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, we have previously one unit at dewas, M.P. only which has its capacity of 60000 MT per year and taking steps toward more growth and development, company in the year 2014 inaugurated a new plant at Meghnagar, M.P, we are manufacturing Single Super Phosphate (SSP), Nitrogen Phosphate and Potassium (NPK), Zinc Sulphate, Organic manure and Calcium Sulphate commonly known as soil conditioner or gypsum.

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 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 two 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:

During the financial year 2019-20, companys production and sales as well as companys Financial Performance are as below.

(Quantity in MT)

S.No. Particulars F.Y. 2019- 20 F.Y.2018- 19
Production
1. SSP 57879.65 52038.2
2. NPK 2925.57 4265
3. Calcium Sulphate 350.50 0
4. ZINC SULPHATE 455.820 615.00
(Hyptahydrate )
5. Potash 1291.700 0
6. Phosphate Rich Orgainic 1530.00 0
Manure (PROM)
Sales
1. SSP 55472.30 47968.6
2. NPK 2938 7354.83
3. Calcium Sulphate 1978.075 345
4. ZINC SULPHATE 313.50 605.045
(Hyptahydrate )
5. Potash 43 0
6. Phosphate Rich Orgainic 1481.40 0
Manure (PROM)

Financial Performance (Amt. in Lakhs)

S.No. Particulars 2019-20 2018-19
1. Revenue from operation 5194 6293
2. Other Income 1810 924
Total Income 7005 7216
3. Total Expences 6557 7053
4 Prfit /Loss before Tax 447 163
5 PAT 392 83
6 Paid up Capital 2027.41 2027.41
7 EPS 1.93 0.41

During the year 2019-20company was recorded 55472.30MT sales for SSP Product which is 7503.7 MT more as compared to last F.Y, in the same way sales for Calcium Sulphate is also increased surprisingly it increased by total 1633 Mt Approx. than last year sales, it positively affected companys profit, sales for NPK was decreased due to less demand in this year, however company have promoted for two more products sales i.e. for PROM and Potash. The overall sales for F.Y. 2019-20 was 62226.27 MT as compare to 56272.83 MT in last F.Y., accordingly total sales is increased by 5953.44 MT than last year sales.

Sale of some of the products of the company is depends on Monsoon season because a better monsoon season resulted in more irrigation of soil in that year and accordingly demand for companys products increases, so we are hope a good monsoon this year, as company have all arrangements for fulfill the demands of its products.

Fertilizer Industry and its Impact on Indian Economy

India is predominantly an agrarian economy. The Indian economy mainly depends upon its agricultural produce. The agricultural output contributes to about 25% of the countrys GDP. As a result of the chem ical fertilizers being one of the related parts of the agriculture, there is vast scope for the growth of the chemical fertilizer industry.

The Indian Fertilizer Industry has shown tremendous growth in the last five decades and at present ranks third in the world. India is the second largest consumer of fertilizers after China. India also ranks second in the production of nitrogenous fertilizers and third in phosphatic fertilizers whereas the requirement of potash is met through imports since there are limited reserves of potash in the country, being an important industry to the Indian economy, the government has ensured the availability of adequate quantity and proper quality of fertilizers to the farmers.

The Indian fertilizer market was worth INR 6,258 Billion in 2019 as compare to INR 5437 Billion in 2018 Fertilizers have played a key role in the success of Indias green revolution and subsequent self-reliance in food-grain production. The increase in fertilizer consumption has contributed significantly to sustainable production of food grains in the country. As a result, the demand of fertilizers has witnessed double digit growth rates over the past several years. Looking forward, IMARC Group expects the Indian fertilizer market to exhibit moderate growth during 2020-2025

Industry structure and developments

The fertilizer industry in India consists of three major players; The Government owned Public Sector undertakings, Cooperative Societies like KRIBHCO, IFFCO and units from Private sector. There are about 33 major producers producing N, NP and NPK fertilizers in the country at present. The fertilizer industry of India had made constructive use of the fertilizer subsidy provided by the Government of India to ensure that the country achieved reasonable self-sufficiency in food grain production. The fertilizer industry has organized itself through Fertilizer Association of India to coordinate with the Government of India to achieve the macro-economic objectives related to agricultural sector and to provide other services. Indian fertilizer industry has succeeded in meeting almost fully the demand of all chemical fertilizers.

