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MIRA
INFORM REPORT
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Report Date : |
28.01.2008 |
IDENTIFICATION
DETAILS
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Name : |
DALMIA CEMENT (BHARAT) LIMITED |
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Registered Office : |
P. O. Dalmiapuram, District Tiruchirapalli District - 621651, Tamilnadu |
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Country : |
India |
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Financials (as on) : |
31.03.2007 |
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Date of Incorporation : |
01.11.1951 |
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Com. Reg. No.: |
18-640 |
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CIN No.: [Company
Identification No.] |
L26942TN1951PLC000640 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
CHED03385E |
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Legal Form : |
Public limited liability company. The company's shares are listed on the
Stock Exchanges |
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Line of Business : |
Engaged in manufacturing of cement, magnesites, sugar, electronics, wind energy and refractories with an installed capacity of 1034000 tons of cement per annum. |
RATING &
COMMENTS
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MIRA’s Rating : |
Aa |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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Maximum Credit Limit : |
USD 30139320 |
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Status : |
Excellent |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well-established and reputed company, having fine track. Available information indicates high financial responsibility of the company. Their trade relations are fair. Financial position is good. Payments are correct and as per commitments. Subject can be considered good for normal business dealings at usual trade terms and conditions. |
LOCATIONS
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Registered Office : |
P. O. Dalmiapuram, District Tiruchirapalli District - 621651, Tamilnadu, India |
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Tel. No.: |
91-4329- 235123 / 235131 |
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Fax No.: |
91-4329-235111 |
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E-Mail : |
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Website : |
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Head Office : |
11th & 12th Floors, 'Hansalaya’, 15, Barakhamba Road, New Delhi – 110 001, India |
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Corporate
Office : |
P. O. Dalmiapuram, Tiruchirapalli Dist - 621651, Tamilnadu, India |
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Tel. No.: |
91-4329-235123 |
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Fax No.: |
91-4329-235111 |
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E-Mail : |
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Plant : |
Cement Plant Dalmiapuram (Tamil Nadu) Dalmiapuram -621651, Dist. Tiruchirapalli, Tamil Nadu Tel No: 91-4329-235123 91-4329-235111 Dalmia Magnesite Corporation Salem (Tamil Nadu) Vellakkalpatti, P.O. Karuppur, Salem-636012. Dalmia Wind Farm Muppandal (Tamil Nadu) Aralvaimozhy -629301 District Kanyakumari (Tamil Nadu) Dalmia Chini Mills Ramgarh (Uttar Pradesh) Village Ramgarh - 261403, Tehsil Misrikh, District Sitapur (Uttar Pradesh) Tel No:.91-5865-236116 Electronics
Divisions Bangalore (Karnataka), Plot No. 53, 54A, Electronics City, Hosur Road, Bangalore - 560100 |
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Branches : |
Dalmiapuram - 621651, Distt.
Trichy (Tamilnadu) Ramgarh Chinni Mills Farun Mansion IV floor 26,
Ethiraj Salai Egmore, Chennai - 600008 (Tamilnadu) 11th floor, Hansalaya Building,
Barakhamba Road, New Delhi 110001 |
DIRECTORS
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Name : |
Mr. P. K. Khaitan |
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Designation : |
Chairman |
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Name : |
Mr. N. Gopalaswamy |
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Designation : |
Whole Time Director |
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Name : |
Mr. Nilratan Khaitan |
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Designation : |
Director |
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Name : |
Mr. M Sankaranarayanan |
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Designation : |
Nominee of Unit Trust of India |
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Name : |
Mr. M. Raghupathy |
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Designation : |
Director |
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Name : |
Mr. Jagdish Sharan Baijal |
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Designation : |
Director |
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Name : |
Mr. M. H. Dalmia |
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Designation : |
Director |
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Name : |
Mr. Jai Hari Dalmia |
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Designation : |
Vice Chairman |
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Name : |
Mr. Y H Dalmia |
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Designation : |
Vice Chairman |
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Name : |
Mr. Gautam Dalima |
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Designation : |
Joint Managing Director |
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Name : |
Mr. Puneet Dalmia |
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Designation : |
Managing Director |
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Name : |
Mr. N Khaitan |
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Designation : |
Director |
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Name : |
Mr. J S Baijal |
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Designation : |
Director |
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Name : |
Mr. Donald M Peck |
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Designation : |
Director |
MAJOR SHAREHOLDERS
/ SHAREHOLDING PATTERN
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Names of Shareholders |
No. of Shares |
Percentage of
Holding |
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Promoters |
17289317 |
40.46% |
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Central State Governments |
128155 |
0.30% |
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Financial Institutions |
1659685 |
3.88% |
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Mutual Funds |
2500 |
0.01% |
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Foreign Institutional Investors |
1006940 |
2.36% |
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Banks |
436667 |
1.02% |
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Insurance Companies |
1348471 |
3.16% |
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Bodies Corporate |
6558888 |
15.35% |
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Overseas Body Corporate |
1483000 |
3.47% |
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Foreign Corporate Bodies |
4470588 |
10.46% |
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NRI / Foreign Nationals |
126904 |
0.30% |
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Individuals / Others |
8217578 |
19.23% |
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Total
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42728693 |
100.00% |
BUSINESS DETAILS
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Line of Business : |
Engaged in manufacturing of cement, magnesites, sugar, electronics,
wind energy and refractories with an installed capacity of 1034000 tons of
cement per annum. |
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Products : |
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PRODUCTION STATUS (as on 31.03.2007):-
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Particulars |
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Unit |
Installed
Capacity * |
Actual
Production |
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Cement |
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(‘000 Tonnes) |
3500.00 |
2736.57 |
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Refractory Products |
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(‘000 Tonnes) |
79.50 |
30.95 |
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Multilayer Ceramic Chip Capacitors |
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(Million Nos.) |
120.000 |
42.29 |
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Chip Resistors |
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(Million Nos.) |
100.000 |
16.70 |
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Sugar |
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(‘000 Tonnes) |
22.50** |
107.73 |
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Refractories etc # |
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(‘000 Tonnes) |
NA |
29.56 |
Note:
Licenced capacity not furnished as the above industries are delicenced.
