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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 233594
52-Week high 20.67
52-Week low 3.70
P/E
Mkt Cap.(Rs cr) 1,006
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

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

Company director report

Dear Members

Your Directors present the Fourteenth Annual Report on the business and operations ofNAGARJUNA FERTILIZERS AND CHEMICALS LIMITED ("NFCL") together with the AuditedFinancial Statements of your Company for the year ended March 312020 and otheraccompanying reports notes and certificates.

A. Business and Financial Highlights

The Standalone and Consolidated Financial Results of the Company for the year endedMarch 312020 prepared as per Ind AS reporting are as under:

Standalone Financial Results

Particulars 2019 - 2020 Current year 2018 - 2019 Previous year
Net Sales/Income from Operations 1704.51 1940.35
Other Income 28.98 26.47
Total Expenditure
a. Changes in inventories of finished goods stock-intrade and work in progress (5.01) 35.49
b. Cost of materials consumed 785.62 709.42
c. Employee Benefits expense 105.33 157.45
d. Purchase of Stock-inTrade 13.95 258.56
e. Power and Fuel 701.23 599.94
f. Other expenses 227.26 317.17
Total 1828.38 2078.03
Finance cost 328.79 307.99
Depreciation and amortization 82.13 88.83
Profit/ (Loss) before exceptional items and tax (505.81) (508.03)
Exceptional Items - 18.86
Profit/(Loss) before tax (505.81) (526.89)
Provision for tax 0.78 0.00
Deferred tax (34.24) (36.16)
Profit / (Loss) after tax (472.35) (490.73)
Other Comprehensive income (net of tax) (3.42) (0.08)
Total Comprehensive income (468.93) (490.65)
Dividend - equity shares - -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (468.93) (490.65)
Paid Up equity share capital (Face value of Re.1/- per share) 59.81 59.81
Reserves excluding revaluation reserve 53.89 522.82
Earnings per share (annualized) - in Rs.
Basic and Diluted (7.90) (8.21)

Consolidated Financial Results

(Rs.in crores)

Particulars 2019 - 2020 Current year 2018 - 2019 Previous year
Net Sales/Income from Operations 1704.51 1940.35
Other Income 29.00 26.48
Total Expenditure
a. Changes in inventories of finished goods stock-in-trade and work in progress (5.01) 35.49
b. Cost of materials consumed 785.62 709.42
c. Employee Benefits expense 105.33 157.45
d. Purchase of Stock-in-Trade 13.95 258.56
e. Power and Fuel 701.23 599.94
f. Other expenses 213.81 312.68
Total 1814.93 2078.05
Finance cost 328.79 307.99
Depreciation and amortization 82.13 88.83
Profit/ (Loss) before exceptional items and tax (492.35) (503.54)
Exceptional Items - 18.86
Profit/(Loss) before tax (492.35) (522.40)
Provision for tax 0.78 0.00
Deferred tax (34.24) (36.16)
Profit / (loss) after tax before minority interest (458.89) (486.24)
Share of Loss transferred to Minority Interest (0.00) (0.00)
Share of Loss from Associate Company - -
Profit / (Loss) for the year (458.89) (486.24)
Other Comprehensive income (net of tax) (3.42) 0.08
Total Comprehensive income (455.48) (486.16)
Dividend-equity shares - -
Tax on proposed dividend - -
Balance sheet (455.48) (486.16)
Paid-up equity share capital (Face value of Re.1/- per share) 59.81 59.81
Reserves excluding revaluation reserve 71.82 527.29
Earnings per share (annualized) - in Rs.
Basic and Diluted (7.67) (8.13)

Financial Summary

The loss after tax for the year was Rs.472.35 crores as against Rs. 490.73 crore forthe previous year. Due to Financial stress the company has not operated Plant - II duringfirst half and Plant - I could not be operated during second half of the financial year2019-2020. Consequently production during the year was lower and had increased energycost.

Share Capital

The Paid-up Equity Capital of the Company as on March 31 2020 is Rs.598065003/-consisting of 598065003 Equity Shares of Re.1/- each.

Transfer to Reserves

There has been no transfer to General Reserves during the Financial Year 2019-20 inview of losses incurred by the Company.

Dividend

The Board of Directors of the Company after considering the operational performancefor the financial year ended on March 312020 do not recommend any dividend for the year.

