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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 145150
52-Week high 19.68
52-Week low 7.60
P/E
Mkt Cap.(Rs cr) 513
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 Fifteenth 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 312021 and otheraccompanying reports notes and certificates.

A. BUSINESS AND FINANCIAL HIGHLIGHTS

The Standalone and Consolidated Financial Results of the Company for the year endedMarch 312021 prepared as per Ind AS reporting are as under:

Standalone Financial Results
Particulars 2020 - 2021 2019 - 2020
Current year Previous year
Net Sales/Income from Operations 1574.91 1704.51
Other Income 24.35 28.98
Total Expenditure
a. Changes in inventories of finished goods stock-in-trade and work in progress 43.20 (5.01)
b. Cost of materials consumed 732.41 785.62
c. Employee Benefits expense 96.80 105.33
d. Purchase of Stock-in Trade 2.67 13.95
e. Power and Fuel 587.49 701.23
f. Excise duty

-

-

g. Other expenses 218.92 227.26
Total 1681.49 1828.38
Finance cost 347.79 328.79
Depreciation and amortization 82.24 82.13
Profit/ (Loss) before exceptional items and tax (512.27) (505.81)
Exceptional Items 140.82 -
Profit/(Loss) before tax (653.09) (505.81)
Provision for tax - 0.78
Deferred tax (37.76) (34.24)
Profit / (Loss) after tax (615.33) (472.35)
Other Comprehensive income (net of tax) (0.59) (3.42)
Total Comprehensive income (615.92) (468.93)
Dividend - equity shares - -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (615.92) (468.93)
Paid Up equity share capital(Face value of Re.1/- per share) 59.81 59.81
Reserves excluding revaluation reserve (562.03) 53.89
Earnings per share (annualized) - in Rs.
Basic and Diluted (10.29) (7.9)
Consolidated Financial Results Rs. in crore
Particulars 2020 - 2021 Current year 2019 - 2020 Previous year
Net Sales/Income from Operations 1574.91 1704.51
Other Income 24.35 29.00
Total Expenditure 43.20 (5.01)
a. Changes in inventories of finished goods stock- in-trade and work in progress
732.41 785.62
b. Cost of materials consumed
c. Employee Benefits expense 96.80 105.33
d. Purchase of Stock-inTrade 2.67 13.95
e. Power and Fuel 587.49 701.23
f. Excise duty
- -
g. Other expenses 218.93 213.81
Total 1681.50 1814.93
Finance cost 347.79 328.79
Depreciation and amortization 82.24 82.13
Profit/ (Loss) before exceptional items and tax (512.27) (492.35)
Exceptional Items 140.82 -
Profit/ (Loss) before tax (653.09) (492.35)
Provision for tax - 0.78
Deferred tax (37.76) (34.24)
Profit / (loss) after tax before minority interest (615.33) (458.89)
Share of Loss transferred to Minority Interest 0 0
Share of Loss from Associate Company - -
Profit / (Loss) for the year (615.33) (458.89)
Other Comprehensive income (net of tax) (0.59) (3.42)
Total Comprehensive income (615.92) (455.48)
Dividend-equity shares - -
Tax on proposed dividend - -
Balance c/d to Balance Sheet (615.92) (455.48)
Paid-up equity share capi- tal(Face value of Re.1/- per share) 59.81 59.81
Reserves excluding revaluation reserve (544.11) 71.82
Earnings per share (annualized) - in Rs.
Basic and Diluted (10.29) (7.67)

Financial Summary

The loss after tax for the year was Rs. 615.33 crores against Rs. 472.35 crore for theprevious year. Due to financial stress and mainly due to impairment of land value to theextent of Rs 140.82 Crs on account of holding agricultural land at Kapa- varam Wargal andNellore district in excess of limits specified in Andhra Pradesh Land Reforms (Ceiling onAgricultural Holdings) Act 1973. Excluding this exceptional item of Rs.140.82 Crs the lossafter tax is higher by Rs. 6.45 Crs inspite of higher production and lower gas cost ascompared to previous year.

Share Capital

The Paid-up Equity Capital of the Company as on March 31 2021 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 2020-2021 inview of losses incurred by the Company.

Dividend

The Board of Directors of your company after considering the operational performanceand keeping in view the company's dividend distribution policy has decided not torecommend any Dividend for the year under review.

