the last mile delivery across our relevant markets, and gives us a strong position in our core rural and semi-urban markets.

Along with strong brand equity, Ambuja has evolved a unique model of channel management, based on values of trust and relationships. The strong bond between the dealer network and the Company has helped Ambuja to withstand severe competition for more than two decades. With the added support of Holcims rich experience of operating in 70 countries, Ambuja has now added sophisticated IT tools and global channel management tools to its traditional Indian model. This has enhanced our capability to face the stiff competition resulting from a scenario of substantial oversupply.

Holcims global experience has also helped Ambuja in fine tuning its product quality management, by introducing best practices from other countries. It has helped in enhancing the overall marketing mix, clearly targeted at the retail market in rural and semi-urban sectors, and the large buyers in the metros and mega cities.

The Companys network of port, bulk terminals, and bulk cement ships, on the West coast has supported a sustainable strong market position in Mumbai, Surat, and now Cochin.

All India

Demand analysis for all India is given below:

Fig.in mil. tonnes

All-India Demand 2009 2010 Growth %

Domestic 192.5 204.0 6.0

Export 2.7 2.1 -21.0

Total – India 195.2 206.1 5.6

Domestic cement demand grew at 9.3% CAGR in the last 5 years. In 2010, the domestic demand growth was 6%. However, exports reduced by 21% as international demand as well as prices continued to remain at low levels.

Northern Region

Demand analysis for the North Region is given below:

Fig.in mil. tonnes

North * 2009 2010 Growth %

Aggregate Demand 38.0 38.7 1.8

Ambujas 6.6 6.8 3.0

Volume

Ambujas Share (%) 17.5 17.6

* (excluding Uttar Pradesh)

Cement market growth in North is showing 8.5% CAGR over the last 5 years. The demand in 2010 grew by 1.8%, primarily due to reduction in the NCR region as a result of completion of Commonwealth Games construction activity. Ambuja continues to hold substantial market share in Punjab, Himachal Pradesh and Jammu & Kashmir. Meanwhile we have further increased sales in Uttaranchal and Delhi. Regional market share was marginally improved.

Eastern Region

Demand analysis for the East Region is given below:

Fig.in mil. tonnes

East * 2009 2010 Growth %

Aggregate Demand 32.2 36.4 13.0

Ambujas Volume 3.2 3.7 15.6

Ambujas Share (%) 9.9 10.2

* Above figs are exclusive of North East except Assam & Bihar Cement demand has grown at 10.1% CAGR over the last 5 years. The industry has grown by 13% in 2010 on YoY basis. Ambuja performed well, recording 15.6% increase in dispatches, and thereby increasing regional market share. The Farakka grinding plant performed at full capacity. We could also further expand our footprints in Jharkhand, Orissa and Bihar. Additionally, clinker sales of 0.28 million tonnes were realised, as a result of the fast ramp-up of production from the newly commissioned kiln at Bhatapara.

West / South Region

Demand analysis for the West / South Region is given below:

Fig.in mil. tonnes

West 2009 2010 Growth %

Aggregate Demand 36.2 39.9 9.9

Ambujas Volume 7.0 7.5 7.1

Ambujas Share (%) 19.4 18.8

Cement demand has grown at 9.7% CAGR over the last 5 years, and 9.9% in 2010 compared to last year. There was a further drop in exports of cement and clinker from the region. Despite the diversion of export volumes into the domestic market, our regional market share declined slightly. 6. PRODUCTION & COST DEVELOPMENTS Production Volumes

Clinker production was 23.4% higher than in 2009, following the commissioning of the two new kiln lines. It was still necessary to purchase around 0.36 million tonnes of clinker, mainly in the first quarter, but this was substantially lower than the 1.7 million tonnes purchased in 2009.

Total cement production increased by 6.9% compared to 2009, from 18.8 to 20.1 million tonnes. Plant utilisation levels on average remained above 80% during the year with the exception of the new plants which were in the ramp-up phase. The Company continued to focus on production of fly ash based PPC, and maintained an average blending ratio of approximately 1.43.

Major Costs

Total raw material costs were reduced significantly (Rs. 368 crore) compared to the previous year, as a result of substituting own produced clinker for purchased clinker to a large extent. However, the costs of other raw materials, principally fly ash and gypsum, including transportation costs, showed an increasing trend.

Fuel and power costs also increased in 2010, largely as a result of steadily rising international coal and freight prices. A lower percentage of the Companys total coal requirements could be satisfied through linkages compared to the previous year, therefore it was necessary to procure greater quantities of imported and e-auction coal. Even where linkage coal was available, deterioration in quality has increasingly become an issue, necessitating blending of linkage coal with higher quality imported coal.

Partially compensating for higher fuel prices, de- bottlenecking initiatives at plants began to bear fruit in terms of improved energy consumption, with the average consumption rate reducing from 757 kcal per kg of clinker in 2009, to 750 kcal per kg in 2010. Some further progress was also made in developing the alternative fuels and raw materials (AFR) business, in order to reduce dependence on coal in the future, as well as improve environmental performance.

Captive power generation capacity increased to more than 400 MW, with which around 80% of current power plant requirements are satisfied. Average power consumption further improved in 2010, from 83.6 kWh to 82.7 kWh per tonne of cement produced, as a result of continuous improvement in grinding process efficiency.

Freight forwarding costs increased by 12% in absolute terms, and freight on cement despatches increased by 5% on per tonne basis. Partial liberalisation of fuel prices during 2010 led to increases in diesel costs, and average lead distance increased as sales were expanded into new markets. In addition there was a further shift away from exports, sold on FOB basis, to domestic sales. The cost of packing materials also went up during 2010, as PP granule prices increased in line with global oil prices.

7. EXPANSION PROJECTS

During the first quarter of 2010, commercial production commenced at two new 2.2 million tonne clinker production lines, at Bhatapara (Chattisgarh) and Rauri (HP), as well as two new 1.5 million tonne cement grinding facilities, at Dadri (UP) and Nalagarh (HP). In addition, a 33 MW captive power unit was commissioned at Bhatapara. Following completion of these projects, which cost approximately Rs. 2,700 crores, the Company can further strengthen its competitive position in the northern and eastern markets.

In the western region, an additional 30 MW captive power unit was commissioned during the year at Ambujanagar (Gujarat). This brings total Company captive power capacity to more than 400 MW. Also in Gujarat, a wind power project is currently under implementation, the first investment by the Company into renewable energy sources.

In the area of logistics, one of three new ships for western coastal transportation was delivered in 2010, with the remaining two expected to be brought into service during 2011 bringing the total fleet size to ten. A number of projects to improve efficiency of logistics operations, including rail connectivity at various locations, are also currently in progress.

Further cement grinding capacity additions totalling around 2 million tonnes are under construction, at the Bhatapara (CG) and Maratha (MH) units. These are scheduled for completion in early 2011, and will take the Companys installed cement capacity to approximately 27 million tonnes.

All the expansion projects have been financed entirely with internal accruals.

In October 2010 it was announced that the Company had signed an agreement with the Rajasthan State Industrial Development and Investment Corporation, to set up a 2.2 million tonne clinkerisation unit in Nagaur district. Pre-project planning is at an advanced stage and construction is expected to start around middle of 2011. This project will support the Company objective of maintaining long term market share at around 10 per cent.

8. OUTLOOK

Structural reforms still needed

The economy is poised to enter an era of sustained growth, and it is widely expected that average GDP growth can be maintained in the range of 8% to 9% in the coming years. Domestic demand as well as both public and private investment will continue to support that growth: an increasing number of young middle class households will have increased capacity for discretionary spending, and the housing sector will be a major beneficiary.

Nevertheless a number of policy challenges remain, which must be tackled in order for the economy to realise its full potential. Government initiatives are needed, to implement structural reforms in infrastructure, agriculture, and education, and attract more private investment into these areas. In the short term, inflation continues to pose a serious threat and it will be a major challenge to tame inflation without harming growth prospects.

Period of adjustment for cement industry

The longer term outlook for the cement industry remains very positive. On one hand the government has ambitious plans for infrastructure investment, looking to accelerate spending to USD 1 trillion in the next five year plan period. On the other hand, sustained high growth should bring a significant increase in the demand for housing and commercial structures.

While these developments augur well for long term cement demand, in the short term the demand-supply imbalance as a result of the significant recent capacity additions is likely to widen further. Effective supply is expected to increase by approximately 30 million tonnes in the coming year, while demand may increase by around 20 million tonnes. Industry capacity utilisation will consequently remain relatively low for some time, and temporary pricing pressures will continue to surface from time to time, and across almost all regions.

Meanwhile, the upward trend in input costs shows no sign of abatement, and Coal India has a stated objective to bring coal prices in line with international prices, although there is no clear timeframe for this.

Ambuja Cement is well positioned, following the commissioning of its new capacities, and with the strength of its brand and focused distribution channels, to consolidate its position as one of the most competitive and profitable players in the industry. 9. RISKS AND AREAS OF CONCERN Energy Costs

Notwithstanding initiatives to reduce the dependence on coal, it will remain the most important cost element for the cement industry for some time yet. Availability of linkage coal is therefore an important cost driver, and every effort is being made to maximise the quantity of linkage coal supplied. Measures have also been implemented with a view to improve the quality of coal received. Development of our allocated captive coal block is progressing, but will still take some time before it is operational. Further opportunities to acquire captive fuel sources are continually being explored.

From a longer term perspective, it is important to continue developing AFR sources, in particular industrial and agricultural waste materials, and we are investing significant amounts to develop this business model. Renewable energy sources for power, such as wind and hydro, also become increasingly important as well as economically viable, and the Company recently started implementation of its first wind power project in Gujarat.

Logistics Infrastructure

Availability of adequate logistics infrastructure is just as critical for future success as building clinker and cement plants. Implementation of the ambitious plans for public road and highway construction, expansion of rail networks and rolling stock, port improvements, etc, will be vital to ensure the cost efficient – as well as safe – movement of materials between cement plants, customers, and suppliers. There have been several examples in the past year of shortages of rail wagons causing bottlenecks in the supply chain. Recognising the importance of this, the Company is also investing in several projects to improve its own logistics infrastructure, in particular rail connectivity of our plants.

