UltraTech Cement Ltd
Directors Reports
#MDStart#
Management Discussion and Analysis
Dear Shareholders,
Your Directors present the 21st Annual Report together with the audited
accounts of your Company for the year ended 31st March, 2021.
OVERVIEW AND THE STATE OF YOUR COMPANY'S AFFAIRS
The year 2020 saw mayhem around the world as COVID-19 threatened all that humanity had
come to take for granted - mobility, safety and a normal life itself. This, in turn, posed
the most formidable economic challenge to India and to the world. Bereft of a cure or a
vaccine, the public health system in every country faced enormous pressure trying to
tackle this allpervasive crisis. The imperative of flattening the disease curve was
entwined with the threat of an imminent recession and job losses, given the restrictions
on economic activities enforced by the lockdown to contain the spread of the virus. In
other words, all containment measures had to consider a trade-off between lives and
livelihood.
Despite the severe economic contraction of ~3.3% in 2020, the International Monetary
Fund now projects global growth at 6% in 2021, which would moderate to 4.4% in 2022. This
is the result of the additional fiscal support provided by governments in a few large
economies, the anticipated vaccine-powered recovery in the second half of 2021, and the
continued adaptior of economic activity to restricted mobility. However, there is
uncertainty around this outlook, and much will depend on the path of the pandemic, the
effectiveness of policy support in shoring up the vaccine-powered normalisation, and how
the financial conditions of countries eventually shape up.
The Indian economy witnessed a contraction in H1FY21, followed by a subdued but
positive growth in the second half. Higher capital expenditure of the government budgeted
for FY22, expectation of a third consecutive normal monsoon and continued normalisation of
economic activities following the progress of vaccination augur well for the Indian
economy. However, recovery will not be easy, given that the scars of the pandemic run deep
and there are uncertainties around the massive second wave of COVID-19 infections, which
has registered a sharper spike than the first wave.
The Reserve Bank of India ("RBI") has taken several steps to maintain easy
liquidity conditions and low interest rates, despite higher government borrowings. Such
support is expected to continue until the growth recovery becomes more durable. The
Government of India has announced measures such as Production-linked Incentive
("PLI") Scheme and monetisation of assets to fund infrastructure development.
These, along with the improving cyclical impulses, are helping improve business confidence
and may stoke a revival of projecl investment activity in due course.
The cement industry witnessed de-growth of 10-12% due to the COVID-19 pandemic.
However, in H2FY21 the industry began to show signs of early recovery. Lockdown-led demand
disruption was the highest in Q1FY21 on account of suspension of production, stalled
construction activities and mass exodus of labour. The total lockdown period from late
March to end-April 2020, was a huge challenge for all manufacturing industries. But with
the central and state governments taking measured steps towards the opening up of the
economy, some encouraging trends were seen from the latter part of May 2020, driven
largely by a better-than-expected pick-up in cement consumption in the rural markets.
Amidst the pandemic, cement consumption witnessed strong growth in the rural, semi-urban
and retail markets. In rural India, better labour availability, increase in construction
of rural infrastructure and low-cost housing drove cement demand. Demand is also getting
influenced by the resumption of construction work related to institutional infrastructure
projects such as road and metro rail networks.
Amidst the pandemic, cement consumption witnessed strong growth in the rural, semiurban
and retail markets. In rural India, better labour availability, increase in construction
of rural infrastructure and low-cost housing drove the cement demand.
Cement demand is closely linked to the housing and infrastructure sector. The industry
has been on a volume growth path, motivated by the government's Housing for All by
2022' mission and large infrastructure projects in the pipeline. Government spending on
infrastructure projects and affordable housing schemes such as the Pradhan Mantri Awas
Yojana ("PMAY") with enhanced budgetary allocations will be the primary drivers
of growth for the cement industry. Going forward, prospects for the industry in FY22 look
bright.
Your Company managed the crisis with a sharp focus on operational efficiencies. In the
face of the pandemic, your Company's operations across locations were stopped in line with
the government directives. It was in continuous engagement with all stakeholders through
various digital platforms. Critical Response Teams were set up across the organisation to
plan scenarios and respond to the rapidly changing situation. With the easing of the
lockdown, operations gradually stabilised. Your Company recovered the carrying amount of
all its inventories, receivables and loans in the ordinary course of business. It was able
to service all its debt obligations as per schedule, with its capital and financial
resources remaining entirely protected and its liquidity position adequately covered. As
part of its commitment to society, your Company undertook various initiatives during the
year to support the country in its fight against the pandemic.
Your Company undertook various initiatives during the year to support the country in
its fight against the pandemic.
Your Company has the unique advantage of being able to cater to demand in different
parts of the country and its focus on conserving cash continues unabated. All this has
resulted in your Company emerging stronger and well prepared in the wake of the ongoing
pandemic.
Your Company is closely monitoring the impact of the second wave of the pandemic on its
operations while giving primacy to the safety and well-being of its employees and business
partners. It has also undertaken a vaccination programme for all its employees and their
dependents. With its focus on operational efficiencies and cost control and its continuing
concern for its employees and all other stakeholders, your Company is better prepared for
any resulting slowdown in the economy.
BUSINESS PERFORMANCE
Production and capacity utilisation (grey cement):
Particulars |
FY21 |
FY20 |
% change |
Installed capacity in India (MTPA) |
111.35 |
111.35 |
- |
Production (MMT) |
79.70 |
76.57 |
4 |
Capacity Utilisation |
71% |
69% |
2 |
MTPA - Million Metric Tonnes Per Annum MMT- Million Metric Tonnes
Cement production at 79.70 million tonnes in FY21 was higher by 4% as compared to the
previous year. This is despite the lower cement consumption during Q1FY21 due to the
outbreak of the pandemic across the country. Capacity utilisation was higher at 71% as
compared to 69% last year.
Sales Volume:
|
|
|
(Figures in MMT) |
Particulars |
FY21 |
FY20 |
% change |
Domestic Sales |
80.18 |
76.40 |
5 |
Exports & Others |
2.38 |
2.36 |
1 |
Total Sales Volume |
82.56 |
78.76 |
5 |
Domestic sales volume registered a growth of 5%, after registering a 32% de-growth in
Q1FY21. Cement consumption started improving from Q2FY21 on the back of consistent rural
demand and pick-up in infrastructure activities during H2FY21.
FINANCIAL PERFORMANCE |
|
|
|
(Rs. in crores) |
|
Standalone |
Consolidated |
|
FY21 |
FY20 |
FY21 |
FY20 |
Net Turnover |
42,677 |
40,033 |
44,239 |
41,781 |
Domestic |
42,363 |
39,706 |
42,264 |
39,597 |
Exports |
314 |
327 |
1,975 |
2,183 |
Other Income |
1,300 |
1,343 |
1,221 |
1,300 |
Total Expenditure |
32,224 |
31,997 |
33,158 |
33,183 |
Profit before Interest, Depreciation and Tax (PBIDT) |
11,754 |
9,379 |
12,302 |
9,898 |
Depreciation |
2,434 |
2,455 |
2,700 |
2,723 |
Profit before Interest and Tax (PBIT) |
9,319 |
6,924 |
9,602 |
7,176 |
Interest |
1,259 |
1,704 |
1,486 |
1,992 |
Profit before Impairment and Tax Expenses / share in profit of |
8,060 |
5,220 |
8,116 |
5,184 |
Associates |
|
|
|
|
Rates and Taxes |
(164) |
- |
(164) |
- |
Impairment on Advances Given |
- |
- |
(97) |
- |
Share in Profit / (Loss) of Associates and Joint Venture (net of tax) |
- |
- |
2 |
(1) |
Profit before Tax Expenses |
7,896 |
5,220 |
7,858 |
5,183 |
Normalised Tax Expenses |
2,554 |
1,570 |
2,539 |
1,543 |
Reversal of Deferred Tax Liability |
- |
(1,805) |
- |
(2,112) |
Profit after Tax |
5,342 |
5,456 |
5,319 |
5,751 |
Profit Attributable to Non-controlling Interest |
- |
- |
(1) |
(4) |
Profit Attributable to Owner of the Parent |
- |
- |
5,320 |
5,755 |
Net Turnover
Your Company's Net Turnover at ? 42,677 crores is 7% higher than the previous year.
Other Income
Other income is marginally lower mainly on account of lower government grants compared
to the previous year.
Operating Profit (PBIDT) and Margin
PBIDT for the year at 7 11,754 crores is 25% higher than the previous year. Operating
margin improved on account of volume growth and better sales realisation.
