DIRECTORS' REPORT TO THE MEMBERS, 1. Your Directors place before you the Sixth Annual Report of the Company together with Statement of Accounts for the accounting year ended 31st March, 2015. Review of Operations : The revenue from operations (Standalone) for the year ended 31st March, 2015 was Rs. 5,52,374.81 lacs as compared to Rs.5,18,858.72 lacs for the previous year ending 31st March, 2014. The Profit before tax for the year ended 31st March, 2015 was Rs. 2,072.62 lacs as compared to Rs. 2,069.74 lacs for the year ending 31st March, 2014. The Profit after Tax stood at Rs. 1,236.60 lacs for the year ending 31st March, 2015 as compared to Rs. 2,614.04 lacs for the previous year. The revenue from operations (Consolidated ) for the year ended 31st March, 2015 was Rs. 7,66,496.80 lacs as compared to Rs. 7,36,479.74 lacs for the previous year. The Consolidated profit/(loss) before tax for the year ended 31st March, 2015 was Rs. 2,311.17 lacs as compared to a loss of Rs. 6,600.29 lacs for the year ending 31st March, 2014. The profit/(loss) after Tax stood at Rs. 1,648.97 lacs for the year ending 31st March, 2015 as compared to a loss of Rs. 5,655.86 lacs for the previous year. There were no material changes and commitments affecting the financial position of the Company from the end of the financial year till the date of the approval of the Directors' Report. 3. Dividend: The Directors recommend a dividend of Rs. 2.00/- per equity share (Rs. 3.00 /- per equity share in the previous year). 4. Capital Projects: The Company is evaluating the integrated revamp of the Ammonia-Urea-Steam & Power Generation facilities. Based on the techno-commercial evaluation/comparison of the two options of revamp by the combination of M/s. KBR, USA (Ammonia) and M/s. TEC, Japan (Urea) vis-a-vis M/s. Casale, Switzerland (Ammonia & Urea), the path forward will be drawn up. The identified key deliverables of the integrated revamp are increase in production capacity, reduction in specific energy consumption and improvement of the reliability of the equipment and machinery. The Company is also in the process of revamping the NPK Plant 'A' capacity to 1350 MTPD of Di-Ammonium Phosphate (DAP) / 1,600 MTPD of NPK fertilizers. The Basic Engineering Design has been carried out by M/s. INCRO S.A., Spain. The detailed Engineering by M/s. Uhde India Pvt. Ltd., has been completed. The mechanical completion of the project is expected to be accomplished by September, 2015. This will be followed by commissioning activities. The Company is in the process of retrofitting the NPK Pant 'B'. M/s Jacobs, USA, has completed the Basic Engineering. The detailed Engineering by M/s. Jacobs India is expected to be completed by the end of December, 2015. The target date for completion of this project is by February, 2016. The detailed engineering for the mechanised system for Muriate of Potash (MOP) handling within the plant premises has been completed. The site work commenced in December, 2014 and expected to be completed by the end of September, 2015. As a matter of risk mitigation, the company has decided to replace the pressurized storage of Liquid Ammonia in Horton Spheres with the Atmospheric Ammonia Storage Tank (AAST). Techno-commercial negotiations for engineering are in progress while obtaining of various clearances is in process. It is expected, the Tank will be ready for commissioning in 15 months time. The detailed internal designing by M/s. Jacobs, India for the repairs of Phosphoric Acid Tanks (One number) at Vasco Installation at Mormugao Port Trust (MPT) is under process. 5. Conservation of Energy/Technology Absorption/Foreign Exchange Earnings and Outgo: The Company has not undertaken any schemes to conserve energy/improve energy efficiency in the last financial year. No new technology was absorbed during the year 2014 -15. By producing fertilisers, the company has contributed to savings of valuable foreign exchange to the National exchequer. The Foreign exchange earnings and outgo is given in Note No. 30, 31, 32 & 33 to the financial statements. 