Nagarjuna Oil Refinery Ltd Directors Report

Your Directors have pleasure in presenting before you the 8th Annual Report of the Company for the year ended March 31, 2018.

The Financial Results of the company for the year ended March 31, 2018 are as under:

A. BUSINESS AND FINANCIAL HIGHLIGHTS

Standalone Financial Results:

Rs. In Lakhs

	2017 – 2018	2016 – 2017
Particulars	Current Year	Previous Year
Net sales/income from Operations	-	-
Other Income	0.05	0.36
Total Expenditure
a. Changes in inventories of finished goods, stock-in-trade and work in progress	-	-
b. Cost of materials consumed	-	-
c. Employee benefits expense	173.70	156.49
d. Purchase of Stock-in-Trade	-	-
e. Power and fuel	-	-
f. Other expenses	110.33	195.65
Total	284.03	352.14
Finance cost	12.02	12.09
Depreciation and amortization	2.06	2.10
Profit/ (Loss) before exceptional items, extra-ordinary items and tax	(298.06)	(365.97)
Exceptional Items	14000.00	23622.00
Profit/(Loss) before tax	(14298.06)	(23987.97)
Provision for tax	-	-
Deferred tax	-	-
Profit/(Loss) after tax	(14298.06)	(23987.97)
Other Comprehensive Income (net of tax)	0.86	(0.90)
Total Comprehensive Income	(14297.20)	(23988.87)
Dividend – equity shares	-	-
Tax on proposed dividend	-	-
Balance c/d to Balance Sheet	(14297.20)	(23988.87)
Paid Up equity share capital (Face value of Re.1/- per share)	4281.82	4281.82
Reserves excluding revaluation reserve	(6106.61)	8190.59
Earning per share (annualized) – in Rs.
Basic and Diluted	(3.34)	(5.60)

Financial Summary

The Loss after tax for the year was Rs.14,297.20 Lakhs against loss after tax of Rs.23,988.87 Lakhs for the previous year.

The main contributor to the loss was on account of exceptional item representing a provision of Rs.14,000 lakhs towards diminution in the value of investment in Nagarjuna Oil Corporation Limited (NOCL) in addition to Rs.40,000 Lakhs and Rs.23,622 Lakhs provided in the year 2014-15 and 2016-17 respectively. Considering the Corporate Insolvency Resolution Process (CIRP) initiated against NOCL, under the Insolvency and Bankruptcy Code, 2016, the management as a prudent measure, made an additional provision of Rs.14,000 Lakhs during the Current Financial Year ended March 31, 2018.

Status of the Oil Refinery Project

Your company holds 46.78% of equity share capital of Nagarjuna Oil Corporation Limited (NOCL) which is involved in setting-up a 6 MMTPA refinery project at Cuddalore, Tamil Nadu.

National Company Law Tribunal (NCLT), Chennai Bench, has admitted the applications of the corporate creditors and initiated the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. NCLT has appointed an Insolvency Resolution Professional (RP) for NOCL on July 26, 2017. The RP of NOCL has received Resolution Plan from Resolution Applicants and discussions with Committee of Creditors (CoC) are in process.

Consolidated Financial Statements

The Company in terms of Section 129(3) of the Companies Act, 2013, is required to prepare Consolidated Financial Statements incorporating the Financial Statements of its Associate Company, Nagarjuna Oil Corporation Limited (NOCL) in addition to Standalone Financial Statements for the year ended March 31, 2018.

The Company had been perusing with NOCL for the Audited Financial Statements for the year ended March 31, 2018. NOCL has informed the Company that in view of the initiation of Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Code, 2016, by National Company Law Tribunal (NCLT), Chennai Bench, NOCL is not in a position to draw up the Financial Statements for the period 2017-18 and accordingly expressed its inability to furnish the Financial Statements for the year ended March 31, 2018.

In view of the Financial Statements of NOCL not being available, the Company could not proceed with the preparation of Consolidation Financial Statements for the F.Y 2017-18, as mandated by Companies Act, 2013.

Accordingly, the Company, in order to meet the statutory requirements under Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, has convened the 8th Annual General Meeting of the Members and is presenting the Standalone Financial Statements without incorporating the Consolidated Financial Statements for the year ended March 31, 2018, for the approval of the Members.

Share Capital

The paid-up equity capital of the company as on March 31, 2018 is Rs.42,81,81,821/- consisting of 42,81,81,821 equity shares of Re.1/- each.

Subsidiaries, Joint Ventures or Associate Companies:

There has been no change in relation to any subsidiary, joint venture or associate company during the year.

Accounts of Associates

Please refer Note on Consolidated Financial Statements above. The Details of Investment of the company in Nagarjuna Oil Corporation Limited (NOCL) an Associate Company is enclosed as Annexure-I.

B. DIRECTORS, BOARD COMMITTEES, KEY MANAGERIAL PERSONNEL AND REMUNERATION

Directors Retiring by Rotation

In accordance with Section 152 of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Chandra Pal Singh Yadav who is liable to retire by rotation and being eligible, offers himself for re-appointment as Director of the Company, subject to retirement by rotation.