Plant Operations

Urea

Your Company during the year 2019-20 manufactured 6.925 LMT of urea as against 5.85 LMTin the previous year. The production for the year 2019-20 is less compared to the usuallevel owing to only one plant operation on account of acute financial stress due toinadequate availability of Fund Based and Non-Fund based working capital facilities fromBanks

Micro-Irrigation

Your Company achieved a production of 260.56 Lakh Meters in FY 2019-20 against 954.79Lakh Meters during the previous year. PVC pipes production of 7.51 Lakh Meters in FY201920 against 32.31 Lakhs Meters during the previous year.

MARKETING

Urea

Your Company achieved a sale of manufactured urea of 6.87 LMT compared to 6.38 LMT inthe previous year.

The total urea sales for both manufactured and imported urea was 7.14 LMT compared to8.85 LMT of previous year

Other Traded Products

Traded Bulk Products

Your Company could not sell any of the Traded Bulk Products during the year. In theprevious year also there was no sale of Traded Bulk Products.

Specialty Fertilizers

Your Company sold 463 MT of Specialty Fertilizer during the year in comparison withsales of 8650 MT during the previous year

Micro-nutrients

Your Company sold 180 MT of Micro-nutrients during the year in comparison with sales of2842 MT during the previous year.

Supplements and OSR

Your Company sold 373 MT/KL of Supplements & OSR during

the year in comparison with sales of 7290 MT/KL during the previous year.

Customized Fertilizers

Your Company sold 11570 MT of Customized Fertilizers during the year in comparison withsales of 14126 MT during the previous year.

Nagarjuna Brand

The Company has been using Nagarjuna Brand/ Trademarks under a License Agreement datedJanuary 29 1998.

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 isbeing complied from time to time.

Health & Safety

By following the best practices and with adoption of international standards andprocedures Plant Operations continued. Your Company as on March 31 2020 completed1566272 accident free man-hours by employees and contractors of the Company.

Further to strengthen the procedures and practices MAH inspection at Ammonia StorageTanks and Cooling Towers Area Safe Work Practices Audit PPE Audit etc. were conducted.Refresher Training has been given to Rescue Squad and basic Fire Fighting techniques toAssociates.

Energy Saving Schemes Implementation at NFCL Kakinada

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 2020-21 onwards).

Resolution Plan (RP)

A. Background for Debt Restructuring

After a decade of focused turn around by 2013 from a pure urea producer NFCL hadbecome India's largest private sector fertilizer company by sales volume (with a pan Indiapresence). The company was also the most profitable urea manufacturing company (per metricton of urea produced) and the fastest growing and the most profitable micro irrigationcompany in the country.

B. Reasons for financial stress and status on debt resolution.

1. During FY 2015 on account of a GAIL pipeline accident around 100KM from the thecompany's plants the company had to stop urea production and started incurring losses.

2. The Company's lenders constituted an empowered Joint Lenders Forum (JLF) in 2015 andapproved rectification under the extant Corrective Action Plan (CAP) guidelines of RBIdated 2014 along with funding. The funding assessed by the lenders for rectification wasRs 3050 Crs of working capital and Rs 800 Crs of Working Capital Term Loan. The Promoter(AMPL) and the nominees agreed to provide share pledge and personal guarantees for theassessed CAP loans*. Due to partial release of the funds assessed for rectification in FY16 the company's fast growing and profitable non-urea businesses were severely impactedand the company could not meet the CAP targets resulting in losses and eventual loandefaults in 2018.

3. The company's financial stress is purely on account of external factors. While thereare ongoing litigations relating to Debt Resolution of the disputed CAP loans in variouscourts the company is working closely with lenders and other agencies and targeting toamicably resolve the debt stress by the end of FY21.

C. Cost Saving Programmes Undertaken

1. Closure of Non-Core Divisions: The Company has decided to focus on Urea and MicroIrrigation manufacturing and distribution business and has decided to and closed down itsResearch Development and Projects Divisions and has outsourced and closed down its ikisandivisions during the first quarter of 2019- 20. Post closure of the ikisan division thecompany had outsourced the remaining eNAM work and agreed to transfer the contractualundertaking to Farmgate Technologies Private Limited (a sub contractor) throughcompetitive bidding to avoid any contingent liabilities. While the company has closed downthe ikisan division it had agreed to participate in future project enquires along withFarmgate consortiums for a 5% share in lump sum profits without financial or operationalobligations.

