To the Members
Your Directors have pleasure in presenting the 72nd Annual Report and Audited FinancialStatements of the Company and the report of the Auditors for the financial year 2015-16.
Your Directors are happy to inform you that despite the severe constraints on workingcapital your Company could continue the production of Fertilisers and other operationsduring the financial year 2015-16.
Your Directors are pleased to inform you that Government of India has allocated `1000crore as plan loan through second supplimentry to continue the operation of FACT duringthe financial year 2015-16. The sanction of plan loan has enabled the company to liquidateoutstanding liabilities to suppliers and excess borrowings and to restart its operations.The sanction of plan loan is a stepping stone towards the turnaround of the company andthe sustained operations in the long run.
Release of `1000 crore as plan loan by Government of India
Number 1 Brand award in Fertiliser sector from International Brand ConsultingLtd. New Jersey USA
All time high turnover of FEDO.
Profitable operation of FEDO and FEW
All time high production and sale of Bio-fertilisers
Certificate of appreciation in very large Industry category from Kerala StatePollution Control Board for Udyogamandal Division
Runner up award for Outstanding Safety Performance for the year 2015 fromNational Safety Council Kerala Chapter.
The Outstanding Achievement of the year Inland Water Transport award atthe India Sea Trade awards
Cargo owner of the year- Inland water transport award at the India Sea Tradeawards
BT -CSR Excellence Awards 2016- "Bureaucracy Today"
PERFORMANCE - FINANCIAL PRODUCTION AND SALES
The Companys performance for the year ended March 31 2016 is summarized below.
|A. FINANCIAL || ||Rs in Lakh |
| ||2015-2016 ||2014-2015 |
|Turnover ||178008.00 ||203236.00 |
|Revenue from operations ||173599.00 ||197879.00 |
|Other Income ||2898.00 ||1855.00 |
|Total Revenue ||176497.00 ||199734.00 |
|Total Expenses ||222951.00 ||237318.00 |
|Profit / Loss (-) Before Tax & Exceptional items ||(-) 46454.00 ||(-) 37585.00 |
|Exceptional items ||1235.00 ||(-) 2406.00 |
|Profit / Loss (-) After tax ||(-) 45219.00 ||(-) 39991.00 |
|B. PRODUCTION || ||in Tonnes |
| ||2015-2016 ||2014-2015 |
|Factamfos 20 : 20 ||527445 ||614004 |
|Ammonium Sulphate ||79567 ||120360 |
|Caprolactam ||0 ||0 |
|C. SALES || ||in Tonnes |
| ||2015-2016 ||2014-2015 |
|Fertilisers ||704962 ||776858 |
|Caprolactam ||0 ||0 |
The financial year 2015-16 was a challenging year to FACT. The cascading effect ofaccumulated losses resulting in high interest and finance charges non operation ofCaprolactam Plant for the 3rd year in succession and the working capital crunch andproduction loss of fertilizers for three months have sevearely affected the financialperformance of the company. However your Directors are happy to inform you that yourcompany could manage the financials in a reasonable way to continue the operations.
The financial results for the year 2015-16 shows a loss of Rs 45219 lakh as against aloss of Rs 39991 lakh during the year 2014-15. The heavy loss for the year 2015-16 ismainly due to high interest and finance charges lower production level due to workingcapital constraints and the unabsorbed fixed costs due to non operation of Caprolactam andintermittent operation of Ammonia Plant.
Due to accumulated loss your directors are not recommending any dividend for thefinancial year 2015-16. The Company has not transferred any amount to Reserve during thefinancial year 2015-16.
The year 2015-16 was a year of mixed performance by the Company in the operationscenario. Company could achieve very good level of production and sales performance duringthe first half of the financial year 2015-16. During the second half of the year thefinancial crunch faced by the Company affected procurement of essential raw materialscausing significant impact on physical performance. However with our efforts Companycould achieve production of 5.27 lakh MT of Factamfos and 0.79 lakh MT of AmmoniumSulphate. The Company could market 7.04 lakh MT of Fertilisers during the year 2015-16.The company could achieve all time high production and sale of Bio-fertilisers.
Your Directors have pleasure to inform you that during the financial year 2015-16 FEDOhas achieved all time high turnover and both FEDO and FEW have earned profit .
