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Directors Report of Gujarat Narmada Valley Fertilizers & Chemicals Ltd.

Mar 31, 2014

The Members,

The Directors have pleasure in presenting this 38th Annual Report together with Audited Statement of Accounts of the Company for the year ended 31st March, 2014.

The fiscal year 2013-14 was a challenging year for Indian Economy. There was a marginal rise in the growth of Indian economy at 4.7% in 2013-14 from 4.5% in 2012- 13, confi rming the signs of sticky slow down. The growth of economy below 5% in 2013-14 is primarily the result of continued slowdown in the Industrial Sector and lower growth in certain segment of service sector. Impact of deceleration in the growth rate in the earlier year had continued.

In the back drop of this sluggish economy, the performance of your company during 2013-14 remained reasonably satisfactory, thanks to the resilient trend in Chemical business segment and company''s efforts to take advantage of the same.

In its quest for excellence, the company has continued its emphasis on higher productivity, adoption of smart marketing strategies, energy saving, effi ciency improvement and cost control / cost savings measures. During the year, 101 new records were established on production and marketing fronts.

FINANCIAL RESULTS

Summary of fi nancial results : (Rs. in Crore)

Particulars 2013-14 2012-13

Income from operations 4,847.19 4,252.57

Other Income 45.05 40.38

Total Income 4,892.24 4,292.95

Total Expenditure 4,230.73 3,659.32

Profit before Depreciation, Finance Cost and Tax 661.51 633.63

Depreciation 145.31 148.55

Finance Cost 92.37 62.68

Profit before Tax (PBT) 423.83 422.40

Provision for Taxes 131.56 149.29

Net Profit for the year 292.27 273.11

Balance brought forward from previous year 394.49 485.02

Amount available for Appropriation 686.76 758.13

Appropriations

Proposed Dividend 54.40 54.40

Tax on Dividend 9.24 9.24

Transferred to General Reserve 300.00 300.00

Balance carried to Balance Sheet 323.12 394.49

YEAR IN RETROSPECT

Your company achieved sales turn-over of Rs. 4,847.19 Crore compared to Rs.4,252.57 Crore in the previous Financial Year, registering an increase of 13.98%. The turnover was higher mainly on account of increased volume of production and increased sales realization. Profi t Before Tax was higher at Rs.423.83 Crore as against Rs.422.40 Crore of the previous financial year. Profit After Tax was Rs.292.27 Crore as against Rs.273.11 Crore of the previous fi nancial year.

DIVIDEND

The company''s financial performance for the year 2013-14 was more or less comparable with that of previous financial year. Keeping in view the company''s performance and the requirement of fund for its future growth and to ensure that the shareholders get sustained return on their investments, your Directors have recommended a dividend of Rs 3.50 per equity share (35%) on 15,54,18,783 equity shares for the year ended 31st March, 2014. The dividend on equity shares is subject to the approval of the shareholders at the Annual General Meeting. On its approval, the dividend payout will work out to Rs.63.64 Crore, including tax on dividend of Rs.9.24 Crore. This amounts to 21.77% of the Net Profit.

APPROPRIATIONS

Your company earned Net Profit of Rs.292.27 Crore for the year 2013-14. After adding thereto Rs.394.49 Crore being the balance of Statement of Profit & Loss brought forward from the previous year, amount available for appropriation is Rs.686.76 Crore. Out of this, Rs.63.64 Crore, including tax on dividend is earmarked for dividend. The company proposes to transfer Rs.300 Crore to General Reserve. An amount of Rs.323.12 Crore is proposed to be retained in the Statement of Profit & Loss.

PERFORMANCE REVIEW

The year 2013-14 was one of the challenging year for chemical business in the country due to overall cost increase and moderate industrial growth coupled with increased competition due to free fl ow of material from international markets. The company has to sell its products keeping parity in prices with imports.

In order to get an edge over competition, a strategy had been formulated by your company during the year to excel both in production and marketing of its products. Keeping this strategy in mind, concerted efforts were made to achieve highest production levels in most of the products with optimum cost. Accordingly, various all time best records were established during 2013-14.

PRODUCTION

Most plants of the company operated at over 100% capacity utilization. Ever highest yearly production was achieved in Ammonia, Ammonia Syngas Generation, Neem coated Urea, Formic Acid, Methyl formate, Ethyl Acetate, Weak Nitric Acid, Concentrated Nitric Acid and Captive Power Generation. Total 66 Ever highest records of production were made during 2013-14.

The company continuously monitors the plants operations and implement various modifi cation schemes, to save energy and to increase plant reliability and production thereby improving the Profitability of the company.

Production of Calcium Ammonium Nitrate (CAN) was discontinued in view of the same falling within the ambit of Ammonium Nitrate Rules 2012, made effective from 11th January 2014.Consequently, AN Melt sale was maximized resulting into improved Profitability.

SALES

Industrial Products

To supplement the production efforts, special drive had been made in the marketing of chemical Industrial Products through innovative marketing, market segmentation and smart pricing. A niche market has been created for many of its products like Acetic Acid, Nitric Acid, AN Melt, Aniline and Formic Acid.

Total 35 Ever highest records of sales were made during 2013- 14. All time best annual sales records were made during the year 2013-14 in Weak Nitric Acid, Concentrated Nitric Acid, AN Melt, export of Methyl Format and Ethyl Acetate. The sale of Ethyl Acetate at 51360 MTs was signifi cantly higher as compared to previous best of 13837 MT during 2012-13. Similarly AN Melt sale of 127087 MT was signifi cantly higher compared to previous best of 88493 MT during 2012-13.

There was alround increase in quantity sold, turn-over, price realization and contribution of chemical Industrial Products during 2013-14 compared to previous year. This was possible due to smart and dynamic pricing of the company''s products, keeping a close watch on cost of production and opportunity to increase price during the year.

