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Directors Report of Madras Fertilizers Ltd.

Mar 31, 2015

The Shareholders Madras Fertilizers Limited

The Directors have pleasure in presenting herewith the 49th Annual Report together with the Balance Sheet as on March 31, 2015 and the Profit & Loss Statement for the year 2014-15.

SUMMARY OF FINANCIAL RESULTS (Rs. Cr)

2014-15 2013-14

Turnover 1701.87 2593.47

Profit Before Interest, Depreciation, (33.10) 231.00 DRE and Tax

Interest 83.98 82.79

Depreciation 17.61 42.41

Extraordinary items (OTS benefit) - -

Profit/(Loss) Before Tax (134.69) 105.80

Provision for Tax - 5.76

Profit/(Loss) After Tax (134.69) 100.04

Cash Profit / (Loss) (117.08) 142.45

The Company's operations for the year ended with a loss of Rs. 134.69 Cr (Previous Year profit Rs. 100.04 Cr). The total accumulated loss as of 31.3.2015 was Rs.517.14 Cr. (Previous YearRs. 380.72 Cr).

SICKNESS AND REVIVAL

As mentioned in the earlier Annual Reports, the main reasons for the continuous losses and consequent sickness was due to cost and time overrun of revamp of Ammonia and Urea Plants, delay in stabilization of revamped Plants due to Technology related issues, higher energy, poor reliability, lack of maintenance of the existing Plant for want of funds and unfavorable Pricing policies up to March 2009.

The Company's operation became profitable, thereafter, due to amendments in policies and improvement in production performance. The Company shall come out of sickness, once the draft rehabilitation scheme (DRS) is approved by DoF & BIFR and the same is implemented.

DIVIDEND

The Company does not propose to declare any Dividend to shareholders during the Fiscal 2015, as per the Companies (Declaration and Payment of Dividend) Rules, 2014, due to huge accumulated losses (Rs. 517.14 Cr) and negative net worth (Rs. 342.61 Cr) as on March 31,2015.

PLANT PERFORMANCE

During 2014-15, Urea production was 328900 MT (67.6% capacity) with an annual specific energy consumption of 8.086 Gcal/MT. Main reason for the lower production and a higher energy consumption is as follows.

1. CPCL Hydrogen limitation and initial technical problem while restarting the Plant during April 2014.

2. From October 8th 2014 to January 14th 2015 plants were shut down due to Gol policy.

During the year, GOI vide notification dated Apr 02, 2014 has directed to close down the Naphtha based Ammonia, Urea Plants from Jul 01,2014. However, vide notification dated Sep 03,2014 the units were permitted to run up to September 30, 2014. Subsequently, GOI vide notification dated Jan 07,2015 permitted to run Naphtha based Ammonia-Urea Plants for 100 days from the date of notification and hence in MFL Ammonia-Urea Plants, after shutdown for 3 months during Oct to Dec 2014, production was resumed during Jan 2015 and Urea Plant was run upto Apr 16,2015.

With respect to Complex Fertilizers, MFL produced 0.74 lac MT of NPK 17:17:17 during 2014-15. Ammonia was procured from RCF for sustaining NPK Production the quantity procured was 1767.59MT.

GAS CONVERSION

MFL Ammonia Plant is gas compatible with minor modifications in the Front End of the Ammonia Plant and the Basic Engineering Design Package has already been completed by M/s Haldor Topsoe A/S (HTAS), Denmark, MFL Ammonia Plant Process Licensor. The detailed engineering is being carried out by M/s Projects & Development India Ltd. (PDIL) and is in the advanced stage of completion.

Tenders for the major equipment viz., NG Fired Heater, Primary Reformer Burners, NG Preheat Coil, NG fuel preheater, Pipings & other instrument items were floated and under technical evaluation by M/s PDIL and as per PDIL, the project is expected to be completed by 2015.

In the meantime, MFL is exploring all the possibilities of sourcing Natural gas either from IOCL from their proposed Ennore LNG Terminal, which would become operational by the year 2018 or from GAIL through KKMBPL (Kochi-Koottanad-Mangalore- Bangalore pipeline) thru a spur line from Krishnagiri. As per GAIL, this project is likely to be implemented by the year 2017-18.

As per MFL's Board direction, Heads of Agreement (HoA) was signed with IOCL on September 17, 2013, for supply of Gas to MFL.

In the meantime, action has also been initiated to procure RLNG from M/s.LNG Bharat Pvt Ltd, through Cryogenic Road Tankers from its proposed RLNG terminal at Krishnapatnam Port which is 150 Km from MFL Plant.

MARKETING PERFORMANCE Fertilizer Sales

Shutdown of Urea Plant for 3 month period due to GOI policy has resulted into lower production and hence during the year, Company has sold 4.01 lakh MT of fertilizers as compared to 5.45 lakh MT of previous year. The seasonal condition by and large in south India was satisfactory except in Andhra Pradesh and Telangana States wherein the rainfall was around 65% only. The market share of MFL urea was 5.71% in south India during 2014-15.

GOI, in order to optimise Nitrogen use efficiency, is promoting production of Neem Coated Urea for slow release of Nitrogen in the soil. There was a cap of 35% of production capacity for Neem Coated Urea so far and during Jan 2015 the GOI announced removal of the cap and 75% production capacity to produce Neem Coated Urea is made mandatory. During the year, MFL commenced production of Neem Coated Urea and sold 967 MT in the market and production of this value added urea would be enhanced in the coming years per GOI directives for optimising urea application with a vision to increase food grains productivity towards achieving food security.

Efforts for streamlining logistics operations on cost effective basis continued this year also and 89% of the products were directly delivered to the dealers.

Cash sales through RTGS payment accounted for 94.5% of total sales and 99% of the cheques got realised within seven days. There has not been a single case of Bad Debt for this year also.

Agrochemicals, Bio-fertilizers & Organic Manure Rs. 197.37 lakh of Eco - friendly Neem based agrochemical was traded during the year as against Rs. 194.47 lakh for previous year.

The Company has sold 349 MT of Biofertilizers during the year as against 147 MT for the previous year. There was an increase of 137% sales against previous year.

Under Basket Approach, the Company has also sold 5432 MT of Organic Manure during the year in Tamil Nadu, Pondicherry, Karnataka, Andhra Pradesh and Kerala States against 8,898 MT sold during last year. The short fall in sales was due to the repeated purchases from farmers were not forthcoming since this eco - friendly product is recently introduced to enrich soil fertility and awareness has been picking up in slow phase. - Intense promotional programmes are planned in the coming years to promote eco - friendly products like Organic Manure, City compost, Neem Pesticides, etc., in a larger way to develop and sustain the eco - friendly agriculture environment.

MARKET DEVELOPMENT & AGRO-SERVICE PROGRAMS

MFL's Marketing personnel have contacted 33602 farmers during the year and educated them about the package and practices of cultivation of major crops, soil health techniques and optimum usage of chemical fertilizers, bio-fertilizers and Neem products to enhance soil fertility and food grains productivity for consequent growth in economy.

Under corporate social responsibility to farming community, the Marketing personnel had collected 5658 Soil samples, analysed and communicated the micro & macro nutrient recommendations of various crops to farmers during the year.

PUBLIC DEPOSIT

There are no Public Deposits with the Company.

ISO 9001/14001

CMD has approved the annual Quality / Environment objectives for all the functional areas and the same has been communicated to the respective functional area for compliance during the year 2014-15

MFL has obtained EMS (IS014001:2004) Renewal Certification for three years effective Jun 1,2014 upto May 31,2017 from M/s Indian Register Quality. Systems (IRQS), our certifying body 1st surveillance Audit for QMS (ISO 9001:2008) has been conducted by IRQS on 30th October 2014 at Head office Manali and October 28,2014 at Vellore and Bangalore regional offices.

Internal Audit on QMS and EMS was conducted during Feb - 2015 which was essential for conducting the Surveillance Audit which took place during first week of April - 2015.

MEMORANDUM OF UNDERSTANDING

The Company entered into MOU with Department of Fertilizers (DOF), Government of India for the year 2015-16 on March 30, 2015 setting up targets for performance of the Company in terms of static and dynamic parameters.

VIGILANCE

ACTIVITIES AND ACHIEVEMENTS OF VIGILANCE DEPARTMENT DURING 2014-15

- Complaints received were attended and reports submitted as per Complaints Handling Policy of the Company / Central Vigilance Commission (CVC) guidelines.

- Continuously monitoring the progress of Disciplinary Proceedings in respect of vigilance cases for timely completion.

- Agreed List of Suspected Officers and List of Officers of Doubtful Integrity were finalised and sent to DoF.

- Annual Property Returns of Officers were scrutinized as per CVC guidelines.

- Rotation of Officers in sensitive posts effected as per CVC guidelines.

- Vigilance activities for the year 2014-15 were reviewed by the Board of Directors in the 276th Meeting held on Nov. 11,2014.

- As per the Central Vigilance Commission's requirement, CVO had one Structured Meeting with the CMD, MFL on July 1, 2014 at MFL Chennai, and pending issues were discussed threadbare and suggestions given to the Management.

- For easy reference, CVC Guidelines / Circulars on Tenders are made available in MFL's Online Integrated System (OL1S).

- CVC guidelines on Tenders and disciplinary proceedings and other matters as and when received were communicated to Management for necessary action,

- Tenders with estimated value more than Rs.2 lacs are being published in Central Public Procurement Portal (CPPP).

- For all Tenders with value more than Rs.5 lacs, e-Tendering method is being followed.

- Vigilance Awareness Week (VAW) 2014 was observed between Oct 27, 2014 and Nov 1, 2014 as advised by CVC. The following are the highlights:

1. CMD administered Vigilance Awareness Pledge on October 27, 2014 at 11 a.m. to mark the commencement of VAW 2014.

2. On Oct 28,2014, a Guest Lecture was organised on the topic 'Dharma and Vigilance' which was delivered by Shri C L Ramakrishnan, retired IPS Officer.

3. Slogan contest in English, Hindi and Tamil on Greed and Corruption was organised in which MFL employees participated.

4. Similarly, an Essay Competition on the theme "Combating Corruption - Technology as an Enabler" was organised for MFL employees as well as for the Students of two neighbouring schools.

5. In a function held on Nov 26, 2014, CMD presented Prizes and Certificates to the Winners of the Slogan / Essay competitions held in connection with VAW 2014 observed from Oct 27 - Nov 1,2014.

HUMAN RELATIONS AND INDUSTRIAL RELATIONS MANPOWERS TRAINING

The total strength of MFL as on 31.03.2015 is 693 as against 734 as on 31.03.2014. 436 employees have been trained during the period Apr 2014 - Mar 2015 on Technical, Soft and Life skills for the enduring benefit and development of the Organisation.

