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Auditor Report of Madras Fertilizers Ltd.

Mar 31, 2023

Madras Fertilizers Limited Report on Audit of the Standalone Ind AS Financial Statements

Opinion

We have audited the accompanying Standalone Ind AS financial statements of Madras Fertilizers Limited (referred to as the âCompanyâ) which comprises the Balance Sheet as at March 31,2023, the Statement of Profit and Loss (including other comprehensive income), Statement of Cash Flows and Statement of changes in Equity for the year then ended, and notes to the standalone financial statements, including 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, the aforesaid standalone financial statements give the information, in the manner so required, and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Companies Act 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (âIND ASâ) and other accounting principles generally accepted in India, of the state of affairs of the company as at March 31, 2023, the Profit including other comprehensive income, changes in equity and its cashflows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the 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 together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules 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 opinion.

a. Provision for un-utilized GST Input Tax Credit:

Attention is drawn to the Note No.30.10 to the Standalone Financial Statements. As explained in the said note, the management is of the opinion that sum of Rs.117.02 cr (being the amount net of provision of Rs.48.33 cr) being the GST ITC included under the other current assets is eligible for set-off in full against the output GST liability arising out of sale of products in the future years. Reconciliation of ITC as per books and as per GST records is under progress and effect for any difference will be given on completion of the reconciliation.

b. Penal Interest on GOI Loans:

Attention is drawn to the Note No.30.1.n to the Standalone Financial Statements, wherein the company has made a request to Government of India for the waiver of the interest and penal interest payable on the GOI loans as part of the revival package. Pending the disposal of the revival package, the Company has considered the penal interest at 2.75%, amounting to Rs.311.40 crores upto the financial year ending 31.03.2023 as Contingent Liability only.

c. Attention is drawn to the Significant Accounting Policy on Depreciation on Property, Plant and Equipment

With the feedstock conversion from Naphtha to RLNG, a technical assessment of the useful life of plant and machinery was made and the useful life of Plant and Equipment was extended for a further period of 15 years (except for NPK Plant which has an extended life of 10 years) from 01.04.2021 and depreciation is provided on the extended useful life of the plant and equipment. The depreciation on plant and equipment as per the technical estimate amounted to Rs.7.63 crores for FY 2022-23.

d. Attention is drawn to our remark under the Qualified opinion on Internal Financials Controls over Financial Reporting (Annexure C to our report) regarding inadequate controls on the following:

- GST ITC eligible claim and reconciliation

- Coverage, procedures and frequency of physical verification of inventories

- Scope and coverage of internal audit

Our opinion is not modified in respect of these matters.

our 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 our Audit procedures addressed the key audit matter

Recognition / de-recognition and measurement of Subsidy income and recoverability of subsidy receivables

(Referto Note No.I.G and 18 to the standalone financial statements)

Subsidy income pertaining to Urea and Complex Fertilizers (NPK) is recognised on the basis of the rates notified by the Department of Fertilisers from time to time in accordance with the New Pricing Scheme (NPS) and Nutrient Based Subsidy (''NBS'') policy on the quantity of fertilisers sold by the Company.

Concessions in respect of urea, as notified under the New Pricing Scheme, is recognized when there is a reasonable assurance that the Company will comply with all necessary conditions attached to Subsidy with adjustments for escalation/de-escalation in the prices of inputs and other adjustments, as estimated by the management on every reporting date in accordance with the known policy parameters in this regard.

During the current year ended March 31, 2023, the company has recognised subsidy income of Rs.3,139.30 Crores which constitute significant portion of its revenue from operations. The recognition and realisation of subsidy income depends on the rates and the period for which approval is issued by the GOI.

Government Subsidy Receivables forms a significant part of the Company''s current assets, amounting to Rs.492.80 Crores as at March 31,2023

Our principal audit procedures adopted in relation to recognition of subsidy income in the accounts for the Financial Year 2022-23 were as under:

â¢ We have read the relevant notifications issued by the GOI and discussed with the management, to understand the underlying matters and basis for management judgement and estimates including necessary changes made in estimates to address variations noted in past. Also ascertained the prevailing trade practice in the fertilisers industries for the recognition of Subsidy income;

â¢ We examined the statement showing the sales quantity considered for subsidy income to ensure the quantity were correlated with the actual sales made by the Company. We also verified the quantities sold as reflected in the records of the company were in agreement with the quantities reflected in customer acknowledgements as appeared in the iFMS portal of the Department of Fertilisers on a selective sampling basis keeping in view with the concept of materiality and tested the DBT claims (subsidy claim) made by the Company;

â¢ We reviewed the accuracy of the management estimate of urea concession price in accordance with relevant New Pricing Scheme and tested the escalation/de-escalation adjustments made;

â¢ We assessed the disclosures in the standalone financial statements in this regard;

â¢ Review of subsidy receivable from Department of Fertilizer (i.e. Sovereign Authority) is supported by the approved claims generated from iFMS (Integrated Fertilizer Management System);

â¢ Subsidy income remaining outstanding over significant period are discussed /enquired with management based on follow-up with Department of Fertilizers, Government of India including basis of management judgement and realisation certainty thereof;

Based on the above procedures performed, we ensured that the recognition of Subsidy Income and recoverability of subsidy receivable is in accordance with applicable financial reporting framework and relevant notifications issued by the Department of Fertilizers, GOI and fairly presented in the standalone financial statements.

Information Other than the Standalone Financial Statements and Auditorâs Report Thereon:

The Company''s Board of Directors is responsible for the other information. The other information comprises the information included in the Directors'' Report and Management Discussion and Analysis, but does not include the standalone financial statements and our auditor''s report thereon.

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.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibility of Management for the Standalone Financial Statements:

The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting

principles generally accepted in India, including the Indian Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate implementation and maintenance of 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 financial statement that give a true and fair view and are free from material misstatements, whether due to fraud or error.

In preparing the Standalone financial statements, management is responsible for assessing the Company''s 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 company''s financial reporting process.

Auditorâs Responsibility 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 misstatements, whether due to fraud

or error, and to issue an auditor''s 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 scepticism throughout the audit. We also:

a. Identify and assess the risks of material misstatements 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;

b. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3) (i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether company has adequate internal financial controls system in place and the operating effectiveness of such controls;

c. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

d. Conclude on the appropriateness of management''s 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 Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s 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 auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern;

e. 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 standalone financial statements may be influenced. We consider quantitative materiality and qualitative factors as 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 standalone 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 auditor''s 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.

Other Matters:

1. The company has eleven (11) Marketing Offices (ie., named as regional offices (RO''s) across India, wherein

all the sales related matters are being undertaken. As part of our audit, we have visited and reviewed the operations of one (1) of the RO''s and the operations of the RO are satisfactory in nature.

2. During the audit, we observed that most of charges already satisfied are still appearing in the records of ''Index of charges'' under Ministry of Corporate Affairs (MCA) portal. The company has to take appropriate measures in order to clear the charges which are not live as on date.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements:

1. As required under the directions and sub-directions issued by the Comptroller and Auditor General of India in terms of Sub-section (5) of Section 143 of the Companies Act 2013, we are enclosing our report in ''''Annexure Aâ.

2. As required by the Companies (Auditor''s Report) Order, 2020 (âthe Orderâ) as amended, issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable. Our report thereon is enclosed as âAnnexure Bâ.

3. Non-Compliance of Composition of Board-SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015: The company is not having the required number of Independent Directors on its Board due to vacancy arising out of expiry of term from 6th June, 2019 onwards. (Refer Note No. 30.31 to the Standalone Financial Statements)

4. As required by Section 143(3) of the Act, we report that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. 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 and proper adequate returns have been received from all the regional offices of the company;

c. The Company''s Balance Sheet, the Statement of Profit and Loss (incl. Other Comprehensive income), the Statement of Cash Flows and the Statement of Changes in Equity dealt with by this report are in agreement with the books of accounts;

d. In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with The Companies (Indian Accounting Standards) Rules, 2015, as amended thereon.

e. The provisions of Section 164(2) of the Act in respect of disqualification of directors are not applicable to the Company, being a Government Company in terms of notification no. G.S.R.463 (E) dated 5thJune, 2015 issued by Ministry of Corporate Affairs, Government of India;

f. With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate Report in âAnnexure Câ. Our report expresses a Qualified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting;

g. With respect to the other matters to be included in the Auditors'' Report in accordance with the requirements of section 197(16) of the Act, as amended:

The provisions of Section 197 read with Schedule V of the Act, relating to managerial remuneration are not applicable to the Company, being a Government Company, in terms of Ministry of Corporate Affairs Notification no. G.S.R. 463 (E) dated 5th June, 2015;

h. With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note No.30.1 to the standalone financial statements;

ii. The company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company except the following:

The company is in the possession of the three deposits amounting to Rs.54,000/-, having maturity value of Rs.60,198/- which were seized by the Income Tax department in the course of search and seizure operations carried at the premises of the depositor. The said deposits had matured during 2001, however due to the intimation received from the department, these are neither been enchased nor transferred to the fund in accordance with Companies Act, 2013.

iv. a. The management has represented that, to the best of it''s 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 kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities (âIntermediariesâ), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall,

> directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (âUltimate Beneficiariesâ)or

> provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

b. 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(s) or entity(ies), including foreign entities (âFunding Partiesâ), with the understanding, whether recorded in writing or otherwise, that the company shall,

> directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or

> on behalf of the Funding Party (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

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

v. The company has not declared and/or paid any dividend during the year in accordance with Sec. 123 of the Companies Act, 2013;

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books ofaccount using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

For Chandran and Raman Chartered Accountants Firm Registration No: 000571S

Sd/-

(S Pattabiraman) Partner

Membership No: 014309 UDIN:23014309BGWQJY5738

Place: Chennai

Date: 17.05.2023

Mar 31, 2021

The Members of Madras Fertilizers Limited

Report on Audit of the Standalone Ind AS Financial

Statements

Qualified Opinion

We have audited the accompanying Standalone Ind AS financial statements of Madras Fertilizers Limited (referred to as the "Companyâ) which comprises the Balance Sheet as at March 31,2021, the Statement of Profit and Loss (including other comprehensive income), Statement of Cash Flow and Statement of changes in Equity for the year then ended, and notes to the standalone financial statements, including 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 effects of the matter described in the Basis for Qualified Opinion section of our report, the aforesaid standalone financial statements give the information, in the manner so required, and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Companies Act 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("IND ASâ) and other accounting principles generally accepted in India, of the state of affairs of the company as at March 31,2021, the Profit including other comprehensive income, changes in equity and its cashflows for the year ended on that date.

