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Auditor Report of Nagarjuna Agrichem Ltd.

Mar 31, 2015

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

Management's Responsibility for the 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 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 specifi ed 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 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.

Auditors' Responsibility:

Our responsibility is to express an opinion on these standalone fi nancial 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.

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 auditors' 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 Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal fi nancial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's 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 financial statements.

Opinion:

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid 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 31st March, 2015, and its Profit and its cash fl ows for the year ended on that date.

Emphasis of Matters:

We draw attention to the following matters in the Notes to the fi nancial statements:

Note No. 36 regarding claim lodged with the insurers based on the provisional assessment of loss made by the management of the fire accident in Block No.5 of the Srikakulam factory during the financial year 2012-13 in respect of totally/ partially damaged assets, inventory and other risks and treatment of the same as receivable pending final assessment and acceptance of the same by the insurers, on the date of the Balance Sheet dealt with by this report.

Our opinion is not modified in respect of these matters.

Report on other Legal and Regulatory Requirements:

1. 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.

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

d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

f) 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:

a. The Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 31 to the financial statements;

b. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

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

2. As required by the Companies (Auditor's report) Order 2015, issued by the Government of India in terms of Section 143(11) of the Act we annex hereto a Statement on the matters specified in paragraphs 3 and 4 of the said Order.

ANNEXURE TO THE AUDITORS' REPORT

Referred to in paragraph 2 under the heading of "Report on Other Legal and Regulatory Requirements" of our report of even date.

1. According to the information and explanations furnished to us,

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

b) The said Fixed assets have been physically verified by the management during the year based on a phased programme of verification over a period of three years, which in our opinion is reasonable having regard to the size of the Company and the nature of its fixed assets. No material discrepancies were noticed in respect of the fixed assets verified during the year and the records in respect thereof.

2. According to the information and explanations furnished to us,

a) Physical verification of its inventories has been conducted during the year by the management. In our opinion, the frequency of the verifi cation is reasonable.

b) In our opinion, the procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business.

c) In our opinion, the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of the inventories 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. According to the information and explanations furnished to us, the company has granted unsecured loan to a Company covered in the register maintained under Section 189 of the Companies Act 2013, in respect of which,

a) The receipt of the principle amounts and interest are not regular and

b) The Principle amount is due to an extent of Rs. 167lakhs out of which Rs. 83 Lakhs is overdue as at the date of Balance Sheet.

c) The interest amount is due to the extent of Rs. 57.99Lakhs which includes overdue amount of Rs. 55.53 Lakhs as at the date of Balance Sheet.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. In our opinion and according to the information and explanations given to us, we have not come across any major weaknesses in the internal control system that continues to remain uncorrected.

5. According to the information and explanations furnished to us, the Company has not accepted deposits covered by sections 73 to 76 of the Companies Act 2013 and the rules framed there under.

6. We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the 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. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

7. a) According to the information and explanations furnished to us, the Company is regular in depositing undisputed statutory dues including Provident Fund, Employees' State Insurance, Income Tax, Wealth Tax, Sales Tax, Value Added Tax, Service Tax, Customs Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities; there are no arrears of such statutory dues as at 31st March, 2015 which are outstanding for a period of more than six months from the date they became payable.

b) According to the information and explanations furnished to us, there are no dues of Income Tax, Sales Tax, Wealth Tax, Service Tax ,Custom Duty ,Excise Duty , or Cess which have not been deposited on account of any dispute pending except the following:

Nature of the Forum where Statute Dues dispute is pending

Finance Act, 1994 Service Tax Commissioner (including (Appeals), Visakhapatnam interest & CESTAT, Bangalore penalty)

Central Excise Act, Excise duty CESTAT, Bangalore 1994 (including interest & Additional C penalty) ommissioner (Appeals) Visakhapatnam

Sales Tax Laws / Sales Tax / VAT Commissioner VAT Laws (Appeals) Additional Commissioner (Appeals) Income Tax Act, Income tax Income Tax Appellate 1961 Tribunal, Hyderabad DCIT

