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Gujarat State Fertilizers & Chemicals Ltd.

BSE: 500690 Sector: Agri and agri inputs
NSE: GSFC ISIN Code: INE026A01025
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OPEN 137.90
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VOLUME 213044
52-Week high 150.75
52-Week low 78.50
P/E 13.27
Mkt Cap.(Rs cr) 5,487
Buy Price 137.70
Buy Qty 1075.00
Sell Price 0.00
Sell Qty 0.00
OPEN 137.90
CLOSE 136.85
VOLUME 213044
52-Week high 150.75
52-Week low 78.50
P/E 13.27
Mkt Cap.(Rs cr) 5,487
Buy Price 137.70
Buy Qty 1075.00
Sell Price 0.00
Sell Qty 0.00

Gujarat State Fertilizers & Chemicals Ltd. (GSFC) - Director Report

Company director report

To

The Members

Your Directors have pleasure in presenting their 55th Annual Report on thebusiness and operations of the Company and the accounts for the Financial Year ended March31 2017.

1. Financial highlights of the Company

(Rs. in Crores)
Particulars Standalone Consolidated
2016-17 2015-16 2016-17 2015-16
1 Gross Sales 5476.88 6326.47 5476.88 6326.47
2 Other Income 56.64 65.75 56.30 65.13
3 Total Revenue 5533.52 6392.22 5533.18 6391.60
4 Less : Operating Expenses 4987.36 5668.02 4987.83 5669.31
5 Operating Profit 546.17 724.21 545.35 722.29
6 Less: Finance Cost 64.93 31.31 64.92 31.31
7 Gross Profit 481.24 692.9 480.43 690.98
6 Less : Depreciation 106.36 100.37 103.62 97.46
9 Exceptional Item 0 0 0 0
10 Profit Before Taxes 374.88 592.53 376.81 593.52
11 Taxation
- Current Tax 57.35 188.06 57.76 188.43
- Deferred Tax (net) 13.84 -4.88 15.55 -3.29
- MAT Credit recognised (24.30) 0 (24.30) 0
- Current tax relating to prior years (91.51) 0 (91.51) 0
12 Profit After Taxes 419.50 409.35 424.46 415.97
13 Other Coprehensive Income arising from remeasurement of defined benefit plan
(55.32) (129.53) (55.32) (129.53)
14 Balance brought forward from last year 285.29 380.98 324.11 413.18
15 Amount available for appropriations 649.47 660.80 693.25 699.62
16 Out of which your Directors have proposed appropriation and transfer as under:
a) Proposed Dividend on Equity shares 87.66 87.66 87.66 87.66
b) Tax on Proposed bividend 17.85 17.85 17.85 17.85
c) General Reserve 300.00 270.00 300.00 270.00
17 Leaving a balance in the Profit & Loss Account 243.96 285.29 287.74 324.11

2. Dividend

Your Directors are happy to recommend a dividend @ 110% i.e. Rs. 2.20/- per EquityShare (Face value of Rs. 2/- each) on 39 84 77530 shares (Previous Year - 110% i.e.Rs. 2.20 per share on 398477530 Equity Shares of Rs.2/- each) for the financial yearended 31st March 2017. The net outgo on account of Dividend shall be Rs. 105.51 Croresincluding Corporate Dividend Tax. The Dividend shall be paid to those members whose namesshall appear on the Register of Members of the Company on the Book Closure Date i.e. on02/ 09/2017.

3. Brief description of the Company's working during the year/ State ofCompany's affair

Your directors wish to report that your Company has achieved turnover of Rs. 5476.88Crores for the year ended March 31 2017 as against Rs. 6326.47 Crores (FY 15-16) onstandalone basis which is lower by 13% (Rs.849 Crores) when compared to the previousfinancial year.

Similarly for the year under review (FY 2016-17) Profit before Tax (PBT) was Rs.374.88 Crores and Net Profit (Profit after Tax) was Rs. 419.50 Crores as against PBT ofRs. 592.53 Crores and PAT of Rs. 409.35 Crores for the previous financial year.

