Annual Report - India Cements - 2009-2010

THE INDIA CEMENTS LIMITED

ANNUAL REPORT 2009-2010

DIRECTORS' REPORT

Your Directors have pleasure in presenting their Sixtyfourth Annual Report
together with audited accounts for the year ended 31st March 2010.



Rs. in Crores

For the year ended 31st March

2010 2009

FINANCIAL RESULTS

Profit before Interest & Depreciation 863.51 1043.20

Less: Interest & Other Charges 142.64 112.15

Less: Depreciation 233.12 203.32

Less: Forex Fluctuation Loss/(Gain) (43.57) 79.43

Add: Transfer from Share Premium 13.28 -

Less: Shares/Bond issue expenses 13.28 -

Profit before Tax 531.32 648.30

Fringe Benefit Tax - 4.78

Deferred Tax 13.66 29.89

Provision for Taxation (net) 163.32 181.45

Profit after Tax 354.34 432.18

Add: Balance brought forward
from last year 823.41 527.32

Less: Dividend proposed on Equity
Capital (including Dividend
Distribution Tax) 71.64 66.09

Less: Transfer to General Reserve 70.00 70.00

Less: Transfer to Contingency Reserve 50.00 -

Balance carried in Profit & Loss A/c 986.11 823.41

DIVIDEND

The Board of directors has recommended a dividend of Rs.2/- per equity
share of Rs.10/- each on 30,71,72,765 equity shares of Rs.10/- each
outstanding as on date. The Board has also recommended payment of such
dividend reduced proportionately to the amount paid up on shares on which
there are calls in arrears.

SHARE CAPITAL

The paid up equity share capital of the Company has increased to Rs.307.18
crore as on 31st March, 2010 comprising of 30,71,75,657 equity shares of
Rs.10/- each on issue of 1,49,750 equity shares at a price of Rs.50/- per
share (including premium of Rs.40/- per share) during 2009-10 on exercise
of options in terms of India Cements Employees Stock Option Scheme, 2006
(ESOS, 2006) and consequent to issue of 2,45,94,000 equity shares of
Rs.10/- each at a price of Rs.120.20 per share (including premium of
Rs.110.20 per share) by way of Qualified Institutional Placement (QIP) made
in March 2010.

EMPLOYEE STOCK OPTION SCHEME

Details of options granted / exercised and other disclosures as required
under Clause 12 of the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
are set out in the Annexure 'F' to this Report.

Messrs. Brahmayya & Co., Statutory Auditors of the Company have certified
that the aforesaid Scheme has been implemented in accordance with the
Securities and Exchange Board of India (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 and the resolutions passed
by the members approving the Scheme.

No options have been granted so far under India Cements Employees Stock
Option Scheme, 2007.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors make the following statement in terms of Section 217 (2AA) of
the Companies Act,. 1956 with respect to Directors' responsibility. 'We
confirm.

1. That in the preparation of the accounts for the year ended 31st March,
2010, the applicable Accounting Standards have been followed.

2. That such Accounting Policies have been selected and applied
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair, view of the state of affairs of the
Company as at 31st March, 2010 and of the profit of the Company for the
year ended on that date.

3. That proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities.

4. That the annual accounts for the year ended 31st March, 2010 have been
prepared on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and
Analysis Report is given as addition to this report.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the listing agreement with Stock Exchanges, a
report on Corporate Governance along with Auditors' Certificate of its
compliance is included as part of the Annual Report and is given in
Annexure 'C' and Annexure'D' respectively. Further, a declaration on Code of
Conduct signed by the Managing Director in his capacity as the Chief
Executive Officer of the Company is given as Annexure'E'.

OPERATIONS

COMPANY PERFORMANCE

The performance of the company has been discussed in detail in the
Management Discussion and Analysis section. The steps taken by the company
to enhance the capacity yielded results in the form of increased
production, of clinker and cement during the year. The second line at
Malkapur and the upgraded kiln-1 at Vishnupuram quickly stabilized during
the year. The Parli Grinding Unit which was commissioned towards the end of
the previous year also contributed for the overall improvement. The clinker
production of the company was at 86.82 Lakh Ts (69.83 Lakh Ts), cement
production was at 104.94 Lakh Ts (91.11 Lakh Ts) while the cement sales was
at 105 Lakh Ts (91.18 Lakh Ts). There was also a clinker sale of 4.63 Lakh
Ts (0.02 Lakh Ts) during the year under review.

Sales and other income for the year ended 31st March 2010 was at Rs.4221.69
Crores as against Rs. 3954.53 Crores in the previous year, registering an
increase of 6.8%. The cement prices which were firm during the first two
quarters declined due to reasons mentioned elsewhere in the report during
the third quarter but has started recovering slowly from the month of
February 2010 onwards. Cost push was felt in the form of increase in the
price of raw materials, power and other operating expenses and consequently
the operating profit was lower at Rs. 863.51 Crores against Rs.1043.20
Crores in the previous year. The interest charges were higher at Rs.142.64
Crores against Rs.112.15 Crores in the previous year while the depreciation
charges amounted to.Rs. 233.12 Crores against Rs.203.32 Crores due to
higher capitalization. Consequently the net profit before tax was lower at
Rs. 487,75 Crores against Rs.727.64 Crores in the previous year.

