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Directors Report of Southern Petrochemicals Industries Corporation Ltd.

Mar 31, 2015

Dear Members,

The Directors present their 44th Annual Report together with the Audited Financial Statement of the Company for the year ended 31 March 2015.

FINANCIAL SUMMARY (Rs. in Crores) Particulars 31.03.2015 31.03.2014

Revenue from operations 2094.16 1345.47

Add: Other income 8.64 8.48

Total Income 2102.80 1353.95

Profit before interest, depreciation 76.23 45.74 and tax

Less: Finance cost 28.26 20.92

Less: Depreciation and 30.39 43.67 amortisation expense

Add: Exceptional items - 84.71

Profit Before Tax 17.59 65.86

Less: Tax expenses - -

Profit After Tax 17.59 65.86

DIVIDEND

In view of the accumulated losses, the Board of Directors are not in a position to recommend dividend on the Preference Share Capital and Equity Share Capital of the Company.

RESERVES

There is no transfer of profits to the reserves.

STATE OF COMPANY'S AFFAIR Production

During the year under review, the plant had a steady run between 1 April 2014 to 30 September 2014 and again between 11 January 2015 to 31 March 2015. The stoppage of plant for 102 days was mainly due to delay in Government according approval for continuation of subsidy for Naphtha based Urea Plants. Urea production achieved during the year 2014-15 was 491,405 MTs compared to 285,923 MTs in the previous year.

Your Company earned a profit before tax of Rs.17.59 crores during the year under review and the performance would have been much better but for the stoppage of plant. Efforts are continuously being made to augment working capital to enable sustained operations of your Ammonia and Urea Plants. The plant operations were carried out mainly by importing Naphtha and Furnace Oil. The reliability of plant operation is expected to improve with the commissioning of a Naphtha Handling Facility in the Tuticorin Port premises which will be taken on lease by your Company. During the shutdown of Ammonia and Urea plants in the third quarter of 2014-15, your Company undertook repairs and maintenance activities to improve reliability, energy efficiency levels and increase production.

Progress in conversion of ammonia plant from naphtha to gas:

Government is in the process of identifying the party to lay the gas pipe line from Ennore to Tuticorin. Meanwhile, the Department of Fertilizers has permitted the Naphtha based Urea plants to run on Naphtha till such time the gas connectivity is established; but with a cap on the Naphtha price which is linked to the average delivered RLNG (Re-gasified Liquefied Natural Gas) price to the recently converted plants. Your Company is in a state of readiness to complete the process of conversion activities to use natural gas / mixed feedstock as and when gas connectivity / availability is established.

PUBLIC DEPOSITS

There are no deposits covered under Chapter V of the Companies Act, 2013 ("the Act") during the year 2014-15, the details of which are required to be furnished.

FINANCIAL STATEMENT OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

Pursuant to Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of the Company's subsidiaries', associates' and joint ventures' (in Form AOC-1) is attached to the Financial Statement. As regards the annual accounts of subsidiaries, refer Notes to the Form AOC-1. During the year under review, no company has become or ceased to be subsidiaries, associates and joint ventures companies.

The Board had approved the policy on Material Subsidiary as per the Listing Agreement and is available on the Company's website under the web link:

http://www.spic.in/Determining%20Material%20Subsidiary%20 Policy.pdf

CONSOLIDATED FINANCIAL STATEMENT

The Consolidated Financial Statements of the Company are prepared in accordance with Section 129 (3) of the Act and relevant Accounting Standards Viz., AS-21 (Consolidated Financial Statements), AS-23 (Accounting for Investment in Associates in Consolidated Financial Statements) and AS-27 (Financial Reporting of Interests in Joint Ventures) issued by the Institute of Chartered Accountants of India and forms part of the Annual Report.

SAFETY, HEALTH AND ENVIRONMENT

Adequate care and attention have been bestowed on matters relating to safety, health and environment in the plant. Your Company has bagged 4 safety awards from Director of Industrial Safety and Health at a function held in Chennai in November 2014, for the lowest accident days during the previous years. Certification of ISO 9001 and ISO 14001 stage audit by External Auditors M/s. Det Norske Veritas (DNV) have been completed and your Company is certified for ISO 9001 and ISO 14001.

HUMAN RESOURCE AND INDUSTRIAL RELATIONS

The Company considers its human resources as important asset and endeavours to nurture, groom and retain talent to meet the current and future needs of its business. The Company continues to provide a conducive work environment and opportunities for professional development of its employees through training and development. Industrial Relations in the Company have been cordial during the year under review. The number of employees as on 31st March, 2015 is 517.

EXTRACT OF ANNUAL RETURN

Form MGT-9 as on 31st March 2015 as required under Section 92 of the Act is given in Annexure - I to this Report.

DIRECTORS

The Board of Directors, pursuant to Section 149 of the Act and on the recommendation of the Nomination and Remuneration Committee appointed Tmt Sashikala Srikanth and Brig (Retd) Harish Chandra Chawla as Independent Directors on 8th September 2014 and Mr. Sumanjit Chaudhry on 10th February 2015 for a period of five years subject to the approval of the Members. The Board of Directors at their Meeting held on 14th November 2014 appointed Tmt G Latha I.A.S, Nominee of TIDCO as an Additional Director of the Company. Thiru S R Ramakrishnan, Whole-time Director is liable to retire by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-election. Thiru K K Rajagopalan, Whole-time Director resigned from the services of the Company and also as a Director with effect from 30th September 2014. The Directors placed on record the appreciation for the invaluable services rendered by Thiru K K Rajagopalan during his tenure as Whole-time Director of the Company.

Particulars relating to the appointment of Thiru S R Ramakrishnan, Tmt Sashikala Srikanth, Brig (Retd) Harish Chandra Chawla, Thiru Sumanjit Chaudhry and Tmt G Latha I.A.S are given in the annexure to the Notice.

All the Independent Directors of the Company on the date of this Report have duly submitted the disclosures to the Board stating that they fulfil the requirements enumerated under Section 149 (6) of the Act and Listing Agreement, so as to qualify themselves to be appointed as Independent Directors.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

Documents/Brochures, Reports and Internal Policies of your Company are provided to the Directors to familiarise with the Company's procedures and practices. Presentations are made at the Board/Committee Meetings, on Company's performance, business strategy, risks involved and global business environment. Presentations are also made to the Independent Directors separately on the Company's business segments. Site visits to plant location were organized to help the Independent Directors to enhance their understanding of the operations of the Company. The details of such familiarization programmes for Independent Directors are available on the Company's website under weblink:

http://www.spic.in/Familiarisation%20Program%20for%20

Independent%20Directors.pdf

KEY MANAGERIAL PERSONNEL

During the year under review, the following changes took place in the appointment / resignation of the Key Managerial Personnel (KMP) of your Company:

Sl. Name of the KMP Designation No Appointed as Whole-time 1 S R Ramakrishnan Director w.e.f 30 July 2014

Ceased to be Whole-time 2 K K Rajagopalan Director and Director from 30th September 2014

Appointed as Chief Financial Officer w.e.f. 1st 3 A V Kumar June 2014 in the place of Mr. M S Sridhar, CFO



NOMINATION AND REMUNERATION POLICY

Your Company has a Nomination and Remuneration Policy for appointment and remuneration of the Directors, Key Managerial Personnel and Senior Executives of the Company including criteria for determining qualifications, positive attributes, independence of a Director and other related matters as required under Section 178(3) of the Act and the Listing Agreement. The details of the Policy are given in Annexure - II to this Report.

PARTICULARS OF REMUNERATION OF DIRECTORS, KMP AND EMPLOYEES

The information required under section 197(12) of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and forming part of the Board's Report for the year ended March 31,2015 is given in Annexure - III to this Report.

