Agro Phos India Ltd Management Discussions

Overview

Our company M/s. Agro Phos (India] Limited being a fertilizer manufacturer is also a part of the agriculture sector of India and continuously serving our best since its pioneering stage, The Company is an ISO 9001:2008 certified Company. We are engaged in manufacturing of Single Super Phosphate (SSP), Nitrogen Phosphate and Potassium (NPK), Zinc Sulphate, PROM, PDM, Organic manure and Calcium Sulphate commonly known as soil conditioner or gypsum. We have one unit at Dewas, Madhya Pradesh which has its capacity of 45000 MT per year and another at Meghnagar, Madhya Pradesh which has its capacity of 115000 MT per year. Our Company also undertakes trading of Diamonium Phosphate (DAP), Urea, Ammonium Sulphate and other fertilizers depending upon the demand of the customer.

We are having at our plant a well- equipped in-house testing laboratory accredited with NABL to test the products as per quality standards and relevant chemical composition. In our quest to maintain high standards of quality for our products, we have imported testing machine to test the product in real time basis. The final product has to pass special quality test to ensure that it is of the requisite quality and contains the requisite chemical composition, apart from manufacturing of above products company since last three years also trading in agricultural produce and Animal feeds management is expecting an extensive growth in this segment in future.

Segment-wise Business Review and Operational and Financial Performance:

Companys production and sales as well as companys Financial Performance are as below:

(Quantity in MT)

Financial Performance (Amt. in Lakhs)

SSP:

During the year 2024-25, company recorded 73,519 MT of sales for all variant of SSP Product as compared to last F.Y. 2023-24 is 71471.60 MT due to high demand of this product Our pre- dominant product is SSP.

NPK:

In FY 2024-25, the Company recorded consolidated sales of 1,541 MT of NPK fertilizers (12:32:06 and 12:12:12 variants], as compared to 147 MT in the previous year. This sharp increase indicates rising demand.

Traded Quantity:

Company apart of the manufacturing of fertilizers products also engaged in trading of the many fertilizers and agri- products the total quantity traded of such products recorded as 8958 MT as the trading of the products is completely depends on the availability of some products in companys stock and market demand of particular products so company may have earn more profit from trading also.

Financial Performance of company during the period under review

The companys performance during the year showed a turnover of Rs11,987.88 lakhs, compared to Rs10,381.95 lakhs in the previous year. Other income also increased from Rs62.57 lakhs to Rs90.88 lakhs during the year. Consequently, the company recorded a profit after tax of Rs525.60 lakhs, as against a loss of Rs765.45 lakhs in the previous financial year.

Details of Significant Changes in Key Financial Ratios:

Indian Fertilizer Industry & Companys Contribution toward the same

According to Indian Fertilizer Market Report (2025-2033) by IMARC Group, the Indian fertilizer market was valued at Rs 982.00 billion (US$11.51 billion @ Rs85.3163/US$) in 2024. The market is expected to grow at a CAGR of 4% between 2025 and 2033, reaching Rs. 1,401.00 billion (US$16.42 billion) by 2033. The burgeoning population expansion, surging food demand, economic development in emerging markets, government financial support, policies and subsidies, rising research and development (R&D) activities, and rapid advancements in agricultural technology are some of the factors supporting the market growth.

Fertilizer is a substance or mixture used to enrich with essential nutrients such as nitrogen, phosphorus, and potassium, supporting plant growth, agricultural productivity and gardening. They may be organic (compost, manure, residues) or synthetic (chemically manufactured) and are available in forms such as granules, powders, and liquids. Balanced fertilization practices are essential to ensure optimal crop growth while minimizing environmental impacts, by providing the necessary nutrients, fertilizers are essential in supporting global food production and agricultural sustainability. Also, it has always been in the agenda of the Government to ensure food and nutritional security to the teeming population.

For decades, farmers have been using biological or chemical fertilizers to enhance crop production and soil fertility. They also play a crucial role in meeting food requirement. To meet the demand for fertilizers, the fertilizer industry emerged in India. The Indian fertilizer industry, established in 1906, has consistently accelerated its growth over the years. Every nutrient requirement of the soil is either fulfilled domestically or imported to meet demands. This industry encompasses private, public, and cooperative sectors, each making significant and collaborative contributions to the agricultural and economic development of India.