4. Material changes and commitments

The Company has not made any material changes or commitments which affect the financialposition of the Company between the end of the financial year of the Company to which thefinancial statements relate and the date of signing of this report.

5. Details of significant and material orders passed by the regulators or courtsor tribunals impacting the going concern status and Company's operations in future

There were no such orders except those which have been appropriately challenged beforethe judiciary and no impact on going concern status and Company's operation in future ofsuch matters are expected or visualised at the current stage at which they are.

6. Details in respect of adequacy of internal financial controls with referenceto the Financial Statements

Your Company has an internal Control System which commensurate with the size scale andcomplexity of its operations. The scope and authority of the Internal Audit function lieswith the Audit Committee of Directors. The Audit Committee monitors and evaluates theefficacy and adequacy of internal control systems accounting procedures and policies.Based on the report of Internal Auditors significant audit observations and actions takenon such observations are presented to the Audit Committee of the Board.

7. Details of Subsidiary/Joint Ventures/Associate Companies

During the year under review Companies listed below are the Subsidiary Company orAssociate Companies:??Subsidiary Company - GSFC Agrotech Limited.

??Associate Companies - Vadodara Enviro Channel Limited

Gujarat Green Revolution Company Limited??Subsidiary of Subsidiary - Gujarat ArogyaSeva Private Limited

There were no new additions/ deletions during the year. A report of the performance andfinancial position of each of the subsidiaries associates and joint venture companies asper the Companies Act 2013 is provided as Annexure - A to the Consolidated FinancialStatement and hence not repeated here for the sake of brevity. The Company does not haveany material subsidiary in terms of Company's Act 2013 read with SEBI (Listing Obligation& Disclosure Requirement) Regulations.

8. Listing of Shares & Depositories

The Equity Shares of your Company are listed on the BSE Limited (BSE) and NationalStock Exchange of India Ltd. (NSE). As approved by the shareholders an application forvoluntary delisting of Equity Shares from Calcutta Stock Exchange Association Ltd.Kolkatta was made however the approval for delisting is still awaited. The listing feefor the FY 17-18 has been paid to both the Stock Exchanges.

Your Directors wish to state that the Equity Shares of your Company are compulsorilytraded in dematerialized form w.e.f. 26/06/2000. Presently 96.94% of shares are held inelectronic/dematerialized form. All shares held by promoters are in dematerialized form.

9. Report on Corporate Governance And Management Discussion And Analysis ReportTo Shareholders

Your Company has complied with all the mandatory requirements of Corporate Governancenorms as mandated by SEBI (Listing Obligations & Disclosure Requirements) Regulations2015. A separate report on Corporate Governance together with the Certificate of SamdaniKabra & Associates Company Secretaries Vadodara forms part of this Annual Report.The Management Discussion & Analysis report also forms part of this Annual Report.

10. Business Responsibility Reporting

Business Responsibility Report is annxed as Annexure 'F' to this Annual Report asrequired under Regulation 34(2) (f) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

11. Fixed Deposits

During the year 2016-17 your Company has not accepted/ renewed any Fixed Deposit. YourDirectors wish to report that there are 11 Fixed Deposits aggregating Rs. 0.87 Lacswhich have remained unclaimed by Depositors as on 31st March 2017. Lettersreminding them to seek repayment have been sent. Upto and including the date of thisreport there are no deposits which were claimed and not repaid during the year.

During the year the Company has transferred a sum of Rs. 4.13 Lacs being the unclaimeddeposits and interest amount thereon to the Investors' Education and Protection Fund(IEPF) as required in terms of Section 125 of the Companies Act 2013. The Company hasdiscontinued accepting new deposits since 15.11.2005 and renewing the deposits since31.03.2009.

