Sh. Digvijay Cem Management Discussions

ECONOMIC SCENARIO AND OUTLOOK GLOBAL ECONOMY

Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose. The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russias war on Ukraine, a considerable surge in inflation, followed by a globally synchronized monetary policy tightening.

Global growth bottomed out at the end of 2022, at 2.3 percent, shortly after median headline inflation peaked at 9.4 percent.

According to our latest World Economic Outlook projections, growth this year and next will hold steady at 3.2 percent, with median headline inflation declining from 2.8 percent at the end of 2024 to 2.4 percent at the end of 2025. Most indicators continue to point to a soft landing.

The risk of a global recession was further reduced by positive factors such as robust labour markets, heightened household consumption, and the overall strength of emerging economies. The International Monetary Fund (IMF) projects a global growth rate of 3.1% in 2024, with a marginal increase to 3.2% anticipated in 2025.

INDIAN ECONOMY

The financial year gone by i.e. FY 2023-24 was better than expected for the Indian Economy. Strong economic growth in the first quarter of FY23 helped India overcome the UK to become the fifth-largest economy. Nominal GDP or GDP at

Current Prices in the year 2023-24 is estimated at 293.90 lakh crores (US$ 3.52 trillion), against the First Revised Estimates (FRE) of GDP for the year 2022-23 of 269.50 lakh crores (US$ 3.23 trillion). The economic growth of India surprised on the upside with growth greater than 8.0% in third quarter of FY 23-24. It is expected to be at strong 7.6% for the whole year. Indian economy was the fastest growing economy in the world amidst slowing global economy. The year ended on a positive note with high frequency indicators like GST collections, car sales, and UPI transactions hitting high spots. Indias manufacturing PMI hit a 16 year high at 59.1 in March, highest level since 2008, and Services PMI hit 61.2 in March, 2024.

Outlook for FY2024-25

The growth momentum of Indian economy is anticipated to remain robust in FY25 as well with a projected GDP growth of 7% as per RBI and close to 7% by different agencies due to drivers such as increased investments, upsurge in consumption, strengthened balance sheets of corporates, moderate inflation and stable external sectors.

Organization for Economic Cooperation and Development (OECD) has projected global growth at 3.1 per cent in 2024, and 3.2 per cent in 2025. But India is projected to grow at 6.6 per cent, the fastest among major emerging markets. China is projected to grow at 4.9 per cent and Brazil at 1.9 per cent. Recently, the IMF, World Bank and rating agencies like Moodys, S&P and many others have revised Indias growth upwards. IMFs April 2024 World Economic Outlook highlights the expected robustness of the Indian economy in 2024 and 2025 and attributes it to strong domestic demand and a growing working-age population. Sustained efforts towards infrastructure development and economic reforms are crucial for maintaining long-term growth momentum. While geopolitical tensions persist, India aims to leverage its strategic partnerships to enhance its position among emerging economies and influence global policies.

The Impact of Higher Oil Price and Inflation

Impact on Indian Economy India, being heavily reliant on energy imports, is particularly vulnerable to fluctuations in international crude oil prices, which can significantly impact macroeconomic stability.

If the higher global crude price is transmitted to the retail market, it can increase domestic inflationary pressures. However, given that there is already pressure on CPI inflation, due to higher food inflation, there would be pressure on oil marketing companies (OMCs) not to hike retail petrol/ diesel prices.

Indias economy faces inflation and growth risks due to rising oil prices from Red Sea disruptions. Key trade routes impacted. High costs and delays could lead to pricier imports and affect export competitiveness. Despite challenges, the government predicts positive close to financial year.

GOVERNMENT INITIATIVES

In order to help private sector companies thrive in the industry, the Government has been approving their investment schemes. Some of the initiatives taken by the Government of late are as below:

As per the Union Budget 2023-24: o The government approved an outlay of US$ 32.57 billion ( 2.7 lakh crore) for the Ministry of Road Transport and Highways which is likely to boost demand for cement.

o Under the housing for all segment, in 2023-24 the budget estimate for Pradhan Mantri Awas Yojana is US$ 9.63 billion ( 79,590 crore), a 66% rise from the last years budget estimate of US$ 6.43 billion (48,000 crore) in 2022-23.

