AFFLUENCE

Dear Members,

2013-14 Challenges - a Journey in Retrospect and Outlook

Indian Economic Environment and Global conditions

The global growth outlook has largely remained unchanged during the year 2013. Growth is likely to be in the region of 3.5 per cent in 2014, about half a percentage point higher than in 2013. The expansion is expected to be led by advanced economies, especially the US. Accommodative monetary policy and reforms in the aftermath of the global financial and the euro zone crises have slowly started bearing fruit in advanced economies. After a soft patch at the start of the year 2013, US economic activity is expected to pick up during 2014 on the back of strong corporate financials, favorable financing conditions, smaller fiscal drag and strong price competitiveness. Moreover, after prolonged recession, the euro zone area is expected to contribute positively to global growth in 2014.

Emerging Markets and developing economies, however, had to face inflationary pressures, though actions in tightening monetary policy and slack in output are expected to generate some disinflationary momentum. These economies also face new risks on account of more tightened monetary policies. Although, growth picked up in these markets, momentum looked weak as compared to advanced economies.

On the back of above, Indias GDP growth for 2013-14 is expected at 4.6 per cent, close to the decade-low growth of 4.5 per cent clocked in 2012-13. However, GDP growth for 2014-15 is expected to hover around little above 5%. Consumer price inflation still remains an  important challenge, and is expected to trend down. Further tightening of the monetary stance might be needed for a durable reduction in inflation and inflation expectations.

Mining and Infrastructure Sectors performed better in recent past. Key Indicators suggest that Manufacturing Sector continues to be an area of concern with the sector, registering a decline of 3.7 per cent in Feb 2014, against stagnant production in January. Recent IIP estimates also suggest revival may turn out to be a protracted process. The sectors dismal performance has been driven largely by the fall in domestic demand. Private final consumption expenditure grew by 2.5 per cent in 2013-14, as against 9.6 per cent 2011-12 implying that domestic-demand-driven industries are seeing sustained weakness.

However, business sentiments are expected to revive with formation of stable government and normal monsoon and country is expected to perform better in time to come on economic front in general and on industrial front in particular.

Indian Cement Industry

On the backdrop of continued recessionary conditions prevailing in Indian economy, Indian Cement Industry has witnessed flat growth during the fiscal 2013-14 which has been largely on account of adverse macro environment prevailing almost through the year. Slowdown in infrastructure sector and prolonged monsoon added further woos for the industry. Lower than expected growth in consumption pattern of cement was mainly on account of higher lending rates in housing sector, a virtual halt in government spending on infrastructure sector as also higher borrowing cost in commercial segment.

The recent years witnessed huge capacity addition in cement industry. Lower than expected growth in demand on account of reasons mentioned above, has resulted into lower capacity utilization. Lower capacity utilization has resulted into pressure on absorption of fixed costs, on the other hand, inflationary conditions have resulted into higher variable cost in form of increase in freight, power and raw material costs. All factors taken together have resulted into contraction in margins and bottom lines of companies.

KEY HIGHLIGHTS 2013 -14

                       Consolidated cement production was 16, 64,037 MT during the year as against 10, 67,465 MT during the previous financial year, registering a growth of 56%.

                       Consolidated net sales were Rs. 102,798.95 Lacs during the year under review as compared to Rs. 59, 497.13 Lacs during the financial year 2012-13, registering a growth of 73%.

                       Consolidated EBIDTA was 96% higher at Rs. 23,650.50 Lacs as compared to Rs. 12,047.69 Lacs during the immediate previous financial year.

                       Consolidated loss before tax during the year 2013-14 was at Rs. 479.26 Lacs as against a profit of Rs. 4,897.67 Lacs in the year 2012-13. This was mainly on account of higher interest charge and depreciation during the year under review.

                       Average net sales realization during the year under review has grown by 3% during the year under review as compared to previous year.

FINANCIAL RESULTS                                                                                  

(Rs. in Lacs)

OPERATIONAL PERFORMANCE

FY 2013-14, although an year marked with inflation, slowdown in economy and flat demand growth of cement, has been an year of stabilization of operation for your company.  Your company has been able to stabilize operation of its newly set up grinding unit at Guwahati which was commissioned during last quarter of Financial Year 2012-13. The operation of newly commissioned Clinker Manufacturing Unit of subsidiary M/s. Star Cement Meghalaya Limited at Lumshnong (Meghalaya) also has largely been stabilized during the year under review.

