gujarat state fertilizers chemicals ltd Management discussions


MACRO-ECONOMIC STATEMENT 2022-23

Overview of the Economy

The global economys recovery from the COVID-19 pandemic was disrupted by the Russia-Ukraine conflict in February 2022, causing disruptions in supply chains and price increases for critical commodities. This further aggravated existing inflationary pressures triggered by uneven demand recovery, loose monetary policy, and fiscal stimulus in many advanced economies. Emerging Market Economies (EMEs) were also affected by the spike in commodity prices, extreme weather conditions, and Chinas zero COVID-19 policy, leading to inflationary pressures.

To combat inflationary pressures, central banks globally have raised interest rates and ended bond purchase programs, resulting in the tightening of financial conditions and an outflow of capital from EMEs into a traditionally safer US market. The stronger dollar and higher commodity prices have resulted in higher current account deficits and inflationary pressures for many developing economies.

Indias growth and macroeconomic stability were threatened by global developments. Rising foreign commodity prices and extreme weather conditions in India like unseasonal rains and extreme heat kept food inflation high. Retail inflation exceeded the Reserve Bank of Indias (RBI) tolerance range in January 2022 and remained outside the target range for the next 11 months. In November and December 2022 retail inflation returned to below the upper end of the target range of 6% due to pre-emptive measures taken by the government, easing of global commodity prices, and monetary policy decisions of RBI.

The US Federal Reserves monetary tightening caused an outflow of portfolio investments from India, resulting in pressure on the Rupee, which depreciated by 8.3% against the US dollar between April and December 2022. Indias current account deficit (CAD) widened in FY 2022-23 due to higher global prices for crude oil, edible oils, and fertilizers.

The rebound in consumption, driven by demand for contact-intensive services, has led to steady growth momentum in service activity in Q3 of FY 2022-23. Purchasing Managers Index (PMI) Services registered strong expansion, and the growth impetus in rail freight and port traffic remains upbeat, with improvement in the domestic aviation sector. Higher output in the manufacturing and services sectors raised the composite PMI, signaling a strong pace of expansion.

GST collections continue to grow. The total gross GST collection for 2022-23 stands at Rs. 18.10 Lakh crores which is 22% higher than that last year. Other high-frequency indicators, such as passenger traffic, e-way bills, and electronic toll collection, indicate healthy domestic economic activity.

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. Rising employment and substantially increasing private consumption, supported by rising consumer sentiment, will support GDP growth.

Economic growth

Indias economy has shown resilience due to its large domestic market and loose integration in global value chains. Real GDP of India grew by 9.5% in H1 of FY 2022-23 which is higher than major economies The growth momentum in Q2 has been sustained in subsequent quarters of FY 2022-23.

Real GDP in the year 2022-23 is estimated to attain a level of Rs. 160.06 Lakh crore (as per the provisional estimates released by NSO on 31st May 2023) thereby showcasing a growth of 7.2% in 2022-23 as compared to 9.1% in 2021-22.High-frequency indicators like Purchasing Managers Index (PMI) in manufacturing and index of industrial production have shown significant improvement, with growth in all sub-sectors except crude oil. Robust expansion in PMI services, indicative of service sector activity, observed since July 2022.

The growth in Nominal GDP (current prices) during 2022-23 is estimated to attain a level of Rs. 272.41 Lakh crore, as against Rs. 234.71 Lakh crore in 2021-22, showing a growth rate of 16.1% as per provisional estimates released by NSO on 31st May 2023.

As per press release by PIB dated 31st July 2023, Gross Fixed Capital Formation (GFCF) in the Indian economy has increased from

Rs. 32.78 Lakh crore (constant 2011-12 prices) in 2014-15 to Rs. 54.35 Lakh crore in 2022-23 (Provisional Estimates).

The Government has continued to support the investment activity with capital expenditure. Private investment also picked up in FY 2022-23. As per union budget exports are estimated to grow at 12.5% in FY 2022-23 despite sustained supply chain disruptions and an uncertain geopolitical environment.

The economic growth of India in FY 2022-23 has been driven by private consumption and capital formation. To support economic growth further, the expansion of public digital platforms and path-breaking measures such as PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive schemes have been implemented. These measures aim to boost manufacturing output and facilitate efficient logistics operations in the country. With such initiatives, India is poised to become a leading player in the global supply chain, which is expected to have a positive impact on the economy.

According to the Economic Survey, the introduction of 5G services marked a significant development in Indian telecoms. While the digital revolution began with Aadhaar as a tool for door-to-door service delivery, UPI strengthened the system for online payments. Additionally, there are other programmes like CoWIN, e-RUPI, TReDS, Account Aggregators, ONDC, Open Credit Enablement Network (OCEN), etc.

India will have the chance to influence the global agenda and promote its interests while holding the G20 presidency. Government of Indias priorities would include advancing equitable and sustainable growth, enhancing digital access and infrastructure, and bolstering the international trading system.

