Mar 31, 2023
The Board of Directors are pleased to present your Company''s 40th Annual Report on business and operations, together with the audited financial statements (consolidated as well as standalone) for the fifteen months period ended March 31, 2023 (FY 2022-23).
1. FINANCIAL PERFORMANCE 2022-2023
('' in Crores) |
||||
Consolidated |
Standalone |
|||
Particulars |
2022-23 |
2021 |
2022-23 |
2021 |
Revenue from Operations |
38,937.03 |
28,965.46 |
19,985.43 |
13,979.04 |
Other Income |
737.71 |
352.44 |
952.27 |
281.18 |
Total Income |
39,674.74 |
29,317.90 |
20,937.70 |
14,260.22 |
Profit before Tax |
3,729.49 |
5,164.47 |
3,055.05 |
2,787.90 |
Tax Expenses |
705.11 |
1,453.43 |
501.56 |
704.71 |
Profit for the year |
3,024.38 |
3,711.04 |
2,553.49 |
2,083.19 |
Attributable to |
||||
Owners of your Company |
2,583.40 |
2,780.38 |
2,553.49 |
2,083.19 |
Non-controlling Interest |
440.98 |
930.66 |
||
Other Comprehensive Income/(Loss) |
28.87 |
11.11 |
(2.11) |
5.67 |
Total Comprehensive Income |
3,053.25 |
3,722.15 |
2,551.38 |
2,088.86 |
Attributable to |
||||
Owners of your Company |
2,596.81 |
2,788.78 |
2,551.38 |
2,088.86 |
Non-controlling Interest |
456.44 |
933.37 |
-â |
-â |
Opening Balance in retained earnings |
6,516.20 |
3,925.98 |
3,526.28 |
1,635.98 |
Amount available for appropriations |
9,113.01 |
6,714.76 |
6,077.66 |
3,724.84 |
Appropriations |
||||
Final Dividend Paid for 2021 |
1,250.96 |
198.56 |
1,250.96 |
198.56 |
Closing balance in retained earnings |
7,857.70 |
6,516.20 |
4,826.70 |
3,526.28 |
The performance of the current year is not comparable to that of the previous year due to change in accounting period,as current year comprises of a period of 15 months as against 12 months of the previous year.
2. CHANGE OF MANAGEMENT - ENTRY OF ADANIGROUP
During the FY 2022-23, your Company became a part of the Adani Group, as Holcim divested their entire shareholding and control in your Company by way of transfer of 100% shareholding of Holderind Investments Limited (Holderind) to Endeavour Trade and Investment Ltd., a company belonging to Adani group (Endeavour). In view of the above, Endeavour also became one of the Promoter of your Company along with Holderind.
With the change in the promoters, there was a change in the Management of your Company. Your Company also revised its Financial year from January- December to April-March to comply with the provisions of the Companies Act, 2013. Accordingly, the financial performance presented is for a period of 15 months i.e. from January 01, 2022 to March 31, 2023.
3. OVERVIEW OF COMPANY''SOPERATIONAL AND PERFORMANCE HIGHLIGHTS
⢠Consolidated income, comprising Revenue from Operations and other income, for the FY 2022-23 was '' 39,675 as against '' 29,318 Crore in 2021.
⢠Consolidated Profit before Tax for the FY 202223 was '' 3,729 Crore vis-a-vis '' 5,164 Crore in 2021.
⢠Consolidated Profit after Tax for the FY 2022-23 was '' 3,024 Crore compared to '' 3,711 Crore in 2021.
⢠Cement production is 67.06 Million tonnes in 2022-23 as against 52.81 Million Tonnes in 2021.
⢠Cement Sales Volume is 67.60 Million tonnes in FY
2022-23 as against 53.23 Million Tonnes in 2021.
⢠The net sales in cement is '' 38,398 Crore in FY 2022-23 as against '' 28,548 Crore in 2021.
4. DIVIDEND
Your Company has a robust track record of rewarding its shareholders with a generous dividend payout. In view of the strong operational and financial performance during the FY 2022-23 under review, the Board of Directors is pleased to recommend a dividend of 2.50 per share (125%) for the period ended March 31, 2023. This represents a pay-out ratio of 19.4%.
The Dividend payment is in accordance with your Company''s Dividend Distribution Policy. In terms of the provisions of Regulation 43A of the SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended (''the Listing Regulations''). This policy is available on your Company''s website at httns://www.ambuiacement. com/Unload/PDF/8.-Dividend-distribution-nolicv.ndf.
5. CAPITAL STRUCTURE OF YOUR COMPANY
Your Company''s paid-up equity share capital continues to stand at '' 397.13 Crore as on March 31, 2023.
During the FY 2022-23, your Company has issued 477,478,249 (Forty Seven Crores Seventy Four Lakhs Seventy Eight Thousand Two Hundred Forty Nine)
warrants, each convertible into, or exchangeable for, 1 (one) fully paid-up equity share of your Company of face value of '' 2/- each (''Warrants'') at a price of '' 418.87 each payable in cash (''Warrants Issue Price''), aggregating upto '' 20,001 crore. The warrant holders have paid 25% of the warrant issue price and have options to convert the warrants within a period of 18 months i.e by April 18, 2024.
Your Company does not have any scheme for the issue of shares, including sweat equity to the Employees or Directors of your Company.
6. TRANSFER TO RESERVES
Your Company has not transferred any amount to the Reserves for the period ended March 31, 2023.
7. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management''s Discussion and Analysis Report for the period under review, as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, ("SEBI Listing Regulationsâ) is presented in a separate section, forming part of this Annual Report.
8. CAPACITY EXPANSION AND NEW PROJECTS
Your Company''s current installed capacity is 31.45 MTPA. Detailed information on capacity expansion and new projects is covered in the report on
Management Discussion and Analysis forming part of this Annual Report.
As in the previous years, CRISIL, the reputed rating agency, has given the highest credit rating of AAA/ STABLE for the long-term and A1 for the short-term financial instruments of your Company. This reaffirms the reputation and trust your Company has earned for its sound financial management and its ability to meet its financial obligations.
There were no outstanding deposits within the meaning of Section 73 and 74 of the Act read with rules made thereunder at the end of the FY 2022- 23
or the previous financial years. Your Company did not accept any deposit during the period under review.
11. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
The details of loans, guarantees and investments covered under the provisions of Section 186 of the
Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 are given in the Notes to the Financial Statements (Refer Note No. 54)
12.1 Internal audit and its adequacy
The scope and authority of the internal audit function is defined in the Internal Audit Charter. To maintain independence and objectivity in its functions, the
internal audit function reports directly to the Audit Committee.
At the beginning of each financial year, a risk-based annual audit plan is rolled out after it is approved by the Audit Committee. The audit plan aims to evaluate the efficacy and adequacy of the internal control system(s) and compliance(s) thereof, robustness of internal processes, policies and accounting procedures, compliance with laws and regulations.
The Internal Audit function, consisting of
professionally qualified accountants, engineers, Fraud Risk and Information Technology audit specialists, is adequately skilled and resourced to deliver audit assurances at highest levels.
Based on the reports of internal audit function, process owners undertake corrective action in their respective areas. Significant audit observations and corrective actions thereon are presented to the Audit Committee.
12.2 Internal Controls over Financial Reporting
Your Company''s internal financial controls are commensurate with the scale and complexity of
its operations. The controls were tested during the FY 2022-23 and no reportable material weaknesses either in their design or operations were observed. Your Company has put in place robust policies and procedures, which inter-alia, ensure integrity in conducting its business, safeguarding of its assets, timely preparation of reliable financial information, accuracy & completeness in maintaining accounting records and prevention & detection of frauds & errors.
Your Company has adopted a Whistle Blower Policy and has established the necessary vigil mechanism for its employees and Directors to report concerns about any unethical and improper activity, without fear of retaliation. No person has been denied access to the Chairman of the Audit Committee. The Whistle Blower policy is uploaded on the website of your Company at https://www.ambuiacement.com/Upload/PDF/3,-Whistle-Blower-Policv_New.odf. The Audit Committee monitors and reviews the investigations of the whistle blower complaints. During the FY 2022-23 under review, 20 complaints were received under Whistle Blower Policy and were resolved after investigation.
14. SUBSIDIARY, ASSOCIATE AND JOINT VENTURE COMPANIES
As of March 31, 2023, your Company has six subsidiaries, one joint venture and one joint operation. Your Company had incorporated two wholly owned Subsidiaries i.e. Ambuja Shipping Services Ltd. and Ambuja Resources Ltd. during FY 2022-23.
M/s. Dirk India Private Limited ceased to be the subsidiary of your Company during the FY 2022-23 due to its merger with the Company and M/s. Dang Cement Industries Private Limited ceased to be the subsidiary of your Company during the FY 2022-23 due to the divestment made by the Company. Pursuant to the provisions of Section 129, 134 and 136 of the Act read with rules made thereunder and Regulation 33 of the SEBI Listing Regulations, your Company has prepared Consolidated Financial Statements of your Company and a separate statement containing the salient features of Financial Statement of subsidiary, joint venture and joint operation entities in Form AOC-1, which forms part of this Annual Report.
The Annual Financial Statements and related detailed information of the subsidiary / joint venture companies shall be made available to the shareholders of the holding and subsidiary / joint venture companies seeking such information on all working days during business hours. The financial statements of the subsidiary / joint venture companies shall also be kept for inspection by any
shareholders during working hours at your Company''s registered office and that of the respective subsidiary / joint venture companies concerned. In accordance with Section 136 of the Act, the Audited Financial
Statements, including Consolidated Financial Statements and related information of your Company and audited accounts of each of its subsidiary joint venture, are available on website of your Company at www.ambujacement.com under the ''Investors'' section.
The Board of Directors of your Company has approved a Policy for determining material subsidiaries in line with the Listing Regulations. The Policy is available on your Company''s website (www.ambujacement.com/investors)
Pursuant to Section 134 of the Act read with rules made thereunder, the details of developments of subsidiaries and joint ventures of your Company are covered in the Management Discussion and Analysis Report, which forms part of this Annual Report.
15. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL
15.1 Directorate
As of March 31, 2023, your Company''s Board had eight members comprising of three Non Executive and Non-Independent Directors, one Executive Director and four Independent Directors including one woman Independent Director. The details of Board and Committees composition, tenure of Directors, areas of expertise and other details are available in the Corporate Governance Report, which forms part of this Annual Report.
During the FY 2022-23, following changes took place: A. Appointments/Re-appointments
With effect from September 16, 2022, the Board
was re-constituted as under:
Mr. Gautam Adani - Non-Executive Chairman, Mr. Karan Adani-Non-Executive Director, Mr. M R Kumar - Nominee Director (LIC nominee), Mr. Rajneesh Kumar - Independent Director, Mr. Ameet Desai - Independent Director, Mr. Maheshwar Sahu - Independent Director and Ms. Purvi Seth - Independent Director, were appointed.
Mr. Ajay Kapur was appointed as Whole Time Director and CEO, by the Members at the Extra Ordinary General Meeting held on October 08, 2022 with effect from September 17, 2022 to
November 30, 2025.
Mr. N. S. Sekhsaria, Chairman & Non-Executive, Non-Independent Director tendered his resignation from the position of Chairman and
Director of your Company w.e.f. September 16, 2022 in order to focus on other interests and endeavours, In recognition of his outstanding and invaluable contributions, Mr, Sekhsaria was appointed as "Chairman Emeritusâ of your Company,
Retirement by Rotation
In accordance with the provisions of Section 152 of the Act, read with rules made thereunder and Articles of Association of your Company, Mr, Karan Adani (DIN: 03088095 ) is liable to retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible, offers himself for re-appointment,
B. Cessation
The Holcim representatives on the Board - Mr, Jan Jenisch, Mr, Martin Kriegner, Mr, Christof Hassig, Ms, Then Hwee Tan, Mr, Ramanathan Muthu, Mr, Ranjit Shahani, Mr, Mario Gross resigned w,e,f September 16, 2022 due to transfer of ownership of Holderind to Endeavour,
Mr, Praveen Kumar Molri and Mr, Arun Kumar Anand representatives of Life Insurance Corporation (LIC) tendered their resignation w,e,f, April 28, 2022 and September 15, 2022 respectively, pursuant to the withdrawal of their nominations by LIC,
The Independent Directors -Mr, Nasser Munjee, Mr, Shailesh Haribhakti, Mr, Rajendra Chitale and Dr, Omkar Goswami also resigned from your Company w,e,f, September 16, 2022 due to change of control of your Company,
Ms Shikha Sharma - Independent Director resigned for personal reasons w,e,f September 16, 2022,
The Board placed on record its appreciation for the valuable services rendered by all outgoing Directors,
15.2 Key Managerial Personnel
During the FY 2022-23 under review Mr, Neeraj Akhoury, Managing Director & CEO and Ms, Rajani Kesari, Chief Financial Officer resigned w,e,f September 16, 2022, Mr, Rajiv Gandhi, Company Secretary resigned w,e,f December 15, 2022 from your Company,
The Board placed on record its appreciation for the valuable services rendered by Mr, Neeraj Akhoury, Ms, Rajani Kesari and Mr, Rajiv Gandhi
Your Company appointed Mr, Vinod Bahety as Chief
Financial Officer and Mr Ajay Kapur as Whole Time Director & CEO w,e,f September 17, 2022,
15.3 Independent Directors
Your Company''s Independent Directors have submitted requisite declarations confirming that they continue to meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations, The Independent Directors have also confirmed that they have complied with Schedule IV of the Act and your Company''s Code of Conduct,
The Board is of the opinion that the Independent Directors of your Company possess requisite qualifications, experience and expertise in the fields of finance, people management, strategy, auditing, tax and risk advisory services, infrastructure, banking, insurance, financial services, investments, mining and mineral industries and e-marketing and they hold highest standards of integrity,
15.4 Board effectiveness
a. Familiarisation programme for Independent Directors
Over the years, your Company has developed a robust familiarisation process for the newly appointed Directors with respect to their roles and responsibilities, way ahead of the prescription of the regulatory provisions, The process has been aligned with the requirements under the Act and other related regulations, This process inter-alia includes providing an overview of the cement industry, your Company''s business model, the risks and opportunities, the new products, innovation, sustainability measures, digitization measures etc,
Details of the familiarisation programme are explained in the Report on Corporate Governance and are also available on your Company''s website and can be accessed at https://www,ambuiacement,com/Upload/ PDF/8,-Familiarization-programme,pdf
b. Formal annual evaluation
The Board carries out its annual performance evaluation of its own performance, the Directors individually, as well as the evaluation of the working of its Audit, Nomination & Remuneration, Risk Management, Stakeholders'' Relationship, CSR Committees as mandated under the Act and SEBI Listing Regulations, as amended from time to time, The criteria applied in the evaluation process are explained in the
Report on Corporate Governance, which forms part of this Annual Report.
