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Director's Report
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Ambuja Cements LtdIndustry : Cement - North India
BSE Code:500425
ISIN Demat:INE079A01024
Book Value(Rs):108.34
NSE Symbol:AMBUJACEM
Div & Yield %:0.76
Market Cap (Rs Cr.):39077.5
P/E(TTM):22.44
EPS(TTM):8.77
Face Value(Rs):2
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Dear Members,

It is our pleasure to present the Annual Report of the company for the year 2018.

1. An overview of the Indian economy and cement industry in 2018.

Macro economy.

Indian economy in 2018 began its journey to recovery as it reclaimed the position as the fastest growing economy. Macro-economic policies and structural reforms along with the improved consumer sentiments, strengthened economic growth which led to a swift revival post the temporary disruption caused due to demonetisation and Goods & Services Tax (GST).

As per the Central Statistics Organisation (CSO), India's GDP grew by 6.7% in FY 2018. The constant increasing trend of quarterly GDP numbers in the four quarters of FY 2018 (Q1: 5.6%, Q2: 6.3%, Q3: 7% and Q4: 7.7%) are indicative of the fact that the structural measures of reforms undertaken by the government are now bringing rich dividends in the form of higher GDP growth. Digitisation across industries brought increased transparency and ease of doing business, which also helped speeding of the revival cycle which otherwise could have taken longer.

Performance across sectors (agriculture, manufacturing and services) improved, which was well reflected in the World Bank's Ease of Doing Business 2019 survey where India climbed 23 places and ranked 77th among 190 countries.

This made India the only country among the top 10 improvers for the second consecutive year; and this sharp rise in ranking will further burnish the reformist credentials of the Government.

During the year long journey, the economy did face a growth risk due to fluctuation in rupee and crude price; however, this continued volatility will not impact India's sovereign credit profile as per Moody's analysis; as the rupee-denominated government bonds and robust foreign exchange reserves will help mitigate the risk.

Cement industry.

Reflecting the country's economic sentiment, the cement sector too displayed impressive growth of approx. 9% in 2018 on the back of faster execution of stalled infrastructure and construction projects. Infrastructure (roads and metros, in particular) and the government's "Housing for All" program (rural and urban), remained the key demand drivers. Implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) too brought a paradigm shift in the construction sector by making the sector transparent. With robust demand, capacity utilization in 2018 improved by 2.3% as compared to 2017 despite capacity expansion during the year.

2. Operational and Financial performance - 2018.

The company cemented its position in 2018.

• Cement production increased by 5.9% from 22.98 million tonnes to 24.34 million tonnes.

• Domestic cement sales volume increased by 5.4% from 22.95 million tonnes in 2017 to 24.18 million tonnes in 2018.

• The net sales increased by 7.1% from Rs. 10,250 crores in 2017 to Rs. 10,977 crores in 2018. The average sales realisation increased by around 1% at Rs. 4510 per tonne against approximately Rs. 4,460 per tonne in 2017.

• The total operating expenses for the year 2018 were higher by 11% than the previous year.

• The EBITDA of Rs. 1,891 crores was 2.5% lower than the corresponding EBITDA of Rs. 1,940 crores for the year 2017.

• Profit before Tax at Rs. 1,506 crores was down by 7% from Rs. 1,619 crores for the year 2017.

• Net Profit at Rs. 1,487 crores was up by 19% over the corresponding Net Profit of Rs. 1,250 crores for the year 2017.

Performance of the material subsidiary.

The Company's material subsidiary, ACC Limited is one of the oldest & leading cement manufacturer of India. The summary of ACC Limited's operational & financial performance is as under:

• Cement sales volumes in 2018 were up by 8% at 28.4 million tonnes.

• Operating EBITDA for the year was Rs. 2,048 crores, as compared to Rs. 1,912 crores in the previous year.

• Consolidated profit before tax for the year was up by 15% to Rs. 1,510 crores as compared to Rs. 1310 crores in the previous year.

Financial Performance at glance.

Amount Rs. in crores

Standalone Consolidated
Current Year Previous Year Current Year Previous Year
31-12-2018 31-12-2017 31-12-2018 31-12-2017
SUMMARISED PROFIT AND LOSS
Sales (Net of excise duty) 10,977.00 10,250.18 25,419.00 23,126.08
Profit before finance cost, depreciation & amortisation expense and exceptional item 2,266.44 2,299.23 4,382.23 4,180.19
Finance costs 82.33 107.19 170.50 205.78
Gross Profit 2,184.11 2,192.04 4,211.73 3,974.41
Depreciation and amortisation expense 548.09 572.92 1,153.94 1,219.45
Add: Share of profit of associates and joint ventures - - 12.53 12.77
Less: Exceptional item 129.95 - 151.78 -
Profit before Tax and Non Controlling Interest 1,506.07 1,619.12 2,918.54 2,767.73
Tax expense 19.06 369.55 (54.15) 822.85
Profit after tax but before non controlling interest 1,487.01 1,249.57 2,972.69 1,944.88
Less: non controlling interest - - 795.29 428.52
Net profit for the year 1,487.01 1,249.57 2,177.40 1,516.36
MOVEMENT IN OTHER EQUITY
Balance as per last account 1,303.52 687.18 1,843.76 992.48
Net profit for the year 1,487.01 1,249.57 2,177.40 1,516.36
Add : other comprehensive income 2.09 3.41 (0.17) 4.32
Less: Dividend on equity shares (including interim) 397.13 555.98 397.13 555.98
Less: Corporate dividend tax on above 52.65 80.66 81.82 113.42
Closing balance 2,342.84 1,303.52 3,542.04 1,843.76

3. Dividend for the year 2018.

The company has a robust track record of rewarding its shareholders with a generous dividend pay-out (both interim & final). However, with a view to conserve resources for the upcoming expansion & other capital expenditure projects, the Company did not declare the Interim Dividend during the year 2018. The Board of Directors is now pleased to recommend a dividend of Rs. 1.50/- per share (75%) which will result in the total pay-out of Rs. 332 crores, inclusive of dividend distribution tax of Rs. 34 crores. This represents a pay-out ratio of 31%. The dividend pay-out is in accordance with the Company's Dividend Distribution Policy, which is annexed as Annexure – I of this report. The policy is also available on the website of the Company and can be accessed through the web link: https://www.ambujacement.com/Upload/PDF/dividend-distribution-policy.pdf

Credit rating.

The Company enjoys a good reputation for its sound financial management and its ability to meet financial obligations. CRISIL, the reputed Rating Agency, has re-affirmed the highest credit rating of CRISIL AAA/ STABLE for the long term and CRISIL A1+ for the short term financial instruments of the Company.

4. Market situations that tested our cement's strength.

Structural reforms and policies ushered the economy to a high growth path which was reflected in the construction, commercial, infrastructure and cement industries. It restored confidence in the domestic and international communities. GDP increased to 6.7% in 2017-18. With a balanced demand and supply, cement sector recorded robust growth of 9% for FY 2018 despite the initial hiccups due to GST.

Ambuja's cement sales in 2018 grew by 5.4% to ~ 24.18 million tonnes as compared to 22.95 million tonnes 2017 on the back of continued focus on core markets and retail push strategy.

The Master Supply Agreement, a maiden initiative by Ambuja and ACC, helped unlock mutual benefits from various areas of synergies.

Excelling through deeper engagement with customers.

In line with company's vision to promote sustainable construction practices our Technical Support (TS) team has started promoting sustainable construction practices through our Twenty-Eight Ambuja Knowledge Centres (AKCs) in core markets. Through AKC platform, the Company promotes sustainable products & solutions amongst its customers, architect, mason's etc. Today, this platform is digital and its reach has considerably widened, thus living up to its objective of becoming a digital service that informs, interacts and engages.

PREMIUM PRODUCTS – SUSTAINABLE INNOVATIONS

Products Developed From Concrete Insights.

Ambuja has continued the approach of discovering latent customer needs, developing and scaling up solutions at market place with a systematic go-to- market platform developed with support from our parent, LafargeHolcim.

This has enabled the company to successfully continue the launch of new products with added focus on premium products and helped scale up sales of premium products by 38% on YoY basis - Ambuja Plus Roof Special: 27% YoY growth and Ambuja Compocem: 125% YoY growth. This was possible due to enhanced consumer trust on product quality, brand promise and other beneficial features extended to consumers. The new products not only fulfil important customer needs but also help in significantly reducing the carbon footprint.

AMBUJA PLUS COOL WALLS

The planet's heating up, so we made cooler cement.