2. Additionally the Company has substantially reduced Fixed Costs through various costreduction initiatives across the Company.

3. The Company would be disposing non-core assets in a scheduled manner to contributetowards its planned Debt Restructuring Program.

4. The Company is working on legal remedies to contain and reduce various contingentliabilities.

Agriculture lands:

The Company is in possession of agricultural lands that have come into the company aspart of the Composite Scheme of Arrangement and Amalgamation in 2011 which have beenrecorded in the books of accounts at fair value as part of the Scheme.

The Board of Directors in compliance with the requirements of the provisions of AndhraPradesh / Telangana Land Reforms Act 1973 (Act) had decided to impair the excessAgricultural Land under the said Act and restate the agricultural land value in the booksof accounts of the company.

Acquisition of Kapavaram lands by Government of Andhra Pradesh:

The company holds land admeasuring 197.08 acres (Kapavaram Land) situated at KapavaramVillage Biccavolu Mandal East Godavari District Andhra Pradesh.

The District Collector East Godavari District pursuant to Section 11 of The FairCompensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act2013 (Act) had issued gazette notification dated February 24 2020 for acquisition ofland in Kapavaram Village Biccavolu Mandal East Godavari District for theimplementation of Government of Andhra Pradesh public welfare scheme "PedallandarikiIllu" which includes 197.08 acres of land of NFCL.

The gazette notification was issued with the authorization to the Revenue DivisionalOfficer Ramachandrapuram and his staff to enter upon and survey land take levels of anyland dig or bore into the sub-soil & do all other acts required for the properexecution of their work as provided and specified in section 12 of the Act.

Further under section 11(a) of the Act no person shall make any transaction or causeany transaction of land i.e. sale/ purchase etc. or create any encumbrances on such landfrom the date of publication of such notification without prior approval of the Collector.Pursuant to the above Notification leading to compulsory acquisition the Companyapproached the Government for enabling appropriate negotiation.

The IDBI Bank Limited to which the said land was mortgaged had issued No ObjectionCertificate (NOC) to the Government for the acquisition of the said land.

In view of the above the Board of Directors had approved for the negotiationsfinalization and subsequent handing over of land of the company at Kapavaram village ofBiccavolu Mandal East Godavari district Andhra Pradesh under land acquisition toGovernment of Andhra Pradesh

Change in the nature of business

During the year there was no change in the nature of business of the company.

Subsidiaries Joint Ventures or Associate Companies

During the year under review the company has only one subsidiary viz. JaiprakashEngineering And Steel Company Limited (JESCO) (a company incorporated under Companies Act1956 bearing CIN U00337KA1993PLC014694 having its Registered Office at 510 3RD A Cross2nd Main3rdBlock Rajmahal Vilas-II Dollars Colony Bangalore-560094 Karnataka.

JESCO couldn't implement the approved projects due to delayed approvals from KarnatakaIndustrial Area Development Board (KIADB) / Government of Karnataka (GOK).

Further GOK had issued GO taking back the land and allotted the JESCO land to NavyCoast Guard. The matter is pending in the Court of Law.

In view of the non-execution of sale deeds and legal complications the Board ofDirectors as a prudent measure had approved writing off of entire investment in itssubsidiary at their meeting held on February 12 2020.

In view of the writing off the entire investment of the company in JESCO the Board ofDirectors at their meeting held on November 30 2020 had approved to sell transferlease and/or otherwise dispose of the whole or substantially the whole of the investmentin JESCO.

The proceeds arising out of the sale of Investment in JESCO shall be utilized for thepurpose / implementation of Resolution Plan in the Company.

The company has two Associate Companies viz. Nagarjuna Agricultural Research AndDevelopment Institute Private Limited (A company incorporated under Companies Act 1956bearing CIN U29100TG1995PTC022409 and having its registered office at Nagarjuna HillsPunjagutta Hyderabad - 500082 Telangana) and K V K Raju International Leadership Limited(a company incorporated under Companies Act

1956 bearing CIN U51100TG1995PLC022410 and having its registered office at NagarjunaHills Punjagutta Hyderabad - 500082 Telangana).

Further Nagarjuna Agricultural Research and Development Institute Private Limitedestablished in 1995 supports agricultural research and farmer training under lease ofagricultural land situated at Wargal admeasuring 97.14 acres from the Company.

