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Nagarjuna Fertilizers & Chemicals Ltd.

BSE: 539917 Sector: Agri and agri inputs
NSE: NAGAFERT ISIN Code: INE454M01024
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VOLUME 5750
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Buy Price 15.70
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Sell Price 15.80
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OPEN 15.75
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VOLUME 5750
52-Week high 20.45
52-Week low 8.61
P/E
Mkt Cap.(Rs cr) 939
Buy Price 15.70
Buy Qty 24.00
Sell Price 15.80
Sell Qty 524.00

Nagarjuna Fertilizers & Chemicals Ltd. (NAGAFERT) - Director Report

Company director report

Your Directors present the 11th Annual Report together with the Audited Accounts ofyour Company for the year ended March 31

2017.

The Financial Results and the Consolidated Financial Results of the Company for theyear ended March 31 2017 are as under:

A. BUSINESS AND FINANCIAL HIGHLIGHTS

Financial Results Rs in Crores
Particulars 2016-2017 2015-2016
Current year Previous year
Net Sales/Income from Operations 3385.07 3977.64
Other Income 35.27 31.93
Total Expenditure
a. Changes in inventories of finished goods stock-in-trade and work in progress 13.10 (60.08)
b. Cost of materials consumed 1164.58 1154.34
c. Employee Benefits expense 154.52 147.95
d. Purchase of Stock-in-Trade 461.56 909.49
e. Power and Fuel 840.68 864.00
f. Excise duty 8.79 7.80
g. Other expenses 521.09 691.05
Total 3164.32 3714.55
Finance cost 324.90 328.90
Depreciation and amortization 89.20 92.65
Profit/ (Loss) before exceptional items extra-ordinary items and tax (158.08) (126.53)
Exceptional Items - -
Profit/ (Loss) before extra-ordinary items and tax (158.08) (126.53)
Extra-ordinary items - -
Profit/(Loss) before tax (158.08) (126.53)
Provision for tax (6.29) -
Deferred tax (30.02) (33.79)
Profit / (Loss) after tax (121.77) (92.74)
Other Comprehensive income (net of tax) 0.30 0.39
Total Comprehensive income (121.47) (92.35)
Dividend – equity shares - -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (121.47) (92.35)
Paid Up equity share capital (Face value of Re.1/- per share) 59.81 59.81
Reserves excluding revaluation reserve 1032.57 1154.05
Earnings per share (annualized)-in Rs.
Basic and Diluted (2.04) (1.55)
Consolidated Financial Results ` in Crores
Particulars 2016-2017 2015-2016
Current year Previous year
Net Sales/Income from Operations 3385.07 3977.64
Other Income 35.28 31.94
Total Expenditure
a. Changes in inventories of finished goods stock-in-trade and work in progress 13.10 (60.08)
b. Cost of materials consumed 1164.58 1154.34
c. Employee Benefits expense 154.54 148.03
d. Purchase of Stock-in-Trade 461.56 909.49
e. Power and fuel 840.68 864.00
f. Excise Duty 8.79 7.80
g. Other expenses 521.09 687.20
Total 3164.34 3710.78
Finance cost 324.90 328.90
Depreciation and amortization 89.21 92.99
Profit/ (Loss) before exceptional items extra-ordinary items and tax (158.10) (123.09)
Exceptional Items - -
Profit/ (Loss) before extra-ordinary items and tax (158.10) (123.09)
Extra-ordinary items - -
Profit/(Loss) before exceptional items and Tax (158.10) (123.09)
Provision for tax (6.29) -
Deferred tax (30.02) (33.79)
Profit/(Loss) after tax before minority interest (121.79) (89.30)
Share of Loss transferred to Minority Interest - -
Share of Loss from Associate Company - -
Profit / (Loss) for the year (121.79) (89.30)
Other Comprehensive Income (Net of tax) 0.30 0.39
Total Compreshensive Income (121.49) (88.91)
Dividend – equity shares - -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (121.49) (88.91)
Paid-up equity share capital 59.81 59.81
(Face value of Re.1/- per share)
Reserves excluding revaluation reserve 1032.57 1154.02
Earnings per share (annualized) – in Rs.
Basic and Diluted (2.04) (1.49)

The financials for the Financial Year 2015-16 have been redrawn in line with Ind AS forthe Financial Year 2016-17. Therefore the financials referred herein for Financial Year2015-16 are different from the published annual accounts of 2015.

Consolidated financial statements are also attached along with the financial statementsof the Company.

Financial Summary

The loss after tax for the year was Rs. 121.78 crores against loss after tax ofRs.92.74 crores for the previous year.

The Company recorded losses during the current year on account of lower production ofManufactured urea due to short supply of Natural Gas by GAIL and RIL during quarter 1 andplants shutdown during quarter 4 resulting in contribution loss and energy incentive loss.Further lower demand for Urea Specialty Fertilizers and CFG coupled with lower sales ofMicro Irrigation due to lack of project orders and recognition of Income as per Ind ASresulted in loss.

