gujarat narmada valley fertilizers chemicals ltd Management discussions

1. Global Economic Scenario:

Over the past few months, the world economy has experienced numerous disruptions including Russia-Ukraine war, almost equal to those caused by the pandemic over a two-year period. These disruptions have caused the prices of important commodities like crude oil, natural gas, fertilizers, and wheat to rise, leading to inflationary pressures. This has been exacerbated by the global economic recovery, which was supported by significant fiscal stimulus and accommodative monetary policies aimed at limiting the output contraction. Inflation in Advanced Economies has reached historic highs, while Emerging Market Economies have also experienced higher inflation due to rising commodity prices. The US Dollar has strengthened against other currencies, leading to widening Current Account Deficit and inflationary pressures in net importing economies. Despite this, many Emerging Market Economies have managed to keep their inflation rates low by implementing a strategic fiscal stimulus to address output contraction.

2. Indian Economic Scenario:

Indias 2022 was a significant year as it marked the 75^th year of Indias Independence. The economy also grew to become the fifth largest in the world, with an estimated nominal GDP of USD 3.5 trillion in the upcoming financial year, and a projected 7% growth rate. Inflation and wholesale prices have remained low, while labor and product output has increased by 16% in the initial nine months of the financial year. Despite concerns about the current account deficit, financing has been manageable due to low external debt and comfortable foreign exchange reserves. The successful monsoon season has also contributed to higher reservoir levels. As India looks towards its centenary as a modern, independent nation, the economys fundamentals remain strong due to carefully planned and sustainable recovery strategies.

The charts below broadly reflects the Indian economic scenario:

3. Industry Structure and Development: 3.1. Fertilizer Industry Climatic Conditions

The rainfall in India is mapped for four seasons i.e. Pre Monsoon (Mar-May), Monsoon (Jun-Sep), Post Monsoon (Oct-Dec) & winter (Jan-Feb). The maximum impact is of Southwest monsoon. Long Period Average (Average of 1961-2010) is compared to classify the rainfall as Deficient, Normal or Excess. Season-wise rainfall, India as a whole, has been excellent during FY 2022-23.

Season	Actual (mm)	LPA (mm)	%
Pre Monsoon	131	132	(1%)
Monsoon	922	865	6%
Post Monsoon	143	120	17%
Winter	22	40	(82%)

Source: https://mausam.imd.gov.in/ (Website of Indian Meteorological Department)

Normal Rainfall has positively impacted agriculture in the country and despite pandemic, the Agriculture Sector has been growing @ 4.6% during last 6 years (Economic Survey 2022-23). Normal rainfall has also contributed in record food grain production As per Second Advance Estimates for 2022-23, Total Foodgrain production in the country is estimated at record 3,235.54 Lakh MT which is higher by 79.38 LMT as compared to previous year 2021-22.

Acreages

Kharif (Apr to Sep) – Against Kharif normal acreage (average of previous 5 years) of 1,085 Lakh hectares, the country had achieved 1,098 Lakh hectares registering 1% growth over normal.

	Progress - Kharif area coverage - As on 23.09.2022 - Lakh Hectare
Crop	Normal Acreage Kharif	Actual		Variance over 2021		Coverage (%) against Normal acreages
		2022	2021	Acreage	%
Rice	397	402	425	(23)	(6)	101
Pulses	140	133	138	(5)	(4)	95
Coarse cereals	184	181	174	7	4	99
Oilseeds	184	192	193	(2)	(1)	104
Sugarcane	47	56	55	0	1	117
Jute & Mesta	7	7	7	0	0	98
Cotton	126	127	119	9	7	101
Total	1,085	1,098	1,111	(14)	(1)	101

Rabi (Oct-Mar) – In Rabi, country has achieved 721 Lakh hectares compared to normal acreage of 636 Lakh hectares.

