MIRA
INFORM REPORT
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Report Date : |
26.11.2008 |
IDENTIFICATION DETAILS
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Name : |
SOUTHERN PETROCHEMICAL INDUSTRIES CORPORATION LIMITED |
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Registered Office : |
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Country : |
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Financials (as on) : |
31.03.2008 |
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Date of Incorporation : |
18.12.1969 |
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Com. Reg. No.: |
18-005778 |
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CIN No.: [Company
Identification No.] |
L11101TN1969PLC005778 |
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Legal Form : |
Public Limited Liability Company. The Company Shares Are Listed On
Stock Exchange. |
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Line of Business : |
Manufacturing and Marketing of Ammonia, Urea, Complex Fertilisers (DAP & NPK) in terms of P2O5, Aluminium Fluoride, Caustic Soda, Liquid Chlorine, Hydrochloric Acid, Ammonium Chloride, Sulphuric Acid, Phosphoric Acid and Penicillin-G (MMU). |
RATING & COMMENTS
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MIRA’s Rating : |
Ca |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
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Status : |
Poor |
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Payment Behaviour : |
Slow |
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Comments : |
Subject is an established company but not doing well. Its financial position is moderate. Payments are reported as slow by + 30/60 days. The company continues to incur huge losses. The company can be considered normal for business dealings at usual trade terms and conditions with some caution. |
LOCATIONS
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Registered Office : |
South India House, 99, |
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Head Office : |
SPIC HOUSE, |
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Tel. No.: |
91-44-22350245 |
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Fax No.: |
91-44-22352163 |
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E-Mail : |
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Website : |
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Corporate Office : |
73, |
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Factory 1 : |
Fertilizer Division SPIC Nagar, Tuticorin 628 005. Pharmaceuticals Division Penicillin - G Plant , Plot No.C 14-16, SIPCOT Industrial
Complex, API Plant, Plot No.3&4, NH-7, Maraimalai Nagar 603
209 Formulations Plant, Plot
No.5, NH-7, Maraimalai Nagar 603 209 Biotechnology Division Agro Biotech Centre Chitrai Chavadi, Pooluvapatti Post, Bioproducts Agro Industrial Complex Seed Conditioning Plant |
DIRECTORS
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Name : |
Dr. A.C. Muthiah |
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Designation : |
Chairman |
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Qualification : |
B.E. (Mech.), Management
Studies, |
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Name : |
Mr. Ashwin C. Muthiah |
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Designation : |
Vice chairman |
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Qualification : |
B.E.(Hons), Ph. D. |
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Name : |
Mr. Kumar jayant, IAS |
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Designation : |
Director |
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Name : |
Mr. M.F.Farooqui, IAS |
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Designation : |
Director |
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Name : |
Mr. Surjit K. Chaudhary, IAS |
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Designation : |
Director |
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Name : |
Mr. N.R. Krishnan |
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Designation : |
Director |
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Name : |
Mr. M. Jayasankar |
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Designation : |
Director |
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Name : |
Mr. Jawahar Vadivelu |
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Designation : |
Director |
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Name : |
Mr. K. Natarajan |
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Designation : |
Director |
KEY EXECUTIVES
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Name : |
Mr. N. Ramakrishnan |
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Designation : |
Company Secretary |
MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN
AS ON 31.03.2008
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Names of Shareholders |
No. of Shares |
Percentage of
Holding |
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(a) TIDCO |
8840000 |
8.19 |
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(b) Dr. M A Chidambaram Group |
33516733 |
31.05 |
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Financials Institutions And Nationalized Banks |
4853831 |
4.50 |
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The Bank Of |
17287500 |
16.01 |
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Foreign Institutional Investors |
11340602 |
10.51 |
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Non-Resident Individuals |
778461 |
0.72 |
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Foreign Companies |
39800 |
0.04 |
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Mutual Funds |
10800 |
0.01 |
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Public And Others |
31280469 |
28.97 |
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Total |
107948196 |
100.00 |