FY 2013-14 was first full year of operation for both the newly commissioned units. However, amid the challenges posed by macro-economic conditions which prevailed throughout the year under review, your company has been able to stabilize its operation of its new units and has been able to manufacture 13,78,616 MT of Clinker on consolidated basis as against 835,576 MT during the FY 2012-13, registering a growth of  65% over last year.

Your company produced 16,64,037 MT of cement during the year under review on consolidated basis as against 10,67,465 MT during FY 2012-13 registering a growth of 56%. Cement dispatch on consolidated basis was 16,53,279 MT during the year under review as against 10,69,489 MT during FY 2012-13, registering a growth of 55% over previous year. Similarly, Sale of cement grew from 10,65,097 MT on consolidated basis during last year to 16,31,048 MT during the FY 2013-14, registering a growth of 53%.

In the first full year of operation, both of the newly commissioned units have been able to achieve around two-third of its capacity utilization. Grinding unit at Guwahati produced 954,679 MT of cement during the year under review which accounts for 60% (approx.) of installed capacity. Similarly, the clinkerisation unit of subsidiary M/s. Star Cement Meghalaya Limited has achieved a capacity utilization of 63% and has manufactured 11,02,905 MT of Clinker during its first full year of operation. With more stabilized operation, your company expects larger volumes of clinker and cement production from next financial year onward.

DIVIDEND

Your Company has declared and paid an interim dividend at the rate of 25% (Rs. 2.50 per equity share of Rs. 10/-each) during the month of January, 2014. Total outgo on account of dividend for the year under review amounts to Rs. 1,226.15 Lacs including dividend distribution tax of Rs. 178.11 Lacs.

To meet the operational requirement of funds, your directors do not recommend any further dividend for the year under review.

MARKET DEVELOPMENTS

With commissioning of new units, your company has been able to capitalize on potential of markets of North Eastern Region (NER). Despite flat demand growth in the markets of North East, your company has been able to grow its sales volume by 37% in the region. Your Company sold 14,16,426 MT of cement on consolidated basis in the markets of NER during the year under review as against 10,32,839 MT during the last financial year. The market share of your company further improved from 18% during last financial year to 23% during the year under review. This has been achieved by concentrating on more focused approach to expand its reach in rural and semi-urban market of NER. This was further supported by increased brand visibility and focused campaigning of your brand STAR CEMENT in remotest areas of the region. Companys Brand STAR CEMENT continues to enjoy leadership position in the region.

Apart from intensifying its effort in NER market, your company is pleased to inform that product of your company under the same brand STAR CEMENT has successfully been placed in the markets of West Bengal and Bihar. Keeping in view the short time frame since your company launched its product in these market, the efforts put in the markets of West Bengal & Bihar have started bearing fruits for the company. Your company has been able to cloak a sales volume of 2,14,622 MT of Cement in a very short span of time in these markets during the year under review as compared to 32,258 MT during the immediate preceding financial year which accounts for more than five times growth during the year under review over previous year.

While in NER, the dealer and retail network has been under expansion during the year under review to further consolidate its feet in the region; your company has started appointing dealer and retailers in the markets of West Bengal & Bihar too. A dedicated team has already been placed for these new and upcoming market areas to strengthen its retail network. A huge marketing and visibility campaign has been put in place to have a better brand visibility and top of mind recall amongst the users of cement in all these markets.

With sustained marketing efforts on continued basis, your company expects to put a much better performance during the ensuing year. In addition, your company is also exploring possibility of placing its product in the markets of neighboring countries viz. Nepal, Bhutan and Bangladesh. Your company, through its subsidiary M/s. Star Cement Meghalaya Limited is already exporting clinker to these neighboring countries. Your company is exploring avenues to export cement too in these markets.

PRODUCTION AND COSTS DEVELOPMENTS

Your company has undertaken cost reduction measures as major thrust area during the year under review. We could achieve reduction of input cost on almost all major raw materials with only exception being packing materials which rose due to rise in global crude prices.

We have successfully implemented Online Reverse Auction of major purchased items achieving considerable reduction on cost. Inventory reduction drive was taken up as a measure focus area in order to liquidate redundant and dead stock items of Stores and Spares.

Cost of Lime Stone and Shale largely remained unchanged. Cost increase on explosives was offset by better utilization factor of same.