Basis for Qualified Opinion

1. Goods and Service Tax (GST) Accounting:

Attention is drawn to the Note No.30.11 to the Standalone Financial Statements, wherein it is disclosed that the balance of Input Tax Credit ("ITCâ) available in the books of accounts is higher by 56.83 crores as compared to the balance reflected in the Electronic Credit Ledger maintained in GST portal as on March 31,2021. Pending completion of reconciliation process, identification of entries

requiring correction and its probable impact on the standalone financials'' statements could not be ascertained.

2. Confirmation of Balances:

Attention is drawn to Note No.30.38 to the Standalone Financials Statements, which describes those outstanding balances reflected under Trade receivables (excl. Subsidy receivables from Government), Trade payables and Advance from Customers as on March 31,2021 are subject to confirmation from the parties. The probable impact of this qualification on the standalone financials'' statements could not be ascertained.

Emphasis of Matters:

1. Remote Audit:

The COVID-19 Pandemic has resulted in restriction on physical visit to the client locations and the need for carrying out alternative audit procedures as per the Standards on Auditing prescribed by the Institute of Chartered Accountants of India (ICAI).

As a result of the above, the entire statutory audit of the company carried out based on the data

as provided by the management. This has been carried out based on the advisory on "Specific Considerations while conducting Distance Audit/ Remote Audit/ Online Audit under current Covid-19 situation" issued by the Auditing and Assurance Standards Board of ICAI. We have been represented by the management that the data provided for our audit purposes which we relied as correct, complete, reliable and are directly generated by the accounting system of the company without any further manual modifications.

The financial statements of the company have been thus prepared and presented by the company and audited by us in the aforesaid conditions.

2. Reclassification of Naphtha:

Attention is drawn to Note No. 30.20 to the Standalone Financial Statements, on reclassification of the stock of Naphtha under âAssets Held for Saleâ as not required for the operation of the company due to conversion of feedstock to RLNG during the FY 2019-20. The stock of naphtha held since 2019 got reduced from 4104 MT valued at '' 17.04 Crores to 3799 MT as confirmed by the Surveyor report and Daily Plant Report (DPR) report, as on March 31,2021. The corresponding reduction in quantity valued at '' 1.26 Crores is charged off to the statement of profit and loss account.

3. Rectification of Stores & Spares:

Attention is drawn to Foot Note No.1.b of Note No.29 to the Standalone Financial Statements, wherein the Stores and Spares lying in the inventories consists of negative figures amounting to '' 13.07 Crores due to recognition of issue of items which are not physically available. Further, there is a variation of ''7.18 Crores between the balance as per the Stores Ledger and the Financial Ledger as on the March 31,2021.The management of the company has rectified the above differences in accordance with Ind AS 8- âAccounting Policies, Changes in Accounting Estimates and Errorsâ

4. Refurbishment of NPK A and B Trains:

Attention is drawn to the Note No.30.6 to the Standalone Financial Statements, wherein The NPK Train A and B are not in operation since 2005 whose Gross block is ''29.19 Cr and carrying value as on March 31, 2020 is ''2.22 Cr. During the year the management has derecognised the assets from Property, Plant and Equipment''s (PPE) and classified under "Capital Work-in-progressâ (CWIP) at its carrying value, as no future economic benefits flow to the company until refurbishment is undertaken as proposed by the management.

5. Penal Interest on GOI Loans:

Attention is drawn to the Note No.30.1.C to the Standalone Financial Statements, wherein the company has request Government of India to waive the interest accrued and penal interest on the GOI loans. However, as per the office memorandum, in case of the waiver of penal interest the company is under obligation to pay minimum penal interest @

0.25% p.a., which will arise in the year of waiver.

6. Going Concern:

The Company has accumulated losses amounting to '' 857.37 Cr (PY'' 891.78 Cr) with a negative net worth of ''695.23 Cr (PY'' 729.64 Cr). The current liabilities exceed its current assets by 1078.60 Cr (PY 1056.13 Cr). However, the company has reported a total comprehensive income of '' 34.41 Cr as against the loss of PY '' 148.70 Cr. The company has submitted proposal for restructuring of the loans received from Government of India. However, considering the strategic importance of the industry in which the company operates and constitution of the equity shareholders and stakeholders, the standalone financial statements of the company have been prepared on going concern basis.

Our opinion is not modified in respect of these matters.

Key Audit Matters:

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the year ended March 31,2021. These matters were addressed in the context of our 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 matte In addition to the matters described in the Basis for Qualified Opinion and Emphasis of Matter paragraphs, we have determined the matters described below to be the key audit matters to be communicated in our report.

1. Recognition / de-recognition and measurement of Subsidy income:

(Refer to Note No.I.G and 17 to the standalone financial statements)

Subsidy income pertaining to the Urea and Complex Fertilizers (NPK) is recognised on the basis of the rates notified by the Department of Fertilisers from time to time in accordance with the New Price Scheme (NPS) and Nutrient Based Subsidy (âNBS'') policy on the quantity of fertilisers sold by the Company.

Concessions in respect of urea, as notified under the New Pricing Scheme, is recognized when there is a reasonable assurance that the Company will comply with all necessary conditions attached to Subsidy with adjustments for escalation/ de-escalation in the prices of inputs and other adjustments, as estimated by the management on every reporting date in accordance with the known policy parameters in this regard.

During the current year ended March 31,2021, the company has recognised subsidy income of ''1,147.25 Crores which constitute significant portion of its total revenue. The recognition and realisation of subsidy income depends on the rates and the period for which approval is issued by the GOI.

Considering significant estimates involved, as mentioned above, revenue and profit may

undergo on account of change in such judgements and estimates, we consider this to be area of significance.

Our principal audit procedures in relation to subsidy income recognition include:

? We read the relevant notifications issued by the GOI and discussed with the management, to understand the underlying matters and basis for management judgement and estimates including necessary changes made in estimates to address variations noted in past. Also ascertained the prevailing trade practice in the fertilisers industries;

? We have correlated the sales quantity considered for subsidy income with the actual sales made by the Company. Further, we have also agreed the quantities sold as per the Company books with the customer acknowledgements as per the iFMS portal of the Department of Fertilisers and tested the DBT claims made by the Company;

? Further, we reviewed the accuracy of the management estimate of urea concession price in accordance with relevant New Pricing Scheme and tested the escalation/ de-escalation adjustments made;

? We have enquired from the Management and discussed with those charged with Governance, the appropriateness of the subsidy rates applied to recognise subsidy income;

? We assessed the disclosures in the standalone financial statements in this regard;

Based on the above procedures performed, the recognition of Subsidy Income is in accordance with applicable financial reporting framework and relevant notifications issued by the Department of Fertilizers, GOI and fairly presented in the standalone financial statements.

However, as discussed in the Basis of Qualified Opinion paragraph above, we were unable to obtain sufficient and appropriate audit evidence about the GST Input Tax Credit(''ITC'') reconciliation and the balance confirmations from the Trade receivables (excl. Subsidy receivables from Government), Trade payables and Advance from Customers as on March 31,2021. Accordingly, we are unable to conclude whether or not the other information is materially misstated with respect to these matte Responsibility of Management for the Standalone Financial Statements:

The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("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 including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate implementation and maintenance of 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 financial statement that give a true and fair view and are free from material misstatements, whether due to fraud or error.

Those Board of Directors are also responsible for overseeing the company''s financial reporting process.

Auditorâs Responsibility 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 misstatements, whether due to fraud or error, and to issue an auditor''s 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 scepticism throughout the audit. We also:

b. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether company has adequate internal financial controls system in place and the operating effectiveness of such controls;

c. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

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 matte We describe these matters in our auditor''s 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.

Other Matters:

1. The comparative financial information of the company for the year ended March 31,2020 and opening balance sheet as at April 1,2019 included in these Standalone financial statements, are audited by the predecessor auditor of the company and their report dated Oct 09,2020 and May 27,2019 respectively expressed a modified opinion for the year ended March 31,2020 and an unmodified opinion for the year ended March 31,2019 on those standalone financial statements, as adjusted for the differences in adoption and changing in accounting policies and correction of prior period errors by the company during the period, which have been audited by us.

Further, we would like to draw the inference on the qualification made by the predecessor auditor on the standalone financial statements for the year ended March 31,2020, that was on adoption of Comparable Company Market Multiple Method (CMM) for fair valuation of unquoted equity instruments of Indian Potash Limited. In view of the qualification, the management had adopted the Cost approach (ie., Net Book Value Method) with effect from the FY 2019-20, in line with the practices adopted by the peers in the industry. Accordingly, the standalone financial statements for the year ended March 31,2020 have been restated. Consequently, the impact due to change in the said fair valuation technique had resulted in increase of Net Loss (incl. Other Comprehensive

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 standalone financial statements may be influenced. We consider quantitative materiality at '' 17.50 crores and qualitative factors as 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 standalone financial statements.

Income) and the other equity and reduction in the Non-Current Investments for the year ended March 31,2020 by ''102.70 Cr.

2. The company has eleven (11) Marketing Offices (ie., named as regional offices (RO''s) across India, wherein all the dealers and sales related matters are being undertaken. As a part of our audit, we have visited and reviewed the operations of four (4) of the ROs and the operations of the ROs are satisfactory in nature.

3. At the conclusion of 54th Annual General Meeting of the company held through virtual mode on December 29,2020, the company has distributed SBI gift cards worth of 2000 each in lieu of sweet boxes to all the minority shareholders, who have attended the meeting. The same is prohibited as per clause 14 of Secretarial Standard-2 read with Sec.118(1) of the Companies Act, 2013.In these regards, the Ministry of Corporate Affairs (MCA) has issued a show cause notice against the company and its office

4. During the audit, we observed that most of charges already satisfied are still appearing in the records of âIndex of charges'' under Ministry of Corporate Affairs (MCA) portal. The company has to take appropriate measures in order to clear the charges which are not live as on the date.

5. Due to COVID-19 pandemic, we are unable to attend the physical verification of inventories as a part of our audit procedures. Based on the further audit procedures, we have relied upon the internal auditor''s report for stores and spares and Surveyor''s report for finished goods, work-in progress, raw materials and packing materials. Regarding the stock lying in warehouses, we relied on the management certificate and the same were duly confirmed through the iFMS portal maintained by the Dept. of Fertilizers.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements:

2. As required by the Companies (Auditor''s Report) Order, 2016 ("the Orderâ), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable our report thereon is enclosed as âAnnexure Bâ.

