2. Contingent Liabilities not provided for:

i. Counter guarantees given to Bankers in respect of Bank guarantees Rs. 1,363.92 Lakhs (Previous year Rs. 1,704.44 Lakhs)

ii. Commitment on account of Sponsor undertaking given pursuant to the agreement with the lenders and shareholders of Nagarjuna Oil Corporation Ltd, a subsidiary, for funding of project cost overrun, if any.

iii. Income Tax matters under appeals Rs 1,660.17 lakhs (Previous Year Rs. 1,028.45 lakhs)

iv. Compensation in respect of 86.55 (Previous Year 86.55) acres of land in possession - amount not ascertained.

v. Claims against the Company not acknowledged as debts Rs 1,129.04 lakhs (Previous year Rs. 1,919.04 lakhs).

3. Share Capital:

In accordance with the CDR Scheme, 37,20,372 0.01% Optionally Convertible Cumulative Redeemable Preference Shares - (OCCRPS) of Rs.100 each were issued to certain lenders to compensate the differential rate of interest for the year 2003-04.

Since the said OCCRPS were not converted into Equity Shares within the time prescribed by SEBI, they remain as Ordinary Redeemable Preference Shares. As per terms of issue, these are redeemable after the entire debt liabilities are fully paid.

During the year, Ordinary Redeemable Preference Shares of 18,60,185 of Rs 100 each aggregating to Rs 18,60,18,500/-were redeemed in pursuance of the Resolution passed by the Board of Directors and as per the directive of CDR EG. The Company has appropriated Rs. 18,60,18,500/- equivalent to amount redeemed , towards Capital Redemption Reserve in accordance with provisions of the Companies Act, 1956.

Scheme of Arrangement:

The Board of Directors of the Company at their meeting held on January 10, 2011 has approved a Composite Scheme of Arrangement and Amalgamation (Scheme) between Ikisan limited, Kakinada Fertilizers Limited (KFL), Nagarjuna Fertilizers and Chemicals Limited (NFCL) and Nagarjuna Oil Refineries Ltd (NORL). The scheme envisages demerger of the oil business undertaking of NFCL into NORL and merger of the fertilizer and micro irrigation business of NFCL along with Ikisan Ltd. into KFL. The scheme is effective from April 1, 2011 and subject to obtaining necessary approvals.

The members of the Company, at the meeting convened by the Honble High Court of Andhra Pradesh on April 15, 2011, have approved the Scheme. The Company has since filed a petition before the Honble High Court of Andhra Pradesh for approval of the Scheme and the same has been admitted.

4. Secured Loans:

A) DEBENTURES

i 30,00,000, 14.50% Secured Redeemable Non-Convertible Debentures of Rs.100/- each aggregating to Rs 30.00 crores issued to LIC redeemable in 41 structured quarterly instalments commencing from 31st March, 2006 as per reschedulement in line with the CDR Package.

ii 80,00,000, 15.00% Secured Redeemable Non-Convertible Debentures of Rs.100/- each aggregating to Rs 80.00 crores issued to IFCI, redeemable in 41 structured quarterly instalments commencing from 31st March, 2006 as per reschedulement in line with the CDR Package.

iii 25,00,000, 15.00% Secured Redeemable Non-Convertible Debentures of Rs.100/- each aggregating to Rs. 25.00 crores issued to IFCI, redeemable in 41 structured quarterly instalments commencing from 31st March 2006 as per reschedulement in line with the CDR Package.

iv 30,00,000, 13.25% Secured Redeemable Non-Convertible Debentures of Rs.100/- each aggregating to Rs. 30.00 crores issued to LIC, redeemable in 41 structured quarterly instalments commencing from 31st March, 2006 as per reschedulement in line with the CDR Package.

v 1,53,30,000, 15.00% Secured Redeemable Non-Convertible Debentures of Rs.100/- each aggregating to Rs 153.30 crores issued to ICICI, redeemable in 21 quarterly instalments commencing from 31st March, 2011 as per reschedulement in line with the CDR Package.

The above debentures together with accrued interest, remuneration and other expenses thereof are secured by a registered mortgage and an exclusive charge on the Companys immovable property situated at Ahmedabad.

Further secured by an equitable mortgage and a charge on the other immovable and movable properties of the Company in favour of the debenture trustees, save and except stock in trade, book debts given as security to banks for obtaining working capital facilities and assets given on lease with exclusive charge in favour of the funding institution.

The interest rates stand revised to 11.50% p.a. (previous year 11.25%) w.e.f. 01.04.2010 (previous reset 01.04.2009) in respect of Debentures stated at ii. iii and iv and in respect of debentures stated at v above interest rate stand revised to 11.40% p.a. (previous year 11.15%) as per CDR letter dated 24th August 2010 regarding reset of interest rates.

vi 2,64,78,014 (Previous year 16.05,67,895) 0% Secured Redeemable Non-Convertible Debentures (ZCDs) of Re.1/- each issued to State Bank of India and UCO Bank, as envisaged in the CDR Package to compensate the differential rate of interest for the year 2003-04. The debentures are redeemable after the entire debt liabilities are fully repaid.