Performance - 2016-17
The support and assistance from Government of India by way of plan loan of Rs 1000crore has enabled the company to plan high production targets in line with the revivalprojections for the financial year 2016-17. The company is having an ambitious target ofproducing one million tonnes of fertilisers during the current year. FACT is targeting tomarket one lakh tonnes of traded products in addition to its production of one milliontonnes of fertilisers. The plan was to optimize production from the beginning of the yearutilizing RLNG available from M/S PLL Kochi. However due to certain technical issues ofleakage in GAIL Gas pipeline the gas supply was started only in May 2016. All thefertilizer production units could reach their capacity operation by 16th May 2016. Allthese fertilizer units are planned to continue the current full load operation in thecoming months of the financial year 2016-17. Availability of the supporting raw-materialsand intermediates are being ensured for this. Stabilization of the prices of raw-materialand RLNG are positive signals leading to the profitability of FACT. FACT is hopeful ofmaking operational profit during the financial year 2016-17.
Management Discussion and Analysis Report
Management Discussion and Analysis Report covering the operational aspects for the yearunder review as stipulated under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is presented in a separate section forming part of Directors Report.
Directors and Key Managerial Personnel
Government of India Ministry of Chemicals & Fertilizers Department ofFertilizers vide Order No.130/8/2003-HR-1 dated 27th Apri1 2015 notified the appointmentof Shri Sham Lal Goyal Joint Secretary (SLG) Department of Fertilizers Ministry ofChemicals & Fertilizers as Part-time Government Nominee Director in place of ShriK.M.Gupta Ex-Economic Advisor Governments of India Ministry of Chemicals &Fertilisers Department of Fertilisers vide Order No. 130/8/2003-HR-1 dated 14th January2016 notified the appointment of Shri Vinod Kumar Thakral Special Secretary and FinancialAdviser Department of Fertilizers Ministry of Chemicals & Fertilizers Government ofIndia as a part time Government nominee Director on the Board of FACT in place of ShriSham Lal Goyal. Government of India Ministry of Chemicals & Fertilisers Departmentof Fertilisers vide Order No.87/8/2006-HR-1 dated 10th June 2016 notified theappointment of Shri K.P.S. Nair DeepaSree Nazreth Road Aluva and Dr. SMuarli 2 Lakshminivas 4th Cross 6th Main Papaiah Garden Bangalore-85 as non officialDirectors on the Board of Directors of FACT.
The Board at its meeting held on 27-04-2016 appointed Shri Sreenath V Kamath ChiefGeneral Manager (Corporate Finance) as the Chief Financial Officer of the Company.
Shri Jaiveer Srivastava C&MD Shri Sreenath V Kamath Chief Financial Officer andShri K.V. Balakrishnan Company Secretary are the Key Managerial personnel of the company.
Retirements and Resignations
Consequent to the appointment of Shri Sham Lal Goyal as Government of India nomineeDirector of FACT Shri K.M.Gupta Director retired from the Board of FACT with effect from6-5-2015. Shri Sham Lal Goyal Director ceased to be Director of FACT with effect from14-01-2016. Shri V.Subramanian Director (Marketing) resigned from the Board of FACT andGovernment of India vide Order No.82/3/2006-HR-I dated 9th June 2015 accepted theresignation of Shri V.Subramanian with effect from 9.6.2015.
Government of India Ministry of Chemicals & Fertilizers Department ofFertilizers vide Order No. 86/4/2009-HR-1 dated 23rd March 2016 conveyed the decisionnot to extend the tenure of Shri. P Muthusamy Director Finance beyond 17-03-2016 and ShriP. Muthusamy Director (Finance) is relieved from the post of Director (Finance) FACT. Oncompletion of five year term on 27-06-2016 Shri V.K. Anil Director (Technical)relinquished the post of Director (Technical) on 12-07-2016. The Board place on record itsappreciation of the valuable services rendered by Shri K M Gupta Director Shri Sham LalGoyal Director Shri P. Muthusamy Director (Finance) Shri V Subramanian Director(Marketing) and Shri V.K. Anil Director (Technical).
Annual Evaluation of Board.
