Chambal Fertilisers & Chemicals Ltd:Annual Report 2023-24 Analysis

Chambal Fertilisers and Chemicals Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Chambal Fertilisers and Chemicals Ltd. was established in 1985. It’s part of the KK Birla Group.

Headquarters Location and Global Presence:

The company is headquartered in Gurugram, Haryana, India. While primarily focused on the Indian market, it has a presence through exports.

Company Vision and Mission:

• Vision: To be a leading agri-solutions provider, enabling prosperity for farmers and contributing to food security.
• Mission: To provide high-quality, innovative products and services to the agricultural sector while adhering to sustainable practices and maximizing stakeholder value.

Key Milestones in their Growth Journey:

• 1993: Commissioning of the first phase of the Gadepan I urea plant.
• 1999: Commissioning of the Gadepan II urea plant.
• Expansion into other agri-inputs like crop protection chemicals and micronutrients.
• Diversification into technical textiles.

Stock Exchange Listing Details and Market Capitalization:

• Listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
• Market capitalization fluctuates based on market conditions and company performance. Refer to current financial data sources for precise figures.

Recent Financial Performance Highlights:

Refer to the company’s latest annual reports and quarterly results for specific financial figures like revenue, profit, and key ratios.

Management Team and Leadership Structure:

• The leadership team consists of experienced professionals in the fields of fertilizers, chemicals, and finance.

Any Notable Awards or Recognitions:

• Recognition for energy efficiency and environmental performance related to their manufacturing plants.

Their Products #

Complete Product Portfolio with Categories:

• Fertilisers: Urea (flagship product), Diammonium Phosphate (DAP), Muriate of Potash (MOP), Nitrogen, Phosphorus and Potassium (NPK) complex fertilizers.
• Crop Protection Chemicals: Insecticides, Herbicides, Fungicides.
• Micronutrients: Zinc Sulphate, Boron, etc.
• Agri Services: Farm advisory, soil testing services.
• Technical Textiles: Coated fabrics, industrial fabrics.

Flagship or Signature Product Lines:

• Urea is the company’s primary and most well-known product.

Key Technological Innovations or Patents:

• Focus on energy-efficient manufacturing processes for urea production.
• Development of crop-specific and region-specific fertilizer blends.

Manufacturing Facilities and Production Capacity:

• Two urea plants located at Gadepan, Rajasthan.
• Significant urea production capacity, contributing to a substantial portion of India’s urea output.

Quality Certifications and Standards:

• ISO 9001 (Quality Management System)
• ISO 14001 (Environmental Management System)
• OHSAS 18001 (Occupational Health and Safety Management System)

Any Unique Selling Propositions or Technological Advantages:

• Strong brand reputation and established distribution network in key agricultural regions.
• Focus on farmer-centric services and advisory.

Primary Customers #

Target Industries and Sectors:

• Agriculture sector.

Geographic Markets (Domestic vs. International):

• Primarily focused on the domestic Indian market.
• Exports to some international markets.

Major Client Segments (agricultural, industrial, residential, etc.):

• Primarily caters to the agricultural sector, serving farmers directly or through dealers and retailers.

Distribution Network and Sales Channels:

• Extensive network of dealers, retailers, and cooperative societies across India.
• Direct farmer engagement through field staff and advisory services.

Major Competitors #

Direct Competitors in India and Globally:

• In India: Coromandel International, National Fertilizers Limited (NFL), Rashtriya Chemicals & Fertilizers (RCF), Indian Farmers Fertiliser Cooperative (IFFCO), Krishak Bharati Cooperative Limited (KRIBHCO)
• Refer to industry reports for global competitors depending on the specific product segment.

Comparative Market Share Analysis:

• Market share analysis fluctuates. Consult industry reports for current information. Chambal Fertilisers holds a significant share in the urea market in specific regions of India.

Competitive Advantages and Disadvantages:

• Advantages: Strong brand presence, established distribution network, efficient manufacturing facilities.
• Disadvantages: Susceptibility to government regulations and subsidy policies, reliance on raw material availability and pricing.

How they differentiate from competitors:

• Focus on farmer-centric services and knowledge dissemination.
• Reputation for quality products and reliable supply.

Industry Challenges and Opportunities:

• Challenges: Fluctuating raw material prices, government regulations and subsidy policies, environmental concerns, competition from imports.
• Opportunities: Growing demand for fertilizers due to increasing population and food security concerns, potential for diversification into value-added agri-inputs, adoption of precision farming technologies.

Market Positioning Strategy:

• Positions itself as a reliable agri-solutions provider, focusing on quality products and farmer support.

Future Outlook #

Expansion Plans or Growth Strategy:

• Focus on expanding its presence in crop protection chemicals and micronutrients.
• Exploring opportunities in precision farming and digital agriculture.
• Investing in research and development for new product development.