Competitive Environment

The developments in the second half of 2010, following the unexpected slowdown in demand growth, demonstrated how quickly the competitive environment can change, and how volatile the market can become, particularly in a scenario of excess supply. Assuming that demand growth can recover fairly soon, in line with GDP resuming steady growth of 8.5% to 9%, the supply overhang can potentially be absorbed relatively quickly. Infrastructure spending moving to a new higher trajectory would certainly help sustain a double-digit cement demand growth rate.

On the other hand, should there be a period of sustained low demand growth, this could lead to further volatility and pricing pressures, especially in the more fragmented markets such as South region. In addition, a disproportionate quantity of the new capacities in the pipeline is being added by smaller regional and / or new players, which could further increase the possibility of future market instability.

Talent Crunch

The projected rate of growth for the cement industry in coming years will require a constant stream of new skilled workers as well as managerial talent. Skill shortages have been developing for several years, and have become an issue for most sectors of the economy. Structural and policy reforms are needed, in order to improve the quality of education and skill development, and promote vocational training. This will be critical to the successful exploitation of the countrys potential demographic advantages.

In order to mitigate the risk of skill shortages and maintain its competitive position, the Company endeavours to attract, develop and retain talented individuals by ensuring a continuous inflow of bright campus graduates; skills- based trainings and structured employee engagement initiatives. Establishing a systematic approach to management and leadership development, in particular through its People Power initiative helps in creation of a pipeline for future leaders and will play an important role in supporting the achievement of the Companys business objectives.

Taxation / Administrative burden

As expected, the reduction in excise duties introduced as part of the 2008 stimulus package was partially rolled back in the 2010 Union budget, and had an impact on cement realisations. Further roll-back of stimulus measures could prove damaging for the industry during what already promises to be a challenging period.

Cement in India continues to be more highly taxed than anywhere else in the world. In addition, the system is very complex and places a heavy administrative and compliance burden on companies. The implementation of GST and the new direct tax code (DTC), hopefully in 2012, should bring much needed simplification making it easier to do business, as well as a reduction in the overall administrative burden on the industry.

10. HUMAN RESOURCES

Talent Management a priority

An extensive job study has helped establish a well defined organisation structure and an appreciation of roles at different levels. This framework forms the basis of a structured talent management system, including people development, career pathing, succession management, and reward management. Since changes in business requirements and technology require changes in business processes, there is an ongoing effort to implement the most effective organisation structure leading to enhanced manpower productivity. Linkage has been drawn from the People Power project to ensure uniformity across all locations.

Succession management for critical roles has its genesis in a structured talent review at different management levels, leading to creation and implementation of individual development plans. Planned interventions for leadership development in general management and leadership competencies serves as an efficient leadership pipeline. Leadership development starts at lower levels of frontline management and extends to senior management levels. Functional expertise development is being planned at individual and team levels through competency mapping and development. Expansion and greenfield projects, expanding markets, and new cross functional initiatives, serve as holistic avenues for individual development. Overseas learning trips and short term overseas assignments have provided exposure to international best practices that have been customised to our operational requirements.

Engagement levels of our employees are recognised by the Company as a leading indicator for Company growth, profitability and efficient operations. Towards this end, an objective mechanism is in place for measuring employee engagement. Organisation Development interventions, designed to enhance employee engagement, are being implemented at several levels, including the plant teams. A structured mechanism monitors action plans and implementation progress.

Rolling out People Power

The successful implementation of the People Power initiative at Ambujanagar has, through improved maintenance practices, resulted in significant improvement in meantime between failures (MTBF) in kilns, raw mills, and cement mills. Electricity and thermal energy consumption have reduced and equipment availability has improved. In 2010 the People Power project was launched at the Bhatapara and Maratha plants, and during 2011 it will be replicated at the remaining plants.

The roll-out at all locations would result in standardisation of organisation structures across Units, institutionalisation of the Academy concept, and creation of leadership positions at lower levels. This would also provide an opportunity to integrate technical training at plants with the Academy.

The People Power roll-out has specific quantifiable KPIs in terms of attaining sustainable manufacturing excellence; competitive plants, EBITDA gain through efficiency improvement, and enhanced productivity and development of the leadership pipeline.

11. SUSTAINABLE DEVELOPMENT

The major thrust in 2010 was to provide renewed impetus on the process of sustainability in our overall business planning and strategy. Faculty members of Harvard Business School (HBS) were engaged for a detailed assessment of our initiatives in this sphere, and have provided certain recommendations to improve our working in this area.

We have simultaneously worked out a strategy and framework to undertake endeavours in a more structured, systematic, integrated and coordinated manner to achieve our goal of corporate sustainability. To achieve this objective, the earlier formed Sustainable Development Steering Committee (SDSC) has been re-constituted as Corporate Sustainability Steering Committee (CSSC) with a clear mandate and programme of implementation. This committee has been entrusted with the assessment of upcoming risks and opportunities in the business, social, and environment, fields. The whole gamut of issues dealing with environment, community development, resource optimisation, Alternative Fuels and Raw materials, energy etc, are part of the mandate for this committee. The decisions will be adopted and implemented by units through Unit Sustainability Steering Committees. The risks and opportunities arising from latest legislation and regulations in environment, labour, etc. are also included. As a leadership commitment we are updating our CSR, climate change, and green procurement policies, and decided to have an over-arching Sustainability Policy.

We have released our third Corporate Sustainable Development Report in October 2010. It is based on the Global Reporting Initiative (GRI) G3 format.

Proactive Environment Management

Moving ahead fulfilling our targets for the year, we have proactively commissioned Continuous Emission Monitoring Systems (CEMS) at 7 out of 9 kiln stacks so far. These systems monitor all vital emissions from our operations online. We have also commissioned Continuous Ambient Air Quality Monitoring Stations at 5 plants, for keeping track of our fugitive emissions.

In 2010, 50 solar street lights were commissioned at Roorkee (UT), a further 22 at Dadri (UP), and 15 at Farakka (WB), in addition to the previous years installations at Ambujanagar, Bhatapara and Bhatinda. This is in line with the target of installing solar street lights at all our plants.

Special type of dust suppression system has been installed at Maratha, in the open coal storage area, which will be used for fire fighting, besides dust suppression.

At Rauri (HP) plant, 6 telescopic chutes were installed at the clinker loading point, a technique to reduce dust generated during loading of clinker in trucks. Rubber curtains are also attached with this telescopic chute, for dust minimisation.

Sankrail (WB) is our first unit to be certified for SA 8000, which is based on adherence to international human rights norms and national labour laws, to protect and empower all personnel within a companys scope of control and influence. It also includes the Companys suppliers and sub-contractors.

Zero discharge-based Effluent Treatment Plant has been installed at Ropar plant with a capacity of 517 m3 per day, and its treated water is re-circulated for cooling.

Water treatment unit with a capacity of 9000 litres has been set up at Surat (Gujarat) in order to reduce water consumption. Waste bath water is re-used for the plantation. Rain water harvesting structure with storage capacity of 2600 m3 is provided, and construction for another such structure with capacity of 4500 m3 is in progress at Nalagarh (HP).

Management Systems

Environment Management System (ISO 14001) is established at most of our plants. Currently all 5 integrated plants and 7 out of 8 grinding units are certified to ISO 14001. In a path breaking effort, the Dadri grinding unit has been certified for Integrated Management Systems including ISO 14001, ISO 9001, OHSAS 18001, within its first year of operation.

Co-processing: Solutions for waste disposal

A modern AFR laboratory has been set up at Ambujanagar for determining the physico-chemical characteristics of wastes to be used for co-processing. This is done to gain better control over legal aspects and stipulating the internal technical specifications and benchmarks, environmental monitoring, and heavy metals and organic analysis. Each month 100 to 150 samples from all the locations are analysed.

Extending our steps further, paint sludge, a hazardous waste from the automobile industry, is being co-processed at Rabriyawas (RJ). The wastes added for co-processing in 2010 are: FMCG waste, liquid waste mix, gelatin waste, and mill scales, in addition to TDI tar, shredded tyres, glycerin foot, groundnut husk, cotton stalk, FO sludge etc. which were earlier being processed.

Voluntary Reporting

Ambuja Cement is proud to be amongst the top 10 companies qualifying for first Carbon Disclosure Leadership Index, India (CDLI), 2010. This leadership index has been prepared by the Carbon Disclosure Project (CDP) of WWF and CII, India. Ambuja is one of the few companies in India reporting GHG emissions through CDP, which today holds the largest database of primary corporate climate change information in the world.

CORPORATE SOCIAL RESPONSIBILTY (CSR)

Ambuja Cement has consistently demonstrated its commitment to have positive and meaningful relations with communities around the Companys plants. They are a large and significant stakeholder group, and our excellent relations with them is one of our strengths. This approach is integrated in our core values and business ethics.

Ambuja Cement Foundation (ACF), the CSR arm of the Company, works with community stakeholders, balancing their expectations and concerns with our business needs.

Our strong relations with the community are built and strengthened on the basis of mutual respect and trust. Initiatives in natural resource management, agro and skill- based livelihood, health and education, begin with careful assessment of their impact on society, company and the environment, and involve stakeholder participation. This year too, the Foundation also strengthened and forged new partnerships with local community-based organisations, the government, and other NGOs at the local, state, national and international level.

Innovations in Natural Resource Management

Salinity ingress, or the seepage of saline sea water into land-based water resources, is a major issue along the coastline of Gujarat. ACF has been working in partnership on several projects with the Government of Gujarat (GoG) and donor agencies, like Sir Ratan Tata Trust (SRTT), on this theme.

