UltraTech Cement Ltd
Directors Reports
Management Discussion and Analysis
The Indian cement industry will add 80-100 million tonnes capacity by FY25, driven by
increased spending on housing and infrastructure. With the Union Budget 2022-23 providing
higher allocation for infrastructure, affordable housing and road projects, the cement
industry is poised for a volume surge.
Dear Shareholders,
Your Directors present the 22nd Annual Report together with the audited
accounts of your Company for the year ended 31st March, 2022.
OVERVIEW AND THE STATE OF YOUR COMPANY'S AFFAIRS
The International Monetary Fund ("IMF") lowered its global growth forecast by
0.8 percentage points to 3.6%, as inflation rises and supply chains continue to be in
disarray. With ongoing supply chain disruptions and high energy prices continuing in 2022,
inflation is expected to remain elevated for an extended period of time, and is likely to
come down only gradually as supply - demand imbalances wane and the effects of monetary
policy responses in major economies kick in.
Towards the end of FY22, the war in Ukraine and subsequent sanctions that disrupted
global commodity markets and supply chains further aggravated the situation. Further more,
the frequent and wide-ranging lockdowns in China - including in key manufacturing hubs -
have also had a far reaching impact on global supply chains. Other global risks may
crystallise as geopolitical tensions remain high.
India is expected to remain the fastest growing major economy over 2021-24, according
to the World Bank, the IMF and the Asian Development Bank. The country recorded GDP of
8.7% for FY22, with the industrial sector staging a sharp rebound from a contraction of 7%
in FY21. The services sector expanded by 8.2%, owing to the rapid growth in software and
IT-enabled services exports while agriculture and allied sectors grew by 3.9%, with food
grain production for the kharif season at a record level of 150.5 million tonnes.
The recent times have put to test the resilience of health systems, economies,
governments across the globe in face of the pandemic. With the pandemic continuing to
evolve, the need for an effective global health strategy has never been so pronounced.
Worldwide access to vaccines, tests, and treatments is essential to reduce the risk from
other COVID-19 variants.
Since the onset of the COVID-19 pandemic in March 2020, monetary policies have been
geared towards mitigating the adverse impact of the unprecedented demand and supply-side
shocks inflicted on the economy. This, in turn, led to an overall stable economic
environment. Several high frequency indicators, such as electricity consumption, PMI
manufacturing, exports, and e-way bill creation, GST collections reflect this. This bodes
well for the Indian economy in 2022-23, barring any geopolitical and economic surprises.
Cement Industry FY22
The first half of FY22 witnessed a sharp recovery in demand, supported by the low base
of the pandemic-hit H1FY21. However, H2FY22 was impacted as the demand for cement declined
due to unexpected rains in different parts of the country, ban on construction activities
in the National Capital Region ("NCR") and shortages of labour and sand in the
eastern region.
Although the macroeconomic factors around India's cement industry remain positive and
will be driven by a revival in demand, the sector is facing headwinds from a surge in
costs. The key cost constituents - coal, pet coke and diesel, have seen a significant
escalation in prices.
The increase in diesel prices resulted in an increase in transport and logistics costs,
putting further pressure on businesses. These commodity prices are not under the control
of any constituent and there is little that the efficiency improvement programs can do to
cushion the impact of rising costs.
As per a recent report by a credit rating agency, the Indian cement industry will add
80-100 million tonnes capacity by FY25, driven by increased spending on housing and
infrastructure. With the Union Budget 2022-23 providing higher allocation for
infrastructure, affordable housing and road projects, the cement industry is poised for a
volume surge. Further, the Union Government's thrust on developing and improving public
infrastructure (roads, highways, metros and railways, airports, ports, logistics) through
projects like PM GatiShakti, National Infrastructure Pipeline ("NIP"), Urban
Rejuvenation Mission: AMRUT and Smart Cities Mission is likely to boost cement demand.
Demand for affordable houses, with ticket size <' 4050 lakhs, is expected to rise in
Tier 2 and 3 cities. The affordable rental housing scheme, which is a sub-scheme under the
Pradhan Mantri Awas Yojana ("PMAY"), is also likely to drive demand for cement
in low-cost housing.
Given its PAN India presence, your Company has the advantage to cater to demand across
the country. This coupled with its focus on controlling costs, conserving cash, advancing
employee well-being and sustainability, makes your Company well placed to tide over the
uncertainties arising out of the pandemic and deliver a robust performance.
BUSINESS PERFORMANCE
Production and capacity utilisation (grey cement)
| Particulars |
FY22 |
FY21 |
% change |
| Installed capacity in India (MTPA) |
114.55 |
111.35 |
2.87 |
| Production (MMT) |
86.98 |
79.70 |
9.13 |
| Capacity Utilisation |
77% |
71% |
6 |
MTPA - Million Metric Tonnes Per Annum;
MMT- Million Metric Tonnes
Cement production in FY22 was higher by 9% at 86.98 million tonnes as compared to FY21
while capacity utilisation was at 77% as against 71%.
Sales volume
|
(Figures in MMT) |
| Particulars |
FY22 |
FY21 |
% change |
| Grey Cement - India |
87.25 |
80.18 |
8.8 |
| Grey Cement - Overseas |
4.93 |
4.90 |
4.8 |
| White Cement |
1.46 |
1.32 |
11.2 |
| Others |
0.35 |
- |
- |
| Total Sales Volume |
93.99 |
86.42 |
8.8 |
Domestic sales volume registered a growth of 9% in FY22.
Cement consumption started improving on the back of consistent rural demand and pick-up
in infrastructure activities.
