paradeep phosphates ltd share price Management discussions

Global Economy

Despite the significant challenges (especially inflationary) faced by the global economy in the aftermath of the Covid-19 pandemic and the Russia-Ukraine conflict, there are positive signs of progress. Most central banks implemented a synchronised and substantial tightening of monetary policy. Such a move helped in reducing the inflationary pressures exacerbated by the war. This was evident through the cooldown of prices across energy, food and commodity and diminishing supply shortages, which had escalated earlier. Although food prices have not fully returned to normal levels, they have declined since their peak in early CY 2022 . Moreover, dislocations in energy and food markets caused by the conflict are gradually dissipating, providing hope for a brighter economic outlook. In addition, supply chain disruptions have started normalising with the opening up of Chinas economy.

While advanced economies experienced a growth rate of 2.7% in 2022, Emerging Markets and Developing Economies registered a growth of 4%. Moving forward as the economies come out of the disruptions there is a need for multilateral cooperation to help defuse geopolitical tensions and respond to the challenges of an interconnected world. It will help in safeguarding the functioning of global financial markets, manage debt distress, foster global trade and reinforce the multilateral trading system. This will ensure food and energy security, advance the green and digital transitions, and improve resilience to future pandemics.

Indian Economy

According to the International Monetary Fund (IMF), India is expected to maintain its position as a favourable contributor to the global economic expansion. Despite global uncertainties, Indias economy has shown greater resilience, with high-frequency economic indicators such as GST collections, E-way bill generation, services PMI, and retail credit growth, pointing towards the healthy consumption demand. The RBIs recurring interest rates hikes since May 2022 to bring inflation under control have further supported the economy in its recovery. However, in April 2023, the central bank paused the rate hikes to assess the impact of the previous hikes.

Riding on this positivity, the economy has grown by 7% in 2022-23. The Governments decision to ease Covid- induced restrictions has resulted in an increase in both manufacturing and financial activities. This eventually helped bolster consumer confidence, resulting in increased private consumption. Additionally, the Governments thrust on becoming a global manufacturing hub is evident through its increased focus on manufacturing schemes. Its

Make in is now focussing on 27 sectors, which include 15 manufacturing and 12 service sectors, including furniture, agri-products, textiles, robotics, televisions, and aluminium. As a result of these initiatives, India is reaping the benefits of new partnerships with other countries as they seek to secure their supply chains by establishing manufacturing plants in India.

Such initiatives are also visible in Indias agriculture as the Economic Survey 2022-23 points out that the Indian agriculture sector has been growing at an average annual growth rate of 4.6% during the last six years. This period of buoyant performance could be attributed to the measures taken by the Government to promote farmer-producer organisations, encourage crop diversification, and improve productivity in agriculture through support provided for mechanisation. Furthermore, the creation of the Agriculture Infrastructure Fund is a remarkable initiative that is helping to unlock the growth potential of Indian agriculture. These initiatives resulted in total food grain production recording around 3,235.54 Lakhs tonnes in 2022-23, which is higher by 79.38 Lakhs tonnes as compared to the previous year 2021-22.


Indias economy is expected to continue its upward trajectory in 2023, with a projected growth rate of 6.5% and an inflation rate of 5.2% as per RBI. Structural reforms and policies aimed at promoting investment and productivity, along with an expanding and youthful workforce, provide India with strong prospects for sustained growth, positioning it well to become a leading economy in the coming years. The Governments focus on fostering entrepreneurship and innovation, combined with a thriving start-up ecosystem and a growing digital economy, further drives growth and creates new opportunities. The Governments increased spending on infrastructure projects, including initiatives, such as Product Linked Incentive Scheme and PM Gati Shakti, has helped boost economic activity, with further acceleration expected in the future. Overall, Indias economy appears to have a bright future in 2023 and beyond.

World Agriculture Overview

The global crop production market was worth USD 5,272.20 Billion in 2022. The global crop production market grew from USD 3843.33 Billion in 2017 to USD 3,843.33 Billion in 2022, registering a compound annual growth rate (CAGR) of 6.53%.

The demand for food is influenced by a number of factors, including population growth, demographic changes, income growth, income distribution, and food prices. It is projected that the world population will increase from 8 Billion in 2022 to 8.5 Billion in 2030, driving up the demand for food. Low and middle-income countries are expected to lead this surge as they are characterised by high population growth rates.

