DIRECTORS' REPORT Dear Shareholders, Your Directors have pleasure in presenting their 74th Annual Report of the company together with the Audited Financial Statement for the financial year ended 31st March, 2015. Business Performance: Cement Division • On account of the marginal correction of price of cement and notwithstanding the higher input costs , cement units reported satisfactory operations from the second half of the year under review. • Uncertainties and non-availability of domestic coal resulted in reliance on imported coal which however, in terms of costs, was lower than its Indian counterpart. However the increase in the statutory levies imposed in the Budget on this coal increased the cost of production of cement. • Notwithstanding the low contribution, cement exports were buoyant throughout the year. Engineering Division: • Engineering unit performance continued to be gravely impacted by the continuing stagnation of the economy. This has resulted in fall in Sales and operating margins which have turned negative. Power Division: • The company commissioned the 18MW thermal based Captive Power Plant in the last quarter of the year. A portion of the power was also sold to the grid. • All the power units' functioning was satisfactory. • The Renewal Energy Certificates (REC) on the solar power unit has accrued regularly but the realization of the same in the market remains tardy. Dividend from subsidiary During the year under review the company received a dividend of Rs 632 lacs (Rs 1504 lacs in the previous year) from its subsidiary, KCP Vietnam Industries Ltd, Vietnam. The company also received a dividend of Rs 40 lacs form its Joint Venture Fives Cail KCP Ltd Redemption of Preference Shares Pursuant to the Share subscription agreement dated 23rd November, 2009, entered with M/s Tata Capital Financial Services Limited (earlier Tata Capital Limited), the Company has redeemed the last tranche of 8 crores preference share capital along with accrued dividend of Rs. 66,27,945 till the date of redemption. Dividend on Equity Shares Subject to the approval of the shareholders at the ensuing Annual General Meeting of the Company the Board of Directors has recommended, a dividend of Re. 0.75 per equity share of Re. 1/- each (i.e 75%). The final dividend, if approved, will be paid to members within the period stipulated by the Companies Act, 2013 and the Companies (Declaration and Payment of Dividend) Rules, 2014. Transfer to Reserves Current year's profits along with carried forward balance of previous year amount to Rs. 5952 lacs. After appropriating Rs.1243 lacs for dividend on preference shares, proposed dividend on equity shares and tax thereon, the Surplus Account will have Rs. 4709 lacs to be carried forward to the next year. The Company has not transfered any amount to the General reserve for the proposed dividend, since the Companies Act, 2013 does not mandate for any transfer to General reserve. The total amount in General Reserve as on 31st March 2015 would stand at Rs. 27450 lacs. Management Discussion & Analysis: All matters pertaining to Industry structure and developments, opportunities and threats, segment/product wise performance, outlook, risks and concerns, internal control and systems, etc are discussed in Management Discussion & Analysis report forms part of this report. Projects under implementation: Discussed in detail in Mgmt Discussions & Analysis Report. Exit from Biotech Division Further to the approval of the shareholders on 31/01/2013 by way of Postal ballot, the company has completed all formalities for the transfer of Company's Biotech Unit at Hyderabad. Fixed Deposits: The total amount of Fixed Deposits outstanding as on 31st March, 2015 was Rs.79,77,39,350/- as compared to the figure of Rs.76,39,35,000/- (Rs.76,39,35,000/-). As on 31st March, 2015, Fixed Deposits matured and remained unclaimed were Rs.1,13,99,000/- from 183 depositors. As on the date of this report, Fixed Deposits of 35 depositors amounting to Rs.12,65,000/- have been renewed and Fixed Deposits of Rs. 6,35,000/- of 15 depositors repaid. Advance intimation has been sent to depositors regarding the maturity of deposits with a request to either renew or claim their deposits. pursuant to Section 125 of the Companies Act, 2013, deposits remaining unclaimed for a period of seven years from the date they became due for payment have to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government. Accordingly, during the year, an amount of Rs. 21,000/- has been transferred to the IEPF. The Company has not accepted any deposits which are not in compliance with the requirements of Chapter V of the Companies Act, 2013 and rules made thereunder. Share Capital The paid up Equity Share Capital as on March 31, 2015 is 2,89,21,160. During the year under review, the Company has not issued shares with differential voting rights nor granted Employees Stock Options (ESOPs) nor Sweat Equity. Corporate Social Responsibility (CSR) As part of its initiatives under "Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of Education, Livelihood, Health, Water and Sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013. A Committee of the Board comprising of Smt V L Indira Dutt Joint Managing Director, Smt Kavitha D Chitturi Executive Director, Sri.P.S.Kumar, Sri V Gandhi and Sri Vijay Sankar has been formed to monitor the CSR activities and suggest further improvement to make it more productive. The Annual Report on CSR activities is annexed herewith as "Annexure 3". Details of various social projects and initiatives undertaken as part of our Corporate Social Responsibility are given in report on CSR activities which forms part of this Annual Report. As some of the CSR activities are Capital in nature the unspent amount of Rs.7,71,086 will be spent in year 2015-16. Risk management Risk management is a structured approach to manage uncertainty. It involves identifying potential risks, assessing their potential impact, taking timely action to minimize potential impact and continuous monitoring of identified risks. Your Company has a robust risk management process to identify and assess business risks and opportunities. The Company's risk management policy describes the potential risks, contains an analysis of the impact of risks and includes risk strategies to help the business reduce the consequences. The policy is regularly reviewed to ensure that it accurately reflects the current potential risks to its business. Your Company has identified the following as key risks: Financial risk The financial risk for your Company emanates from fluctuations in interest rate, exchange rate and commodity prices. Your Company has well defined policies for foreign exchange, treasury investments, interest rate and imported coal hedging. The policies are reviewed periodically to align with the changes in financial market practices and regulations Competition Risks: The Cement Industry is becoming intensely competitive with the foray of new entrants and some of the existing players adopting inorganic growth strategies. To mitigate this risk, the Company is leveraging on its expertise, experience and it's created capacities to increase market share, enhance brand equity / visibility and enlarge product portfolio and service offerings. Organisation Health & Safety (OH&S) Risks: Safety of employees and workers is of utmost importance to the Company. To reinforce the safety culture in the Company, it has identified occupational Health & Safety as one of its focus areas. Various training programmes have been conducted at the plants such as behaviour based safety training program, Visible Safety Leadership program, Logistics Safety program etc. The Details In Respect Of Adequacy Of Internal Financial Controls The Company has designed and implemented a process driven framework for Internal Financial Controls ("IFC") within the meaning of the explanation to Section 134 (5) (e) of the Companies Act, 2013. The Board is of the opinion that the Company has sound IFC commensurate with the nature and size of its business operations; wherein controls are in place and operating effectively and no material weaknesses exist. The Company has a process in place to continuously monitor the existing controls and identify gaps, if any, and implement new and / or improved controls wherever the effect of such gaps would have a material effect on the Company's operation. Vigil Mechanism / Whistle Blower Policy The Company has a vigil mechanism named Whistleblower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistleblower Policy is explained in the Corporate Governance Report and also posted on the website of the Company. Weblink: http: //www.kcp.co.in/downloads/PDF/wb-policy pdf Report Under The Prevention Of Sexual Harassment Act There were no complaints reported under the Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Directors In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company, Smt.Kavitha Dutt Chitturi, Executive Director of the company retires by rotation and is eligible for re-appointment. No Director or Key Managerial Personnel are/were appointed or have resigned during the year; The Independent Directors of the the Company have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Board Meetings During the year four Board Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and the listing agreement. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual evaluation of its own performance, the directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. The Details of familiarisation programme arranged for independent Directors have been disclosed on website of the company and are avilable at the following link: Weblink: <http://www.kcp.co.in/downloads/PDF/FProgamme.pdf> Related Party Transactions All Related Party Transactions are placed before the Audit Committee and as also the Board for approval. Particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 are furnished in Form AOC-2 attached to and forms part of this report as Annexure 6 The policy on Related Party Transactions as approved by the Board is placed on the Company's website. Weblink: <http://www.kcp.co.in/downloads/PDF/rtpolicy.pdf> Auditors