auditor s report - nagarjuna fertilizers

NAGARJUNA OIL CORPORATION LIMITED

AUDITOR’S REPORT

The Members of NAGARJUNA OIL CORPORATION LIMITED 1. We have audited the attached Balance Sheet of Nagarjuna Oil Corporation Ltd, as at

31st March, 2007, Expenditure Pending Allocation Account of the company and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted

in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 as amended by

Companies (Auditors’ Report) Order (Amendment) 2004, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii) In our opinion, proper books of account as required by law have been kept by

the company so far as appears from our examination of those books;

iii) The Balance Sheet, Expenditure Pending Allocation Account and the cash flow statement dealt with by this report is in agreement with the books of account;

iv) In our opinion, the Balance Sheet, Expenditure Pending Allocation Account

and the cash flow statement dealt with by this report complies with the applicable Accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;


v) On the basis of written representations received from the directors, as on 31st

March, 2007 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi) We draw attention to Note 3 under Schedule 9 to the Financial Statements:

Financial Statements for the year are drawn up on a going concern basis on considering the developments in the financial closure (equity and debt tie up) and management’s perception of operational and commercial viability of the project.

vii) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with other notes thereon and Significant Accounting Policies give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the company

as at 31st March, 2007; ii) in the case of the Expenditure Pending Allocation Account, of the

expenditure for the year ended on that date;

iii) in the case of the cash flow statement, of the cash flows for the year ended on that date.

for M. BHASKARA RAO & Co. CHARTERED ACCOUNTANTS

Sd/-

K MURALIDHAR Partner

MEMBERSHIP NO.201570 Place: Hyderabad. Date: 26-04-2007.


ANNEXURE

RE: NAGARJUNA OIL CORPORATION LTD.

Referred to in paragraph 3 of our report of even date

(i) (a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

(b) According to the information and explanations given to us all the assets have been physically verified by the management once during the year under report. As explained to us, no discrepancies were noticed on such verification.

(c) During the year, the company has not disposed off substantial part of the fixed

assets.

(ii) The company does not have inventory. Hence clause (ii) of paragraph 4 of the Companies (Auditors’ Report) Order, 2003 is not applicable.

(iii)(a) According to the information and explanations given to us, the company has not granted any loans secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

As the company has not granted any loans to such parties, sub clauses (b), (c) and (d) of clause (iii) of this Order are not applicable.

(b) According to the information and explanations given to us, the company has not taken any loans secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. As the company has not taken any loans from such parties, sub clauses (f) and (g) of clause (iii) of this Order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the company and the nature of its business with regard to purchase of fixed assets. During the year the company had no purchase of inventory or sale of goods or sale of services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weakness in internal control systems.

(v) (a) In our opinion and according to the information and explanations given to us

and based on the representations by the management, there is no contract or arrangement that needs to be entered in the register to be maintained under section 301 of the Act.

(b) In view of the above, clause v (b) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 is not applicable.

(vi) The company has not accepted any deposits from the public.


(vii) In our opinion the company has an internal audit system commensurate with the size and nature of its business.

(viii) As the project is under implementation, the provisions of clause viii of paragraph 4 of the Companies (Auditors’ Report) Order, 2003 is not applicable.

(ix) (a) According to the information and explanations given to us and the records of the company, the company has been regular in depositing undisputed statutory dues including provident fund, income tax, customs duty, service tax and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of statutory dues as at 31st March 2007 which are outstanding for a period of more than 6 months from the date they became payable.

(b) According to the information and explanations given to us, there were no dues

of income tax/ sales tax/ wealth tax/service tax/ customs duty/ excise duty/ cess which have not been deposited on account of any dispute.

(x) As the project is under implementation stage the company has no accumulated losses at the end of the financial year and has not incurred any cash losses in the financial year under report and in the immediately preceding financial year.

(xi) The Company has defaulted in repayment of dues to banks / financial institution as follows:

Bank / Financial Institution

Date / Period of Default

Particulars Principal O/s (Rs.)

