Gujarat State Fertilizers & Chemicals Ltd Management Discussions.

1. MACRO-ECONOMIC REVIEW: 2018-19

Even under the shadow of rising oil prices, geo-political tension and several other global headwinds, Indian economy is estimated to achieve a growth of 7.2 per cent in 2018-19, higher as compared to 6.7 per cent achieved in 2017-18. Economy is witnessing such a high growth consistently on the strength of ongoing structural reforms, macro-economic stability, fiscal discipline, improved services and financial inclusion. Various economic reforms undertaken in the year under review, include: push to infrastructure development, special support plans for Micro, small and medium enterprises; enhanced minimum support prices (MSP) for farmers, lower income tax for the companies with annual turnover up to Rs.250 Crore and other administrative measures to improve ease of doing business. Consolidation in Banking reforms and Insolvency & Bankruptcy Code (IBC) has institutionalized a resolution friendly mechanism, which helped in accelerating recovery of non-performing loans & also health of the public sector banks. Reforms in real estate regulations through RERA act & Benami Transaction Act helped in bringing transparency in the real estate sector to considerable extent. Continuous review on GST rates made the life of small entrepreneurs as well as poor and middle class consumers comfortable, without sacrificing the pace of growth in tax collection.

Besides generating high economic growth, country could successfully manage the issues of inflation and fiscal deficit. The consumer price inflation has also been addressed meticulously and moderated to 3.7% in first 9 months of fiscal 2018-19 as against over 10% rate of inflation observed few years back in the past up to year 2014-15. Similarly, fiscal deficit has been gradually brought down to 3.4% in 2018-19, from the high of over 6% observed in the past. The fiscal deficit so arrived at is in line with what it was budgeted for 2018-19 @ 3.3 %. Current account deficit is managed to 2.5 % of GDP, which used to be over 5% before 5-6 years. The GVA (gross value added) at constant basic prices is estimated to grow at 7.0 per cent in 2018-19, as compared to 6.5 per cent achieved in 2017-18. The growth in agriculture, industry and services sector is estimated to be 3.8 per cent, 7.8 per cent and 7.3 per cent respectively in 2018-19. Contribution of agriculture, Industry & Service sector in the overall economic growth in terms of GVA is registered at 16%, 30% & 54% respectively. There has been a noticeable improvement in fixed investment and exports of goods and services during the year under review.

Now, Universally India is recognized as a bright spot of the global economy. Country witnessed its best phase of macroeconomic stability in the recent years. From being 11th largest economy few years back, today India has emerged as 6th largest economy in the world. With consistency in reform process & resultant growth reflected in economy, India is strongly emerging as an important player in the world economy. World Bank in its recent report on Ease of Doing Business – 2019, ranked India at 77th position in 2018 from 100th position last year. This will encourage further inflow of investments in India.

Indian Agriculture sector:

Agriculture is the primary source of livelihood for about 58% of the Indias population. It accounts for 16 per cent of the total GVA, which comes to about Rs.18.53 trillion in FY 2018-19 and it appears that India is likely to achieve the ambitious goal of doubling farm income by 2022 set by present Government. In spite of rapid development in non-agriculture sectors in India, agriculture continues to be the main driver of the rural economy. Understanding this fact, the present government has prioritized its efforts for growth in agriculture and initiated various special programmers for this sector includes widening the irrigation base, access to farm credit, food processing, integrated platform for output markets, mentoring agri-enterprenuers, agriculture exports, increased minimum support price (MSP), Transport and marketing assistance for farm produce, warehousing cost, storages, soil health cards, Fasal Bima Yojna to secure the farmers against natural calamities and other non-farm activities to support the income of farmers.

At the sectoral level, growth of agriculture & allied sectors is estimated to remain @ 3.8%, little higher than 3.4% recorded in previous year and close to targeted growth of 4% pegged for agriculture sector. Agriculture remains a dominant sector of Indian economy, both in terms of contribution to aggregate economy and also as a source of employment to millions across the country. Over last few years, India has emerged as a significant agriculture exporter in commodities like cotton, rice, meat, oil meals, pepper and sugar. However, growth in agriculture largely depends on performance of south west monsoon in India as even today the 60 per cent of agriculture in the country is rainfall dependent.