Agriculture

Indias agriculture sector has been witnessing robust growth. As per the provisional estimates of National Income, released by The

Ministry of Statistics and Programme Implementation (MoSPI) on 31st May23, the growth of GVA (Gross Value Added) of agriculture and allied sectors (at 2011-12 prices) is 4.0% for the FY 2022-23. The share of GVA of agriculture and allied sectors in total economy at current prices for 2022-23 is 18.3%.

Indias public digital infrastructure expansion is leading to accelerated financial inclusion and rapid formalization of the economy, which are growth differentiators not only for FY 2023-24 but also in the years ahead.

PM-PRANAM

"PM Programme for Restoration, Awareness, Nourishment and Amelioration of Mother Earth" has been launched to incentivize States and Union Territories to promote alternative fertilizers and balanced use of chemical fertilizers.

Union Budget for FY 2023-24 major highlights for Agriculture Sector

1. Aims to increase capital expenditure and ensure equitable infrastructure investments across the country. The government is committed to the Four Is - Infrastructure, Investment, Innovation, and Inclusion - in the next 25 years, and is focusing on enhancing infrastructure development through increased capital expenditure.

2. GOBARdhan scheme: Establishment of 500 new ‘waste to wealth plants under GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme have been proposed for promoting circular economy. These will include 200 compressed biogas (CBG) plants, including 75 plants in urban areas, and 300 community or cluster-based plants at total investment of Rs. 10,000 crore.

3. Bhartiya Prakritik Kheti Bio-Input Resource Centres: Centre to facilitate one crore farmers to adopt natural farming over the next three years. For this, 10,000 Bio-Input Resource Centres to be set-up, creating a national-level distributed micro-fertilizer and pesticide manufacturing network.

4. Agriculture Accelerator Fund to be set-up to encourage agri-startups by young entrepreneurs in rural areas.

5. Global Millets (Shree Anna): To make India a global hub for ‘Shree Anna, the Indian Institute of Millet Research, Hyderabad will be supported as the Centre of Excellence for sharing best practices, research and technologies at the international level. The year 2023 has been declared as the International Year of Millets (IYM) by the United Nations General Assembly (UNGA).

Enhanced Access to Agricultural Credit

The Government had set a target of Rs. 18.5 Lakh crores in agricultural credit flow in 2022-23. The Government had consistently increased this target every year and it has also been able to continuously surpass the target set every year over the past several years. In 2021-22, it was about 13 per cent more than the target of Rs. 16.5 Lakh crores.

Kisan Credit Cards have been issued to 3.89 crore eligible farmers with a KCC limit of Rs. 4,51,672 crore as on December 2022. With the Government of India extending the KCC facility to fisheries and animal husbandry farmers in 2018-19, now over 1.0 lakh (as on 17th October 2022) KCCs have been sanctioned for the fisheries sector and 9.5 Lakh (as of 4 November 2022) for the animal husbandry sector.

Union Budget 2023-24: Rs. 20 Lakh crore agricultural credit targeted at animal husbandry, dairy and fisheries.

Minimum Support Price (MSP)

Government has increased Minimum Support Price (MSP) for 22 mandated Kharif, Rabi and other commercial crops with at least 50 per cent margin over the all-India weighted average cost of production from 2018-2019. Relatively higher MSP was given to pulses and oilseeds in order to keep pace with the changing dietary patterns and achieve the goal of self-sufficiency.

i. MSP for Paddy (common) has increased to Rs. 2040 per quintal in 2022-23 from Rs. 1310 per quintal in 2013-14.

ii. MSP for Wheat increased from Rs. 1400 per quintal in 2013-14 to Rs. 2125 per quintal in 2022-23.

Food grain Production

As per third advance estimates released by Central Statistical Office (CSO) - Government Of India – MoSPI , total food grain production in the country is estimated at record 331 MMT which is higher by 5% as compared to previous year 2021-22.

The United Nations, at the behest of the Government of India, declared 2023, the International Year of Millets. The Government of India proposed and sponsored the International Year of Millets (IYM) 2023, which was accepted by the United Nations General Assembly. Government of India has emphasized making IYM 2023 a peoples movement and has positioned India as the global hub for millets.

PM-KISAN

The Pradhan Mantri Kisan Samman Nidhi Yojana (PM-KISAN) is a central sector scheme launched on 24th February, 2019 at Gorakhpur, Uttar Pradesh, to supplement financial needs of land holding farmers.

Under the PM Kisan Yojana, financial assistance of Rs. 6,000 per year is provided in three equal installments every year in the bank accounts of crores of farmers in India.

Government of India has made cash transfers totaling Rs. 2.4 Lakh crore as on 9th March 2023 to around 11 crore farmers under the PM-Kisan scheme.

Allocation for PM KISAN (Rs. 60,000 crores) remained the same in both the revised estimates 2022-23 and the budget estimates 2023-24.

Pradhan Mantri Fasal Bima Yojana (PMFBY)

Pradhan Mantri Fasal Bima Yojana (PMFBY) enters its 7th year of implementation. Over 36 crore farmer applications have been insured under PMFBY. Rs. 1.32 Lakh crore claim amounts have been disbursed to the insured farmers under PMFBY as on March 23 2023.

