Incorporation

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INCORPORATION:
Meghalaya cements limited was incorporated on 12 june 2003 as a private company limited by shares under the provision of the companis act 1956. The register office is located at Thangskai village,Shillong.The factory is situated in Jaintia Hills district of Meghalaya.

VISION:
To be the market leader in the manufacture of cement keeping in mind the environmental factors and to adopt innovative technologies for sustainable development.

MISSION:
• Attain leadership in cement manufacturing . • Desire for growth and motivation to conquer new heights. • Minimise environmental impact and become an eco friendly organisation.

VALUES OF THE COMPANY:
• To be ethically , socially , constant and concious. • To focus on exceeding customer satisfaction. • To become a global conglomerate and offer quality products and services. • To uncompromise with quality , trust , integrity and credibility. • To nurture deep concern for every single employee.

• To protect the beautiful jaintia hills and pledged it to keep it unchanged and follow very stringent norms of pollution control and eco friendliness.

GEOGRAPHICAL DISTRIBUTION:
The demand for cement in the north eastern region of india is fast approaching 3 mllion tonnes per annum and is likely to grow @ 7%. The main aim of Meghalaya cement Limited is to meet the need of quality cement in hilly north east india at a competitive price avoiding carrying cost from the plain land. MCL has also planned to go national for which it has geared itself on all possible aspect . It main focus is to cater the market and to attain a position of becoming the best cement manufacturer. The company has been going from strength to strength in which it has been awarded the ISO 9001:2000 and ISO 14001:2004 certification in it very firsy year.

REASONS FOR SUCCESS:
• The magnitude of an organisation is as large as the talent it grows. At MCL , people has powered growth like anything else. The employees are responsible for sustaining the company through the most difficult times over the last few years. • MCL strongly believes that an organisation is as good as its people. • It firmly believes in mutual understanding and co-operation. • The organisation has also been nurturing talent through a well defined module of training and development.

• Individual development plans for higher potential officers and employee training process has helped the company in developing a pool of empowered managers and higher skilled work force who work towards the goals of the organisation.

INDUSTRY PROFILE:
India is the second largest cement producing country in the world which makes it one of the major exporter of cement as well. The major players in the Indian market are ACC Cement , Ultratech Cement and Gujarat Cement. The most popular type of cement is Portland Cement. The growth of the cement industry has achieved a sky high mark of 13.3% from a mere 3.6%. The industrial and real estate boom has a lot of market for cement and has caused the cement industry to flourish. The cement industry at present is passing through its best period which is evident from increasing demand of good quality cement all over the world. In India too, the demand of cement is growing on an average of 10% every year on account of rapid progress in construction , infrastructure and real estate business activities together with overall growth in the national economy. The industry being one of the major revenue earning sources of the government in the form of taxes and duties and India being the largest cement producing country in the world , the government keeps a close watch on the measures necessary for the development of the industry particularly in the eastern region where the demand of quality cement is increasing sharply due to various construction projects being undertaken or are in the process of implementation or proposed to be installed by the eastern region state government to ensure setting up of small , medium and big size industrial units as possible for improving the status of industrialization in their respective state. Cement industry’s growth prospects are mainly based on the government policies specially those relating to investment in infrastructure and industrial sectors. Any change in such policies may have an adverse effect on the demand

and supply ratio of cement . However , right now and in the coming near future it does not appear to happen so as in the recent past the government has been in practice of framing policies in favour of infrastructure and industrial sectors as both are significant contributors to maintain the high GDP growth rate. The recent establishment of various SEZs and an increased importance on having world class infrastructure in competition with other developing countries has provided extra impetus to the cement industry. The future prospects of cement industry in India appears to be undoubtedly bright and looks buoyant as more and more major cement manufacturing companies are either expanding their installed capacities or are seriously thinking to do so to feed back the growing demand of quality cement in the country.