COMPANY'S AFFAIRS

Plant Operations

Urea

Your Company during the financial year 2020-21 manufactured 7.434 lMt of urea asagainst 6.925 LMT in the previous year. The production for the year 2020-21 is lesscompared to the usual level owing to shutdown continuation of Unit I till 25th Jul 2020and Shutdown of Unit II from 1st Jul 2020 on account of acute financial stress due toinadequate availability of Fund Based and Non-Fund based working capital facilities fromBanks. Efforts made to restart unit-II from 4th March 2021 but productioncould not be stabilized due to technical problems and the plant requires repairs.

Micro-Irrigation

Your Company achieved a production of 36.67 Lakh Meters in FY 2020-21 against 260.56Lakh Meters during the previous year. PVC pipes production of 1.87 Lakh Meters in FY202021 against 7.51 Lakhs Meters during the previous year

Marketing

Urea

Your Company achieved a sale of manufactured urea of 7.55 LMT compared to 6.87 LMT inthe previous year.

The total urea sales for both manufactured and imported urea was 7.55 LMT compared to7.14 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 71 MT of Specialty Fertilizer during the year (from out of theexisting stocks available) in comparison with sales of 361 MT during the previous year

Micro-nutrients

Your Company sold 38 MT of Micro-nutrients during the year (from out of the existingstocks available) in comparison with sales of 180 MT during the previous year.

Supplements and OSR

Your Company sold 19 MT/KL of Supplements & OSR during the year (from out of theexisting stocks available) in comparison with sales of 373 MT/KL during the previous year.

Customized Fertilizers

Your Company produced and sold 13674 MT of Customized Fertilizers during the year incomparison with sales of 11570 MT during the previous year on a contract basis.

Nagarjuna Brand

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

The Company had defaulted in payment of royalty dues under the said License Agreement.The Company had agreed to settle the outstanding royalty dues in order to continue brandusage for sales of Urea and Micro Irrigation Products.

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 compiled 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 2021 completed3534284 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).

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).

Change in the nature of business

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

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.

Reasons for Financial Stress and Debt Resolution Status

NFCL a fast growing private sector fertilizer company went into final stress on accountof the GAILs negligence in operating and maintaining its pipelines. The company isclaiming for the losses incurred on account of GAIL negligence and the case is currentlyunder arbitration.

The lenders agreed to rectification of account with funding with zero sacrifice ascorrective action in 2015-16 (under RBI Circular 2014 and subsequent amendments till 2015)on account of GAIL pipeline accident to help overcome the financial stress.

The funding assessed for rectification of account by JLF in 2015 was Rs 3050 Crs ofWorking Capital and Rs 800 Crs of Working Capital Term Loan in 2015-16 to shore up NWC toutilize the Working Capital Limits assessed for CAP. There was no external debt fundingenvisaged by the lenders or the company for rectification of account (CAP) as can be seenin the IM of IDBI. The company promoter AMPL and management agreed to provide thesecurities and guarantees for rectification of account with funding with a clearunderstanding that the securities and obligations of CAP loans are directly linked torectification of account with funding (CAP implementation) by lenders.

It is a documented fact that lenders did not provide the funding assessed forrectifying the account (did not implement CAP) resulting in further impairment ofcompanies finances/CAP failure (failure to achieve the agreed terms/targets for CAP):

Agreed CAP Terms/Targets (Detailed in CAP Information Memorandum)

Rs Crs FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Revenue 5008.51 5470.23 5491.23 5512.60 5534.35 5556.18
PBDIT 494.04 495.17 487.32 479.08 470.42 461.32
PAT 118.33 188.59 119.31 128.24 137.67 130.56
Achieved CAP Targets (Published Results)
Rs Crs FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Revenue 4009.57 3420.34 3968.65 1966.82 1733.49 1599.25
PBDIT 295.02 256.02 370.95 -111.21 -94.89 -82.23
PAT -92.74 -121.78 -21.52 -490.73 -472.36 -615.33
Assessed to be released on 2015-16 for rectification Funding Shortfall (Released Amounts)
Working Capital Rs 3050 Crs (Fund based 850 Crs and NonFund based 2200Crs) Rs 1983 Crs
Working Capital Term Loan Rs 800 Crs Rs 620.70 Crs*
Total Rs 3850 Crs Rs 2604 Crs (Deficit of Rs 1246 Crs)

Given that the Company is listed and widely held the company has stated these facts(GAIL negligence and non implementation of CAP) in writing over the years to theGovernment of India* lenders the courts in its annual reports and to stockexchanges/SEBI.

