Fertilizers & Chemicals Travancore Ltd Directors Report.

To the Members of the FERTILISERS AND CHEMICALS TRAVANCORE LIMITED

Report on the Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of the FERTILISERS AND CHEMICALS TRAVANCORE LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended on that date, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as "the standalone financial statements").

2. 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 prescribed under section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the profit and total comprehensive income, its cash flows and changes in equity for the year ended on that date.

Basis for Opinion

3. 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 Auditors 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 thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.

Material uncertainty related to Going Concern

4. We draw attention to Note # 54 of standalone financial statements. The Company has accumulated loss amounting to Rs. 2,17,077 lakhs (previous year Rs. 2,34,212 lakhs) with a negative net worth of Rs. 1,45,771 lakhs (previous year Rs. 1,63,883 lakhs). However, the Company has reported net profit of Rs. 16,314 lakhs during the year, though it is net loss in the earlier years. These conditions indicate the existence of material uncertainty which may cast doubt as to the Companys ability to continue as a going concern. However, the standalone financial statements of the Company have been prepared on going concern basis.

Our opinion is not qualified in respect of this matter.

Emphasis of Matter

5. We draw attention to Note # 19.1 of the standalone financial statements regarding variance in interest provision of Rs. 28,178 lakhs on the Government of India (GoI) loans in the Companys books as at year-end, which is higher as compared to the provisional working of the Department of Fertilisers (DoF), GoI, which is pending for reconciliation and confirmation and consequent adjustments, if any, thereof.

Our opinion is not qualified in respect of this matter.

Key Audit Matters

6. 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. In addition to the matters described in the Material Uncertainty related to Going Concern section and Emphasis of Matter section, we have determined the matters described below to be the key audit matters to be communicated in our report.

a. Accounting of subsidy income from Government of India under DBT Scheme

Under Direct Benefit Transfer (DBT) scheme of GoI, the Company is entitled to receive subsidy only upon sale of fertilizer by the dealer to the ultimate beneficiary through Point of Sale (PoS) devices. However, the Company continues to account subsidy as income at the time of sale to dealers as in the earlier scheme, considering the reasonable assurance that the sale will take place and subsidy will be received based on experience. Refer Note #27 to the standalone financial statements.

Auditors Response

Our principal audit procedures included the following: Analysed the scheme framed by the DoF notified through Notification F. No. D(FA)/2016/DBT dated March 17, 2017. Reviewed the agreement with dealers.

Performed analytical review procedures on the subsidy claim lodged by the Company from the inception of the DBT scheme and subsidy accounted by the Company.

Analysed post Balance Sheet sales through PoS devices in Integrated Fertiliser Management System (iFMS) to assess the sales trend.

Verified industry practise for accounting of subsidy income in post-DBT period.

Compliance with Ind AS 20 on ‘Accounting for Government Grants and Disclosure of Government Assistance.

b. Sale of 170 acres of land to BPCL

During the year, the Company has sold 170 acres of land to Bharat Petroleum Corporation Limited (BPCL) for Rs. 42,979 lakhs. The sale is part of the financial re-structuring of the Company considered in a meeting chaired by the Principal Secretary to the Prime Minister besides it is between two Central Public Sector Undertakings. The sale price was mutually agreed based on the value determined by the District Collector. The sale has the approval of the administrative ministry of the Company and no objection of the Government of Kerala. However, value of the said land as per approved valuer of the Company in 2016 was Rs. 72,100 lakhs resulting in an apparent lower realisation of Rs. 29,121 lakhs.

Auditors Response

Our principal audit procedures on the transaction included the following: Valuation by the District Collector.

Administrative approval of the Ministry of Chemicals and Fertilisers for transfer of land and its price.

Minutes of the meeting held on June 6, 2017 regarding the sale of 170 acres of land to BPCL held under the chairmanship of Secretary (Fertilisers), GoI, attended by Joint Secretary, Ministry of Petroleum and Natural Gas, GoI and representatives of both the Companies.