During the year 13,40,89,881 ZCDs (previous year 2,07,33,100) of Re 1/- each were redeemed in pursuance of the Resolution passed by the Board of Directors and as per the directive of CDR EG.

B) Term Loans from Institutions are secured by way of a charge created through an equitable mortgage of immovable properties by deposit of title deeds and hypothecation of movable properties of the Company including movable plant and machinery, spares, tools and other movables, present and future, save and except stock in trade, book debts, and stores & spares, given as security to banks for obtaining working capital facilities and assets given on lease with exclusive charge in favour of the funding institution. They are further secured by way of a second charge on the current assets of the Company.

C) Term loans from banks, together with interest accrued thereon, are secured by way of a first charge on the fixed assets of the Company ranking pari-passu with the financial institutions, a second charge on the current assets and are further secured by way of a charge created through an equitable mortgage by deposit of title deeds of certain immovable property of the Company.

D) Working Capital facilities from banks are secured by hypothecation by way of first charge on current assets, stock in trade, book debts and stores & spares, present and future and second charge on the fixed assets of the Company.

E) Shares held in subsidiary Company - JESCO (2,25,61,693) are under pledge with Banks/Financial Institutions as security for the term loans availed by the Company.

F) Further, 9,90,00,000 shares held by the Company in Nagarjuna Oil Corporation Ltd are pledged with ICICI Bank, as security for loan availed. ICICI has given consent for release of said shares. The formalities for release of pledge are in progress.

All the Term Loans from Institutions and Banks, Counter Guarantees, Working Capital facilities from banks are personally guaranteed by Shri K.S.Raju, Chairman and Managing Director of the Company

G) The Company was sanctioned a Debt Restructuring Package (including working capital) under Corporate Debt Restructuring (CDR) Scheme on 20.02.2004 effective from 1st April 2003 vide letter no BY.CDR (AG)/ No.307/2003-04, dated 16th March 2004. All the lenders had approved and implemented the Package. In terms of Package:

- The lenders reserve the right to recompense the sacrifices being made in case the profitability and cash flow position of the Company so warrants in future. The Company, has as a measure of prudence, made provision towards recompense based on management estimate. The lenders have the right to reset the interest rates after every three years.

- The lenders shall have the right to convert 20% of their outstanding debt, after financial year 31.03.2011, into equity and, in the event of any default in servicing the debt; the lenders shall also have the right to convert the defaulted amounts into equity (at par) or any other instruments. The promoters shall be given the first right of refusal, if the converted shares/ instruments are decided to be sold by the lenders.

- The Company is to disinvest its equity investments and recover loans and advances lent to subsidiary/group companies to the extent and in the manner envisaged.

5. Unsecured Loans:

Sales Tax Deferral:

The Govt, of Andhra Pradesh has extended to the Company, the incentive of sales tax deferral scheme pursuant to which the sales tax attributable to the sales effected out of production is deferred (interest-free) for a period of 14 years from 19.03.1998. The deferred sales tax in respect of above aggregates to Rs. 8,757.05 lakhs based on the sales tax returns (previous year Rs. 7,583.22 lakhs) in respect of which payments commence after 19.03.2012.

6. Land and Buildings:

a) Includes 22.38 acres leased to Nagarjuna Agricultural Research and Development Institute.

b) Includes 5 acres, the possession of which is yet to be taken, title under dispute.

c) Includes Land valued at Rs.958.08 lakhs and Buildings valued at Rs.291.92 lakhs vested with the Company pursuant to the order dated 27-04-98, of the Honble High Court of Andhra Pradesh.

d) Includes 45.04 acres attached by Govt of AP in terms of GO Ms No.158 dt. March 16,2009. The Company has filed a writ petition in the High Court of A.P. challenging the notification of the Govt. of A.P.

e) Excludes value of 86.55 acres, which is in the possession and use of the Company pending fixation of compensation by the State Government.

f) Excludes value of 14.06 acres (pending completion) of proposed alienation and handing over possession by Govt, of Andhra Pradesh including 3.14 acres which cannot be alienated under Andhra Pradesh Land Reforms Act, 1973.

g) Includes advance paid towards land and building of Rs.317.00 lakhs and Rs.730.00 lakhs respectively, pending registration since the title deeds are yet to be received from the transferor Company.

7. Investments:

In respect of investment in JESCO, management is of the opinion that there is no diminution in the value of the investment and that the realisation from sale of assets of the JESCO is expected to be in excess of investments made.

8. Group Concession Scheme - (GCS) Subsidy

Nitrogenous fertilizers are under the Group Concession Scheme as per New Pricing Scheme announced by the Government of India, Department of Fertilizers vide their letter dated March 08, 2007 to be implemented for the period from 01.10.2006 to 31.03.2010 (NPS-III) which has further been extended from 01.04.2010 until further orders. The Concession Rate for Plant-1 and Plant-2 for the period 01.04.2010 to 31.03.2011 has been recognized based on the latest notified rates under NPS-III and further adjusted with input price de-escalation aggregating Rs 1,535.56 Lakhs (Previous year Rs. 3,442.81 lakhs) as estimated by Management.

