a) Includes cost of 5 acres - Rs.100 lakhs , situated at Wargal village,Telangana State, the possession of which is yet to be taken, as the title of seller is under dispute. Cost of this land has been impaired in FY 2020- 21.

b) Does not include cost of 33.35 acres situated at Kakinada plant site, cost not ascertainable, , which is in the possession and use of the Company, pending fixation of compensation by the State Government, pending registration of title in the name of the Company.

c) Doesnot include cost of 14.06 acres situated at Kakinada Plant site, cost not ascertainable, pending completion of alienation and handing over of possession to the Company by Govt of Andhra Pradesh, out of which 3.14 acres covered by restrictive provisions of Andhra Pradesh Land Reforms Act, 1973.

d) Includes land of 1040.28 acres in Kakinada allocated by the Government of AP for settingup Ammonia/ Urea fertilizer plant, in which the company’s urea manufacturing plants are situated. These lands were allocated/ awarded to the company by the State Government under its GOs and Agreements.

e) Includes Rs. 4185.39 lakhs, the cost of 340.11 acres (104 cases) situated at Nellore, AFJ which is in the possession of the Company but not registered in the name of the company due to defecticve title and has been fully impaired in FY 2020- 21. (Refer Note No. 28(iii)).

Refer Note 14 for details of PPE offered as security for Borrowings.

7.1. Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member.

7.2. Trade Receivables includes subsidy and other dues of Rs. 44,335.54Lakhs (Previous Year Rs. 11995.51 Lakhs) receivable from Government of India and Rs. 7029.43 Lakhs (Previous Year Rs. 8785.66 Lakhs) from State Governments.

Includes Rs.56.18 lakhs due from SFAC on account of implementation of eNAM project. The company had closed the iKisan division operations due to severe financial constraints. As the Company is unable to perform the contractual obligations with SFAC for eNAM Project due to closure of iKisan division , the remaining contract work had been outsourced to a vendor who invested their resources to fulfil the contractual obligations of NFCL. As agreed, the entire amount receivable from eNAM project is payable to the vendor.

7.3. The subsidy due from GOI is being credited to an Escrow Account maintained with IDBI Bank. GAIL has a first preference as per Escrow Agreement entered among GAIL, NFCL & IDBI.

Department of Fertilizers ( DOF) has revised the Office Memorandum on subsidy sharing mechanism vide No 12012/30/2013-FPP dated 25.11.2021, to transfer 40% of subsidy to Gas Pool Fund Account and 60% to NFCL for its operations. Out of the company’s share, GAIL has a first preference as per Escrow Agreement which was extended on 30.12.2021 till 30.06.2022.

11.1 The Company received a demand for an amount of Rs 5,426.41 Lakhs from the Director, Electrical safety and Chief Electrical inspector towards electricity duty on captive power generation @ 25 Paise per unit for the period of March 2003 to May 2013 . The company filed a Writ Petition against the Government of Andhra Pradesh and Chief Electrical Officer against the above demand challenging that the very concept of the setting up of Captive Power Plant will be defeated by this additional levy. The High Court of Andhra Pradesh dismissed the appeal filed by the Company. The Company filed an SLP (No.23005 / 2016) in the Hon’ble Supreme Court of India. The Hon’ble Supreme Court in its interim order directed the Company to pay duty @ 6 Paise and @ 9 paise per unit. Accordingly, the Company paid an amount of Rs. 3,255.85 lakhs. Matter is pending for final orders.

As a matter of prudence, the company has provided the entire demand amount of Rs. 5,426.41 lakhs in its books of account during the financial year 2021-22 and adjusted the deposited amount of Rs. 3,255.85 lakhs against the liability and the balance is shown as liability.

12.2. Rights, Preferences and Restrictions attached to equity shares

The Company’s issued, subscribed and paidup capital comprises of equity shares of par value of Rs. 1/- per share. Each holder of equity shares is entitled to one vote per share.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company,

Nature of Reserves

(a) Capital Reserve: During the composite scheme of arrangement and amalgamation, the excess of net assets taken over the cost of consideration paid is treated as capital reserve.

(b) Securities Premium: The amount received in excess of face value of the equity shares is recognised in Securities Premium. In case of equity-settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium.

(c) General Reserve: The Company has transferred a portion of its net profit before declaring dividend to general reserve pursuant to the provisions of Companies Act 1956.

(d) Retained Earnings: Retained earnings are the profits earned or loss incurred by the Company till date including OCI, less any transfers to general reserve, dividends or other distributions paid to shareholders.

