It gives me great pleasure to welcome you all to the 75th Annual General Meeting ofFACT. This is my maiden address to the esteemed share holders of FACT and I consider thisas a great privilege to address this august gathering as Chairman and Managing Director ofthis great Organisation.
As you may be aware I assumed charge as Chairman and Managing Director of FACT on 2ndFebruary 2019. After coming here I came to know about the glorious history of FACT alongwith its role in the agriculture revolution in the country and I feel more blessed to be apart of FACT Family.
On this occasion I am remembering with gratitude the contributions made by greatvisionaries like late Sree Chithirathirunal Rama Varma Maharaja of Travancore lateShri.M.K.K Nair the first Chairman and Managing Director and other distinguishedpredecessors who build FACT as a great organisation which pioneered the Green Revolutionin South India.
India continues to remain the fastest growing major economy in the world in 2018-19despite a light moderation in its GDP growth from 7.2% in 2017-18 to 6.8% on 2018-19.India maintained its macro economic stability by containing inflation within 4%. India isthe seventh largest economy in terms of GDP. The monetary policy of the Reserve Bank ofIndia has played a vital role in economic growth. Reduction in interest rate may boost theaggregate demand and reinvigorate investment activities. The economy is moving towards tobecoming a US $ 5 trillion economy by 2024-25. To achieve this India needs to sustain areal GDP growth rate of 8%. Being an agrarian economy the GDP growth would reflect infertiliser sector also.
During the financial year 2018-19 production of Nutrient Nitrogen and phosphorousregistered a decline of 0.7% and 3.1% respectively as compared to the previous yearEventhough the agro climatic conditions were quite good throughout India the rawmaterial prices and exchange rate variations were not favourable during the year 2018-19.The prices of major raw materials were on the higher side due to global supplyconstraints. Surge in oil prices and volatility of Indian currency had also affected theperformance of fertiliser companies in India.
The raw material prices have now firmed up and this may reflect in the performance offertiliser companies during the year 2019-20. All India demand forecast for fertiliserproducts for the year 2019-20 is also encouraging. The Indian fertiliser market isexpected to grow at a Compound Annual Growth Rate (CAGR) of 12.3% during the period 2019to 2024.
The year 2018-19 was the full year of implementation of Direct Benefit Transfer (DBT)in Fertiliser. Now the Government of India is planning implementation of phase II ofDirect Benefit Transfer and the industry is gearing up for its implementation.
One of the main issues being faced by Fertiliser industry in India is to maintainliquidity. Banks are not prepared to lend against subsidy receivables and the interestburden on the companies is also mounting.
Performance of FACT
The year 2018-19 was a year of noticeable improvement in the financial results andreturn of your Company from red to black. I am happy to inform you that after a longperiod FACT has reported a profit of Rs. 163.14 crore during the financial year 2018-19.Key financial figures are given below.
| ||2018-19 (Rs. crore) ||2017-18 (Rs. crore) |
|Income from Sales ||1954.98 ||1928.67 |
|Other income ||456.75 ||41.63 |
|Total Revenue ||2411.73 ||1970.30 |
|EBIDTA ||466.19 ||209.50 |
|PBT ||163.14 ||(-)129.06 |
The production performance of the Company was badly affected by the unprecedented floodoccurred during August 2018 and the total dependence of imported Ammonia for fertiliserproduction due to the high cost of Regasified Liquefied Natural Gas (RLNG). High cost ofother raw material like Phosphoric acid etc. has also affected the performance of theCompany during the year.
A summary of the physical performance is given below.
|Production ||2018-19 (MT) ||2017-18 (MT) |
|NP 20:20:0:13 ||634362 ||661973 |
|Amm Sulphate ||141754 ||180178 |
|Sales ||2018-19 (MT) ||2017-18 (MT) |
|NP 20:20:0:13 ||620552 ||670710 |
|Ammonium Sulphate ||136645 ||168070 |
The financial and physical performance of the Company has been elaborated in the AnnualReport and therefore I am not intending to repeat the same.
The Notice convening the meeting the Director's Report and the Audited Annual accountshave been with you for some time and with your permission I take them as read.
You might have observed that the Statutory Auditors have not made any adverse remarksor qualification in their report for the last six years in succession. Similarly theComptroller and Auditor General of India have also offered NIL comment on the accounts ofthe Company. This is a testimony to the transparency and excellent accounting practicebeing followed by the Company.
