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Corporate Information
  •         DIRECTOR'S REPORT
Gujarat Narmada Valley Fertilizers & Chemicals Ltd
Industry : Fertilizers
BSE Code:500670NSE Symbol:GNFCP/E(TTM):5.11
ISIN Demat:INE113A01013Div & Yield %:3.42EPS(TTM):40.03
Book Value (Rupee ):321.5223266Market Cap (Rupee Cr.):3180.67Face Value(Rupee):10
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To,

The Members,

Your Directors have immense pleasure in presenting this 42nd Annual Report on Company's business and operations together with Audited Financial Statements (Standalone and Consolidated) for the Financial Year ended on 31st March, 2018.

The year 2017-18 was the unprecedented year for your Company registering excellent financial results in the history of 42 years of its operations. The continued emphasis on higher productivity, energy conservation & efficiency improvement, smart marketing strategies, innovation / cost reduction, environmental & safety consciousness, dedication of employees at all levels, etc., have significantly contributed in achieving commendable all-round performance of your Company.

FINANCIAL RESULTS AND STATE OF COMPANY'S AFFAIRS

The concerted efforts put-in by your Company have resulted in achieving glittering financial and operational performance during the year. The Company established total 186 new records on production and marketing fronts.

The financial highlights for the year ended 31st March, 2018 are summarized below:

(Rs. in Crores)
Particulars Standalone
2017-18 2016-17
Income from operations 5,917 4,945
Other Income 141 225
Total Income 6,058 5,170
Total Expenditure 4,526 4,292
Profit before Depreciation, Finance
Cost, Exceptional Item and Tax 1,532 878
Depreciation 270 251
Finance Cost 100 204
Exceptional Item (Impairment
Reversal of TDI-II Assets) - 292
Profit Before Tax 1,162 715
Tax Expense 372 194
Net Profit for the year 790 521
Re-measurement of Losses on defined employee benefit plans 27 6
Balance brought forward from previous year 635 157
Amount available for Appropriation 1,398 672
Appropriations :
Dividend paid 78 31
Tax on Dividend 16 6
Transferred to General Reserve 115 -
Surplus carried to Balance Sheet 1,189 635

FINANCIAL & OPERATIONAL PERFORMANCE OVERVIEW

1. Financial Performance :

Your Directors are delighted to share with you the highest ever financial records established by your company during the year under review on standalone basis, which are as follows:

• Highest Ever Profit Before Tax of Rs.1,162 Crore as against Rs.715 Crore in the previous year, registering an increase of 63%.

• Highest Ever Profit After Tax of Rs.790 Crore as against Rs.521 Crore in the previous year, registering an increase of 51%.

• Highest Ever Turnover of Rs.6,058 Crore as against Rs.5,170 Crore in the previous year, registering an increase of 17%.

• Highest Ever Exports of Rs.629 Crore as against Rs.361 Crore in the previous year, registering an increase of 74%.

• Highest Ever EBITDA of Rs.1,532 Crore as against Rs.1,170 Crore in the previous year, registering an increase of 31%.

• Highest Ever EPS of Rs.50.80 as against Rs.33.54 in the previous year, registering an increase of 51%.

• Recommendation of Highest Ever Dividend of 75% as against 50% paid last year.

• Highest ever pre-payment of Long Term Debt of Rs.534 Crore.

• Highest ever Long Term Debt extinction of Rs.888 Crore. The total debt of Rs.1,436 Crore paid off in one single year.

Thus, your Company has become Long Term Debt free Company.

During the year under review, the exponential growth in revenue and profits are significantly led by non-TDI chemicals products. The realisation from Acetic Acid, Formic Acid and Ethyl Acetate were the highest in the last 6 years.

The Net Profit for FY 2017-18 on consolidated basis was Rs.794.94 Crore as compared to Rs.528.79 Crore in the previous

year.

2. Operational performance :

It is a matter of proud that your Company has once again excelled on production front during the year. Most plants were operated at more than 100% capacity utilization. Special focus was given on energy conservation and cost reduction in all aspects. Ever highest annual production was achieved in Formic Acid : 22,009 MTs. (220.09%) , Ethyl Acetate : 63,126 MTs. (126.25%) , Aniline : 41,883 MTs. (119.67%) Technical Grade Urea : 1,03,601 MTs, TDI-II : 42,577 MTs (85.15%) .

