BOARD'S REPORT Your Directors have pleasure in presenting their 58th Annual Report and the Audited Accounts of the Company for the year ended 31st March 2016. SHARE CAPITAL The paid up capital of the Company is Rs. 23,80,76,780/- consisting of 23,80,76,780 shares of Rs. 1/- each. DIVIDEND Your Directors at the Board Meeting held on 11-03-2016 have approved payment of Interim Dividend of Rs. 3/- per share on the Equity Capital of the Company. Your Directors recommend this to be the total dividend for the year. For the previous year, the Company had paid a dividend of Rs. 1.50 per share. The total dividend for the year amounts to Rs. 71.49 crores as against Rs. 35.75 crores for the previous year. Inclusive of Dividend Tax of Rs. 14.56 crores (PY: Rs. 7.27 crores), the total outgo is Rs. 86.05 crores (PY: Rs. 43.02 crores). TAXATION An amount of Rs. 149.76 crores towards Current Tax and Rs. 38.12 crores towards Deferred Tax have been provided for the year under review. The Company's entitlement of MAT credit of Rs. 19.26 crores has been recognised in the books during the year. MANAGEMENT DISCUSSION & ANALYSIS REPORT CEMENT DIVISION SALES While the overall growth of cement market for the country was at 4% as against 6% growth in the previous year, the market in Southern States have de-grown by 5% during the year, due to lack of demand. This was mainly due to subdued economic conditions, shrinkage of construction activity owing to inadequate infrastructural spending by the Government, irregular monsoon and continued decline in industrial production which have affected the demand drivers. While the capacity utilisation of the industry in the remaining part of the country was at 75% during the year, the utilisation levels were at 55% only in the southern states. During the first two quarters of the year under review, the Southern markets have de-grown by 12%. From the third quarter onwards the southern market started showing improvements, thereby the trend of de-growth was reduced to 5%. During the fourth quarter, the Southern market has come to the growth trajectory. During the year under review, the sale of cement for the Company was at 72.35 Lakh tons, compared to 76.68 Lakh tons of the previous year, showing a decrease of 6%. During the year under review, the Company has exported 1.52 lakh tons as against 1.91 lakh tons during the previous year. The export turnover of the Company for cement and dry mortar products for the year was Rs. 57.93 crores as against Rs. 73.24 crores of the previous year. COST During the year under review, the cost of fuel in the international market has come down due to weak demand. The Company was able to source fuel at competitive prices and reduce the cost of power and fuel. Consequent to the favourable crude prices, the other derivatives like the cost of Polypropylene has come down, leading to lowering of prices of HDPE Bags. During the year under review, the average price of diesel has reduced by around 15%. This has resulted in reduction in mining cost and transportation cost of both incoming and outgoing materials. Moreover, the Company has opted in favour of road movements instead of rail movements in view of its cost advantage. However, obligation to make contribution to District Mineral Foundation and National Mineral Exploration Trust have increased the limestone mining cost. The Government has introduced Swach Bharath Cess of 0.5% with effect from 15-11-2015 on all taxable services. This levy being Non-Cenvatable, the cost of services has increased. The reduction in borrowings by Rs. 506.30 crores, together with the reduction in the average interest rate has resulted in decrease in interest cost. READY MIX CONCRETE DIVISION The Division has produced 18,433 cu.m of concrete during the year, accounting for a revenue of Rs. 8.31 crores (Net of Excise Duty and VAT) as against 30,836 cu.m. of concrete accounting for a revenue of Rs. 13.21 crores during the previous year. DRY MORTAR DIVISION The Division has produced 43,457 tons of Dry Mortar during the year as against 44,025 tons produced during the previous year. The Division has sold 42,787 tons of Dry Mortar accounting for a revenue of Rs. 28.15 crores (Net of Excise Duty and VAT) during the year as against 43,997 tons of Dry Mortar accounting for a revenue of Rs. 27.32 crores during the previous year. WIND FARM DIVISION The Division has generated 1,643 lac units as compared to 2,106 lac units of the previous year. Out of this 1,557 lac units were generated from the wind farms in Tamil Nadu and 86 lac units from the wind farms in Karnataka. Out of the units generated in Tamil Nadu, 154 lac units are meant for adjustment against the power consumed in our plants and balance 1,403 lac units have been sold to Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) for a value of Rs. 42.00 crores. The units generated in Karnataka were fully consumed at our Mathodu Cement Plant. There was delay in the on-set of wind season during the year under review. The Company continued to face evacuation constraints imposed by TANGEDCO. There were frequent backing down of the wind electric generators by TANGEDCO. Because of the above factors, the generation