FUTURE PROSPECTS AND OUTLOOK:
In view of increasing demand of cement in the eastern region due to central and state government thrust on infrastructural developments like boosting of housing sectors , construction of state and national highways and promoting e\and encouraging private sector entrepreneurs to set up new industrial units in the north eastern states by providing them them various tax free incentives , it is expected that prospects of the cement industry vis –a –vis the company in the near future would be bright and brilliant. Moreover , the management is determined to be quality conscious and all possible measures to ensure production of high quality cement are being followed which would in turn attract the prospective consumers to give a priority to the company product over the other cement brands available in the eastern region market. ‘TOPCEM’ brand in the north eastern region at present is as well known and has emerged as a household name due to its superior quality and sustained strength. Further considering the market’s positive response to ‘TOPCEM’ a scheme of expansion is being envisaged and it is expected that he said scheme would be completed by the end of the financial year 2008-09 , when the production capacity of the plant is likely to be 2600 MT of clinker production. Further , it is proposed to set up an additional grinding unit to be situated at a different location in the eastern zone where a part of the clinker production shall be used for production of cement and after the said expansion is completed as aforesaid , it is expected to produce more than 1 million tons of cement per annum. This would not only make the company one of the few top cement manufacturing units in the eastern region but it would also play a vital role in meeting the long awaited demand of the eastern region consumers of a reliable quality of cement to a great extent resulting

in reduction of quantum of cement being supplied by companies based at sales out of the region. Therefore it is expected that barring unforeseen circumstances , the prospects of the company is bright and encouraging in the coming near future and the directors confidently predict an increasing trend of production and sales of the company’s product. Inspite of the fact that the central government has recently announced certain concessions in lowering custom duty for import of cement from other countries but the fact that is unlikely to effect eastern cement market due to transport cost involvement in the import from the ports and harbours. ‘TOPCEM’ has already achieved ISO 9000 status which laid the path towards development if the company. The company is now targeting to achieve ISO 14001 soon which would make it the most environmental friendly cement plant in the north-east. Further, the management is also considering to set up a 18 MW captive thermal power plant to meet the growing power requirement which would also be helpful in reducing the company’s power cost drastically.

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS:

1.

Basis of preparation of financial accounts: The financial statement has been prepared on the historical cost convention basis. In preparation of such statement generally accepted accounting principles and the accounting standards referred under section 211(3C) f the companies act 1956 have been followed by the company and the necessary disclosures have been made in accordance with the requirements of schedule VI to the companies act 1956 and the Indian accounting standards.

2.

Fixed Assets:
(a) Fixed

assets are stated at their original cost of acquisition or

construction less accumulated depreciation . Cost includes attributable interest and financial charges till such assets are ready for their intended use and are stated net of specific grant / subsidy received. (b) Capital work in progress: Capital work in progress is carried at its direct costs.
3.

Depreciation: Depreciation has been provided for on fixed assets on written down value method on a pro rata basis at the rates and in the manner as prescribed under schedule XIV to the companies act 1956. The classification of plant and

machinery into continuous and non continuous process is done as per technical certification depreciation thereon is provided accordingly.
4.

Inventories: a) Raw materials and packing materials are valued at lower of cost computed on FIFO basis or net realizable value. b) Finished goods are valued at lower of cost computed on annual average basis or net realizable value. c) Stores and spares are valued at cost. Stock in trade are value at cost or net realizable value whichever is lower. The costs are determined on a weighted average basis.

5.

Investments: Investments is unquoted equity shares of other companies are classified as “long term investment” and stated at cost price in the financial statements. Investment in quoted shares are classified as “current investment” and are shown at lower cost and market / fair value.

6.

Revenue recognition : Sales are recognized on dispatch and are stated as inclusive of excise duty and are net of trade discounts and sales return. Other items of revenue are recognized in accordance with accounting standards (AS-9).

7.

Government grants and subsidies: Government grants and subsidies are recognized on accrual basis when there is reasonable certainty that the same will be received. Revenue grants

are recognized in the financial statements either as income or deducted from the related expenses.
8.

