DIRECTORS' REPORT Dear Members, The Directors are pleased to present the Fifth Annual Report on the business and operations of your Company together with the audited accounts for the financial year ended 31st March, 2016. BUSINESS AND FINANCIAL PERFORMANCE 2015-16 proved to be a challenging year globally, across most sectors. While India's GDP grew at around 7.6% during the year, the manufacturing and infrastructure sectors failed to perform to expectation. The cement sector reported subdued growth at below 5%. Low consumption from the housing & construction sectors, along with lack of pick-up in industrial and infrastructure development were the primary factors for the weak cement demand. To add to the industry woes, excess capacity led to lower capacity utilization, with all India capacity utilization remaining around 70%. In the backdrop of this macro environment, the key business and financial highlights for the Company for FY16 are as under: • Successfully commissioned the 3 million tonne Greenfield cement plant at Chittapur (Gulbarga, Karnataka) in September, 2015. After initial teething troubles, the plant operations are stabilising fast, with significant ramping up of production and dispatches. • Total cement sales volume for the year stood at 44.19 lac tonnes (including 4.26 lac tonnes from the new plant), against 40.71 lac tonnes in FY15. • Sustained focus on PPC cement promotion in line with your Company's commitment to environmental sustainability; 78% of cement volume was sold as PPC from existing operations, with concurrent scaling-up of PPC sale from new operations during the year. • Net sales realisation for the year was Rs. 3,399 PMT, as against Rs. 3,771 PMT in the previous fiscal. Decline in realisation was attributable mainly to low prevailing prices in the markets serviced by the Company. Subdued demand resulting from poor monsoon, low spending by the government on infrastructure projects, and additional volumes from the new capacities added during the year further impacted the realisation. • Production costs remained under control on account of weak commodity prices and sharp focus on operational efficiencies. Though the costs incurred at the new plant are still not optimised, increased capacity utilisation and equipment stabilisation are expected to help control these costs. • Despite an extremely challenging environment, capacity utilisation at the Company's existing plants was at 80% during FY16. • EBITDA for the year was Rs. 191 Crores as against Rs. 313 Crores in FY 15, primarily due to decline in realisation. • Higher finance costs and depreciation charges for FY16 as compared with FY15, as a result of the commissioning of Chittapur plant in September 2015. • Profit before tax for the year was Rs. 60 Crores, as against Rs. 251 Crores in the previous year. DIVIDEND Your Directors have recommended a final dividend of Rs. 1 (i.e. 100%) per equity share amounting to Rs. 2,465.75 lacs (inclusive of taxes) for the FY 15-16. The dividend payout is subject to the approval of the members at the ensuing AGM. The dividend will be paid to the members whose names appear in the Register of Members as on close of business hours on Monday 18th July, 2016 and in respect of shares held in dematerialized form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date. CHANGES IN DIRECTORS Pursuant to the provisions of section 152 of the Companies Act, 2013, and in terms of Articles of Association of the Company, Mrs. Amita Birla (DIN 00837718), a Non-Executive Director of the Company, is liable to retire by rotation at the ensuing AGM of the Company and being eligible, offers herself for re-appointment. The Board of Directors recommends her re-appointment. Mr. Desh Deepak Khetrapal (DIN 00086164) was re-appointed as Managing Director & CEO of the Company w.e.f. 1st April, 2015 for a period of 5 years. However his remuneration is subject to revision w.e.f. 1st April, 2016. On the recommendation of Nomination & Remuneration cum Compensation Committee, the Board of Directors in their meeting held on 4th May, 2016, subject to approval of Central Government, if required, recommended revision in Mr. Desh Deepak Khetrapal's remuneration for shareholders' approval. The resolution seeking Mr. Desh Deepak Khetrapal's remuneration has been included in the Notice of the AGM. The Board of Directors recommends the resolution for your approval. On the recommendation of Nomination & Remuneration cum Compensation Committee, the Board of Directors in their meeting held on 4th May, 2015 appointed Mr. Swapan Dasgupta (DIN 07113693) as an Additional Director in the category of an Independent Director of the Company for a period of five years, w.e.f. 4th August, 2015. As an Additional Director, Mr. Swapan Dasgupta holds office up to the date of the ensuing AGM and is eligible to be appointed as an Independent Director of the Company. The Company has received a notice in writing from shareholders along with the deposit of requisite amount under section 160 of the Companies Act, 2013 supporting Mr. Swapan Dasgupta's candidature for the office of the Director of the Company. The resolution seeking Mr. Swapan Dasgupta's appointment has been included in the Notice of the