FACT being a Government Compay all appointments in the Board is made by the Governmentof India Ministry of Chemicals and Fertilizers Department of Fertilizers. Theperformance of Directors are evaluated by the Ministry of Chemicals & FertilizersDepartment of Fertilizers Government of India. As per Government of India Ministry ofCorporate Affairs notification dated 5th June 2015 clause (e) and (p) of sub-section 3 ofSection 134 of the Companies Act 2013 relating to appointment remuneration and Annualevaluation of Board on its performance are not applicable to FACT.
Meetings of the Board
During the financial year 2015-16 eight meetings of the Board were convened and held.The details of the meetings of the Board of Directors are given in the report on CorporateGovernance which is part of this report. The intervening gap between the meetings waswithin the period prescribed under the Companies Act 2013.
Directors Responsibility Statement
Pursuant to Sec.134(3)(c) of the Companies Act 2013 your Directors hereby state that:
(a) in the preparation of annual accounts for the year ended March 31 2016 theapplicable accounting standards had been followed along with proper explanation relatingto material departures.
(b) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2016 and of profit andloss of the Company for the year ended March 31 2016.
(c) the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets 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 internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively; and
(f) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
The Company is committed to maintain the highest standard of Corporate Governance andadhere to the Corporate Governance requirements set out by SEBI. The Board lays emphasison transparency and accountability for the benefit of all stake-holders of the Company.The Report on Corporate Governance as stipulated under the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 annexed to this report forms an integral partof this report.
(1) Statutory Auditors.
M/s. K.Varghese & Co. Chartered Accountants Kochi was re appointed as StatutoryAuditors of the Company for the year 2015-2016 by the Comptroller and Auditor General ofIndia. M/s Narotham Madhav & Ramesh Chartered Accountants Hyderabad and M/s Sarathy& Balu Chartered Accountants Chennai were appointed as Branch Auditors for the year2015-2016 by the Comptroller and Auditor General of India.
The report of the statutory Auditors on the financial statements of the company for theyear ended 31st March 2016 is an unmodified one. However the Statutory Auditors in theirreport has emphasized certain issues which are being addressed by the Company.
(2) Cost Auditors
M/s. BBS & Associates Cost Accountants Kochi has been re-appointed as CostAuditors of the Company for the year 2015-2016.
(3) Secretarial Auditors
M/s.SVJS & Associates Company Secretaries Kochi have been appointed asSecretarial Auditors of the Company for the year 2015-16. The report of the SecretarialAuditor is annexed to this report as Annexure-I. Clarification/reply to the remarksof Secretarial Auditor is annexed as Annexure. II.
In line with the provisions of Section 177 of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 an Audit Committee of the Boardhas been constituted. Details of Members/ Meetings of the Audit Committee is elaborated inthe report on Corporate Governance. The Board has accepted all recommendations of AuditCommittee.
Joint Venture / Associate Company
FACT-RCF Building Products Limited (FRBL) Ambalamedu Kochi is a 50:50 Joint VentureCompany of FACT. Kerala Enviro Infrastructure Limited (KEIL) Ambalamedu Kochi is theassociate company of FACT. During the financial year no Company has become/ ceased tobecome subsidiaries/Joint Ventures and Associate Company of FACT.
During the financial year 2015-16 the company has not accepted any deposit frompublic. However as on 31.3.2016 Rs 0.49 lakh is lying in unclaimed matured fixed depositaccount.
Contract or arrangement with related parties
The transactions entered with related parties for the year under review were on armslength basis and in the ordinary course of business. The disclosure in Form No AOC-2 forthe transactions with related parties during the period under review is enclosed asAnnexure III of the report.
Corporate Social Responsibility
FACT continues to give priority on various Social Responsibility measures during thefinancial year 2015-16. The Company has constituted a Board level Committee as per theprovisions of Companies (Corporate Social Responsibility Policy) Rules 2014.
Annual Report on CSR as per the provisions of Companies (Corporate SocialResponsibility Policy) Rules 2014 is annexed to this report as Annexure.IV
Material changes and commitments
There were no material changes and commitments affecting the financial position of thecompany between the end of financial year (31st March 2016) and the date of the report -12th August 2016.
