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National Fertilizer Ltd.

BSE: 523630 Sector: Agri and agri inputs
NSE: NFL ISIN Code: INE870D01012
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OPEN 40.10
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VOLUME 128261
52-Week high 67.35
52-Week low 38.25
P/E 18.55
Mkt Cap.(Rs cr) 2,011
Buy Price 0.00
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Sell Price 0.00
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OPEN 40.10
CLOSE 40.00
VOLUME 128261
52-Week high 67.35
52-Week low 38.25
P/E 18.55
Mkt Cap.(Rs cr) 2,011
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

National Fertilizer Ltd. (NFL) - Auditors Report

Company auditors report

To the Members of National Fertilizers Limited

Report on the Audit of the Standalone Financial Statements [Opinion

We have audited the accompanying standalone financial statements of NationalFertilizers Limited (hereinafter referred to as "the Company") which comprisethe Standalone Balance Sheet as at 31 March 2021 the Standalone Statement of Profit andLoss (including other comprehensive income) the Standalone Statement of Cash Flows andthe Standalone Statement of Changes in Equity for the year then ended and a summary of thesignificant accounting policies and other explanatory information (herein after referredto as "standalone financial statements").

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the Indian Accounting Standards ("IND AS")prescribed under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended and other accounting principles generally accepted inIndia of the state of affairs of the Company as at 31 March 2021 the net profit(including other comprehensive income) changes in equity and its cash flows for the yearended on that date.

[Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing ("SAs") specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the Auditor'sResponsibilities for the Audit of the Standalone Financial Statements section of ourreport. We are independent of the Company in accordance with the Code of Ethics issued bythe Institute of Chartered Accountants of India ("ICAI") together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules made thereunder and we have fulfilled ourother ethical responsibilities in accordance with these requirements and the ICAI's Codeof Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the standalone financialstatements.

[Emphasis of Matter

We draw attention to Note No. 33 of accompanying standalone financial statementsregarding recognizing of one-time payment amounting to ' 167.55 crores towardsreimbursement of conversion cost of the plant representing return on own funds for FY2012-13 to 2017-18 as "Other Operating Revenue" under the head "Revenuefrom Operations". Our opinion is not qualified in respect of this matter.

[Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report. Summary of the same is mentionedhere under:

S. No. Key Audit Matter Response to Key Audit Matter
1 Revenue recognition Principal Audit Procedures
Recognition of subsidy is generally made on the basis of in principle recognition/approval/ settlement of claims from Fertilizer Industry Coordination Committee (FICC) Department of Fertilizers (DoF) Government of India (GOI) while finalizing the financial statements. Also the FICC regulates such subsidy and the bills raised on such notifications. The following principal audit procedures have been performed by us in relation to revenue recognition:
Escalations/de-escalations in notified rates is estimated taking into account the effect of guidelines policies instructions and clarifications given. a) We have reviewed the Company's Accounting policies for Revenue Recognition (Refer Note No. 1 of the standalone financial statements) relevant Notifications and Circulars issued by the Ministry to Government of India.
Since there is a time lag between actual expenditure incurred and notification of concession rates for the year Management exercises significant judgment in arriving at the income entitled on account of same for the year. b) We have carried out substantive procedures on sample basis for evaluation of operating effectiveness of key controls over subsidy and each income stream basis of management estimation and their corresponding disclosure.
Therefore there is a risk of revenue being misstated on account of estimation of concession/ Import Parity Price (IPP) rates yet to be notified. Process of Collection utilization and retention of Retailer Margin. c) We have reviewed directions of Department of Fertilizer various Notifications issued from time to time and management assessment in relation to retailer margin.
2 Estimation of Provision & Contingent Liabilities Principal Audit Procedures
The Company has its operations in various States within India exposing it to a variety of different Central and State laws. Our audit process involved understanding of identification process relating to litigations claims and contingent liabilities.
Litigations and claims may arise from direct and indirect tax proceedings. Resolution of litigations and claims proceedings may span over multiple years beyond 31 March 2021.
The determination of a provision or contingent liability requires significant judgement by the Company because of the inherent complexity in estimating future costs.
The Company has reported Contingent liabilities amounting to ' 118.17 Crores in Note 47 to standalone financial statement.
The provisions and contingent liabilities are subject to changes in the outcomes of litigations and claims over time as new facts emerge as each legal case progresses and positions taken by the Company. We have evaluated the design and testing the operating effectiveness of controls in respect of process.
There is an inherent complexity and magnitude of potential exposures is significant across the Company. Significant judgment is necessary to estimate the likelihood timing and amount of the cash outflows interpretations of the legal aspects legislations and judgements previously made by the authorities. We have evaluated management's assessment of the likely outcome and potential exposures arising from significant contingencies subject to ongoing court cases and arbitration proceedings and considered the requirements for any provision as per the best estimate of the possible expenditure.
In respect of significant claims we checked the amount of claim nature of issues involved management submissions and corroborated the same with external evidence where available.
3 Trade receivables Principal Audit Procedures
Trade Receivables appearing in financial statement consists of receivables from sale of products as well as receivable from Government of India in the form of subsidy. Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
Trade Receivables as at 31 March 2021 amounting to '2634.09 crores includes subsidy receivable of '2162.69 crores receivable from Government of India. Refer Note 12 to the Standalone Financial Statements. a) In respect of Subsidy recoverable from Government of India as no confirmation of balance is on record we have relied on the management's assertion on the recoverability. As subsidy receivable is outstanding from Department of Fertilizer Government of India (i.e. Sovereign Authority) and is backed by the approved claims generated from MFMS (Mobile Fertilizer Management System) amount outstanding as at balance sheet date has been considered as recoverable (net of provisions).
b) In respect of receivables other than Subsidy receivables management have sent request for confirmation from the parties. The response to the request were checked together subsequent realisation check were also performed and long outstanding balances have been reviewed.
4 Property Plant and Equipment Principal Audit Procedures
Management judgment is utilised for determining the carrying value of property plant and equipment intangible assets and their respective depreciation/amortization rates. a) Testing of controls in place over the fixed assets cycle
b) Evaluation of appropriateness of capitalization process performed tests to verify the capitalized costs
These include the decision to capitalize or expense costs; the annual asset life review; the timelines of the capitalization of assets and the measurement and recognition criteria for assets retired from active use. Please refer accounting policy no. 1.2.9. c) Assessment of the timelines of the capitalization of the assets and assessed the derecognition criteria for assets retired from active use. The useful life review of assets has been assessed by the management. In performing these procedures we reviewed the judgments made by management for the following:
a) Identification of the nature of underlying costs capitalized
b) Determination of realizable value of the assets retired from active use
c) Appropriateness of asset lives applied in the calculation of depreciation/ amortization
d) Useful lives of assets prescribed in Schedule II of the Companies Act 2013.
5 Capital Work in Progress Principal Audit Procedures
The Company is in the process of executing various energy reduction projects in Nangal Bhatinda and Panipat plant. a) Our audit process includes a review of the progress of the projects and the intention and ability of the management to carry forward and bring the asset to its state of intended use.
This is a major capitalization against which major debt has been taken from Bank(s). Management assessment includes the decision to capitalize or expense costs; review of Performance Guarantee Run Test;
Preliminary Acceptance Certificate (PAC); the timelines of the capitalization of CWIP Please refer accounting policy no 1.2.12. During the year the Company has made a net addition of '206.13 crores in Capital Work in Progress including expenditure during construction phase ' 58.49 crores towards its plants out of which ' 8.63 crores have been capitalized. Total CWIP as on 31 March 2021 amounts ' 862.43 crores. b) We understood and evaluated the design and tested operating effectiveness of management's internal financial control in relation to approval of expenditure and capitalization of appropriate costs. We were able to place reliance on these controls for the purpose of our audit.
c) In respect of internal costs allocated to the plant test checked the identification and allocation of costs directly attributable to the construction of plant.
6 Impact of Covid-19 Principal Audit Procedures
It is the responsibility of the management to make appropriate adjustments to the financial statements and ensure necessary disclosures specifically the impact on business due to Covid-19 subsequent risks and uncertainties and conditions that may impact future operating results cash flows and financial position of the company. The audit procedures included but were not limited to:
a) Obtaining a detailed understanding of future business climate and demand potential. The audit procedures included but were not limited to:
We are informed by the management that considering the present scale of operations seasonal product demand in the ensuing future the management does not perceive any risk in ensuing operations liquidity and capital resources. We find sufficient and appropriate evidences of such management perception on record. It is also concluded by the management that no material adjustments are required in the financial statements in the current financial year. However the situation with COVID-19 is still evolving. a) Obtaining a detailed understanding of future business climate
Also the various preventive measures taken (such as lockdown restrictions by the Government of India travel restrictions etc.) are still in force leading to a highly uncertain economic environment. ab) Subsequent performance upto the date of signing the report.
However the management's assessment of the impact on the subsequent period is immaterial. Refer Note 59 of Standalone Financial Statements c) Minutes of the Audit Committee/ Board and discussions with the appropriate Management personnel. Possible outcomes and the reasonableness of the estimates and demand potential.

