Equity Analysis

Dear Members,

Your Directors have pleasure in presenting the 37^th Annual Report of the Company together with the Audited Accounts for the year ended March 31, 2024.

Your Company's performance during the year as compared with that during the previous year is summarized below:

(_ in lakhs)

After achieving record turnover growth for the past four consecutive years, the company faced a contraction in the year under review. The consolidated revenue reached _ 1,78,729 lakhs, reflecting a 16% decline compared to the previous year's revenue of _ 2,12,550 lakhs. On the Profitability front, the company encountered a loss before exceptional items and taxes, amounting to _ (7,630) lakhs for the year under review. This marks a significant drop from the previous year's Profit of _ 12,841 lakhs. Furthermore, the company's financial performance deteriorated into a net loss after tax, with this year's loss standing at _ (5,889) lakhs, compared to a Profit of _ 9,487 lakhs in the previous year. This downturn in performance is primarily attributed to navigating through significant headwinds in the Crop Protection sector amidst a storm of challenges.

The Company has not transferred any amount to the General Reserve during the year under review.

The Directors have not recommended any dividend for the year under review.

As per Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations'), the Company has adopted a Dividend Distribution Policy and the same is available on the website of the Company at https://naclind.com/wpcontent/uploads/2023/02/ Dividend-Distribution-Policy.pdf.

NACL's domestic retail business empowers Indian farmers with sustainable and affordable crop protection solutions. Over the past three years, the company's retail business has grown at a CAGR of approximately 18% (compared to industry's growth rate of 6% to 7%) leveraging its strong brand equity, a large field force, and an extensive distribution network across India. In FY 2023-24, our team embraced a farmer-centric approach, educating them through comprehensive field marketing programs and fostering a win-win environment. We are also committed to building long-term, sustainable relationships with key channel partners through dealer club programs.

During the monsoon season (June-September) of 2023, India received 94% of its Long-Period Average (LPA) rainfall. While the forecast predicted 96% ? 4% of the LPA, actual rainfall was close to the forecast. However, uneven rainfall distribution and prolonged dry spells affected sales. Additionally, the 2023 Northeast Monsoon brought varied rainfall patterns, ranging from near-normal to below-normal, with some areas experiencing heavy rainfall events.

Despite all the challenges, the Company has achieved domestic sales of _ 1,35,689 lakhs (out of which domestic retail sales are

_ 85,896 lakhs) for the year under review against _ 1,25,395 lakhs (out of which domestic retail sales were _ 83,755 lakhs) in the previous year, a growth of about 8%. This growth can be attributed to our consistent efforts in enhancing field marketing activities, introducing new products, focusing on key account management, implementing supportive trade policies, and strengthening our sales and marketing team.

During the year under review, the domestic retail business in the insecticides category achieved a revenue of _48,715 lakhs, compared to _ 48,834 lakhs in the previous year.

The insecticides market in India for 2023-24 saw significant growth due to major pest outbreaks, such as fall armyworm in maize, white in cotton, and brown plant hopper in paddy. Erratic climate patterns, including unpredictable rainfall and temperature fluctuations, particularly affected regions like Punjab and Haryana, further exacerbating these issues.

In response to these challenges, we launched two new products: "Bushi," designed to combat mite infestations, and "Suraksha SC," aimed at controlling lepidopteran pests. Bushi has been highly Effective against mite outbreaks in crops such as tea and vegetables, while Suraksha SC has provided critical relief against lepidopteron pests in cotton and pulses. These products underscore our commitment to delivering advanced, targeted solutions to support farmers as they navigate evolving agricultural challenges.

The domestic retail business in the herbicide category achieved a revenue of _ 16,445 lakhs during the year under review, compared to _ 16,287 lakhs in the previous year.

The herbicide product line is experiencing rapid growth in the Indian market, driven by increasing adoption among farmers who aim to reduce costs and address challenges related to labor availability. This trend is expected to continue, encouraging us to expand our portfolio across key crops such as paddy, sugarcane, maize, wheat, and soybean. This strategic expansion is reflected in the significant growth of our herbicide product line over the past year. Furthermore, the Company successfully launched two new products, "Rozzer" and "Temboguard," which are combination solutions designed to Effectively control weeds in maize crops.

The fungicide category within the domestic retail business generated a revenue of _ 16,809 lakhs during the year under review, an increase from _ 15,502 lakhs in the previous year. Despite relatively low demand for fungicides due to favorable weather conditions for crops like grapes, chili, potato, and tomato, the Company experienced notable growth. This success was driven by a strong product portfolio and Effective marketing activities. Additionally, the Company expanded its offerings with the introduction of a new product, "Teeka," designed to combat downy mildew in grapes and late blight in potatoes and tomatoes.

The PGR/Bio Stimulant category within the domestic retail business achieved a revenue of _3,926 lakhs for the year under review, compared to _3,132 lakhs in the previous year, registering a growth of approximately 34%. This remarkable increase can be attributed to the superior performance of the products and vigorous marketing efforts.

The agrochemical industry faced significant challenges in 2023-24, grappling with high-priced inventory and continuous price declines that made it difficult for buyers to stock confidently or set stable selling prices. This adverse environment led to a 1.9% contraction in the global crop protection market, shrinking from $80.5 billion to $78.9 billion. The Middle East and Africa were the hardest hit, experiencing a sharp 7% decline, followed by Asia at 4%, North America at 2.2%, and Latin America at 0.7%. Europe was the only region to show growth, with a modest increase of 2%. Major multinational companies struggled due to reduced demand, exacerbated by high inventory levels and slower stock replenishment by distributors. Persistent price drops compelled these Companies to implement strict cost controls and improve sourcing efficiencies. A notable indicator of the industry's difficulties is the paradox where volume growth occurred, but sales revenue declined as prices stabilized at levels seen in 2021-22.

In response to these challenging market conditions, NACL embarked on a strategy to develop dual growth engines aimed at strengthening its international operations and reducing the risks associated with over-reliance on a single segment. The first growth engine focused on continuing the Key Accounts business, which primarily involves supplying active ingredients to large multinational corporations (MNCs) globally. Concurrently, the company launched a targeted effort to build a portfolio of registrations with national importers in key markets across Asia, Africa, and Latin America. This approach was designed to expand beyond active ingredients to include both generic and differentiated formulations, catering to regional and national players.

Despite strategic initiatives, NACL faced challenges in the international market during FY 2023-24. International sales revenue shrinking to nearly half of the previous year's figures, totaling _40,184 Lakhs. This decline was primarily attributed to reduced demand from key accounts due to minimal restocking by channels in major markets and decreased sales of high-value products. Additionally, there was a substantial drop in demand for one of the company's high-value products, Propiconazole, which saw significant declines in both price and volume across key markets such as the U.S., Australia, and Eastern Europe. However, there were promising developments. The new growth engine, focusing on the export of formulations and active ingredients to national players in Asia and Africa, delivered encouraging results, with a remarkable 250% increase in volume and a 150% rise in sales revenue. Furthermore, the company successfully obtained approvals for over 25 new registrations during the fiscal year.