FINANCIAL PERFORMANCE
|
|
|
|
(Rs. in crores) |
|
Standalone |
Consolidated |
|
FY22 |
FY21 |
FY22 |
FY21 |
| Net Turnover |
49,729 |
42,677 |
51,708 |
44,239 |
| Domestic |
49,479 |
42,363 |
49,528 |
42,264 |
| Exports |
250 |
314 |
2,180 |
1,975 |
| Other income |
1,546 |
1,300 |
1,399 |
1,221 |
| Total Expenditure |
39,727 |
32,224 |
41,084 |
33,158 |
| Profit before Interest, Depreciation and Tax (PBIDT) |
11,548 |
11,754 |
12,022 |
12,302 |
| Depreciation |
2,457 |
2,434 |
2,715 |
2,700 |
| Profit before Interest and Tax (PBIT) |
9,091 |
9,319 |
9,307 |
9,602 |
| Interest |
798 |
1,259 |
945 |
1,486 |
| Profit before Impairment and Tax Expenses/share in profit of Associates |
8,293 |
8,060 |
8,363 |
8,116 |
| Rates and Taxes |
- |
(164) |
- |
(164) |
| Impairment on Advances Given |
- |
- |
- |
(97) |
| Share in Profit/(Loss) of Associates and Joint Venture (net of tax) |
- |
- |
2 |
2 |
| Profit before Tax Expenses |
8,293 |
7,896 |
8,364 |
7,858 |
| NormaNsed Tax Expenses |
2,744 |
2,554 |
2,708 |
2,539 |
| Reversal of Tax Provision of Earlier Years |
(1,518) |
- |
(1,518) |
- |
| Profit after Tax |
7,067 |
5,342 |
7,174 |
5,319 |
| Profit Attributable to Non-controlling interest |
- |
- |
(10) |
(1) |
| Profit Attributable to Owner of the Parent |
- |
- |
7,184 |
5,320 |
Note: In this Report, the figures for the previous year have been regrouped/rearranged
wherever necessary to confirm to the current period's classification to comply with the
requirements of the amended Schedule Ill to the Companies Act, 2013.
Net Turnover
Your Company's Net Turnover at Rs.49,729 crores was 17% higher than the previous year.
Other Income
Other income rose marginaiiy, mainly on account of greater government grants as
compared to the previous year.
Operating Profit (PBIDT) and Margin
PBIDT at Rs.11,548 crores was 1.7% lower than the previous year. Lower operating margin
was attributable to higher input costs, partly offset by volume growth and better sales
realisations.
Cost Highlights
(i) Energy Cost
Overall energy cost increased by 31% from Rs.950/t to Rs.1,240/t mainly due to higher
fuel prices.
(ii) Input Material Cost
Raw material cost rose from Rs.504/t to Rs.531/t as a result of 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 the share
of blended and premium products in its product mix, which is expected to result in an
improvement in overall profitability.
(iii) Freight and Forwarding Expenses
Logistics cost increased marginaNy from Rs.1,158/t to Rs.1,214/t, due to increase in
diesel cost. Reduction in lead distance mainly on account of a change in the market mix
and synergies arising out of the integration of acquired assets aided in lowering the
impact of rising diesel costs.
Employee Costs
Employee cost increased to Rs.2,359 crores as compared to Rs.2,182 crores in the
previous year, primarNy due to the annual increments.
Depreciation
At Rs.2,457 crores, depreciation was higher by Rs.23 crores, on account of fewer assets
being capitalised during the year.
Finance Cost
Repayment of borrowings led a decrease in finance cost from Rs.1,259 crores to Rs.798
crores.
Credit Rating
Your Company has adequate liquidity and a strong balance sheet. CRiSiL and India
Ratings and Research 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
a testament of your Company's sound financial management as well as its ability to service
financial obligations in a timely manner.
Your Company has also obtained its credit rating for its foreign currency bond
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 increase in taxable income.
Net Profit
Normalised Profit after Tax increased by 3.9% from Rs.5,342 crores to Rs.5,549 crores.
Significant changes in key financial ratios, along with detailed explanations:
| Particulars |
FY22I |
FY21 |
% Change |
| Debtors Turnover (Days) |
18 |
18 |
- |
| Inventory Turnover (Days) |
33 |
32 |
(1) |
| Interest Coverage Ratio |
12.72 |
7.20 |
77 |
| Current Ratio |
1.30 |
1.77 |
27 |
| Debt Equity Ratio (Gross) |
0.20 |
0.40 |
50 |
| Debt Equity Ratio (Net) |
0.07 |
0.08 |
12 |
| Operating Profit Margin (%) |
22 |
26 |
(14) |
| Net Profit Margin (%) |
11.2 |
12.5 |
(11) |
| Return on Net Worth (%) |
11.3 |
12.3 |
(9) |
| Return on Capital Employed (ROCE) (%) |
14.4 |
14.4 |
- |
| Earnings per Share (EPS) |
192 |
185 |
4 |
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 77% over the previous
year mainly on account of lower interest outgo as loans were repaid during the years.
(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 NabNities (excluding current borrowings).
CRISIL and India Ratings and Research 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.
(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 50% 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 decreased by 3.7% mainly on account of higher costs and partly
set-off by higher volume 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 decreased by 1.4% mainly on account of
higher costs, and partly set-off by higher volume, 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.
(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.
(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 3.9% over that of the previous year.
