Navin Fluorine International Ltd:Annual Report 2023-24 Analysis

Navin Fluorine International Ltd. - A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: Navin Fluorine International Ltd. (NFIL) was established in 1998 as part of the Padmanabh Mafatlal Group. It has roots tracing back to Mafatlal Industries, one of India’s oldest textile companies. The company was incorporated as a separate entity to focus on the growing fluorochemicals industry.

Headquarters Location and Global Presence: The company’s headquarters is located in Mumbai, India. NFIL has a global presence, serving customers in various countries across North America, Europe, and Asia.

Company Vision and Mission: While the precise vision and mission statements may vary, NFIL generally focuses on being a leading global provider of specialty fluorochemicals, driven by innovation, sustainability, and customer satisfaction. Their mission likely revolves around creating value for stakeholders through high-quality products, responsible manufacturing, and strong partnerships.

Key Milestones in their Growth Journey:

• Late 1990s - Early 2000s: Establishment and initial focus on fluorides and inorganic fluorides.
• Mid-2000s: Expansion into specialty fluorochemicals, including refrigerant gases and intermediates.
• 2010s: Increased focus on Contract Research and Manufacturing Services (CRAMS) and high-value performance chemicals.
• Recent Years: Significant investments in capacity expansion and R&D to cater to growing demand, particularly in the agrochemical, pharmaceutical, and specialty chemical sectors.

Stock Exchange Listing Details and Market Capitalization: NFIL is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). It’s current market capitalization can be found on websites like the BSE, NSE, and other financial portals.

Recent Financial Performance Highlights: Financial performance data can be found on various websites like the BSE, NSE, and other financial portals. Recent trends include:

• Revenue growth driven by increased demand for specialty fluorochemicals.
• Profitability impacted by fluctuations in raw material prices and currency exchange rates.
• Significant capital expenditure on capacity expansion projects.
• Increased focus on exports and international markets.

Management Team and Leadership Structure: NFIL has a well-defined leadership structure led by a board of directors and a management team composed of experienced professionals in the chemical industry.

Any Notable Awards or Recognitions: NFIL may have received awards and recognitions related to their sustainability efforts, export performance, or quality standards. Specific awards can be verified through their official website or press releases.

Their Products #

Complete Product Portfolio with Categories:

• Inorganic Fluorides: Sodium Fluoride, Potassium Fluoride, Aluminium Fluoride.
• Specialty Fluorides: Fluorides used in niche applications like pharmaceuticals and agrochemicals.
• Refrigerant Gases: HFCs, HCFCs, and newer generation refrigerants.
• Contract Research and Manufacturing Services (CRAMS): Custom synthesis and manufacturing of fluorochemicals for various industries.
• Performance Chemicals: High-value fluorochemicals used in electronic materials, polymers, and other advanced applications.

Flagship or Signature Product Lines: The CRAMS business is a key strategic focus area, along with their range of specialty fluorides for agrochemicals and pharmaceuticals.

Key Technological Innovations or Patents: NFIL holds patents related to specific fluorination processes and the development of novel fluorochemical compounds.

Manufacturing Facilities and Production Capacity: NFIL operates multiple manufacturing facilities in India. Production capacities are continually expanding to meet growing demand.

Quality Certifications and Standards: NFIL likely holds certifications such as ISO 9001 (Quality Management), ISO 14001 (Environmental Management), and ISO 45001 (Occupational Health and Safety).

Any Unique Selling Propositions or Technological Advantages: NFIL’s strengths lie in their advanced fluorination technology, strong R&D capabilities, established customer relationships, and integrated manufacturing operations.

Recent Product Launches or R&D Initiatives: Recent initiatives include developing new specialty fluorides for advanced agrochemicals and pharmaceuticals.

Primary Customers #

Target Industries and Sectors:

• Agrochemicals
• Pharmaceuticals
• Refrigeration and Air Conditioning
• Electronic Materials
• Polymers
• Specialty Chemicals

Geographic Markets (domestic vs. international): NFIL serves both the domestic Indian market and international markets, with a growing emphasis on exports.

Major Client Segments (agricultural, industrial, residential, etc.): Customer segments are aligned with their target industries, including agricultural companies, pharmaceutical manufacturers, industrial chemical companies, and electronic material suppliers.

Distribution Network and Sales Channels: NFIL utilizes a combination of direct sales, distributors, and agents to reach its customer base.

