* includes Revaluation Reserve of Rs. 90.57 Crores and Rs. 92.65
Crores respectively.
DIVIDEND
The Board of Directors recommended a dividend of Re.0.70 per equity
share of Rs.10/- each.
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Performance
2008-09 was a year of growth for your Company, with sales and other
income aggregating to Rs.2484.73 Crores, an increase of 49% over
that of the previous year and the EBITDA for the year was Rs.132.54
Crores, an increase of 28% over that of the previous year.
Production Urea
Your Company produced the full re-assessed capacity of 3,79,500
MTs of Urea for the year.
Di-Ammonium Phosphate (DAP) & Complex Fertilizers
The production of DAP and NP (20:20:0:13) during the year was
marginally lower at 2,33,343 MTs compared to 2,48,234 MTs in the
previous year. The shortfall was on account of DAP plant shutdown due
to shortage of phosphoric acid in the international market.
Ammonium Bi-Carbonate (ABC)
Your Company achieved a production of 15,121 MTs of ABC, the
highest ever, compared to 13,502 MTs during the previous year. This
was possible due to the installation of an additional bi-carbonation tower
to enable higher utilization of the capacity of centrifuge equipment.
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Sales
During the year, your Company sold 3,86,836 MTs of Urea compared to
3,76,093 MTs in the previous year. The sale of DAP and NP [20:20:0:13]
was at 2,35,566 MTs compared to 2,50,222 MTs in the previous year.
The sale of traded products, registered good growth, especially 64,126
MTs of imported DAP as compared to none in the previous year.
Integrated Nutrient Management
Agricultural productivity and yield in India have been declining, causing
concern for the food security of the country. Indiscriminate/ imbalanced
use of macronutrients and inadequate use of micronutrients as per
crop requirements are amongst the main reasons. In order to develop
awareness about the advantages of balanced use of fertilizers, your
Company embarked on a unique Integrated Nutrient Management
(INM) Initiative during the year 2004-2005, achieving a modest sale of
Rs.36 Lakhs. As a result of the sustained focus of your Company in this
area over the last few years, the revenue from the INM business for the
year under review stood at Rs.54 Crores, an increase of 100 % over
that of the previous year at Rs.27 Crores.
The INM unit of your Company at Hassan carried out research and
produced soil and crop specific grades of fertilizers and soil health
enhancers, in addition to providing extension support to farmers and
dealers. Farmers using these recommended soil and crop specific
products reported better crop quality and significant increase in yields.
Your Company will continue its efforts to ensure that awareness of
balanced use of fertilizers further increases amongst the farming
community.
Working Capital
The recurrent problem of inadequate budgetary allocation towards
fertilizer subsidy and the resultant delay in settlement of subsidy
claims severely strained our cash flows during the year. Further, the
unprecedented increase in prices of all major raw materials and finished
products during first half of the year resulted in higher subsidy dues from
the Government of India and pushed up the working capital requirements
of the Company. This led to increased borrowings, resulting in additional
interest burden and adverse impact on profitability.
Safety, Environment and Pollution Control
Your Company had obtained Occupational Health and Safety
Management System certification OHSAS 18001 as part of its
commitment to continuous improvement. The Certifying agency, DNV
re-certified the Company’s OHSAS 18001 system conforming to the
latest version. Extensive training programs including rescue operations,
usage of personal protective equipment, safe two wheeler riding skills
and behaviour based safety management were organized for permanent
and contract employees and regular mock drills were conducted.
A Water curtain was installed on the compound walls of Import Ammonia
Terminal (IAT) to create a 3 meter high water shield in an unlikely event
of ammonia release from IAT. In recognition of several such safety
efforts, your company received the “Second Best Safe Industry” award
in the large sector instituted by the Directorate of Factories and Boilers,
Government of Karnataka.
