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Code: 506395
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COROMANDEL INTERNATIONAL LIMITED
ANNUAL REPORT 2011-2012
DIRECTOR`S REPORT
The Board of Directors have pleasure in presenting the highlights of the
performance of your Company together with the Audited Accounts for the
Financial Year ended March 31, 2012.
SUMMARY OF FINANCIAL RESULTS:
Rs. in crore
2011-2012 2010-2011
Income:
From Operations 9,823 7,639
Other 117 80
TOTAL 9,940 7,719
Profit:
Profit before Interest,
Depreciation and Taxation 1,178 1,136
Less: Interest 117 86
Depreciation 56 62
Profit Before Exceptional Items & Tax 1,005 988
Exceptional Item (35) -
Profit Before Tax 970 988
Less: Provision for Tax 277 294
(including deferred tax credit)
Profit After Tax 693 694
Add: Surplus brought forward 318 203
Amount available for Appropriation 1,011 897
Appropriation
- Interim Dividend
(incl. dividend tax) 131 131
- Proposed Final Dividend
(incl. dividend tax) 99 98
- Transfer to General Reserve 300 350
- Surplus retained in the Profit and Loss Account 481 318
Operations:
The Company has shown improved performance in all its business segments and
achieved a higher revenue of Rs. 9,940 crore for the year ended 31 March
2012 (2010-11 - Rs. 7,719 crore). Profit for the year before depreciation,
interest and taxation was Rs. 1,178 crore compared to Rs. 1,136 crore in
the previous year. Profit after tax was Rs. 693 crore as against Rs. 694
crore in 2010-11.
Improved operational efficiencies and appropriate sourcing strategies have
significantly contributed to overall improved performance inspite of lower
production of fertilisers due to shortage of phosphoric acid and high
volatility in the Rupee. The fertiliser business achieved a total sales
volume (including imported fertilisers) of 30.08 lakh tons as against 28.63
lakh tons achieved in the previous year. Besides, the Company also handled
2.65 lakh tons of urea against 1.98 lakh tons achieved in the previous
year. Timely purchase of input raw materials and pro-active forex
management coupled with faster
liquidation of stocks has helped the Company in improving operational
profits.
Crop Protection business performed reasonably well during the year despite
a continuing ban imposed on Endosulfan by Hon`ble the Supreme Court of
India at the beginning of the year and unfavourable monsoon conditions in
certain States during Rabi season. The acquisition of Sabero Organics
Gujarat Limited, a technical grade manufacturer has expanded product
profile of crop protection business and has given greater access to global
markets. Timely introduction of new technicals at Ankleshwar facility has
mitigated the impact on volumes due to ban of Endosulfan. Leveraging the
Retail presence in Andhra Pradesh and Karnataka, the Company has
significantly improved the sale of specialties and captive technical
formulations.
In Speciality Nutrient Business, the Company has achieved sales growth in
Organic Compost, Gromor Sulphur and Water Soluble Fertilisers (WSF) despite
difficult seasonal and market conditions. The Company continues to be a
market leader in Bentonite Sulphur and registered a growth of 14% over last
year in this segment. In the organic fertilisers, the Company has
registered a growth of 33% in volumes as compared to previous year.
In Retail business, the Company has opened 200 new retail centres in Andhra
Pradesh and Karnataka. With this expansion, the Company has 641 centres in
Andhra Pradesh and Karnataka. Retail turnover has grown by 11% during the
year. In retail business, the Company has decided to focus more on agri-
input business and exit from the life style products. The Company continues
to explore Farm Mechanisation Business as part of its retail service
offerings to the farmers.
Subsidiary Companies:
Acquisition of Sabero Organics Gujarat Limited (Sabero)
During the year, your Company entered into a Share Purchase Agreement with
the erstwhile promoters of Sabero and acquired 1,42,98,112 equity shares of
Sabero at Rs. 160 per share and also paid a non-compete fee of Rs.38.47
per share for the resident shareholders aggregating to Rs.35.53 crore.
The Company, also further acquired 1,05,00,000 equity shares of Sabero
through an Open Offer from the shareholders of Sabero at a price of Rs.
160/- per share, pursuant to the approval from Securities Exchange Board of
India (SEBI) for the Open Offer under SEBI (Substantial Acquisition of
Shares and Takeover) Regulations, 1997. Post completion of this
acquisition, your Company now holds 2,47,98,112 equity shares representing
73.23% in the equity share capital of Sabero. The Company along with its
wholly owned subsidiary (Parry Chemicals Ltd.,) holds 74.57% of the equity
share capital of Sabero and effective December 17, 2011 Sabero has become a
subsidiary of the Company. The Consolidated results include results of
Sabero effective this date.
Sabero manufactures technical grade pesticides with manufacturing
facilities in Sarigam, Gujarat and plans are underway for setting up an
ancillary project at Dahej, in the state of Gujarat. Sabero`s shares are
listed on the National Stock Exchange and Bombay Stock Exchange.
Sabero`s revenue from operations for the year ended March 31, 2012 wasRs.
358.43 crore with a Net loss ofRs. 61.24 crore. The production of Sabero
during the year was impacted under judicial restraint. However, the Company
was able to get permission for utilization of capacity up to 75% starting
December 2011. In view of the under utilization of the capacities, higher
power and fuel cost and certain accounting adjustments necessitated on
reconciliation of major balances, the Company had incurred the loss. The
Company is investing into comprehensive revamping of Environmental
Management System to comply with environmental standards. These investments
are aimed at further compliance with environmental regulations and will
also enable the Company to ramp up production and sales volumes from 2012-
13 onwards.
The acquisition of Sabero is part of the company`s long term vision to
consolidate its position as a significant player in the crop protection
business with a combination of products in technical/formulation grade
pesticides catering to both domestic and global markets.
CFL Mauritius Limited:
The Company (a 100% subsidiary) earned a total revenue of US $ 1.22 million
(equivalent to Rs. 5.76 crore) and net profit of US $ 0.74 million
(equivalent to Rs. 3.61 crore) during the year ended December 31, 2011.
During the year, the Company has received dividend from Foskor (Pty) Ltd
amounting to US $ 1.14 million.
Parry Chemicals Limited (PCL):
The Company (a 100% subsidiary) earned a total revenue of Rs. 0.57 crore
for the year ended March 31, 2012 and Profit after Tax was Rs. 0.03 crore.
Your Company had during the year subscribed a sum of Rs. 9.50 crore for
acquiring additional 95,00,000 lakh equity shares of Rs. 10/- each of PCL.
PCL, during the year had acquired equity 4,58,249 equity shares of Sabero
Organics Gujarat Limited representing 1.35% from the stock market.
Coromandel Brasil Limitada:
The Limited Liability Partnership in Brazil incurred net loss of Brazilian
Reals 0.56 million (equivalent to Rs. 1.58 crore) for the year ended
December 31, 2011. Your Company had during the year made a further
investment of Rs. 1.38 crore in this company.
Joint Venture Companies
Tunisian Indian Fertilisers Company Limited (TIFERT)
TIFERT, a joint venture Company, was formed in Tunisia in 2008, to set up a
phosphoric acid plant. The plant which was originally expected to be
commissioned by the first quarter of 2011 got delayed mainly due to the
political developments in Tunisia last year. With the restoration of
normalcy in Tunisia, it is expected that this plant would be commissioned
by second half of 2012-13. The delay has caused cost overrun to the extent
of US $ 30 million and the Board of Directors of your Company in terms of
the JV agreement had approved an additional investment of US$ 5 million
towards its share by way of equity/loan. Your Company`s strategic
investment towards 15% equity stake in TIFERT is aimed at securing
uninterrupted supply of phosphoric acid for the Company`s operations.
