Gujarat State Fertilizers & Chemicals Ltd Directors Report.


The Members,

Your Directors have pleasure in presenting their 57th Annual Report on the business and operations of the Company and the accounts for the Financial Year ended March 31, 2019.

1. Financial highlights of the Company

(Rs. in Crores)

Particulars Standalone Consolidated
2018-19 2017-18 2018-19 2017-18
1 Gross Sales 8574.54 6309.27 8490.67 6304.57
2 Other Income 104.90 94.67 107.53 98.95
3 Total Revenue 8679.44 6403.94 8598.20 6403.52
4 Less : Operating Expenses 7827.15 5742.67 7742.01 5739.72
5 Operating Profit 852.29 661.26 856.19 663.80
6 Less : Finance Cost 61.26 51.35 61.01 51.35
7 Gross Profit 791.02 609.91 795.18 612.45
8 Less : Depreciation 125.61 119.12 126.25 119.45
9 Exceptional Item 0 0 0 0
10 Profit before Taxes 665.42 490.79 668.92 493.00
11 Share in Profit/(Loss) of Associates 0.00 0.00 0.02 (0.08)
12 Profit before taxes after Associates 665.42 490.79 668.94 492.92
13 Taxation
- Current Tax 123.23 82.08 125.61 85.28
- Deferred Tax (net) 53.11 49.74 54.81 50.69
- Mat Credit recognized (6.89) (15.45) (6.89) (15.45)
- Earlier year tax 2.29 (101.31) 2.29 (101.31)
14 Profit after taxes 493.68 475.73 493.13 473.71
15 Non-controlling Interest 0.00 0.00 0.001 0.06
16 Other comprehensive income arising from
re-measurement of defined benefit plan (8.37) (2.11) (8.35) (2.11)
17 Balance brought forward from last year 432.06 243.96 473.52 287.74
18 Amount available for appropriations 917.37 717.57 958.30 759.39
19 Payment of Dividend
- Dividend 87.66 18.02 87.66 17.85
- DDT Paid 87.66 18.12 87.96 17.90
20 Transfer to General Reserve 380.00 180.00 380.00 180.00
21 Leaving a balance in the Profit & Loss Account 431.69 432.06 472.53 473.52

2. Dividend

Your Directors are happy to recommend a dividend @ 110%, i.e. Rs. 2.20/- per Equity Share (Face value of Rs. 2/- each) on 39,84,77,530 shares (Previous Year - 110%, i.e. Rs. 2.20 per share on 39,84,77,530 Equity Shares of Rs.2/- each) for the financial year ended 31st March, 2019. The net outgo on account of Dividend shall be Rs. 105.68 Crores including Corporate Dividend Tax. The Dividend shall be paid to those members, whose names shall appear on the Register of Members of the Company on the Book Closure Date i.e. on 12/09/2019.

3. Brief description of the Companys working during the year/ State of Companys affair

Your directors wish to report that your Company has achieved turnover of Rs. 8574.54 Crores for the year ended March 31, 2019 as against Rs. 6309.27 Crores (FY 17-18) on standalone basis, which is higher by 36% (Rs.2265.27 Crores) when compared to the previous financial year.

Similarly, for the year under review (FY 2018-19), Profit before Tax (PBT) was Rs. 665.42 Crores and Net Profit (Profit after Tax) was Rs. 493.68 Crores as against PBT of Rs. 490.79 Crores and PAT of Rs. 475.73 Crores for the previous financial year.

4. Material changes and commitments

The Company has not made any material changes or commitments which affect the financial position of the Company between the end of the financial year of the Company to which the financial statements relate and the date of signing of this report.

5. Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companys operations in future.

There are no such orders except those which have been appropriately challenged before the judiciary and no impact on going concern status and Companys operation in future of such matters are expected or visualised at the current stage at which they are.

6. Details in respect of adequacy of internal financial controls with reference to the Financial Statements.

Your Company has an internal Control System which commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function lies with the Audit Committee of Directors. The Audit Committee monitors and evaluates the efficacy and adequacy of internal control systems, accounting procedures and policies. Based on the report of Internal Auditors, significant audit observations and actions taken on such observations are presented to the Audit Committee of the Board.

