Profile of the company
The company was originally incorporated on May 14, 2004 as ‘Krishana Phoschem Limited’ under the provisions of the Companies Act, 1956 with the Registrar of Companies, Rajasthan, Jaipur. The company is primarily engaged in manufacturing of fertilizers, intermediate dyes and other allied chemical products in the state of Madhya Pradesh. The company is manufacturers of Benefited Rock Phosphate (BRP), Single Super Phosphate (SSP), Granulated Single Super Phosphate (GSSP), H-Acid, intermediate dyes and other allied chemicals. The company’s products Single Super Phosphate (SSP) and Granulated Single Super Phosphate (GSSP) is used in replenishing ‘P’ (Phosohorous) in the soil and act as a fertilizer for crop.
Initially the company was engaged in manufacturing of BRP and further expanded to forward integration in manufacturing of SSP and GSSP and expanding for Diversification in intermediate dyes and other allied chemicals. The company manufactures specialized chemicals used for dying cloth such as H acid, E K acid, Vinyl sulphone, PNCBOSA, 4 sulphoantranilic acid, Violet acid, Sulpho Tobias acid. The chemicals produce by the company is used as Dye intermediate specifically for textiles Industry.
Proceed is being used for:
The objects of the offer are to achieve the benefits of listing the equity shares on the Stock Exchange and to carry out the sale of 65,76,000 equity shares of the company by the Selling Shareholders at an Offer Price of Rs 30 per equity share.
Agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic Product (GDP). As per estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) was 15.35 per cent of the Gross Value Added (GVA) during 2015-16 at 2011-12 prices. India is the largest producer, consumer and exporter of spices and spice products. India's fruit production has grown faster than vegetables, making it the second largest fruit producer in the world. Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity. The agro industry in India is divided into several sub segments such as canned, dairy, processed, frozen food to fisheries, meat, poultry, and food grains.
Following a drop in 2015/16, world fertilizer demand is anticipated to recover in 2016/17. In response to the economic slowdown in many emerging and developing countries, persistent low international prices for most agricultural commodities, and dry conditions across South Asia, Southeast Asia, Latin America and Africa, world fertilizer demand is expected to contract by 1.0% in 2015/16, to 181 million tonnes (Mt) nutrients. Aggregate demand in 2015/16 is anticipated to rebound in the three regions where it contracted in 2014/15: Eastern Europe & Central Asia (EECA), West Asia and North America. Demand is seen as dropping elsewhere.
The outlook for 2016/17 is more optimistic in view of slightly improving market conditions, the expected more favorable weather, and a better political and economic situation in some sizable markets. Global fertilizer demand in 2016/17 is seen as rebounding (+2.9%) to 186 Mt, with growth rates of relatively similar magnitude for all three nutrients. Demand in developed countries is anticipated to rise marginally, with stronger prospects in Oceania. With N and P demand in China levelling off, about half the world market can be considered ‘mature’. In volume terms, South Asia, East Asia and Latin America would account for 33%, 22% and 22%, respectively, of the global increase in total fertilizer demand anticipated in the next five years. 2015 was characterized by near-stagnant fertilizer demand. Production capacity and supply availability have both been increasing. Between 2016 and 2020 the fertilizer industry will invest close to $130 billion in more than 150 new production units, increasing global capacity by over 150 million tonnes products.
Pros and strengths
Cost Effective sourcing and strategic location of manufacturing unit: The company’s cost efficient manufacturing and supply chain management results in a significant reduction in its operational costs. With its experience, the company is able to gauge its procurement of raw materials in timely manner. Further, the company’s manufacturing units, situated within the state of Madhya Pradesh are ensured with sufficient raw material which is locally procured. The location of its current manufacturing facilities gives it a significant competitive cost advantage in terms of raw material sourcing manufacturing and labour costs and enables it to address the western markets efficiently.
Quality assurance: The company has a testing division and an in house laboratory which is responsible for the final approval of product manufactured. The final product manufactured has to undergo a quality check before it is finally packed and dispatch. The company also has quality control checks before any consignment of Raw material is accepted since it has a direct impact on the quality of Finished Product. The company’s quality assurance has enabled the company to provide satisfactory performance to its customer.
