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UltraTech Cement Ltd.

BSE: 532538 Sector: Industrials
BSE 00:00 | 24 Apr 2020 UltraTech Cement Ltd
NSE 05:30 | 01 Jan 1970 UltraTech Cement Ltd

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OPEN 3435.00
VOLUME 13938
52-Week high 4903.90
52-Week low 2913.15
P/E 26.76
Mkt Cap.(Rs cr) 95,436
Buy Price 3306.50
Buy Qty 70.00
Sell Price 3343.00
Sell Qty 1.00
OPEN 3435.00
CLOSE 3445.70
VOLUME 13938
52-Week high 4903.90
52-Week low 2913.15
P/E 26.76
Mkt Cap.(Rs cr) 95,436
Buy Price 3306.50
Buy Qty 70.00
Sell Price 3343.00
Sell Qty 1.00

UltraTech Cement Ltd. (ULTRACEMCO) - Director Report

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Company director report

Dear Shareholders

Your Directors present the Nineteenth Annual Report together with the Audited Accountsof your Company for the year ended 31st March 2019.


The global economy is estimated to grow at 3.3% in 2019 according to the InternationalMonetary Fund ("IMF"). This comes on the back of two years of ‘cyclicalupswing'. However as the IMF points out this pace of expansion could be at risk onaccount of an increase in trade tensions abrupt tightening of financial conditions andpolicy uncertainty across economies. Emerging economies though remain on a relativelystrong growth trajectory driven largely by robust domestic demand conditions.

The Indian economic growth forecast is estimated ~7.3% in FY20 as per IMF benefitingfrom moderating oil prices and expected fiscal push. India is less exposed to a slowdownin global manufacturing trade growth than other major Asian economies and emerging marketsand is poised to grow at a relatively stable pace. During FY19 (up to February 2019)merchandise exports from India have increased 8.85% year-on-year to US$ 298.47 billionwhile services exports have grown 8.54% year-on-year to US$ 185.51 billion. Net employmentgeneration in the country reached a 17-month high in January 2019. With a stableGovernment at the Centre the country should continue on its path of economic reformsleading to an increase in employment opportunities and consumption. The Indian cementindustry witnessed another good year of favorable demand scenario. During FY19 industryachieved double digit volume growth last witnessed in FY10. Commendable to note is thevolume growth of ~13% achieved this year in continuation of ~ 9% growth in FY18.

Demand from infrastructure is witnessing growth at a fast pace backed by Government'sthrust on infrastructure development viz. construction of roads metro rail projectsairports renovation irrigation projects etc.

Besides there has been a significant improvement in low-cost houses constructed underthe Pradhan Mantri Awas Yozana ("PMAY") in rural areas. The government hassuccessfully achieved its target of constructing 10 million houses in Phase I and hasaccelerated the target for Phase II to 18.5 million houses by FY22. Similarly theaffordable housing segment in the urban areas also gained momentum in the last year. Onthe individual home building ("IHB") front the rural housing market has showndemand traction in major markets; however Tier 2 and Tier 3 urban markets are yet topick-up. In Tier 1 or metro cities with the stabilisation of RERA urban demand haswitnessed some improvement. With healthy volume off-take and comparatively lesser newcapacity addition of 12 MTPA during FY19 capacity utilisation for the industry improvedto 71% about 5% higher over the previous year. This is expected to improve further onlikely sustained demand growth with incremental new supplies at a slower pace vis--visincrement demand.

It is against this background that we share your Company's performance during FY19.


Production and Capacity Utilisation (grey cement):

Particulars FY19 FY18 % change
Installed capacity (MTPA) 88.50 85.00 4
Production (MMT) 67.20 57.23 17
Capacity Utilisation 76% 71% 5

MTPA – Million Metric Tonnes Per Annum. MMT– Million Metric Tonnes.

During the year your Company commissioned a greenfield cement capacity of 3.50 MTPA atManavar District Dhar Madhya Pradesh taking its total capacity to 88.50 MTPA. Besidesthis your Company also completed the acquisition of Binani Cement Limited("BCL") renamed as UltraTech Nathdwara Cement Limited ("UNCL")having an installed capacity of 6.25

MTPA in India. With this the total cement capacity for your Company has enhanced to94.75 MTPA in India and along with its other subsidiary Star Cement the total capacity ofyour company stands at 98.75 MTPA. UNCL has operations in UAE and China with a totalcapacity of 5.2 MTPA. These companies are held for disposal and hence not counted as partof your Company's total capacity.

