MANAGEMENT DISCUSSION AND ANALYSIS Coromandel International in Brief Coromandel is a flagship company of the Murugappa Group and is a subsidiary of E.I.D. Parry (India) Limited (EIDP) which holds 60.81% of the equity share capital in the Company. The Company is engaged in the business of farm inputs comprising of Fertilisers, Crop protection, Specialty Nutrients and Organic compost. The Company also operates a network of around 800 rural retail outlets under its retail business across Andhra Pradesh, Telangana and Karnataka. The Company has 15 manufacturing facilities located in Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh, Uttar Pradesh, Rajasthan, Gujarat and Jammu & Kashmir. The Company's products are marketed all over the Country through an extensive network of dealers and its own retail centers. The crop protection products are exported to various countries. The Company has following subsidiaries and joint ventures for its various business initiatives: a) CFL Mauritius Limited (CML) b) Parry Chemicals Limited (PCL) c) Dare Investments Limited (DIL) d) Liberty Pesticides and Fertilizers Limited (LPFL) e) Coromandel Brasil Limitada (CBL), LLP f) Sabero Organics America S.A. (SOAL) g) Sabero Australia Pty Ltd. (SAPL) h) Sabero Europe BV (SEBV) i) Sabero Argentina S.A. (SA) j) Coromandel Agronegocios De Mexico SA de CV (CAM) earlier known as Sabero Organics Mexico S.A. de C.V. k) Coromandel SQM (India) Pvt Ltd. l) Yanmar Coromandel Agrisolutions Private Limited (YCAS) m) Coromandel Getax Phosphates Pte. Ltd In addition, the Company also holds 14% equity stake in Foskor Pty Ltd, South Africa, through combined holding of Coromandel and CFL Mauritius Limited and a 15% equity stake in TIFERT, a strategic investment of the Company to secure supply of Phosphoric acid. Economic Review During the year 2015, the global economic environment remained subdued and as per World Bank estimate, global economic growth is estimated to decline to 3.1 percent compared to 3.4 percent a year before. While US and Euro continued their recovery driven by strong domestic demand, the Emerging and Developing Economies were impacted by low consumption, weak capital inflows and subdued global trade. In China, the economic rebalancing led to growth contraction and resulted in corrections in property sector and weakness in industrial activities. During the year, all the three commodity price indexes- Energy, Metal and Agriculture- remained soft due to falling consumption and excess supplies. Oil prices declined inspite of production cuts in US, partially offset by lifting of Iran's sanctions. Metal prices continued to reflect well-supplied markets and weaker demand from major emerging markets. The world cereal stock-to-use ratio, a leading indicator of global world food security, still stands at a relatively comfortable level of around 25 percent inspite of regional disturbances due to El Nino occurrence. Going forward, World Bank estimates the global economy to revive slightly to 3.2 percent levels in 2016, where the drag would be due to gradual slowdown and rebalancing in China. Growth is expected on account of continued recovery in major high-income countries and stabilization of commodity prices. However, sharper-than-expected slowdown in major Emerging and Developing Economies and financial market turmoil arising from a sudden increase in borrowing brsents downside risk to growth. Amidst this global volatility, Indian economy continued its revival and grew by 7.6% in 2015-16 on back of its strong domestic consumption. The country is well positioned in terms of macroeconomic stability than the brvious years- indicators like inflation, fiscal deficit and current account balance have exhibited distinct signs of improvement. Rural wages, a key determinant of farm costs, recorded moderate growth in nominal terms and remained almost stagnant in real terms. Inflation has remained under control, which prompted RBI to cut repo rate by 150 basis points from 2015 onwards to April 2016. For the 17th month in a row, wholesale prices fell in Mar'16, but the rate of decline has started slowing down due to spike in food prices. Trade and current account deficits continue to be moderate due to fall in crude prices, partially offset by reduced exports. Rupee, though debrciated against US dollar, has strengthened with respect to other major currencies. The foreign exchange reserve has grown to an all time high of $360 billion while net FDI was $40 billion during FY16 as against $30 billion last year. Going forward, World Bank pegs the Indian economy to grow at 7.8% in 2016-17. Reduced external vulnerabilities, improved infrastructure, strong macroeconomic indicators, strengthened domestic business cycle, and a supportive policy environment (FDI reforms) are likely to keep Indian economy afloat amidst near-term headwinds and volatility in global financial markets. Further, with normal monsoon, low energy prices and key legislative reforms (GST and land acquisition) expected in 2016-17, India's growth prospects seem positive. Agriculture Scenario Globally, Food Price Index continued to decline for 5th consecutive year in 2015 due to strong global output and high stocks of food grains. Despite an anticipated drop in world production in 2015 from brvious year's record levels, supplies are almost sufficient to meet the projected demand, requiring only a small reduction in global stocks by the end of the season. Food and Agriculture Organization (FAO) estimates the agri commodity prices to stay debrssed in the 2016 as well due to comfortable Stock to Use ratio of the food stocks. In India also, total food grain stocks are well above the norms specified under the Food Security Act. However, low pulse output and increased consumer demand created inflationary brssure in the food segment. Government resorted to imports and has currently established buffer levels for pulses to arrest future supply linked volatility. Agriculture continues to be the major source of livelihood for nearly half of the Indian population. Although its share in the overall GDP has dropped to 17.4 percent in 14-15, it continues to provide employment to nearly 49% of the population. With about 10 percent of overall exports basket coming from