STATUTORY AUDITORS

At the 43rd Annual General Meeting (AGM) held on 8th September 2014, M/s. Deloitte Haskins & Sells, Chartered Accountants, were appointed as Statutory Auditors of the Company to hold office until the conclusion of the 45th AGM of the Company. The Company has received a certificate from the Auditors to the effect that it would be in accordance with the provisions of Section 141 of the Act if they are re-appointed at the 44th AGM. In terms of Section 139 of the Companies Act, 2013, the appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company shall be ratified by the Members at every AGM and the resolution seeking ratification is being proposed.

DIRECTOR'S REPLY TO AUDIT QUALIFICATION Audit Qualification-I

Attention is invited to Note 2(b)(i) to the consolidated financial statements describing non consolidation of the financial statements of a subsidiary to reflect the adjustments relating to the period 1 April 2011 to 31 March 2015, as the said financial statements are not available to the Company for the reasons explained in the said Note. Our audit report for the previous year was also similarly qualified.

Reply

As Jebel Ali Free Zone Authorities (JAFZA) had taken over the assets of SPIC Fertilizers and Chemicals (SFC) FZE, Dubai, the holding Company SFCL Mauritius lost control over the subsidiary. Full provision has been made for these investments in earlier years. The Company is considering writing off the investments in SFCL Mauritius and is in the process of getting the approval of the Regulatory Authorities concerned, to write off the aforesaid investment in the books of account. The accounts relating to the subsidiary company, SFCL Mauritius included, in the consolidated financial statement is as at 31 March 2011 which are based on Management accounts and since the financial statements from 1 April 2011 to 31 March 2015 are under preparation, adjustments, if any, to liabilities, in the consolidated financial statement for the said period has not been made in respect of these two subsidiaries.

For the reasons mentioned in Note 2(b)(i) of the Notes to the Consolidated Financial Statements since the Company has already made provision in full for the said investment, the proposal to write off, subject to requisite approval of Regulatory Authorities concerned is not likely to affect the financial statements of your Company. Subsequent to the date of the Statutory Auditors' Report, the annual accounts of SFCL, Mauritius for the year ended 31 March 2010, 31 March 2011, 31 March 2012 and 31 March 2013 were approved by the Directors of SFCL Mauritius on 29th May 2015 and also adopted by their Shareholders on 2nd June, 2015.

Audit Qualification-II

With respect to a jointly controlled entity, the consolidated financial statements carry long term loans and advances amounting to Rs. 211.59 lac, short term loans and advances of Rs.578.93 lac and current liabilities of Rs. 160.86 lac relating to the consolidated financial statements of the subsidiary company - Certus Investment & Trading Limited, Mauritius and its two subsidiaries.

Based on the disclaimer of opinion given by the independent auditors of the subsidiary of the jointly controlled entity, Certus Investment & Trading Limited, Mauritius, we are unable to express our opinion on the long term loans and advances amounting to Rs. 211.59 lac, short term loans and advances of Rs.578.93 lacs and current liabilities amounting to Rs. 160.86 lac included in the consolidated financial statements.

Reply

The Board of Directors of Tamilnadu Petroproducts Limited, a jointly controlled entity have given the following reply with reference to the qualification made by their Statutory Auditors:

"As regards the short term advance of Rs.3419.54 lakhs (proportionate share of Rs.578.93 lakhs) carried in the Consolidated Financial Statement (CFS), it has been confirmed that as on date the subsidiary has recovered the entire dues. As regards the long term loans and advances of Rs.1249.80 lakhs (proportionate share of Rs.211.59 lakhs) in the CFS, which represent the advance paid to the technology partner for knowhow, there is time till December 2016 to avail the same. It is also being explored if the rights can be transferred to other interested parties and hence at present no adjustment is deemed necessary.

In the light of the above, it is expected that these matters will have no impact on the Consolidated Financial Statement."

COST AUDITOR

Thiru P R Tantri, Cost Accountant was appointed as the Cost Auditor of the Company for 2014-15 to carry out the audit of your Company's cost accounts and records. The Cost Audit Report for the year ended 31st March 2014 was filed within the time stipulated under the Act. The Board of Directors, on the recommendation of the Audit Committee, have appointed Thiru P R Tantri, Cost Accountant as Cost Auditor to audit the cost accounts and records of the fertilizer business of your Company for the Financial Year 2015-16 at a remuneration of Rs.1,00,000/- plus reimbursement of actual out-of-pocket expenses for travelling and other expenses. As required under Rule 14 of the Companies (Audit & Auditors) Rules, 2014, approval of Members is sought for the payment of remuneration to the Cost Auditor.

SECRETARIAL AUDIT REPORT

Secretarial Audit under Section 204 of the Act, for financial year 2014-15 was conducted by Ms. B Chandra, Practicing Company Secretary, Chennai. The Secretarial Audit Report as furnished is given as Annexure - IV to this Report. There are no qualifications, reservations or adverse remarks made by the Secretarial Auditor in the Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in Section 134 (3) of the Act, your Directors to the best of their knowledge and belief and according to information and explanations obtained from the management, confirm that:

(a) in the preparation of the annual financial statements for the year ended March 31, 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

(b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2015 and of the profit of the Company for the year ended on that date;

(c) the Directors have taken proper and sufficient care 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;

(d) the Directors have prepared the annual accounts on a going concern basis;

(e) the Directors have laid down proper internal financial controls to be followed by the Company and such controls are adequate and operating effectively;

(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

PARTICULARS OF LOAN, GUARANTEES OR INVESTMENTS

There were no loans, guarantees or investments made by the Company under Section 186 of the Act during the year under review.

RELATED PARTY TRANSACTIONS

The transactions entered into during the financial year with related parties as defined under the Act were in the ordinary course of business and at arm's length basis. There are no material contracts / arrangements / transactions to be disclosed. Hence the provisions of Section 188 of the Act would not apply and disclosure in form AOC-2 is not required.

The approval of the Members is being sought at the 44th AGM for the transactions considered material as per Clause 49 of the Listing Agreement. The policy on Related Party Transaction as required under the Listing Agreement is available on the Company's website under the weblink: http://www.spic.in/Policy%20on%20Related%20Parties.pdf.

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no material changes or commitments affecting the financial position of your Company that has occurred between the end of the financial year i.e., 31st March 2015 and the date of this Report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Conservation of Energy

An Energy Audit group, consisting of senior executives and certified energy auditors, is focusing on various energy saving measures. This group identifies potential areas for improvement, scans the environment for innovative and reliable solutions and considers proposal for implementation. Efforts are continuously being taken to reduce energy consumption in the plants.

Some of the activities implemented during the year are:

- To avoid the energy loss through the exchangers, the coolers of loop refrigeration condenser (bottom), the material of construction has been upgraded with Duplex Stainless steel make. Similarly, syn gas coolers (I/II Stage) & PAC intercooler (III Stage), the material of construction has been upgraded with Austenitic Stainless steel make in the Ammonia plant.

- To prepare the plant towards natural gas operation, all the reformer and fired heater - burners were replaced with dual fuel fired burners. These burners were designed for higher efficiency and lowest emission.

- To reduce the stack temperature and to conserve energy, tubes of the leaky cold air heater bundles of Ammonia plant boilers (3 boilers) were replaced.

- As energy conservation activity, two of the old generation cooling tower cells have been replaced in the Ammonia plant.

- Performance of all pumps and compressors were studied with our energy Audit group. Various energy saving technologies like provision of VFD, speed reduction, impeller trimming and smoothening the fluid passage with special coatings were implemented.

Technology Absorption - Nil

Foreign Exchange Earnings and Outgo:

The foreign exchange earned in terms of actual inflows and the foreign exchange outgo in terms of actual outflows during the year: Rs.in Lakhs Particulars 2014-15 2013-14

Foreign Exchange earned 35.87 66.67

Foreign Exchange outgo 1,44,982.17 80,920.17

INTERNAL FINANCIAL CONTROL & RISK MANAGEMENT SYSTEM

The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed by the Audit Committee of the Board, for identification of deficiencies and necessary time bound actions are taken to improve efficiency at all the levels.

