Alufluoride Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENT

Alufluoride Ltd. (AL) is the only Company in Andhra Pradesh producing high purity Aluminium Fluoride (AlF3). This technology facilitates conversion of Fluorine effluents from a Phosphatic Fertilizer Complex into Hydrofluosilicic Acid (FSA), by the concerned fertilizer complex, and then to Aluminium Fluoride. The project ensures pollution abatement, import substitution, conservation of natural resources like Fluorspar and Sulphur, cost effective production, conversion of waste into wealth and import substitution for India. AlF3 is used as a flux in reducing the melting point of Alumina during the electrolytic process of producing Aluminium, therefore reducing the carbon footprint for production of aluminium. All Aluminium Smelters in India and a few Smelters abroad use the Companys product, with repeat orders due to quality and reliability.

AL commissioned its Aluminium Fluoride Plant in 1995, based on an agreement between AL and Coromandel International Limited (CIL). As per the original agreement, CIL is to supply 4,000 TPA of Hydrofluosilicic Acid (FSA) exclusively to AL. However, since inception, CIL was unable to supply the contracted quantity, and therefore the balance FSA is being procured from Odisha.

All the Aluminium smelters in India and abroad have been increasing their Aluminium production capacities and new Aluminium smelters are coming up with high capacities, resulting in an increased demand for AlF3. CIL expanded its Phosphoric Acid production capacity and AL signed a long-term FSA supply contract with CIL for supply of 3,500 TPA. AL had signed a long-term contract with IFFCO, Paradeep for supply of minimum 7,000 TPA. However, they are supplying over 17,500 TPA due to their increased FSA production and are expected to supply up to of 19,000 TPA in the current financial year. In addition to this, AL can procure the balance FSA requirement, if any, from Paradeep Phosphates Ltd., Odisha, who are presently producing up to 5,000 TPA of FSA.

In view of increased AlF3 demand and availability of additional FSA, the Company expanded its AlF3 production facilities to 12,000 TPA in the 1^st phase,

16,000 TPA in the 2^nd phase and is now enhancing capacity to 18,000 TPA. The risks and concerns for the Company are availability of FSA, increase in transport costs from Paradeep, Odisha, taking debt for the expansion, along with the usual market risks. As the Company has withdrawn from the AlF3 Project in Jordan because of the uncertain political situation in the Gaza area as well as neighbouring countries in the Middle East, it is currently exploring the setup of an Alumina Hydrate (a key raw material for producing AlF3) manufacturing facility. In addition, the Company is evaluating other overseas and domestic projects.

The Company has an internal control system which provides for:

• Efficient use and safeguarding of resources

• Accurate recording and custody of assets

• Compliance with prevalent statutes, policies, procedures, listing requirements, management guidelines and circulars

• Transactions being accurately recorded, cross verified and promptly reported

• Adherence to applicable accounting standards and policies

• IT systems, which include controls for facilitating the above

The internal control system provides for well- documented policies, guidelines, authorizations, and approval procedures. The internal audit reports are laid before the Audit Committee and discussions were held periodically by the Audit Committee at its meetings. The observations arising out of audit are subject to periodic review, compliance, and monitoring. The significant findings/ observations made in internal audit reports, along with the status of action thereon, are reviewed by the Audit Committee of the Board of Directors on a regular basis for further appropriate action, if and as deemed necessary. To further augment the control and fine tune management systems, the Company is implementing Enterprise Resource Planning (ERP) software, with the assistance from consultants.

The continued Certification of Quality and Environmental Management System adopted by the Company to ISO 9001, ISO 14001 and ISO 45001, manifests to the commitment of all the employees to excellence. Committed human resources are a principal core strength of your Company and is an attribute of the extremely cordial atmosphere prevailing in the Company. The total number of employees stood at 110 as on 31^st March 2025.