Union Minister of Agriculture & Farmers Welfare launched NCIPs (National Crop Insurance Portal) digitized claim settlement module namely DigiClaim under the ambit of Pradhan Mantri Fasal Bima Yojana (PMFBY) on 23rd March 2023 at Krishi Bhawan, New Delhi. With the launch of the module, claims can now be disbursed electronically, which will benefit the respective farmers of six states.

With the launch of a DigiClaim Module, insurance claims totaling Rs. 1260.35 crore have been disbursed on March 23, 2023 to insured farmers in the states of Rajasthan, Uttar Pradesh, Himachal Pradesh, Chhattisgarh, Uttarakhand and Haryana with the click of a button, and the process will continue as and when the claims are released.

The ongoing campaign ‘Meri Policy Mere Hath door-step campaign was launched to ensure that all farmers are well informed about their land records, policies, and the PMFBYs claim and grievance redressal process. ‘Meri Policy, Mere Haath campaign has been monumental in enhancing the awareness around PMFBY at the grass root levels.

Ayushman Bharat (PMJAY)

The Ayushman Bharat PMJAY is a health insurance scheme launched in 2018, aiming to provide a health cover of Rs. 5 Lakh per family per year for secondary and tertiary care hospitalization. It aims to over 10.74 crore poor and vulnerable families (or 50 crore beneficiaries) from the bottom 40% of the Indian population. More than 23.19 crores Ayushman cards have been created against verified beneficiaries as on 9th March 2023.

The budget for the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) — the national public health insurance fund, allocated Rs. 7,200 crore for FY 2023-24.

Industry

The cumulative growth rate of the combined Index of Eight Core Industries (ICI) during 2022-23 is reported as 7.8% as compared to the corresponding period of last year. The Eight Core Industries comprise 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).

Cumulative index of production of Coal, Natural Gas, Petroleum Refinery Products, Fertilizers, Steel, Cement and Electricity increased by 14.8%, 1.6%, 4.8%, 11.3%, 9.3%, 8.7%, 8.9% respectively, whereas that of Crude Oil production declined by 1.7% during 2022-23 over the corresponding period of previous year.

The Aatmanirbhar Bharat and Make in India programmes have been significant initiatives to enhance Indias manufacturing capabilities and exports across industries. The sector-specific Production Linked incentives (PLI) schemes, including PM MITRA, introduced in the aftermath of the pandemic is expected to help India become a global manufacturing hub and attract foreign investment, which will create jobs and boost economic growth.

PM MITRA

PM Mega Integrated Textile Regions & Apparel (PM MITRA) Park will be set up in Gujarat and six other states, namely, Tamil Nadu, Telangana, Karnataka, Maharashtra, Madhya Pradesh and Uttar Pradesh. As per original scheme the seven mega textile parks in these seven states would be established at a cost of around Rs. 4445 crore.

The PM MITRA mega textile parks will provide state-of-the-art infrastructure for the textiles sector, attract investment of crores and create lakhs of jobs. It will be a great example of ‘Make in India and ‘Make For the World. PM MITRA mega textile parks will boost the textiles sector in line with 5F (Farm to Fibre to Factory to Fashion to Foreign) vision.

Under PM MITRA, the first mega 1142 acres textile park of the country is going to come up at Vansi villagein Navsari, Gujarat, covering the complete textile value chain.

Green Hydrogen Mission

Under National Green Hydrogen Mission Centre to facilitate the transition of the economy to a low carbon intensity & reduce dependence on fossil fuel imports. India sets a target of annual production of 5 MMT by 2030.

Union Budget for FY 2023-24: Pradhan Mantri Kaushal Vikas Yojana 4.0, to be launched to skill lakhs of youth within the next three years covering new age courses for Industry 4.0 like coding, AI, robotics, mechatronics, IOT, 3D printing, drones, and soft skills.

INDUSTRIAL PRODUCT SCENARIO:

Not all headwinds are meant to be challenges. For instance, globally, nations and multinationals emphasized resilience in, diversification of, and securing their supply chains in light of geopolitical developments and global exigencies. For India, FY 2022-23 was special. It marked the 75th year of Indias Independence. India became the worlds fifth largest economy, measured in current dollars. The country presented huge potential and opportunities as an export hub and investment destination in the manufacturing and services space. The Financial Year started with the ongoing conflict in Ukraine, which continues to ripple its effects till date, and the pandemic had hardly subsided. Prices of food, fuel and fertilizer rose sharply. As inflation rates rose, central banks in advanced economies sought to tighten monetary policy. Many developing countries faced considerable economic hardship as the combination of weaker currencies, higher import prices, rising living costs, and a stronger dollar, which made debt servicing more expensive, proved too much to bear.

