Dear Members,
Your directors present the 18th Annual Report on the business and operations of NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED (NFCL) together with the Audited Financial Statements of your Company for the year ended March 31, 2024, and other accompanying reports, notes and certificates.
A.Business and Financial Highlights
The Standalone and Consolidated Financial Results of the Company for the year ended March 31, 2024, prepared as per Ind AS reporting are as under:
Standalone Financial Results
Rs. in Crore
Consolidated Financial Results
Particulars
Financial Summary
The loss after tax for the year was Rs.1283.89 crores against Rs.900.09 crore for the previous year. The loss before exceptional items for the period increased by Rs 160.49Crs. The loss before impairment loss for the period increased by Rs 201.62 Crs mainly due to accounting of Rs. 231.32 Crs revision in energy norms from Oct 2020 to March 2023 in the previous year which is not there in the current year.
Share Capital
The Paid-up Equity Capital of the Company as on March 31, 2024, is Rs.59,80,65,003/- consisting of 59,80,65,003 Equity Shares of Re.1/- each.
Transfer to Reserves
There has been no transfer to General Reserves during the Financial Year 2023-2024 in view of losses incurred by the Company.
Dividend
The Board of Directors of your company, after considering the operational performance and keeping in view the company's dividend distribution policy, has decided not to recommend any Dividend for the year under review.
COMPANY' SAFFAIRS Plant Operations Urea
Your Company during the financial year 2023-24 manufactured 13.102 LMT of urea as against 11.205 LMT in the previous year. The production for the year 2023-24 is less compared to the usual level, owing to low load operation of the plants due to equipment limitations.
Micro-Irrigation
Micro Irrigation Division had achieved a production of 92.4 Lakhs Meters in FY 2023-24 against 109.59 Lakh Meters during the previous year out of which PVC pipes production of 1.75 Lakh Meters in FY 2023-24 against 3.71 Lakhs Meters during the previous year.
Marketing Urea
Your Company achieved a sale of manufactured urea of 11.20 LMT compared to 9.18 LMT in the previous year.
The total urea sales for both manufactured and imported urea was 11.20 LMT compared to 9.18 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 the previous year also, there was no sale of Traded Bulk Products.
Specialty Fertilizers
Your Company could sell 40.98 Mt of the Specialty Fertilizers during the year. In the previous year, there was no sale of Specialty Fertilizers.
Micro-nutrients
Your Company could not sell any of the Micro-nutrients during the year. In the previous year also, there was no sale of Mi-cro-nutrients.
Supplements and OSR
Your Company could not sell any of the Supplements & OSR during the year. In the previous year also, there was no sale of Supplements & OSR.
Customized Fertilizers
Your Company could not sell any of the Customized Fertilizers during the year in comparison with sales of 99 MT during the previous year.
Nagarjuna Brand
The Company has been using Nagarjuna Brand/ Trademarks under a License Agreement dated January 29, 1998. The Company had defaulted in payment of royalty dues under the said License Agreement. The Grantor had sent a notice for cancellation of the Royalty Agreement as the Company has outstanding Royal payments. The granter had also claimed dues with RP appointed by court in 2021 when the company was admitted to NCLT. However, upon stay from NCLAT, and Agreement on settlement of outstanding dues, the Grantor had allowed continuance of the Brand usage up to end of December, 2022. Consequent to expiry of brand license, the Company is required to change the name of the Company.
Environment and Safety Environment
Your Company continues its mission of protecting the environment and has inculcated the concept right down the organization. The statutory compliance on environmental matters is being complied from time to time.
Health &Safety
By following the best practices and with adoption of international standards and procedures, Plant Operations continued. Your Company as on March 31, 2024, completed 1,03,01,232 accident free man-hours by employees and contractors of the Company.
Further to strengthen the procedures and practices, MAH inspection at Ammonia Storage Tanks 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 to Associates.
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
The material changes and commitments affecting the financial position of the Company which have occurred as at and post March 31, 2024, has been elaborated in the following under Debt Resolution Proposal and SARFAESI Process by Assets Care and Reconstruction Enterprise Limited (ACRE), the Secured Creditor.
Claims Against GAIL
After the GAIL pipeline accident in 2014, NFCL had initiated an Arbitration proceeding against GAIL with a claim that there was no force majeure event and that GAIL was liable for the financial losses suffered by the company on account of stoppage of natural gas supplies from 27.6.2014 basis miss representations and gross negligence by GAIL.
The company had unfortunately lost the arbitration case with GAIL on 13.3.2023 wherein the arbitrator concluded that that stoppage of gas was due to a force majeure event as represented by GAIL.
Debt Resolution Proposal viz. sale of Ammonia/Urea and MI businesses with related assets and liabilities.
NFCL a growing and profitable company in 2014 went into financial stress to due a GAIL pipeline accident*. Subsequently the lenders and subsequently board and shareholders (as per section 180 of the Companies Act, 2013) approved rectification of account as a corrective action plan with funding to revive the company. The company could not be revived due to various factors including inadequate funding approved for rectification of account resulting in the lenders declaring default in 2018. The company had filed various cases since 2018 against lenders for not implementing CAP with funding (there is no order yet supporting the claims of the company). Various and significant efforts to revive the company since 2018 failed to yield any results. The company via press came to know that the erstwhile lenders of the company exited their debt through assignment of debt.
