The Shareholders Madras Fertilizers Limited
Your Directors have pleasure in presenting herewith the 51st AnnualReport together with the Balance Sheet as on March 31 2017 and the Profit & LossStatement for the year 2016-17.
SUMMARY OF FINANCIAL RESULTS
| || ||Rs. Cr |
| ||2016- ||2015-16 |
| ||17 || |
|Turnover ||1400.22 ||1201.64 |
|Profit Before Interest Depreciation ||70.42 ||2.93 |
|Exceptional items and Tax || || |
|Interest ||74.00 ||82.32 |
|Depreciation ||18.53 ||18.15 |
|Exceptional / Extraordinary items ||(1.20) ||(92.00) |
|Profit / (Loss) Before Tax ||(23.31) ||(189.54) |
|Provision for Tax ||Nil ||Nil |
|Profit / (Loss) After Tax ||(23.31) ||(189.54) |
|Cash Profit / (Loss) ||(4.78) ||(171.39) |
The Company's operations for the year ended with a loss of Rs. 23.31 Cr (Previous Yearloss Rs. 189.54 Cr). The total accumulated loss as of 31.3.2017 was Rs. 729.99 Cr(Previous Year Rs. 706.68 Cr).
SICKNESS AND REVIVAL
As mentioned in the earlier Annual Reports the main reasons for the continuous lossesand consequent sickness were due to cost and time overrun of revamp of Ammonia and UreaPlants during the period 1993-98 delay in stabilization of revamped Plants due toTechnology related issues higher energy poor reliability lack of maintenance of theexisting Plant for want of funds and unfavorable Pricing policies up to March 2009.
The Company's operation became profitable thereafter due to amendments in policiesand improvement in production performance. The Company shall come out of sickness oncethe Draft Rehabilitation Scheme (DRS) proposed by the Company on 01.06.2017 based on theStudy Report submitted by M/s. Projects & Development India Limited (PDIL) is approvedby Department of Fertilizers Government of India and the same is implemented.
The Company does not propose to declare any Dividend to shareholders during the Fiscal2017 as per the Companies (Declaration and Payment of Dividend) Rules 2014 due to hugeaccumulated losses (` 729.99 Cr) and negative net worth (` 555.46 Cr) as on March 312017.
Achievements in Plant Production & Performance (%) Current Year (CY) 2016-17 &Corresponding Period Last Year (CPLY) 201516:
1. Increase in Urea Production by 15 % (Production: CY : 468438 MT and CPLY: 407311 MT)
2. Increase in NPK Production by 40 % (Production: CY : 48895 MT and CPLY: 34816 MT)
3. Reduction in Urea specific energy consumption by 2% (Energy: CY : 7.460 MT and CPLY:7.645MT)
4. Successful introduction of dual power supply system for Syn Gas compressor seal oilmotor leading to stoppage of DG power generation with consequent HSD saving.
5. Successful installation of Advanced Process Controller (APC) in Urea plantenvisaging reduction in Ammonia consumption from 0.579 to 0.576/MT with equivalent savingsin Urea energy by about 0.027 Gcal/MT.
6. NPK bags with inner liner was introduced first time in MFLto improve the shelf lifeof NPK product.
7. On 31.03.2017 4.1 Million Man hours of safe operation without any reportableaccident was successfully crossed.
MFLAmmonia Plant Feed Stock Conversion Project from Naphtha to RLNG is in progressunder the Consultancy Services of M/s Projects & Development India Limited (PDIL).
The Civil Piling and Structural works for Gas conversion is nearing completion and thetendering process for procurement of major equipment viz. NG Fired Heater PrimaryReformer Burners NG Pre-Heat Coil NG Feed & Fuel Pre-Heater have been completed andtechnical evaluation is in progress. Placement of orders for the new equipment willbe done shortly. MFLis in the process of entering into Gas Transmission Agreement (GTA)with M/s. Indian Oil Corporation Ltd (IOCL) which is developing a RLNG Terminal atKamarajar Port at Ennore.
MARKETING PERFORMANCE Fertilizer Sales
The Company has sold 435539 MT of Vijay Neem Coated Urea as compared to previousyear's sale of 355123.15 MT of Vijay Neem Coated Urea. The market share for Vijay NeemCoated Urea in MFLmarketing territory increased form 6.55 % to 8.35 % when compared toprevious year. The Company also sold 33406.80 MT of Vijay 17-17-17 as compared toprevious year's sale of 34807.30 MT. The seasonal condition by and large in South Indiawas drought like situation wherein the rainfall was around 42 % of normal rainfall andconcentrated in isolated parts. The crop coverage was 71% of normal area.
