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Southern Petrochemicals Industries Corporation Ltd.

BSE: 590030 Sector: Agri and agri inputs
NSE: SPIC ISIN Code: INE147A01011
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OPEN 22.00
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VOLUME 126065
52-Week high 25.90
52-Week low 9.50
P/E 9.55
Mkt Cap.(Rs cr) 432
Buy Price 21.15
Buy Qty 500.00
Sell Price 21.20
Sell Qty 30.00
OPEN 22.00
CLOSE 22.55
VOLUME 126065
52-Week high 25.90
52-Week low 9.50
P/E 9.55
Mkt Cap.(Rs cr) 432
Buy Price 21.15
Buy Qty 500.00
Sell Price 21.20
Sell Qty 30.00

Southern Petrochemicals Industries Corporation Ltd. (SPIC) - Director Report

Company director report

MANAGEMENT DISCUSSION & ANALYSIS

Your Directors present their 48th Annual Report together with the Audited FinancialStatements of the Company for the year ended 31st March 2019.

FINANCIAL SUMMARY

( Rs. in crores)
Particulars 31.03.2019 31.03.2018
Revenue from Operations 2591.96 1994.46
Add: Other Income 21.46 4.92
Total Income 2613.42 1999.38
Profit before interest depreciation and tax 121.07 115.77
Less: Finance Cost 35.67 40.88
Less: Depreciation & amortization expenses 32.06 40.11
Add: Exceptional Items - 2.44
Profit Before Tax 53.34 37.22
Less: Tax Expenses - -
Profit After Tax 53.34 37.22
Add : Net Comprehensive Income/(loss) (11.18) (0.24)
Total Comprehensive Income 42.16 36.98

DIVIDEND

In view of the accumulated losses the Board of Directors are unable to recommenddividend on the Preference Share Capital and Equity Share Capital of the Company.

STATE OF COMPANY'S AFFAIRS

Production

During the year under review the plants were in operation between 1st April 2018 to7th January 2019 and from 2nd February 2019 onwards. The shutdown of plants for 25 daysduring January and February 2019 was for Annual Turnaround Maintanence to take up repairsof essential equipment and maintenance activities to improve the reliability and energyefficiency levels for sustained production. Your Company produced 100% neem coated Ureaand achieved 652025 MT during 2018-19 compared to 658892 MTs in the previous year.During the year sale of Manufactured Urea was 667058.990 MTs and sale of Imported Ureawas 114732.695 MTs.

The plants were operated using mainly imported Naphtha and Furnace Oil and achievedenergy efficiencylevels of 7 GCal/MT of Urea for 2018-19 as against 6.834 during theprevious year.

Handling of Imported Urea

Government of India allotted to your Company two coastal ports namely Karaikal andTuticorin for handling Imported Urea and 114540 MTs of Imported Urea was handled during2018-19.

Handling of Imported Naphtha

Your Company has signed a Hospitality Agreement with Indian Oil Corporation for aperiod of two years from 1st July 2019 for using their Tank farm facility atTuticorin Port premises for handling a part of SPIC's Imported Naphtha shipments. This hasfacilitated SPIC for faster discharge of cargo and thereby minimizing the ship demurrageto a large extent.

Progress in conversion of ammonia plant from naphtha to gas

Indian Oil Corporation authorized to lay the Natural Gas Pipeline from Ennore toTuticorin has made substantial progress in the Ramanathapuram – Tuticorin sector.The 145 km Natural Gas pipeline along with the Gas Compression station at Ramanathapuramis expected to be completed by December 2019. Your Company continues to be in a state ofreadiness to complete the final hook up as and when gas connectivity is established.

As per the New Urea Policy 2015 revised target energy norm of 6.5 Gcal/MT will becomeeffective from 1st April 2020. To adhere to the Policy various energy saving measureswere designed and detailed engineering was carried out. This Ammonia Plant ModernisationProject will be implemented before deadline under the Policy.