Major Competitors #

Direct Competitors in India and Globally:

• India: SRF Limited, Gujarat Fluorochemicals Limited (GFL)
• Globally: Daikin Industries, Solvay, Arkema, Honeywell

Competitive Advantages and Disadvantages:

• Advantages: Strong R&D, specialized fluorination expertise, integrated manufacturing, CRAMS capabilities.
• Disadvantages: Susceptibility to raw material price fluctuations, competition from larger global players, reliance on regulatory approvals.

How they differentiate from competitors: NFIL differentiates itself through its focus on high-value specialty fluorochemicals, strong R&D capabilities, and CRAMS offerings.

Industry challenges and opportunities:

• Challenges: Environmental regulations, raw material price volatility, competition from cheaper imports, technological advancements.
• Opportunities: Growing demand for fluorochemicals in emerging markets, increasing adoption of new-generation refrigerants, expansion of CRAMS business, focus on sustainable solutions.

Market positioning strategy: NFIL aims to position itself as a leading provider of specialty fluorochemicals and CRAMS solutions, focusing on innovation, quality, and customer service.

Future Outlook #

Expansion plans or growth strategy: NFIL has ongoing capacity expansion projects to meet growing demand. Their growth strategy focuses on expanding their CRAMS business, developing new specialty fluorochemicals, and increasing their global presence.

Upcoming products or innovations: The company is actively engaged in R&D to develop innovative fluorochemical products for various applications, including new agrochemicals, pharmaceuticals, and electronic materials.

Sustainability initiatives or ESG commitments: NFIL is likely to have sustainability initiatives focused on reducing emissions, improving waste management, and promoting responsible manufacturing practices. Specific details can be found in their annual reports or sustainability reports.

Industry trends affecting their business: Key industry trends include the phase-down of HFC refrigerants, the growing demand for specialty fluorochemicals in electronics and pharmaceuticals, and the increasing focus on sustainable manufacturing.

Long-term vision and strategic goals: NFIL’s long-term vision is to be a leading global provider of specialty fluorochemicals, driven by innovation, sustainability, and customer satisfaction.

Navin Fluorine International Limited: FY 2023-24 Performance Overview #

Key Financial Metrics (Consolidated FY22-FY24 Trend Analysis) #

Detailed Analysis #

Financial Analysis: Navin Fluorine International Limited (FY2023-24) #

Balance Sheet Analysis #

Data Source #

This analysis is based on the FY2023-24 Annual Report. A two-year (FY24, FY23) consolidated balance sheet comparison is provided. Standalone data from the ‘Highlights Of 10 year’s Financial Performance’ is referenced where specified.

Overall Financial Performance (Consolidated FY2023-24 vs FY2022-23) #

• Total Income: ₹2,121.07 crores in FY24 (₹2,113.83 crores in FY23). Revenue from Operations: ₹2,065.01 crores in FY24 (₹2,077.40 crores in FY23).
• EBITDA (before exceptional items): ₹454.13 crores in FY24 (₹586.04 crores in FY23), a decrease of 22.5%.
• Operating EBITDA Margin: 19.29% in FY24 (26.49% in FY23).
• Profit Before Tax (PBT) (before exceptional items): ₹283.41 crores in FY24 (₹495.88 crores in FY23).
• Profit After Tax (PAT): ₹271.18 crores in FY24 (₹408.11 crores in FY23), a 33.5% decrease.

Segment Performance: #

• Specialty Chemicals: Revenue of ₹848 crores (14% YoY growth).
• High Performance Products (HPP): Revenue of ₹955 crores (8% YoY growth).
• Contract Development and Manufacturing Organisation (CDMO): Revenue of ₹262 crores (42% YoY decrease).

Comparative Financial Position (Consolidated Balance Sheet Analysis) #

Financial Analysis: Navin Fluorine International Limited (FY 2023-24) #

Revenue Breakdown and Growth Analysis #

Consolidated Performance #

• Total Income for FY 2023-24: ₹2,120.86 crores (FY 2022-23: ₹2,113.47 crores), a growth of 0.35%.
• Revenue from Operations for FY 2023-24: ₹2,065.01 crores (FY 2022-23: ₹2,077.40 crores), a de-growth of 0.60%.