FACT has formulated a risk management policy for identification of potential area ofrisk and mitigation of the same. FACT is having adequate risk management infrastructure inplace capable of addressing all potential risks.
Internal Financial Control
FACT is having an Internal Control System commensurate with the size scale andcomplexity of its operations. The Internal Audit wing of FACT headed by General Manager/Dy. General Manager monitors and evaluate the efficacy and adequacy of Internal ControlSystem in the Company. The observation of internal audit and recommendations along withcorrective actions thereon are presented to the Audit Committee of the Board. Based on therecommendation of Internal Audit the functional heads take necessary corrective actionsin their functional area thereby strengthen internal control.
FACT is having a vigil mechanism for directors and employees to report their concerns.The Directors and employees can approach Chairman Audit Committee of the Board directlyand report their concern in appropriate case. The vigil mechanism and whistle blowerpolicy is published in the web site of the Company www.fact.co.in.
Code of Conduct
FACT is having a code of conduct known as FACT Code of Business Conduct and Ethicsapplicable to the members of the Board and all senior executives of the Company. The codehas been posted on the Companys website www.fact.co.in The code lays down thestandard procedure of business conduct which is expected to be followed by the Directorsand senior executives of the Company. The functional Directors and senior managementpersonnel have confirmed compliance with the code of conduct.
Prevention of Insider Trading
No instances of insider trading have been reported on FACT shares till date. None ofthe Directors and key managerial personnel is holding any shares in FACT. A code ofconduct for prevention of insider trading and code for corporate disclosure is publishedin the website of the company www.fact.co.in
Particulars of Loan given Investment made Guarantees given and securities provided
Particulars of Investment made and guarantees given along with the purpose for whichthe guarantee is given are provided in the financial statement for the year 2015-16 (NoteNo11.2&29(b)) During the financial year 2015-16 FACT has not provided any loan/guarantee or made any investment within the purview of Section 186 of the Companeis Act2013.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review.
1. Details relating to deposits covered under Chapter V of the Act.
2. Issue of equity shares with differentiate rights as to dividend voting orotherwise.
3. Issue of shares (including sweat equity shares) to employees of the company underany scheme.
4. Disclosure as per Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014. FACT is a Government Company and none of the employee was in receipt ofremuneration in excess of the limit specified in Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014.
5. Neither the Managing Director nor the whole time Directors of the Company receiveany remuneration or commission from its Associate Companies.
6. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Companys operations in future.
Your Directors further state that during the year under review there were nocomplaints filed pursuant to the Sexual Harassment of Women at Work Place (PreventionProhibition and Resressal) Act 2013.
Extract of Annual Return
Extract of Annual Return of the Company in Form MGT9 is annexed as Annexure. Vto this report
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
Information regarding the conservation of energy technology absorption and foreignexchange earnings and-outgo as required to be disclosed under the Act is set out in aseparate statement attached to this report as Annexure.
Your Directors gratefully acknowledge the valuable guidance and support extended by theDepartment of Fertilisers Department of Public Enterprises and other Departments ofGovernment of India and the State Governments of Kerala Tamilnadu KarnatakaPuducherry Andhra Pradesh and Telangana.
The Directors deeply appreciate the committed efforts put in by the employees and lookforward to their dedicated services and endeavor in the years ahead to enable the Companyto scale greater heights. The Directors also acknowledge the continued support extended bythe Shareholders Dealers Suppliers Bankers and Customers of the Company the Press andElectronic Media.
For and on behalf of the Board of Directors.
| ||Sd/- |
| ||JAIVEER SRIVASTAVA |
| ||CHAIRMAN AND MANAGING DIRECTOR |
| ||DIN: 01858412 |
|Udyogamandal || |
|Date: 12.08.2016 || |
ANNEXURE TO DIRECTORS REPORT
Particulars Required under Rule 8 (3) of Companies (Accounts) Rules 2014
A. Conservation of Energy
(i) Steps taken or impact on conservation of energy
The raw material /utilities consumption of all the products is monitored regularly byevaluating the critical parameters. The raw material/energy efficiency is reviewed on amonthly basis to identify the weak areas and rectify the shortcomings.
a. The Amophos plant was started production in the year 1966 during the 3rd stageexpansion in Udyogamandal division. The electrical drives then installed were of old frametype with larger dimensions installed before the active implementation of standardizationprocess. Smaller size motors with improved material of construction for windinginsulation and other parts were developed which resulted in considerable improvement inefficiency and there by lesser energy consumption.