There is no change in the status of subsidiaries or associates companies during theyear under review. There is no material fact that requires mention on the performance andfinancial position of the Associate Companies.

Accounts of Subsidiaries

Consolidated financial statements incorporating the accounts of the Subsidiary Companyare enclosed along with the financial statements of the Company. Jaiprakash EngineeringAnd Steel Company Limited (JESCO) is not a material subsidiary whose income or net worthin the immediately preceding accounting year does not exceeds 20% of the consolidatedincome or net worth respectively of the Company and its subsidiaries as per the thresholdslaid down under the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 (hereinafter referred to as "Listing Regulations").

Statement containing salient features of the financial statement of Subsidiary /Associate Companies appears as Annexure I to this Report.

Except mentioned above regarding write off investment of the Company in JESCO and theapproval of the Board of Directors to sell transfer lease and/or otherwise dispose ofthe whole or substantially the whole of the investment in JESCO there is no material factthat requires mention on the performance and financial position of the JaiprakashEngineering and Steel Company Limited.

The Financial Statements of the Subsidiary and Associates are available for inspectionby the Members at the Registered Office of the Company pursuant to the provisions ofSection 136 of the Companies Act 2013. The Company shall provide free of cost a copy ofthe financial statements of its subsidiary companies to the Members upon request. Thestatements of the subsidiaries companies are also available on the website of the Companyat http://www.nagarjunafertilizers.com/ investor.htm.

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.

D. Directors Board Committees Key ManagerialPersonnel and Remuneration Directors

Vacation of office of Mr. V V S Ravindra Nominee Director IDBI Bank Limited

In terms of Section 167 of the Companies Act 2013 Mr. V V S Ravindra NomineeDirector IDBI Bank Limited had vacated his office of Directorship of the Company onAugust 312020 as he had been absent from all the Board Meetings held during the periodof 12 months from August 132019.

Resignation of Mr. Syed Shahabuddin Nominee of State Bank of India

Mr. Syed Shahabuddin Nominee of SBI has resigned from the office of directorship witheffect from June 13 2019 due to disqualification under Section 164 (2) of the CompaniesAct 2013.

The Board placed on record its appreciation for the services and contributions made byMr. Syed Shahabuddin during his tenure as the Director of the Company.

Independent Directors

Resignation of Mr. C.B. Mouli Independent Director

Mr. C B Mouli Director of the Company resigned from the Directorship with effect fromOctober 10 2019 due to personal reasons.

The Board placed on record its appreciation for the services and contributions made byMr. C B Mouli during his tenure as the Director of the Company.

Appointment of Ms. Girija Bhan and Hon'ble Shri Justice K C Bhanu (Retd) IndependentDirectors

In accordance with Section 149 152 and Schedule IV read with relevant Rules of theCompanies Act 2013 Ms. Girija Bhan and Hon'ble Shri Justice K C Bhanu (Retd) have beenappointed as Additional Directors and Independent Directors with effect from November 112019 for a period of five (5) years not liable to retire by rotation by the Board ofDirectors of the Company subject to the approval of the members of the Company.

The Members at the 13th Annual General Meeting held on December 24 2019 approved theappointment of Ms. Girija Bhan and Hon'ble Shri Justice K C Bhan (Retd) as IndependentDirectors of the Company for a period of five (5) years not liable to retire by rotation.

Appointment of Mr. Rajendra Mohan Gonela as an Independent Director

In accordance with Section 149 152 and Schedule IV read with relevant Rules of theCompanies Act 2013 Mr. Rajendra Mohan Gonela have been appointed as Additional Directorand Independent Director with effect from May 28 2020 for a period of five (5) yearsnot liable to retire by rotation by the Board of Directors of the Company subject to theapproval of the members of the Company.

The proposed appointment is being placed before the members for their approval.

During the year under review there is no change in the Composition of Board ofDirectors except mentioned above. In the opinion of the Board the Independent Directorspossess adequate integrity expertise and proficiency.

Re-appointment of Mrs. Lalitha Raghuram as an Independent Director

The Board of Directors of the Company appointed Mrs. Lalitha Raghuram as an IndependentDirector of the Company for a period of five years with effect from April 18 2015.