Ambuja Plus Cool Walls was launched last year as an environment friendly, strong and cool wall solution. During 2018, this product expanded to nine core states in India and 67,250 cubic meters were sold through eight operating units. The target for 2019 is to achieve 100% growth by expanding the product reach in operating markets.

AMBUJA PURA SAND

Aggregate is the most important natural resource for making mortar and concrete in construction. Day by day depleting natural resources like river sand has become a challenge for consumers as well as for entire construction industry. Looking this Ambuja has launched "PuraSand", which is a premium quality manufactured sand for plastering application. The unique feature of Ambuja "PuraSand" is 100% purity (free from impurities), perfectly graded, Zero wastage and guaranteed weight. The initial response of this product is very much encouraging and company is planning to expand its reach to all its important markets.

LOGISTICS AND SURFACE TRANSPORT

Distribution Safety

In line with its commitment to Lafarge Holcim's Zero Harm policy, Ambuja has taken long strides in improving distribution safety in its end-to-end logistics operations. Technology enabled real time monitoring of safety KPIs resulted in a substantial improvement in safe KM from 53% in 2017 to 79% in 2018. During the year, In Vehicle Monitoring System (IVMS) was fitted in over 7000 vehicles and e-passports distributed across all plants. Over 1300 drivers were trained through a structured training process as per stringent global standards.

Capability Building

In order to have sustainable solutions to mitigate challenges of availability of rail wagons; coupled with demand fluctuations, efforts were made to balance mode-mix and insulate the organisation.

The organisation now is well prepared to meet any situation and ensure 100% evacuation under any circumstances. Planned augmentation of road fleet, use of external sidings and network optimization were key drivers of capability building.

Cost Leadership

Led by high fuel cost, change in tax structure (GST) and high cost of packing bags, cost was always under pressure throughout the year. Sharp focus on network optimisation, change in mode-mix, re-negotiation of transportation contracts enabled the organisation to take maximum advantage of cost optimization initiatives. These initiatives will result in recurring cost benefits and enable Ambuja for superior logistic performance in the coming years.

Technology

Acknowledging the importance of real time control over logistic operations, the company has initiated various technical initiatives towards the use of advanced SCM practices and digitization of end-to-end process.

We were amongst the first in the industry to implement Transport Control Tower (TCT) for real time control over logistic KPIs. The first phase derived substantial benefits in distribution safety; and in the second phase, these analytics are being used to optimize cost and improve customer service.

People Management

Logistics organisation was restructured to create a lean and seamless structure to control end to end logistics operation from inbound to outbound. The reorganized structure now has a blend of experienced and young leaders. The global capability of LafargeHolcim is being used to give global exposure to SCM professionals. Recruitment of young talent is being done in a structured manner to ensure an uninterrupted availability of quality professionals. These people initiatives will help Ambuja become the best in class SCM organisation in India and globally too.

5. Cost developments.

On the cost front, the company witnessed significant pressure over the course of the year due to increase in various input costs. These increases were caused largely due to external factors and also affected many other industries. Crude prices, raw material costs and even fuel costs saw a significant rise in prices. To limit the impact of such cost increases, the company improved its efficiency, fuel mix optimisation and strategic sourcing. Such internal initiatives and measures helped restrict the costs from rising to even higher levels.

Major cost movements.

i) Raw Material costs constituted approximately 10% of the total expenses. The cost of major raw materials increased by 6% over the previous year on a per tonne basis. This increase was largely because of an increase in the cost of fly ash. This was however mitigated through optimal sourcing and a judicious change in the gypsum mix, which helped the company to restrict the increase in gypsum cost by only 1% in comparison to the previous year. The company also saw a reduction in the per tonne cost of Bauxite and Iron Dust, which further helped to reduce the impact of the rising cost of raw materials.

ii) Power and fuel costs constituted approximately 25% of the total expenses. In 2018, we saw a significant increase in fuel price as compared to 2017. This was because of an increase in the prices of imported coal and petcoke. As a result, the power and fuel cost in 2018 increased by more than 8% in comparison to 2017 on a per tonne basis. This impact would have been significantly higher, however, the dynamic fuel mix strategy helped restrict the impact. Over the course of the year, the company was able to remain alert and time and again was able to change its fuel mixes in Kiln and CPP by using a relatively lower cost fuel. The usage of alternate fuels in kiln also increased by 2%. Furthermore, the company consumed 69% of the total power requirement from captive sources, including an increased usage of the Waste Heat Recovery System. Lower rate of purchased power also helped to lower overall power & fuel cost over the previous year.

iii) Freight and forwarding costs constituted 32% of the total expenses. On a per tonne basis, the cost increased by 8%. This increase was largely due to 17% increase in diesel prices in comparison to the previous year. To tackle this, the company took up various logistical initiatives such as the reduction of rail lead by 7 km and availing Long term tariff Contract benefit with Indian Railways as well as axle load benefit with transporters. Such initiatives helped offset the impact of higher diesel prices to some extent.

iv) Other expenses that constituted 20% of the total expenses were restricted to an increase of just 1% over the previous year, despite a 10% increase in packing bag cost, which increased because of the PP granule price increase. The company undertook a fixed cost optimization drive and as a result, saw savings in many fixed cost elements. Such initiatives helped to keep other expenses in check.

Cost mitigation measures / efficiency improvement initiatives.

i) To further strengthen the company's philosophy of Sustainable Operations, central focus was placed on the production of fly ash based PPC. While keeping its PPC in mind, several initiatives were taken up to enhance fly ash consumption to maintain the best-in-class quality.

ii) The company continued its effort of optimising costs of the fuel mix and worked on its fuel flexibility to mitigate any risks associated with the dynamic fuel market. All eforts were directed towards using low-cost fuels like petcoke.

6. Expansion projects and new investments.

While bolstering its market position, the company took up several projects to serve its customers in a more efficient, cost-effective, reliable and environment-friendly manner.

Our people are safer, and so is the environment.

The company focused on the consolidation and optimisation of its existing capacities in all the three regions. In accordance with its policies of Zero Harm, Clean and Energy Efficient Infrastructure, Cost Efficiency, Environment-friendly material handling systems and Sustainability initiatives, the company ensured the highest standards of safety with the help of the capital investments during the year.

Achievements at a glance.

i) The projects taken up to comply with the new environmental regulations for Dust, SOx and NOx, issued by the Ministry of Environment, Forests and Climate Change (MoEFCC) are in an advanced stage. The total investment is estimated at approximately Rs. 125 crores. Best technologies are being deployed at par with global best practices.

ii) To meet the limestone requirement, the company has invested Rs. 113 crores to purchase approximately 96 hectares of land at Darlaghat, Ambujanagar, Rabriyawas and Bhatapara.

iii) To strengthen the company's logistical capability as well as extend its reach to customers, a new railway siding project is in progress at the Rabriyawas unit in Rajasthan at a cost of Rs. 180 crores. Possession of land taken and ground work for line laying is currently in progress. Other than the line laying work, 70% of the project is complete. As per current timelines, the project is expected to be completed by Q1-2020.

iv) Ambuja acquired a coal block at Gare-Palma sector IV/8 in Chhatisgarh at an e-auction of coal blocks conducted by the Government of India. This, with an estimated investment of Rs. 363 crores, will secure the company's long-term requirement of fuel. Open cast mining commenced from April 2018 and commercial production from October 2018. The mines development-cum-operation (MDO) contract has been finalised and site development activities are underway for underground mining.

Upcoming Capacities and Investments.

i) In order to secure long-term limestone requirement for the Bhatapara plant, Ambuja acquired a new mining lease at Maldi Mopar. Environmental clearances as well as all other required approvals for the mining lease have already been received. The following two projects are nearing completion:

• Opening of limestone mining with mining infrastructure at Maldi Mopar Mines at an approved cost of Rs. 120 crores.

• Installation of the Limestone

Transportation System for the said mines at an approved cost of Rs. 85 crores.

ii) Setting up of a greenfield integrated plant with a capacity of 3.1 million tonnes clinker, 1.8 million tonnes cement grinding alongwith Captive Power Plant and Waste Heat Recovery System at Marwar Mundwa in Nagaur District of Rajasthan with a total investment of Rs. 2350 crores. The new plant will be commissioned by September, 2020.

iii) In order to secure the long-term limestone requirement of the Ambujangar plant in Gujarat, the company has acquired a new mining lease at Loadhva. The environmental clearance and other required approvals for the mining lease have already been obtained; and mining equipment delivered. Land acquisition is underway; development and infrastructure work for the mine is in progress and expected to be operationalized by March 2019.

iv) In order to secure long-term limestone requirement of Maratha Cement Works plant in Chandrapur, Maharashtra, the company has acquired a new mining lease at the Nandgaon Ekodi. Environmental clearance and other required approvals for the mining are in progress.

v) To ensure adequate availability of dry fly ash for the North cluster, the company has drawn up plan to invest Rs. 20 crores to install a ‘fly ash dryer' at Ropar. Civil construction and delivery of equipment are in progress.