15.5 Remuneration policy and criteria for selection of candidates for appointment as Directors, Key Managerial Personnel and Senior Leadership positions
Your Company has in place, a policy for remuneration of Directors, Key Managerial Personnel and Members of the Managing Committee (''ManCom'') as well as a well-defined criterion for the selection of candidates for appointment to the said positions, which has been approved by the Board. The Policy broadly lays down the guiding principles, philosophy and the basis for payment of remuneration to the Executive and Non-Executive Directors (by way of sitting fees and commission), Key Managerial Personnel and ManCom.
The criteria for the selection of candidates for the above positions cover various factors and attributes, which are considered by the Nomination & Remuneration Committee and the Board while
selecting candidates. The policy on remuneration of Directors, Key Managerial Personnel is available at the website of your Company and can be accessed at https://www.ambuiacement.com/Upload/PDF/4,-Remuneration-Policy.pdf
The Board has also formulated and adopted the policy on the ''Diversity of the Board''. The details of the same are available at the website of your Company and the weblink is provided in Annexure-1 to this report.
16. NUMBER OF MEETINGS OF THE BOARD & ITS COMMITTEES
Regular meetings of the Board and its Committees are held to discuss and decide on various business policies, strategies, financial matters and other businesses. The schedule of the Board/Committee Meetings to be held in the forthcoming financial year is circulated to the Directors in advance to enable them to plan their schedule for effective participation in the meetings. Due to business exigencies, the Board has also been approving several proposals by circulation from time to time.
During the FY 2022-23, 10 Board Meetings were convened and held, the details of which are given in the Report on Corporate Governance, which forms part of this Annual Report.
During the FY 2022-23 under review, with an objective
of further strengthening the governance standards so as to match with internationally accepted better practices, the Board had reconstituted certain existing Committees to bring more independence; constituted certain new Committees and Sub-committees; and amended / adopted the terms of reference of the said Committees. Most of the Committees consist of
majority of Independent Directors. All Committees
are chaired by an Independent Director. Details of the various Committees constituted by the Board, including the Committees mandated pursuant to the applicable provisions of the Act and SEBI Listing Regulations, are given in the Corporate Governance Report, which forms part of this Annual Report.
17. Independent Directorsâ Meeting
The Independent Directors met on 30th March, 2023, without the attendance of Non-Independent Directors and members of the management. The Independent Directors reviewed the performance of Non-Independent Directors, the Committees and the Board as a whole along with the performance of the Chairman of your Company, taking into account the views of Non-Executive Directors and assessed the quality, quantity and timeliness of flow of information between the management and the Board that is necessary for the Board to effectively and reasonably perform their duties.
18. CORPORATE SOCIAL RESPONSIBILITY
Your Company has constituted a Corporate Social Responsibility (CSR) Committee and framed a CSR Policy. The brief details of CSR Committee are provided in the Corporate Governance Report, which forms part of this Annual Report.
In compliance with Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended, statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities forms part of this Report as Annexure-2.
The CSR Policy and CSR Plan as recommended by the CSR Committee and as approved by the Board is available on the website of your Company and can be accessed at https://www.ambuiacement.com/Upload/ PDF/1,-Corporate-Social-Responsibilitv-Policvgh.pdf Further, the Chief Financial Officer of your Company has certified that CSR spends of your Company for the FY 2022-23 have been utilised for the purpose and in the manner approved by the Board of the Company.
Your Company''s governance structure has well-defined roles and responsibilities, which enable and empower the Management to identify, assess and leverage business opportunities and manage risks effectively. There is also a comprehensive framework for strategic planning, implementation and performance monitoring of the business plan, which inter-alia includes a well-structured Business Risk Management process. To systematically identify
risks and opportunities and monitor their movement, a heat map has been designed comprising two (2) parameters:
a) likelihood of the event and
b) the impact it is expected to have on your Company''s operations and performance.
The risks that fall under the purview of high likelihood and high impact are identified as key risks. This structured process in identifying risks supports the ManCom in strategic decision-making and in the development of detailed mitigation plans. The identified risks are then integrated into your Company''s planning cycle, which is a rolling process to, inter-alia periodically review the movement of the risks on the heat map and the effectiveness of the mitigation plan.
The detailed section on key business risks and opportunities forms part of Management Discussion and Analysis Report, which forms part of this Annual Report.
20. TRANSACTIONS WITH RELATED PARTIES
Your Company has developed a Related Party Transactions (''RPTs'') Manual and Standard Operating Procedures to identify and monitor RPTs.
All transactions with related parties are placed before the Audit Committee as well as the Board for approval. Prior omnibus approval of the Audit Committee and the Board is obtained for the RPTs, which are foreseeable and repetitive. The RPTs are entered with prior approvals of the Audit Committee and the same are subject to audit. A statement giving details of all RPTs is placed before the Audit Committee and the Board of Directors on a quarterly basis. The statement is supported by a certificate from the WTD &CEO and the CFO.
All transactions with related parties during the FY 2022-23 were on arm''s length basis and were in the ordinary course of business. The details of the material related-party transactions entered into during the FY 2022-23 as per the policy on RPTs approved by the Board have been reported in Form AOC 2, which is given in Annexure-3 to this Report.
None of the Directors and the Key Managerial Personnel has any pecuniary relationships or transactions vis-a-vis your Company.
Your Company did not enter into any related party transactions during the year which could be prejudicial to the interest of minority shareholders. No loans / investments to / in the related party have been written off or classified as doubtful during the year under review.
The policy on RPTs as approved by the Board of Directors has been uploaded on your Company''s
website and can be accessed at https://www. ambuiacement.com/Upload/PDF/2,-Related-Partv-Transcation-Policy.pdf
21. TRANSFER OF EQUITY SHARES UNPAID/ UNCLAIMED DIVIDEND TO THE IEPF
In line with the statutory requirements, your Company has transferred to the credit of IEPF set up by the Government of India, equity shares in respect of which dividend had remained unpaid/unclaimed for a period of seven (7) consecutive years within the time lines laid down by the Ministry of Corporate Affairs. Unpaid/unclaimed dividend for seven (7) years or more has also been transferred to the IEPF pursuant to the requirements under the Act.
22. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
Order passed by the National Company Law Appellate Tribunal (NCLAT) in the Matter of Penalty Levied by the Competition Commission of India (CCI)
i) Appeal filed by your Company against the Order of the CCI levying penalty of '' 1,163.91 crore on your Company was heard and dismissed by the NCLAT in July 2018 and CCI''s Order was upheld. Further, your Company has challenged the judgement passed by NCLAT before the Hon''ble Supreme Court in September 2018. The Honâble Supreme Court has admitted your Company''s Appeal and ordered for the continuation of interim order passed by the Tribunal.
ii) Pursuant to a reference filed by the Director,
supplies and Disposals, Government of Haryana, the CCI vide its Order dated January 19, 2017 has imposed a penalty of '' 29.84 crore on your Company. Your Company filed an Appeal before the Competition Appellate Tribunal (COMPAT) and obtained an interim stay on the operation of the said Order. Further, by virtue of Government of India notification, all cases pending before the COMPAT were transferred to the NCLAT and as such. The ''Note of Submission'' is filed as directed by NCLAT and during the FY 2022-23 there is no further development.
Other than the aforesaid, there have been no significant and material orders passed by the courts or regulators or tribunals impacting the ongoing concern status and your 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.
23.1 Statutory Auditor & Auditors'' Report
M/s. S R B C & Co. LLP, Chartered Accountants (ICAI Firm Registration Number 324982E/E300003)were
appointed as the Statutory Auditors of your Company for a period of 5 years to hold office from the conclusion of the 39th AGM till the conclusion of the 44th AGM to be held in 2027. The Auditors have also furnished a declaration confirming their independence as well as their arm''s length relationship with your Company as well as declaring that they have not taken up any prohibited non-audit assignments for your Company. The Audit Committee reviews the independence of the Auditors and the effectiveness of the Audit process. The Auditors attend the Annual General meeting of your Company. The Auditorsâ Report for financial year 2022-2023 on the Financial Statement (standalone and consolidated) of your Company forms part of this Annual Report.
The Notes to the financial statements referred in the
Auditorsâ Report are self-explanatory. The Auditorsâ Report is enclosed with the financial statements
forming part of this Annual Report.
Explanation to Auditorsâ Comment:
The Auditorsâ Qualification has been appropriately dealt with in Note No. 65 and 71 of the Notes to the
Audited Financial Statements on Standalone and Consolidated basis respectively.
23.2 Cost Auditor
The cost accounts and records are required to be maintained under Section 148(1) of the Act. They are duly made and maintained by your Company. In terms of the provisions of Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Board has on the recommendation of the Audit Committee appointed M/s P.M. Nanabhoy & Co. Cost Accountants (ICWAI Firm Registration No.000012) as the Cost Auditors, to conduct the cost audit of your Company for the financial year ending March 31, 2023, at a remuneration as mentioned in the Notice convening the 40th AGM.
As required under the Act read with the Companies (Cost Records and Audit) Rules, 2014, the remuneration payable to Cost Auditors must be placed before the Members at a general meeting for ratification. Hence, a resolution for the same forms part of the Notice of the ensuing AGM.
M/s P.M. Nanabhoy & Co. Cost Accountants have confirmed that the cost records for the financial year ended December 31, 2021 are free from any disqualifications as specified under Section 141 (3) and proviso to Section 148(3) read with Section 141(4) of the Act. They have further confirmed their independent status. The cost audit report for the FY 2021 was filed before the due date with Ministry of Corporate Affairs.
23.3 Secretarial Auditor and Secretarial Audit Report
In terms of the provisions of Section 204 of the Act read
with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had
appointed M/s. Mehta & Mehta, Company Secretaries in Practice, Mumbai, as the Secretarial Auditor for conducting Secretarial Audit of your Company for the financial year ended March 31, 2023.
The report of the Secretarial Auditor is given in
Annexure-4. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.
24. MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF YOUR COMPANY
There are no material changes and commitments, affecting the financial position of your Company, which has occurred between the end of FY 2022-23 and the date of this report.
The Board of Directors reaffirm their continued commitment to good corporate governance practices. During the FY 2022-23 under review, your
Company complied with the provisions relating to corporate governance as provided under the Listing Regulations. The compliance report together with a certificate from your Companyâs auditors confirming the compliance is provided in the Report on Corporate Governance, which forms part of this Annual Report.
Board Policies
The details of the policies approved and adopted by the Board as required under the Act and SEBI Listing Regulations are provided in Annexure-1 to this report.
26. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
The Business Responsibility and Sustainability Report, describing the initiatives taken by your Company from environment, social and governance perspective, for the FY 2022-23, forms part of this Annual Report as required under Regulation 34(2)(f) of the Listing Regulations.
Your Company had 4,146 employees on standalone basis as on March 31, 2023.
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
are given in Annexure-5 to this Report.
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 the first provision of section 136(1) of the Act, the Annual Report and Accounts are being sent to the Members and other entitled thereto, excluding the aforesaid information. The said information is available for inspection by the Members at the registered office of your Company during business hours on working days upto the date of the ensuing AGM. Any Member, who is interested in obtaining these, may write to the Chief Financial Officer or your Company Secretary at the Registered Office of your Company.
28. REPORTING OF FRAUDS BY AUDITORS
During FY 2022-23 under review, neither the
Statutory Auditors nor the Secretarial Auditor have reported to the Audit Committee of the Board, under Section 143(12) of the Act, any instances of fraud committed against your Company by its officers or employees, the details of which would need to be mentioned in this Report.
29. ANNUAL RETURN
Pursuant to the provisions of Section 134(3)(a) and Section 92(3) of the Act read with Rule 12 of
the Companies (Management and Administration) Rules, 2014, the draft of the Annual Return of your
Company for the financial year ended March 31, 2023 is uploaded on the website of your Company and can be accessed at www.ambuiacement.com
30. COMPLIANCE WITH SECRETARIAL STANDARDS
The Board of Directors affirms that your Company has complied with the applicable Secretarial Standards (SS) issued by the Institute of Company Secretaries of India, which have mandatory application during the FY 2022-23 under review,
31. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The disclosures required to be made under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, on
Conservation of Energy , Technology Absorption and Foreign Exchange Earnings and Outgo is as follows:
A) Conservation of Energy
(a) The steps taken or impact on conservation of energy:
1. Installation of medium voltage variable frequency drives (''MVVFD'') & low
voltage variable frequency drives (''LVVFD'') for process fans across all ACL plants (Ambuja nagar, Bhatapara, Maratha & Panvel)
2. Burner upgradation at Ambuja nagar, Bhatapara, Rauri, Suli & Maratha
3. Replacement of Component Cooling Water (CCW) Pump with higher efficiency pump (Bhatapara)
4. Reduction in Station Heat Rate (SHR) and auxiliary power consumption by replacing vacuum pump. (Rabriyawas)
5. Installation of LED Lights at Plant and Colony at various location across all plants
6. Optimisation of grinding aid consumption in cement mill across all plants
7. Reduction in Specific Thermal Energy Consumption (STEC) by installation of high level controller in Bhatapara (Kiln - 1)
8. Reduction in (Specific Electric Energy consumption) SEEC Grinding by installation of Mill master (Ropar, Bhatinda, Nalagarh)
9. Improvement in both STEC & SEEC by cooler replacement at Rabriyawas
10. Replacement of 50% traditional HSD usage with PYROLITIC oil in heavy mobile equipment.
11. Replacement of separators in mills [Raw mill / Cement mills] to improve
productivity
12. Maximising utilisation of renewal energy & power from WHRS
13. Utilization of electric & Liquified
Natural Gas (LNG) vehicle at Ambuja nagar
14. Focus on Productivity Rate Index (''PRI'') improvement through Computational Fluid Dynamics (''CFD'') studies and through other in house modification at Rauri, Darlaghat, Ambuja nagar (3 kilns), Maratha
Also, additional internal actions have been taken like timely heat balance and maintenance of equipment''s has increased productivity, thus improving energy consumption.
(b) The capital investment on energy conservation equipment :Capex ~
1. Power saving in by installing VFD, LVFD & MVVFD
2. 2 nos. High efficiency Condensor Cooling Water (CCW) Pumps for TPP
3. 1 no. Vacuum Pump in place of Steam-jet air ejectors (SJAE)
4. 4 no. burner upgradation
5. AFR feeding system upgradation -Solid & Liquid
6. Installation of Gas by-pass system for increasing AF utilization
7. New AFR feeding system, with increased capacity
8. Installation made for increasing utilization of wet / conditioned fly ash
9. 3 nos. of separator replacement
10. Fibre Reinforced Plastic (FRP) blade fan installation for Captive Power plant (CPP)
(c) Steps taken for alternate source of
utilisation:
1. ~1.24 Lakh units of power, generated
from WHRS installed at Rabriyawas, Bhatapara & Rauri has been consumed in above period. WHRS at Suli plant to be commissioned soon.