Coal

Coal being a major cost driver for cement industry has got a very important role in overall cost composition of cement produced. Purchase price of Coal reduced considerably to Rs. 3442/- PMT during the year under review as against Rs. 4,872/- PMT during previous year. However, Coal consumption has also reduced from 17.69% of Clinker manufactured during last financial year to 17.11% during the year under review. This was achieved on account of better quality of coal received. However, specific heat consumption has gone up marginally from 788 Kcal/Kg of Clinker during the last financial year to 806 Kcal/Kg of Clinker during the year under review.

Fly Ash

Cement blended with Fly Ash has got dual advantage. On the one side, usage of fly ash is friendly to environment and on the other hand, it results into achieving cost optimization and energy saving. Your Company has been able to source fly ash from multiple sources which has given an edge in terms of optimization of blending and cost both. Your company has made long term arrangements with major power plants of NTPC, Tata Power and WBPDCL. In addition, your company has also made arrangement with its subsidiary M/s. Meghalaya Power Limited for supply of fly ash. This blend of source has not only given an advantage of less dependence on one source but has also resulted into advantage on cost front. Usage of fly ash of subsidiary company has not only reduced average landed cost but also dependence on availability of railway rakes and uncertainty related thereto has reduced to a great extent. During the year under review, your company has produced 14,75,331 MT of fly ash based Portland Pozzolana Cement (PPC) as against 9,71,098 MT during immediate previous year.

Logistics & Freight

During the year under review, Logistical needs of the organization increased many fold with commissioning of Guwahati Grinding Unit and Clinkerisation unit of subsidiary M/s. Star Cement Meghalaya Limited. The expansion of market to areas outside the North East Region also warranted a mix of Road and Rail movement. While additional capacity was to be distributed in the market, we were subjected to inter unit dispatches of Clinker and increased needs of input and raw materials. Your company braved all challenges and prudent  planning put in place ensured smooth availability of trucks and wagons.

During the year under review Freight Cost reduced to Rs. 1322 PMT as against Rs. 1362 PMT during previous year. This was achieved despite increase in cost of Diesel by 14% in addition to increase in other input costs for transportation industry. With increased capacities, distribution network was developed in West Bengal and Bihar with 24 Warehouses across these two states. Cost effective Railway mode of Transportation was used to a big extent with dispatch of 1.91 Lakh MT by Rail to Bengal & Bihar. Clinker Export to Bangladesh was started during the year by both River Barges and Road Transport.

Your company continued to focus on Infrastructure development and in the process construction of a Railway Siding was initiated which is expected to be commissioned in the ensuing financial year. Company has tied-up arrangement to ensure availability of over 400 trucks to work dedicatedly for its transportation needs. Warehouse and Logistics Infrastructure development was also undertaken for Export of Clinker to neighboring countries.

Power Cost

With commissioning of Clinkerisation unit of its subsidiary M/s. Star Cement Meghalaya Limited at Lumshnong and Companys Grinding Unit at Guwahati, on consolidated basis total requirement of power has gone up considerably during the year under review. Moreover, in the ensuing year and onward with expected improvement in capacity utilization of all the plants including of subsidiaries, the power requirement on consolidated basis is set to grow. The availability of grid power remained a concern both in terms of quality and quantity during the year under review coupled with increase in tariff and minimum demand charges. Keeping this into mind, as also the status of availability of Grid Power from State Electricity Boards, your company has advanced its efforts to towards reducing its dependence for supply of power on State Electricity Boards. Your company has made long term arrangement for supply of power with its subsidiary M/s. Meghalaya Power Limited which has already started its commercial operation with expanded capacity of 51 MW. In addition, Grinding Unit at Guwahati has also been granted permission to purchase power through Indian Energy Exchange (IEX) under Open Access Mode. Although the power cost has gone up from Rs. 5.72 Per Kwh during the FY 2012-13 to Rs. 6.47 Per Kwh during the year under review but on account of reduced dependency for power on State Electricity Board, plant operation remained unaffected. However, increase in cost of power has impacted margins of the Company.

