NACL Industries Ltd Directors Report.

To,

The Members,

Your Directors have pleasure in presenting the 32nd Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2019.

Operating Results:

Your Companys performance during the year as compared with that during the previous year is summarized below:

(Rs. in lakhs)

Particulars

Consolidated

Standalone

2018-19 2017-18 2018-19 2017-18
Total Income (including Other Income) 89,121 88,487 89,119 88,423
Profit/(Loss) before Finance Cost, Depreciation and Tax 3,947 6,768 3,941 6,777
Finance Charges 3,398 3,342 3,398 3,342
Depreciation and Amortization 2,035 1,977 2,035 1,977
Profit/(Loss) before exceptional items and tax (1,486) 1,449 (1,492) 1,458
Share of profit from associate 137 94 - -
Profit/(Loss) before tax (1349) 1,543 (1,492) 1,458
Current Tax - 540 - 540
Deferred Tax (654) (154) (654) (154)
Profit/(Loss) for the year (695) 1,157 (838) 1,072
Other Comprehensive Income 1 46 3 46
Total Comprehensive Income (694) 1,203 (835) 1,118
Balance of profit brought forward from previous year 18,389 17,420 17,998 17,114
TOTAL 17,695 18,623 17,163 18,232
Appropriation
Dividend on equity shares 196 195 196 195
Dividend distribution tax 40 39 40 39
Balance profit carried forward to balance sheet 17,459 18,389 16,927 17,998

Performance:

Your Directors are pleased to inform that your Company has received the following awards during the year 2018–19:

i) Srikakulam Technical Unit and Ethakota Formulation have been awarded with the "Best Management Award" by the Government of Andhra Pradesh for Management Practices for yet another year 2018, by the hands of Honble Chief Minister of Andhra Pradesh. These award were given third time for each of the units in last four years.

ii) Srikakulam Plant received prestigious safety award of "Prashansa Patra" from the National Safety Council (NSC) for the year 2018 for its best Safety Practices by Honble minister of the State Labour and Employment, Government of India and Ethakota Formulation Plant (Certificate has also received Safety Award-2018 of Appreciation) from the NSC.

iii) Crop Care Federation of INDIA has awarded NACL for the best "Safe Handling & Judicious Use of Agro Chemical Awareness".

iv) Srikakulam Technical unit has received "Social Responsibility Excellence Runner Up Award" from Pesticides Manufacturers and Formulators Association (‘PMFAI).

v) Srikakulam Technical Unit has received "Greentech Environment Award - 2018" from Greentech Foundation, Delhi, India by the hands of Honble Member of Parliament, Govt. of India, Shri Ranjan Rajan; Honble Minister of State Excise, Environment & Forest of Assam Govt. Mr. Parimal Suklabaidya and Greetech Chairman, Mr.K.Sharin.

The Company achieved a consolidated revenues of Rs.89,121 lakhs during the year under review as against Rs.88,487 lakhs achieved in the previous year, showing an increase of 0.72%. During the year under review, the Company has recorded a net loss of Rs. 694 lakhs against the net profit of Rs.1,203 lakhs for the financial year 2017-18. The Companys loss before exceptional item and tax is Rs.1,486 lakhs during the year under review against the profit of Rs.1,449 lakhs during the previous year 2017-18.

The loss is mainly attributable to poor domestic Rabi season, steep raw material price increase due to temporary closure of some of the chemical manufacturing facilities in China and rupee depreciation.

Dividend and Reserves:

Keeping in view of loss suffered by the Company, your Directors regret their inability to recommend dividend for the year under review. No amount is being transferred to the General Reserves.

Plant Operations:

The Srikakulam technical plant has achieved annual production of 5,533 MT as compared to 6,023 MT in the previous year, a reduction of production by about ~8%. The loss in production was mainly due to slackening in demand for various Technical grades being captively used for domestic market requirements. However, the plant could meet the enhanced demand for the various Active Ingredients/ Technicals in the export market. The plant has been taking various initiatives for energy conservation, cost savings and capacity utilization by streamlining, debottlenecking, augmenting plant and enhancing productivity. Efforts are being put in to increase the efficiency of Zero Liquid Discharge facility by adopting latest technologies.