INDUSTRIAL RELATIONS

During the year, the overall Industrial Relation situation in the Company has been normal and cordial.

OFFICIAL LANGUAGE IMPLEMENTATION

MFL has been continuously exceeding the target fixed by Department of Official Language for letter correspondence in Hindi and other implementation programs. Hindi Fortnight was celebrated at Head Office and Regional- Offices. Various competitions were organized and prizes were distributed.

SC / ST WELFARE ACTIVITIES

The Presidential Directives and various guidelines issued by the Government of India from time to time relating to the welfare of SC / ST employees are being scrupulously followed. A Liaison Officer for SC / ST at DGM level ensures implementation of Government Directives. MFL is constantly reviewing the vacancies reserved for SC / ST and is taking concerted efforts to fill up those vacancies.

Lumpsum contribution of Rs. 30000/- per year for celebration of Dr. Ambedkar's Jayanthi was sanctioned.

Two computers were provided to Thiruvottiyur Municipality High School and three computers to Panchayat Union Primary School where downtrodden community students are studying.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate and Social Responsibility Policy) Rules, 2014 your Company has updated the CSR Policy which was already approved by the Board at the Board meeting held on 05.11.2013.

As a part of the CSR initiatives, your Company during the financial year 2014-15 has among the other initiatives, undertaken the following projects:

Construction of Toilet in Panchayat Union Primary School (PUPS), Ariyalur, Puzhal Block, Thiruvallur District, Tamil Nadu, at an estimated cost of Rs. 2.5 lacs is under progress.

Regular supply of potable water through pipelines from MFL to Harikrishnapuram (Manali), a neighbourhood village (around 500 families) is ensured.

INVESTOR RELATIONS CELL (IRC)

IRC is functioning in the Company under the Chief Financial Officer (General Manager-F&A) & Company Secretary with members from various Groups to create awareness of the Company's strength and ensuring timely communication to shareholders.

DIRECTORS

Government of India have appointed Shri Heera Lai Samariya, IAS, Undersecretary, Department of Fertilizers, as GOI Nominee Director in MFL Board in place of Shri K M Gupta, IES, effective April 27,2015.

The Board placed on record the valuable and outstanding contribution made by the outgoing Director Shri K M Gupta, IES during his tenure as Director on the Board for the substantial and sustainable development of the Company.

AUDITORS

The Comptroller & Auditor General of India have appointed M/s B Thiagarajan & Co, Chartered Accountants, Chennai as Statutory Auditors of the Company for the year 2014-15.

STATUTORY INFORMATION

Particulars of Employees and Related Disclosures

In terms of the provisions of Section 197 (12) of the Companies Act 2013 read with Rules 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, it is stated that No employee of your Company was in receipt of remuneration for any part of the year at a rate which is more than Rs.5 iacs per month.

Energy, Technology & Foreign Exchange

The data on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo in accordance with the provisions of Section 134 of Companies Act 2013 are given in the Annexure-I forming part of this report.

Directors' Responsibility Statement

Directors' Responsibility Statement as required under Section 134 of Companies Act 2013 is furnished in Annexure-ll forming part of this report.

Management Discussion and Analysis Report

Management Discussion and Analysis Report, as required under Listing Agreement is enclosed as Annexure-lll forming part of this report.

Corporate Governance

Your Company is fully compliant with the Corporate Governance guidelines, as laid out in Clause 49 of the Listing Agreement. Certificate received from the Auditors of the Company regarding compliance of Corporate Governance guidelines of SEBI as required under Listing Agreement is enclosed as Annexure IV' forming part of the report.

Code of Conduct

Declaration affirming compliance with the code of conduct pursuant to clause 49 of the Listing Agreement is enclosed as Annexure V forming part of this report.

Extract of Annual Return

As provided under Section 92 (3) of the Companies Act, 2013 the details forming part of extract of the Annual* Return in form MGT 9 is enclosed as Annexure VI.

Secretarial Audit

In terms of the provisions of Section 204 of the Companies Act, 2013 and Rules framed thereunder, a Secretarial Report in the prescribed format, obtained from a Company Secretary in practice, is required to be annexed to the Board's Report. In view thereof, your Board at its meeting held on November 11, 2014 appointed Mr V Esaki (CP 11022), No.47 VOC Nagar, Nehru Street, Anna Nagar East, Chennai 600 102 as the Secretarial Auditor of your Company. The Secretarial Auditors' Report for the fiscal 2015 is enclosed as Annexure VII.

APPRECIATION

Your Directors wholeheartedly place on record their appreciation for the continued and unstinted support of Government of India, Department of Fertilizers, Government of Tamilnadu, NICO, Financial Institutions, Banks, and all stakeholders during the year. It is most appropriate to mention that the Directors convey their gratitude to the Department of Fertilizers for settlement of subsidy bills on priority basis and to the dealers and farmers for their sustained support to Vijay products. Last but not the least that your Directors also place on record their appreciation for the dedication, commitment and sincere services rendered by the employees for sustained improvements.

By order of the Board

Chennai Dr I Vijayakumar

August 10, 2015 Chairman & Managing Director


Mar 31, 2014

The Shareholders Madras Fertilizers Limited

The Directors have pleasure in presenting herewith the 48th Annual Report together with the Balance Sheet as on March 31, 2014 and the Profit & Loss Statement for the year 2013-14.

SUMMARY OF FINANCIAL RESULTS

(Rs. Cr)

2013-14 2012-13

Turnover 2593.47 2346.29

Profit Before Interest, Depreciation, 231.00 139.78 DRE and Tax

Interest 82.79 73.61

Depreciation 42.41 41.73

Extraordinary items (OTS benefit) - -

Profit / (Loss) Before Tax 105.80 24.44

Provision for Tax 5.76 -

Profit / (Loss) After Tax 100.04 24.44

Cash Profit / (Loss) 142.45 66.17

The Company''s operations for the year ended with a Profit of Rs. 100.04 Cr (Previous Year Rs. 24.44 Cr). The total accumulated loss as of 31.3.2014 was Rs. 380.72 Cr. (Previous Year Rs. 480.76 Cr).

SICKNESS AND REVIVAL

As mentioned in the earlier Annual Reports, the main reasons for the continuous losses and consequent sickness was due to cost and time overrun of revamp of Ammonia and Urea Plants, delay in stabilization of revamped Plants due to Technology related issues, higher energy, poor reliability, lack of maintenance of the existing Plant for want of funds and unfavorable Pricing policies up to March 2009.

The Company''s operation became Profitable, thereafter, due to amendments in policies and improvement in production performance. The Company shall come out of sickness, once the draft rehabilitation scheme (DRS) is approved by DoF & BIFR and implemented.

DIVIDEND

Despite earning Profit during the year, Company could not pay Dividend to shareholders due to huge accumulated losses (Rs..380.72 Cr) and negative net worth (Rs..206.19 Cr) as on March 31, 2014.

PLANT PERFORMANCE

During 2013-14, Urea production has reached an all time high of 486750 MT (100% capacity) with all time low energy consumption of 7.386 Gcal/MT. Main reason for the all time best production combined with lowest energy is the consistent run of Plants coupled with process trimmings. It is also the outcome of Plan Schemes and preventive maintenance jobs carried during the previous year. Further the Urea production has crossed day''s installed capacity (1475 MT) on 284 days.

With respect to Complex fertilizers, MFL produced only 44860 MT of NPK 17-17-17 during 2013-14 compared to 100125 MT during 2012-13 due to the following:

Under NBS Policy, the additional compensation for complex fertilizers (17-17-17 & 20-20-0-13) by using costlier "N" from captive ammonia with Naphtha as feed stock was given to MFL upto March 2012 only. Effective April 2012 the same has not been given. So, MFL had to necessarily curtail the production of NPK so as to avoid substantial loss.

In addition to that under NBS, the subsidy for the nutrients N,P,K and S has been reduced from 1.4.2012 and again from 1.4.2013 which has rendered the manufacture of above NPK grades unviable.

GAS CONVERSION

MFL Ammonia Plant is gas compatible with minor modifi cations in the Front End of the Ammonia Plant and the Basic Engineering Design Package has already been completed by M/s Haldor Topsoe A/S (HTAS), Denmark, MFL Ammonia Plant Process Licensor. The detailed engineering is being carried out by M/s Projects & Development India Ltd. (PDIL) and is in the advanced stage of completion.

Tenders for the major equipment viz., NG fi red heater, Primary Reformer Burners, NG Preheat Coil, NG fuel preheater, Pipings & other instrument items were fl oated and under technical evaluation by M/s PDIL and as per PDIL, the project is expected to be completed by February 2015.

In the meantime, MFL is exploring all the possibilities of sourcing Natural gas either from IOCL from their proposed Ennore LNG Terminal, which would become operational by the year 2017 or from GAIL through KKMBPL (Kochi-Koottanad-Mangalore- Bangalore pipeline) thru a spur line from Krishnagiri. As per GAIL, this project is likely to be implemented by the year 2017-18.

As per MFL''s Board direction, Heads of Agreement (HoA) was signed with IOCL on September 17, 2013, for supply of Natural Gas to MFL.

MARKETING PERFORMANCE

Fertilizer Sales

During the year, Company has sold 5.45 lakh MT of fertilizers as compared to 5.26 lakh MT last year. Considering the adverse seasonal conditions in Tamilnadu and parts of South India as well cut-throat competition in the market, this achievement is commendable. Out of 5.45 lakh MT of total fertilizers sold, Urea alone contributed for 5.00 lakh MT which is the highest sales since inception (previous best V.Urea sales is 4.99 lakh MT). The market share of MFL Urea is 8.34% in South India during 2013-14.

Efforts for streamlining logistics operations on cost effective basis continued this year also and 87% of the products were directly delivered to the dealers.

Cash sales through RTGS payment accounted for 98.8% of total sales and 99% of the cheques got realised within seven days. There has not been a single case of Bad Debt for this year also.

Agrochemicals, Bio-fertilizers & Organic Manure

Rs. 194.47 lakhs environment friendly neem based Agrochemicals were traded during the year as against Rs. 145.93 lakhs during the last year.

The Company sold 147 MT of Bio-fertilizers during the year as against 378 MT during last year.

The Company also sold 8,898 MT of Organic Manure based on Poultry Waste during the year as against 3,827 MT during last year in Tamil Nadu & Karnataka.

MARKET DEVELOPMENT & AGRO-SERVICE PROGRAMS

MFL''s Marketing personnel have contacted 33611 farmers during the year and educated them about the package and practices of cultivation of major crops / soil health techniques and optimum usage of chemical fertilizers, bio-fertilizers and neem products.

