RIDING ON VOLATILITY
S. C. Mehta
Chairman & Managing Director
Dear Friends,
FY23 turned out to be one of the most volatile years on record as
global uncertainties took us all on a rollercoaster ride. For us, at DFPCL, we saw an
unprecedented hike in every single of our raw material prices by 60-80% which led to an
equally unprecedented hike in the pricing of the finished product.
I am delighted to share that DFPCL closed FY23 with the highest ever
profits and revenue. Our revenue jumped by 47% and crossed the Rs.11,000 crore mark. Our
profits jumped by 78% and crossed Rs.1,000 crore to touch Rs.1,221 crore. Enthused by the
performance, the Board has recommended a 100% dividend for the coming year.
VOLATILITY CAN BE A SOURCE OF INNOVATION AND GROWTH. THOSE WHO NAVIGATE
THROUGH UNCERTAINTY WITH AGILITY AND RESILIENCE ARE THE ONES WHO THRIVE".
~ Indra Nooyi, Former CEO, PepsiCo
...Our Volatility Insights
As we looked at the unprecedented volatility and analysed the deeper
undercurrents, we saw the following patterns emerge:
• There was NO DEMAND DESTRUCTION
Despite the huge hikes in all our finished products to aid the
pass-through emerging from the raw material price hikes, there was no impact on the demand
in all our three sectors: namely Fertilisers, Mining Chemicals and Industrial / Pharma
Chemicals. The volatility actually unfolded the resilience and robustness of our end
consumer segments. It left behind an insight of possibilities of new and higher finished
product price bands being possible if we can provide higher value propositions.
• Excellent Alignment with India Growth story
At the root of the robust demand drive, we saw a validation of
excellent alignment with the India Growth story that our businesses enjoy.
Along with the India Growth came the need for more coal, cement,
infrastructure. Our Mining Chemicals beautifully align with these needs and will continue
to enjoy good tailwinds as India grows.
As Indian GDP climbs up, the mid-income group would grow from strength
to strength with growing demand for high-value food, sugar, textiles, etc. Our Crop
Nutrition Business drivers namely: sugarcane, cotton and horticulture crops would continue
to parallelly grow from strength to strength.
Lastly, our Building block
Chemicals and Pharma Chemicals similarly receive a strong tailwind
emerging from the growing domestic needs as well as the China Plus shift into India.
• Strong Foundation of Systems & Processes
Despite all the volatility, we could ride on it and emerge stronger.
Thanks to the solid foundation of sourcing, manufacturing, distribution, customer connect,
systems and processes that we have painfully invested into, we could deliver even in the
face of various uncertainties and vagaries that we saw during the year.
This inherent strength built over decades will continue to provide us a
strong foundation for robust performance.
THE ONLY WAY TO RIDE THE WAVE OF VOLATILITY IS TO HAVE A SOLID
FOUNDATION".
~ Chris Chirnside
From a strategic perspective, a crucial initiative to further
strengthen our foundation is the backward integration into our raw material, Ammonia. Our
5,00,000 MTPA capacity world-class Ammonia Plant, soon to become operational, will provide
a strong risk mitigator support for all our downstream business sectors, especially with
regard to the risks related to imports of ammonia and congestion at the ports. Based on
the world's best KBR technology, we have invested close to Rs. 45 billion in this
mega greenfield project. The size and scale with the global standards of execution and
quality controls promises to make it an industry benchmark. Ammonia being the key raw
material for all our three major sectors
(industrial chemicals, fertilisers, and mining chemicals), this
backward integration will provide a value-chain capture besides bringing a risk-mitigating
stability to the downstream.
Besides the availability-stability, the proximity to our downstream
complex, will reduce the freight costs and help us significantly reduce our carbon
footprint while safeguarding us against any unforeseen long-distance transportation and
supply perils.
From a larger perspective, our Ammonia Project will play an invaluable
role in the import substitution / ‘Aatmanirbhar Bharat Abhiyaan' and will result
in over
Rs. 20,000 crore forex savings over the next 10 years for our country.
VOLATILITY IS NOT A THREAT, BUT AN OPPORTUNITY TO REINVENT, ADAPT, AND
EXCEL."
~ Elon Musk, CEO, Tesla
In the midst of grappling with a volatile world, we have continued our
aggressive drive in all three businesses to move from a commodity orientation to a
specialty orientation, offering holistic solutions for the end consumers. This strategic
orientation has driven us to : a. Deeply segment and understand the end consumer markets
b. Tweak our Manufacturing and Services basket to provide value to each segment c. Move
from competitive pricing to value pricing In the Crop Nutrition Business, our focus is now
ingrained on creating crop-specific nutrient baskets versus commodity NPKs and instead of
focussing on the dealers channel, we are focussing more and more directly on the farmers
and their needs… PULL v/s PUSH. This drive has helped us create a new discerning
farmer segment and help deliver benefits to approximately 7 million farmers through the
farmer connect programmes. A rise in knowledgeable and repeat farmer-customers is helping
us build a unique brand following.
Similarly, for the TAN business, we continue to reinforce our value
proposition in the Mining sector with customised, technology-based, holistic offerings
much beyond a simple product supply. We have begun executing more numbers of TCO (Total
Cost of Ownership) projects that establish us as a productivity partner. We now work very
closely with the end consumers (mining companies and infrastructure projects) to first
baseline and benchmark their operating cost, and then value-add technology together with
specialised differentiated explosive products. That way, we commit ourselves to cost and
productivity improvement in the mines and infrastructure projects through a win-win
formula.
THE GREATEST DANGER IN TIMES OF TURBULENCE IS NOT THE TURBULENCE, IT IS
TO ACT WITH YESTERDAY'S LOGIC."
~ Peter Drucker
To expect "yesterday's" approach to deliver
tomorrow's needs in a sustained manner could be impractical and not prudent.
In order for our Strategic Transformation shift to deliver sustained
results, we have effected transformational changes on all our foundational footings,
namely :
• Structure
• Systems
• People
• Work Culture
As you all are well aware, we have begun the final step of unwinding
and demerging each business into a separate corporate entity. This will ensure
single-minded focus right from the Board to the lowest level in the team to become
committed to delivering the Vision and Mission of serving the specific consumer segment
needs. We expect the NCLT process of demerging the erstwhile entities into clean and
focussed Business-wise Corporate entities to be completed by the second quarter of FY24.
This step will deliver a distinct structure that follows our strategy.
The next driver we are working hard on is the digitisation of our end
consumer orientation, right from predicting consumer needs, algorithms to help crystallise
demand planning, IT-driven Sales & Operations Planning, a GPRS-tracked Supply Chain
and a dashboard-based Management Control System.
People Selection, Competency-building, Reward and Recognition Systems
and Employee Engagement drivers are well underway which are dovetailed to the strategy of
the business to be delivered.
Passionately connecting with the excitement in our journey going
forward, our marquee Institution shareholding has trebled in the last few years crossing
20% adding to our family of shareholders nearing 2 lakh in numbers.
I take this opportunity to thank the whole management team for their
enthusiasm and tireless commitment, without which the results of this year would not have
been possible nor would our vision going forward, come alive.
I also take this opportunity to thank our shareholders, bankers,
business associates and customers. Most importantly, my gratitude to the esteemed members
of our Board for their invaluable guidance and support.
We will continue to be inspired by volatility to forge ahead,
creatively.
| S. C. Mehta |
| Chairman & Managing Director |