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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 105.70
PREVIOUS CLOSE 106.40
VOLUME 143380
52-Week high 150.75
52-Week low 66.00
P/E 7.84
Mkt Cap.(Rs cr) 4,541
Buy Price 113.90
Buy Qty 1.00
Sell Price 114.00
Sell Qty 1.00
OPEN 105.70
CLOSE 106.40
VOLUME 143380
52-Week high 150.75
52-Week low 66.00
P/E 7.84
Mkt Cap.(Rs cr) 4,541
Buy Price 113.90
Buy Qty 1.00
Sell Price 114.00
Sell Qty 1.00

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

Company director report

To

The Members

Your Directors have pleasure in presenting their 58th Annual Report on the business andoperations of the Company and the accounts for the Financial Year ended March 31 2020.

1. Financial highlights of the Company

(Rs in Crores)

Sr. No. Particulars Standalone Consolidated
2019-20 2018-19 2019-20 2018-19
1 Gross Sales 7620.82 8574.54 7797.98 8490.67
2 Other Income 109.19 104.90 106.51 107.53
3 Total Revenue 7730.01 8679.44 7904.49 8598.20
4 Less : Operating Expenses 7318.13 7827.15 7480.76 7742.01
5 Operating Profit 411.88 852.29 423.73 856.19
6 Less : Finance Cost 114.69 61.26 114.80 61.01
7 Gross Profit 297.19 791.02 308.93 795.18
8 Less : Depreciation 170.21 125.61 170.95 126.25
9 Exceptional Item 0 0 0 0
10 Profit before Taxes 126.98 665.42 137.98 668.92
11 Shares in Profit/(Loss) of Associates 0.00 0.00 2.94 0.02
12 Profit before taxes after Associates 126.98 665.42 140.92 668.94
13 Taxation
• Current Tax - 123.23 2.99 125.61
• Deferred Tax (net) 24.79 53.11 24.79 54.81
• Mat Credit recognized - (6.89) - (6.89)
• Earlier year tax 3.49 2.29 3.49 2.29
14 Profit after taxes 98.70 493.68 109.64 493.13
15 Non-controlling Interest 0.00 0.00 -0.06 -0.001
16 Other comprehensive income arising from re-measurement of defined benefit plan (201.20) (8.37) (201.22) (8.35)
17 Balance brought forward from last year 431.69 432.06 472.52 473.52
18 Amount available in retained earnings 329.19 917.37 380.89 958.30
19 Payment of Dividend
- Dividend 87.66 87.66 87.66 87.66
- DDT Paid 18.02 18.02 18.12 18.12
20 Transfer to General Reserve - 380.00 - 380.00
21 Leaving a balance in retained earnings 223.51 431.69 275.11 472.53

2. Dividend:

Your Directors are happy to recommend a dividend @ 60% i.e. Rs 1.20/- per Equity Share(Face value of Rs 2/-each) on 398477530 shares (Previous Year - 110% i.e. Rs 2.20 pershare on 398477530 Equity Shares of Rs 2/- each) for the financial year ended 31stMarch 2020. The net outgo on account of Dividend shall be Rs 47.82 Crores. The Dividendshall be paid to those members whose names shall appear on the Register of Members of theCompany on the Book Closure Date i.e. on 15/09/2020.

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 7620.82Crores for the year ended March 31 2020 as against Rs 8574.53 Crores (FY 18-19) onstandalone basis which is lower by 36% ( Rs 953.71 Crores) when compared to the previousfinancial year.

Similarly for the year under review (FY 2019-20) Profit before Tax (PBT) was Rs126.98 Crores and Net Profit (Profit after Tax) was Rs 98.70 Crores as against PBT of Rs665.42 Crores and PAT of Rs 493.68 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.

