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Auditor Report of NACL Industries Ltd.

Mar 31, 2023

NACL Industries Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of NACL Industries Limited (the "Company") which comprise the standalone balance sheet as at March 31, 2023, and the standalone statement of profit and loss (including other comprehensive income), standalone statement of changes in equity and standalone statement of cash flows for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, and its profit and other comprehensive income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under Section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Revenue Recognition - Existence

See Note 3.1 and Note 22 to standalone financial statements

The key audit matter

How the matter was addressed in our audit

The Company recognises revenue from sale of farm inputs

Our

audit procedures included the following:

based on the terms and conditions of transactions which vary

1.

Assessed the appropriateness of the revenue recognition

with different customers.

policies for compliance with Ind AS 115 - Revenue from

We identified the recognition of revenue from sale of goods as

contracts with customers.

a key audit matter because:

2.

Tested the design, implementation and operating effectiveness of key internal financial controls with respect

Revenue is one of the key performance indicators of the

to revenue recognition.

Company. There could be pressure to meet the expectations of

investors/ other stakeholders for the reporting period.

3.

Performed testing of selected statistical samples of revenue transactions recorded during the year by verifying the

Hence, there could be a risk of revenue being recognised before

underlying documents such as sales invoices and dispatch

the control has been transferred to the customer.

documents/ acknowledged delivery receipts/shipping documents.

4.

Tested revenue transactions recorded before the year end date and revenue reversal transactions recorded after the year end date, selected on a sample basis using statistical sampling, to assess revenue is recognised in the period in which control is transferred.

5.

Evaluated manual journals, sample selected based on specified risk-based criteria posted to revenue to identify unusual or irregular items.

6.

Evaluated the adequacy of disclosures made in the standalone financial statements.

Key Audit matter

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Information Other than the Financial Statements and Auditor''s Report Thereon

The Company''s Management and Board of Directors are responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and auditor''s report thereon. The annual report is expected to be made available to us after the date of this auditor''s report.

Our opinion on the standalone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance as required under SA 720 "The Auditor''s Responsibilities Relating to Other Information.

Management''s and Board of Directors'' Responsibilities for the Standalone Financial Statements

The Company''s Management and Board of Directors are responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) specified under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, the Management and Board of Directors are responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management and Board of Directors.

• Conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting in preparation of standalone financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

The standalone financial statements of the Company for the year ended March 31, 2022 were audited by the predecessor auditor whose report dated May 12, 2022 had expressed an unmodified opinion.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of Section 143(11) of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

2 A. 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 standalone balance sheet, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of changes in equity and the standalone statement of cash flows 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 Ind AS specified under Section 133 of the Act.

e. On the basis of the written representations received from the directors as on March 31, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164(2) of the Act.

f. With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B"

B. 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 as at March 31, 2023 on its financial position in its standalone financial statements -Refer Note 31to the standalone 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 amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

d (i) The management has represented that, to the best of their knowledge and belief, as disclosed in the Note 43 to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(ii) The management has represented that, to the best of their knowledge and belief, as disclosed in the Note 43 to the standalone financial statements, no funds have been received by the Company from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(iii) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances performed, nothing has come

to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (i) and (ii) above, contain any material misstatement. e. The final dividend paid by the Company during the year, in respect of the same declared for the previous year, is in accordance with Section 123 of the Act to the extent it applies to payment of dividend.

The interim dividend declared and paid by the Company during the year and until the date of this audit report is in accordance with Section 123 of the Act.

As stated in Note 14 to the standalone financial statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend

Place: Hyderabad Date: May 22, 2023

declared is in accordance with Section 123 of the Act to the extent it applies to declaration of dividend. f. As proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Company only with effect from April 1, 2023, reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is not applicable.

C. With respect to the matter to be included in the Auditor''s Report under Section 197(16) of the Act:

In our opinion and according to the information and explanations given to us, the remuneration paid by the Company to its directors during the current year is in accordance with the provisions of Section 197 of the Act. The remuneration paid to any director is not in excess of the limit laid down under Section 197 of the Act. The Ministry of Corporate Affairs has not prescribed other details under Section 197(16) of the Act which are required to be commented upon by us.