Dues–Net of Statute Period to which amount paid the amount relates under protest (Rs. In Lakhs)

Finance Act, 1994 2012-13,2013-14 8.77 2009-10 4.17

Central Excice Act,1994 2004-05, 2006-07, 8.13 2006-07, 2007-08 2006-07 12.14

Sales Tax Laws/ 2009-10, 2010-11, Nil VAT Laws 2011-12 & 2012-13 2012-13 Nil

Income Tax Act, 1961 2004-05, 2005-06, Nil 2006-07, 2007-08 2009-10 Nil

c) According to the information and explanations furnished to us, the amount required to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 2013 and the Rules made there under has been transferred to the said fund within time.

8. The Company has no accumulated losses as at 31st March, 2015. The Company has not incurred cash losses during the financial year under report but it did in the immediately preceding financial year

9. According to the information and explanations furnished to us, the Company has not defaulted in repayment of dues to any financial institutions or banks.

10. According to the information and explanations furnished to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

11. According to the information and explanations furnished to us, Term loans were applied for the purpose for which the loans were obtained.

12. In accordance with the information and explanations given to us and on our examination of the Company's books and records, no fraud on or by the Company has been noticed or reported during the year.

For M.BHASKARA RAO & CO;

Chartered Accountants

Firm Registration Number. 000459 S

Place : Hyderabad (V.Raghunandan)

Date : 30th May, 2015 Partner

Membership No. 26255


Mar 31, 2014

We have audited the accompanying Financial Statements of Nagarjuna Agrichem Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the 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 Standards referred to in sub Section (3C) of Section 211 of Companies Act, 1956. This responsibility includes the design, implementation and maintenance of internal control 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.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial 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 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 auditors'' judgement, 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 and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. 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 financial statements.

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

Opinion

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, 2014

(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.

Emphasis of Matter

We draw attention to following notes to the financial statements:

- Note No.38 regarding claim lodged with insurers based on the provisional assessment of the loss made by the management of the fire accident in Block no. 5 of Srikakulam factory during the financial year 2012-2013 in respect of totally / partially damaged assets, inventory and other risks and treatment of the same as receivable pending final assessment and acceptance by the insurers, on the date of the Balance Sheet dealt with by this report.

- Necessary adjustments in the accounts and the final impact, if any, will be accounted on completion of final assessment and its acceptance by the insurers.

Our opinion is not qualified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditors'' 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 specified in paragraphs 4 and 5 of the Order.

2. 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) in our opinion, the said 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;

(e) on the basis of written representations received from the Directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

(f) since the Central Government has not issued any notification as to the rate at which the cess is to be paid under Section 441A of the Companies Act, 1956 nor has it issued any Rules under the said Section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITORS'' REPORT

Referred to in Paragraph 1 under the heading of "Report on Other Legal and Regulatory Requirements"

of our Report of even date

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

b) Fixed assets have been physically verified by the management during the year based on a phased programme of verifying all the assets over a period of three years, which in our opinion is reasonable having regard to the size of the Company and the nature of its fixed assets. No material discrepancies were noticed on physical verification.

c) In our opinion, the Company has not disposed off a substantial part of its fixed assets during the year and the going concern status of the Company is not affected.

ii) a) According to the information furnished to us, physical verification of inventories has been conducted during the year by the management. In our opinion, the frequency of the verification is reasonable.

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

c) In our opinion, the Company is maintaining proper records of inventories and based on the information and explanations given to us, discrepancies noticed on physical verification were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii) a) According to the information and explanations given to us, the Company has granted unsecured loan to one party covered in the Register maintained under Section 301 of the Companies Act 1956. The maximum balance of the said loan during the year was Rs.194.63 Lakhs and the year end balance was Rs.194.63 Lakhs.

b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of such loans are prima facie not prejudicial to the interest of the Company.

c) During the financial year under report, a part of the principal amount of Rs.83.00 Lakhs falling due together with interest upto 31st March, 2013 of Rs.60.61 Lakhs has been converted into equity shares. Further, interest amounting to Rs.27.63 Lakhs is outstanding as at the date of the Balance Sheet, including an overdue amount of Rs.9.36 Lakhs.

d) In our opinion and according to the information and explanations given to us, reasonable steps are being taken by the Company for recovery of the interest.