The Committee also reviews the internal auditors' report, key issues, significant processes and accounting policies.

Risk Management is an integral part of the business process. The Company has constituted a Risk Management Committee and adopted a policy on risk management, identified and drawn mitigation plans to manage risk. The Audit Committee of the Board reviews the risk management report periodically.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

CORPORATE SOCIAL RESPONSIBILITY

As a responsible corporate citizen, your Company in its endeavour to contribute for the sustained development and growth of the Society has set out in its Corporate Social Responsibility (CSR) Policy, plans in line with the provisions of the Act and the Rules thereon. The details of CSR initiatives undertaken by your Company is given in Annexure - V to this Report

PERFORMANCE EVALUATION OF THE BOARD, COMMITTEES AND DIRECTORS

The Board on recommendation of the Nomination and Remuneration Committee has structured a framework for evaluation of the Individual Directors, Chairperson, Board as a whole and its Committees.

The Independent Directors at their Meeting held during March 2015 evaluated the performance of Non Executive Directors, Chairperson and assessing the quality, quantity and timeliness of flow of information between the Company Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

The evaluation of the Directors and the Board as a whole and its Committees were done through circulation of questionnaires, which assessed the performance on select parameters related to roles, responsibilities and obligations of the Board and functioning of the Committees. The evaluation criterion was based on the participation, contribution and offering guidance to and understanding of the areas which are relevant to the Directors in their capacity as Members of the Board/Committees.

NUMBER OF MEETINGS OF THE BOARD

During the year under review, six Board Meetings were held on 28th May 2014, 30th July 2014, 8th September 2014, 14th November 2014, 10th February 2015 and 24th March 2015.

AUDIT COMMITTEE

The Audit Committee comprises of 4 Members with 3 Independent Directors and 1 Non-Executive Director viz.,

Name of the Director Designation Category

Thiruvalargal S Shankar Chairman Independent

B Narendran Member Independent

Tmt Sashikala Srikanth Member Independent (w.e.f. 8th Sept 2014)

T K Arun Member Non-Executive

VIGIL MECHANISM

Pursuant to the provisions of Section 177 (9) and (10) of the Act and the Listing Agreement, Whistle Blower Policy for Directors and employees to report genuine concerns or grievances is put in place and a Vigil Mechanism established, the details of which are available on the website of the Company under weblink: http://www.spic.in/Whistle%20Blower%20 Policy%20and%20Vigil%20Mechanism.pdf.

POLICY ON INSIDER TRADING

Your Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company in line with SEBI (Prohibition of Insider Trading) Regulations, 2015.

POLICY ON SEXUAL HARASSMENT OF WOMEN (POSH) AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules framed thereunder. An Internal Complaints Committee has been constituted and Orientation Programmes were conducted in the Registered Office and the Plant site at Tuticorin, for all female employees. The Members of the committee also attended a Workshop conducted by CII's Women Network to familiarize themselves with practices and procedures. There were no complaints reported under the POSH.

MANAGEMENT DISCUSSION AND ANALYSIS Industry Overview

Indian Fertilizer Industry has been the backbone of Indian agriculture since the era of green revolution in 1960s. It has emerged as a world class industry in terms of state-of-the-art production technologies, high energy efficiency with excellent record in the areas of safety and environment supporting the ever growing demand for food grain.Currently, India is the second largest consumer of fertilisers and third largest producer of nitrogenous and phosphatic fertilisers in the world.

For the year 2014-15 crop year (July - June period), India is expected to record a decline in food-grain production of 3% at 257.07 MT, compared to the highest ever food-grain production of 265.57 MT in 2013-14. The decline is due to lower production of rice, coarse cereals and pulses on account of erratic rainfall conditions during the monsoon season in 2014. Despite the indigenous production and import of fertilisers which is on the rise, there is still a huge deficit in indigenous production of fertilisers to meet the agricultural needs of Indian farmers. The urea production for 2014-15 was 225.85 lakh MT as compared to 227.15 lakh MT in the previous year while the GoI has imported 72.89 lakh MT during 2014-15 compared to 70.88 lakh MT in 2013-14. (Source - Press Information Bureau, Ministry of Chemicals and Fertilizers, GoI).

Globally, the nitrogenous fertiliser raw material prices have been on a declining trend over the last one year. A comparison with the margins of 2013-14 fiscal year shows that Indian fertilisers companies have started reflecting the comfort of lower crude oil prices. Also, the volatility in INR against USD throughout the year enabled the companies to insulate from facing large fluctuations in the forex market. With falling crude oil and natural gas prices, the quantum of subsidy will come down. This factor along with growing demand for fertilisers might benefit the fertiliser companies.

Challenges

During the year under review, your company did face some uncertainties/challenges in the policy front due to delays in the notification of subsidy continuation resulting in the stoppage of the plants for 102 days. In the coming years Naphtha based Urea units, would continue to face uncertainties for continuous operation; especially in the procurement of Naphtha and Furnace Oil since the price of gas to be considered for eligible subsidy would not be known in advance. The frequent start- stop of an Ammonia/Urea complex due to uneconomical price of Naphtha/Furnace Oil can be a deterrent in addition to detrimental effects on the catalysts and equipment operating at high temperatures and pressures. This would disrupt the availability of much needed fertilizers. Hence your Company has flagged the above issues to the GoI.

Regarding gas connectivity to your plant, Indian Oil Corporation has been short listed by PNGRB (Petroleum and Natural Gas Regulatory Board) to lay the Gas pipeline from Ennore to Tuticorin via Ramnad. Once the contract is formally awarded, the Tuticorin - Ramnad section is likely to be completed on priority in about 15 months time. This would help your company to source about 0.6 - 0.9 MMSCMD of gas from ONGC, ahead of the completion of IOC LNG Terminal at Ennore in mid 2018.

Since the Government has proposed to reduce the pre-set energy norm to 6.5 G Cal/MT of urea by 2018 from the present norm of 7.382 G Cal/MT, your Company on a priority basis, has already initiated corrective action to bring down the energy consumption.

During the current year (201 5-1 6) the budget allocation for subsidy for indigenous urea is only Rs.34000 crore against Rs.36200 crore allocated last year. If we factor in the carry over liability of last year, increase in domestic gas price and the exchange rate fluctuations, there could be an adverse impact on the disbursement of Urea subsidy and consequently managing the working capital needs would be a challenge.

ACKNOWLEDGEMENT

Your Company is grateful for the co-operation and continued support extended by the Department of Fertilizers, Ministry of Chemicals and Fertilizers, Ministry of Petroleum and Natural Gas, Ministry of Agriculture, Ministry of Corporate Affairs and other Departments of the Central Government, the Government of Tamilnadu, Governments of other States, Tamilnadu Industrial Development Corporation Limited, Tamilnadu Generation and Distribution Corporation Ltd, Financial Institutions and Banks. The Directors appreciate the dedicated and sincere services rendered by all the employees of your Company. For and on behalf of the Board of Directors ASHWIN C MUTHIAH Place : Chennai (DIN:00255679) Date : 4 August, 2015 Chairman




Mar 31, 2014

The Directors present their 43rd Annual Report together with the audited statement of accounts of the Company for the financial year ended 31 March 2014.