Looking forward, NACL remains optimistic that both growth engines will drive future expansion. The company plans to introduce new active ingredients and intermediates to its key accounts while scaling up volumes with national importers as more registrations for its generic and differentiated formulations are secured.

By pursuing this dual strategy, NACL is positioning itself to navigate the challenging market environment Effectively and capitalize on new opportunities for sustained growth.

The Srikakulam technical plant witnessed an annual production of 9,392 MT during the year under review, a decrease from 10,290 MT in the previous year. Despite significant improvements in productivity and asset utilization in previous years, the drop in fungicide demand impacted overall output. Nevertheless, the plant continued to implement initiatives aimed at energy conservation, effluent reduction, and cost savings. The Zero Liquid Discharge facility operated efficiently throughout the year. Ethakota formulation unit has been able to satisfactorily meet the market demand Effectively with a production of 33,096 MT/KL during the year under review, 38% higher than the previous year's production of 24,002 MT/KL. This unit has been actively engaged in debottlenecking, enhancing productivity, and maintaining high standards of safety and quality.

Safety, quality and overall efficiency improvements remain key priorities across all manufacturing facilities. Both units have fostered a positive working environment, leading to improved productivity and strong relationships at all levels.

The CRISIL Ratings Limited (CRISIIL) vide the letter dated July 23, 2024 has assigned the rating for the Long-Term Bank facilities and Short-Term Bank facilities of the Company, the details of which are given herein below: a) Long-term Bank facilities: CRISIL A-/Negative(Outlook revised from ‘Stable'; Rating Reaffirmed); and b) Short-term Bank facilities: CRISIL A2+(Reaffirmed).

In relation to the appeal _led by The Oriental Insurance Company Limited against the Arbitration Award in favor of the Company, the Company has submitted Execution Petitions to the Hon'ble High Court of Delhi. These petitions seek the deposit of awarded amounts for Material Damage (MD) Claim of _1,649 lakhs (including interest) and Business Interruption Policy Claim: _1,277 lakhs (including interest). The Hon'ble High Court of Delhi, through orders dated March 19, 2021, and April 09, 2021, directed the Insurance Company to deposit the awarded amounts, including interest up to the date of deposit, with the Court. During the financial year 2021-22, the Court released the deposited amounts to the Company following the submission of equivalent bank guarantees.

As the matter remains sub-judice and based on legal counsel's advice, the Company has not recognized the received deposit amount or any associated interest costs, if any in the books of account.

After successfully commissioning and commercializing the _rst phase of the project, with a capacity of 6,000 MTPA in the previous year, NSCL is striving to achieve its full design capacity. The plant has been producing its intended products Effectively. The total revenue of the Company for the year ended March 31, 2024 was _ 18,473 Lakhs as against _ 2,082 Lakhs for the previous year. The Company had incurred a loss after tax of _1243 Lakhs as against the loss of _754 Lakhs for the previous year.

During the year under review, NSCL received approval for an Environmental Clearance (EC) amendment introducing the 5F category and subsequently obtained the Consent for Establishment (CFE) from the Gujarat Pollution Control Board (GPCB) for the amended EC. Additionally, NACL Spec-Chem Ltd. was honored with the Gold Award at the QCFI Surat Chapter Safety Convention 2024. The Quality Circle Forum of India (QCFI), a leading institution in the Quality Circle Movement and an active participant in international forums, organizes this annual safety convention.

NMPL has recently commissioned a new line for the powder form of nutrients, marking an expansion in their manufacturing capabilities. The company has successfully launched an advanced formulation of Zinc HEDP, which is now being manufactured and marketed. This product has received positive feedback from customers, reflecting its high quality and Effectiveness in meeting agricultural nutritional needs.

Looking ahead, NMPL is developing an advanced formulation of Iron HEDP, showcasing their commitment to innovation and product portfolio expansion. The successful on boarding of new customers further strengthens NMPL's market presence and underscores its dedication to providing top-tier agricultural solutions.

The total revenue of the LRRPL for the year ended March 31, 2024 was Nil as against _ Nil Lakhs for the previous year.

NAAPL was initially established to hold local registrations on behalf of the Company to facilitate the sale of its products in Australia. For the financial year ending March 31, 2024, NAAPL reported total revenue of _ 12 Lakhs, compared to _ 12 Lakhs in the previous year. The company achieved a Profit after tax of _ 4 Lakhs, up from _ 2 Lakhs in the previous year.

Incorporated on January 13, 2023, NINL is a wholly-owned subsidiary of the Company. NINL was established to hold local registrations on behalf of the Company to facilitate the sale of its products in Nigeria. These registrations are granted by local government bodies to entities established within each country.

NASPL has recently commissioned the production of nutrients in liquid form, further enhancing its product offerings in the agricultural sector. The company has successfully launched an advanced formulation of Zinc Oxide SC, which is now being manufactured and marketed. This product has received positive feedback from the market for its Effectiveness and quality.

In addition to this successful launch, NASPL is developing advanced formulations of Boron Ethanolamine and Concentrated Liquid Calcium. These developments highlight NASPL's commitment to continuous innovation. The company has also on boarded new customers, reinforcing its growing market presence and dedication to providing high-quality solutions tailored to the needs of modern agriculture.

The Company has successfully commercialized the manufacturing of the following new Formulations:

1) Bushi – Pyridaben 20% WP

2) Nagarjuna Suraksha GR – Chlorantraniliprole 0.4% GR

3) Teeka – Cyazofamid 34.5% SC

4) Temboguard – Tembotrione 34.4 SC

5) Rozzer – Topramezone 336 g/L

At the R&D Centre in Shadnagar, near Hyderabad, product development and process improvement innovations are being driven with a focus on the process development of active ingredients (AIs) and intermediates for herbicides, insecticides, and fungicides, as well as their formulations. In alignment with the ‘Make in India' initiative, processes are being advanced for various generic products, which are at different stages of development. The R&D facilities in Hyderabad, along with the Quality Control Lab in Srikakulam and Ethakota, have achieved significant milestones, receiving the ISO 17025:2017 Certificate of Accreditation from the National Accreditation Board for Testing and Calibration of Laboratories (NABL). These facilities are also recognized by the Department of Scienti_c and Industrial Research (DSIR), Government of India.

A key area of R&D efforts is the development and registration of novel formulation products. It is noteworthy that GLP certification was obtained in 2021, allowing the conduction of studies that support global registration, particularly in Africa and Southeast Asia. This GLP certification was successfully renewed in the year under review and is valid until 2027.