For B S R and Co

Chartered Accountants Firm''s Registration No.: 128510W

Arpan Jain

Partner

Membership No.: 125710 ICAI UDIN: 23125710BGYBQN9591



Mar 31, 2018

INDEPENDENT AUDITOR’S REPORT

To The Members of NACL Industries Limited

(formerly “Nagarjuna Agrichem Limited”)

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of NACL Industries Limited (formerly “Nagarjuna Agrichem Limited”) (“the Company”), which comprise the Balance Sheet as at March 31, 2018, and the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder and the Order issued under section 143(11) of the Act.

We conducted our audit of the standalone Ind AS financial statements 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 standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS 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 standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS 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 Ind AS and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its profit, total comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Other Matters

The comparative financial information of the Company for the year ended March 31, 2017 and the transition date opening balance sheet as at April 1, 2016 included in these standalone Ind AS financial statements, are based on the statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited by the predecessor auditor whose report for the year ended March 31, 2017 and March 31, 2016 dated May 27, 2017 and May 21, 2016 respectively expressed an unmodified opinion on those standalone financial statements, and have been restated to comply with Ind AS. Adjustments made to the previously issued said financial information prepared in accordance with the Companies (Accounting Standards) Rules, 2006 to comply with Ind AS have been audited by us.

Our opinion on the standalone Ind AS financial statements is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act, based on our audit, 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 including Other Comprehensive Income, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act.

e) On the basis of the written representations received from the directors of the Company as on March 31, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.

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

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

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

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

2. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order.

(Referred to in paragraph 1(f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date)

Report on the internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of NACL Industries Limited (formerly “Nagarjuna Agrichem Industries”) (“the Company”) as of March 31, 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

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

Meaning of internal Financial Controls Over Financial Reporting

A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

inherent Limitations of internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over

financial reporting were operating effectively as at March 31, 2018, based on the criteria for internal financial control over financial reporting established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ section 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) The Company has a program of verification of fixed assets to cover all the items in a phased manner 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 assets. Pursuant to the program, certain fixed assets were physically verified by the Management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) According to the information and explanations given to us and the records examined by us and based on the examination of the registered sale deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings, are held in the name of the Company as at the balance sheet date. Immovable properties of land and buildings whose title deeds have been pledged as security for term loans and working capital loan are held in the name of the Company based on the confirmations directly received by us from lenders.

(ii) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals and no material discrepancies were noticed on physical verification.

(iii) According to the information and explanations given to us, the Company has granted loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013, in respect of which:

(a) The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company’s interest.

(b) The schedule of repayment of principal and payment of interest has been stipulated and the repayments of principal amounts and interest have not been regular as per stipulations.

(c) In respect of amounts of Rs. 167 lakhs and Rs. 135 lakhs of principal and interest, respectively, which has been overdue for more than 90 days, as explained to us, the Management has taken reasonable steps for recovery of the principal amounts and interest.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Companies Act, 2013 in respect of grant of loans, making investments and providing guarantees and securities, as applicable.

(v) According to the information and explanations given to us, the Company has not accepted any deposit during the year.

(vi) The maintenance of cost records has been specified by the Central Government under section 148(1) of the Companies Act, 2013 for pesticides. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as amended prescribed by the Central Government under subsection (1) of Section 148 of the Companies Act, 2013, and are of the opinion that, prima facie, the prescribed cost 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.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has been generally regular in depositing undisputed statutory dues, including Provident Fund, Employees’ State Insurance, Income-tax, Goods & Services Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues applicable to it to the appropriate authorities.

(b) There were no undisputed amounts payable in respect of Provident Fund, , Employees’ State Insurance, Income-tax, Goods & Services Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues in arrears as at March 31, 2018 for a period of more than six months from the date they became payable.

