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Director's Report
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UltraTech Cement LtdIndustry : Cement - North India
BSE Code:532538
ISIN Demat:INE481G01011
Book Value(Rs):1,326.85
Div & Yield %:0.34
Market Cap (Rs Cr.):109690.9
Face Value(Rs):10
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Dear Shareholders,

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


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

The Indian economic growth forecast is estimated ~7.3% in FY20 as per IMF, benefiting from moderating oil prices and expected fiscal push. India is less exposed to a slowdown in global manufacturing trade growth than other major Asian economies and emerging markets and 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 billion, while services exports have grown 8.54% year-on-year to US$ 185.51 billion. Net employment generation in the country reached a 17-month high in January, 2019. With a stable Government at the Centre, the country should continue on its path of economic reforms leading to an increase in employment opportunities and consumption. The Indian cement industry witnessed another good year of favorable demand scenario. During FY19, industry achieved double digit volume growth, last witnessed in FY10. Commendable to note is the volume 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's thrust on infrastructure development viz. construction of roads, metro rail projects, airports renovation, irrigation projects etc.

Besides, there has been a significant improvement in low-cost houses constructed under the Pradhan Mantri Awas Yozana ("PMAY") in rural areas. The government has successfully achieved its target of constructing 10 million houses in Phase I and has accelerated the target for Phase II to 18.5 million houses by FY22. Similarly, the affordable housing segment in the urban areas also gained momentum in the last year. On the individual home building ("IHB") front, the rural housing market has shown demand traction in major markets; however, Tier 2 and Tier 3 urban markets are yet to pick-up. In Tier 1 or metro cities, with the stabilisation of RERA, urban demand has witnessed some improvement. With healthy volume off-take and comparatively lesser new capacity addition of 12 MTPA during FY19, capacity utilisation for the industry improved to 71%, about 5% higher over the previous year. This is expected to improve further on likely sustained demand growth with incremental new supplies at a slower pace vis--vis increment 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 at Manavar, District Dhar, Madhya Pradesh, taking its total capacity to 88.50 MTPA. Besides this, 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 to 94.75 MTPA in India and along with its other subsidiary Star Cement the total capacity of your company stands at 98.75 MTPA. UNCL has operations in UAE and China with a total capacity of 5.2 MTPA. These companies are held for disposal and hence not counted as part of your Company's total capacity.

Cement production jumped 17% from 57.23 million tonnes in the previous year to 67.20 million tonnes. The increase in production is on account of healthy cement demand growth and benefit from increased utilisation of the capacities acquired in FY18, where utilisation improved from 53% in the previous year to 72%. Capacity utilisation also improved 5% on expanded capacity base. With the successful integration of the acquisition completed in June, 2017 and subsequent improvements carried out, these plants are now operating in line with the existing plants of your Company. A planned shutdown was undertaken at one of the acquired plants in Madhya Pradesh for cost improvements, the benefits of which will be fully achieved in Q1FY20. Having achieved a cash break even already, the acquisition is now on course to achieve a PBT break even. The acquisition is generating incremental earnings as planned, which are growing month on month. As the next phase 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 likely industry growth of ~ 13%. Some of the key drivers are: (i) F ull year benefit of acquired capacity coupled with increased utilisation level; (ii) Incr eased rural penetration, with higher contribution from UltraTech Building Solutions ("UBS"). There are altogether 1,915 such outlets, with 300 being added during FY19; (iii) higher demand from institutional segment, where UltraTech is the most preferred brand; and (iv) Additional sales volume upon acquisition of UNCL w.e.f. 20th November, 2018.


( Rs. in crores)



FY19 FY18 FY19 FY18
Net Turnover 35,105 28,930 36,775 30,541
Domestic 34,603 28,455 34,626 28,455
Exports 502 475 2,149 2,086
Other Income 1,070 1,027 1,042 1,026
Total Expenditure 29,183 23,475 30,591 24,833
Profit before Interest, Depreciation and Tax (PBIDT) 6,992 6,483 7,226 6,734
Less: Depreciation 2,010 1,764 2,140 1,848
Profit before Interest and Tax (PBIT) 4,982 4,719 5,086 4,885
Interest 1,419 1,191 1,548 1,237
Profit before Impairment and Tax Expenses / share in profit of Associates 3,562 3,528 3,538 3,648
Stamp duty on acquisition of assets - (226) - (226)
Impairment of assets - - - (75)
Impairment on deconsolidation of subsidiary - - - (46)
Profit before Tax Expenses 3,562 3,302 3,538 3,301
Tax Expenses 1,106 1,071 1,106 1,077
Profit after tax 2,456 2,231 2,432 2,224
Profit attributable to Non-controlling Interest - - (3) 2
Profit attributable to Owner of the parent 2,456 2,231 2,435 2,222

Net Turnover:

Your Company's Net Turnover at Rs. 35,105 crores is higher over the previous year, driven 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 State Industrial incentives benefit consequent to the commissioning of capacity in Madhya Pradesh and full year benefits from the acquired capacities.

Operating Profit (PBIDT) and Margin:

PBIDT for the year at Rs. 6,992 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 ` 1,068/t, attributable to an increase in pet coke and coal prices. Imported pet coke prices rose 6% from US$ 96/t to US$ 102/t coupled with the impact of currency depreciation of 8% over previous year and full year impact 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 more than 20% over the previous year. Compared to imported pet coke, the average price increase for domestic pet coke was higher at 27%, which forms over 60% of total power consumption during FY19.