By Business Vertical (Consolidated) #

Based on % of Revenue from Operations

High Performance Products (HPP) #

• FY 2023-24 Revenue: ₹955.00 crores (approx. 46.2% of Revenue from Operations).
• YoY Growth: 7.8% (FY 2022-23: ₹886 crores).
• Growth attributed to the commencement of new HFC R-32 plant, though subdued by lower sales from weak summer, pricing pressures, and extended stabilization of the Orchid (HFO) plant.

Specialty Chemicals #

• FY 2023-24 Revenue: ₹848.00 crores (approx. 41.1% of Revenue from Operations).
• YoY Growth: 14.1% (FY 2022-23: ₹743 crores).
• Growth driven by increased volumes from fully operational Dahej assets and new product launches, despite deferral of campaigns and channel inventory destocking.

Contract Development and Manufacturing Organisation (CDMO) #

• FY 2023-24 Revenue: ₹262.00 crores (approx. 12.7% of Revenue from Operations).
• YoY Decline: -42.0% (FY 2022-23: ₹452 crores, implied).
• Decline due to delayed approval of clinical phase molecules and volatile business nature. Plants operated at sub-optimal levels.

By Geography (Consolidated) #

% of Revenue from Operations

Export #

• FY 2023-24: 65% of Revenue from Operations (Approx. ₹1,342.26 crores).
• Change from FY 2022-23: Decreased by 1 percentage point (FY 2022-23: 66%).
• Exports impacted by weak demand, dumping of Chinese materials, destocking in agrochemicals, and significant decline in refrigerant export selling prices.

Domestic #

• FY 2023-24: 35% of Revenue from Operations (Approx. ₹722.75 crores).
• Change from FY 2022-23: Increased by 1 percentage point (FY 2022-23: 34%).

Cost Structure Analysis (Consolidated) #

Analysis #

• Cost of Materials Consumed as a percentage of revenue increased, potentially due to changes in product mix and pricing pressures on finished goods not fully offset by raw material cost decreases in some areas. While some key raw materials (sulphur, caustic soda, chloroform) saw price decreases, Fluorspar prices increased.
• Employee benefits expense increased due to annual increments, and strengthening capabilities across functions.
• Finance costs rose significantly, likely due to increased borrowings (e.g., ₹350 crores debt arranged by NFASL for the new HF plant) and potentially higher interest rates.
• Depreciation increased due to capitalization of new assets, including the full-year impact of assets commissioned in the previous year (Dahej assets) and new capitalizations in FY24.
• The significant swing in “Changes in Inventories” from a negative (build-up) in FY23 to a positive (draw-down/lower build-up) in FY24 indicates efforts to optimize working capital and destocking.

Margin Analysis (Consolidated) #

Cash Management: Navin Fluorine International Limited (FY 2023-24) #

Cash Flow Analysis (Consolidated, FY 2023-24 vs FY 2022-23) #

Operating Cash Flow (OCF) #

• FY 2023-24: ₹749.89 crores
• FY 2022-23: -₹63.59 crores
• Key Components (FY 2023-24): Profit before tax of ₹325.54 crores, adjusted for non-cash expenses (depreciation & amortization: ₹131.33 crores, finance costs: ₹55.85 crores) and significant positive changes in operating assets and liabilities, notably a decrease in inventories (contributing ₹96.33 crores) and a decrease in trade receivables (contributing ₹49.63 crores).

Investing Cash Flow (ICF) #

• FY 2023-24: -₹1,004.17 crores (Net Outflow)
• FY 2022-23: -₹758.18 crores (Net Outflow)
• Key Components (FY 2023-24): Major outflows include payments for property, plant, and equipment (₹249.01 crores) and purchase of investments (₹1,283.85 crores). Inflows included proceeds from the sale of investments (₹494.17 crores) and proceeds from the sale of property, plant, and equipment (₹61.65 crores, including exceptional item land sale).

Financing Cash Flow (FCF) #

• FY 2023-24: ₹247.59 crores (Net Inflow)
• FY 2022-23: ₹850.09 crores (Net Inflow)
• Key Components (FY 2023-24): Proceeds from long-term borrowings (₹350.00 crores) were a significant inflow, offset by dividend payments (₹39.66 crores) and interest paid (₹54.02 crores).

Free Cash Flow (FCF) #

• Free Cash Flow section is not complete, so removing it.

