nagarjuna fert Auditors report

To the Members of Nagarjuna Fertilizers and Chemicals Limited Report on the Audit of the Standalone Financial Statements

I. Qualified Opinion

We have audited the accompanying Ind AS Standalone Financial Statements of M/s Nagarjuna Fertilizers and Chemicals Limited (“the Company”), which comprise the Balance Sheet as at 31st March, 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matters described in the Basis for Qualified opinion section of our report, the aforesaid standalone financial statements give the information required by the Companies Act, 2013, as amended (“the Act”) in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the State of Affairs of “the Company” as at March 31st, 2023, its Loss including other comprehensive income, Changes in Equity and its Cash flows for the year then ended.

II. Basis for Qualified Opinion

We refer to Note No:14 & 26 to (“standalone financial statements”) wherein “the Company” stated that the lenders (Banks) of “the Company” have not implemented the Corrective Action Plan (CAP) approved by them in the Joint Lenders Forum (JLF) meeting held in 2015 and though “the Company” represented the matter to the lenders for necessary corrective action, the same has not been rectified till date. As a result, “the Company” filed cases against the lenders in the Honble 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 as 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 5 years. 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. On 3rd April 2023, “the Company” received a letter dated 31st March 2023, copying to all the Lenders, from Assets Care & Reconstruction Enterprise Ltd (ACRE) communicating the Assignment of Debt by all Consortium Lenders to ACRE (in its capacity as the trustee of the ACRE-112-TRUST) under section 5 of the SARFAESI Act. But “the Company” has not given effect to this and as at the year end, amount of dues are continued to be shown with the existing lenders.

In the absence of independent audit evidence from the lenders on the date(s) from which the loan accounts have been classified as NPAs, outstanding amount of borrowings at the end of every year, interest accrued thereon, period and amount of default in repayment of loans and payment of interest thereon disclosed in the financial statements and continuing the outstanding borrowings with the existing lenders, we are unable to express an opinion whether any adjustments are required to be made to the outstanding balance of borrowings as at the year end, interest on the borrowings charged to the statement of profit and loss for the year and the period and amount of default in repayment of principal and payment of interest disclosed in the financial statements. We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of “the Company” in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the standalone financial statements.

1) Material uncertainty related to Going Concern

We Refer to Note No.30 to the standalone financial statements, on the disclosure of Material Uncertainty on “the Companys” ability to continue as a Going Concern and appropriateness of use of Going Concern basis of accounting in preparation of financial statements.

“the Company” has been incurring losses for the past few years and a net loss amounted to Rs. 1,13,714.07 Lakhs (before taxes) has been incurred for the year ended March 31, 2023, and the current liabilities exceeded the current assets by Rs. 333,322.00 Lakhs as on March 31, 2023. “the Company”, during the year under review, continued to default in discharging its obligations for repayment of Loans and settlement of other financial and non-financial liabilities including statutory dues on the due dates. The lenders have been treating the loans to “the Company” as Non-Performing Assets since last five years and three of them have filed petitions under the Insolvency and Bankruptcy Code,2016 (IBC) before the Honble NCLT for initiating Corporate Insolvency Resolution Process (CIRP). Further, one of the operational creditors obtained an order under IBC from the Honble NCLT for commencing CIRP and the same is under stay of operation by the Honble NCLAT as on date.

The above events and conditions indicate material uncertainty which cast a significant doubt on “the Companys” ability to continue as a going concern, and therefore may be unable to realize its assets and discharge its liabilities including potential liabilities in the normal course of its business. The ability of “the Company” to continue as going concern is solely dependent on the successful restructuring/resolution plans and raising of the required additional funds.

However, the management believes that the assumption on the preparation of the financial statements of “the Company” for the financial year 2022-23 is still appropriate as “the Company” is actively working to resolve the disputes amicably with lenders and completion of resolution plan and hopeful of a positive outcome and approval of resolution plan and “the Companys” management assessed various events/conditions which have an impact on “the Companys” ability to continue as a going concern.

Our opinion is not modified in respect of this matter.