· * As certified by the Management and accepted by the Auditors.
· ** Sugarcane crushed in Tonnes per day.
· # Production on job-work basis.
GENERAL
INFORMATION
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No. of Employees : |
5000 |
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Bankers : |
Ø Punjab National Bank Ø Canara Bank Ø Corporation Bank Ø United Bank of India Ø State Bank of Travancore Ø BNP Paribas Ø ICICI Bank Limited Ø Axis Bank Limited Ø State Bank of India Ø Indian Bank Ø BNP Paribas Ø Union Bank of India Ø Yes Bank Limited |
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Facilities: |
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Banking
Relations : |
Good |
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Auditors : |
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Name : |
S. S. Kothari Mehta & Company Chartered Accountants |
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Memberships : |
Confederation of Indian Industry |
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Associates/Subsidiaries : |
Subsidiaries · Kanika Investment Limited, · Ishita Properties Limited, · D.I. Properties Limited, · Geetee Estates Limited, · Avnija Properties Limited, · Shri Rangam Properties Limited, · Hemshila Properties Limited, · Himshikhar Investment Limited · Dalmia Minerals and Properties Limited, · Shri Radha Krishna Broker and Holdings Limited, · Seeta Estates and Brokers Limited, · Shri Rangam Brokers and Holdings Limited, · Arjuna Brokers and Minerals Limited, · Sri Kesava Mines and Minerals Limited, · Sri Madhava Minerals and Properties Limited, · Sri Shanmugha Mines and Minerals Limited, · Sri Swaminatha Mines and Minerals Limited, · Sri Subramanya Mines and Minerals Limited, · Sri Trivikrama Mines and Properties Limited (w.e.f. 26.09.06), · Sri Dhandauthpani Mines and Minerals Limited (w.e.f.4.10.06), · Sri Madhusudana Mines and Properties Limited (w.e.f. 04.10.06), · Eswar Cements Private Limited (w.e.f. 1.11.06), · Dalmia Cement (Mehgalaya) Limited (w.e.f. 27.03.07) and Anupama Investment Limited (up to 20.07.06). · Anupama Investment Limited (w.e.f. 21.07.06) Associates · Rama Investment Company Private Limited, · Puneet Trading and Investment Company Private Limited, · Kavita Trading and Investment Company Private Limited, · Sita Investment Company Limited, Mayuka Investments Limited, · Kanodia Commercial Limited, · Ankita Pratishtan Limited, · Kajal (India) Limited, · Himgiri Commercial Limited, · Valley Agro Industries Limited, · Alirox Abrasives Limited, · Shri Nataraj Ceramic and Chemical Industries Limited, · Shri Chamundeswari Minerals Limited, · Shree Nirman Limited, · Dalmia Electrodyne Technologies Limited, · Keshav Power Private Limited, · Avanee and Ashni Securities Private Limited, · OCL India Limited and ZipAhead.Com Limited. |
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CAPITAL STRUCTURE
Authorised Capital :
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No. of Shares |
Type |
Value |
Amount |
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76516210 |
Ordinary Shares |
Rs. 2/- each |
Rs.153.030 millions |
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123483790 |
Unclassified Shares |
Rs. 2/- each |
Rs.246.970 millions |
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Total |
Rs 400.000 millions
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Issued, Subscribed & Paid-up Capital :
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No. of Shares |
Type |
Value |
Amount |
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42728693 |
Ordinary Shares |
Rs. 2/- each |
Rs.85.460
millions |
Notes:
1. Of the above
Shares:
(i) 6651410 Shares
were allotted as fully paid-up pursuant to arrangements/scheme of conversion,
without payments being received in cash; and
(ii) 27631245
Shares were allotted as fully paid-up by way of Bonus Shares by capitalisation
of Reserves.
