GUJARAT STATE FERTILIZERS & CHEMICALS LIMITED 2003-04.pdf · 2019-01-10 · financial year 2004-05 at Corporate level at Head Quarters including its Sikka Unit and Fertilizernagar

GUJARAT STATE FERTILIZERS & CHEMICALS LIMITED

BOARD OF DIRECTORS P K LAHERI Chairman(As on 30-07-2004) DR. MANJULA SUBRAMANIAM

SUDHA ANCHALIABALWANT SINGHN R KRISHNAN UTI NomineeR S AGARWAL IDBI NomineeS R VENGSARKER ICICI Bank NomineeA K LUKE Managing Director

EXECUTIVE DIRECTORS C R RAOA K VIJAY KUMARGAUTAM SEN

COMPANY SECRETARY V D NANAVATY

BANKERS Bank of BarodaState Bank of IndiaBank of IndiaVijaya BankCentral Bank of IndiaDena BankIndian BankIndian Overseas BankHDFC Bank Ltd.Punjab National Bank

STATUTORY AUDITORS M/s. Ghiya & Co., Jaipur

BRANCH AUDITORS M/s. K C Mehta & Co., Vadodara(Polymers & Fibre Units)

COST AUDITORS M/s. Diwanji & Associates, Vadodara

SOLICITORS M/s. Bhaishanker Kanga & Girdharlal, Mumbai

REGISTRARS & M/s. MCS LimitedTRANSFER AGENTS Neelam Apartments, 1st Floor

88, Sampatrao ColonyBehind Standard Chartered BankProductivity Road, Vadodara - 390 007

REGISTERED OFFICE P. O. Fertilizernagar - 391 750District Vadodara, Gujarat, India

42nd Annual Report 2003-04

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42ND ANNUAL REPORT 2003-04

FOR MEMBERS’ ATTENTION

1. With a view to comply with the provisions of theListing Agreements with the Stock Exchanges, theRegister of Members and the Share Transfer Booksof the Company will remain closed from Friday, the27th August, 2004 to Friday, the 10th September,2004 (both days inclusive).

2. Members are requested to quote Folio Number orDP ID and Clients ID No. (in case of shares heldin demat forms) in all correspondence and also tobring with them the Attendance Card which may besubmitted at the entrance duly signed.

3. Members who are registered under two or moreLedger Folios are requested to write to the Registrarsand Transfer Agents of the Company forconsolidation, giving particulars of such Folios andsend relevant Share Certificates.

4. Those members who have not yet submitted theirold shares of Rs.100/- each for exchange of newequity shares of Rs.10/- each are requested to sendthe said shares to the Registrars & Transfer Agentsof the Company.

5. Shareholders of erstwhile Gujarat Nylons Ltd., whohave yet not surrendered their GNL equity sharecertificate/s are advised to surrender the sameimmediately to the Registrars & Transfer Agents ofthe Company so as to enable the despatch ofconverted GSFC shares etc. in exchange thereof atthe earliest.

42nd ANNUAL GENERAL MEETINGDate : 10th September, 2004

Day : Friday

Time : 9.00 a.m.

Place : Fertilizernagar - 391 750District Vadodara

6. Members holding shares in the Dematerialised Formare requested to intimate changes, if any, in respectof their Bank details, Mandate instructions,Nomination, Power of Attorney, Change of Address,Change of Name etc. to their Depository Participant(DP).

7. The Company’s Equity Shares are listed on thefollowing three Stock Exchanges :

1. Vadodara Stock Exchange Ltd.(Regional Stock Exchange)Fortune Tower, 3rd FloorSayajigunj, Vadodara - 390 005

2. The Stock Exchange, MumbaiPhiroze Jeejeebhoy Tower25th Floor, Dalal StreetMumbai - 400 001

3. National Stock Exchange of India Ltd.Exchange Plaza, 5th Floor, Plot No.C/1G Block, Bandra Kurla ComplexBandra (East), MUMBAI - 400 051

The Company has paid annual Listing fees to eachof the above Stock Exchanges for the financial year2003-04.

8. Members are requested to send their queries, if any,at least seven days in advance of the meeting sothat the information can be made available at themeeting.

CONTENTS Page No(s)

Notice ....................................................................... 4

Directors’ Report ...................................................... 9

Corporate Governance Report ............................. 17

Management Discussion and Analysis Report ... 23

Auditors’ Report ..................................................... 28

The Accounts ......................................................... 31

Cash Flow Statement ............................................ 55

Statement Pursuant to Section 212 ..................... 56

Consolidated Accounts ......................................... 57

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THE YEAR IN BRIEF

PARTICULARS UNIT 2003-04 2002-03

PRODUCTION

Fertilizers (loose) MT 1275764 1146668

Caprolactam MT 68489 60004

Nylon-6 MT 7264 5424

Argon Gas ‘000 NM3 3029 2756

Melamine MT 15237 6643

Monomer MT 4472 3586

Sheets MT 498 469

Pellets MT 2159 2114

Nylon Filament Yarn MT 5159 5311

Nylon Chips MT 3553 2283

SALES & EARNINGS

Net Sales & Other Income Rs.Crs. 2182.10 1887.00

Gross Profit (Before Depreciation & Taxes) * Rs.Crs. 187.73 (85.91)

Profit/(Loss) before Taxes * Rs.Crs. 42.40 (228.28)

Profit/(Loss) after Taxes * Rs.Crs. 174.27 (228.30)

FUNDS EMPLOYED

Capital Rs.Crs. 79.74 79.74

Reserves Rs.Crs. 671.53 437.12

Total Shareholders’ Funds (Net Worth) Rs.Crs. 751.27 516.86

Borrowings Rs.Crs. 1390.97 1470.17

Deferred Tax Liability (Net) Rs.Crs. 137.84 272.00

Total Funds Employed Rs.Crs. 2280.08 2259.03

GENERAL

Book Value per Share Rs. 93.63 63.80

Earning per Share Rs. 21.86 (49.02)

Equity Dividend per Share Rs. – –

Debt - Equity Ratio 1.86 : 1 2.89 : 1

Market Price per Share :

2003-04 2002-03

High (on 13/01/04) (on 08/07/02) Rs. 74.30 41.30

Low (on 25/04/03) (on 31/03/03) Rs. 14.05 13.10

No. of Shareholders No. 123318 135236

No. of Employees No. 4688 4906

* Before exceptional items.

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NOTICENOTICE is hereby given that the Forty-second Annual General Meeting of the Members of the Company will beheld at the Registered Office of the Company at 9.00 a.m. on Friday, the 10th September, 2004 to transact thefollowing business :

Ordinary Business

1. To receive, consider and adopt the Audited Accounts, Balance Sheet as at 31st March, 2004, Profit & LossAccount for the year ended on that date & the reports of Directors and Auditors thereon.

2. To appoint a Director in place of Shri Balwant Singh, who retires by rotation and being eligible offers himselffor re-appointment.

3. To pass the following resolution, with or without modifications, as an Ordinary Resolution :

‘‘RESOLVED that, the Board of Directors of the Company be and are hereby authorized to fix the remunerationplus TA and out of pocket expenses, to be paid to the Statutory Auditors and Branch Auditors as may beappointed by the Comptroller and Auditor General of India to audit the accounts of the Company for thefinancial year 2004-05 at Corporate level at Head Quarters including its Sikka Unit and Fertilizernagar Plantsand to audit the accounts of Polymers and Fibre Units of the Company for the financial year 2004-05, as theBoard may deem fit and appropriate in their absolute discretion.”

Special Business

4. To consider and if thought fit, to pass the following resolution, with or without modifications, as an OrdinaryResolution :

“RESOLVED that, in partial modification of Resolutions No. 14 passed at the 32nd Annual General Meetingheld on 22.12.1994, No. 10 passed at the 34th Annual General Meeting held on 27.09.1996, No. 11 passedat the 38th Annual General Meeting held on 22.09.2000 and No. 8 passed at the 39th Annual General Meetingheld on 28.09.2001, the consent of the Company be and is hereby accorded in terms of Section 293(1)(a)and/or other applicable provisions, if any, of the Companies Act, 1956, to the mortgaging and/or charging bythe Board of Directors of the Company, fixed assets of the Company’s Polymers Unit situated at village Ranoliin District Vadodara and Company’s Fibre Unit situated at village Kharach in District Bharuch and villageKuwarda in District Surat, wheresoever situate, in addition to the movable and immovable properties of theCompany situated at Fertilizernagar, District Vadodara and of Sikka Unit situated at villages Motikhavadi andSikka, Dist. Jamnagar, present and future and whole undertaking of the Company together with power to takeover the management of the business and concern of the Company in certain events, to or in favour of -

1. The Trustees for the Debenture holders of the Privately Placed 80,00,000 - Secured Redeemable Non-convertible Debentures of Rs. 100/- each aggregating to Rs. 8000 lakhs, raised for Working Capitalrequirement;

2. The Trustees for the Bond holders of the Privately Placed 2,500 - Secured Redeemable Non-convertibleBonds of Rs. 5 lakhs each aggregating to Rs. 12500 lakhs, raised for DAP Expansion Project at Sikka;

3. The Trustees for the Bond holders of the Privately Placed 1,670 - Secured Redeemable Non-convertibleBonds of Rs. 5 lakhs each aggregating to Rs. 8350 lakhs, raised partly for Sikka DAP Expansion Project,modifications in existing plants and Working Capital requirement;

4. Industrial Development Bank of India (IDBI), Life Insurance Corporation of India, IFCI Ltd., ICICI Bank Ltd.and Industrial Investment Bank of India, in respect of the Rupee Term Loans of Rs. 14500 lakhs forAmmonia Project;

5. IFCI Ltd. in respect of the Rupee Term Loan of Rs. 6000 lakhs for Melamine Expansion Project; and

6. IDBI in respect of the Rupee Term Loan of Rs. 4000 lakhs for normal capital expenditure;

together with interest thereon at the respective agreed rates, compound interest, additional interest, fundedinterest, liquidated damages, commitment charges, remuneration payable to the trustees, premia onprepayment or on redemption, costs, charges, expenses and other monies payable by the Company to therespective debenture/bond holders and lenders as per the terms of issue of debentures/bonds, borrowings andas per Corporate Debt Restructuring Scheme/ Deeds of Modifications/ terms of Loan Agreements/ Heads ofAgreements/ Letters of sanctions/ Trust Deeds/ Memorandum of terms & conditions/ Trustee Agreementsentered into/ to be entered into by the Company in respect of the said debentures/bonds and term loans.”

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“FURTHER RESOLVED that, the Board of Directors of the Company be and are hereby authorised to finaliseand execute with the Trustees of the Debenture/Bond holders and Lenders, the documents for creating theaforesaid mortgages and/or charges and to do all such acts and things, deeds and matters as may be requiredfor giving effect to this resolution.”


“RESOLVED that, in partial modification of Resolution No. 12 passed at the 38th Annual General Meetingheld on 22.09.2000, the consent of the Company be and is hereby accorded in terms of Section 293(1)(a)and/or other applicable provisions, if any, of the Companies Act, 1956, to the mortgaging and/or chargingby the Board of Directors of the Company, fixed assets of the Company situated at Fertilizernagar, DistrictVadodara and of Sikka Unit situated at villages Motikhavadi and Sikka, Dist. Jamnagar, wheresoever situate,in addition to the immovable properties of the Company’s Polymers Unit situated at village Ranoli in DistrictVadodara and Company’s Fibre Unit situated at village Kharach in District Bharuch and village Kuwardain District Surat, together with power to take over the management of the business and concern of the Companyin certain events, to or in favour of Bank of Baroda (BOB), Bank of India (BOI), State Bank of India (SBI)and Vijaya Bank (VB), in respect of the Working Capital Term Loans of Rs. 15000 lakhs; together with interestthereon at the respective agreed rates, compound interest, additional interest, funded interest, liquidateddamages, commitment charges, premia on prepayment or on redemption, costs, charges, expenses and othermonies payable by the Company to the “BOB”, “BOI”, “SBI” and “VB” as per the terms of Loan Agreements/Heads of Agreements/ Letters of sanctions/ Memorandum of terms & conditions/ Corporate Debt RestructuringScheme/ Deeds of Modifications entered into/ to be entered into by the Company in respect of the saidterm loans.”

“FURTHER RESOLVED that, the Board of Directors of the Company be and are hereby authorised tofinalise and execute with the “BOB”, “BOI”, “SBI” and “VB” the documents for creating the aforesaid mortgagesand/or charges and to do all such acts and things, deeds and matters as may be required for givingeffect to this resolution.”


“RESOLVED that, the consent of the Company be and is hereby accorded in terms of Section 293(1)(a) and/orother applicable provisions, if any, of the Companies Act, 1956, to the mortgaging and/or charging by the Boardof Directors of the Company, fixed assets of the Company situated at Fertilizernagar, District Vadodara, Company’sSikka Unit situated at villages Motikhavadi and Sikka, Dist. Jamnagar, Company’s Polymers Unit situated at villageRanoli in District Vadodara and Company’s Fibre Unit situated at village Kharach in District Bharuch and villageKuwarda in District Surat wheresoever situate, present & future together with power to take over the managementof the business and concern of the Company in certain events, to or in favour of -

1. Industrial Development Bank of India (IDBI) for the Term Loan of Rs. 3785.98 lakhs and State Bank of India(SBI) for the Term Loan of Rs. 3790.09 lakhs arising by invoking the guarantee given by IDBI and SBIin favour of Kreditanstalt fur Wiederaufbau, Germany (KfW) for the foreign currency loan; and

2. Oriental Insurance Company Limited (OIC) for the Term Loan of Rs. 250 lakhs for corporate requirements;

together with interest thereon at the respective agreed rates, compound interest, additional interest, fundedinterest, liquidated damages, commitment charges, premia on prepayment or on redemption, costs, charges,expenses and other monies payable by the Company to the “IDBI”, “SBI” & “OIC” as per the terms of LoanAgreements/ Heads of Agreements/ Letters of sanctions/ Memorandum of terms & conditions/ Corporate DebtRestructuring Scheme/ Deeds of Modifications entered into/ to be entered into by the Company in respect ofthe said term loans.”

“FURTHER RESOLVED that, the Board of Directors of the Company be and are hereby authorised to finaliseand execute with the “IDBI”, “SBI” and “OIC” the documents for creating the aforesaid mortgages and/orcharges and to do all such acts and things, deeds and matters as may be required for giving effect to thisresolution.”

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7. To consider and if thought fit, to pass the following resolution, with or without modifications, as a SpecialResolution :

“RESOLVED that, pursuant to the provisions of the Clauses 4,5,6 and other applicable provisions of the Securitiesand Exchange Board of India (Delisting of Securities) Guidelines, 2003 (hereinafter referred to as the “DelistingGuidelines”) and subject to the provisions of the Companies Act, 1956 and Securities Contracts (Regulation) Act,1956 (including any statutory modification(s) or re-enactment thereof for the time being in force), and the Rulesframed thereunder, Listing Agreements, and all other applicable laws, rules, regulations, and guidelines andsubject to such approvals, consents, permissions or sanctions of the Securities and Exchange Board of India,Stock Exchanges where the shares of the Company are listed and any other appropriate authorities, institutionsor regulators as may be necessary and subject to such conditions and modifications, as may be prescribed orimposed by any authority while granting such approvals, permissions and sanctions, which may be agreed toby the Board of Directors of the Company (hereinafter referred to as “the Board”, which term shall be deemedto include any Committee thereof for the time being exercising the powers conferred on the Board by thisResolution), the consent of the Company be and is hereby accorded to the Board to delist the Equity Shares ofthe Company, which shall be voluntary in nature and without giving the exit opportunity to the investors, fromVadodara Stock Exchange at such time as the Board may decide.”

“FURTHER RESOLVED that, the Board of Directors of the Company be and is hereby authorised to seekvoluntary delisting and take all necessary actions in this regard and to do all such acts, deeds, matters andthings as may be necessary for the purpose of giving effect to the above resolution.”

By Order of the Board

Fertilizernagar V D Nanavaty30th July, 2004 Company Secretary

NOTES

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TOATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER.

2. The present Statutory Auditors M/s. Ghiya & Co., Chartered Accountants, Branch Auditors for Polymers & FibreUnits, M/s. K C Mehta & Co., Chartered Accountants, appointed by the Comptroller & Auditor General of Indiawill retire at the conclusion of Forty-second Annual General Meeting. The Auditors of the Company for thecurrent financial year will be appointed by the Comptroller & Auditor General of India as the Companycontinues to attract provisions of Section 619-B read with the provision of Section 619(2) of the CompaniesAct, 1956.

3. Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 in respect of Special Businessis annexed hereto.

4. As required under the Rule 4A of the Companies Unpaid Dividend (Transfer to General Revenue Account ofCentral Government) Rules, 1978, the Company hereby informs its Members that all unpaid/unclaimeddividends declared for and upto the Financial Year ended 31st March, 1994 have been transferred to theGeneral Revenue Account of the Central Government. Members who have not encashed the dividend warrantsfor the said period are requested to claim the amount from the Registrar of Companies (Gujarat), HousingBoard Building, Opp. Roopal Park Society, Ankur Char Rasta, Naranpura, Ahmedabad - 380 013.Consequent upon amendment to Section 205A of the Companies Act, 1956 and introduction of Section 205Cby the Companies (Amendment) Act, 1999, the amount of dividend for the subsequent years remaining unpaidor unclaimed for a period of seven years from the date of transfer to Unpaid Dividend Account of the Companyshall be transferred to the Investor Education and Protection Fund set up by the Government of India and nopayments shall be made in respect of any such claims by the Fund. Accordingly, the unclaimed dividend forthe financial year ended 31-03-1996 has been transferred to the said fund.Members who have not yet encashed their dividend warrant(s) for the financial year ended 31-03-1997 andonwards, are requested to make their claims to the Company accordingly, without any delay.

5. Documents referred to in the notice are available for inspection at the Registered Office of the Company onany day (not being the public holiday) from 09.30 A.M. to 11.30 A.M.

6. Relevancy of questions and the order of speakers at the meeting will be decided by the Chairman.

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ANNEXURE TO NOTICEEXPLANATORY STATEMENT PURSUANT TO SECTION 173 OF THE COMPANIES ACT, 1956

In conformity with the provisions of Section 173 of the Companies Act, 1956, the following Explanatory Statement sets out allthe material facts relating to the Special Business mentioned in the accompanying Notice and should be taken as forming partof the Notice.

Item No. 4The Company had approached the Corporate Debt Restructuring (CDR) Cell through Industrial Development Bank of India (IDBI),the lead financial institution, for restructuring Company’s debt liabilities towards Debentures/Bonds, Secured and Unsecured RupeeTerm Loans, Secured and Unsecured Foreign Currency Loans, Working Capital Term Loans and fund based working capitalfacilities. CDR empowered group in its meeting held on 14.01.2004 approved the restructuring scheme. As per the approvedscheme, the complete debt liabilities are grouped under various series having different terms and conditions. Based on the approvedscheme, Company approached all the debenture/bond holders/lenders for their approvals and is successful in getting approvalfrom most of the debenture/bond holders/lenders except few for which Company is in process of getting consent.As per the approved Debt Restructuring Scheme, Company has to modify the charges as under :-1. 80,00,000- Secured Redeemable Non-convertible Debentures of Rs. 100/- each aggregating to Rs. 8000 lakhs, 2,500 -

12.5% Secured Redeemable Non-convertible Bonds of Rs. 5 lakhs each aggregating to Rs. 12500 lakhs and 1,670 - 12.6%Secured Redeemable Non-convertible Bonds of Rs. 5 lakhs each aggregating to Rs. 8350 lakhs, which are presently securedby first mortgage on the Company’s land, buildings and all movables, both present and future, at Fertilizernagar, DistrictVadodara and of Sikka Unit situated at Villages Motikhavadi and Sikka, District Jamnagar (excluding the assets of theCompany’s Polymers and Fibre Units), subject to prior charges of the Company’s bankers on specified movables for securingborrowings for working capital requirements and ranking pari passu with the mortgages and charges created in favourof other such chargeholders, is now to be additionally secured by the fixed assets of the Company’s Polymers Unit situatedat village Ranoli in District Vadodara and Company’s Fibre Unit situated at village Kharach in District Bharuch and villageKuwarda in District Surat also.

2. Term Loans from : (Rs. in Lakhs)

Particulars Sanctioned Amt. Outstanding Amt.as on 31.3.2004

- For Ammonia Project :-I) LIC 1000.00 162.00ii) IDBI 7000.00 2357.69iii) IFCI 3000.00 902.00iv) ICICI Bank Ltd. 3000.00 822.46vi) IIBI 500.00 88.00

- For Melamine Expansion Project :-i) IFCI 6000.00 2234.00

- For normal capital expenditure :-i) IDBI 4000.00 2934.00

which are presently secured against hypothecation of the movable properties (except book debts) of the Company (excludingthose of Company’s Polymers and Fibre Units and investments in Units of Unit Trust of India) and secured by a joint equitablemortgage created on the immovable properties of the Company (excluding those of Company’s Polymers & Fibre Units),both present and future, are now to be additionally secured by the fixed assets of the Company’s Polymers Unit situatedat village Ranoli in District Vadodara and Company’s Fibre Unit situated at village Kharach in District Bharuch and villageKuwarda in District Surat also.

The creation of mortgage and charge over the fixed assets of the Company tantamounts to the disposal of properties of theCompany within the meaning of Section 293(1)(a) of the Companies Act, 1956 and therefore require approval and consent ofthe members of the Company in the General Meeting. This resolution is therefore proposed.None of the Directors of the Company would be deemed to be interested in this resolution except Shri R S Agarwal, who isDirector nominated by IDBI, Shri N R Krishnan, who is Director nominated by UTI and Shri S R Vengsarker, who is Directornominated by ICICI Bank. Your Directors recommend you to pass this resolution.Item No. 5Working Capital Term Loan of Rs. 15000 lakhs from Bank of Baroda (BOB), Bank of India (BOI), State Bank of India (SBI)and Vijaya Bank (VB), are presently secured by hypothecation of stock of raw materials, finished products, packing materials,general stores, spares, book debts etc. of the Company and are further secured by a joint equitable mortgage created on theimmovable properties of the Polymers Unit and Fibre Unit of the Company. However, as per the approved Corporate DebtRestructuring scheme, same is to be secured only by fixed assets of the Company.

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Accordingly, said Term Loans will be secured by mortgage of the fixed assets of the Company situated at Fertilizernagar, DistrictVadodara and of Sikka Unit situated at villages Motikhavadi and Sikka, Dist. Jamnagar wheresoever situate, in addition to theimmovable properties of the Company’s Polymers Unit situated at village Ranoli in District Vadodara and Company’s Fibre Unitsituated at village Kharach in District Bharuch and village Kuwarda in District Surat, as stated in the proposed resolution, infavour of the aforesaid Banks.The creation of mortgage and charge over the assets of the Company tantamounts to the disposal of properties of the Companywithin the meaning of Section 293(1)(a) of the Companies Act, 1956 and therefore require approval and consent of the membersof the Company in the General Meeting. This resolution is therefore proposed.None of the Directors of the Company would be deemed to be interested in the resolution. Your Directors recommend you topass this resolution.Item No. 6Kreditanstalt fur Wiederaufbau, Germany (KfW) partly invoked the guarantees issued by IDBI and SBI for the recovery of thepayments of Foreign Currency Loan due on 30.06.2003. The invoked amount was shared equally by IDBI and SBI resultinginto Rupee Term Loans of IDBI Rs. 3785.98 lakhs and of SBI Rs. 3790.09 lakhs, which are now to be secured by way of firstcharge on fixed assets of the Company as stated in the proposed resolution.Loan of Rs. 250 lakhs of the Oriental Insurance Company Limited (OIC) which was to be secured by way of second chargeon current assets of the Company is now to be secured by way of first charge on fixed assets of the Company as statedin the proposed resolution.The creation of mortgage and charge over the fixed assets of the Company tantamounts to the disposal of properties of theCompany within the meaning of Section 293(1)(a) of the Companies Act, 1956 and therefore require approval and consent ofthe members of the Company in the General Meeting. This resolution is therefore proposed.None of the Directors of the Company would be deemed to be interested in the resolution except Shri R S Agarwal, who isDirector nominated by IDBI. Your Directors recommend you to pass this resolution.Item No. 7The Securities and Exchange Board of India (SEBI) has issued the Securities and Exchange Board of India (Delisting of Securities)Guidelines, 2003 (hereinafter referred to as the “Delisting Guidelines”) incorporating, among others, provisions for delisting ofsecurities of a body corporate voluntarily by a promoter or an acquirer or any person other than the Stock Exchanges.Accordingly, in the 41st Annual General Meeting of the Company held on 26th September, 2003, members approved delistingof Company’s equity shares from Delhi, Madras, Ahmedabad and Calcutta Stock Exchanges. Thereafter, Company made necessaryapplication for delisting from the said stock exchanges and have received approvals from the Delhi, Madras and AhmedabadStock Exchanges and expect to receive approval from the Calcutta Stock Exchange shortly.In view of the above, the Equity Shares of the Company now remain listed on the following three Stock Exchanges :(i) Vadodara Stock Exchange Ltd. (Regional Stock Exchange)(VSE)(ii) The Stock Exchange, Mumbai (BSE)(iii) National Stock Exchange of India Ltd., Mumbai (NSE).As the provisions of Regional Stock Exchange is withdrawn, Company can delist shares from Vadodara Stock Exchange also.With the extensive networking of BSE and NSE, as also the extension of BSE/NSE terminals to other cities as well, investorshave access to on-line dealings in Equity Shares of the Company across the country. The bulk of the trading in the Company’sequity shares takes place on the BSE and NSE which have nationwide trading terminals and the depth and liquidity of tradingin the Company’s Equity Shares on VSE is not significant.The Company has proposed this resolution, as part of its cost reduction measures, which will enable it to delist its equity sharesat an appropriate time in future, from Vadodara Stock Exchange (VSE).As per the Delisting Guidelines, the Company can delist it shares from VSE with the approval of Members by passing a SpecialResolution, without providing an exit opportunity, provided that the shares will continue to be listed on a stock exchange havingnationwide trading terminals. Accordingly, members approval is being sought by a Special Resolution for enabling voluntary delistingof its securities from the said Stock Exchange.The proposed delisting of the Company’s Equity Shares from the said Stock Exchange, as and when it takes place, will notaffect the investors adversely. The Company’s Equity Shares will continue to be listed on BSE and NSE. The delisting will takeeffect after all approvals, permissions and sanctions are received. The exact date on which delisting will take effect will be suitablynotified at that time.None of the Directors of the Company are, in any way, concerned or interested in this Resolution.

By Order of the Board

Fertilizernagar V D Nanavaty30th July, 2004 Company Secretary

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DIRECTORS’ REPORTToThe Members,Your Directors have pleasure in presenting the 42nd Annual Report and audited Accounts of the Company for theyear ended 31st March, 2004.FINANCIAL RESULTS

(Rs. in Crores)

Particulars 2003-04 2002-03

1. Gross Sales 2219.36 1935.23Less : Excise Duty Recovered 113.12 98.71Net Sales 2106.24 1836.52

2. Other Income 75.86 50.483. Total Revenue 2182.10 1887.004. Less : Operating Expenses 1853.08 1787.005. Operating Profit 329.02 100.006. Less : Interest 138.66 170.767. Gross Profit 190.36 (70.76)8. Less : Depreciation 145.33 142.379. Balance 45.03 (213.13)10. Prior Period Adjustment (2.63) (15.15)11. Profit/(Loss) before tax & Exceptional items 42.40 (228.28)12. Taxation - Current Taxation (2.29) (0.02)

- Deferred Tax (net) 134.16 —13. Profit/(Loss) after tax but before Exceptional items 174.27 (228.30)14. Exceptional items — (162.54)15. Profit/(Loss) after Exceptional items 174.27 (390.84)16. Debenture/Bond Redemption Reserve written back — 51.3817. Balance in Profit & Loss Account 174.27 (339.46)18. Transfer(to)/from General Reserve (134.15) 339.4619. Balance in Profit & Loss Account 40.12 —

Your Company has recorded an all round superior performance during the year. The Company has achieved thehighest net turnover of Rs. 2106.24 crores against Rs. 1836.52 crores in the previous year recording a rise of 14.69 %.The Company sold 13.26 lakhs MTs of fertilizers which is higher by 1.04 lakhs MTs as compared to the previous year.This alongwith better price realisation resulted into higher fertilizer sales by Rs. 150.87 crores. The turnover of industrial& intermediate products at Fertilizernagar increased by Rs. 102.14 crores (19.53%) while turnover of Fibre Unit &Polymers Unit increased by Rs. 11.72 crores (13.9%) and Rs. 4.98 crores (10.05%) respectively.

The operating profit has substantially improved to Rs. 329.02 crores (i.e. 15.62% of the net sales) as against Rs. 100crores (5.45%) in the previous year. The profit before tax & exceptional items is Rs. 42.40 crores as against a lossof Rs. 228.28 crores in the last year. The net profit for the year is Rs. 174.27 crores after considering deferred taxand tax under MAT.

TURN AROUND STRATEGY OF THE MANAGEMENT

During the year under review, management adopted well thought out and courageous strategy to bring theCompany out from losses. Following are the few highlights of the strategy -

1. Comprehensive Debt Restructuring through CDR Cell effective from 1st April, 2003, helped in reduction of rateof interest, waiver of penal charges, reschedulement of repayment installments etc. This has brought interestsaving of Rs. 38.62 crores in 2003-04 as also waiver of principal amount of around Rs. 60.13 crores.