As per Invest India, the National Infrastructure Pipeline

(NIP) expanded to 9,305 projects from 7,400 projects.

In October 2021, Prime Minister, Mr. Narendra Modi, launched the ‘PM Gati Shakti - National Master Plan (NMP) for multimodal connectivity. Gati Shakti will bring synergy to create a world-class, seamless multimodal transport network in India. This will boost the demand for cement in the future.

The Union Budget allocated 13,750 crore (US$ 1.88 billion) and 12,294 crore (US$ 1.68 billion) for Urban Rejuvenation Mission: AMRUT and Smart Cities Mission and Swachh Bharat Mission.

ROAD AHEAD

In the second quarter of FY24, the growth momentum of the first quarter was sustained, and high-frequency indicators (HFIs) performed well in July and August of 2023. Indias comparatively strong position in the external sector reflects the countrys generally positive outlook for economic growth and rising employment rates. India ranked 5th in foreign direct investment inflows among the developed and developing nations listed for the first quarter of 2022.

Indias economic story during the first half of the current financial year highlighted the unwavering support the government gave to its capital expenditure, which, in 2023-24, stood 37.4% higher than the same period last year. In the budget of 2023-24, capital expenditure took lead by steeply increasing the capital expenditure outlay by 37.4 % in BE 2023-24 to 10 lakh crore (US$ 120.12 billion) over 7.28 lakh crore (US$ 87.45 billion) in RE 2022-23. The ratio of revenue expenditure to capital outlay increased by 1.2% in the current year, signalling a clear change in favour of higher-quality spending. Stronger revenue generation because of improved tax compliance, increased profitability of the company, and increasing economic activity also contributed to rising capital spending levels. Further, In the interim budget for FY24, Government increased FY25 Capex outlay to record 11.11 lakh crore (US$ 133.5 billion).

INDIAN CEMENT INDUSTRY: OUTLOOK AND OPPORTUNITIES

The Indian government is firmly focused on infrastructure development to spur economic growth and is striving for full infrastructure coverage to establish smart cities. The government plans to increase the capacity of railways and the facilities for handling and storage to enable the transfer of cement and cut out on transportation costs. These measures are expected to result in increased construction activity in the country, thereby boosting demand for cement.

The eastern states of India are likely to be the newer and untapped markets for cement companies and could contribute to their bottom line in future. In the next 10 years, India could become the main exporter of clinker and grey cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well-armed to face stiff competition from cement plants in the interior of the country. Indias cement production capacity is expected to reach 550 MT by 2025. A number of foreign players are also expected to enter the cement sector owing to the profit margins and steady demand.

Key factors driving demand are as under:

Population demographics

According to United Nations World Population Prospects (WPP) 2022, India is the most populous country in the world, and is expected to reach a population of 150 Crores by 2030 and 166 Crores by 2050. Indias urban population is estimated to stand at around 68 Crores in 2035, the second highest behind Chinas one billion. This translates into a higher demand for housing and related amenities.

Housing shortage

According to government estimates, India had an urban housing shortage of around 19 million units in 2022 and this is expected to double by 2030. The government is also trying to boost affordable housing by providing subsidies, which will encourage construction in Indias smaller towns and cities.

Low per capita cement consumption

Indias per capita cement consumption at 240-250 kg, against the world average of 500-550 kg, is one of the lowest in the world, even behind countries such as Brazil and Indonesia.

Continued focus on infrastructure and housing

The cement industry thrives on demand from housing, infrastructure, commercial, and industrial sectors, with consistent Government support. The Government has increased the allocation of the infrastructure sector to 11.11 Lakh Crores for FY2025, which will be 3.4% of the GDP. The industrys growth is propelled by the governments focus on infrastructure and housing, as seen in initiatives like the National Infrastructure Pipeline and PM Gati Shakti, driving construction activities and increasing cement demand.

COMPANYS PERFORMANCE

During the year under review, earnings before interest, tax and depreciation (EBITDA) of the Company recorded 15,494.21 Lakhs, as compared to 10,759.78 Lakhs in the previous year. This rise in EBITDA resulted from more sales, lower coal prices and effective plant operations.

Companys operating profit margin was 18.39 % and Net Profit Margin was 10.96 %.

