ANNEXURE - II
Business
Madras Fertilizers Limited (MFL) incorporated in the year 1966 as a PSU
under the administrative control of the Department of Fertilizers (DOF), Ministry of
Chemicals & Fertilizers, and Government of India.
MFL is engaged in the manufacture of Ammonia, Urea and Complex
Fertilizers at Manali, Chennai-68. MFL is also engaged in manufacturing Bio-fertilizers
and marketing of eco-friendly Organic fertilizers and Neem Pesticides.
Overview of the Economy
The government has continued its focus on augmenting farmer income
through various steps. Increased allocation across the schemes to drive irrigation
facilities, improve agricultural markets, augment the allied sectors supporting income,
setting-up of FPOs, crop insurance schemes and income supplementation schemes are major
positive. With these steps, a positive effect on fertiliser offtake is expected.
Industry Structure and Development
Fertilizer industry is one of the most industrial sectors that
contributes mainly to achieve food security and sustainable agricultural development.
Indian fertilizer sector witnessed a sustained high growth in
consumption. The Government has taken a number of initiatives for promoting balanced
fertilization to accelerate agricultural growth.
Besides this, there have been efforts on the technological development
in production processes that keep pace with the latest global production methods and
environmental requirements.
Improvement in demand due to a good monsoon which resulted in higher
sowing aided the increase in production. Overall Fertilizers Sales too have increased
buoyed by a good monsoon and harvest season. As overall cost of production of urea
produced using RLNG has seen decrease in the working capital intensity of the fertilizer
manufacturers and it will also act as a relief for the fiscal spending of the government
while disbursing the urea subsidy.
Agricultural Situations prevailed in Southern States :
In Tamilnadu, South West monsoon rainfall (477.7 mm) was
abundant @ 42% excess against normal (336 mm) and 21% increase over CPLY (393.4 mm) but
North East monsoon rainfall (344.5 mm) was not upto the expected level and 47% deficit
against CPLY. Mettur is the major reservoir in Tamilnadu which caters around 16 lakh
acres. Water release commenced well in-advance on May 24 against the customary date of
12th June and the crop coverage under Mettur was above normal. Due to good rainfall during
Kharif season, most of the wells, tanks and reservoirs were filled that lead to increase
in crop coverage over CPLY for Paddy, Sugarcane, Cotton and Maize. Produce price was good
for Maize (Rs.2000 - 2400 per Quintal) and Cotton (Rs.8000 - 12000 per Quintal). Minimum
Support Price of Paddy is not remunerative for farmers despite increase from Rs.1940 to
Rs.2040 per Quintal. Sugarcane price has been increased from Rs.2850/T to Rs.3016/T
(including special incentives given by Tamilnadu @ Rs.195/T). Yield for Paddy and Millets
stood at @1400-1700 Kg/ac and for Pulses @300 Kg/ac. Total TN food grain production
exceeded 120 lakh tonnes. Urea demand prevailed throughout the year due to short supples
and steep increase in the cost of Complex fertilizers. There was no impact on crop yield
and production in spite of supply shortages & steep increase cost of Complex
fertilizers.
Puducherry received 13% less rainfall over normal during the year
2022-23 which was mainly due to 25% deficit rainfall in Rabi. (Normal / annum - 1432.4 mm
Actual- 1254.2 mm). Paddy crop coverage was normal with 50000 acres. No major reservoirs
available in the UT. Paddy produce price ranged between Rs. 1400 - Rs.1650/per 77 Kg bag
and is remunerative due to which farmers are preferring Paddy crop. MFL stood No.1 in Urea
segment with 72.3% market share. MFL & SPIC are the major suppliers of Urea in the UT.
NP segment dominated by FACT with 58 % market share. Restricted supply of MOP & higher
cost impacted its consumption.
Telangana received 1267.40 mm rainfall against normal of 865.30 mm
leading to good seasonal conditions. Major reservoirs viz. Nagarjuna Sagar, Sriram Sagar,
Srishilam and Lower Manair Dam recorded normal water levels. During Kharif major crops
like Paddy, Maize, Jowar, Cotton, Chillies, Pulses, Oil Seeds and other crops including
Vegetables were sown in an area of 126.03 lakh acres which is more than normal of 123.34
lakh acres. During Rabi, Paddy, Maize, Groundnut, Pulses and other crops were sown in an
area of 52.63 lakh acres against normal of 47.85 lakh acres. Supplies of both Complex
& Urea fertilizers were in excess to the demand. 1956870.325 MT of Urea, 1330057.350
MT of NPKs and 73847.50 MT of MOP were sold in Telangana State.