2. As part of its relentless drive to reduce its Naphtha and LSHS bills, the Company has been scouting foravenues for availability of additional gas which is a cheaper and a cleaner feed-stock and fuel alternative. Asa result of untiring efforts made, new gas supply contracts with GSPC and GGCL for Natural Gas, GAIL forR-LNG, and gas transportation contract with GSPL were executed during the year. Within short time of signingthese contracts, the supply of gas from GSPC started from September, 03 and that from GGCL started in

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October, 03 from Diwali day. Similarly, R-LNG supply started in March, 04 and your Company is the first fertilizercompany in India receiving R-LNG. Now, total gas availability is 16.87 lakh SM3/d which is within the existingtotal requirement for the Company. Due to the increased availability of gas there will be substantial savingsin feed & fuel cost as well as other indirect savings.

3. For improving operations of Ammonia-IV Plant, a reliability action plan jointly worked out by GSFC, PDIL &LINDE, Germany was implemented during September, 03 which brought good capacity utilization and higherstream days. Operation of this Ammonia Plant on Natural Gas alone has resulted in further energy & costimprovements.

4. The Company has also taken steps to enhance and maintain the capacity utilization of all the plants to near 100%.5. Focus on other internal factors, such as cost reduction, import substitution for raw materials viz: Rock

Phosphate & Sulphur, reduction of inventory of raw materials and finished goods etc. helped the Companyto survive, avoid deeper financial crisis and achieve a major turn-around.

6. With ever increasing cost of energy, the Company has taken a number of energy conservation steps, whichhave resulted into reducing specific energy consumption of all major plants.

7. On the marketing front, the Company adopted innovative strategies like maximizing sales in economicmarketing zones, gearing up sales of ASP in home market and neighbouring states, substantial reduction infield shortages, marketing of more fertilizers by road, substantial sale of agro inputs, selling productivity insteadof products to farmers etc. This has resulted in remarkable saving in marketing cost per ton on 13.26 lakhstonnes of fertilizers sold.

8. Industrial products face competition from indigenous manufacturers as well as imports with reduction in customduties. Your Company improved efficiency not only in production but also in marketing and competedaggressively in domestic market against imports also. Aggressive approach in market development area andcustomer promotional activities like dealers meeting, increased customer’s plant visits, daily marketing meetingand aggressive efforts in export sale of the additional quantity available after selling in domestic market havebeen taken up as reflected in the results. For protection from unfair competition against cheaper imports forproducts like Caprolactam, Melamine and Cyclohexanone, Company has approached designated authority forlevy of anti dumping duties. As a result, GOI has already imposed anti dumping duty on import of cheaperMelamine from China.

9. At the beginning of the year under review, production at Sikka Unit was very low upto July-2003 due to pooravailability of Phosphoric Acid because of huge outstanding amount to two of the major suppliers of PhosphoricAcid viz. M/s. OCP & M/s. GCT. However, the management negotiated with these suppliers mainly OCP ofMorocco and GCT of Tunisia and assured them of timely and regular payment which resulted in resuming ofsupply of Phosphoric Acid during the course of the same year. This has resulted in running of the Sikka Unitat higher capacity for the rest of the year.

10. We are happy to inform the members that the matter of Retention price for Ammonium Sulphate (CEP-Route),which was pending with Deptt. of Fertilizers (DOF) Govt. of India since 1993-94, after vigorous follow-up bythe Company, has been announced by DOF. GSFC has received the subsidy of more than Rs.12 crores forpast period on this account. Similarly interest concession claim for Ammonia-IV project as per Government ofIndia’s guidelines has been received. Your Company is also taking vigorous steps to resolve various issueswith DOF and is hopeful of getting favourable response. The over all timely receipt of subsidy against saleof various fertilizers also improved substantially during the year under consideration.

11. Your Company has successfully computerised and integrated the key business processes of Human ResourceManagement, Purchase and Inventory Control System, Marketing and Finance. Also online ManagementInformation System has been developed in the areas of Production, Marketing, Materials Management,Finance and Personnel. It is further refined based upon the experience of users. The Company is also inprocess of implementing Document Management System with the view to decrease paper movement.

12. In the history of the Polymers Unit, both in production as well as in marketing fronts the unit has created manymilestones. The yearly production level during the year had surpassed ever highest production of previousyears and established new landmarks at more than 100% capacity utilization. This resulted in substantialimprovement in profit.

13. At Fibre Unit also, increase in sales coupled with reduction in raw material & other cost helped to reduce losses.14. The Company also laid emphasize on disposal of scrap & surplus items to get additional revenue and created

more space.

11

CORPORATE DEBT RESTRUCTURING (CDR)As communicated in the last year report, the Company sought debt restructuring in a comprehensive manner andapproached Industrial Development Bank of India (IDBI) the Lead Institution, under the Corporate Debt Restructuring(CDR) system. The CDR Empowered Group had approved the comprehensive debt restructuring package pursuantto their communication dated 4th February, 2004, classifying the debts under seven different categories with the cutoff date as 1st April, 2003, carrying interest rates from 0% to 11% with tenure varying from immediate payment to tenyears, along with waiver of penal interest, liquidated damages and other charges whatsoever it may be.In addition to above, the Govt. of Gujarat vide GR No. GSF/11/2003/3554/E dated 3-11-2003 have granted interestfree deferment of sales tax on finished goods, electricity duty and water charges to the extent of Rs. 45 crores perannum for a period of 5 years and the said deferred amount of Rs. 225 crores shall be repayable in 60 equalmonthly installments after the deferment period of 5 years is over.Over and above, to improve liquidity of the Company, simple interest for the year 2003-04 on rupee term loans,debentures and bonds will be converted into Funded Interest Term Loan and will be repayable in sixteen quarterlyinstallments commencing from 1-7-2006 @ 8% simple interest rate.Your Directors place on record their grateful acknowledgement to CDR group for restructuring the debts of theCompany and also place on record the gratitude to the financial institutions, banks, debentureholders and otherlenders for agreeing to the proposal of restructuring of debts submitted by the Company to the CDR group.Your Directors believe that the profits earned should be shared with the shareholders, however, keeping in viewthe funds requirements for meeting the immediate financial obligations of the Company as per aforesaidcomprehensive debt restructuring package during the year 2004-05, the Directors could not recommend dividendfor the financial year 2003-04. The Directors sincerely appreciate the support of the shareholders in difficult timesand desire to reward the shareholders in the coming years.

CURRENT PERFORMANCEThe performance of the Company during the first quarter of the current financial year 2004-05 has shown animprovement when compared to first quarter of 2003-04. The capacity utilisation of all the plants is higher inthis quarter. Ammonia-IV plant operated at 90% capacity as against 70% in first quarter of 2003-04. Caprolactamplant was operated at an average capacity of 103% during April-June, 2004-05. The net sales is Rs. 448.53crores as against Rs. 278.78 crores in first quarter of 2003-04. The improvement in net sales is due to bettersales volume and price realisation. The operating profit of the Company improved from Rs. 55.79 crores in firstquarter of 2003-04 to Rs. 80.57 crores during the current quarter. The profit before tax is Rs. 13.70 crores infirst quarter of 2004-05 as against a loss of Rs. 28.44 crores in first quarter of 2003-04. The net profit after provisionfor tax under MAT and deferred tax is Rs. 7.02 crores as against loss of Rs. 28.44 crores in the first quarterof 2003-04. During this period your Company registered a cash profit of Rs. 48.86 crores as against Rs. 8.40crores in the corresponding quarter of the previous year.

DELISTING OF SHARESAs approved by the shareholders at its last Annual General Meeting and as per delisting guidelines, the Companyhad applied for delisting of equity shares from Ahmedabad, Dehli, Madras and Kolkata Stock Exchanges of whichdelisting approval have been received from Ahmedabad, Delhi & Madras Stock Exchanges. It is proposed to delistshares from Vadodara Stock Exchange also this year. As listing of shares of the company will continue with TheStock Exchange, Mumbai and National Stock Exchange the said delisting will not affect the shareholders adversely.

LISTING OF DEBT SECURITIESPursuant to the SEBI guideline, the Company has made application for listing of its three Privately PlacedDebentures/Bonds series with National Stock Exchange.

RELIEF UNDERTAKINGAs members are aware, effective from 2-11-2002, the Govt. of Gujarat had declared your Company as a ReliefUndertaking under The Bombay Relief Undertaking (Special Provision) Act, 1958 for a period of one year. The Govt.of Gujarat has extended the said declaration for one more year effective from 2-11-2003 on the same terms &conditions.

CORPORATE GOVERNANCEPursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Management Discussion and AnalysisReport, Corporate Governance Report and Auditors’ Certificate regarding compliance of conditions of CorporateGovernance are made a part of the Annual Report.

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FIXED DEPOSITSAs on 31st March, 2004 the repayment/renewal of 803 deposits amounting to Rs.75.68 lakhs could not be madefor want of instructions thereof from the depositors. Letters were sent to the concerned deposit holders seekingtheir instructions. Till the date of this report, 305 deposits amounting to Rs. 32.03 lakhs have been repaid/renewed.INSURANCEAll properties and insurable interests of the Company, including buildings, plant & machinery and stocks have beeninsured. As required under the Public Liability Insurance Act, 1991, your Company has taken the necessaryinsurance cover.ISO ACCREDITATIONWith regard to ISO 14001 Environment Management System Certification, your Company has received certificateof approval in that regard for Company’s Fertilizernagar Complex covering all operating plants and support servicesdepartments.SAFETY, HEALTH AND ENVIRONMENTYour Company continues to give priority in the field of Safety, Health and Environment. Your Company has wonprestigious ‘National Safety Award-2003’ from British Safety Council, UK for outstanding performance in the fieldof Safety & Heath. Your Company is one of the few winners from large and small scale enterprises all over thecountry. Your Company has earned ‘‘5 star’’ rating with a grading above 92% in Health and Safety ManagementSystem Audit conducted by British Safety Council. This is the highest ever rating achieved by the Company overthe period of last five years. The audit was conducted comparing the Company’s safety practices with the bestpractices followed internationally. Your Company has also been awarded a ‘Certificate of Merit’ for working morethan 2 million accident free man hours without any lost time accident for the year 2002. This award is given jointlyby Gujarat Safety Council & Directorate of Industrial Safety & Health, Gujarat State.Efforts to increase safety awareness among employees, neighbouring villages and even school children have beencontinued during the said year also.On receipt of authorisation from Gujarat Pollution Control Board, your Company had given contract to M/s. GujaratEnviro Protection and Infrastructure Ltd., Surat (M/s. GEPIL) for stabilization & solidification of our Arsenic Wasteand so far 160 MTs of Arsenic Sludge has been despatched to M/s. GEPIL.Your Company had assigned feasibility study to National Productivity Council (NPC) for checking the possibilityof using our Sulphur Muck for civil/road construction activities and a trial patch of road has also been constructedusing the Sulphur Muck based on the guidelines of NPC. As per guidelines of charter of Corporate Responsibilityfor Environment Protection (CREP) and with a view to dispose off the Sulphur Muck in Secured Land fill site,quotations have been invited from various Secured Land fill sites and other options of recycling/utilizing the SulphurMuck internally are also being explored.Use of Natural Gas for practically total fuel and feed requirement in the complex which is a much cleaner fuelcompared to LSHS and Naphtha will lead to substantial reduction in environment emissions.PROJECTS OF INTERESTThe Company’s growth depends on diversification and expansion of the existing facilities in related areas. Lookingto good export potential for MEK Oxime, your Company has decided to put up production facility of MEK Oximehaving capacity of 6500 MTPY at an estimated cost of Rs.7.5 crores. Finance for the same will be made throughinternal sources of the Company. It is expected that the said facilities may be ready by May, 2005.As members are aware, Company has commenced its high capacity Ammonia-IV Project since April, 2000 andtherefore old Ammonia-I Plant is not much used. The Company is contemplating to convert the said plant for producinggood remunerative product viz. Methanol by making some expenses for technical conversion and installation ofadditional section. The Board of Directors will take its final decision in this regard after obtaining know-how for thesaid project from renowned Technology suppliers. We hope that such conversion will be beneficial for the Company.

SUBSIDIARY COMPANY/CONSOLIDATED ACCOUNTSIn terms of the approval granted by the Central Government under Section 212(8) of the Companies Act, 1956,copy of the Balance Sheet, Profit & Loss Account, Report of the Board of Directors and Report of the Auditors ofthe subsidiary company - GSFC Investment and Leasing Company Ltd. (GSFCIL) has not been attached with theBalance Sheet of the Company. The Company will make available these documents/details upon request byMembers of the Company interested in obtaining the same. In accordance with the Accounting Standard (AS-21)on Consolidation of Accounts and the Listing Agreement entered into with the Stock Exchanges, included as partof the Annual Report are the Audited Consolidated Financial Statements in respect of the Company and GSFCIL.Pursuant to the approval, a statement of the summarised financial position of the subsidiary company is attachedalong with the consolidated financial statements.

13

INFORMATION REGARDING CONSERVATION OF ENERGY, ETC., AND PARTICULARS OF EMPLOYEESInformation required under Section 217(1)(e) of the Companies Act, 1956, read with Rule (2) of the Companies(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexures “A” forming partof this report. The Company did not have any employee falling within the purview of Section 217(2A) of theCompanies Act, 1956 and as such particulars of employees has not been furnished.

DIRECTORATECHANGE IN DIRECTORSHIPThere is no change in directorship upto date of this report.In pursuance of the provisions of Article 170 of the Articles of Association of the Company, as also the provisionsof the Companies Act, 1956, Shri Balwant Singh will retire by rotation at this Annual General Meeting and beingeligible, has offered himself for re-appointment.

DIRECTORS’ RESPONSIBILITY STATEMENTAs required under Section 217 of the Companies Act, the Directors hereby confirm that :(i) In the preparation of the annual accounts, the applicable accounting standards had been followed alongwith

proper explanation relating to material departures.(ii) The accounting policies followed in the preparation of the annual accounts have been consistently applied

except where otherwise stated in the notes on Accounts. The judgement and the estimates in the preparationof annual accounts have been made on prudent and reasonable basis so that the Annual Accounts give atrue and fair view of the state of affairs of the Company, at the end of the financial year and of the profit ofthe Company for the year under review.

(iii) The Directors have taken sufficient and proper care for the maintenance of adequate accounting records, inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the accounts on a ‘going concern’ basis.

AUDITORSThe Company continues to attract the provisions of Section 619-B of the Companies Act, 1956. The Comptrollerand Auditor General of India under his letter No.CA V/COY/GUJARAT, GSFC(2)/30 dated 26-08-2003, appointedM/s. Ghiya & Co., Chartered Accountants, Jaipur as Statutory Auditors of the Company, to audit the consolidatedaccounts of the Company including its Sikka Unit and M/s. K C Mehta & Co., Chartered Accountants, Vadodaraas Branch Auditors, to audit the accounts of its Polymers and Fibre Units for the year ended 31st March, 2004.Auditors for the current year 2004-05 are also to be similarly appointed by the Comptroller & Auditor Generalof India. Pursuant to Section 224(8)(aa) of the Companies Act, 1956, the remuneration of the Auditors appointedby the Comptroller & Auditor General of India shall be fixed by the Company in the General Meeting or shallbe fixed in such manner as the Company in General Meeting may determine. Accordingly, a resolution proposingto give authority to Board of Directors of the Company to fix the remuneration of the Auditors for the financialyear 2004-05 is placed for your approval under ‘Ordinary Business’.In pursuance of the directives received from the Department of Company Affairs for the appointment of Cost Auditors,your Directors have, with the approval of the Central Government, appointed M/s. Diwanji & Associates, CostAccountant, as Cost Auditor to conduct the cost audit of fertilizer products for the financial year ending 31-3-2005.AUDITORS’ REPORTWith regard to observations of Statutory Auditors contained in their Report, the Company has provided clarificationsin Schedule 21 “Notes on Accounts”.PERSONNELEmployees at all levels have made significant contribution towards achieving higher levels of production, sales,improvement in specific consumption of raw materials, utility, cost reduction, energy conservation etc. We recogniseand sincerely appreciate the hard work put in by all the employees of the Company.ACKNOWLEDGMENTSYour Directors are happy to place on record their grateful thanks to the Government of India, the Government ofGujarat, IDBI, IFCI, UTI, ICICI Bank, LIC, GIC, other Indian Financial Institutions as well as International FinancialInstitutions, SEBI, NSDL, CDSL, Stock Exchanges, Bank of Baroda, State Bank of India, Bank of India & other Banksand other agencies for their assistance, cooperation and support extended to your Company. Above all, yourDirectors remain thankful to the shareholders as well as fixed depositors for their continued support.

For and on behalf of the Board

Fertilizernagar P K Laheri30th July, 2004 Chairman

14


Annexure “A”Annexure to the Directors’ Report

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURES OF PARTICULARS IN THE REPORT OFDIRECTORS) RULES,1988.

A] CONSERVATION OF ENERGYMeasures taken at Fertilizernagar Complexa) In Ammonia-IV plant, the revision in logic of control

over Low pressure Steam / Medium Pressure Steamratio in Turbo-Generator set was carried out throughin-house efforts resulting into operation of Turbo-Generator set without steam venting at lower loadwhich otherwise was taking place. The estimatedannual savings are @ Rs. 45 Lacs per year withpractically no cost of modification.

b) In Ammonia-IV plant, as per original design logic, oneelectric motor + one steam turbine driven pump wererequired to be operated for meeting the Cooling Waterrequirement of the plant. Considering favorableeconomics due to high cost of steam, running of onlytwo electric driven motor pumps was resorted sinceJune-2003 resulting into substantial saving of steam.

c) Impeller of Ammonia Transfer Pump in Ammonia-IVplant was trimmed resulting into power saving of about60 MW/Year equivalent to Rs.1.05 Lacs/Year.

d) Various measures like replacement of higher ratingmotor by motor of lower rating, trimming of impellersof pumps, stoppage of one of pumps in Melamine-IIplant have resulted in saving of power of about 122MW/Year equivalent to Rs. 2.13 Lacs/Year.

e) Improvement in loading system of reliquefactioncompressor of Melamine-II plant resulting in reductionof power by about 300 MW/Year equivalent to Rs. 5.25Lacs/Year.

f) Operation of Mother Liquor Stripper for both Melamineplants with optimized operating conditions has resultedin saving of steam consumption by about 3300 MT/Year equivalent to Rs. 33 Lacs/Year.

g) Installation of feed Pre-heater for Distillation Column inCaprolactam plant has resulted in saving 1120 MT/Year of steam equivalent to Rs. 11.2 Lacs/Year.

h) In Nylon-6 plant bypassing of return cooling waterpump for Barometric Condenser has resulted insaving of Power by 49.5 MW/Year equivalent to Rs.0.87 Lacs/Year.

Measures under considerationa) Replacement of Return Cooling Water Pump in Urea-II

plant by more efficient pump with expected powersavings of 375 MW/Year equivalent to Rs. 6.6 Lacs/Year.

Measures taken at Sikka Unita) Installation of Lighting Transformer in ‘C’ train and

replacement of 160 W fixtures by 125 W fixtures inConveyor Gallery/DAP plant has resulted in powersaving of 67.5 MW/Year equivalent to Rs. 2.36 Lacs/Year.

b) Installation of lower rating motors for Fumes Fan ofA&B trains of DAP has resulted in power saving of158.4 MW/Year equivalent to Rs. 5.54 Lacs/Year.

c) Reduction in Electricity bill by Rs. 3.1 Lacs/Year byrecharging pond, reducing transfer of water fromoutside source.

Measures taken at Fiber Unita) Reduction in speed of Nitrogen Blowers in

Polymerization section has resulted in reduction inpower consumption by 450 MWH/Year equivalent toRs. 11 Lacs/Year.

Measures under considerationa) Installation of Capacity feeders at Motor Control

centers - Anticipated power saving 106 MWH/Yearequivalent to Rs. 2.65 Lacs/Year.

Conservation of raw material and chemicals :Measures taken at Fertilizernagar Complexa) Change of Cooling water treatment from conventional

to Package Treatment in Sulfuric Acid-IV plant facilitatedoperation with less corrosion rate & higher cycle ofconcentration, saving about 120 M3/Day of raw waterequivalent to Rs. 3.0 Lacs/Year.

Measures under considerationa) Use of excess condensate after cooling it as

Demineralized Water in Urea plant is expected toreduce fresh DM water consumption up to 15 MT/Hrequivalent to savings upto Rs. 30 Lacs/Year.

Measures taken at Fiber Unita) Modification in Demineralized Water seal system has

resulted in DM Water saving equivalent to Rs. 3.6Lacs/Year.

b) Reduction in Canal water reservation quantity andmodification in Canal Water Meter has resulted insavings of Rs. 15 Lacs/Year.

TOTAL ENERGY CONSUMPTION AND ENERGYCONSUMPTION PER UNIT OF PRODUCTIONAs per enclosed Form - A

B) TECHNOLOGY ABSORPTIONEEFORTS MADE IN TECHNOLOGY ABSORPTIONAs per enclosed Form – BTOTAL FOREIGN EXCHANGE USED AND EARNED 2003-04Foreign Exchange Outgo :(i) C.I.F VALUE OF IMPORTS Rs. Lakhs

(a) Raw Materials 53819.51(b) Stores & Spares 424.59

54244.10

(ii) EXPENDITURE IN FOREIGN CURRENCY(a) Interest 851.16(b) Others 9.74

860.90TOTAL (i) + (ii) 55105.00

Foreign Exchange Earned :FOB VALUE OF EXPORT OFCaprolactam 5024.83MEK Oxime 1003.31Melamine 2053.94Nylon – 6 4.38

8086.46

15

A. POWER AND FUEL CONSUMPTION

PARTICULARS 2003-04 2002-03

1. ELECTRICITY(A) Purchase :

Unit : MWH 354023 381877

Amount Rs. In Lakhs 10246.18 9027.18

Rate Rs./KWH 2.89 2.36

(B) Own Generation :

Unit : MWH 169739 151232

KWH Per Ltr. ofFuel/Gas 4.02 3.27

Cost Rs./KWH 2.03 5.21

FORM-A

Form for disclosure of particulars with respect to Conservation of Energy : 2003-04

2. LSHS

Quantity-MT 68657 94722


Average Rate Rs./MT 13353.07 13952.60

3. NATURAL GAS

Quantity In ‘000 SM3 111715 68680


Average Rate 1000/SM3 5368.46 4531.14

PARTICULARS 2003-04 2002-03

B. CONSUMPTION PER UNIT OF PRODUCTION

Sr. PRODUCT Power Steam Natural Gas NaphthaNo.

2003-04 2002-03 2003-04 2002-03 2003-04 2002-03 2003-04 2002-03KWH KWH MT MT SM3 SM3 KG KG

1. Ammonia 256 378 0.067 0.020 647 618 200 167

2. Sulphuric Acid 33 38 0.681 * 0.683 * – – – –

3. Phosphoric Acid 236 276 1.563 1.678 4 2 – –

4. Urea 183 191 1.442 1.485 – – – –

5. DAP 56 61 0.066 0.076 4 5 – –

6. ASP 50 54 0.025 0.008 6 6 – –

7. Melamine 1641 1931 3.220 6.183 341 332 – –

8. Caprolactam (Old) 2402 2500 7.534 7.539 48 36 – –

9. Caprolactam (Exp.) 1447 1554 7.081 7.034 46 56 – –

10. Nylon – 6 1058 1175 1.085 2.628 – – – –

11. ACH 703 755 1.089 1.057 – – – –

12. Monomer 645 717 3.108 3.290 – – – –

13. MAA 154 290 3.442 3.895 – – – –

14. AS 44 66 0.112 0.152 – – – –

15. Sheets 2010 2334 8.604 8.627 – – – –

16. Pellets 626 589 0.803 0.935 – – – –

17. DAP (Sikka) 59 58 0.021 0.023 – – – –

18. Nylon Chips 796 928 – – – – – –

19. Nylon Filament Yarn 4796 4770 – – – – – –* Indicates Export from Plants

16


Research & Development (R&D) :

1. SPECIFIC AREAS IN WHICH R&D CARRIED OUT :

The areas are Polymers & Fibres, Environmentcontrol & waste Management, Value added products/Derivatives from existing products, support to Plantand Marketing for Quality & Process efficiencyimprovement and assurance, Catalyst PerformanceEvaluation & failure investigation, Corrosion &Materials Evaluation, Failure Investigation ofcomponents of plant equipment & Machinery,consultancy and Analytical services to plants andoutside agencies.

2. BENEFITS DERIVED :

R&D for the commercialization and customization ofGlass fibre reinforced flame retardant Nylon-6composites carried out.

New Extrusion grade suitable for flexible tubing hasbeen developed and are being introduced in market.

Injection molding grades of Nylon-6 suitable forcustomer need for low temperature impact resistancehave been developed and are being introduced inmarket.

R&D related to Quality up gradation and improvementof M28RC grade of Nylon 6 PMMA chips with higherthermal resistance carried out and significantimprovement made. Materials with better qualitymade available.

Commercialization R&D based process for improvedE35 grade with respect to transparency andbrightness and hybrid nylon composites carried out.

Developed a process for production of a synthetictanning agent derived from melamine for leatherprocessing.

Carried out trial production of Sulfonated MelamineFormaldehyde (SMF), a superplasticizer for reinforcedcement concrete for trial marketing/ marketdevelopment.

New application for SMF as cement saver inassociation with flyash developed and demonstratedto various cement precast article manufacturers,especially hume pipe manufacturers upto 40% cementsubstitution demonstrated with flyash if plasticizedcement is used. Chemical analysis of various plantrelated samples has helped in understanding theproblems encountered in plant operation and arrivingat correct solutions.

Commercial chemical analysis services to outsideagencies has also generated about Rs.4 lakh inrevenues.

Performance evaluations of various fresh and spentcatalysts used in the company have helped incomparative evaluation of catalysts from varioussuppliers for procurement.

Corrosion and microbial monitoring and control havereduced fresh water usage, water treatment cost andeffluent generation in plant cooling water systems.Failure investigation of plant components has reducedfrequency of plant shutdown by optimization ofprocess and use of most economical material ofconstruction.

3. FUTURE PLAN OF ACTION :

To develop new Nylon-6 and acrylic based valueadded products having synergy with company’sexisting line and business, and associate applicationsupport to marketing and process plant in thecommercialization of the developed technology,technology absorption and for the quality improvementand assurance for polymer products of the company.To continue to extend support services to thecorporate plants for process trouble shooting, productquality upgradation, failure investigation and marketsupport etc.

To establish pilot plant/ testing facilities for catalystused in the plants.

Regular corrosion monitoring of high temperatureequipment and machinery in various plants and alsoto provide consultancy in analytical services to otheroutside agencies.

4. EXPENDITURE ON RESEARCH & DEVELOPMENT :

Rs. in Lakhs

(a) Capital 14.48

(b) Recurring 823.34

(c) Total 837.82

(d) Total R & D expenditure as apercentage of Net Sales 0.40 %

Technology Absorption, Adoption and Innovation :

No new technology was absorbed during the year2003-04.

Information regarding technology imported during thelast five years. : NIL

FORM-B

Form for Disclosure of particulars with respect to Technology Absorption: 2003-04

17

CORPORATE GOVERNANCE REPORT

(PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT)

1. COMPANY’S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCEThe Company accords utmost importance to the observance of the best corporate governance practices inall its activities. The Company’s corporate governance policy aims at -(i) Maximising the shareholders’ value with improvement in performance of the Company;(ii) Protecting the interests of all the stakeholders through increased transparency in its operations,

accountability, integrity and compliance of statutory requirements; and(iii) Adopting high quality accounting practices.

2. BOARD OF DIRECTORSThe Company has a non-executive Chairman and number of Independent Directors are more than one-third of the total number of Directors. The number of Non-Executive Directors are more than 50% of thetotal number of Directors. In the judgement of the Board of the Company, all the Directors on the Boardare Independent Directors.Eight meetings of the Board of Directors were held during the year (as against the minimum requirementof 4 meetings) on - 26.04.2003, 27.06.2003, 29.07.2003, 26.09.2003, 29.10.2003, 21.11.2003, 31.01.2004,& 29.03.2004.The names and categories of the Directors on the Board, their attendance at Board Meetings during theyear and at the last Annual General meeting, as also the number of Directorships and CommitteeMemberships held by them in other companies are given below :

Sr. Name Category No. of Attendance No. of No. of CommitteesNo Meetings at the other in which

attended last AGM Directorships/ Chairman/MemberMembership (Including GSFC Ltd.)

Chairman Member

1. Shri P K Laheri *1 Nominee of GOG 6 Yes 5 3 -Chairman (As promoter)

Non-Executive Director2. Dr. Manjula Subramaniam Non-Executive Director 6 No 13 2 -3. Shri N R Krishnan Nominee of UTI(As lender) 7 Yes 5 3 4

Non-Executive Director4. Shri R S Agarwal Nominee of IDBI (As lender) 8 Yes 6 - 9

Non-Executive Director5. Shri S R Vengsarker Nominee of ICICI Bank (As lender) 6 Yes 3 - 5

Non-Executive Director6. Smt. Sudha Anchalia *2 Non-Executive Director 3 No 8 - 37. Shri Balwant Singh *2 Non-Executive Director 4 No 7 - 38. Shri A K Luke *3 Nominee of GOG (As promoter) 7 Yes 6 - 3

Managing Director Executive Director9. Shri Ashok Narayan *4 Nominee of GOG (As promoter) 1 N.A. N.A. N.A. N.A.

Non-Executive Director10.Shri G Subba Rao *5 Non-Executive Director 1 N.A. N.A. N.A. N.A.11.Shri C K Koshy *6 Non-Executive Director - N.A. N.A. N.A. N.A.

