Dear Members,

Your directors present the 16th 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, 2022, 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, 2022, prepared as per Ind AS reporting are as under:

Standalone Financial Results

Rs. in Crores

Financial Summary

The loss after tax for the year was Rs.669.91 Crores against Rs. 615.33 Crore for the previous year. The loss before exceptional items for the period increased by Rs 97.93 Crores mainly on account of Higher energy consumption and interest cost by Rs. 21.14 Crores

Share Capital

The Paid-up Equity Capital of the Company as on March 31, 2022, 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 2021-2022 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.

Urea

Your Company during the financial year 2021-22 manufactured 9.142 LMT of urea as against 7.434 LMT in the previous year. The production for the year 2021-22 is less compared to the usual level, owing to low load operation of Unit II due to Ammonia-II Synthesis Converter problem till 17th Aug 2021 and then onwards shutdown of Unit-II till end of financial year.

Micro-Irrigation

Micro Irrigation Company achieved a production of 4.19 Lakh Meters in FY 2021-22 against 36.67 Lakh Meters during the previous year. PVC pipes production of 0.021 Lakh Meters in FY 2021-22 against 1.87 Lakhs Meters during the previous year.

Marketing Urea

Your Company achieved a sale of manufactured urea of 9.18 LMT compared to 7.55 LMT in the 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 Specialty Fertilizer during the year in comparison with sales of 71 MT during the previous year.

Micro-nutrients

Your Company could not sell Micro-nutrients during the year in comparison with sales of 38 MT during the previous year.

Supplements and OSR

Your Company could not sell Supplements & OSR during the year in comparison with sales of 19 MT/KL during the previous year.

Customized Fertilizers

Your Company sold 5117 MT of Customized Fertilizers during the year in comparison with sales of 13674 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 royalty payments. The granter had also claimed dues with RP appointed by NCLT in 2021 when the company was admitted to NCLT. However, upon stay order from NCLAT, and discussions on settlement of outstanding dues, the Grantor had allowed continuance of the Brand usage by the Company upto 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, 2022, completed 57,25,496 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 is taking necessary steps in relation to the revised Energy Norms and Target set by Department of Fertilizers (5.50 Gcal/MT Urea from 2020-21 onwards).

Change in the nature of business

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

Material changes and commitments

There are no material changes and commitments affecting the financial position of 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.

Reasons for Financial Stress and Debt Resolution Status

The operations of the company were impacted during FY 2014-15 on account of the stoppage of gas supply by GAIL due to blast in its pipeline impacting supply of gas.

As per the RBI circular dated 30th January, 2014, titled as ‘Early Recognition of Financial Distress, Prompt Steps for Resolution and fair recovery for lenders: Framework for revitalizing distress assets in the economy': • The Reserve Bank of India has to set up a Central Repository of Information on Large Credits to collect, store and disseminate credit data to lenders.

• Before any loan accounts turn into an NPA, the banks are required to identify and categorize such accounts as ‘Special Mention Accounts' (SMA). The banks are to closely monitor the accounts reported as SMA's.

•In SMA-2 accounts if Principal or interest payment overdue between 61-90 days is reported by one or more lending banks, it would trigger the mandatory formation of a Joint Lenders' Forum (JLF) and formulation of Corrective Action Plan (CAP).

• The JLF is required to explore the options to resolve the stress in the account and arrive at an early and feasible resolution to preserve the economic value of the underlying assets as well as the lender's loans.

• The lenders under the CAP must mandatorily apply

(a) Rectification or

(b) Restructuring, but if Rectification and Restructuring fail, then the Lenders have an option of

(c) Recovery. •Evergreening the account by lenders (i.e., providing debt to repay debt) is strictly prohibited by RBI as a medium for rectification of account (Clause 6.3 of Circular dated 30th January, 2014).

