Nagarjuna Fertilisers and Chemicals

The Directors have pleasure in presenting the 32th Annual Report
 together with the Audited Accounts of your company for the year ended
 March 31, 2008.
 
 The Financial Results and the Consolidated Financial Results of the
 company for the year ended March 31, 2008 are as under:
 
 FINANCIAL RESULTS
                                                         Rs. in Crores
 Particulars                              2007 - 2008      2006 - 2007
                                          current year   previous year
 
 Net Sales/Income from Operations              2193.59       1815.24
 Other Income                                    19.84         27.99
 Remission of principal amount of loan
 Total Expenditure
 a.  (Increase)/decrease in Stock               100.98         22.07
 b.  Consumption of Raw Materials               601.25        538.00
 c.  Staff Cost                                  59.33         47.67
 d.  Purchases-Traded Products                  641.04        338.31
 e.  Power and Fuel                             311.59        369.52
 f.  Marketing, Operating, Administrative
 and other Expenses                             377.96        263.88
 Total                                         1890.19       1535.31
 Interest                                       162.97        137.79
 Depreciation                                   120.15        124.09
 Profit before tax                               40.13         46.04
 Provision for tax                               40.52         43.00
 Deferred Tax                                    28.31         29.49
 Fringe Benefit Tax                               1.10          0.82
 Profit/(loss) after Tax                         22.49         31.71
 Dividend - Preference Shares                   0.0037        0.0037
 Balance C/d to Balance Sheet                   125.79        147.53
 Paid Up Equity Share Capital
 (Face Value of Rs.10/-per share)               427.97        427.97
 Reserves excluding revaluation reserve         441.04        462.77
 Earning per share (annualised)-in Rs.Basic       0.53          0.74
 Diluted                                          0.51             -
 
 Proposed
 
 CONSOLIDATED FINANCIAL RESULTS
                                                          Rs. in Crores
 Particulars                               2007 - 2008     2006 - 2007
                                           current year   previous year
 
 Net Sales/lncome from Operations               2193.59        1815.24
 Other lncome                                     19.84          27.99
 Remission of principal amount of loan
 Total Expenditure
 a (Increase)/decrease in Stock                  100.98          22.07
 b.  Consumption of Raw Materials                601.25         538.00
 c.  Staff Cost                                   59.33          47.67
 d.  Purchases-Traded Products                   641.04         338.31
 e.  Power and Fuel                              311.59         369.52
 f.  Marketing, Operating, Administrative
 and other Expenses                              377.96         263.88
 Total                                          1890.19        1535.31
 Interest                                        162.97         137.79
 Depreciation                                    120.15         124.09
 Profit before tax                                40.13          46.04
 Provision for tax                                40.52          43.00
 Deferred Tax                                     28.31          29.49
 Fringe Benefit Tax                                1.10           0.82
 Profit/(loss) after Tax                          22.49          31.71
 Dividend - Preference Shares                    0.0037         0.0037
 Balance C/d to Balance Sheet                    125.79         147.53 
 Paid Up Equity Share Capital
 (Face Value of Rs.10/-per share)                427.97         427.97
 Reserves excluding revaluation reserve          441.04         462.77
 Earning per share (annualised) - in Rs.Basic      0.53           0.74
 Diluted                                           0.51              -
 
 Proposed
 
 DIVIDEND
 
 Your Directors deliberated at length and considered the payment of
 dividend to the equity shareholders of the company.
 
 While placing on record their deep concern, the Directors decided that
 in view of the inadequate profits it would not be possible to declare
 dividends as there was need to conserve the profits for better
 financial health of the company.
 
 Your Directors resolved to put in every effort to declare and pay
 dividend to the equity shareholders of the company at the earliest.
 Your Directors recommend 0.01% dividend to the preference shareholders
 of the company for the year ended March 31, 2008 amounting to Rs.37203.
 
 SHARE CAPITAL
 
 The Warrants Allotment Committee of the Board of Directors at its
 meeting held on October 26, 2007 allotted 2,25,00,000 warrants
 convertible into equity shares to the Core Promoters of the company
 pursuant to the approval of the Board of Directors and the members of
 the company in accordance with the guidelines prescribed by Securities
 and Exchange Board of India for preferential issues at a price of
 Rs.29/- per warrant, the price being determined by the statutory
 auditors of the company in accordance with the preferential issue
 guidelines.
 
 PROCEEDS OF THE ISSUE
 
 The proceeds of the issue have been utilized for the companys
 de-bottlenecking/ mini re-vamp projects, Carbon dioxide recovery
 project and the operations of the company.
 
