PRELIMINARY INFORMATION MEMORANDUM (PIM)

 

 

                                                                                                        

Sale of 51% of the total voting equity share capital in

 

RASHTRIYA CHEMICALS & FERTILIZERS LIMITED (RCF)

 

 

 

 

January 2004

 

 

 

ICICI SECURITIES LIMITED

 

 

 

1.      This Preliminary Information Memorandum (“PIM”) is being provided in connection with the proposed disinvestment of 51% of the total voting equity share capital of Rashtriya Chemicals & Fertilizers Limited (hereinafter referred as “RCF”) out of the total 92.5% stake held by Government of India (“GoI”). The GoI also proposes to offer 2% of its equity stake to the employees of RCF, out of its total voting equity share capital being disinvested by GoI. Thus a total of 53% of the total voting equity share capital is proposed to be disinvested by the GoI.

 

2.      ICICI Securities Limited (herein after referred as “ICICI Securities”) has been appointed as the advisors (“Advisors”) for the disinvestment and Kapil Sapra & Associates (“KSA”) has been appointed as the legal advisors for the disinvestment process by GoI.

 

3.      The sole purpose of this document is to provide information to the interested parties and is not intended to form the basis of any investment decision or any decision to purchase the equity offered for sale.  This document does not constitute nor should it be interpreted as an offer or invitation or recommendation for the sale or purchase of securities described herein.

 

4.      This PIM does not purport to be all-inclusive or contain all the information about RCF or be the basis of any contract. No representation or warranty, expressed or implied, is or will be made as to the reliability, accuracy or the completeness of any of the information contained herein. It should not be assumed that there shall be no deviation or change in any of the information mentioned herein on RCF.  While this document has been prepared in good faith, neither RCF nor GoI nor ICICI Securities nor KSA nor any of their respective officers,  employees, advisors or agents make any representation or warranty or shall have any responsibility or liability whatsoever in respect of any statements made or omissions here from. Any liability is accordingly expressly disclaimed by RCF, GoI, ICICI Securities, KSA and any of their respective officers or employees, advisors or agents even if any loss or damage is caused by any act or omission on the part of RCF, GoI, ICICI Securities, KSA or any of their respective officers or employees, advisors or agents.

 

5.      Nothing in this PIM is, or should be relied on, as a promise or representation as to the future. By acceptance of this document, the recipient agrees that any information herein will be superseded by any later written information on the same subject made available to the recipient by or on behalf of RCF and GoI. GoI, ICICI Securities, RCF, KSA and any of their respective officers or employees, advisors and agents undertake no obligation, among others, to provide the recipient with access to any additional information or to update this document or to correct any inaccuracies herein which may become apparent, and they reserve the right, at any time and without advance notice, to change the procedure for the sale of all or any part of the equity and/or terminate negotiations or the due diligence process and/or refuse the delivery of information, at any time prior to the execution of the transaction documents without any prior notice or stating any reasons therefor and without incurring any liability in respect thereof.

 

6.      Accordingly, interested recipients should carry out an independent assessment and analysis of RCF and of the information, facts and observations contained herein.

 

7.      ICICI Securities is acting as Advisors to GoI for the purpose of arranging a sale of a strategic stake in RCF and will not regard any person (whether a recipient of this PIM or not of any other information) as its client in relation to this transaction.

 

8.      This PIM has not been filed, registered or approved in any jurisdiction. Recipients of this document resident in jurisdictions outside India should inform themselves of and observe any applicable legal requirements.

