National Fertilizer Ltd Management Discussions.

State of Indian economy, Agriculture and Manufacturing Sector

Despite 2018 being filled with external vulnerabilities arising out of rise in oil prices, trade wars between major global trading partners and US monetary tightening, India has still outshine as world’s fastest growing major economy at growth rate of more than 7.0%.

Better demand conditions, settled GST implementation, growing investments in infrastructure, continuing positive effects of investor friendly policies, various initiatives such as Make in India, Ease of doing business, Start-up & Digital India and fiscal stimulus in the interim budget 2019 such as direct cash transfer program for farmers, middle class tax relief measures and favorable monetary policy are expected to sustain the GDP growth of the country. As per report released by Asian Development Bank, country’s growth is expected to grow at 7.2% in 2019-20. However, some of the challenges that may pose constraint to the Indian economy include lack of liquidity in the market due to restricted lending by financial institutions especially by NBFCs, rising inflation due to increase in crude oil prices, slowdown in global growth, trade war etc.

Rating agency CARE has warned that a 10% rise in global oil prices could increase demand for dollars, putting pressure on the rupee and widening the current account deficit.

On the agriculture front, this sector is likely to grow at an approximate rate of 2% on a year on year basis, however, being a key economic driver, this sector needs to adapt to the various challenges such as digital innovation in agriculture, risk mitigation strategies to deal with climate change, developing start-up eco system in agriculture sector, effective water management to deal with drought like situations, implementation of Agriculture produce and Livestock Marketing Model Act by different states to strengthen agriculture produce marketing etc.

Fertilizer Industry Structure & Developments

Fertilizer industry in India operates in public, private and co-operative sector, with the private sector occupying a larger share in the manufacturing capacity. Fertilizers sector being highly energy & capital intensive, cost of fertilizers is unavoidably high. In order to ensure availability of fertilizers to the majority of the small & marginal farmers at affordable prices, this sector is highly regulated and controlled by GoI for pricing and distribution of fertilizers. At present, Urea prices are highly subsidized and administered under New Urea policy-2015 whereas P & K Fertilizers are partially decontrolled and subsidy is disbursed based on the nutrient content available in the particular fertilizer under Nutrient Based Subsidy introduced by GoI w.e.f. 01-04-2010. In case of Urea, MRP is fixed Rs.5360 per MT which is around one third of byGoIwhichiscurrentlyfixedat the current cost of production / imported price. The country, during the year has produced Urea of 24.0 Million tons and imported 7.60 million tons to meet the total consumption of around 31.70 million tons of Urea. Under vision 2022 of New India, with the commissioning of new Urea plants in the country in a time bound manner, country would become self-reliant in Urea by 2023. The introduction of pooling of gas mechanism in the year 2015-16 has been consistently helping ensuring delivery of gas at uniform and lower price to Fertilizer companies to enable them to make Urea production beyond re-assessed capacity and helping to contain the requirement of working capital to some extent.

The availability position of Urea in the market remained quite comfortable and probably no shortage of Urea was felt by the farmers during last three years in a row. With an aim to cut down the consumption of Urea, GoI introduced a policy on rationalizing the size of the Urea bags and introduced 45 kg bag of Urea replacing existing 50 kg bag from 01st May, 2018.

Direct Benefit Transfer (DBT) system has been rolled out pan India from March 2018 for release of fertilizer subsidy through Industry. Under the fertilizer DBT system, 100% subsidy on various fertilizer grades is being released to the fertilizer companies, on the basis of actual sales made by the retailers to the beneficiaries. Under DBT scheme, subsidy on Fertilizers is being transferred directly to the manufacturers on the sale of fertilizers through Point of Sale Machines at retailers’ level. The eco system of DBT is still under maturity stage as many fertilizer companies are still facing various constraints such as delay in response of PoS machines due to poor infrastructure including internet connectivity at retailers’ points.

