Khaitan Chemicals & Fertilizers Ltd Management Discussions.


Some of the statements in the report may be forward looking and are stated as required by applicable laws & regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance and outlook

The Companys Performance is dependent on several external factors such as performance of monsoons, government policy, fluctuation of prices of raw material and finished products and also their availability etc. which could adversely affect the operations of the Company.


The Company is mainly engaged in the manufacture of Single Super Phosphate (Fertilizer), Sulphuric Acid (Chemical) and Soya Edible Oil. All the segments are related to agriculture and greatly affected by monsoons.

Segment-wise Business Review and Operational and Financial Performance:

The summarized performance of the Company in terms of production and sales for last 5 years is as under:

(Quantity in MT)
Particular 2018-19 2017-18 2016-17 2015-16 2014-15
SSP 318554 300375 415452 337329 347238
Sulphuric Acid 180443 94873 105792 86279 71580
Oleum/Liquid So3 1007 997 3245 2318 2115
Seed Crushing - - - - -
Refined Oil - - - - -
SSP 303679 338986 385574 404646 322071
Sulphuric Acid 140329 52281 51710 46567 41815
Soya Oil 678 861 1001 1709 2083
De-Oiled Cake - - - -

The summarized financial performance of the Company for last 5 years is as under:

Particular 2018-19 2017-18 2016-17 2015-16 2014-15
Fertilizer 36657.38 31513.72 35366.63 37079.10 30320.89
Soya 580.93 4045.64 1347.60 2284.46 2565.78
Fertilizer 3650.12 2813.15 2936.18 3118.46 2750.19
Soya / Agri (232.71) 16.47 361.03 173.86 67.44
EPS(Rs) : 0.81 0.17 0.17 0.17 0.36
DIVIDEND: - 5% 5% 5% 5%
Face Value (Per share) 1 1 1 1 1

The year 2018-19 continued to be a challenging period with low purchases by the farmers due to low income. Also the country faced consecutive drought (in some of the regions especially western Madhya Pradesh, parts of Maharashtra, Rajasthan and Gujarat) in 2018-19 also, which is a rare phenomenon. As a result, the agriculture related businesses; especially fertilizers trade faced many difficulties.

The GOI could successfully implement the partial Direct Benefit Transfer system for the Fertilizer Industry, however some glitches remain. We are hopeful that they would also be sorted out soon. The GOI has also agreed to keep the subsidy for the SSP sector separately earmarked within the overall ‘Phosphates and Potassium segment. This shall further improve the liquidity in the sector once implemented.

During the year, the turnover of your Company has increased from Rs. 35,628.77 lacs for the year 2017-18 to Rs. 37,320.34 lacs for the year 2018-19, by about 15.70%, the operating income has increased from Rs 3,745.88 lacs in 2017-18 to Rs. 4,334.17 lacs in 2018-19, and the cash profit has increased from Rs 1,112.66 lacs to Rs 2,132.91 in the respective periods, while the net profit after tax has increased from Rs. 164.22 lacs to Rs. 789.74 lacs.


The Company has Indias largest Single Super Phosphate (SSP) production capacity of 11,13,500 MT in the states of Madhya Pradesh, Rajasthan, Uttar Pradesh, Chhattisgarh & Gujarat alongwith Sulphuric Acid (SA) production capacity of 2,70,600 MT in the States of Madhya Pradesh, Uttar Pradesh & Chhattisgarh. Sulphuric Acid is also a raw material for production of SSP.

The Company has produced 3,18,554 MT (previous year 3,003,75 MT) Single Super Phosphate and 180443 MT (previous year 90,768 MT) Sulphuric Acid and sold 3,03,679 MT (previous year 3,38,986 MT) & 140329 MT (previous year 51,194 MT) respectively.

The Company is trying to diversify its portfolio by adding imported NPK fertilizers and fortified high value added fertilizers. The products are picking up well in the market.

The Company is continuing its efforts for optimizing its current assets to leverage sales on the one hand and diversifying into new geographical markets on the other. Focus is being laid on producing more value added fortified fertilizers, to improve the product portfolio.


Agriculture is the third largest sector of Indian Economy, which contributes around 17% of total GDP of the Country. Fertilizer Industry, with the emerging scenario, plays vital role in the growth of Agriculture Sector. The balanced use of chemical fertilizer is important not only for increasing agricultural productivity but also for sustaining soil fertility.

The Company is producing SSP, which contains Phosphate, Sulphur, Calcium and other micro nutrients and could be said to be a ‘Generic Customized Fertilizer. It is an essential Fertilizer for crops likes Oilseeds, Pulses, Sugarcane, Fruits and Vegetables, Tea etc. and for sulphur deficient soils. Main features of SSP Fertilizer Industry are-

• Basic need for agriculture and its development.

• Second largest consumer in the world.

• Third largest producers in the world.

• SSP is multi-nutrient fertilizer containing P O as primary nutrient and Sulphur, Calcium & magnesium as secondary nutrients.

• SSP fertilizer is the lowest priced fertiizer per kg, and preferred by small & marginal farmers.

• Highly dependent on Imported Raw Material.