Cash Flow Statement
|
|
(Rs. in crores) |
|
FY221 |
FY21 |
| SOURCES OF CASH |
|
|
| Cash from Operations |
9,237 |
9,569 |
| Non-operating Cash Flow |
286 |
172 |
| Proceeds from Issue of Share Capital |
4 |
7 |
| (Increase)/Decrease in Working Capital |
(567) |
1,979 |
| Total |
8,960 |
11,728 |
| USES OF CASH |
|
|
| Net Capital Expenditure |
5,422 |
1,724 |
| (Redemption)/Increase in Investments |
(5,925) |
7,433 |
| Repayment of Borrowings (net) |
7,360 |
891 |
| Repayment of Lease Liability including |
160 |
121 |
| Interest thereof |
|
|
| (Issue)/Sale of Treasury Shares (net) |
83 |
(7) |
| Interest |
838 |
1,213 |
| Dividend |
1,065 |
375 |
| Total |
9,002 |
11,749 |
| Increase/(Decrease) in Cash & Cash Equivalents |
(42) |
(21) |
Sources of Cash
Cash from Operations
Cash from operations was lower compared to the previous year due to rise in costs,
which was partly set-off by higher volume and sales realisation.
Non-Operating Cash Flow
Cash from other activities was higher due to increased interest income on bank deposits
and intercorporate deposits.
Increase in Working Capital
Increase in working capital is attributed to increase in inventories and trade
receivables on account of inflationary impact on fuel inventory and higher sales
respectively.
Uses of Cash
Net Capital Expenditure
Your Company spent Rs.5,422 crores on various capex during the year, primarily towards
growth and maintenance capex as well as Waste Heat Recovery Systems.
Decrease in Investments
Your Company's liquid investment was used for the repayment of borrowings.
Repayment of Borrowing
In line with its endeavour to maintain optimal capital structure, your Company repaid
high-cost, long-term debt amounting to Rs.7,531 crores.
The loan repayments have been done out of free cash flows that your Company has
generated during the 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 Rs.5,000 crores to the General Reserves.
DIVIDEND
Your Directors recommended a dividend of Rs.38 per equity share (as compared to Rs.37
per equity share in the previous year) of Rs.10 each for the year ended 31st
March, 2022. 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, 2014, aggregating to
Rs.1.40 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 IEPF, 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, 2022, 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
Your Company's current expansion programme is on track and estimated to reach
completion by the end of FY23.
During the year, your Company commissioned cement capacity of 3.2 MTPA at the following
locations, which is the first phase of the 19.5 MTPA capacity expansion announced in
December 2020:
• Patliputra Cement Works, Bihar - Additional cement capacity of 0.6 MTPA
commissioned, taking the Unit's capacity to 2.5 MTPA.
• Dankuni Cement Works, West Bengal - Additional cement capacity of 0.6 MTPA
commissioned, taking the Unit's capacity to 2.2 MTPA.
• Line II of the Bara Grinding Unit, Uttar Pradesh — it's cement capacity
stands at 4 MTPA. Line I was earlier commissioned in January 2020.
This additional capacity will help your Company service the increasing demand for
cement in the Eastern and Central regions of India.
Your Company commenced operations from its 7th bulk terminal at Kalamboli,
Navi Mumbai. The other 6 are located at Cochin in Kerala; Mangalore and Doddaballapur in
Karnataka; Uran and Pune in Maharashtra and Shankarpalli in Telangana. With a capacity to
handle ~1.2 MTPA cement and considering the large infrastructure development projects in
and around Mumbai, the bulk terminal will strengthen your Company to further increase its
sales and distribution of cement in bulk. This will effectively help in reducing freight
cost, with increase in the usage of rail transportation. For your Company, this is one
more step towards reducing carbon emissions and driving sustainable growth.
The Board, further approved capex of Rs.12,886 crores towards increasing capacity by
22.6 MTPA with a mix of brownfield and greenfield expansion. This would be achieved by
setting-up integrated and grinding units as well as bulk terminals. The additional
capacity will be created across the country. Commercial production from these new
capacities is expected to go on stream in a phased manner by FY25.
With these expansions, your Company's total grey cement manufacturing capacity will
stand augmented to 159.25 MTPA, globally.
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 this Integrated 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
The Nomination, Remuneration and Compensation Committee ("the NRC Committee")
allotted 17,449 equity shares of Rs.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 63,684 stock options at an exercise price of Rs.7,424.70 per stock
option, exercisable into the same number of equity shares of Rs.10 each, and 18,869 RSUs
at an exercise price of Rs.10 each on 22nd July, 2021.
• Granted 33,525 stock options at an exercise price of Rs.7,269.10 per stock
option, exercisable into the same number of equity shares of Rs.10 each, and 8,538 RSUs at
an exercise price of Rs.10 each on 27th October, 2021.
• Vested 38,855 stock options and 37,537 RSUs 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 35,988 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 1,043 equity shares pending
for transfer for the year ended 31st March, 2022.
Your Company's current expansion programme is on track and estimated to reach
completion by the end of FY23.
In terms of the provisions of the Securities and Exchange Board of India (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB & SE
Regulations") 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 Secretarial 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.
ESOS-2022
The Board of your Company, based on the recommendation of the NRC Committee, approved
formulation of a new Scheme viz. ‘UltraTech Cement Limited Employee Stock Option and
Restricted Stock Unit Scheme 2022' ("ESOS-2022") in terms of the SEBI SBEB &
SE Regulations. ESOS-2022 will be adminstered by the NRC Committee through a Trust, viz.
the ‘UltraTech Employees Welfare Trust'.
Resolutions seeking your approval for approving ESOS-2022 and related matters form part
of the Notice of the AGM.