The Indian fertilizer industry underwent significant modifications in terms of quality, quantity, types, technology, and feedstock. This broad development propelled the fertilizer industry into the core sector, becoming the second-highest sector in terms of investment after the steel industry.

India is the second-largest consumer and the third-largest producer offer Fertilizers globally.

India Fertilizer Industry Insights, FY 2024-25 a. DAP holds the largest share in the market

According to market report of IMARC Group among complex fertilizers, DAP, MOP, urea, SSP, and others, Di-Ammonium Phosphate (DAP) is currently dominating market growth. DAP is a widely used fertilizer due to its high nutrient content, particularly phosphorus, and nitrogen, which are essential for enhancing crop yield and plant health, thus influencing the market growth. Furthermore, the efficacy, versatility, and government support are escalating the demand for DAP among Indian farmers to ensure sustainable agricultural growth.

h. Dry fertilizers account for the largest market share

Dry fertilizers also known as solid or granular fertilizers dominate the market due to their ease of handling, storage, transport, and uniform field application. Their compatibility with multiple application methods (broadcasting, side dressing, top dressing) makes them versatile for different crops and practices. The wide availability of nutrient-specific formulations allows farmers to tailor crop nutrition, while their cost-effectiveness and affordability make them a preferred choice, especially for resource-constrained farmers, driving market growth

c. North India exhibits a clear dominance in the market

The report has also provided a comprehensive analysis of all the major regional markets, which include East India, North India, South India, and West India. According to the report, North India accounted for the largest market share. States like Uttar Pradesh, Punjab, Haryana, and Rajasthan contribute significantly due to their fertilizer-dependent agriculture aimed at enhancing soil fertility and crop yields. Rising population, urbanization, and food demand, combined with government subsidies and the easy availability of fertilizers, further promote modern farming practices and high-yield crop adoption, driving market growth in the region.

d. Farming holds the largest share of the market

The report analyzes applications such as farming (grains, cereals, oilseeds, fruits, vegetables, etc.) and gardening, with farming holding the largest share. As the backbone of Indias economy, agriculture drives consistent fertilizer demand, with farmers relying on fertilizers to improve soil fertility, ensure healthy crop growth, and support the nations large population, thereby fueling market growth.

News and Developments into the Market:

- On 01 January 2025, the Union Cabinet approved the extension of the One-time Special Package for Di-Ammonium Phosphate (DAP) beyond the National Broadcasting Service (NBS) subsidy, ensuring sustainable availability of DAP at affordable prices for farmers. The subsidy will continue at INR 3,500 (USD 42.5) per metric ton from 01 January 2025, with a tentative budgetary allocation of INR 3,850 Crore (USD 462.5 Million).

- On 14 July 2025, India signed long-term fertilizer supply agreements with Saudi Arabia to secure 3.1 Million Metric Tons of Di-Ammonium Phosphate (DAP) annually for five years starting FY 2025-26, with an option to extend for another five years. This marks a significant jump from 1.9 Million Metric Tons imported in FY 2024-25, up 17% from FY 2023-24 levels. The agreements with Maaden and Indian firms IPL, KRIBHCO, and CIL aim to stabilize supply and pricing in the Indian fertilizer market while encouraging investment and joint research in customized fertilizers.

- On 06 March 2025, Fertilisers and Chemicals Travancore Ltd (FACT) entered advanced talks to sign a three-year contract with Togos SNPT for annual imports of 250,000 Metric Tons of rock phosphate, marking the first long-term fertilizer supply deal between the two countries. The agreement includes quarterly price reviews and follows a non-binding pact signed last month, reflecting Indias effort to diversify raw material sourcing.