Methanol is imported in our Country to the tune of about 19 Lac MTs per annum. Out of this, about 14 Lac MTs of Methanol is imported from Iran itself. Your company is the largest producer of Methanol in the Country. However, due to high cost of Natural Gas, the company has been fi nding it diffi cult to compete with the imported material. To offset this disadvantage, specifi c efforts were made to fi nalize a yearly supply contract of Methanol at very attractive terms with one of the leading producers of Methanol in Iran. The company has also handled import of Acetic Acid. The other signifi cant effort made by the company was to

stream line AN Melt sale logistics, post implementation of stringent Ammonium Nitrate Rules, 2012.

Fertilizers

The Fertilizer business was good through-out the year. The company sold in aggregate 9.35 Lac MTs of fertilizers (both manufactured & traded) during the year. Out of this, 6.96 Lac MTs of Fertilizers constituting 74% of the total sales were sold in the primary sales zone comprising Home State Gujarat and the adjoining States - Maharashtra, Madhya Pradesh and Rajasthan and more than 1 lac MTs of fertilizers were sold through company''s Narmada Agri marts in Gujarat during the year. The company continued its trading activities in Single Super Phosphate (SSP) and commenced trading of indigenously sourced Di-Ammonium Phosphate (DAP) and Muraite of Potash (MoP) during the year.

(n)Code Solutions – IT Division

(n)Code Solutions has continued its growth and expansion in the IT Sector during the year by achieving record sales of Rs.102 Crore, registering an increase of 29% over the previous year, based on strong performance of all its business segments. It remains the market leader in Digital Certifi cate business maintaining about 40% market share.

(n)Code implemented a unique project on behalf of Bharat Electronics Limited (BEL) for securing voting data in the Electronic Voting Machines (EVMs) using PKI (Public Key Infrastructure) Technology. It also implemented a city-wide surveillance project for Ahmedabad Municipal Corporation, one of the largest such projects in the Country and received several recognitions and awards in the fi eld of IT.

(n)Code has undertaken several initiatives during the year in new business lines such as Cloud Computing, IT Management Systems for BRTS, as also Technology based E-Governance Solutions to realize better growth in the coming years.

STATUS OF PROJECTS

As reported last year, Ammonia Syngas Generation Project (ASGP) and TDI-II Project at Dahej were under implementation.

1. Ammonia Syngas Generation Project

During the year, commercial production of ASGP has been declared and the plant has operated at more than 100% capacity in the fi rst year of its operation.

2. TDI-II Dahej Project

The commercial production of TDI-II Plant has been declared on 24th March 2014. TDI-II Plant, Dahej has faced the problem of gas emission during the initial production days. For ensuring the plant worthiness for restarting the plant, hazard operatability study (HAZOP) was carried out by M/s Lloyds Registers Asia,

Mumbai, necessary modifi cations were made and the plant was restarted. However, due to complex and diffi cult technology, the stabilization of operations of the plant is taking time, which has created an anxiety for the company. Looking to the cost of manufacture and prevailing market conditions including price, economic operation of plant currently seems diffi cult. Experts in TDI Technology have been drawn from world-over by M/s Chematur Engineering AB, Sweden, the technology supplier, to supervise and guide the technical personnel of the company. An Action Plan has been drawn and is under implementation for restart, stabilization and economical operation of the plant.

NEW INITIATIVES

With a view to accelerating growth momentum, the company is continuously exploring potential business opportunities in the areas having synergy with company''s existing business operations. Towards this direction, following projects are under active consideration by the company:

Brown fi eld Ammonia ~ Urea Project

The company has initiated actions for setting up a Brown fi eld Ammonia ~ Urea Project at Bharuch and has already expressed its interest to the Department of Fertilizers for setting up the Project. The New Investment Policy, 2012 for Urea, announced last year, is under review by Government of India and appropriate actions will be taken by the company based on the fi nal policy.

Di-Calcium Phosphate Project

Newly commissioned TDI- II Plant at Dahej will generate Hydrochloric Acid (HCl) as by-product. The company has initiated actions for setting up of Di-Calcium phosphate project based on HCl. The company is actively pursuing joint venture with a leading technology supplier of International repute for the same.

Aniline Expansion Project

The company is also considering expansion of the capacity of Aniline based on the availability of surplus hydrogen.

FERTILIZER POLICY

Taking forward the Government''s initiative to transfer the subsidy directly to the farmers, Government of India (GoI) launched pilot projects in six more Districts, including Narmada District in Gujarat, in addition to the pilot projects initially launched in six selected Districts across India. Our company has been assigned the responsibility of co-ordinating the pilot project launched in Narmada District.

The subsidy rates on P&K fertilizers notifi ed by GoI last year under Nutrient Based Subsidy (NBS) Policy have been continued during the current year also. Looking to

the increased cost of production, most of the Fertilizer Companies, including our company have increased the selling price of P&K Fertilizers, which has resulted into increase in realization.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956, your Directors hereby confi rm that -

- in the preparation of the Annual Accounts for the year 2013-14, the applicable Accounting Standards have been followed and there are no material departures;

- they have selected such Accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2014 and of the Profit of the company for the fi nancial year;

- they have taken proper and suffi cient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956. They confi rm that there are adequate systems and controls for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

- they have prepared the Annual Accounts on a going concern basis.

CORPORATE GOVERNANCE

As per the requirement of Clause 49 of the Listing Agreement, a Report on Corporate Governance together with the following are attached herewith and form part of this Annual Report:

- Declaration on the Code of Conduct.

- Certifi cate from the Practicing Company Secretary with regard to company''s compliance with the conditions of Corporate Governance.

MANAGEMENT DISCUSSION & ANALYSIS

Management Discussion & Analysis on the business and operations of the company is attached herewith and forms part of this Annual Report.