Global Pandemic COVID-19

This year Novel Coronavirus (Covid-19) Pandemic has affected the majority of thecountries globally including India. Apart from human suffering it has also caused majoreconomic disruptions. The Government of India has issued various Advisories/Guidelines onpreventive measures to contain the spread of Covid-19. The Iockdowns and restrictionsimposed on various activities due to Covid-19 pandemic have posed challenges to thebusinesses of the Company. In order to control the spread of Covid-19 the Government hadissued various guidelines including nation-wide lockdown with effect from 25th March 2020for 21 days which was further extended upto May 2020. Initially the Company reduced itsmanufacturing operations of its various plants at Vadodara Unit and Sikka Unit with effectfrom 25th March 2020 resulting into significant reduction in economic activities. Lateron the Company had taken complete shut-down of its plants at Vadodara Unit and Sikka Unitin line with the Government of India's announcement from time to time to observenation-wide Iockdown. From 3rd April 2020 onwards the Company resumed partial operationof its various plants at Vadodara Unit and Sikka Unit in phased manner considering therequirements of various municipal corporations and other essential industries afterobtaining necessary permissions from the concerned Authorities. As many of the Company'sproducts are categorized under essential items the plant operations were resumed after afew days of lockdown at minimum capacity due to manpower and demand constraints. TheCompany continued with plant operations with minimum of manpower exercising precautionsof social distancing in compliance with Central and State Government Authorities'guidelines. The Company had adopted "Work from Home Policy" for its employees.Effective from 1st May 2020 all plants at Vadodara Unit and Sikka Unit have startedoperating at full capacity.

All these factors have also adversely affected the progress of ongoing projects underexecution which may result into delay in completion of these projects. However allefforts are being made to minimize the delay in completion of these projects. In assessingthe recoverability of Company's assets such as investments loans advances and otherfinancial and non-financial assets the Company has considered internal and externalinformation and has performed sensitivity analysis on the assumptions used basis theinternal and external information / indicators of future economic conditions and expectsto recover the carrying amount of the assets. The management has evaluated the variousfinancial ratios expected ageing and maturities of assets and liabilities and the variousinternal and external information available. The management does not see any risks toCompany's ability to continue as a going concern and expects that the Company will be ableto meet its liabilities in the foreseeable future as and when the same fall due. Therehas been no other material changes and commitments which affect the financial position ofthe Company which have occurred between the end of the Financial Year 2019-20 and the dateof this Report. There has been no change in the nature of business of the Company.

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 are 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.
Gujarat Port and Logistics Company Limited*
• Associate Companies Vadodara Enviro Channel Limited
Gujarat Green Revolution Company Limited
Gujarat Data Electronics Limited
Karnalyte Resources INC
• Subsidiary of Subsidiary - Gujarat Arogya Seva Private Limited.

*Gujarat Port and Logistics Company Limited was incorporated on 03/02/2020 as a JointVenture Company by Gujarat State Fertilizers & Chemicals Limited and Gujarat MaritimeBoard with proposed investment in the ration of 60:40 respectively. A report of theperformance and financial position of each of the subsidiaries associates and jointventure companies as per the Companies Act 2013 is provided at 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 read withSEBI (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 20-21 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 97.94% of shares are held inelectronic/ 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 M/s. 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 forms part of this Annual Report Annexure-E asrequired under Regulation 34(2) (f) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

11. Fixed Deposits

During the year 2019-20 your Company has not accepted/ renewed any Fixed Deposit. YourDirectors wish to report that there are NIL Fixed Deposits aggregating Rs NIL whichhave remained unclaimed by Depositors as on 31st March 2020. Letters reminding them toseek repayment have been sent. Upto and including the date of this report Nildeposits have been repaid.

During the year the Company has transferred a sum of Rs 0.69 Lakhs being theunclaimed deposits and interest amount thereon to the Investors' Education and ProtectionFund (IEPF) as required in terms of Section 125 of the Companies Act 2013. The Companyhas discontinued 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-Projects under Development: Urea Plant RevampingProject:

To reduce the energy consumption of existing Urea plants and to improve the plantreliability of vintage plant your company is considering to carry out revamping ofUrea-II Plant. The feasibility study for the Project has been completed from ProcessLicensors and Company is in process of carrying out Detail Project Report from reputedconsultant. Also company has invited offers from Process Licensors for supply ofTechnology and Basic Engineering Package.

400 MTPD Sulphuric Acid Plant at Vadodara Unit :

To minimize Sulphuric Acid purchase from market and to meet the captive requirementyour company is considering to set up 400 MTPD Sulphuric Acid Plant on LSTK basis atVadodara Unit. The plant will also export about 440 MTPD steam to the complex which willreduce load on NG fired boilers. Company is in process of carrying out Detail ProjectReport from reputed consultant.

