gujarat alkalies chemicals ltd share price Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

AN OVERVIEW OF ECONOMY-INDUSTRY STRUCTURE AND DEVELOPMENTS GLOBAL ECONOMY

India is estimated to be the fastest growing economy at 6.9 percent in 2023 and 6.3 percent in 2024 as per IMF latest estimates. As per IMFs World Economic Outlook (WEO) April 2023, global growth is projected to slow down from an estimated 3.4 percent in 2022 to 2.8 percent in 2023, amid ongoing geopolitical conflicts, accompanying sanctions and resulting international spillovers through global commodity prices, trade and financial linkages, labour supply etc. For 2023, inflation is projected at 7.00 percent in advanced economies and 5.87 percent in emerging market and developing economies.

Following more than three years of pandemic, war between Russia-Ukraine has led to high commodity prices, adding to supply disruptions, increasing food insecurity, exacerbating inflation, contributing to tighter financial conditions, magnifying financial vulnerability, and heightening policy uncertainty growth in emerging market and developing economies (EMDEs) this year has been downgraded to 2.8 percent. Despite the negative shocks to global activity in 2023, there is essentially no rebound projected next year. Global growth is forecast to edge up only slightly to a still-subdued 3 percent in 2024, as many headwinds in particular, high commodity prices and continued monetary tightening are expected to persist. Moreover, the outlook is subject to various downside risks, including intensifying geopolitical tensions, growing stagflationary headwinds, rising financial instability, continuing supply strains, and worsening food insecurity.

INDIAN ECONOMY

The growth in GDP has touched the $3.75 trillion-mark in 2023 so far from around $2 trillion in 2014 and its position as the fifth largest economy in the world. At current prices, Indias GDP ranks above the UK, France, Canada, Russia, and Australia.

Indias overall exports projected to scale new heights, growing at 13.84 % during FY 2022-23 over FY 2021-22 to achieve USD 770.18 billion worth of exports. Merchandise exports have registered highest ever annual exports of USD 447.46 billion with 6.03% growth during FY 2022-23 surpassing the previous year (FY 2021-22) record exports of USD 422.00 billion. Services export lead the overall exports growth and projected to set a new record annual value of USD 322.72 billion with growth rate at 26.79 percent during FY 2022-23 over FY 2021-22.

The Government of India has introduced Production-Linked Incentive (PLI) Scheme in April 2020. The Government is considering introduction of PLI Scheme for the chemicals and petrochemical sectors. The government also aims India to be energy independent by 2047 and achieve net zero by 2070.

Indias proximity to the Middle East, the worlds source of petrochemicals feedstock, enables it to benefit on economies of scale.

The Indian chemicals industry is expected to reach US$ 304 billion by 2025. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute US$ 383 billion to Indias GDP by 2030.

An investment of Rs. 8 lakh crore (US$ 107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025. The domestic demand for chemicals and petrochemicals (C&PC) is expected to nearly triple and reach $ 1 trillion by 2040. The C&PC sector is growing at a rate of 1.2-1.5 times the GDP. This provides a huge opportunity for growth of the industry.

During FY 2023-24, the Indian chlor-alkali industry began with signs of declining international prices and high imports on west coast. However, the expectation of an overall strong economic growth could provide some respite to chlor-alkali industry. The chemical industry is expected to contribute US$ 300 billion to Indias GDP by 2025. India holds a strong position in exports and imports of chemicals at a global level and ranks 14^th in exports and 8^th in imports at global level.

INDIAN CHLOR-ALKALI INDUSTRY AT A GLANCE

At present, there are 34 active Chlor-Alkali Units in India. The production of Caustic Soda during the FY 2022-23 has been 45 lacs MT as against the total installed capacity of about 59.39 lacs MTPA (as on 31.03.2023) i.e., capacity utilization of approx. 76%. During the same period GACL has produced 4.75 lacs MT against the installed capacity of 4.12 lacs MTPA.

The products of Chlor-alkali industry are the basic raw materials for various industries like Alumina, Paper & Pulp, Soaps & Detergents, Dyes, Pharmaceuticals, Water Treatment chemicals, Pesticides and other Agrochemicals etc.

The additional capacity expansion during FY 2022-23 was approx. 8.99 Lakhs MTPA in Western India, by additional new facilities as well as expansion of existing Plants (Source: AMAI).

The Chlorine Supply of approx 120 MTPD to a major customer through pipeline at Vadodara Complex has eased the day-to-day concern of Chlorine disposal and also helped in maximizing Caustic Soda production. This has also helped in better realization of Chlorine price from the market. Coupled with this factor, Chlorine demand in various other sectors was also satisfactory and has resulted into achieving more than 100% capacity utilization at our Dahej & Vadodara Plants.

We are a multi-product Company, having more than 35 products in our basket, yet the major revenues are coming from Caustic Soda group and therefore market scenario of Caustic Soda and Chlorine is of utmost importance to us.

The installed capacity of Caustic Soda in the country is about 59.39 lacs MtPa as on 31.03.2023 as compared to 50.40 lacs MTPA as on 31.03.2022. Now, all the medium & large-scale Chlor-Alkali units have converted their plants to Membrane Cell Technology. The Membrane Cell process is energy efficient, as the power requirement is much less i.e. in the range of 2150-2200 kwh/MT, as compared to Mercury Cell Technology, where it is around 3150-3300 kwh/MT. GACL has the advantage of having its entire production from Membrane Cell since long.

