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Gujarat State Fertilizers & Chemicals Ltd.

BSE: 500690 Sector: Agri and agri inputs
NSE: GSFC ISIN Code: INE026A01025
BSE 10:17 | 26 Mar 101.00 1.80
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HIGH

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OPEN 100.65
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VOLUME 17836
52-Week high 137.50
52-Week low 85.60
P/E 7.31
Mkt Cap.(Rs cr) 4,025
Buy Price 100.85
Buy Qty 622.00
Sell Price 101.00
Sell Qty 1225.00
OPEN 100.65
CLOSE 99.20
VOLUME 17836
52-Week high 137.50
52-Week low 85.60
P/E 7.31
Mkt Cap.(Rs cr) 4,025
Buy Price 100.85
Buy Qty 622.00
Sell Price 101.00
Sell Qty 1225.00

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

Company director report

To The Members

Your Directors have pleasure in presenting their 56th Annual Report onthe business and operations of the Company and the accounts for the Financial Year endedMarch 31 2018.

1. Financial highlights of the Company

(Rs. in Crores)

Particulars

Standalone

Consolidated

2017-18

2016-17

2017-18

2016-17

1 Gross Sales

6309.27

5476.88

6304.57

5476.88

2 Other Income

94.67

56.64

98.95

56.30

3 Total Revenue

6403.94

5533.52

6403.52

5533.18

4 Less : Operating Expenses

5742.68

4990.28

5739.80

4982.68

5 Operating Profit

661.26

543.24

663.72

550.50

6 Less : Finance Cost

51.35

64.93

51.35

64.92

7 Gross Profit

609.91

478.31

612.37

485.58

8 Less : Depreciation

119.12

103.43

119.45

103.62

9 Exceptional Item

0

0

0

0

10 Profit before Taxes

490.79

374.88

492.92

381.96

11 Taxation
- Current Tax

82.08

57.35

85.28

57.76

- Deferred Tax (net)

49.74

13.84

50.69

15.55

- Mat Credit recognized

(15.45)

(24.30)

(15.45)

(24.30)

- Current tax relating to prior years

(101.31)

(91.51)

(101.31)

(91.51)

12 Profit after taxes

475.73

419.50

473.71

424.46

13 Non-Controling Interest

-

-

0.06

-

14 Other comprehensive income arising from
re-measurement of defined benefit plan

(2.12)

(55.32)

(2.12)

(55.32)

15 Balance brought forward from last year

243.96

285.29

287.74

324.11

16 Amount available for appropriations

717.57

649.47

759.39

693.25

17 Out of which your Directors have proposed appropriation and transfer as under:
a) Proposed dividend on equity shares

87.66

87.66

87.96

87.66

b) Tax on proposed dividend

17.85

17.85

17.90

17.85

c) General Reserve

180.00

300.00

180.00

300.00

18 Leaving a balance in the Profit & Loss Account

432.06

243.96

473.53

287.74

2. Dividend

Your Directors are happy to recommend a dividend @ 110% i.e. Rs.2.20/- per Equity Share (Face value of Rs. 2/- each) on 398477530 shares (Previous Year- 110% i.e. Rs. 2.20 per share on 398477530 Equity Shares of Rs.2/- each) for thefinancial year ended 31st March 2018. The net outgo on account of Dividend shall be Rs.105.51 Crores including Corporate Dividend Tax. The Dividend shall be paid to thosemembers whose names shall appear on the Register of Members of the Company on the BookClosure Date i.e. on 13/09/2018.

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

Your directors wish to report that your Company has achieved turnoverof Rs. 6309.27 Crores for the year ended March 31 2018 as against Rs. 5476.88 Crores (FY17-18) on standalone basis which is higher by 15% (Rs.832.39 Crores) when compared to theprevious financial year.

Similarly for the year under review (FY 2017-18) Profit before Tax(PBT) was Rs. 490.80 Crores and Net Profit (Profit after Tax) was Rs. 475.74 Crores asagainst PBT of Rs. 374.88 Crores and PAT of Rs. 419.50 Crores for the previous financialyear.

4. Material changes and commitments

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

5. Details of significant and material orders passed by the regulatorsor courts or tribunals impacting the going concern status and Company's operations infuture.

There are no such orders except those which have been appropriatelychallenged before the judiciary and no impact on going concern status and Company'soperation in future of such matters are expected or visualised at the current stage atwhich they are.