2. 1.09 Lakh unit of renewal power [own Certificate Purchased] during the reporting period
3. Thermal Substitution Rate (TSR %) increase by 71 bps as compared to 2021.
B) Technology Absorption
(a) Efforts made towards Technology
Absorption:
1. Installation of mill master to improve productivity of cement mill
2. Installation of high-level control to improve productivity of kiln
3. Technical Information system (TIS) Installation at plant locations along with PACT dashboard for close monitoring of process data
4. Close Monitoring & Rescheduling of colony and plant lighting (b) Information regarding Technology Imported during period Jan''22 - Mar''23:
Details of Projects involved in Imports |
Status |
New XRF at Ambuja nagar, Rabriyawas & Ropar |
Fully Absorbed |
X-ray Analyser at Bhatapara |
Fully Absorbed |
Mill Master installation at Bhatinda, Nalagarh, Roorkee & Farakka |
Fully Absorbed |
TIS installation at Ambuja nagar, Rabiriyawas & Farakka |
Fully Absorbed |
Shredder spares [Cutting table, Side & Central Comb, Hydraulic pump, Hydraulic Motor] at Maratha & Ambuja nagar |
Fully Absorbed |
Burner Replacement at Ambuja nagar, Maratha & Darlaghat |
Fully Absorbed |
WHRS System at Rauri, Suli & Bhatapara (Kiln -1) |
Partially Absorbed |
Ecostar Screen shaft assembly at Maratha & Ambuja nagar |
Partially Absorbed |
Retrofitting of LNG kits in 16 nos Tippers, Tip-Trailers & Bulkers at Ambuja nagar Mines |
Fully Absorbed |
Screw conveyor set for Split hopper at Ambuja nagar |
Partially Absorbed |
Replacement of Cutting Mill (Lab) |
Fully Absorbed |
Replacement of Brokk machine at Ambuja nagar |
Fully Absorbed |
Complete Cooler Replacement at Rabriyawas |
Fully Absorbed |
ATS Crane Winch Gear Box at Ambuja nagar |
Partially Absorbed |
PGNNA analyser for limestone stacker belt at Ambuja & Gajambuja unit at Ambuja nagar |
Fully Absorbed |
Cutting Rotor set at Maratha |
Fully Absorbed |
Chain Conveyor accessories at Maratha |
Partially Absorbed |
Replacement of Bomb calorimeter at CPP at Maratha |
Fully Absorbed |
Replacement of Kiln& Cooler CCTV System at Maratha |
Fully Absorbed |
(c) Benefits derived (Cost reduction, product improvement/improvement, Import substitution):
1. Improvement in clinker factor by increasing clinker reactivity and intern increasing the Flyash usage.
2. AFR use brings down the requirement of conventional fuels.
3. Solar power saves fuels used and impacts heavily on electricity cost.
4. Energy saving through initiative
like Variable Frequency Drive
(VFD) installation, LED lights and optimisation.
C) There is no major Expenditure for R&D for the
period of Jan''22 - Mar''23, as various projects were executed. However, expansion plan for laboratory is under progress.
D) Foreign Exchange Earnings and Outgo
'' Crore |
|
Foreign Exchange earned |
5,002 |
Foreign exchange outgo |
2,214 |
32.1 The WTD & CEO of your Company is not drawing any remuneration or commission from any of the subsidiary of the Company.
32.2 Your Company has taken appropriate insurance for all assets against foreseeable perils.
32.3 There were no material changes and commitments affecting the financial position of your Company between the end of the financial year and the date of this report.
32.4Your Company has not issued any shares with differential voting rights/sweat equity shares.
32.5 There was no revision in the Financial Statements.
32.6 There has been no change in the nature of business of your Company as on the date of this report.
32.7 There are no proceedings, either filed by Company or filed against Company, pending under the Insolvency and Bankruptcy Code, 2016 as amended, before National Company Law Tribunal or other courts during the FY 2022-23.
32.8 Prevention of Sexual Harassment of Women at the Workplace
As per the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and rules made thereunder, your Company has constituted Internal Complaints Committees (ICs) at all relevant locations across India to consider and resolve the complaints related to sexual harassment. The ICs includes external member with relevant experience. The ICs, presided by senior women,conduct the investigations and make decisions at the respective locations. The ICs also work extensively on creating awareness on relevance of sexual harassment issues, including while working remotely. During FY 2022-23 under review, there was no complaint pertaining to sexual harassment. All new employees go through a detailed personal orientation on anti-sexual harassment policy adopted by your Company.
33. DIRECTORS* RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information and explanations
obtained by them, your Directors make the following statement in terms of Section 134 of the Act:
a) that in the preparation of the Financial Statements for the extended Financial year ended March 31, 2023, the applicable accounting
standards have been followed along with proper explanation relating to material departures, if any
b) that such accounting policies as mentioned in Note 3 of the Notes to the Accounts have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as on March 31, 2023, and of the profit of your Company for the year ended on that date
c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities
d) that the annual accounts have been prepared on a going concern basis
e) that proper internal financial controls laid down by the Directors were followed by your Company and such internal financial controls are adequate and were operating effectively
f) that proper systems to ensure compliance with the provisions of all applicable laws have been devised and such systems were adequate and were operating effectively
The Directors express their deep sense of gratitude to the Central and State Government Ministries and departments, shareholders, customers, business associates, bankers, employees, trade unions and all other stakeholders for their support and look forward to their continued assistance in future.
For and on behalf of the Board of Directors For Ambuja Cements Limited
Gautam Adani
Ahmedabad Chairman
2nd May 2023 DIN : 00006273
Dec 31, 2018
2. Operational and Financial performance - 2018.
Financial Performance at glance.
Amount Rs, in crores
Standalone |
Consolidated |
|||
Current Year 31-12-2018 |
Previous Year 31-12-2017 |
Current Year 31-12-2018 |
Previous Year 31-12-2017 |
|
SUMMARISED PROFIT AND LOSS |
||||
Sales (Net of excise duty) |
10,977.00 |
10,250.18 |
25,419.00 |
23,126.08 |
Profit before finance cost, depreciation & |
2,266.44 |
2,299.23 |
4,382.23 |
4,180.19 |
amortization expense and exceptional item |
||||
Finance costs |
82.33 |
107.19 |
170.50 |
205.78 |
Gross Profit |
2,184.11 |
2,192.04 |
4,211.73 |
3,974.41 |
Depreciation and amortization expense |
548.09 |
572.92 |
1,153.94 |
1,219.45 |
Add: Share of profit of associates and joint ventures |
- |
- |
12.53 |
12.77 |
Less: Exceptional item |
129.95 |
- |
151.78 |
- |
Profit before Tax and Non Controlling Interest |
1,506.07 |
1,619.12 |
2,918.54 |
2,767.73 |
Tax expense |
19.06 |
369.55 |
(54.15) |
822.85 |
Profit after tax but before non controlling interest |
1,487.01 |
1,249.57 |
2,972.69 |
1,944.88 |
Less: non controlling interest |
- |
- |
795.29 |
428.52 |
Net profit for the year |
1,487.01 |
1,249.57 |
2,177.40 |
1,516.36 |
MOVEMENT IN OTHER EQUITY |
||||
Balance as per last account |
1,303.52 |
687.18 |
1,843.76 |
992.48 |
Net profit for the year |
1,487.01 |
1,249.57 |
2,177.40 |
1,516.36 |
Add : other comprehensive income |
2.09 |
3.41 |
(0.17) |
4.32 |
Less: Dividend on equity shares (including interim) |
397.13 |
555.98 |
397.13 |
555.98 |
Less: Corporate dividend tax on above |
52.65 |
80.66 |
81.82 |
113.42 |
Closing balance |
2,342.84 |
1,303.52 |
3,542.04 |
1,843.76 |
3. Dividend for the year 2018.
The company has a robust track record of rewarding its shareholders with a generous dividend pay-out (both interim & final). However, with a view to conserve resources for the upcoming expansion & other capital expenditure projects, the Company did not declare the Interim Dividend during the year 2018. The Board of Directors is now pleased to recommend a dividend of Rs, 1.50/- per share (75%) which will result in the total pay-out of Rs, 332 crores, inclusive of dividend distribution tax of Rs, 34 crores. This represents a pay-out ratio of 31%.
The dividend pay-out is in accordance with the Company''s Dividend Distribution Policy, which is
annexed as Annexure - I of this report. The policy is also available on the website of the Company and can be accessed through the web link:https://www.ambujacement.com/Upload/ PDF/dividend-distribution-policy.pdf
Credit rating.
The Company enjoys a good reputation for its sound financial management and its ability to meet financial obligations. CRISIL, the reputed Rating Agency, has re-affirmed the highest credit rating of CRISIL AAA/ STABLE for the long term and CRISIL A1 for the short term financial instruments of the Company.
4. Market situations that tested our cement''s strength.
Structural reforms and policies ushered the economy to a high growth path which was reflected in the construction, commercial, infrastructure and cement industries. It restored confidence in the domestic and international communities. GDP increased to 6.7% in 2017-18. With a balanced demand and supply, cement sector recorded robust growth of 9% for FY 2018 despite the initial hiccups due to GST.
Ambuja''s cement sales in 2018 grew by 5.4% to ~ 24.18 million tonnes as compared to 22.95 million tonnes 2017 on the back of continued focus on core markets and retail push strategy.
The Master Supply Agreement, a maiden initiative by Ambuja and ACC, helped unlock mutual benefits from various areas of synergies.
Excelling through deeper engagement with customers.
In line with company''s vision to promote sustainable construction practices our Technical Support (TS) team has started promoting sustainable construction practices through our Twenty-Eight Ambuja Knowledge Centres (AKCs) in core markets. Through AKC platform, the Company promotes sustainable products & solutions amongst its customers, architect, mason''s etc. Today, this platform is digital and its reach has considerably widened, thus living up to its objective of becoming a digital service that informs, interacts and engages.
PREMIUM PRODUCTS - SUSTAINABLE INNOVATIONS
Products Developed From Concrete Insights. Ambuja has continued the approach of discovering latent customer needs, developing and scaling up solutions at market place with a systematic go-to- market platform developed with support from our parent, LafargeHolcim.
This has enabled the company to successfully continue the launch of new products with added focus on premium products and helped scale up sales of premium products by 38% on YoY basis - Ambuja Plus Roof Special: 27% YoY growth and Ambuja Compocem: 125% YoY growth. This was possible due to enhanced consumer trust on product quality, brand promise and other beneficial features extended to consumers. The new products not only fulfil important customer needs but also help in significantly reducing the carbon footprint.
AMBUJA PLUS COOL WALLS
The planet''s heating up, so we made cooler cement.
Ambuja Plus Cool Walls was launched last year as an environment friendly, strong and cool wall solution. During 2018, this product expanded to nine core states in India and 67,250 cubic meters were sold through eight operating units. The target for 2019 is to achieve 100% growth by expanding the product reach in operating markets.
AMBUJA PURA SAND
Aggregate is the most important natural resource for making mortar and concrete in construction. Day by day depleting natural resources like river sand has become a challenge for consumers as well as for entire construction industry. Looking this Ambuja has launched "PuraSand", which is a premium quality manufactured sand for plastering application. The unique feature of Ambuja "PuraSand" is 100% purity (free from impurities), perfectly graded, Zero wastage and guaranteed weight. The initial response of this product is very much encouraging and company is planning to expand its reach to all its important markets.
LOGISTICS AND SURFACE TRANSPORT Distribution Safety
In line with its commitment to Lafarge Holcim''s Zero Harm policy, Ambuja has taken long strides in improving distribution safety in its end-to-end logistics operations. Technology enabled real time monitoring of safety KPIs resulted in a substantial improvement in safe KM from 53% in 2017 to 79% in 2018. During the year, In Vehicle Monitoring System (IVMS) was fitted in over 7000 vehicles and e-passports distributed across all plants. Over 1300 drivers were trained through a structured training process as per stringent global standards.
Capability Building
In order to have sustainable solutions to mitigate challenges of availability of rail wagons; coupled with demand fluctuations, efforts were made to balance mode-mix and insulate the organization.
The organization now is well prepared to meet any situation and ensure 100% evacuation under any circumstances. Planned augmentation of road fleet, use of external sidings and network optimization were key drivers of capability building.
Cost Leadership
Led by high fuel cost, change in tax structure (GST) and high cost of packing bags, cost was always under pressure throughout the year.
Sharp focus on network optimization, change in mode-mix, re-negotiation of transportation contracts enabled the organization to take maximum advantage of cost optimization initiatives. These initiatives will result in recurring cost benefits and enable Ambuja for superior logistic performance in the coming years.
Technology
Acknowledging the importance of real time control over logistic operations, the company has initiated various technical initiatives towards the use of advanced SCM practices and digitization of end-to-end process.
We were amongst the first in the industry to implement Transport Control Tower (TCT) for real time control over logistic KPIs. The first phase derived substantial benefits in distribution safety; and in the second phase, these analytics are being used to optimize cost and improve customer service.
People Management
Logistics organization was restructured to create a lean and seamless structure to control end to end logistics operation from inbound to outbound. The reorganized structure now has a blend of experienced and young leaders. The global capability of LafargeHolcim is being used to give global exposure to SCM professionals. Recruitment of young talent is being done in a structured manner to ensure an uninterrupted availability of quality professionals. These people initiatives will help Ambuja become the best in class SCM organization in India and globally too.
5. Cost developments.
On the cost front, the company witnessed significant pressure over the course of the year due to increase in various input costs. These increases were caused largely due to external factors and also affected many other industries. Crude prices, raw material costs and even fuel costs saw a significant rise in prices. To limit the impact of such cost increases, the company improved its efficiency, fuel mix optimization and strategic sourcing. Such internal initiatives and measures helped restrict the costs from rising to even higher levels.
Major cost movements.
i) Raw Material costs constituted approximately 10% of the total expenses. The cost of major raw materials increased by 6% over the previous year on a per tonne basis. This increase was largely because of an increase in the cost of fly ash. This was however mitigated through optimal sourcing and a judicious change in the gypsum mix, which helped the company to restrict the increase in gypsum cost by only 1% in comparison to the previous year. The company also saw a reduction in the per tonne cost of Bauxite and Iron Dust, which further helped to reduce the impact of the rising cost of raw materials.
ii) Power and fuel costs constituted approximately 25% of the total expenses.
In 2018, we saw a significant increase in fuel price as compared to 2017. This was because of an increase in the prices of imported coal and petcoke. As a result, the power and fuel cost in 2018 increased by more than 8% in comparison to 2017 on a per tonne basis. This impact would have been significantly higher, however, the dynamic fuel mix strategy helped restrict the impact. Over the course of the year, the company was able to remain alert and time and again was able to change its fuel mixes in Kiln and CPP by using a relatively lower cost fuel. The usage of alternate fuels in kiln also increased by 2%. Furthermore, the company consumed 69% of the total power requirement from captive sources, including an increased usage of the Waste Heat Recovery System. Lower rate of purchased power also helped to lower overall power & fuel cost over the previous year.
iii) Freight and forwarding costs constituted 32% of the total expenses. On a per tonne basis, the cost increased by 8%. This increase was largely due to 17% increase in diesel prices in comparison to the previous year. To tackle this, the company took up various logistical initiatives such as the reduction of rail lead by 7 km and availing Long term tariff Contract benefit with Indian Railways as well as axle load benefit with transporters. Such initiatives helped offset the impact of higher diesel prices to some extent.
iv) Other expenses that constituted 20% of the total expenses were restricted to an increase of just 1% over the previous year, despite a 10% increase in packing bag cost, which increased because of the PP granule price increase. The company undertook a fixed cost optimization drive and as a result, saw savings in many fixed cost elements. Such initiatives helped to keep other expenses in check.