Cement production jumped 17% from 57.23 million tonnes in the previous year to 67.20million tonnes. The increase in production is on account of healthy cement demand growthand benefit from increased utilisation of the capacities acquired in FY18 whereutilisation improved from 53% in the previous year to 72%. Capacity utilisation alsoimproved 5% on expanded capacity base. With the successful integration of the acquisitioncompleted in June 2017 and subsequent improvements carried out these plants are nowoperating in line with the existing plants of your Company. A planned shutdown wasundertaken at one of the acquired plants in Madhya Pradesh for cost improvements thebenefits of which will be fully achieved in Q1FY20. Having achieved a cash break evenalready the acquisition is now on course to achieve a PBT break even. The acquisition isgenerating incremental earnings as planned which are growing month on month. As the nextphase of improvement it is now proposed to invest in Waste Heat Recovery Systems("WHRS").

Figures in MMT
Particulars FY19 FY18 % Change
Domestic Sales 69.52 57.75 20
Exports & Others 3.00 2.90 3
Total Sales Volume 72.52 60.65 20

Domestic sales volume registered a 20% growth which is higher as compared to likelyindustry growth of ~ 13%. Some of the key drivers are: (i) F ull year benefit of acquiredcapacity coupled with increased utilisation level; (ii) Incr eased rural penetration withhigher contribution from UltraTech Building Solutions ("UBS"). There arealtogether 1915 such outlets with 300 being added during FY19; (iii) higher demand frominstitutional segment where UltraTech is the most preferred brand; and (iv) Additionalsales volume upon acquisition of UNCL w.e.f. 20th November 2018.


( Rs. in crores)



FY19 FY18 FY19 FY18
Net Turnover 35105 28930 36775 30541
Domestic 34603 28455 34626 28455
Exports 502 475 2149 2086
Other Income 1070 1027 1042 1026
Total Expenditure 29183 23475 30591 24833
Profit before Interest Depreciation and Tax (PBIDT) 6992 6483 7226 6734
Less: Depreciation 2010 1764 2140 1848
Profit before Interest and Tax (PBIT) 4982 4719 5086 4885
Interest 1419 1191 1548 1237
Profit before Impairment and Tax Expenses / share in profit of Associates 3562 3528 3538 3648
Stamp duty on acquisition of assets - (226) - (226)
Impairment of assets - - - (75)
Impairment on deconsolidation of subsidiary - - - (46)
Profit before Tax Expenses 3562 3302 3538 3301
Tax Expenses 1106 1071 1106 1077
Profit after tax 2456 2231 2432 2224
Profit attributable to Non-controlling Interest - - (3) 2
Profit attributable to Owner of the parent 2456 2231 2435 2222

Net Turnover:

Your Company's Net Turnover at Rs. 35105 crores is higher over the previous yeardriven by higher sales volume and improvement in cement prices.

Other Income:

Other income is higher compared to the previous year due to an increase in StateIndustrial incentives benefit consequent to the commissioning of capacity in MadhyaPradesh and full year benefits from the acquired capacities.

Operating Profit (PBIDT) and Margin:

PBIDT for the year at Rs. 6992 crores is higher by 8% over the previous year.Operating margin declined marginally due to increase in operating costs.

Cost Highlights:

(i) Energy Cost

Overall energy cost rose 14% Rs. from 938/t to ` 1068/t attributable to an increasein pet coke and coal prices. Imported pet coke prices rose 6% from US$ 96/t to US$ 102/tcoupled with the impact of currency depreciation of 8% over previous year and full yearimpact of hike in import duty on pet coke from 2.5% to 10% w.e.f. December 2017.Consequently effective landed cost of imported pet coke in energy terms increased morethan 20% over the previous year. Compared to imported pet coke the average price increasefor domestic pet coke was higher at 27% which forms over 60% of total power consumptionduring FY19.

To curb the impact of the increase in fuel your Company continuously works onefficiency improvement. Key initiatives towards these are:

- Focus on increasing usage of renewable (WHRS Solar and Wind power) the total shareof which increased to 8.5% which was 100 bps higher over the previous year. During theyear your Company commissioned 26 MW of WHRS capacity which is under ramp-up and thefull benefit of which will be realised from FY20 onwards. Your Company is further settingup 46 MW of WHRS capacity expected to be commissioned in FY21. This would cater to ~ 12%of your Company's current total power requirement;

- Entering into agreements with third parties for procuring solar power under‘Group captive scheme' which are under implementation. The overall capacity of suchtie-ups will increase from 62.5 MW to over 500 MW by end of FY21 and cater to ~ 10% of thetotal power requirement;

- Use of low cost fuels viz. industrial waste increased from 3% in the previous year to3.3%. Around 3.48 LMT industrial waste has been used in the kilns;

- Power consumption improvement by 100 bps;

- Improved thermal power plant efficiency by reducing auxiliary consumption power.

