DIRECTORS' REPORT Your Directors have pleasure in presenting their Seventieth Annual Report together with audited accounts for the year ended 31st March 2016. DIVIDEND The Board of Directors has recommended a dividend of Re.1/- per Equity Share of Rs.10/- each on 30,71,77,340 Equity Shares of Rs.10/- each for the year ended 31st March, 2016 and proportionate dividend on 1317 Equity Shares having calls in arrears. TRANSFER TO RESERVES The Company proposes to transfer Rs.40 Crores to the General Reserve and to retain Rs.887.79 crores as surplus in the Profit and Loss Account. MANAGEMENT DISCUSSION AND ANALYSIS Pursuant to Regulation 34(2) of Securities and Exchange Board of India [Listing Obligations and Disclosure Requirements] Regulations, 2015, [SEBI (LODR) Regulations, 2015] a Management Discussion and Analysis Report is given as addition to this report. CORPORATE GOVERNANCE Pursuant to Regulation 34(3) of SEBI (LODR) Regulations 2015, a report on Corporate Governance along with Auditors' Certificate confirming its compliance is included as part of the Annual Report and is given in Annexure 'C' and Annexure 'D' respectively. Further, a declaration on Code of Conduct signed by the Vice Chairman & Managing Director in his capacity as Chief Executive Officer of the Company is given in Annexure 'E'. CORPORATE SOCIAL RESPONSIBILITY (CSR) A report on CSR activities of the Company during 2015-16 is given in Annexure 'F'. LICENCES & RECOGNITIONS The Company's Malkapur plant has been granted license for Occupational Health and Safety Management System Certification in accordance with IS 18001:2007. The Company's Malkapur and Yerraguntla plants have been granted Environmental Management System Certification ISO 14001:2004. The Company's Chennai Grinding Unit and Chilamkur plant have been granted ISO 9001:2008 certification for Quality Management Systems. The Company's Dalavoi plant won the 3rd prize for the best safety practices among industries from the Directorate of Industrial Safety and Health, Tamil Nadu. OPERATIONS The Company's performance has been discussed in detail in the Management Discussion and Analysis section. The cement industry had to operate in a surplus situation throughout the year with a meagre growth of around 5% only during the year as per the information published by the Department of Industrial Policy and Promotion (DIPP). The South in particular had to operate under a nil growth scenario with a negative growth in production of around 5% in Tamil Nadu during the year under review. Considering the fact that the entire southern Indian cement industry operated at sub 60% of its capacity, the performance of the Company can be considered to be satisfactory with capacity utilization of around 60% during the year. The sales volume including clinker was at 86.78 lakh tons as compared to 91.10 lakh tons in the previous year. With fairly consistent selling prices of cement during the year, the total sales and other income was at Rs.4,249 crores as compared to Rs.4,454 crores in the previous year, a drop of nearly 5%. The operating parameters of power and fuel consumption were kept under control despite the lower capacity utilization. This together with the improvement in blending efficiency alongwith reduction in the fuel prices resulted in a higher EBIDTA of Rs.791.88 crores an improvement of 11% over that of previous year of Rs.713.35 crores. The interest charges were lower at Rs.370.35 crores as compared to Rs.425.99 crores while depreciation was at Rs.218.02 crores as compared to Rs.257.91 crores in the previous year. The consequent profit before exceptional items and tax was at Rs.203.51 crores compared to Rs.29.45 crores in the previous year. The performance can be considered to be satisfactory considering the weak growth in cement demand. EXPANSION / MODERNISATION As already informed, necessary approvals are in place from the environmental authorities for installing new energy efficient cement grinding facility at Sankarnagar replacing some of the old cement mills. The Company has also got approval from the authorities for enhancing the capacity of its Sankari plant and its Dalavoi plant in Tamil Nadu. SHIPPING DIVISION The Shipping Division continued to operate 2 vessels during the year and performed 45 voyages mainly in Coastal Trade and tramping. The total earnings of the Division were at Rs.40.71 crores, a drop of 13% when compared to Rs.46.97 crores in the previous year due to reduction in the overall shipping freight rates. CHENNAI SUPER KINGS CRICKET LIMITED (CSKCL) The Company was informed that CSKCL had sought the permission of BCCI, for the distribution of its shares by India Cements Shareholders Trust to the non-promoter shareholders of India Cements and India Cements Ex-cricketers Trust, on September 30, 2015. The Company has also been informed that the approval of BCCI is awaited. SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS Pursuant to Section 129(3) of the Companies Act, 2013 read with Rules, the Audited Consolidated Financial Statement of the Company and of all the subsidiary and Associate Companies is enclosed. A separate statement