14.2.1 Assessed Working Capital Term Loans (WCTL) - Rs 80,000 lakhs (Sanctioned Rs 65,900 lakhs and disbursed Rs 62,100 lakhs) are secured by first charge on the fixed assets (movable and immovable) of the holding company both present and future on pari-passu basis among the lenders; first pari-passu charge on the entire current assets of the holding company; pledge of core promoters’ shares (26.16 Crores Shares) on pari-passu basis among the lenders and personal guarantees of Shri K S Raju and Shri K Rahul Raju, former Director and Managing Director of the holding company respectively to the tune of Rs 80,000 lakhs. (Refer Note No 14.7)

14.3. Corporate Rupee loan - Holding Company

Corporate Rupee loan from State Bank of India carries interest @ 4.60% above base rate with a minimum of 14.60%, is secured by first charge on hypothication of chargeable current assets of the Company ranking pari-passu among lender banks in the consortium and collaterally secured by first / pari-passu on the fixed assets of the Company and personal guarantee of Shri K.S.Raju, former Director of the Company. The loan is repayable in 20 quarterly instalments commencing from December 2014.

14.4. Term Loan from DBT - Holding Company

The term loans (three loans) from Department of Bio Technology (DBT), Government of India for Process Development Unit carries simple interest of 2.0% per annum is secured by way of hypothecation of all equipment, apparatus, machineries, spares, tools and other accessories and goods and other movable properties of the holding company acquired for the project. The loans are repayable in 10 equal half-yearly instalments commencing from October 2014, June 2014 and October 2018 respectively.

Cash Credit Facility from 7 banks aggregating to Rs 3,05,000 lakhs (Rs 85,000 lakhs of Fund based and Rs 2,20,000 lakhs of Non Fund Based) are secured by hypothecation by way of first charge on current assets (stock in trade, book debts and stores and spares, present and future) of the company ranking pari-passu among the lenders in the consortium; second charge on the company’s present and future immovable properties and fixed assets ranking pari-passu among the WC consortium members and personal guarantee of Shri K.S.Raju former Director and Shri. K Rahul Raju Managing Director of the Company for rectification of account with funding (CAP) which have been disputed in view of non implementation of Corrective Action Plan.

14.6 Sales Tax Deferral Loan - Holding Company

The Government of Andhra Pradesh sanctioned Sales Tax deferral facility to the holding company with a final eligibility of Rs 1,01,746.56 lakhs, subject to the restriction of loan to the actual Sales Tax collected on the sale of the products manufactured by the holding company for a period of 14 years from 19.03.1998 to 18.03.2012. The Sales Tax deferred in a year should be repaid at the end of 14th year without interest. Repayment of this loan was commenced on March 19, 2012. The deferred Sales Tax outstanding as on March 31,2022 is Rs.3,869.80 Lakhs (Previous Year Rs.4,394.90 Lakhs).

As at the balance sheet date, the Company has defaulted in payment of instalment due on 19.03.2022 amounting to Rs.515.32 Lakhs for a period of 13days (Previous year Rs 525.10 lakhs for a period of 13 days).

14.7 The holding company is in default of principal and interest during the year on the borrowings from various lenders on account of non implementation of CAP To overcome the financial stress caused due to disruption of production and losses, the company approached its lenders for a Corrective Action Plan (CAP) and the lenders formed Joint Lenders Forum (JLF) in 2015 and assessed Rs. 3,05,000 lakhs (Rs.85,000 lakhs under Fund Based & Rs.2,20,000 lakhs under Non-Fund Based) and Rs.80,000 lakhs of Working Capital Term Loan under CAP to shore up the working capital and to enable the company to run. This funding for rectification of account is called Corrective Action Plan 2015 (CAP). Due to non sanction / release of assessed funds by the lenders (non implementation of CAP), the company’s account after the GAIL Pipe Line accident could not be rectified in 2015-16 and went into severe financial stress increasing indebtedness and losses resulting in defaults. Upgrading of account without releasing of the assessed funds for rectification of account (CAP) is in violation of RBI CAP regulations of 2014 and 2015, resulting in the account becoming NPA in 2015 itself as per RBI regulations instead of 2018 after CAP implementation as being claimed by Banks. The debt in the books (CAP loans) are disputed and are sub-judice. Pending resolution of the CAP loans and disputes (working capital and term loans in the books of the Company), the Company has been accounting for the interest / penal interest during the year on the borrowings as per the rate of interest mentioned in the sanction letters and as per CAP and other loan arrangements. This is not confirmation of dues. Adjustments, if any, for the principal, interest and penal interest accounted will be dealt on the outcome of the Debt Resolution Plan agreed by the company and lenders.

