Managing Director's Address

Dear Shareholder,

Today, your Company is a financially strong and resilient organisation. It has achieved a multi-product status ensuring its profits are not dependent only on one market. Also your Company's ability to modify and adjust its product mix in response to dynamic market conditions is a measure of its agility. This has helped your Company in mitigating the risks associated with individual product cycles and ensuring stable operations and profit levels.

Low availability of Natural Gas and a sharp fall in international prices of Methanol affected the bottom line of the last year. Given the limited availability of gas, the operational flexibility developed within the Company enabled us to maximise Ammonia production versus Methanol, thereby optimising the contribution from gas utilisation.

The lack of demand for fertilisers due to a lean season was taken advantage of to make more explosives-grade Ammonium Nitrate for about a month. Since in-built capacities of downstream plants were still available, your Company opted to run them at higher capacities by using bought-out Ammonia to complement in-house production, thereby increasing volumes of its own NP fertiliser from 1.4 Lac tons to 1.8 Lac tons. The Chemicals business continued to support the bottom line, thereby minimising the effects of the adverse factors mentioned above

Brand Building: Over the last decade, your Company has invested substantially in creating, developing and sustaining brands of our leading products. Our umbrella brand of fertilisers and agri-inputs, 'Mahadhan', is well trusted by farmers across western India and the hinterland as a symbol of quality and high yield. In the Industrial Chemicals and Petrochemicals segment, your Company's name stands for customised quality and anytime /prompt service. Similarly, the 'Optimex' brand of explosives-grade prilled Ammonium Nitrate is popular in the mining and construction industries. Optimex is known to give the highest blasting impact in its use as ANFO-type explosives.

Benchmarking with the Best: Moving on to operations, after recent modifications, the Ammonia plant is comparable with the best in terms of operational efficiencies for similar-sized plants worldwide. Our NP plant is one of the most efficiently run plants and makes the best prilled quality complex fertilisers in India.

We are making a constant effort to improve our operational capabilities by benchmarking with the best manufacturing practices within and outside the industry.

Cost Reduction in Manufacturing: Rising costs is one area of concern, which requires constant control. Pursuing in this direction, an 'Energy Task Force' was set up. Its recommendations, when implemented, led to significant improvement in the consumption of Gas and steam, incorporating several energy recovery systems in the plants.

Growth Plan: Given the present economic conditions and uncertain fertiliser policies, your Company has chosen the option to de-bottleneck through marginal investment rather than set up grass-root investment in fertilisers. Keeping this in view and the need to reduce dependence on gas availability -- at the same time exploiting the brand equity in both NP for fertilisers (Mahadhan) and AN for explosives (Optimex) -- your Company has taken up projects to de-bottleneck AN and NP plants to increase production by 50% as well as set up an Ammonia storage terminal at JNPT. Your Company is also concentrating its efforts on Speciality Agro Products to meet the agro needs of high-tech farming, including fertigation. Your Company has been making efforts to further improve the utilisation of its network to market other fertilisers.

Level Playing Field: The primary reforms of the 90s have affected the entire industry directly and your Company felt the impact as well. It was perceived by the industry that primary reforms would be followed quickly by secondary reforms. Sadly that has not happened. To enable us to become globally competitive, areas that require urgent attention are availability of gas, power supply at international levels of tariff and quality, Value Added Tax (VAT) to replace all taxes and, finance at rates prevailing in developed countries. On various occasions and forums, your Company continues to raise these issues with the appropriate authorities.

Your Company is also looking forward for the Government to free the fertiliser industry from control. This will help the fertiliser industry to maximise its returns based on the value generated for the farmers.

We shall continue to strive with the determination to succeed.

I thank you all for your support.

15th June, 2002

Deepak C. Mehta

Managing Director

Back to Contents