- On 01 August 2024, Indias Ostwal Group of Industries announced plans to invest USD 300 Million to set up a fertilizer manufacturing facility in Egypt with an annual production capacity of 700,000 Tons. The company aims to export to the Middle East, Africa, Europe, and India, leveraging Egypts access to raw materials, labor, and energy, along with its strategic trade location. This move positions Ostwal to strengthen Indias fertilizer supply chain by adding offshore production capacity to support domestic demand and export-linked trade.

- The Royal Government of Bhutan has requested India to supply 5,000 metric tonnes of Fertilizers annually for a period of five years. The requested Fertilizers include Urea, Suphala(NPK), Single Super Phosphate (SSP), Muriateof Potash (MOP), and Borax. Bhutan has sought to procure these Fertilizers at subsidised rates, similar to those provided to Indian farmers. To facilitate this, the Department of Fertilizers has nominated the Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) to manage the supply. BVFCL is currently in discussions with Bhutans National Seed Centre to finalise the import arrangements.

- FCI Aravali Gypsum and Minerals India Limited (FAGMIL) has proposed a joint venture with Lanka Phosphate Limited to set up a Single Super Phosphate (SSP) plant with a daily capacity of 800 tonnes. Under the proposal, FAGMIL would hold a 90%stake and invest approximately USD 25 to 30 million over the next three to four years. To facilitate the progress of this project, the Department of Fertilizers has reached out to the Ministry of External Affairs (MEA) to initiate engagement with the Sri Lankan authorities.

- A Memorandum of Understanding (MoU] was signed on 28 February 2022 between the Governments of India and Nepal. The agreement outlines the supply of Urea and Diammonium Phosphate (DAP] from India to support Nepals agricultural requirements

Governments Initiatives in the Fertilizer Sector

- Fertilizer Subsidy and Budgetary Support: The Budget estimation of the Department of Fertilizers is made on the basis of likely consumption of fertilizers in the country, price of natural gas which is the major input cost in the fertilizer production and international prices of the finished fertilizer products may vary from one year to another. For 2024-25, the Department of Fertilizers received a final budget ofRsl,91,836 crore, a notable rise from the Rs1,68,131 crore originally allocated. This increase was made possible through supplementary demands approved by Parliament.

- Nutrient-Based Subsidy (NBS) Scheme:

The Government of India has enhanced the allocation for the NBS scheme on Phosphatic & Potassic (P&K] fertilizers from Rs45,000 crore to Rs54,310 crore, with the Cabinet approving Rs37,216.15 crore specifically for the Kharif 2025 season. To ensure timely supply, the Department of Agriculture and Farmers Welfare (DA&FW], in consultation with States, assesses seasonal requirements and the Department of Fertilizers allocates monthly supply plans. Fertilizer movement is tracked through the Integrated Fertilizer Monitoring System (iFMS], with weekly reviews and corrective actions. The gap between demand (requirement] and production of fertilizers is met through imports. The import for the season is also finalized well in advance to ensure timely availability.

Urea, is provided to the farmers at a statutorily notified Maximum Retail Price (MRP], The MRP of 45 kg bag of urea is Rs.242 per bag (exclusive of charges towards neem coating and taxes as applicable], unchanged since 2018 till date with the gap met through subsidies to manufacturers/importers.

For Phosphatic & Potassic (P&K] fertilizers, the Government has implemented NBS scheme w.e.f. 01.04.2010. Under this scheme, a fixed amount of subsidy, decided on an annual/bi-annual basis, is provided on subsidized P&K fertilizers depending on their nutrient content including DAP. Currently, 28 grades of P&K fertilizers are supplied at subsidized rates through manufacturers and importers. Under NBS scheme, Being a decontrolled sector, companies set MRPs as per market dynamics, while the Government monitors prices. The Union Cabinet chaired by Prime Minister Shri Narendra Modi approved the proposal of the Department of Fertilizers for fixing the Nutrient Based Subsidy (NBS] rates for KHARIF Season, 2025 (from 01.04.2025 to 30.09.2025] on Phosphatic and Potassic (P&K] fertilizers.

The budgetary requirement for Kharif 2025 alone is estimated at Rs37,216.15 crore, around Rs13,000 crore higher than for Rabi 2024-25, reflecting the Governments continued support to ensure affordable fertilizer availability for farmers.