OPERATING RESULTS (Rs. in Crore)

2013-14 2012-13

Income from Operations 1345.47 2076.08

Other Income 8.48 15.44

Total Income 1353.95 2091.52

Profit before interest, depreciation and tax 45.74 34.83

Finance Cost 20.92 44.00

Depreciation 43.67 43.45

Exceptional items 84.71 1157.75

Profit before tax 65.86 1105.13

Provision for tax – –

Profit/ (Loss) after tax 65.86 1105.13

In terms of the Company''s Scheme of Compromise and Arrangement with Creditors under Sec. 391 and other relevant provisions of the Companies Act, 1956 approved by the Hon''ble Hight Court of Madras by its Order dated 16 August 2012, the Creditors under the Scheme as of 1 April 2013 were to be paid over a period of 46 quarterly instalments from 6 Jan 2013 with an option to prepay the settlement amount at any time after the expiry of two years from the date of commencement.The Hon''ble High Court of Madras vide its Orders dated 26 Aug 2013 and 6 Dec 2013 permitted the Company to exercise pre-payment option even before the expiry of two years.The Company thereafter effected fi nal payments by March 2014 to all the remaining Creditors in accordance with the approved Scheme, leaving no further liability. Arising out of the above settlement, a sum of Rs.9158.61 lakhs was settled to the Creditors in line with the Scheme. Consequently, a sum of Rs.11692.51 lakhs being the excess liability has been written back during the current year as an exceptional item. The Trust Deed dated 2 Jan 2013 executed by the Company to create charge in favour of such remaining Creditors on the Specified Assets through the Trust was terminated effective 27 March 2014, consequent to payment to Creditors in full as per the Scheme.

Production

During the year under review, the plant could not be run continuously on account of working capital constraints and raw-material shortage. The plant was shutdown from the beginning of the financial year for a period of 106 days till 15 July 2013 and from 30 October 2013 to 8 February 2014. Working Capital constraints caused by delayed subsidy disbursement issues affected raw materials supply. These factors affected the production performance of your Company. Urea production achieved during the year 2013-14 was 2,85,923 MTs compared to 4,81,920 MTs in the previous year. Efforts are being made to augment working capital to enable sustained operations of your Company''s Ammonia and Urea plants.

The previous year''s profits included a write-back of excess liability of an exceptional nature of Rs.1157.75 Crores to the Statement of Profi t & Loss and a corresponding write-back of Rs.116.92 Crores to the Statement of Profit & Loss has been made on account of full and fi nal settlement with Creditors under the Scheme. Hence, the comparable profi t before tax for the current year would be Rs.65.86 Crores as against Rs.1105.13 Crores for the previous year.

Promoters'' contribution:

During the year, the Promoters have brought in Rs.28.35 Crores by way of loan for meeting re-payment obligations to the Creditors as per the Scheme.

Conversion of Ammonia plant from Naphtha to Gas:

Study for converting the Feedstock of Ammonia plant from Naphtha to Mixed Feedstock (Natural Gas/Naphtha with any combination) and the basic engineering have been completed with the detailed engineering nearing completion. Procurement activity for long lead items is in progress. Civil Foundation for long lead items has been completed. However, in the absence of fi rm allocation of gas, carriers are averse to commit huge capital in laying pipeline for transporting gas to your Plant. The Department of Fertilizers is also seized of the matter.

As per the New Pricing Scheme III introduced by Dept. of Fertilizers, all Naphtha based urea producing fertilizer plants are required to switch over to gas to avail any subsidy beyond 30 June 2014. Representations have been made to Government of India to continue disbursing subsidies till such time Government of India allocates gas on assured basis to the plant and switch over to gas based production. The representation is under consideration of the Government of India.

Agri-business Division

The performance of the Division which was affected by acute power shortage achieved a turnover of Rs.5.58 Crores as against Rs.13.85 Crores in the previous year.

SUBSIDIARIES / JOINT VENTURES / INVESTMENTS

SPEL Semiconductor Limited (SPEL)

SPEL accounted sales of Rs.63.39 Crores with a profit of Rs.0.32 Crores for the year 2013-14.

Subsequent to the approval of the shareholders in the Extra Ordinary General Meeting on 30 Dec 2013, and as approved by SEBI, the entire equity shares of SPEL held by the Company were sold to M/s Natronix Semiconductor Technology Private Limited, Singapore at Rs.7.62 per share for a total consideration of Rs.1966.81 lakhs.

Tamilnadu Petroproducts Limited (TPL)

During the year 2013-14 TPL''s revenue from operations was Rs.1051.82 crore against Rs.1281.42 crore in the previous year. TPL incurred a net loss of Rs.37.30 crore vis-a-vis the net loss of Rs. 50.56 crore during the year 2012-13. The Company made an operating profit of Rs. 5 crore against operating loss of Rs. 34 lakh in FY 2012-13. TPL''s operations continued to be affected due to large scale import of Linear Alkyl Benzene and Caustic soda into India. In spite of this TPL could bring down the losses through concerted efforts to cut the cost and also ensure the best possible market realization.

Tuticorin Alkali Chemicals and Fertilisers Limited

Due to non-availability of raw material and labour unrest, its Plant could be operated for only 62 days during the financial year, when 9775 MT of Soda Ash and 7672 MT of Ammonium Chloride were produced. Measures were taken to reduce the overheads and sales of only Rs.27 Crores could be achieved.

SPIC FERTILIZERS AND CHEMICALS LTD., MAURITIUS (SFCL, MAURITIUS) AND SPIC FERTILIZERS AND CHEMICALS FZE, DUBAI (SFC FZE)

The Company had invested in the equity share capital of SPIC Fertilizers and Chemicals Limited, Mauritius which in turn invested in its wholly owned subsidiary, SPIC Fertilizers and Chemicals (SFC) FZE, Dubai for putting up a fertiliser complex. As the Project did not materialise, Jebel Ali Free Zone Authority (JAFZA) in Dubai, had taken over the land, plant & machinery of SFC FZE and the company did not have any other option in the matter. The Promoters viz., SPIC and the Emirates Trading Agency, Dubai have jointly decided to close the operations of SFC FZE, Dubai.

SPIC Petrochemicals Limited (SPIC Petro)

The assets and effects of SPIC Petro were taken over by the Offi cial Liquidator (OL) during May 2010. Pursuant to Order dated 20 December 2010 passed by the Hon''ble High Court of Madras, ARCIL [Asset Reconstruction Company (India) Limited] took possession of the assets and effects of SPIC Petro during January 2011. On the application fi led by Chennai Petroleum Corporation Limited to set aside the above said Order, an interim stay was granted by the Hon''ble High Court of Madras restraining ARCIL from selling the land belonging to SPIC Petro. ARCIL had fi led its counter and the case is still pending in the Court.

General exemption under Section 212 of the Companies Act, 1956:

Pursuant to the general exemption granted to companies in the General Circular No.51/12/2007 dated 8 February, 2011 issued by the Ministry of Corporate Affairs, Government of India and the resolution passed by the Board of Directors at its meeting held on 28 May, 2014, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Company''s Annual Report. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the above said circular. The Company will make available the said documents to any Member of the Company, who may be interested in obtaining the same. The said documents will also be kept open for inspection by any Member of the Company / its subsidiary(ies), at the Registered Office of the Company and that of the respective subsidiary companies.

DIVIDEND

In view of the accumulated losses, the Board of Directors are not in a position to recommend dividend on the Preference Share Capital and Equity Share Capital of the Company.

SAFETY, HEALTH AND ENVIRONMENT

There have been no safety, health and environment issues in the plant. The Company was awarded fi rst prize in Group A (belongs to Industries working for more than 5 lakh man- hours in a year) by the State for the year 2010 and State Safety Award for 2012.

ISO 9001 and ISO 14001 stage audit by External Auditors have been completed and we await their certifi cation.

PUBLIC DEPOSITS

As on 31 March 2014, there were no outstanding public deposits.

HUMAN RESOURCE DEVELOPMENT

The Company considers its human resources as important asset and endeavours to nurture, groom and retain talent to meet the current and future needs of its business. The Company continues to provide a conducive work environment and opportunities for professional development of its employees through training and development.

INDUSTRIAL RELATIONS

Industrial Relations in the Company has been cordial during the year under review.

DIRECTORS'' RESPONSIBILITY STATEMENT

In accordance with the requirements of Section 217(2AA) of the Companies Act, 1956, the Directors of the Company declare that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 March 2014.

(iii) the Directors have taken proper and suffi cient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the Directors have prepared the annual accounts on a ''going concern'' basis.