Information Other than the Standalone Financial Statements and Auditor's Report Thereon

The company's management and Board of Directors are responsible for the preparation ofother information. The other information comprises the Management Discussion and AnalysisDirector's Report including annexures to Director's Report Business ResponsibilityReport Corporate Governance Performance at a Glance and Chairman's Statement included inthe annual report of the company but does not include the standalone financial statementsand our auditor's report thereon.

Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information identified above and in doing so consider whether theother information is materially inconsistent with the standalone financial statements orour knowledge obtained during the course of audit or otherwise appears to be materiallymisstated. On reading the Annual report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance and take necessary actions as per applicable laws and regulations.

Responsibilities of Management and those charged with Governance for the StandaloneFinancial Statements

The Company's management and Board of Directors is responsible for the matters statedin Section 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the financial position financial performanceincluding other comprehensive income cash flows and changes in equity of the Company inaccordance with the accounting principles generally accepted in India including the INDAS prescribed under Section 133 of the Act read with relevant rules issued thereunder.

This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgements and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the standalonefinancial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.

The Board of Directors are responsible for overseeing the Company's financial reportingprocess.

[Auditor's Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalonefinancial statements whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• Obtain an understanding of internal financial controls relevant to the audit inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Act we are also responsible for expressing our opinion on whether theCompany has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management and Board of Directors.

• Conclude on the appropriateness of the Management and Board of Directors' use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the ability of the Company to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the Statement or if such disclosures are inadequate to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor's report. However future events or conditions may cause the Company to ceaseto continue as a going concern.

• Evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit. We alsoprovide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence and to communicate with them allrelationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.

From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.

Other Matters

The standalone financial statements of the Company for the year ended 31 March 2020were audited by the joint auditors of the Company one of which is the predecessor auditfirm and have expressed an unmodified opinion vide their report dated 30 July 2020 onsuch financial statements.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of section 143(11) of the Act we givein the "Annexure A" a statement on the matters specified in theparagraph 3 and 4 of the order.

2. As required by Section 143(5) of the Act we have considered the direction andsub-directions issued by the Comptroller & Auditor General of India. We give ourreport in the attached "Annexure B".

3. As required by Section 143(3) of the Act we report that:

(a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;

(c) The standalone balance sheet the standalone statement of profit and loss thestandalone statement of cash flows and the standalone statement of changes in equity dealtwith by this Report are in agreement with the books of account;

(d) In our opinion the aforesaid standalone financial statements comply with the INDAS specified under Section 133 of the Act read with relevant rule issued thereunder;

(e) As per notification number G.S.R. 463(E) dated 5 June 2015 issued by Ministry ofCorporate Affairs section 164(2) of the Act regarding the disqualifications of Directorsis not applicable to the Company since it is a Government Company;

(f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in "Annexure C";

(g) As per notification number G.S.R. 463 (E) dated 5 June 2015 issued by Ministry ofCorporate Affairs section 197 of the Act regarding remuneration to director is notapplicable to the Company since it is a Government Company; and

(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

I. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements - Refer Note 47 to the standalonefinancial statements;

ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses;

iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.

For MEHRA GOEL & COMPANY For ARUN K. AGARWAL & ASSOCIATES
Chartered Accountants Chartered Accountants
Firm's Registration No.: 000517N Firm's Registration No.: 003917N
(Devinder Kumar Aggarwal) (Lokesh Garg)
Partner Partner
Membership number: 087716 Membership number: 413012
UDIN No. : 21087716AAAABV5997 UDIN No. : 21413012AAAAAX8029
Place: Noida
Date: 10-06-2021

ANNEXURE "A"

The Annexure refer to in Independent Auditor's Report to the members of the Company onthe standalone financial statements for the year ended 31 March 2021 we report that:

(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets on the basis of the availableinformation.