Interest O/s (Rs.)

Karur Vysya Bank Ltd.

June 2001 to March 2007

Devolvement of Letters of Credit

0 7,23,78,018

Indian Overseas Bank

January 2005 to March 2007


18,92,77,976 1,69,07,420

UTI Bank Ltd January 2005 to March 2007


48,76,35,483 16,56,00,747

Exim Bank

March 2007 Overdue Interest 0 1,85,76,717

(xii) According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The company is not a Chit Fund/Nidhi/Mutual fund/Society. Accordingly the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company.

(xiv) The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly the provisions of clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the company.


(xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from any bank or financial institution.

(xvi) In our opinion the term loan was applied for the purpose for which it was

obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report that short term funds were not used for long term investment during the year.

(xviii) According to the information and explanations given to us, the company, during

the year under report, has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

(xix) The company has not issued any debentures during the year.

(xx) The company has not made any public issue of shares during the year.

(xxi) Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the company has been noticed or reported during the course of our audit.

for M. BHASKARA RAO & Co. CHARTERED ACCOUNTANTS

Sd/-

K MURALIDHAR Partner

MEMBERSHIP NO.201570 Place: Hyderabad. Date: 26-04-2007.


AUDITED ACCOUNTS

31ST MARCH, 2007


BALANCE SHEET AS AT 31ST MARCH 2007

As at As atParticulars Schedule 31.03.2007 31.03.2006

Rupees RupeesSources of Funds

Shareholders' Funds Share Capital 1 6,845,000,000 5,920,000,000

Reserves and Surplus 2 106,842 106,842

Secured Loans 3 1,595,296,233 1,601,705,916

Total 8,440,403,075 7,521,812,758

Application of Funds

Fixed Assets 4 Gross Block 54,062,074 53,465,906 Less: Depreciation 18,932,847 17,927,909 Net Block 35,129,227 35,537,997

Capital Work in Progress 5 8,070,754,865 6,981,877,419 Expenditure pending allocation account 3,197,053,944 2,642,430,259

Current Assets, Loans and Advances 6

Cash and Bank Balances 4,341,774 14,718,073 Other Current Assets Loans and Advances 6,746,702 7,686,843

11,088,476 22,404,916 Less: Current Liabilities and Provisions 7 3,200,713,366 2,487,527,762 Net Current Assets (3,189,624,890) (2,465,122,846)

Miscellaneous Expenditure(to the extent not written off or adjusted) 8 327,089,929 327,089,929 Total 8,440,403,075 7,521,812,758

Accounting policies and Notes on Accounts 9

As per our report attached For and on behalf of the BoardFor M Bhaskara Rao & Co.,Chartered Accountants Dr.Abid Hussain

ChairmanV K MuralidharPartner Shr KS Raju

Shri Minoo R ShroffShri S RamasundaramShri Shankarnarayan R Rao

Place: Hyderabad DirectorsDate: April26,2007

S RammohanManaging Director

As at As atParticulars 31.03.2007 31.03.2006

Rupees Rupees

Salaries & Wages 40,601,579 17,064,342 Contribution to Provident and other funds 4,447,275 2,014,932 Staff Welfare expenses 2,923,210 1,624,668 Rent 5,787,451 4,672,000 Rates & Taxes including Fringe Benefit Tax 3,304,925 17,327 Repairs and Maintenance - Others 2,535,432 1,678,517 Insurance-Office eqpt. & others 1,129,002 1,385,106 Printing & Stationery 548,156 347,624 Postage, Telephone and Telex etc. 1,449,137 1,182,731 Travelling and Conveyance 12,786,353 8,386,608 Advertisement 270,025 265,961 Recruitment & Training 665,429 283,301 Legal & Professional Charges 37,214,292 10,796,167 Directors Sitting Fees 24,000 22,000 Directors Travel Expenses 3,268,432 2,107,226 Auditors Remuneration 593,324 499,909 Loss on sale of fixed assets (Net) 155,843 380,122 Security Expenses 2,281,719 1,863,447 Electricity and Water charges 2,186,315 1,786,751 Miscellaneous Expenses 2,357,408 1,202,038 Depreciation 1,703,733 2,761,487 Interest 417,794,389 300,765,062