(ii) Input material cost:

Raw materials cost saw an increase of 4% from ` 473/t to Rs. 491/t due to increase inslag iron ore aluminous clay and fly-ash prices and additional limestone on transfer oflime stone mines in your Company's name.

To mitigate the impact of the rise in raw material prices your Company is working onidentifying new sources of materials and alternative low costs materials. Besidesincreasing the clinker to cement conversion ratio with the launch of new productsincluding composite cement have been started.

(iii) Freight and Forwarding expenses:

Logistics cost increased Rs. 1124/t from to Rs. 1170/t due to an increase indiesel prices by 16%.

Increase in cost on account of higher diesel prices was partially negated withoptimisation of lead distance realising synergy benefit from the acquisition andcommissioning the 3.5 MTPA capacity in the State energyof Madhya Pradesh. During the yearyour Company has reduced the overall lead distance by ~ 5% over the previous year and 10%since June 2017.

(iv) Employee costs:

Employee cost went up by 13%` 1706from crores in the previous year to Rs. 1926crores. This was on account of normal annual increments commissioning of new plants andfull year impact of the cost of employees from the acquisition in June 2017.


Depreciation for the year at Rs. 2010 crores is higher by ` 246 crores over theprevious year mainly on account of the full year impact of the acquisition andcapitalisation of new capacity.

Finance Cost:

Increase in finance cost from Rs. 1191 crores to Rs. 1419 crores relate to the fullyear impact of the acquisition and additional debt taken during the year for acquiringUNCL.

Your Company does not accept any fixed deposits from the public falling under Section73 of the Companies Act 2013 ("the Act") and the Companies (Acceptance ofDeposits) Rules 2014.

Credit rating:

Your Company has adequate liquidity and a strong Balance Sheet. CRISIL and IndiaRatings and Research have re-affirmed their credit rating as CRISIL AAA and IND AAA forLong Term and CRISIL A1+ and IND A1+ for Short Term respectively.

Income Tax:

Income tax expenses increased in line with an increase in taxable income.

Net Profit:

Profit after tax increased by 10% from Rs. 2231 crores to ` 2456 crores.

Significant changes in key financial ratios along with detailed explanations:

There have been no significant changes (more than 25%) in the key financial ratios asindicated below:

Particulars FY19 FY18 % Change
Debtors Turnover (Days) 22 21 3.96
Inventory Turnover (Days) 41 46 (11.86)
Interest Coverage Ratio 3.50 3.96 (11.61)
Current Ratio 1.02 0.94 8.15
Debt Equity Ratio (Gross) 0.65 0.67 (3.52)
Debt Equity Ratio (Net) 0.53 0.46 15.05
Operating Profit Margin (%) 18.57 19.73 (1.15)
Net Profit Margin (%) 7.00 7.48 (0.49)
Return on Net Worth (%) 9.12 8.95 0.17

Cash Flow Statement

( Rs. in Crores)
FY19 FY18
Sources of Cash
Cash from operations 5800 4885
Non-operating cash flow 285 192
Proceeds from issue of share capital 5 16
Proceeds from sale of investment (net) - 3540
Increase in Borrowings 710 -
Total 6800 8633
Uses of Cash
Net capital expenditure 1527 1836
Increase in investment 2653 -
Increase in working capital 464 1267
Repayment of borrowings (net) - 4027
Interest 1373 1159
Dividend 346 331
Purchase of Treasury Shares 81 -
Total 6444 8620
Increase / (Decrease) in cash & 356 13
cash equivalents

Sources of Cash Cash from operations:

Cash from operations was higher compared to the previous year on account of highersales volume.

Non-Operating Cash Flow:

Cash from non – operations was higher due to higher interest income.


During the year your Company raised Rs. 5360 crores for the refinancing of loansavailed / transferred for the acquisition of Jaiprakash Associates Limited and JaypeeCement Corporation Limited's cement capacity. Your Company raised Rs. 1500 crores whichis placed with UNCL as intercorporate deposits for repayment of financial and operationalcreditors. Your Company availed Rs. 245.32 crores as interest free loan under an incentivescheme of a State government and repaid existing long-term borrowings of Rs. 884 crores inline with the agreed repayment schedule.

