Auditor Report of National Fertilizers Ltd.

Mar 31, 2025

We have audited the accompanying standalone financial statements of National Fertilizers Limited
(hereinafter referred to as “the Company”) which comprise the standalone balance sheet as at 31st March
2025, the standalone statement of profit and loss (including other comprehensive income), the standalone
statement of cash flows and the standalone statement of changes in equity for the year then ended and
notes to the financial statements including a summary of the material accounting policies and other
explanatory information (herein after referred to as “standalone financial statements”).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid
standalone financial statements give the information required by the Companies Act, 2013 (“the Act”) in the
manner so required and give a true and fair view in conformity with the Indian Accounting Standards (“IND
AS”) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards)
Rules, 2015, as amended, and other accounting principles generally accepted in India, of the state of affairs
of the company as at 31st March 2025, its Profit (including other comprehensive income), changes in
equity and its cash flows for the year ended on that date.

| Basis for Opinion |

We conducted our audit of the standalone financial statements in accordance with the standards on
auditing (“SAs”) specified under section 143(10) of the Act. Our responsibilities under those standards are
further described in the auditor''s responsibilities for the audit of the standalone financial statements section
of our report. We are independent of the company in accordance with the Code of Ethics issued by the
Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant
to our audit of the standalone financial statements under the provisions of the Act and the Rules made
thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements
and the ICAI''s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the standalone financial statements.

| Emphasis of Matter |

We draw attention to:

(i) Note No. 37A(ii) of accompanying standalone financial statements regarding recognition of
revenue for adversity of subsidy amounting to '' 134.14 Crore on the basis of DOF letter for “No
Profit - No Loss” basis.

(ii) Note No. 37A(iii) of accompanying standalone financial statements which describes the
recognition of revenue of '' 323.92 Crore and recognition of disadvantage of '' 18.17 Crore in
inventory on account of advantage/disadvantage on upward/downward trend in CFR prices of
imported P&K Fertilizers.

(iii) Note No. 37A(iv) of accompanying standalone financial statements which describes the
recognition of subsidy of '' 174.54 Crore towards special package of '' 3,500 PMT of DAP to meet
''other cost'' over and above the subsidy under Nutrient Based Subsidy Scheme.

Our opinion is not modified in respect of above matters.

| Key Audit Matters |

Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the standalone financial statements of the current period. These matters were addressed in the
context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters. We have determined the matters described
below to be the key audit matters to be communicated in our report. Summary of the same is mentioned
here under:

S.No.	Key Audit Matter	Response to Key Audit Matter
1	Revenue recognition Recognition of subsidy is made on the basis of in-principle recognition / approval / orders settlement of claims from Fertilizer Industry Coordination Committee (FICC), Department of Fertilizers (DoF), Government of India, while finalizing the financial statements. Also the FICC regulates such subsidy and the bills raised on such notifications. Escalation/de-escalation in notified rates is estimated taking into account the effect of guidelines, policies, instructions and clarifications given. Since there is a time lag between actual expenditure incurred and notification of concession rates for the year, management exercises significant judgment in arriving at the income entitled on account of same for the year. Therefore, there is a risk of revenue being misstated on account of estimation of concession/ Import Parity Price (IPP) rates yet to be notified. Regarding process of Collection, utilization and retention of Retailer Margin.	Principal Audit Procedures The following principal audit procedures have been performed by us in relation to revenue recognition: a) We have reviewed the company''s material accounting policies for Revenue Recognition (Refer Note No. 1.2.3 (b) of the standalone financial statements), relevant Notifications and Circulars issued by the DoF, Government of India. b) We have carried out substantive procedures on sample basis for evaluation of operating effectiveness of key controls over subsidy and each income stream, basis of management estimation and their corresponding disclosure. c) We have reviewed directions of FICC, various Notifications/orders issued from time to time and management assessment in relation to retailer margin.
2	Estimation of Provision & Contingent Liabilities The company has its operations in various States within India, exposing it to a variety of different Central and State laws. Litigations and claims	Principal Audit Procedures Our audit process involved understanding of identification process relating to litigations, claims and contingent liabilities.

	may arise from direct and indirect tax proceedings. Resolution of litigations and claims proceedings may span over multiple years beyond 31st March 2025. The determination of a provision or contingent liability requires significant judgement by the company because of the inherent complexity in estimating future liabilities. The company has reported contingent liabilities amounting to '' 454.40 Crores in Note No. 50 to standalone financial statement. The provisions and contingent liabilities are subject to changes in the outcomes of litigations and claims over time as new facts emerge as each legal case progresses and positions taken by the company. There is an inherent complexity in estimations of magnitude of potential exposures. Significant judgment is required to estimate the likelihood amount of cash outflows, timing based on interpretations of the legal aspects, opinions, demand notices, relevant judgements etc.	We have evaluated the design and testing the operating effectiveness of controls in respect of process. We have evaluated management''s assessment of the likely outcome and potential exposures arising from significant contingencies subject to ongoing court cases and arbitration proceedings and considered the requirements for any provision as per the best estimate of the possible expenditure. In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where ever available.
3	Trade receivables	Principal Audit Procedures
	Trade Receivables appearing in financial statement consists of receivables from sale of products as well as receivable from Government of India in the form of subsidy. Trade Receivables amounting to '' 3273.30 crores including subsidy receivable of '' 3001.52 crores were outstanding as at 31st March 2025. Refer Note No. 13 to the Standalone Financial Statements.	Our audit approach was a combination of test of internal controls and substantive procedures which included the following: a) In respect of Subsidy recoverable from Government of India, as no confirmation of balance is on record, we have relied on the management''s assertion and estimates on the recoverability. As subsidy receivable is outstanding from Department of Fertilizer, Government of India (i.e. Sovereign Authority) and is backed by the approved claims generated from MFMS (Mobile Fertilizer Management System), amount outstanding as at balance sheet date has been considered as recoverable (net of provisions). b) In respect of receivables other than subsidy receivables, management have sent request for confirmation from the parties. The response to the request was checked together,

		subsequent realisation check was also performed and long outstanding balances have been reviewed.
4	Property, Plant and Equipment Management judgment is applied for determining the carrying value of property, plant and equipment, intangible assets and their respective depreciation/amortization rates. These include the decision to capitalize or expense costs; the annual asset life review; the timelines of the capitalization/decapitalization of assets and the measurement and recognition criteria for assets retired from active use. Refer material accounting policy no 1.2.9 to the Standalone Financial Statements	Principal Audit Procedures a) Testing of controls in place over the fixed assets cycle, b) Evaluation of appropriateness of capitalization process. Performed tests to verify the capitalized costs, c) Assessment of the timelines of the capitalization of the assets and assessed the derecognition criteria for assets retired from active use. d) The useful life of assets has been assessed made by the management. In performing these procedures, we reviewed the judgments made by management for the following: (i) Identification of the nature of underlying costs capitalized, (ii) Determination of realizable value of the assets retired from active use, (iii) Appropriateness of asset lives applied in the calculation of depreciation/ amortization, (iv) Useful lives of assets prescribed in Schedule II of the Companies Act, 2013.
5	Implementation of SAP Effective January 1, 2025, the Company undertook a significant system transition, moving from its previously used Oracle-based ERP to a new SAP ERP system. This transition has significant implications given the essential role of ERP systems in ensuring the completeness, accuracy, reliability, and integrity of financial data and reports. The period from January 1, 2025, to March 31, 2025, marked the initial implementation phase, during which all business transactions were exclusively processed through various SAP ERP modules implemented in phased manner. This transition required substantial data migration, inherent complexities involved in mapping financial data between two different systems. Considering the extensive and	Principal Audit Procedures Performed: a. Conducted a detailed review of the ERP implementation strategy and governance framework established by management, focusing on planning, execution timelines, project management, risk mitigation strategies, and oversight mechanisms. b. Evaluated the controls and processes implemented for data migration from Oracle ERP to SAP ERP, performing detailed reconciliations of opening balances, transaction records, and account balances as at January 1, 2025, to the closing balances recorded in Oracle ERP as at

