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Dalmia Bharat Ltd.

BSE: 542216 Sector: Industrials
NSE: DALBHARAT ISIN Code: INE00R701025
BSE 00:00 | 24 Apr Dalmia Bharat Ltd
NSE 05:30 | 01 Jan Dalmia Bharat Ltd
OPEN 526.55
PREVIOUS CLOSE 532.40
VOLUME 1248
52-Week high 1219.90
52-Week low 406.00
P/E 97.81
Mkt Cap.(Rs cr) 10,078
Buy Price 521.00
Buy Qty 10.00
Sell Price 522.30
Sell Qty 200.00
OPEN 526.55
CLOSE 532.40
VOLUME 1248
52-Week high 1219.90
52-Week low 406.00
P/E 97.81
Mkt Cap.(Rs cr) 10,078
Buy Price 521.00
Buy Qty 10.00
Sell Price 522.30
Sell Qty 200.00

Dalmia Bharat Ltd. (DALBHARAT) - Chairman Speech


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Company chairman speech

The year FY19 represented a watershed year wherein we successfullycompleted the restructuring and amalgamation of our multiple subsidiaries into one listedentity - Dalmia Bharat Limited - to present our stakeholders with a structure thatenhances simplicity and clarity. Having a single listed entity will strengthen ourprincipal objective of constantly enhancing stakeholder value.

In 2004 when we embarked on a journey to disrupt our steadymulti-decade growth journey with an aspiration to emerge as one of the largest cementgroups in India we recognised that we would need to completely transform ourselveskeeping our core values and culture as the nucleus.

A vision as challenging as this needed us to passionately work towardsour stated objective with a precision in execution to transform ourselves into a pan-Indiacompany possessing scale; from a staid brand recall we would need to enhance our brandexcitement; from a simple manufacturing positioning we needed to evolve to being seen ascommunity catalysts; from being perceived as a company delivering against regionalstandards we were required to evolve to global benchmarks; from being seen as a mere

cement manufacturer to be recognised as a responsible corporatecitizen.

Our foundation during this phase has been our enduring sense of values:a respect for human dignity engagement in nation-building addressing the larger goodhigh ethical standard complete regulatory compliance and commitment to enhancestakeholder value.

Dalmia Bharat increased its manufacturing capacity from 1.2 MTPA in2004 to 26.5 MTPA in 2019 and simultaneously attained a leadership position inprofitability per tonne over the last decade. The Company achieved one of the fastestgrowth rates in the Indian cement sector.

We will endeavour to sustain this growth appetite on the back of anintegrated organisational framework that is simplified more transparent and invested withstronger processes and controls. We

believe that this complement will continue to enhance value for ouremployees vendors customers community and environment.

We have erred a few times but have accepted learnt and improvised toemerge stronger. The recent instance of fraud related to the Company's mutual fund unitswas unexpected and unfortunate as despite reasonable internal controls and diligence athird party outsider perpetrated the fraud through a blatant forgery of base documents.While a responsible investigation is presently in progress we reassure our stakeholdersthat there was no malafide intentions nor internal employee involvement. As a responsibleorganisation we are extensively reviewing our systems with the objective to strengthenour operating environment and reinforce internal controls.

Operational review

On the business front there was a steep escalation across costparameters that impacted annual profitability for the cement industry in 2018-19. Welimited the impact of this slowdown through proactive initiatives like use of multiplefuel pioneering the Portland Composite Cement category and strengthening cost management.The Company's commitment to achieve sectoral cost leadership continues to be driven by anongoing process reassessment deeper employee empowerment investments in technology aswell as strengthening vendor and customer relationships.

The 10% annual volume growth reported by the Company in 2018-19 waswell in line with the broad industry growth. Net sales rose 11% to Rs.9484 Cr; EBITDA wasRs.1942 Cr. As a company we continue to seek opportunities and undertake capacityexpansions for enhancing market share and diversifying locations. With that objective wehad bid for Binani Cement's assets but with the IBC law still evolving and our insistenceon maintaining financial discipline we were unable to acquire the asset despite higherinitial bids.