Coromandel Getax Phosphates Pte Ltd
The JV Company based in Singapore formed for leveraging opportunities for
rock phosphate mining/sourcing continued scouting for opportunities during
the year.
Coromandel SQM (India) Pvt Ltd.
The Joint Venture Company, formed to set up a WSF Plant at Kakinada, Andhra
Pradesh has commenced its operations during the year. The plant is capable
of producing various grades of Water Soluble Fertilisers and this will
enhance the product range offerings in Specialty Nutrients by the Company
resulting in overall increase in market share of Coromandel in this
segment. The Company earned a total income of Rs. 3.81 crore for the year
ended March 31, 2012 and Net loss was Rs.0.70 crore.
Technical Assistance Agreement with Foskor (Pty) Limited (South Africa):
The Technical Assistance Agreement with Foskor (Pty) Limited, South Africa,
for a period of two years ended on March 31, 2012. The relationship with
Foskor continues to be beneficial to both the Companies.
Expansion Projects
Your Company is in the process of expanding capacities and is currently
executing a third Complex granulation train at Kakinada plant. The Plant is
expected to be completed during the financial year 2012-13. As part of this
expansion, your Company is also building Storage Tanks and other support
facilities to augment infrastructure for the expanded capacities. Your
Company is also firming up its plans for setting up a green field Single
Super Phosphate plant in the state of Punjab.
Safety, Health and Environment (SHE)
Company`s focus on Safety, Health and Environment continued during the year
under review across all locations with all manufacturing plants maintaining
high safety standards.
All the plants continued to make significant progress attaining external
SHE recognition, and have been certified with ISO 14001 Environmental
Management System certification and conforms to Process Safety Management
System. Visakhapatnam and Kakinada plants were awarded five star rating by
British Safety council. Barring an unfortunate workplace fatal incident in
Visakhapatnam Plant, the overall safety environment had continued to
improve during the year under review.
Dividend
Your Directors recommend a Final Dividend of Rs.3/- per equity share. With
this the total dividend for the year would be Rs.7/- per equity share
including an interim dividend of Rs.4/- per equity share paid to the
Members. The Members may recall that a Dividend of Rs.7/- per equity share
was paid last year.
Bonus Debentures
In order to commemorate the golden jubilee of the Company and to reward the
Shareholders for their continued support, the Board of Directors approved
issuance of one 9% Unsecured Redeemable
Non- convertible Fully Paid Bonus Debentures of Rs. 15/- each for every
equity share by appropriating the General Reserve through a Scheme of
Arrangement (Scheme). The Members had approved the said Scheme for issuance
of unsecured fully redeemable non convertible Bonus Debentures and the
Company had filed the petition in the Hon`ble High Court of AP seeking its
approval of the Scheme. The Company would complete the process of issue of
the Bonus Debentures upon receipt of necessary approvals.
Consolidated Financial Results
A Consolidated Financial Statement incorporating the operations of the
Company, its Subsidiaries and Joint Venture Companies is appended.
The Ministry of Corporate Affairs, has given a general exemption to
Companies from publishing the Annual Report of its subsidiary Companies
wherever a Consolidated Statement has been appended. In view of this, the
Annual Report of the Subsidiary Companies, i.e. Parry Chemicals Limited,
Sabero Organics Gujarat Limited and its subsidiaries, CFL Mauritius Limited
and Coromandel Brasil Limitada have not been annexed.
However, the Accounts of the Subsidiary Companies and the related
information will be made available to the Members of Coromandel
International Limited and its Subsidiary Companies on request and will also
be kept for inspection in the Registered Office.
Awards/Recognition
Your Company continues to receive numerous awards/accolades from Industry
associations. During the year the Company received the following awards/
accolades:
* Company was awarded Significant Achievement in the CII-EXIM Bank
Business Excellence Award - 2011.
* Company was awarded Business Excellence Award by `Industrial Economist`
a business magazine.
* Kakinada Plant received FAI Award for best overall performance of an
operating fertiliser unit for complex fertilisers
* Visakhapatnam Plant received the CII`s National Water Management Award
for Water Efficient Unit
* FICCI Award received for Best Brand "Godavari Gold"
Management Discussion & Analysis and Corporate Governance
The "Management Discussion and Analysis Report" highlighting the industry
structure and developments, opportunities and threats, future outlook,
risks and concerns etc. is furnished separately and forms part of this
Directors` Report.
As per the requirements of the Listing Agreement with Stock Exchanges, a
report on Corporate Governance duly audited is annexed for information of
the Members.
Directors
In accordance with Article 121 of the Company`s Articles of Association,
read with Section 255, 256 and 262 of the Companies Act, 1956, Mr M K
Tandon, Mr R A Savoor and Mr M M Venkatachalam are retiring at the ensuing
Annual General Meeting.
Mr M K Tandon and Mr R A Savoor have expressed their desire to retire at
the ensuing Annual General Meeting. The board places on record its sincere
appreciation of the services rendered by both Mr M K Tandon and Mr R A
Savoor during their tenure of directorship.
Auditors
M/s Deloitte Haskins & Sells, Chartered Accountants, Auditors of the
Company retire at the conclusion of the ensuing Annual General Meeting and
are eligible for reappointment. Members are requested to appoint the
auditors and fix their remuneration.
Cost Auditors
In pursuance of Section 233B of the Companies Act, 1956 the Central
Government has ordered Cost Audit for Fertilisers and Insecticides
products. Accordingly, Shri V Kalyanaraman and Shri Dantu Mitra, Cost
Accountants, were appointed Cost Auditors to render reports to the Central
Government. The Report for the year 2010-11 were submitted on September 26,
2011 (due date September 30, 2011) and for the year 2011-12 will be
submitted on/before due date.
Disclosures
Additional information on conservation of energy, technology absorption and
foreign exchange earnings/outgo, as required to be disclosed in terms of
Section 217(1)(e) of the Companies Act, 1956, read with the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules,
1988, is annexed hereto and forms part of this Report.
In accordance with the provisions of Section 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975 and the
Companies (Particulars of Employees) Amendment Rules, 2011, the name and
other particulars are set out in the annexure to the Directors` Report.
As required by Section 217 (2AA) of the Companies (Amendment) Act, 2000,
Director`s responsibility statement is annexed hereto and forms part of
this report.
The disclosures as required under clause 12 of SEBI (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are annexed to
this report for information of the Members.
Acknowledgement
The Directors acknowledge and would like to place on record the commitment
and dedication on the part of the employees of your Company in achieving
good results, all round.
The Directors also wish to acknowledge and record their appreciation of the
continued support and assistance received by the Company from State Bank of
India and other Banks, financial institutions, mutual funds, as well as
from various Government bodies both at the Centre and the State.
On behalf of the Board
A Vellayan
Chairman
Place : Hyderabad
Date : April 23, 2012
MANAGEMENT DISCUSSION AND ANALYSIS
1. Economic scenario
In 2011-12, India`s Agricultural Economy performed well with food grain
production estimated to touch 252.5 million tonnes compared with 245
million tonnes in 2010-11. Agricultural Input Industry performed well
despite a highly volatile international raw material prices and generally
depreciating Indian currency besides low rainfall in the southern states.
