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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 741547
52-Week high 7.53
52-Week low 2.49
P/E
Mkt Cap.(Rs cr) 330
Buy Price 5.51
Buy Qty 158291.00
Sell Price 5.51
Sell Qty 747.00

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

Company director report

Dear Members

Your Directors present the Thirteenth 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 31 2019 and otheraccompanying reports notes and certificates.

A. BUSINESS AND FINANCIAL HIGHLIGHTS

The Company adopted Indian Accounting Standards ("Ind AS") from April 12016 with transition date from April 1 2015. Accordingly the financial reports forcurrent financial year 2018-19 and previous financial year 2017-18 have been prepared asper Ind AS reporting frame work. The Financial Results and the Consolidated FinancialResults of the Company for the year ended March 31 2019 are as under:

Standalone Financial Results

Particulars 2018 - 2019 Current year 2017 - 2018 Previous year
Net Sales/Income from Operations 1940.35 3923.68
Other Income 26.47 44.97
Total Expenditure
a. Changes in inventories of finished goods stock-in-trade and work in progress 35.49 66.05
b. Cost of materials consumed 709.42 1381.46
c. Employee Benefits expense 157.45 173.50
d. Purchase of Stock-in-Trade 258.56 458.54
e. Power and Fuel 599.94 1002.43
f. Excise duty - 2.28
g. Other expenses 317.17 513.44
Total 2078.03 3597.70
Finance cost 307.99 308.21
Depreciation and amortization 88.83 89.28
Profit/ (Loss) before exceptional items and tax (508.03) (26.54)
Exceptional Items 18.86 -
Profit/(Loss) before tax (526.89) (26.54)
Provision for tax 0.00 0.57
Deferred tax (36.16) (5.59)
Profit / (Loss) after tax (490.73) (21.52)
Other Comprehensive income (net of tax) (0.08) 2.41
Total Comprehensive income (490.65) (19.11)
Dividend - equity shares - -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (490.65) (19.11)
Paid Up equity share capital 59.81 59.81
(Face value of Re.1/- per share)
Reserves excluding revaluation reserve 522.82 1013.47
Earnings per share (annualized) - in Rs.
Basic and Diluted (8.21) (0.36)

Consolidated Financial Results

Particulars 2018 - 2019 2017 - 2018
Current year Previous year
Net sales/income from operations 1940.35 3923.68
Other income 26.48 44.98
Total expenditure
a. Changes in inventories of finished goods stock-in-trade and work in progress 35.49 66.05
b. Cost of materials consumed 709.42 1381.46
c. Employee Benefits expense 157.45 173.52
d. Purchase of Stock-in-Trade 258.56 458.54
e. Power and Fuel 599.94 1002.43
f. Excise Duty - 2.28
g. Other expenses 317.17 513.45
Total 2078.05 3597.73
Finance cost 307.99 308.21
Depreciation and amortization 88.83 89.28
Profit/ (Loss) before exceptional itemsand tax (508.04) (26.56)
Exceptional Items 18.86 -
Profit/ (Loss) before tax (526.90) (26.56)
Provision for tax 0.00 0.57
Deferred tax (36.16) (5.59)
Profit / (loss) after tax before minority interest (490.74) (21.54)
Share of Loss transferred to Minority Interest (0.00) (0.00)
Share of Loss from Associate Company - -
Profit / (Loss) for the year (490.74) (21.54)
Other Comprehensive income (net of tax) 8.44 2.41
Total Comprehensive income (490.65) (19.12)
Dividend-equity shares - -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (490.65) (19.12)
Paid-up equity share capital (Face value of Re.1/- per share) 59.81 59.81
Reserves excluding revaluation reserve 527.29 1013.41
Earnings per share (annualized) - in Rs.
Basic and Diluted (8.21) (0.36)

Indian Accounting Standards (Ind AS)

The Ministry of Corporate Affairs (MCA) vide its Notification dated February 16 2015has made the application of the Companies (Indian Accounting Standards) Rules 2015 (Ind-AS Rules) effective for certain categories of companies from accounting periods beginningon or after April 01 2016.

The Audited Financial Statements of the Company drawn up both on standalone andconsolidated basis for the financial year ended March 31 2019 are in accordance with therequirements of the Ind-AS Rules. Figures for the previous year have also been re-statedin line with the requirements of the above Rules.