Ethakota formulation unit has been able to satisfactorily meet not only the domestic formulation market demand but also that of the newer and expanding export market. The unit achieved production of 18,639 MT/KL during the year under review, compared to the previous year production of 24,738 MT/KL, a reduction by about ~24%. The decrease in production was mainly due to the reduction in domestic market demand. Export of Formulation trade was affected by price pressure and currency devaluation in South East Asia and East Africa. The unit has been in continuous growth mode being capable of handling any market demand both in terms of flexibility in product mix and demand in higher volumes. The continued focus on areas of improving flexibility, enhancing capacities, increased productivity, de-bottlenecking, quality control and better supply chain initiatives are yielding results.

An amiable working environment in both units has enabled maintaining cordial relationship with workers Unions and other Stakeholders.

Domestic Markets:

In the year 2018, the south west monsoon was 91% of its long period average (‘LPA), which is a 9.4% deficit in the rainfall. The seasonal rainfalls over various Northwest India, Central India, South Peninsula and Northeast (NE) India were 98%, 93%, 98% and 76% of respective LPA.

The country-wide deficiency in North east monsoon stands at 44%. Among the different regions, central India, east and northeast India have fared the worst with deficits of 51% each. Northwest India has received 45% less rains than normal and the southern peninsula is 36% deficient.

This affected the Rabi spraying badly. Wheat acerage was normal, Rice acerage was 22% below of normal, Maize was 7% up and groundnut acerage was down by 21%. Despite the adverse competitive market conditions, your Company achieved domestic sales of Rs.63,389 lakhs for the year under review against Rs.73,341 lakhs in the previous year, a reduction by ~13%. The reduction is mainly due to poor Rabi season. The deficit rain continue to have negative impact on collection.

Export Market:

Global conventional crop protection market has grown by 6% to $ 57.56 billion in 2018 (source: Agrow by Informa). Increase in the prices in China and ease out of the inventory situation in Brazil have led this growth. Crop Protection chemical Exports from India have increased in FY 19 due to the situation in China and increase in the product prices.

The reduction of inventories has helped in resuming the agrochemical business in Brazil, has contributed positively to your companys exports sales. Enforcement of stricter environment norms in China, has provided trading opportunities to supply Technicals to customers in Australia,

New Zealand, Russia and Vietnam. Contract manufacturing business was slightly affected due to less offtake of couple of products. Formulation business was impacted mainly because of price pressure, currency devaluation in South East Asian and East African Countries. However, with business development activities that are being taken, the outlook for this business segment looks positive in the coming years. Your company continued its efforts to register its brands in South East Asia and Africa, and got two registrations in Ethiopia and two new registrations in Myanmar.

In spite of the challenges, the performance of Exports function has increased by nearly 76% when compared to that of the last year. The sales were Rs. 22,362 lakhs in the year under review as compared to Rs. 12,741 lakhs in the previous year. This was possible due to the initiatives that have been taken post fiscal 2013 and your companys continued attempt in maintaining strong relationship with the Contract Manufacturing Customers.

Credit Rating:

During the year under review, the Credit Analysis and Research Limited (CARE) has re-affirmed the following existing rating for Long Term and Short Term Bank facilities of the Company: a) Long-term Bank facilities: CARE A- Stable (‘Single A minus; Outlook: Stable) and, b) Short-term Bank facilities:CARE A2 (A two).

Fire Insurance Claim:

As reported in the previous year, the Company, aggrieved by the assessment and settlement of claim by the Insurance Company with respect to fire accident at Srikakulam plant, filed the differential claims before the sole Arbitrator in line with the orders of Honble High Court of Delhi. The Arbitration proceedings are progressing satisfactorily and in an advanced stage of hearing.