containing the salient features of the audited financial statement of all the subsidiary and Associate Companies is also enclosed in Form AOC-1, (Annexure 'G') as prescribed under the Companies Act, 2013 and the Rules made thereunder. POLICY ON DETERMINATION OF MATERIAL SUBSIDIARIES The India Cements Limited (India Cements) has, as on date, 10 subsidiaries controlled through shareholdings in such Companies. India Cements has one listed subsidiary namely Trinetra Cement Limited (TCL). Four Independent Directors of India Cements are also on the Board of TCL. It is the policy of India Cements that TCL is managed through Board of Directors consisting of non-executive directors. A Scheme of amalgamation of TCL along with Trishul Concrete Products Limited with India Cements has been filed in the Hon'ble Madras High Court for approval. The Appointed Date is 1st January, 2014. The statutory records and books of accounts of TCL are overseen from time to time by the concerned departments of India Cements. TRINETRA CEMENT LIMITED As mentioned elsewhere, the Northern markets had a reasonable growth of around 8% of cement production during the year under review. The only plant which is situated in the Northern India achieved significant strides in its operations clocking the highest clinker and cement production since inception, during the year under review. The clinker production was at 9.78 lakh tons as compared to 8.68 lakh tons in the previous year while the cement grinding was at 13.46 lakh tons (12.10 lakh tons) registering a capacity utilization of 90%. The operating parameters further improved during the year under review and the unit turned out a much improved bottom line with a net profit of Rs.9.32 crores as compared to a loss of Rs.24.18 crores in the previous year. TRISHUL CONCRETE PRODUCTS LIMITED The meagre demand growth for cement also had its impact on the sale of ready mix concrete with the unit achieving only 2.54 lakh cubic meters of sale of concrete as compared to 3.04 lakh cubic meters achieved in the earlier year. The total revenue was at Rs.103 crores against Rs.121 crores in the previous year. While the selling prices were maintained as that of previous year, the lower volume resulted in a profit before tax of Rs.67 lakhs only during the year as compared to a profit before tax of Rs.3.88 crores in the previous year. MERGER OF TWO SUBSIDIARIES WITH THE COMPANY The shareholders and creditors of the Company and of Trinetra Cement Limited (TCL) and Trishul Concrete Products Limited (TCPL) have approved a Scheme of Amalgamation and Arrangement between TCL and TCPL with the Company. Petitions have been filed in the Honorable High Court of Judicature at Madras under Sections 391 to 394 of the Companies Act, 1956 for getting the sanction of the Honorable High Court. COROMANDEL ELECTRIC COMPANY LIMITED The power generation from the gas power plant was continued to be affected due to restrictions imposed on the evacuation of power by State Load Despatch Centre of Tamil Nadu Transmission Corporation Limited during the year and hence the plant was able to generate only 163 million KWH as against 187 million KWH in the previous financial year. The company had sold 49 million KWH of power to the cement plants of The India Cements Limited located in Tamil Nadu State while the balance power of 114 million KWH was sold to other group captive consumers, third party consumers and also to Tamil Nadu Generation and Distribution Corporation Limited on short term tender basis. The net income from operations earned by the Company was at Rs.86.43 crores (Rs.85.44 crores) and the net profit after tax was at Rs.5.18 crores against Rs.6.80 crores in the previous year. As per the existing practice, equity dividend was maintained at 9% while the dividend for the participating preference share capital was at the respective coupon rate. The Company also redeemed the 5th and final installment of redeemable cumulative participating preference shares on the due date and with this, the Company has redeemed the entire paid up preference share capital. INDIA CEMENTS INFRASTRUCTURES LIMITED The Company has taken up for joint development a property in Coimbatore. Necessary approvals for the project have been obtained and the work has already commenced. During the current year, depending on the market, the Company is expected to take up additional projects. The financials are given in Annexure - G. PT. COROMANDEL MINERALS RESOURCES, INDONESIA AND COROMANDEL MINERALS PTE LIMITED, SINGAPORE The international prices of coal continued to be soft and in view of this, it was felt prudent to conserve the reserves of our mines. The Company is taking steps to secure the mines fully to derive the benefits by the time international price of coal begins to harden. The financials are given in Annexure - G. ASSOCIATE COMPANIES COROMANDEL SUGARS LIMITED During the year the crushing was marginally lower than last year at 7.47 lakh tonnes (7.61 lakh tonnes) and the recovery was also lower at 9.49% as against 9.69% in the previous year. Consequent to this, sugar production was lower at 70,888 tonnes as against 73,767 tonnes in