The imbalanced use of fertilizers due to highly subsidized Urea continues to be a big challenge and needs to be addressed on priority. On this front, GoI has been distributing Soil health cards to all the farmers to enable them to get information about nutrients level in the soil to make judicious use of fertilizers through soil and seed testing facilities at retail outlets of fertilizer companies. Fertilizer companies have been marketing city compost and organizing awareness programs for the farmers to boost the use of city compost to improve soil quality and increase yield of crop in line with a policy of the government on city compost under the Swachh Bharat Abhiyan.

Many challenges being faced by Fertilizer Industry which need to be addressed include delay in payment of subsidy due to inadequate subsidy budget of the GoI for Fertilizers, over regulations and procedural delays, unviable investment by Industry on energy saving schemes to meet the stiff energy norms fixed under New Urea Policy (NUP-2015) without any dispensation from GoI, Implementation of DBT which may further aggravate the problem of working capital due to change of subsidy payment from supply to sale. Lack of availability of domestic gas, increasing trend in the price of RLNG and lower price of Urea in international market is also adversely impacting the profitability of the Urea manufactures. The response of fertilizer use to food grain productivity has been declining over the years due to multi-nutrient deficiencies cropping up in the soil. Apart from deficiencies of primary nutrients, widespread deficiencies of secondary and micro nutrients are affecting the soil health. To restore soil health for desired growth in agriculture, balanced and integrated use of various nutrients is required. To address the issue, there is ample opportunity to the industry to introduce many new products containing combination of various nutrients including primary, secondary and micro nutrients. In this context, GoI is promoting use of compost through provision of marketing development assistance to the companies to enable them to provide the city compost to the farmers at an affordable price.

The use of Water Soluble Fertilizers in the country is also on the rise to improve fertilizer use efficiency through fertigation.

The fertilizer industry is highly vulnerable to the adverse climatic conditions which badly impact the fertilizer industry.

Opportunities & Threats Opportunities

Leverage of existing marketing network for undertaking trading and other businesses. Opportunity for New Investments abroad in NPK.

Scaling up of production & sale of certified seeds.

Scope for Increase in capacity utilization of Nitric Acid & Ammonium Nitrate Plants at Nangal.

Customized, Fortified, Water Soluble & Liquid Fertilizers for balanced fertilization.

Manufacturing of Agro Chemicals.

Marketing of Urea produced by other Companies on fee basis.

Manpower training on operation and maintenance of fertilizers plants to other Companies.

Threats

Alarming Urea market scenario after addition of new Urea capacity Volatile international price of Urea restricting additional production. Inadequate subsidy budget of the Government.

Increased Government regulations & procedures. Strict energy norms in 2020-21 under NUP-2015.

Inadequate availability of domestic natural gas as a result more dependence on expressive spot gas. Adverse demand supply scenario of Fertilizers due to adverse agro Climatic condition.

Volatility in prices of Industrial Products. Decontrol of Urea.

Revenue

The company has achieved Revenue from Operations of Rs.12245.24 crore during 2018-19 as against Rs.8954.36 crore achieved during previous year and total income of Rs.12301.05 crore during 2018-19 as against Rs.9016.20 crore during previous year as detailed below:

Rs. in crore

Particulars 2018-19 2017-18 Change
Sale of products (including subsidy) 12214.03 8928.29 3285.74
Sale of services 10.28 0.02 10.26
Other Operating revenue 20.93 26.05 -5.12
Revenue from operations 12245.24 8954.36 3290.88
Other income 55.81 61.84 6.03
Total Revenue 12301.05 9016.20 3284.85

Segment wise or product wise performance Urea and other fertilizers

The Company has achieved the ever highest Urea production of 38.59 LMT with an overall capacity utilization of 119.4% during 2018-19 against previous best production of 38.10 LMT achieved during 2017-18 (CPLY).

