Paradeep Phosphates Ltd Management Discussions

Global Economy

The global economy has demonstrated resilience despite significant challenges in 2023 and 2024. Although stringent monetary policies designed to address high inflation have impacted economic activity, several key factors have supported growth. The early signs of resilience in 2023, observed before the full impact of policy tightening, combined with decisive actions by authorities to mitigate financial instability, have balanced the outlook. Notably, India has emerged as a bright spot with its robust expansion as the fastest-growing major economy.

Inflation is expected to gradually decrease, supporting a more balanced recovery across regions. Projections indicate a decline in inflation from 6.9% in 2023 to 5.0% in 2024 and further to 3.4% in 2025, driven by stringent monetary policies and diminishing pressures on goods and energy prices. This gradual easing, combined with resilient growth and rapid disinflation, reflects favourable supply dynamics, including the reduction of energy price shocks and a rebound in labour supply.

Global Economic Outlook

According to the IMF, the global economy grew by 3.2% in 2023, and this growth rate is expected to remain steady through 2024 and 2025. The global economy is expected to sustain steady growth, showing resilience despite significant central bank interest rate hikes aimed at curbing inflation. Advanced economies are likely to see a slight increase in growth, while emerging and developing markets may experience modest deceleration. The outlook remains cautiously optimistic, supported by continued innovation, technological advancements, and strategic policy measures.

Global Agriculture and Crop Production Market

The global population is projected to increase by over 700 Million, reaching 8.7 Billion by 2033. India, having become the worlds most populous country after surpassing China in 2023, is expected to grow at an average annual rate of 0.8% over the next decade.

The per capita calorie intake is projected to rise in developing and emerging economies, with lower middle-income countries seeing the greatest increases, followed by upper

middle-income countries. Gains in India and emerging Asia will boost food consumption, while low-income countries will see only modest increases. This trend will significantly impact the agriculture market and fertilizer use, supporting sustainable food production across various income levels.

The global crop production market grew from USD 5,743.28 Billion in 2023 to USD 6,254.37 Billion in 2024.

Growth varies by region. Developed areas like North America and Europe are driven by technological advancements and mechanisation, while emerging markets in Asia, Africa, and Latin America benefit from traditional practices, government subsidies, and increased demand due to population growth. Climate variability has also prompted the adoption of resilient farming practices. Looking ahead, advancements in genetic engineering and climate-smart agriculture are expected to drive further growth, with the market projected to reach USD 8,570.63 Billion by 2028, growing at a CAGR of 8.2%.

Key Disruptions in Global Agriculture

The global agriculture sector faces several significant challenges. Climate change, which has led to record high land and sea surface temperatures in 2023, threatens crop yields and food security. It exacerbates extreme weather events such as droughts, hurricanes, and floods, impacting agricultural production and trade patterns. Geopolitical tensions and trade disruptions also affect the availability and pricing of agricultural inputs and products. Additionally, disruptions to key maritime passages, such as the Suez and Panama Canals, can severely impact global supply chains, causing delays and increased freight costs. Technological advancements, while generally beneficial, require substantial investment and adaptation by farmers, adding another layer of complexity to the sector.

Key supply-side disruptions during 2023-24

Suez Canal Blockage

In early 2024, trade through the Suez Canal dropped by 50% compared to the previous year, disrupting global supply chains, and impacting macroeconomic indicators. Increased attacks on vessels in the Red Sea reduced traffic through this crucial route, leading to diversions around

the Cape of Good Hope. This added at least 10-15 days to delivery times, affecting companies with limited inventories storage capacities.

Russia-Ukraine Conflict

The ongoing conflict between Russia and Ukraine has significantly disrupted the global supply of fertilizer raw materials. Russias production and export activities have been severely impacted, resulting in supply shortages and rising prices.

Middle East Tensions

Tensions in the Middle East, a key region for hydrocarbon production, have also disrupted supply chains for natural gas and other raw materials essential for fertilizer production. Conflicts and political instability in countries such as Iran, Iraq, and Syria have led to fluctuations in supply and price volatility.

US-China Trade Disputes

The trade war between the US and China, marked by substantial tariffs on various goods, has disrupted the flow of essential raw materials for fertilizer production. This has increased costs for manufacturers reliant on imports and led to supply shortages as alternative sources are sought.

Global Agriculture and Crop Production Outlook

The global agriculture and crop production market has a positive outlook, driven by ongoing food demand and advancements in agricultural technologies. Growth will be fuelled by rising population, economic development, and the adoption of innovative practices such as digital farming platforms, AI for crop monitoring, autonomous farming equipment, and mechanisation. Chinas influence on global food and agricultural consumption is waning due to domestic challenges. India and Southeast Asia are emerging as key players, supported by their expanding urban populations, and increasing affluence. Fertilizer companies are expected to benefit from this growth, as the demand for crops drives the need for fertilizers to improve soil fertility and yields. Additionally, the shift toward sustainable and regenerative agriculture presents opportunities for the development of eco-friendly, nano, and organic fertilizers, catering to the growing segment focussed on environmental conservation.

