NAGARJUNA AGRICHEM LIMITED
ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting the 25th Annual Report of the
Company together with the Audited Accounts for the year ended 31st March,
Your Company's performance during the year as compared with that during the
previous year is summarized below:
(Rs. in Lakhs)
Particulars 2011-12 2010-11
Sales/Income from Operations 64307 57008
Other Income 386 527
Total Income 64693 57535
Profit Before Tax 1424 643
Less: Provision for Taxation 693 335
Profit After Tax 731 308
Add: Surplus brought forward 14372 14360
Amount available for appropriation 15103 14668
Transfer to General Reserve 40 35
- Interim Paid - 223
- Interim Corporate Dividend Tax - 38
- Final (Proposed) 224 -
- Provision for Corporate 36 -
Surplus Carried Forward 14803 14372
Total Appropriations 15103 14668
Your Directors are pleased to recommend payment of Dividend of Rs.1.50
paise per Equity share (i.e., 15% of the paid up Capital) for the Financial
Year 2011-12, for your consideration and approval at the ensuing Annual
General Meeting of the Company. The total dividend outgo would be Rs.259.72
Lakhs (including Dividend Distribution Tax).
For the year 2011-12, your Company reported annual sales revenue of
Rs.643.07 Crores against Rs.570.08 Crores recorded in 2010-11 registering
an increase of 12.80%. This increase in sales could be achieved due to
increase in production volumes and widening product range with focus on
value added products. The Company recorded an Operating Profit (PBIDT) of
Rs.47.47.Crores and Profit After Tax of Rs.7.31 Crores with respective
growth of 33.98% and 137% over the previous year. The increase in interest
cost is mainly due to higher current asset levels in the form of higher
inventory and receivables due to the monsoon failure & other market
conditions. The cash profits for the year under review were Rs.38.35 Crores
as compared to Rs.28.20 Crores during the previous year.
Your Company's Srikakulam's Technical Unit achieved an Annual production of
5307 MT during the year under review compared to 4335 MT of the previous
The plant at Srikakulam has been stable since May, 2011 after the labour
issues were settled. Since then production has been steadily improving.
Debottlenecking was done for few plants by investing about Rs.4.00 Crores.
The continued focus on streamlining the production facilities, augmenting
the plant efficiencies and enhance the productivity during the year have
started yielding results.
The Ethakota & Shadnagar formulating units continued to be normal as well
and could meet the demand of domestic customer base. Various initiatives in
the areas of production volume increase, quality control and supply chain
have been taken to meet the enhanced marketing demand and effective /
better customer services.
However, rising input costs, erratic & irregular power supply from
Electricity Boards, Rupee depreciation, manpower attrition etc. are the
causes of concern.
Fire incident in Srikakulam plant:
As the Shareholders are aware, a fire was broke out in the block -5 of the
Company's plant at Srikakulam on 30th June, 2012. Although, there were no
casualties, 19 people who sustained minor injuries, were treated in nearby
hospitals and discharged within 5 days. The safety mechanisms and systems
in place had helped to keep the injuries to a minimum. The unfortunate
incident drew extensive media coverage resulting panic reaction by the
nearby villagers. The concerned Government Authorities such as Inspectorate
of Factories, Pollution Control Board and RDO, have issued necessary
orders. The main reason for the fire is being investigated by Factories
Department. Your Company has initiated various measures towards meeting the
additional requirements/compliances of the said Government authorities and
improving upon various safety measures. Your management is confident of the
addressing the concerns of all stakeholders viz: local villagers, public,
employees/laborers, Government Authorities etc. and hopeful to restart the
operations at the earliest.
Domestic & Export Markets:
The Indian Agrichemical market continues to be under pressure due to
significant drop in rabi acreages in certain parts of the country coupled
with excess availability of product. The local pesticide industry in
general is stuck in a spiraling loop of falling price realizations,
inability to pass on increased input cost, tough competition, credit
problems and stock returns. The delayed monsoon in the previous year has
also joined impacting the crops particularly in South India. This resulted
in your Company's domestic sale reducing from Rs.331.10 Crores to Rs.316.57
Crores in the year under review.