INDIAN CEMENT INDUSTRY GROWTH PERSPECTIVE AND OUTLOOK

Despite slowdown in nations economy in recent years, as a developing and emerging economy, India still have great potential in infrastructure sector and cement plays a critical role in the growth and development of the country. As a country, our nation is placed second in terms of production of cement in the world. The cement industry has been expanding on the back of increasing infrastructure activities and demand from housing sector over the past many years. Although there has been flat growth in cement demand during the year 2013-14, on the expectation of increased government spending in infrastructure sector a growth of 56 per cent is expected during next fiscal. This is also supported by an expected increase in demand from the rural sector and tier II and tier III cities. Cement production in India is expected to touch 400 million tonnes (MT) by 2020. In next few years Cement consumption in India is expected to rise by 8 to 9 per cent on a year to year basis and industry is expected to regain its momentum and witness a steady market.

As a nation, our country has the potential of becoming worlds third largest construction hub in next 8 to 10 years. Apart from infrastructure sector, a major consumption segment of cement in India has been housing sector. Government has also been focused on promotion of low-cost affordable housing. Expected leap in infrastructure and housing sector to boost economic growth and with a plan to increase investment in infrastructure sector to US $ 1 trillion in the 12th Five Year Plan (2012-17), the industry is expected to add a sizable capacity.

On the capacity utilization front, in the short to medium term, the industry is expected to operate at a level of 70 to 80 percent of its capacity. However, in the longer term the industry looks promising after a prolonged muted growth years.

On the cost front Coal, Power and freight cost are the major cost drivers for the cement industry. Although prices of coal has stabilized in North Eastern Region with a bias towards reduction, prices and quality of coal in rest of country still poses challenges for the cement industry. Stringent environment and forest regulations are other major challenges affecting availability of coal in general and other critical minerals like limestone in particular for cement industry which may ultimately lead to higher mining and procurement cost. To overcome this situation, many of cement plants have started importing coal from countries like Australia and Indonesia and are also exploring possibility of using alternate fuel. Fluctuating Rupee with bias towards depreciation in its value through the year under review has taken a toll on the prices of diesel too leading to increase in freight cost. Railways have been increasing its freight rates from time to time. Timely availability of railway rakes has been another bottleneck.

On the power front, availability of grid power both in terms of quality and quantity has remained a concern for cement industry. Poor availability of coal to power plants has resulted into lower capacity utilization and reduced output. Recent developments on allocation of coal blocks and consequential halt on its allocation to coal consuming industries has also affected power generating units across country. On the tariff front, state owned electricity supplying companies have been increasing their tariff and minimum demand charges and despite that they have not been able to meet their Actual Revenue Requirement (ARR).

However, on the back of expected growth in countrys economy, India presents a better and promising future ahead for cement industry.

CEMENT SCENERIO IN NORTHEAST A VIEW IN RETROSPECT AND OUTLOOK

Still with potential of huge investment in infrastructure and housing sector in North Eastern Region, the muted and flat growth in cement demand during the year under review has not left the region untouched. The demand growth was close to 4% in the North Eastern Region during the year under review. This was mainly on account of slowdown in spending in infrastructure sector and increased lending rates in housing sector. Overall inflationary conditions also resulted into lowering down the resources at disposal of consumers at large, thereby decreasing their spending capacity. Increasing costs of construction coupled with depressed resources and uneasy access to funds from financial institutions have resulted in a slowdown in demand for cement from the housing as well as infrastructure sector in the North Eastern Region too. Restrained expenditure in current Infrastructure projects by the Government and drying up of fund allocation for new projects has resulted in the sector stagnating which resulted into flat demand for cement in the sector. 

North Eastern Region (NER) even though being rich in mineral resources, lacks in various indicators of development as compared to rest of India. Off-late, the Central Government has renewed its endeavor of providing fillip to the development of infrastructure in the region by constituting a monitoring committee, comprising of representatives from North Eastern States to improve the regions coordination with the Central Government on development of infrastructure in the region. Several ambitious road development projects like Trans Arunachal Highway Programme and special accelerated road development projects have since been cleared by the Central Government and bottlenecks in implementation of these projects have since been removed. Though, there has been a sedate growth in demand for cement during the year under review, on the back of several ambitious infrastructure projects lined up for implementation in the region, the demand for Cement is expected to firm up. Moreover, with the economy expected to pick up in the short term and with rise in sentiments, the major consumption areas like housing, road and rail will drive the demand of cement further in the region.