*The Company initiated arbitration on GAIL claim losses incurred on account of GAIL pipeline accident which was dismissed by the arbitrator stating that it's a force majeure. The Company received a mail correspondence along with a letter of intimation dated March 31, 2023 from M/s Assets Care & Reconstruction Enterprise Ltd (ACRE)(as a Trustee of ACRE-112-Trust)thatall the consortium lenders have assigned to it, vide Assignment Agreement dated March 29, 2023, entire fund based outstanding loans/financial assets along with all its rights, titles, interest, underlying securities and guarantees thereof under the relevant Financing Documents under section 5 of the SARFAESI Act, 2002.
SARFAESI Process by Assets Care and Reconstruction Enterprise Limited (ACRE), the Secured Creditor
Consequently, ACRE, served notice under SARFAESI Act, on May 20, 2023, and the company, without prejudice to the debt disputes, replied to the SARFAESI notice on July 17, 2023. ACRE while disputing Company's claim had sought for a debt resolution vide letter dated July 25, 2023. ACRE while disputing the companies claims had sought debt resolution proposal from the company.
The company after failing to identify investors for the company for providing funding for debt repayment/settlement and funding for CAPEX and working capital to turn around the company, worked to identify strategic investors for core assets/business and non-core assets to fund OTS to repay lenders. As per section 180 if the company wants to voluntarily sell assets (without prejudice to the rights of the lenders), transfer, lease and / or otherwise dispose of any assets of the company exceeding 20% of its net worth or assets generating more then 20% income require members approval.
Consequently, the Board of Directors at their meeting held on August 14, 2023, and the Members at their 17th Annual General Meeting held on September 15, 2023, took note of ACRE's notice under the SARFAESI Actand approved: a) The sale of Ammonia/Urea and MI businesses with related assets and liabilities to M/s. AM Green Ammonia (India) Private Limited (purchaser company) via slump sale subject to certain Condition Precedents (CPs) andsale/lease/ transfer dispose Non Core Assets. b) One Time Settlement (OTS) as debt resolution with Asset Care and Reconstruction Enterprise Limited (ACRE) for an amount not exceeding Rs 1500 Crores as full and final settlement towards of their total debts in Nagarjuna Fertilizers and Chemicals Limited.
The sale and settlement proposal is subject to approval of lenders and any other approvals and clearances s required for the transaction.
Further, the company had enumerated various risks for fulfillment of the above approvals including initiation of SARFAE-SI process by lenders, delays in CP fulfillment for slump sale which included energy claim approval and disbursal,lender not agreeing for settling for lower amount than what's due while taking the approval from Board and Members/Shareholders for OTS and funding for OTS (Slump Sale and Sale of Non Core Assets).
ACRE, while engaging with the company for OTS, was continuing to pursue the SARFAESI process, consequent to serving notice under SARFAESI Act, on May 20, 2023., has subsequently taken symbolic possession of the scheduled assets of the Company in its favor on October 12, 2023.
Consequent to the approval of the Members/Shareholders for OTS and funding for OTS (Slump Sale and Sale of Non Core Assets, the company on October 24, 2023, has formally applied to ACRE without prejudice accepting the debt and sought permission to allow the company (1) sell the core business via slump saleof Urea and MI businesses(2) to sellthe noncore assets as in line with and for the amount approved by Acre and (3) provide a One Time Settlement for an amount of Rs. 1500 crores as full and final settlement towards of their total debtin NFCL.
Basis the proposal of the company for One Time Settlement as a debt resolution, ACRE communicated to the company on October 31, 2023, that Settlement Amount proposed to be paid by the Company is based on an offer to sell the ‘Urea' and ‘Micro Irrigation Business' on a slump-sale basis which is subjective on several conditions' precedents required to be fulfilled by NFCL before effectuating the sale and that as the conditions precedents have either not been fulfilled as on that date by NFCL or are contingent on various other events that the Settlement Proposal submitted to ACREtherefore is tentative and not binding and thereforewas unable to consider and/ or appraise the Settlement Proposal extended by the company at that point in time and hence it will proceed with SARFAESI process initiated by it.
In relation to the CPs the most important CP is the energy claim reimbursement. The Company, based on the developments on the claim with Government (DOF), stated that it was optimistic and will continue to work to fulfill the Conditions Precedents (CPs) for Slump Sale Transaction, Sell Non Core Assets and raise funds for One Time Settlement (OTS). That company was optimistic and was working / pursuing on fulfilling the Conditions Precedents (CPs) for the closure of Slump Sale Transaction with M/s. AM Green Ammonia (India) Private Limited, Sell non core assets and to get ACRE to agree to One Time Settlement (OTS) for Rs 1500 Crs as debt resolution instead of Rs 3500 Crs plus being claimed by ACRE.
Notwithstanding despite efforts to speed up the energy claims the company could not succeed and the lenders continued with the SARFAESI process.