Fluctuations in crude oil prices have significantly impacted fertilizer prices globally and in India throughout the year. Initially, high crude oil prices increased transportation costs for fertilizers.

Crude oil prices co-relate directly with fertilizer prices because they affect natural gas prices—a key raw material for nitrogen-based fertilizers. Additionally, sulphur, a byproduct of crude oil and essential for fertilizer production, also saw price increases. Consequently, elevated crude oil prices led to higher costs for natural gas and sulphur, further driving up fertilizer production costs.

Natural Gas

Note: Pool Price is Weighted average delivered price of Natural Gas to all the Urea Manufacturing Companies

Natural gas is a critical feedstock in the production of ammonia, which is essential for nitrogen-based fertilizers such as urea. In India, urea-based fertilizer companies receive natural gas through a pass-through uniform pool price mechanism. Consequently, fluctuations in natural gas prices have significant implications for both public finances and the working capital cycles of fertilizer companies.

Global Fertilizer Raw Material Prices

Ammonia (CFR)

Ammonia is essential in the production of various fertilizers, acting as a key component for nitrogen-based fertilizers crucial for agricultural productivity. During the 2023-24 period, the average CFR India price for ammonia was USD 446/MT, representing a 49.00% decrease from the previous year.

Ammonia price fluctuations directly affect the cost of producing nitrogen-based fertilizers. Ammonia pricing is significantly influenced by global production rates and production shutdowns. Given that ammonia is a derivate of hydrogen from crude, much of its production occurs in the Middle East, a major crude oil producer. Additionally, since ammonia is hazardous and liquid, production, transportation, and storage costs are critical factors. Fertilizer companies with specialised ammonia storage facilities are better positioned to manage price volatility and benefit from fluctuations in ammonia prices.

Rock phosphates are primarily processed into phosphoric acid, which is then used to produce various phosphorus- based fertilizers, including diammonium phosphate (DAP), triple superphosphate (TSP), and monoammonium phosphate (MAP). Variations in rock phosphate prices directly affect the cost of producing phosphorus-based fertilizers.

Morocco holds the largest rock phosphate reserves, essential for fertilizer production, with approximately 50 Billion tonnes. China follows with about 3.2 Billion tonnes while Egypt and Algeria hold around 2.8 Billion tonnes and 2.2 Billion tonnes respectively. Indias domestic rock phosphate supply is limited, making it heavily reliant on imports to meet fertilizer needs.

Phosphoric acid is a vital component in the production of phosphorous-based fertilizers essential for plant growth. Its price tends to correlate with that of finished DAP and rock phosphate. For 2023-24, the average price of phosphoric acid was USD 986/MT. This stability in pricing provided fertilizer companies with a predictable cost environment, aiding in the planning of production costs and pricing strategies.

Many fertilizer companies produce phosphoric acid in-house from rock phosphate. This proves to be cost- effective and improves operational efficiency and financial stability.

Sulphur and sulphuric acid, both derivatives of crude oil, are essential inputs in the production of finished fertilizers. Their pricing is influenced by crude oil production levels and the storage capacities of crude oil companies.

During the 2023-24 period, the average cost and freight (CFR) India prices for sulphur and sulphuric acid were USD 107.42/MT and USD 64.62/MT, respectively. This represents a decrease of 56.81% and 44.27% compared to the previous year.

The price difference between sulphur and sulphuric acid during this period was USD 42.80/MT, indicating that fertilizer companies producing their own sulphuric acid benefitted from lower costs.

Muriate of Potash (MOP) (CFR)

MOP is essential for supplying potassium, a vital nutrient that enhances plant growth, crop quality, and overall yield. Potassium helps regulate water uptake, improve disease resistance, and increase the efficiency of other nutrients like nitrogen and phosphorus.

Fluctuations in MOP prices directly affect the cost of potassium-based fertilizers.

In 2023, Russia and Qatar remained the leading exporter of urea. Chinese urea exports were constrained by stron domestic demand and export restrictions. Concurrentl India enhanced its self-sufficiency in urea productio leading to a reduction in imports due to higher domesti output.

The major suppliers of urea are Middle Eastern countrie Qatar, Saudi Arabia, Russia, China, and the US, while th major demand for urea comes from India, China, the U and Brazil.

DAP (CFR)

DAP is a widely used phosphorous fertilizer that provides essential nitrogen and phosphorous nutrients for plant growth. It is particularly beneficial during the early stages of crop development, promoting root growth and early- season vigour.

India consumed 10.81 Million MT of DAP during 2023-24, accounting for 16.93% of the total fertilizer consumption volume for the same period.