ABOUT GACL

Your Company was established in 1973 and over a period of time, it has emerged as one of the largest producers of Caustic Soda in India with present installed production capacity of 5,85,750 lakhs MTPA of Caustic Soda as on 31^st March, 2023 and enjoys the economies of scale. Your Company has about 20% share in the domestic Caustic Soda market.

Your Company has implemented elaborate Environment Management System (EMS), Quality Management System (QMS), Occupational Health & Safety management System (OH & S) & Energy Management System (EnMS) and has embarked on continual improvement. Your Company has achieved ISO 9001:2015, ISO 14001:2015, 45001: 2018 and ISO 50001: 2018 Integrated Management System Certificates.

The Quality Policy of your Company reflects its emphasis and commitments. Since inception, your Company has from time to time, expanded its operations in Chlor-Alkali Sector and also diversified into several higher end products, through forward & backward integrations. GACL was the first Indian Company to replace the Mercury Cell Technology with environment friendly and energy efficient Membrane Technology way back in the year 1989.

GACL has always ensured upgrading and adapting to eco-friendly and green technologies while it ensured the optimum capacity utilization during the Financial Year 202223 at Vadodara Complex. Your Company has achieved capacity utilization of 100% and more in some of the products viz. Hydrogen Peroxide (110.7%), Phosphoric Acid (108.5%) and Sodium Chlorate Granules (106.8%). Despite substantial expansion during the year the capacity utilization for Caustic Soda Lye has remained at 95.2% of expanded capacity on pro-rata basis. Similarly, for Chloromethanes products, after expanding the overall installed capacity by 2.9 times, the aggregate capacity utilization remained at 62.1%. The capacity utilization of Poly Aluminum Chloride remained at 98.3%, Potassium Carbonate at 97.7% and Anhydrous Aluminum Chloride at 90.7%.Being a chemical manufacturing Company, GACL carries its passion for protecting the environment at every stage of its operations, keeping in view the interests of Customers, Shareholders, Employees, Society, other Stakeholders and Mother Nature.

Your Companys products basket comprises of Caustic Soda (Lye, Flakes/ Prills), Liquid Chlorine, Hydrochloric Acid, Chloromethanes, Hydrogen Peroxide, Anhydrous Aluminum Chloride, Caustic Potash (Lye & Flakes), Potassium Carbonate, Aluminium Chloride, Phosphoric Acid, Chlorinated Paraffin, Poly Aluminium Chloride (various grades), Chlorotoluene, Sodium Chlorate etc. The major revenues are derived from Caustic Soda Group and therefore, Caustic Soda and Chlorine market scenario has a wide impact on your Companys performance.

Your Companys products are used by various industries viz. Textiles, Pulp & Paper, Soaps & Detergents, Alumina, Water Treatment, Petroleum, Plastics, Fertilizers, Pharmaceuticals, Agrochemicals, Plant Protection, Dyes & Dyes Intermediates, refrigeration gases, epoxy etc. and it has marked its presence across the globe even against stiff international competition by exporting its world class products viz. Caustic Soda Flakes, Caustic Soda Prills, Potassium Carbonate, Potassium Hydroxide Flakes, Hydrogen Peroxide, Liquid Chlorine, Phosphoric Acid, Aluminium Chloride, PAC, Hydrochloric Acid and CPW to Europe, West Asia, South East Asia, Africa, Middle East/Far East, SAARC countries etc. Production of Caustic Soda by electrolysis process is highly power intensive and your Company devised a sustainable strategy to meet its growing energy demands. Besides 90 MW Gas based Captive Co-generation Power Plant and participation in a 145 MW Joint Captive Gas based Power Plant of GIPCL, your Company has taken major initiative for green energy by setting up Wind Farms for a total installed capacity of 171.45 MW as on 31^st March 2023. Your Company has already installed 35 MW of Solar Power Plant. With this, the aggregate renewable energy capacity is 206.45 MW including 171.45 MW of Wind Power capacity. Your Company has also installed floating Solar Power Plant having capacity of 640 kw and Solar Rooftop installations having 220 kw Solar Rooftop installations at Dahej complex and 563 KW Solar Rooftop Power Plants installed at Vadodara Complex.

BUSINESS, OPERATIONS & FINANCIAL PERFORMANCE

The total production (excluding power generation) has increased by 5.46% to 18,12,758 MT during the Financial Year 2022-23 from 17,18,835 MT in previous year.

The Production of Caustic Soda Lye, Caustic Soda Flakes, Caustic Soda Prills, Chloromethanes, Potassium Hydroxide, Potassium Carbonate, Hydrogen Peroxide, Phosphoric Acid, Poly Aluminium Chloride, Chlorinated Paraffin Wax and Sodium Chlorate Granules has increased during the Financial Year 2022-23 as compared to the previous year. However, the production of Caustic Potash Flakes, Aluminium Chloride, Stable Bleaching Powder, Chloro Toluene Products and Anhydrous Sodium Sulphate has decreased during the Financial Year 2022-23 as compared to the previous year.