	Progress - RABI area coverage - As on 03.02.2023 - Lakh Hectare
Crop	Normal Acreage Rabi	Actual		Variance over 2021-22		Coverage (%) against Normal of Season
		2022-23	2021-22	Acreage	%
Wheat	304	343	342	1.39	0.41	113
Rice	48	46	35	11.20	0.32	97
Pulses	150	168	167	0.55	0.00	112
Course Cereals	55	53	51	2.07	0.04	98
Oilseeds	79	110	102	7.48	0.07	139
Total	636	721	698	22.69	0.03	113

Source - https://www.agricoop.gov.in/all-india-crop-situation

The acreages of Cotton, Coarse Cereals & Oilseeds have shown increasing trends over previous year. Cotton, Oilseeds and Sugarcane acreage increased significantly over normal acreages. As per second Advance Estimates of major crops, the country is expected to achieve record production for Rice, Wheat, Maize, Gram, Moong, Rapeseed & Mustard and Sugarcane.

Minimum Support Price (MSP)

The MSPs of most of Kharif & Rabi crops are increased over 2021-22.

Minimum Support Prices – Rs /quintal
KHARIF CROPS	FY 2021-22	FY 2022-23	% Increase
Paddy	1,940	2,040	5
Jowar	2,738	2,970	8
Bajra	2,250	2,350	4
Maize	1,870	1,962	5
Tur (Arhar)	6,300	6,600	5
Moong	7,275	7,755	7
Urad	6,300	6,600	5
Cotton	5,726	6,080	6
Groundnut	5,550	5,850	5
Soybean	3,950	4,300	9
Sesame	7,307	7,830	7
Wheat	2,015	2,125	5
Barley	1,635	1,735	6
Gram	5,230	5,335	2
Lentil (Masur)	5,500	6,000	9
Rapeseed & Mustard	5,050	5,450	8
Safflower	5,441	5,650	4

Source - https://farmer.gov.in/mspstatements.aspx

MSPs are increased by 2% to 9% over previous year. Going by the past three years data, the impact of the Minimum Support Price was almost nil on 12 of the 14 crops covered under MSP Scheme.

Government Policies – Fertilizers

No major changes in Policy have been announced during the year except for introduction of ‘One Nation One Fertilizer (ONOF) in all fertilizers. After deliberations and discussions with the Industry, ONOF has been implemented in all fertilizers including Urea, DAP, MOP & NPK. It has begun with imported urea on 02.10.2022, indigenous Urea on 01.12.2022, DPA & NPK on 01.01.2023.

DoF has started giving movement plans of Urea & other non-Urea fertilizers through a linear programme of RITES (Rail India Technical & Economic Service Limited). There are unexpected changes being noticed since Jun 2022. Attempts are being made for getting the proposed plans approved, so as to have an equal distribution of Urea and ANP and to maintain Urea vs ANP ratio.

As a major step, GoI has introduced "Pradhan Mantri Krishi Samraddhi Kendra (PMKSK)", which is being implemented across the country. In first phase 526 retail shops have been converted into PMKSK have uniform fa?ade and facility as have been prescribed for District/Tehsil/Village level locations. All the fertilizers companies have been allotted 3.30 Lakh retails shops in India to convert as PMKSKs. GNFC has almost completed 2,478 PMKSKs allotted at District/Block/Village levels. The cost of conversion is being met from the retailer margin being retailed by the companies. There is no direct cost to companies.

Subsidy rates which were announced for entire season of Rabi 2022-23, were revised on 18.05.2023, from retrospective effect for Q4 FY 2022-23 (01.01.2023 to 31.03.2023). The industry has never experienced such retrospective changes in past. The subsidy for MOP was increased but was reduced for all other PK & NPK fertilizers.

Subsidy - Rs /MT
Product	Rabi 2022-23	Q-4 2022-23	Change	% Increase
DAP	48,431	40,841	(7,590)	(16)
ANP	32,991	29,842	(3,149)	(10)
20:20:0:13	33,786	30,211	(3,575)	(11)
SSP	7,513	7,513	0	0
MOP	14,190	15,420	1,230	9

Source: DoF Office Memorandum no. 23011/1/2023-P&K dated 18^th May 2023

On the same day, rates for Nutrient Based Subsidy (NBS) for H1 of 2023-24 has been announced. For this period, the subsidy was decreased substantially.