DEMERGER OF V-SAT / ISP GATEWAY BUSINESS

As reported last year, the Scheme of Arrangement and Demerger for transfer of company''s V-SAT / ISP Gateway Business to ING Satcom Limited sanctioned by Hon''ble High Court of Gujarat, is subject to and conditional upon the approval of Government Authorities for transfer of Licenses. Applications submitted for transfer of V-SAT / ISP Gateway Business Licenses standing in the name of company to the name of transferee company viz., ING Satcom Ltd. are pending before the Department of Telecommunications (DoT), Govt. of India.

FIXED DEPOSITS

The company has not accepted any Fixed Deposit during the year. No amount on account of principal or interest on Fixed Deposits was outstanding as on the date of Balance Sheet.

INSURANCE

The properties and insurable assets and interest of your company such as buildings, plant & machinery and stocks amongst others, are adequately insured. As required under Public Liability Insurance Act, 1991, your company has also taken necessary insurance cover.

DIRECTORATE

Change in Directorship

- Shri DC Anjaria retired by rotation at the last Annual General Meeting held on 21/9/2013.

- Dr. Ashok Shah ceased to be a Director vide resignation effective 10/6/2014.

- Prof. Arvind Sahay and Shri Chandrasekhar Mani have been appointed as Additional Directors (Independent Category) effective 4th August, 2014. They have been recommended by the Board to appoint them as Independent Directors at this AGM.

In terms of the provisions of Section 161 of the Companies Act, 2013, Prof. Arvind Sahay and Shri Chandrasekhar Mani hold offi ce up to the date of this AGM. The company has received Notices in writing from a Member under Section 160 of the Companies Act, 2013 along with requisite deposit proposing their appointment as Independent Directors at this AGM.

In pursuance of the provisions of Articles of Association as also of the provisions of Companies Act, two Directors viz, Dr. TT Ram Mohan and Shri GC Murmu, IAS, who are liable to retire by rotation, will retire at this AGM. And Shri GC Murmu, IAS, is proposed to be reappointed as Rotational Director at this AGM.

Your Directors place on record their deep appreciation of the valuable services rendered by the outgoing Directors and take this opportunity to welcome the new Directors.

INFORMATION REGARDING CONSERVATION OF ENERGY, ETC., AND PARTICULARS OF EMPLOYEES

Information required under Section 217(1) (e) of the Companies Act, 1956, read with Rule (2) of the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and information as per Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, are given in Annexure – ''A'' & ''B'' respectively forming part of this report.

AUDITORS AND AUDITORS'' REPORT

In pursuance of the provisions of the Companies Act, 1956, M/s Deloitte Haskins & Sells, Chartered

Accountants, Ahmedabad, who are the Statutory Auditors of the company, hold offi ce up to the conclusion of the forthcoming Annual General Meeting and they are eligible for reappointment.

In terms of the provisions of new Companies Act, 2013, an Ordinary Resolution for reappointment of M/s Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad, as Statutory Auditors of the company to hold offi ce from the conclusion of this AGM until the conclusion of 40th AGM to be held in the year 2016 for a term of two consecutive years and fi xation of their remuneration, has been included in the Notice of this AGM.

Notes to Accounts forming part of Audited Financial Statements are self explanatory and need no further explanation. There are no qualifi cations or adverse remarks in the Auditors'' Report, which require any clarifi cation / explanation.

COST AUDITOR

The Board of Directors has based on recommendation of Audit Committee, appointed Shri Shirish V Diwanji, Cost Accountant of M/s Diwanji & Associates, Vadodara, as the Cost Auditor of the company for fi nancial year 2014-15. In accordance with the provisions of Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Audit & Auditors) Rules, 2014, the remuneration payable to the Cost Auditor is required to be ratifi ed/approved by the shareholders of the company. A suitable Ordinary Resolution in this regard, is included in the Notice of this AGM. The company has e-fi led the Cost Audit Report for the fi nancial year 2012-13 with the Ministry of Corporate Affairs (Cost Audit Branch) on 20/9/2013. The due date of fi ling the said report was 27/9/2013.

INDUSTRIAL RELATIONS

Industrial relations during the year under review have remained extremely cordial and harmonious. Your Directors convey their high sense of appreciation for the contribution made by the employees at all levels.

ACKNOWLEDGEMENTS

The Directors wish to place on record their deep sense of gratitude for the support received from the Government of India and the Government of Gujarat. We take this opportunity of extending our wholehearted thanks to all our Consumers, Dealers, Customers, Banks, Business Associates, SEBI, NSDL, CDSL, Stock Exchanges and other Agencies for their continued support and co-operation. Your Directors are also thankful to the valued Investors for strengthening their bond with the company.

For and on behalf of the Board of Directors,

Place : Gandhinagar Dr. Varesh Sinha Date : 16th August, 2014 Chairman


Mar 31, 2013

To The Members,

The Directors have pleasure in presenting this 37th Annual Report together with Audited Statements of Accounts of the Company for the year ended 31st March, 2013.

The year under review proved to be a challenging year for the Indian economy. Years of lavish spending, a long struggle with high inflation, high interest rates and fragile global economy has put back India in a rut. The slowdown in the rate of growth of services during 2011-12 and particularly in 2012-13 contributed significantly to slowdown in the overall growth of economy, while some slowdown could also be attributed to lower growth in agriculture and industrial activities. As a consequence of this, India''s GDP growth hit decade low of 5%.

In the backdrop of the sluggish economy, the Company performed reasonably well, thanks to buoyancy displayed in chemical business segment.

Year 2012-13 was celebrated as the "Energy Conservation Year" at GNFC. Continuous efforts of your Company towards energy saving, cost control and thus, achieving higher productivity, have resulted in surpassing many milestones during the year in Production, Marketing and Dispatch of Company''s products as well as in terms of the operative parameters.

