Auditor Report of TGV SRAAC Ltd.

Mar 31, 2023

TGV SRAAC LIMITED

Report on the Audit of Financial Statements Opinion

We have audited the accompanying financial statements of TGV SRAAC LIMITED (“the Company”), which comprise the balance sheet as at 31^st March, 2023, the statement of profit and loss (including Other Comprehensive Income), the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the 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 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 Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at 31^st March, 2023, and its profit, other comprehensive income, the 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 Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the financial statements.

Key Audit Matters

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

We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matters	How the key audit matter addressed in our audit
1. Fair Valuation of Investments in Unquoted / unlisted Equity Shares of Andhra Pradesh Gas Power Corporation Limited (APGPCL) • The company has invested as a participitating industry in unquoted equity shares of APGPCL a captive gas based power genarator to avail power for its captive consumption. During the year the operations of APGPCL were haulted due to stoppage of gas supply by Government and has negative profit and huge contingent liabilities on account of disputes pending in court cases. • These factors have triggered in determining the fair value of investments in APGPCL by measuring at nominal value per equity share, which involves significant estimates and judgements. • Accordingly, it is determined as a key audit matter. Refer Note 31 to the Financial Statements.	In view of the significance of the matter, we performed the following key audit procedures, among others to obtain audit evidence. • Examined the company''s accounting policy for recognition of the changes in fair value of investments in equity shares as per Ind AS. • Assessed the company''s assumptions and methods applied in respect of fair value measurement process. • Verified the inputs data used in the valuation and historical trends. • Evaluated the financials, cash flows and pending legal cases and the financial statements of APGPCL. • Assessed the adequacy of disclosures made in the financial statements. Conclusion: Based on the work performed and the evidence obtained, we considered the methodology and assumptions used by management to be appropriate.
2. Contingent liabilities (Refer Note 27 to the financial statement) • The Company has ongoing litigations and claims with State Power Distribution Company of Andhra Pradesh i.e APSPDCL/ APCPDCL. which have arisen from contentions raised by the Company against the charges levied by the State Power Distribution Company of Andhra Pradesh. • Resolution of litigations and claims proceedings may span over multiple years beyond March 31, 2023 due to the complexity and magnitude of the legal matters involved and may involve protracted negotiation or litigation. • The determination of a provision or contingent liability requires significant judgement by the Company because of	We evaluated the design of, and tested, key controls in respect of litigation and regulatory procedures, which we found to be satisfactory for the purposes of our audit. Our procedures included the following: • We read the summary of litigation matters provided by the Company''s legal team and discussed each of the material cases noted in the report to determine the Company''s assessment of the likelihood and magnitude of any liability that may arise. • We read, where applicable, external legal or regulatory advice sought by the Company and reviewed related correspondence. • Assessed the appropriateness of the disclosure in the financial statements.

Key audit matters

How the key audit matter addressed in our audit

the inherent complexity in estimating whether it is probable that there will be an outflow of economic resources. The amount recognized as a provision is the best estimate of the probable expenditure. The provisions and contingent liabilities are subject to changes due to the outcomes of litigations and claims over time as new facts emerge as each legal case progresses. • Significant judgment is necessary to estimate the likelihood, timing and amount of the cash outflows, interpretations of the legal aspects, legislations and judgements previously made by the authorities. Accordingly, this is identified as a key audit matter.

Other Information

The Company''s management and Board of Directors are responsible for the other information. The other information comprises the information included in the Company''s annual report, but does not include the financial statements and our auditor''s report thereon.

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

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

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those charged with governance for the financial statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards specified under section 133 of the Act.

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

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

Those Board of Directors are also responsible for overseeing the company''s financial reporting process. Auditor’s Responsibilities for the Audit of Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the 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 financial statements, including the disclosures, and whether the 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 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.

