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Nagarjuna Oil Refinery Ltd.

BSE: 534184 Sector: Oil & Gas
NSE: NAGAROIL ISIN Code: INE453M01018
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OPEN 4.07
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VOLUME 40907
52-Week high 6.08
52-Week low 2.56
P/E
Mkt Cap.(Rs cr) 173
Buy Price 4.05
Buy Qty 4830.00
Sell Price 4.10
Sell Qty 5000.00
OPEN 4.07
CLOSE 4.10
VOLUME 40907
52-Week high 6.08
52-Week low 2.56
P/E
Mkt Cap.(Rs cr) 173
Buy Price 4.05
Buy Qty 4830.00
Sell Price 4.10
Sell Qty 5000.00

Nagarjuna Oil Refinery Ltd. (NAGAROIL) - Director Report

Company director report

Your Directors have pleasure in presenting before you the 6th Annual Reportof the Company together with the Audited Accounts for the year ended March 31 2016.

The financial Results and the Consolidated financial Results of the company for theyear ended March 31 2016 are as under:

A. BUSINESS AND FINANCIAL HIGHLIGHTS

Standalone financial Results:

Rs. In Lakhs

Particulars 2015 - 2016 2014 - 2015
Current year Previous year
Net Sales/Income from Operations - -
Other Income 1.54 3.30
Total Expenditure
a. (Increase)/Decrease in Stock - -
b. Cost of materials consumed - -
c. Employee benefits expense 150.94 73.71
d. Purchase of traded products - -
e. Power and fuel - -
f. Other expenses 167.98 484.33
Total 318.92 558.04
Finance cost 12.01 7.95
Depreciation and amortization 2.12 2.12
Profit/ (Loss) before exceptional items extra-ordinary items and tax (331.51) (564.81)
Exceptional Items - 40000.00
Profit/ (Loss) before extra-ordinary items and tax (331.51) (40564.81)
Extra-ordinary items - -
Profit/(Loss) before tax (331.51) (40564.81)
Provision for tax - -
Deferred tax - -
Profit / (Loss) after tax (331.51) (40564.81)
Dividend - equity shares - -
Tax on proposed dividend - -
Balance c/d to balance sheet (331.51) (40564.81)
Paid Up equity share capital (Face value of 7 1/- per share) 4281.82 4281.82
Reserves excluding revaluation reserve 32179.46 32510.97
Earning per share (annualized) - in 7 Basic and Diluted (0.08) (9.47)

The Company proposes to further provide for diminution in the value of investmentduring the current year in view of the present status of the project coupled with theoffer since received by the company from a prospective investor.

Extension of time for holding Annual General Meeting

The Registrar of Companies (ROC) Hyderabad has granted extension of time to thecompany for holding the 6th Annual General Meeting up to December 292016.

Status of the Oil Refinery Project

Your company holds 46.78% of equity share capital of Nagarjuna Oil Corporation Limited(NOCL) which is involved in setting-up a 6 MMTPA refinery project at Cuddalore TamilNadu.

The implementation of the Project was impacted by cyclone 'Thane'. The physicalcompletion of the Project as on date is 58%.

Consolidated financial Results

Rs. in Lakhs

Particulars 2015 - 2016 2014 - 2015
Current year Previous year
Net sales/income from operations
Other income 1.54 -
Total expenditure
a. (Increase)/Decrease in Stock
b. Cost of materials consumed
c. Employee benefits expense 150.94 -
d. Purchase of traded products
e. Power and fuel
f. Other expenses 167.98 -
Total 318.92 -
Finance cost -
Depreciation and amortization 2.12 -
Profit/ (Loss) before exceptional items extra-ordinary items and tax (331.51) -
Exceptional Items - -
Profit/ (Loss) before extra-ordinary items and tax (331.51) -
Extra-ordinary items - -
Profit/ (Loss) before exceptional items extra-ordinary items and tax (331.51) -
Provision for tax * -
Deferred tax - -
Profit / (loss) after tax before Minority interest (331.51) -
Share of Loss transferred to Minority Interest - "
Share of Loss from Associate Company (92.58) -
Profit / (Loss) for the year (424.09) -
Dividend-equity shares -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (424.09) - -
Paid-up equity share capital (Face value of 7 1/- per share) (4281.82) -
Reserves excluding revaluation reserve 29809.68 -
Earnings per share (annualized) - in 7 Basic and Diluted (0.10)

NOCL has been actively pursuing with strategic investors to participate in equityinvestment in view of escalation in the project cost.