SHARE CAPITAL
During the year, your Company allotted 17,449 equity shares of Rs.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 Rs.2,88,67,08,470, comprising of
28,86,70,847 equity shares of Rs.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
Integrated Annual Report.
AWARDS
Your Company's constant endeavour to optimise operational procedures and build greater
efficiencies continue to win recognition and prestigious awards. Here is a glimpse of some
awards received during the year.
• International Safety Awards 2022 by British Safety Council - Balaji Cement
Works;
• Indian Chamber of Commerce Social Impact Award 2022 - Birla White;
• National Award for Excellence in Energy Management 2021, Excellent Energy
Efficient Unit - Power Sector - Kotputli Cement Works;
• National Awards for Excellence in Corporate Social Responsibility - Siddhi
Cement Works;
• 15 of your Company's limestone mines have been awarded a five-star rating for
sustainable mine management, by the Ministry of Mines and Indian Bureau of Mines. This was
awarded for last three years (2017-18, 2018-19 and 2019-20). With a total of 30 such
5-star rating awards, this is the highest number awarded to any company in India for all
major minerals such as bauxite, copper, iron ore, manganese, lead & zinc and
limestone. The ratings are based on the adoption of best practices for exhaustive and
universal implementation of Sustainable Development Framework in mining.
• Leaders Award - Mega Large Business, Process Sector - This is the highest award
in that category by Frost & Sullivan and the Energy and Resources Institute
("TERI") for the year 2021.
The award is in recognition of your Company's efforts to build a sustainable business.
This award recognises the Sustainability Excellence on People, Purpose, Partnership, and
Planet pillars, along with Sustainability Analytics and the Renewable Energy Consumption
initiatives of organisations in India.
• One Gold and two Silver trophies for the ‘Chance Na Lo' campaign at
Exchange4Media's Prime Time Awards. The Gold trophy was conferred under the ‘Best use
of influencers' category. The two Silver trophies were conferred in ‘Best Integrated
TV Campaign' and ‘Best use of TV' to create brand awareness categories.
RESEARCH AND DEVELOPMENT
Your Company's Research and Development (R&D) efforts focus on creating advance
application value for customers by continuously exploring and incorporating innovative
features and functionalities in newer cement and concrete variants. Enhancing customer
satisfaction while increasing sustainability is the guiding principle for your Company's
R&D activities.
Devising solutions around themes of reducing water consumption for cement, improved
durability of concrete, enhanced environmental performance in terms of reduced green-house
emissions and natural resource intensiveness, increasing use of alternative raw materials
in cement making have resulted in significant progress in development of new types of
cement.
Your Company's R&D centre is engaged in closely monitoring and incorporating latest
developments, digital interventions, and advance techniques in the field of
cement-concrete technology in your Company's product offerings. With this objective, your
Company's R&D is committed to provide comprehensive technological support to your
Company's policy of promoting sustainable construction and development.
Customers, Quality and Cost are the governing attributes of all R&D projects for
achieving process optimisation and debottlenecking, raw material conservation and use of
alternative fuels and raw material. Towards this objective, your Company is actively
developing alternatives for minimising usage of mineral gypsum and development of cost
economic grinding additives and new generation chemicals while maintaining targeted
product attributes and functionality.
Your Company's R&D efforts in the ready mix concrete and building products division
have resulted in development of new products, viz.
(i) Ultrahigh performance concrete ("UHPC"): For ductile, thin precast
concrete panels and repair overlays;
(ii) Concrete for 3D Printing: For emerging use of 3D printers in building
construction;
(iii) Antiwashout concrete: For enabling high quality construction during rainy season
and in waterlogged situations;
(iv) Corrosion resistant concrete: For longer life of structure by resisting
reinforcement corrosion;
(v) High strength Grout: For precision filling of Sonic Pipe;
(vi) Low and high Gun Grade Grout: For easier filling of tie rod holes;
(vii) Machine applied Spray Ready-mix Plaster: For faster completion of plastering work
that enables cost and time saving.
As a member of the Global Cement and Concrete Association ("GCCA"), your
Company is also part of the Global Cement and Concrete Research Network, formed by the
GCCA to accelerate global collaboration on cement and concrete innovation, an important
step in taking climate action. The efforts are directed at adopting key trends driving the
low-carbon emission initiatives for the Indian cement sector by actively participating in
the mission with other partners to keep abreast on innovation trends, latest scientific
developments in carbon footprint reduction and identifying potential routes for adopting
newer ideas in its sustainability objective with following key areas of interest:
• carbon capture and usage technologies
• alternative calcination technologies in cement manufacturing process
• carbon use in the construction supply chain
• improved recycling of concrete utilisation
• developing alternative SCMs
Your Company is also closely engaged with the Aditya Birla Science and Technology
Company Private Limited, the corporate research and development centre for the Aditya
Birla Group, for developing technological solutions to model cement process equipment,
devising predictive cement quality modelling, CFD Modelling enhancing equipment
productivity, using engineering simulations and devising special concrete products.
SUSTAINABILITY
Your Company is steering from the traditional sustainability models to an innovative
approach that is consistent with its vision to build a sustainable business. It is also
aligned to global goals such as the Paris agreement, and UN's Sustainable Development
Goals ("SDGs"). Your Company is committed to contributing to the protection of
the environmental and upliftment of society while also balancing various stakeholder
expectations and maintaining its lead ahead of the curve.