In contrast, high-income countries are expected to experience slower population growth and a saturation in the per capita consumption of some food groups. The continuous increase in energy and agricultural input prices, such as fertilisers, may raise cost of agricultural production and constrain productivity and output growth in the coming years. Despite these challenges, world demand for agricultural commodities, including for non-food uses, is projected to rise. Moving ahead, governments are also implementing policies to support agriculture, including subsidies and infrastructure development. However, natural disasters, economic conditions, and political developments could impact the growth rate.

(Source: Report on Global Crop Production Market Briefing 2023 Including: Vegetable Farming; Grain Farming; Fruit And Nut Farming; Oilseed Farming; Greenhouse, Nursery, And Flowers; General Crop Farming.)

Commodity Prices Crude Oil

According to the World Economic Outlook published by the IMF, crude oil prices retreated by 15.7% between August 2022 and February 2023 as the slowing global economy weakened demand.

In 2022, China experienced its first annual decline in oil consumption as a result of Covid-19 shutdowns and a weakening real estate market, which raised concerns about demand. Meanwhile, uncertainty surrounding Western sanctions on Russian crude oil exports affected global market balances. However, Russian oil exports remained stable by redirecting oil to non-sanctioned countries such as India and China at discounted prices. The release of strategic petroleum reserves and the implementation of reduced production targets by OPEC+ supported sufficient oil supply. Futures markets predict a significant 24.1% decrease in crude oil prices for 2023 and anticipate further declines in the subsequent years. However, price uncertainty persists due to factors such as Chinas economic rebound and the ongoing energy transition. Upside price risks include potential supply disruptions and insufficient investment, while downside risks relate to the possibility of a global economic relapse.


The phosphate market in 2022 saw significant fluctuations, starting with phosphoric acid prices reaching an all-time high of over USD 1,700 per metric tonne (MT) in the first half of year 2022-23. Prices started to normalise in the latter half of the year, ending lower than the initial point. This upward trend was driven by concerns surrounding grain and fertiliser exports from Russia and Ukraine. The market faced additional challenges when China implemented export suspensions until June 2022, aiming to secure sufficient domestic supply. As a result, Chinese fertiliser exports experienced a sharp decline in 2022 due to trade barriers imposed by the government.

(Source: Muriate of Potash

Muriate of Potash (MOP) prices fluctuated significantly, reaching a peak of USD 562 per metric tonne in

March 2022. Canada remained the top potash producer with 14 Million metric tonnes, while Russia and Belarus produced a combined 17 Million metric tonne. Potash demand weakened due to high prices, limiting the advantage for Canadian producers. Belarus experienced a decline of over 50% in potash exports due to transit restrictions via EU territory.


Agricultural Prices

During January 2023 to April 2023, food inflation was experienced by numerous low- and middle-income countries, with inflation greater than 5% in 70.6% of low- income countries, 81.4% of lower-middle-income countries, and 84.0% of upper-middle-income countries. Additionally, a considerable number of these nations faced double-digit inflation in their food prices. High income countries too faced elevated food price inflation as 80.4% of them experienced it. The most-affected countries are in Africa, North America, Latin America, South Asia, Europe, and Central Asia.

When comparing food price inflation to overall inflation, as measured by the year-on-year change in the Consumer Price Index (CPI), it is evident that food prices rose at a faster pace. This trend held true in 84.5% of the 161 countries analysed, indicating that food price inflation outpaced general inflation.

With estimates from International Research Institute for Climate and Society in May 2023, suggesting an 82% likelihood of El Nino conditions from May 2023 to July 2023, could further drive-up prices of agriculture.


Global Fertiliser Prices

The fertiliser price index of the World Bank experienced a decrease of almost 8% in the third quarter of 2022, when compared to the previous quarter. However, the prices still remain high in historical terms, mainly due to the reduction in supplies following Russia-Ukraine conflict. The price normalisation is happening due re-starting of production facilities around the world leading to a healthier supply of raw materials. The index is expected to decrease further by 12% in 2023, as supply disruptions gradually ease after a projected increase of 66% in 2022. But there are some risks to this outlook, including higher input costs, additional sanctions on Belarus and Russia, and extended export restrictions by China.