Towards focusing on farmers reach & touch, Marketing & Product Development
department has been strengthened. Your Company has also initiated
discussions with different leading International Manufacturers to introduce
new products into India.
Exports have shown significant improvement compared to the previous year,
mainly due to stabilization of the Srikakulam plant. The Sales has
increased from X158.59 Crores to Rs.208.04 Crores in the year under review.
Contract (toll) manufacturing continues to be an important aspect of the
Srikakulam production. The output is being increased in a few products due
to increased demand, by debottlenecking. Relationship continues to be good
with the Contract Manufacturing Customers. Work has commenced on selecting
new products to offer to various existing and new customers.
Your Company has 3 windmills having a total capacity of 6.3 MW, located
near Tirunelveli in Tamil Nadu. The operations of these are managed by M/s
Suzlon Limited. The performance of the Windmills for the year was
satisfactory. During the year under review, receivables from TNEB, who
purchase the entire power generated as per the terms of the PPA, have been
delaying their payments. The Industry has taken up the matter with TNEB.
Sub-division of Shares:
In order to facilitate the Shareholders to avail various inherent
advantages of sub-division of face value of Equity Share of the Company
viz: to improve liquidity of the Company's shares, to bring the share price
down to a popular trading range, to attract new investors etc., the Board
of Directors at its meeting held on 19th May, 2012 approved the proposal to
sub-divide the nominal face value of the Equity Shares of the Company from
Rs.10/- per Equity Share to Rs.1/- per equity share. The proposal is
subject to approval of the Members and the requisite resolutions for such
approval have been set out in the Notice convening this 25th Annual General
As part of growth strategy, your Company has inclined to expand its
business activities and identified Fine Chemicals as an area of opportunity
and accordingly identified USP Organics Private Limited (USP) as a Company
worthwhile being associated with and made investment in order to expand its
products. Your Company has invested a 26% stake in USP. USP has new and
good production facilities located near Hyderabad. They have a an operating
capacity of 225 MT per month. Your Company has started procuring certain
chemicals used for manufacture from them.
Subsidiary Companies and consolidation of Financial Statements:
In Accordance with the general circular issued by the Ministry of Corporate
Affairs, Government of India, the Balance Sheet, Profit and Loss Account
and other Financial Statements /documents of the related Subsidiary
Companies i.e., Nagarjuna Agrichem (Australia) Pty Ltd and LR Research and
Laboratories Pvt.Ltd (which are yet to commence it operations / activities)
are not being attached with the Balance Sheet of the Company. The Audited
annual accounts and related information of subsidiaries as applicable will
be made available upon request.
Since the subsidiaries are yet to commence their business activities, as
per clause 32 of the Listing Agreement with Stock Exchanges, applicable
provisions of the Companies Act, 1956 and Accounting Standard (AS) 21, 17
and other applicable Accounting Standards, Consolidated Financial
Statements and the Segment Reporting for the year ended on 31st March, 2012
are not provided in this Annual Report.
Emphasis on environment and preference of operations in healthy conditions
remains a focus area for your Company. Towards driving various initiatives,
new ETP was commissioned at Ethakota Unit and a new Scrubber System was
commissioned at Shadnagar during the year. The operations of new Zero
Liquid Discharge (ZLD) facility at Srikakulam Unit are in the process of
being stabilized. Steps and efforts are in place in the direction of
demonstrating improved environmental performance constantly.
Your Company continues to enjoy the certifications ISO 9001:2008, ISO 14001
and OHSAS 18001 accredited for its proven standards covering in the areas
of Quality, Environment, Safety and Health Management Systems respectively.
Corporate Social Responsibility:
As a responsible Corporate Citizen, the Company is carrying out various
social activities in diverse fields. Such activities include but not
limited to ongoing drinking water supplies to villages, contribution to
Vidya Volunteer scheme and for construction of temple, providing land and
other amenities for School playground, Mythri Police, Streetlight &
borewell maintenance, development of school facilities, Community Centers &
bus shelters in surrounding villages of the factories, providing medical
services & vocational courses etc.
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company Mrs.K.Lakshmi Raju, Mr.K.Raghuraman
and Mr.D.Rangaraju, Directors of the Company will be retiring by rotation
at the ensuing Annual General Meeting and are eligible for re-appointment.