	critical nature of this transition, along with the potential risks associated with data migration errors, system integration issues, and changes in internal control activities, we identified this as a key audit matter. Refer Note No. 63 to the Standalone Financial Statements	c.	December 31, 2024, to ensure completeness and accuracy along with review of data migration audit report by the external expert. Assessed the adequacy and effectiveness of training provided to users responsible for operating the SAP ERP system, reviewed training attendance records, training materials, and user feedback documentation to ensure sufficient knowledge and understanding for accurate ERP usage.
		d.	Evaluated the design and operating effectiveness of internal controls established within the SAP ERP environment, including those controls relating to authorization, transaction initiation, data processing, segregation of duties, and financial reporting.
		e.	Conducted extensive substantive testing on transaction data recorded within the SAP ERP system during the initial quarter post-implementation, assessing for completeness, accuracy, validity, classification, and cutoff, by tracing transactions to supporting documentation.
		f.	Reviewed and validated key financial data generated by the SAP ERP system during the period from January 1, 2025, to March 31, 2025, ensuring that the data presented was consistent, accurate, reliable, and adequately supported by underlying accounting records and transaction documentation.

¦ Information Other than the Standalone Financial Statements and
Auditor''s Report Thereon

The company''s management and board of directors are responsible for the preparation of other
information. The other information comprises the Management Discussion and Analysis, Director''s Report
including annexures to Director''s Report, Business Responsibility Report, Corporate Governance,
Performance at a Glance and Chairman''s Statement included in the annual report of the Company but does
not include the standalone financial statements and our auditor''s report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the standalone financial statements or our knowledge obtained during the course of audit,
or otherwise appears to be materially misstated. On reading the annual report, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to those charged with
governance and take necessary actions as per applicable laws and regulations. We have nothing to report
in this regard.

Responsibilities of Management and those charged with Governance for the
Standalone Financial Statements

The Company''s management and board of directors is responsible for the matters stated in section 134(5)
of the Act with respect to the preparation of these standalone financial statements that give a true and fair
view of the financial position, financial performance including other comprehensive income, cash flows and
changes in equity of the Company in accordance with the accounting principles generally accepted in India,
including the IND AS prescribed under section 133 of the Act read with relevant rules issued thereunder.
This responsibility also includes maintenance of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds
and other irregularities; selection and application of appropriate accounting policies; making judgements
and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate
internal financial controls, that were operating effectively for ensuring the accuracy and completeness of
the accounting records, relevant to the preparation and presentation of the standalone financial statements
that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the
Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.

The board of directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibility for the Audit of the Standalone Financial Statements |

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with SAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit
procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also
responsible for expressing our opinion on whether the company has adequate internal financial controls
system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management and the board of directors.

• Conclude on the appropriateness of the management and the board of directors'' use of the going
concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the ability of the company to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor''s report to the related disclosures in the Statement or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor''s report. However, future events or conditions may cause the company to cease to
continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements,
including the disclosures, and whether the standalone financial statements represent the underlying
transactions and events in a manner that achieve fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.

From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the standalone financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements |

1. As required by the Companies (Auditor''s Report) Order, 2020 (“the Order”) issued by the Central
Government of India in terms of section 143(11) of the Act, we give in the “Annexure A”, a statement
on the matters specified in paragraph 3 and 4 of the order to the extent applicable.

2. As required by Section 143(5) of the Act, we have considered the directions issued by the Comptroller
& Auditor General of India. We give our report in the attached “Annexure B”.

3. As required by Section 143(3) of the Act, we report that:

(a) We have sought and 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 standalone balance sheet, the standalone statement of profit and loss, the standalone statement
of cash flows and the standalone statement of changes in equity dealt with by this report are in
agreement with the books of account.

(d) In our opinion, the aforesaid Standalone Financial Statements comply with the Indian Accounting

Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting
Standards) Rules, 2015 as amended.

(e) Notification number G.S.R. 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs,
section 164(2) of the Act regarding disqualifications of directors is not applicable to the company, since
it is a Government Company.

(f) With respect to the adequacy of the internal financial controls over financial reporting of the company
and the operating effectiveness of such controls, refer to our separate report in “Annexure C”. Our
report expresses an unmodified opinion on the adequacy and operating effectiveness of the
company''s internal financial controls over financial reporting.

(g) Notification number G.S.R. 463 (E) dated 5 June 2015 issued by the Ministry of Corporate Affairs,
section 197 of the Act regarding remuneration to director is not applicable to the company, since it is a
Government Company; and

(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of
the Companies (Audit and Auditor''s) Rules, 2014, in our opinion and to the best of our information and
according to the explanations given to us:

i. The company has disclosed the impact of pending litigations on its financial position in its
standalone financial statements - Refer Note No. 50 to the standalone financial statements.

ii. The company did not have any long-term contract including derivative contracts for which there
were any material foreseeable losses.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor
Education and Protection Fund by the company.

iv. (a) The management has represented that, to the best of its knowledge and belief, no funds have

been advanced or loaned or invested (either from borrowed funds or share premium or any
other sources or kind of funds) by the company to or in any other person or entity, including
foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or
otherwise, that the Intermediary shall:

• directly or indirectly lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the company (“Ultimate Beneficiaries”);

• provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(b) The management has represented, that, to the best of its knowledge and belief, no funds have
been received by the company from any persons or entities, including foreign entities (“Funding
Parties”), with the understanding, whether recorded in writing or otherwise, that the company
shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any
manner whatsoever by or on behalf of the funding party (“Ultimate Beneficiaries”) or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on the audit procedures that have been considered reasonable and appropriate in the
circumstances, nothing has come to our notice that has caused us to believe that the
representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above,
contain any material mis-statement.

v. The final dividend paid by the Company during the year ended 31st March 2025 in respect of
dividend declared for the previous year is in accordance with section 123 of the Act to the extent it

applies to payment of dividend. The Company has not declared and paid interim dividend during
the year ended 31st March 2025.

vi. As required, maintenance of audit trail in accounting software under Rule 11(g) of the Companies
(Audit and Auditor''s) Rules, 2014, we have to report as under;

a. Based on our examination which included test checks, except for the instances mentioned in
Para b and c below, the Company has used Oracle System (Accounting Software for recording
financial transactions) till 31st December 2024 and sAp ErP System w.e.f 1st January 2025 for
maintaining its books of account, which have a feature of recording audit trail (edit log) facility
and the same has operated throughout the year for all relevant transactions recorded in the
respective software.