The company has been approached by Allied Machineries and Resources Holdings Inc.("AMR") a Company incorporated in Ras Al Khaimah RAS 065114 2014 with principalplace of business located at 36-05 Central Park Dubai International financial CentreDubai UAE to acquire the 776220000 equity shares held in NOCL at Rs.2.50/- per equityshare of face value of Rs.10/- apart from AMR acquiring the entire equity shareholding ofothershareholders of NOCL except TIDCO.

AMR with backing of ultra high net worth individuals who have strategic interest inthe oil and gas sector have the resources and capabilities not only to implement thecurrent project but also propose to undertake expansion / diversification that will resultin economies of scale.

AMR Group is a Dubai based fund with assets exceeding USD 2 billion The AMR Group hashigh profile investors from China Japan Korea and Gulf.

The Group is involved in Aviation Transportation Infrastructure Oil & NaturalResources Media Entertainment Information Technology Education and Social Services.

AMR is also in discussion with Lenders of NOCL for retiring the debt of the company.

AMR is in the process of completing all its due diligences on NOCL.

The proposed sale of NOCL shares to AMR is beneficial to the Company in view of NORLhaving invested substantial funds and being unable to bring further funds to take theProject forward the Project being at stand still since March '2012 the escalation in theProject cost being to the company's dis-advantage the Lenders not willing to have furtherexposure of debt on NOCL in view of the present status of the Project there beingsubstantial diminution in the value of investment and the offer of AMR being the best ascompared to the various offers received by the company earlier in the course ofidentifying a strategic investor.

In view of the above and various legal cases having been filed against NOCL which couldresult in its winding-up and non-realisation of investment by the shareholder due to lossof value of shares the Board of Directors of the company considered it necessary todis-invest the shareholding in NOCL in favour of an investor so as to enable the Projectmove forward as also enable NORL to realize funds to look at new avenues in the interestof the shareholders.

The sale of shares will also relieve the onerous responsibility of NORL as Promoter ofall obligations and comfort provided to the lenders.

The sale of shares held by the company in NOCL will require approval of the Members ofthe company through a process of Postal Ballot.

The company is issuing notice pursuant to Section 110 of the Companies Act 2013 readwith Companies (Management and Administration) Rules 2014 for obtaining the consent of theMembers. The Postal Ballot Notice and Instructions on remote e-voting for postal ballot isappended to the Annual Report at page 50 and page 52. The Members are requested to perusethe documents and exercise their vote either in electronic mode or physical mode inaccordance with the instructions and within the timelines prescribed therein.

Share Capital

The paid-up equity capital of the company as on March 31 2016 is Rs.428181821/-consisting of 428181821 equity shares of Re.l/- each. Subsidiaries Joint Ventures orAssociate Companies:

There has been no change in relation to any subsidiary joint venture or associatecompany duringthe year.

Accounts of Associates

Consolidated financial statements are enclosed along with the financial statements ofthe company. The Associate considered in the preparation of the consolidated financialstatements is Nagarjuna Oil Corporation Limited (NOCL).

Statement containing salient features of the financial statement of subsidiaries/associate companies/ joint ventures appears as Annexure I to this Report.

There is no material fact that requires mention on the performance and financialposition of the Associate other than that mentioned in this report under "Status ofOil Refinery Project."

B. DIRECTORS BOARD COMMITTEES KEY MANAGERIAL PERSONNEL AND REMUNERATION

Directors Retiring by Rotation

In accordance with Section 152 of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. K S Raju who is liable to retire by rotation and beingeligible offers himself for re-appointment as Director of the Company subject toretirement by rotation.

Declaration by independent Directors:

The Independent Directors have submitted their disclosure to the Board that theyfulfill all the requirements as to qualify as an Independent Director under Section 149(6)of the Companies Act 2013 as well as SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

Key Managerial Personnel:

There are no changes in relation to Key Managerial Personnel of the Company

Meetings of the Board

The Board of Directors of your company during the period under review met six times onMay 162015 June 102015 July 232015 September 08 2015 November032015 and February042016.

Remuneration and other particulars of the Directors/ Key Managerial Personnel/Employees

The information relating to remuneration and other particulars of the Directors/ KeyManagerial Personnel/Employees as required under Section 197(12) of the Companies Act2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 appears as Annexure - II Personnel

In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said rules appearsas Annexure - III.