On the sales front, the company has achieved ever best sale of Fertilizers of 48.95 Lakh MT during 2018-19 which includes sale of 38.98 LMT of Urea, 3.71 LMT of Imported Urea, 6.05 LMT of Non-Urea Fertilizers and 0.21 LMT of Compost surpassing previous best of 43.09 LMT during 2017-18 which includes sale of 39.16 LMT of Urea, 3.81 LMT of imported Fertilizers & 0.12 LMT of Compost, 13.60% more than sale in previous year.

The detailed quantity break-up of sale of urea and other fertilizers is as under:

Lakh MT

Products 2018-19 2017-18 Change
Urea (manufactured) 38.98 39.16 (0.18)
Bentonite Sulphur 0.07 - 0.07
Bio-fertilizers 0.006 0.005 0.001
Imported DAP 5.04 3.28 1.76
Imported MOP - 0.27 (0.27)
Imported APS 0.26 0.26 -
Imported NPK 0.68 - 0.68
Imported Urea (Government Account) 3.71 - 3.71
City Compost 0.21 0.12 0.09
Total Fertilizers 48.95 43.09 5.86

Industrial Products

The company registered a record sale of Nitric Acid of 70606 MT during 2018-19 surpassing previous best of 69403 MT achieved during 2017-18. The company also recorded ever best production and sale of Ammonium Nitrate to the tune of 12929 MT during 2018-19 surpassing 11299 MT achieved during 2017-18. In terms of revenue generation from production and sale of Industrial products, the company achieved sale of Industrial Products (IP) comprising of Nitric Acid, Sodium Nitrate & Sodium Nitrite, etc. to the tune of Rs.201 crore during 2018-19 against CPLY of Rs.173 crore.

Bio-fertilizers

The company sold 631 MT of Bio-Fertilizers (Solid & Liquid) to the tune of Rs.1.82 crore during 2018-19 as against 496 MT of Rs.1.43 crore during CPLY.

Import & sale of Fertilizers

The Import of non-Urea Fertilizers undertaken by the Company has witnessed a growth of 97% during 2018-19 over the CPLY. The company sold 5.98 LMT of imported non-Urea fertilizers including DAP, APS, NPK worth Rs.2173 crore during 2018-19 as against 3.81 LMT worth Rs.1102 crore during 2017-18.

Apart from the above, NFL also sold 3.71 LMT of Urea imported in government account out of 4.96 LMT received at three ports.

Domestic Trading of Agro Products

The company has registered a total revenue of Rs.45.43 crore towards trading of various agro products such as seeds, pesticides & compost during the year against Rs.26.92 crore during CPLY.

Gross Sale Composition

Item

% of total Sale Composition

2018-19 2017-18 % Increase / (Decrease)
Urea (manufactured) 77.96 85.40 (8.71)
Non-Urea 22.04 14.60 50.96

Owing to shift in strategy of the company, the composition of gross sale of the company has undergone visible change. Against the Urea (main product) contribution of 94.49% in the overall revenue of the company during 2015-16, Urea contribution has reduced to 77.96% while contribution of non-Urea business has increased to 22.04% during 2018-19.

Projects completed / underway

Revival of Ramagundam Plant of FCIL through Joint Venture with EIL & FCIL

NFL, in association with EIL and FCIL has formed a Joint Venture (JV) Company as Ramagundam Fertilizers & Chemicals Limited (RFCL) to revive the old FCIL plant at Ramagundam (Annual installed capacity-12.71 LMT of Urea) with a total estimated project cost of Rs.5254 crore and equity participation of 26% each of NFL and EIL, 11% each of FCIL and State of Telangana. The remaining equity has been tied up with GAIL (14.3%) and a Consortium led by M/s HTAS, Denmark (11.7%).

The project is in progress and expected to be completed by end of December 2019. GITL is expected to lay the pipeline and supply the gas to the plant by June, 2019. The detailed engineering and the project management consultancy is being undertaken by EIL.

After commissioning of the project, NFL would be leveraging its existing marketing network to sell 100% Urea to be produced by this JV Company as per Marketing Management Agreement entered into with RFCL. NFL has also entered into an agreement with JV to render man power management consultancy for the Ramagundam Plant.