The major suppliers of DAP are China, Morocco, Saudi Arabia, and the US. The major demand for DAP comes from India, Brazil, the US, and China.

Outlook For The Global Fertilizers Market

The global fertilizer market is set for significant expansion, with its size estimated at USD 384.37 Billion in 2024 and projected to reach USD 543.20 Billion by 2030, at a CAGR of 5.93% over the forecast period (2024-2030). This growth is driven by key factors including rising urbanisation, diminishing agricultural land, and increasing food production demands.

Europe, the second-largest fertilizer market, shows strong growth fuelled by modern agricultural practices and regulatory support for sustainable farming. As urbanisation increases and agricultural areas shrink, the efficient use of fertilizers becomes critical to maximise crop yields.

Asia-Pacific emerges as the fastest-growing market for fertilizers, underpinned by its vast agricultural base and rapid industrialisation. China, the worlds largest producer and exporter of fertilizers, contributes 25% of global production according to the US Department of Agriculture (USDA).

India, the second-largest fertilizer consumer worldwide, highlights the robust demand in the Asia-Pacific region. With a consumption volume of 64 million MT major fertilizers in 2023-24, the country underscores the essential role of fertilizers in sustaining agricultural productivity.

As global urbanisation progresses and agricultural land becomes more constrained, fertilizer demand is expected to rise. This trend will likely stimulate market growth, with substantial investments in innovation and sustainable practices. Governments and industry players are concentrating on enhancing fertilizer efficiency, reducing environmental impact, and improving supply chain resilience.

Indian Economy

Indias GDP growth for 2023-24 has surpassed initial projections, with the Ministry of Statistics and Programme Implementation revising the growth rate upward to 8.2%. This represents a significant improvement from the previous fiscal year, underscoring the resilience and strength of the Indian economy amidst shifting global dynamics. This accelerated growth has propelled the Indian economy to a milestone of USD 3.5 Trillion, paving the way toward the ambitious USD 5 Trillion target in the coming years.

Agriculture remains a vital source of livelihood for a substantial portion of the population, generating employment, especially in rural areas where other sectors have not provided sufficient opportunities. In labour-surplus economies like India, where rising incomes increase food demand, agriculture must continuously expand production to avert food shortages and ensure food security.

Additionally, agriculture significantly contributes to capital formation through asset allocation, rural development, infrastructure projects, and job creation. The sectors ability to generate capital supports broader economic growth, fostering the development of other industries and services.

Indian Agriculture

The agriculture market in India is projected to be valued at USD 372.94 Billion in 2024 and is anticipated to grow to USD 473.72 Billion by 2029, at a CAGR of 4.90% from 2024 to 2029.

India, as a major global agricultural powerhouse, holds significant rankings in the production of various crops.

Additionally, India is the second-largest producer of rice, wheat, and cotton globally, following China, and ranks second in sugar production after Brazil. Further, it ranks second in tea production and is among the top producers of various fruits and vegetables, including mangoes, bananas, and potatoes.

Agriculture and allied sectors remain the largest source of livelihoods in India, with 70% of the rural population primarily dependent on agriculture. Despite having 82% of farmers classified as small and marginal, the sector employs 59% of the countrys total workforce. Indias agricultural production has rendered the country selfsufficient in food grains, yet challenges persist in ensuring nutrition security for its 1.3 Billion population.

Balanced fertilisation is crucial to improving agricultural productivity in India, which ranks first globally in fertilizer consumption per hectare of agricultural land. However, the average yields of major crops like rice, wheat, and pulses remain below potential due to fragmented landholdings, imbalanced fertilizer use, and limited adoption of improved technologies.

To address these challenges, the Indian government is promoting the use of technology to boost agricultural productivity and incomes. Key initiatives include digital agriculture platforms like the National Agriculture Market (e-NAM) for online trading, digital registries, and public

infrastructure to ensure IT access across the country, and a robust agricultural research system comprising 102 ICAR institutes and 73 agricultural universities.

Technological advancements are rapidly reshaping agriculture in India, creating investment opportunities, uplifting rural areas, and enhancing global food security. Notable technologies being adopted include IoT for effective farm surveillance and automated irrigation, drones for soil health scans, crop monitoring, spraying, and yield forecasting, precision farming using big data analytics and robotics, AI and machine learning for autonomous farm tasks and predictive analytics, and blockchain for enhancing agricultural supply chains and empowering farmers. These innovations hold the potential to significantly boost productivity, efficiency, and sustainability in Indian agriculture.

Indian Fertilizer Market

The Indian fertilizer market is projected to reach approximately USD 39.54 Billion by the year 2030. This growth represents a CAGR of 5.22% from 2024 to 2030. In 2023, the market size was recorded at USD 27.70 Billion. These figures highlight the expected expansion and significant potential of the fertilizer industry in India over the coming years.