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

iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

v) a) In our opinion and according to the information and explanations given to us, the transactions that need to be entered in the register maintained under Section 301 of the Companies Act, 1956, have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements to be entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Five Lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi) The Company has not accepted any deposits from public during the year.

vii) During the year under report, the Internal Audit of the Company has been conducted by an external agency appointed by the management. In our opinion the scope and coverage of internal audit is commensurate with the size of the Company and nature of its business.

viii) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the 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. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

ix) a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of

statutory dues as at 31st March, 2014 which are outstanding for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Custom Duty / Excise Duty / Cess which have not been deposited on account of any dispute except as stated below:

Name of the Amount Nature of the Dues Statute (Rs. In Lakhs)

Service Tax Irregular availment of Cenvat Credit 3.13 on Service Tax

Interest on differential duty paid 8.13 on supplementary invoices after finalization of cost data of the goods cleared to the sister concern- April,

Excise Duty 04 to Mar,05 & April, 05 to Oct,05) Irregular availment of cenvat credit 12.14 of 4% SAD against DEPB and Target plus schemes - July, 06 to March, 07

Name of the Statute Period to Forum where which the dispute is pending amount relates

Service Tax 2012-13 Commissioner (Appeals), Visakhapatnam

2004-05 & CESTAT, Bangalore 2005-06

Excise Duty 2006-07 Additional Commissioner (Appeals), Visakhapatnam

x) The Company has no accumulated losses as at 31st March, 2014. The Company has incurred cash losses in the financial year under report but not in the immediately preceding financial year.

xi) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, banks.

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

xiii) The Company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society. Therefore, the provisions of clause 4(xiii) of this Order are not applicable.

xiv) The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of this Order are not applicable.

xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi) According to the information and explanations furnished to us, term loans were applied for the purpose for which the loans were obtained.

xvii) On the basis of an overall examination of the Balance Sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on short term basis which have been used for long term investment.

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

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

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

xxi) In accordance with the information and explanations given to us and, on our examination of books and records, no fraud on or by the Company has been noticed or reported during the year.

For M.BHASKARA RAO & CO;

Chartered Accountants

Firm Registration Number. 000459 S

Place : Hyderabad (V.Raghunandan)

Date : 30th May, 2014 Partner

Membership No. 26255


Mar 31, 2013

Report on Financial Statements

We have audited the accompanying Financial Statements of Nagarjuna Agrichem Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the 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 Standards referred to in sub section (3C) of section 211 of Companies Act, 1956. This responsibility includes the design, implementation and maintenance of internal control 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.

Auditors'' Responsibility

Our responsibility is to express an opinion on these financial 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 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 auditors'' judgement, 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 and fair presentation of the financial 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 financial statements.

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

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, 2013;

(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.

Emphasis of Matter

We draw attention to following notes to the financial statements:

- Note No.38 regarding claim lodged with insurers based on the provisional assessment of the loss made by the management of the Are accident in Block no. 5 of Srikakulam factory in respect of totally / partially damaged assets, inventory and other risks and treatment of the same as receivable pending final assessment and acceptance by the insurers.

- Necessary adjustments in the accounts and the final impact, if any, will be accounted on completion of final assessment and its acceptance by the insurers.

Our opinion is not qualified in respect of above matter.

Report on Other Legal and Regulatory Requirements

1. 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 specified in paragraphs 4 and 5 of the Order.

2. 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. 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;

e. on the basis of written representations received from the Directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f. since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITORS'' REPORT

Referred to in paragraph 3 of our report of even date.

