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SANSCO SERVICES - Annual Reports Library Services - www.sansco.net <§ CHAMBAL FERTILISERS AND CHEMICALS LIMITED EIGHTEENTH ANNUAL REPORT 2002-2003 www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net CONTENTS Directors' Report 2 Auditors' Certificate on Corporate Governance 8 Report on Corporate Governance 9 Management Discussion and Analysis Report 16 Auditors' Report 20 Balance Sheet 22 Profit & Loss Account 23 Cash Flow Statement 24 Schedules to Financial Statements 25 General Business Profile 45 www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net CHAMBAL FERTILISERS AND CHEMICALS LIMITED DIRECTORS REGISTERED OFFICE Gadepan, Dr. K. K. Birla Distt. Kota, Rajasthan Chairman PIN - 325 208 H.S. Bawa Vice Chairman SENIOR EXECUTIVES CORPORATE OFFICE International Trade Tower D.L. Birla H.C. Grover Executive President - BTM E Block, 14th Floor, Managing Director Nehru Place, Ajit Chakravarti New Delhi-110019 Sunil Sethy Vice President - Corporate HR It. Managing Director Nirmal Jain LEGAL ADVISORS President - ISC Mohd. Y.A. Al-Roomi Crawford Bayley & Co., (Alternate: P.J. Batavia) Anil Kapoor Mumbai Vice President - Strategic Planning R.N. Bansal AUDITORS V. Krishnan Vice President - Corporate Finance S.R. Batliboi & Co. Dipankar Basu Chartered Accountants R.D. Mall Vice President - Operations Shyam S. Bhartia BANKERS S.M. Nadgir Bank of Baroda M.D. Locke Vice President - Agri-Business (Alternate: C.S. Nopany) Punjab National Bank S.K. Patra State Bank of India S.K. Poddar Vice President Marketing Allahabad Bank State Bank of Indore A.J.A. Tauro GENERAL MANAGER - LEGAL State Bank of Patiala & SECRETARY State Bank of Hyderabad Marco Wadia M.S. Rathore State Bank of Bikaner & Jaipur www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net under the Retention Price Scheme. During the year, the Directors' Report Retention Price support for Gadepan - I plant was To accounted on the basis of Retention Prices notified after the implementation of 7th and 8th pricing parameters The Members, and further adjusted for input price escalation/de- Your Directors have pleasure in presenting the 18th Annual escalation. Report together with audited accounts for the financial year During the year 2001-02, the estimated impact of Final ended March 31, 2003. Retention Price and 7th and 8th pricing period was accounted for on the basis of then prevailing norms and 1. Financial Results and Appropriations policies. Thereafter, there have been changes in the (Rs. in Crores) Government Policies in this regard specifically in the Particulars 2002-2003 2001-2002 matter of Capital Related Charges in respect of certain category of capital expenditure. These changes resulted Turnover* 1950.25 1910.20 in lower subsidy receivables from the Government than Gross Profit after interest but the earlier estimate. before hon recurring subsidy items, Depreciation and Tax 317.04 295.61 Whilst the Company is representing to the respective Depreciation 141.47 139.51 authorities in respect of certain material matters, as a Profit before non recurring measure of prudent accounting, the difference in subsidy items and tax 175.57 156.10 estimated income and actual notification has been Non recurring subsidy items (60.93) (0.86) reversed and shown as "Non recurring subsidy items" Profit before tax 114.64 155.24 in the financial results of the year. Provision for current taxation 9.03 11.82 Gadepan-II Provision for Deferred Tax 16.24 66.24 During the current year, the Final Retention Price for Profit after tax 89.37 77.18 Gadepan II plant, which commenced commercial Balance of Profit brought forward 60.24 196.45 production w.e.f October 20, 1999, was notified and Less: Deferred Tax Liability as accordingly the Retention Price Support has been on 1st April 2001 adjusted - (137.18) accounted for on the basis of Final Retention Price Transferred from Debenture further adjusted for escalation / de-escalation of input and Debt Redemption Reserve 48.23 68.36 prices. Profit available for appropriation 197.84 204.81 Appropriations: 4. New Fertiliser Pricing Policy . Debenture Redemption Reserve 5.00 13.75 The Group of Ministers (GoM) was set up in March • Debt Redemption Reserve - 17.76 2002, which examined the Expenditure Reform • Capital Redemption Reserve - 25.00 Commission's (ERC) recommendations for a Long Term • General Reserve 25.00 25.00 Pricing Policy and submitted their recommendations to • Interim dividend on Cumulative . the Cabinet Committee on Economic Affairs (CCEA) in Redeemable Non Convertible December 2002. CCEA cleared the Long Term Pricing Preference Shares - 1.96 Policy w.e.f. April 1, 2003 but left certain issues to be • Tax on Preference Dividend - 0.20 resolved between Department of Fertilisers and the • Proposed Dividend on Ministry of Finance. Equity Shares 60.90 60.90 • Tax on proposed dividend 7.80 The full impact of the policy will be known only