The foreign exchange translation difference as per AS 11 has resulted in an
exceptional income of Rs. 43.57 Crores against an expense of Rs.79.43
Crores in the previous year. The provision for current tax liability works
out to Rs.163.32 Crores (Rs.181.45 Crores). The deferred tax provision as
per AS 22 resulted in a liability of Rs,13.66 Crores (Rs.29.89 Crores)
while there was no Fringe Benefit Tax during the year (Rs,4.78 Crores).
Consequently the profit after tax was Rs, 354.34 Crores against Rs,432.18
Crores in the previous year.

The year under review witnessed substantial increase in cost of production
on account of various factors which include the following:-

a) Increase in wages to workmen due to increase in cost of living index by
329 points which along with increase in the salaries of management staff in
line with the industry together with the provision for unavailed leave as
per AS 15 accounted for additional outgo of Rs.51 Crores.

b) Revision in the minimum wages payable for the contract workmen.

c) Increase in royalty on limestone from Rs.45/Tn to Rs.63[Tn with effect
from August' 09.

d) Increase in the price of petroleum products namely Diesel.

e) Increase in power generation and purchase of power from alternate
sources due to power cut and restriction of power resulting in higher
overall cost of power.

f) Increase in Excise Duty on cement to 10% from 8%.

All this together with the residual impact of such increases in the
previous year substantially impacted the cost, which was partially offset
through increased blended cement tonnage and through contribution from
higher volume of production.

SUBSIDIARIES

INDO ZINC LIMITED (IZL)

ICL Financial Services Limited (ICLFSL), the Company's wholly owned
subsidiary, acquired 12.97% of equity shares in iZl and entered into an
agreement with the promoters for purchase of another 39.73% of equity share
capital. Since IZL was a listed Company, an open offer was made to non-
promoter shareholders of IZL for acquiring their holdings in IZL subject to
a maximum of 2006 under SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 (Takeover Code). All the formalities under the
Takeover Code have been completed and ICLFSL presently holds 60.89% of
equity share capital of IZL (including 8.19% acquired under open offer) and
PZL became a subsidiary of IGLFSL; thereby becoming the stepdown subsidiary
of your Company.

IZL is presently implementing a project involving construction of an 1.5
million tonne cement plant in Rajasthan. The project is expected to be
commissioned in July 2010.

PT. COROMANDEL MINERALS RESOURCES

The company has set up this subsidiary in Indonesia for acquiring coal
concessions. Pending acquisition of coal mines, the company is yet to
commence operations. However, the company is in discussion with various
concession owners for acquiring coal mines.

The Company has been exempted by the Central Government vide its letter No.
47123612010-CL-III dated 21.4.2010 under Section 212 (8) of the companies
Act, 1956. from attaching a copy of the Balance Sheet, Profit and Loss
Account, Report of the Board of Directors and the Report of the Auditors of
the Subsidiary companies namely Industrial Chemicals & Monomers Limited,
ICL Financial Services Limited; ICL Securities Limited, ICL International
Limited. Trishul Concrete Products Limited, Indo Zinc Limited and PT.
Coromandel Minerals Resources, Indonesia. However, pursuant to Accounting
Standard 21 issued by the Institute of Chartered Accountants of India,
Consolidated Financial Statements presented by the Company include the
financial information of the subsidiaries. The Company wile make available
these documents/details upon request by any member of the Company and its
subsidiaries interested in obtaining the same. The annual accounts of the
Subsidiary Companies will also be kept for inspection by any member at the
Registered/Corporate Offices of the Company and its Subsidiary Companies.

CONSOLIDATED FINANCIAL STATEMENTS

As prescribed by Accounting Standard 21 issued by the Institute of
Chartered Accountants of India, the audited consolidated financial
statements of India Cements Group are annexed.

ASSOCIATE COMPANIES

COROMANDEL SUGARS LIMITED

During the year ended March 31, 2010, Coromandel Sugars Ltd has achieved
the highest Profit before tax of Rs.26.92 crores (unaudited), since
commissioning of the plant. Despite tile lower crushing of 5.28 lakh tonnes
of sugarcane during the year as against 5.63 fakh tonnes in the earlier
year, this was possible, primarily because of significant increase in the
market price for sugar and molasses and also due to higher sugar recovery
of 10.17% achieved as against 90% in the earlier year.

The company has produced 53634 tonnes of sugar (50677 tonnes) and molasses
of 23653 tonnes ( 29824 tonnes). Power exported to grid was marginally
lower at 200 lakh kwh as against 212 lakh kwh in the previous year, due to
lower crushing. Sugar Sales volume fell by over 120%, i.e., from 60167
tonnes in the previous year to 52723 tonnes in the current year, while
molasses sales volume dropped by over 320; i.e., from 30568 tonnes in the
previous year to 20766 tonnes during the year under review. Despite lower
sales volume of Sugar and Molasses; total gross revenue of the company
increased by 250i0 to an all time high of Rs.153.17 cr ( Rs.122.17 cr). It
may be noted that due to shortage of sugarcane, there was stiff competition
among mills resulting in higher Cane price of Rs.1950 per tonne
(Rs.1250/tonne). Based on unaudited financials, the Earnings before
Interest and Depreciation was higher at Rs. 38.38 cr (Rs.15.98 cr). Profit
Before Tax for the year was Rs.26.92 cr. (Rs.2.85 cr.).