7. The year 2019 will be one of growth.

The world is confident of India's growth potential

The confidence in the Indian economy has increased substantially because of the various policy measures taken by the Government and Central Bank.

India's future growth trend will be driven by structurally positive factors – favourable demographics, structural reforms, increased digitization, focus on development of infrastructure and housing and acceleration of productive job opportunities. We are certain that with continued thrust and impetus, India will retain its position as one of the high growth economies over the medium term.

8. Key areas of concern.

Ambuja has a comprehensive framework for risk management covering strategic, operational, compliance, financial and sustainability related risks through the Business Risk Management (BRM) process which is also a part of the yearly business plan. Risk assessment provides not just the mechanism for identifying risks and opportunities but also gives Ambuja a clear view of variables to which the company may be exposed – internal, external or forward-looking.

The BRM process involves identification and prioritization of risks through risk maps, business risk environment scanning and risk assessments. Both approaches -- ‘Top down' and ‘Bottom up' are taken to assess risks / opportunities, which is then consolidated / calibrated to get an overview of the entire organisation.

The Risk Management committee under the chairmanship of Mr. Rajendra Chitale, Independent Director, reviews and discusses the risk trends, exposure and potential impact analysis.

All this is done while maintaining the appropriate controls to ensure effective and efficient operations and regulatory compliance. Following key risks were identified for 2018:

Compliance with new regulations

Regulatory changes have been proceeding at a rapid pace across countries due to changes in climate and environment. Non-compliance to new standards imposes high degree of complexity as it may lead to reputational and financial consequences. To meet business challenges, transformation, upgradation, modification etc. are the different tools which are used to comply with the regulatory changes but these come at a cost.

Various projects across operations within the company have been taken up to comply with the new emission standards (for dust, SOx & NOx) issued by Ministry of Environment and Forest and Climate Change (MoEF & CC). The MoEF & CC vide notifications have stated that Ministry will empanel government institutions of national repute for carrying out compliance monitoring of Environment Clearance conditions of projects and activities.

Securing raw material for business continuity

The cement industry is not just capital intensive but highly raw material and energy intensive too, therefore dependent on natural resources – coal, limestone, water, minerals etc. To ensure business continuity, availability of these materials at a competitive cost and quality is the need of the hour. However, due to the depletion of reserves, volatile prices and rising demand, procurement of such raw materials is a challenge. Ambuja will continue to participate in upcoming auctions to secure raw materials and has already commenced operation of its own Coal Block in Q4 2018.

The Mines and Minerals Development and Regulation Act (MMDRA) notification states that the renewal and grants of mining leases and composite licenses (PL-cum-ML) will only be through auctions.

Creating healthy environment for people's interests

Continuous change in the global climate has been impacting our areas of operations too. The exact timing and severity of physical effects are difficult to estimate especially in the context of economic decision making. Climate-related risks and its expected transition to a lower-carbon economy is one area of focus.

Being a responsive organisation, Ambuja has been responding to the CDP Climate Change questionnaire since the past few years and has resolved to maintain it's leadership position in the cement sector by further improving its CDP disclosure.

The robust mechanism for capturing and reporting GHG performance as per the WBCSD CSI Ver 3.1 protocol, Ambuja has also accounted for Scope 3 emissions emanating from its operations. The company has also been responding on climate change risks, strategies and targets as an outcome of robust sustainability and carbon governance in the organization.

Transforming risks to opportunities through digitisation

Digitisation has deeply embedded in the Ambuja strategy, as most of our businesses activities have been slated for digital transformations, whether from logistics, marketing or manufacturing. The significant advantages of digitization, with respect to customer service, revenue, and cost will certainly reap benefits in the medium to long term. However, in the short term, we need to provide better monitoring and control and more effective regulatory compliance to mitigate any risks arising due to digitisation. This could be misuse of hardware and software, interference, loss, unauthorised access, modification and disclosure.

Ensuring non-disruptive transportation to consumption centres

Streamlined logistics is the biggest opportunity for improving margins via cost optimisation for cement industry. Beyond 250 km distance, the ideal mode of transportation for cement is rail as compared to road because it is environment friendly, cost efficient and faster. Availability of rakes during peak months has always been a challenge. Besides, the railways' policies (giving preference to food and power companies) has impacted the planned movement of cement to consumption centres, thereby adversely impacting production schedule and increasing the overall transportation cost.

9. Human Resources.

A structured approach to streamline functions.

The role of Human Resources has evolved in recent years. Today, it operates in complete partnership with senior leadership and business functions translating strategic priorities into action. The end result: to develop and sustain a culture where every employee is respected and valued for their good work.

The company adopted a balanced approach to talent acquisition, relying both on leveraging the skills and experience already available within the organization, while also bringing in the necessary capabilities that helped position us for long-term sustainable performance. Eforts directed towards strengthening organization's internal career mobility activities to drive greater career development and retention of employees. The year 2018 also saw campus hiring of 65 Graduate Engineer Trainees.

On leadership development, high potential senior leaders were identified for development programs at premier business schools in India like ISB - Hyderabad and SP Jain Institute of Management and Research - Mumbai. To continue efforts to build a coaching culture, a batch of 60 participants were selected for the Sustainable Talent for Enhanced Performance (STEP) III program, and are now part of this learning journey.

A structured approach towards organisation renewal was adopted to create a leaner and flat organisation that is more front-line focused and customer-oriented.

Meanwhile, exemplary work was recognised in 2018 and 540 employees from various categories of awards from across locations and functions won accolades under the Rewards and Recognition program.

10. Health and Safety

A step forward towards making our workplace safe.

Health & Safety is our Core Value and embodied in the way we run our ‘We Care' programme across the length and breadth of Ambuja. Despite setbacks in terms of two fatal incidents this year, we have demonstrated our indomitable ICAN spirit by meeting our H&S challenges with determination leading to a step change in both our leading and lagging indicators. Not only have we maintained the momentum that started gathering last year but also improved in tackling frontline issues in a pragmatic way that resulted in our Total Injury Frequency Rate and Loss Time Injury Frequency Rate for the year being 32% and 38% respectively; and below the previous year performance numbers. We have also seen a 35% drop in the number of resultant injuries.

In 2018, two units (Surat and Farakka) achieved Zero Harm, and Zero Loss Time Injury was recorded at Rabriyawas Integrated plant; and six of the eight grinding units -- Surat, Farakka, Roorkee, Dadri, Nalagarh and Bhatinda; and one BCT (Mangalore).

Our H&S strategy.

We looked at initiatives with five objectives/ pillars in mind:

• onsite fatality elimination

• zero harm culture

• systems & processes

• health We also set for ourselves micro battles on five of our most significant impact objectives such that we could follow a ‘more than robust' process while executing/ implementing on ground. We also supported this plan through:

• In-depth performance monitoring on a monthly basis and real time implementation of actions from such analysis;

• Greater focus on quality of incident investigations and sharing of lessons. We also looked at consequence management in terms of both positive and negative reinforcements;

• Greater digitisation both in health and safety – 50% Health Surveillance records digitised;

• New H&S app introduced to ensure greater proliferation of H&S issues/ incident learnings;

• Campaigns/ waves on the following to ensure that units self-assess their H&S processes on a periodic basis:

• Three tier audit system wherein every unit was audited at least once by the corporate.

What we achieved

• 35% reduction in total onsite injuries in 2018 vs 2017;

• Reduction in total ofsite injuries (16%) and incidents (20%);

• Behaviour Based Safety (BBS) programme was piloted at Bhatapara Integrated plant which resulted in 94 - 120% increase in visible personal commitment and safe behaviour observations;

• The In-Cab training at Ambujanagar and Darlaghat extended to 1269 drivers, recorded drop in injuries amongst our limestone vehicle drivers at Ambujanagar by 70%; and a 20% drop in number of incidents across Ambuja;

• Noise Profiling of all units and 75% units covered with a ‘Protect Your Ear' programme;

• Identifying contractors of high risk activities and commencement of development of these personnel/ team starting with silo cleaning. We have received very heartening response to this efort from our contract partners.