Cash sales thru RTGS payment accounted for 98.62% of total sales. There has not been asingle case of Bad Debt for this year also. As a cost saving measure MFLtransports itsproducts maximum by Rail. During the year 2016-17 MFLachieved Rail : Road ratio of 71:29against CPLY of 68:32.
Neem Pesticides Bio-fertilizers & Organic Manure
` 175.54 lakh of Eco-friendly Neem Pesticides was traded during the year as against Rs.152.43 lakh for the previous year. The Company has sold 110.74 MT of bio-fertilizersduring the year as against 276.76 MT for the previous year.
As part of "Swachh Bharat Mission" the Company has sold 1705.88 MT of CityCompost in the first year of operations in spite of poor Agricultural seasonal conditionsin Tamil Nadu Pondicherry Karnataka Andhra Pradesh Telangana and Kerala States. TheCompany has also sold 712.0 MT of Organic Manure during the year as against 8247.0 MT soldduring the last year. MFLcontinues to promote the eco-friendly products like; VijayNeem City Compost and Vijay Organic. Our endeavor is to develop and sustain theeco-friendly agricultural environment.
MARKET DEVELOPMENT & AGRO-SERVICE PROGRAMMES:
MFL's Marketing personnel have contacted 30326 farmers during the year and educatedthem about the package and practices of cultivation of major crops soil health techniquesand optimum usage of chemical fertilizers bio-fertilizers and Neem products to enhancesoil fertility and food grains productivity for consequent growth in economy.
Under corporate social responsibility to farming community the Marketing personnel hadcollected 6161 soil samples analysed and communicated the micro & macro nutrientrecommendations of various crops to farmers during the year.
In pursuance to the Prime Minister's Mission on empowering the Farmers vide SupportiveSchemes & Education on farming techniques MFLestablished one "Kisan SuvidhaKendra" at Ekkadu Kandigai Tiruvallur District in Tamil Nadu. Apart from sellingagricultural inputs farmer services like soil sample analysis and recommendation offertilizer dosage based on soil test report educating the farmers on weather cropInsurance and other improved farm technologies are being offered. As part of "SwachhBharat Mission" fourteen villages in Tamil Nadu were selected for promotion of CityCompost through field demonstration.
MFLalso actively participated in the Govt. mission on e-mode transactions through"Digi Dhan Melas" in South India by way of Roadshows and training toapproximately 3000 retail dealers and thousands of farmers. Sponsored the "Digi DhanMela" conducted by GOI at Bengaluru Vijayawada East Godavari District Madurai andother places in South India.
MFLactively involved in the implementation of Pilot Project on "Direct BenefitTransfer" in West Godavari Dist. and Krishna Dist. in Andhra Pradesh Ranga ReddyDistrict in Telangana Tumkur District in Karnataka and Trissur District in Kerala.
ISO 9001 / 14001
The Company is committed to maintain the annual Quality / Environment objectives forall the functional areas. To achieve the said objective the Company has renewed the EMS(ISO 14001 : 2004) and QMS (ISO 9001:2008) certification with the concerned CertifyingBodies.
MEMORANDUM OF UNDERSTANDING
In respect of MOU 2017-18 having completed Pre-negotiation and inter-ministerialcommittee meeting the MOU has been duly signed with Government of India on 02.06.2017detailing necessary financial and production performance parameters to be achieved for theyear 2017-18.
Activities and Achievements of Vigilance Department during 2016-17
Complaints received were attended and reports submitted as per ComplaintsHandling Policy of the Company / Central Vigilance Commission (CVC) guidelines.
Continuously monitoring the progress of Disciplinary Proceedings in respect ofvigilance cases for timely completion.
Agreed List of suspected Officers and List of Officers of Doubtful Integritywere finalised and sent to DOF.
CVC Guidelines / Circulars on Tenders and disciplinary proceedings and othermatters as and when received were communicated to Management for necessary action. As perthe Central Vigilance Commission's requirement CVO had one Structured meeting with theCMD MFLon 22.04.2016 and pending issues were discussed and suggestions given to theManagement. Director Technical GM-Plant GM-F&A GM-P&A (a/c) andGM-M&D (a/c) attended the said Meeting. For all Tenders with value more than Rs. 2lacs e-Tendering and e-reverse auction method is being followed.
Annual Property Returns of Officers were scrutinized as per CVC Guidelines.
Rotation of Officers in sensitive posts effected as per CVC guidelines.
For easy reference CVC Guidelines / Circulars on Tenders were uploaded in MFL's OnlineIntegrated System (OLIS). MFLobserved Vigilance Awareness Week 2016 from October 31 2016to November 05 2016 as directed by CVC. The following are the highlights :
CMD administered Vigilance Awareness pledge on October 31 2016 at 11 am to markthe commencement of Vigilance Awareness Week 2016.
