Gujarat State Fertilizers & Chemicals Ltd Directors Report.

To The Members,

Your Directors have pleasure in presenting their 56th Annual Report on the business and operations of the Company and the accounts for the Financial Year ended March 31, 2018.

1. Financial highlights of the Company

(Rs. in Crores)








1 Gross Sales





2 Other Income





3 Total Revenue





4 Less : Operating Expenses





5 Operating Profit





6 Less : Finance Cost





7 Gross Profit





8 Less : Depreciation





9 Exceptional Item





10 Profit before Taxes





11 Taxation
- Current Tax





- Deferred Tax (net)





- Mat Credit recognized





- Current tax relating to prior years





12 Profit after taxes





13 Non-Controling Interest





14 Other comprehensive income arising from
re-measurement of defined benefit plan





15 Balance brought forward from last year





16 Amount available for appropriations





17 Out of which your Directors have proposed appropriation and transfer as under:
a) Proposed dividend on equity shares





b) Tax on proposed dividend





c) General Reserve





18 Leaving a balance in the Profit & Loss Account





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, 2018. The net outgo on account of Dividend shall be Rs. 105.51 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 13/09/2018.

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. 6309.27 Crores for the year ended March 31, 2018 as against Rs. 5476.88 Crores (FY 17-18) on standalone basis, which is higher by 15% (Rs.832.39 Crores) when compared to the previous financial year.

Similarly, for the year under review (FY 2017-18), Profit before Tax (PBT) was Rs. 490.80 Crores and Net Profit (Profit after Tax) was Rs. 475.74 Crores as against PBT of Rs. 374.88 Crores and PAT of Rs. 419.50 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 as 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 18-19 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, 97.42% 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. S. Samdani & 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 is enclosed as Annexure ‘F to this Annual Report as required under Regulation 34(2) (f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

11. Fixed Deposits

During the year 2017-18, your Company has not accepted/ renewed any Fixed Deposit. Your Directors wish to report that there are 2 Fixed Deposits aggregating Rs. 0.25 Lacs which have remained unclaimed by Depositors, as on 31st March, 2018. Letters reminding them to seek repayment have been sent. Upto and including the date of this report, 0 deposits amounting to Rs 0 Lacs have been repaid.

During the year, the Company has transferred a sum of Rs. 2.40 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

Caprolactam Quality project (CQ project) was successfully commissioned on 25th February 2018 and officially inaugurated on 28th February 2018. This project is for improvement of quality of extract Caprolactam made Caprolactam-I Plant of GSFC to produce international grade Caprolactam enhancing its quality. GSFC replicated existing Lactam Section of Caprolactam-I Plant which was commissioned in the year 1992 on BASF technology and carried out their role as a Licenser of the process legally. The project is capable of production of 50000 MTPA International grade Caprolactam from Caprolactam extract. M/s Simon India Limited was awarded the contractor this plant on EPC. The total project cost of CQ Project is @ 71 Crores including taxes. This project is only one of its kinds in India for import substitute product in petrochemical industry.

The plant started producing International grade Caprolactam from the very first day of its commissioning underlining GSFCs operational capabilities. At full load capacity of this plant, it is expected to produce @1000 MT of additional Caprolactam from lactam extract and @3500 MT of additional Ammonium Sulphate per annum as byproduct. With the commissioning of this project GSFC expects to improve their profitability significantly. It also improves operational flexibility and consistent quality of international grade Caprolactam.

GSFC has successfully commissioned its Film Grade Nylon-6 (Dry blending unit) Project on 26th February 2018.The plant was officially inaugurated on 28th February 2018.This plant can produce 15 MT per Day of Film Grade Nylon (5000 MT per annum) of varieties like Lubricated Chips, Nucleated chips and Combination of Lubricated and Nucleated chips. This is first of its kind project in India and provides leverage for import substitution. GSFC had faced a very challenging task of completing this project which was based on PEPC-Germany technology. M/S PEPC-Germany backed out of the project midway due to their poor financial position leaving entire investment of Rs. 15 Crores at stake with a possible long delay. Being a LSTK project, the process recipe was a secret which party did not reveal. GSFC projects execution team developed recipe and Instrumentation logic control along with piping and structural work without drawings of the project and completed mechanically within house efforts in short period. From the first trial production, quality film grade Nylon-6 could be achieved with quantity with negligible hassles endorsing technical capabilities of GSFC Projects execution team. This plant will provide an edge for selling of Nylon-6 with value added benefit and provide direct import substitution to the country.

Projects under development

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

As a part of backward integration, Company is contemplating to install 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.

Company is in process of discussions with Phosphoric Acid Process Licensors for supply of Basic Engineering Package based on which the Company proposes to execute the project on EPC basis. The Company is expected to finalise the Licensor by August/September 2018. Simultaneously the Company is in final discussion with Rock Phosphate Suppliers for execution of Memorandum of Understanding (MoU) to ensure availability of rock phosphate on long term basis. Company has already achieved NoC from GPCB for execution.

