1.  We have audited the attached Balance Sheet of Chambal Fertilisers
 and Chemicals Limited (the Company) as at March 31, 2011 and also the
 Profit and Loss Account and the Cash Flow Statement for the year ended
 on that date annexed thereto, in which are incorporated financial
 statements of Shipping Division of the Company audited by other
 auditors. 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 fi
 nancial statements are free of material misstatement. An audit includes
 examining, on a test basis, evidence supporting the amounts and
 disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and signifi cant estimates
 made by management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 3.  We did not audit the financial statements of shipping division of
 the Company whose financial statements refl ect the Company''s share of
 total assets of Rs. 140391.83 lacs (previous year Rs. 150757.45 lacs)
 as at March 31, 2011, total revenue of Rs. 28521.80 lacs (previous year
 Rs. 27846.30 lacs) and cash outfl ows amounting to Rs. 154.45 lacs
 (cash infl ows in previous year Rs. 132.97 lacs) for the year then
 ended. These financial statements and other information have been
 audited by branch auditors whose reports have been furnished to us and
 our opinion is based solely on the report of branch auditors.
 
 4.  As required by the Companies (Auditor''s Report) Order, 2003 (as
 amended) issued by the Central Government in terms of sub-section (4A)
 of Section 227 of the Companies Act, 1956, we enclose in the Annexure a
 statement on the matters specifi ed in paragraphs 4 and 5 of the said
 Order.
 
 5.  Further to our comments in the Annexure referred to above, we
 report that:
 
 i.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 ii. In our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books and proper returns adequate for the purposes of our audit
 has been received from Shipping Division not visited by us. The Branch
 Auditors'' Report of the Shipping Division have been forwarded to us and
 have been appropriately dealt with;
 
 iii. The balance sheet, profit and loss account and cash fl ow
 statement dealt with by this report are in agreement with the books of
 account and audited returns from the Shipping Division;
 
 iv In our opinion, the balance sheet, profit and loss account and cash
 fl ow statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956;
 
 v On the basis of the written representations received from the
 directors, as on March 31, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualifi ed as on
 March 31, 2011 from being appointed as a director in terms of clause
 (g) of sub- section (1) of Section 274 of the Companies Act, 1956;
 
 vi. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts 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 March 31, 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 Cash Flow Statement, of the cash fl ows of the
 Company for the year ended on that date.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE CHAMBAL
 FERTILISERS AND CHEMICALS LIMITED (THE COMPANY)
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fi xed
 assets.
 
 (b) Fixed assets have been physically verifi ed by the management
 during the year based on a phased programme of verifying all the assets
 over a period of two years, which in our opinion is reasonable having
 regard to the size of the Company and the nature of its fi xed assets.
 No material discrepancies were noticed on physical verifi cation.
 
 (c) There was no substantial disposal of fi xed assets during the year.
 
 (ii) (a) The management has conducted physical verifi cation of
 inventory at reasonable intervals during the year.
 
 (b) The procedures of physical verifi cation 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 is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verifi cation.
 
 (iii) (a) The Company has granted loans to three companies covered in
 the register maintained under Section 301 of the Companies Act, 1956.
 The maximum amount involved during the year was Rs.3000 Lacs and the
 year end balance of loans granted to such parties is Rs.3000 Lacs.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) In respect of loans granted, repayment of the principal amount is
 as stipulated and payment of interest is also regular.
 
 (d) There is no overdue amount of loans granted to companies, fi rms or
 other parties listed in the register maintained under Section 301 of
 the Companies Act, 1956.
 
 (e) As informed, the Company has not taken any loans, secured or
 unsecured from companies, fi rms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Therefore, provisions of clauses 4(iii) (f) and (g) of the Companies
 (Auditor''s Report) Order, 2003 (as amended) are not applicable to the
 Company.
 
 (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 fi xed assets and for the sale of goods and
 services. During the course of our audit, no major weakness has been
 noticed in the internal control system in respect of these areas.
 During the course of our audit, we have not observed any continuing
 failure to correct major weakness in internal control system of the
 Company.  
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Act that need to be
 entered into the register maintained under Section 301 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding value of Rupees Five lakhs have been entered
 into during the financial year at prices which are reasonable having
 regard to the prevailing market prices at the relevant time.  
 
 (vi) In respect of deposits accepted, in our opinion and according to
 the information and explanations given to us, directives issued by the
 Reserve Bank of India and the provisions of Sections 58A, 58AA or any
 other relevant provisions of the Companies Act, 1956 and the rules
 framed there under, to the extent applicable, have been complied with.
 We are informed by the management that no order has been passed by the
 Company Law Board, National Company Law Tribunal or Reserve Bank of
 India or any Court or any other Tribunal.  
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost records under Section 209(1) (d) of the Companies
 Act, 1956, and are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained.
 
 (ix) (a) Undisputed statutory dues including provident fund, investor
 education and protection fund, or employees'' state insurance,
 income-tax, sales- tax, wealth-tax, service tax, customs duty, excise
 duty, cess and other material statutory dues applicable to it, have
 been regularly deposited with the appropriate authorities.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under Section 441 A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the Company in depositing the same.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees'' state insurance, income-tax,
 wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
 other material undisputed statutory dues were outstanding at the year
 end for a period of more than six months from the date they became
 payable.
 
 (c) According to the records of the Company, there are no dues
 outstanding of income-tax, sales-tax, wealth-tax, service tax, custom
 duty, excise duty and cess on account of any dispute, other than the
 following:
 
 Name of the 
 Statute         Nature of the 
                 Dues             Amount      Period to 
                                              which the   Forum where 
                                                          dispute is
                               (Rs. in Lacs)  amount 
                                              relates     pending
 
 Rajasthan 
 Sales-Tax      Sales tax demand 
                on usage of 
                natural gas        352.34    1996 to 2001 Rajasthan 
                                                          High Court,
 Act, 1994      other than Urea 
                manufacture.  
                Jodhpur
 
 The Income Tax 
 Act,           Demand raised on 
                short deduction of 
                TDS.               540.67   2007-08 to 
                                            2008-09      Commissioner of     
                                                         Income 1961 
                                                         Tax (Appeals), 
                                                         Kota)
 
 Service Tax 
 Law,          Demand raised from 
               foreign parties in    2.45   2008-09      Assistant 
                                                         Commissioner,
 Finance Act, 
 1994          respect of service 
               tax paid on tax 
               deducted at                               Central 
                                                         Excise, Kota 
               source 
               (TDS) portion.
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred any cash losses in the current and
 immediately preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to a financial
 institution, bank or debenture holders.  
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted 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 (as amended) are not
 applicable to the Company.  
 
 (xiv) In respect of dealing/trading in shares, securities, debentures
 and other investments, in our opinion and according to the information
 and explanations given to us, proper records have been maintained of
 the transactions and contracts and timely entries have been made
 therein.  The shares, securities, debentures and other investments have
 been held by the Company in its own name.  
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.  (xvi) Based on information and explanations
 given to us by the management, term loans were applied for the purpose
 for which the loans were obtained.  
 
 (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.  
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 Section 301 of the Companies Act, 1956.  
 
 (xix) The Company does not have any outstanding debentures at the year
 end.  
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information oand explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
                                    For S. R. BATLIBOI & Co.
 
                                    Firm''s Registration No. 301003E 
 
                                    Chartered Accountants
 
                                    per Manoj Gupta
 
                                    Partner
 
                                    Membership No.: 83906
 
 Place: Gurgaon
 
 Date: May 10, 2011