Sri Chakra Cement Ltd

Dear Members,

We have pleasure in presenting this 42nd Annual Report of the Company together with the Audited Statements of Accounts, Management Discussion and Analysis for the year ended 31st March, 2024.

Financial Results:

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Despite multiple challenges, the global economy showed exemplary resilience and reported stronger-than-expected growth during the second half of calendar year 2023, led by the United States and several other emerging and developing economies. India remained an outlier and reported an estimated 7.6% growth in FY 2023-24, driven by robust performance broadly across all economic sectors. The construction sector reported an impressive 10.6% growth, owing to the Indian Government's continuous investment in augmenting the country's infrastructure and heightened project execution activities.

The Government of India continued its focus on infrastructure spending to create a multiplier effect on economic growth and job creation and to stimulate private consumption and investment spending. The Rs. 11.11 lakh crore allocated in the Interim Budget FY 2024-25 will focus on creating three important economic corridors (energy, mineral and cement corridor, port connectivity corridor and high traffic density corridor) to enable multi-modal connectivity under the PM Gati Shakti scheme, expansion of metro railways and Namo Bharat in large cities, expansion and development of new airports and initiation of projects for port connectivity, tourism infrastructure and amenities on Indian islands, among others.

These initiatives are in sync with the Prime Minister's vision of Viksit Bharat by 2047. Furthermore, the Interim Budget FY 2024-25 has also targeted building two crore houses under the PM Awas Yojana Gramin (rural housing scheme) in the next five years and proposed a housing scheme for the country's vast middle-class population.

With inflation moderating globally and better-than expected resilience in some major and developing economies, the global economy will likely maintain its growth rate at 3.1% in 2024 before increasing moderately in 2025 to 3.2%. The Indian economy will likely grow by over 7% during FY 2024-25. Domestic economic activity will likely remain robust, underpinned by vigorous consumer and government spending, thriving services sector and increased manufacturing activities. The long-term growth drivers of the economy remain unchanged – a growing base of middle-class driving consumption, booming digital infrastructure driving formalisation of the economy and favourable government policies attracting global investments into the country

Opportunity and Threats:

The cement industry, known for its capital, energy, and raw material intensity, grapples with significant challenges in ensuring fuel and raw material security. Operating expenses hinge on energy and raw material costs, necessitating an uninterrupted supply for business continuity.

The Company is conscious of the risks posed by climate change – physical risks as well as transitional risks. The cement industry predominantly relies on natural resources such as limestone, coal, and minerals. Ensuring an uninterrupted flow of these essential materials, while simultaneously maintaining optimal cost and quality standards, is imperative for sustaining seamless business operations.

Our cement plant being strategically located with high quality limestone mines very near to the plant can cater to the neighbouring States of Tamil Nadu, Karnataka, Goa and Kerala where the realizations are better. The management is putting its best efforts to revive the industry to normal levels.

The Indian cement industry's ever-evolving diverse landscape poses inherent risks to the Company's market position, heightened by ongoing capacity additions and consolidations. Additionally Regulatory changes, driven by shifts in climate and environmental concerns, are occurring rapidly worldwide. Failure to comply with these new standards poses a high degree of complexity, potentially impacting the reputation and financial standing of the Company.

State Of Company's Affairs:

During the year under review, the Company's profitability is impacted due to heavy competition created by the major players in the industry by way of addition of huge capacities in and around the plant area. However, in order to meet such competition, your company has initiated efforts to reduce the cost of production on account of power and fuel as a part of which the Company has already setup captive solar power generation unit at Srikalahasti with a total installed capacity of 5 MW for with an investment of about Rs 30 Crores

Considering geopolitical headwinds, high interest rates and volatile commodity prices, the economic performance is considered commendable. Today, India is reckoned as one of the best performing economies reflecting its bright economic stature in the global economic landscape.

As the country prepares for rapid economic growth and urbanisation, there is a rising demand for robust infrastructure and contemporary living spaces. Upliftment of Tier-II cities and rural areas is also fuelling the need for housing, transportation networks, healthcare facilities, and educational institutions. Additionally, the surge in commercial and industrial activities is boosting demand for commercial spaces. With this positive outlook, the Indian cement sector anticipates demand increasing by 8-9% in FY 2024-25. It also foresees 150- 160 MTPA in capacity additions over the next five years, utilising organic and inorganic expansion strategies.

Cement industry continued with its growth momentum this year as well. The solid growth is attributed mainly to the tailwinds observed in demand from infrastructure and rural housing segments.

Sri Chakra Cement Limited, is among India's growing leading cement companies, renowned for its hassle-free, homebuilding solutions. Unique products tailor-made for Indian climatic conditions, sustainable operations and initiatives that advance the Company's philosophy of contributing to the larger good of the society, have made it the trusted cement brand in India.