AGM. The Board of Directors recommends the resolution for your approval. A brief profile and other details relating to the Directors, who are to be appointed / re-appointed as stipulated under Regulation 36 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Secretarial Standard issued by ICSI, are furnished in the Annual Report. None of the Directors are disqualified under section 164(2) of the Companies Act, 2013. DECLARATION BY INDEPENDENT DIRECTORS Mr. Vinod Kumar Dhall (DIN 02591373), Mr. Rabindranath Jhunjhunwala (DIN 00050729), Mr. Rajeev Jhawar (DIN 00086164), Mr. Janat Shah (DIN 01625535) and Mr. Swapan Dasgupta (DIN 07113693) are Independent Directors on the Board of the Company. All the Independent Directors have given their declarations under section 149 (6) and section 149 (7) of the Companies Act, 2013 and the Rules made thereunder. In the opinion of the Board, the Independent Directors fulfill the conditions relating to their status as an Independent Director as specified in section 149 of the Companies Act, 2013 read with rules made thereunder and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. KEY MANAGERIAL PERSONNEL In terms of the provisions of section 203 of the Companies Act, 2013, Mr. Desh Deepak Khetrapal - Managing Director & CEO (DIN 00086164), Mr. Sushil Gupta - Chief Financial Officer (FCA 044924) and Mrs. Deepanjali Gulati - Company Secretary (FCS 5304) are the Key Managerial Personnel of the Company. DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM / WHISTLE BLOWER POLICY Your Company has established a robust Vigil Mechanism for reporting of genuine concerns through the Whistle Blower Policy of the Company. Adequate safeguards are provided against victimization to those who avail of the mechanism and access to the Chairman of the Audit Committee in exceptional cases. The details of the Vigil Mechanism are also provided in the Corporate Governance Report. The Whistle Blower Policy is available on Company's website and can be accessed through the weblink: <http://orientcement.com/investors/>. AWARDS AND RECOGNITIONS In recognition of its constant quest for growth and achievement, your Company has been honoured and recognised at various forums. During the year, your Company has been judged as the "Best Run Company from India (Small Cap Category)" by ASIAMONEY, a Hong Kong based financial journal. The other prominent awards are listed below for your reference. Devapur Plant: • Best Management Award from Telangana Government. • National Energy Management Award - 2014 from Society of Energy Engineers and Managers. • "Golden Peacock Environment Management Award" 2015. • GREENTECH Safety GOLD Award - 2015 in cement sector by GREENTECH Foundation- New Delhi. • Greentech Environment Award-2015 in GOLD category. • Mines Safety Awards • Mine Lighting & Electrical installations - 1st Prize • Publicity & Propaganda - 1st Prize • Safe Mine Working - 2nd Prize • Risk Assessment, Safety Management - 2nd Prize Plan & SOPs • Overall performance - 2nd Prize • Mines Environment & Mineral Conservation Award • Management of Sub Grade Mineral - 1st Prize • Waste Dump Management - 2nd Prize • Community Development - 2nd Prize • Overall performance - 2nd Prize Chittapur •"Best Safe Project Site Award 2015-16" by a committee formed by the Department of Factories, Boilers, Industrial Safety & Health. • Overall Mines Performance - 2nd Prize Beside this, your Company was felicitated as "Top Assessee" by the Commissioner of Customs, Central Excise & Service Tax, Hyderabad zone. STATUTORY AUDITORS At the AGM held in the year 2014, M/s S.R. Batliboi & Co. LLP, Chartered Accountants, (ICAI Firm Registration Number 301003E/ E300005) Statutory Auditors of the Company were re-appointed by the shareholders to hold office as Statutory Auditors from the conclusion of AGM held in the year 2014 till the conclusion of Eighth AGM of the Company to be held in the year 2019, subject to ratification of their appointment at every AGM. Under section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, the Company is required to place the matter relating to Statutory Auditor's appointment for ratification by members at every AGM. The Company has received a letter from the Statutory Auditors under section 139 of the Companies Act, 2013, confirming that they are eligible for appointment as Auditors of the Company and meet the criteria for appointment specified in section 141 of the Companies Act, 2013. Based on the recommendations of the Audit Committee, the Board of Directors of the Company recommend the ratification of appointment of M/s S.R. Batliboi & Co. LLP, Chartered Accountants, (ICAI Firm Registration Number 301003E/E300005), as Statutory Auditors of the Company by the shareholders at the ensuing AGM. The observations made by the Statutory Auditors on the Financial Statements of the Company in their Report for the financial year ended 31st March, 2016 read with the explanatory notes therein, are self- explanatory and therefore, do not call for any further explanation or comments from the Board under section 134(3)(f) of the Companies Act, 2013. The Auditors' Report does not contain any qualification, reservation or adverse remark. Further, in terms of section 143 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, as amended, Notifications / Circulars issued by the Ministry of Corporate Affairs from time to time, no fraud has been reported by the auditors of the Company where they have reason to believe that an offence involving fraud is being or has been committed against the Company by officers or employees of the Company. COST AUDITORS Pursuant to the provisions of section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014, as amended, Notifications / Circulars issued by the Ministry of Corporate Affairs from time to time, your Board has appointed Mr. Somnath Mukherjee, Cost Accountant, (M.No.