6. Details in respect of adequacy of internal financial controls withreference to the Financial Statements.

Your Company has an internal Control System which commensurate with thesize scale and complexity of its operations. The scope and authority of the InternalAudit function lies with the Audit Committee of Directors. The Audit Committee monitorsand evaluates the efficacy and adequacy of internal control systems accounting proceduresand policies. Based on the report of Internal Auditors significant audit observations andactions taken on 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 SubsidiaryCompany or Associate Companies: Subsidiary Company - GSFC Agrotech Limited.

Associate Companies - Vadodara Enviro Channel Limited Gujarat GreenRevolution Company Limited Gujarat Data Electronics Limited Karnalyte Resources Inc.

Subsidiary of Subsidiary - Gujarat Arogya Seva Private Limited.

There were no new additions/ deletions during the year. A report of theperformance and financial position of each of the subsidiaries associates and jointventure companies as per the Companies Act 2013 is provided as Annexure - A to theConsolidated Financial Statement and hence not repeated here for the sake of brevity. TheCompany does not have any material subsidiary in terms of Company's Act 2013 readwith 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 National Stock Exchange of India Ltd. (NSE). As approved by the shareholders anapplication for voluntary delisting of Equity Shares from Calcutta Stock ExchangeAssociation Ltd. Kolkatta was made however the approval for delisting is stillawaited. The listing fee for the FY 18-19 has been paid to both the Stock Exchanges.

Your Directors wish to state that the Equity Shares of your Company arecompulsorily traded in dematerialized form w.e.f. 26/06/2000. Presently 97.42% of sharesare held in electronic/ dematerialized form.

9. Report on Corporate Governance And Management Discussion AndAnalysis Report To Shareholders

Your Company has complied with all the mandatory requirements ofCorporate Governance norms as mandated by SEBI (Listing Obligations & DisclosureRequirements) Regulations 2015.

A separate report on Corporate Governance together with the Certificateof M/s. S. Samdani & Associates Company Secretaries Vadodara forms part of thisAnnual Report. The Management Discussion & Analysis report also forms part of thisAnnual Report.

10. Business Responsibility Reporting

Business Responsibility Report is enclosed as Annexure ‘F' tothis Annual Report as required under Regulation 34(2) (f) of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.

11. Fixed Deposits

During the year 2017-18 your Company has not accepted/ renewed anyFixed Deposit. Your Directors wish to report that there are 2 Fixed Deposits aggregatingRs. 0.25 Lacs which have remained unclaimed by Depositors as on 31st March 2018. Lettersreminding them to seek repayment have been sent. Upto and including the date of thisreport 0 deposits amounting to Rs 0 Lacs have been repaid.

During the year the Company has transferred a sum of Rs. 2.40 Lacsbeing the unclaimed deposits and interest amount thereon to the Investors' Educationand Protection Fund (IEPF) as required in terms of Section 125 of the Companies Act 2013.The Company has discontinued accepting new deposits since 15.11.2005 and renewing thedeposits since 31.03.2009.

12. Insurance

All the properties and insurable interests of the Company includingthe buildings plant & machinery and stocks have been adequately insured. Also asrequired under the Public Liability Insurance Act 1991 your Company has taken theappropriate insurance cover.

13. Expansion & Diversification

Caprolactam Quality project (CQ project) was successfully commissionedon 25th February 2018 and officially inaugurated on 28th February 2018. This project isfor improvement of quality of extract Caprolactam made Caprolactam-I Plant of GSFC toproduce international grade Caprolactam enhancing its quality. GSFC replicated existingLactam Section of Caprolactam-I Plant which was commissioned in the year 1992 on BASFtechnology and carried out their role as a Licenser of the process legally. The project iscapable of production of 50000 MTPA International grade Caprolactam from Caprolactamextract. M/s Simon India Limited was awarded the contractor this plant on EPC. The totalproject cost of CQ Project is @ 71 Crores including taxes. This project is only one of itskinds in India for import substitute product in petrochemical industry.

The plant started producing International grade Caprolactam from thevery first day of its commissioning underlining GSFC's operational capabilities. Atfull load capacity of this plant it is expected to produce @1000 MT of additionalCaprolactam from lactam extract and @3500 MT of additional Ammonium Sulphate per annum asbyproduct. With the commissioning of this project GSFC expects to improve theirprofitability significantly. It also improves operational flexibility and consistentquality of international grade Caprolactam.