Although, market share of cement imported from outside the region has reduced over the years, still a significant quantity is still being pushed in the markets of North East from the cement players from outside the region. This provides another opportunity to cement industries of North Eastern Region to further consolidate on their market share. In terms of volume, your company has been able to achieve sale of 14,16,426 MT of Cement in the region during the year under review as against 10,32,839 MT during the previous year registering a growth of 37% as against growth of 4% in Cement demand. Market share of your company has increased to 23% as against 18% during the previous financial year in the region. Your Company continues to enjoy brand leadership position in the market of North East. With the stabilization of operations of its newly commissioned units, your Company expects to further strengthen its feet in the Region.

SUBSIDIARIES COMPANIES

Operations of M/s. Star Cement Meghalaya Limited, subsidiary of your Company which commenced commercial production of Cement Clinker during last quarter of FY 2012-13 have largely been stabilized.

M/s. Meghalaya Power Limited, Lumshnong which expanded its capacity during FY 2012-13 is under process of stabilization of its operations.

M/s. Star Cement Meghalaya Limited, M/s. Meghalaya Power Limited, M/s. Megha Technical & Engineers Private Limited and M/s. NE Hills Hydro (P) Limited continue to remain subsidiaries of your company.

The statement pursuant to Section 212 of the Companies Act, 1956 relating to subsidiaries is annexed to this report. The Board of Directors has given their consent for not attaching the financial statements of the subsidiaries referred to in the aforesaid annexed statement, pursuant to general circular no. 2/2011 dated 8th February, 2011 of the Ministry of Corporate Affairs, Government of India. However, the annual account of Subsidiary Companies and the related detailed information shall be made available to the shareholders of the company and that of subsidiaries seeking such information at any point of time. The annual accounts of subsidiaries are also available for inspection by any share holder at the corporate office of the company and that of its subsidiary.

CONSOLIDATED FINANCIAL STATEMENTS

Your Company has also prepared the Consolidated Financial Statement in accordance with Accounting Standards 21 issued by Institute of Chartered Accountant of India, which comprises of the financial statement of the Company and the subsidiaries Megha Technical & Engineers Private Limited, Star Cement Meghalaya Limited, Meghalaya Power Limited, and NE Hills Hydro Private Limited. The audited consolidated financial statements together with Auditors' Report form part of the Annual Report.

The consolidated net Loss of the Company and its subsidiaries stood at  Rs. 421.39 Lacs for the financial year ended on 31st March, 2014 as compared to Rs. 1,569.38 Lacs for the Company on a standalone basis.

HOLDING COMPANY

The Scheme of Arrangement between holding company  Century Plyboards (India)  Limited and Star Ferro And Cement Limited  and their respective shareholders to transfer the Ferro Alloys and Cement Businesses of holding company to Star Ferro and Cement Limited which was pending for approval by Honble High Court of Calcutta was approved on 17th May, 2013. Consequent to approval, M/s. Century Plyboards (India) Limited has ceased to be the holding company of your company with effect from appointed date, i.e. 1st April, 2012 and M/s. Star Ferro and Cement Limited has become holding company of your company effective from the same date.

M/s. Star Ferro & Cement Limited holds 70.48% of equity in your company.

As informed by holding company, demerger will enable the holding company to carry out its core business of Ply boards and laminates more conveniently and advantageously on the one side, and such demerger and transfer will also unlock the potential of each of the businesses to raise and access larger funds for running, growth and expansion thereof on the basis of their individual strength and operating parameters and independent valuation, on the other side.

INTERNAL CONTROL SYSTEMS

The Company has adequate level of internal control system in place commensurate with size and nature of its business. Regular Internal Audits are conducted by an external firm of Chartered Accountants for all the major processes which ensures reliability of transactions being recorded which in turn ensures reliability of financial reporting, timely feedback on operational efficiencies, compliances of processes, policies, laws and regulations which have a bearing on the business and sustenance of your company.

The Internal Audit function reviews the efficacy of internal control system in place from time to time to ensure that companys business and operations remain protected under changing business environment and needs as also with frequent changes in legal and regulatory framework governing the business and operations of your company.

The internal audit and internal control systems have also been designed in the manner that it provides early signal of any lapse or loss of control in the control mechanism affecting operations in any manner.

The report of internal auditors is periodically reviewed by Audit Committee. The Audit Committee reviews the effectiveness of the internal controls and checks in place for processes and the risk management mechanism employed by the Company and suggests, changes, as and when required.