As a service to farming community, the Company has collected 5571 Soil samples, analysed and sent the micro & macro nutrient recommendations for various crops to farmers during the year.

PUBLIC DEPOSIT

There are no Public Deposits with the Company.

ISO 9001 / 14001

Renewal certifi cation audit for ISO 9001:2008 (QMS) was conducted by IRQS during December 2-3, 2013. IRQS have renewed the QMS certifi cation for ISO 9001:2008 for MFL for next three years and issued the Certifi cate on 30th December 2013.

Internal Audit - 18 for QMS & EMS were conducted at Regional Offi ces and Head Offi ce during the period from February 11 to 21, 2014.

MEMORANDUM OF UNDERSTANDING

The Company entered into MOU with Department of Fertilizers (DOF), Government of India for the year 2014-15 on March 24, 2014 setting up targets for performance of the Company in terms of static and dynamic parameters.

VIGILANCE

ACTIVITIES AND ACHIEVEMENTS OF VIGILANCE DEPARTMENT DURING 2013-14

- Complaints received were attended and reports submitted as per Complaints Handling Policy of the Company / Central Vigilance Commission (CVC) guidelines.

- Continuously monitoring the progress of Disciplinary Proceedings in respect of vigilance cases for timely completion.

- Agreed List of suspected Offi cers and List of Offi cers of Doubtful Integrity were fi nalised and sent to DOF.

- CVC guidelines on Tenders and disciplinary proceedings and other matters as and when received were communicated to Management for necessary action.

- Vigilance activities for the year 2012-13 were reviewed by the Board of Directors in the 268th Meeting held on July 29, 2013.

- As per the Central Vigilance Commission''s requirement, CVO had two Structured meeting with the CMD, MFL and pending issues were discussed threadbare and suggestions given to the Management.

- CVO attended the Review Meeting convened by the Secretary, DOF on 27.08.2013 in New Delhi.

- Tenders with estimated value more than Rs. 2 lacs are being published in Central Public Procurement Portal (CPPP).

- For all Tenders with value more than Rs. 5 lacs, e-Tendering method is being followed.

- Annual Property Returns of Offi cers were scrutinized as per CVC guidelines.

- Rotation of Offi cers in sensitive posts effected as per CVC guidelines.

- For easy reference, CVC Guidelines / Circulars on Tenders were uploaded in MFL''s Online Integrated System (OLIS).

- Vigilance Awareness Week was observed between Oct 28, 2013 and Nov 2, 2013 as advised by CVC. During the week, Guest Lectures were arranged on the following topics :

a) "Vigilance Aspects" by Shri D P Naidu, I.R.S, CVO, CPCL on Oct 28, 2013.

b) "Promoting Good Governance - positive contribution of Vigilance" by Shri M Dandayudhapani, I.O.F.S, Director in Armoured Vehicles Head Quarters, Avadi (Ex-CVO, Chennai Port Trust) on Oct 29, 2013.

c) "Disciplinary Proceedings" by Shri N Murali Krishna, I.T.S., CVO, MFL, on Oct 30, 2013.

d) "Vigilance Awareness / Participative Vigilance" by Dr C L Ramakrishnan, I.PS (Retd.), former DGP of DVAC, Government of Tamilnadu on Oct 31, 2013.

Besides the above programmes, Essay Competition on

"Role of Youth in Transforming India into a Corruption Free Country" was held for the students of St Thomas Matriculation Higher Secondary School, Manali, Chennai - 600 068. Essay / Slogan Competitions were held for the employees of MFL. Prizes were distributed to the winners of the above competitions on Nov 6, 2013 by CMD, MFL. Hand out detailing the Do''s and Don''ts in Tendering was brought out during the occasion

- Two Vigilance Offi cials attended a week long Training Program at CBI-Academy, Ghaziabad during November 2013.

HUMAN RELATIONS AND INDUSTRIAL RELATIONS

MANPOWER & TRAINING

The total strength of MFL as on 31.03.2014 is 734 as against 773 as on 31.03.2013. 900 Nos. of Training Programs have been conducted on behavioural & technical subjects to derive enduring benefit, during the period from April 2013 to March 2014.

INDUSTRIAL RELATIONS

During the year, the overall Industrial Relation situation in the Company has been normal and cordial.

OFFICIAL LANGUAGE IMPLEMENTATION

MFL has been continuously exceeding the target fixed by Department of Offi cial Language for letter correspondence in Hindi and other implementation programs. Hindi Fortnight was celebrated at Head Offi ce and Regional Offi ces. Various competitions were organized and prizes were distributed.

SC / ST WELFARE ACTIVITIES

13 SC Contract Labourers working with our existing Janitorial contract have been appointed as Plant Attendant Trainees. On completion of 2 years of training, they will be absorbed in Grade I position. During the fi rst year of training period, they will be paid with a consolidated amount of Rs.15,000/- p.m and second year of training period, they will be paid with a consolidated amount of Rs.16,500/- p.m.

GM - P&A''s position falls under SC point under direct recruitment. Per recruitment Policy, GM - P&A was appointed and confi rmed in E8 Scale of Pay.

Recasting of roster effective July 02, 1997 was completed during April 2013. 27 SC employees benefited due to recasting of roster, by way of promotion / pre-ponement of promotions.

CORPORATE SOCIAL RESPONSIBILITY

MFL ensures regular supply of potable water through pipelines for around 500 families from MFL Plant to Harikrishnapuram (Manali), a neighbourhood village.

A contribution of Rs. 50 lac was made to Gramin Vikas Trust, Odisha towards Relief and Rehabilitation activities in the fl ood affected area at Odisha.

Rs. 25,000/- was contributed to Prime Minister''s Relief fund for Relief and Rehabilitation activities in the fl ood affected area of Uttrakhand.

A sum of Rs. 30,000/- was spent for Celebration of Dr. Ambedkar Jayanthi, by MFL SC / ST Employees Welfare Association, MFL, Manali, Tamil Nadu.

INVESTOR RELATIONS CELL (IRC)

IRC is functioning in the Company under the Chief Financial Offi cer (General Manager-F&A) with members from various Groups to create awareness of the Company''s strength and ensuring timely communication to shareholders.

DIRECTORS

Government of India have appointed the following GOI Nominee Directors in MFL Board :- a) Shri K M Gupta, IES, Economic Advisor, Department of Fertilizers in place of Shri V K Subburaj, IAS, effective May 01, 2014; and

b) Shri Rajiv Yadav, IAS, Additional Secretary and Financial Advisor, Department of Fertilizers, in place of Shri Satish Chandra, IAS, effective July 03, 2014.

The Board placed on record the valuable and outstanding contribution made by the outgoing Directors Shri V K Subburaj, IAS and Shri Satish Chandra, IAS during their tenure as Directors on the Board for the substantial and sustainable development of the Company.

AUDITORS

The Comptroller & Auditor General of India have appointed M/s B Thiagarajan & Co, Chartered Accountants, Chennai as Statutory Auditors of the Company for the year 2013-14.

STATUTORY INFORMATION

No employee was in receipt of remuneration for any part of the year at a rate which is more than Rs. 5 lacs per month as provided under Section 134 of Companies Act 2013.

The data on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo in accordance with the provisions of Section 134 of Companies Act 2013 are given in the Annexure-I forming part of this report.

Directors'' Responsibility Statement as required under Section 134 of Companies Act 2013 is furnished in Annexure-II forming part of this report.

Management Discussion and Analysis Report, as required under Listing Agreement is enclosed as Annexure-III forming part of this report.

Certifi cate received from the Auditors of the Company regarding compliance of Corporate Governance guidelines of SEBI as required under Listing Agreement is enclosed as Annexure IV forming part of the report.

Declaration affi rming compliance with the code of conduct pursuant to clause 49 of the Listing Agreement is enclosed as Annexure V forming part of this report.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required by Section 217 (2AA) of the Companies Act, 1956 (Section 134 of Companies Act, 2013) with respect to the Directors'' Responsibility Statement it is here by confi rmed that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures there-from;

- the Board had selected such accounting policies, consulted the Statutory Auditors and have 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 at the end of the fi nancial year and of the Profit and loss of the company for that year;

- the Board had 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, 2013, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- the Board had prepared the annual accounts on a going concern basis.

- the Board had laid down internal fi nancial control to be followed by the Company and that such internal fi nancial controls are adequate and were operating effectively.

- the Board had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

APPRECIATION

Your Directors wholeheartedly place on record their appreciation for the continued and unstinted support of Government of India, Department of Fertilizers, Government of Tamilnadu, NICO, Financial Institutions, Banks, Depositors and all stakeholders during the year. It is most appropriate to mention that the Directors convey their gratitude to the Department of Fertilizers for settlement of subsidy bills on priority basis and to the dealers and farmers for their sustained support to Vijay products. Last but not the least that your Directors also place on record their appreciation for the dedication, commitment and sincere services rendered by the employees for sustained improvements.

By order of the Board

Chennai Dr I Vijayakumar

July 30, 2014 Chairman & Managing Director


Mar 31, 2013

The Shareholders Madras Fertilizers Limited

The Directors have pleasure in presenting herewith the 47th Annual Report together with the Balance Sheet as on March 31, 2013 and the Profit & Loss Statement for the year 2012-13.

SUMMARY OF FINANCIAL RESULTS

(Rs.Cr)

2012-13 2011-12

Turnover 2346.29 2207.77

Profit Before Interest, Depreciation,

DRE and Tax 139.78 211.02

Interest 73.61 60.00

Depreciation 41.73 40.34

Extraordinary items (OTS benefit) - 1.31

Profit/(Loss) Before Tax 24.44 111.99

Provision for Tax - -

Profit/(Loss) After Tax 24.44 111.99

Cash Profit/(Loss) 66.17 152,33



The Company''s operations for the year ended with a profit of Rs. 24.44 Cr (Previous Year Rs. 111.99 Cr). The total accumulated loss as of 31.3.2013 was Rs. 480.76 Cr (Previous year Rs. 505.20 Cr)

SICKNESS AND REVIVAL

In continuation of the last year Annual Report,

i) A fully tied up Draft Rehabilitation Scheme was submitted to DoFandBIFR.

ii) Further hearings took place on 27.08.2012, 05.12.2012, 26.02.2013, and 01.07.2013.

iii) Inter-ministerial comments have been received

iv) DoF is in the process of submitting a final proposal to BRPSE and then move to Cabinet depending on BRPSE recommendations.

v) First Charge in favour of SBI in lieu of the existing second charge on all immovable properties at Manali was approved by BIFR.