The lenders (Banks) of the holding company have not implemented the Corrective Action Plan (CAP) approved by them in the Joint Lenders Forum (JLF) meeting held in 2015. Though the company represented the matter to the lenders for necessary corrective action, the same has not been rectified till date. As a result, the company filed cases against the lenders in the Hon’ble High Court of Telangana, which has restrained the lenders from taking any coercive action against the company. Further, there is no clear information on when the loans were declared NPAs by the lenders. Due to these disputes, the lenders have not been sending the interest demands and the loan statements/ confirmation of balances to the company since 4 years. The company has also been disclosing CAP debt disputes since 2018. In this background, the company has been accounting the interest on the loans as per the terms of CAP funding sanction letters with a qualification of dispute and furnishing the default details as available with it in the financial statements. This is not confirmation of dues.

The 100% cash margin of Rs. 8,550.00 lakhs deposited for providing Bank Guarantee for gas supplies, has been adjusted by the lenders unilaterally without informing or taking approval from the company Rs 1,723.78 lakhs and Rs 6,826.22 lakhs against outstanding during FY 2021-22 and FY 2020-21 respectively along with interest. While the company has reduced the amount from the outstanding loans, the adjustment and the outstanding have been disputed by the company. Details of appropriation of the margin money adjusted Bank-wise were also not made available to the Company.

20.1. Group Concession Scheme - (GCS) Subsidy

i. Nitrogenous fertilizers (Urea) are under the Group Concession Subsidy scheme of Government of India (GOI), Department of Fertilizers. GOI has notified New Urea Policy (NUP)-2015 from 1st June, 2015 to 31st March, 2019. GOI vide its notification dated 14th May, 2019 has extended the duration of NUP-2015 from 1st April, 2019 till further orders. Gas Pooling Policy applicable to Fertilizer industry effective from June 1,2015. Concession rates for Plant-1 and Plant-2 for the period April 1,2021 to March 31,2022 have been recognized based on notified rates as per respective policies.

During the year escalations of Rs.29,106.64 Lakhs (Previous year de-escalations Rs.15,551.17 Lakhs) on the input prices have been accounted for as per the gas pool prices and provisions applicable under NPS-III, Modified NPS-III, NUP-2015 and Letter dated March 30, 2020 related to Modified NPS-III policy. Adjustments, if any, required will be considered on notification of final prices.

ii. Government of India, Department of Fertilizers has implemented Direct Benefit Transfer (DBT) in Fertilizer Sector in all the States of the Country from 1st March, 2018. The subsidy for the period April, 2021 to March, 2022, has been recognized for the quantities received in the States under DBT scheme.

25.1 Employee benefits Defined Contribution Plans

The Company makes Provident Fund and Superannuation Fund contributions to defined contribution plans for qualifying employees including whole time directors. Under the plans 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 by the Company.

Defined Benefit Plans

The employees’ gratuity fund and leave encashment (PL) schemes managed by Life Insurance Corporation of India are defined benefit plans. 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.

26.1 During the year, the company is in default of principal and interest on the borrowings from various lenders on account of financial stress. The lenders have classified the company’s loan accounts as NPA in the financial year 2018-19 and continuing the same status in the current year too. Pending receipt of interest demands and confirmation of balances of loans from various lenders, the Company has been accounting the interest / penal interest as per the rates of interest mentioned in the sanction letters, Corrective Action Plan (CAP) and other loan documents. Adjustments, if any, for the interest and penal interest accounted, will be made on getting the information from the lenders.

i) Unabosrbed IGST : The company was acting as Fertilizer Market Entity for Government of India, Ministry of Fertilizers for sale and distribution of Imported urea during the earlier years. The company has paid IGST on imports upto 26/07/2018 after which date levy of IGST on such import was withdrawn by Notification No 55/ 2018 -Customs dated 26.07.2018 - issued by Government of India, Ministry of Finance (Dept of Revenue). Since the IGST could not be utilised against the output tax liability on the urea sold, the company had submitted a claim for refund of Rs. 3,617.24 lakhs on 20/3/2019 to Dept of Fertilizers, New Delhi seeking compensation for the aforesaid unabsorbed IGST amount. The Company consequently also reversed the aforesaid unabsorbed amount in its GSTR - 3B return for February 2019. Since the Company has not received any definitive response to its claim despite 2 years having elapsed from Dept of Fertilizers, the Company considered it prudent for accounting purposes, not to carry the claim amount of Rs. 3,617.24 lakhs and has expensed it during the quarter. However, the company will continue to pursue its claim with the Department of Fertilizers.