New Projects/Products: efficiencies In the direction focusing on cost and innovation, the Companys R&D Centre at Shadnagar, near Hyderabad, continues to develop cost effective processes for manufacture of Active Ingredients (AIs)/Technical and Intermediates for Herbicides, Insecticides and Fungicides. To take advantage of the Make in India manufacturing initiative, processes for many generic products are under various stages of development for manufacturing by NACL. Your Directors are pleased to inform that the R&D Centre has received the Certificate of Accreditation from the National Accreditation Board for Testing and Calibration of Laboratories (NABL)

Registration of the active ingredients and the final products is a major activity. This Department works on applying for registration in India as well as in Countries in Africa and SE Asia, to enable marketing of the products. The total number of registrations NACL has is 359 in India and 90 for exports.

Environment Protection:

Your Company continues to maintain high standards in environmental management with its manufacturing facilities operating well within stipulated norms due to the efficient running of the Zero Liquid Discharge (ZLD) facilities in Srikakulam and Ethakota. Srikakulam manufacturing site has an online effluent and emission monitoring devices that continuously upload the data to Pollution Control Board website. These sites have also increased plantation area within the factory premises. Your Company continues to enjoy the certifications ISO:9001:2015, ISO:14001:2015 and ISO 45001:2018 accredited for its proven standards covering in the areas of Quality, Environment, Safety and Health Management Systems respectively.

Alteration in Memorandum and Article of Association:

During the year under review, the Company has entered into a Share Subscription and Shareholders Agreement (‘SSSA) with the Investors (M/s.Krishi Rasayan Exports Private Limited and Mr.Rajesh Kumar Agarwal and Mr.Atul Churiwal, jointly representing M/s.Agro Life Science Corporation a registered Partnership Firm) and Promoters of the Company. Pursuant to SSSA, certain rights were given to the Investors, for which the Articles of Association of the Company has been altered vide the special resolution passed by the shareholders in its Extraordinary General Meeting (‘EGM) held on 07th March, 2019.

Further, the Board in its meeting held on 03rd July, 2019 has approved the adoption of the new Memorandum of Association to align with the new Companies Act, 2013 ("Act") by merging the Objects under part C of Clause III – "Other Objects" with part B of Clause III – "Objects Incidental or Ancillary to the attainment of the Main Objects" and also to rename the part A & B Clause III of the Object Clause. The Board commends the Special Resolutions set out in Item No. 12 of the Notice for approval of the Members.

Share Capital:

During the year under review, your Company has allotted 1,74,376 fully paid equity shares, upon exercise of Stock Option by the eligible Employees of the Company, pursuant to the ‘Nagarjuna Agrichem Ltd., - Employee Stock Option Scheme – 2015 (‘ESOS-2015) of the Company and these shares were duly admitted for trading on the stock exchange(s). Further, pursuant to Section 42, 62(1)(c) of the Companies Act, 2013 read with Chapter V of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, the Company has allotted 1,09,37,500 fully paid Equity Shares on preferential basis to the Investors (i.e., M/s. Krishi Rasayan Exports Private Limited and Mr. Rajesh Kumar Agarwal and Mr. Atul Churiwal, jointly representing M/s. Agro Life Science Corporation, a registered Partnership Firm). Subsequent to the above allotments, the paid up capital of your Company stand increased from Rs.15,63,08,384/- (comprising of 15,63,08,384 fully paid up equity shares of Rs.1/- per equity share) to Rs.16,74,20,260/- (comprising of 16,74,20,260 fully paid up equity shares of Rs.1/- per equity share).

Employee Stock Option Scheme:

Your Company implemented "Nagarjuna Agrichem Ltd., – Employee Stock Option Scheme – 2015" (hereinafter referred to as "ESOS-2015") in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended from time to time and as approved by the members of the Company at their Annual General Meeting held on 28th September, 2015. In terms of the said ESOS-2015, the Compensation Committee is authorized and empowered to administer and implement the Companys Employees Stock Option Scheme (ESOS-2015) including deciding and reviewing the eligibility criteria for grant, issuance of stock options under the Scheme, allotment of shares upon exercise of the options etc., with regard to the 11,50,000 (Eleven Lakhs Fifty Thousand Only) options reserved under the ESOS-2015. During the previous years 2016-17, 2017-18 and 2018-19 9,30,000 (Nine Lakhs Thirty Thousand Only), 60,000 (Sixty Thousand Only) and 90,000 (Ninety Thousand Only) stock options were granted to the eligible Employees with a vesting period spread over a maximum period of five years. Each option would entitle the holders of the option to apply for one equity share of the Company. Upon exercise of the vested stock options by eligible Employees under the ESOS-2015, 1,74,376 equity shares were allotted during the year under review. Applicable disclosures relating to Employees Stock Options as at 31st March, 2019, pursuant to Regulation 14 and other applicable Regulations of SEBI (Share Based Employee Benefits) Regulations, 2014, as amended from time to time, are set out in the Annexure-I to this Report. It was informed that there has been no material change in the said Scheme i.e., ESOS-2015 during the year under review.

Preferential Issue:

During the year under review, the Company has allotted 1,09,37,500 equity shares and 2,50,00,000 convertible warrants on preferential basis, under Chapter V of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 to the following Investors and Promoter at an issue price of Rs.32/- per shares/warrants on 27th March, 2019:

S.No. Particulars Equity Shares Warrants
1) M/s. Krishi Rasayan Exports Private Limited 78,12,500 78,12,500
2) Mr. Rajesh Kumar Agarwal and Mr. Atul Churiwal, jointly representing M/s. Agro Life Science Corporation, aregistered Partnership Firm 31,25,000 1,25,00,000
3) Mrs.K.Lakshmi Raju, Promoter - 46,87,500

The Company has allotted the above equity shares and warrants against the receipt of the full consideration of Rs. 35 crores for equity and Rs.20 crores (Rs.8/- per warrant being 25% of issue price) for warrants aggregating to Rs.55 crores. The above warrants shall be convertible within a period of 12 months from the date of allotment i.e. 27th March, 2019.

Material Changes and Commitments:

There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

Subsidiary Companies and Associate Companies and Consolidation of Financial Statements:

Pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), along with other applicable provisions of the Act, and as per Indian Accounting Standards (IND AS 110 – "Consolidated Financial Statements"), the Audited Consolidated Financial Statements for the year ended on 31st March, 2019 are provided in this Annual Report. The Company has prepared consolidated financial statements by incorporating the financial statements of its wholly owned subsidiaries M/s.LR

Research Laboratories Private Limited and M/s.Nagarjuna

Agrichem (Australia) Pty, Ltd with its financial statements on line by line basis. The investments of the Company in M/s.Nasense Labs Private Limited, an Associate Company, have been accounted for in these consolidated financial statements under the equity method in accordance with IND AS 28 – "Investments in Associates and Joint Ventures".

The Audited Annual Accounts and related information of Subsidiaries and Associate as applicable will be made available upon request. The Statement required under Section 134 of the Act is attached as Annexure - II (Form AOC-1) to this Directors Report.

No other Company has become/ceased to be subsidiary or joint venture or associate Company during the financial year. There has been no material change in the nature of the business of the aforesaid Subsidiaries and Associate. The Company has no Subsidiary which can be considered as material in terms of the Listing Regulations.

In accordance with the provisions of Section 136(1) of the Act, read with Regulation 46 of the Listing Regulations the following have been placed on the website of the Company www.naclind.com:

a) Annual Report of the Company, containing therein its standalone and the consolidated financial statements; and

b) Annual accounts of each of the subsidiary Companies.

Internal Financial Control Systems and their adequacy:

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

The Company has adopted accounting policies which are in line with the Indian Accounting Standards and the Act. These are in accordance with generally accepted accounting principles in India. Changes in policies, if required, are made in consultation with the Auditors and are approved by the Audit Committee.

The Companys internal audit systems are geared towards ensuring adequate internal controls commensurate with the size and needs of the business, with the objective of efficient conduct of operations through adherence to the Companys policies, identifying areas of improvement, evaluating the reliability of financial statements, ensuring compliances with applicable laws and Regulations and safeguarding of assets from unauthorized use.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the Internal, Statutory, Cost and Secretarial Auditors, including audit of the internal financial controls over financial reporting by the Statutory

Auditors, and the reviews performed by Management and the relevant Board and Committees including the Audit Committee, the Board is of the opinion that the Companys internal financial controls were adequate and effective during the financial year 2018-19.