2. During the year
2001-02, the Company had issued 7651621 Non-Convertible debentures of
Rs.10/-each along with detachable tradeable warrants. The holders of these
warrants have the option to subscribe to equity shares of the Company (5
ordinary shares of Rs.2/- each) at Rs. 23.764 per Share upon the call option
being exercised by the Board of Directors or on 11-9-2008, whichever is earlier
in terms of the Letter of Offer dated 26th June, 2001.
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES OF FUNDS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
85.460 |
76.520 |
76.500 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
7449.370 |
4206.140 |
3520.100 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
7534.830 |
4282.660 |
3596.600 |
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LOAN FUNDS |
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1] Secured Loans |
9306.260 |
6373.110 |
4483.900 |
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2] Unsecured Loans |
839.600 |
458.670 |
504.500 |
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TOTAL BORROWING |
10145.860 |
6831.780 |
4988.400 |
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DEFERRED TAX LIABILITIES |
1063.080 |
729.980 |
0.000 |
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TOTAL |
18743.770 |
11844.420 |
8585.000 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
12271.510 |
6305.530 |
3908.400 |
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Capital work-in-progress |
1164.800 |
1580.320 |
2250.900 |
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INVESTMENT |
3785.610 |
1752.830 |
873.300 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
1975.380
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1916.820 |
1927.900 |
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Sundry Debtors |
820.810
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597.540 |
517.000 |
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Cash & Bank Balances |
1037.650
|
589.000 |
228.100 |
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Other Current Assets |
0.000
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0.000 |
0.000 |
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Loans & Advances |
2691.330
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1459.420 |
1009.300 |
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Total
Current Assets |
6525.170
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4562.780 |
3682.300 |
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Less : CURRENT
LIABILITIES & PROVISIONS |
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Current Liabilities |
4453.610
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2037.930 |
1841.100 |
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Provisions |
549.710
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325.850 |
302.300 |
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Total
Current Liabilities |
5003.320
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2363.780 |
2143.400 |
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Net Current Assets |
1521.850
|
2199.000 |
1538.900 |
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MISCELLANEOUS EXPENSES |
0.000 |
6.740 |
13.500 |
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TOTAL |
18743.770 |
11844.420 |
8585.000 |
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PROFIT & LOSS
ACCOUNT
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PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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Sales Turnover |
9864.730 |
5697.460 |
5189.000 |
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Other Income |
1701.960 |
808.210 |
242.400 |
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Total Income |
11566.690 |
6505.670 |
5431.400 |
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Profit/(Loss) Before Tax |
2963.850 |
1089.380 |
357.300 |
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Provision for Taxation |
674.510 |
240.930 |
48.600 |
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Profit/(Loss) After Tax |
2289.340 |
848.450 |
308.700 |
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Export Value |
74.620 |
37.910 |
0.000 |
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Import Value |
1590.290 |
434.050 |
0.000 |
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Expenditures : |
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Raw Material Consumed |
2403.500 |
1704.510 |
1454.400 |
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Excise Duty |
0.000 |
0.000 |
695.400 |
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Purchases made for re-sale |
12.250 |
25.040 |
0.000 |
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Increase/(Decrease) in Finished Goods |
[178.780] |
91.300 |
[118.300] |
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Salaries, Wages, Bonus, etc. |
486.260 |
320.690 |
0.000 |
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Power & Fuel Cost |
0.000 |
0.000 |
990.000 |
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Employee Cost |
0.000 |
0.000 |
268.400 |
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Selling & Administration Expenses |
0.000 |
0.000 |
499.900 |
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Miscellaneous Expenses |
0.000 |
0.000 |
294.700 |
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Interest & Financials Charges |
0.000 |
0.000 |
225.200 |
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Depreciation & Amortization |
550.750 |
279.290 |
202.900 |
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Other Expenditure |
5328.860 |
2995.460 |
561.500 |
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Total Expenditure |
8602.840 |
5416.290 |
5074.100 |
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QUARTERLY RESULTS
|
Year |
31.12.2007 |
30.09.2007 |
30.06.2007 |
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Type |
3rd Quarter |
2nd Quarter
|
1st Quarter |
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Sales Turnover |
3633.200
|
3546.600
|
3481.600
|
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Other Income |
952.200
|
362.800
|
715.900
|
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Total Income |
4585.400
|
3909.400
|
4197.500
|
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Total Expenditure |
2645.900
|
2351.500
|
2765.200
|
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Operating Profit |
1939.500
|
1557.900
|
1432.300
|
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Interest |
294.400
|
257.000
|
223.300
|
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Gross Profit |
1645.100
|
1300.900
|
1209.000
|
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Depreciation |
232.900
|
233.200
|
212.800
|
|
Tax |
164.200
|
123.300
|
115.100
|
|
Reported PAT |
1125.400
|
827.700
|
818.400
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KEY RATIOS
|
Year |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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Debt-Equity Ratio |
1.67 |
1.95 |
1.52 |
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Long Term Debt-Equity Ratio |
1.61 |
1.87 |
1.47 |
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Current Ratio |
1.13 |
1.44 |
1.62 |
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TURNOVER
RATIOS |
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|
Fixed Assets |
0.87 |
0.80 |
0.81 |
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Inventory |
5.74 |
3.39 |
2.91 |
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Debtors |
15.76 |
11.68 |
13.33 |
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Interest Cover Ratio |
4.08 |
3.16 |
2.59 |
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Operating Profit Margin(%) |
24.63 |
15.68 |
15.14 |
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Profit Before Interest And Tax
Margin(%) |
19.70 |
11.39 |
11.23 |
|
Cash Profit Margin(%) |
16.37 |
10.28 |
9.86 |
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Adjusted Net Profit Margin(%) |
11.44 |
5.98 |
5.95 |
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Return On Capital Employed(%) |
16.22 |
8.29 |
9.02 |
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Return On Net Worth(%) |
25.15 |
12.82 |
12.01 |
LOCAL AGENCY FURTHER
INFORMATION
HISTORY:
Subject incorporated in 1951, is into manufacture of Cement, Sugar and Dead Burnt Magnetics. Apart from these the company is also into manufacture of Colour Television sets, radios, tape recorders and allied instruments.