Resignation of Director

During the year under review Mr. S R Ramakrishnan, resigned from the office of Director of the company with effect from November 15, 2017.

Further Mr. K Rahul Raju, resigned from the office of Director with effect from April 20, 2018

The Board placed on record its deep appreciation for the services rendered by them during their tenure as Directors of the Company.

Declaration by Independent Directors

The Independent Directors have submitted their disclosure to the Board that they fulfill all the requirements as to qualify as an Independent Director under Section 149(6) of the Companies Act, 2013, as well as SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Key Managerial Personnel

There are no changes in relation to Key Managerial Personnel of the Company for the year ended March 31, 2018.

Ms. Ankita Mathur, Company Secretary and Key Managerial Personnel resigned from the position, with effect from May 4, 2018.

Meetings of the Board

The Board of Directors of your company, during the period under review met five times on May 26, 2017, August 09, 2017, November 08, 2017, December 26, 2017 and February 09, 2018.

Remuneration and other particulars of the Directors/ Key Managerial Personnel / Employees

The information relating to remuneration and other particulars of the Directors/ Key Managerial Personnel/Employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 appears as Annexure – II.

Personnel

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules appears as

Annexure – III.

Committees Audit Committee:

In compliance with the provisions of Section 177 of the Companies Act, 2013 and Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the company had constituted an Audit Committee consisting of qualified and experienced members from various fields. The Committee consists of two Independent Directors and one non-executive Director. The Chairman of the Committee is Dr. N C B Nath, an Independent Director. The Committee meets periodically to review the internal audit report, quarterly Financial Results and Annual Financial Statements and recommends its decisions to the Board apart from taking action independently whenever required. The Statutory Auditors and Company Secretary attend the Audit Committee Meetings.

The Audit Committee comprises of
Dr. N C B Nath	: Chairman - Independent Director
Ms. Lalitha Raghuram	: Member - Independent Director
Mr. K S Raju	: Member

Nomination and Remuneration Committee:

The Nomination and Remuneration Committee was constituted in compliance with the provisions of the Companies Act, and Regulation 19 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company has adopted a Nomination and Remuneration Policy for determining, inter-alia, qualifications, positive attributes and independence of a Director, matters relating to the remuneration, appointment, removal and evaluation of performance of the Directors, Key Managerial Personnel, Senior Management and other employees.

Stakeholders Relationship Committee:

The Stakeholders Relationship Committee was constituted in compliance with the provisions of the Companies Act, 2013 and Regulation 20 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

C. DISCLOSURES

Company Policy Matters

Your companys endeavor has always been to maintain transparency and accountability to its stakeholders. In this direction, various policies mentioned in the Corporate Governance Report have been implemented to enable the stakeholders to appreciate the various interventions the company has taken.

The implementation of these policies are reviewed periodically by the Board of Directors and updated regularly.

Risk Management Policy

The Board has put in place the Risk Management Policy for the company to address various risks impacting the company.

The company has setup an Enterprise Risk Management System to manage and mitigate risks.

Policy on Board Evaluation

The Company has a Policy on Board Evaluation in compliance of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The purpose of the policy is to assess the effectiveness of the Board as a whole, Committees of the Board and Individual Directors (Independent and Non-Independent) on regular basis and to take necessary steps for improving the effectiveness of the Board. The Nomination and Remuneration Committee has devised the methodology, identified sample tools for evaluation and also laid down the parameters for evaluation of Non-Executive Directors, Independent Directors, Chairman, Board of Directors and Committees of the Board.

The Nomination and Remuneration Committee, have based on the responses received from Directors, evaluated the Directors, conveyed the opinion of the Committee to the Directors, Committees and the Board.

In view of the evaluation not linked to payment of remuneration, the company has opted only for payment of sitting fees, the evaluation has no financial implications on the company.

Whistle Blower Policy/Vigil Mechanism

The company has formulated the policy on Whistle Blower/Vigil Mechanism in compliance with the Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and Section 177(9) of the Companies Act, 2013.

The Policy aims to prohibit managerial personnel from taking adverse personnel action against employees disclosing in good faith, alleged wrongful conduct on matters of public concern involving violation of any law, mismanagement, misappropriation of public funds, among others.

Employees aware of any alleged wrongful conduct are encouraged to make a disclosure to the Audit Committee.

No personnel of the company were denied access to the Audit Committee.

Corporate Social Responsibility

The provisions relating to Corporate Social Responsibility does not apply to the Company.

Corporate Governance

Your company firmly believes that building a culture of compliance is more than meeting regulations and standards. Your company is always proactive in meeting mandated standards and practicing Corporate Governance in spirit and not just the letter of the law.

As Mandated by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 a report on Corporate Governance along with a Certificate from Practicing Company Secretary on the compliance of conditions of Corporate Governance is annexed hereto. Your company is happy to inform you that there were no adverse remarks/ qualifications/ reservations raised in the Corporate Governance Report.