Subsidy - Rs /MT
Product	Rabi 2022-23	Rabi 2023	Change	% Change
DAP	48,431	32,641	(15,790)	(33)
ANP	32,991	23,504	(9,487)	(29)
20:20:0:13	33,786	23,868	(9,918)	(29)
SSP	7,513	6,872	(641)	(9)
MOP	14,190	9,547	(4,643)	(33)

Source: DoF Office Memorandum no. 23011/1/2023-P&K dated 18^th May, 2023

Fertilizer – Production, Imports & Consumption

Production of Urea, DAP, NPK & SSP increased. Imports of Urea & MOP reduced over FY 2021-22. Sales of Urea & DAP increased and sales of NPK, MOP & SSP decreased.

	FY 2022-23 (Lakh MT)			2021-22 (Lakh MT)
Fertilizer	Production	Import	Sales	Production	Import	Sales
Urea	285	76	357	251	91	342
DAP	44	69	105	42	55	93
NP/NPK	100	28	101	83	12	115
MOP	0	14	16	0	25	25
SSP	56	0	50	54	0	57
Total	485	187	629	436	178	598

An increase of 5% in imports of finished fertilizers and 5% in Sales is observed during FY 2022-23 over previous year.

% Variance over FY 2021-22
Fertilizer	Production	Import	Sales
Urea	14	(16)	4
DAP	5	25	13
NPKS	20	133	(12)
MOP	0	(44)	(36)
SSP	4	0	(12)
Total	11	5	5

Source - https://reports.dbtfert.nic.in/

Country is having huge pile of stocks as on 31.03.2023, which is far above the stocks levels as on 31.03.2022.

Fertilizer	Stock As on 31.03.2022 (in LMT)	Stock As on 31.03.2023 (in LMT)	% Change
Urea	51.02	61.07	20
DAP	8.29	25.38	206
MOP	2.63	3.20	22
NPKs	14.91	30.50	105

3.2. Chemical Industry

Indias chemical industry has been a global outperformer in demand growth and shareholder wealth creation over the last decade. It now stands poised to play an increasingly dominant role across both consumption and manufacturing in the global arena. Over recent years, changing geopolitical scenarios have led to many countries focusing on domestic self-sufficiency and localized supply chains. However, benchmarking Indias manufacturing competitiveness reveals that India has a strong starting point vs other key global chemical clusters that could translate into India becoming the next chemicals manufacturing hub.

India: The fastest growing global demand centre for chemicals

Domestic consumption in India is set to grow at a 9-10 percent CAGR in the coming years as illustrated in figure (below), on the back of rising disposable incomes, a favourable demographic dividend, increasing global preference for bio friendly alternatives, and growing diversification of global chemical supply chains.

With this growth, Indias share in the global chemicals sector could triple to 10-12 percent by 2040, creating an additional USD 700 billion market value, over and above the current contribution of USD 170- 180 billion (as of 2021).

The Specialty Chemicals segment is likely to be a key driver of this growth. It has the potential to contribute more than USD 20 billion to Indias net exports by 2040, a 10x jump from the current total of USD 2 billion.

1 2027 estimati ons basis sub-sector level CAGRs from IHS Markit; 2040 projections basis e nd-use sector nominal GVA CAGR (weighted)

2 Estimated basis EIL 2020 an d 2040 projections; 5% price CAGR assumed for 2021, 2027 and 204 0 projections

3 Includes pharma products (vaccines, injectables, OSDs, medical devices etc.) as per N ICs industry division 21. Also includes some personal care consumer products (e.g. Shampoo, hair oil, toothpastes, soaps etc.) as NICs industry division 20 Source:MoCPC2021 repo rt: "Chemical & Petrochemical Statistics at a Glance", Invest India, "India Petrochemicals Scenario 2040" by EIL and I IOCL, IHS Markit, UN Comtrade, McKinsey G lobal Institute, Press search

4. Overview of Company:

Gujarat Narmada Valley Fertilizers and Chemicals Limited (‘the Company or ‘GNFC) operates businesses mainly in the Industrial Chemicals, Fertilizers apart from small presence of IT services.

In the chemical segment, it has a product portfolio of various bulk chemicals which are used in industries for manufacturing various speciality chemicals as well as end products.