Ambuja is committed to achieving its ambition of Zero Harm and Health & Safety continue to constitute its core values.

11. Leveraging digital technology

In 2018, digital transformation was part of the Ambuja core strategy to support business objectives like: Sustainable Growth, Customer Satisfaction, Continuous Productivity Improvement and High employee engagement. Some of the major initiatives taken are as follows:

Dealer connect

We have enabled faster reach to our channel partners/ dealers by adding various value-added features on the existing "Ambuja Dealer Connect" platform. One major feature is to provide visibility of credit and debit note to dealers. This initiative has reduced the cost of printing and courier charges significantly for Ambuja and enabled real-time visibility of reports to dealers from anytime, anywhere. This also helped dealers to submit their GST return on time and faster since the data was readily available to them online.

Mobile Apps

myWorld: an app developed for Technical Service engineers, myWorld is a one-stop shop to manage leads, services, influencers, events and content. This has helped strengthen engagement with customers and contractors.

Estimator: provides customized estimate to home buyers for complete construction, material and fund requirement.

Gruhrachna: provides different options for Plan & Elevation, Vastu-related tips to homebuyers/ contractors.

Going ahead, the apps will be consolidated to provide one user-experience to our contractors.

Transport control tower for logistics operation

Ambuja streamlined its logistics operations by setting up the centralised TCT that uses Telematics technology to monitor logistics transport, type of driving violations, etc. This has helped improve safe Km by above 20%, through one-on-one driver coaching.

Going forward

More value added and exciting features/ benefits have been planned for our dealers and retailers. Additionally, we intend to use Artificial Intelligence to bring in various motivation levers for our sales team so that they can get readymade information on leading and lagging performance indicators which can help them perform better. Similarly, in Logistics our focus will be Paperless Proof of Delivery for our end customers and also streamline our Sales & Operations Planning process. In Manufacturing, we plan to explore the Industry 4.0 features of IoT, Drones, Sensor technology to bring in better productivity and efficiency. Similarly, in finance, we plan to bring in analytical dashboards to monitor financial performance. In HR, we plan to bring a user-friendly platform to enable our employees to learn quicker, faster and anytime, anywhere.

12. Sustainability and environment.

Maintaining consistency delivers greater results.

Training its sights to realise its vision to become the most sustainable company in the industry, Ambuja's teams have consistently strived to achieve excellence and efficiency to improve the level of sustainable performance.

2018 witnessed certain major initiatives and achievements in Sustainability development. Our system improvement, process efficiency measures and all round performance catapulted the company to achieve the 5th rank globally in the Construction Materials category in the Dow Jones Sustainability Index (DJSI) competing with some of the most sustainable companies the world over. Ambuja is the only Indian cement company to achieve such a high ranking in DJSI.

Focussing on future sustainability goals.

It is imperative to monitor progress with respect to Corporate Sustainable Development targets and goals as defined by the company's parent - LafargeHolcim. Our Sustainable development plan -- ‘The Plan 2020 / 2030, Building for Tomorrow' -- has vested an inclusive approach in our project planning and management approach. The four thrust areas of Climate Change, Circular Economy, Water & Nature, as well as People & Community in our Sustainable development plan have acted as the yardstick for developing KPIs and connecting all projects with the overall business objective. The performance results of 2018 show our promising progress towards our intermediate 2020 targets in the above target areas. The company is completely committed to stepping up its eforts year after year to not only meet, but also surpass these targets.

Aligning internal goals with external is hard but necessary.

To endorse the principles of the Sustainable Development Goals (SDGs) and Corporate

Citizenship, Ambuja became a member of the "Indian solutions for the world to achieve SDGs," as part of the Confederation of Indian Industries (CII) and NITI Aayog initiative. Also, Ambuja has mapped its activities against the SDGs and their indicators, which are also reported in our Sustainability reports for 2016 & 2017. This will also be covered in our forth coming SDG Report of 2018.

As part of the company's product stewardship, the year 2018 witnessed some major milestones. Ambuja developed the Environmental Product Declaration (EPDs) for the low carbon - Portland Pozzolana Cement (PPC) as well as Composite Cement produced at all Ambuja plants. These EPDs were verified by an independent third party and were also listed on the international portal ‘Environdec' for stakeholder communication.

As per our assessment, not only is Ambuja water positive by more than six times in 2018, but every integrated plant and grinding unit is independently water positive. In addition, Ambuja also stepped up to compensate the plastic consumption in the supply chain and recovered about 69000 tonnes of plastic waste from the market and became two times plastic negative in the year 2018.

Over the course of the year, Ambuja focussed on encouraging circular economy usage, renewable energy and sustainable product solutions. A total of 2.9 lakh tonnes of Alternate Fuel & Raw Material (AFR) were used that yielded a Thermal Substitution Rate (TSR) of 5.6%. About 8 million tonnes of waste derived raw-materials were used in the company's circular economy portfolio. This contributed to lowering the clinker factor to as low as 64.99%. Ambuja also made a conscious effort towards substituting its power requirements and in the process, sourced about 6.5% of total power generation through renewable sources. As part of its sustainable and innovative product solutions, Ambuja also encouraged the production of 3.5 lakh metric tonnes of slag based, composite cement in 2018.

Sustainability reporting - Global Green Standards

In 2018, Ambuja published its 11th Sustainability Development Report on the triple bottom line performance for the year 2017. Ambuja displayed its stewardship in aligning with the latest guidelines by preparing the report in accordance with the latest Global Reporting Initiative (GRI) Standard (Comprehensive) with ‘Assurance' by an independent certifying agency, as per the AA1000 assurance standard. The report was aligned to the Sustainable Development Goals (SDG) and CSI indicators as well. The Metal and Mining Sector Supplement of the GRI were also referred to while reporting the company's sustainability performance to its stakeholders. The company has been consistent in issuing the Business Responsibility Report (BRR) as part of its Annual Report since 2012. The process also entailed a detailed Materiality Review with the company's internal as well as external stakeholders. From last year the company also initiated reporting its performance against the six capitals (principles of Integrated Report) as a part of this report, and will continue its efforts to transition to a complete Integrated Report in future.

13. Corporate Social Responsibility (CSR)

Improving lives, holistically.

The company's CSR arm, the Ambuja Cement Foundation (ACF) was established over 25 years ago in 1993, at Kodinar, the first area of Ambuja's operations. Here, ACF worked with farmers in the immediate neighbourhood of our plant with the philosophy that if Ambuja prospers, so will our neighbours.

Today, ACF expanded to 30 locations spread across 11 states on issues ranging from Water Resource Development, Agricultural Livelihoods, Skill and Entrepreneurship Development, Community Health and Sanitation, Women Empowerment to Education, with projects suiting the needs of the geography and community. These programmes are implemented in partnership with different government agencies, development agencies and corporates.

Stakeholder engagement

ACF ensures all programmes across locations are based on the needs of the region and engagement of stakeholders. Systematic assessments are carried out annually using the

Social Engagement Scorecard (SES) that rates CSR initiatives across locations.

Stakeholder Engagement Plan (SEP) are formulated at each unit, citing stakeholder concerns relevant to environment, CSR, mining, HR and commercial operations. Implementation and monitoring of stakeholder engagement at all plants is monitored at the corporate level by the Corporate Sustainability Steering Committee (CSSC). Site Specific Impact Assessments (SSIA) are conducted cyclically to apprehend the insights and felt needs of all stakeholders, related to human rights, labor rights, stakeholder conduct at ACL sites. Each site undergoes an assessment every three years.

Water resource management

Water Resource Development remains one of our oldest and largest thrust areas and undertakes projects for: Water Harvesting & Conservation (check dams, interlinking rivers, watershed development, etc.), Drinking Water (Roof Rain Water Harvesting Structures - RRWHS, pond deepening, in-village distribution system, water quality surveillance, etc.) and Optimum Utilisation (Water User Association, Participatory Irrigation Management (PIM), Promotion of Micro Irrigation). By the end of year 2018, ACF completed construction of 425 check dams, 6684 RRWHS, treated 25209 hectares for Watershed Development, which along with other projects created a cumulative water storage capacity of 54 MCM, across all locations.

As a step towards sustainability of the impact created by the programme, community institutions such as Water User Associations (WUAs), Paani Samiti, Village Watershed Committee (VWC) play significant roles in planning and execution of water project; and are also trained and empowered to ensure post project repair and maintenance of assets created.

