Gujarat Narmada Valley Fertilizers & Chemicals Ltd Management Discussions

1. GLOBAL ECONOMIC SCENARIO

Over the past few months, the world economy has experienced numerous disruptions including Iran - Israel, almost equal to those caused by the pandemic, Russia-Ukraine war over a three-year period.

These disruptions have caused the prices of important commodities like crude oil, natural gas, fertilizers, and wheat to rise, leading to inflationary pressures.

The baseline Forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies, where growth is expected to rise From 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025, will be offset by a modest slowdown in emerging market and developing economies From 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The Forecast For global growth Five years From now, at 3.1 percent, is at its lowest in decades. Global inflation is Forecast to decline steadily, From 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies.

2. INDIAN ECONOMIC SCENARIO

Indias economic performance during FY 2023-2024 has remained robust despite global challenges and geopolitical concerns. This can be attributed to strong domestic demand, rural demand pickup, robust investment, and sustained manufacturing momentum. Indias retail inflation For the fiscal year 2023-24 has seen a significant downturn, marking its lowest point since the onset of the Covid-19 pandemic. Indias foreign exchange reserves reached an all-time high in March 2024, sufficient to cover 11 months of projected imports and more than 100 percent of total external debt. Overall, resilient growth, robust economic activity indicators, price stability, and steady external sector performance continue to support Indias promising economic performance amidst uncertain global conditions.

Indias economy is forecast to expand by 6.9 per cent in 2024 and 6.6 per cent in 2025, mainly driven by strong public investment and resilient private consumption. Although subdued external demand will continue to weigh on merchandise export growth, pharmaceuticals and chemicals exports are expected to expand strongly.

3. INDUSTRY STRUCTURE AND DEVELOPMENT

3.1. Fertilizer industry

Climatic Conditions

India saw a rainfall deficit of six percent in monsoon 2023 of the long-period average of 50 years. This, however, doesnt clearly capture the erratic nature of its progression and distribution over India.

The month-wise distribution of rainfall during the SW Monsoon 2023 was as follows.

	JUNE 23	JULY 23	AUG 23	SEPT 23	SW MONSOON 2023
Actual	148.6	318.4	162.7	190.3	820
Normal	165.3	280.5	254.9	167.9	868.6
% departure	-10.1%	+13.5%	-36.2%	+13.34%	-5.55%

Source: IMD; rainfall figures in mm.

The same figures For SW Monsoon 2022 are given in the table below

	JUNE 23	JULY 23	AUG 23	SEPT 23	SW MONSOON 2023
Actual	152.3	327.7	263.8	181.2	925
Normal	165.3	280.5	254.9	167.9	868.6
% departure	-8%	+16.8%	+3.5%	7.9%	+6.5%

Source: IMD; rainfall figures in mm.

The rainfall in India is mapped for four seasons i.e. Pre Monsoon (Mar-May), Monsoon (Jun-Sep), Post Monsoon (Oct-Dec) & Winter (Jan-Feb). The maximum impact is of Southwest monsoon. Long Period Average (Average of 1961-2010) is compared to classify the rainfall as Deficient, Normal or Excess. Season-wise rainfall, India as a whole, has been below normal during FY 2023-2024.

The above normal rainfall in pre-monsoon season has increased the hope of higher acreages. This, however, is not that useful for the agriculture. The major rainfall period i.e. Monsoon was deficit (first time in last four years). Moreover, the monsoon was particularly erratic, with excessive rains in July and September and a dry spell in August, resulting in lower reservoir storage levels and higher risks of yield loss for crops. This erratic distribution of rainfall affected the planting of rabi crops for the 2023/2024 season, with a significant reduction in acreage for pulses.

Acreages

Kharif (Apr to Sep) - Against Kharif normal acreage (average of previous 5 years) of 1095 Lakh hectare, the country had achieved 1107 Lakh hectare registering 1% growth over normal.

Progress - KHARIF area coverage - As on 29.09.2023 - Lakh Hectare

		ACTUAL		VARIANCE OVER PY
CROP	NORMAL ACREAGE KHARIF	23-24	22-23	ACREAGE	%	COVERAGE (%) AGAINST NORMAL OF SEASON
Rice	399	412	404	7.69	1.90	103
Pulses	140	124	129	(5.41)	(0.04)	88
Course Cereals	182	188	185	3.25	0.02	103
Oilseeds	190	193	196	(3.16)	(0.02)	102
Sugarcane	49	60	56	4.25	0.08	123
Jute & Mesta	7	7	7	(0.39)	(0.06)	96
Cotton	129	124	128	(3.86)	(0.03)	96
Total	1,095	1,107	1,105	2.37	0.00	101

In GNFCs operation area, the acreages have been as below

Coverage of Kharif Acreage in GNFCs Area - Lakh Hectare

STATE	NORMAL ACREAGE	ACTUAL ACREAGE	% COVERAGE
Gujarat	350	46	92
Maharashtra	111	113	102
Madhya Pradesh	127	140	110
Rajasthan	121	123	102
Uttar Pradesh	110	124	113
Total	519	546	105

Rabi (Oct-Mar) - In Rabi, country has achieved 709 Lakh hectare compared to normal acreage of 648 Lakh hectare.