INDIA CEMENTS CAPITAL LIMITED (ICCL)

The main focus of the Company continues to be on various fee-based
activities such as, Full Fledged Money Changing [FFMCj, Travel & Tours and
Forex Advisory Services. The wholly owned subsidiary viz: India Cements
Investment Services Limited (ICISL) is in Stock Braking. The FFMC division
operates out of 29 branches and Travels division operates at Ghennai as an
IATA accredited branch. The subsidiary PCISL has 25 branches. The Gross
income from operations of ICCL was Rs.990.66 lakhs and that of ICISL was
Rs.245.37 lakhs for the year ended 31st March, 2010.

COROMANDEL ELECTRIC COMPANY LIMITED (CELL)

Due to higher gas availability during the last quarter of the year, the
company was able to generate 170 million units of power as compared to
163.6 million units in the corresponding period of previous year, which was
wheeled and used at the cement plants of your company in Tamil Nadu. The
total revenue earned by the company during the year was Rs.44.78 Crores
(Provisional) (45.33 Crores) and net profit after tax was Rs.8.44 Crores
(Provisional) (Rs.6.66 Crores). The company maintained its dividend pattern
of 9% on equity shares besides declaring dividend at the respective coupon
rates for the participating / non-participating preference share capital.

EXPANSION/MODERNISATION

Most of the ongoing expansion programmes have been completed towards the
end of the previous financial year. The upgraded capacity of the kiln-1 at
Vishnupuram'commissioned in March 2009 stabilised quickly and has been-
operating to its enhanced production levels. The expansion of Kiln-2 at
Malkapur after initial trial runs has also stabilized earlier than expected
and has been running to capacity. The Parli Grinding Unit has started
producing cement from the month of May '09 and had to face initial
bottlenecks in the form of evacuation problems being a new location. The
problem has since been overcome and the plant has started grinding to its
full levels. The upgradation of the capacity at Chilamakur to 4500 TPD has
been delayed by nearly 6 months and is expected to be completed by the
first quarter of FY 2011.

PUBLIC DEPOSITS

The total amount of fixed deposits including cumulative deposits, which had
not become due but outstanding as at 31st March, 2010 stood at Rs.1,285.85
Lakhs. Deposits totalling Rs.41.11 Lakhs that matured for repayment were
neither claimed by the Depositors nor instructions for renewal were
received by the Company. Reminders were issued to the deposit holders and
since the close of the financial year ended 31st March, 2010, deposits
aggregating to Rs.11.36 Lakhs out of the above have either been claimed and
paid or have been renewed or transferred to Investor Education and
Protection Fund.

CONSERVATION OF ENERGY ETC.

The prescribed details as required under Section 217(1)(e) of the Companies
Act, 1956 are set out in the Annexure'A'.

RESEARCH & DEVELOPMENT

During the year, your Company spent Rs.51.81 Lakhs towards revenue
expenditure of the R&D department besides contributing a sum of Rs.78.72
Lakhs to National Council for Cement and Building Materials (NCCBM), which
carries out research on behalf of the industry.

PERSONNEL

Industrial relations continued to remain cordial during the year.

In terms of the provisions of Section 217(2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, 1975, as amended,
the names and other particulars of the employees are to be annexed to the
Directors' Report. However, as per the provisions of Section 219 (1)(b)(iv)
of the said Act, the Annual Report excluding the aforesaid information is
being sent to all members of the Company and others entitled thereto.

DIRECTORS

Mr.N.Ramachandran resigned as Executive Director and Director with effect
from 12th August, 2009. The directors record their appreciation of the
valuable contribution made by Mr.N.Ramachandran during his tenure as
non-executive director and later as Executive Director of the Company.

IDBI Bank Limited appointed Mr.K.P.Nair on the Board of the Company with
effect from 14,10.2009 in the casual vacancy caused by withdrawal of
nomination of Mr.Arun Datta.

Mr.Arun Datta and Mrs.Chitra Srinivasan were appointed by the Board as
additional directors of the Company with effect from 28.10.2009 and
05.03.2010 respectively. Under Article 103 of the Articles of Association
of the Company, Mr.Arun Datta,and Mrs.Chitra Srinivasan will hold their
offices upto the date of the ensuing Annual General Meeting and resolutions
for their election as directors of the Company are included in the Notice
dated 30th April, 2010 convening the 64th Annual General Meeting of the
Company.

Ms. Rupa Gurunath was appointed as a wholetime director effective from 5th
March, 2010 for a period of 5 years on terms recommended by the
Remuneration Committee of the Board. A resolution for the approval of her
appointment as a wholetime director is included in the Notice dated 30th
April, 2010 convening the 64th Annual. General Meeting of the Company.

Under Article 109 of the Articles of Association of the Company,
Mr.V.Manickam, Mr.A.Sankarakrishnan and Mr.N.R.Krishnan retire by rotation
at the ensuing Annual General Meeting of the Company and are eligible for
re-appointment.

Information on Directors eligible for appointment I reappointment in terms
of Clause 49 of Listing Agreement is annexed to the Notice dated 30th
April, 2010 convening the 64th Annual General Meeting.

AUDITORS

Messrs. Brahmayya & Co and P.S.Subramania lyer & Co., Chennai, the Auditors
of the Company, retire at the ensuing Annual General meeting and are
eligible for reappointment.

Sam Services of Mr.S.A.Muraliprasad, Cost Accountant, Chennai has been
appointed as Cost Auditor for the year 2010-11 subject to approval by the
Government of India.