Agricultural livelihoods

ACF works to boost farmers' production capacity - to make their agriculture more efficient and therefore, more profitable. The Agricultural Livelihoods program fundamentally aims to bridge the existing gap between traditional farm practices and the preferred scientific package practices. For this, ACF organizes them into learner groups, producer groups and ultimately into producer organizations. In 2018, ACF reached out to total 1,75,000 farmers through the agricultural livelihoods program.

The major projects in Agricultural Livelihoods, active across 17 locations are: Better Cotton Initiative (BCI), System of Rice Intensification (SRI), Salinity Ingress Mitigation, Organic Farming, Wadi Development, Fruit and Vegetable Cultivation, Animal Husbandry and Aquaculture. Among these projects, another important project is that of Farmer Producer Organisations (FPO), to build a collective bargaining power of farmers for procurement of inputs and marketing of produce.

Skill and entrepreneurship development institute (SEDI)

SEDIs were initiated by ACF to create suitable skill sets for rural youth, which are in accordance with the needs of the industry.

SEDI courses range across 12 sectors such as hospitality, driving, retail, automobile repair, construction, apparel making, accountancy, healthcare, etc. ACF also develops soft skills to handle the challenges at work and further supports graduates in placement and job retention. In 2018, SEDIs have leapt by 50% with 29 SEDIs across the country now; about 7800 students have graduated from the institutes this year, bringing the cumulative number of skilled youth to over 42000, with 73% of them being gainfully employed. This increasing number of centres and graduates is attributed to our growing partnerships with some lead corporates such ADOR Welding, APM Terminals, Castrol India, Cipla Foundation, Gruh Finance, Godrej Consumer Products, Schneider Electric, Tech Mahindra Foundation, AU Bank, Hindustan Zinc, etc.

Community health and sanitation

The Community Health and Sanitation program works under the thrust areas of Maternal, Child and Adolescent Health, Communicable and Non-Communicable Diseases, Total Sanitation and Curative Health.

In the year 2017, responding to the growing burden of Non-Communicable Diseases (NCD) among the rural population, ACF had rolled out a programme on Awareness and Prevention of NCD. In 2018, realising the extent and the impact of this need, the NCD programme has been expanded, reaching out to 105 villages throughout the country, with scope to expand further in 2019. Further addressing the lifecycle that leads to emergence of NCDs, ACF has also launched programmes addressing Malnutrition in 30 Anganwadis at Dadri. This programme too is designed for further expansion in 2019.

Under community health, ACF also engages with truckers who are large yet vulnerable group of Stakeholders for ACL. ACF in collaboration with Apollo Tyres Foundation runs Health Care Centres for truckers at Surat, Sankrail, Nalagarh and Farakka. In the year 2018, these centres reached out to 66455 truckers, addressing STIs, HIV, common ailments, lifestyle diseases, vision problems and overall safety behaviour.

Women empowerment

Women being the pronounced 50% of our host communities, are a special focus of all of ACF programmes.

As a part of the Women Empowerment programme, ACF has formed 2464 Self Help Groups with total 28285 members and a total corpus of Rs. 18.72 crore. At various locations these SHGs have come together to federate themselves into six Women Federations. Other projects boasting female strength are 41 female extension workers in Better Cotton Initiative, 59 PSS and 352 Sakhis. In 2018, 44% of the students graduating in both technical and non-technical trades from our SEDIs were females.

An important achievement in Women's empowerment is that of the ACF promoted Amrit Dhara Milk Marketing Cooperative Society Limited (ADMMCSL) at Darlaghat, which is an all women run FPC working on a model which addresses the problems related to animal husbandry, right from animal care, veterinary services, to milk collection and marketing.

Education - The only thing our special needs children lacked were opportunities.

Ambuja Manovikas Kendra (AMK) is special facility for intellectually challenged children in Ropar, Punjab and the centre has earned a reputation of being one of the best schools for special children in the vicinity. This school is being currently attended by 93 students and also has 13 under home based rehabilitation. A step further into rehabilitation of the Specially Abled students, AMK initiated a Skill Development Centre in 2017, in partnership with Cipla Foundation. The centre provides training in Bakery, Pottery and Artificial Jewellery making.

ACF has also been working with 118 government schools to support them infrastructure, strengthening School Management Committees, providing e-learning and other Teaching Learning Methodologies. In 2018, ACF in partnership with CII Foundation initiated Make India Play project in 10 schools in Darlaghat. The project aims to bring the zest of organised play among school students in rural India.

Measuring the social impact

While we energise our communities through our CSR work, with time we have realised the worth of measuring the impact of our work. Not only does it help us review and improve on our work incrementally, it helps us recognize models that work best and can be scaled and replicated cost efficiently. The CSR projects have been contributing into ACL's True Value measurement, helping the company comprehend its performance in the sustainability parameters.

The measured impacts of our CSR work has helped us improve our score on the Dow Jones Sustainability Index, taking Ambuja's rank to 5, among the all construction materials companies globally. In addition, The Institute of Company Secretaries of India (ICSI) has also conferred us with the Best Company for CSR Excellence Award under large corporates and Asia Centre for Corporate Governance & Sustainability presented us the ‘Best CSR & Sustainability Practices Award', both benchmarks not only CSR work, but also our implementation processes and governance to be excellent.

Annual report on CSR activities and expenditure

The annual report on CSR activities and expenditure as required under Section 134 and 135 of the Companies Act 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules 2014 and Rule 9 of the Companies (Accounts) Rules 2014 is given as Annexure II to this Report.

14. Disclosures under the Companies Act, 2013 and Listing Regulations.

Extract of Annual Return.

The details forming part of the extract of the annual return in Form MGT-9 is provided as Annexure III of this Report.

Number of Board Meetings.

The Board of Directors met 7 (seven) times in the year 2018. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report forming part of this Report.

Composition of Audit Committee.

The Board has constituted the Audit Committee which comprises of Mr. Rajendra Chitale as the Chairman and Mr. Nasser Munjee, Dr. Omkar Goswami and Mr. Martin Kriegner as members. More details on the committee are given in the Corporate Governance Report.

Related Party Transactions.

In line with the requirements of the Companies Act, 2013 and Listing Regulations, the company has formulated a Policy on Related Party Transactions which is also available on the website of the company at https://www.ambujacement.com/Upload/PDF/policyfonfdeterminingfmaterialityfoffrptf28foctf2015frevised.pdf

All the related party transactions are entered on an arm's length basis in the ordinary course of business and adheres to the applicable provisions of the Act and the Listing Regulations. There are no materially significant related party transactions made by the company with Promoters, Directors or Key Managerial Personnel etc. which may have a potential conflict with the interest of the company at large or which warrants the approval of the shareholders. All Related Party Transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained before the commencement of the new financial year, for the transactions which are repetitive in nature and also for the transactions which are not foreseen (subject to financial limit). A statement of all related party transactions is presented before the Audit Committee on a quarterly basis, specifying the nature, value and terms & conditions of the transactions. The statement is supported by the certification from the MD & CEO and the CFO. All related party transactions are subject to half-yearly independent review by a reputed accounting firm to establish compliance with the requirements of Arms' Length Pricing.

In accordance to Section 134(3)(h) of the Companies Act 2013 and Rule 8(2) of the Companies (Accounts) Rules 2014, the particulars of the material contract or arrangement entered into by the company with related parties referred to in Section 188(1) in Form AOC-2 is attached as Annexure IV of this Report.

Renewal of Agreement for Payment of Technology & Know-how fees to Holcim Technology Ltd.

The Members at the previous Annual General Meeting passed an Ordinary Resolution approving the renewal of Agreement for payment of Technology & Know-how fees to Holcim Technology Ltd. (a Related Party) for a further period of 3 years w.e.f. 1st January, 2018 on the same terms & conditions as that of the previous Agreement, including the payment of fee @1% of the net sales of the Company. Since the resolution was proposed as Related Party Transaction, all the related parties abstained from voting. Further, the Competent Authorities of India and Switzerland under the Bilateral Advance Pricing Agreement (BAPA) has confirmed the Arm's Length rate for payment under the said TKH Agreement @1% of net sales.

Policy on Sexual Harassment of Women at Workplace.

The company has zero tolerance towards sexual harassment at the workplace and to this end, has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 and the Rules thereunder. All employees (permanent, contractual, temporary, trainees) are covered under the said policy. An Internal Complaints Committee has also been set up to redress complaints received on sexual harassment. During the financial year under review, no complaints were received by the company. No cases of child labour, forced labour, involuntary labour and discriminatory employment were reported during the period.

The company is committed to providing a safe and conducive work environment to all its employees and associates.