During the Financial Year 2022-23, your Company has achieved Net External Sales of Rs.4,401.86 Crores on standalone basis as against Rs.3,683.40 Crores in the previous year registered a growth of 19.51%.

The Other Operating Income, for the financial year 2022-23 had been Rs.114.64 Crores as against Rs.75.33 Crores in the previous year and the Other Income decreased to Rs.42.15 Crores from Rs.46.39 Crores in the previous year. The Other income includes Rs.19.30 Crores towards interest income and Rs.18.80 Crores towards dividend income.

The Company could achieve Earning Per Share of Rs.78.39 as on 31.03.2023, as compared to Rs.76.53 as on 31.03.2022. Cash Earning Per share was Rs.154.86 as on 31.03.2023, as compared to Rs.139.77 as on 31.03.2022. Book value of Share has improved to Rs.683.04 per share as on 31.03.2023, as compared to Rs.623.51 per share as on 31.03.2022. The Return on Capital Employed achieved at 14.45% as on 31.03.2023, as compared to 15.15% as on 31.03.2022. During the year total debt level has marginally increased to Rs.595.81 Crores as on 31.03.2023 as compared to Rs.593.34 Crores as on 31.03.2022, which resulted into Debt : Equity ratio to 0.12 : 1 as on 31.03.2023, as compared to 0.13 : 1 as on 31.03.2022.

The overall Raw Material expenses have increased to Rs.1,507.84 Crores during the financial year as compared to Rs.1,278.54 Crores for the previous year, mainly due to increase in production of Caustic Soda Lye, Caustic Soda Flakes, Caustic Soda Prills, Chloromethanes, Potassium Hydroxide, Potassium Carbonate, Hydrogen Peroxide, Phosphoric Acid, Poly Aluminium Chloride, Chlorinated Paraffin Wax and Sodium Chlorate Granules as well as increase in procurement cost of major Raw Materials like Salt, Potassium Chloride, Heavy Normal Paraffin, Aluminium Ingots, Alumina Trihydrate Powder, Rock Phosphate, Amyl Alcohol and Natural Gas. Net External Electricity charges have increased by 45.05% to Rs.885.01 Crores during the financial year from Rs.610.14 Crores in the previous financial year mainly due to increase in power purchased from external sources.

The cost of Fuel, Natural Gas and Water charges increased to Rs.233.43 Crores during the financial year from Rs.128.91 Crores in the previous financial year due to increase in procurement cost of Natural Gas. Employees remuneration has decreased to Rs.252.40 Crores during the financial year from Rs.271.93 Crores in the previous financial year mainly due to Provisioning requirements as per Ind AS-19. Depreciation and amortization expense has increased to Rs.276.09 Crores during the financial year from Rs.197.78 Crores in the previous year due to commissioning of Chloromethanes, Hydrazine Hydrate, Caustic Soda Expansion and Tank Farm at Dahej during current financial year. Other expenses have increased by 8.44% to Rs.521.57 Crores during the financial year from Rs.480.97 Crores in the previous financial year. The Finance cost has increased to Rs.19.46 Crores during the financial year from Rs.6.15 Crores in the previous financial year mainly due to charging of ECB Loan interest in revenue due to commissioning of plants during current financial year.

EBITDA has increased to Rs.1,156.74 Crores in Financial Year 2022-23 from Rs.1,032.56 Crores in the previous year, registering a growth of 12%. The Profit after finance cost but before depreciation and amortization (Cash Profit) has increased to Rs.1,137.28 Crores in Financial Year 202223 from Rs.1,026.41 Crores in the previous year. Your Company has achieved Profit Before Tax of Rs.861.19 Crores for the Financial Year 2022-23 as compared to Rs.828.63 Crores of the previous year.

The Profit After Tax for the year increased to Rs.575.70 Crores as compared to Rs.561.98 Crores of the previous year.

At Consolidated Level, EBITDA has decreased by 3.85% to Rs.990.65 Crores during the year 2022-23 from Rs.1,030.34 Crores in previous year. Profit Before Tax has decreased by 15.89% to Rs.695.10 Crores during the year 2022-23 from Rs.826.41 Crores in previous year. Profit After Tax has decreased by 26.82% to Rs.409.62 Crores during the year 2022-23 from Rs.559.76 Crores in previous year.

KEY FINANCIAL RATIOS

Key Financial Ratios (Standalone) for the Financial Year ended 31^st March, 2023, are provided here-below:

Ratio	Unit	FY 2022-23	FY 2021-22	% Inc. / (Dec.)
Debtors Turnover	Times	14.99	12.45	20.40
Inventory Turnover	Times	7.85	9.10	(13.74)
Interest Coverage	Times	59.43	168.00	(64.63)
Current Ratio	Times	1.68	1.49	12.75
Debt Equity Ratio	Times	0.12	0.13	(7.69)
Operating Profit Margin	%	26.28	28.03	(175)
Net Profit Margin	%	13.08	15.26	(2.18)
Return on Net Worth	%	12.00	12.97	(0.97)

RESEARCH AND DEVELOPMENT

Research and Development is an essential arm for any industry in todays business and generation of new knowledge. Our Companys R&D plays a critical role for development/ improvement in process as well as for development of new products & import substitutes, Energy conservation & water conservation through improved water treatment, recycle & reuse of water.