Upcoming Products or Innovations:

• Development of bio-fertilizers and other sustainable agricultural solutions.

Sustainability Initiatives or ESG Commitments:

• Focus on reducing energy consumption and greenhouse gas emissions in manufacturing processes.
• Promoting responsible use of fertilizers among farmers.
• Implementing water conservation measures.

Industry Trends Affecting their Business:

• Growing adoption of precision farming techniques.
• Increasing demand for sustainable agricultural practices.
• Government focus on promoting balanced fertilizer use.

Long-term Vision and Strategic Goals:

• To become a leading integrated agri-solutions provider in India, contributing to sustainable agricultural growth and food security.

Key Financial Performance & Strategic Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations: Decreased from ₹27,772.81 Crore (FY2022-23) to ₹17,966.41 Crore (FY2023-24).
• Total Income: Decreased from ₹28,031.85 Crore (FY2022-23) to ₹18,350.67 Crore (FY2023-24).
• Profit Before Tax: Increased from ₹1,451.79 Crore (FY2022-23) to ₹1,942.59 Crore (FY2023-24).
• Profit for the Year: Increased from ₹1,069.31 Crore (FY2022-23) to ₹1,331.44 Crore (FY2023-24).
• Total Comprehensive Income: Increased from ₹1,004.43 Crore (FY2022-23) to ₹1,423.78 Crore (FY2023-24).
• Debt Equity Ratio: Improved by reducing from 0.47 (FY 2022-23) to 0.25 (FY 2023-24).
• Operating Profit Margin (%): Increased from 6.38% (FY2022-23) to 11.78% (FY2023-24).
• Net Profit Margin (%): Increased from 3.85% (FY2022-23) to 7.41% (FY2023-24).
• Return on Net Worth: Increased from 16.38% (FY 2022-2023) to 19.02% (FY 2023-2024).

Business Segment Performance (FY2023-24) #

• Own Manufactured Fertilisers: Revenue decreased to ₹12,722.65 Crore from ₹16,689.14 Crore (previous year), mainly due to lower gas costs. Profit before finance costs and tax decreased to ₹1,500.31 from ₹1,904.02 (previous year).
• Complex Fertilisers: Revenue decreased to ₹4,483.30 Crore from ₹10,367.02 Crore (previous year), mainly due to the reduction in volume of P&K fertilisers, as well as reduction in subsidy. Profit before finance costs and tax reported was ₹159.79 Crore versus a loss of ₹418.63 Crore in the previous year.
• Crop Protection Chemicals and Speciality Nutrients: Revenue increased to ₹760.46 Crore from ₹716.65 Crore (previous year). Profit before finance costs and tax was ₹152.80, an increase from ₹136.30 in the previous year.

Major Strategic Initiatives and their Progress #

• Technical Ammonium Nitrate (TAN) Plant: Construction activities are in progress, with the project expected to be commissioned on time.
• Energy Saving Schemes: Multiple energy-saving schemes were completed in the plants by March 2024, delivering better-than-expected benefits.

Risk Landscape Changes #

• Regulatory Risk: Changes or delays in government policies, especially regarding fertilizer subsidies, can adversely affect the Company.
• Market Risk: Volatility in prices of marketed fertilizers (DAP, MOP, NPK) and the regulation of product prices by the government remain short-term challenges.
• Commodity Price Risk (Natural Gas): Less volatility in natural gas prices in FY2023-24, but fluctuations remain a risk, particularly for production beyond Re-Assessed Capacity (RAC).
• Foreign exchange risk: The company managed to hedge this risk through natural cover and hedging contracts.

ESG Initiatives and Metrics #

• Environmental:
  • Reduced Scope 1 emissions in Urea production by approximately 4%.
  • Total specific energy consumption for Urea production decreased by 1.6%.
  • Implemented energy-saving schemes resulting in the reduction of greenhouse gas emissions.
  • Installed rooftop solar panel with a 1000 KW peak power, resulting in the substitution of 15% of grid power.
  • 85% of sludge generated from the RO plant was sent to cement companies for co-processing.
  • “Single Use Plastic” is banned in the Gadepan campus.
• Social:
  • ‘Seed to Harvest’ program covered 2,900 villages and 3.5 lakh farmers.
  • Collected over 65,000 soil samples to support farmers.
  • Expanded CSR initiatives in education, rural development, healthcare, and employability.
• Governance:
  • Maintained a diverse Board of Directors.
  • Adhered to Corporate Governance requirements and the Code of Conduct and Ethics.

Management Outlook #

• Stable performance in the Urea business.
• Growth is expected in non-urea fertilizers, CPC, and SN through geographical expansion and deeper market penetration.
• The implementation of the Technical Ammonium Nitrate plant is also expected to contribute to business diversification.
• Focus on product quality, customer satisfaction, and digital media engagement to drive growth.
• Subsidy received on time, which helps in managing working capital.

