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Ultratech Cement Ltd.
BSE Code   532538
ISIN Demat   INE481G01011
Book Value   1501.89
Dividend Yield %  0.58
Market Cap   1845144.68
P/E   34.54
EPS   185.07
Face Value 10  
Year End: March 2016



India's macroeconomic indicators remained robust, led by the decline in commodity prices and Government's prudent fiscal policies. India's GDP growth is pegged at 7.5% for 2015-16 and expected to sustain this growth momentum in FY17. Going forward, consumption is expected to rise following the Government's impetus on infrastructure development and allied sectors and implementation of the 7th Pay Commission recommendations, among others. An above-normal 2016 monsoon is brdicted after two consecutive weak seasons and this should drive growth in the agriculture sector and help revive rural demand, the investment cycle and economic growth.

India's cement demand remained passive for most of FY16, particularly on account of low demand from the housing segment. However, there were signs of demand recovery in the last quarter, reflected in double-digit growth riding on higher infrastructure spending and development in Andhra Pradesh and Telangana. As the economy revives, the country's cement industry is expected to perform better.

With this background, we brsent, your Company's 2015-16 performance


Production and Capacity Utilisation

Your Company's cement capacity was augmented to 64.65 MTPA following greenfield capacity addition of 4.5 MTPA and commissioning of cement grinding plants at Jhajjar in Haryana and Dankuni in West Bengal. Your Company's cement production increased by 8% from 43.88 MMT in the brvious year to 47.56 MMT. Capacity utilisation was an improved 76% on a higher capacity base. White cement and wall care putty output grew 10%.

Your Company's domestic sales volume increased 8% to 46.93 MMT, which was higher than the estimated industry demand growth of 4.6%. Cement exports were also higher by about 7%. Sales volume for white cement and wall care putty registered 7% growth, largely supported by wall care putty performance

Net Turnover

Your Company's net turnover was Rs. 23,841 crores, an increase of 5% over the brvious year mainly on account of a 7% increase in sales volume. Selling prices remained under brssure and overall realisation declined 2% from Rs.  4,915/t in the brvious year to Rs.  4,838/t.

Other Income

Other income was 23% lower compared to the brvious year. This decline was on account of lower treasury income during the year as surplus funds were invested in long-term mutual fund schemes due for maturity from the next financial year.

Operating Profit (PBIDT) and Margin

PBIDT for the year at Rs. 4,851 crores was 6% higher than the brvious year. Operating margin remained range-bound.

Cost Highlights

(i) Energy Cost: Overall energy cost declined 16% from H 979/t during the brvious year to H 824/t on account of a softening in coal and petcoke prices, increase in petcoke consumption and a reduction in energy consumption norms.

The use of pet coke in kilns rose from 52% to 70% following modifications in raw mix design and other process improvements. Besides using petcoke in kilns, your Company also enhanced petcoke consumption in its thermal power plants. Your Company is evaluating the use of hazardous and non-hazardous wastes to address its energy requirements, which is in line with your Company's sustainable growth philosophy. Your Company disposed around 1.3 LMT of such waste in the kiln, resulting in a total fuel saving of about 2%.

Your Company commissioned 26 MW of Waste Heat Recovery Systems ("WHRS"), so the total capacity stands at 59 MW. These systems are stabilising and addressing around 5-6% of your Company's total power requirement.

(ii) Input material cost: Raw material cost was up 4% from Rs.  444/t in the brvious year to Rs.  464/t during the current year due to:

• increase in royalty on limestone from Rs.  63/t to Rs.  80/t from September, 2014; and

• additional levy for District Mineral Fund (DMF) set up under the Mines and Minerals (Development and Regulation) Amendment Act, 2015 which was made applicable from 12th January, 2015 @ 30% of royalty on limestone (Rs.  24/t).

(iii) Freight and forwarding expenses:

Logistics cost increased marginally by 2% from H 1,075/t to H 1,099/t. While softening in diesel prices aided in controlling logistics cost, that was offset by extended rail freight and problems in rake availability. Your Company's road transportation cost increased from 67% to 69% of the total transport mix leading to consequent cost increases. Your Company is optimising its logistics mix and commissioning new capacities, which are expected to reduce lead distances.

(iv) Employee costs:

Employee costs increased 10% from Rs.  1,218 crores in the brvious year to Rs.  1,342 crores, on account of annual increments and new plants commissioning.


Debrciation for the year at Rs.  1,289 crores was higher by Rs.  156 crores over the brvious year. In terms of the requirements of the Companies Act, 2013, your Company componentised its main assets wherever the component life was different from the main asset, resulting in an additional debrciation charge of Rs.  52 crores. This, together with the commissioning of new cement capacities, WHRS and other capitalisation to the extent of Rs.  2,868 crores, led to higher debrciation charge.