AUDITORS

Your Company''s Auditors, Deloitte Haskins & Sells, Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

DIRECTORS

Since the date of the last Directors'' Report, Thiru M S Shanmugam, IAS, Nominee of TIDCO resigned as Director of the Company. The Board of Directors at their meeting held on 28 May 2014 accepted the resignation of Thiru M S Shanmugam, IAS. The Board of Directors placed on record the invaluable services rendered by Thiru M S Shanmugam, IAS during his tenure as Director of the Company.

Thiru B Elangovan, Nominee Director of TIDCO shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-election. Particulars relating to the appointment of Thiru B Elangovan seeking re-election at the ensuing Annual General Meeting are furnished in the annexure to the Notice. As required under the provisions of Companies Act, 2013, Thiru B Narendran and Thiru S Shankar have been proposed for appointment as Independent Directors for a period of 5 years from the date of 43rd Annual General Meeting.

The Board of Directors at their meeting held on 30 July 2014 co-opted Thiru S R Ramakrishnan as Additional Director and appointed him as Whole-time Director of the Company for a period of three years from 30 July 2014 on certain terms and conditions, subject to the approval of the shareholders and such other approval as may be required. Pursuant to Sec. 161 of the Companies Act, 2013, the term of his Office as Additional Director will be upto the ensuing 43rd AGM. It is therefore proposed to appoint him as Director, liable to retire by rotation and seek approval of the shareholders.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the National Stock Exchange of India Limited is presented in a separate section forming part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS21 on Consolidated Financial Statements read with Accounting Standard AS23 on Accounting for investments in associates in Consolidated Financial Statements and AS27 on Financial reporting of interests in Joint Ventures, the audited Consolidated Financial Statements are provided in the Annual Report. Jebel Ali Free Zone Authorities (JAFZA) had taken over the assets

of SFC FZE, Dubai. SPIC Petro is under liquidation as per Order dated 17 April 2009 passed by the Hon''ble High Court of Madras. Subsequently, ARCIL took possession of the assets from the Offi cial Liquidator on 4 January 2011. Therefore the financial statements of subsidiary companies, SFCL, Mauritius and SPIC Petro have not been considered for consolidation. However, full provision had already been made in the earlier years. The Consolidated Financial Statements include financial results of other subsidiary companies.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

In terms of Section 217(1)(e) of the Companies Act, 1956, read with Rule-2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988, information relating to conservation of energy is set out in the annexure forming part of this Report. There is no information to provide in respect of technology absorption, foreign exchange earnings and outgo and research and development.

PARTICULARS OF EMPLOYEES

Statement giving details of Employees of the Company in receipt of remuneration in excess of the amount prescribed by Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended is enclosed.

COST AUDITOR

Thiru P R Tantri, Cost Accountant, Bengaluru was appointed as the Cost Auditor of the Company for the financial year 2013- 14 pursuant to Section 233B of the Companies Act, 1956 to carry out the audit of your Company''s cost records. The Cost Audit report for the year ended 31 March 2013 certifi ed by Thiru P R Tantri was fi led on 30 September 2013 with the Ministry of Corporate Affairs.

ACKNOWLEDGEMENT

Your Company is grateful for the co-operation and continued support extended by the Department of Fertilizers, Ministry of Chemicals and Fertilizers, Ministry of Petroleum and Natural Gas, Ministry of Agriculture, Ministry of Corporate Affairs and other Departments of the Central Government, the Government of Tamilnadu, other State Governments, Tamilnadu Industrial Development Corporation Limited, Tamilnadu Generation and Distribution Corporation Ltd (formerly Tamilnadu Electricity Board), ARCIL, Financial Institutions and Banks. The Directors appreciate the dedicated and sincere services rendered by all the employees of your Company.

For and on behalf of the Board of Directors

Place : Chennai ASHWIN C MUTHIAH

Date : 30 July, 2014 Chairman


Mar 31, 2013

The Directors present their 42nd Annual Report together with the audited statement of accounts of the Company for the financial year ended 31 March 2013.

OPERATING RESULTS

(Rs. in crore) 2012-13 2011-12 Income from Operations 2076.08 3308.91

Other Income 15.44 13.79

Total Income 2091.52 3322.70

Profit before interest, depreciation and tax 34.83 161.06

Finance Cost 44.00 80.24

Depreciation 43.45 61.21

Excess Liability Written back 1157.75

Profit before tax 1105.13 19.61

Provision for tax 25.92

Profit/ (Loss) after tax 1105.13 (6.31)

To revive your Company which was affected over the years by under-performance of various investments and considering the need to protect the interest of the stakeholders and employees, a Scheme of Compromise and Arrangement was filed under Section 391 of the Companies Act, 1956 (SCHEME). The SCHEME was approved by the Hon''ble Madras High Court vide its Order dated 16 August 2012. Based on the options exercised by the creditors under the SCHEME, your Company has commenced payment of dues as per the settlement terms of the SCHEME. As of 31 March 2013 an amount Rs.132.76 crore has been paid to the creditors.

During the year under review, the plant could not be run continuously on account of working capital constraints, water and raw-material shortage. The plant was shutdown for a period of 53 days from August to October 2012, due to water shortage arising out of failure of monsoon and stoppage of water supply by Tamil Nadu Water Supply and Drainage Board. Working Capital constraints caused by subsidy disbursement issues affected raw materials supply and led to stoppage of plants from 2 March 2013 onwards to date. These factors affected the production performance of your Company. Urea production achieved during the year 2012-13 was 4,81,820 MTs only compared to 6,20,407 MTs in the previous year. Efforts are being made to augment working capital to enable commencement of operations of your Company''s Ammonia and Urea plants.

Your Company recorded a revenue of Rs.2076.08 crore and profit before tax of Rs. 1105.13 crore for the current year as against previous year''s revenue of Rs.3308.91 crore and profit before tax of Rs.19.61 crore. Previous year''s revenue also included revenue from operations of SPIC Maintenance Organisation and Phosphatics Division which were hived off during that year. Hence, the comparable numbers for the previous year would be a revenue of Rs.2455.15 crore and a loss before tax of Rs. 13.24 crore. During the year, there was a write back of excess liability of exceptional nature of Rs. 1157.75 crore to the Profit and Loss Account, on account of the settlement with creditors under the SCHEME. Your Company therefore posted a profit after tax of Rs. 1105.13 crore in comparison to a loss after tax of Rs.6.31 crore in the previous year.

Promoters'' contribution :

During the year, the Promoters brought in Rs.65.23 crore by subscribing to Warrants convertible into equity shares, issued on preferential basis and Rs.71.48 crore by way of loans for meeting the Working Capital requirement and payment obligations to the Creditors as per the SCHEME.

Fertilizer Policy - Conversion of Ammonia plant from Naptha to Gas:

As per the proposed "Modified NPS III Policy" for Urea, all Naptha / Fuel Oil based plants producing Urea will be given time till March 2014 to convert to Gas based plants. Your Company has therefore approached the Department of Fertilizers (DoF) for firm allocation of gas to the Unit and to get gas connectivity to the factory in Tuticorin by creating necessary infrastructure. The process involves modification of desulphurising and reforming sections of your Company''s Ammonia Plant, besides changing fuel burners to dual burners. To equip itself to receive the gas as and when the pipe line connectivity is established, land has been acquired and the basic engineering completed. Detailed Engineering is nearing completion and the procurement activity for long lead items has been initiated.

Pharmaceuticals Division

After acquisition of the Pen-G Unit by M/s Asset Reconstruction Company (India) Ltd and closure of the API Unit due to restrictions imposed by Pollution Control Board, the Pharmaceuticals Division had in its fold only the Formulations and Enzymes Units. However, due to low demand for Formulation products and uncertain power situation, the Formulations operations were discontinued from 2 April 2012. The Enzymes Unit was sold in December 2012 in view of the business becoming unviable.