BUSINESS DETAILS
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Line of Business : |
Manufacturing and Marketing of Ammonia, Urea, Complex
Fertilisers (DAP & NPK) in terms of P2O5, Aluminium
Fluoride, Caustic Soda, Liquid Chlorine, Hydrochloric Acid, Ammonium
Chloride, Sulphuric Acid, Phosphoric Acid and Penicillin-G (MMU). |
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Products : |
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PRODUCTION STATUS AS ON 31.03.2008
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Particulars |
Unit |
Licensed
Capacity Per
annum |
Installed
Capacity Per
annum |
Actual
Production For
18 months |
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Ammonia |
Metric Tonnes |
352000 |
352000 |
150534 |
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Metric Tonnes |
(352000) |
(352000) |
(570735) |
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Urea |
Metric Tonnes |
- |
620400 |
257701 |
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Metric Tonnes |
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(512000) |
(983207) |
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Complex Fertilisers (DAP AND NPK ) in terms of P2 O5 (Phosphorous
Pentoxide) |
Metric Tonnes |
- |
278800 |
94596 |
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Metric Tonnes |
- |
(278800) |
(241973) |
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Aluminium Fluoride |
Metric Tonnes |
- |
10000 |
6132 |
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Metric Tonnes |
- |
(2560) |
(6566) |
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Sulphuric Acid |
Metric Tonnes |
150000 |
150000 |
89444 |
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Metric Tonnes |
(150000) |
(150000) |
(191969) |
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Phosphoric Acid |
Metric Tonnes |
52800 |
52800 |
32365 |
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Metric Tonnes |
(52800) |
(52800) |
(72890) |
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Pencillin – G (MMU) |
Metric Tonnes |
- |
2000 |
2833 |
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Metric Tonnes |
- |
(2000) |
(2961) |
GENERAL INFORMATION
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Bankers : |
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Facilities : |
Secured Loans as
on 31.03.2008
Unsecured Loans
as on 31.03.2008
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Banking
Relations : |
- |
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Auditors : |
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Name : |
Fraser and Rose Chartered Accountants Chennai |
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Subsidiaries : |
Ø Orchard Microsystems Limited Ø Ind-ltal Chemicals Limited Ø SPIC Petrochemicals Limited Ø Indo-Jordan Chemicals Company Limited Ø
SPIC Fertilizers and Chemicals Limited, Ø
SPIC Fertilizers and Chemicals FZE, Ø SPEL Semiconductor Limited Ø
SPEL America Inc., |
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Associates : |
Ø Tuticorin Alkali Chemicals & Fertilisers Limited Ø Manali Petrochemical Limited Ø Gold Nest Trading Company Limited Ø
EDAC Engineering Limited (with effect -from
23,10.2007) |
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Joint Ventures : |
Ø Tamilnadu Petroproducts Limited Ø Technip India Limited Ø National Aromatics and Petrochemicals Corporation Limited Ø SPIC JEL Engineering Construction Limited Ø
(ceased to be a joint venture with effect from
23.10.2007) |
CAPITAL STRUCTURE
AS ON 31.03.2008
Authorised Capital :
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No. of Shares |
Type |
Value |
Amount |
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191000000 |
Equity Shares |
Rs. 10/- Each |
Rs.1910.000
Millions |
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10900000 |
Redeemable Cumulative Preference Shares |
Rs.100/- Each |
Rs.1090.000
Millions |
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Total |
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Rs.3000.000
Millions |
Issued, Subscribed & Paid-up Capital :
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No. of Shares |
Type |
Value |
Amount |
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107948196 |
Equity Shares |
Rs. 10/- Each |
Rs.1079.482 Millions |
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300000 |
14.50% Redeemable Cumulative non-convertible
Preference Shares |
Rs.100/- Each |
Rs.30.000 Millions |
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850000 |
11.50% Redeemable Cumulative non-convertible
preferences shares |
Rs.100/- Each |
Rs.85.000 Millions |
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100000 |
10.00% Redeemable cumulative non-convertible
preferences shares |
Rs.100/- Each |
Rs.10.000 Millions |
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Total |
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Rs. 1204.482 Millions |
Notes :
1. Equity shares
Includes: ,
1,70,00,000 Equity Shares allotted as fully paid up bonus shares, by
capitalisation of Rs.170.000 millions, from General Reserve.
2. Preference
Shares:
(a) 14.50 % Redeemable cumulative non-convertible preference shares of
Rs. 30.000 millions issued on private placement basis, redeemable at par after
the expiry of 60 months from the date(s) of allotment, have fallen due for
redemption during the year 2001-02.
(b) 11.50 % Redeemable cumulative non-convertible preference shares of
Rs. 85.000 millions issued on private placement basis, redeemable at par after
the expiry of 36 months from the date(s) of allotment, have fallen due for redemption
during the year 2002-03.
(c) 10.00 % Redeemable cumulative non-convertible preference shares of
Rs. 10.000 millions issued on private placement basis, redeemable at par after the
expiry of 36 months from the date(s) of allotment, have fallen due for
redemption during the year 2003-04.