ii) Electricity Duty Demand : The Company received a demand for an amount of Rs 5,426.40 Lakhs from the Director Electrical safety and Chief Electrical inspectors, Government of AR towards electricity duty on captive power generation @ 25 Paisa per unit for the period of March 2003 to May 2013. The company filed a Writ Petition against the State Government of Andhra Pradesh and Chief Electrical Officer in relation to payment of Electricity duty @ rate of 25 Paisa per unit stating the very concept of the setting up of Captive Power Plant will be defeated by this additional levy. The High Court of Andhra Pradesh dismissed the appeal filed by the Company. The Company filed an SLP No.23005 / 2016 in the Hon’ble Supreme Court of India. The Hon’ble Supreme Court directed the Company, under different orders to deposit with it, pending disposal of the case, an amount of Rs.3255.85 Lakhs which was deposited under protest by the Company during the financial year 2016-17 . Matter is still pending in Hon’ble Supreme court of India. The Company has been advised that it is prudent for accounting purposes to recognise the entire demand of Rs.5426.40 Lakhs as a liability instead of continuing to disclose it as a contingent liability. Consequently, the said liability has been recognised in the accounts during this year and is carried at the net amount after setting off the amount said deposited there against.

iii) Impairment of Land: The Company as part of the ongoing discussions with the lenders on the resolution plan had to create security for the additional parcels of land offered for the Corrective Action Plan (CAP) Loans sought during 2015-16. (197 Acres in Kapavaram, 110 Acres in Wargal & Gowraram,736 Acres in Nellore) These lands are in possession of the Company and vested with the Company through various schemes of amalgamations approved by Honourable High Courts of which some of the lands are yet to be registered in the name of the Company.

As the Company could not create security in the form of mortgage on these lands offered on account of the land being agriculture parcels. Lenders as part of the RP have carried out detailed title investigation study and sought legal opinion on the title to the lands. The legal opinion obtained has stated that the Company is in possession of Agricultural Lands in excess of the ceiling prescribed under the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act 1973.

Based on the legal opinion obtained, Company has obtained approval of the Board of Directors to restate the value of land which is in excess of the ceiling limits.

Pursuant to confirmation of the above legal status and the limitations on the use, sale, disposal of the said land, by an independent legal counsel, the company impaired the carrying amount of Rs.14,082.00 Lakhs in respect of the said excess lands, during FY 2020-21.

However, the company would continue to take all necessary actions as legally allowed and possible to protect titles, possession and obtaining necessary clearances for all the properties.

(c) As at the end of the year, the Company has a total unabsorbed loss and depreciation of Rs.87,161.74 Lakhs (March 31, 2021: Rs.87,557.19 Lakhs) based on the assessment orders received and Returns of Income filed. Deferred tax asset in respect of unabsorbed depreciation and carried forward loss under the Tax Laws are recognised only if there is reasonable certainity that there will be sufficient future taxable income available to realise such assets.The Company had recognised deferred tax asset on business loss of Rs 13,997.24 Lakhs for FY 2013-14. After setting off Rs. 3,895.07 lakhs, the balance loss of Rs 10,102.16 lakhs is eligible to be carried forward up to FY 2021-22 only. Hence, while calculating the deferred tax for the year, this balance unabsorbed business loss of Rs. 10,102.16 lakhs has not been considered. No deferred tax asset was recognised for the business losses incurred from FY 2014-15 onwards .

(d) The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities as they relate to income taxes levied by the same tax authority.

30. Material Uncertainty on the Holding Company’s ability to continue as a going concern and appropriateness of use of going concern basis of accounting in preparation of financial statements:

The holding company is operating in a regulated environment under the Essential Commodities Act, 1955, supported by Government Subsidy. On account of an accident in the GAIL Pipeline which supplies Gas to the company during 2014, the production of the company was disrupted for long time and as a result, the company suffered losses. To overcome the financial stress caused due to disruption of production and losses, the company approached its lenders for a Corrective Action Plan (CAP) and the lenders formed Joint Lenders Forum (JLF) in 2015 and assessed Rs. 3050 Crs (Rs.850 Cr under Fund Based Rs.2200 Cr. Under Non-Fund Based) and Rs.800 Cr. Working Capital Term Loan under CAP to shore up the working capital and to enable the company to run. This funding for rectification of account is called Corrective Action Plan 2015 (CAP). Due to lack of assessed funds from lenders (nonimplementation of CAP), the company’s account after the GAIL Pipe Line accident could not be rectified in 2015-16 and went into severe financial stress increasing indebtedness and losses resulting in defaults in 2018. Upgrading of account without releasing of the assessed funds for rectification of account (CAP) is in violiation of RBI CAP regulations of 2014 and 2015, resulting in the account becoming NPA in 2015 it self as per RBI regulations instead of 2018 after CAP implementation as being claimed by Banks. The company has been reporting the disputes on CAP debt (Working capital Term Loans and Working Capital Loans in the books of the company) to the lenders and in the annual reports. The debt in the books (CAP loans) are disputed and are sub-judice.