Operational Metrics #

Key Performance Indicators #

Financial Performance Analysis of Navin Fluorine International Limited (FY 2023-24) #

Overall Financial Performance (Consolidated) #

Navin Fluorine International Limited reported a consolidated total income of ₹2,121.30 crores for FY 2023-24, slightly down from ₹2,113.79 crores in FY 2022-23. Revenue from operations was ₹2,065.01 crores, compared to ₹2,077.40 crores in the previous year. Profit After Tax (PAT) significantly decreased to ₹271.10 crores from ₹408.18 crores in FY 2022-23. The Operating EBITDA margin (before exceptional items) contracted to 19.29% from 26.49% in the prior year. Export revenue accounted for 65% of total income. The company recorded an exceptional gain of ₹52.13 crores from the sale of surplus land in Surat.

Segment-wise Performance Analysis (FY 2023-24) #

Specialty Chemicals #

• Revenue: ₹848 crores (14% YoY growth), contributing 41% to total revenue.
• Growth Drivers: Increased volumes from existing products.

Risk Framework #

Comprehensive Risk Assessment #

Strategic Direction #

Strategic and Management Analysis #

Long-term Strategic Goals and Progress #

Navin Fluorine International Limited (NFIL) is focused on capacity-led growth driven by significant capital expenditure, strengthening customer partnerships, diversifying its High Performance Products (HPP) vertical, and expanding its Contract Development and Manufacturing Organisation (CDMO) revenue share to a target of 20%. Key ongoing projects include:

• A new 40,000 TPA Hydrofluoric Acid (HF) plant at Dahej (via subsidiary Navin Fluorine Advanced Sciences Limited (NFASL)), expected to be operational in early 2025 (Board’s Report indicates early FY26).
• cGMP capex project (Phase 1: ₹160 crores of total ₹288 crores) to support a multi-year MSA with a European CDMO, with Phase 1 commissioning expected by end of CY 2025.
• Refrigerant R32 capacity expansion by 4,500 MT (capex ₹84 crores), slated for commissioning by February 2025.
• A specialty agrochemical intermediate plant at Dahej (capex ₹540 crores) on track for commissioning in 1H FY25 (Board’s Report Q2 FY25).

Management aims to operate as both a “Platform Company” and a “Partnership Company,” emphasizing disciplined project execution within a robust financial framework.

Competitive Advantages and Market Positioning #

NFIL leverages over 50 years of expertise in complex fluorine chemistry, positioning itself as one of India’s largest integrated specialty fluorochemical manufacturers. Key competitive advantages include:

• Backward integration into Anhydrous Hydrofluoric Acid (AHF), ensuring raw material security and cost control.
• Leadership position as one of the largest global manufacturers of Boron Trifluoride (BF3) and a significant Indian producer of inorganic fluorides.
• Pioneer in Indian refrigerants (Mafron brand) and India’s first and only producer of Hydrofluoroolefins (HFOs) in the HPP segment.
• CDMO business (“Navin Molecular”) benefiting from India’s only high-pressure fluorination plant with cGMP compliance.
• Strategically located manufacturing units near ports.
• Global reach with 65% of revenue in FY24 from international markets.
• Serving marquee clients, including Fortune 500 firms, across life sciences, crop sciences, petrochemicals, and specialty chemicals.

Innovation Initiatives and R&D Effectiveness #

NFIL emphasizes innovation through its Navin Research Innovation Centre (NRIC) in Surat and an R&D center in Dewas (Navin Molecular).

• Total R&D expenditure in FY24 was ₹125 crores, resulting in the development of 76 products.
• Surat R&D center (72 members) focuses on fluorinated specialty chemicals, delivering approximately 26 projects in FY24.
• Dewas R&D center (65 members, including Manchester Organics Limited) focuses on CDMO projects, delivering around 50 projects in FY24 with an OTIF of 93%.
• Key developments include a new R&D and Pilot Centre, a Process Safety Lab, and flow chemistry capabilities.
• Commercialized R32 based on in-house technology.

The company focuses on developing novel, economically viable, safe, and environmentally friendly commercial manufacturing processes.

M&A Strategy and Execution #

The provided information indicates a focus on organic growth through capex rather than recent M&A activity. The existing structure includes:

• Manchester Organics Limited (MOL), UK: a wholly-owned subsidiary undergoing a turnaround strategy.
• Navin Fluorine Advanced Sciences Limited (NFASL): a material wholly-owned subsidiary for executing large-scale greenfield projects.
• NFIL USA Inc., Navin Fluorine (Shanghai) Co. Ltd.: serving strategic market presence and procurement objectives.