Verified sale deed for 151 acres of land (the sale deed for balance land is yet to be received though executed). Receipt of entire sale consideration.

No objection certificate from Government of Kerala for transfer of land to BPCL.

Memorandum of Understanding between the Companies for sale of 170 acres of land.

Valuation report of approved valuer in 2016.

c. Purchase of raw material from single vendor without tender

The Company has been importing raw materials from a single vendor without inviting tender. During the year, the Company has purchased Rock Phosphate for Rs. 16,906 lakhs (previous year Rs. 6926 lakhs) and Phosphoric Acid for Rs. 53,692 lakhs (previous year Rs. 34,175 lakhs). There is no inter-governmental agreement or memorandum of understanding by the Company with the supplier. According to the Company, the party is providing the materials of required quality at the price for the Indian Market and the Company can procure entire quantity only from the present supplier.

Auditors Response

Our principal audit procedures on the transaction included the following: Evaluated the internal controls relating to import of raw materials.

Verified the purchase documents, receipt of material and consumption thereof on the selected sample.

Ensured there is no major rejection of material.

Compared the import price with indigenous price during the previous year in the absence of any indigenous purchase during the year.

Compared the price in the international market with that of Companys purchase price.

Import purchase is from a Government owned Company. Verified the pattern of purchase in earlier years.

Companys efforts to enter into a government to government agreement for sourcing the material.

Brought to the notice of those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

7. The Companys 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, total comprehensive income, cash flows and changes in equity of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

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

The Board of Directors are responsible for overseeing the Companys financial reporting process.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

9. 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 auditors 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 scepticism 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 control 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.

Conclude on the appropriateness of Managements 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 Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements 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 auditors 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 achieves fair presentation.

10. 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.

11. 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.

12. 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 auditors 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.

Other Matter

13. We did not audit the financial statements of four areas comprising marketing offices of the Company included in the standalone financial statements of the Company, whose financial statements reflect total fixed assets of Rs. 105 lakhs (previous year Rs. 150 lakhs) as at March 31, 2019 and total sales of Rs. 1,37,953 lakhs (previous year Rs. 1,37,953 lakhs) for the year ended on that date, as considered in the standalone financial statements. The Company has submitted certain "financial schedules" only which have been audited by other auditors whose reports have been furnished to us by the Management and our opinion on the standalone financial statements, in so far as it relates to the amounts and disclosures included in respect of these areas and our report, in so far as it relates to the aforesaid areas, is based solely on the reports of other auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

14. As required by the Companies (Auditors Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Companies Act, 2013, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

15. Based on the verification of books of account of the Company and according to information and explanations given to us, we give in "Annexure B" a report on the directions/ additional sub-directions issued by the Comptroller and Auditor General of India in terms of section 143(5) of the Act.

16. 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 and returns generally adequate for the purpose of our audit have been received from the units/ marketing offices not audited by us. c. The reports on the accounts of the four areas of the Company audited under Section 143(8) of the Act by other auditors have been given to us and have been appropriately dealt with by us in preparing this report. d. The Balance Sheet, the Statement of Profit and Loss including other comprehensive income, the Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account and with the returns received from four areas not audited by us. e. In our opinion, the aforesaid standalone financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with Companies (Indian Accounting Standards) Rules, 2015. f. Being a government company, the provisions of sub section (2) of Section 164 of the Companies Act, 2013 is not applicable. g. 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". h. With respect to the other matters to be included in the Auditors 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 Notes #46 to #49) ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company, where applicable.

17. Being a Government Company, the provisions of section 197 of the Act with respect to the matters to be included in the Auditors Report is not applicable.

For Babu A Kallivayalil & Co.
Chartered Accountants
Firm Registration No. 05374S
Sd/-
N K Alexander
Kochi Partner
May 29, 2019 Membership No. 7448

Annexure A to the Independent Auditors Report

(Referred to in paragraph 14 under ‘Report on Other Legal and Regulatory Requirements section of our report) i. In respect of the Companys fixed assets:

(a) The Company has maintained generally proper records showing the particulars including quantitative details except situation of fixed assets and impairment losses.