Bentonite Sulphur Plant at Panipat Unit

In order to meet the demand of Bentonite Sulphur to address the issue of Sulphur deficiencyin soil and to improve the top & bottom line, company has commissioned a Bentonite Sulphur plant of 25000 MTPA Capacity and commercial production started in September, 2018 at Panipat Unit. During 2018-19, the company has produced 8567 MT of Bentonite Sulphur, out of that 6476 MT was sold.

Integrated Energy Saving Projects

The stringent energy norms which were to be implemented applicable w.e.f. 01-04-2018 under New Urea Policy-2015 have been deferred by GoI for 2 years up to 31-03-2020 in respect of all the plants of NFL except Vijaipur-II, with downward revision of existing energy norms of all the NFL’s plants except Vijaipur-II (more stringent) equivalent to token penalty of 2% of difference between NUP Energy Norms and target Energy Norms of NUP-2015 for the first year 2018-19 and similarly 5% for the year 2019-20. Target Energy norm applicable under NUP-2015 i.e. 5.5 Gcal/MT however has been implemented for Vijaipur-II Unit w.e.f 01-04-2018. In order to implement the revised energy norms w.e.f. 01-04-2020, the company has already issued LoI on 01-02-2018 on M/s Thermax, Pune for setting up Gas Turbine Generators along with Heat Recovery Steam Generation (HRSG) Unit at Panipat, Bathinda & Nangal Units with a total project cost of Rs.675 crore. The scheduled date of commissioning of these projects is 22 months from the date of LoI i.e. 30-11-2019. The work on the project was going on in full swing and expected to be commissioned by scheduled date.

In order to recover the investment, GoI has been requested for retention of existing DFR norms in respect of Panipat, Bathinda & Nangal Units for a period of at least 5 years post implementation of the project. All efforts are under way to implement energy saving schemes at Vijaipur Units in an expeditious manner to achieve the strict energy norms applicable w.e.f. 01-04-2020 under NUP-2015.

Industrial Safety, Ecology & Pollution Control

Company strives to achieve excellence in improving employees occupational and personal health by minimizing health hazards and providing modern facilities. Company has well equipped hospitals at all the Units. In addition to that the employees have also access to specialized medical services wherever required. Employees also undergo periodic medical examinations.

Company remained focused towards achieving sustained energy efficiency operations of its ageing manufacturing facilities while maintaining pollution free environment and process safety. All manufacturing units continue to be ISO 9001-2008, ISO 14001-2004 and OHSAS-18001 compliant which reflects company’s commitment to Quality, Environment and Occupational Health and Safety. In order to monitor the level of emission and effluent discharge from all the units, all the units have installed On-line monitoring system effluent and emission discharges. Online monitoring system is integrated with Central and State Pollution Control Boards in order to monitor the level of pollutants on continuous and real time basis.

Unit level Health and Safety Committees have been constituted at all the Units to address the of health and safety issues. Quarterly review meetings are conducted regularly at all units. Modern method and latest technologies such as ‘International Sustainable Rating System’, ‘Total Quality Management’ and ‘Hazard and Operability Study’ were implemented in various units to improve the process safety. To safeguard the plants from emergencies like Fire, Explosion and Toxic gas release, "On site Emergency Disaster Plan" and "Off-site Emergency plan" are available at Units. These plans aim to train people act efficiently and confidently in emergency with minimum damage to humans and assets. The procedures are regularly reviewed and updated by carrying out surprise mock drills. Performance of each mock drill is evaluated and reviewed to bring improvements in the systems. Visits of Local Authorities and central agencies such as National Disaster Management Authority are regularly conducted in order to remain updated on safety related issues in all the plants. All the units are having their "Disaster Management Quick Response Team" to address the incidents that may occur outside the factory area for transportation of Liquid Ammonia and Chlorine Gas. Efficiency of Coal fired Boilers at Nangal, Bathinda and Panipat Units is being improved by using various techniques such as use of coal additives.

