Punjab Chemicals & Crop Protection Ltd Management Discussions.


1.1. Business Segment- Agro Chemicals and other Chemicals

a) Industry Structure and Development:

India has emerged as the fastest growing economy and is expected to be one of the top three economic powers of the world over the next 10-15 years. The growth of the economy is backed by a strong democracy, reforms on better infrastructure, number of technology start-ups, increased labour force participation, higher education and improved health care facilities at the affordable cost. These parameters have had a positive affect and paved the way to the Industrial growth.

The investments in the different sectors of the economy have risen on the basis of the aforesaid reforms and consequently improvement in the economic scenario. One of the important sectors in which the industry grew is "Agro Chemicals". The industry produces various chemical products used in the agriculture like pesticides including insecticides, fungicides, herbicides and other related speciality and other chemicals for different formulations. Indian manufacturers have traditionally concentrated on the generic pesticides market. India is one of largest producers of pesticides in South East Asia after China. In India, both organized and unorganized sectors have contributed to the growth of this industry. Indian manufacturing Companies are catering to both the domestic and overseas markets.

The Company is in the business of the manufacture of Performance Chemicals,technical Agrochemicals,Speciality and other chemicals. The Company has presence in the overseas market because of its quality and price competitiveness. Therefore, the Company is confident that its business segment has high potential for growth.

b) Opportunities and threats:

In the year 2017-18 Indian Exports of inorganic, organic and agro chemicals provisionally stood at US$ 10.67 billion, an increase of 38 per cent year-on-year. Indian agrochemical products are exported to USA, France, UK, other EU countries and some countries in South America, Asia and Africa. As we meet a small part of the demand we are upbeat about the prospects of exports.

Further, 70% of the molecules are off patent and hence there is no threat to Indian players with respect to patent regime so we should be finding markets for new molecules as well.

Other constraints in exponential growth of Agro Chemical manufacturing are stringent environment protection, regulations, scale of operations and requirement of high working capital coupled with limited investment in Research and Development.

c) Outlook:

The producers who set up integrated world class manufacturing facilities, employing state of the art process and technologies developed through in-house Research and Development will survive in the fiercely competitive market. We believe we have the requisite resources in place to meet the challenges.

The market for the Company products due to good quality and meeting the time line of the customers has been well established. The export has risen to Rs. 411 crore during the year which is 64% of the total sales. We believe exports of our products will keep increasing. Therefore, barring unforeseen circumstances, the Company maintains the positive and better outlook.

d) Risks and concerns:

Following factors are considered as critical for the future growth in this industry: i. To have a global reach: There are many countries particularly high priced US and European markets, which offer opportunities. ii. To obtain Global Registrations: It is compulsory to comply with various rules and regulations like registrations to be allowed local sales in the country. The Company has to get global registration for the new molecules. iii. To have extensive distribution Chanel. iv. To have a diversified and enlarge product portfolio.

The Management is conscious of these risks and concerns and is taking required steps wherever possible to address the issues.


The Company has appointed a Chartered Accountant firm to conduct the routine internal audit of all the purchases, inventory, accounts and other statutory matters. The quarterly report submitted by the Internal Auditor is placed before the Audit Committee and the Board. The observations, if any, are reviewed with the management for improvement.

The Company has a robust Internal Financial Control System. On the basis of the detailed study by an Independent Agency, the risks in the different departments were identified. Accordingly, the Internal Financial Controls (IFC) were established to mitigate those risks. The controls have been divided into key and non-key controls. The Internal Auditor has been appointed to find out the adequacy and effectiveness of the internal financial controls.

The Internal Auditor reviews all the departments and assess theinternal controls, identifies risks involved in each step of work flow and categorize risks into financial, operational, fraud and compliance. The internal audit or performs the system of walk through and / or test the effectiveness of existing controls to find out any exception to the controls. The exception, if found, is reported to the management to take the remedial action.

Based on the work performed by the internal, statutory and secretarial auditors and the reviews carried out by the Management and the relevant Board Committees, the Directors are of the opinion that the Company has in place, adequate internal financial controls, with reference to financial statements, commensurate with the size and nature of the business of the Company. During the year, such controls were tested and no reportable material weakness in the operation was observed.

The Company has the Risk Assessment Policy and the concerned Heads of various Departments are responsible to monitor the risks and take effective measures to mitigate them. The report of responsible persons is placed before the respective committee and the Board of Directors.

The financial statements are prepared in conformity with the established Accounting Standards and Principles.


The revenue from operations and other income of the Indian Operations (Standalone) during the financial year under review was Rs. 651 crore against Rs. 502 crore and a profit before tax of Rs. 32.21 crore against Rs. 17.48 crore of the previous year. It includes the job work income of Rs. 39.70 crore as against Rs. 51.33 crore of previous year.