Opportunities and Challenges
For success of every organisation any adversity should be converted into opportunity.Neither boasting in the past glory nor cursing the adversities is going to take us to anysafer shores. We have to be conscious of the hard realities. I firmly believe that thesuccess of any Organisation depends on its ability to convert the adversities in toopportunities. With the support and co-operation of each and every one of you I am sureFACT can turn around in near future. Your Company has been taking a number of strategicinitiatives for its turnaround growth and sustenance in long run. The Company is adoptinga multi pronged approach to improve all spheres of activities. Our first priority is tooptimise the production of fertilisers and operate all the plants at its optimum level.Ever since I took charge my priority is in this direction only and the effort is slowlyshowing results also. All the Fertiliser Plants of FACT is working at its optimum level.The Ammonia Plant which was under shut down for one and a half year has started operationsfrom may 2019.
The trial run of Caprolactam plant which was in shut down condition for the last 6years is progressing as planned. Pollution Control Clearance has been received and thePlant trials are planned in a phased manner.
For uninterrupted production continuous supply of raw materials at a reasonable priceis required. For the first time in the history of FACT tie up for supply of RLNG for thefull financial year 2019-20 has been made with Petronet LNG and oil marketing companies.Signing of G to G agreement with Moroco for supply of Phosphoric acid is on an advancedstage. Arrangements had already been framed for supply of sulphur from BPCL KochiRefineries.
For increasing turnover and profitability the area of operation of the Company is tobe expanded. Import of fertilisers and trading activities should be in an aggressivemanner. Towards this end FACT had started import of fertilisers. One shipment of NPK16:16:16 had reached Tuticorin Port in July 2019. FACT is also planning to expand itsmarketing territory to North West and North eastern zones. FACT is also planning to sellits products through other fertiliser companies. MOU had already been signed withHindustan Insecticides Limited for the sale of FACT fertilisers outside our marketingterritory. FACT intends to enhance its marketing operations Pan India.
Dedicated and skilled manpower is the foundation for the success of every organisation.Unfortunately FACT is facing shortage of experienced manpower especially in seniorlevels. A work study was conducted by the Kerala State Productivity Council to assess therequirement of manpower at various levels and based on their report selection andrecruitment to fill critical vacancies and implementation of succession planning is inprogress. Company is also giving due importance for Training and Development of itsworkforces and R&D activities.
The scale of operation of the Company is to be enhanced to justify the availableinfrastructure facilities. Towards this FACT has identified Capital projects forenhancing the production facilities and increasing the operational efficiency.
FACT always give top priority to ensure clean air and better living environment to theinhabitants in and around the factory without any compromise in safety standards. Thishas been recognised by statutory authorities like Department of Factories and BoilersState Pollution Control board etc with performance awards.
Any savings in energy cost will improve the bottom line of the company. In this regardFACT intends to purchase power through open access from Power exchanges. Company is alsoexploring the possibilities of enhancing the utilisation of low pressure steam byconverting it into power.
All these efforts would definitely lead to improvement in the top and bottom line ofthe Company and the Company expects to generate operating profit from the financial year2019-20.
I am happy to inform you that all the stakeholders of the company including theGovernment of India and Government of Kerala is extending all support for the turnaroundof FACT and closely monitoring the performance of the Company. The confidence reposed bythe shareholders of FACT is reflecting in the upward movement of share price in the stockexchange and the market capitalisation of the company.
Government of India had accorded approval for the sale of 482 acres of land toGovernment of Kerala and the amount realised from the land monetisation would be used forthe expansion and diversification of the Company.
I am failing in my duties if I paint only the rosy picture without mentioning thechallenges to be faced for the sustainable operation of the Company in the long run. Thebiggest challenge is the effective utilisation of the money to be received frommonetisation of land and successful commissioning of the new capital projects.
The financial restructuring package submitted by the Company is still under theconsideration of the Government of India. Wiping out of the accumulated losses and makethe networth of the Company positive is another area of concern.
Your Company is committed to confirm to all relevant directives and guidelines ofGovernment and statutory authorities relating to corporate governance. The philosophy ofthe Company in relation to Corporate Governance is to ensure transparency disclosure andreporting that conforms to the provisions of Companies Act 2013 SEBI (LODR) Regulations2015 and all other applicable laws and regulations. The Company is also complying theguidelines issued by Department of Public Enterprises.
I hereby place on record my sincere thanks to my colleagues on the Board of Directorsfor their advice and support the Officers' Forums the Trade Unions and all the employeesof the Company for their dedicated efforts and unstinted support for overcoming variouschallenges facing the Company and for their contribution for the revival and sustainablegrowth of FACT. I must also thank the various departments of Government of India inparticular the Department of Fertilisers for their support and cooperation.
I also express my sincere thanks to all other stake holders like farmers suppliersbuyers contractors banks shareholders auditors dealers and the general public for thetrust they have been reposing on us.
| ||(Kishor Rungta) |
|Place : Udyogamandal ||Chairman And Managing Director |
|Date : 16-08-2019 ||DIN-00231106 |