In Andhra Pradesh, the rainfall received was 943.80 mm as
against the normal of 886.70 mm showing an increase by 6.4 %. Farmers in East & West
Godavari districts have skipped one dose of fertilizer application due to heavy rainfall
and water stagnation in Agriculture fields during August month. Continuous rains in
Anantapur & Satyasai districts during Dec22 & Jan23 damaged horticultural &
orchard crops. During Kharif season, the coverage of Paddy, Groundnut and Pulses was
reduced by 11.3%, 21.27% and 24.72% respectively. During Rabi season, coverage of Paddy
& Pulses decreased by 16.85% & 24.67% respectively. During the year 2022-23, A
volume of 910409 MT of Urea, 236784 MT of DAP, 818822 MT of NPK and 48684 MT of MoP were
sold. Though there was slight increase in Current year produce price, with the escalation
of inflation, it is not much beneficial to farmers when compared with last year prices. A
Slight demand for NC Urea & MOP was observed in the months of December & January.
However the year 2022-23 ended with an inventory of 2,20,452 MT of Urea, 69,381 MT of DAP,
2,32,669 MT of NPK(Complex) and 22,160 MT of MOP at AP Markfed & Wholesalers as of
31st Mar, 2023.
Karnataka State received a total rainfall of 1474 mm, which is 28%
above normal of 1153 mm. As a result all reservoirs attained their full capacity and
thereby a crop coverage of more than normal was observed. Though the productivity levels
were below normal, the total food grain production was on par with previous year. The
produce price of plantation crops like Coffee and Arecanut was significantly higher over
CPLY i.e., Arabica Parchment Rs.15,000/-, Robusta Parchment Rs.9,000/- per 50 Kg. and
Arecanut Rs.50000 to 60000/quintal, All field crops produce price was normal. Due to
copious rains and more crop coverage, the fertilizer consumption increased to around 47.00
lac MTS in the current year from 45.00 lac MTS in the previous year. The supply of DAP
& NPK Grades were limited during Kharif 2022 and was normal during Rabi & Summer
seasons.
In Kerala, the state received 2840.600mm rainfall against the
normal of 2948.600mm. All the Major reservoirs including Malampuzha attained full capacity
& the dam was released for Agricultural purpose between 15th of November 2022 to 15th
of February 2023. Heavy rainfall during Aug-Sep2022 damaged many crops and adversely
affected yields of Banana and Coffee. The Produce price of Rubber continues to be
un-remunerative. Shortage of Urea, DAP and MOP were observed in most of the districts
during agricultural season.
STRENGTH, WEAKNESS, OPPORTUNITIES & THREATS Strengths
MFLs strength is its Highly skilled manpower, its flagship product and
its dedicated far and wide reach of marketing network throughout South India are its
strength. It has its presence in the market over 5 decades and receive continuous support
from the GoI. It has already converted its feed stock from Naptha to RLNG which is being
supplied by M/s IOC located at the close proximity of MFL.
Weaknesses
Agro-climatic condition has a large effect on the performance of the
Company. NPK raw materials which are imported are subject to severe volatility in terms of
its availability and affordable price. Variation in the foreign currency exchange rates
will also affect the profitability of the Company.
Opportunities
There is a compelling need for alternate fertilizers which will have
lesser wastage and reduced fertilizer usage while keeping the same or more yield. This
opens up for new investment with better return while ensuring food security.
Business diversification like Trading of fertilizer products will
improve the bottom line of the company.
Threats
High volatility in the prices of raw material of NPK resulting in an
adverse impact on production of NPK and marketing plans which eventually affects the
bottom line of the company.
Outlook
The outlook for the fertilizer sector is positive on expectations of
good monsoon. The underlying macros for the Indian fertilizer industry look promising.
With surplus reservoir levels, forecasts for a good monsoon season, demand for the
procurement of fertilizers seems also promising.
Risks and Area of Concern
The company face low operating margin due to working capital limitation
for NPK production. But, the company ensured uninterrupted supply of vital plant nutrients
besides ensuring safety of the plants and personnel including contract labor.
Fertilizer Sector:
(Lac MT)
| PRODUCT |
UREA |
NPK |
|
2021-22 |
2022-23 |
2021-22 |
2022-23 |
| Sales in MFL Marketing Territory |
61.45 |
65.91 |
53.19 |
50.64 |
| MFL Sales |
5.04 |
5.29 |
0.26 |
0.075 |
For Complex fertilizers, NBS is applicable from 1.4.2010 where the
subsidy is being fixed by Government and the MRP is allowed to be fixed by manufacturers
based on market dynamics. Due to steep increase in international prices of raw- materials
during the year 2022-23, the subsidy for 17-17-17 was increased to Rs 32302/MT from Rs
12619/MT and for 2020-0 - Rs 32940/- from Rs 12822/- which is an increase of 156% over
previous year subsidy.