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 sub-section (11) of section 143 of the Act, we give in the “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. 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, Statement of Changes in Equity and the Statement of Cash Flows dealt with by this report are in agreement with the books of account;

d) in our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under section 133 of the Act;

e) on the basis of the written representations received from the directors of the Company as on 31^st March, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st March, 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”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls with reference to financial statements;

g) with respect to the other matters to be included in the Auditor''s report in accordance with the requirements of section 197(16) of the Act, as amended:

In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid/ provided by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act;

h) with respect to the other matters to be included in the Auditor''s Report in accordance with Rule11 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 as on 31^st March, 2023 on its financial position in its financial statements - Refer Note 27 to the 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 are no amounts, which required to be transferred to the Investor Education and Protection Fund by the company.

. a) The management has represented that, to the best of its knowledge and belief, 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, whether, 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;

b) The management has represented that, to the best of its knowledge and belief, no funds have been received by the Company from any person or entity, including foreign entities

(“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

c) Based on audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to above our notice that has caused us to believe that the representations under above sub-clause (a) and (b) contain any material misstatement;

v) The Board of Directors of the Company have proposed dividend for the year which is subject to the approval of the members at the ensuing Annual General Meeting . The dividend proposed is in accordance with section 123 of the Act, as applicable.

vi) As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the company only with effect from 1^st April, 2023 ,reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended 31^st March, 2023.

for Brahmayya & Co.,

Chartered Accountants Firm''s Regn. No.000515S

Sd/-(B.DAIVADHEENAM REDDY)

Partner

Place : Hyderabad Membership Number: 026450

Date : 29^th May, 2023 UDIN: 23026450BGXKWS5158

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Mar 31, 2018

Report on the Ind AS Financial Statements

We have audited the accompanying Ind AS financial statements of TGV SRAAC LIMITED (“theCompany”), which comprise the Balance Sheet as at March 31 2018, and the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year then ended and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the 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 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 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 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 there under and the Order issued under section 143(11) of the Act.

We conducted our audit of the 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 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 Ind AS financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the 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 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 over all presentation of the 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 Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the afore said 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 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, the changes in equity and its cash flows for the year ended on that date.

Other Matters

The comparative financial information of the Company for the year ended 31st March, 2017 and the transition date opening balance sheet as at 1st April 2016 included in these Ind AS financial statements, are based on the previously issued Ind AS financial statements for the years ended 31st March, 2017 and 31st March, 2016 have been audited by the predecessor auditor on which they have expressed an unmodified opinion.We have restated the comparative financial information to comply with Ind AS adjustments made to the said financial information to comply with Ind AS have been audited by us.

Our opinion on the Ind AS financial statements and our report on Other Legal and Regulatory Requirements below 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, 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,Statement of Changes in Equity and the Statement of Cash Flow dealt with by this report are in agreement with the books of account;

d) in our opinion, the aforesaid 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 with reference to financial statements 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 with reference to financial statements;

g) with respect to the other matters to be included in the Auditor’s Report in accordance with Rule11 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 Ind AS financial statements - Refer Note 27 to the Ind AS financial statements;

ii. the Company did not have any long-term contracts including derivative contracts; as such there were no material foreseeable losses thereon;

iii. there are no amounts which are required to be transferred to the Investor Education and Protection Fund;therefore, delay in transferring such sums does not arise.

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

ANNEXURE “A” TO THE INDEPENDENT AUDITORS’ REPORT

(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 with reference to Financial Statements under Clause (i) of Subsection 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls with reference to financial statements of TGV SRAAC LIMITED (“theCompany”) as of March 31, 2018 in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Board of Directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control with reference to 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, 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 internal financial controls with reference to 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 Section143(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 with reference to financial statements 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 with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of internal financial controls with reference to financial statements, 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 judgement, including the assessment of the risks of material misstatement of the Ind AS 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 with reference to financial statements.