The lenders approved ‘Holding on Operations’ (HOO) from December 2018 to amicably resolve the debt issues with the company in the interest of all stakeholders (valid till June 30, 2022). Due to inadequate working capital, financial stress and continued losses on account of stoppage of production of the plants during 2018, without prejudice to the interest, the company had taken up longterm financial Resolution Plan (RP) with its Lenders. The lenders held series of Joint Lenders Meetings (JLM) for consideration and suggestions on the RP Consequent to the lenders meetings, a resolution plan was unanimously approved by the lenders in March 2020, which amongst other things, include segregation of debt into sustainable and unsustainable, reduction in the rate of interest, infusion of fresh equity and sanction of additional debt etc. However, post conclusion of the Resolution Plan, the lenders made arbitrary changes in the said RP on 4th June 2020. The company has filed a Writ Petition in the Hon’ble High court of Telangana, on the arbitrary actions of the lenders against the RBI Regulations. The Hon’ble High Court granted stay against any proceedings that may be initiated by the lenders against the company until further orders and the matter is awaiting final orders. Further, the company had filed contempt cases against 2 lenders who have filed petitions under IBC in violation of the above stay orders of High Court and the matter is pending before the Court.

In view of operating only one plant (out of the two plants) due to lack of working capital, the losses continued, resulting in substantial erosion of net worth and the company faced liquidity issues. As a result of continuous losses, the company’s financial position has become very weak, and it is unable to meet its commitments to the financial and other creditors including statutory dues on the due dates. Due to default in paying the instalments and interest, the lenders have declared the loans to the company as Non-Performing Assets in 2018 (instead of 2015) and the status is continuing till date. As a result of treating the loans as NPAs by the lenders, all the borrowings with, a qualification of dispute, have been recorded as current liabilities in the Books / Financial statements of the company, leading to the situation that the current liabilities are in excess of current assets in the last three financial years. As at the year end, the company’s current liabilities exceeded current assets by Rs. 2,94,164.54 Lakhs.

All the above events / conditions indicate material uncertainty which cast a significant doubt on the company’s ability to continue as a Going Concern.

The company’s management assessed the company’s ability to continue as a Going Concern in which the company considered the following events / conditions, which individually / collectively have contributed in concluding that use of Going Concern basis of accounting is appropriate for this year.

• The company is continuously pursuing with the lenders for resolution of all the disputes amicably and for an acceptable resolution plan to make the company functional successfully.

• The lenders are seriously considering to resolve the Debt burden of the company and vide their letter dt.30.04.2022 advised the company to submit a fresh resolution plan taking into consideration various developments in the company as on date and the company is working on the same.

• Despite the weak financial condition of the company, the company continued the production and supply of goods and able to restart the second plant in April 2022.

• The lenders, to enable the company to generate the Cash flows, have approved the facility of ‘Holding on Operations’ (HOO) in December 2018 and have been extending the same from time to time, in the interest of all the stakeholders. The last extension of HOO facility is valid till June 30, 2022, and the company has approached for further extension of the same, which the management is hopeful.

• The management has no intention to close the plants, liquidate the entity, to cease operations or sell any assets of the company.

• There is no change in law, regulation or government policy which is adversely affecting the company.

• All the Key management personnel in all the operating areas are continuing and no loss of personnel at any level in the company.

• The Product of the company is administered under the essential commodities Act 1955. The production, distribution, pricing are controlled by the Department of Fertilizers, Government of India. As such, there is no loss of market / customers for the company’s product.

• With such a weak financial position, the company, during F.Y 2021-22 could still produce 9.14 lakh MT and sell 9.18 lakh MT of Urea.

• The major supplier of Gas, which is the Raw Material and Power and Fuel, M/s GAIL (India) Limited continue to supply Gas under the Gas Purchase and Sale Agreement which is effective from 07th July 2021 and is valid till 06th July 2026 under liberal terms of payment.

• The Company maintained good relationship with the personnel at all levels and there are no issues with the Labour.

• The company has been paying all the statutory dues, though with some delay and complying with all the applicable Laws.

• There is no entry of fresh competitors to the product of the company despite the fact that the India’s requirement of Urea is about 35 Million Tons which is far in excess of production capacity of the country at 25 Million Tons and the Government of India continue to import Urea at a very high price. Hence, there is no issue of lack of marketability or competition for the product of the company which is covered under the administered pricing mechanism of the Government.