Further, for the periods where audit trail (edit log) facility was enabled and operated throughout
the year for the respective accounting software, we did not come across any instance of the
audit trail feature being tampered with. Additionally, the audit trail has been preserved by the
company as per the statutory requirements for record retention.

b. The Company was using different software/application for recording Payroll, sales transactions
and for maintaining price store ledgers for stores and spares items till 31.12.2024. The data
generated through these systems do not auto feed to the Oracle System and its summary is
manually posted in Oracle System till 29th June 2024. Audit trail (edit logs) for any changes
made at the application level in the aforesaid systems was not enabled till 29th June 2024 and
w.e.f 30th June 2024 till 31st December, 2024 the audit trail features of the said systems was
enabled and operated in the Oracle system. Subsequently, w.e.f. 1st January 2025, the
Company has fully migrated these functions to SAP ERp, wherein audit trail (edit log) features
have been incorporated and remain enabled for the period from 1st January 2025 to 31st March
2025.

c. Beside this, the Company has maintained an audit trail feature at the database level throughout
the year. However, for the period from 1st April 2024 to 31st December 2024, the said audit log
doesn''t have the feature what data was changed. Subsequent to the implementation of SAP
ERP from 1st January 2025, the said feature has been enabled

For Dhawan & Co. For R S P H & Associates

Chartered Accountants Chartered Accountants

Firm’s Registration No.: 002864N Firm’s Registration No.: 003013N

Deeksha Kapoor Tarun Kumar Batra

Partner Partner

M. No.: 460453 M. No.: 094318

UDIN No. : 25460453BNUIFG2563 UDIN No.: 25094318BMNATM9560

Place: Noida
Date: 30-05-2025

---

Mar 31, 2024

National Fertilizers Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of National Fertilizers Limited (hereinafter referred to as “the Company”) which comprise the standalone balance sheet as at 31st March 2024, the standalone statement of profit and loss (including other comprehensive income), the standalone statement of cash flows and the standalone statement of changes in equity for the year then ended and notes to the financial statements including a summary of the material accounting policies and other explanatory information (herein after referred to as “standalone financial statements”).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (“the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards (“IND AS”) prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India, of the state of affairs of the company as at 31st March 2024, its Profit (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the standards on auditing (“SAs”) specified under section 143(10) of the Act. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the standalone financial statements section of our report. We are independent of the company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Emphasis of Matter

We draw attention to:

(I) Note No. 37(C)(iii)(a) of accompanying standalone financial statements regarding recognizing insurance claim amounting to '' 77.01 crores pertaining to Gas Turbine Generator (GTG) at Bathinda Unit.

(ii) Note No. 37(C)(iii)(b) of accompanying standalone financial statements regarding recognizing receipt of interim payment of insurance claim amounting to '' 5.96 crores as income pending finalisation of claim and recognising loss of '' 18.92 crore towards damaged stock at tuna port.

(iii) Note No. 37(A) (ii) of accompanying standalone financial statements regarding recognition of revenue

for adversity of subsidy amounting to '' 486.53 crores on the basis of DOF letter for “No Profit - No Loss” basis and valuation of inventory at Cost instead of NRV.

(iv) Note No. 37(A) (iii) of accompanying standalone financial statements regarding recognition of subsidy on account of DAP amounting to '' 58.02 crores.

Our opinion is not modified in respect of above matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report. Summary of the same is mentioned here under:

S.No.	Key Audit Matter	Response to Key Audit Matter
1	Revenue Recognition Recognition of subsidy is made on the basis of inprinciple recognition/approval/orders settlement of claims from Fertilizer Industry Coordination Committee (FICC), Department of Fertilizers (DoF), Government of India, while finalizing the financial statements. Also the FICC regulates such subsidy and the bills raised on such notifications. Escalation/de-escalation in notified rates is estimated taking into account the effect of guidelines, policies, instructions and clarifications given. Since there is a time lag between actual expenditure incurred and notification of concession rates for the year, management exercises significant judgment in arriving at the income entitled on account of same for the year. Therefore, there is a risk of revenue being misstated on account of estimation of concession/ Import Parity Price (IPP) rates yet to be notified. Regarding process of Collection, utilization and retention of Retailer Margin.	Principal Audit Procedures The following principal audit procedures have been performed by us in relation to revenue recognition: a) We have reviewed the company''s material accounting policies for Revenue Recognition (Refer Note No. 1.2.3 (b) of the standalone financial statements), relevant Notifications and Circulars issued by the DoF, Government of India. b) We have carried out substantive procedures on sample basis for evaluation of operating effectiveness of key controls over subsidy and each income stream, basis of management estimation and their corresponding disclosure. c) We have reviewed directions of FICC, various Notifications/orders issued from time to time and management assessment in relation to retailer margin.
2	Estimation of Provision & Contingent Liabilities The company has its operations in various States within India, exposing it to a variety of different Central and State laws. Litigations and claims may arise from direct and indirect tax proceedings. Resolution of litigations and claims proceedings may span over multiple years beyond 31st March 2024. The determination of a provision or contingent liability requires significant judgement by the company because of the inherent complexity in	Principal Audit Procedures Our audit process involved understanding of identification process relating to litigations, claims and contingent liabilities. We have evaluated the design and testing the operating effectiveness of controls in respect of process. We have evaluated management’s assessment of the likely outcome and potential exposures arising from significant

	estimating future liabilities. The company has reported contingent liabilities amounting to Rs. 185.71 Crores in Note No. 50 to standalone financial statement. The provisions and contingent liabilities are subject to changes in the outcomes of litigations and claims over time as new facts emerge as each legal case progresses and positions taken by the company. There is an inherent complexity in estimations of magnitude of potential exposures. Significant judgment is required to estimate the likelihood amount of cash outflows, timing based on interpretations of the legal aspects, opinions, demand notices, relevant judgements etc.	contingencies subject to ongoing court cases and arbitration proceedings and considered the requirements for any provision as per the best estimate of the possible expenditure. In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where ever available.
3	Trade Receivables Trade Receivables appearing in financial statement consists of receivables from sale of products as well as receivable from Government of India in the form of subsidy. Trade Receivables amounting to Rs. 4037.09 crores including subsidy receivable of Rs. 3592.02 crores were outstanding as at 31st March 2024. Refer Note No. 13 to the Standalone Financial Statements.	Principal Audit Procedures Our audit approach was a combination of test of internal controls and substantive procedures which included the following: a) In respect of Subsidy recoverable from Government of India, as no confirmation of balance is on record, we have relied on the management’s assertion and estimates on the recover ability. As subsidy receivable is outstanding from Department of Fertilizer, Government of India (i.e. Sovereign Authority) and is backed by the approved claims generated from MFMS (Mobile Fertilizer Management System), amount outstanding as at balance sheet date has been considered as recoverable (net of provisions). b) In respect of receivables other than subsidy receivables, management have sent request for confirmation from the parties. The response to the request was checked together, subsequent realisation check was also performed and long outstanding balances have been reviewed.
4	Property, Plant and Equipment Management judgment is applied for determining the carrying value of property, plant and equipment, intangible assets and their respective depreciation/amortization rates. These include the decision to capitalize or expense costs; the annual asset life review; the timelines of the capitalization/decapitalization of assets and the	Principal Audit Procedures a) Testing of controls in place over the fixed assets cycle, b) Evaluation of appropriateness of capitalization process. Performed tests to verify the capitalized costs, c) Assessment of the timelines of the

	measurement and recognition criteria for assets retired from active use. Please refer material accounting policy no 1.2.9.	capitalization of the assets and assessed the derecognition criteria for assets retired from active use.
		The useful life of assets has been assessed made by the management. In performing these procedures, we reviewed the judgments made by management for the following:
		a) Identification of the nature of underlying costs capitalized,
		b)Determination of realizable value of the assets retired from active use,
		c) Appropriateness of asset lives applied in the calculation of depreciation/ amortization,
		d)Useful lives of assets prescribed in Schedule II of the Companies Act, 2013.

Information Other than the Standalone Financial Statements and Auditor’s Report Thereon

The company''s management and board of directors are responsible for the preparation of other information. The other information comprises the Management Discussion and Analysis, Director''s Report including annexures to Director''s Report, Business Responsibility Report, Corporate Governance, Performance at a Glance and Chairman''s Statement included in the annual report of the company, but does not include the standalone financial statements and our auditor’s report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of audit, or otherwise appears to be materially misstated. On reading the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take necessary actions as per applicable laws and regulations.

Responsibilities of Management and those charged with Governance for the Standalone Financial Statements

The company’s management and board of directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the company in accordance with the accounting principles generally accepted in India, including the IND AS prescribed under section 133 of the Act read with relevant rules issued thereunder. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

The board of directors is also responsible for overseeing the company’s financial reporting process. Auditor’s Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(I) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management and the board of directors.