Cost Highlights (i) Energy Cost
Overall energy cost declined 3.5% from 7 985/t in the previous year to 7 950/t, mainly
on account of saving in power consumption and increase in green power mix. Furthermore,
your Company continuously works towards efficiency improvement. Key initiatives in this
regard are:
- Commissioning of 7 MW Waste Heat Recovery System ("WHRS") capacity. Your
Company will commission another 72 MW of WHRS capacity during FY22, taking the total WHRS
capacity to 197 MW. There is plan to further increase this to 302 MW by FY24, which will
cater to 26% of the total power requirement.
- Increase solar and wind power capacity from 125 MW to >350 MW by the end of FY22
and cater to ~7% of the total power requirement.
- Use low-cost fuel viz. industrial waste.
- Continuous improvement in thermal power plant efficiency by reducing auxiliary
consumption power.
(ii) Input Material Cost
Raw material cost rose marginally from 7 493/t to 7 504/t due to an increase in
additive and fly ash prices. Increase in diesel prices impacted inbound transportation,
resulting in higher raw material cost.
Your Company is continuously working on improving share of blended and premium products
in its product mix, leading to an improvement in overall profitability.
(iii) Freight and Forwarding Expenses
Logistics cost saw marginal increase from Rs.1,144/- to Rs. 1,158/-, due to increase in
diesel cost and lead distance on account of change in market mix. Synergies arising out of
the integration of acquired assets aided in lowering the impact.
Employee Costs
Employee cost stood at Rs. 2,182 crores as compared to Rs.2,336 crores in the previous
year. This is a one-time gain on account of lower expenses towards retirement benefits and
staff welfare expenses, during the year.
Depreciation
At Rs.2,434 crores, depreciation for the year is lower by Rs.21 crores over the
previous year, mainly on account of few assets being fully depreciated.
Finance Cost
Reduction in finance cost from Rs.1,704 crores to Rs.1,259 crores was mainly on account
of lower borrowings and interest rates during the financial year.
Credit Rating
Your Company has adequate liquidity and a strong balance sheet. CRISIL and India
Ratings and Research have reaffirmed their credit rating as CRISIL AAA / Stable and IND
AAA / Stable for Long Term and CRISIL A1+ and IND A1+ for Short Term, respectively. This
is an acknowledgement of your Company's ability to service its financial obligations in
time and its sound financial management abilities.
Your Company has also obtained its credit rating for its foreign currency issuances
from Fitch and Moody's and has been rated by them as BBB- and Baa3 respectively.
Income Tax
Normalised income tax expenses increased in line with an increase in taxable income.
Net Profit
Normalised Profit after Tax increased by 46% from ? 3,650 crores to ? 5,342 crores.
Significant changes in key financial ratios, along with detailed explanations:
Particulars |
FY21 |
FY20 |
% Change |
Debtors Turnover (Days) |
18 |
19 |
8 |
Inventory Turnover (Days) |
32 |
35 |
7 |
Interest Coverage Ratio |
7.66 |
4.31 |
78 |
Current Ratio |
0.81 |
1.01 |
20 |
Debt Equity Ratio (Gross) |
0.40 |
0.48 |
16 |
Debt Equity Ratio (Net) |
0.09 |
0.32 |
73 |
Operating Profit Margin (%) |
26 |
22 |
4 |
Net Profit Margin (%) |
12.5 |
9.1 |
3.4 |
Return on Net Worth (%) |
13.1 |
10.2 |
2.9 |
Return on Capital Employed (ROCE) (%) |
15 |
11.4 |
3.5 |
Earnings per Share (EPS) |
185 |
127 |
46 |
Detailed explanation of ratios
(i) Debtors Turnover (Days) is used to quantify a company's effectiveness in collecting
its receivables or money owed by customers. The ratio shows how well a company uses and
manages the credit it extends to customers. The ratio is calculated by dividing average
trade receivables by average per day turnover.
(ii) Inventory Turnover (Days) represents the average number of days a company holds
its inventory before selling it. It is calculated by dividing average inventory by average
per day turnover.
(iii) Interest Coverage Ratio measures how many times a company can cover its current
interest payment with its available earnings. It is calculated by dividing PBIT by finance
cost. Your Company's Interest Coverage Ratio improved by 78% over the previous year mainly
on account of increase in PBIT and lower interest outgo.
(iv) Current Ratio is a liquidity ratio that measures a company's ability to pay
short-term obligations or those due within one year. It is calculated by dividing the
current assets by current liabilities.
(v) Debt Equity Ratio is used to evaluate a company's financial leverage. It is a
measure of the degree to which a company is financing its operations through debt versus
wholly-owned funds. It is calculated by dividing a company's total liabilities by its
shareholder's equity. Your Company's Debt Equity Ratio (Net) has improved by 45% mainly on
account of reduction in Net Debt during the year.
(vi) Operating Profit Margin (%) is a profitability or performance ratio used to
calculate the percentage of profit a company generates from its operations. It is
calculated by dividing the PBIDT (excluding Other Income) by turnover. Your Company's
Operating Profit Margin improved by 4% mainly on account of lower costs and higher
realisations during the year.
(vii) Net Profit Margin (%) is equal to how much net income or profit is generated as a
percentage of revenue. It is calculated by dividing the profit for the year by turnover.
Your Company's Net Profit Margin improved by 3% mainly on account of lower costs, lower
interest outgo and higher realisations during the year.
(viii) Return on Net Worth ("RONW") is a measure of profitability of a
company expressed in percentage.
It is calculated by dividing Net Profit from continuing operations for the year by
average Net Worth during the year. The ratio for your Company improved by 2.8% mainly on
account of increase in its profitability.
(ix) Return on Capital Employed ("ROCE") is a financial ratio that measures a
company's profitability and the efficiency with which its capital is used. In other words,
the ratio measures how well a company is generating profits from its capital. It is
calculated by dividing profit before interest, exceptional items and tax by average
capital employed during the year. This ratio improved by 2.8% for your Company mainly on
account of increase in its profitability.
(x) Earnings Per Share ("EPS") is the portion of a company's profit allocated
to each share. It serves as an indicator of a company's profitability. It is calculated by
dividing profit for the year by weighted average number of shares outstanding during the
year. For your Company, the EPS improved on account of increase in Net Profit by 46% over
that of the previous year.
Cash Flow Statement |
|
(Rs. in crores) |
|
FY21 |
FY20 |
SOURCES OF CASH |
|
|
Cash from Operations |
9,569 |
7,826 |
Non-operating Cash Flow |
172 |
259 |
Proceeds from Issue of Share Capital |
7 |
3 |
Decrease in Working Capital |
1,982 |
433 |
Total |
|
8,521 |
USES OF CASH |
|
|
Net Capital Expenditure |
1,726 |
1,577 |
Increase in Investments |
7,433 |
2,633 |
Repayment of Borrowings (net) |
891 |
2,468 |
Repayment of Lease Liability including Interest thereof |
121 |
112 |
(Issue) / Sale of Treasury Shares (net) |
(7) |
3 |
Interest |
1,213 |
1,631 |
Dividend |
375 |
380 |
Total |
|
8,804 |
Increase / (Decrease) in Cash & Cash Equivalents |
(21) |
(283) |
Sources of Cash
Cash from Operations
Cash from operations was higher compared to the previous year on account of higher
volume, and sales realisation.
Non-Operating Cash Flow
Cash from other activities was lower due to reduced interest income on bank deposits as
a result of lower bank deposits.
Decrease in Working Capital
Working capital decreased on account of increase in trade payables mainly on account of
better credit terms and payment through letter of credit.
Uses of Cash
Net Capital Expenditure
Your Company spent ? 1,726 crores on various capex during the year, primarily towards:
WHRS at various locations
Cuttack Grinding Unit
Patliputra Grinding Unit
Dankuni Grinding Unit
Pali Integrated Unit
Bicharpur Coal Block
Other normal capex schemes for efficiency improvement and compliance with the
changing regulatory framework
Plant modernisation and maintenance Increase in Investments
Your Company's higher operating cash flows, resulted in an increase in liquid
investment during the year.
Repayment of Borrowing
In line with its endeavour to maintain optimal capital structure, your Company repaid
high-cost, long-term debt amounting to 7 5,227 crores and also repaid short-term loans as
per due dates.
The loan repayments have been done through free cash flows that your Company has
generated over the last few quarters, despite the challenging circumstances and severe
business interruptions during the first quarter of the current fiscal year. The aforesaid
steps have resulted in improved Net Debt Equity ratio and Net Debt/EBITDA ratio.
Transfer to General Reserves
Your Company proposes to transfer an amount of 7 4,500 crores to the General Reserves.
DIVIDEND
Prudent working capital management and control on cash flows, resulted in your
Company's strong performance, even during trying times. Aided by deft financial
management, your Company was able to successfully reduce Consolidated Net Debt/EBITDA
ratio to 0.55x from 1.72x as on 31st March, 2020.