Contrary to the forecast made about receiving "Normal to above Normal rains" south-west monsoon has ended with "below normal rainfall" to the tune of 91% of long period average (LPA) rains. Rainfall for the monsoon season – 2018 was recorded at 804 mm as against the normal rains of 888 mm, deficit by 9%. After an encouraging early start of the rains in June18, it turned unfavorable – both in terms of overall quantum of rains & its distribution in the country. June ended with deficiency of 5% that increased in July to 6% and further to 8% in August & large deficit of 22% in September. In many parts of Central & Northern states, monsoon has started late and withdrawn little early in September, leading to moisture stress conditions for Kharif crops, right at the maturity stage. Overall, 12 meteorological divisions of the country, representing about 1/3rd of the total geographical area received deficit rains. Gujarat was one of the worst affected states with large deficit of 24%. Out of 33 districts, rainfall was reported normal only in 9 districts and it was severely deficit in rest of the districts; mainly comprising of Saurashtra, Kutchh and North Gujarat region. In other operational states, west Rajasthan, Marathawada region, Rayalseema, Northern Karnataka, Bihar & Jharkhand remained critically deficit. Overall on account of delayed & deficit rains shrinkage to the tune of 2% (1052 Lakh Hac.) was observed in the Kharif sowing area. Sluggish performance of the monsoon has impacted sowing of major crops like Pulses, Rice, Coarse cereals and cotton with higher magnitude by 4%, 2%, 6% and 2% respectively.

Rabi season started with limited soil moisture status & water storage levels for irrigation were reported to the tune of 73% (118 BCM) of its capacity in the country on account of subdued rains received in the monsoon season. Higher temperature prevailed during October/November18 has further impacted the available moisture status in the soil. Late harvest of Kharif crops & also subsequently late onset of winter has delayed the sowing process of Rabi crops. Sowing of Rabi crops declined by about 4% (618 Lakh Hac.), with major decline in plantation of Rice, Pulses & Coarse cereals. Situation was bad in the rain-fed states like Gujarat, Maharashtra, Karnataka etc, where sowing has taken place in about 80-85% of the normal area, with large deviation in area under main crops such as wheat, Sugarcane, Cereals etc.

Overall sowing area in agriculture year 2018-19 has been compressed by 3% @ 1670 Lakh Hac, with large deviations in area under main crops such as wheat, Rice, Cereals, Oilseeds etc. On account of subdued seasonal prospects, sentiments at farmers level have remained quite low and agriculture year 2018-19 is unlikely to display encouraging performance. As per the advance estimates of food grains production released recently, after achieving record production in 2017-18, reversal in the food production is likely to be witnessed in 2018-19 with estimated production of 281.4 million tons, decline by 1.2%.

Performance of Fertilizer Industry in India:

2018-19 started with a happy note of prediction of better monsoon and moderate fertilizer stocks in the market. Although arrival of monsoon has delayed in central & northern states, demand of fertilizers, especially through state marketing federations has started little early in most markets so as to secure adequate availabilities in time. During the initial time of H1-18/19, supplies have remained neck to neck with respect to demand and business environment for fertilizer sector remained quite conducive till mid of Kharif season. But, at a later time with improved fertilizer demand prospects in the world market, especially from developed countries & continuous spurt in world oil prices as well as depreciation of rupee value, import prices of both, raw materials and finished fertilizers have started showing upward trend. Besides increase in prices, availability of adequate quantities of raw materials remained critical during most part of the year, which has impacted the production efficiency of Indian manufacturers. Although performance of monsoon was not encouraging, with considerable decline in domestic production, imports of P&K fertilizers like DAP surged steeply in H1-18/19 to make up the availability. Second half of the year began with a note of lower stocks of fertilizers in the market & moderate imports in the pipe-line, which, initially helped to clear the back-log pending stocks with the channels. However, sudden & steep depreciation of rupee value close to Rs.74/US $ taken place by October/ November18 has increased the landed cost of phosphatic fertilizers/raw materials to considerable extent. Increase in landed cost of fertilizers & raw materials, coupled with higher exchange rate, compelled fertilizer industry to increase selling prices of P&K fertilizers in the range of 20-25% during the year under review, which has started showing resistance at farmers level. Prices of NPK products have increased even with higher magnitude as import prices of MOP alone, one of the ingredients to make NPKs have increased by about 25% in FY 2018-19. Relatively, domestic manufacturers have experienced more heat as compared to importers of finished fertilizers. At instances imports were fetching better margins as compared to making DAP in the country. This has prompted for higher imports of DAP in India during 2018-19.