 

CONTENTS

 

Section	Title	Page no.
Part A	Submission of Expression of Interest (EoI)
1	Introduction	5
2	Advertisement Inviting EoI	5
3	Expression of Interest	5
4	Eligibility / Pre-Qualification Criteria	6
5	Initial Process	7
6	Filing Requirements	8
7	EOI filed by Consortia	9
8	Disqualification	11
9	Future Process	12
10	Enquiries	13
11	Governing Law / Jurisdiction	13
Part B	Rashtriya Chemicals & Fertilizers Limited
1	Background and History	14
2	Management	15
3	Growth of Operations	15
4	Business Overview	16
5	Sales & Marketing	16
6	Manufacturing Facilities	16
7	Real Estate, Facilities And Utilities	18
Part C	Financial Performance
1	Summarised Profit and Loss Account	19
2	Summarised Balance Sheet	20
Part D	Key Strengths	20
	Annexures
	Annexure I – A copy of the Advertisement
	Annexure II – Expression of Interest
	Annexure III – Statement of Legal Capacity
	Annexure IV – Request for Qualification
	Annexure V – Government of India Guidelines for                         Qualification of Bidders
	Annexure VI–Guidelines for management-employee                     bids

 

 

A.                                 SUBMISSION OF EXPRESSION OF INTEREST

 

1. INTRODUCTION

 

1.1       The Government of India (“GoI”) presently holds 92.5% of the total voting equity share capital in Rashtriya Chemicals & fertilizers Limited (“RCF”) and intends to divest such portion of its equity which is equivalent to 51% of the total voting equity capital with  management control in RCF to a strategic investor through a competitive bidding process, which shall be handled solely by GoI. The proposed disinvestment by GoI is hereinafter referred to as the “Transaction”. Further, GoI also proposes to offer 2% of its equity stake to the employees of RCF, out of its total voting equity share capital. Thus a total of 53% is being disinvested by GoI.

 

1.2       This Preliminary Information Memorandum (“PIM”) has been prepared to enable potential bidders to submit their Expression of Interest (“EoI”), subject to `Limitations and Disclaimer’ set out earlier

 

1.3       ICICI Securities Limited has been appointed as the Advisors and Kapil Sapra & Associates, as the legal advisors for the disinvestment process.        

 

For the purposes of this Transaction, the potential bidder shall ascertain the applicability of all laws including Indian laws and shall ensure compliance with the same.

 

2.       ADVERTISEMENT INVITING EOI

 

An advertisement has been issued in leading business and other newspapers inviting interested parties to submit their EoI to participate in the disinvestment process, a copy of which is enclosed as Annexure-I. The GoI reserves the right to terminate or alter the bidding process at any stage, without prior notice or assigning any reasons whatsoever and without incurring any liability in respect thereof.

 

3.       EXPRESSION OF INTEREST

 

            The process of participating in the disinvestment process and the requirements relating to information to be provided by interested parties when submitting their EoI is set out in the ensuing sections. 

 

                                             

 

4.       ELIGIBILITY/ PRE-QUALIFICATION CRITERIA

 

4.1       The EoI may be submitted by domestic or foreign incorporated entities either as a sole bidder or as part of a consortium, for acquiring the said voting equity share capital in RCF being disinvested subject to the terms and conditions specified in this PIM and any other subsequent additions and modifications thereof.

4.2       In case of a consortium bid, there will be a lead bidder, who will be singly required:

 

(a)    in the case of direct shareholding  in RCF  by the consortium members - to be the single largest shareholder amongst the members of the consortium and such shareholding of the lead bidder shall be more than 50% of the  total voting equity share capital in RCF being disinvested; or

 

(b)    in the case of company promoted / to be promoted by the consortium members for acquiring the said voting equity share capital in RCF being disinvested - to be the single largest shareholder of such company  and such shareholding of the lead bidder shall be more than 50% of the total voting equity share capital of such company

 

4.3       In case of a sole bidder, the net worth of the sole bidder should be in excess of Rs.3.00 billion (Rs. 300 Crores) as per the latest audited annual accounts; and it should have a satisfactory business and management track record.

 

4.4       In case of a consortium bid, the combined net worth of all the consortium members should be in excess of Rs. 3.00 billion (Rs. 300 Crores) and the networth of the lead bidder must be at least 51 per cent of this amount. The name of the lead bidder must be specified in the EoI. Each of the consortium partner should have a satisfactory business and management track record[1].

