1) We have audited the attached Balance Sheet of The Dharamsi Morarji
 Chemical Company Limited, as at March 31, 2011 and also the Profit and
 Loss Account and the Cash Flow Statement for the nine months period
 (the period) 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, 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 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, 2011 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, 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) Attention is invited to Note No.22, 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) 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 period, further net
 deferred tax asset has not been recognized in view of management''s
 perceptions and reason detailed in Note No. 16 (b). 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 period would have been higher by Rs.2654.15 Lacs.
 
 (viii) During the period, consequent to the negotiated settlements with
 the secured/unsecured lenders of the Company, waived dues representing
 only the Principal amount of borrowings aggregating to Rs.3362.76 Lacs
 have been credited directly to the ''Capital Reserve'' of the Company for
 the reasons detailed in Note No. 14, instead of crediting the same to
 the Profit and Loss Account of the period, as per the treatment
 recommended by the Expert Advisory Committee of the Institute of
 Chartered Accountants of India, in respect of a similar case.  Had this
 been credited to the Profit & Loss Account of the period, the Loss for
 the period would have been lower by Rs. 3362.76 Lacs and accumulated
 losses as at the end of the period would have been lower by a like
 amount.
 
 (ix) Had the impact of matters stated at (vii) and (viii) been
 considered, Loss for the period ended 31st March, 2011 of Rs.479.53 Lacs
 would have been converted into Profit for the period ended 31st March,
 2011 of Rs.2883.23 Lacs and accumulated losses as at 31st March, 2011
 of Rs.9357.42 Lacs would have been Rs.8648.81 Lacs.
 
 (x) Subject to Clause No.(vii) and (viii)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, 2011 ;
 
 b.  in the case of the Profit and Loss Account, of the Loss for the
 period ended on that date; and
 
 c.  in the case of the Cash Flow Statement, of the cash flow for the
 period 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 nine months period ended March 31,2011, 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
 reconciled.
 
 (b) A substantial portion of the fixed assets has been physically
 verified by the management during the period 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 period 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
 period 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.896.80 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 of the principal amounts are as stipulated.
 
 (iv) In our opinion and according to the information and explanatioas
 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 sale of
 goods and services. However, there is scope to strengthen the internal
 controls at operational level through proper implementation. During the
 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 usr 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 infonved 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 the Central
 Government for the maintenance of cost records under Section 209 (1
 ){d) of the Companies Act, 1956, in respect of Sulphuric Acid, Single
 Super Phosphate (Fertilizer) 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 31,2011 for a period of
 more than six months from the date they became payable.
 
 Nature of Dues           Period to which 
                          Amount relates    Due Dates     Amount (Rs. 
                                                             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          10.99
 
                             2008-09        Various           0.99
 
                             2009-10        Various           0.55
 
                             2010-11        Various           0.65
 
                                            Total            24.36
 
 VAT arid CST                               Various           8.10
 
 PF,FPF,EDLI,Admin Charges.ESIC etc         Various           0.18
 
 Tax deducted at source on:
 
 Salary                      2010-11        Various          10.36
 
 Contractors                 2010-11        Various           0.74
 
 Prof. Fees                  2010-11        Various           3.07
 
 Interest                    2010-11        Various           2.33
 
 Brokerage                   2010-11        Various           1.58
 
 Non resident                2010-11        Various           0.04
 
                                            Total            18.12
 
 Nature of Dues   Period to which Amount
                  relates                  Due Dates      Amount (Ra.
                                                           In Lacs)
 
 IEPF-Unclaimed 
 divedend         Cannot be Ascertained    Cannot be         10.63
                                           Ascertained 
 
 IEPF-Unclaimed 
 Interest on FD/
 Debentures       Cannot be Ascertained    Cannot be          5.29
                                           Ascertained       
 
 lEPF-Unclaimed 
 Fixed Deposits   Cannot be Ascertained    Cannot be         19.83
                                           Ascertained      
 
 Sales Tax Loans                                            221.90
 
 (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 
                              dispute        Period to which
                                             relate               Amount
 Statute                      is Pending                          (Rs In
                                                                   Lacs)
 
 Central 
 Excise Act   Duty/interest/
              Penalty         Asst.
                              Commissioner   June 1999 to 
                                             August 1999           2.29
 
              Duty/Interest/
              Penalty         Asst.
                              Commissioner   Sept 1999 to
                                             Dec 1999              1.81
 
              Duty/interest/
              Penalty         Asst.
                              Commissioner   Jan 2000 to
                                             June 2000             3.04
 
              Duty/interest/
              Penalty         Asst.
                              Commissioner   July 1996 to
                                             May 1999              4.03
 
              Duty/interest/
              Penalty         Asst.
                              Commissioner   July 2000 to 
                                             May 2001              2.68
 
              Duty/interest/
              Penalty         Asst.
                              Commissioner   Various              24.48
 
              Duty/interest/
              Penalty         Asst.
                              Commissioner   Various               0.57
 
              Duty/interest/
              Penalty         Asst.
                              Commissioner   August 2003 to
                                             May 2004              1.18
 
              Duty on 
              captive
              consumption     Asst.
                              Commissioner   Various               0.80
 
              Alleged 
              undervaluation
              of SA           CESTAT         Various               9.76
 
              CenVat Credit 
              on CHA related
              services        Deputy 
                              Commissioner   April 2010 to
                                             March 2011            2.93
 
                                             Total                53.57
 
 Sales Tax 
 Act          Tax/interest/
              Penalty         Appelate 
                              Tribunal       1992-93               6.91
 
                                             1993-94               4.20
 
                                             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 financial period,
 and it has not incurred cash loss during the current financial period,
 but it had incurred cash loss during the immediately preceding
 financial perdiod.
 
 (xi) Company had defaulted in repayment of Sales Tax Loans for which
 rescheduling has been sought by the Company.
 
 (xV) 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.
 
 (xiH) 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 loans outstanding in the books of the Company as on
 March 31,2011 have been taken and utilized in earlier accounting
 periods, including working Capital term loans, which have been
 converted from working capital fund based limits.
 
 (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.4255.26 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 period. 
 
 (xx) The Company has not raised money by public issue during the
 period.
 
 (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. Alyar & Co.
 
                                            Chartered Accountants
 
                                                      FRN:100186W
 
                                                Raghuvtr M. Alyar
 
                                                          Partner
 
                                             Membership No. 38128
 
 Mumbai, 30th May, 2011