- In Pradhan Mantri Krishi Sinchayee Yojana, extended till 2025-26, the overall outlay of Rs. 93,068.56 crores have been approved by the Government for the period 2021-22 to 2025-26.

- Special DAP package:

In view of geopolitical disruptions impacting supply, the government approved a special support package of Rs3,500 per MT for DAP, beyond the NBS rates on actual PoS (Point of Sale] sale of DAP. Initially applicable from 01.04.2024 to 31.12.2024, the package has been extended until 31.03.2025 to ensure uninterrupted availability of DAP at affordable prices for farmers. Further, the guidelines on evaluation of reasonableness of MRPs fixed by the P&K Fertilizer companies also ensure availability of fertilizers at affordable prices to farmers across the country.

• One Nation One Fertilizer (ONOF)

The One Nation One Fertilizer scheme also known as "Pradhanmantri Bhartiya Janurvarak Pariyojna (PMBJP) was introduced to bring uniformity in branding and ensure transparency in the Fertilizer sector. Under this initiative, all subsidized fertilizers, including Urea, DAP, MOP, and NPK, are marketed under a single brand name ‘Bharat. For example, products are labeled as Bharat Urea, Bharat DAP, or Bharat NPK, with the manufacturers name displayed in smaller print. This uniform branding reduces farmer confusion, curbs black marketing, and ensures consistent quality with government assurance across the country.

- Viksit Bharat Sankalp Yatra: The Viksit Bharat Sankalp Yatra (VBSY], launched on 15 November 2023 by the Prime Minister Shri Narendra Modi, promoted drone use in agriculture. The initiative focused on showing farmers how drones can spray nano and water-soluble Fertilizers effectively across various crops.

- Namo Drone Didi Programme: Launched by the Prime Minister Shri Narendra Modi during the Viksit Bharat Sankalp Yatra aims to provide 15,000 drones to women from Self-Help Groups (2023-26]. It promotes drone use in agriculture for spraying nano-fertilizers and pesticides, improving efficiency, reducing costs, and boosting yields. The Drone Didis are connected to PM Kisan Samridhi Kendras (PMKSKs] for service delivery

- Neem Coated Urea (NCU): Plants need nitrogen the most among all nutrients. Urea is the main source of nitrogen for crops. However, normal urea has low efficiency, with nearly half of the nitrogen getting lost through evaporation and leaching. This loss can be reduced by using better methods and neem-coated urea. Neem coating helps nitrogen stay in the soil longer, making it more useful for the plants.

• Nano Fertilizers

Various steps have been taken to promote the use of nano Fertilizers amongst the farmers by the Department of Fertilizers

i. Use of Nano Urea is promoted through different activities such as awareness camps, webinars, nukkad nataks, field demonstrations, Kisan Sammelans and films in regional languages etc.

ii. Nano Urea and Nano DAP are made available at Pradhan Mantri Kisan Samridhi Kendras (PMKSKs] by concerned companies.

iii. Nano Urea has been included under monthly supply plan issued by Department of Fertilizers regularly.

iv. ICAR through Indian Institute of Soil Science, Bhopal recently organized National Campaign on "Efficient and Balanced Use of Fertilizer (including Nano-fertilizers]".

v. Promotion of use of nano fertilizers was done during the Viksit Bharat Sankalp Yatra (VBSY] which was launched on 15th November, 2023.

vi. For ease in application and utilization of Nano fertilizers like Nano Urea through foliar application, initiatives such as spraying of Nano Urea through drones and distribution of battery operated Sprayers at retail points are undertaken. For this purpose, pilot training and custom hiring spraying services through Village Level Entrepreneurs are actively promoted.

vii. DoF in collaboration with fertilizer companies has initiated a Maha Abhiyan for adoption of Nano DAP in all 15 agro-climatic zones of the country through consultations and field level demonstrations. Further, DoF in collaboration with fertilizer companies has also launched campaign for field level demonstrations and awareness programs of Nano Urea plus in 100 districts of the country. At present, there is no provision for subsidy by Department of Fertilizers. However, DoF is encouraging its companies to set up Nano fertilizer plants.

