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Auditor Report of Sree Rayalaseema Alkalies & Allied Chemicals Ltd.

Mar 31, 2015

(1) Report on the Standalone Financial Statements

We have audited the accompanying financial statements of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool ("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 significant accounting policies and other explanatory information.

(2) Management's Responsibility for the Standalone Financial Statements

The management and Board of Directors of the company are responsible for the matters stated in section 134(5) of the Companies Act, 2013 (" the Act") with respect to the preparation and presentation of these standalone 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 Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes the 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; design, implementation and maintenance of adequate internal financial controls, that are 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.

(3) Auditors' Responsibility

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. 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 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 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 financial 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 management and Board of 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.

(4) 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;

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

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

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

(5) Report on Other Legal and Regulatory Requirements

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.

As required by Section 143(3) of the Act, we further 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, 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 aforesaid standalone financial statements comply with the applicable Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

e) on the basis of written representations received from the Directors as on 31st March, 2015 and 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) in our opinion and to the best of our information and according to the explanations given to us, we report as under 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;

(i) The company does not have any pending litigations which would impact its financial position.

(ii) The company did not have any long term contracts including derivative contracts; as such there were no material foreseeable losses thereon.

(iii) During the year under report there are no amounts that require to transfer to the Investor Education and Protection Fund; therefore, delay in transferring such sums does not arise.

ANNEXURE TO AUDITOR'S REPORT Re: Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool. Referred to in Paragraph (5) of our report of even date;

(i) In respect of fixed assets;

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

b. As explained to us, the Company has a regular programme of physical verification of its fixed assets and have been physically verified by the management in a phased manner during the year, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were noticed on such physical verification.

(ii) In respect of inventory;

a. The physical verification of inventory has been conducted by the management at reasonable intervals during the year. In our opinion, the frequency of verification is reasonable.

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

c. The Company has maintained proper records of inventory and as explained to us, no material discrepancies were noticed on physical verification and the small discrepancies, if any, have been properly dealt with in the books of account.

(iii) 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 Companies Act, 2013 ('the Act').

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness in the internal control system.

(v) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public specified under the provisions of section 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

(vi) In our opinion and according to the information and explanations given to us, the Central Government has prescribed for the maintenance of Cost records under sub section (1) of Section 148 of the Companies Act, 2013 in respect of the products manufactured by the company and such accounts and records have been made and maintained by the Company.

(vii) In respect of statutory dues;

a. According to the information and explanations given to us and based on the records of the company examined by us, the Company is regular in depositing undisputed statutory dues including Provident Fund, Employee's State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Value Added Tax, duty of Customs, duty of Excise, Cess and other statutory dues, as applicable, with the appropriate authorities. There were no arrears of statutory dues outstanding as at 31.03.2015 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 material dues of Income Tax, Wealth Tax, Service Tax and Cess, which have not been deposited on account of any dispute. However, the following dues of Sales Tax, Value Added Tax, Duty of Excise and Duty of Customs have not been deposited by the company on account of disputes pending;

Sl. Amount Name of the Statute Nature of dues No. (Rs. in lakhs)

1. The Central Excise Act, 1944 CENVAT Credit disallowed on input Services 85.62

238.40

11.91

2. The Central Excise Act, 1944 CENVAT Credit availed against 95.41 manufacture of exempted goods disallowed.

3. A.P.VAT Act, 2005 Input tax credit on furnace oil & 53.91 coal disallowed (Paid)

(53.91)

Interest on delay payment of 4. AP VAT Act, 2005 132.11 deferred sales tax (Paid). (44.04)

VAT on estimated turnover 5. KERALA VAT Act, 2005 20.51 (paid).VAT on stock transfer (5.13) price (Paid)

6.69

(1.81)

Disallowance of input tax on sales Returns. 6. KERALA VAT Act, 2005 4.41

2.68

7. KERALA VAT Act, 2005 Late submission of Form-F 9.95

8. Karnataka Tax on Entry of Goods Entry tax on purchase of machinery 3.88 Act, 1979 items and interest (paid)

(2.10)

9. Indian Customs Act, 1962 Differential customs duty on raw 1161.14 material purchases (Paid) (125.00)

10. Indian Customs Act, 1962 Finalisation of assessed Bill of 16.06 Entries pertaining to KCL.

11. Indian Customs Act, 1962 Penalty on classification of goods 9.90 disputed

12. Indian Customs Act, 1962 Anti dumping duty on import of 32.69 Barium Carbonate

13. Indian Customs Act, 1962 Differential duty on classification of 3.62 goods disputed (Lauric Acid)

14. Employees Provident Fund and PF delay charges/ damages for 15.34 Miscellaneous Provisions Act, 1952. belated payments

15. The Electricity Act, 2003. Refund of Income tax on account 500.00 of change in tax rates as per (500.00) PPA.(paid)

16. The Electricity Act, 2003. Fuel Surcharge Adjustment (FSA) Charges 871.93

1255.71

695.34

17. The Electricity Act, 2003. Interest on amount pending in Court Cases 268.05

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

The Central Excise Act, 1944 April,2005 to Feb, 2008 Central Excise and Service Tax Appellate Tribunal, Bengaluru.

Additional Commissioner Mar,2008 to March,2014 Commissioner of Central Excise and Customs, Tirupati.