Responsible Stewardship: This key pillar facilitates the transition from current
legal standards to international standards like International Finance Corporation
("IFC"), the Organisation for Economic Cooperation and Development
("OECD"), the International Standards Organisation ("ISO"),
Occupational Health and Safety Advisory Services ("OHSAS"), the Global Reporting
Initiative ("GRI"), the Forestry Stewardship Council and others. The Aditya
Birla Group's Sustainable Business Framework of Policies, Technical Standards, and
Guidance Notes help us reach higher standards of performance.
The Group Sustainable Business Framework is currently certified to 14 international
standards. The framework has given success with respect to reduction in carbon footprint,
energy use, water use, and implementing nature- based solution projects.
Your Company's commitment to the pledge of ‘World Business Council for Sustainable
Development's Water and Sanitation and Hygiene' ("WASH") to provide safe
drinking water, sanitation and hygiene across all its operations has resulted in the
construction of over 600 new bathrooms, many of these for women and the differently abled.
This is a significant initiative towards the wellbeing of people and communities.
Through stakeholder engagement, your Company gains further insights into the potential
opportunities and business risks. These are leveraged for enhancing business models,
strategies and risk profiles in order to future-proof them and the value chains in the
medium to long term, which is beneficial to the stakeholders.
Disclosures and ESG: Your Company has adopted the recommendation of Task Force for
Climate related Financial Disclosure ("TCFD") and has integrated its findings
into risk management, business planning and strategy. This year your Company continued
consideration of carbon US$ 10 per tCO2 which has enabled it to consider the
impact on environment of project/capex in its evaluation and decision making.
Your Company's performance in S&P's Dow Jones Sustainability Index
("DJSI") improved by 11 points to 79 as per DJSI results released this year.
This is a 16% increase from the previous year, and your Company now is ranked 7th
globally in the Construction Material category. This disclosure has helped your Company to
benchmark itself against world best companies in sustainability performance and will be
using this to identify opportunities to excel in sustainability performance.
Green Initiatives: Your Company has been consistently adopting new technologies
that are cleaner and greener. There is constant effort across all plants and processes to
become more energy efficient, given your Company's goal to become better stewards of
natural resources.
Climate Change: Your Company has committed to deliver Net Zero Concrete by 2050 or
earlier and will work together with value chain partners to accelerate decarbonisation.
Further, your Company has joined the Science-Based Targets Initiative and got its targets
successfully validated.
Under the SBTi target, your Company aims to achieve 27% reduction in its Scope 1 carbon
intensity by 31st March, 2032 against the carbon emission from March 2017. Your
Company has achieved 9.1% of Scope 1 carbon intensity reduction till FY22 from the base
year of 2017. In energy efficiency, your Company has overachieved the target set by the
Government of India for the first Perform, Achieve and Trade ("PAT") cycle.
Green Energy: As part of RE100 commitment led by the Climate Group in partnership
with CDP, your Company aims to meet 100% of its electricity requirement through renewable
sources by 2050. Your Company also continues to increase the use of renewable energy as
part of its energy mix and has increased the consumption of RE by more than 30% as
compared to previous year.
Circularity: With its thrust on the use of alternative fuels, your Company has been
relentlessly striving to reduce consumption of fossil fuels by substituting these with
wastes from other industries. These efforts have resulted in around 4.6% of your Company's
fuel requirements being met using alternative fuels. Your Company continues to scale its
contribution to the circular economy by utilising 23.6 million tonnes of Alternative Raw
Material ("ARM") as part of its operations. Your Company has reinforced its
commitments and has taken further strides towards being a more sustainable business.
Water Positive: Your Company aims to be 5x water positive by 2024, which means that
it will replenish five times the amount of water it consumes. The volume of water
replenished is ~168% over five-years (from 27.4 million m3 in FY17 to 73.6
million m3 in FY22) as compared to the total volume of water consumed.
Sustainable Products: As part of its continuing initiatives in sustainable growth,
your Company has completed Life Cycle Assessment ("LCA") studies for four
products. Your Company is amongst few companies to conduct the LCA study and has used this
as input to identify hotspots over the value chain to reduce environmental impact. Your
Company has 73 products with GreenPro Certification. This is one of the largest green
product portfolios in the building material industry in India. Your Company has also
conducted Environment Product Declaration ("EPD") studies as part of its product
stewardship pillar and published its EPD documents for the four major categories of
cement.
Other Initiatives: Your Company has embarked on digital transformation during the
year that has the potential to decouple emissions and resource use from economic growth as
well as making its operations safer and more reliable. Your Company launched its
Sustainability
Culture building program-Project Jagruti and under the program on sustainability
awareness sessions, an extensive e-module was launched, reaching more than 5,000
employees.
DIGITALISATION
Your Company's digital solutions keep customers at the core of innovation to achieve a
connected and smart ecosystem. With deep understanding of customers, the teams learn fast,
pivot rapidly, leveraging the best possible technologies to design state-of-the-art
digital solutions. These solutions provide enhanced customer experience by empowering
internal stakeholders and partners, improving efficiencies and driving collaborations
amongst teams.
Your Company further enhanced existing solutions and launched new digital solutions for
customers, partners and employees.
Customer First: We put customers at the centre of our conversations and
continuously innovate to meet their current and evolving needs. Last year, your Company
launched UltraTech Trade Connect, an app that provides unparalleled convenience to its
channel partners. The app has been well received with a high-level adoption and has become
an integral part of daily business operations.