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

b) Fixed assets have been physically verified by the management during the year based on a phased programme of verifying all the assets over a period of three years, which in our opinion is reasonable having regard to the size of the Company and the nature of its fixed assets. No material discrepancies were noticed on physical verification.

c) According to the information and explanations given to us, the Company has not disposed off substantial part of fixed assets and hence, reporting on the going concern status in this regard does not arise.

ii) a) Physical verification of inventories has been conducted during the year by the management. In our opinion, the frequency of the verification is reasonable.

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

c) In our opinion, the Company is maintaining proper records of inventories and based on the information and explanations given to us, discrepancies noticed on physical verification were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii) a) According to the information and explanations given to us, the Company has granted unsecured loan to a party covered in the register maintained under section 301 of the Companies Act 1956. The maximum amount involved during the year was Rs..288.49 Lakhs and the year end balance was Rs..288.49 Lakhs

b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of such loans are prima facie not prejudicial to the interest of the Company.

c) According to the terms and conditions of the agreement, the repayment of the principal amounts starts from two years after the disbursement of such loan and has not yet fallen due. The interest amount is in arrears since the inception of loan.

d) In our opinion and according to the information and explanations given to us, reasonable steps have been taken by the Company for recovery of the interest.

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

iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in internal control system.

v) a) In our opinion and according to the information and explanations given to us, the transaction that need to be entered in the register maintained under section 301 of the Companies Act, 1956, have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements to be entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of Five Lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi) The Company has not accepted any deposits from public during the year.

vii) During the year under report, the Internal Audit of the Company has been conducted by an external agency appointed by the management. In our opinion the scope and coverage of internal audit is commensurate with the size of the Company and nature of its business.

viii) On the basis of records produced to us, we are of the opinion that, prima facie, the cost records and accounts prescribed by the Central Government under Section 209(1) (d) of the Companies Act, 1956, have been maintained.

ix) a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of statutory dues as at 31st March, 2013 which are outstanding for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Custom Duty / Excise Duty / Cess which have not been deposited on account of any dispute except as stated below:

Name Amount of the Nature of Dues (Rs. in Statute Lakhs)

Service Irregular availment of Cenvat Credit on Service Tax 3.13 Tax

Interest on differential duty paid on supplementary invoices after finalization of cost data of the goods 8.13 cleared to the sister concern - April,04 to Mar,05 & April, 05 to Oct,05)

Irregular availment of cenvat credit of 4% SAD against DEPB and Target plus schemes - July,06 12.14 to March,07

Excise Duty Interest on differential duty paid on supplementary invoices after finalization of cost data of the 4.15 goods cleared to the sister concern - April,05 to February,06

Irregular availment of cenvat credit on inputs(welding electrodes) for the period from 0.41 January,07 to November,07

Name of the Statute Forum where dispute is pending

Service Tax Commissioner (Appeals), Visakhapatnam.

CESTAT, Bangalore

Additional Commissioner (Appeals), Visakhapatnam.

Excise Duty CESTAT, Bangalore.

CESTAT, Bangalore

x) The Company has no accumulated losses as at 31st March, 2013. The Company has not incurred any cash losses in the financial year under report and in the immediately preceding financial year.

xi) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, banks.

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

xiii) The Company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society. Therefore, the provisions of clause 4(xiii) of this Order are not applicable.

xiv) The Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of this Order are not applicable.

xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi) Term loans were applied for the purpose for which the loans were obtained.

xvii) On the basis of an overall examination of the Balance Sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on short term basis which have been used for long term investment.

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

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

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

xxi) In accordance with the information and explanations given to us and, on our examination of books and records, no fraud on or by the Company has been noticed or reported during the year.