With adequate cash flows and the confidence of sustaining its performance going
forward, your Directors have recommended a dividend of 7 37 per equity share (as compared
to 7 13 per equity share in the previous year) of 7 10 each for the year ended 31st
March, 2021. Except for unforeseen circumstances or the need to retain cash for its
operations, your Company will endeavour to maintain this trend in future years as well.
The recommended dividend is in line with your Company's dividend policy, which is given
in Annexure I of this Report and is also available on your Company's website.
In terms of the provisions of the Finance Act, 2020, dividend shall be taxed in the
hands of shareholders at applicable rates of tax and your Company shall withhold tax at
source appropriately.
Unclaimed dividend for the year ended 31st March, 2013, aggregating to 7
1.30 crores has been transferred to the Investor Education and Protection Fund
("IEPF"). Your Company has also credited to the IEPF set up by the Government of
India, equity shares in respect of which dividend had remained unpaid/unclaimed for a
period of seven consecutive years within the timelines laid down by the Ministry of
Corporate Affairs, Government of India. Unpaid/unclaimed dividend for seven years or more
has also been transferred to the I EPF, pursuant to the requirements under the Companies
Act, 2013 (the "Act").
DIRECTORS' RESPONSIBILITY STATEMENT
The audited accounts for the year under review are in conformity with the requirements
of the Act and the Indian Accounting Standards. The financial statements reflect fairly
the form and substance 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
In the preparation of the Annual Accounts, applicable accounting standards have
been followed along with proper explanations relating to material departures, if any.
The accounting policies selected have been applied consistently, and judgments
and estimates are made that are reasonable and prudent to give a true and fair view of the
state of affairs of your Company as on 31st March, 2021, and of the profit of
your Company for the year ended on that date.
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.
The Annual Accounts of your Company have been prepared on a going concern basis.
Your Company had laid down internal financial controls and that such internal
financial controls are adequate and were operating effectively.
Your Company has devised proper systems to ensure compliance with the provisions
of all applicable laws and that such systems were adequate and operating effectively
CAPITAL EXPENDITURE PLAN
The Board of Directors of your Company approved capex of ? 5,477 crores towards
increasing capacity by 12.8 MTPA with a mix of brown field and green field expansion. The
additional capacity will be created in the fast-growing markets of the east, central and
north regions of the country. This expansion is in addition to your Company's 6.7 MTPA
capacity expansion currently underway in Uttar Pradesh, Odisha, Bihar and West Bengal. The
expansion programme are on track, except for some slowdown on account of the second wave
of the pandemic.
Nonetheless, given your Company's history of setting up capacities in record time,
commercial production from the new capacities is expected to go on stream in a phased
manner by Q4FY23.
This capacity addition will not impact the ongoing deleveraging programme, which is on
track to make your Company debt free by the time the expansion programme is completed.
Upon completion of the latest round of expansion, your Company's capacity will grow to
136.25 MTPA, reinforcing its position as the third largest cement company in the world,
outside of China.
Your Company approved capex of ? 5,477 crores towards increasing capacity by 12.8 MTPA
with a mix of brown field and green field expansion.
SUSTAINABILITY LINKED BONDS
Your Company successfully raised US$ 400 million, corresponding to approximately 7
2,900 crores by way of issuance of senior unsecured US$ denominated notes (in the form of
Sustainability Linked Bonds), due on 16th February, 2031. The bonds bear coupon
of 2.80% per annum, payable semi-annually on 16th August and 16th
February each year, commencing 16th August, 2021 as per applicable laws. The
bonds are listed on the Singapore Stock Exchange.
Your Company is the first company in India and the second in Asia to issue
Sustainability Linked Bonds.
Subject to compliance with applicable laws and regulations and as permitted by the RBI
under the External Commercial Borrowings Guidelines, your Company intends to use the
proceeds from this offering to refinance existing rupee- denominated debt, ongoing capital
expenditure requirements and general corporate purposes.
Your Company is the first company in India and the second in Asia to issue
Sustainability Linked Bonds.
Apart from the above, your Company has also raised funds amounting to ? 1,000 crores by
the issuance of Non- Convertible Debentures, which have been fully subscribed.
CORPORATE GOVERNANCE
Your Directors reaffirm their commitment to good corporate governance practices. During
the year under review, your Company was compliant with the provisions relating to
corporate governance. The compliance report is provided in the Corporate Governance
section of the Annual Report.
The Auditor's Certificate on compliance with the conditions of corporate governance
forming part of the Securities and Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015 ("Listing Regulations") is provided
in Annexure II of this Report.
EMPLOYEE STOCK OPTION SCHEMES ESOS-2013
During the year, 9,533 stock options vested in eligible employees. The Nomination,
Remuneration and Compensation Committee ("the NRC Committee") allotted 28,293
equity shares of ? 10 each of your Company upon exercise of stock options and Restricted
Stock Units ("RSUs") by the grantees.
ESOS-2018
During the year, the NRC Committee:
Granted 2,152 stock options at an exercise price of ? 4,544.35 per stock option,
exercisable into the same number of equity shares of ? 10 each, and 594 RSUs at an
exercise price of ? 10 each on 21st October, 2020.
Granted 2,040 stock options at an exercise price of ? 6,735.25 per stock option,
exercisable into the same number of equity shares of ? 10 each, and 564 RSUs at an
exercise price of ? 10 each on 27th March, 2021.
Vested 40,352 stock options to eligible employees, subject to the provisions of
ESOS - 2018, statutory provisions as may be applicable from time to time and the rules and
procedures set out by your Company in this regard.
Your Company transferred 17,014 equity shares during the year upon receipt of
applications from some option grantees for the transfer of equity shares of your Company
in their account, from the Trust account, which also include 123 shares pending for
transfer for the year ended 31st March, 2020.
In terms of the provisions of the Securities and Exchange Board of India (Share Based
Employee Benefits) Regulations, 2014, the details of the stock options and RSUs granted
under the aforementioned schemes are available on your Company's website
https://www.ultratechcement.com/investors/financials.
A certificate from the Statutory Auditors on the implementation of your Company's
Employee Stock Option Schemes will be available at the ensuing Annual General Meeting
("AGM") for inspection by the Members.
SHARE CAPITAL
During the year, your Company allotted 28,293 equity shares of 7 10 each to option
grantees upon exercise of stock options and RSUs in terms of ESOS-2013. As a result, the
paid-up equity share capital of your Company stood at 7 2,88,65,33,980, comprising of
28,86,53,398 equity shares of 7 10 each.
Transfer of unclaimed dividend and shares: The details relating to unclaimed dividend
and shares are given in the Corporate Governance section that forms part of this Report.
RESEARCH AND DEVELOPMENT
Your Company's Research and Development ("R&D") efforts stand on the five
pillars of - Customers, Sustainability, Innovation, Quality, and Profitability. These
pillars have contributed to the upgradation and optimisation of processes and helped your
Company unlock bottlenecks. These have also been instrumental in your Company's efforts
towards preservation of mineral resources and use of alternative fuels and raw materials.
Your Company has developed premium products that reduce limestone consumption, thus
conserving fossil fuels and use of water in cement and concrete applications, while
ensuring top-notch functionality.
Your Company's continuing endeavour to address current and future customer needs and
provide unmatched scientific and technical support to its manufacturing units and
customers have led to greater focus on the development of new products, processes, and
technologies, while adopting sustainable means of operations to further reduce emissions.
The R&D unit was granted a patent this year for the invention of A Mineral-Based
Composition for Use as a Binder in the Manufacture of Cement' as an alternative to the
available supplementary cementitious material ("SCM").
Your Company has been granted a patent on safety sieve for its ability to control flow
in raw material hopper. The safety sieve offers the following benefits - safety of labour;
maintaining quality of raw material; ensuring smooth operations among others.
Your Company is also the first Company to conceptualise and implement a zero discharge
Ready-Mix Concrete ("RMC") plant, the first of its kind RMC in the world.
The R&D unit was granted a patent this year for the invention of A
Mineral-Based Composition for Use as a Binder in the Manufacture of Cement' as an
alternative to the available supplementary cementitious material ("SCM").
To remain competitive and make desirable scientific and technical progress, all global
developments in the field of cement, concrete, and construction materials are tracked in a
continuing manner.
Your Company's R&D is accredited by the National Accreditation Board for Testing
and Calibration Laboratories ("NABL"), making the organisation future-ready and
enhancing its capabilities in pollution abatement and carbon capture, nanotechnology of
cement and concrete, concrete durability, concreterheology, 3D printable concrete,
Geopolymer concrete, modelling cement and concrete hydration and chemical admixtures for
cement and concrete, including process innovation for improving manufacturing efficiency.