This will help to reduce consumption of fossil fuel.

Afforestation has been adopted in all the Units to improve the environment surrounding the Units. Tree saplings were planted in and around various Units leaving a cleaner and greener earth for future generation. The cumulative plantation since commencement is over 8 lakh for all the units.

To increase the sub soil water level, all the units have installed Rain Water Harvesting system. This measure has helped in conservation of water, increase in underground water table and increase greenery in the surroundings.

Outlook

The company is envisaging the growth in its top & bottom line by adopting various business strategies as under:

Maximization of Urea production in energy efficient manner.

Production of new products like Bentonite Sulphur, Agro Chemicals, DAP, Water soluble Fertilizer, Seeds etc. Maximization of production of Industrial Products including Ammonium Nitrate.

Marketing of Urea manufactured of unit of RFCL.

Manpower Management Consultancy for Ramagundam plant. Dividend from RFCL.

Overseas footprints by setting up a fertilizer plant in other country in a joint venture and buy back mode.

Leasing out idle assets of the company. Rationalization of manpower.

New recruitment of manpower to meet the short fall arising out of massive retirements and future growth of the company.

Production and sale of quality & certified seeds in own brand name through seeds multiplication program.

Domestic trading of Agro products (Pesticides, Weedicides etc.), Compost, Seeds, Water Soluble Fertilizers, Calcium Nitrate, SSP etc. Import and sale of fertilizers like Urea, DAP, MoP and Complex fertilizers.

Risk & Concerns

The major risk & concerns of NFL are outlined below:

Higher dependence on subsidy. Delay in receipt of subsidy leads to higher interest cost.

Low operating margins in Urea due to tight regulations.

Strict Energy Norms for all the plants under New Urea policy (NUP-2015). Dispensation sought from GoI against investment required to meet energy norms under NUP-2015 to maintain profitability at all the plants.

Lack of Internal resources (funds) for future investment.

Bathinda, Nangal and Panipat being old plants consuming high energy.

Small Prill size of urea produced at Panipat & Bathinda Units leading to poor acceptability in the market. Dependence of Nangal Unit on external power.

Risk Management Policy

The chemical fertilizer industry is operated in a hazardous environment and faces many risks including those related to health, safety and to mitigate them, the company has a comprehensive Risk Management environmentinadditiontogeneralbusiness&financial Policy which is regularly reviewed and a periodical review of the risks, procedures and strategies is undertaken. Risks are analysed at the highest level by Risk Management Committee and Audit Committee of Directors and efforts are made in a planned way to obviate the risks either fully or to minimize their impact. During the year, the Risk Management Policy of the company has been reviewed and revised in view of the Changed Government Policies such as NIP 2008, NUP 2015, Gas pooling, New Projects executed / under execution by NFL and introduction of New Business Verticals at NFL. The element of risk has been identified which may threaten the existence of the Company. The Company has put in place a mechanism whereby the quarterly Risk Assessment Report is presented to Risk Management Committee, Audit Committee and Board of Directors along with mitigation thereof. The Company has put in place a mechanism whereby the quarterly Risk Assessment Report is presented to Risk Management Committee, Audit Committee and Board of Directors along with mitigation actions thereof after thorough review by Risk Assessment Committee chaired by C&MD.

Internal Control Systems and their adequacy

The Company has a sound system of internal controls that ensures compliance with statutory requirements, regulations and implementation of various policies and guidelines. Besides Statutory Audit by C & AG, regular and exhaustive internal audits are conducted by independent chartered accountant firms in close co-ordination with NFL’s Internal Audit Division to examine, evaluate, monitor and report on adequacy and effectiveness of the system of checks and balances is in place, compliance with policies, plans and statutory requirements, to protect its resources against waste, fraud and in-efficiency and to ensure accuracy and reliability in accounting and operating data.