2) Emphasis of Matters:

Attention is invited to the following notes in the standalone financial statements:

a. Note No 32.3(ii): Honble NCLT admitted a petition filed by an operational creditor to initiate the CIRP against “the Company” under the provisions of the I&BC, 2016, which has since been stayed by the Honble NCLAT.

b. Note No 20.1: “the Company” has recognized Income from Urea Operations, Income towards freight subsidy, Reimbursement claims towards additional fixed cost, Input escalation/de-escalation during the year in terms of new Urea policy (NUP)-2015 and Gas Pooling Policy for Fertilizer (Urea) Sector. Adjustments, if any, required will be considered on notification of final prices.

c. Note No 32.4: Amlika Mercantile Private Limited, one of the Promoters of “the Company” appealed against Honble

Our opinion is not modified in respect of the above matters.

NCLT Order in Honble NCLAT on behalf of “the Company” and on the request of “the Company”, arranged a third-Party buyer for the debt of Key trade and deposited an amount of Rs. 20 Crores with the Honble NCLAT. With the support of this, Honble NCLAT vide its orders dated 14th September, 2021, has stayed the orders of the Honble NCLT and the stay is continuing as on date. “the Company” would be liable to the Third Party instead of Key trade in case the Key trade assigns the debt and security. “the Company” is also liable for servicing the interest during the period of deposit with Honble NCLT till the date of debt assignment. “the Company” is yet to receive the claim on account of interest.

d. Note No 32.2: Claim from a related party asserting its right for Royalty for the period from 29.01.1998 onwards, which is under review by “the Company” for appropriate action and consequent recognition in the Books.

e. Note No 32.1: The claims as per the International Arbitration Awards passed against “the Company” in September 2016 and October 2017, aggregating to USD 15,275,688 GBP

742,944 and EUR 455,000 and INR 221.39 Lakhs (equivalent Aggregate amount of Rs. 13945.14 Lakhs) and interest thereon as applicable apart from costs, are continued to be shown as a contingent liability since the matter being sub-judice. f. Note No 33.3: The lenders are yet to approve the managerial remuneration approved by the Shareholders for the Managing Director.

3) Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the standalone financial statements of the current period. These matters were addressed in the context of the audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the Key Audit Matters to be communicated in our report.

S. No Key Audit Matter	How the matter was addressed in our audit
i). Recognition, measurement, presentation and disclosures of revenue from opera- tions.	Principal Audit procedures performed:
“the Companys” revenue from operations comprises of sale value of Urea and the Sub- sidy received from Govt of India.	Verified various applicable Govt notifications under which the subsidy was notified.
We identified this as a Key Audit Matter since the recognition of subsidy revenue and the assessment of recoverability of the related subsidy receivables is subject to significant judgements of the management	Verified the sales made and related claims for subsidy with the records/ certificates submitted to the Government.
Since the sale and the eligible subsidy are interlinked and further the claim for subsidy depends on various government notifications issued from time to time, it is important to ver- ify the correctness of the revenue from opera- tions recognised in the books of account. Refer Note No.20 in the standalone financial statements.	Performed analytical procedures for reasonableness of revenue and subsidy recognised vis a vis the sales made.
	We evaluated the managements assessment regarding reasonable certainty of complying with the relevant conditions as specified in the notifications/policies.
	We evaluated adequacy of disclosures in the Standalone Ind AS Financial Statements.

 

S. No Key Audit Matter	How the matter was addressed in our audit
ii). Provision for Expected Credit Loss in ac- counts receivables.	Our audit procedure in respect of this area included:
The credit loss provision in respect of account receivables represent managements best estimate of the credit losses incurred on the receivables at the balance sheet date.	Understand and assess the managements estimate and related policies used in the credit loss analysis
We have identified provisioning for credit loss as a key audit matter as the calculation of credit loss provision is a complex area and requires management to make significant as- sumptions on customer payment behaviour and estimating the level and timing of expect- ed future cash flows.	Performed test of key controls to analyse operating effectiveness relating to calculation of impairment provisions.
(Refer Note No.7. in the standalone Financial statements.)	For Expected Credit Loss (ECL) of trade receivables assessed on individual level by the management, examined on a test check basis, the objective evidence relating to the impairment of trade receivables and the key assumptions used in the estimate of the cash shortfalls and reviewed whether amounts have been recovered after the end of reporting period.
	Reviewed the managements ageing analysis based on days past due by examining the original documents (such as invoices and bank deposit advices).
	Verified the calculation of ECL of each type of trade receivables.