Agri and allied sector, it currently ranks fifth in terms of generating foreign currency reserves for India. During the last five years, its share in exports has steadily moved up from 7.1 percent in 2010-11 to 9.2 percent in 2015-16. Inspite of its social and economic importance in India in terms of ensuring food security and employment, Agriculture remains low on the productivity front. While structural gaps like low irrigation and mechanization and slow technological research persist, nutrient subsidy related policy void has led to improper application practice. The disproportionate subsidy difference between Urea and Phosphatic fertilisers has led to imbalanced consumption pattern resulting in poor soil health and lower crop output. During the year, policy driven interventions like soil health cards, neem coated Urea, irrigation focus, organic manure promotion, new crop insurance scheme and unified agriculture market were introduced, which bode well with the objective of making farming profitable. However, nutrient subsidy gaps still persist which continues to pull down the agriculture productivity Growth in the agriculture sector in 2015-16 was lower than the average of last decade, mainly on account of it being the second successive year of below normal monsoon rains. During the year, the South west monsoons recorded a 14 percent deficit over Long Period Average (LPA) levels, while North east monsoons showed a highly skewed spatial distribution with a 23 percent deficit over LPA. Though Central Statistics Office expects a growth of 1.2 percent in agriculture in 15-16 which is an improvement over 1415 levels (-0.2 percent), it is mainly driven by the allied sectors consisting of livestock products, forestry and fisheries. As per the Third Advance Estimates for 2015-16 released in May 2016, food grains production is expected to be marginally higher at 252.2 million tons in 2015-16 compared to 252.0 million tons production during 2014-15. Strategic Business Unit Review Fertiliser In Brief Coromandel has been at the forefront of providing unique farming solutions since its inception in 1961. In the last 55 years of its operations, Coromandel has added in excess of 3 million tons phosphatic manufacturing capacity to emerge as the largest private sector phosphatic fertiliser player in India. Currently, with its manufacturing facilities in Kakinada and Visakhapatnam in Andhra Pradesh (AP) and Ennore in Tamil Nadu, Coromandel has a combined production capacity of 3.6 million tons. The Visakhapatnam and Ennore plants have integrated operations with captive phosphoric acid and sulphuric acid production facilities. Coromandel also markets imported DAP, Potash and NPKs to offer complete plant nutrient solutions to the farmers. In addition, it handles Urea operations under government contracts through Kakinada port in AP and Kandla port in Gujarat. Fertiliser Industry Overview Global Markets During the year 2015-16, the global plant nutrient demand was impacted by soft agriculture commodity prices, debrciating currency in emerging markets and weak rainfall pattern across the major agricultural geographies. As per the International Fertilizer Industry Association (IFA), global nutrient demand in 2015-16 is estimated to retreat by 0.1 percent, to 183.1 million tons. Going forward, IFA estimates the global demand to expand by 2 percent in 2016-17. Globally, with the exception of increased DAP production, the fertiliser output remained stagnant in 2015. Potash production declined, while other products registered modest increases operating at 78 percent of the installed capacity. IFA estimates around 100 new expansion projects to come up between 2015 and 2016, which will add 20 million ton nutrients of incremental capacity for the manufacture of primary products (ammonia, phos acid and potash). On the policy front, China reduced the export taxes for 2016 on ammonia, phosphoric acid and phosphate rock, which is likely to improve the raw material availability to India in future. Indian Markets The year 2015-16 witnessed second consecutive El Nino phenomenon causing sub par rainfall in Coromandel's major operating markets. Overall, the Kharif and Rabi seasons were rain deficit by 17%, which impacted crop sowing and subsequent nutrient application. During the year, industry's phosphatic sales volumes improved by 18 percent - DAP volumes grew by 28 percent while Complex segment showed a moderate increase of 8 percent over last year levels Industry resorted to higher DAP imports on expectation of better monsoons, and its imports went up by 45% to 56 Lakh MT during the year. Despite high volume growth during the year, the industry faced headwinds in terms of seasonal vagaries and lower soil moisture that impacted fertiliser off take and consumption. This resulted in build up of channel inventory and stressed cash flows in the market. As per the industry estimate, it is likely to carry higher stocks for 2016-17 as compared to brvious year. However, with El Nino fading off in May'16, the excess inventory is likely to be liquidated during next season. On the raw material front, global consumption slowdown resulted in drop in commodity prices and all major raw materials witnessed a decline during the year. Drop in crude oil and natural gas prices softened the Urea and Ammonia prices. Further, demand contraction due to lower nutrient offtake from Brazil and season failure in India affected the phosphatic prices during the 2nd half. However, rupee debrciation due to Yuan devaluation and tightening of US credit policy offset the gains partially. With significant capacity expansion projects expected to come up in next 2-3 years domestically, the availability of phosphatic fertilisers will improve, going forward. Government Policies During the year, Government introduced a slew of measures towards reforming the agriculture and fertiliser sector. Neem coating of Urea has improved fertiliser use efficiency and brought transperancy in its usage. Natural gas pooling mechanism of domestic gas with re-gasified LNG to provide feedstock at uniform delivered price for Urea manufacturing units has been a welcome step. On the farming front, in order to improve coverage and scope of crop insurance, Fasal Bima