Cement Division with 1.2 million tonne cement plant in Tamilnadu contributes
around 62% of the sales. Subject is one of the oldest players in Cement
Industry in Tamilnadu is known for the manufacture of special cements. These
basically find applications in airstrips, railway sleepers and oil wells. The
company has well known brands such as Dalmia Super Roof, Dalmia Foundations and
Vajram. Further the company is also in talks with couple of Cement Companies
operating mini cement plant in and around Andhra Pradesh, TamilNadu and Kerala
to market their products under its portfolio. In last two years the Company has
increased the proportion of its blended cement production to 53%. The rest is
split between OPC (ordinary portland cement), PPC (pozzolan portland cement),
slag and oil well cement. The company is also contemplating to expand the
cement capacity to 3.5 million tonne by setting up a brownfield project near
its existing facility at Dalmiapuram, Trichy and a 29 MW captive thermal power
plant at a total cost of Rs.5000 millions.
Sugar Division of the company is contributing around 30 % to the top line. The
sugar unit of the company with 5000 tonnes/ day crushing capacity is located at
Ramgarh in Uttarpradesh.
The Magnetic Division of the Company, which manufactures Dead Burnt Magnesite,
Monoliths and Magnesia Carbon Bricks. The demand for all the above three
products are closely linked to the fate of Steel Industry as the latter is the
exclusive consumer of Monoliths and Magnesia Carbon Bricks and major consumer
of Dead Burnt Magnesite. This division's contribution to the company’s topline
is mere 3 percent. The magnesite ore benefication plant of the company was
installed during FY 1984-85.
Other business operation of the company which includes Travel Agency(Govan
Travels), Electronic Goods, Multilayer Ceramic Chip Capacitors, Chip Resistors
etc contributes around 5 percent to the topline of the company. The Govan
Travels, an diversification of operation was started in 1970 in New Delhi. The
diversification into manufacture of Electronic Goods under the name of Dalmia
Electronics Corp was made in 1980 but commercial production starete in 1981.
The company has roped in Palomer System and Machines of USA as its technical
Collaborator for manufacture of Multi-layer Ceramic Chip Capacitors (MCCC), the
letter of intent is obtained in this regard on 1987-98, DCBL has also purchased
a Cashew factory at Kundara(in Kerala) in 1965 and renamed it as Dalmia
International.
The R and D of the company, through its own research, developed oil well
cement, class 'G' and also obtained rights to use the API (American Petroleum
Institute) monogram on its oil well cement.
During 1999-2000, Shri Rangam Investment ceased to be the subsidiary of the company due to merger of the same with Mayuka Investments.
Founded in 1935 by Jaidayal Dalmia; the cement division was
established in 1939 and enjoys a heritage of 70 years of expertise and
experience. The company is headquartered in New Delhi with cement, sugar,
travel agency, magnesite, refractory and electronic operations spread across
the country.
The Dalmia Group established four cement plants in
pre-independence years, two of which were affected by partition
and Independence. The two remaining plants operate as Dalmia Cement and the
other as an independent company called Orissa Cements Limited. Managed by a
professional team,
DCBL
sustained has the path to innovation and growth for seven decades.
Early
in their history they learnt the importance of strong relationships. They
learnt that the key to maintaining relationships with their – employees,
shareholders and customers was to learn from each other, to enjoy a spirit of
camaraderie, and to understand and to empathize with their needs. Understanding
their needs led subject to broaden its horizon to include a holistic approach
to best practices in the industry.
Subject
prides itself on having been at the forefront of pioneering and introducing
many new technologies, which exist today, which are followed by others in the
industry. Subject has been and continues to be an industry leader in the niche
market segments.
This
timeline highlights some of the significant moments that took place over the
years and shows how their business has evolved.