The primary M&A-related activity appears to be the optimization and integration of past acquisitions like MOL.

Management’s Track Record in Execution #

Management consistently emphasizes a “successful track record of disciplined execution.”

• The agro specialty capex at Dahej (₹540 crores) is reported to be on track for H1 FY25 commissioning, with POs secured for the dedicated capacity for CY 2024.

ESG Framework #

Financial Performance Analysis: Navin Fluorine International Limited (FY 2023-24) #

Overall Financial Performance #

Navin Fluorine International Limited reported consolidated revenues of ₹2,065 crores for FY 2023-24, a marginal decrease from ₹2,077.40 crores in FY 2022-23. Consolidated Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) fell to ₹454.13 crores from ₹586.04 crores. Operating EBITDA declined by 27.62% to ₹398.28 crores from ₹550.31 crores, resulting in a decrease in the Operating EBITDA Margin to 19.29% from 26.49%. Consolidated Profit After Tax (PAT) stood at ₹271 crores.

The decline in profitability was attributed to challenging market conditions. However, the company demonstrated operating cash flow generation of ₹749.89 crores. Net Debt to Equity ratio remained at 0.37.

Segmental Performance Analysis #

Specialty Chemicals #

• Revenue: ₹848 crores, a 14% year-on-year growth.
• Contribution to Total Revenue: Approximately 41%.
• Performance Drivers: Increased volumes from new products and Dahej assets.
• Strategic Focus: Transition from pharmaceutical to agrochemical intermediates and new molecule development.

High-Performance Products (HPP) #

• Revenue: ₹955 crores, an 8% year-on-year growth.
• Contribution to Total Revenue: Approximately 46%.
• Performance Drivers: Commencement of the new R-32 plant.
• Strategic Focus: Expansion of R32 capacity and a new HF plant at Dahej to cater to renewables and EV markets.

Contract Development and Manufacturing Organisation (CDMO) #

• Revenue: ₹262 crores, a 42% year-on-year decline.
• Contribution to Total Revenue: Approximately 13%.
• Strategic Developments:
  • Launch of “Navin Molecular” brand.
  • Focus shift towards increasing revenue share from commercial and late-phase molecules.
  • Signed multiple Master Service Agreements (MSAs) with a large European CDMO.
• Capex & Outlook: A cGMP4 capex of ₹288 crores approved.

Capital Expenditure and Future Outlook #

• HF Plant (Dahej, NFASL): ₹450 crores, 40,000 TPA, targeting emerging sectors, expected operational by early 2025.
• Agro Specialty Plant (Dahej): ₹540 crores, for fluorine-based agro intermediates, expected commercial production in Q2 FY25.
• R32 Capacity Expansion (HPP): ₹84 crores, additional 4,500 MT, commissioning by February 2025.
• cGMP4 Facility (CDMO): ₹288 crores (Phase 1: ₹160 crores), operational by end CY 2025.

Financial Performance Overview (FY2023-24) #

Navin Fluorine International Limited (NFIL) reported consolidated total income of ₹2,121.28 crores for FY2023-24, a marginal decrease from ₹2,113.97 crores in FY2022-23. Revenue from operations was ₹2,065.01 crores, slightly down from ₹2,077.40 crores in the previous year. Consolidated Profit After Tax (PAT) stood at ₹271.07 crores.

Operating EBITDA (before exceptional items and other income) declined by 27.62% to ₹398.28 crores from ₹550.31 crores in FY2022-23. Consequently, the Operating EBITDA margin contracted significantly to 19.29% from 26.49%. This margin compression is attributed to a challenging market environment, including geopolitical tensions, inflation, higher interest rates, and destocking in the agrochemical sector, alongside a change in business mix, lower operating leverage, and pricing pressures in refrigerant gases in export markets. An exceptional gain of ₹52.13 crores was recorded from the sale of surplus unused colony land.

Net Debt to Equity ratio remained healthy at 0.37, within the company’s guided framework of approximately 0.5x. The working capital cycle was maintained at around 104 days of turnover.

Segmental Performance Analysis #

Specialty Chemicals #

• Revenue: ₹848 crores, registering a 14% year-on-year (YoY) growth. This segment contributed 41% to total revenue.
• Drivers: Growth was driven by increased volumes and new product launches, particularly from the full operationalization of Dahej assets. The segment demonstrated resilience despite deferral of campaigns and channel inventory destocking in the agrochemical space.
• Outlook: Focus on deepening relationships in crop science applications and incubating opportunities in performance materials, including electronic and semiconductor chemicals. The Dahej agro specialty capex is expected to be commissioned in 1H FY25, with POs secured for CY2024. A new capability in Surat is anticipated to generate revenue from FY26.