Larger fertilizer companies gain advantages from longterm agreements with raw material suppliers, backward integration of production processes, extensive distribution networks, and strong brand recognition among farmers for their product portfolios. In contrast, many smaller players in the fragmented market lack these capabilities and depend on imported raw materials and intermediates.

Production, Import, and Sales during 2023-24

During 2023-24, the production of urea reached 31.41 Million MT and NP/NPK complex fertilizers stood at 9.55 Million MT, reflecting increases of 10.2% and 2.8%, respectively, compared to 2022-23. Conversely, the production of DAP declined by 1.2% to 4.29 Million MT, and SSP production dropped by 21.0% to 4.46 Million MT over the same period.

Imports of urea, DAP, and NP/NPKs also saw declines during 2023-24 compared to the previous year. Urea imports fell by 7.1% to 7.04 Million MT, DAP imports decreased by 15.4% to 5.57 Million MT, and NP/NPK imports dropped by 19.4% to 2.22 Million MT. However, MOP imports increased by 53.8% to 2.87 Million MT during the same period.

Except for SSP, the DBT sales (sales by retailers to farmers through point-of-sale machines) of major fertilizer products increased during 2023-24 compared to 2022-23.

Total fertilizer sales reached approximately 64.70 Million MT in 2023-24, up from 63.84 Million MT in 2022-23. Specifically, the sales of urea increased by 0.2% to 35.78 Million MT, DAP sales rose by 3.8% to 10.81 Million MT, MOP sales grew by 0.8% to 1.64 Million MT, and NP/NPKs sales surged by 9.9% to 11.07 Million MT. However, SSP sales declined by 9.4% to 4.54 Million MT during the same period.

Production, Import and Sale of Major Fertilizers in 2022-23 and 2023-24 (April/March)

	Urea	DAP	NP/ NPKs	SSP	MOP
Production (Million MT)
2022-23	28.50	4.35	9.29	5.65	-
2023-24 (P)	31.41	4.29	9.55	4.46	-
+- % in 2023-24 over 2022-23	10.2	(1.2)	2.8	(21.0)	-
Import (Million MT)
2022-23	7.58	6.58	2.75	-	1.87
2023-24 (P)	7.04	5.57	2.22	-	2.87
+- % in 2023-24 over 2022-23	(7.1)	(15.4)	(19.4)	-	53.8
Sales# (Million MT)
2022-23	35.75	10.42	10.07	5.02	1.63*
2023-24 (P)	35.78	10.81	11.07	4.54	1.64*
+- % in 2023-24 over 2022-23	0.2	3.8	9.9	(9.4)	0.8

* MOP for direct application # = DBT sale (P) = Provisional Source : Fertilizer Association of India report

The overall market expanded by 1.96% in 2023-24 compared to 2022-23.

Notably, the NPK segment experienced the most significant growth, approximately 10%, while DAP saw a year-on-year increase of around 4%. These impressive growth rates for both NPK and DAP are highly beneficial for the balanced nutrition of Indian soils and bode well for the phosphatic fertilizer companies in India.

Factors influencing fertilizer market size during 2023-24

Stabilisation of Raw Material Prices

In 2023-24, fertilizer raw material prices corrected steadily from post-COVID levels. This stabilisation enabled companies to improve planning, manage inventory efficiently, and optimise their production mix. Moreover, stable prices enhanced market confidence among farmers and distributors, ensuring consistent demand for fertilizers.

El Nino

The transition from La Nina to El Nino in 2023-24 led to erratic rainfall, impacting fertilizer consumption and creating financial challenges for companies. Government investments in irrigation helped mitigate some impacts, but adapting to these climatic changes will be crucial for future market stability.

Rainfall

In March-April 2024, India faced a 13% rainfall deficit, impacting soil moisture and delaying crop sowing. While 19 of 36 meteorological sub-divisions had normal to excess rainfall.

Water Reservoirs

As of 25^th April 2024, 150 of Indias major reservoirs had a total live storage capacity of 178.78 BCM, with 53.36 BCM available, down from 64.78 BCM a year earlier. This represented 82% of last years storage and 96% of normal levels. Several states in India reported lower storage levels, impacting agricultural activities by potentially limiting irrigation and affecting fertilizer demand and application.

Government Policies

The Government of India plays a crucial role in the fertilizer sector, acting as a stabilising force to protect Indian farmers from the volatile macroeconomic impacts of commodity price fluctuations. By ensuring the consistent availability of fertilizers, the government supports agricultural productivity and sustainability.

In the context of a growing population and decreasing availability of arable land, combined with the predominance of small agricultural land parcels, the government has prioritised food security. This is achieved through substantial subsidies to fertilizer companies, aligning domestic fertilizer prices with global raw material costs, thereby maintaining affordability and accessibility for farmers.

a) Agriculture Initiatives:

• The government announced MSPs for 23 crops to provide price assurance to farmers. MSPs act as a safety net and incentivise farmers to increase production of these crops.