CORPORATE SOCIAL RESPONSIBILITY

Your Company is one of the few Companies in the country which have taken a
number of initiatives for community development right from inception.

It spends approximately a sum of Rs.375 lakhs annually for imparting
education at its colleges and schools. The following deserve special
mention.

A Baiavidyalaya was started in Sankarnagar. Tirunelveli District as early
as in 1952. Sankar Higher Secondary School was started in Sankarnagar in
1957. The school has today 1900 students.

A Polytechnic College was started in Sankarnagar in 1958. The College has
evolved into one of the best polytechnics in the country and celebrated its
Golden Jubilee in 2008.

The other plants of the Company namely Sankaridurg and Dalavoi in Tamil
Nadu and Chilamakur, Vishnupuram and Malkapur in Andhra Pradesh also have
matriculation and higher secondary schools imparting education, in all to
about 2669 students.

A College by name T.S.Narayanaswami College of Arts and Science was started
in 1996 at Navalur near Chennai. It is a postgraduate College offering
affordable education to about 950 students - mostly from the lower strata
of society.

Besides assisting schools run by the Company, India Cements has been
helpipg other educational institutions also. Nearly 50 such schools have
benefited in the recent past by having their infrastructure strengthened. a

Besides education, India Cements has been donating liberally for the
construction and renovation of temples, mosques and churches. The, donation
made by the Company for these and other purposes during the last 5 years is
Rs.90 lakhs per annum on an average.

The. Company contributed liberally to alleviate the sufferings of people
affected by earthquake in Gujarat, floods in Andhra Pradesh and tsunami in
Tamil Nadu in the recent past.

In the matter of healthcare, India Cements is second to none in taking
proactive steps for supporting primary health centres. Conducting of
medical camps has been another major area and at least 7500 people have
been covered by health camps.

The importance your Company attaches to Corporate Social Responsibility
(CSR) can be gleaned from the fact that an exclusive department consisting
of 6 executives has been established at the Corporate Office and a CSR
policy was officially adopted on 1st April, 2009. The policy is based on
the globally accepted Triple Bottom Approach, which is an initiative to
create new value to Economic, Environmental and Social issues. The policy
specifies 6 sectors namely socio-economic and cultural, infrastructure,
health, human development and capacity building for self-employment,
environment, sports and recreation.

In the year 2009-10, in the aforesaid 6 sectors, the cement plants of the
Company have carried out nearly 40 different specific activities like
health camps, veterinary camps, provision of drinking water and other
infrastructure to the Government schools in the nearby villages, repairing
and provision of infrastructure facilities at the villages etc. The
empowerment of the communities in and around our plants is of special
significance. Support to self-employment activities at Dalavoi and two lift
irrigation projects in Vishnupuram and a check dam near Yerraguntla plant
are some examples.

In the matter of environment, the wind mills setup by the Company in
Coimbatore and Tirunelveli Districts, waste heat recovery plant in
Vishnupuram and the use of fly ash need special mention.

CHENNAI SUPER ICINGS

As the shareholders are aware, your company has bought the Chennai cricket
franchise of the Indian Premier League in 2008. The cricket team of the
Chennai franchise styled 'Chennai Super Kings' has garnered very quickly an
eminent brand value and various analysts have valued the Chennai franchise
in multiples of the original investment. The company besides having built
up this excellent brand has also fostered a successful cricket team with
the most consistent record among all teams over the last 3 years. This well
knit unit has cornered the glory of being champions of the just concluded
Indian Premier League in April 2010. The Company's investment in the
cricket franchise has not only served to enhance shareholder value, built
up a strong brand which can be used to market the company's products in
future but also has promoted cricket and a large fan following all over the
world.

NEW CORPORATE OFFICE BUILDING

Your 64 year old company has been helping people move into their own homes.
Your directors thought it was time your company also moved into its own
premises. Its long cherished dream has been realized in February 2010 with
the company moving its corporate office to its own building at 'Coromandel
Towers', 93, Santhome High Road, Karpagam Avenue, R.A. Puram, Chennai 600
028.

ACKNOWLEDGEMENT

The Directors are thankful to the Financial Institutions and the Bankers
for their continued support. The Directors also thank the Central
Government and the various State Governments for their support. The
stockists continued their excellent performance during the year and the
Directors are appreciative of this. The continued dedication and sense of
commitment shown by the employees at all levels during the year deserve
special mention.

On behalf of the Board

N.Srinivasan Rupa Gurunath
Vice Chairman & Managing Director Wholetime Director

B.S.Adityan
Arun Datta
R.K.Das
N.R.Krishnan
V. Nanickam
A.Sankarakrishnan
N.Srinivasan
K.Subramanian

Directors

Place: Chennai 600 028
Date : 30th April, 2010

ANNEXURE A' TO DIRECTORS' REPORT FOR THE YEAR ENDED 31ST MARCH, 2010.

Information pursuant to Section 217(1)(e) of the Companies Act, 1956 read
with the Companies (Disclosure of particulars in the report of Board of
Directors) Rules, 1988.