Domestic GDP on the other hand continued to slide down on a quarter on
quarter basis during the year with growth of 5.3% in Q4 versus growth of
9.2% in the same period of 2010-11. After witnessing growth rate of 8.4% in
each of the two preceding years, Indian economy grew by 6.5% in 2011-12
(2.8% growth in agriculture and related sectors) and is estimated to grow
by 6.5% in 2012-13 (3% growth estimated in agriculture and related
sectors).
While the growth has slowed down as compared with previous years, India
continues to be among the frontrunners in the global arena. With
agriculture and services continuing to perform well, slow growth rate was
mainly attributable to weakening industrial growth. The financial crisis in
Europe, sluggish growth in other industrialized countries like the USA,
stagnation in Japan and hardening of international prices of crude oil had
impacted industrial growth in India. Coupled with this, domestic monetary
policy, particularly raising the repo rate to control inflation resulted in
slowing down of investment and growth particularly in the Industrial
sector.
Agriculture even though shrunk in its proportion to GDP to 12.9%, it is a
vital sector which provides livelihood for more than 50% of the population.
The area under food grains production has declined over the last three
decades. In yield parameters India is still lagging behind global levels in
most crops. A holistic approach, simultaneously working on agricultural
research and development, dissemination of technology and provision of
quality agricultural inputs like seeds, fertilisers and pesticides would be
important besides making adequate investment in agricultural marketing
infrastructure and water conservation.
Indian farmers are mostly small and marginal farmers with small and
fragmented landholdings. The average farm size in the country has declined
over the years which pose a challenge in terms of adoption of farm
mechanization. Pooling of many landholdings may yield better economies of
scale for which laws for leasing land should be put in place. It is
necessary to have comprehensive and coordinated efforts for improving farm
production and productivity of food grains, developing rural
infrastructure, renewing thrust on irrigation sector, strengthening
marketing infrastructure and supporting investment in R&D. These efforts
will rejuvenate agricultural sector and bring about inclusive growth of the
economy.
The growth and progress of Indian agriculture depends largely on the
progress, and precipitation through the south west monsoon. During the year
2011-12, the country received 101% of the long period average, but the
numbers of rainy days were fewer, causing long gaps in precipitation or
floods. The initial estimates on the progress of monsoon for 2012-13 are
varying, between a sub-normal to normal monsoon.
2. Organisation
Coromandel is a flagship Company of the Murugappa Group and is a subsidiary
of EID Parry (India) Limited (EIDP) which holds 62.69% of the equity share
capital in the Company. The Company is engaged in the business of Farm
Inputs comprising of Fertilisers, Crop protection, Speciality Nutrients and
Organic compost. The Company is also engaged in rural retail business in
the States of Andhra Pradesh and Karnataka through a chain of 641 retail
centres set up in various parts of these States. The Company has 8
manufacturing facilities located in Andhra Pradesh, Tamil Nadu, Gujarat and
Jammu & Kashmir. The Company`s products are marketed all over the country
through an extensive network of dealers and its own retail centres. During
the year, the Company, along with its wholly owned subsidiary, acquired
74.57% stake in Sabero Organics Gujarat Limited, a crop protection company
which has exposure in all three segments i.e. Fungicides, Insecticides and
Herbicides in crop protection business. Sabero has manufacturing facility
at Sarigam and another formulation plant is being set up in Dahej.
The Company has following subsidiaries and joint ventures for its various
business initiatives.
* Sabero Organics Gujarat Limited, India
* Sabero Organics America Ltda, Brazil
* Sabero Australia Pty Ltd, Australia
* Sabero Europe BV
* Sabero Argentina S.A., Argentina
* Parry Chemicals Limited, India
* CFL Mauritius Limited, Mauritius
* Coromandel Brasil Limitada, Brazil
* Coromandel Getax Phosphates Pte Ltd, Singapore
* Coromandel SQM (India) Pvt Ltd, India
* Tunisia Indian Fertilisers Company Ltd, Tunisia
In addition, the Company also holds 14% equity stake in Foskor Pty Ltd,
South Africa, through combined holding of Coromandel and CFL Mauritius
Limited.
The Management Discussion and Analysis given below discusses the key issues
concerning each of the Strategic Business Units (SBUs) forming part of the
Farm Inputs segment of the Company and of the Retail Business.
3. Farm inputs:
A. Fertilisers SBU :
Coromandel with a production capacity of 32.6 Lakh tonnes of Phosphatic
fertilisers is the leading private sector player in phosphatic fertilisers
in India. The Company produces and sells Phosphatic (P) and Potassic (K)
Fertilisers of various grades ranging from Di Ammonium Phosphate (DAP),
Complex Fertilisers with different composition of nutrients to Single Super
Phosphate (SSP). The Company also distributes imported DAP, Potash, Urea
and NPKs. The Company`s fertilisers are sold under the well established
brand names viz. `Gromor`, `Godavari`, `Paramfos`, `Parry Gold` and `Parry
Super`. The Company`s fertiliser manufacturing facilities are located at
Visakhapatnam and Kakinada in Andhra Pradesh and Ennore and Ranipet in
Tamil Nadu.
(a) Industry scenario:
Global fertiliser demand in 2011 grew by 2.8% enabled by high food prices
and strong demand for agri commodities. World nutrient consumption in 2011
reached 177 million tonnes (in terms of nutrients), rose by 3% as compared
to 2010. However, global fertiliser demand and price levels remained
sluggish since December 2011 and right into the first quarter of 2012.
Globally the fertilizer industry has operated at 83% of the installed
capacity compared with 82% in 2010. Fertiliser demand in 2012-13 is
expected to grow but at moderate level due to uncertain economic condition
in Europe and lower commodity prices.
India continues to remain one of the key drivers for growth of fertiliser
demand in the World. India recorded the highest sale of chemical
fertilisers of 580 Lakh MT, registering an increase of 10 Lakh MT, over the
earlier year.
Import of various complex fertilisers registered a sharp increase of 270%.
India saw an unprecedented import of low grade NP fertilisers like 20:20 to
fill up the shortfall of DAP imports.
Consumption of fertilisers in terms of nutrients crossed 287 Lakh MT
compared to 280 Lakh MT last year. Imports of fertilisers also shot up
significantly especially in the II half of the year.
Production of phosphatic fertilisers remained almost at the same levels in
2011-12 as compared to 2010-11.
International price of DAP and other fertilisers went up during I half and
DAP prices reached peak level of US $ 677 CFR India before softening during
the last quarter to US $ 550 CFR India level. Urea/Ammonia prices were very
volatile during the year and softened during the year end. Prices of MOP
hardened during the year from US $ 420 to US $ 490/MT.
(b) Government policies:
The subsidy rates applicable (Rs. per kg) for financial year 2012-13 are
as under:
Nutrient Based Subsidy (NBS) Policy announced by GOI for phosphatic
fertilisers continued for the second year and this has helped the
government to reduce the subsidy bill during 2011-12. During the year
industry had to raise MRPs to recover increase in input costs from the
market besides absorbing the impact of currency depreciation. With
softening of international prices of fertilisers in the last quarter,
Government has reduced the subsidy rates for 2012-13 to bring down the
subsidy outgo. Since introduction of NBS the Government has saved a
substantial amount of subsidy outgo in the past two years.