Meaning of Internal Financial Controls Over Financial Statements

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

Limitations of Internal Financial Controls with reference to Financial Statements

Because of the inherent limitations of internal financial controls with reference to financial statements, including the possibility of collusion or improper management over ride 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 with reference to financial statements to future periods are subject to the risk that the internal financial control with reference to financial statements 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 with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at March 31, 2018, based on the internal control with reference to financial statements 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

(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date)

i) in respect of the Company’s fixed assets:

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 to cover all the items of fixed assets in a phased manner 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 on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

ii) in respect of Company’s inventory:

the physical verification of inventory has been conducted at reasonable intervals by the management during the year and no material discrepancies were noticed on physical verification and the small discrepancies, if any, have been properly dealt with in the books of account;

iii) according to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013 (‘the Act’);

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 Act in respect of grant of loans,making investments and providing guarantees and securities, as applicable;

v) the Company has not accepted deposits from public during the year and does not have any unclaimed deposits as at March 31, 2018 and therefore, the provisions of the clause 3 (v) of the Order are not applicable to the Company;

vi) the maintenance of cost records has been specified by the Central Government under Section 148(1) of the Companies Act, 2013. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014, as prescribed by the Central Government under sub-section (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 generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees’State Insurance, Income-tax, Goods and Service Tax (GST), Sales Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, cess and other material statutory dues to the appropriate authorities;

b. there were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income-tax, Goods and Service Tax (GST), 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 Sales Tax, Excise Duty and Value Added Tax which have not been deposited as at March 31, 2018 on account of dispute are given below:

Sl. No.	Name of the Statute	Nature of dues	Amount (Rs. in lakhs)	Period to which the amount relates	Forum where dispute is pending
1.	The Central Excise Act, 1944	CENVAT Credit disallowed on input services	9.82 31.53*	March, 2007 to Feb, 2008 March, 2008 to Sept. 2015	Customs, Excise and Service Tax Appellate Tribunal, Hyderabad.
2.	The Central Excise Act, 1944	CENVAT Credit availed against manufacture of exempted goods disallowed	95.41	2008-09	Customs, Excise and Service Tax Appellate Tribunal, Hyderabad.
3.	AP VAT Act, 2005	Interest on delay payment of deferred sales tax	154.29*	2005-06 and 2006-07	High Court Juridicature at Hyderanad
4.	KERALAVAT Act, 2005	Vat on stock transfer price (paid Rs. 1.81 Lakhs)	0.71	2010-11	Sales Tax Appellate Tribunal, Ernakulam
5.	KERALAVAT Act, 2005	Disallowance of input tax on sales returns (paid Rs. 8.14 Lakhs) Disallowance of input tax on sales returns	8.14 2.68	2009-10 2009-10	High Court of Kerala Ernakulam Deputy Commissioner (Appeals) Palakkad
6.	Karnataka Tax on Entry of Goods Act, 1979	Entry tax on purchase of machinery items and interest	1.78*	2006-07 2007-08 2009-10	Deputy Commissioner of Commercial Taxes, Bellary.
7.	Indian Customs Act, 1962	Customs duty claimed on raw material purchases	1036.14*	2000 -2006	Customs, Excise and Service Tax Appellate Tribunal, Chennai
8.	Indian Customs Act, 1962	Finalisation of assessed bill of entries pertaining to KCL	16.06	2006-07	Customs, Excise and Service Tax Appellate Tribunal, Mumbai
9.	Indian Customs Act, 1962	Anti-dumping duty on import of Barium Carbonate	32.69	2010-11	Joint Commissioner of Customs, Chennai
10.	Indian Customs Act, 1962	Differential duty on classification of goods disputed (Lauric Acid)	9.63* 10.51	2014-15 2014-15	Customs, Excise and Service Tax Appellate Tribunal, Chennai Asst. Commissioner of Customs, Chennai
11.	Employees Provident Fund and Miscellaneous Provisions Act, 1952.	PF delay charges/ damages for belated payments	15.34	May, 2002 to Dec, 2007	Employees Provident Fund Appellate Tribunal, New Delhi.

12.	The Electricity Act, 2003.	Fuel Surcharge Adjustment (FSA) charges Levy of interest by APCPDCL on FSA Charges	871.93 651.87 598.17	2008-09 2009-10 May & June 2010 and October, 2011 to March, 2012	Supreme Court of India High Court Juridicature at Hyderanad
13	The Electricity Act, 2003.	Interest on amount pending in Court Cases	648.11	From 2014-15 to March, 2018	High Court Juridicature at Hyderanad
14.	The Electricity Act, 2003.	Electricity Duty Demand Additional Consumption Deposit and interest thereon	551.44* 1284.75	July, 2003 to May, 2013 2016-17	Supreme Court of India High Court Juridicature at Hyderanad

* Net of amounts paid under protest.

