1.  We have audited the attached balance sheet of Khaitan Chemicals &
 Fertilizers Limited as at 31st March, 2011, the profit and loss account
 and also the cash flow statement for the year ended as on that date
 annexed thereto. These financial statements are the responsibility of
 the Companys management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with 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 (Auditors Report) Order, 2003 {as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004}
 issued by the Central Government of India in terms of Sub-section (4A)
 of Section 227 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 explanation given to
 us, 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 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 accounts 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 & 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 & loss account and 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,;
 
 v. On the basis of written representations received from the directors,
 as on 31st March, 2011 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:
 
 vi. 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 balance sheet, of the state of affairs of the Company
 as at 31st March, 2011;
 
 b) in the case of profit and loss account, of the profit for the year
 ended on that date; and
 
 c) in the case of cash flow statement, of the cash flows for the year
 ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (As referred to in paragraph 3 of our report to the members of
 Khaitan Chemicals & Fertilizers Limited on the accounts as at & for the
 year ended 31st March 2011)
 
 (i) (a) The company has maintained proper records showing full
 particulars including quantitative details and situation of fixed
 assets..
 
 (b) The fixed assets are physically verified by the management
 according to a phased programme designed to cover all the items over a
 period of three years, which in our opinion, is reasonable having
 regard to the size of the company and the nature of its assets.
 Pursuant to the programme, a portion of the fixed assets has been
 physically verified by the management during the yearand no material
 discrepancies were noticed on such verification.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 off by the Company during the year.
 
 (ii) (a) The inventory of the Company has been physically verified by
 the management during the year (except for stock of Rock Phosphate,
 Sulphur and Single Super phosphate for which stock is taken on
 estimation basis and for the stock in transit and stock lying with
 outside parties). In our opinion, the frequency of verification is
 reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventory
 followed by the management are 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 the records of inventory, in our
 opinion, the Company has maintained proper records of inventory and as
 explained to us, discrepancies noticed on physical verification of
 inventory as compared to the books records were not material and have
 been properly dealt with in the books of accounts.
 
 (iii) (a) According to the information and explanations given to us,
 the Company has granted inter-corporate loans/advances to one company
 covered in the register maintained under Section 301 of the Companies
 Act, 1956. The maximum amount involved during the year and the year-end
 balance of such loans was Rs. 2286.09 lacs and Rs. 621.82 lacs
 respectively.
 
 (b) In our opinion and according to information and explanations given
 to us, the rate of interest and other terms and conditions are prima
 facie not prejudicial to the interest of the Company.
 
 (c) The Companies to whom loans have been granted have been regular in
 the payment of principal and interest wherever stipulated.
 
 (d) There is no overdue amount outstanding at the end of the year in
 respect of above loans/advances.
 
 (e) The Company has taken loan from two Companies during the year
 covered in the Register maintained under Section 301 of the Companies
 Act, 1956. The maximum amount involved during the year and the year-end
 balance of such loans was Rs. 500 lacs and Rs.500 lacs respectively.
 
 (iv) 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 purchase of inventory, fixed assets and for the
 sale of goods. Further, on the basis of our examination of the books
 and records of the Company, carried out in accordance with the
 generally accepted auditing practices in India, we have neither come
 across nor have been informed of any instance of continuing failure to
 correct major weaknesses in the aforesaid internal control procedures.
 (v) (a) Based on audit procedures applied by us and according to the
 information and explanations provided by the management, we are of the
 opinion that all the particulars of contracts or arrangements that need
 to be entered in to the register maintained under Section 301 of the
 Companies Act, 1956 have been so entered.  
 
 (b) In our opinion and according to information and explanations 
 given to us, the transactions made in pursuance of such contracts 
 or arrangements have been made at prices which are reasonable having 
 regard to prevailing market prices at the relevant time.  
 
 (vi) The company has not accepted any deposits from the public within 
 the meaning of Section 58A and 58AA or any other relevant provisions 
 of the Companies Act, 1956 and the rules framed there under.
 
 (vii) In our opinion, the company has an adequate internal audit system
 commensurate with the size and nature of its business.  
 
 (viii) We have broadly reviewed the books of account maintained 
 in pursuance to section 209 (1) (d) of Companies Act, 1956 in respect 
 of single super phosphate, Sulphuric acid and refined vegetable oil 
 manufactured by the Company and are of the opinion that, prima facie, 
 the prescribedrecords and accounts have been made and maintained. 
 However, we have not carried out a detailed examination of such 
 records to verify its authenticity and accuracy.  
 
 (ix) (a) According to the information and explanations given to us 
 and the records of the company examined by us,in our opinion, the 
 Company is generally regular in depositing undisputed statutory dues 
 in respect of provident fund, investor education and protection fund, 
 employees state insurance, income tax, sales tax, wealth tax, 
 service tax, customs duty, excise duty, cess and other material 
 statutory dues as applicable with the appropriate authorities though 
 there has been slight delay in few cases.
 