The R&D Centre plays a pivotal role in facilitating both domestic and international product registrations through rigorous testing and comprehensive documentation. To date, 518 registrations have been secured within India and 120 for export markets.

The Company continues to uphold high standards in environmental management, with its manufacturing facilities operating well within the stipulated norms, owing to the efficient operation of the Zero Liquid Discharge (ZLD) facilities at Srikakulam and Ethakota. The Srikakulam manufacturing site is equipped with online effluent and emission monitoring devices that continuously upload data to the Pollution Control Board's website, ensuring transparency and compliance. Both sites have also expanded the plantation areas within the factory premises, further contributing to environmental sustainability.

The Company maintains its commitment to excellence in quality, environmental, safety, and health management systems, as evidenced by its certifications: ISO 9001:2015 for Quality Management, ISO 14001:2015 for Environmental Management, and ISO 45001:2018 for Occupational Health and Safety Management Systems. Additionally, both the Srikakulam and Ethakota units are accredited by the National Accreditation Board for Testing and Calibration of Laboratories (NABL), affirming their adherence to stringent standards.

Your Company has successfully implemented the Responsible Care 7 Codes of Management Practices across all its sites and has secured the recertification of the RC Logo from the Indian Chemical Council (ICC) for another three years. This achievement underscores the Company's commitment to the safe and sustainable management of chemicals and processes, demonstrating our adherence to the highest standards of environmental, health, and safety practices in the chemical industry.

Your Company has made significant strides in adopting energy-efficient technologies at both the Ethakota and Srikakulam sites, resulting in a marked reduction in operational costs and carbon emissions. At the Ethakota site, the transition from diesel to LPG for boiler fuel, and at the Srikakulam site, the shift from furnace oil to LPG for incineration and hot oil systems, have collectively resulted in an impressive 50% cost savings compared to the previous year's expenses. Additionally, these changes have significantly reduced carbon emissions, demonstrating your Company's commitment to sustainable practices.

On an organization-wide level, there have been notable improvements in Specific consumption metrics: y Specific Energy Consumption: Increased by only 0.02% in FY 2022-23 and then significantly decreased by 28.75% in FY 2023-24. y Specific Power Consumption: Rose by 5.48% in FY 2022-23 and further decreased by 25.18% in FY 2023-24. y Specific Water Consumption: Decreased by 3.05% in FY 2022-23 and further reduced by 4.82% in FY 2023-24. y Specific Carbon Emissions: Slightly increased by 0.35% in FY 2022-23, followed by a substantial reduction of 19.20% in FY 2023-24. y Specific Hazardous Waste Generation: Increased by 18.06% in FY 2022-23, but subsequently decreased by 21.44% in FY 2023-24.

These initiatives reflect our commitment to sustainable practices and our continuous efforts to optimize resource usage and reduce environmental impact.

Your Company's commitment to responsible water management is demonstrated through the implementation of water harvesting systems at all sites. Rainwater is Effectively collected and stored for reuse, primarily for plantation and utility purposes, ensuring efficient water usage and sustainability.

The Company's Environment, Health, and Safety (EHS) and Sustainability team is dedicated to fostering a culture of safety and environmental awareness at all our plants. To enhance safety consciousness, the team regularly organizes events such as National Safety Week, World Environment Day, Fire Service Week, and Electrical Safety Week. Additionally, it keeps employees informed and engaged through EHS newsletters, safety _ashes, safety contacts, and cautionary notes.

In the year under review, the Company introduced initiatives such as Suraksha Sammelan and the Safety Monthly Star program to recognize and reward outstanding safety practices across all sites. These initiatives are designed to motivate our workforce and reinforce our commitment to maintaining a safe and healthy working environment.

During the year under review, your Company has allotted 24,000 fully paid equity shares, under Nagarjuna Agrichem Ltd.,-Employee Stock Option Scheme-2015 ("ESOS-2015 Scheme") and 3,03,334 fully paid equity shares under NACL Employee Stock Option Scheme-2020 ("ESOS-2020 Scheme"), upon exercise of Stock Options by the Eligible Employees of the Company under the respective ESOS Schemes and these shares were duly admitted for trading on the Stock Exchange(s). The equity shares issued pursuant to the above Employee Stock Option Schemes rank pari-passu with the existing equity shares of the Company. Subsequent to the above allotments, the paid up capital of your Company stand increased from _ 19,88,41,843/- (comprising of 19,88,41,843 fully paid up equity shares of _ 1/- per equity share) to _ 19,91,69,177/- (comprising of 19,91,69,177 fully paid up equity shares of _ 1/- per equity share).

The Company has aforesaid two stock option schemes i.e the ESOS-2015 Scheme and the ESOS-2020 Scheme. Both schemes are in compliance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. a) ESOS-2015 Scheme:

During the year under review, the Company has allotted 24,000 fully paid equity shares to the Eligible Employees upon exercise of the vested stock options. b) ESOS-2020 Scheme: During the year under review, the Company granted 2,65,000 stock options under the ESOS-2020 Scheme to eligible employees. Each option entitles the holder to apply for one equity share of the Company. Upon the exercise of the vested stock options, the Company allotted 3,03,334 fully paid equity shares to these eligible employees.

In compliance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, a certificate from the Secretarial Auditor of the Company confirming that the ESOS-2015 Scheme and ESOS 2020 Scheme are being implemented in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and the resolutions passed by the members, will be placed at the ensuing Annual General Meeting. The applicable disclosure, as stipulated under the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, as on March 31, 2024 with regard to the ESOS-2015 & ESOS-2020 is attached as Annexure-I.

Except the changed Specifically described in this report, there have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

Pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), along with other applicable provisions of the Companies Act, 2013 ("Act") and as per Indian Accounting Standards (Ind AS 110 – "Consolidated Financial Statements"), the Audited Consolidated Financial Statements for the year ended on March 31, 2024 are provided in this Annual Report. The Company has prepared consolidated financial statements by incorporating the financial statements of its wholly owned subsidiaries M/s. NACL Spec-Chem Limited, M/s.NACL Multichem Private Limited, M/s.LR Research Laboratories Private Limited, M/s.Nagarjuna Agrichem (Australia) Pty, Ltd., and M/s.NACL Agri-Solutions Private Limited with its financial statements in line-by-line basis. The investments of the Company in M/s.Nasense Labs Private Limited, an Associate Company, have been accounted for in these consolidated financial statements under the equity method in accordance with Ind AS 28 – "Investments in Associates and Joint Ventures".

The Statement required under Section 134 of the Act is attached as Annexure - II (Form AOC-1) to this Directors' Report.

No other Company has become/ceased to be Subsidiary or Joint Venture or Associate Company during the year under review. Except the changes Specifically described in this report, there has been no material change in the nature of the business of the aforesaid Subsidiaries and Associate.

