GUJARAT FLUOROCHEMICALS LIMITED
ANNUAL REPORT 2011-2012
To the Members of
GUJARAT FLUOROCHEMICALS LIMITED
Your Directors take pleasure in presenting to you their Twenty-Fifth Annual
Report for the year ended 31st March, 2012.
1. FINANCIAL RESULTS
Following are the working results for the year 2011-2012:
(Rs. in Lacs)
Net Sales/Income from Operations 206556 97897
Other operating Income 344 388
Total Income from Operations 206900 98285
Less: Total Expenses 106835 70816
Profit from operations before other income and
finance cost and exceptional items 100065 27469
Add: Other Income 5764 9953
Less: Finance Cost 5713 2987
Profit from ordinary activity before Taxation 100116 34435
Provision for Taxation 24816 8485
Profit for the year from Ordinary Activity 75300 25950
Profit/(Loss) before Tax (34927) 715
Tax Expense (2787) 301
Net Profit/(Loss) (32140) 414
Net Profit/(Loss) for the year 43160 26364
Profit brought forward from earlier year 183 292
Profit available for appropriations 43343 26656
Transferred to General Reserves 38500 22000
Interim Dividend 2197 1099
Proposed Dividend subject to
approval of the Shareholders 1648 2746
Tax on Dividend 624 628
Balance Carried forward to Balance Sheet 374 183
2. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
a. PTFE/Chemicals Business
Industry structure and developments
Total global PTFE market is around 140,000 tpa, of which 60% is granular
and 40% is dispersion grade. In terms of supply, the industry is dominated
by two kinds of players - long time, high quality big players from
developed countries, who command around 60% market share, and upcoming new
players from developing countries who have around 40% market share.
The Company has entered the PTFE business in 2008, and in a short span of
time, become a significant player in the global market. The Company is
increasingly being perceived as a high quality PTFE supplier, and with the
present capacity of 12,000 tpa, planned to be increased to 18,000 tpa, is
poised to cater to a significant share of the global market, putting it in
the bracket of the top 3 - 4 PTFE suppliers globally.
Indian market for PTFE is around 2,500 - 3,000 tpa, and growing at a
healthy 7 - 8% per annum. The Company has more than 80% market share in
India, being the only significant producer in the country. There is an
immense latent potential for higher PTFE demand, and the Company is working
with Indian PTFE processors to develop new products and applications to
spur higher growth and demand in the domestic market.
Globally, the established players are moving to higher value added
polymers, leaving the space in the traditional PTFE markets for players
like the Company. The Company also plans to enter the segment of higher
value added polymers in the near future.
The Company enjoys a significant competitive advantage, because of its
integrated operations. It is amongst the only top 2 or 3 integrated
players, giving it significant cost competiveness amongst other global
players. The Company has placed enormous emphasis on high and consistent
quality of all PTFE grades matching the best in the business, by continuous
operations and process improvements. The Company has adopted marketing
strategies to be proximate with customers and provide value added services
such as warehousing facilities in the US and EU markets, and technical
services to drive value for customers.
Opportunities and threats
The key opportunities in the PTFE business include the vast undeveloped
potential in the Indian markets that would be converted into market demand
by new product and application development, and the market gaps created by
established players moving to higher value added polymers. There also exist
the potential to work with reputed global players of PTFE based components
to expand the PTFE market in India.
Some of the significant threats include further capacity expansions in
China, and the impact of such expansion on PTFE prices, as also the
continued economic downturn in developed markets like Europe, that could
cause demand to remain sluggish.
Segment-wise product-wise performance
Caustic Soda accounts for around 9% of the Company`s sales in value terms.
Caustic soda sales increased last financial year by 45% in volume terms and
by 136% in value terms. Similarly, Chloromethanes, which account for around
10% of the Company`s sales in value terms, increased last financial year by
84% in volume terms and 66% in value terms.
PTFE accounts for around 32% of the Company`s sales in value terms. PTFE
sales recorded an increase of 23% in volume terms and 138% in value terms.
Around 16% of the Company`s PTFE sales last financial year came from the
domestic market and more than 84% of PTFE sales from the export markets.
The Company witnessed a 25% growth in its PTFE exports.
A bulk of the Company`s PTFE sales, more than 90%, comes from granular
PTFE, with modified PTFE and compounds accounting for around 7%. Granular
PTFE sales grew by around 19%, whereas modified PTFE and compounds grew by
around 66% last year.
