OCL India Limited Annual Report 2014-15 ANNUAL REPORT 2014-15 02 Accelerating CONTENTS Value Creation CORPORATE OVERVIEW Business Overview 02 04 Financial Highlights 12 About OCL India 14 Growth MANAGEMENT REPORTS Management Discussion and 15 06 Analysis Directors’ Report 20 Optimization Corporate Governance 24 Report Annexures to Directors’ 34 Report 08 FINANCIAL STATEMENTS Acceleration Standalone Financial 60 Statements Consolidated Financial 89 10 Statements Sustainability Cautionary Statement Statements made in this report describing industry outlook as well as the Company’s plans, policies and expectations may constitute ‘forward-looking statements’ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied. Corporate Information BOARD OF DIRECTORS STATUTORY AUDITORS Pradip Kumar Khaitan V. Sankar Aiyar & Co. Chairman Chartered Accountants Puneet Yadu Dalmia Managing Director REGISTERED OFFICE Gaurav Dalmia Rajgangpur – 770 017 (Odisha) Gautam Dalmia District Sundargarh D. N. Davar V. P. Sood CORPORATE OFFICE Sudha Pillai 17th Floor, Narain Manzil, Jayesh Doshi 23, Barakhamba Road, Mahendra Singhi New Delhi – 110 001 Whole Time Director & CEO Amandeep REGISTRAR AND SHARE Whole Time Director & CEO TRANSFER AGENT (Cement Division) C B Management Services (P) Limited PRESIDENT P-22, Bondel Road, R. H. Dalmia Kolkata - 700 019 COMPANY SECRETARY Rachna Goria BANKERS/FINANCIAL INSTITUTIONS State Bank of India United Bank of India Punjab National Bank UCO Bank Axis Bank Limited International Finance Corporation Export Import Bank of India Yes Bank Limited HSBC Bank Annual Report 2014-15 Focused and Steady – two distinguishing traits that summarise more than six-decades rich legacy of our Accelerating integrated Cement and Refractory businesses. Staying focused on the developmental needs of our operating Value Creation geography of Eastern India, we have remained committed to offer high quality cement to the housing, infrastructure and commercial sectors. While our cement focus has remained concentrated on Eastern India, we have served the developing and developed economies across the globe with our niche refractory products. 2 Corporate Overview Management Reports Financial Statements Rajgangpur, Odisha We have steadily expanded our capabilities across our captive power plants with generation capacity of product portfolio, manufacturing locations and market 54 MW. In Refractory business also, we have grown from geographies, the pace of which has accelerated over one unit to two units and installed capacities from 1.06 the last 7 years. The first strategic investment in our lakh tonnes to 1.31 lakh tonnes. Company by our parent, Dalmia Bharat Group through While steadily growing, we have also enhanced our its subsidiary Dalmia Cement (Bharat) Limited (DCBL) responsibility quotient. Our drive for environmental in 2008 triggered our expansion phase. Since then, our conservation has resulted in cumulative plantation manufacturing units have grown from one to three, installed of over 200,000 trees, renewable power capacity of capacities from 1.7 MnT to 6.7 MnT, market footprint from 2.5 MW and reduced emission of green house gases. two states to five states and improved market share in Having become a part of country’s leading cement Eastern India with deeper penetration into states through Group, Dalmia Bharat during the year under review, we distinguished positioning. During this expansion phase, are geared up to accelerate our value creation over the we have achieved backward integration by investing in coming years. 3 Annual Report 2014-15 Growth Consistent performance lends predictability to growth. Cement Capacity Expansion (MnT) At OCL India, we steadily strengthen our growth Plant Locations FY08 FY10 FY14 foundations in a holistic manner, with a firm belief that Rajgangpur, Odisha 1.80 4.00 4.00 the impact must be visible on social, environmental Kapilas, Odisha - 1.35 1.35 and economic aspects of progress of our operating geographies. Medinipur, West Bengal - - 1.35 Total 1.80 5.35 6.70 Our third manufacturing unit, which is also our first unit outside Odisha was commissioned in March 2014 at Medinipur, West Bengal. The plant possesses state-of- the-art machinery and technology to produce Portland Slag Cement and Portland Pozolana Cement. The 1.35 MnT plant has taken our cumulative installed capacity to 6.7 MnT besides expanding our reach to West Bengal, a major cement consuming market in Eastern India. Growing our brand portfolio at the beginning of FY15, we launched a premium brand ‘Konark DSP’ – (Dhalai special) high strength cement specially designed for 4 Corporate Overview Management Reports Financial Statements Bengal Cement Works (BCW), Medinipur, W.B. casting. Offering high endurance concrete casting, Net Worth (` in Cr) great compressive strength and zero transit loss through its tamper and moisture proof packaging, the brand generated instant acceptance and appreciation 1,241 across all serving markets - Odisha, Jharkhand, Bihar 1,153 and West Bengal. 