During the year under review, the Company has no Subsidiary which can be considered as material in terms of the Listing Regulations.

In accordance with the provisions of Section 136(1) of the Act, read with Regulation 46 of the Listing Regulations the following have been placed on the website of the Company www.naclind. com a) Annual Report of the Company, containing therein its Standalone and the Consolidated Financial Statements; and b) Annual accounts of each of the Subsidiary Companies.

The Company has in place adequate internal financial controls commensurate with the size and complexity of its operations. During the year, such controls were tested and no reportable material weakness in the design or operations were observed. The Company has policies and procedure in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of accounting records and the timely preparation of reliable financial information.

The Company has adopted accounting policies which are in line with the Indian Accounting Standards and the Act. These are in accordance with generally accepted accounting principles in India. Changes in policies, if required, are made in consultation with the Auditors and are approved by the Audit Committee. The Company's internal audit systems are geared towards ensuring adequate internal controls commensurate with the size and needs of the business, with the objective of efficient conduct of operations through adherence to the Company's policies, identifying areas of improvement, evaluating the reliability of financial statements, ensuring compliances with applicable laws and regulations and safeguarding of assets from unauthorized use.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the Internal, Statutory, Cost and Secretarial Auditors, including audit of the internal financial controls over financial reporting by the Statutory Auditors, and the reviews performed by Management and the relevant Board and Committees including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and Effective during the financial year 2023-24, except the controls the Auditors identified in relation to the Qualification/ Comment (as given below) in their respective reports.

M/s. BSR and Co. (Firm Registration No. 128510W), Chartered Accountants, were appointed as Statutory Auditors of the Company at the 35^th Annual General Meeting held on September 29, 2022 for a period of 5 years commencing form the conclusion of 35^th Annual General Meeting till the conclusion of 40^th Annual General Meeting to be held in the year 2027. The firm has consented and confirmed that the appointment is within the limit specified under section 141(3)(g) of the Companies Act, 2013. The Statutory Auditors have also confirmed that they are not disqualified to be appointed as such in terms of the proviso to section 139(1), 141(2) and 141(3) of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014. The statutory Auditors Report forms part of the Annual Report. The notes on the financial statement referred to in the Auditors Report are self-explanatory and do not call for any further comments.

As stated in note 44 to the standalone financial statements, the Company has trade receivables from certain customers aggregating to _ 7,796 lakhs as at March 31, 2024 (netted o_ with subsequent collections up to the date of these financial statements), for which the auditors of the Company received unreliable responses to their independent balance confirmation requests from some of these customers. Management has initiated an independent investigation into this matter, pending which, the Company has made a provision of _ 1,880 lakhs in the books of account.

The Company/Group carried trade receivables aggregating to _7,796 lakhs as at March 31, 2024 (netted o_ with subsequent collections up to the date of the auditor's report for the year ended March 31, 2024), for which the auditors of the Company/Group had received unreliable responses to their independent balance confirmation requests, for audit of the financial statements for the year ended March 31, 2024, from some of these customers.

Subsequently, the management has instituted an independent investigation into the matter and has also undertaken steps including but not limited to conducting internal investigation, terminating the Company/Group's employee allegedly involved in the matter and carrying out balance confirmation and reconciliation procedures with the customers. The Audit Committee approved the engagement of M/s Ernst & Young LLP (E&Y) for a forensic audit to address the auditors' concerns about trade receivables irregularities.

The management has assessed the resultant impact on the financial results of the Company/ Group in its best estimate. Based on the same, the net exposure is estimated at _ 1,978 lakhs. This exposure is fully provided for in the Company/ Group's books of account as of June 30, 2024 (which includes the provision for expected credit loss of _ 1,880 lakhs that was recognized during the quarter ended March 31, 2024). The Company/ Group also has received a legal opinion clarifying that the concerned dealer-customers' claim is not legally tenable, and the Company/ Group is well within its rights to proceed with legal action to claim its entitlement. b) Cost Auditor:

Pursuant to Section 148 of the Companies Act, 2013, the Board of Directors of the Company, on the recommendation of the Audit Committee appointed M/s. K. Narasimha Murthy & Co., Cost Accountants, Hyderabad to conduct cost audits relating to Insecticides (Technical Grade and Formulations), of the Company for the year ended March 31, 2025. The Company has received their written consent that the appointment will be in accordance with the applicable provisions of the Act, and rules framed thereunder. Pursuant to the provisions of Section 148 of the Act read with Rules made thereunder, members are requested to consider the ratification of the remuneration of _ 8 Lakhs payable to M/s. K. Narasimha Murthy & Co., Cost Accountants, Hyderabad, for the financial year 2024-25. Your Company is maintaining all the cost records referred above and M/s. K. Narasimha Murthy & Co., Cost Auditors, have issued a cost audit report for FY 2023 which does not contain any qualification, reservation or adverse remarks and the same report were duly _led with the Central Government.

In light of Statutory Auditors Qualification in their report, the Cost Auditors of the Company have also included the Qualification in their Audit Report for the year 2023-24, detailing the following audit Qualification: "The Company has Trade Receivables aggregating to _ 7796 Lakhs as at 31st March, 2024 (netted o_ with subsequent collections up to 6th June, 2024) for which the Financial Auditors of the Company received unreliable responses to their independent balance confirmation requests from some of the Customers. Management is initiating an Independent Investigation in this matter, pending which, it has made a Provision of _ 1880 Lakhs against these Receivables. Pending such Investigation, we are unable to determine whether any adjustments to the Standalone Financials are necessary"

Please refer to the Board's response under point (a) of the Statutory Auditor's and Audit Reports. The Board's reply remains consistent with the response provided to the Statutory Auditor's report in the aforementioned point (a). c) Internal Auditor:

The Board of Directors of the Company has appointed M/s. M.Bhaskara Rao & Co., Chartered Accountants, Hyderabad, as Internal Auditors to conduct internal audit of the Company for the financial year ended March 31, 2024 and their reports are reviewed by the Audit Committee from time to time. The Internal Auditors monitor and evaluate the efficiency of the internal control system of the Company, its compliance with applicable laws/regulations, accounting procedure and policies. Based on the reports of the Internal Auditor, corrective actions will be undertaken, thereby strengthening the controls. Significant audit observations and action plans were presented to the Audit Committee of the Board on a quarterly basis.

