Asian Fertilizers Ltd Management Discussions

1. Industry structure and developments:

Fertilizers enhance the growth of plants by supplying crucial nutrients to them. Some of the essential nutrients required by plants are:

Straight Fertilizers: N-Nitrogen, P-Phosphorous, K-Potassium Secondary Fertilizers: CA-Calcium, Mg-Magnesium and S-Sulphur Micronutrients- Cu-Copper, Fe- Iron, Mn- Manganese, Zn- Zinc, B-Boron etc.

Nitrogen, phosphorus, and potassium (NPK) are three major constituents of fertilizers. Nitrogen helps in leaf growth, phosphorus helps in the development of roots, flowers, seeds, and fruits and potassium helps in strong stem growth, movement of water in plants, and promotion of flowering and fruiting.

Due to the non-availability of Indigenous Rock Phosphate (32%), we depend on imported Rock Phosphate, which can be processed to give water-soluble phosphatic fertilizers. Single Super Phosphate is a cheap fertilizer and is also known as a common farmers fertilizer.

Single super phosphate (SSP) is manufactured by carrying out a reaction of rock phosphate with Sulphuric acid for converting non-soluble phosphate (present in rock phosphate) into water-soluble phosphate which is called single super phosphate. It contains 14.5-16% water soluble phosphorous, 10-11% Sulphur, and 18- 21% Calcium. Straight Phosphatic 16% P2O5 Grade The company started its manufacturing unit of single super phosphate (powder plant) in 1992 with a capacity of 66000 MT per annum while single super phosphate (Granulated plant) in 1993 with a capacity of 45000MT per annum and Sulphuric Acid in 1993 with a capacity of 33000MT per annum which is used for the production of SSP, in Village deokahiya, block Sardar Nagar, Tehsil chaurichaura, Gorakhpur, Uttar Pradesh.

Company sale fertilizers with its own brand name "PASHUPATI" and also company has made contract with one of the urea manufacturer Company named Matix Fertilizers and Chemicals for marketing/Sale in the state of UP, Bihar and West Bengal.

2. Opportunities and Threats:

Since the agriculture sector has its importance in the Indian economy, it is bound to grow and our product SSP has also its importance in the Agriculture sector.

Govt. of India has emphasized promoting SSP to fulfill the demand for phosphatic

fertilizers and also Fertilizers Association of India has organized farmers meetings in all states of India to promote SSP and convince to farmers for use of SSP instead of DAP or other phosphatic fertilizers.

3. Segment-wise or product-wise performance:

Single Superphosphate: The Company produces single superphosphate in two categories: powder and granule. The company can achieve production of 21600.20 MT of Green SSP during the year 2024-25 against the targeted production of 46000 MT which is 49.96% of the targeted production and 32.73% of the installed capacity of 66000 MT. The company has dispatched 26874.35 MT during the year. Quantum-wise production of SSP was decreased as compared to previous year but Dispatches of SSP increase as compared to previous year.

Sulphuric Acid: The Company has produced Sulphuric acid for captive consumption and the excess quantity of Acid sold by the Company. The company can achieve the production of 26927.87 MT of Sulphuric acid during the year 2024-25 against the installed capacityof 33000 MT which is 81.60 % of the installed capacity. The captive consumption of the Sulphuric Acid for production of SSP is 7737.70 MTand the sale of Sulphuric Acid was 31186.22 MT including trading. Quantum vise sale of Sulphuric acid has decreased during the year.

2. Outlook:

Agriculture has been playing a vital role in the Indian economy with its contribution to GDP. Around 49% of the Indian population is still dependent on agriculture and its allied activities for their livelihood. The growth rate in agriculture has been fluctuating and these uncertainties/ fluctuations in growth rate can be attributed to over- dependence on rains (around 60% of agriculture is still rainfall- dependent). One of the vital industries in the Indian economy is the fertilizer industry which serves as a very crucial raw material for agriculture. Fertilizer, alone accounts for a large subsidy, the second highest after food. Owing to poor monsoons in the last two years and low commodity prices, there was a slowdown in the fertilizer sector.

5. Risks and concerns:

(a) Government Policy:

This sector was operated in a highly regulated environment with a cost of production and selling prices being regulated by the Government ofIndia.