• Conclude on the appropriateness of the management and the board of directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Statement or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieve fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably

be expected to outweigh the public interest benefits of such communication.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”) issued by the Central Government of India in terms of section 143(11) of the Act, we give in the “Annexure A”, a statement on the matters specified in paragraph 3 and 4 of the order to the extent applicable.

2. As required by Section 143(5) of the Act, we have considered the directions issued by the Comptroller & Auditor General of India. We give our report in the attached “Annexure B”.

3. As required by Section 143(3) of the Act, we report that:

(a) We have sought and 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 standalone balance sheet, the standalone statement of profit and loss, the standalone statement of cash flows and the standalone statement of changes in equity dealt with by this report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone financial statements comply with the IND AS specified under Section 133 of the Act read with relevant rule issued thereunder;

(e) Notification number G.S.R. 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, section 164(2) of the Act regarding disqualifications of directors is not applicable to the company, since it is a Government Company;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the company and the operating effectiveness of such controls, refer to our separate report in “Annexure C”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the company’s internal financial controls over financial reporting;

(g) Notification number G.S.R. 463 (E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, section 197 of the Act regarding remuneration to director is not applicable to the company, since it is a Government Company; and

(h) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditor’s) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

I. The company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note No. 50 to the standalone financial statements;

ii. The company did not have any long-term contract including derivative contracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

iv. (a) The management has represented that, to the best of its knowledge and belief, no funds have been

advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person or entity, including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:

• directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”);

• provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the company from any persons or entities, including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material mis-statement.

v. The interim and final dividend declared and paid by the Company during the year 31st March 2024 is in

accordance with section 123 of the Act, as Applicable.

vi. As required, maintenance of audit trail in accounting software under Rule 11(g) of the Companies

(Audit and Auditor’s) Rules, 2014, we have to report as under;

a. Based on our examination which included test checks, except for the instances mentioned in Para b and c below, the Company has used Oracle System (Accounting Software for recording financial transactions) for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective software.

Further, for the periods where audit trail (edit log) facility was enabled and operated throughout the year for the respective accounting software, we did not come across any instance of the audit trail feature being tampered with.

b. The Company is using different software/application for recording Payroll, sales transactions and for maintaining price store ledgers for stores and spares items. The data generated through these systems do not auto feed to the Oracle System and its summary is manually posted in Oracle System. In the absence of any information on existence of audit trail (edit logs) for any changes made at the application level in the aforesaid systems, we are unable to comment on whether audit trail features of the said systems was enabled and operated throughout the year.

c. Beside this, the feature of recording audit trail at database level is enabled and maintained throughout the year which contains standard log feature enabled in oracle system. However, the said audit log doesn’t have the feature of recording what data was changed.

As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable from 1st April 2023, reporting under Rule 11(g) of the Companies (Audit and Auditor’s) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended 31st March 2024.

For Dhawan & Co. For R S P H & Associates

Chartered Accountants Chartered Accountants

Firm’s Registration No.: 002864N Firm’s Registration No.: 003013N

Sunil Gogia Tarun Kumar Batra

Partner Partner

M. No.: 073740 M. No.: 094318

UDIN No. : 24073740BKFAKI1908 UDIN No.: 24094318BKFLDL6832

Place: Noida Date: 30-05-2024

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Mar 31, 2023

National Fertilizers Limited

Report on the Audit of the Standalone Financial Statements

| ?Opinion | ?

We have audited the accompanying standalone financial statements of National Fertilizers Limited (hereinafter referred to as "the Company") which comprise the Standalone Balance Sheet as at 31 March 2023, the Standalone Statement of Profit and Loss (including other comprehensive income), the Standalone Statement of Cash Flows and the Standalone Statement of Changes in Equity for the year then ended and notes to the financial statements including a summary of the significant accounting policies and other explanatory information (herein after referred to as "standalone financial statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards ("IND AS") prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India, of the state of affairs of the company as at 31 March 2023, its profit (including other comprehensive income), changes in equity and its cash flows for the year ended on that date.

Basis for Opinion | ?

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing ("SAs") specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Emphasis of Matter | ?

We draw attention to:

(I) Note No. 2(d) of accompanying standalone financial statements regarding derecognizing Property, Plant

& Equipment amounting to '' 67.65 crores on account of permanent damage of part of Gas Turbine Generator (GTG) at Bathinda Unit.

(ii) Note No. 36 of accompanying standalone financial statements regarding recognition of subsidy amounting to '' 928.37 crores on management''s estimates, towards extension of the Revised Energy Norms.

(iii) Note No. 62 of accompanying standalone financial statements regarding write-off of advance recoverable from foreign supplier against import of urea amounting to '' 129.64 crores as per the decision of Board of Directors due to remote possibility of recovery.

Our opinion is not modified in respect of above matters.

Key Audit Matters | ?

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report. Summary of the same is mentioned here under:

S.No.	Key Audit Matter	Response to Key Audit Matter
1	Revenue recognition	Principal Audit Procedures
	Recognition of subsidy is made on the basis of in-	The following principal audit procedures have
	principle recogniti''on/approval/ settlement of claims	been performed by us in relation to revenue
	from Fertilizer Industry Coordination Committee	recognition:
	(FICC), Department of Fertilizers (DoF), Government of India, while finalizing the financial statements. Also the FICC regulates such subsidy and the bills raised on such notifications. Escalation/de-escalation in notified rates is estimated taking into account the effect of guidelines, policies, instructions and clarifications given.	a) We have reviewed the company''s Accounting policies for Revenue Recognition (Refer Note No. 1.2.6 of the standalone financial statements), relevant Notifications and Circulars issued by the DoF, Government of India.
	Since there is a time lag between actual expenditure incurred and notification of concession rates for the year, Management exercises significant judgment in arriving at the income entitled on account of same for the year.	b) We have carried out substantive procedures on sample basis for evaluation of operating effectiveness of key controls over subsidy and each income stream, basis of management estimation and their
		corresponding disclosure.
	Therefore, there is a risk of revenue being misstated on account of estimation of concession/ Import Parity Price (IPP) rates yet to be notified.	c) We have reviewed directions of FICC, various Notifications issued from time to time and management assessment in relation to
	Regarding process of Collection, utilization and retention of Retailer Margin.	retailer margin.
2	Estimation of Provision & Contingent Liabilities	Principal Audit Procedures
	The company has its operations in various States within	Our audit process involved understanding of
	India, exposing it to a variety of different Central and	identification process relating to litigations,
	State laws. Litigations and claims may arise from direct	claims and contingent liabilities. We have
	and indirect tax proceedings. Resolution of litigations	evaluated the design and testing the operating

	and claims proceedings may span over multiple years beyond 31 March 2023. The determination of a provision or contingent liability requires significant judgement by the company because of the inherent complexity in estimating future liabilities. The company has reported contingent liabilities amounting to '' 154.20 Crores in Note 49 to standalone financial statement. The provisions and contingent liabilities are subject to changes in the outcomes of litigations and claims over time as new facts emerge as each legal case progresses and positions taken by the company. There is an inherent complexity in estimations of magnitude of potential exposures. Significant judgment is required to estimate the likelihood amount of cash outflows, timing based on interpretations of the legal aspects, opinions, demand notices, relevant judgements etc.	effectiveness of controls in respect of process. We have evaluated management''s assessment of the likely outcome and potential exposures arising from significant contingencies subject to ongoing court cases and arbitration proceedings and considered the requirements for any provision as per the best estimate of the possible expenditure. In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where available.
3	Trade receivables Trade Receivables appearing in financial statement consists of receivables from sale of products as well as receivable from Government of India in the form of subsidy. Trade Receivables as at 31 March 2023 amounting to ''4118.53 crores includes subsidy receivable of '' 3522.11 crores. Refer Note 13 to the Standalone Financial Statements.	Principal Audit Procedures Our audit approach was a combination of test of internal controls and substantive procedures which included the following: a) In respect of Subsidy recoverable from Government of India, as no confirmation of balance is on record, we have relied on the management''s assertion and estimates on the recoverability. As subsidy receivable is outstanding from Department of Fertilizer, Government of India (i.e. Sovereign Authority) and is backed by the approved claims generated from MFMS (Mobile Fertilizer Management System), amount outstanding as at balance sheet date has been considered as recoverable (net of provisions). b) In respect of receivables other than subsidy receivables, management have sent request for confirmation from the parties. The response to the request was checked together, subsequent realisation check was also performed and long outstanding balances have been reviewed.