Detailed Analysis #

Chambal Fertilisers and Chemicals Limited - Financial Analysis #

Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(Rs. in Crore)

Significant Changes in Major Line Items (>10% YoY) #

• Trade Receivables (Current Assets): Decreased significantly from Rs. 1,760.48 Crore to Rs. 191.56 Crore (-89%). This is primarily due to improved collections and subsidy de-escalation, linked to lower natural gas prices.
• **Total Current Liabilites:**Decreased from 3,152.14 cr to 2,036.59 cr.
• Borrowings(Current and Non Current): Borrowing are constantly decreasing due to the repayment of installments.
• Other Financial Assets: Decreased in both current and non-current.
• Complex Fertilizers: Decreasing trend of assets and liabilities.

Working Capital Trends #

• Current Assets: Decreased from Rs. 5,638.74 Crore to Rs. 4,089.13 Crore, majorly on account of decrease in Trade Receivables.
• Current Liabilities: Decreased from Rs. 3,152.14 Crore to Rs. 2,036.59 Crore, mainly because of decrease in Current Borrowings and Trade Payables.
• There is a slight increase in current ratio from 1.79 to 2.00.

Asset Quality Metrics #

• Allowance for Doubtful Debts: Increased from Rs. 16.58 Crore to Rs. 19.01 Crore for Trade Receivables, indicating a minor deterioration in the collectibility of receivables. However, a large decrease in overall receivables value mitigates this.

Debt Structure and Maturity Profile #

• Debt Composition: Primarily consists of External Commercial Borrowings (ECBs) and Foreign Currency Term Loans (FCTL) from banks and a financial institution.
• Maturity: A significant portion of the debt (Rs. 709.33 Crore) is classified as a current maturity of long-term borrowing, indicating repayment obligations within the next year. The remaining long-term debt has a staggered repayment schedule, providing some flexibility.

Off-Balance Sheet Items #

• Contingent Liabilities: Rs. 167.40 Crore, primarily related to disputed tax demands.
• Keepwell Agreements: The Parent Company has keepwell agreements with buyers of assets from its subsidiaries, obligating it to ensure sufficient funds in those subsidiaries to meet indemnity obligations up to Rs. 131.80 Crore.

Chambal Fertilisers and Chemicals Limited: Financial Performance Analysis #

Revenue Breakdown by Segment #

• Own Manufactured Fertilizers: Revenue decreased to Rs. 12,722.65 crore (FY2023-24) from Rs. 16,689.14 crore (FY2022-23), a decline of 23.77%.
• Complex Fertilizers: Revenue decreased to Rs. 4,483.30 crore (FY2023-24) from Rs. 10,367.02 crore (FY2022-23), a decline of 56.75%.
• Crop Protection Chemicals and Specialty Nutrients: Revenue increased to Rs. 760.46 crore (FY2023-24) from Rs. 716.65 crore (FY2022-23), a growth of 6.11%.
• Geographical Breakdown: 100% domestic sales.

Cost Structure Analysis #

• Cost of Materials Consumed: Decreased to Rs. 6,581.95 crore (FY2023-24) from Rs. 8,522.56 crore (FY2022-23).
• Purchases of Stock-in-Trade: Decreased to Rs. 4,174.90 crore (FY2023-24) from Rs. 9,395.60 crore (FY2022-23).
• Employee Benefits Expense: Increased to Rs. 220.77 crore (FY2023-24) from Rs. 190.02 crore (FY2022-23).
• Power and Fuel: Decreased to Rs. 3,650.12 crore (FY 2023-24) from Rs. 4,838.21 crore (FY 2022-23).
• Finance costs: Decreased to 173.06 Cr (FY 2023-24) from 320.02Cr (FY 2022-23)

Margin Analysis #

• Operating Profit Margin: Increased to 11.78% (FY2023-24) from 6.38% (FY2022-23).
• Net Profit Margin: Increased to 7.41% (FY2023-24) from 3.85% (FY2022-23).

EPS Analysis #

• Basic and Diluted EPS: Increased to Rs. 32.19 (FY2023-24) from Rs. 25.69 (FY2022-23).

Chambal Fertilisers and Chemicals Limited: Financial Analysis #

Cash Flow and Liquidity Analysis #

OCF, ICF, FCF Components (Consolidated) #

• OCF (Operating Cash Flow): Increased to Rs. 3,326.75 crore in FY 2023-24 from Rs. 3,241.14 crore in FY 2022-23. Key drivers included a working capital decrease due to reduction in trade receivables and inventories.
• ICF (Investing Cash Flow): Outflow increased to Rs. (382.48) crore in FY 2023-24 from Rs. (1,872.82) crore in FY 2022-23, primarily driven by a decrease in proceeds from sale of current investments. Capital expenditure constitute a major outflow under this segment.
• FCF (Financing Cash Flow): Outflow increased from Rs. (1,861.99) crore in FY 2022-23 to Rs. (2,871.41) crore in FY 2023-24. Major financing activities are repayment of long term borrowings, availment/repayment of supplier’s credit and payout towards buyback of equity shares during the year.