Share Capital and Debentures

The paid-up equity capital of the Company as on March 31 2017 is Rs.598065003/-consisting of 598065003 equity shares of Re.1/- each.

Reserves

There has been no transfer to Reserves during the Financial Year in view of lossesincurred by the Company.

Restructuring

The Bombay Stock Exchange and The National Stock Exchange of India Limited commencedtrading of the equity shares of the Company effective from June 15 2016 with Scrip Code539917 and NAGAFERT respectively.

The members of the Company at the 10th Annual General Meeting held on September 302016 had approved by Special Resolution for sale of Fractional entitlements arising out ofComposite Scheme and transfer of net proceeds due for distribution to the shareholders ofthe Company who are eligible to receive the same to Investor Education and Protection Fund(IEPF) established by the Government of India in terms of Companies Act 2013 in view ofthe inadequate realization of the net sale proceeds.

The Company has sold 16510 shares arising out of fractional entitlement on February 12017 at an average net rate of Rs.12.40/- and transferred a sum of Rs. 218258/- to IEPF.

Plant Operations

Urea

Your Company during the year manufactured 14.98 LMT of urea as against 13.42 LMT in theprevious year.

Micro-Irrigation

Your Company achieved a production of 1236 Lakh Mtrs against 1071 Lakh Mtrs duringthe previous year.

MARKETING

Urea

Your Company achieved a sale of manufactured urea of 15.27 LMT compared to 12.47 LMT inthe previous year.

The total urea sales for both manufactured and imported Urea was 18.91 LMT compared to22.69 LMT of previous year.

Other Traded Products

Traded Bulk Products

Your Company sold 29675 MT of Traded Bulk Products during the year in comparison withsales of 1165 MT during the previous year.

Specialty Fertilizers

Your Company sold 19127 MT of Speciality Fertilizer during the year in comparison withsales of 17031 MT during the previous year.

Micro-nutrients

Your Company sold 5547 MT of Micro-nutrients during the year in comparison with salesof 6237 MT during the previous year.

Supplements

Your Company sold 26162 MT of Supplements during the year in comparison with sales of24297 MT during the previous year.

Customized Fertilizers

Your Company sold 18368 MT of Customized Fertilizers during the year in comparison withsales of 14569 MT during the previous year.

Environment and Safety

Environment

Your Company continues its mission of protecting the environment and has inculcated theconcept right down the organization.

The statutory compliance on environmental matters are being complied from time to time.

Safety

Your Company as on March 31 2017 completed 9485077 accident-free man-hours byemployees and contractors of the Company.

Gas Supply

Subsequent to Nagaram incident the complex started receiving adequate Natural GasSupplies from May 2016 onwards. The first two months of the Financial Year i.e. duringApril and May 2016 the Company experienced shortage of Natural Gas.

Presently the Company is getting the required Natural Gas supplies from both RIL andGAIL.

Kakinada Maintenance Scheme

The Company is taking necessary steps in relation to the revised Energy Norms andTarget set by Department of Fertilizers (5.50 Gcal/MT Urea from 2018-19 onwards)

Research and Development

The Company's Research and Development is actively pursuing development of cutting edgetechnologies to propel core business and commercialize new and allied business.

The focus areas for technology development are in the areas of Plant Nutrition GreenChemicals Nutraceuticals and Renewable fuels. In each area Company has made substantialprogress. The new products and processes will provide a sustainable competitive advantageto the Company. All the technology developed shall be protected through robust IP network.

Change in the nature of business

There is no change in the nature of business.

Subsidiaries Joint Ventures or Associate Companies

The changes in relation to any subsidiary joint venture or associate Company duringthe year are mentioned below:

Subsidiary Company

The Domiciliation Agents of Nagarjuna Industrial Services and Investments PrivateLimited (NISIPL) had initiated the procedure for closure of NISIPL and have put NISIPLunder Voluntary Liquidation. NISIPL has received No Objection Certificate (NOC) fromFinancial Services Commission for closure and NOC from Tax Authorities. The Registrar ofCompanies Mauritius has approved the application to close the Company on March 20 2017.The Company has been removed from the Register of the Registrar of Companies at Mauritiuswith effect from April 25 2017.

Step Down Subsidiary Company

Spawnt Private S.a.r.l the step down subsidiary of the Company at Luxembourg has beenstruck off from the Trade Register with effect from November 9 2016. The Patents held bySpawnt Private Sarl have been transferred and assigned to Nagarjuna Industrial Servicesand Investments Private Limited (NISIPL) the wholly owned subsidiary and thereafter fromNISIPL to the Company.

Accounts of Subsidiaries

Consolidated financial statements incorporating the accounts of the subsidiary companyJaiprakash Engineering and Steel Company Limited are enclosed alongwith the financialstatements of the Company.