of electricity during the year was less compared to the previous year. The installed capacity of the wind farm of the company is 125.95 MW as on 31-03-2016 comprising of 108 Wind Electric Generators. The income during the year from the Division was Rs. 43.35 crores as against Rs. 53.44 crores of the previous year. POWER PLANTS In the Directors' Report for the year ended 31-03-2014, it was informed about the proposal to enhance the capacity of the thermal power plants at Alathiyur, Ariyalur and Jayanthipuram by adding one turbine each of 6 MW capacity. The 6 MW project at Ariyalur had been completed and commissioned during the 4th quarter of the year 2015-16. With this, the aggregate capacity of the thermal power plants of the Company had gone up from 157 MW to 163 MW. The 6 MW projects at Alathiyur and Jayanthipuram would be commissioned in the current year. With the completion of these projects, the aggregate capacity of the thermal power plants of the Company would go up from 163 MW to 175 MW. Due to lower demand and consequently lower production of cement during the year under review, there was surplus capacity available with our thermal power plants. However, there was lesser demand for power from State Electricity Boards / HT Consumers. Hence, during the year under review, the power sold from the surplus capacity of the thermal power plants had come down to 2,417 lakh units compared to 3,866 lakh units in the previous year. The lower realisation for the power sold coupled with the decrease in units sold had resulted in lower profits from the power plant operations. TURNOVER AND PROFITABILITY The total revenue for the year (Net of Excise Duty and VAT) was Rs. 3,687.09 crores as against Rs. 3,731.77 crores of the previous year. The operating profit and net profit for the year had increased to Rs. 1,150.31 crores and Rs. 558.26 crores as against Rs. 800.12 crores and Rs. 242.35 crores respectively of the previous year. SUBSIDIARY COMPANY The Company has a subsidiary, by name, Ramco Windfarms Limited, whose capital is Rs. 1.00 crore, out of which 71.50% is held by our Company. The rest of the share capital is held by Ramco Group of Companies. During the year, in the month of March 2016, the Subsidiary Company had acquired 6 Nos. of Wind Electric Generators aggregating to 6.6 MW capacity from Thanjavur Spinning Mill Limited. With this, the installed capacity of the Subsidiary Company has increased to 39.835 MW comprising of 127 Wind Electric Generators. The Subsidiary Company had generated 227 lakh units of power as compared to 279 lakh units of power during the previous year. The revenue and net profits for the subsidiary company for the year ended 31-03-2016 are Rs. 8.54 crores and Rs. 0.30 crores compared to Rs. 10.53 crores and Rs. 1.35 crores respectively of the previous year. In accordance with Rule 5 of Companies (Accounts) Rules, 2014, a statement containing the salient features of the Financial Statements of the subsidiary is attached in Form AOC-1 as Annexure - 1 to the Financial Statement. CONSOLIDATED FINANCIAL STATEMENTS As per provisions of Section 129(3) of the Companies Act, 2013 and Regulation 34 of LODR, Companies are required to prepare consolidated financial statements of its Subsidiaries and Associates to be laid before the Annual General Meeting of the Company. Accordingly, the consolidated financial statements incorporating the accounts of Subsidiary Company, viz. Ramco Windfarms Limited and Associate Company, viz. Madurai Trans Carrier Limited along with the Auditors' Report thereon, forms part of this Annual Report. The Annual Report containing the Audited Statement of Accounts for the Subsidiary Company and Associate Company are available at the Company's website at the following link at <http://www>. ramcocements.in/ financial-performance.aspx The consolidated net profit of the company amounted to Rs. 558.47 crores for the year ended 31st March 2016 as compared to Rs. 246.13 crores of the previous year. DIRECTORS Shri.P.R.Ramasubrahmaneya Rajha (DIN:00331357), was reappointed as CMD of the Company for a period of three years starting from 01-04-2014 to 31-03-2017 at the AGM held on 28-07-2014. Based on the recommendation of the Nomination and Remuneration Committee and Audit Committee made at their meetings held on 19-05-2016, the Board of Directors at their meeting held on 20-05-2016 have reappointed him as CMD for a further period of 3 years starting from 01-04-2017. Approval of the Members has been sought for his reappointment in the Notice convening the AGM. His reappointment consequent to retirement by rotation has also been included in the Notice convening the AGM. The Independent Directors hold office for a fixed term of 5 years and are not liable to retire by rotation. No Independent Director has retired during the year. Pursuant to Rule 8(5)(iii) of Companies (Accounts) Rules, 2014, it is reported that, there have been no changes in the Directors or Key Managerial Personnel during the year. The Company has received necessary declarations from all the Independent Directors under Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013. The Audit Committee has four members, out of which