In addition, annual production at more than 100% capacity utilization was also achieved in Acetic Acid : 1,57,067 MTs. (157.07%) , Ammonium Nitrophosphate : 2,16,575 MTs. (151.98%) , Ammonia : 6,13,010 (137.60%) and TDI-I : 17,056 MTs. (121.83%) .

Currently, TDI-II Plant, Dahej is running smoothly on consistent basis. Your Company is making on-going efforts for reliability and improvement in TDI-II Plant operations in terms of consistency, safety and capacity utilization by implementing various schemes. Actions have been initiated for implementation of various schemes under "Reliability Phase-II" with an estimated investment of Rs.170 Crore. This will help in decreasing downtime and achieving sustainable production, resulting into higher contribution in the profitability of the Company.

SALES :

1. Industrial Products :

The Chemical Segment has performed extremely well for FY 2017-18 despite competitive scenario of Chemical business in the country and International Market. Almost all Industrial Products performed well in terms of sales and realization during the year. Many new milestones have been achieved in sales. E-tendering of Methanol successfully launched and well accepted in the market. Your Company is the first Company to adopt such a unique way of Chemical sales through e-Tendering. Export turn-over has increased to Rs.629 Crore in FY 2017-18 from Rs.361 Crore in FY 2016-17. The company is one of the leading suppliers of TDI in Markets of Middle East and Africa. The company's products have been exported to 66 Countries. The outstanding performance of Chemical Segment was mainly attributed to smart marketing strategy and dynamic pricing of company's products.

2. Fertilizer Business:

The year 2017-18 was challenging for Fertilizer Sector as the over-all rainfall remained normal during the monsoon season and there was high carried forward stock of Fertilizers at the beginning of the year.

Despite these challenges, your Company performed well in the fertilizer business during the year and achieved total sale of Urea (Manufactured and Traded) at 7.31 Lac MTs. as compared to 10.37 Lac MTs. in the previous year. Lower sales volume of Urea was due to reduced handling of Imported Urea during the year. The sale of Ammonium Nitro Phosphate (ANP) was highest ever at 2.23 Lac MTs. compared to 2.16 Lac MTs in the previous year. Out of the total sale of fertilizers, around 1.09 Lac MTs fertilizers were sold through Company's own 68 Narmada Khedut Sahay Kendras (NKSKs) .

During the year, trading activities continued in Muriate of Potash (MoP) , indigenously sourced Di-Ammonium Phosphate (DAP) , Ammonium Sulphate, Single Super Phosphate (SSP) and City Compost. Total 10,415 MTs. of fertilizers were sold as part of Trading activities.
3. (n) Code Solutions – IT Division:
(n) Code Solutions - IT Division has also contributed in achieving stellar performance of your Company during the year. This division has registered sales turnover of Rs.174 Crore and profit of Rs.39.53 Crore across all its business segments.
(n) Code Solutions has bagged major prestigious order from Vadodara Smart City Development Ltd. Another notable contribution by (n) Code in the Government Sector was its role in conducting reverse auction on its own e-auction for Gujarat State Civil Supplies Corporation (GSCSC) resulting in to a massive savings of Rs.32.58 Crore to GSCSC.
With a view to maintain growth momentum in IT business, (n) Code has undertaken several new initiatives in the areas of smart cities, education, intelligent transportation, system integration, Geographical Information Systems, security and surveillance, Digital Mapping and Surveys, business intelligence, Data Analytics, e-Auction, etc.

(n) Code Solutions - IT Division of the company was appointed as an Authentication User Agency (AUA) and e-KYC User Agency (KUA) by Unique Identification Authority of India (UIDAI) for the purpose of providing Aadhaar enabled services. UIDAI had vide its interim order dated 7th June, 2018 imposed financial disincentive of Rs.2,05,32,000/- (including GST of Rs.31,32,000/-) due to violation of certain provisions of Aadhaar Act, 2016 and its Regulations by (n) Code. Your Company had submitted due explanations in this proceedings. However, in order to amicably resolve the issue and close the matter, the Company had made full payment towards financial disincentive to UIDAI. As such, there is no material impact of the said payment on the financial position of the Company.

A detailed analysis of Company's operational and financial performance is presented under a separate section on "Management Discussion & Analysis" forming part of this report.

DIVIDEND :

Your Directors are delighted to inform that in view of unprecedented performance of your Company for FY 2017-18 in its history of 42 years and to meet with the aspirations of shareholders for higher dividend on their investments, your Directors have recommended ever highest dividend of Rs.7.50 per share (75%) on 15,54,18,783 equity shares of Rs.10/- each, subject to the approval of shareholders at this Annual General Meeting. The dividend payout would work out to Rs.140.52 Crore including tax on dividend. This amounts to 17.80% of the Net Profit of the Company.

