1.  We have audited the attached Balance Sheet of SOUTHERN
 PETROCHEMICAL INDUSTRIES CORPORATION LIMITED (the Company) as at 31
 March 2011, the Profit and Loss Account and the Cash Flow Statement of
 the Company for the year ended on that date, both 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 misstatements.  An audit
 includes examining, on a test basis, evidence supporting the amounts
 and the disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and the 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.  The Company''s current liabilities exceeded its current assets by
 Rs. 19873.86 lac and its total liabilities exceeded its total assets by
 Rs. 102609.78 lac. The ability of the company to continue as a going
 concern is dependent on the successful implementation of the rework
 package approved by ARCIL and other financial institutions through CDR
 mechanism as referred to in Note B-3(b) of Schedule 16. However the
 financial statements have been prepared on a going concern basis based
 on matters as set forth in Note B-4 of Schedule 16.
 
 4.  As required by the Companies (Auditor''s Report) Order, 2003 (CARO)
 issued by the Central Government in terms of Section 227(4A) 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.
 
 5.  Further to our comments in paragraph 3 above and in the Annexure
 referred to in paragraph 4 above, we report as follows:
 
 (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 it 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 are in compliance
 with the Accounting Standards referred to in Section 211 (3C) of the
 Companies Act, 1956;
 
 (e) 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:
 
 (i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31 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 of the
 Company for the year ended on that date.
 
 6.  On the basis of the written representations received from the
 Directors as on 31 March 2011 taken on record by the Board of
 Directors, none of the Directors is disqualified as on 31 March 2011
 from being appointed as a director in terms of Section 274(1 )(g) of
 the Companies Act, 1956.
 
 ANNEXURE TO THE AUDITORS'' REPORT (Referred to in paragraph 4 of our
 report of even date)
 
 (i) Having regard to the nature of the Company''s business / activities
 / result, clauses (xii), (xiii), (xiv), (xv), (xix) and (xx) of CARO
 are not applicable.
 
 (ii) In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of the fixed assets.
 
 (b) The fixed assets were physically verified during the year by the
 Management in accordance with a regular programme of verification
 which, in our opinion, provides for physical verification of all the
 fixed assets at reasonable intervals.  According to the information and
 explanation given to us, no material discrepancies were noticed on such
 verification.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (iii) In respect of its inventory:
 
 (a) As explained to us, the inventories were physically verified during
 the year by the Management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanation
 given to us, the procedures of physical verification of inventories
 followed by the Management were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 (iv) The Company has not granted / taken any loans, secured or
 unsecured, to companies, firms or other parties listed in the Register
 maintained under Section 301 of the Companies Act, 1956.
 
 (v) 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 purchases of inventory and fixed assets and the sale of goods and
 services. During the course of our audit, we have not observed any.
 major weakness in such internal control system.
 
 (vi) In respect of contracts or arrangements entered in the Register
 maintained in pursuance of Section 301 of the Companies Act, 1956, to
 the best of our knowledge and belief and according to the information
 and explanations given to us:
 
 (a) The particulars of contracts or arrangements referred to Section
 301 that needed to be entered in the Register maintained under the said
 Section have been so entered.
 
 (b) Where each of such transaction is in excess of Rs. 5 lac in respect
 of any party, the transactions have been made at prices which are prima
 facie reasonable having regard to the prevailing market prices at the
 relevant time.
 
 (vii) According to the information and explanations given to us, the
 Company has not accepted any deposit from the public during the year.
 In respect of unclaimed deposits, the Company has complied with the
 provisions of Sections 58A & 58AA or any other relevant provisions of
 the Companies Act, 1956.
 
 (viii) In our opinion, the Company has an adequate internal audit
 system commensurate with the size and the nature of its business.
 