Nine motors of capacity varying from 18.5 KW to 300 KW were replaced with new framestandard size motors in 3rd stage Amophos plant.
b. The power distribution system followed for the Amophos plants and other utilitieswere matching to the requirements when all plants in the division were productive.Subsequent to the stoppage of many of the plants continuous efforts were being exploredto eliminate the unutilized/under-utilized feeders to have a safe and energy efficientscheme.
During the effort two transformers of 1250 KVA & 750 KVA ratings could be isolatedpermanently which resulted savings in energy.
c. In the area of lighting in Udyogamandal complex a good number of conventionalfluorescent lamp fixtures were replaced with LED and T-5 type fixtures which resultedsavings in energy.
With the above conservation activities an annual Energy savings of 1.55 Lakh units isachieved.
(ii) Steps taken by the Company for utilizing alternate source of energy One10 KW roof top solar project is proposed for Udyogamandal complex for FY 2016-17. Twonumbers roof top photo voltaic solar plants and two numbers large size solar heaters arealready in operation. Field survey is proposed to identify feasible additional solarprojects.
(iii) The capital investment of energy conservation equipment
No capital investment is made during FY 2015-16.
B. Technology Absorption
(I) Efforts made towards technology absorption
No new installations were made in the year 2015-16 for technology absorption.
(II) Benefit derived
Not applicable in view of (I) above.
(III) Imported Technology No technology has been imported during thefinancial year.
(IV) The expenditure incurred for Research & Development
The Research and Development (R&D) Centre function with the aim of carrying outin-depth research in new fertilizer formulations innovation in the fertilizer productionfor cost control and value addition of by-products existing product lines and wasteutilization in the Organisation. R&D Centre is carrying out the specialized servicessuch as the monitoring and controlling the quality of the finished products beforedispatch to the market and periodical collection of product samples from the fieldgodowns Agro Service Centre distributors dealers and the evaluation of post-dispatchquality as part of three tier quality control systems practiced in the company. Threetypes of Biofertiliser produced in R&D Centre is dispatched to marketing area of thecompany in all the five southern states. Apart from the above activities R&D Centreis focusing on developing organic fertilizer from farm yard waste and cost reduction inBiofertilizer production.
Details of expenditure on R&D are given below.
EXPENDITURE ON R & D
| || || || ||Rs in Lakh |
|Year ||Capital ||Revenue ||Total ||As % of total Turnover |
|2013-2014 ||0.00 ||71.65 ||71.65 ||0.032 |
|2014-2015 ||0.00 ||94.01 ||94.01 ||0.046 |
|2015-2016 ||0.00 ||145.14 ||145.14 ||0.081 |
C. Foreign Exchange Earnings and Outgo-
Details of foreign exchange earning and outgo are given below.
FOREIGN EXCHANGE EARNINGS AND OUTGO
| ||Current Year ||Previous Year |
| ||Rs in Lakh ||Rs in Lakh |
|1) Foreign exchange earned ||0.00 ||0.00 |
|2) Foreign Exchange Outgo || || |
|(i) C.I.F.Value of Imports: || || |
|(a) Raw Materials ||85645.14 ||113543.01 |
|(b) Traded Products ||- ||6395.23 |
|(c) Spares and Other Materials ||118.79 ||272.47 |
|(d) Capital Goods ||1.63 ||181.24 |
| ||85765.56 ||120391.95 |
|(ii) Expenditure in Foreign Currency || || |
|(Cash Basis) || || |
|(a) Consultancy Service ||- ||37.68 |
|(b) Others ||34.77 ||21.66 |
| ||34.77 ||59.34 |
|Total (i) + (ii) ||85800.33 ||120451.29 |
| ||Sd/- |
| ||JAIVEER SRIVASTAVA |
|Udyogamandal ||CHAIRMAN AND MANAGING DIRECTOR |
|Date:12-08-2016 ||DIN: 01858412 |