Most of companys products are competing with big multinational players at import parity. Since India is net importer of oil and gas and this being primary feed/fuel for company, its financial performance is dependent upon how these variable play out.

Although in chemicals, company is in few cases the only manufacturer, it does provide some reference in industry, however it has to compete fiercely when it comes to basic pricing against freely available imports. Necessary measures are taken e.g. Anti-Dumping duty, applicability of BIS standards, inclusion on PLI scheme etc. through concerned Ministry of GoI. Company has added from time to time various production facilities. Company has been consistent in utilising, by and large, its existing production capacities.

The journey so far is reproduced below:

d >Co-generation Power & Steam Unit

Product	Operational Year	Rated Capacity MTPA	Production MTPA	Remarks
Ammonia	1982	4,45,500	6,79,535
Urea (Including Tech. Urea)	1982	6,36,900	8,35,863
Methanol - I	1985	50,000	0
Formic Acid	1989	19,720	25,461	Revamped in 2004-05 and 2022-23.
Methanol-II	1991	1,88,100	30,985	Revamped in 2008. Redistillation of bought out methanol for Captive Consumption.
Concentrated Nitric Acid-I	1991	33,000	27,835
Weak Nitric Acid-I	1991	2,47,500	3,03,247	Revamped in 1999.
Ammonium Nitro Phosphate	1991	1,42,500	1,31,025
Calcium Ammonium Nitrate	1991	1,42,500	0	The plant operation stopped since 2014 due to AN rules.
Aniline	1995	35,000	22,167	Both plant installed by a separate JV company NCPL.
Toluene Di-Isocyanate-I	1998	14,000	17,669
Acetic Acid	1995	1,00,000	1,62,563	Revamped in 2002.
Syn Gas Generation unit	1998	2,01,960 KNm3	0 KNm3
Concentrated Nitric Acid-II	1999	33,000	32,353
Methanol Synthesis Unit	2006	30,600	0
Concentrated nitric acid-III	2011	50,000	49,890
Weak nitric acid - II	2011	1,00,000	1,28,095
2012	2,84,515	1,85,738
Ethyl Acetate Plant	2012	50,000	68,658
Ammonia Syngas Generation Plant	2013	Equivalent 3,69,600 MTPA Ammonia	Equivalent 3,69,823 MTPA Ammonia
Toluene Di-Isocyanate - II	2014	50,000	37,322

As it is evident from the above that gradual debottlenecking / revamping has resulted in achieving higher than rated capacities.

Fertilizer is more or less a controlled and working capital intensive business. In this business, currently company has no plans of expansion. The subsidy part consists of major portion of working capital.

5. Opportunities and Strengths:

a. In chemical segment, to cater to demand growth, profitable opportunities are being explored in different chemicals.

Major benefits envisaged from change of worlds view about China post pandemic.

b. Company has entered into Long/Mid Term / Annual Contracts / Agreements for supplies of most of the critical Raw Materials like Coal, Oil, Rock Phosphate, Packaging Materials etc. which are essential for continuous production.

Company is continuously trying for broad basing supplier base.

c. In respect of fertilizers and chemicals, both, trading is another opportunity which is being explored.

d. For IT business, areas like software, e-Governance to support ever evolving client requirements are likely focus area apart from looking at evolving technologies for foray.

6. Segment-wise performance for FY 2022-23:

Segment	Revenue	Revenue %	Result	Result %
Fertilizers	3,655	36	(161)	(10)
Chemicals	6,484	63	1,849	108
Others	88	1	28	2
Total	10,227	100	1,716	100

Fertilizer Segment revenue has been improved by Rs 1,203 Crore from Rs 2,452 Crore to Rs 3,655 Crore primarily due to higher claimable subsidy of Urea in view of higher variable cost, subsidy breather and higher sales price of ANP and Fertilizers traded products which is partly offset by lower volumes. Fertilizer Segment Results further reduced from loss of Rs (92) Crore to Rs (161) Crore lower by 75 % at Rs (69) Crore mainly due to higher energy norms of urea than permissible limit, increase in input cost of complex fertilizers and increase in fixed cost, partially compensated by subsidy breather in case of complex fertilizer.