Progress - RABI area coverage - As on 02.02.2024 - Lakh Hectare

		ACTUAL		VARIANCE OVER PY
CROP	NORMAL ACREAGE KHARIF	23-24	22-23	ACREAGE	%	COVERAGE (%) AGAINST NORMAL OF SEASON
Wheat	307	342	339	2.37	0.70	111
Paddy	53	39	40	(1.08)	(0.03)	75
Pulses	153	160	166	(6.11)	(0.04)	105
Coarse Cereals	51	57	54	3.81	0.07	112
Oilseeds	84	111	110	1.20	0.01	131
Total	648	709	709	0.19	0.00	109

For the same period, in GNFCs area of operation, the coverage has been 115% against the normal acreage of season, till 02.02.2024 and the acreage increased in all states.

Rabi Coverage of Acreage in GNFCs Area - Lakh Hectare

STATE	NORMAL ACREAGE	ACTUAL ACREAGE	% COVERAGE
Gujarat	350	46	92
Maharashtra	111	113	102
Madhya Pradesh	127	140	110
Rajasthan	121	123	102
Uttar Pradesh	110	124	113
Total	519	546	105

Source - https://www.agricoop.gov.in/all-india-crop-situation

In Kharif, the acreages of Sugarcane, Rice, Coarse Cereals and Oilseeds increased over normal and the acreages of Pulses, Oilseeds and Cotton decreased over PY. In Rabi acreages of Wheat, Oilseeds, Coarse Cereals and Pulses have increased over normal and the acreages of Pulses & Paddy decreased over PY.

As per the advance estimates of Department of Agriculture and Farmer welfare, total foodgrain production in 2023-2024 is estimated to be 309 million tonnes (mt), against foodgrain production in the 2022-2023 crop year which was pegged at 329.6 mt. The production loss is contributed by almost all the crops except for wheat which has been estimated as 112.02 mt against 110.55 mt in PY).

Minimum Support Price (MSP)

The MSPs of most of Kharif & Rabi crops are increased over 2022-2023.

Minimum Support Prices - Rs./quintal

CROPS	FY 22-23	FY 23-24	% INCREASE
Paddy	2,040	2,183	7%
Jowar	2,970	3,180	7%
Bajra	2,350	2,500	6%
Maize	1,962	2,090	7%
Tur (Arhar)	6,600	7,000	6%
Moong	7,755	8,558	10%
Urad	6,600	6,950	5%
Cotton	6,080	6,620	9%
Groundnut	5,850	6,377	9%
Soybea	4,300	4,600	7%
Sesame	7,830	8,635	10%

 

CROPS	FY 22-23	FY 23-24	% INCREASE
Wheat	2,125	2,275	7%
Barley	1,735	1,850	7%
Gram	5,335	5,440	2%
Lentil (Masur)	6,000	6,425	7%
Rapeseed & Mustard	5,450	5,650	4%
Safflower	5,650	5,800	3%

Source - https://farmer.gov.in/mspstatements.aspx

MSPs are increased by 2% to 10% over previous year. Going by the past three years data, the impact of the Minimum Support Price was almost nil on 12 of the 14 crops covered under MSP Scheme.

Government Policies - Fertilizers

No major changes in Policy have been announced during the year, except for the reasonability of MRP/Discounts/margins guidelines on fertilizers governed through NBS policy.

Government Policies - Fertilizers

GoI has strengthened efforts in setting up all Fertilizer retail outlets into "Pradhan Mantri Krishi Samridhi Kendra (PMKSK)". The cost of conversion is continued to be met From the retailer margin being retained by the companies. There is no direct cost to companies.

GoI has started Namo Drone Didi initiative and have provided 1,100 drones to ladies pilots, who have been trained for using drones for spray on crops. Another 14,500 Drones shall be funded by GoI in next two years. The technology and the women empowerment goes hand in hand.

PM-Pranam Scheme is introduced, announcing Market Development Assistance of Rs 1,500 per MT on sales of Fermented Organic Manure (By product of CBG Units under GOBARdhan Scheme). DoF is planning to produce 25% of total Urea as Urea Gold (Sulphur Coated Urea) during 2024-2025. The technological glitches are, however, impacting its production adversely.

Rates for Nutrient Based Subsidy (NBS) for the Rabi 2023-2024 (01.10.2023 to 31.03.2024) are mentioned below:

Subsidy - Rs/MT

PRODUCT	RABI 22-23	RABI 23-24	INCREASE (+/-)	% CHANGE
DAP	48,431	22,541	-25,890	-53%
ANP	32,991	13,568	-19,423	-59%
20:20:0:13	33,786	13,814	-19,972	-59%
SSP	7,513	3,540	-3,973	-53%
MOP	14,190	1,427	-12,763	-90%

Rates for Nutrient Based Subsidy (NBS) for the Rabi 2023-2024 (01.10.2023 to 31.03.2024) are mentioned below:

Subsidy - Rs/MT

PRODUCT	W.E.F. 01.01.23	RABI 23-24	INCREASE (+/-)	% CHANGE
DAP	40,841	22,541	-18,300	-45%
ANP	29,842	13,568	-16,274	-55%
20:20:0:13	30,211	13,814	-16,397	-54%
SSP	7,513	3,540	-3,973	-53%
MOP	15,420	1,427	-13,993	-91%

Rates for Nutrient Based Subsidy (NBS) for the Rabi 2023-2024 (01.10.2023 to 31.03.2024) are mentioned below:

Subsidy - Rs/MT

PRODUCT	W.E.F. 01.01.23	RABI 23-24	INCREASE (+/-)	% CHANGE
DAP	40,841	22,541	-18,300	-45%
ANP	29,842	13,568	-16,274	-55%
20:20:0:13	30,211	13,814	-16,397	-54%
SSP	7,513	3,540	-3,973	-53%
MOP	15,420	1,427	-13,993	-91%