A two-day conference on Coastal Salinity Ingress Mitigation and Prevention: Experiences and Challenges was conducted in Diu to look at various alternatives towards salinity ingress prevention. The conference aimed at synergising efforts of various stakeholders, including corporate agencies working in the coastal regions. More than 120 delegates representing universities, scientific institutions, the government, corporates, NGOs, and local communities, participated. The conference helped pool information and resources about the various methods of salinity ingress prevention undertaken by different groups. The Companys innovative water resource management programmes in Ambujanagar were appreciated for their impact and effectiveness.

Rajasthan too faces frequent droughts and water scarcity. The team at Rabriyawas brought in a mix of traditional as well as modern technological methods to conserve water in many villages around the Company plant. Khadins are a traditional method to catch and store rainwater. These structures, built around farms, prevent excess rain water from draining off, and help saturate the soil moisture. This ensures that farmers are able to grow an additional crop, with increased financial returns.

Agro-based Livelihood Initiatives

Enhancing agro-based livelihoods for rural communities is another area of focus for ACF. Better Cotton Initiative (BCI) is a programme for producing economically, environmentally, and socially sustainable cotton. BCI is a farm level intervention that has the potential to change the scenario on the global market, and has demonstrable long -term benefits for both farmers and the environment.

Better Cotton Initiative is an international programme implemented in major cotton producing countries in the world, including India. Major retailers and promoters have pooled money in a Fast Track Fund (FTF), to enable cotton growers access to technology, and inputs on producing environmentally friendly, higher grade cotton. ACF is the largest among the 8 implementing agencies in the country, a process coordinated by the Dutch organisation Solidairdad.

In 2010, ACF worked with cotton farmers in Bhatinda, Kodinar, Chandrapur and Nadikudi, to integrate BCI techniques in current farming practices. Through planned interventions, strategic pesticide use, contamination prevention and effective picking, storing and harvesting methods, more than 2552 farmers across locations have been able to show a reduction of Rs. 3000 per acre on production costs. And BCI cotton has been able to command upper-band rates bringing in profits to farmers. Projected figures of BCI cotton produced in 2010-11 under ACF are expected to be 83537 quintals. In recognition of ACFs efforts, we have been invited to be a partner in the global BCI programme, a move that will bring in additional funds and technical inputs to processes here.

In 2010, ACFs nascent organic farming intervention grew exponentially to reach out to more farmers. Awareness programmes among the farming community provided a glimpse of a viable, alternate way of farming. Currently there are 558 farmers growing organically on more than 564 acres of land in Punjab alone. Using organic manures and preventive pest control methods has ensured that the yield they get from their land is sufficient, and the crop produced is healthy and safe for consumption. The soil is no longer getting stripped of its nutrients and is in fact on the road to recovery. Farmers are recognising the profitability in organic farming, and motivating others to take it up as well.

Other innovative initiatives include the Wadi project, wherein fruit-bearing trees are planted along existing farms. At no extra cost or effort, the farmer is ensured of additional income within five years. Quality Seed Production in collaboration with the Rajasthan State Seed Corporation has taken root in Rajasthan. Farmers from 6 villages are involved in raising quality seeds in a controlled manner in more than 230 acres of land. The plots on which the seeds are produced are closely monitored and are inspected periodically by the Rajasthan State Seed Certifying Agency. These seeds are then certified, bought and marketed by the State Agency, bringing in additional income to the farmers.

Skills and Capacity Building

The construction sector is closely related to the cement industry. In view of the paucity of skilled workers, ACF, along with the Tribal Development Department of Government of Gujarat, has been working on mason training for the past two years. The process brought together ACFs community mobilisation skills, ACLs technical inputs, and governmental support to train hundreds of unskilled tribal youths into skilled masons.

This year ACF initiated the Advanced Mason Training

programme, to hone the semi-skilled into skilled professionals. The course is shorter in duration, but more intense, and includes skills such as plumbing, pointing, tiling and roofing.

ACF has also focused on providing alternate skills for employment generation to rural youth. The number of Skill and Entrepreneurship Development Institutes (SEDI) has increased to 12 this year. The new SEDIs though are in various stages of development. More than 1500 students have been trained this year in 17 different technical trades including welding, carpentry, repairs of domestic appliances, mobiles, two-wheelers, computer basics and DTP and security guard training. SEDIs are also ideal vehicles for collaboration with other organisations. Apart from centres that are solely managed by ACF, SEDIs have also been set up in PPP with the government in different locations.

Post-training, SEDI provides trainees assistance in finding suitable job opportunities or in establishing small scale enterprises. Across the Institutes, the rate of employment of those trained has reached about 70%, which is very encouraging.

By concentrating on livelihood generation of various kinds, ACF is working towards improving the standard of living of people and improving the quality of their life – a factor that is inextricably linked to the Companys growth and expansion.

Integrated Health Programme

Access to health care has been identified by ACF as one of the critical community issues. Communities around the Company plants have little or no access to clean drinking water, or health care services. ACF addresses these issues through its integrated health programme.

In 2010, ACF continued to strengthen its cadre of health workers under the Village Health Functionary (VHF) Programme. VHFs, also called Sakhis, are village women trained in clinical, preventive and promotive aspects of health. Sakhis are the crucial link bridging the community with health care access. They conduct sessions on health with women, and youth, interact with Panchayats to implement sanitation programmes in the villages, promote sustainable practices like kitchen garden and vermin composting, and work closely with state-run anganwadis to monitor health of young children.

Currently, 309 Sakhis from 258 villages cater to a population of over 1.4 lacs. ACF is proud that the health programme is completely supportive of and complementary to the National Rural Health Mission (NRHM) and will be replicated to more villages in our current operational areas in partnership with the government.

ACFs health programme is moulded to suit the conditions and the specific needs of communities in the region. In Bhatinda, ACF implements a drug de-addiction programme, while malnutrition among young children is a key area of focus in Bhatapara in Chhattisgarh. Given the skewed sex-ratio in Punjab, ACF implements a programme against sex-selection in Ropar. In Chandrapur, Maharashtra, ACF broadened the Home Based Neo-natal Care (HBNC) programme to tackle maternal and infant mortality, institutionalise deliveries and promote safe child care. This shift in approach has been able to meet community needs better, and in turn contributed to greater trust and a more solid stakeholder relationship with the Company.

Truckers are also an important stakeholder for a cement company. However, they also are a high-risk group for HIV and AIDS. In 2010, the HIV and AIDS Prevention Programme continued to reach out to them and other communities though setting up of Sexually Transmitted Infection (STI) Clinics and Voluntary Counselling and Testing Centres (VCTC).

Education Development

ACFs work in raising the quality of education in village- level government schools got a boost in 2010 with the introduction of various innovative learning tools and concepts for trainers, teachers, and students.

For many students, maths continues to remain a complex and unfriendly subject. Activity-Based Maths Learning, introduced this year, combines a hands-on and practical process to make maths enjoyable and fun. Reading as a Way to Literacy focuses on building and retaining a childs interest in reading. Introduced in three locations in HP, UP, and Maharashtra, the programme includes training of teachers, resource acquisition, and giving a new lease of life to existing school libraries. Concept Learning through Technology was launched as a pilot project in primary schools in Dadri and Darlaghat. This programme integrates the use of computers into the education process.

ACF also concentrated on strengthening the existing School Management Committees (SMC). Set-up by the government, this group is empowered to make decisions for the school. With ACFs intervention these committees, in schools across three locations, are now able to make a bigger difference.

Regular and sustained training of anganwadi workers and school teachers are an important feature of the ACF education programme. Fifty anganwadi workers and teachers each were trained this year on various methods of learning and teaching.

A significant collaboration has been with UNICEF in Maharashtra, to promote sport and leadership skills among school children in district Chandrapur.

Measuring Success

At ACF, communication and stakeholder involvement is a continuous activity. Understanding their needs and expectations is therefore fundamental to our work. It is important to assess, take stock and receive feedback from the communities we are working with, on a regular basis. This helps in gauging the effectiveness of our programmes.

The unique Social Engagement Scorecard (SES) was used this year as well to assess community development initiatives at all locations. The responses have been encouraging, with scores in all locations in the range of 75% to 100%. Many discussions were also able to identify newer issues facing the community, and the ways in which the Company could contribute to its solution. For example in the SES process in Bhatinda, community representatives expressed their satisfaction with the way ACF had taken up organic farming practices. However, they also shared their need for intensive programmes in water management and sanitation, areas which ACF will include in future planning.

To further integrate CSR into its culture and thinking, ACF is in the process of establishing Community Advisory Panels (CAP). Comprising representatives from the Company, ACF, and community stakeholders, CAP is designed to coordinate and conduct engagement with stakeholders. Through regular meetings and other trust-building activities, CAP aims to promote sustainable local development and ensure synergy between community initiatives in all business segments. These processes are opportunities to identify and address stakeholder concerns proactively, and the natural way to earn trust and gain acceptance for our business activities.

OCCUPATIONAL HEALTH & SAFETY (OH&S)

Towards "Zero Harm"

We have significantly improved OH&S awareness across all levels and have adopted a structured approach towards achieving our objective of "Zero Harm to People". The key focus areas in 2010 were:

1) Increase in Visible Leadership by line managers. This has been achieved through conducting awareness programmes on OH&S, safety observation tours, and sharing of leadership experience across the organisation.

2) Implementing OH&S management system, including Fatality Prevention Elements, and other Holcim directives.

3) Reducing vehicle and traffic safety risks through structured approach in the form of conducting surveys and risk assessments. This has resulted in significant improvements in the operating environment.

4) Establishing capacity and capability to manage projects, which present significant OH&S risks. We have addressed this challenge by strengthening OH&S systems and their application, by establishing formal project OH&S organisations.