FINANCIAL RESULTS

Summary of financial results: (Rs. in Crore)

Particulars 2012-13 2011-12

Income from operations 4,252.57 3,862.01

Other Income 40.38 30.09

Total Income 4,292.95 3,892.10

Total Expenditure 3,659.32 3,310.58

Profit before Depreciation,

Finance Cost and Tax 633.63 581.52

Depreciation 148.55 130.53

Finance Cost 62.68 33.59

Profit Before Tax (PBT) 422.40 417.40

Provision for Taxes 149.29 133.56

Net Profit for the year 273.11 283.84

Balance brought forward from previous year 485.02 564.41

Amount available for Appropriation 758.13 848.24

Appropriations

Proposed Dividend 54.40 54.40

Tax on Dividend 9.24 8.82

Transferred to General Reserve 300.00 300.00

Balance carried to Balance Sheet 394.49 485.02



YEAR IN RETROSPECT

Your Company achieved sales turn-over of Rs. 4,252.57 Crore compared to Rs.3,862.01 Crore in the previous Financial Year, registering an increase of 10.11%. The turnover was higher mainly on account of increased volume of production and increased sales realization. Profit Before Tax was higher at Rs.422.40 Crore as against Rs.417.40 Crore of the previous financial year. Profit After Tax was Rs.273.11 Crore as against Rs.283.84 Crore of the previous financial year.

DIVIDEND

Keeping in view the Company''s performance and long term growth strategy, your Directors have recommended a dividend of Rs 3.50 per equity share on 15,54,18,783 equity shares for the year ended 31st March, 2013. The dividend on equity shares is subject to the approval of the shareholders at the Annual General Meeting. On its approval, the dividend payout will work out to Rs.63.64 Crore, including tax on dividend of Rs.9.24 Crore. This amounts to 23.30% of the Net Profit.

APPROPRIATIONS

Your company earned Net Profit of Rs.273.11 Crore for the year 2012-13. After adding thereto Rs.485.02 Crore being the balance of Statement of Profit & Loss brought forward from the previous year, amount available for appropriation is Rs.758.13 Crore. Directors have recommended a Dividend @ 35% for the financial year 2012-13, which will entail payout of Rs. 63.64 Crore, including tax on Dividend. The Company proposes to transfer Rs.300 Crore to General Reserve. An amount of Rs.394.49 Crore is proposed to be retained in the Statement of Profit & Loss.

PERFORMANCE REVIEW

Production

The Company achieved commendable production performance during the year 2012-13. Most plants of the Company were operated at over 100% capacity utilization. Ammonia Plant produced 5,91,861 MT of Ammonia with capacity utilization of 132.85%, Urea Plant produced 7,08,795 MT of Urea with capacity utilization of 111.29%, Formic Acid Plant produced 20,153 MT of Formic Acid with capacity utilization of 201.53%, Acetic Acid Plant produced 1,57,093 MT of Acetic Acid with capacity utilization of 157.09%, Weak Nitric Acid (WNA) Plants produced in aggregate, 3,99,997 MT of WNA with capacity utilization of 115.11%, Ammonium Nitrophosphate Plant (ANP) produced 2,00,895 MT of ANP with capacity utilization of 140.98%, Aniline Plant produced 41,717 MT of Aniline with capacity utilization of 119.19%, Toulene Di-Isocyanate (TDI) Plant produced 17,875 MT of TDI with capacity utilization of 127.68%.

Concentrated Nitric Acid (CNA) plants produced in aggregate 1,08,100 MT of CNA with capacity utilization of 93.19%. Calcium Ammonium Nitrate (CAN) Plant produced 1,06,401 MT of CAN with capacity utilization of 74.67%. Production of CAN was contained to suit the requirement of ANP production/ sale of AN Melt. AN Melt being more remunerative, it was sold directly to the extent possible rather than using the same for producing CAN. Production of WNA and CNA was planned as per the market conditions. Methanol Plants were not operated at their full capacity in view of high cost of production of Methanol coupled with its lower sales realization.

The Government of India encourages production of Neem Coated Urea. During the year, the Company has started production of Neem Coated Urea and has produced 1,00,076 MT of Neem Coated Urea.

Sales

The Company achieved impressive performance in the sale of Fertilizers and Industrial Chemicals. The Company sold in aggregate 11.11 Lac MT of Fertilizers, (both manufactured and traded) during the year. 7.74 Lac MT of Fertilizers constituting 70% of the total sales were sold in the primary marketing zone comprising the Home State Gujarat and the adjoining States - Maharashtra, Madhya Pradesh and Rajasthan. The Company continued the trading activities in imported Urea and Single Super Phosphate. In addition to the manufactured Fertilizers, the Company sold 88,619 MT of imported Urea and 13,014 MT of SSP.

Almost all the Industrial Products performed well in terms of sales and their realization during the year. The Company sold in aggregate 8,59,235 MT of Industrial Products during 2012-13 as against 8,49,761 MT of Industrial Products sold during year 2011-12. The Company exported in aggregate 4,686 MT of Industrial Products registering an increase of 257% over the previous year.

(n)Code Solutions – IT Division

(n)Code Solutions, the IT Division of the Company has continued its growth and expansion in the IT Sector during the year. It achieved the record sales of Rs.79.08 Crore and the record profit by registering 35% growth in profitability based on strong performance of its Digital Signature Certificate (DSC) business and e-Procurement services. It remains market leader in DSC business maintaining about 40% market share. (n)Code has undertaken several initiatives during the year in new business lines such as Cloud Computing, Technology & E-Governance Solutions to realize better growth in the coming years.

STATUS OF PROJECTS

As reported last year, Ethyl Acetate Project, Ammonia Syngas Generation Project (ASGP) and TDI Project at Dahej were under implementation. We are happy to inform you that during the year, Ethyl Acetate Project has been commissioned at a total cost of Rs.124.34 Crore and put into operation. As per the policy of Government of India, ASGP with total investment of Rs.1215.74 Crore is currently under test run.