12.Shri Balwant Singh *7 Nominee of GOG (As promoter) 1 N.A. N.A. N.A. N.A.Managing Director Executive Directorupto 07-05-2003

*1 Appointed on 14-07-2003*2 Appointed on 27-06-2003*3 Appointed on 07-05-2003

*4 Ceased to be a Director w.e.f. 14-07-2003




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None of the Directors is a member in more than ten Committees or is a Chairman in more than five Committees,across all companies in which he/she is a Director.

Notes : (i) None of the Directors is related to any other Director.(ii) None of the Directors has any business relationship with the Company.(iii) None of the Directors received any loans and advances from the Company during the year.

The information as required under Annexure I to Clause 49 is being made available to the Board.In addition to the Audit Committee viz., Finance-cum-Audit Committee, Remuneration Committee andShareholders’ Committee viz. Shares-cum-Debentures Transfer and Investors Grievance Committee, asrequired to be constituted under the Listing Agreement, the Board has constituted four more committees viz.Project Committee, Personnel Committee, Research Committee and ‘Committee of Directors’ for over-viewingthe Implementation of the Restructuring Committee’s Report to deal with the specialized issues.DETAILS OF DIRECTOR BEING APPOINTED/RE-APPOINTEDShri Balwant Singh retires by rotation at the forthcoming Annual General Meeting and being eligible, hasoffered himself for re-appointment. Shri Balwant Singh, aged 53 years is a Director since 27-06-2003,possessing IAS qualification and having wide experience in Administration and Industry and on seniorpositions in various Deptt. of the Govt. of Gujarat. At present he is a Managing Director of Gujarat NarmadaValley Fertilizers Co. Ltd. He is a Chairman of three Companies viz. Gujarat Chemical Port Terminal Co. Ltd.,Narmada Chematur Petrochemicals Ltd. and Gujarat Narmada Finance & Investment Co. Ltd. and Director inthree other Companies/Association viz. Gujarat Agri Processing Co. Ltd., The Fertilizer Association of India andGujarat State Fuel Management Co. Ltd. He is also Member in other Committees of the Board of Directors viz.Project, Personnel, Finance-cum-Audit and Shares-cum-Debentures Transfer & Investors Grievance Committeesof the Company.

COMMITTEES OF THE BOARD

3. AUDIT COMMITTEEThe Finance-cum-Audit Committee is presently comprising of five independent non-executive Directors. All themembers of the Committee possess adequate knowledge of corporate finance and accounts. The scope ofthe activities of the said Committee is as set out in Clause 49 II(D) of the Listing Agreements with StockExchanges read with Section 292-A of the Companies Act, 1956.Major terms of reference of the committee are :i) To review the Company’s Financial Reporting Process and its financial statements.ii) To review the accounting and financial policies and practices.iii) To review the adequacy of Internal Control Systems.iv) To review the Company’s Financial and Risk Management Policies and ensure compliance with

regulatory guidelines.v) To review reports furnished by the internal and statutory auditors.During the financial year 2003-04, six meetings of Finance-cum-Audit Committee were held viz. on 26-04-2003,24-06-2003, 28-07-2003, 29-10-2003, 31-01-2004 and 29-03-2004. The composition of Audit Committee anddetails of meetings attended by the members of the Committee are as under :

Sr. Name of the Category Tenure No. of meetings No. ofNo. Member held during the meetings

tenure of attendedDirectors

1. Shri N R Krishnan (Nominee of UTI) Independent From 01-04-03 6 6Chairman of the Committee Non-Executive

2. Shri R S Agarwal Independent From 01-04-03 6 6(Nominee of IDBI) Non-Executive

3. Shri S R Vengsarker Independent From 01-04-03 6 4(Nominee of ICICI Bank) Non-Executive

4. Smt. Sudha Anchalia Independent From 27-06-03 4 2Non-Executive

5. Shri Balwant Singh Independent From 27-06-03 4 2Non-Executive

19

The Finance-cum-Audit Committee meetings are usually attended by the Executive Director (Finance). TheManaging Director attend the said Committee as Special Invitee. The Internal Auditors, Statutory Auditors,Cost Auditors and Branch Auditors remain present on need basis. The Company Secretary acts as theSecretary of the Audit Committee.Shri N R Krishnan, Chairman of the Finance-cum-Audit Committee attended the last Annual General Meetingheld on 26-9-2003.

4. REMUNERATION POLICY(a) The remuneration of the Directors is decided by the Board of Directors, keeping in view the provisions

of the Articles of Association of the Company and the Companies Act, 1956 subject to such approvalsfrom shareholders as and when necessary. The Managing Director is appointed by the Government ofGujarat and is from IAS Cadre. He is being paid remuneration as per the terms and conditions prescribedby the Govt. of Gujarat. The remuneration of Whole Time Director and other Non-Executive Directorsof the Company if any, is decided by the Board. The Company pays sitting fee @ Rs.2000/- per meetingto the Directors other than Managing Director.The details of the remuneration paid to the Directors during the financial year 2003-04 are as under :

(Rupees)

Name Salary & Perquisites Sitting Totalallowances Fees

Shri P K Laheri, Chairman – – 24,000/- (¬) 24,000/-Dr. Manjula Subramaniam – – 22,000/- (¬) 22,000/-Shri N R Krishnan – – 34,000/- 34,000/-Shri R S Agarwal – – 32,000/- 32,000/-Shri S R Vengsarker – – 22,000/- 22,000/-Smt. Sudha Anchalia – – 12,000/- (¬) 12,000/-Shri Balwant Singh 46,378/- 35,873/- – 82,251/-as Managing Directorupto 07-05-03As Director – – 32,000/- (¬) 32,000/-Shri A K Luke 4,17,510/- 1,39,698/- – 5,57,208/-Managing DirectorShri Ashok Narayan – – 8,000/- (¬) 08,000/-ChairmanShri G Subba Rao – – 2,000/- (¬) 02,000/-

(¬) Deposited in the Govt. Treasury.The Company does not currently have a Stock Option Plan.

(b) REMUNERATION COMMITTEEThe Board of the Company has constituted “Remuneration Committee of Directors” comprising of threemembers viz. (1) Shri N R Krishnan as Chairman of the Committee (2) Shri S R Vengsarker and (3)Dr. Manjula Subramaniam and all of them are Independent and Non-Executive Directors.From 1st April, 2003 to 31st March, 2004, one meeting of the Remuneration Committee was held on24-06-2003 which was attended by two members of the Committee viz. (1) Shri N R Krishnan & (2)Shri S R Vengsarker.

5. SHARES-CUM-DEBENTURES TRANSFER AND INVESTORS’ GRIEVANCE COMMITTEETo facilitate quick response to shareholders, the authority to approve transfer etc. upto 500 shares has beendelegated to the Company Secretary/Manager (Secretarial & Legal). The proposals for transfer etc. of sharesabove 500 nos. as also various issues of the shareholders such as registration of transfer of shares, issueof share certificates, redressal of shareholders’ complaints etc. are placed before the aforesaid Committee. Thisauthority has been delegated to the Committee by the Board to approve the transfer/transmission of shares,issuance of share certificates etc. The Committee presently comprises of three Directors viz. Shri P K Laheri,Shri Balwant Singh and Shri A K Luke.

20


The details of Committee meetings attended by the Members during year 2003-04 are furnished below :

Sr. Name of the Member No. of meetings held during No. of meetingsNo. the tenure of Directors attended

1. Shri P K Laheri 7 32. Shri Balwant Singh 8 83. Shri A K Luke 7 74. Shri Ashok Narayan 1 15. Shri C K Koshy 1 -

(a) Name of the Non-Executive Director headingthe Committee

(b) Name and Designation of Compliance Officer

(c) No. of Shareholders’ complaints receivedfrom Stock Exchanges, SEBI, Dept. ofCompany Affairs, Registrar of Companiesduring the financial year 2003-04

(d) No. of complaints not redressed to thesatisfaction of shareholders

(e) No. of applications received for transfers/transmissions/transposition of shares duringthe year 2003-04

(f) No. of pending requests for share transfers,transmissions and transposition of sharesas on 31-3-2004

As per mandatory requirements of SEBI, a qualified practicing Company Secretary carried out secretarialaudit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and CentralDepository Services (India) Limited (CDSL) and the total issued and listed capital. The audit confirms thatthe total issued and paid up capital is in agreement with the total number of shares in physical form andthe total number of dematerialized shares held with NSDL and CDSL.Upto 31-3-2004, 4,78,85,470 Nos. of Equity Shares (60.09%) were dematerialised.

6. GENERAL BODY MEETINGSLast three Annual General Meetings of the Company were held at the Registered Office of the Companyat P.O. Fertilizernagar - 391 750, Dist. Vadodara on 28-09-2001, 27-09-2002 and 26-09-2003 respectivelyat 09.00 hrs.No postal ballots were used for voting at aforesaid meetings. At the forthcoming Annual General Meeting,there is no item on the agenda that needs approval by postal ballot.

7. DISCLOSURESThere are no materially significant related party transaction made by the Company with its Promoters,Directors or Management, their subsidiaries or relatives etc. that may have potential conflict with the interestof the Company at large.During the last three years, there were no strictures or penalties imposed by either SEBI or the StockExchanges or any statutory authority for non compliance of any matter related to capital markets.

8. MEANS OF COMMUNICATIONThe company’s results and official news releases are displayed on the Company’s Web-sitewww.gsfclimited.com. The quarterly financial results are published in the national and regional newspapersand the same are electronically filed on the EDIFAR website www.sebiedifar.nic.in. The presentation aboutCompany’s performance etc. is made to the Institutional Investors/Financial Analysts as and when considerednecessary.The Management Discussion and Analysis Report forms a part of this Annual Report.

: Shri P K Laheri

: Shri V D NanavatyCompany Secretary

: 7

: Nil

4,789

: 36 requests consisting of 1,752 equity shareswere lodged in last week of March, 2004.The same has been dealt with by 08-04-2004.

21

9. GENERAL SHAREHOLDER INFORMATION(a) Annual General Meeting :

- Date and Time : September 10, 2004 at 9.00 a.m.- Venue : Registered Office of the Company at

P.O. Fertilizernagar - 391 750 Dist. Vadodara(b) Financial Calendar :

TentativeUnaudited Results for quarter ending June 30, 2004 : Before end of July, 2004Unaudited Results for quarter ending Sept. 30, 2004 : Before end of October, 2004Unaudited Results for quarter ending Dec. 31, 2004 : Before end of January, 2005Unaudited Results for quarter ending March 31, 2005 : Before end of April, 2005Audited Results for year ending March 31, 2005 : Before end of June, 2005

(c) Book closure date : 27th August, 2004 to 10th September, 2004 (Both days inclusive).(d) Dividend payment date : Not applicable.(e) (i) Listing of Equity Shares on Stock Exchanges at :

Vadodara (Regional Stock Exchange), Mumbai, Kolkata and National Stock Exchange (NSE).Note : As approved in the last Annual General Meeting, the equity shares of the Company were

to be delisted from Ahmedabad, Chennai, Kolkata and Delhi Stock Exchanges. Out of fourexchanges, except Kolkata, shares have been delisted from other three exchanges namelyAhmedabad, Chennai & Delhi. Further it is proposed to delist the equity shares of theCompany from Vadodara Stock Exchange at an appropriate time in future.

(ii) Stock Code :The Stock Exchange, MumbaiEquity Shares(Physical Segment) : “690”(Demat Segment) : “500690”

(iii) Demat ISIN Number in NSDL & CDSL for Equity Shares : INE026A01017(iv) Stock Market Data – High, Low during each month in last Financial year and Performance in

comparison to broad-based indices such as BSE Sensitive Index (200 Scrips)

GSFC Share Price BSE 200 Index GSFC Share Price BSE 200 IndexMonth High (Rs.) High Low (Rs.) Low

Apr-2003 18.40 380.61 14.05 349.68May-2003 24.75 409.90 15.50 354.41Jun-2003 26.85 455.65 20.00 405.91Jul-2003 30.20 478.95 22.80 441.36Aug-2003 29.90 556.54 23.00 470.52Sep-2003 32.10 584.74 25.75 514.82Oct-2003 31.95 626.23 26.50 572.62Nov-2003 44.40 652.19 27.00 603.46Dec-2003 56.70 776.50 41.05 648.71Jan-2004 74.05 836.11 47.10 712.25Feb-2004 52.85 781.19 43.00 700.01Mar-2004 60.50 776.89 46.80 689.29

(f) Share Transfer System :Share Transfer in physical form can be lodged with M/s. MCS Ltd., Registrars & Transfer Agents or atthe Registered Office of the Company. Share Transfer requests received are normally processed within15-25 days from the date of receipt, if the documents are complete in all respects.All requests for dematerialisation of shares are processed and confirmation thereof is conveyed by theRegistrars & Transfer Agents of the Company viz. M/s. MCS Ltd., Vadodara to the depositories within7 to 15 days from the date of the receipt thereof.

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(g) Distribution of shareholding as on 31st March, 2004 :

No. of No. of % to totalshareholders shares held shares

GROUP OF SHARES1 TO 50 81,700 17,45,224 2.19

51 TO 100 15,361 12,30,833 1.55101 TO 250 13,325 22,74,289 2.85251 TO 500 7,625 28,21,796 3.54501 TO 1000 3,094 23,64,102 2.97

1001 & above 2,213 6,92,59,262 86.90

1,23,318 7,96,95,506 100.00CATEGORY

State Financial Corporations & its Associates 7 3,06,59,981 38.47Public Financial Institutions and Insurance Companies 28 2,36,90,892 29.73Companies, Nationalised Banks and other Banks 1,035 68,99,622 8.66Individuals, Co-operative Societies and Banks 1,22,248 1,84,45,011 23.14

1,23,318 7,96,95,506 100.00

(h) Dematerialisation of shares :Over 60% of the shares have been dematerialised upto 31st March, 2004.

(i) Plant locations :Main Plants : Fertilizernagar, Vadodara DistrictPolymers Unit : Nandesari, Vadodara DistrictSikka Unit : Moti Khavdi, Jamnagar DistrictFibre Unit : Kuwarda, Surat District

(j) Address for correspondence :Registrars & Transfer Agents for Equity Shares of the Company :M/s. MCS LimitedNeelam Apartments, 1st Floor, 88, Sampatrao Colony,Behind Standard Chartered Bank, Productivity Road, Vadodara - 390 007Tel. Nos. 0265-2339397/2314757, Fax No. 0265-2341639E-mail [email protected]

AUDITORS’ CERTIFICATE

To the Shareholders,

We have examined the compliance of conditions of Corporate Governance by Gujarat State Fertilizers & ChemicalsLimited for the year ended on 31st March, 2004 as stipulated in clause 49 of the Listing Agreement of the said Companywith stock exchange.The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination waslimited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditionsof Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.In our opinion and to the best of our information and according to the explanations given to us, we certifiy that the Companyhas complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.We state that in respect of investor grievances received during the year ended 31st March, 2004, no investor grievancesare pending against the Company as per the records maintained and information given by the Company and presentedto the Shareholders’/Investors’ Grievance Committee.We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiencyor effectiveness with which the management has conducted the affairs of the Company.

For Ghiya & Co.Chartered Accountants

Place : Ahmedabad Devendra UpadhyayDate : 28-06-2004 Partner

23

MANAGEMENT DISCUSSION AND ANALYSIS REPORT1. Macro Economic Overview

The year 2003-04 has placed Indian economy firmly amongst the fastest growing economies in the world.The GDP growth in the year 2003-04 of around 8.2% was the highest achieved in over a decade. Thisgrowth was spread across all sectors and is an indicator of the robustness of the Indian economy. Theforeign exchange reserves of the country swelled to US $ 112 billion at the end of the fiscal year andare still continuing to rise. The Indian Rupee appreciated by about 8% to the U.S. Dollar in this one year.The agriculture sector is estimated to have grown by 12.6% as compared to 5.2% during 2002-03. Thiswould be the highest growth in agriculture sector since 1988-89 when it grew by 15.5%. The manufacturingsector is expected to end the year with overall growth of 7% with the industrial sector as a whole projectedto grow by 6.5%, while the service sector growth is estimated at around 8.3% in the year 2003-04. India’seconomy continues to rely on growth in domestic demand compared to exports, and is a pointer to itsresilience to external shocks.

The agriculture sector grew by 16.9% in real terms during third quarter of 2003-04. It is estimated thatfourth quarter would yield an impressive growth of 22%. This extraordinary growth reflects a good monsoonduring 2003-04 and a recovery from severe drought, the country suffered in 2002-03.

2. Opportunities & Threats

2.1 Urea : Government of India had announced the “Group Pricing Policy” for urea units from 1.4.2003 basedon the feedstock as replacement of RPS. The goal of the new pricing policy was to encourage efficiency.

As per the new policy, there are six groups based on the feedstock. GSFC has been placed in mixfeedgroup in the first stage alongwith RCF and IFFCO, Kalol. The units in each group receive the concessionfor urea, after adjustment on account of escalation/de-escalation in the variable cost related to changesin the price of feedstock, fuel, purchased power and water. In Stage-II (2004-05 to 2006-07), the concessionrates will be adjusted for reduction in capital related charges. Further, the group energy norms have beenenforced on efficiency considerations. For GSFC the energy norms fixed is 6.935 G cal/MT of Urea. GSFChas already tied up with GSPC, GGCL & GAIL for supply of gas. This arrangement will definitely help inreducing the cost of production and achieving the energy norms.

2.2 DAP / APS : Tariff Commission in their report classified DAP Units into two groups – units manufacturingDAP from captive Phosphoric Acid & units manufacturing DAP from imported PA. In case of Sikka unit,PA price considered in the Tariff Commission was on the lower side than the actual procurement price.At Fertilizernagar also, the rock phosphate price considered by Tariff Commission was on the lower side.While fixing adhoc concession, GOI takes into account average price of PA procured by all companies.At present Govt. of India is giving same concession for both groups.

2.3 For complex fertilizers, the Tariff commission report has been implemented for pricing of the complexfertilizers. The units were classified in to two groups (i) units producing ammonia through natural gas (ii)units producing ammonia through other liquid hydrocarbons.

APS production at Fertilizernagar is covered under Tariff commission. As per this report, we are coveredunder group - I. At Fertilizernagar, APS is produced by using captive ammonia.

2.4 Industrial Products have to face competition from imports coupled with reduction in duties. The Companybrought efficiency not only in production but also in marketing to compete with imports. To have value additionin Industrial Products, new applications for automobile sector have been developed for product like Nylon-6.Aggressive market developmental and customer promotional activities have been taken up to have morepenetration into markets. To protect from unfair competition for products like Caprolactam, Melamine andCyclohexanone, Company has approached designated authority for Anti-dumping.

Since the economy is improved over previous year due to good monsoon, there is an upward trend inconsumption of various products including Industrial Products which indirectly helped not only in increasingvolumes but also higher realization.

24


2.5 International prices of various products such as Caprolactam and Ammonia improved while that of Nylon-6 andMelamine remained stagnant during the year. On the other hand, international prices of various raw materialsfor these products such as Benzene, Ammonia, Naphtha, Sulphur etc. also increased substantially therebyaffecting our margins.

2.6 Evaluation trials and Commercial applications of various value added grades of Nylon-6 and Melamine are beingexplored. Successful commercialization is expected to enhance overall demand of Nylon-6 and Melamine.

3. Business Segment Update

Productwise performance in terms of production and sales for ten years is as follows :

PARTICULARS Unit 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97 1995-96 1994-95

PRODUCTION

FERTILIZERS (Loose) M T 1275764 1146668 1360661 1292283 1409520 1289755 1325643 1493460 1489239 1388499

CAPROLACTAM M T 68489 60004 59546 65051 64647 65987 59501 63901 65651 54037

NYLON-6 M T 7264 5424 5487 6698 -@ -@ -@ 4607 7524 7023

MELAMINE M T 15237 6643 11521 10527 10797 10193 6315 5440 5120 5390

ARGON �000NM3 3029 2756 2785 2218 2620 2815 1752 1980 2202 2256

MONOMER M T 4472 3586 2665 4012 1965 3241 3096 3995 3288 3813

SHEETS M T 498 469 358 745 650 1073 1116 1413 1148 1671

PELLETS M T 2159 2114 2010 2119 1563 1667 950 1910 1747 1478

NYLON FILAMENT YARN M T 5159 5311 4084 5850 5647 5746 5931 6231 6824 5552

NYLON CHIPS M T 3553 2283 2073 3025 4077 3692 3504 2987 2172 1976

SALES

FERTILIZERS* M T 1325562 1221559 1330856 1183105 1318744 1408681 1414318 1440090 1297959 1425066

CAPROLACTAM* M T 52528 46991 47707 60504 57720 43949 43057 50563 50641 51670

NYLON-6 M T 6613 6307 5777 5254 1544 4939 4722 6708 7890 8303

MELAMINE M T 13417 10619 10062 17462 3687 7819 6593 4500 6570 4813

ARGON �000NM3 3033 2759 2817 2179 2627 2827 1717 1984 2138 2237

MONOMER* M T 1610 1309 828 1315 103 552 1639 1007 1521 1174

SHEETS M T 588 600 555 503 842 865 1161 1370 1508 1378

PELLETS M T 1938 2149 2361 1909 1552 1716 1591 1226 1553 1997

NYLON FILAMENT YARN M T 4948 5251 3964 5404 5784 5696 5808 5791 6890 5573

NYLON CHIPS M T 3324 2351 2048 2642 3361 3299 2651 2082 1492 848

@ Plant under reconstruction *Excluding captive consumption

3.1 Turnover

In the year 2003-04, gross turnover of the Company was Rs. 2219.37 crores as against Rs. 1935.23 croresin 2002-03 registering an increase of Rs. 284.14 crores. The sale of fertilizers were higher by Rs. 150.28crores. For sales of industrial products, Company registered a turnover of Rs. 888.87 crores as againstRs. 755.01 crores in the previous year.

Proportion of fertilizers and industrial products in gross sales were as follows in the last two years :-

2003-04 2002-03Rs. Crores % Rs. Crores %

Fertilizers 1330.50 59.95 1180.22 60.99Industrial Products 888.87 40.05 755.01 39.01

Total 2219.37 100.00 1935.23 100.00

25

3.2 ExportCaprolactam and MEK Oxime exports during the year have been marginally lower than last year in quantityterms due to increased sale in the domestic market for both these products. However, they gave marginallyhigher realization due to higher prices and higher exchange rate.

Melamine exports during the year reached 4000 MTs as against 300 MTs in the preceding financial year.This has resulted into an increase in the overall export turnover from Rs. 64 crores during 2002-03 toRs. 87 crores during 2003-04. M/s. Agrolinz have lifted the improved quantity from us and during theforthcoming financial year, we hope to export the same quantity.

Other products such as Nylon-6 and Ammonium Sulphate could not be exported during the year due to thevery high prices of our Nylon-6 or a robust domestic demand for Ammonium Sulphate.

4. Outlook

4.1 The Indian economy, after passing through a difficult phase, is on the path of revival. Indicators for overalleconomic growth as well as industrial growth are showing positive signals. However high international crudeoil prices may have some impact on prices of industrial products. Good monsoon alongwith budget with thruston Agriculture, may give boost to fertilizer demand.

4.2 The feed stock price, as it relates to Fertilizer Industries, is yet to be firmed up particularly that for LNG.Department of Fertilizers, GOI is also making concentrated effort for the purchase of imported LNG throughFAI. Next 6 to 8 months are thus expected to be the setting down phase for feed stock prices.

4.3 Your Company has already entered into contract for supply of LNG with GAIL and have already substitutedcostlier inputs like Naphtha & LSHS with NG/LNG.

The effect of above and the Corporate Debt Restructuring completed last year coupled with better pricerealization and reduction in cost of production is expected to give better results for your Company in the timeperiod immediately before us.

5. Risk Management

Company is exposed to risks in Fertilizer business due to uncertainty contained in the new pricing schemefor Urea. The modalities of the pricing scheme for Urea for the period 1-4-2006 onwards will be decided byDOF after review of its implementation for the period 1-4-2003 to 31-3-2006. This leaves us in a largelyuncertain environment for taking any major investment decisions.

The status of availability of major inputs at a desired level of prices for Urea units also remain to be firmed up.

In case of your Company, we are carefully examining all the factors and the Production, Sales, Inventory etc.are decided accordingly in time, keeping in view the dynamics of the situation.

6. Internal Control Systems

The Company maintains a system of internal controls including suitable monitoring procedures. The Companyhas engaged firms of Chartered Accountants for internal audit in respect of Head Office and the Units of theCompany. The internal auditors cover operational audit & review of business processes and performance, inaddition to transaction audit. The Audit Committee of the Board regularly reviews the reports of internal auditors.

7. Discussion on Financial Performance

It was a year of turnaround for the Company. The Company recovered from a huge loss before adjustmentof taxation and exceptional items of Rs. 228.28 crores to a profit (before tax and exceptional item) of Rs. 42.40crores in 2003-04. The improvement in operational efficiency along with reduction in interest cost due to CDRled the Company to reinstate its past glory.

The Gross Sales of the Company increased by Rs. 284.14 crores from Rs. 1935.23 crores in previous yearto Rs. 2219.37 crores during 2003-04. The improvement in sales was due to better price realisation and

26


higher sales volume. During 2003-04, other Income was Rs. 75.86 crores as against Rs. 50.48 crores in theprevious year. The increase was largely due to additional income of Rs. 15.48 crores through gain inexchange variation on revenue items.

There was remarkable improvement in the production capacity utilisation at Fertilizernagar. During the yearAmmonia-IV plant operated at a capacity of 90% as against 71% in the previous year. Raw materialexpenditure increased due to higher production and higher prices of inputs. During the year, Company startedgetting natural gas from sources other than GAIL and ONGC. This helped in replacing costly LSHS andNaphtha with natural gas. The impact of full availability of Natural Gas / Re-gassified LNG will be visible inthe operations of the current year. The personnel expenses decreased by Rs. 14.73 crores from Rs. 175.17crores in 2002-03 to Rs. 160.44 crores during the year. The decrease is largely because last year provisionfor Deferred LTC liability also included provision for earlier period. Administration expenditure decreased byRs. 11.79 crores from Rs. 59.72 crores to Rs. 47.93 crores due to discontinuation of lease rentals oncompletion of the lease period. Marketing expenditure decreased by Rs. 29.44 crores from Rs. 118.40 croresin 2002-03 to Rs. 88.96 crores for the year where reduction is mainly due to sales promotion expenditure,which was lower by Rs. 24.30 crores.

The operating profit i.e. profit before interest, tax and depreciation for the year 2003-04 increased by 2.29times at Rs. 329.02 crores as against Rs.100 crores in 2002-03. The operating profit margin increased threetimes and was 15.62% as against 5.45% in 2002-03. The interest cost of the Company reduced duringthe year due to Corporate Debt Restructuring. Interest on total borrowings decreased by Rs. 32.10 croresfrom Rs. 170.76 crores in 2002-03 to Rs. 138.66 crores during the year. The profit after exceptional Itemsand taxation (including net deferred tax credit of Rs. 134.16 crores) is Rs. 174.27 crores as against whoppingloss of Rs. 390.84 crores during 2002-03.

Your Company had approached the Corporate Debt Restructuring (CDR) Cell through IDBI, the lead financialinstitution for debt restructuring. CDR Cell had approved the restructuring scheme. Out of total debt ofRs. 1288 crores restructured as on 1/4/2003, Company has received approvals for 92.2% of the above debt.Company is in constant follow-up and is confident of getting formal sanction for the remaining debt very soon.Along with reduction in interest amounting to approximately Rs. 38.62 crores for the financial year 2003-04company has also been awarded one-time concessions on principal debts amounting to Rs. 60.13 crores.These one-time concessions on principal debts are transferred to the Debt Restructuring Reserve. TheCompany’s debt equity ratio as on 31st March, 2004 was 1.86 : 1 as against 2.89 : 1 at the end of the previousfinancial year. The gross value of fixed assets decreased from Rs. 3057.31 crores to Rs. 3028.99 crores. Thecarrying cost of Ammonia-IV fixed assets decreased by Rs. 26.81 crores due to refund of customs duty onthe imported consignments of Ammonia-IV project which was capitalised earlier. The deferred tax liability (netof deferred tax assets) as on 31-3-2004 is Rs. 137.85 crores.

8. Human Resources

The Company continued to have cordial & harmonious relations with its employees. Presently 4,666employees are on the roll of the Company. Environmental concerns are adequately reflected in the annualreport elsewhere. The Company has been discharging its social responsibility by providing help in welfaremeasures to the surrounding villages.

9. Cautionary Note

Certain statements in the Management Discussion and Analysis Report may be forward looking and arestated as required by applicable laws & regulations. Many factors may affect the actual results, which couldbe different from what the Directors envisage in terms of future performance and outlook.

27

FINANCIAL HIGHLIGHTS OF TEN YEARS

PARTICULARS 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97 1995-96 1994-95

OPERATING RESULTS (Rs. in Crs.)

GROSS INCOME # 2182 1887 2002 2213 2151 2091 2068 1942 1851 1672

GROSS PROFIT 187 (86) 49 138 111 232 261 282 271 172

DEPRECIATION 145 142 137 132 88 85 73 65 65 58

PROFIT/(LOSS) BEFORE TAX 42 (228) (88) * 6 23 147 189 217 206 114

TAX (132) – (21) – 3 15 19 31 – –

PROFIT/(LOSS) AFTER TAX 174 (228) (67) * 6 20 132 170 186 206 114

EXCEPTIONAL ITEMS – (163) 19 – – – – – – –

PROFIT/(LOSS) AFTER TAX& EXCEPTIONAL ITEMS 174 (391) (48) * 6 20 132 170 186 206 114

DIVIDEND – – – – 4 36 36 31 27 22

DIVIDEND TAX – – – – – 4 4 3 – –

RETAINED EARNINGS 174 (391) (48) * 6 16 92 130 152 179 92

SOURCES & APPLICATION OF FUNDS (Rs. in Crs.)