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 subsidiaries in view of the details given as following:

Jaiprakash Engineering and Steel Company Limited (JESCO)

JESCO is considering implementing various projects to utilize the available landappropriately and gainfully.

Material changes and commitments

There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the Financial Year of the Company to whichthe financial statements relate and the date of the report.

B. DIRECTORS BOARD COMMITTEES KEY MANAGERIAL

PERSONNEL AND REMUNERATION Directors Nominee Directors

Mr. O Ramesh Babu Deputy General Manager IFCI Limited has joined the Board as NomineeDirector of IFCI Limited with effect from April 27 2016 in place of Mr. Pawan Kumar.

Mr. Syed Shahabuddin has joined the Board as Nominee Director of State Bank of Indiawith effect from May 26 2017 in place of Mr. M P Radhakrishnan.

The Board placed on record the valuable contribution made by Mr. Pawan Kumar and Mr. MP Radhakrishnan during their tenure as Directors on the Board.

Non-Executive Directors

Mr. Chandra Pal Singh Yadav retires at the forthcoming Annual General Meeting inaccordance with the Articles of Association of the Company and being eligible offershimself for reappointment.

The Board of Directors recommend the re-appointment of Mr. Chandra Pal Singh Yadav forconsideration of the members.

Independent Directors

Mr. Arjun Kumar Arora resigned as an Independent Director of the Company with effectfrom June 17 2016.

Mr. Uday Shankar Jha and Mr. C B Mouli had been appointed as Independent Directors ofthe Company not liable to retire by rotation at the 10th Annual General Meeting.

Mr. D Ranga Raju resigned as an Independent Director of the Company with effect fromFebruary 1 2017 in view of personal reasons.

In accordance with Section 149 152 and Schedule IV read with relevant Rules of theCompanies Act 2013 Mr. D Ranga Raju was appointed as Additional Director and IndependentDirector by the Board of Directors at the meeting held on May 26 2017. It is proposed toappoint Mr. D Ranga Raju as Independent Director of the Company not liable to retire byrotation upto the conclusion of 16th Annual General Meeting pursuant to the provisions ofSection 149 of the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

Declaration by Independent Directors

The Independent Directors have submitted their disclosure to the Board that theyfulfill all the requirements of independence so as to qualify as an Independent Directorunder Section 149(6) of the Companies Act 2013 as well as SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015.

Executive Directors

Mr. K S Raju and Mr. K Rahul Raju were re-appointed as Chairman and Managing Directorof the Company respectively for a period of three years effective from August 1 2014.Their term of appointment expires on July 31 2017.

The Board of Directors vide resolution date July 19 2017 based on the commendation ofthe Nomination and Remuneration Committee approved the re-appointment of Mr. K S Raju asChairman of the Company for a period of 3 years with effect from August 1 2017 andpayment of remuneration subject to approval of members of the Company FinancialInstitutions and Central Government.

The Board of Directors at their meeting held on May 26 2017 based on commendation ofNomination and Remuneration Committee approved the re-appointment of Mr. K Rahul Raju asManaging Director of the Company for a period of 3 years with effect from August 1 2017and payment of remuneration subject to approval of members of the Company FinancialInstitutions and Central Government.

The re-appointment of Mr. K S Raju and Mr. K Rahul Raju and payment of remuneration isbeing placed before the members of the Company at the 11th Annual General Meeting to beheld on September 26 2017 for their approval.

Key Managerial Personnel

Mr. M Ramakanth Company Secretary and Mr. Sudhir Bhansali Chief Financial Officer arethe other Key Managerial Personnel of the Company. There were no changes in relation tothe Key Managerial Personnel during the year.

Meetings of the Board

The Board of Directors of the Company had met five times during the year on May 122016 August 6 2016 September 8 2016 December 2 2016 and February 9 2017.

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 (a).

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 -II (b).

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 the Company hadconstituted on July 27 2011 an Audit Committee consisting of highly qualified andexperienced members from various fields.

The Audit Committee was re-constituted and the terms of reference enlarged with effectfrom May 29 2014 to bring it in line with the provisions of Companies Act 2013 andErstwhile Listing Agreement entered into with the Stock Exchanges (now Regulation 18 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015).

The Chairman of the Committee is Dr. N C B Nath an Independent Director and theCommittee consists of Four Independent Directors One Nominee Director and one Whole-timeDirector.

The Committee meets periodically to review the internal audit report quarterlyfinancial statements and annual financial statements and recommends its findings to theBoard apart from taking action independently whenever required. The Statutory AuditorsCompany Secretary and the Internal and Cost Auditors attend and participate in the AuditCommittee Meetings.