the previous year. However the company sold higher quantum of sugar drawing from stock which was at 83,330 tonnes as against 81,414 tonnes in the previous year. During the year, sugar prices crashed well below the cane prices affecting the performance of the industry. Coromandel Sugars Limited has earned an EBIDTA of Rs.21.08 crores as against Rs.22.41 crores in the previous year. There was a marginal loss of Rs.0.33 crores as compared to a profit of Rs.0.32 crores made in the previous year. The sugar prices have recovered smartly in the latter part of the year and is currently hovering around Rs.3375 per quintal as against Rs.1950 it touched during the year. The Company is expected to derive the benefit of the 30 MW Cogeneration project from current year. INDIA CEMENTS CAPITAL LIMITED (ICCL) The main focus of the Company continues to be on various fee-based activities such as, Full Fledged Money Changing [FFMC], Travel & Tours and Forex Advisory Services. The Company's FFMC division continues to enjoy the status of Authorised Dealers, Category II. The wholly owned subsidiary viz. India Cements Investment Services Limited (ICISL) is into Stock Broking. The Gross income from operations of ICCL was Rs.402.72 lakhs and that of ICISL was Rs.158.85 lakhs for the year ended 31st March, 2016. ADEQUACY OF INTERNAL FINANCIAL CONTROLS In accordance with Section 134(5)(e) of the Companies Act, 2013 and Rule 8(5)(viii) of Companies (Accounts) Rules, 2014, the Company has an Internal Financial Control Policy and Procedures commensurate with the size and nature of operations and financial reporting. The Company has defined standard operating procedures covering all functional areas like sales, marketing, materials, fixed assets etc. The Company has engaged the services of Chartered Accountant firms for carrying out internal audit of all its plants as well as marketing offices. The internal auditors have been given the specific responsibility to verify and report on compliance of standard operating procedures. The auditors have reported that there are adequate financial controls in place and are being followed by the Company. This has been further explained in the Management Discussion and Analysis Report. RISK MANAGEMENT POLICY Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of SEBI (LODR) Regulations 2015, the Company has developed and implemented a Risk Management Policy. The Policy envisages identification of risk and procedures for assessment and mitigation thereof. MARKET CAPITALISATION OF THE COMPANY The details are given in Annexure H. VIGIL MECHANISM / WHISTLE BLOWER POLICY In accordance with Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of SEBI (LODR) Regulations 2015, the Company has established a Vigil Mechanism and has a Whistle Blower Policy. The policy has been uploaded on the Company's website www.indiacements.co.in . India Cements has always been encouraging its employees to give constructive criticism and suggestions, which will better the overall prospects of the Company and its various stakeholders. India Cements will continue to adopt this as a corner stone of its Personnel Policy. THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has in place an anti-sexual harassment policy in line with the requirements of the captioned Act and Rules made thereunder. There was no complaint of harassment, reported during the year. POLICY ON DEALING WITH RELATED PARTIES All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions entered by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseeable and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The policy on Related Party Transactions as approved by the Board has been uploaded on the Company's website. None of the Directors has any pecuniary relationships or transactions vis-à-vis the Company other than remuneration in the case of whole time directors or sitting fee in the case of others. TRANSACTIONS WITH RELATED PARTIES Particulars of contracts or arrangements with related parties in Form AOC-2 along with justification are given in Annexure I. LOANS / INVESTMENTS / GUARANTEES ETC UNDER SECTION 186 OF THE COMPANIES ACT, 2013 Details of loans, investments and guarantees covered under Section 186 of the Companies Act, 2013 are given in Notes No.33.4 and 33.18(B to D) on accounts for the financial year 2015-16. ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS There has been no order passed by any Regulatory authority or Court or Tribunal impacting the going concern status and future operations of the Company. MATERIAL CHANGES AND COMMITMENTS There have been no material changes and commitments affecting the financial position of the Company which have occurred between 1st April 2016 and the date of this report other than those disclosed in the financial statements. ANNUAL RETURN Extract of the Annual Return in Form No. MGT-9 is attached with this Report as Annexure - J. PUBLIC DEPOSITS Your Company has not been accepting deposits from public and shareholders since 16th September 2013. Deposits totalling Rs.15 lakhs have not so far been claimed by the depositors. CONSERVATION OF ENERGY, ETC. Necessary particulars