The Indian cement industry, the second-largest producer globally, stands out for its energy efficiency, resource conservation, social responsibility, and environmental consciousness. Embracing green, clean, and sustainable practices has been a longstanding commitment of the cement industry.

By integrating sustainability into operational and growth planning, we have continued to reduce its carbon footprint by reducing thermal and electrical energy intensity, implementing Solar Power Systems at the plants, and increasing the use and capacity of generating renewable energy. We continue to play a pivotal role in building a greener and more sustainable future.

Board of directors, Key managerial personnel and changes during the year:

The Board is duly constituted and balanced as required under the Companies Act, 2013 and the Listing Regulations/Agreement read with the policy of the Board of Directors appointment and remuneration in terms of the provisions of Section 134(3)(e), read with sub-section (3) of Section 178 of the Companies Act, 2013.

Sri K P Patnaik ceased to be director on demise w.e.f 28/05/2023. The Board places on record its appreciation for the contribution made to the Board during his tenure.

Sri N Gopal was re-appointed as Director (Independent Category) for second term of five years at the previous Annual general Meeting.

Pursuant to section 134(3) (c) of the Companies Act, 2013, the Directors confirm that:

- In the preparation of Annual Accounts, the applicable accounting standards had been followed and there are no material departures from the same.

- The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give true and Fairview of the state of affairs of the company at the end of the financial year and the profit and loss of the company for that period.

- Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

- Annual accounts were prepared on a going concern basis., and

- Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

- The proper system was devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DECLARATION BY INDEPENDENT DIRECTORS:

The company has received necessary declaration from all independent Directors under section 149(7) of the Companies Act, 2013 that they meet the criteria of Independence laid down in section 149(6) of the Companies Act, 2013.

BOARD MEETINGS:

The Board met four times during the year under review and the particulars of meeting held and attended by each Director are detailed in the Corporate Governance Report.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The company's policy lays down the criteria for determining qualifications, positive attributes, Independence of a director and other matter as provided under sub-section (s) of section 178 of the Companies Act, 2013.

The current policy is to have an appropriate mix of executive and independent directors to maintain the independence of the Board in terms of the provisions of section 178. The Board consists of two executive directors and one non-executive director and four independent Directors. We affirm that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the company.

AUDIT COMMITTEE:

Pursuant to the provisions of section 177 of the Companies Act, 2013 the company board constituted the audit committee with the following directors.

- Sri P Ramamoorthy, Non-Executive Independent Director as Chairman.

- Sri N Gopal, Non-Executive Independent Director

- Smt. K. V. Naga Lalitha, Non-Executive Director.

- Statutory Auditors: At the 41st Annual General Meeting held on 23rd day of August 2023; M/s Satyanarayana & Co., Chartered Accountants, Secunderabad, were appointed as Statutory Auditors of the Company to hold office till the conclusion of 46th Annual General Meeting of the Company. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of section 141 of the Companies Act, 2013.

- Cost Auditors: M/s Naval & Associates, Cost Accountants, Hyderabad, are the Cost Auditors appointed by the company Board for auditing the cost accounts of the Company for the year ended 2023-2024.

- Secretarial Auditors: M/s. Puttaparthi Jagannatham & Co., Company Secretaries, Hyderabad are the Secretarial Auditors appointed by the board of directors of the Company for the FY 2023-24.

- Internal Auditors: M/s C Ramachandram & Co, Chartered Accountants, Hyderabad, were appointed to conduct the internal Audit and review of internal financial controls on financial statements and other matters for better performance of the Company which is being implemented by your Company from time to time.

Disclosure of particulars of employees and related matters:

The information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managing Personnel) Rules, 2014 and Companies (Particulars of Employees) Rules, 1975, in respect of employees of the Company and Director is given in a separate annexure to this Report. Particulars of employees as per the Rule-5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are not applicable to the company.

Statutory auditors comment in the independent auditors' report and reply:

With regard to the observations of the Statutory Auditors regarding the confirmations from some of the parties, it is hereby clarified that the company has obtained confirmations from major accounts and some minor accounts, the Board felt that it was required as there is no impact on the accounts.

- Board Committees:

The details of composition, terms of Reference, meetings and attendance particulars of various committees of Board such as Audit Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders Relationship Committee, Share Transfer Committee are provided in the Corporate Governance Report vide annexure to this Directors report. The intervening gap between the meetings of the Committees are within the prescribed period under the Companies Act, 2013 and the listing regulations. The Committees are constituted with optimum balance of independent, executive/non-executive directors in line with the Companies Act, 2013 and the Listing Regulations, 2015.