The Audit Committee comprises of

Dr. N C B Nath Chairman and Independent Director
Mr. S R Ramakrishnan Member and Independent Director
Mrs. Lalitha Raghuram Member and Independent Director
Mr. C B Mouli* Member and Independent Director
Mr. K S Raju Member and Chairman of the
Company

Mr. Arjun Kumar Arora# Member and Independent Director Mr. Syed Shahabuddin@Memberand Nominee Director Mr. M P Radhakrishnan$ Member and Nominee Director

* - Inducted as Member with effect from August 22 2016

# - Ceased to be a Member with effect from June 17 2016

 

@ - Inducted as Member with effect from May 26 2017

$ - Ceased to be a Member with effect from May 26 2017

Nomination and Remuneration Committee

The Nomination and Remuneration Committee was constituted with effect from April 222014 in compliance with the provisions of the Companies Act 2013 and Erstwhile ListingAgreement entered into with the Stock Exchanges (now Regulation 19 of Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015)

The Company has adopted a Nomination and Remuneration Policy with effect from October1 2014 for determining inter-alia qualifications positive attributes and independenceof a Director matters relating to the remuneration appointment removal and evaluationof performance of the Directors Key Managerial Personnel Senior Management and otheremployees.

Stakeholders Relationship Committee

The Stakeholders Relationship Committee was constituted with effect from April 22 2014in compliance with the provisions of the Companies Act 2013 and Erstwhile ListingAgreement entered into with the Stock Exchanges (now Regulation 20 of

Securities and Exchange Board of India (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 set up a Grievance Redressal Mechanism for all its associates. TheGrievance Redressal Mechanism is aimed to redress the grievances of associatesexpeditiously to ensure good working atmosphere and culture in the organization.

The Company has drawn-up Policy on Bio-diversity Gift Policy Health Safety andEnvironment Policy and Human Rights Policy.

Risk Management Policy

The Board of Directors of the Company in accordance with the Erstwhile ListingAgreement entered into with the Stock Exchanges (now Regulation 21 of Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015) had constituted a Risk Management Committee of the Board of Directors which framesimplements and monitors risk management plan of the Company and lays down procedures toinform the Board of the risk assessment and risk minimization procedures in the Company.

The Company has an Enterprise Risk Management System set up as required by theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015.

As per the Risk Management System the risks of the Company are being regularlyidentified/assessed and documented by way of individual profiles and risk registers. TheCompany is also maintaining web based risk management application by eachdepartment/division at Plant as well as Corporate Office to manage and control the risk instructured manner.

The Risk Management Organization Structure consists of Risk Management SteeringCommittee (RMSC) at apex level and at divisional level Corporate Risk ManagementCommittee (CRMC) and Plant Risk Management Committee (PRMC) were formed to facilitatemonitoring and governance of the ERM process under the purview of Chief Risk Officer on anongoing basis.

Periodical meetings of the CRMC and PRMC are being held wherein the criticalcautionary and acceptable risks are presented by the departments through web based RMSapplication. During such presentations various cross-functional deliberations take placeon the contributing factors and the control measures to mitigate the risks. The outcome ofCRMC and PRMC deliberations and the analysis of risks are presented to RMSC on a quarterlybasis.

The Chief Risk Officer of the Company and the Compliance Officer attend all themeetings of the Risk Management Committee.

Policy on Board Evaluation

The Policy on Board Evaluation was adopted with effect from October 1 2014 by theBoard of Directors in compliance of Companies Act 2013 and the Erstwhile ListingAgreement entered into with the Stock Exchanges (now Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulation 2015.

The purpose of the policy is to assess the effectiveness of the Board as a wholeCommittees of Board and Individual Directors on regular basis and to take necessary stepsfor improving the effectiveness of the Board.

The Nomination and Remuneration Committee has devised the methodology identifiedsample tools for evaluation and also laid down the parameters for evaluation of DirectorsIndependent Directors Managing Director Chairman Committees of the Board and the Board.

The Nomination and Remuneration Committee based on the responses received fromDirectors evaluated the Directors and conveyed the opinion of the Committee to theBoard.

In view of the evaluation not linked to payment of remuneration as the Company hasopted only for payment of sitting fees the evaluation has no financial implications onthe Company.

Whistle Blower Policy/Vigil Mechanism

The Company formulated the policy in compliance with Clause 49 of Erstwhile ListingAgreement. The same is in conformity with Regulation 22 of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 and Section 177(9) of the Companies Act 2013.The Policy aims to prohibit managerial personnel from taking adverse personnel actionagainst employees disclosing in good faith alleged wrongful conduct on matters of publicconcern involving violation of any law mismanagement misappropriation of public fundsamong others.

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

No personnel of the Company was denied access to the Audit Committee.

Corporate Social Responsibility

The Company has always desired to play a proactive role in societal development with anintention to bring positive change in the lives of many. The Company under the aegis ofNagarjuna Foundation started several CSR activities since seven years and continues tosupport the initiatives.

An initiative started in 2009 with the spirit of making a difference has todaydeepened its roots and is making a bigger impact and changing many more lives.