• There is no underinsurance for the assets of the company in the events of major catastrophe.

• The company’s industry is a major capital-intensive Industry with highly regulated operations. The Government cannot afford to close the operations of the company as the demand for the product is huge and any shortage would affect the food security of the country.

• The company is exploring various avenues to resolve the financial crisis and sought the help of the Government of India for financial assistance and hoping for positive response from the Government.

• The Government of India has made an arrangement wherein the GAIL would supply the required Gas for which part payment only will be made by the company and the lenders also would get part payment of their dues.

• During the past four years, only one plant was in operation producing about 5 lakh MT due to working capital shortages. However,

in the current year, the company with the support of lenders under holding on operations facility, funded the repair costs of Plant II. Now, both the plants are operating at a reasonable capacity and expected to generate cash flows and make cash profits.

• The company is confident of running the operations as the government has allowed the Gas supply to continue till 31.03.2023 vide their Office Memorandum dated 13th April 2022.

In the light of all the above, the Management concluded that the company is a Going Concern and accordingly use of the Going Concern basis of accounting in the preparation of the financial statements for FY 2021-22 is appropriate.

31. Impairment of Property Plant & Equipment

The Management of the Holding Company, while assessing whether there is any indication that an asset is impaired, considered the relevant external and internal sources of information and decided to test its Property Plant & Equipments for impairment as at the year end, by an independent professional valuer. But could not complete the impairment testing during the year as the valuer’s report was not received as on date. 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 31st December 2021.

Due to Covid situation and the complexity of the assets to be tested for impairment, the independent valuer could not complete the impairment testing and submit his report to the company till date.

As the independent valuer’s report on impairment has not been received, the company could not account the impairment, if any, on the PPE for the year ended 31st March 2022 and hence the carried value of Fixed Assets have been continued in the financial statements. The impairment, if any, will be recognized in the financial year in which the valuer’s report is received.

32.1. (a) In relation to some of the contracts for purchase of fertilisers, an international Arbitration Award has been passed against the Holding Company in September 2016 for USD 14,398,188 and GBP 690,630 and interest as applicable apart from costs based on a claim filed by one of the Suppliers of Fertilizers to the Company.

The Company is of the view that the Award has been obtained based on documents tampered with and mis-representations of facts by said supplier. The Company is contesting the enforcement of the Award in the Courts in India and has also filed a Criminal Complaint before the Metropolitan Magistrate of Hyderabad against the supplier and its officials. Matter yet to be listed for hearing.

(b) The Company entered into two Contracts dated December 15, 2012 on Early Works, Offshore and Onshore towards certain engineering drawings to be utilised towards its plant for third ammonia and urea project on conditions that balance amounts payable only upon (a) the anouncement of a fertilizer policy and (b) that the fertilizer policy being found favorable for the Project of the Company. The Company could not proceed further as the policy was not conducive for the project.

The service provider raised invoices for the balance amounts claiming that the work carried out was per contract. As the amounts were not paid the service provider invoked arbitration. The arbitral Tribunal passed an award on October 23, 2017 for USD 877,500, GBP 52,314, EUR 455,000 and INR 221.39 Lakhs and interest as applicable apart from costs in favour of the claimant. NFCL challenged the Awards by filing two petitions separately for each case under section 34 of Arbitration & Conciliation Act as the tribunal ignored vital evidence such as Govt communication dt 9th May 2013 where in the industries we’re asked not to proceed further without necessary approvals from Govt, amongst other grounds. Matter yet to be listed for hearing.

Based on the current legal progress, the management has provided for 25% of the claim made on the Offshore contract and deposited 15% of the onshore contract value with the court . The Company continues to proceed legally and hence the balance claims have been disclosed as contingent liabilities.

32.2 The Holding Company has been using the “Nagarjuna Brand / Trademarks” for its urea and other products under a license agreement Dt 29/01/1998 with the grantor, a related party. The company, during the current year, received a claim from the grantor asserting its right for royalty for the period from 29/01/1998 to 31/12/2021. The said claim is under review by the Company for appropriate action.

