At the outset I hope you and your family members are safe during these difficult timesof COVID-19 pandemic. As India faces one of its biggest challenges caused by the COVID-19related disruptions the importance of agriculture has been brought to the fore more thanever. Fertilizer and agriculture sectors provided much needed strength to Indian economyduring the 1st wave of COVID-19.
Apart from providing fertilizers the domestic fertilizer industry also extended allpossible help and support to the country in fighting COVID crisis including contributionto PM Care Fund providing direct help to the citizens affected by COVID during lockdown.Many of the fertilizer companies are setting up plants for medical grade oxygen to tideover the present oxygen crisis in the country. The fertilizer industry is fully committedto work with the government in these difficult times
Overview of the Economy
Indian economy had started recovering from the shocks of 1st wave of COVID-19 pandemicwhich resulted in estimated negative growth of about 8% for the year 2020-21. But thecountry again got affected by the sudden spurt of 2nd wave of COVID-19 in April 2021 withmuch higher intensity. This has impacted the pace of recovery. Luckily unlike the 1stwave in 2020 when the entire nation was locked down for a considerable stretch so far theCOVID-related restrictions are being implemented selectively in different parts of thecountry. It is expected that on account of measures undertaken by the Government theimpact on economy would be mitigated to some extent.
As per the second advance estimates of national income 2020-21 agriculture and alliedsector registered a positive growth of 3% during financial year 2020-21 over the previousyear. Apart from normal monsoon for the second consecutive year growth in agriculture wasalso supported by slew of measures by the central and state governments to facilitateuninterrupted agricultural activities throughout the country. These included exemption ofagriculture related activities from COVID linked lockdown enhanced credit availabilityhigher level of procurement and financial support through number of other programmes underAtma Nirbhar Bharat.
Overview of the Fertilizer Industry
Overall sales of fertilizers have increased by 7.09% during financial year 2020-21 asagainst financial year 2019-20.
Sales of Urea DAP NPKS and MOP have increased by 4.55% 2.13% 16.84% and 19.06%respectively during financial year 2020-21 as against financial year 2019-20. Initially atthe start of 2020-21 additional buying by farmers and dealers. The momentum in sales hasbeen sustained due to a favourable monsoon season which has led to good. crop sowing.
Overall fertilizers production has increased by 1.82 % during financial year 2020-21 asagainst financial year 2019-20. The country witnessed an on-time arrival of Southwestmonsoon followed by a quick spread across the region which has resulted in higher sowingthus augmenting the sales of fertilizers which has led to an increase in production.Increase in production can also be ascribed to restocking activities undertaken by themanufacturers in order to keep up with the sharp increase in fertilizer sales witnessedduring the year. Imports have increased sharply by 14.29% due to increase in demand.
Production of urea increased by 0.60% during the financial year 2020-21 as againstfinancial year 2019-20 due to favourable weather and market conditions. Urea is largelysourced domestically however high demand necessitated imports which rose sharply by 7.72%to supplement the domestic production.
DAP production fell by 17.05% during financial year 2020-21 as against financial year2019-20. Decline in production can be attributed to the shortage of raw material andincrease in prices of inputs. Imports on the other hand have risen by 2.13% in financialyear 2020-21 as against financial year 2019-20.
MOP imports have increased sharply by 23.09% during financial year 2020-21 as againstfinancial year 2019-20.
India meets its Potassium chloride (commonly referred to as Muriate of Potash or MOP)requirements completely through imports from Canada Russia CIS+ Belarus Israel Jordanand Lithuania.
NPK imports have increased sharply by 102.13% during financial year 2020-21 as againstfinancial year 2019-20.
The production of SSP which is an indigenous phosphatic multi-nutrient fertilizerincreased sharply by 16.04 % during financial year 2020-21 as against financial year2019-20.
SSP is a cheaper alternative to DAP.
Fertilizer sector is intimately tied up with agriculture and witnessed positive growthin financial year 2020-21.