4.5     Bids by management/employees of RCF directly and independently or in consortium or Joint Venture or as a Special Purpose Vehicle (SPV), along with a bank, venture capitalist or a financial institution will be considered in accordance with the guidelines issued by Ministry of Disinvestment, annexed herewith as per Annexure VI    (“Guidelines”) if the legal entity so formed is qualified as per the criteria laid down in the PIM.

 

4.6    Net Worth = Equity Share Capital + Free Reserves & Surplus – deferred revenue / miscellaneous expenditure not written off – debit balance in Profit and loss account.

              

4.7    Where the financial statements are expressed in currency other than the Indian Rupee, the eligible amount as described above shall be computed by taking the equivalent US Dollars at the exchange rates (as stipulated by Reserve Bank of India / Foreign Exchange Dealers Association of India) prevailing on the date(s) of such financial statements.

 

4.8    Interested parties should note that in terms of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,1997, the strategic partner selected to acquire shares of RCF from GoI, may be required to make a public offer to acquire further shares of RCF in accordance with these regulations. For further details, interested parties may refer to the Securities and Exchange Board of India regulations in this regard.

 

4.9    This Preliminary Information Memorandum (“PIM”) along with its enclosures does not constitute any commitment on the part of the GoI or RCF or ICICI Securities or KSA or any of their respective officers,  employees, advisors or agents, whether in respect of the disinvestment process or otherwise. Furthermore, this invitation confers neither any right nor expectation to any party to participate in the said process.

 

4.10   GoI and RCF reserve the right to withdraw from the process or any part thereof, to accept or reject any or all offers at any stage of the process and/or modify the process or any part thereof or to vary any terms at any time without assigning any reason whatsoever.  In such an event no financial obligation whatsoever shall accrue to the GoI or RCF or ICICI Securities or KSA or any of their respective officers,  employees, advisors or agents.

 

5.       INITIAL PROCESS

 

5.1    Following the receipt of this PIM, interested parties will be required to submit an EoI Package comprising an Expression of Interest, a Statement of Legal Capacity and a Request for Qualification in formats specified in Annexures II, III and IV.

 

5.2    Based on an evaluation of the EoI Package received, interested parties who are deemed to be qualified by the GoI (“Qualified Interested Parties” or “QIPs”) will be allowed to participate in the subsequent selection process (without conferring any right or expectation whatsoever to the QIPs).

 

5.3    Following signing of a Confidentiality Undertaking (“CU”) by duly authorized personnel, QIPs will be provided with the Bid Packet comprising the Confidential Information Memorandum (“CIM”) and the Request for Proposal (“RFP”) and will be invited to participate further in the process as detailed in the RFP.

 

6.       FILING REQUIREMENTS

 

6.1  Interested parties must submit, in duplicate, their EoI accompanied by a Statement of Legal Capacity and Request for Qualification (“RFQ”), as per the formats given in Annexures II, III & IV of this PIM. This comprises the EoI Package.

 

6.2  EoIs must be signed by a duly authorised representative of the interested party/designated lead bidder. However, in the case of a consortium,  Statements of Legal Capacity and RFQs would have to be submitted by each member of the consortium duly signed by an authorized official of the member of such consortium.

 

6.3 All EoI Packages must be in English and each copy shall be bound in a separate volume.  Submission of the aforesaid documents by fax, e-mail or other electronic means will not be acceptable. It is the responsibility of the interested party(ies) alone to ensure that its EoI with required documents is delivered at the address given below by the stated time and date. The covering envelope containing the aforesaid documents should be clearly marked “Expression of Interest - RCF”. Neither the GoI nor RCF nor ICICI Securities nor KSA or any of their respective officers,  employees, advisors or agents  shall be responsible for non-receipt of correspondence.

