1. A Brief Analysis
HINDUSTAN FERTILIZER
CORPORATION LIMITED.
Presented by : Group 8
Gunjan Garg
Megha Agarwal
Shreyans Golchha
Kartikeya Sharma
Shaurya Vikram Singh
2. CONTENTS
About the Company
Profit and loss account of the company
Fertilizer Industry in India : Performance
Type of Market : Fertilizer Industry
Regression Analysis of the Industry
Reasons for the decline in industry
Recommendations
3. ABOUT THE COMPANY
Incorporated on 14.3.1978 consequent upon
the reorganization of the Fertilizers
Corporation of India Ltd.
Owns production units at
Namrup-Assam,
Barauni-Bihar and
Durgapur-West Bengal besides the
Haldia Fertilizer Project in West Bengal.
Ason 31.3.2000, the company held an
authorized share capital of Rs. 1200 crore and
a paid up capital of Rs. 776.11 crore.
4. CONT..
Production Performance: The total annual installed
capacity at the 5 manufacturing units of HFC at
Barauni Durgapur & Namrup (I, II & III) was 6.53
lakh MT of nitrogen which has been derated to 4.03
lakh MT.
Financial performance: The Company has incurred a
loss of Rs.532.64 crore in the year 1996- 97 and
expected loss: Year1997-98 Rs.580.70 crore
1998-99 Rs.707.62 crore
HFC was declared sick in November 1992 by the
Board for Industrial and Financial Reconstruction
(BIFR) in terms of Section 15 of the Sick Industrial
Companies (Special Provisions)Act, 1985 (SICA)
5. PROFIT AND LOSS ACCOUNT OF
THE COMPANY
Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00
Total
income 257.38 221.89 224 280.08 341.69 153.49 153.67 238.78 202.45 141.45 1310.28 75.66
Sales 254.8 217.68 219.13 269.72 332.66 140.5 129.09 218.25 192.47 131.68 100.71 67.79
Total
expenses 383.61 385.27 424.83 625.81 664.92 493.97 558.55 728.85 734.82 801.36 649.26 631.24
PAT net
of P&E -148.78 -171.04 -229.68 -330.8 -352 -374.05 -415.52 -491.85 -539.46 -641.16 -552.7 -570.29
6. FERTILIZER INDUSTRY IN INDIA :
PERFORMANCE
The Indian fertilizer industry
Agriculture the backbone of Indian Economy still
holds its relative importance for more than a
billion peoples
Fertilizer industry in India has succeeded in
meeting the demand of all chemical fertilizers in
the recent years.
Total capacity of the industry as on 30.01.2003 had
reached a level of 121.10 lakh MT of nitrogen
Presently there are 57 large fertilizers plants in
the country producing urea, DAP, Complex
fertilizer, Ammonium Sulphate (AS) and Calcium
Ammonium Nitrate (CAN).
7. TYPE OF MARKET : FERTILIZER
INDUSTRY
Oligopoly Market
Few large suppliers like
Bharat Fertilizer Industries Limited
Chambal Fertilizers and Chemicals Limited
National Fertilizers Limited
Paradeep Phosphates Limited etc..
Few number of firms selling same kind of product.
Firms are competing on price so that price and profits
will be the same as a competitive industry
8. Some Facts About the Fertilizer Industry
Year Production Import
1995-96 15,805 3782
1996-97 15,628 68
1997-98 18,594 533
1998-99 19,292 556
1999-2000 19,807 2389
2000-2001 19,734 2328
Fig 1 : Figures showing the production and imports of urea.
•Total fertilizer consumption in the country reached a level of 18.069 million tonne
during 1999-00 and in next four years it ranged between 16.09 to 17.35 million
tonne.
•Similarly, per hectare use of NPK reached 95.4 kg during 1999-00 but it remained
below 92 kg during next four years
•After 1991 -92 growth rate in fertilizer consumption turned out to be only a little
more than one third of what it was during 1966-67 to 1991-92
•The growth rate in fertilizer consumption declined further after 1998-99, the growth
rate in output of crop sector became statistically non significant.