Your Company's R&D has also collaborated with the Aditya Birla Science and Technology
Company Private Limited and the academia, and the organisation is represented by its
R&D unit in the national and international scientific and technical forums.
SUSTAINABILITY
Sustainable growth is an integral part of your Company's business ethos and it
continuously strives to enhance environmental conservation measures while ensuring that
business growth and profitability are concomitant with its contribution to societal
well-being. Your Company's sustainability initiatives include efforts to reduce carbon
emissions, increase the use of alternative materials and fuels, increase green power
capacity, adopt best practices to remain water positive, conservation of the ecosystem
through the implementation of its Biodiversity Management Plan ("BMP"). Apart
from strengthening the brand reputation, these measures have enabled your Company to push
the industry towards greater sustainable practices.
A Board-level Risk and Sustainability Committee oversees your Company's Environmental,
Social, Governance ("ESG") strategy, with the senior management closely involved
in driving sustainability across the organisation. The structure ensures adherence,
implementation, and monitoring of the sustainability initiatives. Moreover, performance
assessment, including that of the senior management, is closely linked to ESG and
sustainability outcomes.
Your Company has aligned its sustainability strategy to the UN Sustainable Development
Goals ("SDGs"), which address critical issues such as climate change, poverty,
gender equality, health and well-being, consumption and biodiversity.
As a founding member of the Global Cement and Concrete Association, your Company is
committed to decarbonising its footprint and its aim to deliver carbon-neutral concrete by
2050 by working across the build environment value chain. It also aims to be 5x water
positive by 2023, which means that it will replenish five times the amount of water it
consumes. The total volume of water consumed has been replenished -160% over four-years
(from 27.4 million m3 in FY17 to 72.3 million m3 in FY21). For these
efforts and others, your Company has scored 71% higher than the industry average on the
Dow Jones Sustainability Index ("DJSI"). In FY20, it ranked among the top 10
companies on the DJSI Index under the Construction Material' category globally.
Your Company has scored 71 % higher than the industry average on the Dow Jones
Sustainability Index.
In FY20, only the second year of its participation, your Company's score on the
S&P's DJSI Index was 68, reflecting a 15% increase over the previous year. This has
helped your Company in benchmarking itself against the world's best companies in
sustainability performance, thereby establishing its sustainability commitment and helping
it identify opportunities to further excel in its sustainability journey.
Your Company has consistently disclosed its climate performance to the Carbon
Disclosure Project ("CDP") and has been rated B', the highest score in the
Indian cement sector. This year your Company also disclosed its water performance to CDP.
Your Company has committed to reducing its Scope 1 Greenhouse Gas ("GHG")
emission intensity by 27% by 2032 from the base year of 2017. It is also focused on
reducing Scope 2 GHG intensity by 69% within the same time frame.
Your Company has been consistently disclosing its climate performance to the Carbon
Disclosure Project ("CDP") and has been rated B', the highest score in the
Indian cement sector. This year your Company also disclosed its water performance to CDP.
Its carbon dioxide ("C02") emissions reduction targets, which were
committed in July 2020, have been validated by the Science Based Targets Initiative
("SBTi"). Your Company has reduced 6% of Scope 1 C02 intensity from
the base year of 2017 as against the target of 27% reduction by 2032. In energy
efficiency, your Company has overachieved the target set by the Government of India for
the first Perform, Achieve and Trade ("PAT") cycle.
Your Company continues to consider emissions at US$ 10 per tC02, which has
enabled it to evaluate the impact of any project/capex on the environment and take
decisions to drive down carbon emissions. It is also committed to doubling its energy
productivity under the #EP100 program run by The Climate Group ("TCG") by 2035
against the base year of 2010.
Being a signatory to the Task Force on Climate-Related Financial Disclosures
("TCFD"'), your Company has undertaken a climate change risk and opportunities
assessment study by TCFD recommendations. These findings have been integrated with the
long-term business strategy, risk management and business planning.
For further details on your Company's Sustainability efforts, please refer to the
Sustainability Report which is available at -
https://www.ultratechcement.com/about-us/sustainabilitv/ sustainabilitv-at-ultratech.
DIGITALISATION
Decarbonisation and Digitalisation are megatrends driving companies to take a relook at
structural changes and fundamentally alter traditional business models.
Your Company leverages technology to provide superior value to internal and external
stakeholders. Speed, scale, customer convenience and operational efficiency have been the
focus areas of its digital transformation journey over the years.
During the year, your Company launched a slew of new initiatives as part of its
continuous efforts to accelerate the digital transformation journey. Mobile solutions have
been launched for the sales network, dealers and retailers. These facilitate booking and
tracking of orders. Digital platforms, through which customers can transact using multiple
modes of payments viz. credit/debit cards, UPI and avail convenient EMIs on credit cards,
have been launched. It has provided access to up-to-date individual performance
information for employees, eliminating efforts in manual and reporting tasks through a
single source. The alignment of actions and effective real-time decisions enabled by data
integrity is helping teams in achieving organisational goals and improve customer
interaction and service at all levels.
The setting up of a single integrated platform, amalgamating data from multiple
systems, lies at the heart of your Company's logistics transformation. With the ability to
manage real time exceptions for its entire logistics operations, the integrated
information hub has made your Company future ready and brought agility in decision making.
Developing a digital ecosystem for its service partners, i.e., transporters and
drivers, and using digital solutions to improve their safety and efficiency have been a
crucial element of your Company's digitalisation strategy. It is also leading from the
front in applying digital solutions in its manufacturing activities to gain advantage and
drive sustainability. It has done successful pilots leveraging digital and Artificial
Intelligence ("Al") across the manufacturing value chain of cement plant,
thermal power plant, safety, mines etc.
Your Company has done successful pilots leveraging digital and Artificial Intelligence
("Al") across the manufacturing value chain of cement plant, thermal power
plant, safety, mines etc.
The digital transformation has the potential to decouple emissions and resource use
from economic growth while making operations sustainable, safer and more reliable.
As a part of your Company's continued focus towards making it future-ready, the Shared
Services Centre viz. UltraTech Knowledge Service Centre ("UKSC") has been set-up
at Pune to centralise the accounting processes, thereby enabling it to standardise and
make the accounting processes agile.
During the year, your Company completed migrating all transactional accounting
processes from the manufacturing and marketing office locations to UKSC. UKSC's main
objectives will be to continue creating stronger financial discipline, uniform practices
in finance and accounting processes and building up a digitally enabled Centre of
Excellence' for the accounting processes.
UKSC is currently responsible for processing -1.3 million invoices annually, amounting
to a payment of ? 35,000 crores, managing GST compliance of ? 9,000 crores, maintaining 1
million customer / vendor master records and accounting closure for 55 manufacturing units
and marketing zones every quarter.
The digital transformation projects undertaken in the last 12-18 months have resulted
in immense benefits in the areas of operational efficiency / productivity, improved
customer convenience and employee collaboration.
With the successful roll-out and seamless adoption of digital solutions by employees,
customers, and service partners, the digital journey is expected to further accelerate in
the coming months, yielding significant benefits to your Company and its stakeholders.
HUMAN RESOURCES
Amid the raging pandemic, it is your Company's human resource that has been the
backbone for not only carrying on business through the period of disruption but also in
ensuring the safety of the workforce and that of the community around your Company's
locations. Given the situation, the organisation was in a state of readiness to operate
remotely from home and all operations were carried out from stop to restart rapidly and
safely. The use of the virtual medium was maximised through close online networking of
teams and, connect with trade partners, customers and suppliers. Emphasis continued to be
laid on the development of talent within and strengthening the core areas of expertise by
enabling continuous learning, leveraging the digital platform. Formal digital platforms
were launched to enable sharing of ideas and best practices across work levels which
helped to drive continuous improvement and innovation.
Your Company's employee strength stood at 21,909 as on 31st March, 2021
(2020: 21,592).
SAFETY
Health and safety of all people working for your Company and on its behalf remained the
most important focus area. We are guided by our safety belief: Life is precious, and
we care for it'. Therefore, your Company ensured greater outreach despite limited mobility
during the pandemic. It acted with agility to combat the spread of COVID-19 by:
Preparing SOPs with timely amendment based on government guidelines and
communicating across locations for their strict adherence.
Ensuring online PTW (permit to work) to avoid requirement of touching paper.
Facilitating Doctors on Call' service across all locations.
Organising meetings and trainings in the virtual mode.