Auditors:

a) Statutory Auditor and Audit Reports:

M/s. Deloitte Haskins & Sells LLP, (Deloitte) Chartered Accountants, Madhapur (Firm Registration No.117366W/W100018), Chartered Accountants, were appointed as Statutory Auditors of the Company at the 30th Annual General Meeting held on 05th August, 2017, for a period of 5 years commencing form the conclusion of 30th Annual General Meeting till the conclusion of 35th Annual General Meeting to be held in the year 2022. The firm has consented and confirmed that the appointment is within the limit specified under section 141(3)(g) of the Companies Act, 2013. The statutory auditors have also confirmed that they are not to be appointed as such in terms of the proviso to section 139(1), 141(2) and 141(3) of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014.

In terms of Section 40 of the Companies (Amendment) Act, 2017 notified by the Ministry of Corporate Affairs on 07th May 2018, the requirement for ratification of the appointment of Statutory Auditors by the members at every Annual General Meeting has been done away with. Accordingly, no resolution has been proposed for of the Statutory Auditors, who were appointed in the 30th Annual General Meeting held on 05th August, 2017.

The Audit Report of Deloitte on the Financial Statements of the Company for the Financial Year 2018-19 is a part of Annual Report and the report does not contain any qualification, reservation, adverse remark or disclaimer.

b) Internal Auditor:

The Board of Directors of the Company have appointed M/s. M.Bhaskara Rao & Co., Chartered Accountants, Hyderabad, as Internal Auditors to conduct internal audit of the Company for the financial year ended 31st March, 2019 and their reports are reviewed by the Audit Committee from time to time. The Board of Directors re-appointed M/s. Bhaskara Rao & Co., Chartered Accountants, Hyderabad as Internal Auditors for the financial year ending 31st March, 2020.

c) Cost Auditor:

The Board of Directors of the Company, on the recommendation of the Audit Committee appointed M/s. K. Narasimha Murthy & Co., Cost Accountants, Hyderabad to conduct cost audits relating to Insecticides (Technical Grade and Formulations) of the Company for the year ending 31st March, 2020. The Company has received their written consent that the appointment will be in accordance with the applicable provisions of the Act and rules framed thereunder. Pursuant to the provisions of Section 148 of the Act read with Rules made thereunder, members are requested to consider the of the remuneration payable to M/s. K.Narasimha Murthy & Co., Cost Accountants, Hyderabad, for the financial year 2019-20. As a matter of record, relevant cost audit report for financial year ended 31st March, 2018 were filed with the Central Government, within a stipulated timeline.

d) Secretarial Auditor and Secretarial Audit Report:

Pursuant to Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Mr. K.V. Chalama Reddy, Practicing Company Secretary, to carry out secretarial audit in terms of the Act for the financial year 2018-19. The secretarial audit report issued by Mr.K.V.Chalama Reddy, Practicing Company Secretary in form MR-3 is enclosed to this report as Annexure - III. The Secretarial Auditors have not expressed any qualification or reservation in their report and the report is self-explanatory.

Directors:

As on the date of this report, Companys Board comprises of 10 (Ten) Directors, out of which, 2 (two) are Non-Executive, Non-Independent Directors including 1 (One) Woman Director. Further, out of the remaining Directors, 5 (five) are Non-Executive Independent Directors, 2 (two) are Investors Nominee Directors and 1 (one) is an Executive Director.

a) Director(s) to retire by rotation:

In accordance with the provisions of Section 152 of the Act and Articles of Association of the Company, Mr.N.Vijayaraghavan, Director (DIN: 02491073) of the Company, retires by rotation at the forthcoming Annual General Meeting of the Company and being eligible, offers himself for re-appointment.

b) Key Managerial Personnel:

In terms of Section 203 of the Companies Act, 2013 the following are the Key Managerial Personnel of the Company:

i) Mr.V.Vijay Shankar, Managing Director (upto 31st May, 2019)

ii) Mr. M. Pavan Kumar Managing Director & CEO (with effect from 01st June, 2019)

iii) Mr.R.K.S Prasad, Chief Financial Officer

iv) Mr.Satish Kumar Subudhi, Company Secretary & Head-Legal.