RBIs Monetary Policy Committee has increased the policy repo rate under the liquidity adjustment facility (LAF) by 250 basis points from 4.0% to 6.50% between May 2022 and February 2023. Global economic activity remained resilient amidst the persistence of inflation at elevated levels, turmoil in the banking system in some advanced economies (AEs), tight financial conditions and lingering geopolitical hostilities. Recent financial stability concerns have triggered risk aversion, flights to safety and heightened financial market volatility. Sovereign bond yields fell steeply in March 2023 on safe haven demand, reversing the sharp increase in February 2023 over aggressive monetary stances and communication. Of late the Equity markets have declined and the US dollar has pared its gains. Following the announcement of an output cut by OPEC+, crude oil reversed the entire price decline of the several weeks and ended slightly above the levels seen in February 2023.

On the domestic front, the worlds second-largest vaccination drive involving more than 2 billion doses served to lift consumer sentiments that may have prolonged the rebound in consumption. This is evident in the housing market witnessing a significant decline in inventory overhang to 33 months in Q3 of FY 2022-23 from 42 months last year. Global growth has been projected to decline in 2023 and is expected to remain generally subdued in the following years as well. The slowing demand will likely push down global commodity prices and improve Indias CAD in FY 2023-24. Despite these, agencies worldwide continue to project India as the fastest-growing major economy at 6.5-7.0% in FY 2023-24. These optimistic growth forecasts stem in part from the resilience of the Indian economy seen in the rebound of private consumption seamlessly replacing the export stimuli as the leading driver of growth. Advance estimates suggest that the Indian economy is expected to witness real GDP expansion of 7% in FY 2022-23.

The Company plans to complete the expansion of 6.6 KTPA Hydroxylamine Sulphate Crystal plant by FY 2023-24. The increased capacity of the Hydroxylamine Sulphate Crystal would assist the Company in gaining a greater market share. Phosphoric Acid & Sulphuric Acid Plants at Sikka Unit, Sulphuric Acid & Melamine expansion and 10 MW Electrolyzer based Green Hydrogen are progressing as per schedule. The Company has identified Capex plans of around Rs. 4,100 Crores for the above. Future Growth plan with expected outlay of around Rs. 4000 Crores at Dahej location is also being examined.

The sales of Industrial products have been impacted during FY 2022-23 in terms of international prices which are down by more than 45% on a year-over-year basis for Melamine, 7% for Caprolactam, and 13% for Nylon 6 chips, respectively. However, for Nylon-6 chips, the company was able to achieve ever highest sales due to increased availability post commissioning of new compounding lines. The oversupply and subdued downstream demand of Caprolactam in international market has resulted into lower prices of Caprolactam globally. Margin of Industrial products continued to remain under pressure during FY 2022-23 due to poor demand, upward price movement of raw materials like benzene and natural gas which has impacted the profitability of the Industrial Products segment.

Fertilizer Market Scenario

Agriculture Situation:

Consecutively, for 4th year, country received ‘Normal monsoon with extended rainy days till Oct22. During initial time of June22, the rainfall remained deficit, however, subsequently in July, August & September22; country received very good rains, which supported agriculture operations well in Kharif season across the states. Overall, country received 925 mm of rains, higher by 6% over Long Period Average (LPA) rains received in the country in the past. Gujarat has received significantly higher rains by 29% over normal precipitation. Except Dahod district, all other 32 districts received normal to excess rains. Better rains coupled with extended rainy days helped in filling up all major reservoirs up to 89% level of their capacity at the end of the monsoon season and charged the soil moisture well, which continued better prospects for agriculture in Rabi season also followed in later half of the year.

Favorable escalation considered by GoI in MSP for Kharif & Rabi crops in the range of 5-8% motivated farmers to follow higher plantation. Overall, sowing of crops during the year registered a considerable growth of 6% over Normal area coverage and also 1% higher over the previous year. Expecting better return, sowing of Oil seeds, Pulses, Sugarcane, Cotton etc., has recorded substantial growth.

As per the third advance estimates of food production published by CSO, GoI, country has achieved record food grain production of 331 MMT, also higher by 5% over FY 2021-22.

Market Scenario:

With prediction of better monsoon to follow, FY 2022-23 had started with high hopes for better demand of Agri-Inputs, like fertilizers to prevail in the country. Further, steep increase in the prices of imported fertilizers & raw materials experienced in FY-21-22, impacted both production & imports of fertilizers in the country, especially in later half of FY 2021-22 and as a result the pipeline stock of fertilizes as on 01.04.22 had dried out to historical low levels.

Well recognizing the need for ensuring adequate availability of fertilizers in the country, especially under the situation of continued Geo-Political disturbance between Russia & Ukraine and restricted export policy for fertilizers followed by China, both combined disrupting supply sides of fertilizers for India, GoI has considered fixation of NBS rates in a most favorable manner.

The year had begun with such important riders as mentioned here above, favoring fresh fertilizer demand in the country.

During initial period, on account of delayed & deficit rains, fertilizer demand had remained moderate, however, subsequently improved performance of south west monsoon has brightened prospects for agriculture and fertilizer demand in the country to a considerable extent.