We have also initiated the process of implementing Contractor Safety Management systems. This will enable us to significantly mitigate the OH&S risks. Our long term OH&S strategy is to reduce OH&S risks through engineering design improvements, together with behaviour-based safety interventions. 12. EMPLOYEE STOCK OPTION SCHEME

In recognition of the valuable contribution made by the employees in the progress of the Company, and with a view to remain a preferred employer, the Company has granted Stock Options for the eleventh year in succession to all management grade employees and the then Managing Director. The particulars required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock Option Scheme) Guidelines 1999, are given in subsequent paragraphs.

a) ESOS 2010

Salient Features:

During the year 2010, the company granted 99,98,900 stock options on 22nd April, 2010 (each option carrying entitlement for one share of the face value of Rs.2/- each) at an exercise price of Rs.119.00 per share. The exercise price was determined by averaging the daily closing price of the equity shares of the Company on the National Stock Exchange during 7 days immediately preceding the date of grant. The market price of the shares on the date of grant was Rs.121.05 per share. These stock options shall vest on expiry of one year from the date of grant and can be exercised during a period of four years from the date of vesting.

Valuation and Accounting:

The company has adopted intrinsic value method for the valuation and accounting of the stock options as per SEBI guidelines. Since the market price per share on the previous day of the date of grant was more by Rs. 2.05 than the exercise price, a sum of Rs. 2.05 crores has been accounted for as compensation cost for the year ended 31st December, 2010. The fair value of the options as per the "Black Scholes" model comes to Rs. 39.37 per option. Had the Company valued and accounted the options as per the "Black Scholes" model, the net profit for the year would have been lower by Rs. 39.37 crores and the diluted earnings per share (of the face value of Rs. 2 each) would have been Rs. 8.05 instead of Rs. 8.26 per share.

The "Black Scholes" model captures all the variables with their respective appropriateness which influences the fair value of stock options. The significant assumptions to estimate the fair value of options as per "Black Scholes" model are:

(i) Risk-free interest rate – 6.64%.

(ii) Expected life of the option – 3 years.

(iii) Expected volatility – 43.75%.

(iv) Expected dividend yield – 2.30%.

Grants beyond threshold:

No employee or Director has been granted options in excess of 1% of the issued equity share capital of the Company. None of the Directors have been granted options of more than 5% of the total options granted during the year.

Disclosure on grants:

(i) To senior management employees:

The options granted to the then Managing Director and other Executive Committee members are as follows:

Mr. A. L. Kapur 325000

Mr. David Atkinson 95000

Mr. B. L. Taparia 95000

Mr. J.C. Toshniwal 95000

Mr. S.N. Toshniwal 95000

Mr. Ajay Kapur 50000

Mr. R.R. Darak 44600

Ms. Meenakshi Narain 44600

Total 844200

(ii) To other employees:

An aggregate of 91,54,700 options were granted to all other employees in management grades. Some important data relating to them: Total number of other employees 3658

Total number of options granted 9154700

Max. number of options granted 44600

Min. number of options granted 350

Avg. number of options granted 2500

b) Cumulative disclosure

The particulars with regard to the stock options as on 31st December, 2010 as required to be disclosed under the SEBIs guidelines are as follows:

13. CORPORATE GOVERNANCE

The company has complied with the Corporate Governance requirements as stipulated under the listing agreement with the stock exchanges. A separate section on corporate governance, along with a certificate from the auditors confirming the compliance, is annexed and forms part of the Annual Report. Corporate Governance Voluntary Guidelines The major part of the Corporate Governance Voluntary Guidelines, 2009, has been complied with by complying the requirements under the Companies Act, 1956, the Listing Agreement, and the Companys own governance policies.

14. DIRECTORS

Cessation

A.L. Kapur

Mr. A.L. Kapur superannuated on 30th April 2010 as Managing Director of the Company. He joined the Board as Whole-time Director in May 1999 and became Managing Director in May 2007.

Amongst many achievements during his tenure as Managing Director, his significant achievements were: efficient handling of the transition phase upon Holcim taking over the management control, implementation of SAP and People Power Projects, successful commissioning of Rauri, Bhatapara, Dadri and Nalagarh projects, and Captive Power Plants at Bhatapara and Ambujanagar. He was also responsible for building a strong team across all levels in the Company. During his tenure, major thrust was given in the areas of HR, Health and Safety, Alternative Fuels and Raw materials.

The Board placed on record its appreciation for the valuable services rendered by Mr. Kapur during his tenure. Retirement by rotation

In accordance with the provisions of Article 147 of the Articles of Association of the company, (i) Mr. M. L. Bhakta, (ii) Dr. Omkar Goswami, (iii) Mr. Naresh Chandra, Directors of the company, will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer themselves for re-appointment. The Board recommends their re-appointment. Onne van der Weijde, new Managing Director The Board has appointed Mr. Onne van der Weijde as the Managing Director of the Company w.e.f. 1st May, 2010 upon superannuation of Mr. A. L. Kapur. The Members at their 27th Annual General Meeting held on 5th April, 2010, approved his appointment. Since Mr. Weijde is a foreign national, additional approval of the Central Government was also obtained on 24th May, 2010, confirming his appointment as the Managing Director. Further details about Directors are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

15. DIRECTORS RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended, the Directors confirm that:

i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures.

ii) Appropriate 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 as on 31st December, 2010, and of the profit and cash flow of the company for the period ended 31st December, 2010.

iii) 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.

iv) The annual accounts have been prepared on a going concern basis.

16. INTERNAL CONTROL SYSTEM

The company has implemented a robust and comprehensive internal control system in order to direct, monitor, and measure its resources. The internal control system has been established by standardising and documenting policies and procedures for all the major processes, to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, and compliance with laws and regulations. The formalised systems of control are designed to ensure effective compliance as per Clause 49 of the Listing Agreement, and article 728 (a) of the Swiss Code of Obligations, applicable to the Holcim Group since 2008. The Companys Internal Audit department independently tests the design and operating effectiveness of the internal control system across the Company. This provides an objective assurance to the Board of Directors and Audit Committee regarding the adequacy and effectiveness of the internal control system.

The Internal Audit function monitors the effectiveness of controls, and also provides an independent and objective assessment of the overall governance processes in the company, including the application of a systematic risk management framework.

The scope and authority of the Internal Audit activity are well defined in the Internal Audit Charter, approved by the Audit Committee. Internal Audit plays a key role by providing an assurance to the Board of Directors, and value adding consultancy service to the business operations.

17. AUDITORS

M/s. S.R. Batliboi & Associates, the Statutory Auditors of the company, will retire at the ensuing Annual General Meeting and are eligible for re-appointment. M/s. S.R. Batliboi & Associates have expressed their unwillingness to get re-appointed as the Statutory Auditors of the company.

The Board, based on the recommendation of the Audit Committee, recommends the appointment of M/s S.R. Batliboi & Co. as the Statutory Auditors of the company, for whom the company has received a notice u/s 225 read with section 190 of the Companies Act from a shareholder seeking their appointment in place of M/s.S.R. Batliboi & Associates. M/s S.R. Batliboi & Co have confirmed that their appointment, if made, shall be within the limits of Section 224(1B) of the Companies Act, 1956.

M/s. P.M. Nanabhoy & Co., Cost Accountants, have been appointed as Cost Auditors of the company for the year 2011.

18. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

The company has transferred a sum of Rs 0.31 crore during the financial year 2010 to the Investor Education and Protection Fund established by the Central Government, in compliance with Section 205C of the Companies Act, 1956. The said amount represents unclaimed dividends which have been with the company for a period of 7 years from their respective due dates of payment. Prior to transferring the aforesaid sum, the Company has sent reminders to the shareholders for submitting their claims for unclaimed dividend.

19. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE Information on conservation of energy, technology absorption, foreign exchange earnings and outgo, is required to be given pursuant to Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto marked Annexure - I, and forms part of this report.

20. PARTICULARS OF EMPLOYEES The information required under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, in respect of the employees of the Company, is provided in the Annexure forming part of this Report. In terms of Section 219(1)(b) (iv) of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the aforesaid Annexure. The Annexure is available for inspection by Members at the Registered Office of the Company during business hours on working days upto the date of the ensuing Annual General Meeting, and if any Member is interested in obtaining a copy thereof such Member may write to the Company Secretary, whereupon a copy would be sent.

21. SUBSIDIARY COMPANIES As required u/s 212 of the Companies Act, 1956, the audited statements of accounts, alongwith the report of Board of Directors, relating to the Companys subsidiaries, viz. Kakinada Cements Limited, MGT Cements Private Limited, and Chemical Limes Mundwa Private Limited, and respective Auditors Report thereon for the year ended 31st December, 2010, are annexed to this report.

22. CONSOLIDATED FINANCIAL STATEMENTS As stipulated by Clause 32 of the listing agreement with the stock exchanges, the consolidated financial statements have been prepared by the company in accordance with the applicable accounting standards issued by The Institute of Chartered Accountants of India. The audited consolidated financial statements together with Auditors Report form part of the Annual Report. The consolidated net profit of the Company, its subsidiaries and associates, amounted to Rs.1,263 crores for the corporate financial year ended on 31st December, 2010 as compared to Rs.1,264 crores for the Company on a standalone basis.

23. EQUAL OPPORTUNITY EMPLOYER The company has always provided a congenial atmosphere for work to all sections of the society. It has provided equal opportunities of employment to all without regard to their caste, religion, colour, marital status and sex.

24. AWARDS AND RECOGNITION

(a) Our mines continued to be adjudged among the best mines in their respective regions by the Director General of Mines on various parameters such as mine working, maintenance, innovations, health & safety, training, environmental protection etc.

(b) Our MCW plant won the following awards:

1) Awarded for National award for "Excellence in Water Management - 2010 given by Confederation of Indian Industries (CII).

2) Awarded Silver Medal in IMEA-2010 (Indian Manufacturing Excellence Award) conducted jointly by Frost and Sullivan and Economic Times.

3) Awarded Green Tech Environment Excellence award - 2010" in Gold category in Cement Sector.

4) Awarded IIIrd in Inter Industrial Safety Performance 2009-10 conducted by Vidarbh Industrial Safety Council.

25. CAUTIONARY STATEMENT

Statements in the Directors Report and the Management Discussion & Analysis describing the Companys 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 Companys operations include: global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country, and such other factors which are material to the business operations of the Company.