Rates for Nutrient Based Subsidy (NBS) for the Kharif 2024 (01.04.2024 to 30.09.2024) have been announced in advance. Comparison of NBS rates for Rabi 2023-2024 & Kharif 2024 is given below:

Subsidy - Rs/MT

PRODUCT	RABI 23-24	KHARIF 2025	INCREASE	% INCREASE
DAP	22,541	21,646	-865	-4%
ANP	13,568	15,148	1,580	12%
20:20:0:13	13,814	15,395	1,581	11%
SSP	3,540	4,804	1,264	36%
MOP	1,427	1,427	0	0%

DAP prices have surged abnormally during the year 2023-2024, compelling the GoI to increase the subsidy on it. The GoI has ensured price control in DAP which was kept at 1,350 per bag MRP level. There is decrease in price in finished products/raw material in international markets during Q4 over the corresponding period of 2022-2023. However, price have increased in RP during Q4 FY 2022-2023 over Q4 of the FY 2021-2022.

International Fertilizer Price - In US $ per MT

PRODUCT	MAR23	MAR24	% CHANGE
DAP	606	617.5	2%
Rock Phosphate	345	152.5	-56%
Phosphoric Acid	1050	968	-8%
Natural Gas (MMBTu)	2.1	1.54	-7.78%
Urea	313.5	330	-6.05%

Source - https://fertiliserindia.com/march-2024-global-fertilizer-price-updates-unveiled/ There is decreasing trend in the prices of finished goods and raw material, except for DAP

FERTILIZER - PRODUCTION, IMPORTS & CONSUMPTION

Production of Urea, DAP, NPK & SSP increased. Imports of Urea & MOP reduced over FY 2022-2023. Sales of Urea & DAP increased and sales of NPK, MOP & SSP decreased.

Progress - RABI area coverage - As on 02.02.2024 - Lakh Hectare

FERTILIZER	23-24 (LAKH MT)			22-23 (LAKH MT)
	PRODUCTION	IMPORT	SALES	PRODUCTION	IMPORT	SALES
Urea	314	69	357	285	76	357
DAP	43	54	109	44	66	104
NP/NPK	102	22	111	93	28	101
MOP	0	30	16	0	19	16
SSP	44	0	46	57	0	50
Total	503	175	639	478	188	629

During FY 2023-2024, production of Urea & NPKs increased whereas production of DAP remained same as per PY. SSP production reduced by 19% over PY. Imports of Urea, DAP & NPK reduced over FY 2022-2023. Sales of DAP & NPK increased and sales of SSP decreased.

% Variance over FY 2022-2023

FERTILIZER	PRODUCTION	IMPORT	SALES
Urea	10	-10	0
DAP	-1	-18	4
NPKS	10	-20	10
MOP	NA	60	0
SSP	-21	NA	-8
Total	5	-7	2

STOCKS OF DIFFERENT FERTILIZERS 1.4.2023 vs. 1.4.2024

PRODUCT	OPENING STOCK AS ON 1.4.2023	EST. OPENING STOCK AS ON 1.4.2024	DIFFERENCE IN STOCK	% VARIATION
Urea	57.2	80.98	23.78	42%
DAP	25.41	15.29	-10.12	-40%
MOP	3.2	6.2	3	94%
NP/NPKs	30.51	35.73	5.22	17%
SSP	19.68	19.42	-0.26	-1%

Source - https://reports.dbtfert.nic.in/

Country is having huge pile of stocks of Urea - 80.98 LMT, MOP - 6.20 LM & NPKs - 35.73 LMT as on 31.03.2024, which is far above the stocks levels as on 31.03.2023 (Urea - 57.2 LMT, MOP - 3.2 LMT, NPKs - 30.51 LMT).

3.2. Chemical industry

India is one of the worlds leading chemical producers and exporters. India is the sixth largest producer of chemicals and the fourth largest producer of agrochemicals globally. The Indian Chemicals Industry is one of the most diversified among other industrial sectors covering a multitude of commercial products and comprises of both small scale as well as large scale units. With linkages to several other sectors of the economy, it enjoys a position of paramount importance. The rapid expansion of the various subsectors like bulk, speciality, petrochemicals, agrochemicals, fertilizers, etc., can be attributed to favourable government policies growing demand from multiple end-user sectors, the growing domestic customer base and changes in consumers lifestyles.

The total installed capacity for major chemicals and petrochemicals in India has grown at a CAGR of 4.5 per cent between 2018 and 2022, with a similar trend in production. This is expected to grow further as the demand for chemical consumption increases in India, while the nation also grows further as an export hub.

Chemical and Petrochemical Statistics at a Glance - 2022, DCPC

KPMG & CII Report titled - Chemicals value chain transition : Addressing the impact of ESG, globalization and innovation (Jan 2024)

To facilitate the indigenous production of chemicals, the Government of India has allowed 100 per cent FDI in the chemicals sector under the automatic route (except in the case of certain toxic chemicals). The production of most chemicals, including organic/inorganic products, dyes, and pesticides, has been de-licensed to allow ease of doing business in the segment.

COMPANY OVERVIEW

Gujarat Narmada Valley Fertilizers and Chemicals Limited (the Company or GNFC) operates businesses mainly in the Industrial Chemicals, Fertilizers apart from small presence of IT services.

In the chemical segment, it has a product portfolio of various bulk chemicals which are used in industries for manufacturing various speciality chemicals as well as end products.

Most of companys products are competing with big multinational players at import parity. Since India is net importer of oil and gas and this being primary feed/fuel for company, its .financial performance is dependent upon how these variable play out.