Chemical Segment revenue improved by Rs 382 Crore from Rs 6,102 Crore to Rs 6,484 Crore due to higher realisation in all chemicals except Acetic Acid, Ethyl Acetate and Formic Acid which are off set due to lower volume mainly in Aniline, Methanol, TDI, WNA and CNA. Chemical Segment Results reduced from Rs 2,263 Crore to Rs 1,849 Crore lower by 18% at

Rs 414 Crore mainly due to increase in input cost and fixed cost partially compensated by better realisations and higher volume.

The other segment revenue remains constant.

7. Outlook:

7.1. Fertilizers Business:

The India fertilizer market is expected to grow at a CAGR of 4.7% between 2023 and 2028, reaching a projected value of USD 1160.18 billion by 2028. The market growth is being driven by increasing demand for food production and improvements in agriculture processes.

On fertilizer subsidy budget front, for FY 2023-24, the urea subsidy has been cut to Rs 1.31 lakh crore from Rs 1.54 lakh crore in FY 2022-23, while the allocation for nutrient-based subsidy is down 38% to Rs 44,000 crore.

The decline in the allocations for FY 2023-24 are broadly in line with expectation, following the cooling of input prices and the discontinuation of the Pradhan Mantri Garib Kalyan Ann Yojana and its integration with the National Food Security Act.

The subsidies in FY 2022-23 were 64% higher than the budget estimate as the government had to step up support in the form of free food grains and fertilizer subsidies amid higher commodity inflation.

As per the projections made by government, considering increasing of conventional & nano urea domestic output, India to be self-sufficient in urea by 2025 end. This will result in the foreign exchange saving of about Rs 40,000 crore per annum to government.

7.2. Chemicals Business:

The Indian chemical industry is growing at CAGR 9.3% since FY 2018-19 and it is likely to grow with same pace to reach the target of USD 304 billion by FY 2024-25. Indian Chemical Industry contributes 7% of the countrys Gross Domestic Product (GDP). India is the worlds sixth largest producer of chemicals

The Indian Chemical industry continues to be a significant contributor to Indias "Make in India" or Atmanirbhar Bharat reform. Given that Indian chemical sector provides several building blocks and raw materials for many industries, the sector will benefit from Indias strong macroeconomic indicators. This is apart from the transformational opportunities arising out of the Indian chemical sector, now being viewed favorably as a reliable supplier for global majors designing a China+1 and Europe+1 strategy to de-risk their operations. Government of India has declared various schemes to boost growth of Chemical Industry. GNFC being the leading producer of Basic Chemicals, will be benefitted from these developments.

Risk and concerns: a. Most products are import substitutes and hence fierce competition from dominant foreign suppliers is a major threat. b. Key raw materials and feedstock are purchased at import parity price and its availability from limited supplier base and at time almost single pre-dominant source operates as possible threat to profitable operations. c. NBS support from time to time may not match with actual input costs hence may affect profitable operations. d. Energy norms for fertilizers being prescribed without capital subsidy support increases further strain on resources is a source of major risk.

Urea Energy Norms & Consumption of COMPANY:

Over one decade, Company has put their best efforts to bring down its energy consumption of Urea with a capital investment over Rs 300 Crore. However, even after putting all out efforts, due to vintage nature of plant & consumption of coal, Urea targeted energy norms remains higher than prescribed norms for FY 2022-23.

As company uses coal as one of the energy source for the Urea, the energy level of Urea is higher side against the prescribed norms by DoF. The representation at highest level in government are continued to re-look the prescribed energy norms for the Company.

8. Internal control system, their adequacy and Risk Management:

The Company has an independent Internal Audit function with a well-established risk management framework. The scope and authority of the Internal Audit function are derived from the Internal Audit Charter approved by the Audit Committee. The Company has engaged a reputable external firm to support the Internal Audit function for carrying out the Internal Audit reviews.

The Audit Committee meets every quarter to review and discuss the various Internal Audit reports and follow up action plans of past significant audit issues and compliance with the audit plan.

The Internal Financial Control framework of the company is subjected to review every year independently.

The Company has well-defined Enterprise Risk Management (ERM) framework in place which evolved over the years.