(b) As explained to us the Company has a regular program of physical verification ofits fixed assets by which all fixed assets are verified in a phased manner which in ouropinion is reasonable having regard to the size of the Company and nature of its assets.Accordingly the physical verification of fixed assets has been carried out by themanagement during the year. We are informed that discrepancies noticed on suchverification were not material and have been properly dealt with in the books of account.Further as per the Government directions the company have installed PoS devices atdifferent retail points for which no physical verification is carried out.

(c) According to the information and explanations given to us and on the basis and onthe basis of our examination of the Company the title deeds of immovable properties areheld in the name of the Company except the following:

Nature Area (in Acres) Net Carrying Amount (' in crores)
Freehold Land at Bhatinda 14.261 0.15
Leasehold Land at Vijaipur 1250.254 -
Freehold Land at Alwar 0.164 -

* Value is less than or equal to '1 hence figure not given in crores.

Further symbolic possession of 325.70 acres of land at Nangal (having net carryingamount ' 0.12 crores) was taken by the Punjab Government on 29.10.1998 against which thecompany has filed a Civil Writ Petition in the Punjab & Haryana High Court and thematter is sub-judice.

(ii) The physical verification of the inventory has been carried out by the managementin accordance with the perpetual inventory programme at regular intervals during theyear. The discrepancies noticed have been properly dealt within the books of account;

(iii) The Company has not granted any loans secured or unsecured to companies firmsor other parties covered in the register maintained under Section 189 of the Act.Accordingly paragraph 3(iii)(a) (b) and (c) of the Order is not applicable.

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans and investments made.

(v) According to the information and explanation given to us the Company has notaccepted any deposits within the provisions of sections 73 to 76 or any other relevantprovisions of the Act and the rules framed there under. Accordingly paragraph 3(v) of theOrder is not applicable.

(vi) We have broadly reviewed the Cost Records maintained by the Company specified byCentral Government under Sub Section (1) of section 148 of the Act and are of the opinionthat prima facie the prescribed records have been maintained. We have however not made adetailed examination of the Cost Records with a view to determine whether they areaccurate or complete.

(vii) (a) According to information and explanations given to us and on the basis of ourexamination of the records of the

Company the Company is generally regular in depositing with the appropriateauthorities undisputed statutory dues including Provident Fund Employees' StateInsurance Income tax Sales tax Wealth tax Service tax Customs duty Excise duty Cessand Goods and Service Tax and other statutory dues.

According to the information and explanations given to us no undisputed amounts remainpayable in respect of such statutory liabilities as at 31 March 2021 for a period of morethan six months from the date they became payable.

(b) According to the information and explanations given to us the particulars of thestatutory dues as at 31 March 2021 which have not been deposited on account of a disputeare as under:

Name of Statute Nature of Dues Amount Involved (Rs. in crore) Period to which the amount relates Forum where the dispute is pending
Income Tax Act 1961 Income Tax 33.08 AY 2006-07 and AY 2011-12 to 2014-15 ITAT Delhi
Income Tax 6.74 AY 2017-18 CIT (Appeals)
Income Tax 8.03 AY 2018-19 CIT (Appeals)
Custom Act 1962 Custom Duty 6.02 1996-97 CESTAT Mumbai
Central Excise Act 1944 Excise Duty 3.69 2013-14 CESTAT Ahmedabad
Penalty on Excise Duty 0.02 FY 2017-18 Commissioner (Appeals) Bhopal
Punjab VAT Act VAT 0.55 2006-07 to 2009-10 VAT Tribunal Punjab
Punjab Municipal Act Property Tax 0.81 2007-08 to 2009-10 & 2013-14 Municipal Council Nangal
0.09 1982-83 to 1990-91
Haryana Local Development tax Act 2000 Entry tax 6.72 2000-01 to 2002-03 Joint Excise & Taxation Commissioner Rohtak
MP Value Added Tax Act 2002 VAT 0.01 2008-09 Assistant Commissioner Gwalior
MP Entry Tax Act 1976 Entry Tax 0.08 2013-14 2014-15 and 2016-17 Additional Commissioner Gwalior
Entry Tax 0.03 2010-11 & 2012-13 MP Commercial Tax Appellate Board Bhopal
MP Vidyut Shulk Adhiniyam 2012 Electricity Generation Duty & Cess 0.47 2008-09 to 2012-13 MP High Court Jabalpur Bench Gwalior
Municipal Corporation Bathinda Octroi Charges 0.40 FY 1998-99 1991-92 Punjab and Haryana High Court
Finance Act Penalty on Service Tax 0.17 FY 2016-17 Commissioner (Appeals) Ludhiana

(viii) In our opinion and according to the information and explanations given to usthe Company has not defaulted in repayment of dues to any bank or bonds/debenture holdersas at the Balance Sheet date.