Individually, production of DAP has declined by 16 per cent, whereas, its imports surged substantially by 57 per cent. With increased MRP, demand has tilted more towards NPKs from DAP. Products like APS remained in better demand. Moreover, under the situation of inadequate availability of Phosphoric acid, in order to make overall higher volumes, manufacture of NPK products increased @ 9 per cent and also its imports rose by same magnitude in 2018-19. In case of Urea, practically production remained stagnant close to 240 Lakh MT, however, its import has been accelerated by GoI considerably in the later half of the year and overall imports of Urea increased by 25 per cent in 2018-19. Sales of DAP attained moderate growth of 6 per cent, whereas, that of NPK products has increased by 7%. Sales of Urea have registered growth of 5 per cent.

With opening up of real demand at retail level in the market and clearance of major back-log stocks with retailers from mid of the FY 2018-19, PoS sales has started picking up since October18 onwards and industry could able to avail subsidy under DBT scheme. However, still the compliance under DBT is not adequate and in general the working capital requirement of the industry has been increased considerably as compared to pre-DBT time. In order to ensure DBT compliance effectively, companies are expanding their dealers net-work, appointing more number of fragmented retailers, selling small-small quantities rather than big wholesalers. Even some of the companies having co-operative background & used to market their products only through co-operatives have started appointing private dealers under its subsidiary in various states. In fact, over a period, there have been some improvements in DBT compliance, but still industry continue to encounter various issues such as system downtime, recording wrong details of transactions and performing sales outside PoS machines by retailers, leading to non-consideration of such sales quantities for subsidy purpose.

Availability of adequate rail rakes has remained quite critical during peak demand time. Importers were constrained to hold stocks on ports for want of rakes during major time of the year under review.

Import prices of DAP have surged from the level of US $ 410-415 in the beginning of FY-2018-19 to US $ 430-435/MT by mid of the FY-2018/19. Major imports of DAP in India have taken place at the rate of US $ 430/MT during the year. In the later half of the year, on account of subdued prospects for Rabi season and also with steep depreciation of rupee value, import prices have started declining and touched to US $ 416/MT by December18 and even below US $ 400/MT by March19. Import prices of PA have gone up from US $ 678/MT in the beginning of the year to US $ 758/MT in Q2-2018/19, US $ 768/MT by Q3-2018/19. However, with declining DAP prices; PA prices also got corrected to US $ 750/MT in the last quarter of 2018-

19. Prices of Ammonia have experienced an upswing of 20% during the 1st half of 2018/19 and prevailed in the range of US $ 356-380/MT. However, in the later half, Ammonia prices have corrected sharply and declined to the level of US $ 350/MT by December18 and US $ 290/MT by Mar19.

GSFCs performance FY 2018-19:

Although rains have remained deficit in the monsoon season 2018-19, with large deficit in our home market as well as part of primary market such as Maharashtra and market environment remained quite competitive for fertilizer sector during 2018-19, GSFC could exhibit remarkable growth in agri-business sector and achieved record fertilizer sales (including trading) of 25.79 Lakh MT, which are all time higher sales in the history of GSFC. It is higher by about 5.71 LMT over 2017-18 (20.08 LMT), exhibiting growth of 28%. With such sales volumes, GSFC has emerged as 8th largest fertilizer supplier in the country with overall contribution of 5% in total fertilizer consumption. Individually, achieved all time highest sales of Ammonium Sulphate (4.35 LMT) and Urea (8.75 LMT). Availability of Urea through import handling at Rozi port helped us in increasing overall sales volumes of fertilizers. Although availability of Phosphoric acid remained as constraint in 2018-19, consistency has been maintained in Phosphatic Fertilizers production at Sikka unit, with marginal reduction by 1%, which helped in achieving overall DAP sales of 7.45 LMT, including imports, which is the highest sales of DAP achieved in last five years. Volume of Fertilizers traded products @ 9.80 LMT is all time highest sales. Taking the cognizance of changing buying preference towards customized NPK products from DAP, GSFC is increasingly concentrating to raise the volumes of NPK products and achieved record NPK sales of 1.84 LMT. Our sales in the home market of Gujarat (10.05 LMT) and also in primary market (6.75 LMT), comprising of Maharashtra, MP, Rajasthan & Chhattisgarh, is all time highest. Such market segments Home market of Gujarat and primary market fetches better economy for the Company. Overall Company has sold about 65% of the total volumes in Primary market of Gujarat and surrounding states in 2018-19.