During the financial year 2018-19, no KMP has been appointed or has retired/resigned. Mr.V.Vijay Shankar, vide its letter dated 28th May, 2019 to the Board, has stepped down from the position of Managing Director as well as Director of the Company with effect from 01st June, 2019. The Board in its meeting held on 29th May, 2019 has accepted the said letter and took note of the sincere appreciation of Mr.V.Vijay Shankar for the notable contribution and valuable guidance to the Company during his association of the Company for more than eight years. Further, the Board in its meeting held on 29th May, 2019, on recommendation of Nomination and Remuneration Committee, has appointed Mr. M. Pavan Kumar (DIN:01514557) as an Additional Director and Managing Director & CEO of the Company, for a period of three years, with effect from 01st June, 2019.

c) Independent Directors:

In terms of Sections 149, 152, Schedule IV and all other applicable provisions of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof for the time being in force), the Independent Director can hold office for a term of up to five (5) consecutive years on the Board of Directors of the Company and shall not be liable to retire by rotation.

All the Independent Directors including Additional Independent Director have given declaration that they meet the criteria of independence laid down under Section 149(6) of the Act read with Regulation 16(b) of Listing Regulations.

During the year under review, Mr.D.Ranga Raju has tendered his resignation from the Directorship of the Company effective from 13th June, 2018. Consequent upon the resignation of Mr.D.Ranga Raju, from the directorship, he ceased to be the member as well as Chairman of the Audit Committee. The Board of Directors places on record his valuable and constructive contribution to the Company during his long association with the Company. Mr.Raghavender Mateti and Mr.K.Raghuraman have been appointed as Independent Directors of the Company by the shareholders at the 27th AGM of the Company held on 09th August, 2014, for a period of 5 (five) years effective from 09th August, 2014 and to hold office up to 08th August, 2019. Mr.Raghavender Mateti and Mr.K.Raghuraman, are eligible for re-appointment for the second term as Independent Directors. However, Mr.K.Raghuraman, vide its mail dated 01st July, 2019 has communicated his desire for not seeking re-appointment for the second term due to personal reasons. The Board in its meeting held on 03rd July, 2019 has duly considered and noted his retirement with effect from 09th August, 2019 and accordingly, not recommended his re-appointment for shareholders approval. The Board of Directors places on record his valuable and constructive contribution to the Company during his long association with the Company. Based on the performance evaluation and recommendation of the Nomination and Remuneration Committee ("NRC") the Board has approved the re-appointment of Mr.Raghavender Mateti as an Independent Director for the second term of five years and recommended to the shareholders for necessary approval in the ensuing Annual General Meeting. The Board, based on the recommendation of the NRC, has also appointed Mr.Dorairaj Kuppurangam, as an Additional Independent Directors on the Board of the Company with effect from 29th May, 2019. The Board recommends the appointment of the Mr.Dorairaj Kuppurangam, as an Independent Director of the Company effective from 29th May, 2019, to the members at the ensuing Annual General Meeting.

The brief resume/details regarding the Directors proposed to be appointed/re-appointed as above are furnished in the annexures to the AGM Notice. There have been no changes in the Directors and Key Managerial Personnel of the Company other than the above.

d) Investor Nominee Directors:

During the year under review, your Company has entered into a Share Subscription and Shareholders Agreement (‘SSSA) entered with Investors and Promoters, and as per the terms of SSSA, the Investors would be entitled certain rights including right to appoint two nominee directors on the Board of Directors of the Company. The Investors, in the Board Meeting held on 29th May, 2019, have appointed Mr.Atul Churiwal and Mr.Rajesh Kumar Agarwal, as Investors Nominee Directors, not liable to be retire by rotation, with effect from 29th May, 2019. The Investors shall have a right to appoint two Investor Nominee Director as long as they hold 10% of the equity shares of the Company. In case the shareholding falls below 10%, the Investors shall have a right to appoint only one Investor Nominee Director on the Board of the Company. However, if the shareholding of the Investors falls below 5% of the equity shares of the Company, the right to appoint Investor Nominee Director shall fall away.