The next hearing is fixed on 18.09.2013.

REASONS FOR SICKNESS

As mentioned in earlier Annual Reports, the main reason for the continuous losses and consequent sickness was due to the cost and time overrun of revamp of Ammonia and Urea Plats, delay in stabilization of revamped Plants due to Technology related issues, higher energy, poor reliability, lack of maintenance for want of funds and unfavourable Pricing policies upto March 2009.

Thereafter, the Company''s operations became profitable due to amendments in policies and increased quantum of Plan loans to maintain the Plants adequately. Once the Draft Rehabilitation Scheme is approved and implemented, the Company shall come out of sickness.

DIVIDEND

Company could not pay dividend to the shareholders due to huge accumulated losses and negative networth as on March 31,2013.

PLANT PERFORMANCE

During 2012-13, Urea production was 4,35,771 MT (89.5% capacity) with an annual specific energy consumption of 7.822 Gcal/MT. Main reason for the lower production and a higher energy consumption is that there were two Turnarounds (TAR) viz., Apr-May 2012 and Feb- Mar 2013. During these months, exhaustive maintenance jobs were carried out to improve Productivity, Energy Efficiency & to address Pollution Control related aspects. The second Turnaround during the end of the year was in fact an advancement of the planned shutdown during Apr 2013 (FY 2013-14) under forced circumstances - unexpected equipment problem with potential for environment related issues. Plant has started reaping the benefits out of the maintenance jobs carried out during the advanced shutdown on startup from the last week of Mar 2013.

With respect to Complex Fertilizers, MFL produced 1,00,125 MT of NPK 17:17:17 during 2012-13 registering an increase of 179% over the previous year production.

Salient Features of Plant during 2012-13

- During Annual Turnaround 2012, Ammonia Converter S 200 Catalyst along with Basket was renewed after 21 years of service, which was a major achievement.

- Continuous Ambient Air Quality Monitoring Station (CAAQMS)

MFL installed one CAAQMS on 17th May 2012. The parameters analyzed are S02, NOx, PM -10, PM-2.5, 03 and CO. This is a statutory requirement stipulated by TNPCBd.

- Demineralization Plant (DM)

The New DM Plant''s, operating system has been switched over to Distributed Control System (DCS) as in Ammonia and Urea Plants, on 17th May 2012

- Urea production exceeded the day''s installed capacity on 225 days during the year.

- Turnaround during 2013

Refrigeration Compressor HP Case Seal leak and tube leaks in Inter-stage Coolers of Syngas Compressor and Process Air Compressor and deterioration of Cooling Water system were attended to.

Statutory Annual Inspection of Boilers were carried out in Feb 2013 availing the shutdown opportunity.

Post-Turnaround Performance

- The lowest specific energy consumption was 9.364 Gcal/ MT Ammonia (Design: 9.461 Gcal) & 6.818 Gcal/MT Urea (Derived design: 7.004 Gcal) on Mar 31, 2013, the average being 9.433 Gcal/MT & 6.882 Gcal/MT respectively during Mar 26-31,2013.

GAS CONVERSION

MFL Ammonia Plant was revamped in 1997 and during that time itself, the Plant was designed to be gas compatible with minor modifications in the Front end of the Ammonia Plant

Feasibility Report and Basic Engineering Design Package (BEDP) has been completed by M/s. HTAS, Denmark. Project is being executed through PDIL (Engineering Consultant) and is expected to be completed in Jan 2014, subject to delivery of equipment at site. Major equipment enquiry has been floated by M/s PDIL and offers were received from the Vendors and Technical Evaluation is in progress. The Tie-in points were identified by PDIL & MFL

It is proposed to take up Shut down of Ammonia plant during January 2014 for execution of the project and commencement of trial production is expected in February 2014.

MARKETING PERFORMANCE Fertilizer Sales

Company has sold 5.26 lakh MT of fertilizers during the year (previous year 5.33 lakh MT) Considering the adverse seasonaf conditions throughout South India, this achievement is commendable taking into consideration of competitors sales. The market share of Urea is maintained at 9% in South India.

Efforts for streamlining logistics operations on cost effective basis continued this year also and 93% of the products were directly delivered to the dealers.

Cash sales were 96.5% of total sales and 99.8% of the cheques got realised within seven days. During this year also, there were no bad debts.

Agrochemicals, Biofertilizers & Organic Manure

Rs. 1.46 Cr environment friendly neem based Agrochemicals were traded during the year (previous year Rs. 1.81 Cr).

The Company sold 378 MT of Bio-fertilizers during the year (Previous year 481 MT).

The Company also sold 3,827 MT of Organic Manure during the year (Previous year 3,630 MT).

MARKET DEVELOPMENT & AGRO-SERVICE PROGRAMS

Marketing Department contacted 35,514 farmers during the year and educated them about the package and.practices of cultivation of major crops / soil health techniques and optimum usage of chemical fertilizers, bio-fertilizers and neem pesticides.

As a service to farming community, the Company has collected 5,501 soil samples, analysed and sent the micro & macro nutrient recommendations for various crops to the farmers during the year.

Collection of Old Dues

An amount of Rs. 30.90 lakhs has been collected from old dishonour cases and the Company is taking all out efforts to optimise the collection.

PUBLIC DEPOSIT

There are no Public Deposits with the Company.

ISO 9001 /14001

Second Surveillance Audit on Quality Management System (ISO 9001:2008) was conducted during Nov 7-8, 2012 and continuance of certification has been approved by External Agency.

First Surveillance Audit on Environment Management System (ISO 14001:2004) for which the audit was conducted during Jun 20-21,2012 and continuance of certification has been approved by External Agency.

MEMORANDUM OF UNDERSTANDING

The Company entered into MOU with Department of Fertilizers (DOF), Government of India for the year 2013-14 on March 21, 2013 setting up targets for performance of the Company in terms of production, sales and other parameters.

VIGILANCE

- Complaints received were attended and reports submitted as per Complaints Handling Policy of the Company / CVC guidelines.

- All disciplinary proceedings in respect of vigilance cases have been completed.

- Property Returns of Officers were scrutinized as per CVC guidelines.

- Rotation of Officers in sensitive posts effected as per CVC guidelines.

- Dishonour of cheques by dealers and collections thereon were monitored periodically to prevent losses to the Company.

- CVC guidelines on tenders and disciplinary proceedings and other matters as and when received, were communicated to Management for necessary action.

- System improvements for preventing losses were suggested to the Management for implementation-, contributing to the Company''s revenues

- As part of Leveraging technology, MFL has already implemented the e-Payment system by making all payments thru Electronic Clearing System (ECS). Effective January 2013, MFL has introduced the e-Receipt system for all Receipts from Dealers and Marketers. MFL has also commenced e-Procurement and e-Sale operations. A separate sub-menu has been created for Vigilance in MFL website wherein the contact details of all the Vigilance officials have been incorporated for registering complaints.

- Vigilance Awareness Week -with the theme of ''Transparency in Public Procurement'' - was observed during Oct/Nov 2012. As part of this, Vigilance arranged a guest lecture on Preventive Vigilance by Shri. N. Sankaran, IRS, Commissioner of Income Tax, Chennai, to line Managers of MFL. Chief Vigilance Officer had an interactive session with the top executives on all Vigilance related matters.

- As advised by DPE on ''Corporate Governance'', a Fraud Prevention Policy has been formulated by Vigilance Department and the same has been duly approved by the Board of Directors and notified by MFL on 12.Q9.2012.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS Manpower & Training

The total strength of MFL as on 31,03.2013 is 773 as against 733 during the previous year end. 250 employees have been trained on behavioral & technical subjects to derive enduring benefit.

Industrial Relations

During the year, the overall Industrial Relation situation in the Company has been normal and cordial.

Official Language Implementation

MFL has been continuously exceeding the target fixed by Department of Official Language for letter correspondence in Hindi and other implementation programs. Hindi Fortnight was celebrated at Head Office and Regional Offices. Various competitions were organized and prizes were distributed.

SC / ST Welfare Activities

The presidential Directives and various guidelines issued by the Government of India relating to the welfare of SC / ST employees are being scrupulously followed. A Liaison Officer for SC / ST at DGM level ensures implementation of Government Directives. MFL is constantly reviewing the vacancies reserved for SC/ST and is taking concerted efforts to fill up those vacancies.

Recasting of post based rosters is being done by a consultant from Integrated Training and Policy Research, New Delhi for Direct Recruitment and Promotions carried out by the Company since July 2,1997. Report on the Recasting of rosters has been submitted by the Committee and the implementation is under progress.

Lumpsum contribution of Rs. 30,000 per year for celebration of Dr Ambedkar''s Jayanthi was approved. An amount of Rs.1.57 lakhs was spent for repairing and maintenance of potable water pipelines from MFL to Harikrishnapuram, a neighbourhood village in Manali, Tamilnadu.

CORPORATE SOCIAL RESPONSIBILITY

Serving the interests of Society by taking responsibility is an integral job of MFL and the Comparly provided two Computers to Thiruvottiyur Municipality High School and three Computers to Panchayat Union Primary School during the year.

INVESTOR RELATIONS CELL (IRC)

IRC is functioning in the Company under the Chief Financial Officer, ED-F with members from various Groups to create awareness of the Company''s strength and ensuring timely communication to shareholders.

DIRECTORS

Government of India have appointed Shri V K Subburaj, IAS, Additional Secretary and Financial Advisor, DOF in place of Dr V Rajagopalan, IAS, on the Board of the Company effective May 02,2013.

The Board placed on record the valuable and outstanding contribution made by the outgoing Director Dr V Rajagopalan, IAS during his tenure as Director on the Board for the substantial and sustainable development of the Company

AUDITORS

The Government of India have appointed M/s B Thiagarajan & Co., Chartered Accountants, Chennai as Statutory Auditors of the Company for the year 2012-13.

STATUTORY INFORMATION

No employee was in receipt of remuneration for any part of the year at a rate which is more than Rs. 5 lacs per month as provided under Section 217 (2A) of the Companies Act, 1956.

The data on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 are given in the Annexure-I forming part of this report.

Directors'' Responsibility Statement as required under Section 217 (2AA) of the Companies Act, 1956 is furnished in Annexure- II forming part of this report.

Management Discussion and Analysis Report, as required under Listing Agreement is enclosed as Annexure-lll forming part of this report.

Certificate received from the Auditors of the Company regarding compliance of Corporate Governance guidelines of SEBI as required under Listing Agreement is enclosed as Annexure IV forming part of the report.

Declaration affirming compliance with the code of conduct pursuant to clause 49 of the Listing Agreement is enclosed as Annexure V forming part of this report.