The consumption of UREA has marginally increased around 6.8% due to
favorable agricultural situation and NP/NPK/NPKS (Other than DAP) consumption decreased by
5% over CPLY in MFLs territory due to short availability.
* MFL achieved Rail : Road ratio of 86:14 for Urea movement
against the DoF norms of 80:20, which is the best in last 12 years.
* For the 4th Consecutive year since 2019-20, MFL products were
marketed without any additional rebates., thereby saved a financial outgo on marketing
costs.
* No credit period/Open credit offered by MFL during the financial
year, whereas Competitors offered several discounts/ rebates and open credit facilities.
* For the 5th consecutive year, achieved 100 % RTGS/online payments
for all the sales transactions.
Global Scenario :
During 2022-23, the International FoB Prices of Urea were in continuous
fluctuating trend as compared to 2021-22. The Urea price that was at USD 596 PMT during
Mar22 touched its peak of USD 722 PMT by May22 and further fluctuated between USD
549-691 PMT during Kharif2022. Afterwards, there was a continuous fall in Prices during
Rabi 2022-23. Urea Price of USD 665 PMT during Oct2022 fell to USD 361 PMT by Mar2023.
Overall there was a reduction of 39.43% in Prices of Urea by March 2023 when compared to
Mar2022. The Prices during the previous year ranged between USD 376-596 PMT.
Phosphoric acid CFR price was also in fluctuating trend. It was at USD
1530 PMT during Mar - Jun2022, touched its peak at USD 1715 during Jul-Sep22, declined
to USD 1355/-PMT during Oct22 and finally stabilized at USD 1175 PMT during
Nov22-Jan23. The Prices further reduced to USD 1050 PMT during Feb-Mar2022. Overall
there was a reduction of 31.37% in Prices of Phosphoric acid when compared to Mar2022.
The Prices during previous year ranged between USD 795-1530 PMT.
MOP CFR price was stable at USD 590 PMT for the entire year 2022-23,
and no fluctuations were observed. But it ranged between USD 247-590 PMT during the
previous year.
Production, Imports and Consumption of Major Fertilizers (All India
Basis) :
The figures of production, imports and consumption of major fertilizers
viz. Urea, complexes in India for the years 2021-22 and 2022-23 are given below:
[Lakh MT]
| PRODUCT |
UREA |
DAP |
NP/NPK (Other
than DAP) |
MOP * |
| 2021-22 |
2022-23 |
2021-22 |
2022-23 |
2021-22 |
2022-23 |
2021-22 |
2022-23 |
| PRODUCTION |
250.8 |
284.9 |
42.2 |
43.4 |
83.1 |
92.9 |
- |
- |
| IMPORTS |
91.4 |
75.8 |
54.6 |
65.8 |
11.7 |
27.5 |
24.6 |
18.7 |
| CONSUMPTION |
341.8 |
357.3 |
92.7 |
105.3 |
114.8 |
100.7 |
24.6 |
16.3 |
* = For direct application only, Excludes supply to NPK/Complex
fertilizers units.
All India Demand Forecast For Fertilizer Nutrients for the Periods
2022-23 to 2024-25
[Lakh MT]
| PERIOD |
N |
P |
K |
TOTAL |
RATIO (NPK) |
| 2022-23 * |
202.1 |
79.1 |
17.2 |
298.4 |
11.8:4.6:1.0 |
| 2023-24 (Estd) |
206.4 |
85.0 |
24.3 |
315.7 |
8.5:3.5:1.0 |
| 2024-25 (Forecast) |
211.1 |
87.1 |
25.3 |
323.5 |
8.3:3.4:1.0 |
* = DBT Pos sale.
All India Product-Wise Demand Forecast For 2022-23 To 2024-25
[Lakh MT]
| PERIOD |
UREA |
DAP |
SSP |
MOP |
COMPLEX FERTILIZERS |
| 2022-23* |
357.3 |
105.3 |
50.2 |
16.3 |
100.7 |
| 2023-24 (Estd) |
364.3 |
112.9 |
54.2 |
23.5 |
110.8 |
| 2024-25 (Forecast) |
372.2 |
115.8 |
56.1 |
24.6 |
113.1 |
* = DBT Pos sale.
The Demand forecast for nutrients and corresponding fertilizers are
based on anticipating favorable onset of monsoon, availability of irrigation, production,
imports, cropping pattern etc. And it is based on existing product nutrient ratio also.
However, with Nutrient Based subsidy scheme and programs like soil health management and
promotion of balanced fertilizer nutrients application, the demand for complex fertilizers
will get rationalized in the coming years
Nutrient Based Subsidy (NBS) for Phosphatic & Potassic Fertilizers
The Government of India introduced the Nutrient Based Subsidy Phase-I
with effect from 1.4.2010. This scheme is applicable for DAP, MOP, MAP, SSP, TSP and for
other twenty grades of Complex fertilizers.
