Dear Members,
Your directors present the 17th 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, 2023, 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, 2023, prepared as per Ind AS reporting are as under:
Standalone Financial Results
Consolidated Financial Results
Financial Summary
The loss after tax for the year was Rs. 900.09 crores against Rs. 669.91crore for the previous year. The loss before exceptional items for the period increased by Rs 526.94 Crs. The loss for the year despite higher production and sales is mainly on account of impairment losses of Rs.675.19 Crs and interest cost by Rs. 157.02 Crs.
Share Capital
The Paid-up Equity Capital of the Company as on March 31, 2023, 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 2022-2023 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'S AFFAIRS Plant Operations Urea
Your Company during the financial year 2022-23 manufactured 11.205 LMT of urea as against 9.142 LMT in the previous year. The production for the year 2022-23 is less compared to the usual level, owing single unit operation from 1st Oct 2022 till end of financial year.
Micro-Irrigation
Micro Irrigation Division had achieved a production of 109.59 Lakhs Meters in FY 2022-23 against 4.19 Lakh Meters during the previous year out of which PVC pipes production of 3.71 Lakh Meters in FY 2022-23 against 0.021 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 not sell any of the Specialty Fertilizers during the year. In the previous year also, 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 Micro-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 sold 99 MT of Customized Fertilizers during the year in comparison with sales of 5117 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.
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, 2023, completed 79,33,356 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.
Energy Saving Schemes Implementation at NFCL, Kakinada
The Company will take necessary steps in relation to the revised Energy Norms and Target set by Department of Fertilizers (5.50 Gcal/MT Urea) after the energy claim reimbursement by Government and as part of the debt resolution process.
Change in the nature of business
During the year, there was no change in the nature of business of the company.
Material changes and commitments
There are no material changes and commitments affecting the financial position of the Company which have occurred as at March 31, 2023.
As on August 14, 2023, the Board has approved and recommended for the approval of the Members of the Company the Slump Sale and Debt Resolution for the Company.
Reasons for Financial Stress and Debt Resolution Status
The detailed reasons for financial stress and debt resolution Status have been provided as part of the notice to the Shareholders annexed to this Annual Report.
Debts of the company
The Company has been disputing the rectification of account / CAP implementation and CAP debt and security in the books of the Company since inception i.e., 2015. Consortium bank issued a letter dated 17th September 2021 claiming to have implemented CAP. The Company had filed case against the Lenders in the Hon'ble High Court of Telangana against the contention of the Lenders that the accout was rectified/CAP has been implemented without actually rectifying the accout/implementing CAP in terms of RBI mandates of 2014 and 2015. Subsequently, the Company received on 3rd April 2023 a letter dated 31st March 2023, copying to all the Lenders, from Assets Care & Reconstruction Enterprise Ltd (ACRE) communicating that the Assignment of Debt by all Consortium Lenders to ACRE (in its capacity as the trustee of the ACRE-112-TRUST) under section 5 of the SARFAESI Act, As there is no communication to the Company u/s 6 of the SARFAESI Act 2002 from the Lenders about the assignment of their loans I credit facilities I Interest etc., as stated above to the ACRE-112-TRUST by 31.03.2023. The company has not yet changed from the Lenders to ACRE-112-TRUST.
Admission of the Company in to IBC, 2016 by Hon'ble NCLT, Hyderabad Bench.
The Company has complied with the attachment of Rs.20 crores towards settlement of the award vide Execution Petition bearing Ex EP No. 03 of 2017, filed before the Hon'ble High Court of Telangana at Hyderabad under the provisions of Arbitration and Conciliation Act, 1996 and CPC, 1908 from its bank accounts for the exclusive entitlement of the Keytrade (decree holder) securing the award amount worth US $ 2,143,168 as ordered by the Hon'ble High Court r dated 23.04.2019 in I.A. No. 2 of 2019 in EX.EP No. 3 of 2017. Thereafter the company has also filed an affidavit stating that the said order passed by the Hon'ble High Court of attachment was complied. The company has no pending dues/compliance on the EP filed by Keytrade. However, despite compliance of the Execution Petition Order of the Hon'ble High Court High Court of Telangana at Hyderabad, Keytrade had filed a petition before the Hon'ble NCLT Hyderabad Bench, to initiate the Corporate Insolvency Resolution Process (CIRP) against the company on the same issue suppressing Hon'ble High Court compliance and the same has been admitted by the Hon'ble NCLT under the provisions of the I&BC, 2016 vide its order dated August 27, 2021. Amlika Mercantile Private Limited, one of the Promoters of the Company appealed against the said order of NCLT in NCLAT. The NCLAT has since stayed the orders of the NCLT vide its orders dt.14.09.2021 and the stay is in operation as on date.
Valuation of Property, Plant and Equipment
The company could not spend the budgeted funds on energy and maintenance capex for the past several years on account of financial constraints, due to which the economic performance of the plant and equipment has been deteriorated than expected. The company basis a technical due diligence conducted by an external agency on capex requirement (to produce at 100% capacity within the government energy norms) has appointed an independent Registered valuer to assess the impairment of PPE as at 31st March 2023. As per the Registered valuer's report the Company has carried out the necessary adjustments in the books of account for an impairment loss of Rs.67,519.40 Lakhs on plant and equipment during the quarter ended 31st March 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. Further JESCO went into Voluntary Liquidation under Insolvency and Bankruptcy Code, 2016, vide resolution passed by the Members on 25th April, 2022, and an Insolvency Professional, had been appointed as the Liquidator of JESCO. Consequently, the Financial Statements for the year ended March 31, 2023, were prepared on Liquidation basis - the values of the Assets are stated at Liquidation Value 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 except Nagarjuna Agricultural Research and Development Institute Private Limited (NARDI), which ceased to be an Associate Company as on March 31, 2023, consequent to further issue of Capital by NARDI which resulted in the shareholding of the company coming down to below 20%. 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 enclosed along 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 Process by JESCO, effective from 25th April, 2022, and appointment of Insolvency Professional, as the Liquidator of JESCO 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.