The prices of nitrogen (urea) decreased by 20% in the third quarter of 2022, after reaching an all-time high in April. This was mainly due to the reassessment of fertiliser affordability by buyers, amid record-high natural gas prices in Europe. The steep increase in input costs, especially that of ammonia, and rising production costs have reduced European nitrogen production capacity by at least half. Also, China extended export restrictions on urea fertilisers until the end of 2022, resulting in a 60% year-on-year decrease in its urea exports during the first eight months of 2022. Nevertheless, a significant increase in new capacity is expected outside Europe and Russia within the next two years, which will eventually restore global supplies. Some fertiliser plants were commissioned earlier this year in countries like Brunei and Nigeria but have yet to reach full capacity. Furthermore, six new plants in India, each with a capacity of 1.3 Million metric tonne (mmt), are anticipated to commence operations between 2023 and 2025.

The decrease in urea prices is expected to be 10% in 2023, and a further 8% in 2024 as new capacity comes online. DAP (diammonium phosphate) prices decreased by 11% in the third quarter of 2022, after recording large gains earlier in the year. Some countries have also experienced strong phosphate demand, including Brazil and India, which could begin to weigh on global demand. Furthermore, export restrictions by China, which account for 30% of global trade in DAP, have had a material effect on supply. Owing to the restrictions, Chinas DAP exports fell 50% year-on-year, during the first ten months of 2022. Following an expected increase of 32% in 2022, DAP prices are projected to fall modestly in 2023 and 2024.

MOP (muriate of potash, or potassium chloride) contract benchmark prices remained unchanged in the third quarter of 2022, following a large jump in contract prices between

Note: DAP=diammonium phosphate. MOP=muriate of potash. mt= metric tonne. Last observation is December 2022.

Source: Bloomberg; World Bank. producers and Chinese and Indian buyers in February same year. However, spot prices retreated from their April highs due to lacklustre demand, mainly in North America. The market remains tight due to reduced supply from Belarus and Russia, which account for about two-fifths of global potash exports, as a result of sanctions related to the war in Ukraine. Belarusian fertiliser exports are blocked from global markets, whereas exports from Russian ports have been limited due to logistical issues, even though the Russian fertiliser industry has not been subject to sanctions. Potash prices are predicted to remain high in 2023 and 2024. This follows an estimated increase of 150% in 2022, as MOP production is highly concentrated in a few countries, including Belarus, Canada, China, Israel, and Russia. As per estimate, these countries account for 85% of global production, and supplies from smaller markets are not likely to make up for the shortfall in the short-term.

(Source: prices-ease-affordability-and-availability-issues-linger)

Countering Global Fertiliser Crisis

China implemented a second round of quotas in July 2022, limiting phosphate exports to 3.16 Million tonnes. This round imposed a lower limit compared to the first round in October 2021, which restricted exports to 5.5 Million tonnes. The decision was made in response to soaring prices of raw materials and the need to address high fertiliser prices caused by factors like strong overseas demand, low domestic production, high energy costs, and the impact of floods in Henan province. Albeit, China was able to export DAP and urea to buyers like India and Pakistan in 2022.

In May 2022, India entered into a Memorandum of Understanding (MOU) with the Jordan Phosphate Mining Company (JPMC) to secure the supply of essential fertilisers for the year 2022. The agreement includes the delivery of 30 LMT of rock phosphate, 2.50 LMT of DAP and 1 LMT of phosphoric acid. Furthermore, India has also signed a long-term MOU with Jordan, spanning five years, for the annual supply of 2.75 LMT of MoP The agreement includes a uniform increase in supply every year, which will reach up to 3.25 LMT by the end of the agreement.