In view of the above,while asking the company to continue and speed up closure of CPs for the approved Slump Sale transaction, the Board of Directors on December 24, 2023, without prejudice, considered and approved the company's initiative to engage and workwith ACRE on a One Time Settlement under SARFAESI/directly (or a combination of both) if any in parallel to the current efforts on the Slump Sale transaction to amicably settle debt.
The company had as part of CAP funding obtained the board and shareholders approval as per section 180 for obtaining loans and mortgage of assets. The company is obligated to service and repay debt once availed. Once the current and fixed assets are mortgaged to lenders the company does not have rights over assets if the company is unable to service and repay debt (and is in default) and the lenders require no approval of the company, its board or shareholders to recover their dues under the provisions of law if there is an event of default.
While Board or Member's approval was required to repay the debt as a matter of good governance the company obtained the approval for and the amount approved by the board for negotiations/debt settlement with ACRE is the amount equal to or lower than the amount realized from sale of core and non-core assets and lower than the amounts due to ACRE.
Accordingly, the company engaged with and agreed to cooperate with ACRE vide OTS Cooperation Agreement (Letter dated January 12, 2024) OTS amount is the amount realized from the sale of assets (Core assets Rs.1350/- Crs and Non-core assets Rs.200/- Crs), as sought by ACRE, without prejudice to the rights of the company and guarantors for a One Time Settlement (OTS) under SARFAESI/directly. The final OTS amount was yet to be determined and will be communicated by ACRE to the company as the sale process was yet to be completed. Subsequently, ACRE,as part of the SARFAESI process after taking symbolic possession of assets, has issued a Public Notice for physical auction for sale of Movable and Immovable properties of the Company under SARFAESI Act, 2002, vide email to the company dated January 17, 2024.
Simultaneously, JLL was appointed for sale of non-core assets. As per the mandate of ACRE, JLL shortlisted the buyers for non-core assets and advances were deposited in to fixed deposits lien marked in favor of ACRE, as sought by ACRE. Consequent to the issue of Public Notice for physical auction for sale of Movable and Immovable properties of the Company under SARFAESI Act, 2002,the Company has received email communication dated April 17, 2024, from ACRE that it has received an offer from a bidder above the reserve price and the bidder has submitted an upfront amount of 25% of the purchase consideration, in line with the terms of the sale andasked the company to deposit the proceeds/advancesreceived from the sale of non-coreassets as mandated by ACRE into fixed deposits lien marked in favor of ACRE.
While things stood thus, ACRE vide email dated May 31, 2024, has communicated to the Company thatthe bidder, AM Green Ammonia (India) Private Limited, has made payment of balance 75% of the total bid amount of lNR.1685 Crores and in terms of the provisions of SARFAESI Act read along with the Rules, ACRE has issued sale certificates in favor of the bidder AM Green Ammonia (India) Private Limited (“Bidder/Buyer”) for all the secured assets forming part of the sale notice. The buyer has now become the legal and rightful owner of the assets listed and requested to provide assistance in handing over the physical possession ofthe secured assets sold to the buyer. The company basis the approval of the Board of Directors on May 31, 2024handedover the physical, vacant, quiet and peaceful possession of the Listed Secured Assets of the Company to AM Green Ammonia (India) Private Limited (“Bidder/ Buyer”) ACRE, consequent to the sale of core assets wrote to the company for payment of the remaining amount due to its account from the sale of non-core assets. After obtaining NOC from ACRE, the company sought the payment of the remaining amount from the buyers of the non-core assets in the name of the ACRE. The buyers paid a total of Rs.221/- Crs from the sale of non-core assets to ACRE.
ACRE, consequent to recovery from sale of core assets (Urea and MI facilities), non-core assets (all assets other than Urea and MI assets) amounting to Rs.1685 Crores and Rs. 200 crores respectively totaling to Rs. 1885 crores and cutback due till June 30, 2024, towards full and final settlement of debt outstanding of Rs. 3858 Crores claimed by ACRE as of 10th December 2023, has issued a No Due Certificate dated 11thJu-ly 2024, confirming that NFCL stands unconditionally and irrevocably released and discharged of any liabilities, dues, demands or claims in respect of the outstanding debt, other amounts due and payable to ACRE, including release of all security created in favor of ACRE, personal guarantees and pledge of shares of NFCL held by promoter (Amlika Mercantile Private Limited).
NFCL does not have any term loans and working capital debt outstanding and is also not in default with any secured lenders.
Company's Exit from Corporate Insolvency Resolution Process (CIRP) under IBC, 2016:
Hon'ble NCLT Hyderabad Bench, vide order dated August 27, 2021, has initiated Corporate Insolvency Resolution Process (CIRP) against the company Amlika Mercantile Private Limited, one of the Promoters of the Company appealed against the said order of Hon'bleNCLT in Hon'ble NCLAT, Chennai. The Hon'bleNCLAT has since stayed the orders of the Hon'ble NCLT, Hyderabad vide its orders dt.14.09.2021.
Hon'ble NCLAT, Chennai, vide order dated October 05, 2023, has allowed the appeal filed by Amlika Mercantile Private Limited, Core Promoter of Nagarjuna Fertilizers and Chemicals Limited by setting aside “the impugned order dated August 27, 2021, passed by Hon'ble NCLT, Hyderabad Bench admitting the company into Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Code, 2016 Consequently,the Company has exited Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Code, 2016, effective from October 05, 2023.
