ULTRATECH CEMENT LIMITED
ANNUAL REPORT 2007-2008
DIRECTOR'S REPORT
TO THE SHAREHOLDERS
Dear Shareholders,
Your Directors present the Eighth Annual Report together with the Audited Accounts of your Company for the year ended 31st March, 2008:
FINANCIAL RESULTS (Rs. in crores) 2007-08 2006-07
Gross Turnover 6,286.24 5,484.35
Gross Profit 1,744.24 1,392.44
Less: Depreciation 237.23 226.25
Profit Before Tax 1,507.01 1,166.19
Tax Expenses 499.40 383.91
Profit After Tax 1,007.61 782.28
Add: Balance brought forward from Previous Year 775.16 180.57
Surplus available for Appropriation 1,782.77 962.85
Appropriation
Debenture Redemption Reserve (8.17) 30.92
General Reserve 120.00 100.00
Dividend 62.24 49.79
Corporate tax on Dividend 10.58 6.98
Balance transferred to Balance Sheet 1,598.12 775.16
Total 1,782.77 962.85
REVIEW OF OPERATIONS AND OVERVIEW
During the year, your Company produced 15.07 MMT of cement (14.64 MMT). Effective capacity utilisation remained flat at 101%. Exports were curtailed to cater to the growing domestic demand. This supported domestic volume growth of 7%. Variable cost increased by over 8% mainly on account of escalation in the cost of raw materials, including imported coal and mounting freight charges.
Continuous de-bottlenecking efforts across your Company's Units resulted in a capacity increase of 1.2 MMT.
Your Company's turnover at Rs. 6,286.24 crores was up by 15% compared to Rs. 5,484.35 crores achieved in the previous year. Profit after tax stood at Rs.1,007.61 crores (Rs.782.28 crores) after providing for depreciation - Rs. 237.23 crores (Rs. 226.25 crores) and tax Rs. 499.40 crores (Rs. 383.91 crores).
DIVIDEND
Your Directors recommended a dividend of Rs. 5/- per equity share of Rs. 10/- each for the year ended 31st March, 2008. The dividend distribution would result in a cash outgo of Rs. 72.82 crores (including tax on dividend of Rs. 10.58 crores) compared to Rs. 56.77 crores (including tax on dividend of Rs. 6.98 crores) paid for the year 2006-07.
CAPITAL EXPENDITURE
Your Company initiated various expansion and de-bottlenecking programs to maintain growth and improve efficiencies.
The Clinkerisation (pyrosection) unit at Andhra Pradesh Cement Works (APCW) was commissioned during the fourth quarter of the financial year ended 31st March, 2008. The balance work on capacity expansion at APCW is progressing and the split grinding Unit at Ginigera in Karnataka is on track. The Unit will be operational in the first half of the current fiscal.
Upon commissioning of expanded capacity at APCW your Company's total capacity will be 23.1 MMT.
Trials have begun on the 1st Stream of the Thermal Power Plant (TPP) of 23MW at Gujarat Cement Works (GCW) in Gujarat. All four Streams aggregating to 92MW will be fully operational by HIFY09. In addition, TPP's aggregating to 135MWs are being set up at Awarpur Cement Works (ACW) in Maharashtra, APCW and Hirmi Cement Works (HCW) in Chhattisgarh. These power plants, except ACW will be commissioned in a phased manner in FY09.
In FY08 15 Ready Mix Concrete (RMC) plants have been set up across the country.
EMPLOYEE STOCK OPTION SCHEME
The ESOS Compensation Committee of the Board of your Company formulated the Employee Stock Option Scheme - 2006 ('ESOS-2006') at its meeting held on 23rd August, 2007.
The ESOS Compensation Committee granted 1,68,070 stock options to eligible employees of your Company. The disclosure, as required under Clause 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is set out in Annexure I to this Report.
AWARDS
Your Company was the recipient of the following awards:
* The Top Exporter Award from CAPEXIL for the eleventh consecutive year.
* State level award for excellence in energy conservation and management for 2006 for ACW.