SOURCES OF FUNDS

SHARE CAPITAL 80 80 80 113 113 113 80 78 66 66

RESERVES & SURPLUS 671 437 828 1177 1394 1378 1286 1141 885 706

LOANS 1391 1470 1473 1519 1507 1383 1276 1371 1241 1058

DEFERRED TAXLIABILITY (NET) 138 272 272 – – – – – – –

FUNDS EMPLOYED 2280 2259 2653 2809 3014 2874 2642 2590 2192 1830

APPLICATION OF FUNDS

FIXED ASSETS (GROSS) 3031 3060 3029 3023 2902 2845 2643 2406 2016 1711

DEPRECIATION 1305 1162 1023 911 781 693 612 540 481 423

FIXED ASSETS (NET) 1726 1898 2006 2112 2121 2152 2031 1866 1535 1288

INVESTMENTS 121 127 134 138 136 147 140 129 106 100

CURRENT ASSETS (NET) 428 226 505 549 756 571 456 569 525 442

MISC.EXP. 5 8 8 10 1 4 15 26 26 –(to the extent not w/off)

NET ASSETS EMPLOYED 2280 2259 2653 2809 3014 2874 2642 2590 2192 1830

AMOUNT PER SHARE (Rupees)

SALES 264 230 255 268 258 251 251 237 274 236

EARNING 22 (49) (6) * 1 2 17 21 @ 27 31 17

EQUITY DIVIDEND – – – – – 4.50 4.50 4.50 4.00 3.30

BOOK VALUE 94 64 113 156 185 182 169 149 139 116

MARKET PRICE : HIGH 74 41 27 41 66 128 141 170 180 276

LOW 14 13 8 19 32 32 68 70 105 153

# Gross Income from 2001-02 does not include Excise duty recovered* After adjusting exceptional item of Rs. 224.02 Crores against General Reserves@ At weighted average basis on the paid up capital

28


Auditors’ Report to the Members of Gujarat State Fertilizers & Chemicals Ltd.

We have audited the attached Balance Sheet of Gujarat State Fertilizers & Chemicals Limited as at 31st March2004, and also the Profit and Loss Account for the year ended on that date annexed thereto and also the CashFlow Statement for the year ended on that date in which are incorporated the accounts of the Polymers Unitand Fibre Unit of the Company, audited by another firm of Chartered Accountants. These financial statementsare the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditor’s Report) Order, 2003 issued by the Central Government of India in termsof sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement onthe matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that :

(i) We have obtained all the information and explanations, which to the best of our knowledge and beliefwere necessary for the purposes of our audit;

(ii) In our opinion proper books of account as required by law have been kept by the Company so far asappears from our examination of those books (and proper returns adequate for the purposes of our audithave been received from the Polymers and Fibre Units not visited by us. The Branch Auditor’s Report(s)have been forwarded to us and have been appropriately dealt with);

(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are inagreement with the books of account and with the audited returns from the branches;

(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by thisreport comply with the accounting standards referred to in sub-section (3c) of section 211 of the CompaniesAct, 1956;

(v) On the basis of written representations received from certain directors of the Company and from themanagement in respect of other directors exempted vide General Circular No.8/2001-CLV dated 22-3-2002issued by Ministry of Law, Justice and Company Affairs, Department of Company Affairs and taken on recordby the Board of Directors, we report that none of the directors is disqualified as on 31st March 2004 frombeing appointed as a director of the Company in terms of clause (g) of sub-section (1) of section 274of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to the explanations given to us andsubject to :

Note No. 13 of provision not considered out of the order of Commissioner of Labour;

and read with Note No. 3 & 4 in respect of Gas price of ONGC and CDR respectively and other notes thereon,the said accounts give the information required by the Companies Act, 1956, in the manner so required andgive a true and fair view in conformity with the accounting principles generally accepted in India;

(a) in the case of the balance sheet, of the state of affairs of the Company as at 31st March 2004;(b) in the case of the profit and loss account, of the profit for the year ended on that date; and(c) in the case of the cash flow statement, of the cash flows for the year ended on that date.

For GHIYA & COMPANYChartered Accountants

Place : Ahmedabad DEVENDRA UPADHYAYDate : 28-06-2004 PARTNER

29

Annexure referred to in paragraph 3 of our Auditor’s Report of even date on the financial statements forthe year ended 31st March, 2004 of Gujarat State Fertilizers & Chemicals Limited(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of

fixed assets.

(b) As explained to us, the Fixed Assets have been physically verified by the management during the year and thereis regular programme of verification which, in our opinion, is reasonable having regard to the size of the Companyand the nature of its assets. No material discrepancies were noticed on such verification.

(c) During the year, the Company has not disposed of a major part of the plant and machinery.

(ii) (a) The inventory has been physically verified during the year by the management. In our opinion, the frequency ofverification is reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonable and adequatein relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between thephysical stocks and the book records have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, there are no companies, firms and other parties listed in theregister maintained u/s 301 of the Companies Act, 1956. As such, clause (a) to (d) are not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal controlprocedures commensurate with the size of the Company and the nature of its business with regard to purchases ofinventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed anycontinuing failure to correct major weaknesses in internal controls.

(v) (a) According to the information and explanations given to us, we are of the opinion that the transactions that need tobe entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuanceof contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 andexceeding the value of rupees five lakhs in respect of any party during the year have been made at prices whichare reasonable having regard to prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the Company has complied with theprovisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,1975 with regard to the deposits accepted from the public. No order has been passed by the Company Law Board.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by theCompany pursuant to the Rules made by the Central Government for the maintenance of cost records under section209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and recordshave been made and maintained.

(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund,investor education protection fund, employees’ state insurance, income tax, sales tax, wealth tax, custom duty, exciseduty, cess and other material statutory dues applicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of income tax,wealth tax, sales tax, customs duty, excise duty and cess were in arrears, as at 31-3-2004 for a period of morethan six months from the date they became payable.

(c) According to the information and explanations given to us, the following are the details of sales tax, income tax,customs duty, wealth tax, excise duty and cess which have not been deposited on account of any dispute :

Nature of the Dues Amount (Rs.in Lacs) Forum where dispute is pending

Excise Duty 1,799.79 Supreme Court121.64 CESTAT353.44 Excise Departmental Authorities

2,274.87Sales Tax 2.34 Sales Tax Departmental AuthoritiesOctroi 148.81 Stay granted from local AuthoritiesIncome Tax 0.52 C.I.T. (Appeals)

30


Annexure to the Auditor’s Report (Contd.)(x) In our opinion, the accumulated losses of the Company, are not more than fifty percent of its net worth. The Company

has not incurred cash losses during the financial year covered by our audit and has incurred the cash loss in immediatelypreceding financial year.

(xi) The Company has defaulted in repayment of dues to some of the financial institutions, banks and debenture holders fromMay 2003. Subsequently, Company approached its lenders for restructuring its debt liabilities of Rs.1288 crores as on1-4-2003 through Corporate Debt Restructuring Cell (CDR Cell). Restructuring proposal of the Company was approvedby CDR Cell on 14-1-2004. Thereafter Company has received approvals for 92.2% of its total debt liability, which hasmade the default good. However, Company has yet to receive the approval for the remaining 7.8% of debt. The outstandingdue to these lenders as per original terms and conditions is as under :

Particulars Amount (in Rs.)

Interest accrued and due 4,61,11,322Principal payment due 3,33,33,333Total due as on 31-3-04 7,94,44,655

(xii) As explained to us, the Company has not granted any loans or advances on the basis of security by way of pledgeof shares, debentures or any other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause4(xiii) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments.Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to theCompany.

(xv) In our opinion, the terms and conditions on which the Company has given guarantees for loans taken by others frombanks or financial institutions are not prejudicial to the interest of the Company.

(xvi) This clause is not applicable as no term loans have been raised during the year.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of theCompany, we report that the no funds raised on short-term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

(xviii) According to the information and explanations given to us, the Company has not made preferential allotment of sharesto parties and companies covered in the register maintained under section 301 of the Act.

(xix) No debentures have been issued during the year.

(xx) The Company has not raised any money by public issue during the year.

(xxi) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reportedduring the course of our audit.



Comments of the Comptroller and Auditor General of India under Section 619 (4) read with Section619-B of the Companies Act, 1956 on the accounts of Gujarat State Fertilizers and Chemicals Limited,Vadodara for the year ended 31 March 2004.

I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to theAuditors’ Report under Section 619 (4) read with Section 619-B of the Companies Act, 1956 on the accountsof Gujarat State Fertilizers and Chemicals Limited, Vadodara for the year ended 31 March 2004.

Ahmedabad ANUPAM KULSHRESHTHADated : 09-08-2004 PR. ACCOUNTANT GENERAL

31

Balance Sheet as at 31st March, 2004(Rs. in lakhs)

Schedule As At As At31st March, 2004 31st March, 2003

SOURCES OF FUNDSShareholders’ Funds :Share Capital 1 7973.68 7973.68Reserves and Surplus 2 67152.93 43712.51

75126.61 51686.19Loan Funds :Secured Loans 3 111406.14 108293.93Unsecured Loans 4 27691.10 38723.29

139097.24 147017.22Deferred Tax Liability 45660.60 46561.01Deferred Tax Assets (31875.98) (19360.97)(Refer Note 9(c) of Schedule-21) 13784.62 27200.04

Total 228008.47 225903.45APPLICATION OF FUNDSFixed Assets : 5Gross Block 302899.26 305731.11Less: Depreciation 130530.22 116181.25Net Block 172369.04 189549.86Capital work in progress 288.57 276.25Projects under execution — —

172657.61 189826.11Investments 6 12087.72 12632.91Current Assets, Loans and Advances :Income accrued on Investments 16.92 2.58Inventories 7 37281.08 41213.26Sundry Debtors 8 53356.81 30928.96Cash and Bank Balances 9 4154.10 4202.89Loans and Advances 10 24548.23 24185.64

119357.14 100533.33Less: Current Liabilities and Provisions :Current Liabilities 11 70510.54 72294.44Provisions 12 6055.33 5609.44

76565.87 77903.88Net Current Assets 42791.27 22629.45Miscellaneous Expenditure 471.87 814.98(To the extent not written off or adjusted)(Refer Note 17 of Schedule-21)

Total 228008.47 225903.45Significant Accounting Policies 20Notes on Accounts 21

Gautam Sen A. K. Luke P. K. Laheri Dr. Manjula SubramaniamExecutive Director (Finance) Managing Director Chairman R. S. Agarwal

Ahmedabad V. D. Nanavaty S. R. Vengsarker28 June, 2004 Company Secretary Directors

As per our attached Report of even dateFor Ghiya & Co.

Chartered Accountants

Ahmedabad Devendra Upadhyay28 June, 2004 Partner

32


Profit and Loss Account for the year ended 31st March, 2004(Rs. in lakhs)

Schedule For the year ended For the year ended31st March, 2004 31st March, 2003

INCOMESales 13 221936.73 193523.19

Less : Excise Duty recovered on Sales 11312.34 9870.79

Net Sales 210624.39 183652.40

Other Income 14 7586.10 5047.63

Total 218210.49 188700.03

EXPENDITUREMaterials, Manufacturing &

Operating Expenses 15 147640.61 130147.16

Personnel Expenses 16 16043.80 17517.16

Administration, Marketing & Other Expenses 17 13877.26 18030.99

Purchase of Finished Products 317.83 283.66

Interest :

On Debentures / Bonds and Fixed Loans 8129.32 10489.33

Others 5736.81 6587.10

13866.13 17076.43

Depreciation 14533.02 14236.64

Sub Total 206278.65 197292.04

(Increase)/Decrease in Stock ofFinished products, Trading Goodsand Stock-in-Process 18 7428.48 12720.99

Total 213707.13 210013.03

Balance 4503.36 (21313.00)

Prior Period Adjustments (Net) 19 (263.20) (1515.01)

Profit / (Loss) before Taxes & Exceptional Items 4240.16 (22828.01)

Provision for Taxation :

Wealth Tax (2.00) (2.00)

Current Income Tax (MAT) (226.71) —

Deferred Tax (net) 13415.42 —

13186.71 (2.00)

Profit / (Loss) after Taxes butbefore Exceptional Items 17426.87 (22830.01)

Exceptional Items — (16253.83)

Profit / (Loss) after Exceptional Items 17426.87 (39083.84)

Balance brought forward from last year — —

Excess Provision for Taxation written back 0.58 0.44

Debenture/Bond Redemption Reserve Written back — 5137.50

Balance in Profit & Loss Account 17427.45 (33945.90)

Transferred (to) / from General Reserve (13415.42) 33945.90

Balance carried to Balance Sheet 4012.03 —

(Contd.)

33

Profit and Loss Account for the year ended 31st March, 2004 (Contd.)(Rs. in lakhs)


Profit / (Loss) after Exceptional Items 17426.87 (39083.84)Weighted average number of Equity Shares 79736830 79736830Basic and Diluted Earnings per Share (in Rs.) 21.86 (49.02)Nominal value per Share (in Rs.) 10.00 10.00Significant Accounting Policies 20Notes on Accounts 21

Schedules Forming Part of Balance Sheet

SCHEDULE - 1 SHARE CAPITAL(Rs. in lakhs)

As At As At31st March, 2004 31st March, 2003

Authorised :1,60,00,000 Redeemable Cumulative Preference

Shares of Rs.100 each 16000.00 16000.0020,00,00,000 Equity Shares of Rs.10 each 20000.00 20000.00

36000.00 36000.00Issued :

7,98,24,370 Equity Shares of Rs.10 each 7982.44 7982.447982.44 7982.44

Subscribed :7,98,13,937 Equity Shares of Rs.10 each 7981.39 7981.39

7981.39 7981.39Paid-up :

7,96,95,506 Equity Shares of Rs.10 each 7969.55 7969.551,16,091 Add : Forfeited Equity Shares 4.13 4.13

(Amount originally paid up)7973.68 7973.68

Total 7973.68 7973.682,340 Equity Shares forfeited and amount

transferred to Capital Reserve in earlier years

Notes :

Out of the Equity Shares mentioned above :

(a) Under the scheme of amalgamation with the Company(i) 5,86,390 shares of Rs. 10 each were issued to the shareholders of erstwhile Polymers Corporation of Gujarat Limited.(ii) 18,57,600 shares of Rs.10 each were issued to the shareholders of erstwhile Gujarat Nylons Limited.

(b) 3,12,41,915 shares of Rs.10 each were issued as fully paid-up bonus shares by capitalisation of Reserves and Share PremiumAccount.






34



SCHEDULE - 2 RESERVES AND SURPLUS (Rs. in lakhs)

Balance as at Additions Deductions Balance as at Balance as at 1st April, 2003 31st March, 2004 31st March, 2003

Capital Reserve I 3.43 — — 3.43 3.43Capital Reserve II 1248.77 — — 1248.77 1248.77Capital Redemption Reserve 3335.00 — — 3335.00 3335.00Share Premium Account 30524.02 — — 30524.02 30524.02Debenture/Bond Redemption Reserve 7212.50 — — 7212.50 7212.50Debt Restructuring Reserve — 6012.97 (b) — 6012.97 —General Reserve 1388.79 13415.42 (a) — 14804.21 1388.79

Total Reserves 43712.51 19428.39 — 63140.90 43712.51Profit and Loss Account — 4012.03 — 4012.03 —

Total 43712.51 23440.42 — 67152.93 43712.51

(31-3-2003) (82795.91) (—) (39083.40) (43712.51) (82795.91)

(a) Transferred to General Reserve (b) Refer Note 4 of Schedule 21

SCHEDULE - 3 SECURED LOANS(Rs. in lakhs)


A] Debentures / Bonds :i) 80,00,000 - Secured Redeemable Non-convertible

Debentures of Rs.100 each * 8000.00 8000.00(on private placement basis)

ii) 2,500 - Secured Redeemable Non-convertibleBonds of Rs. 500000 each * 11800.00 12500.00(on private placement basis) (out of which 200bonds have face value of Rs. 400000 each)

iii) 1,670 - Secured Redeemable Non-convertible Bondsof Rs. 500000 each * (on private placement basis) 8350.00 8350.00

iv) Interest accrued and due on above * 2286.64 —30436.64 28850.00

* (Of the above, Debentures / Bonds of Rs. 2220.25 lakhsare payable during the next twelve months)

B] Loans from :i) Life Insurance Corporation of India(LIC) 162.00 162.00ii) Industrial Development Bank of India (IDBI) 5291.69 5291.69iii) The Industrial Finance Corporation of India Ltd. (IFCI) 3136.00 3136.00iv) ICICI Bank Ltd. 822.46 822.46v) General Insurance Corporation of India(GIC)

and its Subsidiaries — 12.80vi) Industrial Investment Bank of India Ltd.(IIBI) 88.00 88.00vii) IDBI * 3596.68 —viii) SBI * 3600.59 —ix) Kreditanstalt fur Wiederaufbau, Germany (KfW) *

Foreign Currency Loan 2594.66 12579.51x) ICICI Bank Ltd.* 2800.00 3000.00xi) Oriental Insurance Company Ltd. (OIC) 250.00 250.00xii) Deposits from a Company * 3700.00 3700.00xiii) Interest accrued and due on above 1517.80 —

27559.88 29042.46* (Of the above, Rs. 9631.07 lakhs are payable

during the next twelve months)C] From Banks :

i) Cash Credit 38409.57 35360.62ii) Working Capital Term Loans 15000.00 15000.00iii) Interest accrued and due on above 0.05 40.85

53409.62 50401.47

Total 111406.14 108293.93

(Contd.)

35


SCHEDULE - 3 SECURED LOANS ( Contd.)

Notes :

1. The Company had approached the Corporate Debt Restructuring (CDR) Cell through Industrial Development Bank ofIndia (IDBI), the lead financial institution, for debt restructuring. CDR Cell had approved the restructuring scheme. Asper the approved scheme the debt liabilities have different terms and conditions.

2. (a) Debentures at A(i) and Bonds at A(ii) and A(iii) are presently secured by first mortgage on the Company’s land,buildings and all movables, both present and future, at Fertilizernagar, District Vadodara and at Villages Motikhavadiand Sikka, District Jamnagar (excluding the assets of the Company’s Polymers and Fibre Units), subject to priorcharges of the Company’s bankers on specified movables for securing borrowings for working capital requirementsand ranking pari passu with the mortgages and charges created in favour of other such chargeholders. However,as per the approved restructuring scheme, the same is to be secured by the fixed assets of the Company’s Polymersand Fibre units also.

(b) The Debentures at A(i) which were redeemable in three equal annual installments commencing from 01-01-2004are restructured and are now redeemable in ten bi-annual installments commencing from 30-6-2006 and carry interestat 9% p.a. instead of 14.50% / 16.25% w.e.f. 1-04-2003 except for 10,00,000 debentures amounting to Rs.1000lakhs held by the Army Group Insurance Fund which is to be redeemed in 33 equal monthly installments commencingfrom 31-7-2004 and carry interest at 4.50% p.a.

(c) The Bonds at A(ii) which were redeemable in five equal bi-annual installments commencing from 29-10-2004,are restructured and are now redeemable in ten bi-annual installments commencing from 30-6-2006 and carryinterest at 9% p.a. instead of 12.50% w.e.f. 1-4-2003 except for 100 Bonds held by SBI Mutual Fund amountingto Rs. 500 lakhs and 200 Bonds held by Prudential ICICI Trust Ltd. amounting to Rs.1000 lakhs. The Companyhas purchased bonds held by SBI Mutual Fund at 50% of the face value of Bonds alongwith waiver ofinterest from 1-4-2003 and subsequently cancelled the same. Prudential ICICI Trust Ltd. have agreed to accept80% of the original face value of Bonds of Rs.5,00,000 each in the following manner against full dischargeand waived interest from 1-4-2003.

Date 30-4-04 31-5-04 30-6-04 31-7-04 31-8-04 30-9-04 31-10-04 30-11-04 31-12-04Rs. Lakhs 50 50 100 100 100 100 100 100 100

(d) The Bonds at A (iii) which were redeemable in four equal bi-annual installments commencing from 1-10-2005, arerestructured and are now redeemable in ten bi-annual installments commencing from 30-6-2006 and carry interestat 9% p.a. instead of 12.60% w.e.f. 1-4-2003.

3. The loans at B(i) to B(vi) are presently secured against hypothecation of the movable properties (except book debts)of the Company (excluding those of Company’s Polymers and Fibre Units and investments in Units of Unit Trust ofIndia) and secured by a joint equitable mortgage created on the immovable properties of the Company (excluding thoseof Company’s Polymers & Fibre Units), both present and future. However, as per the approved restructuring scheme,same is to be secured by the fixed assets of the Company’s Polymers and Fibre Units also. These loans are nowto be repaid in 28 quarterly installments commencing from 1-04-2006. The restructured security arrangements will alsobe extended to loans stated at B(vii), B(viii) and B(xi).

KfW loan at B(ix) is secured by guarantees issued by IDBI and SBI. KfW partly invoked the said guarantees for therecovery of the payments due on 30-6-2003. The devolved amount was shared equally by IDBI and SBI resulting intonew loans at B(vii) and B(viii). These loans now restructured and to be repaid in 16 quarterly installments commencingfrom 1-04-2004.

The loan from KfW at B(ix) is secured by guarantees issued by IDBI and State Bank of India. The guarantee assistanceby IDBI is secured by joint equitable mortgage/hypothecation of the immovable/movable properties of the Company(excluding those of Company’s Polymers and Fibre Units and investments in Units of Unit Trust of India), both presentand future. The guarantee assistance by SBI is secured by joint equitable mortgage of the immovable properties of theCompany (excluding those of Company’s Polymers and Fibre Units and investments in Units of Unit Trust of India),both present and future and by the counter guarantee of the Company.

All these mortgage & hypothecation charges are subject to prior charges in favour of Company’s bankers on specifiedmovables. Above charges are ranking pari passu amongst the lenders.

The loan from ICICI Bank Ltd. at B(x) is secured against pledge of Equity shares of Gujarat Narmada Valley FertilizersCompany Limited held by the Company. The same is restructured to be paid in 18 monthly installments commencingfrom 1-04-2004 without interest.

Deposits from a Company stated at B(xii) is to be secured by way of second charge either on fixed assets or currentassets (excluding those of Company’s Polymers & Fibre Units).

(Contd.)

36


SCHEDULE - 4 UNSECURED LOANS(Rs.in lakhs)


1] Fixed Deposits 8215.31 7638.09

2] Other Loans :

(a) Housing Development Finance Corporation Ltd. 2211.52 2107.14(HDFC) (for housing loans to employees) *

(b) Kreditanstalt fur Wiederaufbau Germany (KfW)Foreign Currency Loan 3094.04 6000.25

(c) (i) External Commercial Borrowings in Foreign Currency 2616.00 7119.00

(ii) Interest accrued & due on above 25.25 —

(d) Banks :

(i) For housing loans to employees * 2989.23 3116.00

(ii) Interest accrued & due on (i) above 39.96 22.07

(iii) For vehicle loans to employees * 505.94 510.00

(iv) Interest accrued & due on (iii) above 2.88 —

(v) Under acceptance-cum-bill discounting facility 6601.25 12210.74

10139.26 15858.81

(e) Govt. of Guj. Deferment Loans 1389.72 —

19475.79 31085.20

Total 27691.10 38723.29

(Of the above, Rs.13483.17 lakhs are payableduring the next twelve months)

Notes :

1. Loan under 2(a) is restructured and is payable in 48 monthly installments commencing from 30-4-2005, while loansunder 2(d)(i), 2(d)(iii) are also restructured and are payable in 60 monthly installments commencing from April 2004.

2. KfW loan under 2(b) is restructured and only 50% of the principal is payable in 10 half yearly installments commencingfrom 1-07-2004.

3. Loan under 2(e) is Deferment of sales tax, electricity duty and water charges granted to Company by Governmentof Gujarat vide their notification G.R.No. GSF/11/2003/3554-E dated 3-11-2003. The deferment will be available to theCompany for a period of five years commencing from 1-1-2004. The said loan will be repayable in 60 equal monthlyinstallments commencing after deferment period of 5 years.

* Refer Note 7 of Schedule 21.


SCHEDULE - 3 SECURED LOANS (Contd.)

4. The Credit Facility from Banks at C(i) is secured by hypothecation of stock of raw materials, finished products, packingmaterials, general stores, spares, book debts etc. of the Company.

The Working Capital Term Loan from Banks at C(ii) is presently secured by hypothecation of stock of raw materials,finished products, packing materials, general stores, spares, book debts etc. of the Company and are further securedby a joint equitable mortgage created on the immovable properties of the Polymers Unit and Fibre Unit of the Company.However, as per the approved restructuring scheme, same is to be secured only by the fixed assets of the Company.

5. Based on the approved restructuring scheme, Company approached all the lenders for their approval and is successfulin getting approval from most of them except from few holders of Debentures / Bonds at A(i) and A(iii) for which Companyis in process of getting consent.

6. Out of the total interest accrued & due a sum of Rs. 3323.58 lakhs will be converted in Funded Interest Term Loan@ 8% p.a. repayable in 16 quarterly installments starting from 1-7-2006.

37


SCHEDULE - 5 FIXED ASSETS

(Rs.in lakhs)

Sr. Assets Gross Block Depreciation Net Block

No. As at Additions/ Deductions/ As at For the year upto As at As at1-4-2003 Adjustments Adjustments 31-3-2004 2003-04 31-3-2004 31-3-2004 31-3-2003

1. Land-Freehold 549.17 — — 549.17 — — 549.17 549.17

2. Land-Leasehold 29.39 — — 29.39 — — 29.39 29.39

3. Buildings 8624.55 7.81 — 8632.36 217.62 2641.30 5991.06 6200.87(Including Roads,Culverts &Compound Walls)

4. Railway Sidings 1598.16 — — 1598.16 74.17 561.37 1036.79 1110.96

5. Plant &Machinery 291016.74 520.27 4021.39 287515.62 14051.81 123876.97 163638.65 180431.49

6. Furniture,Fittings &Equipments 2659.53 45.69 36.21 2669.01 124.82 1758.54 910.47 1002.34

7. Vehicles 150.90 0.20 2.05 149.05 6.74 112.72 36.33 42.97

8. Library Books 68.42 0.54 — 68.96 1.65 47.75 21.21 22.32

9. Live Stock 0.14 — — 0.14 — — 0.14 0.14

10.Assets retiredfrom use & heldfor disposal 1034.11 1161.27 507.98 1687.40 56.21 1531.57 155.83 160.21

Total 305731.11 1735.78 4567.63 302899.26 14533.02 130530.22 172369.04 189549.86

(31st March 2003) (285698.51) (22597.05) (2564.45) (305731.11) (14236.64) (116181.25) (189549.86)

11.Capital Workin Progress 288.57 — — 288.57 276.25

12.Projects underexecution — — — — —

Total 303187.83 14533.02 130530.22 172657.61 189826.11

Notes :

1. The Company has acquired land through Government and also through direct negotiations. The entire land is in possessionof the Company. In respect of portion of land for which the Company has still not received the award/sale deed, the advancepaid to land owners have been treated as land. In respect of other portion of land acquired through direct negotiations,compensation has been paid at the negotiated price. The Company also holds possession of a portion of land for whichno amount has been paid in absence of receipt of awards.

2. The Company has leased a portion of its land to Bank of Baroda for bank premises at Fertilizernagar and Sikka and anotherportion at Fertilizernagar to Department of Atomic Energy (DAE) for establishment of Synthesis Gas Facility (A-III Plant).

3. Buildings include Rs. 0.02 lakh being the value of shares in Co-operative Housing Societies.

4. Cost of equipment against which Government subsidy is received are shown net of subsidy.

5. Additions/Deductions include :

Rs. 190.02 lakhs being the net increase (previous year Rs. 3125.09 lakhs net increase) in value on account of realignmentof foreign currencies affecting liabilities payable in foreign currencies.

6. Assets retired from use and held for disposal at item No. 10 are stated at cost or realisable value whichever is lower. Nodepreciation has been charged on these assets for the year after its retirement.

7. The deduction/adjustments in Plant & Machinery includes Rs. 2681.27 lakhs being the decapitalisation due to refund ofcustoms duty on the imported consignments of Ammonia-IV project which was capitalised earlier.

38



SCHEDULE - 6 INVESTMENTS(Rs. in lakhs)

Nos. Face As At As AtValue 31st March, 2004 31st March, 2003

Rs.

LONG TERM INVESTMENTS1. GOVERNMENT SECURITIES (Unquoted)

National Savings Certificates 0.37 0.37Govt. of Guj. 5% ULC Bond 1976 0.55 —

0.92 0.372. TRADE INVESTMENTS

(i) Quoted :a) Fully paid Equity Shares of -

Gujarat Narmada Valley Fertilizers Co. Ltd. 3,07,79,167 10 5838.81 5838.81Gujarat Industries Power Company Ltd. 1,86,92,927 10 2656.89 2656.89Gujarat Alkalies & Chemicals Ltd. 10,34,400 10 749.94 749.94

9245.64 9245.64b) Fully paid Debentures :

Gujarat Industries Power Company Ltd. — 472.44(Non-convertible part of 18% securedredeemable debentures)(Third & Final installment of Rs.15 perdebenture redeemed during the year) 9245.64 9718.08

(ii) Unquoted :a) Fully paid Equity Shares of -

Indian Potash Limited 7,50,000 10 60.50 60.50Gujarat Chemical Port Terminal Co. Ltd. 1,48,00,000 10 1480.00 1480.00Gujarat Agri Processing Company Ltd. 6,00,000 10 60.00 60.00

1600.50 1600.503. OTHER INVESTMENTS


ICICI Bank Ltd. (sold during the year) — 0.14Gujarat Rural Housing FinanceCorporation Limited 1,00,000 10 10.00 10.00Industrial Development Bank of India 5,49,440 10 446.42 446.42HDFC Bank Limited (sold during the year) — 0.05Bank of Baroda (sold during the year) — 106.25Gujarat State Financial Corporation 9,35,600 10 187.12 187.12Mangalore Chemicals & Fertilizers Ltd. 5,79,000 10 38.45 —(acquired during the year)

b) Fully paid Bonds :Unit Trust of India 6.75% Tax free US 64 Bonds 4,41,872 100 441.87 —(received against Unit ’64 during the year)(Earmarked for repayment of Fixed Deposits)

1123.86 749.98(ii) Unquoted :

a) Units of Unit Trust of India (Unit ’64) — 617.83(converted in US 64 Bonds during the year)Less : Provision for Diminution in value

of investment — -175.45

— 442.38(Previous year repurchase priceRs. 245.46 lakhs)

Total c/f. — 11970.92 442.38 12068.93

(Contd.)