Working Capital Management Efficiency #

• The Consolidated Financial data displays an improvement on Working Capital Management due to significant reduction in the Trade receivables from Rs. 1760.48 Crore to Rs. 191.56 Crore and inventories from Rs. 1,373.83 Crore to Rs. 1,254.66 Crore.

Capex Analysis by Segment (Consolidated) #

• Own Manufactured Fertilizers: Capex of Rs. 379.28 crore in FY 2023-24, compared to Rs. 209.59 crore in FY 2022-23.
• Other Segments (including Technical Ammonium Nitrate project): Capex of Rs. 271.32 crore in FY 2023-24, compared to Rs. 3.55 crore in FY2022-23.
• Total capital expenditure during the financial year 2023-24, was Rs. 650.60 Crore, including the costs towards implementation of energy saving schemes.

Dividend and Share Buyback Trends (Consolidated) #

• Dividends: Total dividend payout (interim and final) for FY 2023-24 was Rs. 7.50 per share, totaling Rs. 312.16 crore, same as in FY 2022-23.
• Share Buyback: The Company completed a buyback of 1,55,55,555 equity shares at Rs. 450 per share, totaling Rs. 700 crore (excluding tax) during FY 2023-24. Total payout towards buy-back including transaction costs and tax amounted to Rs. 864.83 Crore.

Debt Service Coverage (Consolidated) #

• Debt Service Coverage Ratio improved to 2.02:1 in FY 2023-24 from 1.60:1 in FY 2022-23, indicating improved ability to meet debt obligations.

Liquidity Position and Cash Conversion Cycle #

• Current Ratio: Improved to 2.00 in FY 2023-24 from 1.79 in FY 2022-23.
• Cash and Cash Equivalents: Increased to Rs. 109.86 crore at the end of FY 2023-24, compared to Rs. 36.93 crore at the end of FY 2022-23.

Chambal Fertilisers and Chemicals Limited: Financial Analysis #

Profitability Ratios (3-Year Trends) #

(Rs. in Crore, except ratios and %)

Liquidity Metrics #

(Rs. in Crore, except ratios)

Efficiency Ratios #

(Rs. in Crore, except ratios)

Leverage Metrics #

(Rs. in Crore, except ratios)

Working Capital Ratios #

(Rs. in Crore, except ratios)

Chambal Fertilisers and Chemicals Limited: Segment Performance Analysis #

Revenue and Profitability Metrics with Growth Rates #

Own Manufactured Fertilizers #

• Revenue FY 2023-24: Rs. 12,722.65 crore.
• Revenue FY 2022-23: Rs. 16,689.14 crore.
• Revenue Growth Rate: -23.76%
• Profit Before Finance Costs and Tax (PBFCT) FY 2023-24: Rs. 1,500.31 crore.
• PBFCT FY 2022-23: Rs. 1,904.02 crore.
• PBFCT Growth Rate: -21.19%
• Revenue decreased due to lower gas costs

Complex Fertilisers #

• Revenue FY 2023-24: Rs. 4,483.30 crore.
• Revenue FY 2022-23: Rs. 10,367.02 crore.
• Revenue Growth Rate: -56.75%
• PBFCT FY 2023-24: Rs. 159.79 crore.
• PBFCT FY 2022-23: Rs. (418.63) crore.
• PBFCT Growth Rate: 138.17% (from a loss to a profit).
• Revenue and volume decreased, the Company has registered higher profits in comparison to the last year.

Crop Protection Chemicals and Speciality Nutrients #

• Revenue FY 2023-24: Rs. 760.46 crore.
• Revenue FY 2022-23: Rs. 716.65 crore.
• Revenue Growth Rate: 6.11%
• PBFCT FY 2023-24: Rs. 152.80 crore.
• PBFCT FY 2022-23: Rs. 136.30 crore.
• PBFCT Growth Rate: 12.10%
• The segment registered Double digit growth.

Market Share and Competitive Position #

• The Company is the largest single-location private sector urea manufacturer in India.
• The Company faces competition from other urea plants, especially those commissioned under the New Investment Policy 2012.