Revenue generation from India was higher at Rs. 229 crore against Rs. 199 crore of previous year and exports of Rs. 411 crore against Rs. 291 crore of previous year. The net worth of the Company increased to Rs. 101 crore as on 31st March, 2019 against Rs. 82 crore as on 31st March, 2018.

During the year under review STS Chemicals (UK) Ltd., was disposed off. As on 31st March, 2019, the Company has only one wholly owned overseas subsidiary namely- SD AgChem (Europe) NV, Belgium.

The Consolidated results includes the results of SDAgChem (Europe) NV along with Standalone Indian Operations. The summary of operating results of the subsidiary company has been given in the Directors Report.

The consolidated accounts show the total revenue of Rs. 650 crore with a profit before tax of Rs. 28.76 crore in the financial year 2018-19 against the total income of Rs. 507 crore and profit of Rs. 24.26 crore in the previous year.

All the loans availed from the Banks have been repaid after one time settlement and the Company is now out of Corporate Debt Restructuring (CDR) mechanism. The Company has availed of Inter Corporate Deposits for the repayment of loans to the Banks. The Company was managing the working capital requirement with the support of major customers by taking advances or immediate payment upon supply of products. However, the Company is now in the process of availing working capital and other loans from banks for expansion and upgradation of plants.

Some of the other details of Financial Statements are as follows:

i) Shareholders Funds:

On Standalone basis, the shareholders fund has increased to Rs. 101.20 crore as on 31st March, 2019 against Rs. 82.13 crore as on 31st March, 2018. On Consolidated basis, the shareholders fund has increased to Rs. 90.86 crore as on 31st March, 2019 against Rs. 74.17 crore as on 31st March,2018.

ii) Borrowings:

In view of One Time Settlement (OTS) and repayment of all debts of banks, the long term borrowings have reduced to Rs. 11 crore in the year under review against Rs. 48.19 crore as on 31st March, 2018, whereas, the short term borrowings have been increased to Rs. 79.50 crore as on 31st March, 2019 as against Rs. 52.81 crore of 31st March, 2018 due to availing of Inter Corporate loans.

iii) Earning Per Equity Share:

The earning per equity share was Rs. 16.51 as on 31st March, 2019 against Rs. 8.48 as on 31st March, 2018 on standalone basis under Ind AS preparation.

iv) Revenue from Operations of Various Divisions:

During the year, the turnover of Agrochemicals Division, Derabassi was Rs. 495 crore against Rs. 371 crore of last year. The Speciality and Other Chemical Division at Lalru, the revenue increased to Rs. 115 crore from Rs. 92 crore. The turnover of Pune unit including phosphorous and its compounds was Rs. 28 crore against Rs. 25 crore of last year.

v) Other key financial indicators:

Ratios 2018-19 2017-18 % change
Debtors Turnover (no of days) 12.44 11.02 12.85%
Inventory Turnover (no. of days) 5.37 4.87 10.20%
Interest Coverage Ratio 3.38 1.81 86.48%
Current Ratio 0.75 0.78 -4.11%
Debt Equity Ratio 2.80 3.48 -19.67%
Operating Profit Margin (%) 8.86% 6.32% 40.22%
Net Profit Margin (%) 3.11% 2.07% 50.27%
Return on net Worth 0.20 0.13 58.02%

The increase in ratios was primarily on account of higher profit margin due to increase in sales turnover by 30% of major products.

The Companys exports was Rs. 411 crore (64% of sales) against Rs. 291 crore of last year, which is higher by 41%.


The employee strength of the Company as on 31st March, 2019 was 971. The relations with the employees of the Company remained cordial and harmonious.

The Company encourages the employees to upgrade their knowledge and skills. The training sessions on various working parameters are conducted in routine apart from allowing employees for outside specialized training, wherever required.


Audited Financial Statements for the year ended 31st March, 2019 are in compliance with the Indian Accounting Standards (Ind-AS) prescribed under section 133 of the Companies Act, 2013.


Statements in "Management Discussion and Analysis" describing the Companys objectives, projections, estimates, expectations or predictions are forward looking statements within the meaning of applicable security laws or regulations. These statements are based on certain assumptions and expectations of future events. The actual results might differ materially from those expressed or implied depending upon factors such as climatic conditions, global and domestic demand-supply conditions, finished goods prices, raw materials cost and availability, foreign exchange market movements, changes in Governmental regulations and tax structure, economic and political developments within India and the countries with which the Company has business.

Therefore, the Company assumes no responsibility in respect of forward looking statements herein which may undergo change in future on the basis of subsequent developments, information or events.