3. As required by Section 143(3) of the Act, we report that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit except as stated in Basis for Qualified Opinion;

b. Except for the effects of matters described in Basis of Qualified Opinion paragraph above, 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 and proper adequate returns have been received from all the regional offices of the company;

d. Except for the effects of matters described in Basis of Qualified Opinion paragraph above, in our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with The Companies (Indian Accounting Standards) Rules, 2015, as amended thereon;

Corporate Affairs Notification no. G.S.R. 463 (E) dated 5th June, 2015;

j. With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note No.30 to the standalone financial statements;

ii. The company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company;

For Anand & Ponnappan Chartered Accountants

FRN000111S

Sd /-

R.Ponnappan

Partner

Place : Chennai MRN 021695

Date : 23.06.2021 UDIN: 21021695AAAADE1065

e. The provisions of Section 164(2) of the Act in respect of disqualification of directors are not applicable to the Company, being a Government Company in terms of notification no. G.S.R.463 (E) dated 5th June, 2015 issued by Ministry of Corporate Affairs, Government of India;

f. With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate Report in "Annexure Câ. Our report expresses a Qualified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting;

g. The matters described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company;

h. The qualification relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Qualified Opinion paragraph above;

i. With respect to the other matters to be included in the Auditors'' Report in accordance with the requirements of section 197(16) of the Act, as amended:

The provisions of Section 197 read with Schedule V of the Act, relating to managerial remuneration are not applicable to the Company, being a Government Company, in terms of Ministry of

Mar 31, 2018

Report on the Financial Statements

We have audited the accompanying financial statements of Madras Fertilizers Limited, Manali, which comprise the Balance Sheet as at March 31, 2018, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and a summary of the significant accounting policies and other explanatory information.

Managementâs Responsibility for the Standalone Financial Statements

The Companyâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditorâs Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. In conducting our Audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder and the Order issued under section 143(11) of the Act.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditorâs judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companyâs preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Companyâs Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by 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 31, 2018; and its Loss, Total Comprehensive Income, the changes in Equity, and Cash Flows for the year ended on that date.

Emphasis of Matter

i. We draw attention to Note 47 regarding

a. Accounting of a sum of Rs.182.13 Crores towards escalation in input prices which has been considered as receivable from Fertilizer Industry Coordination Committee (FICC) for the year ended 31st March 2018 under New Pricing Scheme (NPS) for Urea. Adjustments may arise in future in respect of the above on final payment.

b. Accounting of a sum of Rs.15.71 Crores of subsidy claim for additional fixed cost of Rs.350/MT of Urea as envisaged in the modified NPS III Policy announced by DOF dated April 02, 2014, the notification of which is awaited.

ii. We draw attention to Note 48 regarding balances in Long term borrowings and Other current liabilities from GOI, Trade Receivable/ Payables, Claim recoverable and loans and advances are subject to confirmation and consequential adjustments;

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

Report on Other Legal and Regulatory Requirements

(1) As required by the Companies (Auditorâs Report) Order, 2016 (âthe Orderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the âAnnexure Aâ a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

(2) As required by Section 143 (3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) I n 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;

c) t he Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the books of account;

d) I n our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act.

e) The Ministry of Corporate Affairs has clarified that the provisions of sub section (2) of Section 164 the Companies Act, 2013 are not applicable to Government Companies.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in âAnnexure Bâ.

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

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements.

ii. The Company has made provision, as required under the applicable law and Accounting standards, for material foreseeable losses, if any, on long-term contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the investorâs education and protection fund by the Company.

(3) As required by section 143(5) of the Act, we have considered the directions issued by the Comptroller and Auditor General of India, the action taken thereon and its impact on the accounts and financial statements of the company -âAnnexure Câ

âANNEXURE Aâ TO INDEPENDENT AUDITORSâ REPORT

(Referred to in Paragraph 1 under the heading âReport on Other Legal and Regulatory Requirementsâ of our report of even date on the accounts of Madras Fertilizers Limited, Manali (âthe Companyâ), for the year ended March 31, 2018)

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

(b) According to the information and explanations given to us, physical verification of movable fixed assets is being conducted in a phased manner by the management under a programme designed to cover all the movable fixed assets over a period of three years, which, in our opinion, is reasonable having regard to the size of the Company and nature of its business, last physical verification was done during 2014, and the same is due to be done for 2018. As per the information and explanations provided by the management, the same is in progress as on date. Immovable Fixed Assets like plant and machinery is being inspected every year by an independent chartered engineer.

(c) Title deeds of immovable properties were not provided to us for verification; hence we are unable to comment on the same.

ii) (a) Physical verification of inventories inside factory premises and at Chennai Port has been carried out by a independent surveyor at year end and the physical verification of stocks of stores and spare parts has been conducted by an independent firm of Chartered Accountants on a ongoing basis so as to complete the verification of all items over the period of one year. Finished goods at warehouse are taken as per warehousing certificates. Warehousing certificates has not been received in a few cases, which however is not significant in value.

(b) I n our opinion and according to the information and explanations given to us, the procedures for physical verification of inventory followed by the management were reasonable and adequate in relation to the size of the company and the nature of its business.

(c) I n our opinion, the company has maintained proper records of inventory. We are informed that no major discrepancies were noticed on verification between the physical stock and book records.

iii) According to the information given to us, the Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Therefore clauses (iii) (a), (iii) (b) and (iii)(c) of Paragraph 3 of the Order are not applicable to the Company.

iv) The Company has complied with the provisions of the section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees, and security.

v) According to the information and explanations given to us, the Company has complied with the provisions of Section 73 to 76, other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 2014 with regard to deposits accepted from public. The Company has not accepted any deposits from public during the year within the meaning of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules 2014.

vi) We have broadly reviewed the books of account and records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 prescribed by the Central Government under section 148(1) of the Companies Act, 2013, and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate and complete.

vii) (a) According to the information and explanations given to us, in our opinion, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employeesâ State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Cess and any other statutory dues as applicable to it .

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, duty of Customs, duty of Excise, Value Added Tax, Cess and any other statutory dues were outstanding as at March 31, 2018 for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, there are no dues of Income Tax Act, Excise Duty, Customs Duty, Value Added Tax, Sales Tax and Service Tax which have not been deposited with the appropriate authorities on account of any dispute.

viii) Based on our audit procedures and according to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to a financial institution, bank, or dues to debenture holders except in respect of the default of repayment of principal amount of the following Government of India (GOI) Loans:

Nature of Loan	Year of default	Amount (in Crores)
GOI Loans	2004-05	23.49
GOI Loans	2005-06	23.49
GOI Loans	2006-07	24.89
GOI Loans	2007-08	26.08
GOI Loans	2008-09	27.03
GOI Loans	2009-10	26.44
GOI Loans	2010-11	27.34
GOI Loans	2011-12	28.63
GOI Loans	2012-13	38.33
GOI Loans	2013-14	45.78
GOI Loans	2014-15	32.68
GOI Loans	2015-16	32.68
GOI Loans	2016-17	31.28
GOI Loans	2017-18	30.09
	Total *	418.23

* The above loan consists of Plan loans, Non Plan Loans and Revamp Loans.

ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable.

x) During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no fraud by the Company or any fraud on the Company by its officers or employees has been noticed or reported during the course of our Audit.

xi) In respect of sl. no. (xi), being a Govt. Company, Section 197 of the Companies Act, 2013 is not applicable to the Company in view of Notification no. G.S.R. 463(E) dtd. 05-06-2015

xii) The company is not a Nidhi Company. Therefore clause 3 (xii) of the Companies (Auditorâs Report) Order, 2016 is not applicable to the Company.

xiii) According to the records of the Company examined by us and the information and explanations given to us, there are no related party transactions; accordingly clause (xi) of the Companies (Auditorâs Report) Order, 2016 is not applicable to the Company.

xiv) According to the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review, and therefore clause 3(xiv) of the Companies (Auditorâs Report) Order, 2016 is not applicable to the Company.

xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

xvi) In our opinion and according to the information and explanations given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

âANNEXURE Bâ TO THE INDEPENDENT AUDITORâS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF MADRAS FERTILIZERS LIMITED

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)

We have audited the internal financial controls over financial reporting of M/s Madras Fertilizers Limited (âthe Companyâ) as of March 31, 2018 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managementâs Responsibility for Internal Financial Controls

The Companyâs management 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 companyâs 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.

Auditorsâ Responsibility

Our responsibility is to express an opinion on the Companyâs internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 auditorâs 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 Companyâs internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A companyâs internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companyâs 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 authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companyâs assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

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.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, 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 and jointly controlled companies, which are companies incorporated in India, as of that date.

for J. V. RAMANUJAM & Co.,

Chartered Accountants

FRN: 02947S

(SRI NARAYANA JAKHOTIA)

Chennai Partner

28th May, 2018 M. No: 233192

Mar 31, 2016

The Members of Madras Fertilizers Limited

Report on the Financial Statements

1. We have audited the accompanying financial statements of Madras Fertilizers Limited (âthe Companyâ), which comprise the Balance Sheet as at March 31, 2016, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and the summary of significant accounting policies and other explanatory information.

Managementâs Responsibility for the Financial Statements

2. The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies ( Accounts) Rules 2014. 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 preventing and deducting frauds and other irregularities; section and application of appropriate accounting policies; making Judgment 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditorâs Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the act and the rules made there under.

4. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those

Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation of the financial statements that give true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by companies directors, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Basis for Qualified Opinion

6. Reference is invited to Note 24(A)7(vii) of the Significant Accounting Policies of the Company regarding valuation of inventories, Ammonia is valued at cost which is not in accordance with Accounting Standard 2 (Valuation of Inventories) which requires inventory to be valued at lower of cost and Net Realizable Value (NRV);

7. Reference is invited to Note 24(B)(ii) regarding accounting of a sum of Rs. 882.63 crores towards de-escalation in input prices which has been considered as payable to Fertilizer Industry Coordination Committee (FICC) for the year ended 31st March 2016 under New Pricing Scheme (NPS) for Urea. Adjustments may arise in future in respect of the above on final payment;

8. Reference is invited to Note 29(g) regarding balances in Long term borrowings from GOI, Trade Receivable/ Payables, Claim recoverable and loans and advances are subject to confirmation and consequential adjustments;

The effect of Paragraphs 6, 7 and 8 above on the profit of the Company for the year ended 31^st March 2016 is not ascertainable.

Qualified Opinion

9. Subject to our comments in Para 6 to 8 above, in our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2016;

(b) in the case of the Statement of Profit and Loss, of the LOSS for the year ended on that date; and

Report on Other Legal and Regulatory Requirements

10. As required by the Companies (Auditor''s Report) Order, 2016 (âthe Orderâ) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure âA'' a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

11. As required by Section 143(5) of the Act, we give in Annexure âB'', a statement of matters specified by the Comptroller and Auditor-General of India for the Company.

12. As required by section 143(3) of the Act, we report that

a. we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. i n 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;

c. t he Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. except for the effects of the matters described in the âBasis for Qualified Opinion'' paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) rules, 2014;

e. The Department of Company Affairs has clarified that the provisions of sub section (2) of Section 164 the Companies Act, 2013 are not applicable to Government Companies.

f. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in âAnnexure Câ; and.

g. With respect to the other matters included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to best of our information and according to the explanation given to us:

a. The Company has disclosed the impact of pending litigation on its financial position in its financial statement.

b. The Company has made provision, as required under the applicable law or Accounting Standards, for material foreseeable losses, if any, on long term contracts including derivative contracts.

c. There has been no delay in transferring amounts, required to be transferred, to the investor''s education and protection fund by the Company.