15. Corporate Governance

The company has complied with the corporate governance requirements under the Companies Act, 2013 as stipulated under the Listing Regulations. A separate section on corporate governance along with a certificate from the statutory auditors confirming compliance is annexed and forms part of this report.

16. Internal audits and controls

To keep things under control

The Company believes that a strong internal control framework is an important pillar of Corporate Governance. It has established internal control mechanisms commensurate with the size and complexity of its business. A strong Internal Control framework is established through right tone at the top for good corporate governance which serves as a foundation for excellence and the same is embedded in operations through its policies and procedures. Employees of the Company are guided by the Company's ‘Code of Conduct'.

The Company has laid down Internal Financial Controls as detailed in the Companies Act, 2013 and has covered all major processes commensurate with the size of business operations. These have been established at the entity & process levels and are designed to ensure compliance to internal control requirements, regulatory compliance and appropriate recording & reporting of financial & operational information. The Company has reviewed and sustained internal financial controls by adopting a systematic approach to evaluate, control design and operating effectiveness.

As the first line of defence, primary responsibility for design & establishment of internal controls and its operating effectiveness lies with the management in their respective areas of operation. Internal control frameworks and procedures documented in the form of Internal Controls Manuals, Standard

Operating Procedures, Accounting Guidelines including regular management reporting and monitoring thereof. Policies and procedures are reviewed periodically for any changes required, to changing business needs as well as improvements in processes to strengthen the internal control systems. Authorisation Matrices for financial transactions are derived based on Board decisions.

Over the years, the formal and independent evaluation of internal controls is conducted for the effective compliance of Section 138 of the Companies Act 2013 and relevant statutes applicable to the LafargeHolcim group.

To ensure that controls work as designed

The company has a strong and independent in-house Internal Audit (IA) department that functionally reports to the Chairman of the Audit Committee, thereby maintaining its objectivity. Remediation of deficiencies by the IA department has resulted in a robust framework for internal controls.

The scope and authority of the Internal Audit function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the IA function reports directly to the Chairman of the Audit Committee. The IA team develops risk-based annual internal audit plan which is approved by the Audit Committee. In addition Audit Committee also reviews compliance to the IA plan. The IA team monitors and evaluates the efficacy and adequacy of internal control systems, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal audit function, process owners undertake corrective action(s) in their respective area(s) and thereby strengthen the controls, mitigate risk. The IA department provides independent assurance to the Audit Committee, the Board, the senior management and the regulators regarding the effectiveness of the company's governance & controls. Significant audit observations and corrective action(s) thereon are presented to the Audit Committee. The Audit Committee reviews the reports submitted by the Internal Auditors in each of its meeting. Recommendations of Internal Audit are mainly focused on Process Design, Process Compliance, Process Improvement and Statutory compliance. It mainly focus on mitigating existing risk and identifying improvement opportunity.

17. Managing the risks of fraud, corruption and unethical business practices.

Vigil mechanism / Whistle blower policy – protecting those who speak up, by listening.

Creating a fraud and corruption free culture has always been at Ambuja's core. In view of the potential risk of fraud, corruption and unethical behaviour that could adversely impact the company's business operations, performance and reputation, Ambuja has emphasised even more on addressing these risks. To meet this objective, a comprehensive Ethical View Reporting Policy akin to Vigil Mechanism or the Whistle-blower policy has been laid down. In terms of the said Policy, all the reported incidents are reviewed by a designated Committee. Based on an in-depth review, all such incidents are investigated in an impartial manner and appropriate actions are taken to uphold the highest professional, ethical and governance standards. The Policy also provides for the requisite checks, balances and safeguards to ensure that no employee is victimised or harassed for reporting and bringing up such incidents in the interest of the company.

No personnel have been denied access to the Audit Committee pertaining to the Ethical View Policy. The implementation of the Ethical View Policy is overseen by the Audit Committee.

More details on this Policy are given in the Corporate Governance Report, which forms part of this Report. The Ethical View Reporting Policy is available on the company website: www. ambujacement.com

Code of conduct

The company has laid down a robust Code of Business Conduct and Ethics, which is based on the principles of ethics, integrity and transparency. More details about the Code is given in the Corporate Governance Report.

ANTI-BRIBERY AND CORRUPTION DIRECTIVES (ABCD)

We're only intolerant to corruption.

In furtherance to the company's philosophy of conducting business in an honest, transparent and ethical manner, the Board has laid down ‘ABC Directives' as part of the company's Code of Business Conduct and Ethics. As a company, Ambuja has zero-tolerance to bribery and corruption and is committed to act professionally and fairly in all its business dealings. To spread awareness about the company's commitment to conduct business professionally, fairly and free from bribery and corruption and as part of continuous education to the employees on ‘ABC Directives', mandatory online training & testing through a web-based application tool was conducted for approximately 3000 relevant employees. The above policies and its implementation are closely monitored by the Audit and Compliance Committees of Directors and periodically reviewed by the Board.

18. Board of Directors and key managerial personnel.

Cessation.

Mr. Ajay Kapur (DIN 03096416) MD & CEO, after an illustrious career of 26 years with the Company, decided to pursue his career outside the cement industry and accordingly resigned from the Board w.e.f. 1st March, 2019. His five year term as MD & CEO was to expire on 24th April, 2019.

Mrs. Usha Sangwan (DIN 07238383), Director (representing Life Insurance Corporation of India) resigned from the Board w.e.f. 21st December, 2018.

Mr. Haigreve Khaitan (DIN 00005290), who was appointed as an Independent Director and who holds oJice upto 31st March, 2019 has conveyed that he does not intend to seek re-appointment for the second term due to personal commitment and will ceased to be a Director upon completion of his current term.

Mr. B.L. Taparia (DIN 00016551) will retire by rotation at the ensuing Annual General Meeting of the Company in accordance with the provisions of Section 152 and Article 147 of the Articles of Association of the company. Mr. Taparia, who is eligible for re-appointment, has conveyed that he does not intend to seek re-appointment and will retire upon completion of his current term at the ensuing Annual General Meeting.

The Board placed on record its appreciation for the valuable services rendered by Mr. Ajay Kapur, Mrs. Usha Sangwan, Mr. Haigreve Khaitan and Mr. B.L. Taparia.

Retirement by rotation.

Mr. Jan Jenisch (DIN 07957196) and Mr. Roland Kohler (DIN 08069722) will retire by rotation at the ensuing Annual General Meeting of the company and being eligible, have ofered themselves for re-appointment.

The Board recommends their re-appointment.

APPOINTMENT.

Mr. Nasser Munjee (DIN: 00010180), Mr. Rajendra Chitale (DIN: 00015986), Mr. Shailesh Haribhakti (DIN: 0007347) and Dr. Omkar Goswami (DIN: 00004258) as Independent Directors

Mr. Nasser Munjee, Mr. Rajendra Chitale, Mr. Shailesh Haribhakti and Dr. Omkar Goswami were appointed as Independent Directors of the Company pursuant to Section 149 of the Companies Act, 2013 for the first term of 5 years and will hold office upto 31st March, 2019. Considering their knowledge, expertise and experience in their respective fields and the substantial contribution made by these Directors during their tenure as an Independent Director since their appointment, the Nomination & Remuneration Committee and the Board has recommended the re-appointment of these Directors as Independent Directors on the Board of the Company, to hold oJice for the second term of five consecutive years commencing from 1st April, 2019 upto 31st March, 2024 and not liable to retire by rotation. The Company has received declaration from all these Directors that they continue to fulffil the criteria of independence as prescribed under the provisions of the Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Regulation 16 of the Listing Regulations (including statutory re-enactment thereof for the time being in force).

In terms of the provisions of Section 160(1) of the Companies Act, 2013, the Company has received a Notice from a Member signifying his intention to propose the candidature for the reappointment of Mr. Nasser Munjee, Mr. Rajendra Chitale, Mr. Shailesh Haribhakti and Dr. Omkar Goswami for the office of Independent Directors not liable to retire by rotation.

Ms. Then Hwee Tan (DIN 08354724)

Ms. Then Hwee Tan has been appointed as an Additional Director w.e.f. 18th February, 2019. As Additional Director, Ms. Then Hwee Tan shall hold the office up to the date of the ensuing Annual General Meeting and being eligible, has offered herself to be appointed as a Director liable to retire by rotation. The Company has received a notice from a Member under Section 160 (1) signifying his intention to propose the candidature of Ms. Then Hwee Tan for the office of Director.

The Nomination Committee and the Board of Directors recommends her appointment.