Risk Management:

Risks are identified proactively periodically considering inputs from external as well as internal factors along with risk mitigation plans. Through the mechanism of action taken reports, the identified mitigation plans are monitored for their execution / current status against their set target dates.

The company has well defined Governance Structure viz., from Board to Committee to Risk Management function and so on as depicted below:

Risk Management Committee meeting takes place during the year wherein the framework as well as various risks are reviewed thoroughly. In addition to this, Risk Management Report covering various risks is put-up before the Board of Directors Meetings periodically for their review.

In order to further strengthen the Risk Management, with the help of expert risk management consultant, company has update the Existing Risk Management Policy and Risk Reporting System in line with highest industry standards & practices. Company has developed an online portal for better monitoring the Risk Management system.

Company is also seriously working towards reducing its carbon footprints and ultimately achieving target of "NET CARBON ZERO". Also, company has appointed reputed consultant to workout existing carbon footprints & to develop net carbon zero roadmap.

9. Operational & Financial performance 9.1. Operational Performance (Production):

The Company has achieved remarkable production performance during the year 2022-23, in spite of emergency shutdown of Ammonia & its downstream plants (6 days) in July22. Day to day plant operations were closely reviewed and plant operations were optimized accordingly, to maximize profit. During the year, strategic optimization of various plant operations had to be done keeping in line with prices of raw materials so as to achieve cost reduction in all aspects.

New Records Established:

During the year 2022-23, in all, 80 nos. of new records were established, out of which 44 nos. of new records were established in Production and 36 nos. in Dispatch /sale.

Ever highest daily production achieved for Acetic acid, Urea, Methyl Formate, Formic acid, DNT-Bharuch, Hydrogen-Dahej.

Ever highest Monthly production achieved for Acetic acid, Methyl Formate, Formic acid, Technical grade Urea, DNT-Dahej, MTD-Dahej, Hydrogen-Dahej.

Ever highest yearly production achieved for Urea, Methyl Formate, Formic acid, Ethyl Acetate, Net AN Melt, CATSOL catalyst.

Production/ Operational Performance:

Ammonia plant, an emergency shutdown had to be taken in July22 to attend adsorber mol-sieve slippage, which was effectively handled in 6 days. Plant was operated at more than 1850 MTPD for 333 days.

Ammonia synthesis gas generation plant (ASGP) plant load was varied according to Single/Two Gasifiers operation. LT Shift reactor deteriorated & catalyst were changed in annual shutdown in March 2023.

Urea plant had another golden year in its history & 27^th Million MT of urea was produced in lowest days. Plant was operated at more than 2,500 MTPD for 128 days. New Reactor with latest super cup tray & higher grade liner MOC which is under manufacturing at M/S L&T, will be put up in service in next annual shutdown. New higher capacity Carbamate & molten Urea pump procurement is under progress to sustain higher productivity and consistency.

Methanol-I, Methanol-II, SGGU & MSU plants were not operated during most of the year due to very high NG price. Captive consumption requirements of Methanol for Formic acid & Acetic acid plants were met by sourcing Methanol from market.

Formic Acid Revamp project (additional production of 20 MTPD) was successfully commissioned in April 2022. Acetic Acid plant, established continuous plant operation record of 237 days and 206 days with production level of

> 470 MTPD.

Ethyl Acetate plant, set highest continuous running hours operation & was operated for more than 130% load for 311 days.

In WNA-I plant, damage of Air compressor was observed (August 2022) & its rotor was replaced by new one. New Cooling tower erection work is taken up, which will remove limitation of cooling water temperature in summer and will also facilitate stand by availability of CT cell. To enhance production, installation of suction cooling coils & modification in chilled water system of absorption column is planned. Also, new boiler drum is being procured to accommodate higher capacity of process gas cooler.

In ANP Plant, in Rock Phosphate area, to unload higher capacity dumpers inside silo, increasing height of one silo is completed & other will be finished by August 2023. Morocco rock phosphate was procured & processing up to 70% blending with Jordan rock phosphate could be established with use of antifoam chemical. Online analyzer was provided in stack, as a part of Environment Compliance and better monitoring/control of fluoride.