The policies and guidelines are in the form of various codes, manuals and procedures, issued by the management, covering all critical and important activities viz. Budget, Purchase, Material, Stores, Works, Finance, Human Resources etc. Internal Audit Program is approved by Audit Committee of Directors and is conducted as per Accounting Standards and these codes, manuals, procedures, etc. that are updated from time to time. The observations/recommendations made by the auditing agencies are reported to Management Audit Committee and the Audit Committee of Directors along with a report of compliance of directions issued in the past. The quarterly financial statements as also reports of statutory and Government Audit are reviewed by the Audit Committee of Directors before they are submitted to Board of Directors.

The Company has a well-defined Delegation of Powers in place, which lays down the powers for different managerial levels to facilitate faster decision making. The various policies, procedures and guidelines are continuously reviewed to improve effectiveness of the systems.

The Company has a full-fledged Vigilance Division to oversee that the guidelines of the Government and the rules/procedures of the company are strictly adhered/ implemented in all matters. The Vigilance Division conducts regular inspection of various activities in Manufacturing Units, Zonal Offices and other Offices for taking corrective/preventive action.

Internal financial controls and its effectiveness

As per assessment done by an external auditor, internal controls over periodic financial reporting in the company for the year 2018-19 have been found effective in general except few deficiencies which are not likely to lead to any major misstatement in the annual financial statements. However, company is gearing up to integrate existing home grown on line applications in vogue for different business functions in a seamless way to gain greater benefits in terms of improved MIS, faster declaration of results and greater analysis of operational parameters which shall facilitate easier decision making and improved control on financial reporting. The Company is also in the process of identifying system integrator for implementation of ERP.

Financial Performance

During the year, Company achieved revenue from operations of Rs.12245.24 crore (including subsidy of Rs.8295.68 crore) compared to Rs.8954.36 crore of CPLY (including subsidy of Rs.5934.55 crore). The sales turnover is mainly higher due to higher sale quantity of traded fertilizers by 5.87 LMT, city compost by 0.09 LMT, higher sales quantity of seeds, agro-chemicals, industrial and other products and increase in average gas price from USD 9.66/ MMBTU during CPLY to USD 12.19/ MMBTU during 2018-19 i.e. an increase of 26.19%.

During the year, Company earned Profit before Tax (PBT) of Rs.463.37 crore as against Rs.334.83 crore achieved during CPLY. The increase in profit is mainly attributed to decrease in energy consumption, increase in contribution from sale of traded goods, decrease in employee benefit expenses, etc. However, the above increase in PBT was partially offset by increase in finance charges and reduction in energy norms due to penalty @ 2% as per DoF Notification dated 28.02.2018 compared to CPLY, etc.

Short term borrowings of the Company as at 31.03.2019 stood at Rs.6122.11 crore, including cash credit utilization, short term loans and working capital demand loan, etc. as compared to Rs.2,890.43 crore as at 31.03.2018 mainly due to increase in pool gas price by 25.54%, increase in production of urea by 0.49 LMT, higher purchase of traded goods and lower receipt of subsidy viz-a-viz subsidy due from FICC due to budget limitations. Short term borrowings include Special Banking Arrangement (SBA) of Rs.1451.73 crore (Rs.194.71 crore during previous year).

Analysis of the Financial Performance of the Company:

(a) Revenue from Operations

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Revenue from Operations 12245.24 8954.36 37

Reason for variation:

Gross sales turnover was increased mainly due higher sale quantity of traded fertilizers by 5.87 LMT, city compost by 0.09 LMT, higher sales quantity of seeds, agro-chemicals, industrial and other products and increase in average gas price from USD 9.66/ MMBTU during CPLY to USD 12.19/ MMBTU during 2018-19 i.e. an increase of 26.19%.

(b) Consumption of Raw Materials

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Raw Materials Consumed 4738.34 3399.15 39

Reason for variation:

The increase in cost of Raw Material is due to increase in average price of gas to USD 12.19/MMBTU during FY 2018-19 as compared to USD 9.66/MMBTU during CPLY i.e. increase of 26.19% and higher production of urea by 0.49 LMT.

