Fertilizers & Chemicals Travancore Ltd Management Discussions.

Industry Structure and Development

The Fertilisers And Chemicals Travancore Limited (FACT) was incorporated in 1943. In 1947, FACT started production of Ammonium Sulphate with an installed capacity of 10,000 MT per annum at Udyogamandal, near Cochin. In the year 1960, FACT became a Kerala State PSU and on 15th August, 1962, Government of India became the major shareholder.

From a modest beginning, FACT has grown and diversified into a multi-division/multi-function Organisation with basic interest in manufacture and marketing of Fertilisers and Petrochemicals, Engineering Consultancy and Design and Fabrication and Erection of Industrial Equipments.

FACTs mission is to be a significant player in Fertilisers, Petrochemicals and other business such as Engineering and Technology services.

FACTs objectives are: a. To produce and market Fertilisers & Caprolactam and other products efficiently and economically, besides achieving a reasonable and consistent growth. b. Turnaround of the CPSE by all efforts. c. To effectively manage the assets and resources of the company to ensure a reasonable return on investment d. To focus on cost reduction and technology upgradation in order to become competitive in its line of business. e. To constantly innovate and develop new products and services to satisfy customer requirements. f. To invest in new business lines, where profit can be made on a sustainable basis over the long term. g. To provide services to the farming community by organizing technical training, soil testing and other productivity improvement services in agriculture.

Performance highlights during the Year 2018-19 Udyogamandal Complex:

During the year 2018-19 Udyogamandal Complex produced 129122 MT of Factamfos, (NP 20:20:0:13) and 141754 MT of Ammonium Sulphate. During the financial year 2017-18 production of Factamfos and Ammonium Sulphate were 178873MT and 180178 MT respectively.

Nutrient wise the production during 2018-19 was 54175 MT of N and 25824 MT of P2O5 as against 72891 MT of N and 35775 MT of P2O5 during the previous year.

Cochin Division: During the financial Year 2018-19, Cochin Division produced 505240 MT of Factamfos 20:20 as against 483100 MT during the financial year 2017-18.

The production of Nutrient Nitrogen and Nutrient P2O5 during the year was 101048 MT each as against 96620 MT during the last year. During the year 2018-19, the division produced 293000 MT of Sulphuric Acid and 41900 MT of Phosphoric Acid as compared to 263850 MT of Sulphuric Acid and 29300 MT of Phosphoric Acid in the year 2017-18.

Marketing Division: During the financial year 2018-19 the Fertiliser sales was 7.81 lakh MT as against 8.67 lakh MT during the previous year. Sale of Factamfos during the year was 620552 MT as compared to 670710 MT during the year 2017-18. The sale of Ammonium Sulphate during the year was 136645 MT as compared to 168070 MT during the previous year.

FEDO: During the financial year 2018-19, FEDO focused on execution of major jobs for its external and own clientele and achieved substantial progress in completion of major milestones laid out in the spectrum of design, engineering, procurement & inspection fronts as well as in the Projects & Construction-Commissioning phases in the Engineering Consultancy/EPMC business domain, such as commissioning of Crude Oil Tank for BPCL- Kochi Refinery and Completion of Residential Township for BPCL-Kochi Refinery. FEDO attained recertification for ISO 9001:2015 from M/s DNV in the year 2018 in the field of Design and detailed engineering consultancy.

The turnover (including own division jobs) of FEDO for the year 2018-19 was Rs. 22.69 crore as against Rs. 17.59 crore in 2017-18. During the year 2018-19 FEDO received new orders for a value of Rs. 14.75 crore as compared to Rs. 11.60 crore during the year 2017-18.

FEW : The turnover of FEW for the year 2018-19 was Rs. 10.93 crore as against Rs. 9.82 crore during the year 2017-18. During the year 2018-19, FEW has bagged orders worth Rs. 13.74 crore compared to

Rs. 6.80 crore during the year 2017-18.

During the financial year 2018-19, FEWs order position from external clients has made a quantom jump. The percentage of jobs from external clients has risen to around 75% of the total value of jobs received during the year. FEW expect to increase the turnover during the financial year 2019-20 and also generate profits. There is a steady demand from the process industry for pressure vessels and heat exchangers for replacements as well as for capacity expansion. FEW is charting out plans for associating with Cochin Shipyard Limited with a prospect to achieve more orders. FEW has already ventured into the field of fabrication of Barges for inland cargo transportation . FEW is also proposing to install a higher capacity CNC drilling machine which will help drilling of higher size tube sheet and plates. Both FEW and FEDO have now jointly started business development activities for creating synergy.