4	Property, Plant and Equipment	Principal Audit Procedures
	Management judgment is applied for determining the	a) Testing of controls in place over the fixed
	carrying value of property, plant and equipment,		assets cycle,
	intangible assets and their respective depreciation/ amortization rates. These include the decision to capitalize or expense costs; the annual asset life review; the timelines of the capitalizati''on/decapitalize of assets and the measurement and recognition criteria for assets retired from active use. Please refer accounting policy no 1.2.9.	b) Evaluation of appropriateness of capitalization process. Performed tests to verify the capitalized costs, c) Assessment of the timelines of the capitalization of the assets and assessed the derecognition criteria for assets retired from active use.
		The useful life of assets has been assessed by the management. In performing these procedures, we reviewed the judgments made by management for the following:
		a)	Identification of the nature of underlying costs capitalized,
		b)	Determination of realizable value of the assets retired from active use,
		c)	Appropriateness of asset lives applied in the calculation of depreciation/ amortization,
		d)	Useful lives of assets prescribed in Schedule II of the Companies Act, 2013.

Information Other than the Standalone Financial Statements and Auditor''s Report Thereon | ?

The company''s management and board of directors are responsible for the preparation of other information. The other information comprises the Management Discussion and Analysis, Director''s Report including annexures to Director''s Report, Business Responsibility Report, Corporate Governance, Performance at a Glance and Chairman''s Statement included in the annual report of the company, but does not include the standalone financial statements and our auditor''s report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of audit, or otherwise appears to be materially misstated. On reading the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take necessary actions as per applicable laws and regulations.

Responsibilities of Management and those charged with Governance for the Standalone Financial Statements

The company''s management and board of directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the company in accordance with the accounting principles generally accepted in India, including the IND AS prescribed under section 133 of the Act read with relevant rules issued thereunder. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

The board of directors is also responsible for overseeing the company''s financial reporting process.

Auditor''s Responsibility for the Audit of the Standalone Financial Statements | ?

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management and the board of directors.

¦ • Conclude on the appropriateness of the management and the board of directors'' use of the going

concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the company to

continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the Statement or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieve fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements | ^

1. As required by the Companies (Auditor''s Report) Order, 2020 ("the Order") issued by the Central Government

of India in terms of section 143(11) of the Act, we give in the "Annexure A", a statement on the matters

specified in the paragraph 3 and 4 of the order to the extent applicable.

2. As required by Section 143(5) of the Act, we have considered the direction and sub-directions issued by the

Comptroller & Auditor General of India. We give our report in the attached "Annexure B".

3. As required by Section 143(3) of the Act, we report that:

(a) We have sought and 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 standalone balance sheet, the standalone statement of profit and loss, the standalone statement of cash flows and the standalone statement of changes in equity dealt with by this report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone financial statements comply with the IND AS specified under Section 133 of the Act read with relevant rule issued thereunder;

(e) As per notification number G.S.R. 463(E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, section 164(2) of the Act regarding disqualifications of directors is not applicable to the company, since it is a Government Company;

(f) With respect to the adequacy of the internal financial controls over financial reporting of the company

and the operating effectiveness of such controls, refer to our separate report in "Annexure C". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the company''s internal financial controls over financial reporting;

(g) As per notification number G.S.R. 463 (E) dated 5 June 2015 issued by the Ministry of Corporate Affairs, section 197 of the Act regarding remuneration to director is not applicable to the company, since it is a Government Company; and

(h) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The company has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Note 49 to the standalone financial statements;

ii. The company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

iv. (a) The respective management has represented that, to the best of its knowledge and belief, no

funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person or entity, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall,

• directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company ("Ultimate Beneficiaries")

• provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material mis-statement.

v. No dividend has been declared or paid during the financial year by the company. However, the board of directors of the company in its meeting held on 29 May 2023, have declared an interim dividend of '' 1.53 per equity share aggregating to '' 75.06 crore in respect of the financial year ended 31 March 2023, which is yet to be paid. The dividend declared is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.

vi. Since applicability of maintenance of audit trail in accounting software has been deferred to 1 April 2023, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended 31 March 2023.

For ARUN K. AGARWAL & ASSOCIATES For DHAWAN & CO.

Chartered Accountants Chartered Accountants

Firm''s Registration No.: 003917N Firm''s Registration No.: 002864N

Lokesh Kumar Garg Deepak Kapoor

Partner Partner

M. No. : 413012 M. No.: 072302

UDIN No. : 23413012BGWRJP7020 UDIN No. : 23072302BGXHAU2085

Place: Noida Date: 29-05-2023

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Mar 31, 2018

INDEPENDENT AUDITOR’S REPORT

To the Members of National Fertilizers Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of National Fertilizers Limited (''the Company''), which comprise the balance sheet as at 31^st March 2018, the statement of profit and loss (including other comprehensive income), the statement of cash flows and the statement of changes in equity for the year then ended and a summary of the significant accounting policies and other explanatory information (herein after referred to as “standalone Ind AS financial statements”).

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act’) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with relevant rules issued thereunder. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS financial statements based on our audit. While conducting the audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the Standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the Auditor considers internal financial control relevant to the Company''s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the Standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the financial position of the Company as at 31^st March, 2018, and its financial performance including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 (“the Order’) issued by the Central Government of India in terms of section 143(11) of the Act, we give in the “Annexure A”, a statement on the matters specified in the paragraph 3 and 4 of the order.

2. As required by Section 143(3) of the Act, we report that:

(a) we have sought and 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 statement of profit and loss, the statement of cash flows and the statement of changes in equity dealt with by this Report are in agreement with the books of account;

(d) in our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act read with relevant rule issued thereunder;

(e) on the basis of the written representations received from the directors as on 31^st March 2018 taken on record by the Board of Directors, none of the directors are disqualified as on 31^st March 2018 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure B”; and

(g) with respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements -Refer Note 45 to the standalone Ind AS financial statements;

ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company; and

3. As required by Section 143(5) of the Act, we have considered the direction and sub-directions issued by the Comptroller & Auditor eneral of India. We give our report in the attached “Annexure C”.

(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. Accordingly, the physical verification of fixed assets has been carried out by the management during the year. We are informed that discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of our examination of the Company,the title deeds of immovable properties are held in the name of the Company except the following:

Immovable Properties	Area
Bhatinda Unit	14.261 Acres
Vijaipur Unit	1250.254 Acres
Alwar	0.164 Acres

(ii) 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. The discrepancies noticed have been properly dealt within the books of account;

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013 (“the Act”). Accordingly, paragraph 3(iii)(a), (b), (c) of the Order is not applicable.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans and investments made.

(v) According to the information and explanation given to us the Company has not accepted any deposits within the provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under.

(vi) We have broadly reviewed the Cost Records maintained by the Company specified by Central Government under Sub Section (1) of section 148 of the Act, and are of the opinion that prima facie the prescribed records have been maintained. We have, however, not made a detailed examination of the Cost Records with a view to determine whether they are accurate or complete.

(vii) (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, Employees'' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and other statutory dues.