Subsidiaries, Joint Ventures or Associate Companies
During the year under review the company has only one subsidiary viz., Jaiprakash Engineering and Steel Company Limited (JESCO) (a company incorporated under Companies Act, 1956 bearing CIN U00337KA1993PLC014694 having its Registered Office at 510, 3RD A Cross, 2nd Main,3rdBlock Rajmahal Vilas-II, Dollars Colony, Bangalore-560094, Karnataka. JESCO couldn't implement the approved projects due to delayed approvals from Karnataka Industrial Area Development Board (KIADB) / Government of Karnataka (GOK).
Further, GOK had issued GO taking back the land and allotted the JESCO land to Navy Coast Guard. The matter is pending in the Court of Law.
In view of the non-execution of sale deeds and legal complications the Board of Directors of your company, as a prudent measure, had written off entire investment in its subsidiary during the Financial Year 2019-20 and the Members of the Company had approved to sell, transfer, lease and/or otherwise dispose of the whole or substantially the whole of the investment in JESCO.
After issuance of GO by Govt of Karnataka (KIADB) cancelling the allocation of land and after prolonged litigation (due to lack of cash flows to support operations and financial creditors), JESCO (a subsidiary of NFCL) with loans went into Voluntary Liquidation under IBC with effect from April 25, 2022. As per IND AS accounting standards shares of JESCO (part of non current assets) were accordingly fully provided for. The liquidator after completing all formalities of voluntary liquidation proceedings had filed the petition for dissolution of JESCO on 01.10.2023 with NCLT, Bangalore.
Subsequently, the company has been informed by JESCO that the Liquidator of JESCO is of the opinion that the JESCO will not be able to pay its debts in full from the proceeds of assets to be sold in the liquidation and accordingly, the liquidator has filed a Memo for withdrawal from Voluntary Liquidation Proceedings and the same is dismissed By NCLT Bangalore as withdrawn vide order dated 16/04/2024.
The Financial Statements for the year ended March 31, 2024, were prepared on Liquidation basis - the values of the Assets are stated at Liquidation Value. Post the sale of non-core assets on June 12, 2024 (which includes JESCO shares) NFCL is no longer is a shareholder in JESCO.
The company has an Associate Company viz., K V K Raju International Leadership Limited (a company incorporated under Companies Act, 1956 bearing CIN U51100TG1995PLC022410 and having its registered office at Nagarjuna Hills, Punjagutta Hyderabad 500082, Telangana).
There are no changes in the status of subsidiaries or associates' companies during the year under review.Further, there are no material fact that requires mention on the performance and financial position of the Associate Companies.
Accounts of Subsidiaries
Consolidated financial statements incorporating the accounts of the Subsidiary Company are enclosedalong with the financial statements of the Company.Jaiprakash Engineering And Steel Company Limited (JESCO) is not a material subsidiary whose income or net worth in the immediately preceding accounting year does not exceeds 20% of the consolidated income or net worth respectively of the Company and its subsidiaries as per the thresholds laid down under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “Listing Regulations”).
Statement containing salient features of the financial statement of Subsidiary / Associate Company appears as Annexure I to this Report.
Except mentioned above regarding implementation of Voluntary Liquidation ProcessbyJESCO, effective from 25th April, 2022, and appointment of Insolvency Professional, as the Liquidator of JESCO and exit from the Liquidation Process, there are no material fact that requires mention on the performance and financial position of the Jaiprakash Engineering and Steel Company Limited.
The Financial Statements of the Subsidiary and Associate are available for inspection by the Members at the Registered Office of the Company pursuant to the provisions of Section 136 of the Companies Act 2013. The Company shall provide free of cost, a copy of the financial statements of its subsidiary companies to the Members upon request. The statements of the subsidiary's companies are also available on the website of the Company at http://www.nfcl.in/inv_sub.htm.
DIRECTORS, BOARD COMMITTEES, KEY MANAGERIAL PERSONNEL AND REMUNERATION
Directors
Continuation of the Appointment of Mr. Sudhakar Kudva as an Independent Director after attaining the age of 75 years.
Mr. Sudhakar Kudva (DIN: 02410695), was appointed as an Independent Director of the Company, not liable to retire by rotation, for a period of five years commencing from June 17, 2023 up to June 16, 2028, by the Members at their 17th Annual General Meeting held on September 15, 2023.
Mr. Sudhakar Kudva, will attain the age of 75 years on Decem-ber 06, 2025, during the term of Independent Directorship of the Company.
In terms of Regulation17(1A) SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the appointment / continuation of the appointment of Mr. Sudhakar Kudva, after the attainment of 75 years is subject to the approval of the Members by way of Special Resolution Accordingly, the Board of Directors, considering the experience and expertise and so as to utilize his services for the Company, have proposed to continue Mr.Sudhakar Kudva (DIN: 02410695), as an Independent Director of the Company, after attaining the age of 75 years still the completion of the term of Independent Directorship till June 16, 2028, in compliance with Regulation 17(1A) SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The proposed appointment is being placed before the members at the 18th AGM for their approval.