PARTICULARS OF EMPLOYEES

The Company has no employee whose salary exceeds the limit prescribed under section 217(2A) of the Companies Act, 1956. Hence, information required to be given under the said section read with Companies (Particular of Employees) Rules, 1975 as amended has not been provided in this report.

HUMAN RESOURCE AND INDUSTRIAL RELATIONS

Human Capital has always been critical and one of most important and most valuable element for any organization. Employees with high moral and engagement deliver unexpected benefits to the organization. To keep the morale high, besides adopting standard HR management processes, your company has created a favorable work environment that encourages innovation and meritocracy by aligning the growth of individual talent with Organizational objectives to meet the strategic needs of the organization as also ensures fulfillment of individual and team aspirations. The Organizational Objectives cascaded to Department, Team and Individuals as their targets are reviewed periodically.

Continuous learning of employees has remained of prime significance for your company. We believe that this is necessary not only for companys own sustainability and growth as an organization; but also for enabling professional development of employees. Leadership development at every level is core part of our In-house, external and internal training programme in addition to build & develop required competencies on functional and behavioral aspects as well. For contractual employees, your company has also started a systematic training programme before and after they are engaged at work.

Mentoring local employees to inculcate industrial work culture amongst them is our continuous effort and delivering desired results.

Your Company strives towards attracting best possible talent through employee referrals, open market and campus recruitment. This provides a blend of ideas & knowledge at work place. 

To maintain the work life balance, social gatherings and competitions are organized across the organization and various festivals are celebrated with active participation of employees and their family members. 

Your Company continues to enjoy a good and harmonious Industrial relation and congenial environment across the organization.

OCCUPATIONAL HEALTH AND SAFETY

Safety has always been a top priority area for your company. Your Company has been focusing not only on creating safe environment to work at work place, but has also been endeavoring to build a mindset amongst its employees and stake holders which is one of the most essential input for creating safe working environment at work place and outside too. If one carries out a root cause analysis of any accident or near-miss, the instances where the accident has occurred on account of avoidable human errors will be observed the most. This happens mostly on account of ignorance or tendency to ignore prescribed safety norms to be adopted during execution in a particular kind of job either at work place or even otherwise. To avoid such instances, your company has been consistently conducting awareness programme involving all employees and other stake holders across the organization in form of regular EHS Gate Meetings, Safety Drills, quiz Competition. During the year under review, to create awareness on Fire Safety, a fire safety day was observed wherein mock drills were conducted and demonstrated to share the knowledge about actions to be taken in the eventuality of any fire. A monthly Gate Meeting on environment health and safety is arranged wherein participation is ensured across all levels and departments and incidents are discussed and analysis is carried out to create awareness amongst the participants to avoid repetition of such incidents. Periodical and surprise safety audits are carried out to check the level of prescribed safety norms being followed during execution of different works. A behavioral based safety audit was also conducted during the year under review by an external agency amongst managerial employees. An emergency control room has been put in place to attend any eventuality. Your company has also started a safety induction programme for all new employees and contractual workers.

As a measure towards environment protection and to make its campus the greenest, your company has adopted Akira Miyawaki, a method which aims at planting a dense forest instead of planting a tree. Company at its unit has planted 2700 saplings of 14 native species on a single day on 20.09.2013.

DIRECTORS

Mr. Brij Bhushan Agarwal and Mr. Pankaj Kejriwal will retire by rotation at the forthcoming Annual General Meeting in accordance with the provisions of the Companies Act, 1956 and Company's Articles of Association and being eligible, offer themselves for reappointment.

The Board recommends their reappointment.

DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 as amended, the Board of Directors hereby confirms:

1.       That in the preparation of Annual Accounts, the applicable Accounting Standards have been followed and that there are no material departures.

2.       That the Director's have selected appropriate accounting policies and have applied them consistently and have 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, 2014 and of the Statement of Profit & Loss and Cash Flow of the Company for year ended 31st March'2014.

3.       That the Directors have taken proper and sufficient care 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.

4.       That the Directors have prepared the annual accounts on going concern basis.

CORPORATE CITIZENSHIP

Your Company believes in principal of inclusive growth and considers the growth of community along with the growth of the Company as an important aspect of business ethics. With an aim of giving back to the society, the Company, as a responsible corporate citizen, has been proactively undertaking social welfare activities for the benefit of local people and all around development of local area.