ANNEXURE âAâ TO INDEPENDENT AUDITORSâ REPORT

(Referred to in paragraph 10 under âReport on Other legal and Regulatory Requirementsâ section of our report of even date to the members of MADRAS FERTILIZERS LIMITED on the financial statements of the company for the year ended 31 March 2016)

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

(b) As per the information and explanations given to us, physical verification of fixed assets has been carried out in terms of the phased programme of verification adopted by the company, i.e. once in three years by an independent firm of Chartered Accountants which in our opinion is reasonable having regard to the size of the Company and nature of its assets. We have been informed that discrepancies noticed on physical verification if fixed assets carried out in the past, other than what has been subsequently located, as compared to the books and records were not material.

(c) According to the information and explanation given to us, the title deeds of immovable properties of the Company are held in the name of the Company.

2. (a) Physical verification of inventories inside factory

premises has been carried out by the management at reasonable intervals and the physical verification of stocks of stores and spare parts has been conducted by an independent firm of Chartered Accountants in a phased manner so as to complete the verification of all items over a period of three years. Finished goods are taken as per warehousing certificates. In our opinion, the frequency of verification of inventory is reasonable. Warehousing certificates has not been received in a few cases, which however is not significant in value.

(c) I n our opinion, the company has maintained proper records of inventory. We are informed that no major discrepancies were noticed on verification between the physical stock and book records.

3. (a) The Company has not granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the Register maintained under Section 189 of the Companies Act, 2013. Accordingly, sub Clause (a), and (b) are not applicable.

4. I n our opinion and according to the information and explanations given to us, there are no loans, investments, guarantees and securities in the nature covered under Section 185 and 186 of the Companies Act, 2013 and accordingly Clause (iv) of the Order is not applicable.

5. I n our opinion, the Company has complied with the provisions of Section 73 to 76, other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 2014 with regard to deposits accepted from public. During the year, the Company has not accepted any fixed deposits from public. We are also informed by the Management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or Tribunal and any other relevant authority.

6. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government under Section 148(1) of the Companies Act, 2013 for maintenance of cost records in respect of Chemical Fertilizers and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, carried out a detailed examination of the same.

7. (a) According to the records provided to us, the Company is regular in depositing with the appropriate authorities undisputed statutory dues including provident fund, employees'' state insurance, income- tax, sales tax, customs duty, excise duty, value added tax, cess and other material statutory dues applicable to the Company.

According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were in arrears, as at 31st March 2016 for a period of more than six months from the date they become payable.

b) According to the information and explanations given to us, there are no disputed demands in respect of Income tax, Service tax, Sales tax, Customs duty, Excise duty Sales Tax, Income tax, Provident Fund contribution and other material statutory dues as applicable, which have been deposited with the relevant statutory authority.

However, according to information and explanations given to us, disputed dues of excise duty and Employees Provident Fund and Misc. Provisions Act which have been deposited by the Company and disputed dues of Customs duty, Kerala Value Added Taxes, and Employees State Insurance Act which have not been deposited by the Company are given below:

S No	Name of the statute	Nature of dues/demand	Period of dispute	Amount (Rs lakhs)	Forum where dispute is pending
1.	Central excise act, 1944	With regard to dispute on levy of excise duty for the period from 26.08.1995 to 16.11.2006	1995	542.25	CESTAT
2.	Customs Act	Differential customs duty claimed by Commissioner of Customs	1998	6586.00	Commissioner of Customs (Appeals)
3.	Kerala Value Added Taxes	Levy of VAT on subsidy	2009-10 2010-11	510.57	High Court of Kerala
4.	Employees Provident Fund and Misc. Provisions Act, 1952	Penalty for late remittance	1995-96 to 1996-97	10.97	High Court of Madras
5.	Employees State Insurance Act, 1948	Belated remittance of contribution and levy of interest	Apr 92'' to Sep 95'' Jan 97'' to Jul 99'' 1999-00 2000-01	61.80	ESI Court

8. Based on our audit procedures and according to the information and explanations given to us, the Company has not defaulted in repayment of loans or borrowings to a financial institution, bank, government or dues to debenture holders except in respect of the default of repayment of principal amount of the following Government of India (GOI) Loans:

Nature of Loan	Year of default	Amount (in Crores)
GOI Loans	2004-05	23.49
GOI Loans	2005-06	23.49
GOI Loans	2006-07	24.89
GOI Loans	2007-08	26.08
GOI Loans	2008-09	27.03
GOI Loans	2009-10	26.44
GOI Loans	2010-11	27.34
GOI Loans	2011-12	28.63
GOI Loans	2012-13	38.33
GOI Loans	2013-14	45.78
GOI Loans	2014-15	32.68
GOI Loans	2015-16	32.68
Total		356.86

There were no debenture holders at any time during the year.

9. I n our opinion, and according to the information and explanations given to us, the Company has obtained term loans during the year are applied for the purposes for which it has been sanctioned. During the year, there were no money raised by way of initial public offer or further public offer.

10. According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.

11. According to the information and explanations given to us and based on our examination of the records of the Company, provisions of Section 197 read with Schedule V to the Act are not applicable to the Company and accordingly Clause (xi) of the Order is not applicable.

12. In our opinion, the company is not a Nidhi Company. Therefore the provisions of clause 3 (xii) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.

13. In our opinion, there are no transactions with the related parties and accordingly Clause (xiii) of the order is not applicable.

14. According to the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and therefore, the provisions of clause 3(xiv) of the Companies (Auditor''s Report) Order, 2016 are not applicable to the Company.

15. According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

16. In our opinion and according to the information and explanations given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

ANNEXURE âBâ TO THE INDEPENDENT AUDITORâS REPORT

(Referred to in paragraph 11 of the Auditorsâ Report of even date to the members of MADRAS FERTILIZERS LIMITED on the financial statements for the year ended March 31, 2016)

General Directions under section 143(5) of The Companies Act, 2013 (Applicable from the accounts of 2015-16)

1. Whether the Company has clear title/ lease deeds for freehold and leasehold land respectively? If not, please state the area of freehold and leasehold land for which title/lease deeds are not available.

The Company has a clear title in respect of all freehold land held by it.

2. Whether there are any cases of waiver/write off of debts/ loans/interest etc. If yes, the reasons therefore and the amount involved.

As informed to us by the Management, no waiver of debt/loan/ interest has been sanctioned to the Company by Government of India or any third party against debts due by the Company.

3. Whether proper records are maintained for inventories lying with third parties & assets received as gift/grant(s) from Govt. or other authorities.

As informed to us by the Management, there are no amounts of inventories lying with third parties. Further, no assets have been received as gift from Government or other authorities.

ANNEXURE âCâ TO INDEPENDENT AUDITORSâ REPORT

(Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Act") referred to in paragraph 12(f) of the Auditorsâ Report of even date to the members of MADRAS FERTILIZERS LIMITED on the financial statements for the year ended March 31, 2016)

1. We have audited the internal financial controls over financial reporting of MADRAS FERTILIZERS LIMITED (âthe Companyâ) as of 31 March 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managementâs Responsibility for Internal Financial Controls

2. The Company''s management 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 (âICAI''). 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 company''s 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.

Auditorsâ Responsibility

3. Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the âGuidance Noteâ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

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

Meaning of Internal Financial Controls over Financial

Reporting

5. A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s 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 company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls

Over Financial Reporting

6. 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.

Opinion

7. I n our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2016, 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 B THIAGARAJAN & CO.

Chartered Accountants

Firm Regn. No. 004371S

Ram Srinivasan

Chennai Partner

May 27, 2016 M No. 220112

Mar 31, 2015

Report on the Financial Statements

1. We have audited the accompanying financial statements of Madras Fertilizers Limited ("the Company"), which comprise the Balance Sheet as at March 31,2015, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and the summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

2. The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules 2014. 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 preventing & detecting frauds and other irregularities; section and application of appropriate accounting policies; making Judgement 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the act and the rules made thereunder.

4. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation of the financial' statements that give true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Company's directors, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Finanical Statements..

Basis for Qualified Opinion

6. Reference is invited to Note 24(B)(iii) regarding accounting of a sum oft 23.80 crores towards additional compensation under Nutrient Based Subsidy (NBS) for producing P&K fertilizers which has been accrued as receivable from Department of Fertilizers (DOF) during the current financial year ended 31st March 2015. As the proposal to extend the scheme for additional compensation is still under consideration by DOF as at the year end, in our opinion, the sum of Rs. 92.00 crores (including Rs. 68.20 Crores pertaining to previous year ended 31st March 2014) is not recoverable as it is not in accordance with the principles of revenue recognition as laid down in Accounting Standard 9-Revenue Recognition and to that extent has the effect of understatement of loss for the year ended 31st March 2015 and overstatement of claims recoverable (forming part of Note 16 - Other Current Assets) as at 31st March 2015;

Paragraph 6 has the effect of understatement of the current year's loss to the extent oft 23.80 crores and has the effect of overstatement of net worth and overstatement of claims recoverable (forming part of Note 16 - Other Current Assets) to the extent oft 92.00 Crores;

7. Reference is invited to Note No. 24(A)(7)(vii) of the Significant Accounting Policies of the Company regarding valuation of inventories, Ammonia is valued at cost which is not in accordance with Accounting Standard 2 (Valuation of Inventories) which requires inventory to be valued at lower of cost and Net Realisable Value (NRV);

8. Reference is invited to Note 24(B)(0) regarding accounting of a sum ofX 159.17 crores towards de- escalation in input prices which has been considered as payable to Fertilizer Industry Coordination Committee (FICC) for the year ended 31st March 2015 under New Pricing Scheme (NPS) for Urea. Adjustments may arise in future in respect of the above on final payment;

9. Reference is invited to Note 29(h) regarding balances in Long term borrowings from GOI, Trade Receivable/ Payables, Claim recoverable and loans and advances are subject to confirmation and consequential adjustments;

The effect of Paragraphs 7,8 and 9 above on the profit of the Company for the year ended 31st March 2015 is not ascertainable.

Emphasis of matter

10. Without qualifying our opinion, reference is invited to Note 10(b) regarding value of land at Manali New Town in respect of which the Company is yet to acquire title as at the year end.

Qualified Opinion

11. Subject to our comments in Para 6 to 9 above, in our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31,2015;

(b) in the case of the Statement of Profit and Loss,-of the LOSS for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

12. As required by the Companies (Auditor's Report) Order, 2015 ("the Order`) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

13. As required by Section 143(5) of the Act, we give in Annexure A, a statement of matters specified by the Comptroller and Auditor-General of India for the Company.