The dedicated support strength initiative and encouragement from the associates ofthe Group to be part of this initiative gave impetus to the movement.

Your Company during the year spent a sum of around Rs.7086988/- (Rupees Seventy LakhsEighty Six Thousand Nine Hundred and Eighty Eight only) towards the CSR activities.

The Company in view of its inadequate profits is not required to statutorilycontribute towards CSR. The Company however contributes to undertake CSR to meet itscontinuing commitment for welfare of the society.

The report on CSR activities and the CSR Responsibility statement signed by ManagingDirector and Chairman of CSR Committee appears as Annexure - III to this Report.

Your Company made contribution in areas of education sports healthcare and communitywelfare under the aegis of Nagarjuna Foundation and during the year proposes tocollaborate with various leading organizations charitable and other funds or trusts.

Corporate Governance

Your Company driven by a desire to be more competitive and recognized globally hadinculcated more than a decade ago rules defining ethical business much before it wasintroduced as statutory compliance.

Your Company firmly believes that building a culture of compliance is more than meetingregulations and standards. Your Company has always proactively met mandated standards andpracticed Corporate Governance in spirit and not just as letter of the law.

The Secretarial Auditor in the Corporate Governance Report has invited attention asemphasis that in view of having an Executive Chairman though the Company is presently incompliance with the provisions Regulation 17 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 it is falling short of having one Independent Director onthe Board as on March 31 2017.

The Company has since appointed Mr. D Ranga Raju as Additional Director and IndependentDirector with effect from May 26 2017 and is in compliance with Regulation 17 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015.

Sustainability Report

The Company as a good governance practice has compiled a Sustainability Report.

A detailed report on the sustainability initiatives taken up by the Company ispublished in the Nagarjuna Sustainability Report. The report is available on the Company'swebsite www.nagarjunafertilizers.com.

Business Responsibility Report

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirement)Regulations 2015 the Company has voluntarily prepared a Business Responsibility Reportdescribing the initiatives taken by the Company from an environmental social andgovernance perspective

A detailed Business Responsibility Report forms part of the Directors Report as Annexure- IV

Related Party Transaction

Particulars of Contracts or Arrangements with Related parties referred to in Section188(1) of Companies Act 2013 appears as Annexure - V.

The transactions with related party are at arms length basis and not material asdefined in SEBI (Listing Obligations and Disclosure Requirement) Regulations 2015.

Particulars of loans guarantees or investments

There were no loans guarantees or investments under Section 186 of the Companies Act2013 during the Financial Year 2016-17 other than a sum of Euro 35000 provided toNagarjuna Industrial Services and Investments Private Limited (NISIPL) the wholly ownedsubsidiary of the Company.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

Disclosure in terms of Companies (Disclosure of particulars in the Report of the Boardof Directors) Rules 1988 in respect of conservation of energy technology absorptionearnings and outgo of foreign exchange is attached as Annexure - VI to this Report.

Extract of Annual Return

Extract of Annual Return appears as Annexure - VII 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

Arbitration Awards have been passed against the Company for the following amounts:

1. Payment of USD 1840000 + interest at 5% pa w.e.f September 12 2013 and costs ofUSD 237500 plus CHF 16359.83 plus GBP 79178.95

2. (a) Cost for Interim Final Award - GBP 465630 + USD

43187.79 with interest at 1% above Bank Rate with 3 monthly rests wef January 7 2016+ GBP 15000

(b) Cost ordered by the Court at London - GBP 100000

(c) Final Award for a sum of

(i) USD 11825000 towards DAP contracts and (ii) USD 2530000 towards NPS contractstaking the total sum awarded to USD 14355000 apart from the sum awarded in the Interimaward

(d) Third Interim Final Award of GBP 110000

The Company is taking necessary steps to contest in relation to the Awards.

Adequacy of Internal Financial Controls with reference to Financial Statements

The Company maintains all its records in SAP system and the work flow and approvals arerouted through SAP.

The Company's Internal Auditors scrutinize on periodical basis and ensure that theinternal controls and the work flow of the organization is being done through the approvedpolicies of the Company. In every quarter the Internal Auditors present the InternalAudit Report and Management comments on the Internal Audit observations to the AuditCommittee.

The Board of Directors of the Company have adopted various policies like the RelatedParty Transaction Whistle Blower Policy etc for ensuring the orderly and efficientconduct of its business for safeguarding its assets prevention and detection of fraudsand errors accuracy and completeness of accounting records and timely preparation ofreliable financial information.

The Auditors in their Report of Internal Financial Controls (Annexure A to theIndependent Auditors' report) have opined that the Company has in all material respectsan adequate Internal Financial Controls System over financial reporting and such InternalFinancial Controls over financial reporting were operating effectively as at March 312017 based on the internal control over financial reporting criteria established by theCompany considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting issued by theInstitute of Chartered Accountants of India.

