Chairman’s note

Demonstrating holistic performance

Dear Stakeholders,

It is a moment of pride for all of us to present to you our proposed first ever integrated report, as part of our continued commitment to transparent and holistic stakeholder communication.

This report would highlight the entire spectrum of our value creation process, with the relevant resources that are deployed and relationships that are involved in producing the desired outputs and outcomes. SCL is one of India’s first cement companies to adopt Integrated Reporting <IR> to raise the bar in transparent stakeholder communications.

Notwithstanding the COVID-19 catastrophe, when I look back at FY2020, I can say that the year was a mixed bag. While at the start of the year global growth was stunted, towards the fourth quarter, we could see some easing in geopolitical uncertainties and protectionist measures adopted by various countries. However, global growth was fragile and prone to various headwinds.

India continued to suffer from structural impediments such as credit crunch, low private capex and tepid consumption. The Reserve Bank of India (RBI) announced significant rate cuts to infuse additional liquidity in the economy and undertook various regulatory initiatives to reinstate the trust of stakeholders in the banking and financial sector. This was needed to support India’s growing appetite for capital, bolster economic growth and enhance the quality of life of average citizens.

“We have what it takes to play a significant role in India’s growth story. With the right investments, the right intent and the right approach, we will cross many more milestones in the coming years.”

Infrastructure creation is critical to take the economy to the next orbit of growth. During the year, the Government of India announced a National Infrastructure Pipeline with a proposed investment of ` 102 Lakhs Crores, which is expected to go a long way in making India a US$ 5 trillion economic powerhouse by 2024.

In India, the cement demand was subdued in the first half owing to cautious sentiment during the parliamentary elections, while extended monsoons eroded demand in the second half. The result was stagnant sectoral growth (1.5-2%). That said, with large-scale infrastructure projects being planned, the cement industry is expected to benefit in the medium to long term.

SCL has undertaken two capacity expansion projects in Madhya Pradesh and Odisha. Our majority stake investment in Satguru Cements Private Limited, a 1 MTPA cement production facility, enhances our presence in the central Indian markets. Similarly, our full ownership of Jajpur Cements Private Limited, a grinding unit with a 1.5 MTPA capacity, strengthens our capability to fully serve the eastern belt. Both these greenfield projects are expected to be completed by September 2021 and our units in Mattampally, Gudipadu and Bayyavaram will chart a new growth chapter for SCL.

Even amidst a dynamic and challenging year, we delivered a relatively robust performance, with a slight dip in the revenue but a significant increase in profitability at both operating and net levels. It’s a good reflection of our unwavering cost focus, larger use of technology and long-standing commitment from our people. I applaud the management for holding the ground and delivering such results, even amidst challenging times.

With the world combating emerging risks such as environmental degradation and climate change, the need for all businesses to pursue Environmental, Social and Governance (ESG) priorities has become a standard ask.

“The cement sector is a huge helping hand in supporting infrastructure creation and has an important correlation with the socio-economic prosperity of any nation.”

Good mining practices, technology-led and data-driven manufacturing processes, proactive waste reduction, strict emission control and increased use of renewable energy comprise our key environmental priorities. On the social front, our continued engagement with local communities ensure that they can also partner our prosperity. In the past three years, we have spent nearly ` 3 Crores on corporate social responsibility initiatives, with intervention areas ranging from infrastructure building to education and providing healthcare services to the disadvantaged sections of the society.

I must acknowledge the contribution of our 1,800+ workforce on behalf of the Board and the leadership team. Their boundless passion and untiring efforts have made us what we are today.

Having associated myself with your Company as its Chairman for nearly four decades, I am leaving the board with a sense of satisfaction over my contribution to its growth.

We have what it takes to play a significant role in India’s growth story. With the right investments, the right intent and the right approach, I am sure your Company will cross many more milestones in the coming years. In this journey, I seek your continued support and guidance to it.

Yours truly,

O. Swaminatha Reddy

Date 24th June 2020