7. Details of Subsidiary/Joint Ventures/Associate Companies

During the year under review, Companies listed below are the Subsidiary Company or Associate Companies:

Subsidiary Company - GSFC Agrotech Limited.
Associate Companies - Vadodara Enviro Channel Limited
Gujarat Green Revolution Company Limited
Gujarat Data Electronics Limited
Karnalyte Resources INC
Subsidiary of Subsidiary - Gujarat Arogya Seva Private Limited.

There were no new additions / deletions during the year. A report of the performance and financial position of each of the subsidiaries, associates and joint venture companies as per the Companies Act, 2013 is provided at Annexure - A to the Consolidated Financial Statement and hence not repeated here for the sake of brevity. The Company does not have any material subsidiary in terms of Companys Act, 2013 read with SEBI (Listing Obligation & Disclosure Requirement) Regulations.

8. Listing of Shares & Depositories

The Equity Shares of your Company are listed on the BSE Limited (BSE) and National Stock Exchange of India Ltd. (NSE). As approved by the shareholders, an application for voluntary delisting of Equity Shares from Calcutta Stock Exchange Association Ltd., Kolkatta, was made, however, the approval for delisting is still awaited. The listing fee for the FY 19-20 has been paid to both the Stock Exchanges.

Your Directors wish to state that the Equity Shares of your Company are compulsorily traded in dematerialized form w.e.f. 26/06/2000. Presently, 97.72% of shares are held in electronic/ dematerialized form.

9. Report on Corporate Governance And Management Discussion And Analysis Report To Shareholders

Your Company has complied with all the mandatory requirements of Corporate Governance norms as mandated by SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

A separate report on Corporate Governance together with the Certificate of M/s. Samdani Kabra & Associates, Company Secretaries, Vadodara forms part of this Annual Report. The Management Discussion & Analysis report also forms part of this Annual Report.

10. Business Responsibility Reporting

Business Responsibility Report forms part of this Annual Report at annexure "F" as required under Regulation 34(2) (f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

11. Fixed Deposits

During the year 2018-19, your Company has not accepted/ renewed any Fixed Deposit. Your Directors wish to report that there are NIL Fixed Deposits aggregating Rs. NIL which have remained unclaimed by Depositors, as on 31st March, 2019. Letters reminding them to seek repayment have been sent. Upto and including the date of this report, NIL deposits amounting to Rs. NIL have been repaid.

During the year, the Company has transferred a sum of Rs. 1.25 Lacs being the unclaimed deposits and interest amount thereon to the Investors Education and Protection Fund (IEPF) as required in terms of Section 125 of the Companies Act, 2013. The Company has discontinued accepting new deposits since 15.11.2005, and renewing the deposits since 31.03.2009.

12. Insurance

All the properties and insurable interests of the Company, including the buildings, plant & machinery and stocks have been adequately insured. Also, as required under the Public Liability Insurance Act, 1991, your Company has taken the appropriate insurance cover.

13. Expansion & Diversification

Projects under development

1000 MTPD Phosphoric Acid and 3000 MTPD Sulphuric Acid Plant at Sikka Unit:

As a part of backward integration, your Company is contemplating to set up 1000 MTPD Phosphoric Acid and 3000 MTPD Sulphuric Acid Plant on EPC basis at its Sikka Unit. This will reduce the import dependency for sustaining the plant operation on continuous basis for production of Phosphatic Fertilizers at Sikka Unit.

For Phosphoric Acid, Company has selected the technology supplier for supply of License & Know-How and Basic Engineering Package. Your Company is in the final discussions with Sulphuric Acid Process Licensors for supply of Technology and Basic Engineering Package. Company is expecting to start construction of this project in first quarter of Financial Year (FY) 2020-21. Company has already received No Objection Certificate (NoC) from GPCB for the execution of this Project.

Expansion of Sikka Jetty for better Utilisation :

As present Sikka Jetty and its associated infrastructure facilities are under unutilized. Your Company is contemplating to expand its jetty for handling solid cargo and for handling of other liquid chemicals by developing necessary infrastructure / storage facilities at jetty and Chemical Shore Terminal (CST).

After expansion and development of jetty / CST, Rock Phosphate required for the proposed Phosphoric Acid Plant and other fertilizers like Urea, DAP for trading purpose will be imported at jetty. Also, other liquid chemicals like Sulphuric Acid / Methanol, Cyclohexane etc. can be imported and stored for captive use / trading purpose.

Your Company has also undertaken feasibility study for the expansion of Sikka jetty and is now in the process of carrying out Detail Project Report, getting the Environment Clearance and finalising the joint venture partners for the project.