Your Company's manufacturing units are certified as per International Safety Standard
(OHSAS 18001/ ISO 45001) and it maintains a thorough safety management system right from
hazard identification and risk assessment, compliance with applicable legal requirements,
effective implementation of risk control measures following hierarchy of control, to
periodic checks through inspection and audit and appropriate corrective and preventive
action. Consequently, it could achieve the lowest ever lost time injury frequency rate
("LTIFR") of 0.14 with reduction by 37% compared to FY20. Number of lost time
injury incidents reduced by 39%, from 32 in FY20 to 20 this year. The organisational goal
of zero harm' gained momentum with 80% of your Company's sites having no lost time
injury.
Achieve the lowest ever lost time injury frequency rate ("LTIFR") of 0.14
with reduction by 37% compared to FY20.
Number of lost time injury incidents reduced by 39%, from 32 in FY20 to 20 this year.
The organisational goal of zero harm' gained momentum with 80% of your Company's
sites having no lost time injury.
Initiatives for the improvement in safety performance and culture were centered around
the following five major elements, viz. System and Processes; Capability Building;
Behavioural Safety; Assurance and Logistics Safety.
CORPORATE SOCIAL RESPONSIBILITY
In terms of the provisions of Section 135 of the Act read with the Companies (Corporate
Social Responsibility Policy) Rules, 2014, the Board of Directors of your Company has
constituted a Corporate Social Responsibility ("CSR") Committee chaired by Mrs.
Rajashree Birla. Other Members of the Committee are Mrs. Sukanya Kripalu, Independent
Director; Mr. K. K. Maheshwari, Vice Chairman and Non-Executive Director.
Dr. (Mrs.) Pragnya Ram, Group Executive President, CSR, Legacy, Documentation &
Archives is a permanent invitee to the Committee. Your Company also has in place a CSR
Policy which is available at - https://www.ultratechcement.com/
investors/corporate-aovernance.
Your Company's CSR activities are focused on Social Empowerment and Welfare,
Infrastructure Development, Sustainable Livelihood, Healthcare and Education. Various
activities across these segments have been initiated during the year around its plant
locations and the neighbouring villages. During the year, Rs. 120.68 crores was spent on
CSR activities, which constitutes over 3.3% of the average net profits of the last three
financial years.
A report on CSR activities is provided in Annexure III which forms part of this Report.
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES
The audited financial statements of your Company's subsidiaries and joint ventures viz.
Dakshin Cements Limited ("Dakshin"), Harish Cement Limited, Gotan Lime Stone
Khanij Udyog Private Limited, Bhagwati Lime Stone Company Private Limited, UltraTech
Nathdwara Cement Limited ("UNCL"), UltraTech Cement Middle East Investments
Limited ("UCMEIL"), UltraTech Cement Lanka (Private) Limited, PT UltraTech
Mining Indonesia and PT UltraTech Investments Indonesia and their related information are
available on your Company's website and also available for inspection. Any Member who is
interested in obtaining a copy of the audited financial statements of your Company's
subsidiaries may write to the Company Secretary.
The name of Dakshin was struck off from the register of companies maintained by the
Registrar of Companies, Hyderabad with effect from 9th April, 2021. This was on
an application made by Dakshin in terms of the provisions of the Act. Consequently,
Dakshin stood dissolved and ceased to be a subsidiary of your Company.
During the year, UNCL through its subsidiary, Krishna Holdings Pte. Ltd,
("Krishna"), a company incorporated in Singapore has completed the divestment of
its entire equity shareholding of 92.5% in its cement subsidiary and has recorded net gain
on divestment of Rs. 437.68 crores.
UNCL's subsidiary, Star Super Cement Industries LLC, UAE ("SSCI") was
previously classified as held for sale'. During the year, it was decided to make it
a part of the continuing operations considering the synergies available with the existing
capacity. Consequently, UNCL has divested SSCI to UCMEIL.
In terms of the order of the National Company Law Appellate Tribunal
("NCLAT") dated 14th November, 2018, approving the Resolution Plan
submitted by your Company under the Insolvency and Bankruptcy Code, 2016 for acquisition
of Binani Cement Limited, subsequently renamed UNCL, a loan of US$ 230.4 million in 3B
Binani Glassfibre SARL, ("3B") a company registered in Luxembourg, was assigned
to UNCL from IDBI Bank Limited. Assignment of the loan was along with securities, which
included pledge over all assets and shares of 3B in various forms in favour of UNCL. Since
3B was in continuous default in servicing the loan, UNCL enforced its pledge of 3B shares,
consequent to which UNCL became owner of 100% equity of 3B w.e.f 12th March,
2021. 3B's Board has also been re-constituted. UNCL has taken this step to safeguard and
expedite the recovery of its loan from 3B. Till the time UNCL is able to recover its loan,
the investment in 3B will be treated as investment held for sale.
In accordance with the provisions of Section 129(3) of the Act read with the Companies
(Accounts) Rules, 2014, a report on the performance and financial position of each of the
subsidiaries, joint venture and associate companies is provided in Annexure IV to this
Report.
Consequently, Dakshin stood dissolved and ceased to be a subsidiary of the Company.
PARTICULARS OF LOAN, GUARANTEE AND INVESTMENT
Details of Loan, Guarantee and Investment covered under the provisions of Section 186
of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014 are
given in Notes to the standalone financial statements.
ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
Information on conservation of energy, technology absorption and foreign exchange
earnings and outgo, required to be disclosed pursuant to Section 134(3)(m) of the Act read
with the Companies (Accounts) Rules, 2014, is given in Annexure V to this Report.
PARTICULARS OF EMPLOYEES
Disclosures pertaining to remuneration and other details as required under Section
197(12), read with the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, are given in Annexure VI. In accordance with the provisions of the
aforementioned section, the names and other particulars of employees drawing remuneration
in excess of the limits set out in the aforesaid rules form part of this Report. However,
in line with the provisions of Section 136(1) of the Act, the Report and Accounts as set
out therein, are being sent to all Members of your Company, excluding the aforesaid
information. Any Member, who is interested in obtaining these particulars, may write to
the Company Secretary.
BUSINESS RESPONSIBILITY REPORT
In terms of Regulation 34(2)(f) of the Listing Regulations, a Business Responsibility
Report forms part of the Annual Report.
CONTRACT AND ARRANGEMENT WITH RELATED PARTIES
During the financial year, your Company entered into related party transactions
completely on an arm's length basis and in the ordinary course of business. There are no
material transactions with any related party, as defined under Section 188 of the Act read
with the Companies (Meetings of Board and its Powers) Rules, 2014. All related party
transactions have been approved by the Audit Committee of your Company and are reviewed by
it on a periodic basis. The policy on Related Party Transactions, as approved by the Audit
Committee and the Board, is available at https://www.ultratechcement.com/
investors/corporate-governance.
The details of contracts and arrangements with related parties of your Company for the
financial year ended 31st March, 2021 is given in Note No. 39 to the standalone
financial statements of your Company.
RISK MANAGEMENT
Risk is an integral and unavoidable component of business. Given the challenging and
dynamic environment of your Company's operations, it is committed to proactively managing
risk in accomplishing its ambitious goals. Though risks cannot be eliminated, an effective
risk management program ensures that risks are reduced, avoided, mitigated or shared. To
maintain oversight of your Company's risks, the Risk Management and Sustainability
Committee ("RMS Committee") of your Company is mandated to review its Enterprise
Risk Management Framework (including plan / process), analyse the risks more deeply and
define risk mitigation actions, where necessary.
Through the Annual Risk Report processes, which are based upon the business
environment, operational controls and compliance procedures, your Company aims to assess
and prioritise risks, according to their significance and likelihood. The key risks
identified by your Company include economic environment and market demand; inflation and
cost of production; legal and compliance with local laws; financial and accounting;
environment, climate and sustainability; information technology and talent management.
Needless to mention, with the challenges presented by the COVID-19 outbreak, pandemic and
epidemic-related business risks have also been identified by your Company.
The risk horizon considered includes long-term strategic risks, short to medium-term
risks as well as single events. The risks are analysed considering likelihood and impact
as a basis to determine their management.
Key Business Risks identified by your Company:
Economic Environment and Market Demand
The demand for construction material is fundamentally driven by the economic growth in
the country. Economic slowdown and subdued infrastructural development might lead to a
slowdown in construction projects, thus leading to a reduction in cement consumption in
the country. The growth in construction activity in the country has been slow over the
last few years, impacting the cement consumption. In a scenario where incremental capacity
addition exceeds incremental cement demand, the government's push for infrastructure and
housing will aid the growth in cement consumption and reduce the overcapacity gap.
The cement industry in India is an aggregation of small and large companies. In such an
environment, the risk of protecting market share is optimal. With the expanding capacities
of existing players and the emergence of new entrants, competition is a sustained risk. To
mitigate this, continuous endeavours to enhance brand equity through innovative marketing
activities, enhancement in the product portfolio and value-add services have been the
thrust areas for your Company. The engineering expertise of your Company and its emphasis
on quality also minimise its risk against market fluctuations considerably.
