1.  We have audited the attached Balance Sheet of National Fertilizers
 Limited as at 31st March, 2011, the Profit & Loss Account and the Cash
 Flow Statement 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 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, issued
 by the Central Government of India in terms of Section 227 (4A) of the
 Companies Act, 1956, we enclose in the Annexure hereto a statement on
 the matters specified in paragraph 4 and 5 of the said Order.
 
 4.  Furtherto 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
 ouraudit;
 
 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 & 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, to the extent applicable;
 
 I v) 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 on Accounts, give the
 information as required by the Companies Act, 1956, in the manner so
 required and gives a true and fair view in conformity with the
 accounting principles generally accepted in India:
 
 a) in case of the Balance Sheet, of the state of affairs of the Company
 as at 31st March, 2011;
 
 b) in case of the Profit & Loss Account, of the profit for the year
 ended on that date; and
 
 c) in case of the Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Anexture 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 fixed assets on the basis of the available information.
 
 b) As explained to us, the Company has a regular programme of physical
 verification of its fixed assets by which all fixed assets are verified
 in a phased manner, which in our opinion is reasonable, having regard
 to the size of the Company and nature of its assets. We are informed
 that discrepancies noticed on verification were not material and have
 been properly dealt with in the books of account.
 
 c) There was no disposal of a substantial part of fixed assets during
 the year.
 
 (ii) a) The physical verification of the inventory has been carried out
 by the management in accordance with the perpetual inventory programme,
 at regular intervals during the year. In our opinion, the frequency of
 such verification is reasonable having regard to the size of the
 Company and the nature of its business.
 
 b) 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) The Company is maintaining proper records of inventory. The
 discrepancies noticed on verification between the physical stocks and
 book records were not material and have been properly dealt with in the
 books of account.
 
 (iii) The Company has neither granted nor taken any loans, secured or
 unsecured, to/or from companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Therefore, Clauses 4(iii)(b), (c), (d), (f) & (g) of the Companies
 (Auditor''s Report) Order, 2003 are not applicable to the Company.
 
 (iv) In our opinion and according to the information and explanations
 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, sale of goods & services.
 During the course of audit, we have not observed any continuing failure
 to correct major weakness in internal controls.  
 
 (v) According to the information and explanations given to us, the 
 Company has no contracts or arrangements that need to be entered into 
 the register maintained in pursuance of Section 301 of the Companies 
 Act, 1956.  Therefore, Clause 4 (v) (b) of the Companies (Auditor''s 
 Report) Order 2003 is not applicable to the Company.  
 
 (vi) The Company has not accepted any deposit from the public within 
 the meaning of Section 58A, 58AA or any other relevant provisions of 
 the Companies Act, 1956.  
 
 (vii) In our  opinion, the Company''s internal audit system is generally 
 commensurate with the size and nature of its business, which however 
 further requires more indepth coverage.  
 
 (viii)We have broadly reviewed the books of account maintained by the 
 Company pursuant to the rules prescribed by the Central Government for
 maintenance of cost records in respect of certain products under
 Section 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. We have, however, not made a detailed examination of the
 records.  
 
 (ix) (a) According to information and explanations given to
 us and on the basis of our examination of the records of the Company,
 the Company is generally regular in depositing, with the appropriate
 authorities, undisputed statutory dues including Provident Fund,
 Investor Education and Protection Fund, Employees'' State Insurance,
 Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise
 duty and other statutory dues. According to the information and
 explanations given to us, no undisputed amounts remains payable in
 respect of such statutory liabilities as at 31st March, 2011 for a
 period of more than six months from the date they became payable.
 
 There were no dues on account of cess under Section 441A of the
 Companies Act, 1956 since the date from which the aforesaid section
 comes into force has not yet been notified by the Central Government.
 (b) According to the information and explanations given to us, the
 particulars of the disputed dues as at 31.03.2011 which have not been
 deposited on account of matters pending in appeal before appropriate
 authorities are as under:
 
 Name of Statute   Nature      Amount 
                             involved    Forum/Period where the
                   of Dues   (Rs. in 
                              Lakhs)     dispute is pending
 
 Income Tax Act  Income Tax  257.56   Supreme Court since 2009-10
 
                            5529.01   High Court since 2008-09 and 
                                      2009-10
 
                            1353.72   ITAT since 2008-09 and 2009-10
 
                            3103.13   CIT(A) since 2008-09 and 2009-10
 
 Central Excise 
 Act             Excise 
                  Duty       104.24   CESTAT since 2008-09
 
                             200.00   Commissioner (Appeals) since 
                                      2009-10
 
 Finance Act 
 1994 Service 
 Tax            Service 
                Tax           29.36   Addl. Commissioner,Central Excise
                                      Indore since 2006-07
 
 MP. Commercial 
 Tax Act        Purchase 
                 Tax         130.07   Commercial Tax Appellate Board,
                                      Bhopal since 2006-07
 
 Haryana Local 
 Area          Entry Tax     671.94   Joint Excise Taxation Commissioner,
 Development 
 Tax Act                              Rohtak since 2004-05
 
               TOTAL       11379.03
 
 (x) The Company has no accumulated losses as at the end of the
 financial year and has not incurred cash losses
 during the financial year and the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to any 
 bank. There were no dues to financial institutions.  
 
 (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) The Company is not a chit fund or a nidhi/mutual benefit 
 fund/society.
 
 (xiv) The Company is not dealing in or trading in shares, securities,
 debentures and other investments.  
 
 (xv) According to the information and explanations given to us, the 
 Company has not given any guarantee for loans taken by others from banks 
 or financial institutions.  
 
 (xvi) As per the information and explanations given to us, the Company 
 has taken certain short term loans during the year which have been 
 utilized for the purposes forwhich they were obtained.  
 
 (xvii) According to the information and explanations given
 to us and on an overall examination of the Balance Sheet and Cash
 Flow Statement of the Company, in our opinion, no fund raised on short
 term basis have been used for long term investment.  
 
 (xviii) The Company has not made any preferential allotment of shares 
 to any parties and companies covered in the
 
 Register maintained under Section 301 of the Companies Act, 1956,
 during the year.  (xix) The Company does not have any outstanding
 bonds/ debentures at the end of the year.  (xx) The Company has not
 raised any money by way of public issue during the year.  (xxi)
 According to the information and explanations given by the management,
 no fraud on or by the Company has been noticed or reported during
 the year.
 
 For S.P.CHOPRA & CO.,                For DSP & ASSOCIATES
 CHARTERED ACCOUNTANTS                CHARTERED ACCOUNTANTS
 
 (ANKUR GOYAL)                       (ATUL JAIN)
 PARTNER                             PARTNER
 (Membership no. 99143)              (Membership no. 91431)
 FIRM REGD. NO. 000346N              FIRM REGD. NO.006791 N
 
 Place: New Delhi 
 Date: 30th May, 2011