(c) Finance Cost

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Finance Cost 316.36 189.57 67

Reason for variation:

Finance Cost has been increased due to increase in average three month LIBOR rates to 2.458% on rate of payment as compared to 1.366% during CPLY on long term loans, higher interest rates on working of the loan @ 6.91 % as compared 6.34% during CPLY and higher average borrowings of Rs.4338.90 crore as compared to Rs.2724.95 crore during CPLY due to higher purchase of imported fertilizers, increase in pool gas prices and lower receipt of subsidy.

(d) Repairs & Maintenance

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Repairs and Maintenance 71.68 73.77 -3
(e) Employees Benefits
(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Employee Remuneration & Benefits 556.01 724.77 -23

Reason for variation:

Employee Benefit Expenses has decreased mainly on account of one time provision of Rs.152.75 crore towards liability for gratuity/EL/HPL as per DPE OM dated 03.08.2017 made during CPLY.

(f) Power and Fuel

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Power and Fuel 3122.74 2398.92 30

Reason for variation:

Power and Fuel expenses have increased mainly due to increase in average gas price from USD 9.66/ MMBTU during CPLY to USD 12.19/ MMBTU during 2018-19 i.e. an increase of 26.19% and increase in Urea production by 0.49 LMT.

(g) Freight and Handling

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Freight and Handling 797.24 607.36 31

Reason for variation:

Freight and Handling expenses has increased mainly due to rise in fuel cost, higher sale of fertilizers and higher dispatches of Urea.

(h) Other Expenses

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Other Expenses 188.42 170.83 10

Reason for variation:

Other expenses have increased as compared to CPLY mainly due to provisioning of unavailed input tax credit of GST relating to import services of marketing division.

(i) Other Operating Revenue

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Forfeiture of security deposit, LD, Sale of scrap and recoveries on delayed payments of credit sales, etc. 20.93 26.05 -20

Reason for Variation:

The other operating revenue has decreased mainly due to decrease in recoveries on delayed payment on credit sales and lower sale of scrap in comparison to CPLY.

(j) Other Income

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Other income comprising of interest income and other non-operating income. 55.81 61.84 10

Reason for Variation:

Other income is mainly lowered due to higher profit from sale of assets (Redundant front and Ammonia Plant) during CPLY (byRs.37.99 crore) which was partially offset of interest income on income tax refund by (Rs.23.70 crore).

Financial Status

(a) Fixed Assets

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Tangible Assets 3989.94 4073.68 -2
Intangible Assets 3.51 5.85 -40
Capital work in progress 133.38 64.26 108
Total 4126.83 4143.79 -1

(b) Non-current Investment

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Investments (Net of Provisions) 273.72 218.72 25

Reason for Variation:

Increase due to increase in equity investment in Ramagundam Fertilizers & Chemicals Limited during 2018-19.

(c) Inventories

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Raw Materials 1.58 3.91 -60
Stores and Spares (Incl. packing material) 186.01 142.63 30
Semi-finished / finished products 1398.45 379.40 369
Total 1586.04 525.94 202

Reason for Variation:

Inventories have increased due to higher inventory of traded goods for making it available for strategic sale in kharif season immediately after close of financial year.

(d) Trade Receivables

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Gross Debtors FICC 6561.90 3696.25 78
- Others 604.67 239.03 153
Less: Provision for Doubtful Debts (10.81) (10.90) -1
Net Debtors 7155.76 3924.38 82

Reason for Variation:

Trade Receivables have increased during 2018-19 mainly due to increase in subsidy receivable from Government of India and increase in receivables from market.

(e) Current Assets Other Financial Assets

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Other Financial Assets 231.80 233.18 -1

Reason for Variation:

Other Financial Assets includes Capital Subsidy receivable from GOI for Ammonia Feed Stock Changeover Project (AFCP) has decreased due to decrease in interest subsidy receivable from Government of India.