Companys R&D with collaboration of CSIR-IICT has developed Eco-friendly technology for manufacture of Hydrazine Hydrate for which joint patent is granted by US and Indian Patent office. Based on this technology commercial scale plant for manufacture of 10000 MTA of Hydrazine Hydrate is put up by the Company, which has become operational.

R&D is working on alternate source of imported/proprietary raw materials/chemicals likes 2- Methyl Cyclohexyl Acetate, Iso Amyl Alcohol, Alamine -336, Stabilizers in Hydrogen Peroxide, Palladium Catalyst, etc., which is used in existing plants. Our R & D is also working on regeneration of spent catalyst, spent raw martials, waste water treatment for monitory as well as environmental benefits. During the year under review, Indian patent office have granted patent of Hydroxy Propyl Methyl Cellulose, in which we are using our two products as raw materials.

EXPANSION AND DIVERSIFICATION

As a part of its ambitious growth plan, the Company had taken up various projects, which included adding a new product(s) in the product portfolio as well as expanding the current product lines by putting up additional capacities through new plants. These projects included (a) 105,000 TPA Chloromethanes Plant at Dahej at new a complex (b) 10,000 TPA Hydrazine Hydrate Plant at existing Dahej complex (c) Caustic Soda expansion from 259,050 TPA to 432,300 TPA at existing Dahej complex and (d) 33,780 TPA Purified Phosphoric Acid (Food Grade Phosphoric Acid) Project at existing Dahej complex. Besides, a new green field project for manufacturing Caustic Soda integrated with a captive thermal power plant was also taken up as a joint venture with NALCO.

We are pleased to inform that all these new plants are now operative commercially. The Chloromethanes Plant was commissioned in August 2022, the Hydrazine Hydrate Plant was commissioned in September 2022, the Caustic Soda expansion Plant was commissioned in September 2022 and the Purified Phosphoric Acid Plant was commissioned in April 2023. Though, the Joint venture plant for Caustic Soda was commissioned at the end of previous Financial Year 2021-22, it was stabilized with progressive ramping of the capacity during the Financial Year 2022-23.

The Company had its proud moments recently, on 10^th October 2022, when four of its projects viz. Chloromethanes Plant, Hydrazine Hydrate Plant, Caustic Soda expansion plant and the Caustic Soda Plant in joint venture with NALCO were dedicated to the Nation by our Honble Prime Minister. As mentioned by Honble Prime Minister in his address then, these projects would also contribute towards savings in precious foreign exchange for the country by cutting down imports with the products manufactured at these plants.

The Company also celebrated the dispatches of 1^st consignments of commercial products viz. Hydrazine Hydrate, an import substitute product manufactured using indigenously developed technology and Purified Phosphoric Acid, also an import substitute product, on 8^th July 2023 in the presence of stake holders of the Company and Director of CSIR-IICT, Hyderabad, who had been Companys partner in development of patented production process (in India and USA) for Hydrazine Hydrate.

The Company, as a long-term strategic measure, to enhance its in-house chlorine consumption, has planned to put-up a 30,000 TPA Chlorotoluenes Project at Dahej to produce benzyl chloride, benzaldehyde and benzyl alcohol, which is planned to be made operational during the Financial Year 2024-25.

In order to promote Green Technology, and to meet the Solar Renewable Purchase Obligations, the Company had installed in the past 35 MW of Solar Power Plant and 171.45 MW of Wind Power Plants, with an aggregate renewable energy capacity of 206.45. To these the Company had later added roof-top solar installations at Dahej and Vadodara complex of 220 KW and 560 KW capacities respectively. In addition, a 640 KW floating solar plant was also installed at Dahej. With all these, the Companys aggregate renewable power capacity installation for captive use stands at 207.87 MW. The captive use of the power from these installations has been providing benefits of lower power cost to the Company for its power intensive operations.

The discussions with NTPC REL, a wholly owned subsidiary of NTPC Ltd., for sourcing 100 MW of renewable power on round the clock basis is at advance stage of finalization. The joint initiatives with NTPC REL, for synthesizing green chemicals for captive use viz. methanol and ammonia using hydrogen and CO2 made available by the Company, are also at the stage of techno-economical feasibility studies.

As a step towards contributing to the drive for ‘Atmanirbhar Bharat through the mission launch by the Honble Prime Minister for achieving 20% ethanol blending in petrol, the Company is working with GAIL India Ltd. for setting up a 500 KLD Bio-ethanol plant in Gujarat. The technoeconomical feasibility study has been completed and is being reviewed prior to proposing for investment decision. In the meantime, the steps for identifying and acquiring suitable land are initiated.

As a preparation for taking up the next quantum leap on its growth trajectory, the Company has envisioned several actions for taking up new initiatives in the next five years for value addition to its current products, expansions, forward integration, backward integration, diversification etc., with a broad objective to increase its annual turnover to over Rs. 10,000 crores by 2028. These plans are currently at various stages of conception / evaluation and, based on their fitting with the companys overall strategy for growth, would be taken up progressively for implementation, as appropriate, over the next 3 to 4 years.