Yojana was announced during the year. In the backdrop of weather based crop losses over last two years, the scheme assumes high significance. However, fertiliser subsidy reforms continue to elude the industry. The artificially low price of Urea has influenced the agricultural practices of the Indian farmers leading its excessive usage. This has not only resulted in depletion of soil quality, but has also affected the crop productivity. Current N:P:K nutrient ratio stand at 7.8:3.2:1.0 in comparison to recommended levels of 4:2:1. Although Government has planned to roll out the Direct Benefit Transfer for fertilisers on a pilot basis during 2016-17 to improve transparency, the long term benefit can only be realized if the price disparity between Urea and phosphatic is rationalized. Post the implementation of Nutrient based Subsidy (NBS) policy, share of subsidy in overall realization for P and K fertilisers has come down to 34% against 62% six years before. For the financial year 2016-17, subsidy allocation to P&K fertilisers has been further reduced by ~ Rs. 3,500 Cr in line with dip in imported prices of phosphates. With the significant fall in international DAP prices and 'N' prices in form of Urea and Ammonia, the Government has revised the subsidy component of the nutrients for 2016-17. With the revised rates, the share of subsidy in the overall phosphatic realization is likely to come down to 27 percent. Fertiliser Performance Coromandel fertiliser SBU experienced a mixed year in 2015-16. Business improved its sales volumes by 5 percent but registered lower market share mainly on account of higher industry sales in its Northern markets. Coromandel's performance in home markets of AP, Telangana and Tamil Nadu has shown signs of resilience, where inspite of seasonal headwinds, Company improved its market share. Secondary markets of Madhya Pradesh, Chhattisgarh and West Bengal also improved on volumes and market share. During the year, Coromandel strengthened its brand promotion efforts that resulted in improved brand equity index and higher share of unique grades. In last 3 years, Business's focus towards differentiated offering has resulted in unique grade share going up from 28% in 2013-14 to 33% in 2015-16. With introduction of new unique grades (Shell technology based Gromor Max and 17:17:17) during the year, Coromandel is set to position itself as a differentiated solution provider. During the year, Process Safety Management System was implemented across all the fertiliser sites. Business continued its focus towards creating a safe work environment through safety training, compliance audits and structural safety improvements. Coromandel's commitment towards improving the employee safety resulted in maintaining Total Reportable Injury Rate per million man hours (TRIR) at less than 1 level (0.95). Vizag plant restoration, post Hud hud cyclone in 2014, was effectively carried out during the first half of the year. Significant investments were made towards improving environmental compliances - online emission monitoring systems were deployed that captures and uploads information online and is available to all stakeholders. The coverage under Green Visaka Project expanded by further 20 acres, with plantation of additional 13000 saplings around the Vizag plant ecosystem. In addition, green belts were developed around the Kakinada and Ennore plants, covering around 15 acres and 4000 saplings, including fruits and herbs. All the units participated in various environmental awareness initiatives by celebrating World Environment Day, World Earth Day, World Ozone Day etc with employees and community members. On the raw material front, phosphoric acid availability remained tight as Coromandel's partners TIFERT and Foskor's operations got impacted due to geo political and technical disturbances. Coromandel has been working closely with the TIFERT & Foskor teams through offering technical assistance for improving the production throughput Inspite of acid constraints, manufacturing operations responded to the market needs by swiftly altering product mix and at the same time maintaining the process efficiency. During 2015-16, the plant achieved operational flexibility by manufacturing unique grade (28:28:0) at multiple locations. Production of new grades, 17:17:17 and 20:20:0:13 (with elemental Sulphur), got stabilized for consistent throughput and further improvements are envisaged in 2016-17. Ennore unit conducted Phos acid production trials with various rock combinations and was successful in achieving desired yield. Cost optimization initiatives were successfully rolled out through cross functional teams across the manufacturing locations and this has resulted in significant savings through conversion cost reduction and improved efficiencies. Overall, Coromandel manufactured 24.14 lakh tons of phosphatic fertilisers (DAP and Complex) through its production facilities which is similar to last year's levels. Crop Protection Industry Overview The year 2015-16 was characterized by deficit monsoon conditions resulting in wide sbrad crop failure in domestic market, uncertain economic environment in export markets, softening commodity prices and debrciating currencies resulting in contraction of demand for the global agrochemical industry. Increased coverage of Genetically Modified (GM) soya, lower pest incidences and delayed sowings negatively affected the consumption pattern. Further, weakened Glyphosate prices and high channel inventory impacted the industry's performance. As per the market estimates, the Crop chemical segment declined by 9 percent to USD 52 billion from USD 57 billion a year ago. In India also, monsoon failure in major crop areas led to inventory built up and slow market cash flows that resulted in price erosion of key generic molecules. Further, lower reservoir levels in Coromandel's major operating markets during Rabi season reduced crop acreages and affected application opportunities. Crop Protection Performance Inspite of the environmental and economic challenges, exports segment registered good numbers. One of the key molecule for the Business, Mancozeb, witnessed strong export demand especially in LatAm markets. Also, low raw material cost and currency