39


SCHEDULE - 6 INVESTMENTS (Contd.)(Rs. in lakhs)


Rs.

Total b/f. — 11970.92 442.38 12068.93

b) Fully paid Equity Shares of -Gujarat Data Electronics Limited 1,15,000 10 11.50 11.50Less : Provision for Diminution in value

of investment -11.50 -11.50

0.00 0.00Gujarat Venture Finance Limited 60,000 10 6.00 6.00Biotech Consortium India Limited 50,000 10 5.00 5.00Gujarat State Petroleum Corporation Limited 2,50,000 10 25.00 25.00Gujarat State Fuel Management Co. Limited 1,00,000 10 10.00 10.00

c) Contribution to :Gujarat Venture Capital Fund-1990 13.20 18.00(Rs. 4.80 lakhs redeemed during the year)Gujarat Venture Capital Fund-1995 57.60 57.60

116.80 563.984. IN SHARES OF SUBSIDIARY COMPANY

(i) Unquoted :Fully paid Equity Shares of -GSFC Investment and Leasing Company Ltd. 10,00,000 10 100.00 100.00Less : Provision for Diminution in value

of investment -100.00 -100.000.00 0.00

Total 12087.72 12632.91

Aggregate Value of Unquoted Investments 1718.22 2164.85Aggregate Value of Quoted Investments 10369.50 10468.06Market Value of Quoted Investments 25844.99 12389.86

SCHEDULE - 7 INVENTORIES(Rs. in lakhs)


Stores and Spare-parts (Including Loose Tools 15444.20 16178.27Rs. 8.88 lakhs - previous year Rs. 10.02 lakhs)

Raw Materials 8829.20 4598.83

Finished Goods :

Finished Products 9859.79 17442.31

Trading Goods 52.15 49.73

9911.94 17492.04

Stock-in-Process * 3095.74 2944.12

13007.68 20436.16

Total 37281.08 41213.26

* Includes Loose (unpacked) products Rs. 1682.30 lakhs(previous year Rs. 1987.22 lakhs)

Notes :(1) Inventories as taken, valued and certified by the Management.(2) For mode of valuation refer Schedule-20 - Significant Accounting Policies.

40



SCHEDULE - 8 SUNDRY DEBTORS(Rs. in lakhs)


Over Six MonthsSecured - Good 65.59 89.37Unsecured - Good 5876.78 8414.68

- Doubtful 2825.39 2676.05

8767.76 11180.10

Less : Provision 2825.39 2676.05

5942.37 8504.05Others (Considered Good)

Secured 743.32 550.94Unsecured 46671.12 21873.97

47414.44 22424.91

Total 53356.81 30928.96

SCHEDULE - 9 CASH AND BANK BALANCES

Cash, Cheques & Stamps on hand * 12.48 127.92Remittances in transit 118.45 113.85With Scheduled Banks :

In Current Accounts 668.02 829.98(including Rs. 50.09 lakhs of unpaid dividendaccounts and Rs. 2.45 lakhs in Saving Accounts)(previous year Rs. 61.16 lakhs andRs. 0.27 lakh respectively)In Collection Accounts 2882.51 2569.38In Short Term Deposit Accounts 472.63 561.75

4023.16 3961.11With Non-Scheduled Banks :

In Current Accounts/Fixed Depositwith Co-operative Banks 0.01 0.01(for details refer Note 18 of Schedule-21)In Post Office Savings Bank Account (Rs. 100) — —(Maximum balance during the yearRs. 100, previous year Rs. 100)

Total 4154.10 4202.89* Includes balances in Savings Bank Accounts opened

in names of the authorised representatives of theCompany in respect of Imprest Accounts.

SCHEDULE - 10 LOANS AND ADVANCES

Secured (Considered Good)Loans to employees for construction/purchase of houses and vehicles 7050.90 7396.01(including interest accrued) *(Refer Note 7 of Schedule-21)Unsecured (Considered Good)Advances to subsidiary Company 1265.22 1265.22

Less : Provision for Doubtful Advances — -641.26

Total c/f. 1265.22 7050.90 623.96 7396.01(Contd.)

41


SCHEDULE - 10 LOANS AND ADVANCES (Contd.)(Rs. in lakhs)


Total b/f. 1265.22 7050.90 623.96 7396.01

Advances to other Companies 110.80 108.76(Refer Note 6 of Schedule-21)

Advances recoverable in cash or in kind or forvalue to be received (including interest accrued) * 14080.48 13636.30

Deposits with Excise, Customs and otherGovernment Departments 135.10 204.34

Deposits with Limited Companies/FinancialInstitutions (including interest accrued) 127.16 76.55

Advance payment of Tax (net of provision) 1778.57 2139.72

Unsecured (Considered Doubtful)

Advances to other Companies 75.00 75.00

Advances recoverable in cash or in kind orfor value to be received 1.07 1.07

17573.40 16865.70

Less: Provision for Doubtful Advances 76.07 76.07

17497.33 16789.63

Total 24548.23 24185.64

* Includes Nil (previous year Nil) due from officersof the Company-maximum balance Nil(previous year Rs. 0.52 lakh).

SCHEDULE - 11 CURRENT LIABILITIES1. Sundry Creditors 63303.50 62942.92

(Refer Note 8 of Schedule-21)

2. Advances from Customers 814.90 830.14

3. (a) Unpaid Dividends * 50.09 61.16(b) Unpaid application money * — 0.14(c) Unpaid matured deposit * 75.68 74.39(d) Unpaid matured debentures * 28.70 35.98(e) Interest accrued on 3(a) to 3(d) above * 17.34 —

171.81 171.67

4. Other Liabilities 4975.77 5866.49

5. Interest accrued but not due on loans 1244.56 2483.22

Total 70510.54 72294.44

* These figures do not include any amounts, dueand outstanding to be credited to InvestorEducation and Protection Fund.

SCHEDULE - 12 PROVISIONS

Retirement Benefits 6055.33 5609.44

Total 6055.33 5609.44

42


Schedules Forming Part of Profit and Loss Account

SCHEDULE - 13 SALES

Quantity 2003-04 Quantity 2002-03MTs Rs. Lakhs MTs Rs. Lakhs

Manufacturing Operations

(A) Fertilizernagar & Sikka Unit :

Fertilizernagar Unit :

Urea 301806 27445.78 269261 24990.57

Ammonium Sulphate 253561 13000.69 213525 10956.94

Di-ammonium Phosphate 104626 13029.00 40078 4649.81

Ammonium Phosphate Sulphate 74349 6457.05 89248 6993.80

Total Fertilizernagar unit 734342 59932.52 612112 47591.12

Sikka Unit :Di-ammonium Phosphate 590813 73083.35 601590 69796.31


Total Sikka Unit 591220 73117.78 609447 70372.37

Total Fertilizers 1325562 133050.30 1221559 117963.49

Caprolactam 52528 34574.16 46991 28593.69

Cyclohexanone 8577 4412.01 8577 3662.87

Nylon-6 6613 6119.14 6307 5784.01

Melamine 13417 7780.65 10619 6132.27

MEK Oxime 1478 1396.01 1488 1309.74

Argon Gas (NM3) 3032951 1348.30 2759443 633.34

Ammonia 30854 3415.77 29359 2675.05

Nitric Acid 8525 362.76 7579 322.74

Sulphuric Acid 55349 868.89 61712 932.47

Other Items 1878.59 1858.12

195206.58 169867.79

(B) Polymers Unit’s Products :

Methyl Methacrylate Monomer 1610 1367.04 1309 1039.95

Polymethyl Methacrylate Sheets 588 628.94 600 621.90

Polymethyl Methacrylate Pellets 1938 2174.26 2149 2253.87


Methacrylic Acid 732 722.98 503 472.24

Acetone Cyano Hydrine 388 327.19 360 302.49

Others 78.50 79.70

5462.62 4964.37

(C) Fibre Unit’s Products :

Nylon Filament Yarn 4948 6369.85 5251 6168.18

Nylon Chips 3324 3236.83 2351 2266.17

9606.68 8434.35

Trading Activities 348.51 385.89(Refer Annexure-I (B))

Sales (Net of Excise Duty) 210624.39 183652.40

Excise Duty Recovered 11312.34 9870.79

Total 221936.73 193523.19

43

Schedules Forming Part of Profit and Loss AccountSCHEDULE - 14 OTHER INCOME

(Rs. in lakhs)

2003-04 2002-03

Rent 15.47 16.34Income from Long Term Investments (Gross) :Dividend : Trade 778.48 776.98

Others 11.84 24.79(Tax deducted at source Nil)(previous year - Rs. 84.18 lakhs) 790.32 801.77

Interest : Trade 14.21 130.94Others 24.86 —

(Tax deducted at source Rs. 2.91 lakhs)(previous year Rs. 27.50 lakhs) 39.07 130.94

829.39 932.71Interest on Advances, Deposits and others (gross) 1024.10 1657.40(Tax deducted at source Rs. 45.72 lakhs)(previous year Rs. 51.23 lakhs)Recoveries for services rendered 63.72 60.44Insurance claims 269.51 166.39Captive Consumption in Projects under Execution — 59.68Profit on sale of Investments 36.57 —Profit on sale of Fixed Assets 0.20 0.32Variation in Exchange Rates 2411.80 863.38Excess provision no longer required 782.81 490.92Miscellaneous 2152.53 800.05

Total 7586.10 5047.63

SCHEDULE - 15 MATERIALS, MANUFACTURING AND OPERATING EXPENSES

Raw Materials Consumed :Opening Stock 4598.83 10858.13Add : Purchases 115371.61 88174.83

119970.44 99032.96Less : Closing Stock 8829.20 4589.63

111141.24 94443.33Electricity and Fuel 25713.90 25525.12Water 503.32 946.77Stores and Spares Consumed 2760.24 2898.76Packing Expenses 3232.02 2780.59Insurance 1275.26 1272.16Repairs and Maintenance :Buildings 50.30 53.43Plant & Machinery 2380.19 2401.64Others 208.41 212.67

2638.90 2667.74Excise Duty (Net) 375.73 (387.31)

Total 147640.61 130147.16

SCHEDULE - 16 PERSONNEL EXPENSES *

Salaries, Wages and Bonus 10852.07 10736.55Contribution to Provident, Gratuityand Superannuation (Pension) Funds 2676.62 3270.72[Including provision for Gratuity, Superannuation (Pension)]Welfare Expenses 2515.11 3509.89

Total 16043.80 17517.16* Refer Note 14 of Schedule-21

44



SCHEDULE - 17 ADMINISTRATION, MARKETING AND OTHER EXPENSES(Rs. in lakhs)

2003-04 2002-03Administration ExpensesInsurance-General 292.68 318.27Rates and Taxes 89.11 83.44Printing, Stationery, Postage, Telephones, Telex etc. 140.88 153.56Brokerage on Deposits 58.86 67.91Letter of Credit/Guarantee Commission, Bank Charges 374.79 357.63Travelling and Conveyance 78.29 86.05(Including tour expenses of Directors Rs. 8.87 lakhs)(Previous year Rs. 10.86 lakhs)Vehicle running & maintenance (net)including hire charges 158.62 178.57Directors’ Fees 1.88 1.64Auditors’ Remuneration 10.41 6.53(Refer Note 15 of Schedule-21)Cost Auditors’ Fees 0.56 0.53Rent 36.28 77.38Subscriptions, Membership Fees, etc. 23.30 32.04Legal, Professional and Consultancy charges 474.80 69.16Research and Development expenses 10.76 4.98Loss on fixed assets sold/discarded 519.06 647.68Provision for diminution in value of investments — 275.45Obsolete spares and other items written off 433.29 42.61Provision for Doubtful Debts/Advances 232.84 664.13Lease Rent on Assets taken on lease 6.70 817.99Take or pay rental charges to GCPTCL 641.53 718.38Expenditure on abandoned project written off — 132.39Miscellaneous 1208.18 1235.57

4792.82 5971.89

Marketing Expenses

Sales promotion, Demonstration, Extension servicesand Publicity etc. 822.70 3248.30

Expenses on Depots-cum-Farm Information Centres,Warehouses, Area/Regional Offices etc. and Products’Transportation, Loading & Unloading charges 7148.95 7778.65

Commission to Selling Agents 399.69 342.47

Cash Rebate on Sales 521.17 466.48

Turn over tax 3.12 4.12

8895.63 11840.02

Other Expenses

Contribution to Government Authorities for dischargeof effluent and pollution control expenses 86.69 85.41

Laboratory Expenses 35.38 33.50

Fire Fighting and Safety Services 65.14 56.04

Crop Compensation/Assistance 1.60 43.61

Donations and Contributions — 0.52

188.81 219.08

Total 13877.26 18030.99

45


SCHEDULE - 18 (INCREASE)/DECREASE IN STOCK OF FINISHED PRODUCTSTRADING GOODS AND STOCK-IN-PROCESS

(Rs. in lakhs)

2003-04 2002-03

Opening StockFinished Products 17442.31 17807.48Trading Goods 49.73 124.03Stock-in-Process 2944.12 2767.96Stock out of Trial Run Production — 12457.68

20436.16 33157.15Less : Closing Stock

Finished Products 9859.79 17442.31Trading Goods 52.15 49.73Stock-in-Process * 3095.74 2944.12

13007.68 20436.16

(Increase) / Decrease 7428.48 12720.99


SCHEDULE - 19 PRIOR PERIOD ADJUSTMENTS (NET)

(A) IncomeSales (36.35) (49.42)Other Income 1.05 1.04

Total (35.30) (48.38)(B) Expenditure

Raw Materials consumed (8.19) (70.10)Electricity and Fuel (74.21) 1486.25Water 74.39 96.82Stores and Spares consumed (2.22) (33.27)Packing expenses 0.01 —Insurance (0.34) (2.04)Repairs and Maintenance (23.12) (8.12)Salaries, Wages, Bonus & Welfare Expenses 270.11 (0.04)Administration, Marketing and Other Expenses 4.66 (10.49)Excise Duty 0.11 (0.17)Purchase of Finished Products (4.88) 16.14Interest (12.62) (8.22)Depreciation 4.20 (0.13)

Total 227.90 1466.63

Net (A-B) (263.20) (1515.01)

Schedules Forming Part of Accounts

SCHEDULE - 20 SIGNIFICANT ACCOUNTING POLICIES

1. Capital Expenditure :a) Fixed Assets acquired and constructed are stated at

historical cost including attributable cost for bringingthe asset to its intended use and includes amountadded on revaluation of fixed assets of PolymersUnit at the time of merger.

b) Assets under erection/installation of the existingprojects are shown as “Capital Work in Progress”.Capital expenditure and project stores (includingadvances) for on going projects are shown as

“Projects under execution” in the Schedule of FixedAssets.

c) In the absence of availability of specific original cost inrespect of a part of assets capitalised under turn-keycontracts, the original value of such asset written /disposed off is estimated on the basis of its currentcost adjusted for price and technological factors.

d) Major cost of civil works required as plant andmachinery supports, on the basis of technicalestimates, is considered as Plant & Machinery.

46


e) Advances paid for the purchase / acquisitions of landin possession of the Company are included in the costof land.

f) Renewals and replacements are either capitalised orcharged to revenue as appropriate, depending upon thenature and long term utility of such renewals and/orreplacements.

2. Borrowing Cost :Borrowing cost of the funds borrowed for the qualifying assetis capitalised till the date of commencement of commercialproduction. Other borrowing cost is charged to revenue.

3. Investments :Investments are valued at cost.

4. Exchange Variation :Foreign currency transactions are recorded at the exchangerate prevailing on the date of transaction. Assets and liabilitiesrelated to foreign currency transactions remaining unsettledat the year-end are translated into rupee at the contract rates,when covered by forward cover contracts and at the year-end exchange rates in other cases. The exchange differencearising on foreign currency transactions including gain orloss arising due to cancellation of forward cover contractsare recognised in the profit and loss account except thoserelating to fixed assets which are adjusted to the carryingcost of the fixed assets.

5. Inventories :a) Raw materials, stores and spares are valued at weighted

average / FIFO cost. Cost of stores and spares itemsis based on the purchase order price and the difference,if any, between the invoice value and the purchase orderprice is charged to consumption. Stores returns, non-standard/obsolete items are valued at assessed orrealisable value below cost. Imported raw material lyingat port is valued at cost based on the Bill of Ladingquantity.

b) Finished products and stock in process are valued atlower of weighted average cost or net realisable value.Value of stock of finished products lying at depots,warehouses, consignment stockists, other parties andstocks remaining out of inter-unit transfers is inclusiveof transportation cost. Stock of trading items is valuedat lower of cost or realisable value.

c) Consumable stores categorised separately with anannual consumption of less than Rs. 3000/- per item arecharged to Profit & Loss Account at the time of purchaseat Fertilizernagar unit. At Polymers Unit, sundryconsumable items are charged to Profit & Loss Accountas and when procured, while at Sikka and Fibre Unitssuch items are charged to Profit & Loss Account as andwhen consumed.

d) Freight on indigenous stores & spares are directlycharged to Profit & Loss Account.

6. Sales & Other income :a) Sales

Sales of industrial products are accounted on thedespatch basis except export sales, which arerecognised on the basis of bill of lading. Sales offertilizers are accounted for on the basis of issue ofrelease orders. Subsidy and equated freight on fertilizersare accounted on accrual basis as and when the orderfor the same is available with the Company from theGovernment of India.

b) Other IncomeThe amounts receivable from various agencies areaccounted for on accrual basis except interest ondelayed payments, refunds from customs & exciseauthorities, insurance claims (other than marine claims),etc. where it is not possible to ascertain the income withreasonable accuracy or in absence of finality of thetransaction.

7. Retirement benefits :a) Superannuation (Pension)

In respect of eligible employees of the Company, theLiability for Superannuation (pension) schemes havebeen accounted for on the basis of the actuarial valuationby Life Insurance Corporation of India (LIC) and fundedwith them.

b) GratuityThe liability for Gratuity at Fertilizernagar unit has beenaccounted for on the basis of valuation report receivedfrom LIC and funded with them. At Polymers, Sikka andFibre units, the gratuity liability have been accounted foron the basis of actuarial valuation.

c) Encashment of LeaveThe Company accounts for Leave Encashment Liabilityon the basis of actuarial valuation.

8. Depreciation :Depreciation on Fixed Assets is provided on Straight LineMethod at the rates prescribed in Schedule XIV to theCompanies Act, 1956. Depreciation on additions to fixedassets and assets disposed off/discarded is charged onmonthly pro-rata basis. Depreciation on commissioning ofplants and other assets of new projects is charged for thedays they are actually put to use. Exchange variationadjusted in the carrying cost of the fixed assets is amortisedover the residual life of the assets.

9. Prior Period Adjustments :In respect of the transactions pertaining to the period priorto the current accounting year, the Company follows thepractice in conformity with the Accounting Standard.

10. Prepaid Expenses :Expenses incurred but pertaining to subsequent period(except those not exceeding Rs. 50,000/- in each case,which are accounted through respective revenue accounts)are accounted as ‘Prepaid Expenses’.

11. Research and Development :Capital expenditure on Research & Development activitiesis included in Fixed Assets to the extent it has alternativeeconomic use, the revenue expenditure thereof is chargedunder respective account heads in the Profit & Loss Account.

12. Taxation :Provision for income tax for the current year is based on theestimated taxable income for the period in accordance withthe provisions of the Income Tax Act, 1961.Deferred Tax is calculated at current statutory income taxrate and is recognised on timing differences between taxableincome and accounting income that originate in one periodand are capable of reversal in one or more subsequentperiods. Deferred Tax assets, subject to consideration ofprudence, are recognised and carried forward only to theextent there is reasonable certainty that sufficient futuretaxable income will be available against which such deferredtax assets can be realised.

47

1. Contingent Liabilities not provided for :

2003-04 2002-03Rs. lakhs Rs. lakhs

(a) Disputed Excise Duty andCustoms Duty 2439 2297

(b) Disputed demand of SalesTax and Interest on TurnoverTax & Purchase Tax againstwhich the Company haspreferred appeals 17 17

(c) Claims by StatutoryCorporations and othersdisputed and notacknowledged as debt 4352 1477

(d) Claim by ONGC for royaltyon gas 81 81

(e) Claims by employees/ex-employees pending beforecourts Not ascertainable

2. Estimated amount of contractsremaining to be executed on capitalaccounts, net of advances 11 22

3. On expiry of pricing period of the earlier agreement, Oil& Natural Gas Commission (ONGC) demanded increasedgas price from April 1982 to 29th January, 1987. Thisprice increase was not agreed to by the Company sinceas provided in the earlier agreement, gas price for thefuture period was to be determined mutually whereasONGC had increased the price unilaterally without theconsent of the Company and not executed freshagreement inspite of various efforts of the Company.ONGC has referred this matter to the Ministry ofPetroleum and Natural Gas and Ministry of Fertilizers. Thedecision of the Government in this regard is still awaited.ONGC has also submitted an application in Civil Courtbefore Civil Judge (S.D.) Baroda for the recovery ofprincipal amount of Rs. 118.10 crores for the pricedifference and interest thereon. As per the legal opinion,the aforesaid application for recovery is not tenable in lawin the said Civil Misc. Application and hence the Companyhas no obligation towards the same. As such it has notbeen shown under Contingent Liability also.

4. Company's debt restructuring proposal envisagingmoratorium for repayments of debts, reduction in interestcost and concessions in outstanding principal amountwas approved by Corporate Debt Restructuring Cell. Thedebt restructured comprised of rupee term loans,debentures, bonds, foreign currency loans and workingcapital facilities. The restructured debts are classifiedunder various series, having different terms and conditions.Company has received formal approval letters from mostof the financial institutions/banks. The reduction in interestcost coupled with improved operational efficiency hasresulted into cascading positive impact on Company'sperformance.

Out of total debt of Rs. 1288 crores restructured as on1/4/2003, company has got approvals for 92.2% of the total

restructured debt. Company is in constant follow-up and isconfident of getting formal sanction for the remaining debtvery soon. Along with reduction in interest amounting toapproximately Rs. 38.62 crores for the financial year 2003-04, Company has also been awarded one-time concessionson principal debts amounting to Rs. 60.13 crores. Theseone-time concessions on principal debts are transferred tothe Debt Restructuring Reserve.

5. (a) As one of the promoters of the Gujarat IndustriesPower Company Ltd. (GIPCL), the Company hasgiven undertaking to Industrial Development Bank ofIndia (IDBI), Power Finance Corporation Ltd. (PFC)and Gujarat Industrial Investment Corporation Ltd.(GIIC) for non disposal of and non creation of acharge against the Company's investment in theshares of the said company during the pendency ofloans given to GIPCL by IDBI, PFC and GIIC.

(b) As one of the promoters of the Gujarat ChemicalPort Terminal Company Limited (GCPTCL), theCompany has given undertaking to ICICI Bank fornot to transfer, assign, dispose off, pledge, chargeor create any lien or in any way encumbercompany's existing or future shareholding in theGCPTCL in favour of any person so long as moneyremains due by GCPTCL to ICICI Bank or till theproject is duly completed, whichever is later.

6. (a) In joint participation with other Industrial undertakingsin Gujarat, the Company has paid Rs. 30.21 lakhsto Gujarat Acrylics Limited (GAL) and Rs. 40.59lakhs to Gujarat Agri Processing Company Limitedby way of advance towards equity contribution.These amounts have been shown under Schedule-10 "Loans & Advances".

(b) Under Rehabilitation and Revival Scheme for M/s.Gujarat Tractors Corporation Ltd. (GTCL) finalised bythe Government of Gujarat, the Company has giveninterest free loan of Rs. 40 lakhs to M/s. Gujarat AgroIndustries Corporation Ltd. (GAIC) for GTCL.

7. The Company has given an undertaking to assign andtransfer to Housing Development Finance CorporationLtd. (HDFC), Central Bank of India, Vijaya Bank, HDFCBank and ICICI Bank, all its rights, titles, interests andclaims under the mortgages/hypothecation obtained fromemployees against loans given to employees forconstruction/purchase of residential houses and vehiclesout of original amount of loans of Rs. 3750 lakhs takenby the Company from HDFC, Rs. 1000 lakhs fromCentral Bank of India and Rs. 1000 lakhs from VijayaBank, Rs. 1375 lakhs from HDFC Bank and Rs. 1250lakhs from ICICI Bank. Pending this, the mortgages/hypothecation created in the Company's favour are beingheld by the Company in trust for HDFC, Central Bank ofIndia, Vijaya Bank, HDFC Bank and ICICI Bank.

8. Sundry creditors in Schedule-11 includes (i) Rs. 215.43lakhs due to Small Scale Industrial Undertakings and(ii) Rs. 63088.07 lakhs due to other creditors. The disclosureis based on the information available with the Company

SCHEDULE - 21 NOTES ON ACCOUNTS

48


regarding the status of suppliers under the Industries(Development and Regulation) Act, 1961. Small ScaleIndustrial Undertakings to whom the Company owes formore than 30 days, which were within the agreed terms, are :

A N Instruments Pvt. Ltd.; AEP Company; Acoustics IndiaPvt. Ltd.; Aditya Forge Ltd.; Arpita Enterprise; BharatForge & Press Industries Ltd.; Bhavani Forge Pvt. Ltd.;Chemtrol Valves Pvt. Ltd.; Chisel & Hammer; DimplePolymers; Detection Instruments (I) Pvt. Ltd; Eagle PlasticIndustries; Eby Fasteners; Econo Valves Pvt. Ltd.; ElectroMech Industries; Excel Hydropneumatics P. Ltd.; EchjayForgings Ltd.; Elson Packing Industries Pvt. Ltd; FabwelEngg. Corporation; Fainger Engg.; Flowchem Industrial PLtd.; Ferro Tube & Forge Ind. ; Fainger Laser Valves Pvt.Ltd.; Fisher-Xomox Sanmar Ltd.; Flexican Bellows &Hoses; Filteration Engrs. (I) Pvt. Ltd.; Fluid Controls Pvt.Ltd.; Goa Instrument Ind.; Gasket India P. Ltd; GaugesBourdon (I) Pvt. Ltd.; Gujarat Infrapipes Pvt. Ltd; HawaIndustries Pvt. Ltd.; Hydropneumatics; Hyd-Air Engg.Works Lonavla; Instrument Engg. Pvt. Ltd.; Kishor PumpsPvt. Ltd. ; Keld Ellentoft (I) Ltd.; Madras IndustrialProducts; Mayank Gasket Manufacturing; Multi ThreadFasteners; Myricks Piping Systems Pvt. Ltd.; Multi TexFiltration Engg. P. Ltd.; Mkt Valves Pvt. Ltd.; Manoj PlasticIndustries; Maldeep Catalyst Pvt. Ltd.; New Field IndustrialEqpt.; New Mercantile Impex Pvt. Ltd.; Odin India Pvt. Ltd.;Panelec Pvt. Ltd.; Plas-Pack Industries - Gujarat; PrestigeCounting Instruments; Pressure & Flow Control; PratolinaInstruments Pvt. Ltd.; Propel Valves Pvt. Ltd.; ProtegoEquipment Pvt. Ltd.; Powergrip (I) Fasteners Pvt. Ltd.;Parekh Engg. Co.; Sarathi Engineering Ent. Pvt. Ltd.; SamIndustry Ltd.; S & G Engineers (P) Ltd.; Sanghvi Forging& Engg.; Samleshwari Packaging Pvt. Ltd.; T S Pumps &Valves P Ltd.; Unitop Engineers Pvt. Ltd.; Vansh Steel Pvt.Ltd.; Zenith Machine Tools P. Ltd.; Allza Flex Industries;Anticorrosive Equipment; ARW Filters P. Ltd.; AshamCarbon Products Ltd.; Controquip P. Ltd.; Elson PackingP. Ltd.; Florocarbon Processing P. Ltd.; Inmarco Ind. Maint.P. Ltd.; Jyoti Ind.; Kulkarni Eng. Co.; KJB Titanium P. Ltd.;Mico Entrerprices; Meeka Engineers; Naval ThermoplastP. Ltd.; New Field Ind. Equip. P. Ltd.; Pap Flon Eng. Co.;Prestige HM Poly containers; Silex Industries; TurnweldEngineers; Vadilal Gases & Chem.; Vako Seals; SapnaIndustries; Amrut Plymers; Olympics Synthetics Sacks;Plast Pack Ind (Guj.) ; Accurate Paper Tube (P) Ltd.;Cooline Mfg. (P) Ltd; Jalaram Container Ltd.; LunarmechMachinenfabrik; Partkar Extrusions Ltd., Sai Paper BoxIndustries and Vinayak Industries.