The Company expects to maintain a healthy sales growth rate going forward.
PTFE has been witnessing a growth rate of 4 - 5% over the past 30 years
globally, and it is expected that this growth rate will continue, if not
increase, due to new product and application development particularly in
developing countries, in the future. With established players moving away
into other fluoropolymers, this creates a space in the market that your
Company aspires to be the first choice for the market to fill.
The establishment of capacity for dispersion PTFE is expected to improve
the product mix of the Company significantly. With the Company increasing
focus on dispersion PTFE, and growing the modified and compounding
business, the Company expects the value addition in the PTFE business to
The Company has, in addition to being the largest PTFE producer in the
country, has also become the largest producer of chloromethanes, and a
significant player in the caustic soda business in India.
The Company is also seriously considering other product candidates in the
fluoropolymer space, and would be taking an investment decision in these
areas shortly, after a complete evaluation of the market, technologies and
economics. This would provide an avenue of substantial growth in the near
Risk and concerns
As indicated in the "threats" section, the key risk includes impact on
demand and pricing, due to sluggish growth in markets like Europe due to
the economic turndown, and pressure on prices due to capacity expansion in
However, the Company remains confident of being able to maintain a healthy
return on investment due to the cost competiveness due to its integrated
b. Carbon Credit Business
The Company has a Clean Development Mechanism (CDM) Project registered by
the United Nations Framework Convention for Climate Change (UNFCCC). This
project generates Certified Emission Reductions (CERs) by destruction of
HFC-23, a potent greenhouse gas inevitably generated in the production
process of HCFC-22, a refrigerant produced by the company.
A part of the expected CER generation of the Company till December 2012
have been sold under firm fixed price contracts, a part under floating
price contracts with floor prices, and a part have been kept unhedged for
sale in the spot market on issuance. Spot prices have softened over the
past twelve months, due to supply-demand imbalance, largely caused by the
European economic situation.
The key market for CERs so far has been through the European Union
Emissions Trading Scheme (EU-ETS). The EU has announced that it would not
buy CERs from HFC-23 destruction (as also some other technologies) after
December 2012. There is also some uncertainty over the continuation of the
emission reduction obligations under the Kyoto Protocol, from 2013. Hence,
it is likely that the Company`s CERs may not have a significant market from
2013 and onwards.
c. Wind Energy Business
The Company has floated two subsidiaries to pursue its wind energy business
-Inox Wind Limited and Inox Renewables Limited. Inox Wind Limited
manufactures state-of-the-art wind turbine generators, rotor blades and
tubular towers, at its two manufacturing plants, one in Himachal Pradesh
and one in Gujarat, with technology sourced from a leading European wind
turbine technology developer. Inox Renewables Limited sets up and operates
Pursuant to its decision to grow its wind energy business in its
subsidiary, and also to enable raising non-recourse capital for the same,
the Company has transferred, by way of a slump sale, its entire wind energy
business, as of 30 March, 2012, comprising of 69 MW of operational
capacity, and 70 MW of capacity being set up, to Inox Renewables Limited.
The business plan is to set up all incremental wind generation capacity in
Inox Renewables Limited going forward. The company is already in
discussions with various equity and debt capital providers for funding the
growth in this business.
The regulatory development in this business remains favourable, with
various incentives like higher feed-in tariffs, generation based
incentives, mandatory Renewable Purchase Obligations (RPOs) on distribution
companies, and Renewable Energy Certificates (RECs) all adding to the
revenue streams a wind energy producer can avail to improve the viability
of investments in wind farms. With access to a significant pool of viable
land banks, and access to efficient wind turbines, the Company`s
subsidiaries are well-poised to mark a significant presence in this
d. Internal control system and their adequacy
The company has an adequate internal audit system commensurate with its
size and the nature of its business. The internal audit is carried out by
independent firms of Chartered Accountants, who interact with the Audit
Committee on a regular basis, with respect to the scope of audit,
significant audit observations, and remedial action required, if any.
e. Discussion on financial performance with respect to operational
The financial performance of your Company continues to remain strong, and
is expected to show an improvement in the coming years, with the higher
production levels at the chemical complex at Dahej and the commencement of
revenues from the Wind Energy business through its subsidiaries.
f. Material developments in human resources / industrial relations front,
including number of people employed
The company has around 1500 employees on its rolls. Your company continues
to have cordial and harmonious relations with all its employees.