Methyl Methacrylate (MMA) Plant at Dahej :

Your Company is also contemplating to set up 64,800 MTPA MMA plant at Dahej and for which it has executed the required agreements with technology supplier M/s Mitsui Chemicals Incorporation (MCI), Japan for supply of License Know-How, Process Design Package and Catalyst. Your Company is expecting the final Process Design Package (PDP) package sometime in August-Sept 2019 and based on that it is expected that bids for EPC package shall be finalized by the first quarter of FY 2020-21.

Caprolactam Plant at Vadodara :

Your Company is contemplating to set up 50,000 MTPA Caprolactam Plant at Vadodara based on procurement of major raw material Cyclohexanone. It is in discussions with EPC Contractors for this Project. Your Company is expecting the final commercial bids by the 3rd Quarter of FY 2019-20. Also, your Company is in process of obtaining environmental clearance for the project.

14. Information regarding conservation of energy, technology absorption, foreign exchange earnings and outgo and particulars of employees etc.

Information as required under Section 134 (3) (m) of Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 are enclosed in Annexure "E" forming part of this report.

The details relating to Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been disclosed in point # 5 of Corporate Governance Report.

15. Corporate Social Responsibility (CSR)

The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. As a part of its initiatives under "Corporate Social Responsibility", the Company has undertaken projects in the areas of education, livelihood, health, water and sanitation. The Annual Report on CSR activities is enclosed as Annexure A. CSR Policy adopted by the Company is placed on the Companys website at

16. Directors

A) Changes in Directors and Key Managerial Personnel

Shri Arvind Agrawal, IAS has been appointed w.e.f. 04.06.2018 as a rotational Director in place of Shri Anil Mukim, IAS, Director of the Company who was in the office till 07.03.2018.

Shri Sujit Gulati, IAS has been appointed as Managing Director of the Company w.e.f.13.07.2018 (afternoon) vice Shri A. M. Tiwari, IAS. (Managing Director till 13.07.2018 (forenoon)). Shri Sujit Gulati, IAS was Director of the Company for the period from 25.07.2016 to 13.07.2018.

Shri Raj Gopal, IAS, ceased to be a Director of the Company w.e.f. 01.02.2019. His resignation has been taken on record by the Board of Directors.

Shri Arvind Agrawal shall be liable to retire by rotation at the ensuing Annual General Meeting, has offered himself for re-appointment.

The appropriate resolution/s and brief resume of Directors under appointment/ re-appointment at 57th Annual General Meeting is annexed to the Notice convening the 57th Annual General Meeting and it forms the integral part of this Annual Report and your Directors recommend the same for your approval.

B) Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligation & Disclosure Requirement) Regulations, 2015 the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of its committees. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report which forms the part of this Annual Report.

C) Appointment and Remuneration Policy

The Board has on the recommendation of the Nomination and Remuneration Committee, framed a policy for selection and appointment of Directors, senior management and their remuneration. The details of Remuneration Policy and its weblink are contained in the Corporate Governance Report.

D) Meetings

During the year, Five Meetings of the Board of Directors and Five meetings of the Audit Committee were held. The composition of Board and Committees along with details of attendance is contained in Corporate Governance Report.

17. Details of establishment of vigil mechanism for Directors and Employees

The Company has a Vigil Mechanism Policy in place to deal with instances, if any, of the fraud, mismanagement, misappropriations, if any and the same is placed on the Companys website. The details of the policy as well as its weblink are contained in the Corporate Governance Report.

18. Particulars of loans, guarantees or investments under section 186

Particulars of loans given, investments made, guarantee given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement.

Your Directors would further like to inform that in continuation to the reporting made in previous year regarding the investments made by the Company in Bhavnagar Energy Company Limited (BECL) as directed by Government of Gujarat, it is further informed that the Company was holding 5,92,20,000 equity shares of Rs. 10/-each, aggregating Rs.59.22 Crores in BECL which represents 5.95% of BECLs total equity share capital as on 31.03.2018.

During the year company has also acquired 1,20,00,000 shares of Rs. 10 each having value of Rs. 12.00 Crores comprising total holding of 7,12,20,000 equity shares having value of Rs. 71.22 Crores.