Opportunities & Threats

Opportunities

a) Premium product in the complex fertilizer segment containing Sulphur

b) Extensive Marketing network in Southern India

c) Substantial infrastructure facilities

d) Operational efficiency and high capacity utilisation of plants.

e) Scope for expansion and diversification

f) Availability of land resources for generating additional revenue

g) Availability of RLNG at Kochi Threats

a) High interest and finance charges.

b) Volatility in the prices of raw materials and feedstock.

c) Exchange rate variations

d) Over dependence on import of raw materials and the logistics

Segment-wise or Product-wise Performance

Details of Unit-wise/Product-wise performance is furnished separately in the Annual Report.

Risk and Concern

a) Lack of level playing field in the price of RLNG/LNG

b) Non-operation of Caprolactam plant due to economic reason

c) High fixed cost

Key Financial Ratios

Key financial ratios of the Company for the financial year 2017-18 and financial year 2018-19 are given below

Particulars 2018-19 2017-18
1 Debtors Turn Over Ratio 0.20 0.20
2 Inventory Turn Over Ratio 3.18 3.71
3 Interest Coverage Ratio 1.58 0.60
4 Current Ratio 1.07 0.95
5 Debt Equity Ratio -2.60 -2.11
6 Operating Profit Margin 0.23 0.10
7 Net Profit Margin 0.08 -0.07

Since the networth of the Company is negative, other ratios are not relevant to FACT

HUMAN RESOURCES DEVELOPMENT

1. Industrial Relations

The Industrial Relations situation was generally peaceful during the year 2018-19. There were no issues connected with Industrial Relations in the Company. There was no stoppage of work affecting normal operations in the Company. The relations between the Management and the Trade unions, and Officers Association were cordial and the year witnessed whole hearted support in all areas of activities of the Company.

2. Human Resources

Human resources functions in the Company were effective during the year. The Company has recruited 29 Management Trainees, 9 layer 1 Officers and 81 Non-Managerial employees to meet the shortage in critical areas of operation during 2018-19. Normal promotions were also effected during the year. A work study was conducted by the Kerala State Productivity Council to assess the requirement of manpower in the Company. Based on the report of the work study steps are being taken to recruit employees in various categories in the Company.

3. Development of SC&ST.

Employment of Reserved categories as on 31.03.2019 is given below:

Total SC ST OBC Others
No of Employees 1769 214 49 628 878
Percentage of total employees 12.00 2.78 35.5 49.6

Steps taken for the welfare of SCs/STs:

SC/ST Employees association are functioning in the Company. SC/ ST officers are adequately represented in all the interview boards and Management ensures their representation in other associations like FACT Sports Association, Welfare Fund Advisory Committee, Canteen Managing Committee etc. Reservation of SC/ST employees is ensured in recruitment and Promotions as per Government directives.

SC/ST Grievance Cell

SC/ST Grievance cell is functioning at corporate level comprising the Chairman, who is also Chief Liaison Officer for matters pertaining to reservation of SC/ST and their grievances in the Company, Liaison officers of various divisions and two officers each belonging to SC & ST. The grievances received are examined in detail by the Cell and appropriately redressed. The employee concerned is informed of the decision/action taken on the grievances by the Grievance cell. Due consideration is given for allotment of residential quarters and also for nomination of SC/ST employees for training courses.

Training

Inservice Training to company employees is arranged through the training department. Maximum representation is ensured for SC/ST employees to attend in house training programme. 41 SC employees and 10 ST employees had undergone training during the year 2018-19. For engagement of Apprentices under the Apprentices Act, representation as per rules is provided. The representation for SC/ ST in Apprentices as on 31.03.2019 is as follows:

Total No of Apprentices SC ST
152 14 2

4. Allotment of Residential Quarters

Due consideration is given for allotment of Residential Quarters to SC/ST employees. About 40% of the quarters are presently occupied by SC/ST employees. Details of quarter allotted to SC/ST employees as on 31.03.2019 is furnished below:

Total Number of Employees
Occupying Quarters SC ST
426 140 33

5. Reservation of Dealership

FACT is having 6273 dealers for distribution of fertilizers. FACT is encouraging SC/ST category dealers to apply for the dealership in accordance with policy of Department of Fertilisers, Government of India.

Total number of dealers and the representation of SC/ST in dealership as on 31.3.2019 is given below.