In January 2023, OCP, the Moroccan producer of phosphates and fertilisers, entered into an agreement to supply India with 1.7 Million tonnes of phosphate-based fertilisers during the year. As per the terms of the deal, OCP is set to provide India with 700,000 tonnes of triple super phosphate (TSP), a nitrogen-free fertiliser, along with 1 Million tonnes of diammonium phosphate (DAP). Notably, Morocco, which boasts the worlds largest reserves of phosphates, recorded a significant increase of 54.8% in exports of the mineral and its derivatives, including fertilisers, amounting to 108 Billion dirhams (USD 10.6 Billion) in the first 11 months of 2022. (Source:, . aspx?PRID=1881518, china-exports-fertilisers -idUSKBN2F007W, https://www. india-17-Million-tonnes-fertilisers-2023-2023-01-22/)

Indian Agriculture

Indias agriculture sector has made remarkable progress in recent years, with the country achieving record-high production of several crops, including rice, wheat, maize, pulses, mustard, sugarcane, and oilseeds. This achievement has been made possible with contributions from top crop- producing states, including Uttar Pradesh, Punjab, West Bengal, Gujarat, Haryana, Madhya Pradesh, Assam, Andhra Pradesh, Karnataka, and Chhattisgarh. India is the largest producer of spices, pulses, milk, tea, cashew, and jute, and the second-largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton, and oilseeds, with over 50% of the population depending on agriculture for their livelihood.

Financial support from the Government in the form of subsidies has played a critical role in promoting the growth of the agriculture sector. The amount of subsidies has seen a remarkable increase from the pre-pandemic year of 2019- 20 when it totalled USD 10 Billion, to an impressive USD 27 Billion in 2022-23.

In addition, Indias agriculture exports have witnessed significant growth, reaching a record-high of USD 50.2 Billion in 2021-22. This growth highlights Indias potential as a major player in the global agriculture market and contributes to the countrys overall economic development. Moreover, the sector is projected to grow by 3.5% in 2022- 23, reflecting Indias commitment to sustainable agricultural practices and modernisation of the sector.

Overall, Indias impressive achievements in the field of agriculture are a testament to its capacity to emerge as a significant force in this sector. This can contribute to the countrys economic growth and development, while also helping to address global food security challenges.

Government Initiative (Budget Highlights)

The agriculture sector is of utmost importance to Indias food security, as it accounts for 15% of the countrys GDP with 50% of the population engaged in agricultural activities. The Government has implemented initiatives to boost agriculture in India. The Union Budget 2023-24 has increased funding for agriculture, with the Ministry of Agriculture and Farmers Welfare receiving Rs 1.25 Lakh Crores for various schemes.

The Government has taken the following initiatives for the agricultural sector:

• The Digital Agriculture Mission, initiated by the Central Government, will be provided with Rs 450 Crores

• About Rs 600 Crores will be allotted for promoting the agriculture sector through technology

• The Pradhan Mantri Garib Kalyan Yojana will be extended for another year. This scheme was originally introduced to provide free rations to 80 Crores people during the Covid-19 pandemic

• The budgetary allocation for the development of the horticulture sector has been increased to Rs 2,200 Crores

• The Union Government has increased the budget to Rs 1,623 Crores to address food and nutritional security

• An allocation of Rs 459 Crores has been made to promote Natural Farming, which aims to support 1 Crore farmers in the next 3 years and establish 10,000 bio-input research centres across India

• The Agriculture Accelerator Fund has been formulated with an allocation of Rs 500 Crores over 5 years to promote agri-startups led by young entrepreneurs

• Aatmanirbhar Krishi and Aatmanirbhar BharatRs initiatives are meant to ensure the food and nutritional security of the nation, under which nano urea has been developed indigenously

• The PM-KISAN scheme is set to receive an allocation of Rs 60,000 Crores for 2023-24

• Sahkar se Samriddhi and Atmanirbhar Bharat aim to increase farmersRs income and provide them with a better future, thus benefiting the agriculture sector greatly

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Indian Fertiliser Market

The fertiliser sector is a crucial component of Indias agrarian economy. Globally, India is the third-largest producer and second- largest consumer of fertilisers. During the six-year period 2017-18 to 2021-22, fertilisers output in India increased at a CAGR of 4.13% from 41.5 Million metric tonne (mmt) in 2017-18 to 47.7 Million tonnes in 2022-23. With a rapidly growing population and increasing food demand, the use of fertilisers is imperative to boost crop productivity per hectare. This is especially crucial, given the shrinking availability of arable land due to swift urbanisation.

Indias Total Fertiliser Production

To tackle the challenges of low productivity and quality of agricultural output, the Indian Government has provided subsidies, aimed at incentivising farmers to increase consumption of fertilisers. The fertiliser industry in India has great potential for growth, as historical data has shown strong momentum in fertiliser consumption. Moreover, the disparities in fertiliser usage among different states in India present an excellent opportunity to address this gap, and further increase fertiliser usage, leading to even greater growth and success for the industry.