Registrar and Share Transfer Agents

The Company has been functioning as Category II Share Transfer Agent (in-house)pursuant to the Securities and Exchange Board of India (SEBI) approval to the Company.

Deposits

The Company has not accepted any deposits during the year nor are there any unpaid/unclaimed deposits at the end of the year.

D. AUDITORS AND AUDIT REPORT

Statutory Auditors

M/s. M Bhaskara Rao & Co. Chartered Accountants (Firm Registration No-000459S)Hyderabad the Company's auditors were appointed at the 8th Annual General Meeting for aterm of five years from the conclusion of 8th Annual General Meeting to the conclusion of13th Annual General Meeting subject to ratification by the members of the Company everyyear.

M/s. M Bhaskara Rao & Co have signified their willingness to accept ratification oftheir appointment and have further confirmed their eligibility under Section 141 of theCompanies Act 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 there under commend the ratification of the appointmentof Statutory Auditors for the Financial Year 2017-18 for consideration of theshareholders.

Auditors Report

The Statutory Auditors' of the Company have invited attention as emphasis on the matterin relation to:

a. Note 5.1 regarding the provision for diminution in the value of investment made fora value of investment in Jaiprakash Engineering and Steel Company Limited (JESCO) asusidiary and its adequacy based on management assessment for the reason stated in thesaid note.

b. Note 25.1 regarding recognising income from urea operations including reimbursementclaims for additional fixed cost input escalation and for production beyond reassessedcapacity based on prices and provisions applicable under NPS-III modified NPS-IIIpending notification of the final prices under New Urea Policy 2015 and consequentialadjustments if any that may arise.

c. Note 35.1.1 regarding Arbitration awards passed against the Company for USD14398188 and GBP 690630 the impact of which has not been recognized in the FinancialStatements for reasons stated in the said note.

Cost Auditor

Pursuant to Section 148 of the Companies Act 2013 and the Rules made thereunder theCentral Government has directed that the cost accounts maintained by the Company beaudited by a Cost Auditor.

Mr. Dantu Mitra Cost Accountant ceased to be the Cost Auditor of the Company witheffect from October 3 2016.

The Board of Directors of the Company have appointed M/s Sagar & Associates CostAuditors (Firm Registration No. 000118) Hyderabad as Cost Auditor of the Company witheffect from October 14 2016 for the Financial Year 2016-17 for the manufacturedFertilizer Products and for the manufactured Micro Irrigation products at a remunerationas may be approved by the members of the Company.

The Board of Directors at their meeting held on May 26 2017 re-appointed M/s. Sagar& Associates as Cost Auditors of the Company for the Financial Year 2017-18 at aremuneration as maybe fixed by the Board of Directors of the Company.

Accordingly ratification of remuneration paid to the Cost Auditor for the FinancialYear 2016-17 and approval for the remuneration payable to the Cost Auditor for theFinancial Year 2017-18 is being placed before the members at the 11th Annual GeneralMeeting of the Company to be held on September 26 2017 for approval.

Secretarial Auditor

The Board of Directors at their meeting held on May 26 2017 pursuant to the provisionsof Section 203 of the Companies Act 2013 have appointed Mr. C S S Krishna Partner M/sKBG Associates Company Secretaries Hyderabad as the Secretarial Auditor of the Companyto undertake Secretarial Audit for the Financial Year 2017-18.

Secretarial Audit Report

Pursuant to Section 204 of the Companies Act 2013 the Secretarial Audit Report forthe Financial Year 2016-17 appears as Annexure - VIII to this Report.

The Secretarial Auditor in his report has invited attention as emphasis that in view ofhaving an Executive Chairman though the Company is presently in compliance with theprovisions Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 it is falling short of having one Independent Director on the Board ason March 31 2017.

The Company has since appointed Mr. D Ranga Raju as Additional Director and IndependentDirector with effect from May 26 2017 and is in compliance with Regulation 17 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015.

Internal Audit

The Company has a well established system of Internal Audit which carries out audit onRisk Management framework covering the gamut of financial marketing plant operations andservice functions.

The Company's Internal Audit function has obtained Quality Management System (ISO 9001:2000) certificate in December 2006 and the same has been confirmed.

A Chief Internal Auditor of the Company has been appointed by the Board of Directorsin compliance with Companies Act 2013 and Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015.

E. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) and 134(5) of the Companies Act 2013 your Directorshereby report that:

(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;

(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 Governmentof Andhra Pradesh Government of Telangana and the Financial Institutions and Company'sbankers for their assistance and cooperation.

Further the Company places on record its sincere appreciation for the continuingsupport and unstinting efforts of investors dealers and associates and all stakeholdersin ensuring an excellent all round operational performance.