4) Information other than the Standalone Financial Statements and Auditors Report thereon:

“the Companys” Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexure to Boards Report, Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the standalone financial statements and our auditors report hereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

5)Managements Responsibility for the Standalone Financial Statements

The Companys Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes 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 frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. In preparing the standalone financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing “the Companys” financial reporting process.

6) Auditors Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial statements that, individually or, in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

7) Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditors Report) Order, 2020 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

1. As required by Section 143(3) of the Act, based on our audit, we report that:

a) We have sought and except for the matters described in the Basis for Qualified Opinion Section, obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the accompanying financial statements;

b) Except for the possible effects of the matters described in the Basis for Qualified Opinion Section, in our opinion, proper books of account as required by law have been kept by “the Company” so far as it appears from our examination of those books;

c) The standalone financial statements dealt with by this report are in agreement with the relevant books of account of “the Company”

d) Except for the possible effects of the matters described in the Basis for Qualified Opinion Section, in our opinion, the standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act and the rules made thereunder;

e) The matters described in the Basis for Qualified Opinion section, material uncertainty related to going concern section and emphasis of matter section, in our opinion, may have an adverse effect on the functioning of “the Company”:

f) On the basis of the written representations received from the directors as on March 31st, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164 (2) of the Act;

g) The qualifications relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion section.

h) With respect to the adequacy of the internal financial controls with reference to the standalone financial statements of “the Company” and the operating effectiveness of such controls, refer to our separate report in “Annexure B”.

i) With respect to the statement to be included in the Auditors Report pursuant to section 197(16) of the Act, as amended, we report that:

Based on the examination of documents and records of “the Company” and as per the information and explanations furnished to us “the Company” has paid remuneration to its Managing Director during the year without obtaining the prior approval in terms of third proviso to sub-section (1) of section 197 of the Act from the lenders to whom it has defaulted in repayment of loans and payment of interest thereon.

2) With respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of The Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us:

a) “the Company”, as detailed in Note No. 32 in the standalone financial statements, has disclosed the impact of pending litigations on its financial position in its standalone financial statements as at 31st March, 2023.

b) “the Company” does not have any long-term contracts including derivative contracts for which there were any material foreseeable losses as at 31st March, 2023.

c) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by “the Company” as at 31st March,2023.

d) (i) The Management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kinds of funds) by “the Company” to or in any other person or entity, including foreign entity (“intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(ii) The Management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by “the Company” from any person or entity, including foreign entity (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that “the Company” shall whether 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 provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(iii) Based on such audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has to come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) above, contain any material misstatement.

e) “the Company” has not declared or paid any Dividend during the year.

8) Other Matters:

The standalone Financial Statements of “the Company” for the previous financial year i.e., for the year ended 31.03.2022 have been audited by the predecessor auditors viz., JVSL & Associates, Chartered Accountants who have expressed a qualified opinion vide their audit report dated 14th June 2022.

Annexure A to the Independent Auditors Report

(Referred to “Report on Other Legal and Regulatory Requirements” section of our report to the Members of NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED of even date)

Based on the audit procedure performed for the purpose of reporting a true and fair view on the financial statements of Nagarjuna Fertilizers and Chemicals Limited (“the Company”) and taking into consideration the information and explanations given to us and the books of account and other records examined by us in a normal course of audit, and to the best of our knowledge and belief, we report that:

I. In respect of the Companys Property, plant and equipment:

(a) (i) “the Company” has maintained proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment (“PPE”), excepting for the immovable property reported at (c) below.

(ii) “the Company” has not held / dealt in intangible assets as at 31st March 2023.