Cost mitigation measures / efficiency improvement initiatives.
i) To further strengthen the company''s philosophy of Sustainable Operations, central focus was placed on the production of fly ash based PPC. While keeping its PPC in mind, several initiatives were taken up to enhance fly ash consumption to maintain the best-in-class quality.
ii) The company continued its effort of optimizing costs of the fuel mix and worked on its fuel flexibility to mitigate any risks associated with the dynamic fuel market.
All efforts were directed towards using low-cost fuels like pet coke.
6. Expansion projects and new investments.
While bolstering its market position, the company took up several projects to serve its customers in a more efficient, cost-effective, reliable and environment-friendly manner.
Our people are safer, and so is the environment.
The company focused on the consolidation and optimization of its existing capacities in all the three regions. In accordance with its policies of Zero Harm, Clean and Energy Efficient Infrastructure, Cost Efficiency, Environment-friendly material handling systems and Sustainability initiatives, the company ensured the highest standards of safety with the help of the capital investments during the year.
Achievements at a glance.
i) The projects taken up to comply with the new environmental regulations for Dust, SOx and NOx, issued by the Ministry of Environment, Forests and Climate Change (MoEFCC) are in an advanced stage. The total investment is estimated at approximately Rs, 125 crores. Best technologies are being deployed at par with global best practices.
ii) To meet the limestone requirement, the company has invested Rs, 113 crores to purchase approximately 96 hectares
of land at Darlaghat, Ambujanagar, Rabriyawas and Bhatapara.
iii) To strengthen the company''s logistical capability as well as extend its reach to customers, a new railway siding project is in progress at the Rabriyawas unit
in Rajasthan at a cost of Rs, 180 crores. Possession of land taken and ground work for line laying is currently in progress. Other than the line laying work, 70% of the project is complete. As per current timelines, the project is expected to be completed by Q1-2020.
iv) Ambuja acquired a coal block at Gare-Palma sector IV/8 in Chhatisgarh at an e-auction of coal blocks conducted by the Government of India. This, with an estimated investment of Rs, 363 crores, will secure the company''s long-term requirement of fuel. Open cast mining commenced from April 2018 and commercial production from October 2018. The mines development-cum-operation (MDO) contract has been finalized and site development activities are underway for underground mining.
Upcoming Capacities and Investments.
i) In order to secure long-term limestone requirement for the Bhatapara plant, Ambuja acquired a new mining lease at Maldi Mopar. Environmental clearances as well as all other required approvals for the mining lease have already been received. The following two projects are nearing completion:
- Opening of limestone mining with mining infrastructure at Maldi Mopar Mines at an approved cost of Rs, 120 crores.
- Installation of the Limestone
Transportation System for the said mines at an approved cost of Rs, 85 crores.
ii) Setting up of a greenfield integrated plant with a capacity of 3.1 million tonnes clinker, 1.8 million tonnes cement grinding alongwith Captive Power Plant and Waste Heat Recovery System at Marwar Mundwa in Nagaur District of Rajasthan with a total investment of Rs, 2350 crores. The new plant will be commissioned by September, 2020.
iii) In order to secure the long-term limestone requirement of the Ambujangar plant
in Gujarat, the company has acquired a new mining lease at Loadhva. The environmental clearance and other required approvals for the mining lease have already been obtained; and mining equipment delivered. Land acquisition is underway; development and infrastructure work for the mine is in progress and expected to be operationalized by March 2019.
iv) In order to secure long-term limestone requirement of Maratha Cement Works plant in Chandrapur, Maharashtra, the company has acquired a new mining lease at the Nandgaon Ekodi. Environmental clearance and other required approvals for the mining are in progress.
v) To ensure adequate availability of dry fly ash for the North cluster, the company has drawn up plan to invest Rs, 20 crores to install a ''fly ash dryer'' at Ropar. Civil construction and delivery of equipment are in progress.
7. The year 2019 will be one of growth.
demographics, structural reforms, increased digitization, focus on development of infrastructure and housing and acceleration of productive job opportunities. We are certain that with continued thrust and impetus, India will retain its position as one of the high growth economies over the medium term.
The world is confident of India''s growth potential
The confidence in the Indian economy has increased substantially because of the various policy measures taken by the Government and Central Bank.
India''s future growth trend will be driven by structurally positive factors - favorable
8. Key areas of concern.
All this is done while maintaining the appropriate controls to ensure effective and efficient operations and regulatory compliance. Following key risks were identified for 2018:
Compliance with new regulations Regulatory changes have been proceeding at a rapid pace across countries due to changes in climate and environment. Non-compliance to new standards imposes high degree of complexity as it may lead to reputational and financial consequences. To meet business challenges, transformation, up gradation, modification etc. are the different tools which are used to comply with the regulatory changes but these come at a cost.
Various projects across operations within the company have been taken up to comply with the new emission standards (for dust, SOx & NOx) issued by Ministry of Environment and Forest and Climate Change (MoEF & CC). The MoEF & CC vide notifications have stated that Ministry will empanel government institutions of national
Ambuja has a comprehensive framework for risk management covering strategic, operational, compliance, financial and sustainability related risks through the Business Risk Management (BRM) process which is also a part of the yearly business plan. Risk assessment provides not just the mechanism for identifying risks and opportunities but also gives Ambuja a clear view of variables to which the company may be exposed - internal, external or forward-looking.
The BRM process involves identification and prioritization of risks through risk maps, business risk environment scanning and risk assessments. Both approaches -- ''Top down'' and ''Bottom up'' are taken to assess risks / opportunities, which is then consolidated / calibrated to get an overview of the entire organization.
The Risk Management committee under the chairmanship of Mr. Rajendra Chitale, Independent Director, reviews and discusses the risk trends, exposure and potential impact analysis. repute for carrying out compliance monitoring of Environment Clearance conditions of projects and activities.
Securing raw material for business continuity The cement industry is not just capital intensive but highly raw material and energy intensive too, therefore dependent on natural resources
- coal, limestone, water, minerals etc. To ensure business continuity, availability of these materials at a competitive cost and quality is the need of the hour. However, due to the depletion of reserves, volatile prices and rising demand, procurement of such raw materials is a challenge. Ambuja will continue to participate in upcoming auctions to secure raw materials and has already commenced operation of its own Coal Block in Q4 2018.
The Mines and Minerals Development and Regulation Act (MMDRA) notification states that the renewal and grants of mining leases and composite licenses (PL-cum-ML) will only be through auctions.
Creating healthy environment for people''s interests
Continuous change in the global climate has been impacting our areas of operations too. The exact timing and severity of physical effects are difficult to estimate especially in the context of economic decision making. Climate-related risks and its expected transition to a lower-carbon economy is one area of focus.
Being a responsive organization, Ambuja has been responding to the CDP Climate Change questionnaire since the past few years and has resolved to maintain it''s leadership position in the cement sector by further improving its CDP disclosure.
The robust mechanism for capturing and reporting GHG performance as per the WBCSD CSI Ver 3.1 protocol, Ambuja has also accounted for Scope 3 emissions emanating
from its operations. The company has also been responding on climate change risks, strategies and targets as an outcome of robust sustainability and carbon governance in the organization.
Transforming risks to opportunities through digitization
Digitization has deeply embedded in the Ambuja strategy, as most of our businesses activities have been slated for digital transformations, whether from logistics, marketing or manufacturing. The significant advantages of digitization, with respect to customer service, revenue, and cost will certainly reap benefits in the medium to long term. However, in the short term, we need to provide better monitoring and control and more effective regulatory compliance to mitigate any risks arising due to digitization. This could be misuse of hardware and software, interference, loss, unauthorized access, modification and disclosure.
Ensuring non-disruptive transportation to consumption centres
Streamlined logistics is the biggest opportunity for improving margins via cost optimization for cement industry. Beyond 250 km distance, the ideal mode of transportation for cement is rail as compared to road because it is environment friendly, cost efficient and faster. Availability of rakes during peak months has always been a challenge. Besides, the railways'' policies (giving preference to food and power companies) has impacted the planned movement of cement to consumption centres, thereby adversely impacting production schedule and increasing the overall transportation cost.
9. Human Resources.
On leadership development, high potential senior leaders were identified for development programs at premier business schools in India like ISB - Hyderabad and SP Jain Institute of Management and Research - Mumbai. To continue efforts to build a coaching culture, a batch of 60 participants were selected for the Sustainable Talent for Enhanced Performance (STEP) III program, and are now part of this learning journey.
A structured approach towards organization renewal was adopted to create a leaner and flat organization that is more front-line focused and customer-oriented.
Meanwhile, exemplary work was recognized in 2018 and 540 employees from various categories of awards from across locations and functions won accolades under the Rewards and Recognition program.
10. Health and Safety
in our Total Injury Frequency Rate and Loss Time Injury Frequency Rate for the year being 32% and 38% respectively; and below the previous year performance numbers. We have also seen a 35% drop in the number of resultant injuries.
In 2018, two units (Surat and Farakka) achieved Zero Harm, and Zero Loss Time Injury was recorded at Rabriyawas Integrated plant; and six of the eight grinding units -- Surat, Farakka, Roorkee, Dadri, Nalagarh and Bhatinda; and one BCT (Mangalore).
A step forward towards making our workplace safe.
Health & Safety is our Core Value and embodied in the way we run our ''We Care'' programme across the length and breadth of Ambuja.
Despite setbacks in terms of two fatal incidents this year, we have demonstrated our indomitable ICAN spirit by meeting our H&S challenges with determination leading to a step change in both our leading and lagging indicators. Not only have we maintained the momentum that started gathering last year but also improved in tackling frontline issues in a pragmatic way that resulted
A structured approach to streamline functions.
The role of Human Resources has evolved in recent years. Today, it operates in complete partnership with senior leadership and business functions translating strategic priorities into action. The end result: to develop and sustain a culture where every employee is respected and valued for their good work.
The company adopted a balanced approach to talent acquisition, relying both on leveraging the skills and experience already available within the organization, while also bringing in the necessary capabilities that helped position us for long-term sustainable performance. Efforts directed towards strengthening organization''s internal career mobility activities to drive greater career development and retention of employees. The year 2018 also saw campus hiring of 65 Graduate Engineer Trainees.
Our H&S strategy.
We looked at initiatives with five objectives/ pillars in mind:
- onsite fatality elimination
- zero harm culture
- systems & processes
- health
We also set for ourselves micro battles on five of our most significant impact objectives such that we could follow a ''more than robust'' process while executing/ implementing on ground. We also supported this plan through:
- In-depth performance monitoring on a monthly basis and real time implementation of actions from such analysis;
- Greater focus on quality of incident investigations and sharing of lessons. We also looked at consequence management in terms of both positive and negative reinforcements;
- Greater digitization both in health and safety - 50% Health Surveillance records digitized;
- New H&S app introduced to ensure greater proliferation of H&S issues/ incident learning;
- Campaigns/ waves on the following to ensure that units self-assess their H&S processes on a periodic basis:
- Three tier audit system wherein every unit was audited at least once by the corporate.
What we achieved
- 35% reduction in total onsite injuries in 2018 vs 2017;
- Reduction in total offsite injuries (16%) and incidents (20%);
- Behaviour Based Safety (BBS) programme was piloted at Bhatapara Integrated plant which resulted in 94 - 120% increase in visible personal commitment and safe behavior observations;
- The In-Cab training at Ambujanagar and Darlaghat extended to 1269 drivers, recorded drop in injuries amongst our limestone vehicle drivers at Ambujanagar by 70%; and a 20% drop in number of incidents across Ambuja;
- Noise Profiling of all units and 75% units covered with a ''Protect Your Ear'' programme;
- Identifying contractors of high risk activities and commencement of development of these personnel/ team starting with silo cleaning. We have received very heartening response to this effort from our contract partners.
Ambuja is committed to achieving its ambition of Zero Harm and Health & Safety continue to constitute its core values.
11. Leveraging digital technology
Going ahead, the apps will be consolidated to provide one user-experience to our contractors.
Transport control tower for logistics operation Ambuja streamlined its logistics operations by setting up the centralized TCT that uses Telematics technology to monitor logistics transport, type of driving violations, etc. This has helped improve safe Km by above 20%, through one-on-one driver coaching.
Going forward
More value added and exciting features/ benefits have been planned for our dealers and retailers. Additionally, we intend to use Artificial Intelligence to bring in various motivation levers for our sales team so that they can get readymade information on leading and lagging performance indicators which can help them perform better. Similarly, in Logistics our focus will be Paperless Proof of Delivery for our end customers and also streamline our Sales & Operations Planning process. In Manufacturing, we plan to explore the Industry 4.0 features of IoT, Drones, Sensor technology to bring in better productivity and efficiency. Similarly, in finance, we plan to bring in analytical dashboards to monitor financial performance. In HR, we plan to bring a user-friendly platform to enable our employees to learn quicker, faster and anytime, anywhere.
In 2018, digital transformation was part of the Ambuja core strategy to support business objectives like: Sustainable Growth, Customer Satisfaction, Continuous Productivity Improvement and High employee engagement. Some of the major initiatives taken are as follows:
Dealer connect
We have enabled faster reach to our channel partners/ dealers by adding various value-added features on the existing "Ambuja Dealer Connect" platform. One major feature is to provide visibility of credit and debit note to dealers. This initiative has reduced the cost of printing and courier charges significantly for Ambuja and enabled real-time visibility of reports to dealers from anytime, anywhere. This also helped dealers to submit their GST return on time and faster since the data was readily available to them online.
Mobile Apps
- my World: an app developed for Technical Service engineers, my World is a one-stop shop to manage leads, services, influencers, events and content. This has helped strengthen engagement with customers and contractors.
- Estimator: provides customized estimate to home buyers for complete construction, material and fund requirement.
- Gruhrachna: provides different options for Plan & Elevation, Vastu-related tips to homebuyers/ contractors.
12. Sustainability and environment.
Maintaining consistency delivers greater results.
Training its sights to realise its vision to become the most sustainable company in the industry, Ambuja''s teams have consistently strived to achieve excellence and efficiency to improve the level of sustainable performance. 2018 witnessed certain major initiatives and achievements in Sustainability development.
Our system improvement, process efficiency measures and all round performance catapulted the company to achieve the 5th rank globally in the Construction Materials category in the Dow Jones Sustainability Index (DJSI) competing with some of the most sustainable companies the world over. Ambuja is the only Indian cement company to achieve such a high ranking in DJSI.