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. The Company has not issued any debentures;

ix) in our opinion and according to the information and explanations given to us, money raised by way of term loans have been applied by the Company during the year for the purposes for which they were raised. The Company has not raised moneys by way of public offer;

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 or provided 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 ana 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 Ind AS financial statements etc as required by the applicable accounting standards;

xiv) in our opinion and 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 fully or partly convertible debentures during the year under review. The company has made preferential allotment of Share Warrants and allotment of shares by conversion of warrants during the year under review. The requirements of section 42 of Companies Act, 2013 have been complied with and the amounts raised have been used for the purpose for which the funds were raised;

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 its directors 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 K S RAO & Co.,

Chartered Accountants

Firm’s Regn. No. 003109S

Sd/-

P. GOVARDHANA REDDY

Place : Hyderabad Partner

Date : 5^th May, 2018 Membership No.029193

---

Mar 31, 2016

To

The Members of

Sree Rayalaseema Alkalies And Allied Chemicals Limited

(1) Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool (“the Company”), which comprise the Balance Sheet as at 31^st March, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

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

The 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 and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes 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.

(3) Auditors’ 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. 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 standalone financial statements

(4) Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

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

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

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

(5) Report on Other Legal and Regulatory Requirements

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

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

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

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

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

d) in our opinion, the aforesaid standalone financial statements comply with the 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 31^st March, 2016 taken on record by the Board of Directors, none of the Directors is disqualified as on 31^st March, 2016, from being appointed as a director in terms of Section 164 (2) of the Act;

t) 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 B”; and.

g) in our opinion and to the best of our information and according to the explanations given to us, we report as under with respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014;

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

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

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

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

Referred to in Paragraph (5) of our report of even date;

(i) In respect of fixed assets;

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

b. As explained to us, the Company has a regular programme of physical verification of its fixed assets and have been physically verified by the management in a phased manner at reasonable intervals and no material discrepancies were noticed on such physical verification.

c. According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

(ii) In respect of inventory;

The physical verification of inventory has been conducted at reasonable intervals by the management during the year and no material discrepancies were noticed on physical verification and the small discrepancies, if any, have been properly dealt with in the books of account.

(iii) According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under Section 189 of the Companies Act, 2013 (‘the Act'').

(iv) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees and security.

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

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

(vii) In respect of statutory dues;

a. According to the information and explanations given to us and on the basis of our examination of the records of the company, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employee''s State Insurance, Income-Tax, Service Tax, Sales Tax, Value Added Tax, duty of Customs, duty of Excise, Cess and other statutory dues, as applicable, to the appropriate authorities and there were no arrears of statutory dues outstanding as at 31.03.2016 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us, there are no material dues of Income Tax, and Service Tax, which have not been deposited on account of any dispute. However, the following dues of Sales Tax, Value Added Tax, Duty of Excise and Duty of Customs other statutory dues have not been deposited by the company on account of disputes pending;