In terms of the provisions of Section 149 of the Companies Act2013 and the Rules madethereunder an Independent Director can be reappointed for a second term of maximum 5(five) years by obtaining approval of the shareholders by a way of special resolution andsubject to report of performance evaluation and on disclosure of such reappointment in theBoard's Report.

In accordance with Section 149 152 and Schedule IV read with relevant Rules of theCompanies Act 2013 Mrs. Lalitha Raghuram have been re-appointed as an IndependentDirector with effect from April 18 2020 for a period of five (5) years not liable toretire by rotation by the Board of Directors of the Company subject to the approval ofthe members of the Company.

The proposed appointment is being placed before the members for their approval.

During the year under review there is no change in the Composition of Board ofDirectors except mentioned above. In the opinion of the Board the Independent Directorspossess adequate integrity expertise and proficiency

Key Managerial Personnel

Resignation of Company Secretary

Mr. K Chandra Sekhar Naidu Company Secretary and Compliance Officer resigned from theCompany with effect from July 012019

Resignation of Chief Financial Officer

Mr. H Muralidhar Chief Financial Officer and Key Managerial Personnel resigned fromthe Company with effect from November 012019.

Appointment of Company Secretary

Mr. Vijaya Bhasker M has been appointed as the Company Secretary and ComplianceOfficer of the Company with effect from November 29 2019.

Appointment of Chief Financial Officer

The Board of Directors at their meeting held on November 30 2020 had appointed Mr. KRahul Raju Managing Director as the Chief Financial Officer of the Company with effectfrom November 30 2020 to fill the vacancy and comply with the requirements of applicablelaws until the Company finds a suitable candidate for the position.

Executive Director

Mr. K Rahul Raju was re-appointed as the Managing Director of the Company for a periodof three years effective from August 12017. His term of appointment expired on July312020

The Board of Directors at their meeting held on August 14 2020 based on thecommendation of the Nomination and Remuneration Committee had approved the re-appointmentof Mr. K Rahul Raju as Managing Director of the Company for a period of 3 years witheffect from August 01 2020 and payment of remuneration subject to the prior approval ofthe Financial Institutions/Banks and the approval of the members of the Company

The re-appointment of Mr. K Rahul Raju and payment of remuneration is being placedbefore the members of the Company at the 14th Annual General Meeting.

The details of Directors being recommended for re-appointment are contained in theCorporate Governance Report.

Key Managerial Personnel

The following are the Key Managerial Personnel of the Company as defined under Sections2(51) 203 of the Companies Act 2013 read with The Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 for the year ended March 312020:

a) Mr. K. Rahul Raju Managing Director

b) Mr. K Chandra Sekhar Naidu Company Secretary (resigned w.e.f July 012019)

c) Mr. M Vijaya Bhasker Company Secretary (w.e.f November 29 2019)

Retiring by Rotation

In terms of the provisions of Section 152 of the Companies Act 2013 and Articles ofAssociation of the company Mr. Uday Shankar Jha and Mr. Chandrapal Singh Yadav retires atthe forthcoming Annual General Meeting and being eligible offers themselves forreappointment. The Board of Directors recommends the reappointment of Mr. Uday Shankar Jhaand Mr. Chandrapal Singh Yadav as directors liable to retire by rotation forconsideration of the Members.

Declaration by Independent Directors The Independent Directors have submitted theirdeclaration to the Board that they fulfill all the requirements of independence so as toqualify as an Independent Director under Section 149(6) of the Companies Act 2013 andRegulation 25 of Listing Regulations.

Meetings of the Board

The Board of Directors of the Company had met four times during the year on May 242019 August 13 2019 November 12 2019 and February 12 2020.

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) to this report.

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) to this report.

Familiarization Programme and Performance Evaluation

Details of the Familiarization Programme and Performance Evaluation are incorporated inthe Corporate Governance Report.

COMMITTEES Audit Committee

The Audit Committee of the Board of Directors is in compliance with the provisions ofSection 177 of the Companies Act 2013 and Regulation 18 of Listing Regulations. The termsof reference are in compliance with the provisions of the Law. The Chairman of theCommittee is Mrs. Girija Bhan Independent Director as on March 31 2020 and the Committeeconsists of three Independent Directors and one Non-Executive Director. The Board hasaccepted all the recommendation made by the Audit Committee.

The Committee meets periodically to review the internal audit report quarterlyfinancial results and annual audited financial statements among others and recommends itsfindings to the Board apart from taking action independently whenever required. TheStatutory Auditors Company Secretary Internal Auditor and Cost Auditors attend andparticipate in the Audit Committee Meetings.