* As 100% of the Company's activities (from raw material supply for ureaproduction to packaging and sales) 100% of the urea costs and revenues are controlled byGOI the company is compelled to report all material events to GOI.

Lenders approved a debt resolution plan in March 2020 amongst other things includeSegregation of debt into sustainable and unsustainable reduction in the rate of interestwith infusion of fresh equity and additional debt. Post conclusion of the Resolution Planthe lenders made arbitrary changes to the agreed RP on 4th June 2020. The company hasfiled a Writ Petition in the Hon'ble High court of Telangana on the arbitrary actions ofthe lenders. The Hon'ble High Court granted stay on any proceedings against the companyuntil further orders and the case is currently under disposal with the Court.

The company had filed contempt cases against 2 lenders who have invoked IBC inviolation of High Court orders and the case is currently under disposal of the Court.

Notwithstanding without prejudice the Company is working with lenders to amicablysettle the debt and related security disputes.

Keytrade Settlement

The Company has complied with the attachment of Rs.20 crores towards settlement of theaward vide Execution Petition bearing Ex EP No. 03 of 2017 filed before the Hon'ble HighCourt of Telangana at Hyderabad under the provisions of Arbitration and Conciliation Act1996 and CPC 1908 from its bank accounts for the exclusive entitlement of the Key- trade(decree holder) securing the award amount worth US $ 2143168 as ordered by the Hon'bleHigh Court r dated 23.04.2019 in I. A. No. 2 of 2019 in EX.EP No. 3 of 2017. Thereafterthe company has also filed an affidavit stating that the said order passed by the Hon'bleHigh Court of attachment was complied. The company has no pending dues/com- pliance on theEP filed by Keytrade.

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 Main3rd Block Rajmahal Vilas- II Dollars Colony Bangalore-560094 Karnataka.

Further GOK had issued GO taking back the land allocated to JESCO and reallotted theland to Navy Coast Guard. JESCO field a petition in the court challenging the cancellationas it couldn't implement the approved projects due to delayed approvals from KarnatakaIndustrial Area Development Board (KiADB) / Government of Karnataka (GOK). The matter ispending in the courts.

In view of the land being the only asset in Jesco and in view of the legalcomplications during the last quarter of the Financial Year 2019-20 the Board ofDirectors of your company as a prudent measure had approved writing off the remaininginvestment in Jesco. The Members of the Company had earlier approved to sell transferlease and/or otherwise dispose of the whole or substantially the whole of the investmentin JES- CO in view of the legal complications.

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 KVK Raju International Leadership Limited (acompany incorporated under Companies Act 1956 bearing CiN u51100TG1995PLC022410 andhaving its registered office at Nagarjuna Hills Punjagutta Hyderabad - 500082Telangana).

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 are no changes in the status of subsidiaries or associates' companies during theyear under review. Further there are no material fact that requires mention on theperformance and financial 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 of investment of the Company in JESCO and theapproval of the Members of the Company to sell transfer lease and/or otherwise disposeof the whole or substantially the whole of the investment in JESCO there are no materialfact that 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 subsidiary's companies are also available on the website of the Companyat http://www.nagarjunafertilizers.com/inves- tor.htm.

DIRECTORS BOARD COMMITTEES KEY MANAGERIAL PERSONNEL AND REMUNERATION

Independent Directors

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 and the Regulation 25 of Listing Regulations Mr. Rajendra MohanGonela was appointed as an Independent Director of the Company not liable to retire byrotation for a period of five years from May 28 2020 to May 27 2025.

In the opinion of the Board the Independent Director posses adequate integrityexpertise and experience.

Resignation of Ms. Girija Bhan Independent Director

Ms. Girija Bhan Independent Director of the Company resigned from the Directorshipwith effect from December 14 2020 due to personal reasons and exigencies.

Ms. Girija Bhan has confirmed that there are no other material reasons other thanthose mentioned above for the resignation.

The Board placed on record its appreciation for the services and contributions made byMs. Girija Bhan during her tenure as the Director of the Company.