FINANCIAL DATA
[all figures are
in Rupees Millions]
ABRIDGED BALANCE
SHEET
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SOURCES OF FUNDS |
31.03.2008 |
30.09.2006 |
31.03.2005 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
1204.482 |
1204.482 |
1005.500 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
2377.087 |
2377.087 |
6889.500 |
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4] (Accumulated Losses) |
(7419.143) |
(1750.902) |
0.000 |
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NETWORTH |
(3837.574) |
1830.667 |
7895.000 |
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LOAN FUNDS |
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1] Secured Loans |
20994.909 |
17249.170 |
17298.600 |
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2] Unsecured Loans |
4418.166 |
4169.097 |
4054.500 |
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TOTAL BORROWING |
25413.075 |
21418.267 |
21353.100 |
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DEFERRED TAX LIABILITIES |
0.000 |
0.000 |
0.000 |
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TOTAL |
21575.501 |
23248.934 |
29248.100 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
13209.440 |
14326.047 |
12661.800 |
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Capital work-in-progress |
211.997 |
211.919 |
220.200 |
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INVESTMENT |
10365.341 |
10785.721 |
10350.700 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
1608.288
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1574.944 |
1481.000 |
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Sundry Debtors |
1200.125
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1695.288 |
1510.100 |
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Cash & Bank Balances |
1934.757
|
39.158 |
41.700 |
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Other Current Assets |
0.000
|
0.000 |
0.000 |
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Loans & Advances |
1650.253
|
4680.061 |
12793.700 |
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Total
Current Assets |
6393.423
|
7989.451 |
15826.500 |
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Less : CURRENT
LIABILITIES & PROVISIONS |
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Current Liabilities |
8618.697
|
10103.900 |
9885.900 |
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Provisions |
0.000
|
0.000 |
0.000 |
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Total
Current Liabilities |
8618.697
|
10103.900 |
9885.900 |
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Net Current Assets |
(2225.274)
|
(2114.449) |
5940.600 |
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MISCELLANEOUS EXPENSES |
13.997 |
39.696 |
74.800 |
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TOTAL |
21575.501 |
23248.934 |
29248.100 |
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PROFIT & LOSS
ACCOUNT
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PARTICULARS |
31.03.2008 |
30.09.2006 |
31.03.2005 |
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Sales Turnover |
14774.987 |
32742.880 |
19135.500 |
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Other Income |
781.580 |
579.046 |
2305.200 |
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Total Income |
15556.567 |
33321.926 |
21440.700 |
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Profit/(Loss) Before Tax |
(5641.036) |
(3894.764) |
97.400 |
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Provision for Taxation |
27.205 |
13.494 |
- |
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Profit/(Loss) After Tax |
(5668.241) |
(3908.258) |
97.400 |
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Earnings in Foreign Currency : |
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Export Earnings |
318.896 |
181.689 |
NA |
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Income from contracts |
6.982 |
34.999 |
NA |
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Dividend Income |
130.014 |
226.051 |
NA |
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Other Earnings |
0.067 |
NA |
NA |
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Total Earnings |
455.959 |
442.739 |
NA |
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Imports : |
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Raw Materials |
1283.621 |
3693.080 |
NA |
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Stores & Spares |
45.429 |
11.462 |
NA |
|
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Capital Goods |
NA |
18.100 |
NA |
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Furnace Oil |
NA |
749.584 |
NA |
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Total Imports |
1329.050 |
4472.226 |
NA |
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Expenditures : |
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Cost of Goods Sold |
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Manufacturing Expenses |
16018.834 |
30233.022 |
1248.600 |
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Administrative Expenses |
0.000 |
0.000 |
1905.200 |
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Raw Material Consumed |
0.000 |
0.000 |
11383.200 |
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Purchases made for re-sale |
96.240 |
166.818 |
0.000 |
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Interest |
3823.481 |
2991.149 |
1822.800 |
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Insurance Expenses |
0.000 |
0.000 |
0.000 |
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Power & Fuel |
0.000 |
0.000 |
2949.200 |
|
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Depreciation & Amortization |
1259.048 |
1192.387 |
422.800 |
|
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Other Expenditure |
0.000 |
2633.314 |
11611.500 |
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Total Expenditure |
21197.603 |
37216.690 |
21343.300 |
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QUARTERLY RESULTS
|
PARTICULARS |
|
30.06.2008 |
30.09.2008 |
|
Type |
|
1st
Quarter |
2nd
Quarter |
|
Sales Turnover |
|
1003.600 |
1202.000 |
|
Other Income |
|
35.400 |
148.800 |
|
Total Income |
|
1039.000 |
1350.800 |
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Total Expenditure |
|
1209.600 |
1387.600 |
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Operating Profit |
|
(170.600) |
(36.800) |
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Interest |
|
609.400 |
594.300 |
|
Gross Profit |
|
(780.000) |
(631.100) |
|
Depreciation |
|
213.800 |
200.600 |
|
Tax |
|
01.200 |
02.000 |
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Reported PAT |
|
(995.000) |
(833.700) |
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PARTICULARS |
31.03.2008 |
30.09.2006 |
31.03.2005 |
|
Debt-Equity
Ratio |
0.00 |
22.01 |
347.90 |
|
Long
Term Debt-Equity Ratio |
0.00 |
15.50 |
232.74 |
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Current
Ratio |
0.55 |
0.75 |
0.96 |
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TURNOVER
RATIOS |
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Fixed
Assets |
0.37 |
0.98 |
1.11 |
|
Inventory |
6.20 |
14.25 |
12.62 |
|
Debtors |
6.93 |
13.70 |
11.27 |
|
Interest
Cover Ratio |
(0.46) |
(0.29) |
(0.10) |
|
Operating
Profit Margin(%) |
(3.53) |
(0.19) |
1.26 |
|
Profit
Before Interest And Tax Margin(%) |
(11.89) |
(2.69) |
(0.95) |
|
Cash
Profit Margin(%) |
(29.28) |
(9.36) |
(8.27) |
|
Adjusted
Net Profit Margin(%) |
(37.64) |
(11.86) |
(10.48) |
|
Return
On Capital Employed(%) |
0.00 |
0.00 |
(0.76) |
|
Return
On Net Worth(%) |
0.00 |
0.00 |
(127.96) |
LOCAL AGENCY FURTHER INFORMATION
Directors Report
SPIC operates its business
in four divisions:
The Fertiliser Division manufactures fertilizers and fertilizer
intermediates.
