Chairman's Speech

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Chairman's Speech for the 75th AGM

Ladies and Gentlemen,

It is a great honour and privilege for me to address all of you on behalf of the Board of Directors and I am delighted to welcome all the shareholders to the75th Annual General Meeting of the company, Platinum jubilee year of the company.

It was the vision of late Sri. V Ramakrishna I.C.S, with his vast experience in Government in the development of industries that led to the founding of this company in 1941. He has set high standards of governance and ethics for our people at all levels and KCP consistently strives to meet them. We on regular basis, review our systems and practices in terms of transparency and accountability.

Now, KCP is a group with turnover of about Rs 1400 crores with diverse initiatives into Cement; Sugar, Heavy Engineering, Hospitality, Generation of all types of power like Thermal, Hydel, Wind and Solar.

Now let me say a few words onthe developments in the Indian Industry and the operational performance of various segments of the Company. The performance of our Company is intertwined with the macro economic conditions of the country. The GDP in India in the year 2015-16, advanced to 7.6 percent, and primarily reflected the robust growth in private consumption, which accounts for nearly 60% of the economy.The budget deficit has been shrinking for several years and is expected to narrow further. The Stellar management of inflation, which kept the Indian rupee stable, supported the government’s efforts to attract foreign-direct investment. India is reasonably insulated against global ramifications of ‘Brexit’ Brittan’s decision to exit European Union. The strengthening of other macroeconomic indicators including swelling foreign-exchange reserves and narrowing current-account deficits also inspired confidence in would-be investors. Interest rates reduction was gradual due to the hawkish stance on inflation taken by the authorities.

As countries like China and Brazil have slipped in their economic management, India signaled that it is a mature economy, where prudent macro economic decisions are taken based on technical expertise, not political whim. This raised its profile in the international arena substantially.

Let me now turn to the performance of our company during FY 15-16.The 75th Annual Report of the company reveals that the financial year (FY) 2016 was one of the best yearsof our company, in recent times. Both on standalone basis as well as at group level, KCP registered good bottom line.

I am particularly pleased to state that cement segment of the company made giant contributions to the bottom line. Better realisations primarily helped in registering good profits in the cement segment. Though, on pan India basis, the demand for cement did not pick up as anticipated by the cement players, our company could enhance the cement volumes also.

The power segment was a mixed bag during the year 2015-16. While captive thermal power plant could optimise its capacity utilisation by selling the surplus power to the state grids as well as other buyers through the exchange, the hydel unit’s performance was dismal due to the prevailing drought conditions.

The record rainfall in Chennai during the second half of the year, affected the performance of the Engineering Unit at Chennai. Coupled with the rains and floods, the pickup of the demand for capital goods is still awaited. Consequently, despite registering higher turnover, the unit recorded losses.

The newly approved, National Capital Goods Policy(NCGP), in essence aspires to be a game changer for India's capital goods sector which aims to increase exports and lay emphasis on market development, promotion of technology. The policy could benefit many sectors including Heavy engineering under Make In India initiative of Govt of India.

I am delighted to share with you the fact that the Hotel project at Hyderabad has been completed and is operational under the brand name Mercure Hyderabad KCP. Ours is a business hotel located in the heart of the capital city of Telangana, Hyderabad.

I am also happy to state that the phase-I stage of expansion of our Company’s subsidiary sugar unit at Vietnam, was completed and the results of the expansion would be reflected in the year 2016-17. Global prices of sugar have been improving since second half of the financial year 2015-16. The realisations in Vietnam also improved leading to enhanced financial performance of that unit. However, the drought condition led to the poor crop resulting in reduction of volumes of sugar produced and sold.

Backed bythe optimistic conditions in the economy, the Budget 2016-17 proposed a slew of measures to boost infrastructure and investment, which should be positive for the cement sector, as increased spending on infrastructure enhancesthe demand for cement. Incremental spend on smart city development, the government allocated funds towards Urban Rejuvenation Mission and Mission for Development of 100 Smart Cities should also help cement off take. The rural push given in the Budget should also spur the rural demand.Adoption of cement in the place of bitumen in new road projects will also help in creating demand for cement.

With the government’s announcement to allow 100% foreign ownership of firms in a broad swath of industries further reinforces the message that India is open for business.

With the passage of Goods and Services Tax (GST) Bill by the Parliament of India, it is expected to improve the prospects of engineering, capital goods and Cement sectors by rationalising and simplifying the tax structure and the expected decline in logistic costs.

Buoyed by the policy measures taken by the government, encouraging economic indicators and the developments in the Capital Region of Andhra Pradesh and projects taken up in Telangana and Andhra Pradesh, our Board of Directors’ have decided to expand the capacity of the existing plant at Muktyala from 1.8 million tons per annum (TPA) to 3.5 million TPA. The project is likely to go on stream in the financial year 2019.

As a caring corporate citizen, our Company actively contributes to social and economic development in the communities in which it operates. The major areas of focus are education, healthcare, sustainable livelihood and infrastructure development. The KCP has been consistently adopting new technologies that are cleaner and greener and more energy efficient.

Before I conclude, I convey, on behalf of the Board of Directors,our deep sense of gratitude to all our stakeholders, business associates, the Central and State Governments for their ongoing support. The commitment of all of our employees to the growth of your Company is invaluable. Finally, I thank each one of you and all of our other shareholders across the country for backing us always and reposing your faith in us.

Chairman and Managing Director

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