According to the information and explanations given to us, no undisputed amounts remain payable in respect of such statutory liabilities as at 31^st March, 2018 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the particulars of the disputed dues as at 31^st March, 2018 which have not been deposited on account of matters pending in appeal before appropriate authorities are as under:

Name of the Statute	Nature of Dues	Amount Involved ( Rs, in Crore)	Period to which the amount relates	Forum where the dispute is pending
Income Tax Act,1961	Income tax	82.09	AY 2006-07 and AY 2009-10	SC
		92.41	AY 2006-07 and AY 2010-11 to AY 2012-13	ITAT
		9.08	AY 2013-14 & AY 2014-15	CIT(A)
Central Excise Act,1944	Excise Duty	1.36	2005-06	Punjab and Haryana High Court
Customs Act 1962	Custom Duty	6.02	1996-97	Commissioner of Customs (Appeal)

Name of the Statute	Nature of Dues	Amount Involved ( Rs, in Crore)	Period to which the amount relates	Forum where the dispute is pending
Punjab VAT Act	VAT	0.55	2006-07 to 2009-10	Dy. Excise and Taxation Commissioner (Appeal), Patiala
Punjab Municipal Act	Property Tax	0.81	2007-08 to 2009-10 & 2013-14	Municipal Council, Nangal
		0.09	1982-83 to 1990-91	Municipal Council, Nangal
Haryana Local Development tax Act, 2000	Entry tax	6.72	2000-01 to 2002-03	Joint Excise Taxation Comm. Rohtak
Madhya Pradesh Value Added Tax Act, 2002	VAT	0.01	2008-09	Appellate Board, Commercial Tax
Entry Tax Act 1976	Entry Tax	0.07	2010-11, 2012-13, 2013-14 and 2014-15	Appellate Board, Commercial Tax
M P Vidyut Shulk Adhiniyam 2012	Electricity Generation Duty & Cess	0.47	2008-2012	MP High Court
Finance Act, 1994	Service Tax	1.00	2011-12 to 2014-15	Commissioner Appeal
Municipal Corporation Bathinda	Octroi Charges	0.40	FY 1998-99, 1991-92	Punajb and Haryana High Court

(viii) 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 or bonds/debenture holders as at the Balance Sheet date.

(ix) As per the information and explanations given to us on an overall basis the term loans taken by the company have been applied for the purposes for which they were obtained.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the company and no fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) I n our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the standalone Ind AS financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) The Company is not required to be registered under section 45-I A of the Reserve Bank of India Act 1934.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of National Fertilizers Limited (“the Company”) as of 31 March 2018 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that

1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31^st March 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For CHANDIOK AND GULIANI For HDSG & Associates

Chartered Accountants Chartered Accountants

Firm’s Registration No.: 001199N Firm’s Registration No.: 002871N

B.B. Kalia ^{Harbir Gulati}

Partner Partner

Membership number: 085772 Membership number: 084072

New Delhi 2^nd May, 2018

---

Mar 31, 2017

INDEPENDENT AUDITOR’S REPORT

To the Members of National Fertilizers Limited

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of National Fertilizers Limited (''the Company''), which comprise the balance sheet as at 31^st March 2017, the statement of profit and loss (including other comprehensive income), the statement of cash flows and the statement of changes in equity for the year then ended and a summary of the significant accounting policies and other explanatory information (herein after referred to as “Standalone Ind AS financial statements”).

Management ’s Responsibility for the Standalone Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act’) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under Section 133 of the Act read with relevant rules issued thereunder. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India including the Ind AS, of the financial position of the Company as at 31^st March, 2017, and its financial performance including other comprehensive income, its cash flows and the changes in equity for the year ended on that date.

1. As required by the Companies (Auditor''s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of section 143(11) of the Act, we give in the “Annexure A”, a statement on the matters specified in the paragraph 3 and 4 of the order.

2. As required by Section 143(3) of the Act, we report that:

(a) we have sought and 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 statement of profit and loss, the statement of cash flows and the statement of changes in equity dealt with by this Report are in agreement with the books of account;

(d) in our opinion, the aforesaid standalone Ind AS financial statements comply with the Accounting Standards specified under Section 133 of the Act read with relevant rule issued there under;

(e) on the basis of the written representations received from the directors as on 31^st March 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st March 2017 from being appointed as a director in terms of Section 164 (2) of the Act;

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure B”; and

(g) with respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements -Refer Note 45 to the standalone Ind AS financial statements;

ii. the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses;

iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company; and

iv. the Company has provided requisite disclosures in its standalone Ind AS financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8^th November, 2016 to 30^th December, 2016 and these are in accordance with the books of accounts maintained by the Company. Refer Note 54 to the standalone Ind AS financial statements.

3. As required by Section 143(5) of the Act, we have considered the direction and sub-directions issued by the Comptroller & Auditor General of India. We give our report in the attached “Annexure C”.

(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. Accordingly, the physical verification of fixed assets has been carried out by the management during the year. We are informed that discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis and of our examination of the Company, the title deeds of immovable properties are held in the name of the Company except the following:

Immovable Properties	Area
Nangal Unit	2578.000 Acres
Bhatinda Unit	14.261 Acres
Vijaipur Unit	1250.254 Acres
Alwar	0.164 Acres
Bhopal	9707.250 Sq. Ft

(ii) 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. The discrepancies noticed have been properly dealt within the books of account;

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act, 2013 (“the Act”). Accordingly, paragraph 3(iii)(a), (b), (c) of the Order is not applicable.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans and investments made.

(v) According to the information and explanation given to us the Company has not accepted any deposits within the provisions of sections 73 to 76 or any other relevant provisions of the Act and the rules framed there under.

(vi) We have broadly reviewed the Cost Records maintained by the Company specified by Central Government under Sub Section (1) of section 148 of the Act, and are of the opinion that prima facie the prescribed records have been maintained. We have, however, not made a detailed examination of the Cost Records with a view to determine whether they are accurate or complete.

(vii) (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, Employees'' State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and other statutory dues.

According to the information and explanations given to us, no undisputed amounts remain payable in respect of such statutory liabilities as at 31^st March, 2017 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the particulars of the disputed dues as at 31^st March, 2017 which have not been deposited on account of matters pending in appeal before appropriate authorities are as under:

Name of the Statute	Nature of dues	Amount Involved (in Rs, Crore)	Period to which amount relates	Forum where the dispute is pending
Income Tax Act, 1961	Income Tax	55.36	AY2006-07, AY 2011-12, AY 2013-14, AY 2014-15	Commissioner of Income Tax (Appeals)
		23.98	AY 2010-11, AY 2012-13	Income Tax Appellate Tribunal, New Delhi
Central Excise Act, 1944	Excise Duty	0.32	FY 2005-06	CESTAT
Finance Act, 1994 (Service Tax)	Service Tax	1.00	FY 2011-12 to FY 2014-2015	Commissioner (Appeals)

Name of the Statute	Nature of dues	Amount Involved (in Rs, Crore)	Period to which amount relates	Forum where the dispute is pending
Customs Act 1962	Custom Duty	6.02	F.Y. 1996-97	CESTAT
Punjab VAT Act	VAT	0.55	FY 2006-07 to FY 2010-11	Dy. Excise and Taxation Commissioner (Appeal), Patiala
Madhya Pradesh Value Added Tax Act, 2002	VAT	0.01	FY 2008-09, 2013-14 and 2014-15	Appellate Board, Commercial Tax, Bhopal
MP VidyutShulkAdhiniyam 2012	Electricity Generation Duty &Cess	0.43	FY 2008-09 to FY 2011-12	MP High Court
Punjab Municipal Act	Property Tax	0.81	FY 2007-08 to FY 2009-10	Municipal Council, Nangal
		0.09	FY 1982-83 to FY 1990-91	Municipal Council, Nangal
MP Commercial Tax Act,1994	Purchase Tax	1.30	FY 2001-02	MP Commercial Tax Appellate Board, Bhopal
Haryana Local Development tax Act, 2000	Entry tax	6.72	FY 2000-01 to FY 2002-03	Joint Excise Taxation Commissionor Rohtak
Entry Tax Act 1976	Entry Tax	0.07	FY 2010-11, 2012-13, 2013-14 and FY 2014-15	Appellate Board, Commercial Tax
Municipal Corporation, Bhatinda	Octroi Charges	0.39	FY 1988-1999,1991-1992	Punjab and Haryana Court

(viii) 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 or bonds/debenture holders as at the Balance Sheet date.