Due to this reason, the fertilizer industry suffered from low profitability as compared to other sectors. Govt. imposed several regulations on prices, subsidies, imports, etc

There have been changes in regulations, and subsidy structure from time to time creating confusion and uncertainty among producers. In past years, govt. has decontrolled DAP, MOP, complex fertilizers, and SSP which will stimulate the growth of this industry and thereby ensureadequate supply of essential fertilizers to farmers.

Subsidy for P&K fertilizers is fixed and does not vary with market prices. Govt. does not regulate the import of DAP and MOP as it does for Urea. Govt. has decontrolled prices of P&K fertilizers, MRP is left open to manufacturers to decide and so domestic prices are decided by demand and supply. P&K fertilizers are less regulated compared to Urea, therefore P&K fertilizer producers can optimize operations, and improve the supply chain and product mix to earn better profits.

Considering all the issues relating to agriculture productivity, balanced fertilization, growth of the indigenous fertilizer industry, competitiveness amongst the fertilizer companies and to overcome the deficiency of the concession scheme, the Government introduced the Nutrient Based Subsidy (NBS) Policy for P&K fertilizers with an effective from 1.4.2010.

Under the NBS Policy, a fixed rate of subsidy (in Rs. per Kg basis) isannounced on nutrients namely Nitrogen (N), Phosphate (P), Potash (K), and Sulphur (S) by the Government on an annual basis which is decided based on international prices, exchange rates, inventory and prevailing MRP, etc.

The Govt. of India has opened the MRP of SSP from 01/04/2011 and

manufacturers are free to decide their rates up to a fixed limit.

(b) Development In Government Policy:

Investment required for setting up an SSP unit is modest compared to Nitrogenous fertilizers. The setup with indigenous technology depends on imported material because of the non-availability of good qualityrock phosphate except from Rajasthan State Mines & Minerals Limited,a State Govt. Undertaking. The demand for fertilizers is likely to increase with the emphasis by the Govt. on augmenting agricultural produce.

The Govt. of India has notified that Imported Rock Phosphate from some countries for used in the production of SSP for competitive Production cost.

(c) Availability of Raw Material:

Rock Phosphate is imported from various countries by different dealers. There is a problem with the availability and hike of Prices of Raw Material.

(d) Subsidy on SSP:

The Govt. of India has introduced a nutrient-based subsidy policy for all types of fertilizers including SSP. The Govt. of India has a flexible subsidy for a whole year and for the reporting year subsidy was Rs. 4804/MT for SSP and Rs. 5304/MT for Zincated SSP till 30-09-2024 and then 5121/MT for SSP and Rs. 5621/MT for Zincated SSP till 31.03.2025.

6. Internal control systems and their adequacy:

In any industry, the processes and internal control systems play a critical role in the health of the Company. The Companys well-defined organizational structure, documented policy guidelines, defined authority matrix, and internal controls ensure efficiency of operations, compliance with internal policies and applicable laws and regulations as well as protection of resources. Moreover, the Company continuously upgrades these systems in line with the best available practices. The internal control system is supplemented by extensive internal audits, regular reviews by the management, and standard policies and guidelines to ensure the reliability of financial and all other records to prepare financial statements and other data.

7. Discussion on financial performance concerning operational performance: The highlights of the companys performance for the year ended March 31, 2025, are as under:

Revenue from operation decreased by 25.13% to Rs. 6536.38 Lakhs.

PBDIT decreased by 15.91% to Rs. 209.64 Lakhs.

Profit before tax decreased by 366.15% to Rs. 36.08 Lakhs.

Net profit decreased by 419.44% to Rs. 24.31 Lakhs.

8. Material developments in the Human resources / Industrial Relations front, including the number of people employed:

Asian Fertilizers Limited is a knowledge-driven organization focused on judicious people recruitment and retention. The Companys HR function focuses on employee training, values inculcation, andenhanced functional expertise. The Companys key HR objective is to ensure that employees are aware of expected roles leading to organizational momentum.

The top management conducted several discussions with employees to discuss multiple issues includingleadership qualities, values, responsibilities, workplace freedom, and empowered decision-making. Going ahead, the Company will continue to invest in people to strengthen its production processes, product quality, and service delivery. During the year under report, the Company also focused on the automation of key HR processes for employee benefit. The result of these initiatives was that the Company was able to keep its attrition levels well under control, much below the industry average. The companys head count stood at 20 as of 31st March 2024.