By Order of the Board

Hyderabad K S Raju
August 9 2017 Chairman

ANNEXURE - I

Statement containing salient features of the financial statement of subsidiaries/associate companies/ joint ventures

(Pursuant to first proviso to sub-section (3) of section 129 read with Rule 5 ofCompanies (Accounts) Rules 2014 - Form AOC-I)

Part "A" : Subsidiaries Rs. in lakhs

Subsidiary Company
Particulars Jaiprakash Engineering and Steel Company Limited
(JESCO)
Reporting period for the subsidiary concerned if different from the holding Company's reporting period March 31 2017
Reporting currency and Exchange rate as on the last date of the relevant Financial Year in the case of foreign subsidiaries INR
Share capital 23000000 shares of Rs.10/- each
Reserves and Surplus (464.23)
Total assets 1830.87
Total Liabilities 1830.87
Investments -
Turnover 1.25
Profit/(Loss) before taxation (1.65)
Provision for taxation -
Profit after taxation (1.65)
Proposed Dividend -
% of shareholding 99.84

Part "B" : Associates and Joint Ventures Rs. in Lakhs

Nagarjuna Agricultural KVK Raju International
Particulars
Research and Development Institute Leadership Academy
1. Latest Audited Balance Sheet Date March 31 2017 March 31 2017
2. Shares of Associate/Joint Ventures held by the Company at the year end
Number 25020 150000
Amount of Investment in Associates/Joint Venture 2.50 15.00
Extent of Holding % 25% 42.85%
3. Description of how there is significant influence Common Directors
4. Reason why the associate/joint venture is not consolidated The investments in associates are not considered for consolidation as the Companies are registered under Section 8 of the Companies Act 2013 and by law are not allowed to transfer any funds to the investing Company. These investments are accounted for in accordance with Accounting Standard 13 - "Accounting for Investments".
5. Net worth attributable to Shareholding as per latest Audited Balance Sheet (0.063) (4.12)
6. Profit / Loss for the year - (0.073)
Considered in Consolidation - -
Not considered in Consolidation - (0.073)
By Order of the Board
Hyderabad
K S Raju
May 26 2017
Chairman

ANNEXURE - II (a)

Particulars of Remuneration of Directors / Key Managerial Personnel / Employees

(Pursuant to Sec.197(12) of the Companies Act 2013 read with Rule 5(1) of Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014)

1. The ratio of the remuneration of each director to the median remuneration ofthe employees of the Company for the Financial Year- 2016-17.

S. No. Name of the Director Median Remuneration Directors Remuneration Median Remuneration in %
(Rs.) (Rs.)
1. Mr. K S Raju 448600 6856619 15.28
2. Mr. K Rahul Raju 448600 6680199 14.89

2. The Percentage increase in remuneration of Manager Chief Financial OfficerCompany Secretary in the Financial Year- 2016-17

S. No. Name Designation 2015-16 2016-17 Percentage
(Rs.) (Rs.) Increase of salary
1. Mr. K S Raju Chairman 7117582 6856619 -3.67
2. Mr. K Rahul Raju Managing Director 7006259 6680199 -4.65
3. Mr. M Ramakanth Company Secretary 6901573 8796418 27.46
4. Mr. Sudhir Bhansali CFO 8227322 9419258 14.49

3. The percentage increase in the median remuneration of employees in theFinancial Year 2016-17.

Particulars 2015-16 2016-17 Percentage Increase of Median salary
(Rs.) (Rs.)
Median Salary 421900 448600 6.33
4. The number of permanent employees on the rolls of the Company.
Particulars 2015-16 2016-17
No. of Employees 1550 1605

5. The explanation on the relationship between average increase in remunerationand Company Performance

The average increase in remuneration is marginal and aimed to protect the employeesremuneration from inflation and not related to Company performance.

6. Comparison of the remuneration of the Key Managerial Personnel againstperformance of the Company

The average increase in remuneration is marginal and aimed to protect theemployees remuneration from inflation and not related to Company performance.

7. Variations in the Market Capitalisation of the Company Price Earnings Ratioas at the closing date of the current Financial Year and previous Financial Year andpercentage increase over decrease in the market quotations of the shares of the Company incomparison to the rate at which the Company came out with the last public offer in case oflisted companies and in case of unlisted companies the variations in the net worth ofthe Company as at the close of the current Financial Year and previous Financial Year.

The equity shares of the Company were not traded as on closing date of the previousFinancial Year i.e. March 31 2016.

8. Average percentile increase already made in the salaries of employees otherthan the managerial personnel in the last financial year and its comparison with thepercentile increase in the managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in the managerial remuneration

9.71% including Managerial personnel except directors.

9. The key parameters for any variable component of remuneration availed by thedirectors

There is no variable component paid during the year in the remuneration of thedirectors.

10. The ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year- 2016-17.

Emp No Name Designation

Ratio

Salaries (Rs.)