In the preparation of Financial Statements for FY2019 there is no treatment of anytransaction which is different from that prescribed in the Indian Accounting Standards(Ind AS) notified by the Government of India under section 133 of the Companies Act 2013read with rule 7 of the Companies (Accounts) Rules 2014 and the Companies (IndianAccounting Standards) Rules 2015 as amended from time to time the guidelines issued bySEBI and other accounting principles generally accepted in India.

Financial Summary

The loss after tax for the year was Rs. 490.73 crore as against Rs. 21.52 crore for theprevious year. Due to financial stress the company has operated only one Plant in last 3quarters of financial year and Plant - I could be operated partially during the 2018-19.Consequently the production during the year was lower and increase in energy cost.

Share Capital

The Paid-up Equity Capital of the Company as on March 31 2019 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 2018-19 inview of losses incurred by the Company.

Dividend

Considering the operating performance for the financial year ended on March 31 2019your Directors do not recommend any dividend for the year.

Plant Operations

Urea

Your Company during the year manufactured 5.85LMT of urea as against 15.90 LMT in theprevious year. The production for the year 2018-19 is less by 10.05 Lakh LMT compared tothe previous year. The negative variance is due to shutdown of Unit I from 3rd Jul 2018 to22nd Dec 2018 and shutdown of Unit II from 3rd Jul 2018 onwards for Annual turnaround andfinancial stress due to inadequate availability of Fund Based and Non-Fund based workingcapital facilities from Banks.

Micro-Irrigation

Your Company achieved a production of 959 Lakh Mtrs against

1271 Lakh Mtrs during the previous year. PVC pipes production of 1927.1 metric tonsagainst 2704.27 metric tons during the previous year.

MARKETING

Urea

Your Company achieved a sale of manufactured urea of 6.38 LMT compared to 15.99 LMT inthe previous year.

The total urea sales for both manufactured and imported urea was 8.85 LMT compared to20.83 LMT of previous year.

Other Traded Products

Due to financial stress the Company has scaled down its operations in trading. Givenbelow is the segment wise performance :

Specialty Fertilizers

Your Company sold 8650 MT of Specialty Fertilizer during the year in comparison withsales of 20847 MT during the previous year.

Micro-nutrients

Your Company sold 2842 MT of Micro-nutrients during the year in comparison with salesof 5391 MT during the previous year.

Supplements

Your Company sold 7233 MT of Supplements during the year in comparison with sales of28805 MT during the previous year.

Customized Fertilizers

Your Company sold 14126 MT of Customized Fertilizers during the year in comparison withsales of 18625 MT during the previous year.

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 without any accident during the year. Your Companyas on March 31 2019 completed 15277403accident free man-hours by employees andcontractors 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 metrictonne 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 the year 2014 - 15 on account of a GAIL pipeline accident the company couldnot continue urea production and started incurring losses.

2. The company's lenders approved a Corrective Action Plan (CAP) during the year 2015and a short term debt resolution plan (RP) in 2018 but due to non-release of the workingcapital and working capital term loans agreed to/approved under CAP and RP the companycontinued to incur losses.

3. The company's financial stress is purely on account of external factors andrecognized by the government as well as its lenders. The company is working closely withlenders and other agencies to complete the debt resolution process during the year2019-20 along with financing urea capital expenditure for reliability and energyreduction.

C. Cost Saving Programmes

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 Ikisandivision during the first quarter of 2019- 20.

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

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

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 (a company incorporated under Companies Act 1956bearing CIN U00337KA1993PLC014694 having its Registered Office at 510 3RD A Cross 2ndMain 3rd Block Rajmahal Vilas-II Dollars Colony Bangalore-560094 Karnataka.

The company has two Associate Companies viz. Nagarjuna Agricultural Research AndDevelopment Institute Private Limited (A company incorporated under Companies Act 1956bearing CIN U29100TG1995NPL022409 and having its registered office at Nagarjuna HillsPunjagutta Hyderabad - 500082 Telangana) and K V K Raju International Leadership PrivateLimited (a company incorporated under Companies Act 1956 bearing CINU51100TG1995PLC022410 and having its registered office at Nagarjuna Hills PunjaguttaHyderabad - 500082 Telangana).