APPROPRIATIONS :

Your Company has registered a Net Profit of Rs.789.52 Crore for FY 2017-18. After deducting therefrom Rs.26.72 Crore being the re-measurement losses on defined employee benefit plans and adding thereto Rs.635.19 Crore being the balance of Statement of Profit & Loss brought forward from previous year, an amount of Rs.1,397.99 Crore is available for appropriation. Out of this, Rs.93.53 Crore (inclusive of Tax on Dividend) is appropriated towards payment of dividend for FY 2016-17 and Rs.115 Crore is transferred to General Reserve. The balance amount of Rs.1,189.46 Crore is proposed to be carried to Balance Sheet. The Company proposes to transfer Rs.175 Crore to General Reserve upon declaration of dividend for FY 2017-18.

FERTILIZER INDUSTRY – GOVERNMENT POLICY :

The Government of India (GoI) increased subsidy on Phosphates and decreased subsidy on Nitrogen and Potash nutrient covered under the policy of Nutrient Based Subsidy for FY 2018-19. Net effect of such changes in subsidy on 'Narmada Phos' produced by your Company has been positive resulting into annual benefit of around Rs.14 Crore.

After the success of pilot project of GoI for sale of fertilizers under 'Direct Benefit Transfer' (DBT) Scheme in 19 Districts of selected States, the said scheme has now been implemented across the Country from 1st February, 2018 with the objectives of addressing the challenges such as diversion of Urea for non-agricultural use, imbalanced use of fertilizers, delay in subsidy receipts from Government and protection of some of the legacy / operation of inefficient plants. The subsidy is now available directly to farmers under DBT Scheme. GST @ 5% on fertilizers is applicable from 1st July, 2017.

Recently, GoI has made it compulsory for all Fertilizer Manufacturers to use 45 Kgs. bag of Urea in place of existing 50 Kgs. bag, with a view to bring down consumption of Urea by 10% since farmers mostly assess their requirement of Urea in terms of bags for agriculture purposes. This will not only save country's precious Foreign Exchange out-go but also reduce de-gradation of soil & environment.

ON-GOING PROJECTS / INITIATIVES :

1. Neem Project :

Inspired by Hon'ble Prime Minister's Policy mandate of 100% Neem coating of Urea, your Company has achieved significant progress in its innovative Neem Project, implemented in 2015. With effective backward integration of Neem Oil production, your Company has created shared value among rural and urban poor people empowering communities with targeted focus on women empowerment through income generation and improved livelihood. During the last three years, by collecting over 45,000 MTs of Neem seeds, income of more than Rs.45 Crore was generated for 4.5 Lac Women in 53 Districts across Six States of India. Besides, more than 2.5 Lac people were benefitted by indirect employment.

During the year under review, around 23,000 MTs of Neem seeds were collected from six States from which 1,724 MTs. of Neem Oil and 14,421 MTs. of Neem Cake were produced.

As reported last year, facilities for manufacture of Neem Oil based products were set-up and the Company launched various products such as Neem Shampoo, Neem Mosquito Repellent, Neem Face-wash, Neem Hair Oil, Neem Hand-wash, etc. New Soap manufacturing Unit with a capacity of producing 225 MTPA Neem Soaps has been established by Company's CSR Wing - NARDES and registered under Khadi Village Industries Commission (KVIC) .

Hon'ble Prime Minister inaugurated Neem Product facility on 8th October, 2017 and also laid foundation stone for Neem Seed expelling / extraction Unit at Bharuch. Neem based products launched by your Company has received overwhelming response from the consumers across India. To meet with the growing demand, the Company has opened first of its kind Neem Stores and Neem Parlours in various major cities of Gujarat. The Company has opened 17 own outlets and 40 Garden Parlours in Ahmedabad, Surat, Vadodara and Rajkot.

With a view to cater to the market demand of Neem products, a large scale Neem Seed expelling / extraction unit is under implementation to produce around 2,900 MTPA Neem Oil and around 22,000 MTPA Neem Cake. The Company is also setting-up 10 MTPD Toilet Soap Manufacturing Unit at Bharuch.

We are happy to inform that your Company's innovative multi-dimensional socio-economic Neem Project has been lauded in the UNDP impact assessment survey which concluded that there has been significant decrease in domestic violence, increase in annual income, asset creation and education expenditure. In addition, the project has been appreciated by Hon'ble Prime Minister and many other Dignitaries at various occasions and has won many prestigious Awards and Recognitions at both National and International levels, the details of which are separately given under the heading "Awards and Recognitions" in this Report.