6. Environment and Safety : The Company's Fertilizer Plant continues to be a 'Zero Effluent Discharge Plant' since 1990 and the man-made green belt around the Complex continues to flourish and attract a variety of birds and animals. As reported earlier, the Company's policy is to continuously improve the surrounding environment; it has installed and commissioned a continuous online Ambient Air Quality Monitoring Station and an online continuous Stack Monitoring System for the Utilities Boiler Stack. The Company has commissioned an online continuous Stack Monitoring System for the Reformer stack of Ammonia plant. Your Company continues its safety initiatives across all functions and is also planning to go for the certification of OHSAS 18001:2007 and ISO 14001:2004. Your Company continues its community awareness programmes on the 'Do's and Don'ts' in the event of any abnormal plant operations. School children, employees and port users of Mormugao Port Trust and the general public are actively engaged in such programmes on a regular basis. The Company also conducts campaigns through FM Radio and also participates in the mock fire and safety drills conducted by the South Goa District Collectorate, wherein local bodies such as Panchayats, Police and Fire Services are present as part of the District Disaster Management Plan. 7. Industrial Relations: The Industrial relations with Company employees continue to be harmonious. The Company has signed a settlement with Zuari Agro Chemicals Employee's Union on 11th December, 2014, for seven years (i.e. from 1st January, 2011 to 31st December, 2017). The industrial relations with contract workmen is on a firm footing. The Company is working towards rationalisation in manpower and improvement in productivity. 8. Extract of the Annual Return: The extract of the Annual Return as on 31st March, 2015 in Form No. MGT-9 is enclosed as Annexure 'E' to the Directors' Report. 9. Related Party Transactions: All related party transactions that were entered into during the financial year were on an arm's length basis. All related party transactions are approved by the Audit Committee and the Board of Directors. The details of Material Related Party transactions as per Form AOC-2 is enclosed as Annexure 'G' to the Directors' Report. There were no other materially significant related party transactions made by the Company with the Promoters, Directors, Key Managerial Personnel which may have a potential conflict with the interest of the Company at large. 10. Particulars of Loans, Guarantees or Investments: The details of Loans, Corporate Guarantees and Investments made during the year under the provisions of Section 186 of the Companies Act, 2013 are given in Note No. 51 of the financial statements. 11. Nomination and Remuneration Policy and Disclosures on Remuneration: The Board has, on the recommendation of the Nomination and Remuneration Committee framed a policy for selection, appointment and remuneration of Directors, Key Managerial Personnel and employees in the Senior Management. More details of the same is given in the Report on Corporate Governance. The information required pursuant to Section 197 of the Companies Act, 2013 ('Act') read with Rule 5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request by the shareholders. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company in this regard. The disclosures under Section 197 of the Act read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 'I' to this Report. 12. Risk Management : The objectives of the Risk Management Committee is to monitor and review the risk management plan for the Company including identification therein of elements of risks if any, which may threaten the existence of the Company and such other functions. The Board of Directors on the recommendation of the Risk Management Committee has approved the Risk Management Policy for the Company in accordance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The Risk Management Policy document has in its scope, the establishment of a process for risk assessment, identification of risks both internal and external and a detailed process for evaluation and treatment of risks. The risks identified and the steps taken to mitigate risks shall be reviewed by the Risk Management Committee and shall be placed before the Board from time to time. 13. Vigil Mechanism/Whistle Blower Policy : The Company in accordance with the provisions of Section 177(9) of the Companies Act, 2013 and Clause 49 of the Listing Agreement has established a vigil mechanism for directors and employees to report genuine concerns to the management viz. instances of unethical behavior, actual or suspected, fraud or violation of the Company's Code of Conduct. The Company has also formulated a Whistle Blower Policy ("Policy") which provides for adequate safeguard against victimisation of persons and has a provision for direct access to the Chairperson of the Audit Committee. The Company has not denied any person from having access to the Chairperson of the Audit Committee. 