 

6.4 The EOI must be submitted by no later than 17.30 hours (Indian Standard Time), January 27, 2004 at either of the following addresses:

 

Dhanpal Jhaveri Sr. Vice President ICICI Securities Limited 41/44 Minoo Desai Marg Colaba, Mumbai 400 005   Tel : +91 22 22826449

Or

Indraneil Borkakoty Vice President ICICI Securities Limited ICICI Bank Towers NBCC Place, Pragati Vihar Bisham Pitamah Marg New Delhi 110 003, India Tel : +91 11 24308337

       

7        EOI FILED BY CONSORTIA

 

7.1 If a consortium is formed, or proposed to be formed, specifically for the purpose of this investment, details of the members of the consortium  and the extent of their interest herein must be provided in the EoI Package.

 

7.2 Any change by way of withdrawal/substitution/inclusion of any member of the consortium or any change affecting the composition of the consortium may be permitted prior to the stage of submission of financial bid, but only with the specific approval of the GoI. GoI or RCF or ICICI Securities have the sole discretion to determine the impact of the change in membership on the quality of the consortium and reject a proposal for such reason.

 

7.3    The Government of India issued guidelines for qualification of bidders seeking to acquire any public sector enterprises through the process of disinvestment vide Department of Disinvestment OM No.6/4/2001-DD-II dated 13th July, 2001, a copy of which is enclosed as Annexure-V.  The interested party(ies) are required to read the guidelines and satisfy themselves that they are qualified to bid for the stake in RCF through the process of disinvestment. The interested party(ies) would be required to submit the following:

 

o       an undertaking to the effect that they are qualified to bid for the stake in RCF.

 

o       an undertaking to the effect that no investigation by a regulatory authority is pending against them.

 

o       In case any investigation is pending against the concern or its sister concern or against its CEO or any of its Directors/Managers/employees, full details of such investigation including the name of the investigating agency, the charge/offence for which the investigation has been launched, name and designation of persons against whom the investigation has been launched and other relevant information should be disclosed, to the satisfaction of the GoI.

 

o       Provide other relevant information as required in the guidelines of 13th July, 2001

 

7.4     In addition to the above, the RFQ should be duly filled in and accompanied by the following details:

 

 In case of a sole bidder

 

·        The audited balance sheet and profit & loss account of the sole bidder (Indian company/foreign company) for the last 3 financial years.

 

Write-up on:

 

·        Profile of the sole bidder

·        A statement of reasons for strategic interest in RCF

·        Details of litigation and/or legal/ statutory enquiry if any, including litigation by the bidder against RCF.

·        Statement as regards any indictment by any income tax, sales tax, customs or excise authorities.

·        Authorisation/delegation of power to enable the authorized signatory to sign the EoI

·        Any other information considered material

 

In case of a consortium bid

 

·        The audited balance sheet and profit & loss Account for the last 3 financial years of the lead bidder and other members associated in the bid.

 

·        Write-up on:

 

Lead bidder

 

·        Profile of the lead bidder

·        A statement of reasons for strategic interest in RCF

·        Any other information considered material by the lead bidder

 

Other member companies

 

·     Profile of members in the consortium

·     Any other information considered material

  

·              Details of litigation and/or legal/ statutory enquiry if any, including litigation by the bidder(s) against RCF.

 

·               Statement as regards any indictment by any income tax, sales tax, customs or excise authorities.

 

·              Document evidencing authorisation/delegation of power by each of the consortium members(s) to enable the authorized signatory to sign the EoI.

 

8        DISQUALIFICATION

 

8.1 The GoI shall not consider for the purpose of qualification, an EoI which is found to be incomplete in content and/or attachments and/or authentication, etc.

 

8.2 Without prejudice to any other rights or remedies available to GoI, a sole bidder  or a consortium may be disqualified and its EoI dropped from further consideration for any reason whatsoever including those listed below:

 

·         misrepresentation by  the bidder or any member of the  consortium; or

 

·        failure by the parties mentioned above to provide necessary and sufficient information required to be provided in the EoI, along with the Statement of Legal Capacity and RFQ, pursuant to relevant sections of the PIM; or

 

·        submission of an EoI along with Statement of Legal Capacity and RFQ in respect of any entity/company/consortium, where such company or any member of such consortium has already submitted an EoI.