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

- Focus on increasing usage of renewable (WHRS, Solar and Wind power), the total share of which increased to 8.5%, which was 100 bps higher over the previous year. During the year, your Company commissioned 26 MW of WHRS capacity, which is under ramp-up and the full benefit of which will be realised from FY20 onwards. Your Company is further setting up 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 such tie-ups will increase from 62.5 MW to over 500 MW by end of FY21 and cater to ~ 10% of the total power requirement;

- Use of low cost fuels viz. industrial waste increased from 3% in the previous year to 3.3%. 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 in slag, iron ore, aluminous clay and fly-ash prices and additional limestone on transfer of lime stone mines in your Company's name.

To mitigate the impact of the rise in raw material prices, your Company is working on identifying new sources of materials and alternative low costs materials. Besides, increasing the clinker to cement conversion ratio with the launch of new products, including composite cement have been started.

(iii) Freight and Forwarding expenses:

Logistics cost increased Rs. 1,124/t from to Rs. 1,170/t, due to an increase in diesel prices by 16%.

Increase in cost on account of higher diesel prices was partially negated with optimisation of lead distance, realising synergy benefit from the acquisition and commissioning the 3.5 MTPA capacity in the State energyof Madhya Pradesh. During the year, your 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%` 1,706from crores in the previous year to Rs. 1,926 crores. This was on account of normal annual increments, commissioning of new plants and full year impact of the cost of employees from the acquisition in June, 2017.


Depreciation for the year at Rs. 2,010 crores is higher by ` 246 crores over the previous year, mainly on account of the full year impact of the acquisition and capitalisation of new capacity.

Finance Cost:

Increase in finance cost from Rs. 1,191 crores to Rs. 1,419 crores relate to the full year impact of the acquisition and additional debt taken during the year for acquiring UNCL.

Your Company does not accept any fixed deposits from the public falling under Section 73 of the Companies Act, 2013 ("the Act") and the Companies (Acceptance of Deposits) Rules, 2014.

Credit rating:

Your Company has adequate liquidity and a strong Balance Sheet. CRISIL and India Ratings and Research have re-affirmed their credit rating as CRISIL AAA and IND AAA for Long 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. 2,231 crores to ` 2,456 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 as indicated 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 5,800 4,885
Non-operating cash flow 285 192
Proceeds from issue of share capital 5 16
Proceeds from sale of investment (net) - 3,540
Increase in Borrowings 710 -
Total 6,800 8,633
Uses of Cash
Net capital expenditure 1,527 1,836
Increase in investment 2,653 -
Increase in working capital 464 1,267
Repayment of borrowings (net) - 4,027
Interest 1,373 1,159
Dividend 346 331
Purchase of Treasury Shares 81 -
Total 6,444 8,620
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 higher sales volume.

Non-Operating Cash Flow:

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


During the year, your Company raised Rs. 5,360 crores for the refinancing of loans availed / transferred for the acquisition of Jaiprakash Associates Limited and Jaypee Cement Corporation Limited's cement capacity. Your Company raised Rs. 1,500 crores, which is placed with UNCL as intercorporate deposits for repayment of financial and operational creditors. Your Company availed Rs. 245.32 crores as interest free loan under an incentive scheme of a State government and repaid existing long-term borrowings of Rs. 884 crores in line with the agreed repayment schedule.

Uses of Cash

Net Capital Expenditure:

Your Company spent over Rs. 1,600 crores on various capex during the year, primarily towards:

- completing work remaining on the green plant at Manavar, District Dhar, Madhya Pradesh, 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 be operational by FY21; and - other modernisation capex schemes.

Increase in Investments:

Your Company completed the acquisition of UNCL under the provisions of the Insolvency and Bankruptcy Code, 2016. Upon infusion of funds to the extent of ` 3,400 crores; taking over management control and re-constitution of the Board of Directors; UNCL became a wholly-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 receivables, outstanding incentive receivables under State Industrial Investment Promotion Schemes and upfront royalty payment for the transfer of mines.

Purchase of Treasury Shares:

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

Transfer to General Reserve:

Your Company proposes to transfer an amount of Rs. 1,800 crores to the General Reserves.


Your Directors have recommended a dividend of Rs. 11.50 per equity share (` 10.50 per equity 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 tax on dividend of Rs. 64.92 crores) compared to Rs. 347.61 crores (including tax on dividend of Rs. 59.27 crores) paid for FY18.

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


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 less than 365 days, setting a global benchmark for size of such capacity. The plant has already scaled 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 is expected to be commissioned by Q2 FY20.

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

Your Company has further plans to spend ~ Rs. 2,000 crores in FY20, related to remaining work at Bara, WHRS projects, development of coal block at Bicharpur, packaging terminal 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 14th November, 2018 approved your Company's Resolution Plan for acquiring BCL under the provisions of the Insolvency and Bankruptcy Code, 2016, as amended. BCL became a wholly-owned subsidiary of your Company w.e.f. 20th November, 2018 and it was re-named UltraTech Nathdwara Cement Limited, w.e.f. 13th December, 2018.

The acquisition provides your Company access to large reserves of high quality limestone. It consolidates your Company's leadership in the fast growing Northern and Western markets in the country. Major overhauling of the plants was undertaken in Q4FY19 to improve production efficiencies. The plants have been ramping up on capacity utilisation, achieving 72% in the month of March, 2019. After completing quality upgradation, 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 Board of 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 business into your Company. Century's cement business consists of 3 integrated cement units in Madhya Pradesh, Chhattisgarh and Maharashtra and a grinding unit in West Bengal. In terms of the Scheme, your Company will issue 1 (one) equity share of face value of Rs. 10/- each for every 8 (eight) equity shares of Century of face value of ` 10/- each to the shareholders of Century. The Scheme having received the approval from the stock exchanges, Competition Commission of India and the shareholders, is now awaiting approval of the National Company Law Tribunal, Mumbai Bench and other regulatory authorities as may be required.

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


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