The Board of Directors, based on the recommendation of the Audit Committee, has re-appointed M/s. M. Bhaskara Rao & Co., Chartered Accountants, Hyderabad, as Internal Auditors for the financial year ending March 31, 2025. d) Secretarial Auditor and Secretarial Audit Report:

Pursuant to Section 204 of the Act read with the Rule 9 of Companies (Appointment and Remuneration of Managerial

Personnel) Rules, 2014, the Board has appointed M/s. B S S & Associates, Company Secretaries, to carry out secretarial audit in terms of the Act for the financial year 2023-24. The secretarial audit report for the FY 2023-24 issued by M/s.B S S & Associates, Practicing Company Secretary in form MR-3 is enclosed to this report as Annexure – III and the report does not contain any Qualification, reservation, adverse remark or disclaimer. Pursuant to Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the Annual Secretarial Compliance Report from M/s. B S S & Associates and submitted the same to the stock exchange where shares of the Company are listed.

The Audit Committee has taken cognizance of the notice dated May 30, 2024 served by the Statutory Auditors under Section 143(12) of the Companies Act, 2013, highlighting discrepancies in trade receivables. As per Rule 13 of the Companies (Audit and Auditors) Rules, 2014, the following details, as reported to the Audit Committee and the Board, are given below: (a) Nature of Fraud: The Company/Group carried trade receivables aggregating to _ 7,796 lakhs as at March 31, 2024 (netted o_ with subsequent collections up to the date of the auditor's report for the year ended March 31, 2024), for which the auditors of the Company/Group had received unreliable responses to their independent balance confirmation requests, for audit of the financial statements for the year ended March 31, 2024, from some of these customers (b) Approximate Amount Involved: Not ascertainable at this stage.

Following the qualified opinion issued by M/s BSR and Co, Statutory Auditors, under Section 143(12) of the Companies Act, 2013, the management has instituted an independent investigation into the matter and has also undertaken steps including but not limited to conducting internal investigation, terminating the Company/Group's employee allegedly involved in the matter and carrying out balance confirmation and reconciliation procedures with the customers. The Audit Committee approved the engagement of E&Y for a forensic audit to address the auditors' concerns about trade receivables irregularities.

Pursuant to the internal investigation and carried out by E&Y, it has been identified that the former head of North Business Unit (Marketing & Sales) was involved in such fraudulent activities.

The management has assessed the resultant impact on the financial results of the Company/ Group in its best estimate. Based on the same, the net exposure is estimated at _ 1,978 lakhs. This exposure is fully provided for in the Company/ Group's books of account as of June 30, 2024 (which includes the provision for expected credit loss of 1,880 lakhs that was recognized during the quarter ended March 31, 2024). The Company/ Group also has received a legal opinion clarifying that the concerned dealer-customers' claim is not legally tenable, and the Company/ Group is well within its rights to proceed with legal action to claim its entitlement.

During the year under review Company's comprises of 14 (Fourteen) Directors, out of which, 3 (three) are Non-Executive, Non-Independent Directors (NEDs) including 1 (one) Woman Director. Further, out of the remaining 11 (Eleven) Directors, 8 (Eight) are Non-Executive Independent Directors including 2(two) Women Independent Directors, 2 (two) are Investors Nominee Directors and 1 (one) is an Executive Director.

However as on the date of this report, Mr. Raghavender Mateti has ceased to be an Independent Director w.e.f August 08, 2024. Mr. Raghavender Mateti completed his tenure as Independent Director for two consecutive terms of five years each. a) Director(s) to retire by rotation:

In accordance with the provisions of Section 152 of the Act, and Articles of Association of the Company, Mr. Raj Kaul, Director (DIN: 00394139) of the Company, who retires by rotation at the forthcoming Annual General Meeting of the Company and being eligible, offers himself for reappointment.

The necessary resolution for re-appointment of Mr.Raj Kaul forms part of the Notice convening the AGM. The profile and particulars of experience that qualify Mr. Raj Kaul for Board membership, are disclosed in the said Notice. b) Renewal of consultancy agreement entered with Mr.C.V Rajulu

The Company entered into a Consultancy Arrangement with Mr. C.V. Rajulu, a Non-Executive and Non-Independent Director, for a period of one year ending June 23, 2024. The Board of Directors, through a circular resolution dated May 17, 2024, approved the renewal of the consultancy agreement and the shareholders, subsequently, approved the same through a postal ballot on June 22, 2024.

In terms of Section 203 of the Companies Act, 2013 the following are the Key Managerial Personnel of the Company: i) Mr.Pavan Kumar Munjuluri, Managing Director & CEO ii) Mr.R.K.S Prasad, Chief Financial Officer iii) Mr.Satish Kumar Subudhi, Vice President – Legal & Company Secretary.

During the year under review, there were no changes to the Key Managerial Personnel of the Company. c) Independent Directors:

In terms of Sections 149, 152, Schedule IV and all other applicable provisions of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory amendment(s), modification(s) or re-enactment thereof for the time being in force), the Independent Director can hold office for a term of up to five (5) consecutive years on the Board of Directors of the Company and shall not be liable to retire by rotation. All the Independent Directors have given a declaration that they meet the criteria of independence laid down under Section 149(6) of the Act read with Regulation 16(b) of Listing Regulations.

In the opinion of the Board, there has been no change in the circumstances which may affect their status as Independent Directors of the Company and the Board is satisfied of the integrity, expertise, and experience (including proficiency in terms of Section 150(1) of the Act and applicable rules thereunder) of all Independent Directors on the Board.

Further, in terms of Section 150 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, Independent Directors of the Company have included their names in the data bank of Independent Directors maintained with the Indian Institute of Corporate Affairs (IICA). d) Evaluation of performance of the Board of Directors:

Pursuant to the provisions of the Act, and Listing Regulations, the Board has carried out the evaluation of its own performance and Committees of the Board, the performances of Directors individually, the Executive Director, the Chairperson of the Board etc. Various parameters under the guidance note issued by the Institute of Company Secretaries of India and SEBI, were considered for evaluation and after receiving the inputs from the Directors, the performance evaluation exercise was carried out. The parameters include attendance of Directors at Board and Committee meetings, integrity, credibility, expertise and trustworthiness of Directors, Board's monitoring of various compliances, laying down and Effective implementation of various policies, level of engagement and contribution of the Directors, safeguarding the interest of all stakeholders etc. The performance evaluation of the Board as a whole was carried out by the Independent Directors. The performance evaluation of each Independent Director was carried out by the Board. The Directors expressed their satisfaction with the evaluation process. In a separate meeting, the Independent Directors evaluated the performance of the Non-Independent Directors and performance of the Board as a whole. They also evaluated the performance of the Chairperson taking into account the views of Executive Director and Non-Executive Director. e) Meeting of Independent Directors:

The details on the separate meeting of the Independent Directors are reported in the Corporate Governance Report. f) Familiarization Programme for the Independent Directors:

In compliance with the requirement of Listing Regulations, the Company has put in place a familiarization programme for the Independent Directors to familiarize them with their role, rights and responsibility as Directors, the working of the Company, nature of the industry in which the Company operates, business model etc. The same is available on the website of the Company i.e., www.naclind.com. Through the Familiarization programme, the Company apprises the Independent Directors about the business model, corporate strategy, business plans and operations of the Company. These Directors are also informed about the financial performance, annual budgets, internal control system, statutory compliances etc. They are also familiarized with Company's vision, core values, ethics and corporate governance practices.