Government facilitated uninterrupted production movement and sale of fertilizersthroughout the crisis period. Fertilizer sector also got additional allocation of Rs65000 crores as one-time package to clear the long pending subsidy dues of the fertilizerindustry. This helped in improving the industry's liquidity position. This in turn enabledindustry to maintain production of fertilizers.
Corporate Overview of the Company
During the year your Company achieved Revenue from Operations of Rs 8281.18 crore asagainst Rs 9697.95 crore in previous year (PY). Despite Revenue from operations beinglower on account of lower gas prices resulting in lower subsidies of Urea Companyachieved a record revenue of Rs 1138.48 crore during the year from its industrialchemicals segment which is highest ever since inception.
Your Company has reported the highest ever Profit Before Tax (PBT) of Rs 516.17 crorefor the financial year 2020-21 as compared to Rs 202.93 crore for the previous yearregistering a growth of more than 154%. The previous highest PBT was Rs 509.63 crore inthe year 2014-15. Profit after tax for financial year 2020-21 surged toRs 373.11 crorefrom Rs 208.15 crore in previous year registering an increase of 79.25% as the Companygained from improved energy efficiencies improved productivity better margins ofindustrial chemicals and reduction in finance cost.
Owing to settlement of back log of subsidy claims under special budget allocation byGovernment of India in the last quarter of the year there has been a substantialreduction in subsidy receivables and receivables for urea imports on account ofGovernment. This resulted in reduction in short term borrowings and subsequent reductionin finance cost by 24.49% y-o-y to Rs 179.57 Crore from Rs 237.82 Crore.
Your Company achieved fertilizer sales volume of 31.35 lakh MT during financial year2020-21 as compared to 33.01 lakh
MT during the previous year. The Total sale of manufactured fertilizers duringfinancial year 2020-21 was 28.05 lakh MT as against 29.65 lakh MT during the previousyear. Sales of manufactured fertilizers registered decrease of 5.41 % over previous yearowing to some impact of Covid 19 on plant operations during initial period of first wavewhich severely affected Mumbai and surrounding areas where our plants are located.
Your Company produced 27.87 lakh MT of fertilizers ( 22.50 lakh MT of Urea & 5.37lakh MT of Suphala 15:15:15) during the year as against 29.19 lakh MT of fertilizers(23.48 lakh MT of Urea & 5.71 lakh MT of Suphala15:15:15) produced during the previousyear. Despite revenue from operations being lower on account of lower gas prices resultingin lower subsidies of urea your company achieved revenue of Rs 1138.48 crore during theyear from it's Industrial Chemicals Segment which is highest ever since inception
During the year your Company has achieved:
? Yearly highest ever sale of 50930 MT City compost. (Previous best being 40329 MT inthe FY 20).
? Highest ever sale of 347 KL of Microla.
? Second Highest sale of 7100 MT of Sujala (Indigenous & Imported).
? Highest ever sale of AN melt of 1.399 LMT (Previous best being 1.311 LMT in the year2018-19).
? Highest ever yearly production of Tri Methyl Amine (TMA) of 2475 MT (Previous bestbeing 2416 MT in 2011-12).
Although your Company has lined up a number of capex programmes which will entailsubstantial expenditure considering the consistent profits being made by the Company andbased on the Company's performance your Directors are please to recommend a finalDividend of Rs1.78 per equity share of Rs10/- each for the financial year 2020-21. YourBoard had earlier approved payment of interim dividend of Rs1.20 per equity share ofRs10/- each for the financial year 2020-21 at its meeting held on February 5 2021 andsame was paid on March 2 2021. The total dividend for the financial year 2020-21 amountsto Rs 2.98 per equity share (Previous year Rs 2.84 per equity share) and would involve atotal cash outflow ofRs 164.40 Crore consisting Rs 66.20 crore as interim dividend and Rs98.20 crore as final dividend (Rs 156.68 Crore in the previous year). The final dividendpay-out is subject to the approval of members at the ensuing Annual General Meeting.