There is no change in the status of subsidiary or associate companies during the yearunder review. There is no material fact that requires mention on the performance andfinancial position of the Subsidiary and 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 is not a material subsidiary whose income or net worth in theimmediately preceding accounting year does not exceeds 20% of the consolidated income ornet worth respectively of the Company and its subsidiaries as per the thresholds laid downunder the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015(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.

There is no material fact that requires mention on the performance and financialposition of the Jaiprakash Engineering and Steel Company Limited as the subsidiary isconsidering implementing various projects to utilize the available land appropriately andgainfully.

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. TheFinancial Statements of the Subsidiary and Associate Companies are also available on thewebsite of the Company at 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.

B. DIRECTORS BOARD COMMITTEES KEY MANAGERIAL PERSONNEL AND REMUNERATION

Directors

Retirement of Mr. K S Raju Chairman.

Mr. K S Raju Chairman of the Company has retired from the Company with effect fromJanuary19 2019.

The Board placed on record its appreciation for the distinguished service andcontributions made by Mr. K S Raju in various capacities to the company since itsinception and also to that of the industry and awarded him the honorary title of"Chairman Emeritus".

Appointment of Mr. Uday Shankar Jha as Chairman

The Board has appointed Mr. Uday Shankar Jha Independent Director as the Chairman ofthe Board as the Nominee of the Core Promoter with effect from January 19 2019.

Mr. Uday Shankar Jha who was originally appointed as Independent Director on theBoard has been changed to Non-Executive Director consequent to his appointment as theChairman of the Board as the Nominee of Promoter.

Nominee Director

Appointment

During the year under review IDBI Bank Ltd has nominated Mr. V V S Ravindra as itsNominee on the Board of the Company with effect from November 09 2018.

Resignation

Mr. Syed Shahabuddin Nominee of SBI has resigned from the office of directorship witheffect from June 13 2019.

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 Dr. NCB Nath

Dr. N C B Nath Director of the Company resigned from the Directorship with effect fromDecember 03 2018.

The Board placed on record its appreciation for the services and contributions made byDr. NCB Nath during his tenure as the Director of the Company.

Demise of Capt. Hariharan Ramanathan

Capt. Hariharan Ramanathan Independent Director of the Company passed way on November13 2018.

The Board expressed its condolences to Capt. Hariharan Ramanathan's family at hisdemise.

The Board placed on record its deep appreciation for the services rendered by Capt.Hariharan Ramanathan during his tenure as Director of the Company.

Resignation of Mr. C.B. Mouli

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

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 Mrs. Girija Bhan and Hon'ble Shri Justice K C Bhanu (Retd)

In accordance with Section 149 152 and Schedule IV read with relevant Rules of theCompanies Act 2013 Mrs. Girija Bhan and Hon'ble Shri Justice K C Bhanu (Retd) have beenappointed as Additional Directors and Independent Directors by the Board of Directors onNovember 11 2019. It is proposed to appoint Mrs. Girija Bhan and Justice Shri K.C. Bhanu(Retd.) as Independent Directors of the Company not liable to retire by rotation upto theconclusion of 18th Annual General Meeting pursuant to the provisions of Section 149 of theCompanies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.

The proposed appointments are 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.

Key Managerial Personnel Resignation of Company Secretary

Mr. K Chandra Sekhar Naidu Company Secretary and Compliance Officer has resigned fromthe Company with effect from July 01 2019

Resignation of Chief Financial Officer

Mr. H Muralidhar Chief Financial Officer and Key Managerial Personnel has resignedfrom the Company with effect from November 01 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. Chandra Pal Singh Yadav retire atthe forthcoming Annual General Meeting and being eligible offers themselves forreappointment. The Board of Directors recommend the reappointment of Mr. Uday Shankar Jhaand Mr. Chandra Pal Singh Yadav as directors liable to retire by rotation forconsideration of the Members.

Declaration by Independent Directors

The Independent Directors have submitted their declaration 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 Regulation 25 of ListingRegulations.

Executive Directors

Mr. K S Raju Chairman has been appointed for a period of three years as an ExecutiveDirector w.e.f. August 01 2017. Mr. K.S. Raju subsequently retired from the Company witheffect from January 19 2019.

Mr. K Rahul Raju Managing Director has been appointed for a period of three years asan Executive Director w.e.f. August 1 2017.