Under NBS Scheme, A new product Potash Derived from Molasses
(PDM-0:0:14.5:0) was included as 25th grade of P & K fertilizers for which a subsidy
amount of Rs 1467/MT extended to Manufacturers effective Apr2022. Any fortified
fertilizers with secondary & micro-nutrients like Sulphur, Boron and Zinc will
continue to be eligible for additional per MT subsidy of Rs 300/- respectively & for
Zinc Rs 500/-.
The per kg Nutrient Based Subsidy for Nutrients N P K for the
period 2019-20 to 2022-23 is given below:
| Sl.No. Nutrients |
2019-20 |
2020-21 |
2021-22 |
2022-23 |
|
|
|
|
01.04.2022 to 30.09.2022 |
01.10.2022 to 31.03.2023 |
| 1 N |
18.901 |
18.789 |
18.789 |
91.96 |
98.02 |
| 2 P |
15.216 |
14.888 |
45.323 |
72.74 |
66.93 |
| 3 K |
11.124 |
10.116 |
10.116 |
25.31 |
23.65 |
| 4 S |
3.562 |
2.374 |
2.374 |
6.94 |
6.12 |
For the current year 2022-23, GOI has increased NBS rate for 20:20:0 to
32,940 up to September 30, 2022 from the earlier year rate of 12,822 and a further
increase of 32,991/- for October 01, 2022 to March 31, 2023.
Risk Management
Major challenges that fertilizer industry is facing are increasingly
volatile International market for fertilizers and raw materials, steep depreciation in
rupee value, increasing prices of NPK fertilizers due to new NBS policy and rise in the
working capital requirements of fertilizer firms in addition to the historical challenges
associated with the rural markets. The Company has a well laid down Risk Management System
with Risk Assessment & Risk Mitigation procedures to evolve suitable strategies for
mitigating associated risks through better management practices and achieve corporate
objectives.
The identified potential risks such as Operational, Input, Utilities,
Project Implementation, Business, Competition, Assets, Internal Control, Environmental,
Financial, Human Resources, Legal, Regulatory, MIS and Market Risks and their impact on
the Companys performance and Stakeholders interest is assessed on continual manner. The
reporting of Risk Assessment and Risk Mitigations under the policy is reviewed by the
Audit Committee and the Board periodically.
Internal Control System
The Company has an Internal Control System designed to ensure security
of the assets of the Company and efficiency of operations. The Internal Control System
includes proper delegation of authority, supervision, Online Integration System (OLIS) and
checks and procedures through documented policy guidelines and manuals.
The Company has an Internal Audit function, managed by a team of
professionals, which is empowered to examine the adequacy and compliance with the
policies, procedures and statutory requirements. Internal Audit conducts regular audit
across Companys operations and the management duly considers and takes appropriate action
on the recommendations made by the Government Auditors, Statutory Auditors, Internal
Auditors and the Audit Committee of the Board of Directors for the improvement of the
same.
Ratio Analysis
| Particulars |
FY 2022-23 |
| (i) Debtors Turnover |
6.84 |
| (ii) Inventory Turnover |
1.19 |
| (iii) Interest Coverage Ratio |
4.18 |
| (iv) Current Ratio |
0.63 |
| (v) Debt Equity Ratio |
(5.20) |
| (vi) Operating Profit Margin (%) |
9.76 |
| (vii) Net Profit Margin (%) |
5.38% |
| (viii) Return on Net worth |
NA |
Accounting Treatment:
There is no change in the accounting treatment adopted by the Company
during the year in the preparation of financial statement other than the Indian Accounting
standards as per the provisions of the Companies Act and Rules made thereunder.
Prevention of Sexual Harassment
Disclosures in relation to the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013 have been provided in the Report on
Corporate Governance Report.
The Company has zero tolerance for sexual harassment at the work place
and has been following the provisions of the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2014 and the Rules thereunder for prevention
and redressal of complaints of sexual harassment at workplace.
During the year, one program was conducted on November 09, 2022 to
create awareness among women associates explaining the provisions available under the PoSH
Act 2014.
Internal Compliance Committee (ICC) is in place at MFL to redress
complaints received regarding sexual harassment. All women associates (permanent,
temporary, contractual and trainees) as well as any woman visiting the Companys premises
are covered under this provision.
Summary of sexual harassment issues raised attended and disposed of
during the financial year 2022-23:
| No. of complaints received : |
Ni |
| No. of complaints disposed of : |
Ni |
| No. of cases pending for more than 90 days : |
Ni |
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