14. As required by section 143(3) of the Act, we report that

a. we have sought and obtained, all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. 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;

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. except for the effects of the matters described in the 'Basis for Qualified Opinion' paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) rules, 2014;

e. The Department of Company Affairs has clarified that the provisions of sub section (2) of Section 164 of the Companies Act, 2013 are not applicable to Government Companies.

f. With respect to the other matters included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to best of our information and according to the explanation given to us:

1. The Company has disclosed the impact of pending litigation on its financial position in its financial statement.

2. The Company has made provision, as required under the applicable law or Accounting Standards, for material foreseeable losses, if any, on long term contracts including derivative contracts.

3. There has been no delay in transferring afnounts, required to be transferred, to the investor's education and protection fund by the Company.

ANNEXURE TO AUDITORS' REPORT

(Referred to in paragraph 12 of the Auditors' Report of even date to the members of MADRAS FERTILIZERS LIMITED on the financial statements for the year ended March 31, 2015)

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

(b) As per the information and explanations given to us, physical verification of fixed assets has been carried out in terms of the phased programme of verification adopted by the company, i.e. once in three years by an independent firm of Chartered Accountants which in our opinion is reasonable having regard to the size of the Company and nature of its assets. We have been informed that discrepancies noticed on physical verification of fixed assets carried out in the past, other than what has been subsequently located, as compared to the books and records were not material.

2. (a) Physical verification of inventories inside factory premises has been carried out by the management at reasonable intervals and the physical verification of stocks of stores and spare parts has been conducted by an independent firm of Chartered Accountants in a phased manner so as to complete the verification of all items over a period of three years.' Finished goods are taken as per warehousing certificates. In our opinion, the frequency of verification of inventory is reasonable. Warehousing certificates has not been received in a few cases, which however is not significant in value.

(b) Reference is drawn to Note 24(B)(viii)(b) forming part of Accounts regarding evaluation of effectiveness of inventory management by an outside professional agency. As the exercise has not been completed on the date of this report, we are unable to express an opinion on whether any adjustments would be required in the books of account.

(c) In our opinion, the company has maintained proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3. (a) As per information furnished 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 189 of the Act during the year.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures, commensurate with the size of the company and the nature'of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit; no major weaknesses have been noticed in the internal control systems.

5. In our opinion, the Company has complied with the provisions of Section 73 to 76, other relevant provisions of the Act and the Companies (Acceptance of Deposits) Rules, 2014 with regard to deposits accepted from public. During the year, the Company has not accepted any fixed deposits from public. We are also informed by the Management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or Tribunal and any other relevant authority.

6. We have broadly reviewed the books of account maintained by the Company in resptect of products pursuant to the order of Central Government for maintenance of cost records prescribed under Section 148(1) of the Companies Act, 2013 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we are not required to and have not carried put any detailed examination of such records.

7. (a) According to the records provided to us, the company is generally regular in depositing with the appropriate authorities, undisputed statutory dues to ESI, EPS, Excise duty, Customs duty Sales Tax, Income tax, Provident Fund contribution, Service tax and other material statutory dues applicable to it. We are informed that the Company has no liability towards Wealth tax, Cess and Investor education and protection fund.

According to the information and explanations given to us, there are no undisputed demands in respect of Income tax, Service'tax, Sales tax, Customs duty, Excise duty, Provident Fijpd contribution and other material statutory dues as applicable which were in arrears as at 31st March 2015 for a period of more than six months from the date they became payable, which have not been deposited with the relevant statutory authority.

(b) According to the information and explanations given to us, there are no disputed demands in respect of Income tax, Service tax, Sales tax,, Customs duty, Excise duty, Provident Fund contribution and other material statutory dues as applicable, which have been deposited with the relevant statutory authority. However, according to information and explanations given to us, disputed dues of Excise duty, Employees Provident Fund,and Misc. Provisions Act and Tamil Nadu General Sales Tax which have been deposited by the Company and disputed dues of Customs duty, Kerala Value Added Taxes, and Employees State Insurance Act which have not been deposited by the Company are given below:

S No Name of the statute Nature of dues/demand

With regard to dispute on levy of Central excise act, 1. excise duty for the period from 1944 26.08.1995 to 16.11.2006

Levy of additional tax @1%u/s Tamil Nadu General 2. Sales tax act, 1959 3(4) of TNGST Act 1995-96 and 1996-97

Differential customs duty claimed 3. Cuustoms Act by Commissioner of Customs

Kerala Value Added 4. Levy of VAT on subsidy Taxes

Employees Provident 5. Fund and Misc. Penalty for late remittance Provisions Act, 1952

6. Employees State Belated remittance of contribution Insurance Act,1948 and levy of interest

Name of the Statute Period of dispute Amount Forum where dispute (Rs. lakhs) dispute is pending

Central excise act,1944 1995 542.25 CESTAT

Tamil Nadu General Sales tax act, 1959 2003 47.05 Sales tax appellate Tribunal

Customs Act 1998 6586.00 Commissioner of Customs (Appeals)

Kerala Value Added Taxes 2009-10 510.57 High Court of Kerala 2010-11

Employees Provident Fund and Misc Provisions Act, 1952 1995-96 to 1996-97 10.97 High Court of Madras

Employees State Insurance Act, 1948 Apr 92'to Sep 95' Jan 97'to Jul 99' 61.80 ESI Court 1999-2000, 2000-01

c) Transfer of any amount to Investor education and protection fund in accordance with the relevant provisions of the Companies Act, 1956 and rules made thereunder is not applicable to the company during the period under review.

8. Subject to the effect of our comments in Paragraphs 6 to 9 described in the 'Basis for Qualified Opinion' of the main audit report, the Company has accumulated losses as at the end of the financial year of Rs. 517.14 crores which has exceeded 50 per cent of the net worth. Subject to the effect of our comments in Paragraphs Â to 9 described in the 'Basis for Qualified Opinion' of the main audit report, the Company has incurred cash loss in.the current financial year but has not incurred cash loss in the immediately preceding financial year.

9. Based on our verification and according to the information and explanations given by the management, the Company has not defaulted in repayment of dues to its financial institutions and banks.

10. In our opinion and according to the information and explanation given to us, the Company has not given any guarantee for loans taken by others from Â£anks / financial institutions.

11. In our opinion, and according to the information and explanations given to us, the Company has obtained term loanS(during the year are applied for the purpose for which it has been sanctioned.

12. During the course of examination of the books and records of the Company carried out in accordance with the generally accepted auditing procedures in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have been informed of such cases by the management.

For BTHIAGARAJAN & CO.

Chartered Accountants

Firm Regn. No. 004371S

Ram Srinivasan

Chennai Partner

21st July 2015 M No. 220112

Mar 31, 2014

1. We have audited the accompanying financial statements of Madras Fertilizers Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and the summary of signifi cant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

2. Management is responsible for the preparation of these fi nancial statements that give a true and fair view of the fi nancial position, fi nancial performance and cash fl ows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act") read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the fi nancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error.

5. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

6. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Basis for Qualified Opinion

7. Reference is invited to Note 24(B)(iii) regarding accounting of a sum of Rs 20.80 crores towards additional compensation under Nutrient Based Subsidy (NBS) for producing P&K fertilizers which has been accrued as receivable from Department of Fertilizers (DOF) during the current fi nancial year ended 31st March 2014. As the proposal to extend the scheme for additional compensation is still under consideration by DOF as at the year end , in our opinion, the sum of Rs 68.20 crores (including Rs 47.40 Crores pertaining to previous year ended 31st March 2013) is not recoverable and to that extent has the effect of overstatement of Profit for the year ended 31st March 2014 and claims recoverable (forming part of Note 16 - Other Current Assets) as at 31st March 2014

Paragraphs 7 has the effect of overstatement of the current year''s Profit to the extent of Rs 20.80 crores and has the effect of overstatement of net worth and overstatement of claims recoverable (forming part of Note 16 - Other Current Assets) to the extent of Rs 68.20 Crores.

8. Reference is invited to Note No. 24(A)(7)(vii) of the Signifi cant Accounting Policies of the Company regarding valuation of inventories, Ammonia is valued at cost which is not in accordance with Accounting Standard 2 (Valuation of Inventories) which requires inventory to be valued at lower of cost and Net Realisable Value (NRV)

9. Reference is invited to Note 24(B)(ii) regarding accounting of a sum of Rs 32.99 crores towards escalation in input prices which has been considered as receivable from Fertilizer Industry Coordination Committee (FICC) for the year ended 31st March 2014 under New Pricing Scheme (NPS) for Urea. Adjustments may arise in future in respect of the above on fi nal payment.

10. Reference is invited to Note 29(e) regarding balances in Long term borrowings from GOI, Trade Receivable/ Payables, Claim recoverable and loans and advances are subject to confi rmation and consequential adjustments.

The effect of Paragraphs 8, 9 and 10 above on the Profit of the Company for the year ended 31st March 2014 is not ascertainable.

Emphasis of matter

11. Without qualifying our opinion, reference is invited to Note 10(b) regarding value of land at Manali New Town in respect of which the Company is yet to acquire title as at the year end.

Qualifi ed Opinion

12. Subject to our comments in Para 7 to 11 above, in our opinion and to the best of our information and according to the explanations given to us, the fi nancial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

(b) in the case of the Statement of Profit and Loss, of the PROFIT for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash fl ows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

13. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specifi ed in paragraphs 4 and 5 of the Order.

14. Further to our comments in Para 7 to 11 above, as required by section 227(3) of the Act, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. 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;

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. except for the effects of the matters described in the ''Basis for Qualifi ed Opinion'' paragraph, in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956 read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013;

e. The Department of Company Affairs has clarifi ed that the provisions of clause (g) of sub section (1) of Section 274 the Companies Act, 1956 are not applicable to Government Companies.

ANNEXURE TO AUDITORS'' REPORT (Referred to in paragraph 13 of the Auditors'' Report of even date to the members of MADRAS FERTILIZERS LIMITED on the fi nancial statements for the year ended March 31, 2014).

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

(b) As per the information and explanations given to us, physical verifi cation of fixed assets has been carried out in terms of the phased programme of verifi cation adopted by the company, i.e. once in three years by an independent fi rm of Chartered Accountants which in our opinion is reasonable having regard to the size of the Company and nature of its assets. We have been informed that discrepancies noticed on physical verifi cation if fixed assets carried out in the past, other than what has been subsequently located, as compared to the books and records were not material.

(c) During the year the company has not disposed off any substantial / major part of fixed assets.

2. (a) Physical verifi cation of inventories inside factory premises has been carried out by the management at reasonable intervals and the physical verifi cation of stocks of stores and spare parts has been conducted by an independent fi rm of Chartered Accountants in a phased manner so as to complete the verifi cation of all items over a period of three years. Finished goods are taken as per warehousing certifi cates. In our opinion, the frequency of verifi cation of inventory is reasonable. Warehousing certifi cates has not been received in a few cases, which however is not signifi cant in value.