April, 2011 to March, 2013 Asst Commissioner of Central Excise and Customs, Kurnool.

The Central Excise Act, 1944 2008-09 Central Excise and Service Tax Appellate Tribunal, Bengaluru.

A P VAT Act, 2005 April,2005 to High Court of Andhra Pradesh. Dec, 2005

A P VAT Act, 2005 2005-06 High Court of Andhra Pradesh.

KERALA VAT Act, 2005 2008-09 Sales tax Appellate Tribunal, Ernakulam.

2010-11 Sales tax Appellate Tribunal, Ernakulam.

KERALA VAT Act, 2005 August,2009 Sales tax Appellate Tribunal, Ernakulam.

Deputy Commissioner of 2009-10 Appeals,Palakkad

KERALA VAT Act, 2005 2009-10 Deputy Commissioner of Appeals, Palakkad.

Karnataka Tax on Entry of Goods Act, 1979 2006-07 Joint Commissioner of 2007-08 Commercial Taxes, 2008-09 Davangeri.

Indian Customs Act, 1962 2000 to 2006 Commissioner of Customs, Chennai.

Indian Customs Act, 1962 2006-07 Commissioner of Customs (Appeals), Mumbai.

Indian Customs Act, 1962 2008-09 High Court of Andhra Pradesh, Hyderabad.

Indian Customs Act, 1962 2010-11 Deputy Commissioner of Customs, Chennai.

Indian Customs Act, 1962 2014-15 Deputy Commissioner of Customs, Chennai.

Employees Provident Fund and Miscellaneous Provisions Act, 1952 May, 2002 to Regional PF Commissioner, Dec, 2007 Cuddapah, (for waiver).

The Electricity Act, 2003. 2000-2005 The Supreme Court of India.

The Electricity Act, 2003. 2008-09 Supreme Court of India.

Oct, 2011 to Supreme Court of India (demand raised during the year 2014-15)

Mar, 2012 High Court of Andhra Pradesh, April,2009 to Hyderabad. June,2010

The Electricity Act, 2003. 2014-15 High Court/Supreme Court of India (demand raised during the year 2014-15

c. According to the information and explanations given to us, during the year under report, there are no amounts which require to transfer to the Investor Education and Protection Fund.

(viii) The company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the financial year and in the immediately preceding financial year.

(ix) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Financial Institutions or Banks or Debenture holders and the interest and principal dues fallen due during the year were paid and there were no dues outstanding as at 31st March, 2015.

(x) 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 during the year.

(xi) In our opinion and according to the information and explanations given to us, the term loans received during the year were applied for the purpose for which the loans were obtained.

(xii) According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year.

For Brahmayya & Co.,

Chartered Accountants

Firm Regn. No. 000514S

Sd/-

CA B.DAIVADHEENAM REDDY

Place : Hyderabad (Camp) Partner

Date : 7th May, 2015 Membership No.026450


Mar 31, 2014

(1) Report on the Financial Statements

We have audited the accompanying financial statements of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool ("the Company"), Which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss and also Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

(2) Management''s Responsibility for the Financial Statements

The Company''s 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 Section 211(3C) of the Companies Act, 1956 ("the Act") (which continue to be applicable in respect of Section 133 of Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal controls 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.

(3) 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 the 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 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 assessment, 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 the accounting policies used and the reasonableness of the accounting estimates made by the 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.

(4) 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.

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

b) In the case of the Statement of Profit and Loss, of the Profit of the Company for the year ended on that date; and

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

(5) Emphasis of Matter

We draw attention to Note No.24.3 to the financial statements relating to the Recompense amount of Rs.1345.71 lakhs payable to CDR Lenders (FIs and Banks) by the company being exit from CDR Scheme, was considered as Exceptional Item as stated in the said note. Our opinion is not qualified in respect of this matter.

(6) Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order. As required by Section 227(3) of the Act, 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 it appears from our examination of those books.

iii) 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.

iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211(3C) of the Act. (which continue to be applicable in respect of Section 133 of Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs).

v) On the basis of the written representations received from the directors as on 31st March, 2014 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014 from being appointed as a director in terms of Section 274 (1)(g) of the Act.

ANNEXURE TO AUDITOR''S REPORT

Re: Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool.

Referred to in Paragraph (6) of our report of even date;

(i) In respect of fixed assets;

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

b. As explained to us, all the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

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

(ii) In respect of inventories;

a. The inventories have been physically verified by the management at regular intervals during the year. In our opinion, the frequency of verification is reasonable.

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

c. The Company has maintained proper records of inventories. As explained to us, no material discrepancies were noticed on physical verification.

(iii) a) The Company has taken interest free unsecured loans from five companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 1613.14 lakhs and the year end balance of loans taken from such companies was Rs. 1613.14 lakhs. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

b) In our opinion and according to the information and explanations given to us, the terms and conditions on which loans have been taken from the companies listed in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

c) In our opinion and according to the information and explanations given to us and as represented by the Company, interest free unsecured loans were taken from Promoters group as contribution towards approved project scheme as stipulated by Lenders (Banks) to be converted into Equity. Therefore, no repayment of principal and interest payment.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commen- surate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any major weaknesses in internal controls.

(v) In respect of transactions covered under Section 301 of the Companies Act, 1956;

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed 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 entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, other than purchases of certain items of fixed assets that are of the Company''s specialized requirements for which prevailing market prices at the relevant time were not available for comparison.