The war between Russia & Ukraine continuously impacted Global demand and prices of food, which in turn had its influence on both, prices as well as availability of fertilizers in the international market during initial time of H1-2022-23. The development had critical bearing for country like India, largely dependent on imports of both, fertilizers and intermediates. However, subsequently on account of lack of sufficient demand support globally, prices of fertilizers & inter-mediates started diffusing from Q2-22/23. On the other hand resumption of fertilizer exports through China at normal level and availability of more quotas through Russia & Middle East provided breather in overall availability situation. Further, higher supplies considered by Saudi Arabia & Russia at reasonable price helped the country in making up the overall deficit in availabilities to a considerable extent.

Price of DAP, which was prevailing in the range of USD 920 PMT during Kharif-22 season came down in the range of USD 700 PMT, a decline of 35% in later half of the year. Similarly, prices of PA, Ammonia & Sulphur had proportionately depreciated. However, the magnitude of decline in prices of raw materials was not exactly in proportion to what has been experienced in case of finished fertilizers like DAP. Throughout the peak time of fertilizer demand, DoF was utmost vigilant to ensure equitable distribution of fertilizers across the country so as to avoid any shortage like situation. State wise and company wise availability situation was reviewed on weekly basis to ensure supply adequacy across the states.

Overall, even under challenging Global situation, India could sail smoothly in terms of ensuring adequate availabilities of fertilizers to the farmers at reasonable prices to support agriculture.

During the financial year under review, GoI enacted two mandates, I) One Nation One Fertilizer (ONOF), wherein all the companies have to sell their fertilizers in one single brand ‘BHARAT and II) All the shops of fertilizer trade are to be converted into an identical retail outlets called Pradhan Mantri Kisan Samridhi Kendra (PMKSK), which can facilitate as "One Stop Shop" and can also provide farm advisory services to farmers in addition to providing information on various Govt. schemes.

Relatively lower MRP followed for DAP vs that of other non-DAP /NPKs products, tempted farmers to use more of DAP. Most selling NPK fertilizer i.e. APS faced major heat in the market. Further, the states where traditionally NPKs had preference over DAP, there was a marked reversal, favoring increased preference for DAP, replacing demand for NPKs. The declining preference for NPK group of products has made it challenging to sustain the sales of products like AS & APS in the market.

Performance of Fertilizer Industry

Better seasonal prospects, moderate supplies, lenient support from GoI, in terms of fixing NBS rates & deciding MSP created conducive business environment during the year for fertilizer industry, including for importers.

The declining trend in International prices and ease in its availability developed as the year progressed were favoring, both imports as well as manufacturing of fertilizers in the country in P&K sector. However, imports had an edge over domestic production in terms of cost economics and therefore contribution of imports in making the overall availability of fertilizers remained prominent in this sector.

The positive business environment favored domestic production of fertilizers in the country, which grew @ 11% (5 MMT) on YoY basis. Especially, with revamping of old Urea plants and gradually attaining stability in plant operations helped in increasing Urea production by 3.5 MMT (14%) over FY 2021-22. Production of DAP & SSP had a moderate growth in the range of 3-5%, however, that of NPKs registered considerable growth @12% (1.1 MMT) during the period.

Declining global prices of fertilizers in a consistent manner remained encouraging for Indian buyers. However, overall imports grew marginally by 3% (0.6 MMT), largely on account of significant reduction made in Urea imports by GoI to the tune of about 1.5 MMT on YoY basis. In case of Phosphatic group of products, imports of DAP & NPKs rose with a higher magnitude (41%). Imports of MOP has declined substantially by 24%, for want of demand support.

In spite of having conducive market environment; practically there was no growth in actual sales of fertilizers made to farmers (PoS) during the year. Having favorable MRP, sales of DAP has grown over 1.2 MMT, 13 %, substituting sales of NPKs with similar magnitude. Sales of MOP have declined considerably, close to 1.0 MMT. Sales of SSP also registered a negative growth @ 12% (0.7 MMT) during the year under review.

Business Performance of GSFC: FY-2022/23

On account of economic viability constraint, production through Sikka Unit remained moderate during the year. On the other hand imports of Urea under Govt. account at Rozy port handled by GSFC reduced substantially @ 1.25 LMT on YoY basis. These two aspects impacted the overall availability of fertilizers considerably at GSFC during the year under review.

In line with overall availabilities built up, we have sold 18.01 LMT fertilizers during the year under review. Practically, we were stocked out at the end of 31.03.23.

Having moderate availabilities, GSFCs endeavor was to sell available quantities most effectively in the economic segments, which can fetch better margins for the company. Based on this focused objective, GSFC could make around 85% of its total fertilizers sales in Gujarat & Primary Market which was also 1% higher over FY 2021-22. Contribution of Gujarat on standalone basis has increased to 52% in aggregate fertilizer sales of the company from 50% in 2021-22.

In order to sustain the market share of DAP, especially in our home state of Gujarat, GSFC imported 1.15 LMT quantity of DAP through two vessels during the year, which has been sold efficiently, within the overall cycle of 90 days.

Your Company effectively controlled the physical inventories of fertilizers at Plant, Port & Field warehouses and maintained consistent follow-up with our team as well as with the dealers to ensure timely recovery of sales proceeds from the market and reduced the over dues substantially during the year.