Agri-business Division

The performance of the Division which was affected by acute power shortage achieved a turnover of Rs. 13.85 crore as against Rs. 15.21 crore in the previous year,

SUBSIDIARIES / JOINT VENTURES / INVESTMENTS

SPEL Semiconductor Limited (SPEL)

SPEL accounted sales of Rs.80.77 crore with a loss of Rs.4.55 crore for the year 2012-13. This was owing to global semiconductor sales for 2012 decreasing by 2.6% to US$ 299.9 Billion (according to Gartner Inc), due to poor market condition.

Tamilnadu Petroproducts Limited (TPL)

During the year 2012-13 TPUs revenue from operations was Rs.1281.42 crore against Rs. 1248.19 crore in the previous year. TPL incurred a net toss of Rs.50.56 crore vis-a-vis the net profit of Rs.5.94 crore during 2011-12. The company''s operations were affected mainly due to crude price increase, escalations in other input costs, dumping, higher cost of alternate power to meet energy shortage, exchange losses, etc. which could not be passed on to the customers on account of competition from overseas suppliers.

Tuticorin Alkali Chemicals and Fertilisers Limited (TAC)

During the year 2012-13, their Plant could be operated only for 235 days, primarily due to non-availability of Carbon-di- oxide from SPIC. The company produced 56,750 MTs of Soda Ash and 50,226 MTs of Ammonium Chloride, representing 49% capacity utilization. The turnover was Rs.155.91 crore with a net loss Rs.21.77 crore. BIFR (Board for Industrial and Financial Reconstruction) proceedings are in progress.

SPIC Fertilizers And Chemicals FZE, Dubai (SFC FZE) and SPIC Fertilizers And Chemicals Ltd., Mauritius (SFCL, Mauritius)

During the first quarter of the financial year 2010-11, as part of recovery process, the Jebel Ali Free Zone Authority (JAFZA) in Dubai, had taken over the land, plant & machinery of SFC FZE and the company did not have any other option in the matter. The Promoters, viz., SPIC and the Emirates Trading Agency, Dubai have jointly decided to close the operations of SFC FZE, Dubai.

SPIC Petrochemicals Limited (SPIC Petro)

The assets and effects of SPIC Petro were taken over by the Official Liquidator (OL) during May 2010, Pursuant to Order dated 20 December 2010 passed by the Hon''ble High Court of Madras. ARCIL [Asset Reconstruction Company (India) Limited] took possession of the assets and effects of SPIC Petro during January 2011. On the application filed by Chennai Petroleum Corporation Limited to set aside the above said Order, an interim stay was granted by the Hon''ble High Court of Madras restraining ARCIL from selling the land belonging to SPIC Petro. ARCIL has filed its counter and the case is still pending in the Court.

General exemption under Section 212 of the Companies Act, 1956:

Pursuant to the general exemption granted to companies in the General Circular No. 51/12/2007 dated 8 February 2011 issued by the Ministry of Corporate Affairs, Government of India and the resolution passed by the Board of Directors at its meeting held on 29 May 2013, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Company''s Annual Report. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the above said Circular. The Company will make available the said documents to any Member of the Company, who may be interested in obtaining the same. The said documents will also be kept open for inspection by any Member of the Company / its subsidiary(ies), at the Registered Office of the Company and that of the respective subsidiary companies.

PREFERENTIAL ALLOTMENT OF SECURITIES

1. During the year under review, in line with the rework package approved by Corporate Debt Restructuring Empowered Group,

- On 27 April 2012, 12,631 Equity Shares of Rs.10/- each at a premium of Rs.9/- per share, fully paid up were allotted to Industrial Investment Bank of India (IIBI) pursuant to the approval of the shareholders at the Annual General Meeting held on 16 November 2011, by way of conversion of debt of Rs.2.40 lac into equity. IIBI later assigned its financial exposure in the Company to M/s Edelweiss Asset Reconstruction Company Limited during July 2012.

- On 9 November 2012, 72,631 Equity Shares of Rs.10/- each at a premium of Rs.9/- per share, fully paid up were allotted to United India Insurance Company Limited pursuant to the approval of the shareholders at the Annual General Meeting held on 26 September 2012 by way of conversion of debt of Rs.13.80 lac into equity.

2. Your Company allotted equity shares to a company belonging to Promoters'' group, on preferential basis, pursuant to the approval of the shareholders at the Annual General Meeting held on 26 September 2012 as detailed below:

- On 10 January 2013, 74,55,350 Equity Shares of Rs.10/- each were allotted by way of part conversion of 1,49,10,700 Warrants that were issued on 11 October 2012;

- On 13 March 2013, 74,55,350 Equity Shares of Rs.10/- each were allotted by way of conversion of the balance 74,55,350 Warrants issued under (a) above; and

- On 13 March 2013, 2,23,66,000 Equity Shares of Rs.10/- each were allotted by way of full conversion of 2,23,66,000 Warrants that were issued on 7 March 2013 on receipt of requisite Exemption Order from SEBI.

DIVIDEND

In view of the accumulated losses, the Board of Directors are not in a position to recommend dividend on the Preference Share capital and Equity Share capital of the Company.

SAFETY, HEALTH AND ENVIRONMENT

Won Award for "Longest accident free man-hours worked for the year 2008", from National Safety Council, Tamilnadu Chapter. The online Ambient air quality monitoring system was erected and uploaded to Care Air Centre - Tamil Nadu Pollution Control Board.

DISCONTINUED OPERATIONS

Discontinuance of Formulations and Enzymes'' operations of Pharma Division are covered under ''Pharmaceuticals Division''.

PUBLIC DEPOSITS

As on 31 March 2013, there were no outstanding public deposits and the overdue unclaimed deposits covering 6 depositors, amounted to Rs. 0.52 lac.

HUMAN RESOURCE DEVELOPMENT

The Company considers its human resources as important assets and endeavours to nurture, groom and retain talent to meet the current and future needs of its business. The Company provides a conducive and challenging work environment and opportunities for professional development of its employees through training and development.

INDUSTRIAL RELATIONS

Industrial Relations in the Company has been cordial during the year under review.

DIRECTORS'' RESPONSIBILITY STATEMENT

In accordance with the requirements of Section 217(2AA) of the Companies Act, 1956, the Directors of the Company declare that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of. the Company as at 31 March 2013.

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the. Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the Directors have prepared the annual accounts on a ''going concern'' basis.

AUDITORS

Your Company''s Auditors, Deloitte Haskins & Sells , Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.

DIRECTORS

Since the date of the last Directors'' Report, Thiru M Jayasankar resigned as Director of the Company. The Board of Directors at their meeting held on 29 May 2013 accepted the resignation of Thiru M Jayasankar and in his place Thiru S Shankar was appointed as an Independent Director in the casual vacancy caused by the resignation. The Board of Directors placed on record the invaluable services rendered by Thiru M Jayasankar during his tenure as Director of the Company.

Thiruvalargal B Narendran and M S Shanmugam, IAS, Directors shall retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-election. In accordance with Clause 49 of the Listing Agreement, Particulars relating to the appointment of Thiruvalargal Narendran and Shanmugam, IAS seeking re-election at the ensuing Annual General Meeting are furnished in the annexure to the Notice.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the National Stock Exchange of India Limited is presented in a separate section forming part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS21 on Consolidated Financial Statements read with Accounting Standard AS23 on Accounting for investments in associates in Consolidated Financial Statements and AS27 on Financial reporting of interests in Joint Ventures, the audited Consolidated Financial Statements are provided in the Annual Report. Jebel AN Free Zone Authorities (JAFZA) had taken over the assets of SFC FZE, Dubai. SPIC Petro is under liquidation as per Order dated 17 April 2009 passed by the Hon''ble Madras High Court. Subsequently, ARCIL took possession of the assets from the Official Liquidator on 4 January 2011. Therefore the financial statements of subsidiary companies, SFCL, Mauritius and SPIC Petro have not been considered for consolidation. However, full provision had already been made in the earlier years. The Consolidated Financial Statements include financial results of other subsidiary companies.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

In terms of Section 217(1)(e) of the Companies Act, 1956, read with Rule-2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988, information relating to conservation of energy is set out in the annexure forming part of this Report. There is no information to provide in respect of technology absorption, foreign exchange earnings and outgo and research and development.