(vi) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public specified under the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

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

(viii) The Central Government has prescribed for the maintenance of Cost records under Section 209(1)(d) of the Companies Act, 1956 in respect of the products of the company. We have broadly reviewed the cost records relating to materials, labour and other items of cost maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 and we are of the opinion, that prima facie, the prescribed cost records have been made and maintained. We have not, however, made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) In respect of statutory dues;

a. According to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protec- tion Fund, Employees''s State Insurance, Income-Tax, Wealth Tax, Sales Tax, Value Added Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it have generally been regularly deposited with marginal delays with the appropriate authorities.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Inves- tor Education and Protection Fund, Employee State Insurance, Income Tax, Wealth Tax, Sales Tax, Value Added Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues were in arrears as at 31st March, 2014 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 disputed statutory dues, which have not been deposited in respect of the following :

Sl. Name of the Statute Nature of due Amount No. in lakhs

1. The Central Excise CENVAT Credit 85.62 Act, 1944 disallowed on input services 177.84

11.91

2.The Central CENVAT Credit availed 95.41 Excise Act, 1944 against manufacture of exempted goods disallowed.

3.A.P.VAT Act, 2005 Input tax credit on furnace 53.91 oil & coal disallowed

4.AP VAT Act, 2005 Interest on delay payment of 132.11 deferred sales tax (Paid). (44.04)

5.KERALA VAT Act,2005 VAT on estimated 20.51 turnover (paid). (5.13) VAT on stock transfer price 6.69 (Paid) (1.81)

6.KERALA VAT Act, 2005 Disallowance of input tax on 4.41 sales returns. 2.68

7.KERALA VAT Act, 2005 Late submission of Form-F 9.95

8.The Central Sales Tax Differential Tax for Non 16.43 Act, 1956 submission of C Forms (2.05) (Paid)

9.Karnataka Tax on Entry of Entry tax on purchase of 4.20 Goods Act, 1979 machinery items and (2.10) interest (50% paid)

10.Indian Customs Act, 1962 Differential customs 1161.14 duty on raw material (125.00) purchases (Paid)

11.Indian Customs Act, 1962 Finalisation of 16.06 assessedf Bill of Entries pertaining to KCL. 12.Indian Customs Act, 1962 Penalty on classification 9.90 of goods disputed

13.Indian Customs Act, 1962 Anti dumping duty on 32.69 import of Barium Carbonate

14.Employees Provident Fund PF delay charges/ damages 15.34 and Miscellaneous Provisions for belated payments Act, 1952.

15.The Electricity Act, 2003. Refund of Income tax on 500.00 account of change in tax (500.00) rates as per PPA.(paid)

16.The Electricity Act, 2003. Fuel Surcharge Adjustment 871.93 (FSA) charges. 695.34

Sl. Name of the Statute Period Forum where No. dispute is pending

1. The Central Excise April, Central Excise and Act, 1944 2005 to Service Tax Appellate Feb, 2008 Tribunal , Bangalore.

Mar,2008 to Additional March,2011 Commissioner/ Commissioner of Central Excise and Customs, Tirupati

April,2011 Asst Commissioner of to March,2013 Central Excise and Customs, Kurnool.

2.The Central 2008-09 Central Excise and Excise Act, 1944 Service Tax Appellate Tribunal, Bangalore.

3.A.P.VAT Act, 2005 April,2005 to High Court of Andhra dce,2005 Pradesh.

4.AP VAT Act, 2005 2005-06 High Court of Andhra Pradesh.

5.KERALA VAT Act,2005 2008-09 Sales tax Appellate Tribunal,Ernakulam.

2010-11 Deputy Commissioner of Appeals,Palakkad.

6.KERALA VAT Act, 2005 August,2009 Sales tax Appellate Tribunal,Ernakulam.

2009-10 Deputy Commissioner of Appeals,Palakkad

7.KERALA VAT Act, 2005 2009-10 Deputy Commissioner of Appeals,Palakkad.

8.The Central Sales Tax 2009-10 The Deputy Commissio Act, 1956 -ner of Appeals, Kurnool. 9.Karnataka Tax on 2006-07 Deputy Commissioner Entry of Goods Act, 1979 2007-08 of Commercial Taxes, 2008-09 Bellary.

10.Indian Customs Act, 1962 2000 to Commissioner of 2006 Customs, Chennai.

11.Indian Customs Act, 1962 2006-07 Commissioner of Customs (Appeals), Mumbai. 12.Indian Customs Act, 1962 2008-09 High Court of Andhra Pradesh, Hyderabad.

13.Indian Customs Act, 1962 2010-11 Deputy Commissioner of Customs, Chennai.

14.Employees Provident Fund May,2002 to Regional PF and Miscellaneous Provisions Dec, 2007 Commissioner,Cuddapah Act, 1952. for waiver.

15.The Electricity Act, 2003. 2000-2005 The Supreme Court of India. 16.The Electricity Act, 2003. 2008-09 Supreme court of April,2009 to India. June, 2010 High Court of Andhra Pradesh, Hyderabad.

(x) In our opinion, the company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, we are of the opinion, that the Company has not defaulted in repayment of dues to Financial Institutions, Banks or Debenture holders, except the interest and principal dues fallen due during the year, which were paid subsequent to due dates and an amount of Rs.757.50 lakhs was due at the year end.