APPRECIATION

Your Directors wholeheartedly place on record their appreciation for the continued and unstinted support of Government of India, Department of Fertilizers, Government of Tamilnadu, NICO, Financial Institutions, Banks, Depositors and all stakeholders during the year. It is most appropriate to mention that the Directors convey their gratitude to the Department of Fertilizers for settlement of subsidy bills on priority basis and to the dealers and farmers for their sustained support to Vijay products. Last but not the least that your Directors also place on record their appreciation for the dedication, commitment and sincere services rendered by the employees for sustained improvements.



By order of the Board

Chennai Dr IVIJAYAKUMAR

July 29,2013 Chairman & Managing Director


Mar 31, 2012

The Members of Madras Fertilizers Limited

The Directors have pleasure in presenting herewith the 46th Annual Report together with the Balance Sheet as on March 31,2012 and the Profit & Loss Statement for the year 2011-12.

SUMMARY OF FINANCIAL RESULTS

(Rs. Cr)

2011-12 2010-11

Turnover 2207.77 1622.83

Profit Before Interest, Depreciation, DRE and Tax 211.02 141.43

Interest 60.00 55.05

Depreciation 40.34 41.21

Extraordinary items (OTS benefit) 1.31 124.69

Profit/(Loss) Before Tax 111.99 169.86

Provision for Tax - -

Profit/(Loss) After Tax 111.99 169.86

Cash Profit/(Loss) 152.33 211.07

The Company's operations for the year ended with a profit of Rs. 111.99 Cr (Previous Year Rs. 169.86 Cr). This is the highest ever operating profit made in any year since inception if extraordinary items (OTS benefit) is not taken into account. This could be possible mainly because of 100% capacity utilisation of Urea achieved for the first time in the history of the Company. The total accumulated loss as of 31.3.2012 was brought down to Rs. 505.20 Cr from Rs. 617.19Cr.

SICKNESS AND REVIVAL

As informed in the last year Annual Report, BIFR declared the Company as Sick on 02.04.2009 and State Bank of India (SBI) Commercial Branch, Chennai was appointed as Operating Agency. So far eight hearings have taken place.

The viability proposal of MFL prepared by PDIL was examined by SBICAPS and they prepared a Financial Revival Package based on PDIL report' with the recommendation of three options of which write-off of GoI outstanding principal and interest was considered to be the most suitable option to come out of BIFR with the understanding that GoI would recommend exemption of tax on the waiver granted. However, this proposal was turned down by Planning Commission and other Ministries.

BIFR at its hearing held on October 22, 2011 directed SBI to submit a fully tied up DRS considering conversion of GOI loan in to equity and waiver of interest. Accordingly, SBI submitted the DRS to BIFR on February 10, 2012. During the hearing held on May 7, 2012, as NICO, co-promoter, objected for conversion of GOI loan into equity, BIFR directed the Company to prepare a revised DRS incorporating responses to the observations made by BIFR in its letter dated 02.05.2012. Accordingly, the Company has prepared a Draft Rehabilitation Proposal and forwarded the same to Operating Agency (SBI) for further review.

REASONS FOR SICKNESS

Continuous losses have arisen due to cost and time over run during revamp of Ammonia and Urea Plants, delay in stabilization of revamped Plants due to technology related problems, higher energy consumption, deterioration in reliability of Plants due to poor maintenance for want of funds and unfavourable Pricing Policies of GOI in respect of fertilizers during April 2003 to March 2009.

The Company's operations have become profitable since 2009-10 due to the amendment in NPS III policy w.e.f. 01.04.2009 and improvement in production performance and it can now come out of sickness if accumulated loss is taken care of.

DIVIDEND

Despite earning profit during the year, Company could not pay Dividend to the shareholders due to huge accumulated losses and negative net worth.

PLANT PERFORMANCE

The Company produced 4,86,750 MT of Urea as of March 04,2012 which is 100% of installed Capacity. The previous record was 4,78,834 MT (98.4% cap) during the year 2010-11.

After a gap of about four years, production of Complex fertilizers could be started initially with NPKS 20-20-0- 13.and thereafter could switch over to the Company's flagship product of NPK 17-17-17.

NPK 'C' Train was restarted after extensive refurbishment on February 12, 2012. Thus, now two of three NPK Trains are available for production.

Specific energy consumption of 10.369 Gcal/MT Ammonia and 7.517 Gcal/MT Urea achieved during the year 2011-12 are the Second Best achievements since inception.

GAS CONVERSION

In order to comply with the Directives of GOI, Company has already initiated action for feedstock conversion from Naphtha to Natural Gas. The Basic Engineering & Design Package (BEDP) has been received and Detailed Engineering is in progress.

The Company's request for allocation of 1.54 MMSCMD of Natural Gas has been forwarded by Department of Fertilizers vide their letter NO.12012/24/2006-FFP dated 11.06.2010 to Ministry of Petroleum & Natural Gas. The Company is now examining the following options for sourcing gas:

i. From KG D6 field when additional production materializes and gas pipeline is laid between Kakinada and Chennai.

ii. From IOCL's proposed LNG terminal at Ennore, expected to be commissioned in 2015-16.

iii. From GAIL's LNG Kochi terminal, through spur line from Krishnagiri on Kochi- Bengaluru pipeline.

iv. From Krishnapatnam Port through road/rail in cryogenic containers.

In order to proceed further on the subject, Gas Transmission Agreement (GTA) and Gas Supply Agreement (GSA) need to be signed with one of the above suppliers for which Department of Fertilizers has been requested to take up the matter further with respective authorities to spell out the modalities for executing the agreement and to fix the total landed cost to be recognized for payment of subsidy.

MARKETING PERFORMANCE

Fertilizer Sales

During the year, Company sold a total of 5.33 lakh MT of fertilizers compared to 4.74 lakh MT last year, which is 12.5% increase. The market share of Urea got increased from 8% to 9% in South India.

Efforts for streamlining logistics operations continued this year also and 97% of the products were directly delivered to the dealers.

Cash sales accounted for 99.7% of total sales. 99.6% of the cheques realized within 7days. There has not been a single Bad Debt during this year also.

Agrochemicals, Biofertilizers & Organic Manure

Rs. 181.10 lakhs environment friendly neem based Agrochemicals were traded during the year as against Rs. 142.01 lakhs during the last year, which is 27.5% higher.

The Company sold 481 MT of Bio-fertilizers during the year as against 453 MT during last year which is 6% higher.

The Company also sold 3,630 MT of Organic Manure based on Poultry Waste during the year in Tamil Nadu & Karnataka.

Market Development and Agro-service Programs

MFL's Marketing Personnel contacted 74,503 farmers during the year and educated them about soil health techniques and usage of Bio-fertilizers/Neem products.

As a service to farming community, the Company collected 5,620 soil samples, analysed and sent the nutrient recommendations for various crops to farmers during the year.

Collection of Old Dues

An amount of Rs. 37.10 lakhs has been collected from old dishonour cases and the Company is taking all out efforts to optimize the collection.

PUBLIC DEPOSIT

The Company could not accept fresh deposits or renew the existing deposits during the year due to statutory restrictions. The unclaimed deposits as of March 31,2012 is Rs. 1.85Cr.

ISO 9001/14001

First Surveillance Audit on Quality Management System (ISO 9001:2008) was conducted on November 9,2011 and continuance of certification has been approved by External Agency.

The Company has obtained ISO 14001:2004 renewal certification for Environment Management System for which the audit was conducted during May 2- 4, 2011 and certification is valid up to May 31, 2014.

MEMORANDUM OF UNDERSTANDING

The Company entered into an MOU with Department of Fertilizers, Government of India for the year 2012-13 on March 13, 2012 setting up targets for performance of the Company in terms of production, sales and other parameters.

VIGILANCE

- Complaints received were attended and reports submitted, as per Complaints Handling Policy of the Company/CVC guidelines.

- System improvements for preventing losses were suggested to the Management for implementation, contributing to the Company's revenues.

- All the pending investigations have been completed by Vigilance in time. Also all disciplinary proceedings in respect of vigilance cases have been completed.

- Property Returns of officers were scrutinized as per CVC guidelines.

- Dishonour of cheques by dealers and collection thereon was monitored periodically to prevent losses to the Company.

- CVC guidelines on tenders and disciplinary proceedings, as and when received, were communicated to Management for necessary action.

- As a part of Leveraging technology, all payments are being made through Electronic Clearance System (ECS). With respect to dealer payments towards sale proceeds, e-transfer of funds to Company is being arranged in association with banks. With regard to E-procurement/e-sale, sen/ice provider has been appointed.

- As Participative vigilance was the theme of Vigilance Awareness Week observed in November 2011, dealers and farmers at village level and Company officials were sensitized on vigilance perspectives with regard to the services and product deliveries.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Manpower & Training

The total strength of MFL as on 31.03.2012 is 733 as against 765 during the previous year end. 519 employees have been trained on Behavioural & Technical subjects to derive enduring benefit.

Industrial Relations

During the year, the overall Industrial Relation situation in the Company has been normal and cordial.

OFFICIAL LANGUAGE IMPLEMENTATION

MFL has been continuously exceeding the target fixed by Department of Official Language for letter correspondence in Hindi and other implementation programs. Hindi Fortnight was celebrated at Head Office and Regional Offices. Various competitions were organized and prizes were distributed.

SC/ST WELFARE ACTIVITIES

The presidential Directives and various guidelines issued by the Government of India relating to the welfare of SC/ST employees are being scrupulously followed. A Liaison Officer for SC/ST at DGM level ensures implementation of Government Directives. MFL is constantly reviewing the vacancies reserved for SC/ST and is taking concerted efforts to fill up those vacancies.

Recasting of post based rosters is being done by a consultant from Integrated Training and Policy Research, New Delhi for Direct Recruitment and Promotions carried out by the Company since July 2, 1997. There is a good progress in the review DPC activity.

Lumpsum contribution of Rs. 30,000 per year for celebration of Dr Ambedkar's Jayanthi was approved. To carry out development programmes in the neighbourhood SC/ST inhabited areas, an amount of Rs. 50,000 per annum was sanctioned.

CORPORATE SOCIAL RESPONSIBILITY

Serving the interests of Society by taking responsibility is an integral job of any PSU and your Company is committed to operate in an economically, socially and environmentally sustainable manner. This commitment is beyond statutory requirements and linked to the practice of Sustainable Development.

INVESTOR RELATIONS CELL (IRC)

IRC is functioning in the Company under Chief Financial Officer, ED-F with members from various Groups to create awareness of the Company's strength and ensuring timely communication to shareholders.