400 MTPD Ammonium Sulphate Plant at Vadodara Unit:

To capture growing market of Ammonium Sulphate your company is considering to set up400 MTPD Ammonium Sulphate Plant at Vadodara Unit. Company is in process of carrying outDetail Project Report from reputed consultant.

PA & APS Plants refurbishment:

To improve productivity efficiency and reliability of the old PA and APS Plantsestablished in the year 1967 Your Company has taken up refurbishment of these plants.

15 MW Solar Power Project at Charanka:

To make use of green energy & meet Renewable Purchase Obligation (RPO) requirementyour company is considering to install 15 MW ground mounted solar power plant at CharankaGujarat. Company is in process of floating of RFP to reputed vendors.

Expansion of Sikka Jetty for better Utilization:

Considering the high cost about Rs 800 Crores for the Project which will add to PA/SAProject cost at Sikka complexity of the operation for which GSFC has no experience andaddition of Operating cost your company is not moving ahead with the Project. As analternative your company has initiated discussions with M/s Essar Port for unloading ofimported rock phosphate for PA Project at Sikka which is a cheaper option.

Methyl Methacrylate (MMA) Plant at Dahej:

Considering uncertainty for sourcing of major raw material C4 Raffinate from OPaLrecent downtrend in the chemical market Global demand / supply outlook Your Company isnot moving ahead with the Project.

Caprolactam Plant at Vadodara:

Considering recent downtrend in the chemical market and international prices ofCaprolactam your Company has put the Project on hold.

NPK Pilot Plant at Sikka:

It is essential to produce various grades of NPK in competitive market. For developingvarious NPK grades and optimization of process parameters for effective scale up yourCompany is considering to install pilot plant at its Sikka unit

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 details relating to Section 197 (12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014have been disclosed in point # 5 of Corporate Governance Report.

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 enclosed as Annexure A. CSR Policy adopted by the Company is placed on theCompany's website at https://www.gsfclimited.com/social_commitment.asp?mnuid=1&fid=15

16. Directors

A) Changes in Directors and Key Managerial Personnel:

Shri Arvind Agarwal IAS has been appointed as Chairman and Managing Director of theCompany w.e.f.07.12.2019 in place of Dr. J. N. Singh IAS Chairman (till 01.12.2019) andShri Sujit Gulati IAS Managing Director of the Company (till 06.12.2019).

Shri Pankaj Joshi IAS has been appointed w.e.f. 21.12.2019 as rotational director andnominee of Finance Dept. to the Govt. of Gujarat in place of Shri Arvind Agarwal IAS (whowas the erstwhile nominee of Finance Dept. to the Govt. of Gujarat till 06.12.2019) andSmt. Sunaina Tomar IAS has been appointed w.e.f. 04.01.2020 as rotational director inplace of Shri Pankaj Joshi IAS Director who was the erstwhile nominee of Energy andPetrochemicals Dept. to the Govt. of Gujarat on the Board of the Company.

Smt. Sunaina Tomar IAS shall be liable to retire by rotation at the ensuing AnnualGeneral Meeting being eligible has offered herself for re-appointment.

The appropriate resolution/s and brief resume of Directors under appointment/re-appointment at 58th Annual General Meeting is annexed to the Notice convening the 58thAnnual General Meeting and it forms the integral part of this Annual Report and yourDirectors recommend the same for your approval.

The Board of Directors via circular resolution dated 02-09-2020 appointed;

(1) Shri Tapan Ray DIN 00728682 as an additional director in the category ofIndependent Director of the Company with effective from 02-09-2020 and subject to approvalof shareholders of the Company the term of appointment of Shri Tapan Ray as anIndependent Director of the Company shall be 5 (five) Years from the conclusion of 58thAnnual General Meeting till the conclusion of 63rd Annual General Meeting.

(2) Dr. Ravindra Dholakiya DIN 00069396 as an additional director in the category ofIndependent Director of the Company with effective from 02-09-2020 and subject to approvalof shareholders of the Company the term of appointment of Shri Ravindra Dholakiya as anIndependent Director of the Company shall be 5 (five) Years from the conclusion of 58thAnnual General Meeting till the conclusion of 63rd Annual General Meeting.