This has been made possible due to better availability of phosphatic fertilizers through Sikka unit, import handling of Urea at Rozy port and need based imports of DAP,APS & Ammonium Sulphate made at various ports during 2018-19. In order to serve the North Eastern & Southern states economically, imports are supplemented through Kakinada port. Better product mix, improved packing well supported with intensive promotional campaigns undertaken by the Company during the year under review helped in enhancing acceptance of our brand further in the market. Establishment of Supply Chain Management cell for efficient logistic of fertilizers and other agro products and trading desk to take care of the prompt import decisions helped in improving the overall operational performance of agri business. GSFC Agro tech limited (GATL), an extended retail arm of GSFC has facilitated in strengthening retail business of fertilizers and agro products during the year. GATL is continuously expanding its retail network in Gujarat and neighboring states so as to gradually expand the share of retail sales in total agri business. This will undoubtly help Company in realizing the subsidy payments fast under DBT regime, besides improved margins. The expanded basket of agro-products at retail shops will enhance the foot print of farmers at our retail outlets and improve the overall sales volumes. Various promotional initiatives taken by Government of Gujarat, including Krishi-Mahotsav, special projects runs for tribal farmers, and increased coverage of area under micro irrigation system (MIS) through Gujarat Green Revolution Co. Ltd. (GGRC) etc. has helped state to sustain the agricultural productivity to considerable extent during past few years.

Special initiatives taken by the Company:

Aiming to reduce the freight cost of farmers on fertilizers and ensure timely availability of fresh and quality material, first time in the history of fertilizer industry, Company has started "Door to Door" (D2D) delivery scheme in Gujarat, wherein, fertilizers are supplied to the door-step of the farmers in truck-loads free of freight cost within stipulated timeline, which has been well received by the farming community.

Recognizing the increasing need for supplementation of Boron to the soil and its demand prospects, Company has started manufacturing Boronated NPK-12 at its Sikka unit. The product is well received and we foresee better marketing prospects for it. Recently, Company has also launched value added product Gypsum+, which is granulated Gypsum, fortified with important micronutrients and will have better market potential. In order to motivate the dealers and retailers, Company has started special quantity linked discount schemes, with a dual objective of enhancing the sales and also DBT compliance. With a view to remain more market centric, our access to the market has been accelerated during the year under review. Special promotional efforts are initiated for enhancing our brand preference in the market. Focused campaigns are organized to promote Sulhpur & Boron based fertilizers, NPK products and WSF in various states. Stringent monitoring and close follow up for recovery of out standings in the market, deployment of special chasers in some of the states having higher stake in over dues and also following up with GoI for pending subsidy bills on daily basis has helped us to recover major amount and sustain cash flow.

To sustain competition against imported DAP, your Company is producing coloured DAP at its Sikka unit on regular basis. Continuous application of anti-caking agent in entire range of phosphatic production has improved the product quality further and it remains free flowing to the expectation of the market. With a view to increase the outreach of our fertilizers in North Eastern states economically, first time imported APS on East coast, besides DAP and Ammonium Sulphate. First time, Company has tied up imports of MOP fertilizer, which will enhance our product basket and make available complete range of fertilizers. Manage simultaneous production of two to three products at a time at Sikka unit on regular basis facilitate supplying product mix in small consignments in various market segments and expand our overall share in non-DAP segment.

GATL, agri-retail Company of GSFC is penetrating further in the market of Gujarat and many surrounding states through expanding its retail business. GATL is opening new outlets, revamping existing outlets and launching various innovative products and farmer friendly schemes. At Baroda, besides, supplies of bulk fertilizers, stepped up production of full range of WSF products, SAG, City compost, TCB plants etc. to tap the market demand for such high value inputs through GATL. GATL is also focusing on trading business of high value inputs like seeds and pesticides. It has also developed business synergy with big institutional agencies of some of the states in mutual business interest. Company has tied up its procurement of trading products with reputed sources in individual sectors having quality products.

Your Company has entered into new market of Uttarakhand & Himachal Pradesh besides consolidating its presence into existing markets so as to expand overall volumes. Company has aggressively participated in the institutional tenders of various states, including Punjab, MP, Chhatisgadh, Karnataka etc, which helped in stepping up volumes in such states considerably. Concerted efforts are initiated to economies the cost, especially logistic & inventory management of our products.

Recently, introduced packing of imported fertilizers in yellow coloured bags, especially to cater the preference of Eastern markets.