Although in chemicals, company is in few cases the only manufacturer due to stiff import competition, it does provide some premium in realisation however it has to compete fiercely when it comes to basic pricing. Necessary measures are taken e.g. Anti-Dumping duty, applicability of BIS standards, inclusion on PLI scheme etc. through concerned Ministry of GoI. Company ^ has added from time to time various production facilities. Company has been consistent in utilising, by and large, its existing production capacities.

4. OVERVIEW OF COMPANY

The journey so far is reproduced below:

PRODUCT	OPERATIONAL YEAR	RATED CAPACITY MTPA	PRODUCTION MTPA	REMARKS
Ammonia	1982	4,45,500	6,36,948
Urea (Including Tech. Urea)	1982	6,36,900	7,99,791
Methanol - I	1985	50,000	0
Formic Acid	1989	19,720	31,663	Revamped in 2004-05 and 2022.
Methanol-II	1991	1,88,100	1,00,408	Revamped in 2008. Re-distillation of bought out methanol for AA-FA.
Concentrated Nitric Acid-I	1991	33,000	30,888
Weak Nitric Acid-I	1991	2,47,500	3,12,882	Revamped in 1999.
Ammonium Nitro Phosphate	1991	1,42,500	1,86,970
Calcium Ammonium Nitrate	1991	1,42,500	0	The plant operation stopped since 2014 due to AN rules.
Aniline	1995	35,000	30,337	Both plant installed by a separate JV company NCPL.
Toluene Di-Isocyanate-I	1998	14,000	17,688
Acetic acid	1995	1,00,000	1,61,927	Revamped in 2002.
Syn Gas Generation unit	1998	2,01,960 KNm3	0
Concentrated Nitric Acid-II	1999	33,000	34,037
Methanol Synthesis Unit	2006	30,600	0
Concentrated nitric acid-III	2011	50,000	50,503
Weak nitric acid - II	2011	1,00,000	1,23,695
Co-generation Power & Steam Unit (MWh)	2012	2,84,515	2,14,614
Ethyl Acetate Plant	2012	50,000	71,510
Ammonia Syngas Generation Plant	2013	3,69,600	3,74,979	Equivalent Ammonia Prod.
Toluene Di-Isocyanate - II	2014	50,000	53,117
Concentrated Nitric Acid-IV	2023	50,000	34,141

As it is evident from the above that gradual debottlenecking / revamping has resulted in achieving higher than rated capacities.

Fertilizer is more or less a controlled and working capital intensive business. In this business, currently company has no plans of expansion. The subsidy part consists of major portion of working capital.

5. OPPORTUNITIES AND STRENGTHS

In chemical segment, to cater to demand growth, profitable opportunities are being explored in different chemicals. Major benefits envisaged from change of worlds view about China post pandemic.

¦ Company has entered into Long/Mid Term / Annual Contracts / Agreements For supplies of most of the critical Raw Materials like Coal, Oil, Rock Phosphate, Packaging Materials etc. which are essential for continuous production. Company is continuously trying for broad basing supplier base.

¦ In respect of fertilizers and chemicals, both, trading is another opportunity which is being explored.

¦ For IT business, areas like software, e-Governance to support ever evolving client requirements are likely focus area apart from looking at evolving technologies for foray.

6. SEGMENT-WISE PERFORMANCE FOR FY 2023-24:

SEGMENT	REVENUE (Rs. in Crores)	REVENUE (%)	RESULT (Rs. in Crores)	RESULT (%)
Fertilizers	3,054	38%	(104)	(30%)
Chemicals	4,726	60%	402	117%
Others	150	02%	45	13%
Total	7,930	100%	343	100%

Fertilizer Segment revenue has been decreased by Rs. 601 Crores from Rs. 3,655 Crores to Rs.3,054 Crores primarily due to lower claimable subsidy of Urea in view of lower variable Cost, lower subsidy of complex fertilizer and lower volume of Neem Urea which is partially compensated by higher volume of complex fertilizer and fertilizer-traded products. Fertilizer Segment Results reduced from gain of Rs. 36 Crores to loss of Rs. (104) Crores lower by 389 % at Rs. 140 Crores mainly due to low subsidy of complex fertilizer and higher fixed cost partly compensated by decrease in input cost of complex fertilizers, lower energy norms in Neem Urea and higher volume.

Chemical Segment revenue decreased by Rs. 1,758 Crores from Rs. 6,484 Crores to Rs. 4,726 Crores due to lower realization in all the products partially compensated by higher volume mainly due to TDI, Aniline, CNA, Formic Acid, Methanol, and Ethyl Acetate. Chemical Segment Results reduced from Rs. 1,652 Crores to Rs. 402 Crores lower by 77% at Rs. 1,250 Crores mainly due to lower realizations, lower volume and increase in fixed cost partially compensated by decrease in input cost and increase in other operating income.

The other segment revenue improved by Rs. 62 Crores which is mainly due to increase in revenue of IT services provided by (n)Code Solutions. The other segment results improved from Rs. 28 Crores to Rs. 45 Crores higher by 61% at Rs. 17 Crores mainly due to higher profitability of IT services and other products.

7. OUTLOOK

7.1. Fertilizers Business

Skymet predicts a normal monsoon in 2024 for India with rainfall at 102% of the long-period average, ensuring equitable rains in the core agricultural zone. While the monsoon might begin weakly due to El Nino remnants, the later half of the season is anticipated to be abundant, especially in South, West, and Northwest regions. However, Bihar, Jharkhand, Odisha, and West Bengal may face deficit rainfall during peak months.

