Tuticorin Alkali Chemicals & Fertilisers Ltd

1. We have audited the attached Balance Sheet of Tuticorin Alkali Chemicals andFertilisers Limited as at 31st March, 2010, the Profit and Loss Account and also the CashFlow Statement for the year ended on that date annexed thereto. These financial statementsare the responsibility of the Company's management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by Government ofIndia in terms of subsection (4A) of Section 227 of the Companies Act, 1956, we enclose inthe annexure a statement on the matters specified in paragraphs 4 and 5 of the said order.

4. Further to our comments in the annexure referred to above, we report that:

i. We have obtained all the information and explanations, which to the best of ourknowledge 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 theCompany, so far as appears from our examination of those books.

iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with bythis report are in agreement with the books of account.

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statementdealt with by this report comply with the accounting standards, referred to in sub-section(3C) of Section 211 of the Companies Act, 1956.

v. Attention is drawn to the fact owing to plant shut down for over 36 months the networth of the company continued to be negative.

vi. Subject to 4(v) above, in our opinion and to the best of our information andaccording to the explanations given to us, the said accounts give the information requiredby the Companies Act, 1956, in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India:

(i) in the case of Balance Sheet, of the state of affairs of the Company as at 31stMarch 2010,

(ii) in the case of Profit and Loss Account, of the LOSS for the year ended on thatdate, and

(iii) in the case of Cash Flow Statement, of the Cash Flows for the year ended on thatdate.

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

1. a. The company has maintained proper records showing full particulars includingquantitative details and situation of Fixed Assets.

b. The company has a phased programme of physical verification of all the Fixed Assets,over a period of three years, which in our opinion is reasonable having regard to the sizeof the company and the nature of its business; accordingly, the physical verification partof the Fixed Assets was carried out by the management during the year and we are informedthat no material discrepancies were noticed on such verification.

c. During the year, the Company has not disposed off a major part of the plant andmachinery

2. a. Physical verification of inventories other than those held by the third partieshave been conducted by the management.

b. The procedures of physical verification of inventories followed by the managementare reasonable and adequate in relation to the size of the Company and the nature of itsbusiness.

c. The Company is maintaining proper records of inventory. The discrepancies noticed onverification between the physical stocks and the book records were not material.

3. a. The Company has neither granted nor taken any loans, secured or unsecured fromcompanies, firms or other parties covered in the register maintained under Section 301 ofthe Companies Act, 1956.

b. The clause relating to the rate of interest and other terms and conditions on whichloans have been taken from / granted to companies, firms or other parties listed in theregister maintained under Section 301 of the Companies Act, 1956 is not applicable.

c. The clause relating to the regularity in repayment of the principal amounts asstipulated and payment of interest is not applicable.

d. The clause relating to reporting of overdue amount of loans taken from or granted tocompanies, firms or other parties listed in the register maintained under Section 301 ofthe Companies Act, 1956 is not applicable.

4. In our opinion and according to the information and explanations given to us thereare adequate internal control system commensurate with the size of the Company and thenature of its business with regard to purchases of inventory, fixed assets and with regardto sale of assets. During the course of our audit, we have not observed any continuingfailure to correct major weaknesses in internal controls.

5. a. According to the information and explanations given to

us, the Company has not entered into any transaction that need to be entered into theregister maintained under Section 301 of the Companies Act, 1956. b. The clause as towhether the transactions made in pursuance of contracts or arrangements entered in theregister maintained under Section 301 of the Companies Act, 1956 and exceeding the valueof Rupees Five lakhs in respect of any party during the period have been made at priceswhich are reasonable having regard to prevailing market prices at the relevant time is notapplicable.

6. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of Sections 58A and 58AA of the Companies Act,1956 and any other relevant provisions of the Act.

7. In our opinion, the Company has an adequate internal audit department commensuratewith the size and the nature of its business. However due to long and continued shut downof the plants, no observations have been placed before the audit committee during theyear.

8. We have broadly reviewed the books of account, without detailed examination of thebooks and records maintained by the Company pursuant to the rules prescribed by theCentral Government for the maintenance of cost records under Section 209(1) (d) of theCompanies Act, 1956 in respect of Soda Ash and Ammonium Chloride and are of the opinionthat prima facie the prescribed accounts and records have been made and maintained.

9. a. Undisputed statutory dues including Provident Fund, Investors' Education andProtection Fund, Employees

State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty and Cesshave generally been regularly deposited with the appropriate authorities. However, therehave been delays in some cases. However the company has not remitted PF amounting to Rs.79.80 lakhs, Deferred sales tax of Rs. 109.98 lakhs and service tax of Rs. 13.30 lakhs.

b. According to the information and explanations given to us, there are no undisputedamounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Service Tax, CustomsDuty, Excise Duty and Cess that were in arrears as at 31a March 2010 for a period of morethan six months from the date they became payable.

c. According to the information and explanation given to us, there are no dues of SalesTax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not beendeposited on account of any dispute excepting the following:

10. At the end of the accounting year, the accumulated loss of the Company is not lessthan fifty percent of its net worth. The Company has made cash loss during the yearcovered by our audit and also in the immediately preceding financial year.

11. The company has defaulted in repayment of dues to Financial Institutions and Banks.

(Rupees in lakhs)

However these amounts are subject to confirmations from the respective institutions asthey are presently under reconciliation and negotiations.

Interest on interest and liquidated damages for non-payment of interest amounting toRs.162.21 lakhs is not included in the above figures.

12. The Company has not granted any loans or advances on the basis of security by wayof pledge of shares, debentures and other securities.

13. In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund /society. Therefore the provisions of clause 4 (xiii) of the Companies (Auditor's Report)Order, 2003 are not applicable to the Company.

14. In our opinion, the Company is not dealing in or trading in shares, securities,debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of theCompanies (Auditor's Report) Order, 2003 are not applicable to the Company.

15. The Company has not given any guarantee for loans taken by others from banks orfinancial institutions.

16. The Company has not received any new term loan during the year under review.

17. According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we report that no funds raised on shortterm basis have been used for long term investment.

18. According to the information and explanations given to us, the Company has not madepreferential allotment of shares to parties and companies covered in the registermaintained under Section 301 of the Companies Act, 1956.

19. The Company has not issued any debentures during the year.

20. The Company has not raised any money by public issues during the year.

21. According to the information and explanations given to us, no fraud on or by theCompany has been noticed or reported during the course of our audit.