1) We have audited the attached Balance Sheet of The Dharamsi Morarji
 Chemical Company Limited, as at March 31, 2012 and also the Statement
 of Profit & Loss and the Cash Flow Statement for the year ended on that
 date annexed thereto. These financial statements are the responsibility
 of the Company''s management. Our responsibility is to express an
 opinion on these financial statements based on our audit.
 
 2) We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3) As required by the Companies (Auditor''s Report) Order, 2003, as
 amended by the Companies (Auditor''s Report) (Amendment) Order, 2004,
 issued by the Central Government of India in terms of sub-section (4-A)
 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 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 written representations received from the directors
 as on March 31, 2012 and taken on record by the Board of Directors, we
 report that none of the directors of the Company are disqualified as on
 March 31, 2012 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 (vi) Attention is invited to Note No. X(11), regarding preparation of
 accounts on a ''Going Concern'' basis despite continued losses and
 erosion of total net worth of the Company, in view of the management''s
 perceptions and reasons detailed therein.
 
 (vii) Attention is invited to Note No. X(16), regarding Trade
 Receivables that could not be classified as outstanding for a period of
 more than six months from the due date instead of invoice date as
 required by the revised Schedule VI to the Companies Act, 1956. We were
 explained that the necessary modification in the existing computer
 program will be carried out in due course. This revised classification
 does not have any material impact on the financial statements except
 for the Presentation and Disclosure of the same.
 
 (viii) The Company had recognized net deferred tax asset in earlier
 years aggregating to Rs. 2654.15 lacs till 31st March, 2009 considering
 unabsorbed loss up to 31st March, 2008 and unabsorbed depreciation up
 to 31st March, 2009. For the subsequent financial periods, further net
 deferred tax asset has not been recognized in view of management''s
 perceptions and reason detailed in Note No. V(c). We are not in a
 position to opine on the net deferred tax asset recognized till date as
 regards its ultimate realization since the virtual certainty of the
 available sufficient future taxable income, as required by Accounting
 Standard 22 i.e. ''Accounting for taxes on income'' notified pursuant to
 Companies (Accounting Standards) Rules, 2006, could not be
 substantiated.
 
 Had the Company not recognized the said net deferred tax asset
 aggregating to Rs. 2654.15 Lacs, the Accumulated Losses as at the end
 of the year would have been higher by Rs. 2654.15 Lacs.
 
 (ix) Had the impact of matter stated at (viii) been considered,
 accumulated losses as at 31st March, 2012 of Rs. 9755.75 Lacs would
 have been Rs. 12409.90 Lacs.  
 
 (x) Subject to Clause No. (viii) and (ix)above, 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, 2012;
 
 b.  in the case of the Statement of Profit and Loss of the Loss for the
 year ended on that date; and
 
 c.  in the case of the Cash Flow Statement of the cash flow for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS'' REPORT
 
 (Referred to in paragraph 3 of our report of even date on the Accounts
 for the year ended March 31, 2012, of The Dharamsi Morarji Chemical
 Company Limited)
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets. However, in the case of some assets, individual records with
 quantitative details and values are to be segregated, updated and
 reconcited.
 
 (b) A substantial portion of the fixed assets has been physically
 verified by the management during the year and in our opinion, the
 frequency of verification is reasonable having regard to the size of
 the Company and the nature of its assets. No material discrepancies
 were noticed on such verification.
 
 (c) The fixed assets disposed off during the year were not substantial.
 According to the information and explanations given to us, we are of
 the opinion that the disposal of the fixed assets has not affected the
 going concern status of the Company.
 
 (ii) (a) The inventories have been physically verified during the year
 by the management. In our opinion, the frequency of verification is
 reasonable.
 
 (b) 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) In our opinion and according to the explanations given to us, the
 Company is maintaining proper records of inventory. The discrepancies
 noticed on verification between the physical stocks and the book
 records have been properly dealt with in the books of account.
 
 (iii) (a) According to the information and explanations given to us,
 the Company has not granted any loans, secured or unsecured to the
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956. Accordingly sub clause
 (b), (c) and (d) are not applicable.
 
 (b) The Company has taken interest free loan amounting to Rs. 1715.43
 Lacs from a director/s of the Company and inter-corporate deposits of
 Rs. 716.80 Lacs from four parties listed in the register maintained
 under section 301 of the Companies Act, 1956.
 
 (c) In our opinion and according to the information and explanations
 given to us, the terms and conditions of the unsecured loans taken were
 prima facie not prejudicial to the interest of the Company.
 
 (d) According to the information and explanations given to us the
 repayment terms of the principal amounts are not decided.
 
 (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 with regard
 to purchase of inventory, fixed assets and with regard to the sate of
 goods and services. However, there is scope to strengthen the internal
 controls at operational level through proper implementation. During me
 course of our audit no major weakness has been noticed in the internal
 controls.
 
 (v) (a) In our opinion and according to the information and
 explanations given to us, the particulars of contracts or arrangements
 referred to in Section 301 of Companies Act, 1956 have so been entered
 in register required to be maintained under that section.
 
 (b) In our opinion and according to the information and explanations
 given to us, these contracts or arrangements 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 complied with certain provisions of
 Sections 58A and 58AA or any other relevant provisions of the Companies
 Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with
 regard to the deposits accepted from the public including non-filing of
 returns of fixed deposits etc. As informed to us, no order has been
 passed by the Company Law Board or National Law Tribunal or Reserve
 Bank of India or any other Court or any other Tribunal in contravention
 of the aforesaid provisions and/or rules by the Company.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business, however, the
 scope and coverage of the same needs to be increased.
 