DIRECTORS

Government of India have appointed Shri Satish Chandra, IAS, Joint Secretary, DOF in place of Shri Sham Lal Goyal, IAS, on the Board of the Company effective August 8, 2011.

The Board placed on record the valuable and outstanding contributions for the substantial and sustainable development of the Company made by the outgoing Director Shri Sham Lal Goyal, IAS during his tenure as Director on the Board.

AUDITORS

The Government of India have appointed M/s A.V. Deven & Co., Chartered Accountants, Chennai as Statutory Auditors of the Company for the year 2011-12.

STATUTORY INFORMATION

No employee was in receipt of remuneration for any part of the year at a rate which is more than Rs. 5 lacs per month as provided under Section 217 (2A) of the Companies Act, 1956.

The data on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 are given in the Annexure-I forming part of this report.

Directors' Responsibility Statement as required under Section 217 (2AA) of the Companies Act, 1956 as amended is furnished in Annexure-II forming part of this report.

Management Discussion and Analysis Report, as required under Listing Agreement is enclosed as Annexure-III forming part of this report.

Certificate received from the Auditors of the Company regarding compliance of Corporate Governance guidelines of SEBI as required under Listing Agreement is enclosed as Annexure IV forming part of this report.

Declaration affirming compliance with the code of conduct pursuant to Clause 49 of the Listing Agreement is enclosed as Annexure V forming part of this report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to Directors' Responsibility Statement, it is hereby confirmed

- that in the preparation of the annual accounts for the financial year ended March 31,2012, the applicable accounting standards had been followed along with proper explanation relating to material departures.

- that the Board had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period.

- that the Board had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

- that the Board had prepared the annual accounts on a going concern basis.

APPRECIATION

Your Directors wholeheartedly place on record their appreciation for the continued and unstinted support of Government of India, Department of Fertilizers, Government of Tamilnadu, NICO, Banks and all stakeholders during the year. It is most appropriate to mention that the Directors convey their gratitude to the Department of Fertilizers for settlement of subsidy bills on priority basis and to the dealers and farmers for their sustained support to Vijay products. Last but not the least your Directors also place on record their appreciation for the dedication, commitment and sincere services rendered by the employees for sustained high production of Urea and restart of Complex fertilizers after putting in real hard work.

By order of the Board

Dr. I VIJAYAKUMAR Chairman & Managing Director

Chennai July 30,2012


Mar 31, 2011

The Shareholders Madras Fertilizers Limited

The Directors have pleasure in presenting herewith the 45th Annual Report together with the Balance Sheet as on March 31,2011 and the Profit & Loss Account for the year 2010-11.

SUMMARY OF FINANCIAL RESULTS

(Rs. Cr)

2010-11 2009-10

Turnover 1622.83 1302.84

Profit Before Interest, Depreciation, DRE and Tax 141.43 144.87

interest 55.05 88.45

Depreciation 41.21 41.53 Deferred Revenue Expenditure - 1.21

01.01.97 Arrears (Employees' Salary) - 6.80

Extraordinary items (OTS benefit) 124.69 -

Profit /(Loss) Before Tax 169.86 6.88

Provision for Tax - -

Profit/(Loss) After Tax 169.86 6.88

Cash Profit/(Loss) 211.07 49.62

The Company's operations for the year ended with a profit of Rs. 169.86 Cr (Previous Year Rs. 6.88 Cr) mainly on account of better production performance and lower energy consumption in Urea operations coupled with One Time Settlement benefit from Financial Institutions. The total accumulated loss as of 31.3.2011 is Rs. 617.19 Cr.

REFERENCE TO BIFR AND REVIVAL PROPOSAL

Due to continued erosion of net worth, the company was declared a Sick Industrial Company u/s 3(1 )(o) of Sick Industrial Companies (Special Provisions) Act, 1985 in April 2009 and State Bank of India (SBI),Commercial Branch, Chennai was appointed as an Operating Agency(OA) for the Company.

Per BIFR direction, Company appointed Projects & Development India Ltd (PDIL) to prepare a Rehabilitation Proposal and suggest a suitable road map for the Company with the objective of bringing back the plant operations on a sustainable manner by adopting a suitable technical and financial improvement measures.

Further to the recommendations of the PDIL, the Operating' Agency(SBI) approached their sister concern SBICAPS to evaluate the suggested options and to submit recommendation on the financial revival package for the submission to BIFR and DOF.

SBICAPS in their report recommended that write-off of Gol outstanding principal and interest appears to be most suitable option for MFL to come out of BIFR with the understanding that Gol would recommend waiver of the tax incidence under the option.

The Financial restructuring Proposal Prepared by DOF based on the above recommendation was circulated to the stake holder ministries. Comments received are under consideration by the DOF.

CAUSES FOR ACCUMULATED LOSSES

The main reasons for the accumulated losses are cost and time over run during revamp of Ammonia and Urea Plants, delay in stabilization of revamped Plants due to technology related problems, higher energy consumption, deterioration in reliability of Plants due to poor maintenance for want of funds and unfavourable Pricing Policies of GOI in respect of Nitrogenous and Complex fertilizers during the period from April 2003 to March 2009.

ONE TIME SETTLEMENT (OTS) WTTH FINANCIAL INSTITUTION

The Company entered into One Time Settlement (OTS) with IFCI, SASF (IDBI), LIC and IIBI for Rs. 106.31 Cr as against total dues of Rs. 231.00 Cr towards Principal and Interest as of March 31, 2010. During the financial year 2010-11, the Company completed payments.under OTS with Financial Institutions as per agreement. Your Company has gained Rs. 124.69 Cr through the OTS.

DIVIDEND

Though the Company earned a profit of Rs. 169.86 Cr during the year 2010-11, Company could not pay Dividend due to accumulated losses and negative net worth.

PLANT PERFORMANCE

There has been substantial improvement in the plant performance. At the close of financial year 2010-11, Plant has created several records in terms of Production and Energy efficiency, highest production and lowest energy since inception.

- Urea monthly production of 50,530 MT (Mar 2011) is the Best, the previous best being 50,345 MT achieved in March 2009.

- Quarterly Urea production of 1,44,763 MT (119.0% cap) is the Highest during January - March 2011, surpassing the previous Best of 1,42,498 MT (117.1 % cap) during Oct-Dec 2010.

- Annual Urea production of 4,78,834 MT (98.4% cap) during 2010-11 is the Highest, surpassing the previous Best of 4,73,363 MT (97.3% cap) during 2006-2007.

- Specific energy consumption of 6.898 Gcal/MT Urea in Mar 2011 is the Lowest energy achieved in a month, bettering the previous record of 6.964 Gcal/ MT achieved in Oct 2010.

- Specific energy consumption of 7.057 Gcal/MT Urea during Jan-Mar 2011 is the Lowest quarterly energy, bettering the previous record of 7.136 Gcal/MT achieved during Oct-Dec 2010.

- Annual Specific Energy consumption of 7.492 Gcal MT Urea is the Lowest, the previous record being 7.769 Gcal/MT in 2004-05.

- Specific energy consumption of 9.448 Gcal/MT Ammonia in Mar 2011 is the Lowest energy achieved in a month, breaking the previous record of 9.581 Gcal/MT achieved in Dec 2009.

- Specific energy consumption of 9.652 Gcal/MT Ammonia during Jan-Mar 2011 is the Lowest quarterly energy, bettering the best energy of 9.862 Gcal/MT achieved during Oct-Dec 2010.

- Annual Specific Energy consumption of 10.334 Gcal/ MT Ammonia is the Lowest, the previous record being 10.411 Gcal/MT in 2004-05.

- Urea production exceeded the day's installed capacity on 239 days during Apr 2010 - Mar 2011. This is the Best achieved surpassing 2004-05 record of 229 days.

GAS CONVERSION

As per feedstock policy of the Government of India, natural gas is the preferred feedstock for the manufacture of urea over the other feed stocks viz. naphtha, FO/LSHS firstly because it is clean and efficient source of energy and secondly it is considerably cheaper and more cost effective in terms of manufacturing cost of urea which also has direct impact on the quantum of subsidy on urea. The policy on conversion of existing naphtha / FO / LSHS based urea units to natural gas, formulated in January 2004, encourages the early conversion to natural gas/LNG.

GOI would give the highest priority for conversion of Naphtha / FO / LSHS based fertilizer industries as and when their Plants are ready to utilise the natural gas. Considering the above, MFL is implementing the projects of conversion of feedstock from naphtha to natural gas. The provision is also being kept to enable processing of both naphtha and natural gas depending upon the availability.

Award of work has been issued to HTAS for carrying out Engineering Design Package and the work is under process. M/s Projects & Development India Ltd (PDIL) has been proposed to be the EPCM contractor for this project.

The Company's request for allocation of Natural Gas has already been forwarded by Department of Fertilizers to the Ministry of Petroleum & Natural Gas for their consideration.

MARKETING PERFORMANCE

During the year, Company sold a total of 4.74 lakh MT of fertilizers compared to 4.41 lakh MT last year. There was 8% increase in sales of fertilizers over the last year and the market share of Urea is maintained at 8% in South India.

Company continued to embark upon various policies for reduction of marketing costs. Efforts for streamlining logistics operations continued this year also and 98% of the products were directly delivered to the dealers.

Rationalisation of territories and Regions was another area of cost saving. There has been a manpower reduction of 5%.

Marketing Team put up a creditable performance in sales realization by making 98% cash sales. 99% of the cheques realized within 7days. Further, it goes to their credit that there has not been a single Bad Debt for this year also.

AGROCHEMICALS & BIOFERTILIZERS

Company continued to market environment friendly Neem based Agrochemicals. A total of Rs. 1.39 Cr of Agrochemicals was traded during the year 2010-11 as against Rs. 1.42 Cr last year.

MFL sold 453 MT of Bio-fertilizers during 2010-11 as against 435 MT in 2009-10, which is 4% increase over the last year sales.

MARKET DEVELOPMENT AND AGRO-SERVICE PROGRAMS

MFL continued its tradition of conducting informative and educational programs for the farmers and dealers in terms of Corporate Social Responsibility.

During 2010-11,64 promotional programs were conducted benefiting 22,492 farmers. MFL continued to have demos on bio-fertilizers, follow up on soil tests results with farmers and participation in Government exhibitions etc., SC/ST dealers, who now form 27% of our total dealer strength of 5,920.

COLLECTION OF OLD DISHONOURS

An amount of Rs. 33.45 lakhs has been collected from old dishonour cases as detailed below:

Region Rs. Lakhs

Cuddapah 20.55

Bangalore 12.60

Trichy 0.30

PUBLIC DEPOSIT

The Company has not accepted fresh deposits or renewed the existing deposits during the Financial Year 2010-11. The total deposit, including unclaimed, as of March 31,2011 is Rs. 7.82Cr.

