CAUTIONARY STATEMENT
Some of the statements in the report may be forward looking and are
stated as required by applicable laws & regulations. Many factors may affect the
actual results, which could be different from what the Directors envisage in terms of
future performance and outlook The Companys Performance is dependent on several
external factors such as performance of monsoons, government policy, fluctuation of prices
of raw material and finished products and also their availability.
BUSINESS OVERVIEW:
The Company is mainly engaged in the manufacture of Single Super
Phosphate (Fertilizer), Sulphuric Acid and other chemicals; the main business segment is
related to agriculture and greatly affected by monsoons.
Segment-wise Business Review and Operational and Financial Performance:
The summarized performance of the Company in terms of production and
sales for last 5 years is as under: (Quantity in MT)
Particular |
2022-23 |
2021-22 |
2020-21 |
2019-20 |
2018-19 |
Production: |
|
|
|
|
|
| Fertilizer (SSP) |
4,92,613 |
5,34,645 |
4,53,218 |
4,36,181 |
3,18,554 |
| Chemicals & |
|
|
|
|
|
| Speciality Chemicals |
2,06,377 |
2,13,969 |
1,84,234 |
2,13,493 |
1,81,450 |
Sales: |
|
|
|
|
|
| Fertilizer (SSP) |
4,73,194 |
5,33,654 |
4,66,237 |
4,00,796 |
3,03,679 |
| Chemicals & |
|
|
|
|
|
| Speciality Chemicals |
1,13,681 |
1,17,910 |
1,11,071 |
1,32,674 |
1,40,329 |
The summarized financial performance of the Company for last 2 years is
as under:
Particular |
2022-23 |
2021-22 |
Sales |
|
|
| Fertilizer (SSP) |
79,517.34 |
72,493.65 |
| Chemicals & Speciality Chemicals |
9,411.94 |
9,983.58 |
Segment Operating Profit/(Loss) {PBIT}: |
|
|
| Fertilizer (SSP) |
3,913.75 |
8,206.91 |
| Chemicals & Speciality Chemicals |
3,120.71 |
3,477.00 |
EPS(Rs) : |
4.29 |
8.23 |
Dividend: |
30% |
30% |
Face Value (Per share) |
1/- |
1/- |
The year 2022-23 saw the operations begin in a global uncertainty
following the Russia Ukraine War. This war led to an unprecedented rise in prices of all
commodities including Rock Phosphate and Sulphur the two major raw materials for the
Company. This war also led to closure of several businesses in Europe due to high energy
costs and subsequently there was a crash in prices of Sulphuric acid and related
chemicals.
The GOI could successfully implement the partial Direct Benefit
Transfer system for the Fertilizer Industry. The GOI has recently initiated the pilot
project for the final stage of Direct Benefit Transfer to the farmers. Hopefully in a few
years this may also be fully implemented. During the current year the turnover of your
Company has increased from Rs. 82,503.66 Lakhs for the year 2021-22 to Rs. 88,929.29 Lakhs
for the year 2022-23, the operating income has decreased from Rs. 12,284.81 Lakhs in
2021-22 to Rs. 7,940.65 Lakhs in 2022-23, and the cash profit has decreased from Rs.
11,022.39 Lakhs to Rs. 6,009.23 Lakhs in the respective periods, while the net profit
after tax has decreased from Rs. 8,016.86 Lakhs to Rs. 3,735.78 Lakhs.
FERTILIZER, CHEMICALS & SPECIALITY CHEMICALS DIVISION:
The Company has one of Indias largest Single Super Phosphate
(SSP) Fertilizer production capacity of 11,13,500 MT in the states of Madhya Pradesh,
Rajasthan, Uttar Pradesh, Chhattisgarh & Gujarat alongwith Chemicals production
capacity of 2,70,600 MT in the States of Madhya
Pradesh, Uttar Pradesh & Chhattisgarh. Sulphuric Acid is also a raw
material for production of SSP.
The Company has produced 4,92,613 MT (previous year 5,34,645 MT) of
Single Super Phosphate (SSP) Fertilizer and 2,06,377 MT (previous year 2,13,969 MT) of
Chemicals & Speciality Chemicals and sold 4,73,194 MT of SSP (previous year 5,33,654
MT) & 1,13,681 MT of Chemicals (previous year 1,17,910 MT) respectively.
The Company is continuously trying to improve its share in the
fortified high value added fertilizers segment. The products are picking up well in the
market.