The Pharmaceuticals Division manufactures Penicillin-G Potassium (fermentation-based), active pharmaceutical ingredients (APIs), finished dosage products, industrial enzymes and plant-based nutraceuticals.
The Engineering/Construction Services Division offers specialized and extra high voltage transmission line construction, railway electrification, operation and maintenance and related engineering services.
The Agri-business Division offers products for sustainable agricultural development with a global footprint?tissue culture plants, hybrid seeds, bio-fertilizers, bio-pest control agents for eco-friendly crop production.
SPIC's strategic investments
inter-alia in subsidiaries and joint ventures are as follows:
Indo-Jordan Chemicals Company Limited, Jordan
Manufacture of phosphoric acid, sulphuric acid
SPIC Fertilizers and Chemicals FZE,
Manufacture
of ammonia, urea
SPIC Petrochemicals Limited,
Manufacture of polyester filament yam (PFY), purified
terephthalic acid (PTA)
Ind-Stal Chemicals Limited,
Manufacture of synthetic resins, both liquid and powder, used in automotive, abrasives, railway brake blocks,
paints and inks
Orchard Microsystems Limited,
iC design
Tamilnadu Petro-products Limited,
Manufacture of linear alkyl benzene (LAB); epichlorohydrin (ECH); heavy alkalyte; caustic soda; chlorine;
hydrochloric acid; ammonium chloride; sodium hypochlorite
Tschnip India Limited,
Global engineering, procurement and construction (EPC) services for refinery, oil and gas, petrochemical, chemical, fertilizer, power, environmental and pharmaceutical industries
EDAC Engineering
Limited,
Electro-mechanical erection works for power, petrochemical
and industrial plants. Fabrication of structural, piping, ducting, tanks,
vessels, non-pressure components and windmill towers, used in power,
petrochemical and infrastructure sectors. Deputation of specialized manpower to
overseas project sites.
Tuticorirt Alkali
Chemicals and Fertilisers Limited,
Manufacture of soda ash, ammonium chloride, sodium
bicarbonate, ammonium bicarbonate and bio-products
Manali Petrochemical Limited,
Manufacture of propylene oxide, propylene glycol, polyols
SPEL Semiconductor Limited,
Turnkey wafer sort; IC assembly; test sub-contracting
OPERATIONS:
Some of the Fertilizer Division's
operational achievements during 2006-08 were:
Aluminium flouride plant capacity was augmented to produce 25 MT/day and a
record monthly production of 738.24 MT was achieved during September
2007.
Environmental clearance has been obtained from the Ministry of Environment and
Forests, Government of India, for the enhanced production capacities of urea,
di-ammonium phosphate (DAP) and aluminium fluoride at their fertilizer
complex.
Despite shut down, the plant and machineries are maintained in good
condition.
Technical studies on plant's fuel and feed switch over to natural gas (NG) are
being carried out.
Market scene:
The performance of the Fertilizer Division, as Indian agriculture, depends to a
large extent on the monsoon. The major cropping seasons in
The monsoons during the period were more or less normal except the north-east
monsoon 2007, which was exceptionally good. Tamilnadu, Andhra Pradesh and
Karnataka received copious rains, which, ensured recharge of the water
table.
Awards won by Fertilizer Division in
2006-08:
Fertilizer Association of
Plant was the best among
'International Safety Award for the year 2006' was received in 2007 from the
British Safety
28th consecutive year.
Fertilizer industry
scenario:
While the consumption is in increasing trend, production has not increased to
the required level. In fact, production of N and P at 10.902 MMT and 3.709 MMT
during 2007-08 showed a decline of 5.4% and 16.5% respectively over the
production achieved in 2006-07.
The gap between the demand and indigenous production is met out of imports;
urea import was high at 6.93 MMT during the current year as against 4.72 MMT
during the previous year; DAP and muriate of potash (MoP) imports were at 2.72
MMT and 4.42 MMT respectively during the year as against 2.88 MMT and 3.45 MMT
respectively imported during the previous year.