2. Di-Calcium Phosphate Project :

Hon'ble Prime Minister laid foundation stone for Di-Calcium Phosphate (DCP) project on 8th October, 2017 at Bharuch. The project execution activities to manufacture 2 Lac MTPA DCP at Dahej to be set-up by Ecophos GNFC India Pvt. Ltd. (EGIL) at an estimated cost of Rs.538 Crore are under progress. Financial closure for the project has been completed. There is a slight delay in execution of this project as reported last year and the same is expected to be completed by end September, 2019. The Company is concentrating on speedy implementation of the said project as downstream integration of TDI-II Plant.

Once the project goes on stream, the entire HCI generated as by-product from TDI-II Plant will be consumed for production of DCP, which would help the Company in improving the profitability of TDI business.

3. Contribution towards "Digital India" :

As was reported last year, your Company was the first Fertilizer Company in India to have its 100% Cashless Township, following the clarion call of Hon'ble Prime Minister for "Digital India". The efforts put-in by your Company for Cashless initiatives in various segments of its business were well appreciated by Hon'ble Prime Minister and other Dignitaries at various occasions including Government of India, Government of Gujarat and other renowned Organizations / Authorities. Last year, the Company received many prestigious Awards at National and International Levels in recognition of Cashless drive undertaken by your Company. This year also, the Company has received Awards, the details of which are given separately under the heading "Awards and Recognitions" in this Report.

GROWTH PLAN / REVAMP SCHEMES :

(1) Formic Acid Capacity Enhancement :

Your company is the only producer of Formic Acid (FA) in India. To meet with the domestic demand of the Country, around 15,000 MTPA FA is imported mainly from China, Germany and Finland. To bridge the gap of demand & supply in India to some extent, the Company is planning to enhance the present capacity of its FA Plant from 22,000 MTPA to 28,800 MTPA through implementation of FA Plant revamp. The proposed capacity enhancement will save country's precious foreign exchange. Moreover, one of the raw materials viz. Carbon Monoxide to produce FA is also available at Company's Dahej site. Hence, possibilities are being explored for setting-up FA Plant at Dahej.

(2) Acetic Acid Capacity Enhancement :

Your company is the only producer of Acetic Acid (AA) in India with installed capacity of 1 Lac MTPA. Currently, 80% of domestic demand of AA is met through import. Looking to the market of AA in India, the Company is actively considering Acetic Acid capacity expansion. The level of capacity of the plant is under technical examination.

(3) Concentrated Nitric Acid (CNA) - IV Plant :

Your Company is operating three CNA Plants. With the increase in captive consumption of CNA for manufacture of TDI, market share of GNFC is reducing. Hence, the Company has initiated actions for setting up 150 MTPD CNA-IV Plant and is expected to be completed by Mid 2020.

(4) Ammonia Plant Revamp :

The Company produces about 1,850 MTPD Ammonia from both fuel oil and natural gas route and further, Syngas loop revamp is under implementation to increase the production to 1,900 MTPD. This revamp is expected to be implemented by end 2018. Ammonia production capacity can be further increased from 1,900 MTPD to 2,050 MTPD by installing Make-up Gas Convertor Loop in existing Ammonia Synthesis loop. This will increase Ammonia production by 150 MTPD (50,000 MTPA) and reliability of operations. Actions have been initiated for implementation of revamp in Ammonia Plant, which is expected to be completed by end 2020.

(5) Reliability Improvement Schemes for TDI-II Plant, Dahej :

With a view to further increasing the reliability of TDI-II Plant operations and achieving sustainable production, resulting into higher contribution in the profitability, your company has undertaken implementation of various schemes under 'Reliability Phase-II'.

The above mentioned projects / revamp schemes would be implemented with an estimated investment between Rs.1000 ~ Rs.2000 Crore, depending upon the scale of operations.