The proposed subsidy rates for 2012-13 translate in to effective subsidy of
Rs.14350/MT of DAP as against existing subsidy rate of Rs.19763/MT and
Rs.14400/MT for MOP as against existing rate of Rs.16054/MT.
NBS policy is one of the most important reforms introduced in the
fertiliser sector in the last thirty years. This reform is not only helping
Indian Government to save subsidy but is also helpful in ensuring judicious
use of fertiliser by farmers. It is well established that India does not
have any natural resource to manufacture P and K fertilisers and hence it
is very important that Government has to put in place a suitable mechanism
to fund acquisition of natural resources of P and K. Further, Government
also needs to leverage its trade relations with resource rich countries to
secure long term supplies of P and K fertilisers for Indian companies to
address food security concerns of India.
Fertiliser consumption is increasing at a steady pace, while the domestic
capacity of fertiliser manufacturers is not increasing due to a lack of
fresh investments resulting in increased imports of fertilizers. Lower
investor interest is due to limitations in availability of natural gas,
phosphoric acid and other key inputs.
A working committee has been set up by the Planning Commission to study on
performance of eleventh five year plan and the key issues to be addressed
in twelfth five year plan. The study includes the assessment of required
raw materials to meet the demand of all type of fertilisers in the country,
assessment of various inputs and infrastructural facilities required during
the next 5 years to fill the gap between demand and supply, review the
present status of various taxes and duties and suggest measures for their
realisation.
Some of the policy initiatives announced in the year beginning 2012
including tax incentives with respect to investments in fertiliser sector
is likely to kick-start new investments. It is further expected that the
urea subsidy regime could be moved to nutrient-based subsidy (NBS). This
will bring in a uniform subsidy regime for all fertilisers to ensure that
there is a balanced use of all major nutrients. Current policy of
differential subsidy for "N" fertilisers may lead to imbalanced use of
fertilisers.
During the year, the Government through Reserve Bank of India has bought
back remaining fertiliser bonds issued in lieu of subsidy and also
compensated 50% of the loss on such sale of bonds. The industry is still
representing for full reimbursement of the loss on the buy back of bonds.
Government has reaffirmed that with new NBS policy for phosphatic
fertilisers and reasonable allocation of subsidy, fertiliser industry will
not be paid its dues by bonds in future. However key concern on policy
front continues to be lack of adequate budgetary provisions for payment of
subsidies.
(c) Fertiliser SBU Performance:
The Company achieved a highest ever sales volume of 32.73 Lakh MT (24.78
Lakh MT of manufactured fertilisers and 5.3 Lakh MT of imported phosphatic
fertilisers/ MOP and 2.65 Lakh MT of Urea) as against 30.61 Lakh MT during
the previous year.
However, production during the year was affected mainly on account of short
receipt of phosphoric acid especially from Tunisia due to domestic
developments in that region. The Company has optimized the production and
also resorted to imported phosphatic fertilisers to maintain supplies to
farming community which also enabled it to achieve a highest ever market
share.
All fertiliser plants have improved on their operational efficiencies over
last year and the performance has been satisfactory, inspite of shortfall
in production due to delayed and short supply of key raw materials and
volatility in international prices. During the year, the Company has
resorted to revision in fertiliser MRPs mainly to offset the input cost
increase and rupee depreciation. Timely purchase of raw materials and pro-
active forex management coupled with faster liquidation of materials has
helped the Company in improving the overall performance.
As part of its tie up with Shell International Petroleum Company Limited
(Shell) for manufacture of Sulphur enhanced fertilisers, the Visakhapatnam
plant successfully commenced trial production of DAP 4S using Shell`s
Thiogro technology. The company has also introduced new complex grade of
fertilizer 14:28:14, to cater to the needs of farmers in its various
markets.
The Company has been investing continuously in meeting its obligations
towards protecting the environment. Towards this step, during the year a
new Effluent Treatment Plant (ETP) has been commissioned at Visakhapatnam
plant. The Company`s Kakinada and Visakhapatnam plants were awarded 5 star
rating by the British Safety Council for its Health and Safety Management
System. The Company will continue to undertake investments in further
improving the safety culture at its Plants.
The project for installation of an additional granulation plant at Kakinada
("C" train project) has been progressing well and is expected to be
commissioned by second half of 2012. The investments include augmenting
ammonia, sulphuric acid and phosphoric acid tanks and other infrastructure
to meet the increased storage and handling requirements of these raw
materials.
The movement of Fertilisers sold during the year was governed by movement
orders issued by Government of India which helped the Company to expand its
market footprint thus positioning it well for the proposed sale of 40 Lakh
MT with new "C" train coming on stream. Company now operates in 9 States
with over 1 Lakh MT of fertiliser sales in a year.
Coromandel continues to have a significant presence in Andhra Pradesh,
Tamil Nadu, Karnataka, Orissa, Chattisgarh, Maharashtra, Madhya Pradesh,
Uttar Pradesh and West Bengal.
B. Crop Protection -SBU:
a) Industry Scenario
Globally agrochemicals industry witnessed growth with the business touching
$ 45 billion for the year ($ 38 billion during 2010) boosted by good demand
and stable prices for generics across the globe. Industry achieved a growth
of 16% in nominal terms and 8% in real terms over previous year supported
by higher commodity prices.
Global business was largely driven by adequate rainfall and disease
incidence in Latin American countries, early winter in Europe and good
growth in Asia. All the leading companies achieved double-digit growth
against last year, supported by stable prices for high volume products like
Glyphosate. MNCs continued investing significantly in genetically modified
(GM) seeds segment, which continued to grow at significant rate though no
new approval has been given in for GM technology in any new crop.
Indian industry witnessed record sowing of cotton during the year though
there was late onset of monsoon. Due to insufficient rains in South,
consumption suffered in critical states like AP Maharashtra and Karnataka.
Industry also witnessed banning of Endosulfan and withdrawal of license for
manufacturing of Chloro + Cyper during the year. Despite such setbacks
Industry is estimated to have sustained the market size of last year, due
to growth from Northern and Eastern regions where monsoon was normal.
Prices of all critical crops like cotton, paddy and chillies ruled lower
than previous year while groundnut and soyabean were stable. Due to
increased acreage of paddy in East and good weather for wheat in North,
food grains production in the country is expected to touch the highest
level this year, demonstrating the growing resilience of Indian agriculture
against weather vagaries.
b) Crop Protection SBU Performance
In pursuit of its vision to build a significant presence globally, the
Company acquired M/s Sabero Organics Gujarat Ltd. This strategic
acquisition has catapulted the Company into top 5 companies in the branded
formulation business in India and provided access to global markets and
helped expand its basket of captive technicals.
The SBU achieved a turnover of Rs. 441 crores, despite sudden ban on
Endosulfan by Supreme Court at the beginning of the year and unfavorable
weather in its critical states in second half. The Company could cover the
void left by Endosulfan (close to 10% of previous year turnover) through
successful change in its product mix and scale-up of high margin
specialties and other captive technicals.
Formulations business performed well to achieve record sales of brands of
Specialties and captive technicals through its wide channel network and
Retail chain, through intensive branding. Launch of Buprofezin technical in
its captive range and leveraging on captive technicals from Sabero Organics
helped the SBU mitigate the loss of Endosulfan effectively.