- Soil Health Card Scheme: A Soil Health Card is a printed report given to farmers for each of their land holdings. It shows the condition of the soil by testing 12 key parameters, namely Nitrogen, Phosphorus, Potassium, pH (Acidic or Basic), EC (Electrical Conductivity), Organic Carbon, Sulphur, Zinc, Boron, Iron, Manganese and Copper. The scheme helps farmers understand what their soil needs through regular testing and provides guidance every 2 years.

- PM-PRANAM Scheme: The PM-PRANAM Scheme (Prime Minister Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth) aims to reduce chemical fertilizer use and promote balanced nutrient application. It encourages eco-friendly alternatives like organic manure, bio-fertilizers, and compost, while providing incentives to states that achieve reductions in chemical fertilizer consumption.

Indian Fertilizer Market Trends/Drivers:

- Advancements in agricultural technology: Modern agricultural technologies such as precision farming and drone-based monitoring are transforming fertilizer usage in India. Controlled-release fertilizers and bio fertilizers improve nutrient absorption, reduce wastage, and enhance soil health, supporting sustainable agriculture. These innovations make fertilizers more efficient and environmentally friendly, creating a positive market outlook.

- The implementation of government initiatives: Government policies and subsidies are essential in influencing the fertilizer market. The Gol is providing financial support and incentives to farmers to encourage the adoption of modern agricultural practices, including the use of fertilizers. Moreover, subsidies lower cost for farmers, making them more accessible and affordable, thereby boosting productivity, food production, and food security. Programs like One Nation One Fertilizer and the Soil Health Card scheme further promote balanced fertilizer use and awareness among farmers. Along with this, investments in R&D for advanced formulations and technologies are supporting sustainable growth in the sector.

- Growth Drivers and Potential Opportunities: Rising population, food demand, and expanding agricultural activities continue to push fertilizer consumption. Increased adoption of sustainable practices such as bio fertilizers and integrated nutrient management, along with precision agriculture and smart farming methods, are opening new opportunities. Government support and the growing focus on crop yield improvements are expected to further accelerate market expansion.

Challenges (Risks and Concerns):

- Government policies and subsidies significantly influence the fertilizer market. Changes in government policies, such as the reduction or elimination of fertilizer subsidies, can have adverse effects on the fertilizer market by impacting demand and profitability. The interplay between government regulations and subsidies can shape the usage and production of fertilizers on a regional and global scale.

- The international market is quite volatile and ups and downs in prices of raw materials and finished products are observed from time to time. About 50% of feedstock i.e. natural gas for production of urea is imported. Similarly, India remained heavily dependent on imports for phosphatic fertilizers, with 49.72 LMT of DAP imported in FY 2024-25, compared to 55.67 LMT in the previous year. Notably, imports from China witnessed a sharp decline from 22.28 LMT in FY 2023-24 to just 8.47 LMT in FY 2024-25, largely due to regulatory hurdles and supply restrictions. Furthermore, the country continued to rely on international markets to meet its entire demand for MOP, underscoring Indias persistent dependence on global suppliers for critical fertilizer inputs.

- While India strides towards achieving self-sufficiency, India continued to depend substantially on fertilizer imports in FY 2024-25 - importing approximately 4.7 million tonnes of DAP. Import volumes from China fell dramatically from 2.29 million tonnes in FY 2023-24 to just 0.84 million tonnes in FY 2024-25, prompting a strategic shift toward suppliers in the Middle East and North Africa. Total fertilizer import expenditure reached around USD 8.29 billion for the year highlighting Indias ongoing dependence on imports to meet its agricultural needs.

- Competition and Market Dynamics: Intense competition among domestic players and increasing presence of international companies. Fluctuating market prices, demand, and supply affect industry profitability.

- Raw Material Dependency: The industry heavily relies on imported raw materials like rock phosphate, potash, and phosphoric acid.