The Audit Committee comprises of

Mrs. Girija Bhan1 Chairperson and Independent Director
Mrs. Lalitha Raghuram Member and Independent Director
Mr. Uday Shankar Jha2 Member
Mr. Rajendra Mohan Gonela3 Member

1 Inducted as a member with effect from November 11 2019

2 Inducted as a member with effect from June 20 2019

3 Inducted as a member with effect from May 28 2020

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 Regulation 19 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015.

The Company has adopted a Nomination and Remuneration Policy with effect from October12014 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.

The Nomination and Remuneration Committee comprises of:

Mrs. Lalitha Raghuram Chairperson and Independent Director Mr. Uday Shankar Jha1Member and Non-executive Director Ms. Girija Bhan2 Member and IndependentDirector

Mr. V V S Ravindra3 Member and Nominee Director

1 Inducted as a member with effect from September 30 2020

2 Inducted as a member with effect from November 11 2019

3 Ceased to be a member with effect from August 31 2020

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 Regulation 20 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015. The Committee reviews and ensures Redressal of investors' grievances.

The Stakeholders Relationship Committee comprises of:

Mrs. Lalitha Raghuram Chairperson and Independent Director
Mr. V V S Ravindra1 Member and Nominee Director
Mrs. Girija Bhan2 Member and Independent Director
Mr. Uday Shankar Jha3 Member and Non-executive Director

1 Ceased to be a member with effect from August 31 2020

2 Inducted as a member with effect from November 11 2019

3 Inducted as a member with effect from September 30 2020

Corporate Social Responsibility (CSR) Committee

The CSR Committee comprises of three members of which one is an Independent Director.The Chairman of the Committee is an Independent Director.

The Corporate Social Responsibility Committee comprises of:

Mrs. Lalitha Raghuram Chairperson and Independent Director
Mr. K Rahul Raju Member and Executive Director
Mr. V V S Ravindra1 Member and Nominee Director
Mr. Uday Shankar Jha2 Member and Non-executive Director

1 Ceased to be a member with effect from August 31 2020

2 Inducted as a member with effect from September 30 2020

E. 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 in place Policy on Bio-diversity Gift Policy Health Safety andEnvironment Policy and Human Rights Policy.

Risk Management Policy

Even though Regulation 21 of Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015. is not applicable to theCompany the Board of Directors of the Company as a Good Governance practice constituteda Risk Management Committee of the Board which frames implements and monitors RiskManagement Plan of the Company and lays down procedures to inform the Board of the riskassessment and risk minimization procedures in the Company.

The Company has an Enterprise Risk Management System set up as required by the ListingRegulations.

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.

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 Listing Regulations.

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 Board ofDirectors its Committees Chairman Managing Director and Individual Directors for theyear ended March 312020.

The Nomination and Remuneration Committee at their meeting held on August 14 2020 hadapproved the criteria for evaluation of the Board and its Committees and IndividualDirectors.

The Board of Directors based on the responses received from all the Directorsevaluated the performance of the Board of Directors its Committees Chairman ManagingDirector and the individual Directors at the meeting held on September 30 2020.

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 Regulation 22 of ListingRegulations and Section 177(9) of the Companies Act 2013. The Policy aims to prohibitmanagerial personnel from taking adverse personnel action against employees disclosing ingood faith alleged wrongful conduct on matters of public concern involving violation ofany law mismanagement and misappropriation of public funds among others.

Employees / associates aware of any alleged wrongful conduct are encouraged to make adisclosure to the Audit Committee. The Audit Committee periodically reviews the existenceand functioning of the mechanism. No personnel of the Company have been denied access tothe Audit Committee. The above mechanism has been appropriately communicated within theCompany across all levels and has been displayed on the Company's website. Web link forthe same is www.nagarjunafertilizers.com/inv_corp.htm

Corporate Social Responsibility (CSR)

The Company supports CSR activities through Nagarjuna Foundation and NagarjunaEducation Trust which runs a school under the name of Akshara School and supportsAgricultural research and formal training through Nagarjuna Agricultural Research andDevelopment Institute.

The Annual report of CSR signed by the Managing Director and Chairman of CSR Committeeappears as Annexure -III to this report.

