Chambal Fertilisers and Chemicals

1.  We have audited the attached Balance Sheet of Chambal Fertilisers
 and Chemicals Limited (the Company) as at March 31, 2009 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
 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 misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation.  We believe that our audit provides a reasonable basis
 for our opinion.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 (as
 amended) 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 specified in paragraphs 4 and 5 of the said
 Order.
 
 4.  Further to our comments in the Annexure referred to above, we
 report that:
 
 i.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit; ii.  in our opinion, proper books of account as required by law
 have been kept by the Company so for 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 flow 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 flow 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, 2009, and
 taken on record by the Board of Directors, we report that none of the
 directors is disqualified as on March 31, 2009 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, 2009;
 
 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 flows of the Company
 for the year ended on that date.
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) Fixed assets have been physically verified by the management during
 the year based on a phased programme of verifying all the assets over a
 period of two years, which in our opinion is reasonable having regard
 to the size of the Company and the nature of its fixed assets. No
 material discrepancies were noticed on physical verification.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (b) 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 is maintaining proper records of inventory and no
 material discrepancies were noticed on physical verification.  (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.1000
 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 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, firms 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
 (Auditors 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 fixed 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.
 
 (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) According to the information and explanations
 given to us and the books and records examined by us, the Company has
 been regular in depositing with appropriate authorities undisputed
 statutory dues including provident fund, investor education and
 protection fund, employees state insurance, income-tax, sales-tax,
 weallh-tax, service tax, customs dutv. excise dutv. cess nnH invesror
 eaucanon ana protection fund, employees state insurance, income-tax,
 wealth tax, service tax, sales-tax, customs duty, excise duty, cess and
 other 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
 
 Rajasthan Sales-Tax Act, 1994     Disallowance of VAT credit on stock
 						  lying on 01-04.2006
 Rajasthan Sales-Tax Act, 1994    Sales tax demand on usage of natural 
 				      gas other than urea manufacture.  
 Service Tax                        Service tax demand on intellectual
 					     property rights services.
 Service Tax                            Service tax demand on services 
 					  received from non residents.
 
 
 
    Amount 
 (Rs. in lacs)    Period to which the    Forum where dispute is pending
 		 amount relates 
 
    22.18         2006-07                  Rajasthan Tax Board, Ajmar          
   352.34         1996 to 2001           Rajasthan High Court,Jodhpur 
   126.60         2006-07             Commissioner (Excise and Customs)
    18.33         2002-03 to 2005-06      Commissioner Excise (Appeals)
 
  
 
 
 (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 given guarantee for loans taken by its subsidiaries
 from bank/financial institutions, the terms and conditions whereof in
 our opinion are not prima-facie pre judicial to the interest of the
 Company.  (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) Based on books and records produced to us by the
 management, securities have been created in respect of debentures
 issued, wherever required.  (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 and
 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.
                                                   Chartered Accountants
 
 Place : Gurgaon 
 Date : May 15, 2009
                                                         per MANOJ GUPTA
 						                Partner
                                                   Membership No.: 83906