26. ACKNOWLEDGEMENTS

Your Directors take this opportunity to express their deep sense of gratitude to the banks, Central and state governments and their departments and the local authorities for their continued guidance and support. We would also like to place on record our sincere appreciation for the total commitment, dedication and hard work put in by every member of the Ambuja family. To them goes the credit for the Companys achievements. And to you, our shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the Board,

N. S. Sekhsaria Chairman

Mumbai

3rd February, 2011


Dec 31, 2009

We are pleased to present Annual Report of the Company for the year 2009.

1. 2009 - ROAD TO RECOVERY Indian economy shows resilience

The year 2009 began amid great uncertainty with regard to the likely impact of the global financial crisis, which had finally erupted in the second half of 2008. Governments around the world acted quickly and decisively, and in a coordinated manner, which helped prevent the situation slipping into a full scale depression. Nevertheless, recession on a global scale was inevitable and the only questions were, and still are to some extent, how deep the recession would be and how long it would last. And, in particular, to what extent would the Indian economy be affected?

The various stimulus measures which were introduced by the government and Reserve Bank of India towards the end of 2008 played an important role in maintaining liquidity in the financial system, limiting the spill over impact on the real economy, and underpinning a widespread confidence that the Indian economy was well placed to weather the storm and emerge from the downturn in a strong position.

That resilience has been demonstrated during 2009, as India was one among the handful of countries not to experience outright recession, and indeed has managed to maintain GDP growth at 6.7% for the year 2008-09. Emerging markets in general, and India in particular, are leading the way on the road to recovery, with strong growth rates based on robust economic fundamentals. Despite inflationary pressures gradually building, a steady monetary policy course has been maintained, with a focus on supporting growth recovery.

The federal parliamentary elections in India in May resulted in a renewed mandate for the incumbent government, which is now in a favourable position to carry out much needed economic reforms, and provide the impetus for a major thrust in infrastructure development. Encouraging signs already began to appear in 2009, for example the initiative to dramatically increase road and highway construction, to 20 kms per day from the present 2.5 kms per day.

Conditions remain favourable for cement industry

It was expected that the general economic slowdown would have a corresponding impact on construction and the cement industry. However, although some large real estate projects in metro areas were impacted by the liquidity crunch, this was generally compensated by a number of other factors:

- Increased infrastructure spending as part of the stimulus measures

- Across the board excise duty cuts to stimulate demand

- Solid demand for housing in rural and semi-urban areas

- Low cost housing initiatives

- Pre-election spending

Consequently, cement demand growth remained buoyant and in double digits throughout most of calendar year 2009, and total industry dispatches increased by 10.5%, from 177 million tonnes to 195 million tonnes.

Export markets in contrast declined sharply, as demand in the Gulf region contracted at the same time as new capacities came on stream in Saudi Arabia and the Emirates.

Despite the cancellation or postponement of some expansion projects, Indian cement capacity additions during 2009 nevertheless totalled approximately 40 million tonnes. However, the increase in effective supply was much less, owing to delays in commissioning and ramp-up of various units. The buoyant demand meant that most of the new supply could be effectively absorbed, resulting in only a minor surplus for the year as a whole, and indeed some shortages in the first half.

Capacity utilisation levels consequently remained at around 85% on an average, and pricing pressure, which had been a concern at the start of the year, did not materialise in the first 9 months. Rather, shortages in certain markets led to increased realisations during this period, which largely corrected in the last quarter when demand growth dipped, particularly in the South region.

Against the backdrop of continuing strong demand, Ambuja has endeavoured to maintain its market position despite significant internal constraints in terms of clinker availability, by purchasing clinker from third parties as well as maximising the blending ratio without compromising product quality.

2. HIGHLIGHTS OF 2009

- Cement production and sales volumes increased by 6% and 6.5% respectively, to reach 18.83 million tonnes and 18.79 million tonnes.

- Average sales realisation increased by 7%, to Rs. 3,760 per tonne.

- Net sales were 14% higher, at Rs.7,077 crores.

- EBITDA was 8% higher, at Rs.1,972 crores.

- Consolidated net profit excluding exceptional items increased 12%, to Rs.1,217 crores.

- The clinkerisation expansion projects at Bhatapara and Rauri were commissioned in December 2009 and January 2010 respectively. While Bhatapara plant has come closer to the stabilisation by the date of this report, the Rauri plant is busy attaining stabilisation.

3. FINANCIAL RESULTS 2009

As a result of the consistently strong growth in demand for cement, the Companys operating results improved as compared to 2008, despite the fact that availability of clinker was a major limiting factor during the year.

FINANCIAL RESULTS

Rs. in Crores

Stand Alone Consolidated Current Year Previous Year Current Year Previous Year 31.12.2009 31.12.2008 31.12.2009 31.12.2008

Sales (net of excise duty) 7076.87 6220.27 7076.87 6247.41

Profit before interest and Depreciation 2122.72 * 2261.66 2121.48 2250.34

Less: Interest 22.43 32.06 22.43 32.60

Gross Profit 2100.29 2229.60 2099.05 2217.74

Less: Depreciation 296.99 259.76 297.28 260.10

Profit before Tax 1803.30 1969.84 1801.77 1957.64

Provision for Tax 584.93 567.57 584.93 567.93

Profit after Tax 1218.37 1402.27 1216.84 1389.71

Add: Balance brought forward from previous year 358.58 348.20 675.84 683.74

Profit available for appropriation 1576.95 1750.47 1892.68 2073.45

Appropriations:

Transfer from Exchange Fluctuation Reserve on cessation of subsidiary - - - 5.72

General Reserve 800.00 1000.00 800.00 1000.00

Dividend on Equity Shares (including interim) 365.59 334.97 365.59 334.97

Corporate Dividend Tax 62.13 56.92 62.13 56.92

1227.72 1391.89 1227.72 1397.61

Balance carried forward 349.23 358.58 664.96 675.84

1576.95 1750.47 1892.68 2073.45

* Including exceptional items Rs. 308.33 crores

4. DIVIDEND

The Company has paid an interim dividend of 60% (Rs. 1.20 per share) during the year. The directors are pleased to recommend a final dividend of 60% (Rs. 1.20 per share). Thus the aggregate dividend for the year 2009 works out to 120% (Rs. 2.40 per share) as against 110% (Rs. 2.20 per share) in 2008, and the total payout will be Rs. 428 crores, including dividend distribution tax of Rs. 62 crores. This represents a payout ratio of 35%.

5. MARKET DEVELOPMENTS

Despite the significant capacity additions in the industry, the Company kept pace with the double digit demand growth, and maintained its strong position of approximately 18% market share in its main markets, and around 10% on an all India basis. Sales volumes increased by 6.5%, to 18.8 million tonnes in 2009 as against 17.6 million tonnes in 2008.

The Company has built a large network of over 6,000 dealers and 20,000 retailers across 18 states in India. Its reach and penetration helps the Company to manage the last mile delivery across our relevant markets, and gives us a strong positioning in the booming rural markets.

Along with strong brand equity, Ambuja has evolved a unique model of channel management, based on values of trust and relationships. The strong bond between the dealer network and the Company has helped Ambuja to withstand severe competition for more than two decades. With the added support of Holcims rich experience of operating in 70 countries, Ambuja has now added sophisticated IT tools and global channel management tools to its traditional Indian model, thus adding to our capabilities to face stiff competition endemic to large capacity additions.

Holcims global experience has also helped Ambuja in fine tuning its product quality management, by introducing best practices from other countries. It has helped in enhancing the overall marketing mix, clearly targeted at the retail market in semi urban and rural sectors, and the large buyers in the metros and mega cities.

Our network of port, bulk terminals, and bulk cement ships, on the west coast has supported a sustainable strong market position in Mumbai and Surat. In 2009, another bulk terminal in Kochi has been added to the network to establish a footprint in Kerala.

All India

Demand analysis for all India is given below:

Fig. in mil. tonnes

All India Demand 2008 2009 Growth (%)

Domestic 174.0 192.2 10.5

Export 2.9 2.7 -6.9

Total - India 176.9 194.9 10.2

Domestic cement demand grew at 10% CAGR in the last 5 years. In 2009, the domestic demand growth was 10.5%. However, exports reduced by 7% as international prices dropped substantially, due to global recession and new capacity additions in the middle-east, hitherto a large export market for Indian cement manufacturers. Pakistan also emerged as a major exporter in the region.

Northern Region

Demand analysis for the North Region is given below:

Fig. in mil. tonnes

North * 2008 2009 Growth (%)

Aggregate Demand 34.4 38.0 10.5

Ambujas Volume 6.2 6.6 6.5

Ambujas Share (%) 18.1 17.5

* (excluding Uttar Pradesh)

Cement market growth in North is showing 9% CAGR over the last 5 years. The demand in 2009 grew by 10.5%, due to increased investment in infrastructure. We continue to hold substantial market share in Punjab, Himachal Pradesh and Jammu & Kashmir. At the same time, we have increased sales in Uttaranchal and Rajasthan. However, due to clinker capacity limitations, the Companys market share was slightly reduced.

Eastern Region

Demand analysis for the East Region is given below:

Fig. in mil. tonnes

East * 2008 2009 Growth (%)

Aggregate Demand 21.1 24.8 17.5

Ambujas Volume 2.6 3.2 23.1

Ambujas Share (%) 12.4 12.8

* Above figures are exclusive of North East except Assam & Bihar.

Cement demand has grown at 10% CAGR over the last 5 years. The industry has grown by 17.5% in 2009 on YoY basis. Our people performed well, to clock 23.1% increase in sales, and we were able to marginally increase market share in spite of clinker capacity constraints. The Farakka grinding plant performed at full capacity. We could also expand our footprints in Jharkhand, Orissa and Bihar.

West / South Region

Demand analysis for the West / South Region is given below:

Fig. in mil. tonnes

West / South 2008 2009 Growth (%)

Aggregate Demand 33.8 36.2 7.1

Ambujas Volume 6.9 7.0 1.5

Ambujas Share (%) 20.3 19.4

Cement demand has grown at 8% CAGR over the last 5 years. The industry has grown by 7.1% compared to last year. These regions faced two setbacks during 2009, in the form of drop in exports, and the sharp price correction in the southern markets in the final quarter. Both these factors created tremendous pressure in the domestic market. Despite this, we sold 7 million tonnes and retained close to 20% market share. In Mumbai, Indias largest and most prestigious market, the Company further increased its market share, to 26%.