 

8.3 If information becomes known which would have entitled the GoI to reject or disqualify the interested party(ies) the GoI reserves the right to reject the interested party(ies) at the time, or at any time after, such information becomes known to the GoI.

 

8.4 Where the interested party is a consortium, the GoI may disqualify the entire consortium for any of the reasons (but not limited to) set out above, even if it applies to only one member of the consortium.

 

8.5 Further, GoI has issued guidelines for disqualification of bidders seeking to acquire any public sector enterprises through the process of disinvestment vide Department of Disinvestment OM No.6/4/2001-DD-II dated 13 July, 2001, a copy of which is enclosed as Annexure-V. Interested party(ies) not satisfying the qualification criteria under the guidelines will not be qualified to bid for the stake in RCF..

 

8.6 The interested parties not satisfying the eligibility and requisite qualification criteria specified in the above sections are not eligible to bid for the stake in RCF.

 

8.7 The sole bidder, lead bidder, member of a consortium and the consortium as a whole not satisfying the eligibility and requisite qualification criteria specified in the above sections are not eligible. It must be noted that the sole bidder, lead bidder, member of a consortium and the consortium as a whole must be eligible, as per the criteria mentioned above, on the date of submission of the EoI and shall continue to be eligible throughout the Transaction at the discretion of GoI and/or RCF and/or ICICI Securities.

 

9        FUTURE PROCESS

 

9.1 Based on the EoI submitted by the interested parties, GoI, advised by ICICI Securities, will carry out an evaluation of the qualification of such interested parties. If at any time during the evaluation process, GoI or ICICI Securities requires any clarification in order to carry out the evaluation, it reserves the right to request such information from any or all of the companies/ consortium and the companies/ consortium will be obliged to respond to any reasonable request for such information and to supply the same to ICICI Securities within such reasonable time frame as GoI or ICICI Securities may require.

 

9.2 Based on an evaluation of EoIs received, interested parties, which are deemed fit, will be (“Qualified Interested Parties” or “QIP”) invited to participate in the subsequent selection process (without conferring any right or expectation whatsoever to QIPs). QIPs will be required to sign a Confidentiality Undertaking (“CU”) by the duly authorized personnel.  QIPs will be provided with the Request For Proposal (RFP) and the Confidential Information Memorandum (CIM) and shall be invited to participate further in the process described in detail in the RFP. QIPs will get an opportunity to conduct a due diligence and take up plant visits and will also have access to data rooms and hold discussions with the management of RCF/officials of Ministry of Chemicals and Fertilizers/Ministry of Disinvestment, Government of India. The rules regarding access to information in the data rooms will be provided to QIPs later. QIPs will be invited to submit their proposal and a binding price bid.

 

10   ENQUIRIES

 

The GoI and ICICI Securities reserve the right, in their sole discretion, not to respond to any questions raised or provide clarification sought, if it is considered that it would be inappropriate to do so. Nothing in this section shall be taken or read as compelling or requiring the GoI and ICICI Securities to respond to any question or to provide any clarification. No extension of any time and date referred to in this PIM shall be granted on the basis or grounds that the GoI and ICICI Securities has not responded to any question/ provided any clarification.

 

11   GOVERNING LAWS/JURISDICTION/ ARBITRATION

 

All matters relating to the disinvestment process and the bidding procedure shall be governed by the laws of Union of India. Only Courts at New Delhi (with exclusion of all other Courts) shall have the jurisdiction to decide or adjudicate on any matter, which may arise.

B. RASHTRIYA CHEMICALS & FERTILIZERS LIMITED

 

Name                                               Rashtriya Chemicals & Fertilizers Limited (“RCF” or the Company”)

 

Registered Office               “Priyadarshini”, Eastern Express Highway,

Sion, Mumbai 400 022, Maharshatra

 

Year of incorporation        1978

 

Liaison Office:                    Mumbai

 

Marketing Area Offices: Pune, Nagpur, Ahmedabad, Bhopal, Hyderabad, Bangalore, Chennai, Patna, Chandigarh, Lucknow and Calcutta.