Committees Audit Committee:

In compliance with the provisions of Section 177 of the Companies Act 2013 and theErstwhile Listing Agreement entered into with the Stock Exchanges (now Regulation 18 ofSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015) the company hadconstituted an Audit Committee consisting of qualified and experienced members fromvarious fields. The Committee consists of three Independent Directors and one nonexecutiveDirector. The Chairman of the Committee is Dr. N C B Nath an Independent Director. TheCommittee meets periodically to review the internal audit report quarterly financialResults and Annual financial Statements and recommends its decisions to the Board apartfrom taking action independently whenever required. The Statutory Auditors and CompanySecretary attend the Audit Committee Meetings.

The Audit Committee comprises of

Dr. NCBNath : Chairman-Independent Director
Mr.SRRamakrishnan : Member-Independent Director
Ms. Lalitha Raghuram Member-Independent Director
Mr. KS Raju Member

Nomination and Remuneration Committee:

The Nomination and Remuneration Committee was constituted in compliance with theprovisions of the Companies Act 2013 and Erstwhile Listing Agreement entered into withthe Stock Exchanges (now Regulation 19 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

The Company has adopted a Nomination and Remuneration Policy for determininginter-alia qualifications positive attributes and independence of a Director mattersrelating to the remuneration appointment removal and evaluation of performance of theDirectors Key Managerial Personnel Senior Management and other employees. StakeholdersRelationship Committee:

The Stakeholders Relationship Committee was constituted in compliance with theprovisions of the Companies Act 2013 and Erstwhile Listing Agreement entered into withthe Stock Exchanges (now Regulation 20 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

C. DISCLOSURES

Company Policy Matters

Your company's endeavor has always been to maintain transparency and accountability toits stakeholders. In this direction various policies mentioned in the CorporateGovernance Report have been implemented to enable the stakeholders to appreciate thevarious interventions the company has taken.

The implementation of these policies are reviewed periodically by the Board ofDirectors and updated regularly.

The company has during the year drawn-up Policy for preservation and archival ofdocuments that sets out the standard for Classifying Managing and Storing of records ofthe Company and Policy on Disclosure of Material Events for the purpose of makingdisclosures to Stock Exchanges effective from December 012015.

Risk Management Policy:

The Board has put in place the Risk Management Policy forthe company to address variousrisks impacting the company.

The company has setup an Enterprise Risk Management System to manage and mitigaterisks.

Policy on Board Evaluation

The Policy on Board Evaluation was adopted with effect from November 10 2014 by theBoard of Directors in compliance of Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. The purpose of the policy is to assess theeffectiveness of the Board as a whole Committees of the Board and Individual Directors(Independent and Non-Independent) on regular basis and to take necessary steps forimprovingthe effectiveness of the Board.

The Nomination and Remuneration Committee has devised the methodology identifiedsample tools forevaluation and also laid down the parameters for evaluation ofNon-Executive Directors Independent Directors Chairman Board of Directors andCommittees of the Board.

The Nomination and Remuneration Committee have based on the responses received fromDirectors evaluated the Directors conveyed the opinion of the Committee to theDirectors Committees and the Board.

In view of the evaluation not linked to payment of remuneration the company has optedonly for payment of sitting fees the evaluation has no financial implications on thecompany.

Whistle Blower Policy/Vigil Mechanism

The company has formulated the policy on Whistle Blower/Vigil Mechanism in compliancewith Clause 49 of Erstwhile Listing Agreement. The same is in conformity with Regulation22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and Section177(9) of the Companies Act 2013. The Policy aims to prohibit managerial personnel fromtaking adverse personnel action against employees disclosing in good faith allegedwrongful conduct on matters of public concern involving violation of any lawmismanagement misappropriation of public funds among others.

Employees aware of any alleged wrongful conduct are encouraged to make a disclosure tothe Audit Committee.

No personnel of the company were denied access to the Audit Committee.

Corporate Social Responsibility

The provisions relating to Corporate Social Responsibility does not apply to theCompany.

Corporate Governance

Your company firmly believes that building a culture of compliance is more than meetingregulations and standards. Your company is always proactive in meeting mandated standardsand practicing Corporate Governance in spirit and not just the letter of the law.

As Mandated by SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015a report on Corporate Governance along with a Certificate from Practicing CompanySecretary on the compliance of conditions of Corporate Governance is annexed hereto. Yourcompany is happy to inform you that there were no adverse remarks/qualifications/reservations raised in the Corporate Governance Report.