after Balance carried forward to each unit's Retention Price is updated based on Balance Sheet 99.14 60.24 escalation / de-escalation till March 31, 2003 and after Gokak Committee's recommendations are submitted * Excluding excise duty and accepted by GOI. The Industry is in the process of meeting with the Government to seek more clarity on 2. Dividend the above. Your Company and the industry fully realize The Board recommends dividend of Rs. 1.50 per equity that a long term uniform policy is necessary but in the share on 40,60,00,000 equity shares of Rs. 10 each process the government must ensure that the long term (Previous year Rs. 1.50 per share). The total outgo on viability of this core industry is not endangered. this account will be Rs. 68.70 crores including dividend tax. The policy as currently formulated is not expected to negatively impact the Company in the long term. 3. Retention Price 5. Joint Venture* Gadepan - I Urea price is regulated by the Government of India (i) Indo Marac Phosphore S.A., Morocco (IMACID) through fixation of uniform Consumer Price and IMACID is a 50:50 joint venture between Office Ex-Factory Retention Price for each manufacturing unit Cherifien Des Phosphates, Morocco and your www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net CHAMBAL FERTILISERS AND CHEMICALS LIMITED <S Company. During the year 2002, IMACID produced branches and has received encouraging response 2,76,791 MT of Phosphoric Acid (P2O5) with from public at large. capacity utilization of 84% on normative basis and During the year 2002-03, the Company has earned 101.70% on stream days basis. Sales during the Cash Profit of Rs. 2.5 crores (provisional) against period were 2,82,694 MT of Phosphoric Acid, Rs. 3.14 crores earned during the year 2001-02. which included 11,799 MT of Phosphoric Acid, tolled as DAP. The cash profit during the year was (iv) NovaSoft Information Technology Corporation Moroccan Dirham (MAD) 118.20 million (US$ 11.6 (NovaSoft) million) against MAD 190.6 million (US$ 18.71 Your Company had acquired a stake in US based million) in the previous year. Drop in profitability NovaSoft in November 2001 through US $ 2 million was as a result of unplanned shutdown due to subscription of convertible preferred stock. The super heater breakdown in the sulphuric acid plant Company has opted to convert preferred stocks into and lower safes realization on sales of P2O5. The common stocks on April 30, 2003. Consequent breakdown of the equipment and the consequent upon the conversion, the Company has acquired loss of production are covered by insurance. The about 51% equity stake in NovaSoft from this date. claim is being processed by the insurance company. The Company further purchased from the promoters, common stocks valued at US$ 700,000 raising its (ii) Chambal Agritech Limited (CAL) holding to about 69%. CAL is a 50:50 Joint Venture between your Company NovaSoft is directly providing IT consulting services and Technico- Pty. Ltd., Australia to produce in USA and through wholly owned subsidiaries in miniature potato seeds known as TECHNITUBER™. United Kingdom, Germany and Singapore. The During the financial year 2002-03, CAL produced services offered by NovaSoft include professional 15.71 million TECHNITUBER™ Seeds. services group, solutions group and education. CAL sold 124,500 TECHNITUBER™ seeds and 1,534 NovaSoft offers its services in manufacturing, MT Early Generation seeds during financial year financial, health and government sectors. NovaSoft 2002-03. The feedback received from the market is had moved up the value chain in ERP application encouraging. CAL will achieve full commercial and key customers in this market were being pursued production of Early Generation Seeds during the closely. year 2003-04. The primary objectives of the Company for the year In order to tap the export market, CAL has signed 2002 were to turnaround the operations to make it MOU with Alpha Agro, Bangladesh and Hayleys profitable, achieve better customer focus to establish Agro Product, Sri Lanka. long-term partnerships and move up the value chain to increase higher margin revenue stream. It During the year 2002-03, CAL has incurred cash has reduced its overheads and re-deployed its team loss of Rs. 3.82 crores (Provisional). Since, this to achieve the aforesaid objectives. project has a long gestation period, the losses are mainly on account of early stages of expenditure For the year ended December 2002, the provisional incurred during the multiplication of seeds, market revenue and cash profit of Novasoft were US$ development and inventories. 19.67 million and 0.61 million, respectively. (v) Technico Pty. Limited (Technico) (iii) Birla Home Finance Limited (BHFL) Your Company incorporated a new company in BHFL is a 50:50 joint venture between your Singapore viz. Chambal Biotech Private Limited as Company and BHW Holding AG, Germany.

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