(c) Details of dues of Income-tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, and Value Added Tax which have not been deposited as on March 31, 2018 on account of disputes are given below:

Name of Statute

Nature of Dues

Forum where Dispute is Pending

Period to which the Amount Relates

Amount involved ('' in lakhs)

Amount Unpaid ('' in lakhs)

Finance

Act,1994

Service

Tax

Commissioner (Appeals)-II, Visakhapatnam

2012-13

3.13

3.13

Finance

Act,1994

Service

Tax

CESTAT, Hyderabad

2011-12

1.43

1.29

Central Excise Act,1994

Excise duty

Hon’ble High Court of Andhra Pradesh

2005-06

2006-07

8.13

8.13

Central Excise Act,1994

Excise duty

Addl. Commissioner (Appeals), Visakhapatnam

2007-08

12.14

12.14

Sales Tax Act

Sales Tax

Sales Tax Department

2012-13

17.01

13.61

Sales Tax Act

Sales Tax

Sales Tax Department

2013-14

14.85

13.37

Sales Tax Act

Sales Tax

Sales Tax Department

2014-15

0.23

0.21

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of loans or borrowings to financial institutions, banks and government and dues to debenture holders.

(ix) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year. In our opinion and according to the information and explanations given to us, the term loans have been applied by the Company during the year for the purposes for which they were raised.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) In our opinion and according to the information and explanations given to us, the Company has paid managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act, 2013.

(xii) The Company is not a Nidhi Company and hence reporting under clause (xii) of the CARO 2016 Order is not applicable.

(xiii) In our opinion and according to the information and explanations given to us the Company is in compliance with Section 188 and 177 of the Companies Act, 2013, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the financial statements etc. as required by the applicable accounting standards.

(xiv) During the year the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures and hence reporting under clause (xiv) of CARO 2016 is not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its directors or persons connected with him and hence provisions of section 192 of the Companies Act, 2013 are not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

FOR DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm’s Registration No. 117366W/W-100018)

Ganesh Balakrishnan

Place: Hyderabad Partner

Date: May 19, 2018 (Membership No. 201193)


Mar 31, 2017

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Nagarjuna Agrichem Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2017, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”).

Management’s responsibility for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and 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 standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone 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 standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the standalone 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 standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes 88evaluating 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 standalone financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2017 and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following Notes to the financial statements:

Note No. 35 regarding the insurance claim on fire affected Block-5 of Srikakulam Plant during 30th June, 2012 has been settled and the company received an amount of Rs. 32.44 Crores on 15th December, 2016. The total amount of insurance claim proceeds (including scrap realization) of Rs. 45.65 Crores is credited to the Profit & Loss Account. The company has debited to the Profit & Loss Account Rs. 20.08 Crores being the book value of completely damaged assets, partially damaged assets, damaged inventories. The net amount of Rs. 25.57 Crores is shown under Exceptional Items.

Our opinion is not modified in respect of above 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 Standalone 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 March 31, 2017 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2017 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, we give our separate Report in “Annexure A”.

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

i. The Company has disclosed the impact of all pending litigations on its financial position in its standalone financial statements - refer Note 31 to the standalone financial statements.

ii. The Company did not, as at March 31, 2017, have any material foreseeable losses relating to long-term contracts including derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Holding Company and its Subsidiary Companies incorporated in India except in cases where in disputes relating to ownership of the underlying shared have remained unresolved.

iv. The Company has provided disclosures in Note 42 in the standalone financial statements as to the holding of Specified Bank Notes on November 8, 2016 and December 30, 2016 as well as dealings in Specified Bank Notes during the period from November 8, 2016 and December 30, 2016. Based on our audit procedures and relying on the management representation regarding the holding and nature of cash transactions, including those in Specified Bank Notes, we report that these disclosures are in accordance with the books of accounts maintained by the Company and as produced to us by the management.

2. As required by the Companies (Auditors Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in the “Annexure B”, a statement on the matters specified in paragraphs 3 and 4 of the Order.

i) 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.

