1.  We have audited the attached Balance Sheet of Gujarat State
 Fertilizers & Chemicals Limited as at 31st March, 2011 and the Profit
 and Loss Account and the Cash Flow Statement for the year ended on that
 date annexed thereto in which are incorporated the accounts of the
 Polymers Unit and Fibre Unit of the Company, audited by another firm of
 Chartered Accountants. 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 misstatements. 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 Government of India 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.  Attention is drawn to Note No. 12 of Schedule 22 regarding non
 provision of wage revision.
 
 5.  Further to our comments in the Annexure referred to 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;
 
 (c) the Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (d) in our opinion, the Balance Sheet, the Profit and Loss Account and
 the 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.
 
 (e) On the basis of written representations received from certain
 directors of the Company and from the management in respect of other
 directors exempted vide General Circular No. 8/2001-CLV dated
 22/03/2002 issued by Ministry of Law, Justice and Company Affairs,
 Department of Company Affairs and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March, 2011 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956.
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with para 4 above
 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 31st March 2011;
 
 (ii) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Annexure to the Auditors'' Report
 (Referred to in paragraph 3 of our Report of even date)
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation, of its fixed
 assets.
 
 (b) As explained to us, all major items of fixed assets were physically
 verified by the Management at the end of the year, in accordance with
 the regular programme of verification which in our opinion is
 reasonable, having regard to the size of the Company and nature of its
 assets. No material discrepancy was noticed on such physical
 verification.
 
 (c) The Company has not disposed off any substantial part of its fixed
 assets during the year as would affect its going concern status.
 
 (ii) (a) In our opinion, physical verification of inventory has been
 conducted by the management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedure of physical verification of inventory
 followed by the Management is reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (c) On the basis of our examination of records of inventory, in our
 opinion, the Company is maintaining proper records of inventory. No
 material discrepancy was noticed on physical verification of the
 inventory.
 
 (iii) (a) As per the information and explanations given to us, the
 Company has not granted any loans, secured or unsecured, to companies,
 firms or other parties covered in the Register maintained under Section
 301 of the Companies Act, 1956.  (b) As per the information and
 explanations given to us, 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.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory, fixed assets and with regard to the sale of
 goods and services.  During the course of audit, we have not observed
 any continuing failure to correct major weakness in Internal Control
 System.
 
 (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 the Companies Act, 1956 have been entered
 in the Register maintained under that Section;
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 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 complied with the provisions of section
 58A and 58AA or any other relevant provision of the Companies Act, 1956
 and the Companies (Acceptance of Deposits) Rules 1975 with regard to
 the deposits accepted from the public. We are informed by the
 management that, no order has been passed by the Company Law Board or
 National Company Law Tribunal, 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 relating to
 materials, labour and other items of cost 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 we are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. However, we have
 not made a detailed examination of the records.
 
 (ix) (a) According to the information given to us, the Company is
 generally regular in depositing with appropriate authorities undisputed
 statutory dues and the Company had no arrears of such outstanding
 statutory dues as at 31st March, 2011 for a period more than six months
 from the date they became payable.
 
 (b) According to the information and explanations given to us, the
 Company had no disputed outstanding statutory dues as at 31st March,
 2011, except as enumerated here under :
 
 Nature of the Dues                  Amount 
                                (Rs. in Lakhs)  Forum where dispute is 
                                                pending
 
 Excise & Custom Duties              4513.45    Up to Tribunal
 
                                        2.76    High Court
 
 Sales Tax                            461.51    Up to Tribunal
 
 Income Tax                           160.35    C.I.T. (Appeals)
 
                                        1.51    ITAT
 
 (x) The Company does not have any accumulated losses as at 31st March,
 2011 and it has not incurred any cash losses in the financial year
 ended on that date or in the immediately preceding financial year.
 
 (xi) As per the information and explanations given to us, the Company
 has not defaulted in the repayment of dues to financial institutions,
 banks or debenture holders during the year.
 
 (xii) As per the information and explanations given to us, the Company
 has not granted any loans or advances on the basis of security by way
 of pledge of shares, debentures and other securities.
 
 (xiii) The provisions of any special statute applicable to chit
 fund/nidhi/mutual benefit fund/societies are not applicable to the
 Company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the Company does not deal or trade in shares, securities,
 debentures and other investments.
 
 (xv) In our opinion, the terms and conditions on which the Company has
 given guarantees for loans taken by other from banks or financial
 institutions are not prejudicial to the interest of the Company.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, no term loans were availed by the Company.
 
 (xvii) In our opinion and 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
 utilized for long-term investment.
 
 (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 under
 review. 
 
 (xx) The Company has not raised any money by public issue during the
 year.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the year
 under review.
 
                                         For Prakash Chandra Jain & Co.
 
                                                 Chartered Accountants
 
                                         Firm Registration No. 002438C
 
                                               Prakash Chandra Nalwaya
 
 Place : Gandhinagar                                           Partner
 
 Date : 27-05-2011                                Membership No. 33710