2015-16 2016-17 2015-16 2016-17
5002 Mr. K S Raju Chairman 1.00 1.00 7117582 6856619
1825 Mr. Banibrata Pandey President-Performance Biomaterials and Fuels 1.12 1.43 7944714 9827302
50578 Mr. Sudhir Bhansali CFO 1.16 1.37 8227322 9419258
90323 Mr R S Nanda Sr.Advisor to Chairman & MD 1.07 1.27 7609202 8700370
90414 Mr. J Mahalingam Executive Director-Corporate Affairs 1.15 1.47 8169134 10081813
90060 Mr. R.M. Deshpande Executive Director-FICC 0.90 1.13 6399626 7767311
1425 Mr. M Ramakanth Company Secretary 0.97 1.28 6901573 8796418

11. Affirmation that the remuneration is as per the remuneration policy of the Company

The Remuneration paid is as per the remuneration policy of the Company.

ANNEXURE - II (b)

Statement of particulars of employees

(Pursuant to Section 197(12) of the Companies Act 2013 read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014)

S. No. Name Designation Remune- ration received (Rs.) Nature of Employ- ment Qualifi- cations Years of experience Date of commen- cement of employ- ment Age Last employment held by employee before joining No. of equity shares held Relation with Director or Manager
1 Mr . K S Raju Chairman 6856619 Refer Note 1 B.E(Mech) 42 01-08-11 66 Chairman & MD Nagarjuna Fertilizers and Chemicals Ltd. ( Merged ) Nil Father of Managing Director
2 Mr. K Rahul Raju Managing Director 6680199 Refer Note 1 B.Com(Hons) 19 01-08-11 40 JMD Nagarjuna Fertilizers and Chemicals Ltd. (Merged) Nil Son of Chairman
3 Mr. M Ramakanth Company Secretary 8796418 Refer Note 1 B.Sc. FCSLLB Dip. In Public Relations P.G.Dip in Business Admn. PG Dip. in Personnel Management 32.5 14-09-94@ 60 Company Secretary Nagarjuna Investment Trust Ltd. Nil -
4 Dr.Banibrata Pandey President Performance Bio- materials and Fuels 9827302 Refer Note 1 M.Sc. (Micro) Ph.D(Sc)M.B.A 34 19-09-02@ 57 Sr. Manager Barnby Technologies USA Nil -
5 Mr. Sudhir Bhansali CFO 9419258 Refer Note 1 B.Com ACS ACA 36 13-05-08@ 59 President & CFO Andhra Pradesh Paper Mills Ltd. Nil -
6 Mr. R S Nanda Sr. Advisor to Chairman & MD 8700370 Refer Note 1* B.Sc. (Eng.) Mech 51 26-06-04@ 73 President & MD Coromandel Fertilizers Ltd. 2420 -
7 Mr. J Mahalingam Exec. Director- Corporate Strategy 10081813 Refer Note 1* B.A C.A 38 01-10-90@ 63 DGM-Finance Andhra Cement Company Nil -
8 Mr. R M Deshpande Exec. Director - Coordination 7767311 Refer Note 1* M.Com LLB 45 03-04-07@ 69 Advisor to MD GSFC Nil -
9 Mr. D Jayarami Reddy Senior Vice President - Operations 6743359 Refer Note 1 B.Sc(Ag) 33 10-07-14 58 Vice President Indo Gulf Fertilisers 550 -
10 R Raghavan Sr. Vice President- Urea Manufacturing 6679230 Refer Note 1 B.Tech BOE 35 04-01-99@ 58 Day Co-Ordination Urea Plant SAFCO - SABIC Group Nil -
11 K Pradeep Kumar Vice President- HPD 6292343 Refer Note 1 M.Tech Phd. 23 02-11-15 45 HR Head India Middle East Africa - Signode India Ltd Nil -
12 K Himakara Dharudu Vice President Projects 6499215 Refer Note 1* M.A 47 29-01-08@ 71 GM Business Development - Inspection - PDIL Nil -
13 Navinchadra M Suthar Chief Operating Officer-Captive Power Project 6053665 Refer Note 1* Diploma in Mech.Engg. 52 05-01-15 73 Sr. Vice President (Thermal Power) SEW Infrastructure Nil -
14 K Radha Krishna VP-Operations & Marketing 6000557 Refer Note 1 B.Tech Specialisation in Plastic Engg CIPET. 29 09-02-95@ 52 Manager - Plastics Timex Watches Ltd Nil -
15 G V Jagadeesh Kumar Sr. G M - Business Strategy & Corp Planning 6278612 Refer Note 1 M. Tech MBA 18 23-09-09@ 41 Sr. Manager Business Analyst RIL Nil -
16 M S N Murthy Chief Risk Officer 6137926 Refer Note 1 B.Com CA 24 23-05-12 50 CFO Sujana Towers Ltd. Nil -

All the above mentioned appointments are non-contractual except marked

"*" and are terminatable by notice.

@ - Continue employment from Erstwhile NFCL