debrciation acted favorably and resulted in improved margins. Domestic formulations business improved its sales sbrad and field focus and maintained the profitability of specialty products while bringing down the inventory and receivables. Umbrella branding through "Gromor Suraksha" was undertaken that resulted in significant improvement in brand equity scores in key markets. Channel engagement and field force productivity initiatives were also rolled out which improved the customer connect. During the year, Business launched new combination product for paddy and cotton segments to expand its product offering. On the manufacturing front, Mancozeb and Propineb plants underwent debottlenecking, that has increased the production capacities for the key molecules. With this, Coromandel is set to take advantage of the growing opportunity in the segment. Business continued its commitment towards improving the Safety, Health and Environment (SHE) at the plant ecosystem and engaged in multiple projects spanning around Environmental Management Systems (EMS) and structural stability. Performance of Multi Effect Evaporator (MEE) operations for effluent treatment improved and new scrubber systems were installed. R&D product synthesis lab at Hyderabad worked closely in areas of improving product quality, process improvement, product development (off patent and combinations) and building technical capabilities. Specialty Nutrients Coromandel has been a pioneer in introducing and promoting the concept of Crop Specialty Nutrition in India. With its brsence across Water Soluble Fertilisers, Sulphur products and Micro Nutrients segments, Coromandel ranks among the market leader, providing crop specific solutions and quality agri inputs to the farming community. During the year, Government introduced slew of measures ranging from promoting micro irrigation, balanced crop nutrition and soil health awareness which bodes well with the business objectives. Though the adverse seasonal conditions impacted the industry's performance in 2015-16, the segment continues to offer attractive growth opportunities. During the year, Business continued its shift towards crop based approach, strengthening its marketing initiatives under the umbrella brand "Gromor Sampoorthi". Under this, SBU offers crop specific solution package to address the plant's nutrient requirement across its life cycle. It expanded its coverage under the program to include new crop segments. SBU collaborated with its joint venture partner SQM Chile to introduce crop specific water soluble product, Speedfol Cotton. In addition, prilled variant of Potassium Nitrate and micronized sulphur were introduced to expand the product offerings and address customer needs. Overall, it was a challenging year for the SBU, but it continued its focus towards unlocking the mega opportunities in plant nutrition through combining innovation in new products and expanding to new crops and markets. Retail Coromandel's Retail arm, which started in 2007 with two outlets now operates around 800 stores. The Retail Centers (Mana Gromor/ Namma Gromor Centers) have developed as 'One Stop Solution' for the farmer needs offering entire range of agri input products and services. During the year, the Retail business improved its operational efficiencies and delivered good results despite operating in rain deficit markets in Andhra, Telangana and Karnataka. Focused sales approach, cost optimization and better working capital management helped in improving the business performance. Apart from continuing the key initiatives like "Gromor Nutrient Manager" (an IT enabled tool to increase farmers' returns on fertilisers), systematic demand generation and auto-indenting, the Business expanded its digital brsence to improve customer connect. The Retail Business has received many brstigious awards in 201516 in recognition of its contribution to agriculture. • Retail SBU has won 2 awards at "CMO Asia Retail excellence Awards" in an event organized at Pan Pacific, Singapore - Retailer of the year - Rural impact & CSR - Retail marketing campaign of the year -Organizational • Coromandel Retail won 4 awards in "Flame Asia Awards 2016" organized by "Rural Marketing Association of India": - Gold award for "ROI Concept" under Agriculture & allied - Innovative lab to farm model for farm profits - Silver award for "Gromor webinars" under Digital & Technology - Use of technology for customer engagement - Bronze award for "Organic manure promotion" under Integrated campaign of the year - Bronze award for "Customer satisfaction study" under Research project of the year - New insights Single Super Phosphate (SSP) Post integration of erstwhile Liberty Phosphate operations with Coromandel in 2013-14, the SSP sales has grown significantly and during 2015-16 volumes further surged by 13 percent. With this, Coromandel has now fully diversified its operations in terms of geography, product offering and crop segments. However margins came under stress with SSP business's major operating markets in MP, Rajasthan and Maharashtra witnessing consecutive seasons of crop failure resulting in high inventory buildup and slow cash flows. With some proportion of the industry sales coming from unorganized players, quality remains an area of concern for the sector. Recognizing this, Coromandel has realigned its business approach towards delivering superior crop solutions to the farming community. This involved revamping the manufacturing processes and promotion approach towards ensuring quality output. During the year, Business introduced Quick test kits, developed to demonstrate the 'P' content in the product to bring quality awareness among the farmers. In recognition to the efforts made towards bringing operational improvements, Business was certified with Integrated Management System (ISO 9001 for Quality Management, ISO 14001 for Environment Management and OSHAS 18001 for Occupational Health and Safety Management System) by British Standards Institution. Zinc fortified SSP was introduced and has generated positive response from the market. Going forward, Business expects to appropriate value out of the initiatives undertaken in 2015-16. Opportunities and Strengths Opportunities • Higher budgetary allocation