Pioneer
in cement manufacturing since 1939, DCBL has been synonymous with super
specialty cements. Undoubtedly the leader, subject with an ISO 9002
certification for its products has always stood for the highest quality cements
for over seven decades. All from a highly modernized plant with R and D backup,
has elevated Subject to the status of the best in the industry today.
Over
the years, they have been at the forefront of innovation and technological
advances in the cement.
Sugar is
a key focus area of the company and has been potentially growing.
At the
company, special emphasis is placed on Research and Development facilities to
augment product quality.
BUSINESS
Subject is engaged in manufacturing of cement, magnesites, sugar, electronics, wind energy and refractories with an installed capacity of 1034000 tons of cement per annum.
CHANGE IN
CAPITAL STRUCTURE AND LISTING OF SHARES
The Company decided
to infuse more equity by issuing forty four lakh seventy thousand five hundred
eighty eight (4470588) shares of face value Rs. 2 each at a premium of Rs.
260.43 per share to Actis and/or their nominees, a leading private equity
investor in emerging markets. Formal agreement to this effect was signed on 24.04.2006 and the entire amount of
approximately Rs.1173 million has been received by the Company.
In terms of the
resolution passed by the Shareholders in the Annual General Meeting held on
27.09.2003, the Company applied for delisting of its securities from dealings
on the Calcutta Stock Exchange. The Company has received an 'in principle'
approval from the' Calcutta Stock Exchange in response to its application for
delisting of the securities.
DIRECTOR REPORTS:
Management Discussion
and Analysis:
Even as they await the final growth numbers, there is little
doubt that 2006-07 has been an excellent year for the country. According to the
advanced estimates of the Central Statistical Organisation (CSO), India is
expected to record a 9.2% GDP growth in 2006-07. Coming after 9% GDP growth in
2005-06, it confirms that India is a story of sustained economic progress one
that is driven by higher investments, ever-increasing purchasing power and a
fiercely competitive marketplace which is forcing companies to continually
recalibrate their efficiency parameters.
Economic Overview:
In 2006, India has grown the second fastest amongst emerging countries of its size. India's compound annual trend rate of GDP growth over the last four years has been in excess of 8.5% which, among the major nations, is second only to China.
A key factor behind of this scorching GDP growth has been construction a sector
which has a direct bearing on the cement operations of Dalmia Cement (Bharat)
Limited (`Dalmia Cement' or `the Company'). It is not difficult to see why. Not
only has there been a visible spurt in infrastructure investments, particularly
under the National Highway Development Programme (NHDP), but also a significant
step-up in the construction of new housing.
While this positive economic milieu has had a favourable impact on the Company's cement operations, the Company has faced several policy-induced challenges in its sugar business.
During the year, the domestic sugar industry witnessed systematic softening in
prices because of a ban on sugar exports for the period 21 July 2006 to 23
January 2007. Additionally, the Government also allowed zero duty imports of
sugar between 23 June 2006 and 30 September 2006. This difficult situation was
exacerbated by a huge surge in domestic sugar production of 25 million metric
tons (MT), compared to 19.3 million MT a year ago. Thus, while the sugar mills
were required to pay stipulated support prices for sugarcane to farmers, record
sugar production resulted in a glut in the sugar market lowering prices and
severely affecting the profitability of the industry.
Despite these adversities in one area of its business, subject performed well
during the year.
Financial highlights for 2006-07 are presented below:
· Revenue from operations, net of excise duty, increased by 73.1% to Rs.9865 million and total income increased by 77.8% to Rs.11567 million.
· Profit before depreciation, interest and taxes (PBDIT) increased by 152.9% from Rs.1603 million in 2005-06 to Rs.4055 million in 2006-07.
· Profit before tax (PBT) increased by 172.2% from Rs.1089 million in 2005-06 to Rs.2964 million in 2006-07.
· Profit after tax (PAT) grew by 169.9% from Rs.848 million in 2005-06 to Rs.2289 million in 2006-07.
· Cash return on average capital employed (cash ROCE) increased from 14.3% in 2005-06 to 24.3% in 2006-07.
· Return on average net worth (RONW) increased from 21.6% in 2005-06 to 38.8% in 2006-07.
· Earnings per share on a fully diluted basis (EPS diluted) rose from Rs.11.78 in 2005-06 to Rs.29.18 in 2006-07.
In the backdrop of the economic scenario outlined above, they now turn to review the performance of the Company's major businesses.
Business Overview:
Given the robust performance of the Company's cement
operations, the share of gross sales from this segment grew from Rs.3946
million in 2005-06 or 61% of the total, to Rs.8657 million in 2006-07, or 78%.
The share of sugar in gross sales declined from Rs.1911 million in 2005-06 or
29% of total to Rs.1714 million in 2006-07, or 15%.
Other businesses, which include power co-generation, magnesite and
refractories, registered Rs.805 million of gross sales in 2006-07 which was
marginally higher than Rs.650 million in 2005-06.