-F5343) as the Cost Auditor to conduct the Cost Audit of the Company for the FY16-17 at a remuneration as mentioned in the Notice convening the AGM. The Company has received a letter from him to the effect that his re-appointment would be within the limits prescribed under section 141(3)(g) of the Companies Act, 2013 and that he is not disqualified for such re-appointment within the meaning of section 141 of the Companies Act, 2013. SECRETARIAL AUDITORS Pursuant to the provisions of section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed M/s. Ranjeet Pandey and Associates, Company Secretaries (Registration No. F-5922), to conduct the Secretarial Audit for the FY15-16. The Secretarial Audit Report issued by M/s. Ranjeet Pandey and Associates, Company Secretaries, for the FY15-16 forms part of this Report and is set out in Annexure 1 to this Report. The said report is self-explanatory and does not call for any comments. The Secretarial Auditors' Report does not contain any qualification, reservation or adverse remark. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS The Company has not given loans or guarantee, made investments and provided securities covered under the provisions of section 186 of the Companies Act, 2013. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year under review were on an arm's length basis and were in the ordinary course of business. No materially significant related party transactions were made by the Company which may have a potential conflict with the interest of the Company at large. All related party transactions were placed before the Audit Committee and also for the Board approval, wherever required. Prior omnibus approval of the Audit Committee was obtained for the transactions that were of a foreseen and repetitive nature, these transactions were reviewed by the Audit Committee on a quarterly basis. The policy on related party transactions as approved by the Board is available on the Company's website and can be accessed through the weblink: <http://orientcement.com/> investors/. The details of transactions entered into with related parties are attached as Annexure 2 in form AOC-2 that forms an integral part of this Report. RISK MANAGEMENT The Company has constituted a Risk Management Committee to review the risk management plan / process of your Company. The Risk Management Committee identifies potential risks, assesses their potential impact and takes timely action to mitigate the same. The Company has a Risk Management Policy which has been approved by the Board. The aim of the Company's risk management policy is to create awareness of predictable risks and consequently limit, control and manage them, while safeguarding business opportunities and strengthening profitability. Through its well formulated strategy, the Company ensures that the risk exposure remains at the defined appropriate levels, while the overall management of the risks is integrated and embedded in the everyday business operations and activities. There are no risks identified by the Board which may threaten the existence of the Company. The detailed Risk Review is provided in the Management Discussion & Analysis section forming part of the Annual Report. INTERNAL FINANCIAL CONTROLS The Company has identified and documented all key internal financial controls, which impact the financial statements, as part of its Standard Operating Procedures (SOP). The SOP's are designed for all critical processes across all plants, warehouses and offices wherein financial transactions are undertaken. The SOP's cover the standard processes, risks, key controls and each process is identified to a process owner. The financial controls are tested for operating effectiveness through ongoing monitoring and review process of the management and independently by the Internal Auditors. In our view the Internal Financial Controls, affecting the financial statements are adequate and are operating effectively. CORPORATE SOCIAL RESPONSIBILITY Continuing on the path that we are committed to, we have created a holistic impact on the society through a range of Corporate Social Responsibility (CSR) activities. Your Company has been taking initiatives under CSR for society at large, well before it was prescribed through the Companies Act, 2013. The Company has constituted a Corporate Social Responsibility (CSR) Committee and has a well-defined Policy on CSR which is available on the Company's website and can be accessed through the weblink: <http://orientcement.com/investors/>. The CSR Policy laid down by the Company ensures