e) Evaluation of performance of the Board of Directors:

Pursuant to the provisions of the Act and Listing Regulations, the Board has carried out the evaluation of its own performance and Committees of the Board, the performances of Directors individually, the Executive Director, the Chairman of the Board etc. Various parameters, including the guidance note issued by the Institute of Company Secretaries of India, were considered for evaluation and after receiving the inputs from the Directors, the performance evaluation exercise was carried out. The parameters include attendance of Directors at Board and Committee meetings, integrity, credibility, expertise and trustworthiness of Directors, Boards monitoring of various compliances, laying down and effective implementation of various policies, level of engagement and contribution of the Directors, safeguarding the interest of all stakeholders etc. The performance evaluation of the Board as a whole was carried out by the Independent Directors. The performance evaluation of each Independent Director was carried out by the Board. The Directors expressed their satisfaction with the evaluation process.

In a separate meeting, the Independent Directors evaluated the performance of the Non-Independent Directors and performance of the Board as a whole. They also evaluated the performance of the Chairperson taking into account the views of Executive Director.

f) Meeting of Independent Directors:

The details on the separate meeting of the Independent Directors are reported in the Report on Corporate Governance.

g) Familiarization Programme for the Independent Directors:

In compliance with the requirement of Listing Regulations, the Company has put in place necessary familiarization programme for the Independent Directors to familiarize them with their role, rights and responsibility as Directors, the working of the Company, nature of the industry in which the Company operates, business model etc. The same is available on the website of the Company i.e., www.naclind.com.

Through the Familiarization programme, the Company apprises the Independent Directors about the business model, corporate strategy, business plans and operations of the Company. These Directors are also informed about the financial performance, annual budgets, internal control system, statutory compliances etc. They are also familiarized with Companys vision, core values, ethics and corporate governance practices.

At the time of appointment of Independent Director, necessary information including various documents such as the informations about Company, Memorandum and Articles of Association, Annual Reports for previous 2 years, Investor Presentations and recent Media Releases, Brochures, Organization policies are provided. Further, a formal letter of appointment has also given, explaining fiduciary duties, roles, responsibility and the accompanying liabilities that come with the appointment as an independent director of the Company.

Board Meeting:

During the year under review, 4 (four) Board Meetings were held. The details of the same are given in Corporate Governance Report which forms part of this Annual Report.

The provisions of Act and the Listing Regulations were adhered to, while considering the time gap between two meetings.

Audit Committee:

The Audit Committee comprising of Mr.Sudhakar Kudva as the Chairman and Mr.K.Raghuraman, Mr.Raghavender Mateti, Mr.N.Vijayaraghavan as the members. During the year under review, Mr.D.Ranga Raju, consequent to the resignation from the position of the Directorship of the Company, ceased to be the Chairman of the Audit Committee. Further, the Board has re-constituted the Audit Committee by appointing Mr.Sudhakar Kudva as Chairman and inducted Mr.N.Vijayaraghavan as Member of the Committee.

The details about Audit Committee including the brief description of its terms of reference and number of meetings held during the year are mentioned in the Corporate Governance Report. There have been no instances during the year when recommendations of the Audit Committee were not accepted by the Board.

Criteria for selection of candidates for appointment as Directors, Key Managerial Personnel and Senior Management Personnel.

Your Company has laid down well-defined criteria for the selection of candidates for appointment as Directors, Key Managerial Personnel and Senior Management Personnel.

Criteria for making payment to Non-Executive Directors of the Company.