GSFC has successfully commissioned its Film Grade Nylon-6 (Dry blendingunit) Project on 26th February 2018.The plant was officially inaugurated on 28th February2018.This plant can produce 15 MT per Day of Film Grade Nylon (5000 MT per annum) ofvarieties like Lubricated Chips Nucleated chips and Combination of Lubricated andNucleated chips. This is first of its kind project in India and provides leverage forimport substitution. GSFC had faced a very challenging task of completing this projectwhich was based on PEPC-Germany technology. M/S PEPC-Germany backed out of the projectmidway due to their poor financial position leaving entire investment of Rs. 15 Crores atstake with a possible long delay. Being a LSTK project the process recipe was a secretwhich party did not reveal. GSFC projects execution team developed recipe andInstrumentation logic control along with piping and structural work without drawings ofthe project and completed mechanically within house efforts in short period. From thefirst trial production quality film grade Nylon-6 could be achieved with quantity withnegligible hassles endorsing technical capabilities of GSFC Projects execution team. Thisplant will provide an edge for selling of Nylon-6 with value added benefit and providedirect import substitution to the country.

Projects under development

1000 MTPD Phosphoric Acid and 3000 MTPD Sulphuric Acid Plant at SikkaUnit:

As a part of backward integration Company is contemplating to install1000 MTPD Phosphoric Acid and 3000 MTPD Sulphuric Acid Plant on EPC basis at its SikkaUnit. This will reduce the import dependency for sustaining the plant operation oncontinuous basis for production of Phosphatic Fertilizers at Sikka Unit.

Company is in process of discussions with Phosphoric Acid ProcessLicensors for supply of Basic Engineering Package based on which the Company proposes toexecute the project on EPC basis. The Company is expected to finalise the Licensor byAugust/September 2018. Simultaneously the Company is in final discussion with RockPhosphate Suppliers for execution of Memorandum of Understanding (MoU) to ensureavailability of rock phosphate on long term basis. Company has already achieved NoC fromGPCB for execution.

Expansion of Sikka Jetty for better utilisation :

As present Sikka jetty and its associated infrastructure facilities arehighly unutilized Company is contemplating to expand the present jetty for solid handlingand handling of other liquid chemicals by developing necessary infrastructure / storagefacilities at jetty and Chemical Shore Terminal (CST).

After expansion and development of jetty / CST Rock Phosphate requiredfor new Phosphoric acid plant and other fertilizers like Urea DAP for trading purposewill be imported at jetty. Also other liquid chemicals like Sulphuric Acid / MethanolCyclohexane etc. can be imported and stored for captive use / trading purpose. Company hasgot done feasibility study for the expansion of Sikka jetty and is now in the process ofgetting the Environment Clearance and finalising the joint venture partners for thisproject.

Ammonia Urea Complex in Republic of Congo (RoC) :

To avail benefits of availability of Natural gas at reasonable priceand active interest shown by Government of RoC Company is contemplating to install 800MTPD Ammonia and 1100 MTPD Urea plants in RoC wherein Government of RoC will also haveequity participation.

PDIL has completed Techno Economic Feasibility (TEFR) for the Projectand based on initial assessment Project seems to be feasible. Company has executed a Nonbinding term sheet with G-RoC to form a basis of discussions for the Project. Company isprocess of discussions with bankers technology suppliers and EPC contractors for theirequity participation. G-RoC has applied for Line of Credit from GoI for this project andthe project will be further taken based on the approvals received.

Methyl Methacrylate (MMA) Plant at Dahej:

Company is contemplating to install 50000 MTPS MMA plant at Dahej forwhich land acquisition has been completed. Company has entered into an understanding withOPaL for supply of the major raw material C4 Raffinate along with the mode of execution ofthe project. Company have also finalised the M/s Mitsui Chemicals Incorporation (MCI) asthe technology suppliers and the requisite agreements will be shortly executed for supplyof License Know-How Process Design Package and Catalyst. The Company is expected tofinalise the EPC Contractor for this project by June 2019.

14. Information regarding conservation of energy technologyabsorption foreign exchange earnings and outgo and particulars of employees etc.

Information as required under Section 134 (3) (m) of Companies Act2013 read with the Companies (Accounts) Rules 2014 are enclosed in Annexure “E”forming part of this report.

The Company does not have any employee falling within the purview ofSection 197 (12) of the Companies Act 2013 read with Rule 5 (1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 and hence suchParticulars of Employees are not included.