(xii) In our opinion and 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) 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 (Auditors'' Report) Order, 2003 are not applicable to the company.

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

(xv) 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) In our opinion, the term loans received during the year have been applied for the purposes for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company as at 31st March, 2014, we report that no funds raised on short-term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

(xviii) According to the information and explanations given to us, during the year, the company has made preferential allotment of Equity Shares by conversion of convertible share warrants issued in earlier years, to parties and companies covered in the register main- tained under Section 301 of the Companies Act, 1956. In our opinion, the price at which the share warrants have been issued in earlier years was determined in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and is not prejudicial to the interest of the company.

(xix) According to the information and explanations given to us, the Company has created securities in respect of debentures issued.

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

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For Brahmayya & Co., Chartered Accountants Firm''s Regn.No.000514S

Sd/- Place : Hyderabad (Camp) (B.DAIVADHEENAM REDDY) Date : 26th May, 2014 Partner Membership No.026450


Mar 31, 2013

(1) Report on the Financial Statements

We have audited the accompanying financial statements of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool ("the Company"), Which comprise the Balance Sheet as at 31st March, 2013, the Statement of Profit and Loss and also Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

(2) Management''s Responsibility for the Financial Statements

The Company''s 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 Section 211(3C) of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal controls 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.

(3) 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 the 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 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 assessment, 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 the accounting policies used and the reasonableness of the accounting estimates made by the 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.

(4) 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 :

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31a March, 2013;

b) In the case of the Statement of Profit and Loss, of the Profit of the Company for the year ended on that date; and

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

(5) Emphasis of Matter , .

We draw attention to Hole Nd. 24.3 to the financial statements relating to the recompensation payable to CDR Lenders ( FIs and Banks) being the Company opted to exist from CDR Scheme and the recompense amount of Rs.1366 lakhs was calculated by the Lenders and the matter is pending before the CDR Empowered Group and the same will be considered as stated in the said note. Our opinion is not qualified in respect of this matter.

(6) Report on Other Legal and Regulatory Requirements

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

As required by Section 227(3) of the Act, 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.

iij 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.

iii) 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.

iv) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in Section 211 (3C) of the Act.

v) On the basis of the written representations received from the directors as on 31a March, 2013 taken on record by the Board of Directors, none of the directors is disqualified as on 31a March, 2013 from being appointed as a director in terms of Section 274(1)(g) of the Act.

( ANNEXURE TO AUDITpR''S REPORT

Re: Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool.

Referred to in Paragraph (6) of our report of even date; (i) In respect of fixed assets;

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

b. As explained to us, all me frxed assets have rKrt been physically verified by the management during tht ~ year birt there is a regular programme of verification which, in our opinion, is reasonable having regard tc the size of the Company and nature df Its assets/No material discrepancies were noticed on such physica verification.

c. In our opinion, the Company has not disposed dff substantial part of fixed assets during the year and the

a. The lrwerftoTte«!have%e«hip^sSo^,weTlf^lby''the management at regular intervals during the year. Ir our opinion, thetr^uericy ctverifkationisreBsonabte.

b. IndurdpihioriWidacMttflrglolhelrt^^

veriftoalion df irtvehtoriesfollowed bylheTnanagement are reasonable and adequate in relation to the siz< ofthe€ompany«nillheKBibaBlness.

c. The''CofnPany''tias!rr«irtailhti*pR^rw6ortte''dfiinventories. As-explained to us, no material discrepancies were noticed an ''physical >vwffie8tion.

(iii) a. The Company has fttfcen interest free unsecured loans from five companies covered in the registe maintained under Section SOH''dflhe ''Companies ''Act,,1956. The maximum amount involved during th< year was Ws. 148400 lakhs and the year end balance of loans taken from such companies was Rs 7S9.24!WHhs. The Company has -not granted any loans, secured or unsecured, to companies, firms o other parties listed inthe register mairitBined under Section 301 of the Companies Act, 1956.

b. ln
c. ln
(iv) In our opinion and according to the information and explanations given to us, there are adequate internal contrc procedures commensurate with the size of the Company and the nature of its business with regard to purchase c inventory, fixed assets and with regard tofhe sale of goods.During ttiecourse of our audit, we have not observei any major weaknesses in internal controls.

(v) In respect of transactions covered under 9e«ion 301 of the Companies Act, 1956;

a. According to the information and exptertations given to us, we are of the opinion that the transaction made in pursuance of contmcts or arrangements, that needed to be entered in the register maintaine under Section 301 of the Companies Am, 19S6 have been-so entered.

b. In our opinion and according to the information and explanalions given to us, the transactions made i pursuance of cortmacts or arrangements entered hrthe register maintained under Section 301 of th

Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the , year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given tB us, the company has not accepted any deposits from the public specified under the provisions of section SiA and 68AA of the Companies Act, 1956 and the Companies (Acceptance of deposits) Rules, 1375. No Order has been passed by the Company Law ftoafd.

(vii) in our opinion, the Company has an iritetrial audit system commensurate with the size and nature of its business.

(viii) The Central Government has prescribed for the maintenance of Cost records under Section 209(1 )(d) of the Companies Act, 1956 in respect of the products of the Company. We have broadly reviewed the books of account and records relating to materials, labour and Other Items Of cost maintained by the Company pursuant to the Companies (Cost Accounting Records) Rules, 2011 and we Sre of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the cost records with a view to determine whether they are aoobrate or complete.