Steep increase in import of fertilizers and its intermediates by the country as
well as surging global demand for fertilizers for the bio-fuel segment pushed
up fertilizer price manifold. To illustrate, in just over twelve months, the
price of urea has increased from USD 328/MT to USD 840/MT, DAP, from USD 395/MT
to USD 1268/MT and phosphoric acid, from USD 560/MT to USD 2300/MT. Despite
such a steep price rise in the international market, the farm gate price has
remained static since 2002, which has resulted in the fertilizer subsidy bill
burgeoning to over Rs.10.000 millions during 2007-08.
Lag in reimbursement of input-cost
escalation:
There has been an average increase of 40% in the price of petroleum inputs in
the last 18 months. The spiraling input cost has strained the working capital
of fertilizer companies. This is due to the fact that reimbursement of
input-cost escalation by the Government is made after a lag of more than twelve
months. This will require significant additional working capital and place
enormous strain on the profitability of fertilizer manufacturing
companies.
New Pricing Scheme Stage-Ill:
The Government has approved the New Pricing Scheme (NPS) Stage-Ill for urea
units in the country. The scheme is effective from 1 October 2006 to 31 March
2010. The NPS Stage-Ill has been formulated keeping in view the recommendations
of the Working Group on Urea Policy set up under the chairmanship of Dr Y K
Alagh.
Under the NPS Stage-Ill, all the non-gas based urea units have to switch over
to natural gas/liquefied natural gas (NG/LNG) within three years. Units not so
converted within three years will be reimbursed concession only on the basis of
the Import Parity Price (IPP) of urea. The Company has completed the technical
feasibility for such feedstock conversion from naphtha to NG. The Company has
initiated discussions with the prospective suppliers of NG for a long-term
supply agreement. The Company is also actively pursuing the option of putting
up a floating storage-cum-regasification unit (FSRU) through a competent
agency, as a stopgap arrangement till such time NG is made available to the
unit.
New Urea Investment Policy:
The Government has recently approved the new Urea Investment Policy governing
the revamp/expansion of existing units (brown-field units)/ setting up of new
units (green-field units) and price recognition in respect of urea produced
after such expansion/creation of,new capacity.
The new Policy provides inter alia that the additional urea from the revamp of
existing units would be recognized at 85% of the IPP with the floor and ceiling
price of USD 250/MT and USD 425/MT respectively.
Urea from expansion of existing units (investments of more than Rs.30000.000
millions) would be recognized at 90% of the IPP with the floor and ceiling,
price of USD 250/MT and USD 425/MT respectively.
Price of urea from green-field units will be recognized through a bidding route
with percentage discount over the IPP and with an appropriate floor and ceiling
price, which will be worked out by the Department of Fertilizers, Government of
India, based on prevailing gas prices.
Coal gasification based urea projects would be treated at par with a
brown-field or green-field project.
Joint venture projects abroad will be encouraged through firm offtake contracts
for a maximum quantity of 5 MMT, with pricing decided on the basis of
prevailing market conditions and in mutual consultation with the joint venture
company in accordance with the pricing principle recommended by Prof. Abhijit
Sen Committee.
Pharmaceuticals Division:
SPIC's Pharmaceuticals Division consists of four strategic sub-divisions,
namely, Penicillin-G (Pen-G), active pharmaceutical ingredients (APIs),
formulations and industrial enzymes.
In Pen-G business, production was 2,833 MMU in 2006-08 (18-month period) as
against 2,961 MMU in 2005-06 (18-month period). Sales were 2,863 MMU during the
period under review as against 3,103 MMU in 2005-06. The industry was subjected
to a roiler coaster ride during the period under review with the demand-supply
and pricing of Pen-G fluctuating wildly, at levels never witnessed before.
While international prices of Pen-G, till January 2007, hovered around USD 6.30
to 6.50 per BU (Billion Units) GIF, it rapidly doubled and almost tripled to
USD 18.50 per BU, by April 2007. However, by mid-October 2007, prices started
heading south, as rapidly as it had
scaled the peak, to touch a bottom of USD 7 by January 2008, only to
again rebound to USD 15 by March 2008. In line with the above trend, the unit's
performance significantly improved during the period under review and sales
realization was better than in the previous financial year, 2005-06 despite
lower production and sales.
MANAGEMENT DISCUSSION
AND ANALYSIS REPORT
FERTILIZER
Industry scenario:
Fertilizer is a key input for agriculture.
Fertilizer consumption in the country is directly related to monsoon. There has
been an uneven growth in the past few years. However, the growth in consumption
of total nutrients during 2007-08 has touched an estimated level of 22.59
million metric tonnes (MMT) as against 22.04 MMT during 2006-07. As compared
with the previous year, 2006-07, consumption of Nitrogen (N) during 2007-08
marginally increased to 14.51 MMT from 14.05 MMT, Phosphatics consumption declined
to 5.47 MMT from 5.66 MMT and Potash (P) consumption, registered a positive
growth of 2.61 MMT from 2.33 MMT.The negative growth of P205 is mainly
attributable to the short-supply of fertilizers during the consumption
months.