* The CII National award for excellence in Energy Management 2007 - Energy Efficient Unit' and Innovative Project' for APCW
* Mines safety award - First prize in Method of Working' and Second prize in Drilling and Blasting' for APCW.
* National Safety Award for outstanding performance in industrial safety for HCW
RESEARCH AND DEVELOPMENT
Your Company continued its efforts towards maximising waste utilisation, search for alternative sources of fuel and chemical and mineral evaluation of captive limestone mines. These measures will aid in conserving natural resources.
HUMAN RESOURCES
At your Company, employees continue to be the key driving force of the organisation and remain a strong source of our competitive advantage. We believe in aligning business priorities with the aspirations of employees leading to the development of an empowered and responsive human capital. We strive to create a work environment which encourages innovation and creativity.
Through our strong Employer Brand, we were able to attract quality people with required skills who have become part of our competent and committed workforce. Appropriate measures are being planned by your Company to ensure talent retention and employee engagement.
Your Company continued to support learning and development initiatives to enhance the functional as well as the behavioural competencies of our people. At Gyanodaya' - The Aditya Birla Institute of Management Learning, executives of your Company were enlisted for various high quality learning interventions. These programs supplemented with a combination of developmental assignments, classroom and web based training, has enabled our people to continuously learn, develop and grow.
Our performance management system is primarily based on competencies and values. We closely monitor growth and development of top talent in your Company, to align personal aspirations with the organisation purpose.
CORPORATE GOVERNANCE
Your Directors reaffirm their continued commitment to good corporate governance practices. During the year under review, your Company complied with the provisions of Clause 49 of the Listing Agreement with the stock exchanges which relates to corporate governance.
A separate section on corporate governance together with a certificate from your Company's Statutory Auditors forms a part of this Annual Report.
SUBSIDIARY COMPANIES
In terms of Section 212 of the Companies Act, 1956, ('the Act') the Accounts together with the Report of Directors and the Auditor's Report of your Company's subsidiaries viz. Dakshin Cements Limited (Dakshin) and U1traTech Ceylinco (Pvt) Limited (U1traTech Ceylinco) forms a part of this Report.
In line with the provisions of the Accounting Standards prescribed by the Institute of Chartered Accountants of India and the provisions of the Listing Agreement with the stock exchanges, the duly audited Consolidated Financial Statement has been prepared after considering the financial statements of your Company's subsidiaries viz. Dakshin and U1traTech Ceylinco.
FINANCE
CRISIL has upgraded your Company's rating from 'AA+/Stable' to 'AAA/Stable'. Your Company is also one of the few companies to have its bank loan facilities rated. CRISIL has assigned your Company's bank loan facility, the highest rating of 'AAA/Stable/Pl+'. Such a rating allows your Company to borrow on competitive terms.
Your Company has raised Rs.90 crores by way of fully hedged Buyers Credit for a tenure of three years. These funds have been used for various ongoing capex.
Your Company has repaid debentures and loans amounting to Rs. 285 crores.
Your Company has not invited or renewed deposits from the public/ shareholders in accordance with Section 58A of the Act.
ENERGY, TECHONOLOGY AND FOREIGN EXCHANGE
Information on conservation of energy, technology absorption and foreign exchange earnings and outgo, required to be disclosed pursuant to section 217(1)(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given in Annexure II and forms part of this Report.
PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 217(2A) of the Act read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are to be set out in the Directors' Report, as an addendum thereto. However, as per the provisions of Section 219(1)(b)(iv) of the Act, the Report and Accounts as therein set out, are being sent to all Members of your Company excluding the aforesaid information about the employees. Any Member, who is interested in obtaining such particulars about employees, may write to the Company Secretary at the Registered Office of your Company.
DIRECTOR'S RESPONSIBILITY STATEMENT
The Audited Accounts for the year under review are in conformity with the requirements of the Act and the Accounting Standards. The financial statements reflect fairly the form and substances of transactions carried out during the year under review and reasonably present your Company's financial condition and results of operations.
Your Directors confirm that:
(i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures, if any;
(ii) The accounting policies selected have been applied consistently and judgments and estimates are made that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company as at 31st March, 2008 and of the profit of your Company for the year ended on that date;
(iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting frauds and other irregularities;
(iv) The Annual Accounts of your Company have been prepared on a going concern basis.