A. Conservation of Energy:

(a) Energy conservation measures undertaken:

i. Optimisation of the pressure drop in the pre-heater down comer duct
through Computerised Fluid Dynamics modification.

ii. Installation of high efficiency HT drive for cement mill and VFD for
mill vent fan operations resulted in lower power consumption.

iii. Additional power capacitors wherever required installed to improve the
power factor.

iv. High efficiency electronic packers with truck loaders installed in

place of conventional mechanical packers resulting in higher output and
lower power consumption.

v. Optimisation of air distribution in the cooler section resulting in
power reduction.

vi. Reciprocating compressors in the cement mill and packing house replaced
with modem efficient screw compressors.

vii. Line II at Malkapur with most modem high efficiency motors, air slides
in place of screw conveyors, high efficiency process fans and with latest
automation technology for better monitoring and improvement of
productivity.

viii. Incandescent conventional bulbs replaced with energy saving CFL/FL
bulbs for reducing the colony electricity consumption.

ix. Retrofitting of old MOCBs with VCBs.

x. Upgradation of cooler II drive and kiln drive and replacement of kiln
girth gear in one of the plants resulting in improved kiln operation and
reduction in specific heat and power consumption.

xi. Installation of fly-ash silo and feeding system resulting in increased
additives consumption and reduction in specific power, consumption in PPC.

(b) Additional investments and proposals, if any, being implemented for
reduction of Consumption of energy:

i. Installation of high efficiency and low pressure preheater cyclones.

ii. Optimisation of mill outputs through closed circuiting of raw mill and
cement mills.

iii. Close circuiting of tertiary crusher to improve the output of raw
mill.

iv. Cooler mid air tapping for increasing the hot air temperature and
improving the VRM output which will result in reduction of hot air from
preheater saving the fuel.

v. Installation of fly-ash silos and proper feeding systems at two of the
plants further to optimize the usage of fly-ash and reduce the power
consumption.

vi. Upgradation of pyro section for 4500 TPD output (3600 TPD) ensuring
heat and power reduction.

vii. Installation of fly-ash driers ensuring optimum utilization of hot gas
and higher availability of fly-ash to reduce the overall power consumption.

viii. Modem wagon loading arrangements planned for increasing the packing
output and reduction in power / labour including installation /
retrofitting of electronic packers in place of mechanical packers.

ix. Mechanical conveyor for cement transport to reduce the power
consumption.

x. Optimisation of mill output through introduction of PLC and DCS for one
of the plants.

(c) Impact of measures at (a) and (b) above for reduction of energy
consumption and consequent impact on cost of production of goods:

The measures that are proposed to be takeniunder implementation are
expected to reduce the power consumption by nearly 4 units/Tn of cement and
overall heat consumption by around 10-15 k.cals per kg of clinker. However,
during the year, the power was higher on account of stabilization of the
new line at Malkapur and the expanded line at Vishnupuram which has been
explained elsewhere in the report.

(d) Total energy consumption and energy consumption per unit of production:

Given in Form 'A' annexed.

B. Technology Absorption:

Efforts made in technology absorption:

Particulars given in Form'B' annexed.

C. Foreign exchange earnings and outgo:

(a) Activities relating to exports, initiatives taken to increase exports,
development of new export market for products and services and export
plans:

We have not exported cementlclinker during 2009-10.

(b) Total foreign exchange used and earned:

Current Year Previous Year

Used Rs. lakhs - -

Earned Rs. lakhs 1.68 -

FORM A

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

Current Previous
Year Year

A. POWER & FUEL CONSUMPTION

1. Electricity

(a) Purchased

Units - KWH - Lakhs 8797.25 7262.40

Total amount - Rs. Lakhs 27214.84 21887.85

Rate per unit - Rs. 3.09 3.01

(b) Own Generation

(1) Through Diesel/Furnace Oil Genset

Units - KWH - Lakhs 1444.98 1039.05

Unit per Litre of

Diesel/Furnace Oil-KWH 3.88 3.82

Cost per unit - Rs. 4.71 3.80

(2) Through Steam Turbine/Genset

Units - KWH - Lakhs - -

Unit per Litre of Furnace Oil/Gas-KWH

Cost per unit - Rs.

2. Coal for Kilns (various grades
incl. Lignite)

Quantity Tonnes 1419277 1177630

Total Cost Rs.Lakhs 65697 63113

Average Rate Rs./Tonne 4629 5359

3. HSD/Furnace Oil
for Kilns

Quantity K.Litres 677.35 509.70

Total Cost Rs.Lakhs 227.68 173.70

Average Rate Rs./K.Litre 33613 34079

4. Consumption per
unit of Production Standards
(if any)

Electricity (KWH/Tn
of Cement) 110 93.16 91.13

Coal Consumption Per
Tn of Clinker 20-25 16.35 16.87

(Depending on Quality
of Coal)

Diesel Oil/Furnace Oil
per to of Cement (Litres) 0.06 0.05

* Including Power from Waste Heat Recovery Plant.

FORM B

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECTTO ABSORPTION

Research and Development (R & D):

1. Specific areas in which R&D carried out by the Company
2. Benefits derived as a result ofabove R & D
3. Future plan of action
4. Expenditure on R & D:

The Company has started an inhouse R&D department during Dec.99 with a
specified objective of carrying of R&D Projects in development of expert
systems for the mills and kilns optimisation, Benchmark studies of our
Cement Plants, optimisation of process Systems and Parameters ensuring
Product improvement and cost reduction.

(a) Capital:

Nil

(b) Recurring:

A sum of Rs.51.81 Vakhs has been spent during the year for the functioning
of R&D department. Besides this, a sum of Rs.78.72 lakhs is the
contribution to National Council for Cement and Building Materials (NCCBM)
which carries out Research on behalf of the Industry.