9. (a) No provision has been considered necessarytowards the income tax demand of Rs. 13573 lakhsfor the assessment years 1987-88, 1990-91 and1997-98, as the same is disputed in appeals and theCompany is hopeful of succeeding in the saidappeals.

(b) Pending approval of the competent authority to theCompany's application for exemption under section10(15)(iv)(c) of the Income Tax Act for the IncomeTax on interest paid on import payments, income taxliability of Rs. 22 lakhs has not been considered inaccounts.

(c) Deferred Taxation :(Rs. lakhs)

As on As on Difference31-03-2004 31-03-2003

A] Deferred Tax Liability :

1. Depreciation 45660.60 46561.01 -900.41

45660.60 46561.01 -900.41

B] Deferred Tax Assets :

1. Unabsorbed Losses* 12672.82 3005.60 9667.22

2. Unabsorbed Depreciation* 14737.81 13434.87 1302.94

3. Expenses allowable fortax purpose when paid 3401.59 1890.20 1511.39

4. Provision for DoubtfulDebts and Advances 1040.90 1027.89 13.01

5. Diminution in value ofinvestments 22.86 2.41 20.45

31875.98 19360.97 12515.01Net Deferred TaxLiability/ (Assets) 13784.62 27200.04 -13415.42

* In the opinion of the Management, the Company willhave sufficient taxable profit to set off unabsorbedlosses and depreciation in subsequent periods.

10. Extra Duty Deposit equivalent to 5% of CIF value levied onconsignments of Caprolactam/Melamine Expansion Projectand capitalised is subject to adjustment on final assessmentby special valuation branch of Customs Department.

11. The Company established Sikka Jetty at its own cost, whichis in operation since 1987. After due discussion with GujaratMaritime Board (GMB), a consensus was arrived atestablishing ownership of jetty with GSFC. Thereafter, interms of resolution passed by GMB, the ownership of the jettyat Sikka was transferred to the Company. However, during1994, GMB has reversed its earlier decision not supportedby resolution, and contended that the ownership of the jettyrests with GMB. The Company has made representation tothe appropriate authority with regard to the ownership of thejetty with the Company. Pending finalisation of therepresentation, no provision is considered necessary inrespect of various claims against the Company and thecounter claims of the Company (both the amounts notdetermined) which is dependent upon the establishment ofthe ownership of jetty. At present the Company is inpossession of the jetty and continues to be in ownership ofthe jetty till the final decision of the appropriate authority.

12. The liability for natural gas supplied by Gas Authority of IndiaLimited (GAIL) from 1-4-2000, is accounted at provisionalrates billed by GAIL, pending final fixation of natural gas priceby the Government of India.

Similarly, fuel cost adjustment charges levied by GujaratIndustries Power Company Limited, for the power suppliedto the Company from 1-4-2000 is also provisional and subjectto adjustment on fixation of natural gas price by Governmentof India.

13. Consequent upon the order dated 31-12-2002 of theCommissioner of Labour pertaining to equal work equalwages matter in respect of the contract labourers, the

49

Company had challenged the order in the Hon'ble High Courtof Gujarat. The Hon'ble High Court had earlier granted ad-interim relief staying the operation and implementation of theorder of the Labour Commissioner. Thereafter, now the saidad-interim relief has been confirmed by the Hon'ble HighCourt and the matter has been admitted for final hearing.

Further in the case of other litigation pertaining to aforesaidlabourers demand for permanency, the Industrial Tribunalhas vide its order (Part 1 Award) dated 13-6-2003 held that490 labourers working in abolished areas are to be madepermanent employees of GSFC w.e.f. 1-6-1995. The saidorder of the Industrial Tribunal has been challenged by theCompany by filing a writ petition in the Hon'ble High Court ofGujarat and the Hon'ble Court has granted ad-interim bystaying the operation and implementation of the said order ofIndustrial Tribunal and also stayed further proceedings in thepending reference before the Industrial Tribunal and thematter is now pending for further hearing before the HighCourt. The Company's liability in both these litigation would notexceed Rs. 68 crores.

Since the Company is having strong grounds in the abovecases and further recourses are available for approachinghigher courts, the Company has not provided liability in abovereferred both the cases and neither considered ascontingent liability at this juncture in the matter of equal workequal wages and in the matter of permanency case.

14. Details of Managerial Remuneration : (Rs. in Lakhs)

Managing Director

2003-04 2002-03

Salary 4.64 4.31

Other Perquisites * 0.77 0.70

Pension Contribution 0.67 0.63

Leave Salary Contribution 0.31 0.30

TOTAL 6.39 5.94

* Includes Monetaryvalue of Perquisites 0.33 0.19

15. The break-up of payment to Auditors is as under :

2003-04 2002-03(Rs. in lakhs)

(a) Audit Fees including Service Tax 2.07 1.96(including fees to Branch AuditorsRs. 0.40 lakh)(previous year Rs. 0.39 lakh)

(b) In other capacity in respect of :

1. Tax Audit fees 0.76 0.74

2. Other services 4.50 3.05(for certification work etc.)

(c) Reimbursement of expenses 3.08 0.78(including Rs. 0.13 lakh paidto Branch Auditors)(previous year Rs. 0.11 lakh)

10.41 6.53

16. Investment including trade investment have been valuedat cost as in the opinion of the Management, all theinvestments are long term investments and the diminutionin value of certain investments are of in temporary nature.

17. Details of deferred revenue expenditure under the head"Miscellaneous Expenditure" to the extent not written offor adjusted and those proportionately written off duringthe year are as under :

Particulars Written off Balance asduring the year on 31-3-2004(previous year) (31-3-2003)

(Rs. in lakhs)

1. Security Issue 70.14 117.22Expenses (70.14) (187.36)

2. Superannuation (Pension) 100.59 100.58of past period (100.59) (201.17)

3. Realignment of 33.31 0.52Finance charges (48.89) (33.83)

4. Licence, Know-how fees 139.07 253.55for production process (139.08) (392.62)

18. Details of balances with non-scheduled banks :(Refer Schedule-9 Cash & Bank balances)

Name of the Balance as on Maximum balanceBank 31-3-2004 during the year

(31-3-2003) (previous year)Rs. Rs.

The Panchmahal District 500 500Co-operative Bank Ltd. (500) (277935)Co-operative Bank of 500 500Baroda Ltd. (500) (500)

19. Fixed Assets taken on lease amount to Rs. 21 lakhs(previous year Rs. 35 lakhs). Future obligations towardslease rentals under the lease agreements as on 31-03-2004 amount to Rs. 3 lakhs (previous year Rs. 11 lakhs).

20. Loans and Advances in the nature of Loans given tosubsidiaries etc. are as follows :

As on Maximum31-3-2004 Balance

duringthe year

(Rs. in lakhs)

1. (a) Loans & Advances inthe nature of Loanto subsidiaries :

GSFC Investment &Leasing Co. Ltd. 1265.22 1265.22

(b) Loans & Advances inthe nature of Loan toassociates :

Gujarat Narmada ValleyFertilizers Co. Ltd. 50.00 50.00

Gujarat Agri ProcessingCo. Ltd. 40.59 40.59

50


No. of Shares Rs. in Lakhs2. Investment by the Loanee

in the shares ofthe Company :Gujarat Narmada ValleyFertilizers Co. Ltd. 1500000 1503.75

21. Related Party Disclosures :Related Party disclosures as required by AS-18 "RelatedParty Disclosures" are given below :1. Relationship :(a) Subsidiary Company :

1. GSFC Investment and Leasing Co. Ltd.(b) Associate Company :

1. Gujarat Agri Processing Co. Ltd.(c) Directors and their relatives :

1. Shri Balwant Singh Managing Director(upto 6-05-03) andDirector (w.e.f. 27-06-03)

2. Shri A K Luke Managing Director(w.e.f. 7-05-03)

2. Details of transactions with related parties :(i) Details relating to parties referred to in 1(a) above :

(Rs. in lakhs)

Sr. Name of Transaction Value for OutstandingNo. the year as on

(previous 31-03-04year) (as on

31-03-03)

1. Services rendered 4.50 2.25(4.50) (2.25)

2. Lease rent paid 7.71 —(10.63) (—)

3. Inter-Corporate — 1265.22Deposit placed (114.50) (1265.22)

4. Investment made in — 100.00equity shares (at cost) (0.00) (100.00)

5. Outstanding receivable — 2.25(—) (2.25)

6. Fixed Assets taken — 21.44on lease (—) (34.63)

7. Renouncement ofright of 6,20,640 Unascertainable —equity share of GACL (—) (—)

(ii) Details relating to parties referred to in 1(b) above :(Rs. in lakhs)

Sr. Nature of Transaction Value for OutstandingNo. the year as on


31-03-03)

1. Advance towards 2.04 40.59equity contribution (—) (38.55)

2. Investments in equity — 60.00shares (at cost) (—) (60.00)

(iii) Details relating to parties referred to in 1(c) above :

Sr. Nature of Transaction Rs. LakhsNo. (previous year)

1. Remuneration to 6.39Managing Director (5.94)

22. Segment Information :(Rs. Lakhs)

For the year For the yearended on ended on31-03-04 31-03-03

i) PRIMARY SEGMENT INFORMATION :

A] SEGMENT REVENUE :

1. Total Segment Revenue :a) Fertilizer Products 139973.90 123711.95b) Caprolactam and

Nylon Products 57053.66 48454.77c) Other Segments 13596.83 11485.68

TOTAL 210624.39 183652.40

2. Inter Segment Revenue 0.00 0.00

3. External Revenue (1 - 2) :a) Fertilizer Products 139973.90 123711.95b) Caprolactam and


TOTAL 210624.39 183652.40

B] RESULT :

1. Segment Result :a) Fertilizer Products 5608.16 -8360.17b) Caprolactam and


TOTAL 18773.56 -3576.64

2. Unallocated Expenses netof unallocated Income -667.27 -2174.94

3. Operating Profit (B1 + B2) 18106.29 -5751.584. Interest expenses -13866.13 -17076.435. Provision for Taxation :

Wealth Tax -2.00 -2.00Income Tax (MAT) -226.71 0.00Deferred Tax (net) 13415.42 —

6. Profit beforeExceptional Items 17426.87 -22830.01

7. Exceptional Items — -16253.838. Net Profit 17426.87 -39083.84

OTHER INFORMATION :

1. Segment Assets :a) Fertilizer Products 205911.21 202827.69b) Caprolactam and


TOTAL 282113.90 280515.26

51

(Rs. Lakhs)


2. Unallocatedcorporate Assets 21988.57 22477.10

3. Total Assets 304102.47 302992.36

4. Segment Liabilities :

a) Fertilizer Products 63238.38 64471.60

b) Caprolactam andNylon Products 7340.61 6537.78

c) Other Segments 3700.81 3176.67

TOTAL 74279.80 74186.05

5. Unallocatedcorporate Liabilities 155167.93 177935.10

6. Total Liabilities 229447.73 252121.15

7. Capital Expenditure :




d) Corporate CapitalExpenditure 104.75 42.70

TOTAL 574.51 21185.47

8. Depreciation :




d) Unallocated corporateDepreciation 240.18 251.27

TOTAL 14533.02 14236.64

(Rs. Lakhs)


9. Non-Cash Expenses :a) Fertilizer Products 157.36 252.87b) Caprolactam and

Nylon Products 151.21 156.61c) Other Segments 136.81 117.16d) Unallocated non-cash

Expenses — 916.71

TOTAL 445.38 1443.35

ii) SECONDARY SEGMENT INFORMATION :The Company operates mainly in Indian market andthere are no reportable geographical segments.

iii) OTHER DISCLOSURES :1. The Products and Services covered under each

business segment is as under :Fertilizer Products : Urea, Ammonium Sulphate,

Di-ammonium Phosphate,Ammonium PhosphateSulphate.

Caprolactam and : Caprolactam, Nylon-6,Nylon Products Nylon Filament Yarn,

Nylon Chips.Other Segments : Melamine, Polymer products,

Trading activity etc.2. Segment revenue, results, assets and liabilities

include the respective amounts identifiable to eachof the segment and amounts allocated onreasonable basis.

23. Balance of certain creditors and debtors/advances aresubject to confirmation/reconciliation and consequentialadjustments, if any.

24. Previous year's figures have been regrouped wherevernecessary.

25. Additional information pursuant to the relevant provisionsof paragraphs 3 and 4 of Part-II of Schedule-VI to theCompanies Act, 1956 as per Annexure-I.

26. Balance sheet abstract and company's general businessprofile in terms of Part-IV of Schedule-VI to the CompaniesAct, 1956 as per Annexure-II.

Signatures to Schedules 1 to 21 :






52


ANNEXURE - IADDITIONAL INFORMATION PURSUANT TO THE PROVISIONS OF PARAGRAPHS 3 & 4 (C) & (D) OFPART-II OF SCHEDULE-VI TO THE COMPANIES ACT, 1956

(A) Capacities, Production and Stock Year 2003-04

Product Unit Licenced Installed Production Opening Stock Closing Stock Value of Closing StockCapacity Capacity Rs. in lakhs

Per Per Annum Annum 2003-04 2002-03 2003-04 2002-03 2003-04 2002-03 2003-04 2002-03 2001-02

1. Ammonia MT 150000 150000 c 5637 6670 0 0 0 0 0.00 0.00 0.00

2. Ammonia Expansion MT 445500 445500 c 401400 314670 4099 5112 2221 4099 216.80 409.07 460.08

3. Urea MT 364000 364000 300641 245159 4065 29535 1960 4065 174.59 342.93 2700.32

4. Ammonium Sulphate Phosphate MT 256000 108000 58299 93865 17576 13489 1392 17576 100.67 1355.43 953.05or orDi-ammonium Phosphate MT 108000 110648 38999 535 1733 6304 535 664.94 60.76 188.66

5. Caprolactam h MT 70000 70000 68489 60004 1462 981 1619 1462 1034.47 953.36 520.04

6. Ammonium Sulphate h MT 202000 196000 250956 213852 8889 8948 5264 8889 256.99 447.08 412.05(Caprolactam)

7. Nylon-6 Chips MT d 7000 7264 5424 588 1413 1339 588 1211.82 572.90 1264.73

8. Sulphuric Acid MT 132000 132000 e 103372 108641 10567 11746 5543 10567 75.85 115.91 69.34

9. Styrene Acrylonitrile MT 500 300 0 0 0 0 0 0 0.00 0.00 0.00

10. Melamine MT d 15000 15237 6643 916 4893 2731 916 1295.59 518.04 2553.22

11. MEK Oxime MT d 1200 1472 1464 53 78 47 53 24.68 31.71 48.48

12. Methyl Methacrylate Monomer MT 5000 5000 c 4472 3586 62 232 420 62 309.75 45.50 173.90

13. Polymethyl Methacrylate Sheets MT 2000 2000 498 469 280 411 191 280 210.45 318.50 538.01

14. Polymethyl Methacrylate Pellets MT 1500 1500 2159 2114 97 137 390 97 337.41 88.51 124.05

15. Ammonium Sulphate (Polymers) MT 10000 10000 10902 8973 939 575 3457 939 70.86 24.88 15.23

16. Acetone Cyano Hydrine MT 5150 5150 c 5936 5009 259 22 208 259 104.60 126.61 11.36

17. Methacrylic Acid MT 500 500 740 493 19 32 19 19 14.89 16.61 31.22

18. 1A) DAP (A+B TRAIN) MT 150000 f 150000 f 512282 537623 93298 49704 14242 93298 1674.76 10297.92 5447.26

1B) DAP (C TRAIN) MT g 396000 g

2) APS MT f f 0 0 605 8616 193 605 13.89 47.60 683.71

19. Synthetic Filament Yarn MT 6000 6000 5159 5311 581 669 569 581 643.17 721.00 819.99Incl.industrial Yarn/Tyre Cord

20. Nylon Chips - Fibre MT 2000 2000 3553 2283 570 640 802 570 742.64 542.85 531.85

21. Others 680.97 405.13 260.93

9859.79 17442.31 17807.48

a] Installed capacities and projects under execution are as certified by the Managing Director.

b] Quantities of production & stock of the products other than Ammonia,Sulphur Dioxide, Oleum, Sulphuric Acid, Monomer,Acetone Cyano Hydrine, are in packed form. Caprolactam production is inclusive of molten caprolactam.

c] Mainly for captive consumption.

d] Licence not applicable/exempt from compulsory licencing.

e] Production and Stock of Oleum & Sulphur Dioxide obtained from the Plant are expressed in terms of Sulphuric Acid.

f] Licenced and installed capacities of A+B trains are in terms of P2O5, whereas installed capacity of C train is in terms ofDAP. However the production and stock of all the trains are in terms of DAP/fertilizers and in packed form. APS also producefrom Sikka DAP plant.

g] Installed 3rd train (C) with a capacity of 396000 MT per annum & commercial production commenced w.e.f. 23/10/2002.

h] Information at Sl. No. 5 & 6 includes Caprolactam and Ammonium Sulphate produced from “Caprolactam (Expansion Phase I)”

Inter Unit transfers for captive consumption are taken at cost and the accounting effect of such transfers is not considered.

}

53

ANNEXURE - I (Contd.)(B) Stocks, Purchases and Sales of Trading Items

2003-04 Opening Stock Purchases Sales Closing Stock(2002-03) MT Rs. Lakhs MT Rs. Lakhs MT Rs. Lakhs MT Rs. Lakhs

Urea — — — — — — — —(467) (21.84) (350) (17.29) (817) (40.78) (—) (—)

Di-ammonium Phosphate — — — — — — — —(167) (15.38) (—) (0.86) (167) (17.76) (—) (—)

Potash 410 17.23 3213 134.89 3093 137.76 530 22.28(569) (22.79) (3134) (131.99) (3293) (145.77) (410) (17.23)

Single Super Phosphate 1.15 — 1.18 —(4.21) (0.22) (3.25) (1.15)

Pesticides 22.37 94.73 108.63 18.77(28.89) (96.63) (109.51) (22.37)

Seeds — 70.20 82.50 0.72(19.55) (27.98) (54.44) (—)

Zinc Sulphate 0.19 18.01 18.44 1.59(2.58) (8.69) (14.38) (0.19)

Imported Nylon-6 7 8.79 — — — — 7 8.79(7) (8.79) (—) (—) (—) (—) (7) (8.79)

Total 49.73 317.83 348.51 52.15(124.03) (283.66) (385.89) (49.73)

(C) Raw Materials Consumption

Unit 2003-04 2002-03

Quantity V alue Quantity ValueRs. in lakhs Rs. in lakhs

FertilizernagarRock Phosphate MT 213473 5833.37 120527 3312.86Sulphur MT 159518 6967.44 138432 4571.28Naphtha MT 80073 13181.72 52533 7795.12Gas ”000 SM3 226168 11961.08 182025 8360.56Benzene MT 80981 19476.42 71184 14926.61MEK MT 1298 459.99 1324 442.24Ammonia MT — — 524 48.96Others 29.49 43.15

57909.51 39500.78Polymers unitAcetone MT 4190 1506.70 3539 1109.81Hydrocyanic Acid MT 1952 260.02 1635 233.23Methanol MT 1814 311.64 1471 219.88Monomer MT 1 0.70 12 4.94Others 10.03 8.90

2089.09 1576.76Sikka UnitAmmonia MT 98909 11159.90 123028 8998.53Phosphoric Acid MT 232355 39346.82 252852 44002.33Others 415.61 214.14

50922.33 53215.00Fibre UnitOthers 220.31 150.79

220.31 150.79

Total 111141.24 94443.33

(Contd.)

54


ANNEXURE - I (Contd.)(D) Value of Imported and Indigenous Raw Materials and Spare Parts consumed and percentage thereof to total

consumption

2003-04 2002-03Rs. in lakhs % Rs. in lakhs %

Raw MaterialsImported 54595.99 49.12 57677.57 61.07Indigenous 56545.25 50.88 36765.76 38.93

111141.24 100.00 94443.33 100.00Spare PartsImported 415.82 31.94 608.06 48.74Indigenous 886.00 68.06 639.61 51.26

1301.82 100.00 1247.67 100.00

(E) C.I.F. Value of Imports

2003-04 2002-03Rs. in lakhs Rs. in lakhs

Raw Materials 53819.51 58405.78Spare Parts 424.59 579.61Capital Goods — 17.47

(F) Expenditure in Foreign Currency(on payment basis)Interest 851.16 1870.93Technical Assistance / Know-how — —Others 9.74 19.51

(G) Remittance of dividend in Foreign Currency — —

(H) Earnings in Foreign ExchangeF.O.B.value of Exports 8086.46 6515.82

ANNEXURE - IIPART-IV BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration Details

Registration No. 1121

State Code 04

Balance Sheet Date 31-03-2004

II. Capital raised during the year(Amount in Rs. Thousands)

Public Issue Rights Issue

NIL NIL

Bonus Issue Private Placement

NIL NIL

III. Position of Mobilisation and Deployment of Funds(Amount in Rs. Thousands)

Total Liabilities Total Assets

30457434 30457434

Sources of Funds

Paid up Capital Reserves & Surplus

797368 6715293

Secured Loans Unsecured Loans

11140614 2769110

Net Deferred Tax

1378462

Application of Funds

Net Fixed Assets Investments

17265761 1208772Net Current Assets Misc. Expenditure

4279127 47187Accumulated Losses

NILIV. Performance of Company

(Amount in Rs. Thousands)

Turnover and Other Income Total Expenditure21821049 21397033

Profit/(Loss) Before Tax Profit/(Loss) After Tax& Exceptional item & Exceptional item

424016 1742687Earning per Share in Rs. Dividend Rate %

21.86 NILV. Generic Names of Three Principal Products/

Services of Company (as per monetary terms)Item Code No. Product Description(ITC Code)

310200 CHEMICAL FERTILIZERS293300 CAPROLACTAM540200 NYLON FILAMENT YARN

55

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2004(Rs. In Lakhs)

FOR THE YEAR FOR THE YEARENDED 31-3-2004 ENDED 31-3-2003

[A] Cash Flow From Operating ActivitiesNet Profit/(Loss) before tax & Exceptional item 4240.16 (22828.01)Exceptional item — (16253.83)Adjustment for :Depreciation 14537.22 14236.64Interest charged 13866.13 17076.43Miscellaneous Expenditure Written Off 343.11 358.70Loss on Fixed Assets Sold/Written Off 519.06 744.81Profit on Sale of Fixed Assets (0.20) (0.32)Income from Investments (829.39) (932.71)Profit on sale of Investments (36.57) —Provision for Doubtful Debts/Advances 232.84 699.39Provision for diminution in value of Investments — 275.45

28632.20 32458.39

Operating Profit before Working Capital Changes 32872.36 (6623.45)Adjustment for :Inventories 3932.18 7267.55Trade and Other Receivables (23241.23) 23576.88Current Liabilities and Provisions (88.28) (7129.24)Miscellaneous Expenditure(To the extent not written off or adjusted) — (405.93)

(19397.33) 23309.26

Cash Generated from Operations 13475.03 16685.81Interest Paid (15104.79) (17939.31)Direct Taxes Paid (48.63) (162.92)

(15153.42) (18102.23)

Net Cash From Operating Activities (1678.39) (1416.42)[B] Cash Flow From Investing Activities

Purchase of Fixed Assets (586.83) (4332.67)Sale of Fixed Assets 17.98 84.66Reduction of Fixed Assets due to Customs Refund 2681.27 —Purchase of Investments (442.42) —Sale of Investments 1062.63 478.39Interest Received 24.73 198.73Dividend Received 790.32 801.77Net Cash used in Investing Activities 3547.68 (2769.12)

[C] Cash Flow From Financing ActivitiesProceeds from borrowings (1907.01) (273.48)Dividend Paid (11.07) (8.72)Net Cash Generated in Financing Activities (1918.08) (282.20)

NET INCREASE/(DECREASE) IN CASHAND CASH EQUIVALENTS [A+B+C] (48.79) (4467.74)CASH AND CASH EQUIVALENTS ATTHE BEGINNING OF THE YEAR 4202.89 8670.63CASH AND CASH EQUIVALENTS ATTHE END OF THE YEAR 4154.10 4202.89



As per our attached Report of even date



56


STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANY

(A) Name of the Subsidiary Company : GSFC Investment And Leasing Company Limited

(B) The Financial Year of the Subsidiary Companyended on : 31st March, 2004

(C) Shares of the subsidiary held by Gujarat StateFertilizers & Chemicals Limited

(a) Number and face value : 10,00,000 Shares of Rs. 10/- each fully paid up

(b) Extent of holding : 100%

(D) The net aggregates of Profit / (Loss) of the SubsidiaryCompany so far as it concerns the members ofGujarat State Fertilizers & Chemicals Limited :-

(a) not dealt with in the accounts of Gujarat StateFertilizers & Chemicals Limited for the yearended 31st March, 2004 amounts to :-

(i) for Subsidiary’s financial year ended asin (B) above. : Rs. 18.82 lakhs

(ii) for the previous financial years of theSubsidiary since it became the HoldingCompany’s Subsidiary : (Rs. 297.85 lakhs)

(b) dealt with in the accounts of Gujarat StateFertilizers & Chemicals Limited for the yearended 31st March, 2004 amounts to :-

(i) for Subsidiary’s financial year ended asin (B) above. : NIL

(ii) for the previous financial years of theSubsidiary since it became the HoldingCompany’s Subsidiary : Rs. 20.00 lakhs

Details of Subsidiary Company

Name of Subsidiary Company : GSFC Investment And Leasing Company Limited

Rs. in Lakhs2003-04

Capital 100.00

Reserves —Accumulated Loss -279.02

Total Assets 1365.22

Total Liabilities 1365.22Details of Investment 1070.28

Turnover 27.23

Profit before Taxation 19.38Provision for Taxation 0.56

Profit after Taxation 18.82

Proposed Dividend —



57

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF


We have audited the attached Consolidated Balance Sheet of Gujarat State Fertilizers & Chemicals Limitedand it’s subsidiary as at 31st March, 2004 and also the related Profit and Loss Account and the Cash FlowStatement for the year then ended. These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these statements based on our audit. We did not audit the financialstatements of GSFC Investment and Leasing Co. Limited, the subsidiary, for the year ended 31st March, 2004.These statements were audited by other Auditor whose report has been furnished to us, and in our opinion,

so far as it relates to this company is based solely on the report of the other Auditor.

We conducted our audit in accordance with generally accepted auditing standards in India. These standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are

free of material mis-statement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the management as well as evaluating the overall financial statement presentation.

We believe that our audit and the report of other auditors provide a reasonable basis for our opinion.

We report that the consolidated financial statements have been prepared by the Company in accordance withthe requirements of Accounting Standard - 21 ‘Consolidated Financial Statement’ issued by the Institute of

Chartered Accountants of India, on the basis of the individual financial statements of Gujarat State Fertilizers& Chemicals Limited and it’s subsidiary included in the consolidated financial statements.

Based on our audit and on consideration of the report of the other auditor on separate financial statements,

in our opinion and to the best of our information and according to the explanations given to us, the attachedconsolidated financial statements give a true and fair view in conformity with the accounting principles generallyaccepted in India :

a) in the case of the consolidated Balance Sheet, of the state of affairs of Gujarat State Fertilizers & ChemicalsLtd. & its subsidiary at March 31st, 2004;

b) in the case of consolidated Profit and Loss Account, of the profit for the year ended on that date; and

c) in the case of the consolidated Cash Flow Statement, of the cash flows for the year ended on that date.



58

CONSOLIDATED ANNUAL ACCOUNTS 2003-04

Balance Sheet as at 31st March, 2004(Rs. in lakhs)

Schedule As At As At31st March, 2004 31st March, 2003

SOURCES OF FUNDSShareholders’ Funds :Share Capital 1 7973.68 7973.68Reserves and Surplus 2 76267.64 52622.36

84241.32 60596.04Loan Funds :Secured Loans 3 111406.14 108293.93Unsecured Loans 4 27691.10 38723.29

139097.24 147017.22Deferred Tax Liability 45660.60 46561.01Deferred Tax Assets (31875.98) (19360.97)(Refer Note 9(c) of Schedule-21) 13784.62 27200.04

Total 237123.18 234813.30APPLICATION OF FUNDSFixed Assets : 5Gross Block 302921.77 305775.78Less: Depreciation 130549.33 116215.69Net Block 172372.44 189560.09Capital work in progress 288.57 276.25Projects under execution — —

172661.01 189836.34Investments 6 22451.73 22129.55Current Assets, Loans and Advances :Income accrued on Investments 17.02 2.83Inventories 7 37281.08 41213.26Sundry Debtors 8 53354.71 30926.86Cash and Bank Balances 9 4158.33 4205.43Loans and Advances 10 23294.11 23588.18

118105.25 99936.56Less: Current Liabilities and Provisions :Current Liabilities 11 70510.80 72294.69Provisions 12 6055.88 5609.44

76566.68 77904.13Net Current Assets 41538.57 22032.43Miscellaneous Expenditure 471.87 814.98(To the extent not written off or adjusted)(Refer Note 17 of Schedule-21)

Total 237123.18 234813.30Significant Accounting Policies 20Notes on Accounts 21






59

Profit and Loss Account for the year ended 31st March, 2004(Rs. in lakhs)


INCOMESales 13 221936.73 193523.19

Less : Excise Duty recovered on Sales 11312.34 9870.79

Net Sales 210624.39 183652.40

Other Income 14 6963.89 5049.30

Share in profit of Associate Companies 827.29 —

Total 218415.57 188701.70

EXPENDITUREMaterials, Manufacturing &

Operating Expenses 15 147640.61 130147.16

Personnel Expenses 16 16043.80 17517.16

Administration, Marketing & Other Expenses 17 13874.14 17284.68

Purchase of Finished Products 317.83 283.66

Interest :

On Debentures / Bonds and Fixed Loans 8129.32 10489.33

Others 5736.99 6587.10

13866.31 17076.43


Sub Total 206278.32 196549.92

(Increase)/Decrease in Stock ofFinished products, Trading Goodsand Stock-in-Process 18 7428.48 12720.99

Total 213706.80 209270.91

Balance 4708.77 (20569.21)

Prior Period Adjustments (Net) 19 (263.20) (1515.01)

Profit / (Loss) before Taxes & Exceptional Items 4445.57 (22084.22)

Provision for Taxation :

Wealth Tax (2.00) (2.00)

Current Income Tax (MAT) (227.26) (0.24)

Deferred Tax (net) 13415.42 —

13186.16 (2.24)

Profit / (Loss) after Taxes butbefore Exceptional Items 17631.73 (22086.46)

Exceptional Items — (16253.83)

Profit / (Loss) after Exceptional Items 17631.73 (38340.29)

Balance brought forward from last year 443.41 (300.14)

Excess Provision for Taxation written back 0.58 0.44

Debenture/Bond Redemption Reserve Written back — 5137.50

Balance in Profit & Loss Account 18075.72 (33502.49)

Transferred (to) / from General Reserve (13415.42) 33945.90

Balance carried to Balance Sheet 4660.30 443.41

(Contd.)