Pending finalisation of "Net Gain" and "IPP benefit" as per the Government policies for Production and Sale of Urea beyond 100% re-assessed capacity, the Company has estimated the Net Gain and IPP benefit in accordance with the known policy parameters in this regard.

Adjustments if any, on notification of final prices under the scheme will be considered in the year in which notifications are received.

9. Sundry Debtors, Loans and Advances :

a. Debtors and advances identified as irrecoverable are written off - Rs.37.27 Lakhs (previous year Rs. 1.90 Lakhs) as bad debts.

b. Certain advances aggregating to Rs.3,158.81 lakhs (previous year Rs 4,017.82 lakhs) considered good for recovery by the management.

c. Confirmations of balance from most of the sundry debtors have been obtained and others are awaited.

10. Staff Welfare Expenses under Schedule 9: Salaries, wages and benefits includes Rs 4,500.00 lakhs (Previous year: Rs Nil) provided by the Company towards Contribution to Employees Welfare Trust in accordance with approval of the Board of Directors.

12. Foreign Currency Liabilities (Buyers Credit) un-hedged Rs. 54,380.46 lakhs (Previous Year Rs Nil)

13. Fixed Deposits:

There are no deposits which are claimed but remain unpaid as on the date of the Balance Sheet. The balance of matured unclaimed deposits included in liability towards Investor Education Protection Fund outstanding as on 31.03.2011 was Rs 0.05 lakhs (previous year Rs 1.12 Lakhs). During the year unclaimed deposits transferred to the Investor Education and Protection Fund on the relevant due dates Rs 1.30 lakhs including interest (previous year:Rs.4.22 Lakhs).

14. income Tax:

a) Current Tax:

Provision for current tax is made for the amount of tax payable in respect of taxable income for the year under Income Tax Act, 1961. The Company after making review of the pending tax matters, is of the opinion that no further provision is necessary in respect of disputed tax demand of Rs. 1,660.16.lakhs (previous year: Rs. 1,028.45 Lakhs) which are in various stages of appeals. Any further provision required in respect of disputed tax will be considered on completion of the appellate proceedings.

19. Sales are net of cash discounts of Rs 89.88 lakhs (Previous year Rs. 74.22 lakhs).

20. Segmental Accounting:

The financial results relate mainly to fertilizer segment. In Accordance with Accounting Standard (AS) -17, since the financial results of micro irrigation segment and wind energy segment are less than the limit for separate disclosure, the same are not shown separately.

21. Related party transactions

Names of related parties and description of relationship.

Subsidiaries

(i) Nagarjuna Oil Corporation Limited

(ii) Jaiprakash Engineering & Steel Co. Limited

(iii) Kakinada Fertilizers Limited.

(iv) Nagarjuna Mauritius Pvt Ltd

Step down Subsidiaries

(i) Nagarjuna East Africa Limited

(Subsidiary of Nagarjuna Mauritius Pvt Ltd)

Associates

(i) IKisan Limited

(ii) Nagarjuna Agrichem Limited

(iii) Nagarjuna Foundation

(iv) Nagarjuna Oil Refinery Ltd

Key Management Personnel

(i) Mr. K.S.Raju, Chairman & Managing Director

(ii) Mr. K.Rahul Raju, Joint Managing Director

(iii) Mr. P.P.Singh, Director - Technical *

(iv) Mr. R.S.Nanda, Director & Chief Operating Officer

* ceased to be Director after 23rd February, 2011.

Relatives of Key Management Personnel.

(i) Smt. Lakshmi Raju (Daughter of Shri K.S.Raju and Sister of Shri K Rahul Raju)

(ii) Smt. K Lakshmi Raju (Sister of Shri K S Raju)

Enterprises able to exercise significant influence

(i) Nagarjuna Management Services Private Ltd.

(ii) Nagarjuna Holdings Private Ltd.

(iii) Nagarjuna corporation Limited

23. The disclosure required under Accounting Standard 15 "Employee Benefits" notified in the companies (Accounting Standards) Rules 2006, is given below.

Defined Contribution Plan

The Company makes Provident Fund and Superannuation Fund contribution to defined contribution retirement benefit plans for qualifying employees. Under the schemes the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Provident Fund scheme additionally requires the Company to guarantee payment of interest at rates notified by the Central Government from time to time, for which shortfall if any, shall be provided for.

Defined Benefit Plan

The employees gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

f. Actuarial assumptions

The estimate of rate of escalations in salary considered in actuarial valuation, taken in to account inflation, length of service and other relevant factors.

24. Information pursuant to provisions of Paras 3 & 4 of Part II of Schedule VI of Companies Act, 1956 is as under:

* Licenced Capacity is not applicable in terms of Government of India Notification No. S.0.477(E) dated 25th July, 1991. Registered pursuant to the scheme of delicensing.

@ As certified by the Management and relied upon by the Auditors being a technical matter.

# Re-assessed capacity by Government of India.

26. Previous year figures have been re-grouped / re-classified / re-cast wherever neoessary.