Urea will continue to get sold as per availability and on normal terms. However, considering the higher stocks positions in the country, there are chances of requirement of additional credit during the peak off seasonal months Feb & Mar. There is an expected increase in production of indigenous Urea due to start/stabilization of the various plants like HURL Gorakhpur/Sindhri/Barauni and RFCL Ramagundam and revival of NFCL, Kakinada.

ANP can be liquidated/placed in accordance to the market, if made available. The realization is expected to de-grow in light of huge availability and preference to DAP (which is priced at a low MRP due to special subsidy dispensation). ANP is one of the least preferred fertilizer due to content value vis-a-vis the offered price.

With reasonability guidelines in place, the ANP margins shall reduce. In Urea the losses shall continue till the fixed cost is revised. Trading activities for bulks & non-bulk agri inputs through retail outlets shall continue. Getting DAP from Hindalco Industries Limited is likely during the year. Procurement of Nano Urea has started. Arrangement for procuring FOM & City compost have been done.

7.2. Chemicals Business

The chemical sector in India is a major industry in the Indian economy and contributes significantly to the countrys GDP and employment.

It drives growth by providing raw materials and performance to other sectors. It fuels the needs of several downstream industries such as textiles, papers, paints, varnishes, soaps, detergents, pharmaceuticals, etc. As of 2023, India is the worlds sixth-largest producer of chemicals and the third largest in Asia. The market size of the Indian chemical industvry is around ~USD 233 billion as of FY 2021-2022 and is expected to expand at a CAGR of ~9 per cent reaching a value of ~USD 304 billion by 2025.

While India makes a steady progress towards achieving complete Atmanirbharta in the chemical sector, it requires sustained efforts and continuous adoption to evolving market dynamics and technological advancements. The Department of Chemicals and Petrochemicals Vision 2024 aims to use this opportunity to establish India as a leading chemicals and petrochemicals manufacturing hub, with importance on reduction in import dependency. GNFC is fully committed in accomplishing this vision of DCPC by operating all its plants at more than 100% capacity and catering to the indigenous demand various plants like HURL Gorakhpur/Sindhri/Barauni and RFCL Ramagundam and revival of NFCL, Kakinada.

Risk and concerns

Most products are import substitutes and hence fierce competition from dominant foreign suppliers is a major threat. Key raw materials and feedstock are purchased at import parity price and its availability from limited supplier base and at time almost single pre-dominant source operates as possible threat to profitable operations.

NBS support from time to time may not match with actual input costs hence may affect profitable operations. Energy norms for fertilizers being prescribed without capital subsidy support increases further strain on resources is a source of major risk.

Urea Energy Norms & Consumption of COMPANY

Over one decade, Company has put their best efforts to bring down its energy consumption of Urea with a capital investment over INR 300 Crore. However, even after putting all out efforts, due to vintage nature of plant & consumption of coal, Urea targeted energy norms remains higher than prescribed norms for FY 2023-2024.

As company uses coal as one of the energy source for the Urea, the energy level of Urea is higher side against the prescribed norms by DoF. The representation at highest level in government are continued to re-look the prescribed energy norms for the Company.

8. INTERNAL CONTROL SYSTEM, THEIR ADEQUACY &

RISK MANAGEMENT

The Company has an independent Internal Audit function with a well-established risk management framework. The scope and authority of the Internal Audit function are derived from the Internal Audit Charter approved by the Audit Committee.

The Company has engaged a reputable external firm to support the Internal Audit function for carrying out the Internal Audit reviews.

The Audit Committee meets every quarter to review and discuss the various Internal Audit reports and follow up action plans of past significant audit issues and compliance with the audit plan.

The Internal Financial Control framework of the company is subjected to review every year independently.

The Company has well-defined Enterprise Risk Management (ERM) framework in place which evolved over the years.

Risk Management

Risks are identified proactively periodically considering inputs From external as well as internal Factors along with risk mitigation plans. The company has well defined Governance Structure viz., from Board to Committee to Risk Management Function.

Company has developed the digital risk management platForm where through the mechanism oF action taken reports, the identified mitigation plans are monitored For their execution / current status against Risk Management Committee meeting takes place twice during the year wherein the Framework as well as various risks are reviewed thoroughly. In addition to this, Risk Management Report covering various risks is put-up beFore the Board oF Directors Meetings periodically For their review.

9. OPERATIONAL & FINANCIAL PERFORMANCE

9.1. Operational Performance (Production)

The Company has achieved remarkable production performance during the year 2023-24. Day to day plant operations were closely reviewed and plant operations were optimized accordingly, to maximize profit. During the year, strategic optimization of various plant operations had to be done keeping in line with prices of raw materials so as to achieve cost reduction in all aspects.

New Records Established

During the year 2023-2024, in all, 103 nos. of new records were established, out of which 56 nos. of new records were established in Production and 47 nos. in Dispatch /sale. Ever highest daily production achieved for ASGP, Total Urea (Neem+Technical), Methyl Formate, Formic acid, CNA-IV, Aniline, Nitro benzene, DNT-Bharuch, MTD-Bharuch.

Ever highest Monthly production achieved for ASGP, Methyl Formate, Formic acid, CNA-IV, DNT-Bharuch.

Ever highest yearly production achieved for Methyl Formate, Formic acid, Ethyl Acetate, CNA-IV, WNA-I, TDI-II, MTD-II, OTD-II, HCL, Hydrogen, CO, Steam production at Dahej & CATSOL catalyst.