ISO 9001/14001

MFL has revisited the Quality Policy for ISO 9001 - 2008. standards and amended per MFL requirements after obtaining approval from CMD. The revised policy has been exhibited throughout the Company and made available to the interested parties and stakeholders through company website with effect from 24.05.2010.

MFL has obtained ISO 9001:2008 certification on Quality Management System which has been upgraded from ISO 9001 - 2000 version and it is valid up to December 29,2013.

MEMORANDUM OF UNDERSTANDING

The Company entered into MOU with Department of Fertilizers (DOF), Government of India for the year 2011 -12 on March 25,2011 setting up targets for performance of the Company in terms of production, sales and other parameters.

VIGILANCE

Preventive vigilance is the main theme of the Vigilance Department. The stress is on transparency and accountability in the working of the company. Leveraging technology for corporate governance was the highlight of the Vigilance activities during the year. File tracking system and displaying the status of payment to contractors / vendors on Company's website on a monthly basis have been introduced by the Management at the instance of the Vigilance. Vigilance has ensured that a Complaint Handling Policy has been put in place by the Management for receipt, processing and disposal of all complaints in line with the directive of the Central Vigilance Commission (CVC).

Besides providing the Management necessary guidelines in various areas particularly tendering based on extant CVC guidelines, Vigilance has also conducted workshops on vigilance aspects for line managers. Almost all the pending investigations have been completed by the Vigilance and all pending disciplinary proceedings pursued with the Management for completion.

In addition to the above, Vigilance Awareness Week has been observed, property returns of employees were scrutinized, high value contracts were reviewed, CTE (Chief Technical Examiner) type inspections were conducted and status of dishonour of cheques by dealers and collection details was reviewed.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Manpower & Training

The total strength of MFL as on 31.03.2011 is 765 as against 802 for the period ending 31.03.2010.333 employees have been trained on Behavioural & Technical subjects.

Voluntary Retirement Scheme

Two employees have availed Voluntary Retirement Scheme during the year 2010-11. The VRS Scheme was closed effective Jan 24,2011.

INDUSTRIAL RELATIONS

During the year 2010-11, the overall Industrial Relation situation in the Company has been normal and cordial.

OFFICIAL LANGUAGE IMPLEMENTATION

MFL has been continuously exceeding the target fixed by Department of Official Language for letter correspondence in Hindi and other implementation programs.

Hindi Fortnight was celebrated at Head Office and Regional Offices. Various competitions were organized and prizes were distributed to the winners.

SC / ST WELFARE ACTIVITIES

The presidential Directives and various guidelines issued by the Government of India relating to the welfare of SC/ST were scrupulously followed during the year. A separate Liaison Officer for SC/ST at DGM Level, nominated for this purpose ensures implementation of Government Directives. MFL is constantly reviewing the vacancies reserved for SC/ST and taking concerted efforts to fill up such vacancies.

Recasting of Post Based Rosters is being done by Shri S M Gupta from Integrated Training and Policy Research, New Delhi for Direct Recruitment and Promotions carried out by the Company since July 2,1997.

CORPORATE SOCIAL RESPONSIBILITY

Your Company considers Corporate Social Responsibility as one of the pivotal functions to accelerate the process of over all sustainable development and more significant contribution for the uplrftment of society.

During the year, an amount of Rs. 15 lakhs was spent on Mahali Municipality for construction for Water Storage Supply tank - and Compound Wall around the same.

Also a sum of Rs. 1 lakh was donated to ANUSARAN, a Charitable Institution at New Delhi which is a Shelter Centre for destitute women and works for women's empowerment in our country.

INVESTOR RELATIONS CELL (IRC)

Company created IRC headed by the Chief Finance Officer(ED-F) with members from various groups of Company to create awareness of the Company's strengths and ensuring timely communication to all shareholders.

DIRECTORS

Government of India have appointed Shri Sham Lal Goyal, IAS, Joint Secretary, DOF in place of Shri Satish Chandra, IAS, on the Board of the Company effective November 3, 2010.

The Board placed on record the valuable and outstanding contributions for the substantial and sustainable development of the Company made by the outgoing Director Shri Satish Chandra, IAS during his tenure as Director on the Board.

AUDITORS

The Government of India have appointed M/s. A. V. Deven & Co., Chartered Accountants, Chennai as Statutory Auditors of the Company for the year 2010-11.

STATUTORY INFORMATION

No employee was in receipt of remuneration for any part of the year at a rate which is more than Rs. 5 lacs per month as provided under Section 217 (2A) of the Companies Act, 1956.

The data on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 are given in the Annexure-I forming part of this report.

Directors' Responsibility Statement as required under Section 217 (2AA) of the Companies Act, 1956 as amended is furnished in Annexure-II forming part of this report.

Management Discussion and Analysis Report, as required under Listing Agreement is enclosed as Annexure-lll forming part of this report.

Certificate received from the Auditors of the Company regarding compliance of Corporate Governance guidelines of SEBI as required under Listing Agreement is enclosed as Annexure- IV forming part of this report.

Declaration affirming compliance with the code of conduct pursuant to clause 49 of the Listing Agreement is enclosed as Annexure V forming part of this report.

APPRECIATION

Your Directors wish to place on record their appreciation for the continued unstinted support of Government of India, Department of Fertilizers, Government of Tamilnadu, NICO, Financial Institutions, Banks, Depositors and all stakeholders during the year. Your Directors further convey their gratitude to the Department of Fertilizers for the settlement of subsidy bills on priority basis and to the dealers and farmers for their sustained support to the Vijay products. Your Directors also place on record their appreciation for the dedication, commitment and sincere services rendered by all employees for sustained high production in the difficult times.



By order of the Board

Satish Chandra Chairman & Managing Director

Chennai 29.07.2011


Mar 31, 2010

The Directors have pleasure in presenting herewith the 44th Annual Report together with the Balance Sheet as onMarch 31,2010 and the Profit & Loss Account for the year 2009-10.

SUMMARY OF FINANCIAL RESULTS

(Rs. inCr)

2009-10 2008-09

Turnover 1302.84 1123.59

Profit Before Interest,

Depreciation, DRE and Tax 144.87 (8.39)

Interest 88.45 92.62

Depreciation 41.53 41.63

Deferred Revenue Expenditure 1.21 2.57

01.01.97 Arrears (Employees

Salary) 6.80 -

Profit / (Loss) Before Tax 6.88 (145.21)

Provision for Tax - 0.17

Profit/(Loss) After Tax 6.88 (145.38)

Cash Profit / (Loss) 49.62 (101.18)



The Companys operations for the year ended with a profit of Rs.6.88 Cr against loss of Rs.145.38 Cr in the previous year mainly on account of implementation of New Pricing Scheme (NPS)-Stage III amendment by GOI restricting the reduction in fixed cost to 10% for 2009-10. The total accumulated loss as of 31.3.2010 is Rs.787.05 Cr.

REFERENCE TO BIFR

Consequent on total erosion of net worth, the BIFR has registered the Company as Case No. 501/2007. It has declared MFL as a Sick Company under the provision of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) in its meeting held on 2.4.2009 and appointed State Bank of India (SBI), Commercial Branch, 232 N.S.C Bose

Road, Chennai 600 001 as Operating Agency (OA) to prepare a Draft Rehabilitation Scheme (DRS) for the Company. BIFR held hearings on 15.10.2009, 12.1.2010 and 22.3.2010. GOI Nominee Directors attended the meeting held on 22.3.2010 and expressed the view that DOF is keen on revival of the Company. On the advice of DOF, M/s Project & Development India Ltd (PDIL) was appointed to undertake a study on rehabilitation proposal for the Company. Accordingly, PDIL submitted its report on Viability Proposal on MFL and the same was forwarded to DOF after obtaining approval from Board. The proposal is under active consideration of GOI for revival of your Company. However, Bl FR advised the Company to submit its Viability Proposal at the earliest.

CAUSES FOR ACCUMULATED LOSSES

The main reasons for the recurring losses from 2003-04 and the sickness of the Company are due to cost over run during the revamp of Ammonia and Urea Plants, delay in stabilization of revamped Plants due to technology related problems, high energy consumption and changes in the Pricing Policies of DOF.

Introduction of NPS of Urea from 1.4.2003 had a deleterious effect on the Company as there was an inherent under recovery of about Rs 1995 / MT under New Pricing Scheme (NPS) Stage I and II which has increased to Rs 3991/MT during Stage - III (w.e.f. 1.10.2006) due to withdrawal of outlier benefit. Based on Deloitte Report, the DOF has restricted the reduction in fixed cost in respect of Urea to 10% for 2009-10.

Also, the Price Concession Scheme (PCS) for complex fertilizers applicable from 1.4.2002 did not adequately compensate the Company for cost of N in its flagship product NPK 17-17-17.

The Company does not have adequate funds to procure raw materials for production of complex fertilizers. NPK capacity utilization has drastically fallen from 51% in 2003- 04 to 40% in 2004-05 to 4% in 2007-08 and "Nil" in 2008-09.

However, the Company has started manufacture of NPKS 20-20-0-13 for Indian Potash Limited on tolling basis from March 2010 and produced 7,335 MT during the month.

GOING CONCERN CONCEPT

As future operations do not suggest there would be reduction of debts, increase in flow of revenue and improvement in net worth, your Statutory Auditors have qualified that the Company should not have compiled the accounts on Going Concern basis in their Audit Report for 2009-10.

Whereas the Company accounts for the year 2009-10 was audited by C&AG of India and have cleared the Accounts with NIL comments for the fifth consecutive year.

REVISED PROPOSAL FOR RESTRUCTURING

As per the directives of Department of Fertilizers (DOF), PDIL was engaged in July 09 to undertake a project study of the Company and prepare a Viability study report for making the operations sustainable.

The report submitted by PDIL suggesting short term measures, long term measures and financial restructuring are given below:

- Conversion of GOI loan portion of Rs 293.80 Cr as on 31.3.2009 to equity.

- Continuation of special dispensation in pricing mechanism under New Pricing Scheme Stage III

(NPS III) beyond 31.3.2010 and up to the

conversion of Natural Gas.

- Cash induction of Rs 346.54 Cr by amendment in NPS III from 1.10.2006 to 31.3.2009.

- Waiver of GOI loan interest amounting to Rs 123.09 Cr as on 31.3.2009 along with penal

interest.

- Release of Rs 376.84 Cr through Plan Loan for implementation of the Capital Schemes from 2009-10 to 2013-14.