(b) In our opinion and according to the information and explanations given to us, the procedures for physical verifi cation of inventory followed by the management were reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion, the company has maintained proper records of inventory. In our opinion, discrepancies noticed on physical verifi cation of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3. (a) As per information furnished to us, the Company has not granted any loans, secured or unsecured to companies, fi rms or other parties covered in the register maintained under Section 301 of the Act during the year.

(b) The company has not taken any loans, secured or unsecured from fi rms, or other parties covered in the register maintained under Section 301 of the Act.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures, commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weaknesses have been noticed in the internal control systems.

5. (a) According to the information and explanations provided by the management, there are no contracts or arrangements that need to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956. Accordingly Clause 4(v)(a) & (b) of the Order are not applicable.

6. In our opinion, the Company has complied with the provisions of Section 58A and other relevant provisions of the Act with regard to deposits accepted from public. During the year, the Company has not accepted any fixed deposits from public. Based on records produced to us, there has not been any default on payment of deposits and hence provisions of Section 58AA of the Companies Act are not attracted.

7. The Company has an in-house formal internal audit system, which in our opinion, is required to be strengthened by taking into account the size and nature of its business with professionally qualifi ed persons. However, internal controls and checks are adequate and the frequency of such checks is in line with the generally accepted procedures.

8. We have broadly reviewed the books of account maintained by the Company in respect of products pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we are not required to and have not carried out any detailed examination of such records.

9. (a) According to the records provided to us, the company is generally regular in depositing with the appropriate authorities, undisputed statutory dues to ESI, EPS, Excise duty, customs duty, Sales Tax, Income tax,

Provident Fund contribution, service tax and other material statutory dues applicable to it. We are informed that the Company has no liability towards wealth tax, Cess and Investor education and protection fund.

(b) According to the information and explanations given to us, there are no undisputed demands in respect of Income tax, Service tax, Sales tax, Customs duty, Excise duty Sales Tax, Income tax, Provident Fund contribution and other material statutory dues as applicable which were in arrears as at 31st March 2014 for a period of more than six months from the date they became payable, which have not been deposited with the relevant statutory authority.

(c) According to the information and explanations given to us, there are no disputed demands in respect of Income tax, Service tax, Sales tax, Customs duty, Excise duty Sales Tax, Income tax, Provident Fund contribution and other material statutory dues as applicable, which have been deposited with the relevant statutory authority. However, according to information and explanations given to us, disputed dues of excise duty and Tamil Nadu General Sales Tax which have been deposited by the Company and disputed dues of Customs duty, Kerala Value Added Taxes and Employees State Insurance Act which have not been deposited by the Company are given below:

S Period of Name of the statute Nature of dues/demand No dispute

1. Central excise act, 1944 With regard to dispute on levy of excise 1995 duty for the period from 26.08.1995 to 16.11.2006

2. Tamil Nadu General Sales tax Levy of additional tax @ 1% u/s 3(4) of 2003 act, 1959 TNGST Act 1995 -96 and 1996-97

3. Customs Act Differential customs duty claimed by 1998 Commissioner of Customs

4. Kerala Value Added Taxes Levy of VAT on subsidy 2009-10

2010-11

5. Employees Provident Fund and Penalty for late remittance 1995-96 to Misc. Provisions Act, 1952 1996-97

6. Employees State Insurance Act, Belated remittance of contribution and Apr 92'' to Sep 95'' 1948 levy of interest Jan 97'' to Jul 99''

1999-00 2000-01

Name of the statue Forum where Amount dispute is (Rs. lakhs) pending

Central excise act, 1944 542.25 CESTAT

Tamil Nadu General Sales tax act, 1959 47.05 Sales tax appellate Tribunal

Customs Act 6586.00 Commissioner of Customs (Appeals)

Kerala Value Added Taxes 510.57 High Court of Kerala

Employees Provident Fund and Misc. Provisions Act, 1952 10.97 High Court of Madras

Employees State Insurance Act, 1948 62.77 ESI Court

Subject to the effect of our comments in Paragraphs 7 to 10 described in the ''Basis for Qualifi ed Opinion'' of the main audit report, the Company has accumulated losses as at the end of the fi nancial year of Rs 380.72 crores which has exceeded 50 per cent of the net worth. Subject to the effect of our comments in Paragraphs 7 to 10 described in the ''Basis for Qualified Opinion'' of the main audit report, the Company has not incurred cash losses in the financial year and in the immediately preceding financial year.

11. Based on our verification and according to the information and explanations given by the management, the Company has not defaulted in repayment of dues to its financial institutions and banks.

12. Based on our examination and according to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares and other securities.

13. The Company is not a Chit / Nidhi / Mutual benefit fund / Society and as such clause (xiii) of the Order is not applicable.

14. The Company is not dealing or trading in shares, securities, debentures and other investments. Therefore provisions of Clause (xiv) of paragraph 4 of the order are not applicable.

15. In our opinion and according to the information and explanation given to us, the Company has not given any guarantee for loans taken by others from banks / fi nancial institutions. Therefore, clause (xv) of paragraph 4 of the Order is not applicable.

16. According to the information and explanations given to us, no fresh term loans were raised during the fi nancial year.

17. On the basis of our examination of books and records provided and the basis of explanation provided to us and on an overall examination of the balance sheet of the Company, we report that no short term funds have been used for long term purposes.

18. The company has not allotted any shares on preferential basis to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19. During the year, the company has not issued any secured debentures.

20. The Company has not raised any money by public issue during the year.

21. During the course of examination of the books and records of the Company carried out in accordance with the generally accepted auditing procedures in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have been informed of such cases by the management.

For B THIAGARAJAN & CO.

Chartered Accountants Firm Regn. No. 004371S

Ram Srinivasan

Chennai Partner

July 28, 2014 M No. 220112

Mar 31, 2012

We have audited the attached Balance Sheet of Madras Fertilizers Ltd, Chennai as at 31 st March, 2012 and also the Profit and Loss and Cash Flow Statements 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.

We conducted our audit in accordance with 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 mis-statement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order 2003, issued by the 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.

2. Further to our comments in paragraph 1 above:

a) We have obtained all the information and explanation, which to the best of our knowledge and belief were necessary for the purpose of our audit.

b) In our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, Profit and Loss and Cash Flow Statements dealt with by this report are in agreement with the books of accounts,

d) The Department of Company Affairs has clarified that the provisions of clause (g) of sub section (1) of section 274 of the Companies Act 1956 are not applicable to Government Companies.

e) The Company has not complied with Accounting Standard on Valuation of Inventories (AS-2) and Accounting Standard on Provisions, Contingent Liabilities and Contingent Assets (AS-29). The impact of the above non-compliance is detailed in Paras f (i) to f (v) below. Subject to the foregoing, in our opinion, the Balance Sheet and Profit and Loss and Cash Flow Statements dealt with by this report comply with the Accounting Standards referred to in section 211 (3C) of the Companies Act 1956.

f) Attention is invited to the following:

i) Note No. 24 (B) (ii) regarding accounting of a sum of Rs. 65.69 crores towards escalation in input prices. Adjustments may arise in future in respect of the above, on final payment.

ii) Note No. 24 (B) (vi) regarding a sum of Rs. 63.09 lakhs deposited till date with ESI authorities for which, in our opinion, a provision should have been made. The current year's profit is overstated and accumulated losses are understated and the short term loans and advances are overstated to the same extent.

iii) In our opinion, the following amounts included in Other Current Assets (Claims Recoverable) should have been charged off to Profit and Loss Statement:

- Rs. 28.93 Lakhs under Price Concession Scheme

- Rs. 0.70 Lakhs due from Customs Department (m.v. Pan Queen)

The current year's profit is overstated and the accumulated losses are understated and other Current Assets are overstated to the extent of Rs. 29.63 Lakhs.

iv) Note No. 24 (A) 7 of the Significant Accounting Policies of the Company regarding Valuation of Inventories, Ammonia is valued at cost which is not in accordance with Accounting Standard-2 (Valuation of Inventories) which requires inventory to be valued at lower of Cost and Net realizable value (NRV).

v) Balances in the Long Term Borrowings from GOI, Trade Receivables/Payables, Claims Recoverable and Loans and Advances are subject to confirmation and consequential adjustments (Refer Note No. 29(c)).

The effect of paras f (i), (iv) and (v) on the Accounts is not ascertainable and paras f(ii) and (iii) above have the net effect of overstatement of profit and understatement of accumulated losses.

The effect of paras f (i), (iv) and (v) on the Accounts is not ascertainable and paras f(ii) and (iii) above have the net effect of overstatement of profit and understatement of accumulated losses.

g) In our opinion and to the best of our information and according to the explanations given to us, subject however to para (f) above, the said Balance Sheet and Profit and Loss statement read together with the Significant Accounting Policies and notes thereon, give the information required by the Companies Act 1956 in the manner so required and also 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 the company's affairs as at 31st March 2012,

ii. in the case of the profit and loss statement, of the PROFIT for the year ended on that date, and

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

ANNEXURE TO THE AUDITOR'S REPORT (CARO)

With reference to the Annexure referred to in paragraph 1 of the Auditors' Report of even date to the Members of the Madras Fertilizers Ltd on the accounts for the year ended 31st March 2012, we report that:

1. a. The Company is maintaining proper records showing particulars including quantitative details and situation of fixed assets.

b. As informed to us, the fixed assets have been physically verified under a phased programme (i.e.) once in three years by an independent firm of Chartered Accountants which in our opinion is reasonable having regard to the size of the Company and nature of its assets. We have been informed that discrepancies noticed on physical verification of fixed assets carried out in the past, other than what has been subsequently located, as compared to the books and records were not material.

c. The Company has not disposed substantial part of the fixed assets.

2. a. Physical verification of inventories inside factory premises has been carried out by the management at reasonable intervals and the physical verification of stocks of stores and spare parts has been conducted by an independent firm of Chartered Accountants in a phased manner so as to complete the verification of all items over a period of three years. Finished goods are taken as per warehousing certificates. In our opinion, the frequency of verification of inventory is reasonable. Warehousing Certificate has not been received in few cases, which however is not significant in value.

b. In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3. As per the information furnished, the Company has not granted or taken any loans, secured or unsecured, to/ from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under Clause 4(iii)(b)/(c)/(d)/(e)/(f) and (g) of the Order is not applicable to the Company.

4. In our opinion, and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of inventories and fixed assets and for the sale of goods and services. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have been informed of any instance of major weakness in the aforesaid internal control procedure.

5. According to the information and explanations given to us, there are no transactions that need to be entered into a register in pursuance of Section 301 of the Companies Act, 1956. Accordingly Clause 4(v) (a) & (b) of the Order is not applicable.