Fertiliser Imports by India

Indias imports of fertilisers during year 2022-23 was led by urea with 75.8 Lakhs metric tonne. Followed by DAP at 65.83 Lakhs metric tonne and MOP at 18.6 Lakhs metric tonne. Urea imports over the years have increased, while peaking in the year 2019-20 after which they have been subsiding. Imports of DAP have been range bound between 42.17 Lakhs metric tonne to 66.02 Lakhs metric tonne. While the imports of MOP have witnessed a decline over the years.

Import Prices of Raw Materials and DAP for India

The 2022-23 period witnessed a significant surge in international fertiliser and raw material prices. This growth in prices can be attributed to supply disruptions and logistical challenges. Phosphoric acid recorded an average price of USD 1,415 per tonne, indicating a growth rate of 16.3%. Ammonia, on the other hand, was priced at USD 1,160.3 per tonne, exhibiting a substantial growth rate of 64.6%. DAP (CFR) experienced a minor growth of 0.32% with a price of USD 741 per tonne, while urea saw a decrease of 8.75% with a price of USD 646.67 per tonne. MOP (CFR) witnessed a remarkable growth rate of 110.71%, priced at USD 590 per tonne. Sulphur, however, faced a decline of 40.8% with a price of USD 152.67 per tonne. Rock phosphate (CFR) showed strong growth of 107.6% with a price of USD 299 per tonne. Overall, international prices experienced a growth ranging from 20% to 120% during this period.

Due to Indias heavy reliance on fertiliser imports to meet its needs, domestic fertiliser prices are closely linked to global prices. Consequently, to prevent farmers from bearing the brunt of price hikes and to avoid disruption in agricultural production, the Government offers subsidies on fertilisers to farmers through manufacturers. The fertiliser sector is also being impacted by the surge in natural gas prices caused by the Russia-Ukraine crisis, as natural gas is a critical raw material for the sector.

(Source: Care Edge Research India - Fertiliser Industry Update)

Company Overview

Paradeep Phosphates Limited (referred to as Paradeep Phosphates or PPL! or The Company) is the second- largest privately-owned phosphatic company in India, boasting a robust capacity of 3 Million Metric Tons per annum for producing finished fertilisers such as NPK, DAP and urea. Originally established as a joint venture between the Government of India and the Republic of Nauru, the Company later became a public sector enterprise in 1993. In 2002, the Government of India divested close to 80% of its stake in PPL in favour of Zuari Maroc Phosphates Private Limited. In May 2022, PPL completed its initial public offering (IPO ) in which the Government of India divested its residual stake of 19.55% and the Company used part of the proceeds to acquire the 1.2 Million MT fertiliser plant in Goa. Post IPO, Zuari Maroc Phosphates Private Limited holds a 56.10% stake in PPL.

Paradeep Phosphates has its manufacturing units in Paradeep, Odisha, and Zuarinagar, Goa that are strategically located near the ports and cater to the heavier phosphatic fertiliser consuming states of India. With its cutting-edge technology and world-class infrastructure, the Company is committed to deliver high-quality fertilisers that help farmers achieve optimal yields and enhance agricultural productivity. PPL sources its raw materials globally and sells finished fertilisers under the brand names Jai Kisaan and Navratna to over 8 Million farmers across 15 states in India.

Performance Highlights in 2022-23

March 23 March 22
Production (Million metric tonne) 2,032,516 1,247,178
Revenue from Operations 133,407 78,587
( Million)
PBT ( Million) 4,257 5,344
PAT ( Million) 3,037 3,978

The revenue from operations in 2022-23 were Rs 133,407 Million showcasing a jump of 69.76% from the year 2021-

22. The total output of fertiliser in 2022-23 was 2,032,516 Million metric tonne showcasing a jump of 63% as compared to the previous year.

The Profit Before Tax in 2022-23 was reduced by 20.34% to Rs 4,257 Million as compared to the previous year. The Profit After Tax too reduced by 23.66% as compared to the previous to Rs 3,037 Million. This reduction was primarily due to changes in subsidy rates in fourth quarter of the year 2022-23.