High Performance Products (HPP) #

• Revenue: ₹955 crores, an 8% YoY growth, contributing 46% to total revenue.
• Drivers: Growth was supported by the commencement of the new HFC R-32 plant.
• Challenges: The segment faced pricing pressures in export markets (R22, HFO), a weak summer impacting refrigerant gas sales, and extended stabilization of the Orchid plant. HFO business was impacted by volume pressure due to weak US housing sector demand. R22 export pricing pressure stabilized in Q1 FY25.
• Outlook: Expansion of R32 capacity by 4,500 MT (commissioning by February 2025) and a new 40,000 TPA HF plant at Dahej (NFASL, operational early CY2025) are key growth enablers. The strategy involves transitioning from HCFCs to HFCs and further to HFOs.

Contract Development and Manufacturing Organisation (CDMO) #

• Revenue: ₹262 crores, a decline of 42% YoY, contributing 13% to total revenue under the ‘Navin Molecular’ brand.
• Challenges: Performance was impacted by delayed approvals of clinical phase molecules, the inherently volatile/campaign-based nature of the business, and postponement of commercial stage approvals for certain late-stage drugs. Plants operated at sub-optimal levels.
• Developments: Multiple Master Service Agreements (MSAs) signed with a leading European CDMO for commercial products, expected to contribute significantly from FY26. The portfolio now comprises over 50% non-fluorinated molecules by revenue. Capex of approximately ₹50 crores was incurred in FY24 for debottlenecking cGMP-3, establishing dedicated hydrogenation capability, and augmenting ETP.
• Outlook: Strategic focus on increasing the share of commercial and late-phase molecules. A cGMP4 capex of ₹288 crores (Phase 1 outlay of ₹160 crores, expected commissioning by end of CY2025) is underway to support the European CDMO MSA and augment capacity.

Strategic Initiatives and Capital Expenditure #

NFIL is pursuing capacity-led growth with significant capex investments:

• New HF Plant (Dahej, NFASL): ₹450 crores investment for a 40,000 TPA capacity, expected to be operational in early 2025. This aims to cater to increasing demand from emerging sectors like renewables and EV markets and provide backward integration.
• R32 Capacity Expansion: Additional ₹84 crores capex for expanding R32 capacity by 4,500 MT, slated for commissioning by February 2025.
• cGMP4 Capex (CDMO): ₹288 crores allocated, with Phase 1 outlay of ₹160 crores to support the MSA with a European CDMO, expected to be commissioned by the end of CY2025.
• Agro Specialty Plant (Dahej): Investment of ₹540 crores, on track for commercial production in Q2 FY25 (as per Board’s Report; Chairman’s communique mentions early FY25).
• R&D and Pilot Centre: A new R&D and Pilot Centre, alongside a Process Safety Lab, was commissioned to facilitate testing of new molecules.

Financial Analysis Report: Navin Fluorine International Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements #

• The Statutory Auditors, Price Waterhouse Chartered Accountants LLP, issued an unqualified opinion, stating the standalone financial statements give a true and fair view of the state of affairs as at March 31, 2024, and of its total comprehensive income, changes in equity, and cash flows for the year then ended, in conformity with Indian Accounting Standards (Ind AS).

Key Audit Matter (KAM) #

• Assessment of Carrying Value of: a) Investment in Wholly Owned Subsidiaries i.e., NFIL (UK) Limited, UK and Manchester Organics Limited, UK; and b) Identified Property, Plant and Equipment (PP&E) relating to Dewas Unit. The auditors performed procedures including understanding management’s process, evaluating internal controls, assessing CGU determination, comparing forecasts to actuals, engaging valuation experts for discount/growth rates, sensitivity analysis, and checking computations. They found management’s assessment reasonable.

Other Reporting Matter #

• The auditors noted that the accounting software used has an audit trail (edit log) facility which operated throughout the year for all relevant transactions, except when certain privileged access is used, the audit log does not capture pre-modified values, and the audit trail was not enabled at the database level for direct data changes via privileged access (since activated). For payroll software operated by a third-party, an ISAE 3402 Type 2 report was not available, preventing comment on its audit trail feature.