Government of Gujarat, Energy & Petrochemicals Department approved proposal of merger of BECL into Gujarat State Electricity Corporation Limited (GSECL). The said merger shall be carried out by the State Government under the provisions of Gujarat Electricity Industry (Reorganization & Regulation) Act, 2003. By virtue of that, the Government of Gujarat issued a notification dated 27th August, 2018 inter-alia determining the terms and conditions on which the said merger shall be made effective.

As per the terms, the Transferee Company i.e. GSECL shall issue one equity share to each shareholder of BECL against total number of equity shares of BECL held by each of such shareholders as on the date of notification of this scheme. Issue of equity shares by GSECL to the shareholders of BECL shall be the consideration for shareholders of BECL in respect of transfer of the undertaking of BECL and extinguishment of their rights as shareholder of BECL.

Hence, all rights attached thereto by virtue of shareholding at BECL gets extinguished and there shall be diminution of value of shares by effect of this notification during the year under report i.e. 2018-19.

19. Particulars of contracts or arrangements with related parties

All related party transactions that were entered into during the financial year were on an arms length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel and other Designated Persons which may have a potential conflict with the interest of the Company at large.

All Related party transactions were placed before the Audit Committee and also the Board of Directors for Approval. Prior omnibus approval of the Audit Committee is obtained and a statement giving details of transactions, if any, shall be placed before the Audit Committee meeting as mandated. The Company has developed a mechanism for identification of related party transactions and the Company is also having the system of monitoring of such transactions.

The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto have been disclosed in Annexure "D" to this report.

20. Managerial Remuneration:

Details as required pursuant to Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are contained in Corporate Governance Report.

21. Risk management policy

The details of such Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Boards Report.

22. Directors Responsibility Statement:

Pursuant to Section 134 (3) (c) of the Companies Act, 2013, your Directors confirm that: a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b. The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; c. The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. The Directors had prepared the annual accounts on a going concern basis; e. The Directors, in the case of a listed Company, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f. The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

23. Auditors:

(a) Statutory Auditors on recommendation of the Audit Committee, the Board of Directors has recommended for the appointment of M/s. T. R Chadha & Co. LLP, Ahmedabad, Chartered Accountants (Firm Registration No.006711N/ N500028) as the Statutory Auditors for the second term of three consecutive years i.e. to hold the office from the conclusion of 57th Annual General Meeting till the conclusion of 60th Annual General Meeting of the Company to be held in the year 2022.

(b) Cost Auditors:

In terms of the Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014, the Company is required to maintain cost accounting records and get them audited every year.

The Board of Directors of your Company, on the recommendations made by the Audit Committee has approved appointment of M/s Diwanji & Company, Cost Accountants, Vadodara (Firm Registration Number 000339) as the Cost Auditors of your Company to conduct the audit of cost records for the Financial Year 2019-20. The remuneration proposed to be paid to the Cost Auditor is placed for your ratification at the ensuing 57th Annual General Meeting. The Cost Auditors for the F.Y. 2018-19 was filed within stipulated time.

(c) Internal Auditors:

Your Company has appointed M/s Talati & Talati, Chartered Accountants, Vadodara, as Internal Auditors of Baroda & Sikka Unit for Financial Year i.e. 2019-20. M/s K. N. Mehta & Co., Chartered Accountants, Vadodara have been appointed as Internal Auditors for the Companys Polymers Units.

(d) Secretarial Auditors & Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Niraj Trivedi, Practicing Company Secretary to undertake the secretarial audit of the Company. The Report of the Secretarial Auditor is enclosed as Annexure "B".


There are no comments/ observations, reservations or adverse remarks in the Auditors Report and Secretarial Audit Report and hence no clarifications need to be given on their clean report.

25. Extract of the annual return:

Link of annual return as per the Companies Amendment Act, 2017 is as below;

26. Human Resources

Your Directors are happy to acknowledge that the well positioned human resource of the Company have been key drivers in implementing ideas, polices, cultural and behavioral aspects of the organization and ultimately with their outstanding performance has helped the Company to realize its objectives. Your Directors are happy to place on record their appreciation for highly potential, consistent and ethical employees for their remarkable contribution to the Company.

27. Acknowledgements

Your Directors place on record their appreciation for the overwhelming co-operation and assistance received from the Government of Gujarat, Government of India, Bank of Baroda and other Banks and agencies. Your Directors also wish to express their gratitude to the investors for their continued support and faith reposed in the Company.

For and on behalf of the Board
Place: Fertilizernagar Dr. J N Singh, IAS
Date : 09/08/2019 Chairman