While the consumption is in increasing trend, production has not grown to the
required level. In fact, production of N and P at 10.902 MMT and 3.709 MMT
during 2007-08 has shown a decline by 5.4% and 16.5% respectively, over
2006-07.
The gap between demand and indigenous production is met out of imports, Urea
import was higher at 6.93 MMT during the current year as against 4.72 MMT
imported during the previous year; similarly, DAP and Muriate of Potash (MoP)
imports were at 2.72 MMT and 4.42 MMT against 2.88 MMT and 3.45 MMT imported
last year.
Steep increase in import of fertilizers and its intermediates by the country as
well as surging global demand for fertilizers for the bio-fuel segment pushed
up fertilizer price manifold. In just over twelve months, the price of urea has
increased from USD 328 per metric tonnes (MT) to USD 840 per MT, DAP, from USD
395 per MT to USD 1268 per MT and phosphoric acid, from USD 560 per MT to USD
2300 per MT. Despite such a steep price rise in the international market, the
farm gate price has remained static since 2002, resulting in the fertilizer
subsidy bill burgeoning to over Rs.10.000 millions during 2007-08.
Subsidy related issues:
Agricultural subsidies are essential, not only to make agriculture viable but
also to protect the interest of farmers. Since the farmers cannot afford to buy
fertilizer, at the price, as per cost production, the Government introduced the
Retention Price Scheme to determine the appropriate subsidy so that fertilizer
can be made available to the farmers at affordable prices. Government
introduced the fertilizer subsidy scheme, by which urea manufacturers have to
sell urea to the farmer at the Government administered price. The difference
between the cost of production of urea and the administered selling price, as
assessed by the Government, is reimbursed to the manufacturers. Instead of
permitting the fertilizer manufacturer to sell urea at its normal price and
disbursing the subsidy amount directly to the farmer, the Government, for
administrative convenience, is fixing the manufacturer's selling price at a
lower level and making over the difference (the subsidy amount) to the
manufacturer.
The subsidy, in reality, is to the farmer and not to the manufacturer and the industry is just a channel that is used by the Government for administrative convenience. The industry does not benefit from fertilizer subsidy in any manner, as generally misconstrued by many, but on the contrary, is severely affected thereby - both in terms of determination of the subsidy amount as well as by its delayed disbursement. In line with the above policy, the industry first passes on the benefit to the farmers and only thereafter claims the reimbursement from the Government. However, there is a considerable time lag between the Company incurring the cost and getting reimbursement from the Government. The situation is further worsened by the Government postponing the disbursement of the subsidy amount due to budgetary constraints. It has become the norm, over the last several years, to carry forward a large amount of unpaid subsidy from one year to the next due to inadequate budgetary provisions. To tide over the problem to some extent, the Government has recently started the issue of bonds to the industry against subsidy dues, a move comparable in a way to the oil bonds that are being issued to the oil refining/marketing PSUs towards subsidy. The fertilizer industry, faced with acute liquidity crunch, finds itself in an unenviable situation of having to sell these bonds at a discount, which squeezes the profitability conditions further.
Sustaining the health and growth of the industry is an absolute pre-requisite to ensure timely supply of fertilizers to the farmer in adequate quantities; reimbursement of subsidy without time lag through adequate budgetary provisions is the need of the hour under the present subsidy dispensation.
Lag in reimbursement of Input-cost
escalation:
There has been a steep increase in the prices of petroleum inputs in the last
18 months. The spiraling input cost has strained the working capital of
fertilizer companies. This is due to the fact that reimbursement of input-cost
escalation by the Government is made after a lag of more than twelve months.
Government is yet to recognize the escalation in the cost of inputs since April
2007. This will require significant additional working capital and place
enormous strain on the profitability of the industry.
New Pricing Scheme Stage-Ill for urea
units:
The Government has approved the New Pricing Scheme (NPS) Stage-Ill for urea
units in the country. The scheme is effective from 1 October 2006 to 31 March
2010. The NPS Stage-Ill has been formulated keeping in view the recommendations
of the Working Group on Urea Policy set up under the chairmanship of Dr Y K Alagh.
Under the NPS Stage-Ill, all the non-gas based urea units have to switch over
to natural gas/liquefied natural gas (NG/LNG) within three years. Units not so
converted within three years will be reimbursed concession on the basis of the
Import Parity Price of urea.
The Company has completed the technical feasibility for such feedstock
conversion from naphtha to NG. The Company has also initiated discussion with
prospective NG suppliers for a long-term supply agreement. As a stop-gap
arrangement till NG is made available, the Company is actively pursuing the
option of putting up a floating storage-cum-regasification unit (FSRU) through
a competent agency.