• Subsidised by Government of India to control the prices of the input to the farmers.

• Substantial Import of Finished Products other than SSP.

SSP, which is a poor farmers fertilizer (price wise), is an option to optimize the use of phosphate fertilizers. It also helps to treat sulphur deficiency in soil (40% Indian soil is sulphur deficient) as well as for further enhancement of yields at the least cost.

The Industry, however has been suffering from poor quality supply from some unethical players in the market, mainly from the unorganized sector. The Ministry of Fertilizers has now laid special focus on improving the quality in the SSP sector.

However, the Fertilizer Industry including SSP is a working capital intensive Industry. Therefore interest rates and delay in disbursement of subsidy are always matters of concern to the Company.

Governments continuous thrust to encourage SSP to substitute imports of DAP and NPK is an indicator of upward trend in the Industrys future.

Future Outlook:

It is expected that the Country will have an near normal monsoon in 2019, resulting in relief to Indian agriculture sector and related industries like Fertilizer. The Economic Survey-2018 has floated the idea of replacing the input subsidy with direct income support to farmers and there is a need for "replacing untargeted subsidies (power and fertiliser) by direct income support to address agricultural stress and to achieve doubling farmers income. The Prime Minister had announced to double farmers income in budget-2018, currently estimated at Rs 77,976 annually, by 2022. The government has been spending nearly 30% of its total subsidy on food, fuel and fertiliser to ensure that farmers get the key agriculture input at cheaper rates. The total outgo on fertilizer subsidy alone was Rs 70,000 crore in 2017-18.

The Telangana government has announced to start an input assistance scheme by paying Rs 8,000 per acre to each farmer every year to enable them recover costs of fertilisers, seeds and pesticides. Experts have viewed this as an alternative to various subsidy schemes by the government in the farm sector.

In the event of such a call by the GOI, SSP fertilizer being one of the cheapest fertilizers including subsidy, stands to gain by reducing the payout of the farmer.

The Government has introduced the partial DBT system for fertilizer subsidy successively in different states and now the entire country is covered under this scheme. Under this scheme, 100% subsidy on various fertilizer grades is to be released to fertilizer companies on the basis of actual sales made by retailers to beneficiaries. The sale of all subsidised fertilisers to farmers is made through point of sale (PoS) devices installed at each retailer shop. The beneficiaries are identified through Aadhaar, voter identity card and other instruments. The scheme has been implemented smoothly by the Department of Fertilzers with a few glitches remaining. We are hopeful that the same would be resolved soon. The Government has also provided for a separate budget earmarked for the SSP Industry, which shall improve the liquidity in the Industry.

The raw material prices have increased and are now on an uptrend. To keep the end prices of fertilizers to the farmers within reasonable limits, the Government has maintained the Nutrient Based Subsidy rates at Rs. 2,734/- per MT.

Despite the slowdown in the previous years, the SSP Industry is very optimistic for the coming financial year, on account of expected near normal monsoon. Monsoons have a major impact on the agricultural sector, besides the commodity prices of major raw material inputs. In such a regime SSP fertilizer being a low cost fertilizer has an increased preference with the farmers.

The performance of the Company is expected to be better in coming years considering its basic strengths like high integrated capacity which is already operational, multi-geographical locations and established brands. The well maintained plant and equipments ensure uninterrupted production and distribution of goods

Opportunity, Threats, Risk & Concerns:

The Company welcomes the Governments plan to introduce DBT subsidy directly to farmers which shall give the farmers unrestricted choice as well as make them understand the real worth of fertilizer used by them.

The Company is in an advantageous position for tapping its already established production capacity with multi- geographical locations; wide spread marketing network and high brand value for its product.

NBS policy as envisaged has attracted new entrants in the market, which in fact shall be better for the wider reach of this long neglected product and establishing the SSP Industry in its right place, However, entry of new entrants in overall bad market conditions has created excess supply in the market resulting into changing consumption and stocking patterns necessitating higher inventories.

SSP fertilisers are based on imported raw-materials which can face severe volatility in prices and foreign currency exchange rates, affecting the profitability of the Company. Agro-Climatic conditions also have a large effect on the performance of the Company.

Delay in subsidy payments, uncertainty of monsoon, volatile international market of raw material, seasonal consumption of fertilizer mainly in two months each in Kharif and Rabi, lack of awareness of benefits of SSP consumption amongst farmer fraternity, clubbed with logistics availability/ cost and higher requirement of working capital shall remain concerns for the Industry & of the Company.

Soya/Agri Division

The Company is having 1400 TPD Soyabean crushing capacity along with 100 TPD Edible Oil Refinery located in Soyabean growing area i.e., Ratlam, Madhya Pradesh, which is well connected with rail/road network with nearby ports.

The Company has reduced its activities in this segment to a large extent alongwith total control on fixed expenses due to low margins in the Industry. During the year, the Company has crushed Nil MT (Previous year Nil MT) Soyabean seed.


The most popular and the largest produced oilseed in the world is Soyabean. It has got the support of wide variety of climates and soils and that is why it is considered to be the most economical crop and has a good worth.