AWARDS & RECOGNITIONS :

Your Directors are delighted to inform that in recognition of exemplary work done in the areas of Neem Project and Cashless initiatives, the Company has won many prestigious National and International Awards from Governments and other renowned Institutions, which are listed below :

• Porter Prize for Enabling Social Progress, Mumbai for second consecutive year

• India CSR Innovative Project of the year 2017, Mumbai

• India CSR Award for PSU Leader of the year 2017, Mumbai

• CMO Asia Best CSR Practices Award 2017, Singapore

• Global Giving Award for Best CSR Innovation Practices 2017, Dubai

• CII-ITC Sustainability CSR Award 2017, New Delhi

• Shared Value Inclusive Business List Award, New Delhi

• CMO Asia 50 Most Influential Rural Marketing Professional, Malaysia

• ET Now CSR Award for Innovation in CSR practices, Mumbai

• Dhainik Bhaskar India Pride Award for Excellence in CSR, New Delhi

• Business World Digital India Award for implementation of cashless initiatives, New Delhi

• SKOCH BSE Order of Merit, Mumbai

• SKOCH Smart Governance SKOCH Order-of-Merit Award

• Times Network Digital India Award for Digital Social Innovation, New Delhi

• CII Supply Chain and Logistics Excellence Award, Hyderabad

• Star Performer of the year 2017 by SBI Mutual Fund

• India's Best Company of the year Award

DIRECTORS' RESPONSIBILITY STATEMENT :

Pursuant to Sections 134(3) (c) and 134(5) of the Act, the Directors state that–

(i) in the preparation of Annual Accounts for the financial year ended 31st March, 2018, the applicable Accounting Standards had been followed along with proper explanation relating to material departures, if any, therefrom had been furnished;

(ii) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period;

(iii) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, if any;

(iv) they had prepared Annual Accounts on a going concern basis;

(v) they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(vi) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY :

Except for additional equity investment of Rs.12 Crore in the equity of Bhavnagar Energy Co. Ltd., there has been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of financial year to which the financial statements relate and the date of the Report.

DETAILS OF SUBSIDIARY / JOINT VENTURES / ASSOCIATE COMPANIES :

The Company has Wholly Owned Subsidiary Company and Associate Company namely - Gujarat NCode Solutions Limited (GNSL) and Gujarat Green Revolution Co. Ltd. (GGRCL) respectively. Statements containing salient features of Financial Statements of GNSL and GGRCL are given in Form AOC-1 as Annexures to the Consolidated Financial Statements and the same have not been repeated here for the sake of brevity.

GNSL has not commenced its business operations during FY 2017-18 and therefore, report on performance and financial position has not been furnished in this Report.

The project execution activities for setting-up of 2 Lac MTPA Di-Calcium Phosphate Project by EcoPhos GNFC India Pvt. Ltd. (EGIL) , a Joint Venture Company are underway. Therefore, report on operational performance and financial position of EGIL for FY 2017-18 has not been furnished in this Report.

CONSOLIDATED FINANCIAL STATEMENTS :

Pursuant to Section 129(3) of the Act, read with Regulation 33 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company has prepared Consolidated Financial Statement in respect of Gujarat Ncode Solutions Ltd. (GNSL) , a wholly owned subsidiary of the Company and Gujarat Green Revolution Co. Ltd., being an Associate Company for FY 2017-18 and forms part of this Annual Report.

As per Indian Accounting Standards, the accounts of EcoPhos GNFC India Pvt. Ltd. (EGIL) , a Joint Venture Company are not required to be consolidated.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS :

During the year, the Company has neither made any investment in other bodies corporate nor given any Loan or Guarantee or provided any Security in connection with loan to any other body corporate or person.

PARTICULARS OF CONTRACT OR ARRANGEMENT MADE WITH RELATED PARTY :

The Policy for Related Party Transactions (RPTs) deals with review and approval of RPTs and the same is available on the Company's website at web link http://www.gnfc.in/aboutus/corporate/policies.html The Audit Committee has granted Omnibus approval for RPTs, which are routine and repetitive in nature, based on the criteria approved by the Board of Directors within the overall framework of the said policy. All RPTs under omnibus approval are placed periodically before the Audit Committee for its review and approval.

In terms of the Policy on Related Party Transactions, the Company had not entered into any contract or arrangement with related parties, which could be considered "material" (i.e. transactions exceeding 10% of the annual consolidated turnover as per the last Audited Financial Statement entered into individually or taken together with previous transactions during the financial year) during FY 2017-18. Hence, the disclosure of RPTs as required under Section 134(3) (h) of the Act, in Form AOC-2 is not applicable to your company. Suitable Related Party disclosure under Ind AS-24 is also reported in the Note No.40 to the Standalone Financial Statement.

Requisite details on RPTs have also been furnished in the 'Report on Corporate Governance' forming part of this Report.

MEETINGS OF THE BOARD & COMMITTEES THEREOF :

(i) Board Meeting :

Five (5) meetings of the Board were held during the year.