In terms of the product mix, DAP comprised approximately 33.93% of the manufactured portfolio of PPL in 2022-23.

Production in ‘000 MT 2022-23 2021-22
DAP 675 722
N-20 595 380
Other fertilizers 763 145
Total Fertilisers 2,033 1,247

Analysis of Financial Performance

The analysis in this section relates to the consolidated financial results of the year ended 31st March 2023. The financial statements of Paradeep Phosphates and its joint venture are prepared as per the Indian Accounting Standards (referred to as Ind AS), prescribed under Section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules, as amended from time to time. Significant accounting policies used in the preparation of the financial statements are disclosed in the notes to the consolidated financial statements.


(In Crores) 2022-23 2021-22 % Change
Operating Revenue 13,340.72 7,858.72 69.76
Other Income 91.07 39.27 131.91
Total Revenue 13,431.79 7,897.99 70.07

Revenue from Manufactured Products and Traded Products

(In Crores) 2022-23 2021-22 % Change
Manufactured 12,642.72 6,591.87 91.79
Traded Products 698.00 1,266.85 (44.90)
Operating Revenue 13,340.72 7,858.72 69.76

Other Income

(In Crores) 2022-23 2021-22 % Change
Other Income 91.07 39.27 131.91

Other income went up on account of the reversal of excess provision written back.

Cost of Materials

(In Crores) 2022-23 2021-22 % Change
Cost of Material Consumed 10,439.70 5,246.22 98.99
Purchase of Stock in Trade 182.26 1,428.28 (87.24)
Changes in Inventories (8.78) (393.24) (97.77)
Total Materials 10,613.18 6,281.26 68.97
Operating Revenue 13,340.72 7,858.72 69.76
Cost of Materials/ Operating Revenue 79.55% 79.93%

Employee Benefits

( In Crores) 2022-23 2021-22 % Change
Employee Benefits 213.20 138.51 53.92
% of Total Revenue 1.59% 1.75%

Finance Costs

( In Crores) 2022-23 2021-22 % Change
Finance Costs 291.24 85.54 240.47
% of Revenue 2.17% 1.08%

Depreciation and Amortisation

( In Crores) 2022-23 2021-22 % Change
Depreciation and 175.15 90.46 93.62
% of Revenue 1.30% 1.15%

Other Expenses

( In Crores) 2022-23 2021-22 % Change
Other Expenses 1,713.35 767.84 123.14
% of Revenue 12.76% 9.72%

Income Tax

( In Crores) 2022-23 2021-22 % Change
Income Tax 121.98 136.54 (10.66)
Profit Before Tax 425.66 534.38 (20.34)
Tax as % of Profit 28.66 % 25.55%
Before Tax

Key Financial Ratios

Ratio Numerator Denominator Current Year Previous Year % Change
Current Ratio (in Times) Total Current Assets Total Current Liabilities 1.10 1.02 8%
Debt-Equity Ratio (in Times) Total Borrowings Total Equity 1.32 1.33 0%
Debt Service Coverage Ratio (in Times) (Note A) Earning for Debt Service = Profit for the Year + Interest Expenses + Depreciation and Amortisation Expenses + Other Non-Cash Adjustments Debt Service = Interest + Principal Repayments 1.24 2.79 (56)%
Return on Equity Ratio (In %) (Note B) Profit for the Year Average Total Equity 10.60% 19.63% (46%)
Inventory Turnover Ratio (in Times) Revenue from Operations Average Inventory 5.89 4.92 20%
Trade Receivables Turnover Ratio (In Times) (Note C) Revenue from Operations Average Trade Receivables 5.68 7.35 (23%)
Trade Payables Turnover Ratio (In Times) Purchase of Raw Materials and Traded Goods Average Trade Payables 5.16 4.77 8%
Net Capital Turnover Ratio (In Times) (Note C) Revenue from Operations Average Working Capital (i.e. Total Current Assets Less Total Current Liabilities) 37.88 24.20 56%
Net Profit Ratio (In %) (Note D) Profit for the Year Revenue from Operations 2.28% 5.07% (55%)
Return on Capital Employed (In %) (Note E) Profit Before Tax and Finance Costs Capital Employed = Tangible Net Worth + Total Debt + Deferred Tax Liabilities 8.70% 11.76% (26%)
Return on Investment (In %) Income Generated from Invested Funds Average Investments 2.04% 2.00% 2%