Inflation and Cost of Production
Your Company faces the risk of inflation and fluctuations in the market-driven cost of
coal, pet coke, power, and other fuels. Since the cement industry is extremely energy
intensive, changes in fuel prices can significantly impact production cost. To de-risk,
your Company has established specific policies of long deliveries and it continuously
optimises its fuel mix and energy efficiency, while exploring the use of alternative
fuels. The procurement of raw materials at an economical cost or of suitable quality faces
a high degree of inflationary certainty. Your Company mitigates this risk through the
establishment of exhaustive policies for procurement of specific raw materials and stores
and those amenable to just in time inventories. Limestone being the primary raw material
required to produce cement, its continuous and long-term availability is critical,
particularly under the dynamic regulatory environment. Your Company currently possesses
sufficient limestone reserves. Securing additional reserves is critical to address your
Company's expansion plans. Apart from the preservation and extension of existing
reserves, a range of measures including strategic sourcing and changing input mix are
adopted by your Company to mitigate the risk of unavailability of limestone.
Legal and Compliance
This comprises the risk if your Company is found to have inadvertently violated laws
covering business conduct.
The country's regulatory framework is ever-evolving and the risk of non-compliance and
penalties may increase for your Company, leading to reputational risks. A comprehensive
risk- based compliance programme, involving inclusive training and adherence to the Code
of Conduct, is thus institutionalised by your Company.
As a step to mitigate the legal and compliance risk, your Company's management
encourages its employees to place their reliance on professional guidance and opinion to
discuss the impact of any changes in laws and regulations to ensure total compliance.
Periodic and ad-hoc reporting to various internal committees for oversight ensures the
effectiveness of such a programme.
Financial
This comprises the risk of exposure to interest rates, foreign exchange rates and
commodity price fluctuations. The risk management strategy is to identify the risk
exposure, measure and evaluate the financial impact, and decide on steps to mitigate the
risks together with ensuring regular monitoring and reporting.
With the objective of minimising risks arising from uncertainty and volatility of
foreign exchange fluctuations, an elaborate financial risk management policy is followed
for every transaction undertaken in foreign currency. Your Company's policies to counter
such risks are reviewed periodically and constantly aligned with the financial market
practices and regulations.
Changing laws, rules, regulations and standards relating to accounting, corporate
governance, public disclosure and listing regulations are generating newer and unforeseen
risks for companies. The new or changed laws, regulations and standards may lack
precedence and are subject to varying interpretations. Their application in practice may
evolve as new guidance is provided by regulatory and governing bodies. Thus your Company
maintains a high standard of corporate governance and public disclosure to de-risk itself
from such dynamic regulatory changes.
Environment
This comprises risks associated with environmental pollution through the discharge of
waste and GHG emissions, which may cause damage to the local ecology and environment.
Various initiatives such as sewage treatment plants, recycling of industrial wastewater,
bag-house, WHRS and extensive plantation and creation of green belts have been undertaken
by your Company to de-risk and protect the environment.
Apart from a targeted reduction of C02 emissions (Scope 1 by 27% and Scope 2
by 69% by 2032), your Company's risk mitigation strategy includes a change in product mix,
energy efficiency, use of alternative fuels and raw materials, WHRS and the increased use
of renewable energy. Your Company has also adopted measures such as rainwater harvesting
and water recharge that help it overcome challenges related to water availability.
Climate and Sustainability
Sustainability-related climate change risks and opportunities are assessed in line with
your Company's risk management policy and have been integrated in its multi-disciplinary
Risk Management Framework. Classified as ESG risks, these relate to energy, emissions and
water, among other issues. Sectoral review and relevant stakeholder interactions are
conducted regularly to develop a list of climate-related risks specific to business and
location. Identified risks are then mapped to your Company's risk matrix, which classifies
the risk according to its impact and likelihood.
Prioritised climate risks are managed through Unit-level committees. Unit and
Functional Heads are responsible for identifying risks, developing mitigation plans,
updating and reviewing their respective risk registers as per the defined process. The
consolidated risk report is submitted to the Board-level committee.
Scenario based analysis has been conducted for physical as well as transition risks.
For physical risks, four scenarios have been considered that are linked to Representative
Concentration Pathway ("RCP"), which is a GHG concentration trajectory adopted
by the Intergovernmental Panel on Climate Change ("IPCC"). These include RCP
8.5, RCP 6, RCP 4.5 and RCP 2.6 scenarios. The pathways describe four possible climate
futures on the basis of the volume of GHG emitted in the coming years. All four scenarios
have been considered to assess the impact of temperature and precipitation changes in
areas where your Company operates. Maximum possible impact has been considered based on
projections up to the year 2100.
Your Company has conducted risk assessment exercise to identify climate-related
physical and transition risks. Risks are assessed based on the defined time horizons over
short term (0-3 years), medium term (3-10 years) and long term (10-30 years). The
categorisation of risks into physical and transition risks has been done in alignment with
TCFD guidelines.
In case of assessing the impact of transition risks on your Company, scenario analysis
has been conducted in alignment with ETP B2DS and IPCC 1.5-degree scenarios. The potential
impact of the evolution of climate policies has been considered under both scenarios to
assess the resilience of your Company, as well as the potential pathways for
decarbonisation so that it can comply with policy mechanisms such as emission trading
schemes.
Product mix is an important variable in managing climate- related risks. Your Company's
products are not only sustainable but also aim to embed sustainability in the entire
construction value chain. As many as 73 UltraTech products are certified by GreenPro, the
largest Ecolabel in India, which enables end users in the built environment sector to
choose sustainable materials for reducing the environmental impact during construction,
operation as well as use phase of buildings.
Your Company's approach is highlighted below:
Enhancing resilience of the building sector: Extreme weather events due to
climate change, such as floods, cyclones and heat waves, may impact the building sector
considerably. To mitigate the impact of physical risks on the building sector and society
at large, your Company is working with the built environment sector to make buildings more
resilient to climate change effects.
Your Company is committed to developing products and solutions that reduce
carbon emissions throughout the lifecycle of the built environment sector. It offers
building products and solutions that lead to optimisation of concrete mixing, improving
overall quality and strength of construction, and thus alleviating the impact of physical
risks.
Your Company has introduced many new products that are designed to make
buildings more resilient to dampness.
This also leads to reduced wear and tear of buildings, increasing longevity, thereby
reducing the use of input materials and natural resources during their entire lifetime.
Physical risks
Acute physical risks: Such risks can potentially impact sales volumes because of
disruption of business operations due to interruption in supply chain, rise in logistics
costs, power outage, infrastructure damages, manpower shortage, among other aspects.
Few sites of your Company have been exposed to extreme weather events during the last
few years, such as floods and cyclones. In the last three years, sites located in
Bhubaneswar, Chennai and Gujarat have been impacted due to extreme weather events. Some of
your Company's sites are in geographies that are susceptible to periodic heat waves.
However, your Company has implemented several measures to mitigate the impact of physical
risks.
Given its pan-India presence, your Company's sites are highly diversified
geographically. If a manufacturing plant faces business disruption or shutdown due to
extreme weather events, alternative plants in other locations can serve the market need.
Also, its wide logistics network, with warehouses across different parts of the country,
enable flexibility in your Company's operations.
Annual weather forecasts are considered in supply chain decisions in order to mitigate
the risk of delays in sourcing of fuels. Your company has developed strategic partnerships
with geographically diverse global vendors for fuels. Regular monitoring of environmental,
political and regulatory developments, coupled with flexible contracts mitigate risks of
supply chain disruptions. Inventory norms for fuels are periodically reviewed considering
probability and expected impact of likely supply chain disruptions due to above
developments. Insurance coverage is in place to protect against damages to business assets
or loss of material in warehouses due to extreme weather events.
Your Company has not witnessed any impact of heat waves on its facilities.
Nevertheless, it ensures that its employees are protected during peak summer days. It is
committed to the WASH Pledge, ensuring adequate availability of safe drinking water to
workers. Warehouses are also secured with early morning and late evening operational
hours.
Disaster management plans, health and safety protocols and adequate communication
protocols during extreme weather events ensure safety at sites and minimise the impact on
the workforce.
The financial impact of physical risks is estimated to be less than 1% of EBITDA. Risk
mitigation measures have largely insulated your Company from the impact of extreme weather
events.
Chronic physical risks: Your Company's vast geographical presence makes it vulnerable
to long-term chronic physical risks, such as variation in temperature, precipitation and
water scarcity. Potential impact of variation in temperature and precipitation patterns
has been assessed through scenario analysis across all four scenarios. Less than a quarter
of your Company's cement plants are in sites with extremely high water-stress, combined
with a projected long-term decrease in precipitation patterns.
