1.We have audited the attached Balance Sheet of THE FERTILISERS AND
 CHEMICALS TRAVANCORE LIMITED as at March 31, 2011 and also the Profit
 and Loss Account and the Cash Flow Statement of the Company 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 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 of Section 227 (4A) of
 the Companies Act, 1956 and on the basis of such checks of the books
 and records of the Company as we consider appropriate and according to
 the information and explanations given to us, we annexed here to 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:
 
 (a) 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;
 
 (b) 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
 have been received from the area / regional offices not audited by us.
 The area / regional Auditor''s Reports have been given to us and have
 been appropriately dealt with in preparing our report.
 
 ( c) the Balance Sheet and Profit and Loss Account and Cash
 
 Flow Statement dealt with by this report are in agreement with the
 books of account and with the audited returns from the area/regional
 offices;
 
 5.  Being a Government Company, the provisions of clause (g) of
 sub-section (1) of Section 274 of the Companies Act, 1956 is not
 applicable.
 
 6.  In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 flow Statement dealt with by this report are in compliance with the
 Accounting Standards referred to in Section 211 (3C) of the Companies
 Act, 1956 except for the points (a) to (e) given below:
 
 (a) Valuation of closing stock of by-product gypsum, for rupees 20,354
 lakhs as at year end based on five years expected sales, in variation
 to Accounting Standard 2 issued by the Institute of Chartered
 Accountants of India. [Refer point 14 (d) of Notes on Accounts of
 Schedule 25].
 
 (b) Reduction of estimated loss provision of rupees 504 lakhs during
 the year on retired assets determined in previous year, based on the
 re-assessment of estimated realisable value as at year end in variation
 to Accounting Standard 10 issued by the Institute of Chartered
 Accountants of India, [Refer point 6 of Notes on Accounts of Schedule
 25].
 
 (c) Recognition of interest income of rupees 597 lakhs during the year
 besides the accummulated interest receivable as at year end of rupees
 3,568 lakhs on mobilisation advance to a contractor in variation of the
 Accountaing Standard 9 issued by the Institute of Chartered Accountants
 of India, considering the significant uncertainity in realisation. This
 contractor has also lodged a claim of rupees 1,77,713 lakhs against the
 Company towards shortfall charge and damages upon termination of the
 contract, shown as contingent liability and the dispute is under
 arbitration.  [Refer points 13 of Notes on Accounts of Schedule 25].
 
 (d) Capitalisation of cost of revamping of main cooling tower of rupees
 747 lakhs in the nature of repairs and withdrawal of rupees 175 lakhs
 on estimation out of estimated gross block of rupees 394 lakhs, in
 variation to Accounting Standard 10 issued by the Institute of
 Chartered Accountants of India.
 
 (e) Subsidy receivable of rupees 2,068 lakhs on ammonium sulphate
 recognised as revenue during 2009-10, since the request of the Company
 for subsidy is under the consideration of the Government of India and
 is still pending, though payment of subsidy was discontinued by the
 Government during that year.
 
 We further report that:- Had the quantifiable qualifications in
 paragraph 6 (a) to (d) above been effected, the loss before tax for the
 year would have been higher by rupees 22,202 lakhs and the current
 assets would bave been lower by rupees 20,951 lakhs and fixed assets
 would have been lower by rupees 1,251 lakhs.
 
 7.  Subject to the above, in our opinion and to the best of our
 information and according to the explanations given to us, the said
 financial statements read together with the 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:
 
 (i) in the case of the Balance Sheet, of the State of affairs of the
 Company as at March 31,2011;
 
 (ii) in the case of the Profit and Loss account, of the loss of the
 Company for the year ended on that date and
 
 (iii)in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph 3 of the Auditors'' Report to the
 Members of THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED, on the
 financial statements for the year ended March 31, 2011
 
 i. a) The Company has maintained generally proper records showing full
 particulars including quantitative details and situation of fixed
 assets.
 
 b) The fixed assets have been stated to be physically verified by the
 Management during the year, which in our opinion is reasonable having
 regard to the size of the Company & nature of its assets. As explained
 to us, no material discrepancies were noticed on such physical
 verification.
 
 c) In our opinion and according to the information and explanations
 given to us, fixed assets disposed off during the year were not
 substantial, and therefore, do not affect the going concern status.
 
 ii. a)The inventories have been physically verified by the management
 during the year. In our opinion, the frequency of verification is
 reasonable.
 
 b) In our opinion, 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 is maintaining proper records of inventories. The
 discrepancies noticed on verification between the physical stock and
 the book records were not material and have been properly dealt with in
 the books of account.
 
 iii. As informed to us, the Company has neither granted nor taken any
 loans, secured or unsecured, to/from companies, firms or other parties
 listed in the register maintained under section 301 of the Companies
 Act, 1956, and hence reporting requirements under clauses (iii) (a) to
 (g) of this clause do not apply.
 
 iv. In our opinion and according to the information and explanations
 given to us, the internal control system needs to be strengthened
 especially considering the emerging requirements, to commensurate with
 the size of the Company and nature of its business for the purchase of
 inventory and fixed assets and for the sale of goods and services.
 According to the information and explanations given to us, there is no
 continuing failure to correct major weaknesses in internal control.
 
 v. a) In our opinion and according to the information and explanations
 given to us, the particulars of contracts or arrangements that need to
 be entered in the register maintained under Section 301 of the
 Companies Act,1956, have been entered in the register under that
 section.
 
 b) In our opinion and according to the information and explanations
 given to us, there are no transactions made in pursuance of contracts
 or arrangements entered in the register maintained under section 301 of
 the Companies Act, 1956 aggregating to rupees five lakhs or more during
 the year in respect of any party.
 