The demand for cement may further increase, as the infrastructure projects such as bridges, roads, ports, metro rails and low budget housing segment gain momentum, creating prospects for expansion in this sector. The long-term prospect for cement is anticipated to be favorable.

The Company did well by enhancing plant performance and managing the costs. The Company made a higher operating profit with an EBITDA margin of 19.34%. With the consistent efforts throughout the year, the Company achieved higher sales volume, higher cement and clinker production. The Company keeps focusing on lowering costs, increasing operational efficiency, blended and special products sales and building the brand. To lower the risk of energy, the Company also focuses on reducing grid dependency by using more alternate fuels, solar and wind energy sources.

OPERATIONAL PERFORMANCE:

Particulars	Year ended 31.03.2024	Year ended 31.03.2023
Production (Lakhs TPA)
Clinker	10.34	9.74
Cement	13.48	12.74
Sales Volume (Lakhs Ton)
Domestic
- Cement *	13.58	12.59
- Clinker	0.00	0.09
Export
- Cement	0.03	0.01
- Clinker	0.00	0.00

*The cement sales figure includes self-consumption of 0.063 lakh ton (last year it was 0.002 lakh ton).

FINANCIAL PERFORMANCE:

Particulars	Year Ended 31.03.2024	Year Ended 31.03.2023
Revenue from operations (gross)	78,985.41	72,234.88
Add: Other operating income	178.59	252.55
Less: Operating expense	64,603.13	62,432.04
Profit before other income, interest, depreciation & tax	14,560.87	10,055.39
Add: Other Income	246.34	349.05
Profit before Interest Depreciation & Tax [PBIDT]	14,807.21	10,404.44
Add: Interest Income	687.00	355.34
Profit before Interest cost Depreciation, & Tax [PBIDT]	15,494.21	10,759.78
Less: Interest Cost	211.77	133.67
Less: Depreciation/amortisation	3,461.77	3,525.96
Profit before tax	11,820.67	7,100.15
Less: Tax Expenses	3,044.96	1,328.85
Profit for the period	8,775.71	5,771.30

Details of significant changes in key financial ratios are as given below:

d >Rs. In Lakhs

Sr. No. Particulars	UOM	Year Ended 31.03.2024	Year Ended 31.03.2023	Growth YOY
1 Contribution to Exchequer	Rs. in Lakhs	27,633.50	23,839.58	27%
2 Revenue Growth	Rs. in Lakhs	80,097.34	73,191.82	9%
3 EBITDA	Rs. In Lakhs	15,494.21	10,759.78	44%
4 EBITDA MARGIN	%	19.34%	15%	4%
5 PBT	11,820.67	7,100.15	66%
6 PAT	Rs. In Lakhs	8,775.71	5,771.30	52%
7 Net Worth	Rs. In Lakhs	38,120.66	32,469.02	17%
8 ROE %	%	24.9%	18.10%	7%
9 NET DEBT	Rs. In Lakhs	-	-	-
10 Debt	Weight	-	-	-
Equity		1.00	1.0	-
11 Working Capital Ratio	Times	2.0%	2.1%	-3.5%
12 Fixed Assets Turnover Ratio	Times	4.0	3.7	7.4%
13 Inventory Turnover Ratio	Times	6.4	6.0	7%
14 Debtors Turnover Ratio	Times	29.8	41.8	-29%
15 Days Sales Outstanding (DSO)	Days	12	9	-3
16 Interest Coverage Ratio	Times	73.17	80.50	9%

SEGMENT REVIEW AND ANALYSIS

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision

Maker (CODM). The Chief Executive Officer (CEO) and Managing Director (MD) of the Company has been identified as CODM who assesses the financial performance and position of the

Company and makes strategic decisions.

The Companys CODM has identified one business segment viz. Manufacturing and Sales of Cement and its only production facility is located in India. There are no other reportable segments.

COST AND PROFITABILITY

Your Company constantly strives to keep costs under control. The Company focuses on cost reduction by sourcing procurement, increasing power from green energy, which is both eco-friendly and cheaper, using alternative fuel, improving logistics operations, controlling overheads including manpower and expanding sales & marketing presence to enhance the overall performance and profitability of the Company.