Retirement benefits: Contribution to provident fund is deposited on actual liability basis. Other retirement basis are provided for as and when applicable.

9.

Miscellaneous expenditure: Miscellaneous expenditure having endurable benefit is amortized over a period of five years.

10.Taxes on income: Income tax expense comprises current tax and deferred tax charge or credit. The deferred tax change or credit is recognized using prevailing enacted or substantively enacted tax rate where there are unabsorbed depreciation or carry forwarded losses, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Other deferred tax assets are recognized only to the extent there is reasonable certainty of realization in future. Deferred tax assets / liabilities are reviewed as at such balance sheet date based on developments during the year and available case law to re-assess realization / liabilities. 11. Research and development expenditure: Revenue expenditure on Research and development expenditure is charged out in the year in which it is incurred and are included under the related head of expenditure.

12. Expenditure during construction: In respect of substancial capacity enhancement a existing location direct cost along with part of indirect expenses are capitalized together with interest on the funds related to them upto the date of commercial production. 13. Borrowing costs: Borrowing costs that are direct attributable to the acquisition , construction or production of an assets are capitalized as part of the cost of the asset. Other Borrowing costs are recognized are recognized as an expense in the period in which they are incurred. 14. Foreign currency transaction: Foreign currency transaction are accounted for at the rates prevailing on the dates of transaction / converted at contracted rate. Foreign currency assets and liabilities covered by forward contracts are stated at forward contract rates while those not covered are restated at year end rate. Exchange difference relating to fixed assets is adjusted in the cost of the assets. Any other Exchange difference is dealt within the profit and loss a/c. Premium in respect of forward contracts is recognized over the life of contracts. 15. Contingent liability: Contingent liability not acknowledged as debt are disclosed by way of note. 16. Intangible assets: Intangible assets is recognized when it is probable that the future economic benefit that are attributable to the assets will flow to the company and the cost of

the assets can be measured reliably. The depreciable amount of an intangible assets is allocated over its estimated useful life. 17. Provision and Contingencies: Provision is recognized for a present obligation as a result of past events if it is probable that an outflow of resource will be required to settle the obligation and in respect of which a reliable estimate can be made. Provision are determined based on best estimate of the amount required to settle the obligation at the balance sheet date. A contingent liability of an outflow of resources is remote . Contingent assets are neither recognized or disclosed in the financial statements.

OPERATIONS:
The company started its commercial production of cement w.e.f. 1 april 2006 and achieved a total production of 294747 MT during the year under review which is about 90% of its installed capacity. The sales realization amounted to Rs.129.54 crores during the year indicating that the product of the company under the brand name ‘TOPCEM’ has flexed its wings and is gradually establishing its roots deep in the cement market of the north eastern region of the country. Achieving a net profit of Rs.25.98 crores in the very first year of operation is itself a matter of great significant for a company of this size and that a sound management policy determined to have still better financial results in the coming years is behind the success story of the company. After the implementation of the project within the stipulated time , the plant is now being geared up to further expand its installed capacity. On the other hand, sales promotional and marketing activities are being organized in such a way that

no part of all the seven states of the region should be left unapproachable to boost the sales. Transportation of finished goods are being handled under supervision of reputed transport organizations for dispatch of goods to any destination all over the eastern region.

DIVIDEND:
In view of the proposed scheme of expansion and commitment of the company regarding the repayment of term loan to the lending banks , no dividend is being recommended for the year under review.

DIRECTOR’S RESPONSIBILITY STATEMENT:
Persuant to the requirement of section 217(2A) of the companies act 1956 , the board of directors hereby state: 1. That in the preparation of annual accounts , the applicable accounting standards have been followed and there are no materials departures. 2. That the directors have selected such accounting policies and have applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company.
3.

That the directors have taken proper and sufficient care for the maintenance of adequate accounting record in accordance with the provision of this act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

4. That the directors have prepared the annual accounts on going concern basis.

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