DIRECTORS
Mr. S. Rajgopal, Nominee Director resigned from the Board of your Company with effect from 20th October, 2007 consequent to the withdrawal of his nomination by the Administrator of the Specified Undertaking of the Unit Trust of India. However, considering his vast knowledge and experience, the Board inducted Mr. Rajgopal as an Additional Director with effect from that date. Mr. Rajgopal holds office upto the conclusion of the ensuing Annual General Meeting. Notice pursuant to Section 257 of the Act has been received from a Member of your Company proposing Mr. Rajgopal's appointment as Director.
Mrs. Rajashree Birla, Mr. V T. Moorthy and Mr. R. C. Bhargava retire from office by rotation and being eligible, offer themselves for re-appointment.
A brief resume of the Directors being appointed / re-appointed are attached to the Notice of the ensuing Annual General Meeting.
AUDITORS
M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai and M/s. G. P. Kapadia & Co., Chartered Accountants, Mumbai were appointed Joint Statutory Auditors of your Company from the conclusion of the previous Annual General Meeting until the conclusion of the ensuing Annual General Meeting. M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai and M/s. G.P. Kapadia & Co., Chartered Accountants, Mumbai being eligible, offer themselves for re-appointment as auditors of your Company.
The Board proposes the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai and M/s. G. P. Kapadia & Co., Chartered Accountants, Mumbai as Joint Statutory Auditors of your Company based on the recommendation of the Audit Committee, to hold office from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting.
The Board also proposes the re-appointment of M/s. Haribhakti & Co., Chartered Accountants, Mumbai as the Branch Auditors of your Company's Unit's at Jafrabad and Magdalla in Gujarat and Ratnagiri in Maharashtra, based on the recommendation of the Audit Committee, to hold office from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting. In terms of the provisions of the Act the Board also seeks your approval for the appointment of Branch Auditors in consultation with your Company's Statutory Auditors for any other Branch / Unit / Division of your Company, which may be opened / acquired / installed in future in India or abroad.
Resolutions seeking your approval on these items are included in the Notice convening the Annual General Meeting.
The observation made in the Auditor's Report are self-explanatory and therefore, do not call for any further comments under Section 217(3) of the Act.
COST AUDITORS
Pursuant to the provisions of Section 233E of the Act, your Directors have appointed M/s. N. 1. Mehta & Co., Cost Accountants, Mumbai as the Cost Auditor to conduct the cost audit of your Company for the financial year ending 31st March, 2009, subject to the approval of the Central Government.
APPRECIATION
Your Directors place on record their appreciation of the contribution made by employees at all levels. Your Company's growth was made possible by employee's support, co-operation, commitment, solidarity and hard work.
Your Directors wish to take this opportunity to express their deep sense of gratitude to the Central and State Governments, banks, financial institutions, shareholders and business associates for their co-operation and support and look forward to their continued support in future.
For and on behalf of the Board
Mumbai Kumar Mangalam Birla22nd April, 2008 Chairman
ANNEXURE I
Disclosure pursuant to Clause 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
Particulars ESOS - 2006 Tranche I [23rd August, 2007]
a. No. of Options granted 99,010
b. The Pricing formula The exercise price is the average price of the equity shares of the Company in the immediate preceding seven days period (at a stock exchange as determined by the ESOS Compensation Committee) on the date prior to the date on which the ESOS Compensation Committee finalised the specific number of Options to be granted to the employees, discounted by 30%.