The Company looks forward to continuing its growth journey in the years to come.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The operations of your Company are under one segment only i.e., Chemical Manufacturing. The total production (excluding power generation) of your Company has increased by 5.46% to 18,12,758 MT during the Financial Year 202223 from 17,18,835 MT in previous year.

Product-wise production details are given in back side of the cover page of the Annual Report. Further, the quantitative product-wise data relating to production and sales for last ten years are also given in the Annual Report.

OPPORTUNITIES & THREATS, RISKS & CONCERNS

The strengths of your Company are economies of scale, state of the art eco-friendly technologies, extensive usage of renewable energy, integrated downstream plants, strong network for Marketing and Distribution, In-house Research and Development facilities, proximity to major raw material source and markets etc. Economical power supply has remained a major area of concern for your Company, during the year under review, the weighted average cost of electrical power continued remaining high because of higher fuel cost (natural gas & coal) and reduced availability of wind power, leading to increased dependence on grid power sourced from DISCOMs.

Your Company has been following business plan for growth and therefore, continued sustaining operating performance. Your Company has continued to concentrate both on enhancement of top line and bottom line. The major factors contributing to the profitability of your Company during the year under review, were increase in Net External Sales, Increase in Other Operating Income, decrease in Employee Benefits expenses and decrease in Job Work / Processing Charges. Increase in raw material consumption, natural gas consumption, External Electricity charges, water, fuel & Natural Gas costs, finance cost, Depreciation and Amortisation expense, Stores and Spare Parts consumed and Repairs & Maintenance Expense, Insurance Cost, Packing Materials Cost and Other expenses etc. were major factors which adversely affected the profitability of your Company during the year under review.

To augment its power resource with eco-friendly renewable energy in 2022-23, your Companys total Wind Energy Generation Capacity has gone up to 171.45 MW. Your Company has already installed 35 MW Solar Power Projects for captive use with an aggregate renewable energy capacity of 206.45 MW & 640 kW (AC) Floating Solar Power Plant on the reservoir of captive power plant & 220 kW (AC) Solar Roof top Installations at Dahej Complex.

Dispute with Delhi Jal Board

An investigation was conducted by the Director General of the Competition Commission of India (CCI) against your Company, for alleged contravention of the provisions of Section 3(1) read with 3(3)(d) of the Competition Act, 2002, in respect of sales of chemical products to Delhi Jal Board (DJB). The Competition Commission of India vide its order dated 05.10.20l7 imposed penalty Rs.1.88 Crores. Your Company had filed an Appeal before the NCLAT Challenging the order of the CCI. The Honble NCLAT through its order dated 04.12.2017 granted stay on the operation of the impugned order of the CCI subject to a deposit of 10% of the penalty amount. The Delhi Jal Board has filed its Reply to the Appeal. Your Company has also filed its Rejoinder to the Reply of the DJB. Your Company had submitted convenience compilation and Note of Submission before NCLAT. The Delhi Jal Board had also submitted their Note of Submission. The matter is at the stage of final arguments. Your Company will strongly defend the case. Your Company believes that it had not indulged in any such activity.

ECB LOAN

To part finance the cost of the expansion, your Company has from time-to-time availed following financial assistance by way of External Commercial Borrowing (ECB) instead of Rupee Term Loan with a view to minimize the interest outgo. These ECB Loans are not hedged, there being natural hedge available due to exports and considering low risk profile of your Company :

1. ECB loan of US $ 20 Million equivalent to Rs.133.25 crore from ICICI Bank Limited in Financial Year 2016-17.

2. ECB loan of US $ 68.70 Million equivalent to Rs.500.22 crore (Rs. 362.35 crore in Financial Year 2020-21 and Rs. 137.87 crore in Financial Year 2021-22) from State Bank of India.

RISK MANAGEMENT

Your Company has constituted Internal Risk Management Committee comprising of Senior Executives of your Company who are heading respective departments viz. Finance, Manufacturing, Marketing, Purchase, Project, Safety, Information Technology, HR, Secretarial and Legal functions. The Managing Director is the Chairman of the Internal Risk Management Committee. The Internal Risk Management Committee reports to the Managing Director and the risks identified by the said Committee along with proposed mitigation actions are discussed periodically on quarterly basis with the Managing Director.

Your Company has constituted the Risk Management Committee of Directors w.e.f. 11^th February, 2016. Shri Rajiv Lochan Jain has been appointed as the Chairman of the said Committee w.e.f. 28^th September, 2018. As on 31^st March, 2023, below were the Members of the Risk Management Committee:

1. Shri Rajiv Lochan Jain, Chairman;

2. Shri S B Dangayach;

3. Shri Nitin Shukla; and

4. Shri Swaroop P. IAS.

The said Committee was reconstituted by the Board at their Meeting held on 4^th August, 2022. The said Risk Management Committee was renamed as "Risk Management-cum-Safety Committee" w.e.f. 10^th November, 2016 by the Board. The existing Internal Risk Management Committee of Senior Executives of your Company continues to function. Out of the various risks identified by the Internal Risk Management Committee, the Audit Committee has identified certain critical risks, which are reviewed by the Risk Management-cum- Safety Committee, the Audit Committee and by the Board of Directors. A Report on the steps taken to mitigate those critical risks is also submitted to the Risk Management- cum-Safety Committee, Audit Committee and the Board of Directors.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has in place adequate internal financial controls commensurate with the size and nature of its business. Your Company periodically reviews the internal financial controls in the light of new statutes, changes in business models, adoption of new technology solutions and suggestions for improvements received from employees. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

For all amendments to Indian Accounting Standards (Ind-AS) and the new standards notified, your Company carries out a detailed analysis and presents the impact on accounting policies, financial results including revised disclosures to the Audit Committee. The Approach and changes in policies are also validated with the Statutory Auditors.