under agriculture and rural schemes in the Union Budget 2016-17 to increase investment in the sector. As Government plans to double farm income in 6 years, the industry will benefit from additional consumer spending • Above normal monsoon forecast for 2016-17 season after two consecutive El Nino occurrence to recharge ground water levels and improve irrigation prospects • Higher asset creation due to increased allocation under MGNREGA in 2016-17. With the commencement of National Agriculture Market from 2016 onwards, farmers to benefit from improved price discovery. Further, moderate growth in minimum support price for food grains, pulses and oilseeds during 2016-17 to improve farm returns for the coming period • Enhanced focus on soil health and yield improvement through sustainable means to promote usage of complex, organic and specialty products. Also, with the micro irrigation schemes being aggressively advocated by the Government, water soluble fertiliser consumption to pick up • Market development assistance for Organic manure to increase acceptability and scale of the segment • Direct transfer of subsidy likely to reduce working capital requirement in the industry Strengths • Strong brsence across major agri input consumption states in South and East India. Post the acquisition of erstwhile Liberty Phosphate, Coromandel has diversified its brsence in North and Western markets as well • Presence across major export markets in LatAm, Africa, Europe and Asia post acquisition of erstwhile Sabero Organics provides scope for Business expansion and market diversification • Value added unique products portfolio offers differentiation and brand building opportunity to the Business. Currently, significant proportion of Coromandel sales comes from these differentiated offerings • Highly efficient complex fertiliser plants located in strategic locations in Andhra Pradesh and Tamil Nadu to serve key markets of South and East India. Further, SSP plants sbrad across West, Central and North India, provide access to high SSP consumption pockets of oilseeds and pulses • Strong fertiliser brands in Gromor and Godavari commands significant equity and farmer trust. • Urea handling contract at Kandla and Kakinada ports provides access to the nitrogenous fertiliser • Ability to manufacture products at multiple sites provides operational flexibility to work under various constraints • Integrated facility to manufacture Phosphoric Acid and Sulphuric Acid at Vizag and Ennore improves cost structure and sourcing flexibility • Dedicated set up in China to strengthen sourcing, marketing and registration opportunities across the Company • Robust R&D set up at Vizag and strong agronomy team for new product development for Fertiliser. For Crop Protection chemicals, R&D centers located at Hyderabad, Sarigam and Ankleshwar for process improvement and new product development • Vast network of Retail operations through around 600 Mana Gromor Centers located in Andhra Pradesh and Telangana and around 200 centers in Karnataka improves farmer connect, trust and brand equity • Strategic investments in TIFERT and Foskor to ensure availability of key raw material Phosphoric Acid • Joint venture in Water soluble fertiliser and farm implements with SQM, Chile and Yanmar respectively Financial Review Coromandel's overall financial performance for the year 2015-16 has been satisfactory amid a difficult business scenario. The total revenue stood at Rs. 11,564 Cr in 2015-16 as compared to Rs. 11,341 Cr in the brvious year. The Company's PBT stood at Rs. 535 Cr as compared to Rs. 592 Cr in the brvious year. Coromandel generated Rs. 944 Cr (2014-15: Rs. 974 Cr) of cash surplus from its operations, before changes in working capital and after adjusting for the changes in working capital, the net cash generated from operations is Rs. 413 Cr (2014-15: Rs. 85 Cr). During the year, the net working capital came under stress due to increased trade receivables and delay in 10 % subsidy disbursements. The Company's long term Debt: Equity ratio has come down to 0.03 compared to 0.11 in the brvious year. The total Debt : Equity ratio stood at to 0.95 as against 1.05 in the brvious year. The Company's liquidity position continues to remain healthy with year-end cash and bank balance of Rs. 183 Cr of temporary surplus retained in short term bank deposits/current accounts in addition to term deposits of Rs. 480 Cr with HDFC Limited. The Company's long term credit rating by 'CRISIL' continued to be 'CRISIL AA+ (stable)' and short term debt rating at 'CRISIL A1+'. Outlook As per the estimates of Food and Agriculture Organization of the United Nations, the global food price is likely to stay soft in 2016 as stock levels remain at comfortable levels. Combined with the weakening economic activity in emerging economies, fertiliser prices are expected to remain mild in 2016. However, world fertilizer demand in 2016 is seen as recovering around 2 percent as improved rainfall and currency stability will boost consumption in South Asia. On the domestic front, with higher allocation for rural and agriculture provided in the Union Budget 2016-17, expectation of normal monsoon and structural reforms taking shape, the agrarian sector is likely to witness a growth momentum in 2016-17. Phosphatic segment growth during 2016-17 is projected to remain moderate at 2-5 percent levels on account of normal monsoons, partially offset by high pipeline inventory. Coromandel's focus for 2016-17 will be differentiating itself through unique product offering and diversifying its market brsence in geography of choice. It has identified Digital Initiatives, Technological Breakthrough and Customer Engagement as the key growth areas for augmenting its performance. Cost controls through improving operational efficiency, supply chain effectiveness and inventory and cash management will be specifically targeted to positively impact the profitability. Fertiliser SBU plans to scale up its Unique product share through market development and brand building initiatives. While the focus will continue on improving market share in Complex fertiliser segment, Business will introduce new value added grades to enhance its product portfolio. The three pronged channel (Trade, Retail