Forward integration and diversification: Initially the company was engaged in manufacturing of Beneficiated Rock Phosphate (BRP) in Unit - I with installed capacity of 2,00,000 MT. As a step towards forward integration the company has set up a manufacturing facilities for production of Single Super Phosphate (SSP) with an installed processing capacity of 1,20,000 MT in the year 2012-13 and production of Granulated Single Super Phosphate (GSSP) with an installed processing capacity of 90,000 MT in the year 2013-14 at Unit -I situated at 115- 120 & 126-133 A.K.V.N Industrial area, Meghnagar, Jhabua (M.P.), Madhya Pradesh. Furthermore, the company has diversified its business into manufacturing of intermediate dyes and other allied chemicals in its Unit II situated at Meghnagar, Jhabua, Madhya Pradesh.
Risks and concerns
Geographical constraints: The company conducts its manufacturing operations in India at Meghnagar, Madhya Pradesh, Due to the geographic concentration of its manufacturing operations and the operations of certain of its suppliers, its operations are susceptible to local and regional factors, such as accidents, system failures, economic and weather conditions, natural disasters, and demographic and population changes, and other unforeseen events and circumstances. Such disruptions could result in the damage or destruction of a significant portion of its manufacturing abilities, significant delays in shipments of its raw material and/or otherwise affect its business, financial condition and results of operations. In addition, its manufacturing plants produce BRP, SSP and GSSP for a single customer i.e Shriram Fertilizers & Chemicals Limited (a unit of DCM Shriram). Disruptions, damage or destruction of those plants may affect its ability to meet its customer demand and the loss of its key customer or a significant reduction in demand from such customers could have an effect on its business, results of operations and financial condition.
Revenues are dependent on Shriram Fertilizers & Chemicals: The company has entered into Supply and Purchase Agreement dated March 20, 2015 with Shriram Fertiliser & Chemicals (a unit of DCM Shriram) for Supply of Super Single Phosphate (SSP) for period of five year beginning from April 01, 2015. For the financial year ended March 31, 2016 and November 30, 2016, the company’s top client accounted up to 100% of total sales of the company. The loss of this significant customer would have an effect on its financial results. The company cannot assure you that it can maintain the historical levels of business from this customer or that it will be able to replace this customer in case it loses it. Furthermore, major events affecting its customer, such as change of management, mergers and acquisitions could impact its business. If the company’s customer becomes insolvent, it may lose some or all of its business from that client and its receivable from that client would increase and may have to be written off, impacting its income and financial condition.
Significantly dependent on key personnel: The company’s business and the implementation of its strategies are dependent upon its management team, who oversee its day-to-day operations, strategy and growth of its business. If one or more members of such management team is unable or unwilling to continue in their present positions, such persons would be difficult to replace and its business, prospects and results of operations could be affected. In addition, the company’s success in expanding its business will also depend, in part, on its ability to attract, retain and motivate mid-to senior management personnel. The company’s failure to successfully manage its personnel needs could affect its business prospects and results of operations. These risks could be heightened to the extent the company invests in businesses or geographical regions in which it has limited experience. If the company is not able to address these risks, its business, results of operations and financial condition could be affected.
Krishana Phoschem is an ISO 9001:2008 certified company for manufacturing & supply of Benefited Rock Phosphate (BRP), Single Super Phosphate (SSP) and Granulated Single Super Phosphate (GSSP). The company’s manufacturing facilities are well equipped with required facilities including machinery, Feed Hopper, Conveyor Belt, Crusher and other handling equipments to facilitate smooth manufacturing process. On the concern side, the company’s revenues are dependent upon its major customer i.e. Shriram Fertilizers & Chemicals (a unit of DCM Shriram).The geographical concentration of the company’s manufacturing facilities may restrict its operations and affect its business and financial conditions.
On performance front, the company’s revenue increased to Rs 9062.67 lakh in FY16 as against Rs 7725.82 lakh in FY15, representing an increase of 17.30% of the total revenue, on the back of increase in sale of products. Meanwhile, for the year 2015-16 the profit stood at Rs 315.30 lakh as against the profit of Rs 292.79 lakh for the year 2014-15, representing an increase of 7.69% to the previous year. The company constantly endeavors to improve its manufacturing process, and will increase service activities to optimize the utilization of resources. The company has invested significant resources, and intends to further invest in its activities to develop customized systems and processes to ensure effective management control. Going forward, the company intends to expand its research and development capabilities, by increasing its investment in employing qualified individuals from the industry thereby augmenting its dedicated in-house R&D team. The continued investments in R&D will enable the company to increase its productivity, improve operating efficiency, and enable it to penetrate existing and new market segments.