Sl. No.	Name of the Statute	Nature of dues	Amount (Rs. in lakhs)	Period to which the amount relates	Forum where dispute is pending
1.	The Central Excise Act, 1944	CENVAT Credit disallowed on input services	85.62 261.92 11.91	April,2005 to Feb, 2008 Mar,2008 to March,2015 April, 2011 to March, 2013	Central Excise and Service Tax Appellate Tribunal, Bengaluru. Additional Commissioner/ Commissioner of Central Excise and Customs, Tirupati. Asst Commissioner of Central Excise and Customs, Kurnool.
2.	The Central Excise Act, 1944	CENVAT Credit availed against manufacture of exempted goods disallowed.	95.41	2008-09	Central Excise and Service Tax Appellate Tribunal, Bengaluru.
3.	A.P.VAT Act, 2005	Input tax credit on furnace oil & coal disallowed (Paid)	53.91 (53.91)	April, 2005 to Dec, 2005	High Court of Andhra Pradesh.
4.	AP VAT Act, 2005	Interest on delay payment of deferred sales tax (Paid).	351.14 (69.04)	2005-06 And 2006-07	High Court of Andhra Pradesh.
5.	KERALA VAT Act, 2005	VAT on estimated turnover (paid).VAT on stock transfer price (Paid)	20.51 (5.13) 5.44 (1.81)	2008-09 2010-11	Sales tax Appellate Tribunal, Ernakulam. Sales tax Appellate Tribunal, Ernakulam.
6.	KERALA VAT Act, 2005	Disallowance of input tax on sales returns.(Paid)	8.14 (8.14) 2.68	August,2009 2009-10	Sales tax Appellate Tribunal, Ernakulam. Deputy Commissioner of Appeals,Palakkad
7.	KERALA VAT Act, 2005	Late submission of Form-F	9.95	2009-10	Deputy Commissioner of Appeals, Palakkad.
8.	Karnataka Tax on Entry of Goods Act, 1979	Entry tax on purchase of machinery items and interest ( paid)	3.88 (2.10)	2006-07 2007-08 2008-09	Joint Commissioner of Commercial Taxes, Davangeri.
9.	Indian Customs Act, 1962	Differential customs duty on raw material purchases (Paid)	1161.14 (125.00)	2000 to 2006	Commissioner of Customs, Chennai.
10.	Indian Customs Act, 1962	Finalisation of assessed Bill of Entries pertaining to KCL.	16.06	2006-07	Central Excise and Service Tax Appellate Tribunal, Bengaluru.
11.	Indian Customs Act, 1962	Penalty on classification of goods disputed	9.90	2008-09	High Court of Andhra Pradesh, Hyderabad.
12.	Indian Customs Act, 1962	Anti dumping duty on import of Barium Carbonate	32.69	2010-11	Deputy Commissioner of Customs, Chennai.
13.	Indian Customs Act, 1962	Differential duty on classification of goods disputed (Lauric Acid)(Paid)	10.70 (1.07)	2014-15	Central Excise and Service Tax Appellate Tribunal, Bengaluru.

Sl. No.	Name of the Statute	Nature of dues	Amount (Rs. in lakhs)	Period to which the amount relates	Forum where dispute is pending
14.	Employees Provident Fund and Miscellaneous Provisions Act, 1952.	PF delay charges/ damages for belated payments	15.34	May, 2002 to Dec, 2007	Regional PF Commissioner, Cuddapah (for waiver).
15.	The Electricity Act, 2003.	Refund of Income tax on account of change in tax rates as per PPA.(paid)	500.00 (500.00)	2000-2005	The Supreme Court of India.
16.	The Electricity Act, 2003.	Fuel Surcharge Adjustment (FSA) charges.	871.93 1255.71 695.34	2008-09 Oct, 2011 to Mar, 2012 April,2009 to June,2010	Supreme Court of India. Supreme Court of India (demand raised during the year 2014-15) High Court of Andhra Pradesh, Hyderabad.
17.	The Electricity Act, 2003.	Interest on amount pending in Court Cases	268.05	2014-15	High Court/Supreme Court of India(demand raised during the year 2014-15)

(viii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of loans to Financial Institutions or Banks or dues to Debenture holders.

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

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

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3 (xii) of the CARO, 2016 is not applicable.

(xiii) In our opinion and according to the information and explanations given to us and based on our examination of the records of the Company, all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements, as required by the applicable Accounting Standards.

(xiv) In our opinion and 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 under review. The company has made preferential allotment of Share Warrants and allotment of shares by conversion of warrants during the year under review. The requirements of section 42 of Companies Act, 2013 have been complied with and the amounts raised have been used for the purpose for which the funds were raised.

(xv) In our opinion and 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 any non-cash transactions with directors or persons connected with them. Accordingly, paragraph 3(xv) of the CARO, 2016 is not applicable.