and Institutions) approach developed over last few years has been helping the Business in diversifying its operational risk and the SBU intends to build the synergy across these multiple channels to drive future growth. Customer engagement initiatives will be focused upon to further strengthen trust and generate stakeholder feedback. Customer based digital application will be rolled out for establishing faster connect and seamless communication channel with the farmers. Safety remains a key focus area and plans are in place to strengthen the Process Safety Management System (PSMS) across all the manufacturing locations. Safety training man-days and behavior based safety will continue to play a vital part for ensuring 201617 as Incident Free Year. Environment initiatives like Green Visaka and Green belt development at Kakinada will be expanded during the year. Manufacturing strategy will work towards ensuring self sufficiency in raw material and cost optimization initiatives. Coromandel plans to work closely with its partners, TIFERT and Foskor, to improve acid availability and maximize capacity utilization of the plants. Crop Protection SBU envisages growth through focus on exports and domestic brand business with improved margins. This is sought to be achieved by maximizing asset utilization and improving cost efficiencies in manufacturing plants, completing capacity expansion projects in time, leveraging registrations, branding and marketing initiatives in both domestic and export markets and improving working capital management to bring down interest costs. In addition, Business will expedite work on new product development through its R&D. Structural strengthening projects will be executed across the locations to improve the safety focus and bring down the TRIR levels. For 2016-17, Specialty Nutrients SBU plans to bring focused marketing approach around high potential crop clusters to drive growth. Customer loyalty programs, high intensity brand promotion and field team's capability enhancement initiatives will be rolled out to expand coverage in the identified crop pockets. The partnership with SQM group will be utilized to test market and introduce innovative products. With increased budgetary allocation towards improving micro irrigation coverage in India, water soluble fertiliser segment is likely to witness higher consumption. Business will continue to work on developing crop solutions to increase farmer productivity through cost reduction and yield maximization. Customer centricity will be a key aspect that the Retail Business will drive in 2016-17 primarily with the help of IT, analytics and improved agro-technology interventions. IT enabled technical advisory like Gromor Nutrient Manager, Webinars, Gromor Scientist, Scientists meetings, Mobile App will continue to aid knowledge dissemination and customer connect. The supply chain operations will be made more robust to ensure timely product availability and control inventory levels. SSP Business will focus on brand and product differentiation by providing value added offering to the customers. Differentiators such as free flowing, non-caking, correct nutrient content, correct weight and a unique packaging will be the key driver in all campaigns. With a favorable monsoon projected in 2016-17, Coromandel expects the rural consumption to pick up in 2016-17, that will drive the agriculture output. With its brsence across the farm value chain, Coromandel will leverage its strong brand brsence and farmer trust to sustain its growth momentum. Risk Management Risk management is a very important part of the Company's business policy. Coromandel's Risk Management structure spans across different levels and the Company continuously identifies, classifies and formulates mitigation measures. Coromandel has a Risk Management Committee, comprising of three Directors, of which one is an independent director who chairs the committee meetings. The committee members along with the senior executives and Business Heads of the Company carry out regular review of risk management practices and evaluate their implementation status. The key risk management practices include risk assessment, measurement, monitoring, reporting, mitigation actions and integration with strategy and business planning. The key risks associated with various processes of Company's business are analyzed in detail, covering causes and sources of the risk, a logical sequence of triggering events (Key Risk Indicators), positive and negative consequences and the likelihood of occurrence of such consequences and the severity of the impact, both in qualitative and quantitative terms. The Key Risk Indicators are mapped to the job function of respective executives and the reporting and monitoring frequencies are also defined. The identified key risks at the Entity Level are evaluated on quantitative, semi-quantitative and qualitative aspects of impact for timely decision on its treatment. Risk Categories The risks associated with the Company's businesses are broadly classified into six major categories. Environmental Risk: the Company may face litigation and penalty due to adverse impact of its effluents on eco-system. Economic Risk: due to downturn or adverse political situations which may negatively impact on the Company's organizational objectives Regulatory Risk: due to inadequate compliance to regulations, contractual obligations or any other statutory violations leading to litigations and loss of reputation. Operational Risk: inherent to business operations including manufacturing & distribution operations, tangible or intangible property and any other business activity disruptions. Financial Risk: to organization due to major fluctuations in currency market, rise in interest rates and possible non recovery of debts. HR & Legal Risk: due to attrition of any Key Managerial Person or disruption of operations due to any other human resources issue. The key risks associated with the Company's business, its likely impact and the mitigation mechanism evolved are discussed hereunder. The evaluation of risk is based on management's perception and the risks listed below are not exhaustive. Internal Financial Controls Coromandel has adequate internal controls consistent