During the year under review there is no change in the Composition of Board of Directors except mentioned above
Key Managerial Personnel
During the year under review there are no changes in the status of the Key Managerial Personnel of the Company.
Executive Director
Mr. K Rahul Raju was re-appointed as the Managing Director of the Company for a period of three years effective from August 01, 2020 and the term of appointment concluded on July 31, 2023.
The Board of Directors at their meeting held on August 14, 2023, based on the commendation of the Nomination and Remuneration Committee, have approved the re-appointment of Mr. K Rahul Raju, as Managing Director, of the Company for a further period of 3 years with effect from August 01, 2023 and payment of remuneration subject to the prior approval of the Secured Creditors and the approval of the members of the Company The Members at their 17th Annual General Meeting held on September 15, 2023 have approved the reappointment of Mr. K Rahul Raju, for a further period of 3 years with effect from August 01, 2023.
The following are the Key Managerial Personnel of the Company as defined under Sections 2(51), 203 of the Companies Act, 2013 read with The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, for the year ended March 31, 2024: a) Mr. K. Rahul Raju, Managing Director b) Mr. Sudhakar Rao Annam, Chief Financial Officer c) Mr. Vijaya Bhasker M, Company Secretary
Retiring by Rotation
In terms of the provisions of Section 152 of the Companies Act, 2013 and Articles of Association of the company, Mr. Uday Shankar Jha and Mr. Chandrapal Singh Yadav, retire at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment.
Mr. Uday Shankar Jha, subject to the appointment as a Non-Executive Director at the ensuing Annual General Meeting, will attain the age of 75 years on June 16, 2025, during the term of his Non-Executive Directorship.
In terms of Regulation 17(1A) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the appointment / continuation of the appointment of Mr. Uday Shankar Jha, after the attainment of 75 years is subject to the approval of the Members by way of Special Resolution.
The Board of Directors considering the vast experience and expertise and so as to utilize his services for the Company, have proposed to appoint Mr. Uday Shankar Jha as a Non-Executive Director of the Company and continue the appointment as a Non-Executive Director, after attaining the age of 75 years in compliance with Regulation 17(1A) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Board of Directors recommend the reappointment of Mr. Uday Shankar Jha and his continuation after attaining the age of 75 years and Mr. Chandrapal Singh Yadav, as directors liable to retire by rotation, for the consideration of the Members of the Company.
Declaration by Independent Directors
The Independent Directors have submitted their declaration to the Board that they meet the criteria of Independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 25 of Listing Regulations so as to qualify as an Independent Director of the Company.
Meetings of the Board
The Board of Directors of the Company had met five times during the year on June 15, 2023, June 22, 2023 (Adjourned Meeting), August 14, 2023, October 09, 2023, November 14, 2023 and February 07, 2024
Remuneration and other particulars of the Directors/ Key Managerial Personnel/ Employees
The information relating to remuneration and other particulars of the Directors / Key Managerial Personnel / Employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) 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 with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules appears as Annexure II (b) to this report.
Familiarization Program and Performance Evaluation
Details of the Familiarization Program and Performance Evaluation are incorporated in the Corporate Governance Report.
COMMITTEES Audit Committee
The Audit Committee of the Board of Directors is in compliance with the provisions of Section 177 of the Companies Act, 2013 and Regulation 18 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The terms of reference are in compliance with the applicable provisions of the Law.
The Chairman of the Committee is Mr. Rajendra Mohan Gon-ela, an Independent Director as on March 31, 2024,and the Committee consists of three Independent Directors, and one Non-Executive Director. The Board has accepted all the recommendations made by the Audit Committee.
The Committee meets periodically to review the internal audit report, quarterly financial results and annual audited financial statements among others and recommends its findings to the Board apart from taking action independently whenever required. The Statutory Auditors, Company Secretary, Internal Auditor and Cost Auditors attend and participate in the Audit Committee Meetings.
The Audit Committee comprises of
Name
1
Nomination and Remuneration Committee
The Nomination and Remuneration Committee was constituted with effect from April 22, 2014, in compliance with the provisions of the Companies Act, 2013 and Regulation 19 of
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Company has adopted a Nomination and Remuneration Policy with effect from October 1, 2014, for determining, inter-alia, qualifications, positive attributes and independence of a director, matters relating to the remuneration, appointment, removal and evaluation of performance of the Directors, Key Managerial Personnel, Senior Management and other employees.
The Nomination and Remuneration Committee comprises of:
Stakeholders Relationship Committee
The Stakeholders Relationship Committee was constituted with effect from April 22, 2014, in compliance with the provisions of the Companies Act, 2013 and Regulation 20 of Securities 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
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:
Risk Management Committee
The Risk Management Committee was constitutedin compliance with the provisions of Regulation 21 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The committee comprises of three members, including one Independent Director. The Chairman of the Committee is an Executive Director.
B. DISCLOSURES
Company Policy Matters
Your Company's endeavor has always been to maintain transparency and accountability to its stakeholders. In this direction, various policies mentioned in the Corporate Governance Report have been implemented to enable the stakeholders to appreciate the various interventions the Company has taken. The implementation of these policies are reviewed periodically by the Board of Directors and updated regularly.