• Direct financial assistance has been provided to 11.8 Crores farmers under PM-KISAN.

• Crop insurance has been provided to 4 Crores farmers under PM Fasal Bima Yojana.

• The Saksham Anganwadi and Poshan 2.0 scheme will expedite the upgradation of Anganwadi centres to improve nutrition delivery, early childhood care, and development.

b) Fertilizer-Based Initiatives

• In the July 2024 Union Budget, the government has allocated 1.52 Lakh Crores to farming and allied sectors

• The fertilizer sector has received a total budget of 1.64 Lakh Crores, with 45,000 Crores designated for products under nutrient-based subsidies

• The Government of India is promoting the use of nano fertilizers via a) awareness campaigns b) newer capacity building c) availability at PMKSKs d) SHGs e) field demonstrations

• The Namo Drone Didi Scheme provides drones to 15,000 women SHGs for nano fertilizer application

• Domestic urea production is expected to increase by 2025, with four new plants operational, advancing India toward self-sufficiency (Atma Nirbhar Bharat)

Fertilizer Market Outlook for India

The Indian fertilizer market is poised for growth in the upcoming fiscal year, driven by several key factors. The monsoon forecasts, with expected levels at 106% and 102% of the long-period average for 2024 according to IMD and Skymet respectively, are favourable for the sector.

There is a noticeable shift towards soil and crop-specific nutrient applications aimed at enhancing farm yields by addressing the unique requirements of different crops. This trend signifies a move towards more precision based fertilisation practices.

A significant development is the increasing preference for phosphate and potash-oriented NPKs over urea alone. This approach supports balanced fertilisation and optimises nutrient delivery. Additionally, the gradual adoption of Nano fertilizers, which offer higher nutrient content per unit, is expected to reduce reliance on imported fertilizers and boost domestic production.

Ensuring a consistent supply of high-quality raw materials and finished fertilizers is vital for effective nutrient management, soil health, and food security. The governments focus on self-reliance (Aatmanirbhar

Bharat) aligns with this objective. A strong performance in the sector will contribute to overall economic growth in 2024-25, improve rural income prospects, replenish granaries, and address food inflation concerns.

Paradeep Phosphates Limited (PPL) is strategically positioned to capitalise on these trends. The Companys expertise in sourcing reliable raw materials and producing a diverse range of NPK products, including making Nano fertilizers, supports its market position. With a robust distribution network serving over 9 Million farmers across 15 states, PPL is well-equipped to meet the growing demand.

Company Overview

PPL is Indias second-largest privately-owned phosphatic fertilizer Company, with a production capacity of 3.0 Million metric tonnes per annum (MMTPA). The Companys diverse product portfolio includes core products such as DAP various NPK grades, Zypmite, and Urea, as well as industrial products like phospho-gypsum, sulphuric acid, and hydrofluorosilicic acid (HFSA).

PPL operates advanced manufacturing facilities in Paradeep, Odisha (1.8 MMTPA), and Zuarinagar, Goa (1.2 MMTPA). The Odisha plant is ISO 9001, ISO 14001, ISO 45001, and ISO 50001 certified, while the Goa plant holds ISO 14001 and ISO 45001 certifications and features a unique co-located urea and NPK manufacturing capability.

Under its flagship brand, Jai Kisaan Navratna, PPL serves over 9 Million farmers across 15 states in India. The Companys extensive network includes 22 regional offices, 529 stock points, and more than 5,000 dealers. Through its core competencies of plant locations by the ports, fungible production lines of NPKs, state-of-art infrastructure in manufacturing and storages and pan- India distribution capability, PPL produces and delivers high-quality fertilizers, thereby significantly boosting agricultural productivity across the country.

PPL demonstrated its commitment to environmental, social, and governance (ESG) principles through several key initiatives. These included product stewardship innovations such as nano fertilizers and specialised NPKs, water-stress assessment, biodiversity study and comprehensive greenhouse gas (GHG) accounting for scope 1, 2, and 3. PPL also reported its ESG performance through two successive ESG reports and one Business Responsibility and Sustainability Report (BRSR). As a result of these efforts, PPL achieved an ESG score of 51 in S&Ps Dow Jones Sustainability Index (DJSI) for the year 2023.

Performance Highlights in 2023-24

	31st March 2024	31st March 2023
Production (MT)	2,304,970	2,032,516
Sales Volume (MT)	2,527,591	2,029,183
Revenue from	11,575.12	13,340.72
Operations ( Crores) PBT ( Crores)	140.17	425.66
PAT ( Crores)	99.24	303.69

The Company achieved year-on-year increases in production and sales volumes of 13% and 25%, respectively, during 2023-24, resulting in a larger market share. NPK fertilizers represented approximately 50% of total sales volumes, reflecting the Companys ability to produce and sell a diverse range of NPK grades tailored to specific soil and crop conditions in India.