Company also consistently monitored the status of un-cleared PoS stocks across the states & followed up with the team on regular basis so as to enable us in receiving admissible subsidies in time. Company registered PoS sales of 17.30 LMT during the year, which is in proportion to the 1st point sales achieved during the period.

Future Outlook for Fertilizer Industry:

The bumper harvest achieved during FY 2022-23, coupled with favorable output prices of farm produce realized in the market may proportionately enable farmers for reasonable spending on agri-inputs towards Kharif23 season. Demand of agri-inputs like fertilizers is largely dependent on performance of the monsoon. IMD predicted about likely behavior of monsoon as ‘Normal (96% rains w.r.t LPA) in rainy season 2023.

Now with better availability of fertilizers through alternative countries, besides opening up exports through China, impact of Russia-Ukraine war has relatively diffused. Therefore, availability of fertilizers, especially P&K products may not remain a constraint, unlike the situation faced over past 2 years.

Import prices of two major fertilizers, DAP & Urea have prevailed significantly lower during Q1-23/24, which are the lowest in past two years.

Similarly, prices of raw materials like PA, Ammonia, Sulphur are having consistently declining trend, which will support Indian domestic industry to follow higher production. Prices of PA & Ammonia have declined in the range of USD 970 & USD 300 PMT respectively during the period of Q1-23/24.

Significant increase in Urea production achieved through revival of the old plants will extend great relief to Govt. for its imports. As followed during FY 2022-23, GoI may proportionately curtail Urea imports further in FY 2023-24.

The higher stock levels of fertilizers in the country as on 01.04.23, coupled with likely momentum to be achieved in fresh production/ imports, FY 2023-24 is likely to witness the situation of comfortable availabilities in the fertilizer sector.

Adequate availability of major products like DAP & Urea and its reasonable MRP may continue to be challenging to sustain market growth for products like AS & APS.

Selling prices of fertilizers are unlikely to get increased, at least in Kharif23 season.

The prevailing price trend of raw materials and its adequate availability will support Phosphatic production at our Sikka Unit.

Raw Material Prices:

The international prices of raw materials were having a sharp increase during FY 2022 23 as compared to 2021 22.

The average CFR prices of Phosphoric Acid (PA – P2O5) which was USD 1255 per ton P2O5 during FY 2021 22 went high to USD

1368 (9%) per ton P2O5 during FY 2022-23. As on 31/03/2023, the price of PA was USD 1050 per ton P2O5.

The average prices of Ammonia increased sharply during FY 2022-23 as compared to 2021–22. The average CFR prices of Ammonia during 2021–22 was USD 675. It increased to USD 904 (+ 34%) per ton during 2022-23. As on 31/03/2023, the price of Ammonia was USD 415 per ton.

The average CFR price of Rock Phosphate, which is mainly derived from price of Phosphoric Acid, increased substantially in FY

2022 23 as compared to FY 2021 22. The average CFR price of Rock Phosphate during FY 2021 22 was USD 162 per ton. It increased to USD 229 (+41%) per ton during FY 2022–23. As on 31/03/2023, the price of Rock Phosphate was USD 151 per ton.

The average CFR price of Sulphur increased during 2022-23 as compared to FY 2021-22. The average CFR price of Sulphur during FY 2021-22 was USD 256.33 per ton. It went up to USD 271.70 (+ 6 %) per ton during 2022-23. As on 31/03/2023, the price of Sulphur was USD 147.63 per ton.

The price of Benzene increased during FY 2022-23 as compared to FY 2021-22. The average CFR price of Benzene during FY 2021-22 was USD 1006.75 per ton, which increased to USD 1066.08 (+6 %) per ton during FY 2022-23. As on 31/03/2023, the price of Benzene was USD 1002.14 per ton.

Average price of Raw Material products ($ / MT):

Product

2021- 22 2022-23 % Increase / Decrease Prices as on 31/03/2023
1255 1368 (+)9 1050

Phos. Acid (C & F), P2O5

Ammonia (C & F) 675 904 (+)34 415
Rock Phosphate (C & F) 162 229 (+)41 151
Sulphur (C & F) 256.33 271.70 (+) 6 147.63
Benzene (C & F) 1006.75 1066.08 (+) 6 1002.14

FINANCIAL PERFORMANCE OF THE COMPANY DURING FY 2022-23:

Particulars

Units 2022-23 2021-22 Change Change in % Reason For Change
Trade Receivables Turnover Times 12.90 13.70 -0.80 -6
Inventory Turnover Times 17.82 16.29 1.53 9
Interest Coverage Ratio Times 274.46 327.80 -53.34 -16
Current Ratio was higher due
Current Ratio Times 5.17 3.43 1.74 51 to lower Trade Payables at
the end of FY 22-23.
Debt Equity Ratio Times - - - -
Operating Profit Margin % 15.61 16.59 -0.98 -6

Net Profit Margin

% 11.45 9.90 1.55 16 Return on Equity improved

Return on Net Worth (ROE)

% 10.94 8.56 2.38 28 because of higher turnover and profits during the year.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

There exists a robust and comprehensive system of internal controls. The internal auditors of the Company comprehensively carry out their audit and their observations/audit queries are being discussed and debated at length by the Audit Committee. The Audit Committee of the Company also reviews the follow-up actions in respect of the items which did not get close and seek explanation for the open items. The internal control system is so designed that a particular transaction gets filtered at different levels so as to ensure that proper recording of such transaction takes place and no unscrupulous elements get into the system. The Company uses the SAP platform where-in the roles, responsibilities and authorities are well defined and no deviation is allowed without proper management approval.