Outlook:
The domestic foodgrain production target has been set at 320 MMT by 2011-12
from the present 210 MMT. With the demand-supply chasm widening, it looks the
country will remain a net importer of most fertilizer raw materials in the near
future and barring the urea sector, which may witness some capacity additions
if and only if the policy framework is friendly, imports of DAP and urea are
only expected to rise significantly in the coming years. Fertilizer industry
being capital intensive, huge capital outlay is required to create new capacity
and without enabling policies in place, investors would only shy away from
investing in the sector. The Government has recently come out with the new Urea
Investment Policy governing the revamp/expansion of existing units and setting
up of new units and price recognition in respect of urea produced after such
expansion/creation of new capacity. It remains to be seen whether arising from
this new Policy, the industry would be able to attract fresh large-scale
investments.
PHARMA
Industry scenario:
The Indian pharmaceutical market, the second largest pharmaceutical market in
the world in terms of volume consumed, remains highly competitive and
fragmented. Lack of global marketing skills, absence of a forward-looking drug
policy and the prevalent skepticism about patents are just some of the key areas
of concern for the Indian pharmaceutical industry. The industry does have its
share of strengths in production of low cost, high quality bulk drugs and
formulations through superior drug synthesis skills, high quality manufacturing
assets and significant cost advantages backed by world-class innovative,
scientific human resources.
Operations, opportunities and
outlook:
SPIC Pharma has been advantageously positioned with respect to high
productivity and.low cost for almost 4-5 years viz, between 2002 to 2007, in
the Indian Penicillin-G (Pen-G) industry; however, between 2005 and 2007,
Chinese companies have ramped up their technologies due to investments/jv with
European/US based companies. SPIC Pharma's Pen-G production was at 2,833 MMU in
2006-08 (18-month period) as against 2,961 MMU in 2005-06 (18 month period).
Sales were at 2,863 MMU during the period under review as against 3,103 MMU in
2005-06. The demand/supply and pricing scenario of Pen-G during the financial
year, 2006-08 was an unprecedented one in the annals of the Pen-G industry.
Till January 2007, the prices internationally were around USD 6.30 to 6.50 per
BU (Billion Units) CIF, which, however, rapidly rose to USD 18.50 per BU, by
April 2007. This high price line held through six months and till mid-October
2007. From mid-October 2007, the prices started falling rapidly and reached its
nadir of USD 7 by January 2008; in a rapid reversal, prices re-bounded to USD
15 by March 2008. In line with the trend, the unit's performance significantly
improved and sales realization was higher when compared with the performance
for the previous financial year.
The active pharmaceutical ingredients (API) industry in
As regards Pen-G, SPIC Pharma and Alembic which has restarted its operations
recently, are the only indigenous Pen-G manufacturers with a combined capacity
of about 4,400 MMU, which, however, is vastly lower than the actual demand and
growth in Pen-G consumption.
A stable and less turbulent pricing trend for Pen-G is expected in the near
term due to various developments in China with respect to Pen-G and antibiotics
industries like stricter environmental laws and increase in internal cost
structure viz, power, labour and other overheads.
As regards API, the current scenario is that the business is highly
competitive and regulated. Investments in modernization and accreditation
oriented support systems are a pre-requisite for survival. The unit sees
excellent business opportunities in niche products like D-Penicillamine,
Ipriflavone, Risedronate Sodium and Pentosan Polysulfate, which it hopes to
harness gainfully. The unit is gearing itself to cater to the low-volume,
high-value segments backed by its niche products. Exciting opportunities are
also seen in CRAMS (contract research and manufacturing services), an area with
vast growth potential but remaining largely untapped hitherto. It is proposed
to upgrade, modernize and augment the RandD facility and the API plant to cater
to the expanding market segment and aim for higher accreditations like current
good manufacturing practice (cGMP), certificate of suitability (CoS) etc.
The unit was able to secure and execute good export orders for its formulations,
especially anti-histaminic products (syrups), anti-TB products, aerosol sprays
etc, to African and Asian markets. Improving exports and venturing into
overseas markets with good business potential would be the thrust areas in the
near future. Besides Tamilnadu, the unit .also expects to expand its reach into
the other southern states. The unit has also commenced contract-manufacturing
services for bulk customers and is looking at expanding the customer and
product base. Aided by a strong base in Pen-G manufacture, it is proposed to
set up a Betalactam formulation facility at Cuddalore shortly, for conversion
of Pen-G into semi-synthetic Penicillins (SSPs) and Cephalosporins for
domestic/overseas markets.
In the industrial enzymes business in the country, 70% of the requirement is
met by imports. The potential for varied industrial application for enzymes has
increased with existing and newer areas of application. The unit proposes to
invest further in technology to stabilize/exploit existing strain for Protease,
Amylase and Pectinase and outsource and adopt new strain for Cellulase, Lypase,
Phytase, de-bottleneck downstream process, upgrade utilities and accessories
etc. It expects to strengthen itself and enhance its market share of enzymes
for the leather and textile processing industries and poultry feed and
supplement industries in the years to come.