(c) The title deeds of the immovable properties of the Company are held in its name.

ii) According to the information and explanations 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. Further, the discrepancies found during such verification were not material and the same have been properly dealt with in the books of the Company.

iii) According to the information and explanations furnished to us, the Company has granted an unsecured loan to its Associate Company covered in the register maintained under Section 189 of the Companies Act 2013, in respect of which, in our opinion,

(a) The terms and conditions of the grant of such loan are not prejudicial to the Company’s interest.

(b) The repayment of the loan and the payment of interest thereon have not been regular in terms of the stipulated schedule in respect thereof

(c) Principal amount of Rs. 167 Lakhs and interest of Rs. 109.24 Lakhs was overdue for more than 90 days as at the date of the Balance Sheet

(d) The Company has been taking reasonable steps for recovery of such overdue principal and interest.

iv) According to the information and explanations furnished to us, the company has not made any loans to which the provisions of Sections 185 and 186 of the Act apply, except a loan made by the company to its associate company in respect of which in our opinion, the provisions of Sec 186 of the Act to the extent applicable, have been complied with.

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

vi) 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, 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.

vii)(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, Service Tax, Customs duty, Excise Duty, Value Added Tax, Cess and other applicable statutory dues with the appropriate authorities; there were no arrears of such statutory dues as at 31st March 2017 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, Wealth Tax, Value Added Tax, Customs duty, Service Tax, Excise duty or Cess, which have not been deposited on account of any dispute pending except the following:

Statute

Nature of the Dues

Forum where dispute is pending

Period to which the amount relates

Demand (Rs. In Lakhs)

Amount paid under protest (Rs. In Lakhs)

Dues-Net of amount paid under protest (Rs.

In Lakhs)

Finance

Act,

1994

Service Tax(including interest & penalty)

Commissioner

(Appeals),

Visakhapatnam

CESTAT, Bangalore

2011-12 2012-13

2013-14

2014-15

2015-16 2010-11

52.26

4.17

3.52

48.74

4.17

Statute

Nature of the Dues

Forum where dispute is pending

Period to which the amount relates

Demand (Rs. In Lakhs)

Amount paid under protest (Rs. In Lakhs)

Dues-Net of amount paid under protest (Rs.

In Lakhs)

Central

Excise duty

Andhra Pradesh

2004-05

Excise

Act,1994

(including interest And

Honourable High Court

2006-07

2007-08

8.13

-

8.13

penalty)

Additional

Commissioner(Appeals)

Visakhapatnam

2006-07

27.00

14.86

12.14

(c) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank.

(d) According to the information and explanations given to us, the working capital term loans raised by the Company have been applied for the purpose for which they were raised.

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

(f) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

(g) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, reporting under paragraph 3(xii) of the Order does not arise.

(h) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(i) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

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

(k) According to the information and explanations furnished to us, the Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934

For M. Bhaskara Rao & Co;

Chartered Accountants

Firm Registration Number: 000459 S

(V. Raghunandan)

Place : Hyderabad Partner

Date : 27th May,2017 Membership No. 26255


Mar 31, 2016

To

The Members of Nagarjuna Agrichem Limited

Report on the Standalone Financial Statements

We have audited the accompanying Standalone Financial Statements of Nagarjuna Agrichem Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the Standalone Financial Statements”).

Management’s responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and 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 Standalone Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these Standalone 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 Standalone Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the Standalone 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 Standalone Financial Statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the Standalone Financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2016 and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following Notes to the financial 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 in these Financial Statements 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 above matters.

Report on Other Legal and Regulatory Requirements

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

- 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.

- 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.

- 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.

- In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

- On the basis of the written representations received from the Directors as on March 31, 2016 taken on record by the Board of Directors, none of the Directors is disqualified as on March 31, 2016 from being appointed as a Director in terms of Section 164 (2) of the Act.

- With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, we give our separate Report in “Annexure A”.

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

i. The Company has disclosed the impact of all pending litigations on its financial position in its Standalone Financial Statements - refer Note 31 to the standalone financial statements.

ii. The Company did not, as at March 31, 2016, have any material foreseeable losses relating to long-term contracts including derivative contracts.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company except in case wherein disputes relating to the ownership of the underlying shares have remained unresolved..