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

Directors Responsibility Statement:

Pursuant to Section 134(3)(c) and 134(5) of the Act, the Board of Directors, to the best of their knowledge and ability, confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures;

b) it has selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2019 and of the Profit/Loss of the Company for the year ended on that date;

c) it has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) it has prepared the Annual Accounts of the Company on a ‘going concern basis.

e) it has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) it has devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Corporate Social Responsibility:

Corporate Social Responsibility (CSR) has been an integral part of your Companys culture and it has been associated, directly or indirectly, for contributing towards societys development. For the year under review, Company did a number of CSR activities in and around Srikakulam and Ethakota where the Companys factories are situated. Such activities includes ongoing drinking water supplies to villages and maintenance of the Company installed RO plants in the neighboring villages, contribution to vidhya volunteer Scheme, street lightning and bore-well maintenance, development of school facilities, community centers and bus shelters in the surrounding villages of the factories, providing medical services and vocational courses and conducting various medical camps, etc. These projects are largely covered under Schedule VII of the Act.

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

Change in the nature of business:

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

Significant and Material Orders passed by the Regulators or Courts:

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

Particulars of Loans, Guarantees or Investments under Section 186:

The details of Loans, Guarantees and Investments made during the financial year ended 31st March, 2019 in compliance with the provisions of Section 186 of the Act read with the Companies (Meetings of the Board and its Powers) Rules, 2014 have been disclosed in the Financial Statements forming part of this Annual Report.

Extract of Annual Return:

The Extracts of the Annual Return in form MGT-9 as per the provisions of Section 92 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is enclosed as Annexure-V to this Directors Report. The extract of the Annual Return of the Company can also be accessed on the website of the Company at www.naclind.com.

Risk Management Policy:

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

Related Party Transactions:

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

As, there are no materially significant related party transactions made by the Company with Promoters, Directors or Key Managerial Personnels etc., which may have potential conflict with the interest of the Company at large, the disclosure in Form AOC-2 is not applicable. Necessary disclosures and the statement of all related party transactions is presented before the Audit Committee and the Board of Directors on a quarterly basis specifying the nature, value and terms and conditions of the transactions. All Related Party Transactions are approved by the Audit Committee and omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. The transactions entered into pursuant to the omnibus approval so granted are reviewed on a quarterly basis by the Audit Committee. Approval of the shareholders is being sought for 2 (two) material RPTs at the ensuing Annual General Meeting.

The Related Party Transactions Policy as approved by the Board is uploaded on the Companys website www.naclind.com. The details of the transactions with Related Parties are provided in the accompanying financial statements.

Vigil Mechanism/Whistle Blower Policy:

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

Nomination and Remuneration Policy:

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

Corporate Governance:

In compliance with Regulation 34 read with Para-C of Schedule V of Listing Regulations, a separate report on Corporate Governance has been included in this Annual Report together with the Auditors Certificate confirming compliance of the Corporate Governance as stipulated under the said Regulations. All the Board members and the Senior Management Personnel have affirmed compliance with the Companies "Code of Conduct for Board and Senior Management Personnel" for the financial year 2018-19.

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

Management Discussion and Analysis Report:

Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 16(b) of the Listing Regulations, is presented in a separate section forming part of this Annual Report.

Policy on Sexual Harassment:

The Company has zero tolerance for sexual harassment at workplace and has adopted a "Policy on Sexual Harassment of Associates" in accordance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The Policy aims to provide protection to employees at the workplace, and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, and framed with the objective of providing a safe working environment, where employees feel secure. There were no cases reported during the financial year 2018-19 under the said Policy.

Brand Protections:

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

Fixed Deposit:

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

Industrial Relations:

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

Insurance:

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

Particulars of Employees and Remuneration:

The information required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure–VI to this report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Disclosures required under the Section 134(3)(m) of the Act relating to conservation of energy, technology absorption and foreign exchange outgo and earning, in terms of Rule 8 of the Companies (Accounts) Rules, 2014, are set out in a separate statement attached hereto as Annexure-VII and forms part of this report.

Acknowledgement:

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

For and on behalf of the Board

K.Lakshmi Raju
Place: Hyderabad Chairperson
Date: 03rd July, 2019 (DIN:00545776)