There has been a time and cost overrun in the implementation of TDI Project undertaken by the Company under its growth plan. We are seriously concerned about the delay in the implementation of this project. As informed earlier, an action plan was chalked out and project team has been reorganized to boost up speedy implementation of TDI Project. With the committed and concerted efforts, the TDI project is expected to be commissioned by end September, 2013.

NEW INITIATIVES

With a view to accelerating its growth momentum, the Company is continuously exploring the potential business opportunities in India and Abroad in the areas having synergy with Company''s existing business operations. Towards this direction, following projects are under consideration by the Company:

Brown field Ammonia-Urea Project

The Government of India (GoI) has recently announced the New Investment Policy, 2012 for Urea. Considering the demand-supply gap of Urea and very high price of imported Urea, GoI is likely to approve 4-5 large Ammonia – Urea Projects in India in near future under the new investment policy. The Company is considering to set up a gas based Brown field Ammonia-Urea Project (BAUP) at Bharuch using some of its existing facilities/ utilities. The Company has expressed its interest to the Department of Fertilizers, GoI for setting-up of BAUP at Bharuch. Implementation of this project is subject to the approval of Department of Fertilizers, GoI.

Ghana - India Fertilizer Project

Government of India and Government of Ghana have agreed to set-up in joint venture, a Natural Gas based Ammonia ~ Urea Project in Ghana. Rashtriya Chemicals & Fertilizers Ltd., (RCF) is acting as a nodal agency of GoI for implementation of the said project. The Company has submitted an Expression of Interest (EoI) to RCF for participating in the equity of Indian joint venture to be formed for the proposed project in consortium with Gujarat State Fertilizers & Chemicals Ltd. (GSFC) and Gujarat Alkalies & Chemicals Ltd. (GACL).

Joint Venture Project with M/s. Jordan Phosphate Mines Company Ltd (JPMC), Jordan

M/s JPMC are supplying Rock Phosphate for Company''s existing Nitrophosphate Complex. The Company is having a long term business relationship with them. The Company is considering to set-up a Phosphoric Acid Project in Joint Venture with M/s JPMC and has signed MoU for setting up the said project. Actions have been initiated for carrying out the pre-feasibility studies of this project.

Poly Aluminium Chloride and Di-Calcium Phosphate Project

TDI Project at Dahej, when commissioned, will generate Hydrochloric Acid (HCl) as by-product. Poly Aluminium Chloride and Di-Calcium Phosphate Project based on the HCl are under active consideration of the Company.

FERTILIZER POLICY

Government of India (GoI) is slowly but steadily pursuing its initiative to transfer subsidy directly to the farmers. GoI is planning to provide Point of Sale (PoS) devices with an inbuilt thermal printer and internet connectivity to retailers. A pilot plan has been planned in six select Districts across the country.

GoI has announced a New Investment Policy to facilitate fresh investments in Urea sector. GoI has notified lower subsidy rates on P&K fertilizers for the current year and also announced lower indicative selling prices for these fertilizers.

Government of India has notified Ammonium Nitrate Rules, 2012 in July, 2012. The said Rules will become effective from 11th January, 2014. Ammonium Nitrate (AN) Melt and Calcium Ammonium Nitrate (CAN) fertilizer manufactured by the Company are under the purview of the said Rules. As per the provisions of the Rules, Licenses will be required for production, storage, transportation, sale and export of both the products.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956, your Directors hereby confirm that -

- in the preparation of the Annual Accounts for the year 2012-13, the applicable Accounting Standards have been followed and there are no material departures;

- they have selected such Accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the profit of the Company for the financial year;

- they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956. They confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

- they have prepared the Annual Accounts on a going concern basis.

CORPORATE GOVERNANCE

As per the requirement of Clause 49 of the Listing Agreement, a Report on Corporate Governance together with the following are attached herewith and form part of this Annual Report:

- Declaration on the Code of Conduct.

- Certificate from the Practicing Company Secretary with regard to company''s compliance with the conditions of Corporate Governance.

MANAGEMENT DISCUSSION & ANALYSIS

Management Discussion & Analysis on the business and operations of the Company is attached herewith and forms part of this Annual Report.

DEMERGER OF V-SAT / ISP GATEWAY BUSINESS

Subsequent to the Order by the Hon''ble High Court of Gujarat sanctioning the Scheme of Arrangement and Demerger for transfer of V-SAT / ISP Gateway Business of the Company to ING Satcom Ltd., an unlisted Company, two separate applications for transfer of V-SAT / ISP Gateway Business Licenses standing in the name of company to the name of transferee company viz., ING Satcom Ltd. have been submitted to the Department of Telecommunications (DoT). The Scheme is subject to and conditional upon the approval of Government Authorities for transfer of Licenses as aforesaid, which is in progress.

FIXED DEPOSITS

The Company has not accepted any Fixed Deposit during the year. No amount on account of principal or interest on Fixed Deposits was outstanding as on the date of Balance Sheet.

INSURANCE

The properties and insurable assets and interest of your Company such as buildings, plant & machinery and stocks amongst others, are adequately insured. As required under Public Liability Insurance Act, 1991, your Company has also taken necessary insurance cover.

DIRECTORATE

Chairman

Dr. Varesh Sinha, IAS, Chief Secretary to Government of Gujarat (GoG) was nominated by GoG as Government Director on the Board vice Shri AK Joti, IAS (Retd.) effective 1st March, 2013. Dr. Sinha has been appointed Chairman of the Company effective 1st March, 2013.

Managing Director :

- Shri AM Tiwari, IAS relinquished the charge of Managing Director effective 2nd May, 2013.

- Dr. Rajiv Kumar Gupta, IAS, assumed the charge of Managing Director of the Company effective 2nd May, 2013.

Change in Directorship

- Shri MM Srivastava, IAS (Retd.) tendered resignation as Director effective 31st July, 2012.

- Dr. Varesh Sinha, IAS, was appointed Director in the casual vacancy caused by the resignation of Shri MM Srivastava, IAS (Retd.) w.e.f. 22.09.2012. He resigned as Director w.e.f. 28.02.2013.