(ix) In respect of statutory dues;

a. According to the records of the Company, undisputed statutory dues including Provident Fund, investor Education and Protection Fund, fimpioyees''s State Insurance, Income-lax, Sales tax, Wealth Tax, Customs Duty, Excise Duty, cess and other material statutory dues have been generally regularly deposited with marginal delays with the appropriate authorities.

b. According to the information and explanations given to U§, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31s" March,"2013 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 disputed Statutory dues, which have not been deposited in respect Of the following :

SL. Name of the Amount

Nature of dues No. Statute IN lAKHS

1. The Central Excise CENVAT Credit disallowed on 85.62 Act, 1944 input services

177.84

9.75

2. The Central Excise CENVAT Credit availed 95.41 Act, 1944 against manufacture of exempted goods disallowed.

3. A.P.VAT Act, 2005 Input tax credit on furnace Oil 53.91 & coal disallowed (Paid) (53.91)

4. AP VAT Act, 2005 Interest on delay Payment of 132.11 deferred sales tax.

5. KERALA VAT Act, VAT on estimated turnover. 20.51 2005 (paid)

(9.12)

6.69

Name Forum where dispute is pending

The Central Excise April, 2005 to Central Excise and Service Tax Feb, 2008 Appellate Tribunal, Bangalore.

Mar, 2008 to Additional Commissioner of March, 2011 Central Excise and Customs, Tlrupati.

The Central Excise April, 2011 to Asst Commissioner of Central July, 2012 Excise and Customs, Kumool.

The Central Excise 2008-09 Central Excise and Service Tax Appellate Tribunal, Bangalore.

The Central Excise April, 2008 to High Court of Andhra Pradesh. Dec, 2005

The Central Excise 2008-06 High Court of Andhra Pradesh.

The Central Excise 2008-09 Sales tax Appellate Tribunal, Emakulam.

The Central Excise 2010-11 Deputy Commissioner of Appeals, Palakkad

SL. Name of the Amount

Nature of dues No. Statute IN lAKHS

6. KERALA VAT Act, Disallowance of input tax on 4.41 2005 sales returns.

2.68

7. KERALA VAT Act, Late submission of Form-F 9.95 2005

8. The Central Sales Differential Tax for Non 16.44 Tax Act, 1956 submission of C Forms (Paid) (2.05)

9. Indian Customs Differential customs duty on 1161.14 Act; 1962 raw material purchases (Paid) (125.00)

10. Indian Customs Finalisation of assessed Bill of 16.06 Act, 1962 Entries pertaining to KCL.

11. Indian Customs Penalty on classification of 9.90 Act, 1962 goods disputed

12. Indian Customs Anti dumping duty on import of 32.69 Act, 1962 Barium Carbonate

13. Employees PF delay charges/ damages 15.34 Provident Fund for belated payments and Miscellaneous Provisions Act, 1952.

14. The Electricity Act, Refund of Income tax on 500.00 2003. account of change in tax rates (500.00) as per PPA.(paid)

15. The Electricity Act, Fuel Surcharge Adjustment 871.93 2003. (FSA) charges. 695.34



Name Forum where dispute is pending

Indian Customs August, Sales''tax Appellate Tribunal, '' 2009 Ernakulam.

Indian Customs 2009-10 Deputy Commissioner of Appeals.Palakkad

Indian Customs 2009-10 Deputy Commissioner of Appeals, Palakkad.

Indian Customs 2009-10 The Deputy Commissioner of Appeals, Kurnool. _

Indian Customs 2000 to 2006 Commissioner of Customs, Chennai.

Indian Customs 2006-07 Commissioner of Customs, (Appeals) Mumbai.

Indian Customs 2008-09 High Court of Andhra Pradesh, Hyderabad.

Indian Customs 2010-11 Deputy Commissioner of Customs, Chennai.

Indian Customs May, 2002 to Regional PF Commissioner, Dec 2007 Cuddapah, for waiver.

Indian Customs 2000-2005 The Supreme Court of India.

2008-09 Supreme Court of India

Indian Customs April, 2009 to High Court of Andhra Pradesh, June, 2010 Hyderabad.

(x) In our opinion, the company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, we are of the opinion, that the Company has not defaulted in repayment of dues to Financial Institutions, Banks or Debenture holders, except the interest and principal dues fallen due during the year, which were paid subsequent to due dates, but no amount was due at the year end.

(xii) In our opinion and 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) 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 (Auditors'' Report) Order, 2003 are not applicable to the company.

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

(xv) 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) In our opinion, the term loans received during the year have been applied for the purposes for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

(xviii) According to the information and explanations given to us, during the year, the company has made preferential allotment of convertible share warrants to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956. In our opinion, the price at which the share warrants have been issued, which is determined in accordance with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and is not prejudicial to the interest of the company.

(xix) According to the information and explanations given to us, the Company has created securities in respect of debentures issued.

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

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For Brahmayya & Co.,

Chartered Accountants

Firm''s Regn. No. 000514S

Sd/-

Place: Kurnool (Camp) (B DAIVADHEENAM REDDY)

Date : 15th May, 2013 Partner

Membership No. 026450


Mar 31, 2012

1. We have audited the attached Balance Sheet of M/s. Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool as at 31st March, 2012 and the Statement of Profit and Loss and also 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 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 misstatements. 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.