14. Corporate Social Responsibility ('CSR') : The Board of Directors has constituted a CSR Committee and also approved the CSR Policy. CSR Committee comprises two Independent Directors and a Non-Executive Director. Terms of Reference: The CSR Committee formulates and recommends to the Board a CSR Policy which shall indicate the activities to be undertaken by the Company, as specified in Schedule VII of the Companies Act, 2013. The Committee also recommends the amount of expenditure to be incurred on the CSR activities and monitors the CSR Policy of the Company from time to time. 15. Directors and Key Managerial Personnel: All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Mr. N. Suresh Krishnan retires by rotation at the forthcoming Annual General Meeting and is eligible for re-appointment. Mr. Arun Duggal resigned as Director of the Company w.e.f. 4th November, 2014. The Board places on record its appreciation and invaluable contribution by Mr. Duggal to the Company during his tenure. Mr. Akshay Poddar, resigned as Executive Director of the Company w.e.f. 20th December, 2014 but continues to be a Non-Executive Director on the Board of Directors of the Company. Ms. Kiran Dhingra has been appointed as Additional Independent Director/Woman Director w.e.f. 10th March, 2015. Mr. N. Suresh Krishnan ceased to be the Managing Director and Key Managerial Personnel of the Company w.e.f. 31st March, 2015 but continues as a Non-Executive Director on the Board of Directors of the Company. Mr. Kapil Mehan has been appointed as an Additional Director of the Company w.e.f. 1st April, 2015. The Board of Directors on the recommendation of the Nomination and Remuneration Committee and subject to the approval of the shareholders have appointed Mr. Kapil Mehan as Managing Director and Key Managerial Personnel of the Company for a period of 5 years w.e.f. 1st April, 2015. Mr. V. Seshadri, Vice-President, Finance (CFO) and Mr. R. Y. Patil, Chief General Manager & Company Secretary have been designated as Key Managerial Personnel in accordance with provisions of Section 203 (1) of the Companies Act, 2013. A brief profile and details of other directorships and committee memberships of Mr. N. Suresh Krishnan, Ms. Kiran Dhingra and Mr. Kapil Mehan are given in the Report on Corporate Governance attached as Annexure 'A' to this report. 16. Board Evaluation : Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Nomination and Remuneration Committee and the Board of Directors have formulated a policy for performance evaluation of its own performance, of various Committees of the Board and the individual Directors. The Board has carried out evaluation in accordance with the policy on performance evaluation and the manner and the details of the evaluation process have been included in the Report on Corporate Governance. 17. a. Board Meetings: During the year under review, five Board meetings were held on : 8th May, 2014, 30th July, 2014, 29th October, 2014, 22nd January, 2015 and 10th March, 2015 b. Audit Committee: The details of the composition of the Audit Committee are given in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board. 18. Fixed Deposits: The Company has not accepted any fixed deposits in the past or during the year. 19. Details of significant and material orders passed by the regulators or courts: There are no siginificant material orders passed by the courts/regulators or tribunals impacting the going concern status and company's operations in future. The details pertaining to various demand notices from various statutory authorities are disclosed in Note No. 26 (a) of financial statements under the heading - Contingent Liabilities. 20. Adequacy of internal financial controls with reference to financial statements: The company has adequate systems of internal control in place, which is commensurate with its size and the nature of its operations. The Company has designed and put in place adequate Standard Operating Procedures and Limits of Authority Manuals for conduct of its business, including adherence to Company's policies, safeguarding of its assets, prevention and detection of fraud and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. These documents are reviewed and updated on an ongoing basis to improve the internal control systems and operational efficiency. The Company uses a state-of-the-art ERP (SAP) system to record data for accounting and managing information with adequate security procedure and controls. 