 (viii) We have broadly reviewed the books of account maintained by the
 Company which have been made pursuant to the Rules made by me 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. We have
 not, however, made a detailed examination of the same.
 
 (ix) (a) According to the records of the Company, the Company is not
 regular in depositing with appropriate authorities undisputed statutory
 dues including Customs Duty and Wealth Tax, Provident Fund, Investor
 Education Protection Fund, Employees'' State Insurance, Income Tax,
 Sales Tax, Excise Duty, Service Tax, Cess and other statutory dues
 applicable to it. Based on our audit procedures and according to the
 information and explanations given to us, the following undisputed
 statutory dues were outstanding as at March 31, 2012 tor a period of
 more than six months from the date they became payable.
 
 Nature of Dues     Period to which      Due Dates      Amount (Rs.
                    Amount relates                         In Lacs)
 
 Service Tax/
 Interest thereon   2005-06              Various               0.19
 
                    2006-07              Various              45.51
 
                    2007-08              Various              33.31
 
                    2008-09              Various               3.53
 
                                         Total                82.54
 
 Professional Tax   2006-07              Various              11.18
 
                    2007-08              Various               9.75 
 
                    2008-09              Various               0.20 
 
                    2009-10              Various               0.05 
 
                    2010-11              Various               0.50
 
                    2011-12              Various               1.25
 
                                         Total                22.88
 
 VAT and CST                             Various               3.36
 
 PF, FPF, EDLI, 
 Admin. Charges,
 ESIC etc                                Various              12.75
 
 Tax deducted 
 at source on:
 
 Salary             2011-12              Various               2.55
 
 Contractors        2011-12              Various               2.54
 
 Prof. Fees         2011-12              Various               1.39
 
 TDS on WCT         2011-12              Various               0.15
 
 TCS                2010-11              Various               0.06
 
                    2011-12              Various               0.02
 
                                         Total                 6.71
 
 IEPF-              Cannot be            Cannot be            10.63
 Unclaimed          Ascertained          Ascertained
 dividend 
 
 IEPF-Unclaimed 
 Interest on 
 FD/Debentures      Cannot be            Cannot be             5.29
                    Ascertained          Ascertained
 
 
 IEPF-Unclaimed     Cannot be            Cannot be            17.31
 Fixed Deposits     Ascertained          Ascertained    
 
 Sales Tax Loans                                             161.10
 
 
 (ix) (b) According to the records of the Company, Income Tax, Sales
 Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax and Cess which
 have not been deposited on account of dispute are given below:
 
 Name of the  Nature of Dues     Forum where    Period to      Amount 
 Statute                         dispute is     whch relate      (Rs.
                                 Pending                        Lacs) 
 
 Central      Duty/Interest/     Asst.          June 1999 to     2.29
 Excise Act   Penalty            Commissioner   August 1999 
 
              Duty/Interest/     Asst.          Sept 1999 to     1.81
              Penalty            Commissioner   Dec 1999 
 
              Duty/Interest/     Asst.          Jan 2000 to      3.04 
              Penalty            Commissioner   June 2000 
 
              Duty/Interest/     Asst.          July 1996 to     4.03  
              Penalty            Commissioner   May 1999
 
              Duty/Interest/     Asst.          July 2000 to     2.68
              Penalty            Commissioner   May 2001
 
              Duty/Interest/     Asst.          Various         24.48
              Penalty            Commissioner    
 
              Duty/Interest/     Asst.          Various          0.57
              Penalty            Commissioner    
 
              Duty/Interest/     Asst.          August 2003      1.18   
              Penalty            Commissioner   to May 2004
 
              Duty/Interest/     Asst.          Various          0.80
              Penalty            Commissioner   
 
              Alleged            CESTAT         Various          9.76
              undervaluation    
              of SA
 
                                                Total           50.64
 
 
 Sales Tax    Tax/Interest/      Appellate      1992-93          6.91
 Act          Penalty            Tribunal
 
              Tax/Interest/      Appellate      1993-94          4.20
              Penalty            Tribunal
 
                                                Total           11.11
 
 Entry Tax    Tax/Interest       High Court                      4.47
 
 
 
 
 (x) The accumulated losses of the Company are more than fifty percent
 of the Net Worth of the Company as at the end of the year and it has
 not incurred any cash loss during the current financial year and in the
 immediately preceding financial year.
 
 (xi) Company has defaulted in repayment of Sales Tax Loans of Rs.
 161.10 Lacs. Pending receipt of revised schedule the same has been
 considered as ''Other Payables'' in ''Current Liabilities'' (Also referred
 to in ix(a) above).
 
 (xii) Based on our examination of the records and the information and
 explanations given 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 Order are not applicable to the Company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the Company is not dealing in or trading in shares,
 securities, debentures and other investments. Accordingly the
 provisions of clause 4 (xiv) of the Order are not applicable to the
 Company.
 
 (xv) The Company has not given any guarantee for loans taken by others
 from bank or financial institutions.
 
 (xvi) The term loan taken from a Bank has been utilized for the purpose
 for which it is taken.
 
 (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 the funds amounting to Rs. 2396.16 Lacs raised on short-term basis
 have been used for long-term purposes.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties and companies covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) The Company has not issued any debentures during the year.
 
 (xx) The Company has not raised money by public issue during the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting 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 K. S. Aiyar & Co.
                                                Chartered Accountants 
                                                         FRN: 100186W
 
                                                    RAGHUVIR M. AIYAR
                                                              Partner 
                                                 Membership No. 38128
 
 Mumbai, 30th May, 2012