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 45000 MT per annum and Sulphuric Acid in 1993 with a capacity of 33000 MT 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 25567.80 MT of Green SSP during the year 2025-26 against the targeted production of 46000 MT which is 55.58% of the targeted production and 38.74% of the installed capacity of 66000 MT. The company has dispatched 25422.10 MT during the year. Quantum-wise production of SSP was increased as compared to previous year and dispatches of SSP is decreased 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 14393.17 MT of Sulphuric acid during the year 2025-26 against the installed capacity of 33000 MT which is 43.62% of the installed capacity. The captive consumption of the Sulphuric Acid for production of SSP is 7270.91 MT and the sale of Sulphuric Acid was 14154.858 MT including trading. Quantum vise sale of Sulphuric acid has decreased during the year.

4. 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 of India. 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 ensure adequate 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) is announced 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.

(a) 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 quality rock 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.

(b) Availability of Raw Material:

Rock Phosphate is imported from various countries by different dealers. There is a problem with the non-availability and hike of Prices of Raw Material due to war conditions among countries.

(c) 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. 7263/MT for SSP and Rs. 7763/MT for Zincated SSP till 30-09-2025 and then 7408/MT for SSP and Rs. 7908/MT for Zincated SSP till 31.03.2026.

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, 2026, are as under: Revenue from operation increased by 4.40 % to Rs. 6823.78 Lakhs. PBDIT increased by 15.77 % to Rs. 242.69 Lakhs. Profit before tax increased by 51.51 % to Rs. 54.65 Lakhs. Net profit increased by 61.30 % to Rs. 39.18 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, and enhanced 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 including leadership 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 15 as of 31st March 2026.

SECRETARIAL AUDIT REPORT For the Financial Year Ended March 31, 2026

[Pursuant to section 204(1) of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

To, The Members, Asian Fertilizers Limited Flat No. 202, Preet Garden 3A/172, Azad Nagar, Kanpur 208002, U.P.

I have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Asian Fertilizers Limited (hereinafter called as “the Company”). The Secretarial Audit was conducted in a manner that provided us with a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion thereon.

Based on our verification of the books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, I hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on March 31, 2026 (“Audit Period”), complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter.

I have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on March 31, 2026 according to the provisions of: (i) The Companies Act, 2013 (“the Act”) and the rules made there under;

(ii) The Securities Contracts (Regulation) Act, 1956 (“SCRA”) and the rules made there under; (iii) The Depositories Act, 1996, and the Regulations and Bye-laws framed there under; (iv) Foreign Exchange Management Act, 1999, and the rules and regulations made there under to the extent of Foreign Direct Investment, Overseas Direct Investment, and External Commercial Borrowings (Not applicable to the Company during the Audit Period). (v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (“SEBI Act”), as amended from time to time: (a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; (b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015; (c ) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (Not applicable to the Company during the Audit Period); (d) The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (Not applicable to the Company during the Audit Period); (e ) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (Not applicable to the Company during the Audit Period); (f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with the client (Not applicable to the Company during the Audit Period); (g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 (Not applicable to the Company during the Audit Period); (h) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 2018 (Not applicable to the Company during the Audit Period); (i) The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”).

I further report that having regard to the compliance system prevailing in the Company and as certified by management and on examination of the relevant documents and records in pursuance thereof, on a text check basis, the Company has complied with the law applicable specifically to the Company named as under:

(a) The Boilers Act, 1923;

(b) The Environment Protection Act, 1986, and rules framed thereunder; and

(c) The National Green Tribunal Act, 2010, and other acts and rules related thereto. I have also examined compliance with the applicable clauses of the following: I. Secretarial Standards issued by the Institute of Company Secretaries of India (as amended from time to time); II. The Listing Agreement as entered into by the Company with Stock Exchange(s).

During the Audit Period the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above subject to the following observations: i) The company has provided the facility of Demat of the shares to all the shareholders. However, the process of Demat of shareholding including promoters is in progress; ii) Compliance strictly needs to adhere to the terms of the provision of regulations 3(5) and 3(6) of SEBI (Prohibition of Insider Trading) Regulation 2015 regarding the Structured Digital Data Base.

I further report that the Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors, and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice was given to all Directors to schedule the Board Meetings, agenda, and detailed notes on the agenda was sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

All decisions at the Board Meeting and Committee Meeting have been carried out without dissent, as recorded in the minutes of the meetings of the Board or Committee of the Board, as the case may be.

I further report that there exist systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations, and guidelines.

I further report that the trading in securities of the Company has been suspended since 2002 due to some penal provisions. However, the Company has complied with all the pending compliances and the application for revocation of suspension has been filed and is in process.

I have relied on the representations made by the Company and its officers for systems and mechanisms formed by the Company for compliance under other applicable Acts/Laws/Regulations to the Company.

I further report that, during the audit period there were no instances of:

(i) issue of public/right / Preferential Issue of shares/sweat equity, debentures etc; (ii) Redemption / Buyback of securities; (iii) major decisions were taken by the members in pursuance to section 180 of the Act; (iv) Merger/amalgamation / re-construction, etc; (v) Foreign technical collaboration.