(c) Total:

Rs.130.53 Lakhs

(d) Total R&D expenditure as a percentage of total turnover:

0.03

Technology absorption, adaptation and innovation:

1. Efforts, in brief, made towards technology absorption, adaptation and
innovation:

Not applicable

2. Benefits derived as a result of above efforts e.g. product improvement,
cost reduction, product development, import substitution etc:

Not applicable

3. In case of imported technology (imported during the last 5 years
reckoned from the beginning of the financial year), following information
may be furnished:

Not applicable

(a) Technology imported }
(b) Year of Import }
(c) Has technology been fully absorbed }
(d) If not fully absorbed, areas where } Not applicable
this has not taken place, reasons }
therefor and future plans of action. }

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMY-AN OVERVIEW

India's economy expanded at the rate of 7.9% in the July-September 2009
period bolstered by Government injected stimulus packages and rising
industrial production.

A sustained revival in production of capital goods and consumer durables
has fuelled a 15.1% growth in official Index of Industrial Production (IIP)
in February 2010, which marks the fourth consecutive month of double digit
industrial growth with the cumulative growth for 11 month period (April-
February 2009-10) working out to 10.1% as against 3% in the corresponding
period of 2008-09.

The country's exports in February 2010 touched $16.09 billion registering a
34.7% increase over $11.94 billion recorded in February last year. Imports
surged a whopping 66.4% at $25.06 billion in February 2010 compared to
$15.08 billion in the same month last year, Cumulative imports during April
2009 / February 2010 declined to $248 billion compared to $287 billion in
the corresponding period of the earlier financial year.

Inflation rate as measured by wholesale price index touched a 16 month high
of 9.89% in February 2010 as compared to 8.56% in January 2010.

INDUSTRY SCENARIO

Despite the widely published impact of global melt down elsewhere in the
world, the growth of cement industry in India was upbeat registering double
digit growth during the year under review defying the prediction of
troubled times for the industry. Based on the available information
furnished by Cement Manufacturers' Association, the all India clinker
production was up by a healthy 13.4% while cement production was up by
12.4% with the industry operating at close to 85% of its capacity. The
domestic consumption of cement in the country grew significantly by 12.8%
for the year ended 31 st March 2010. However, the growth in the south was
sluggish due to a negative growth in Andhra Pradesh and it was only at 5.1%
for the year under review as, compared to a double digit growth in the
previous year. The core markets of Tamil Nadu, Kerala and Karnataka
registered a growth of 11.1%, 4.4% and 6.6% respectively for the period.
With materialization of more capacities in the South,and with a negative
growth in Andhra Pradesh, the cement prices were depressed from the month
of October '09 but has started recovering from February 2010. With growth
in demand absorbing the additional capacities created, it is expected that
prices would further recover to pre-October '09 levels in the busy season
ahead. Though South witnessed substantial increase in capacity which has
started materializing from the second half of the year, the natural flow to
the deficit markets of East and North have already started taking place and
which acts as a buffer in helping stabilization of prices in the South.
During the year under review the international priced of oil were
fluctuating frequently moving from a level of US$ 40 in March '09 to US$ 82
by March 2010. This upward movement of oil prices had its impact on the
coal prices which also went up from a level of around US$ 85 CIF per Tn in
the first quarter of the year to a level of US$ 115 CIF per Tn during March
2010. The strengthening of the Rupee against Dollar from a level of Rs.51
in the year beginning to around Rs.45 towards the end of the year gave some
cushioning effect to the increase in the price of coal. The industry was
also burdened with increase in the price of diesel and petroleum products
which impacted the freight rates of incoming materials and outgoing
finished product. The Royalty on limestone was also revised steeply from
Rs.45/Tn to Rs.63/Tn from the month of August' 09. The Excise Duty on
cement was also hiked by 2% from 8 to 10% in the Union Budget from 1st
March 2010.

COMPANY PERFORMANCE

With the steps taken to enhance the capacities, the performance of the
company was significantly up as given hereunder:

In Lakh Tns

2009-10 2008-09 % Growth

Clinker 86.82 69.83 24

Cement 104.94 91.11 15

Cement Sales 105.00 91.18 15

Clinker Sales 4.63 0.02

Overall sales including
Clinker 109.63 91.20 20

It can be seen from the above that the company has achieved significant
strides in clinker, cement and dispatches during the year under review. The
performance of the company could have been better but for the constraints
in the availability of power from the grid in Tamil Nadu and Andhra Pradesh
during early part of the year and the evacuation problems in the newly
created facility at Parli and the enhanced facility at Malkapur. While
there was a minimum power cut to the tune of 20% throughout the year in
Tamil Nadu, there were significant disruptions in the power availability
during the first quarter of the year in Andhra Pradesh imposing power
holidays for 2 days in a week besides peak hour restrictions. The company
could overcome the problem by running the costly captive heavy oil
generating sets and by availing power from the collective captive power
plantsand through sourcing of high cost power from alternate sources:

Also, there was delay in the commissioning of the cement grinding
facilities at the Malkapur Plant and at Parli Grinding Unit and more time
was taken for stabilization of these facilities. The Company had therefore
resorted to the sale of 4.63 Lakh Ts of clinker particularly during the
first half of the year under review.