Cement:
With a combined capacity of 166 million MT in 2006-07, the size of India's
cement industry exceeds that of developed countries, and is second only to that
of China. It is also an industry which is growing rapidly. The industry has
been recording high utilisation rates despite concomitant increase in
capacity.
Thanks to a strong surge in demand, 2006-07 was a very good year for the Indian cement industry. Capacity utilisation increased from below the 80% levels in 2005-06 to 94% in 2006-07.
The Company's cement operations, located in Dalmiapuram, Tamil Nadu, saw a significant ramp-up during 2006-07. The Company completed execution of its 2 million MT's per annum brownfield expansion. Its brands such as Dalmia Superoof and Vajram continue to remain the preferred brands in the market and command premium over other brands.
The Company also has a significant presence in select niche segments including
high-value special cement for construction of oil wells, railway sleepers and
air strips. It is a market leader in the manufacture of cement for construction
of walls of on-shore and off-shore oil wells. In fact, oil well cement
manufactured by company was the first in India to receive the prestigious
American Petroleum Institute (API) certification.
Subject also continues to maintain its leadership position in the manufacture
of high grade cement for railway sleepers. Introduced in India by the Company,
this cement is widely used to replace wooden railway sleepers for high speed
trains, and is supplied to all major railway sleeper manufacturers in India.
The Company continued to work ceaselessly to improve efficiency and manage
costs. Subject is one of India's most efficient companies in cement
manufacturing. Not only did the Company continue to hold to that standard, but
also worked to create new efficiency benchmarks.
Outlook:
There is little doubt that the cement sector will see robust demand in the
years to come. Growth in this business is closely linked to the overall growth
of the economy and the construction sector. India is expected to see GDP growth
in excess of 8% and this would be accompanied by significantly greater spends
on housing as well as in infrastructure sectors such as roads, power, ports,
airports and urban development. All these trends augur well for cement.
The highway sector itself makes for a useful illustration of the potential
demand that could emerge from infrastructure. The National Highway Authority of
India (NHAI) has drawn out a seven-stage highway development programme with the
target of covering almost 46,000 km of national highways by 2015 at an
estimated cost of approximately US$49 billion. In the last six years, only
about 7,150 km has been covered. The opportunities will only multiply given the
investments envisaged for other infrastructure sectors. Subject is
well-positioned to tap these opportunities of growth.
Given the high costs of transportation of cement, Indian markets are
geographically segmented and competition is largely local. With its plant
located in Tamil Nadu, the Company services the southern region, mainly Tamil
Nadu and Kerala. The Company has decided to set up another manufacturing
facility in the State of Andhra Pradesh to expand its Southern footprint. It is
also keenly pursuing opportunities in other parts of the country, as all the
States have been recording robust GDP growths.
Going forward, Subject intends to maintain its premium pricing strategy while
focusing on the high-margin retail segment. With significantly enhanced
capacity, a strong brand image and effective distribution channels, it is
confident of pursuing a path of profitable growth in its cement business.
Sugar:
2006-07 has been a challenging year for the domestic sugar industry. A perilous
combination of record domestic production, zero duty imports and ban on exports
led to huge reduction in sugar prices through the year.
In 2006-07, the domestic sugar production was at a record 25 million MT
compared to 19.3 million MT of the previous year. Off-take of sugar, however,
declined marginally to 19.5 million MT in 2006-07 _ compared to 19.6 million MT
in 2005-06. The ban on export for most part of the year significantly widened
the gap between sugar availability and demand.
While the Government did lift the ban on sugar export in late January 2007,
sugar exporters missed the crucial four-month (October to January) export
window. Export prospects were also affected by weakening of international sugar
prices. Thus, overall price realisation during 2007-08 is estimated at approximately
Rs.1,340 per quintal versus Rs.1,800 per quintal during the previous year.
The record sugar production in 2006-07 is due to several factors. First, strong
sugar prices in the preceding years as well as higher Central and State
Government support prices encouraged significant increase in sugar
manufacturing capacities as also cane planting during the year. The late
monsoon rains in 2006 and generally favourable weather conditions in most
sugarcane growing areas also resulted in higher cane yields.
Second, relatively high Government administered prices payable by sugar mills
for sugarcane discouraged cane diversion to the production of alternative
sweeteners such as gur (jaggery). In fact, gur production estimate for 2006-07
stood substantially lower at 3.3 million MT, from an earlier estimate of 4.7
million MT.
Thus, after two continuous years of poor performance due to drought conditions
and pest attacks in the sugar belts of the country, India has witnessed record
production of sugar in 2005-06 and 2006-07.
Operations:
In this challenging business environment of huge sugar stocks, low sugar
prices and high administered sugarcane prices, the Company's sugar business
performed creditably.
In volume terms, sugar production grew by 28.2% from 84,000 MT in 2005-06 to
107,700 MT in 2006-07. Sugar recovery rate improved to 10.5% - which is one of
the highest in the industry. Sales during this period, however, declined by
6.4% from 98,800 MT to 92,500 MT.
In value terms, gross sales of the sugar business decreased by 10.3% from
Rs.1911 million in 2005-06 to Rs.1714 million in 2006-07.