with the nature of business and size of the operations, to effectively provide for safety of its assets, reliability of financial transactions with adequate checks and balances, adherence to applicable statutes, accounting policies, approval procedures and to ensure optimum use of available resources. These systems are reviewed and improved on a regular basis. Coromandel has a combrhensive budgetary control system to monitor revenue and expenditure against approved budget on an ongoing basis. The Company has its own corporate internal audit function to monitor and assess the adequacy and effectiveness of the Internal Controls and System across all key processes covering various locations. Deviations are reviewed periodically and due compliance is ensured. Summary of Significant Audit Observations along with recommendations and its implementations are reviewed by the Audit Committee and concerns, if any, are reported to the Board. Human Resources Coromandel puts people capability building in the forefront of its human resource initiatives. All Learning & Development programs are specifically designed to realize the Company's vision and focus on areas that are critical for achieving the growth. During the year, a new competency framework, covering all roles at Divisional Offices was created. The framework details proficiency levels for each position ensuring a platform for assessing and developing competencies to build a performance based culture. Coromandel's efforts in building functional and technical capabilities at the manufacturing plants received increased impetus with employee coverage of 92% and training in excess of 5000 man-days. Coromandel has been constantly looking to adopt latest trends and methodology to improve learning environment. In relation to it, Simulator based training for the phosphoric acid plant was undertaken at Vizag to ensure real time experience and improvement in learning curve. Retail business developed Field Force Competency Model to enable competency based hiring, elevation and talent development. Coromandel continues to emphasize on employee engagement and its importance in constituting a workforce that can ideate, innovate and perform. Keeping this in mind, a survey was conducted to assess the effectiveness of engagement initiatives carried out across businesses and locations. The results have shown a marked improvement over the brvious year and Coromandel plans to continue these activities to develop a highly engaged workforce. As the organization is expanding its domestic and global footprint, it is imperative to keep the workforce across geographies connected to the Senior Leadership. Coromandel continued its enterprise wide Communication Program "Chronicle" in which the Senior Leadership interacted with the employees across locations through webex on a quarterly basis. The initiative, along with the in house magazine 'Voice' were well recognized and Coromandel won National and International Awards for these connect programs. • Global Award of Distinction (Silver) for in-house magazine 'Voice', Distinction for "Voice" Cover page and Excellence for Wall calendar from Academy of Interactive & Visual Arts, New York. • National awards for 'Chronicle' in Best Employee Communication Category and 'Voice' in Best House Journal Category from Public Relations Society of India • National Award for 'Voice' from Association of Business Communicators of India Coromandel ensures total employees involvement towards delivering high quality product and services to customers through its integrated Total Quality Management (TQM) framework. During the year, Coromandel undertook various workforce development initiatives on Customer Orientation, Integrated Management System, Systematic Problem Solving, Quality Control Tools and Lean Techniques and reiterated its commitment to excellence. In its consistent drive to promote excellence, a knowledge sharing competitive forum 'i-Quest' was organized at manufacturing plant level. The Vizag unit participated in Indian Manufacturing Excellence Assessment as a part of regular external assessments for continuous improvement of systems & processes. The company received various certifications and recognition for employee activities in external industry forums: • Coromandel SSP Business Certified for Quality, Environment and Safety Management Systems by British Standards Institution (BSI) • Excellence Awards for 5S implementation at Ranipet Unit, QCFI, Chennai Chapter • Excellence in Suggestion Scheme under Fertilizer Industry,2nd Rank, for FY 2014-15, Indian National Suggestion Scheme Association • Par Excellence, Excellence and Gold Awards for Small Group Activity Projects, Quality Circle Forum of Indian, Regional and National Chapters • Outstanding & Gold Awards for Kaizens, QCFI, Chennai Chapter Industrial Relations Industrial relations continue to be an essential part of employee engagement and align with the overall vision of the Company. During the year, the Industrial Relations across all the plants continued to remain cordial. As part of sensitization, line managers have been provided with training on industrial relations at Ankleshwar, Ennore & Visakhapatnam units. During the year, Visakhapatnam unit reached a four-year long term wage settlement between management and employees union amicably by tripartite meetings. Prevention of Sexual Harassment at Workplace Policy Coromandel has in place a Prevention of Sexual Harassment (POSH) Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (Act). An Internal Compliance Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees are covered under this Policy. A certification based e-learning course on POSH was conducted across the Company to bring about awareness about the Policy. During the year 2015-16, there were no complaints received by the ICC. CSR Activities Coromandel is committed to improve the quality of lives of people it serves through long term value creation. Care and concern for the communities has been an integral part of all the interventions to ensure that the people the Company engages with gain from the association. Coromandel has focused its efforts towards sustainable development, accelerated inclusive growth and social equity and supports the