Access to product registrations available for Sabero range of technicals
and reorganization of teams globally has laid a strong platform for the SBU
to build its global presence in existing and new markets. Increased
availability of wider range of captive technicals has made the SBU a strong
player in domestic technicals sales space also.
SBU with its strategic sourcing tie-ups in China and registrations for new
technicals is set to grow faster in Latin America, the fastest growing
markets, through its operations based in Brazil.
C. Speciality Nutrients - SBU
Industry/ Company`s Performance
Speciality Nutrients division comprising of three segments -Secondary &
Micro nutrients, Water Soluble Fertilisers (WSF) and Organic Manure
registered a growth of 31% over previous year, despite difficult seasonal
and market conditions.
The Company continues to be a market leader in Bentonite Sulphur and
registered a growth of 14% over last year in this segment. The Company
successfully entered into institutional business in this segment. Drought
during Kharif in major states like AP, Karnataka and Maharashtra followed
by failure of Rabi in these states severely impacted the consumption.
However, by virtue of the intensive field level demand generation
activities, the Company was able to retain the leadership position in this
segment.
As regards WSF segment, the increase in price of bulk fertilizers like DAP,
NPK complexes and MOP has resulted in a mixed response from the market. In
the traditional WSF segment like grapes, the farmers increased the
proportion of WSF in their total fertiliser programme where as in new
segments like field crops the consumption dropped significantly. However
the market for WSF has shown positive signs of accelerated growth during
the last two years. The new WSF plant which was set up as a joint venture
with SQM, Chile has commenced its operations in March 2012. This enables
the Company to increase the market share in this segment with increased
volumes and new product offerings.
In order to improve soil health, the Company had started marketing compost.
The current market size is 10 lakh MTs with a year on year industry growth
of 20-30%. The Company has achieved a sales volume of 1.6 Lakh MTs
registering a growth of 33% over previous year. The Company has its
presence in both Municipal Solid Waste Compost and Pressmud segments. The
Company has launched many variants to these products including variants
like KASH, Phos Gold and N-Rich which were introduced during the year.
D. Retail SBU
The retail business in Agri inputs has consolidated well and the new
strategic business areas like organic products and seeds received good
response from the market. The Retail turnover has grown by 11% during the
year. However restructuring of the business portfolios in Retail was done
to strategically focus more on Agri input businesses and exit the life
style products business.
During the year, the Company has added 200 agri retail centres in AP and
Karnataka and with this expansion presently there are 641 stores in
operation. The business has shown improved performance over the previous
year and the Company is in the process of further expanding its retail
network in Karnataka and plans to enter into Maharashtra.
To study the Mana Gromor Centres linkage with farming community, an
independent study was commissioned through AC Neilson for estimating Brand
Equity index. This has shown `Mana Gromor` brand an equity Index of 5 on 10
point scale, while a score of 3 and above is considered as very strong
brand.
The branding efforts made by retail team has been recognized by CMO Asia
and world Brand Congress and given three best brand promotion awards to
Mana Gromor Retail during the Asia Retail Congress in Mumbai. These three
awards are in recognition of a) Most effective use of interactive rural
marketing, b) Best brand loyalty marketing campaign and c) Holistic
marketing for rural brand deployment.
4. Strengths and opportunities:
During last few years Company has taken number of steps to expand the
manufacturing capacities and infrastructure facilities, this being the key
strength of Coromandel. As part of capacity building, the company has
started construction of `C` train including infrastructural facilities like
raw material storage tanks, godowns, bagging and distribution facilities
which is expected to be commissioned in second half of 2012-13. The Company
has also implemented new effluent treatment plant at Visakhapatnam as part
of its larger objective of contributing to cleaner environment.
Strategic tie-ups with key raw material suppliers which are critical for
operations enable the Company in ensuring timely availability of raw
material for operating the plant at optimal capacity..
With R&D facility at Visakhapatnam, the Company is able to take up trials
on different grades of rock phosphate and optimize production of phosphoric
acid which is very critical for increasing the throughput of complex
fertilisers. Besides, the Company has carried out necessary modifications
in the current facilities to manufacture sulphur enhanced formulations like
DAP 4S and other complex grades based on Shell`s Thiogro technology as part
of its strategy to provide new grades of fertilisers.
On marketing front, one of the major strength is that the Company offers
almost complete range of agri needs of the farmers such as fertilisers,
crop protection products, speciality nutrients, organic manure and farm
inputs etc. Besides this, the Company has strong brand image supported by
strong dealer and retail network and dedicated technical and managerial
workforce.
In the crop protection business, the Company has made significant capital
investments augmenting plant capacity at its Ankaleshwar plant which are of
long term value, including its upgraded R & D facility which has enabled
the Company to bring out new technicals for introduction in the market.
The Company`s focus on specialties in the formulation business through
special marketing efforts has helped in scaling up the volumes of these
profitable products. With the acquisition of Sabero Organics Gujarat
Limited, the Company is able to get access to export markets in various
countries. This enables the Company to expand the product range and size of
the market.
Intensified field promotion activities with dedicated teams to address the
special needs of potential crop segments are among the key factors in
speciality nutrients business and the Company has developed strategies for
increased focus and targeted marketing.
The strong financials of the Company and its sustained healthy credit
rating/credit worthiness with the bankers and vendors has enabled the
Company to raise working capital finance at competitive interest rates.
5. Outlook
Demand for fertiliser, crop protection and crop nutrition are expected to
grow up as demand for food keeps increasing. With the increasing pace of
urbanization and population growth and shrinking of arable land, India has
to take various initiatives to increase the productivity and fulfill the
needs of the growing population. This calls for increased usage of
fertiliser and crop protection to improve yields. Increasing crop prices in
both domestic and international markets will improve farmer profitability
and will support the growth of fertilisers, crop protection and crop
nutrition. Indian fertiliser industry is growing at an average growth rate
of 5% to 6% p.a in volume terms.
Government has announced the reduction in Nutrient based subsidy rates
applicable for 2012-13 for all phosphatic and potassic fertilisers. Any
change in the international prices and currency depreciation may warrant
revision in farm gate prices and this may pose challenge to phosphatic and
potassic fertilisers with Urea continuing under retention price scheme. It
is expected that revision in Minimum support prices for crops to be
announced by the Government in the ensuing season will absorb the
fertiliser price increase to a greater extent.
Ensuring timely availability of key raw materials is necessary for
maximising the production and this continues to be a key focus area for the
Company. The Company is always looking out for new sources of raw materials
and global tie up to manage the situation.
The C train expansion project and other infrastructural facilities like
ammonia storage tank, phosphoric acid storage tank, bagging facilities and
railway siding at Kakinada plant is under way and is expected to be
commissioned by second half of 2012-13. This will enable the Company to
take the production capacities closer to 40 Lakh tonnes.
In the crop protection business, the Company will continue to focus on
specialities and will scale up sale of formulations based on captive
technicals including additional range being manufactured by Sabero
Organics. Increased reach through retail outlets augurs well for scaling up
branded formulation business and Company will be focussing on developing
strong brands for key molecules to stay ahead of competition. The Company
will also leverage on the global network of Sabero Organics to scale up
export of technicals and will continue to focus on registrations in the key
market segments.