6. In our opinion, the company has complied with the provisions of Section 58A and other relevant provisions of the Act with regard to deposits accepted from public. Based on records produced to us there has not been any default on payment of deposits and hence provision of Section 58 AA of the Companies Act is not attracted.

7. The Company has an in house internal audit system, which needs to be adequately strengthened commensurate with the size of the company and nature of its business, with professionally qualified persons.

8. We have broadly reviewed the books of account maintained by the Company in respect of its products pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209(1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we are not required to and have not carried out any detailed examination of such records.

9. a. Based on our review, it is noticed that there is no delay in remittance of undisputed statutory dues to ESI and EPS. Excise Duty, Customs Duty and Service Tax have generally been remitted in time. We are informed that the Company has no liability towards Wealth Tax, Cess and Investor Education and Protection Fund.

9. b. According to information and explanations given to us, no undisputed amount payable in respect of Income tax, Wealth tax, Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31 st March 2012 for a period of more than six months from the date they became payable.

9. c. Based on review, the dues of Excise Duty and Customs Duty, which have not been and the sales tax which has been deposited on account of disputes and the forum where the dispute is pending, are as given below:

SI. Name of the Nature of Period Amount Forum No. Statute the Dues/ of (Rs. where Demand Dispute Lakhs) Dispute is pending

1. Central Excise Act, With regard 1995 542.25 Appeal to 1944 to dispute CESTAT on levy of under Excise Duty Progress for the period from 26.08.1995 to 16.11.2006.

2. Tamil Nadu General Levy of 2003 47.05 Sales Tax Sales Tax Act,1959 additional Appellate tax @1%u/s Tribunal 3 (4) of TNGST Act 1995-96 and 1996-97

3. Customs Act Differential 1998 6586.00 Commissioner Customs Duty of Customs Claimed by (Appeals) Commissioner of Customs

10. The Company has accumulated losses of Rs. 505.20 crores at the end of the financial year, which is more than its net worth. However, the Company has not incurred cash losses in the current and immediately preceding financial year.

11. The Company has not defaulted in repayment of dues to financial institutions or banks or debenture holders.

12. Based on our examination of the records and the information and explanations given to us, the Company has not granted any loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities.

13. In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) order, 2003 are not applicable to the Company.

14. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the order are not applicable to the Company.

15. According to the information and explanations given to us, the Company has not given any guarantee of loan taken by others from banks or financial institutions.

16. According to the information and explanations given to us, the term loans raised during the year have been applied for the purpose for which they were raised.

17. 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 have not been used for long term uses.

18. According to the information and explanations given to us, during the year, the Company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act.

19. According to the information and explanations given to us, during the year the Company has not issued debentures.

20. The Company has not raised any money by public issues during the year covered by our report.

21. To the best of our knowledge and belief, according to the information and explanations given to us, no material fraud on or by the Company was noticed or reported during the year.

For A.V.DEVEN & CO Chartered Accountants FRN 000726S

CA. R. RAGHURAMAN Partner M. No.201760

Chennai May 15, 2012

Mar 31, 2011

We have audited the attached Balance Sheet of Madras Fertilizers Ltd, Chennai as at 31st March, 2011 and also the Profit and Loss Account and 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.

We conducted our audit in accordance with 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 mis-statement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditor's Report) Order 2003, issued by the Central Govt, 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.

2. Further to our comments in paragraph 1 above:

a) We have obtained all the information and explanation, which to the best of our knowledge and belief were necessary for the purpose of our audit.

b) In our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts.

d) The Department of Company Affairs has clarified that the provisions of clause (g) of sub section (1) of section 274 of the Companies Act 1956 are not applicable to Government Companies.

e) The Company has not complied with Accounting Standard on Valuation of Inventories (AS-2) and Accounting Standard on Provisions, Contingent Liabilities and Contingent Assets (AS-29). The impact of the above non-compliance is detailed in Para f (i) to f (v) below. Subject to the foregoing, in our opinion, the Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in section 211 (3C) of the Companies Act 1956.

f) Attention is invited to the following:

i) Note No.20B (ii) regarding accounting of a sum of Rs. 50.99 crores towards escalation in input prices. Adjustments may arise in future in respect of the above, on final payment.

ii) Note No.20B (vi) regarding a sum of Rs. 63.09 lakhs deposited till date with ESI authorities for which, in our opinion, a provision should have been made. The current year's profit is overstated and accumulated losses are understated and the loans and advances are overstated to the same extent.

iii) In our opinion, the following long pending amounts included in Loans and Advances (Claims Recoverable) should have been charged off to Profit and Loss Account:

- Rs. Rs. 19.25 Lakhs from S&G Engineers

- Rs. Rs. 28.93 Lakhs under Price Concession Scheme

- Rs. Rs. 35.72 Lakhs receivable from South Central Railway

- Rs. Rs. 0.70 Lakhs due from Pan Queen

- Rs. Rs. 0.67 Lakhs due from Radiant Star

The current year's profit is overstated and the accumulated losses are understated and loans and advances are overstated to the extent of Rs. 85.27 Lakhs.

iv) Note No. 20A (7) of the Significant Accounting Policies of the company regarding Valuation of Inventories, Ammonia is valued at cost which is not in accordance with Accounting Standard - 2 (Valuation of Inventories) which requires inventory to be valued at lower of Cost and Net realizable value (NRV).

v) Balances in the Accounts of loans from GOI / Financial Institutions, Debtors, Creditors, Claims Recoverable and other parties included under Loans and Advances are subject to reconciliation, confirmation and consequential adjustments (Refer Note No.25(b)).

The effect of para f (i),(iv) and (v) on the accounts is not ascertainable and para f (ii) and f (iii) above has the net effect of overstatement of profit, understatement of accumulated losses and overstatement of loans and advances by Rs. 148.36 lakhs.

g) In our opinion and to the best of our information and according to the explanations given to us, subject however to para (f) above, the said Balance Sheet and Profit and Loss Account read together with the Significant Accounting Policies and notes thereon, give the information required by the Companies Act 1956 in the manner so required.and also 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 the Company's affairs as at 31.3.2011.

ii. In the case of the Profit arid Loss Account, of the PROFIT for the year ended on that date, and

iii. In the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT (CARO) (REVISED)

With reference to the Annexure referred to in paragraph 1 of the Auditors' Report of even date to the Members of the Madras Fertilizers Ltd on the accounts for the year ended 31st March 2011, we report that

1. a. The Company is maintaining proper records showing

particulars including quantitative details and situation of fixed assets, other than location details in respect of furniture and fixtures and office equipments.

b. As informed to us, the fixed assets have been physically verified under a phased programme (i.e.) once in three years by an independent firm of Chartered Accountants which in our opinion is reasonable having regard to the size of the Company and nature of its assets. We have been informed that discrepancies noticed on physical verification of fixed assets carried out in the past, other than what has been subsequently located, as compared to the books and records were not material.

c. During the year, the Company has not disposed off a substantial part of its fixed assets.

2. a. Physical verification of inventories inside factory premises has been carried out by the management at reasonable intervals and the physical verification of stocks of stores and spare parts has been conducted by an independent outside agency in a phased manner so as to complete the verification of all items over a period of three years. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively. In our opinion, the frequency of verification of inventory is , reasonable. Third party confirmation has not been received in few cases, which however is not significant in value.

b. In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3. As per the information furnished, the Company has not granted or taken any loans, secured or unsecured, to/from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under Clause 4(iii)(b)/(c)/(d)/(e)/(f) and (g) of the Order is not applicable to the Company.

4. In our opinion, and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of inventories and fixed assets and for the sale of goods and services. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have been informed of . any instance of major weakness in the aforesaid internal control procedure.

5. According to the information and explanations given to us, there are no transactions that need to be entered into a register in pursuance of Section 301 of the Companies Act, 1956. Accordingly Clause 4(v)(a) and 4(v)(b) of the Order is not applicable.

6. In our opinion, the company has complied with the provisions of Section 58A and other relevant provisions of the Act with regard to deposits accepted from public. Based on records produced to us there has not been any default on payment of deposits and hence provision of Section 58 AA of the Companies Act is not attracted.

7. The Company has an in house internal audit system, which needs to be adequately strengthened commensurate with the size of the company and nature of its business, with professionally qualified persons.

8. We have broadly reviewed the books of account maintained by the Company in respect of its product / Fertilizers pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we are not required to and have not carried out any detailed examination of such records.

9. a. Based on our review, it is noticed that there is no delay in remittance of undisputed statutory dues to ESI and EPS, Excise Duty, Customs Duty and Service Tax have generally been remitted in time. We are informed that the company has no liability towards Wealth Tax, Cess and Investor Education and Protection Fund.

b. According to information and explanations given to us, no undisputed amount payable in respect of Income-tax, Wealth tax, Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31st March 2011 for a period of more than six months from the date they become payable.

c. Based on review, the dues of Excise Duty and Customs Duty, which have not been and the sales tax which has been deposited on account of disputes and the forum where the dispute is pending, are as given below:

SI. Name of Nature of the Dues/ Period of Amount No. the Statute Dispute [Rs.Lakhs]

1. Central Excise With regard to dispute 1995 542.25 Act, 1944 on levy of Excise Duty for the period from 26.08.1995 to 16.11. 2006.

2. Tamil Nadu Levy of additional tax Dec 2003 47.05 General Sales @ 1% u/s3(4) of TNGST Tax Act,1959 Act 1995 - 96 and 1996-97.

3. Customs Differential Customs 1998 6,586.00 Act Duty claimed by Commissioner of Customs

Name of Forum where Dispute the Statute is pending

Central Excise Appeal to CESTAT Act, 1944 under Progress

Tamil Nadu Sales Tax Appellate General Sales Tribunal TaxAct,1959

Customs Act Commissioner of Customs (Appeals)

10. The company has accumulated losses of Rs. 617.19 Cr at the end of the financial year, which is more than its net worth. The company has not incurred cash loss in the current and intermediately proceeding financial year.

11. The Company has not defaulted in repayment of dues to Financial Institutions or bank or debenture holders. Ã

12. Based on our examination of the records and the information and explanations given to us, the Company has not granted any loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities.

13. Clause 4(xiii) of the Order is not applicable to the Company as the Company is not a chit fund company or nidhi /mutual benefit fund / society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xfv) of the order are not applicable to the Company.

15. According to the information and explanations given to us, the Company has not given any guarantee of loan taken by others from banks or financial institutions.

16. According to the information and explanations given to us, the term loans raised during the year have been applied for the purpose for which they were raised.

17. 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 have not been used for long term uses.

18. The company has not made any preferential altotment of shares during the year.

19. The company has not issued any debentures during the year.

20. The company has not raised any money by public issues during the year covered by our report.

21. To the best of our knowledge and belief according to the information and explanations given to us, no material fraud on or by the Company was noticed or reported during the year.