 

1        BACKGROUND & HISTORY

 

RCF was set up in 1978, by transfer of a part of the assets of Fertilizer Corporation of India (FCI), for manufacture of Fertilizers and Industrial Chemicals at Trombay, Chembur, Mumbai. Subsequently RCF has also put up facilities to manufacture Urea at Thal, Alibag, Raigarh District, Maharashtra.

 

RCF is primarily engaged into manufacturing and marketing of urea and NPK fertilizers and trading of Muriate of Potash. RCF has an aggregate capacity to produce 1,815,000 tonnes per annum (tpa) of urea, 661,000 tpa of complex fertilizers and other industrial chemicals at Trombay, Mumbai and Thal, Alibag, Raigarh District, Maharashtra.

 

RCF has a dominant position in the Western states like Maharashtra, Madhya Pradesh, Gujarat and in southern states of Andhra Pradesh and Karnataka. RCF markets its fertilizers mainly under the “Suphala” and “Ujwala” brand names.

 

The shareholding pattern of the company as on March 31, 2003 was as follows:

 

Shareholders	% Stake
Government of India	92.50%
Financial Institutions	2.53%
Public & Others	4.97%
Total	100.00%

                     Source: Company

 

2        MANAGEMENT

 

The Board of Directors are nominated by the GoI to manage the company. There are presently 11 directors including the Chairman cum Managing Director. Senior executives posted at the corporate office and the plants manage the day to day affairs of the company.

 

The directors on the Board of RCF are as follows:

 

Name	Designation
Shri S Balan	Chairman cum Managing Director
Shri U S Jha	Director – Marketing
Shri H.S. Karangale	Director – Technical
Shri M Sundararaman	Director – Finance
Ms Swatantra K Sekhon	Director
Shri Balvinder Kumar	Director
Prof Ashok Mishra	Director
Dr. Hemlata Santhanam	Director
Shri K P Fabian	Director
Lt. Gen. (Retd) M S Bhullar	Director
Shri Sanjay Kaushik	Director

 

3        GROWTH OF OPERATIONS

 

The first facilities at Trombay, Mumbai, were commissioned in the year 1965. This first phase known as Trombay I which comprised facilities for the manufacture of ammonia, urea, sulphuric acid and nitric acid and nitrophosphates, based on the technology of Chemico, Corporation, USA. The urea plant set up in 1965 as mentioned above has been scrapped since then and the other plants have been revamped. In the second phase, RCF diversified into the production of methanol in the year 1965 mainly for meeting defense requirements.

 

In 1969, under a de-bottlenecking scheme, RCF added a supplementary gasification plant to produce 120 tpd of methanol and increased the capacity of the nitrophosphate plant by 100 tpd. At the same time the company also added small facilities for the manufacture of ammonium bi-carbonate, sodium nitrite and nitrate, concentrated nitric acid (C-NA), methylamines and facility to manufacture phosphoric acid.

 

In 1978, under the scheme called Trombay IV, RCF set up a complex fertilizer unit of 1200 tpd capacity along with a nitric acid plant of 750-tpd capacity. In 1981, under a scheme called Trombay V, RCF set up ammonia and urea plants capable of producing 900 tpd of ammonia and 1000 tpd of urea, with the technology of Haldor Topsoe and Snamprogetti.  Part of the ammonia is used (to the extent of 600 tpd) to produce urea while an amount of about 300 tpd is diverted to other plants for consumption.

 

In 1985, RCF commissioned a gas based fertilizer unit having two 1,350 metric tpd ammonia plants and three 1,500 mtpd urea plants at Thal, Alibag, District Raigarh, Maharashtra which is the largest single location urea manufacturing facility based on gas in Asia.  The Thal unit also manufactures methylamines, dimethyl formamide and dimethyl acetamide. The Thal complex of RCF, based on Haldor Topsoe /Snamprogetti technology, was set up at a cost of Rs.900crores. The plant receives natural gas feedstock from Bombay High region.

 

RCF, is one of the largest producers of urea in the world and one of the most dominant producers in the domestic market.