Focussing on future sustainability goals.
It is imperative to monitor progress with respect to Corporate Sustainable Development targets and goals as defined by the company''s parent
- LafargeHolcim. Our Sustainable development plan -- ''The Plan 2020 / 2030, Building for Tomorrow'' -- has vested an inclusive approach in our project planning and management approach. The four thrust areas of Climate Change, Circular Economy, Water & Nature, as well as People & Community in our Sustainable development plan have acted as the yardstick for developing KPIs and connecting all projects with the overall business objective. The performance results of
2018 show our promising progress towards our intermediate 2020 targets in the above target areas. The company is completely committed to stepping up its efforts year after year to not only meet, but also surpass these targets.
Aligning internal goals with external is hard but necessary.
To endorse the principles of the Sustainable Development Goals (SDGs) and Corporate
Citizenship, Ambuja became a member of the "Indian solutions for the world to achieve SDGs," as part of the Confederation of Indian Industries (CII) and NITI Aayog initiative. Also, Ambuja has mapped its activities against the SDGs and their indicators, which are also reported in our Sustainability reports for 2016 & 2017. This will also be covered in our forth coming SDG Report of 2018.
As part of the company''s product stewardship, the year 2018 witnessed some major milestones. Ambuja developed the Environmental Product Declaration (EPDs) for the low carbon - Portland Pozzolana Cement (PPC) as well as Composite Cement produced at all Ambuja plants. These EPDs were verified by an independent third party and were also listed on the international portal ''Environdec'' for stakeholder communication.
As per our assessment, not only is Ambuja water positive by more than six times in 2018, but every integrated plant and grinding unit is independently water positive. In addition, Ambuja also stepped up to compensate the plastic consumption in the supply chain and recovered about 69000 tonnes of plastic waste from the market and became two times plastic negative in the year 2018.
Over the course of the year, Ambuja focussed on encouraging circular economy usage, renewable energy and sustainable product solutions.
A total of 2.9 lakh tonnes of Alternate Fuel &
Raw Material (AFR) were used that yielded a Thermal Substitution Rate (TSR) of 5.6%. About 8 million tonnes of waste derived raw-materials were used in the company''s circular economy portfolio. This contributed to lowering the clinker factor to as low as 64.99%. Ambuja also made a conscious effort towards substituting its power requirements and in the process, sourced about 6.5% of total power generation through renewable sources. As part of its sustainable and innovative product solutions, Ambuja also encouraged the production of 3.5 lakh metric tonnes of slag based, composite cement in 2018.
Sustainability reporting - Global Green Standards
In 2018, Ambuja published its 11th Sustainability Development Report on the triple bottom line performance for the year 2017. Ambuja displayed its stewardship in aligning with the latest guidelines by preparing the report in accordance with the latest Global Reporting Initiative (GRI) Standard (Comprehensive) with ''Assurance'' by an independent certifying agency, as per the AA1000 assurance standard. The report was aligned to the Sustainable Development Goals (SDG) and CSI indicators as well. The Metal and Mining Sector Supplement of the GRI were also referred to while reporting the company''s sustainability performance to its stakeholders. The company has been consistent in issuing the Business Responsibility Report (BRR) as part of its Annual Report since 2012. The process also entailed a detailed Materiality Review with the company''s internal as well as external stakeholders. From last year the company also initiated reporting its performance against the six capitals (principles of Integrated Report) as a part of this report, and will continue its efforts to transition to a complete Integrated Report in future.
13. Corporate Social Responsibility (CSR)
Improving lives, holistically.
The company''s CSR arm, the Ambuja Cement Foundation (ACF) was established over 25 years ago in 1993, at Kodinar, the first area of Ambuja''s operations. Here, ACF worked with farmers in the immediate neighborhood of our plant with the philosophy that if Ambuja prospers, so will our neighbours.
Today, ACF expanded to 30 locations spread across 11 states on issues ranging from Water Resource Development, Agricultural Livelihoods, Skill and Entrepreneurship Development, Community Health and Sanitation, Women Empowerment to Education, with projects suiting the needs of the geography and community. These programmes are implemented in partnership with different government agencies, development agencies and corporates.
Stakeholder engagement ACF ensures all programmes across locations are based on the needs of the region and engagement of stakeholders. Systematic assessments are carried out annually using the
Social Engagement Scorecard (SES) that rates CSR initiatives across locations.
Stakeholder Engagement Plan (SEP) are formulated at each unit, citing stakeholder concerns relevant to environment, CSR, mining, HR and commercial operations. Implementation and monitoring of stakeholder engagement at all plants is monitored at the corporate level by the Corporate Sustainability Steering Committee (CSSC). Site Specific Impact Assessments (SSIA) are conducted cyclically to apprehend the insights and felt needs of all stakeholders, related to human rights, labor rights, stakeholder conduct at ACL sites. Each site undergoes an assessment every three years.
Water resource management Water Resource Development remains one of our oldest and largest thrust areas and undertakes projects for: Water Harvesting & Conservation (check dams, interlinking rivers, watershed development, etc.), Drinking Water (Roof Rain Water Harvesting Structures - RRWHS, pond deepening, in-village distribution system, water quality surveillance, etc.) and Optimum Utilization (Water User Association, Participatory Irrigation Management (PIM), Promotion of Micro Irrigation). By the end of year 2018, ACF completed construction of 425 check dams, 6684 RRWHS, treated 25209 hectares for Watershed Development, which along with other projects created a cumulative water storage capacity of 54 MCM, across all locations.
As a step towards sustainability of the impact created by the programme, community institutions such as Water User Associations (WUAs), Paani Samiti, Village Watershed Committee (VWC) play significant roles in planning and execution of water project; and are also trained and empowered to ensure post project repair and maintenance of assets created.
Agricultural livelihoods
ACF works to boost farmers'' production capacity
- to make their agriculture more efficient and therefore, more profitable. The Agricultural Livelihoods program fundamentally aims to bridge the existing gap between traditional farm practices and the preferred scientific package practices. For this, ACF organizes them into learner groups, producer groups and ultimately into producer organizations. In 2018, ACF reached out to total 1,75,000 farmers through the agricultural livelihoods program.
The major projects in Agricultural Livelihoods, active across 17 locations are: Better Cotton Initiative (BCI), System of Rice Intensification (SRI), Salinity Ingress Mitigation, Organic Farming, Wadi Development, Fruit and Vegetable Cultivation, Animal Husbandry and Aquaculture. Among these projects, another important project is that of Farmer Producer Organizations (FPO), to build a collective bargaining power of farmers for procurement of inputs and marketing of produce.
Skill and entrepreneurship development institute (SEDI)
SEDIs were initiated by ACF to create suitable skill sets for rural youth, which are in accordance with the needs of the industry.
SEDI courses range across 12 sectors such as hospitality, driving, retail, automobile repair, construction, apparel making, accountancy, healthcare, etc. ACF also develops soft skills to handle the challenges at work and further supports graduates in placement and job retention. In 2018, SEDIs have leapt by 50% with
29 SEDIs across the country now; about 7800 students have graduated from the institutes this year, bringing the cumulative number of skilled youth to over 42000, with 73% of them being gainfully employed. This increasing number of centres and graduates is attributed to our growing partnerships with some lead corporates such ADOR Welding, APM Terminals, Castrol India, Cipla Foundation, Gruh Finance, Godrej Consumer Products, Schneider Electric, Tech Mahindra Foundation, AU Bank, Hindustan Zinc, etc.
Community health and sanitation The Community Health and Sanitation program works under the thrust areas of Maternal, Child and Adolescent Health, Communicable and Non-Communicable Diseases, Total Sanitation and Curative Health.
In the year 2017, responding to the growing burden of Non-Communicable Diseases (NCD) among the rural population, ACF had rolled out a programme on Awareness and Prevention of NCD. In 2018, realizing the extent and the impact of this need, the NCD programme has been expanded, reaching out to 105 villages throughout the country, with scope to expand further in 2019. Further addressing the lifecycle that leads to emergence of NCDs, ACF has also launched programmes addressing Malnutrition in
30 Anganwadis at Dadri. This programme too is designed for further expansion in 2019.
Under community health, ACF also engages with truckers who are large yet vulnerable group of Stakeholders for ACL. ACF in collaboration with Apollo Tyres Foundation runs Health Care Centres for truckers at Surat, Sankrail, Nalagarh and Farakka. In the year 2018, these centres reached out to 66455 truckers, addressing STIs, HIV, common ailments, lifestyle diseases, vision problems and overall safety behavior.
Women empowerment
Women being the pronounced 50% of our host communities, are a special focus of all of ACF programmes.
As a part of the Women Empowerment programme, ACF has formed 2464 Self Help Groups with total 28285 members and a total corpus of Rs, 18.72 crore. At various locations these SHGs have come together to federate themselves into six Women Federations. Other projects boasting female strength are 41 female extension workers in Better Cotton Initiative, 59 PSS and 352 Sakhis. In 2018, 44% of the students graduating in both technical and non-technical trades from our SEDIs were females.
An important achievement in Women''s empowerment is that of the ACF promoted Amrit Dhara Milk Marketing Cooperative Society Limited (ADMMCSL) at Darlaghat, which is an all women run FPC working on a model which addresses the problems related to animal husbandry, right from animal care, veterinary services, to milk collection and marketing.
Education - The only thing our special needs children lacked were opportunities.
Ambuja Manovikas Kendra (AMK) is special facility for intellectually challenged children in Ropar, Punjab and the centre has earned a reputation of being one of the best schools for special children in the vicinity. This school is being currently attended by 93 students and also has 13 under home based rehabilitation. A step further into rehabilitation of the Specially Abled students, AMK initiated a Skill Development Centre in 2017, in partnership with Cipla Foundation. The centre provides training in Bakery, Pottery and Artificial Jewellery making.
ACF has also been working with 118 government schools to support them infrastructure, strengthening School Management Committees, providing e-learning and other Teaching Learning Methodologies. In 2018, ACF in partnership with CII Foundation initiated Make India Play project in 10 schools in Darlaghat. The project aims to bring the zest of organized play among school students in rural India.
Measuring the social impact While we energise our communities through our CSR work, with time we have realized the worth of measuring the impact of our work. Not only does it help us review and improve on our work incrementally, it helps us recognize models that work best and can be scaled and replicated cost efficiently. The CSR projects have been contributing into ACL''s True Value measurement, helping the company comprehend its performance in the sustainability parameters.
The measured impacts of our CSR work has helped us improve our score on the Dow Jones Sustainability Index, taking Ambuja''s rank to 5, among the all construction materials companies globally. In addition, The Institute of Company Secretaries of India (ICSI) has also conferred us with the Best Company for CSR Excellence Award under large corporates and Asia Centre for Corporate Governance & Sustainability presented us the ''Best CSR & Sustainability Practices Award'', both benchmarks not only CSR work, but also our implementation processes and governance to be excellent.
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 II to this Report.
14. Disclosures under the Companies Act, 2013 and Listing Regulations.
Extract of Annual Return.
The details forming part of the extract of the annual return in Form MGT-9 is provided as Annexure III of this Report.
Number of Board Meetings.
The Board of Directors met 7 (seven) times in the year 2018. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report forming part of this Report.
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.
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 https://www. ambujacement.com/Upload/PDF/policy_on_ determining_materiality_of_rpt_28_oct_2015_ revised.pdf
All the related party transactions are entered on an arm''s length basis in the ordinary course of business and adheres to 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 a 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 before the commencement of the new financial year, for the transactions which are repetitive in nature and also for the transactions which are not foreseen (subject to financial limit). A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms & conditions of the transactions. The statement is supported by the certification 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 to Section 134(3)(h) of the Companies Act 2013 and Rule 8(2) of the Companies (Accounts) Rules 2014, the particulars of the material contract or arrangement entered into by the company with related parties referred to in Section 188(1) in Form AOC-2 is attached as Annexure IV of this Report.
Renewal of Agreement for Payment of Technology & Know-how fees to Holcim Technology Ltd.
The Members at the previous Annual General Meeting passed an Ordinary Resolution approving the renewal of Agreement for payment of Technology & Know-how fees to Holcim Technology Ltd. (a Related Party) for a further period of 3 years w.e.f. 1st January, 2018 on the same terms & conditions as that of the previous Agreement, including the payment of fee @1% of the net sales of the Company. Since the resolution was proposed as Related Party Transaction, all the related parties abstained from voting. Further, the Competent Authorities of India and Switzerland under the Bilateral Advance Pricing Agreement (BAPA) has confirmed the Arm''s Length rate for payment under the said TKH Agreement @1% of net sales.
Policy on Sexual Harassment of Women at Workplace.
The company has zero tolerance towards sexual harassment at the workplace and to 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, no complaints were received by the company. No cases of child labour, forced labour, involuntary labour and discriminatory employment were reported during the period.
The company is committed to providing a safe and conducive work environment to all its employees and associates.
15. Corporate Governance
The company has complied with the corporate governance requirements under the Companies Act, 2013 as stipulated under the Listing Regulations. A separate section on corporate governance along with a certificate from the statutory auditors confirming compliance is annexed and forms part of this report.
16. Internal audits and controls
To keep things under control
The Company believes that a strong internal control framework is an important pillar of Corporate Governance. It has established internal control mechanisms commensurate with the size and complexity of its business. A strong Internal Control framework is established through right tone at the top for good corporate governance which serves as a foundation for excellence and the same is embedded in operations through its policies and procedures. Employees of the Company are guided by the Company''s ''Code of Conduct''.
The Company has laid down Internal Financial Controls as detailed in the Companies Act, 2013 and has covered all major processes commensurate with the size of business operations. These have been established at the entity & process levels and are designed to ensure compliance to internal control requirements, regulatory compliance and appropriate recording & reporting of financial & operational information. The Company has reviewed and sustained internal financial controls by adopting a systematic approach to evaluate, control design and operating effectiveness.
As the first line of defence, primary responsibility for design & establishment of internal controls and its operating effectiveness lies with the management in their respective areas of operation. Internal control frameworks and procedures documented in the form of Internal Controls Manuals, Standard
Operating Procedures, Accounting Guidelines including regular management reporting and monitoring thereof. Policies and procedures are reviewed periodically for any changes required, to changing business needs as well as improvements in processes to strengthen the internal control systems. Authorization Matrices for financial transactions are derived based on Board decisions.
Over the years, the formal and independent evaluation of internal controls is conducted for the effective compliance of Section 138 of the Companies Act 2013 and relevant statutes applicable to the Lafarge Holcim group.
To ensure that controls work as designed The company has a strong and independent in-house Internal Audit (IA) department that functionally reports to the Chairman of the Audit Committee, thereby maintaining its objectivity. Remediation of deficiencies by the IA department has resulted in a robust framework for internal controls.