three are Independent Directors. Pursuant to Section 177(8) of the Companies Act, 2013, it is reported that there has not been an occasion, where the Board had not accepted any recommendation of the Audit Committee. In accordance with Section 178(3) of the Companies Act, 2013 and based upon the recommendation of the Nomination and Remuneration Committee, the Board of Directors have approved a policy relating to appointment and remuneration of Directors, Key Managerial Personnel and Other Employees. The objective of the Nomination and Remuneration Policy is to ensure that the level and composition of remuneration is reasonable, the relationship of remuneration to performance is clear and appropriate to the long term goals of the Company. As required under Regulation 25(7) of LODR, the Company has programmes for familiarisation for the Independent Directors about the nature of the industry, business model, roles, rights and responsibilities of Independent Directors and other relevant information. As required under Regulation 46(2) of LODR, the details of the Familiarisation Programme for Independent Directors are available at the Company's website, at the following link at <http://www.ramcocements.in/> Familiarisation.aspx The details of the familiarisation programme are explained in the Corporate Governance Report also. Board Evaluation Pursuant to Section 134(3)(p) of the Companies Act, 2013, and Regulation 25(4) of LODR, Independent Directors have evaluated the quality, quantity and timeliness of the flow of information between the Management and the Board, Performance of the Board as a whole and its Members and other required matters. Pursuant to Schedule II, Part D of LODR, the Nomination and Remuneration Committee has laid down evaluation criteria for performance evaluation of Independent Directors, which will be based on attendance, expertise and contribution brought in by the Independent Director at the Board Meeting, which shall be taken into account at the time of reappointment of Independent Director. Meetings During the year five Board Meetings were held. The details of the Meetings of the Board and its various Committees are given in the Corporate Governance Report. PUBLIC DEPOSITS The Company had fixed deposits amounting to Rs. 5.63 lakhs at the beginning of the year. The Company has decided not to accept fresh deposits from 01-04-2014 and to avail the option provided under Section 74 of the Companies Act, 2013 to repay all the existing deposits by complying with the formalities required in this regard. Accordingly, during the year, the Company has repaid deposits to an extent of Rs. 3.63 lakhs together with the accrued interest thereon. An amount of Rs. 2.00 lakhs representing 8 deposits were remaining unclaimed as on 31-03-2016. ORDERS PASSED BY REGULATORS Pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014, it is reported that, no significant and material orders have been passed by the Regulators or Courts or Tribunals, impacting the going concern status and Company's operations in future. INTERNAL FINANCIAL CONTROLS In accordance with Section 134(5)(e) of the Companies Act, 2013, the Company has Internal Financial Controls Policy by means of Policies and Procedures commensurate with the size & nature of its operations and pertaining to financial reporting. In accordance with Rule 8(5)(viii) of Companies (Accounts) Rules, 2014, it is hereby confirmed that the Internal Financial Controls are adequate with reference to the financial statements. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS Pursuant to Section 186(4) of the Companies Act, 2013, the details of loans, guarantees and investments are provided under Note No.49(33), 49(36) and 49(29) respectively of Notes forming part of Standalone financial statements. AUDITS STATUTORY AUDIT At the Annual General Meeting held on 28-07-2014, M/s.M.S.Jagannathan & N.Krishnaswami, Chartered Accountants and M/s.CNGSN & Associates LLP, Chartered Accountants, were appointed as Statutory Auditors of the Company for three consecutive years being their remaining eligible period in terms of Rule 6 of Companies (Audit and Auditors) Rules, 2014. The matter relating to their appointment for the third year of their term is being placed before the Members for ratification at the ensuing Annual General Meeting, in accordance with the requirements of Section 139(1) of the Companies Act, 2013. The Auditors have confirmed their eligibility for their reappointment, under Section 141 of the Companies Act, 2013. As required under Regulation No: 33(1)(d) of LODR, the Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. The report of the Statutory Auditors for the year ended 31st March 2016 does not contain any qualification, reservation or adverse remark. COST AUDIT The Board of Directors had approved the appointment of M/s.Geeyes & Co., Cost Accountants as the Cost Auditors of the Company to audit the Company's Cost Records relating to manufacture of cement and generation of wind energy for the years 2014-15 to 2016-17. The remuneration of the cost auditor is required to be ratified by the members in accordance with the provisions of Section 148(3) of the Companies