 

4        BUSINESS OVERVIEW

 

The Thal operations of RCF represent one of the largest single location urea manufacturing facilities in the world. The plant has a gas allocation of 3.15 mnscm per day from the Bombay High fields. The capacity utilisation of Thal plants has in the past been restricted to a range of 90-95% mainly due to limitations in the supply of gas from GAIL at around 2.75 mnscm per day. To overcome the shortfall in gas supply, RCF switched over to naphtha in the steam generation plant (boilers) and in the steam super heaters of ammonia plant. Also, the company installed a prereformer at Thal, which enabled the company to use naphtha as feedstock upto 30% of its total feedstock requirements.

 

5        SALES AND MARKETING

 

RCF markets the Ujwala and Suphala brand of fertilizers in the states of Maharashtra, Gujarat, Tamilnadu, Andhra Pradesh, Karnataka, Uttar Pradesh, Rajasthan, Bihar, West Bengal, Punjab, Madhya Pradesh, Chattisgarh and Haryana. RCF has its own regional marketing teams in all the 12 States where it markets its products. RCF has a wide marketing network of 33 branch offices and more than 500 marketing professionals in the field.

 

6        MANUFACTURING FACILITIES

 

RCF is a multi product company having dominant presence in the market in urea, complex fertilizers, methanol and nitric acid with plants located at Trombay (Chembur) and Thal both in Maharashtra. The installed capacity of plants is as follows:

 

Installed capacities

Plant	Location	Metric Tonne
Ammonia	Trombay	4,12,500
	Thal	9,90,000
Urea	Trombay	3,30,000
	Thal	17,06,800
Complex Fertilizers	Trombay	6,61,000
Nitric Acid	Trombay	3,53,100
Sulphuric Acid	Trombay	99,000
Phosphoric Acid	Trombay	30,000
Ammonium Nitrate	Trombay	54,000

  Source: Annual Report / Company

 

The fertilizer operations contribute significantly to sales forming 86% of the total sales. The physical performance of the fertilizer units during the last five year period ended March 31, 2003 is given below:

 

Trombay (Chembur) Unit

FY ended March 31,	1999	2000	2001	2002	2003
Ammonia
Installed Capacity	412,900	412,900	412,900	412,900	4,12,900
Production Quantity	319,430	365,190	335,105	271,205	262,800
Capacity Utilisation	77.4%	88.4%	81.2%	65.7%	63.6%
Urea
Installed Capacity	330,000	330,000	330,000	330,000	330,000
Production Quantity	270,200	302,920	290,765	39,200	20840
Capacity Utilisation	82%	92%	88%	12%	6%
Complex Fertilizers
Installed Capacity	661,000	661,000	661,000	661,000	661,000
Production Quantity	596,025	722,100	551,980	619,385	552,345
Capacity utilization	90%	109%	84%	94%	84%

  Source: Annual Report

 

Thal Unit

FY ended March 31,	1999	2000	2001	2002	2003
Ammonia
Installed Capacity	891,000	990,000	990,000	990,000	990,000
Production Quantity	893,400	930,115	840,600	831,175	885,550
Capacity Utilisation	100%	94%	85%	84%	89%
Urea
Installed Capacity	1485,000	1485,000	1485,000	1485,000	1706,800
Production Quantity	1442,900	1488,585	1329,400	1451,500	1537,300
Capacity Utilisation	97%	100%	90%	98%	90%

  Source: Annual Report

 

7        REAL ESTATE, FACILITIES AND UTILITIES

 

The nature and use of certain real estate assets is regulated.  There are real estate assets, facilities and utilities of RCF, which are not specific to and/ or directly required for the operations and business of RCF.  The Government is exploring various options/ structures with regards to the alternative use/ disposal of such real estate assets, facilities and utilities.

 

Trombay Unit

 

Several lands at Villages Wadhavali, Marvali, Borla Anik, Chembur within Greater Mumbai were acquired under Land Acquisition Act by the State Government of Maharashtra for setting up fertilizer project by the Government of India through Fertilizer Corporation of India Limited (FCI) and possession thereof was handed over to FCI.