The Company has set up a Grievance Redressal Mechanism for all its associates. The Grievance Redressal Mechanism is aimed to redress the grievances of associates expeditiously to ensure good working atmosphere and culture in the organization.
The Company has in place Policy on Bio-diversity, Gift Policy, Health Safety and Environment Policy and Human Rights Policy.
Risk Management Policy
The Company had constituted Risk Management Committee-which frames, implements and monitors Risk Management Plan of the Company and lays down procedures to inform the Board of the risk assessment and risk minimization procedures in the Company much before it was introduced as statutory compliance.
The Risk Management Committee is in compliance with the provisions of Regulation 21 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Company has an Enterprise Risk Management System set up as required by the Listing Regulations.
As per the Enterprise Risk Management System, the risks of the Company are being regularly identified/assessed and documented by way of individual profiles and risk registers. The Company is also maintaining web-based risk management application by each department/division at Plant as well as Corporate Office to manage and control the risk in structured manner.
The Risk Management Organization Structure consists of Risk Management Steering Committee (RMSC) at apex level, and at divisional level, Corporate Risk Management Committee (CRMC) and Plant Risk Management Committee (PRMC) were formed to facilitate monitoring and governance of the ERM process on an ongoing basis.
Periodical meetings of the CRMC and PRMC are being held wherein the critical, cautionary and acceptable risks are presented by the departments through web-based RMS application. During such presentations, various cross-functional deliberations take place on the contributing factors and the control measures to mitigate the risks. The outcome of CRMC and PRMC deliberations and the analysis of risks are presented to RMSC on a quarterly basis.
Policy on Board Evaluation
The Policy on Board Evaluation was adopted with effect from October 01, 2014, by the Board 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 whole, Committees of Board and Individual Directors on regular basis and to take necessary steps for improving the effectiveness of the Board.
The Nomination and Remuneration Committee has devised the methodology, identified sample tools for evaluation and also laid down the parameters for evaluation of Board of Directors, its Committees, Chairman, Managing Director and Individual Directors for the year ended March 31, 2024.
The Nomination and Remuneration Committee at their meeting held on May 20, 2024 , had approved the criteria for evaluation of the Board and its Committees and Individual Directors for the Financial Year 2023-24.
The Board of Directors, based on the responses received from all the Directors, evaluated the performance of the Board of Directors, its Committees, Chairman, Managing Director and the individual Directors at their Meeting held on August 31, 2024. Further, Independent Directors at their meeting held on August 31, 2024, have reviewed the 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 has opted only for payment of sitting fees, the evaluation has no financial implications on the Company.
Whistle Blower Policy/Vigil Mechanism
The Company formulated the Whistle Blower Policy/Vigil Mech-anismin compliance with Regulation 22 of Listing Regulations and Section 177(9) of the Companies Act, 2013.
The Policy aims to prohibit managerial personnel from taking adverse personnel action against employees disclosing in good faith, alleged wrongful conduct on matters of public concern involving violation of any law, mismanagement, and misappropriation of public funds among others.
Employees / associates aware of any alleged wrongful conduct are encouraged to make a disclosure to the Audit Committee. The Audit Committee periodically reviews the existence and functioning of the mechanism. No personnel of the Company have been denied access to the Audit Committee. The above mechanism has been appropriately communicated within the Company across all levels and has been displayed on the Company's website. The Web link for the same is http://nfcl.in/ corporate-governance/Whistle_Blower_Policy.pdf
Corporate Social Responsibility (CSR)
The Company has in place a CSR Policy in line with Schedule VII of the Companies Act, 2013. The Company has always desired to play a proactive role in societal development with an intention to bring positive change in the lives of many. The CSR Policy may be accessed on the Company's website at the link: http://nfcl.in/company-policies/Policy%20on%20Cor-porate%20Social%20Responsibility.pdf An initiative started in 2009 with the spirit of making a difference, haddeepened its roots and bigger impact and changing many more lives. The dedicated support, strength, initiative and encouragement from the associates to be part of this initiative gave impetus to the movement.
The Company supports CSR activities through Nagarjuna Foundation and Nagarjuna Education Trust which runs a school under the name of Akshara School and supports Agricultural research and formal training through Nagarjuna Agricultural Research and Development Institute.
During the year under review, the Company was not required to spend on CSR as the company had been incurring losses for the past few years. 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 Annex-ure III(a) Corporate Governance
Your Company driven by a desire to be more competitive and recognized globally, had inculcated more than a decade ago rules defining ethical business, much before it was introduced as statutory compliance.
Your Company firmly believes that building a culture of compliance is more than meeting regulations and standards. Your Company has always proactively met mandated standards and practiced 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 for every stakeholder; the company believes best practice Corporate Governance is critical to enhance and retain investor trust and to perform with integrity. The Annual Report contains a separate section on the Company's corporate governance practices, together with a certificate from M/s. KBG Associates, Practicing Company Secretaries on compliance with conditions of Corporate Governance as stipulated under Listing Regulations.
MANAGEMENT DISCUSSION AND ANALYSIS
A detailed report on the ManagementDiscussion and Analysis in terms of theprovisions of Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is provided as a separate section in the Annual Report.