(b) The fixed assets have been stated to be physically verified by the Management during the year and are not observed by us. However, the physical verification procedure needs to be strengthened. As explained to us, no material discrepancies were noticed on such physical verification.

(c) In our opinion and according to information and explanations given to us, the records examined by us and based on the examination of the conveyance deeds/ registered sale deeds of immovable properties included in fixed assets, we report that, out of the 1,980 acres of land held by the Company, we have been informed that the original title deeds of immovable properties of 1179 acres of land are submitted to District Court, Ernakulam, pledging 80 acres of land as a security against claim of a contractor (Refer Note number 1.2 to the standalone financial statements), title deeds of 553 acres of land is pledged with Banks as security against credit facilities sanctioned (Refer Note number 22 to the standalone financial statements) and 145 acres of land is under lease (Refer Note number 1.2 to the standalone financial statements). We have not verified the documents in this regard as is not made available for our verification.

We have verified the original title deeds of 41 acres of freehold land and are in the name of the Company. Further, title deeds in respect of the following freehold and leasehold immovable properties are not held in the name of the Company.

Particulars Extent of land Gross Block as at March 31, Net block as at March 31,
(in acres) 2019 2018 2019 2018
(Rs. in lakhs)
Freehold land 48.49 513* 513* 513* 513*
Leasehold land 14.26 -** -** -** -**

*As provided by Management (Refer Note number 1.3 to the standalone financial statements).

**The Company has executed a deed of indemnity with the Lessor in respect of the property on February 26, 2016, wherein it was agreed that the Company is interested to continue the lease for a further period of 30 years from April 01, 2014 to March 31, 2044 on execution of fresh lease deed incorporating mutually agreed terms and conditions. However, no fresh deed is executed till date, though the Company continues to occupy the land and pay the lease rentals (Refer Note number 1.2 to the standalone financial statements).

ii. In respect of the Companys inventories: (a) The inventories have generally been physically verified by the Management as at year-end. In our opinion, the frequency of verification needs to be improved.

(b) In our opinion and according to the information and explanations given to us, the procedure of physical verification of inventories followed by the Management is reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of inventories. As explained to us, no material discrepancies were noticed on such physical verification except in the case of sulphur, rock phosphate, gypsum and have been properly dealt with in the books of account.

iii. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured to companies, firms, limited liability partnerships or other parties covered under register maintained under section 189 of the Companies Act, 2013 ("the Act"), except the interest free advances in the nature of loans doubtful of recovery, of Rs. 3,819 lakhs (previous year Rs. 3803 lakhs) to a joint venture company (Refer Note number 6). Being an interest free advance doubtful of recovery given to a joint venture company, we are unable to comment whether the terms and conditions of the loan is prejudicial to the interest of the Company or not.

iv. According to the information and explanations given to us, there are no loans, investments, guarantees and securities given in respect of which provisions of section 185 and 186 of the Act are applicable including the amount due from the joint venture company.

v. According to the information and explanations given to us, the Company has not accepted any deposits from public. Therefore, the provisions of clause (v) of paragraph 3 of the Order are not applicable to the Company. vi. We have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Government under section 148(1) of the Act and are of the opinion that, prima facie, the prescribed cost records have been made and maintained by the Company. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete.

vii. According to the information and explanations given to us and records of the Company examined by us, in respect of statutory dues: a. In our opinion, the Company has generally been regular in depositing undisputed statutory dues including provident fund, employees state insurance, income tax, goods and services tax, customs duty, cess and other material statutory dues applicable to it with the appropriate authorities during the year.

