1.  We have audited the attached Balance Sheet of United Phosphorus
 Limited (the Company) as at March 31, 2011 and also the Profit and
 Loss Account and the Cash Flow Statement for the year ended 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) issued by the Central 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.  Without qualifying our opinion, we draw attention to Note 14 of
 Schedule T to the financial statements. As per legal advice obtained
 in relation to the Court order, the Company has not adjusted tax
 benefit in respect of amortization of the Product Registrations and
 Product Acquisitions to the reserves, as explained therein.
 
 5.  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 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 and 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 and 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 the written representations received from the
 directors, as on March 31, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 31, 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 the Balance Sheet, of the state of affairs of the
 Company as at March 31, 2011;
 
 b) in the case of the 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
 Annexure referred to in paragraph 3 of our report of even date
 Re: United Phosphorus Limited (the Company)
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) Fixed assets have been physically verified by the management during
 the year and no material discrepancies were identified on such
 verification.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (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 and no
 material discrepancies were noticed on physical verification carried
 out at the end of the year.
 
 (iii) (a) The Company has granted loan to two firms covered in the
 register maintained under Section 301 of the Companies Act, 1956. The
 maximum amount involved during the year was Rs. 4,372 lacs and the
 year- end balance of loans granted to such parties was Nil.
 
 (b) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) In respect of loans granted, repayment of the principal amount is
 as stipulated and payment of interest have been regular.
 
 (d) There is no overdue amount of loans granted to companies, firms or
 other parties listed in the register maintained under Section 301 of
 the Companies Act, 1956.
 
 (e) The Company has taken loan from a company covered in the register
 maintained under Section 301 of the Companies Act, 1956. The maximum
 amount involved during the year was Rs. 7,145 lacs and the year-end
 balance of loan taken from such party was Rs. 651 lacs.
 
 (f) In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (g) In respect of loan taken, repayment of the principal amount is as
 stipulated and payment of interest have been regular.
 
 (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, for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, no major weakness has been
 noticed in the internal control system in respect of these areas.
 During the course of our audit, we have not observed any continuing
 failure to correct major weakness in internal control system of the
 Company.
 
 (v) (a) According to the information and explanations provided by the
 management, we are of the opinion that the particulars of contracts or
 arrangements referred to in Section 301 of the Act that need to be
 entered into the register maintained under Section 301 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements exceeding value of Rupees five lakhs in respect of any
 party during the year have been made at prices which are reasonable
 having regard to the prevailing market prices at the relevant time,
 except in respect of certain transactions of purchases and sale of
 goods, material or services, we are unable to comment in respect
 thereof in the absence of similar transactions with other parties.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (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 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 are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained.
 
 (ix) (a) The Company is regular in depositing with 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, cess and other material statutory dues applicable to it, though
 there has been a slight delay in a few cases.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under Section 441A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the Company in depositing the same.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees state insurance, income-tax,
 wealth-tax, service tax, sales-
 
 tax, customs duty, excise duty, cess and other material undisputed
 statutory dues were outstanding, at the year end, for a period of more
 than six months from the date they became payable.
 
 (c) According to the records of the Company, the dues outstanding of
 income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
 duty and cess on account of any dispute, are as follows:
 
 Name of the  Nature of   Amount   Period to    Forum where dispute
 statute      dues        (Rs.In   which the        is Pending
                          lacs)    amount 
                                   relates
 
 Income Tax 
 Act, 1961    Income-tax    6      1996-97 &    Income-tax Appellate
              demands              1997-98      Tribunal
 
 Sales Tax    Sales tax    955     1997-98 to   Ahmedabad High Court,
 Act          demands              2005-06      Commissioner of 
                                                Sales-tax, Baroda & 
                                                Sales Tax Tribunal, 
                                                Ahmedabad
 
 Central 
 Excise Act/  Excise duty/ 7,123   1989-90 to   Commissioner (Appeals)
 Finance Act  Service tax          2008-09      Central Excise and 
              demands                           Service Tax Appellate
                                                Tribunal
 
 Customs Act  Custom duty  2,193   1992-93 to   Commissioner (Appeals)
              demands              1995-96      Central Excise and 
                                                Service Tax Appellate
                                                Tribunal, Mumbai
 
 Foreign 
 Trade        Fiscal       3,348   1992 to      Bombay High Court
 (Develop-    penalty              1997
 ment and 
 regulation) 
 Act
 
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to a financial
 institution, bank or debenture holders.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, the Company has not
 granted loans and advances on the basis of security by way of pledge of
 shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended)
 are not applicable to the Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Companies (Auditors Report) Order,
 2003 (as amended) are not applicable to the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has given guarantee for loans taken by others from bank or
 financial institutions, the terms and conditions whereof, in our
 opinion, are not prima-facie prejudicial to the interest of the
 Company.
 
 (xvi) Based on information and explanations given to us by the
 management, term loans were applied for the purpose for which the loans
 were obtained.
 
 (xvii) 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 used for long-term
 investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 Section 301 of the Companies Act, 1956.
 
 (xix) According to the information and explanations given to us, during
 the period covered by our audit report, the Company has created
 security or charge in respect of debentures issued. The Company also
 has unsecured debentures outstanding during the year on which no
 security or charge is required to be created.
 
 (xx) The Company has not raised any money by public issues during the
 year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information 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.V. GHATALIA & ASSOCIATES
                                     Firm registration number: 103162W
                                     Chartered Accountants
 
 
                                     per Sudhir Soni
                                     Partner
                                     Membership No. 41870
 
 
 Mumbai 
 April 29, 2011