- Dr. Hasmukh Adhia, IAS, has been appointed as an Additional Director effective 25th March, 2013.

- Shri RK Tripathy, IAS (Retd.) tendered resignation as Director effective 7.05.2013.

In terms of the provisions of the Companies Act, 1956, Dr. Hasmukh Adhia, IAS, holds office up to the date of forthcoming Annual General Meeting (AGM) of the Company. The Company has received a Notice in writing from a Member under Section 257 of the Act, along with the requisite deposit proposing his appointment as Director of the Company at the forthcoming AGM.

In pursuance of the provisions of Articles of Association of the Company as also of the provisions of the Companies Act, 1956, S/Shri DC Anjaria and Atanu Chakraborty, IAS retire by rotation at the forthcoming Annual General Meeting and they are eligible for reappointment.

Your Directors place on record their deep appreciation of the valuable services rendered by the outgoing Directors and take this opportunity to welcome the new Directors.

INFORMATION REGARDING CONSERVATION OF ENERGY, ETC., AND PARTICULARS OF EMPLOYEES

Information required under Section 217(1) (e) of the Companies Act, 1956, read with Rule (2) of the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and information as per Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, are given in Annexure – ''A'' & ''B'' respectively forming part of this report.

AUDITORS AND AUDITORS'' REPORT

In pursuance of the provisions of the Companies Act, 1956, M/s Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad, who are the Statutory Auditors of the Company, hold office up to the conclusion of the forthcoming Annual General Meeting and they are eligible for reappointment.

Notes to Accounts forming part of the Audited Financial Statements are self explanatory and need no further explanation. There are no qualifications or adverse remarks in the Auditors'' Report, which require any clarification / explanation.

COST AUDITOR

The Board of Directors has appointed Shri Shirish V Diwanji, Cost Accountant of M/s Diwanji & Associates, Vadodara, as the Cost Auditor of the Company to conduct the Audit of the Cost Accounts in respect of the manufacturing of fertilizers and other related manufacturing activities carried out by the Company for financial year 2013-14 under the Cost Accounting Records (Fertilizer Industry) Rules, 2011.

The Company has e-filed the Cost Audit Report for the financial year 2011-12 with the Ministry of Corporate Affairs (Cost Audit Branch) on 17th December, 2012. The due date of filing the said report was 31st December, 2012.

INDUSTRIAL RELATIONS

Industrial relations during the year under review have remained extremely cordial and harmonious. Your Directors convey their high sense of appreciation for the contribution made by the employees at all levels.

ACKNOWLEDGEMENTS

The Directors wish to place on record their deep sense of gratitude for the support received from the Government of India and the Government of Gujarat. We take this opportunity of extending our wholehearted thanks to all our Consumers, Dealers, Customers, Banks, Business Associates, SEBI, NSDL, CDSL, Stock Exchanges and other Agencies for their continued support and co-operation. Your Directors are also thankful to the valued Investors for strengthening their bond with the Company.



For and on behalf of the Board of Directors,



Place : Gandhinagar Dr.Varesh Sinha

Date : 9th August, 2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting this 36th Annual Report together with Audited Statements of Accounts of the Company for the year ended 31 st March, 2012.

FINANCIAL PERFORMANCE

Summary of financial results: (Rs. in Crore)

Particulars 2011-12 2010-11

Income from Operations 3,862.01 2,845.89

Other Income 30.09 143.56

Total Income 3,892.10 2,989.45

Total Expenditure 3,310.58 2,466.84

Profit before Depreciation, Finance Cost and Tax 581.52 522.61

Depreciation 130.53 121.11

Finance Cost 33.59 20.26

Profit Before Tax (PBT) 417.40 381.24

Provision for Taxes (Net) 133.56 114.71

Net Profit for the year 283.84 266.53

Balance brought forward from previous year 564.41 456.58

Amount available for Appropriation 848.24 723.11

Appropriations

Proposed Dividend 54.40 50.51

Tax on Dividend 8.82 8.19

Transferred to General Reserve 300.00 100.00

Balance carried to Balance Sheet 485.02 564.41

YEAR IN RETROSPECT

Your company achieved a sales turn-over of Rs.3,862.01 Crore compared to Rs.2,845.89 Crore in the previous Financial Year, registering an increase of 35.70%. The turnover was higher mainly on account of increased volume of production and increased sales realization. Profit Before Tax was higher at Rs.417.40 Crore as against Rs.381.24 Crore of the previous financial year, registering an increase of 9.48%. Profit After Tax was also higher at Rs.283.84 Crore as against Rs.266.53 Crore of the previous financial year, registering an increase of 6.49%.

DIVIDEND

The Company is presently implementing CAPEX programmes under its Corporate Plan which will entail substantial expenditure. In order to part finance the CAPEX programmes, it is necessary to retain some profits for generating internal accruals. Keeping in view the Company's performance, need for capital for its Growth Plan and to ensure that the shareholders of the Company get sustained return on their investments, your Directors have recommended a higher dividend @ 35%, for the financial year ended 31st March, 2012 as against 32.5% for the previous financial year ended 31st March, 2011. On its approval, the dividend payout will work out to Rs.63.22 Crore, including tax on dividend of Rs.8.82 Crore. This amounts to 22.27% of the Net Profit.

APPROPRIATIONS

Your company earned Net Profit of Rs.283.84 Crore for the year 2011-12. After adding thereto Rs.564.41 Crore being the balance of Profit & Loss Account brought forward from the previous year, amount available for appropriation is Rs.848.24 Crore. Directors have recommended a Dividend @ 35% for the financial year 2011-12, which will entail payout of Rs.63.22 Crore, including tax on Dividend. The Company proposes to transfer Rs.300 Crore to General Reserve. An amount of Rs.485.02 Crore is proposed to be retained in the Statement of Profit & Loss.