 

FCI thereafter put up fertilizer plants, residential quarters and other structures on the said land. RCF has acquired these lands with built up structures thereon in 1978 when the fertilizer division of FCI was transferred to RCF. The total area in possession of RCF on which the above facilities are located is approximately about 785 acres.

 

 

Thal Unit

 

Several lands at villages Thal, Boris, Gunjis, Vaishet, Kurul, Veshvi and Chendhare have been acquired under Land Acquisition Act by the State Government of Maharashtra and a small portion through private negotiation for setting up fertilizer project and the Town Ship at Thal. The lands acquired are in the possession and in the name of RCF. The total area under the possession of RCF at Thal is approximately about 958 acres.

 

C       FINANCIAL PERFORMANCE

 

The annual financial statements of the Company are prepared in accordance with Indian Generally Accepted Accounting Principles. The financial statements are audited by a qualified independent auditor firms of Chartered Accountants and are then subject to a review by the Comptroller and Auditor General of India.

An abstract of the financial statements of RCF for the past three years is presented in the following tables:

Summarised Profit & loss Statement

 

Rs. Crores (1 Crore = 10 Million)	FY 2003	FY 2002	FY 2001
Sales	1468	1359	1398
Consumer Price Support Subsidy	558	659	654
Other income	77	51	50
Total revenue	2103	2070	2102
EBITDA	20*	175	201
EBITDA margin	1%	8%	10%
Interest	48	64	76
Depreciation	68	77	59
Profit/ (Loss) after tax	(48)	24	65

Source: Annual reports

*FICC has notified the policy parameters in respect of the 7th and 8th pricing period and hence urea subsidy has been accounted based on the notified prices. The impact of the above for the previous years from July 1, 1997 to March 31, 2002 is estimated at Rs.111.29 crores. The above is a one time write-off and has been adjusted in the current year’s profitability. The EBIDTA before this one time charge would have been Rs.131 crores and the margins would have been 6.25%. 

 

An abstract of the unaudited financial results for the half year ended September 30, 2003 is presented in the following table:

  

Rs. Crores (1 Crore = 10 Million)	Half year ended Sept. 30, 2003
Net Sales/ Income from Operations	1073.88
Other Income*	43.08
Expenditure	990.80
EBIDTA	126.16
Interest	17.18
Depreciation	34.32
Profit/(Loss) before tax	74.66
Provision for taxation	4.00
Net Profit/(Loss)	70.66

* Other Income includes an amount of Rs.25.10 crores on account of interest on income tax refund for FY 1994-95  

Summarised Balance Sheet

 

Rs. Crores(1 Crore = 10 Million)	FY 2003	FY 2002	FY 2001
Assets
Gross fixed assets	2,297	2,274	2,220
Less: Depreciation	1,362	1,306	1,230
Net fixed assets	935	969	990
Investments	0	0	0
Net current assets	855	782	1,010
Miscellaneous expenditure (to the extent not written off)	16	15	-
Total assets	1,806	1,765	2,000
Liabilities
Equity capital	552	552	552
Reserves	633	681	815
Cash credit	208	489	446
Other Secured loans	33	43	185
Unsecured loans	380	0	2
Total liabilities	1,806	1,765	2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Annual reports

 

D       KEY STRENGTHS

 

·        Well maintained production facilities: The plants are in excellent condition owing to regular maintenance and periodic revamp.  

·        Established brands: RCF’s brands (Suphala and Ujwala) enjoy strong recall and credibity in the market. 

·        Locational Advantage: RCF has a locational advantage due to its proximity to the port for import of raw material. Also the proximity to Gujarat facilitates gas availability from new projects.

·        Economies of Scale: RCF is one of the largest single plant capacities in Asia enjoying significant economies of scale.

·        Gas-based feedstock: Although the plants are capable of dual feed, their ability to function on gas feed imparts economy in operations

·        Wide marketing network of 33 branches in 12 states

·        Potential to widen geographical reach into western and southern India