PARTICULARS OF EMPLOYEES

No employee of the Company was in receipt of remuneration in excess of the amount prescribed by Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules,1975, as amended.

COST AUDITOR

Thiru P R Tantri, Cost Accountant, Bengaluru was appointed as the Cost Auditor of the Company for the financial year 2012-13 pursuant to Section 233B of the Companies Act, 1956 to carry out the audit of your Company''s cost records. The Cost Audit report for the year ended 31 March 2012 certified by Thiru P R Tantri was filed on 31 January 2013 with the Ministry of Corporate Affairs.

ACKNOWLEDGEMENT

Your Company is grateful for the co-operation and continued support extended by the Department of Fertilizers, Ministry of Chemicals and Fertilizers, Ministry of Petroleum and Natural Gas, Ministry of Agriculture, Ministry of Corporate Affairs and other departments of the Central Government, the Government of Tamilnadu, other State Governments, Tamilnadu Industrial Development .Corporation Limited, Tamilnadu Electricity Board, ARCIL, Financial Institutions and Banks. The Directors appreciate the dedicated and sincere services rendered by all employees of your Company.

For and on behalf of the Board of Directors

Place : Chennai ASHWIN C MUTHIAH

Date :29May2013 Chairman


Mar 31, 2012

The Directors present their 41st Annual Report together with the audited statement of accounts of the Company for the financial year ended 31 March 2012.

OPERATING RESULTS

(Rs. in Crore)

2011-12 2010-11

Income from Operations 3308.91 1743.39

Other income 13.79 14.46

Total income 3322.70 1757.85

Profit before interest, depreciation 161.06 197.91 and tax

Finance Cost 80.24 26.98

Depreciation 61.21 88.95

Profit before tax 19.61 81.98

Provision for tax 25.92 -

Profit/(loss) after tax (6.31) 81.98

FINANCE

The Company recorded a revenue of Rs.3308.91 Crore and profit before tax of Rs.19.61 Crore as against previous year revenue of Rs.1743.39 Crore and profit before tax of Rs.81.98 Crore respectively. The Company's profit from ordinary activities before finance cost and exceptional items is Rs.71.59 Crore as against Rs.3.11 Crore in the previous year. The improvement in the profit is mainly due to Urea Plant operating at its full capacity coupled with energy efficiency measures undertaken by the Company. The Company incurred a loss of Rs.6.31 Crore in comparison to Profit after tax of Rs.81.98 Crore in the previous year. The loss is mainly due to provision for exchange currency fluctuation of Rs.61.75 Crore, Interest of Rs.34.46 Crore on delayed payment to secured lenders (included in the Finance Cost) and provision for MAT pertaining to earlier periods amounting Rs.25.92 Crore. The above results include both continuing and discontinuing operations.

The Company fi led a Scheme of Compromise and Arrangement with certain creditors u/s 391 of the Companies Act, 1956 during December 2011 before the Hon'ble High Court, Madras and pursuant to the directions of the Hon'ble High Court, the meeting of the creditors of the Company was held on 24 February 2012 at Chennai. The Scheme was approved by the requisite majority of creditors and thereafter the Company has fi led a Petition before the Hon'ble High Court, Madras for the sanction of the Scheme and the Order is awaited.

OPERATIONS:

Fertilizer Division

The Nitrogenous Plants which recommenced its operations during October 2010 achieved a production of 6.204 Lac MT (recording 100% of its re-assessed capacity). The Fertilizer division achieved a turnover of Rs.3096.96 Crore.(including other income) earning an operational profit (before exceptional items) of Rs.137.96 Crore. The results of the Phosphatic division, till divestment during October 2011, are included in the above results.

The production and sales performance of the Fertilizer Division are as follows:

Qty in MT

Product Category 2011-12 2010-11

Production 620407 #297650 Urea Sales 627442 290529

Production 106521* **31116

DAP Sales 106579* 30974

Complex Production 124377* 175566 Fertilizer Sales 127903* 171294

Production 490* 14528 SSP Sales 8751* 5074

Alf Production 2248* 3388 3 Sales 2228* 4656

Gypsum Sales 85667* 205371

*Until divestment # Production recommenced during October 2010 ** Production recommenced during November 2010 Fertilizer Policy

The Government is proposing to implement "Modified NPS III Policy" for Urea shortly and it is expected that all Naphtha and Fuel Oil based plants producing Urea will be granted time till March 2014 to convert to Natural Gas. Your Company has taken up with Department of Fertilizers (DoF) for firm allocation of gas to your Company and also for creating necessary gas transportation infrastructure in the State of Tamil Nadu to facilitate gas connectivity to your Company. The Company has engaged a leading Process Engineering Company to carryout basic engineering for gas conversion, to make your Company ready to receive the gas as and when the pipe line connectivity is established.

Pharmaceuticals Division

SPIC's Pharmaceuticals Division comprises of Penicillin-G (Pen-G), Active Pharmaceutical Ingredients (APIs), Formulations and Industrial Enzymes. Pen-G: The plant could not be restarted and the operations were discontinued due to competition from cheap Chinese imports, low market prices, high cost of inputs and non-imposition of anti-dumping duty. The assets of the division at Cuddalore were taken over by Asset Reconstruction Company (India) Limited (ARCIL) during the year. API: The operations have not been carried out during the year owing to environmental constraints and restrictions imposed by Pollution Control Board. Formulations: Due to low demand for its products and uncertain power situation, the operations have been discontinued. Enzymes: The operations are being discontinued in view of uneconomical business size and constraints of fund infusion for revival/restart-up of the operations.

Agri-business Division

The Division achieved higher turnover of Rs.15.21 Crore as against Rs.12.36 Crore in the previous year, due to increase in volume of high breed seed business.

SUBSIDIARIES/JOINT VENTURES/INVESTMENTS SPEL Semiconductor Limited (SPEL)

SPEL had accounted sales of Rs.80 Crore (excluding other income) with a PAT of Rs.0.57 Crore for the financial year 2011- 12. According to the Semiconductor Industry Association forecast, the year 2012 looks promising with a 10% growth. Global semiconductor revenues are expected to reach US$323.2 Billion up from US$302.2 Billion. SPEL is taking steps to enhance its sales for the financial year 2012-13 by exploiting the potential of the industry.

Tamilnadu Petroproducts Limited (TPL)

During the year, the Company achieved a turnover and a net profit of Rs.1309 Crore and Rs.5.94 Crore as compared to Rs.1066 Crore and a profit of Rs.29.47 Crore respectively during the previous year. The Company declared a dividend of 5% during the year. LAB production was maintained at high levels due to the installation of new molecular sieves in 2010. Despite unstable crude prices and power shortage, the reduction in energy consumption (due to energy audit, advance process control, etc.) and optimal use of raw materials helped in controlling the cost of production. The first phase of Prefrac revamp was completed during March 2012 and the benefi t will be realised from the second quarter of 2012-13. TPL continues to meet sizeable demand of the domestic market for LAB and supplies to major international detergent manufacturers. Epichlorohydrin (ECH) Unit performed reasonably well with a capacity utilisation of about 85%. The increase in the crude price was offset by increase in the sales realisation. TPL continues to supply a substantial portion of its production to the joint venture Company M/s Petro Araldite Private Limited. The imports of ECH and Epoxy Resin from European markets add to the competition in the market. Chlor Alkali Unit performed better with the capacity utilisation exceeding 90%. The power shortage, increase in power cost, high crude prices and fuel oil prices, adversely impacted the business.