PERFORMANCE REVIEW

The Company has achieved all-round satisfactory performance during the year. Members will be happy to know that during the year under review, three new plants viz. 300 MTD WNA-II, 150 MTD CNA-III and 33 MW CPSU Plants have been commissioned.

Production

The Company achieved impressive production performance during 2011-12. Most plants of the Company were operated at over 100% capacity utilization. Ammonia Plant produced 5,49,502 MTs of Ammonia with capacity utilization of 123.35%, Urea Plant produced 7,01,572 MTs of Urea with capacity utilization of 110.15%, Formic Acid Plant produced 19,656 MTs of Formic Acid with capacity utilization of 196.56%, Acetic Acid Plant produced 1 ,56,023 MTs of Acetic Acid with capacity utilization of 156.02%, Weak Nitric Acid (WNA)-I Plant produced 2,83,504 MTs of WNA with capacity utilization of 114.55%, Ammonium Nitrophosphate Plant (ANP) produced 1,96,394 MTs of ANP with capacity utilization of 137.82%, Aniline Plant produced 39,597 MTs of Aniline with capacity utilization of 113.13%, Toulene Di-Isocyanate (TDI) Plant produced 17,727 MTs of TDI with capacity utilization of 126.62%. Production of Acetic Acid, Formic Acid, Methyl Formate and TDI was adjusted to maximize contribution based on availability of Carbon Monoxide. Production of WNA and CNA was planned as per the market condition. Methanol- I & II Plants were not operated at their full capacity and Methanol Synthesis Unit (MSU) was not operated in view of high cost of production of Methanol coupled with its lower sales realization. Production of Calcium Ammonium Nitrate (CAN) was contained to suit the requirement of ANP production / sale of AN Melt. AN Melt being more remunerative, it was sold directly to the extent possible rather than using the same for producing CAN.

Sales

The Company achieved a commendable performance in the sale of Fertilizers and Industrial Chemicals. The Company sold in aggregate 10.85 Lacs MTs of Fertilizers, (both manufactured and traded) during the year. 7.43 Lacs MTs of Fertilizers constituting 69% of the total sales were sold in the primary marketing zone comprising the Home State Gujarat and the adjoining States - Maharashtra, Madhya Pradesh and Rajasthan. The Company continued the trading activities in imported Urea, imported MOP and SSP. In addition to the manufactured Fertilizers, the Company sold 37,021 MTs of imported Urea, 30,873 MTs of imported MOP and 30,456 MTs of SSP.

The chemical market continued its recovery from the Global meltdown. Almost all the Industrial Products performed well in terms of realization during the year. The Company sold in aggregate 8,49,761 MTs of Industrial Products during financial year 2011-12 vis-a-vis 7,84,592 MTs of Industrial Products sold during financial year 2010-11, registering an increase of 8.31%. The Company during financial year 2011-12 exported in aggregate 1 31 0 MTs of Industrial Products registering an increase of 22.19% over the previous year.

78 new records were established during the year in terms of production, marketing and despatch.

GROWTH STRATEGY

(a) Projects under Corporate Plan

As informed to you last year, of the total 14 projects taken- up for implementation by the Company under its Growth Plan, 8 projects were completed by 2010-11 at a total cost of Rs.432.05 Crore. During the year, three more projects viz. WNA-II, CNA-III and CPSU Projects were completed and commissioned, at a cost of around Rs.596.25 Crore. Wet Sulphuric Acid Project has been abandoned. Remaining two projects viz. TDI Project and Ethyl Acetate Project are under implementation. An action plan was chalked out last year for the speedy implementation of these projects. With the committed and concerted efforts, the TDI project is expected to be mechanically complete by March, 2013 and Ethyl Acetate Project is expected to be mechanically complete by August, 2012.

As per the policy of Government of India, the Company is also implementing Ammonia Plant Feed Stock Conversion Project. This project is scheduled to be commissioned by September, 2012.

(b) New Initiatives :

With a view to accelerating its growth momentum going forward, the Company is continuously looking for opportunities of business avenues in India and abroad.

Formulation of a new Urea Investment Policy by Government of India is in the offing aimed at boosting the production of Urea - India's most widely used Fertilizer. The Company is actively considering setting-up a world scale Ammonia ~ Urea facility.

Major raw materials for Methylene Diphenyl Di-isocyanate (MDI) are Aniline, Formaldehyde, Carbon Monoxide and Chlorine. The Company has the required infrastructure for setting up MDI Project. As such, as a forward integration, the Company is considering putting-up MDI Project. The Company has approached the technology suppliers for tie- up. The Company has also initiated actions for sourcing the technology to take care of the higher requirement of Aniline, which is the main raw material for MDI.

The Company has joined hands with a renowned Engineering Company of India for providing the Project Management Services for relocation of Ammonia ~ Urea Plant from Alaska to Nigeria. The Company has signed an Agreement with M/s Chematur AB, (CEAB) Sweden, to provide commissioning assistance / technical services for CEAB's projects world-wide.

Considering the Company's experience of successfully absorbing technology from variety of sources, its technical personnel are providing commissioning services for TDI, Methanol and other plants in China, Iraq, Myanmar, Iceland, Iran, etc.

The Company is considering to have overseas offices in Middle East, Africa and South East Asia.

(n) Code Solutions - IT Division :

(n) Code Solutions, the IT Division of the Company issued 7,51,194 Digital Signature Certificates during the financial year 2011-12, registering a growth of over 300% over the previous year and completed 23,502 tenders, registering a growth of around 59% over the previous year. (n) Code recorded highest ever sales of Rs.73.10 Crore during 2011-12 registering a growth of 43% over the previous year.

(n) Code won four prestigious awards for its project on Mineral Administration implemented for Commissionerate of Geology and Mining, Government of Gujarat and Department of Mining and Geology, Government of Karnataka.