2. As required by the Companies (Auditors Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in the “Annexure B”, a statement on the matters specified in paragraphs 3 and 4 of the Order.

ANNEXURE A TO THE INDEPENDENT AUDITORS’ REPORT

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

We have audited the internal financial controls over financial reporting of Nagarjuna Agrichem Limited (“the Company”) as of March 31, 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the “Guidance Note on Audit of Internal Financial Controls over Financial Reporting” issued by the Institute of Chartered Accountants of India (‘ICAI’). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the “Guidance Note on Audit of Internal Financial Controls over Financial Reporting” (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk whether a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

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

Meaning of Internal Financial Controls over Financial Reporting

A Company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

ANNEXURE B TO THE INDEPENDENT AUDITORS’ REPORT

(Statement referred to in paragraph 2 under ‘Other Legal and Regulatory requirements’ in our report of even date)

i) 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.

(c) The title deeds of the immovable properties of the Company are held in its name.

ii) According to the information and explanations 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. Further, the discrepancies found during such verification were not material and the same have been properly dealt with in the books of the Company.

iii) According to the information and explanations furnished to us, the Company has granted an unsecured loan to its Associate Company covered in the register maintained under Section 189 of the Companies Act 2013, in respect of which, in our opinion,

(a) The terms and conditions of the grant of such loan are not prejudicial to the Company’s interest.

(b) The repayment of the loan and the payment of interest thereon have not been regular in terms of the stipulated schedule in respect thereof

(c) Principal amount of Rs. 167 lakhs and interest of Rs. 75.12 Lakhs was overdue for more than 90 days as at the date of the Balance Sheet

(d) The Company has been taking reasonable steps for recovery of such overdue principal and interest.

iv) According to the information and explanations furnished to us, the Company has not made any loans to which the provisions of Sections 185 and 186 of the Act apply, except a loan made by the Company to its associate Company in respect of which in our opinion, the provisions of Sec 186 of the Act to the extent applicable, have been complied with.

v) According to the information and explanations furnished to us, the Company has not accepted any deposits covered by Sections 73 to 76 of the Companies Act 2013 and the Rules framed there under.

vi) 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.

vii) (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, Service Tax, Customs duty, Excise Duty, Value Added Tax, Cess and other applicable statutory dues with the appropriate authorities; there were no arrears of such statutory dues as at 31st March 2016 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, Wealth Tax, Value Added Tax, Customs duty, Service Tax, Excise duty or Cess, which have not been deposited on account of any dispute pending except the following:

Statute

Nature of the Dues

Forum where dispute is pending

Period to which the amount relates

Demand (Rs. In Lakhs)

Amount paid under protest (Rs. In Lakhs)

Dues-Net of amount paid under protest (Rs. In Lakhs)

2011-12 2012-13,

Finance Act, 1994

Service Tax (including interest & penalty)

Commissioner (Appeals), Visakhapatnam

2013-14,

2014-15,

2015-16

54.63

3.52

51.11

CESTAT, Bangalore

2010-11

4.17

-

4.17

Andhra Pradesh

2004-05,

2006-07,

2007-08

2006-07

Central Excise Act,1994

Excise duty (including interest And penalty)

Honorable High Court Additional Commissioner (Appeals) Visakhapatnam

8.13

27.00

14.86

8.13

12.14

viii) According to the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank.

ix) According to the information and explanations given to us, the working capital term loans raised by the Company have been applied for the purpose for which they were raised.

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

xi) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

xii) In our opinion and according to the information and explanations given to us, the Company is not a Nidhi Company. Accordingly, reporting under paragraph 3(xii) of the Order does not arise.

xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

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

xvi) According to the information and explanations furnished to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934.

For M. Bhaskara Rao & Co.,

Chartered Accountants

Firm Registration No. 000459S

(M Bhaskara Rao)

Place : Hyderabad Partner

Date : 2151 May 2016 Membership No.005176


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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