As in the past, periodic medical examination was conducted for all the
employees that included general physical examination, laboratory tests
for blood sugar and Lipid profile, audiometry and vision tests. Medical
examination of the canteen workers including their personal hygiene
was conducted twice in the year.
As an ISO 14001 certified company, many environmental management
programmes were implemented during the year. Your company
maintained zero liquid effluent discharge by recycling the entire quantity
of treated effluent for process use and irrigation of the green belt within
the factory premises.
Social Responsibility
Your company is very conscious about its corporate responsibility and
undertakes several initiatives for the benefit of the community within
which it operates. Some such initiatives during the year are listed
below:
- A water body adjoining the Company’s premises filled with silt
was completely transformed and developed into a lake with
about 20,000 CuM of water. This project, which took 5 months to
complete at a cost of Rs.20 Lakhs, demonstrates the commitment
of the Company to bring harmony between industry and nature.
NITK, Suratkal were the project consultants.
- The Government of UK granted aid for the overall development
of villages in Karnataka. For the purpose, a trust named “United
Kingdom – Mangalore Chemicals and Fertilizers – Tungabhadra
Gramin Bank Gram Vikas Project Trust” was established in the
year 1986 with a corpus of Rs.40 Lakhs with a representative
of the Company as its permanent Trustee & Chairman. During
the year, the trust contributed more than Rs.31 Lakhs to assist
various village developmental programs and rural education. The
assistance was intended for the construction of Raitha Bhavana,
school compound and classrooms, and provision of solar lighting,
school furniture, computers, drinking water facilities and sports
items to rural schools.
- For the benefit of the farming community and their families in times
of distress, the Company has taken an accident insurance for
farmers in its operating territory under a Group Accident Insurance
Scheme. The scheme covers over 1.65 Lakh farmers and provides
insurance of Rs.25,000 in cases of death, and permanent
disability.
- Some of the other initiatives of the Company included, adoption
of ‘Sambar Deer’ at the Pilikula Biological Park, public awareness
programs in the neighbourhood for educating the residents in
environmental and safety aspects, contribution towards renovation
of St. Anthony’s Higher Primary School in Thokur Village, organizing
cardiac and eye camps for the economically backward in the
neighbourhood and sponsorship of rural sports and community
development programs through NGO’s.
During the year under review, the Government of India issued Fertilizer
Bonds worth Rs.402.99 crores in lieu of cash towards the subsidy
dues. In order to meet its working capital requirements, the Company
was forced to sell these bonds in the market at high discounts, incurring
heavy losses. The loss during the year on this account is Rs.35.63
Crores (sale of Bonds Rs. 16.23 Crores and the diminution in value of
bonds on mark to market valuation Rs. 19.40 Crores).
Fertilizer Policy
Stage III of the New Pricing Scheme (NPS) for Urea announced by
the Government of India in March 2007 expires by 31-3-2010. The
policy specifies that all Naphtha/Furnace Oil/LSHS based units should
convert to gas by 31-3-2010. Despite readiness of the Company for
conversion, non-availability of gas within this deadline is a concern. As
per current indications, gas is expected to be available only by end
2012. Representations have been made by your Company as well as
the Industry Association requesting additional time for conversion to
gas.
The policy on Phosphatic Fertilizers was announced based on the
recommendation of the Tariff Commission, effective 1.4.2008. The
concession for the indigenous DAP was benchmarked with import
parity price of DAP and fixed at the same level of imported DAP. A
nutrient based pricing policy for complex fertilizers was introduced
with effect from 18.6.2008. This made the operations of granulated
fertilizers un-remunerative. Hence, production / sales of Granulated
Fertilizers were curtailed. In view of Industry representations, this policy
is under review.
Subsidiary Company
Besides being one of the world’s largest producers of food grains, India
ranks second in the world in the production of fruits and vegetables.
However, lack of adequate processing, preservation and storage
facilities and inadequate supply chain management lead to high
post-harvest losses on account of spoilage, wastages and quality
deficiencies. On the other hand, increased urbanization and improved
standards of living have led to increase in demand for food and food
products.