? Projected Financials as per Agreed CAP Terms/Targets (Detailed in CAP Information Memorandum)

• Financial Results (due to non-implementation of CAP / Lack of Funding)

• Projected Cash Flows as per Agreed CAP Terms/Targets Vs Actual Cash Flows due to non-implementation of CAP / Lack of Funding

On account of GAIL pipeline accident, NFCL's account was classified as SMA-2 due to defaults in May 2015, and due to negative / no operating cash flows to support debt servicing. The lenders formed JLF as per RBI guidelines and decided for the rectification of account with funding as a CAP to ensure that the account comes out of SMA status and not to slip into NPA.

Lenders assessed the funding required for rectification of account as (a) Working Capital Term Loan of Rs. 800 Crores (for margin money / correction of net working capital) and (b) Working Capital Limits of Rs. 3050 Crores to be disbursed in the Financial Year 2015-16.

The lenders instead released working capital term loan of Rs.621 crores (instead of Rs.800 crores) and (b) Reduced Working Capital limits (funded and non funded limits) to Rs 2058 crores instead of increasing the limits to Rs. 3050 Crores.

As per RBI guidelines of 2014 and 2105, funding assessed for rectification was not provided and the account was never rectified (resulting in negative cash flow with no DSCR, required for repayment of debt). Funding was only released to keep the account current and upgrading the account from SMA2 (which is strictly prohibited by RBI‘s mandatory CAP guidelines, RBI Master

Guidelines of Asset Classification dated 1st July, 2015, titled as ‘Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances' and the reporting and disclosure of the account as standard is violative of RBI CLRIC guidelines dated 22nd May, 2014 titled as ‘Reporting to Central Repository of Information on Large Credits'.

The under-funding/non-implementation of CAP/rectification of account resulted in Rs 1000's of crores of loss to the company. It is a well-established principle that where an agreement consists of reciprocal promises to be performed on both sides, and one party fails to do so, then not only is the other party not required to perform its obligations but is also discharged and further entitled to compensation.

The claim of rectification of account and upgradation of account that was classified as SMA-2 by the bankers is only allowed by RBI subject to rectification of account as defined by RBI and any claim of rectification of account/implementation of CAP and upgradation of account from SMA 2 in violation of RBI's mandatory guidelines is invalid.

The Lenders classified the account as NPA in 2018 as opposed to classifying the account as NPA in 2015 from SMA 2 on account of not rectifying the account as per RBI mandated guidelines.

The rectification of account / CAP implementation and CAP debt in the books of the company is disputed on record since inception i.e., 2015. One of the consortium banks 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.

Keytrade Settlement

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 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 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 IBC, 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.

Agricultural Lands:

The company is in possession of agricultural lands at

a). Kapavaram Village, East Godavari District,

b). Nellore District and

c). Wargal and Gowraram villages of Siddipet District, that have come into the company as part of the Scheme of Arrangement and Amalgamations and purchase of lands, which have been recorded in the books of accounts of the Company. It has come to the notice of the Company that the Andhra Pradesh / Telangana Land Reforms Act, 1973 (Act), prohibits holding and alienation of the excess Agricultural Lands over and above the ceiling area.

The Company had identified excess Agricultural Land holding in the hands of Transferor Companies / Sellers and accordingly, the Board of Directors at their meeting held on February 12, 2020, in compliance with the requirements of the provisions of Andhra Pradesh / Telangana Land Reforms Act, 1973, and legal opinion impaired the Agricultural Lands in excess of the ceiling area and accordingly restated the Agricultural Land value in the books of accounts of the Company.

The excess Agricultural Lands at Kapavaram village also additionally were notified as Prohibited in Prohibition List by the Government of Andhra Pradesh, part of the Agricultural Lands at Nellore District in addition to being excess are under Prohibition vide Prohibition List maintained under Registration Act and part of the Lands at Wargal and Gowraram of Siddipet District, Telangana, in addition to being excess are also attached and is in absolute custody of the Department of Police, in relation to a case pertaining to the original seller.