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 goal of the Company in the area of Corporate Governance is to ensure fairness forevery stakeholder; the company believes best practice Corporate Governance is critical toenhance and retain investor trust and to perform with integrity.

The Annual Report contains a separate section on the Company's corporate governancepractices together with a certificate from M/s. KBG Associates Practicing CompanySecretaries on compliance with conditions of Corporate Governance as stipulated underListing Regulations.

Management Discussion and Analysis

A detailed report on the Management Discussion and Analysis in terms of the provisionsof Regulation 34 of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 is provided as a separate section in theAnnual Report.

Business Responsibility Report

In terms of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirement)Regulations 2015 Business Responsibility Report forms part of this Report as Annexure IVwhich describes the initiatives taken by the Company from an environmental social andgovernance perspective

Related Party Transaction

All related party transactions done by the Company during the financial year were atarm's length and in ordinary course of business. During the financial year your Companyhas not entered into any material transaction as per the Listing Regulations with any ofits related parties which may have potential conflict with the interest of the Company atlarge.

Disclosures pursuant to Accounting Standards on related party transactions have beenmade in the notes to the Financial Statements (refer Note 39). All related partytransactions are placed before the Audit Committee and the Board for review and approvalas appropriate. To identify and monitor significant related party transactions theCompany has also framed a Policy on the Related Party Transactions and the same isavailable on the Company's website. Web link for the same ishttp://www.nagarjunafertilizers.com/inv_corp.htm

All the related party transactions entered during the year were in Ordinary Course ofthe Business and on Arm's Length business. Particulars of Contracts or Arrangements withRelated parties appears as Annexure V to this report.

Particulars of loans guarantees or investments

Particulars of loans guarantees and investments under Section 186 of the Act as at theend of the Financial Year 2019-20 are provided in the Notes forming part of the financialstatements for the year ended March 312020 (refer Note No. 48).

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

Disclosure in terms of Section 134(3)(m) read with Rule 8(3) of The Companies(Accounts) Rules 2014 in respect of conservation of energy technology absorptionearnings and outgo of foreign exchange is attached as Annexure-IV to this Report.

Extract of Annual Return

The extract of the annual return in Form MGT-9 appears as Annexure VII to this report.

Compliance with Secretarial Standards

The Board of Directors affirms that the Company has complied with the applicableSecretarial Standards issued by the Institute of Companies Secretaries of India relatingto Meetings of the Board and its Committees and the General Meetings which have mandatoryapplication during the year under review.

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 significant awards that have been passed by any Court or JudicialAuthority against the company during the Financial Year 2019-20 impacting the goingconcern status and Company's operations in future.

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 are being done through theapproved policies of the Company. In every quarter the Internal Auditors present theInternal Audit Report and Management comments on the Internal Audit observations to theAudit Committee.

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 312020 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.

Details in respect of frauds reported by Auditors other than those which are reportableto the Central Government

The Statutory Auditors Cost Auditors or Secretarial Auditors of the Company have notreported any frauds to the Audit Committee or to the Board of Directors under Section143(12) of the Companies Act 2013 including rules made there under.

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 approval to the Company.

Deposits

The Company has not accepted any deposits falling under the ambit of Chapter V of theCompanies Act 2013 and the Rules framed there under during the year nor are there anyunpaid /unclaimed deposits at the end of the year. Accordingly no disclosure or reportingis required in respect of details relating to deposits.

Maintenance of Cost records and accounts

The Company in terms of provisions of Section 148 (1) of the Companies Act 2013 isrequired to maintain cost records. Accordingly such accounts and records are made andmaintained by the Company for the year ended March 31 2020.

Transfer of unpaid and unclaimed amounts to Investor Education and Protection Fund(IEPF)

During the period under review the Company in terms of provisions of Companies Act2013 and Investor Education and Protection Fund Rules 2016 had transferred dividendwhich remained unpaid and unclaimed for a period of 7 years along with their correspondingshares to IEPF.

F. AUDITORS AND AUDIT REPORT Statutory Auditors

The Members of the Company at the 13th Annual General Meeting held on December 242019 reappointed M/s. M Bhaskara Rao & Co. Chartered Accountants (Firm RegistrationNo-000459S) Hyderabad Statutory Auditors of the Company for a second term of three yearsto hold office from the conclusion of 13th Annual General Meeting till the conclusion ofthe 15th Annual General Meeting.