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

4. Further to our comments in the Annexure referred to in paragraph 3 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 mandatory 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, 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 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 together with the 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 ;

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

b) In the case of the Statement of Profit and Loss, of the Profit of the Company for the year ended on that date; and

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

ANNEXURE TO AUDITOR'S REPORT

Re: Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool.

Referred to in Paragraph 3 of our report of even date;

(i) in respect of fixed assets;

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

b. As explained to us, all the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

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

(ii) In respect of inventories;

a. The inventories have been physically verified by the management at regular intervals during the year. In our opinion, ;he frequency of 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 the nature of its business.

c. The Company has maintained proper records of inventories. As explained to us, the discrepancies noticed on physical verification between the physical stocks and the boo records were not material.

(iii) a. The Company has taken interest free unsecured lean from one company covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 920.00 lakhs and the year end balance of loan taken from such company was Rs. 920.00 lakhs. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions on which loans have been taken from the company listed in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facial prejudicial to the interest of the company.

c. In our opinion and according to the information and explanations given to us and as represented by the Company, the loan amount was taken from Promoters group contribution towards Equity and no stipulation for repayment of principal and no interest payment on the loan amount. Therefore, no irregularity in repayment of principal and interest payment.

(iv) 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 in purchase of inventory, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any major weaknesses in internal controls.

(v) In respect of transactions covered under Section 301 of the Companies Act, 1956;

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed to be entered into 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 entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public specified under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

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

(viii) The Central Government has prescribed maintenance of Cost records under Section 209(1 )(d) of the Companies Act, 1956 in respect of chemicals and soaps manufacturing and electricity generation activities of the Company. We have broadly reviewed the books of account and records relating to materials, labour and other items of cost maintained by the

Company and we are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) In respect of statutory dues;

a. According to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees's State Insurance, Income-Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and other material statutory dues have been generally regularly deposited with marginal delays with the appropriate authorities.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 3181 March, 2012 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 disputed statutory dues, which have not been deposited in respect of the following :

SI. Name of the Statute Nature of dues Rs. in Period Forum where dispute is No. lakhs pending

1. The Central Excise CENVAT Credit availed on. 8.35 2005 to 2007 Central Excise and Service Act, 1944 input services Tax Appellate Tribunal, Bangalore.

2 The Central Excise CENVAT Credit availed 95.41 2008-09 Central Excise and Service Act, 1944 against manufacture of Tax Appellate Tribunal, exempted goods dismally, so Bangalore.

3. The Central Excise CENVAT Credit availecoi 77.27 2007-08 Central Excise and Service Act, 1944 service tax disallowed (April, 2007 Tax Appellate Tribunal, to Feb, 2008) Bangalore.

4. The Central Excise CENVAT Credit availed on 45.67 2008-09 Additional Commissioner Act, 1944 service tax disallowed (March, 2008 of Central Excise, Tirupati. to Aug, 2008

5. The Central Excise CENVAT Credit on input 40.41 2008-09 Additional Commissioner Act, 1944 service tax (Sep, 2008 to of Central Excise, Tirupati.

March, 2009)

6. The Central Excise CENVAT Credit on input 52.88 2009-10 Commissioner of Customs Act, 1944 service tax (April, 2009 to and Excise , Tirupati. March, 2010)

7. The Central Excise CENVAT Credit on input ' 38.88 2010-11 Commissioner of Customs Act, 1944 service tax (April, 2010 to and Excise Tirupati.

March. 2011)

8. A.P.VAT Act, 2005 input tax credit on furnace oil 53.91 2005-06 Sales tax Appellate & coal disallowed (Paid) (53.91) Tribunal, Hyderabad:

9. KERALA VAT Disputed VAT on estimated 20.51 2008-09 The Deputy Commissioner Act. 2005 gross profit (5.12) of Appeals. Ernakulam.

10.KERALA VAT Disallowance of tax on 4.41 2009-10 The Deputy Commissioner Act, 2005 sales returns of Appeals. Palakkad.

11.KERALA VAT Late submission of Form-F 9.95 2009-10 The Deputy Commissioner Act, 2005 of Appeals, Palakkad ,

12.KERALA VAT Disallowance of tax on 2.68 2009-10 The Deputy Commissioner Act, 2005 sales returns of Appeals, Palakkad.

13.Indian Customs Differential customs duty 1161.14 2000 to 2006 Commissioner of

Act, 1962 on raw material purchases (Paid) (125.06) Customs, Chennai.

14.Indian Customs Finalisation of assessed bill 16.06 2006-07 Additional Commissioner of Act, 1962 of entries pertaining to KCL Customs, Mumbai.

from Dharmthar Port

15. Indian Customs Penality on classification of 9.90 2008-09 High Court of Andhra Pradesh Act.,1962 goods disputed Hyderabad.

16, Indian Customs Anti dumping duty on 32.69 2010-11 Deputy Commissioner of Act, 1962 Barium Corbonate Customs, Chennai.

17.Employees Provident PF delay charges/ damages 15.34 May, 2002 Regional PF Fund a for belated payments to Nov, 2006 Commissioner, Miscellaneous Cuddapah (for waiver). Provisions Act, 1952

(x) In our opinion, the company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, we are of the opinion, that the Company has not defaulted in repayment of dues to Financial Institutions, Banks or Debenture holders, except the interest and principal dues fallen due during the year, which were paid subsequent to due dates, but no amount was due at the year end.