Exercise Price : Rs. 606/- per option
c. Options vested Nil
d. Options exercised Nil
e. The total number of shares N.Aarising as a result of exerciseof the options
f. Options lapsed Nil
g. Variation of terms of options Nil
h. Money realised by exercise N.Aof options
i. Total number of optionsin force:
- Vested Nil
- Unvested 99,010
j. Employee wise details ofoptions granted to:
i. Senior Managerial Personnel Mr. S. Misra, 32,640Managing Director
ii. Any other employee who Nil receives a grant in any oneyear of option amounting to5% or more of option granted during that year
iii. Identified employees who Nil were granted option, during any one year, equal to orexceeding 1% of the issuedcapital (excluding outstandingwarrants and conversions)of the company at the timeof grant
ESOS - 2006 Tranche II [25th January, 2008]
a. No. of Options granted 69,060
b. The Pricing formula The exercise price is the average price of the equity shares of the Company in the immediate preceding seven days period (at a stock exchange as determined by the ESOS Compensation Committee) on the date prior to the date on which the ESOS Compensation Committee finalised the specific number of Options to be granted to the employees, discounted by 2%.
Exercise Price : Rs. 794/- per option
c. Options vested Nil
d. Options exercised Nil
e. The total number of shares N.Aarising as a result of exercise of the options
f. Options lapsed Nil
g. Variation of Nilterms of options
h. Money realised by exercise N.Aof options
i. Total number of options Nilin force:
- Vested Nil- Unvested 69,060
j. Employee wise details of
options granted to:
i. Senior Managerial Personnel Mr. S. Misra, 51,650Managing Director
ii. Any other employee who Nil receives a grant in any oneyear of option amounting to5% or more of option granted during that year
iii. Identified employees who Nilwere granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant
ESOS - 2006 Tranche I Tranche II [23rd August, 2007] [25th January, 2008]
k. Diluted Earnings Per Share NA(EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20Earning Per Share'
1. Where the company has The Company has calculated the employee calculated the employees compensation cost using theintrinsic compensation cost using the value method of accounting to account intrinsic value of the for options issued under the stock options: ESOS - 2006.
i. The difference between the Employee compensation cost:employee compensation cost so - intrinsic value based Rs. 0.77 crorescomputed and the employee - fair value based Rs. 1.84 crorescompensation cost that shall Difference Rs. 1.07 croresbe recognised if it had used the fair value of the options shall be disclosed.
Reported Adjustedii. The impact of this difference:
- on profits Net Profit Rs. 1007.61 Rs. 1,006.54 crores crores
- EPS Basic: Rs. 80.94 Rs. 80.86 Diluted: Rs. 80.91 Rs. 80.83
m. Weighted average exerciseprices of options:
i. Equal to market price of -the stock
ii. less than market price of Rs. 683/the stock
Weighted average fair values of ontions
i. Equal to market price of thestock -
ii. less than the market priceof the stock. Rs. 462/-
n. A description of the methodused during the year to estimate Black - Scholes Methodthe fair values of options.
Significant assumptions usedduring the year to estimate the fair values of options including the following weighted average information:
i. Risk - free interest rate 8%
ii. Expected life Period up to vesting plus the average of the exercise period corresponding to each vesting.
iii. Expected volatility Implied volatility of the Company's stock prices on NSE based on the price data of last one year up to the date of grant
Tranche I = 49% Tranche II = 52%
iv. Expected dividend Adjustment of the closing price of the Company's share on the NSE for the expected dividend yield over the expected life of the options (dividend for FY 2006-07 and a growth factor have been considered, which are then discounted and an average present value of dividend ascertained)
v. The price of the underlying Rs. 829/-share in the market at thetime of option grant.
ANNEKURE II
DISCLOSURES OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO AS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988:
A. CONSERVATION OF ENERGY:
a) Energy Conservation Measures taken:
Installation of Variable Frequency Drives Use of fuel efficient and higher capacity mining equipments Optimisation of Grinding Media size distribution in mills Close circuiting of cement mills Cooler Gas waste heat recovery system installed.
b) Additional investments and proposals if any, being implemented for reduction of consumption of energy:
Close circuiting of cement mills Installation of Roller Press Installation of Vertical roller mill for fuel grinding Installation of Dry Fly Ash handling and feeding system Modification of clinker characteristic to improve clinker grindability Increased Fly Ash absorption and Blended Cement production.
c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:
The proposals stated above shall result in reduction in power consumption and recovery of waste heat to use for productive purpose thereby reduction in cost.
d) Total energy consumption and energy consumption per unit of production:
As per FORM-A of this Annexure
B. TECHNOLOGY ABSORPTION:
Efforts made in technology absorption as per FORM-B of this Annexure.