communities that are socially and economically marginalized. The activities target on inclusive growth and improving social capital through health and education initiatives. Coromandel has also created access to opportunities and resources through its economic development and infrastructure & environment support initiatives. Education - Coromandel is committed to create an enabling environment for children and young people to develop and evolve as responsible citizens. Through the education initiatives, focus is given on access, equity and quality of education especially in government schools. The activities support the government programs of Swachh Vidyalaya and ensure the children get a conducive environment to study. The initiative has also focused on improving the facilities in the schools to ensure that the children are provided with the best possible atmosphere to continue education. The Coromandel Girl Child Education Scheme was relaunched to achieve equity of educational opportunities and promote talent from rural areas. The scheme was conceptualized with the aim of providing educational assistance to girls to encourage them to continue their education. The scholarship has been designed to reach out to girls, who otherwise dropout from schools after standard IX and X and provide them an opportunity to continue their education. Coromandel has partnered with the IIM Ahmedabad Alumni Association-Hyderabad Chapter to provide quality education for economically deprived first generation learners at Udbhav School. Coromandel not only supports the students monetarily, but also promotes its employees to participate and improve various aspects of child development. Coromandel also supports education to the children born with hearing impairment. At Balavidyalaya, the children are taught to make use of their residual hearing through constant use of suitable hearing aids and develop age appropriate language skills. The Murugappa Polytechnic College has been imparting quality education & training of international standards in Engineering and Technology to the impoverished. Health - Coromandel is committed to the health and well-being of the communities across all areas of its operations. It recognizes the need to support the government health delivery system for effective primary healthcare. Within this larger objective, Coromandel has undertaken several initiatives with rural communities focused on promoting integrated healthcare and developing health behavior. The Coromandel Medical Centres have been successful in imbibing the practice of brventive healthcare among the beneficiaries and inculcate awareness towards leading a healthy lifestyle. The Centres have gained tremendous popularity with the people and have emerged as trusted institutions. Sanitation has also become a prime focus for delivery to ensure people maintain the desired health standards. The provision of toilets, a concentrated 'Behavior Change' strategy towards its usage and provision of safe drinking water has resulted in improving health standards of the communities. During the year, Coromandel conducted various medical camps in its operating areas. These camps were designed as per the health requirements of the communities and aim at improving their awareness levels to ensure disease free life. The Coromandel Pediatric Ward in Government General Hospital in Kakinada was refurbished to improve the quality and service levels. During the year, Company donated four ventilators in addition to other medical equipment, which has helped in saving lives of critically ill children. The ward is projected as a Model Facility for the hospital and has been showcased to all other companies for replication. The initiative has been well recognized and apbrciated at various platforms by the district administration. Coromandel has partnered with 'Hrudaya - Cure a little Heart' Foundation to treat underprivileged children with Congenital and Acquired Heart Diseases (CHD) and gives them a chance to live normal, healthy life. The commitment to ensure quality healthcare to the needy has been strengthened with the support to the AMM Foundation run hospitals namely the Sir Ivan Stedeford Hospital, AMM Hospital and AMM Arunachalam Hospital. These hospitals help in bridging the gap in the existing health care system. Community Development- On the community development front, the programs initially started with health awareness sessions for women, were strengthened to provide livelihood intervention as well. Women from rural areas are engaged in a range of productive activities essential to household welfare, agricultural productivity and economic growth but there is no direct economic benefit to them. Through the experience of Federation of Farmers Associations, efforts are being made to engage with women in the backward area of Mehbubnagar district in Telangana to provide health awareness and diagnostics as well as create alternate livelihood opportunities for women farmers. Coromandel conducted relief and recovery support activities in the flood affected areas in Chennai in 2015 through ensuring availability of basic amenities like safe drinking water and food. Research and Development - Coromandel is working with Punjab Agricultural University and Aston University to do a three year study on analyzing bio-char as a fertilizer, analyze the energy output for rural application and do a cost benefit analysis for this technology for commercial applications. The commercial benefits for the technology will be huge for the farmer community and the technology will have positive environmental impact in the form of energy generation and use of biochar as a soil conditioner and fertilizer. Studies have also been taken up to ensure environmental sustainability and ecological balance. This include projects managed by Murugappa Chettiar Research Centre (MCRC) in the field of water security and water use efficiency, climate change mitigation and developing solar energy based devices. During the year, Coromandel's CSR initiatives have centered around the areas of Education, Health and Community Development and the Company will continue its commitment to ensure economic growth takes place within the paradigm of societal development and inclusiveness |