The Speciality Nutrient business is all geared up to expand the business in
all segments. The new WSF plant at Kakinada, set up in joint venture with
SQM Chile was commissioned in 2011-12. This will enable the Company to
scale up the volumes of WSF and also to introduce new products in this
segment. The Company is focussed to improve the business in this segment by
forming crop based units with dedicated teams to address the special needs
of potential crop segments. The Company is in the process of introducing
new variants in organic business segment.
Rural Retail business is poised to further expand its reach to Karnataka
and Maharashtra. The Company has commenced its retail operations in
Karnataka by opening 75 stores in 201112 and is planning to expand further
in Karnataka and enter into Maharashtra in the later years. These retail
centres continues to provide all agri inputs along with advisory services
including farm mechanisation in rural areas.
6. Risk management
Overview
Risk Management at Coromandel is an integral part of its business model,
focusing to minimize adverse impact of risks on business objectives and
enable the Company to leverage market opportunities effectively. The core
values and ethics provide the platform for the Company`s risk management
practices.
Risk Management Framework
Risk Management Structure
The Risk Management structure at Coromandel spans across different levels
which form the various lines of defense in Risk Management. These levels
includes but not limited to Board of directors (Board) who has the
responsibility for oversight of Risk Management performed by Executive
Management and review of performance of the Risk Management Committee.
Coromandel has a Risk Management Committee, comprising of an independent
director who chairs the Committee meetings and the Managing Director. The
committee members along with the senior executives and Business Heads of
the Company carry out regular review of risk management practices.
Risk Categories
The risks associated with the business are broadly classified into six
major categories.
* Environmental Risk: due to adverse effects on living organisms and
environment by effluents, emissions, wastes etc., arising due to
organization`s activities.
* Economic Risk: due to downturn or adverse political situations which may
negatively impact on organizational objectives.
* Regulatory Risk: due to inadequate compliance to regulations,
contractual obligations or any other statutory violations leading to
litigations and loss of reputation.
* Operational Risk: inherent to business operations including
manufacturing and distribution operations, tangible or intangible property,
any other business activity disruptions.
* Financial Risk: to organization due to major fluctuations in currency
market, Rise in Interest Rates and possible non recovery of debts.
* HR Risk: due to attrition of any Key Managerial Person or disruption of
operations due to any other human resources issue.
The key risk management practices include those relating to risk
assessment, measurement, monitoring, reporting, mitigation actions and
integration with strategy and business planning.
The key risks associated with the Company`s business, its likely impact and
the mitigation mechanism evolved are discussed hereunder. The evaluation of
risk is based on management`s perception and the risks listed below are not
exhaustive.
Risk Risk Impact Mitigation Plan
Environmental/Economic/
Regulatory Risks:
Handling and - Impact on operations * Strict PSMS
storage of hazardous - Stoppage of production Implementation
materials incl., - Accidents resulting
Ammonia, Sulphuric from release of the * Strict adherence
acid etc. hazardous materials to maintenance/
and consequent claims inspection
schedules,
training and
emergency/disaster
management plans
* Public Liability
Insurance Policy
* ISO 14001 &
OHSAS 18001
Un-treated - Revocation of * Augmenting ETP
effluents factory license facilities
causing Strict adherence
pollution - Civil/criminal to PC standards
action
Non-compliance - Disruption of operations * Understanding /
with Legal/ awareness of regulations
Regulatory/ - Legal proceedings against and statutes
Tax Compliance the Company and its
-Including officials. * Engagement /
other advice by renowned
Countries lawyers and experts
* Monitoring
regulatory changes
Non compliance - Civil / criminal * Rigid quality
with FCO proceedings checks at Plants
Standards &
Specifications - Production stoppages * Test verification
of bags
- Disallowance of
subsidy claims * Reprocessing of
non-standard materials
* Better bags handling
procedures
Change in - Impact on turnover/ * New NBS Policy -
Government working capital greater clarity /
Subsidy certainty
Policies - Change in product mix
* New grades/
- Change in distribution customized
pattern Fertilisers
* Increased focus
on non-subsidy
Business
* Optimisation of
rail road
transportation.
* Liaison with
Government
Restriction - Impact on turnover/ * Development of
on sale/usage profitability newer and safer
of some crop technical;
protection - Negative publicity
products in * Extension of
India/abroad product life-cycle.
Operational
Risks:
Volatility in - Impact on revenues. * Close monitoring
the price of of international
key raw - Increased cost of price of raw
materials production materials.
- Increase in working * Tie-up for
capital requirement expanded product
range
- Volume shrinkage
Product - Impact on * Identification
life-cycle turnover/ of new off-patent
obsolescence profitability molecules
* R&D initiatives
Introduction - Impact on profitability * Identification of
of pest/ emerging pests and
resistant BT - Financial loss suitable molecules
crops or
change in * Introduction of
crop pattern new products
Loss due to * Close monitoring
shrinkage of inventory, regular
at Rural inspection / audit
Retail
Centres * Daily MIS
Financial
Risks:
Currency - Under recovery * Close monitoring
and exchange of Subsidy of exchange trend
fluctuation
risk - Impact on * Forward covers
profitability at appropriate
time and level
Interest rate - Increase in cost * Healthy debt-equity
risk of borrowing and interest cover ratio
- Impact on profitability * Sustain good credit
rating
Credit risk - Impact on working capital * Review of credit
evaluation and limits
- Dues becoming bad
* Close monitoring
- Loss of interest receivables
Liquidity risk - Impact on working capital * Close monitoring of
- Delay in subsidy dues
subsidy - Increase in cost of
settlement borrowing * Increased working
capital facilities
* Securitization of
subsidy dues
Legal & Human
Resource:
Contractual - Disruption of operations * Clearance from legal
Liability Risk cell
- Impact on turnover &
profitability * Independent experts`
services for important
contracts
Attrition of - Disruption of operations * Compensation revision
skilled/ inline with market
trained - Knowledge dissipation
manpower * Succession Planning
* Career planning and
training
In addition, IT related risks can result in loss of important data etc.,
leading to disruption in operations. These are addressed through adequate
back-up mechanism, including Disaster Recovery Centre, authorization
verification, regular training programs, regular purchase of licenses in
line with the business requirement and other preventive measures.
The assets of the Company, including its plant and machinery, as well work
in process, inventory and Finished stocks are adequately insured against
loss or destruction by fire and allied perils.
7. Internal controls
Coromandel has adequate internal controls consistent with the nature of
business and size of the operations, to effectively provide for safety of
its assets, reliability of financial transactions with adequate checks and
balances, adherence to applicable statutes, accounting policies, approval
procedures and to ensure optimum use of available resourses. These systems
are regularly reviewed and improved.
Coromandel has a comprehensive budgetary control system to monitor revenue
and expenditure against approved budget on an ongoing basis.
The Company has its own corporate internal audit function to monitor &
assess the adequacy and effectiveness of the Internal Controls and System
across all key processes covering various locations. Deviations are
reviewed periodically and due compliance ensured. Summary of key audit
observations along with recommendations and its implementation are reviewed
by the Audit Committee and the concerns, if any, are reported to the Board.
8. Finance
The Company`s overall financial performance for the year 2011-12 has been
good. The total revenue grew by 29% in 2011-12 as compared to the previous
year. The Company`s PBT before prior period subsidy income and exceptional
items has moved up from Rs. 762 crore to Rs. 959 crore, registering a
growth of 26%. The PBT after considering prior period subsidy income and
exceptional items is Rs. 970 crore as compared to previous year Rs. 988
crore.