Related Party Transaction
All related party transactions done by the Company during the financial year were at arm's length and in ordinary course of business. During the financial year, your Company has not entered into any material transaction as per the Listing Regulations with any of its related parties which may have potential conflict with the interest of the Company at large.
Disclosures pursuant to Accounting Standards on related party transactions have been made in the notes to the Financial Statements(refer Note 33).All related party transactions are placed before the Audit Committee and the Board for review and approval, as appropriate. To identify and monitor significant related party transactions, the Company has also framed a Policy on the Related Party Transactions and the same is available on the Company's website. Web link for the same is http://nfcl.in/pdfs/Policy_on_Related_Party_Transactions.pdf All the related party transactions entered during the year were in Ordinary Course of the Business an don Arm's Length basis. Particulars of Contracts or Arrangements with Related parties appears as Annexure-IV to this report.
Particulars of loans, guarantees or investments
There are no loans, guarantees and investments under Section 186 of the Act as at the end of the Financial Year 2023-24.
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 absorption, earnings and outgo of foreign exchange is attached as Annexure-V to this Report.
Annual Return
The Annual Return of the Company for the year ended March 31, 2024, is placed on the website of the Company. The web link for the same is http://www.nfcl.in/inv_annualreturn.htm.
Compliance with Secretarial Standards
The Board of Directors affirms that the Company has complied with the applicable Secretarial 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 Tribunals impacting the going concern status and Company's operations in future
There were no significant awards that have been passed by any Court or Judicial Authority against the company during the Financial Year 2023-24 impacting the going concern 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 are routed through SAP.
The Company's Internal Auditors scrutinize on periodical basis and ensure that the internal controls and the work flow of the organization are being done through the approved policies of the Company. In every quarter, the Internal Auditors present the Internal Audit Report and Management comments on the Internal Audit observations to the Audit Committee. The Board of Directors of the Company have adopted various policies like the Related Party Transaction, Whistle Blower Policy etc., for ensuring the orderly and efficient conduct of its business for safeguarding its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information.
Details in respect of frauds reported by Auditors other than those which are reportable to the Central Government
The Statutory Auditors, Cost Auditors or Secretarial Auditors of the Company have not reported any frauds to the Audit Committee or to the Board of Directors under Section 143(12) of the Companies Act, 2013, including rules made thereunder.
Registrar and Share Transfer Agents
The Company has been functioning as Category II, Share Transfer Agent (in-house) pursuant to the 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 the Companies Act, 2013 and the Rules framed there under, during the year nor are there any unpaid
/unclaimed deposits at the end of the year. Accordingly, no disclosure or reporting is required in respect of details relating to deposits.
Maintenance of Cost records and accounts
The Company in terms of provisions of Section 148 (1) of the Companies Act, 2013, is required to maintain cost records. Accordingly, the Company had maintained Cost Accounts and Records for the year ended March 31, 2024.
C. AUDITORS AND AUDIT REPORT
Statutory Auditors
The Members of the Company at the 16thAnnual General Meeting held on November 29, 2022, appointed M/s. P Murali & Co., Chartered Accountants (Firm Registration No. 007257S), Hyderabad, Statutory Auditors of the Company for term of five years to hold office from the conclusion of 16th Annual General Meeting till the conclusion of the 21st Annual General Meeting.
Auditor's Report
M/s. P Murali & Co., Chartered Accountants, Statutory Auditors', have submitted the Statutory Auditors Report for the year ended March 31, 2024, and have invited attention on emphasis of matters in relation to:
Basis for Qualified Opinion:
Notes No: 14 and 26 in the standalone financial statements wherein the company explained that the lenders (Banks) of the company have not implemented the Corrective Action Plan (CAP) approved by them in the Joint Lenders Forum (JLF) meeting held in 2015 and though the company represented the matter to the lenders for necessary corrective action, the same has not been rectified till date.
Management Explanation to Auditors' Qualification
Qualification on Note No. 14 & 26 to the standalone audited financial statements discussed in detail on implementation of Corrective Action Plan is self-explanatory and does not call for any further comments.
Emphasis of Matters: a) Note No 20.1: The Company has recognised Income from Urea Operations, Income towards freight subsidy, Reimbursement claims towards additional fixed cost, Input escalation/de-escalation during the quarter in terms of new Urea policy (NUP)-2015 and Gas Pooling Policy for Fertilizer (Urea) Sector. Adjustments, if any, required will be considered on notification of final prices. b) Note No 31: The Plant and Machinery, buildings attached there to have been put to test for impairment as of 31st March 2024 and management perceive that there is no further impairment loss required to be recorded Impairment test of property (land) was carried out as of 30th June 2023 during the year and recorded an impairment loss of Rs. 63,407.20 Lakhs as per the Registered Valuer's Report dated 12th August 2023. The management is of the opinion that there is no further impairment of land as at 31.03.2024. c) Note No 32.1: The claims as per the International Arbitration Awards passed against the Company in September 2016 and October 2017, aggregating to USD 15,275,688, GBP 742,944 and EUR 455,000 and INR 221.39 Lakhs (equivalent Aggregate amount of Rs. 14,150.09 Lakhs) and interest thereon as applicable apart from costs, are continued to be shown as a contingent liability since the matter being sub-judice. d) Note No 32.2 Claim from a related party asserting its right for Royalty for the period from 29.01.1998 onwards, is being negotiated with the granter for settlement. e) Note No 32.4: Hon'ble NCLT admitted a petition filed by an operational creditor to initiate the CIRP against the Company under the provisions of the IBC 2016, Amlika Mercantile Private Ltd (One the of Promoter of the Company) appealed against the order of Hon'ble NCLT. The NCLAT has set aside the this CIRP proceedings under IBC and currently the Company is out of CIRP. AMPL has claimed the legal expenses for the NCLAT appeal filed on behalf of the Company and the Company is liable to reimburse the legal expenses to AMPL.