15. Corporate Social Responsibility (CSR)

The Company has constituted a Corporate Social Responsibility (CSR)Committee in accordance with Section 135 of the Companies Act 2013. As a part of itsinitiatives under “Corporate Social Responsibility” the Company has undertakenprojects in the areas of education livelihood health water and sanitation. The AnnualReport on CSR activities is enclosed as Annexure A. CSR Policy adopted by the Company isplaced on the Company's website www.gsfclimited.com.

16. Directors

A) Changes in Directors and Key Managerial Personnel

Shri Arvind Agrawal IAS has been appointed w.e.f. 04.06.2018 as arotational Director in place of Shri Anil Mukim IAS Director of the Company (till07.03.208).

Shri Raj Gopal IAS has been appointed w.e.f. 08.08.2018 as arotational director in place of Shri Sujit Gulati IAS.

Shri Sujit Gulati IAS has been appointed as Managing Director of theCompany w.e.f. 13.07.2018 (afternoon) vice Shri A M Tiwari IAS (Managing Director of theCompany till 13.07.2018).

Shri Arvind Agarwal shall be liable to retire by rotation at theensuing Annual General Meeting has offered himself for re-appointment.

The brief resume of Directors with regard to appointment/re-appointment at 56th Annual General Meeting is annexed to the Notice convening the 56thAnnual General Meeting which forms the integral part of this Annual Report.

B) Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and SEBI (ListingObligation & Disclosure Requirement) Regulations 2015 the Board has carried out anannual performance evaluation of its own performance the Directors individually as wellas the evaluation of its committees. The manner in which the evaluation has been carriedout is explained in the Corporate Governance Report which forms the part of this AnnualReport.

C) Appointment and Remuneration Policy

The Board has on the recommendation of the Nomination and RemunerationCommittee framed a policy for selection and appointment of Directors senior managementand their remuneration. The details of Remuneration Policy and its weblink are containedin the Corporate Governance Report.

D) Meetings

During the year Six Meetings of the Board of Directors and Fivemeetings of the Audit Committee were held. The composition of Board and Committees alongwith details of attendance is contained in Corporate Governance Report.

17. Details of establishment of vigil mechanism for Directors andemployees

The Company has a Vigil Mechanism Policy in place to deal withinstances if any of the fraud mismanagement misappropriations if any and the same isplaced on the Company's website. The details of the policy as well as its weblink arecontained in the Corporate Governance Report.

18. Particulars of loans guarantees or investments under section 186

Particulars of loans given investments made guarantee given andsecurities provided along with the purpose for which the loan or guarantee or security isproposed to be utilized by the recipient are provided in the standalone financialstatement.

Your Directors would further like to inform that GSFC is one of thepromoters of Bhavnagar Energy Company Limited (BECL) and currently holds 59220000equity shares of Rs.10/- each aggregating Rs.29.31 Crores in BECL which represents 5.95%of BECL's total equity share capital.

Energy & Petrochemicals Department (EPD) Government of Gujarat(GoG) in May 2018 in-principle approved the proposal of merger of BECL into GujaratState Electricity Corporation Ltd. (GSECL). GSECL is a wholly owned subsidiary of GujaratUrja Vikas Nigam Limited (GUVNL). The merger shall be carried out by the State Government(GoG) under the provisions of Gujarat Electricity Industry (Reorganization &Regulation) Act 2003. By virtue of which upon issuance of notification by GoG theScheme of Merger of BECL with GSECL shall stand approved and the transfer and vesting ofthe undertaking/s of BECL shall become operative and effective. No further actions shallbe required to be taken by BECL or GSECL or any other persons including the promoters ofBECL thereafter.

All promoters of BECL have made representation to calculate and fix theshare exchange ratio based on the fair valuation approach. The precise financial impact ofthis merger would be known only after merger ratio is notified by GoG and post-mergervaluation of the equity shares of GSECL. The impact of merger shall be appropriately dealtinto the books of accounts once it actually gets implemented.

19. Particulars of contracts or arrangements with related parties

All related party transactions that were entered into during thefinancial year were on an arm's length basis and were in the ordinary course ofbusiness. There are no materially significant related party transactions made by theCompany with promoters Directors key managerial personnel and other designated personswhich may have a potential conflict with the interest of the Company at large.