 vi. In our opinion and according to the information and explanations
 given to us, the Company has complied with directives issued by Reserve
 Bank of India, the provisions of section 58 A and 58 AA of the
 Companies Act, 1956 and the Companies (Acceptance of Deposits )Rules
 1975, with regard to the deposits accepted from the public.
 
 vii. On the basis of the test checks conducted by us and according to
 the explanations given to us, the Company has an internal audit system
 generally commensurate with the size of the Company and nature of its
 business.
 
 viii. We have broadly reviewed the books and records maintained by the
 Company pursuant to the order of the Central Government u/s 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 by the
 Company.  We have however not made a detailed examination of the
 records with a view to determining whether these records are accurate
 or complete.  ix. a) According to the information and explanations
 given to us and according to the books and records of the Company
 produced to us and examined by us, in our opinion, the Company has been
 generally regular in depositing undisputed statutory dues including
 provident fund, employees state insurance, income tax, service tax,
 sales tax, customs duty excise duty and other material statutory dues
 applicable to it with the appropriate authorities during the year and
 there were no outstanding as at March 31, 2011 for a period of more
 than six months from the date they became payable.
 
 b) According to the information and explanations given to us and the
 records of the Company examined by us, the particulars of dues towards
 sales tax, income tax, customs duty, excise duty, service tax, entry
 tax and cess as at March 31, 2011, which have not been deposited on
 account of disputes are furnished below:
 
 Name of the   Nature of the 
               dues             Amount  Period to 
                                        which       Forum where dispute
 Statute                      (Rupees)  the dispute
                                        relates     is pending
 
 Income Tax 
 Act, 1961     Tax demand 
               due to         10 lakhs    1997-98   High Court of Kerala
               disallowances
 
 Income Tax 
 Act, 1961     Tax demand
               due to                               Income Tax Appellate
                                                    Tribunal,
                               8 lakhs    2005-06
               disallowances                        Kochi
 
 Income Tax 
 Act, 1961     Additional Tax 
               and interest   78 lakhs    1994-95
               demanded on
               payments to                   to     High Court of Kerala
               foreign 
               technicians
                                          1997-98
 
 Finance Act, 
 1994          Tax, penalty
               and interest   10 lakhs    2003 - 04
                                                    Customs, Excise and
                                                    Service
               demand                         to
                                                    Tax Appellate 
                                                    Tribunal, Bangalore
                                          2005 - 06
 
 Finance Act, 
 1994                         41 lakhs    2005 - 06
               Tax, penalty 
               and interest                         Commissioner of
                                                    Central Excise,
                                              to
               demanded, 
               disputed by
                                                    Kochi
               the Company                2008 - 09
 
 Customs Act, 
 1962          Differential 
               duty           39 lakhs    1991 - 92 Customs, Excise and
                                                    Service
                                        to1992 - 93 Tax Appellate
                                                    Tribunal, Chennai
 
 Central 
 Excise Act,   Duty with 
               interest and                         Adjudicating
                              64 lakhs    2003 - 04
 1944          penalty on 
               shortages
                                                    Authority
               written off
 
 Madhya 
 Pradesh                                             Board of Revenue 
                                                     (Commercial Tax 
               Entry tax
               demand          4 lakhs    1980 - 84
 Entry Tax                                           Tribunal),Gwalior,
                                                     Madhya Pradesh
 
 Sales Tax 
 Act,          Sales Tax 
               demand         63 lakhs    1985 - 92  High Court of Orissa
 Orissa
 
 Sales Tax & 
 Central                                             High Court of Punjab
               Sales Tax
               demand         380 laks    2000 - 01
 Sales Tax 
 Act, Punjab                                         and Haryana
 
 (x) The accumulated losses of the Company as at March 31, 2011 after
 giving effect to the qualifications in the Auditors'' Report are more
 than Fifty percent of its net worth and it has incurred cash losses
 during the year and also in the immediately preceding financial year.
 
 (xi) Based on our examination of the records of the Company and
 according to the information and explanations given to us, the Company
 has not defaulted in repayment of dues to Banks as at Balance Sheet
 date.
 
 (xii) 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 (Auditor''s 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. Therefore, the
 provisions of clause 4 (xiv) of the Companies (Auditor''s Report) Order,
 2003 are not applicable to the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has given guarantee for loan taken by FACT – RCF Building
 Products Limited from State Bank of India, to the extent of Rs. 15.50
 Crore. (Refer Point no. 1 (iii) of Notes on Accounts of Schedule 25).
 
 (xvi) According to the information and explanations given to us ,we are
 of the opinion that the term loans availed by the Company were,
 prima-facie, applied during the year for the purpose for which the
 loans were obtained except temporary deployment in working capital.
 
 (xvii) According to the information and explanations given to us and
 overall examination of the Balance Sheet of the Company, we are of the
 opinion that the funds raised by the company on short-term basis has
 not been used for long term investments.
 
 (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 during the year.
 
 (xix) The Company has not issued any debentures .
 
 (xx) The Company has not raised any money by Public Issue during the
 year.
 
 (xxi) During the course of our examination of the books and records of
 the Company, carried out in accordance with the generally accepted
 auditing practices in India, and as per the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have been informed of such case by the Management.
 
                                       For Babu A.Kallivayalil & Co.,
 
                                                Chartered Accountants
 
                                     Firm Registration Number. 05374S
 
                                                                 Sd/-
 
 New Delhi                                  Babu Abraham Kallivayalil
 
 August 12, 2011                        Partner, Membership No. 26973