Resignation of Hon'ble Shri Justice K C Bhanu (Retd). Independent Director

Hon'ble Shri Justice K C Bhanu (Retd) Independent Director of the Company resignedfrom the Directorship with effect from June 19 2021 due to personal and professionalreasons. Hon'ble Shri Justice K C Bhanu (Retd) has confirmed that there are no othermaterial reasons other than those mentioned above for the resignation

The Board placed on record its appreciation for the services and contributions made byHon'ble Shri Justice K C Bhanu (Retd) during his tenure as the Director of the Company.

Key Managerial Personnel Appointment of Chief Financial Officer

The Board of Directors of your company had appointed Mr. K Rahul Raju ManagingDirector as the Chief Financial Officer of the Company with effect from November 302020 to fill the vacancy and comply with the requirements of applicable laws until theCompany finds a suitable candidate for the position. Resignation of Chief FinancialOfficer Mr. K Rahul Raju Chief Financial Officer and Key Managerial Personnel hadresigned as the CFO of the Company with effect from May 24 2021.

Appointment of Chief Financial Officer

Mr. Sudhakara Rao Annam has been appointed as the Chief Financial Officer and KeyManagerial Personnel of the Company with effect from May 24 2021.

Executive Director

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 further period of 3 yearswith effect from August 012020 and payment of remuneration subject to the prior approvalof the Financial Institutions/Banks and the approval of the members of the Company

The Members of the Company at the 14th Annual General Meeting held on December 302020 has approved the re-appointment of Mr. K Rahul Raju Managing Director for a term ofthree years with effect from August 012020.

There is no change in the status of Executive Directors during the year under review.

The details of Directors being recommended for reappointment 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 312021:

Mr. K. Rahul Raju Managing Director

Mr. Sudhakara Rao Annam Chief Financial Officer (appointed w.e.f May 24 2021)

Mr. M Vijaya Bhasker Company Secretary & Compliance officer

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 Directorsretires at the forthcoming Annual General Meeting and being eligible offers themselvesfor reappointment.

The Board of Directors recommends the reappointment of Mr. Uday Shankar Jha and Mr.Chandrapal Singh Yadav as Directors liable to retire by rotation for the considerationof the Members of the Company.

Declaration by Independent Directors The Independent Directors have submitted theirdeclaration to the Board that they meet the criteria of Independence as provided inSection 149(6) of the Companies Act 2013 and Regulation 25 of Listing Regulations so asto qualify as an Independent Director of the Company.

Meetings of the Board

The Board of Directors of the Company had met four times during the year on August 142020 September 30 2020 November 30 2020 and February 12 2021.

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 Program and Performance Evaluation

Details of the Familiarization Program 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 Mr. Rajendra Mohan Gon- ela an Independent Director. The Committee consistsof three Independent Directors and one Non-Executive Director as on March 312021. TheBoard has accepted 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

Mr. Rajendra Mohan Gonela1 Chairman and Independent Director
Mrs. Lalitha Raghuram Member and Independent Director
Mr. Uday Shankar Jha Member and Nonexecutive Director
Mr. K C Bhanu2 Member and Independent Director
Mrs. Girija Bhan3 Member and Independent Director

 

1 Elected as a Chairman with effect from December 25 2020

 

2 Inducted as a member with effect from December 25 2020 and ceased to be amember with effect from June 19 2021

 

3 Ceased to be a member with effect from December 14 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 October1 2014 for determining in- ter-alia qualifications positive attributes andindependence of a director matters relating to the remuneration appointment removal andevaluation of performance of the Directors Key Managerial Personnel Senior Managementand other employees.

The Nomination and Remuneration Committee comprises of:

Mrs. Lalitha Raghuram Chairperson and Independent Director
Mr. Uday Shankar Jha1 Member and Nonexecutive Director
Mr. K C Bhanu2 Member and Independent Director
Mr. V V S Ravindra3 Member and Nominee Director
Mrs. Girija Bhan4 Member and Independent Director

 

1 Inducted as a member with effect from September 30 2020

 

2 Inducted as a member with effect from December 25 2020 & ceased to be amember with effect from June 19 2021

 

3 Ceased to be a member with effect from August 312020

 

4 Ceased to be a member with effect from December 14 2020

Stakeholders Relationship Committee

The Stakeholders Relationship Committee was constituted with effect from April 222014 in 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. Uday Shankar Jha1 Member and Nominee Director
Mr. Rajendra Mohan Gonela2 Member and Independent Director
Mr. V V S Ravindra3 Member and Non-executive Director
Mrs. Girija Bhan4 Member and Independent Director

 

1 Inducted as a member with effect from September 30 2020

 

2 Inducted as a member with effect from December 25 2020

 

3 Ceased to be member with effect from August 312020

 

4 Ceased to be member with effect from December 14 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 312020

 

2 Inducted as a member with effect from September 30 2020

Risk Management Committee

The Risk Management Committee was constituted in compliance with the provisions ofRegulation 21 of Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015.