OPPORTUNITIES, THREATS, RISK & CONCERN

The Company has well defined structure that allows and enables management to recognize, evaluate and exploit business opportunities and manage risk exposure in the organization effectively.

As per Risk Management framework and procedures, management deal with various types of risks and take suitable actions for its mitigation. For example, for higher priority risks, the Company has developed and implemented specific risk management plans that help management in strategic decisions and funding considerations, if any. Lower priority risks are also monitored as per plan. Company has the process of communication, consultation, monitoring and periodical & regular review of the risks and effectiveness of the mitigation plan.

Raw Material Risk:

The cement industry mainly relies on limestone as primary raw material and other raw materials are the main inputs for the cement industry. However, nearby sources of limestone are scarce and therefore, it is important to encourage the use of blended cement, which uses other raw materials such as fly ash and slag. The rise in the price and availability of these other materials may also raise the costs of production.

Sales and Marketing Risk:

Fragmented markets, rapid capacity additions by competitors, limited distribution networks, and changing industry preferences pose sales and marketing risks. We address these risks through benchmarking analysis, proactive market positioning, and developing innovative products for niche markets.

Compliance Risk (Legal Risk):

With the constantly evolving regulatory framework, there is a risk of non-compliance with legal requirements, which can lead to fines and charges. We have developed compliance system and established committees to create employee awareness and mitigate compliance risks effectively.

Climate Change Risk:

We are committed to adopting sustainable practices as a socially and environmentally responsible company. Our philosophy of ‘Clean and Green is Profitable and Sustainable guides our operations, making us a powerful and distinctive brand. We have subscribed to stringent voluntary emissions reduction programmes to address climate change risks proactively.

Human Resource Risk (Talent Management Risk):

Our critical challenges include retaining talent and ensuring the right people are in the right roles. We mitigate talent management risks by providing specialised training courses to enhance and reskill employees, thus creating a talent pipeline for future roles.

Financial Risk:

We face risks from changes in interest rates, foreign exchange rates, and commodity prices. We use a suitable policy to reduce these risks and check and report on them regularly.

Infrastructure Risk:

Infrastructure sector drives overall development of the economy and is a major focus of the Government of India. Any pullback by the government on its initiatives will result in de-growth for the cement industry. Moreover, too many regulatory approvals and compliances might be a hindrance to the segments progress.

Power, Fuel and Freight Risk:

The Company has seen a lot of fluctuation in fuel prices in the international markets throughout the year, along with uncertainty over the supply of domestic and linkage coal. These issues create for the availability and pricing of coal for the cement industry and the Company. During the year, the

Company used coal for about 85% of its kiln fire needs. Therefore, any increase in international coal prices will negatively affect the operating costs of the Company.

The cement industry consumes a lot of energy and about 36% of its total spending goes to power and fuel costs. Out of 36% of power and fuel cost, about 10.38% of the cost is for power. However, the Company strives to constantly focus on green energy with lower sourcing costs and becoming a self-reliant Company in the current energy situation.

During the year, the Company consumed 35.83% of its total power requirement from Green Energy Sources like Wind and WHRS.

We use railways and sea for limited dispatches. Majority of Companys dispatches are through road. Increase in Diesel prices may make road transportation more expensive. The chance of crude oil prices going up and the instability in the global market and our big reliance on road transportation may hurt our operating costs.

Cyber Security Threats:

Technology has changed rapidly in recent years, and so have the risks associated with it. The spread of business data from data centers to the cloud, social media and digital platforms for B2B and B2C interactions are affecting cyber security.

Besides data loss, cyber-attacks can harm business operations, equipment and human resources, and lead to legal and regulatory responsibilities.

Suitable controls (technology and governance) are being designed and executed.

Strategies:

The Company has followed two strategies. First is a short-term strategy, aimed at health, cost and cash to mitigate immediate risks. We focused on ensuring the health and safety of our employees, suppliers and channel partners, while initiating stringent measures to control costs and strengthen cash flows. Secondly, long-term strategies include increasing our market reach through capacity expansion, launch of more innovative and superior quality products; enhance efficiency through digital transformation, cost optimization and logistics efficiency; and achieve our sustainability goals through our targeted initiatives across four pillars of our sustainable development plan. The Company successfully integrated its environmental, social and governance (ESG) plans and targets across all functions and continue to give top priority to improve upon in all ESG parameters.