 PLANT OPERATIONS
 
 Urea Your company during the year manufactured 13.54 MT of urea as
 against 13.24 MT in the previous year.  The year saw plant I recording
 the highest ever production after a decade and plant II production was
 limited on account of low contribution on additional (more capacity
 than 100%) production.
 
 Your company during the year undertook various initiatives for
 improving energy efficiency, reliability and cost reduction.
 
 FUTURE PLANS
 
 Your company in order to comply with the NPS stage -III policy
 effective from October 2009 proposes to change over the mix feed/fuel
 for unit II from naphtha to natural gas. The change over would also
 result in shortfall in CO2 requiring setting-up of a CO2 recovery
 plant. The change over of fuel and the setting-up of the CO2 recovery
 plant along with other related matters concerning plant revamp would be
 carried out at a capital expenditure of around Rs. 200 crores. The
 expenditure is proposed to be met out of borrowing from existing
 lenders and internal accruals of the company.
 
 The de-bottlenecking and revamp of the existing plant would result in
 the capacity of the plant going up from the present 13.5 lakhs MTS per
 annum to 15.65 lakhs MTS per annum The increased requirements of
 natural gas shall be met out of definitive supplies for which contracts
 are being entered into by the company.
 
 The company proposes to undertake the Clean Development Mechanism (CDM)
 project along with the revamp and de-bottlenecking of the plant to
 ensure proper control of environment in view of its concern and
 commitment to the environment in the area. Your company under the
 Clean Development Mechanism has commenced the following:
 
 - Setting up a 450 TPD capacity CO2 recovery plant from the flue gases.
 
 - De-bottlenecking/mini revamp schemes in order to improve the plant
 energy consumption, reliability and to enhance the capacity of both the
 units together to a level of 15.65 LMT.
 
 The projects are progressing satisfactorily. The projects are expected
 to be completed in the second half of 2009.
 
 Micro Irrigation
 
 Your company during the year commissioned and streamlined the
 production of flat type integral drip lateral line successfully and
 also improved its product range in relation to drippers and route
 guard.
 
 Your company has achieved highest ever production of 376.5 lakh meters
 of micro irrigation products against 228.6 lakh meters during the
 previous year.
 
 Your company during the year achieved the highest production in the
 various products manufactured by the micro irrigation division while
 maintaining high levels of quality.
 
 MARKETING
 
 During the year under review, your company established new records in
 sales and marketing.
 
 - Achieved highest ever urea sale of 25.9 lakhs MT
 
 - Marketed 12.51 lakhs MT of imported urea.
 
 - Recorded sale of 9600 MT of water soluble fertilizers.
 
 - Achieved record sales in micro irrigation segment (57% higher than
 the year 2006-07)
 
 - Achieved record sales of all micronutrients.  Urea
 
 The year 2007 - 2008 witnessed substantial rise in demand for all
 fertilizer products following favourable agro climatic situation across
 all the states.  Your company accordingly achieved high levels of sales
 of 25.90 lakh MT as against 20 lakh MT during the previous year.
 
 Specialty Fertilizers
 
 Your company sold 9600 MTS during the year, recording a growth of 42%
 in sales, in comparison with sales of 6750 MTS during the previous
 year.
 
 Micro Irrigation
 
 Your company during the year achieved 57% growth in sales aggregating
 Rs.48 crores as compared with that of the previous year (Rs.30.56
 crores).
 
 ENVIRONMENT, SAFETY AND AWARDS
 
 Environment Your company continues its mission of protecting the
 environment and has inculcated the concept right down the organization.
 
 The statutory compliance of the company on environmental matters are
 meeting all the statutory requirements.
 
 Safety
 
 Your company has implemented the Process Safety Management Systems in
 the company and successfully up-graded itself to ISO-14001-2004.
 
 Your company has high safety standards for preventing unforeseen
 accidents. There has been no accident during the year.
 
 The plant has completed 7.0 million accident-free man-hours taking into
 account man-hours worked by own associates & contract employees.
 
 Awards
 
 Your company during the year has bagged prestigious awards
 
 such as
 
 - FAI Environmental Protection Award in the Nitrogenous Fertilizer
 Plants category for the year 2006-07
 
 - Confederation of Indian Industry, Hyderabad awarded National Award
 for Excellence in Water Management 2007.  NFCL has been certified as a
 Water Efficient Unit
 
 - Andhra Pradesh Productivity Council, Hyderabad awarded Commendation
 Prize to NFCL under the Process Stream Category for its Energy
 Conservation Initiatives.
 
 - NFCL bagged Cll-Sohrabji Godrej Green Business Centre Water
 Efficient Unit 2007 award
 
 RESEARCH AND DEVELOPMENT
 
 Your company is undertaking adaptive research in order to develop
 alternate feedstock for the plant so as to reduce its dependency on
 natural gas. Your company has been accredited by the Department of
 Scientific and Industrial Research (DSIR) to undertake research and
 accordingly would be eligible for tax benefits on funds deployed
 towards research.
 