FERTILIZER POLICY

The primary nutrients viz. Nitrogen (N) Phosphatic (P) Potash (K) and Secondary Nutrient, Sulphur (S) in NPK Fertilizers covered under NBS Policy introduced by the Government of India (GoI) effective 1st April, 2010 shall be eligible for the NBS during 2012-13. GoI has vide its Office Memorandum dated 29.3.2012 announced per kg NBS for nutrients, N, P, K & S for the year 2012-13 with effect from 1st April, 2012. In terms of the said NBS Policy applicable to the Company's product, the Company was free to decide selling price of ANP in the market. Considering the market scenario, the prices of ANP were increased gradually. With the de-regulation of prices of all the Fertilizers, excepting Urea, the market has become very competitive. The Company has been able to benefit from such de-regulation of prices. The Company increased prices of ANP and CAN during the year by taking advantage of its brand equity.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of sub section (2AA) of Section 217 of the Companies Act, 1956, your Directors hereby confirm that -

- in the preparation of the Annual Accounts for the year 2011-12, the applicable Accounting Standards have been followed and there are no material departures;

- they have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 st March, 2012 and of the profit of the Company for the financial year;

- they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956. They confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

- they have prepared the Annual Accounts on a going concern basis.

CORPORATE GOVERNANCE

As per the requirement of Clause 49 of the Listing Agreement, a Report on Corporate Governance together with the following are attached herewith and form part of this Annual Report:

- Declaration on the Code of Conduct.

- Certificate from the Practising Company Secretary with regard to company's compliance with the conditions of Corporate Governance.

MANAGEMENT DISCUSSION & ANALYSIS

Management Discussion & Analysis on the business and operations of the Company is attached herewith and forms part of this Annual Report.

DEMERGER OF V-SAT / ISP GATEWAY BUSINESS

Hon'ble High Court of Gujarat has vide its order dated 15th June, 2012 approved the Scheme of Arrangement and Demerger for transfer of V-SAT / ISP Gateway Business of the Company to ING Satcom Ltd., an unlisted Company. The Scheme of Arrangement and Demerger will become finally effective upon the transfer of Licenses for V-SAT / ISP Gateway Business by the competent authority to the name of ING Satcom Ltd.

FIXED DEPOSITS

The Company has not accepted any Fixed Deposit during the year. No amount on account of principal or interest on Fixed Deposits was outstanding as on the date of Balance Sheet.

INSURANCE

The properties and insurable assets and interest of your Company such as buildings, plant & machinery and stocks amongst others, are adequately insured. As required under Public Liability Insurance Act, 1991, your Company has also taken necessary insurance cover.

DIRECTORS

The position with respect to Board of Directors since the last Annual Report is as follows:

- Shri Atanu Chakraborty, IAS, Director of the Company was appointed to hold the additional charge of Managing Director of the Company during the absence of Shri AM Tiwari, IAS, Managing Director of the Company, on election duty from 11th January, 2012 to 9th March, 2012.

- In terms of the provisions of the Companies Act, 1956, Shri GC Murmu, IAS, holds office up to the date of forthcoming AGM of the Company. The Company has received a Notice in writing from a Member under Section 257 of the Act, along with requisite deposit proposing appointment of Shri GC Murmu as Director of the Company at the forthcoming AGM.

- In pursuance of the provisions of Articles of Association of the Company as also of the provisions of the Companies Act, 1956, S/Shri Dr. Ashok Shah and Dr. TT Ram Mohan retire by rotation at the forthcoming AGM and they are eligible for reappointment.

- Shri MM Srivastava, IAS on reaching superannuation, has retired from the services of Government of Gujarat effective 31st July, 2012. He has tendered his resignation as Director of the Company w.e.f. 31st July, 2012.

INFORMATION REGARDING CONSERVATION OF ENERGY, ETC., AND PARTICULARS OF EMPLOYEES

Information required under Section 217(1) (e) of the Companies Act, 1956, read with Rule (2) of the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and information as per Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time, are given in Annexure - 'A' & 'B' respectively forming part of this report.

AUDITORS AND AUDITORS' REPORT

In pursuance of the provisions of the Companies Act, 1956, M/s Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad, who are the Statutory Auditors of the Company, hold office up to the conclusion of the forthcoming Annual General Meeting and they are eligible for reappointment.

Notes to Accounts forming part of the Audited Financial Statements are self explanatory and need no further explanation. There are no qualifications or adverse remarks in the Auditors' Report, which require any clarification / explanation.

COST AUDITOR

The Board of Directors has appointed Shri Shirish V Diwanji, Cost Accountant of M/s Diwanji & Associates, Vadodara, as the Cost Auditor of the Company to conduct the Audit of the Cost Accounts in respect of the manufacturing of fertilizers and other related manufacturing activities carried out by the Company, for financial year 2012-13 under the Cost Accounting Records (Fertilizer Industry) Rules, 2011.

The Company has e-filed the Cost Audit Report for the financial year 2010-11 with the Ministry of Corporate Affairs, (Cost Audit Branch) on 24th September, 2011. The due date of filing the said report was 27th September, 2011.

INDUSTRIAL RELATIONS

Industrial relations during the year under review have remained extremely cordial and harmonious. Your Directors convey their high sense of appreciation for the contribution made by the employees at all levels. A fresh Long Term Wage Settlement has been entered into with the Employees' Union for the period from 1st July, 2010 to 30th June, 2014 on the expiry of previous settlement.

ACKNOWLEDGEMENTS

The Directors wish to place on record their deep sense of gratitude for the support received from the Government of India and the Government of Gujarat. We take this opportunity of extending our wholehearted thanks to all our Consumers, Dealers, Customers, Banks, Business Associates, SEBI, NSDL, CDSL, Stock Exchanges and other Agencies for their continued support and co-operation. The Directors are also thankful to the valued Investors for strengthening their bond with the Company.

For and on behalf of the Board of Directors,

Place: Gandhinagar A K Joti

Date : 08-08-2012 Chairman

 
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