1,072 The result of all round capability development was visible in our comparative performance during the year. 903 Against the regional volume growth of 7%, we achieved an impressive volume growth of 20% in cement. During 884 the year under review, we reported a revenue growth of 18% and operating profit growth of 11%. Your Company is committed towards maximising value for stakeholders which is witnessed in the improved Net FY11 FY12 FY13 FY14 FY15 Worth of around 10% CAGR over last five years. 5 Annual Report 2014-15 Optimization Power Consumption/ At OCL India, optimum utilization of resources has always remained our way of life. ‘Maximum output Ton of Cement Produced (Kwh/T) through minimum input’ is the mantra we follow. Holistic growth needs constant enrichment of the internal capabilities. At OCL India, we are staying focused in strengthening our production and logistics 82 81 functions in order to further improve our operational efficiencies. 75 73 The Company undertook various cost reduction and 69 efficiency improvement initiatives during the year. As result of our efforts in energy efficiency, our power consumption/unit reduced from 73 Kwh to 69 Kwh. FY11 FY12 FY13 FY14 FY15 6 Corporate Overview Management Reports Financial Statements Centralised Control Room Another area bearing significant headroom for efficiency Fuel Mix (on calorific value basis) improvement was initiating and enhancing the use of pet coke and other alternate fuel. Q1 FY15 Q2 Y15 Q3 FY15 Q4 FY15 Coal 100% 92% 85% 68% The Company has invested in railway siding at all the locations with one of the railway siding at Medinipur, Petcoke 0% 8% 14% 31% West Bengal is about to get commissioned by end of Alteranate fuel 0% 0% 1% 1% FY16. This will help us to further optimize the logistics Total 100% 100% 100% 100% cost. Aligning with the best practices of the group, we shall drive significant further improvement in our operational efficiencies. The Company is looking at achieving operational synergies with the other units of Dalmia Bharat Group. 7 Annual Report 2014-15 Acceleration With a resolve to enhancing our market share in the Konark DSP Sales as Eastern India, we adopted innovative marketing and percentage of total trade sales (%) product augmentation strategies. Our new plant at Medinipur, West Bengal achieved a quick ramp up in its first year of operation, FY15. 14 The resultant enhanced access to West Bengal market 12 coupled with our newly introduced premium cement under ‘Konark DSP’ brand led to a rapid surge in our 8 market share to 10% during the year from 8% recorded a year ago. 4 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 8 Corporate Overview Management Reports Financial Statements The share of Konark DSP sales to total trade sales has State wise Market Share been on an increasing trend since the launch of the brand. FY15 FY14 Odisha 23.3% 22.1% Going forward, we plan to entrench deeper in the Eastern India markets by further expanding our distribution West Bengal 8.4% 6.1% network and retail touch points. The Company focuses Bihar 6.5% 5.2% on lifting the brand salience through intensive marketing Jharkhand 8.2% 7.6% and promotion campaign. Total 9.9% 8.3% 9 Annual Report 2014-15 Sustainability Cement Clinker Ratio (x) To conduct in a socially and environmentally responsible manner is a key value of OCL India trait. Throughout the history, we have contributed to a healthy and inclusive 2.3 growth of our adjoining habitats. 2.0 2.0 1.9 1.9 The Company has taken step to conserve mineral resources and fossil fuels. In order to minimize the usage of minerals, we increased the usage of slag in Portland Slag Cement from 48% to 56% during the year under review. We are one of the largest users of FY11 FY12 FY13 FY14 FY15 slag, a process waste of the steel industry. Our clinker conversion ratio of 2.3x, one of the highest in the country, means lower consumption of input for each bag of cement produced. 10 Corporate Overview Management Reports Financial Statements Inter Village Dalmia Cup Football Tournament Dr. APJ Abdul Kalam inaugurated ‘OCL Eye Centre’ Cycle Rally ‘World Environment Day 2014’ at Rajgangpur These initiatives apart from preserving minerals have sewage water treatment plant also caters to effluent also helped Company in achieving significant cost discharge of Rajgangpur Municipality. savings. Going forward, the Company intends to Our plant observes ‘No-Vehicle Day’ once in a week. increase the usage of alternate fuel and slag. Promoting the concept of green building, we have used All these initiatives have started to further limit our fly ash concrete blocks in our housing colonies. Also, in carbon footprint, thereby aiding to a greener tomorrow order to tap potential of renewable sources of energy, and a sustainable growth. we have commissioned 2.5 MW solar power plant at Kapilas Cement works. We have made significant contributions to water and energy conservation.