Dalmia Bharat Refractories Limited Unlisted Shares

Annual Report: 2023

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Year: 2023

Annual Report Summary

Dalmia Bharat Refractories Ltd (DBRL) Annual Report 2022-23 Summary:

Company Overview:

DBRL successfully completed the sale of its India refractory business and its German subsidiary to RHI Magnesita (RHIM), gaining equity shares in RHIM's India business, which controls around 27% of the Indian refractory market. DBRL is now exploring new business opportunities and has invested in start-ups as well as Dalmia Bharat Limited and HippoStores Technology Private Ltd.

CEO's Message:

The CEO, C N Maheshwari, highlights the successful sale of the Indian refractory business to RHIM, resulting in a 13.47% stake in RHIM for DBRL. DBRL received a record valuation of 27x. He notes that DBRL is exploring emerging opportunities in India and will continue to build value in its existing refractory businesses, both in India and China. The CEO anticipates 2023-24 as pivotal for DBRL.

Management Discussion & Analysis:

FY 2022-23 was a dynamic year with the consolidation of DBRL's refractory business approved by the National Company Law Tribunal. A definitive agreement was implemented with RHIM on November 19, 2022, to transfer the India business, resulting in RHIM holding a 13.47% stake and maximizing the valuation benefit. DBRL transferred its entire India business to Dalmia OCL Limited, a then wholly-owned subsidiary. DBRL received INR 2,213 crores, including INR 505 crores in cash (subject to adjustments) and the remaining as equity shares of Dalmia OCL Limited to RHIM in exchange for 2.7 crore shares of RHIM, making DBRL a 13.47% shareholder of RHIM.

Economic Outlook:

The report notes global economic instability due to the Russia-Ukraine war and recession in the IT sector. The IMF forecasts a decline in global growth rates from 3.4% in 2022 to 2.8% in 2023. India's growth is expected to be 6.7% in calendar year 2024. DBRL has divested from refractories and is targeting investments in cement, construction materials and startups. Cement demand is expected to grow by up to 9% in FY 2024. The construction material industry is witnessing advancements.

Opportunities and Threats:

DBRL aims to capitalize on new opportunities by exploring sustainable solutions and leveraging digital transformation. Expanding into new geographical regions and forming strategic alliances are also priorities. Key risks include market volatility, competition, regulatory compliance, technological disruptions, and talent acquisition. DBRL will focus on innovation to maintain its competitive edge.

DBRL Performance Overview:

Due to the impact of transfer of business undertaking to RHIM, DBRL's revenue increased by 12.92% to Rs 102.69 Cr on a standalone basis. The total revenue of INR 358.67 Cr can be bifurcated as (i) INR 96.48 Cr from domestic; and (ii) INR 262.19 Cr from international. Profit before tax was Rs 1,727.20 Cr on standalone and Rs 1,749.45 Cr on consolidated basis. DBRL has announced investments in Dalmia Bharat Limited and HippoStores Technology Private Limited. DBRL plans to leverage its technology and manufacturing capabilities. DBRL's workforce is 47 people, with the majority transferred to RHIM.

Internal Controls & Human Resources:

DBRL has adequate internal financial controls. DBRL is law-abiding and transparent. DBRL strengthened human resources and employee skill development.

Director's Report:

The Directors are recommending a dividend of 15% (Rs 1.50 per share). DBRL is amending its object clause. The Company transferred Indian refractory businesses to RHIM in January 2023. On standalone basis, FY 2022-23 revenue was Rs 102.69 crore and profit before tax was Rs 1727.20 crore. Dalmia Mining and Services Private Limited became a wholly owned subsidiary in March 2023. There are 4 subsidiaries (3 wholly owned). The Board composition is described, with Sameer Nagpal retiring by rotation and being eligible for re-appointment.

Corporate Social Responsibility (CSR):

DBRL is not obligated to contribute towards CSR. However, DBRL has contributed INR 30 lakhs on voluntary basis for CSR activities.

Auditors:

M/s Chaturvedi & Shah are the statutory auditors for 5 years.

Dividend:

A dividend of 15% i.e. INR 1.50/- per equity share is recommended.

Share Capital Structure:

The capital structure as of March 31, 2023 is specified.

Subsidiaries, Associates & Joint Venture Companies:

Details of subsidiaries as of January 05, 2023.

Related Party Transactions:

Several related party transactions occurred, including transfers to Dalmia OCL limited.

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