For M. Bhaskara Rao & Co.,

Chartered Accountants

(Firm Registration No: 000459 S)

(V. Raghunandan)

Place : Hyderabad Partner

Date: 18th May, 2013 Membership No.:26255


Mar 31, 2012

1. We have audited the attached Balance Sheet of Nagarjuna Agrichem Limited as at 31st March, 2012, the Statement of Profit and Loss and also the Cash Flow Statement for the year ended on that date, annexed thereto. These Financial Statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these Financial Statements based on our Audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the Accounting Principles used and significant estimates made by Management, as well as evaluating the overall Financial Statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 as amended by the Companies (Auditor's Report) Order, (Amendment 2004 issued by the Central Government in terms of sub-section (4A of Section 227 of the Companies. Act, 1956, we enclose in the Annexure a Statement on the matter specified in paragraphs 4 and 5 of the said Order.

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

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

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

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

iv. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the applicable Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; and

v. On the basis of written representations received from the Directors, as on 31st March, 2012 and, taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2012 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with note no.10 regarding reconciliation of Unclaimed Dividend Account, "Significant Accounting Policies" and other notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2012;

ii. In the case of Statement of Profit and Loss, 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

Referred to in paragraph 3 of our Report of even date.

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

b) Fixed assets have been physically verified by the Management during the year based on a phased programme of verifying all the assets over a period of three years, which in our opinion is reasonable having regard to the size of the Company and the nature of its fixed assets. No material discrepancies were noticed on physical verification.

c) According to the information and explanations given to us, the Company has not disposed off substantial part of fixed assets and hence, reporting on the going concern status in this regard does not arise.

ii. a) Physical verification of inventories has been conducted during the year by the Management. In our opinion, the frequency of the verification is reasonable.

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

c) In our opinion, the Company is maintaining proper records of inventories and based on the information and explanations given to us, discrepancies noticed on physical verification were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii. a) According to the information and explanations given to us, the Company has not granted any loan, secured or unsecured to Companies, Firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, sub clauses (b), (c) and (d) of clause (iii) of this Order are not applicable.

e) According to the information and explanations given to us, the Company has not taken any loans, secured or unsecured from Companies, Firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, sub clauses (f) and (g) of clause (iii) of this Order are not applicable.

iv. In our opinion and according to the information and explanations given to us, there are adequate Internal Control Systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. In our opinion and according to the information and explanations given to us, there is no continuing failure to correct major weaknesses in Internal Control System.

v. a) In our opinion and according to the information and explanations given to us, the transaction that need to be entered in the register maintained under Section 301 of the Companies Act, 1956, have been so entered.

b) In our opinion and according to the information and explanations given to us, the transaction made in pursuance of contracts or arrangements to be entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi. The Company has not accepted any Deposits from public during the year.

vii. During the year under report, the Internal Audit of the Company has been conducted by firms of Chartered Accountants. In our opinion the scope and coverage of Internal audit is commensurate with the size of the Company and nature of its business.

viii. On the basis of records produced to us, we are of the opinion that, prima facie, the cost records and accounts prescribed by the Central Government under Section 209 (1) (d) of the Companies Act, 1956, have been maintained.

ix. a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other applicable Statutory Dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of Statutory Dues as at 31st March, 2012 which are outstanding for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Custom Duty / Excise Duty / Cess which have not been deposited on account of any dispute except as stated below:

Name of the Amount Forum where dispute is Nature of Dues statute (Rs in Lakhs) pending

Disputed tax on disallowance of R&D 73.21 Commissioner of Income Income Tax expenditure in Assessment Year 2009-10 Tax (Appeals) Hyderabad.

Interest on Differential Duty paid on supplementary invoices after finalization of cost data of the goods cleared to the sister 8.13 CESTAT, Bangalore. concern - April, 04 to Mar 05 & April 05 to Oct 05)

Irregular availment of Cenvat Credit of 4% SAD against DEPB and Target plus schemes -July 12.14 Additional Commissioner 06 to March 07 (Appeals), Visakhapatnam. Excise Duty

Interest on Differential Duty paid on supplementary invoices after finalization of cost data of the goods cleared to the sister 4.15 CESTAT, Bangalore. concern - April, 05 to February, 06

Irregular availment of Cenvat Credit on inputs (Welding Electrodes) for the period from 0.41 CESTAT, Bangalore. January, 07 to November, 07

x. The Company has no accumulated losses as at 31st March, 2012. The Company has not incurred any cash losses in the financial year under report and in the immediately preceding financial year.

xi. According to the information and explanations given to us, the Company has not defaulted in repayment of dues to a Financial Institution, Banks.