Mr. Mahendra Kumar Sharma (DIN 00327684) and Mr. Ranjit Sahani (DIN 00103845)

Pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Mahendra Kumar Sharma and Mr. Ranjit Sahani are proposed to be appointed as a Non Independent Directors (representing LafargeHolcim Group) liable to retire by rotation w.e.f. 1st April, 2019.

In terms of the provisions of Section 160(1) of the Companies Act, 2013, the Company has received a Notice from a Member signifying his intention to propose the candidature for the appointment of Mr. Mahendra Kumar Sharma and Mr. Ranjit Shahani as Directors liable to retire by rotation.

The Nomination & Remuneration Committee and the Board of Directors recommends their appointment.

Ms. Shikha Sharma (DIN 00043265)

The Nomination and Remuneration Committee and the Board after evaluating the profiles of suitable Women candidates have shortlisted Ms. Shikha Sharma to be appointed as a Women Independent Director on the Board. The Company has received a notice from a Member signifying his intention to propose the candidature of Ms. Sharma for the office of Independent Director.

The Company has also received declaration from her that she fulfil the criteria of independence as prescribed under the provisions of the Companies Act, 2013 read with the Schedules and Rules issued thereunder as well as Regulation 16 of the Listing Regulations (including statutory re-enactment thereof for the time being in force).

If appointed as an Independent Director, Ms. Shikha Sharma shall hold office w.e.f. 1st April, 2019 for a period of five years and shall not be liable to retire by rotation.

The Nomination Committee and the Board of Directors recommends her appointment. The appointment of Ms. Sharma on the Board will also fulfil the requirement of the amended Listing Regulations, which requires top 500 Listed Companies by market capitalization to have a Woman Independent Director by 1st April, 2019.

Mr. Praveen Kumar Molri (DIN 07810173)

Consequent to the stepping down of Mrs. Usha Sangwan from the Board, Life Insurance Corporation of India (LIC) has nominated Mr. Praveen Kumar Molri as their representative on the Company's Board. In terms of Section 160(1) of the Companies Act, 2013, the Company has received a notice from a Member signifying his intention to propose the candidature of Mr. Molri as a Director, liable to retire by rotation.

The Nomination Committee and the Board of Directors recommends his appointment.

Mr. Bimlendra Jha (DIN 02170280)

Mr. Bimlendra Jha has been appointed as an Additional Director w.e.f. 18th February, 2018 and as a Managing Director & CEO for a period of five years w.e.f. 1st March, 2019.

More details about the Directors are either given in the Corporate Governance Report or in the Notice of the ensuing Annual General Meeting being sent to the shareholders along with the Annual Report.

Attributes, qualifications & independence of Directors and their appointment.

The Nomination & Remuneration Committee of Directors has approved a Policy for the Selection, Appointment and Remuneration of Directors, which inter-alia, requires that the Directors shall be of high integrity with relevant expertise and experience to have a diverse Board. The Policy also lays down the positive attributes/criteria while recommending the candidature for the appointment of a new Director.

The Board Diversity Policy of the company requires the Board to comprise of a set of accomplished individuals, ideally representing a wide cross-section of industries, professions, occupations and functions and possessing a blend of skills, domain and functional knowledge, experience and educational qualifications, both individually as well as collectively.

Directors are appointed/re-appointed with the approval of the Members for a term in accordance with the provisions of the law and the Articles of Association. The initial appointment of Managing Director & CEO is generally for a period of five years. All Directors other than Independent Directors are liable to retire by rotation unless otherwise specifically provided under the Articles of Association or under any statute. One-third of the Directors who are liable to retire by rotation, retire at every Annual General Meeting and are eligible for reappointment.

The relevant abstract of the Policy for Selection, Appointment & Remuneration of Directors is given as Annexure V of this Report.

Independent Directors declaration.

The Independent Directors have submitted the Declaration of Independence, as required pursuant to Section 149 of the Companies Act 2013 and provisions of the Listing Regulations, stating that they meet the criteria of independence as provided therein. The profile of the Independent Directors forms part of the Corporate Governance Report.

Evaluation of the Board's performance.

As per provisions of the Companies Act 2013 and Regulation 17(10) of the Listing Regulations, the evaluation process for the performance of the Board, its committees and individual Directors for the year 2018 was carried out. For this purpose an external consultant was engaged to review the existing evaluation process. The external consultant, after detailed review, found the review process to be satisfactory. However, they had suggested re-organization of the evaluation templates and the rating matrix coupled with the inclusion of new evaluation criteria in line with the guidelines under the Listing Regulations and Secretarial Standards.

With a view to maintain high level of confidentiality and ease of doing evaluation, this years' exercise was carried out online using secured web based application. Each Board member submitted a detailed evaluation form online on the functioning and overall level of engagement of the Board and its committees on parameters such as composition, execution of specific duties, quality, quantity and timeliness of flow of information, deliberations at the meeting, independence of judgement, decision making, management actions etc.

A one-on-one meeting of the individual Directors with the Chairman of the Board was also conducted as a part of self-appraisal and peer group evaluation and the engagement & impact of individual Director was reviewed on parameters such as contribution, attendance, decision making, inter-personal relationship, actions oriented, external knowledge etc. The Directors were also asked to provide their valuable feedback and suggestions on the overall functioning of the Board and its committees and the areas of improvement for a higher degree of engagement with the management.

The Independent Directors met on 11th December 2018 to review the performance evaluation of Non–Independent Directors and the entire Board of Directors including the Chairman, while considering the views of the Executive and Non-Executive Directors.

The Independent Directors were highly satisfied with the overall functioning of the Board, its various committees and with the performance of other Non-executive and Executive Directors. They also appreciated the exemplary leadership role of the Board Chairman in upholding and following the highest values and standards of corporate governance.

Post the review by the Independent Directors, the results were shared with the entire Board and its respective committees. The Board expressed its satisfaction with the Evaluation results, which reflects the high degree of engagement of the Board and its committees with the company and its Management.

Based on the outcome of the evaluation and assessment cum feedback of the Directors, the Board and the Management have also agreed on various action points which will be implemented during the year 2019.

Remuneration policy.

The company follows a Policy on the Remuneration of Directors and Senior

Management Employees. The policy is approved by the Nomination & Remuneration Committee and the Board. The main objective of the said policy is to ensure that the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate the Directors, KMP and Senior Management employees. The remuneration involves a balance between fixed and incentive pay, reflecting short and long-term performance objectives appropriate to the working of the company and its goals. The Remuneration Policy for the Directors and Senior Management employees is given in the Corporate Governance Report which form part of this Report.

Induction and familiarisation programme for Directors.

The details of the induction and familiarisation program of the Directors are given in the Corporate Governance Report.

Key managerial personnel.

The MD & CEO, the CFO and the Company Secretary are the Key Managerial Personnel of the company. As mentioned elsewhere in this report. Mr. Bimlendra Jha is appointed as the MD & CEO in place of Mr. Ajay Kapur. There was no change in the CFO and the Company Secretary during the year under review.

19. Directors' responsibility.

Pursuant to Section 134(5) of the Companies Act 2013, the Board of Directors to the best of their knowledge and ability confirm that:

i) in the preparation of the annual accounts, the applicable accounting standards have been followed, along with proper explanations relating to material departures.

ii) they have selected such accounting policies, judgments and estimates that are reasonable and prudent and have applied them consistently to give a true and fair view of the state of affairs of the company as on 31st December 2018, and of the statement of Profit and Loss and cash flow of the company for the period ended 31st December 2018.

iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

iv) the annual accounts have been prepared on an ongoing concern basis

v) proper internal financial controls to be followed by the company have been laid down and that such internal financial controls are adequate and were operating effectively and

iv) proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and are operating effectively.

20. Auditors & Auditors' Report.

Statutory Audit.

At the 34th Annual General Meeting held on 31st March 2017, the shareholders had approved the appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (ICAI Firm Registration No.117366W/W-100018) as the Statutory Auditors for a period of 5 years commencing from the conclusion of the 34th Annual General Meeting until the conclusion of the 39th Annual General Meeting, subject to ratification by the shareholders every year. Pursuant to the recent amendment to Section 139 of the Companies Act, 2013 effective 7th May, 2018, ratification by Shareholders every year for the appointment of the Statutory Auditors is no longer required and accordingly the Notice of ensuing Annual General Meeting does not include the proposal for seeking Shareholders approval for ratification of Statutory Auditors appointment. M/s. Deloitte Haskins & Sells LLP has furnished a certificate of their eligibility and consent under section 139 and 141 of the Companies Act 2013 and the Companies (Audit and Auditors) Rules 2014 for their continuance as the Auditors of the company for the financial year 2019. In terms of the Listing Regulations, the Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI. The Auditors' Report for financial year 2018 on the financial statement of the company forms part of this Annual Report.