Your Company has a stated process and periodicity for physical verification of its inventory and fixed assets. Any variances are analysed and accounted post necessary approvals.

Your Company gets its financial statements reviewed every quarter by its Statutory Auditors. The accounts of GNAL are audited and certified by their Statutory Auditors for consolidation.

None of the auditors of the Company have reported any fraud as specified under second proviso of section 143 (12) of the Companies Act, 2013 including any statutory modifications or re-enactments thereof for the time being in force.

OUTLOOK

Your Company deals in marketing of Caustic Soda (Lye, Flakes & Prills), Liquid Chlorine, Hydrochloric Acid, Chloromethanes, Hydrogen Peroxide, Anhydrous Aluminum Chloride, Caustic Potash (Lye & Flakes), Potassium Carbonate (Powder & Granules), Phosphoric Acid, Poyl Aluminum Chloride (various grade), Chlorotoluene, Sodium Chlorate, Chlorinated Paraffin etc. Plants are integrated in such a way that part of finished product of one plant is consumed as a raw material in other plant to produce further vaule added products. The Company thus enjoys some advantage over its competitors because of its forward integration philosophy.

As a value addition to Hydrochloric Acid, we had commissioned Poly Aluminum Chloride at our Vadodara (Coelho) Complex and able to capture sizable domestic market for various grades of PAC. The physical export of PAC (Powder) has also been increased, wherein realisations are promising. Because of the quality, consistent efforts for branding our SBP against existing brands and regional penetration in North & South market, we are successful in selling SBP among various segments like Water Treatment plants, Disinfection, Aquaculture etc., acorss India. We are successful in seizing the additional market for additional availability of MDC & Chloroform.

In addition to this captive consumption of Hydrogen Gas is maximized through expanded Hydrogen Peroxide Plant, which is also fetching additional revenue. Further, the company has successfully optimized its Sodium Chlorate Plant at Dahej, which finds applications primarily in Paper & Pulp Industry for "Elemental Chlorine Free Bleaching".

Gujarat is predominantly an industrial state, which contains a number of large, medium & small business units in the Chemical, Petrochemical, Plastics, Textile, Fertilizer and other Industries. As part of market development, the emphasis is to interact with customers and develop new market for the products. Providing prompt after sales service as & when required is part of this strategy and this helps the company to increase its volume especially for new products.

GACL is also exporting many of its products viz Caustic Soda Flakes, Caustic Soda Prils, Potassium Carbonate, Potassium Hydroxide Flakes, Hydrogen Peroxide, Phosphoric Acid, liquid Chlorine, Aluminum Chloride, PAC, Hydrochloric Acid and CPW to Europe, West Asia, South-East Asia, Africa, Middle-East/Far East, SAARC countries etc.

India has successfully transitioned into a net exporter with the commissioning of GACL new Chloromethanes capacity. GACL is exporting Methylene Chloride product to 20 Countries, and within a short period. we have achieved remarkable sales growth. This accomplishment highlights Indias expanding presence in the global market and the Companys success in capitalizing new opportunities.

Company is facing import threat and dumping of various products at low prices, which affects capacity utilization, prices etc. and is pro-actively taking corrective action for imposition of Anti-Dumping Duty within the WTO guidelines.

As, approx. 67% of the total production capacity of India is located in Western region, it has been observed that - there is 10-15% surplus supply available than the actual current demand in the region.

In order to balance the Western market, we used to cater the market of Eastern India. Accordingly, we have successfully executed supplies of CS Lye to M/s. National Aluminium Company Limited (NALCO) and M/s. Vedanta Limited, M/s. Utkal Alumina International Ltd as well as Hindalco Industries Limited in the tune of approx. 79,559.22 MT i.e. 70,864.86 MT through Rail Racks and 8,694.36 MT through Ship/Coastal. In addition to this, we have done Exports of approx. 38,048 MT.

FOREIGN EXCHANGE EARNINGS AND OUTGO

GACL has consistently embraced a proactive approach in undertaking various activities to sustainably export volume, boost revenues, and explore new export market for both existing and new products. These proactive stances showcase dedication to continue growth and the expansion of global presence.

GACL has experienced a quantum leap in Export capabilities. Company has achieved an impressive 46% growth in Export turnover, increasing from INR 497 Crore to INR 726 Crore. In the current Financial Year also, the company targets at wider markets for Exports of various products with the help of companys accreditation of IS/ISO 9001, 14001, 18001 & 50001 and having registration of Benzyl Alcohol and Aluminium Chloride with ‘REACH while for Poly Aluminium Chloride and Caustic Soda registration have been made with NSF International, USA and Halal India.

SAFETY & ENVIRONMENT

Our commitment to safety and preservation of environment has been encompassed in our "Quality, Health, Safety, Environment and Energy (QHSE En) Policy".