Status of the Project Activities

As mentioned in the previous paragraph most of the project activities namely designengineering ordering of long delivery items etc. for the energy reduction project havebeen completed during the year under review. The new Urea Reactor with improved materialof construction and high efficiency internals has been received at site and is ready forerection. Meticulous planning is in place to complete this project within the budgetedcost and time. One of our Associate companies is putting up a 24.7

MW floating solar power project in the Company's water reservoirs which when completedduring this year will reduce the cost of power. Your Company also has an arrangement withanother company for putting up a 10 mld Desalination project which will be completedduring this year. This is expected to reduce the risk associated with supply of water fromGovernment source.

PUBLIC DEPOSITS

There are no deposits covered under Chapter V of the Companies Act 2013 (the Act)during the year 2018-19 the details of which are required to be furnished.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company are prepared in accordance withInd AS and forms part of the Annual Report.

FINANCIAL STATEMENTS OF SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES

Pursuant to Section 129(3) of the Act read with Rule 5 of the Companies (Accounts)Rules 2014 the statement containing salient features of the Financial Statements of theCompany's associates and joint ventures (in Form AOC-1) is attached to the FinancialStatements. The Company has no subsidiaries.

Tamilnadu Petroproducts Limited (TPL)

During the year under review revenue from operations was Rs.1241.56 crores comparedto Rs.1081.83 crores in 2017-18. The Net profit for the year was Rs.54.27 crores againstRs.51.70 crores in the previous year. Though TPL is facing stiff competition from importsvarious steps have been taken to improve the performance which have started showingresults. The significant improvement profitability was on account of the improvedproductivity and realizations from both LAB (Linear Alkyl Benzene) and Heavy ChemicalsDivision. The conversion of ECH (Epichlorhydrin) manufacturing facility to producePropylene Oxide was also commissioned during the year.

Tuticorin Alkali Chemicals and Fertilizers Limited (TFL) plant came under controland the

The problems in the CO2 gas was produced for use in Soda Ash plant. required CO2

However due to long periods of shutdown and subsequent low load operation the Soda Ashand Ammonium Chloride process plants had several mechanical issues which were hamperingthe stepping up of the production. Even though the production is better than the previousyears still it is only 50% of the capacity and hence the turnover is low and the companyhas not made profits during the year. The company's petition before the NCLT seekingapproval for a scheme to convert the outstanding dues and the preference capital both intoequity shares was approved by SEBI on 6th Sep 2018. Accordingly 46850000 equityshares were allotted on 17.9.2018 with lock in condition. Approval from BSE for Listing& Trading is awaited.

Greenam Energy Private Limited (GREENAM)

Greenam Energy Private Limited (Greenam) is setting up a Floating Solar Power Projectof capacity 24.7MW DC in the water reservoirs of the Company at Tuticorin. IndianRenewable Energy Development Agency Limited (IREDA) has sactioned a Term loan of Rs. 88Crores. Action is being taken to complete documentation for availing the loan and thePromoters during the year have so far brought in around Rs. 28.74 crores towards equity.Your Company as one of the Promoters has invested in 5686500 equity shares of Rs.10/-each of value Rs.5.68 crores. An agreement has been entered into by your Company withGreenam permitting them to use the Company's water reservoir for the Project and forusage of certain portion of land for installing inverters transformers and Powerevacuation systems. The Project activities are progressing well and orders have beenplaced for critical instruments. Major Inverter transformers have been received. Thecommissioning of the Project is expected by January 2020.

SAFETY HEALTH AND ENVIRONMENT

• Your Company is in the process of going for integrated management systemcertification i.e. QMS.ISO 9001:2015 EMS – ISO 140001:2015 and OHS – ISO45001: 2018 by 2019 and system updating is in progress.

• Your Company has achieved longest accident free period of about 585 days with1.71 million man hours continuously.

• Your Company has revamped one of the fire tenders with modernized fire system.