Financing Charges 10,966,789 11,247,387

Less: Miscellaneous Income (TDS on Deposits -Rs.2,088/-, previous year Rs.1,083/-) (370,533) (9,890)

Sub-Total 554,623,685 372,344,823

Brought forward from previous year 2,642,430,259 2,270,085,436 Carried forward to Balance Sheet - Total 3,197,053,944 2,642,430,259

As per our report attached to the Balance Sheet For and on behalf of the BoardFor M Bhaskara Rao & Co.,Chartered Accountants

Dr.Abid HussainV K Muralidhar ChairmanPartner

Shr KS RajuShri Minoo R ShroffShri S Ramasundaram

Place: Hyderabad Shri Shankarnarayan R RaoDate: April26,2007 Directors



EXPENDITURE PENDING ALLOCATION ACCOUNT AS AT 31ST MARCH 2007


SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH 2007As at As at

Particulars 31.03.2007 31.03.2006Rupees Rupees

Schedule 1 - Share Capital

Authorised2,000,000,000 Equity Shares of Rs.10/- each 20,000,000,000 12,000,000,000 (Previous year 1,200,000,000 Equity Shares of Rs.10/- each)

Issued, and Subscribed 684,500,000 (Previous year 592,000,000) Equity Shares 6,845,000,000 5,920,000,000 of Rs.10/- each, fully paid

Total 6,845,000,000 5,920,000,000

Schedule 2 - Reserves & SurplusGeneral Reserve 106,842 106,842

Total 106,842 106,842

Schedule 3 - Secured Loans

From Financial Institution *Exim Bank-Rupee Term Loan 644,794,874 696,474,012

From Banks - Overdraft *Karur Vysya Bank - 54,518,562 UTI Bank 487,635,483 487,635,483 Indian Overseas Bank 189,277,976 219,277,976

Hire Purchase Loan *ICICI Bank 124,997 291,665

1,321,833,330 1,458,197,698

Interest Accrued and Due 273,462,903 143,508,218

Total 1,595,296,233 1,601,705,916

* Repayments falling due in the next twelve months - Rs.769,152,008/- (Rs. 820,082,941/-)


SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH 2007

Schedule 4 - Fixed Assets Rupees

Gross Block (At Cost) DEPRECIATION Net BlockAdditions Deductions/ Deductions/

Particulars As at during Adjustments As at Upto For the Adjustments Upto As at As at31.03.2006 the Period during the Period 31.03.2007 31.03.06 Period during the Period 31.03.2007 31.03.2007 31.03.2006

Freehold Land 23,541,435 23,541,435 23,541,435 23,541,435

Furniture, Fixtures & Office Equipment 28,386,310 1,610,522 239,700 29,757,132 17,246,353 1,572,815 74,928 18,744,240 11,012,892 11,139,957

Vehicles 1,538,161 5,100 779,754 763,507 681,556 130,918 623,867 188,607 574,900 856,605

Total 53,465,906 1,615,622 1,019,454 54,062,074 17,927,909 1,703,733 698,795 18,932,847 35,129,227 35,537,997PREVIOUS YEAR 53,875,520 709,335 1,118,949 53,465,906 15,827,426 2,761,487 661,004 17,927,909 35,537,997 38,048,094



Particulars As at 31.03.2007 As at 31.03.2006Rupees Rupees

Schedule 5 - Capital Work in Progress

Site Development 97,228,709 97,228,709 Building under construction 19,543,812 16,876,216 Plant & Machinery: Equipment at Site * 4,230,038,451 4,144,024,344 Equipment at European Ports** 2,783,782,863 610,752,492 Construction Power 2,150,708 2,150,708 Technical Services 878,798,561 892,026,593

Advance against Capital Expenditure:

Land & Site Development 48,638,543 48,638,543

Plant & Machinery and Others 10,573,218 1,170,179,814

Total 8,070,754,865 6,981,877,419

* includes - Rs.69,45,00,104 (Previous year 63,53,62,361) represents Cenvatable Customs duty.