Under Atmanirbhar Bharat' your Company has started Methanol plant at Trombay.Sale of Methanol will improve our turnover and profitability. Enhancement of existingproduction capacity of AN Melt & improved energy consumption has been proposed. Saleof high volume products like Ammonia AN(Melt) & DNA will facilitate improvement inturnover as well as profitability. Maximizing sale of SNA 72% & 68% will support inimproving Profitability.
I am happy to announce that your Company is planning to undertake major projects in thedirection of: improving efficiency in use of energy in production operations; participationin the revival of closed fertilizer units; and making efforts for increasingavailability of raw materials / finished fertilizers on consistent basis. The details ofsuch projects are available in the Directors' Report. Your Company is also looking foropportunities for long term off take agreements for procurement of fertilizers to ensuresustained growth. I am confident that with your continuous support encouragement andfaith in us and support from the Government your Company would march ahead successfully.
On July 27 2021 in presence of Hon'ble Union Minister of Health & Family Welfareand Chemicals and Fertilizers Shri Mansukh Mandaviya and Hon'ble Minister of State for Newand Renewable Energy and for Chemicals and Fertilizers Shri. Bhagwanth Khuba MoU hasbeen signed between M/s RCF and M/s IFFCO for technology transfer for manufacture of NanoUrea liquid fertilizer.
I am delighted to present the Annual Report for the FY 21 and hope to see you onOctober 28 2021 at the 43rd Annual General Meeting of the Company.
Rural demand and markets have been buoyed and are very promising despite thecoronavirus pandemic and macroeconomic uncertainty. This has translated in improving theunderlying macros for the Indian fertilizer industry. Agricultural operations have beenwell placed and supported by a bumper Rabi harvest and good monsoon during the Kharifseason. With surplus reservoirs levels record high kharif crop sowing and plentifulrainfall during the monsoon season demand for the procurement of fertilizers has beenpromising till date.
Going forward with the increase in liquidity of farmers and good moisture level in thesoil we expect a very good Rabi season. Keeping this in mind the demand outlook forfertilizers for the rest of financial year 2020-21 seems positive. With the forecast ofnormal monsoons and the rollout of COVID vaccination program in the coming months weexpect the economic activities to normalize during the financial year 2021-22. CurrentlyIMD is forecasting a normal monsoon This will lead to the acreage being favourable aswell. So from that standpoint we should see the consumption and the growth in demand tocontinue. With lowering of the debt and the associated interest costs the cash generationand the credit profile of the industry would improves substantially. For financial year2021-22 profitability is expected to remain healthy for the industry given theexpectations of a normal monsoon for the upcoming kharif season. Additionally theagri-economy has witnessed strong performancefinancialyear 2020-21 with healthy farmincomes and we expect the benefit of the current year to rub off on the next fiscal aswell. However increase in the prices of raw material for NPLC fertilizers will bechallenge.
On the environmental side RCF has continued to expand the green belt coverage at theplant locations and its commitment towards society remains firm. Going forward yourCompany will continue to strengthen its customer engagement initiatives and leveragetechnology for developing sustainable cost-effective solutions for the farmers.
Before I conclude I would like to place on record my appreciation to all my colleagueson the Board past and present for their valuable contribution in the growth of theCompany. Our employees are the backbone of our operations and it is only because of theirsupport and commitment that your company could achieve good results. I am thankful to allthe stakeholders of RCF our valued customers and service providers for their relentlessfaith in the company. Finally on behalf of the Board I would like to thank each one ofyou our valued shareholders employees of the Company Trade Unions OfficersAssociations and the RCFian family for your unwavering support in our journey to delivervalue to all our stakeholders.
Thank you ladies and gentlemen.
S. C. Mudgerikar
Chairman & Managing Director
Dated : September 18 2021