(ix) As per the information and explanations given to us on an overall basis the term loans taken by the company have been applied for the purposes for which they were obtained.

(x) To the best of our knowledge and according to the information and explanations given to us, no fraud by the company and no fraud on the Company by its officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) I n our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the standalone Ind AS financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of National Fertilizers Limited (“the Company”) as of 31^st March 2017 in conjunction with our audit of the standalone Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that

1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31^st March 2017, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For CHANDIOK & GULIANI For HDSG & Associates

Chartered Accountants Chartered Accountants

Firm’s Registration No.: 001199N Firm’s Registration No.: 002871N

B.B. Kalia ^{Dalbir Gulati}

Partner Partner

Membership number: 085772 Membership number: 081024

New Delhi 18^th May 2017

---

Mar 31, 2016

To the Members of

National Fertilizers Limited

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of National Fertilizers Limited (''the Company''), which comprise the balance sheet as at 31^st March 2016, the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31^st March, 2016, and its profit and its cash flows for the year ended on that date.

Emphasis of matter

Without qualifying, we draw attention to:

(a) Note No. 3 to Standalone financial statement regarding provision of proposed dividend of 30% of PAT has been made as against 30% PAT or 30% on GOI equity (whichever is higher) as directed by Ministry of Finance vide notification against which Company has applied for exemption which is pending from Department of Economic Affairs (Government of India).

(b) Note No. 48(a) to standalone financial statement regarding non availability of balance confirmation in respect of Subsidy Rs. 4629.17 crore and Capital Grant Rs. 2030.58 crore which is due for recovery from Government of India.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of subsection (11) of section 143 of the Act, we give in the ''Annexure A'', a statement on the matters specified in the paragraph 3 and 4 of the order.

2. As required by Section 143 (3) of the Act, we report that:

(a) we have sought and 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 statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account;

(d) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014;

(e) on the basis of the written representations received from the directors as on 31^st March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st March 2016 from being appointed as a director in terms of Section 164

(2) of the Act;

(f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure B”; and

(g) with respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 36 to the financial statements;

ii. The company did not have any long-term contracts including derivative contracts for which there were any material forseeable losses.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

3. As required by Section 143(5) of the Act, we have considered the direction and sub-directions issued by the Comptroller & Auditor General of India. We give our report in the attached “Annexure C”.

ANNEXURE"A" The Annexure refer to in our Independent Auditors Report to the members of the company on the standalone financial statement for the year ended 31^st March, 2016, we report that:

(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. Accordingly, the physical verification of fixed assets has been carried out by the management during the year. We are informed that discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of our examination of the Company ,the title deeds of immovable properties are held in the name of the Company except following:

Immovable Properties	Area
Nangal Unit	2578 Acres
Bhatinda Unit	14.261 Acres
Vijaipur Unit	1250.254 Acres
Alwar	0.164 Acres
Bhopal	9707.25 Square Feet

(ii) 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. The discrepancies noticed have been properly dealt within the books of account;

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 189 of the Companies Act. Accordingly, paragraph 3(iii)(a), (b), (c) of the Order is not applicable.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans and investments made.

(v) According to the information and explanation given to us the Company has not accepted any deposits within the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under.

(vi) We have broadly reviewed the Cost Records maintained by the Company specified by Central Government under Sub Section (1) of section 148 of the Companies Act, 2013 and are of the opinion that prima facie the prescribed records have been maintained. We have, however, not made a detailed examination of the Cost Records with a view to determine whether they are accurate or complete.

(vii) (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, Employees’ State Insurance, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and other statutory dues.

According to the information and explanations given to us, no undisputed amounts remain payable in respect of such statutory liabilities as at 31^st March, 2016 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the particulars of the disputed dues as at 31.03.2016 which have not been deposited on account of matters pending in appeal before appropriate authorities are as under:

Name of the Statute	Nature of dues	Amount (in Rs.) Involved ('' Crore)	Period to which amount relates	Forum where the dispute is pending
Income Tax Act, 1961	Income Tax	70.16	AY 2006-07 to AY 2010-11	Income Tax Appellate Tribunal, New Delhi
		70.65	AY 2006-07, AY 2011-12, AY 2012-13 & AY 2013-14	Commissioner of Income Tax (Appeals)
		11.34	AY 2009-10	Delhi High Court
Central Excise Act, 1944	Excise Duty	1.04	FY 1997-98 to FY 1999-2000	Punjab and Haryana High Court
Customs Act 1962	Custom Duty	6.48	F.Y. 1996-97	Commissioner of Customs (Appeal)
Punjab VAT Act	VAT	0.55	FY 2006-07 to FY 2009-10	Dy. Excise and Taxation Commissioner (Appeal), Patiala
Madhya Pradesh Value Added Tax Act, 2002	VAT	0.01	FY 2008-09	Appellate Board, Commercial Tax Bhopal
M P Vidyut Shulk Adhiniyam 2012	Electricity Generation Duty &Cess	0.39	FY 2008-09 to FY 2011-12	MP High Court
Punjab Municipal Act	Property Tax	0.82	FY 2007-08 to FY 2009-10 and FY 2013-14	Municipal Council, Nangal
		0.09	FY 1982-83 to FY 1990-91	Municipal Council, Nangal
MP Commercial Tax Act,1994	Purchase Tax	1.30	FY 2001-02	Commercial Tax Appellate Board, Bhopal
Haryana Local Development tax Act, 2000	Entry tax	6.72	FY 2000-01 to FY 2002-03	Joint Excise Taxation Comm. Rohtak
Entry Tax Act 1976	Entry Tax	0.05	FY 2010-11 and FY 2012-13	Appellate Board, Commercial Tax

(viii) 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 or bonds/debenture holders as at the Balance Sheet date.

(ix) As per the information and explanations given to us on an overall basis the term loans taken by the company have been applied for the purposes for which they were obtained.

(x) 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.

(xi) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

(xii) In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

(xv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

(xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

ANNEXURE"B" The Annexure refer to in our Independent Auditors Report to the members of the company on the standalone financial statement for the year ended 31^st March, 2016.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of National Fertilizers Limited (“the Company”) as of 31^st March 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''ICAI'').These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that

1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31^st March 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

For CHANDIOK AND GULIANI For HDSG & Associates

Chartered Accountants Chartered Accountants

Firm’s Registration No.: 001199N Firm’s Registration No.: 002871N

B. B.Kalia Harbir Gulati

Partner Partner

Membership no.: 085772 Membership no.: 084072

New Delhi 23^rd May 2016

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Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of National Fertilizers Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2013, the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting principles generally accepted in India including the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on auditor''s judgment, including assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act 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, 2013;

(b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 (“the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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, the Statement of Profit and Loss, 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, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e. Central Government has directed vide notification number G.S.R. 829 (E) dated 21st October 2003 that clause (g) of sub section (1) of section 274 of the Act is not applicable to Government Company.

ANNEXURE TO THE AUDITORS'' REPORT

(Referred to in paragraph 1 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. Accordingly, the physical verification of fixed assets has been carried out by the management during the year. We are informed that discrepancies noticed on such verification were not material and have been properly dealt with in the books of account.

c) In our opinion, the company has not disposed off substantial part of its 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) a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, Clauses 4(iii)(b), (c) and (d) of the Order are not applicable to the Company.

b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, Clauses 4(iii) (f) and (g) of the Order 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 and for the 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 and rules framed thereunder.