Your Company has implemented elaborate Environment Management System (EMS), Quality Management System (QMS), Occupational Health & Safety Management System (OH&S) and Energy Management System (EnMS) and has embarked on continual improvement. TUV(India) Pvt. Ltd. has granted ISO 9001: 2015, ISO 14001: 2015, ISO 45001: 2018 and ISO 50001: 2018 Integrated Management System Certificates to your Company.

Your Company has continued its emphasis on safety awareness not only for its employees and contract labourers but also for customers handling our products and community in neighbourhood of our plants. Your Company regularly organizes public awareness programs in surrounding villages emphasizing the importance of safety and focusing on industrial hazards. Safety awareness programme for the employees as well as for contract workers are also organized regularly. Your Company has also adopted a unique concept of "Plant Healthiness Check-up" to identify and address areas for improvement of the manufacturing facility.

Your Company has also its Emergency Response Plan (ERP) system to minimize effect of any Emergency situations. The ERP is also frequently reviewed and updated by considering various Maximum Credible Scenarios. Preparedness and response to this ERP is evaluated periodically by conducting various Mock-drills. Your Company regularly conducts safety audit through third-party.

Adequate steps have been taken for Pollution Control, Green Belt Development etc. besides due compliance with statutory requirements for the protection of environment. At the landfill site for our Vadodara Complex, green belt has been developed and maintained in 101171 sq. mts. of land. Your Company has also developed and maintained about 24000 sq. mts. green area inside the Plant area. In the field of water conservation, GACL has installed wastewater recycling RO Plant for converting wastewater into reusable water. Daily 400 to 500 M³ of wastewater is treated and converted to reusable water which is recycled back to the Plant.

In DahejComplex, large area has been covered by development and maintenance of green belt, landscaping, flora & fauna, rainwater harvesting and natural ponds. Your Company has installed facility for recycling part of its liquid effluent stream, using RO System in Dahej Complex. Your Company has undertaken water conservation by channelizing Cooling Tower Water Spillage, treated sewage and drip irrigation. Nearly 24,000 nos. of trees have been planted and 54.4-acre green belt developed.

Your Company regularly sends hazardous waste for co processing to provide AFT (Alternate Fuel) and Raw Material for Cement Industries via pre-processing through third party. The canteen and garden waste are being converted into organic manure through in-house vermi-composting facility on regular basis at both the Complexes.

GACL is one of the Promoters of Vadodara Enviro Channel Limited (VECL). VECL was formed by various nearby industries for the purpose of safe discharge of treated effluent in sea. Thus, entire treated liquid effluents of Caustic Soda & Coelho Complex are being discharged through VECL. Gujarat Pollution Control Board (GPCB) had issued a closure direction to VECL under The Water Act 1974. VECL has submitted compliance report to GPCB vide letter dtd. 14.04.2022. GPCB has given temporary revocation upto 26.04.2023. VECL has submitted letter on dtd. 26.03.2023 for permanent revocation. No adverse comment is received from GPCB in the matter so far.

CORPORATE SOCIAL RESPONSIBILITY

During the year under review, your Company has continued to fulfill its Corporate Social Responsibilities to enhance Human Development Index (HDI) by undertaking thematic activities viz. (a) Promotion of Education and related activities (b) Care for Special Children (c) Healthcare, Hygiene and Sanitation (d) Livelihood and skill development activities (e) Art, Culture and Heritage (f) Water Conservation and Environment related activities.

Promoting inclusive growth has been a priority for GACL from both a social and business perspective. Your Company strives to make a difference to its customers, to the society and to the nations development directly through its products and services, as well as through its development initiatives and community outreach.

During the Financial Year 2022-23, your Company had carried out various CSR activities. kindly refer Annexure-2 of Boards Report i.e. Annual Report on CSR activities, for more details on various CSR Activities.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES

Harnessing the incredible power of chemistry & people, GACL has embarked on a mission to produce the creme de la creme of chemical products in the country along with eco-friendly technology that provides value to the Industrial productions and common lives every day. Your Companys Human Resources Department identifies itself as the Process Department of People, it formulates strategies, executes human resource policies and practices which directly contribute to enhancing employee competencies and behaviours which would help Company reach greater heights.

Today all organizations are struggling to deal with external pressures such as globalization, aggressive competition and the increasing pace of change. This is compounded by internal pressures to lower costs, ability to strategize effectively, demonstrate business impact and maintain accountability for results. The only way to counter all of this is by developing a talent and leadership pool that acts as a path paver for achieving greater results. For this, your company has Succession Planning in place for its Senior Management Personnel.

As the organization gets older, clock begins to tick for the old generation of employees to retire and a new generation of employees to step in. This comes with a lot of challenges -along with that of retention - as the Nextgen performers are eager to expand their horizons and enhance their capabilities. Hence, we at GACL have developed an indigenous platform of Learning Management System (LMS), customised to cater organisational needs for skill development through upskilling and reskilling at all levels. This platform provides knowledge sharing opportunities from experienced technocrats and enables young entrants to gain life-long learning opportunities with innovation.