Your Company has implemented several measures which protect the business from the
identified chronic risks. Rainwater harvesting systems have also been installed across
sites. Harvested rainwater is either used within the sites or recharged into the ground
for raising groundwater levels. In addition, your Company's manufacturing sites are Zero
Liquid Discharge ("ZLD") and they reuse 100% of treated water within the sites.
As a result, nearly 41 out of 58 sites are water positive. The endeavour is to make all
sites water positive, enabling your Company to be future-ready for mitigating risks of
water stress.
Transitional risks
Emerging climate-related regulations and carbon pricing mechanisms may financially
impact business in the long run. For example, Emission Trading Scheme ("ETS")
and Carbon Tax have been adopted in several geographies around the world. India has
committed to reducing its emission intensity by 33-35% by 2030 and is on track to achieve
this target five years in advance (2025). National level commitments may, in the future,
cascade down to various industry sectors through the introduction of new climate change
policies. The estimated impact of a policy such as ETS on your Company is estimated to be
less than 1% of EBITDA, considering commitments already made to decarbonise the business.
Your Company is prepared to mitigate emerging risks pertaining to climate change policy
changes through its existing voluntary GHG reduction targets which are SBTi validated,
sustainability-linked bonds, its commitment to the GCCA announced 2050 Climate
Ambition' and so on.
Delay in adopting low-carbon technologies may lead to increased indirect operating
costs. This could be through early retirement of existing assets. Your Company has
strategically reduced its dependence on coal-based power generation and is focused on
increasing the share of WHRS and renewable energy. Further, initiatives to utilise waste
or by-products from other industries, and reducing clinker ratio are driving down
emissions intensity. There are also efforts to track the technology and cost trends in
emerging areas such as carbon capture, utilisation and storage ("CCUS"), and
hydrogen and kiln electrification. Also, your Company is committed to aligning with the
Paris Agreement Goals and is judiciously monitoring climate change performance at the
Board-level, Unit-level and across all relevant functions.
Information Technology Risks
This comprises risks related to Information Technology ("IT") systems; data
integrity and physical assets. Your Company deploys IT systems, including ERP, SCM, Data
Historian, and Mobile Solutions to support its business processes, communications, sales,
logistics, and production. Risks could primarily arise from the unavailability of systems
and/or loss or manipulation of information. To mitigate these risks, your Company uses
backup procedures and stores information at two different locations. Systems are upgraded
regularly with the latest security standards. For critical applications, security policies
and procedures are updated periodically, and users are educated on adherence to the
policies to eliminate data leakages.
Talent Management
Your Company's growth has been driven by its ability to attract and retain top-quality
talent and effectively engage them in the right jobs. The risks in talent management are
mitigated by following a policy of being an employer of choice and inculcating a sense of
belonging. Specialised training courses are adopted to enhance and reskill the employees
to prepare them for future roles and create a talent pipeline.
Pandemic-linked Disruptions in Global Markets
The COVID-19 outbreak has been declared a pandemic by the World Health Organization,
and has caused a huge impact on people's lives, families and communities. The pandemic
presents a serious threat, impacting organisations in numerous concurrent ways, and
potentially limiting their options around recovery if other companies are also affected or
challenged by logistical constraints. There are several associated risks viz. cyber and
fraud risks, operations risks, supply chain risks, health and safety, among others. Your
Company has assessed these risks as part of the risk identification and mitigation process
and is considering the impact thereof while making business decisions.
Amid the COVID-19 crisis, your Company is updating and expanding its crisis management
and business continuity plans with an emphasis on employees, customers, supply chain,
contacts, other stakeholders and business assets. Your Company currently operates in 53
locations in India and five overseas locations. Managing the risk of a multicultural and
diverse workforce is extremely critical to the sustained growth of your Company.
Continuous dissemination of your Company's Values and strict adherence to the Code of
Conduct for the employees are reiterated through various forums to contain this risk.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
Your Company has put in place adequate internal control systems that are commensurate
with the size of its operations. Internal control systems comprising policies and
procedures are designed to ensure sound management of your Company's operations,
safekeeping of its assets, optimal utilisation of resources, reliability of its financial
information, and compliance. Clearly defined roles and responsibilities have been
institutionalised, and systems and procedures are periodically reviewed to keep pace with
the growing size and complexity of your Company's operations.
DIRECTORS
Retiring by rotation and continuing as Director
In accordance with the provisions of the Act and Articles of Association of your
Company, Mr. Kumar Mangalam Birla (DIN: 00012813) retires by rotation, and being eligible,
offers himself for re-appointment.
Resolution seeking his re-appointment along with a brief profile forms part of the
Notice convening the AGM.
Appointment of Director
Based on the recommendation of the NRC Committee, the Board on 14th August,
2020 appointed Mr. Sunil Duggal (DIN:00041825) as an Additional Director (Independent).
Resolution seeking the appointment of Mr. Duggal as an Independent Director of your
Company for a term of five years commencing 14th August, 2020 along with his
brief profile forms part of the Notice convening the AGM.
Appointment of Whole-time Director
The existing term of Mr. Atul Daga (DIN: 06416619), Wholetime Director and Chief
Financial Officer is upto 8th June, 2021. The Board at its meeting held on 7th
May, 2021, based on the recommendation of the NRC Committee and considering the
contributions made by Mr. Daga during his term of appointment, re-appointed Mr. Daga for a
further period of three years from 9th June, 2021.
Resolutions seeking his re-appointment along with a brief profile forms part of the
Notice convening the AGM.
Meetings of the Board
The Board of Directors of your Company met five times during the year to deliberate on
various matters. The meetings were held on 20th May, 2020; 28th
July, 2020; 21st October, 2020; 3rd December, 2020, and 23rd
January, 2021. Additional details relating to the meetings of the Board of Directors are
provided in the Report on Corporate Governance, which forms part of the Annual Report.
Your Company has the following six Board-level Committees, which have been established
in compliance with the requirements of the business and relevant provisions of applicable
laws and statutes:
Audit Committee
Nomination, Remuneration and Compensation Committee
Stakeholders Relationship Committee
Corporate Social Responsibility Committee
Risk Management and Sustainability Committee
Finance Committee
The details with respect to the composition, terms of reference, number of meetings
held, etc. of the above Committees are included in the Report on Corporate Governance,
which forms part of the Annual Report.
Independent Directors
Your Company's Independent Directors have submitted requisite declarations confirming
that they continue to meet the criteria of independence as prescribed under Section 149(6)
of the Act and Regulation 16(1)(b) of the Listing Regulations. The Independent Directors
have also confirmed that they have complied with Schedule IV of the Act and the Company's
Code of Conduct.
Your Company's Board is of the opinion that the Independent Directors possess requisite
qualifications, experience, and expertise in industry knowledge; innovation; financial
expertise; information technology; corporate governance; strategic expertise; marketing;
legal and compliance; sustainability; risk management; human resource development and
general management, and they hold highest standards of integrity. All Independent
Directors of your Company have registered their name in the data bank maintained with the
Indian Institute of Corporate Affairs, Manesar in terms of the provisions of the Companies
(Appointment and Qualification of Directors) Rules, 2014.
Formal Annual Evaluation
The evaluation framework for assessing the performance of the Directors of your Company
comprises contributions at meetings and strategic perspective or inputs regarding the
growth and performance of your Company, among others.
The NRC Committee and the Board have laid down the way in which formal annual
evaluation of the performance of the Board, its Committees and individual Directors has to
be made. It includes circulation of evaluation forms separately forevaluation of the Board
and its Committees, Independent Directors / Non-Executive Directors / Executive Directors
and the Chairman of your Company. The process of the annual performance evaluation broadly
comprises:
Board and Committee Evaluation
Evaluation of the Board as a whole and the Committees is done by individual Directors,
which is collated for submission to the NRC Committee and feedback to the Board.
Independent / Non-Executive Directors Evaluation
Evaluation done by Board members, excluding the Director, is submitted to the Chairman
of your Company and individual feedback is provided to each Director. The evaluation of
the Chairman / Executive Director as done by the individual Directors is submitted to the
Chairman of the NRC Committee and subsequently to the Board. The evaluation framework
focused on various aspects of the Board and Committees such as review, timely information
from management etc. Also, performance of individual Directors was divided into Executive,
Non-Executive and Independent Directors and based on parameters such as contribution,
attendance, decision-making, action-oriented, external knowledge etc.
A brief summary of the evaluation exercise is as follows:
The Board as a whole functions as a cohesive body. The Committees function well in
their respective areas and the recommendations of the Committees have been accepted by the
Board. The Directors bring to the table their knowledge and experience. Independent
Directors are rated high in understanding your Company's business and expressing their
views freely during deliberations. The Non-Executive Directors score well in all aspects.