Valuation of Property, Plant and Equipment

On account of the continuing losses the company could not spend the budgeted funds on energy and maintenance capex for the last several years. The company on the basis of a recent technical due diligence conducted by an external agency on capex requirement (to produce at 100% capacity within the government energy norms) and considering the relevant external and internal sources of information had decided to test its Property, Plant and Equipment value for impairment by an independent professional valuer. The current carrying value of the assets in the books of the company today are basis restructuring exercise taken up in 2010-11 by way of Merger & Amalgamation transaction (wherein the oil business was demerged, the fertiliser business got merged into Kakinada Fertilizers Limited and renamed as current NFCL and erstwhile NFCL got liquidated) and not the value at which the assets were originally acquired.

The company has appointed a valuer to value the current value of Property, Plant and Equipment (PPE) and assess impairment if any, in the current carrying value of its Property, Plant and Equipment basis which it will carry out the necessary adjustments in the books of account. As part of the exercise the valuer would also review the land allocation terms, PCB norms on utilisable land and land that is to be maintained as green belt which cannot be utilised for industrial purposes basis which the company would make necessary adjustments if any to the book value of land at Kakinada. The decision to test the PPE for impairment has been duly disclosed in the notes to the financial results for the quarter ended 30th September and thereon. Due to covid situation, the complexity and costs the exercise by the valuer could not be completed during the year 21-22 as originally planned. The exercise and impairment if any, will be recognised during the financial year 22-23.

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,3rd Block Rajmahal Vilas-II, Dollars Colony, Bangalore-560094, Karnataka.

JESCO could not 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 in to Voluntary Liquidation under Insolvency and Bankruptcy Code, 2016, with effect from 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, 2022, were prepared on Liquidation basis - the values of the Assets are stated at Liquidation Value The company has two Associate Companies viz., Nagarjuna Agricultural Research And Development Institute Private Limited (A company incorporated under Companies Act, 1956 bearing CIN U29100TG1995PTC022409 and having its registered office at Nagarjuna Hills, Punjagutta Hyderabad 500082, Telangana) and 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). Nagarjuna Agricultural Research and Development Institute Private Limited established in 1995 supports agricultural research and farmer training under lease of agricultural land situated at Wargal, admeasuring 97.14 acres from the Company.

The Company has subsisting lease agreement with its Associate Company, NARDI, in relation to Agriultural Lands situated at Wargal, Siddipet District, Telangana, admeasuring upto 97.14 acres, for the purpose of agricultural and related research and development, since the last 26 years, starting from 1st April, 1996, and renewed from time to time. The Company has received communication dated 30th April, 2022, from NARDI, invoking its right to purchase the land.

There are no changes in the status of Subsidiary or Associate' Companies during the year under review except mentioned above. Further, there are no material facts that require 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 Companies 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 Associates 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 Financial Statements of the subsidiary company is also available on the website of the Company at http://www.nagarjunafertilizers.com/investor.htm.

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

Hon'ble Justice Shri K C Bhanu, (Retd), Independent Director of the Company resigned as an Independent Director with effect from June 19, 2021, due to personal and professional reasons.

Hon'ble Justice Shri K C Bhanu, (Retd), has confirmed that there are no other material reasons other than those mentioned above for the resignation The Board placed on record its appreciation for the services and contributions made by Hon'ble Justice Shri K C Bhanu, (Retd), during his tenure as the Director of the Company.

Key Managerial Personnel Resignation of Chief Financial Officer

Mr. K Rahul Raju, had resigned as the Chief Financial Officer of the Company with effect from May 24, 2021.

Appointment of Chief Financial Officer

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

Executive Director

The Members of the Company at the 14th Annual General Meeting held on December 30, 2020, has approved the re-appointment of Mr. K Rahul Raju, Managing Director for a term of three years with effect from August 01, 2020.

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

The details of Directors being recommended for reappointment are contained in the Corporate Governance Report.

Key Managerial Personnel

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, 2022:

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 four times during the year on June 29, 2021, August 13, 2021, November 12, 2021, and February 14, 2022.

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.

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, 2022, and the Committee consists of two Independent Directors, and one Non-Executive Director. The Board has accepted all the recommendation 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 Ceased to be a member with effect from June 19, 2021.