The details of Directors being recommended for appointment or re-appointment pursuantto Regulation 36(3) of the Listing Regulations are contained in the Corporate GovernanceReport being annexed to Board's 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 as on date of this report:

a) Mr. K. Rahul Raju Managing Director

b) Mr. H Muralidhar as Chief Financial Officer (resigned w.e.f November 01 2019)

c) Mr. K Chandra Sekhar Naidu Company Secretary (resigned w.e.f July 01 2019)

Meetings of the Board

The Board of Directors of the Company had met five times during the year on May 252018 July 27 2018 November 09 2018 January 19 2019 and February 8 2019.

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).

Familiarization Programme and Performance Evaluation

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

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 is appended as Annexure VII to the Board's report. The Nominationand Remuneration Policy may be accessed on the Company's website at the link:http://www.nagarjunafertilizers.com/inv_corp.htm

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 the Committee is Mr. C B Mouli an Independent Director as on March 312019 and the Committee consists of two Independent Directors and one Nominee Director.The Board has accepted all the recommendation made by the Audit Committee.

The Committee meets periodically to review the internal audit report quarterlyunaudited financial statements and annual audited financial statements 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

Mr. C B Mouli# Chairman and Independent Director
Mrs. Lalitha Raghuram Member and Independent Director
Mr. Uday Shankar Jha Member and Chairman
Mr. Syed Shahabuddin* Member and Nominee Director
Mrs. Girija Bhan@ Member and Independent Director

*Ceased to be a Member with effect from June 13 2019.

# Ceased to be a Member with effect from October 10 2019.

@ Inducted as a Member with effect from November 11 2019.

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 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.

The Nomination and Remuneration Committee comprises of:

Mr. C B Mouli* Chairman and Independent Director
Mrs. Lalitha Raghuram Member and Independent Director
Mr. V V S Ravindra Member and Nominee Director
Mrs. Girija Bhan@ Member and Independent Director

*Ceased to be a Member with effect from October 10 2019.

@ Inducted as a Member with effect from November 11 2019.

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:

Mr. C B Mouli* Chairman and Independent Director
Mrs. Lalitha Raghuram Member and Independent Director
Mr. V V S Ravindra Member and Nominee Director
Mrs. Girija Bhan@ Member and Independent Director

*Ceased to be a Member with effect from October 10 2019.

@ Inducted as a Member with effect from November 11 2019.

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 Chairman and Independent Director
Mr. K Rahul Raju Member and Executive Director
Mr. V V S Ravindra Member and Nominee Director

D. 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

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 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 on an ongoing 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 crossfunctional 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 ofIndependent Directors Chairman Managing Director and Committees of the Board and theBoard.

The Nomination and Remuneration Committee based on the responses received fromDirectors evaluated the Directors and conveyed the opinion of the Committee to the Boardat the meeting held on May 24 2019.

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 has in place a CSR Policy in line with Schedule

VII of the Companies Act 2013. The CSR Policy can be accessed on the Company's websiteat the link: http://www. nagarjunafertilizers.com/inv_corp.htm. The Company has alwaysdesired to play a proactive role in societal development with an intention to bringpositive change in the lives of many.

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. Thededicated support strength initiative and encouragement from the associates of the Groupto be part of this initiative gave impetus to the movement.

The Company with the support of Nagarjuna Foundation started several CSR activities andcontinues to support the initiatives. Your Company during the year has spent Rs. 33.10Lakh towards CSR activities though the Company was not required to spend any amount on CSRas it did not have any profits. The details of such activities carried out with thesupport of Nagarjuna Foundation signed by Managing Director and Chairman of CSR Committeeappears as Annexure-III to this Report.

Your Company made contribution in areas of education sports healthcare communitywelfare agricultural research with Nagarjuna Foundation Nagarjuna Education Trust (underthe aegis of Nagarjuna Foundation) Nagarjuna Agricultural Research and DevelopmentInstitute.

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 Reportcontains a separate section on the Company's corporate governance practices together witha certificate from M/s. KBG Associates Practicing Company Secretaries on compliance withconditions of Corporate Governance as stipulated under Listing 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.

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 andon Arm's Length business and hence disclosure under section 134(3)(h) inForm AOC-2 of the Companies Act 2013 is not applicable.