Key Products/Services Performance #

• Urea: Production increased to 33.83 lakh MT (FY 2023-24) from 33.47 lakh MT (FY 2022-23). Sales decreased to 32.56 lakh MT (FY 2023-24) from 34.40 lakh MT (FY 2022-23).
• DAP: Sales decreased to 5.56 lakh MT (FY 2023-24) from 10.65 lakh MT (FY 2022-23).
• MOP: Sales decreased to 1.54 lakh MT (FY 2023-24) from 1.89 lakh MT (FY 2022-23).
• NPK Fertilisers: Sales decreased to 1.56 lakh MT (FY 2023-24) from 2.69 lakh MT (FY 2022-23).
• Crop Protection Chemicals and Speciality Nutrients: Revenue increased to Rs. 760.46 crore (FY 2023-24) from Rs. 716.99 crore (FY 2022-23). The Company introduced various new products, including biological products.

Geographic Distribution and Market Penetration #

• The Company focuses its urea supplies in the northern and central parts of India.
• The Company is working on geographical expansion of its marketing network for non-urea fertilisers, CPC, and SN.
• The “Seed to Harvest” program covers approximately 2900 villages.

Segment-wise CAPEX #

Capital Expenditure #

• Own Manufactured Fertilizers: 379.28
• Complex Fertilizers: 0.00
• Crop Protection Chemical and Specialty Nutrients: 0.00
• Others: 271.32

Operational Efficiency Metrics #

• The urea production facilities continued to operate at optimum capacity.
• The Company’s urea production facilities’ energy efficiency is among the best in the industry.
• Energy saving schemes were implemented and are delivering better than expected results.

Growth Initiatives and Challenges #

Growth Initiatives #

• Setting up a Technical Ammonium Nitrate plant.
• Expanding product portfolio and volume of marketed products, including new CPC and SN products.
• Establishing marketing arrangements with innovator companies for access to new age products.
• Strengthening farmer outreach initiatives.
• Installation of Roof-Top Solar Plants.

Challenges #

• Demand variation due to changes in the monsoon pattern.
• Availability constraints.
• Volatility in prices of DAP, MOP, and NPK fertilisers.
• Regulation of product prices by the Government of India.
• Reduction in prices of bulk technical molecules.

Risk Assessment #

Strategic Risks #

• Severity: High. Policy changes can significantly impact profitability, especially concerning urea subsidy.
• Likelihood: Medium. Government policies in the fertilizer industry are subject to change.
• Trend: Stable, but with potential for volatility. New Investment Policy 2012 is effective for 8 years from the commencement of production.
• Mitigation Strategies: The Company is trying to continuously engaging with policymakers and diversifying its product portfolio (Technical Ammonium Nitrate project, Crop Protection, and Speciality Nutrients).
• Control Effectiveness: Partially effective. Diversification mitigates some risk, but policy dependence remains high.
• Potential Financial Impact: Substantial, given that 70.81% of standalone revenue in FY2023-24 was from own manufactured fertilizers (primarily urea). Any unfavorable change in policy may put pressure on the revenues and profitability.

Operational Risks #

• Severity: Medium to High. Plant operations and supply chain disruptions can impact production volume.
• Likelihood: Medium. The company operates in a high-risk industry.
• Trend: Improving. Urea production increased from 33.47 lakh MT (FY2022-23) to 33.83 lakh MT (FY2023-24).
• Mitigation Strategies: Implemented robust Health, Safety, Security, Environment & Quality Policy. Process safety management system, Behavior Based Safety program. Regular maintenance, safety audits, and drills.
• Control Effectiveness: High, as evidenced by the National Energy Conservation Award 2023, certificate of merit, and reduced accident rate.
• Potential Financial Impact: Moderate. Production disruptions can lead to lower revenue; energy conservation and safety practices are resulting in cost efficiency.

Financial Risks #

• Severity: High. Exposure to fluctuations in natural gas prices, imported fertilizer prices, and currency exchange rates (USD).
• Likelihood: Medium to High. Natural gas prices and imported fertilizer prices are volatile. USD/INR exchange rate is also variable.
• Trend: Volatile. Natural gas prices showed less volatility in FY2023-24 compared to FY2022-23.
• Mitigation Strategies: For natural gas, a portion is purchased at fixed prices. For imported fertilizers, dynamic sourcing, pricing strategies, and hedging through forward contracts and option structures are used.
• Control Effectiveness: Partially effective. Hedging and fixed-price contracts provide some protection, but external market forces remain a factor.
• Potential Financial Impact: Significant impact on costs, profit margins, and the valuation of financial instruments. The Interest Coverage Ratio improved from 5.54 (FY2022-23) to 12.22 (FY2023-24), Debt Equity Ratio improved from 0.47 to 0.25.

Compliance/Regulatory Risks #

• Severity: High. Non-compliance with fertilizer regulations can lead to penalties and reputational damage.
• Likelihood: Low. The company states full compliance with corporate governance requirements and Listing Regulations.
• Trend: Stable. No penalties or strictures were imposed on the Company by stock exchanges or SEBI during the last three years.
• Mitigation Strategies: Established internal control systems, regular audits, and a Whistle Blower Policy.
• Control Effectiveness: High, as evidenced by the absence of penalties or strictures.
• Potential Financial Impact: High in case of major non-compliance, but currently mitigated.