(xii) In our opinion and 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) 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 (Auditors' Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and others investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(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) In our opinion, the term loans received during the year have been applied for the purposes for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

(xviii) 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 Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company has created securities in respect of debentures issued.

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

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For Brahmayya & Co

Chartered Accountants

Firm's Regn. No. 000514S

Sd/-

Place : Hyderabad (Camp) (B.DAIVADHEENAM REDDY)

Date : 07.05.2012 Partner

Membership No.026450


Mar 31, 2011

1. We have audited the attached Balance Sheet of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool as at 31s1 March, 2011 and the Profit and Loss Account and also 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 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 misstatements. 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.

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

4. Further to our comments in the Annexure referred to in paragraph 3 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 mandatory 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 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 together with the 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;

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2011;

b) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; and

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

ANNEXURE TO AUDITOR'S REPORT Re: Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool. Referred to in Paragraph 3 of our report of even date;

(i) In respect of fixed assets;

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

b. As explained to us, all the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

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

(ii) In respect of inventories;

a. The inventories have been physically verified by the management at regular intervals during the year. In our opinion, the frequency of 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 the nature of its business.

c. The Company has maintained proper records of inventories. As explained to us, the discrepancies noticed on physical verification between the physical stocks and the book records were not material.

(iii) a. The Company has taken interest free unsecured loan from one company covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 520.00 lakhs and the year end balance of loan taken from such company was Rs. 520.00 lakhs. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

b. In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions on which loans have been taken from the company listed in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company.

c. In our opinion and according to the information and explanations given to us and as represented by the Company, the loan amount was taken from Promoters group contribution towards Equity and no stipulation for repayment of principal and no interest payment on the loan amount. Therefore, no irregularity in repayment of principal and interest payment.

(iv) 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, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any major weaknesses in internal controls.

(v) In respect of transactions covered under Section 301 of the Companies Act, 1956;

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed to be entered into 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 entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public specified under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

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

(viii) The Central Government has prescribed maintenance of Cost records under Section 209(1 )(d) of the Companies Act, 1956 in respect of chemicals and soaps manufacturing and electricity generation activities of the Company. We have broadly reviewed the books of account and records relating to materials, labour and other items of cost maintained by the Company and we are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) In respect of statutory dues;

a. According to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees's State Insurance, Income-Tax, Sales Tax, Wealth Tax, Customs'Duty, Excise Duty, Cess and other material statutory dues have been generally regularly deposited with marginal delays with the appropriate authorities.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth 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 became payable.

c. According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited in respect of the following SI.Name of the Statute Nature of dues Rs.in No. lakhs 1. The Central Excise CENVAT Credit availed 8.35 Act, 1944 on input service

2. The Central Excise CENVAT Credit availed 95.41 Act, 1944 against manufacture of exempted goods disallowed

3. The Central Excise CENVAT Credit availed 2.77 Act, 1944 on welding electrodes disallowed

4. The Central Excise CENVAT Credit availed 77.27 Act, 1944 on service tax disallowed

5. The Central Excise CENVAT Credit availed 45.67 Act, 1944 on service tax disallowed

6. The Central Excise CENVAT Credit on input 40.41 Act, 1944 service tax

7. The Central Excise CENVAT Credit on input 52.88 Act, 1944 service tax 8. A.P.VAT Act, 2005 Input tax credit on 53.91 furnace oil & (53.91) coal disallowed 9. KERALA VAT Disputed VAT on 20.51 Act, 2005 estimated gross profit

10.Indian Customs Differential customs 1161.14 Act, 1962 on raw material (125.00) purchases(Paid) 11.Indian Customs Penalty on classific 9.90 Act, 1962 ation of goods disputed

12.Employees Provident PF delay charges/damages 15.34 Fund and Miscelianeous for bealated payments Provisions Act, 1952

Name of the Statute Period Forum where dispute is pending

The Central Excise 2005 to 2007 Central Excise and Act,1944 Service Tax Appellate Tribunal,Bangalore

The Central Excise 2008-09 Central Excise and Act, 1944 Service Tax Appellate Tribunal,Bangalore.

The Central Excise 2008-09 Central Excise and Act,1944 Service Tax Appellate Tribunal,Bangalore.

The Central Excise 2007-08 Central Excise and (April, 2007 service Tax Appellate to Feb, 2008)

The Central Excise 2008-09 Additional Commissioner Act, 1944 (March, 2008 of Central Excise, to Aug, 2008 Tirupati.

The Central Excise 2008-09 Additional Commissioner Act, 1944 (Sep, 2008 to of Central Excise, March, 2009 Tirupati. The Central Excise 2009-10 Commissioner of Customs Act, 1944 (April, 2009 and Excise, Tirupati to March, 2010 A.P.VAT Act, 2005 2005-06 Sales tax Appellate Tribunal, Hyderabad. KERALA VAT 2008-09 The Deputy Commissioner Act, 2005 of Appeals, Ernakulam.

Indian Customs 2000 to 2006 Commissioner of Act, 1962 Customs, Chennai. Indian Customs 2008-09 High Court of Andhra Act, 1962 Pradesh, Hyderabad.