TEN YEARS PRODUCT PERFORMANCE RECORD:

The last 10 years Product-wise performance years is given below:

Product-wise performance in terms of production and sales for the last ten years is given below:

PARTICULARS

Unit 2022-23 2021-22 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14

PRODUCTION

FERTILIZERS MT 1389458 1461910 1908828 1665824 1733957 1678958 1507911 1491741 1385857 1423059
Ammonium Sulphate MT 500246 503100 487250 445630 374720 372330 337370 334030 318680 306671
Ammonium Sulphate
Phosphate MT 300380 251330 268730 267140 291940 282360 313860 328430 337930 336340
Di-Ammonium Phosphate MT 193810 307880 565790 484720 459090 503830 411850 370200 314600 390300
N P K MT 20550 28870 208730 128120 193150 154220 38340 47650 15460 19520
UREA MT 371070 362826 370700 332705 405360 361181 406571 411431 399187 370228
CAPROLACTAM MT 87198 86639 81927 83093 91479 86662 86191 86297 89918 84856
NYLON-6 MT 26794 25623 24455 24296 23887 20215 17421 9885 9400 9751
MELAMINE MT 47756 52847 38732 29215 14161 15188 14886 15697 14284 14916
ARGON ‘000NM3 3564 3294 3325 3116 3574 3319 3549 3581 3611 3334

SALES

FERTILIZERS* MT 1377337 1504194 1945122 1682171 1598428 1604222 1412044 1434684 1320471 1383154
Ammonium Sulphate MT 475917 523891 497430 446117 396109 360555 308214 329778 315926 309843
Ammonium Sulphate
Phosphate MT 279885 264959 299160 244482 262134 299025 290107 334072 334193 335865
Di-Ammonium Phosphate MT 230822 297765 563510 524410 399309 500999 417820 368874 302666 386585
N P K MT 20579 46431 214999 141409 184270 130194 35024 46558 14628 25811
UREA MT 370134 371148 361049 325536 366763 313448 360879 355402 353058 325051
CAPROLACTAM* MT 57402 60359 58170 58764 65596 63217 63101 66483 68901 65725
NYLON-6 MT 29187 27644 28150 23752 25311 22569 13697 9999 9701 9915
MELAMINE MT 48486 48452 40173 26216 13953 15298 15341 15096 14283 15378
ARGON ‘000NM3 3545 3292 3349 3099 3563 3317 3546 3599 3622 3313

*excluding captive consumption

RISK MANAGEMENT:

Changes in Government policy, currency risk, fluctuation in input prices, increase in NG prices, insufficient availability of natural gas and raw material in the international market will have an impact on Companys profitability.

Market may experience frequent changes in the price of domestic Phosphatic Fertilizers depending upon the cost of production of the manufacturers. The resistance from farming community has impacted demand. With sharp increase in NG price, prices of Phosphatic fertilizers would go up. In the current scenario, good and widely distributed rainfall, smooth & comparatively cheaper availability of raw materials and timely reimbursement of subsidy by the Govt. of India would be the prime catalysts for the Company to sustain its operations profitably.

In the above likely scenario, the Company is focusing on the efficiency improvement with higher production levels, efficiencies in raw material procurement, increased availability through imports, reduction in marketing & distribution costs, production of various complex grade fertilizers at Sikka and proper product/ segment strategies to maximize the sales to achieve better contribution from its product basket.

To control the financial risks associated with the Foreign Exchange/ Currency rate movements and their impact on raw material prices, the Company has put in place a sophisticated Foreign Exchange Risk Management System. Further the Company has put in –place a digital risk management portal under which each identified risk is catogarised, monitored and mitigation procedures are devised and implemented so as to minimise them (risks).

RESEARCH AND PROMOTIONAL ACTIVITIES:

Your company has a well-established DSIR approved Research Center established in 1977 at Vadodara complex. A team of young scientists putting efforts to innovate and improve products, processes & technologies to meet the needs and exceed the expectations of customers and works on conceptualization of emerging ideas in the field of fertilizers, industrial products, biotechnology, waste utilization & corrosion & metallurgy. The R&D facilities at Vadodara Unit also includes a demo pilot plant to establish & optimize parameters for scale up of new processes developed at lab scale and to manufacture products in small quantity for initial market seeding.

Your company, being a responsible organization, is always promised to put efforts and contribute towards cleaner future. Keeping this in mind, your Company has taken various green initiatives for effective waste management practices across the complex. As a part of these initiatives, a biogas pilot plant is installed at township nursery to generate energy from waste. This plant is designed for processing of 500kg/Day of food waste to generate biogas. This biogas can be utilized at guesthouse for cooking purpose. Alternatively biogas can also be used to generate electricity and slurry/remains can be used as fertilizer.

