Annual Report: 2021
Here is a comprehensive summary of the 66th Annual Report for 2020-21 of Indian Potash Limited (IPL), covering its financial performance, operations, and key initiatives:
General Overview & Director's Report:
India experienced above-normal rainfall during the pre-monsoon and southwest monsoon seasons, leading to higher sowing and improved reservoir levels. This augmented fertilizer demand and improved sales performance. The live storage in 128 major reservoirs was significantly higher than the 10-year average. Demand outlook for fertilizers remained positive. Agriculture was a bright spot despite the coronavirus pandemic. Sales through Point of Sales (POS) system are now a key indicator of actual fertilizer consumption. All India sales of urea, DAP, MOP, and complexes increased. IPL's urea sales depend on imports by the Department of Fertilizers (DOF), while DAP and MOP are decontrolled fertilizers, more directly reflecting company performance. Panic buying by farmers and dealers, coupled with lower international prices, led to increased fertilizer sales initially. Imports of urea were higher to avoid shortages. The fertilizer industry witnessed a spurt in international DAP prices from late October 2020. IPL lowered DAP imports and imported more complex fertilizers.
Financial Performance (FY 2020-21):
Total volume sales reached 7.8 million tonnes, a 26% increase. Total income was Rs. 16,581.09 crores, a 13% growth. Turnover was the highest in the last 8 years, attributed to higher volume sales despite per tonne realization decrease due to subsidy reduction. Profit Before Tax (PBT) was Rs. 759.95 crores, a 44% growth and the highest ever since IPL's inception. Profit After Tax (PAT) was Rs. 570.07 crores, a 64.29% growth and also the highest ever.
Factors Affecting Profitability:
Credit Rating & Bio-Refinery Project:
Credit rating agencies enhanced IPL's rating outlook from A1+ to AA- stable for long-term borrowings. The bio-refinery project successfully completed trial operations of distillery and Bio-CNG operations in Uttar Pradesh. The Bio-CNG plant was dedicated to the nation under the Ujwala scheme. The distillery project is in the final stages of commercial operations.
Extension & Promotion Activities:
IPL conducted numerous field activities, campaigns, farmer meetings, crop seminars, and dealer training programs to promote balanced fertilization and increase fertilizer use efficiency. The Indo Canadian Potash Promotion Project (ICPPP) continued across 5 states despite Covid-19. The Potash for Life (PFL) project continued across 11 states.
Prospects for 2021-22:
Rural demand is expected to remain strong. Agriculture is expected to grow with normal monsoon forecasts and bumper harvests. Economic activities are expected to normalize due to the COVID vaccination program. Normal monsoons will result in healthy moisture levels and rising water levels.
Challenges and Risks:
Credit metrics of the fertilizer industry are expected to remain subdued due to delays in subsidy disbursement. The company faces issues regarding inadequate subsidy provisioning, affecting liquidity. International prices are expected to increase. China curtailing fertilizer export to meet domestic demand may also affect international prices. The government may push for increasing importation even at higher cost and not revise the selling price.
Share Capital & Dividend:
Authorized share capital is Rs. 6,120 lakhs. Issued, subscribed, and paid-up capital is Rs. 2,859.72 Lakhs. The Directors recommend a dividend of Rs. 4/- per equity share.
Subsidiaries & Amalgamation:
A statement containing salient features of the financial statements of the Company's subsidiaries is included. The scheme of amalgamation of M/s. Goldline Milkfood, M/s. IPL Gujarat Port, and M/s. Sri Krishna Fertilisers with the Company became effective April 1st, 2019.
Board of Directors and Governance:
Various changes occurred in the Board of Directors during the year. The company had difficulties in appointing Independent Directors due to Covid-19 restrictions. The Company reconstituted the Board with the appointment of 3 Additional Directors in August, 2021. The board met four times during the year via video conference. The Audit Committee and Nomination and Remuneration Committee also met.
Corporate Social Responsibility (CSR):
The CSR committee met twice. IPL supplied 5 Medical Oxygen generation plants to hospitals in Uttar Pradesh. CSR activities focused on eradicating hunger, promoting education, ensuring environmental sustainability, and other social causes. 2% of the average net profits of the preceding 3 years are allocated to CSR, with Rs.1,039.66 lakhs being the average profit before tax of the company for the last three financial years. The company spent Rs 241.57 lakhs.
Auditors' Report & Internal Controls:
Price Waterhouse Chartered Accountants LLP were re-appointed as statutory auditors. The Board is addressing a First Information Report (FIR) filed by the CBI against the Managing Director. The Board believes no independent investigation is necessary at this stage. The company has a strong internal control mechanism.
Extracts of Annual Return & Other Disclosures:
A standardized Risk Management Process and System is in place. The Company has a Whistle Blower Policy. Details on Conservation of Energy, Technology Absorption, and Foreign Exchange Earnings and Outgo are provided.
Key Financial Data:
Auditors' Qualifications: The auditor's report includes qualified opinions due to concerns regarding an ongoing CBI investigation, non-compliance regarding the composition of the Board of Directors and Audit Committee, and the lack of prior approval for certain related-party transactions.
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