 POLICY MATTERS
 
 Your companys endeavor has always been to maintain high levels of
 transparency and accountability to its stakeholders. In this direction,
 various policies mentioned below have been put in place to enable the
 stakeholders to appreciate the various interventions the company will
 take in areas connected with the stakeholders of the company.
 
 1.  Corporate Governance Policy
 
 2.  Policy on Corporate Social Responsibility
 
 3.  Policy on Supply Chain
 
 4.  Policy on Grievance of Vendors
 
 5.  Succession Planning
 
 6.  Employees Participation in Management
 
 The implementation of these policies will be reviewed periodically by
 the Board of Directors and updated from time to time.
 
 CORPORATE GOVERNANCE
 
 Your company driven by a desire to be more competitive and recognized
 globally had inculcated more than a decade ago, the rules that define
 ethical business, much before it was introduced as statutory compliance
 through Clause 49 of the listing agreement.
 
 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 In the quest to
 update the level of corporate governance and also to make the same
 known to all the stakeholders, your company has adopted a Policy on
 Corporate Governance.
 
 A report on Corporate Governance along with the Practicing Company
 Secretarys certificate on its compliance is annexed hereto.
 
 DIRECTORS
 
 Your Directors with a deep sense of sorrow have to share with you the
 demise of Field Marshal Sam Manekshaw, Chairman Emeritus of the
 company. Field Marshal Sam Manekshaw, Chairman Emeritus, attained his
 heavenly abode in the early hours of June 27, 2008 Field Marshal Sam
 Manekshaw, Chairman Emeritus, stood by and carried the company through
 hard times during his long association with the company.
 
 Your Directors place on record the extra-ordinary contribution made by
 Field Marshal to the company and for carrying the flag of the company
 across the country. The company would continue to live with his fond
 cherished memories.
 
 Your Directors dedicate themselves to his principles and ideals to meet
 the expectation of the stakeholders of the company.  In accordance with
 the Articles of Association of the company.  Dr NCB Nath, Shri Ashok
 Chopra, Shri K Rahul Raju, retire at the forthcoming Annual General
 Meeting and being eligible, offer themselves for re-appointment.
 
 The Board of Directors at their meeting held on January 23, 2008
 re-appointed Shri P P Singh as Director (Technical) of the company for
 a period of one year with effect from February 24, 2008. The
 re-appointment of Shri P P Singh is being placed before the
 shareholders at the forthcoming Annual General Meeting.  The Board of
 Directors during March 2008 re-appointed Shri K S Raju as Managing
 Director of the company for a period of five years with effect from
 April 1, 2008. The re-appointment of Shri K S Raju is being placed
 before the shareholders at the forthcoming Annual General Meeting.
 
 The Board of Directors at their meeting held on April 29, 2008 re-
 appointed Shri R S Nanda as Director & Chief Operating Officer of the
 company for a period of one year with effect from June 26, 2008. The
 re-appointment of Shri R S Nanda is being placed before the
 shareholders at the forthcoming Annual General Meeting.
 
 The Government of Andhra Pradesh is yet to nominate its nominee on the
 Board of Directors of the company consequent to their nominee Smt. D
 Lakshmi Parthasarathy, IAS, ceasing to be Principal Secretary to Govt.
 & CIP, Industries & Commerce Department, Hyderabad.
 
 The Board in view of her ceasing to be Principal Secretary to Govt. &
 CIP, Industries & Commerce Department, Hyderabad, took on record her
 cessation from the Board of Directors of the company with effect from
 April 29, 2008.
 
 AUDITORS AND AUDIT REPORT
 
 M/s. M Bhaskara Rao & Co., Chartered Accountants, Hyderabad, the
 companys auditors retire at the conclusion of the ensuing Annual
 General Meeting. They have signified their willingness to accept
 re-appointment and have further confirmed their eligibility under
 Section 224 (1B) of the Companies Act, 1956.  In relation to the
 matters dealt by the Auditors in the Audit Report, the company has not
 adhered to the Accounting Standard 5 and made a departure in view of
 the fact that the loss relating to the subsidiary company, Jaiprakash
 Engineering and Steel company Limited arose not out of the current year
 operations of the company and accordingly was being written off in the
 Opening Balance of the Profit & Loss Account of the company.
 
 COST AUDITOR
 
 Shri Dantu Mitra, Cost Accountant, continues to be the Cost Auditor of
 the company for the financial year 2008 - 09.
 