Finance Cost

Your Company's overall finance cost at Rs.  505 crores was lower by Rs.  42 crores compared to Rs.  547 crores in the brvious year following the repayment of borrowings during the year.

Income Tax

Income tax expenses amplified marginally in line with the increase in taxable income.

Net Profit

Profit after tax for the year was higher by 8% from Rs.  2,015 crores in 2014-15 to Rs. 2,175 crores.

Sources of Cash Cash from operations

Cash from operations was lower compared to the brvious year due to higher current tax and lower realisations despite larger sales volume and lower production costs.

Non-operating cash flow

Non-operating cash flow was lower compared to the brvious year as a result of surplus funds being invested in long-term mutual fund schemes which are scheduled to be realised from the next year.

Increase in borrowings

Your Company mobilised Rs.  707 crores in long-term debt primarily in the form of non-convertible debentures and rupee-term loans. Net short-term borrowings mounted by Rs.  441 crores. Your Company repaid a long-term loan of around Rs.  901 crores in line with the repayment schedule.

Borrowings were maintained to fund on-going capital expenditure.

Uses of Cash

Net capital expenditure

Your Company ploughed more than h 2,000 crores in capital expenditure, a significant part of which was allocated towards capacity expansion and Waste Heat Recovery Systems. Your

Company also invested in capital expenditure to address regulatory requirements, plant maintenance and efficiency improvement initiatives.


Human resources play a significant role in your Company's growth strategy. Your Company emphasised talent nurturing and retention, providing avenues for learning and development through functional, behavioral and leadership training programs, among others.

Your Company is engaged in a constructive relationship with employees with an emphasis on productivity and efficiency and underlining safe working practices.

As on 31st March, 2016, your Company's employee strength was 14,410 employees (14,436 employees).


Risk management forms an integral part of your Company's operations. Your Company's risk management identifies potential risks, analyses their impact and responds with risk mitigation initiatives. Your Company's Risk Management Committee oversees the risk management process.

Your Company identified the following key risks:

Excess cement capacity

The cement industry is experiencing a mismatch in cement supply and demand. The industry invested in additional capacity on the back of the government's projected infrastructure spending. However, the anticipated increase in cement demand did not materialise, even as the incremental capacity was created. A slowdown in the rural economy aggravated the surplus situation. Going forward, incremental capacity addition is expected to be limited while cement demand is likely to improve, resulting in higher capacity utilisation.

Securing critical resources

Limestone and coal rebrsent basic inputs in cement manufacture. Although your Company possesses sufficient limestone reserves for existing operations, securing additional reserves is critical to address your Company's expansion programme. Under the new Mines and Minerals (Development and Regulation) Amendment Act, 2015, any mining lease provided for captive use will be extended upto 31st March, 2030. In future, all mining leases will be granted through auction/bidding, which is likely to increase costs. With the government taking various measures viz. auction of coal mines to the private sector and removing bottlenecks at Coal India to enhance coal supply and given softer global coal demand, the risks relating to coal availability have declined. Your Company increased its petcoke consumption to reduce dependance on coal and continues to review its raw material and fuel mix with the objective of optimising the use of scarce raw material/fuel.


Competition in India's cement industry is becoming more intense, a reality likely to sustain. Your Company continues to enhance brand equity, value-added services, customer focus and cost optimisation.


Business growth and increasing regulation has enhanced the need for compliances. Non-compliance could lead to penalties and loss of reputation. This risk has been mitigated through periodical monitoring and review of the regulatory framework to ensure complete compliance with all applicable statutes and regulations.

Financial risk

Fluctuations in interest rates, exchange rates and commodity prices enhance the risk for cement players. Your Company implemented well-defined policies to counter the risks arising from currency movements, treasury investments, interest costs and imported commodities. These policies are periodically reviewed to align with the changes in financial market practices and regulations.


Internal controls encompass a set of rules, policies and procedures to provide reasonable assurance for achievement of an organisation's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. Your Company's internal control systems are commensurate with the size and nature of its operation. Your Company has adequate internal financial controls which were tested by independent agencies and no material weaknesses were observed. Standard Operating Procedures are in place for critical areas of operations and the same are reviewed periodically. The internal audit team monitors the effectiveness of the internal control systems. The recommendations of the internal audit team on improvements in the operating procedures and control systems are for further strengthening the operating procedures.


The prospects of the country's cement industry are linked to economic growth. The Government's focus on infrastructure development, housing, Smart Cities, and Swachh Bharat Abhiyan, among others, are expected to strengthen cement demand and reduce oversupply, which augurs well for the sector.


Statement in this "Management Discussion and Analysis" describing the Company's objectives, projections, estimates, expectations or brdictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.

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