Some of the company's plants achieved record levels of production as
under:

* The new dry process cement plant at Sankaridrug achieved record clinker
production of 4.37 Lakh Ts.

* Dalavoi Plant achieved its highest cement grinding and dispatch of 16.64
Lakh Ts and 16.62 Lakh Ts respectively.

* Yerraguntla Plant surpassed its previous record in clinker production at
5.62 Lakh Ts (5.39 Lakh Ts).

The upgraded facility at ulshnupuram and the second line at Malkapur have
also started producing up to their revised enhanced capacities.

During the year under review, the company's ships were gainfully employed
with one of the ships on captive cargo doing 11 voyages and the other one
fixed on the coastal coal movement at reasonably good rates. The sale and
purchase prices having bottomed out, the shipping sector is now looking up
with an opportunity for further investment in business to capitalize on the
rise in ocean freight rates.

ENERGY EFFICIENCY AND COST REDUCTION

While the company has taken lot of proactive steps in minimizing the cost
of power through addition of wind mills and stakes in gas power plants in
Andhra Pradesh and Tamil Nadu and through Waste Heat Recovery System, the
restrictions in the overall availability of power and resultant dependence
on heavy oil fuel sets and purchase of alternate source of power at higher
cost resulted in marginal increase in the overall cost of power. While
sustained efforts yielded results in the form of reduced power consumption
in four of our plants, increased power consumption at two other plants
where expansions/upgradations were carried'out could not be avoided given
the initial teething problems and stabilization period for the new /
upgraded facilities. Towards the end of the year the power consumption has
started coming down at these units also and is expected to stabilize at
normal levels.

The company's wind mills generated a total of 359 Lakh units (282 Lakh
units) which was used by the company's plants in Tamil Nadu. The Waste Heat
Recovery System at Vishnupuram generated 561 Lakh units (472 Lakh units)
during the year under review. The company has also availed 1638 Lakh units
of power from Coromandel Electric Company Ltd (1595 Lakh units) and 1882
Lakh units from Andhra Pradesh Gas Power Corporation Ltd (1330 Lakh units)
chargeable at cheaper prices which helped in mitigating the impact of
increase in average cost of power.

The blended cement proportion was also maintained in consonance with the
increase in the production volume and was at 75.10 Lakh Ts as compared to
64.85 Lakh Ts in the previous year which also helped in mitigating the
impact of cost increases.

DEVELOPMENT ACTIVITIES

Your company has already obtained ISO 9001 certification for quality
assurance for the plants at Sankarnagar, Chilamakur and Vishnupuram and
implementation of the same is already in progress for other plants and
expected to be completed by financial year end.

Your company has implemented Total Productive Maintenance (TPM) for
productivity improvement in your plants at Sankarnagar, Dalavoi, Chilamakur
and Yerraguntla. The implementation of TPM for productivity enhancement is
in progress for the Vishnupuram and Malkapur plants.

CLEAN DEVELOPMENT MECHANISM (CDM)

Your company has been earning its Certified Emission Reductions in its
approved CDM project of the. Waste Heat Recovery at Vishnupurarn plant and
further avenues involving reduction of carbon emissions through usage of
alternate fuels are also being explored.

OPPORTUNITIES, THREATS, RISKS AND CONCERNS

The growth of the industry has been upbeat with a capacity utilization of
85%. Though the economy showed signs of slow down in the early part of the
year, it posted a remarkable recovery, thanks to the inherent strength of
the economy and revival of the infrastructure industry and improvement in
industrial production. With the outlook of a 10% growth rate in the 12th
plan period and with more investments in the infrastructure sector, the
industry can expect buoyancy to continue in the medium term. However,
significant portion of the balance of capacities announced earlier are on
the anvil and which is likely to have an impact on the cement prices in the
short term. But with the anticipated boost to the infrastructural
developments such as roads, ports and mega power plants and with the
revival of the global economy as being witnessed, the demand supply
imbalance for the country as a whole could get corrected within a short
span of time, which augurs well for the industry. However, the demand
supply imbalance in the South where huge capacities are materializing may
take a longer time to correct. The challenge to the industry will be to
overcome the transport bottlenecks that may come in the way of reaching
these capacities to deficit markets.

Your company is also well placed with the enhanced capacities Which are
functional and will participate in the overall growth in the cement sector.
Indo Zinc Limited, a stepdown subsidiary of your company, is setting up a
new 1.5 million tonnes green field cement plant in Rajasthan, which is
expected to be operational from July, 2010. The upgradation at the
Chilamakur Cement Plant to 4500 TPD of clinker is slightly delayed and will
start materializing from the second quarter of FY 2011.

To overcome the bottlenecks in the availability of power posed through
restrictions from grid supply, the company is putting up two thermal plants
of 50 MW capacity each in Tamil Nadu and Andhra Pradesh. The company has
also completed the formalities for obtaining the coal mining rights in
Indonesia to meet the requirements of coal for power generation and to meet
in part the requirements of coal for cement manufacture. The company has
also taken steps to secure long term agreement for supply of additional fly
ash to maximize blended cement production.

Impending increase in the price of petroleum products could affect the
energy and transportation cost of the company. The company's ships are
available at hand to partially protect against the increase in ocean
freight rates for inward carriage of coal and other materials. The
volatility of the Rupee against Dollar could significantly impact the
prices of imported coal / spares and thereby the. cost of production. The
anfrastructural bottlenecks in the form of shortages in availability of
indigenous coal and wagon supplies for movement of cement are also causes
of concern. With additional allocation of indigenous coal and with the
mining rights in Indonesia for imported coal, this risk has been mitigated
to a certain extent.