The Company is continuing its efforts for optimizing its current assets
to leverage sales on the one hand and diversifying into new geographical markets on the
other. Focus is being laid on producing more value added fortified fertilizers, to improve
the product portfolio.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
Agriculture is the third largest sector of Indian Economy, which
contributes around 17% of total GDP of the Country. Fertilizer Industry, with the emerging
scenario, plays vital role in the growth of Agriculture Sector. The balanced use of
chemical fertilizer is important not only for increasing agricultural productivity but
also for sustaining soil fertility. Single Super Phosphate is a multi nutrient fertilizer
containing phosphate (16%) and sulphur (11%) as primary nutrients. SSP is applied as a
basal fertilizer being rich in secondary nutrients like calcium and magnesium oxide and
several micro nutrients. It is an essential Fertilizer for crops likes Oil seeds, Pulses,
Sugarcane, Fruits and Vegetables, Tea etc. and for sulphur deficient soils. Main features
of SSP Fertilizer Industry are-· Basic need for agriculture and its development.
·
SSP is a multi-nutrient fertilizer containing PO as primary nutrient 2
5
and Sulphur, Calcium & magnesium as secondary nutrients. ·
SSP fertilizer is the lowest priced fertiizer per kg, and preferred by small &
marginal farmers.
· Highly dependent on Imported Raw Material.
· Subsidised by Government of India to control the prices of the
input to the farmers.
· Substantial Import of Finished Products other than SSP.
Agronomic Importance of SSP:
· SSP helps in improving root growth and development which is
most important for uptake of plant nutrient and water.
· For Leguminous crops like groundnut, use of SSP, ensures a
large number of nodules on the roots, which fix atmospheric Nitrogen directly into the
soil and also increase Nitrogen uptake.
· SSP improves soil aeration and increase water holding capacity
of the soil and increase root growth which increase crop yield.
· Oil content of Groundnut and other oil seeds increases. The
quantity and quality of oil seeds crops increases.
· In Sugarcane, the sugar content increases which provide more
production and monetary benefit to the farmers · SSP increases resistance power of
the plants against attack of pest and disease.
· SSP increases protein content in pulses crop
· SSP helps in leaching excess water from the root zone and
prevent yellowing of the crop · SSP improves storage capacity of product ·
SSP also acts as a soil reclaiming agent.
SSP, which is a poor farmers fertilizer (price wise), is an
option to optimize the use of phosphate fertilizers. It also helps to treat sulphur
deficiency in soil (about 36% of Indian soil is sulphur deficient) as well as for further
enhancement of yields at the least cost. SSP being an indigenously manufactured fertilizer
saves on foreign exchange outgo vis a vis imported phosphatic fertilizers.
The Industry, however has been suffering from poor quality supply from
some unethical players in the market, mainly from the MSME sector. The Ministry of
Fertilizers and the Fertilizer Association of India have now laid special focus on
improving the quality in the SSP sector.
Governments continuous thrust to encourage SSP to substitute
imports of DAP and NPK is an indicator of upward trend in the Industrys future.
Future Outlook:
The Countrys stress on higher agricultural productivity is
expected to lead to a considerably better realization to farmers and increase the demand
of fertilizers. The Single Super Phosphate fertilizer is a generic customized fertilizer
containing sulphur, calcium & other micro nutrients besides phosphate. The Nutrient
Based Subsidy is a long term positive for the Fertilizer Industry, particularly SSP
Industry, with free market mechanism encouraging more interaction between producers and
farmers for efficient use of fertilizer for better agriculture output. The Company expects
healthy growth in the demand for fertilizers, especially SSP due to the Governments
focus on promotion of a more balanced nutrient consumption It is expected that the Country
will have a sub normal monsoon in 2023, giving stress to Indian agriculture sector and
related industries like Fertilizer in the short term.
The Government has floated the idea of replacing the input subsidy with
direct income support to farmers and there is a need for "replacing untargeted
subsidies (power and fertilizer) by direct income support to address agricultural stress
and to achieve doubling farmers income. The government has been spending nearly 30%
of its total subsidy on food, fuel and fertilizer to ensure that farmers get the key
agriculture inputs at cheaper rates. The year 2018 saw the beginning of DBT (Direct
Benefit Transfer), which would transfer money directly to the retailers account.
Presently, the companies are being paid only after the actual sale to the farmer.
Currently, there are 2.3 lakh retailers across the country, attached to a Point of Sale
(PoS) machine, which is in turn linked to Ministry of Fertilizers
‘E-Urvarak DBT channel. The Government also seems keen to implement the last
phase of the subsidy reforms by way of direct benefit transfer to the farmers. The GOI has
initiated a pilot project for the final phase of DBT and hopefully on conclusion of the
pilot project the Subsidy maybe directly transferred to the farmers. It shall be very
beneficial for the SSP Industry.