6. PRODUCTION & COST DEVELOPMENTS Volumes

Total cement production increased by 6% compared to 2008, from 17.8 to 18.8 million tonnes, despite the fact that clinker production was marginally lower at 11.4 million tonnes (11.5 million tonnes in 2008). This could be achieved only by purchasing significant quantities of clinker from third parties, and in total 1.7 million tonnes were purchased, compared to 0.7 million tonnes in 2008. Plants were running flat out for most of the year, trying to keep up with the demand, and utilisation levels on average remained above 85% during the year.

Major Costs

Although EBITDA increased in absolute terms in 2009, the EBITDA margin reduced slightly, from 29.3% to 27.9%. Two main factors had a significant impact on production costs in 2009:

- Clinker purchases were 1 million tonnes higher than the previous year, as a result of building market positions in the East and North in preparation for the new capacities, as well as to sustain production at the Maratha unit during major maintenance work on the kiln. For the year as a whole this had a negative impact on EBITDA margin of approximately 400 basis points.

- The year began with a large inventory of imported coal, which had been procured in 2008 at what turned out to be peak prices of more than Rs. 9,000 per tonne (landed cost), and this had a significant negative impact on the EBITDA margin during the first half of 2009, as those inventories were consumed. Otherwise, global commodity prices, including oil and coal, were relatively stable during 2009 compared to the previous year, therefore once the coal inventory overhang was absorbed, the Companys variable input costs reduced significantly in the second half, compared to the first half year. However, the quality of domestic coal continued to be a challenge and the average fuel consumption rate increased from 744 kcal to 755 kcal per kg of clinker. Many initiatives are underway at all the plants, aimed at sustainable reducing thermal energy consumption rates.

Efforts to optimise the fuel mix, and reduce the dependence on coal for both kilns and captive power plants, have been intensified, and usage of alternatives such as petcoke, lignite, biomass, and co-processing of industrial waste materials, increased during 2009. Financial benefits currently remain modest, however, the development of the Alternative Fuels and Raw Materials (AFR) business represents an important investment for the future.

Power consumption in 2009 has by and large remained at the same level as that of 2008.

Total freight and forwarding costs increased by 8% in absolute terms, and freight on cement increased by 6% per tonne sold, mainly as a result of the continued shift from exports to domestic sales, and longer average lead distances. The costs of diesel and packing materials remained stable during the year and only slightly increased compared to 2008.

7. EXPANSION PROJECTS

During 2009 a new bulk cement terminal started operation at Kochi, providing access to new markets in the South, and two new captive power units, each with 15 MW capacity, were commissioned at Bhatapara (Chhattisgarh) and Maratha (Maharashtra).

Significant progress has been made during 2009 on the two major expansion projects which will enable the Company to secure its market position through the next business cycle.

Production trials at the 2.2 million tonnes clinker production line at Bhatapara (Chhattisgarh) began in mid December 2009, and the plant is expected to be fully stabilised during the first quarter of 2010, along with a 33 MW captive power unit.

The new clinker production line at Rauri (HP), also with 2.2 million tonnes capacity, has commenced production trials during January 2010 and is expected to get fully stabilised during the first quarter of 2010. The associated cement grinding facilities at Dadri (UP) and Nalagarh (HP), each with 1.5 million tonnes capacity, will also be commissioned during this quarter.

The total cost of these two projects will be approximately Rs. 2,700 crores.

Apart from the above two major projects, an additional 30 MW captive power unit at Ambujanagar (Gujarat) is currently undergoing production trials and will be commissioned during the first quarter 2010, taking total captive power capacity to more than 400 MW. In addition, three new ships for western coastal transportation are under construction, of which two are expected to be brought into service in 2010. Further investments to improve rail connectivity at several locations are also in progress, for increased efficiency of logistics operations.

Additional cement grinding capacity is also under construction, at the Bhatapara and Maratha units, and will be completed during 2010. By the end of the year, the Companys total installed cement capacity will be increased from 22 million tonnes to approximately 27 million tonnes.

All the expansion projects have been financed through internal accruals.

8. OUTLOOK

Economy heading for strong growth recovery

As green shoots tentatively start to appear across the globe, the Indian economy, which in any case suffered less during the financial crisis, is well positioned to quickly get back to a sustainable high growth trajectory. The inherent advantages of strong domestic consumption, favourable demographics, relatively low export dependence, political stability, and a well regulated financial sector, mean that there is less vulnerability to any negative impact from the rolling back of emergency stimulus measures which is likely during 2010. The government nevertheless still has to deliver on reforms, in order to further stimulate free markets and facilitate private investment, particularly in infrastructure.

Infrastructure and housing are key drivers

Infrastructure development and rising housing construction, as a result of recovery in the urban real estate sector as well as expansion of affordable housing provision, will be key drivers in accelerating growth. This augurs well for the cement industry, and cement consumption growth is expected to be in the range of 9% to 9.5% for the next couple of years, with further upside potential if infrastructure spending really takes off in a big way.

There will still be significant cement capacity additions during 2010, totalling 40 to 50 million tonnes (installed capacity), therefore temporary pricing pressures are almost inevitable in certain markets. However, as long as the economy maintains high growth and demand remains buoyant, it should be possible for the new capacity to be absorbed without major disruption.

Ambuja Cement, with its own new capacity in place, intends to fully participate in the anticipated industry growth and maintain its strong market position, through continuous improvement in the construction solutions offered to our customers.

9. RISKS AND AREAS OF CONCERN Energy Costs

Coal will continue to be one of the primary inputs for the cement production process, and securing reliable supplies of indigenous coal of consistent quality remains a key area of concern. Allotment of coal blocks for captive mining is a step in the right direction, but it will still be some years before projects come to fruition, and on an industry wide basis they only account for a relatively small part of the requirements.

Therefore we have to work continuously on improving indigenous supplies, as the degree of volatility in international prices seen in 2008 could always return. At the same time, efforts are being intensified to develop alternative sources of fuel as well as renewable resources for power generation, in order to gradually reduce dependence on coal.

Logistics Infrastructure

While road and rail infrastructure development is important for stimulating the demand for cement, it is also critical in terms of enabling ever increasing volumes of cement to be delivered to relevant markets cost effectively, as well as for bringing fuel and other material inputs to the production facilities. Shortages of rail wagons in particular have increasingly imposed logistical constraints, and increased investment is required from both, public and private sectors in order to adequately expand rail infrastructure and ensure the continuous smooth flow of goods and materials. We are actively working to improve the rail connectivity.

Competitive Environment

The pace of new capacity addition by the industry has not been as fast as previously anticipated, therefore pricing pressures, although still expected to occur, are likely to have a more limited impact and be of shorter duration. However, if demand growth were to slow again, for example because of any loss of impetus in implementing infrastructure programmes, then oversupply could potentially become a more significant issue.

Taxation

Taxation remains a perennial issue for the cement industry. Although some welcome relief in the form of reduced excise duties was introduced as part of the overall stimulus package at the end of 2008, it is widely predicted that these measures will be at least partially rolled back during 2010, and this would most likely have an impact on cement realisations. A complete rationalisation and simplification of the tax regime would be beneficial for both consumers and producers, as Indian cement continues to be the most highly taxed across the globe.

10. HUMAN RESOURCES

Performance Orientation

Integrated HR systems, from fresh talent acquisition to performance management and individual development, are aimed at creating and building a quality talent pipeline. Adequate emphasis has been made on development of cross-functional skills early in career, and has been meticulously incorporated in the induction plan.

Learning the inter-disciplinary approach to organisational issues, and learning to manage people, are the focus areas of management development. Special in-house customised development programmes, targeted at different management levels, are systematically delivered by a well balanced combination of internal and external faculty.

A structured approach to people management is being established based on an extensive jobs study. This facilitates organisation structure clarification, and establishment of a framework for individual development, career pathing, succession planning, and reward management.

One of the core strengths of the Company is the strong bonding "Ambujaites" have always had with the Company. Changes both within and outside the Company bring to the fore the changing aspirations of the people. To preserve this core strength, employee engagement levels are being monitored, and where necessary actions taken to reinforce people bonding with the Company.

Consolidating People Power

The "People Power" project, launched at the Ambujanagar plant in 2008, was aimed at ensuring "healthy people and healthy plants", on a sustainable basis. The key focus areas for achieving this were organisation transformation, and institution of an Academy and a Development cell.

The Academy and the Development cell together serve as a local Centre of Expertise for ensuring healthy plants and continuous process improvements. As a result of these efforts, the Mean Time Between Failures (MTBF) has significantly improved, in kilns by 23%, in the raw mills by 59%, and in the cement mills by 33% in the year 2009.

Under the process of organisation transformation, leadership positions have been created at lower organisation levels. People development is further enriched through the use of Performance Dialogue, which aids continuous development of technical, functional and leadership skills. The "People Power", structure is aimed at providing a holistic approach to individual development, career pathing, and succession planning activities.

11. SUSTAINABLE DEVELOPMENT

The Company published its second Corporate Sustainability Development Report in October 2009. We have a deep rooted philosophy of conducting operations in a manner consistent with established principles of sustainability, and the report explains many of the initiatives that have been taken in order to improve our environmental, economic and social performance, and increase engagement with all our stakeholders.

PROACTIVE ENVIRONMENT MANAGEMENT

Staying at the forefront

From its inception, Ambuja Cement has always been the first to adopt environmental safeguards and improvement initiatives at all its units and facilities. Eco-efficient operations, eco-friendly mining practices, restoration of mined areas, recycling of sewage, zero discharge of waste water and emissions well below prescribed norms are just a few of these measures. Almost all our units have Environment Management System (ISO 14001) certification. This year our existing units at Sankrail and Surat, and one of our newest facilities at Roorkee (Uttarakhand), have been certified for the Integrated Management System (IMS) (i.e. ISO 9001, ISO 14001 & OHSAS 18001).