60


Profit and Loss Account for the year ended 31st March, 2004 (Contd.)(Rs. in lakhs)


Profit / (Loss) after Exceptional Items 17631.73 (38340.29)Weighted average number of Equity Shares 79736830 79736830Basic and Diluted Earnings per Share (in Rs.) 22.11 (48.08)Nominal value per Share (in Rs.) 10.00 10.00Significant Accounting Policies 20Notes on Accounts 21


SCHEDULE - 1 SHARE CAPITAL(Rs. in lakhs)


Authorised :1,60,00,000 Redeemable Cumulative Preference

Shares of Rs.100 each 16000.00 16000.0020,00,00,000 Equity Shares of Rs.10 each 20000.00 20000.00

36000.00 36000.00Issued :

7,98,24,370 Equity Shares of Rs.10 each 7982.44 7982.447982.44 7982.44

Subscribed :7,98,13,937 Equity Shares of Rs.10 each 7981.39 7981.39

7981.39 7981.39Paid-up :

7,96,95,506 Equity Shares of Rs.10 each 7969.55 7969.551,16,091 Add : Forfeited Equity Shares 4.13 4.13

(Amount originally paid up)7973.68 7973.68

Total 7973.68 7973.682,340 Equity Shares forfeited and amount

transferred to Capital Reserve in earlier years

Notes :

Out of the Equity Shares mentioned above :

(a) Under the scheme of amalgamation with the Company(i) 5,86,390 shares of Rs. 10 each were issued to the shareholders of erstwhile Polymers Corporation of Gujarat Limited.(ii) 18,57,600 shares of Rs.10 each were issued to the shareholders of erstwhile Gujarat Nylons Limited.

(b) 3,12,41,915 shares of Rs.10 each were issued as fully paid-up bonus shares by capitalisation of Reserves and Share PremiumAccount.






61


SCHEDULE - 2 RESERVES AND SURPLUS (Rs. in lakhs)

Balance as at Additions Deductions Balance as at Balance as at 1st April, 2003 31st March, 2004 31st March, 2003

Capital Reserve I 3.43 — — 3.43 3.43Capital Reserve II 1248.77 — — 1248.77 1248.77Capital Redemption Reserve 3335.00 — — 3335.00 3335.00Share Premium Account 30524.02 — — 30524.02 30524.02Debenture/Bond Redemption Reserve 7212.50 — — 7212.50 7212.50Debt Restructuring Reserve — 6012.97 (b) — 6012.97 —General Reserve 9855.23 13415.42 (a) — 23270.65 9855.23

Total Reserves 52178.95 19428.39 — 71607.34 52178.95Profit and Loss Account 443.41 4216.89 — 4660.30 443.41

Total 52622.36 23645.28 — 76267.64 52622.36

(31-3-2003) (82495.77) (9209.99) (39083.40) (52622.36) (82495.77)

(a) Transferred to General Reserve (b) Refer Note 4 of Schedule 21

SCHEDULE - 3 SECURED LOANS(Rs. in lakhs)


A] Debentures / Bonds :i) 80,00,000 - Secured Redeemable Non-convertible

Debentures of Rs.100 each * 8000.00 8000.00(on private placement basis)

ii) 2,500 - Secured Redeemable Non-convertibleBonds of Rs. 500000 each * 11800.00 12500.00(on private placement basis) (out of which 200bonds have face value of Rs. 400000 each)

iii) 1,670 - Secured Redeemable Non-convertible Bondsof Rs. 500000 each * (on private placement basis) 8350.00 8350.00

iv) Interest accrued and due on above * 2286.64 —30436.64 28850.00

* (Of the above, Debentures / Bonds of Rs. 2220.25 lakhsare payable during the next twelve months)

B] Loans from :i) Life Insurance Corporation of India(LIC) 162.00 162.00ii) Industrial Development Bank of India (IDBI) 5291.69 5291.69iii) The Industrial Finance Corporation of India Ltd. (IFCI) 3136.00 3136.00iv) ICICI Bank Ltd. 822.46 822.46v) General Insurance Corporation of India(GIC)

and its Subsidiaries — 12.80vi) Industrial Investment Bank of India Ltd.(IIBI) 88.00 88.00vii) IDBI * 3596.68 —viii) SBI * 3600.59 —ix) Kreditanstalt fur Wiederaufbau, Germany (KfW) *

Foreign Currency Loan 2594.66 12579.51x) ICICI Bank Ltd.* 2800.00 3000.00xi) Oriental Insurance Company Ltd. (OIC) 250.00 250.00xii) Deposits from a Company * 3700.00 3700.00xiii) Interest accrued and due on above 1517.80 —

27559.88 29042.46* (Of the above, Rs. 9631.07 lakhs are payable

during the next twelve months)C] From Banks :

i) Cash Credit 38409.57 35360.62ii) Working Capital Term Loans 15000.00 15000.00iii) Interest accrued and due on above 0.05 40.85

53409.62 50401.47

Total 111406.14 108293.93

(Contd.)

62



SCHEDULE - 3 SECURED LOANS ( Contd.)

Notes :

1. The Company had approached the Corporate Debt Restructuring (CDR) Cell through Industrial Development Bank ofIndia (IDBI), the lead financial institution, for debt restructuring. CDR Cell had approved the restructuring scheme. Asper the approved scheme the debt liabilities have different terms and conditions.

2. (a) Debentures at A(i) and Bonds at A(ii) and A(iii) are presently secured by first mortgage on the Company’s land,buildings and all movables, both present and future, at Fertilizernagar, District Vadodara and at Villages Motikhavadiand Sikka, District Jamnagar (excluding the assets of the Company’s Polymers and Fibre Units), subject to priorcharges of the Company’s bankers on specified movables for securing borrowings for working capital requirementsand ranking pari passu with the mortgages and charges created in favour of other such chargeholders. However,as per the approved restructuring scheme, the same is to be secured by the fixed assets of the Company’s Polymersand Fibre units also.

(b) The Debentures at A(i) which were redeemable in three equal annual installments commencing from 01-01-2004are restructured and are now redeemable in ten bi-annual installments commencing from 30-6-2006 and carry interestat 9% p.a. instead of 14.50% / 16.25% w.e.f. 1-04-2003 except for 10,00,000 debentures amounting to Rs.1000lakhs held by the Army Group Insurance Fund which is to be redeemed in 33 equal monthly installments commencingfrom 31-7-2004 and carry interest at 4.50% p.a.

(c) The Bonds at A(ii) which were redeemable in five equal bi-annual installments commencing from 29-10-2004,are restructured and are now redeemable in ten bi-annual installments commencing from 30-6-2006 and carryinterest at 9% p.a. instead of 12.50% w.e.f. 1-4-2003 except for 100 Bonds held by SBI Mutual Fund amountingto Rs. 500 lakhs and 200 Bonds held by Prudential ICICI Trust Ltd. amounting to Rs. 1000 lakhs. The Companyhas purchased bonds held by SBI Mutual Fund at 50% of the face value of Bonds alongwith waiver ofinterest from 1-4-2003 and subsequently cancelled the same. Prudential ICICI Trust Ltd. have agreed to accept80% of the original face value of Bonds of Rs. 5,00,000 each in the following manner against full dischargeand waived interest from 1-4-2003.

Date 30-4-04 31-5-04 30-6-04 31-7-04 31-8-04 30-9-04 31-10-04 30-11-04 31-12-04Rs. Lakhs 50 50 100 100 100 100 100 100 100

(d) The Bonds at A(iii) which were redeemable in four equal bi-annual installments commencing from 1-10-2005, arerestructured and are now redeemable in ten bi-annual installments commencing from 30-6-2006 and carry interestat 9% p.a. instead of 12.60% w.e.f. 1-4-2003.

3. The loans at B(i) to B(vi) are presently secured against hypothecation of the movable properties (except book debts)of the Company (excluding those of Company’s Polymers and Fibre Units and investments in Units of Unit Trust ofIndia) and secured by a joint equitable mortgage created on the immovable properties of the Company (excluding thoseof Company’s Polymers & Fibre Units), both present and future. However, as per the approved restructuring scheme,same is to be secured by the fixed assets of the Company’s Polymers and Fibre Units also. These loans are nowto be repaid in 28 quarterly installments commencing from 1-04-2006. The restructured security arrangements will alsobe extended to loans stated at B(vii), B(viii) and B(xi).

KfW loan at B(ix) is secured by guarantees issued by IDBI and SBI. KfW partly invoked the said guarantees for therecovery of the payments due on 30-6-2003. The devolved amount was shared equally by IDBI and SBI resulting intonew loans at B(vii) and B(viii). These loans now restructured and to be repaid in 16 quarterly installments commencingfrom 1-04-2004.

The loan from KfW at B(ix) is secured by guarantees issued by IDBI and State Bank of India. The guarantee assistanceby IDBI is secured by joint equitable mortgage/hypothecation of the immovable/movable properties of the Company(excluding those of Company’s Polymers and Fibre Units and investments in Units of Unit Trust of India), both presentand future. The guarantee assistance by SBI is secured by joint equitable mortgage of the immovable properties of theCompany (excluding those of Company’s Polymers and Fibre Units and investments in Units of Unit Trust of India),both present and future and by the counter guarantee of the Company.

All these mortgage & hypothecation charges are subject to prior charges in favour of Company’s bankers on specifiedmovables. Above charges are ranking pari passu amongst the lenders.

The loan from ICICI Bank Ltd. at B(x) is secured against pledge of Equity shares of Gujarat Narmada Valley FertilizersCompany Limited held by the Company. The same is restructured to be paid in 18 monthly installments commencingfrom 1-04-2004 without interest.

Deposits from a Company stated at B(xii) is to be secured by way of second charge either on fixed assets or currentassets (excluding those of Company’s Polymers & Fibre Units). (Contd.)

63

SCHEDULE - 4 UNSECURED LOANS(Rs.in lakhs)


1] Fixed Deposits 8215.31 7638.09

2] Other Loans :

(a) Housing Development Finance Corporation Ltd. 2211.52 2107.14(HDFC) (for housing loans to employees) *

(b) Kreditanstalt fur Wiederaufbau Germany (KfW)Foreign Currency Loan 3094.04 6000.25

(c) (i) External Commercial Borrowings in Foreign Currency 2616.00 7119.00

(ii) Interest accrued & due on above 25.25 —

(d) Banks :

(i) For housing loans to employees * 2989.23 3116.00

(ii) Interest accrued & due on (i) above 39.96 22.07

(iii) For vehicle loans to employees * 505.94 510.00

(iv) Interest accrued & due on (iii) above 2.88 —

(v) Under acceptance-cum-bill discounting facility 6601.25 12210.74

10139.26 15858.81

(e) Govt. of Guj. Deferment Loans 1389.72 —

19475.79 31085.20

Total 27691.10 38723.29

(Of the above, Rs.13483.17 lakhs are payableduring the next twelve months)

Notes :

1. Loan under 2(a) is restructured and is payable in 48 monthly installments commencing from 30-4-2005, while loansunder 2(d)(i), 2(d)(iii) are also restructured and are payable in 60 monthly installments commencing from April 2004.

2. KfW loan under 2(b) is restructured and only 50% of the principal is payable in 10 half yearly installments commencingfrom 1-07-2004.

3. Loan under 2(e) is Deferment of sales tax, electricity duty and water charges granted to Company by Governmentof Gujarat vide their notification G.R.No. GSF/11/2003/3554-E dated 3-11-2003. The deferment will be available to theCompany for a period of five years commencing from 1-1-2004. The said loan will be repayable in 60 equal monthlyinstallments commencing after deferment period of 5 years.

* Refer Note 7 of Schedule 21.


SCHEDULE - 3 SECURED LOANS (Contd.)

4. The Credit Facility from Banks at C(i) is secured by hypothecation of stock of raw materials, finished products, packingmaterials, general stores, spares, book debts etc. of the Company.

The Working Capital Term Loan from Banks at C(ii) is presently secured by hypothecation of stock of raw materials,finished products, packing materials, general stores, spares, book debts etc. of the Company and are further securedby a joint equitable mortgage created on the immovable properties of the Polymers Unit and Fibre Unit of the Company.However, as per the approved restructuring scheme, same is to be secured only by the fixed assets of the Company.

5. Based on the approved restructuring scheme, Company approached all the lenders for their approval and is successfulin getting approval from most of them except from few holders of Debentures / Bonds at A(i) and A(iii) for which Companyis in process of getting consent.

6. Out of the total interest accrued & due a sum of Rs. 3323.58 lakhs will be converted in Funded Interest Term Loan@ 8% p.a. repayable in 16 quarterly installments starting from 1-7-2006.

64



SCHEDULE - 5 FIXED ASSETS

(Rs.in lakhs)

Sr. Assets Gross Block Depreciation Net Block

No. As at Additions/ Deductions/ As at For the year upto As at As at1-4-2003 Adjustments Adjustments 31-3-2004 2003-04 31-3-2004 31-3-2004 31-3-2003

1. Land-Freehold 549.17 — — 549.17 — — 549.17 549.17

2. Land-Leasehold 29.39 — — 29.39 — — 29.39 29.39

3. Buildings 8624.55 7.81 — 8632.36 217.62 2641.30 5991.06 6200.87(Including Roads,Culverts &Compound Walls)

4. Railway Sidings 1598.16 — — 1598.16 74.17 561.37 1036.79 1110.96

5. Plant &Machinery 291016.74 520.27 4021.39 287515.62 14051.81 123876.97 163638.65 180431.49

6. Furniture,Fittings &Equipments 2660.58 45.69 36.21 2670.06 124.87 1758.78 911.28 1003.20

7. Vehicles 194.52 0.20 24.21 170.51 9.30 131.59 38.92 52.34

8. Library Books 68.42 0.54 — 68.96 1.65 47.75 21.21 22.32

9. Live Stock 0.14 — — 0.14 — — 0.14 0.14

10.Assets retiredfrom use & heldfor disposal 1034.11 1161.27 507.98 1687.40 56.21 1531.57 155.83 160.21

Total 305775.78 1735.78 4589.79 302921.77 14535.63 130549.33 172372.44 189560.09

(31st March 2003) (285743.18) (22597.05) (2564.45) (305775.78) (14240.83) (116215.69) (189560.09)

11.Capital Workin Progress 288.57 — — 288.57 276.25

12.Projects underexecution — — — — —

Total 303210.34 14535.63 130549.33 172661.01 189836.34

Notes :

1. The Company has acquired land through Government and also through direct negotiations. The entire land is in possessionof the Company. In respect of portion of land for which the Company has still not received the award/sale deed, the advancepaid to land owners have been treated as land. In respect of other portion of land acquired through direct negotiations,compensation has been paid at the negotiated price. The Company also holds possession of a portion of land for whichno amount has been paid in absence of receipt of awards.

2. The Company has leased a portion of its land to Bank of Baroda for bank premises at Fertilizernagar and Sikka and anotherportion at Fertilizernagar to Department of Atomic Energy (DAE) for establishment of Synthesis Gas Facility (A-III Plant).

3. Buildings include Rs. 0.02 lakh being the value of shares in Co-operative Housing Societies.

4. Cost of equipment against which Government subsidy is received are shown net of subsidy.5. Additions/Deductions include :

Rs. 190.02 lakhs being the net increase (previous year Rs. 3125.09 lakhs net increase) in value on account of realignmentof foreign currencies affecting liabilities payable in foreign currencies.

6. Assets retired from use and held for disposal at item No. 10 are stated at cost or realisable value whichever is lower. Nodepreciation has been charged on these assets for the year after its retirement.

7. The deduction/adjustments in Plant & Machinery includes Rs. 2681.27 lakhs being the decapitalisation due to refund ofcustoms duty on the imported consignments of Ammonia-IV project which was capitalised earlier.

8. The Depreciation reserve upto the year 31-3-2004 includes Rs. 9.88 lakhs (previous year Rs. 16.82 lakhs) towards leaseadjustment amount made by the subsidiary company.

65


SCHEDULE - 6 INVESTMENTS(Rs. in lakhs)


Rs.

LONG TERM INVESTMENTS1. GOVERNMENT SECURITIES (Unquoted)

National Savings Certificates 0.37 0.37Govt. of Guj. 5% ULC Bond 1976 0.55 —

0.92 0.372. TRADE INVESTMENTS


Gujarat Narmada Valley Fertilizers Co. Ltd. 3,07,79,167 10 15187.49 14338.33Gujarat Industries Power Company Ltd. 2,23,62,784 10 3649.59 3649.59Gujarat Alkalies & Chemicals Ltd. 10,34,400 10 749.94 749.94Application Money for Rights Shares ofGACL pending allotment 77.58 —

19664.60 18737.86b) Fully paid Debentures :

Gujarat Industries Power Company Ltd. — 472.44(Non-convertible part of 18% securedredeemable debentures)(Third & Final installment of Rs.15 perdebenture redeemed during the year) 19664.60 19210.30

(ii) Unquoted :a) Fully paid Equity Shares of -

Indian Potash Limited 7,50,000 10 60.50 60.50Gujarat Chemical Port Terminal Co. Ltd. 1,48,00,000 10 1480.00 1480.00Gujarat Agri Processing Company Ltd. 6,00,000 10 5.05 26.92

1545.55 1567.423. OTHER INVESTMENTS


ICICI Bank Ltd. (sold during the year) — 0.14Gujarat Rural Housing FinanceCorporation Limited 1,00,000 10 10.00 47.50Industrial Development Bank of India 5,49,440 10 446.42 446.42HDFC Bank Limited (sold during the year) — 0.05Bank of Baroda (sold during the year) — 106.25Gujarat State Financial Corporation 9,35,600 10 187.12 187.12Mangalore Chemicals & Fertilizers Ltd. 5,79,000 10 38.45 —(acquired during the year)

b) Fully paid Bonds :Unit Trust of India 6.75% Tax free US 64 Bonds 4,41,872 100 441.87 —(received against Unit ’64 during the year)(Earmarked for repayment of Fixed Deposits)

1123.86 787.48(ii) Unquoted :

a) Units of Unit Trust of India (Unit ’64) — 617.83(converted in US 64 Bonds during the year)Less : Provision for Diminution in value

of investment — -175.45

— 442.38(Previous year repurchase priceRs. 245.46 lakhs)

Total c/f. — 22334.93 442.38 21565.57

(Contd.)

66



SCHEDULE - 6 INVESTMENTS (Contd.)(Rs. in lakhs)


Rs.

Total b/f. — 22334.93 442.38 21565.57

b) Fully paid Equity Shares of -Gujarat Data Electronics Limited 1,15,000 10 11.50 11.50

Less : Provision for Diminution in valueof investment -11.50 -11.50

0.00 0.00

Gujarat Venture Finance Limited 60,000 10 6.00 6.00

Biotech Consortium India Limited 50,000 10 5.00 5.00

Gujarat State Petroleum Corporation Limited 2,50,000 10 25.00 25.00Gujarat State Fuel Management Co. Limited 1,00,000 10 10.00 10.00

c) Contribution to :Gujarat Venture Capital Fund-1990 13.20 18.00(Rs. 4.80 lakhs redeemed during the year)

Gujarat Venture Capital Fund-1995 57.60 57.60

116.80 563.98

Total 22451.73 22129.55

Aggregate Value of Unquoted Investments 1663.27 2131.77

Aggregate Value of Quoted Investments 20788.46 19997.78Market Value of Quoted Investments 27577.16 12971.53

SCHEDULE - 7 INVENTORIES(Rs. in lakhs)


Stores and Spare-parts (Including Loose Tools 15444.20 16178.27Rs. 8.88 lakhs - previous year Rs. 10.02 lakhs)

Raw Materials 8829.20 4598.83

Finished Goods :

Finished Products 9859.79 17442.31

Trading Goods 52.15 49.73

9911.94 17492.04

Stock-in-Process * 3095.74 2944.12

13007.68 20436.16

Total 37281.08 41213.26


Notes :

(1) Inventories as taken, valued and certified by the Management.

(2) For mode of valuation refer Schedule-20 - Significant Accounting Policies.

67


SCHEDULE - 8 SUNDRY DEBTORS(Rs. in lakhs)


Over Six MonthsSecured - Good 65.59 89.37Unsecured - Good 5876.93 8414.83

- Doubtful 2825.39 2676.05

8767.91 11180.25

Less : Provision 2825.39 2676.05

5942.52 8504.20Others (Considered Good)

Secured 743.32 550.94Unsecured 46668.87 21871.72

47412.19 22422.66

Total 53354.71 30926.86

SCHEDULE - 9 CASH AND BANK BALANCES

Cash, Cheques & Stamps on hand * 12.49 127.92Remittances in transit 118.45 113.85With Scheduled Banks :

In Current Accounts 672.24 832.52(including Rs. 50.09 lakhs of unpaid dividendaccounts and Rs. 2.45 lakhs in Saving Accounts)(previous year Rs. 61.16 lakhs andRs. 0.27 lakh respectively)In Collection Accounts 2882.51 2569.38In Short Term Deposit Accounts 472.63 561.75

4027.38 3963.65With Non-Scheduled Banks :

In Current Accounts/Fixed Depositwith Co-operative Banks 0.01 0.01(for details refer Note 18 of Schedule-21)In Post Office Savings Bank Account (Rs. 100) — —(Maximum balance during the yearRs. 100, previous year Rs. 100)

Total 4158.33 4205.43* Includes balances in Savings Bank Accounts opened

in names of the authorised representatives of theCompany in respect of Imprest Accounts.

SCHEDULE - 10 LOANS AND ADVANCES

Secured (Considered Good)Loans to employees for construction/purchase of houses and vehicles 7050.90 7396.01(including interest accrued) *(Refer Note 7 of Schedule-21)

Total c/f. 7050.90 7396.01(Contd.)

68



SCHEDULE - 10 LOANS AND ADVANCES (Contd.)(Rs. in lakhs)


Total b/f. 7050.90 7396.01

Unsecured (Considered Good)Advances to other Companies 110.80 108.76(Refer Note 6 of Schedule-21)Advances recoverable in cash or in kind or forvalue to be received (including interest accrued) * 14080.48 13636.30Deposits with Excise, Customs and otherGovernment Departments 135.10 204.34Deposits with Limited Companies/FinancialInstitutions (including interest accrued) 137.39 102.13Advance payment of Tax (net of provision) 1779.44 2140.64Unsecured (Considered Doubtful)Advances to other Companies 75.00 75.00Advances recoverable in cash or in kind orfor value to be received 1.07 1.07

16319.28 16268.24

Less: Provision for Doubtful Advances 76.07 76.07

16243.21 16192.17

Total 23294.11 23588.18

* Includes Nil (previous year Nil) due from officersof the Company-maximum balance Nil(previous year Rs. 0.52 lakh).

SCHEDULE - 11 CURRENT LIABILITIES1. Sundry Creditors 63303.76 62943.17

(Refer Note 8 of Schedule-21)

2. Advances from Customers 814.90 830.14

3. (a) Unpaid Dividends * 50.09 61.16(b) Unpaid application money * — 0.14(c) Unpaid matured deposit * 75.68 74.39(d) Unpaid matured debentures * 28.70 35.98(e) Interest accrued on 3(a) to 3(d) above * 17.34 —

171.81 171.67

4. Other Liabilities 4975.77 5866.49

5. Interest accrued but not due on loans 1244.56 2483.22

Total 70510.80 72294.69

* These figures do not include any amounts, dueand outstanding to be credited to InvestorEducation and Protection Fund.

SCHEDULE - 12 PROVISIONSRetirement Benefits 6055.33 5609.44Provision for Taxation 0.55 —

Total 6055.88 5609.44

69


SCHEDULE - 13 SALES

Quantity 2003-04 Quantity 2002-03MTs Rs. Lakhs MTs Rs. Lakhs

Manufacturing Operations

(A) Fertilizernagar & Sikka Unit :

Fertilizernagar Unit :

Urea 301806 27445.78 269261 24990.57


Di-ammonium Phosphate 104626 13029.00 40078 4649.81


Total Fertilizernagar unit 734342 59932.52 612112 47591.12

Sikka Unit :Di-ammonium Phosphate 590813 73083.35 601590 69796.31


Total Sikka Unit 591220 73117.78 609447 70372.37

Total Fertilizers 1325562 133050.30 1221559 117963.49

Caprolactam 52528 34574.16 46991 28593.69

Cyclohexanone 8577 4412.01 8577 3662.87

Nylon-6 6613 6119.14 6307 5784.01

Melamine 13417 7780.65 10619 6132.27

MEK Oxime 1478 1396.01 1488 1309.74

Argon Gas (NM3) 3032951 1348.30 2759443 633.34

Ammonia 30854 3415.77 29359 2675.05

Nitric Acid 8525 362.76 7579 322.74

Sulphuric Acid 55349 868.89 61712 932.47

Other Items 1878.59 1858.12

195206.58 169867.79

(B) Polymers Unit’s Products :

Methyl Methacrylate Monomer 1610 1367.04 1309 1039.95

Polymethyl Methacrylate Sheets 588 628.94 600 621.90

Polymethyl Methacrylate Pellets 1938 2174.26 2149 2253.87


Methacrylic Acid 732 722.98 503 472.24

Acetone Cyano Hydrine 388 327.19 360 302.49

Others 78.50 79.70

5462.62 4964.37

(C) Fibre Unit’s Products :

Nylon Filament Yarn 4948 6369.85 5251 6168.18

Nylon Chips 3324 3236.83 2351 2266.17

9606.68 8434.35

Trading Activities 348.51 385.89(Refer Annexure-I (B))

Sales (Net of Excise Duty) 210624.39 183652.40

Excise Duty Recovered 11312.34 9870.79

Total 221936.73 193523.19

70


Schedules Forming Part of Profit and Loss AccountSCHEDULE - 14 OTHER INCOME

(Rs. in lakhs)

2003-04 2002-03

Rent 15.47 16.34Income from Long Term Investments (Gross) :Dividend :

Trade 778.48 776.98Others 14.09 26.59

(Tax deducted at source Nil)(previous year - Rs. 84.18 lakhs) 792.57 803.57Interest :

Trade 14.21 130.94Others 24.86 —

(Tax deducted at source Rs. 2.91 lakhs)(previous year Rs. 27.50 lakhs) 39.07 130.94

831.64 934.51Interest on Advances, Deposits and others (gross) 1025.99 1659.73(Tax deducted at source Rs. 45.72 lakhs)(previous year Rs. 51.23 lakhs)Recoveries for services rendered 63.72 60.44Insurance claims 269.51 166.39Captive Consumption in Projects under Execution — 59.68Profit on sale of Investments 55.92 2.04Profit on sale of Fixed Assets 0.20 0.32Variation in Exchange Rates 2411.80 863.38Excess provision no longer required 141.55 490.92Miscellaneous 2148.09 795.55

Total 6963.89 5049.30

SCHEDULE - 15 MATERIALS, MANUFACTURING AND OPERATING EXPENSESRaw Materials Consumed :Opening Stock 4598.83 10858.13Add : Purchases 115371.61 88174.83

119970.44 99032.96Less : Closing Stock 8829.20 4589.63

111141.24 94443.33Electricity and Fuel 25713.90 25525.12Water 503.32 946.77Stores and Spares Consumed 2760.24 2898.76Packing Expenses 3232.02 2780.59Insurance 1275.26 1272.16Repairs and Maintenance :Buildings 50.30 53.43Plant & Machinery 2380.19 2401.64Others 208.41 212.67

2638.90 2667.74Excise Duty (Net) 375.73 (387.31)

Total 147640.61 130147.16

SCHEDULE - 16 PERSONNEL EXPENSES *

Salaries, Wages and Bonus 10852.07 10736.55Contribution to Provident, Gratuityand Superannuation (Pension) Funds 2676.62 3270.72[Including provision for Gratuity, Superannuation (Pension)]Welfare Expenses 2515.11 3509.89

Total 16043.80 17517.16* Refer Note 14 of Schedule-21

71


SCHEDULE - 17 ADMINISTRATION, MARKETING AND OTHER EXPENSES(Rs. in lakhs)

2003-04 2002-03Administration ExpensesInsurance-General 292.68 318.27Rates and Taxes 89.11 83.44Printing, Stationery, Postage, Telephones, Telex etc. 140.88 153.56Brokerage on Deposits 58.86 67.91Letter of Credit/Guarantee Commission, Bank Charges 374.79 357.63Travelling and Conveyance 78.29 86.05(Including tour expenses of Directors Rs. 8.87 lakhs)(Previous year Rs. 10.86 lakhs)Vehicle running & maintenance (net)including hire charges 158.62 178.57Directors’ Fees 1.88 1.64Auditors’ Remuneration 10.52 7.22(Refer Note 15 of Schedule-21)Cost Auditors’ Fees 0.56 0.53Rent 36.28 77.38Subscriptions, Membership Fees, etc. 23.30 32.04Legal, Professional and Consultancy charges 475.06 69.31Research and Development expenses 10.76 4.98Loss on fixed assets sold/discarded 519.06 647.68Provision for diminution in value of investments — 175.45Obsolete spares and other items written off 433.29 42.61Provision for Doubtful Debts/Advances 232.84 22.87Lease Rent on Assets taken on lease 3.03 811.75Take or pay rental charges to GCPTCL 641.53 718.38Expenditure on abandoned project written off — 132.39Miscellaneous 1208.36 1235.92

4789.70 5225.58

Marketing Expenses

Sales promotion, Demonstration, Extension servicesand Publicity etc. 822.70 3248.30

Expenses on Depots-cum-Farm Information Centres,Warehouses, Area/Regional Offices etc. and Products’Transportation, Loading & Unloading charges 7148.95 7778.65

Commission to Selling Agents 399.69 342.47

Cash Rebate on Sales 521.17 466.48

Turn over tax 3.12 4.12

8895.63 11840.02

Other Expenses

Contribution to Government Authorities for dischargeof effluent and pollution control expenses 86.69 85.41

Laboratory Expenses 35.38 33.50

Fire Fighting and Safety Services 65.14 56.04

Crop Compensation/Assistance 1.60 43.61

Donations and Contributions — 0.52

188.81 219.08

Total 13874.14 17284.68

72



SCHEDULE - 18 (INCREASE)/DECREASE IN STOCK OF FINISHED PRODUCTSTRADING GOODS AND STOCK-IN-PROCESS

(Rs. in lakhs)

2003-04 2002-03

Opening StockFinished Products 17442.31 17807.48Trading Goods 49.73 124.03Stock-in-Process 2944.12 2767.96Stock out of Trial Run Production — 12457.68

20436.16 33157.15Less : Closing Stock

Finished Products 9859.79 17442.31Trading Goods 52.15 49.73Stock-in-Process * 3095.74 2944.12

13007.68 20436.16

(Increase) / Decrease 7428.48 12720.99


SCHEDULE - 19 PRIOR PERIOD ADJUSTMENTS (NET)(A) Income

Sales (36.35) (49.42)Other Income 1.05 1.04

Total (35.30) (48.38)(B) Expenditure

Raw Materials consumed (8.19) (70.10)Electricity and Fuel (74.21) 1486.25Water 74.39 96.82Stores and Spares consumed (2.22) (33.27)Packing expenses 0.01 —Insurance (0.34) (2.04)Repairs and Maintenance (23.12) (8.12)Salaries, Wages, Bonus & Welfare Expenses 270.11 (0.04)Administration, Marketing and Other Expenses 4.66 (10.49)Excise Duty 0.11 (0.17)Purchase of Finished Products (4.88) 16.14Interest (12.62) (8.22)Depreciation 4.20 (0.13)

Total 227.90 1466.63

Net (A-B) (263.20) (1515.01)

Schedules Forming Part of Accounts

SCHEDULE - 20 SIGNIFICANT ACCOUNTING POLICIES

1. Principles of Consolidation :The consolidated financial statements relate to Gujarat StateFertilizers & Chemicals Limited (holding company) andGSFC Investment & Leasing Company Limited (whollyowned subsidiary company). The consolidated financialstatements have been prepared on the following basis :

a) The financial statements of the Holding Company andits wholly owned Subsidiary Company have beencombined on a line-by-line basis adding together thebook values of like items of assets, liabilities, incomeand expenses, after fully eliminating intra-group

balances and intra-group transactions resulting inunrealised profit or losses.

b) The consolidated financial statements are prepared byadopting uniform accounting policies for like transactionsand other events in similar circumstances and arepresented to the extent possible, in the same manneras the Holding Company’s separate financial statements.