Aniline Plant was operated for 269 on-stream days. Plant was operated with occasional stoppage & at lower load as per prevailing marketing conditions of Aniline, NB & CNA.

TDI- Plant was operated for 337 on stream days. Plant was operated on comparatively low load from May to July22 due to non-availability of regular catalyst for MTD reactor & MTD operation was continued using palladium/platinum catalyst of Aniline reactor.

TDI-II Dahej Plant was operated for 258 days (on-stream days) during the year with capacity utilization of 74.65%. Yearly production target could not be achieved mainly on account of market constraints, higher input cost amid global geopolitical crisis and technical glitches faced in plant during the year. Annual shut down of plant was taken in July 2022. However ever highest Quarterly production of 13528 MTs was achieved during Q4 of FY 2022-23.

In Steam & Power generation plant, due to hike in fuel prices, operational philosophy for power generation was optimized. Techno-Economic Feasibility Study for installation of new 5^th Coal fired CFBC type Boiler is completed. Investment decision will be taken in due course of time to enhance reliability of operation, cost economics and to elevate environmental performance.

In Utility Group of Plants, PLC conversion at DM plant was done. During the year, all water offtake agreements were renewed. SSNNL agreement which is one of the best water source & caters to 75% GNFC requirement has been renewed till 2027.

ISO Certification

ISO 14001:2015 and ISO 45001:2018 certificates from M/s. Bureau of Veritas India Ltd for GNFC complex Bharuch are valid up to 03^rd September 2025.

ISO 9001:2015 and ISO 50001:2018 certificates from M/s. Bureau of Veritas India Ltd for GNFC complex Bharuch is valid up to 07^th May 2024 & 13^th June 2024 respectively.

ISO 9001:2015, ISO 14001:2015, ISO 45001:2018 and ISO 50001:2018 certificates from M/s. Bureau of Veritas India Ltd for GNFC Dahej complex is valid up to 17^th December 2025.

Fertilizers Sales performance

The fertilizer sales was marginally reduced by ~2% for FY 2022-23 y-o-y. For Urea, sales was marginally decreased due to lesser availability. ANP sales was marginally increased due to comparatively higher availability during FY 2022-23. "Qty. in LMT"

Trading operations continued and overall quantum is 84% higher compared to last year, however, there is a reduction in MOP, primarily due to higher MRP resulted into lower farmer demand. Increase in quantity of DAP was registered during the period due to good supply.

Fertilizer Trading (MT)
Products	FY 2022-23	FY 2021-22	Variance MT	% Variance
City Compost	3,230	2,809	421	15
DAP	17,452	6,927	10,525	152
SSP	6,705	3,782	2,923	77
MOP	816	1,266	(450)	(36)
UREA (Traded)	666	406	260	64
Amm. Sulphate	2,149	1,634	515	32
Total	31,018	16,824	14,194	84

In addition, an attempt was made to have a stronger synergy with GATL (wholly owned subsidiary of GSFC). The company sold non bulk agro products worth about one crore through their retail outlets during FY 2022-23. The company could offer a bigger range of agro products to our farmers and the volumes shall grow, going forward.

Chemicals sales performance

The demand for industrial products has not witnessed much uptrend due to overall slowdown in the market. Despite that the sales turnover of top ten industrial products in FY 2022-23 was 6% higher as compared to previous FY 2021-22. This was possible due to efficient product management, constant team efforts and prudent decision making. Industrial products of the company have wide applications in various end use sectors as a result of which aggregate sales quantity of top ten products remained almost same in FY 2022-23 as compared to previous financial year. Some of the products could establish ever-highest pricing milestones even in highly aggressive competitive market.

9.3. Materials Management

Feed stock (FO/LSHS/FOHV) availability

From inception of Company, IOCL have been meeting our entire requirement of feed-stock (FO/LSHS/FOHV/ LSHS Premium) to the Company. The current agreement signed between GNFC and IOCL for supply of FOHV and FO is valid up to Mid-2026.

Long Term Contracts

Company has entered into Long Term / Annual Contracts / Agreements for supplies of most of the critical Raw Materials like Coal, FOHV/FO, Rock Phosphate, Benzene, Toluene, Packaging Materials etc. which are essential for continuous production.

