agro phos 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 one unit at Dewas, M.P. which has its capacity of 60000 MT per year and We have another One 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 three years also trading in agricultural produce and Animal feeds management is expecting an extensive growth in this segment in future, also during this pandemic period where availability of resources was very low, our company was able to maintain its quality standards and not compromise the efficiency of its products.

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)

S.No.	Particulars	F.Y. 2022- 23	F.Y.2021- 22
1.	Production SSP	84241.15	54626
2.	NPK	2401.8	14548
3.	Calcium Sulphate	0	17
4.	ZINC SULPHATE (Heptahydrate )	0	211.29
5.	Potash Phosphate Rich	250	0
6.	Organic Manure (PROM) Sales	645.2	600
1.	SSP	77141.25	66111
2.	NPK	2432.8	13723
3.	Calcium Sulphate	0	17
4.	ZINC SULPHATE (Heptahydrate )	0	25
5.	Potash	1384.5	197
	Phosphate Rich
6.	Organic Manure (PROM)	499.45	735

 

S.No .	Particulars	2022-23	2021-22
1.	Revenue from operation	13101.7 0	11606.13
2.	Other Income	33.70	118.88
		13135.4
	Total Income		11725.02
		0
3.	Total	12424.3	11017.30
	Expences	5
4	Prfit /Loss before Tax	711.04	707.71
5	PAT	500.36	583.11
6.	Total Comprehensi ve Income	507.82	581.94
6	Paid up Capital	2027.41	2027.41
7	EPS	2.47	2.88

SSP:

During the year 2022-23 company was recorded 77141.25 MT sales for all variant of SSP Product which is 11030.25 MT more as compared to last F.Y. 2021-22, the major reason of increase in sale of SSP is government scheme for increase in subsidy system which creates more scope for sale of SSP in Indian Markets, and management is in the view that in upcoming years also government with intention to empower or support to Indian farmers and for growth of fertilizers industry in India will become remain the higher subsidy system for SSP sale therefore it will left more scope for sale of SSP in Indian Market and it will be considered as good market opportunity for our company.

NPK:

Sale of NPK was increased during the period under review as consolidated sale of NPK for Both 12:32:06 and 12:12:12 variants are recorded as 2432.8 MT which was 13723 MT In last Financial Year, Due to High Demand of this product in the Indian Market.

PROM:

Prom sale is decreased this year and recorded as 499.45 MT as compared to last financial year which was 735 MT companys sale of PROM is done through both government entities and private parties, during the reporting financial year Due to tough competition in the Indian Market and Since Company is mainly focussing of SSP. Zinc sulphate

Companys Sale of ZINC Sulphate during the year recorded nil, the major reason of the same was storage of maximum quantity of Zinc Sulphate for making SSP in upcoming year as ZINC sulphate is also a raw material to companys Core Product SSP and this year sale of SSP increased therefore with intention to increase production and sale of SSP in upcoming yearsZinc was Kept as Stock for captive use in future. However, in upcoming year we will plan for increase of production of zinc sulphate as per market demand and as per our captive consumption.

Other Products such as Calcium Sulphate, Potash

There was no sale of calcium sulphate, However there was increase in sale of Potash from 1384.5 Lakhs as compared to the sale of 197 Lakh for previous year reason for increase in sale was due to Increase in demand of the Potash in the Indian market.

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 27344 MT as the trading of the products is completely depends on the un-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 this year was was recorded at 13101.70 Lakhs as compared to the last year Turnover as 11606.13 Lakhs while the other income was also Decreased from 118.88 Lakhs to 33.70 lakhs this year accordingly the Profit after tax of company was recorded as 500.36 Lakhs as compared to 583.11 Lakh in last financial year. Management in upcoming year also ensure to keep maintain the more profitability from companys products for which whatever be the efforts management will be ensure to do all in future.