Production/ Operational Performance

Ammonia plant, annual shut down was taken in March-April 2023 for Synthesis gas compressor (C-701) performance improvement job & turbine replacement. After rectification of compressor and turbine vibration, plant was restarted on May 08, 2023. Installation of E-1101 I/J additional exchange battery set at refrigeration compressor discharge resulted reduction in discharge pressure and steam saving of 1.3 MT/hr, as well as load limitation in summer to some extent. Ammonia storage tank D-1003A (10000 MT) replacement from single wall to double wall tank, work is under progress.

Ammonia synthesis gas generation plant (ASGP) plant, was under annual shut down in March-April 2023 along with Ammonia plant. LT shift reactor & Desulphuriser-1 catalyst replaced & improvement in CO slip helped in sustained plant operation above 1160 MTPD. Plant faced interruptions in May 2023 (PDI 2139 leakage, October 2023 (Urea stoppage & ID fan tripping), November 2023 (UPS power supply problem).

Urea plant was operated for more than 2500 MTPD for 150 days. New Reactor with latest super cup tray and higher grade liner MOC is received & its foundation work is under progress. at urea plant. New higher capacity Carbamate & molten Urea pump procurement is under progress to sustain higher productivity and consistency. For energy optimization in-principle approval for conversion of torque converter to VFD drive in HP ammonia pump is obtained.

Methanol-I/SGGU/MSU plant remained inoperative throughout the year due to unfavorable cost economics.

In Methanol-II plant, plant remained under shutdown due to economics. Captive consumption requirements of Formic acid & Acetic acid plants are met by sourcing methanol from market. Further purification of methanol is done in Methanol Distillation Unit. Modifications were done to operate PSA stand-alone with minimum Oil loading in absence of M-II purge gas.

In Formic Acid plant, commissioning of project after revamp, both MF and FA have set new milestones in Production levels. Methanol-1 plant distillation was started in Mar.24 to independently treat off spec methanol of FA plant, to prevent metal contaminants going to Acetic acid plant through MDU route during combined reprocessing.

Acetic Acid plant, established a record of highest annualized average daily production (463.97 MT) with lowest Ir-Ru catalyst consumption, showing its strength and consistency.

Ethyl Acetate plant, set an record of highest annual production & annualized average daily production (202.58 MT) with plant operation >100% load for 350 days.

CATSOL Unit, received annual order of 760.35 MT catalyst supply, marking a fivefold leap than previous years.

In WNA-I plant, the newly commissioned cooling tower (CT) cell overcomes limitation of cooling water temperature in summer & facilitates as a stand by CT cell. Safety & reliability of cooling tower is enhanced by timber replacement of two CT cells. For sustainable production during summer & monsoon, a scheme for compressor suction air chilling, modification in absorption column cooling coils & new boiler drum procurement is under progress.

Outsourced WNA tanker unloading scheme is completed.

In CNA-III plant, provision of passenger lift has been accomplished for safe and efficient movement of staff & goods.

CNA-IV new plant of 150 MTPD capacity successfully commissioned in July 2023.

In ANP plant, in rock phosphate area to unload higher capacity dumpers inside silo, increasing height of second silo (2C) is completed & third (2A) will be taken up. Modification in AN Melt transfer loop has made in-house chemical cleaning possible without affecting production. CCTV surveillance system is installed at AN Melt storage & tanker filling station.

In Steam & Power generation plant, due to hike in fuel prices, operational philosophy for power generation was optimized. For environment protection, ESP retrofitting is planned in phased manner & it will be completed in one boiler in April 2025.

In Utility Group of Plants, uninterrupted supply of all the Utilities were done. New C-2204M1 compressor was commissioned with enhanced capacity, to cater the emergency air requirement, as it is the sole compressor with emergency power supply. Resins of Cation-B & C ion exchangers were replaced to enhance efficiency of DM streams. Diesel driven fire water pump (P-1912CM1) commissioned & taken in service.

Aniline Plant was operated for 282 on-stream days. Plant was operated with occasional stoppage & at lower load as per prevailing marketing conditions of Aniline, NB & CNA. Energy conservation Turbine (ECT) was commissioned in May 2023 and 65,11,650 kWh of power was generated.

TDI Plant was operated for 324 on-stream days. Amine water was sent to TDI-II Dahej for subsequent treatment. In line with prevailing international market & to cater to customers requirement, 1543 MT of TDI was manufactured using a new Antioxidant (LeNox 1076) and sold in tankers as well as 40 MT exported in barrels. Red water was send to external agency for further treatment & disposal. In March 2024, plant suffered 7 Nil production days due to internal oil leakage in LIST reactor.

TDI-II DahejPlant was operated for 322 on-stream days with capacity utilization of 106.23%. Since commissioning in FY 2013-2014, first time plant achieved name plate capacity of 50,000 MTPA with highest annual production. Sulphuric Acid concentration plant was operated with in-house fabricated E31704 shell with PTFE sleeve of SS304L MOC. Major anxieties like hydrogenator reactor coil leakage, steam jacket failures in OTD distillation column, P-36202-line leakage, E-36811 tubes failure were successfully identified & resolved which averted long shut down.

Existing VAM units are replaced with screw chillers, enhancing reliability in plant operation. Supply of desalinated water supply from GIDC has averted scarcity anxiety in summers.

ISO 14001:2015 and ISO 45001:2018 certificates from M/s. Bureau of Veritas India Ltd for GNFC complex Bharuch are valid up to September 03, 2025.

ISO 9001:2015 and ISO 50001:2018 certificates from M/s. Bureau of Veritas India Ltd for GNFC complex Bharuch are valid up to May 07, 2027 & June 13, 2027 respectively.