(3) Smt. Gauri Kumar DIN 01585999 as an additional director in the category ofIndependent Director of the Company with effective from 02-09-2020 and subject to approvalof shareholders of the Company the term of appointment of Smt. Gauri Kumar as anIndependent Director of the Company shall be 5 (five) Years from the conclusion of 58thAnnual General Meeting till the conclusion of 63rd Annual General Meeting.

(4) Dr. Sudhir Kumar Jain DIN 03646016 as an additional director in the category ofIndependent Director of the Company with effective from 02-09-2020 and subject to approvalof shareholders of the Company the term of appointment of Dr. Sudhir Kumar Jain as anIndependent Director of the Company shall be 5 (five) Years from the conclusion of 58thAnnual General Meeting till the conclusion of 63rd Annual General Meeting.

The Board of Directors is of the opinion that Shri Tapan Ray Shri Ravindra DholakiyaSmt. Gauri Kumar and Dr. Sudhir Kumar Jain are the persons of integrity with high level ofethical standards and they were holding senior positions in other organizations all thedirectors possess requisite expertise and experience for appointment as IndependentDirector of the Company.

All the independent directors have submitted declarations that they meet the criteriaof Independence as provided under section 149 (6) of the Companies Act 2013 read withRule 6 of the Companies (Appointment and Qualification of Directors) Rules 2014 asamended the names of all the Independent Directors of the Company have been included inthe data bank maintained by the Indian Institute of Corporate Affairs.

The brief resume of Directors with regard to appointment/ re-appointment at 58th AnnualGeneral Meeting is annexed to the Notice convening the 58th Annual General Meeting whichforms 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 2015 the Board has carried out the annualperformance evaluation of its own performance the Directors individually as well as theevaluation of its committees. The manner in which the evaluation has been carried out isexplained in the Corporate Governance Report which forms the part of this Annual Report.

C) Appointment and Remuneration Policy:

The Board has on the recommendation of the Nomination and Remuneration Committeeframed 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 Six 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.

19. Particulars of contracts or arrangements with related parties:

All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel and other Designated Persons which may have a potential conflict withthe 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 continued to be placedbefore the Audit Committee meeting as mandated. The Company has developed a mechanism foridentification of related party transactions and the Company is also having the system ofmonitoring of such transactions.

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

on recommendation of the Audit Committee the Board of Directors has recommended forthe appointment of M/s. T. R Chadha & Co. LLP Ahmedabad Chartered Accountants (FirmRegistration No.006711N/ N500028) as the Statutory Auditors for the second term of threeconsecutive years i.e. to hold the office from the conclusion of 57th Annual GeneralMeeting till the conclusion of 60th Annual General Meeting of the Company to be held inthe year 2022.

The Companies Amendment Act 2017 read with notification S O 1833(E) dated 7th May2018 has deleted the provision requiring annual ratification of the appointment ofAuditors. Therefore a resolution relating to the ratification of appointment of Auditors(M/s. T R Chadha & Co. LLP Ahmedabad the Statutory Auditors) of the Company whoshall continue to hold office from the conclusion of 58th Annual General Meeting of theCompany till the conclusion of 59th Annual General Meeting of the Company has not beenincluded in the notice convening 58th Annual General Meeting.

(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 Diwanji & Company Cost AccountantsVadodara (Firm Registration Number 000339) as the Cost Auditors of your Company to conductthe audit of cost records for the Financial Year 2020-21. The remuneration proposed to bepaid to the Cost Auditor is placed for your ratification at the ensuing 58th AnnualGeneral Meeting. The Cost Auditors for the F.Y. 2019-20 was filed within stipulated 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. 2020-21.

(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 M/s Niraj Trivedi Practicing Company Secretary to undertake the secretarialaudit of the Company. The Report of the Secretarial Auditor is enclosed as Annexure B.

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:

Link of annual report as per the Companies Amendment Act 2017 is Annexure-C asbelow;

www.gsfclimited.com/statu_comp.asp?mnuid=12

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.

Industrial Relations have remained cordial during the period under report.

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/-
Place : Fertilizernagar Arvind Agarwal IAS
Date : 02nd September 2020 Chairman & Managing Director

.