Nagarjuna Fertilizers and Chemicals Ltd. - Quarterly/Annual Result Disclosures and Notes dated 30 Jun 2024

1) The above statement of Unaudited Standalone and Consolidated Financial Results for the quarter ended 30th June 2024 was reviewed by the Audit Committee and approved by the Board of Directors at their respective meetings held on 16th September 2024.

2) The Statutory Auditors have carried out Limited Review of the above financials for the quarter ended June 30, 2024.

3) The financial results comprise the combined operations of the company of its Fertilizer and Micro Irrigation businesses. For the purposes of disclosures under Ind AS 108, Operating Segments, as the financial result of Micro Irrigation is below the reportable segment threshold limit, and since they do not have similar economic characteristics and do not share any of the aggregation criteria, the same is neither disclosed as separate segments nor are combined as "all other segments”.

4) During the quarter, Ammonia/Urea plants operated up to 4th June 2024, i.e., one plant till 31st May 2024 and the other plant till 04th June 2024, Micro Irrigation Plants operated till 31st May 2024. Thereafter the plants for operations are not available in view of sale of Core Assets by the Lenders under SARFAESI Act 2002 on 31ST May 2024.

5) "The Company continued to incur losses due to an accident in the GAIL pipeline in June 2014 and eroded its net working capital. The company sought for Corrective Action Plan which was to be implemented but could not be implemented by the Lenders in 2015. Consequently, the Debt of the company was declared as NPA by the lenders in 2018 and stopped supporting funding for working capital since then. The numerous efforts of the company for an amicable debt resolution with the lenders have yielded no result. The Consortium of Banks collectively, on 29th March 2023 assigned the Debt of the company to an Asset Reconstruction Company i.e., M/s Assets Care and Reconstruction Enterprise Limited (ACRE) and the Assignment of Debt communication was received by the Company on 3rd April 2023 through a letter dated 31st March 2023.



ACRE, by virtue of the Debt Assignment became a Secured Creditor, issued a demand notice on 20th Mary 2023 U/s 13(2) of the SARFAESI Act to repay the outstanding dues of Rs 3,344.37 Crs. The Company replied to the said notice on 17th July 2023 explaining the disputes with the lenders. ACRE reverted on 25th July 2023 disputing the objections raised by the company and advised the company to expedite submission of Debt Resolution Plan/OTS. ACRE on 12th October taken symbolic possession of scheduled assets in its favour including Core and Non-core assets. The company submitted its OTS proposal on 24th October with certain Conditions Precedents (CPs) after obtaining due approvals. On 31st October 2023 ACRE replied to the Company’s OTS proposal that the Settlement Proposal submitted to ARCE is not binding and tentative on fulfilment of CPs and therefore was unable to consider and /or appraise the Settlement Proposal and communicated that it would continuing to pursue SARFAESI process.



In terms of the mandate of the Board of Directors on 24th December 2023, the Company engaged with and vide letter agreement dated 12th January agreed to cooperate with ACRE basis terms set by ACRE. After taking symbolic possession of assets, ACRE has issued a public notice on 17th January 2024 for physical auction for sale of Movable and immovable properties of the Company under SARFAESI Act, 2002 for recovery of dues to ACRE Rs 3,858 Crs including interest as of 10th December 2023 and mandated the company to sell the non core assets. The Board of directors have taken note of update on SARFAESI process by ACRE on their meeting held on 26th January 2024."

"The Company received an email communication dated 17th April 2024 from ACRE that it has received an offer from a bidder above the reserve price and the bidder has submitted an upfront amount of 25% of the Purchase Consideration, in terms of the sale. ACRE vide email dated April 24, 2024, asked the Company to deposit the proceeds/advances received from the sale of non-core assets as mandated by ACRE into fixed deposits lien marked in favour of ACRE. The Sale of non-core assets was to take effect along with or after receipt of sale consideration from the sale of Core Assets under SARFAESI Act, 2002.



ACRE on 31st May 2024 had communicated the Company that as per the Sale Notice dated January 17, 2024, initiated process of sale of the Secured Assets of the Company under the provisions of SARFAESI Act 2022, 2002, read with Security Interest (Enforcement) Rules, 2002 that the bidder had paid the balance 75% of the total bid amount of Rs 1,685 Crores and ACRE has issued a Sale Certificates in favour of the bidder i.e., AM Green Ammonia (India) Pvt Limited and further intimated that the buyer has now become the legal and rightful owner of the assets as listed bid notice.



Consequent to sale of Core assets, the Company was advised by ACRE that Pursuant to ACRE communication to NFCL dated 31.05.2024 regarding sale of core assets under SARFAESI, the Company is requested to deposit the amounts pertaining to the sale of Non-Core Assets of NFCL in the bank account of ACRE-112-Trust and be intimated once transfer is done by Buyer.



Based on the above advice the Company proceeded to obtain NOC from ACRE to facilitate sale of non-core Assets as mandated in the OTS letter agreement dated 12th January 2024. ACRE had issued NOCs for the Sale of non-core assets on 11th June 2024. Accordingly, the buyers of non-core assets deposited the sale consideration directly into ACRE -112-Trust bank Account.



ACRE had upon recovery of Rs 1,685 Crores for Core Assets, Rs 200 Crores from Non-Core Assets amount totalling to Rs. 1,885 Crores sale as per OTS and the balance cutback amount up to 30.06.2024 had issued a No Dues and Security release Certificate (NDC) on 11th July 2024 as per the agreed arrangements informing that - NFCL stands unconditionally and irrevocably released and discharged of any liabilities, dues, demands or claims in respect of the outstanding debt and other amounts due and payable to ACRE by NFCL including personal guarantees of Mr. Kanumuru Satyanarayana Raju and Mr. Kanumuru Rahul Raju in relation to ACRE and pledge of shares of NFCL by Amlika Mercantile Private Limited (AMPL) under the DSA or any other document in relation to the Financing Documents, in each case in accordance with the terms of the DSA / OTS.