Areas of concern:

Continuing Urea out of the NBS policy and keeping its MRP at quite low level v/s that of P&K fertilizers, resulting into excessive use of Urea by the farmers impacting NPK ratio of the soil adversely and affecting the soil productivity.

Timely receipt of subsidy payments through Government is very important for sustaining financial health of the industry. However, unfortunately, releasing payment of subsidy by Government gets inordinately delayed primarily because of under provisioning in the union budget besides cumbersome procedures under DBT. Delays in subsidy payments entail to liquidity crisis and higher borrowing cost at industry level.

Regulation of movement through supply plan limits the market development in various territories and results into inconsistent presence in farther but important market segments.

GSFCs higher dependence on imported raw materials, especially Phosphoric Acid (PA) for Sikka unit affected the production of Phosphatic fertilizers through Sikka unit over last few years. This constraint, however is mitigated partly through PA supplies gradually getting channelized through our JV partner TIFERT besides supplementing DAP requirement through imports.

On account of Indias over reliance on imports for both, raw materials & also finished fertilizers and global suppliers are by far common for both the category of imports; as far as competitiveness is concerned, domestic industry is always at disadvantage vis--vis imported finished fertilizers.

Recent Developments and outlook for 2019-20:

Continuous decline in prices of imported DAP is expected to encourage more imports in current season. Further, with declining import prices, channels and farmers are hoping reduction in MRP by the industry on fresh supplies and also on the sold but unlifted stocks lying in account of channels. India Meteorological Department (IMD) in its recent update on monsoon, predicted "Near Normal" rains in ensuing season, expecting about 96% rainfall of long period average, which is quite encouraging and promises for better seasonal prospects to prevail in 2018-19. Bottlenecks of Direct benefit transfer (DBT) scheme of subsidy and the constraint of budgetary provisions of subsidy may continue to impact the cash flow of fertilizer industry. At present subsidy rates for P&K fertilizers for 2019-20 are maintained in line with 2018-19 and likely to be reviewed once new government is formed. Any change in subsidy rates will have proportionate impact on the margins of the industry. Selling prices of P&K fertilizers are unlikely to get improved in short run. Hike in minimum support prices (MSP) extended for Rabi crops will give enhanced return to the farmers on their output to be marketed in current season and also the purchasing power of farmers for procurement of inputs.

Vigorous promotional campaigns taken by the Company across the states is expected to help in increasing the market share of Ammonium Sulphate as well as NPK products.

Overall, demand outlook in general for the fertilizer industry looks moderate for 2019-20 as far as demand is concerned and also in terms of margins.

Raw material prices:

The international prices of raw materials were higher during FY 2018 19 as compared to 2017 18. The average CFR prices of Phosphoric Acid (PA) which was USD 600 per ton during 2017–18 went upwards to USD 752 (25.33 %) per ton during

2018 19.

The average prices of Ammonia decreased during 2018–19 as compared to 2017–18. The average CFR prices of Ammonia during 2017–18 was USD 331 per ton went down to USD 322 (2.72 %) per ton during 2018-19. On an average, there was 2.72 % decrease in prices of Ammonia as compared to 2017–18.

The average CFR price of Rock Phosphate increased during 2018 19 as compared to 2017 18. The average CFR price of

Rock Phosphate during 2017–18 was USD 71 per ton went up to USD 85.58 (20.53%) per ton during 2018–19. On an average there was 20.53% increase in price of Rock Phosphate compared to 2017–18.

The price of Sulphur increased during 2018-19 as compared to 2017-18. The average CFR price of Sulphur during 2017-18 was USD 140 per ton went up to USD 154.06 (10%) per ton during 2018-19. On average, there was 10% increase in price of Sulphur as compared to 2018-19.

Average price of Raw Material products ($ / MT)

Product 2017-18 2018-19 % Increase / Decrease
Phos. Acid (C & F) 600 752 (+)25.33
Ammonia (C & F) 331 322 (-)2.72
Rock Phosphate (C & F) 71 85.58 (+)20.53
Sulphur (C & F) 140 154.06 (+) 10

INDUSTRIAL PRODUCT SCENARIO:

The Financial Year 2018-19 observed series of events like ever highest fuel prices in India, coupled with highest depreciation of Rupee against US$, weakening of global trade and struggling efforts by the Govt. to curb the imports, trade war between China and USA amid geo political tension. The first advance estimate of GDP, the growth in GDP during 2018-19 is estimated at 7.2% as compared to the growth rate of 6.7% in 2017-18. Deceleration in economic activity which had set during Q2, became entrenched in Q3.

The Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 for the month of March 2019 stands at 140.2, which is 0.1 percent lower as compared to the level in the month of March 2018. The cumulative growth for the period April-March 2018-19 over the corresponding period of the previous year stands at 3.6 percent. Passenger vehicle segment has posted conservative growth despite negative sentiments in the market. Despite liquidity crunch, the commercial vehicle segment posted strong double digit growth. Some of the key consumer segment for industrial products is automobiles, households, pesticides, paints and chemical allied industries.

The crude oil prices have risen during second quarter to third quarter of financial year on production cuts by OPEC and Russia as well as disruption in supplies due to USA sanctions on exports from Venezuela. Inflation continued to remain low in major advance economies and many key emerging market economies due to slowing global growth and stable or falling commodity prices.

Global chemical market has experienced turbulence due to upstream crude oil price and demand supply dynamics due to geo political tension between Iran & USA. Elections were held in many countries globally during early 2019 to mid 2019. The formation of new government will be one of the major factors for boosting of trade and fresh investment in new projects. Trade war between China and USA has resulted higher of price of some of key chemicals and expected to remain at the elevated level. This has resulted in higher prices of Industrial chemicals and better realization for the financial year 2018-19.

Majority of industrial products of the Company have observed higher prices by 10% as compared to last financial year. Prices started downward trend from end of 3rd Quarter onwards amid supply glut and poor demand.

2. FINANCIAL PERFORMANCE OF THE COMPANY DURING FY 2018-19:

Particulars Units 2017-18 2018-19 CHANGE CHANGE %
I Measurement of Investment:
1 Return on Equity % 6.55 6.79 0.24 4%
2 EPS* ‘/Share 11.94 12.39 0.45 4%
3 Cash Earning per Share* ‘/Share 16.18 16.87 0.69 4%
II Measurement of Performance
1 EBIDTA / Sales % 10.48 9.94 -0.54 -5%
2 PBT / Sales % 7.78 7.76 -0.02 0%
3 PAT / Sales % 7.54 5.76 -1.78 -24%
4 Sales / Net Fixed Assets Times 3.00 3.05 0.05 2%
5 Stock Turnover Times 17.40 13.66 -3.74 -21%
6 Debtors Turnover # Days 69.43 58.25 -11.18 -16%
III Measurement of Financial Status
1 Debt Equity Ratio Ratio 0.14 0.14 0 0%
2 Current Ratio Ratio 1.83 1.86 0.03 2%
3 Book Value per Share* ‘/Share 182.24 182.39 0.15 0%
IV Others
1 Interest Coverage Ratio Times 12.89 12.70 -0.19 -1%

*Based on 39,84,77,530 equity shares of Face value ‘ 2/- each

# Debtors Turnover is excluding subsidy income and receivables

Return on Net Worth has increased to 6.79 % in FY 2018-19 as compared to 6.55 % in FY 2017-18. This is due to higher Sales Rs. 8574.54 Lakhs and PAT Rs. 493.68 Lakhs in FY 2018-19 as against Sales of Rs. 6309.27 Lakhs and PAT Rs.

475.73 Lakhs in FY 2017-18.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

There exists a comprehensive system of internal controls in place. 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 closed 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.