The Company generated Rs. 1108 crore (2011: Rs. 1024 crore) of cash
surplus from its operations, before changes in working capital and after
adjusting for the changes in working capital the net cash generated from
operations is Rs. 110 crore (2011: Rs. 839 crore). The Company`s net
worth increased during the year and was at Rs. 2371 crore as on 31 March
2012 compared to Rs. 1904 crore as on 31 March 2011.
During the year, the Company incurred Rs. 186 crore towards capital
expenditure including Rs. 109 crore on "C" train and expansion facilities
at Kakinada.
During the year, the Company along with its wholly owned subsidiary has
acquired 74.57% equity stake in Sabero Organics Gujarat Limited involving
cash outgo of Rs. 403.10 crore. Further, the Company has paid a non-
compete fees of Rs. 35.53 crore to the erstwhile Indian promoters of
Sabero Organics Gujarat Limited which has been charged off to the Statement
of Profit and Loss as an exceptional item.
Pursuant to the notification of the Government of India to buy back the
Fertiliser Companies` Government of India Special Bonds in two equal
tranches during 2010-11 and 2011-12 through Reserve Bank of India and to
share at least 50% of loss on such buy back of fertiliser bonds, the
Company has sold the special bonds with an aggregate face value of Rs.
997.6 crore 498.8 crore each in the years 2011-12 & 2010-11) and incurred a
loss of Rs. 52.75 crore in 2011-12 (2010-11: Rs. 37.18 crore), net of
compensation received from GOI. Consequently, the provision towards mark to
market loss made earlier on such bonds amounting to Rs. 68.89 crore (2010-
11: Rs. 68.89 crore) has been reversed.
During the year, the members of the Company approved the transfer/assigning
of the lease rights on the land located at Navi Mumbai to the prospective
buyers.
During the year, the Board approved, subject to the approval of
shareholders and regulatory authorities, issue of bonus debentures. The
Company has obtained approvals of the Scheme from National Stock Exchange
and Bombay Stock Exchange for issue of one 9% Unsecured Redeemable Non-
convertible Fully Paid Bonus Debenture of Rs. 15 each for every equity
share from the General Reserve, and has filed the Scheme with the Hon`ble
High Court of Andhra Pradesh.
The Company has been resorting to prudent mix of rupee and foreign currency
borrowings to finance its working capital requirements and tied up long
term ECB loans to fund capital projects. The Company`s long term debt:
equity ratio continues to remain very healthy and the cash and bank balance
as at the year end includes Rs. 907 crore of temporary surplus retained in
short term bank deposits/current accounts. The Company`s long term credit
rating by `CRISIL` was reaffirmed at `AA+ (stable)` and short term debt
rating at P1+.
9. Value creation and financial analysis
Increase in net worth
The net worth has increased 3 times in the last five years.
10. Human resources /Industrial relations
During the year the industrial relations across all the plants continued to
remain cordial. Settlements at Visakhapatnam, Ennore and Ranipet for
permanent workmen were concluded under section 18(1) of The Industrial
Disputes Act, 1947 for a period of 4 years.
Leadership Development Process gained momentum during the year with a
number of leadership initiatives for various levels. This included
Development Centres for managers, `Agnya` - Coromandel Leadership
Development program spread over 9 months for certain senior managers,
Building Leadership Skills program with focus on Retail and Manufacturing
covering executives, Leadership program for Area Sales Managers of
Fertiliser and Crop Protection businesses.
Competency Assessments were completed for functional and behavioural
competencies for all executives to track improvements in proficiency
levels.
With a view to strengthen the Training Quality Management System in the
organisation, Coromandel applied for the ISO 10015 certification, for which
an internal pre-audit was completed by QAI.
Coromandel continued its focus on building employee engagement. Gallup
employee engagement action planning was completed for certain managers and
their teams. Employee engagement continued to be a focus area for the
Company and the employee engagement survey conducted by Gallup continued to
show improvement over previous surveys.
Coromandel won several awards in the area of talent management.
The Company continued its focus on improving its internal processes to meet
multiple, at times conflicting requirements of various stakeholders. The
key anchor for this is institutionalising Business Excellence Process in
the company through its TQM initiatives in its quest to improve the quality
of its products, processes and systems. The Company won many awards from
CII, Quality Circle Forum, Indian National Suggestion Scheme Association
(INSSAN).
The emphasis on innovation continued through the venture funding process.
To date 70 i-leads (Innovation Leaders) have been developed who are
spearheading the innovation effort within the organisation. Coromandel was
given the Best Practice Award for its Innovation practices by the National
HRD Network.
The Company continued its effort on improving communication through various
means. The in-house magazine `The Voice` won many National and
International awards.
Coromandel`s corporate film won the National Award, 1st Prize, Corporate
Film by Public Relations Society of India, New Delhi.
ANNEXURE TO DIRECTORS` REPORT
DIRECTORS` RESPONSIBILITY STATEMENT
The Board of Directors of Coromandel International Limited confirm that in
the preparation of the Statement of Profit & Loss for the year ended March
31, 2012 and the Balance Sheet as at that date ("financial statements") :
* the applicable accounting standards have been followed
* appropriate accounting policies have been selected and applied
consistently and judgments and estimates that are reasonable and prudent
have been made so as to give a true and fair view of the state of affairs
of the Company as at the end of the financial year and of the profit of the
Company for that period.
* proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities. To ensure this,
the Company has established internal control systems, consistent with its
size and nature of operations, subject to the inherent limitations that
should be recognised in weighing the assurance provided by any such system
of internal controls. These systems are reviewed and updated on an ongoing
basis. Periodic internal audits are conducted to provide reasonable
assurance of compliance with these systems. The Audit Committee meets at
regular intervals to review the internal audit function.
* Proper systems are in place to ensure compliance of all laws applicable
to the Company.
* The financial statements have been prepared on a going concern basis.
On behalf of the Board
Place : Hyderabad A Vellayan
Date : April 23, 2012 Chairman
Information under Section 217(1)(e) of The Companies Act, 1956 read with
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988 and forming part of Directors` Report.
A. CONSERVATION OF ENERGY
Various Energy conservation Schemes formulated by Operational Improvement
Teams have yielded considerable energy savings during the year 2011-12.
At Visakhapatnam Plant, the following were implemented:
* Installed capacitor banks for Power factor improvement from 0.97 to near
unity.
* Modernised static excitation system for 5 MW turbo Generator for
improving operating performance of 5MW turbo power generator.
* Small Group Activity teams have been constituted to constantly look at
the energy conservation and other improvement schemes.
At Ankleshwar Plant, MEE 1 & MEE 2 cooling water supply were inter-
connected to run with 30 KW pump instead of 60 KW pump.
B. TECHNOLOGY ABSORPTION
Facilities for production of Sulphur Enhanced Fertilisers with Shell
Thiogro Technology were installed in Complex Train A at Visakhapatnam plant
and commissioned successfully.
At Ankleshwar Plant -
* Acephate technology developed in existing Malathion Plant.
* Modern Effluent Treatment Plant commissioned for enhanced environmental
compliance.
C. RESEARCH AND DEVELOPMENT
At Visakhapatnam Plant -
* Improved sulphur bentonite product developed which has shown significant
agronomic benefit during farmer trials.