Your Company maintains a school, equipped with modern educational facilities, for providing better educational facilities at the local area at Lumshnong Village. The School is affiliated to Central Board of Secondary Education and imparts education up to 10th Standard and is staffed with well-trained teaching and non-teaching staff. Plans have been put in place to upgrade the school to 12th Standard of education in the coming years. During the year under review, your company has actively contributed in construction of new school building and classes have started from the newly constructed building. The school provides free-ships to poor and needy students of local and surrounding villages.

The Company has been actively participating in social and economic development of the local village and the surrounding areas and has been one of the key contributors to the Village Area Development Fund. During the year under review, your Company has started several skill development programs for the youth of the area. With a view to increase the means of livelihood for local people and for uplifting their social status and with a view to encourage local entrepreneurship, your Company has been engaging local people as suppliers of limestone, coal, river sand etc. The Company has continued to maintain street lights of the village. Potable drinking water has been made available to the people of the local village and adjoining areas through a dedicated fleet of tanks maintained by the Company.

The Company has also been actively involved on the health front and maintains a well-equipped hospital to take care of day to day medical, diagnostic and emergency requirements of local residents. The Company also maintains dedicated fleet of ambulances fitted with modern facilities and equipment to cater to all kind of medical emergencies round the clock. During the year under review, several free medical health check-ups, eye check-ups and vaccination camps were conducted by your Company. Doctor on call facility has also been put in place for the welfare of the local people.  

To further strengthen its social responsibilities, your company has plans to put in place a committee dedicated towards monitoring and implementation of its responsibilities as a responsible corporate citizen.

AUDIT COMMITTEE

Your Company has an audit committee at the Board level, which acts as a link between the management, the statutory and internal auditors and the Board of Directors and oversees the financial reporting process. The Committee comprises of Mr. Sajjan Bhajanka, Mr. Brij Bhushan Agarwal and Mr. Prem Kumar Bhajanka with Mr. Sajjan Bhajanka as its Chairman. The Constitution of the Audit Committee also meets the requirements under Section 292A of the Companies Act, 1956. Four meetings of the Committee were held during the year i.e. on 19th April 2013, 17th July, 2013, 28th October, 2013 and 8th January, 2014.

The Audit Committee, inter-alia, reviews:

                  Quarterly, half- yearly and yearly Financial Statements before submission to the Board for approvals.

                  Significant related party transactions.

                  Audit Reports including Internal Audit Reports and report of internal audit team of the Company.

                  The Companys financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

                  Recommendation to the Board, the appointment, re-appointment of auditor, and, fixation of audit fees.

                  Changes, if any, in accounting policies and practices and reason for the same.

The Audit Committee so constituted advises the management on the areas where internal audit can be improved. The minutes of the meetings of the audit committee are placed before the Board.

AUDITORS' REPORT

The observations made in the auditor's note are self-explanatory and therefore do not call for any further comments under section 217 (3) of the Companies Act, 1956.

APPOINTMENT OF COST AUDITORS

Your Company has appointed M/s. B.G. Chowdhury & Company, Cost Accountants to audit the Cost Records of the Company for the financial year ended on 31st March 2014 in terms of Section 233B of the Companies Act, 1956.

AUDITORS

M/s. Kailash B. Goel & Co., Chartered Accountants, Statutory Auditors of the Company, will retire at the conclusion of the ensuing Annual General Meeting of the Company. Being eligible, they have offered themselves for re-appointment and have confirmed that their appointment, if made, will be in accordance to the provisions of section 141 read with section 139 of the Companies Act, 2013. In terms of requirement of section 177 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the audit committee of the company in their meeting dated 17th of May, 2014. have recommended their appointment as statutory auditors for the year 2014-15 to Board of Directors. Members are requested to approve and ratify the appointment. Members are also requested to empower the Board of Directors for fixation of Auditors Remuneration.

FORWARD LOOKING STATEMENTS

In the Management Discussion and Analysis and Directors Report, statements given while describing Companys Long Term Plans, objectives, prospects and opportunities may be forward looking. Such Statements have been made on the basis of experience so far and are contingent upon various factors like legislative and regulatory developments, macro economic and political trends, domestic demand and supply conditions affecting selling prices, new capacity additions which are material to the business operation of the Company and actual performance may differ materially from those expressed in the said statements.