 (ix) We have broadly reviewed the books of account 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 in respect of Fertilisers, Sulphuric Acid, Penicillin G, Bulk
 Drugs and
 
 Formulations and are of the opinion that prima facie the prescribed
 accounts and records have been made arid maintained. We have, however,
 not made a detailed examination of the records with a view to
 determining whether they are accurate or complete.  To the best of our
 knowledge and according to the information and explanations given to
 us, the Central Government has not prescribed the maintenance of cost
 records for any other product of the Company.
 
 (x) According to the information and explanations given to us in
 respect of statutory dues:
 
 (a) The Company has generally been regular in depositing undisputed
 dues, including 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
 applicable to it with the appropriate authorities.
 
 (b) There were no undisputed amounts payable in respect of Income-tax,
 Wealth Tax, Customs Duty, Excise Duty, Cess and other material
 statutory dues in arrears as at 31 March 2011 for a period of more than
 six months from the date they became payable.
 
 (c) Details of dues of Income-tax, Sales Tax, Wealth Tax, Service Tax,
 Customs Duty, Excise Duty and Cess which have not been deposited as on
 31 March 2011 on account of disputes are given below:
 
 Statute        Nature of Dues    Forum where Dispute 
                                   Is pending         Period
                                                      to which   Amount
                                                     the amount  involved
                                                      relates  (Rs.inlac)
 
 Central 
 Excise 
 Act, 1944      Excise Duty      Commissioner of
                                 Central Excise 
                                 (Appeals)           1998-99 to  346.63
                                 / Customs, Excise 
                                 & Service Tax
                                 Appellate           2007-08    (346.63)
                                 Tribunal
 
                Service Tax      Commissioner of
                                 Central Excise 
                                 (Appeals) /        2003-04 to   124.23
                                 Hon''ble Madras 
                                 High Court         2007-08     (124.23)
 
 Sales Tax Act 
 under various  Local Sales tax  Deputy Commissioner 
                                 (Appeals) / 
                                 Sales Tax          1996-97 to   107.25
 State Enactments                Appellate Tribunal  2002-03    (110.79)
 
 Central Sales 
 Tax Act, 1956  Central Sales 
                  Tax            Deputy Commissioner 
                                 (Appeals) / 
                                 Sales Tax          1998-99 and   50.17
                                 Appellate Tribunal   1999-00   (46.67)
 
 (xi) The accumulated losses of the Company at the end of the financial
 year are more than its net worth and the Company has not incurred cash
 losses in the financial year and in the immediately preceding financial
 year.
 
 (xii) As mentioned in Note B-3(b) of. Schedule 16 in view of the
 Company''s inability to meet its liability under the CDR package dated
 19 March 2003, ARCIL and other financial institutions have approved the
 rework package dated 13 March 2010, read with ARCIL term sheet dated 28
 March 2010 through CDR mechanism. The Company has paid Rs. 82555 lac to
 ARCIL as of 31 March 2011.  and as per the rework package, there is a
 shortfall of Rs. 19220 lac as on that date.
 
 (xiii) In our.opinion and according to the information and explanations
 given to us, the company has not availed any term loans during the
 current year.
 
 (xiv) In our opinion and according to the information and explanations
 given to us and on an overall examination of the Balance Sheet.  we
 report that funds raised on short-term basis have not been used during
 the year for long-term investment.
 
 (xv) According to the information and explanations given to us, the
 Company has not made preferential allotment of Equity Shares (other
 than Conversion of Fully Compulsorily Convertible Preference Shares
 into Equity Shares) to parties and companies covered in the Register
 maintained under Section 301 of the Companies Act, 1956.
 
 (xvi) To the best of our knowledge and according to the information and
 explanations given to us, no fraud by the Company ana no fraud on the
 Company has been noticed or reported during the year.
 
 For FRASER & ROSS
 
 Chartered Accountants 
 (Registration No.Q0C829S)
 
 M K ANANTHANARAYANAN
 
 Partner
 
 (Membership No. 19521)
 
 Place : Chennai
 Date  : 26 July 2011