Act, 2013 and Rule 14 of Companies (Audit and Auditors) Rules, 2014. Accordingly, the matter relating to remuneration had been ratified by the Members at the Annual General Meeting held on 06-08-2015 The Cost Audit Report for the financial year 2014-15 due to be filed with Ministry of Corporate Affairs by 27-09-2015, had been filed on 22-09-2015. The Cost Audit Report for the financial year 2015-16 is due to be filed within 180 days from the closure of the financial year and will be filed within the stipulated period. SECRETARIAL AUDIT M/s.S.Krishnamurthy & Co., Company Secretaries, have been appointed to conduct the Secretarial Audit of the Company. Pursuant to Section 204(1) of the Companies Act, 2013, the Secretarial Audit Report submitted by the Secretarial Auditors for the year ended 31st March 2016 is attached as Annexure - 2. The report does not contain any qualification, reservation or adverse remark. EXTRACT OF ANNUAL RETURN In accordance with Section 92(3) of the Companies Act, 2013, read with Rule 12(1) of Companies (Management and Administration) Rules, 2014, an extract of the Annual Return in Form MGT-9 is attached herewith as Annexure - 3. CORPORATE GOVERNANCE The Company has complied with the requirements regarding Corporate Governance as stipulated in LODR. As required under Schedule V(C) of LODR, a Report on Corporate Governance being followed by the Company is attached as Annexure - 4. As required under Schedule V(E) of LODR, a Certificate from the Secretarial Auditors confirming compliance is also attached as Annexure - 5. CORPORATE SOCIAL RESPONSIBILITY In terms of Section 135 and Schedule VII of the Companies Act, 2013, the Board of Directors have constituted a Corporate Social Responsibility (CSR) Committee and adopted a CSR Policy which is based on the philosophy that "As the Organisation grows, the Society and Community around it also grows." The Company has undertaken various projects in the areas of education, health, rural development, water and sanitation, promotion and development of traditional arts, protection of national heritage, livelihood enhancement projects, etc. largely in accordance with Schedule VII of the Companies Act, 2013. The CSR obligations pursuant to Section 135(5) of the Companies Act, 2013, for the year 2015-16 is Rs. 7.33 crores. As against this, the Company has spent Rs. 6.66 crores on CSR, leaving a shortfall of Rs. 0.67 crores. Because of want of identification of projects, the shortfall had occurred. However, the company had spent a sum of Rs. 3.14 crores on other social causes and projects including, contribution of Rs. 2 crores to Tamil Nadu Chief Minister's Public Relief Fund, which do not qualify under the classifications listed out in Schedule VII of the Companies Act, 2013. The Annual Report on CSR activities as prescribed under Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure - 6. VIGIL MECHANISM / WHISTLE BLOWER POLICY In accordance with Section 177(9) and (10) of the Companies Act, 2013 and Regulation 22 of LODR, the Company has established a Vigil Mechanism and has a Whistle Blower Policy. The policy is available at the Company's website. RISK MANAGEMENT POLICY Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 17(9) of LODR, the Company has developed and implemented a Risk Management Policy. The Policy envisages identification of risk and procedures for assessment and minimisation of risk thereof. RELATED PARTY TRANSACTIONS Prior approval / omnibus approval is obtained from the Audit Committee for all Related Party Transactions and the transactions are also periodically placed before the Audit Committee for its approval. The particulars of contracts entered into by the Company during the year as per Form AOC 2 is enclosed as Annexure -7. No transaction with the related party is material in nature, in accordance with Company's "Related Party Transaction Policy" and Regulation 23 of LODR. In accordance with AS-18, the details of transactions with the related parties are set out in the Disclosures forming part of Financial Statements. As required under Regulation 46(2)(g) of LODR, the Related Party Transaction Policy is disclosed in the Company's website and its weblink is - <http://www.ramcocements.in/pdffiles/policies> / RELATED%20PARTY%20TRANSACTION%20POLICY.pdf As required under 46(2)(h) of LODR, the Company's Material Subsidiary Policy is disclosed in the Company's website and its weblink is - <http://www.ramcocements.in/pdffiles/policies/> MATERIAL%20 SUBSIDIARY%20POLICY.pdf INDIAN ACCOUNTING STANDARDS (IND AS) - IFRS CONVERGED STANDARDS The Ministry of Corporate Affairs vide its notification dated 16th February 2015 has notified the Companies (Indian Accounting Standard) Rules, 2015. In pursuance of this notification, the Company, its subsidiary and associate company has adopted IND AS with effect from 01-04-2016. For Company's financial results for periods commencing on or after 01-04-2016, the corresponding previous periods' figures will also be recast in accordance with IND AS. FUTURE OUTLOOK The present Government's policies are expected to give a big push to the economic activities. The thrust given in the Union Budget 2016-17 for development