Indian Fertilizer Industry & companys Contribution toward the same

India is the second-largest consumer and the third-largest producer offer Fertilizers globally. The Indian fertilizer ecosystem comprises the private, Government and cooperative sectors. Over the years, the fertilizer sector in India has played a major role in shaping the Indian farms and driving agricultural prosperity

INDIAN FERTLIZER MARKET

The Indian fertilizer market size reached INR 898.5 Billion in 2022. Looking forward, IMARC Group expects the market to reach INR 1,188.3 Billion by 2028, exhibiting a growth rate (CAGR) of 4.85% during 2023-2028. The growing population, rapid urbanization, and increasing food consumption are escalating the demand for fertilizers, emerging technological advancement, and the implementation of favourable government initiatives are some of the major factors propelling the market. Agriculture forms the backbone of the Indian economy, and the demand for fertilizers in this sector is consistently high. Indias large population depends heavily on agriculture for livelihood and sustenance, thus escalating the demand for fertilizers. In addition, farmers rely on fertilizers to enhance soil fertility and supplement essential nutrients required for healthy crop growth, thus augmenting the market growth. The diverse agro-climatic conditions across different regions of the country require the use of various types of fertilizers for catering to specific crop and soil needs, which is accelerating the product adoption rate. Besides this, the Indian governments focus on improving agricultural productivity through various initiatives, subsidies, and support measures further augment the product demand. Additionally, several policies aimed at ensuring food security, enhancing rural incomes, and promoting sustainable farming practices further contribute to the prominence of farming in the market. The India Fertilizers Market is fragmented, with the top five companies occupying 34.30%. The major players in this market are Coromandel International Ltd., Indian Farmers Fertiliser Cooperative Limited, Israel Chemicals Ltd, National Fertilizers Ltd and Yara Fertilisers India Pvt. Ltd. The fertilizer industry in India experienced a remarkable surge in production during the months of April to May 2023, showcasing impressive growth rates for key fertilizers. Urea, DAP, and NPKs took centre stage with soaring growth rates of 16%, 10%, and 31% respectively, when compared to the same period in the previous year. This surge in production led to an outstanding achievement, with the total fertilizer production reaching an impressive 7.3 million tons by May 2023. Urea accounted for a significant portion of this achievement, with 5 million tons produced, followed by DAP at 0.8 million tons, and NPKs contributing 1.6 million tons. Not only did the production numbers rise, but the sales of urea, DAP, and NPKs also stole the spotlight during April to May 2023, with remarkable growth rates of 34%, 47%, and 55% respectively, compared to the same period in the previous year. However, the sales of MOP faced a challenging decline of 43% in the current year until May, as compared to the previous year. Furthermore, the fertilizer market in India witnessed a surge in imports during April to May 2023, showcasing an impressive overall increase of 61% compared to the same period in the previous year. Among the imported fertilizers, Urea, DAP, MOP, and NPK Complex emerged as frontrunners, boasting growth rates of 37%, 73%, 85%, and a stunning 56% respectively, surpassing the imports recorded during April to May 2022. Overall, imports of fertilisers rose by 22% from April to December of FY 22 23 compared to the same period the previous year. Imports of urea, DAP, MOP, and NPK Complex increased from April to December 22 over the same period in 2021 by 5%, 36%, 14%, and 67%, respectively. The robust growth in fertilizer production, coupled with significant sales growth and a surge in imports, highlights the thriving fertilizer industry in India during the specified period. These positive trends demonstrate the countrys increasing emphasis on agricultural productivity and its commitment to meeting the growing demand for fertilizers in the agricultural sector. The Indian government has been implementing various policies to support the agriculture sector and ensure the availability of fertilizers at affordable prices. Subsidies and price control mechanisms have played a significant role in stimulating urea consumption. However, its important to note that there have also been efforts to optimize urea use and reduce its wastage. Initiatives such as the promotion of Nano Urea, balanced nutrient management, neem-coating of urea, and the direct benefit transfer (DBT) system have aimed to improve the efficiency of urea use and prevent its misuse and wastage.

INDIA FERTILIZER PRODUCTION RISE BY 10% TILL AUGUST 2022

Urea and DAP production in India is up by 16% and 22% till August 2022 over 2021 during the same period. Urea production during FY22 till August is 116 Lac Tons and DAP production is 17 Lac Tons.

Urea and DAP sales is up by 5% and 7% respectively.

NPKs Complex production and import all together have increased by 5% over last year during April to August. DAP, MOP and NPK Complex imports have increased by 3%, 25% and 105% respectively during

April to August22 over 2021 during same period, however urea imports down by 13%.