A written Quiz on MFL's Tendering & Contracting Procedures RTI VigilanceRules and General Topics was organized for MFLemployees on November 01 2016.
A Guest Lecture by Shri Ramesh Chandra Chief Technical Examiner of CVC wasorganised on the theme of "Common irregularities in Procurements & Tenders"on 02.11.2016.
Slogan contest & Essay competition in English Tamil and Hindi wereorganized for the employees of MFLon the theme of "Public Participation in PromotingIntegrity & Eradicating Corruption".
An Essay Competition on the theme "Public Participation in PromotingIntegrity & Eradicating Corruption" was organized for students of neighbouringschool children.
Prizes and Certificates were distributed to the winners of the VigilanceAwareness Week Competition on 29.11.2016 by CMD & CVO of MFL.
HUMAN RELATIONS AND INDUSTRIAL RELATIONS
Manpower & Training
The total strength of MFLas on 31.03.2017 is 684 as against 723 as on31.03.2016. 457 employees have been trained during the period Apr 2016- Mar 2017 onTechnical Soft and Life skills for the enduring benefit and development of theOrganisation.
During the year the overall Industrial Relation situation in the Company has beennormal and cordial.
Official Language Implementation
MFLhas been meeting the target fixed by Department of Official Language for lettercorrespondence in Hindi and other implementation programs. Hindi Fortnight was celebratedat Head Office and Regional Offices. Various competitions were organized and prizes weredistributed.
SC / ST Welfare Activities
The Presidential Directives and various guidelines issued by the Government of Indiafrom time to time relating to the welfare of SC / ST employees are being scrupulouslyfollowed. A Liaison Officer for SC / ST has been posted at DGM level to ensureimplementation of Government Directives.
Dr. Ambedkar Jayanthi was celebrated on 14th April 2016 at our TrainingCentre and conducted in a grand manner in commemoration of National Leader.
INVESTOR RELATIONS CELL (IRC)
IRC is functioning in the Company under the Chief Financial Officer (General Manager -F&A & Company Secretary) with members from various Groups to create awareness ofthe Company's strength and ensuring timely communication to shareholders.
Government of India have appointed the following GOI Nominee Directors in MFLBoard :Ms.Meenakshi Gupta IA&AS (DIN 07686646) Additional Secretary and Financial AdvisorDepartment of Fertilizers in place of Dr A K Padhee IAS effective Dec 08 2016; and ShriKuntal Sensarma IES (DIN 07626530) Economic Advisor Department of Fertilizers inplace of Shri Piyush Srivastava effective Sep 08 2016.
The Board placed on record the valuable and outstanding contribution made by theoutgoing Directors Dr A K Padhee and Shri Piyush Srivastava during their tenure asDirectors on the Board for the substantial and sustainable development of the Company.
STATUTORY INFORMATION Annual Evaluation of Board
MFLbeing a Government Company all appointments in the Board are made by the Governmentof India Ministry of Chemicals and Fertilizers Department of Fertilizers. Theperformance of Directors are evaluated by the Ministry of Chemicals & FertilizersDepartment of Fertilizers Government of India. As per Government of India Ministry ofCorporate Affairs notification dated 5th June 2015 clause (e) and (p) of sub-section 3 ofSection 134 of Companies Act 2013 relating to appointment remuneration and Annualevaluation of Board on its performance are not applicable to MFL.
Meeting of the Board
During the year 2016-17 nine meetings of Board were convened and held. The details ofthe meetings of the Board of Directors are given in the report on Corporate Governancewhich is part of this report. The intervening gap between the meetings was within theperiod prescribed under the Companies Act 2013.
Particulars of Employees and Related Disclosures
In terms of the provisions of Section 197 (12) of the Companies Act 2013 read withRules 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 it is stated that no employee of your Company was in receipt ofremuneration for any part of the year at a rate which is more than Rs. 5 lacs per month.
Directors' Responsibility Statement
Pursuant to Section 134(3)(c) of the Companies Act 2013 your Directors hereby statethat
a) in the preparation of the annual accounts for the year ended March 31 2017 theapplicable accounting standards had been followed along with proper explanation relatingto material departures.
b) the Directors have 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 year;
c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;
d) the Directors have prepared the annual accounts on a going concern basis.
e) the Directors have laid down internal financial control to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
Energy Technology & Foreign Exchange
The data on Conservation of Energy Technology Absorption and Foreign Exchange Earningsand Outgo in accordance with the provisions of Section 134 of Companies Act 2013 are givenin the Annexure I forming part of this report.