3. RESPONSIBILITY STATEMENT
Your Directors would like to confirm that
I. in the preparation of the Annual Accounts, the applicable Accounting
Standards have been followed;
II. the Directors have selected such Accounting Policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the Financial Year and of the Profit or Loss of the
Company for that period;
III. the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
IV. the Directors have prepared the Annual Accounts on a going concern
Your Company has paid an Interim Dividend of Rs 2.00 per share (200%) and
your Directors now recommend a final dividend of Rs 1.50 per share (150%)
subject to approval of the shareholders. The total dividend pay-out
(including dividend distribution tax on dividend pay-out) for the year will
be Rs 4468 lacs.
Shri DK Jain and Shri Shailendra Swarup retire by rotation and being
eligible, offer themselves for re-appointment.
The Board of Directors have re-appointed /appointed Shri DK Sachdeva, Shri
JS Bedi and Shri G Arumugam as Whole-time Director Is of the Company
subject to the approval of Members at the ensuing Annual General Meeting.
The Board of Directors have also re-appointed Shri Vivek Jain as Managing
Director of the Company for a period of five years with effect from 01st
January, 2013 subject to the approval of Members at the ensuing Annual
Necessary resolutions in respect of Directors seeking appointment / re-
appointment and their brief resume pursuant to clause 49 of the listing
agreement are provided in the Notice of the Annual General Meeting forming
part of this Annual Report.
Ministry of Corporate Affairs, New Delhi vide its Circular No 5/12/2007-CL-
lll dated 08th February, 2011 has granted general exemption to Holding
Companies from attaching the Balance Sheet(s) of Subsidiary Company(ies)
concerned as required under Section 212 of the Companies Act, 1956. In view
of the above, the Board of Directors of the Company has by resolution 25th
May, 2012 accorded consent to not attaching Annual Accounts of the
financial year ended on 31st March, 2012 of all the Company`s subsidiaries.
A statement showing holding Company`s interest in subsidiaries as required
under Section 212(3) of the Companies Act, 1956 is annexed to the Directors
7. AUDITORS` REPORT
The notes forming part of the accounts are self-explanatory and do not call
for any further clarifications under Section 217(3) of the Companies Act,
Members are requested to appoint Auditors for the current year and to fix,
or authorise the Board to fix, their remuneration. The Auditors, M/s.
Patankar & Associates, retire and offer themselves for re-appointment. Due
notice has been received from them that their appointment, if made, will be
in accordance with the limits specified in Section 224 (1B) of the
Companies Act, 1956.
9. CORPORATE GOVERNANCE
Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a
Management Discussion and Analysis, Corporate Governance Report and
Auditors` Certificate regarding compliance of conditions of Corporate
Governance are made a part of the Annual Report.
In compliance with the requirements of Clause 49(V), a certificate from the
Managing Director and Director and Group Head (Corporate Finance) of the
Company, who are responsible for the finance function, was placed before
All the Board Members and Senior Management Personnel of the Company had
affirmed compliance with the Code of Conduct for Board and Senior
Management Personnel. A declaration to this effect duly signed by the
Managing Director is enclosed as a part of the Corporate Governance Report.
10. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
EARNINGS AND OUTGO
Information pursuant to Section 217(1) (e) of the Companies Act, 1956, read
with the Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988, relating to the matters contained therein is given
by way of an Annexure to this Report.
11. PARTICULARS OF EMPLOYEES
In accordance with the provisions of Section 217(2A) of the Companies Act,
1956 and the rules framed there under, the names and other particulars are
set out in the Annexure to the Directors` Report. In terms of the
provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the
Directors` Report is being sent to all the Shareholders of the Company
excluding the aforesaid annexure. The annexure is available for inspection
at the Registered Office of the Company. Any Shareholder interested in
obtaining a copy of the said annexure may write to the Company Secretary at
the Registered Office of the Company.
12. SUSTAINABLE DEVELOPMENT ACTIVITIES
The Company undertakes sustainable development work as part of its ongoing
efforts to improve the quality of life of the people in the areas
surrounding its plant. Your company has spent around Rs 80 lakhs in the
last financial year on these initiatives. Diligent and sincere efforts in
this direction have had a positive and lasting impact on the neighbouring
community. During the year, the Company has had its Corporate Social
Responsibility initiatives certified by Ernst and Young.