Employees Provident May, 2002 Regional PF . Fund and Miscelia to Nov. 2006 Commissioner neous Provisions Cuddapah( for waiver). Act, 1952



(x) In our opinion, the company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, we are of the opinion, that the Company has not defaulted in repayment of dues to Financial Institutions, Banks or Debenture holders, except the interest and principal dues fallen due during the year, which were paid subsequent to due dates, but no amount was due at the year end.

(xii) In our opinion and 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) 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 (Auditors' Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and others investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

(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) In our opinion, the term loans received during the year have been applied for the purposes for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. No . long-term funds have been used to finance short-term assets except permanent working capital.

(xviii) 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 Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company has created securities in respect of debentures issued.

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

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For Brahmayya & Co.,

Chartered Accountants Firm's Regn. No. 000514S

Sd/- (B.DAIVADHEENAM REDDY) Partner Membership No.026450

Place : Hyderabad (Camp) Date : 02.05.2011


Mar 31, 2010

1. We have audited the attached Balance Sheet of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool as at 31s March,2010 and the Profit and Loss Account and also 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 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 misstatements. 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.

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

4. Further to our comments in the Annexure referred to in paragraph 3 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 mandatory 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 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 together with the 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;

a) In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2010;

b) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; and

c) InthecaseoftheCashFlowStatement, of the cash flows of the Company for the year ended on that date.

ANNEXURE TO AUDITORS REPORT Re: Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool.

Referred to in Paragraph 3 of our report of even date;

(i) In respect of fixed assets;

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

b. As explained to us, all the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

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

(ii) In respect of inventories;

a The inventories have been physically verified by the management at regular intervals during the year. In our opinion, the frequency of 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 the nature of its business.

c. The Company has maintained proper records of inventories. As explained to us, the discrepancies noticed on physical verification between the physical stocks and the book records were not material.

(iii) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.The Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Therefore, the provisions of Clause 4(iii)(b)(c) and (d) of the Companies (Auditors Report) Order, 2003 are not applicable.

(iv) 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, fixed assets and with regard to the sale of goods. During the course of our audit, we have not observed any major weaknesses in internal controls.

(v) In respect of transactions covered under Section 301 of the Companies Act, 1956;

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed to be entered into 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 entered in the register maintained under Section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(vi) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public specified under the provisions of sections 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. No order has been passed by the Company Law Board.

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

(viii) The Central Government has prescribed maintenance of Cost records under Section 209(1 )(d) of the Companies Act, 1956 in respect of chemicals and soaps manufacturing and electricity generation activities of the Company. We have broadly reviewed the books of account and records relating to materials, labour and other items of cost maintained by the Company and we are of the opinion, that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the same.

(ix) In respect of statutory dues;

a. According to the records of the Company, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employeess State Insurance, Income-Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and other material statutory dues have been generally regularly deposited with marginal delays with the appropriate author! ties.

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax. Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31s March, 2010 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 disputed statutory dues, which have not been deposited in respect of the following :



The Central Excise Service tax levied on goods transport operator Central Excise and Service Tax Appellate Act, 1944 and clearing^ forwarding agent services 32.18 Tribunal. Bangalore. CentralExcise CENVAT Credit availed on input

3 The Central Excise CENVAT Credit availed against manufacture of nc41 2008-09 Central Excise and Service Tax Appellate Act, 1944 exempted goods disallowed Tribunal, Bangalore.

4. The Central Excise CENVAT Credit availed on welding electrodes , 77 Central Excise and Service Tax Appellate

5. Central Excise CENVAT Credit availed on service tax 77?7 2007-08 (April,07to Central Excise and Service Tax Appellate Act, 1944 disallowed Feb08 Tribunal, Bangalore

6. JCentralExcise CENTO 45,67 Commissioner of Central Excise. Tirupati

7. CENVAT Credit on input service tax 40.41 Cornmissioner ot Central Tirupathi

8. Input tax credit on furnace oil & coat ,Sales Tax Appellate Tribunal, Hyderabad.

9 Indian Customs Differential customs duty on raw material 1161.14 ?mn nfi Commissioner of Customs,

Act 1962 purchases(Paid) (125.00) duuu"UD chennai.

Tax Indian Customs Penalty on classification of Act1962 goods disputed 9-90 2008-09 High Court of Andhra Pradesh, Hyderabad.

(x) In our opinion, the company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, we are of the opinion, that the Company has not defaulted in repayment of dues to Financial Institutions, Banks or Debenture holders, except the interest and principal dues fallen due during the year, which were paid subsequent to due dates, but no amount was due at the year end,

(xii) In our opinion and 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) 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 (Auditors Report) Order, 2003 are not applicable to the company.

(xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and others investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

(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) The Company has not raised any new term loans during the year. In our opinion, the term loans outstanding at the beginning of the year were applied for the purposes for which they were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment. No long-term funds have been used to finance short-term assets except permanent working capital.

(xviii) 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 Companies Act, 1956.

(xix) According to the information and explanations given to us, the Company has created securities in respect of debentures issued.

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

(xxi) In our opinion and according to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

For Brahmayya & Co.,

Chartered Accountants Firms Regn.No.000514S

Sd/- Place: Kurnool (Camp) (B.DAIVADHEENAM REDDY)

Date : 11.05.2010 Partner

Membership No.026450

 
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