At the time of appointment of Independent Director, necessary information including various documents such as the information's about Company, Memorandum and Articles of Association, Annual Reports for previous years, Investor Presentations and recent Media Releases, Brochures, Organization policies are provided. Further, a formal letter of appointment has also given, explaining fiduciary duties, roles, responsibility and the accompanying liabilities that come with the appointment as an Independent Director of the Company.

On an on-going basis, periodic presentations are made at the Board and Committee meetings, on the performance updates of the Company, Industry scenario, business strategy, internal control and risks involved and mitigation plan. The Directors are also provided with quarterly update on relevant statutory changes, judicial pronouncements and important amendments.

During the year under review, 5 (Five) Board Meetings were held. The details of the same are given in the Corporate Governance Report which forms part of this Annual Report. The provisions of the Act and the Listing Regulations were adhered to, while considering the time gap between two meetings.

The Audit Committee comprising of Mr. Santanu Mukherjee as the Chairman and Mr. Sudhakar Kudva, Mr. Raghavender Mateti, Mr. N. Vijayaraghavan, Mr. N. Sambasiva Rao as the members. The details about the Audit Committee including the brief description of its terms of reference and number of meetings held during the year are mentioned in the Corporate Governance Report. There have been no instances during the year when recommendations of the Audit Committee were not accepted by the Board.

Your Company has laid down well-defined criteria for the selection of candidates for appointment as Directors, Key Managerial Personnel and Senior Management Personnel. The details of the same forming part of Company's Nomination and Remuneration Policy are available at the Company's website at www.naclind. com.

Your Company has laid down well-defined criteria for making payment to Non-Executive Directors of the Company. The details of the same are available at the Company's website at www. naclind.com.

Pursuant to Section 134(3)(c) and 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirm that: a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures; b) it has 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 as at March 31, 2024 and of the Profit/Loss of the Company for the year ended on that date; c) it has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) it has prepared the Annual Accounts of the Company on a ‘going concern' basis; e) it has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating Effectively; and f) it has devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating Effectively.

Corporate Social Responsibility (CSR) has been an integral part of your Company's culture and it has been associated, directly or indirectly, for contributing towards society's development. For the year under review, the company carried out several CSR activities in the areas surrounding Srikakulam and Ethakota(AP), where its factories are located. Such activities includes RO Water Supply to surrounding Villages, Village & Community Development, Scholarships to Merit students, contribution to Vidhya Volunteer Scheme, street lightning and bore-well maintenance, development of school facilities, community centers and bus shelters in the surrounding villages of the factories, providing medical services and vocational courses and conducting various medical camps, etc. These projects are largely covered under Schedule VII of the Companies Act, 2013 (‘Act').

In accordance with the CSR provisions in the Act, the Company has formed a CSR Committee and the CSR Policy is in conformity with the provisions of the Act. The CSR Policy can be accessed on the Company's website at http://www.naclind.com. The Annual Report of CSR activities are annexed herewith as Annexure-IV and forming part of this Report.

There is no change in the nature of business of the Company.

During the year, the Company has not received any significant and material orders passed from Regulators or Courts or Tribunals impacting the going concern status and the Company's operations in future.

The Company makes investments or extends loans/guarantees to its wholly-owned subsidiaries for their business purposes. Details of loans, guarantees and investments covered under Section 186 of the Act, along with the purpose for which such loan or guarantee was proposed to be utilized by the recipient, form part of the notes to the financial statements provided in this Annual Report.

Pursuant to Section 92(3) and 134(3)(a) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extract of the Annual Return of the Company can be accessed on the website of the Company at www.naclind.com.

Pursuant to the provisions of Section 134, and other applicable provisions if any, of the Act and Listing Regulations, the Company constituted the Risk Management Committee and framed Risk Management Policy, which inter-alia covers implementation and monitoring of the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its Effectiveness. The details about Committee including the brief description of its terms of reference are given in the Corporate Governance Report. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

All the related party transactions are entered into during the financial year were on arm's length basis and in the ordinary course of Company's business and are in compliance with the applicable provisions of the and Regulation 23 of Listing Regulations. The Company has not entered into any contract, arrangement or transactions with any related party which could be considered as material within the meaning of Regulation 23 of the Listing Regulations. Related Party Transactions (RPTs) under IndAS (Indian Accounting Standards) -24 are disclosed in the notes to the financial statement.

Necessary disclosures and the statement of all related party transactions are presented before the Audit Committee and the Board of Directors on a quarterly basis specifying the nature, value and terms and conditions of the transactions. All Related Party Transactions are approved by the Audit Committee and omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. The transactions entered into pursuant to the omnibus approval so granted are reviewed on a quarterly basis by the Audit Committee. The Related Party Transactions Policy as approved by the Board is uploaded on the Company's website www.naclind.com. The details of the transactions with Related Parties are provided in the accompanying financial statements.

The Company has implemented Whistle Blower Policy to deal with any fraud, irregularity or mismanagement in the Company. The policy enables any employee or Director to directly communicate to the Chairman of the Audit Committee to report any fraud, irregularity or mismanagement in the Company. The policy ensures strict confidentiality while dealing with concerns and also that no discrimination or victimization is meted out to any whistleblower. The Whistle Blower Policy as approved by the Board is uploaded on the Company's website www.naclind.com. During the year under review, your Company has not received any complaints under the said policy of the Company. It is affirmed that no personnel of the Company has been denied access to the Audit Committee.

Pursuant to Section 178(3) of the Act, the Company has adopted a policy on Nomination and Remuneration of Directors, Key Managerial Personnel and Senior Management Personnel. The Nomination and Remuneration Committee (NRC) has formulated the criteria for determining Qualification, positive attributes and independence of Directors in terms of provisions of Section 178(3) of the Act and as Listing Regulations. The details about the Committee, including the brief description of its terms of reference are given in the Corporate Governance Report.

In compliance with Regulation 34 read with Para-C of Schedule V of Listing Regulations, a separate report on Corporate Governance has been included in this Annual Report together with the Auditor's Certificate confirming compliance of the Corporate Governance as stipulated under the said Regulations. All the Board members and the Senior Management Personnel have affirmed compliance with the Companies "Code of Conduct for Board and Senior Management Personnel" for the financial year 2023-24.

A certificate signed by the Managing Director & CEO and Chief Financial Officer (CFO) certifying the financial statements and other matters as required under Regulation 17(8) of the Listing Regulations, forms part of this Annual Report.

Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 16(b) of the Listing Regulations, is presented in a separate section forming part of this Annual Report. A Business Responsibility and Sustainability Report containing the requisite details under Regulation 34 of the Listing Regulations has been included in this Annual Report.

The Company has zero tolerance for sexual harassment at workplace and has adopted a "Policy on Sexual Harassment of Associates" in accordance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, and framed with the objective of providing a safe working environment, where employees feel secure. There were no cases reported during the financial year 2023-24 under the said Policy.

Your Company has taken appropriate actions against counterfeits, fakes and other forms of unfair competitions/trade practices.

Your Company has not accepted any _xed deposits from the public during the year under review, and no such amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet.

The industrial relations at the factories and head o_ce continued to be cordial.

All the assets and insurable interests of your Company including inventories, buildings, plant and machinery, enactments are adequately insured.

Pursuant to the provisions of Section 136 (1) of the Act and as advised, the particulars of employees as required under Section 197 (12) of the Act read with Rule 5 (1) and 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure–V to this report.

During the year under review, your Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).

Disclosures required under the Section 134(3)(m) of the Act relating to Conservation of Energy, Technology Absorption and Foreign Exchange Outgo and Earning, in terms of Rule 8 of the Companies (Accounts) Rules, 2014, are set out in a separate statement attached hereto as Annexure-VI and forms part of this report.

During the year under review, Company has not made any application under the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

The requirement to disclose the details of difference between amount of the valuation done at the time of onetime settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof is not applicable.

Your Directors thank the Company's Bankers and the Financial Institutions for their help and co-operation extended throughout the year. Your Directors place on record their appreciation for the support and co-operation that the Company received from its Shareholders, Customers, Agents, Suppliers, Employees, various Government/Non-Government Departments, Associates and Community in the vicinity of the plants. Your Directors also record their appreciation for the excellent operational performance of the staff of the Company that contributed to the achievements of the Company. The Directors also acknowledge with much gratitude, the continued trust and confidence reposed by the Dealers/Customers of the Company. Your Directors look forward to the future with confidence.

Disclosure under "Guidance note in Accounting for the employee share based payments" or any other applicable Accounting Standards (AS): For details please refer to notes to Financial Statements, forming part of this Annual Report 2023-24 which can be accessed through the web link: https://naclind.com/investor-relations/.

A) ESOS – 2015: i) Weighted average fair value of options granted during the year whose exercise price is less than market price _ 78.

Note: The fair value has been calculated using the Black Scholes Option pricing model. For details of the same along with the assumptions used in the model, the Note No 14.7 to the Standalone Financial Statements forming part of this Annual Report may be referred. ii) Weighted average exercise price of options granted during the year whose exercise price is less than market price: _ 8/-

B) ESOS – 2020: i) Weighted average fair value of options granted during the year whose exercise price is less than market price _ 76.

Note: The fair value has been calculated using the Black Scholes Option pricing model. For details of the same along with the assumptions used in the model, the Note No 14.7.1 to the Standalone Financial Statements forming part of this Annual Report may be referred. iii) Weighted average exercise price of options granted during the year whose exercise price is less than market price: _ 29/- _ 82/-

v) Employee wise details of option granted during the year: a) Details of grant made during the FY 2023-24 to Key Managerial Personnel and Senior Managerial Personnel:

1) ESOS-2020 Scheme:

b) Any other employee who receives a grant in any one year of options amounting to 5% or more of options granted during the year: Nil d) Identified employees who were granted options in any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant: Nil vi) A description of the method and significant assumptions used during the year to estimate the fair value of options including the following information:

(_ in Lakhs)

* The Company is yet to subscribe to the share capital of NACL Industries (Nigeria) Limited as on date.

Note: a) Names of subsidiaries which are yet to commence operations: NACL Industries (Nigeria) Limited

b) Names of subsidiaries which have been liquidated or sold during the year: None

To,

The Members,

NACL Industries Limited, (CIN: L24219TG1986PLC016607) Plot No.12-A, "C"- Block, Lakshmi Towers, No.8-2-248/1/7/78, Nagarjuna Hills, Panjagutta, Hyderabad, Telangana - 500082.

We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by NACL Industries Limited (hereinafter called "the Company"), having CIN: L24219TG1986PLC016607. Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion thereon.

Based on our verification of the Company's books, papers, minute books, forms and returns _led and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, we hereby report that in our opinion, the Company, during the audit period covering the financial year ended on March 31, 2024, complied with the statutory provisions listed hereunder and also the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter: We have examined the books, papers, minute books, forms and returns _led and other records maintained by the Company for the financial year ended on March 31, 2024 according to the provisions of: i) The Companies Act, 2013 (the "Act") and the rules made thereunder; ii) The Securities Contracts (Regulation) Act, 1956 ("SCRA") and the rules made thereunder; iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder; iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings; v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 ("SEBI Act"): a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015; c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018; (Not applicable to the Company during the audit period) d) The Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021; e) The Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021; (Not applicable to the Company during the audit period) f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client; (Not applicable to the Company during the audit period) g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021; (Not applicable to the Company during the audit period) and vi) The Securities and Exchange Board of India (Buy-back of Securities) Regulations 2018; (Not applicable to the Company during the audit period) vii) The Employees' Provident Funds and Miscellaneous Provisions Act, 1952; viii) The Employees' State Insurance Act, 1948; ix) The Employers' Liability Act, 1938; x) The Equal Remuneration Act, 1976; xi) The Factories Act, 1948; xii) Maternity Benefits Act, 1961; xiii) Minimum Wages Act, 1948; xiv) The Negotiable Instruments Act, 1881; xv) The Payment of Bonus Act, 1965; xvi) Payment of Gratuity Act, 1972; xvii) The Payment of Wages Act, 1936 and other applicable labour laws xviii) Laws specially applicable to the industry to which the Company belongs, as identified by the Management: a) Factories Act, 1948, Fertilizer (Control) Order, 1985 and Rules made thereunder; b) The Insecticides Act,1968 and Rules made there under; c) Explosives Act, 1889 - Gas Cylinder Rules, 1981; d) The Indian Boilers Act, 1923 & the Indian Boilers Regulations, 1950; e) The Chemical Accidents (Emergency Planning, Preparedness and Response) Rules, 1996; f) Environment Protection Act, 1986 and other environmental laws.

We have also examined compliance with the applicable clauses of the following: i) Secretarial Standards issued by the Institute of Company Secretaries of India; ii) The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

During the period under review, the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, standards etc. mentioned above.

We further report that on examination of the relevant documents and records and based on the information provided by the Company, its officers and authorized representatives during the conduct of the audit, and also on the review of compliance reports by respective department heads / Company Secretary of the Company, in our opinion, there exist adequate systems and processes and control mechanism in the Company to monitor and ensure compliance with applicable general laws.