Explanations or comments by the Board on "emphasis of matters" made by the statutory auditors in their report includes Order passed by the Competition Commission of India in two matters, which dealt in more detailed in the full Annual Report.

Cost Audit.

Pursuant to section 148 of the Companies Act 2013, the Board of Directors on the recommendation of the Audit Committee appointed M/s. P. M. Nanabhoy Co. Cost Accountants (ICWAI Firm Registration No.000012) as the Cost Auditors of the company for the Financial Year 2019 and has recommended their remuneration to the Shareholders for their ratification at the ensuing Annual General Meeting. M/s P.M. Nanabhoy Co. have given their consent to act as Cost Auditors and confirmed that their appointment is within the limits of the Section 139 of the Companies Act, 2013. They have also certified that they are free from any disqualifications specified under Section 141 of the Companies Act, 2013. The Audit Committee has also received a certificate from the Cost Auditor certifying their independence and arm's length relationship with the company. Pursuant to Companies (Cost Records and Audit) Rules, 2014, the Cost Audit Report for the financial year 2017 was filed with the Ministry of Corporate Affairs on 29.06.2018 vide SRN: G91152223.

Secretarial Audit.

The Board had appointed Mr. Himanshu S. Kamdar (CP No.3030), Partner of M/s. Rathi & Associates, Company Secretaries in Whole-time Practice, to carry out Secretarial Audit under the provisions of Section 204 of the Companies Act, 2013 for the fiscal year 2019.

The company has received consent from Mr. Himanshu S. Kamdar of M/s. Rathi & Associates to act as the auditor for conducting audit of the Secretarial records for the financial year ending 31st December 2019. The report of the Secretarial Auditor for financial year 2018 is annexed as Annexure VI of this Report. The report does not contain any qualification, reservation and adverse remarks.

Reporting of fraud.

The Auditors of the company have not reported any fraud as specified under Section 143(12) of the Companies Act, 2013.

21. Compliance with secretarial standards on Board and Annual General Meetings.

The company has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India on Board Meetings and Annual General Meetings.

22. Significant material orders passed by the courts or regulators.

Order Passed by the National Company Law Appellate Tribunal (NCLAT) in the matter of penalty levied by the Competition Commission of India (CCI).

i) Appeal filed by the Company against the Order of the CCI for levying penalty of Rs. 1163.91 crores on the Company was heard and dismissed by the NCLAT and CCI's Order was upheld. Further, the Company has challenged the judgment passed by NCLAT before the Hon'ble Supreme Court. The Hon'ble Supreme Court has admitted the Company's Appeal and ordered for the continuation of interim order passed by the Tribunal.

ii) Pursuant to a reference filed by the Director, Supplies and Disposals, Government of Haryana, the CCI vide its Order dated 19th January, 2017 has imposed a penalty of Rs. 29.84 crores on the Company. The Company filed an Appeal before the Competition Appellate Tribunal (COMPAT) and obtained an interim stay the operation of the said Order. Further, by virtue of Government of India notification, all cases pending before the COMPAT were transferred to the NCLAT and as such, the hearing on the Appeal is underway at the NCLAT.

Other than the aforesaid, there have been no significant and material orders passed by the courts or regulators or tribunals impacting the ongoing concern status and company's operations. However, members' attention is drawn to the statement on contingent liabilities and commitments in the notes forming part of the Financial Statements.

23. Particulars of loans, guarantees or investments.

Particulars of loans, guarantees given and investments made during the year, as required under Section 186 of the Companies Act 2013 and Schedule V of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirement) Regulations 2015, are provided in Notes 9, 11, 16, 45, 46 of the Standalone Financial Statements.

Treasury operations.

During the year, the company's treasury operations continued to focus on cash forecasting and the deployment of excess funds on the back of effective portfolio management of funds within a well-defined risk management framework. All investment decisions in deployment of temporary surplus liquidity continued to be guided primarily by the tenets of safety of Principal and liquidity.

During the year, the investment portfolio mix was continuously rebalanced in line with the evolving interest rate environment.

24. Transfer of unclaimed dividend and unclaimed shares.

The details relating to Unclaimed Dividend and Unclaimed shares forms part of the Corporate Governance Report.

25. Energy, technology and foreign exchange.

Information on the conservation of energy, technology absorption, foreign exchange earnings and out go is required to be given pursuant to the provisions of Section 134 of the Companies Act 2013, read with the Companies (Accounts) Rules 2014, which is marked Annexure VII and forms part of this report.

26. Particulars of employees.

There were 5058 permanent employees of the company as of 31st December 2018. The disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are annexed to this report at Annexure VIII.

Further, a statement showing the names and other particulars of employees drawing remuneration in excess of the limits as set out in the Rules 5(2) and 5(3) of the aforesaid Rules forms part of this report. However, in terms of first provision of Section 136(1) of the Act, the Annual Report and Accounts are being sent to the members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection by the members at the Registered Office of the company during business hours on working days up to the date of the ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.

27. Direct subsidiaries, joint ventures and joint operations.

As of 31st December 2018, the company has 6 direct subsidiaries, 1 joint venture and 1 joint operation.

The Policy for determining Material Subsidiaries adopted by the Board pursuant to Regulation 16 of the Listing Regulations, can be accessed on the company's website at:www.ambujacement. com/investors

28. Corporate Governance.

The company has complied with the corporate governance requirements under the Companies Act, 2013 as stipulated under the Listing Regulations. A separate section on corporate governance along with a certificate from the statutory auditors confirming compliance is annexed and forms part of this Report.

29. Consolidated financial statements.

As stipulated by Regulation 33 of the Listing Regulations, the Consolidated Financial Statements have been prepared by the company in accordance with the applicable Accounting Standards. The audited Consolidated Financial Statements, together with Auditors' Report, form part of the Annual Report.

Pursuant to Section 129(3) of the Companies Act 2013, a statement containing the salient features of the financial statements of each subsidiary, joint venture and joint operations in the prescribed Form AOCf1 is annexed at Annexure IX of this Report.

Pursuant to Section 136 of the Companies Act 2013, the financial statements of the subsidiary and joint venture companies are kept for inspection by the shareholders at the Registered Office of the company. The company shall provide free of cost, the copy of the financial statements of its subsidiary and joint venture companies to the shareholders upon their request. The statements are also available on the website of the company www.ambujacement. com/investors.

The consolidated net profit of the company amounted to Rs. 2,177.40 crore for 2018 as compared to Rs. 1516.36 crores for 2017.

30. Business Responsibility Reporting

The Business Responsibility Report of the Company for the year ended 31st December, 2018, is made available on the website of the Company at and forms part of this Report.

31. Equal opportunity employer

The company has always provided a congenial atmosphere for work that is free from discrimination and harassment, including sexual harassment. It has provided equal opportunities of employment to all without regard to their caste, religion, colour, marital status and sex.

32. Other disclosure.

No disclosure or reporting is made with respect to the following items, as there were no transactions during the year under review:

• Details relating to deposits that are covered under Chapter V of the Act.

• The issue of equity shares with differential rights as to dividend, voting or otherwise.

• The issue of shares to the employees of the company under any scheme (sweat equity or stock options).

• There is no change in the Share Capital Structure during the year under review.

• The company does not have any scheme or provision of money for the purchase of its own shares by employees or by trustees for the benefits of employees.

• Neither the Managing Director nor the whole-time Directors of the company receive any remuneration or commission from any of its subsidiaries.

• No material fraud has been reported by the Auditors to the Audit Committee or the Board.

• There was no revision in the financial statements.

There was no change in the nature of business.

33. Caution statement.

Statements in the Directors' Report and the Management Discussion and Analysis describing the company's objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Crucial factors that could influence the company's operations include global and domestic demand and supply conditions affecting selling prices, new capacity additions, availability of critical materials and their cost, changes in government policies and tax laws, economic development of the country and other factors that are material to the business operations of the company.

34. Acknowledgements.

The Directors take this opportunity to express their deep sense of gratitude to the Banks, Central and State Governments and their Departments, and the Local Authorities for their continued guidance and support. The Directors would also like to place on record their sincere appreciation for the commitment, dedication and hard work put in by every member of the Ambuja family. To them goes the credit for the company's achievements. And to you, our Shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the Board of Ambuja Cements Limited

N. S. Sekhsaria

Chairman & Principal Founder

Mumbai

18th February, 2019

   

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