ISO 9001:2015, ISO 14001:2015, ISO 45001:2018 and ISO 50001:2018 certificates from M/s. Bureau of Veritas India Ltd for GNFC Dahej complex is valid up to December 17, 2025.

Fertilizers Sales performance

Fertilizer Sales during FY 2023-2024 was marginally at par in Urea but increased 49% in ANP by compared to FY 2022-2023. The increase in ANP was due to comparatively higher availability during FY 2023-2024.

Trading operations continued and overall quantum is 10% higher compared to last year, however, there is a reduction in City Compost and SSP. Increase in quantity of DAP was registered during the period due to good supply from Hindalco (20,104 MT DAP)

Fertilizer Trading (MT)

PRODUCT	FY 23-24	FY 22-23	VARIANCE MT	% VARIANCE
City Compost	2,665	3,230	(564.75)	-17%
DAP	23,477	17,452	6,024.80	35%
SSP	4,382	6,705	(2,323.65)	-35%
MOP	1,167	816	350.90	43%
UREA (Traded)	197	666	(469.35)	-70%
Amm. Sulphate	2,180	2,149	31.40	1%
Total	34,068	31,018	3,049	10%

In addition, an attempt was made to have a stronger synergy with GATL (wholly owned subsidiary of GSFC), we sold non bulk agro products worth Rs.95.56 Lakhs through our retail outlets during FY2023-2024 and earned profit margin of Rs.18.10 Lakhs during FY2023-2024. We could offer a bigger range of agro products to our farmers and the volumes shall grow, going forward. Besides, we supplied 2,090 MT of Urea & 660 MT ANP to GATL retail outlets in Gujarat & Rajasthan.

Chemicals sales performance

The Indian Chemical industry as a whole was adversely affected in FY 2023-2024 with many chemical giants witnessing plunge in their sales volume and profits. Pricing of major industrial products of GNFC witnessed downtrend compared to the previous year. GNFCs products have better resonance due to their application and use in different end use sectors. Some of the industrial products could outperform by achieving sales milestones even in highly aggressive competitive market. The sales volume of these products has increased in range of 25-65% respectively compared to the previous year.

9.3. Materials Management

Vendor Registration / Vendor Management

To have resourceful, competitive and cost-effective vendors in approved list, continuous efforts are being made to enlarge vendor base for supply of goods. In 2023-2024, total 277 new applications were processed for vendor registration and 32 new vendors added in the vendor list. This will help in increasing competition and improvement in delivery of goods.

Feed stock availability

Since inception of GNFC, IOCL has been meeting our entire requirement of feed-stock (HSFO/LSHS-P/FOHV). The current agreement signed between GNFC and IOCL for supply of FOHV, LSHS-P and HSFO is valid up to 30-4-2029.

Long Term Contracts

Company has entered into Long Term / Annual Contracts / Agreements for supplies of most of the critical Raw Materials like Coal, FOHV/FO, Natural gas, Rock Phosphate, Benzene, Toluene, Packaging Materials etc. which are essential for continuous production.

Disposal of Used Equipment / Scrap

With the sustained team efforts, the disposal of used equipment / scraps and surplus items worth Rs.1,124.65 Lakhs was achieved during 2023-2024

LOCATION	SCRAP DISPOSAL	SURPLUS DISPOSAL	TOTAL
Bharuch	926.60	155.93	1,082.53
TDI-II Dahej	42.12	-	42.12
Total	968.72	155.93	1,124.65

Outlook for 2024-2025

On raw material front FOHV/HSFO/LSHS-P

Their prices vary depending on International crude prices. International Crude Oil prices are having upward trend on account of rising global demand supply scenario. The Crude prices are difficult to forecast especially due to current geo-political disturbances.

Coal

GNFC has been getting Indian Coal under the ambit of Fuel Supply Agreement (FSA) with M/s South Eastern Coalfields Limited (SECL) a subsidiary of Coal India Limited (CIL). FSA between GNFC and SECL is renewed w.e.f. 01-05-2023 and valid up to 30-04-2028.

Indian Coal is being utilized for the production of Urea Fertilizer in compliance of the undertaking given to SECL and accordingly, the annual contract quantity has been reduced. For the requirement of Coal towards balance plants, Imported Coal is being procured through competitive bidding and subsequently Reverse Auction is being conducted on nCode portal.

Benzene and Toluene

The Benzene and Toluene are being procured on Import Price Parity basis. During the FY2023-2024, the average annual rate on NOCD basis of both Benzene and Toluene have decreased from Rs.85,369/- to Rs.80,927/- (5.20%) and from Rs.94,237/- to Rs.91,103/- (3.33%) PMT (respectively as compared to FY 2022-2023.

Currently, the commodity prices are highly volatile. It is anticipated that, the prices will remain volatile during 2024-25 till Geo political stability established. As a result, it is expected that aromatic market will remain unpredictable during FY 2024-25. Indian Rupee may also likely to be depreciated slightly against US$ in FY 2024-2025. Exchange rate for USD / INR remains concern.

Considering above points of view, an annualized average prices of both Benzene and Toluene are expected to remain upward during FY 2024-2025 as compared to the prices of FY 2023-2024.

Rock Phosphate

Phosphoric Acid and Rock Phosphate prices have been steadily declining since July 2023. The FOB rate of Rock Phosphate stood at USD 230 PMT in the first half of 2023, but dropped to USD 228 PMT in the first quarter of 2024, and further decreased to USD 220 PMT in the second quarter of 2024. Current international market trends suggest

that Rock Phosphate prices are likely to stabilize at this level.