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:

1 Inducted as a member with effect from June 29, 2021

2 Ceased to be a member with effect from June 19, 2021

Stakeholders Relationship Committee

The Stakeholders Relationship Committee was constituted with effect from April 22, 2014, in compliance with the provisions of the Companies Act, 2013 and Regulation 20 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Committee reviews and ensures Redressal of investors' grievances.

The Stakeholders Relationship Committee comprises of:

Corporate Social Responsibility (CSR) Committee

The CSR Committee comprises of three members, of which one is an Independent Director. The Chairman of the Committee is an Independent Director.

The Corporate Social Responsibility Committee comprises of:

Risk Management Committee

The Risk Management Committee was 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.

1 Inducted as a Member with effect from June 29, 2021.

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 1, 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, 2022.

The Nomination and Remuneration Committee on July 08, 2022, had approved the criteria for evaluation of the Board and its Committees and Individual Directors for the Financial Year 2021-22.

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 the Adjourned Meeting held on September 06, 2022. Further, Independent Directors at their meeting held on August 30, 2022, had 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 Mechanism in 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 disclosures 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://www. nagarjunafertilizers.com/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://www. nagarjunafertilizers.com/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 Management Discussion and Analysis in terms of the provisions 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.

Business Responsibility Report

In terms of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, Business Responsibility Report forms part of this Report and appears as Annexure IV, which describes the initiatives taken by the Company from an environmental, social and governance perspective

Related Party Transaction

All related party transactions 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:// www.nagarjunafertilizers.com/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 V to this report.

Particulars of loans, guarantees or investments

There are no loans, guarantees and investments under Section 186 of the Act as at the end of the Financial Year 2021-22.

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-VI to this Report.

Annual Return

The Annual Return of the Company for the year ended March 31, 2022, is placed on the website of the Company. The web link for the same is http://www.nagarjunafertilizers.com/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 2021-22 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 work flow 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 there under.

Registrar and Share Transfer Agents

The Company has been functioning as Category – II, Share Transfer Agent (in-house) pursuant to the approval of the Securities and Exchange Board of India.

Deposits

The Company has not accepted any deposits falling under the ambit of Chapter V of 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, 2022.

Statutory Auditors Resignation of Statutory Auditors

M/s. JVSL & Associates, Chartered Accountants, Hyderabad, Statutory Auditors, resigned effective from August 12, 2022, resulting in Casual Vacancy as envisaged under section 139(8) of the Companies Act, 2013.

Appointment of Statutory Auditors in Casual Vacancy.

In terms of the provisions of Section 139(8) of the Companies Act, 2013, the Board of Directors at their meeting held on August 30, 2022, basis the recommendation of the Audit Committee and subject to the approval of the member of the Company, have appointed M/s. P Murali & Co., (Firm Registration No 007257S), as the Statutory Auditors of the Company to fill the casual vacancy caused by the resignation of M/s. JVSL & Associates, (Firm Registration No, 015002S) Chartered Accountants, Hyderabad, till the conclusion of the ensuing 16th Annual General Meeting at such remuneration as may be agreed by the Company and the Statutory Auditors.

The Board of Directors in accordance with the provisions of Section 139(8) of the Companies Act, 2013 and the Rules made there under, recommends the appointment of M/s. P Murali & Co., (Firm Registration No 007257S), as the Statutory Auditors of the Company to fill the casual vacancy till the conclusion of the ensuing 16th Annual General Meeting at such remuneration as may be agreed by the Company and the Statutory Auditors for the approval of the Members of the Company.

Appointment of Statutory Auditors

The Company in terms of Section 139 of the Companies Act 2013, is required to appoint the Statutory Auditors of the Company for a period of 5 years from the conclusion of 16th Annual General Meeting till the conclusion of 21st Annual General Meeting. The Company proposes to appoint M/s. P Murali & Co., (Firm Registration No 007257S), as the Statutory Auditors of the Company for a period of 5 years commencing from the conclusion of the 16th Annual General Meeting till the conclusion of the 21st Annual General Meeting.

M/s. P Murali & Co., Chartered Accounts, have consented to their appointment as Statutory Auditors and have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India and if appointed, their appointment will be in accordance with Section 139 read with Section 141 of the Act.