State Total Dealers SC ST
1 Kerala 2909 193 26
2 Tamil Nadu 1097 54 0
3 Karnataka 1294 36 23
4 Telangana 450 6 8
5 Andhra Pradesh 501 3 1
6 Pondicherry 22 1 0
Total 6273 293 58

Official Language

FACT gives high priority and importance to the implementation of the Official Language Act & Rules and other instructions given by the Government of India from time to time. Regular meetings of the Official Language Implementation Committee are organized under the chairmanship of Chairman and Managing Director and the progress in the use of official language is reviewed in the meeting. In order to create awareness among the staff in the use of official language, FACT is regularly conducting Official Language Seminar and various Hindi competitions. As part of the Hindi implementation, the Company is regularly organizing Hindi workshops and other programmes. Every year Hindi Fortnight is celebrated with various competitions for the employees of the company and winners are given awards/prizes . In order to make enthusiasm for doing work in Hindi, Company gives cash prizes for the employees who are doing their work in Hindi in every year. The cash prizes and trophies are awarded to the students (son/daughters of the employees) who receive the highest marks in Hindi in the SSLC and Plus-two-Examinations in every year.

Public procurement policy of Micro and Small enterprises (MSEs) Order 2012

During the financial year 2018-19, the Company has procured material worth Rs 19.16 crore from MSEs. Most of the feed stocks and materials procured by FACT are not available with the MSEs.

Pollution Control Activities

All Fertiliser Plants in Udyogamandal Complex and Cochin Division are certified for ISO 14001:2015, which always gives top priority to ensure clean air and better living environment to the inhabitants in and around the factory.

The Effluent Treatment Plant and Emission Control Facilities were kept in operation along with the production plant throughout the year. Treated liquid effluents and gas emission discharged from plants conformed to the Standards prescribed by the Kerala State Pollution Control Board throughout the year.

On the environmental front, Udyogamandal Division could maintain all effluent parameters within limits as specified by the statutory authority. As per the agreement between FACT and Kerala Enviro Infrastructure Limited (KEIL), the accumulated stock of hazardous catalysts and Sulphur muck were sent to KEIL

wastes viz. spent V2O5

for final disposal.

Sludge generated from Fertilizer Effluent Treatment Plant is categorized as Hazardous waste under Hazardous waste Management rules. From periodical analysis, it was observed that the sludge does not contain any components hazardous in nature. KSPCB approved consultant studied and their study report was presented before KSPCB Technical Review Committee and KSPCB approved in principle that the ETP sludge is non hazardous and it is to be converted in to value added products.

As directed by Kerala State Pollution Control Board, the uploading of emission data from Sulphuric Acid Plant stack at Central Pollution

SO2

Control Board (CPCB) website was started in the year 2014-15. In addition to the above, the data regarding pH and flow of the effluent let out are also uploaded to the website of CPCB.

Action has been initiated for the procurement of online analysers for particulate matter & fluoride in NP & PAP stacks, Ammonical Nitrogen & Fluoride in Channel II effluent outlet also.

Construction of Gypsum Stack as directed by CPCB guidelines is in progress as per schedule.

Awards and recognitions

1. FACT Cochin Division was adjudged the winner of "Outstanding Safety Performance" Award in the category of large scale chemical industries for the year constituted by National Safety Council (Kerala Chapter)

2. FACT Udyogamandal Complex received "Sreshta Suraksha Puraskar" from National Safety Council, Kerala Chapter for outstanding safety performance in the category of Very Large Chemical Factories

3. FACT Udyogamandal Complex received Safety Award from Factories and Boilers, Kerala in Very Large Chemical Factories Categories.

4. During the Joint Hindi Fortnight Celebration- 2018 held under the auspices of the Kochi Town Official Language

Implementation Committee, Company secured the second prize for the implementation of the official language and the third prize for Official language magazine "Rashtravani".

Roadmap for sustainability

The Company plans to utilize part of the revenue generated from the sale of land for implementing essential capital jobs with a view to enhance the reliability of production plants and compliance with changing statutory requirements. Company also plans to invest in critical renovation and modernizing schemes for debottlenecking raw material and product handling facilities. The main capex projects under the consideration of the Company are as follows.

1. 1000 TPD Factamfos plant at FACT Cochin Division at Ambalamedu

2. Additional Ammonia Storage facility at Cochin Division at Ambalamedu

3. Additional Phosphoric Acid storage facility at Willingdon Island

4. Additional Sulphuric Acid storage facility at Cochin Division

5. Construction of New barge for transportation of Ammonia

Outlook for the future

The Financial Restructuring proposal submitted by the Company is under the consideration of Department of Fertilisers. The Company expects an early implementation of the same.

Implementation of the Financial Restructuring along with the Capital projects would result in turn around the Company in the near future.

(Kishor Rungta)
Place : Udyogamandal Chairman And Managing Director
Date : 31-07-2019 DIN-00231106