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

xiii. The Company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society. Therefore, the provisions of clause 4 (xiii) of this Order are not applicable.

xiv. The Company is not dealing in or trading in shares, securities, debentures and other Investments. Accordingly, the provisions or clause 4 (xiv) of this Order are not applicable.

xv. In our opinion and according to the information and explanations given to us, the terms and conditions on which the Company has given guarantee for finances taken by others in the course of business are not prejudicial to the interests of the Company.

xvi. Term loans were applied for the purpose for which the loans were obtained.

xvii. On the basis of an overall examination of the Balance Sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on short term basis which have been used for long term investment.

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

xix. The Company has not issued any debentures during the year.

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

xxi. In accordance with the information and explanations given to us and, on our examination of books and records, no fraud on or by the Company has been noticed or reported during the year.

For M. Bhaskara Rao & Co.,

Chartered Accountants

(Firm Registration No: 000459 S)

V. Raghunandan

Place : Hyderabad Partner

Date : 19th May, 2012 Membership No. 26255


Mar 31, 2011

1. We have audited the attached balance sheet of NAGARJUNA AGRICHEM LIMITED as at 31st March, 2011, the Profit and Loss account and also the cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003 as amended by the Companies (Auditor's Report) Order, (Amendment) 2004 issued by the Central Government in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matter specified in paragraphs 4 and 5 of the said Order.

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

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

ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

iii) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the applicable accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

v) On the basis of written representations received from the directors, as on 31st March, 2011 and, taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with "Significant Accounting Policies", note no. 20 regarding reconciliation of unclaimed dividend account and other notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2011;

ii) in the case of the profit and 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 AUDITOR'S REPORT Referred to in paragraph 3 of our report of even date.

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

b) Fixed assets have been physically verified by the management during the year based on a phased programme of verifying all the assets over a period of three years, which in our opinion is reasonable having regard to the size of the Company and the nature of its fixed assets. No material discrepancies were noticed on physical verification.

c) According to the information and explanations given to us, the company has not disposed off substantial part of fixed assets and hence, reporting on the going concern status in this regard does not arise.

ii) a) Physical verification of inventories has been conducted during the year by the management. In. our opinion, the frequency of the verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the company and nature of its business.

c) In our opinion, the company is maintaining proper records of inventories and based on the information and explanations given to us, discrepancies noticed on physical verification were not material in relation to the operations of the company and the same have been properly dealt with in the books of account.

iii) a) According to the information and explanations given to us, the company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, sub clauses (b), (c) and (d) of clause (iii) of this Order are not applicable.

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

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

v) a) In our opinion and according to the information and explanations given to us, and based on the representations made by the management, there are no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act. Accordingly, sub clause (b) of clause (v) of this Order is not applicable to the Company for the current year.

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

vii) During the year under report, the internal audit of the company has been conducted by Firms of Chartered Accountants. In our opinion the scope and coverage of internal audit is commensurate with the size of the company and nature of its business.

viii) On the basis of records produced to us, we are of the opinion that, prima facie, the cost records and accounts prescribed by the Central Government under Section 209(l)(d) of the Companies Act, 1956, have been maintained. However, we are not required to and, have not carried out any detailed examination of such accounts and records.

ix) a) According to the records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of statutory dues as at 31st March, 2011 which are outstanding for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Custom Duty / Excise Duty / Cess which have not been deposited on account of any dispute except as stated below:

NAME OF THE NATURE OF DUES STATUTE

Income Disputed tax on disallowance of R&D Tax expenditure in AY 2007-08 Disputed tax on disallowance of R & D expenditure in AY 2008-09 Excise Interest on differential duty paid Duty on supplementary invoices after finalization of cost data of the goods cleared to the sister concern - April 2004 to March 2005 & April 2005 to Octobter 2005)