OUTLOOK

Based on the announcements and projections of the Planning Commission and
ADB, the Indian economy is better placed to grow at over 8% in the. medium
term despite the relatively nil growth or recessionary trends elsewhere.
The economy is driven by self-consumption and growth in fundamental sectors
of industry, agriculture and services. Even during the difficult times in
the previous year, the industry was not affected by the economic slow down
and it registered a growth of over 8% in 200809 and over 12% in FY 2010.
Since economic growth is driven more by development of infrastructure and
housing, it has a direct link to the cement consumption which has grown at
more than 100% of the growth in GDP. With this sustained growth in cement
consumption and with part of the new capacities having already been
absorbed in the market place, the industry is poised to register
significant strides with improved returns despite marginal aberrations in
prices during commissioning of new capacities in 2010-11.

VALUE ENHANCING STRATEGIES

The company has taken lot of steps in increasing the capacity through
upgrades and installation of green field plants and has been constantly
looking for opportunities for further growth in capacity thereby enhancing
the value of the stakeholders. This has resulted in improvement in
production by over 20% as detailed elsewhere during the year under review.

On the cost front, the company has taken steps for increasing the sources
of fly ash in order to maintain the blended cement proportion which was
over 73% during the year under review. The company is also taking steps to
bring down the cost of fuel through securing additional coal linkages in
the domestic front and mining rights for imported coal besides inducting
the Company's own ships for transport of coal to combat the freight costs.
Steps are also taken to ensure powet,availability through installation of
power plants. The company has also trimmed its manpower across all the
units already.

HUMAN RESOURCES & INDUSTRIAL RELATIONS

The industrial relations remained cordial throughout the year at all the
units. Training and multi-task development skills are given prime
importance. With sustained efforts taken for reduction of manpower, the
overall number of employees at the end of the year under review was 3262
(Previous Year - 3323).

INTERNAL CONTROL SYSTEMS &THEIR ADEQUACY

Your company has a well defined internal control system to support
efficient business operations and statutory compliance. A team of external
Firms of Chartered Accountants appointed to carry out the internal audit
function adds to the stability of the internal control systems. Suitable
internal checks have been built-in to cover all monetary transactions with
proper delineation of authority, which provides for checks and balances at
every stags. The company has a strong, system of budgetary control which
covers all aspects of operations, finance, capital expenditure at a macro
level on a monthly basis reporting directly to top management. All the
physical performances and efficiency parameters are monitored on a daily
basis and actions are taken then and there. The company has an Audit
Committee of Directors to review financial statements to shareholders. The
role and terms of reference of the Audit Committee cover the areas
mentioned under Clause 49 of the Listing Agreement with Stock Exchanges and
Sec.292A of the Companies Act, 1956 besides other terms as may be referred
to by the Board of Directors from time to time.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

HIGHLIGHTS OF FINANCIAL PERFORMANCE

Rs. Crores

2009-10 2008-09

Net Sales/Income from operations 3687.27 3359.49

Other Income 120.99 115.41

Total Income 3808.26 3474.90

Total Expenditure 2944.75 2431.70

Operating Profit 863.51 1043.20

Operating Margin % 22.67% 30.02%

Interest & Finance Charges 142.64 112.15

Gross Profit after Interest but
before Depreciation and Tax 720.87 931.05

Depreciation 233.12 203.32

Profit for the year 487.75 727.73

Foreign Exchange Fluctuation 43.57 (79.43)

Profit before Tax 531.32 648.30

Fringe Benefit Tak - 4.78

Deferred Tax Liability 13.66 29.89

Taxation provision - net 163.32 181.45

Profit after Tax 354.34 432.18

Return On Capital Employed (ROCE)* 16.52% 24.33%

* ROCE = Operating Profit/Capital Employed (excluding capital work in
progress and revaluation) Sales and other income from operations has gone
up by 9.8% mainly due to increase in the volume of sales by over 20% as
offset by the reduction in selling prices. The other income was higher due
to higher income derived from the Franchisee income of the Chennai Super
Kings. The total expenditure has gone up by 21% driven by the increase in
volume as well as the cost push mentioned elsewhere in the report and also
due to higher provisioning required as per AS 15 of ICAI for unavailed
leave.

Interest and other charges were higher at Rs.142.64 Crores as compared to
Rs.112.15 Crores due to drawal of additional loans for operations and
capital expenditure, while Depreciation charges were higher at Rs.233.12
Crores against Rs.203.32 Crores due to higher capitalization including the
grinding facilities at Malkapur.

The deferred taxation as per AS 22 has resulted in a liability of Rs.13.66
Crores (Rs.29.89 Crores) while the provision for tax works out to Rs.163.32
Crores (F1s.181.45 Crores). There was no Fringe Benefit Tax during the year
(Rs.4.78 Crores). The resultant net profit after tax was lower at Rs.354.34
Crores as compared to Rs.432.18 Crores in the previous year.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report 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.
Important factors that could influence the Company's operations include
global and domestic supply and demand conditions affecting selling prices
of finished goods, input availability and prices, changes in government
regulations, tax laws, economic developments within the country and other

factors such as litigation and industrial relations.