- Loans, Guarantees or Investments:

Details of Loans, Guarantees and investments covered under the provisions of section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

- Contracts Or Arrangements With Related Parties:

All related party transactions that were entered into during the financial year 2023-24 were on an arms-length basis and in the ordinary course of business and were in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Regulations. There were no material related party contracts or arrangements or transactions made by the company. The Company has adopted a related party transactions policy duly approved by the Board, Details of the related party disclosures (transactions) are provided in the accompanying financial statements. The disclosure in form AOC-2 is not applicable.

- Vigil Mechanism/ Whistle Blower Policy:

The Company has adopted a whistle blower policy ad has established a clear vigil mechanism and directors to report concerns unethical behaviour. The policy provides for adequate safeguards against victimisation of employees who avail of the mechanism and also provides for direct access to the chairman of the audit committee. The whistle blower policy may be accessed on the website of the company.

- Prevention of Sexual Harassment at Workplace:

The Company has adopted a policy on prevention, prohibition and redressal of sexual harassment at the work place in line with the provisions of the "The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 and Rules made thereunder, your Company has constituted Internal Complaints Committee (ICC). The Committee has four members and is chaired by a senior women member of the organisation. It is stated that there are no such complaints received by the committee/company during the year under review.

- Material Changes after close of the financial year:

There have been no material changes and commitments which have occurred after the close of the year till date of this report, effecting the financial position of the company.

- Segment-wise or product-wise performance:

The Company is mainly engaged in the business of manufacturer of OPC 53/ 43 and PPC grade cement and captive solar power generation. During the year under review, the company has Single Reportable Segment i.e., Cement.

- Risk and concerns:

The risks and concerns which are applicable to all industries and specially to cement industry can be said to be prevalent in the case of your company as well. Few of the major risks are given below. Periodical increases in the cost of inputs leading to impact on margins

- Uncertainty in coal supplies and increases in the prices.

- Failure or deficiency in the monsoon which may lead to reduction/ loss of revenue due to reduction in demand for cement

- Changes in Government policy impact the costs, demand and supply.

- The drying up of Government contracts through irrigation, infrastructure and housing programs was major reason for hitting the Industry

- In addition to high cost of power and coal, high freight costs, inadequate infrastructure, non-availability of wagons and poor quality of coal and heavy taxes/royalty levies are the other concerns.

- Internal control systems and their adequacy:

The internal control system includes the policies, processes, tasks, behaviours and other aspects of the Company, which when combined, facilitate effective and efficient operation, quality of internal and external reporting, compliance with applicable laws and regulations.

The Company has put in place adequate internal control systems commensurate with its size of operations. Company's internal control systems include policies and procedures, IT systems, delegation of authority, segregation of duties, internal audit and review framework, etc. The Company has laid down internal financial controls and systems with regard to adherence to Company's policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial information. The framework is in compliance with the requirements of the Companies Act, 2013 and best industry practices. The Company periodically assesses design as well as operational effectiveness of its internal controls across multiple functions and locations through extensive internal audit exercises.

For carrying out internal audit, Company has an experienced in-house team manned by professionals who collectively possess the necessary skills, technical knowledge, objectivity and understanding of the Company, industries and markets in which it operates. Further, to improve and strengthen processes, the Company has appointed professional external agency for conducting internal audit/ review of all the operational locations of the Company. Such external agencies bring in their domain expertise for optimization and improvement of various business processes which can then be replicated throughout the organization.

Based on the assessment and observations of internal audit, process owners undertake corrective action in their respective areas of operations, and thereby strengthen the processes and controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board on a periodical basis. The Audit Committee evaluates the adequacy and effectiveness of internal financial control systems periodically.

- Human resources development and industrial relations:

The main focus of the company is to attract, develop and retain talented employees in order to achieve the business objectives. The company has made efforts in the field of training and development, congenial work environment, providing challenging work opportunities etc. The Company has framed HR practices in order to strengthen and building people talent for achieving the business objectives. Initiatives to develop leadership lines as well as enhance technical and functional capability with special focus on nurturing young talent are taken. Young managers are groomed by providing higher responsibilities, Focus remains on gaining cross functional knowledge to enable meaningful participation of employees all across of the company in innovation and process improvement. With the company entering in next phase of growth, the nurtured talent pool will enable smooth transition to new growth trajectory. During the year employee relations remained cordial. This has enabled company to build healthy relationship and resolve issues through dialogue and discussions.

Annexures to the Directors' Report

Corporate Social Responsibility: The Company has constituted a Board level Committee "Corporate Social Responsibility Committee" in terms of section 135 and Schedule VII of the Companies Act, 2013 read with the provisions of the listing agreement/ regulations. There were no CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 as CSR was not applicable during the FY 2023-24, however the Company has spent Rs. 8 Lakhs towards the same in good corporate governance. The annual report w.r.t CSR is enclosed as Annexure-1

Conservation of energy, technology absorption, foreign exchange earnings and outgo: The information relating to the conservation of energy, technology absorption, foreign exchange earnings/outgo, as required under the Companies Act, 2013 and the rules made there under is set out in Annexure 2 which forms part of this Annual Report.