2. Other significant accounting policiesThese are set out under “Significant Accounting Policies” asgiven in the unconsolidated Financial Statements of GujaratState Fertilizers & Chemicals Limited and its subsidiary.

73

1. Contingent Liabilities not provided for :

2003-04 2002-03Rs. lakhs Rs. lakhs

(a) Disputed Excise Duty andCustoms Duty 2439 2297

(b) Disputed demand of SalesTax and Interest on TurnoverTax & Purchase Tax againstwhich the Company haspreferred appeals 17 17

(c) Claims by StatutoryCorporations and othersdisputed and notacknowledged as debt 4352 1477

(d) Claim by ONGC for royaltyon gas 81 81

(e) Claims by employees/ex-employees pending beforecourts Not ascertainable

2. Estimated amount of contractsremaining to be executed on capitalaccounts, net of advances 11 22

3. On expiry of pricing period of the earlier agreement, Oil& Natural Gas Commission (ONGC) demanded increasedgas price from April 1982 to 29th January, 1987. Thisprice increase was not agreed to by the Company sinceas provided in the earlier agreement, gas price for thefuture period was to be determined mutually whereasONGC had increased the price unilaterally without theconsent of the Company and not executed freshagreement inspite of various efforts of the Company.ONGC has referred this matter to the Ministry ofPetroleum and Natural Gas and Ministry of Fertilizers. Thedecision of the Government in this regard is still awaited.ONGC has also submitted an application in Civil Courtbefore Civil Judge (S.D.) Baroda for the recovery ofprincipal amount of Rs. 118.10 crores for the pricedifference and interest thereon. As per the legal opinion,the aforesaid application for recovery is not tenable in lawin the said Civil Misc. Application and hence the Companyhas no obligation towards the same. As such it has notbeen shown under Contingent Liability also.

4. Company's debt restructuring proposal envisagingmoratorium for repayments of debts, reduction in interestcost and concessions in outstanding principal amountwas approved by Corporate Debt Restructuring Cell. Thedebt restructured comprised of rupee term loans,debentures, bonds, foreign currency loans and workingcapital facilities. The restructured debts are classifiedunder various series, having different terms and conditions.Company has received formal approval letters from mostof the financial institutions/banks. The reduction in interestcost coupled with improved operational efficiency hasresulted into cascading positive impact on Company'sperformance.

Out of total debt of Rs. 1288 crores restructured as on1/4/2003, company has got approvals for 92.2% of the total

restructured debt. Company is in constant follow-up andis confident of getting formal sanction for the remainingdebt very soon. Along with reduction in interest amountingto approximately Rs. 38.62 crores for the financial year2003-04, Company has also been awarded one-timeconcessions on principal debts amounting to Rs. 60.13crores. These one-time concessions on principal debts aretransferred to the Debt Restructuring Reserve.

5. (a) As one of the promoters of the Gujarat IndustriesPower Company Ltd. (GIPCL), the Company hasgiven undertaking to Industrial Development Bank ofIndia (IDBI), Power Finance Corporation Ltd. (PFC)and Gujarat Industrial Investment Corporation Ltd.(GIIC) for non disposal of and non creation of acharge against the Company's investment in theshares of the said company during the pendency ofloans given to GIPCL by IDBI, PFC and GIIC.

(b) As one of the promoters of the Gujarat ChemicalPort Terminal Company Limited (GCPTCL), theCompany has given undertaking to ICICI Bank fornot to transfer, assign, dispose off, pledge, chargeor create any lien or in any way encumbercompany's existing or future shareholding in theGCPTCL in favour of any person so long as moneyremains due by GCPTCL to ICICI Bank or till theproject is duly completed, whichever is later.

6. (a) In joint participation with other Industrial undertakingsin Gujarat, the Company has paid Rs. 30.21 lakhsto Gujarat Acrylics Limited (GAL) and Rs. 40.59lakhs to Gujarat Agri Processing Company Limitedby way of advance towards equity contribution.These amounts have been shown under Schedule-10 "Loans & Advances".

(b) Under Rehabilitation and Revival Scheme for M/s.Gujarat Tractors Corporation Ltd. (GTCL) finalised bythe Government of Gujarat, the Company has giveninterest free loan of Rs. 40 lakhs to M/s. Gujarat AgroIndustries Corporation Ltd. (GAIC) for GTCL.

7. The Company has given an undertaking to assign andtransfer to Housing Development Finance CorporationLtd. (HDFC), Central Bank of India, Vijaya Bank, HDFCBank and ICICI Bank, all its rights, titles, interests andclaims under the mortgages/hypothecation obtained fromemployees against loans given to employees forconstruction/purchase of residential houses and vehiclesout of original amount of loans of Rs. 3750 lakhs takenby the Company from HDFC, Rs. 1000 lakhs fromCentral Bank of India and Rs. 1000 lakhs from VijayaBank, Rs. 1375 lakhs from HDFC Bank and Rs. 1250lakhs from ICICI Bank. Pending this, the mortgages/hypothecation created in the Company's favour are beingheld by the Company in trust for HDFC, Central Bank ofIndia, Vijaya Bank, HDFC Bank and ICICI Bank.

8. Sundry creditors in Schedule-11 includes (i) Rs. 215.43lakhs due to Small Scale Industrial Undertakings and(ii) Rs. 63088.33 lakhs due to other creditors. The disclosureis based on the information available with the Company

SCHEDULE - 21 NOTES ON ACCOUNTS

74


regarding the status of suppliers under the Industries(Development and Regulation) Act, 1961. Small ScaleIndustrial Undertakings to whom the Company owes formore than 30 days, which were within the agreed terms, are :

A N Instruments Pvt. Ltd.; AEP Company; Acoustics IndiaPvt. Ltd.; Aditya Forge Ltd.; Arpita Enterprise; BharatForge & Press Industries Ltd.; Bhavani Forge Pvt. Ltd.;Chemtrol Valves Pvt. Ltd.; Chisel & Hammer; DimplePolymers; Detection Instruments (I) Pvt. Ltd; Eagle PlasticIndustries; Eby Fasteners; Econo Valves Pvt. Ltd.; ElectroMech Industries; Excel Hydropneumatics P. Ltd.; EchjayForgings Ltd.; Elson Packing Industries Pvt. Ltd; FabwelEngg. Corporation; Fainger Engg.; Flowchem Industrial P.Ltd.; Ferro Tube & Forge Ind. ; Fainger Laser Valves Pvt.Ltd.; Fisher-Xomox Sanmar Ltd.; Flexican Bellows &Hoses; Filteration Engrs. (I) Pvt. Ltd.; Fluid Controls Pvt.Ltd.; Goa Instrument Ind.; Gasket India P. Ltd; GaugesBourdon (I) Pvt. Ltd.; Gujarat Infrapipes Pvt. Ltd; HawaIndustries Pvt. Ltd.; Hydropneumatics; Hyd-Air Engg.Works Lonavla; Instrument Engg. Pvt. Ltd.; Kishor PumpsPvt. Ltd. ; Keld Ellentoft (I) Ltd.; Madras IndustrialProducts; Mayank Gasket Manufacturing; Multi ThreadFasteners; Myricks Piping Systems Pvt. Ltd.; Multi TexFiltration Engg. P. Ltd.; Mkt Valves Pvt. Ltd.; Manoj PlasticIndustries; Maldeep Catalyst Pvt. Ltd.; New Field IndustrialEqpt.; New Mercantile Impex Pvt. Ltd.; Odin India Pvt. Ltd.;Panelec Pvt. Ltd.; Plas-Pack Industries - Gujarat; PrestigeCounting Instruments; Pressure & Flow Control; PratolinaInstruments Pvt. Ltd.; Propel Valves Pvt. Ltd.; ProtegoEquipment Pvt. Ltd.; Powergrip (I) Fasteners Pvt. Ltd.;Parekh Engg. Co.; Sarathi Engineering Ent. Pvt. Ltd.; SamIndustry Ltd.; S & G Engineers (P) Ltd.; Sanghvi Forging& Engg.; Samleshwari Packaging Pvt. Ltd.; T S Pumps &Valves P Ltd.; Unitop Engineers Pvt. Ltd.; Vansh Steel Pvt.Ltd.; Zenith Machine Tools P. Ltd.; Allza Flex Industries;Anticorrosive Equipment; ARW Filters P. Ltd.; AshamCarbon Products Ltd.; Controquip P. Ltd.; Elson PackingP. Ltd.; Florocarbon Processing P. Ltd.; Inmarco Ind. Maint.P. Ltd.; Jyoti Ind.; Kulkarni Eng. Co.; KJB Titanium P. Ltd.;Mico Entrerprices; Meeka Engineers; Naval ThermoplastP. Ltd.; New Field Ind. Equip. P. Ltd.; Pap Flon Eng. Co.;Prestige HM Poly containers; Silex Industries; TurnweldEngineers; Vadilal Gases & Chem.; Vako Seals; SapnaIndustries; Amrut Plymers; Olympics Synthetics Sacks;Plast Pack Ind (Guj.) ; Accurate Paper Tube (P) Ltd.;Cooline Mfg. (P) Ltd; Jalaram Container Ltd.; LunarmechMachinenfabrik; Partkar Extrusions Ltd., Sai Paper BoxIndustries and Vinayak Industries.

9. (a) No provision has been considered necessarytowards the income tax demand of Rs. 13573 lakhsfor the assessment years 1987-88, 1990-91 and1997-98, as the same is disputed in appeals and theCompany is hopeful of succeeding in the saidappeals.

(b) Pending approval of the competent authority to theCompany's application for exemption under section10(15)(iv)(c) of the Income Tax Act for the IncomeTax on interest paid on import payments, income taxliability of Rs. 22 lakhs has not been considered inaccounts.

(c) Deferred Taxation :(Rs. lakhs)

As on As on Difference31-03-2004 31-03-2003

A] Deferred Tax Liability :

1. Depreciation 45660.60 46561.01 -900.41

45660.60 46561.01 -900.41

B] Deferred Tax Assets :

1. Unabsorbed Losses* 12672.82 3005.60 9667.22

2. Unabsorbed Depreciation* 14737.81 13434.87 1302.94

3. Expenses allowable fortax purpose when paid 3401.59 1890.20 1511.39

4. Provision for DoubtfulDebts and Advances 1040.90 1027.89 13.01

5. Diminution in value ofinvestments 22.86 2.41 20.45

31875.98 19360.97 12515.01Net Deferred TaxLiability/ (Assets) 13784.62 27200.04 -13415.42

* In the opinion of the Management, the Company willhave sufficient taxable profit to set off unabsorbedlosses and depreciation in subsequent periods.

10. Extra Duty Deposit equivalent to 5% of CIF value levied onconsignments of Caprolactam/Melamine Expansion Projectand capitalised is subject to adjustment on final assessmentby special valuation branch of Customs Department.

11. The Company established Sikka Jetty at its own cost, whichis in operation since 1987. After due discussion with GujaratMaritime Board (GMB), a consensus was arrived atestablishing ownership of jetty with GSFC. Thereafter, interms of resolution passed by GMB, the ownership of the jettyat Sikka was transferred to the Company. However, during1994, GMB has reversed its earlier decision not supportedby resolution, and contended that the ownership of the jettyrests with GMB. The Company has made representation tothe appropriate authority with regard to the ownership of thejetty with the Company. Pending finalisation of therepresentation, no provision is considered necessary inrespect of various claims against the Company and thecounter claims of the Company (both the amounts notdetermined) which is dependent upon the establishment ofthe ownership of jetty. At present the Company is inpossession of the jetty and continues to be in ownership ofthe jetty till the final decision of the appropriate authority.

12. The liability for natural gas supplied by Gas Authority of IndiaLimited (GAIL) from 1-4-2000, is accounted at provisionalrates billed by GAIL, pending final fixation of natural gas priceby the Government of India.

Similarly, fuel cost adjustment charges levied by GujaratIndustries Power Company Limited, for the power suppliedto the Company from 1-4-2000 is also provisional and subjectto adjustment on fixation of natural gas price by Governmentof India.

13. Consequent upon the order dated 31-12-2002 of theCommissioner of Labour pertaining to equal work equalwages matter in respect of the contract labourers, the

75

Company had challenged the order in the Hon'ble High Courtof Gujarat. The Hon'ble High Court had earlier granted ad-interim relief staying the operation and implementation of theorder of the Labour Commissioner. Thereafter, now the saidad-interim relief has been confirmed by the Hon'ble HighCourt and the matter has been admitted for final hearing.

Further in the case of other litigation pertaining to aforesaidlabourers demand for permanency, the Industrial Tribunalhas vide its order (Part 1 Award) dated 13-6-2003 held that490 labourers working in abolished areas are to be madepermanent employees of GSFC w.e.f. 1-6-1995. The saidorder of the Industrial Tribunal has been challenged by theCompany by filing a writ petition in the Hon'ble High Court ofGujarat and the Hon'ble Court has granted ad-interim bystaying the operation and implementation of the said order ofIndustrial Tribunal and also stayed further proceedings in thepending reference before the Industrial Tribunal and thematter is now pending for further hearing before the HighCourt. The Company's liability in both these litigation would notexceed Rs. 68 crores.

Since the Company is having strong grounds in the abovecases and further recourses are available for approachinghigher courts, the Company has not provided liability in abovereferred both the cases and neither considered ascontingent liability at this juncture in the matter of equal workequal wages and in the matter of permanency case.

14. Details of Managerial Remuneration : (Rs. in Lakhs)

Managing Director

2003-04 2002-03

Salary 4.64 4.31Other Perquisites * 0.77 0.70Pension Contribution 0.67 0.63Leave Salary Contribution 0.31 0.30

TOTAL 6.39 5.94* Includes Monetary

value of Perquisites 0.33 0.19

15. The break-up of payment to Auditors is as under :

2003-04 2002-03(Rs. in lakhs)

(a) Audit Fees including Service Tax 2.18 2.07(including fees to Branch AuditorsRs. 0.40 lakh)(previous year Rs. 0.39 lakh)

(b) In other capacity in respect of :1. Tax Audit fees 0.76 0.742. Other services 4.50 3.63

(for certification work etc.)(c) Reimbursement of expenses 3.08 0.78

(including Rs. 0.13 lakh paidto Branch Auditors)(previous year Rs. 0.11 lakh)

10.52 7.22

16. Investment including trade investment have been valuedat cost as in the opinion of the Management, all theinvestments are long term investments and the diminutionin value of certain investments are of in temporary nature.

17. Details of deferred revenue expenditure under the head"Miscellaneous Expenditure" to the extent not written offor adjusted and those proportionately written off duringthe year are as under :

Particulars Written off Balance asduring the year on 31-3-2004(previous year) (31-3-2003)

(Rs. in lakhs)

1. Security Issue 70.14 117.22Expenses (70.14) (187.36)

2. Superannuation (Pension) 100.59 100.58of past period (100.59) (201.17)

3. Realignment of 33.31 0.52Finance charges (48.89) (33.83)

4. Licence, Know-how fees 139.07 253.55for production process (139.08) (392.62)

18. Details of balances with non-scheduled banks :(Refer Schedule-9 Cash & Bank balances)

Name of the Balance as on Maximum balanceBank 31-3-2004 during the year

(31-3-2003) (previous year)Rs. Rs.

The Panchmahal District 500 500Co-operative Bank Ltd. (500) (277935)Co-operative Bank of 500 500Baroda Ltd. (500) (500)

19. Related Party Disclosures :Related Party disclosures as required by AS-18 "RelatedParty Disclosures" are given below :1. Relationship :(a) Associate Company :

1. Gujarat Agri Processing Co. Ltd.(b) Directors and their relatives :

1. Shri Balwant Singh Managing Director(upto 6-05-03) andDirector (w.e.f. 27-06-03)

2. Shri A K Luke Managing Director(w.e.f. 7-05-03)

2. Details of transactions with related parties :(i) Details relating to parties referred to in 1(a) above :

Sr. Nature of Transaction Value for OutstandingNo. the year as on


31-03-03)

1. Advance towards 2.04 40.59equity contribution (—) (38.55)

2. Investments in equity — 60.00shares (at cost) (—) (60.00)

(ii) Details relating to parties referred to in 1(b) above :

Sr. Nature of Transaction Rs. LakhsNo. (previous year)

1. Remuneration to 6.39Managing Director (5.94)

76


20. Segment Information :(Rs. Lakhs)


i) PRIMARY SEGMENT INFORMATION :

A] SEGMENT REVENUE :

1. Total Segment Revenue :a) Fertilizer Products 139973.90 123711.95b) Caprolactam and


TOTAL 210624.39 183652.40

2. Inter Segment Revenue 0.00 0.00

3. External Revenue (1 - 2) :a) Fertilizer Products 139973.90 123711.95b) Caprolactam and


TOTAL 210624.39 183652.40

B] RESULT :

1. Segment Result :a) Fertilizer Products 5608.16 -8360.17b) Caprolactam and


TOTAL 18773.56 -3576.64

2. Unallocated Expenses netof unallocated Income -461.68 -1431.15

3. Operating Profit (B1 + B2) 18311.88 -5007.79

4. Interest expenses -13866.31 -17076.43

5. Provision for Taxation :Wealth Tax -2.00 -2.00Income Tax (MAT) -227.26 -0.24Deferred Tax (net) 13415.42 —

6. Profit beforeExceptional Items 17631.73 -22086.46

7. Exceptional Items — -16253.83

8. Net Profit 17631.73 -38340.29

OTHER INFORMATION :

1. Segment Assets :a) Fertilizer Products 205911.21 202827.69b) Caprolactam and


TOTAL 282115.20 280523.39

2. Unallocatedcorporate Assets 31102.79 31379.07

3. Total Assets 313217.99 311902.46

(Rs. Lakhs)


4. Segment Liabilities :a) Fertilizer Products 63238.38 64471.60b) Caprolactam and


TOTAL 74280.06 74186.30

5. Unallocatedcorporate Liabilities 155168.48 177935.10

6. Total Liabilities 229448.54 252121.407. Capital Expenditure :

a) Fertilizer Products 412.24 21065.68b) Caprolactam and

Nylon Products 52.40 55.13c) Other Segments 5.12 21.96d) Corporate Capital

Expenditure 104.75 42.70

TOTAL 574.51 21185.47

8. Depreciation :a) Fertilizer Products 9139.96 8824.32b) Caprolactam and

Nylon Products 4635.86 4639.21c) Other Segments 519.63 526.03d) Unallocated corporate


TOTAL 14535.63 14240.83

9. Non-Cash Expenses :a) Fertilizer Products 157.36 252.87b) Caprolactam and

Nylon Products 151.21 156.61c) Other Segments 136.81 117.16d) Unallocated non-cash

Expenses — 916.71

TOTAL 445.38 1443.35

ii) SECONDARY SEGMENT INFORMATION :The Company operates mainly in Indian market andthere are no reportable geographical segments.

iii) OTHER DISCLOSURES :1. The Products and Services covered under each

business segment is as under :Fertilizer Products : Urea, Ammonium Sulphate,

Di-ammonium Phosphate,Ammonium Phosphate Sulphate.

Caprolactam and : Caprolactam, Nylon-6, NylonNylon Products Filament Yarn, Nylon Chips.

Other Segments : Melamine, Polymer products,Trading activity etc.

2. Segment revenue, results, assets and liabilities includethe respective amounts identifiable to each of thesegment and amounts allocated on reasonable basis.

77

21. The associate companies considered in the consolidatedfinancial statements are :

Name of the Proportion ofassociate company Ownership interest

31-03-04 31-03-03

1. Gujarat Narmada ValleyFertilizers Co. Ltd. 21.01% 21.01%

2. Gujarat Agri Processing Co. Ltd. 44.44% 44.44%

22. As required by Accounting Standard (AS-23) onAccounting for Investments in Associates in ConsolidatedFinancial Statements issued by the Institute of CharteredAccountants of India, the carrying amount of Investmentsin Associates is computed on Equity Method on the basisof audited balance sheet of 31-03-2003.

Signatures to Schedules 1 to 21 :






ANNEXURE - IIPART-IV BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration Details

Registration No. N.A.

State Code 04

Balance Sheet Date 31-03-2004

II. Capital raised during the year(Amount in Rs. Thousands)

Public Issue Rights Issue

NIL NIL

Bonus Issue Private Placement

NIL NIL

III. Position of Mobilisation and Deployment of Funds(Amount in Rs. Thousands)

Total Liabilities Total Assets

31368986 31368986

Sources of Funds

Paid up Capital Reserves & Surplus

797368 7626764

Secured Loans Unsecured Loans

11140614 2769110

Net Deferred Tax

1378462

Application of FundsNet Fixed Assets Investments

17266101 2245173Net Current Assets Misc. Expenditure

4153857 47187Accumulated Losses

NILIV. Performance of Company

(Amount in Rs. Thousands)

Turnover, Other Income & Share Total Expenditurein Profit of Associate Companies

21841557 21397000Profit/(Loss) Before Tax Profit/(Loss) After Tax

& Exceptional item & Exceptional item

444557 1763173Earning per Share in Rs. Dividend Rate %

22.11 NILV. Generic Names of Three Principal Products/

Services of Company (as per monetary terms)

Item Code No. Product Description(ITC Code)310200 CHEMICAL FERTILIZERS293300 CAPROLACTAM540200 NYLON FILAMENT YARN

23. The accounting policy of valuation of raw material by GujaratNarmada Valley Fertilizers Co. Ltd. is lower of cost or realisablevalue while at GSFC, it is valued at weighted/FIFO cost.However, it is not possible to quantify the effect of the saiddifference.

24. Balance of certain creditors and debtors/advances aresubject to confirmation/reconciliation and consequentialadjustments, if any.

25. Previous year's figures have been regrouped wherevernecessary.

26. Additional information pursuant to the relevant provisions ofparagraphs 3 and 4 of Part-II of Schedule-VI to theCompanies Act, 1956 as per Annexure-I.

27. Balance sheet abstract and company's general businessprofile in terms of Part-IV of Schedule-VI to the CompaniesAct, 1956 as per Annexure-II.

ANNEXURE - IRefer Annexure - I on Page No. 52.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2004(Rs. In Lakhs)

FOR THE YEAR FOR THE YEARENDED 31-3-2004 ENDED 31-3-2003

[A] Cash Flow From Operating ActivitiesNet Profit/(Loss) before tax & Exceptional item 4445.57 (22084.22)Exceptional item — (16253.83)Adjustment for :Depreciation 14543.83 14247.05Interest charged 13866.31 17076.43Miscellaneous Expenditure Written Off 343.11 358.70Loss on Fixed Assets Sold/Written Off 519.06 744.81Profit on Sale of Fixed Assets (0.20) (0.32)Income from Investments (831.64) (934.51)Profit on sale of Investments (55.92) (2.04)Provision for Doubtful Debts/Advances 232.84 58.13Provision for diminution in value of Investments — 175.45Profit in share of associate companies (827.29) —

27790.10 31723.70Operating Profit before Working Capital Changes 32235.67 (6614.35)Adjustment for :Inventories 3932.18 7267.55Trade and Other Receivables (22584.57) 23586.45Current Liabilities and Provisions (88.27) (7158.59)Miscellaneous Expenditure(To the extent not written off or adjusted) — (405.93)

(18740.66) 23289.48Cash Generated from Operations 13495.01 16675.13Interest Paid (15104.97) (17939.31)Direct Taxes Paid (48.63) (162.92)

(15153.60) (18102.23)Net Cash From Operating Activities (1658.59) (1427.10)

[B] Cash Flow From Investing ActivitiesPurchase of Fixed Assets (586.83) (4332.67)Sale of Fixed Assets 18.20 84.66Reduction of Fixed Assets due to Customs Refund 2681.27 —Purchase of Investments (520.00) —Sale of Investments 1119.48 487.73Interest Received 24.88 198.67Dividend Received 792.57 803.57Net Cash used in Investing Activities 3529.57 (2758.04)

[C] Cash Flow From Financing ActivitiesProceeds from borrowings (1907.01) (273.48)Dividend Paid (11.07) (8.72)Net Cash Generated in Financing Activities (1918.08) (282.20)

NET INCREASE/(DECREASE) IN CASHAND CASH EQUIVALENTS [A+B+C] (47.10) (4467.34)CASH AND CASH EQUIVALENTS ATTHE BEGINNING OF THE YEAR 4205.43 8672.77CASH AND CASH EQUIVALENTS ATTHE END OF THE YEAR 4158.33 4205.43

78








ATTENDANCE CARD

I/We Folio No.

*Client I.D.

*D.P. I.D.

hereby record my/our presence at the FORTYSECOND ANNUAL GENERAL MEETING of the Company held at itsRegistered Office at Fertilizernagar, District Vadodara, at 9.00 a.m. on Friday, the 10th September, 2004.

Signature of the member/proxy/representative attending the meeting __________________________________

Notes : (i) Please handover this Attendance Card at the entrance to the place of meeting.

(ii) Only Members and in their absence, duly appointed proxies will be allowed for the meeting. Pleaseavoid bringing non-members/children to the meeting.

GUJARAT STATE FERTILIZERS & CHEMICALS LIMITEDP O Fertilizernagar - 391 750 Dist. Vadodara

PROXY FORM

I/We ___________________________________________________________________________________________________________

of______________________________________________ being a member/members of the above named company,

hereby appoint __________________________________________________________________________________

of ______________________________________ failing him/her __________________________________________

of _____________________________________ as my/our proxy to vote for me/us and on my/our behalf at the

FORTYSECOND ANNUAL GENERAL MEETING of the Company to be held at 9.00 a.m. on Friday, the 10th September,

2004 and at any adjournment thereof.

Signed by the said

Date _______________ *

Note : The Proxy Form must reach at the Company’s Registered Office not later than 48 hours before the time ofthe meeting.

* Applicable only in case of investors holding shares in Electronic form.

15 PaiseRevenue

Stamp

Folio No.

*Client I.D.

*D.P. I.D.