Consequent to the settlement of Debt vide receipt of sale proceeds from Core and Non-Core assets by ACRE, there are no other assets including property plant and equipment left with the Company for operations.

“No Dues and Security release Certificate” from ACRE was received on 11th July 2024. As per Ind As 10 “Events after the Reporting Period”, this is an adjustable event and thereby affecting the Going Concern of the Company and accordingly drawn the Financial Results giving effect of the same for the quarter ended on 30th June 2024.



In view of the Debt settlement happened, the Actual interest (cut back) paid to ACRE for the quarter ended 30th June 2024 is recognised in the Financial Results. "

6) "The Financial Results for the quarter ended on June 30, 2024 have been drawn, basis the sale of Core and Non-core assets controlled by ACRE under SARFAESI Act as explained above, represent the discontinuation of its combined operations of Fertilizers and Micro Irrigation businesses i.e., the entire Cash generating operations of the Company and the effect of debt settlement with the Lenders.



Without considering the energy and other claims from the Government, the current liabilities exceed the current assets by Rs. 83,169.47 Lakhs. Consequent to the discontinuation of operations the going concern of the company is affected and the financial results are prepared accordingly.



However, the Company is pursuing various claims with the Government including reimbursement of Energy consumed etc., the funds from these claims if and when received will be used for the settlement of the current liabilities which are showing a shortfall compared to the current assets available for discharge of these liabilities.



The Company is reviewing to revive the CFG business post the debt settlement. Further the company is exploring the possibility of operating the Ammonia/Urea plants on lease basis seeking permissions from Government and the Buyer of the plants.



Consequent to the results of the above propositions, the Company’s financial statements will be reviewed to re-consider the going concern accounting during the subsequent quarters of the financial year 2024-25. "

7) "There are claims against the company, which are not acknowledged as debts and are disputed in various forums, courts, appeals, including arbitration awards amounting to Rs 67,342.75 lakhs.



These contingent liabilities/claims stated above are not confirmation of dues but record of disputes.

8) Amlika Mercantile Private Limited (AMPL), Core Promoter of the Company had preferred an appeal before Hon’ble National Company Law Appellate Tribunal (NCLAT), Chennai, against the Order dated 27.08.2021, passed by the 'National Company Law Tribunal’, Hyderabad Bench, admitting the Nagarjuna Fertilizers and Chemicals Limited (NFCL) into Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Code, 2016. Basis the appeal of AMPL, Hon’ble NCLAT, Chennai, vide order dated October 05, 2023, has allowed the appeal by setting aside “the impugned order dated August 27, 2021, passed by Hon’ble NCLT, Hyderabad Bench. Thereby, the Company exited CIRP under IBC, 2016 effective October 05, 2023. AMPL has claims the legal expenses, amount not ascertained, for the NCLAT appeal filed on behalf of the Company and the company is liable to reimburse the legal expenses to AMPL.

9) The company had lost the GAIL arbitration case in 2024. The company filed an application under section 34 of Arbitration and Conciliation Act 1996 which is pending adjudication in Delhi High Court in 2023. Since going for appeal, all the assets of NFCL have been sold basis the secured creditor invoking SARFAESI. The company’s accounts have been drawn up accordingly as a non going concern. Given the financial situation NFCL therefore assigned its rights in favour of AMPL to represent it in all legal forums/proceedings to pursue claims from GAlL including Arbitration claim in its name as an assignee along with agency coupled with interest under the provisions of Indian Contract Act, 1872. Should GAIL satisfy the award in the future, NFCL shall use the award as it deems fit after clearing its liabilities.

10) Government of India announced New Urea Policy (NUP)-2015 and Gas Pooling Policy for Fertilizer (Urea) Sector which are effective from 1st June 2015 to 31st Mar 2019. Government of India extended the NUP -2015 from 1st April 2019 until further orders. Income from Urea Operations has been recognised in accordance with the said policies. Income towards freight subsidy, Reimbursement claims towards additional fixed cost, Input escalation / de-escalation, have been recognized during the Quarter/ Year in terms of the said policies. Adjustments required, if any, will be considered on notification of final prices.

11) The Government from time to time extended the preset energy norms which were valid till 31st March 2023. Accordingly, Subsidy income is recognized based on Target Energy Norms as per NUP-2015 policy for the Quarter ended June 2024.

12) The Company has been using the “Nagarjuna Brand / Trademarks” for its urea and other products under a license agreement Dt 29/01/1998 with the grantor, a related party. The company, during the period ended on 31.12.2021, received a claim from the grantor asserting its right to royalty for the period from 29/01/1998. The company agreed without impairment and prejudice to the rights of AMPL to settle the claims in a manner such that the dues are secured and paid on a priory basis from the receipts if any from claims against GAIL if and when GAIL satisfies the award in relation to pipeline accident.

13) The Company is pursuing various claims with the Government including reimbursement of Energy consumed, State Electricity Duty paid and IGST.



14) Jaiprakash Engineering and Steel Co Ltd.,the subsidiary shares were sold as part of Non-core Assets as on 12th June 2024, thereby JESCO ceases to be a subsidiary of the Company. The consolidated results include results of associate company KVK Raju International Leadership Ltd

15) The figures for the quarter ended 31 March 2024 are the balancing figures between the audited figures for the full financial year and the unaudited published year to date figures up to December 31,2023.



16) "The figures for the corresponding previous periods have been regrouped, wherever necessary, to make them comparable with those of the current periods.