Secretarial Audit Report: The Secretarial Audit Report issued by M/s. Puttaparthi Jagannatham & Co., Company Secretaries, Hyderabad for the year 2023-24 is attached to this Directors' Report vide Annexure-3.

The Annual Return of the company has been placed at the website of the company and can be accessed at http://srichakracement.com

Your Company has taken adequate steps to adhere to all the stipulations laid down in 27 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015. A report on the Corporate Governance is included as a part of this report. Certificate from the Secretarial Auditors of the company M/s. Puttaparthi Jagannatham & co, Company Secretaries, confirming the compliance with the conditions of Corporate Governance as stipulated under above regulations is included as a part of this report vide ANNEXURE-4.

- Risk Management Policy:

The Company has been addressing various risks impacting the company and the policy of the company on risk management is set out in the Management Discussion and Analysis which forms part of this report.

- Depository System

Your Company has connectivity with both the Depositories i.e. National Securities Depository Limited (NSDL) and Central Depository Service (India) Limited (CDSL). As per the SEBI (Listing Obligations & Disclosure Requirements) (Fourth Amendment) Regulations, 2018, vide Gazette notification dated 8th June, 2018 & 30th November, 2018 mandated that Share transfer shall be mandatorily carried out in dematerialized form only w.e.f. from 1st April, 2019. In view of the numerous advantages offered by the Depository System, members are requested to avail the facility of Dematerialization of the Company's shares on either of the Depositories mentioned as aforesaid.

- Board Evaluation:

The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The evaluation process has been explained in the Corporate Governance report section in this Annual Report. The Board approved the evaluation results as collated by the Nomination and Remuneration Committee. None of the Independent Directors are due for re-appointment.

- Details Of Difference Between Amount Of The Valuation Done At The Time Of One-Time Settlement And The Valuation Done While Taking Loan From The Banks Or Financial Institutions Along With The Reasons Thereof:

The aforementioned clause is not applicable to the Company during the financial year ended as on 31st March, 2024 as the Company has not taken any loan from the banks or financial institutions under the above mentioned scheme and accordingly there is no instance of one time settlement.

Your Directors state that no disclosure or reporting is required in respect of the following items as they are not apprised there were no transactions on these items during the year under review.

- Details relating to deposits covered under chapter 5 of the Act.

- No significant or material orders were passed by the Regulators or courts or tribunal which impact two going concern status and the company's operations in future.

- There are no such instances of frauds reported by Auditors under Section 143(12) and hence the reporting clause is not applicable to the Company.

- No cases were filed pursuant to the sexual harassment of women at workplace (prevention, prohibition and Redressal) Act, 2013 as per the internal complaints committee (ICC).

- No Dividend was recommended by the Board.

- Your Directors do not propose to carry any amount to General Reserve Account.

- No Issue of equity shares with differential rights as to Dividend, voting or otherwise.

- No Issue of shares to employees of the company under any revenue.

- Corporate social responsibility policy not applicable for the year under report.

- The Company has complied with all the applicable Secretarial Standards issued by The Institute of Company Secretaries of India and notified by the Central Government

- The Company has maintained cost records under Section 148(1) of the Companies Act, 2013

- The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, is not applicable to your Company for the financial year ending March 31, 2024

- There is no change in the nature of the business of the company during the year under report.

- There were no such companies which have come or ceased to be the company's subsidiaries, joint ventures or associate companies during the year.

- There were no significant material events occurred between the closure of the books of accounts for the year 2023-24 and the date of this report.

- The company has adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2024 based on the internal controls over financial reporting.

- During the period under review, there was no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016

- Disclosure of Remuneration:

A Statement as required under section 197 of Companies Act, 2013 and Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed as Annexure 4.

- Cautionary Statement:

Statements made in this report describing the Company's projections, estimates, expectations or predictions may be ‘forward looking predictions within the meaning of applicable securities laws and regulations. Actual results may differ from such estimates, projections, etc. whether expressed or implied. Factors which would make a significant difference to the Company's operations include availability of quality raw materials, market prices in the domestic and overseas markets, changes in Govt. Regulations and tax laws, economic conditions affecting demand/ supplies and other environmental factors over which the Company does not have any control.

- Acknowledgement:

Your directors take this opportunity to express their sincere appreciation for the support and co-operation received from the various departments of the Government, Bankers, Suppliers, Customers and Shareholders.

The Directors also wish to place on record their appreciation for the committed services of the company's Employees.