 SUBSIDIARY COMPANIES
 
 A statement of the holding companys interest in the subsidiary
 companies viz., Jaiprakash Engineering and Steel company Limited
 (JESCO) and Nagarjuna Oil Corporation Limited (NOCL), is enclosed in
 accordance with Section 212 (2) (a) of the Companies Act, 1956.
 
 In accordance with the approval granted by the Central Government, the
 balance sheet and profit and loss account, report of the directors and
 auditors report of subsidiary companies viz., Nagarjuna Oil Corporation
 Limited, Jaiprakash Engineering and Steel company Limited are exempted
 from being appended to the Annual Report. Any shareholder seeking
 information on any of the subsidiary companies may write to the company
 to enable the same to be forwarded.
 
 Jaiprakash Engineering and Steel company Limited (JESCO) Your company
 has entered into an agreement for disinvestment of its equity in JESCO
 to comply with the requirements of the Corporate Debt Restructuring
 scheme approved by the financial institutions and banks.
 
 Nagarjuna Oil Corporation Limited (NOCL) NOCL, the subsidiary of your
 company is involved in implementing the refinery project at Cuddalore
 in Tamil Nadu.  The foundation stone of the project was laid on July 2,
 2008.  NOCL has made substantial progress during the year under review
 and the financial closure has been completed.
 
 Consequent to certain changes among the equity investors and their
 preferences, the balance of 49% of the equity in Nagarjuna Oil
 Corporation Limited has now been taken by Tata Petrodyne Limited, 30%
 on behalf of TSL, Cuddalore Port company Private Limited by 10%, Uhde
 GmbH by 4% and TIDCO by 5%.  The debt component of the project has
 already been tied up with Industrial Development Bank of India Limited
 (IDBI) and State Bank of India (SBI) as the lead financial
 institutions.
 
 Various agreements and MOUs have been entered into for implementation
 of the Project and all the statutory approvals are valid and
 subsisting.
 
 The company expects to complete the project within 36 months of Zero
 date.
 
 DISCLOSURES
 
 Disclosure in terms of Companies (Particulars of Employees) Rules, 1975
 and Companies (Disclosure of particulars in the Report of the Board of
 Directors) Rules, 1988 in respect of conservation of energy, technology
 absorption, earnings and outgo of foreign exchange are attached and
 forms part of this report.
 
 AUDIT COMMITTEE CONSTITUTION
 
 In compliance with the provisions of the Section 292A of the Companies
 Act, 1956 and the listing agreement entered into with the stock
 exchanges, the company had constituted an Audit Committee consisting of
 highly qualified and experienced members from various fields. The
 committee consists of four independent directors, two of whom are
 nominees of financial institutions and one Whole-time Director. 
 
 The Chairman of the committee Dr. N C B Nath, is an Independent
 Director and the committee meets periodically to review the quarterly
 financial statements and recommends its findings to the Board apart
 from taking action independently whenever required.  The Statutory
 Auditors/ Secretary and the Internal and Cost Auditors attend and
 participate in the Audit Committee Meetings.
 
 The Audit Committee comprises of
 
 Dr. N C B Nath                 Chairman, Independent Director
 Shri B K Batra                 Member & independent Director
 Shri K M Jaya Rao              Member & Independent Director
 Shri S R Ramakrishnan          Member & Independent Director
 Shri K S Raju                  Member & CMD
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 Your company has always been a responsible corporate citizen and has
 made significant contributions towards community development. To
 provide more thrust and to inculcate the spirit of corporate social
 responsibility among all associates in the organization, your company
 has adopted a Policy on Corporate Social Responsibility.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, Your Directors
 hereby report:
 
 a.  that in the preparation of Annual Accounts for the year ended March
 31, 2008, the applicable accounting standards have been followed except
 the adherence to Accounting Standard 5 for which a proper explanation
 relating to material departures made have been stated.
 
 b.  that the Directors have selected such accounting policies and
 applied them consistently and made judgements 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 March 31, 2008 and of profit and loss
 account for the period ended March 31, 2008.
 
 c.  that the Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956 for safeguarding the assets of
 the company and for preventing and detecting fraud and other
 irregularities.
 
 d.  that the Directors have prepared the Annual Accounts on a going
 concern basis.
 
 ACKNOWLEDGEMENT
 
 Your Directors place on record their gratitude to the Government of
 India, Government of Andhra Pradesh and Government of Tamilnadu and the
 financial institutions and companys bankers for their assistance and
 co operation. Further, the company places on record its sincere
 appreciation for the continuing support and unstinting efforts of
 investors, dealers and associates in ensuring an excellent all around
 operational performance.
 
                                                On Behalf of the Board
 
 Hyderabad                                 K S Raju
 July 25,2008                              Chairman & Managing Director