* Two new rocks and several rock blends tested in the pilot plant for
phosphoric acid production.
At Ankleshwar Plant -
* Developed in-house process technology for production of Buprofezin
Technical and Cyproconazole Technical and later produced the same on
commercial scale.
* Worked on developing process technology for some new molecules for
production from their intermediates.
During the year the company incurred a sum of Rs. 468 lakhs towards
revenue expenditure on account of Research and Development at the Approved
In House R&D Units at Visakhapatnam and Ankleshwar. The Company also
incurred a sum of Rs. 38 lakhs towards Capital expenditure in respect of
Approved In-house R&D units at Vishakapatnam and Ankleshwar.
R&D expenses incurred at the In-House Approved Centres Rs. in Lakhs
Nature of expenses 2011-12 2010-11
Capital expenditure 38 48
Revenue expenditure 468 336
D. FOREIGN EXCHANGE EARNINGS AND OUT GO:
Total foreign exchange used and earned:
Rs. in Lakhs
2011-12 2010-11
Used 6,90,373 5,03,046
Earned 11,484 7,290
FORM - A
Current Year Previous Year
2011-12 2010-11
A. Power and Fuel Consumption
1. Electricity
a) Purchased
Units (Lakh Units) 1,274.22 1,286.28
Amount (Rs. Lakhs) 5,577.11 5,020.76
Rate / Unit (Rs./ kwh) 4.38 3.90
b) Own generation Through DG Sets
Units (Lakh Units) 19.22 7.83
Units / litre of HSD 3.60 2.85
Rate / Unit (Rs./ kwh) 16.68 14.07
Through TG Set
Units (Lakh Units) 436.94 428.43
Units / litre LSHS
Rate / Unit (Rs./ kwh) 0.18 0.15
2. Coal Not used Not used
3. a) Fuel: Furrnace oil / LSHS
Quantity (K. Litres) 1,627.78 1,612.24
Total cost (Rs.Lakhs) 783.12 538.09
Rate / Unit (Rs./ K. Litres) 48,110 33,375
b) Compressed Natural Gas
Quantity SM3 in Lakhs 65.56 83.68
Total amount (Rs.In Lakhs) 1,210.98 1,154.99
Average Rate per 1000 SM3 (Rs.) 18,471 13,802
B. Consumption per MT of Fertilisers Produced
Electricity (KWH) 67.51 61.97
Fuel: Furnace Oil / LSHS (K.Litres) 0.0012 0.0012
Compressed Natural Gas (SM3) 2.95 3.51
Disclosure pursuant to Clause 12 of SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines 1999
Nature of Disclosure:
a. Options granted:
2,40,400 were granted during the year. The total options granted is
75,72,000. Each Option gives the grantee a right to subscribe to one equity
share of Rs. 1/- each of the company
b. The pricing formula:
The Options carry a right to subscribe to equity shares at the closing
price on the Stock Exchange in which there was highest trading volume,
prior to the date of grant of the Options.
c. Options vested 42,61,456
d. Options exercised 27,75,646
e. The total no of shares arising as a
result of exercise of option 27,75,646
f. Options lapsed/surrendered 14,94,574
g. Variation of terms of Option Vesting schedule has been
varied in certain cases
h. Money realised by exercise of Options Rs. 3,65,88,534
i. Total no of Options in force 33,01,780
j. (i) Details of Options granted to Senior Management Personnel:
Name and Designation No of Options granted
Mr Kapil Mehan
Managing Director 9,46,000
Dr G Ravi Prasad
President- Marketing Fertilisers & SND 2,70,400
Mr P Gopalakrishna
Sr Vice President-Retail 2,70,400
Mr G Veerabhadram
President-Pesticides SBU 2,70,400
Mr Arun Leslie George
Sr Vice President & Head of HR 2,70,400
Mr S Govindarajan
Sr Vice President & Head of Manufacturing 2,70,400
Mr S Sankarasubramanian
Chief Financial Officer 1,37,200
(ii) Any other employee who received a grant in any one year of Option
amounting to 5% or more of Options granted during the year
Mr Kapil Mehan 9,46,000
Dr G Ravi Prasad 2,70,400
Mr P Gopalakrishna 2,70,400
Mr Arun Leslie George 2,70,400
Mr S Govindarajan 2,70,400
Mr G Veerabhadram 2,70,400
Ms Hima Srinivas 1,20,000
Mr C Sitaram 1,44,000
Mr K Sankaranarayanamoorthy 1,44,000
Mr Manoj K Agarwal 91,400
Mr Parvez Shaikh 80,000
Mr R Vaidyanathan 80,000
Mr Suri V 96,000
Mr K Muruganandam 96,400
Mr M Ravindra Rao 72,000
Mr M Hari Shankar 72,000
(iii) Employees who were granted Options, None during any one year, equal
to or exceeding 1% of the issued capital of the Company at the time of
grant.
None.
k. Diluted Earnings Per Share (EPS) : Rs.24.43 per share
pursuant to issue of shares on exercise
of Option calculated in accordance with
Accounting Standard AS-20.
l.(i) Method of calculation of employee compensation cost:
The employee compensation cost has been calculated using the intrinsic
value method of accounting to account for Options issued under the ESOP
Scheme 2007. The stock based compensation cost as per the intrinsic value
method for the financial year 2011-12 is Nil.
(ii) Difference between the compensation cost using the intrinsic value of
the Stock Options (which is the method of accounting used by the Company)
and the compensation cost that would have been recognized in the accounts
if the fair value of Options had been used as the method of accounting:
Rs.2289 lakhs
(iii) Impact of the difference mentioned in (ii) above on the profits of
the Company
Net Income Rs. in lakhs
As reported 69327
Less: fair value compensation cost 2289
(Black Scholes model) 67038
(iv) Impact of the difference mentioned in (ii) above on the EPS of the
Company:
Basic (Rs.) Diluted (Rs.)
As reported 24.57 24.43
As Adjusted 23.76 23.62
m.(i) Weighted Average exercise price of : Rs.49.76
per equity share Options
(ii) Weighted Average fair value of : Rs.50.89
per equity share Options
n.(i) Method used to estimate the fair : Black Scholes Model
value of Options
(ii) Significant assumptions used
(Weighted Average information
relating to all grants):
(a) Risk-free interest rate : 8.0%
(b) Expected life of the Option : 4 years
(c) Expected volatility : 0.48 - 0.50
(d) Expected dividend yields : 400%
(e) Price of the underlying share in market at the time of option grant:
Date of grant Market Price (Rs.)
31.08.2007 44.58
22.01.2008 56.08
22.04.2008 67.88
22.07.2008 59.95
22.10.2008 62.75
18.03.2009 45.10
19.10.2010 317.30
12.01.2011 287.50
21.07.2011 334.35
18.10.2011 315.00
On behalf of the Board
Place : Hyderabad A Vellayan
Date : April 23, 2012 Chairmanadvertisements
Sensex
| Company | Price | Gain (%) |
|---|---|---|
| Bharti Airtel | 299.70 | 2.83 |
| Hindalco Inds. | 104.20 | 2.66 |
| Sterlite Inds. | 85.25 | 2.65 |
| Jindal Steel | 245.80 | 2.52 |
| Tata Steel | 290.55 | 2.05 |
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