Revenue from operations for 2023-24 was 11,575.12 Crores, showing a decline of 13.2% compared to the previous year. This can be attributed to a reduction in product subsidies during 2023-24. The adjustment in these subsidies was a direct consequence of the global correction in key fertilizer raw material prices.

Profit Before Tax (PBT) and Profit After Tax (PAT) were 140.17 Crores and 99.24 Crores, respectively. Profit margins in 2023-24 were influenced by multiple factors, including a greater reduction in subsidies for DAP, an unviable pricing structure for specific NPK grades, and retrospective adjustments to subsidies.

Production in 000 M^^: 2023-241	2022-23
DAP 734	675
N-20 712	595
Other fertilizers 859	763
Total Fertilizers 2305	2,033

Analysis of Financial Performance

This section reviews the consolidated financial results for the year ending 31^st March 2024. PPL and its joint ventures financial statements comply with Indian Accounting Standards (Ind AS) under Section 133 of the Companies Act, 2013. Details of significant accounting policies are included in the notes to the consolidated financial statements.

Key Financial Ratios

Ratio	Numerator	Denominator	Current Year Previous Year		% Change
Current Ratio (in Times) Total Current Assets		Total Current Liabilities	1.10	1.10	0
Debt-Equity Ratio (in Times)	Total Borrowings	Total Equity	1.12	1.32	(15.15)
Debt Service Coverage Ratio (in Times)	Earning for Debt Service = Profit for the Year + Interest Expenses + Depreciation and Amortisation Expenses + Other Non-Cash Adjustments	Debt Service = Interest + Principal Repayments	0.93	1.24	(25)
Return on Equity Ratio (In %)	Profit for the Year	Average Total Equity	2.81%	10.60%	(73.49)
Inventory Turnover Ratio (in Times)	Revenue from Operations	Average Inventory	5.68	5.89	(3.57)
Trade Receivables Turnover Ratio (In Times)	Revenue from Operations	Average Trade Receivables	3.54	5.68	(37.68)

 

Ratio	Numerator	Denominator	Current Year Previous Year		% Change
Trade Payables Turnover Ratio (In Times)	Purchase of Raw Materials and Traded Goods	Average Trade Payables	5.06	5.16	(194)
Net Capital Turnover Ratio (In Times)	Revenue from Operations	Average Working Capital (i.e. Total Current Assets Less Total Current Liabilities)	20.02	37.88	(47.15)
Net Profit Ratio (In %)	Profit for the Year	Revenue from Operations	0.86%	2.28%	(62.28)
Return on Capital Employed (In %)	Profit Before Tax and Finance Costs	Capital Employed = Tangible Net Worth + Total Debt + Deferred Tax Liabilities	6.57%	8.70%	(24.48)

Opportunities

Increasing awareness of environmental issues, such as soil degradation, water pollution, and biodiversity loss, is driving a shift towards sustainable agriculture. Stakeholders are prioritising practices that minimise environmental impacts.

The Indian fertilizer industry is also adopting Nanofertilizers as a sustainable solution to boost productivity while reducing environmental harm. PPL has responded to this trend by launching the Jai Kisaan Navratna Nano Shakti brand, catering to the growing demand for ecofriendly fertilizers.

Advancements in agricultural technology and precision farming further enhance fertilizer application efficiency. Additionally, government subsidies and incentives support the adoption of modern agricultural practices, presenting further growth opportunities for the industry.

Threats

The ongoing macro-conflicts, rising input and energy costs and reliance on regulatory policies could be potential threats to the sector.

Key threats include:

Dependency on Imports and Limited Domestic Production

India imported around 26% of finished fertilizers (DAP, NPK, Urea) in 2023-24, making it vulnerable to global

supply chain disruptions and price fluctuations. As the third-largest food producer, any fertilizer supply issues can significantly affect food security.

Indian manufacturers face production constraints due to limited access to raw materials, high costs, and regulatory challenges.

Global Energy and Raw Material Prices

The conflicts in Ukraine, Middle East and global energy price increases have driven up the costs of raw materials such as natural gas, sulphur, and ammonia. This raises manufacturing costs for fertilizers, squeezing profit margins.

Reliance on Subsidies

Dependence on government subsidies for fertilizer affordability affects working capital and operational efficiency. Delays or changes in subsidy policies can disrupt cash flow and financial stability for manufacturers.

Risk and Mitigations

PPL has implemented a comprehensive risk management plan designed to safeguard workers, the public, and the environment. This plan identifies potential hazards and outlines strategies to mitigate risks and ensure responsible product use. The following sections detail these risks and the corresponding mitigation strategies.