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 2018-19 are provided in the Notes forming part of the financialstatements for the year ended March 31 2019 (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

Details forming part of the extract of the Annual Return in Form MGT 9 is enclosed asAnnexure-V.

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 2018-19 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 312019 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 thereunder.

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 thereunder 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.

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

Pursuant to the provisions of the Companies Act 2013 read with IEPF Authority(Accounting Audit Transfer and Refund) Rules 2016 as amended the dividends declaredwhich remained unpaid or unclaimed for a period of seven years along with the correspodingshares have been transferred by the company to the IEPF which has been established by thecentral government.

D. AUDITORS AND AUDIT REPORT STATUTORY AUDITORS

The Staturory Auditors of the Company M/s. M Bhaskara Rao & Co. CharteredAccountants (Firm Registration No- 000459S) Hyderabad were appointed at the EighthAnnual General Meeting (AGM) for a term of five years from the conclusion of Eighth AGM tothe conclusion of Thirteenth AGM

In terms of Section 139(2) no listed company shall appoint or re-appoint an audit firmas Statutory Auditor for more than two terms of five consecutive years.

M/s. M Bhaskara Rao & Co. Chartered Accountants appointed for a term of fiveyears from 8th AGM to 13th AGM are eligible for another term of two years.

In view of the above the Board of Directors recommend the appointment of M/s. MBhaskara Rao & Co. Chartered Accountants as the Statutory Auditors of the Companyfor a term of two more years from the conclusion of 13th AGM till the conclusion of 15thAGM i.e. for the Financial Year 2019-2020 and 2020-2021.

M/s. M Bhaskara Rao & Co. have signified their willingness to accept appointmentand have further confirmed their eligibility under Section 141 of the Companies Act2013.The Company's Statutory Auditors have also furnished a certificate from the PeerReview Board of the ICAI confirming that they have undergone the process of peer review.

The Board of Directors in accordance with the provisions of Section139 of the CompaniesAct 2013 and Rules made there under recommends the appointment M/s. M Bhaskara Rao &Co. Chartered Accountants Hyderabad for a term of two years from the conclusion of 13thAnnual General Meeting upto the conclusion of 15th Annual General Meeting every year forthe consideration of the shareholders.

Auditors Report

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

a) Diminution in the value of investments made for the value of investment inJaiprakash Engineering and Steel Company Limited (JESCO). A subsidiary and its adequacybased on Management assessment.

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 NPSIII ModifiedNPSIII 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 - 690630EUR455000 and 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 5.1 of Notes forming part of the standalone financial statementsfor the year ended March 31 2019 are selfexplanatory and do not call for any furthercomments

b) 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 31 2019 are selfexplanatory and do not call for anyfurther comments.

c) Emphasis of Matter given in Note (c) of the Auditor's Report on standalone financialstatements read with Note 38.1.1(b) of Notes forming part of the standalone financialstatements for the year ended March 31 2019 are self-explanatory and do not call for anyfurther comments.

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 in Practice.

The Board of Directors on the recommendation of the Audit Committee at their meetingheld on May 24 2019 accorded their approval to the appoint of M/s. Sagar& Associatesas Cost Auditor and recommended for approval of shareholders a remuneration of Rs.4 Lakhplus taxes as applicable and reimbursement of out-of-pocket expenses for conducting theaudit of cost records of the company for the Financial Year 2019-20.

M/s. Sagar & Associates Cost Auditors have issued cost audit report for FinancialYear 2018-19 which does not contain any qualification reservation or adverse remark.

Secretarial Auditor & Secretarial Audit Report

The Board of Directors at their meeting held on May 24 2019 pursuant to the provisionsof Section 204 of the Companies Act 2013 have appointed Mr. C S S Krishna Partner M/s.KBG Associates Company Secretaries Hyderabad as the Secretarial Auditor of the Companyto undertake Secretarial Audit for the Financial Year 2019-20.The Secretarial Audit Reportfor the Financial Year 2018-19 appears as Annexure - VI to this Report which isself-explanatory.

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.

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 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.

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

Your Company has in place Policy on Sexual Harassment at work place 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 following is a summary of sexual harassment complaints received and disposed ofduring the FY ended March 312019: Number of complaints received: NIL Number of complaintsdisposed of: NIL 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 Uday Shankar Jha
November 12 2019 Chairman

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