Expansion of Sikka Jetty for better utilisation :

As present Sikka jetty and its associated infrastructure facilities are highly unutilized, Company is contemplating to expand the present jetty for solid handling and 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 new 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. Company has got done feasibility study for the expansion of Sikka jetty and is now in the process of getting the Environment Clearance and finalising the joint venture partners for this project.

Ammonia Urea Complex in Republic of Congo (RoC) :

To avail benefits of availability of Natural gas at reasonable price and active interest shown by Government of RoC, Company is contemplating to install 800 MTPD Ammonia and 1100 MTPD Urea plants in RoC wherein Government of RoC will also have equity participation.

PDIL has completed Techno Economic Feasibility (TEFR) for the Project and based on initial assessment Project seems to be feasible. Company has executed a Non binding term sheet with G-RoC to form a basis of discussions for the Project. Company is process of discussions with bankers, technology suppliers and EPC contractors for their equity participation. G-RoC has applied for Line of Credit from GoI for this project and the project will be further taken based on the approvals received.

Methyl Methacrylate (MMA) Plant at Dahej:

Company is contemplating to install 50,000 MTPS MMA plant at Dahej for which land acquisition has been completed. Company has entered into an understanding with OPaL for supply of the major raw material C4 Raffinate along with the mode of execution of the project. Company have also finalised the M/s Mitsui Chemicals Incorporation (MCI) as the technology suppliers and the requisite agreements will be shortly executed for supply of License Know-How, Process Design Package and Catalyst. The Company is expected to finalise the EPC Contractor for this project by June 2019.

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 Company does not have any employee falling within the purview of Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and hence such Particulars of Employees are not included.

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

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 (till 07.03.208).

Shri Raj Gopal, IAS has been appointed w.e.f. 08.08.2018 as a rotational director in place of Shri Sujit Gulati, IAS.

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 of the Company till 13.07.2018).

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

The brief resume of Directors with regard to appointment/ re-appointment at 56th Annual General Meeting is annexed to the Notice convening the 56th Annual General Meeting, which forms the integral part of this Annual Report.

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, Six 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 GSFC is one of the promoters of Bhavnagar Energy Company Limited (BECL) and currently holds 5,92,20,000 equity shares of Rs.10/- each, aggregating Rs.29.31 Crores in BECL, which represents 5.95% of BECLs total equity share capital.

Energy & Petrochemicals Department (EPD), Government of Gujarat (GoG) in May, 2018, in-principle, approved the proposal of merger of BECL into Gujarat State Electricity Corporation Ltd. (GSECL). GSECL is a wholly owned subsidiary of Gujarat Urja Vikas Nigam Limited (GUVNL). The merger shall be carried out by the State Government (GoG) under the provisions of Gujarat Electricity Industry (Reorganization & Regulation) Act, 2003. By virtue of which, upon issuance of notification by GoG, the Scheme of Merger of BECL with GSECL shall stand approved and the transfer and vesting of the undertaking/s of BECL shall become operative and effective. No further actions shall be required to be taken by BECL or GSECL or any other persons including the promoters of BECL thereafter.

All promoters of BECL have made representation to calculate and fix the share exchange ratio based on the fair valuation approach. The precise financial impact of this merger would be known only after merger ratio is notified by GoG and post-merger valuation of the equity shares of GSECL. The impact of merger shall be appropriately dealt into the books of accounts once it actually gets implemented.

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

The Board of Directors has on recommendation of the Audit Committee, recommendation of the Audit Committee, 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 period of two years i.e. to hold the office from the conclusion of this Annual General Meeting till the conclusion of 57th Annual General Meeting of the Company to be held in the year 2019.

The Companies Amendment Act, 2017 read with notification S O 1833(E) dated 7th May, 2018 has deleted the provision requiring annual ratification of the appointment of Auditors. Therefore a resolution relating to the ratification of appointment of Auditors (M/s. T R Chadha & Co., LLP, Ahmedabad, the Statutory Auditors) of the Company, who shall continue to hold office from the conclusion of 56th Annual General Meeting of the Company till the conclusion of 57th Annual General Meeting of the Company, has not been included in the notice convening 56th Annual General Meeting.

(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 A G Dalwadi & Company, Cost Accountants, Ahmedabad (Firm Registration Number 100071) as the Cost Auditors of your Company to conduct the audit of cost records for the Financial Year 2018-19. The remuneration proposed to be paid to the Cost Auditor is placed for your ratification at the ensuing 56th Annual General Meeting. The Cost Auditors for the F.Y. 2017-18 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. 2018-19. M/s K. N. Mehta & Co., Chartered Accountants, Vadodara and M/s Parikh Mehta & Associates, Chartered Accountants, Vadodara have been appointed as Internal Auditors for the Companys Fiber and Polymers Units respectively.

(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.

24. Auditors Report

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

Extract of Annual Return in Form No. MGT 9 is enclosed as Annexure C.

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


DR. J. N. Singh, IAS


Place: Fertilizernagar Date : 10/08/2018