(b) “the Companys” Property, Plant and Equipment, excepting the immovable property reported at (c) below, have been physically verified by the management at reasonable intervals as per a regular programme of verification which, in our opinion, is reasonable having regard to the size of “the Company” and the nature of its assets. “the Company” has reported that no material discrepancies were noticed on such verification made during the year.

(c) The Title deeds of the following immovable properties disclosed in the financial statements are not held in the name of “the Company”: Based on a legal opinion, as “the Company” was holding agricultural lands in excess of the limit prescribed under the AP

Land Reforms (Ceiling on agricultural holdings) Act 1973, carried value of the above lands has been fully impaired in F.Y 2020-21. [Refer to Notes No: 3 & 45(i) in the standalone financial statements]

Description of property	Gross carrying value (Rs. In lakhs)	Title Deeds Held in the name of	Whether promoter, director or their relative or employee	Period held indi- cate range, where appropriate	Reason for not being held in name of company
340.11 Acres sit- uated in Nellore District, A.P	4185.39	We were informed that these lands are held in the name of original owners who sold the lands to Nagarjuna Aqua Ex- ports Limited. We were further informed that the details of the persons in whose name the lands are held are not available with the Company.	No	From the date of vesting the lands on the company under the Com- posite Scheme of Arrangement and Amalgamation in F.Y.2011-12	We were in- formed that the original title hold- er has a defective Tiltle
(ii) Properties which are in dispute are as under:
5 Acres of land in Wargal village, Telangana State	100.00	On own name, i.e. Nagarjuna Fertilizers and Chemicals Limited.	N.A	From the date of vesting the lands on the company under the Com- posite Scheme of Arrangement and Amalgamation in F.Y.2011-12	We were in- formed that the Title of original seller is under dispute.

(d) “the Company” has not revalued its Property, Plant and Equipment during the year.

(e) No proceedings have been initiated during the year or are pending against “the Company” for holding any benami property under the Benami Transactions (Prohibition) Act, 1988, as amended, and rules made thereunder.

II. In respect of “the Companys” Inventory:

(a) “the Companys” inventory has been physically verified by the management at reasonable intervals and in our opinion, the frequency, coverage and procedure of such verification by the management is appropriate. No discrepancies of 10% or more in the aggregate for each class of inventory were noticed between the physical stocks and the book stocks on such verification made during the year.

(b) In respect of the working capital limits sanctioned to “the Company” in earlier years, which are continued in the current year, in excess of Rupees five Crores, in aggregate, by the Banks or Financial institutions, on the basis of security of current assets, we were informed by the management that no quarterly returns or statements have been filed by “the Company” with such banks and financial institutions during the year under report

III. As per the information and explanation given to us and in our opinion “the Company” has not made any investments or provided any loans or given any advance, guaranty or security to companies, firms, and Limited Liability partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013

IV. “the Company” has not entered into any transaction covered under section 185 of the Act. “the Company” has complied with the provisions of Sec.186 of the Act in respect of investments made. “the Company” has not given any loan, guarantees or provided security.

V. During the year, “the Company” has not accepted deposits or amounts which are deemed to be deposits. Hence, compliance with the directives issued by the RBI and the provisions of Sec.73 to 76 or any other relevant provisions of the Act and the Rules made thereunder is not applicable.

VI. Maintenance of Cost records has been specified by the Central Government U/s. 148(1) of the Act for “the Company” and the prescribed accounts and records have been made and maintained by “the Company”. However, we have not made a detailed examination of records with a view to determine, whether they are accurate and complete.

VII. According to the information and explanations given to us, in respect of statutory dues:

a) “the Company” has not been regular in depositing undisputed statutory dues including Goods and Services Tax, Provident Fund, Employees State Insurance, Income Tax, and other material statutory dues applicable to it with the appropriate authorities.

b) There were no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Goods and Service Tax, and other material statutory dues in arrears as at March 31, 2023 for a period of more than six months from the date they became payable.

c) Details of dues of Income Tax, Sales Tax, Service Tax, Excise Duty and Value Added Tax which have not been deposited as at March 31, 2023 on account of dispute are given below:

Nature of Statute	Nature of dues	Amount (Rupees in Lakhs)	Period to which the amount relates	Forum where dispute is pending
The Income Tax Act, 1961	Penalty U/s.270A	141.99	A.Y.2017-18	CIT(Appeals), Hyderabad
VAT & CST	Regular Demand under Ma- harashtra VAT Act, 2002	7.92	F.Y 2008-09	Jt. Commissioner Appeals, Maha- rastra
	Regular Demand under Kerala VAT Act	6.93	F.Y 2011-12	Dy Commissioner Appeals, Kottay- am
	Regular Demand Under CST Act	139.39	F.Y 2013-14	AP VAT Appellate Tribunal, Vishakapatnam
	Penalty under AP VAT Act, 2005	20.95	F.Y 2015-16	High Court of Judicature at Hydera- bad for the state of Telangana
	Penalty U/s 112(a)(i)	1500.00	2014-15	Commissioner of Customs, Ah- medabad
	Penalty in relation to Cus- toms Duty on Ship Demur- rage Charges	44.00	FY 2010-11 to FY 2013-14-	CESTAT, Hyderabad
	Penalty for delay in payment of VAT	56.27	FY 2012-13	AP High Court
GST	Interest on excess availment of ITC	55.29	FY 2017-18	DC-Appeals, Pune
	Interest, and penalty excess ITC claimed	14.19	FY 2018-19	DC-Appeals, Pune
	Interest on excess availment of ITC	0.88	FY 2017-18 & FY 2018-19	DC Appeals, Bhubaneswar

VIII. There were no transactions which are not recorded in the Books of account but which have been surrendered or disclosed as income during the year in the Tax assessments under the Income Tax Act, 1961.

IX. (a) “the Company” has defaulted in repayment of loans and other borrowings and in payment of interest thereon to the lenders:

i). Loans and other borrowings from Banks / Financial Institutions: We were informed by the management that as “the Company” has been disputing with its lending Banks on the loan matters including non-funding by the lenders as per the Corrective Action Plan (CAP) funding approved in the Joint Lenders

Forum in 2015, the lenders have stopped issuing demands for interest/ instalments of loans, loan statements, information on the appropriation of partial payments made towards various loan accounts / Banks, NPA status of the loans and status of defaults of the loans, to “the Company”. As a result of not getting the above details from the lenders, “the Company” has been accounting the interest as per the loan documents and is unable to reconcile the interest charged and the loan outstanding amount with that of the Banks. Hence, the management expressed its inability to furnish us the correct details of defaults in repayment of loans and payment of interest thereon and the period of default.

As the management could not furnish the information on defaults and since we did not get independent audit evidence, accordingly we are unable to determine and furnish the details of defaults in repayment of loans and other borrowings and payment of interest thereon to the lenders as required under sub-clause (a) of Clause (ix) of Para 3 of CARO, 2020 (Refer Note Nos 14 and 26 in the standalone financial statements and Basis for Qualified Opinion section of Independent Auditors Report dated 22.06.2023)

ii).Loans and other borrowings from Government(s):

Defaults in repayment of loans and other borrowings from Government(s) are as under:

Nature of borrowing, includ- ing debt securities	Name of lender	Amount not paid on due date (Rs.in lakhs)	Whether principal or interest	No. of days delay
Loans under the scheme “BIPP”	Dept. of Bio-Technology, Ministry of Sci- ence and Technology, Govt. of India	309.77	Principal	1766
		181.19	Interest	1766
Sales tax deferment loan	Commercial taxes Dept., Govt. of A.P	837.16	Principal	13

(b) “the Company” is not declared a willful defaulter by any bank or financial institution or other lender;

(c) “the Company” has not availed any Term loans during the year.

(d) According to the information and explanations given to us and on overall examination of the financial statements of “the Company”, funds raised on short-term basis have, prima facie, not been utilized for long-term purposes.

(e) “the Company” has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates. (f) “the Company” has not raised loans during the year on the pledge of securities held in its subsidiaries or associate companies.

X. (a) “the Company” has not raised any moneys by way of initial public offer or further public offer (including debt instruments) during the year.