In order to keep upgrading our environment management, we are installing Continuous Emission Monitoring Systems (CEMS) and Continuous Ambient Air Quality Monitoring Systems (CAAMS) at all facilities to monitor all vital pollution parameters.

Eliminating waste

In 2009, the Company expanded the initiative for co-processing various industrial wastes in cement kilns. These wastes include TDI tar, shredded tyres, glycerine foot, groundnut husk, agro waste, and FO sludge.

Millions of tonnes of fly ash are produced by coal based power plants in India, posing a major environmental challenge. Our Pozzolana Cement manufacturing process consumes large quantities of fly ash (4.6 million tonnes in 2009) thus helping to dispose this waste.

We have shifted to using air cooling systems at all our captive power plants for condenser cooling, thereby eliminating water consumption.

Tackling climate change

The Company is engaged in important policy issues like climate change. With measures like waste utilisation as alternative fuel, energy conservation, non-conventional power sources, and use of fly ash in cement production, we have already been able to achieve substantial reductions in CO2 emissions from our operations. In 2009 we emitted approximately 660 kg CO2 per tonne of cementitious product.

Ambuja Cement is one of the few companies in India to report greenhouse gas (GHG) emissions and take voluntary reduction initiatives, by participating in the Carbon Disclosure Project (CDP) being executed by WWF and CII in India. CDP holds the largest database of primary corporate climate change information in the world.

Ambuja is also one of 200 companies in the country who have participated in the Green Rating Project (GRP) of the Centre for Science and Environment (CSE) supported by the Ministry of Environment and Forests (MoEF) and United Nations Development Programme (UNDP), to rate the energy and water efficiency of major industries, including cement.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Engaging Stakeholders

Ambuja Cement has a long history as a pioneer and a leader in the field of CSR. We have always viewed the communities and villages that border

our plants as significant stakeholders in our business. Over the years weve learned that addressing their concerns goes a long way in ensuring sustainable growth.

The Ambuja Cement Foundation (ACF) was established to be our implementation arm for community development. ACF forges partnerships with development agencies and departments within the government and other organisations and leverages resources for wider outreach.

Through ACF, we scientifically assess the needs of these communities, set goals and design interventions to respond to them. ACF’s integrated rural development projects address critical issues like water resources, livelihood, health and education standards. By partnering with communities, we aim to transform lives from mere survival to prosperity.

In 2009 we started assessing the social impact of future projects sites to ensure they create a positive impact on society. A reputed external consulting agency, undertook this assessment for our project site in Marwar Mundwa. In accordance with the recommendations made by their study, a well-planned programme has been put into place for rehabilitation of the project affected people. This group of people is now being viewed as an important stakeholder group for whom special programmes are being planned to ensure their future livelihood. Our Company is committed to follow this process for all future projects.

Protecting scarce resources

Water is vital for the survival of neighbouring communities. In light of diminishing water sources, the Company has put into place numerous programmes to conserve, harvest and judiciously utilise water. We are harvesting rain water to supplement drinking water supplies and have renovated traditional water reservoirs like wells and ponds. In places with very poor water quality, community water purifying and de-fluoridation units have been installed. Through the construction of check dams, deepening of ponds and construction of dykes we are ensuring a supply of water for irrigation and household use. Micro-irrigation systems like drip and sprinkler irrigation systems are enabling farmers to judiciously use water. With the continued focus on harvesting as well as conserving water, the overall quantity of water available to the people has increased and noticeable change has been seen in its quality. A direct impact of this has been the increase in agricultural produce due to better availability of water and improvement in the health status of the community.

Investing in Agriculture

A majority of ACL’s manufacturing units are located in rural areas. The ACF is focused on enabling people economically to prosper through agriculture. To this end several programmes are being implemented by ACF including the provision of quality seeds, access to agricultural technology, farmer training, mixed and multiple cropping, organic farming and allied activities such as animal husbandry and the construction of fisheries.

A significant development in the area of agro based livelihoods during this year was the expansion of the Krishi Vigyan Kendra (KVK) or Agro Science Centre in 2009 at Kodinar. KVK offers multiple services to the farming community for improving the overall state of agriculture. It has extended its reach to 77 villages of Junagadh district.

Another noteworthy intervention in agriculture has been Systematic Rice Intensification (SRI). Begun on an experimental basis with a few rice cultivators in West Bengal, the project has taken off well with cultivators experiencing a marked increase in the yield of paddy. The project is currently running in our West Bengal and Chhattisgarh units. The results from SRI cultivation show over a two-fold increase in productivity over traditional rice cultivation.

The Seed Production Programme in Rajasthan was also expanded. ACF has partnered with the Government to produce and supply certified quality seeds to farmers through co-operatives. With the favour it has found within the government and the positive economic impact it has on farmers, there are plans to extend the programme.

Investing in people

Rural families tend to rely mainly on income from agriculture. That’s why ACF is focusing on skill training to enable them to augment their incomes by engaging in alternate livelihoods. It has established six Skill and Entrepreneurship

Development Institutes (SEDIs), one each in Chandrapur, Darlaghat, Jaitaran, Panvel, Farakka and Anandpur Sahib. These institutes offer short term training on employable skills in different areas easily adaptable by unskilled people. More than 3000 people have already undergone training and about 70% of those trained have found employment.

Another effort towards alternate livelihood opportunities by ACF along with the Company’s technical support team was the mason training camps at Dahod, Gujarat. The camps were organised on the invitation of the Tribal Development Department of the Government of Gujarat. The project has been able to successfully turn unskilled tribals into skilled masons, with placement rates around 65% and significant increase in income of these tribals. The Government of Gujarat has extended this partnership for a two year period.

Ambuja Manovikas Kendra saw considerable expansion during 2009, and now has more than 70 children enrolled in the school. An Early Intervention Centre was started to provide therapy and inputs for children under five. It offers physiotherapy, speech and occupational therapies, and starting at an early age ensures appropriate support can be given according to the individual development needs.

Meeting basic needs

ACF began its Village Health Functionary programme some years ago, which trained village women to provide preventive healthcare and referral services to the community. Three new locations were covered under the programme in 2009. Our work on health in Roorkee was recognised by the government, when it declared ACF the Mother NGO for the Haridwar district. The government has also handed us the responsibility of bringing down infant and material mortality rates, and strengthening the Village Health and Sanitation Committees.

With the support of the government and other NGOs, ACF constructed 129 houses to provide shelter to the Gaggar Villagers in Bhatinda. The project was co-ordinated by ACF untill the handing over of the homes.

Measuring success

Over the last two years, we have used a unique tool called the Social Engagement Scorecard (SES) to gauge the effectiveness of our intervention with the community. This tool is administered through an inclusive process which allows community members to review and evaluate our work and help ascertain any future course of action. This year we completed administering the SES at all our sites. In every location, we found our engagement was in line with the needs of the area and the aspirations of the people. The scores for all locations were in the range of 75% to 100%.

ACF also registered for an accreditation process with the Credibility Alliance, a consortium of voluntary organisations committed to enhancing accountability and transparency in the voluntary sector through good governance. ACF received the Desirable Norms Certification in March 2009. This certification recognises that ACF follows the norms of good governance, transparency and accountability set by the consortium.

OCCUPATIONAL HEALTH & SAFETY (OH & S)

Visible Safety Leadership

Visible safety leadership is one of the critical aspects of an effective OH & S programme. A training programme tailored and developed by Holcim has been initiated across the Company to ensure that visible safety leadership is practised at all levels. We have also continued implementation of 3 Fatality Prevention Elements (part of the Holcim OH & S Pyramid), viz. (i) working at height, (ii) isolation and lock-out procedures, and (iii) working in hot areas. The number of critical incidents related to these areas show significant improvement. The journey of implementing the complete Holcim OH & S Pyramid in a phased manner is ongoing, with a special focus on third party contractors. These measures have helped the Company to reduce the Lost Time Injury Frequency Rate (LTIFR) to 1.75, a reduction of 45% compared to 2008, and compares favourably with Holcim global benchmarks.

Increased OH & S awareness is being achieved through development and implementation of specialised training programmes, related to Fatality

Prevention Elements and Holcim OH & S pyramid blocks, for all management levels. We are committed to continue our implementation of a world class OH & S management system, in pursuit of our vision of "zero harm".

12. EMPLOYEE STOCK OPTION SCHEME

With a view to remaining a preferred employer, the Company has granted Stock Options to the Managing Director, Whole-time Directors and employees, for the tenth year in succession. The particulars required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock Option Scheme) Guidelines, 1999, are given in subsequent paragraphs.

a) ESOS 2009 Salient Features:

During the year 2009, the Company granted 74,99,600 stock options on 19th June, 2009 (each option carrying entitlement for one share of the face value of Rs. 2/- each) at an exercise price of Rs. 96.00 per share. The exercise price was determined by averaging the daily closing price of the equity shares of the Company during 7 days on the National Stock Exchange, immediately preceding the grant. The market price of the shares on the date of grant was Rs. 89.35 per share. These stock options shall vest on expiry of one year from the date of grant and can be exercised during a period of four years from the date of vesting.

Valuation and Accounting:

The Company has adopted intrinsic value method for the valuation and accounting of the stock options as per SEBI guidelines. Since the market price per share on the previous day of the date of grant was less than the exercise price, no employee compensation cost has been accounted for the year ended 31st December, 2009. The fair value of the options as per the "Black Scholes" model comes to Rs. 26.38 per option. Had the Company valued and accounted the options as per the "Black Scholes" model, the net profit for the year would have been lower by Rs. 15.08 crores and the diluted earning per share (of the face value of Rs. 2 each) would have been Rs. 7.89 instead of Rs. 7.99 per share.

The "Black Scholes" model captures all the variables with their respective appropriateness which influences the fair value of stock options. The significant assumptions to estimate the fair value of options as per "Black Scholes" model are:

(i) Risk-free interest rate - 5.98%.