During the year, UltraTech Trade Connect was extended to its Construction Chemicals and
Ready-Mix Concrete division, making it a single interface for channel partners. By
introducing the app, your Company replaced several paper-based processes, helping save
time and improving the speed of operations for customers, partners and internal teams in a
sustainable manner
Our Institutional Customers are engines of India's infrastructure growth. Keeping them
in mind, your Company launched an industry-first digital solution - UltraTech Customer
Connect. This solution helps customers plan their site operations better, through
visibility of supplies and test certificates. The sites can provide electronic proof of
delivery (ePOD), and access to finance documents enabling a seamless payment process.
Empowering Partners: Our driver and transport partners are a crucial link for
superior delivery experience to customers. The digital solution empower transporters for
bidding, bill submission, and faster payments.
To bring driver partners on to the digital ecosystem, your Company launched a
future-ready mobile application, Eye-to-track. This multilingual app is convenient for
drivers and connects them with customers and transporters. The delivery ratings received
from our customers are visible to the drivers and transporters, which helps them to
further improve delivery experience.
Empowering Internal Stakeholders: Our integrated information hub, Logistics Control
Tower ("LCT"), which provides a single version of the truth and end-to-end
visibility to logistics, is also extended on mobile phones ("LCT Lite") to our
front-end sales teams, for driving collaboration to improve logistics efficiencies.
Smart Manufacturing: Your Company has accelerated adoption of digital and industry
4.0 technologies in its operations, encouraged by incremental value delivered through
various initiatives. Your Company is investing in setting up of cloud infrastructure as a
key foundation for smart and connected factories.
Energy Optimisation and Enhanced Productivity:
During the year, your Company focused on scaling up and adopting algorithmic advisory
solutions to improve process stability and efficiency across all energy metrics, mainly
focusing on increasing alternative fuel consumption and improving WHRS power generation
among others. These initiatives were helped and complemented by investments in expert
control systems over the last few years.
Other initiatives around digital mining management and optimisation are also underway
to realise gains through better operational efficiencies.
Reliable Operations and Process stability: Reliability teams are being empowered by
complementing existing preventive procedures with predictive and early alerts generated,
using AI platforms.
Your Company has instituted mechanisms to monitor and sustain process stability using
combination of software and AI solutions. Through combination of domain knowledge and
digital tools, it continues to improve long term process reliability.
Safer Operations: Each employee in your Company is a safety officer. Use of digital
tools allow improving effectiveness and collaboration of efforts on safety. Computer
vision, AR, VR and other sensors are being adopted or scaled to support safety objectives
at the Units.
Empowering Teams: Use of digital solutions for dynamic planning and sourcing of
packaging materials is improving central synergies and efficiency. In addition, your
Company is working on end-to-end fuel sourcing planning and control platform. The
procurement team has adopted ‘procure to pay' digital platform and is exploring spend
analytics solutions to drive efficiency over and above current capabilities.
Your Company's Shared Services Centre viz. UltraTech Knowledge Service Centre
("UKSC"), has a strength of 675 people processing payments, performing
accounting transactions, ensuring controls and managing tax compliance for all of your
Company's operations. UKSC is a digitally-enabled "Centre of Excellence" which
will also serve as a platform to create future finance leaders and a best-in-class
knowledge hub.
UKSC currently processes ~1.7 million vendor invoices annually, and maintains 1.25
million customer/vendor master records. This model helps your Company seamlessly absorb
accounting work for any new cement capacity expansion.
Collaborating with the information technology and other related functions and
leveraging state of the art technology applications, UKSC is currently executing various
digital initiatives for people, process, and compliance which will not only make it more
efficient but also create business value by creating an Analytics CoE for the future. This
digital journey is expected to further accelerate in the coming months, yielding
significant benefits for your Company and its stakeholders.
HUMAN RESOURCES
In FY22, your Company continued to witness pandemic- led challenges which included
mobility restrictions and consequent attendance at work. Units had controlled entry,
regulated movement and assembly to minimise contact and ensure employee safety without
adversely impacting operations. Offices allowed minimal entry with most of the employees
operating from home.
Your Company continued to focus on employee core connect, engagement, learning and
development to build a workplace that is safe engaging and productive. It undertook
digitalisation of the entire talent management processes for regular communication. All
employees were presented with various learning opportunities to enhance career growth.
Learning and Development teams ensured learning of employees and leveraged virtual medium
to organise learning sessions for the employees. Wellness sessions dealing with topics
related to safety, and health helped create awareness among employees and their families
about key areas related to their well-being. Throughout the year, employees remained
connected through planned events such as seminars, learning programs and self-learning
modules.
Your Company's employee strength stood at 21,921 as on 31st March, 2022
(compared to 21,909 in 2021).
SAFETY
To ensure that the organisational objective of "zero harm" gains momentum,
your Company undertook the following initiatives under six major elements: Assurance;
Contractor safety; Safety inspection; Capability building; Digital intervention and
Project safety. This resulted in more than 90% of the manufacturing sites remaining Lost
Time Injury ("LTI") free during the year.
Assurance:
Safety Assurance by using gadget - Virtual third- party safety assessment:
Assurance is one of the key elements of safety management system that helps in
identifying discrepancies within the system and addressing them. While on-site safety
audits were not possible on account of the pandemic, independent virtual safety
assessments were conducted by third-party expert agencies across the manufacturing
locations to assess the degree of implementation vis-a-vis requirements of the various
safety standards. Prior to assessment, a calibration workshop was organised for the
auditors to ensure uniformity and consistency in their approach and to express the
expectation out of the exercise. Post assessment, reports were shared with the Units to
enable them take corrective measures. Unit-wise compliance of audit findings was reviewed
by the OHS Board.