13. SAFETY, HEALTH AND ENVIRONMENT
Safety, health and environment have been of prime concern to the Company
and necessary efforts were made in this direction in line with the safety,
health and environment policy laid down by the Company. The Company has
achieved certification of ISO: 14001:2004 (Environment Management System)
and ISO 18001:2007 (Occupational Health and Safety Management System) for
its Ranjitnagar Unit. Health of employees is being regularly monitored and
environment has been maintained as per statutory requirements.
The Company`s property and assets have been adequately insured.
Your Directors express their gratitude to all other external agencies for
the assistance, co-operation and guidance received. Your Directors place on
record their deep sense of appreciation for the dedicated services rendered
by the workforce of the Company.
By Order of the Board of Directors
Noida D.K. Jain Vivek Jain
25th May, 2012 Director Managing Director
To The Directors` Report
Information as required under Section 217(1)(e) read with Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988
(A) CONSERVATION OF ENERGY
(a) Energy conservation measures taken
Ranjitnagar unit: Nil Dahej unit:
* Energy Audit of all the plant units was conducted and relevant
suggestions were implemented resulting into substantial power saving in
each plant operations.
* Air flow control of K2401A/B air blowers in CMS-2 was optimized with the
help of VFD resulting in saving of 36 kWh/day.
* One 22 kWoil pump P2102 is running in place of 2 x 18.5 kW pumps in CMS-
1. Energy saving of 168 kWh/day is achieved.
* Optimized methanol feeding by stopping one pump of 15kW. A saving of 360
kWh/day is achieved in CMS Plant.
* Removed P2203 and optimized the process by P2202 in CMS Plant. Direct
Saving of 88 kWh/day is achieved.
* In CMS-2, NP2901C stopped by using capacity of NP2901A or B. Saving of
3240 kWh/day is achieved.
* In CA Plant Cooling Tower revamping done and one cooling water pump
stopped resulting into saving of 3840 kWh/day.
* Thermo oil an additive applied in fifty numbers of Split Air Conditioners
(continuous running) to improve the efficiency and cooling resulting in
saving of 232 kWh/day.
* Installed 15 nos. Solar Street lights in plant at different locations.
* Optimisation of DM water usage in CA plant, one DM water pump operation
was stopped resulting in saving of 510 kWh/day.
* Optimisation of process water usage in CA plant, one process water pump
operation was stopped resulting in saving of 500 kWh/day.
(b) Additional investments and proposals, if any, being implemented for
reduction of consumption of energy
Ranjitngar Unit: Nil
1. PTFE Air Heater capacity to be increased upto 90 kW per Heater for
enhancing production capacity.
2. Further 50 numbers of Split Air Conditioners to be provided with Thermo
3. Conventional street light to be replaced with Solar Lights.
(c) Impact of measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods at
1. The impact of the measures indicated in (a) and (b) above are expected
to be favourable i.e., reduced energy consumption and its consequential
effect on cost of production.
(d) Total energy consumption and energy consumption per unit of production
as per Form A;
Current Year Previous Year
A. Power and Fuel Consumption
Units (in lacs) 749 97
Total Amount (Rs in lacs) 5649 831
Rate/Unit (Rs.) 8 9
B. Own Generation
Units (in lacs) 3548 3501
Total Amount (Rs in lacs) 18612 15113
Rate/Unit (Rs.) 5 4
Quantity (MT) 127437 129275
Total amount (Rs in lacs) 5525 4735
Average Rate (Rs) 4335 3662
3. Furnace Oil
Quantity (k. Itrs.) 81 89
Total Amount (Rs. in lacs) 34 32
Average Rate (Rs.) 42 36
Quantity (scm) 813 763
Total Amount (Rs. in lacs) 14534 10602
Average Rate (Rs.) 18 14
B. Consumption per unit of production
Ranjitnagar (Fluorochemicals) Unit
1. Electricity KWH/MT 751 758
2. Fuel Oil LTR/MT 2 2
3. RLNG SCM/MT 277 285
4. Coal 0 0
5. Others 0 0
1. Electricity KWH/MT 2036 2214
2. Fuel Oil LTR/MT 0.06 0.09
3. RLNG SCM/MT 361 533
4. Coal Qty MT/Coal Power unit lacs 139 110
5. Others 0 0
(B) TECHNOLOGY ABSORPTION
(e) efforts made in technology absorption as per Form B;
Research and Development
(1) Specific Area in which R &D carried out: Nil
(2) Benefits derived as a result of the above R & D: Nil
(3) Future Plan of Action: Nil
(4) Technology absorption, adaptation and innovation: Nil
Research and Development
R&D Centre at Dahej is recognized by DSIR (Department of Scientific and
Industrial Research) for Research activities
1. Specific areas in which R&D carried out by the Company
i. Development of PTFE fine powder grades.