- initiate proposal for purchase of NICO shares by GOI.

Based on the report of PDIL, DOF is in the process of finalizing the revised restructuring proposal for submission to BRPSE and BIFR to bail out the Company from sickness.

ONE TIME SETTLEMENT (OTS) WITH FINANCIAL INSTITUTION

The Company entered into One Time Settlement (OTS) with IFCI Ltd for Rs.44.06 Cr as against Rs.91.57 Cr of Principal and Interest as of March 31, 2010. Company made an upfront payment of Rs.20 Cr on 31.03.2010 and balance Rs.24.06 Cr will be paid in monthly installments commencing . July to December 2010. Your Company gained Rs.47.51 Cr through the OTS.

DIVIDEND

Though the Company earned a profit of Rs.6.88 Crores during the year 2009-10, Company could not pay Dividend due to accumulated losses.

PLANT PERFORMANCE

- Urea production exceeded the days installed capacity of 1475 MT on 207 days and 436100 MT of Urea produced during the year is the 4th best since revamp. Also, Urea production of 49261 MT during Dec 2009 is the 3rd best record.

- Specific Energy consumption of 7.834 Gcal/MT of Urea is the 3rt lowest since revamp.

- Ammonia energy of 9.5372 Gcal/MT and Urea energy of 6.9452 Gcal/MT on December 30, 2009 are the lowest ever since revamp.

- Specific Energy consumption of 9.581 Gcal/MT of Ammonia during Dec 2009 is the lowest since inception surpassing the previous record of 9.715 Gcal/MT in December 2004.

- Specific Energy consumption of 6.974 Gcal/MT of Urea in Dec 2009 is the lowest since inception

"surpassing the earlier record of 7.199 Gcal/MT in August 2008 and below the derived design energy of 7.004 Gcal/MT of Urea for a full month.

NPK A train was restarted after 3 years and production of NPKS complex 20-20-0-13 commenced on March 8,2010 for M/s Indian Potash Limited on tolling basis. During March 2010,7335 MT of complex fertilizer was produced.

GAS CONVERSION

MFL Ammonia Plant with minor modifications is compatible to use Natural Gas and the Feedstock conversion can be completed in about 12 months time. The requirement of CNG will be 1.54 MMSCMD (Cal. Value 8600 Kcal/SM3) and the requirement may go up to 2.5 MMSCMD. MFLs requirement of 1.54 MMSCMD of Natural Gas has been forwarded by Department of Fertilizers to Ministry of Petroleum & Natural Gas for allocation.

M/s Gas Authority of India Limited (GAIL) has come up with an offer to supply RLNG to your Company at Market Driven Prices, by laying a dedicated branch line (250 km long) from Krishnagiri to Chennai on its Kochi - Kanjironkode - Bangalore / Mangalore pipeline. Similarly, M/s Indian Oil Corporation Ltd (IOCL) evinced interest in supplying LNG to your Company through the Ennore Satellite Port Terminal and requested the Company to sign HoA and initiate action on the subject. lOCLs LNG terminal at Ennore is expected to be ready in 2014-15.

MARKETING PERFORMANCE

Agricultural situation was extremely favourable during the year also in view of the widespread rains received throughout our marketing territories. The demand for products were continued to be high and products were sold in good quantities. During the year, Company sold a total of 4.41 lakh MT of fertilizers compared to 4.15 lakh MT last year. There was an increase of 6% in sale of fertilizers over the last year.

During this year, 4.34 lakh MT of Urea was made available for sale as against 4.15 lakh MT during last year, which is 5% increase over CPLY sales, whereas market share of Urea is maintained at 8% in South India.

Company continued to embark upon various policies for reduction of marketing costs. Efforts for streamlining logistics operations continued this year also and 99% of the products were directly delivered to the dealers whereas it was only 96% during the CPLY.

Rationalisation of territories & regions and manpower reduction was another area of cost saving. There has been a manpower reduction of 4%.

Marketing Team put up a creditable performance in sales realization by making 98% cash sales. 95% of the cheques realized within 7 days. Further, it goes to their credit that there has not been a single bad debt during this year also.

AGROCHEMICALS, BIO-FERTILIZERS AND CARBON-DI-OXIDE

Company continued to market environment friendly neem based Agrochemicals. A total of Rs.1.42 Crof Agrochemicals were traded during the year 2009-10 as against the CPLY of Rs.1.34Cr.

MFL sold 435 MT of Bio-fertilizers during 2009-10 as against 463 MT in the previous year.

Company has sold Carbon-di-oxide valuing Rs.3.30 Cr during the year 2009-10 against Rs.2.37 Cr during the last year.

PUBLIC DEPOSIT

The Company had approached the Ministry of Corporate Affairs (MCA), Govt, of India vide application dated 25.2.2009 for extending the exemption for a further period of 2 years from 01.04.2009 to accept / renew deposits up to Rs.61.09 Cr under the Companies Act, 1956, which was approved only oh 30.04.2010 with a validity up to 31.3.2010.

Hence, the Company could not accept fresh deposits or renew the existing deposits during the Financial Year 2009-10. The total deposit, including unclaimed, as of March 31,2010 is Rs.8.66 Cr against the eligible limit of Rs.61.09 Cr.

ISO 9001 /14001

Internal Quality Audit - VIII & IX for ISO 9001 (Quality Management System) & ISO 14001 (Environmental

Management System) had been conducted between April 20 - 23, 2009 and September 23 - 30, 2009 respectively.

CMD approved Quality Objectives (9001 - 2000) and Environmental Objectives (14001-2004) for the year 2009-10 had been communicated to all the Functional Areas for implementation.

A Core Group has been formed by CMD for preparing ISO 9001:2008 Apex Manual / QCPs in the respective Functional Areas for renewal certification which is due by November 2010.

MEMORANDUM OF UNDERSTANDING

The Company entered into MOU with DOF, GOI for the year 2010-11 on March 15, 2010 setting out Targets for Performance of the Company in terms of Production, Sales and other parameters.

VIGILANCE

Preventive vigilance with a stress on adherence to the set rules and procedures and transparency & accountability, is the main objective of the Vigilance Department. Direction / guidance is provided to the Management based on the Circulars / Guidelines received from the Central Vigilance Commission from time to time.

In compliance with the recommendations of the Central Vigilance Commission, the following activities were completed during the year.

- Complaints received were attended and reports submitted

- Vigilance Awareness Week observed

- Property returns of Officers scrutinized

- Outstanding from dealers due to dishonour of cheques monitored

- Implementation of Leveraging Technology / Amendment to Service Policies and Purchase Manual pursued

- Monitoring implementation of Leveraging technology

- High Value Contracts reviewed

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Manpower & Training

The total strength of MFL as on 31.03.2010 is 802 as against 847 for the period ending 31.03.2009. 494 employees have been trained on Behavioural & Technical subjects and 214 employees have been re-trained on the above subjects during the year 2009-10.

Voluntary Retirement Scheme

Two Employees availed Voluntary Retirement Scheme during 2009-10. The Company plans to reduce the manpower further during the current year through rationalization in all the Functional Groups, except Plant, where shortage of manpower has been severe.

INDUSTRIAL RELATIONS

During the year 2009-10, the overall Industrial Relation situation in the Company has been normal and cordial.

OFFICIAL LANGUAGE IMPLEMENTATION

MFL has been continuously exceeding the target fixed by Department of Official Language for letter correspondence in Hindi and other implementation programmes.

Hindi Fortnight was celebrated during September 2009 at Head Office and Regional Offices. Various competitions were organized and prizes were distributed to the winners.

Two batches of Spoken Hindi Classes were conducted during the period April to July 2009 and January to March 2010.

The First Sub-Committee of the Committee of Parliament on Official Language carried out its Inspection at MFL on Oct 29, 2009 and reviewed the implementation of Official Language.

SC/ST WELFARE ACTIVITIES

The Presidential Directives and various guidelines issued by the Government of India relating to the welfare of SCs / STs were scrupulously followed during the year. A Liaison Officer nominated for this purpose ensures implementation of Government Directives.

As of 31.03.2010, the number of employees belonging to SC/ST category is 190, which constitutes around 23.69% of the total strength of the employees as could be seen from the table furnished below:

Group Total SC Employees ST Employees

Employees Number % Number %

A&B
Statutory

Requirement 15.00 7.50

C&D

(GrltoV) 321 107 33.33 1 0.31

Statutory

Requirement 19.00 1.00



Presently, MFL is in the process of downsizing its existing manpower through VRS. However, MFL has been constantly reviewing the vacancies reserved for SC/ST, and taking concerted efforts to fill up such vacancies.

DIRECTORS

Government of India have appointed Dr V Rajagopalan, IAS, Additional Secretary & Financial Advisor, DOF in place of Shri Sudhir Bhargava, IAS, on the Board of the Company effective May 3, 2010.

The Board placed on record the valuable and outstanding contributions for the substantial development of the Company made by the outgoing Director Shri Sudhir Bhargava, IAS during his tenure as Director on the Board.

AUDITORS

The Government of India have appointed M/s Venkatram & Co., Chartered Accountants, Chennai as Statutory Auditors of the Company for the year 2009-10.

STATUTORY INFORMATION

No employee was in receipt of remuneration for any part of the year at a rate which is more than Rs 2 lacs permonth as provided under Section 217 (2A) of the Companies Act, 1956.

The data on Conservation of Energy, Technology Absorption. and Foreign Exchange Earnings and Outgo in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 are given in the Annexure-I forming part of this report.

Directors Responsibility Statement as required under Section 217 (2AA) of the Companies Act, 1956 as amended is furnished in Annexure-ll forming part of this report.

Management Discussion and Analysis Report, as required under Listing Agreement is enclosed as Annexure-ll! forming part of this report.

Certificate received from the Auditors of the Company regarding compliance of Corporate Governance guidelines of SEBI as required under Listing Agreement is enclosed as Annexure-IV forming part of this report.

Declaration affirming compliance with the code of conduct pursuant to clause 49 of the Listing Agreement is enclosed as Annexure V forming part of this report.

APPRECIATION

Your Directors wish to place on record their appreciation for the continued unstinted support of Government of India, Department of Fertilizers, Government of Tamilnadu, NICO, Financial Institutions, Banks, Depositors and all stakeholders during the year. Your Directors further convey their gratitude to the Department of Fertilizers for the settlement of subsidy bills on priority basis and to the dealers and farmers for their sustained support to the Vijay products. Your Directors also place on record their appreciation for the dedication, commitment and sincere services rendered by all employees, in the most difficult times.

By order of the Board

Chennai M Sagar Mathews

19.05.2010 Chairman & Managing Director

 
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