Auditors Report

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

a) Accounting of interest and penal interest on the overdue borrowings pendingconfirmation and acceptance by the lenders.

b) Recognizing Income from urea operations including reimbursement claims foradditional fixed cost input escalation/de-escalation and for production beyondreassessed capacity based on prices and provisions applicable under NPS III Modified NPSIII pending notification of final prices under New Urea Policy 2015 and consequentialadjustments if any that may arise.

c) Arbitration awards passed against the Company for USD 15275688 GBP 690630 EURO455000 aggregating to Rs.15641.51 Lakhs (31.03.2019: Rs.14188.03 Lakhs) approximatelyand Rs. 221.39 Lakhs.

Management Explanation to emphasis on the matter

a) Emphasis of Matter given in Note (a) of the Auditor's Report on standalone financialstatements read with Note 16.5 of Notes forming part of the standalone financialstatements for the year ended March 312020 are self-explanatory and do not call for anyfurther comments

b) Emphasis of Matter given in Note (c) of the Auditor's Report on standalone financialstatements read with Note 38.1.1 of Notes forming part of the standalone financialstatements for the year ended March 312020 are self-explanatory and do not call for anyfurther comments.

c) Emphasis of Matter given in Note (b) of the Auditor's Report on standalone financialstatements read with Note 25.1 of Notes forming part of the standalone financialstatements for the year ended March 312020 are self-explanatory and do not call for anyfurther comments.

Cost Auditor & Cost Audit Report

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

The Board of Directors on the recommendation of the Audit Committee at their meetingheld on August 14 2020 appointed M/s. Sagar & Associates as Cost Auditor at aremuneration of Rs.4 Lakh plus taxes as applicable and reimbursement of out-of-pocketexpenses for conducting the audit of cost records of the company for the Financial Year2020-21.

The remuneration payable to the Cost Auditor for the Cost Audit undertaken / to beundertaken is subject to ratification by the members of the company.

M/s. Sagar & Associates Cost Auditors have issued cost audit report for FinancialYear 2019-20 which does not contain any qualification reservation or adverse remark.

Secretarial Auditor & Secretarial Audit Report

The Board of Directors at their meeting held on August 14 2020 pursuant to theprovisions of Section 204 of the Companies Act 2013 have appointed Mr. C S S KrishnaPartner M/s. KBG Associates Company Secretaries Hyderabad as the Secretarial Auditor ofthe Company to undertake Secretarial Audit for the Financial Year 2020-21.

The Secretarial Audit Report for the Financial Year 201920 appears as Annexure -VIII to this Report which is selfexplanatory.

Internal Audit

The Company has 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 the Companies Act 2013 and Listing Regulations.

Remuneration Policy

The salient features of the policy on director's appointment and remunerationincluding criteria for determining qualifications positive attributes independence of adirector and other matters provided under Section 178(3) of the Companies Act 2013adopted by the Board appears as Annexure IX to this report. We affirm that theremuneration paid to the directors is as per the terms laid out in the nomination andremuneration policy of the Company. The Nomination and Remuneration Policy may be accessedon the Company's website at the link: http://www.nagarjunafertilizers.com/inv_corp.htm

Disclosure under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013

Your Company has in place Policy on Sexual Harassment at workplace in line with therequirements of The Sexual Harassment of Women at the Workplace (Prevention Prohibitionand Redressal) Act 2013. An Internal Complaints Committee (ICC) has been set up toaddress complaints received regarding sexual harassment. All employees (permanentcontractual temporary trainees) are covered under this Policy.

The Company has not received any complaints pertaining to sexual harassment during theFY ended March 312020.

G. 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 had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.

(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.

INDUSTRIAL RELATIONS

During the year the industrial relations at all the works of the company were cordial.

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 stakeholders.

CAUTIONARY STATEMENT

The Board's Report may contain certain statements that the Company believes are or maybe considered to be "forward looking statements" within the meaning ofapplicable securities law and regulations. All these forward looking statements aresubject to certain risks and uncertainties including but not limited to Governmentaction economic developments risks inherent to the Company's growth strategy and otherfactors that could cause the actual results to differ materially from those contemplatedby the relevant forward looking statements and the company is not obliged to update anysuch forwarding looking statements.

By Order of the Board
Hyderabad November 30 2020 Uday Shankar Jha Chairman