Contractor Safety:
Contractor Connect Initiative (i^ ^^^t #):
To correct "at risk" behaviour of a huge size of continuously changing
contract workforce, the Unit Head and Functional Head (Technical) of one of the integrated
Units established fortnightly virtual connect with contract workmen from other Units, as
per rosters prepared and shared in advance. The agenda was to discover any gaps in safety
processes through regular conversations with contract workers. Weekly observations were
circulated across Units through mailers to encourage safe behaviour at work.
Safety Inspection:
Walk Through Inspection ("WTI"):
To make your Company's workplaces free from unsafe conditions, WTI has been
institutionalised through development of standard inspection checklists for 41 sections
(including RMC) and integrating those with the organisational safety management system
portal for ease of reporting and analysis.
Pratibimb ("Leaders Connect with employees") to review Walk Through
Inspection:
To review and improve effectiveness of Walk-Through Inspections, each Cluster Head
virtually connected with any four employees on a weekly basis. Through this, 16 employees
of 4 Units learned about the focus areas and methods for improvement towards workplace
safety.
Capability building:
Safety Standard Champions Training:
To build a pool of competent in-house resource, employees across Units were trained on
18 safety standards through virtual "Standard Champions training" programme.
This enabled them to further impart training to employees and ensure compliance. 515
employees qualified as standard champions through this program.
Digital intervention:
a. Addressing high-risk operations through augmented process knowledge:
To enhance technical knowledge of employees associated with specific high-risk
operations, e-learning modules have been developed and uploaded in the learning management
platform.
Employees were mandatorily required to complete the e-learning course which helped them
to become fully aware of the processes to prevent any incident.
b. Data analytics:
By integrating mySetu (your Company's safety portal) with Tableau, your Company's
online reporting platform, in-depth analysis of various leading indicators was carried out
and focused action was taken for improvement of identified areas. This resulted in
reducing high-risk unsafe conditions related to machine guarding and acts related to
procedure violation across Units.
c. "Speech to text" for Walk Through Inspection:
To facilitate line team members in making walk through inspection reports, speech to
text feature was added in the process, thereby bringing more ease and comfort. This
resulted in substantial reduction of time required for doing the exercise. While the
manual method took around one hour, with this intervention, WTI takes only 25 minutes.
d. Virtual inspection using gadget ("Realwear"):
Cluster Heads conducted virtual safety inspection of respective Units by using gadgets
(Realwear), identified discrepancies and monitored compliance. This led to reduction in
high-risk unsafe conditions relating to housekeeping, electrical safety, work at height.
Project Safety:
To give greater thrust to safe execution of multiple projects going on simultaneously,
multilayer monitoring was introduced over and above existing safety management systems.
Virtual training on Vishwakarma (project safety guidelines) was imparted to all employees
deployed at various project sites. Safety Experts were deployed at Pali, Dhar and Hirmi
and rigging and scaffolding experts were deployed at project sites to support safe
execution.
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 and Mr. K. C. Jhanwar, Managing Director. Dr. (Mrs.) Pragnya Ram, Group Executive
President, CSR, Legacy, Documentation & Archives is a permanent invitee to the
Committee. Your Company has in place a CSR Policy which is available
at-https://www.ultratechcement.com/ investors/corporate-governance#policies.
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 adjacent villages. During the year, your Company spent Rs.96.40 crores on
CSR activities and set-off Rs.6.60 crores from the excess spent during FY21, aggregating
to Rs.103 crores, resulting in 2% of the average net profits of your Company during 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.
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 for inspection on your Company's website. 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.
During the year ended 31st March, 2022, UNCL entered into an agreement with
Galata Chemicals Holding Gmbh, Germany ("Galata") for restructuring of 3B Binani
Glassfibre SARL ("3B") as per which Galata along with its affiliates has made
necessary payments to UNCL for the purposes of refinancing the loans given to 3B and
acquisition of entire shareholding of UNCL in 3B.
UNCL has, inter alia, transferred its entire shareholding in 3B to Galata as on 31st
March, 2022. Consequent to the transaction, 3B has ceased to be a wholly owned subsidiary
of UNCL.
UCMEIL acquired 29.79% equity share capital of ‘RAK Cement Co. for White Cement
and Construction Materials PSC', ("RAKWCT') a company listed on the Abu Dhabi and
Kuwait stock exchanges for a consideration of US$ 101.10 million. RAKWCT is engaged in the
manufacture and sale of white cement clinker, white cement and construction materials.
This strategic acquisition strengthens your Company's position in the white cement
business in India while also providing access into the GCC and African markets. The white
cement market in India is witnessing robust growth, propelled by demand in white
cement-based putty as well as other emerging new applications in coatings and construction
secters. The acquisition provides opportunity to tap operational synergies between your
Company and RAKWCT, to improve shareholder value apart from exploring cost efficiencies
and expansion of markets.
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.
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 forming part of 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 relating 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 AND SUSTAINABILITY REPORT
The Securities and Exchange Board of India ("SEBI"), in its circular dated 10th
May, 2021, introduced new sustainability related reporting requirements to be reported in
the specific format of Business Responsibility and Sustainability Report
("BRSR"). SEBI, vide the aforesaid circular, has made BRSR mandatory for the top
1,000 listed companies (by market capitalisation) from fiscal 2023, while disclosure is
voluntary for fiscal 2022. Your Company has adopted the BRSR voluntarily for FY22 and also
publishes a comprehensive Sustainability Report annually, based on GRI standards. The
Sustainability Report is available at https://www.ultratechcement.com/
about-us/sustainability/sustainability.
The BRSR forms part of this Integrated Annual Report.