Uses of Cash

Net Capital Expenditure:

Your Company spent over Rs. 1600 crores on various capex during the year primarilytowards:

- completing work remaining on the green plant at Manavar District Dhar MadhyaPradesh commissioned during Q1FY19;

- ongoing capex at Bara Grinding Unit expected to be commissioned by Q2FY20;

- WHRS - currently work is in progress at 4 different plant locations to beoperational by FY21; and - other modernisation capex schemes.

Increase in Investments:

Your Company completed the acquisition of UNCL under the provisions of the Insolvencyand Bankruptcy Code 2016. Upon infusion of funds to the extent of ` 3400 crores; takingover management control and re-constitution of the Board of Directors; UNCL became awholly-owned subsidiary of your Company w.e.f. 20th November 2018.

Increase in Working Capital:

Working capital increased on account of an increase in inventory trade receivablesoutstanding incentive receivables under State Industrial Investment Promotion Schemes andupfront royalty payment for the transfer of mines.

Purchase of Treasury Shares:

The UltraTech Employee Welfare Trust constituted in terms of your Company's EmployeeStock Option Scheme 2018 ("ESOS 2018") acquired equity shares of your Companyto be allotted to eligible employees under ESOS 2018. As per the Ind AS purchase of ownequity shares are treated as treasury shares.

Transfer to General Reserve:

Your Company proposes to transfer an amount of Rs. 1800 crores to the GeneralReserves.


Your Directors have recommended a dividend of Rs. 11.50 per equity share (` 10.50 perequity share in the previous year) of Rs. 10/- each for the year ended 31st March 2019.The dividend distribution would result in a cash outgo of Rs. 380.76 crores (including taxon dividend of Rs. 64.92 crores) compared to Rs. 347.61 crores (including tax on dividendof Rs. 59.27 crores) paid for FY18.

In terms of the provisions of Regulation 43A of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 ("ListingRegulations") your Company has formulated a dividend distribution policy. The policyis given in Annexure I to this Report. It is also accessible from your Company'swebsite


Your Company commissioned a greenfield capacity of 3.5 MTPA at Manavar District –Dhar Madhya Pradesh in June 2018. This project went on stream in a record time of lessthan 365 days setting a global benchmark for size of such capacity. The plant has alreadyscaled up to full capacity and Clinkerisation section operated at 100% during Q4 FY19.

Work on the 4.0 MTPA Bara Grinding unit is now progressing satisfactorily and isexpected to be commissioned by Q2 FY20.

Your Company has a current cement capacity of 94.8 MTPA in India which will beaugmented to 98.8 MTPA in India post commissioning of the Bara capacity.

Your Company has further plans to spend ~ Rs. 2000 crores in FY20 related toremaining work at Bara WHRS projects development of coal block at Bicharpur packagingterminal at Mumbai wall care putty projects and other normal maintenance capex.


UltraTech Nathdwara Cement Limited:

The National Company Law Appellate Tribunal ("NCLAT") by its order dated 14thNovember 2018 approved your Company's Resolution Plan for acquiring BCL under theprovisions of the Insolvency and Bankruptcy Code 2016 as amended. BCL became awholly-owned subsidiary of your Company w.e.f. 20th November 2018 and it was re-namedUltraTech Nathdwara Cement Limited w.e.f. 13th December 2018.

The acquisition provides your Company access to large reserves of high qualitylimestone. It consolidates your Company's leadership in the fast growing Northern andWestern markets in the country. Major overhauling of the plants was undertaken in Q4FY19to improve production efficiencies. The plants have been ramping up on capacityutilisation achieving 72% in the month of March 2019. After completing qualityupgradation the UltraTech brand has been successfully launched from the plants.UNCL has a capacity of 6.25 MTPA in the State of Rajasthan.

Scheme of Demerger – Century Textiles and Industries Limited: Your Company's Boardof Directors approved a Scheme of Demerger amongst Century Textiles and Industries Limited("Century") your Company and their respective shareholders and creditors("the Scheme"). In terms of the Scheme Century will demerge its cement businessinto your Company. Century's cement business consists of 3 integrated cement units inMadhya Pradesh Chhattisgarh and Maharashtra and a grinding unit in West Bengal. In termsof the Scheme your Company will issue 1 (one) equity share of face value of Rs. 10/- eachfor every 8 (eight) equity shares of Century of face value of ` 10/- each to theshareholders of Century. The Scheme having received the approval from the stock exchangesCompetition Commission of India and the shareholders is now awaiting approval of theNational Company Law Tribunal Mumbai Bench and other regulatory authorities as may berequired.

Upon completion of the acquisition of Century's cement assets your Company's totalcapacity will reach 113.35 MTPA.

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