The year under review saw a significant expansion in capacity of the sugar
business. The Company commissioned two new sugar plants, each with a cane
crushing capacity of 7,500 TCD, at Jawaharpur and Nigohi. Both the plants are
located in Uttar Pradesh and qualify for significant fiscal concessions from
the State Government. These concessions would be spread over a period of ten
years. The new capacities along with the existing manufacturing facility of
7,500 TCD at Ramgarh in Uttar Pradesh, have increased the total cane crushing
capacity of the Company to 22,500 TCD or approximately 2,25,000 MT of sugar per
annum.
To de-risk itself from the cyclical nature of the sugar industry, the Company
ventured into power co-generation and industrial alcohol/ethanol (bio-fuel)
production _ both of which have a high growth potential. As far as ethanol
goes, the Government intends initially mixing up to 5% ethanol with petrol,
which may go up to 10%. Therefore, ethanol will become a partial petroleum
substitute, and thus has high business potential. The Company's industrial
alcohol/ethanol manufacturing facility of 80 KL per day was installed in record
time. Trial runs are in progress and the plant is expected to stabilise
production by June 2007.
While the first year of expansion has undoubtedly been challenging, Subject
perceives several advantages of increased scale and integration.
With additional revenue streams from the sale of
by-products, the Company would be better positioned to diversify and de-risk
itself from the cyclical nature of the industry. Additionally, given the
anticipated increase in demand for ethanol as an alternate fuel, it would be
able to scale-up its ethanol operations as and when deemed necessary.
Outlook:
India registered a record sugar production of 25 million MT in 2006-07. The
likelihood of another year of record production in 2007-08 could translate into
subdued prices in the coming months and even during the next marketing year.
Nevertheless, the Company has positioned itself to withstand these shocks by
installing the power co-generation plants and the ethanol manufacturing
capacity.
Record production and large carry-over stocks will position Indian exporters favourably in the export markets. Although the cost of production of sugar in India is higher than in some other countries, the Government's export incentives should provide much-needed impetus for exports in 2007-08. Thus, unless export competitiveness is dampened by significant appreciation in rupee, sugar exports during 2007-08 are expected to be considerably higher than in 2006-07.
Power Co-Generation:
In 2006-07, Subject commissioned two bagasse-based co-generation power plants at Jawaharpur and Nigohi each of 27 MW. Additionally, the Company is in the process of commissioning another 25 MW bagasse-based co-generation power plant at its sugar mill in Ramgarh.
These newly installed generation capacities have not only given the Company
significant operational advantages but also opened new revenue streams. It has
signed a Power Purchase Agreement (PPA) with the Uttar Pradesh Power
Corporation Limited (UPPCL), and is currently supplying power to the grid.
This arrangement is particularly suitable for the Company, as it allows Subjectto sell a large part of its excess power to the grid during the off-season. Going forward, the 79 MW of power generation capability, of which approximately 52 MW will be surplus power sold to the grid, will contribute to the Company's financial performance in 2007-08.
Other Businesses:
Other businesses of Subject accounted for Rs.805 million or 7% of the Company's gross sales in 2006-07. These comprise mainly the refractory and the magnesite divisions. Though comparatively small, businesses of both divisions have shown improvement mainly on account of growth in the steel and cement industry, the two main consuming sectors.
On the back of significant capacity additions and strong demand for cement, the Company recorded a growth of 73.1% in net sales from Rs.5698 million in 2005-06 to Rs.9865 million in 2006-07. Total income increased by 77.8% from Rs.6506 million in 2005-06 to Rs.11567 million in 2006-07 due to increase in other income primarily from interest and profit from sale of investments.
As mentioned earlier, the Company was able to realise significant operational
efficiencies with increased scale. In fact, total expenditure as a share of net
sales has decreased from 95.1% in 2005-06 to 87.2% in 2006-07. This occurred
despite an increase of 130% in interest costs from Rs.235 million in 2005-06 to
Rs.540 million in 2006-07.
Cash profits (PBDT) increased by 156.9% from Rs.1368 million in 2005-06 to Rs.3515
million in 2006-07. Profit before tax (PBT) rose by 172.2% from Rs.1089 million
in 2005-06 to Rs.2964 million in 2006-07. Profit after tax (PAT) grew by 169.9%
from Rs.848 million in 2005-06 to Rs.2289 million in 2006-07. This has
translated into earnings per share on a fully diluted basis of Rs.29.18 in
2006-07 from Rs.11.78 in 2005-06. Cash EPS has increased to Rs. 40.40 from
Rs.17.60.
There has been a significant improvement in all profitability ratios (Table 2).
Cash ROCE (return on capital employed) defined as PBDIT minus current tax and
FBT as a percentage of average capital employed during the year, increased by
almost 10 percentage points to 24.28%. Return on average net worth also
registered a substantial increase from 21.60% in 2005-06 to 38.76% in 2006-07.