• Your Company continues to conduct health camps as an ongoing activity to createawareness on critical health related matters viz. eye camps and cancer / diabetesawareness camps. Your Company continues to conduct pre medical and periodicalmedical examination for in employees on regular basis. Similarly Green Belt developmentis given top most importance and is a continuing activity with about 700 tree plantationdone during this year.

HUMAN RESOURCE AND INDUSTRIAL RELATION

Your Company continues to provide a conducive work environment and opportunities fordevelopment of its employees. Industrial Relations in the Company have been cordial duringthe year under review. The number of employees as on 31st March 2019 is 651. Your Companycontinues with the regular campus recruitment programme as a process of building theorganisation from the bottom.

EXTRACT OF ANNUAL RETURN

Form MGT-9 as on 31st March 2019 as required under Section 92 of the Act is given inAnnexure I to this Report and is available in the website of the Company i.e. www.spic.in.

DIRECTORS

Since the date of the last Report Mr. Arun Roy I.A.S was inducted as Nomineedirector of TIDCO at the Board meeting held on 23rd October 2018. The resignation of Mr.S. Shankar Independent Director effective 31st March 2019 was accepted by the Board ofDirectors at their meeting held on 12th February 2019. Mr.S.Visakan IAS TIDCO NomineeDirector was appointed as Additional Director as per Section 161 of the Companies Act2013 at the Board meeting held on 7th August 2018. Subsequently

TIDCO had withdrawn the nomination of Mr.Visakan which was given effect from 29th March2019. In his place TIDCO had nominated Dr.Aneesh Sekhar IAS as the Nominee Director andthe Board of Directors at their meeting held on 23rd May 2019 appointed him as AdditionalDirector. The Board of Directors place on record the invaluable services rendered by Mr SShankar and Mr S.Visakan IAS during their tenure.

The Board of Directors at their Meeting held on 23rd May 2019 appointed Mr.Debendranath Sarangi as Independent Director for a period of 5 years from 23 May 2019. Onthe same day Mr. B Narendran and Mrs. Sashikala Srikanth were recommended forreappointment as Independent Directors for the second term of 5 years from 8thSeptember 2019. Mr. B Narendran during the second term will attain the age of 75 on 22ndJune 2020. The approval of shareholders is being sought for the above said appointment andre appointment of Independent Directors. Mr. B.Elangovan Director shall retire by rotationat the ensuing Annual General Meeting of the Company and being eligible offers himselffor re-election.

All the Independent Directors of the Company on the date of this Report have dulysubmitted the disclosures to the Board stating that they have fulfilled the requirementsset out in Section 149 (6) of the Act and the SEBI (Listing Obligations and DisclosuresRequirements) Regulations 2015 as amended so as to qualify themselves to act asIndependent Directors.

TRANSFER OF SHARES IN RESPECT OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION ANDPROTECTION FUND (IEPF) AUTHORITY

Pursuant to Section 124 (6) of the Companies Act 2013 read with The Investor Educationand Protection Fund (Accounting Audit Transfer and Refund) Rules 2001 the Company aftergiving due notice in writing to the shareholders whose dividend remained unclaimed weretransferred to IEPF Authority. 166454 equity shares in respect of 1008 shareholders weretransferred during March 2018. Corporate action taken in this regard was made throughCDSL.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

Independent Directors are familiar with their roles responsibilities in the Companynature of the industry business model etc. through familiarisation programmes. Documents/ Brochures Reports and Internal Policies of your Company are provided to them.Presentations are made at the Board / Committee Meetings on Company's Performancebusiness strategy risks involved and global business environment. Details of means offamiliarization of the business to Independent Directors are disclosed on the Company'swebsite under the following web link:http://spic.in/wp-content/uploads/policies/Familiarisation-Program-for-Independent-Directors.pdf

PARTICULARS OF REMUNERATION OF DIRECTORS KEY MANAGERIAL PERSONNEL AND EMPLOYEES

The information required under section 197(12) of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 for the year ended 31stMarch 2019 and forming part of this Report is given in Annexure III to this Report.