** Refer to note no.7 of Schedule 9 (II) - Notes to Accounts




Rupees RupeesSchedule 6 - Current Assets, Loans and Advances

A. Current Assets

Cash and Bank BalancesCash on Hand 98,109 83,544Balances with Scheduled BanksCurrent Accounts 4,243,665 14,634,529

Sub-Total 4,341,774 14,718,073

B. Loans and AdvancesLoans & Advances to Employees 71,050 93,036

Advances recoverable in cash or in kind or for value to be received

Advances to Suppliers / Services / Others 13,937 155,325Advance Payment of Tax including TDS 366,751 659,017Deposits with port and Customs Authorities 581,371 717,811Deposits with others 4,917,260 4,294,063Prepaid Expenses 796,333 539,485

Fringe Benefit Tax - 1,228,106

Sub-Total 6,746,702 7,686,843

Total 11,088,476 22,404,916




Rupees RupeesSchedule 7 - Current Liabilities and Provisions

Current LiabilitiesSundry Creditors Small Scale Industries Nil Nil Others * 3,188,944,936 2,482,848,399

Other Liabilities 6,654,320 853,364 Interest accrued but not due 2,204,497 2,203,911

3,197,803,753 2,485,905,674

Provisions - Taxation 117,064 117,064 - Fringe Benefit Tax - 110,156 - Provident fund 386,675 56,574 - Other staff benefit schemes 2,405,874 1,338,294

Total 3,200,713,366 2,487,527,762 * Includes amount due to Nagarjuna Fertilizers and Chemicals Ltd., the Holding Company - Rs.14,78,18,771/- (Previous year Rs.57,19,46,838/-). Deposit from Tamil Nadu Industrial Development Corporation Ltd. Rs.23,20,00,000/-.(Previous year Rs.23,20,00,000)

Schedule 8 - Miscellaneous Expenditure(to the extent not written off or adjusted)

Preliminary Expenses 327,089,929 327,089,929

Total 327,089,929 327,089,929

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SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH 2007

SCHEDULE 9 – Accounting Policies and Notes to Accounts I Significant Accounting Policies:

1. General:

The Company follows accrual system of accounting and recognizes the income and expenditure on accrual basis unless otherwise stated. The accounts are prepared on historical cost convention.

2. Fixed Assets:

a. Fixed assets are stated at historical cost less depreciation. b. Borrowing Costs incurred on acquisition of Qualifying Assets are

Capitalised.

3. Foreign Currency Transactions:

The transactions in foreign currencies remaining outstanding at the end of the year are translated at the exchange rates prevailing on the date of the Balance Sheet or at the rate of exchange fixed under contractual agreements. Exchange gain/ loss on transactions relating to liabilities incurred to acquire fixed assets is treated as an adjustment to the cost of fixed assets. Exchange gains and losses on foreign exchange transactions other than those relating to fixed assets are adjusted in the profit and loss account.

4. Expenditure pending allocation:

Expenditure during construction period other than those directly related to an asset is included under “Expenditure pending allocation” and is allocated to various fixed assets at the time of commencement of commercial production, as determined in accordance with the Generally Accepted Accounting Principles.

5. Depreciation on Fixed Assets:

Depreciation on fixed assets is provided on straight-line method at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956.

6. Retirement Benefits:

The company’s liability towards gratuity and superannuation benefits of eligible employees is covered by a policy with LIC and the annual contributions are paid / provided in accordance with this scheme. Leave encashment is provided on the basis of valuation by independent actuaries, as at date of the Balance Sheet.