Management Discussion and Analysis Report
Management Discussion and Analysis Report as required under SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 is enclosed as Annexure - II formingpart of this report.
The Company is committed to maintain the highest standard of Corporate Governance andadhere to the Corporate Governance requirements set out by SEBI. The Board lays emphasison transparency and accountability for the benefit of all stakeholders of the Company. TheReport on Corporate Governance as stipulated under the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is enclosed forming part of this report. Acertificate recevied from the Auditors of the Company regarding compliance of CorporateGovernance guidelines of SEBI as required under SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is enclosed as Annexure - III forming part of thisreport.
Code of Conduct
Declaration affirming compliance with the Code of Conduct pursuant to the provisions ofRegulation 17(5) of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 ("Listing Regulations") is enclosedas Annexure - IV forming part of this report.
Extract of Annual Return
As provided under Section 92 (3) of the Act the details forming part of extract of theAnnual Return in form MGT 9 is enclosed as Annexure - V forming part of thisreport.
Auditors a) The Comptroller & Auditor General of India have appointed M/s J VRamanujam & Co. (MD0377) Chartered Accountants Chennai as Statutory Auditors of theCompany for the year 2016-17. b) Shri P R Tantri Cost Accountant has been re-appointedas Cost Auditor of the Company for the year 2016-17. c) In terms of the provisions ofSection 204 of the Companies Act 2013 and Rules framed thereunder a Secretarial Reportin the prescribed format obtained from a Company Secretary in practice is required to beannexed to the Board's Report.
In view thereof your Board at its 293rd meeting held on 18th July 2017 hasappointed Mr. V Esaki (CP No. 11022) Practicing Company Secretary as the SecretarialAuditor of your Company. The Secretarial Auditor's Report (Form No.MR-3) for theyear 2016-17 is enclosed as Annexure VI forming part of this report.
In line with the provisions of Section 177 of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 an Audit Committee of theBoard has been constituted. Details of Members / Meetings of the Audit Committee areelaborated in the report on Corporate Governance. The Board has accepted allrecommendations of the Audit Committee.
During the financial year 2016-17 the Company has not accepted any deposit frompublic. However as on 31.3.2017 Rs. 762054/- is lying in unclaimed matured fixeddeposit account.
Contract or arrangement with Related Parties
The transactions entered with related parties for the year under review were on armslength basis and in the ordinary course of business. The disclosure in Form No.AOC-2for the transactions with related parties during the period under review is enclosed as Annexure- VII of the report.
Corporate Social Responsibility (CSR)
The Company has constituted "Corporate Social Responsibility Committee"comprising of two independent directors. The Committee monitors CSR activities. TheCompany has carried out the following CSR activities during the financial year 2016-17:
A sum of Rs. 10000/- was spent towards CSR activities for Government Schools in Bellaryof Karnataka State. Rs. 28000/- was spent for Mahatma Gandhi Leprosy RehabilitationSociety at Salem.
Regular supply of potable water through pipelines from MFLto Harikrishnapuram (Manali)a neighbourhood village (around 500 families) is ensured at a cost of Rs. 5.43 lakhs. Thedetails are contained in the Annual Report on CSR activities is enclosed as Annexure VIII forming part of this report.
Material changes and commitments
There were no material changes and commitments affecting the financial position of theCompany between the end of financial year (March 31 2017) and the date of the report(July 18 2017).
As required by Regulation 17(8) of the SEBI Regulation a Certificate on the FinancialStatements and Cash Flow Statement of the Company for the year ended March 31 2017 dulysigned by the Chairman & Managing Director and General Manager (Finance &Accounts) & Company Secretary was submitted to the Board of Directors at their meetingheld on May 30 2017 is enclosed as Annexure IX forming part of this report.
Prevention of Insider Trading
No instance of insider trading has been reported on MFLshares till date. None of theDirectors and Key Managerial Personnel is holding any shares in MFL. A code of conduct forprevention of insider trading and code for corporate disclosure are published in thewebsite of the Company www.madrasfert.nic.in.
Your Directors wholeheartedly place on record their appreciation for the continued andunstinted support of Department of Fertilizers Government of India Government ofTamilnadu NICO Financial Institutions Banks Depositors and all stakeholders during theyear. It is most appropriate to mention that the Directors convey their gratitude to theDepartment of Fertilizers for settlement of subsidy bills on priority basis and to thedealers and farmers for their sustained support to Vijay products. Last but not the leastthat your Directors also place on record their appreciation for the dedication commitmentand sincere services rendered by the employees for sustained improvements.
| ||By order of the Board |
|Chennai ||A B Khare |
|18th July 2017 ||Chairman & Managing Director |