APPRECIATION

Your directors take this opportunity to express deep sense of gratitude to the banks, Central and State Governments and their departments, the local authorities and business associates 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 CMCL family. To them goes the credit for the company's achievements. Your Company also wishes to convey its sincere thanks and appreciation to the villagers of Lumshnong village and other villages in Narpuh Elaka and also to the villagers of Chamta Pathar, Sonapur, Guwahati for their continuous and ever strengthening support. 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 Board

                                                                                                                                                    SAJJAN BHAJANKA CHAIRMAN AND MANAGING DIRECTOR

Kolkata, the 17th day of May, 2014

ANNEXURE - I

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO AS REQUIRED UNDER COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH 2014.

 A. Conservation of Energy

a.    Energy Conservation Measures taken :

Specific energy consumption (Kwh/Ton of cement) has gone up to 97.81 units.

During the FY 2013-14 following energy conservation, modification and efficiency improvement measures were undertaken:

1.    Suitable Interlocks have been provided for gear box & girth gear cooling  fans to avoid idle running of these fans.

2.    Optimization of pressure drops in pre heater cyclones.

3.    Optimization of raw mix.

4.    Mill Output was increased by minimizing breakdowns and optimizing Mill.

5.    The Bag House Fan and Material transportation bucket elevators are stopped after 20 minutes whenever mill operation is stopped in place of 30 minutes initially.

6.    Modification in Cement Mill bulk loading system by installing one air slide directly from silo bottom to bulker receiving point.

7.    Optimization of Fuel in Hot Air Generator between diesel and coal.

8.    Optimization of coal consumption in Hot Air Generator by optimizing Coal Firing.

9.    Use of Grinding Aid.

10.  Reduction in idle running by reorganization of system interlocks.

11.  Optimization of Bag House by changing purging sequence and by optimizing on time and off time through repeated trials.

12.  Optimization of Truck Tippler Operation.

13.  Installation of Capacitor Bank resulted into improvement in power factor.

 Additional Investments and proposals, if any, being implemented for reduction of consumption of energy:

The Company has planned to implement the following measures:

(i)            Replacement of Coal Mill Grit Separator with high efficiency dynamic separator.

(ii)           Installation of Dry Fly Ash feeding system for feeding of fly ash directly into classifier.

(iii)          Installation of Timers/Optical Sensors for outdoor lighting.

(iv)         Additional installation of Capacitor Banks to further improve on power factor.

 Impact of measures at (a) and (b) above for reduction of Energy Consumption and consequent impact on the cost of production of goods:

Measures referred in (a) and (b) are expected to result in energy saving resulting into lowering down the cost of finished goods produced.

Form for Disclosure of particulars with respect to Conservation of Energy

  B. TECHNOLOGICAL ABSORPTION

Research & Development (R&D)

Research & Development Cell of company has carried out various tests in different areas of operation for achieving greater level of efficiencies.

Specific areas in which such R&D was carried out by the Company:

 Use of iron ore and Laterite as alternative raw material.

 Trial Production of Slag Cement and PPC Part II

 Laboratory Test and study of Calcined Clay to find out its suitability for replacement with Fly Ash.

 Development of Raw Mix design for usage of low grade lime stone.

 Trail for use of newly designed packing bags.

 Study of sustainability of Performance Improver in Cement Mill.

Benefit derived as a result of R&D

1.    Usage of low cost iron ore fines and Laterite resulted into reduction in input cost.

2.    Successful Trail production of Slag Cement and PPC Part II will help in exploring new markets and in optimizing cost of production.

3.    Usage of Calcined clay will optimize use of high cost fly ash and clinker.

4.    Usage of Low Grade Lime Stone will result into improved mines life and conservation of natural resources.

5.    Improved design of packing bags shall result into reduction in bursting ratio and better customer satisfaction.

6.    Use of Performance Improver would result into optimization of cost.

Future Plan of Action

 Development of technical feasibility for usage of industrial waste as alternative fuel.

 Feasibility study for installation of pre grinder.

 Installation and Upgradation of energy efficient equipments.

 Exploratory Research Work in above specific areas.

 NABL Accreditation of Laboratory.

Expenditure on Research & Development

 (Rs. In Lacs)

Industrial Relation

The Industrial relation situation in the company remains harmonious and healthy at all levels.

Foreign Exchange Earnings & Outgo                                                                   

(Rs. In Lacs)