(vii) In our opinion, internal audit system of the Company 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 such 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, Cess and other statutory dues. According to the information and explanations given to us, no undisputed amounts remain payable in respect of such statutory liabilities as at 31st March, 2013 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the particulars of the disputed dues as at 31.03.2013 which have not been deposited on account of matters pending in appeal before appropriate authorities are as under:

Name of the Statute Nature of Amount the Dues Involved (Rs. Crore)

Income Tax Act''1961 Income Tax 63.17

12.85

132.06

Central Excise Act''1944 Excise Act 1.04 2.94

2.90

FInance Act 1994 Service Service Tax 0.31

Tax

Punjab VAT Act''2005 VAT 0.30

MP Commercial Tax Purchase Tax 1.30 Act''1994

Haryana Local Area Entry Tax 6.72

Development Tax Act''2000

Total 223.59

NAME Period to which Forum where the dispute amount relates is pending

Income Tax Act''1961 AY 1998-99 to AY High Court 2004-05

Income Tax Act''1961 AY 2003-04 Income Tax Appellate Tribunal

Income Tax Act''1961 AY 2006-07 to AY Commissioner of Income 2010-11 Tax (Appeals)

1997-98 to 1999-00 Central Excise Service Tax Appellate Tribunal

2005-06 to 2011-12 Additional Commissioner Central Excise, Chandigarh

Income Tax Act''1961 2010-11 to 2012-13 Commissioner Central Excise, Chandigarh

Income Tax Act''1961 2003-04 to 2006-07 Additional Commissioner Central Excise, Indore

2006-07 to 2008-09 Dy. Excise and Taxation Commissioner (Appeal), Patiala

2001-02 Commercial Tax Appellate Board, Bhopal

Income Tax Act''1961 2000-01 to 2002-03 Joint Excise Taxation Commissioner Rohtak

(x) The company has incurred cash losses during the year, however, no cash loss was incurred by the company in the immediately preceding financial year. The Company has no accumulated losses as at the end of the current 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 or bonds/debenture holders as at the Balance Sheet date. 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 provisions of any special statues applicable to a chit fund/nidhi/mutual benefit fund/society are not applicable to the company.

(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 on an overall basis the term loans taken by the company have been applied for the purposes for which 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 funds raised on short term basis have been used for long term investments.

(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) Company has not issued any debenture during 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.

Forming an Opinion and Reporting on Financial Statements

For THAKUR, VAIDYANATH AIYAR & CO For DSP & ASSOCIATES

CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANTS

FIRM REGD. NO. 000038N FIRM REGD. NO.006791N

(ANIL K. THAKUR) (SANJAY JAIN)

PARTNER PARTNER

(MEMBERSHIP NO. 88722) (Membership no. 84906)

Place: New Delhi Date: 29th May, 2013

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Mar 31, 2012

We have audited the accompanying financial statements of National Fertilizers Limited, which comprise the Balance Sheet as at March 31,2012, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

MANAGEMENT'S RESPONSIBILITY FORTHE FINANCIAL STATEMENTS

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

AUDITOR'S RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on auditor's judgment, including assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act 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 31,2012;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditor's Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, 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 Cash Flow Statement dealt with by this Report are in agreement with the books of account;

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

e. Central Government has directed vide notification number G.S.R. 829 (E) dated 21st October 2003 that clause (g) of sub section (1) of section 274 of the Act is not applicable to Government Company.

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in paragraph 1 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. Accordingly, the physical verification of fixed assets has been carried out by the management during the year. We are informed that discrepancies noticed on such 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) a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, Clauses 4(iii)(b), (c) and (d) of the Order are not applicable to the Company.

b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Therefore, Clauses 4(iii) (f) and (g) of the Order 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 and for the 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 and rules framed thereunder.

(vii) In our opinion, internal audit system of the Company 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 such 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 remain payable in respect of such statutory liabilities as at 31st March, 2012 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the particulars of the disputed dues as at 31.03.2012 which have not been deposited on account of matters pending in appeal before appropriate authorities are as under:

Name of the Statute Nature of the Amount Forum where the dispute Dues Involved is pending (Rs.Crore)

Income Tax Act'1961 Income Tax 83.26 High Court since 2008-09

9.32 Income Tax Appellate Tribunal since 2008-09

114.73 Commissioner of Income Tax (Appeals) since 2008-09

Central Excise Excise Act 1.04 Central Excise Service Tax Act'1944 Appellate Tribunal since 2008-09

2.47 Adll Commissioner Central Excise, Chandigarh since 2011-12

2.55 Commissioner Central Excise, Chandigarh since 2011-12

Finance Act 1994 Service Tax 0.58 Adll Commissioner Central Excise, Service Tax Indore since 2006-07

Punjab VAT Act'2005 VAT 0.14 Dy. Excise and Taxation Commissioner (Appeal), Patiala since 2011-12

MP Commercial Purchase Tax 59.23 Supreme Court of India Tax Act'1994 since April 2012

1.30 Commercial Tax Appellate Board, Bhopal since 2006-07

Haryana Local Area Entry Tax 6.72 Joint Excise Taxation Commissioner Development Tax Act'2000 Rohtak since 2004-05

Total 281.34

(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 or bonds/debenture holders as at the Balance Sheet date. 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 provisions of any special statues applicable to a chit fund/nidhi/mutual benefit fund/society are not applicable to the company.

(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 on an overall basis the term loans taken by the company have been applied for the purposes for which 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 funds raised on short term basis have been used for long term investments.

(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) Yes. The Company has issued debenture during the year and security has been given and charge has been created in respect of debenture issued.

(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.

Forming an Opinion and Reporting on Financial Statements

For THAKUR, VAIDYANATH AIYAR & CO For DSP & ASSOCIATES

CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANTS

FIRM REGD. NO. 000038N FIRM REGD. N0.006791N

(ANIL K.THAKUR) (SANJAY JAIN)

PARTNER PARTNER

(MEMBERSHIP NO. 88722) (Membership no. 84906)

Place: New Delhi

Date: 28th May, 2012

---

Mar 31, 2011

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

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of National Fertilizers Limited as at 31s1 March, 2010, 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 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, 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. Further to 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 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 & 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;

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, 2010;

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.

Annexure 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 (Auditors 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 (Auditors 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 Companys 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, 2010 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 31.03.2010 which have not been deposited on account of matters pending in appeal before appropriate authorities are as under:

Name of Statute Nature of Dues Amount involved Forum/ Period where the (Rs. in Lakhs) dispute is pending

Income Tax Act Income Tax 257.56 Supreme Court since 2009-10

5,529.01 High Court since 2008-09 and 2009-10

1,353.72 ITAT since 2008-09 and 2009-10

3,103.13 CIT(A) since 2008-09 and 2009-10

Central Excise Act Excise Duty 104.24 CESTAT sinace 2008-09

200.00 Commissioner (Appeals) since 2009-10

Finance Act 1994 Service Tax 29.36 Addl. Commissioner, Central Excise, Indore Service Tax since 2006-07

MP. Commercial Purchase Tax 130.07 Commercial Tax Appellate Board, Bhopal Tax Act since 2006-07

Haryana Local Area Entry Tax 671.94 Joint Excise Taxation Commissioner, Rohtak Development Tax Act since 2004-05

TOTAL 11,379.03

(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 for which 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 KPMC & ASSOCIATES

CHARTERED ACCOUNTANTS CHARTERED ACCOUNTANTS

(ANKUR GOYAL) (ANKUR GOEL)

PARTNER PARTNER

(Membership No. 99143) (Membership. No.512648)

Place: New Delhi Date: 27th May, 2010