(ii) Expected life of the option - 3 years.

(iii) Expected volatility - 44.51%.

(iv) Expected dividend yield - 2.17%.

Grants beyond threshold:

No employee or Director has been granted options in excess of 1% of the issued equity share capital of the Company. None of the Directors have been granted options of more than 5% of the total options granted during the year.

Disclosure on grants to Senior Management Employees:

The options granted to the Managing Director,

Whole-time Directors and other senior management personnel are as follows:

Mr. A. L. Kapur 275000

Mr. N. P. Ghuwalewala 120000

Mr. David Atkinson 85000

Mr. B. L. Taparia 85000

Mr. J. C. Toshniwal 60000

Mr. S. N. Toshniwal 40000

Mr. Ajay Kapur 35000

Mr. R. R. Darak 35000 Ms. Meenakshi Narain 24500

Total 759500

Other employees i.e. other than stated above have been granted 67,40,100 options in aggregate. Some important indicators are: Total number of other employees 3375

Total number of options granted 6740100

Max. number of options granted 35000

Min. number of options granted 300

Avg. number of options granted 1997

13. CORPORATE GOVERNANCE

The Company has complied with the Corporate Governance as stipulated under the listing agreement with the stock exchanges. A separate section on corporate governance, along with a certificate from the auditors confirming the compliance is annexed and forms part of the Annual Report.

14. DIRECTORS

Cessation

Suresh Neotia

Mr. Suresh Neotia stepped down on 24th September, 2009 after more than two decades as Chairman. As a founder promoter of the Company, who joined the Board in 1985, he played a key role in the phenomenal growth and success of the Company.

Apart from his extraordinary entrepreneurial acumen, Mr. Neotia is a great visionary. His affectionate care for the well-being of the employees and their families, his belief in human values and business ethics and his deep concern for the environment and the community around our plants, are some of the principles upon which the Company stands today. They have enabled the Company to build a successful and sustainable business model.

Mr. Neotia’s contribution through the Ambuja Cement Foundation, the Company’s CSR arm, in the fields of environment, water management, women empowerment, HIV eradication and development of communities is immeasurable.

In 2008, he was bestowed with the prestigious ‘Padma Bhushan’ award for his outstanding contribution to the industry and philanthropic social initiatives.

In appreciation of his farsighted vision, wisdom and guidance, which have been invaluable to the Company’s growth, Mr. Neotia has been conferred the status of “Chairman Emeritus” by the Board.

N. P. Ghuwalewala

Mr. N. P. Ghuwalewala joined the Company in August 1999. Upon acquisition of Ambuja Cement Rajasthan Limited (ACRL) (earlier known as DLF Cement Ltd.) in the year 2000, he was made the Managing Director of that company. Subsequently, ACRL was merged with the Company in 2004 when Mr. Ghuwalewala was appointed on the Board of Directors as Whole-time Director. He ceased to be the Whole-time Director upon expiry of his term on 28th June, 2009.

Amongst many achievements during his tenure, turnaround of ACRL from a sick company to a profitable one was significant. At the time of his retirement he was heading the business operations of West and South regions and was also in charge of the Company‘s OH&S and Alternative Fuel and Raw materials initiatives.

The Board placed on record its appreciation for the valuable services rendered by Mr. Ghuwalewala.

B. L. Taparia

Mr. B. L. Taparia joined the Board as a Whole-time Director in 1999 and ceased from the Directorship upon expiry of his contract on 30th April, 2009. In order to comply with the requirements of clause 49 of the listing agreement relating to Composition of the Board of Directors, the contract of Mr. Taparia, as Whole-time Director was not renewed. However, he has continued with the Company with additional responsibilities of some of the key corporate functions and is re-designated as Company Secretary and Head – Corporate Services.

The Board placed on record its appreciation for the valuable services rendered by Mr. B. L. Taparia as Whole-time Director.

Appointment

Mr. Onne van der Weijde, joined the Board as Non-executive Director in January 2009. In view of Mr. A. L. Kapurs superannuation as Managing Director becoming due in April 2010, the Board appointed Mr. Onne as a Whole-time Director, designated as the "Chief Executive Officer (CEO) - Designate" for the period 17th February, 2010 till 30th April, 2010, and as the "Managing Director" from 1st May, 2010 till 16th February, 2015. As per the provisions of the Companies Act, his appointment is subject to the approval of the members and the Central Government.

Mr. Onne has more than 15 years of experience in cement industry, including 5 years in Indian cement industry, of which around 2 years as the CFO of ACC Ltd. Further details about Mr. Onne are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

Retirement by rotation

In accordance with the provisions of Article 147 of the Articles of Association of the Company, (i) Mr. Nasser Munjee, (ii) Mr. Rajendra Chitale,

(iii) Mr. Shailesh Haribhakti, Directors of the Company will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer themselves for re-appointment. The Board recommends their re-appointment.

Further details about Directors are given in the Corporate Governance Report as well as in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

15. DIRECTORS RESPONSIBILITY

Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended, the Directors confirm that:

i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures.

ii) Appropriate 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 as on 31st December, 2009, and of the profit and cash flow of the Company for the period ended 31st December, 2009.

iii) 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.

iv) The annual accounts have been prepared on a going concern basis.

16. INTERNAL CONTROL SYSTEM

The Company has implemented robust and comprehensive internal controls to support smooth and efficient business operations and effective statutory compliance. The Company has established the internal control system by standardising and documenting policies and procedures for all the major processes, and associated key controls, for credible reporting of the financial and operating results. Tasks and responsibilities have been assigned to the designated personnel to correctly and timely perform the controls.

The formalised systems of control ensure effective compliance of Clause 49 of the Listing Agreement, and article 728 (a) of the Swiss Code of Obligations, applicable to the Holcim Group from 2008.

The Companys Internal Audit department independently tests the design and operating effectiveness of the internal control system across the Company. This provides an objective assurance to the Board and Audit Committee regarding the adequacy and effectiveness of the internal control system.

The scope and authority of the Internal Audit are well defined in the Internal Audit Charter, approved by the Audit Committee. Internal Audit plays a key role by providing an assurance to the Board of Directors, and value adding consultancy service to the business operations.

17. AUDITORS

M/s. S. R. Batliboi & Associates, auditors of the Company, will retire at the ensuing Annual General Meeting and are eligible for re-appointment. M/s. S. R. Batliboi & Associates have confirmed that their re-appointment, if made, shall be within the limits of Section 224 (1B) of the Companies Act, 1956.

The Board recommends their re-appointment as Auditors and to fix their remuneration.

M/s. P. M. Nanabhoy & Co., Cost Accountants, have been appointed Cost Auditors of the Company for the year 2010.

18. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

The Company has transferred a sum of Rs. 0.27 crore during the financial year 2009 to the Investor Education and Protection Fund established by the Central Government, in compliance with Section 205C of the Companies Act, 1956. The said amount represents unclaimed dividend which has been lying with the Company for a period of 7 years from their respective due dates of payment.

19. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE

Information on conservation of energy, technology absorption, foreign exchange earnings and outgo, is required to be given pursuant to Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto marked Annexure - I, and forms part of this report.

20. PARTICULARS OF EMPLOYEES

Information required to be given pursuant to the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 is annexed hereto marked Annexure - II, and forms part of this report.

21. SUBSIDIARY COMPANIES

As required u/s 212 of the Companies Act, 1956, the audited statements of accounts, along with the report of Board of Directors, relating to the Companys subsidiaries, viz. Kakinada Cements Limited, MGT Cements Private Limited and Chemical Limes Mundwa Private Limited, and respective Auditors Report thereon for the year ended 31st December, 2009, are annexed to this report.

22. CONSOLIDATED FINANCIAL STATEMENTS

As stipulated by Clause 32 of the listing agreement with the stock exchanges, the consolidated financial statements have been prepared by the Company in accordance with the applicable accounting standards issued by The Institute of Chartered Accountants of India. The audited consolidated financial statements together with Auditors Report form part of the Annual Report.

The consolidated net profit of the Company, its subsidiaries and associates amounted to Rs.1,217 crores for the corporate financial year ended on 31st December, 2009 as compared to Rs.1,218 crores for the company on a standalone basis.

23. EQUAL OPPORTUNITY EMPLOYER

The Company has always provided a congenial atmosphere for work to all sections of the society. It has provided equal opportunities of employment to all without regard to their caste, religion, colour, marital status and sex.

24. AWARDS AND RECOGNITION

(a) Our mines continued to be adjudged among the best mines in their respective regions by the Director General of Mines on various parameters such as mine working, maintenance, innovations, health & safety, training, environmental protection etc.

(b) Ambujanagar unit won the national award on "Best Environmental Excellence in Plant Operation" from NCBM.

(c) Ambujanagar unit won Certificate of Appreciation from Gujarat Safety Council for "Accident Free Million Man Hour Worked".

(d) Bhatapara unit won the 1st prize at 11th FL SMIDTH ENERGY AWARDS for Energy Conservation in cement industry.

(e) Our Ambuja Public School at Rabriyawas won "Gobar Times Green Schools Programme Award" from Centre for Science and Environment.

(f) The Company recently won 2009 IMC Ramkrishna Bajaj National Quality "Performance Excellence Trophy" in the Manufacturing Category.

25. CAUTIONARY STATEMENT

Statements in the Directors Report and the Management Discussion & Analysis describing the Companys 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 Companys operations include global & domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and its cost, changes in government policies and tax laws, economic development of the country and such other factors which are material to the business operations of the Company.

26. ACKNOWLEDGEMENTS

Your Directors take this opportunity to express their deep sense of gratitude to the banks, Central and state governments and their departments and the local authorities for their continued guidance and support.

We would also like to place on record our sincere appreciation for the total commitment, dedication and hard work put in by every member of the Ambuja family.

To them goes the credit for the Companys achievements.

And to you our shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the Board

N. S. Sekhsaria Chairman

Mumbai

17th February, 2010

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