We further report that the compliances by the Company of applicable financial laws, like direct and indirect tax laws, have not been reviewed in this audit since the same is not within the scope of our audit.

We further report that the Board of Directors of the Company has been duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

We further report that adequate notice is given to all Directors to schedule the Board and Committee Meetings. Agenda and detailed notes on agenda were sent adequately in advance of the meetings, in case of less than seven days the Company has taken shorter notice consent from Directors / Members of the Board

/ Committees, and a system exists for seeking and obtaining further information and clarifications as may be required by them on the agenda items before the meeting and for meaningful participation at the meeting.

As per the minutes of the meetings duly recorded and signed by the Chairman, all the decisions of the Board were without any dissent.

We further report that there are adequate systems and processes in the Company commensurate with its size and operations to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

We further report there were no major events which had bearing on the Company's affairs in pursuance of the above referred laws, rules, regulations, guidelines etc.

To,

The Members,

NACL Industries Limited,

Plot No.12-A, "C"- Block, Lakshmi Towers No.8-2-248/1/7/78, Nagarjuna Hills, Panjagutta,] Hyderabad, Telangana - 500082.

Our report of even date is to be read along with this letter.

1. Maintenance of Secretarial record is the responsibility of the management of the Company. Our responsibility is to express an opinion on these secretarial records based on our audit.

2. We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in Secretarial records. We believe that the process and practices, that we followed provide a reasonable basis for our opinion.

3. We have not verified the correctness and appropriateness of financial records and Books of Accounts of the Company.

4. Wherever required, we have obtained the Management representation about the Compliance of laws, rules and regulations and happening of events etc.

5. The compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. Our examination was limited to the verification of procedure on test basis.

6. The Secretarial Audit report is not an assurance as to the future viability of the Company or of the efficacy or Effectiveness with which the management has conducted the affairs of the Company.

1. Brief Outline on CSR Policy of the Company:

We at NACL Industries Limited, act in accordance with the principles of responsible, care and sustainable development to safeguard our employees, customers, stockholders, society and environment. In doing so, we ensure compliance with globally accepted social and ethical standards and values. As an organization, the Company is committed to operate in accordance with the demands of economy, ecology and society.

2. Composition of CSR Committee:

3. Provide the web-link where Composition of CSR committee, CSR Policy and CSR projects approved www.naclind.com by the Board are disclosed on the website of the Company:

4. Provide the executive summary along with web-link(s) of Impact Assessment of CSR Projects carried Not Applicable out in pursuance of sub-rule (3) of rule 8, if applicable. 5. a) Average net Profit of the company as per section 135(5) _ 10,592.01 Lakhs b) Two percent of average net Profit of the company as per sub-section (5) of section 135. _ 211.84 Lakhs c) Surplus arising out of the CSR projects or programmes or activities of the previous financial Nil years. d) Amount required to be set o_ for the financial year, if any Nil e) Total CSR obligation for the financial year [ (b)+(c)-(d)] _ 211.84 Lakhs

6. a) Amount spent on CSR Projects (both Ongoing Project and other than Ongoing Project) _ 212.74 Lakhs b) Amount spent in Administrative Overheads Nil c) Amount spent on Impact Assessment, if applicable Nil d) Total amount spent for the Financial Year [(a)+(b)+(c)] _ 212.74 Lakhs e) CSR amount spent or unspent for the financial year:

7. (a) Details of Unspent CSR amount for the preceding three financial years:

8) Whether any capital assets have been created or acquired through Corporate Social Responsibility amount spent in the Financial Year:

If Yes, enter the number of Capital assets created/ acquired- Not Applicable

Furnish the details relating to such asset(s) so created or acquired through Corporate Social Responsibility amount spent in the Financial Year:

9) Specify the reason(s), if the company has failed to spend two per cent of the average net Profit as per subsection (5) of section 135. Not Applicable.

1. Ratio of remuneration of each Director to the median remuneration of employees of the Company for the financial year 2023-24 and the Percentage increase in remuneration of each Director, Chief Executive O_cer, Chief Financial O_cer, Company Secretary or Manager, if any in the financial year.

1. a) During the year under review, the sitting fees have been paid to the Non-Executive Directors for attending meetings of the Board of Directors and Committee Meetings. b) Employees for the purpose above include all employees excluding employees governed under collective bargaining.

2. The Percentage increase in the median remuneration of employees in the financial year: 21.11 %.

3. The number of permanent employees on the rolls of the Company: 1399.

4. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: The average percentile increases in the salaries of employees other than the managerial personnel was 9.99%.

5. Statement under Section 197 of the Companies Act, 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:

(a) i) Gross remuneration shown above is subject to tax and comprises salary, allowances, commission, incentives, monetary value of perquisites, Company's contribution to provident fund and superannuation fund. In addition to the above, employees are also entitled to gratuity, medical benefits etc. in accordance with Company's Rules. ii) None of the above employee, along with the spouse and dependent children holds more than 2% of the equity shares of the Company. iii) All employees are permanent employee of the Company.

(b) Employed throughout the financial year and in receipt of remuneration aggregating One Crore and Two Lakhs Rupees per financial year: Mr. M. Pavan Kumar, Managing Director & CEO (c) Employed for part of the financial year and in receipt of remuneration aggregating Eight Lakhs and Fifty Thousand Rupees per month or more: Nil

(d) In terms of Section 136 of the Act, the statement containing particulars of employee as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is open for inspection at the Registered office of the Company. Any shareholder interested obtaining copy of the same may write to the Company Secretary.

6. Affirmation that the remuneration is as per the Remuneration Policy of the Company:

It is affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees, adopted by the Company.

[Pursuant to the provisions of Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014]

1. Steps taken or impact on conservation of energy: i) Reduction of electricity consumption of street lighting by using Solar street lights. ii) Reduction of electricity consumption of conventional light fittings by replacing them with LED light fittings. iii) Reduction of electricity consumption of Standard efficiency motor by replacing them with Premium efficiency motor. iv) Reduction of electricity consumption of conventional air conditioners by replacing them with 5 star rated inverter split air conditioners v) Reduction of electricity consumption of conventional ceiling fansby replacing them with Brushless DC ceiling fans vi) Reduction of electricity consumption of street lighting by replacing them with Solar street lights vii) Reduction of electricity consumption by Optimizing the size of the motor. viii) Reduction of electricity consumption of Belt driven agitators by replacing them with direct driven agitators. ix) Reduction of electricity consumption by reducing agitator speeds with gear box replacement

2. The capital investment on energy conservation equipment's:

4. The expenditure incurred on Research & Development

The foreign exchange earned in terms of actual inflows during the year and the foreign exchange outgo during the year in terms of the actual outflow.