Tuticorin Alkali Chemicals and Fertilisers Limited (TAC)

Since the restart of the plants last year, TAC continued the production and fine tuned the operational parameters to bring down the production cost. The Company produced 86,855 MT of Soda Ash and 78,350 MT of Ammonium Chloride representing 75.7% capacity utilization. The Company recorded a total income of Rs.217.49 Crore with a net loss of Rs.12.79 Crore. Competition from import touching an all time high has affected the market. BIFR proceedings are in progress and a Draft Rehabilitation Scheme (DRS) is under process.

SPIC Fertilizers And Chemicals FZE, Dubai (SFC FZE) and SPIC Fertilizers and Chemicals Ltd., Mauritius (SFCL, Mauritius)

During the fi rst quarter of the Financial Year 2010-11, as part of recovery process, the Jebel Ali Free Zone Authority (JAFZA) in Dubai, had taken over the land, Plant & Machinery of SFC FZE and the Company did not have any other option in the matter. Simultaneously, the Plant & Machinery stored in the Ras Al Khaimah Port (RAK) were auctioned to realise the storage charges payable to the RAK Port Authorities. The Promoters viz., SPIC and the Emirates Trading Agency, Dubai have jointly decided to close the operations of SFC FZE, Dubai.

SPIC PETROCHEMICALS LIMITED (SPIC Petro)

Consequent to the takeover of the assets and effects of SPIC Petro by the Official Liquidator (OL) during May 2010, the Company ceased to be a subsidiary of SPIC. On the basis of the Petition filed by ARCIL u/s 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI ACT), the Hon'ble High Court of Madras, vide its Order dated 20 December 2010 directed the OL to handover the possession of the assets and effects of SPIC Petro to ARCIL. ArCIL took possession of the same during January 2011. Meanwhile, Chennai Petroleum Corporation Limited (CPCL) has fi led an application to set aside the above Order and in the meanwhile an interim stay has been granted by the Hon'ble High Court of Madras restraining ARCIL from selling the land belonging to SPIC Petro. ARCIL filed a Counter against the Order.

PREFERENTIAL ALLOTMENT OF SECURITIES

During the year under review, at the request of Secured Lenders and in line with the rework package approved by Corporate Debt Restructuring Empowered Group, three Secured Lenders were cumulatively allotted 2,03,175 (14%) Secured Non-Convertible Debentures of the face value of Rs.100/- each, amounting to Rs.2.03 Crore by conversion of part of their secured debt. These debentures are redeemable in seven equal quarterly instalments commencing from 31 March 12.

GOING CONCERN

The financial statements of the Company have been prepared on a going concern basis, despite the erosion of net worth due to the reasons as explained in Note 30 of Notes on Accounts.

DIVIDEND

In view of the accumulated losses, the Board of Directors is not in a position to recommend dividend on the Preference and Equity Share capital of the Company.

SUBSIDIARY COMPANIES

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with this Annual Report. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said Circular. The Company will make available the said documents to any member of the Company, who may be interested in obtaining the same. The said documents will also be kept open for inspection by any member of the Company / its Subsidiary(ies) at the Office of the Company, SPIC House, 88 Mount Road, Guindy, Chennai - 600 032. and that of the respective subsidiary Companies. The consolidated financial statements include the financial results of its Subsidiary Companies.

DISCONTINUED OPERATIONS

The operations of Pen-G Unit was discontinued due to low sales realisation, increased cost of inputs, rejection of anti-dumping duty and the eventual take over of its assets at Cuddalore by ARCIL. The operations of Active Pharmaceutical Ingredients Unit have not been carried out due to reasons, inter alia, including environmental constraints, the restrictions imposed by Pollution Control Board and the uneconomical business size. Consequently, the operations of the connected Research & Development was also closed. The Formulations Unit discontinued its operations due to low demand in the market and uncertain power situation. The SMO Division and the Phosphatics Business of the Company were divested, pursuant to the approval of CDR-EG (Empowered Group) and the consent of the shareholders obtained through postal ballot.

PUBLIC DEPOSITS

As on 31 March 2012, there were no outstanding public deposits and the overdue unclaimed deposits covering 15 depositors, amounted to Rs 3.33 lac.

HUMAN RESOURCE DEVELOPMENT

The Company, as always, places great emphasis on its human capital, and the need to retain and develop talent in realising Corporate objectives. The Company provides a conducive and challenging work environment and opportunities for professional development of its employees.

INDUSTRIAL RELATIONS

Industrial Relations in the Company has been cordial during the year under review. A memorandum of settlement u/s 12 (3 ) of the Industrial Disputes Act, 1947, has been entered into with SPIC Employees Union in September 2011 .

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the requirements of Section 217(2AA) of the Companies Act, 1956, the Directors of the Company declare that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 March 2012.

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the Directors have prepared the annual accounts on a going concern basis for the reasons stated in Note 30 of the Notes on Accounts.

DIRECTORS

Dr A C Muthiah resigned as Chairman and Managing Director of the Company with effect from 16 November 2011. The Board places on record the guidance, advice and valuable contribution made by Dr A C Muthiah during the long tenure of his association with the Company. The Board of Directors at its Meeting held on 16 November 2011, elected Thiru Ashwin C Muthiah as the Chairman of the Company.

Thiru M Jayasankar, Director who retires by rotation at this Annual General Meeting, being eligible, offers himself for reappointment. In accordance with Clause 49 of the Listing Agreement, particulars relating to the appointment of Thiru M Jayasankar, seeking re-election/appointment at the ensuing Annual General Meeting are furnished in the annexure to the Notice.

Thiru K K Rajagopalan was co-opted as Additional Director and designated as Whole-time Director of the Company with effect from 16 November 2011 and a resolution seeking his appointment as the Whole-time Director is being placed before the shareholders in this Annual General Meeting of the Company.

During April 2012, ARCIL withdrew the nomination of Thirumathi Neeta Mukerji from the Board and the Board places on record its appreciation for the contribution made by Thirumathi Neeta Mukerji during her tenure.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange is presented in a separate section forming part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Accounting Standard AS21 on Consolidated financial statements read with Accounting Standard AS23 on Accounting for investments in associates in Consolidated Financial Statements and AS27 on Financial reporting of interests in Joint Ventures, the audited Consolidated Financial Statements are provided in the Annual Report. As Jebel Ali Free Zone Authorities (JAFZA) had taken over the assets of SFC FZE, Dubai, SFCL Mauritius lost control over its subsidiary SFC FZE Dubai. Therefore financial statements of SPIC's Subsidiary Company, SFCL, Mauritius have not been considered for consolidation. However, full provision has already been made in the earlier years.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

In terms of Section 217(1)(e) of the Companies Act, 1956, read with Rule-2 of the Companies (Disclosure of Particulars in the report of Board of Directors) Rules 1988, information relating to conservation of energy is set out in the annexure forming part of this Report. The Company has no information to provide in respect of technology absorption, foreign exchange earnings and outgo and research and development.

PARTICULARS OF EMPLOYEES

None of the employees of the Company was in receipt of remuneration in excess of the amount prescribed by Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules,1975, as amended.

COST AUDITOR

Thiru P R Tantri, Cost Accountant, Bengaluru was appointed as the Cost Auditor of the Company for the financial year 2011-12 pursuant to Section 233B of the Companies Act, 1956 to carry out the audit of your Company's cost records. The Cost Audit report for the year ended 31 March 2011 certified by Thiru P R Tantri was filed on 29 September 2011 with the Ministry of Corporate Affairs.

ACKNOWLEDGEMENT

Your Company is grateful for the co-operation and continued support extended by the Department of Fertilizers, Ministry of Chemicals and Fertilizers, Ministry of Petroleum and Natural Gas, Ministry of Agriculture, Ministry of Corporate Affairs and other departments in the Central Government, the Government of Tamilnadu, other State Governments, Tamilnadu Industrial Development Corporation Limited, Tamil Nadu Electricity Board, ARCIL, Financial Institutions and Banks. The Directors appreciate the dedicated and sincere services rendered by all employees of your Company.

On behalf of the Board

Place: Chennai ASHWIN C MUTHIAH

Date 30 May 2012 Chairman

 
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