Emerging Risks: Data Privacy & Cybersecurity Risks #

• Severity: High. In the era of digitalization, data privacy and cybersecurity are a high risk.
• Likelihood: Medium.
• Trend: Increasing. More digital interventions are resulting in a higher probability of this risk.
• Mitigation Strategies: The company states it has policies.
• Control Effectiveness: No data breach during FY 2023-24.
• Potential Financial Impact: Significant, potential fines and reputational damages.

Strategic and Management Analysis of Chambal Fertilisers and Chemicals Limited #

Long-Term Strategic Goals and Progress #

• Own Manufactured Fertilizers: Maintaining optimum capacity and energy efficiency. Progress is demonstrated through achieving industry-leading energy efficiency levels, completion of energy-saving schemes, and recognition with the National Energy Conservation Award 2023.
• Complex Fertilisers: Aiming to provide for the channel and farmers’ needs for DAP, NPK, and MOP to keep the channel supplied, in the overall interest of the farmer.
• Crop Protection Chemicals (CPC) and Speciality Nutrients (SN): Establishing marketing arrangements with innovator companies for access to new age CPC, SN, and biological products. Progress is evidenced by double-digit growth, expansion of focus, introduction of biological products, collaboration with R&D organizations, and an international product of the year award in 2023.
• Technical Ammonium Nitrate Plant: Timely commissioning and operationalization of the TAN plant. All statutory and other approvals have been obtained.

Competitive Advantages and Market Positioning #

• Own Manufactured Fertilizers: Chambal Fertilisers is the largest single-location private sector urea manufacturer in India, with urea production facilities recognized as among the most energy-efficient in the industry.
• Complex Fertilisers: Headwinds in pricing presents a disadvantage for the Company.
• Crop Protection Chemicals (CPC) and Speciality Nutrients (SN): Focusing on offering quality products to farmers at reasonable prices.

Innovation Initiatives and R&D Effectiveness #

• Own Manufactured Fertilizers: Initiatives include energy-saving schemes, with some completed by March 2024 and delivering better-than-expected benefits.
• CPC and SN: Actively collaborating with R&D organizations, launching innovative biological products, and planning to introduce biostimulants, such as ‘Uttam Superrhiza,’ which won the Applied Microbiology International Product of the year 2023.

Management’s Track Record in Execution #

• Own Manufactured Fertilizers: Maintained optimum capacity and energy efficiency.
• CPC and SN: Farmer outreach programs have been effective and strengthened via digital interventions.
• Technical Ammonium Nitrate Plant: Construction is progressing well and is expected to be commissioned on time.

Capital Allocation Strategy #

• Own Manufactured Fertilizers: Investment in energy conservation schemes (Rs. 227.84 Crore in FY 2023-24).
• Technical Ammonium Nitrate Plant: Significant investment in setting up the plant, demonstrating a focus on business diversification.
• Share Buyback: Completed a buyback of 1,55,55,555 equity shares for an aggregate consideration of Rs. 700 Crore, indicating a return of capital to shareholders.
• Dividend Payment: Payment of both interim and final dividends, demonstrating commitment to shareholder returns.

Organizational Changes and Their Impact #

• Key Management Personnel Changes: Gaurav Mathur ceased to be Managing Director and Key Managerial Personnel effective July 21, 2023. Abhay Baijal was appointed as Managing Director effective from the same date. Rajveer Singh ceased to be Company Secretary and Key Managerial Personnel, with Anuj Jain appointed in May 2023, and Tridib Barat as Company Secretary and Key Managerial Personnel appointed in November 2023.
• Segment Reporting Changes: From having two reporting segments, during the Financial Year 2023-24, the financial results had three reporting segments.

ESG Framework #

Environmental Metrics and Targets #

• Urea production’s Scope 1 emissions decreased by approximately 4% year-over-year.
• Total specific energy consumption for Urea production improved, decreasing by 1.6%.
• Renewable energy share achieved was 0.46%
• The Gadepan-III plant is a zero liquid discharge plant.
• 85% of sludge generated from the reverse osmosis plant was sent for co-processing during FY23-24.
• Implemented various schemes to reduce energy consumption, thereby reducing greenhouse gas emissions and saving natural gas and water.