(ix) In our opinion and according to the information and explanations given to us theCompany did not raise any money by way of initial public offer or further public offer(including debt instruments) and term loans during the year. Accordingly paragraph 3(ix)of the Order is not applicable to the Company.

(x) To the best of our knowledge and according to the information and explanationsgiven to us no fraud by the company and no fraud on the Company by its officers oremployees has been noticed or reported during the year.

(xi) In view of the Government Notification No. GSR 463 (E) dated 5 June 2015;Government Companies are exempt from the applicability of Section 197 of the Companies Act2013. Accordingly clause 3 (xi) of the Order is not applicable to the Company.

(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company as prescribed under Section 406 of the Act. Accordinglyparagraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.

(xiv) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934. Accordingly paragraph 3(xvi) of the Order is not applicable tothe Company.

For MEHRA GOEL & COMPANY For ARUN K. AGARWAL & ASSOCIATES
Chartered Accountants Chartered Accountants
Firm's Registration No.: 000517N Firm's Registration No.: 003917N
(Devinder Kumar Aggarwal) (Lokesh Garg)
Partner Partner
Membership number: 087716 Membership number: 413012
UDIN No. : 21087716AAAABV5997 UDIN No. : 21413012AAAAAX8029
Place: Noida
Date: 10-06-2021

ANNEXURE "B"

The Annexure referred to in Independent Auditor's Report to the members of the Companyon the standalone financial statement for the year ended 31 March 2021.

COMPLIANCE CERTIFICATE

We have conducted the audit of the accounts of National Fertilizers Limited for theyear ended 31 March 2021 in accordance with the Directions / Sub-Directions issued by theC&AG of India under Section 143(5) of the Companies Act 2013 and certify that we havecomplied with all the directions/sub-directions issued to us.

For MEHRA GOEL & COMPANY For ARUN K. AGARWAL & ASSOCIATES
Chartered Accountants Chartered Accountants
Firm's Registration No.: 000517N Firm's Registration No.: 003917N
(Devinder Kumar Aggarwal) (Lokesh Garg)
Partner Partner
Membership number: 087716 Membership number: 413012
UDIN No. : 21087716AAAABV5997 UDIN No. : 21413012AAAAAX8029
Place: Noida
Date: 10-06-2021

AUDIT REPORT OF NATIONAL FERTILIZERS LIMITED FOR THE YEAR 2020 -2021 PURSUANT TODIRECTIONS UNDER SECTION 143(5) OF THE COMPANIES ACT 2013

Directions for the year 2020-21

1. Whether the company has system in place to process all the accounting transactionsthrough IT system? If yes the implications of processing of accounting transactionsoutside IT system on the integrity of the accounts along with the financial implicationsif any may be stated.

Yes the company has its system in place to process majority of the accountingtransactions through IT system except:

a. Calculation of depreciation of fixed asset

b. Valuation of Closing Stock of traded goods

c. Calculations of subsidy on Urea production (through GC-4)

Unit-wise accounting is maintained on different computer systems which are notinterconnected. However integrity of the accounts is not in jeopardy.

2. Whether there is any restructuring of an existing loan or cases of waiver/write offof debts/loans/interest etc. made by a lender to the company due to the company'sinability to repay the loan? If yes the financial impact may be stated. Whether suchcases are properly accounted for? (In case lender is a Government Company then thisdirection is also applicable for statutory auditor of the lender company).

Based on Audit Procedure performed by us and as per the information and explanationgiven to us there has been no restructuring of an existing loan or cases of waiver/writeoff of debts/ loans/interest etc. made by a lender to the company.

3. Whether funds (grants/subsidy etc.) received/receivable for specific schemes fromCentral/State Government or its agencies were properly accounted for/utilized as per itsterm and conditions? List the cases of deviation.

Funds received/receivable for specific schemes from Central/State Government or itsagencies were properly accounted for/utilized as per its terms and conditions.

II. Sub-Directions under section 143(5) of Companies Act 2013 for the year 2020-21

1. Whether subsidy received/recoverable from the GOI has been properly accounted forand reconciled as per claims admitted?