of Roads and Highways, Ports, Flyovers & Bridges, Irrigation Schemes, Railway Projects, Development of Smart Cities, etc. are expected to boost demand for cement industry. The Government's commitment to reforms and its initiatives relating to "Make in India" and ease of doing business are expected to make the GDP grow faster than earlier years. The reduction in interest rates, moderate inflation, availability of loans for housing and the tax benefits are expected to encourage investments in residential housing sector. Subsequent to the bifurcation of Andhra Pradesh into Telengana and Andhra Pradesh, infrastructure activities are expected to get a fillip in the Region. All these will positively impact the demand for cement in future and the industry is expected to grow at 7 to 8% for the financial year 2016-17. The growth for the cement industry will be further sustained, provided the country has average to above average monsoon for the year. However, the continued Rupee depreciation and volatility in oil prices are cause of concerns. As all our plants are fully equipped with railway siding, stand-by power back up facility and are supported with grinding units, our Company will be able to take full advantage of the economic momentum in the coming years. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Pursuant to Section 134(3)(m) of the Companies Act, 2013 and Rule 8(3) of Companies (Accounts) Rules, 2014, the information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is attached as Annexure - 8. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES The disclosures in terms of provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1), (2) & (3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, relating to remuneration, are provided in Annexure - 9. Having regard to the first proviso to Section 136(1) of the Companies Act, 2013, the physical copy of the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid information is being sent electronically to all those members who have registered their email addresses and is also available on the Company's website. INDUSTRIAL RELATIONS & PERSONNEL The Company has 2,846 employees as on 31-03-2016. Industrial relations in all the Units continue to be cordial and healthy. Employees at all levels are extending their full support and are actively participating in the various programmes for energy conservation and cost reduction. There is a special thrust on Human Resources Development with a view to promoting creative and group effort. AWARDS Shri.P.R.Ramasubrahmaneya Rajha, Chairman & Managing Director, was bestowed with "Best Management Award" by Shri.N.Chandrababu Naidu, Honourable Chief Minister of Andhra Pradesh, on the occasion of May Day on 01-05-2016. The Company had won many awards in Mines Environment and Mineral Conservation, Environmental Health and Safety, Mines Safety, Quality Circles, etc. during the year. The Ramasamy Raja Nagar unit had won the following awards from National Council for Cement and Building Materials. a. National Award for Best Improvement in Electrical Energy Performance 2014-15. b. National Award for Best Improvement in Energy Performance in Manufacture of Blended Cements 2014-15. The unit had also been awarded "Energy Efficient Unit" for the year 2015 by Confederation of Indian Industry. The Alathiyur unit had won "National Award for Best Improvement in Energy Performance in Manufacture of Blended Cements 2013-14" from National Council for Cement and Building Materials. The Chengalpattu Grinding unit had been awarded "Certificate of Merit" for 2015 and the Salem Grinding Unit had won "Energy Conservation Award 2014" from Bureau of Energy Efficiency of Ministry of Power, Government of India. The Company has secured for the 4th time CIO100 Award instituted by International Data Group (IDG) India. In appreciation of this feat, our company has been admitted to the exclusive "CIO HALL OF FAME". SHARES The Company's shares are listed in BSE Limited and National Stock Exchange of India Limited. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm that (a) they had followed the applicable accounting standards along with proper explanation relating to material departures, if any, in the preparation of the annual accounts for the year ended 31st March 2016; (b) they had 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 of the company for the year ended on that date; (c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (d) they had prepared the annual accounts on a going concern basis; (e) they had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and (f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. ACKNOWLEDGEMENT The Directors are grateful to the various Departments and agencies of the Central and State Governments for their help and co-operation. They are thankful to the Financial Institutions and Banks for their continued help, assistance and guidance. The Directors wish to place on record their appreciation of employees at all levels for their commitment and their contribution. On behalf of the Board of Directors For THE RAMCO CEMENTS LIMITED, P.R.RAMASUBRAHMANEYA RAJHA Chairman & Managing Director Chennai 20-05-2016 |