21. Corporate Governance: Your Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement. The Report on Corporate Governance pursuant to Clause 49 of the Listing Agreement is enclosed as Annexure 'A' to this report. The Certificate by Practicing Company Secretary on compliance of Corporate Governance is enclosed as Annexure 'B'. Declaration by the Managing Director is enclosed as Annexure 'C' and the Management Discussion and Analysis is enclosed as Annexure 'D' to this report. 22. Auditors: As per Section 139 of the Companies Act, 2013 and Rules made thereunder, the Auditors, M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, Gurgaon, Statutory Auditors of the Company were appointed as Auditors from the conclusion of the Fifth Annual General Meeting till the conclusion of the Seventh Annual General Meeting subject to ratification by the members at every Annual General Meeting. The Board based on the recommendation of the Audit Committee recommends ratification of appointment of M/s. S.R. Batliboi & Co. LLP as statutory auditors of the Company for the year 2015-16. The Report of the Statutory Auditors for the current year does not contain any qualifications or any adverse remarks. 23. Cost Auditor: The Company has re-appointed Mr. Irudayam Savari Muthu, Cost Accountant, as the Cost Auditor for the year 2015-16 and has recommended the remuneration payable to the Cost Auditor for ratification at the ensuing Annual General Meeting. The Cost Audit Report for the year ended 31st March, 2014 was filed by the Company with the Ministry of Corporate Affairs vide SRN:S31288772 dated 20th September, 2014. 24. Secretarial Audit Report : Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Shivaram Bhat, Practicing Company Secretary as Secretarial Auditor, to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is enclosed as Annexure 'F' to this Directors' Report. The Report does not contain any qualifications. 25. Internal Complaints Committee: As per provisions of Section 4 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, your Company has constituted an Internal Complaints Committee for redressal of complaints against sexual harassment. There were no complaints received by the said Committee during the year. 26. Employees' Stock Option Scheme: The Scheme for Employees Stock Option (ESOPS) was approved by the shareholders in the Annual General Meeting held on 7th August, 2012. The Company has not issued any ESOPS to its employees during the year. 27. Changes in Capital/Qualified Institutional Placement: The Authorised Share capital of the Company has been increased from the existing Rs. 42,05,80,060/- to Rs. 65,00,00,000/-pursuant to the approval obtained from shareholders vide Postal Ballot on 11th September, 2014. Your company has passed a Special Resolution by Postal Ballot on 9th March, 2015 to issue and allot equity shares for an amount upto Rs. 400 crores through private placement and / or preferential allotment and / or qualified institutional placement and / or any other permitted modes. 28. Consolidated Financial Statements under Section 129 of the Companies Act, 2013 : The consolidated financial statements of the Company are prepared in accordance with Section 129 of the Companies Act, 2013 and relevant Accounting Standards (AS) issued by the Institute of Chartered Accountants of India, forms part of the Annual Report. The Company will make available the financial statements of subsidiaries, upon request by any member of the Company interested in receiving this information. The Annual Accounts of the Subsidiary Companies will also be kept for inspection by any investor at the Registered Office of the Company and its Subsidiaries. 29. Subsidiaries: A brief review of the subsidiaries of the Company is given below:- a. Zuari Fertilisers and Chemicals Limited Zuari Fertilisers and Chemicals Limited (ZFCL), a wholly owned subsidiary of your Company was incorporated for the manufacture of organic and inorganic fertilisers. ZFCL has set up a 600 MTPD unit at Mahad in Maharashtra for the manufacture of Powdered & Granulated Single Super Phosphate (GSSP). On completion of the construction, trial run was started on 21st August, 2014. Due to technical and related issues, the plant could not achieve reasonable level of production. The company had to carry out modifications to the plant and machinery and expected that the plant would run near or at rated capacity from the month of May, 2015. During the current year, ZFCL has acquired additional stake of 0.04 % in the equity share capital of Mangalore Chemicals & Fertilizers Limited (MCFL) by open offer and currently holds 16.47% stake. Further, company has made another voluntary open offer for acquisition of additional 4,33,29,000 (Four Crore Thirty Three Lacs