ENGINEERING/CONSTRUCTION SERVICES
(SMO):
The Government of India's plans to improve rural electrification through
accelerated power development programmes and power system strengthening schemes
in various states through introduction of the National Electricity Policy has
attracted increased investments towards this sector. The Government's 11lh plan
envisages an addition of 78,000 MW to power generation capacity, formation of a
national power grid and continued focus on modernization and up-gradation of
urban and rural power networks. Power Grid Corporation of India Ltd (PGCIL) has
plans for adding 60,000 kilometres of transmission lines in the next ten years,
as against the 37,000 kilometres laid in the last ten years. The Indian
Railways too have ambitious plans for track electrification in many sections in
the next few years. There is good potential for implementation of exclusive
freight corridor projects all over the country. SMO plans to capitalize on
these business opportunities to improve its avenues and revenue.
Five major transmission line projects and one rural electrification project were successfully completed and commissioned during the year. Presently, three transmission line projects are under execution for PGCIL in Chattisgarh, Madhya Pradesh and Tamil Nadu and five projects in rural electrification works under the Government of India's Rajiv Gandhi Grameen Vidyutikaran Yojana/Accelerated Power Development and Reform Programme launched under the aegis of the Ministry of Power, Government of India, for PGCIL in Uttar Pradesh and Rajasthan.
Contingent
Liabilities
(a) Bills and Cheques discounted Rs. NIL (Previous Period Rs.10.827
millions)
(b) Claims not acknowledged as debts: •
(i)
Disputed claims against the Company which are being
challenged before the Courts - Rs.314.681 millions (Previous Period Rs.330.338
millions). The Company has been advised that there are reasonable chances of
successful outcome of the cases and / accordingly no provision is considered
necessary.
(ii)
Other disputed claim Rs.56.831 millions (Previous
Period Rs.NIL).
(c) Guarantees/Security given to Banks/Financial Institutions on behalf
of other companies Rs.450.000 millions (Previous Period Rs.450.000 millions)
(d) Bank Guarantees outstanding Rs.76.690 millions (Previous Period
Rs.76.712 millions )
(e) Cumulative amount of Preference Dividend and Dividend Tax thereon
not provided for the period from 1.4.2001 to 31.3.2008 is Rs.158.267 millions
(Previous Period Rs.128.404 millions)
(f) No provision is considered necessary for the following disputed
Income Tax, Sales Tax, Excise Duty, Service Tax, Electricity Tax and Employees
State Insurance demands which are under various stages of appeal proceedings.
The Company has been advised that there are reasonable chances of successful
outcome of the appeals
FIXED ASSETS
Tangible Assets
Ø Freehold land
Ø and development
Ø Leasehold land
Ø Buildings and
Ø Sanitary fittings
Ø Plant and machinery
Ø Electrical fittings
Ø and water supply
Ø installations
Ø Furniture, fixtures,
Ø office and
Ø other equipment
Ø Roads
Ø Railway sidings
Ø Vehicles
Ø Intangible Assets
Ø Technical Know-how
PRESS RELEASE
National project
inaugurated at Tuticorin
Chennai, 2 July 2005
The foundation stone of the Department of Atomic Energy's new zirconium oxide and sponge plant was today laid at Palayakayal near Tuticorin by S K Jain, CMD, Nuclear Power Corporation, in the presence of R Kalidas, Chairman and CEO of Nuclear Finance Corporation and their VP (Operations) R Muthu Manoharan
CMT REPORT (Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts,
1] INFORMATION ON
DESIGNATED PARTY
No exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No available
information exist that suggest that subject or any of its principals have been
formally charged or convicted by a competent governmental authority for any
financial crime or under any formal investigation by a competent government
authority for any violation of anti-corruption laws or international anti-money
laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling shareholders,
director, officer or employee of the company is a government official or a
family member or close business associate of a Government official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press
reports / filings exists on the subject.
CORPORATE GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.49.97 |
|
|
1 |
Rs.75.45 |
|
Euro |
1 |
Rs.64.21 |
SCORE & RATING EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
7 |
|
PAID-UP CAPITAL |
1~10 |
5 |
|
OPERATING SCALE |
1~10 |
- |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
7 |
|
--PROFITABILIRY |
1~10 |
- |
|
--LIQUIDITY |
1~10 |
- |
|
--LEVERAGE |
1~10 |
- |
|
--RESERVES |
1~10 |
- |
|
--CREDIT LINES |
1~10 |
- |
|
--MARGINS |
-5~5 |
- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
YES |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
YES |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
NO |
|
TOTAL |
|
19 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General unfavourable
factors will not cause fatal effect. Satisfactory capability for payment of
interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Unfavourable & favourable factors carry similar weight in credit
consideration. Capability to overcome financial difficulties seems
comparatively below average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
|