Since November 2023, Houthi rebels from Yemen are attacking marine vessels in the Red Sea area, causing ocean freight rates to surge by over 50%. Freight rates are expected to stabilize upon settlement of geo-political issues.

Natural Gas

Our total natural gas requirement for Urea production is met through competitive Long term /Medium Term contracts. However, if any short fall in natural gas supply is found then the same is mitigated by submitting our deficit gas requirement to EPMC (pooling for Urea gas) or arranged by floating spot tenders.

Total gas requirement for industrial products is being met by floating monthly spot tenders and/or through contract finalization on competitive bidding for Short or Medium term basis.

Projection of future price trend of natural gas is very difficult considering high volatility, supply-demand and geo-political disturbances.

9.4. Comparative Financial Performance Highlights

Charts A and B illustrate GNFCs financial performance

PARTICULARS	FY 23-24	FY 22-23	CHANGE
			VALUE	%
Revenue from operations	7,930	10,227	(2,297)	(22%)
Other income	469	361	108	30%
EBITDA @	503	1,879	(1,376)	(73%)
PBT	651	1,932	(1,281)	(66%)
PAT	485	1,464	(979)	(67%)
Book value (Rs. Per share)	558	579	(21)	(4%)
EPS (Rs. Per share)	31.67	94.20	(62.53)	(66%)

@ EBITDA Excludes Other income

On a Y-o-Y full year basis, both, the bulk chemicals as well as complex fertilizers have witnessed substantial dents in realisation and margin as the cycle has turned from sellers to buyers market.

The results for full year is not fully comparable in view of the annual shutdown during the period, which limited the availability of saleable volume. During the current financial year, Dahej operations of TDI has been stable with increased volume, which has improved the operating results. It achieved highest ever production of ~53 TMT against the plants rated capacity of 50 TMT. The Concentrated Nitric Acid (CNA-IV) plant, which became operational during the year, achieved ~90% capacity utilisation in its first year of operation.

During the FY 2023-2024, two important developments took place (a) Employee Wage Settlement (b) Equity Share Buyback worth ~Rs.802 crores including income tax.

Cash Flow Summary (_{Rs. in Crores})

PARTICULARS	FY 23-24	FY 22-23	CHANGE
			VALUE	%
Operating cash flow before working capital changes	648	1,975	(1,327)	(67%)
Net change in working capital	(404)	(17)	(387)	(2,276%)
Taxes paid	(212)	(585)	373	64%
Net cash from operating activities	32	1,373	(1,341)	(98%)
Net cash from / (used in) investing activities	1,235	(1,229)	2,464	200%
Net cash (used in) financing activities	(1,281)	(161)	(1,120)	(696%)
Net (decrease) in cash & cash equivalent	(14)	(17)	3	18%

During FY 2023-2024, the highest ever dividend payment as well as first ever Share Buyback Program of ~Rs.461 crores and ~Rs.802 crores, respectively are the main reasons for cash outflow under financing activities whereas the positive investment activities refer to liquidation of cash deposit positions held for meeting the needs of financing activities.

10. MATERIAL DEVELOPMENT IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT INCLUDING NUMBER OF PEOPLE EMPLOYED

The companys Human Resource is a highly valued contributor to the success of business of the company. Ensuring well-being of employees on the job and off the job remains top priority of the company with focused attention to provide an inclusive environment for promoting diversity in gender, age and culture and inculcating organizational values and ethics.

The company makes all possible efforts for maintaining work life balance and improving the well-being of its employees through various welfare schemes leading to an atmosphere conducive to sustained growth of the company. The company conducts various In-house training programs on safety awareness, environmental protection, health awareness, awareness on sexual harassment policy, as also, for enhancing employees skill and knowledge.

The companys proactive actions have resulted in harmonious, cordial and healthy industrial relations throughout the year which has helped in sustained growth and enrichment of value for the shareholders.

Rightsizing of the company and continuous enhancement of productivity, learning and skill sets of the employees remains the prime focus of the company.

The total strength of the Human Assets of the Company was 2431 on 31.03.2024.

11. SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS ALONG WITH EXPLANATIONS

Key financial ratios (standalone) for the financial year ended 31.03.2024 are provided here below:

PARTICULARS	UNITS	FY 23-24	FY 22-23	CHANGE(%)	REASON
Debtors turnover	Times	15.96	20.61	(23%)
Inventory turnover	Times	7.07	9.74	(27%)	a
Interest coverage	Times	40.09	357.13	(89%)	b
Current ratio	Times	4.14	3.77	10%
Debt equity ratio	Times	-	-	-
Operating profit margin	%	8.37	18.94	(56%)	c
Net profit margin	%	6.11	14.31	(57%)	d
Return on net worth	%	5.64	17.32	(67%)	e

a. Inventory turnover ratio decreased by 27% mainly due to due to decrease in revenue from operations.

b. Interest coverage ratio has decreased by 89% mainly due to lower PBT and higher interest expense compared to previous year.

c. Operating profit margin decreased by 56% mainly due to decrease in operating profit and decrease in revenue from operation.

d. Net profit margin decreased by 57% due to decrease in net profit by Rs. 979 Crores.

e. Return on net worth decreased by 67% due to decrease in net profit by Rs. 979 Crores.

12. CAUTIONARY STATEMENT

The statements in Management Discussion and Analysis describing the companys objectives, expectations or projections, may be forward looking and it is not unlikely that the actual outcome may differ materially from that expressed, influenced by wide variety of factors affecting the business environment and the companys operations. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or event.