The scope and authority of the Internal Audit function is defined in the Internal Audit Charter. To maintain its objectivity and independence,
the IA function reports directly to the Chairman of the Audit Committee. The IA team develops risk-based annual internal audit plan which is approved by the Audit Committee. In addition Audit Committee also reviews compliance to the IA plan. The IA team monitors and evaluates the efficacy and adequacy of internal control systems, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action(s) in their respective area(s) and thereby strengthen the controls, mitigate risk. The IA department provides independent assurance to the Audit Committee, the Board, the senior management and the regulators regarding the effectiveness of the company''s governance & controls. Significant audit observations and corrective action(s) thereon are presented to the Audit Committee. The Audit Committee reviews the reports submitted by the Internal Auditors in each of its meeting. Recommendations of Internal Audit are mainly focused on Process Design, Process Compliance, Process Improvement and Statutory compliance. It mainly focus on mitigating existing risk and identifying improvement opportunity.
17. Managing the risks of fraud, corruption and unethical business practices.
Vigil mechanism / Whistle blower policy -protecting those who speak up, by listening.
Creating a fraud and corruption free culture has always been at Ambuja''s core. In view of the potential risk of fraud, corruption and unethical behavior that could adversely impact the company''s business operations, performance and reputation, Ambuja has emphasised even more on addressing these risks. To meet this objective, a comprehensive Ethical View Reporting Policy akin to Vigil Mechanism or the Whistle-blower policy has been laid down. In
terms of the said Policy, all the reported incidents are reviewed by a designated Committee.
Based on an in-depth review, all such incidents are 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 victimized or harassed for reporting and bringing up such incidents in the interest of the company.
No personnel have been denied access to the Audit Committee pertaining to the Ethical View Policy. The implementation of the Ethical View Policy is overseen by the Audit Committee.
More details on this Policy are given in the Corporate Governance Report, which forms part of this Report. The Ethical View Reporting Policy is available on the company website: www. ambujacement.com
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.
ANTI-BRIBERY AND CORRUPTION DIRECTIVES (ABCD)
We''re only intolerant to corruption.
In furtherance to the company''s philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down ''ABC Directives'' as part of the company''s Code of Business Conduct and Ethics. As a company, Ambuja has zero-tolerance to bribery and corruption and is committed to act professionally and fairly in all its business dealings. To spread awareness about the company''s commitment to conduct business professionally, fairly and free from bribery and corruption and as part of continuous education to the employees on ''ABC Directives'', mandatory online training & testing through a web-based application tool was conducted for approximately 3000 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.
18. Board of Directors and key managerial personnel.
Cessation.
Mr. Ajay Kapur (DIN 03096416) MD & CEO, after an illustrious career of 26 years with the Company, decided to pursue his career outside the cement industry and accordingly resigned from the Board w.e.f. 1st March, 2019. His five year term as MD & CEO was to expire on 24th April, 2019.
Mrs. Usha Sangwan (DIN 07238383), Director (representing Life Insurance Corporation of India) resigned from the Board w.e.f. 21st December, 2018.
Mr. Haigreve Khaitan (DIN 00 005290), who was appointed as an Independent Director and who holds office up to 31st March, 2019 has conveyed that he does not intend to seek re-appointment for the second term due to personal commitment and will ceased to be a Director upon completion of his current term.
Mr. B.L. Taparia (DIN 00016551) will retire by rotation at the ensuing Annual General Meeting of the Company in accordance with the provisions of Section 152 and Article 147 of the Articles of Association of the company. Mr. Taparia, who is eligible for re-appointment, has conveyed that he does not intend to seek re-appointment and will retire upon completion of his current term at the ensuing Annual General Meeting.
The Board placed on record its appreciation for the valuable services rendered by Mr. Ajay Kapur, Mrs. Usha Sangwan, Mr. Haigreve Khaitan and Mr. B.L. Taparia.
Retirement by rotation.
Mr. Jan Jenisch (DIN 07957196) and Mr. Roland Kohler (DIN 08069722) 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.
APPOINTMENT.
Mr. Nasser Munjee (DIN: 00010180),
Mr. Rajendra Chitale (DIN: 00015986),
Mr. Shailesh Haribhakti (DIN: 0007347) and Dr. Omkar Goswami (DIN: 00004258) as Independent Directors Mr. Nasser Munjee, Mr. Rajendra Chitale,
Mr. Shailesh Haribhakti and Dr. Omkar Goswami were appointed as Independent Directors of the Company pursuant to Section 149 of the Companies Act, 2013 for the first term of 5 years and will hold office up to 31stMarch, 2019. Considering their knowledge, expertise and experience in their respective fields and the substantial contribution made by these Directors during their tenure as an Independent Director since their appointment, the Nomination & Remuneration Committee and the Board has recommended the re-appointment of these Directors as Independent Directors on the Board of the Company, to hold office for the second term of five consecutive years commencing from 1st April, 2019 up to 31st March, 2024 and not liable to retire by rotation. The Company has received declaration from all these Directors that they continue to fulfil the criteria of independence as prescribed under the provisions of the Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Regulation 16 of the Listing Regulations (including statutory re-enactment thereof for the time being in force).
In terms of the provisions of Section 160(1) of the Companies Act, 2013, the Company has received a Notice from a Member signifying his intention to propose the candidature for the reappointment of Mr. Nasser Munjee, Mr. Rajendra Chitale, Mr. Shailesh Haribhakti and Dr. Omkar Goswami for the office of Independent Directors not liable to retire by rotation.
Ms. Then Hwee Tan (DIN 08354724)
Ms. Then Hwee Tan has been appointed as an Additional Director w.e.f. 18th February, 2019. As Additional Director, Ms. Then Hwee Tan shall hold the office up to the date of the ensuing Annual General Meeting and being eligible, has offered herself to be appointed as a Director liable to retire by rotation. The Company has received a notice from a Member under Section 160 (1) signifying his intention to propose the candidature of Ms. Then Hwee Tan for the office of Director.
The Nomination Committee and the Board of Directors recommends her appointment.
Mr. Mahendra Kumar Sharma (DIN 00327684) and Mr. Ranjit Sahani (DIN 00103845)
Pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Mahendra Kumar Sharma and Mr. Ranjit Sahani are proposed to be appointed as a Non Independent Directors (representing LafargeHolcim Group) liable to retire by rotation w.e.f. 1st April, 2019.
In terms of the provisions of Section 160(1) of the Companies Act, 2013, the Company has received a Notice from a Member signifying his intention to propose the candidature for the appointment of Mr. Mahendra Kumar Sharma and Mr. Ranjit Shahani as Directors liable to retire by rotation.
The Nomination & Remuneration Committee and the Board of Directors recommends their appointment.
Ms. Shikha Sharma (DIN 00043265)
The Nomination and Remuneration Committee and the Board after evaluating the profiles of suitable Women candidates have shortlisted Ms. Shikha Sharma to be appointed as a Women Independent Director on the Board.
The Company has received a notice from a Member signifying his intention to propose the candidature of Ms. Sharma for the office of Independent Director.
The Company has also received declaration from her that she fulfil the criteria of independence as prescribed under the provisions of the Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Regulation 16 of the Listing Regulations (including statutory re-enactment thereof for the time being in force).
If appointed as an Independent Director, Ms. Shikha Sharma shall hold office w.e.f. 1st April, 2019 for a period of five years and shall not be liable to retire by rotation.
The Nomination Committee and the Board of Directors recommends her appointment. The appointment of Ms. Sharma on the Board will also fulfil the requirement of the amended Listing Regulations, which requires top 500 Listed Companies by market capitalization to have a Woman Independent Director by 1st April, 2019.
Mr. Praveen Kumar Molri (DIN 07810173) Consequent to the stepping down of Mrs.
Usha Sangwan from the Board, Life Insurance Corporation of India (LIC) has nominated Mr. Praveen Kumar Molri as their representative on the Company''s Board. In terms of Section 160(1) of the Companies Act, 2013, the Company has received a notice from a Member signifying his intention to propose the candidature of Mr. Molri as a Director, liable to retire by rotation.
The Nomination Committee and the Board of Directors recommends his appointment.
Mr. Bimlendra Jha (DIN 02170280)
Mr. Bimlendra Jha has been appointed as an Additional Director w.e.f. 18th February, 2019 and as a Managing Director & CEO for a period of five years w.e.f. 1st March, 2019.
More details about the Directors are either given in the Corporate Governance Report or in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.
Attributes, qualifications & independence of Directors and their appointment.
The Nomination & Remuneration Committee of Directors has approved a Policy for the Selection, Appointment and Remuneration of Directors, which inter-alia, requires that the Directors shall be of high integrity with relevant expertise and experience to have a diverse Board. The Policy also lays down the positive attributes/criteria while recommending the candidature for the appointment of a new Director.
The Board Diversity Policy of the company requires the Board to comprise of a 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 and educational qualifications, both individually as well as 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 reappointment.
The relevant abstract of the Policy for Selection, Appointment & Remuneration of Directors is given as Annexure V of this Report.
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.
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 for the year 2018 was carried out. For this purpose an external consultant was engaged to review the existing evaluation process. The external consultant, after detailed review, found the review process to be satisfactory. However, they had suggested re-organization of the evaluation templates and the rating matrix coupled with the inclusion of new evaluation criteria in line with the guidelines under the Listing Regulations and Secretarial Standards.
With a view to maintain high level of confidentiality and ease of doing evaluation, this years'' exercise was carried out online using secured web based application. Each Board member submitted a detailed evaluation form online on the functioning and overall level of engagement of the Board and its committees on parameters such as composition, execution of specific duties, quality, quantity and timeliness of flow of information, deliberations at the meeting, independence of judgment, decision making, management actions 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 & impact of individual Director was reviewed on parameters such as contribution, attendance, decision making, inter-personal relationship, actions oriented, external knowledge etc. The Directors were also asked to provide their valuable feedback and suggestions on 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 11th December 2018 to review the performance evaluation of Non-Independent Directors and the entire Board of Directors including the Chairman, while considering the views of the Executive and Non-Executive Directors.
The Independent Directors were highly satisfied with the overall functioning of the Board, its various committees and with 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 the review by the Independent Directors, the results were shared with the entire Board and its 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 2019.
Remuneration policy.
The company follows a Policy on the 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 which form part of this Report.
Induction and familiarization programme for Directors.
The details of the induction and familiarization program of the Directors are given in the Corporate Governance Report.
Key managerial personnel.
The MD & CEO, the CFO and the Company Secretary are the Key Managerial Personnel of the company. As mentioned elsewhere in this report. Mr. Bimlendra Jha is appointed as the MD & CEO in place of Mr. Ajay Kapur. There was no change in the CFO and the Company Secretary during the year under review.
19. 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) they have selected such accounting policies, judgments and estimates that are reasonable and prudent and have applied them consistently to give a true and fair view of the state of affairs of the company as on 31stDecember 2018, and of the statement of Profit and Loss and cash flow of the company for the period ended 31stDecember 2018.
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 have been laid down and that such internal financial controls are adequate and were operating effectively and
iv) proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and are operating effectively.
20. Auditors & Auditors'' Report.
Statutory Audit.
At the 34th Annual General Meeting held on 31st March 2017, the shareholders had approved the appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (ICAI Firm Registration No.117366W/W-100018) as the Statutory Auditors for a period of 5 years commencing from the conclusion of the 34th Annual General Meeting until the conclusion of the 39th Annual General Meeting, subject to ratification by the shareholders every year. Pursuant to the recent amendment to Section 139 of the Companies Act, 2013 effective 7th May, 2018, ratification by Shareholders every year for the appointment of the Statutory Auditors is no longer required and accordingly the Notice of ensuing Annual General Meeting does not include the proposal for seeking Shareholders approval for ratification of Statutory Auditors appointment. M/s. Deloitte Haskins & Sells LLP has furnished a certificate of their eligibility and consent under section 139 and 141 of the Companies Act 2013 and the Companies (Audit and Auditors) Rules 2014 for their continuance as the Auditors of the company for the financial year 2019. In terms of the Listing Regulations, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI. The Auditors'' Report for financial year 2018 on the financial statement of the company forms part of this Annual Report.
Explanations or comments by the Board on "emphasis of matters" made by the statutory auditors in their report includes Order passed by the Competition Commission of India in two matters, which dealt in more detailed in the full Annual Report.
Cost Audit.
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 (ICWAI Firm Registration No.000012) as the Cost Auditors of the company for the Financial Year 2019 and has recommended their remuneration to the Shareholders for their ratification at the ensuing Annual General Meeting. M/s P.M. Nanabhoy Co. have given their consent to act as Cost Auditors and confirmed that their appointment is within the limits of the Section 139 of the Companies Act, 2013. They have also certified that they are free from any disqualifications specified under Section 141 of the Companies Act, 2013. 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 Companies (Cost Records and Audit) Rules, 2014, the Cost Audit Report for the financial year 2017 was filed with the Ministry of Corporate Affairs on 29.06.2018 vide SRN: G91152223.
Secretarial Audit.
The Board had appointed Mr. Himanshu S. Kamdar (CP No.3030), Partner of 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 fiscal year 2019.
The company has received consent from Mr. Himanshu S. Kamdar of M/s. Rathi & Associates to act as the auditor for conducting audit of the Secretarial records for the financial year ending 31st December 2019. The report of the Secretarial Auditor for financial year 2018 is annexed as Annexure VI of this Report. The report does not contain any qualification, reservation and adverse remarks.
Reporting of fraud.
The Auditors of the company have not reported any fraud as specified under Section 143(12) of the Companies Act, 2013.
21. Compliance with secretarial standards on Board and Annual General Meetings.
The company has complied with the Secretarial Standards issued by the Institute of Company
Secretaries of India on Board Meetings and Annual General Meetings.
22. Significant material orders passed by the courts or regulators.
Order Passed by the National Company Law Appellate Tribunal (NCLAT) in the matter of penalty levied by the Competition Commission of India (CCI).
i) Appeal filed by the Company against the Order of the CCI for levying penalty o Rs, 1163.91 crores on the Company was heard and dismissed by the NCLAT and CCI''s Order was upheld. Further, the Company has challenged the judgment passed by NCLAT before the Hon''ble Supreme Court. The Hon''ble Supreme Court has admitted the Company''s Appeal and ordered for the continuation of interim order passed by the Tribunal.
ii) Pursuant to a reference filed by the Director, Supplies and Disposals, Government of Haryana, the CCI vide its Order dated 19th January, 2017 has
imposed a penalty of '' 29.84 crores on the Company. The Company filed an Appeal before the Competition Appellate Tribunal (COMPAT) and obtained an interim stay the operation of the said Order. Further, by virtue of Government of India notification, all cases pending before the COMPAT were transferred to the NCLAT and as such, the hearing on the Appeal is underway at the NCLAT.
Other than the aforesaid, there have been no significant and material orders passed by the courts or regulators or tribunals impacting the ongoing 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.
23. 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 9, 11, 16, 45, 46 of the Standalone Financial Statements.
Treasury operations.
During the year, the company''s treasury operations continued to focus on cash forecasting and the 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.
During the year, the investment portfolio mix was continuously rebalanced in line with the evolving interest rate environment.