regarding conservation of energy etc. as per provisions of Section 134 of the Companies Act, 2013 are set out in Annexure A. RESEARCH & DEVELOPMENT During the year your Company spent Rs.159.40 Lakhs towards revenue expenditure on the R&D department besides a contribution of Rs.61.47 lakhs to National Council for Cement and Building Materials (NCCBM) which carries out research on behalf of cement industry as a whole. DIRECTORS Under Article 109 of the Articles of Association of the Company, Smt. Chitra Srinivasan retires by rotation at the ensuing Annual General Meeting of the Company and she is eligible for reappointment. Sri Rabinarayan Panda was appointed as a nominee Director by IDBI Bank Limited with effect from 29.12.2015 in the place of Sri Nagaraj Garla and he will hold the office upto the date of the ensuing Annual General Meeting and the resolution for his election as director liable to retire by rotation is included under Special Business in the Notice convening the 70th Annual General Meeting of the Company. Sri M.R.Kumar was appointed as a nominee Director of Life Insurance Corporation of India (LIC) with effect from 26th May, 2016 in the casual vacancy caused by the withdrawal of nomination of Sri Basavaraju by LIC. The Board expresses its appreciation of the valuable contributions made by Sri Nagaraj Garla and Sri Basavaraju during their tenure as directors. Sri S.Balasubramanian Adityan was appointed as an additional Director by the Board of Directors at their meeting held on 07.12.2015 and he will hold the office upto the date of the ensuing Annual General Meeting and the resolution for his election as an Independent Director for a term of 5 consecutive years from 7.12.2015 to 6.12.2020 is included under Special Business in the Notice convening the 70th Annual General Meeting of the Company. Under Section 149 of the Companies Act, 2013, Sri Arun Datta, Sri R.K.Das, Sri N.R.Krishnan, Sri V.Manickam and Sri N.Srinivasan (F&R) were appointed as Independent Directors of the Company for a term of two consecutive years with effect from 26th December, 2014 to 25th December, 2016 or the date of 70th Annual General Meeting of the Company whichever is earlier. The Company proposes to reappoint Sri Arun Datta, Sri N.R.Krishnan, Sri V.Manickam and Sri N.Srinivasan (F&R) as Independent Directors of the Company to hold office for a second term of 2 consecutive years from 29th August, 2016 to 28th August 2018 and special resolutions for their reappointments as Independent Directors of the Company are included in the Notice convening the 70th Annual General Meeting of the Company. The Board has appointed Sri N.Srinivasan, as Managing Director for a fresh term of five years with effect from 26th May 2016 in terms of Section 196 of the Companies Act, 2013 read with Schedule V of the said Act. Necessary Special Resolutions seeking the approval of the Shareholders for his appointment as Managing Director alongwith Explanatory Statement justifying the appointment are included in the Notice convening the 70th Annual General Meeting of the Company. Brief particulars of Directors eligible for appointment / reappointment are annexed to the Notice convening the 70th Annual General Meeting. Smt. Chitra Srinivasan and Smt. Rupa Gurunath are related to Sri N.Srinivasan, Vice Chairman & Managing Director of the Company and are also related to each other. No other director is related to them or each other. The details of shares and convertible instruments held by non-executive directors are given in Annexure 'C'. INDEPENDENT DIRECTORS A statement on declaration given by Independent Directors under Section 149(7) of the Companies Act, 2013 that they meet the criteria of independence as provided under Section 149(6) of the Companies Act, 2013, has been received by the Company. The Company has started sponsoring Independent Directors for training programmes in a phased manner. The details of familiarization programme for independent directors have been uploaded in the Company's website www.indiacements.co.in . FAMILIARIZATION PROCESS Senior management personnel of the Company, on a structured basis, interact with directors from time to time to enable them to understand the Company's strategy, business model, operations, service and product offerings, markets, organization structure, finance, human resources, technology and risk management and such other areas. The directors also are facilitated to visit Company's plants to familiarize themselves with factory operations. DIRECTORS' RESPONSIBILITY STATEMENT Your Directors make the following statement in terms of Section 134(5) of the Companies Act, 2013. "We confirm: 1. That in the preparation of the annual accounts for the year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures. 2. That such Accounting Policies have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2016 and of the profit of the Company for the year ended on that date. 3. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. 4. That the annual accounts for the year ended 31st March, 2016 have been prepared on a going concern basis. 