At the 73rd Annual General Meeting (AGM) of the Company held on 11th August, 2014, M/s. Brahmayya &Co, Chartered Accountants, Vijayawada (Firm Registration No.000513S) have been appointed as the Statutory Auditors of the Company for a period up to 3 years. In terms of the provisions of the Companies Act, 2013 and rules made thereunder it is necessary to get the appointment ratified by the shareholders in every Annual General Meeting until the expiry of the period of original appointment. the Board of Directors recommends your ratification of the appointment of M/s. Brahmayya &Co, Chartered Accountants, Vijayawada (Registration No.000513S) as the Statutory Auditors of the Company for the year 2015-16. The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Rules, 2014 as amended, your Board of Directors, on the recommendation of the Audit Committee, have appointed M/s Narsimhamurthy & Co, Cost Accountants, Hyderabad and Mahadevan & Co, Chennai as the Cost Auditors for the Cement and Engineering units for the year 2015-16. The Cost Audit Reports for the year 2013-14 were filed by the Cost Auditors within the due date. Secretarial Audit Pursuant to Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Smt. Sobhana Pranesh, Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed to the report herewith as "Annexure 7". Subsidiary & Associate Companies Your Company does not have any Indian Subsidiary company. The Audit Committee and Board reviews the financial statements, significant transactions, working and the financial results of the subsidiary company in Vietnam, KCP Vietnam Industries Limited. There is no material change in the nature of the business of the subsidiary. A statement containing brief financial details of the subsidiaries is included in the Annual Report in Form AOC 1 as Annexure 5. The annual accounts of the subsidiary and the related information will be made available to any member of the Company for inspection at the registered office of the Company during business hours. The Company shall furnish a copy of the details of annual accounts of the subsidiary to any member on demand. The annual accounts of the subsidiary company will be placed on the website of the company www.kcp.co.in Consolidated Financial Statements Pursuant to the requirements of Accounting Standard - 21 and the Listing Agreement with National Stock Exchange, the audited financial statements of the Company consolidating those of its subsidiary KCP Vietnam Industries Ltd, financials and unaudited Financials of Fives Cail K C P Ltd, have been attached. No company ceased to be its Subsidiary, joint venture or associate company during the year Transfer of amounts to Investor Education and Protection Fund (IEPF) Pursuant to sections 124 and 125 and other applicable provisions, if any, of the Companies Act, 2013, all Unclaimed dividend, and interest on deposits as well as the principal amount of deposits, as applicable, remaining unclaimed for a period of seven years from the date they became due for payment, have been transferred to the IEPF established by the Central Government. Corporate Governance: As per clause 49 of the Listing Agreements entered into with the Stock Exchanges, detailed Corporate Governance Report with auditors' certificate thereon is attached and form part of this report. Human Resource Development Your Company considers its employees as most valuable resource and ensures strategic alignment of Human Resource practices to business priorities and objectives. The human resources strategy enabled the Company to attract, integrate, develop and retain the best talent to deliver business growth. Our Company continued to invest in enhancing its human capital by providing opportunities to its employees to develop their skills and competencies relevant to the market requirements The Company has 508 permanent employees at various locations across the Registered office and plant locations. Our Cement Production Unit at Muktyala has received "National Energy Conservation Award" from Ministry of Power & Coal, Govt of India for the year 2014. It is great honor to our Cement Unit and its Team to receive the award, this Award was given to us after critical analysis of energy usage pattern in 311 Cement Units in India by Bureau of Energy Efficiency (BEE), Ministry of Power. In choosing KCP Cement Unit-II for this award, BEE recognized our efforts in continuing to build upon its sound energy management foundation. Our unit has saved 137 lakh Units power and 736 MT of coal in 2012-13 and 110.5 lakh Units of Power and 2277 MT coal in 2013-14. Which has resulted in a net saving of Rs 886.4 Lakhs and Rs 798 lakhs in 2012-13 & 2013-14 respectively. Our Cement Production Unit - I, Macherla was awarded with "Best Management award" by the Governement of Andhra Pradesh. Policy on Directors' Appointment and Remuneration including criteria for determining qualifications, positive attributes, independence of a Director, Key Managerial Personnel and other employees (Section 178 of the Companies Act, 2013) The Board shall have minimum 