12. Insurance

All the properties and insurable interests of the Company including the buildingsplant & machinery and stocks have been adequately insured. Also as required under thePublic Liability Insurance Act 1991 your Company has taken the appropriate insurancecover.

13. Expansion & Diversification

Your Directors are happy to inform you that 40000 MTPA Melamine Plant project based ontechnology supplied by M/s Casale Switzerland is making good progress. Your Company hasawarded the contract for the Melamine Project on EPC basis to L & T HydrocarbonEngineering Ltd. on 30/03/2016. The new plant will be operational in the third quarter ofthe year 2018-19.

Your Directors are happy to inform that installation of 2 Nos. 10000 capacityPhosphoric Acid Tanks at Sikka Shore Terminal Jamnagar on lump sum turnkey basis (LSTK)are duly commissioned and lined up in February 2017 as per planned schedule.

Your Company has set up Associated Additional Facility related to DAP-NPK Plant atSikka Dist Jamnagar (SU) for which TKIS (ThyssenKrupp-Germany) is hired to provideengineering services. Your Company has successfully commissioned Bagging ‘B' facilityalong with new bulk silo and 2 Nos. sub stations on 27/03/ 2017. Rest of the facilities ofBagging ‘C' and Bagging ‘A' will be completed by September 2017.

Your Directors are happy to inform that the project for enhancing the productioncapacity of Nylon-6 by 15000 MTPA at Vadodara Unit based on technology supplied by M/sLurgi Germany (Now Technip Zimmer) and detailed engineering by M/s TATA ConsultancyEngineers Ltd; India was commissioned in July 2016.

After addressing initial teething problems the plant is now in the process ofstabilization for quality and quantity. In order to enhance market of value added Nylon-6chips the Company has taken up installation of Dry Blending Unit (DBU) concurrently inNylon-6 project to produce superior quality Nylon-6 chips for taking care of applicationand marketing based on the technology supplied by M/s PE Polymer Engineering PlantConstruction GmbH Germany (PEPC). DBU is under construction phase and is expected to becommissioned by end of 2nd quarter or beginning of 3rd quarter of2017-18. The delay of the project is attributed to weak financial condition of PEPC. YourCompany is taking all steps to complete this project.

Your Directors are happy to inform that the Company has also awarded contract forCaprolactam Quality improvement project to M/s Simon India Ltd. on EPC basis. The projectis expected to be commissioned by third quarter of 2017-18. This project will improve thequality of Caprolactam produced at Caprolactam-I Plant.

Your Directors also would like to inform that Water Soluble Fertilizer (WSF) Project of20000 MTPA capacity at Vadodara Unit got commissioned in September 2016 successfully within-house efforts despite of backing out by the detailed engineering consultant M/sHindustan Dorr-Oliver Ltd.

??Projects under development

??Revamping of Urea Plants For Energy Reduction:

Your Directors are pleased to inform you that your Company is contemplating to revampits Urea plants for reducing the energy consumption so as to achieve the revised energynorms of 6.2 Gcal / MT as per new Urea policy and improving the plant reliability. As perthe technical feasibility study carried out by process licensors estimated reduction innatural gas consumption will be to the tune of 28 MMSCM per year.

Your Directors also would like to inform that your Company is in advance stage ofdiscussions with Process Licensors for implementation of the Project on EPC basis. Basedon financial viability further decision for implementation of the Project will be takenby September 2017. Estimated Project completion time is 28 months after signing ofContract.

??1 MW and 10 MW Solar Power Plants:

In line with Government of India's initiatives for use of renewable energy Company isin process of setting up 1 MW roof top Solar Power Project at its existing Vadodaracomplex and 10 MW Solar Power Plant at Gujarat Solar park Charanka for which land hasbeen allotted. Estimated Power generated will be 45 MWH per day based on Capacityutilisation factor of 17 %.

Bid evaluation process for 1MW and 10 MW Solar Power plants is under progress. Based onfinancial viability of the Project final decision for 1 MW and 10MW Solar Power Plants isunderway. Estimated Project completion time is 6 months after signing of the Contract.