Recognizing the need to improve efficiencies and to address the issue of
inadequate post-harvest processing, storage, packing and distribution,
your Company’s subsidiary MCF International Limited embarked on
an innovative AGRI project to address some of these problems by
leveraging its linkages with farmers.
The AGRI Project is aimed at providing comprehensive services to the
farmers that include farm advisory, soil/water management and nutrition
management aimed at improving the yield, quality and consequently
the returns to the farmer. The Company sources the staples and
vegetables from the farmers at market prices and supplies these to the
modern retailers and other bulk buyers.
Under the AGRI project, after evaluating the acceptance of farmers,
pilot projects have been started at Hassan and Chickamagalur
and state-of-the-art processing and packaging facilities have been
established at these centres as well as in Bangalore to process and
pack vegetables and staples. The Company has started test marketing
of staples in select markets under the brand ‘Navodaya’ and sale of
vegetables at Bangalore and Mangalore to retail chains, hotels and
industrial canteens.
Your Company has received approval from the Ministry of Corporate
Affaris, Government of India, granting exemption from attaching the
audited accouts of the subsidiary Company to the annual accounts of
your Company for the year ended March 31, 2009. The annual accounts
of the subsidiary Company and the related detailed information will be
made available to the holding and subsidiary Company’s investors
seeking such information at any point of time. The annual accounts
of the subsidiary Company is kept for inspection by any investor at
the Registered Office of the subsidiary Company as well as your
Company.
Conservation of Energy, Technology Absorption, Foreign Exchange,
etc.
A report in respect of conservation of energy, technology absorption,
foreign exchange earnings and outgo as required under Section
217(1)(e) read with the Companies (Disclosure of Particulars in
the Report of the Board of Directors) Rules, 1988, is set out as
Annexure-1 to this report.
Particulars of Employees
Information in accordance with Sub-section (2A) of Section 217 of
the Companies Act, 1956, read with the Companies (Particulars of
Employees) Rules, 1975, is set out in Annexure-2 to this report.
Corporate Governance
A detailed report on Corporate Governance is set out as
Annexure-3 to this report.
Management Discussion and Analysis
The Management Discussion and Analysis report is annexed to
this report as Annexure-4.
Director's Responsibility
Pursuant to Section 217 (2AA) of the Companies Act, 1956, your
Directors confirm that:
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The applicable accounting standards have been followed in the
preparation of the annual accounts and there are no material
departures.
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The accounting policies are in line with those generally accepted and
have consistently been followed and the judgements and estimates
made are reasonable and prudent so as to give a true and fair view
of the state of affairs of the Company at the end of the financial year
and of the Profit for the year under review.
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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.
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The annual accounts have been prepared on a going concern basis.
Board of Directors
In accordance with the provisions of the Companies Act, 1956 and
the Company’s Articles of Association, Mr. N. Sunder Rajan and
Mr. Shrikant G. Ruparel retire by rotation at the ensuing Annual General
Meeting and, being eligible, offer themselves for re-appointment.
Auditors
M/s. K.P. Rao & Company, Chartered Accountants, retire as Statutory
Auditors of the Company at the conclusion of the ensuing forty second
annual general meeting and being eligible, offer themselves for reappointment.
Cost Auditors
Mr. P. R. Tantri, Cost Auditor has submitted the report for the financial
year 2008 – 2009 which has been considered by your Directors.
Acknowledgement
Your Directors wish to place on record their appreciation for the excellent
performance of the employees of the Company during the year.
Your Directors also express their gratitude to the Bankers, Government
Agencies, Customers, Business Associates and Shareholders for their
co-operation and look forward to their continued support in the future.
On behalf of the
Board of Directors
Bangalore
July 29, 2009 |
Dr. Vijay
Mallya
Chairman |
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