Executives Directors are action oriented and good in implementing Board decisions. The
Chairman leads the Board effectively and encourages active participation and contribution
by all Board members.
The details of the programme for familiarisation of Independent Directors of your
Company are available at https://www. ultratechcement.com/about-us/leadership-team.
Policy on Appointment and Remuneration of Directors and Key Managerial Personnel and
Remuneration Policy
Your Company's Directors are appointed / re-appointed by the Board on the
recommendations of the NRC Committee and approval of the shareholders.
In accordance with the Articles of Association of your Company, provisions of the Act
and the Listing Regulations, all Directors, except the Executive Directors and Independent
Directors, are liable to retire by rotation and, if eligible, offer themselves for
re-appointment. The Executive Directors are appointed for a fixed tenure and are not
liable to retire by rotation. The Independent Directors can serve a maximum of two terms
of five years each and their appointment and tenure are governed by provisions of the Act
and the Listing Regulations.
The NRC Committee has formulated the remuneration policy of your Company, which is
provided in Annexure VII to this Report.
KEY MANAGERIAL PERSONNEL
In terms of the provisions of Section 203 of the Act,
Mr. K. C. Jhanwar, Managing Director; Mr. Atul Daga, Wholetime Director and Chief
Financial Officer and Mr. Sanjeeb Kumar Chatterjee, Company Secretary are the Key
Managerial Personnel of your Company.
AUDIT COMMITTEE
The Audit Committee comprises of Mr. S. B. Mathur, Mr. Arun Adhikari, Mrs. Alka
Bharuchaand Mr. K. K. Maheshwari. The Committee comprises majority of Independent
Directors with Mr. Mathur being the Chairman. Mr. K. C. Jhanwar, Managing Director and Mr.
Atul Daga, Whole-time Director and CFO, are permanent invitees. Further details relating
to the Audit Committee are provided in the Report on Corporate Governance, which forms
part of the Annual Report. During the year under review, all recommendations made by the
Audit Committee were accepted by the Board.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
Your Company has in place a vigil mechanism for the Directors and employees to report
instances and concerns about unethical behaviour, actual or suspected fraud, or violation
of your Company's Code of Conduct. Adequate safeguards are provided against victimisation
of those who avail of the mechanism and direct access to the Chairman of the Audit
Committee, in exceptional cases, is provided to them.
The vigil mechanism/whistle blower policy is available at
https://www.ultratechcement.com/investors/corporate- governance.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
Your Company had filed appeals against the orders of the Competition Commission of
India ("CCI") dated 31st August, 2016. The NCLAT disallowed the
appeal against the CCI order filed by your Company. The Hon'ble Supreme Court has, by its
order dated 5th October, 2018 granted a stay against the NCLAT order.
Consequently, your Company has deposited an amount of ? 144.95 crores equivalent to 10% of
the penalty amount (including the acquired Cement Division of Century Textiles and
Industries Limited). Your Company, backed by legal opinions, believes that it has a good
case in the said matters and accordingly no provision has been made in the accounts.
AUDITORS
Statutory Auditors
In terms of the provisions of Section 139 of the Act and the Companies (Audit and
Auditors) Rules, 2014, M/s. BSR & Co. LLP, Chartered Accountants, Mumbai (Registration
No: 101248W/W-100022) ("BSR") were re-appointed as Joint Statutory Auditors for
a second term of five years from the conclusion of the 20th AGM held on 12th
August, 2020 up to the conclusion of the 25th AGM to be held in 2025.
The first term of M/s. Khimji Kunverji & Co. LLP, Chartered Accountants, Mumbai
(Registration No: 105146W/W- 100621) ("KKC"), the other Joint Statutory Auditor
is up to the conclusion of the 21st AGM. They are eligible for reappointment
for a second term of five years as provided under Section 139 of the Act read with the
Companies (Audit and Auditors) Rules, 2014.
KKC has confirmed that they are eligible to be re-appointed in accordance with the
provisions of the Act and Rules made thereunder. KKC, registered with the Institute of
Chartered Accountants of India ("ICAI"), was established in 1936 and is led by
10 partners. The firm provides a range of services, including audit and assurance,
taxation, advisory and accounting. The firm has significant experience in providing
auditing, taxation and advisory services to leading banks and corporates in the
manufacturing, services and financial services sectors. The signing partner heads the
Assurance vertical of the firm. He also holds a Diploma in Information System Audit and
IFRS Certification of ICAI. In the past, he was a member of various committees of ICAI
related to auditing and accounting. Your Company's Board of Directors, upon the
recommendation of the Audit Committee, proposes their re-appointment for a second term,
subject to the approval of Members. Resolution seeking their re-appointment forms part of
the Notice convening the AGM.
The observations made in the Auditor's Report are self- explanatory and, therefore, do
not call for any further comments under Section 134(3)(f) of the Act.
Cost Auditors
The Cost Accounts and records as required to be maintained under Section 148 (1) of the
Act are duly made and maintained by your Company.
In terms of the provisions of Section 148 of the Act read with the Companies (Cost
Records and Audit) Rules, 2014, the Board of Directors of your Company have, on the
recommendation of the Audit Committee, appointed M/s. D. C. Dave & Co., Cost
Accountants, Mumbai and M/s. N. D. Birla & Co., Cost Accountants, Ahmedabad, to
conduct the Cost Audit of your Company for the financial year ending 31st
March, 2022, at a remuneration as mentioned in the Notice convening the AGM.
As required under the Act, the remuneration payable to the Cost Auditors has to be
placed before the Members at a general meeting for ratification. Hence, a resolution for
the same forms part of the Notice convening the AGM.
Secretarial Auditors
In terms of the provisions of Section 204 of the Act read with the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board had
appointed M/s. Makarand M Joshi & Co. LLP, Company Secretaries as Secretarial Auditors
for conducting Secretarial Audit of your Company for the financial year ended 31st
March, 2021.
The report of the Secretarial Auditor is provided in Annexure VIII. The Secretarial
Audit Report does not contain any qualification, reservation or adverse remark.
Compliance with Secretarial Standards
Your Company is compliant with the Secretarial Standards specified by the Institute of
Company Secretaries of India.
Your Company has complied with all applicable provisions of Secretarial Standard - 1
and Secretarial Standard -2 relating to Meetings of the Board of Directors' and
General Meetings' respectively, issued by the Institute of Company Secretaries of
India.
ANNUAL RETURN
In terms of the provisions of Section 92 and Section 134 of the Act read with Rule 12
of the Companies (Management and Administration) Rules, 2014, the Annual Return is
available at - https://www.ultratechcement.com/investors/financials.
OTHER DISCLOSURES
No material changes and commitments affected the financial position of your
Company between the end of the financial year and the date of this Report.
Your Company has not issued any shares with differential voting rights.
There was no revision in the financial statements.
There has been no change in the nature of business of your Company.
Your Company has not issued any sweat equity shares.
Disclosures as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition
and Redressal) Act, 2013 ("POSH Act"):
Your Company has adopted zero tolerance for sexual harassment at workplace and has
formulated a policy on prevention, prohibition and redressal of sexual harassment at
workplace, in line with the provisions of the POSH Act and the rules framed thereunder,
for prevention and redressal of complaints of sexual harassment at workplace. Your Company
has complied with provisions relating to the constitution of the Internal Committee under
the POSH Act. During the year under review, your Company received four complaints of
sexual harassment, of which for two complaints, there were no evidence of harassment, one
complaint has been resolved and one complaint is under investigation.
CAUTIONARY STATEMENT
Statements in the Directors' Report and the Management Discussion and Analysis
describing your Company's objectives, projections, estimates, expectations or predictions
and plans for navigating the COVID-19 impact on your Company's performance, its employees,
customers and other stakeholders may be forward-looking statements' within the
meaning of applicable securities laws and regulations.
Actual results could differ materially from those expressed or implied. Important
factors that could make a difference to your Company's operations include global and
Indian demand- supply conditions, finished goods prices, feed stock availability and
prices, cyclical demand and pricing in your Company's principal markets, changes in
government regulations, tax regimes, economic developments within India and the countries
within which your Company conducts business, risks related to an economic downturn or
recession in India, the efforts of the government and other measures seeking to contain
the spread of COVID-19 and other factors such as litigation and labour negotiations. Your
Company is not obliged to publicly amend, modify or revise any forward-looking statements
on the basis of any subsequent development, information or events, or otherwise.
ACKNOWLEDGEMENT
Your Directors express their deep sense of gratitude to the banks, financial
institutions, stakeholders, business associates, central and state governments for their
support, and look forward to their continued assistance in the future. We thank 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.
#MDEnd#