 (b) Further, According to information & explanations given to us,
 undisputed amount of Sa/es Tax and Advance Income Tax of Rs. 1.55 lacs
 and Rs 181.90 lacs respectively were outstanding as at the Balance
 Sheet Date for more than six months from the date they become payable.
 
 (c) According to the information and explanations given to us and the
 records of the Company examined by us, the particulars of dues of
 income tax, sales tax, custom duty, wealth tax, excise duty, service
 tax and cess, which have not been deposited on account of any dispute,
 are as follows: -
 
 S.  Name of the 
     Statute       Nature of   Amount   Period to     Forum where the
                                                      dispute is 
                                                      pending
 No.               dues        (Rs.)    which the
 
                                        amount 
                                        relates
 
 I.  MP.Commerc-
     ial Tax       Sales Tax  0.48 
                               Lacs     2001-02       Tribunal 
                                                      Commercial
                                                      Tax, Bhopal 
     Act,1974     Trade Tax    3.98 
                               lacs
 
 2   UP Trade 
     Tax 1948     Sales Tax  (princi-
                              pal)      Before 1996   Joint Commissio-
                                                      ner of Trade Tax, 
                                                      Lucknow
                  Trade Tax 
 
                              15.94 
                              Lacs
 
                              (Inter-
                              est)
 
 3.  MP. Comme-
     rcial Tax    Entry tax   0.11 
                              Lacs      1991-92       Tribunal Commer-
                                                      cial Tax, Bhopal 
                                                      1974
 
 4.  Mines and 
     Minerals     Royalty on  118.77    2004-05       High Court, 
                                                      Rajasthan
     (Develop-
     ment and     rock        Lacs
     Regulation) 
     Act, 1957    phosphate
 
 
 5.  Purchase 
     Tax Act      Purchase
                  Tax         63.38
                              Lacs      2004-05       High Court of 
                                                      MadhyaPradesh, 
                                                      Jabalpur
 
 6.  Income 
     Tax Act 
     1961         Income 
                  Tax        36.87 
                             Lacs       2007-08      CIT(Appeal),New
                                                     Delhi
 
 7.  Central 
     Excise 
     Act          Penalty    17.78 
                             Lacs       2007-08      Custom Excise 
                                                     and Service Tax 
                                                     Appellate 
                                                     Tribunal
 
 8.  UP Trade 
     Tax 1948     Sales Tax  0.49 
                             Lacs       2007-08      The Deputy 
                                                     Commission
                                                     Commercial 
                                                     Tax-Jhansi
 
 9.  UP Trade 
     Tax 1948     Sales Tax  0.93 
                             Lacs       2005-06      The Deputy
                                                     Commission 
                                                     Commercial 
                                                     Tax-Jhansi
 
 10.  UPTrade
      Tax1948     Sales Tax  1.00 
                             Lacs.      2006-07      The Deputy
                                                     Commission 
                                                     Commercial 
                                                     Tax-Jhansi
 
 II.  MP. Entry 
      TaxAct 
      1976        EntryTax   35.37
                             lacs       2007-08      MP Commercial
                                                     TaxAppellate 
                                                     Board,Bhopal  
 
 x) The company does not have any accumulated losses as at 31st March
 2011 and it has not incurred any cash losses during the financial year 
 ended on that date or in the immediately preceding financial year.  
 
 (xi) Based on our audit procedure and on the basis of information and 
 explanations given to us by the management, we are of the opinion that 
 the Company has not defaulted in repayment of dues to any financial 
 institution or bank during the year.  
 
 (xii) Based on our examination of documents and records, we are of 
 the opinion that the company has maintained adequate records
 where the company has granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.  
 
 (xiii) The Company is not a chit fund, nidhi, mutual
 benefit fund or a society.  (xiv) The company has maintained proper
 records of transactions & contracts for purchase & sale of securities
 during the year under review & timely entries were made therein. 
 All the shares, securities and other investments have been held by 
 the Company in its own name.  
 
 (xv) As per the information and explanations given to us and
 on our examination of records, the Company has not given any
 guarantee for loans taken by others from banks or financial
 institutions.  
 
 (xvi) According to the records of the Company examined
 by us and the information and explanations given to us, in our opinion,
 the term loans taken by the Company have been applied for the purpose for
 which they were obtained.  
 
 (xvii) According to information and
 explanations given to us and on an overall examination of balance sheet
 of the Company, we report that no funds raised on short term basis 
 have been used 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 Act during the year.  
 
 (xix) The Company has not issued any debenture during the year.  
 
 (xx) The Company has no raised any money by public issues during the 
 year.  
 
 (xxi) Based upon the audit procedures performed and information and 
 explanation 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 the year ended March 31, 2011.
 
                                                For: S.S.KOTHARI MEHTA 
                                                & CO.
 
                                                Chartered Accountants 
                                                Firm Regn.No. 000756N
 
 
                                                NAVEEN AGGARWAL
 
                                                Partner 
                                                Membership No. 94380
 
 Place : New Delhi 
 Date  : 18th May 2011