Particulars	FY 2022-23	FY 2021-22	Change Value	%
Revenue from Operations	10,227	8,642	1,585	18
Other Income	361	210	151	72
EBITDA @	1,879	2,383	(504)	(21)
PBT	1,932	2,298	(366)	(16)
PAT	1,464	1,704	(240)	(14)
Book Value (Rs Per Share)	579	508	71	14
EPS (Rs Per Share)	94.20	109.62	(15.42)	(14)

@ EBITDA Excludes Other income

FY 2022-23 is a landmark year where revenue from operations has crossed Rs 10,000 crores mark.

With this, the company reported highest ever revenue of Rs 10,227 Crores; 18% more than previous highest reported revenue in last financial year which was a year of historic performance.

The higher revenue has come from, both, fertilizers and chemicals.

During FY 2022-23, GNFC has crossed over a billion USD worth of import substitution saving precious foreign exchange to the country and becoming active contributor to ‘Make in India initiative of Government of India.

Cash Flow Summary

Particulars	FY 2022-23	FY 2021-22	Change	Change in %
Operating Cash Flow before Working Capital changes	1,975	2,486	(511)	(21)
Net Change in Working Capital	(17)	109	(126)	(116)
Taxes Paid	(585)	(628)	43	7
Net cash from / (used in) Operating Activities	1,373	1,967	(594)	(30)
Net cash from / (used in) Investing Activities	(1,229)	(1,899)	670	35
Net cash from / (used in) Financing Activities	(161)	(130)	(31)	(24)
Net (Decrease) / Increase in Cash & Cash Equivalent	(17)	(62)	45	73

10. Material development in Human Resources/ Industrial Relations front including number of people employed

The companys Human Resource is one of the most valued contributors to the success of business of the company. Ensuring well-being of employees on the job and off the job remains top priority of the company with focused attention to provide an inclusive environment for promoting diversity in gender, age and culture and inculcating organizational values and ethics. The company makes all possible efforts for maintaining work life balance and improving the well-being of its employees through various welfare schemes leading to an atmosphere conducive to sustained growth of the company. The company conducts various in-house training programs on safety awareness, environmental protection, health awareness, awareness on sexual harassment policy, as also, for enhancing employees skill and knowledge.

The companys proactive actions have resulted in harmonious, cordial and healthy industrial relations throughout the year which has helped in sustained growth and enrichment of value for the shareholders.

Rightsizing of the company and continuous enhancement of productivity, learning and skill sets of the employees remains the prime focus of the company.

The total strength of the human assets of the Company was 2490 on 31.03.2023.

11. Significant changes in key financial ratios along with explanations:

Key Financial Ratios (Standalone) for the Financial Year ended 31.03.2023 are provided here below:

Particulars	Units	FY 2022-23	FY 2021-22	Change (%)	Reason
Debtors turnover	Times	20.61	15.23	35	a
Inventory turnover	Times	9.74	9.65	1
Interest coverage	Times	357.13	688.95	(48)	b
Current ratio	Times	3.77	3.58	5
Debt equity ratio	Times	-	-	-
Operating profit margin	%	18.94	26.63	(29)	c
Net profit margin	%	14.31	19.71	(27)	d
Return on net worth	%	17.32	24.55	(29)	e

a. Debtors turnover ratio improved by 35% mainly due to Due to decrease in average trade receivables on account of better realisation during the year and improved revenue from operation due to better market conditions. b. Interest coverage ratio has decreased by 48% mainly due to lower PBT and higher other income (which is excluded from calculation of Ratio) compared to previous year. c. Operating profit margin decreased by 29% mainly due to decrease in operating profit. d. Net profit margin decreased by 27% due to decrease in net profit by Rs 240 Crores. e. Return on net worth decreased by 29% due to decrease in net profit by Rs 240 Crores.

12. Cautionary Statement:

The statements in Management Discussion and Analysis describing the companys objectives, expectations or projections, may be forward looking and it is not unlikely that the actual outcome may differ materially from that expressed, influenced by wide variety of factors affecting the business environment and the companys operations. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or event.