9. Table 3.1: Maximum retail prices of fertilizers in terms of
nutrients (50 kg pack) exclusive of central VAT,/ state sales
tax and local taxes
Year Urea (46% N)
1986-87 5.11
1987-88 5.11
1988-89 5.11
1989-90 5.11
1990-91 5.11
1991-92 6.91
1992-93 6.00
1993-94 6.00
1994-95 6.81
1995-96 7.22
1996-97 7.46
1997-98 7.96
1998-99 8.33
1999-00 9.35
2000-01 10.00
2001-02 10.50
2002-03 10.76
2003-04 10.50
2004-05 10.50
2005-06 10.50
2006-07 10.50
Annual growth rate % 3.94
Trend in fertilizer use in
India
10. REGRESSION ANALYSIS OF THE
INDUSTRY
Shows that 1 percent
increase in real price of
fertilizer reduces fertilizer
Coefficient Std. Error t-Statistic Prob.
use by 0.616 percent.
Constant C(11) 4.746 0.355 13.358 0.000
Area irrigated C(12) 1.456 0.117 12.440 0.000
Real price C(13) -0.616 0.075 -8.219 0.000
ST credit C(14) 0.098 0.024 4.090 0.000
Equation: FERT =C(11)+C(12)*GCAIR +C(13)*FERTRPRICE+C(14)*CRST
98.8% of the variation in fertilizer’s
Observations: 25
use is explained by the variation in
R-squared 0.990 Mean dependent var 7.073 price
Adjusted R-squared 0.988 S.D. dependent var 0.375
S.E. of regression 0.041 Sum squared resid 0.035
Durbin-Watson stat 1.856
11. FERTILIZER INDUSTRY IN INDIA :
PERFORMANCE
The Indian fertilizer industry
Achieved phenomenal growth in 80’s
Witnessed decline in 90’s
Hasn’t seen any multinational investment in recent times
Government is also considering disinvestment of its equity of
public sector fertilizer
Average price of fertilizer (weighted for N.P and K) was Rs.
12.5 per kg and subsidy works out to Rs. 8.63. If subsidy on
fertilizer is removed completely then price of fertilizer increase
by 69 percent which would lead to decrease in use of
fertilizers.
High cost of production, and less revenues due to non-
negotiable prices.
12. REASONS FOR THE DECLINE IN
INDUSTRY
Trickle down effect of downturn in whole fertilizer industry
Closing of Haldia Project:
due to a variety of equipment related problems, the
suspension of commissioning activities had to be ordered in
October 1986.
Unavailability of Natural gas
Problems at Namrup Unit:
Under utilization of current resources
Mismanagement, and wrong decisions regarding procuring the
new ones.
Huge inventory and ideal lying machinery.
13. REASONS CONTINUED…
High raw material procurement cost.
Increasing cost of production.
Obsolete technology and machinery
Constant prices, leading to decreasing margins of
revenue.
High In fructuous Expenditure on Import of
Material
Loss due to delayed submission of returns to a
Bank.
14. Raw material details
Hindustan Fertilizer Corpn. Ltd.
Product/
s Quantity Value Quantity Value Quantity Value
/Units Rs. Crore /Units Rs. Crore /Units Rs. Crore
Mar 2001 (12 mths) Mar 2002 (12 mths) Mar 2003 (12 mths)
Ammonia 136 0.02 264 0.04
Tonnes Tonnes
Burnt
Rice
Husk
/Char
Coal 157 0.04 166 0.05 89 0.03
Tonnes Tonnes Tonnes
Fuel Oil 28 0 3 0 6 0.01
Kls Kls Kls
Naptha 357 0.28 115 0.09 138 0.11
Tonnes Tonnes Tonnes
Natural
Gas 91053 15.04 50606 8.25
000 cu.metres 000 cu.metres
Sulphur 280 0.11
Tonnes
15. RECOMMENDATIONS
Should bring in a change in the technology of
production and diversify
Should opt for disinvestment to do away with the
official lethargy and red-tapism
Should aim to have a high Inventory Turnover
Ratio
