We have audited the attached Balance Sheet of Hindustan Fluorocarbons
 Ltd., Hyderabad, as at March 31, 2012 the Statement of profit and Loss
 and the Cash Flow Statement for the year ended on that date, which are
 revised statements of the original Balance Sheet and Statement of
 Profit and Loss covered by the audit report of Hindustan Fluorocarbons
 Ltd., dated 25.05.2012. We have considered the earlier audit report
 dated 25.05.2012 on the original accounts and also revised report dated
 13.07.2012 and have examined the changes made therein which are as
 under:
 
 The reversal of excess provision of Gratuity amounting to Rs.65.89
 lakhs has now been treated as Other non operating Income instead of
 Exceptional Item, however due to change, there is no impact on profit
 for the year from continuing operations.
 
 Revised Audit Report:
 
 In the light of C & AG''s observations under Section 619(4) of the
 Companies Act, 1956, on the accounts of the company, the above Audit
 Report Dated 13.07.2012 is revised by modifying sub Paras 1(d) &
 1(f)(V). This report is in substitution of our earlier report dated
 13.07.2012.
 
 These financial statements are the responsibility of the Company''s
 management. Our responsibility is to express an opinion on the
 Financial Statements based on our audit.
 
 We conducted our audit in accordance with Audit 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 
 Statements presentation. We believe that our audit provides a
 reasonable basis for our opinion.
 
 I. As required by the Companies (Auditor''s Report) Order, 2003, issued
 by the Central Government of India in terms of subsection (4A) of
 section 227 of the Companies Act, 1956, we enclose in the Annexure here
 to a statement of the matters specified in paragraphs 4 & 5 of the said
 Order.
 
 II. Further to our comments in the Annexure referred to in paragraph I
 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 purpose 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, Statement of Profit and Loss and the Cash Flow
 Statements dealt with by this report are in agreement with the books of
 accounts.
 
 (d) In our opinion, the Balance Sheet, Statement of Profit and Loss and
 the Cash Flow Statement dealt with this report comply with the
 Accounting Standards referred to in subsection (3C) of Section 211 of
 the Companies Act. 1956, except AS – 6, AS- 15 & AS – 29.
 
 (e) As per the Notification No. GSR. 829 (e) dated 21.10.2003 issued by
 the Central Government clause(G) of sub-section(1) of Section 274 of
 the Companies Act, 1956, is not applicable to the Government Company
 and hence we offer no comment as to whether any of the Directors are
 disqualified from being appointed as the Directors in terms of the said
 section.
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with the
 Significant Accounting Policies and Notes thereon, subject to following
 qualifications;
 
 (I) The Company had incurred Rs.284.14 lakhs and Rs. 17.83 lakhs as
 refurbishment expenditure on Plant & Machinery during the Financial
 Year 2008-09 & 2009-10 respectively. As per the guidelines laid down in
 scheme of BIFR, Modified Draft Rehabilitation Scheme (MDRS), it has
 been stipulated that this sum shall be written off in 5 equal annual
 installments. Accordingly, during the current financial year, a sum of
 the Rs.61.49 lakhs has been written off on pro – rata basis. This
 accounting treatment is a deviation from Accounting Standard ( AS-6)
 issued by The Institute of Chartered Accountants of India (ICAI) and
 incorporated as a mandatory accounting standard in Section 211(3C) of
 the Companies Act 1956;
 
 (II) An amount of Rs.223.57 lakhs was incurred towards VRS payments for
 31 employees in accordance with BIFR''s Modified Draft Rehabilitation
 Scheme (MDRS) in Jan 2009.  As per scheme, this amount is to be
 amortized and charged to P & L Account over a period of 3 years on
 pro-rata basis. Accordingly, the balance of Rs.37.27 Lakhs has been
 amortized/written off during the year to Statement of profit & loss.
 This is in accordance with BIFR''s Modified Draft Rehabilitation Scheme
 (MDRS). However, the aforesaid accounting treatment is a deviation from
 the Accounting Standard (AS-15) issued by The Institute of Chartered
 Accountants of India (ICAI) and incorporated as a mandatory accounting
 standard in Section 211(3C) of the Companies Act;
 
 (III) The arrears payable on account of pay fixation in the revised
 scale with effect from 01-01-1997 vide wage revision settlement as per
 DPE guidelines, have had not been provided for in the books of the
 company.  The arrears payable at the close of the year was Rs.1160
 lakhs (Pr. year Rs.1552 Lakhs).  As per BIFR-MDRS, the company has
 implemented the wage revision for officers and non officers'' with
 effect from December 2010 and the arrears payable for the period before
 that date has not been charged to profit and loss account on account of
 categorically stipulation made under the scheme that arrears are to be
 released subject to availability of funds. The company has accordingly
 not provided for. This liability has been disclosed under contingent
 liability in the financial statements;
 
 (IV) Trade Receivables, Trade payables, sundry balances of debit and
 credit of parties are subject to confirmation and review by the
 management, 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 Balance Sheet of the state of affairs of the 
 company as at 31st March,2012.
 
 ii) in the case of the Statement of Profit and Loss, of the result 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 to Auditors Report
 
 (Referred to in Paragraph 1 of our report of even date)
 
 1(a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 1(b) All the fixed assets have been physically verified by management
 during the year and there is regular program of verification which, in
 our opinion, is reasonable having regard to the size of the Company and
 the nature of its assets. As informed no major material discrepancies
 were noticed on such verification.
 