Irregular availment of Cenvat credit of 4% SAD against DEPB and Target plus schemes - July 2006 to March 2007

Interests on differential duty paid on supplementary invoices after finalization of cost data of the goods cleared to the sister concern - April 2005 to February 2006

Irregular availment of Cenvat credit on inputs(welding electrodes) for the period from January 2007 to November 2007

Service Interest and Penalty on Service Tax paid Tax on Goods Transport Agencies payment for the period from October 2005 to February 2006

NAME AMOUNT FORUM WHERE DISPUTE IS OF THE (Rs. Lakhs) PENDING STATUTE

Income 59.83 Commissioner of Income Tax Tax (Appeals), Hyderabad

30.67 Commissioner of Income Tax (Appeals), Hyderabad

Excise 8.13 CESTAT, Bangalore Duty 12.14 Additional Commissioner (Appeals), Visakhapatnam

4.15 CESTAT, Bangalore

0.41 CESTAT, Bangalore

Service 3.39 CESTAT, Bangalore Tax

x) The company has no accumulated losses as at 31st March, 2011. The company has not incurred any cash losses in the financial year under report and in the immediately preceding financial year.

xi) According to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, banks.

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

xiii) The company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society. Therefore, the provisions of clause 4(xiii) of this Order are not applicable.

xiv) The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of this Order are not applicable.

xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantee for finances taken by others in the course of business are not prejudicial to the interests of the company.

xvi) Term loans were applied for the purpose for which the loans were obtained.

xvii) On the basis of an overall examination of the Balance Sheet of the company, in our opinion and according to the information and explanations given to us, there are no funds raised on short term basis which have been used for long term investment.

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

xix) The company has not issued any debentures.

xx) The company has not raised any money by public issue during the year.

xxi) In accordance with the information and explanations given to us and, on our examination of books and records, no fraud on or by the company has been noticed or reported during the year.

for M.BHASKARA RAO & CO., Chartered Accountants (Firm Registration No: 00459 S)

(V. RAGHUNANDAN) Partner Membership No. 26255

Place: Hyderabad Date: 11th May, 2011


Mar 31, 2010

1. We have audited the attached balance sheet of NAGARJUNA AGRICHEM LIMITED as at 31st March, 2010, the profit and loss account and also the 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.

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

3. As required by the Companies (Auditors Report) Order, 2003 as amended by the Companies (Auditors Report) Order, (Amendment) 2004 issued by the Central Government in terms of sub- section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matter specified in paragraphs 4 and 5 of the said Order.

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

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

ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books;

i i i) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the applicable accounting standards referred to in sub- section (3C) of Section 211 of the Companies Act, 1956;

v) On the basis of written representations received from the directors, as on 31st March, 2010 and, taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

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

i) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2010;

ii) in the case of the profit and 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

Referred to in paragraph 3 of our report of even date.

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

b) Fixed assets have been physically verified by the management during the year based on a phased programme of verifying all the assets over a period of three years, which in our opinion is reasonable having regard to the size of the Company and the nature of its fixed assets. No material discrepancies were noticed on physical verification.

c) According to the information and explanations given to us, the company has not disposed off substantial part of fixed assets and hence, reporting on the going concern status in this regard does not arise.

ii) a) Physical verification of inventories has been conducted during the year by the management. In our opinion, the frequency of the verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the company and nature of its business.

c) In our opinion, the company is maintaining proper records of inventories and based on the information and explanations given to us, discrepancies noticed on physical verification were not material in relation to the operations of the company and the same have been properly dealt with in the books of account.

iii) a) According to the information and explanations given to us, the company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, sub clauses (b), (c) and (d) of clause (iii) of this Order are not applicable.

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

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

v) a) In our opinion and according to the information and explanations given to us, and based on the representations made by the management, there are no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act. Accordingly, sub clause (b) of clause (v) of this Order is not applicable to the Company for the current year.