??1000 MTPD Phosphoric Acid and 3000 MTPD Sulphuric Acid Plant at Sikka Unit:

As a part of backward integration your Company is contemplating to install 1000 MTPDPhosphoric Acid and 3000 MTPD Sulphuric Acid Plant on EPC basis at its Sikka Unit. Thiswill reduce the import dependency for sustaining the plant operation on continuous basisfor production of Phosphatic Fertilizers at Sikka Unit.

Your Directors also would like to inform that your Company is in the process ofdiscussions with Phosphoric Acid Process Licensors for supply of Plant on EPC basis.Memorandum of Understanding (MoU) will be executed with rock phosphate suppliers soon toensure availability of rock phosphate on long term basis. Consultant for obtainingEnvironmental clearance will be selected shortly. For Sulphuric acid possibilities arebeing explored for production of Sulphuric acid from molten sulphur or direct purchase ofSulphuric acid produced from smelter. Company is in process of discussions with respectivesuppliers and final decision will be taken based on long term availability and financialviability.

??Changeover of drive from steam turbine to electric motor for Main air Blower(CR-0501) in Sulphuric Acid Plant :

Your Directors are pleased to inform that in Sulphuric Acid-IV plant the main airblower (CR-0501) is presently steam turbine driven. Based on steam and power economics itis contemplated to change the drive from steam to electric motor. The estimated savingafter implementation of proposal will be approximately Rs. 10 Crores per year.

Considering major modifications required in electrical system Company has engaged arenowned consultant for carrying out feasibility study which will be completed by August2017. Based on feasibility study report further decision for implementation of theproposal will be taken.

??Ammonia –Urea Complex in Republic of Congo (RoC) :

To avail benefits of availability of Natural gas at reasonable price and activeinterest shown by Government of RoC Company is contemplating to install 800 MTPD Ammoniaand 1100 MTPD Urea plants in RoC wherein Government of RoC will also have equityparticipation.

PDIL has completed Techno Economic Feasibility (TEFR) for the Project and based oninitial assessment Project seems to be feasible. Company has executed a Non binding termsheet with G-RoC to form a basis of discussions for the Project. Company is process ofdiscussions with bankers technology suppliers and EPC contractors for their equityparticipation.

For further assessment Detail Project Report (DPR) will be carried out and furtherdecision to move ahead with the Project will be taken by December 2017 based on DPR andother factors.

??Methyl Methacrylate (MMA) Plant at Dahej:

Your Directors also would like to inform that your Company is contemplating to install50000 MTPS MMA plant at Dahej for which land acquisition has been completed. Company isin the process of technology selection and discussion with OPaL for supply of major rawmaterial C4 Raffinate.

Based on raw material availability and financial viability further decision for theProject will be taken.

??Conversion of Methanol Plant for Production of Synthesis Gas / Ammonia.

Your Directors are pleased to further inform that to meet the future Ammoniarequirements of the complex & to maintain present Ammonia sales after commissioning ofMelamine-III plant your Company is contemplating to convert its Methanol plant forproduction of Synthesis Gas / Ammonia by utilising existing equipment of Methanol plant.M/s Haldor Topsoe the technology supplier for Methanol will carry out the feasibilitystudy for conversion of Methanol plant for production of Synthesis Gas / Ammonia.Feasibility study will be completed in November 2017 & based on feasibility studyreport further decision for implementation of proposal will be taken.

14. Information regarding conservation of energy technology absorption foreignexchange earnings and outgo and particulars of employees etc.

Information as required under Section 134 (3) (m) of Companies Act 2013 read with theCompanies (Accounts) Rules 2014 are enclosed in Annexure "E" forming part ofthis report.

The Company does not have any employee falling within the purview of Section 197 (12)of the Companies Act 2013 read with Rule 5 (1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 and hence such Particulars of Employeesare not included.