Soya oil is extracted from the basic Soyabean through complex refining process by crushing Soyabeans, 17-18% soy oil is recovered and the rest is called soy meal or De-oiled cake.

The contribution of soy oil in worlds total oil production has reached around 25%, after growing at 5.8% p.a. during the last 10-16 years, and figures around 31 million tons in absolute terms. Countries like U.S, China, Argentina and India have a strong consumer base. Consumption has also risen in other nations like European Union, Central Europe, Egypt, Morocco, Mexico, and Brazil.

Soyabean meal comprises of the remnant after the oil extraction. It has high protein content and is easily digestible and that is why it serves as an animal feed and accounts for about 65% of the worlds total animal feed.

Soyabean holds a very important position in the Indian agriculture and economy. Madhya Pradesh has the lead among the Soyabean producing states in India followed by Maharashtra. The other major producers are Rajasthan and Andhra Pradesh. The major trading centers for soy in India include Indore and Ujjain in Madhya Pradesh, Nagpur in Maharashtra and Kota in Rajasthan. The country is seeing increased consumption of soyabean meal mainly going into poultry and cattle feed.

The total crop size in India is about 10-12 million tonnes out of world crop of 250 million tonnes. Soya Oil is consumed in the country while sadly a protein deficient country like India is exporting its cheapest protein containing soy meal to other countries due to poor promotion of its benefits and by incentivising Exports. However, in due course of time home consumption of Soyabean meal is bound to increase.

Soyabean and Soy-Oil are actively traded in Indian commodity exchanges namely, National Commodity & Derivatives Exchange Limited (NCDEX) and Multi Commodity Exchange of India Limited (MCX). However, the trading in these exchanges are now a days in the hand of speculator instead of showing a reasonable trend due to non feasibility of ‘Free Trade and ‘Liquid Market.

Future Outlook:

In India, crushing capacity of Soyabean is much higher than availability of raw material. In spite of higher capacity, the efficient processing capacity in good locations like ours, shall perform reasonably well with higher Soyabean crop due to increase in yield.

Eventually on expiry of incentive period accorded to new entrants alongwith control on tax evasion, existing players like us will have a competitive edge in a level playing field. The Company has reduced its fixed expenses in view of limited activities.

Further in a major development the GOI has doubled the import duty on palm oil, a major substitute for edible oils, from 15% to 30% giving a major relief to the soya seed producing farmers and the seed crushing Industry. However during last year the major palm oil producing countries like Malaysia lowered the oil prices again making the domestic Industry incompetetive.

Opportunity, Threats, Risk & Concerns:

The Company is enjoying ideal location of its soya processing plant i.e. at the heart of Soyabean cultivation area, which assures us a value added advantage in operations

The present yield per hectare is around 1.2 MT against world average of 2.4 MT. The yield is increasing by adopting good practices by farmers and reasonable return on Input.

The Indian consumption of soy meal/DOC has started to increase and therefore Indian soy meal need not compete in International market which produces and sells its surplus Soyabean, with hefty State subsidies to agriculture.

Production of Soyabean is highly dependent on the vagaries of monsoon. The delayed and uneven monsoon creates shortage of raw material thus affecting the capacity utilisation and profitability of the Industry. The large crushing capacity with insufficient raw material alongwith long shelf life and volatility of international market make Soyabean & soya oil very speculative products in Commodity Exchanges.

In view of increasing speculative behavior in the market, which is not at all aligned with either international market or with forward market, the Company has reduced its activities in this segment to large extent


The Company conducts its business with integrity and high standards of ethics, and in compliance with the laws and regulations that govern its business. The Company has a well established system of internal controls in operations, supported by suitable monitoring procedures and self-assessment exercises. The financial and commercial functions at various locations are structured and reviewed timely to provide adequate support and controls for the business of the Company.

In addition to external audit, The Company has appointed M/s APAS & Company, Chartered Accountants, as an Internal Auditor, who report significant findings to the Audit Committee of the Board. Consequently required steps are taken to improve the operations.


The ability to attract, onboard, develop and engage the right kind of talent is, therefore crucial to an organization long term success. Company strongly believes in continuously taking steps towards talent management, leadership development, employee engagement. Employees are the back-bone of good organization and to motivate them to achieve greater heights, the Company undertook various HR initiatives towards their development, enhancement and retention. The Company considers its highly motivated and well-maintained team as its most valuable asset. As on 31.03.2019, the Company has employed 590 peoples at various locations in India.

Amidst all the pressures and demands of the growing business, Industrial Relations continued to be reasonably cordial with our Union(s).


The Company has always considered safety and environment one of its key focus area and has always strived to make continues improvements in these two aspects.

At Company, environment concerns have always taken precedence; to address the concerns on Environment Protection, the Company has set up an Online Monitoring System at all the plants and concrete efforts were made towards natural resource conservation by way of Water Harvesting, Sewage Treatment Plant, etc.


The Company dwells on chalking out the best possible future plans and policies so as to avoid the pitfalls and following the best course in the long run. In both the business segments, a focus on assets utilization, earning maximization, continuous growth and relentless strengthening of the internal efficiencies will enable the Company to deliver superior value for its shareholders on a sustained basis in future.