STATUTORY AUDITORS

M/s. MSKA & Associates Chartered Accountants (Firm Registration No: 105047W)Chennai are the Statutory Auditors of the Company appointed by the shareholders for aperiod of 5 years from 2017- 18 and to hold office until the conclusion of 51st AGM of theCompany.

COST AUDITOR

Mr. P R Tantri Cost Accountant (M. No. 2403) was appointed as the Cost Auditor of theCompany for 2018-19 to carry out the audit of your Company's Cost Accounts and Records offertilizer business. The Company is required to maintain Cost Records as specified by theCentral Government under Section 148 (1) of the Act and that accordingly such accounts andrecords are made and maintained. The Cost Audit Report for the year ended 31st March 2018was filed within the time stipulated under the Act. The Board of Directors at theirmeeting held on 23rd May 2019 on the recommendation of the Audit Committee havere-appointed Mr. P R Tantri Cost Accountant as Cost Auditor for 2019-20 at a remunerationof Rs.150000/- plus reimbursement of actual out-of-pocket expenses . As required underSection 148 of the Act and Rule 14 of the Companies (Audit & Auditors) Rules 2014ratification by

Members is sought for the payment of remuneration to the Cost Auditor.

SECRETARIAL AUDIT REPORT

In terms of Section 204 of the Act Regulation 24A of Lisiting Regulations and theRules made thereunder your Company has appointed Ms. B Chandra Practicing CompanySecretary Chennai as Secretarial Auditor. The Secretarial Audit Report as furnished isgiven as Annexure IV to this Report. There are no qualifications reservations or adverseremarks made by the Secretarial Auditor in the Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in Section 134 (3) of the Act your Directors tothe best of their knowledge and belief and according to information and explanationsobtained from the management confirm that:

a) in the preparation of the annual financial statements for the year ended March 312019 the applicable Ind AS had been followed along with proper explanation relating tomaterial departures;

b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at March 31 2019 and of the profit of theCompany for the year ended on that date;

c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) the annual accounts have been prepared on a going concern basis;

e) they have laid down proper internal financial controls to be followed by the Companyand such controls are adequate and operating effectively; f) Proper systems have beendevised to ensure compliance with the provisions of all applicable laws and that suchsystems are adequate and operating effectively.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

No loans or guarantees were given by the Company under Section 186 of the Act duringthe year under review. During the year your Company invested in 5686500 equity sharesof Rs.10 each at par of Greenam Energy Private Limited offered on rights basis and 456Equity shares of Rs.10 each at par in RK Windfarms (Karur) Private Ltd. Tuticorin AlkaliChemicals and Fertilizers Limited (TFL) allotted of 46850000 equity shares of Rs 10/-each at par pursuant to the proposal submitted by TFL to National Company Law Tribunal(NCLT) for full conversion of loan and outstanding dues as well as settlement towardsRedeemable cumulative preference shares held by SPIC. The above arrangement was approvedby SEBI vide Order dated 6th September 2018. SPIC received from Gold Nest Trading CompanyLimited (Goldnest) 509575 equity shares of Rs.10 each of South India Travels Pvt Limitedat par and 5808000 equity shares of Rs.10 each of MVL at Rs.13.50 per share towardssettlement of unsecured loans received from SPIC and pending repayment pursuant to theScheme of Arrangement by Goldnest with its Shareholders and Creditors as approved by Boardof Directors of SPIC at their Meeting held on 17th May 2018. The said Scheme was approvedby NCLT Vide Order dated 7th March 2019.