Revenue
(In Crores)	2023-24	2022-23	% Change
Operating Revenue	11,575.12	13,340.72	(13.23)
Other Income	68.84	91.07	(24.41)
Total Revenue	11,643.95	13,431.79	(13.31)
Revenue From Manufactured Products and Traded Products
(In Crores)	2023-24	2022-23	% Change
Manufactured Products	10,316.68	12,642.72	(18.40)
Traded Products	1,258.44	698.00	80.29
Operating Revenue	11,575.12	13,340.72	(13.23)
Cost of Materials
(In Crores)	2023-24	2022-23	% Change
Cost of Material Consumed	7,609.04	10,439.70	(27.11)
Purchase of Stock in Trade	1,055.09	182.26	478.89
Changes in Inventories	334.32	(8.78)	(3,907.74)
Total Materials	8,998.45	10,613.18	(15.21)
Operating Revenue	11,575.12	13,340.72	(13.23)
Cost of Materials/ Operating Revenue	77.74%	79.55%

 

Employee Benefits
(In Crores)	2023-24	2022-23	% Change
Employee Benefits	229.79	213.20	7.78
% of Total Revenue	1.99%	1.59%
Finance Costs
(In Crores)	2023-24	2022-23	% Change
Finance Costs	366.03	291.24	25.68
% of Revenue	3.16%	2.17%
Depreciation and Amortisation
(In Crores)	2023-24	2022-23	% Change
Depreciation and Amortisation	210.67	175.15	20.28
% of Revenue	1.82%	1.30%
Other Expenses
(In Crores)	2023-24	2022-23	% Change
Other Expenses	1,698.86	1,713.35	(0.85)
% of Revenue	14.68%	12.76%
Income Tax
(In Crores)	2023-24	2022-23	% Change
Income Tax	40.93	121.98	(66.45)
Profit Before Tax	140.17	425.66	(67.07)
Tax as % of Profit Before Tax	29.20%	28.66 %

 

Risk	Risk Description	Risk Causes	Risk Mitigation
Governments Policy and Subsidy PayOuts	Impact on the profitability of manufactured and traded complex fertilizers. Frequent changes in government fertilizer policy affecting sales and subsidy realisation.	• Retrogressive changes in policy. • Limitation to sell P&K fertilizers at higher MRP despite global price volatility. • Subsidy determined at the beginning of the season, leaving price volatility during the season unaddressed. • Subsidy payment linked to dealers/ farmers acknowledgment in iFMS and POS.	• Conduct gap analysis between current MRPs and reasonable MRP. • Optimise product mix. • Maintain constant discussion with the Government of India at the industry level. • The finance team compiles subsidy outstanding details weekly for follow-up with the Department of Fertilizers (DOF) to minimise outstanding subsidy. • Following submission of claims, the Subsidy Cell in Delhi conducts follow-up with the Ministry to seek early settlement.
Global Uncertainties	Global uncertainties regarding the availability	• Raw materials are available in a limited number of geographies	• Establish long-term supply linkages for all key raw materials:
	of key raw materials for production. Volatility in prices impacting pricing and profitability.	worldwide: o Phosphoric Acid - Morocco o Rock Phosphate - Morocco o Ammonia - Middle East, SEA o MOP - Middle East, Canada • Price volatility due to macroeconomic factors and global supply chain constraints from geopolitical conflicts (e.g., Ukraine-Russia war, Palestine- Israel conflict).	o Rock Phosphate / P2O5 o Ammonia o MOP o Sulphur o H2SO4 • Optimise product mix across sites to focus on products with higher contribution. • Engage regularly with suppliers at operational and strategic levels to ensure competitive pricing and sustainable availability.
ESG Risks	Adverse effects on climate and the environment, and stoppages of production due to non-compliance with environmental laws. Legal, financial exposure, and reputational loss related to Environment, Health, and Safety issues. Human error in handling hazardous chemicals, particularly ammonia. Global push towards "Green Hydrogen" with uncertain commercial viability.	• Inability to control and reduce emissions and inappropriate monitoring of gas emissions. • Failure to adopt and upgrade pollution control technologies. • Non-compliance with applicable environmental laws and regulations.	• Strict adherence to all environmental laws. • Installation and rigorous monitoring of all prescribed pollution control devices. • Verification of tankers hazardous chemical licences and fitness certificates before loading. • Insurance policy for Public Liability to mitigate financial exposure.

 