Related Party Transactions

There are no contracts or arrangements entered into by the company with related parties in accordance with the provisions of Section 188(1) of the Companies Act, 2013, other than the transaction entered into with Nagarjuna Fertilizers and Chemicals Limited pursuant to the order of the jurisdictional High Courts in relation to the Composite Scheme of Arrangement and Amalgamation between Ikisan Limited, Kakinada Fertilizers Limited, Nagarjuna Fertilizers and Chemicals Limited and Nagarjuna Oil Refinery Limited.

The Policy on Related Party Transactions appears on the website of the Company at www.norl.co.in

Particulars of Loans, Guarantees or Investments

The company has not provided any loans, guarantees or made investments pursuant to Section 186 of the Companies Act, 2013 other than executing a Sponsored Undertaking in favor of the lenders of Nagarjuna Oil Corporation Limited.

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

In relation to the information required to be furnished under the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, the company is not undertaking any manufacturing activity and accordingly there is no information available pertaining to Conservation of Energy and Technology Absorption. There is no Foreign Exchange Earnings and Outgo.

Extract of Annual Return

The Extract of the Annual Return for the year ended March 31, 2018 appears as Annexure- IV to this report

Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future

There were no orders passed by Regulators or Courts or Tribunals impacting the going concern status and future business operations of the Company.

Adequacy of Internal Financial Controls

The company has established and is maintaining internal controls and procedures based on the internal control over financial reporting criteria established by the Company

The Board of Directors have evaluated the effectiveness of the companys internal financial controls and procedures and confirmed that they are adequate in all material respects based on the size and the nature of its business and such internal financial controls over financial reporting were operating effectively as at March 31, 2018

Deposits

The company has not accepted any deposits within the purview of the Companies Act, 2013 and the Rules made there under during the Financial Year 2017-18.

AUDITORS AND AUDIT REPORT

Statutory Auditors

M/s. M Bhaskara Rao & Co., Chartered Accountants (Firm Registration No-000459S), Hyderabad, were appointed as the Statutory Auditors for a term of five (5) years commencing from the conclusion of the 4th Annual General Meeting up to the conclusion of the 9th Annual General Meeting subject to ratification by the members of the company every year at the Annual General Meeting.

M/s. M Bhaskara Rao & Co have signified their willingness to accept ratification of appointment and have further confirmed their eligibility under Section 141 of the Companies Act, 2013.

The companys Statutory Auditors have also furnished a certificate from the Peer Review Board of the ICAI confirming that they have undergone the process of peer review.

The Board of Directors commended the ratification of the appointment of Statutory Auditors for the Financial Year 2018-19 for consideration of the members.

Auditors Report

The Statutory Auditors of the Company have qualified their opinion in the following respect:

The Accounts have been drawn up on Going Concern basis, notwithstanding the 100% provisions in respect of investment in Associate Company Nagarjuna Oil Corporation Limited for the reasons stated in Note 4.1, indicating the existence of material uncertainity that may cast significant doubt about the companys ability to continue as a Going Concern, pending finalization of future business plans by the Company.

Note 4.1 forming part of Financial Statements for the year ended March 31, 2018:

The Project undertaken by Nagarjuna Oil Corporation Limited (NOCL) is in Construction Stage. Project construction substantially slowed down from the year 2012-13 due to delay in tying up of equity for a re-assessed cost and effect of ‘Thane Cyclone.

National Company Law Tribunal (NCLT), Chennai Bench had admitted the applications of the corporate creditors of NOCL and initiated the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC, 2016). NCLT had appointed an Insolvency Resolution Professional (RP) for NOCL on July 26, 2017. The Resolution Professional of NOCL has received Resolution Plan from Resolution Applicants and discussions with Committee of Creditors (CoC) is in process.

Considering the developments as stated above, the management as a prudent measure, made an additional provision of Rs.14,000.00 Lakhs (Previous years Rs. 23,622.00 Lakhs) towards balance of investment value Rs. 77,622.00 lakhs (46.78%) of NOCL equity, pending approval of the resolution plan by NCLT.

Management explanation to Auditors Qualification

The resolution plan of NOCL is in process. The going concern aspect will be appropriately dealt with by the Company on approval of the resolution plan by NCLT.

Secretarial Auditor

The Board of Directors have appointed Mr. C S S Krishna, Partner, M/s KBG Associates, Company Secretaries, Hyderabad as the Secretarial Auditor of the Company to undertake Secretarial Audit for the Financial Year 2018-19.

Secretarial Audit Report

The Secretarial Audit Report for the Financial Year 2017-18 appears as Annexure – V to this Report. There are no qualifications or adverse remarks in the report.

Internal Audit

The company has a well-established system of Internal Audit which carries out audit on Risk Management framework covering all the functions.

An Internal Auditor of the company has been appointed by the Board of Directors, in compliance with the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

D. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 (3)(c) and 134(5) of the Companies Act, 2013, the Board of Directors of the Company hereby report:-

(a) in the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the Directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to the Government of India, the financial institutions and companys bankers for their assistance and cooperation.

Further, the company places on record its sincere appreciation for the continuing support and unstinting efforts of investors, associates and all stakeholders.

	By Order of the Board
Hyderabad	K S Raju
July 26, 2018	Chairman