Mr.N.Vijayraghavan has resigned from the position of Whole-Time Director
with effect from 29th October, 2011, However, he is continuing as a
Director of the Company.
Mr.Sukhendu Ray and Mr.P.K.Mallik, Directors have resigned with effect from
29th October, 2011 and 27th January, 2012 respectively.
Mr.R.S.Nanda has resigned from the position of Director with effect from
18th April, 2012.
The Board wishes to place on record the significant contribution that Mr.
Ray and Mr. Mallik have provided to your Company during their association,
with your Company for over 2 decades. The Board also wishes to place on
record the contributions made by Mr. Nanda during his association with your
M/s. M. Bhaskar Rao & Company, Chartered Accountants, Hyderabad, the
Company's Statutory Auditors, retire at the conclusion of the ensuing
Annual General Meeting. They have signified their willingness to accept re-
appointment and have further confirmed their eligibility under Section
224(1-B) of the Companies Act, 1956.
Directors' Responsibility Statement:
Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956, with respect to Directors Responsibility Statement, it is hereby
i. In the preparation of the annual accounts the applicable Accounting
Standards have been followed along with proper explanations relating to
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 31st March, 2012 and of the profit of the Company for the
year ended on that date.
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;
vi. The Directors have prepared the annual accounts of the Company on a
'going concern' basis.
Transfer of Un-claimed Dividend:
Pursuant to Section 205C (2) of the Companies Act, 1956 read with the
Investor Education and Protection Fund (awareness and protection of
investors) Rules, 2001 as amended from time to time, the un-claimed
dividend aggregating to Rs.10,21,665/-(Rupees Ten Lakhs Twenty One
Thousands Six Hundred Sixty Five only) for the final dividend of the year
2003-04 and interim dividend declared during year 2004-05 were transferred
to the Investors Education and Protection Fund. The un-claimed final
dividend for the year 2004-05 is due for transfer to the said fund account.
Your Company has not accepted any Fixed Deposits from the public during the
The Industrial Relations at the Factories and Head Office continued to be
Your Directors would like to place on record their deep sense of
appreciation of the devoted services of the Executives, Staff and Workers
of your Company. In terms of the provisions of section 217(2A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rules, 1975 as amended from time to time, the names and particulars of the
employees are set out in the Annexure-II to the Directors report.
Energy Conservation, Technology Absorption and Foreign Exchange Earnings
Disclosures required under the provisions of Section 217 (1) (e) of the
Companies Act, 1956 relating to conservation of energy, technology
absorption and foreign exchange outgo and earning, and in terms of the
Companies (Disclosure of particulars in the report of the Board of
Directors) Rules 1988, are set out in a separate statement attached hereto
and forms part of this report.
Management Discussion and Analysis Report:
Management Discussion and Analysis Report for the year under review, as
stipulated under Clause 49 of the Listing Agreement, is presented in a
separate section, forming part of this Annual Report.
A separate section on Corporate Governance and a Certificate from the
Auditors' of the Company regarding compliance of conditions of Corporate
Governance as stipulated under Clause 49 of the Listing Agreement with the
Stock Exchange forms part of the Annual Report.
Your Directors thank the Company's Bankers and the Financial Institutions
for their help and co-operation extended throughout the year. Your
Directors place on record their appreciation for the support and co-
operation that the Company received from its stakeholders, customers,
agents, suppliers, employees, Associates and Community in the vicinity of
the plants. Your Directors also record their appreciation for the excellent
operational performance of the staff of the Company that contributed to the
achievements of the Company. The Directors also acknowledge with much
gratitude, the continued trust and confidence reposed by the Dealers /
Customers of the Company.
Your Directors look forward to the future with confidence.