RELATED PARTY TRANSACTIONS

The transactions entered into during the year 2018-19 with Related Parties as definedunder the Act were in the ordinary course of business and at arm's length basis. Detailsof contracts / arrangements with related parties as required under Section 188 (1) and 134(h) of the Act have been disclosed in Form AOC-2 and is attached as Annexure VI. Asrequired under Regulation 23 of SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 approval of the Members is being sought at this Annual General Meetingfor the transactions with Related Parties during the year considered material in nature.The details of transactions with entity belonging to Promoter Group which holds 10% ormore shareholding in the Company as per Regulation 10 of LODR are included in Note No.13of Notes on Accounts

MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING THE FINANCIAL POSITION OF THECOMPANY

There were no material changes or commitments affecting the financial position of yourCompany that has occurred between the end of the financial year i.e. 31st March 2019 andthe date of this Report.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGOConservation of Energy

Your Company has an Energy Audit group which identifies potential areas forimprovement scans the environment for innovative and reliable solutions and considersproposal for implementation. Efforts are continuously being taken to reduce energyconsumption in the plants.

Some of the activities implemented during the year:

• As energy conservation activity Low temperature Shift convertor catalyst wasrenewed with new catalyst in Ammonia plant.

• To avoid energy loss through the heat exchangers several exchangers werere-tubed / replaced.

• Syngas compressor turbine Silica washing and Loop refrigeration compressoroverhauling was done to improve the efficiency.

• Steam system audit were carried out periodically and the faulty traps and leakswere addressed immediately.

Technology Absorption - Nil

Foreign Exchange Earnings and Outgo

The foreign exchange earned in terms of actual inflows and the foreign exchange outgoin terms of actual outflows during the year:

(Rs. in Lakhs)
Particulars 2018-19 2017-18
Foreign Exchange Earnings 2.70 16.14
Foreign Exchange Expenditure 201457.15 138551.44

INTERNALFINANCIALCONTROL&RISKMANAGEMENT SYSTEM

Your Company has adequate internal financial control systems to monitor businessprocesses financial reporting and compliance with applicable regulations. The systemswere reviewed by Internal Auditors and reported to the Audit Committee of the Board foridentification of deficiencies and necessary time bound actions were taken to improveefficiency at all levels. The Committee also reviews the internal auditors' report keyissues significant processes and accounting policies.

Risk Management is an integral part of the business process. Your Company pursuant tothe Companies Act 2013 and Listing Regulations has a Risk Management Committee and aPolicy on Risk Management to identify and draw mitigation plans to manage risk. The AuditCommittee of the Board reviews the risk management report periodically.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed the regulators or courts ortribunals impacting the going concern status and Company's operations in future.

CORPORATE GOVERNANCE

Corporate Governance Report 2018-19 along with the Certificate of the StatutoryAuditors M/s. MSKA Associates Chartered Accountants confirmingcompliance to conditionsof Corporate Governance as stipulated in the Listing Regulations forms part of thisReport.

PERFORMANCE EVALUATION OF THE BOARD COMMITTEES AND DIRECTORS

Your Company has a structured framework for evaluation of the Individual DirectorsChairperson Board as a whole and its Committees. The Independent Directors at theirMeeting held on 11th February 2019 evaluated the performance of Non-Independent DirectorsBoard as a whole Chairperson and assessed the quality quantity and timeliness of flow ofinformation between the Company

Management and the Board that is necessary for the Board to effectively and reasonablyperform their duties. The Board of Directors at their Meeting held on 23rd May 2019evaluated the performance of all Independent Directors and the Board as a whole and itsCommittees and assessed the quality quantity and timeliness of flow of informationbetween the Company Management and the Board through circulation of questionnaires toassess the performance on select parameters relating to roles responsibilities andobligations of the Board and functioning of the Committees. The evaluation criteria wasbased on the participation contribution and guidance offered and understanding of theareas etc. which are relevant to the Directors in their capacity as Members of the Board/Committees.

NUMBER OF MEETINGS OF THE BOARD

During the year under review five Board Meetings were held on 17th May 2018 7thAugust 2018 23rd October 2018 12th February 2019 and 27th March 2019 the details ofwhich are provided in the Corporate Governance Report.

AUDIT COMMITTEE

The details of the composition and meetings of the Audit Committee held are provided inthe Corporate Governance Report.