All Related party transactions were placed before the Audit Committeeand also the Board of Directors for Approval. Prior omnibus approval of the AuditCommittee is obtained and a statement giving details of transactions if any shall beplaced before the Audit Committee meeting as mandated. The Company has developed amechanism for identification of related party transactions and the Company is also havingthe system of monitoring of such transactions.

The particulars of every contract or arrangements entered into by theCompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arms length transactions under third proviso theretohave been disclosed in Annexure D to this report.

20. Managerial Remuneration

Details as required pursuant to Rule 5 of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 are contained in CorporateGovernance Report.

21. Risk management policy

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

22. Directors' Responsibility Statement

Pursuant to Section 134 (3) (c) of the Companies Act 2013 yourDirectors confirm that: a. In the preparation of the annual accounts the applicableaccounting standards had been followed along with proper explanation relating to materialdepartures; b. The Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that period; c. The Directorshad taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of this Act for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; d. The Directors had preparedthe annual accounts on a going concern basis; e. The Directors in the case of a listedCompany had laid down internal financial controls to be followed by the Company and thatsuch internal financial controls are adequate and were operating effectively; and f. TheDirectors had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

23. Auditors

(a) Statutory Auditors

The Board of Directors has on recommendation of the Audit Committeerecommendation of the Audit Committee recommended for the appointment of M/s. T. R Chadha& Co. LLP Ahmedabad Chartered Accountants (Firm Registration No.006711N/N500028) asthe Statutory Auditors for the period of two years i.e. to hold the office from theconclusion of this Annual General Meeting till the conclusion of 57th Annual GeneralMeeting of the Company to be held in the year 2019.

The Companies Amendment Act 2017 read with notification S O 1833(E)dated 7th May 2018 has deleted the provision requiring annual ratification of theappointment of Auditors. Therefore a resolution relating to the ratification ofappointment of Auditors (M/s. T R Chadha & Co. LLP Ahmedabad the StatutoryAuditors) of the Company who shall continue to hold office from the conclusion of 56thAnnual General Meeting of the Company till the conclusion of 57th Annual General Meetingof the Company has not been included in the notice convening 56th Annual General Meeting.

(b) Cost Auditors

In terms of the Section 148 of the Companies Act 2013 read withCompanies (Cost Records and Audit) Rules 2014 the Company is required to maintain costaccounting records and get them audited every year.

The Board of Directors of your Company on the recommendations made bythe Audit Committee has approved appointment of M/s A G Dalwadi & Company CostAccountants Ahmedabad (Firm Registration Number 100071) as the Cost Auditors of yourCompany to conduct the audit of cost records for the Financial Year 2018-19. Theremuneration proposed to be paid to the Cost Auditor is placed for your ratification atthe ensuing 56th Annual General Meeting. The Cost Auditors for the F.Y. 2017-18 was filedwithin stipulated time.

(c) Internal Auditors

Your Company has appointed M/s Talati & Talati CharteredAccountants Vadodara as Internal Auditors of Baroda & Sikka Unit for Financial Yeari.e. 2018-19. M/s K. N. Mehta & Co. Chartered Accountants Vadodara and M/s ParikhMehta & Associates Chartered Accountants Vadodara have been appointed as InternalAuditors for the Company's Fiber and Polymers Units respectively.

(d) Secretarial Auditors & Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act 2013read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014the Company has appointed M/s Niraj Trivedi Practicing Company Secretary to undertake thesecretarial audit of the Company. The Report of the Secretarial Auditor is enclosed asannexure B.

24. Auditors' Report

There are no comments/ observations reservations or adverse remarks inthe Auditors Report and Secretarial Audit Report and hence no clarifications need to begiven on their clean report.

25. Extract of the annual return

Extract of Annual Return in Form No. MGT 9 is enclosed as Annexure C.

26. Human Resources

Your Directors are happy to acknowledge that the well positioned humanresource of the Company have been key drivers in implementing ideas polices cultural andbehavioral aspects of the organization and ultimately with their outstanding performancehas helped the Company to realize its objectives. Your Directors are happy to place onrecord their appreciation for highly potential consistent and ethical employees for theirremarkable contribution to the Company.

27. Acknowledgements

Your Directors place on record their appreciation for the overwhelmingco-operation and assistance received from the Government of Gujarat Government of IndiaBank of Baroda and other Banks and agencies. Your Directors also wish to express theirgratitude to the investors 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 : 10/08/2018