Overall availability of Fertilisers in India is more than requirement till August 2022, in all major Fertilisers like Urea, DAP, MOP and NPKS. There is no shortage of fertilizers.

NEWS AND DEVELOPMENTS IN THE MARKET

May 2022: ICL signed Framework agreements with customers in India and china to supply 600,000 and 700,000 metric tons of potash, respectively in 2022 at 590 USD per ton. June 2022: ICL signed a long-term agreement with India Potash Limited (IPL) to supply Polysulphate through 2026. The five-year term is for an aggregate amount of 1 million metric tons. The availability of Polysulphate is expected to help boost the Government of Indias organic agriculture program.

In September 2022, Coromandel International launched an organic product named Cumist Calcium at Hotel Novotel in Vijayawada. The new product includes specialty nutrients and improves efficiency and soil health.

In August 2022, the Ministry of Chemicals and Fertilizer instructed all companies to employ the new brand name ‘Bharat and the logo of the subsidy scheme on the bags in order to convey the governments decision. In August 2022, Gujrat Chief Minister introduced IFFCO Nano Urea Spraying Scheme. The Gujarat CM praised the farmers for employing drones to spray nano urea for the first time in the state as well as encouraged them to take benefit of the innovative drone technology scheme in agriculture which will further help them in saving time and energy. This technology is expected to help support the India fertilizer market.

GROWTH DRIVERS FOR FERTILIZER INDUSTRY

Some of the key factors that are driving growth in the sector are:

1. India is known as an agricultural nation. Since it is one of the worlds largest agricultural producers offering crops like rice, pulses, wheat, potatoes, groundnut, etc. the higher demand for fertilizer products is going to continue. 2. In the long run, rising agricultural production to cater to the worlds growing food demands are expected to drive fertilizer demand in the country.

3. The Indian government has also been focusing on extending maximum support to farmers by allowing easier access to subsidized fertilizers and newer technologies. This boosts agriculture and, thereby, fertilizer production.

4. There has also been a significant surge in fertilizers production capacities across India. This is said to be driven by government initiatives to cut down on fertilizer imports and boost domestic fertilizer production.

KEY CHALLENGES FACED BY THE FERTILIZER INDUSTRY

Fertilizer manufacturers in the country are continuing to face some challenges. These include: 1. Non-availability of raw materials 2. Rising input costs 3. Insufficient long-term and favourable policies 4. Large-scale imports due to limited domestic production that cannot cater to rising demand

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 33 large sized urea pants in India manufacturing urea and 21 units producing DAP & Complex Fertilizers and 2 units producing ammonia sulphate as a by-product. The actual production of all major fertilizers during the 2021-22 and Financial Year 2022-23 were 425.92 Lakh MT and 320.76 Lakh MT respectively.As per the report of fertilizer association of India total production of SSP during the Financial Year 2021-22 was 40.20 Lakh MT and production during 2022-23. The Indian Government has been encouraging Indian Companies to establish Joint ventures aboard in countries which are rich in fertilizers resources for production facilities and buy back arrangements and to enter into long term agreements for supply of fertilizers and fertilizers inputs to India, there are about 5 countries including Russia, Nepal, Morocco, Canada, Saudi Arabia where Indian companies/government has joint venture. However during the financial year 2022-23 Indias fertiliser companies- Coromandel International, Chambal Fertilizers and Indian Potash Limited signed anMoU with Canpotex, Canada on 27th September 2022 for ensuring long-term fertiliser availability for the farming community. Canpotex, Canada is amongst the largest suppliers of Potash globally, exporting around 130 LMT of product annually.

PARTICIPATION IN SOCIAL ACTIVITIES

Everyone is having their liability towards the social environment around us. Being a corporate entity we also require our active participation for better empowerment of society at large and in the same way management of the company observed that during this financial year, company apart from the existing social activities such as distribution of food, groceries, etc. have also done some more help among the society. As under CSR contribution, company has invested INR 9,51,000/-to one

Charitable Trust namely "Karmaputra Charitable Trust", a Non- Profit making registered charitable trust which is serving for feeding Cows, maintaining them and taking care of ill Cows and also helping them with surgeries. Apart of the financial investment it is always necessary for a corporate to become socially active among the people around us. In the same way company have taken participation in various social programs, events and in one of them company have also been awarded as "Dewaska Sartaj" by the

Dainik Bhaskar Group at Dewas for its social activism among the society.