The debt-equity ratio has declined over the last one year from 1.6 at the end of 2005-06 to 1.35 at the end of 2006-07. This can be attributed to the issue of 4.47 million shares of face value of Rs.2 each at a premium of Rs.260.43 per share to affiliates of Actis, a leading private equity investor in emerging markets.
FIXED ASSETS:
· Land
· Buildings
· Plant and Machinery
· Railway Sidings
· Vehicles
· Furniture and Fixtures
· Other Assets
OTHER INFORMATION:
· Prior period expenses amounting to Rs Nil (Rs. Nil) and prior period income amounting to Rs. 2.97 Million ( Rs.7.11 Million) representing excess provision written back credited to Miscellaneous Receipts, have been accounted for under the relevant heads of account.
· In the opinion of the Board and to the best of their knowledge and belief, the value on realisation of loans, advances and current assets in the ordinary course of business will not be less than the amount at which they are stated in the Balance Sheet.
· The Company is in the process of identifying the suppliers who would be covered under the Micro, Small and Medium Enterprises Development Act, 2006. In the circumstances, the information, if any, required to be disclosed under the said Act, is not yet ascertained.
· There are no Small Scale Industries, to whom the Company owes dues, which are outstanding for more than 30 days at the Balance Sheet Date
· The Company is a lessor in respect of certain items of buildings, plant and machinery, etc. The said fixed assets have been given on an operating lease for a period of 10 years. The lease is non-cancellable by the lessee and the lease rental in respect of the said lease is Rs. 22.05 Million per annum. The lease rentals recognised in the accounts for the year is Rs. 22.05 Million and no contingent rent has been recognised in this regard.
· Dalmia Sugars Limited, a wholly owned subsidiary was amalgamated with the Company with effect from the date of incorporation of that company i.e.8th June, 2005 as per the Scheme of Amalgamation approved by the members and subsequently sanctioned by the Honourable High Court of Madras and Delhi. The amalgamation has been accounted for under the pooling of interests method as prescribed in AS 14 – “Accounting for Amalgamations”. The accounts of the transferor company for the year ended 31st March,2006 is already audited and approved by the members, hence the assets and liabilities of the company as at 1st April,2006 have been taken over at their book values. The Loss of Rs.1901220 for the period ended 31st March,2006 has been transferred to the debit of Profit and Loss account of the Company. As per scheme, 100000 Equity shares of Dalmia Sugars Limited of Rs.10 each, fully paid up, stand cancelled.
· Particulars of Foreign currency exposures that are not hedged by derivative instruments or otherwise are as under: Sundry Creditors USD 11.29 Million equivalent to Rs.483.08 Million, JPY 10 Million equivalent to Rs.3.60 Million (Previous year USD 7.72 Million equivalent to Rs.330.22 Million, JPY 175 Million equivalent to Rs 63.04 Million, SEK 29.92 Million equivalent to Rs.182.73 Million, CHF 0.02 Million equivalent to Rs. 0.79 Million).
Awards and
Recognitions
Ø
Dalmia Cement
has won numerous awards from the government and independent agencies such as
National Council for Cement and
Ø
Building
Material (NCCBM) and Confederation of Indian Industry (Cll) for energy
efficiency and energy conservation in its cement business.
Ø
The company
also received awards for environment excellence in plant operations and
limestone mining from NCCBM, and acclaim for its initiatives in the area of
safety, health and environment from the Cll.
CMT REPORT
(Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts, India Prisons Service,
Interpol, etc.
1] INFORMATION ON
DESIGNATED PARTY
No records exist designating subject or any of its beneficial owners, controlling
shareholders or senior officers as terrorist or terrorist organization or whom
notice had been received that all financial transactions involving their assets
have been blocked or convicted, found guilty or against whom a judgement or
order had been entered in a proceedings for violating money-laundering,
anti-corruption or bribery or international economic or anti-terrorism sanction
laws or whose assets were seized, blocked, frozen or ordered forfeited for
violation of money laundering or international anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper payments
to government officials for engaging in prohibited transactions or with
designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No
available information exist that suggest that subject or any of its principals
have been formally charged or convicted by a competent governmental authority for
any financial crime or under any formal investigation by a competent government
authority for any violation of anti-corruption laws or international anti-money
laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE
GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE
RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.39.47 |
|
UK Pound |
1 |
Rs.77.98 |
|
Euro |
1 |
Rs.57.92 |
SCORE & RATING
EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
9 |
|
PAID-UP CAPITAL |
1~10 |
9 |
|
OPERATING SCALE |
1~10 |
9 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
10 |
|
--PROFITABILIRY |
1~10 |
8 |
|
--LIQUIDITY |
1~10 |
9 |
|
--LEVERAGE |
1~10 |
9 |
|
--RESERVES |
1~10 |
9 |
|
--CREDIT LINES |
1~10 |
9 |
|
--MARGINS |
-5~5 |
--- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
YES |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
81 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING
EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Unfavourable & favourable factors carry similar weight in credit consideration.
Capability to overcome financial difficulties seems comparatively below
average/normal. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
|