Management Explanation to emphasis on the matter a) Emphasis of Matter given in Note (a) of the Auditor's Report on standalone financial statements read with Note 20.1 of Notes forming part of the standalone financial statements for the year ended March 31, 2024, are self-explanatory and do not call for any further comments. b) Emphasis of Matter given in Note (b) of the Auditor's Report on standalone financial statements read with Note 31 of Notes forming part of the standalone financial statements for the year ended March 31, 2024, are self-explanatory and do not call for any further comments. c) Emphasis of Matter given in Note (c) of the Auditor's Report on standalone financial statements read with Note 32.1 of Notes forming part of the standalone financial statements for the year ended March 31, 2024, are self-explanatory and do not call for any further comments. d) Emphasis of Matter given in Note (d) of the Auditor's Report on standalone financial statements read with Note 32.2 of Notes forming part of the standalone financial statements for the year ended March 31, 2024, are self-explanatory and do not call for any further comments. e) Emphasis of Matter given in Note (e) of the Auditor's Report on standalone financial statements read with Note 32.4 of Notes forming part of the standalone financial statements for the year ended March 31, 2023, are self-explanatory and do not call for any further comments.
Cost Auditor's & Cost Audit Report Cost Auditor
In terms of Section 148 of the Companies Act, 2013 and the Rules made thereunder the Company is required to undertake Audit of the cost accounts maintained by the Company by a Cost Auditor.
The Board of Directors, on the recommendation of the Audit Committee, at their meeting held on May 20, 2024, appointed M/s. D V & Associates as Cost Auditor, at a remuneration of Rs.4 Lakh plus taxes as applicable and reimbursement of out-of-pocket expenses for conducting the audit of cost records of the company for the Financial Year 2024-25.
The remuneration payable to the Cost Auditor for the Cost Audit undertaken / to be undertaken is subject to ratification by the members of the company.
The Board of Directors recommends the remuneration payable to the Cost Auditor for the Financial Year 2024-25, for the approval of the Members.
Cost Audit Report
M/s. D V & Associates, Cost Auditors have issued Cost Audit Report for Financial Year 2023-24, which does not contain any qualification, reservation or adverse remarks.
Secretarial Auditor & Secretarial Audit Report Secretarial Auditor
The Board of Directors at their meeting held on May 20, 2024, pursuant to the provisions of Section 204 of the Companies Act, 2013, have appointed Mr. C S S Krishna, Partner, M/s.KBG Associates, Company Secretaries, Hyderabad as the Secretarial Auditor of the Company to undertake Secretarial Audit for the Financial Year 2024-25.
Secretarial Audit Report
M/s.KBG Associates, Secretarial Auditor, have issued the Secretarial Audit Report for the Financial Year 2023-24, which does not contain any qualification, reservation, or adverse remark. The Secretarial Audit Report appears as Annexure-VI to this Report.
Internal Audit
The Company has well established system of Internal Audit which carries out audit on Risk based Internal Audit framework covering the gamut of financial, marketing, plant operations and service functions.
The Company's Internal Audit function has obtained Quality Management System ISO 9001, certificate since December 2006 and the same was upgraded to ISO 9001:2015. A Chief Internal Auditor of the Company has been appointed by the Board of Directors, in compliance with the Companies Act, 2013 and Listing Regulations.
Remuneration Policy
The salient features of the policy on director's appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Section 178(3) of the Companies Act, 2013, adopted by the Board, appears as Annexure-VII to this report. We affirm that the remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company. The Nomination and Remuneration Policy may be accessed on the Company's website at the link:http://nfcl.in/pdfs/Nomination%20and%20Remunera-tion%20Policy%20-%20nfcl.pdf
Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Your Company has in place Policy on Sexual Harassment at workplace in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to address complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this Policy.
The Company has not received any complaints pertaining to sexual harassment during the FY ended March 31, 2024.
D. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) and 134(5) of the Companies Act, 2013 your Directors hereby report that: (a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.
(b) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; (c) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets 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 Directorshad laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operating effectively. (f) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws andthat 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, Government of Andhra Pradesh, Government of Telangana and the Financial Institutions and Company's Bankers for their assistance and cooperation.
Further, the Company places on record its sincere appreciation for the continuing support 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 may be considered to be forward looking statements within the meaning of applicable securities law and regulations. All these forward-looking statements are subject to certain risks and uncertainties, including but not limited to Government action, economic developments, risks inherent to the Company's growth strategy and other factors that could cause the actual results to differ materially from those contemplated by the relevant forward-looking statements and the company is not obliged to update any such forwarding looking statements.