ii. Development of modified type PTFE dispersion and suspension grades.
iii. Development of new PTFE/PAEK Blend.
iv. Development of a very Special glass filled compound having high
mechanical properties to cater niche global market
v. Development of PTFE Micro-powder (Fluoro additive).
vi. Development & optimization of PTFE processing techniques.
2. Benefits derived as a result of the above R&D
i. Grade lock In: New products and grades are locked In at many major OEMs
to cater their global requirement.
ii. Tailor made grade for new applications to provide complete sourcing
solution to customer and to establish GFL as potential raw material
supplier in global market.
iii. Addition of new testing facilities to GFRC to develop Fluoropolymer
with improved properties in terms of better performance to establish as a
Key global player.
iv. GFRC has contributed positively to grow domestic market of PTFE by
setting up new applications in various fields including chemical,
mechanical, automotive, lubricants and inks.
v. GFRC is working actively with the marketing team to increase awareness
among domestic processors about the latest technological advancements in
the field of fluoropolymer processing and applications.
vi. Technical support in terms of process optimization and performance of
the final product was provided to all the PTFE processors as a part of the
Company`s policy to grow along with the Company`s valued customers.
3. Future plan of action
i. Project activities of following plants are under progress to be
commissioned in the financial year 2012-13.
a. PTFE- Phase II
ii. Development of surfactant system for polymerization of fluoropolymers.
iii. Development of PTFE micro fine powder grades as fluoro-additives.
iv. To develop process for in-house manufacturing of Perfluoro Propylene
Vinyl Ether (PPVE)
Technology absorption, adaptation and innovation :
1. Efforts, in brief, made towards technology absorption, adaptation and
1) TFE plant has successfully commissioned the new plant and the total
capacity has been achieved for monomer plant is 15000 tpa.
2) PTFE plant has successfully completed expansion in the first phase:
Suspension grade: 9500 tpa
Dispersion grade: 2000 tpa
3) In the suspension grade, the Company has done technology upgradation in
the modified grade of PTFE to expand market share internationally and in
the domestic region.
4) The Company has also completed trials in up gradation of dispersion
grade PTFE and got approval from various processors in India & abroad. This
will certainly increase market segment in the near future.
SHE & WATER CONSERVATION
1) TFE & PTFE plants have been successfully operated without any incidental
occurrence and continuously maintained safety, health and environment
2) The Company has nominated responsible persons various training in
strengthening safety matters in fluoropolymer operations which are known
worldwide to be very critical. The Company representative has also been
nominated for prestigious membership in `Plastic Europe & BAM committee`
which is an organization for TFE safety. The Company`s representative has
participated in the meeting held in Berlin along with the representatives
of DuPont, Dikin, AGC, BAM, Gore and few more high players in TFE/PTFE
PTFE plant has successfully conserved water of 500m3 water per day from its
reject water to reuse in cooling tower and non critical operation.
1) Further expansion of TFE to obtain plant capacity up to 16500 tpa by
debottlenecking in plant and energy requirement.
2) Further expansion of PTFE to obtain capacity up to 12500 tpa by
3) Further expansion of dispersion grade to obtain capacity up to 3500 tpa
4) Development of new method of PTFE granulation technology to make
improved version of granular PTFE with high bulk density and round shape
for premium application.
5) Development of more modified and non modified grade dispersion grade
product for increasing market segment of premium product.
2. Benefits derived as a result of the above efforts.
i. Improvements in operational efficiency.
(C) FOREIGN EXCHANGE EARNINGS AND OUTGO
(f) Foreign exchange used - Refer to Note No. 38 of Annual Accounts
Foreign exchange earned- Refer to Note No. 39 of Annual Accounts
By Order of the Board of Directors
Noida D.K. Jain Vivek Jain
25th May, 2012 Director Managing Director