Risk	Risk Description	Risk Causes	Risk Mitigation
Currency Exchange Rate Volatility and Working Capital Strain Risk	Volatility in USD-INR exchange rates leading to increased hedging costs. Blockage of working capital, causing strain on fund availability and increased interest costs.	Key raw materials are imported (~75% of production costs) and are vulnerable to exchange rate fluctuations and global inflation indices.	• Implementation of a Board- approved hedging policy to manage exchange rate fluctuations, with periodic reviews for necessary updates. • Formation of a task force for the prioritised collection of overdue receivables, with categorisation of dealers based on supply and overdue status.
Cybersecurity	IT risks include hardware and software failures, human error, spam, viruses, and malicious attacks. The most significant and widespread threat facing businesses is phishing attacks.	• Endpoint security lapses. • Delays in patch updates for server OS and firewall. • Lack of SSL in communication ports and applications. • Outdated firmware. • Weak passwords for emails and online applications. • Pop-up blocking not done. • User awareness issues.	• Implement a robust cybersecurity strategy focusing on prevention, detection, and remediation. • Regularly update antivirus software and firmware. • Enable gateway-level security for emails. • Establish a strong backup plan for servers and endpoint devices. • Conduct regular user training and awareness programmes on cybersecurity. • Perform yearly Vulnerability Assessment and Penetration Testing (VAPT).
Talent Retention	Impact on business processes due to the loss of business-critical leaders or key talent.	Non-readiness of second-in-line to take over in the event of exit of functional heads.	• Succession planning and manpower planning are conducted based on business requirements. • Ensure readiness of successors through targeted interventions.

Human Resource

The Company continued to focus on employee core connect, engagement, learning, and development to build a workplace that is safe, engaging, and productive. The Company is undertaking digitalisation of all talent management processes for regular communication. All the employees of the Company were presented with various learning opportunities to enhance career growth. Learning and development teams ensured the training of employees, wellness sessions that dealt with topics related to safety and health helped create awareness among employees and their families about key areas related to their well-being. Throughout the year, employees remained connected through planned events.

The Company undertakes a plethora of HR initiatives starting from talent acquisition, development and retention

for longer period. The Company is declared as a Public Utility Service under the provisions of Industrial Dispute Act. The Employee Engagement Initiatives are customized to engage the employees in a positive and constructive way to get maximum satisfaction at the work place. QC/ Kaizen Team have been increased from 8 to 18 nos. as a part of Employee Engagement Initiative. Training calendar is designed to fill the identified Competency gaps of the employees. Skill gap is accessed taking into account of the direct input by employees on the basis of challenges in his function as depicted by him. The change in approach is to listen to the voice of employees with respect to their functional requirement. Succession planning and Leadership coaching are conducted for the high performers. Balance Score Card, the latest and best form of PMS, is adopted to appraise the performance of employees in effective and efficient manner.

Diversity Drive: The Company is dedicated to fostering an inclusive culture, empowering individuals, and enhancing competitiveness.

Nurturing Human Capital: Nurturing and empowering talent to take on new leadership roles is one of the most important ways to grow our human capital. In this journey of growth and ambition, the Company will continue to reward and recognise the employees and encourage them to achieve bigger and higher goals.

Performance Excellence: Performance Management

System enables individuals and teams to set stretched goals and review performance in relation to these goals. The process empowers every level of the organisation to own their performance and improve it on continuous basis.

Employee Well-being:

The Companys focus is on cultivating a holistic employee experience that prioritises growth, engagement, and wellbeing. The Company is committed to raising awareness among employees and their families on topics of health and safety. Active communication, employee surveys, and feedback mechanisms enable the Company to foster a culture of transparency. The Company proactively identifies areas for improvement and designs well-being initiatives to meet the unique needs of employees. 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 45 hours training per employee for the year 2023-24), and a safety-focused culture prioritise team wellbeing.

Talent Development:

The Company successfully completed the 3rd Season of the training initiative - NAYI DISHA 3.0 - Aspire, Innovate & Collaborate. The 3^rd Season was held in the picturesque locales of Goa and Chail.

NAYI DISHA 3.0 is not just another training program; it was an immersive journey designed to empower team members with essential skills and insights to navigate the ever-evolving professional landscape. With a comprehensive agenda focusing on key areas of behavioural and functional domains, the program equips the front-line workforce with the tools needed to excel in their roles and beyond.

NAYI DISHA 3.0 wasnt just about imparting knowledge; it was about igniting passion, fostering growth mindsets, and cultivating a culture of excellence within PPL. The Company believes that investing in the teams development is key to unlocking their full potential and driving collective success. Aligning team efforts with the overarching goals and vision of the organization and a deep dive into mindfulness and effective communication techniques help foster a positive work environment. The program guides team members on the path to becoming impactful leaders within their respective domains and empowers individuals to chart their career paths and seize opportunities for growth.

As of 31^st March 2024, the Company has 2,398 permanent employees and workers contributing to its sustained growth and success.

Internal Control

PPL has a robust internal control system crucial to its success. This system ensures effective oversight of operations, safeguards assets, and maintains regulatory compliance. The annual internal audit process reviews key business areas with inputs from internal auditors, the Audit Committee, and the Board, who collectively work to enhance internal controls.

Cautionary Statement

Certain statements in the MDA section regarding future prospects may be forward-looking and involve risks and uncertainties that could lead to actual results differing materially. These statements are based on current assumptions and available information, which may change over time. As such, they reflect only the Companys intentions, beliefs, or expectations as of their date and are subject to change. The Company assumes no obligation to update these forward-looking statements in light of new information or future events.