that: 1. The CSR agenda is integrated with the business 2. Focused efforts are made in the identified community development areas to achieve the expected outcome 3. It contributes towards nation-building through its CSR activities. In terms of CSR Policy the Company shall focus in the areas of: ^ Education ^ Healthcare CSR Report, pursuant to clause (o) of subsection (3) of section 134 of the Companies Act, 2013 and Rule 9 of the Companies (Corporate Social Responsibility) Rules, 2014 forms part of this Report as Annexure 3. The core areas for Orient Cement Limited's CSR programmes are education and healthcare support. During the FY15-16, the Company has, like in the previous years, made required contributions towards promotion of education and social good by providing primary healthcare support in the vicinity of its plants. The Company has felt that it will be worthwhile to carry forward the unspent amount, required to be spent under section 134 of the Companies Act, 2013 and Rule 9 of the Companies (Corporate Social Responsibility) Rules, 2014 to the next financial year to complete some of the initiatives which are under active consideration and for which preparatory work is at hand. With focus on making real impact through its CSR activities, the Company endeavors to spend on CSR activities in accordance with the prescribed rules and limits. PARTICULARS OF EMPLOYEES, DIRECTORS & KEY MANAGERIAL PERSONNEL The information required pursuant to section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 4 and forms an integral part of this Report. SHARE CAPITAL The paid up Equity Share Capital as on 31st March, 2016 was Rs. 20,48,68,760. During the year under review, there is no change in the share capital of the Company. EXTRACT OF THE ANNUAL RETURN Pursuant to section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return of the Company for the financial year ended 31st March, 2016 is annexed as Annexure 5. EMPLOYEES STOCK OPTION SCHEMES The Company has an operative Employees Stock Option Scheme 2015 (ESOS-2015) which provides for grant of Stock Options to eligible employees of the Company. The Shareholders have approved ESOS-2015 at the 4th AGM of the Company held on 25th July, 2015. Nomination & Remuneration cum Compensation Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees' Stock Option Scheme of the Company in accordance with the Securities and Exchanges Board of india (Share Based Employee Benefits) Regulations, 2014 ("SEBI Regulations"). Details as required under the SEBI Regulations, for Orient Cement Limited Employees Stock Option Scheme, 2015 has been uploaded on the website of the Company and can be accessed through the weblink <http://orientcement.com/investors/>. There is no change in the ESOS scheme of the Company during the year. Certificate from M/s S.R. Batliboi & Co. LLP, Chartered Accountants (ICAI Firm Registration Number 301003E/E300005), Statutory Auditors of the Company confirming that the scheme has been implemented in accordance with the SEBI Regulations will be placed at the forthcoming Annual General Meeting of the Company for inspection by the members. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE Your Company is an equal opportunity provider and believes in providing opportunity and key positions to women professionals. At the same time, it has been an endeavour of the Company to support women professionals through a safe, healthy and conducive working environment by creating and implementing proper policies to tackle issues relating to safe and proper working conditions for them. As per the provisions of section 21 and 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the report on the details of the number of cases filed under Sexual Harassment and their disposal, during the calendar year 2015 is as under: CORPORATE GOVERNANCE Your Company always places intense focus on managing its affairs with diligence, transparency, responsibility and accountability thereby upholding the important dictum that an organisation's corporate governance philosophy directly impacts its performance. The Company is committed to adopt and adhere to the best corporate governance practices. The Company understands and respects its fiduciary role and responsibility towards all its stakeholders and society at large, and strives to serve their interests in a balanced manner, resulting in creation of value and wealth for all its stakeholders. The corporate governance philosophy of the Company is driven by the interest of its stakeholders and business needs of the organisation. Aligning itself to this philosophy and in order to sustain the stakeholder's trust, the Company has placed corporate governance on a high priority. In terms of Regulation 34(3) of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations, 2015 with the Stock Exchanges, the Corporate Governance Report along with certificate from M/s S.R. Batliboi & Co. LLP, Chartered Accountants (ICAI Firm Registration Number 301003E/E300005), Statutory Auditors of the Company, certifying the compliance with the conditions of Corporate Governance is annexed as Annexure 6 forming an integral part of this Report. The Corporate Governance Report, inter-alia, contains the following disclosures: 1. Number of Board Meetings 2. Composition of Audit Committee 3. Composition of Corporate Social Responsibility Committee 4. Appointment & Remuneration Policy (for Directors, Key Managerial Personnel, Senior Management Personnel of the Company) 5. Performance Evaluation criteria of the Board, its Committees & individual Directors MANAGEMENT DISCUSSION & ANALYSIS REPORT A detailed report on the Management Discussion and Analysis is provided as a separate section in the Annual Report which forms part of the Directors Report. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a framework of the Board Performance Evaluation has been formulated. In terms of this framework, the Nomination & Remuneration cum Compensation Committee and the Board has carried out an annual performance evaluation of its own performance, the performance of the various Committees of the Board, individual Directors and the Chairman. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. The details of programme for familiarisation of the Independent Directors of your Company is available on the Company's website and can be accessed through the weblink: <http://orientcement.com/investors/>. LISTING WITH STOCK EXCHANGES The Equity Shares of the Company are listed on National Stock Exchange of India Limited and BSE Limited. The annual listing fees for the FY16-17 have been paid to these exchanges. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to section 134(3)(c) of the Companies Act, 2013, the Board of Directors hereby state that: 1. In the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; 2. We have selected such accounting policies and applied them 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 on 31st March, 2016 and of the profit and loss of the Company for the year ended on that date; 3. We have taken proper and sufficient care 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. We have prepared the annual financial statements on a going concern basis; 5. We have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively. 6. We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THE FINANCIAL STATEMENT RELATES AND THE DATE OF THE REPORT There have been no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report and there has been no change in the nature of business. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION Information relating to the conservation of energy and technology absorption, as stipulated under section 134(3)(m) of the Companies Act, 2013 read with The Companies (Accounts) Rules, 2014, for the year ended 31 st March, 2016, is attached as Annexure 7 and form an integral part of this Report. FOREIGN EXCHANGE EARNINGS AND OUTGO During the financial year the Company has not earned any foreign exchange. The total foreign exchange outgo during the year was Rs. 1,370.26 lacs. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES During the FY15-16, the Company has no Subsidiary, Associate or Joint Venture company. GENERAL Your Directors state that no disclosure or reporting is required with respect to the following items as there were no transactions related to these items during the year under review: 1. Details relating to deposits covered under Chapter V of the Companies Act, 2013. 2. Issue of equity shares with differential rights as to dividend, voting or otherwise. 3. Issues of shares (including sweat equity shares) to employees of the Company under any scheme save and except the options granted under Employees Stock Option Scheme referred to in this Report. 4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. HUMAN RESOURCE Employees are our vital and most valuable assets. We have created a favourable work environment that encourages innovation and meritocracy. It is important for us that organisational culture and organisational strategy are well aligned. We have developed a strong culture of transparency through constant employee communication and have developed strong performance management practices wherein best in class reward and recognition systems are deployed. We have also set up a scalable recruitment and human resources management process which enables us to attract and retain high caliber employees. To make employee processes more system driven and to prevent aberrations, the Company has implemented SAP in the past few months and has successfully gone live on SAP. Your Company's organisational culture upholds professionalism, integrity and continuous improvement across all functions, as well as efficient utilisation of the Company's resources for sustainable and profitable growth. ACKNOWLEDGEMENTS The Directors acknowledge the support and assistance extended to the Company by the Government of India, various State Governments and Government Departments, bankers, community, shareholders and investors at large, and look forward to having the same support in the Company's future endeavors. We very warmly thank all our employees for their contribution to your Company's performance. We applaud them for their superior levels of competence, dedication and commitment to your Company. By order of the Board of Directors For Orient Cement Limited CK. Birla Chairman (DIN 00118473) Place: New Delhi Date: May 4, 2016 |