POLICIES

POLICY ON MATERIAL SUBSIDIARY

The Company has a Policy on Material Subsidiary approved by the Board of Directors asper the Listing Regulations and is available on the Company's website under the web link:http://spic.in/wp-content/uploads/policies/Determining-Material-Subsidiary-Policy.pdf

NOMINATION AND REMUNERATION POLICY

Your Company has a Nomination and Remuneration Policy as required under Section 178(3)of the Act and the Listing Regulations. The details of the Policy are given in Annexure IIto this Report.

POLICY ON RELATED PARTY TRANSACTIONS

The Policy on Related Party Transaction as required under the Listing Regulations andthe Companies Act 2013 is available on the Company's website under the web link:http://spic.in/wp-content/uploads/policies/Policy-on-Related-Parties.pdf

POLICY ON INSIDER TRADING

Your Company has a Code of Conduct for Prevention of Insider Trading with a view toregulate trading in securities by the Directors and designated employees of the Company inline with amended SEBI (Prohibition of Insider Trading) Regulations 2015 as amended.

POLICY ON SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION ANDREDRESSAL) ACT 2013. (POSH)

The Company has zero tolerance for sexual harassment at workplace. A policy is in placeand an Internal Complaints Committee has been constituted which is monitoring theprevention prohibition and redressal of sexual harassment at workplace in line with theprovisions of POSH and the Rules made there under. There were no complaints reported underthe POSH during the year under review.

VIGIL MECHANISM:

Pursuant to the provisions of Section 177 of the Act and the Listing RegulationsWhistle Blower Policy for Directors and employees to report genuine concerns or grievanceshas been put in place and a Vigil Mechanism established the details of which areavailable on the website of the Company under weblink: http://spic.in/wp-content/uploads/policies/Whistle-Blower-Policy-and-Vigil-Mechanism.pdf

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company has a CSR Policy in line with the provisions of the Act. As a responsiblecorporate citizen your Company in its endeavour to contribute for the sustaineddevelopment and growth of the Society has taken several initiatives. Your Company is notrequired to spend towards CSR activities in view of absence of profits computed underSection 198 of the Act. However the details of CSR initiatives undertaken voluntarily byyour Company are given in Annexure V to this Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Industry Overview

The fertilizer industry of India is growing satisfactorily during the last five decadesdue to increased awareness of the benefits of fertilizer application to replace the cropremoval of nutrients from the soil. Indian ranks second in the world with respect toconsumption of Urea; first being China. Government of India is taking necessary steps toincrease the indigenous production of Urea like pipeline connectivity revival of oldplants etc. These efforts may result in the reduction of import of Urea in few years fromnow.

The seasonal conditions play a vital role in consumption of fertilizers in the country.During the Kharif season (June to Sept); the total rainfall was 9% less than normal.However locations like Rayalaseema and Interior Karnataka received deficient rainfallresulting in reduction in coverage of crops that consume large quantities of fertilizers.The post monsoon (October to December) in southern peninsula recorded a reduction of 36%from the normal. This reduced monsoon has resulted demand for Urea and other fertilizers.The meteorological report for post monsoon period states that about 87 % of the total areaof the country received deficient rainfall when compared to the normal.

During the year the availability of Urea in the market was satisfactory without anyinstance of deficit during the period of requirement. The year witnessed a higher quantityof Urea supplies and consequent sales over the previous year. The supplies were higher by4% to record 31.33 million tonnes. Similarly the import of Urea was also higher than theprevious year by about 24.70 % and stood at 7.44 million tonnes. The sale of Urea recorded31.72 million tonnes which is 4.6% higher than the previous year. (Source: FertilizerAssociation of India).

The capacity utilization of Urea has declined marginally from 97.10% to 96.10% duringthe year under review.