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.

UREA PRODUCTION, CONSUMPTION& SUBSIDY SCHEME

Production of urea has increased to 284,000 tonne in 2022-23 from 225,000 tonnes in 2014-15, to 250 lakh tonne during 2021-22.

Indias Urea and DAP production increased by 13% and 4% respectively, till December of FY 22-23 over 21-22 during the same period, however NPKs production is remain unchanged. 211 Lac Tons of urea and 32 Lac Tons of DAP were produced till December of FY 2022-23.

Sales of urea and DAP increased by 10% and 13%, respectively, however MOP and NPKs dropped by 35% and 15%. Urea consumption in India has traditionally been significant due to the countrys large agricultural sector. It is used extensively as a nitrogenous fertilizer to enhance crop productivity. The demand for urea has been steadily increasing over the years, driven by factors such as population growth, the need for food security, and government initiatives to promote agricultural productivity. Despite all efforts, the purchase of urea by farmers in India on an all-India basis witnessed a 5% increase during the fiscal year 2022-23 compared to the previous year. The 5% increase in urea consumption in India, mentioned earlier, specifically pertains to prilled urea consumption and does not take into account the consumption of Nano urea. The Government of India has been actively promoting Nano urea due to its proven efficacy, zero wastage, and affordability. It is believed that the consumption of Nano urea has contributed to a restrained increase in prilled urea consumption on a pan India basis. The overall urea consumption in India experienced an increase from 34.2 million tons to 36.1 million tons during the fiscal year 2022-23. Notably, the West zone demonstrated substantial growth in consumption, rising from 10.5 million tons to 11.8 million tons. In the South zone, urea consumption increased from 6.1 million tons to 6.4 million tons. However, the North zones consumption exhibited a negligible growth, going from 12.8 million tons to 13 million tons, while the East zone experienced a slight increase in consumption from 4.7 million tons to 4.8 million tons. Significant increases in urea purchase were observed in Western India, with a notable growth rate of 12.2%. Southern India also showed a considerable increase of 4.5%. However, the Northern zone exhibited a negligible growth rate of 1.4%, while the Eastern zone showed a relatively modest increase of 2.9% during the fiscal year 2022-23 compared to the previous year. The urea subsidy scheme, which has been extended for another three years till March 2025, aims to ensure constant availability of urea to farmers at the same price of 242/45 kg bag. The actual cost of a bag comes around 2,200. This scheme, which entails a cost of 3.68 trillion, will be wholly financed by the Centre through budgetary support. The Union Cabinet has introduced sulphur-coated urea (Urea Gold) to address the issue of sulphur deficiency of soil and save input costs for farmers.

NUTRIENT BASED SUBSIDY SCHEME

Under the NBS regime fertilizers are provided to the farmers at subsidized rates based on the nutrients (N, P, K & S) contained in these fertilizers. Also, fertilizers that are fortified with secondary and micronutrients such as molybdenum (Mo) and zinc are given additional subsidies. The subsidy on Phosphatic and Potassic (P&K) fertilizers is announced by the Government on an annual basis for each nutrient on a per kg basis which is determined taking into account the international and domestic prices of P&K fertilizers, exchange rate, inventory level in the country etc.

NBS policy intends to increase the consumption of P&K fertilizers so that the optimum balance (N:P:K= 4:2:1) of NPK fertilization is achieved. Government has approved revision in the NBS rates for Rabi 2022-2023 effective from 01.01.23 to 31.03.2023 and approved the NBS rates for Kharif, 2023 (from 01.04.2023 to 30.09.2023) to make available 25 grades of Phosphatic and Potassic (P&K) fertilizers to farmers at subsidized prices. Government will be providing a subsidy of Rs. 38,000 crores for the Kharif 2023 to fulfil its commitment of providing quality and subsidized P&K fertilizers to farmers.

RISKS AND CONCERNS

There are a lot 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 programs 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 labor 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, 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 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. Apart of the same company was also conducted with PDIL (Project Development India Limited a Govt. authorized unit for Audit) which conducted audit for companys overall production process repot 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 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.

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.