On behalf of the Board
Dr.Nitish K Sengupta
Date : 9th August, 2012
FORM - A
FORM OF DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY
POWER AND FUEL CONSUMPTION UNIT 2011-12 2010-11
Unit KWH 23934566 22659794
(Net of Subsidy) Rs.in Lakhs 1024.33 935.37
Rate/Unit Rs. 4.28 4.13
(B) OWN GENERATION
Generator Unit KWH 3355030 1640939
Unit per Liter
of Diesel Oil Rs. 2.81 2.89
Cost/Unit Rs.in Lakhs 17.43 13.55
2. COAL (SPECIFY
QUALITY & WHERE USED) C Rom -
Quantity MT 33170 28498
Total Cost Rs.in Lakhs 1134.66 880.93
Average Rate/Mt Rs. 3420.74 3091.19
3. FURNACE OIL
Quantity KL 126.00 167.00
Total Cost Rs.in Lakhs 44.70 47.44
Average Rate/Mt Rs. 35479 28406
Quantity KL 206.81 234.61
Total Cost Rs.in Lakhs 70.70 66.62
Rate/Unit (KL) Rs. 34187 28395.76
5. CONSUMPTION PER TONNE
Electricity KWH 4411.63 5098.79
Furnace Oil KL 0.02 0.04
Coal-Quality C Rom MT 6.27 6.57
Farm Waste MT 0.04 0.05
FORM - B
Form for Disclosure of Particulars with respect to Technology Absorption
and Foregn Exchange Earnings and Outgo
A. RESEARCH AND DEVELOPMENT (R&D):
1. Specific areas in which : a. R & D Work on the existing processes
R&D carried out by the to make them environment
Company friendly and cost effective.
b. Indigenous Process Developments for
2. Benefits derived as a : Increased export business and improved
result of the above R&D product quality.
3. Future plans of action : Introduction of new products through
indigenously developed Technology.
4. Expenditure on R & D
a) Capital : Rs.12,06,667/-
b) Recurring : Rs.65,83,522/-
c) Total Expenditure as
a percentage of
Total Turnover : 0.12%
B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION
1 Efforts in brief, made : Increased size of R&D process development,
towards technology purchase of new equipments and generation
absorption, adaptation of process technical for new products.
2. Benefits derived as a : a. The plants operate effectively with
result of the above effort new addition of products.
e.g. Product improvement,
cost reduction, product b. Exports started growing.
3. In case of imported
during the last 5 years
reckoned from the
beginning of the
Technical Year) following
information may be
a) Technology Imported : None
b) Year of Import : Not Applicable
c) Has Technology been
fully Absorbed : Not Applicable
d) If not fully absorbed, : Not Applicable
areas where this has not
taken place, reasons
therefore and future
plans of action
C. PARTICULARS OF FOREIGN EXCHANGE EARNINGS AND OUTGO:
i. Activities relating to : Exports are an important part of
exports, initiatives taken Nagarjuna future growth strategy.
to increase exports, As a result of new product introduction
development of new export and Research & Development investments,
markets for products and Exports have shown a satisfactory growth.
services, and export plans
ii. Foreign Exchange Outgo : Rs.in Lakhs
and Earnings Foreign
Raw Materials : 13,640.05
Capital Goods : 199.04
Traded Goods : -
Others : 82.24
Total : 13,921.33
Foreign Exchange Earnings
(FOB Value) : 19,686.07
MANAGEMENT DISCUSSION AND ANALYSIS
This discussion is on the Agrochemical Business as it constitutes the main
portion of revenues.
The Agrochemicals Industry plays a significant role in the Agriculture
sector in India, which accounts for about one fifth of its GDP. The
domestic market size of the Indian Agrochemical Industry is around Rs.12000
Crores and is expected to grow at 10 % per annum. India's growth rate
compares with the highest in the world. With emphasis in agriculture by the
Government of India the growth is expected to continue. India is currently
the fourth largest producer of Agrochemicals globally, after United States,
Japan and China.
The current domestic consumption is also expected to grow driven by rising
population, decreasing per capita availability of arable land and focus on
increasing agricultural yield. The demand will also be driven by the rising
food grain demand and increasing awareness about pesticide usage among the
farmer community. The pesticide consumption is around 480 gm per hectare
which is very low compared to countries like Japan, USA etc.
The Indian market is served by many Companies. Being a generic market,
ability to introduce me-too products is easy. Many small players have
seized this and have a influencing presence in the market space. This has
resulted in stiff competition and quality being compromised. Despite this,
the attractiveness of the Indian market has made MNCs to set up shops in
India over the past few years, through commencing business / acquisitions
viz Maktisham Agan, Sumitomo and Arysta. Existing MNCs are implementing
plans to grow.