The committee comprises of three members including one Independent Director. TheChairman of the Committee is an Executive Director.

Mr. K Rahul Raju Chairman and Executive Director
Mr. Uday Shankar Jha Member and Non-Executive Director
Mrs. Lalitha Raghuram1 Member and Independent Director

 

1 Inducted with effect from June 29 2021.

B. DISCLOSURES

I Company Policy Matters

Your Company's endeavor has always been to maintain transparency and accountability toits stakeholders. In this direc- I tion 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

The Company had constituted Risk Management Committee which frames implements andmonitors Risk Management Plan of the Company and lays down procedures to inform the Boardof the risk assessment and risk minimization procedures in the Company much before it wasintroduced as statutory compliance.

The Risk Management Committee is in compliance with the i provisions of Regulation 21of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015.

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

As per the Enterprise Risk Management System the risks of the Company are beingregularly identified/assessed and documented by way of individual profiles and riskregisters. The Company 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 I ERM process under the purview of Chief Risk Officer onan 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 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 312021.

The Nomination and Remuneration Committee at their meeting held on June 29 2021 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 August 13 2021.

Further Independent Directors at their meeting held on August 11 2021 had reviewedthe performance of Non-Independent Directors Chairman and the Board as a whole.

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 Whistle Blower Policy/Vigil Mechanism in compliance withRegulation 22 of Listing Regulations and Section 177(9) of the Companies Act 2013.

The Policy aims to prohibit managerial personnel from taking adverse personnel actionagainst employees disclosing in good faith alleged wrongful conduct on matters of publicconcern involving violation of any law mismanagement and misappropriation of publicfunds 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. The Web linkfor the 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 Act2013. The Company has always desired to play a proactive role in societal development withan intention to bring positive change in the lives of many. The CSR Policy may be accessedon the Company's website at the link: http://www.nagarjunafertilizers.com/inv_corp.

htm.

An initiative started in 2009 with the spirit of making a difference had deepened itsroots and bigger impact and changing many more lives. The dedicated support strengthinitiative and encouragement from the associates to be part of this initiative gaveimpetus to the movement.

During the year under review the Company was not required to spend any amount on CSRas the company had been incurring losses for the past few years. Your Company during theyear has contributed Rs.18.17 lakh to PM cares fund and CM relief fund towards CSRactivities. The Annual Report on CSR Activities carried out by the Company appears as Annexure-III to this Report.

The salient features of the policy on CSR appears as Annexure - III(a)

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 and appears asAnnexure IV describing the initiatives taken by the Company from an environmentalsocial and governance 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 37). 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 is http://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

There are no loans guarantees and investments under Section 186 of the Act as at theend of the Financial Year 2020-21.

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 appears as Annexure-VI to this Report.

Annual Return

The Annual Return of the Company for the year ended March 31 2021 is placed on thewebsite of the Company. The web link for the same is http://nagarjunafertilizers.com/inv_annualreturn.htm

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 SS-1 -Meetings of Board of Directors and SS-2 - General Meetings.

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 2020-21 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 workflow and approvals arerouted through SAP.

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

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

The Auditors in their Report of Internal Financial Controls (Annexure A to theIndependent Auditors' report) have opined that the Company has in all material respectsan adequate Internal Financial Controls system over financial reporting and such InternalFinancial Controls over financial reporting were operating effectively as at March312021 based on the internal control over financial reporting criteria established bythe Company considering the essential components of internal control stated in theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting issued bythe Institute 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 approval of the Securities and Exchange Board of India.

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 the provisions of Section 148 (1) of the Companies Act 2013is required to maintain cost records. Accordingly the Company had maintained CostAccounts and Records for the year ended March 312021.