The Board of Directors in accordance with the provisions of Section 139 of the Companies Act, 2013 and the Rules made there under, recommends the appointment of M/s. P Murali & Co., (Firm Registration No 007257S), as the Statutory Auditors of the Company to hold office for a period of 5 years from the conclusion of 16th Annual General Meeting till the conclusion of 21st Annual General Meeting, at such remuneration and actual out of pocket as may be determined by the Members of the Company for the approval of the Members.

Auditors Report

M/s. J V S L & Associates, Chartered Accountants, Statutory Auditors', have submitted the Statutory Auditors Report for the year ended March 31, 2022 and have invited attention as under:

Basis for Qualified Opinion: i. Note No: 31 in the standalone financial statements wherein the company explained the basis and reasons for not testing its Property, Plant and Equipment (PPE) for impairment as at the year end. ii. 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

The Auditors' Qualifications in the Independent auditor's report and report of IFC have been appropriately dealt with in Note No. 31 of financial Report is self-explanatory and do not call for any further comments.

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 do not call for any further comments.

Emphasis of Matters:

a) Note 20 regarding recognizing Income from urea operations including reimbursement claims for additional fixed cost, input escalation/de-escalation, and for production beyond reassessed capacity based on prices and provisions applicable under NPS III, Modified NPS III, pending notification of final prices under New Urea Policy 2015 and consequential adjustments, if any that may arise.

b) Note 32.1 on the International Arbitration awards passed against the Company in the previous years for USD 15,275,688, GBP 742,944, EURO 455,000 [aggregating to Rs.12704.88 lakhs, approximately] and Rs.3265.70 lakhs; the impact of which has not been recognized in the Financial Statements.

c) Note No:32.3 on the petition filed against the company under

IBC by one of the operational creditors in the Hon'ble NCLT and its current status. d) Note No:28(i) on the expensing of unabsorbed IGST of Rs.3,617.24 lakhs on import of urea for the reasons stated in the note. e) Note No:28(ii) on the providing of demand for electricity duty of Rs.5,426.41 lakhs for the reasons stated in the note.

f) Note No:32.2 on the claim for royalty, received from a related party for the period referred to therein, which is under review of the company.

Management Explanation to emphasis on the matter

a) Emphasis of Matter given in Note

(i) of the Auditor's Report on standalonefinancial statements read with Note 20 of Notes forming part of the standalonefinancial statements for the year ended March 31, 2022, are self-explanatory anddo not call for any further comments.

b) Emphasis of Matter given in Note

(ii) of the Auditor's Report on standalonefinancial statements read with Note 32.1 of Notes forming part of the standalonefinancial statements for the year ended March 31, 2022, are self-explanatory anddo 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 32.3 of Notes forming part of the standalone financial statements for the year ended March 31, 2022, 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 28. (i) of Notes forming part of the standalone financial statements for the year ended March 31, 2022, 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 28. (ii) of Notes forming part of the standalone financial statements for the year ended March 31, 2022, 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 32.2 of Notes forming part of the standalone financial statements for the year ended March 31, 2022, 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 there under 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 14, 2022,, appointed M/s. D V & Associates as Cost Auditor's, 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 2022-23.

The remuneration payable to the Cost Auditor's 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 2022-23, for the approval of the Members.

Cost Audit Report

M/s. Sagar & Associates, Cost Auditors have issued Cost Audit Report for the Financial Year 2021-22, 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 14, 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's of the Company to undertake Secretarial Audit for the Financial Year 2022-23.

Secretarial Audit Report

M/s. KBG Associates, Secretarial Auditor's, have issued the Secretarial Audit Report for the Financial Year 2021-22, which does not contain any qualification, reservation, or adverse remark. The Secretarial Audit Report appears as Annexure - VII 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 VIII 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:// www.nagarjunafertilizers.com/pdfs/Nomination%20and%20 Remuneration%20Policy%20-%20nfcl.pdf

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Your Company has in place Policy on Sexual Harassment at workplace in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to address complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this Policy.

The Company has not received any complaints pertaining to sexual harassment during the FY ended March 31, 2022.

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.