5. That internal financial controls to be followed by the Company have been laid down and that such internal financial controls are adequate and are operating effectively. 6. That proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and operating effectively." REMUNERATION As prescribed under Section 197(12) of the Companies Act, 2013 ("Act") and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details are given in Annexure H. In terms of provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing names of the employees and other particulars, drawing remuneration in excess of the limits, as prescribed in the said Rules forms part of this report. However, in terms of first proviso to Section 136(1) of the Act, the Annual Report, excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any member who is interested in obtaining these particulars may write to the Company Secretary of the Company. BOARD MEETINGS During the year, seven Board Meetings were held. The details of the meetings of the Board and its Committees are given in the Corporate Governance Report (Annexure 'C'). EVALUATION OF BOARD / BOARD COMMITTEES Pursuant to the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the Board has carried out annual performance evaluation of its own performance, the directors individually as well as evaluation of the working of its Committees. REMUNERATION POLICY The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a Policy for selection and appointment of Directors, Key Managerial Personnel (KMP) and other employees and their remuneration for implementation. Broadly, the performance of the employee concerned and the performance of the Company are the fundamental parameters determining the remuneration payable to an employee. More specifically, there will be reciprocity in the matter of remunerating executive directors, KMPs and other employees. At the middle and lower levels of management, the yardsticks of assessment are different. The ability to speedily execute policy decisions, sincerity and devotion and discipline are the main attributes expected. KEY MANAGERIAL PERSONNEL The Key Managerial Personnel of the Company for the purpose of Companies Act, 2013 are Sri N.Srinivasan, Vice Chairman & Managing Director (Chief Executive Officer), Smt. Rupa Gurunath, Wholetime Director, Sri G.Balakrishnan, Senior President & Company Secretary (till 31.03.2016) and Sri R.Srinivasan, President (Finance & Accounts) (Chief Financial Officer). Consequent to the attainment of superannuation by Sri G.Balakrishnan on 31.03.2016, Sri S.Sridharan has been appointed as Company Secretary with effect from 01.04.2016. PERSONNEL Industrial relations continued to remain cordial during the year. EMPLOYEES STOCK OPTION SCHEME No fresh options have been granted under India Cements Employees Stock Option Scheme, 2006 during the financial year. No options at all have been granted under India Cements Employees Stock Option Scheme, 2007. AUDITORS The Shareholders of the Company at the 68th Annual General Meeting held on 26th December, 2014, appointed Messrs. Brahmayya & Co., and P.S.Subramania Iyer & Co., Chennai, the Auditors of the Company, to hold office for a period of 3 years from the conclusion of the 68th Annual General Meeting until the conclusion of the 71st Annual General Meeting. Their appointment is subject to ratification by members every year at the Annual General Meeting and hence is included in the Notice convening the 70th Annual General Meeting of the Company. INTERNAL AUDITORS Messrs Capri, Gopalaiyer & Subramanian, Kalyanasundaram & Associates and Bala & Co., Chennai, have been appointed as Internal Auditors for the year 2016-17. COST AUDITOR Sri S.A.Murali Prasad, Cost Accountant, Chennai has been appointed as Cost Auditor for the year 2016-17 at a remuneration of Rs.15 lakhs. The remuneration is subject to ratification of members and hence is included in the Notice convening the 70th Annual General Meeting of the Company. SECRETARIAL AUDITOR Smt. P.R.Sudha, Practising Company Secretary, Chennai, has been appointed as Secretarial Auditor of the Company for the year 2016-17. Secretarial Auditor's Report in Form MR-3, as prescribed under Section 204(1) of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Management Personnel) Rules, 2014 is enclosed as Annexure K. The Secretarial Audit Report does not contain any qualification, reservation or other remarks. ACKNOWLEDGEMENT The Directors are thankful to the Financial Institutions and the Bankers for their continued support. The Directors also thank the Central Government and the various State Governments for their support. The stockists continued their excellent performance during the year and the Directors are appreciative of this. The continued dedication and sense of commitment shown by the employees at all levels during the year deserve special mention. On behalf of the Board N.SRINIVASAN Vice Chairman & Managing Director RUPA GURUNATH Wholetime Director CHITRA SRINIVASAN R.K.DAS ARUN DATTA Directors V. MANICKAM N. SRINIVASAN N.R.KRISHNAN Directors RABINARAYAN PANDA PL. SUBRAMANIAN Directors S.BALASUBRAMANIAN ADITYAN Directors Place : Chennai Date :26th May, 2016 |