24. Transfer of unclaimed dividend and unclaimed shares.
The details relating to Unclaimed Dividend and Unclaimed shares forms part of the Corporate Governance Report.
25. Energy, technology and foreign exchange.
Companies Act 2013, read with the Companies (Accounts) Rules 2014, which is marked Annexure VII and forms part of this report.
Information on the conservation of energy, technology absorption, foreign exchange earnings and out go is required to be given pursuant to the provisions of Section 134 of the
26. Particulars of employees.
There were 5058 permanent employees of the company as of 31st December 2018. 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 VIII.
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 provision of 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.
27. Direct subsidiaries joint ventures and joint operations.
As of 31st December 2018, the company has 6 direct subsidiaries, 1 joint venture and 1 joint operation.
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
28. Corporate Governance.
The company has complied with the corporate governance requirements under the Companies Act, 2013 as stipulated under the Listing Regulations. A separate section on corporate governance along with a certificate from the statutory auditors confirming compliance is annexed and forms part of this Report.
29. 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 subsidiary, joint venture and joint operations in the prescribed Form AOC-1 is annexed at Annexure IX of this Report.
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 amounted to Rs, 2,177.40 crore for 2018 as compared to Rs, 1516.36 crores for 2017.
34. 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. The Directors would also like to place on record their 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
18th February, 2019
Dec 31, 2017
Dear Members,
It is our pleasure to present the Annual Report of the company for the year 2017.
1. An overview of the Indian economy in 2017.
Reforms have helped reform the economy into a powerhouse.
2017 was a momentous year with path-breaking reforms undertaken by the Government.
The implementation of GST encouraged financial discipline, while the Fiscal Responsibility and Budget Management Act strengthened Indiaâs institutional framework with the further goal of reducing the fiscal deficit and improving macroeconomic management.
The upgrading of Indiaâs government bond rating from Baa3 to Baa2 by Moodyâs, as well as the RBIâs marginal reduction in the repo rate from 6.25% to 6% further contributed to the elevated growth sentiments felt during the year.
A countryâs international rankings and sovereign ratings are used by investors not only to ascertain its macroeconomic health and investment climate, but also to instil confidence in its economy.
In terms of the âEase of Doing Business,â India emerged in the top 100 countries, an improvement of 30 places. This improvement was attributed to the changes brought about by the sustained business reforms undertaken over the course of the year.
The good monsoon showered the economy with gains.
On the sectoral front, the average performance of the agricultural sector improved more in 2017 than in previous years, all thanks to a normal monsoon and the support of the Central and State Governments.
The average manufacturing PMI for the year stood at 51.4. In the services sector, there was a moderate rate of expansion with a PMI of 50.1. Growth within the core industries comprising of coal, crude oil, natural gas, petroleum & refinery, fertilizers, steel, cement and electricity rebounded in the last quarter of 2017 in spite of the fact that crude prices were not very favourable.
Our economy is heading forward by moving online.
India is witnessing structural shifts at multiple levels and across various sectors. It is not only transitioning from an informal to a formal economy, but also from a cash to a digital economy, a rural to an urban and an offline to an online one. Due to this, the economy may experience short-term pains, but in the long run, it stands to gain.
The cement sectorâs growth in 2017 was led largely by the continued support from Government backed infrastructural and constructional initiatives, as well as by the facilitation of the flexible interstate movement of cement. The latter was made possible by the elimination of local taxes through the implementation of GST.
Over the course of the year, the Government focused on rural development (increased outlay), infrastructure and affordable housing. It did this through its âBharatmala Project,â which was undertaken to construct cement concrete roads and highways, as well as to develop the economic corridor, the coastal and port connectivity roads, the international connectivity road, expressways and so on. The overall demand for cement in 2017 grew steadily at 6%, which was predominantly from the Government sponsored affordable housing sector and infrastructure segment.
The Government also introduced the Real Estate Regulatory Act (RERA) and Real Estate Investment Trusts (REIT) to increase transparency in the real estate sector and discourage parallel economies. This will in turn bring back homebuyersâ confidence. Through RERA, the buyer will be guaranteed a dedicated governing body, timely project completion, as well as complete information on the project and the amenities that were promised.
RERA and REIT-like reforms are here for good. This may have affected the growth of the construction sector in the short term, but in the long run, it is felt that such reforms will surely accrue multiple benefits and growth.
2. Amalgamation of the company and ACC Limited.
Cementing a new partnership.
The members may be aware that pursuant to the approval of the FIPB, the Scheme of Amalgamation of the Holcim India Pvt. Ltd. (HIPL) with the company came into effect from 1st August 2016 and ACC Limited and all its subsidiaries became the subsidiary of the company. ACC is one of the oldest cement manufacturers in India with a pan India footprint.
It has also been a pioneer and trendsetter in cement manufacturing since it was established in 1936.
To further optimise the economies of scale to generate higher value for all the stakeholders, the Board of Directors of both the companies decided to explore the possibility of a merger. This could enable both companies to combine their strengths of business and thereby benefit all the stakeholders.
The Special Committee of Directors formed for this purpose have concluded their extensive study and are of the view that currently, there are certain constraints in the implementation of a merger between the Company and ACC. Accordingly, the Board decided not to pursue the merger at this point in time, though it remains the ultimate goal.
In the meanwhile, to maximise synergies and unlock additional value for stakeholders, the Board has approved an arrangement in the form of a Master Supply Agreement for the sale and purchase of materials and services on mutually agreed terms. The approval of the shareholders for the proposed arrangement between the two companies has been obtained through Postal Ballot.
3. Financial performance - 2017.
AT A GLANCE - STANDALONE FINANCIAL ACHIEVEMENTS IN 2017.
The company cemented its financial position in 2017.
- Cement production increased by 8% from 21.2 million tonnes to 22.98 million tonnes.
- The domestic cement sales volume increased from 21.1 million tonnes in 2016 to 22.95 million tonnes in 2017. Clinker sales (including exports) decreased from 0.37 million tonnes in 2016 to 0.03 million tonnes in 2017.
- The net sales of Rs.10,240 crores are an increase of 12.32% from the previous yearâs Rs.9,117 crores. The average sales realisation increased by around 5% at Rs.4,455 per tonne against approximately Rs.4,227 per tonne in 2016.
- The total operating expenses for the year 2017 were higher than the previous year.
- The absolute EBITDA of Rs.1,940 crores was 14.66% higher than the corresponding EBITDA of Rs.1,692 crores for the year 2016.
- Profit before Tax at Rs.1,619 crores was up by 26.58% over the corresponding Profit before Tax of Rs.1,279 crores from the year 2016.
- Net Profit at Rs.1,250 crores was up by 34.12% over the corresponding Net Profit of Rs.932 crores from the year 2016.
Performance of the material subsidiary.
Pursuant to the Amalgamation of HIPL the company acquired 50.05% shareholding of ACC Limited. The summary of ACC Limitedâs financial performance is as under:
- Cement volumes in 2017 were at 26.21 million tonnes, as compared to 22.99 million tonnes in the previous year.
- Operating EBITDA for the full year was Rs.1,912 crores, as compared to Rs.1,478 crores of the previous year.
- Consolidated profit before tax for the year was up by Rs.425 crores.
The Implementation of IND-AS in 2017.
The company has adopted Indian Accounting Standards (Ind-AS) with effect from 1st January 2017. The transition date was 1st January 2016, as prescribed under section 133 of the Companies Act 2013 and read with the relevant rules issued thereunder. Accordingly, the company has provided Ind-AS compliant comparative financial results for the previous year that ended on 31st December 2016.
Amount in Rs. Crore
Standalone |
Consolidated |
|||
Current Year 31-12-2017 |
Previous Year 31-12-2016* |
Current Year 31-12-2017 |
Previous Year 31-12-2016* |
|
SUMMARISED PROFIT AND LOSS Sales (Net of excise duty) |
10,240.18 |
9,117.19 |
23,116.08 |
19,874.97 |
Profit before finance cost, depreciation & amortisation expense and exceptional item |
2,299.23 |
2,202.56 |
4,180.19 |
3,649.04 |
Finance costs |
107.19 |
74.24 |
205.78 |
152.99 |
Gross Profit |
2,192.04 |
2,128.32 |
3,974.41 |
3,496.05 |
Depreciation and amortisation expense |
572.92 |
848.85 |
1219.45 |
1,460.93 |
Add: Share of profit of associates and joint ventures |
- |
- |
12.77 |
11.31 |
Less: Exceptional item |
- |
- |
- |
(38.59) |
Profit before Tax and Non Controlling Interest |
1,619.12 |
1,279.47 |
2,767.73 |
2,007.84 |
Tax expense |
369.55 |
347.23 |
822.85 |
573.77 |
Profit after tax but before non controlling interest |
1,249.57 |
932.24 |
1,944.88 |
1,434.07 |
Less: non controlling interest |
- |
- |
428.52 |
328.99 |
Net profit for the year |
1,249.57 |
932.24 |
1516.36 |
1,105.08 |
MOVEMENT IN RETAINED EARNING Balance as per last account |
687.18 |
(445.56) |
988.48 |
(261.67) |
Net profit for the year |
1,249.57 |
932.24 |
1,516.36 |
1,105.08 |
Add : other comprehensive income |
3.41 |
(1.24) |
4.32 |
(9.00) |
Transfer from / to general reserve (net) |
- |
850.00 |
- |
834.98 |
Dividend on equity shares (including interim) |
555.98 |
434.53 |
555.98 |
522.99 |
Corporate dividend tax on above |
80.66 |
88.46 |
113.42 |
32.65 |
Interim equity dividend paid by HIPL including tax thereon |
- |
199.96 |
- |
199.96 |
Add: Inter company elimination of dividend pursuant to scheme of amalgamation of HIPL with the company |
74.69 |
74.69 |
||
Closing balance |
1,303.52 |
687.18 |
1,839.76 |
988.48 |
* Figures have been restated as per Ind AS.
4. Disclosures under the Companies Act, 2013 and listing regulations.
Extract of Annual Return.
The details forming part of the extract of the annual return in Form MGT-9 is given as Annexure II to this Report.
Number of Board Meetings.
The Board of Directors met 7 (seven) times in the year 2017. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report.
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.
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_2015 _revised.pdf.
All the related party transactions are entered on an armâs length basis in the ordinary course of business and adhers to 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 a 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 certification from the MD & CEO and the CFO. All related party transactions are subject to half-yearly independent reviews by a reputed accounting firm to establish compliance with the requirements of Armsâ Length Pricing.
In accordance to Section 134(3)(h) of the Companies Act 2013 and Rule 8(2) of the Companies (Accounts) Rules 2014, the particulars of the contract or arrangement entered into by the company with related parties referred to in Section 188(1) in Form AOC-2 is attached as Annexure III.
Renewal of Agreement for Payment of Technology & Know-how fees to Holcim Technology Ltd.
Members of the Company had given their consent through postal ballot conducted in the year 2013 for entering into the Technology and Know-how Agreement with Holcim Technology Ltd, a group company for a period of five years w.e.f. 1st January, 2013. The fee payable for the various services and know-how availed by the Company pursuant to the said Agreement was initially approved @1% of the net sales of the Company for each financial year for two years and was thereafter retained for the remaining period of three years.
It is proposed to renew the said Technology and Know-how Agreement for a further period of three years w.e.f. 1st January, 2018 on the same terms & conditions except for the payment of fee which has been proposed @1% of the net sales of the Company for each financial year or at such rate as may be determined by the Competent Authorities of India and Switzerland under the Bilateral Advance Pricing Agreement (BAPA). Applications have been filed by the Company under BAPA to confirm the Armâs Length rate for payment under TKH Agreement which applications are still pending with the concerned authorities.
Membersâ attention is drawn to the Resolution proposing the approval for the renewal of Technology and Know-how Agreement as aforesaid. As the transaction is a related party transaction, all related parties shall abstain from voting on the resolution. The Directors recommend the resolution set out in item No.9 of the Notice convening the Annual General Meeting.
Policy on Sexual Harassment of Women at Workplace.
The company has zero tolerance towards sexual harassment at the workplace and to 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, 1 (one) complaint was received by the company (under its CSR arm, ACF) and the same was investigated in accordance with the procedure laid down under the said Act and the same stands concluded.
No cases of child labour, forced labour, involuntary labour and discriminatory employment were reported during the period.
The company is committed to providing a safe and conducive work environment to all its employees and associates.
5. Corporate Governance.
The company has complied with the corporate governance requirements under the Companies Act 2013 as stipulated under the Listing Regulations. A separate section on corporate governance along with a certificate from the auditors confirming compliance is annexed and forms part of this Annual Report.
6. Internal audits and controls.
A strong internal control framework is an important part of operations and corporate governance.
It is the overall responsibility of the Directors of the listed company to ensure that the company has laid down internal financial controls and that these controls are adequate and are operating effectively.
Simplifying the complexities.
The company has already developed and implemented a robust system and framework of internal controls over financial reporting 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, to comply with the applicable laws and to safeguard the assets of the company. This framework contains Entity Level Controls as well as Business Process Controls. The operating effectiveness and adequacy of these controls are periodically tested and validated. The internal control systems are evaluated with respect to their compliance with operating systems and policies of the company and accounting procedures across all locations of the company.
Ambujaâs Robust Risk Mitigation System.
The company has a strong and independent in house Internal Audit (IA) department that functionally reports to the Chairman of the Audit Committee, thereby maintaining its objectivity and independence. The scope and authority of the IA function is defined in the Internal Audit Charter approved by the Audit Committee. Every year, the IA department conducts an Internal Audit Risk Assessment which serves as the basis for the preparation of the Annual Internal Audit plan.
This risk-based annual internal audit plan is duly approved by the Audit Committee. The IA department comprises of Internal Auditors along with Subject Matter Experts (SMEs) and IT System Audit Specialists that carry out risk-based audits across all locations, thereby enabling the identification of areas where risk management processes may need to be strengthened. Significant audit observations and corrective action plans are presented to the Audit Committee.
The IA department provides independent assurance to the Board, the Audit Committee, the senior management and the regulators regarding the effectiveness of the companyâs governance and controls designed for risk mitigation to enhance the companyâs compliance and control. It assesses opportunities for improvement in business processes and follows up on the implementation of corrective actions and improvements in these processes after they have been reviewed by the Audit Committee.
Over the years, the formal and independent evaluation of internal controls and initiatives for remediation of deficiencies by the IA department has resulted in a robust framework for internal controls. This formalised system of internal control and risk management framework facilitates the effective compliance of Section 138 of the Companies Act 2013 and relevant statutes applicable to the LafargeHolcim group.
7. Managing the risks of fraud, corruption and unethical business practices.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY Protecting those who speak up, by listening.
Creating a fraud and corruption free culture has always been at Ambujaâs core. In view of the potential risk of fraud, corruption and unethical behaviour that could adversely impact the companyâs business operations, performance and reputation, Ambuja has emphasised even more on addressing these risks. To meet this objective, a comprehensive Ethical View Reporting Policy akin to Vigil Mechanism or the Whistle-blower policy has been laid down.