3. 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 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10
PRODUCTION
FERTILIZERS M T 1733957 1678958 1507991 1491741 1385857 1423059 1436535 1470350 1556172 1812570
Ammonium Sulphate M T 374720 372330 337370 334030 318680 306671 315145 298000 278470 271580
Ammonium Sulphate M T 291940 282360 313860 328430 337930 336340 294600 302800 280500 293600
Phosphate
Di-Ammonium Phosphate M T 459090 503830 411850 370200 314600 390300 424520 534100 706170 921090
N P K M T 193150 154220 38340 47650 15460 19520 10280 0 0 0
UREA M T 405360 361181 406571 411431 399187 370228 391990 335450 291032 326300
CAPROLACTAM M T 91479 86662 86191 86297 89918 84856 83180 80503 79577 81151
NYLON-6 M T 23887 20215 17421 9885 9400 9751 9659 8914 9464 8715
MELAMINE M T 14161 15188 14886 15697 14284 14916 14001 15279 13938 13735
ARGON ‘000NM3 3574 3319 3549 3581 3611 3334 3458 3270 3327 3464
MONOMER M T 3993 3187 751 2281 3435 3227 3116 4287 4547 4597
ACRYLIC SHEETS M T 0 10 0 122 79 780 566 876 721 687
ACRYLIC PELLETS M T 0 9 285 1346 969 1701 1974 2046 1710 1937
NYLON FILAMENT YARN M T 0 811 4044 4219 3427 3643 3080 3910 4361 4433
NYLON CHIPS M T 0 2749 6559 8397 9114 9219 6563 5103 5399 4652
SALES
FERTILIZERS* M T 1598428 1604222 1412044 1434684 1320471 1383154 1395376 1441232 1571500 1797894
Ammonium Sulphate M T 396109 360555 308214 329778 315926 309843 320007 302915 336988 278211
Ammonium Sulphate Phosphate M T 262134 299025 290107 334072 334193 335865 296470 304940 277285
293115
Di-Ammonium Phosphate M T 399309 500999 417820 368874 302666 386585 431238 543699 707529 948171
N P K M T 184270 130194 35024 46558 14628 25811 3925 0 0 21
UREA M T 366763 313448 360879 355402 353058 325051 343736 289678 249699 278375
CAPROLACTAM* M T 65596 63217 63101 66483 68901 65725 64728 63082 61770 62650
PARTICULARS Unit 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10
NYLON-6 M T 25311 22569 13697 9999 9701 9915 9732 8756 9623 9189
MELAMINE M T 13953 15298 15341 15096 14283 15378 14166 15283 13319 13695
ARGON ‘000NM3 3563 3317 3546 3599 3622 3313 3453 3272 3327 3464
MONOMER* M T 3989 3236 480 1947 2934 1316 2108 2036 2292 2282
ACRYLIC SHEETS M T 0 76 91 112 122 707 678 726 728 696
ACRYLIC PELLETS M T 9 44 344 1365 984 1705 1978 1993 1855 1883
NYLONE FILAMENT YARNM T 20 991 4309 2706 3233 3378 2924 3319 4033 4081
NYLON CHIPS M T 146 3730 4296 6262 6514 6455 6331 5121 5251 4596

*excluding captive consumption

4. 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. DAP sales was 111 Lakh MT during 2010-11 which has gone down substantially during the subsequent years (74 Lakh MT during 2013-14, 76 Lac MT in 2014-15 & 98 Lac MT in 2015-16). 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 grades 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.

5. RESEARCH AND PROMOTIONAL ACTIVITIES:

Your company has a state-of-the-art soil testing laboratory equipped with high through-put machine i.e. ICP-OES with a testing capacity of 1 Lac samples per annum. Over a period of time, this laboratory has analysed more than 1.47 million of Soil samples across the state. With compilation of last 10 Years data, your company has developed GUJARAT SOIL ATLAS, which has complete mapping of all talukas of Gujarat with pictorial depiction of soil nutrient deficiency in all talukas of the state. Your company make use of the latest IT technology and with the available database; you have developed Software to generate online Fertilizers recommendations for particular crops for all talukas of Gujarat State. This software provides options of THREE fertilizers packages to farmers along with cost benefit ratio. Your company promotes balanced fertilizer usage which is environment friendly. With an endeavour to achieve prosperity for farmers on one hand and commitment for improving the soil health, your company has been involved in organizing awareness campaigns not only in Gujarat but also in Punjab, Haryana, Maharashtra & Rajasthan. The motive is to maintain and improve the soil fertility for future generations.

Your company is running round the year call centre (Toll free number-1800 123 5000) to support farmers in Hindi, Gujarati and Marathi languages. The call centre not only provides answers to general issues but has the capacity to link farmers to experts from Agricultural Universities as well.

Your Company is organizing regular & re-orientation Farm Youth Training Programs since 1986 in coordination with Agriculture Universities of Gujarat to educate the young generation of Farming Community regarding latest agricultural technology and also motivate them to adopt it for increasing farm productivity. It organizes four regular & one re-orientation Farm Youth Training Programs every year to promote high-tech agri-concepts among the farmers, who are now decision makers.

Your company is publishing agricultural monthly magazine ‘Krishi Jivan since 1968 in local language and in Hindi quarterly. It has one of the highest circulations i.e. 50000 copies per issue. It provides latest agriculture information to farmers based on scientific research of scientists of Agriculture Universities and acts as a link for transfer of technology from ‘Lab to Land.