 1(c) During the year, the Company has not disposed off substantial part
 of its fixed assets.
 
 2(a) As explained to us, the stocks of finished products,
 stock-in-process and raw materials have been physically verified by the
 management during the year. Stock of stores and spare parts are
 reported to be physically verified in accordance with the procedure
 followed by the management. In our opinion, the frequency of such
 physical verification of stocks is reasonable.
 
 2(b) In our opinion, the procedure of physical verification of stocks
 followed by the management is reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 2(c) The Company is maintaining proper records of inventory and no
 material discrepancies have been noticed on physical verification of
 stocks compared to the books/records.
 
 3(a) The company has not granted any loans secured or unsecured to/from
 Companies, Firms or other parties covered in the registers maintained
 u/s 301 of the Companies Act, 1956.
 
 3(b) The company has taken secured loan from its holding company,
 Hindustan Organics Company Limited, covered in the register maintained
 under section 301 of the Companies Act 1956 and the maximum amount
 involved during the year was Rs.4021.06 lakhs (Pr. Year Rs.4019.15
 lakhs ) and the year - end balance is Rs. 3929.33 lakhs (Pr. Year Rs.
 4019.15 lakhs )
 
 3(c) In our opinion, the rate of interest and other terms and
 conditions on which loans have been taken on the holding company, are
 not prima facie prejudicial to the interest of the company.
 
 3(d) The Company is irregular in repaying the principal amount as
 stipulated and also irregular in payment of interest. The overdue of
 principal and interest at the close of the year is Rs. 1514.62 lakhs
 (Pr. Year Rs.  916.62 lakhs)
 
 4. In our opinion and according to the information and explanations
 given to us, there are adequate internal control procedures,
 commensurate with the size of the Company and the nature of its
 business with regard to the purchase of inventory, fixed assets and
 with regard to the sale of goods.  Further, on the basis of our
 examination of the books and records of the company and according to
 the information and explanations given to us, we have neither come
 across nor have been informed of any continuing failure to correct
 major weaknesses in the aforesaid internal control procedures;
 
 5(a) According to the information and explanations given to us, we are
 of the opinion that the transactions that need to be entered in the
 register maintained u/s 301 of the Companies Act, 1956 have been so
 entered.
 
 5(b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts and
 arrangements entered in the register maintained under section 301 of
 the Companies Act 1956 in respect of transactions during the year, have
 been made at prices which are reasonable having regard to the
 prevailing market price at the relevant time.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of section 58A, 58AA of the companies Act 1956 or any other
 relevant provisions of the act and the rules made there under.
 
 7.  The internal audit of the company has been entrusted to an
 independent firm of Chartered Accountants to carry out the functions as
 Internal Auditors. In our opinion the company has internal audit system
 commensurate with the size and nature of business.
 
 8. We have broadly reviewed the books of accounts maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost records u/s 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. We have not however made a
 detailed examination of the records with a view to determine whether
 they are accurate or complete.
 
 9(a) The company is generally regular in depositing with appropriate
 authorities undisputed statutory dues including Provident fund,
 Employee''s state Insurance, Income-tax, CST/VAT, Wealth-tax, Service-
 tax, Customs duty, Excise duty, cess and other material statutory dues
 applicable to it. The arrears of CST/VAT, Provident fund etc.
 outstanding at the close of previous year have been deposited during
 the year.
 
 9(b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of income – tax, wealth tax,
 service tax, sales tax, customs duty, excise duty and cess were in
 arrears, as at 31st March 2012 for a period of more than six months
 from the date they became payable;
 
 10. The accumulated losses of the company as at the end of the year are
 more than fifty percent of its net worth. Further, the company has not
 incurred cash losses during the financial year covered by our audit and
 in the opinion of the previous auditor; the company has incurred cash
 losses in the immediately preceding financial year. The company is
 under the Scheme of BIFR and hence considered as a Sick Company as per
 Sick Industries Companies (Special Provisions) Act 1985.
 
 11.  The Company has not defaulted in repayment of dues to financial
 institutions during the current financial year.  There are no over dues
 as on 31st March, 2012.
 
 12.  The Company has not granted any loans and advances on the basis of
 shares, debentures and other securities of a similar nature and hence
 maintenance of documents and records relating to such items are not
 applicable.
 
 13. In our opinion the Company is not a chit fund or a nidhi/mutual
 benefit fund/society.  Therefore, clause-4 (iii) of the Companies
 (Auditor''s Report) Order, 2003, is not applicable to the Company.
 
 14.  The Company has not dealt in or traded in shares, securities,
 debentures and other investments.
 
 15.  The Company has not given any guarantee for loans taken by others
 from banks and financial institutions.
 
 16.  In our opinion, the term loans have been applied for the purpose
 of which they were raised.
 
 17.  In our opinion and as per the explanations given to us, no funds
 raised on short term basis have not been used for long term purposes
 and vice-versa.
 
 18.  The Company has not made any preferential allotment of the shares
 during the year.
 
 19.  The Company has not issued any debentures during the year.
 
 20.  The Company has not raised any money by public issues during the
 year.
 
 21.  Based upon the audit procedures performed 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. Daga & Co.,
                                                Chartered Accountants
                                                        (FRN 000669S)
 
                                                                 Sd/-
 
                                                     (Shantilal Daga)
                                                              Partner 
                                                        M. No. 011617
 
 Place: Mumbai 
 Date: 27.08.2012