CONTRACT AND ARRANGEMENT WITH RELATED PARTIES
Related party transactions entered into by your Company during the financial year were
completely on an arm's length basis and in the ordinary course of business. There were 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 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#policies.
The details of contracts and arrangements with related parties of your Company for the
financial year ended 31st March, 2022 is provided in Note No. 38 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 been identified by your Company.
Further, the Ukraine war has resulted in geopolitical tension, thereby impacting fuel
prices, which would have an adverse impact on the operations of 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 price fluctuations in the cost of coal,
pet coke, power, and other fuels since these are market driven. The cement industry is
extremely energy intensive, changes in fuel prices can significantly impact production
cost. To derisk, 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 risk relates to any 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 CO2 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
is not only focused on developing sustainable products but also aims 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 and 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 43 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 while effectively engaging 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 employees to
prepare them for future roles and create a talent pipeline.
Pandemic-linked Disruptions in Global Markets
The COVID-19 outbreak caused a huge impact on people's lives, families and communities.
Your Company continues to update and expand its crisis management and business continuity
plans with an emphasis on employees, customers, supply chain, contacts, other stakeholders
and business assets.
Geopolitical tension
The rising fuel prices in the wake of geopolitical tensions have had an adverse impact
on the cost of manufacturing cement owing to increased raw material, fuel and energy
costs. For your Company's business, raw material, fuel and logistics account for a major
share of the manufacturing cost. The anticipated rise in the procurement of raw materials
and high consumption of energy is likely to lead to the need for prioritising local
dependence for raw material and energy fulfilment in order to mitigate the disruption
caused due to such global geopolitical tension.
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. Krishna Kishore Maheshwari (DIN: 00017572) retires by rotation, and being
eligible, offers himself for re-appointment.
Re-appointment of Managing Director
The existing term of Mr. Kailash Chandra Jhanwar (DIN:01743559), Managing Director is
upto 31st December, 2022. The Board at its meeting held on 22nd
July, 2022, based on the recommendation of the NRC Committee and considering the
contributions made by Mr. Jhanwar during his term of appointment, re-appointed Mr. Jhanwar
for a further period of two years with effect from 1st January, 2023.
Resolutions seeking their re-appointment along with a brief profile forms part of the
Notice convening the AGM.
Meetings of the Board
Your Company's Board of Directors met five times during the year to deliberate on
various matters. The meetings were held on 7th May, 2021; 22nd July,
2021; 18th October, 2021; 27th October, 2021 and 17th
January, 2022. Additional details relating to the meetings of the Board of Directors are
provided in the Report on Corporate Governance, which forms part of this Integrated Annual
Report.
Your Company has the following six Board-level Committees, 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
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 this Integrated 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 the provisions of Schedule IV of the Act
and your 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 your Company's Directors
comprises of 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 manner in which formal annual evaluation of the performance of the Board,
its Committees and individual Directors are to be made. Separate evaluation forms are
circulated to individual directors for evaluation of the Board; its Committees,
Independent Directors/Non- Executive Directors/Executive Directors and the Chairman of
your Company. The process broadly comprises:
Board and Committee Evaluation
Evaluation of the Board as a whole and the Committees is done by individual Directors.
These are 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 who is being evaluated, is
submitted to the Chairman of your Company and individual feedback 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 focuses on various aspects of the Board and Committees such as
review, timely information from management and others. Performance of individual Directors
are categorised 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 cohesively. The Committees function well in their
respective areas and the recommendations of the Committees are considered and 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. Executive 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 familiarisation programme for Independent Directors are available at
https://www. ultratechcement.com/about-us/board-of-directors.
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, Whole- time 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 Mr. S.B. Mathur, Mr. Arun Adhikari, Mrs. Alka Bharucha
and Mr. K.K. Maheshwari, majority of whom are 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 this Integrated 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 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#policies.
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 (Penalty of Rs.1,449.51 crores)
and 19th January, 2017 (Penalty of Rs.68.30 crores). Upon the National Company
Law Appellate Tribunal ("NCLAT") disallowing its appeal against the CCI order
dated 31st August, 2016, your Company filed an appeal before Hon'ble Supreme
Court which has, by its order dated 5th October, 2018, granted a stay against
the NCLAT order. Consequently, your Company has deposited an amount of Rs.144.95 crores
equivalent to 10% of the penalty of Rs.1,449.51 crores. Your Company, backed by legal
opinions, believes that it has a good case in both the matters and accordingly no
provision has been made in the accounts.
AUDITORS
Statutory Auditors
Pursuant to 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) and M/s. KKC & Associates LLP, Chartered Accountants (formerly
Khimji Kunverji & Co.), Mumbai (Registration No: 105146W/W100621) have been appointed
as Joint Statutory Auditors of your Company for a second term of five years until the
conclusion of the 25th and 26th AGMs, respectively. In accordance
with the provisions of the Act, the appointment of Statutory Auditors is not required to
be ratified at every AGM.
The Joint Statutory Auditors have however confirmed that they are not disqualified to
continue as Auditors and are eligible to hold office as Auditors of your Company.
The observations made in the Auditor's Report are selfexplanatory 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, 2023,
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
relating to 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, 2022.
The report of the Secretarial Auditor is provided in Annexure VIII, which 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 three complaints of
sexual harassment, of which for one complaint, there was no evidence of harassment, and
two complaints have been resolved.
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 ‘forwardlooking 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, geopolitical tensions, 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.
|
For and on behalf of the Board |
|
Kumar Mangalam Birla |
|
Chairman |
|
(DIN: 00012813) |
| Mumbai, |
|
| 22nd July, 2022 |
|
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