On the agricultural front, the government has continued its focus on
augmenting farmer income through various steps. Increased allocation across the schemes to
drive irrigation facilities, improve agricultural markets, augment the allied sectors
supporting income, setting-up of FPOs, crop insurance scheme and income supplementation
scheme is a major positive. With these steps, Industries expects a positive rub-off effect
on fertiliser offtake. However, subsidy reduction remains a major negative takeaway for
the fertiliser sector.
The raw material Prices of Rock Phosphate and Sulphur remained high
throughout the year mainly due to global sentiment following the Russia Ukraine war,
constraints in domestic and global situations has led to short availability of material
from suppliers leading to prices rise. The Government of India (DoF) increased the
Nutrient Based Subsidy rates for all phosphatic and potassic fertilizers following the
prices rise excepting SSP for the year 2022-23. For SSP the subsidy has been capped at Rs.
7513/- per MT as prevailing in the previous year 2021-22 thus giving an unfair deal to the
SSP Industry. Monsoons have a major impact on the agricultural sector, besides the
commodity prices of major raw material inputs. In the current year the predictions till
date estimate a sub normal monsoon. Coupled with rise in prices of raw material for SSP
fertilizer this is going to be a challenge for the SSP Industry in the coming year
2023-24.
However, in the long term the performance of the Company is expected to
be better in coming years considering its basic strengths like high integrated capacity
which is already operational, multi-geographical locations and established brands. The
well maintained plant and equipments ensure uninterrupted production and distribution of
goods.
Opportunity, Threats, Risk & Concerns:
The Company welcomes the Governments plan to introduce DBT
subsidy directly to farmers which shall give the farmers unrestricted choice as well as
make them understand the real worth of fertilizer used by them.
The Company is in an advantageous position for tapping its already
established production capacity with multi- geographical locations; wide spread marketing
network and high brand value for its product. NBS policy as envisaged has attracted new
entrants in the market, which in fact shall be better for the wider reach of this long
neglected product and establishing the SSP Industry in its right place, However, entry of
new entrants in overall bad market conditions has created excess supply in the market
resulting into changing consumption and stocking patterns necessitating higher
inventories.
SSP fertilisers are based on imported raw-materials which can face
severe volatility in prices and foreign currency exchange rates, affecting the
profitability of the Company. Agro-Climatic conditions also have a large effect on the
performance of the Company.
Uncertainty of monsoon, volatile international market of raw material,
seasonal consumption of fertilizer mainly in two months each in Kharif and Rabi, lack of
awareness of benefits of SSP consumption amongst farmer fraternity, clubbed with logistics
availability/cost and higher requirement of working capital shall remain concerns for the
Industry & of the Company.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Company conducts its business with integrity and high standards of
ethics, and in compliance with the laws and regulations that govern its business. The
Company has a well established system of internal controls in operations, supported by
suitable monitoring procedures and self-assessment exercises. The financial and commercial
functions at various locations are structured and reviewed timely to provide adequate
support and controls for the business of the Company.
In addition to external audit, The Company has appointed M/s O P Bagla
& Co., Chartered Accountants, as an Internal Auditor, who report
significant findings to the Audit Committee of the Board. Consequently required steps are
taken to improve the operations.
HUMAN RESOURCE AND INDUSTRIAL RELATIONS:
The ability to attract, onboard, develop and engage the right kind of
talent is crucial to an organizations long term success. Company strongly believes
in continuously taking steps towards talent management, leadership development, and
employee engagement. Employees are the back - bone of good organization and to motivate
them to achieve greater heights, the Company undertook various HR initiatives towards
their development, enhancement and retention. The Company considers its highly motivated
and well-maintained team as its most valuable asset. As on 31.03.2023, the Company has
employed 697 peoples at various locations in India.
Amidst all the pressures and demands of the growing business,
Industrial Relations continued to be reasonably cordial with our Union(s).
ENVIRONMENT AND SAFETY:
The Company has always considered safety and environment one of its key
focus area and has always striven to make continuous improvement in these two aspects. At
Company, environment concerns have always taken precedence; to address the concerns on
Environment Protection, the Company has set up an Online Monitoring System at all the
plants and concrete efforts were made towards natural resource conservation by way of
Water Harvesting, Sewage Treatment Plant, etc.
CONCLUSION:
The Company dwells on chalking out the best possible future plans and
policies so as to avoid the pitfalls and following the best course in the long run. In
both the business segments, a focus on assets utilization, earning maximization,
continuous growth and relentless strengthening of the internal efficiencies will enable
the Company to deliver superior value for its shareholders on a sustained basis in future.
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