Your Company is concerned about the environment and ecological balance and in its endeavour it is contributing through tree plantation, garden development & maintenance etc. with an objective to turn GSFC ‘Green to Greener and thus also supporting the initiative of Govt. of Gujarat in this direction.

For encouraging urban population to increase greenery and maintaining the ecological balance, your Company sponsored Fruit, Flower & Vegetable shows in association with Baroda Agri Horti Committee. It has participated in the competitions and won accolades and appreciation and sales plants and Agro Inputs from "Kissan Suvidha Kendra".

GSFC Agrotech Limited

GSFC Agro Tech Ltd., a wholly owned subsidiary of GSFC which was established in the year 2012 with the aim of providing single stop solution to the farmers by providing reliable Agri-products at reasonable prices and promoting extension services either directly or in association with Government. Today GATL and its services are synonymous with innovation and path breaking ventures in the agri-input industry. Some of its key avenues include:

Currently, GATL manages 285 plus retail outlets across the state of Gujarat. We take pride in the fact that we are the only agri-input company in India which has deployed by trained Agriculture Graduates / Post Graduates to manage its retail outlet.

We consider farmer as our partner and provide assured supply of agri inputs to our customers, all our retail outlets have a specified policy for complaint redressal of farmers.

Due to our presence in Gujarat, we are able to provide a fair price to the farmers and thus contributing to government agenda of doubling farmers income. Being a market leader, we also control the rates in the market. One such example is Sardar Water Soluble Fertilizers (WSF). Earlier the rates of WSF were Rs. 130/kg but GATL has now been able to reduce the rates to Rs.75/kg as MRP for farmers.

With a commitment to serve the farmers, GATL is in constant touch with the latest technology and innovations. We have a state-of-the-art Tissue Culture lab which is certified by DBT (Department of Biotechnology, Government of India) and has already developed tissue culture protocols for over 10 varieties of fruits, flowers and commercial crops.

GATL has moved further with the concept of Fertilizer Vending Machine. Presently fertilizers come in standard packing of 50 Kg. The vending machines would help small farmers to buy fertilizers in desired quantity according to available land. These machines are designed to dispense fertilizers (Urea, DAP and NPK) from 5-20 Kg and would ensure fertilizer availability to farmers round the clock supply.

GATL is an implementing agency for many Gov. of Gujarat promoted projects. Besides marketing its own and GSFC products, GATL has commercial tie up with many nationally reputed companies like National Seed Corporation, Pioneer, Coromandel International, Indian Potash Limited, Kribhco, Rise N Shine, etc.

6. SAFETY, HEALTH AND ENVIRONMENT:

During the year under review, Health Safety Management System as well as elements of Process Safety Management were strengthened both of which are the fundamental building block of Safety functionaries in any industry.

HAZOP studies have been conducted as necessitated by inviting external agencies. Facelift is provided to the modules of the Contractors Safety and Visitors safety training topics. Focused Efforts have been pinned on trainings related to personal protective equipments and basic fire prevention; utilization of fire extinguishers etc.

Safety and Fire Trainings have covered more than 3000 employees, Contractors and visitors during the last FY 18-19.

Basic Fire safety awareness sessions have been imparted to school going students in adjacent Taluka places in association with District Disaster Management centre; the said Fire safety awareness has covered schools under the ambit of Padra and Savli taluka. Both manmade and artificial disasters were covered and methods of mitigation were shared as a part of interactive sessions.

Plant shutdown and start up activities pose hazards that are different than operational plant hazards and therefore intensified safety covers have been provided in a structured fashion, ensured right kind of hand tools, power tools, lifting tools and tackles as well as material handling and shifting devices to ascertain robust safety during plant shut down and start up activities. Pre Start up Safety Review and Non routine work permit as per checklist and in accordance with stipulations of SOPs has been ensured. Personal protection often termed as the last line of defense has always been emphasized and ensured for Employees, Contractors and Visitors.

Project commissioning work is going on for Melamine III which again has its own set of safety challenges. Adequate measures have been taken to ensure safety during Construction, Mechanical and Electro-mechanical work by elevating the safety measures and employing safety mechanisms utilized for project related works. Joint safety campaigns have been launched together with M/s L & T as well. More than 7 Million safe Manhrs were clocked during the Melamine III project activities.

Measures have been put in place to impart mechanical turnaround to fire fighting vehicles and as such Fire tenders are quick response vehicles now.

7. HUMAN RESOURCES:

Shareholders are requested to refer to point 26 on page no. 15 of the Directors Report which forms part of the Annual Report.

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