Consolidated Financial Statements #

• The Statutory Auditors issued an unqualified opinion, stating the consolidated financial statements give a true and fair view of the consolidated state of affairs as at March 31, 2024, and of its consolidated total comprehensive income, consolidated changes in equity, and consolidated cash flows for the year then ended, in conformity with Ind AS.

Key Audit Matter (KAM) #

• Impairment assessment of carrying value of: a) Goodwill relating to acquisition of Manchester Organics Limited, U.K.; and b) Identified Property, Plant and Equipment (PP&E) relating to Dewas Unit. Auditor procedures were similar to standalone, leading to a conclusion that management’s assessment was reasonable.

Other Auditors #

• The opinion relies on the audit reports of other auditors for one subsidiary (total assets ₹34.93 cr, net assets ₹19.53 cr) and converted financial statements (audited by other auditors under their local GAAP) for two subsidiaries and one step-down subsidiary located outside India (total assets ₹63.29 cr, net assets ₹63.19 cr). Unaudited financial statements certified by management were used for one subsidiary and one branch outside India, and one joint venture, deemed not material to the Group.

Other Reporting Matter #

• Similar comments regarding the audit trail (edit log) facility in accounting software and third-party payroll software as in the standalone report.

Key Accounting Policies and Changes #

Basis of Preparation #

• Financial statements are prepared in accordance with Ind AS under the historical cost convention, except for certain financial assets/liabilities at fair value, defined benefit plan assets at fair value, and share-based payments at fair value.

Key Policies #

• Standard Ind AS policies are applied for revenue recognition (point in time, net of variable consideration), leases (RoU asset and lease liability recognized), income taxes (current and deferred tax using liability method), employee benefits (short-term, long-term, post-employment including defined benefit and contribution plans), share-based payments (equity-settled at fair value), PPE (cost less depreciation, SLM), investment properties (cost less depreciation), intangible assets (goodwill tested for impairment, software amortized), inventories (lower of cost and NRV), financial instruments (classified at amortized cost, FVTPL, or FVOCI based on business model and cash flow characteristics), and principles of consolidation (subsidiaries fully consolidated, joint ventures equity accounted).

Changes in Accounting Policies #

• The Group adopted amendments to Ind AS 1 (Disclosure of accounting policies), Ind AS 8 (Disclosure of accounting estimates), and Ind AS 12 (Deferred tax related to assets and liabilities arising from a single transaction), effective April 1, 2023. These amendments did not have any material impact on recognized amounts and are not expected to significantly affect current or future periods.

Internal Control Effectiveness #

Auditor’s Opinion #

• For both standalone and consolidated financial statements, the auditors opined that the Company/Group has, in all material respects, an adequate internal financial controls system with reference to financial statements and such controls were operating effectively as at March 31, 2024.

Management’s Responsibility #

• The Board of Directors confirmed they have laid down internal financial controls to be followed by the Company and that such controls are adequate and operating effectively. The Management Discussion and Analysis (MD&A) report details robust internal control systems tailored to operational size and complexity, integrated via SAP, regularly tested by statutory and internal auditors, with significant findings reported to the Audit Committee.

Regulatory Compliance Status #

General Compliance #

• The Board’s Report and Corporate Governance Report affirm compliance with applicable provisions of the Companies Act, 2013, SEBI Listing Regulations, and Secretarial Standards.

Secretarial Audit #

• The Secretarial Audit Report (Standalone) by Parikh & Associates for FY 2023-24 indicates compliance with statutory provisions and proper Board processes. One observation noted was the inability to file Form MR-1 for MD re-appointment due to technical reasons, subsequently filed via e-Form GNL-2. The Secretarial Audit Report for the material subsidiary, Navin Fluorine Advanced Sciences Limited (NFASL), was also unqualified.

Environmental Compliance #

• The Business Responsibility and Sustainability Report (BRSR) and Directors’ Report note that NFASL was directed by the Gujarat Pollution Control Board (GPCB) on August 04, 2023, to pay Environment Damage Compensation of ₹1 crore for alleged violations of the Air (Prevention and Control of Pollution) Act, 1981. The Company states it has reviewed concerns and taken immediate measures for resolution.

Capital Market Compliance #

• The Corporate Governance Report states no penalties or strictures were imposed on the Company by SEBI or Stock Exchanges on capital market-related matters in the last three years.