Dalmia Bharat's acquisition strategy has been integral to itsaccelerated growth aspiration and nearly 57% of its present installed capacity wasacquired inorganically over the last decade. We are pleased to communicate

that the hearing of Murli Industries at NCLT with regards to theresolution plan is concluded and the final order is awaited. This acquisition willstrengthen our overall competitiveness: it will extend our presence to a state where weare not fully present; widen our presence; empower us to enter new markets and is a stepfurther towards a pan- India presence. In view of the fact that the Murli Industriesfacilities had been shut for the last few years we are estimating that following initialcapital expenditure we should be able to commence commercial production of the acquiredfacility within one year of the actual acquisition.

The Company's planned capacity expansion in East India is well onschedule.

We expect to commission the clinker line and almost half the grindingcapacity by March 2020 with the entire capacity on stream by March 2021. We believe thatwith an enhanced capacity we will consolidate our position deeper in the eastern marketpotentially leading to leadership across the foreseeable future.

This capacity growth will ensure our participation in addressing thecountry's growing cement requirement. Even as we grew our manufacturing capacities at aCAGR of 15% over the last decade we intend to add almost 40% to our existing capacityover the next two years. As a result of disciplined capital allocation the cost ofcapacity addition

is below the industry average. We intend to fund this capitalexpenditure primarily through internal accruals and minimal borrowings.

At Dalmia Bharat we believe that sustainability across market cyclesis derived from a position of disciplined leverage. In line with this conviction andstakeholder feedback we focused on debt moderation and paid down more debt than wasscheduled in the last couple of years a commitment we would sustain. We are optimisticthat our disciplined resource management will continue to provide us with a steady streamof surplus cash flows.

Technology

As a future-focused company Dalmia Bharat has progressively investedin technology on a continuous basis. Technology has continued to play a key role acrossthe breadth of our operations. At our Company a three-pronged technology approach isdirected towards improving efficiency moderating costs and creating a better experiencefor our dealers and customers. We recognise that in an increasingly digitising world weneed to replace the mechanical with the digital.

Environment

Having a committed and consistent focus on the environment DalmiaBharat has evolved as a powerful and distinct brand that commands respect as anenvironmentally responsible company. The sustainability of our business model is definedby our commitment to challenge the status quo every single day with the objective ofretaining our leadership as a cement company with the lowest global carbon footprint.

During the year under review we became the first Indian cement companyto commit to science based targets. We made a commitment during Global Climate ActionSummit to emerge as a carbonnegative cement group by 2040 with an impetus on carboncapture and utilisation.

We continue to invest in community building covering education skilldevelopment job creation agriculture health & sanitation and clean energy. Webecame the first global cement company to have our CSR processes assured by BSI forfollowing the ISO 26000 guidance.

Knowledge capital

At Dalmia Bharat our business sustainability has been reinforcedthrough the passion of our people. Their commitment skill knowledge and loyaltyrepresent the building blocks of our Company. We value their contributions and are workingon a measurable plan to grow their intellectual capital comprising increased empowermenttraining career growth leadership capabilities and interest alignment with theorganisation.

We embark on the foreseeable future with increased optimism. In FY20we expect that India's GDP growth will be catalysed by increased government investments ininfrastructure and affordable housing. We believe that the country's cement industry is atan inflection point marked by incremental demand exceeding incremental supply after morethan a decade.

In this environment we also foresee more industry consolidationfollowing the Reserve Bank of India's focus of non-performing assets and strict IBCenforcement. We are well capitalised and structurally equipped today to take advantage ofall opportunities and address any challenges in our journey.

I wish to express my gratitude to all our stakeholders who have reposedtheir confidence in our management. We remain committed to enhance value for all ourstakeholders in a sustainable way.

Sincerely

Gautam Dalmia and Puneet Yadu Dalmia

Managing Director(s)

Dalmia Bharat Limited