Social Responsibility Programs #

• The Company spent Rs. 35.25 crore on CSR projects, exceeding the statutory requirement of Rs. 35.16 crore.
• Adopted one additional Government school, bringing the total to 54 adopted schools and 47 Aanganwadi centers.
• Supported around 10,000 rural students.
• Supported an additional 32 Government schools in Haryana, Punjab, and Madhya Pradesh.
• Facilitated 22 meritorious students to join coaching classes.
• Conducted career counseling in secondary and senior secondary classes.
• Constructed three new Aanganwadi centers and 16 additional rooms in 7 Government schools.
• Renovated 6 Government Aanganwadi centers and 18 Government schools.
• The company received its 5th consecutive Bhamashah Award.
• Offered skill training programs to rural youth through 5 adopted ITIs and a Government Polytechnic College.
• Facilitated placement offers for around 500 students.
• Offered short-term vocational courses in villages.
• Developed community infrastructure in villages near the plant location, installing streetlights and open gyms.
• Extended healthcare support to 26 villages and over 100 academic institutions.
• Provided OPD services and pathological lab tests to approximately 130,000 individuals.
• Conducted health camps and awareness sessions reaching approximately 70,000 community members.
• Installed Reverse Osmosis units and water coolers in selected schools in Haryana and Punjab.
• Established the ‘Chambal Fertilisers Skill Institute’, with 100% placement for nearly 150 students.
• Extended ‘Crop Residue Management’ and ‘Sustainable Agriculture’ initiatives to over 380 villages.
• Saved approximately 3.67 Lakhs of Green House Gas emission and prevention of crop residue burning.
• Provided soil testing services for approximately 31,500 soil samples.
• Established rainwater harvesting structures and community ponds.
• Set up sports development centers and a stadium.

Governance Structure and Effectiveness #

• The Board of Directors comprises eight directors, including one Managing Director and seven Non-Executive Directors, four of whom are Independent (including one woman).
• Board committees include Audit, Corporate Social Responsibility, Nomination and Remuneration, Stakeholders’ Relationship, Risk Management, Banking and Finance, Project Monitoring, Strategy, and Buyback Committees.
• The Company maintains a Code of Conduct and Ethics, and a Whistle Blower Policy, accessible on the Company’s website.
• All Independent Directors have submitted declarations of meeting the independence criteria.
• During the FY 2023-24, ESOS 2010 was completed, as all the eligible employees had exercised their stock options.

Sustainability Investments and ROI #

• Capital investment in energy conservation schemes, including the cost of a rooftop solar plant, totaled Rs. 227.84 crore in FY23-24.
• The rooftop solar panels at the Gadepan campus have a capacity of 1000 KW peak power, substituting 15% of grid power utilized in the complex.
• Implemented Energy Saving schemes to reduce Energy consumption.

Regulatory Compliance and Future Preparations #

• The Company complies with applicable Secretarial Standards.
• There were no reported penalties or strictures imposed by stock exchanges, SEBI, or any statutory authority for non-compliance.
• All related party transactions were conducted on an arm’s length basis and in the ordinary course of business, with no material related party transactions requiring disclosure under Section 134(3)(h) of the Companies Act, 2013.
• The Company complied with the constitution of Internal Complaints Committees under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, receiving no complaints.
• The Company maintains cost records as required under Section 148(1) of the Companies Act, 2013, for fertiliser production.
• The Company is using an accounting software that has a feature of recording an audit trail.

Future Projections and Guidance #

Management Guidance and Assumptions #

• Urea Production: Continued optimum capacity and energy efficiency levels.
• Natural Gas Prices: Less volatility compared to the previous year.
• Subsidy Regime: Assessments subject to government policies on fertilizer subsidies. Timely release of subsidy positively supported working capital management.
• Marketed Products: Maintained adequate supply despite headwinds in P&K fertilizer pricing. Sourcing products for reputed manufacturers.
• Crop Protection Chemicals (CPC) and Speciality Nutrients (SN): Double-digit growth achieved; further expansion planned. Focus on marketing CPC and SN.

Market Growth Forecasts #

• Urea Sales (India): Decadal growth (2013-2023) showed a CAGR of ~1.74% p.a.
• Crop protection chemicals and specialty nutrients: Turnover growing at a CAGR of 24% over the last three years.

Planned Strategic Initiatives #

• Geographical Expansion: Focused on growth in existing marketing territory and geographical expansion.
• Product Portfolio Expansion: Plans to add new products, especially in the CPC and SN business segments.
• Strategic Alliances: Establishing marketing arrangements with innovator companies for new CPC and SN products.
• Farmer Outreach: Strengthening farmer relationships through programs like ‘Seed to Harvest,’ ‘Chambal ki Chitthi,’ WhatsApp BOT, and ‘Uttam Santulit Poshan Abhiyan.’
• Technical Ammonium Nitrate: Setting up a Technical Ammonium Nitrate plant.

Capital Expenditure Plans #

• Technical Ammonium Nitrate (TAN) Plant: Construction progressing on time with a capacity of 240,000 MTPA, including a Weak Nitric Acid (WNA) plant with a capacity of 210,000 MTPA.
• Energy Conservation Schemes: Rs. 227.84 Crore invested, showing positive impact.
• Renewable Energy: Investment of Rs. 1,000 KW (AC) peak power for roof top solar panels.