C. FOREIGN EXCHANGE EARNINGS AND OUTGO:
The information on foreign exchange earnings and outgo is contained in Schedule 22(6) and (5) of the Accounts.
FORM - A(See Rule 2)
Form for disclosure of particulars with respect to conservation of energy
A. POWER AND FUEL CONSUMPTION Current Year Previous Year 2007-08 2006-071. Electricity (a) Purchased Units 000 Kwh 923400 847582 Total Amount Rs. crores 432.69 405.70 Rate/unit Rs. 4.69 4.79 (b) Own generation* (i) Through Diesel generator Units 000 Kwh 176961 188908 Units (Kwh) per Ltr. of fuel oil 3.96 4.03 Cost/Unit Rs. 5.62 4.91 (ii) Through Steam Turbine/Generator Units 000 Kwh 316750 309571 Units(Kwh) per kg of coal 0.70 0.73 Cost/Unit Rs. 1.73 1.40 (iii) Through Steam Turbine/Generator Units 000 Kwh 5527 64249 Units(Kwh) per kg of Naphtha 3.80 4.73 Cost/Unit Rs. 15.05 7.40 (iv) Waste Heat Recovery system Units 000 Kwh 19064 477.05 Cost/Unit Rs. 0.35 0.25
2. Coal (S1ack,Steam & ROM including lighting Coal) For Co-generation of Steam & Power Tonnes 454839 425246 Total Cost Rs. crores 46.95 35.23 Average rate Rs./Tonnes 1032 828 For Process in Cement Plants Quantity Tonnes 2157186 1991666 Total Cost Rs. crores 650.76 543.99 Average rate Rs./Tonnes 3017 2731
3. Furnace Oil (Including Naphtha) Quantity K. Ltrs 47020 66184 Total amount Rs. crores 86.70 122.70 Average rate Rs./K.ltr 18438 18539
4. Light Diesel Oil (LDO) Quantity K. Ltrs 1332 1431 Total amount Rs. crores 3.70 4.24 Average rate Rs./K ltr 27765 29626
5. High Speed Diesel Oil (HSD) Quantity K. Ltrs 358 265 Total amount Rs. crores 1.20 0.95 Average rate Rs./K ltr 33531 35661
B. CONSUMPTION PER UNIT OF PRODUCTION
Electricity # Kwh /T of Cement 84.69 86.93
Furnace oil $ Ltr /T of Clinker 0.11 0.10
Coal Kcal /Kg of 713 707 Clinker
* Excludes Auxillary & Wheeling# Excludes non production power consumption$ Furnace oil used for kiln light up
FORM - B(See Rule 2)
Form for disclosure of particulars with respect to absorption
RESEARCH AND DEVELOPMENT (R&D)
1. Specific areas in which R&D carried out by the Company
Evaluation of use of
* Mineralisers
* Performance improver to enhance quality
* Higher % of Fly Ash Content in PPC without affecting quality
* CFD technique for optimising Plant operations
2. Benefits derived as a result of the above R&D
The above initiatives have resulted in increase in production, energy efficiency, resources conservation and reduction in related cost of production.
3. Future plan of action
* Commercialisation of alternative fuels
* Optimisation of chemistry of raw mix and fuel mix to improve mines life
* Installation of waste heat recovery system for power generation
(Rs. in crores)4. Expenditure on R&D 2007-08 2006-07 a. Capital expenditure 0.53 1.12 b. Recurring expenditure 8.82 4.90 c. Total expenditure 9.36 6.02 d. Total R & D expenditure 0.17 0.12as % of turnover
TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION
1. Efforts, in brief, made towards technology absorption, adaptation and innovation:
* Participation in national and international conferences
* Imparting training to personnel by foreign technicians in various manufacturing techniques by foreign and Indian experts and technology suppliers
2. Benefits derived as a result of the above efforts:
* Improvement in existing processes and reducing consumption of scarce raw
materials and fuel
* Cost reduction
3. Information regarding technology imported during the last 5 years : Nil