‘Welfare of each is bound up in the welfare of all. We at GACL see to it that our policies reach not only the employees but their families as well. We have one of the best of medical schemes, such as Covid welfare facility, Children education fund, Post-retirement Medical Insurance, Housing Loan Insurance, Extra leave & Flexi leave benefit for Maternity and so on for all category of employees. Our separation benefits are the most lucrative that ensures social security beyond statutes. GACL is one family when it comes to Welfare & Wellness.

GACL HR operates in allyship at workplace, for every employee-oriented process there is a committee consisting of members from all category of employees from helpers to Executive Director level to collaborate and maintain harmonious Industrial Relations.

HR Digitization, HR policies, transparency towards and active participation of employees has made it possible for GACL to keep the pace of exponential growth and establish a culture of esprit de corps. Even at the time of adversity of pandemic/lockdown, Operations & Business were running with the same zeal of catering to the society. Your company also achieved remarkable record of nearly 22,000 training hours (Virtual & Offline) during the year under review, which reflects its people orientation and its aim to become a learning organisation in near future by nurturing knowledge and paving a way for innovation, making GACL truly an idea-land of Chemical Companies.

AWARDS AND RECOGNITIONS

Your company has adopted a constant pursuit of growth and prosperity. In an effort to do so, it is important to acknowledge your companys achievements and recognitions. This not only boosts your employees confidence and zeal but also enables the company to push its limits and aim higher always. GACL continued its impressive run and added new awards and recognitions.

GACL has been honoured with the prestigious National Award for its Dahej Complex under the category of "Top Performer Designated Consumer for Chlor Alkali Sector of Perform Achieve & Trade (PAT) Cycle II under National Mission for Enhanced Energy Efficiency (NMEEE)". On behalf of GACL, Mr Pankaj Pujara, Advisor to MD and Mr. Amit Mehta, DGM (ES) jointly received this prestigious honour from the Honble Cabinet Minister, Shri R.K. Singh (Power, New and Renewable Energy) in Delhi on the occasion of the 21^st BEE Day and the celebration of the 1^st Decade of the PAT Scheme. An initiative by the Ministry of Power, the National Mission for Enhanced Energy Efficiency (NMEEE) consists of various initiatives to enhance energy efficiency in energy-intensive industries. Under this, the Perform, Achieve and Trade (PAT) scheme aims at reducing Specific Energy Consumption (SEC) i.e. energy use per unit of production for Designated Consumers (DCs) in energyintensive sectors, with an associated market mechanism to enhance the cost-effectiveness through certification of excess energy saving which can be traded.

GACL won 17^th National Award of Institute of Cost Accountants of India for the Excellence in the Cost Management-2019. Significantly, winning this prestigious recognition is a rare distinction achieved by GACL as it has won this National Award consecutively three years, 2017, 2018 and 2019 under the category Manufacturing - Public - Medium. Conferred by The Institutes of Cost Accountants of India (ICAI - CMA) this honour is awarded in recognition of Excellence in the Cost Management Practices adopted by the GACL which inter alia include the following:

• Elaborate Costing System which facilitates ascertainment of correct & reliable cost of production

• Continuous monitoring of various costs against Budgets

• Various Costing Based MIS Reports to support the management in its Cost Management Drive which includes monitoring, controlling and reducing of various costs.

GACL firmly believes that Effective Cost Management enables the management in achieving the desired Cost Competitiveness for Various Products. Award function for 17^th National Award for Excellence in the Cost Management -2019 was held on 20^th April 2022 in New Delhi. The award was handed over by the Honourable cabinet minister Shri Piyush Goyal Ji.

At the 50^th Flower, Fruits, and Bonsai Exhibition/Competition, GACL has been awarded second place in two categories namely Class C Flowers and F Cut Flowers. The event was organized by The Baroda Agri Horticulture Committee (BAHC) with the Department of Horticulture, Govt. of Gujarat, and other organizations supporting horticulture, floriculture, gardening, and bonsais. The event was held from 23^rd to 27^th February 2023 at the Navalakhi Ground, Vadodara. Around 70 stalls were set up and the exhibition received a fair turnout. This achievement of GACL reinforces its commitment to developing a culture of growing plants and inculcating environmental consciousness among the people.

INFORMATION TECHNOLOGY

In line with your companys overall growth objective and strengthening of our IT infrastructure, the Company continues to focus and invest in information technology tools and applications for leveraging business value. Processes are reviewed regularly and are digitized, resulting in enhanced speed, accuracy, management of data, controls, and effectiveness. Implementation of a robust IT system has allowed for seamless working at office premises at all sites, remote location, and Work from Home. IT Processes are continuously strengthened for enhanced effectiveness. For cyber risks, we have implemented measures for cyber security including remote access to applications through encrypted VPN, Online and offline employee trainings and awareness on cyber security, Digital Signature, and Dual authentication to access applications.

CAUTIONARY STATEMENT:

The Company assumes no responsibility in respect of forward-looking statements, expectations and assumptions herein which may undergo changes in future on the basis of subsequent development, information, or unforeseen circumstances or force majeure events. This shall not be considered as investment guidance or advice or invitation. The readers are advised to make their own independent assessment and judgement.

	For and on behalf of the Board
	Sd/-
	DR. HASMUKH ADHIA, IAS (RETD.)
	CHAIRMAN
Place: Gandhinagar
Date : 8th August, 2023