Twenty Nine Thousand) Equity Shares representing 36.56% stake in the equity share capital of MCFL. MCFL is a company engaged in the manufacture of urea and complex fertilisers. b. Zuari Agri Sciences Limited Zuari Agri Sciences Limited (ZASL) (formerly known as Zuari Seeds Limited) is a wholly owned subsidiary of your Company which is engaged in the production and trading of hybrid seeds. Due to deficit rainfall in the main Kharif season, there has been a drop in the key crop areas. However, good improvement in terms of cotton liquidation and paddy liquidation was seen during the year. Due to focused efforts of past few years, the Company was able to bank on few performing products on each key crops like cotton, paddy, maize, bajra and few vegetables. ZASL has robust plans to bring the seed business on a stable and sustainable path in the next 2 to 3 years. 30. Joint Ventures: A brief review of the joint ventures of the Company are given here below : a. Zuari Maroc Phosphates Private Limited Zuari Maroc Phosphates Private Limited (ZMPPL), a 50:50 joint venture with Office Cherifien Des Phosphates (OCP) S.A., was established as a Special Purpose Vehicle (SPV) for acquisition of stake in Paradeep Phosphates Limited (PPL). At present, ZMPPL is holding 80.45% of the equity stake in PPL. During the current year, it has been converted from a public company to a private company. PPL manufactures and markets complex Phosphatic fertilisers and intermediary products such as Phosphoric Acid and Sulphuric Acid which are crucial in the manufacture of Phosphatic fertilisers. All the products are marketed under the popular 'Navratna' brand. PPL's portfolio caters to almost all agricultural applications. PPLs plant is located in the port town of Paradeep in Onitsha, with an installed annual capacity of 7,20,000 Metric Tonnes of DAP and other Phosphates’ fertilizers. (b) Zuari Rotem Speciality Fertilizers Limited Zuari Rotem Speciality Fertilizers Limited (ZRSFL), is a 50:50 joint venture with Rotem Amfert Negev Limited, Israel. It has Water Soluble Fertilisers (WSF's) manufacturing facility at Baramati, Maharashtra. ZRSFL has a capacity of 24,000 Metric Tonnes per annum, in two shift basis for production of different NPK blends. The Plant is working on one shift basis and producing 30 Metric Tonnes per day on an average. (c) MCA Phosphates Pte. Limited MCA Phosphates Pte. Limited (MCAP), a company incorporated in Singapore, is a joint venture between your Company and Mitsubishi Corporation (Mitsubishi), Japan. Your Company has invested an additional amount of Rs. 36.76 lacs in the Company during the current financial year. As reported earlier, your company holds 30% in MCAP while the balance 70% is being held by Mitsubishi. MCAP has been set up as a Special Purpose Vehicle (SPV) and acquired 30% equity stake in Fosfatos del Pacifico, Peru (FDP). FDP owns rock phosphate mining license of asset - Bayovar No. 9, Peru and is implementing upstream rock phosphate project for producing beneficiated rock phosphate with an annual capacity of 2.5 million Metric Tonnes Per Annum (MMTPA). The project is likely to complete its bankable feasibility study and achieve the financial closure in the coming fiscal year. The supply of rock phosphate from the asset will help your company to reduce its dependence on suppliers for critical raw material - rock phosphate and is a step forward in the backward integration of its downstream phosphate business. The statement containing salient features of the financial statement of subsidiaries/associates/joint ventures is attached as Annexure 'J' to this report. 31. Directors' Responsibility Statement : To the best of their knowledge and belief and according to the information and explanation obtained by them, your Directors make the following statements in terms of provisions of Section 134 (5) of the Companies Act, 2013, and hereby confirm that: (a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that 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 and loss of the company for that period; (c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (d) the directors have prepared the annual accounts on a going concern basis; (e) the directors, have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and (f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 32. Acknowledgements: Your Directors wish to place on record their appreciation for the dedication, commitment and contribution of all stakeholders and employees of your Company. For and on behalf of the Board S. K. Poddar Chairman Date : 15th May, 2015 Place : Gurgaon |