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7. Impairment of Assets:

Impairment of an Asset is reviewed and recognized in the event of changes and circumstances that indicate that the carrying amount of an asset is not recoverable. Difference between the carrying amount of an asset and the recoverable amount is recognized as impairment loss in the statement of Profit and Loss in the year of impairment.

8. Contingencies:

Losses arising from claims, litigation, assessments, fines, penalties etc., are provided for when it is probable that a liability may be incurred and the amount can be reasonably estimated.

II. Notes to Accounts: 1. Estimated amount of contracts remaining to be executed on capital account and

not provided (net of advances):

Capital Commitments

For the year ended 31.03.07 (Rupees)


Plant and Machinery Foreign Currency Contracts * Indian Contracts

2,177,063,587107,926,296

2,999,337,704 100,453,154

Technical Services Foreign Currency Contracts ** Indian Technical Services

2,320,582,342186,122,946

931,853,107184,437,720

Land and Site Development

221,633,698

221,245,182

Building and Civil Works

230,652,986

393,211,798

Total

5,243,981,855

4,830,538,665

* Includes difference in foreign exchange translation Rs.429,718,350(Previous Year Rs.774, 231,383) ** Includes difference in foreign exchange translation Rs.116,006,567 (Previous Year Rs.169, 827,455)

Most of the Contracts on capital account have expired. Since the financial closure is expected shortly, the company is renegotiating the terms and most of the contractors have expressed willingness to continue, which are in various stages of finalization. Thereafter, the figures mentioned above may undergo a revision based on the renegotiated contracts.

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2. Contingent Liabilities:

Claims against the company not acknowledged as debts: Rs. 1,65,000 (Previous year – 1,65,000)

3. Financial Statements:

The financial statements for the year have been drawn up as a going concern based on the Management’s assessment of the project after taking into account the following positive developments:

• Project has been appraised by the equity participants and re-appraised by

Industrial Development Bank of India (IDBI) and SBI confirming the commercial viability.

• Achieved 100% equity participation (Rs.1372 crores) with commitments

from leading industrial groups and others in India and Overseas.

• Term loan of Rs.500 crores sanctioned by IDBI. State Bank of India (SBI) has also given sanction for Rs 300 crores and Life Insurance Corporation of India for Rs 85crores. Mandate for syndication given to IDBI and SBI for tying up the balance Rupee term loan of Rs. 1340 crores. ‘In principle’ sanction aggregating Rs.550 crores has been received from some banks and the sanction process for the remaining rupee term loan with other banks is in progress.

• The contracts with ABB Lummus to act as Project Management

Consultants have been renewed. The agreements with other Process Licensors are in the process of revival and are expected to be finalized soon.

• Marketing of company’s products in the domestic and overseas markets

have been tied up with oil companies comprising of reputed public and private sector companies.

• Equipment stored at Cuddalore and ports in Europe are subjected to

regular inspection and technical experts have certified the good condition of the equipment.

• The Company has obtained and is in the process of obtaining statutory clearances and approvals.

Despite the delay in execution of the Project, in view of the positive developments during the year as stated above, the Management perceives that the project is viable and is confident of implementation of the Project.

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4. Share Capital

During the year, pursuant to Resolution passed at 15th Annual General Meeting held on 25th September 2006, the Authorised Share Capital of the Company has been increased from 1,200,000,000 equity shares of Rs.10/- each aggregating to Rs.12,000,000,000/- to 2,000,000,000 equity shares of Rs.10/- each aggregating to Rs.20,000,000,000/-.