There were no undisputed amounts payable in respect of provident fund, employees state insurance, income tax, goods and services tax, customs duty, cess and other material statutory dues in arrears as at March 31, 2019 for a period of more than six months from the date they became payable. b. The details of dues towards income tax, sales tax, service tax, customs duty, excise duty, value added tax and goods and services tax which have not been deposited as at March 31, 2019, on account of disputes are given below:

Name of statute Nature of dues Demand– net of payment Period to which dispute relates Forum where dispute pending
(Rs. in lakhs)
Central Excise Act, 1944 Excise duty, interest and penalty against utilization of CENVAT credit against duty payable. 7,236 2006-07 to 2013-14 Customs, Excise and Service Tax Appellate Tribunal, Bengaluru
Central Excise Act, 1944 Excise duty, interest and penalty on shortage of raw material written off. 93 2003-04 Commissioner of Central Excise, Kochi
Finance Act, 1994 Service tax and interest thereon on training fee, upfront premium on shares issued and maintenance charges. 293 2003-04 to 2009-10 Customs, Excise and Service Tax Appellate Tribunal, Bengaluru
Finance Act, 1994 Service tax and interest thereon on training fee. 151 2006-07 to 2015-16 Commissioner of Central Excise, Kochi
Madhya Pradesh Entry Tax Entry tax 4 1980-84 Board of Revenue (Commercial Tax Tribunal) Gwalior
Sales Tax Act, Punjab Sales tax 51 1999 -00 to 2000-01 High Court of Haryana and Punjab
Sales Tax Act, Orissa Sales tax 63 1985-1992 High Court of Orissa
Sales Tax, Kerala Sales tax 12,252 2011-12 High Court of Kerala (Stay order granted) Commercial Taxes, Ernakulam
Sales Tax, Kerala Sales tax 164 2003-04 to 2012-13
Income Tax Act, 1961 Interest on income tax 3 2001-02 Commissioner of Income Tax (Appeals), Kochi
Income Tax Act, 1961 Income tax and interest thereon on certain disallowances in assessment. 10 1997-98 High Court of Kerala

viii. Based on our examination of the records of the Company and according to the information and explanations given to us, the Company has no dues to financial institution or debenture holders as at Balance Sheet date. The Company has not defaulted in repayment of loans or borrowings to banks and government except the repayment of interest on loan to Government of India.

The details of defaulted interest on loan as on reporting date:
Name of lender and nature Period of default Defaulted amount
(Rs. in lakhs)
Interest accrued and due on loans from 366 days 23,902
Government of India 1 day 23,902

(Refer Note number 24 to standalone financial statements).

ix. According to the information and explanations given to us, the Company has not raised money by way of initial public offer or further public offer (including debt instruments) and term loans during the year except the inter-corporate loan which has been applied by the company for the purpose for which it was raised

(Refer Note number 19.2 of standalone financial statements).

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

xi. Being a government Company, the provisions of Section 197 read with Schedule V of the Act regarding managerial remuneration are not applicable to the Company and hence reporting under clause

(xi) of paragraph 3 of the Order is not applicable.

xii. The Company is not a Nidhi Company as prescribed under Section 406 of the Act and hence reporting under clause

(xii) of paragraph 3 of the Order is not applicable. xiii. In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Act, where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable Accounting Standards.

xiv. According to the information and explanations given to us and based on our examination of the records of the Company, during the year the Company has not made any preferential allotment or private placement of shares or fully or partly paid convertible debentures and hence reporting under clause (xiv) of paragraph 3 of the Order is not applicable.

xv. In our opinion and according to the information and explanations given to us and based on our examination of records of the Company, during the year the Company has not entered into any non-cash transactions with its directors or persons connected to its directors and hence provisions of section 192 of the Act are not applicable to the Company.

xvi. According to the information and explanations given to us, the Company is not required to be registered under section 45 IA of the Reserve Bank of India Act, 1934 and hence reporting under clause (xvi) of paragraph 3 of the Order is not applicable.

For Babu A Kallivayalil & Co.