(ii) Committees of the Board :

Currently, there are six Committees of the Board as under:

1. Audit Committee;

2. Stakeholders' Relationship Committee;

3. Nomination and Remuneration Committee;

4. Corporate Social Responsibility Committee;

5. Project Committee; and

6. Human Resource Development Committee.

Details of composition of Board and its Committees, which are mandatorily required to be constituted, major terms of reference of these Committees, meetings held during the year and attendance of Directors at such meetings are provided in ‘‘Report on Corporate Governance'' forming part of this report.

All the recommendations made by the Audit Committee were accepted by the Board.

REMUNERATION POLICY FOR DIRECTORS / KEY MANAGERIAL PERSONNEL / SENIOR MANAGEMENT AND OTHER EMPLOYEES :

The Company has formulated a Nomination, Remuneration & Evaluation Policy as required under Section 178 of the Act and SEBI (Listing Obligations & Disclosure Requirements) , Regulations, 2015. The details of remuneration paid to Directors / Key Managerial Personnel / Senior Management and other employees are furnished in the Report on Corporate Governance, forming part of this Report.

PERFORMANCE EVALUATION OF BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS :

The Company has carried out annual performance evaluation of the Board, its Committees and Individual Directors in line with the provisions of the Act and SEBI (LODR) Regulations, 2015.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL :

During the year, Shri Anil Mukim, IAS ceased to be the Director of the Company effective 7th March, 2018.

Shri Sunil Parekh and Shri Piruz Khambatta who were appointed as Independent Directors (IDs) at the 39th AGM held on 26th September, 2015 for a term of three years up to 30th September, 2018, their term of office will expire on that date. They are eligible for re-appointment as IDs in terms of Section 149(10) (11) of the Act. Therefore, suitable resolutions proposing their reappointment as IDs are included in the Notice of this AGM for your kind approval.

Government of Gujarat (GoG) has vide its Notification dated 12.07.2018 nominated Shri M.S. Dagur as Government Director on the Board for a period of two years from the date he assumes the charge of Managing Director (MD) and withdrawn the nomination of Dr. Rajiv Kumar Gupta, IAS. In accordance with Article 171 of the Articles of Association of the Company, the Board in its meeting held on 9.08.2018, appointed Shri M.S. Dagur as MD w.e.f. 16.07.2018 (i.e. the date of which he assumed the charge) . Dr. Rajiv Kumar Gupta, IAS relinquished the charge of MD on 15.07.2018. Accordingly, he ceased to be the Director and MD effective from the said date.

The Members had at their 37th AGM held on 21.09.2013 accorded their consent to the appointment of Dr. Rajiv Kumar Gupta, IAS as MD from 2.05.2013 until further orders from GoG or for five years as per the Companies Act, 2013. Accordingly, the term of Dr. Rajiv Kumar Gupta, IAS as MD had completed on 1.05.2018. In order to formalize the appointment Dr. Rajiv Kumar Gupta, IAS as MD for intervening period from 2.05.2018 to 15.07.2018, the Board had in its meeting held on 9.08.2018 reappointed him as MD. Necessary resolutions proposing the appointment of Shri M.S. Dagur and re-appointment of Dr. Rajiv Kumar Gupta, IAS as MD as required under the Companies Act, 2013 are included in the Notice of this AGM for your kind approval.

Retirement of Director(s) by Rotation:

In terms of Section 152 of the Act, Shri V D Nanavaty, Director will retire by rotation at this AGM and is proposed to be re- appointed thereat.

Declaration by Independent Directors:

The Company has received necessary declarations from all Independent Directors under Section 149(7) of the Act and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 to the effect that they meet with the criteria of independence as laid down in the Act and Listing Regulations.

Change in Directorate :

The information relating to change in Directorship during the year is furnished in the 'Report on Corporate Governance' forming part of this Report.

Your Directors place on record their deep sense of appreciation for the valuable services rendered by the outgoing Director.

Key Managerial Personnel :

During the year under review, there is no change in the Key Managerial Personnel of the Company.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Pursuant to the applicable provisions of the Act, read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ('the Rules') , all unpaid or unclaimed dividends which were required to be transferred by the Company to the IEPF were transferred by the Company to IEPF Authority. The Company also transferred 15,40,351 Nos. of shares held by 27,868 Shareholders in respect of which dividend amount remained unpaid / unclaimed for a consecutive period of seven years or more to IEPF Authority within stipulated time. The details of unpaid / unclaimed dividend and the shares transferred to IEPF Authority are available on Company's website at web link http://www.gnfc.in/PDFandWORD/List-of-Shareholders.pdf

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

A formal Policy against Sexual Harassment of Women at Workplace is in place as required under The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. The Company has constituted Internal Complaints Committee to redress the complaint(s) . No complaint was received during the year.

RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The Company has in place a Risk Management Policy. Under this Policy, various risks pertaining to operations & maintenance of plants, financial and other organizational risks are assessed, evaluated and continuously monitored for taking effective steps for its mitigation. Risk Management Report, inter-alia, containing major anxiety areas of risks and action plan for their mitigation and noteworthy risk management activities carried out by the Company is put-up periodically before mettings of the Audit Committee and Board of Directors for its review.

The Company has adequate internal controls commensurate with the nature of business, size and complexity of its operations. Details of internal control system and its adequacy are furnished in "Management Discussion & Analysis Report", forming part of this Report.

EXTRACT OF ANNUAL RETURN :

In accordance with Sections 92(3) & 134(3) (a) of the Act, an extract of Annual Return in Form MGT-9 is enclosed as Annexure - A to this Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) :

In accordance with the requirement of Section 135 of the Act, read with the Companies (CSR Policy) Rules, 2014, the Company has constituted a Corporate Social Responsibility Committee and formulated a CSR Policy. As a responsible corporate, the Company has been undertaking societal activities directly as well as through its CSR arm - Narmadanagar Rural Development Society (NARDES) in the areas which are covered in CSR Policy and Schedule-VII to the Act. During FY 2017-18, the company has spent Rs.838 Lac against the requirement of spending Rs.356.35 Lac towards CSR expenditure. Thus, the Company has spent around 4.70%, which is more than 2% of average Net Profit of last three Financial Years.

CSR Policy is available on the website of the Company at web link http://www.gnfc.in/aboutus/corporate/policies.html Annual Report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is enclosed as Annexure - B to this Report.

The Company's exemplary contribution on CSR front has been widely acknowledged and appreciated at various foras as can be seen from the list of Awards listed under 'Awards and Recognitions'.

VIGIL MECHANISM-CUM-WHISTLE BLOWER POLICY :

The Company has formulated a "Vigil Mechanism-cum-Whistle Blower Policy" for its Directors and Employees to report their genuine concerns, details of which have been furnished in the "Report on Corporate Governance", forming part of this Report.

SIGNIFICANT AND MATERIAL ORDERS :

There are no significant or material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations in future.

MANAGEMENT DISCUSSION & ANALYSIS AND REPORT ON CORPORATE GOVERNANCE :

"Management Discussion & Analysis" on the business and operations of the Company and the Report on Corporate Governance together with the following are attached herewith and form part of this Annual Report.

• Declaration regarding compliance of Company's Code of Conduct by Board Members and Senior Management Personnel.

• Certificate by Practicing Company Secretary on compliance with the conditions of Corporate Governance by the Company.

BUSINESS REPONSIBILITY REPORT :

The Company has been conducting its business in such a way that it delivers both long term stakeholders value and benefit society under the approach of "Creating Shared Value". The Company was covered under top 500 listed entities based on market capitalization as on 31.03.2017. Therefore, as required under Regulation 34 of SEBI (LODR) Regulations, 2015, Business Responsibility Report is enclosed as Annexure - C to this Report.

INFORMATION REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO :

As required under Section 134(3) (m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014, requisite information on conservation of energy, technology absorption and foreign exchange earnings and outgo is furnished in enclosed Annexure - D to this Report.

PARTICULARS OF EMPLOYEES AND REMUNERATION :

The required information under Section 197(12) of the Act read with Rule 5(1) (2) &(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is furnished in enclosed Annexures - E & F to this Report.

AUDITORS AND AUDITORS' REPORT :

Pursuant to the provisions of Section 139 and other applicable provisions of the Companies Act, 2013, M/s SRBC & Co. LLP, Chartered Accountants, a Member Firm of E&Y India were appointed as Statutory Auditors of the Company at the 40th AGM held on 30th September, 2016 for a term of five consecutive years, until the conclusion of 45th AGM to be held in the year 2021, subject to ratification of their appointment at every AGM held thereafter. However, in terms of the Companies Amendment Act, 2017, ratification for appointment of Statutory Auditors is now not required to be made at every AGM when Auditors have been appointed for a term of five years. Hence, resolution for ratification of appointment of Statutory Auditors is not included in the Notice of this AGM.