Comparison of All India Urea Production Import Supplies and sales with previous year

DBT in Fertilizers:

Your Company as a Lead Fertilizer Supplier (LFS) for Tamil Nadu and Pondicherry wehave ensured the usage of 11611 numbers of Point of Sales (PoS) devices out of 11980devices available in the States. The usage percentage is 97 % which is the highest in thecountry. To achieve this level of usage we facilitated the conduct of 45 numbers ofService Workshops at each Blocks of the State with the active participation of all stakeholders like Department of Agriculture Distributors Dealers Retailers Officials fromCollectorates and National Informatics Centers.

Further change in this is anticipated with the plan to introduce Web Based applicationsat retailer locations to conduct the business with ease and error free. With this changewe expect to reduce the un-authorized sale of fertilizers for Agriculture. During theyear special approval is given by the Government of India to authorized MixingManufacturers to buy straight fertilizers from the manufacturers or importers by complyingwith ePoS sales process.

To increase the sale of our Urea through ePOS machines we have educated our employeeson the use of ePOS machines trained them to train the retailers and to address minorerrors in the machine while on operation. As a ready reckoner we have documented andissued an Operation Manual for all activities related to the revised concessioneligibility like Manual for Release Order (RO for stocks) Module and User guide for ePoSdevices for all the field marketing officers of the company.

During the year sale of Manufactured Urea was 667058.990 MTs and sale of ImportedUrea was 114732.695 MTs.

Tissue Culture Business:

During the year the sale of tissue cultures recorded a sales turnover of Rs. 838.04Lacs. The demand for the product was low due to unfavorable seasonal conditions andsubsidy policy under National Horticulture Mission.

To hedge similar risks due to seasonal variation we have commercialized intermediatestages in production of Banana plants as Multi Culture Ex Agar Plants and net pot plants.This innovation not only enable us to increase the production substantially but also tocater to distant markets like Maharashtra Uttar Pradesh Bihar and Gujarat. As part ofnew business development your Company has also signed MOU with ICAR-CPCRI KasargodeKerala for technology transfer for the production of high yielding disease resistantarecanut plants for mass production. This initiative will increase the profitability infuture.

Financial Ratios:

The significant changes in the financial ratios of the Company which are more than 25%as compared to the previous years are summarized below:

Ratio 2018 - 19 2017 - 18 Reasons for change
Debtors Turnover Ratio (days) 80 29 Mainly due to delayed disbursement of Subsidy by the Government of India.
Inventory Turnover Ratio (days) 9 5 Higher cost of Goods in current year compared to last year
Interest Coverage Ratio (times) 2.50 1.91 Due to improved Net Profit we have better Interest Coverage Ratio in current year.
Debt Equity Ratio (times) 4.78 3.70 Due to delay in subsidy disbursement trade payable had accumulated resulting in higher total liabilities and higher Debt Equity Ratio
Return on net worth (%) 15.34 12.18 Mainly due to Increased Profits in current year
Debt - Service Coverage ratio (times) 2.50 1.91 Improved Cash profits during current year had improved the Debt Service Coverage Ratio

CHALLENGES

Your Company's stable operation depends on completion of NG pipeline infrastructure byIOC and sustained supply of gas. DBT stabilization using ePoS machines at retail shops andaddressing connectivity issues are of utmost importance. The working capital pressure willalso continue to be a challenge.

ACKNOWLEDGEMENT

Your Company is grateful for the co-operation and continued support extended by theDepartment of Fertilizers Ministry of Chemicals and Fertilizers Ministry of Petroleumand Natural Gas Ministry of Agriculture Ministry of Shipping Ministry of CorporateAffairs and other Departments of the Central Government the Government of TamilnaduGovernments of other States Tamilnadu Industrial Development Corporation LimitedTamilnadu Generation and Distribution Corporation Ltd Financial Institutions and Banks.The Directors appreciate the dedicated and sincere services rendered by all the employeesof your Company.

For and on behalf of the Board of Directors
ASHWIN C MUTHIAH
Place : Chennai (DIN:00255679)
Date : 23rd May 2019 Chairman