Chartered Accountants Firm Registration No. 05374S

Sd/-N K Alexander Partner Membership No. 7448

Kochi May 29, 2019

Annexure B to the Independent Auditors Report

(Referred to in paragraph 15 under ‘Report on Other Legal and Regulatory Requirements section of our report of even date)

AUDIT REPORT ON THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2019 AS PER DIRECTIONS OF COMPTROLLER AND

AUDITOR GENERAL OF INDIA (C&AG) UNDER SECTION 143(5) OF THE COMPANIES ACT, 2013

Comments of Statutory Auditor
C & AG Directions
1. Whether the company has system in place to process all The accounting transactions through IT system If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated. According to information and explanations given to us and based on the examination of records of the Company, all the accounting transactions of the Company are processed through IT system. As explained to us, there is no accounting transaction being processed outside the IT system.
2. Whether there is any restructuring of an existing loan or cases of waiver/write off of debts /loans/interest etc. made by a lender to the company due to the companys inability to repay the loan If yes, the financial impact may be stated. According to information and explanations given to us, during the year, there was no restructuring of existing loans of the Company or cases of waiver/write off of debts /loans/interest etc. made by a lender to the Company due to Companys inability to repay the loan.
3.Whether funds received/receivable for specific schemes from central/ state agencies were properly accounted for/ utilized as per its term and conditions List the cases of deviation. According to information and explanations given to us, during the year, the Company has not received any funds received/ receivable for specific schemes of central/ state agencies.
4. State of impact of revision of subsidies for fertilizers products, viz. NPK, Ammonium Sulphate and imported MoP in valuation of its closing stock. As per company policy for inventory valuation "Finished / trading products are valued at lower of cost or net realizable value in the aggregate, product- wise. Costs of finished / semi-finished / intermediate products are determined based on annual average cost excluding interest and head office and administrative overheads. Cost of finished goods in warehouse includes freight and handling charges".
During the year following items are valued at cost, since it is lower than net realizable value.
1. NPK,
2. Ammonium sulphate,
3. Imported MoP.
The closing stock of items transferred under non-Direct Benefit Transfer scheme is valued at cost less subsidies received for the same. Hence, during the year the impact of revision of subsidies for fertilizers products, viz. NPK, Ammonium Sulphate and imported MoP is reflected in valuation of its closing stock.

For Babu A Kallivayalil & Co.

Chartered Accountants, Firm Registration No. 05374S

Sd/-N K Alexander Partner Membership No. 7448

Kochi May 29, 2019

Annexure C to the Independent Auditors Report

(Referred to in paragraph 16 (g) under ‘Report on Other Legal and Regulatory Requirements section of our report)

REPORT ON THE INTERNAL FINANCIAL CONTROLS

under Clause (i) of sub-section 3 of Section 143 of the Companies Act, 2013

We have audited the internal financial controls over financial reporting of FERTILISERS AND CHEMICALS TRAVANCORE LIMITED (‘the Company) as of March 31, 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Managements Responsibility for Internal Financial Controls

The Companys 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 the Companys 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 (‘the Act).

Auditors Responsibility

Our responsibility is to express an opinion on the Companys 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 the 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 ICAI. 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 were 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 auditors judgment, including the assessment of the risks of material misstatement of the standalone 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 Companys internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A companys 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 companys 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 the management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys 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, to the best of our information and according to the explanations given to us, the Company has, in all material respects, reasonably adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting need to be strengthened as at March 31, 2019, 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 ICAI. However, we are unable to comment on the adequacy of internal financial controls over financial reporting on two out of four marketing areas, in the absence of any specific reporting by the auditors of these areas.

For Babu A Kallivayalil & Co.

Chartered Accountants

Firm Registration No. 05374S

Sd/-

N K Alexander

Partner

Membership No. 7448

Kochi May 29, 2019

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA

(Indian Audit and Accounts Department Office of the Director General of Commercial Audit and ex-officio Member Audit Board, Chennai)

Dated : 31.07.2019

CONFIDENTIAL

DGCA/G-2/4-12/2019-20/46 To

The Chairman and Managing Director

The Fertilisers and Chemicals Travancore Limited, Eloor, Udyogamandal, Kochi-683 501

Sir,

Sub: Comments of the Comptroller and Auditor General of India under Section 143(6)(b) of the Companies Act, 2013 on the Consolidated and Standalone Financial Statements of The Fertilisers and Chemicals Travancore Limited, for the year ended 31 March 2019 ******* I am to forward herewith the Comments of the Comptroller and Auditor General of India under Section 143(6)(b) of the Companies Act, 2013 on the Consolidated and Standalone financial statements of The Fertilisers and Chemicals Travancore Limited, for the year ended 31 March 2019. Five copies of Annual Report of your Company may kindly be arranged to be forwarded to this office Receipt of this letter may be acknowledged.