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

vii) During the year under report, the internal audit of the company has been conducted by Firms of Chartered Accountants. In our opinion the scope and coverage of internal audit is commensurate with the size of the company and nature of its business.

viii)On the basis of records produced to us, we are of the opinion that, prima facie, the cost records and accounts prescribed by the Central Government under Section 209(l)(d) of the Companies Act, 1956, have been maintained. However, we are not required to and, have not carried out any detailed examination of such accounts and records.

ix) a) According to the records of the company, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other applicable statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of statutory dues as at 31st March, 2010 which are outstanding for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues of Income Tax / Sales Tax / Wealth Tax / Service Tax / Custom Duty / Excise Duty / Cess which have not been deposited on account of any dispute except as stated below:

STATUTE DISPUTE

Income Tax Disputed tax on disallowance of R&D expenditure & product development expenditure in AY 2005-06 Disputed tax on disallowance of R&D expenditure & Business development expenditure in AY 2006-07

Disputed tax on disallowance of R&D and certain other expenditure in AY 2004-05

AMOUNT INVOLVED STATUTE (Rs. LAKHS) FORUM WHERE DISPUTE IS PENDING

Income Tax 32.21 Commissioner of Income Tax(Appeals), Hyderabad

31.35 Commissioner of Income Tax(Appeals), Hyderabad

57.23 Commissioner of Income Tax(Appeals), Hyderabad

STATUTE DISPUTE

Excise Duty Interest on differential duty paid on supplementary invoices after finalization of cost data of the goods cleared to the sister concern - Apl 04 to Mar 05 & Apl 05 to Oct 05)

Irregular availment of Cenvat credit of 4% SAD against DEPB and Target plus schemes - July 06 to March 07

Interest on differential duty paid on supplementary invoices after finalization of cost data of the goods cleared to the sister concern - Apl 05 to Feb 06

Irregular availment of Cenvat credit on inputsfwelding electrodes) for the period from Jan 07 to Nov 07

Service Tax Irregular availment of abatement of 75% on value of taxable services -Apl 05 to Feb 06

Interest and Penalty on Service Tax paid on Goods Transport Agencies payment for the period from Oct 05 to Feb 06

AMOUNT STATUTE INVOLVED (Rs. LAKHS) FORUM WHERE DISPUTE IS PENDING

Excise Duty 8.14 CESTAT, Bangalore

12.14 Additional Commissioner (Appeals), Visakhapatnam

4.15 Additional Commissioner, Visakhapatnam

0.41 Asst. Commissioner of Central Excise, Vijayanagaram

Service Tax25.88 Commissioner Appeals, Visakhapatnam

3.39 CESTAT, Bangalore

x) The company has no accumulated losses as at 31st March, 2010. The company has not incurred any cash losses in the financial year under report and in the immediately preceding financial year.

xi) According to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, banks.

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

xiii) The company is not a Chit Fund / Nidhi / Mutual Benefit Fund / Society. Therefore, the provisions of clause 4(xiii) of this Order are not applicable.

xiv) The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of this Order are not applicable.

xv) In our opinion and according to the information and explanations given to us, the terms and conditions on which the company has given guarantee for finances taken by others in the course of business are not prejudicial to the interests of the company.

xvi) Term loans were applied for the purpose for which the loans were obtained.

xvii) On the basis of an overall examination of the Balance Sheet of the company, in our opinion and according to the information and explanations given to us, there are no funds raised on short term basis which have been used for long term investment.

xviii) During the year under report the company has not made any preferential allotment of sharesto parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

xix) The company has not issued any debentures.

xx) The company has not raised any money by public issue during the year.

xxi) In accordance with the information and explanations given to us and, on our examination of books and records, no fraud on or by the company has been noticed or reported during the year.

For M.BHASKARA RAO & CO.,

CHARTERED ACCOUNTANTS

(FIRM REGISTRATION

NO. : 00459 S)



(ANILKUMAR MEHTA)

PARTNER

MEMBERSHIP

NO.14284

Place: Hyderabad

Date : 26th April, 2010





 
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