5. i. Secured Loans:

a) Rupee Term Loan from Exim Bank is secured by mortgage of immovable properties and hypothecation of the Company’s movable fixed assets both present and future, including movable Plant & Machinery, appliances, furniture, vehicles, machinery spares and stores, tools and accessories, whether or not installed. The loan is further secured by exclusive pledge of equity shares of the Company held by Nagarjuna Fertilizers and Chemicals Limited of aggregate face value of Rs. 90 crores.

b) Overdraft from Karur Vysya Bank Limited for interest due and UTI Bank Limited resulting out of devolvement of foreign Letters of Credit opened by the respective Banks are secured by a charge created by way of hypothecation of refinery equipment imported under Foreign Letters of Credit opened with the respective Banks. The charge is ranking pari-passu with other lenders.

c) Overdraft from Indian Overseas Bank resulting out of devolvement of foreign

Letters of Credit opened by the Bank is secured by a charge created by way of hypothecation of all the Company’s movable assets and properties present and future, whether or not installed including movable plants, machineries, goods, semi-finished and finished goods, consumable stores and spares, stock in trade, goods in process, movables in transit, bills receivables and book debts. The charge is ranking pari-passu with other lenders.

All the above loans are further secured by Corporate Guarantee of Nagarjuna Fertilizers and Chemicals Limited, the holding company.

d) Vehicle Loan from ICICI Bank is secured by the hypothecation of the Car purchased.

ii. UTI Bank has filed an application with Debt Recovery Tribunal (DRT) in June

2005, for recovery of its dues. The Company is in the process of raising the loan required in full (including UTI Bank loan portion) for the Project and accordingly mandated IDBI and SBI for syndication. The Company is confident of achieving financial closure during the year 2007-08,which will enable the Company to settle the dues to UTI Bank in full.

iii. Of the loan outstanding, Exim Bank has agreed to convert Rs.28 crores into

convertible debentures.

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6. Land:

Land totaling to 509 acres has been acquired directly by the Company. State Industries Promotion Corporation of Tamil Nadu Limited (SIPCOT) has acquired 736 acres of land for handing over to the company. The company has made a part payment, which is included under Capital Work in Progress. On payment of balance amount, the same will be transferred / leased to the Company.

7. Equipment:

The Company has entered into an agreement with Uhde GmbH in February 1996 for supply, dismantling, packing, storage and transportation of Mobil Refinery Equipment at a cost of DM.284.11 Million. On payment of DM 133.43 Million (equivalent to Rs.299.76 Crores), Uhde GmbH dispatched part of the equipment, which is received and stored at Bonded Ware House at Company’s Plant site at Cuddalore. Against the balance due, the Company had already paid an advance of DM 48.49 Million (equivalent to Rs. 115.99 Crores) leaving an outstanding of DM 102.19 Million (equivalent to Rs. 302.72 Crores). The rest of equipment, for which the amount is outstanding, is retained at European Ports by Uhde GmbH at the risk and responsibility of the Company. The Company has subsequently entered into further agreement(s) for storage of the rest of equipment at European Ports, which inter alia provides for ownership rights and in case of non-payment of dues to Uhde GmbH, disposal after giving notice to the Company. The agreement for Storage was valid upto 31st March 2007 and the Company has requested Uhde GmbH to extend the agreement for storage till 30th June 2007 and the Company is confident of getting a positive response from them. Considering the fact that Uhde GmbH has only constructive right of ownership and disposal of equipment in the event of non payment of storage charges and based on legal opinion, the amount of Euro 14.67 Million (equivalent to Rs.85.02 Crores) due to Uhde GmbH by the Company has been recognised in the Books of account. Uhde GmbH has agreed for conversion of Euro 14.65 Million aggregating Rs. 84.88 Crores into Equity, which will be effected by the Company after obtaining necessary approvals.

8. Balances in the accounts of Suppliers, Advances Recoverable and Other receivables are

subject to confirmation.