15. Corporate Social Responsibility (CSR)

The Company has constituted a Corporate Social Responsibility (CSR) Committee inaccordance with Section 135 of the Companies Act 2013. As a part of its initiatives under"Corporate Social Responsibility" the Company has undertaken projects in theareas of education livelihood health water and sanitation. The Annual Report on CSRactivities is annexed as Annexure A. CSR Policy adopted by the Company is placed on theCompany's website www.gsfclimited.com.

16. Directors

A) Changes in Directors and Key Managerial Personnel

Dr. J. N. Singh IAS Chief Secretary to Govt. of Gujarat has been appointed w.e.f.31.08.2016 as the Government of Gujarat Nominee Director & Chairman of the Companyvice Shri G. R. Aloria consequent upon his retirement from the services of the Govt. ofGujarat.

Dr. J. N. Singh IAS was the Additional Chief Secretary to the Government of Gujaratand was also Director of the Company for the period from 25.11.2014 to 31.08.2016.

Shri Sujit Gulati IAS has been appointed w.e.f. 25.07.2016 as a rotational Director inplace of Shri L Chuaungo IAS Director of the Company (till 25.07.2016) & Shri AnilMukim IAS has been appointed w.e.f. 24.10.2016 vice Dr. J N Singh (who was then nominatedas Addl. Chief Secretary Finance Dept. to Govt. of Gujarat). Shri Anil Mukim IAS shallbe liable to retire by rotation at the ensuing Annual General Meeting has offered himselffor re-appointment.

The brief resume of Directors with regard to appointment/ re-appointment at 55thAnnual General Meeting is annexed to the Notice convening the 55th AnnualGeneral Meeting which forms the integral part of this Annual Report.

B) Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligation& Disclosure Requirement) Regulations the Board has carried out an annual performanceevaluation of its own performance the Directors individually as well as the evaluation ofits committees. The manner in which the evaluation has been carried out is explained inthe Corporate Governance Report which forms the part of this Annual Report.

C) Appointment and Remuneration Policy

The Board on the recommendation of the Nomination and Remuneration Committee hasframed a policy for selection and appointment of Directors senior management and theirremuneration. The details of Remuneration Policy and its weblink are contained in theCorporate Governance Report.

D) Meetings

During the year Five Meetings of the Board of Directors and Five meetings of the AuditCommittee were held. The composition of Board and Committees along with details ofattendance is contained in Corporate Governance Report.

17. Details of establishment of vigil mechanism for Directors and employees

The Company has a Vigil Mechanism Policy in place to deal with instances if any ofthe fraud mismanagement misappropriations if any and the same is placed on theCompany's website. The details of the policy as well as its weblink are contained in theCorporate Governance Report.

18. Particulars of loans guarantees or investments under section 186

Particulars of loans given investments made guarantee given and securities providedalong with the purpose for which the loan or guarantee or security is proposed to beutilized by the recipient are provided in the standalone financial statement. (Pleaserefer to note 7 8 9 and 10 to the standalone financial statement).

19. Particulars of contracts or arrangements with related parties

All related party transactions that were entered into during the financial year 2016-17were on an arm's length basis and were in the ordinary course of business. There are nomaterially significant related party transactions made by the Company with promotersDirectors key managerial personnel and other designated persons which may have apotential conflict with the interest of the Company at large.

All Related party transactions were placed before the Audit Committee and also theBoard of Directors for Approval. Prior omnibus approval of the Audit Committee is obtainedand a statement giving details of transactions if any shall be placed before the AuditCommittee meeting as mandated. The Company has developed a mechanism for identification ofrelated party transactions and the Company is also having the system of monitoring of suchtransactions.

The particulars of every contract or arrangements entered into by the Company withrelated parties referred to in sub-section (1) of section 188 of the Companies Act 2013including certain arms length transactions under third proviso thereto have been disclosedin Annexure D to this report.