32.3 Cases / Petitions filed against the company in NCLT / Courts / Other Tribunals:

i) Based on an execution petition filed by one of the operational creditors with the Honourable High Court of Telangana, the Court had directed the Holding company to earmark an amount of Rs 20 Crs. Accordingly, the company complied with the said order. However, despite compliance of the High Court Order, the operational creditor filed a petition before the Hon’ble NCLT Hyderabad Bench, to initiate the CIRP against the company and the same has been admitted by the Hon’ble NCLT (putting the company in CIRP under the provisions of the I&BC, 2016 vide its order dt.27.08.2021). Amlika Mercantile Private Ltd ,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 (the next hearing date is on 5th July 2022).

ii) Three of the financial creditors have filed petitions against the holding company before the NCLT under IBC. In view of the stay granted by the Hon’ble NCLAT on the implementation of its orders in CB (IB) No: 524/9 HDB/2019, the NCLT directed for listing of these matters on 05-07-2022.

iii) Few other creditors have filed petitions against the company in various Courts / Tribunals for recovery of dues / claims for compensation for their services / supplies and all these matters are at various stages in the respective courts. The legal counsel confirmed that the cases / petitions filed against the company are not tenable and are of the view that these cases may not have any impact on the financials of the company.

The management is of the view that the pending litigations will not have any adverse impact on the financial position of the company as at the year end.

32.4 Other Contingent Information:

i) Based on the Supreme Court judgement dated February 28,2019, the Group was required to reassess the components to be included in the basic salary for the purposes of deduction of Provident Fund. On the basis of legal advice, the management has determined that there is no impact of the aforesaid ruling on the standalone financial statements of the Company.

ii) The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Group towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the code on Seocial Security, 2020 on November 13, 2020, and has invited suggestions from stakeholders which are under consideration by the Ministry. The company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statement in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

iii)The commissioner of Customs , customs Preventive commissionerate , Vijayawada filed an appeal on 23/3/2017 in the Hon’ble Highcourt of Judicature at Hyderabad U/s. 35G of The central Excise Act, 1944 against the Final order No A/30792/2016 Dt 1/9/2016 passed by CESTAT, which was in favour of the company . If the Dept wins the appeal in HC, the liability on the company will be Rs 107.51 lakhs . The appeal is pending disposal as on date.

As on date as there is no demand against the company in respect of the matter referred to at (iii) above, no contingent liability has been recongnized in the books.

33.3. Remuneration to key management personnel of the Company

The remuneration to KMPs disclosed in the table has been recognised as an expense during the reporting period.

In terms of the provisions of Sections 196, 197,198,203 and any other applicable provisions of the Companies Act, 2013 (“Act”) and the rules made there under, read with Schedule V of the Act and subject to the prior approval of the Financial Institutions, Banks and such other approvals and permissions as may be required in this regard, the Board of Directors and the Members of the Company had approved the appointment and payment of remuneration to Mr. K Rahul Raju as Managing Director (MD) of the Company with effect from August 01,2017 to July 31,2020 and August 01,2020 to July 31,2023, for a period of three years respectively .

Pending approval of the Financial Institutions, Banks, the Company has taken on record and paid remuneration to Mr. K Rahul Raju, Managing Director, for the period as per the approval granted by the shareholders for the appointment and remuneration to the Managing Director.

33.5. Terms and conditions of transactions with related parties

Transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the yearend are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the period ended March 31,2022, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (March 31,2021: Rs. Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

34. Segment Reporting

The financial results comprise the combined operations of the Group relating to the Fertilizer, Micro Irrigation and Agri Services businesses. The financial results of Micro Irrigation and Agri Services being below the reportable thresholds, and since they do not have similar economic characteristics and do not share any of the aggregation criteria, are neither disclosed as separate segments nor combined as “all other segments” for the purpose of disclosures under Ind AS 108 - Operating Segments.

The management assessed that cash and cash equivalents, other bank balances, trade receivables, trade payables and short term loans approximate their carrying amounts largely due to the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The fair values of the foreign exchange forward contracts have been determined based in the valuation report obtained from the bank. Significant observable inputs used in the valuation report are quoted forward exchange rates.

37. Financial risk management objectives and policies

Financial Risk Management Framework

The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans and advances, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The Company is exposed primarily to Credit Risk, Liquidity Risk and Market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversely impact the fair value of its financial instruments. The Company’s senior management oversees the management of these risks. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company based on the policies agreed by the Company’s senior management. The same are summarised below:

A. Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, derivative financial instruments, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk except trade receivables where more than 50% is due from Governemnt of India and various State Governments. The same are realisable in due course.

To manage this, the Company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of accounts receivable. Individual risk limits are set accordingly.

The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:

(i) Actual or expected significant adverse changes in business,

(ii) Actual or expected significant changes in the operating results of the counterparty,

(ii) Financial or economic conditions that are expected to cause a significant change to the counterparty’s ability to meet its obligations,

(iv) Significant increases in credit risk on other financial instruments of the same counterparty,

(v) Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.

Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the company. The company categorises a loan or receivable for write off when a debtor fails to make contractual payments greater than 2 years past due. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.

Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry.

Trade receivables:

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major clients based on ageing.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved authorities. Credit limits of all authorities are reviewed by the Management on regular basis.

B. Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.

The Company was unable to meet the financial obligations during the current year on account of continued losses. The Company is in discussion with the lenders for Resolution Plan. Refer Note 34.

C. Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk for the entity comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include loans and borrowings and derivative financial instruments.

The sensitivity analyses in the following sections relate to the position as at March 31,2022 and March 31,2021

The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign currencies are all constant in place at March 31,2022.

The analyses exclude the impact of movements in market variables on: the carrying values of gratuity and other post-retirement obligations; provisions; and the non-financial assets.

The following assumptions have been made in calculating the sensitivity analysis:

- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31,2022 and March 31,2021.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates.

The company’s interest rate exposure is mainly related to variable interest rates debt obligations. The company uses a mix of interest rate sensitive loan facilties from the lenders to manage the liquidity and fund requirement for its day to day operations like working capital, short term loans and suppliers / buyers credit etc.,

45. (i) In view of rapid spread of virus causing Covid-19 pandemic, Government of India imposed lockdown from 25th March 2020 to curb the spread of virus. The nationwide lockdown temporarily impacted the operations of the company due to non-availability of labour, transportation and supply chain disruptions. However, the Government classified urea and micro irrigation business of the company as “Essential Commodity” and granted certain relaxations and guidelines so that production and distribution of Urea will not be effected. The Company operated one Urea plant during the lockdown period, following safety measures as per guidelines. Thus, the impact of Covid-19 on the Company is minimal at this point of time. The Company has assessed the recoverability of receivables, inventories and other financial assets considering the available internal and external information up to the date of approval of these financial statements. Considering the nature of these assets, the Company expects to recover the carrying amount of these assets.

(ii) The company has not borrowed funds from Banks/Financial Institutions during the year.

46. Additional Regulatory information

(i) Details of Immovable Properties (Other than the properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held in the name of the company:

Under the Composite Scheme of Arrangement and Amalgamation approved by the Hon’ble High Courts at Bombay and Andhra Pradesh in FY 2011-12, the Company was vested with the land of 736.13 acres situated in Nellore, AP together with buildings constructed therein, which was actually purchased from Nagarjuna Aqua Exports Limited (NAEL) way back in 2001 for a consideration of Rs. 317 Lakhs (towards land). Of these lands, 340.11 acres were not registered in the name of the company as the same were found to be defective titles.

Despite the Company’s continuous persuasion, these lands could not be registered in the name of the company as title of all these lands is defective and the original owners who sold the land are not traceable.

Based on the legal opinion wherein it was opined that as these lands are in excess of the limit specified under the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act 1973, it was concluded that these lands are not transferable on to the name of the Company. Accordingly, considering the restriction under the applicable Law to hold these lands, the passage of over two decades of time since original acquisition, non-traceability of original owners who sold these lands and defective titles, the Company has impaired the entire carried value of these lands during FY 2020-21, along with some other lands, aggregating to Rs 14,082 lakhs. (Refer Note no: 3 and 28 (iii)).

(ii) The Group has no investment property

(iii) The Group has not revalued its Property Plant and Equipment including Right of use assets

(iv) The Group has not revalued its intangible assets.

(v) The Group has not granted loans or advances in the nature of Loans to promoters, Directors , KMPs and the related parties (As defined under The Companies Act,2013) either severally or jointly with any other person, that are (a) repayable on demand; or (b) without specifying any terms or period of repayment.

(vii) The Group has no intangible assets under development

(viii) No proceeding has been initiated or pending against the Group under the Benami Transactions (Prohibition) Act 1988.

(ix) In respect of the borrowings from bank or financial institutions on the basis of security of current assets, quarterly returns, or statements of current assets are not being filed by the Group.

(x) The Group is not a declared wilful defaulter by any bank or financial institution (as defined in the Companies Act 2013), or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India.

(xi) The Group has no transactions with companies struck off under section 248 of the Companies Act 2013 or section 560 of Companies Act 1956

(xv) The Group has not undertaken any scheme of arrangements in terms of section 230 to 237 of the Companies Act 2013 during the year

(xvi) (A) The Group has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

(B) The Group has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(xvii) During the year, the Group has not surrendered or disclosed any transaction in the Income tax assessments under the Income Tax Act 1961, which was not recorded in the books of account.

(xviii) The Group is not covered under section 135 of the Companies Act 2013

(xix) The Group has not traded or invested in crypto currency or virtual currency during the financial year

47. Balances in the accounts of various parties appearing in these statements are subject to confirmations and reconciliations.

48. The figures of the previous year have been reclassified / regrouped, wherever necessary, to make them comparable with that of Current Year.