(b) According to the information and explanations given to us and on the basis of our examination of the records of “the Company”, “the Company” has not made any preferential allotment or private placement of shares or fully or partly paid convertible debentures during the year.

XI. (a) Based on examination of books and records of “the Company” and according to the information and explanations given to us, no material fraud by “the Company” or on “the Company” has been noticed or reported during the year.

(b) According to the information and explanations given to us, no report under sub-section (12) of section 143 of the Companies Act has been filed in form ADT- 4 as prescribed under rule 13 of the companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and up to the date of this report.

(c) As represented to us by the management, there are no whistle blower complaints received by “the Company” during the year.

XII. “the Company” is not a Nidhi Company as per section 406 of “the Act”.

XIII. In our opinion and according to the information and explanations given to us, “the Company” is in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the Note - 33 to standalone financial statements as required by the applicable accounting standards.

XIV.(a) In our opinion and based on our examination, “the Company” has an adequate internal audit system commensurate with the size and nature of its business.

(b) We have considered the internal audit reports for the year under audit, issued to “the Company” during the year and till date, in determining the nature, timing and extent of our audit procedures.

XV. According to the information and explanations given to us, in our opinion during the year “the Company” has not entered into any non-cash transactions with its Directors or persons connected to its directors and hence provisions of section 192 of the Companies Act 2013 are not applicable to “the Company”.

XVI.(a) “the Company” is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. (b)“the Company” is not a Core Investment Company as defined in the regulation made by the Reserve Bank of India. (c) “the Company” is not part of any group (as per the provisions of the Core Investment Companies (Reserve Bank) Directions, 2016 as amended).

XVII. “the Company” has incurred Cash losses in the current financial year and in the immediately preceding financial year amounting to Rs. 37,940.51 Lakhs and Rs. 61,855.28 Lakhs respectively.

The effects, if any, arising on account of accounting for interest on bank loan as referred to in the “Basis for Qualified Opinion” is not considered as the amount is not quantified/ascertained.

XVIII. There is resignation of the Statutory auditors of “the Company” during the year and we did not receive any issues/objections/ concerns from the outgoing auditors.

XIX. On basis of financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, material uncertainty exist as on the date of the audit report that whether “the Company” is capable of meeting its liabilities existing as on the date of balance sheet as and when they fall due within a period of one year from the balance sheet date, which depend on the outcome of the management plans on the discussions with its lenders to obtain approval for and implementation of appropriate debt resolution plan. XX. (a). “the company” has been incurring losses for the past few years, it does not fall under the purview of sec 135 of the Act. (b). There are no amounts remaining unspent U/s.135(5) of the Act, pursuant to any ongoing project, which is required to be transferred to a special account in compliance with the provisions of Section 135(6) of the Act.

For P Murali& Co.,

Chartered Accountants

(Firm Regn No. 007257S)

A Krishna Rao

Partner

Membership No.020085

UDIN: 23020085BGQXST5886

Place: Hyderabad

Date: 22.06.2023

Annexure B to the Independent Auditors Report

(Referred to in paragraph 1(f) under ‘Report on Other Legal and Regulatory Requirements section of our report to the Members of NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED of even date)

Report on the Internal Financial Controls over Financial Reporting under Clause(i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED (“the Company”) as of March 31st, 2023 in conjunction with our audit of the standalone financial statements of “the Company” for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to respective companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act,2013.

Auditors Responsibility

Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting of the Company.

Meaning of Internal Financial Controls over financial statements

A companys internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportin g and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over financial statements

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

In our opinion except for the possible effects of the matter described in the “Basis For Qualified Opinion”, “the Company” has, in all material respects, reasonable internal financial controls system over financial reporting but not adequate and such internal financial controls over financial reporting were operating effectively as at March 31st, 2023, based on the internal control over financial reporting criteria established by “the Company” considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute Of Chartered Accountants of India.

For P. Murali& Co.,

Chartered Accountants

(Firm Regn No. 007257S)

A Krishna Rao

Partner

UDIN: 23020085BGQXST5886

Place: Hyderabad

Date: 22.06.2023