- The cost of raw material input: Expenses generally depend on changes in mining costs and fluctuations in raw material prices, which vary by location. Fluctuations in raw material prices or input prices depend on supply and demand dynamics for the specific raw material, which are affected by macro-economic activity, weather, and industry-specific trends. Movements in input price can impact fertilizer prices - and therefore demand too. The elevated prices of raw materials like natural gas and phosphate rock lead to variable fertilizer costs, complicating affordability for farmers, particularly in rural regions, thereby affecting the market share of fertilizers in India

- The fertilizer business is highly seasonal and such seasonality may affect our operating results.

- Imbalanced Nutrient Application: The overuse of urea and excessive nitrogen consumption in India, compared to other countries, along with neglect of other essential nutrients has raised concerns about soil health and agricultural sustainability.

- We are subject to various laws and regulations relating to the handling and disposal of hazardous materials and wastes and bio-medical wastes.

- We require a number of approvals, NOCs, licenses, registrations and permits in the ordinary course of our business and any failure or delay in obtaining the same in a timely manner may affect our operations.

- Our Company is dependent on third party transportation providers for the delivery of our goods and any disruption in their operations or a decrease in the quality of their services could results of operations.

- The aspect of climate change has created unpredictability in crop production, complicating the demand for fertilizers, which impacts stability and, in turn, affects the Indian fertilizer market share.

Conclusion

Indias Fertilizer strategy during the Amrit Kaal focuses on balanced use of nutrients, sustainable practices, affordability, and innovation. The government has introduced advanced options such as nano and neem-based Fertilizers while also reviving major production plants across the country. Smart monitoring systems are being adopted to improve efficiency and transparency. These efforts are designed to empower farmers, protect the environment, and reduce dependency on imports. The aim is to ensure that Indian agriculture remains strong and self-reliant while contributing to food security and economic progress.

FUTURE OUTLOOK

As per the government trend over fertilizer sector of India in the form of increase in subsidy scheme over fertilizers products we may see a positive growth in production and sales of fertilizers in India also the governments encouragement toward foreign joint ventures will probably make a good result in future and India will become one of the most fertilizer producer in world economy, apart of that Indian culture is closely related with farmers and their dependency is on agriculture sector which Indian government always want to empowered so it keep always a scope for all fertilizers manufacturers in India toward the more productions and sales.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has clearly laid down policies, guidelines and procedures that form a part of the internal control system which provide for automatic checks and balances. The Audit committee reviews the effectiveness and efficiency of these systems to ensure that all the assets are protected against loss and that the financial and operational information is complete and accurate, in additionof external audit, company has also appointed Internal Auditor to list out any deficiency or loop halls in companys Internal Control and financial reporting, Audits are finalized and conducted based on the internal risk assessment. Significant findings are brought to the notice of the Audit committee of the Board and corrective measures recommended for implementation. Our work opportunities and competitive compensation policy helps us in attracting and retaining our personnel.

Apart of the same company was also conducted with PDIL (Project Development India Limited a Govt, authorized unit for Audit) for Meghnagar plant which conducted audit for companys overall production process report to the concerned department.

HEALTH, SAFETY, SECURITY AND ENVIRONMENT

Health, safety, security and environment have always been an integral part of our value system, we always having concern about Health safety and security of our Employees, workers at their work place, we are aiming at "Zero Accident" as goal of our company, when the matter is about health and safety, company always follow these some important measure

> Identification of hazard and risk present in work environment and its rectification.

> Continuous monitoring of unsafe condition and unsafe acts through safety inspection.

> Safety induction training for all employees and specific job safely awareness programs on a continuous basis.

Our factory are well equipped with required facilities including machinery, crane, conveyor belt, other handling equipments to facilitate smooth manufacturing process and easy logistics. We endeavor to maintain safety in our premises by adhering to key safety norms. We are having enough greenery at our plant location and also having modern and efficient system to dispose of factory waste, mainly we focus on re- made process of waste and scrap and we always keep in mind about optimum use of energy resources and conservation of natural resources, company is continuously visited by pollution control officers and, we will do it good, if they found any lack of safety measure and other element to protect the surrounding environment of the company.

CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among other things, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in Government regulations, tax laws and other statutes and incidental factors.