Your company is also promoting Organic fertilizers for reduced health hazard and sustainable agriculture. In this line, an organic fertilizer product named "Sardar SUDHAN" developed by fortification and granulation of the material derived from dung based gobargas plants. These gobargas plants are installed in villages under GOBAR (Galvanizing Organic Bio-Agro Resources) – DHAN scheme as a part of Manure management program of NDDB. Your company has also executed MoU with NDDB for further research inputs and marketing of product.

Liquid fertilizers are gaining more importance day by day because of its easy application through foliar spray, fast response and less logistics cost. Your company has also added a product to this segment by developing a FCO grade Calcium Nitrate Suspension, fortified with Magnesium. This product is a nitrogen fertilizer with added nutrients like calcium and magnesium and can be used in fruit and vegetable crops.

In addition to research on new product & process development, R&D of your company has also played a vital role in offering technical services to plants for trouble free operation by providing inputs for heat treatment, welding, import substitution, MoC selection, Material compatibility study, lube oil analysis by ferrography & corrosion and microbial activity monitoring in cooling towers of all operating plants. During the year, 14 Root Cause Failure Analysis jobs were done and more than 120 locations on various critical equipments was studied for assessment of possible damage and monitoring of extent of degradation of material of construction due to high temperature/ stress conditions. These efforts has resulted into direct/indirect benefit to organization in the form of better MOC selection, reducing down time, import substitution, better repair practices, extension of service life & change in material specifications for better performance.

GSFC Agrotech Limited

GSFC Agrotech Ltd., a wholly owned subsidiary of GSFC was established in the year 2012 with an objective to aggressively diversify into non-bulk category of agri-inputs. It also aimed at providing single stop solution to the farmers by providing reliable Agri-products at reasonable prices along with farm advisory services.

GATL manages 286 retail outlets under COCO model across the state of Gujarat, part of Rajasthan and is pursuing to strengthen its existing space as well as to expand in other states in coming years. Taking further the legacy of Sardar brand with aggressive marketing tactics and other initiatives including participation in government projects, GATL outlets have solidified their reputation as a reliable retail entity in both bulk fertilizer and non-bulk agri input space and touches base with more than Six lac farmers annually.

We consider farmer as our partner and are committed to providing an assured supply of a comprehensive range of agri-inputs to our customers and for that very reason GATL embraced multi brand strategy through co-marketing tie-ups.

GATL has also expanded its product portfolio, especially in organic segment under SARDAR brand and has set its footprints in hilly states of Himachal Pradesh and Jammu & Kashmir. This eventually enhanced presence of Sardar brand in new geographies.

Your company also has a state of the art DBT certified Tissue Culture lab and has developed tissue culture protocols for fruits, flowers and commercial crops. Besides other projects, GATL undertakes Agronomy services under MIS project of GGRC providing advisory services to more than 75,000 farmers annually.

SAFETY, HEALTH AND ENVIRONMENT:

Safety Management system has been strengthened by enhancing control measures during the time period under discussion. Safety Control has been pegged up by way of additional supervision particularly on contract workers. Site safety inspections have been enhanced by allotting half of the total available time to site safety activities. Safety checklists have been revisited, revised and updated. Hazard and Operability study has been conducted as per need. Quantitative Risk assessment has been conducted for the entire Vadodara unit as well as Sikka Units. Quantitative Risk assessment has been carried out in respect of PESO licensed premises in GSFC Vadodara.

Shut down and startups have been concluded safely during this period. Tool box talk, Pep talks etc have been increased multifold. Safety trainings to employees, contractors and visitors have been intensified. Fire prevention and Emergency management has been constantly upgraded. Purchase order has been placed for the procurement of Snorkel which would scale 54 Meter height.

Emergency Control Centre (ECC) has been functional round the clock and is stationed in R&D building. The operational manpower of ECC has been outsourced. Trainings to employees and Contract workers on Safety and Fire prevention have been a regular phenomenon that has attracted more than 2880 participants.

The safety initiatives and increased surveillance with greater imposition of Control have shown the impact and GSFC Vadodara has bagged two national level award as follows

1. Awarded HSE Excellence in Chemicals on 16 December 2022 in New Delhi INDIA HSE SUMMIT Sixth Edition.

2. Awarded FICCI GIZ Golden Award on 28 February 23 in the category of Industrial Disaster risk mitigation. The function was held in Delhi.

3. Responsible Care (RC) is the global chemical industrys voluntary initiative to drive continuous improvement in safe chemicals management and achieve excellence in environmental, health, safety and security performance. Responsible Care Logo is awarded to chemical industries by Indian Chemical Council (ICC), Mumbai. GSFC has been granted RC Logo Certification for second consecutive term for next 3 years from January 2023 to December 2025.

HUMAN RESOURCES:

Shareholders are requested to refer to the Directors Report which forms part of the Annual Report.