Yours faithfully,

Sd/-

(R AMBALAVANAN)

Director General of Commercial Audit and

Ex-officio Member Audit Board, Chennai

Encl: Audit comments

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) READ WITH SECTION 129(4) OF THE COMPANIES ACT, 2013 ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE FERTILISERS AND CHEMICALS

TRAVANCORE LIMITED FOR THE YEAR ENDED 31 MARCH 2019

The preparation of Consolidated financial statements of The Fertilisers and Chemicals Travancore Limited for the year ended 31 March 2019 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 (Act) is the responsibility of the management of the Company. The Statutory Auditor appointed by the Comptroller and Auditor General of India under Section 139(5) read with section 129(4) of the Act, is responsible for expressing opinion on the financial statements under Section 143 read with section 129(4) of the Act based on independent audit in accordance with the standards on auditing prescribed under section 143(10) of the Act. This is stated to have been done by them vide their Audit Report dated 29 May 2019.

I, on behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit of the consolidated financial statements of The Fertilisers and Chemicals Travancore Limited for the year ended 31 March 2019 under section 143(6) (a) read with section 129(4) of the act. We conducted a supplementary audit of the financial statements of The Fertilisers and Chemicals Travancore Limited, but did not conduct supplementary audit of the financial statements of FACT-RCF Building Products Limited, for the year ended on that date. .Further, section 139(5) and 143(6)(a) of the Act are not applicable to Kerala Enviro Infrastructure Limited being private entity for appointment of their Statutory Auditor and for conduct of Supplementary Audit. Accordingly, Comptroller and Auditor General of India has neither appointed the Statutory Auditor nor conducted the supplementary audit of the Company. This supplementary audit has been carried out independently without access to the working papers of the Statutory Auditors and is limited primarily to inquiries of the Statutory Auditors and company personnel and a selective examination of some of the accounting records.

On the basis of my supplementary audit, nothing significant has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditors report under section 143(6)(b) of the Act.

For and on the behalf of the Comptroller & Auditor General of India

Sd/- (R. AMBALAVANAN) Director General of Commercial Audit and Ex-officio Member Audit Board,Chennai

Place: Chennai Date: 31 July , 2019

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF

THE FERTILISERS AND CHEMICALS TRAVANCORE LIMITED

FOR THE YEAR ENDED 31 MARCH 2019

The preparation of financial statements of The Fertilisers and Chemicals Travancore Limited for the year ended 31 March 2019 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 (Act) is the responsibility of the management of the Company. The Statutory Auditor appointed by the Comptroller and Auditor General of India under Section 139(5) of the Act, is responsible for expressing opinion on the financial statements under Section 143 of the Act based on independent audit in accordance with the Standards on auditing prescribed under section 143(10) of the Act. This is stated to have been done by them vide their Audit Report dated 29 May 2019.

I, on behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit of the financial statements of The Fertilisers and Chemicals Travancore Limited for the year ended 31 March 2019 under section 143(6)(a) of the Act. This supplementary audit has been carried out independently without access to the working papers of the Statutory Auditors and is limited primarily to inquiries of the Statutory Auditors and company personnel and a selective examination of some of the accounting records.

On the basis of my supplementary audit, nothing significant has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditors report under section 143(6) (b) of the Act.

For and on the behalf of the

Comptroller & Auditor General of India

Sd/-

(R. AMBALAVANAN)

Director General of Commercial Audit and

Ex-officio Member Audit Board,Chennai

Place: Chennai

Date: 31 July 2019