Future Outlook

In the upcoming year, it is expected that the Indian Fertilizer industry will have some positive results, as being related to the agriculture sector, govt. focused more on Fertilizer industry, part of the same 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 off take. However, subsidy reduction remains a major negative takeaway for the fertiliser sector.

Despite the slowdown in the previous years, the SSP Industry is very optimistic for the coming financial year, on account of expected normal monsoon. Monsoons have a major impact on the agricultural sector, besides the commodity prices of major raw material inputs. In such a regime SSP fertilizer being a low cost fertilizer has an increased preference with the farmers

The performance of the Company is expected to be better in coming years considering its basic strengths as working with high efficiency, a good supply channel, skilled labour, geographical location of companys Plants, established brands. The well maintained plant and equipments ensure uninterrupted production and distribution of goods.

Risks and Concerns

There are a lots of risk factors which Company faces but these are some main Risk factors which adversely affect Companys working.

1. Fertilizer Prices:

In the fertilizer industry and pretty much any other commodity companies revenue depends on fertilizer prices and the quantity of fertilizer companies sell. Fertilizer prices are driven by industry capacity, rivalry (competition among firms), marginal producers cost, proximity to customers, inventory, and demand.

2. Fertilizer demand and purchases:

Demand, in turn, is driven by fertilizer prices, crop economics, currencies, cycles, economic activity, and macro factors like subsidy programs. Crop economics consist of factors like crop inventory, crop demand and supply, and crop prices, which depend on economic activity, food consumption, diet patterns, crop yields, nutrient application, weather, plantation, and energy consumption.

3. 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. As you can see, analyzing the factors that affect expense and revenue can be confusing. This weekly fertilizer series breaks them down into key parts to show investors how theyre affecting (or how they could affect) the industry and its respective companies.

4. Change in Government Policies/ Procedures:

Sometimes the polices/ regulation or procedure of Government is change frequently which affects the liquidity of fund in Company, secondly Company suffers with ideal Time loss due to managing its affairs or programmes as per these changes, when Government makes changes in the Tax Rates, it directly affects Cost of the Product, simultaneously reduces demands among customers.

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

6. We are subject to various laws and regulations relating to the handling and disposal of hazardous materials and wastes and bio-medical wastes. If we fail to comply with such laws and regulations, we can be subjected to prosecution, including imprisonment and fines or incur costs that could have a material adverse effect on the success of our business.

7. Our industry is labour intensive and our business operations may be materially adversely affected by strikes, work stoppages or increased wage demands by our employees or those of our suppliers.

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

9. Our operations may be adversely affected in case of industrial accidents at any of our production facilities.

10. Conflicts of interest may arise out of common business undertaken by our Company, Promoters and our Group Company.

11. 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 affect our Companys reputation and results of operations.

12. Continued operations of our manufacturing facility are critical to our business and any disruption in the operation of our facility may have a material adverse effect on our business, results of operations and financial condition.

13. Our lenders have charge over our movable and immovable properties in respect of finance availed by us.

14. The industry segments in which we operate being fragmented, we face competition from other players, which may affect our business operations and financial conditions.

15. We have taken guarantees from Promoters, Directors as well as others in relation to debt facilities provided to us.

16. Any changes in regulations or applicable government incentives can materially and adversely impact our operations and growth prospects.

17. We could be harmed by employee misconduct or errors that are difficult to detect and any such incidences could adversely affect our financial condition, results of operations and reputation.

18. Political instability or a change in economic liberalization and deregulation policies could seriously harm business and economic conditions in India generally and our business in particular.

19. Global economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

20. The extent and reliability of Indian infrastructure could adversely affect our Companys results of operations and financial condition.

21. Natural calamities could have a negative impact on the Indian economy and cause our Companys business to suffer.

22. Terrorist attacks, civil unrests and other acts of violence or war involving India or other countries could adversely affect the financial markets, our business, financial condition and the price of our Equity Shares.

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 addition of 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.

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 safety 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.

During the COVID-19 Pandemic we have effectively take care of our employees and workers, company have provided them face mask, sanitizers and also established a sanitization tunnel at factories gate for workers and outsiders, also the company have provided food facility to all workers and other needy persons, a part of it, we are also following govt. guidelines regarding social distancing, shift wise work at plant and administrative office we also promoted work from Home.

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.