Based on Audit Procedure performed by us and as per the information and explanationgiven to us Price and Freight Subsidy receivable is measured and raised based on policyissued by DOF /principle/ notifications received from Fertilizer Industry CoordinationCommittee (FICC) an office of the Government of India which regulates such subsidy.Escalation/De-escalation in notified rates is estimated taking into account the effect ofguidelines policies instructions and clarifications given by the Government. Thedifference if any based on final notification received from FICC is accounted for inrelevant year.

Taking into consideration the above the subsidy received /recoverable from Governmentof India has been properly accounted for by the Company. Further the subsidy receivedduring the year has been reconciled as per the claims admitted.

2. Impact of revision of subsidies for Fertilizer Product viz NPK Ammonium Sulphateand imported MoP in valuation of closing stock may be stated.

The closing stock of NPK Ammonium Sulphate and imported MoP as on 31 March 2021 hasbeen valued at cost. There is no impact of revision of subsidy in valuation of closingstock.

3. Whether subsidy was recognized as per provision of the Direct Benefit TransferScheme of GoI?

Recognition of subsidy is generally made on the basis of in principlerecognition/approval/ settlement of claims from Fertilizer Industry Coordination Committee(FICC) Department of Fertilizers (DoF) Government of India (GOI). Also the FICCregulates such subsidy and the bills raised on such notifications. Subsidy is beingrecognised at point of sale by the company. Escalations/de-escalations in notified ratesis estimated taking into account the effect of guidelines policies instructions andclarifications given. The difference if any based on final notification received fromFICC is accounted for in relevant year.

However under Direct Benefit Transfer Scheme of GoI 100% payment of subsidy is madeon the basis of actual sale by the retailers to the beneficiaries on weekly basis throughPoS machines.

Pursuant to above procedure pending sale of urea and P&K fertilizer totalling10.80 lakh MT through POS machine to beneficiaries as on 31 March 2021 subsidy of '1276.70 crore which has accrued on sale to dealers but shall become due for payment underDBT upon sale through PoS machines has been recognized in the current period. (refer note33 of the standalone financial statement)

Hence subsidy was recognized as per the applicable provisions.

4. State the area of land under encroachment if any and briefly explain the stepstaken by the company to remove the same.

According to the information and explanation given to us symbolic possession of 325.70acres of land at Nangal was taken by the Punjab Government on 29.10.1998 against which thecompany has filed a Civil Writ Petition No 4446 of 2000 in The Punjab & Haryana HighCourt and the matter is sub-judice. (refer note 2(b) of the standalone financialstatement)

For MEHRA GOEL & COMPANY For ARUN K. AGARWAL & ASSOCIATES
Chartered Accountants Chartered Accountants
Firm's Registration No.: 000517N Firm's Registration No.: 003917N
(Devinder Kumar Aggarwal) (Lokesh Garg)
Partner Partner
Membership number: 087716 Membership number: 413012
UDIN No. : 21087716AAAABV5997 UDIN No. : 21413012AAAAAX8029
Place: Noida
Date: 10-06-2021

ANNEXURE "C"

The Annexure referred to in Independent Auditor's Report to the members of the Companyon the standalone financial statement for the year ended 31 March 2021.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of NationalFertilizers Limited (hereinafter referred to as "the Company") as of 31 March2021 in conjunction with our audit of the standalone financial statements of the Companyfor the year ended on that date.

[Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India ('ICAI'). These responsibilitiesinclude the design implementation and maintenance of adequate internal financial controlsthat were operating effectively for ensuring the orderly and efficient conduct of itsbusiness including adherence to company's policies the safeguarding of its assets theprevention and detection of frauds and errors the accuracy and completeness of theaccounting records and the timely preparation of reliable financial information asrequired under the Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Act to the extent applicable to an audit ofinternal financial controls both applicable to an audit of Internal Financial Controlsand both issued by the Institute of Chartered Accountants of India. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols over financial reporting was established and maintained and if such controlsoperated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

[Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that:

1. pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;

2. provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and

3. provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

(Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2021 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the ICAI.

For MEHRA GOEL & COMPANY For ARUN K. AGARWAL & ASSOCIATES
Chartered Accountants Chartered Accountants
Firm's Registration No.: 000517N Firm's Registration No.: 003917N
(Devinder Kumar Aggarwal) (Lokesh Garg)
Partner Partner
Membership number: 087716 Membership number: 413012
UDIN No. : 21087716AAAABV5997 UDIN No. : 21413012AAAAAX8029
Place: Noida
Date: 10-06-2021

.