9. Managerial Remuneration:

Particulars

Managing Director



Salary 32,85,484 24,00,000Perquisites 13,79,668 11,10,828Contribution to Provident Fund and other funds

5,20,248 3,81,692

Total 51,85,400 38,92,520

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10.. Auditors’ Remuneration:

S. No Particulars For the year ended 31.03.2007 (Rupees)


a) Statutory Audit 4,97,920* 4,00,000

b) Certification 5,612 33,629

c) Out of pocket expenses 89,792 66,280 Total 5,93,324 4,99,909

* Includes service tax of Rs.48,960/- relating to previous year. 11. CIF value of Imports - Nil (Previous year- Nil) 12. Expenditure in Foreign Currency:

Particulars For the year ended 31.03.2007 (Rupees)


a) Foreign Travel 10,67,572 14,00,999

b) Storage charges etc. 8,59,82,561 23,97,39,721

c) Engineering Services 7,02,60,250 5,38,90,000

d) Interest Charges NIL 11,92,07,204

e) Syndication Fee 20,26,500 NIL

f) Books and Periodicals 5,702 5,747

Total 15,93,42,585 41,42,43,671

13. Additional information pursuant to the Provisions of Paragraphs 3 &4 – C of Part –

II of Schedule – VI of the Companies Act 1956 is not furnished since it is not applicable.

14. Related party transactions: 1. Names of related parties and description of relationship.

a) Holding Company Nagarjuna Fertilizers and Chemicals Limited

b) Fellow Subsidiaries

Jai Prakash Engineering & Steel Company Limited c) Key Management Personnel

(i ) Shri. S Rammohan (Managing Director) (iii) Shri. K S Raju (Director) (iv) Shri K.Rahul Raju (Director) (v) Shri P.P.Singh (Director)

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2. Related party transactions are as under:

(In Rupees) Sl. No

Nature of transaction

Holding Company 2006-2007

Key Mgmt. Personnel 2006-2007

Holding Company 2005-2006

Key Mgmt. Personnel 2005-2006

01. 02.

Finance: Share Application Money Advances received Remuneration to Key Management Personnel

35,30,53,162

14,78,18,771

5,185,400

2,00,00,000 42,32,62,327

-

- -

38,92,520

15. Profit and Loss account has not been prepared as the project is under

Implementation. 16. Figures of previous year have been re-grouped wherever necessary to conform to current year’s presentation / classification.

___________________________________________________________________ Signatures to Schedules “1” to “9”.

As per our report attached to the Balance sheet For M BHASKARA RAO & CO For and on behalf of the Board Chartered Accountants Dr.Abid Hussain K. Muralidhar Chairman Partner Shri. K S Raju Shri Minoo R Shroff Shri S Ramasundaram

Shri Shankarnarayan R Rao Place : Hyderabad Directors Date : April 26, 2007 S Rammohan

Managing Director

Rs. In Lacs

Particulars Amount Amount Amount Amount

A.Cash flow from Investing activities :

Purchase of Fixed Assets (16.15) (7.09) Capital Work in progress (10,888.77) (2,114.49) Expenditure pending allocation (net) (5,527.64) (3,692.03) Sale of Fixed Assets 1.65 0.77 Misc Expenditure incurred (40.18) Adjustment towards Current Liablities 7,141.25 5,075.75

Net Cash used in investing activities (9,289.66) (777.27)

B.Cash flow from financing activitiesShare Capital 9,250.00 200.00 Proceeds / (Repayment) from long term borrowings (64.10) 690.13

Net Cash from financing activities 9,185.90 890.13

Net increase / (Decrease) in cash and cash equivalent (103.76) 112.86

Cash and cash equivalent as on 01.04.2006 147.18 34.32

Cash and cash equivalent as on 31.03.2007 43.42 147.18

As per our report attached For and on behalf of the BoardFor M Bhaskara Rao & Co.,Chartered Accountants Dr.Abid Hussain

ChairmanV K MuralidharPartner Shr KS Raju

Shri Minoo R ShroffShri S RamasundaramShri Shankarnarayan R Rao

Place: Hyderabad DirectorsDate: April26,2007


2007 2006

NAGARJUNA OIL CORPORATION LIMITEDCASH FLOW STATEMENT FOR THE YEAR ENDED 31st March,2007

auditor s report - nagarjuna fertilizers

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