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

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 M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool (“the Company”) as of 31^st March, 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, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

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

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 31^st March, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Brahmayya & Co.,

Chartered Accountants

Firm''s Regn. No. 000514S

Sd/-

CA B.DAIVADHEENAM REDDY

Place: Hyderabad (Camp) Partner

Date :12^th April, 2016 Membership No.026450

---

Mar 31, 2015

(1) Report on the Standalone Financial Statements

We have audited the accompanying financial statements of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool ("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

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

The management and Board of Directors of the company are responsible for the matters stated in section 134(5) of the Companies Act, 2013 (" the Act") with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; design, implementation and maintenance of adequate internal financial controls, that are operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

(3) Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements, that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's management and Board of Directors, as well as evaluating the overall presentation of the financial statements.

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

(4) Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India;

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

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

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

(5) Report on Other Legal and Regulatory Requirements

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

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

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

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

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

d) in our opinion, the aforesaid standalone financial statements comply with the applicable Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

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

f) in our opinion and to the best of our information and according to the explanations given to us, we report as under with respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014;

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

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

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

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

(i) In respect of fixed assets;

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

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

(ii) In respect of inventory;

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

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

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

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013 ('the Act').

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

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

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

(vii) In respect of statutory dues;

a. According to the information and explanations given to us and based on the records of the company examined by us, the Company is regular in depositing undisputed statutory dues including Provident Fund, Employee's State Insurance, Income-Tax, Wealth Tax, Service Tax, Sales Tax, Value Added Tax, duty of Customs, duty of Excise, Cess and other statutory dues, as applicable, with the appropriate authorities. There were no arrears of statutory dues outstanding as at 31.03.2015 for a period of more than six months from the date they became payable.

b According to the information and explanations given to us, there are no material dues of Income Tax, Wealth Tax, Service Tax and Cess, which have not been deposited on account of any dispute. However, the following dues of Sales Tax, Value Added Tax, Duty of Excise and Duty of Customs have not been deposited by the company on account of disputes pending;

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

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

238.40

11.91

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

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

(53.91)

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

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

6.69

(1.81)

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

2.68

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

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

(2.10)

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

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

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

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

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

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

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

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

1255.71

695.34

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

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

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

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

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

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

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

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

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

2010-11 Sales tax Appellate Tribunal, Ernakulam.

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

Deputy Commissioner of 2009-10 Appeals,Palakkad

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(x) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from Banks or Financial Institutions during the year.

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

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

For Brahmayya & Co.,

Chartered Accountants

Firm Regn. No. 000514S

Sd/-

CA B.DAIVADHEENAM REDDY

Place : Hyderabad (Camp) Partner

Date : 7th May, 2015 Membership No.026450

---

Mar 31, 2014

(1) Report on the Financial Statements

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

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

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 ("the Act") (which continue to be applicable in respect of Section 133 of Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

(3) Auditors'' Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessment, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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

(4) Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

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

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

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

(5) Emphasis of Matter

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

(6) Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order. As required by Section 227(3) of the Act, we report that:

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

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

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

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

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

ANNEXURE TO AUDITOR''S REPORT

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

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

(i) In respect of fixed assets;

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

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

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

(ii) In respect of inventories;

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

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

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

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

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

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

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

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

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed to be entered in the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

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

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

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

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

(ix) In respect of statutory dues;

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

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund, Inves- tor Education and Protection Fund, Employee State Insurance, Income Tax, Wealth Tax, Sales Tax, Value Added Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues were in arrears as at 31st March, 2014 for a period of more than six months from the date they became payable.

c. According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited in respect of the following :

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

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

11.91

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2010-11 Deputy Commissioner of Appeals,Palakkad.

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

2009-10 Deputy Commissioner of Appeals,Palakkad

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

---

Mar 31, 2013

(1) Report on the Financial Statements

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

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

The Company''s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

(3) Auditors'' Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessment, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

(4) Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India :

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

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

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

(5) Emphasis of Matter , .

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

(6) Report on Other Legal and Regulatory Requirements

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

As required by Section 227(3) of the Act, we report that:

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

iij In our opinion, proper books of account as required by law have been kept by the company so far as it appears from our examination of those books.