Related Party Transactions

There are no contracts or arrangements entered into by the company with related partiesin accordance with the provisions of Section 188(1) of the Companies Act 2013 other thanthe transaction entered into with Nagarjuna Fertilizers and Chemicals Limited pursuant tothe order of the jurisdictional High Courts in relation to the Composite Scheme ofArrangement and Amalgamation between Ikisan Limited Kakinada Fertilizers LimitedNagarjuna Fertilizers and Chemicals Limited and Nagarjuna Oil Refinery Limited.

The Policy on Related Party Transactions appears on the website of the Company at www.norl.co.in .

Particulars of Loans Guarantees or Investments

The company has not provided any loans guarantees or made investments pursuant toSection 186 of the Companies Act 2013 other than executing a Sponsored Undertaking infavor of the lenders of Nagarjuna Oil Corporation Limited.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

In relation to the information required to be furnished underthe Companies Act 2013read with Companies (Accounts) Rules 2014 the company is not undertaking anymanufacturing activity and accordingly there is no information available pertaining toConservation of Energy and Technology Absorption. There is no Foreign Exchange Earningsand Outgo.

Extract of Annual Return

The Extract of the Annual Return for the year ended March 312016 appears as Annexure-IV to this report

Significant and material orders passed by the regulators or courts or tribunalsimpacting the going concern status and company's operations in future

There were no orders passed by Regulators or Courts or Tribunals impacting the goingconcern status and future business operations of the Company.

Adequacy of Internal financial Controls

The company has established and is maintaining internal controls and procedures basedon the internal control over financial reporting criteria established by the Company

The Board of Directors have evaluated the effectiveness of the company's internalfinancial controls and procedures and confirm that they are adequate in all materialrespects based on the size and the nature of its business and such internal financialcontrols over financial reporting were operating effectively as at March 312016

Deposits

The company has not accepted any deposits within the purview of the Companies Act 2013and the Rules made there under during the financial Year 2015-16.

AUDITORS AND AUDIT REPORT

Statutory Auditors

M/s. M Bhaskara Rao & Co. Chartered Accountants (Firm Registration No- 0004595)Hyderabad were appointed as the Statutory Auditors'for a term of five (5) yearscommencing from the conclusion of the 4th Annual General Meeting up to the conclusion ofthe 9th Annual General Meeting subject to ratification by the members of the company everyyear at the Annual General Meeting.

M/s. M Bhaskara Rao & Co have signified their willingness to accept ratification ofappointment and have further confirmed their eligibility underSection 141 of the CompaniesAct 2013.

The company's Statutory Auditors have also furnished a certificate from the Peer ReviewBoard of the ICAI confirming that they have undergone the process of peer review.

The Board of Directors in accordance with the provisions of Section 139 of theCompanies Act 2013 and Rules made thereunder commend the ratification of the appointmentof Statutory Auditors for the financial Year 2016-17 for consideration of the members.

Statutory Audit Report

There are no adverse comments in the Report of the Statutory Auditors' of the company.

Secretarial Auditor

The Board of Directors have appointed Mr. C S S Krishna Partner M/s KBG AssociatesCompany Secretaries Hyderabad as the Secretarial Auditor of the Companyto undertakeSecretarial Audit forthe financial Year2016-17.

Secretarial Audit Report

The Secretarial Audit Report for the financial Year 2015-16 appears as Annexure - V tothis Report. There are no qualifications or adverse remarks in the report.

Internal Audit

The company has a well established system of Internal Audit which carries out audit onRisk Management framework covering all the functions.

An Internal Auditor of the company has been appointed by the Board of Directors incompliance with the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

D. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to Section 134 (3)(c) and 134(5) of the Companies Act 2013 the Board ofDirectors of the Company hereby report:-

(a) in the preparation of the annual accounts the applicable Accounting Standards hadbeen followed along with proper explanation relating to material departures;

(b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;

(c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the Directors in the case of a listed company had laid down internal financialcontrols to be followed by the company and that such internal financial controls areadequate and were operating effectively.

(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to the Government of India and thefinancial institutions and company's bankers for their assistance and cooperation.

Further the company places on record its sincere appreciation for the continuingsupport and unstinting efforts of investors associates and all stakeholders.

By Order of the Board
Hyderabad K S Raju
November 082016 Chairman