Notes to Financial Statements (Standalone and Consolidated) forming part of Audited Financial Statements for FY 2017-18 are self explanatory and need no further explanation. The Auditors Reports on Audited Standalone and Consolidated Financial Statements does not contain any modified opinions.

COST AUDITOR :

The Board of Directors, on the recommendations of Audit Committee, appointed M/s Dalwadi & Associates, Cost Accountant, Ahmedabad, as the Cost Auditor of the Company for a period of three years from FY 2017-18 to 2019-20 at a remuneration of Rs.3.80 Lac per annum for FY 2017-18 and thereafter increase of 10% every year up to FY 2019-20 plus out of pocket expenses and statutory levies.

In accordance with Section 148 of the Act read with Rule 14 of the Companies (Audit & Auditors) Rules, 2014, the remuneration of Rs.4.18 Lac per annum payable to Cost Auditor for FY 2018-19 is subject to ratification by the Shareholders at the AGM. Therefore, a suitable Resolution in this regard is included in Notice of this AGM for your kind approval.

The Company had e-filed the Cost Audit Report for FY 2016-17 with the Ministry of Corporate Affairs (Cost Audit Branch) on 1st September, 2017. The due date of filing the said Report was 30th September, 2017.

SECRETARIAL AUDITOR :

As required under Section 204 of the Act and the Rules made thereunder, the Board of Directors has appointed M/s J.J. Gandhi & Co., Practicing Company Secretaries, Vadodara as Secretarial Auditor for FY 2017-18. The Secretarial Audit Report in Form MR-3 in respect of Secretarial Audit work carried out by the Secretarial Auditors for FY 2017-18 is enclosed as Annexure - G. In respect of qualifications mentioned in the Secretarial Audit Report, the comments are under: (i) In order to have proper composition of the Board, as per Regulation 17(1) of SEBI (LODR) Regulations, 2015, during the first three quarters of FY 2017-18, the Company made all out efforts for identifying / selecting one more Independent Director having relevant expertise and experience with appropriate balance of skill and knowledge. However, the Board of the company was properly constituted from the fourth quarter.

(ii) The Board Meeting on 29th May, 2017 held after a gap of 125 days against maximum permissible gap of 120 days as per Section 173 of the Companies Act, 2013 was due to slight delay in finalization of Annual Accounts for FY 2016-17 on account of adoption of Indian Accounting Standards (Ind AS) .

DIVIDEND DISTRIBUTION POLICY :

As per Regulation 43A of SEBI (LODR) , 2016, the Company has formulated Dividend Distribution Policy, inter-alia, setting-out the parameters and circumstances that will be taken into account while determining the distribution of dividend to the shareholders and / or retaining profits by the Company. This policy is enclosed as Annexure - H and the same is also available on the Company's website at web link http://www.gnfc.in/PDFandWORD/Dividend-Distribution-Policy.pdf

DISCLOSURE ON COMPLIANCE OF SECRETARIAL STANDARDS :

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India and approved by the Central Government.

DETAILS OF FRAUDS, IF ANY, REPORTED BY THE AUDITORS :

During the year, there was no fraud to be reported by Auditors under Section 143(12) of the Act.

FIXED DEPOSITS :

The Company has not accepted any Fixed Deposit during the year.

INSURANCE

The properties and insurable assets and interest of the Company such as buildings, plants & machineries and stocks amongst others, are adequately insured. As required under Public Liability Insurance Act, 1991, the Company has also taken necessary insurance cover.

INDUSTRIAL RELATIONS

Industrial relations during the year under review have remained extremely cordial and harmonious. Your Company has been able to function efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all major business areas as well as efficient utilization of Company's resources for sustainable and profitable growth.

Your Directors wish to express their deep sense of gratitude for the efficient and loyal services rendered by each and every employee at all levels, without whose whole hearted efforts, overall splendid performance would have not been possible and also look forward the bright future of your Company with confidence.

ACKNOWLEDGEMENTS

The Board of Directors wish to place on record their deep sense of gratitude for the kind support and guidance received from Government of India and Government of Gujarat. Your Directors also take this opportunity of extending their wholehearted thanks to all our Consumers, Dealers, Customers, Banks, Business Associates, SEBI, NSDL, CDSL, Stock Exchanges and other Agencies for their continued support and co-operation and valued Investors for strengthening their bond with the Company.

For and on behalf of the Board of Directors,
Dr. J.N. Singh
Dated : 9th August, 2018 Chairman