A. The % change is primarily on account of increase in debt to be serviced during the year.

B. The % change is primarily on account of lower profits earned during the year coupled with increase in average equity.

C. The % change is primarily on account of increase in turnover coupled with better working capital management.

D. The % change is primarily on account of lower profits earned as against higher revenue during the year.

E. The % change is primarily on account of lower profits earned against higher capital employed during the year.


Fertilisers have been a crucial factor in the success of Indias green revolution and subsequent self-sufficiency in food-grain production. The increased use of fertilisers has made a significant contribution to sustainable food-grain production in the country.

The agriculture sector has been a bright spot for the Indian economy, and the demand for fertilisers is expected to remain strong due to higher Minimum Support Prices (MSP) for kharif and rabi crops in the marketing season of 2022- 23. Furthermore, the continued upfront subsidy support for fertilisers, including urea and nutrient-based subsidies, worth Rs 1.75 Lakh Crores for the year 2023-24, is likely to boost the fertilisers industry and the agriculture sector. In addition, it is also set to take care of the surge in input commodity prices.

Moreover, the continuation of the Nutrient-Based Subsidy (NBS) amounting to Rs 51,875 Crores for the rabi season of 2022 (from October 01,2022 to March 31,2023) was aimed to sustain the momentum of the fertilisers industry and agriculture sector, while protecting farmers from the cost burden of input commodities. The direct payment of MSP to farmers are expected to enhance their credit availability, leading to increased fertiliser demand, and encourage the use of complex and organic fertilisers.

With the capacity expansion to 3 MMTPA and the backward brownfield integration undertaken to expand the capacity of phosphoric and sulphuric acids, PPL foresees the benefits of operating at a large scale. The Company looks to leverage growth by expanding the product portfolio, penetrating new markets, and deepening the existing markets.


The non-urea fertiliser sector in India presents promising growth prospects, driven by the imbalanced use of urea (Nitrogen) among farmers, resulting in disruptions to the soils NPK balance. The ideal NPK mix for optimal soil health and crop growth is 4:2:1, whereas the current ratio in 2019-20 was 6.6:2.7:1.0. Through Government initiatives to enhance awareness about soil fertility and promote the use of fertiliser mixtures, the NPK mix is expected to improve to 5.8:2.6:1.0 by 2025-26. This creates a favourable opportunity for non-urea fertilisers to capitalise on this trend. With its strategic positioning, Paradeep Phosphates is well-equipped to leverage the increasing adoption of phosphatic fertilisers.


The non-urea fertiliser sector in India has been encountering several challenges. Firstly, there is a lack of awareness among farmers regarding the benefits of non-urea fertilisers, which impedes their adoption rate. In addition, fluctuations in the prices of raw materials used in the production of non-urea fertilisers can affect their profitability. Moreover, the sector is heavily regulated by the Government, and any changes in regulations can impact its growth and viability. The depreciation of the Rupee may also increase the import bill of fertiliser manufacturers, further adding to their costs. The fertiliser sector still relies on subsidies from the Government, and any delay in their disbursement can affect the manufacturers. Hence, addressing these challenges is crucial to sustain the growth and contribution of the non- urea fertiliser sector to the agriculture industry in India.

Risk and Mitigations

While the products of PPL provide numerous benefits to various industries, handling, storing, and transporting these chemicals can pose several risks. These risks need to be identified and mitigated to ensure the safety of its workers, the public, and the environment. In this context, it is essential to develop a comprehensive risk management plan, which outlines potential hazards and their respective mitigation strategies. This will help to minimise the risk of accidents and ensure the safe and responsible use of the Companys products. The following sections discusses some of the potential risks associated with Paradeep Phosphate and their corresponding mitigation strategies.