Efficiency Improvement Targets #

• Energy Efficiency: Aims to maintain and improve energy efficiency in urea production.
• Resource Optimization: Focus on optimization of resource usage and reduction of waste generation and emissions.

Potential Challenges and Opportunities #

• Opportunities:

  • Growth in volumes of bulk fertilizers, CPC, and SN.
  • Geographical expansion and deeper market penetration.
  • Increased demand for CPC & SN products.
  • Setting up of Technical Ammonium Nitrate Plant.
  • Timely release of subsidy.

• Challenges:

  • Policy changes or delays by the Government of India.
  • Volatility in prices of marketed fertilizers and government regulation of prices.
  • Potential impact on production due to fluctuations in natural gas prices and Import Parity Price (IPP) of urea.
  • Dependence of CPC application on weather conditions, pest attacks, and cropping patterns.
  • Exposure of SN business to cropping patterns, import prices, and farmer affordability.
  • Reduction in prices of bulk technical of some molecules.

Scenario Analysis and Sensitivity #

• Interest Rate Sensitivity: A 50 basis points increase would negatively impact profit before tax by Rs. 11.75 Crore.
• Foreign Currency Sensitivity: A 5% increase/decrease in the USD/INR exchange rate would impact profit before tax and other comprehensive income.
• Energy Cost Sensitivity: Significant changes in natural gas prices would impact the cost of urea production and profitability.
• Subsidy Receivable Sensitivity: Delays or changes in subsidy policies represent a risk.
• Climate Change Sensitivity: Energy intensive processes and emissions contribute to climate change and environmental degradation.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The auditors issued an unmodified opinion on the consolidated financial statements, indicating a true and fair view in conformity with generally accepted accounting principles in India.
• The auditors’ report includes a ‘Key Audit Matter’ related to the assessment of implications of government policies/notifications on the recognition of subsidy revenue and its recoverability.
• The auditors did not identify any material misstatements related to the key audit matter after performing audit.

Key Accounting Policies and Changes #

• The consolidated financial statements are prepared in accordance with Indian Accounting Standards (Ind AS).
• Material accounting policies are included in the relevant notes to the financial statements.
• Amendments to certain accounting standards (Ind AS 1, 8, and 12) were adopted, effective April 1, 2023, with no material impact on the reported amounts.
• Property, plant, and equipment are depreciated using the straight-line method over estimated useful lives, which are generally aligned with those in the Companies Act, 2013, with some exceptions.
• Revenue recognition includes subsidy income, accounted for based on notified concession prices and estimated input price adjustments.

Internal Control Effectiveness #

• The Company maintains an internal financial controls system with reference to the financial statements.
• The auditor’s report (Annexure B) provides an opinion on the adequacy and operating effectiveness of these controls.
• The Company has used accounting software with a feature of recording audit trail (edit log) facility and that has operated throughout the year, except that the audit log (a) is not maintained in case of modi/fication by a user with privileged access rights to few tables however, no such direct changes have been made in these tables during the year; and (b) was not enabled to capture any direct changes at the database level.

Regulatory Compliance Status #

• The Company has complied with the applicable Secretarial Standards.
• The Company did not receive penalties or strictures from stock exchanges, SEBI, or other statutory authorities for non-compliance on capital market matters in the last three years.
• During the year, all forms, returns, documents and resolutions were /filed with the Registrar of Companies and other authorities with all the required formalities.

Legal Proceedings and Their Potential Impact #

• The consolidated financial statements disclose the impact of pending litigations.
• Contingent liabilities exist for disputed tax demands and other claims (Note 26).
• The Company believes that the risk of unfavorable outcomes in pending litigations is low, based on legal opinions and past decisions.

Related Party Transactions #

• Related party transactions were conducted on an arm’s length basis and in the ordinary course of business.
• No material related party transactions were entered into during the year, and disclosure requirements under Section 134(3)(h) of the Companies Act, 2013 (Form AOC-2) were not triggered.
• Detailed disclosures of related party transactions and balances are provided in Note 29, complying with Ind AS 24.

Subsequent Events #

• There were no material changes or commitments affecting the financial position of the Company between the end of the financial year 2023-24 and the date of the Board’s Report (May 7, 2024).

Analysis of Accounting Quality #

The use of estimates, and policies for subsidy recognition, create potential areas of subjectivity. Audit trail log had minor exceptions related to access and changes not being recorded.

Revenue Recognition (Subsidy) #

• The accounting for fertilizer subsidies involves estimates and interpretations of government policies.

Regulatory Risk Assessment #

• The Company is subject to various regulations, including those related to fertilizers, environment, labor, and taxation.
• The company faces risk in terms of change or delay in notification of policies by Government of India.

Litigation #

• Pending tax litigation cases represent a regulatory risk.