C. AUDITORS AND AUDIT REPORT

Statutory Auditors

The Members of the Company at the 13th Annual General Meeting held onDecember 24 2019 reappointed M/s. M Bhaskara Rao & Co. Chartered Accountants (FirmRegistration No-000459S) Hyderabad as the Statutory Auditors of the Company for a secondterm of three years to hold office from the conclusion of 13th Annual General Meeting(AGM) till the conclusion of the 15th AGM.

In terms of Section 139 of the Companies Act 2013 the term of M/s M Bhaskara Rao andCo. Chartered Accountants the current Statutory Auditors of the Company will complete atthe conclusion of the 15th AGM of the Company and are not eligible forre-appointment.

The Company is required to appoint a new Statutory Auditors to conduct the StatutoryAudit of the books of accounts of the Company for the Financial Year 2021-22 onwards.

The Company proposes to appoint M/s. J V S L & Associates Chartered Accountants(Firm Registration No. 015002S) as the Statutory Auditors of the Company for a period of5 years commencing from the conclusion of the 15th AGM till the conclusion ofthe 20th AGM.

M/s. J V S L & Associates Chartered Accounts have consented to their appointmentas Statutory Auditors and have confirmed that they hold a valid certificate issued by thePeer Review Board of the Institute of Chartered Accountants of India and if appointedtheir appointment will be in accordance with Section 139 read with Section 141 of the Act.

The Board of Directors in accordance with the provisions of Section 139 of theCompanies Act 2013 and Rules made there under recommends the appointment M/s. J V S L& Associates Chartered Accountants Hyderabad (Firm Registration No. 015002S) as thestatutory Auditors of the Company for a term of five years from the conclusion of 15thAnnual General Meeting up to the conclusion of 20th Annual General Meeting forthe approval of the shareholders.

Auditors Report

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

a. Note 15.5 regarding accounting of interest and penal interest on the overdueborrowings pending confirmation and acceptance by the lenders for the reasons stated inthe said note;

b. Note 24.1 regarding recognizing Income from urea operations including reimbursementclaims for additional fixed cost input escalation/de-escalation and for productionbeyond reassessed capacity based on prices and provisions applicable under NPS IIIModified NPS III pending notification of final prices under New Urea Policy 2015 andconsequential adjustments if any that may arise.

c. Note 33 regarding provision of Rs. 14082 Lakhs towards impairment of land mentionedtherein and the reasons therefor and to the Company's assertions as to its continuedpossession of the said lands and its intent to pursue mutation of title in the said landsto its name;

d. Note 36.1.1 regarding International Arbitration awards passed against the Companyfor USD 15275688 GBP 742944 EURO 455000 [aggregating to Rs. 12307.95 lakhs(31.03.2020: Rs.12585.09Lakhs) approximately] and Rs.221.39 lakhs; the impact of whichhas not been recognised in the Financial Statements for reasons stated in the said note.

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 15.5 of Notes forming part of the standalone financialstatements for the year ended March 31 2021 are self-explanatory and do not call for anyfurther comments

b. Emphasis of Matter given in Note (b) of the Auditor's Report on standalone financialstatements read with Note 24.1 of Notes forming part of the standalone financialstatements for the year ended March 31 2021 are self-explanatory 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 33 of Notes forming part of the standalone financial statementsfor the year ended March 31 2021 are self-explanatory and do not call for any furthercomments.

d. Emphasis of Matter given in Note (d) of the Auditor's Report on standalone financialstatements read with Note 36.1.1 of Notes forming part of the standalone financialstatements for the year ended March 31 2021 are self-explanatory and do not call for anyfurther comments.

Cost Auditor & Cost Audit Report

In terms of 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 June 29 2021 appointed M/s. Sagar & Associates as the Cost Auditor of theCompany at a remuneration of Rs.4 Lakh plus taxes as applicable and reimbursement ofout-of-pocket expenses for conducting the audit of cost records of the company for theFinancial Year 2021-22.

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 2020-21 which does not contain any qualification reservation or adverse remark.

Secretarial Auditor & Secretarial Audit Report

The Board of Directors at their meeting held on June 29 2021 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 2021-22.

M/s. KBG Associates Secretarial Auditor have issued the Secretarial Audit Report forthe Financial Year 2020-21 which does not contain any qualification reservation oradverse remark. The Secretarial Audit Report appears as Annexure -VII to thisReport.

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 VIII 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 312021.

D. 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.

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