20. Managerial Remuneration:

Details as required pursuant to Rule 5 of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 are contained in Corporate Governance Report.

21. Risk management policy

The details of such Committee and its terms of reference are set out in the CorporateGovernance Report forming part of the Board's Report.

22. Directors' Responsibility Statement:

Pursuant to Section 134 (3) (c) of the Companies Act 2013 your Directors confirmthat:

a. In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

b. The Directors had 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 at the end of the financial year and ofthe profit and loss of the Company for that period;

c. The Directors had 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 had prepared the annual accounts on a going concern basis;

e. The Directors in the case of a listed Company had laid down internal financialcontrols to be followed by the Company and that such internal financial controls areadequate and were operating effectively; and

f. The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

23. Auditors:

(a) Statutory Auditors

M/s Deloitte Haskins & Sells Chartered Accountants Vadodara shall retire at theconclusion of 55th annual general meeting of the company. Pursuant to the provisions ofCompanies Act 2013 and the Companies

(Audit and Auditors) Rules 2014. The board put on record its appreciation for thevaluable services provided by the retiring auditors to the shareholders during theirassociation with the Company.

The Board of Directors has on recommendation of the Audit Committee recommended forthe appointment of M/s. T R Chadha & Co. LLP Ahmedabad Chartered Accountants (FirmRegistration No. 006711N/ N500028) as the statutory auditors for the period of two yearsi.e. to hold the office from the conclusion of this annual general meeting till theconclusion of 57th Annual General Meeting of the Company to be held in the year2019.

(b) Cost Auditors:

In terms of the Section 148 of the Companies Act 2013 read with Companies (CostRecords and Audit) Rules 2014 the Company is required to maintain cost accountingrecords and get them audited every year.

The Board of Directors of your Company on the recommendations made by the AuditCommittee has approved appointment of M/s A G Dalwadi & Company Cost AccountantsAhmedabad (Firm Registration Number 100071) as the Cost Auditors of your Company toconduct the audit of cost records for the Financial Year 2017-18. The remunerationproposed to be paid to the Cost Auditor is placed for your ratification at the ensuing 55thAnnual General Meeting. The Cost Audit Report for the F.Y. 2015-16 was filed withinstipulated time.

(c) Internal Auditors:

Your Company has appointed M/s Talati & Talati Chartered Accountants Vadodara asInternal Auditors of Baroda & Sikka Unit for Financial Year i.e. 2017-18. M/s K. N.Mehta & Co. Chartered Accountants Vadodara and M/s Parikh Mehta & AssociatesChartered Accountants Vadodara have been appointed as Internal Auditors for the Company'sFiber and Polymers Units respectively.

(d) Secretarial Auditors & Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act 2013 read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Niraj Trivedi Practicing Company Secretary to undertake the secretarialaudit of the Company. The Secretarial Audit Report for FY 2016-17 is enclosed as annexureB.

24. AUDITORS' REPORT

There are no comments/ observations reservations or adverse remarks in the AuditorsReport and Secretarial Audit Report and hence no clarifications need to be given on theirclean report.

25. Extract of the annual return:

The extract of the annual return in Form No. MGT – 9 is annexed herewith asAnnexure C.

26. Human Resources

Your Directors are happy to acknowledge that the well positioned human resource of theCompany have been key drivers in implementing ideas polices cultural and behavioralaspects of the organization and ultimately with their outstanding performance has helpedthe Company to realize its objectives. Your Directors are happy to place on record theirappreciation for highly potential consistent and ethical employees for their remarkablecontribution to the Company.

27. Acknowledgements

Your Directors place on record their appreciation for the overwhelming co-operation andassistance received from the Government of Gujarat Government of India Bank of Barodaand other Banks and agencies. Your Directors also wish to express their gratitude to theinvestors for their continued support and faith reposed in the Company.

For and on behalf of the Board
Sd/-
DR. J. N. Singh IAS
Chairman

Place: Fertilizernagar Date : 25.07.2017