DIGITALISATION AND INNOVATION

We firmly believe digitalisation is a crucial driver of sustainable business growth. Over the past few years, the Company has embraced digital technologies across its core business processes, including sales, logistics, materials management, manufacturing, control systems and technology operations.

The Companys well defined digital transformation strategy aims to streamline business processes and optimise resource usage to achieve sustainable business growth while complying with regulatory requirements.

CAPACITY EXPANSION

The cement industry is witnessing a significant imbalance in its total installed capacity vis-a-vis the capacity utilization which is currently about 75%. Even though there is excess capacity, capacity expansion still continues, resulting in intense competition and adverse impact on the Companys market share, sales volume and profitability. To enhance its market position and lower the competitive risk, the Company has already started its capacity expansion. The work on the new 1.8 million ton grinding unit is going well and it is expected to be operational in the fourth quarter of the year 2024-25.

INTERNAL CONTROLS OVER FINANCIAL REPORTING (ICFR)

The internal financial controls within the Company are commensurate with the size, scale and complexity of its operations. The controls were tested during the year and no reportable material weaknesses either in their design or operations were observed. The Company has robust policies and procedures which, inter alia, ensure integrity in conducting its business, the safeguarding of its assets, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records and the prevention and detection of frauds and errors. The operating effectiveness of such controls are in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting

("the Guidance Note") and the Standards on Auditing specified by the Central Government in accordance with Section 143(10) of the Act and other authoritative pronouncements, to the extent applicable to an audit of internal financial controls over financial reporting, both issued by the ICAI.

HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS

The Company continued with efforts to ensure that its pool of human resources is "future ready" through its robust processes of learning & development, capability building and its development programmes. Efforts were taken to develop leadership lines as well as to enhance technical and functional capabilities with special focus on nurturing young talent, in order to face future challenges that may arise. The Company organized several training, awareness and coaching programs to develop the leadership, technical and management skills of employees. Employee engagement programs were organized to create openness and sharing ideas by employees. This learning journey includes formal, informal and highly interactive components that would help in honing their leadership, and coaching skills. It will ensure that the development initiatives result not just in better skills but in enhanced performance and higher engagement.

As of 31^st March, 2024, the Company had 245 employees in its payroll (The number as of 31^st March, 2023 was 241).

Industrial relations during the year under report remained cordial.

EDUCATION

The Company has been providing primary/secondary education for the children of the employees and local community staying in nearby areas of Factory / Mines. The Company has provided educational kits to needy children in the nearby villages. More details on this are covered in the Annual Report on CSR activities forming part of the Directors Report.

ENVIRONMENT, SUSTAINABILITY AND GOVERNANCE

The Company has been continuously contributing towards environmental sustainability. Continuous improvement, enhanced process efficiency and periodic capital expenditures have helped us position "KAMAL" Cement one of the most responsible cement manufacturers in the country. The Company.

has been periodically reviewing the criteria of Environment, Sustainability & Governance (ESG) as per its ESG Policy with a focus on continuous improvement in Environment Sustainability. During the year, the Companys efforts continued with the same rigour. It conducted its business maintaining high standards of governance, respecting nature and demonstrating social responsiveness towards its communities & people.

Under its ESG Implementation plan, the Company has identified

14 key areas viz. water management, circular economy & waste management, energy & climate change, atmospheric emissions, biodiversity management & greenbelt development, sustainable mining, product quality management, health & safety, transparency, ethical practices & corporate governance, innovations & digitalization, sales & supply chain, human resources, community engagement and corporate social responsibility under which key initiatives are undertaken. Despite a challenging year 2023-24, we were able to achieve considerable improvements across the targets and are on track with the agenda of the Company.

More details on the Companys ESG initiative and performance during the year are annexed to this MDA and BRSR forming an integral part of the Annual Report.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable laws or regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand- supply conditions finished goods prices, raw materials costs and availability, fluctuations in exchange rates, changes in Government regulations, tax laws, natural calamities litigation and industrial relations, monsoon, economic developments within the country and other factors.

For and on behalf of the Board of Directors
Anil Singhvi	R. Krishnakumar
Executive Chairman	CEO & Managing Director
Place: Digvijaygram
Date: 26th April, 2024