In terms of the said Policy, all the reported incidents are reviewed by a designated Committee under the Chairmanship of Mr. B.L. Taparia, Director. Based on an in-depth review, all such incidents are 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 in the interest of the company.
No personnel have been denied access to the Audit Committee pertaining to the Ethical View Policy. The implementation of the Ethical View Policy is overseen by the Audit Committee.
More details on 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
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 are given in the Corporate Governance Report.
ANTI-BRIBERY AND CORRUPTION DIRECTIVES (ABCD) Weâre only intolerant to corruption.
In furtherance to the companyâs philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down âABCDâ as part of the companyâs Code of Business Conduct and Ethics. As a company, Ambuja has zero-tolerance to bribery and corruption and is committed to act professionally and fairly in all its business dealings.
To spread awareness about the companyâs commitment to conduct business professionally, fairly and free from bribery and corruption, employee training and awareness workshops were conducted for relevant employees across the organisation during 2017. As part of the continuous education of employees on âABCDâ, a mandatory face to face workshop was conducted online through a web-based application tool that was used by approximately 3,000 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.
8. Board of Directors and key managerial personnel.
Cessation.
Mr. Eric Olsen (DIN 07238383), Director (representing LafargeHolcim) resigned from the Board w.e.f. 21st september, 2017 upon his stepping down as the CEO of LafargeHolcim Ltd.
The Board placed on record its appreciation for the valuable services rendered by Mr. Olsen.
Retirement by rotation.
In accordance with the provisions of Section 152 and Article 147 of the Articles of Association of the company, Mr. Christof Hassig (DIN 01680305) and Mr. Martin Kriegner (DIN 00077715) 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.
Appointment.
Mr. Jan Jenisch (DIN:07957196)
Mr. Jan Jenisch has been appointed as an Additional Director (Non-Independent) under section 161 of the Companies Act 2013, w.e.f. 24th October 2017. Consequent to the stepping down of Mr. Eric Olsen, Mr. Jan Jenisch has also been appointed as the Vice-Chairman of the Board w.e.f. 24th October 2017.
Mr. Jan Jenisch is currently the CEO of LafargeHolcim Ltd. He is an MBA from the University of Fribourg, Switzerland. Prior to joining LafargeHolcim, Mr. Jan Jenisch worked with Sika AG, which develops and manufactures systems and products for building materials and automotive sectors. He worked in various management functions and countries and was appointed to the Management Board in 2004 as Head of the lndustry Division and served as President, Asia Pacific from 2007 to 2012. Under his leadership, Sika AG expanded into new markets and set new standards of performance in sales and profitability. He also served as the Chief Executive Officer of Sika AG from 2012 until 2017.
Mr. Roland Kohler (DIN:08069722)
Mr. Roland Kohler has been appointed as an Additional Director (Non-Independent) under section 161 of the Companies Act, 2013, w.e.f. 20th February, 2018.
Mr. Kohler has extensive commercial and international experience in the cement, ready mix and aggregates industry ranging from operations, marketing, business integration, mergers & acquisitions, divestments etc. He joined Holcim group in 1994 as Head Management Consultant and progressed through the ranks to be appointed to the Executive Committee in March 2010 and was responsible for Group Functions. He was a key member of the integration Committee for the merger of Lafarge and Holcim. He also served as interim COO of the LafargeHolcim group. He is also the Chairman of LafargeHolcim Foundation for Sustainable Construction.
As Additional Directors, Mr. Jan Jenisch and Mr. Roland Kohler shall hold the office up to the date of the ensuing Annual General Meeting. The Board of Directors recommends their appointment.
Further details about the Directors is 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.
Attributes, qualifications & independence of Directors and their appointment.
The Nomination & Remuneration Committee of Directors has approved a Policy for the Selection, Appointment and Remuneration of Directors, which inter-alia, requires that the Directors shall be of high integrity with relevant expertise and experience 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 a 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 and educational qualifications, both individually as well as 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.
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.
Evaluation of the Boardâs 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 submitted a detailed evaluation form on the functioning and overall level of engagement of the Board and its committees on parameters such as composition, execution of specific duties, quality, quantity and timeliness of flow of information, deliberations at the meeting, independence of judgement, decision making, management actions 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 was reviewed on parameters such as contribution, attendance, decision making, inter-personal relationship, actions oriented, external knowledge etc.
The Directors were also asked to provide their valuable feedback and suggestions on 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 8th December 2017 to review the performance evaluation of Non-Independent Directors and the entire Board of Directors including the Chairman, while considering the views of the
Executive and Non-Executive Directors.
The Independent Directors were highly satisfied with the overall functioning of the Board, its various committees and with 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 the review by the Independent Directors, the results were shared with the entire Board and its 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 2018.
Remuneration policy.
The company follows a Policy on the 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.
Induction and familiarisation programme for Directors.
The details of the induction and familiarisation program of the Directors are given in the Corporate Governance Report.
9. Directorsâ 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) they have selected such accounting policies, judgments and estimates that are reasonable and prudent and have applied them consistently to give a true and fair view of the state of affairs of the company as on 31st December 2017, and of the statement of Profit and Loss and cash flow of the company for the period ended 31st December 2017.
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 have 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 have been devised and that such systems are adequate and are operating effectively.
10. Auditors & Auditorsâ Report.
Statutory Audit.
At the 34th Annual General Meeting held on 31st March 2017, M/s. Deloitte Haskins & Sells LLP (ICAI Firm Registration No.117366W/W-100018), Chartered Accountants, were appointed as the 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, subject to ratification of their appointment by members at every subsequent AGM. M/s. Deloitte Haskins & Sells LLP has furnished a certificate of its eligibility and consent under section 139 and 141 of the Companies Act 2013 and the Companies (Audit and Auditors) Rules 2014 for their appointment as Auditors of the company for the financial year 2018. In terms of the Listing Regulations, the Auditors have confirmed 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. Deloitte Haskins & Sells LLP, Chartered Accountants as Statutory Auditors of the company for the fiscal 2018.
The Auditorsâ Report for financial year 2017 on the financial statement of the company forms part of this Annual Report.
Explanations or comments by the Board on âemphasis of mattersâ made - (i) by the statutory auditor in his report
- Order passed by the Competition Commission of India - refer to section âSignificant and material orders passed by courts or regulatorsâ.
- During the year that ended 31st December 2016, pursuant to Scheme of Amalgamation, Holcim (India) Private Limited has been amalgamated with the Company with effect from the appointed date 1st April 2013 and was accounted for in accordance with then applicable accounting standards as per the scheme.
Cost Audit.
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 (ICWAI Firm Registration No.000012) as the Cost Auditors of the company for the Financial Year 2018 and has recommended their remuneration to the Shareholders for their ratification at the ensuing Annual General Meeting. M/s P.M. Nanabhoy & Co. have given their consent to act as Cost Auditors and confirmed that their appointment is within the limits of the Section 139 of the Companies Act, 2013.
They have also certified that they are free from any disqualifications specified under Section 141 of the Companies Act, 2013. The Audit Committee has also received a certificate from the Cost Auditor certifying their independence and armâs length relationship with the company. Pursuant to Companies (Cost Records and Audit ) Rules, 2014, the Cost Audit Report for the financial year 2016 was filed with the Ministry of Corporate Affairs on 16th May, 2017 vide SRN No.G43667930.
Secretarial Audit.
The Board had appointed M/s Himanshu S. Kamdar (CP No.3030), Partner of 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 fiscal year 2018.
The company has received consent from M/s. Rathi & Associates to act as the auditor for conducting audit of the Secretarial records for the financial year ending 31st December 2018.
The report of the Secretarial Auditor for financial year 2017 is annexed to this report as Annexure V. The report does not contain any qualification, reservation and adverse remarks.
Reporting of fraud.
The Auditors of the company have not reported any fraud as specified under Section 143(12) of the Companies Act, 2013.
11. Compliance with secretarial standards on Board and Annual General Meetings.
The company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.
12. Significant and material orders passed by the courts or regulators.
Order Passed by the Competition Commission of India (CCI).
i) Acting upon the complaint filed by the Builders Association of India (BAI), the Competition Commission of India (CCI) held the Cement Manufacturers Association (CMA) with its member cement companies, including the company guilty of violating provisions of the Competition Act, and imposed a penalty of Rs.1,163.91 crore vide Order dated 20.06.2012. On Appeal, the Competition Appellate Tribunal (COMPAT) remanded the matter back to CCI for fresh hearing vide Order dated 11th December 2015.
CCI heard the matter afresh and vide its Order dated 31st August 2016 once again held CMA 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 then obtained a stay against the operation of the said order, subject to the deposit of a 10% penalty amount which was forthwith complied by the company.
By Government Notification, all cases pending before COMPAT were transferred to the National Company Law Appellate Tribunal (NCLAT) and, as such, the Appeal was heard by NCLAT and the Order is kept reserved.
ii) State of Haryana had filed a Complaint before the Competition Commission of India (CCI) alleging that Cement Companies including Ambuja Cements Limited (ACL) had indulged in anti-competitive practices while participating in Tender for supply of Cement to Government department. CCI conducted inquiry and vide order dated January 19, 2017, held the Cement Companies guilty of breaching provisions of the Competition law and accordingly imposed penalty at the rate of 0.3% of the average turnover of the last 3 financial years (2012-13, 2013-14 & 2014-15). In case of ACL, the penalty amounts to Rs.29.84 Crores.
ACL has filed Appeal against CCIâs Order before the Competition Appellate Tribunal (COMPAT) and obtained interim relief/stay against the operation of CCIâs Order in the meanwhile. Pursuant to merger of COMPAT with the National Company Law Appellate Tribunal (NCLAT), the Appeal is now being heard by NCLAT.
Other than the aforesaid, there have been no significant and material orders passed by the courts or regulators or tribunals impacting the ongoing concern status and companyâs operations. However, membersâ attention is drawn to the statement on contingent liabilities and commitments in the notes forming part of the Financial Statements.
13. 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 12, 29 and 45 of the Standalone Financial Statements.
Treasury operations.
During the year, the companyâs treasury operations continued to focus on cash forecasting and the 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 2017, 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.
14. Transfer of unclaimed dividend and unclaimed shares.
The details relating to Unclaimed Dividend and Unclaimed shares forms part of the Corporate Governance Report.
15. Energy, technology and foreign exchange.
Information on the conservation of energy, technology absorption, foreign exchange earnings and out go is required to be given pursuant to the provisions of Section 134 of the Companies Act 2013, read with the Companies (Accounts) Rules 2014, which is marked Annexure VI and forms part of this report.
16. Particulars of employees.
There were 4992 permanent employees of the company as of 31st December 2017.
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 provision of 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.
17. Direct subsidiaries, joint ventures and joint operations.
As of 31st December 2017, the company has 6 direct subsidiaries, 1 joint venture and 1 joint operation.
The Policy for determining Material Subsidiaries adopted by the Board pursuant to Regulation 16 of the Listing Regulations, can be accessed on the companyâs website at: www.ambujacement.com/investors
18. 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 Auditorsâ 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 subsidiary, joint venture and joint operations 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.1516.36 crore for 2017 as compared to Rs.1105.08 crores for 2016.
19. Equal opportunity employer.
The company has always provided a congenial atmosphere for work that is free from discrimination and harassment, including sexual
20. Other disclosures.
No disclosure or reporting is made with respect to the following items, as there were no transactions during the year under review:
- Details relating to deposits that are covered under Chapter V of the Act
- The issue of equity shares with differential rights as to dividend, voting or otherwise
- The 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 harassment. It has provided equal opportunities of employment to all without regard to their caste, religion, colour, marital status and sex.
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 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
21. Caution statement.
Statements in the Directorsâ Report and the Management Discussion and Analysis describing the companyâs 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. Crucial factors that could influence the companyâs 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 that are material to the business operations of the company.
22. 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. The Directors would also like to place on record their 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 companyâs 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 4th May, 2018
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 companyâs 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 (âLODRâ), 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 companyâs 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 âGo Cashlessâ 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 Ambujaâs 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 companyâs 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 companyâs 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 ofâZero Harmâ, 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 companyâs 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 birdâs 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 âemployment experienceâ. important raw material for the infrastructure and real estate sectors. However, steel falls under the category ofâGoods of Special Importanceâ, 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 countryâs 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 âI Canâ, our core philosophy with LH CRISP Values and âACEâ Behaviour
At Ambuja, we all believe and practice the spirit ofâI 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 - âCRISPâ (Customers, Results,
Integrity, Sustainability, People) and behaviour -ACE (Agility & Simplicity, Collaboration & Trust, Empowerment, Accountability & Transparency) which have a strong connection to the âI Canâ 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 Coachesâ, 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 âWorkdayâ system, which is a cloud based global HR system, initiated by LafargeHolcim. âWorkdayâ 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 Doâs and Donâts 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, âLogistics Safety Vision - 2020â 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 Cementâs 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 companyâs 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 driverâs 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 companyâs 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 Nationsâ 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 âCradle 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) - Indiaâs 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 âWater Positiveâjourney 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 â2â 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 âWater Positiveâ 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 Tomorrowâ 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 companyâs 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 Excellenceâ. 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 âGoldâ 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 âLow Carbon Technology Road Map for Cement Industryâ.
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 Assuranceâ 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 âBâ 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 âTrue Valueâ [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. ACFâs 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.
ACFâs 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 managementâ 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 AGFâs 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. ACFâs 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 AOFâs 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. ACFâs 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 BCIâs 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 Donât 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 stakeholdersâ 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 Ambujaâs 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 armâs 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 Armsâ 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 companyâs internal controls system is founded on values of integrity and operational excellence. It supports the vision of the company, âTo be the most sustainable and competitive company in our industryâ. 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 âRisk 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 âIIA Excellence Award for Application of Internal Audit Technologyâ. 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 companyâs 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 companyâs philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down ABCDâ as part of the companyâs 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 companyâs 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 âABCDâ 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 Boardâs 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. Directorsâ 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 Auditorsâ 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 armâs 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. (âShareproâ), 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 companyâs operations. However, membersâ 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 companyâs 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 companyâs 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 Auditorsâ 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 companyâs efforts towards building a sustainable company were well recognised at major award ceremonies. We won the prestigious Cll Sustainability Award for âOutstanding Accomplishmentâ, 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 Directorsâ Report and the Management Discussion and Analysis describing the companyâs 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 companyâs
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 companyâs 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 à 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 à as well
as safe à 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 à 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 à 6.64%.
(ii) Expected life of the option à 3 years.
(iii) Expected volatility à 43.75%.
(iv) Expected dividend yield à 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. ACFÃs 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 ACLÃs 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. ThatÃs
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 CompanyÃs 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. NeotiaÃs contribution through the Ambuja Cement Foundation, the
CompanyÃs 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 ÃPadma Bhushanà 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 CompanyÃs growth, Mr. Neotia has been
conferred the status of ÃChairman Emeritusà 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 CompanyÃs 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 à 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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