It is also to be noted that the Government is becoming active in reviewing
products that have high toxicity levels. This has resulted in products
Contract Manufacturing and Exports in India is around USD 1.8 Billions.
Phillips MacDonald (a leading global publication in the pesticide industry)
has indicated that the contract manufacturing is expected to grow, as MNCs
are focusing on growth in the generic markets as new product developments
is becoming more expensive.
The growing requirement of agricultural products in India is a major
opportunity. Having a good pan India presence through the large network of
dealers and channel partners, your Company is in a position to seize the
opportunities for growing in India. The growing presence of more MNC should
bring in more discipline in the mid to long run in the markets which augurs
well for the Industry.
India is also a fast becoming a destination for contract manufacturing of
generic pesticides by many Multinationals.
This is due to the cost advantages and the technical skills available in
the country. Your Company is one of the leading players in this field.
As per a study by Task Force, Government of India, the Export and Contract
Manufacturing market opportunity by 2020 is USD 7.3 billon. India has the
opportunity to leverage on its strength to become a major player in this
Many of the AI's (Active Ingredient) used in India are being imported from
China. China is going through a phase of tightening its manufacturing
facilities through introducing tougher pollution conditions. The Chinese
currency Yuan is also appreciating thereby making imports into India
costlier. This gives an opportunity for India to produce AIs and to be
competitive in the global markets.
Keeping the above in view, your Company is gearing up to meet these
opportunities through strategies which will leverage its strength in the
pan India dealer network and by introducing new formulations in
collaborations with MNCs. It is also implementing various initiatives for
improving its productivity and capacity utilisation in its plants to seize
the Contract Manufacturing opportunities.
Threats, Risks and Concerns:
Timely arrival of the Monsoon, its quantity and spread continues to be a
major concern for the entire Agri Sector in India. The high inflation and
shortage of power to run the manufacturing facilities is also high in the
list of concerns for the Industry. The stiff price competition in India
makes it difficult for passing on the cost increases.
In contract manufacturing the changing consumption patterns of pesticides
in the global markets have an impact on reduction in the volumes. The
higher cost of production due to power costs and inflation related costs
are not easily passed through to the customers.
The pesticide business, despite the above concerns is an attractive
business. There are many short term challenges for growth. Your Company is
implementing various plans to leverage on its domestic network strength and
as well as improving the efficiencies and productivity of the manufacturing
Internal Control Systems:
The Company has proper and adequate systems of internal controls, which
ensure that all the assets are safeguarded and that all the transactions
are authorized, recorded and reported correctly. The Company maintains
adequate and effective internal control systems and suitable monitoring
procedures with regard to the purchase of raw materials, stores, plant &
machinery, equipment and other assets as well as for sale of goods. The
Finance and Commercial Functions have been structured to provide adequate
support and controls for the business of the Company. There is a Internal
Audit System which focuses on all the main systems and processes.
Financial performance: (with respect to operational performance)
The Sale has shown a growth of 13% over the previous year mainly due to
Exports. The EBIDT was Rs.74.43 Crores and has improved from last year of
Rs.55.44 Crores due to improved sales. Interest was higher than previous
year due to increase in working capital. The Long Term Debt Equity Ratio is
0.29 compared to 0.46 of the last year.
The Company's improved financial and operations performance during 2011-12
and the positive outlook about the Company's continued growth in the years
to come enabled the Board to recommend a dividend of 15% to the
Industrial Relations and Human Resource Development:
The number of employees in the Company as on 31st March, 2012 was 1123. The
Company enjoys cordial and harmonious industrial relations. Training
programs and various initiatives are being taken to create an environment
to enhance individual and team performance.
The statements in the Report of the Board of Directors and the Management
Discussion & Analysis Report describing the Company's projections,
estimates, expectations or predictions may be forward looking statements
within the meaning of applicable Securities Laws and Regulations. Actual
results could differ materially from those expressed or implied since the
Company's operations are influenced by many external and internal factors
beyond the control of the Company.
On behalf of the Board of Directors
For Nagarjuna Agrichem Limited
Dr. Nitish K Sengupta
Date : 9th August, 2012