For A.V. DEVEN & CO Chartered Accountants FRN000726S

CA. R. RAGHURAMAN Partner M.No.201760

Chennai June 10,2011

Mar 31, 2010

We have audited the attached Balance Sheet of Madras Fertilizers Ltd, Chennai as at 31s1 March, 2010 and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with 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 mis- statement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order 2003, issued by the Central Govt, 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.

2. Further to our comments in paragraph 1 above:

a) We have obtained all the information and explanation, which to the best of our knowledge and belief were necessary for the purpose of our audit.

b) In our opinion proper books of accounts as required by law have been kept by the Company so far as appears from our examination of those books.

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts.

d) The Department of Company Affairs has clarified that the provisions of clause (g) of sub section (1) of section 274 of the Companies Act 1956 are not applicable to Government Companies.

e) The Company has not complied with Accounting Standard on Valuation of Inventories (AS-2) and Accounting Standard on Provisions, Contingent Liabilities and Contingent Assets (AS-29). The impact of the above non-compliance is detailed in Para f (i) to f (viii) below. Subject to the foregoing in our opinion,

the Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in section 211 (3C) of the Companies Act 1956.

f) Attention is invited to the following:

i) Note No.20B (ii) regarding accounting of a sum of Rs. 28.62 crores towards escalation in input prices. Adjustments may arise in future in respect of the above, on final payment.

ii) Note No.20B (vii) regarding a sum of Rs. 63.09 lakhs deposited till date with ESI authorities for which in our opinion a provision should have been made. The current years profit is overstated and accumulated losses are understated and the loans and advances are overstated to the same extent.

iii) Note No.20B (viii) regarding a sum of Rs. 1.16 crores paid till date as interim award towards gratuity to past employees, for which in our opinion a provision should have been made. The current years profit is overstated and accumulated losses are understated and the loans and advances are overstated to the same extent.

iv) Note No.20B (ix) regarding a sum of Rs. 81.74 lakhs retained under claims recoverable which in our opinion should have been charged to Profit and Loss Account. The current years profit is overstated and accumulated losses are understated and the loans and advances are overstated to the same extent.

v) In our opinion, the following long pending amounts included in Loans and Advances (Claims Recoverable) should have been charged off to Profit and Loss Account:

- Rs. 19.25 Lakhs from S&G Engineers

- Rs. 28.93 Lakhs under Price Concession Scheme

- Rs. 35.72 Lakhs receivable from South Central Railway

- Rs. 0.70 Lakhs due from Pan Queen Rs. 0.67 Lakhs due from Radiant Star

The current years profit is overstated and the accumulated losses are understated and loans and advances are overstated to the extent of Rs. 85.27 Lakhs.

vi) Sundry Debtors include a sum of Rs. 1.03 Crores for which the company holds no security other than

debtors personal security, for which in our opinion provision should have been made. The current years profit is overstated and accumulated losses are understated and Debtors are overstated to the same extent.

vii) Current Liabilities include an amount of Rs. 81.11 Crores (Rs. 64.59 crores - VAT credit claimed from the sales tax authorities for tax paid on inputs and Rs. 16.52 crores - output tax payable) which has not been deducted from cost of purchases. Also, the inventory has been valued without excluding the VAT credit available. Both are in contradiction of Accounting Standard - 2 (Valuation of Inventories) end adjustment may arise in future in respect of the above, depending upon the final VAT claim adjustment/setoff based on the sales in the subsequent year.

viii) Note No. 20A (7) of the Significant Accounting Policies of the company regarding Valuation of Inventories, Ammonia is valued at cost which is not in accordance with Accounting Standard.- 2 (Valuation of Inventories) which requires inventory to be valued at lower of Cost and Net realizable value (NRV).

The effect of para f (i),(vii) and (viii) on the accounts is not ascertainable and para f (ii) to f (vi) above has the net effect of overstatement of profit, understatement of accumulated losses, and overstatement of loans and advances by Rs.4.49 crores.

g) Attention is also invited to Note No. 20 (A) (1), significant accounting policies of the Company, wherein it is stated that the Companys financial statements have been prepared on "GOING CONCERN" basis. In our opinion, the concept of "GOING CONCERN" is no more valid as far as this Company is concerned having regard to the following:

i. The accumulated losses as at 31.3.2010 stands at Rs. 787.05 Crores as against the net owned shareholders funds of Rs. 174.53 Crores.

ii. The net worth has been fully eroded and the Company has consistently made significant losses in the past, upto the year ended 31.03.2009.

iii. The company has stopped production of its major product - NPK Complex Fertilizer under its Brand name, since July 2007.

iv. The company has made a reference to BIFR under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the same has been registered

as Case No. 501/2007. In the hearing held on 2nd April 2009, BIFR declared the company as a sick company as per the provisions of SICA and appointed State Bank of India as Operating Agency for further course of action.

In view of the above, we are of the opinion that the Companys accounts should NOT have been compiled on "GOING CONCERN" basis. Had the Company not followed GOING CONCERN ACCOUNTING, there would have been significant adjustments to the assets and liabilities as on 31st March 2010, which may result in further erosion in the net worth of the Company. The impact of above on the accounts is not ascertainable at this stage.

h) In our opinion and to the best of our information and according to the explanations given to us, in view of the adverse opinion formed by us vide para (f) and (g) above, the said Balance Sheet and Profit and Loss Account does not give the information required by the Companies Act 1956 in the manner so required and also does not give a true and fair view in conformity with the accounting principles generally accepted in India: -

i. In case of Balance Sheet, the state of affairs of the Company as at 31.3.2010.

ii. In case of Profit and Loss Account, the PROFIT of the Company for the year ended on that date, and

iii. In case of Cash Flow Statement, of the Cash Flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT With reference to the Annexure referred to in paragraph 1 of the Auditors Report of even date to the Members of the Madras Fertilizers Ltd on the accounts for the year ended 31st March 2010, we report that:

1. a. The Company is maintaining proper records showing

particulars including quantitative details and situation of fixed assets, other than location details in respect of furniture and fixtures and office equipments.

b. As informed to us, the fixed assets have been physically verified under a phased programme (i.e.) once in three years by an independent firm of Chartered Accountants which in our opinion is reasonable having regard to the size of the Company and nature of its assets. We have been informed that discrepancies noticed on physical verification of fixed assets carried out in the past, other than what has been subsequently located, as compared to the books and records were not material.

c. During the year, the Company has not disposed off a substantial part of its fixed assets.

2. a. Physical verification of inventories inside factory premises has been carried out by the management at reasonable intervals and the physical verification of stocks of stores and spare parts has been conducted by an independent outside agency in a phased manner so as to complete the verification of all items over a period of three years. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively. In our opinion, the frequency of verification of inventory is reasonable. Third party confirmation has not been received in few cases, which however is not significant in value.

b. In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

3. As per the information furnished, the Company has not granted or taken any loans, secured or unsecured, to/

from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under Clause 4(iii)(b)/(c)/{d)/ (e)/(f) and (g) of the Order is not applicable to the Company.

4. In our opinion, and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and nature of its business with regard to purchase of inventories and fixed assets and for the sale of goods and services, Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have been informed of any instance of major weakness in the aforesaid internal control procedure.

5. According to the information and explanations given to us, there are no transactions that need to be entered into a register in pursuance of Section 301 of the Companies Act, 1956. Accordingly Clause 4(v)(a) and 4(v)(b) of the Order is not applicable.

6. In our opinion, the company has complied with the . provisions of Section 58A and other relevant provisions

of the Act with regard to deposits accepted from public. Based on records produced to us there has not been any default on payment of deposits and hence provision of Section 58 AA of the Companies Act is not attracted.

7. The Company has an in house internal audit system, which needs to be adequately strengthened commensurate with the size of the company and nature of its business, with professionally qualified persons.

8. We have broadly reviewed the books of account maintained by the Company in respect of its product / Fertilizers pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209(1 )(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we are not required to and have not carried out any detailed examination of such records.

9. a. Based on our review, it is noticed that there has

been a delay in remittance of following undisputed statutory dues: ESI and EPS. Excise Duty, Customs Duty and Service Tax have generally been remitted in time. We are informed that the company has no liability towards Wealth Tax, Cess and Investor Education and Protection Fund.

b. According to information and explanations given to us, no undisputed amount payable in respect of Income- tax, Wealth tax, Service Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31st March 2010 for a period of more than six months from the date they become payable.

c. Based on review, the dues of Excise Duty, Sales Tax and Customs Duty, which have not been deposited on account of disputes and the forum where the dispute is pending, are as given below:

Sl. Name of Nature of the Dues / Demand Period of No. the Statute Dispute

1. Central Excise With regard to dispute on levy of Excise Duty 1995 Act, 1944 for the period from 26.08.1995 to 16.11.2006.

2. Tamil Nadu Levy of additional tax @ 1% u/s Dec 2003 General Sales 3(4) of TNGST Act 1995-96 and 96-97. Tax Act, 1959

3. Customs Differential Customs Duty 1998 Act claimed by Commissioner of Customs

Sl. Name of Amount Forum where No. the Statute

[Rs.in Lakhs] Dispute is pending

1. Central Excise 542.25 Commissioner

Act, 1944 (Appeal)

2. Tamil Nadu 47.05 Sales Tax Appellate

General Sales Tax Act,1959 Tribunal

3. Customs 6,586.00 Commissioner

Act of Customs (Appeals)

10. The company has accumulated losses at the end of the financial year, which is more than its net worth. The company has not incurred cash loss during the year ended 31st March 2010.

11. The Company has defaulted in payment of dues to Financial Institutions. As on 31sl March 2010, the principal and interest overdues due to Financial Institutions amounted to Rs.89.09 Crores and Rs. 104.96 Crores respectively. The period of default ranges from 1 to 66 months for principal overdues and 1 to 70 months for interest overdue.

12. Based on our examination of the records and the information and explanations given to us, the Company has not granted any loans and/or advances on the basis of security by way of pledge of shares, debentures and other securities.

13. Clause 4(xiii) of the Order is not applicable to the Company as the Company is not a chit fund company or nidhi /mutual benefit fund / society.

14. According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the order are not applicable to the Company.

15. According to the information and explanations given to us, the Company has not given any guarantee of loan taken by others from banks or financial institutions.

16. According to the information and explanations given to us, the term loans raised during the year have been applied for the purpose for which they were raised.

17. 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 have not been used for long term uses.

18. The company has not made any preferential allotment of shares during the year.

19. The company has not issued any debentures during the year.

20. The company has not raised any money by public issues during the year covered by our report.

21. To the best of our knowledge and belief according to the information and explanations given to us, no material fraud on or by the Company was noticed or reported during the year.

For S. VENKATRAM & CO.,

Chartered Accountants

R.VAIDYANATHAN

Chennai Partner

19th May 2010 M.No.18953

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