3 and maximum 14 directors, unless otherwise approved. The Company shall have such person on the Board who complies with the requirements of the Companies Act, 2013, Provisions of the Listing Agreement, Memorandum of Association and Articles of Association of the Company. Composition of the Board shall be in compliance with the requirements of Clause 49 of the Listing Agreement of the Stock Exchanges. Majority of the Directors shall have specialised knowledge/experience in the areas like Banking, Accountancy, Finance, etc. The Company has costituted the Nomination and Remuneration committee, which has formulated the criteria for determining qualifications, positive attributes and independence of Directors and recommonded a Remuneration policy to the Board. Except for the Chairman and Managing Director, Joint Managing Director, Executive Director and Technical Director, no other directors are paid remuneration, but are paid only sitting fees. The Chairman and Managing Director, Joint Managing Director, Executive Director and Technical Director are paid remuneration as approved by the Shareholders as per the applicable provisions of the Companies Act, 2013 and rules made there under but are not paid sitting fees. The Chairman and Managing Director, Joint Managing Director, Executive Director, Technical Director, Company Secretary and Chief Financial Officer shall be the Key Managerial Personnel (KMPs) of the Company. All persons who are Directors / KMPs, members of Senior Management and all other employees shall abide by the Code of Conduct. Independent Directors are not entitled for ESOPs. Directors/KMPs shall not acquire any disqualification and shall be persons of sound integrity and honesty, apart from knowledge, experience, etc. in their respective fields. h) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and any exceptional circumstances for increase in the managerial remuneration: Average increase in managerial remuneration is at par with increase in remuneration of Employees other than Managerial Personnel and there is/are no exceptional circumstances for increase in the managerial remuneration. i) The key parameters for any variable component of remuneration availed by the directors: Except Dr.V.L.Dutt, Chairman & Managing Director, Smt.V.L.Indira Dutt, Joint Managing Director, Smt.Kavitha Dutt Chitturi, Executive Director and Sri.V.Gandhi, Technical Director of the Company no director was paid any remuneration. Sitting Fees was paid to the independent Dirctors and for the above said whole time Directors variable component was paid in the form of Commission, which is as per the Remuneration Policy of the Company and in accordance with the provisions of the Companies Act, 2013 and rules made there under and approved by the shareholders of the company. j) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year: NA k) If remuneration is as per the remuneration policy of the company: Yes Particulars of Loans, Guarantees or Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. Extract of Annual return The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure 4". Significant and Material orders passed by the Regulators or Courts There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Particulars regarding Conservation of Energy, Technology absorption and Foreign exchange earnings and outgo Details provided in Annexure: 2 forming part of the Annual report Director's Responsibility Statement To the best of our knowledge and belief and according to the information and explanations obtained by us, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013: (a) i n the preparation of the annual financial statements for the year ended 31st March, 2015 , the applicable accounting standards, read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; (b) the Directors have selected such accounting policies and applied them consistently and made judgements and estimtes that are reasonable and pruduent so as to give a true and fair view of the state of affairs of the Company and for preventing and detecting fraud and other irregularities; (c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) the Directors have prepared the annual accounts on a 'going concern' basis; (e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and (f) the Directors have devised proper systems to ensure compliance with provisions of all applicable laws and that such systems are adequate and operating effectively. Acknowledgements The Board of Directors wishes to place on record their gratitude to the Central Government, State Governments, Company's Bankers, Customers, dealers and other business associates for the assistance, co- operation and encouragement they extended to the Company. Your Directors wish to whole heartedly thank the employees for their sincere and devoted contribution to the company's continued performance. Your Directors are thankful to the shareholders and deposit holders for their continued patronage. For and on behalf of the Board of Directors (V.L. DUTT) Chairman and Managing Director Place: Chennai Date: 18th May, 2015 |