A.DIRECTORS, BOARD COMMITTEES, KEY MANAGERIAL PERSONNEL AND REMUNERATION
Directors
Appointment of Mr. Sudhakar Kudva as an Independent Director.
In terms of Section 149, 152 and Schedule IV read with relevant Rules of the Companies Act, 2013, Mr. Sudhakar Kudva, has been appointed as Additional Director and Independent Director with effect from June 17, 2023, for a period of five (5) years, not liable to retire by rotation, by the Board of Directors of the Company subject to the approval of the members of the Company. The proposed appointment is being placed before the members 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 re-appointment of Mr. K Rahul Raju and payment of remuneration is being placed before the members of the Company at the 17th Annual General Meeting.
The details of Directors being recommended for reappointment are contained in the Corporate Governance Report.
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, 2023: 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, retires at the forthcoming Annual General Meeting and being eligible, offers themselves for reappointment. The Board of Directors recommends the reappointment of Mr. Uday Shankar Jha and Mr. Chandrapal Singh Yadav, as directors liable to retire by rotation, for the 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 14, 2022, August 30, 2022, September 06, 2022 (Adjourned Meeting), October 28, 2022, November 14, 2022 and February 07, 2023.
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 provisions of the Law.
The Chairman of the Committee is Mr. Rajendra Mohan Gonela, an Independent Director as on March 31, 2023, 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
1 Inducted as a member with effect from June 17, 2023.
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, 2013and 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 constituted in 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, 2023.
The Nomination and Remuneration Committee at their meeting held on June 15, 2023, had approved the criteria for evaluation of the Board and its Committees and Individual Directors. 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 14, 2023.
Further, Independent Directors at their meeting held on August 14, 2023, has 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 Mechanismin 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%20 Corporate%20Social%20Responsibility.pdf An initiative started in 2009 with the spirit of making a difference, had deepened 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 Annexure 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 DISCUSSIONAND 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 and on Arm's Length business. 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 2022-23.
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, 2023, is placed on the website of the Company. The web link for the same is http://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 2022-23 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, 2021.
C. AUDITORS AND AUDIT REPORT
Statutory Auditors
The Members of the Company at the 16th Annual 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.
Auditors Report
M/s. P Murali & Co., Chartered Accountants, Statutory Auditors', have submitted the Statutory Auditors Report for the year ended March 31, 2023, 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 32.3(ii): Hon'ble NCLT admitted a petition filed by an operational creditor to initiate the CIRP against “the Company” under the provisions of the I&BC, 2016, which has since been stayed by the Hon'ble NCLAT. b) 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. c) Note No 32.4: Amlika Mercantile Private Limited, one of the Promoters of “the Company” appealed against Hon'ble NCLT Order in Hon'ble NCLAT on behalf of “the Company” and on the request of “the Company”, arranged a third-Party buyer for the debt of Key trade and deposited an amount of Rs. 20 Crores with the Hon'ble NCLAT. With the support of this, Hon'ble NCLAT vide its orders dated 14th September, 2021, has stayed the orders of the Hon'ble NCLT and the stay is continuing as on date. “The Company” would be liable to the Third Party instead of Key trade in case the Key trade assigns the debt and security. “The Company” is also liable for servicing the interest during the period of deposit with Hon'ble NCLT till the date of debt assignment. “The Company” is yet to receive the claim on account of interest. d) Note No 32.2: Claim from a related party asserting its right for Royalty for the period from 29.01.1998 onwards, which is under review by “the Company” for appropriate action and consequent recognition in the Books. e) 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. 13945.14 Lakhs) and interest thereon as applicable apart from costs, are continued to be shown as a contingent liability since the matter being sub-judice. f) Note No 33.3: The lenders are yet to approve the managerial remuneration approved by the Shareholders for the Managing Director.
Management Explanation to emphasis on the matter a) Emphasis of Matter given in Note (i) of the Auditor's Report on standalone financial statements read with Note 32.3(ii) 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. b) Emphasis of Matter given in Note (ii) 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, 2023, are self-explanatory and do not call for any further comments. c) Emphasis of Matter given in Note (iii) 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. d) Emphasis of Matter given in Note (iv) 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, 2023, are self-explanatory and do not call for any further comments. e) Emphasis of Matter given in Note (v) 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, 2023, are self-explanatory and do not call for any further comments. f) Emphasis of Matter given in Note (vi) of the Auditor's Report on standalone financial statements read with Note 33.3 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 & 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 June 22, 2023, 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 2023-24.
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 2023-24, for the approval of the Members.
Cost Audit Report
M/s. D V & Associates, Cost Auditors have issued Cost Audit Report for Financial Year 2022-23, 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 June 15, 2022, 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 2023-24.
Secretarial Audit Report
M/s. KBG Associates, Secretarial Auditor, have issued the Secretarial Audit Report for the Financial Year 2022-23, 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%20Remuneration%20 Policy%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, 2023.
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 Directors had laid down internal financial controls to be followed by the Company 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 and that such systems were adequate and operating effectively.
INDUSTRIAL RELATIONS
During the year, the industrial relations at all the works of the company were cordial
ACKNOWLEDGEMENT
Your directors place on record their gratitude to the Government of India, 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.