Sl No Risks Description of the Risk Risk Probability (High/Medium/ Low) Risk Impact (High/ Medium/Low) Risk Mitigation
1 Strategic Risks
Business Model The business model encompasses the entire value chain of a company and how it manages and generates value for each of its stakeholders. High High PPLs integrated business model includes backward integration, R&D for diversified products, strategic plant locations, and strong partnerships with channels and farms for better value chain control.
Macro- Economic Factors, such as global and local demand and supply, inflationary trends, a countrys economic growth, and per capita income can impact business operations. Medium/Low High/Medium PPLs agile management processes enable it to adjust strategies and operations, based on macro-economic conditions, including both financial and operational aspects, whether favourable or unfavourable.
Policy/ Regulatory Government policies on agriculture and subsidies for agri-inputs can impact business operations. High/Medium Medium/Low PPL closely monitors the regulatory environment, applicable to the industry and maintains financial and operational flexibility to minimise the impact of unfavourable regulatory policies.
Market Competition Risk-related to competition from peer group companies. High/Medium High/Medium PPL mitigates this risk by leveraging its position as a leading fertiliser manufacturer, ranked second in phosphatic product production in the country. Its Jai Kisaan and Navratna brands have strong brand equity among farmers, Jai Kissan Navratna dealers, and retailers.
2 Climate & Climate Change Risks
Monsoon and Climate Change Changing weather patterns can hurt agri-input sales. Medium High PPL mitigates this risk by expanding its network in 15 states. Thus, reducing the impact of climatic risk with exposure to different conditions.
3 Financial Risks
Interest Rate Risk Rising interest rates can limit borrowing options and affect profit margins. Medium/Low High PPL mitigates this risk through lowering costs by paying off long-term debts and maintaining a healthy debt-to-equity ratio.
Credit Risk High/Medium High PPL assesses creditworthiness, sets limits, monitors collections, manages subsidies, and has an internal system for managing LCs.
Liquidity Risk High/Medium High PPL maintains a healthy revenue growth and cash flow to mitigate this risk.
4 Operational Risk
Location Risk Limited locations for production, distribution, and sourcing pose a risk. Medium/Low High PPL acquired Goa plant, expanded its production capabilities to two units, and reduced location risk.

Human Resource

• Diversity Drive: The Company is dedicated to fostering an inclusive culture, empowering individuals, and enhancing competitiveness. The Board Diversity Policy and unbiased hiring practices bolster this dedication.

• Nurturing Human Capital: Lifelong learning nurtures growth, supported by comprehensive training, education grants, and self-learning opportunities that drive continuous advancement.

• Performance Excellence: A robust scorecard system fuels exceptional performance and personal growth, cultivating careers for all employees.

• Employee Well-being: Beyond mandates, the

Company offers comprehensive benefits, safeguarding employees health and happiness. Various clubs at the Plant, including PPERC, PPOC, and others, enhance engagement through indoor games, swimming, and movies, fostering team-building.

• Safety Culture: Vigilant safety committees, regular training (with an average of 28.67% training hours per employee for the year 2022-23), and a safety-focused culture prioritise team well-being.

• Sustained Growth: Continuous growth is driven by efficiency and safety. A motivated workforce, achieved through effective recruitment, retention, and training, plays a pivotal role. Diverse engagement programs and harmonious operations support relations. Regular reviews maintain industry alignment, leading to prestigious awards. As of March 31, 2023, there are 2,486 permanent employees and workers.

Internal Control Systems and their Adequacy

Paradeep Phosphates has implemented an internal control system that is reliable, efficient, and critical to the Companys success. The Company relies on its internal control system to review its numerous segments and sales operations. The system is crucial in maintaining internal audit controls, which include observing various operations, protecting assets, and complying with regulations. The yearly internal audit covers important areas of business operations identified by a team of experts. Each area is reviewed by internal auditors, the Audit Committee and the Board. The Audit Committee considers the inputs from the internal auditors and gives advice on ways to enhance the internal controls.

Cautionary Statement

Certain statements in the MDA section concerning future prospects may be forward-looking statements, which involve a number of underlying identified/non-identified risks and uncertainties that could cause actual results to differ materially. In addition to the foregoing changes in the macro-environment, a global pandemic like Covid-19 may pose an unforeseen, unprecedented, unascertainable, and constantly evolving risk(s), inter-alia, to the Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based are also subject to change accordingly. These forward-looking statements represent only the Companys current intentions, beliefs, or expectations, and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forward- looking statements, whether as a result of new information, future events, or otherwise.

For and on behalf of the Board of Directors,
Saroj Kumar Poddar
Date: 17th May 2023 DIN: 00008654