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

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

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

( ANNEXURE TO AUDITpR''S REPORT

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

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

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

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

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

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

b. IndurdpihioriWidacMttflrglolhelrt^^

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

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

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

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

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

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

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

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

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

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

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

(ix) In respect of statutory dues;

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

b. According to the information and explanations given to U§, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31s" March,"2013 for a period Of more than Six months from the date they became payable.

c. According to the information and explanations given to us, there are disputed Statutory dues, which have not been deposited in respect Of the following :

SL. Name of the Amount

Nature of dues No. Statute IN lAKHS

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

177.84

9.75

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

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

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

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

(9.12)

6.69

Name Forum where dispute is pending

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

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

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

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

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

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

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

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

SL. Name of the Amount

Nature of dues No. Statute IN lAKHS

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

2.68

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

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

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

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

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

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

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

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

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



Name Forum where dispute is pending

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

Indian Customs 2009-10 Deputy Commissioner of Appeals.Palakkad

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

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

Indian Customs 2000 to 2006 Commissioner of Customs, Chennai.

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

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

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

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

Indian Customs 2000-2005 The Supreme Court of India.

2008-09 Supreme Court of India

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

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

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

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

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

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

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

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

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

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

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

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

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

For Brahmayya & Co.,

Chartered Accountants

Firm''s Regn. No. 000514S

Sd/-

Place: Kurnool (Camp) (B DAIVADHEENAM REDDY)

Date : 15th May, 2013 Partner

Membership No. 026450

---

Mar 31, 2012

1. We have audited the attached Balance Sheet of M/s. Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool as at 31st March, 2012 and the Statement of Profit and Loss and also Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

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

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

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

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

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

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

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

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

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

ANNEXURE TO AUDITOR'S REPORT

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

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

(i) in respect of fixed assets;

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

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

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

(ii) In respect of inventories;

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

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

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

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

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

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

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

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

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

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

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

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

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

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

(ix) In respect of statutory dues;

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

b. According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 3181 March, 2012 for a period . of more than six months from the date they became payable.

c. According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited in respect of the following :

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

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

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

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

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

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

March, 2009)

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

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

March. 2011)

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

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

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

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

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

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

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

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

from Dharmthar Port

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

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

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

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

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

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

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

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

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

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

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

(xviii) According to the information and explanations given to us, during the year, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

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

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

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

For Brahmayya & Co

Chartered Accountants

Firm's Regn. No. 000514S

Sd/-

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

Date : 07.05.2012 Partner

Membership No.026450

---

Mar 31, 2011

1. We have audited the attached Balance Sheet of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool as at 31s1 March, 2011 and the Profit and Loss Account and also Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

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

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

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

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

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

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

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

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

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

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

(i) In respect of fixed assets;

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

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

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

(ii) In respect of inventories;

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

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

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

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

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

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

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

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

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

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

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

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

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

(ix) In respect of statutory dues;

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

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

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

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

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

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

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

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

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

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

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

Name of the Statute Period Forum where dispute is pending

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

(xviii) According to the information and explanations given to us, during the year, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

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

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

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

For Brahmayya & Co.,

Chartered Accountants Firm's Regn. No. 000514S

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

Place : Hyderabad (Camp) Date : 02.05.2011

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of M/s.Sree Rayalaseema Alkalies and Allied Chemicals Ltd., Kurnool as at 31s March,2010 and the Profit and Loss Account and also Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

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

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

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

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

iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt

with by this report are in agreement with the books of account.

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

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

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

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

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

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

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

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

(i) In respect of fixed assets;

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

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

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

(ii) In respect of inventories;

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

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

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

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

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

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

a. According to the information and explanations given to us, we are of the opinion that the transactions made in pursuance of contracts or arrangements, that needed to be entered into the register maintained under Section 301 of the Companies Act, 1956 have been so entered.

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

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

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

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

(ix) In respect of statutory dues;

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

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

c. According to the information and explanations given to us, there are disputed statutory dues, which have not been deposited in respect of the following :



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(xviii) According to the information and explanations given to us, during the year, the company has not made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

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

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

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

For Brahmayya & Co.,

Chartered Accountants Firms Regn.No.000514S

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

Date : 11.05.2010 Partner

Membership No.026450