(f) Current Liabilities

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Short Term Borrowings 6122.11 2890.43 112
Trade Payables 630.86 491.08 28
Other Financial Liabilities 1191.74 606.09 97
Provisions 217.80 223.62 -3
Total 8162.51 4211.22 94

Reason for Variation:

The current liabilities are increased during 2018-19 due to higher purchase value of gas, increase in production of Urea by 0.49 LMT, higher purchase of traded goods, lower receipt of subsidy, increase in statutory dues and increase in advance from customers, etc.

(g) Non-current Liabilities

(Rs. in crore)
Particulars FY 2018-19 FY 2017-18 Change (%)
Long Term Borrowings 341.49 170.28 100

Reason for Variation:

Long term borrowing have increased during 2018-19 mainly due to new rupee term loan availed from State Bank of India for financing saving schemes and general capex of all units. The same was partially offset by repayment of External Commercial Borrowings (ECB).

Human Resource Management

The Company considers its Human Resource as its most important asset and makes sustained efforts for the development of its manpower. Company has a well-established Human Resource Department to cater to the training needs of employees, keeping in view the changing technology and overall business environment.

The Company has manpower strength of 3333 employees as on 31-03-2019, which comprises of 1637 Executives and 1696 Non-Executives. The company promotes the employment of women and at present 199 women employees are on its roll, which is 5.97% of the total work force. To improve skills and instil behavioural and personality development traits in all supervisory staff and managerial cadre, NFL organised number of training programmes (in-house as well as external) on contemporary subjects during the year. The training programmes were identified through Performance Management System by synchronizing organizational needs with individual needs. The Company also organized specially designed training programmes for developing women employees in various areas of expertise. In these diverse programmes, 12591 man-days training was imparted to employees and 3.67 man-days training to women employees.

Employees’ participation in Management is an essential ingredient of industrial democracy, which implies mental and emotional involvement of employees in the management of enterprise. NFL always supported the participative culture in the management through consultative approach.

The efforts to promote employees’ participation in various activities like Suggestion Scheme, Welfare, Safety, interactions between Management and employees’ representatives on various issues continued during the year. Industrial relations remained cordial during the year. NFL continues to make efforts for improving employees’ health, well-being and welfare. For achieving these objectives, the Company has various welfare schemes such as school facility, medical, benevolent scheme, housing facility, Social Security Scheme, NFL Employees Family Economic & Social Rehabilitation Scheme, Defined Contribution Superannuation Pension Scheme. Company has made Post-Retirement Medical Scheme (PRMS) more beneficial for the ex-employees from the year 2018-19 with higher insurance cover for Self & Spouse for IPD treatment. Facility of OPD reimbursement has been introduced from the year 2017-18.

The industrial relations at all Units/ Offices of NFL during 2018-19 remained cordial.

Details of Significant changes in Key Financial Ratios

Details of Significant changes in Key Financial Ratios as compared to immediately previous FY are as follows:

Sr. No. Particulars 2018-19 2017-18 Change in % Remarks
01. Inventory Turnover Ratio 14.17:1 24.73:1 43 Inventory have increased due to higher inventory of traded goods for making it available for strategic sale in kharif season closure of financial year.
02. Debt Equity Ratio 2.91:1 1.54:1 89 Increase due to increase in borrowings.
03. Earning per share (Rs.) 6.08 4.34 40 Increase due to increase in profits.

Cautionary Statement

Statements in the Management Discussions and Analysis describing the Company’s focal objectives, expectations or anticipations may be forward looking statements within the meaning of applicable securities, laws and regulations that describe our objectives, plans or goals. All these forward looking statements are subject to certain risks and un-certainties, including but not limited to, Government action, economic development, and risks.

Registered Office: For and on behalf of the Board of Directors
Scope Complex, Core-III,
7, Institutional Area, Lodhi Road, New Delhi-110003. (Manoj Mishra)
Date : 02nd August, 2019 Chairman & Managing Director
DIN: 06408953